Spokesperson Name: Sheng-Wei, Mai Title: Assistant Vice President Tel: 886-2-2758-9599...

SpokespersonName: Sheng-Wei, MaiTitle: Assistant Vice PresidentTel: 886-2-2758-9599E-mail:[email protected]

Deputy SpokespersonName: Da-Chang, DaiTitle: Accounting ManagerTel: 886-6-282-1155E-mail:[email protected]

Stock Transfer AgentPresident Security Corp.Address: No.8, Dongxing Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)Tel: 886-2-2746-3797Website: www.pscnet.com.tw

AuditorsPriceWaterhouseCooperAuditors: Yi-Zhang, Lin Guo-Hua, WangAddress: 22F., No.95, Minzu 2nd

Rd., Lingya Dist., Kaohsiung City 802, Taiwan (R.O.C.)Tel.: 886-7-237-3116Website: www.pwc.com/tw

Overseas Securities ExchangeNone

Corporate Websitehttp://www. prince.com.tw

Headquarters, Branches and PlantHeadquartersAddress: 21F., No.11, Songgao Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)Tel: 886-2- 2758-9599

Taichung BranchAddress: 14F., No.416, Sec. 2, Chongde 2nd Rd., Beitun Dist., Taichung City 406, Taiwan (R.O.C.)Tel: 886-4- 2242-7376

Tainan BranchAddress: 19F., No.30, Zhongzheng S. Rd., Yongkang Dist., Tainan City 710, Taiwan (R.O.C.)Tel: 886-6-282-1155

KaouHsiung BranchAddress: 11F., No.74, Zhongzheng 2nd Rd., Lingya Dist., Kaohsiung City 802, Taiwan (R.O.C.)Tel: 886-7-222-9891

Prince Housing & Development Corp . Annual Report 2012

1


IV

V

III

II

I

ContentsLetter to Shareholders 3

Company Profile

2.1 Date of Incorporation 72.2 Company History 7

Corporate Governance Report

3.1 Organization 93.2 Directors, Supervisors and Management Team 123.3 Implementation of Corporate Governance 273.4 CAPs Fee 403.5 CPA Replacement Information 413.6 If the chairman, president, and financial or accounting manager of the company who had worked for the independent auditor or the related party in the most recent year, the name, title, and term with the independent auditor or the related party must be disclosed 413.7 Equity transferred and equity pledged (or changes thereto) by Directors, Supervisors, Department Heads and Shareholders of 10% Shareholding or More during the preceding fiscal year or in the current fiscal year up to the date of printing of the annual report 413.8 The relationship of the top ten shareholders as defined in the Finance Standard Article 6 443.9 Investments of Directors, Supervisors, managers and directly or indirectly controlled business on the reinvested business and the total shareholdings ratio 45

Capital Overview

4.1 Capital and Shares 474.2 Issuance of Corporate Bonds 524.3 Issuance of Preferred Shares 534.4 Global depository receipts 534.5 Employee Stock Options 534.6 Status of New Shares Issuance in Connection with Mergers and Acquisition 534.7 Information on Implementation of the Company’s Funds Utilization Plans 53

Operational Highlights

5.1 Business Activities 55

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2

5.2 Market and Sales Overview 575.3 Human Resources 615.4 Disbursement of environmental protection 615.5 Labor Relations 615.6 Important Contracts 62

Financial Information

6.1 Five-Year Financial Summary 656.2 Five-Year Financial Analysis 696.3 Supervisors’ Report in the Most Recent Year 716.4 Financial Statements for the Years Ended December 31, 2011 and 2010, and Independent Auditors’ Report 736.5 Consolidated Financial Statements for the Years Ended December 31, 2011 and 2010, and Independent Auditors’ Report 140

VII. Review of Financial Conditions, Operating Results, and Risk Management

7.1 Analysis of Financial Status 2147.2 Analysis of Operation Results 2157.3 Analysis of Cash Flow 2167.4 Major Capital Expenditure Items 2177.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and the Investment Plans for the Coming Year 2177.6 alysis of Risk Management 217

Special Disclosure

8.1 Summary of Affiliated Companies 2218.2 Private Placement Securities in the Most Recent Years 2328.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years 232

VIII

VI

VII

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Letter to Shareholders

I Annual Report 2012

4

Letter to Shareholders

I. Operating Performance in 2012

Looking back to 2012, global economic went down continually caused by worsen European debt crisis and China’s macro-economic control. Domestic economy grew slowly result from decreasing export, second generation national health insurance, taxation of capital gains on securities, price lift and unconfident consuming.

In real estate, luxury home tax, financing controlling, and actual selling price property value reporting shock the luxury house market, especially in Taipei City. However, these policies worked. The government successfully constrained the speculation trade, and steadied the house market price. Last year, we launched app. Customers can look the houses online, get news, life information, discount and so on. Besides, we establish fans group on Facebook to create our blue ocean market. With faithful, reputation and precise choosing valued location, we had caught up and be the top. Completed location were Taipei Shinyi, Prince College, Prince Yan Yan, Prince Ju , Prince Hui , Prince Flora II, Prince Feng Yun Hui , Prince Shi Bo, Prince Shi Yun, and Prince Bon. The sales revenue amounted to NT$7.892 billion in 2012, net income amounted to NT$1.786 billion.

II. Business Plan in 2013

Global economies will recover slowly in uncertainty atmosphere. Every country imposed variety fiscal policies looking forward to get out of swamp such as European Union treaties of single fiscal supervising institute, increasing tax in America, devaluing Yen to increase the export. It’s hard to see the significant effect on these measures in short term, following American fiscal negotiation, slow-down growth in China and political crisis in the Middle East countries are unsure condition for economy grown-up. In Taiwan, the export trade increased by the global economy recovery and the capital attracted by the law “Strengthen the promotion of Taiwanese investment program back to Taiwan” will resume the consumer confidences and strengthen the domestic demand. Beside, “Economic momentum push up program” develop emerging markets and export service industry, as a result, we can improve our output momentum and consumer markets.

Real estate market bloomed near HSR and along the MRT areas, moreover, expanded to urban cities. For example, HSR areas, along the MRT and essential site in Taichung City are the hot spots. The law of actual selling price property value reporting stroke the over high price in Taipei City, but luxury tax will relieve intention this year. It is worthy to observe if it will bring another upsurge. Expected completed sites this year are Prince Central Park, Prince Fu, Prince Dao, Jing Yun Jian, Flower Expo III, Prince Cloud, and Prince Flower Blossom.


5

III. Strategy in the future

Our company will push some programs including Young Man First Buy, changing houses, and cooperating with known enterprise to build business building combined with resident. In addition, we launch the business center of environmental buildings and smart management in order to provide complete product and cloud computing system, we expect our customers can enjoy the future life. Our income-producing real estate has stable profit and operating. We persist faithful, profitable on operating, and care about stockholders equity and employee benefits. With three good and one faith spirit, we will continually provide good location, good design, good construction quality and good price buildings.

Company Profile

Annual Report 2012II


7

I. Company Profile2.1 Date of Incorporation: September 20, 19732.1 Company History

Prince was founded on September 20 by Xiu-Ji, Wu, Yu-Li, Hou, Zum-Xian, Wu, Jum-Jie, Wu, Qing-Yuan, Gao, Gau-Hui, Zheng, Sheng-Ru, Zhuang, Xian-Fu, Zhuang, Zhang-Xing, Wu in 1973. The changes in capital are as followed.

Year Milestones

1973 Founded on September 20 with NT$37.5 million capital.

1975 Increased Capital to NT$97.5 million

1976 Increased capital to NT$120 million.




1984 Increased capital to NT$327.6 million.

1989 Increased capital to NT$1,300 million.

1990 Increased capital to NT$1,950 million

1991 Increased capital to NT$2,925 million

1992 Increased capital to NT$3,948.75 million








2002 Decreased capital to NT$9,150.76 million









Annual Report 2012III

Corporate Governance Report


9

II. Corporate Governance Report3.1 Organization3.1.1 Organization Chart

10

3.1.2 Major Corporate Functions

Department Functions

Audit Office

1. Perform auditing activities identified by the Board of Directors.2. Evaluate the internal control system and identify the effectiveness and

the efficiency of each operation cycle.3. Report periodically the status of audit plan and provide related

recommendations as well as continuous improvement.4. Make certain that Prince is in full compliance with the government laws

and regulations.

Secretary Office

1. Legal: A. Manage Prince’s involvement in litigation; B. Draft and review contracts and correspondence. C. Participate in negotiation.

2. Public Relationship: a. Borden and deepen Prince’s network of relationship across the

Foreign Investors, the Security Investment Companies, and company associations.

b. Serve as Prince’s central contact for media and disseminate information regarding Prince activities to the public.

3. Secretary: Conduct assignments from the Chairman, the supervisors and the Board of Directors, arrange schedules, and manage artist paintings.

Cost Control1. Follow the company policy to purchase and deliver raw materials.2. Update continuously individual project cost from planning to settlement.

Planning and Strategy

1. BOT projects: Operate dormitory BOT of National Taiwan University and National Cheng Kung University.

2. Investment Planning: Indentify effective investment strategies and conduct investment feasibility evaluation.

Information Technology

1. Overall information technology and information security.2. Develop and maintain software programs.3. Run the IT vendor management and the contract, acquisitions, and

relationship with strategic IT vendors.

Accounting

1. Accounting: a. Record the transactions on the basis of invoice, bills and vouchersb. Keep bills and vouchers in safe place after including them in files.

2. Prepare interim financial statement.3. Cost: Prepare different kinds of documents to maintain individual/

summary inventory costs.


11

Department Functions

Finance

1. Financea. Collect and analyze the subsidiaries data.b. Monitor the subsidiaries budget operations and make sure they are in

line with their budget estimates.2. Finance:

a. Prepare cash budget.b. Collect and distribute cash to support each branch and each subsidiary.c. Pay salaries and manage cash and notes payable in hand.

3. Finance in Taipei:a. Meet and surpass the internal and the subsidiaries financial needs.b. Maintain loans, accounts, and matters related thereof.

Administrative1. Administrative: Responsible for all general affaires.2. Human Resource: All matters related to human resource management.

Engineering

1. Conduct surveys, engage in research, analyze results, plan constructions and oversee them along the way.

2. Estimate costs involved and submit proper documents related to the construction quality and construction progress.

3. Technique Development: Research and develop in construction technique and matters about technique cooperation.

12

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ultin

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gine

ers,

Inc

None

None

None

Not

e: M

anag

ing

Dire

ctor

Zho

ng-J

ian,

Wu

died

on

May

2, 2

012,

and

the

seat

of m

anag

ing

dire

ctor

is s

ubst

itute

d by

Yon

g-Yu

an In

vest

men

t Co.

, Lrd

(R

ep. Z

hong

-Huo

, Wu)


15

Name of institutional shareholders

Major shareholders of the institutional shareholders

Hon

g-Ya

n In

vest

men

t Co.

, Ltd

Shi-H

ong,

Zhu

ang(

34%

), Q

in-T

i, W

u(33

%),

Yan-

Yo, Z

huan

g(33

%)

Fu-S

heng

Inve

stm

ent C

o., L

tdM

ing-

Hui

, Che

n(24

%),

Guo

Yin

g X

un, C

hen(

22%

), Ji

an-H

au, C

hen(

16%

), Ji

an-H

ong,

C

hen(

15%

)

Yong

-Yua

n In

vest

men

t Co.

, Lrd

Zhon

g-H

uo, W

u(27

%),

Zhon

g-Ji

an, W

u(25

%),

Wu

Jun

Jie

Cha

ritab

le F

ound

atio

n(25

%),

Boa

-H

ui, W

u(8.

5%),

Man

-Hui

, Wu(

8.5%

), M

ei-X

iang

, Zhe

n(3%

), A

i-Gui

, Hua

ng(3

%)

Jiou

-Fu

Inve

stm

ent C

o., L

tdC

hao-

Yuan

, Zhe

ng(5

0%),

Hon

g M

iao

Yu, C

heng

(24.

5%),

Li-L

ing,

Zhe

ng(6

%),

Bi-H

uei,

Zhen

g(3.

5%),

Tai-B

o In

vest

men

t Co.

, Ltd

Ping

-Zhi

, Wu(

21%

), Pi

ng-Y

uan,

Wu(

21%

), Ji

an-D

e, W

u(19

%),

Wei

-De,

Wu(

19%

), Ze

ng Z

hao

Mei

, Wu(

9%),

Su-M

ei, H

uang

(9%

), C

heng

-Ta

Inve

stm

ent C

o., L

td(1

%)

Che

ng-L

ong

Inve

stm

ent C

o., L

tdY

ing-

Zhi,

Zhua

ng(2

7%),

Yin

g-N

an, Z

huan

g(26

%),

Che

n M

ei Y

u, Z

huan

g(15

%),

Ling

Jin

g Zh

i, Zh

uang

(15%

), Yu

n-D

a, Z

huan

g(4%

), Yu

n-Zh

en, Z

huan

g(4%

), Zh

i-Jin

,Zhu

ang(

2%),

Tina

-Ya,

Zh

uang

(2%

), Yu

-Xua

n, Z

huan

g(2%

), M

ing-

Xua

n, Z

huan

g(3%

)

Che

ng-D

a In

vest

men

t Co.

, Ltd

Wei

-De,

Wu(

23%

), Ji

an-D

e, W

u(23

%),

Ping

-Zhi

, Wu(

23%

), Pi

ng-Y

uan,

Wu(

23%

)

Gua

ng-W

ei In

vest

men

t Co.

, Ltd

Yin

g-Zh

i, Zh

uang

(26%

), Y

ing-

Nan

, Zhu

ang(

26%

), C

hen

Mei

Yu,

Zhu

ang(

10%

), Li

ng J

ing

Zhi,

Zhua

ng(1

0%),

Yun-

Da,

Zhu

ang(

7%),

Yun-

Zhen

, Zhu

ang(

7%),

Zhi-J

in,Z

huan

g(4%

), Ti

na-Y

a,

Zhua

ng(3

%),

Yu-X

uan,

Zhu

ang(

4%),

Min

g-X

uan,

Zhu

ang(

3%)

Maj

or sh

areh

olde

rs o

f the

inst

itutio

nal s

hare

hold

ers

12.

31.2

012

Name of juridical persons

Name of shareholders

Major shareholders of the juridical persons

Tai-B

o In

vest

men

t Co.

, Ltd

.C

hen-

Da

Inve

stm

ent C

o., L

td.

Wei

-De,

Wu(

23%

), Ji

an-D

e, W

u(23

%),

Ping

-Zhi

, Wu(

23%

), Pi

ng-Y

uan,

Wu(

23%

)

Yong

-Yua

n In

vest

men

t Co.

, Lrd

Wu

Jun

Jie

Cha

ritab

le F

ound

atio

nN

one

Ava

ilabl

e

Maj

or sh

areh

olde

rs o

f the

maj

or sh

areh

olde

rs th

at a

re ju

ridi

cal p

erso

ns 1

2.31

.201

1

16

Mee

t One

of t

he F

ollo

wing

Pro

fess

iona

l Qua

lifica

tion

Requ

irem

ents

, Tog

ethe

r wi

th a

t Lea

st F

ive Y

ears

Wor

k Ex

peri

ence

Inde

pend

ence

Cri

teri

a(No

te)

Num

ber o

f Ot

her P

ublic

Co

mpa

nies

in

Whi

ch th

e In

divi

dual

is Co

ncur

rent

ly

Serv

ing

as an

In

depe

nden

t Di

recto

r

An

Instr

ucto

r or H

ighe

r Po

sitio

n in

a D

epar

tmen

t of

Com

mer

ce, L

aw, F

inan

ce,

Acc

ount

ing,

or O

ther

A

cade

mic

Dep

artm

ent R

elat

ed

to th

e Bus

ines

s Nee

ds o

f the

Co

mpa

ny in

a Pu

blic

or

Priv

ate J

unio

r Col

lege

, Co

llege

or U

nive

rsity

A Ju

dge,

Publ

ic P

rose

cuto

r, A

ttorn

ey, C

ertif

ied

Publ

ic

Acc

ount

ant,

or O

ther

Pro

fess

iona

l or

Tec

hnic

al S

peci

alist

Who

has

Pa

ssed

a N

atio

nal E

xam

inat

ion

and

been

Aw

arde

d a C

ertif

icat

e in

a Pro

fess

ion

Nec

essa

ry fo

r the

Bu

sines

s of t

he C

ompa

ny

Hav

e Wor

k Ex

perie

nce

in th

e Are

as o

f Co

mm

erce

, Law

, Fi

nanc

e, or

Acc

ount

ing,

or

Oth

erw

ise N

eces

sary

fo

r the

Bus

ines

s of t

he

Com

pany

12

34

56

78

910

Cha

irman

Hon

g-Ya

o In

vestm

ent

Co.,

Ltd

Na-

Tian

, Zh

uang

Vice

Cha

irman

Fu-S

heng

D

evel

opm

ent

Co.,

Ltd

Min

g-H

ui,

Zhen

Man

agin

g D

irect

orBo

-Min

g,

Hao

XX

XX

XX

0

Man

agin

g D

irect

or

Yong

-Yua

n In

vestm

ent

Co.,

Ltd.

Zhou

ng-H

uo

Wu

Dire

ctor

Jiou-

Fu

Inve

stmen

t Co

., Lt

d.Li

-Lin

g,

Zhen

g

Dire

ctor

Tai-B

o In

vestm

ent

Co.,

Ltd

Jian-

De,

Wu

Prof

essi

onal

qua

lifica

tions

and

inde

pend

ence

ana

lysi

s of d

irec

tors

and

supe

rvis

ors

12.

31.2

011

Title & NameCriteria


17

Mee

t One

of t

he F

ollo

wing

Pro

fess

iona

l Qua

lifica

tion

Requ

irem

ents

, Tog

ethe

r wi

th a

t Lea

st F

ive Y

ears

Wor

k Ex

peri

ence

Inde

pend

ence

Cri

teri

a(No

te)

Num

ber o

f Ot

her P

ublic

Co

mpa

nies

in

Whi

ch th

e In

divi

dual

is Co

ncur

rent

ly

Serv

ing

as an

In

depe

nden

t Di

recto

r

An

Instr

ucto

r or H

ighe

r Po

sitio

n in

a D

epar

tmen

t of

Com

mer

ce, L

aw, F

inan

ce,

Acc

ount

ing,

or O

ther

A

cade

mic

Dep

artm

ent R

elat

ed

to th

e Bus

ines

s Nee

ds o

f the

Co

mpa

ny in

a Pu

blic

or

Priv

ate J

unio

r Col

lege

, Co

llege

or U

nive

rsity

A Ju

dge,

Publ

ic P

rose

cuto

r, A

ttorn

ey, C

ertif

ied

Publ

ic

Acc

ount

ant,

or O

ther

Pro

fess

iona

l or

Tec

hnic

al S

peci

alist

Who

has

Pa

ssed

a N

atio

nal E

xam

inat

ion

and

been

Aw

arde

d a C

ertif

icat

e in

a Pro

fess

ion

Nec

essa

ry fo

r the

Bu

sines

s of t

he C

ompa

ny

Hav

e Wor

k Ex

perie

nce

in th

e Are

as o

f Co

mm

erce

, Law

, Fi

nanc

e, or

Acc

ount

ing,

or

Oth

erw

ise N

eces

sary

fo

r the

Bus

ines

s of t

he

Com

pany

12

34

56

78

910

Dire

ctor

Chen

g-Lo

ng

Inve

stmen

t Co

., Lt

d.Yi

ng-Z

hi,

Zhua

ng

Dire

ctor

Chen

g-Ta

In

vestm

ent

Co.,

Ltd.

Pien

-Chi

, Wu

Dire

ctor

Zeng

Zha

u M

ei, W

uX

XX

XX

XX

0

Dire

ctor

Bo-Y

i, H

oX

XX

XX

0

Dire

ctor

Zhao

-Wen

, H

uang

XX

XX

XX

XX

0

Dire

ctor

Zhen

-Qin

, Ch

enX

XX

XX

XX

XX

X0

Dire

ctor

Jing-

Xin

, Ch

enX

XX

XX

XX

XX

0

Dire

ctor

Hon

g-Ya

n,

Zhua

ngX

XX

XX

XX

XX

X0

Dire

ctor

Jun-

Chen

g,

Kuo

XX

XX

XX

XX

X0

Supe

rvis

or

Gua

ng-W

ei

Inve

stmen

t Co

., Lt

dYi

ng-N

a, Zh

uang

Supe

rvis

orD

a-X

iong

, X

uX

XX

XX

XX

XX

X0


18

Not

e: P

leas

e tic

k th

e co

rres

pond

ing

boxe

s if

dire

ctor

s or

sup

ervi

sors

hav

e be

en a

ny o

f the

follo

win

g du

ring

the

two

year

s pr

ior t

o be

ing

elec

ted

or d

urin

g th

e te

rm o

f off

ice.

1. N

ot a

n em

ploy

ee o

f the

Com

pany

or a

ny o

f its

aff

iliat

es.

2. N

ot a

dire

ctor

or s

uper

viso

r of t

he C

ompa

ny o

r any

of i

ts a

ffili

ates

. The

sam

e do

es n

ot a

pply

, how

ever

, in

case

s w

here

the

pers

on is

an

inde

pend

ent

dire

ctor

of t

he C

ompa

ny, i

ts p

aren

t com

pany

, or a

ny s

ubsi

diar

y in

whi

ch th

e C

ompa

ny h

olds

, dire

ctly

or i

ndire

ctly

, mor

e th

an 5

0% o

f the

vot

ing

shar

es.

3. N

ot a

nat

ural

-per

son

shar

ehol

der w

ho h

olds

sha

res,

toge

ther

with

thos

e he

ld b

y th

e pe

rson

’s s

pous

e, m

inor

chi

ldre

n, o

r hel

d by

the

pers

on u

nder

ot

hers

’ nam

es, i

n an

agg

rega

te a

mou

nt o

f 1%

or m

ore

of th

e to

tal n

umbe

r of o

utst

andi

ng s

hare

s of

the

Com

pany

or r

anki

ng in

the

top

10 in

hol

ding

s.4.

Not

a s

pous

e, re

lativ

e w

ithin

the

seco

nd d

egre

e of

kin

ship

, or l

inea

l rel

ativ

e w

ithin

the

fifth

deg

ree

of k

insh

ip, o

f any

of t

he p

erso

ns in

the

prec

edin

g th

ree

subp

arag

raph

s.5.

Not

a d

irect

or, s

uper

viso

r, or

em

ploy

ee o

f a c

orpo

rate

sha

reho

lder

that

dire

ctly

hol

ds 5

% o

r mor

e of

the

tota

l num

ber o

f out

stan

ding

sha

res

of th

e C

ompa

ny o

r tha

t hol

ds s

hare

s ra

nkin

g in

the

top

five

in h

oldi

ngs.

6. N

ot a

dire

ctor

, sup

ervi

sor,

offic

er, o

r sha

reho

lder

hol

ding

5%

or m

ore

of th

e sh

are,

of a

spe

cifie

d co

mpa

ny o

r ins

titut

ion

that

has

a fi

nanc

ial o

r bu

sine

ss re

latio

nshi

p w

ith th

e C

ompa

ny.

7. N

ot a

pro

fess

iona

l ind

ivid

ual w

ho, o

r an

owne

r, pa

rtner

, dire

ctor

, sup

ervi

sor,

or o

ffic

er o

f a s

ole

prop

rieto

rshi

p, p

artn

ersh

ip, c

ompa

ny, o

r ins

titut

ion

that

, pro

vide

s co

mm

erci

al, l

egal

, fin

anci

al, a

ccou

ntin

g se

rvic

es o

r con

sulta

tion

to th

e C

ompa

ny o

r to

any

affil

iate

of t

he C

ompa

ny, o

r a s

pous

e th

ereo

f.8.

Not

hav

ing

a m

arita

l rel

atio

nshi

p, o

r a re

lativ

e w

ithin

the

seco

nd d

egre

e of

kin

ship

to a

ny o

ther

dire

ctor

of t

he C

ompa

ny.

9. N

ot b

een

a pe

rson

of a

ny c

ondi

tions

def

ined

in A

rticl

e 30

of t

he C

ompa

ny L

aw.

10. N

ot a

gov

ernm

enta

l, ju

ridic

al p

erso

n or

its

repr

esen

tativ

e as

def

ined

in A

rticl

e 27

of t

he C

ompa

ny L

aw.


19

Title

Nam

eDa

teEf

fecti

veSh

areh

oldi

ngSp

ouse

& M

inor

Sh

areh

oldi

ngSh

areh

oldi

ng

by N

omin

eeAr

rang

emen

tEx

perie

nce(

Educ

ation

)Ot

her P

ositi

onM

anag

ers w

ho ar

e Spo

uses

or

With

in T

wo D

egre

es of

Kin

ship

Shar

es%

Shar

es%

Shar

es%

Title

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eRe

latio

n

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ral

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ager

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g-Fa

n, X

ie07

.05.

2010

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500.

01%

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590.

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00

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f Civ

il En

gine

erin

g,Ta

mKa

ng U

nive

rsity

Chair

man

of C

heng

-Shi

Co

nstra

ction

Co.

, Ltd

and

Prin

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ecur

ity C

o., L

td.

None

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None

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tant V

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ent

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emen

t Tea

m

20

Title

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ame

Rem

uner

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unera

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Comp

ensa

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ector

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y(B)

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loyee

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ock O

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any

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comp

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ancia

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eco

mpan

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anies

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co

nsoli

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ancia

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temen

ts

The

comp

any

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anies

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ancia

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temen

tsCa

shSt

ock

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Stoc

k

Chair

man

Hong

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stmen

t Co

., Lt

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pres

entat

ive:

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ian, Z

huan

g

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Vice

Chair

man

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velo

pmen

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Repr

esen

tativ

e:M

ing-

Hui,

Zhen

Man

agin

gDi

recto

r

Jiou-

Fu In

vestm

ent

Co.,

Ltd.

Repr

esen

tativ

e:Li

-Lin

g, Z

heng

Man

agin

gDi

recto

rBo

-Min

g, H

ao

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agin

gDi

recto

r(e

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n 5.

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12)

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ng-Ji

an, W

u

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agin

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recto

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art o

n 6.

20.2

012)

Yong

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n In

vestm

ent

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Repr

esen

tativ

e:Zh

oung

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, Wu

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emun

erat

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ervi

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nt, a

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iden

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The

num

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mn

incl

uded

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ctor

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entio

ned

in p

age

19


21

Title

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ame

Rem

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atio

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ance

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anies

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ancia

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ctor

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o In

vestm

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Repr

esen

tativ

e:Jia

n-De

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Dire

ctor

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g-Lo

ng

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ang

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ctor

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heng

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rese

ntati

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heng

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rese

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ian-D

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rese

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rese

ntati

ve: Y

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rese

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heng

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rese

ntati

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stmen

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rese

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heng

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u)Ta

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ian-D

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houn

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Zeng

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men

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ive:

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Tian

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ang)

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Yao

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us to

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com

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rese

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ve:Y

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huan

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Title

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Xia

o-Yu

, Jia

ng

Ass

ista

nt M

anag

erX

i-Fen

, Zha

ng

Ass

ista

nt M

anag

erD

e-Ju

, Yan

Juni

or M

anag

er

Ken

g-W

ang,

Che

n

Uni

t: N

T$ th

ousa

nds

26

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

A. The ratio of total remuneration paid by the company and by all companies included in the consolidated financial statements for the most recent two fiscal years to directors, supervisors, presidents and vice presidents of the Company, to the net income.

Year

Total remuneration paid to directors, supervisors, presidents and vice

presidents

Ratio of total remuneration paid to directors, supervisors, presidents and

vice presidents to net income (%)

The companyCompanies in

the consolidated financial statements

The companyCompanies in

the consolidated financial statements

2011 170,037 170,797 7.35% 7.38%

2012 169,841 169,841 9.50% 9.50%

Unit: NT$ thousands


27

3.3

Impl

emen

tatio

n of

Cor

pora

te G

over

nanc

e3.

3.1

Boa

rd o

f Dir

ecto

rs

A to

tal o

f five

mee

tings

of t

he b

oard

of d

irect

ors

wer

e he

ld in

201

2. D

irect

or a

nd s

uper

viso

r atte

ndan

ce w

as a

s fo

llow

s:

Boa

rd o

f Dir

ecto

rs M

eetin

g St

atus

Title

Nam

eA

tten

danc

e in

Pe

rson

(B)

By

Prox

yA

tten

danc

e ra

te

(%) [

B/A

]R

epre

sent

ativ

eR

emar

ks

Cha

irman

Hon

g-Ya

o In

vest

men

t Co.

Ltd

50

100%

Na-

Tian

Zhu

ang

Vic

e C

hairm

anFu

-She

ng D

evel

opm

ent C

o. L

td5

010

0%M

ing-

Hui

Che

nM

anag

ing

Dire

ctor

Bo-

Min

g H

ou5

010

0%M

anag

ing

Dire

ctor

Zhon

g-Ja

n w

u0

00%

Res

ign

in 2

012.

5.2

Man

agin

g D

irect

orYo

ng-Y

uan

Inve

stm

ent C

o. L

td3

010

0%Zh

ong

He

Wu

Ass

ume

in

2012

.6.2

0M

anag

ing

Dire

ctor

Jiu-

Fu In

vest

men

t Co.

Ltd

50

100%

Li-L

ing

Zhen

gD

irect

orTa

i-Bo

Inve

stm

ent C

o. L

td3

260

%Ji

an-D

e W

uD

irect

orZh

ao-M

ei W

u Ze

ng2

340

%D

irect

orC

eng-

Long

Inve

stm

ent C

o. L

td3

260

%Y

ing-

Zhi Z

huan

gD

irect

orC

heng

-Da

Inve

stm

ent C

o. L

td3

260

%Pi

ng-Z

hi W

uD

irect

orB

o-Y

i Hou

5

010

0%D

irect

orC

hao-

Wen

Hua

ng5

010

0%D

irect

orR

en-Q

in C

hen

50

100%

Dire

ctor

Jing

-Xin

g C

hen

50

100%

Dire

ctor

Hon

g-Ya

n Jh

uang

32

60%

Dire

ctor

Jun-

Che

ng G

uo5

010

0%

Oth

er m

entio

nabl

e ite

ms:

1. If

ther

e ar

e th

e ci

rcum

stan

ces

refe

rred

to in

Arti

cle

14-3

of S

ecur

ities

and

Exc

hang

e A

ct a

nd re

solu

tions

of t

he d

irect

ors’

mee

tings

obj

ecte

d to

by

Inde

pend

ent D

irect

ors

or s

ubje

ct to

qua

lified

opi

nion

and

reco

rded

or d

ecla

red

in w

ritin

g, th

e da

tes

of m

eetin

gs, s

essi

ons,

con

tent

s of

mot

ions

, all

in

depe

nden

ts’ o

pini

on a

nd th

e C

ompa

ny’s

resp

onse

to in

depe

nden

t dire

ctor

s’ o

pini

on s

houl

d be

spe

cifie

d: N

one

2. If

ther

e is

Dire

ctor

s’ a

void

ance

of m

otio

ns in

con

flict

of i

nter

est,

the

Dire

ctor

s’ n

ames

, con

tent

s of

mot

ions

, cau

ses

for a

void

ance

and

vot

ing

sh

ould

be

spec

ified

: Non

e

28

3. M

easu

res

take

n to

stre

ngth

en th

e fu

nctio

nalit

y of

the

Boa

rd: T

he B

oard

of D

irect

ors

has

esta

blis

hed

an A

udit

Com

mitt

ee a

nd a

Com

pens

atio

n

Com

mitt

ee to

ass

ist t

he B

oard

in c

arry

ing

out i

ts v

ario

us d

utie

s.

Not

e: W

hen

dire

ctor

s' an

d su

perv

isor

s' ar

e be

long

to ju

ridic

al p

erso

n sh

ell b

e sh

owed

the

com

pany

's na

me

and

repr

esen

tativ

e.N

ote:

(i)

If d

irect

or o

r sup

ervi

sor r

esig

ned

befo

re e

nd o

f yea

r, co

mpa

ny s

hall

show

dat

e in

not

e, a

nd a

ttend

ance

rate

(%) i

s at

tend

ant t

imes

of m

eetin

g in

in

cum

bent

per

iod.

(ii

) If

ther

e is

re-e

lect

ion

of d

irect

or a

nd s

uper

viso

r, co

mpa

ny s

hall

show

form

er, n

ew, r

eapp

oint

ed m

embe

r and

dat

e in

not

e.

A

ttend

ance

rate

(%) i

s at

tend

ant t

imes

of m

eetin

g in

incu

mbe

nt p

erio

d.


29

3.3.

2 A

udit

Com

mitt

ee o

r Att

enda

nce

of S

uper

viso

rs fo

r B

oard

Mee

tings

(I

) Aud

it C

omm

ittee

Mee

ting

Stat

us: N

ot a

pplic

able

.

(II)

Atte

ndan

ce o

f sup

ervi

sors

at t

he b

oard

mee

ting

A to

tal o

f five

Boa

rd o

f Dire

ctor

s m

eetin

gs a

nd th

ree

disc

harg

ed m

eetin

gs w

ere

held

in 2

011.

Inde

pend

ent d

irect

or a

ttend

ance

was

as

follo

ws:

Att

enda

nce

of su

perv

isor

s at t

he b

oard

mee

ting

Title

Nam

eA

tten

danc

e in

Per

son(

B)

Att

enda

nce

rate

(%) [

B/A

]R

epre

sent

ativ

eR

emar

ksSu

perv

isor

Gua

ng-W

ei In

vest

men

t Co.

Ltd

360

%Y

ing-

Nan

Zhu

ang

Supe

rvis

orD

a-X

iong

Xu

510

0%

Oth

er m

entio

nabl

e ite

ms:

I. C

ompo

sitio

n an

d R

espo

nsib

ilitie

s of

Sup

ervi

sors

:

We

have

2 s

uper

viso

rs a

nd n

o in

depe

nden

t dire

ctor

.

(I)

Com

mun

icat

ions

bet

wee

n su

perv

isor

s an

d th

e C

ompa

ny's

empl

oyee

s an

d sh

areh

olde

rs. I

f it i

s ne

cess

ary,

em

ploy

ees

and

shar

ehol

ders

hav

e

ad

equa

te a

cces

s to

the

supe

rvis

ors

for c

omm

unic

atio

ns.

(I

I) C

omm

unic

atio

ns b

etw

een

supe

rvis

ors

and

the

Com

pany

's C

hief

Inte

rnal

Aud

itor a

nd C

PA:

1. C

heif

audi

tor i

s to

hav

e th

e au

ditin

g re

port

subm

itted

to th

e su

perv

isor

s in

the

follo

win

g m

onth

upo

n th

e co

mpl

etio

n of

aud

it; a

lso,

the

chie

f au

dito

r is

to re

port

the

audi

t at t

he b

oard

mee

ting.

2. S

uper

viso

rs m

ay c

omm

unic

ate

with

the

CPA

if it

is n

eces

sary

.II

. If a

sup

ervi

sor e

xpre

sses

an

opin

ion

durin

g a

mee

ting

of th

e B

oard

of D

irect

ors,

the

date

s of

mee

tings

, ses

sion

s, c

onte

nts

of m

otio

ns, r

esol

utio

ns

of th

e di

rect

ors’

mee

tings

and

the

Com

pany

’s re

spon

se to

sup

ervi

sor’

s op

inio

n sh

ould

be

spec

ified

.

30

3.3.

3 C

orpo

rate

Gov

erna

nce

Exe

cutio

n St

atus

and

Dev

iatio

ns f

rom

“C

orpo

rate

Gov

erna

nce

Bes

t-Pr

actic

e Pr

inci

ples

for

T

WSE

/GT

SM L

iste

d C

ompa

nies

”

Item

Impl

emen

tatio

n St

atus

Devi

atio

ns fr

om “

Corp

orat

e G

over

nanc

e Bes

t-Pra

ctice

Pr

incip

les fo

r TW

SE/G

TSM

Li

sted

Com

pani

es”

and

reas

ons

1. S

hare

hold

ing

Stru

ctur

e &

Sha

reho

lder

s’ R

ight

s(1

) M

etho

d of

han

dlin

g sh

areh

olde

r su

gges

tion

s or

co

mpl

aint

s

(2)

The

Com

pany

’s p

osse

ssio

n of

a l

ist

of m

ajor

sh

areh

olde

rs a

nd a

lis

t of

ulti

mat

e ow

ners

of

thes

e m

ajor

sha

reho

lder

s

(3)

Ris

k m

anag

emen

t mec

hani

sm a

nd “

firew

all”

bet

wee

n th

e C

ompa

ny a

nd it

s af

filia

tes

The

Com

pany

has

des

igna

ted

appr

opria

te d

epar

tmen

ts to

ha

ndle

sha

reho

lder

sug

gest

ions

or c

ompl

aint

s.

The

Fina

nce

& S

hare

d Se

rvic

es D

ivis

ion

is re

spon

sibl

e fo

r co

llect

ing

the

upda

ted

info

rmat

ion

of m

ajor

sha

reho

lder

s an

d th

e lis

t of u

ltim

ate

owne

rs o

f the

se m

ajor

sha

reho

lder

s.

Rul

es a

re m

ade

to s

trict

ly re

gula

te th

e ac

tiviti

es o

f tra

ding

, en

dors

emen

t an

d lo

ans

betw

een

the

Com

pany

and

its

af

filia

tes.

Als

o, w

e fo

llow

ed t

he “

Cri

teri

a of

Int

erna

l C

ontr

ol M

echa

nism

for

Pub

lic C

ompa

ny”

outli

ned

by

the

Fina

ncia

l Su

perv

isor

y C

omm

issi

on w

hen

draf

ting

the

guid

elin

es f

or t

he “

Supe

rvis

ion

and

gove

rnan

ce o

f su

bsid

iarie

s” in

ord

er to

impl

emen

t tot

al r

isk

cont

rol w

ith

resp

ect t

o su

bsid

iarie

s.

Non

e

2.

Com

posi

tion

and

Res

pons

ibili

ties

of t

he B

oard

of

Dire

ctor

s(1

) Ind

epen

dent

Dire

ctor

s

(2) R

egul

ar e

valu

atio

n of

CPA

s’ in

depe

nden

ce

The

Com

pany

has

fifte

en d

irect

ors

but n

o in

depe

nden

t di

rect

ors.

No

Aud

it C

omm

ittee

eva

luat

ion

of C

PA.


31

Item

Impl

emen

tatio

n St

atus

Devi

atio

ns fr

om “

Corp

orat

e G

over

nanc

e Bes

t-Pra

ctice

Pr

incip

les fo

r TW

SE/G

TSM

Li

sted

Com

pani

es”

and

reas

ons

3. C

omm

unic

atio

n ch

anne

l with

sta

keho

lder

sTh

e C

ompa

ny h

as d

esig

nate

d ap

prop

riat

e de

part

men

ts,

such

as

Inve

stor

Rel

atio

ns, E

mpl

oyee

Wel

fare

Com

mitt

ee,

Cus

tom

er R

elat

ions

etc

., to

com

mun

icat

e w

ith st

akeh

olde

rs

as n

eede

d. F

urth

erm

ore,

the

cont

act i

nfor

mat

ion

prov

idin

g ac

cess

to

the

Com

pany

’s s

poke

sper

son

and

rele

vant

de

partm

ents

is a

vaila

ble

on th

e C

ompa

ny’s

web

site

.

Non

e

4. In

form

atio

n D

iscl

osur

e(1

) E

stab

lishm

ent

of a

cor

pora

te w

ebsi

te t

o di

sclo

se

info

rmat

ion

rega

rdin

g th

e C

ompa

ny’s

fin

anci

als,

bu

sine

ss a

nd c

orpo

rate

gov

erna

nce

stat

us

(2)

Oth

er i

nfor

mat

ion

disc

losu

re c

hann

els

(e.g

., m

aint

aini

ng a

n En

glis

h-la

ngua

ge w

ebsi

te, a

ppoi

ntin

g re

spon

sibl

e pe

ople

to h

andl

e in

form

atio

n co

llect

ion

and

disc

losu

re, a

ppoi

ntin

g sp

okes

pers

ons,

web

cast

ing

inve

stor

s co

nfer

ence

)

The

Com

pany

has

a w

ebsi

te (h

ttp://

ww

w.p

rince

.com

.tw/)

setu

p to

dis

clos

e in

form

atio

n re

gard

ing

the

Com

pany

’s

finan

cial

s, b

usin

ess

and

corp

orat

e go

vern

ance

sta

tus.

The

com

pany

has

des

igna

ted

appr

opria

te p

erso

ns to

ha

ndle

info

rmat

ion

colle

ctio

n an

d di

sclo

sure

and

als

o ha

s es

tabl

ishe

d a

spok

espe

rson

sys

tem

.W

ebsi

te: h

ttp://

ww

w.p

rince

.com

.tw

Non

e

5. O

pera

tions

of t

he C

ompa

ny’s

Nom

inat

ion

Com

mitt

ee,

Com

pens

atio

n C

omm

ittee

, or o

ther

com

mitt

ees

of th

e B

oard

of D

irect

ors

5. T

he C

ompa

ny s

et u

p th

e R

emun

erat

ion

Com

mitt

ee in

20

11.9

.30,

the

re h

ad b

een

four

tim

es m

eetin

gs u

ntil

2013

.5.1

5.

Exce

pt R

emun

erat

ion

Com

mitt

ee, c

orpo

rate

go

vern

ance

regu

latio

ns h

ave

been

dis

cuss

ing.

6.

If th

e C

ompa

ny h

as e

stab

lishe

d co

rpor

ate

gove

rnan

ce p

rinci

ples

bas

ed o

n “C

orpo

rate

Gov

erna

nce

Bes

t-Pra

ctic

e Pr

inci

ples

for T

WSE

/GTS

M L

iste

d

Com

pani

es”,

ple

ase

desc

ribe

any

disc

repa

ncy

betw

een

the

prin

cipl

es a

nd th

eir i

mpl

emen

tatio

n:

The

Com

pany

has

not

est

ablis

hed

corp

orat

e go

vern

ance

prin

cipl

es b

ased

on

“Cor

pora

te G

over

nanc

e B

est-P

ract

ice

Prin

cipl

es fo

r TW

SE/G

TSM

List

ed C

ompa

nies

”.

32

Item

Impl

emen

tatio

n St

atus

Devi

atio

ns fr

om “

Corp

orat

e G

over

nanc

e Bes

t-Pra

ctice

Pr

incip

les fo

r TW

SE/G

TSM

Li

sted

Com

pani

es”

and

reas

ons

7.

Oth

er im

porta

nt in

form

atio

n to

faci

litat

e be

tter u

nder

stan

ding

of t

he C

ompa

ny’s

cor

pora

te g

over

nanc

e pr

actic

es (e

.g.,

empl

oyee

righ

ts, e

mpl

oyee

w

elln

ess,

inve

stor

rela

tions

, sup

plie

r rel

atio

ns, r

ight

s of

sta

keho

lder

s, d

irect

ors’

and

sup

ervi

sors

’ tra

inin

g re

cord

s, th

e im

plem

enta

tion

of ri

sk

m

anag

emen

t pol

icie

s an

d ris

k ev

alua

tion

mea

sure

s, th

e im

plem

enta

tion

of c

usto

mer

rela

tions

pol

icie

s, a

nd p

urch

asin

g in

sura

nce

for d

irect

ors

and

su

perv

isor

s):

(1)

Stat

us o

f em

ploy

ee ri

ghts

and

em

ploy

ee w

elln

ess:

Ple

ase

refe

r to

the

“Em

ploy

ees”

sec

tion

on p

ages

57

of th

is A

nnua

l Rep

ort.

(2)

Con

sum

er P

rote

ctio

n Po

licy:

The

com

pany

has

est

ablis

hed

serv

ice

cent

er to

pro

cess

bui

ldin

g m

aint

enan

ce, r

epai

r, co

mm

unity

saf

e an

d cl

ean

se

rvic

e.(3

) Th

e C

ompa

ny h

as p

urch

ased

D&

O in

sura

nce

for i

ts d

irect

ors

and

supe

rvis

ors

sinc

e ye

ar 2

006.

(4)

Dire

ctor

s’ a

nd s

uper

viso

rs’ t

rain

ing

reco

rds:

Title

Nam

eA

ssum

ed

Dat

eSt

udy

peri

odSp

onso

ring

O

rgan

izat

ion

Cou

rse

Trai

ning

ho

urs

Con

form

ing

to

Reg

ulat

ions

Rem

arks

From

To

Man

agin

g D

irect

orB

o-M

ing

Hou

2010

.06.

2420

12.5

.720

12.5

.7

Taiw

an

Cor

pora

te

Gov

erna

nce

Ass

ocia

tion

New

am

endm

ent

and

the

reso

lutio

n of

the

Com

pany

Act

3Ye

s

8.

If th

e C

ompa

ny h

as im

plem

ente

d a

self

corp

orat

e go

vern

ance

eva

luat

ion

or h

as a

utho

rized

any

oth

er p

rofe

ssio

nal o

rgan

izat

ion

to c

ondu

ct s

uch

an

ev

alua

tion,

the

eval

uatio

n re

sults

, maj

or d

efici

enci

es o

r sug

gest

ions

, and

impr

ovem

ents

are

sta

ted

as fo

llow

s: N

one

Not

e1: D

irect

or’ a

nd s

uper

viso

rs’ t

rain

ing

reco

rds:

The

com

pany

refe

rs to

the

rule

dec

lare

d by

TSE

C.

Not

e2: I

f co

mpa

ny’s

bus

ines

s is

in s

ecur

ities

, inv

estm

ent t

rust

and

adv

isor

y, o

r fu

ture

s, it

sha

ll sh

ow r

isk

man

agem

ent p

olic

y, s

tand

ards

for

ris

k

mea

surin

g an

d pr

otec

tion

of c

onsu

mer

and

clie

nts.

Not

e3: S

elf-

eval

uatio

n re

port

of c

orpo

rate

gov

erni

ng is

acc

ordi

ng it

em in

cor

pora

te g

over

ning

, eva

luat

ed a

nd s

tate

d by

com

pany

. It s

hall

repo

rt si

tuat

ion

of o

pera

tion

and

exec

utio

n in

eac

h ite

m s

epar

atel

y.


33

Mee

t One

of t

he F

ollo

wing

Pro

fess

iona

l Qua

lifica

tion

Requ

irem

ents

, Tog

ethe

r wi

th a

t Lea

st F

ive Y

ears

Wor

k Ex

peri

ence

Inde

pend

ence

Cri

teri

a(No

te)

Num

ber o

f Ot

her P

ublic

Co

mpa

nies

in

Whi

ch th

e In

divi

dual

is Co

ncur

rent

ly

Serv

ing

as an

In

depe

nden

t Di

recto

r

An

Instr

ucto

r or H

ighe

r Po

sitio

n in

a D

epar

tmen

t of

Com

mer

ce, L

aw, F

inan

ce,

Acc

ount

ing,

or O

ther

A

cade

mic

Dep

artm

ent R

elat

ed

to th

e Bus

ines

s Nee

ds o

f the

Co

mpa

ny in

a Pu

blic

or

Priv

ate J

unio

r Col

lege

, Co

llege

or U

nive

rsity

A Ju

dge,

Publ

ic P

rose

cuto

r, A

ttorn

ey, C

ertif

ied

Publ

ic

Acc

ount

ant,

or O

ther

Pro

fess

iona

l or

Tec

hnic

al S

peci

alist

Who

has

Pa

ssed

a N

atio

nal E

xam

inat

ion

and

been

Aw

arde

d a C

ertif

icat

e in

a Pro

fess

ion

Nec

essa

ry fo

r the

Bu

sines

s of t

he C

ompa

ny

Hav

e Wor

k Ex

perie

nce

in th

e Are

as o

f Co

mm

erce

, Law

, Fi

nanc

e, or

Acc

ount

ing,

or

Oth

erw

ise N

eces

sary

fo

r the

Bus

ines

s of t

he

Com

pany

12

34

56

78

910

Con

venr

tQ

ian,

Dai

XX

XX

XX

XX

XX

X3

Com

miss

ione

rSh

u-Fe

n, X

un X

XX

XX

XX

XX

XX

0

Com

miss

ione

rM

ei-H

ui, Q

iu X

XX

XX

XX

XX

XX

X2


1.3

.4 C

ompo

sitio

n, R

espo

nsib

ilitie

s and

Ope

ratio

ns o

f Com

pens

atio

n C

omm

ittee：

Rem

uner

atio

n co

mm

ittee

was

set

up

in S

ep 3

0, 2

011

with

3 c

omm

ittee

mem

bers

and

1 m

embe

r in

wai

ting

list.

Thei

r res

pons

ibili

ties

are

esta

blis

hing

th

e re

gula

tions

of

rem

uner

atio

n an

d pe

rfor

man

ce f

or b

oard

s, s

uper

viso

rs a

nd m

ange

rs, a

nd v

iew

ing

them

reg

ular

ly. C

omm

ittee

sho

uld

refe

r to

the

indu

stry

pay

men

t and

con

side

r per

sona

l per

form

ance

, com

pany

’s o

pera

tions

and

futu

re ri

sk ra

ther

than

see

k th

e hi

gher

com

pens

atio

n. T

here

wer

e 4

mee

tings

unt

il M

ay 6

, 201

3.

A to

tal o

f five

Boa

rd o

f Dire

ctor

s m

eetin

gs a

nd th

ree

disc

harg

ed m

eetin

gs w

ere

held

in 2

011.

Inde

pend

ent d

irect

or a

ttend

ance

was

as

follo

ws:

Title

Nam

eA

tten

danc

e in

Per

son(

B)

Att

enda

nce

rate

(%) [

B/A

]R

epre

sent

ativ

eR

emar

ksC

onve

nrt

Qia

n, D

ai4

010

0%C

omm

issi

oner

Shu-

Fen,

Xun

40

100%

Com

mis

sion

erM

ei-H

ui, Q

iu3

175

%

34

Item

Impl

emen

tatio

n St

atus

Devi

atio

ns fr

om “

Corp

orat

e Gov

erna

nce

Best-

Prac

tice P

rincip

les fo

r TW

SE/

GTS

M L

isted

Com

pani

es”

and

reas

ons

1. P

rom

ote

the

impl

emen

tatio

n of

cor

pora

te g

over

nanc

e(1

) C

orpo

rate

def

ines

cor

pora

te s

ocia

l re

spon

sibi

lity

poli

cy o

r sy

stem

and

rev

iew

the

eff

ect

of

impl

emen

tatio

n.

(2)

Ope

ratio

n of

cor

pora

te s

ocia

l res

pons

ibili

ty f

ull-t

ime

(par

t-tim

e) u

nit

(3)

Cor

pora

te a

rran

ges

busi

ness

eth

ics

educ

atio

n,

train

ing,

and

pro

mot

ion

perio

dica

lly fo

r the

dire

ctor

s,

supe

rvis

ors,

and

em

ploy

ees;

als

o, it

is in

tegr

ated

with

em

ploy

ee’s

per

form

ance

eva

luat

ion

syst

em fo

r a c

lear

ef

fect

ive

rew

ard

and

puni

shm

ent s

yste

m.

(1) N

one

(2) N

one

(3) N

one

(1)

The

com

pany

has

not

set

up

corp

orat

e so

cial

res

pons

ibili

ty

polic

y or

gui

delin

es y

et.

(2)

The

com

pany

has

not

set

up

corp

orat

e so

cial

res

pons

ibili

ty

polic

y or

gui

delin

es y

et.

(3)

The

com

pany

has

not

set

up

corp

orat

e so

cial

res

pons

ibili

ty

polic

y or

gui

delin

es y

et.

2. T

he d

evel

opm

ent o

f a s

usta

inab

le e

nviro

nmen

t(1

) Th

e co

mpa

ny s

trive

s to

upg

rade

the

effe

ctiv

enes

s of

re

sour

ce u

tiliz

atio

n; a

lso

uses

rec

ycle

d m

ater

ials

that

ar

e fr

iend

ly to

the

envi

ronm

ent

(2)

The

com

pany

est

ablis

hes

adeq

uate

env

iron

men

tal

man

agem

ent s

yste

m b

y th

e in

dust

rial f

eatu

res

(3)

The

com

pany

set

ups

envi

ronm

enta

l m

anag

emen

t sp

ecia

lists

uni

t to

prot

ect t

he e

nviro

nmen

t

(4) T

he c

ompa

ny s

tays

ale

rt th

e im

pact

of c

limat

e ch

ange

on

bus

ines

s ac

tiviti

es; a

lso,

dra

fts u

p en

ergy

sav

ing

and

carb

on r

educ

tion

and

gree

nhou

se g

as r

educ

tion

stra

tegy

.

(1) N

one

(2) N

one

(3) N

one

(4) N

one

(1)

The

com

pany

has

not

set

up

corp

orat

e so

cial

res

pons

ibili

ty

polic

y or

gui

delin

es y

et.

(2)

The

com

pany

has

not

set

up

corp

orat

e so

cial

res

pons

ibili

ty

polic

y or

gui

delin

es y

et.

(3)

The

com

pany

has

not

set

up

corp

orat

e so

cial

res

pons

ibili

ty

polic

y or

gui

delin

es y

et.

(4)

The

com

pany

has

not

set

up

corp

orat

e so

cial

res

pons

ibili

ty

polic

y or

gui

delin

es y

et.

3.3.

5 So

cial

Res

pons

ibili

ty


35

Item

Impl

emen

tatio

n St

atus

Devi

atio

ns fr

om “

Corp

orat

e Gov

erna

nce

Best-

Prac

tice P

rincip

les fo

r TW

SE/

GTS

M L

isted

Com

pani

es”

and

reas

ons

3. M

aint

enan

ce o

f soc

ial w

elfa

re(1

) T

he c

ompa

ny f

ollo

ws

the

gove

rnin

g la

bor

law

s,

prot

ect

empl

oyee

’s l

awfu

l in

tere

st,

and

esta

blis

h ad

equa

te m

anag

emen

t and

pro

cedu

re

(2) T

he c

ompa

ny p

rovi

des

wor

kers

with

saf

e an

d he

alth

y w

orki

ng e

nviro

nmen

t; al

so, p

rovi

de r

egul

arly

saf

ety

and

heal

th e

duca

tion.

(3)

Est

abli

shin

g th

e co

mm

unic

atio

n sy

stem

s. T

he

com

pany

can

info

rm e

mpl

oyee

s w

hen

ther

e is

a h

uge

effe

ct o

n th

e ch

ange

of o

pera

tion.

(4)

The

com

pany

def

ines

and

ann

ounc

es t

he c

onsu

mer

po

licy

; al

so,

the

clea

r an

d ef

fect

ive

cons

umer

co

mpl

aint

s pr

oced

ures

pro

vide

for

the

com

pany

pr

oduc

ts a

nd s

ervi

ces.

(5)

The

com

pany

wor

ks w

ith

supp

lier

s to

upg

rade

co

rpor

ate

soci

al re

spon

sibi

lity.

(6) T

he c

ompa

ny p

artic

ipat

es in

com

mun

ity d

evel

opm

ent

and

char

ity

acti

viti

es b

y co

mm

erci

al a

ctiv

itie

s,

mat

eria

ls d

onat

ion,

cor

pora

te v

olun

teer

s’ s

ervi

ce, a

nd

othe

r fre

e sp

ecia

l ser

vice

s.

(1)

The

com

pany

fol

low

s th

e go

vern

ing

labo

r la

ws,

pr

otec

ts e

mpl

oyee

’s in

tere

st.

(2)

The

com

pany

em

phas

izes

lab

ors’

saf

ety

by

requ

esti

ng t

he w

orke

rs i

n co

nstr

ucti

on s

ite

exac

tly t

o la

unch

tra

inin

g pr

ogra

m a

nd s

afet

y ac

tivity

gui

danc

e.

(3)

(3)

Bui

lt u

p a

inte

rior

EIP

net

wor

k an

d em

ploy

ees

can

rece

ive

the

late

st n

ews

and

info

rmat

ion

via

it.

(4)

The

com

pany

set

up

cons

umer

com

plai

nt

hotli

ne c

ombi

ned

with

tech

nica

l sys

tem

to s

olve

pr

oble

ms

for

clie

nts

in t

ime,

aft

er r

epai

ring

we

will

con

tinue

to tr

ack

the

build

ing.

(5)

Non

e

(6)

Spon

sore

d ar

ts a

ctiv

ities

, and

pro

vide

clo

thes

and

fo

ods

for m

inor

ities

.

4. E

nhan

ce in

form

atio

n di

sclo

sure

(1)

The

way

dis

clos

ing

rele

vant

rel

iabl

e co

rpor

ate

soci

al

resp

onsi

bilit

y in

form

atio

n.

(2) T

he c

ompa

ny c

ompo

ses c

orpo

rate

soci

al re

spon

sibi

lity

repo

rt an

d di

sclo

ses

the

prom

otio

n of

cor

pora

te s

ocia

l re

spon

sibi

lity.

(1) N

one

(2) N

one

(1)

The

com

pany

has

not

set

up

corp

orat

e so

cial

res

pons

ibili

ty

polic

y or

gui

delin

es y

et.

(2)

The

com

pany

has

not

set

up

corp

orat

e so

cial

res

pons

ibili

ty

polic

y or

gui

delin

es y

et.

36

Item

Impl

emen

tatio

n St

atus

Devi

atio

ns fr

om “

Corp

orat

e Gov

erna

nce

Best-

Prac

tice P

rincip

les fo

r TW

SE/

GTS

M L

isted

Com

pani

es”

and

reas

ons

5.

If th

e co

mpa

ny h

as c

orpo

rate

soc

ial r

espo

nsib

ility

defi

ned

in a

ccor

danc

e w

ith th

e “R

ules

Gov

erni

ng L

iste

d &

OTC

cor

pora

te g

over

nanc

e,”

plea

se

stat

e th

e op

erat

ion

and

the

devi

atio

n fr

om th

e “R

ules

Gov

erni

ng L

iste

d &

OTC

cor

pora

te g

over

nanc

e” :

none

6.

Oth

er m

ater

ials

info

rmat

ion

cruc

ial t

o co

rpor

ate

soci

al r

espo

nsib

ility

(su

ch a

s th

e sy

stem

, mea

sure

s, a

nd p

erfo

rman

ce o

f th

e co

mpa

ny r

elat

ed to

en

viro

nmen

tal p

rote

ctio

n, c

omm

unity

invo

lvem

ent,

soci

al c

ontri

butio

n, s

ocia

l ser

vice

, soc

ial c

harit

y, c

onsu

mer

’s in

tere

st h

uman

rig

ht, s

afet

y an

d he

alth

, and

soc

ial a

ctiv

ities

): no

ne

7.

Plea

se d

etai

l if t

he c

ompa

ny p

rodu

cts

or c

orpo

rate

soc

ial r

espo

nsib

ility

repo

rt is

cer

tified

by

any

inst

itutio

ns: n

one

Item

Impl

emen

tatio

n St

atus

Devi

atio

ns fr

om “

Corp

orat

e Gov

erna

nce

Best-

Prac

tice P

rincip

les fo

r TW

SE/

GTS

M L

isted

Com

pani

es”

and

reas

ons

1.

Prom

ulga

te e

thic

al c

orpo

rate

man

agem

ent

best

pr

actic

e pr

inci

ples

(1

) C

lear

ly sp

ecify

eth

ical

cor

pora

te m

anag

emen

t pol

icie

s in

com

pany

rul

es, e

xter

nal d

ocum

ents

and

und

erta

ke

to r

igor

ousl

y en

forc

e su

ch p

olic

ies

prom

ised

by

the

boar

d of

dire

ctor

s an

d th

e m

anag

ers.

(2)

Esta

blis

h et

hica

l cor

pora

te m

anag

emen

t bes

t pra

ctic

e pr

inci

ple

com

preh

ensi

ve p

rogr

ams

to f

ores

tall

unet

hica

l con

duct

("p

reve

ntio

n pr

ogra

m")

, inc

ludi

ng

oper

atio

nal p

roce

dure

s, g

uide

lines

, and

trai

ning

.

(3)

Whe

n es

tabl

ishi

ng t

he p

reve

ntio

n pr

ogra

m, e

nfor

ce

prev

entiv

e m

easu

res

agai

nst o

ffer

ing

and

acce

ptan

ce

of b

ribes

and

ille

gal p

oliti

cal d

onat

ions

for t

he h

ighe

r ris

k in

volv

ed in

une

thic

al c

ondu

ct b

usin

ess

activ

ities

.

(1) N

one

(2) N

one

(3) N

one

(1)

The

com

pany

has

not

set

up

ethi

cal

corp

orat

e m

anag

emen

t be

st p

ract

ice

prin

cipl

e ye

t.

(2)

The

com

pany

has

not

set

up

ethi

cal

corp

orat

e m

anag

emen

t be

st p

ract

ice

prin

cipl

e ye

t.

(3)

The

com

pany

has

not

set

up

ethi

cal

corp

orat

e m

anag

emen

t be

st p

ract

ice

prin

cipl

e ye

t.

3.3.

6 P

erfo

rmin

g in

tegr

ity o

pera

tion

and

adop

ting

mea

sure

s:


37

Item

Impl

emen

tatio

n St

atus

Devi

atio

ns fr

om “

Corp

orat

e Gov

erna

nce

Best-

Prac

tice P

rincip

les fo

r TW

SE/

GTS

M L

isted

Com

pani

es”

and

reas

ons

2. I

mpl

emen

ting

ethi

cal m

anag

emen

t bes

t pra

ctic

e(1

) A

void

trad

ing

with

une

thic

al p

eopl

e an

d st

ipul

ate

the

ethi

cal b

ehav

ior c

laus

e in

the

busi

ness

con

tact

s.

(2

) Se

t up

the

ente

rpris

e et

hic

depa

rtmen

t to

prom

ote

the

prac

tice

and

supe

rvis

e th

e pr

oces

s.

(3)

Est

abli

sh r

egul

atio

ns f

or p

reve

ntin

g co

nfli

ct o

f in

tere

sts

and

prov

ide

appr

opria

te s

tate

way

.

(4)

Esta

blis

h ef

fect

ive

acco

untin

g sy

stem

s an

d in

tern

al

cont

rol

syst

ems

for

busi

ness

act

iviti

es a

nd p

repa

re

audi

t rep

orts

regu

larly

.

(1) N

one

(2) N

one

(3) N

one

(4) N

one

(1)

The

com

pany

has

not

set

up

ethi

cal

corp

orat

e m

anag

emen

t be

st p

ract

ice

prin

cipl

e ye

t. (2

) T

he c

ompa

ny h

as n

ot s

et u

p et

hica

l co

rpor

ate

man

agem

ent

best

pra

ctic

e pr

inci

ple

yet.

(3)

The

com

pany

has

not

set

up

ethi

cal

corp

orat

e m

anag

emen

t be

st p

ract

ice

prin

cipl

e ye

t. (4

) T

he c

ompa

ny h

as n

ot s

et u

p et

hica

l co

rpor

ate

man

agem

ent

best

pra

ctic

e pr

inci

ple

yet.

3.

Esta

blis

h a

form

al c

hann

el f

or r

ecei

ving

rep

orts

on

unet

hica

l con

duct

and

a c

ompl

aint

sys

tem

to h

andl

e vi

olat

ion

of th

e et

hica

l cor

pora

te m

anag

emen

t rul

es.

Non

eTh

e co

mpa

ny h

as n

ot s

et u

p et

hica

l co

rpor

ate

man

agem

ent b

est p

ract

ice

prin

cipl

e ye

t.

4. E

nhan

ce in

form

atio

n di

sclo

sure

(1)

The

com

pany

set

up

web

site

to

disc

lose

eth

ical

co

rpor

ate

man

agin

g in

form

atio

n.

(2)

Oth

er d

iscl

osur

e ch

anne

ls(

i.e.

Eng

lish

web

site

, de

sign

ated

per

sonn

el i

n ch

arge

of

com

pany

in

form

atio

n co

llect

ion

and

disc

losu

re)

(1) N

one

(2) N

one

(1)

The

com

pany

has

not

set

up

ethi

cal

corp

orat

e m

anag

emen

t be

st p

ract

ice

prin

cipl

e ye

t.(2

) T

he c

ompa

ny h

as n

ot s

et u

p et

hica

l co

rpor

ate

man

agem

ent

best

pra

ctic

e pr

inci

ple

yet.

5.

If th

e co

mpa

ny h

as e

thic

al c

orpo

rate

man

agem

ent b

est p

ract

ice

defin

ed in

acc

orda

nce

with

the

“Eth

ical

Cor

pora

te M

anag

emen

t Bes

t Pra

ctic

e Pr

inci

ples

,” p

leas

e st

ate

the

oper

atio

n an

d th

e de

viat

ion

from

the

“Eth

ical

Cor

pora

te M

anag

emen

t Bes

t Pra

ctic

e Pr

inci

ples

” : n

one

6. O

ther

mat

eria

ls in

form

atio

n cr

ucia

l to

ethi

cal c

orpo

rate

man

agem

ent b

est p

ract

ice

prin

cipl

es: n

one

38

3.3.7 The company does not have corporate governance rules and regulations defined; therefore, it is not applicable

3.3.8 Other important information that helps understand corporate governance: None.

3.3.9 Internal Control System Execution Status

1. Declaration of Internal Control: Please refer to following2. If the company is requested by the SEC o retain CPA’s service for examining internal control

system, the independent Auditor’s Report must be disclosed: None


39

Prince Housing and Development Corporation Declaration of Internal Control

Date: March 15, 2013

The internal control system in 2012 is with the following declarations made in accordance with self-inspection conducted: l. We understand it is the responsibility of the company's management to have internal control

system established, enforced, and maintained. The company internal control system established to provide a reasonable assurance for the realization of operating effect and efficiency (including profits, performance, and assets safety), the reliability of financial report, and the obedience of relevant regulations.

2. Internal control system is designed with limitations; therefore, no matter how perfect it is designed, an effective internal control system is to ensure the realization of the aforementioned three objectives. Due to the change of environment and condition, the effectiveness of an international control system could change at any time. Our internal control system is designed with self-monitoring mechanism; therefore, we are able to have corrective actions initiated upon identifying any nonconformity.

3. We have based on the internal control criteria of "Governing Rules for handling international; control system by public offering companies" (referred to as "the Governing Rules" hereinafter) to determine the effectiveness of internal control design and enforcement. The internal control divided into five elements: 1. Environment control, 2. Risk analysis, 3. Control process, 4.Information and communication, and 5. Supervision. Each element is subdivided into several items. Please refer to the "Governing Rules" for the details of the said items.

4. We have based on the aforementioned internal control criteria to inspect the effectiveness of internal control design and enforcement.

S. We believe that our audits provide a reasonable basis for our opinion. On December 31, 2011 , those standards require that we plan and perform the audit to obtain reasonable assurance about whether the internal control system (including the supervision and management over the subsidiaries) including the fulfillment of business performance and efficiency, the reliability of financial statements and the obedience of governing regulations, and the design and enforcement of internal control system is free of material misstatement and is able to ensure the realization ofthe aforementioned objectives.

6. The Declaration of Internal Control is the content of our annual report and prospectus for the information of the public. For any forgery and concealment of the aforementioned information to the public, we will be held responsible by law in accordance with Securities Transaction Regulation No. 20, No.32, No.171, and No.174.

7. We hereby declared the Declaration ofInternal Control was approved by Board of Directors on March 15,2013 unanimously by the directors at the meeting.

Prince Housing and Development CorporationChairman: Na-Tian Zhuang President: Ming-Fan Xie

40

3.3.10 The punishment delivered to the company and the staff of the company, or, the punishment delivered by the company to the staff for a violation of internal control system, the major nonconformity, and the corrective action in the most recent years and up to the date of the annual report printed: None

3.3.11 Resolutions reached in the Shareholders’ Meeting or by the board of directors in the most recent years and up to the date of the annual report printed:

The company cash dividends distribution $0.5/share was passed in the board meeting in March 15, 2013, but capital increase out of earnings stock dividends $1/share (0.1 shares per share) distribution date will depend on shareholders’ meeting.

3.3.12 The directors or supervisors who have objected to the resolutions reached by the board of directors and the objections are recorded or declared in writing in the most recent year and up to date of the annual report printed:

The Chairman Na-Tian, Zhuang opposed to Ta-Chen Construction & Engineering Corp’s plan of selling the holding shares of our company in the board of directors meeting, March 15, 2013, and other directors had no opposition.

3.3.13 The resignation or discharge of personnel who are responsible for financial statements in the most recent years and up to the date of the annual report printed:

CPA firm Name Auditing period NoteKPMG Yi-Zhang Lin Kuo-Hua Wang Jan 1, 2012~Dec 31, 2012

3.4 CPAs fees(1) The non-auditing fees paid to CPAs, CPA firm, and the CPA form’s related party accounted for over

a quarter of the total auditing fees, the auditing amount and non-auditing amount; also, the non-auditing service must be disclosed:

Title Name To assume a post Date Expiration

The resignation or expiration the

reasonManaging Director Zhong-Jan Wu 2010.06.24 2012.5.2 resign

Range of Audit fees and Non-Audit Fees Unit: NT$ thousands

Audit Fees Non-Audit Fees Total

1 Below 2,000 0 0 02 2,000(included)~4,000 0 0 03 4,000(included)~6,000 5,991 4,142 10,1334 6,000(included)~8,000 0 0 05 8,000(included)~10,000 0 0 06 More than 10,000(included) 0 0 0

Range of Audit FeesItem


41

CPA

firm

CPA

Aud

it Fe

es

Non

-Aud

it Fe

esTe

rmR

emar

kSy

stem

D

esig

nIn

dustr

ial an

d Co

mm

ercia

l Re

gistr

ation

Hum

an

Res

ourc

eOt

her

Tota

l

KPM

GY

i-Zha

ng L

in5,

991

015

20

3,99

04,

142

Jan

1 ,2

012

~Dec

31,

201

2$3

,023

for e

ntiti

es o

rgan

izat

ion,

$7

66 fo

r tra

nsfe

r pric

ing

repo

rt, a

nd

$201

for c

orpo

rate

bon

d.K

uo-H

ua W

ang

(2)

If

the

audi

ting

fee

paid

in th

e ye

ar r

etai

ning

ser

vice

fro

m a

noth

er C

PA F

irms

is le

ss th

an th

e au

ditin

g fe

e pa

id in

the

year

bef

ore,

the

amou

nt o

f au

ditin

g fe

e be

fore

and

afte

r the

cha

nge

of C

PA F

irm a

nd th

e re

ason

s fo

r the

sai

d ch

ange

mus

t be

disc

lose

d: N

one

(3)

If th

e au

ditin

g fe

e pa

id in

the

year

ret

aini

ng s

ervi

ce f

rom

ano

ther

CPA

Firm

s is

ove

r 25

% le

ss th

an th

e au

ditin

g fe

e pa

id in

the

year

bef

ore,

the

amou

nt a

nd ra

tio o

f aud

iting

fee

redu

ced

and

the

reas

ons

for t

he s

aid

chan

ge m

ust b

e di

sclo

sed:

Non

e

3.5

CPA

Rep

lace

men

t Inf

orm

atio

n: N

one

3.6

If t

he c

hair

man

, pre

side

nt, a

nd fi

nanc

ial o

r ac

coun

ting

man

ager

of

the

com

pany

who

had

wor

ked

for

the

inde

pend

ent

audi

tor

or th

e re

late

d pa

rty

in th

e m

ost r

ecen

t yea

r, th

e na

me,

title

, and

term

with

the

inde

pend

ent a

udito

r or

the

rela

ted

part

y m

ust b

e di

sclo

sed:

Non

e

3.7

Equ

ity

tran

sfer

red

and

equi

ty p

ledg

ed (

or c

hang

es t

here

to)

by D

irec

tors

, Su

perv

isor

s, D

epar

tmen

t H

eads

and

Sh

areh

olde

rs o

f 10%

Sha

reho

ldin

g or

Mor

e du

ring

the

prec

edin

g fis

cal y

ear

or in

the

curr

ent fi

scal

yea

r up

to th

e da

te o

f pr

intin

g of

the

annu

al r

epor

t:

Cha

nges

in S

hare

hold

ing

of D

irect

ors,

Sup

ervi

sors

, Man

ager

s an

d M

ajor

Sha

reho

lder

s

42

Title

Nam

e

2012

As o

f Apr

. 30,

201

3

Hol

ding

Incr

ease

(Dec

reas

e)

Pled

ged

Hol

ding

Incr

ease

(Dec

reas

e)

Hol

ding

Incr

ease

(Dec

reas

e)

Pled

ged

Hol

ding

Incr

ease

(Dec

reas

e)M

ajor

Sha

reho

lder

Uni

-Pre

side

nt E

nter

pris

es C

o.11

,345

,986

-

--

Cha

irman

Hon

g-Ya

o In

vest

men

t Co.

Ltd

18

8,27

6 -

--

Cha

irman

Hon

g-Ya

o In

vest

men

t Co.

Ltd

Rep

:Na-

Tian

Zhu

ang

1,30

8,17

4 -

--

Man

agin

g D

irect

orFu

-She

ng D

evel

opm

ent C

o. L

td74

1,25

4 (1

,900

,000

)(1

,900

,000

)-

Man

agin

g D

irect

orFu

-She

ng D

evel

opm

ent C

o. L

td R

ep:

Min

g-H

ui C

hen

474,

750

(4,0

40,0

00)

(4,0

40,0

00)

-M

anag

ing

Dire

ctor

Jiu-

fu In

vest

men

t Co.

Ltd

1,03

5,91

5 -

--

Man

agin

g D

irect

orB

o-M

ing

Hou

1,50

9,79

9 -

--

Man

agin

g D

irect

orYu

n W

en In

vest

men

t Co.

Ltd

1,01

5,60

3 -

--

Man

agin

g D

irect

orZh

ong-

Jan

Wu

353,

462

--

-D

irect

orTa

i-Bo

Inve

stm

ent C

o. L

td3,

935,

218

--

-D

irect

orTa

i-Bo

Inve

stm

ent C

o. L

td R

ep: J

ian-

De

Wu

521,

544

--

-D

irect

orC

heng

-Lon

g In

vest

men

t Co.

Ltd

1,72

2,08

5 -

--

Dire

ctor

Che

ng-L

ong

Inve

stm

ent C

o. L

td R

ep:

Yin

g-Zh

i Zhu

ang

48,9

46

--

-D

irect

orC

heng

-Da

Inve

stm

ent C

o. L

td46

1,98

8 -

--

Dire

ctor

Che

ng-D

a In

vest

men

t Co.

Ltd

Rep

: Pi

ng-Z

hi W

u80

4,57

3 -

--

Dire

ctor

Zhao

-Mei

Wu

Zeng

2,66

0,90

4 -

- -

Dire

ctor

Bo-

Yi H

ou1,

099,

351

- -

- D

irect

orC

hao-

Wen

Hua

ng1,

068,

950

- -

- D

irect

orR

en-Q

in C

hen

(759

,709

)-

--

Dire

ctor

Jing

-Xin

g C

hen

40,8

27

--

-D

irect

orH

ong-

Yan

Jhua

ng34

,660

-

--

Supe

rvis

orG

uang

-Wei

Inve

stm

ent C

o. L

td1,

366,

432

--

-Su

perv

isor

Gua

ng-W

ei In

vest

men

t Co.

Ltd

Rep

: Y

ing-

Nan

Zhu

ang

104,

378

- -

- Su

perv

isor

Da-

Xio

ng X

u45

,749

-

--

Pres

iden

tM

ing-

Fan

Xie

5,45

0 -

--

Seni

or V

ice

Pres

iden

tW

en-Z

hen

Qiu

(20,

605)

- (1

8,00

0)-

Man

ager

Yin

g-Ji

e Zh

uang

40,0

00

--

-M

anag

erJu

n-Li

ang

Lin

717

- -

- M

anag

erD

a-C

hang

Dai

306

- -

- V

ice

Ass

ista

nt P

resi

dent

Ken

g-W

ang

Zhen

(290

,112

)-

--


43

Not

e1: S

hare

hold

ers

with

a s

take

of 1

0 pe

rcen

t or m

ore,

the

reci

pien

t's n

ame

shal

l be

disc

lose

d al

ong

with

a n

ote

expl

aini

ng.

Not

e2: W

here

the

reci

pien

t of t

he e

quity

tran

sfer

or e

quity

ple

dge

has

ties

to th

e co

mpa

ny, i

t has

to fi

ll in

the

follo

win

g ta

bula

tion.

Not

e3: O

ther

dire

ctor

s, s

uper

viso

rs, m

anag

ers

and

maj

or s

hare

hold

ers

have

no

chan

ge in

equ

ity.

Nam

eR

easo

n of

Tr

ansf

erD

ate

of

Tran

sact

ion

Tran

sfer

eeR

elat

ions

hip

betw

een

Tran

sfer

ee a

nd

Dir

ecto

rs, S

uper

viso

rs, M

anag

ers a

nd M

ajor

Sh

areh

olde

rsSh

ares

Tran

sact

ion

Pric

e (N

TD

)

Non

e.

Shar

es T

radi

ng w

ith R

elat

ed P

artie

s

Shar

es P

ledg

e w

ith R

elat

ed P

artie

s

Nam

eR

easo

n of

Pl

edge

Dat

e of

Tr

ansa

ctio

nTr

ansf

eree

Rela

tions

hip

betw

een

Tran

sfer

ee a

nd D

irect

ors,

Supe

rviso

rs, M

anag

ers

and

Maj

or S

hare

hold

ers

Shar

esSh

ares

ho

ldin

g%

Shar

es

Pled

ged

%

Pled

ged

Am

ount

Fu-S

heng

D

evel

opm

ent C

o. L

tdre

deem

ed20

12.3

.20

Gra

nd B

ills

Fina

nce

Cor

p.N

O1,

900,

000

0.68

%0%

(19,

000,

000)

Tai-B

o In

vest

men

t C

o. L

tdre

deem

ed20

12.3

.20

Meg

a B

ills

Fina

nce

Co.

, Ltd

NO

4,04

0,00

00.

44%

0%(4

0,40

0,00

0)

44

3.8

The

rel

atio

nshi

p of

the

top

ten

shar

ehol

ders

as d

efine

d in

the

Fina

nce

Stan

dard

Art

icle

6 :

Nam

eSh

areh

oldi

ngSp

ouse

& M

inor

Shar

ehol

ding

by N

omin

eeA

rran

gem

ent

The

rel

atio

nshi

p be

twee

nan

y of

the

Com

pany

’sTo

p Te

n Sh

are

hold

ers

Rem

arks

Shar

es%

Shar

es%

Shar

es%

Nam

eR

elat

ion

Uni

-Pre

side

nt E

nter

pris

es

Co.

124,

805,

850

10.4

5%0

00

0Ta

i-Bo

Inve

stm

ent C

o. L

tdD

irect

or

Kao

-Qua

n In

vest

men

t Co.

Ltd

Cha

irman

Tai-B

o In

vest

men

t Co.

Ltd

(Rep

. Jia

ng-D

e W

u)53

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4.46

%0

00

0U

ni-P

resi

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erpr

ises

Co.

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ctor

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tral B

ank

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stm

ent o

f K

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om o

f Sau

di A

rabi

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trust

ed to

JP

Mor

gan

36,2

22,0

693.

03%

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00

Non

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one

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hen

Con

stru

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En

gine

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g C

orp

34,4

35,7

202.

88%

00

00

Non

eN

one

Kao

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n In

vest

men

t Co.

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d (R

ep. Q

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)31

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2.63

%0

00

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Cha

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Wu

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29,2

69,9

462.

45%

00

00

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g-Yo

ng-X

ing

Inve

stm

ent

Co.

,Ltd

20,1

81,9

321.

69%

00

00

Non

eN

one

Jiu-

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vest

men

t Co.

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19,0

76,0

681.

60%

00

00

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eN

one

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ong

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ent C

o.

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18,9

42,9

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00

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g Sp

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td

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one

Bas

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Uni

t: Sh

are;

%


45

3.9

Inve

stm

ents

of D

irec

tors

, Sup

ervi

sors

, man

ager

s an

d di

rect

ly o

r in

dire

ctly

con

trol

led

busi

ness

on

the

rein

vest

ed b

usin

ess

and

the

tota

l sha

reho

ldin

gs r

atio

:

Inve

stee

sIn

vest

men

t of t

he C

ompa

ny

Inve

stm

ents

from

Dir

ecto

rs,

Supe

rvis

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Man

ager

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di

rect

ly o

r In

dire

ctly

Con

trol

led

Bus

ines

s

Tota

l Inv

estm

ent

Shar

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es%

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Che

ng-S

hi In

vest

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t Hol

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, Ltd

120,

807,

230

100.

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Annual Report 2012IV

Capital Overview


47

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48

Share TypeAuthorized Capital

RemarksIssued Shares Un-issued Shares Total Shares

Common Stock 1,194,476,449 5,523,551 1,200,000,000

B. Type of Stock

C. Aggregated declaration information: N/A

4.1.2 Status of Shareholders

As of 05/15/2013

As of 05/15/2013

Item Government Agencies

Financial Institutions

Other Juridical Person

Domestic Natural Persons

Foreign Institutions & Natural

Persons

Total

Number of Shareholders 1 1 155 51,820 178 52,155

Shareholding (shares) 711 325,000 498,365,665 485,826,808 209,958,265 1,194,476,449

Percentage (%) 0 0.03 41.72 40.67 17.58 100.00

4.1.3 Shareholding Distribution Status

A. Common Shares (The par value for each share is NT$10) As of 05/15/2013Class of Shareholding

(Unit : Share) Number of Shareholders Shareholding (Shares) Percentage

1 ~ 999 30,281 6,834,050 0.57%1,000 ~ 5,000 14,747 32,180,625 2.69%

5,001 ~ 10,000 3,233 23,737,162 1.99%10,001 ~ 15,000 1,381 16,906,939 1.42%15,001 ~ 20,000 574 10,340,204 0.87%20,001 ~ 30,000 585 14,425,503 1.21%30,001 ~ 40,000 280 9,978,633 0.84%40,001 ~ 50,000 179 8,294,181 0.69%

50,001 ~ 100,000 344 24,205,201 2.03%100,001 ~ 200,000 184 26,666,001 2.23%200,001 ~ 400,000 129 36,306,298 3.04%400,001 ~ 600,000 59 28,878,561 2.42%600,001 ~ 800,000 28 19,785,874 1.66%

800,001 ~ 1,000,000 12 10,687,526 0.89%1,000,001 or over 139 925,249,691 77.45%

Total 52,155 1,194,476,449 100.00%


49

4.1.4 List of Major Shareholders As of 05/15/2013

Shareholder's NameShareholding

Shares PercentageUni-President Enterprises Corp. 124,805,850 10.45%Tai-Bo Investment Co. Ltd 53,287,399 4.46%Central Bank Investment of Kingdom of Saudi Arabia entrusted to JP Morgan 36,222,069 3.03%Ta Chen Construction & Engineering Corp. 34,435,720 2.88%Kao-Quan Investment Co. Ltd 31,446,866 2.63%Wu Ceng Zhao Mei 29,269,946 2.45%Xin Yong Xing Investment Corp 20,181,932 1.69%Jiu-Fu Investment Co. Ltd 19,076,068 1.60%Cheng Long Investment Corp 18,942,942 1.59%San Shing Spinnign Co., Ltd 17,245,039 1.44%

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share Unit: NT$

Item 2011 2012 01/01/2012-03/31/2012

Market Price per ShareHighest Market Price 31.50 25.30 22.00Lowest Market Price 13.00 15.55 19.90Average Market Price 23.04 20.88 20.99Net Worth per ShareBefore Distribution 13.97 14.19 14.48After Distribution 13.47 Note 4 N/AEarnings per ShareWeighted Average Shares 1,054,056,584 1,159,462,243 1,159,462,243

Diluted Earnings Per Share Before retrospectively adjustment 2.20

Before retrospectively adjustment 1.54 0.09

Adjusted Diluted Earnings Per Share After retrospectively adjustment 1.99 Note 4

Dividends per ShareCash Dividends 0.5 Note 4 N/AStock Dividends ● Dividends from Retained Earnings 1.0 Note 4 N/A ● Dividends from Capital Surplus 0 Note 4 N/AAccumulated Undistributed Dividends 0 0 N/AReturn on InvestmentPrice / Earnings Ratio (Note 1) 1.0 Note 4 N/APrice / Dividend Ratio (Note 2) 0 Note 4 N/ACash Dividend Yield Rate (Note 3) 0 0 N/A

50

Note 1: Price / Earnings Ratio = Average Market Price / Earnings per ShareNote 2: Price / Dividend Ratio = Average Market Price / Cash Dividends per ShareNote 3: Cash Dividend Yield Rate = Cash Dividends per Share / Average Market PriceNote 4: The shareholders’ meeting has not yet determined the distribution of 2011 retained earnings.

4.1.6 Dividend Policy and Implementation Status

A. Dividend PolicyDividends will allocate in cash and common stocks as 50%-50%. If we need to keep our cash in hand because of the plan of capital outgoings, we will have a higher percentage of distribution of cash dividend. The dividends will be distributed in accordance with the resolution that is approved by the Board of Directors and the Annual Shareholders’ Meeting. Weather the percentage of cash or stock dividends of all dividends, it can’t be lower than 30%.

B. Implementation

Cash Dividends Stock Dividends

2006 0.55 0.752007 0.3 0.32008 None None2009 0.2 0.42010 0.9 0.92011 0.5 1.0

2012 Distributed byShareholders’ meeting

Distributed byShareholders’ meeting

Year Item

C. Proposed Distribution of Dividend1. Available for distribution a. Undistributed Earnings in the beginning 587,892,726 b. Less: adjustment of equity investment (9,357,241) c. plus: Net income 1,785,929,595 d. Available for distributed accumulated earnings 2,364,465,080

2. Items a. a. Provision of legal reserve 178,592,960 b. Payment of cash dividends ($0.5 per share) 597,238,225 c. Payment of stock dividends ($1 per share) 1,194,476,450 d. Accumulated un-distributed earnings 394,157,445

Note 1: Distribution of employee bonus: $32,146,733 (cash); of compensation for Directors and supervisors: $48,220,099.


51

4.1.7 The effect of business performance, earnings per stock, and return on investment by stock dividend

2012(Estimate)

Pain-in capital in beginning (thousands) 11,944,764

DistributionCash dividend per share (NT Dollars) 0.50Stock divident per share-retained earnings 0.10Stock divident per share-capital reserve 0

Business performance

Operation income

N/A(Note 1)

Operation income (compare with last year)Net incomeNet income (compare with last year)Earning per shareEarning per share (compare with last year)Average of return on investment

Fictitious earnings per share & ratio of profit

Capital increase paid out of earnings -> cash dividend

Fictitious earnings per share

N/A(Note 1)

Fictitious average of return on investment

No capitalization of capital reserveFictitious earnings per shareFictitious average of return on investment

No capitalization of capital reserve and capital increase paid out of earnings -> cash dividends

Fictitious earnings per shareFictitious average of return on investment

Year Item

Note 1: No preparation and declaration of any financial forecast in 2012, therefore, no need to disclose the affect of issuance of bonus shares.

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

If there are earnings for distribution at the end of each fiscal year, after offsetting any loss of prior year(s) and paying all taxes and dues, 10% of the remaining net earnings shall be set aside as legal reserve, and appropriation will be made as special reserve in accordance with the Securities Exchange Law. The remaining net earnings can be distributed together with prior accumulated inappropriate retained earnings. The Board of Directors will consider the factors that were mentioned above when making the dividend distribution proposal.

Information on employee bonus and compensation for directors and supervisors as given in the company charter:

52

1. 2 % plus as bonus for employees.2. 3 % as compensation for directors and supervisors.3. Shareholders’ meeting could resolve the distribution of retained earnings.

B. The base of allocate employee bonus, directors’ and supervisors’ remuneration and stock dividends:

It’s base on the net income, legal reserve, and company charter and reported as an operation expense. However, if there is any difference from the decided amount from shareholders’ meeting and the actual amount, it would report as profit/loss of next year.

C. Profit Distribution Approved in Board of Directors Meeting for Employee Bonus and Directors’ and Supervisors’ Remuneration

(1) Recommended Distribution of Employee Bonus and Directors’ and Supervisors’ Remuneration: Employee Bonus – in Cash $32,146,733 Directors' and Supervisors' Remuneration $48,220,099

(2) Ratio of Recommended Employee Stock Bonus to Capitalization of Earnings: None

(3) Recounted EPS after Recommended Distribution of Employee Bonus and Directors’ and Supervisors’ Remuneration:

Employee Bonus – in Cash $32,146,733 Directors' and Supervisors' Remuneration $48,220,099 Recounted EPS (NT$) $ 1.54

D. Information of 2012 Earnings Set Aside to Employee Bonus and Directors’ and Supervisors’ Remuneration: None

4.2 Issuance of Corporate Bonds

A. On Aug 24th, 2011, Board of Directors decided to issue NTD 10-15 millions of domestic secured convertible bonds (First time) and NTD 10-15 millions of unsecured convertible corporate bonds (Second time). Total is NTD 20-30 millions.

B. On March 26th, 2012, Board of Directors decided to issue domestic secured corporate bonds and total is within 20 millions. This issuance completed on July 12, 2012.

C. On March. 15,Board of Directors decided to issue domestic secured corporate bonds $15 million-$30 million to strengthen company financial structure.


53

Type of Corporate Bonds Domestic Secured Corporate Bonds

Issuance Date 101.7.12Par Value $100,000Issuance price As ParTotal Price $2 millionsRate Fixed rate 1.33%Period 5 years. Mature date:106.7.12Guarantee Agency Bank of TaiwanUnderwriter MasterLind Securities Corporate.Lawyer Ho Yen, YenCertified Public Accountant Yi Cheng, Lin and Su Chung,ChengRedemption At maturityPrinciple $2 millions

4.3 Issuance of Preferred Shares: None

4.4 Global depository receipts: None

4.5 Employee Stock Options: None

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

4.7 Information on Implementation of the Company’s Funds Utilization Plans

(a) Description of the plans: The decisions made by Board of Directors of issuance of bonds in 2011 and 2013 are all in preparation and will be implemented depend on our financial needs.

(b) Status of implementation: The fist secured corporate bonds have implemented on July 12, 2012, with total price NTD$2 millions to payback our short-term loans.

This implementation has efficiently lower our debt rate and strengthen our financial structures.

Issuance of Corporate Bonds

Annual Report 2012V

Operational Highlights


55

V. Operational Highlights5.1 Business Activities

5.1.1 Business Scope

A. Main areas of business operations 1. Development, operation and rental/sale of farms, forests, and livestock aquaculture farms 2. Commissioned the construction and rental/sale of public housing & commercial buildings, tourist

hostels, tourism and recreation business (children’s playground, water park, etc.), indoor/outdoor sports place, parking lots, super markets, ports, and warehouses etc.

3. Development, operation and rental of industrial and residential zone. 4. Promoting the business of manufacturing and trading of construction materials and proxy of

construction skills. 5. Rental and sale of reality 6. Proxy, business, manufacturing and import of sports equipments 7. The commission of the land readjustment 8. E201010 Landscape engineering 9. I503010 Landscape and interior design10. ZZ99999 In addition to the licensing business, an operating act is not prohibited or restricted.

B. Revenue distribution

Major Divisions Total Sales in Year 2011 (%) of total salesConstruction Income 7,166,541 91%

Other Operating Income 725,956 9%Total 7,895,497 100%

Unit；NT$ Thousands

C. Current product line, future service and new products development Current products and services would be the basis to develop the future plan. 1. Operating business A. Products - Focus on residential business, plus business building, rental and BOT project. B. Business management - implement performance management system - emphasize on human resources - By using computer and information tools to strengthen the efficiency and quality of decision. 2. Non-operating business Integration of enterprise resources of Tainan Group in diversification - Leisure service: Howard Beach Resort Kenting, Splendor Hotel Taichung, Time Square

International Hotel. - Biochemical Science and Technology: Taiwan Scino Pharm, Prince Technology Co., Ltd., Bio Sun

Technology Co., Ltd.

56

5.1.2 Industry Overview

In recent years, our government keeps releasing a variety of policies to stable the house selling price. The demand for the residence and commercial usage is still the mainstream. Also, we focus on developing the new residential area in sub-urban in northern Taiwan

The correlation among upstream, midstream and downstreamUpstream: The main raw materials of upstream are lands and construction materials. Because of the

limited resources of materials, it causes the supply and demand unbalanced. But, as of now, there are more and more replaced construction materials.

Midstream: Contractors of building the project.Downstream: Real estate breakage is responsible for the sales

5.1.3 Research and Development

Research and development is our target to keep pursuing. Because of the shortage of construction workers and lands, Prince focuses on research and improving our construction skills. Also, we dispatch employees to Japan on a regular basis to learn the latest and the most environmental standardized construction method. In internal management, we use digitized and standardized progress to spread the information over the company to lower operation cost.

5.1.4 Long-term and Short-term Development

A. Short-term Development1. Operating Business - Effective use of assets and accurate to purchase land - Proactive to receivables and track cask flow - Effective to control cost, personnel training, and prudent investment

2. Real Estate Securitization - Old Community Renewal and BOT project. - Rental and sell of warehouse and business office building to increase profit.

3. Promote the industry related products to increase income.

B. Long-term DevelopmentPrince focuses on tourism facilities and international hotels. So far, we have Howard Beach Resort Kenting (jointed venture with Howard Hotel), Splendor Hotel (jointed venture with CMP Group) and International Time Square Hotel.

Prince is planning to run “Cloud service system” in order to combine all the basis life services to enhance the living environment into a better level.


57

Area

Taipei

1. Changchun Building

2. Changchun Office Building

3. I-Kao Building4. Neihu Financial

Center5. Prince Building6. President

International Tower

Taipei Area:1. Taipei City2. New Taipei

City3. Taoyoan City4. Hsinchu

City/Country

Taichung

Wanton Financial Center Taipei Area:1. Taichung City2. Chunghwa

City/Country

Tainan

1. Prince Building2. Prince Finance

Building

Taipei Area:1. Taichung City

Kaohsiung None

Kaohsiung Area:1. Kaohsiung

City2. Pitung City/

Country

5.2.2 Market and Sales Overview

5.2.1 Market Analysis

A. Sales (Service) Region

1. Pu Lo Wang Shi2. Prince Town3. Prince Global Village4. Shan Ger Li La5. Prince International

Village6. Prince Sun Town7. Prince Phoenix Town8. Prince Tun Yuan9. Prince Beauty Hall10. Prince Mei Sui11. Prince Vacation

12. Prince 10113. Sansia International

Village14. Guishan Global

Village15. Prince Jin-Hua16. Prince Sky Building17. Prince College18. Taipei Sinyi19. Central Park20. Prince Fu

1. Yuan Han Li Chan2. Prince Seattle3. Prince Jing Jing Yuan4. Prince Jung Fu5. Four Season. Cambridge6. Prince Manor7. Ping Chun Fung Chia8. Prince Sen Huo9. Prince Yuan Ye10. Lin Tung Boulevard11. Prince Zuo Shin Ming A12. Chan Chan Prince13. Prince Culture

14. Prince Yo Life15. Prince New

Generation16. Sung Guan Prince17. Yun Yun Prince18. Prince Ju19. Prince Hui20. Prince Dau21. Prince Fu22. Jing Yun Sian23. The Cloud Century24. Prince Hai Yan

1. Prince Culture2. Prince Life Park3. Century Empire4. Fashion Spring5. Southern Taiwan Science

Splendor6. Prince Golden Brick7. Century Splendor8. Wen Yuan Hall9. Fashion House10. Prince Fu Di11. Prince Wen Yuan

12. Prince. New Culture13. Golden Age14. Culture Hall15. Prince Fung Ho16. Nan Ger Zi Li17. Prince New Culture

II18. Prince Hua Bo II19. Prince Mei Xue20. Prince Hua Bo III21. Prince Fung Yun Hui22. Prince i-Cloud

1. Prince Space2. Prince Harvard3. Prince Chun Di4. Prince Dragon House5. Prince In Mon Hu6. Prince Chun Pin7. Prince Chun Pin Haw

Chia8. Prince Dian Sha9. Prince Sha Lui Di10. Prince Seattle

11. Prince Tun-Yuan12. Prince Dragon13. Prince New York

57th Street14. Prince Culture15. Prince Yuan-Shan16. Prince Town17. Prince Shi Bo18. Prince Shi Yun19. Prince Hua Yang20. Prince Bon

58

5.2 Market and Sales Overview

B. Market Share (%) of Major Product N/A

C. Market demand and supply1. Supply - Supply slowed down because of the floor area ration policy. - Product diversification

2. Demand - Basic Market: For personal use. The demanders in this category are the real estate demanders

because they usually change or buy houses not affected by the economic boom. - Investment Market:

a. Investment market demand: people take the real estate as an investment tool.b. Speculative market demand: it usually happens during the booming economic period.

3. GrowthPrince already focus on its selling and marketing on integrating real estate and high-tech industry. Customers can collect new information, shop, watch entertainment show and understand how Prince manages the communities via internet at home. In the other hand, Prince releases the application system in the smart phone online store which can attract the potential customers to view the case online via smart phone. Customers can also contact us via internet if they have any problem and we could improve the after-sale service time after time.

D. Favorable and Unfavorable Factors in the Long-range Future 1. Competition strengthSince 1973, we insist our spirit of “good location, good design, good quality, and good price.” Also, Tainan Group provides us lot of resource to make the best building in Taiwan.

2. Strength:A. Under circumstance of limited supply of land, market price will keep stable.B. Government opens the real estate market to foreign and China and they can invest the market

directly.C. Consumers ask more about the living quality which make them willing to change or purchase a

new house.D. Administrative region re-design (Taichung, Tainan, and Kaohsiung) and new public transportation

(high speed rail, MRT, and high way) has been completed or extended from original route. We expected that will expand the urban living area.

3. WeaknessA. A lot of pre-sale cases in the past few years made a large amount of inventory.B. Government policies are trying to slow down the selling price and speculation.C. The consumption ability decline and inflation affect the economic.


59

4. Corresponding Policy

We will focus our project on the spirit of “good location, good design, good quality and good price” plus good after-sale services which will help us keep customers.

5.2.2 The Production Procedures of Main Products

A. Major Products and Their Main UsesPrince’s main products are houses, apartments, high-end residential buildings, stores, and high-end office buildings.

B. Major Products and Their Production Processes

60

5.2.3 Supply Status of Main Materials

1. Location: Base on the land information, we evaluate it by researching, a roughly planning, and profit ability analyzing. If we think the land is workable after evaluating it, we would choose it as our construction site.

2. Plan and design: We will analyze again about the land features, laws, market, product position and business plan. Also, do some detail discussion about the flat space, façade, structure and facilities of the product.

3. Sales: Product cost analyzing, selling price planning, advertisement and promotion, and marketing.4. Project: After getting permission from government, we would start to construct the site base on the

permitted design.5. Registration: After we receive the license and apply for double checking the area, we could register

the land to keep the property right.6. Turn in house: Customer would check before accept the completed and licensed building. After that,

Prince will transfer the property right and building to customer. 7. After-sale service: Prince will set up a service center which will provide the services of maintenance

of buildings, repair, community safety, and cleanness.

5.2.4 Major Suppliers and Clients

Prince’s main products are offered to the public, and we don’t have any customer whose purchase value has been reach to 10% of total sales.

A. Major Suppliers Information for the Last Two Calendar Years

2012 2010Company

Name Amount % Relationwith Issuer

CompanyName Amount % Relation

with IssuerCheng-Shi

Construction Corp 699,743 12 Subsidiary Prince Water and Electricity Corp. 367,848 6 Subsidiary

Prince Water and Electricity Corp. 365,254 6 Subsidiary Cheng-Shi

Construction Corp 224,166 4 Subsidiary

Ta Chen Construction &

Engineering Corp.267,329 4 Subsidiary

Ta Chen Construction &

Engineering Corp.158,960 3 Subsidiary

Unit；NT$

Note 1: Major suppliers mean each commanding 10%-plus share of annual order volume.

Unit；Pin / NTD thousands5.2.5 Production over the Last Two Years

2012 2011

Capacity Quantity Capacity Quantity

House 57,246.39 10,268,926 26,925.04 2,264,355Total 57,246.39 10,268,926 26,925.04 2,264,355

YearSales

Major Products


61

Unit；Pin / NTD thousands5.2.6 Sales over the Last Two Years

2012 2011

Local Local

Quantity Amount Quantity AmountHouse 53,631.87 7,892,497 32,044.76 9,023,105Total 53,631.87 7,892,497 32,044.76 9,023,105

YearSales

Major Products

5.3 Human Resources

Year 2011 2012 01/01/2013- 05/15/2013

Number of Employees

Employees 59 67 71Technician 3 5 5

Others 173 174 179Total 235 246 255

Average Age 37 37 38Average Years of Service 8 8 9

Education

Ph.D. 1 1 1Masters 35 36 38

Bachelor’s Degree 151 171 178Senior High School 41 29 28

Below Senior High School 7 9 10

5.4 Disbursement for environmental protection

Under construction period, mud, sands and litters would result in a mess of the environment pollution. Therefore, Prince dispatches our employees to Japan to learn about the construction skills and environmental management. We always try our best to keep the site area being mess up.

5.5 Labor Relations

A. Management System: Promotion, welfare, rewards and punishments, vacations, pension, and redundancy payments etc.

B. Welfare: Employee welfare committee, education grant, employees' children scholarships, employee training, domestic/foreign company trip, site accident insurance, and etc.

C. Prince is in order to enhance the quality of human resources and development advantages, we always hold the education events and training programs in domestic and foreign.

D. The company suffered due to loss of labor disputes as so far: None

62

5.6

Impo

rtan

t Con

trac

ts

Agr

eem

ent

Part

ySt

art D

ate

Con

tent

Res

tric

tion

BO

TPr

ince

Hou

sing

(A)

Nat

iona

l Tai

wan

Uni

vers

ity

(B)

Mar

17,

200

5

B s

houl

d re

spon

se fo

r acc

ess

the

owne

rshi

p an

d th

e rig

ht o

f use

of

the

land

in th

is p

rogr

am. A

sho

uld

com

plet

e th

e co

nstru

ctio

n in

3 y

ears

an

d op

erat

e it

for 3

2 ye

ars.

Stu

dent

s pa

y th

e re

nt a

nd o

ther

exp

ense

to A

.

1. D

urin

g th

e co

nstru

ctio

n pe

riod,

the

ratio

of

own

fund

s to

inve

st in

this

pro

gram

cou

ld n

ot lo

wer

th

an 3

0%.

2. D

urin

g th

e op

erat

ion,

the

ratio

of s

tock

equ

ity to

to

tal a

cces

s co

uld

low

er th

an 2

5%. T

he r

atio

of

curr

ent a

sset

s to

cur

rent

liab

ility

cou

ld n

ot lo

wer

th

an 1

00%

/3.

Non

e tra

nsfe

rabl

e

BO

TPr

ince

Hou

sing

(A)

Nat

iona

l Che

ng K

ung

Uni

vers

ity (B

)M

ay 1

0, 2

005

B s

houl

d re

spon

se fo

r acc

ess

the

owne

rshi

p an

d th

e rig

ht o

f use

of t

he

land

in th

is p

rogr

am. A

shou

ld g

et th

e lic

ense

with

in 3

yea

rs s

tarte

d fr

om

the

date

con

tract

sig

ned.

Cha

rtere

d pe

riod

for

stud

ent d

orm

itory

is 3

5 ye

ars

and

shop

ping

mal

l and

hot

el is

50

year

s

Non

e tra

nsfe

rabl

e

Synd

icat

ed L

oan

Prin

ce H

ousi

ng (A

)Ta

Cho

ng B

ank

and

othe

r 9

finan

cial

inst

itutio

ns (B

)Ju

ly 1

0, 2

006

Tota

l am

ount

is 2

5 bi

llion

. The

item

s ar

e in

clud

ing

med

ium

-term

loan

s an

d co

mm

erci

al p

aper

.

Cur

rent

ratio

, deb

t rat

io, a

nd in

tere

st c

over

age

ratio

cou

ldn’

t low

er th

an th

e re

stric

tion

num

ber.

Ban

k w

ill c

heck

it o

nce

a ye

ar.

Synd

icat

ed L

oan

Prin

ce H

ousi

ng (A

)M

ega

Inte

rnat

iona

l C

omm

erci

al B

ank

and

othe

r 7

finan

cial

inst

itutio

ns (B

)

Jan

4, 2

006

Tota

l am

ount

is 2

1.6

billi

on. T

he

item

s ar

e in

clud

ing

long

-term

loan

s an

d gu

aran

tee

rece

ivab

le.

Cur

rent

ratio

, deb

t rat

io, a

nd in

tere

st c

over

age

ratio

cou

ldn’

t low

er th

an th

e re

stric

tion

num

ber.

Ban

k w

ill c

heck

it o

nce

a ye

ar.

Synd

icat

ed L

oan

Prin

ce H

ousi

ng (A

)Ta

Cho

ng B

ank

(B)

June

, 200

7C

urre

nt ra

tio, d

ebt r

atio

, and

inte

rest

co

vera

ge ra

tio c

ould

n’t l

ower

than

th

e re

stric

tion

num

ber.

Cur

rent

rat

io,

debt

rat

io,

tang

ible

ass

ets

and

inte

rest

cov

erag

e ra

tio

unde

r un

cons

olid

ated

fi

nanc

ial

stat

emen

t co

uldn

’t l

ower

tha

n th

e re

stric

tion

num

ber.


63

Agr

eem

ent

Part

ySt

art D

ate

Con

tent

Res

tric

tion

Coo

pera

tion

in

the

cons

truct

ion

of h

ousi

ng

Prin

ce H

ousi

ng (A

)Ta

iwan

Sug

ar C

orpo

ratio

n (B

)M

ay 1

8, 2

007

Mai

nly

for t

he tr

ansa

ctio

n of

Koa

n A

n lo

t No.

12-1

2 (T

aich

ung)

and

He

Gua

n lo

t No.

44 (T

aina

n)

Agr

eed

to p

ay fo

r the

con

stru

ctio

n an

d sa

les

rela

ted

expe

nses

. No

com

pens

atio

n fo

r any

re

ason

. Acc

ordi

ng to

the

cont

ract

, nee

d to

pay

for

the

depo

sit o

f $18

1,09

0 an

d $9

2,78

0.

Cre

dit c

ase

Prin

ce H

ousi

ng (A

)M

ega

Inte

rnat

iona

l C

omm

erci

al B

ank

(B)

May

2, 2

006

Tota

l am

ount

is 7

.85

billi

on. T

he

item

s ar

e in

clud

ing

med

ium

-term

lo

ans

and

com

mer

cial

pap

er. T

he

foun

datio

n is

pro

vide

d to

est

ablis

h an

d op

erat

e do

rmito

ry B

OT

of

NC

KU

.

Cur

rent

ratio

, deb

t rat

io, a

nd in

tere

st c

over

age

ratio

cou

ldn’

t low

er th

an th

e re

stric

tion

num

ber.

Ban

k w

ill c

heck

it o

nce

a ye

ar.

Synd

icat

ed L

oan

Prin

ce H

ousi

ng (A

)M

ega

Inte

rnat

iona

l C

omm

erci

al B

ank

and

othe

r 7

finan

cial

inst

itutio

ns (B

)

Dec

14,

201

0To

tal a

mou

nt is

36

billi

on.

Cur

rent

ratio

, deb

t rat

io, a

nd in

tere

st c

over

age

ratio

cou

ldn’

t low

er th

an th

e re

stric

tion

num

ber.

Ban

k w

ill c

heck

it o

nce

a ye

ar.

Coo

pera

tion

in

the

cons

truct

ion

of h

ousi

ng

Prin

ce H

ousi

ng (A

)Ta

iwan

Sug

ar C

orpo

ratio

n (B

)

Jul 1

1, 2

011

Jul 2

2, 2

011

Sep

2, 2

011

Mai

nly

for t

he tr

ansa

ctio

n of

Fen

g Sh

eng

Min

g D

ing

Lot N

o. 1

1 &

12,

Q

iao

Tou

Hou

Bi T

ian

Lot N

o. 4

8 &

51

, and

Qia

o To

u Q

iao

Chu

ng L

ot

No.

117

& 1

18.

Agr

eed

to p

ay fo

r the

con

stru

ctio

n an

d sa

les

rela

ted

expe

nses

. No

com

pens

atio

n fo

r any

re

ason

. Acc

ordi

ng to

the

cont

ract

, nee

d to

pay

for

the

depo

sit o

f $27

,370

, $63

,480

, and

$92

,780

.

Coo

pera

tion

in

the

cons

truct

ion

of h

ousi

n

Prin

ce H

ousi

ng (A

)Sh

ui-P

in, T

sai (

B)

July

12,

201

1M

ainl

y fo

r the

tran

sact

ion

of Y

u X

ian

Sec

Lot N

o. 5

2 of

Tai

Pin

g D

istri

ct (T

aich

ung)

Acc

ordi

ng to

the

cont

ract

, tot

al d

epos

it is

$8

3,93

0. A

s of

Dec

31,

201

2, th

e ba

lanc

e of

de

posi

t was

$83

,930

.

Coo

pera

tion

in

the

cons

truct

ion

of h

ousi

ng

Prin

ce H

ousi

ng (A

)Ts

ai-Y

uan,

Fan

g (B

)W

orld

Vis

ion

Uni

ted

Co.

, Lt

d (B

)

Mar

ch 5

, 201

2Ju

ly 1

7, 2

012

Mai

nly

for t

he tr

ansa

ctio

n of

Zh

i San

Sec

. Lot

No.

602

& 5

72 o

f Sh

i Lin

Dis

trict

(Tai

pei)

Acc

ordi

ng to

the

cont

ract

, nee

d to

pay

for t

he

depo

sit o

f $35

0,00

0 an

d $1

9,57

0. A

s of

Dec

31,

20

12, t

he b

alan

ce o

f dep

osit

was

$35

0,00

0 an

d $1

9,57

0.

Annual Report 2012VI

Financial Information


65

VI. Financial Information6.1 Five-Year Financial Summary6.1.1 Condensed Balance Sheet and Statement of Income Condensed Balance Sheet

Five-Year Financial Summary 1/1/2011-3/31/20132008 2009 2010 2011 2012

Current assets

N/A N/A N/A N/A N/A

22,442,598Real estate, factories, and facilities

7,024,424

Intangible assets 3,302,597Other assets 14,534,304Total assets 47,303,923

Current liabilities

Before distribution

15,133,587

After distribution

N/A

Non-current liabilities 14,876,719

Total liabilities

Before distribution

30,010,306

After distribution

N/A

Owner’s equity (parent company)

16,904,288

Capital stock 11,944,765Capital surplus 521293

Retained earnings

Before distribution

2,852,387

After distribution

N/A

Other equity 1,646,283Treasure stock (60,440)Non-controlling equity 389,329

Total shareholders’equity

Before distribution

17,293,617

After distribution

N/A

Item

Year

Unit；NT $ thousands

66


Operating revenue

N/A N/A N/A N/A N/A

2,576,417Gross profit 866,440Operating Revenue 146,104Non-operating income & expense

(39,756)

Pre-tax income 106,348Income from operations of continuedsegments - after tax

104,106

Income from discontinued departments

0

Net profit 104,106Other income (after tax) 55,836Total net income 159,942Net profit (parent company)

99,478

Net profit (non-controlling equity)

4,628

Net income (parent company)

155,314

Net income (non-controlling equity)

4,628

Earnings per share 0.09

Item

Year


67

Five-Year Financial Summary

2008 2009 2010 2011 2012Current assets 16,680,226 16,487,721 20,045,183 24,919,460 21,001,978Funds & Long-term investments

6,221,574 5,931,797 5,200,606 6,296,090 7,100,375

Non current – other financial assets 53,038 243,798 216,322 147,983 808,337

Fixed assets 8,677,702 9,630,882 9,607,662 9,943,368 9,660,797Intangible assets 2,426 1,213 0 0 0Other assets 1,173,614 1,154,503 1,147,121 1,212,838 1,609,587Total assets 32,808,580 33,449,914 36,216,894 42,519,739 40,181,074

Current liabilities

Before distribution 14,336,359 12,111,645 11,194,644 17,059,144 13,505,717

After distribution 14,336,359 12,303,227 12,091,249 17,602,088 -

Long-term liabilities 7,907,605 10,064,113 11,843,008 10,102,875 9,522,182Other liabilities 135,221 173,492 182,530 188,869 203,348

Total liabilities


After distribution 22,379,185 22,540,832 24,116,787 27,893,832

Capital stock 9,579,108 9,579,108 9,962,272 10,858,877 11,944,765Capital surplus 674,559 680,469 521,293 521,293 521,293

Retained earnings

Before distribution 219,853 830,111 2,539,453 3,060,374 3,208,115

After distribution 219,853 638,529 746,243 1,431,542 -

Unrealized gain or loss on financial instruments 34,325 110,515 111,427 851,992 1,416,607

Cumulative translation adjustments 1,615 (12,370) (44,451) (30,317) (43,643)

Net loss unrecognized as pension cost (19,625) (26,729) (32,842) (32,928) (36,870)

Treasure stock (60,440) (60,440) (60,440) (60,440) (60,440)

Total shareholders’equity


After distribution 10,429,395 10,909,082 12,100,107 14,625,9071 -

Item

Year

Note 1: The shareholders’ meeting has not yet determined the distribution of 2011 retained earnings.

6.1.2 Five-Year Financial Summary - Domestic Financial Accounting Principle Condensed Balance Sheet - Domestic Financial Accounting Principle


68

Condensed Statement of Income - Domestic Financial Accounting Principle


Operating revenue 7,227,721 7,651,315 10,569,802 9,023,105 7,892,497 1,611,076Gross profit 2,201,100 2,088,677 4,160,620 3,662,849 3,216,120 772,145162,324Income from operations 1,299,314 1,100,783 2,713,925 2,234,846 1,559,811 529,917

Non-op38,869erating income 339,329 266,316 197,728 497,591 679,538 104,624

Non-operating( expenses (1,910,085) (741,358) (764,225) (412,080) (403,376) (110,955)

Income from operations of continued segments - before tax

(271,412) 625,741 2,147,428 2,320,357 1,835,973 523,586

Income from operations of continuedsegments - after tax

(271,470) 603,258 2,130,822 2,314,131 1,785,930 523,586

(612,105) 893,223 2,143,331 2,117,626 1,991,605 706,852

Income from discontinued departments 0 0 0 0 0 0

Extraordinary gain or loss 0 0 0 0 0 0

Cumulative effect of accounting principle changes

0 0 0 0 0 0

Net income(271,470) 603,258 2,130,822 2,314,131 1,785,930 523,586(612,105) 893,223 2,413,331 2,117,626 1,991,605 709,852

Earnings per share(0.23) 0.52 1.84 1.99 1.54 0.50(0.51) 0.75 2.02 1.77 1.67 0.65

Item

Year

Unit；NT $ thousands (Except EPS as NT$)

Year CPA Firm CPA's Name Auditing Opinion2008 PWC Taiwan K.H. Wang & Z.M. Liu Non-standard unqualified opinion2009 PWC Taiwan Y.L. Wu & K.H. Wang Non-standard unqualified opinion2010 PWC Taiwan Y.C. Lin & S.C. Chang Non-standard unqualified opinion2011 PWC Taiwan Y.C. Lin & S.C. Chang Non-standard unqualified opinion2012 PWC Taiwan Y.C. Lin & K.H. Wang Non-standard unqualified opinion

6.1.3 Auditors’ Opinions from 2008 to 2012


69

Financial analysis in the past five years 1/1/2013-3/31/20132008 2009 2010 2011 2012

Financial structure (%)

Ratio of liabilities to assets

N/A N/A N/A N/A N/A

63Ratio of long-term capital to fixed assets

458

Solvency (%)

Current ratio 148Quick ratio 43Times interest earned ratio 1.51

Operating ability

Accounts receivable turnover (turns)

1.25

Average collection period 72Inventory turnover (turns) 0.13Accounts payable turnover (turns) 0.56

Average days in sales 702Fixed assets turnover (turns) 0.37Total assets turnover (turns) 0.05

Ratio to issued

capital (%)

Return on total assets (%) 0.38Return on stockholders' equity (%) 0.60

Operating income 1.22

Pre-tax income 0.89

Profit ratio (%) 4.04Earnings per share ($) 0.09

Cash flow

Cash flow ratio (%) 0.13Cash flow adequacy ratio (%)

31.09

Cash reinvestment ratio (%) 0.10

LeverageOperating leverage 4.59Financial leverage 2.79

Analysis of financial ratio change in the last two years. (If the difference does not exceed 20%, the analysis is not required.)

Ratio to issued capital

(%)

6.1.2 Five-Year Financial Analysis6.2.1 Financial Analysis

Item

Year

70

6.2.2 Financial Analysis - Domestic Financial Accounting Principle

Financial analysis in the past five years

2008 2009 2010 2011 2012

Financial structure (%)

Ratio of liabilities to assets 68 67 64 64 58Ratio of long-term capital to fixed assets

211 220 259 254 274

Solvency (%)

Current ratio 116 136 179 146 156Quick ratio 8 13 18 12 54Times interest earned ratio 0.45 2.53 8.62 6.74 5.62

Operating ability

Accounts receivable turnover (turns) 7.83 24.50 21.95 14.01 6.76Average collection period 47 15 17 26 54Inventory turnover (turns) 0.33 0.38 0.40 0.27 0.26Accounts payable turnover (turns) 2.97 3.84 5.94 5.74 2.68Average days in sales 1106 960 903 1352 1404Fixed assets turnover (turns) 1.02 0.84 1.10 0.92 0.81Total assets turnover (turns) 0.23 0.23 0.30 0.23 0.19


(%)

Return on total assets (%) 0.3 2.75 6.79 6.73 5.12Return on stockholders' equity (%) (3) 6 18 16 11

Operating income 14 11 27 21 13

Pre-tax income (3) 7 22 21 15

Profit ratio (%) (4) 8 20 26 23

Earnings per share ($)(0.23) 0.52 1.84 1.99 1.54(0.51) 0.75 2.02 1.77 -

Cash flowCash flow ratio (%) 12.57 30.09 10.64 - 61.88Cash flow adequacy ratio (%) 8.84 46.97 42.02 22.60 83.94Cash reinvestment ratio (%) 9.42 19.26 4.15 - 32.84

LeverageOperating leverage 1.31 1.43 1.25 1.32 1.48Financial leverage 1.65 1.59 1.12 1.22 1.34

Item

Year


(%)


71

6.3 Supervisors’ Report in the Most Recent Year

To: The General Meeting of Shareholders as of year 2012

The undersigned has duly audited the Operating Report, Financial Statements and Schedule

of Earnings Distribution prepared by the Board of Directors for the year of 2012, and found

the same to be true and correct. Therefore, the Supervisors’ Report is hereby issued in

accordance with Article 219 of Company Law.

Prince Housing & Development Corp.

Supervisors:

Ying-Na, Zhuang

Da-Xiong, Xu

March 15th, 2013

72

PRINCE HOUSING & DEVELOPMENT CORP.

NON-CONSOLIDATED FINANCIAL STATEMENTS

AND REPORT OF INDEPENDENTACCOUNTANTS

DECEMBER 31, 2012 AND 2011

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.


73

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Stockholders of Prince Housing & Development Corp.

We have audited the accompanying non-consolidated balance sheets of Prince Housing & Development Corp. as of December 31, 2012 and 2011, and the related non-consolidated statements of income, of changes in stockholders’ equity and of cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the 2012 and 2011 financial statements of certain long-term investments accounted for under the equity method. These long-term equity investments amounted to NT$1,151,315 thousand and NT$1,290,718 thousand as of December 31, 2012 and 2011, respectively, and the related net investment income amounted to NT$137,387 thousand and NT$383,302 thousand for the years then ended. The financial statements of these investee companies were audited by other auditors whose reports thereon have been furnished to us and our opinion expressed herein, insofar as it relates to the amounts included in the financial statements and the information disclosed in Note 11 relative to these long-term investments, is based solely on the reports of the other auditors.

We conducted our audits in accordance with the “Regulations Governing the Examination of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China. Those standards and rules require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and reports of other auditors, the non-consolidated financial statements referred to above present fairly, in all material respects, the financial position of Prince Housing & Development Corp. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended in conformity with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and generally accepted accounting principles in the Republic of China.

74

We have also audited the consolidated financial statements of Prince Housing & Development Corp. and its subsidiaries (not presented herein) as of and for the years ended December 31, 2012 and 2011.In our report dated March 15, 2013, we expressed a modified unqualified opinion on those statements.

PricewaterhouseCoopers, Taiwan March 15, 2013

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


75

PRINCE HOUSING & DEVELOPMENT CORP.NON-CONSOLIDATED BALANCE SHEETS

DECEMBER 31(Expressed in thousands of New Taiwan dollars)PRINCE HOUSING & DEVELOPMENT CORP.

NON-CONSOLIDATED BALANCE SHEETSDECEMBER 31

(Expressed in thousands of New Taiwan dollars)

2012 2011ASSETS Notes AMOUNT % AMOUNT %

~3~

Current AssetsCash and cash equivalents 4(1) $ 3,611,373 9 $ 281,987 1Financial assets at fair value through profit or loss -

current4(2) and 6

- - 76,027 -Notes receivable, net 3 and 4(3) 120,032 - 47,031 -Accounts receivable, net 3 and 4(4) 1,407,766 4 573,674 2Accounts receivable - related parties 3 and 5 185,560 - - -Other receivables 3 1,233,941 3 958,531 2Other financial assets - current 6 782,612 2 85,644 -Inventories, net 4(5), 5 and 6 13,041,773 32 22,594,959 53Prepayments 618,921 2 301,607 1

Total current assets 21,001,978 52 24,919,460 59

Funds and InvestmentsFinancial assets at fair value through profit or loss -

non-current4(2) and 6

76,593 - - -Available-for-sale financial assets - non-current 4(6) and 6 1,489,350 4 971,816 2Financial assets carried at cost - non-current 4(7) and 6 932,135 2 999,664 2Long-term equity investments accounted for under

the equity method4(8) and 6

4,331,179 11 4,053,492 10Investments in real estate 4(9) and 6 271,118 1 271,118 1Other financial assets - non-current 6 808,337 2 147,983 -

Total funds and investments 7,908,712 20 6,444,073 15

Property, Plant and Equipment, net 4(10) and 6Costs

Land 122,657 - 122,657 -Buildings 401,309 1 401,309 1Computer equipment 49,471 - 39,324 -Transportation equipment 6,367 - 14,807 -Office equipment 370,188 1 369,680 1Property held for lease - Land 3,181,239 8 3,243,202 8Property held for lease - Building 6,670,114 17 6,702,320 16Leasehold improvements 47,000 - 47,000 -Other equipment 1,970 - 1,945 -

Cost and revaluation increments 10,850,315 27 10,942,244 26Less: Accumulated depreciation ( 1,189,518 )( 3 )( 998,876 )( 3 )

Total property, plant and equipment, net 9,660,797 24 9,943,368 23

Other AssetsRefundable deposits 7 492,761 1 85,860 -Other assets - other 5 and 6 1,116,826 3 1,126,978 3

Total other assets 1,609,587 4 1,212,838 3

TOTAL ASSETS $ 40,181,074 100 $ 42,519,739 100

(Continued)

76

PRINCE HOUSING & DEVELOPMENT CORP.NON-CONSOLIDATED BALANCE SHEETS

DECEMBER 31(Expressed in thousands of New Taiwan dollars)PRINCE HOUSING & DEVELOPMENT CORP.

NON-CONSOLIDATED BALANCE SHEETSDECEMBER 31

(Expressed in thousands of New Taiwan dollars)

2012 2011LIABILITIES AND STOCKHOLDERS' EQUITY Notes AMOUNT % AMOUNT %

The accompanying notes are an integral part of these non-consolidated financial statements.See report of independent accountants dated March 15, 2013.

~4~

Current LiabilitiesShort-term loans 4(11) and 6 $ 3,820,000 10 $ 5,367,400 13Notes and bills payable 4(12) and 6 1,653,227 4 1,380,669 3Notes payable 16,220 - 135,112 -Accounts payable 2,092,087 5 750,687 2Accounts payable - related parties 5 424,886 1 75,893 -Income tax payable 4(21) 37,775 - 3,001 -Accrued expenses 683,918 2 437,679 1Other payables - related parties 5 - - 240,000 1Other payables 2,910 - 3,225 -Receipts in advance 4(13) 1,611,334 4 4,819,011 11Long-term liabilities - current portion 4(15) and 6 3,094,284 8 3,812,079 9Other current liabilities 69,076 - 34,388 -

Total current liabilities 13,505,717 34 17,059,144 40

Long-term LiabilitiesBonds payable 4(14) 2,000,000 5 - -Long-term loans 4(15) and 6 7,522,182 19 10,102,875 24

Total long-term liabilities 9,522,182 24 10,102,875 24

Other LiabilitiesAccrued pension liabilities 4(16) 67,507 - 58,682 -Guarantee deposits received 135,841 - 130,187 -

Total other liabilities 203,348 - 188,869 -

TOTAL LIABILITIES 23,231,247 58 27,350,888 64

Stockholders' EquityCapital

Common stock 1 and 4(17) 11,944,765 30 10,858,877 26Capital Reserves 4(18)

Additional paid-in capital - treasury stocktransactions 514,061 1 514,061 1

Capital reserve - other 7,232 - 7,232 -Retained Earnings 4(17)(19)

Legal reserve 843,650 2 612,237 1Undistributed earnings 2,364,465 6 2,448,137 6

Other Adjustments to Stockholders' EquityCumulative translation adjustments ( 43,643 ) - ( 30,317 ) -Unrecognized pension cost 4(16) ( 36,870 ) - ( 32,928 ) -Unrealized gain or loss on financial instruments 4(6) 1,416,607 3 851,992 2

Treasury stock 4(20) ( 60,440 ) - ( 60,440 ) -

TOTAL STOCKHOLDERS' EQUITY 16,949,827 42 15,168,851 36

Commitments and Contingent Liabilities 5 and 7TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY $ 40,181,074 100 $ 42,519,739 100


77

PRINCE HOUSING & DEVELOPMENT CORP.NON-CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31(Expressed in thousands of New Taiwan dollars, except for earning per share data)PRINCE HOUSING & DEVELOPMENT CORP.

NON-CONSOLIDATED STATEMENTS OF INCOMEFOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars, except for earning per share data)

2012 2011Notes AMOUNT % AMOUNT %


~5~

Operating Revenue 5Construction revenues $ 7,166,541 91 $ 8,336,145 92

Other operating revenues 725,956 9 686,960 8

Total Operating Revenues 7,892,497 100 9,023,105 100

Operating Costs 4(23) and 5Construction costs ( 4,527,939 )( 57 ) ( 5,177,346 )( 57 )

Other operating costs ( 148,438 )( 2 ) ( 182,910 )( 2 )

Total Operating Costs ( 4,676,377 )( 59 ) ( 5,360,256 )( 59 )

Gross profit 3,216,120 41 3,662,849 41

Operating Expenses 4(23)Sales and marketing expenses ( 534,567 )( 7 ) ( 555,381 )( 6 )

General and administrative expenses ( 1,121,742 )( 14 ) ( 872,622 )( 10 )

Total Operating Expenses ( 1,656,309 )( 21 ) ( 1,428,003 )( 16 )

Operating income 1,559,811 20 2,234,846 25

Non-operating Income and GainsInterest income 5 and 7 37,635 - 31,955 -

Investment income accounted for underthe equity method

4(8)448,949 6 344,930 4

Dividend income 76,243 1 7,652 -

Gain on disposal of investments 567 - 3,444 -

Gain on valuation of financial assets 4(2) 566 - 27 -

Other non-operating income 115,578 1 109,583 1

Total non-operating Income andGains 679,538 8 497,591 5

Non-operating Expenses and LossesInterest expense 4(5) and 5 ( 397,688 )( 5 ) ( 404,370 )( 4 )

Foreign exchange losses, net - - ( 477 ) -

Impairment loss 4(7) - - ( 5,321 ) -

Other non-operating losses ( 5,688 ) - ( 1,912 ) -

Total non-operating Expenses andLosses ( 403,376 )( 5 ) ( 412,080 )( 4 )

Income before income tax 1,835,973 23 2,320,357 26

Income tax expense 4(21) ( 50,043 ) - ( 6,226 ) -

Net income $ 1,785,930 23 $ 2,314,131 26

Before Tax After Tax Before Tax After TaxBasic Earnings per Share (in dollars) 4(22)

Net income $ 1.58 $ 1.54 $ 2.00 $ 2.00

Diluted Earnings per Share (in dollars) 4(22)Net income $ 1.58 $ 1.54 $ 2.00 $ 1.99

Assuming the Company treated the stocks held by a subsidiary as long-term investments rather than treasury stock, the pro formainformation is as follows:

Net income $ 2,041,648 $ 1,991,605 $ 2,123,852 $ 2,117,626

Basic Earnings Per Share (in dollars)Net income $ 1.71 $ 1.67 $ 1.78 $ 1.77


78

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79

PRINCE HOUSING & DEVELOPMENT CORP.NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

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



2012 2011

~7~

CASH FLOWS FROM OPERATING ACTIVITIESNet income $ 1,785,930 $ 2,314,131

Adjustments to reconcile net income to net cash provided by(used in) operating activitiesGain on valuation of financial assets ( 566 ) ( 27 )

Reversal of allowance for doubtful accounts - ( 21,098 )

Provision for (reversal of) inventory obsolescence and valuedecline ( 28,252 ) 34,054

Impairment loss on financial assets carried at cost - 5,321

Investment income accounted for under the equity method ( 448,949 ) ( 344,930 )

Cash dividend from equity subsidiaries 180,000 -

Gain of disposal of investments ( 567 ) ( 3,444 )

Depreciation 202,230 234,450

(Gain) loss on disposal of property, plant and equipment ( 1,017 ) 54

Changes in assets and liabilitiesFinancial assets at fair value through profit or loss - current 76,027 ( 76,000 )

Notes receivable ( 73,001 ) 17,810

Accounts receivable ( 834,092 ) 7,232

Accounts receivable - related parties ( 185,560 ) -

Other receivables ( 275,410 ) ( 351,999 )

Inventories 9,671,845 ( 5,683,193 )

Prepayments ( 317,314 ) 244,041

Financial assets at fair value through profit or loss -non-current ( 76,027 ) -

Notes payable ( 118,892 ) 5,351

Accounts payable 1,341,400 51,046

Accounts payable - related parties 348,993 ( 1,815 )

Income tax payable 34,774 3,001

Accrued expenses 246,239 ( 43,258 )

Other payables ( 315 ) ( 73,454 )

Receipts in advance ( 3,207,677 ) 723,492

Other current liabilities 34,688 ( 9,632 )

Accrued pension liabilities 2,823 ( 4,829 )

Net cash provided by (used in) operating activities 8,357,310 ( 2,973,696 )

(Continued)

80





2012 2011


~8~

CASH FLOWS FROM INVESTING ACTIVITIESDecrease in other receivables - related parties $ - $ 413,600Increase in other financial assets - current ( 696,968 ) ( 85,644 )Increase in available-for-sale financial assets - non-current - ( 975 )Proceeds from capital reduction of financial assets carried at cost 67,529 6,237Increase in long-term investments - subsidiaries ( 170,254 ) ( 8,403 )Proceeds from capital reduction of subsidiaries 185,000 -Proceeds from disposal of long-term investments - subsidiaries 3,541 -Proceeds from capital reduction of subsidiaries - 6,840(Increase) decrease in other financial assets - non-current ( 660,354 ) 68,339Cash paid for acquisition of property, plant and equipment ( 11,098 ) ( 14,608 )Proceeds from disposal of property, plant and equipment 2,049 7Increase in refundable deposits ( 406,901 ) ( 73,272 )Decrease in other assets - other 10,152 7,555

Net cash (used in) provided by investing activities ( 1,677,304 ) 319,676CASH FLOWS FROM FINANCING ACTIVITIES

(Decrease) increase in short-term loans ( 1,547,400 ) 1,257,050Increase in notes and bills payable 272,558 565,994(Decrease) increase in other payables - related parties ( 240,000 ) 240,000Increase in bonds payable 2,000,000 -(Decrease) increase in long-term loans ( 3,298,488 ) 1,406,592Increase in guarantee deposits 5,654 9,652Payment of cash dividends ( 542,944 ) ( 896,605 )

Net cash (used in) provided by financing activities ( 3,350,620 ) 2,582,683Increase (decrease) in cash and cash equivalents 3,329,386 ( 71,337 )Cash and cash equivalents at beginning of year 281,987 353,324Cash and cash equivalents at end of year $ 3,611,373 $ 281,987

Supplemental disclosures of cash flow information1.Interest paid $ 535,263 $ 484,555

Interest capitalized ( 146,743 ) ( 82,594 )Interest paid (excluding capitalized interest) $ 388,520 $ 401,961

2.Income tax paid $ 15,269 $ 3,225

Non-cash flows from investing and financing activities1.Property, plant and equipment transferred from prepaid building

and land $ - $ 619,605

2.Buildings and land held for sale transferred from property heldfor lease and property, plant and equipment $ 90,407 $ 63,996

3.Financial assets carried at cost - non-current transferred to theavailable-for-sale financial assets - non-current $ - $ 84,780



81

PRINCE HOUSING & DEVELOPMENT CORP. NOTES TO THE FINANCIAL STATEMENTS


(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANIZATION

Prince Housing & Development Corp. (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China (R.O.C.) in September 1973. As of December 31, 2012, the Company’s authorized capital was $16,000,000 and the paid-in capital was $11,944,765, consisting of 1,194,476 thousand shares of common stock with a par value of $10 (in NT dollars) per share. The Company is primarily engaged in the construction, leasing and sale of public housing, commercial building, tourism/recreation place (children’s playground, water park, etc.) and parking lot/parking tower, and leasing and sale of real estate. The common shares of the Company have been listed on the Taiwan Stock Exchange since April 1991. As of December 31, 2012 and 2011, the Company had 246 and 235 employees, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements are prepared in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and generally accepted accounting principles in the Republic of China. The Company’s significant accounting policies are summarized as follows:(1) Foreign currency transactions A. Transactions denominated in foreign currencies are translated into functional currency at the spot

exchange rates prevailing at the transaction dates. Exchange gains or losses due to the difference between the exchange rate on the transaction date and the exchange rate on the date of actual receipt and payment are recognized in current year’s profit or loss.

B. Receivables, other monetary assets and liabilities denominated in foreign currencies are translated at the spot exchange rates prevailing at the balance sheet date. Exchange gains or losses are recognized in profit or loss.

(2) Classification of current and non-current items A. If assets and liabilities are related to the construction business, they are classified as current or

non-current according to their operating cycle; if they are not related to the construction business, they are classified by annual basis.

B. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets: (a) Assets arising from operating activities that are expected to be realized or consumed, or are

intended to be sold 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

82

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 arising from operating activities 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.

(3) Cash and cash equivalents A. Cash and cash equivalents include cash on hand and in banks and other short-term highly liquid

investments which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value resulting from fluctuations in interest rate.

B. The Company’s statement of cash flows is prepared on the basis of cash and cash equivalents.

(4) Financial assets and financial liabilities at fair value through profit or loss A. Financial assets and financial liabilities at fair value through profit or loss are recognized and

derecognized using settlement date accounting and are recognized initially at fair value. B. These financial instruments are subsequently remeasured and stated at fair value, and the gain

or loss is recognized in profit or loss. The fair value of listed stocks, OTC stocks and closed-end mutual funds is based on latest quoted fair prices of the accounting period. The fair value of open-end and balanced mutual funds is based on the net asset value at the balance sheet date.

C. When a derivative is an ineffective hedging instrument, it is initially recognized at fair value on the date a derivative contract is entered into and is subsequently remeasured at its fair value. If a derivative is a non-option derivative, the fair value initially recognized is zero.

D. Financial assets and financial liabilities at fair value through profit and loss are classified into asset or liability held for trading and those designated at fair value through profit or loss at inception. Financial assets and financial liabilities are classified as held for trading if acquired principally for the purpose of selling in the short term. Financial assets and financial liabilities designated as at fair value through profit or loss at inception are those that are managed and whose performance is evaluated on a fair value basis, in accordance with a documented Company’s investment strategy. Information about these financial assets and financial liabilities are provided internally on a fair value basis to the Company’s management. The Company’s investment strategy is to invest free cash resources in equity securities or convertible bonds as part of the Company’s long-term capital growth strategy. The Company has designated almost all of its compound debt instruments as financial liability at fair value through profit and loss.

(5) Available-for-sale financial assets A. Available-for-sale financial assets in equity and debt are recognized and derecognized using trade

date accounting and settlement date accounting, respectively, and are initially stated at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.

B. The financial assets are remeasured and stated at fair value, and the gain or loss is recognized in equity, until the financial asset is derecognized, at which time the cumulative gain or loss


83

previously recognized in equity shall be recognized in profit or loss. The fair value of listed stocks, OTC stocks and closed-end mutual funds are based on latest quoted fair prices of the accounting period. The fair values of open-end and balanced mutual funds are based on the net asset value at the balance sheet date.

C. If there is any objective evidence that the financial asset is impaired, the cumulative loss that had been recognized directly in equity shall be transferred from equity to profit or loss. When the fair value of an equity instrument subsequently increases, impairment losses recognized previously in profit or loss shall not be reversed. When the fair value of a debt instrument subsequently increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed to the extent of the loss recognized in profit or loss.

(6) Financial assets carried at cost A. Investment in unquoted equity instruments is recognized or derecognized using trade date

accounting and is stated initially at its fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.

B. The investments in equity instruments, including unlisted stocks and emerging stocks, are measured at cost since their fair value cannot be measured reliably.

C. If there is any objective evidence that the financial asset is impaired, the impairment loss is recognized in profit or loss. Such impairment loss shall not be reversed when the fair value of the asset subsequently increases.

(7) Notes and accounts receivable, other receivables A. Notes and accounts receivable are claims resulting from the sale of goods or services.

Receivables arising from transactions other than the sale of goods or services are classified as other receivables. Notes and accounts receivable and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

B. The Company assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. If such evidence exists, a provision for impairment of financial asset is recognized. The amount of impairment loss is determined based on the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the fair value of the asset subsequently increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. Such recovery of impairment loss shall not result to the asset’s carrying amount greater than its amortized cost where no impairment loss was recognized. Subsequent recoveries of amounts previously written off are recognized in profit or loss.

(8) Inventories The inventories include “land held for construction”, “construction in progress”, “buildings and land held for sale”. Gains or losses occurring from construction contracts are recognized using the percentage of completion method. Inventories are stated at cost and evaluated at the lower of cost

84

or net realizable value at the end of period. The individual item approach is used in the comparison of cost and net realizable value. The calculation of net realizable value is based on the estimated selling price in the normal course of business, net of estimated costs of completion and estimated selling expenses. The interest costs related to construction in progress are capitalized during the construction.

(9) Accounting for construction A. Effective January 1, 2009, for the ‘off plan’ housing projects where the Company engages the

construction firm to construct, the profit or loss of the ‘off plan’ housing projects is recognized on a percentage-of-completion basis if the projects meet the criteria of the percentage-of-completion method recognition; for other projects of the ‘off plan’ housing projects, the costs and profit or loss of the projects are recognized using the completed-contract method when the ownership of the houses are transferred and the houses are handed over, or when the houses are handed over before the balance sheet date (or when the ownership of the houses are transferred before the balance sheet date), but the ownership of the houses are transferred subsequently after the balance sheet date (but the houses are handed over subsequently after the balance sheet date).

B. For the costs associated with the acquisition of the assets to be allocated over the period when the underlying assets will produce economic benefit to meet the revenue-cost (expense) matching principle, effective January 1, 2001, the Company capitalized interest incurred in accordance with ROC SFAS No. 3, “Borrowing Cost”.

C. The construction-use land refers to the land that is under construction or under planning to be constructed. Such land is stated at the acquisition costs, including the purchase proceeds of the land and all necessary costs to acquire the land.

D. The selling expenses incurred on the ‘off plan’ housing sale are recognized initially as “deferred selling expenses”, and are reclassified to “operating expenses” when revenue is recognized after the construction of houses is completed.

E. At the end of year, inventories are evaluated at the lower of cost or net realizable value, and the individual item approach is used in the comparison of cost and net realizable value. The calculation of net realizable value is based on the estimated selling price in the normal course of business, net of estimated costs of completion and estimated selling expenses.

(10) Long-term equity investments accounted for under equity method A. Long-term equity investments in which the Company holds more than 20% of the investee

company’s voting shares or has the ability to exercise significant influence on the investee’s operational decisions are accounted for under the equity method.

B. Effective January 1, 2005, investment loss on the non-controlled entities over which the Company has the ability to exercise significant influence is recognized to the extent that the amount of long-term investments in such investees is written down to zero. However, if the Company continues to provide endorsements, guarantees or financial support for such investees, the investment loss is recognized continuously in proportion to the Company’s equity interest in such investees. In the case of controlled entities, the Company recognizes all the losses incurred by such entities that will not be covered by other stockholders. When the operations of such investees become profitable, the Company recognizes the profits until the amount of losses previously recognized by the Company is fully recovered.


85

C. Exchange differences arising from translation of the financial statements of overseas investee companies accounted for under the equity method are recorded as “cumulative translation adjustments” under stockholders’ equity.

D. Long-term equity investments in which the Company holds more than 50% of the investee company’s voting shares or has the ability to control the investee’s operational decision, in accordance with the Statement of Financial Accounting Standards (SFAS) No. 7, “Consolidated Financial Statements”, are accounted for under the equity method and included in the quarterly consolidated financial statements.

(11) Property, plant and equipment A. Property, plant and equipment are stated at cost. Interests incurred on the loans used to bring the

assets to the condition and location necessary for their intended uses are capitalized.B. Depreciation is provided under the straight-line method based on the assets’ estimated economic

service lives. The estimated economic service lives of property, plant and equipment are 44~60 years for property held for lease-building, 50~60 years for buildings, and 5~15 years for other property, plant and equipment.

C. Major improvements and renewals are capitalized and depreciated accordingly. Maintenance and repairs are expensed as incurred.

D. When an asset is sold or retired, the cost and accumulated depreciation are removed from the respective accounts and any resulting gain or loss on disposal is recorded as non-operating income or expense.

(12) Deferred assets Deferred assets are stated at cost and are amortized on a straight- line basis over 5 years.

(13) Impairment of non-financial assets The Company recognizes impairment loss when there is indication that the recoverable amount ofan asset is less than its carrying amount. The recoverable amount is the higher of the fair value less costs to sell and value in use. The fair value less costs to sell is the amount obtainable from the sale of the asset in an arm’s length transaction after deducting any direct incremental disposal costs. The value in use is the present value of estimated future cash flows to be derived from continuing use of the asset and from its disposal at the end of its useful life. When the impairmentno longer exists, the impairment loss recognized in prior years shall be recovered.

(14) Pension plan Under the defined benefit pension plan, net periodic pension costs are recognized in accordance with the actuarial calculations. Net periodic pension costs include service cost, interest cost, expected return on plan assets, and amortization of unrecognized net transition obligation and gains or losses on plan assets. Under the defined contribution pension plan, net periodic pension costs are recognized as incurred.

(15) Income tax A. Provision for income tax includes deferred income tax resulting from temporary differences,

investment tax credits and loss carryforward. Valuation allowance on deferred tax assets is

86

provided to the extent that it is more likely than not that the tax benefit will not be realized. Over or under provision of prior years’ income tax liabilities is included in current year’s income tax. When a change in the tax laws is enacted, the deferred tax liability or asset is recomputed accordingly in the period of change. The difference between the new amount and the original amount, that is, the effect of changes in the deferred tax liability or asset, is recognized as an adjustment to current income tax expense (benefit).B. Adjustments of prior years' income tax liabilities are included in the current year's income tax expense.

C. 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.

D. If the amount of regular income tax is more than or equal to the amount of basic tax, the income tax payable shall be calculated in accordance with the Income Tax Act and other relevant laws. Whereas the amount of regular income tax is less than the amount of basic tax, the income tax payable shall also include the difference between the amount of regular income tax and basic tax, in addition to the amount as calculated in accordance with the “Income Tax Act” and other relevant laws. The balance calculated in accordance with the provisions shall not allow for deductions claimed in regard to investment tax credits granted under the provisions of other laws.

(16) Treasury stock

A. When the Company acquires its issued and outstanding shares as treasury stocks, the book value of those treasury stocks is computed respectively on a weighted-average basis according to the type of shares (common shares) and the reason for reacquisition. Treasury stock transactions should be dealt with in the following ways: (a) Reacquisition: if the shares are purchased, they are stated at the acquisition cost; if the shares

are donated, they are stated at fair value. (b) Disposal: when treasury stocks are sold, if the selling price is above the book value, the

difference should be credited to the capital surplus-from treasury stock transactions account. If the selling price is below the book value, the difference should first be offset against capital surplus from the same class of treasury stock transactions, and the remainder, if any, debited to retained earnings.

(c) Write off: When a company’s treasury stock is retired, the treasury stock account should be credited, and the capital surplus-premium on stock account and capital stock account should be debited proportionately according to the share ratio. Any excess of the carrying value of treasury stock over the sum of its par value and premium on stock should first be offset against capital surplus from the same class of treasury stock transactions, and the remainder, if any, debited to retained earnings. Any excess of the sum of the par value and premium on stock of treasury stock over its carrying value should be credited to capital surplus from the same class of treasury stock transactions.

B. The Company adopted the Statement of Financial Accounting Standards No. 30, “Accounting for Treasury Stocks” since January 1, 2002, which requires the Company’s stocks held by subsidiaries should be treated as treasury stock when the Company recognizes investment income or loss and prepares financial statements.

(17) Employees’ bonuses and directors’ and supervisors’ remuneration Effective January 1, 2008, pursuant to EITF 96-052 of the Accounting Research and


87

Development Foundation, R.O.C., dated March 16, 2007, “Accounting for Employees’ Bonuses and Directors’ and Supervisors’ Remuneration”, the costs of employees’ bonuses and directors’ and supervisors’ remuneration are accounted for as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and the amounts can be estimated reasonably. However, if the accrued amounts for employees’ bonuses and directors’ and supervisors’ remuneration are significantly different from the actual distributed amounts resolved by the stockholders at their annual stockholders’ meeting subsequently, the differences shall be recognized as gain or loss in the following year. In addition, according to EITF 97-127 of the Accounting Research and Development Foundation, R.O.C., dated March 31, 2008, “Criteria forListed Companies in Calculating the Number of Shares of Employees’ Stock Bonus”, the Company calculates the number of shares of employees’ stock bonus based on the closing price of the Company's common stock at the previous day of the stockholders’ meeting held in the year following the financial reporting year, after taking into account the effects of ex-rights and ex-dividends.

(18) Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses during the reporting period. Actual results could differ from those assumptions and estimates.

(19) Operating segments A. Operating segments are reported in a manner consistent with the internal reporting provided

to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

B. In accordance with R.O.C. SFAS No. 41, “Operating Segments”, segment information is disclosed in the consolidated financial statements rather than in the separate financial statements of the Company.

(20) Settlement date accounting If an entity recognizes financial assets using settlement date accounting, any change in the fair value of the asset to be received during the period between the trade date and the settlement dateis not recognized for assets carried at cost or amortized cost. For financial assets or financial liabilities classified as at fair value through profit or loss, the change in fair value is recognized in profit or loss. For available-for-sale financial assets, the change in fair value is recognized directly in equity.

3. CHANGES IN ACCOUNTING PRINCIPLES

(1) Notes and accounts receivable, other receivables Effective January 1, 2011, the Company prospectively adopted the amendments of R.O.C. SFAS No. 34, “Financial Instruments: Recognition and Measurement”. The Company recognizes impairment loss on notes receivable, accounts receivable and other receivables when there is an objective evidence of impairment. This accounting change has no significant effect on the Company’s financial statements for the year ended December 31, 2011.

88

~17~

4. DETAILS OF SIGNIFICANT ACCOUNTS(1) Cash and cash equivalents

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

(a) The Company recognized net gain of $566 and $27 for the years ended December 31, 2012 and2011, respectively.

(b) For details of pledged assets, please refer to Note 6.

(3) Notes receivable

2012 2011

Cash：Cash on hand 2,674$ 2,327$Checking accounts 2,302,639 218,115Savings deposits 1,156,060 61,545

3,461,373 281,987

Cash equivalents：Repurchase of bonds 150,000 -

3,611,373$ 281,987$

December 31,

2012 2011Current items:

Financial assets held for tradingMutual funds -$ 76,000$

Valuation adjustments - 27-$ 76,027$

Non-Current items:Financial assets held for tradingMutual funds 76,000$ -$

Valuation adjustments 593 -76,593$ -$

December 31,

2012 2011Notes receivable 123,735$ 50,734$Less: Allowance for doubtful accounts 3,703)( 3,703)(

120,032$ 47,031$

December 31,

(2) Operating segments Effective January 1, 2011, the Company adopted the newly issued R.O.C. SFAS No. 41, “Operating Segments” to replace the original R.O.C. SFAS No. 20, “Segment Reporting”. In accordance with such standard, the Company restated the segment information for 2010 upon the first adoption of R.O.C. SFAS No. 41. This change in accounting principle had no significant effect on net income and earnings per share for the year ended December 31, 2011.

4. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents


89

~18~

(4) Accounts receivable

(5) Inventories

2012 2011Accounts receivable 1,414,672$ 580,580$Less: Allowance for doubtful accounts 6,906)( 6,906)(

1,407,766$ 573,674$

December 31,

A.Construction in progress

Taipei Branch 2012 2011

Nei Hu Tanmei lot 2,658,711$ 2,450,902$

Canon Cooperation Project 1,256,523 1,253,548

Taoyuan Qing Shi Lot No. 462 673,574 665,610

Prince Fu (Taoyuan Qing Sun Lot No. 356-1 557,816 415,259

& 356-2)

Prince Central Park 292,397 70,791

Shi Lin Dist. Zhi San Sec. Lot No. 602, etc. 13,285 -

Taipei Shinyi - 9,295,035Prince College - 1,474,148

5,452,306 15,625,293

December 31,

Taichung BranchJing Yun Sian (Tu ku Lot No. 73-11) 583,128 512,985Hui Li Lot No. 195 551,524 550,340Tu ku Lot No. 8-2 433,272 -

Prince Dau (Tai Shun Lot No..175) 316,278 227,630Tai Ho Lot No. 29 198,793 191,581

Prince Fu (Feng Zun Lot No.1053 etc.) 191,621 -

The Cloud Century (Kao An Lot No.12-12) 110,252 67,224Yong Yong Prince - 253,877Pince Ju (Xin Xing Lot No. 34) - 164,925San Kuai Cuo Lot 1244 - 154,500Others 7 4,977

2,384,875 2,128,039

90

~19~

Tainan Branch 2012 2011Prince i-Cloud (Ren He Lot No. 1335) 506,297$ 345,325$Prince Flora Ⅲ(He Guan Lot No.38) 291,617 118,911Jin Yixing Heban 208,445 208,445Ching An Sec. Lot No. 373, etc. 183,861 -Shang Hua Shin Hua Road No. 897 113,838 60,475Shang Hua Shin Hua Road No. 923 91,449 61,162Bei An Lot No. 56-10 62,073 62,073Jin Hua Lot No. 136 23,700 -Ren Wu Dist. Xia Hai Lot 15,229 -Prince Flora II - 20,847Prince the Gathering(Ren He Lot No. 1278) - 475,062Others 3,524 3,524

1,500,033 1,355,824

December 31,

Kaohsiung BranchPrince Hua Yang (Chiao Tou Dist, Hou Bi

Tian Sec.)80,821 3,664

Prince Shi Bo (Zuo Yingqu Xin Fu Lot) - 282,848Others - 6,933

80,821 293,445Total construction in progress 9,418,035$ 19,402,601$

B.Land held for construction siteTaipei Branch

Zhong Li Pu Ren Lot 140,156$ 140,156$Others 6,276 6,274

146,432 146,430

Taichung Branch

Song Quan Lot No. 164 etc. 176,296 176,296

Wu Feng Lot No. 365~420 etc. 175,661 175,661

Song Chang Lot No. 557 etc. 19,912 19,912

Xi Zhou Lot No. 112-54 etc. 11,941 11,941

Feng Zun Lot No. 1053 etc. - 170,952

Others 24,134 24,135

407,944 578,897


91~20~

Tainan Branch 2012 2011Shan Zhong Lot No. 1468, 1475 & 1476 etc. 234,699$ 234,699$Xue Zhong Lot No. 679 etc. 50,798 50,798Yong Kang Ding An Lot No. 879 etc. 28,610 28,610Bei An Lot No. 54-3 etc. 15,344 15,344Bao An Lot No. 882 etc. 10,325 10,325Yu Dong Lot No. 995 etc. - 93,857Zeng Wen Lot No. 190-1-7 etc. - 25,314Others 20,615 20,616

360,391 479,563

December 31,

Kaohsiung BranchQian Jin Section Wen Dong Lot No. 16 14,964 14,964Da Hua Lot No. 434 & 436 13,923 13,923

28,887 28,887Total land held for construction site 943,654$ 1,233,777$

C.Buildings and land held for saleTaipei Branch

Taipei Shinyi 315,261$ -$Pu Lo Wang Shi 91,760 -Prince Dragon House III 44,859 47,284Prince Guo Boa 22,770 22,813Prince Da Din 12,657 12,466Prince Vacation - 20,842Shangrila - 17,593Prince 101 - 10,547Others 909 3,982

488,216 135,527

Taichung BranchPrince Hui 86,387 -New Generation - 128,512Sung Guan Prince - 63,405Others 16,977 20,234

103,364 212,151

92~21~

Tainan Branch 2012 2011Prince FloraⅡ 169,172$ -$Prince the Gathering 75,626 -Prince Dragon 46,672 55,858Tun Sha Building III 28,376 28,376Jun Chan LV 19,725 20,430Prince Golden Age 19,572 21,854Won Tung Global lan Tsai House 14,763 14,763Southern Taiwan Science Splendor - 151,112Prince Mei Xue - 116,682Prince Flora - 16,072Others 11,961 17,336

385,867 442,483

December 31,

Kaohsiung BranchPrince Bon 419,866 -Pince Shi Yun 227,119 -Prince Shi Bo 90,168 -Prince Dai Din 16,951 18,255Prince Culture - 22,304Others - 4,296

754,104 44,855Total buildings and land held for sale 1,731,551$ 835,016$

D.Prepayment for landTaipei Branch

Zhi San Sec. Lot No. 619 14,819$ -$Taichung Branch

Tu Ku Lot No. 2-8 etc. - 414,462Others 1,535 13,277

1,535 427,739Tainan Branch

Ren Wu Dist. Xia Hai Lot No. 978, etc. 384,078 383,265Others - 5,919

384,078 389,184Total prepayment for land 400,432$ 816,923$


93

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(a) For details of pledged assets, please refer to Note 6.(b) For the years ended December 31, 2012 and 2011, the interest capitalized as cost of inventory

are as follows:

(c)As of December 31, 2012 and 2011, construction contracts that met the requirements to use thepercentage of completion method are listed as follows:2012: None.

(6) Available-for-sale financial assets

Certain available-for-sale financial assets were pledged as security for short-term and commercialpapers payable. For details of pledged assets, please refer to Note 6.

E.Prepayment for buildings and land2012 2011

Taisugar Kao An Lot 543,274$ 362,185$Taisugar Qiao Tou Hou Bi Tian Lot 158,854 31,874Taisugar He Guan Lot - 45,697Taisugar Feng Sheng Ming Ding Lot - 41,145Others 6 7,960

702,134$ 488,861$

December 31,

F.MerchandiseMerchandise 1,357$ 1,423$

Total inventories 13,197,163$ 22,778,601$Less：Allowance for decline in market

value and obsolescence 155,390)( 183,642)(13,041,773$ 22,594,959$

2012 2011Interest paid before capitalization 544,431$ 486,964$Interest capitalized 146,743$ 82,594$Annual interest rate used for capitalization 2.57%～3.32% 2.29%～2.81%

Contract sales(VAT excluded)

Estimated totalconstruction cost

Percentage ofcompletion

Expected date ofcompletion

Accumulatedconstruction profit

Taipei Shinyi 11,375,310$ 5,966,140$ 81% June, 2012 4,562,113$

Prince College 1,849,266 1,495,970 95% March, 2012 335,631

2011

Items 2012 2011Non-current items:

Listed (TSE and OTC) stocks 121,799$ 121,799$Adjustment of financial assets heldfor trading

1,367,551 850,0171,489,350$ 971,816$

December 31,

E. Prepayment for buildings and land

F. Merchandise

94

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(7) Financial assets carried at cost

(a) The Company was committed to invest US$10,000,000 in President Energy Development Ltd. OnJune 17, 2010, July 8, 2011, and July 4, 2012, President Energy Development Ltd. reduced its capitaland returned share capital amounting to US$127,500, US$85,000 and US$85,000, respectively. Asof reporting date, the Company had paid US$1,275,000 for the shares investment.

(b) The investments were measured at cost since its fair value cannot be measured reliably.(c) Certain financial assets carried at cost had been impaired. Accordingly, the Company recognized

impairment loss of $0 and $5,321 for the years ended December 31, 2012 and 2011,respectively.

(d) Certain financial assets carried at cost were pledged as security for short-term and commercialpapers payable. For details of pledged assets, please refer to Note 6.

Items 2012 2011

Non-current items:Unlisted stocks 930,359$ 997,888$Emerging stocks 1,776 1,776

932,135$ 999,664$

December 31,

(a) The Company was committed to invest US$10,000,000 in President Energy Development Ltd. On June 17, 2010, July 8, 2011, and July 4, 2012, President Energy Development Ltd. reduced its capital and returned share capital amounting to US$127,500, US$85,000 and US$85,000, respectively. As of reporting date, the Company had paid US$1,275,000 for the shares investment.

(b) The investments were measured at cost since its fair value cannot be measured reliably.(c) Certain financial assets carried at cost had been impaired. Accordingly, the Company

recognized impairment loss of $0 and $5,321 for the years ended December 31, 2012 and 2011, respectively.

(d) Certain financial assets carried at cost were pledged as security for short-term and commercial papers payable. For details of pledged assets, please refer to Note 6.

(7) Financial assets carried at cost


95

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(8) Long-term equity investments accounted for under the equity methodA. Details of long-term equity investments accounted for under the equity method are set forth

below:

(Note 1)Due to the investment structure adjustments in the Group, Ta-Chen Construction &Engineering Corp., Cheng-Shi Construction Co., Ltd. and Prince Utility Co., Ltd. wereall changed to be the consolidated entities of Cheng-Shi Investment Holdings Co., Ltd.

(Note 2)Due to the investment structure adjustments in the Group, Prince Real Estate Agent Co.,Ltd. as the surviving company merged with Prince Real Estate Appraisal Co., Ltd.,Prince Entertainment Co., Ltd. and Prince Property Management Co., Ltd., and wasrenamed Prince Property Management Consulting Co., Ltd. In addition, PrinceApartment Management Maintain Co., Ltd. and Prince Security Co., Ltd. were bothchanged to be the consolidated entities of Prince Property Management Consulting Co.,Ltd.

Carrying Percentage of Carrying Percentage of

amount ownership amount ownership

Cheng-shi Investment Holdings Co., 539,263$ 100.00% -$ -

Ltd. (Note 1)

Time Square International Hotel 438,189 100.00% 292,974 100.00%

Prince Housing Investment Co., Ltd. 312,282 100.00% 308,137 100.00%

Dong-Feng Enterprises Co., Ltd. 231,522 100.00% 446,010 100.00%

Prince Property Management 223,903 100.00% 2,202 100.00%

Consulting Co., Ltd.( formerly Prince

Real Estate Agent Co., Ltd.) (Note 2)

Jin Yi Xing Plywood Co., Ltd. 661,381 99.65% 653,212 99.65%

The Splendor Hotel Taichung 383,078 50.00% 391,564 50.00%

Uni-President Development Corp. 980,708 30.00% 911,199 30.00%

Geng-Ding Co., Ltd. 317,735 30.00% 305,165 100.00%

Ming-Da Enterprise Co., Ltd. 132,453 20.00% 134,018 20.00%

Ta-Chen Construction & - - 330,466 100.00%

Engineering Corp.(Note 1)

Prince Apartment Management - - 85,404 100.00%

Maintain Co., Ltd.(Note 2)

Others (individually less than 2%)(Note 1, 2) 110,665 193,141

4,331,179$ 4,053,492$

December 31,

2012 2011

(8) Long-term equity investments accounted for under the equity method A. Details of long-term equity investments accounted for under the equity method are set forth

below:

(Note 1) Due to the investment structure adjustments in the Group, Ta-Chen Construction & Engineering Corp., Cheng-Shi Construction Co., Ltd. and Prince Utility Co., Ltd. were all changed to be the consolidated entities of Cheng-Shi Investment Holdings Co., Ltd.

(Note 2) Due to the investment structure adjustments in the Group, Prince Real Estate Agent Co., Ltd. as the surviving company merged with Prince Real Estate Appraisal Co., Ltd., Prince Entertainment Co., Ltd. and Prince Property Management Co., Ltd., and was renamed Prince Property Management Consulting Co., Ltd. In addition, Prince Apartment Management Maintain Co., Ltd. and Prince Security Co., Ltd. were both changed to be the consolidated entities of Prince Property Management Consulting Co., Ltd.

96

B. Investment income accounted for under the equity method for the years ended December 31, 2012 and 2011 was $448,949 and $344,930, respectively.

C. The investment income (loss) of certain investees for the years ended December 31, 2012 and 2011, accounted for under the equity method, was based on their financial statements for the corresponding periods, which were audited by other auditors. The investment income recognized for these investees for the years ended December 31, 2012 and 2011 was $137,386 and $383,302, respectively. As of December 31, 2012 and 2011, long-term equity investments in these investees were $1,151,315 and $1,290,718, respectively. The investees whose financial statements were audited by other auditors for the years ended December 31, 2012 and 2011 are as follows: Prince Property Management Consulting Co., Ltd. (Original: Prince Real estate Agent Co., Ltd.,), Geng-Ding Co., Ltd., Prince Apartment Management Maintain Co., Ltd., Prince Housing Investment Co., Ltd., BioSun Technology Co., Ltd., Prince Security Co., Ltd., Dong-Feng Enterprises Co., Ltd., Cheng-Shi Construction Co., Ltd., Early Success Investments Limited and Prince Assets Management LLC.

D. Details of endorsements and guarantees provided to Ta-Chen Construction & Engineering Corp., The Splendor Hotel Taichung and Time Square International Hotel Corp. are described in Note 7.

E. Certain long-term equity investments were pledged as security for short-term and commercial papers payable. For details of pledged assets, please refer to Note 6.

(9) Real estate investments A. Details of real estate investments are set forth below:

~25~

B. Investment income accounted for under the equity method for the years ended December 31,2012 and 2011 was $448,949 and $344,930, respectively.

C. The investment income (loss) of certain investees for the years ended December 31, 2012 and2011, accounted for under the equity method, was based on their financial statements for thecorresponding periods, which were audited by other auditors. The investment income recognizedfor these investees for the years ended December 31, 2012 and 2011 was $137,386 and $383,302,respectively. As of December 31, 2012 and 2011, long-term equity investments in these investeeswere $1,151,315 and $1,290,718, respectively.The investees whose financial statements were audited by other auditors for the years endedDecember 31, 2012 and 2011 are as follows: Prince Property Management Consulting Co., Ltd.(Original: Prince Real estate Agent Co., Ltd.,), Geng-Ding Co., Ltd., Prince ApartmentManagement Maintain Co., Ltd., Prince Housing Investment Co., Ltd., BioSun Technology Co.,Ltd., Prince Security Co., Ltd., Dong-Feng Enterprises Co., Ltd., Cheng-Shi Construction Co.,Ltd., Early Success Investments Limited and Prince Assets Management LLC.

D. Details of endorsements and guarantees provided to Ta-Chen Construction & Engineering Corp.,The Splendor Hotel Taichung and Time Square International Hotel Corp. are described in Note 7.

E. Certain long-term equity investments were pledged as security for short-term and commercialpapers payable. For details of pledged assets, please refer to Note 6.

(9) Real estate investmentsA. Details of real estate investments are set forth below:

B. For details of pledged assets, please refer to Note 6.

2012 2011Beitou District, Zhenxing Section 3,

No. 122, etc., Taipei City162,426$ 162,426$

Xiaobei Section No. 966, Tainan City 68,329 68,329Wenlin Secion 4, Taipei City 38,552 38,552Others (individually less than 3%) 1,811 1,811

271,118$ 271,118$

December 31,



97

(10) Property, plant and equipment

~26~

(10) Property, plant and equipment

For details of pledged assets, please refer to Note 6.(11) Short-term loans

For details of pledged assets, please refer to Note 6.

Accumulated NetInitial cost depreciation book value

Land 122,657$ -$ 122,657$Buildings 401,309 104,006)( 297,303Computer equipment 49,471 29,505)( 19,966Transportation equipment 6,367 4,530)( 1,837Office equipment 370,188 151,699)( 218,489Property held for lease-Land 3,181,239 - 3,181,239Property held for lease-Buildings 6,670,114 861,550)( 5,808,564Leasehold improvements 47,000 37,600)( 9,400Other equipment 1,970 628)( 1,342

10,850,315$ 1,189,518)($ 9,660,797$

December 31, 2012

Accumulated NetInitial cost depreciation book value

Land 122,657$ -$ 122,657$Buildings 401,309 96,513)( 304,796Computer equipment 39,324 26,114)( 13,210Transportation equipment 14,807 9,901)( 4,906Office equipment 369,680 117,573)( 252,107Property held for lease-Land 3,243,202 - 3,243,202Property held for lease-Buildings 6,702,320 720,222)( 5,982,098Leasehold improvements 47,000 28,200)( 18,800Other equipment 1,945 353)( 1,592

10,942,244$ 998,876)($ 9,943,368$

December 31, 2011

2012 2011Unsecured loans 2,580,000$ 880,000$Secured loans 1,240,000 4,487,400

3,820,000$ 5,367,400$Range of interest rate 2.07%~2.69% 2.00%~2.75%

December 31,

98

(12) Notes and bills payable

~27~


(a)The above commercial papers were issued by banks and bills financial institutions.

(b)For details of pledged assets, please refer to Note 6.(13) Receipts in advance

(14) Bonds payable

Note：Please refer to 4(14)A(g).A. The Company issued secured ordinary bonds payable in July 2012. The significant terms of the

bonds are as follows:(a)Total issue amount: $2,000,000(b)Issue price: At pay value of $1,000 per bond.(c)Coupon rate: 1.33%(d)Terms of interest repayment: The bonds interest is calculated on simple rate every year

starting July 2012 based on the coupon rate.(e)Repayment term: The bonds are repaid upon the maturity of the bonds.(f)Period: 5 years, from July 12, 2012 to July 12, 2017.(g)The way of security: The Bonds are secured by Bank of Taiwan.(h)Guarantee Bank: The Bonds are guaranteed by Mega International Commercial Bank.

2012 2011

Commercial papers 1,655,000$ 1,383,000$Less: Unamortized discount 1,773)( 2,331)(


December 31,

2012 2011Advance real estate receipts 1,462,659$ 4,736,091$Advance rent 148,012 82,263Other advance receipts 663 657

1,611,334$ 4,819,011$

December 31,

Collateral or2012 2011 security

2012 lst secured ordinarybonds payable 2,000,000$ -$ Note

December 31,

(13) Receipts in advance

(14) Bonds payable

A. The Company issued secured ordinary bonds payable in July 2012. The significant terms of the bonds are as follows: (a) Total issue amount: $2,000,000(b) Issue price: At pay value of $1,000 per bond.(c) Coupon rate: 1.33%(d) Terms of interest repayment: The bonds interest is calculated on simple rate every year

starting July 2012 based on the coupon rate.(e) Repayment term: The bonds are repaid upon the maturity of the bonds.(f) Period: 5 years, from July 12, 2012 to July 12, 2017.(g) The way of security: The Bonds are secured by Bank of Taiwan.(h) Guarantee Bank: The Bonds are guaranteed by Mega International Commercial Bank


99

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(15) Long-term loans

For detail of pledged assets, please refer to Note 6.

(16) Pension plansA. The Company has a non-contributory and funded defined benefit pension plan in accordance

with the Labor Standards Law, covering all regular employees. Under the defined benefitpension plan, two units are accrued for each year of service for the first 15 years and one unitfor each additional year thereafter, subject to a maximum of 45 units. Pension benefits arebased on the number of units accrued and the average monthly salaries and wages of the last 6months prior to retirement. The Company contributes monthly an amount equal to 8% of theemployees’ 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 following sets forth the pension information based on the actuarial report:

(a)Actuarial assumptions

2012 2011Secured bank loans 10,043,153$ 13,215,516$Unsecured loans 175,000 300,000Long-term commercial papers 400,000 400,000

10,618,153 13,915,516Less: Unamortized discount 1,687)( 562)(

Current portion 3,094,284)( 3,812,079)(7,522,182$ 10,102,875$

Range of maturity dates 2013.02.06~2027.11.02 2013.02.13~2027.11.02

Range of interest rates 0.86%~3.07% 0.86%~3.01%

December 31,

2012 2011Discount rate 1.75% 1.90%Rate of compensation increase 1.50% 1.50%Expected rate of return on plan assets 1.75% 1.90%

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For detail of pledged assets, please refer to Note 6.

(16) Pension plansA. The Company has a non-contributory and funded defined benefit pension plan in accordance

with the Labor Standards Law, covering all regular employees. Under the defined benefitpension plan, two units are accrued for each year of service for the first 15 years and one unitfor each additional year thereafter, subject to a maximum of 45 units. Pension benefits arebased on the number of units accrued and the average monthly salaries and wages of the last 6months prior to retirement. The Company contributes monthly an amount equal to 8% of theemployees’ 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 following sets forth the pension information based on the actuarial report:

(a)Actuarial assumptions

2012 2011Secured bank loans 10,043,153$ 13,215,516$Unsecured loans 175,000 300,000Long-term commercial papers 400,000 400,000


Current portion 3,094,284)( 3,812,079)(7,522,182$ 10,102,875$



December 31,

2012 2011Discount rate 1.75% 1.90%Rate of compensation increase 1.50% 1.50%Expected rate of return on plan assets 1.75% 1.90%


(16) Pension plansA. The Company has a non-contributory and funded defined benefit pension plan in accordance with

the Labor Standards Law, covering all regular employees. 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 8% 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 following sets forth the pension information based on the actuarial report:(a) Actuarial assumptions

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(b)The funded status of the plans is as follows:

(c)Net pension cost comprises the following:

Effective July 1, 2005, the Company has established a funded defined contribution pension plan(the “New Plan”) under the Labor Pension Act. Employees have the option to be covered under theNew Plan. Under the New Plan, the Company contributes monthly an amount based on 6% of theemployees’ monthly salaries and wages to the employees’ individual pension accounts at theBureau of Labor Insurance. The benefits accrued are portable upon termination of employment.The pension costs under the defined contribution pension plan for the years ended December 31,2012 and 2011 were $7,458 and $6,414, respectively.

(17) Common stockA. The stockholders at their annual stockholders’ meeting on June 17, 2011 adopted a resolution to

increase capital for 89,660 thousand shares through capitalization of unappropriated retainedearnings of $896,605. Pursuant to the approval by the Financial Supervisory Commission,Securities and Futures Bureau, No. 1000035447, the capital increase was effective on July 29,2011. After the capital increase, the paid-in capital was $10,858,877.

B. The stockholders at their annual stockholders’ meeting on June 20, 2012 adopted a resolution toincrease capital for 108,589 thousand shares through capitalization of unappropriated retained

December 31, 2012 December 31, 2011Benefit obligation:

Vested benefit obligation 12,870)($ 27,712)($Non-vested benefit obligation 60,058)( 53,728)(Accumulated benefit obligation 72,928)( 81,440)(Additional benefit based on future salaries 13,996)( 14,020)(Projected benefit obligation 86,924)( 95,460)(

Fair value of plan assets 5,421 23,436Funded status 81,503)( 72,024)(Unrecognized loss on plan assets 49,149 43,170Additional minimum liability recognized 35,152)( 29,150)(Accrued pension liabilities 67,506)($ 58,004)($Vested benefit 14,419$ 30,468$

2012 2011Service cost 630$ 688$Interest cost 1,814 1,896Expected return on plan assets 445)( 455)(assets 2,586 2,687

Net pension cost 4,585$ 4,816$

For the years ended December 31,

(b) The funded status of the plans is as follows:

(c) Net pension cost comprises the following:

Effective July 1, 2005, the Company has established a funded defined contribution pension plan (the “New Plan”) under the Labor Pension Act. Employees have the option to be covered under the New Plan. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are portable upon termination of employment. The pension costs under the defined contribution pension plan for the years ended December 31, 2012 and 2011 were $7,458 and $6,414, respectively.

(17) Common stockA. The stockholders at their annual stockholders’ meeting on June 17, 2011 adopted a resolution

to increase capital for 89,660 thousand shares through capitalization of unappropriated retained earnings of $896,605. Pursuant to the approval by the Financial Supervisory Commission, Securities and Futures Bureau, No. 1000035447, the capital increase was effective on July 29, 2011. After the capital increase, the paid-in capital was $10,858,877.B. The following sets forth the pension information based on the actuarial report:

B. The stockholders at their annual stockholders’ meeting on June 20, 2012 adopted a resolution to increase capital for 108,589 thousand shares through capitalization of unappropriated retained earnings of $1,085,888. Pursuant to the approval by the Financial Supervisory Commission, Securities and Futures Bureau, No. 1010034424, the capital increase was effective on August 6,


101

2012. After the capital increase, the paid-in capital was $ 11,944,765.

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

(19) Retained earningsA. In accordance with the Company’s Articles of Incorporation, the Company will take into

consideration its future business plans and capital expenditures in determining the amounts of earnings to be retained and to be distributed. In accordance with the Company Law, 10% of the current year’s earnings, after payment of all taxes and after offsetting accumulated deficit, shall be set aside as legal reserve until the balance of legal reserve is equal to that of issued share capital. Afterwards, an amount shall be appropriated as special reserve in accordance with applicable legal or regulatory requirements, and then distribution should be in the following order:(a) 3% as remuneration to directors and supervisors;(b) At least 2% as bonuses to employees; and(c) Appropriation of the remainder plus prior years’ accumulated unappropriated retained earnings

shall be proposed by the Board of Directors, taking into consideration the cash requirements for future business and investments and other factors. In principle, cash and stock dividends shall account for 50% and 50%, respectively, of the total dividends distributed. While, in case the Company has the need of reserving cash for a significant capital expenditure plan, or intends to adopt the high cash dividends policy instead to avoid capital inflation, the Board of Directors may adjust the cash and stock dividends payout ratios; however, cash and stock dividends shall account for at least 30% and 30%, respectively, of the total dividends distributed, and the final adjustments shall be approved by the stockholders. The parties entitled to the employees’ stock bonus may include the employees of the Company’s affiliates who meet certain criteria.

B. According to the R.O.C. Company Law, except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.

C. As of December 31, 2012 and 2011 , the balance of unappropriated retained earnings is as follows:

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shareholders in proportion to their share ownership is permitted, provided that the balance of thereserve exceeds 25% of the Company’s paid-in capital.

C.As of December 31, 2012 and 2011 , the balance of unappropriated retained earnings is asfollows:

D.(a)The appropriations of 2011 and 2010 earnings had been resolved at the stockholders’meetings on June 20, 2012 and June 17, 2011, respectively. Details are summarized below:

(b)The appropriations of 2012 earnings had been proposed by the Board of Directors on March15, 2013. Details are summarized below:

As of March 15, 2013, the abovementioned 2012 earnings appropriation had not beenapproved by the stockholders.

2012 2011

Unappropriated retained earnings in and after 1998 2,364,465$ 2,448,137$

December 31,

Dividends per Dividends per

share share

Amount (in dollars) Amount (in dollars)

Legal reserve 231,413$ -$ 213,082$ -$Stock dividends 1,085,888 1.00 896,605 0.90Cash dividends 542,944 0.50 896,605 0.90Employees' cash bonus 41,654 - 38,355 -Directors' and supervisors'

remuneration 62,482 - 57,532 -

1,964,381$ 1.50$ 2,102,179$ 1.80$

2011 2010

Dividends pershare

Amount (in dollars)Legal reserve 178,593$ -$Stock dividends 1,194,476 1.00Cash dividends 597,238 0.50Employees' cash bonus 321,147 -

48,220 -2,339,674$ 1.50$

2012

Directors' and supervisors' remuneration


103

E. Employees’ bonus for 2012 and 2011 are estimated and accrued at $31,640 and $41,654, respectively, and directors’ and supervisors’ remuneration for 2012 and 2011 are estimated and accrued at $47,460 and $62,482, respectively. The basis of estimates is based on a certain percentage of net income taking into account the legal reserve and other factors prescribed by the Company’s Articles of Incorporation (2% and 3% of after-tax earnings for 2011 and 2010, respectively). The estimated amounts were recognized as operating expenses for the years ended December 31, 2012 and 2011. If the estimated amounts differ from the amounts approved by the stockholders, the difference is recognized as income or expense in the following year.

F. The actual distribution of 2011 and 2010 earnings were as stated in the previous paragraph. The difference of $328 between the amounts recognized in 2010 (cash bonus to employees of $38,224 and remunerations to directors and supervisors of $57,335) and the amount resolved by the stockholders was adjusted in the statement of income for 2011. There was no difference for 2011.

(20) Treasury stockA. Treasury stocks bought back by the Company:

(a) For the years ended December 31, 2012 and 2011: None.(b) Pursuant to the R.O.C. Securities and Exchange Law, the number of shares bought back as

treasury stock should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital reserve. Treasury stocks to enhance the Company’s credit rating and the stockholders’ equity should be retired within six months of acquisition.

(c) Pursuant to the R.O.C. Securities and Exchange Law, treasury stock should not be pledged as collateral and is not entitled to dividends before it is reissued to the employees.

B. Stocks of the Company held by its subsidiaries:(a) Effective January 1, 2002, the stocks of the Company held by its subsidiaries are regarded

as treasury stocks. Those treasury stocks should be eliminated from the calculation of the Company’s weighted-average outstanding shares of EPS.

(b) As of December 31, 2012 and 2011, the total number of the Company’s shares held by its subsidiaries was 35,014 thousand shares and 31,831 thousand shares with an average book value of $1.73 and $1.90 (in dollars) per share and market value of $20.70 and $16.20 (in dollars) per share, respectively.

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(21) Deferred income tax and income tax expenseA. Income tax expense and income tax payable are reconciled as follows:

The difference between financial income and taxable income mainly lies in the tax-exemptincome of land.

B. Details of loss carryforwards and investment tax credits resulting in deferred income tax assetsare as follows:

C. As of December 31, 2012, the Company's investment tax credits consisted of the following:

D.As of December 31, 2012 and 2011, the imputation tax credit account balance amounted to$43,935 and $1,777, respectively. The Company distributed unappropriated earnings in 2011and 2010 as dividends in accordance with the resolution adopted at the stockholders’ meetingon June 20, 2012 and June 17, 2011, respectively. The 2012 and 2011 creditable ratio were

2012 2011Income tax at statutory tax rate 312,115$ 394,461$Tax effect of permanent and temporary differences 198,705)( 373,147)(Tax effect of investment tax credits 41,523)( 6,227)(Tax effect of loss carryforwards 75,753)( 21,314)(Under provision of prior year's income tax 8,520 -10% tax on unappropriated earnings 45,389 12,453

Income tax expense 50,043 6,226Under provision of prior year's income tax 8,520)( -Prepaid income tax 3,748)( 3,225)(Income tax payable 37,775$ 3,001$


Non-current: Amount Tax effect Amount Tax effectLoss carryforwards -$ -$ 451,709$ 76,790$Investment tax credits 92,625 14,148

92,625 90,938Less: Valuation allowance 92,625)( 90,938)(

-$ -$

December 31, 2012 December 31, 2011

Qualifying Total tax Unused tax Final year taxRegulation item credits credits credits are due

Act for Promotion of PrivateParticipation in InfrastructureProjects Investment 120,000$ 92,625$ 2016

The difference between financial income and taxable income mainly lies in the tax-exemptincome of land.

B. Details of loss carryforwards and investment tax credits resulting in deferred income tax assets are as follows:

C. As of December 31, 2012, the Company's investment tax credits consisted of the following:


D. As of December 31, 2012 and 2011, the imputation tax credit account balance amounted to $43,935 and $1,777, respectively. The Company distributed unappropriated earnings in 2011 and 2010 as dividends in accordance with the resolution adopted at the stockholders’ meeting on June 20, 2012 and June 17, 2011, respectively. The 2012 and 2011 creditable ratio were 2.73% and 0.16%, respectively. The 2012 estimated creditable ratio was 1.86%. The amount of deductible tax distributable by the Company to its shareholders shall be limited to an amount not exceeding the


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2.73% and 0.16%, respectively. The 2012 estimated creditable ratio was 1.86%. The amount ofdeductible tax distributable by the Company to its shareholders shall be limited to an amountnot exceeding the amount of the imputation tax credit account balance on the date ofdistribution of the dividends. Accordingly, the actual creditable ratio for the distribution of2012 undistributed earnings will be based on the imputation tax credit account balance up tothe date of distribution of the dividends.

E.As of December 31, 2012, the Company’s income tax returns through 2011 have been assessed bythe Tax Authority and there were no disputes existing between the Company and the Tax Authority.

(22) Earnings per share

Weighted average

number of shares

outstanding

during the year

Before tax After tax (in thousands) Before tax After tax

Basic earnings per share

Net income 1,835,973$ 1,785,930$ 1,159,462 1.58$ 1.54$

Dilutive effect of common

stock equivalents:

Employees' bonus - - 1,723

Diluted earnings per share

Net income plus the dilutive

effect of common stock

equivalents 1,835,973$ 1,785,930$ 1,161,185 1.58$ 1.54$

2012

Earnings per share

Amount (in dollasrs)

~35~

(a) The above weighted-average outstanding common shares have been adjusted retroactively inproportion to retained earnings as of December 31, 2010.

(b) Effective January 1, 2008, as employees’ bonus could be distributed in the form of stock, thediluted EPS computation shall include those estimated shares that would increase fromemployees’ stock bonus issuance in the calculation of the weighted-average number ofcommon shares outstanding during the reporting year, taking into account the dilutive effectsof stock bonus on potential common shares; whereas, basic EPS shall be calculated based onthe weighted-average number of common shares outstanding during the reporting year thatinclude the shares of employees’ stock bonus for the appropriation of prior year earnings,which have already been resolved at the stockholders’ meeting held in the reporting year.Since capitalization of employees’ bonus no longer belongs to distribution of stock dividends(or retained earnings and capital reserve capitalized), the calculation of basic EPS and dilutedEPS for all periods presented shall not be adjusted retroactively. However, the accountingtreatment for the appropriation of employees’ bonus for 2007 earnings resolved at thestockholders’ meeting held in 2008 is still in accordance with the regulations on capitalizationof employees’ bonus under paragraphs 19 and 39 of R.O.C. SFAS No. 24, “Earnings perShare”.

Weighted average

number of shares

outstanding

during the year



Net income 2,320,357$ 2,314,131$ 1,159,462 2.00$ 2.00$

Dilutive effect of common

stock equivalents:


Diluted earnings per share

Net income plus the dilutive

effect of common stock

equivalents 2,320,357$ 2,314,131$ 1,162,673 2.00$ 1.99$

2011

Earnings per share

Amount (in dollasrs)

amount of the imputation tax credit account balance on the date of distribution of the dividends. Accordingly, the actual creditable ratio for the distribution of 2012 undistributed earnings will be based on the imputation tax credit account balance up to the date of distribution of the dividends.

E. As of December 31, 2012, the Company’s income tax returns through 2011 have been assessed by the TaxAuthority and there were no disputes existing between the Company and the TaxAuthority.


106

(a) The above weighted-average outstanding common shares have been adjusted retroactively in proportion to retained earnings as of December 31, 2010.

(b) Effective January 1, 2008, as employees’ bonus could be distributed in the form of stock, the diluted EPS computation shall include those estimated shares that would increase from employees’ stock bonus issuance in the calculation of the weighted-average number of common shares outstanding during the reporting year, taking into account the dilutive effects of stock bonus on potential common shares; whereas, basic EPS shall be calculated based on the weighted-average number of common shares outstanding during the reporting year that include the shares of employees’ stock bonus for the appropriation of prior year earnings, which have already been resolved at the stockholders’ meeting held in the reporting year. Since capitalization of employees’ bonus no longer belongs to distribution of stock dividends (or retained earnings and capital reserve capitalized), the calculation of basic EPS and diluted EPS for all periods presented shall not be adjusted retroactively. However, the accounting treatment for the appropriation of employees’ bonus for 2007 earnings resolved at the stockholders’ meeting held in 2008 is still in accordance with the regulations on capitalization of employees’ bonus under paragraphs 19 and 39 of R.O.C. SFAS No. 24, “Earnings per Share”.

(23) Personnel expenses and depreciationPersonnel expenses and depreciation are summarized as follows:

~36~

(23) Personnel expenses and depreciation

Personnel expenses and depreciation are summarized as follows:

Operating costs Operating expenses Total

Personnel expenses:

Salaries 18,427$ 396,923$ 415,350$

Insurance - 13,589 13,589

Pension - 12,043 12,043

Others - 26,340 26,340

18,427$ 448,895$ 467,322$

Depreciation 145,090$ 57,140$ 202,230$

For the year ended December 31, 2012

Operating costs Operating expenses Total

Personnel expenses:

Salaries 12,733$ 411,326$ 424,059$

Insurance - 12,154 12,154

Pension - 11,230 11,230

Others - 14,693 14,693

12,733$ 449,403$ 462,136$

Depreciation 179,483$ 54,967$ 234,450$



107

5. RELATED PARTY TRANSACTIONS

A.Names of related parties and their relationship with the Company

~37~

5. RELATED PARTY TRANSACTIONSA. Names of related parties and their relationship with the Company

For other related parties over which the Company exercises significant influence but with which theCompany had no material transaction, please refer to Note 11 for related information.

B. Significant transactions and balances with related partiesa. Sales

(a)On July 8, 2009, the Company signed a house sale contract with the spouse of its chairman, Ms.Chung, Wu-Chuan, in the amount of $270,060. The Company recognized sale revenue for thiscontract on a percentage-of-completion basis, amounting to $50,530 and $87,760, for the yearsended December 31, 2012 and 2011, respectively. As of December 31, 2012 and 2011,accumulated sales revenue recognized for this contract on a percentage-of-completion basisamounted to $265,944 and $215,414, respectively. The sale terms of this contract are notsignificantly different from other sale contracts of the same building case.

Names of related parties Relationship with the CompanyTa-Chen Construcion & Engineering Corp. Subsidiary accounted for under the equity method

(Ta-Chen Construction)Prince Utility Co., Ltd. (Prince Utility) Subsidiary accounted for under the equity methodDong-Feng Enterprises Co. Ltd. Subsidiary accounted for under the equity method

(Dong-Feng Enterprises)Cheng-Shi Construction Co., Ltd. Subsidiary accounted for under the equity method

(Cheng-Shi Construction)Prince Security Co., Ltd. Subsidiary accounted for under the equity method

(Prince Security)Prince Apartment Management Maintain Subsidiary accounted for under the equity method

Co., Ltd. (Prince Apartment)The Splendor Hotel Taichung Subsidiary accounted for under the equity method

(The Splendor Hotel)Jin-Yi-Xing Plywood Co., Ltd. Subsidiary accounted for under the equity method

(Jin-Yi-Xing plywood)BioSun Technology Co., Ltd. Subsidiary accounted for under the equity method

(BioSun Technology)Chuang, Nan-Tien The Company’s chairmanHsieh, Ming-Fan The Company’s general managerChung, Wu-Chuan The Chairman’s spouse

For other related parties over which the Company exercises significant influence but with which the Company had no material transaction, please refer to Note 11 for related information.

B. Significant transactions and balances with related parties a. Sales

(a) On July 8, 2009, the Company signed a house sale contract with the spouse of its chairman, Ms. Chung, Wu-Chuan, in the amount of $270,060. The Company recognized sale revenue for this contract on a percentage-of-completion basis, amounting to $50,530 and $87,760, for the years ended December 31, 2012 and 2011, respectively. As of December 31, 2012 and 2011, accumulated sales revenue recognized for this contract on a percentage-of-completion basis amounted to $265,944 and $215,414, respectively. The sale terms of this contract are not significantly different from other sale contracts of the same building case.

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b. Purchases(a) Details of the Company’s subcontracting to related parties and its purchases from related

parties for the years ended December 31, 2012 and 2011 are as follows:

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

(b)As of December 31, 2012 and 2011, unsettled construction contracts that were signed by theCompany and Chen-Shi Construction Company totaled $1,357,473 and $645,487, respectively;payments already made for those contracts amounted to $181,392 and $119,469, respectively; andfuture payments required under those contracts amounted to $1,176,081 and $526,018,respectively.

(c)As of December 31, 2012 and 2011, unsettled construction contracts that were signed by theCompany and Ta-Chen Construction Company totaled $427,810 and $400,000, respectively;payments already made for those contracts amounted to $1,000 and $213,460, respectively;and future payments required under those contracts amounted to $426,810 and $186,540,respectively.

(d) As of December 31, 2012 and 2011, unsettled construction contracts that were signed by theCompany and Prince Utility Company totaled $372,413 and $304,060, respectively; paymentsalready made for those contracts amounted to $9,641 and $144,682, respectively; and futurepayments required under those contracts amounted to $362,772 and $159,378, respectively.

Amount % Amount %

Chen-Shi Construction 699,743$ 12 367,848$ 6Ta-Chen Construction 365,254 6 158,960 3Prince Utility 267,329 4 224,166 4Prince Security 36,094 1 22,391 -BioSun Technology 14,328 - 13,296 -Prince Apartment 13,729 - 9,511 -Others - - 3,163 -

1,396,477$ 23 799,335$ 13

For the years ended December 31,2012 2011

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

(b) As of December 31, 2012 and 2011, unsettled construction contracts that were signed by the Company and Chen-Shi Construction Company totaled $1,357,473 and $645,487, respectively; payments already made for those contracts amounted to $181,392 and $119,469, respectively; and future payments required under those contracts amounted to $1,176,081 and $526,018, respectively.

(c) As of December 31, 2012 and 2011, unsettled construction contracts that were signed by the Company and Ta-Chen Construction Company totaled $427,810 and $400,000, respectively; payments already made for those contracts amounted to $1,000 and $213,460, respectively;

and future payments required under those contracts amounted to $426,810 and $186,540, respectively.

(d) As of December 31, 2012 and 2011, unsettled construction contracts that were signed by the Company and Prince Utility Company totaled $372,413 and $304,060, respectively; payments already made for those contracts amounted to $9,641 and $144,682, respectively; and future payments required under those contracts amounted to $362,772 and $159,378, respectively.

b. Purchases(a) Details of the Company’s subcontracting to related parties and its purchases from related

parties for the years ended December 31, 2012 and 2011 are as follows:


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C. Accounts receivable

D. Prepayment for land

E. Other assets(a)On June 20, 2006, the Company and CHINA METAL PRODUCTS CO., LTD. (“A party”)

jointly signed a creditor’s rights transfer contract with AMIDA TRUSTLINK ASSETSMANAGEMENT CO., LTD. (“B party”). Under the contract, the Company and A partyshould pay $2,100,000 each (totaling $4,200,000) to jointly acquire whole creditor’s rights ofmortgages, security interests and other dependent claims (collectively referred herein as thecreditor’s rights) on the Splendor Hotel Taichung Building, and each bears 50% rights andobligations of this acquisition; when all creditor’s rights of this object turn into property rights,the Company and A party should pay B party totaling $1,000,000 as the cost and reward of Bparty for it is entrusted with the task to help turn the creditor’s rights as stated above intoproperty rights, but any excess cost over $1,000,000 if incurred on this task shall be borne byB party on its own; the Company should pay B party $300,000 before June 30, 2006, and theCompany and A party should jointly issue a promissory note of $1,800,000 to B party on thesigning date; payment should be done before July 15, 2006. The title to the creditor’s rights asstated above had been transferred to the Company and A party on August 2, 2006. OnDecember 29, 2006, the Company and A party signed an additional contract following theoriginal contract with B party to raise total acquisition price of the creditor’s rights to$4,750,000 (the Company and A party bear 50% of the price each). As of December 31, 2012,the Company had paid its price.

(b)The Company and CHINA METAL PRODUCTS CO., LTD. jointly established The SplendorHotel Chunggang (“A party”) by investing $200,000 each. On November 1, 2006, A partysigned a certain assets transfer contract with The Splendor Hotel Chunggang (“B party”).Under the contract, A party should pay B party $352,310 for related employees’ service years,goods purchases and taxes, and A party should pay the shortfall, if any, up to the maximum of$100,000, and B party does not need to return the remainder, if any, to A party. The abovepayments required of A party were made from the share capital of its initial establishment.

Amount % Amount %Chung, Wu-Chuan 185,560$ 12 -$ -

December 31,2012 2011

2012 2011Jin-Yi-Xing Plywood 238,163$ 237,350$

December 31,

C. Accounts receivable

E. Other assets(a) On June 20, 2006, the Company and CHINA METAL PRODUCTS CO., LTD. (“A party”)

jointly signed a creditor’s rights transfer contract with AMIDA TRUSTLINK ASSETS MANAGEMENT CO., LTD. (“B party”). Under the contract, the Company and A party should pay $2,100,000 each (totaling $4,200,000) to jointly acquire whole creditor’s rights of mortgages, security interests and other dependent claims (collectively referred herein as the creditor’s rights) on the Splendor Hotel Taichung Building, and each bears 50% rights and obligations of this acquisition; when all creditor’s rights of this object turn into property rights, the Company and A party should pay B party totaling $1,000,000 as the cost and reward of B party for it is entrusted with the task to help turn the creditor’s rights as stated above into property rights, but any excess cost over $1,000,000 if incurred on this task shall be borne by B party on its own; the Company should pay B party $300,000 before June 30, 2006, and the Company and A party should jointly issue a promissory note of $1,800,000 to B party on the signing date; payment should be done before July 15, 2006. The title to the creditor’s rights as stated above had been transferred to the Company and A party on August 2, 2006. On December 29, 2006, the Company and A party signed an additional contract following the original contract with B party to raise total acquisition price of the creditor’s rights to $4,750,000 (the Company and A party bear 50% of the price each). As of December 31, 2012, the Company had paid its price.

(b) The Company and CHINA METAL PRODUCTS CO., LTD. jointly established The Splendor Hotel Chunggang (“A party”) by investing $200,000 each. On November 1, 2006, A party signed a certain assets transfer contract with The Splendor Hotel Chunggang (“B party”). Under the contract, A party should pay B party $352,310 for related employees’ service years, goods purchases and taxes, and A party should pay the shortfall, if any, up to the maximum of $100,000, and B party does not need to return the remainder, if any, to A party. The above payments required of A party were made from the share capital of its initial establishment.

D. Prepayment for land

110

~40~

(c)The Company’s creditor’s rights above amounting to $2,375,000 were originally receivablefrom The Splendor Hotel Chung-gang. After The Splendor Hotel Chung-gang and TheSplendor Hotel Taichung signed a certain assets transfer contract in December, 2006, thecreditor’s right to the above receivables were transferred to The Splendor Hotel Taichung. Asof December 31, 2012 and 2011, the Company’s creditor’s rights receivable from TheSplendor Hotel Taichung both amounted to $575,000.

(d)On January 16, 2007, the Company acquired 99.62% ownership in Jin-Yi-Xing Plywood Co.,Ltd. by cash. As of December 31, 2012 and 2011, the Company’s creditor’s rights receivablefrom Jin-Yi-Xing Plywood Co., Ltd. amounted to $480,186 and $490,338, respectively.

F. Accounts payable

G. Financing(a)Loans receivable from related parties (shown as other receivables-related parties) Year 2012：

None.

(b) Loans payable to related parties (shown as other payables-related parties)

Amount % Amount %

Ta-Chen Construction 191,827$ 8 -$ -Cheng-Shi Construction 128,311 5 32,702 4Prince Utility 98,712 4 40,720 5Others 6,036 - 2,471 -

424,886$ 17 75,893$ 9

December 31,2012 2011

Maximum Maximum Ending Interestbalance date balance balance Interest rate expense

Dong-Feng Enterprises 2011.01.01 413,600$ -$ 2.7% 3,132$



Dong-Feng Enterprises 2012.01.01 240,000$ -$ 2.7% 4,474$


Dong-Feng Enterprises 2011.09.01 240,000$ 240,000$ 2.7% 2,166$



G. Financing(a) Loans receivable from related parties (shown as other receivables-related parties) Year

2012: None.

(b) Loans payable to related parties (shown as other payables-related parties)

(c) The Company’s creditor’s rights above amounting to $2,375,000 were originally receivable from The Splendor Hotel Chung-gang. After The Splendor Hotel Chung-gang and The Splendor Hotel Taichung signed a certain assets transfer contract in December, 2006, the creditor’s right to the above receivables were transferred to The Splendor Hotel Taichung. As of December 31, 2012 and 2011, the Company’s creditor’s rights receivable from The Splendor Hotel Taichung both amounted to $575,000.

(d) On January 16, 2007, the Company acquired 99.62% ownership in Jin-Yi-Xing Plywood Co., Ltd. by cash. As of December 31, 2012 and 2011, the Company’s creditor’s rights receivable from Jin-Yi-Xing Plywood Co., Ltd. amounted to $480,186 and $490,338, respectively.

F. Accounts payable


111

~41~

H. Endorsements and guarantees provided for related parties(a)Endorsements and guarantees provided by the related parties as of December 31, 2012 and

2011 were as follows:

(b)Endorsement and guarantees provided for the related parties are described in Note 7.

I. Salaries/rewards information of key management

Note:(a) Salaries and bonuses include regular wages, special responsibility allowances, pensions,

severance pay, various bonuses, rewards, etc.(b) Service execution fees include travel or transportation allowances, special expenditures,

various allowances, housing and vehicle benefits, etc.(c) Directors’ and supervisors’ remuneration and employees’ bonuses were those amounts

estimated and accrued in the statement of income for the current year.J. Others

(a)As of December 31, 2012 and 2011, the investee, Jin Yi Xing Plywood Co., Ltd., obtainedsecured loans from the bank both amounting to $1,246,889, by providing its land as collateral.

Names of Endorsers Total Credit Line Amount Drawn Down Interest ExpenseDong-Feng Enterprises 1,810,889$ 1,810,889$ 14,527$Jin-Yi-Xing Plywood 1,552,889 1,246,889 10,002Prince Utility 540,651 540,651 4,337Ta-Chen Construction - - 3,260

3,904,429$ 3,598,429$ 32,126$

Names of Endorsers Total Credit Line Amount Drawn Down Interest ExpenseDong-Feng Enterprises 1,810,889$ 1,810,889$ 13,582$Jin-Yi-Xing Plywood 2,500,000 1,246,889 8,238Prince Utility 540,651 540,651 2,189Ta-Chen Construction 927,889 423,733 3,178

5,779,429$ 4,022,162$ 27,187$

December 31, 2012

December 31, 2011

2012 2011Salaries and bonuses 115,140$ 100,845$Service execution fees 6,480 6,710Directors' and supervisors' remuneration andemployees' bonus 47,460 62,482

169,080$ 170,037$

(b) Endorsement and guarantees provided for the related parties are described in Note 7.

I. Salaries/rewards information of key management

H. Endorsements and guarantees provided for related parties(a) Endorsements and guarantees provided by the related parties as of December 31, 2012 and

2011 were as follows:



various allowances, housing and vehicle benefits, etc.(c) Directors’ and supervisors’ remuneration and employees’ bonuses were those amounts

estimated and accrued in the statement of income for the current year.J. Others

(a) As of December 31, 2012 and 2011, the investee, Jin Yi Xing Plywood Co., Ltd., obtained secured loans from the bank both amounting to $1,246,889, by providing its land as collateral.

112

(b) Certain short and long-term loans of the Company were guaranteed by its chairman, Chuang, Nan-Tien, and general manager, Hsieh, Ming-Fan.

(c) The accumulated operating losses of the subsidiary, the Splendor Hotel, had exceeded 50% of its paid-in capital and its current liabilities were greater than current assets. The Company was committed to give the Splendor Hotel financial support for its continuing operations for one year from the date of the financial support letter.

6. PLEDGED ASSETS

~42~

(b) Certain short and long-term loans of the Company were guaranteed by its chairman, Chuang,Nan-Tien, and general manager, Hsieh, Ming-Fan.

(c) The accumulated operating losses of the subsidiary, the Splendor Hotel, had exceeded 50% ofits paid-in capital and its current liabilities were greater than current assets. The Companywas committed to give the Splendor Hotel financial support for its continuing operations forone year from the date of the financial support letter.

6. PLEDGED ASSETS

7. COMMITMENTS AND CONTINGENT LIABILITIESA. According to the sale contracts, the Company should provide warranty on the house structure and

major facilities for one year from the handover day for the houses it sold. However, any damage tothe houses caused by disasters, additions to the houses made by the buyers, or events that are notattributed to the Company is not included in the scope of warranty.

The details of pledged assets were as follows:

Pledged asset December 31, 2012 December 31, 2011 PurposeDemand deposits (shown as other

financial assets - current)782,612$ 85,644$ Performance guarantees

Certificate of deposit and checkingdeposit (shown as other financialassets - non-current)

1,230 1,830 To obtain a higher credit for clients

Demand deposits and certificate ofdeposit (shown as other financialassets - non-current)

807,107 146,153 Short-term and long-term loans guarantee

Land held for construction 7,087,276 8,632,631 Short-term loans, notes and bills payableand long-term loans

Prepayment for land purchases 146,789 526,209 Short-term loans, notes and bills payable

Buildings and land held for sale 330,592 15,330 Short-term loans, notes and bills payable

Financial assets at fair value throughprofit or loss - current

76,593 76,027 Long-term loans

Available-for-sale financial assets 1,282,523 843,516 Short-term loans, notes and bills payableFinancial assets carried at cost 575,426 575,426 Short-term loans, notes and bills payableLong-term equity investments accounted

for under the equity method1,192,440 203,443 Short-term loans, notes and bills payable

Investments in real estate 162,426 162,426 Short-term loans, notes and bills payableand long-term loans

Land 91,782 55,370 Short-term loans, notes and bills payableand long-term loans

Buildings 239,037 95,739 Short-term loans, notes and bills payableand long-term loans

Property held for lease 4,562,712 4,260,463 Short-term loans, notes and bills payableand long-term loans

Other assets - other 1,055,186 1,065,338 Long-term loans18,393,731$ 16,745,545$

Book value

7. PLEDGED ASSETS

A. According to the sale contracts, the Company should provide warranty on the house structure and major facilities for one year from the handover day for the houses it sold. However, any damage to the houses caused by disasters, additions to the houses made by the buyers, or events that are not attributed to the Company is not included in the scope of warranty.

B. Information on the commitments of the Company relating to purchases from related parties is described in Note 5(2).


113

~43~

B. Information on the commitments of the Company relating to purchases from related parties isdescribed in Note 5(2).

C. Information on the commitments of the Company relating to financial support to related parties isdescribed in Note 5(2).

D. Information on the commitments of the Company on investments and related share capital paymentstatus is described in Note 4(7).

E. As of December 31, 2012 and 2011, the real estate sale contracts which were signed by theCompany and buyers but the ownership of the real estate had not been transferred to the buyersboth amounted to $483,321; payments already made for those contracts both amounted to $471,166;and future payments required from the buyers under those contracts both amounted to $12,155.

F. As of December 31, 2012 and 2011, the details of endorsements and guarantees provided to relatedparties were as follows:

For the years ended December 31, 2012 and 2011, the interest income received fromthe above guarantees and endorsements were $3,997 and $9,721, respectively.

G. On March 17, 2005, the Company (“A party”) signed a contract with National Taiwan University(“B party”) relating to the construction and operation of dormitories in Changxing St. Campus andShuiyuan Campus. The major terms of the contract are as follows:(a)Under the contract, B party should be responsible for acquiring the ownership or land-use right

for this project, and let A party use the land; A party must complete the construction within 3years from the registration of the superficies, and may operate the dormitories for 44 years(theCompany reached an agreement with B party that the operating period be changed from original32 years to 44 years), collecting dormitory rentals and use fees of other facilities from students,and should return the related assets to B party on the expiry of the contract.

(b)A party should give B party performance guarantee of $60,000 for the construction on thesigning date and $30,000 for operations before the start of operation. As of December 31, 2012and 2011, A party had provided performance guarantee with a guarantee letter issued by the bank,both amounting to $30,000.

(c)A party should pay B party land rentals from the registration of the superficies, according to theterms of the contract, and pay B party operating royalties from the third year of the operation,

Contract Amount Contract AmountCompany Name Amount Used Amount Used

The Splendor Hotel Taichung 1,932,720$ 1,717,720$ 1,832,720$ 1,456,547$Ta-Chen Construction &

Engineering Corp. 1,200,000 309,084 1,100,000 478,389Time Square International

Co., Ltd. 900,000 - 1,100,000 305,2904,032,720$ 2,026,804$ 4,032,720$ 2,240,226$


C. Information on the commitments of the Company relating to financial support to related parties is described in Note 5(2).

D. Information on the commitments of the Company on investments and related share capital payment status is described in Note 4(7).

E. As of December 31, 2012 and 2011, the real estate sale contracts which were signed by the Company and buyers but the ownership of the real estate had not been transferred to the buyers both amounted to $483,321; payments already made for those contracts both amounted to $471,166; and future payments required from the buyers under those contracts both amounted to $12,155.

F. As of December 31, 2012 and 2011, the details of endorsements and guarantees provided to related parties were as follows:

For the years ended December 31, 2012 and 2011, the interest income received from the above guarantees and endorsements were $3,997 and $9,721, respectively.

G. On March 17, 2005, the Company (“A party”) signed a contract with National Taiwan University (“B party”) relating to the construction and operation of dormitories in Changxing St. Campus and Shuiyuan Campus. The major terms of the contract are as follows:(a) Under the contract, B party should be responsible for acquiring the ownership or land-use right

for this project, and let A party use the land; A party must complete the construction within 3 years from the registration of the superficies, and may operate the dormitories for 44 years(the Company reached an agreement with B party that the operating period be changed from original 32 years to 44 years), collecting dormitory rentals and use fees of other facilities from students, and should return the related assets to B party on the expiry of the contract.

(b) A party should give B party performance guarantee of $60,000 for the construction on the signing date and $30,000 for operations before the start of operation. As of December 31, 2012 and 2011, A party had provided performance guarantee with a guarantee letter issued by the bank, both amounting to $30,000.

(c) A party should pay B party land rentals from the registration of the superficies, according to the terms of the contract, and pay B party operating royalties from the third year of the operation,based on 0.5% of dormitory rentals and use fees of other facilities collected from students.

(d) Terms of restrictions for A party:i) The ratio of A party’s own capital invested in this project to total construction cost of this

project should be at least 30%;

114

ii) During the operation period, the ratio of shareholders’ equity to total assets should be at least 25%; and current ratio (current assets/current liabilities) should be at least 100%;

iii) All rights acquired by A party under the contract, except other conditions specified in the contract and approved by B party, should not be transferred, leased, registered as a liability/obligation or become an executed object of civil litigation.

H. On May 10, 2005, the Company (“A party”) signed a contract with National Cheng Kung University (“B party”) relating to the construction and operation of student dormitories and alumni hall. The major terms of the contract are as follows:(a) Under the contract, B party should be responsible for acquiring the ownership or land-use right

for this project, and let A party use the land by way of registration of the superficies; A party must obtain the user license within 3 years after the signing date, and may operate the student dormitories and motorcycle parking lots for 35 years from the start of operation and collect dormitory rentals and use fees of other facilities from students for 50 years from the start of construction, and should return the related assets to B party on the expiry of the contract.

(b) A party should give B party performance guarantee of $50,000 for this project on the signing date, which will be returned in installment according to the contractual terms. As of December 31, 2012 and 2011, A party had provided performance guarantee with a guarantee letter issued by the bank, both amounting to $20,000.

(c) During the operation period, A party should pay B party dormitory operating royalties based on 2% of annual operating revenue of the dormitories and auxiliary facilities operating royalties based on 4% of annual operating revenue of the auxiliary facilities. A party should pay such operating royalties for prior year before the end of June every year. Further, according to the superficies contract signed by the two parties, A party should pay B party land rentals from the registration of superficies.

(d) All rights acquired by A party under the contract, except other conditions specified in the contract and approved by B party, should not be transferred, leased, registered as a liability/obligation or become an executed object of civil litigation.

I. The Company signed a syndicated loan contract with 9 banks - Ta Chong Bank as the lead bank for a credit line of $2.5 billion. The syndicated loans include medium-term (secured) loans, commercial paper guarantees and long-term (secured) loans. During the loan period, the Company should maintain financial commitments such as current ratio, liability ratio and interest coverage; those financial ratios/restrictions shall be reviewed at least once every year, based on the Company’s audited annual consolidated financial statements. If the Company violates the above financial commitments, it might be requested to stop drawing down all or part of the loans, and allor part of the loans might be asked to mature early, as resolved by the majority of the consortium.

J. The Company signed a syndicated loan contract with 7 banks - Mega International Commercial Bank as the lead bank for a credit line of $2.16 billion. The syndicated loans include long-term (secured) loans and guarantee payments receivable (secured), which are used to fund the construction of dormitories in Changxing St. Campus and Shuiyuan Campus of National Taiwan University. During the loan period, the Company should maintain financial commitments such as current ratio, liability ratio and interest coverage; those financial ratios/restrictions shall be reviewed at least once every year, based on the Company’s audited annual consolidated financial statements. If the Company violates the above financial commitments, it shall improve its financial


115

position by capital increase or other ways before the end of October of the following year from the year of violation; it would not be regarded as a default if the managing bank confirms that its financial position has improved completely. In case of violation, interest on the loans would be charged at the loan rate specified in the contract plus additional 0.25％ per annum from the notification date of the managing bank to the completion date of financial improvement or to the date the Company obtains a waiver from the consortium for its violation.

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

L. The Company signed a syndicated loan contract with 9 banks - Mega International Commercial Bank as the lead bank for a credit line of $3.6 billion. The syndicated loans are medium-term (secured) loans. During the loan period, the Company should maintain financial commitments such as current ratio, liability ratio and interest coverage; those financial ratios/restrictions shall be reviewed at least once every year, based on the Company’s audited annual consolidated financial statements. If the Company violates the above financial commitments, it shall improve its financial position before June 30 of the year when it presents the underlying financial statements; it would not be regarded as a default if the Company’s semiannual consolidated financial statements of that year reviewed by independent auditor show that the financial ratios/restrictions conform to the commitments again. In case of violation, interest on the loans would be charged at the loan rate of 0.80% per annum from the notification date of the managing bank to the completion date of financial improvement or to the date the Company obtains a waiver from the consortium for its violation.

M. For the requirement of the syndicated loans of subsidiary-The Splendor Hotel Taichung with SinoPac Bank, the Company promised to maintain financial commitments such as current ratio, liability ratio, tangible net equity and interest coverage. Those financial ratios/restrictions shall be reviewed based on the Company’s annual non-consolidated financial statements. If the Company violates the above financial commitments, the managing bank has the right to take the following actions, including but not limited, according to the contract or the resolution of majority of the consortium: 1) request the subsidiary to stop drawing down all or part of the loans; 2) cancel all or part of the credit line of the contract which has not been drawn down yet; 3) announce that all outstanding principal, interest and other accrued expenses payable to the consortium in relation to the loan contract should mature immediately; 4) demand the subsidiary’s payment of the

116

promissory note acquired under the loan contract; 5) exercise creditor’s right of mortgage, pledge right, other rights or contract transfer right; 6) exercise other rights given by the laws, the loan contract and other relevant documents; 7) take other actions as resolved by the majority of the consortium.

N. On May 18, 2007, the Company signed a contract with Taiwan Sugar Corporation (“TSC”) in relation to cooperative construction of houses. According to the contract, TSC shall provide Lot Nos. 12-12 and 601-1, Guo-An Sec., Xitun District, Taichung City and Lot No. 44, He-Guan Sec., Annan District, Tainan City; the Company shall provide funding for those projects and repurchase houses and land allocated to TSC amounting to $1,810,889 and $927,889, respectively, and shall bear all improvement fees of houses, public facilities and land, selling expenses, and other expenses or contributed expenses required under the decrees. The Company shall not ask for any compensation for price fluctuations or other reasons. Further, under the contract, the Company shall give TSC performance guarantee amounting to $181,090 and $92,780, respectively, on the signing date, which will be returned in installments according to the contractual terms. As of December 31, 2012 and 2011, the Company had provided performance guarantee with a guarantee letter of the bank amounting to $181,090, $0 and $181,090, $24,160, respectively. The development of Lot No. 44, He-Guan Sec., Annan District, Tainan City has been postponed because of the consideration of capital planning, as approved by TSC. According to the Nan-Tu-Kai-Zi Letter No. 0980001113 of Tainan Office of TSC, the Company shall pay compensation fee amounting to $6,344 for this postponed development. The Company had paid such fee in 2010.

O. On July 11, July 22 and September 2, 2011, the Company signed a contract with Taiwan Sugar Corporation (“TSC”) in relation to cooperative construction of houses. According to the contracts, TSC shall provide Lot Nos. 11 and 12, Ming-Ding Sec., Fongshan District, Kaohsiung City and Lot Nos. 48 and 51, Hou-Bi-Tian Sec., Ciaotou District, Kaohsiung City and Lot Nos. 117 and 118, Qiao-Zhong Sec., Ciaotou District, Kaohsiung City, respectively; the Company shall provide funding for those projects and repurchase houses and land allocated to TSC amounting to $273,680, $634,880 and $157,960, respectively, and shall bear all improvement fees of houses, public facilities and land, selling expenses, and other expenses or contributed expenses required under the decrees. The Company shall not ask for any compensation for price fluctuations or other reasons. Further, under the contract, the Company shall give TSC performance guarantee amounting to $27,370, $63,480 and $15,790, respectively, on the signing date, which will be returned in installments according to the contractual terms. As of December 31, 2012, the Company had provided such performance guarantee with a guarantee letter of bank amounting to $27,370, $63,480, 0 and $27,370, $63,480, $15,790.

P. The Company signed an agreement with Mr. Tsai Shuei-Pin on July 12, 2012 for joint construction of houses. Under those agreements, Mr. Tsai Shuei-Pin, the owner of land, shall provide the land located at No. 52 Yu-Shien Lot, Tai-Pian Dist. Taichung City, and the Company is responsible for the construction; the houses built would be allocated to both sides based on the specified proportion. In addition, the Company shall give performance bond in the amount $83,930, which would be returned to the Company in installments. As of December 31, 2012 and 2011, balance of the performance bond was $83,930 and $66,000, respectively.

Q. The Company signed an agreement with Mr. Fang Tsai-Yuan and World Vision United Co., Ltd. on March 5, 2012 and July 17, 2012, respectively, for joint construction of houses. Under those agreements, Mr. Fang Tsai-Yuan and World Vision United Co., Ltd., the owners of land,


117

shall provide the land located at Nos. 572 and 602, Sec. Zhi-Shan 1, Shilin District, Taipei City, respectively, and the Company is responsible for the construction; the houses built up would be allocated to both sides based on the specified proportion. In addition, the Company shall give performance bond in the amount of $350,000 and $19,570 to Mr. Fang Tsai-Yuan and World Vision United Co., Ltd., respectively, which would be returned to the Company in installments. As of December 31, 2012, balance of the performance bond was $350,000 and $19,570, respectively.

8. SIGNIFICANT CATASTROPHE

None.

9. SUBSEQUENT EVENTS

None.

118

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119

The methods and assumptions used to estimate the fair values of financial instruments are summarized as follows:(a) The due dates of short-term financial instruments are near the balance sheet date. Accordingly,

the fair value of short-term financial instruments are estimated based on the amount at the balance sheet date which include the accounts of cash and cash equivalents, notes and accounts receivable, other receivables, other financial assets - current, short-term loans, notes and bills payable, notes and accounts payable, accrued expenses, and other payables.

(b) The fair values of pledged deposits (shown as "other financial assets - non-current") are estimated at its book value since its future maturity value will be affected by interest rate changes.

(c) The fair value of refundable deposits is based on the discounted value of expected future cash inflows, which are discounted based on the interest rate of one-year time deposit of the Postal Savings System as of December 31, 2012 and 2011.

(d) The fair value of ordinary bonds issued by the Company is based on the present value of expected cash flow amount. The discount rate is the effective interest rate of bonds payable in the current market, whose contractual terms are similar to those of ordinary bonds issued by the Company.

(e) Since long-term liabilities’ interest rates are approximate market interest rates and the discounted value of expected future cash flows are equivalent to the book value, the fair value is estimated at the book value basis.

C. The Company recognized the amount of $564,615 and $740,565 as addition to stockholders’ equity for the changes in fair value of available-for-sale financial assets as of December 31, 2012 and 2011, respectively.

D. As of December 31, 2012 and 2011, the Company’s financial assets subjected to fair value risk due to the change in interest rate amounted to $1,590,949 and $233,627, respectively. The financial liabilities subjected to cash flow risk due to the change in interest rate amounted to $16,089,693 and $20,663,023, respectively.

E. Procedures of financial risk control and hedge The Company’s activities expose it to a variety of financial risks: market risk, credit risk, liquidity

risk and cash flow interest rate risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance. The Company uses derivative financial instruments to hedge certain risk exposures.

In order to achieve the goal of risk management, the Company's hedging activities are concentrated in the market value risk and cash flow risk.

F. Information of financial riska. Equity financial instruments: including financial assets at fair value through profit or loss,

available-for-sale financial assets and financial assets carried at cost.(a) Market risk

The equity financial instruments held by the Company were subject to the fluctuations in market prices. However, since the investment amount was not significant to the Company, it was assessed that the Company was not exposed to significant market risk.

(b) Credit riskFor financial assets with fair value through profit or loss, the Company had carried out

120

the transactions through the Taiwan Stock Exchange and GreTai Securities Market. These transactions are carried out only with counterparties with good credit standing and breaches of agreements are not expected. Thus, the likelihood that credit risk would arise is remote. The Company also assesses the credit ratings of the counterparties when they trade. The possibility of default by those parties is low.

(c) Liquidity riskThe equity financial instruments were traded in active markets and it was expected that these financial instruments would be readily sold at amounts approximate to their fair values. In the case of financial assets carried at cost without active market, the liquidity risk is material.

(d) Cash flow risk due to the fluctuation of interest rateThe equity financial instruments held by the Company were not interest-bearing instruments. Thus, the Company was not subject to cash flow risk arising from the fluctuation of the interest rate.

b. Notes and account receivable(a) Market risk

As the notes and accounts receivable held by the Company was due within one year, it was assessed that the Company was not exposed to significant market risk.

(b) Credit riskThe Company’s debtors of receivables have good credit standing and banks would verify debtors’ credit appropriately before they release loans. Therefore, it was assessed that the Company was not exposed to significant credit risk from receivables.

(c) Liquidity riskIt was assessed that Company was not exposed to significant liquidity risk as the Company’s notes and accounts receivable were all due within one year.

(d) Cash flow risk due to the fluctuation of interest rateIt was assessed that the Company was not exposed to significant cash flow risk due to change ininterest rate as the Company’s notes and accounts receivable were all due within one year.

c. Loans: including short-term loans, short-term notes and bills payable, bonds payable, long-term loans (including current portion).(a) Market risk

Loans of the Company are floating interest rate bearing and mostly due within one year. Thus, the Company did not expect to be exposed to significant market risk.

(b) Credit riskThe Company has good credit standing and the transactions with banks were normal. It wasassessed that the Company was not exposed to credit risk.

(c) Liquidity riskThe Company’s loans are mostly due within one year, and the cycle of housing construction to receivables is within a year. Thus, the working capital of the Company was considered sufficient to support its funding needs. The Company did not expect to be exposed to significant liquidity risk.

(d) Cash flow risk due to the fluctuation of interest rateLoans of the Company except bonds payable, are floating interest rate bearing. Thus, the


121

effective interest rate on the loans fluctuated based on changes in market interest rates. As a result, the future cash flow is expected to also fluctuate.

F. Financial statement presentation Certain accounts in the 2011 financial statements were reclassified to conform with the 2012

financial statement presentation.

122

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123

~53~

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ndor

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year

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ea：

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inve

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pany

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base

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Com

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vest

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ote

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ount

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otex

ceed

50%

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orth

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ote

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gine

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limit

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emen

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aran

tees

fora

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ngle

entit

yis

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00,0

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ulat

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ount

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ote

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acco

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ong-

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ulat

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ount

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ote

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acco

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cew

ithPr

ince

Util

ityC

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td.r

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,the

limit

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aran

tees

fora

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ngle

entit

yis

$1,0

00,0

00,t

heto

tala

ccum

ulat

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ount

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,000

,000

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ote

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acco

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ithJin

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ing

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ood

Co.

,Ltd

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ated

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helim

itof

endo

rsem

ents

and

guar

ante

esfo

rany

sing

leen

tity

is$2

,500

,000

,the

tota

lacc

umul

ated

amou

ntis

$5,0

00,0

00.

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e7：

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cord

ance

with

Chen

g-Sh

iCon

struc

tion

Co.

,Ltd

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ated

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latio

ns,t

helim

itof

endo

rsem

ents

and

guar

ante

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sing

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tity

is$1

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00,t

heto

tala

ccum

ulat

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ount

is$2

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00.

Not

e8：

Endo

rsem

ents

and

guar

ante

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ount

isth

eam

ount

ofth

een

dors

emen

tand

guar

ante

eco

ntra

ctsi

gned

with

the

bank

.Aso

fDec

embe

r31,

2012

,the

Com

pany

had

draw

ndo

wn

$309

,084

.N

ote

9：En

dors

emen

tsan

dgu

aran

tees

amou

ntis

the

amou

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the

endo

rsem

enta

ndgu

aran

tee

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pany

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wn

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2012

,the

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pany

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draw

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wn

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2012

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pany

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wn$5

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pany

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ral

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ote

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ount

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rsem

ents

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ante

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ount

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eam

ount

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bank

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pany

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draw

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$309

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eba

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r31,

2012

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Com

pany

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wn

$1,7

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e11：

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r31,

2012

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Com

pany

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r31,

2012

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Com

pany

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wn$5

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party

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mm

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2393

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9,71

9Th

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Mar

ketv

alue

-

No.

995

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ount

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%of

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heng

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stru

ctio

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9,71

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ting

use

Mar

ketv

alue

-

No.

995

Com

pany

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nter

party

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ses

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ount

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osal

the

pric

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ts

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/05/

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347

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96$

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party

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rope

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gus

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ue-

&D

evel

opm

ent

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44

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p.

Yu

Don

gLo

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/05/

2393

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108,

395

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395

9,71

9Th

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rtyN

one

Foro

pera

ting

use

Mar

ketv

alue

-

No.

995

Com

pany

Cou

nter

party

Rel

atio

nshi

pw

ithth

eC

ompa

nyPu

rcha

ses

/(Sal

es)

Am

ount

%of

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lPu

rcha

ses

(Sal

es)

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ditt

erm

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nitp

rice

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ditt

erm

sB

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ce

%of

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lac

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ts/n

otes

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ivab

le(p

ayab

le)

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eC

heng

-Shi

Con

stru

ctio

nC

o.,

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idia

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ses

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nK

uaiC

uo20

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ent

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Don

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,857

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395

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395

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9Th

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rtyN

one

Foro

pera

ting

use

Mar

ketv

alue

-

No.

995

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pany

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nter

party

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atio

nshi

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eC

ompa

nyPu

rcha

ses

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es)

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ount

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erm

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rice

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ts/n

otes

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le)

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eC

heng

-Shi

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stru

ctio

nC

o.,

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idia

ryPu

rcha

ses

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ts”,

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enti

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sclo

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137

PRINCE HOUSING & DEVELOPMENTCORP. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENTACCOUNTANTS


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.

138

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Stockholders of Prince Housing & Development Corp.

We have audited the accompanying consolidated balance sheets of Prince Housing & Development Corp. and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of income, of changes in stockholders’ equity and of cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the 2012 and 2011 financial statements of certain long-term investments accounted for under the equity method. These long-term equity investments amounted to NT$810,735 thousand and NT$760,609 thousand as of December 31, 2012 and 2011, respectively, and the related net investment income amounted to NT$63,192 thousand and NT$31,553 thousand for the years then ended. We also did not audit the financial statements of certain subsidiaries which statements reflect total assets of NT$1,450,174 thousand and NT$1,491,576 thousand, as of December 31, 2012 and 2011, respectively, both representing 3% of the related consolidated totals, and total operating revenue of NT$518,027 thousand and NT$1,282,619 thousand, representing 4% and 9% of the related consolidated totals for the years then ended. The financial statements of these investee companies and subsidiaries were audited by other auditors whose reports thereon have been furnished to us and our opinion expressed herein, insofar as it relates to the amounts included in the financial statements is based solely on the reports of the other auditors.

We conducted our audits in accordance with the “Regulations Governing the Examination of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China. Those standards and rules require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.


139

In our opinion, based on our audits and reports of other auditors, the consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Prince Housing & Developments Corp. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for the years then ended in conformity with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and generally accepted accountingprinciples in the Republic of China.

PricewaterhouseCoopers, Taiwan March 15, 2013

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

140

PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

DECEMBER 31(Expressed in thousands of New Taiwan dollars)

2012 2011ASSETS Notes AMOUNT % AMOUNT %

~3~

Current AssetsCash and cash equivalents 4(1) $ 4,352,233 9 $ 1,122,874 2Financial assets at fair value through profit or loss - current 4(2) and 6 260,236 1 352,661 1Notes receivable, net 3 and 4(3) 140,694 - 58,645 -Accounts receivable, net 3, 4(4) and 5 2,426,231 5 1,237,872 2Other receivables 3 and 4(21) 1,255,947 3 966,298 2Other financial assets - current 6 825,630 2 94,833 -Inventories, net 4(5) and 6 15,522,871 32 25,391,618 50Prepayments 668,937 1 349,791 1Deferred income tax assets - current 4(21) 20,239 - - -Other current assets 24,825 - 23,336 -

Total current assets 25,497,843 53 29,597,928 58Funds and Investments

Financial assets at fair value through profit or loss -non-current

4(2) and 676,593 - - -

Available-for-sale financial assets - non-current 4(6) and 6 1,581,087 3 1,017,055 2Financial assets carried at cost - non-current 4(7) and 6 965,951 2 1,034,854 2Long-term equity investments accounted for under the

equity method4(8) and 6

1,923,896 4 1,805,826 3Investments in real estate 4(9) and 6 271,118 1 271,118 -Other financial assets - non-current 6 1,138,343 2 826,051 2

Total funds and investments 5,956,988 12 4,954,904 9Property, Plant and Equipment, net 4(10) and 6

CostLand 2,775,597 6 2,780,311 6Buildings 4,233,465 9 3,379,320 7Machinery and equipment 12,008 - 15,344 -Computer and communication equipment 51,719 - 56,995 -Transportation equipment 29,115 - 17,232 -Office equipment 909,717 2 866,404 2Leased assets 71,848 - - -Property held for lease - Land 3,205,959 6 3,267,922 6Property held for lease - Buildings 6,629,884 14 6,662,160 13Leasehold improvements 47,000 - 47,000 -Other equipment 90,620 - 88,749 -

Cost and revaluation increments 18,056,932 37 17,181,437 34Less: Accumulated depreciation ( 1,925,736 )( 4 )( 1,493,769 )( 3 )Construction in progress and prepayments for equipment 7,277 - 540,458 1

Total property, plant and equipment, net 16,138,473 33 16,228,126 32Intangible Assets

Trademarks 1,072 - 1,366 -Patents - - 273 -Computer software costs 8,960 - 17,466 -Deferred pension costs 4(16) 3,776 - 5,667 -

Total intangible assets 13,808 - 24,772 -Other Assets

Refundable deposits 692,938 2 295,137 1Deferred income tax assets - non-current 4(21) 612 - - -Other assets - other 123,859 - 120,884 -

Total other assets 817,409 2 416,021 1TOTAL ASSETS $ 48,424,521 100 $ 51,221,751 100

(Continued)

PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIESNON-CONSOLIDATED BALANCE SHEETS



141

PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS


2012 2011LIABILITIES AND STOCKHOLDERS' EQUITY Notes AMOUNT % AMOUNT %

The accompanying notes are an integral part of these consolidated financial statements.See report of independent accountants dated March 15, 2013.

~4~

Current LiabilitiesShort-term loans 4(11) and 6 $ 4,360,000 9 $ 5,586,400 11

Notes and bills payable 4(12) and 6 1,952,887 4 1,880,177 4

Notes payable 209,390 - 425,005 1

Accounts payable 3,176,615 6 1,597,775 3

Income tax payable 4(21) 42,477 - 9,039 -

Accrued expenses 1,263,588 3 806,940 2

Other payables 52,720 - 119,030 -

Receipts in advance 4(13) 2,331,351 5 5,850,696 11

Long-term loans - current portion 4(15) and 6 3,777,505 8 4,068,868 8

Other current liabilities 90,330 - 86,917 -

Total current liabilities 17,256,863 35 20,430,847 40

Long-term LiabilitiesBonds payable 4(14) 2,000,000 4 - -

Long-term loans 4(15) and 6 10,171,369 21 13,617,609 27

Long-term notes payable 54,534 - - -

Long-term payables 796,845 2 796,845 1

Total long-term liabilities 13,022,748 27 14,414,454 28

ReservesLand value incremental reserve 495,328 1 495,328 1

Other LiabilitiesAccrued pension liabilities 4(16) 107,066 - 99,286 -

Guarantee deposits received 141,344 1 156,957 1

Other liabilities - other 67,226 - 65,991 -

Total other liabilities 315,636 1 322,234 1

TOTAL LIABILITIES 31,090,575 64 35,662,863 70

Stockholders' EquityCapital

Common stock 1 and 4(17) 11,944,765 24 10,858,877 21

Capital Reserves 4(18)Additional paid-in capital - treasury stock transactions 514,061 1 514,061 1

Capital reserve - others 7,232 - 7,232 -

Retained Earnings 4(17)(19)Legal reserve 843,650 2 612,237 1

Undistributed earnings 2,364,465 5 2,448,137 5

Other Adjustments to Stockholders' EquityCumulative translation adjustments ( 43,643 ) - ( 30,317 ) -

Unrecognized pension cost 4(16) ( 36,870 ) - ( 32,928 ) -

Unrealized gain or loss on financial instruments 4(6) 1,416,607 3 851,992 1

Treasury stock 4(20) ( 60,440 ) - ( 60,440 ) -

Total Parent Company Stockholders' Equity 16,949,827 35 15,168,851 29

Minority interest 384,119 1 390,037 1

TOTAL STOCKHOLDERS' EQUITY 17,333,946 36 15,558,888 30

Commitments and Contingent Liabilities 5 and 7TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $ 48,424,521 100 $ 51,221,751 100

PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIESNON-CONSOLIDATED BALANCE SHEETS



142

PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31(Expressed in thousands of New Taiwan dollars, except for earnings per share data)

2012 2011Notes AMOUNT % AMOUNT %


~5~

Operating Revenue 5Construction revenues $ 10,769,213 73 $ 10,785,238 74Other operating revenues 3,888,529 27 3,804,704 26

Total Operating Revenues 14,657,742 100 14,589,942 100

Operating Costs 4(23)Construction costs ( 7,979,496 )( 54 ) ( 7,427,954 )( 51 )Other operating costs ( 2,004,601 )( 14 ) ( 2,187,863 )( 15 )

Total Operating Costs ( 9,984,097 )( 68 ) ( 9,615,817 )( 66 )

Gross profit 4,673,645 32 4,974,125 34

Operating Expenses 4(23)Sales and marketing expenses ( 650,627 )( 4 ) ( 679,208 )( 4 )General and administrative expenses ( 2,133,168 )( 15 ) ( 1,717,141 )( 12 )

Total Operating Expenses ( 2,783,795 )( 19 ) ( 2,396,349 )( 16 )

Operating income 1,889,850 13 2,577,776 18

Non-operating Income and GainsInterest income 37,454 - 32,780 -Investment income accounted forunder the equity method

4(8)131,135 1 70,974 1

Dividend income 91,609 1 16,664 -Gain on valuation of financial assets 4(2) - - 26,447 -Other non-operating income 176,699 1 168,283 1

Total Non-operating Income andGains 436,897 3 315,148 2

Non-operating Expenses and LossesInterest expense 4(5) ( 468,104 )( 4 ) ( 502,568 )( 4 )Loss on disposal of property, plantand equipment ( 4,708 ) - ( 83,714 )( 1 )

Impairment loss 4(7) ( 330 ) - ( 5,581 ) -Loss on valuation of financial assets 4(2) ( 14,426 ) - - -Other non-operating losses ( 20,615 ) - ( 37,492 ) -

Total Non-operating Expensesand Losses ( 508,183 )( 4 ) ( 629,355 )( 5 )

Income before income tax 1,818,564 12 2,263,569 15Income tax expense 4(21) ( 42,719 ) - ( 19,294 ) -

Consolidated net income $ 1,775,845 12 $ 2,244,275 15

Attributable to:Equity holders of the Company $ 1,785,930 12 $ 2,314,131 16Minority interest ( 10,085 ) - ( 69,856 )( 1 )

$ 1,775,845 12 $ 2,244,275 15

Before Tax After Tax Before Tax After TaxBasic Earnings Per Share (in dollars) 4(22)

Net income (loss) $ 1.58 $ 1.54 $ 2.01 $ 2.00

Diluted Earnings Per Share (indollars)

4(22)

Net income $ 1.57 $ 1.54 $ 2.01 $ 1.99

PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31(Expressed in thousands of New Taiwan dollars, except for earnings per share data)



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144

PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS


2012 2011

~7~

CASH FLOWS FROM OPERATING ACTIVITIESConsolidated net income $ 1,775,845 $ 2,244,275

Adjustments to reconcile consolidated net income to net cashprovided by (used in) operating activitiesLoss (gain) on valuation of financial assets 14,426 ( 26,447 )Provision for doubtful accounts 103 -Transfer of allowance for doubtful accounts to other

non-operating income - ( 21,167 )Provision for (reversal of) inventory obsolescence and value

decline ( 28,252 ) 34,054Impairment loss on financial assets carried at cost 330 5,581Investment income accounted for under the equity method ( 131,135 ) ( 70,974 )Gain on disposal of investments - ( 3,444 )Depreciation 457,684 459,923Loss on disposal of property, plant and equipment 4,708 83,714Transfer of property, plant and equipment to other

non-opreating losses 4,421 11,877Amortization 9,000 8,954Changes in assets and liabilities

Financial assets at fair value through profit or loss - current 76,027 ( 69,397 )Notes receivable ( 82,049 ) 35,366Accounts receivable ( 1,188,462 ) ( 72,983 )Other receivables ( 289,649 ) ( 335,594 )Inventories 9,978,055 ( 5,453,346 )Prepayments ( 319,146 ) 235,864Other current assets ( 1,489 ) 26,322Deferred income tax assets ( 20,851 ) -Financial assets at fair value through profit or loss -

non-current ( 76,027 ) -Deferred pension costs 1,891 -Notes payable ( 215,615 ) 92,089Accounts payable 1,578,840 ( 165,567 )Income tax payable 33,438 9,039Accrued expenses 456,648 158,039Other payables ( 66,310 ) 9,879Receipts in advance ( 3,519,345 ) 1,598,696Other current liabilities 3,413 15,017Accrued pension liabilities 3,838 ( 5,280 )Other liabilities - other 1,235 ( 2,278 )

Net cash provided by (used in) operating activities 8,461,572 ( 1,197,788 )

(Continued)




145



2012 2011


~8~

CASH FLOWS FROM INVESTING ACTIVITIESIncrease in other financial assets - current ($ 730,797 ) ($ 94,833 )

Decrease in available-for-sale financial assets - non-current 583 382

Increase in financial assets carried at cost - non-current - ( 1,600 )

Proceeds from capital reduction of financial assets carried at cost 67,529 7,244

Increase in other financial assets - non-current ( 312,292 ) ( 268,965 )

Acquisition of property, plant and equipment ( 508,195 ) ( 1,053,447 )

Proceeds from disposal of property, plant and equipment 40,628 1,267

Increase in refundable deposits ( 397,801 ) ( 153,687 )

Increase in other assets - other ( 2,902 ) ( 29,306 )

Net cash used in investing activities ( 1,843,247 ) ( 1,592,945 )

CASH FLOWS FROM FINANCING ACTIVITIES(Decrease) increase in short-term loans ( 1,226,400 ) 540,108

Increase in notes and bills payable 72,710 744,600

Increase in bond payable 2,000,000 -

(Decrease) increase in long-term loans ( 3,737,603 ) 2,151,284

Increase in long-term notes payable 54,534 -

(Decrease) increase in guarantee deposits ( 15,613 ) 34,624

Payment of cash dividends ( 542,944 ) ( 896,605 )

Increase in minority interest 4,167 15,971

Net cash (used in) provided by financing activities ( 3,391,149 ) 2,589,982

Effect of foreign exchange rate changes on cash 2,183 2,058

Increase (decrease) in cash and cash equivalents 3,229,359 ( 198,693 )

Cash and cash equivalents at beginning of year 1,122,874 1,321,567

Cash and cash equivalents at end of year $ 4,352,233 $ 1,122,874

Supplemental disclosures of cash flow information1.Interest paid $ 684,214 $ 591,489

Interest capitalized ( 152,134 ) ( 91,210 )

Interest paid (excluding capitalized interest) $ 532,080 $ 500,279

2.Income tax paid $ 30,132 $ 10,255

Non-cash flows from investing and financing activities1.Property, plant and equipment transferred from prepayments for

building and land $ - $ 619,605

2.Buildings and land held for sale transferred from property heldfor lease and property, plant and equipment $ 90,407 $ 388,137

3.Financial assets carried at cost - non-current transferred toavailable-for-sale financial assets - non-current $ - $ 84,780



146

~9~

PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS,

EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANIZATIONPrince Housing & Development Corp. (the “Company”) was incorporated as a company limited byshares under the provisions of the Company Law of the Republic of China (R.O.C.) in September 1973.As of December 31, 2012, the Company’s authorized capital was $16,000,000 and the paid-in capitalwas $11,944,765 , consisting of 1,194,476 thousand shares of common stock with a par value of $10(in NT dollars) per share. The Company is primarily engaged in the construction, leasing and sale ofpublic housing, commercial building, tourism/recreation place (children’s playground, water park, etc.)and parking lot/parking tower, and leasing and sale of real estate. The common shares of the Companyhave been listed on the Taiwan Stock Exchange since April 1991. As of December 31, 2012 and 2011,the Company had 2,775 and 2,732 employees, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe accompanying consolidated financial statements of the Company and its subsidiaries (collectivelyreferred herein as the “Group”) are prepared in accordance with the “Rules Governing the Preparationof Financial Statements by Securities Issuers” and generally accepted accounting principles in theRepublic of China. The Group’s significant accounting policies are as follows:(1) Principles of consolidation

A. All majority-owned subsidiaries or controlled entities, which the Company owns less than 50% ofthe voting rights of the investee companies directly or indirectly, are included in the consolidatedfinancial statements. The income (loss) of the subsidiaries is included in the consolidated statementof income effective on the date the Company gains control over the subsidiaries. The income (loss)of the subsidiaries is excluded from the consolidated statement of income effective the date on whichthe Company loses control over the subsidiaries. Significant intercompany transactions and assetsand liabilities arising from intercompany transactions are eliminated.

B. Subsidiaries included in the consolidated financial statements and their changes in 2011：

Investor Subsidiary Main activities 2012 2011 NotePrince Housing &Development Corp.

Ta-Chen Construction & Engineering Corp. Construction - 100.00 5

Prince Utility Co., Ltd. Electricity and water pipemaintenance

- 100.00 5

Prince Property Management Consulting Co.,Ltd.(formerly Prince Real Estate Agent Co.,Ltd.)

Real estate managers 100.00 100.00 6

Ownership(%)December 31,

PRINCE HOUSING & DEVELOPMENT CORP. AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS,EXCEPTAS OTHERWISE INDICATED)

1. HISTORY AND ORGANIZATION

Prince Housing & Development Corp. (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China (R.O.C.) in September 1973. As of December 31, 2012, the Company’s authorized capital was $16,000,000 and the paid-in capital was $11,944,765, consisting of 1,194,476 thousand shares of common stock with a par value of $10 (in NT dollars) per share. The Company is primarily engaged in the construction, leasing and sale of public housing, commercial building, tourism/recreation place (children’s playground, water park, etc.) and parking lot/parking tower, and leasing and sale of real estate. The common shares of the Company have been listed on the Taiwan Stock Exchange since April 1991. As of December 31, 2012 and 2011, the Company had 2,775 and 2,732 employees, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements of the Company and its subsidiaries (collectively referred herein as the “Group”) are prepared in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and generally accepted accounting principles in the Republic of China. The Group’s significant accounting policies are as follows:(1) Foreign currency transactions A. All majority-owned subsidiaries or controlled entities, which the Company owns less than 50% of

the voting rights of the investee companies directly or indirectly, are included in the consolidated financial statements. The income (loss) of the subsidiaries is included in the consolidated statement of income effective on the date the Company gains control over the subsidiaries. The income (loss) of the subsidiaries is excluded from the consolidated statement of income effective the date on which the Company loses control over the subsidiaries. Significant intercompany transactions and assets and liabilities arising from intercompany transactions are eliminated.

B. Subsidiaries included in the consolidated financial statements and their changes in 2011:


147

~10~

Note 1: The Company does not directly or indirectly own 50% above of voting shares of TheSplendor Hotel Taichung and Splendor Assets Management Co., Ltd. However, as theCompany has control over the finance and operations of the two companies, they areincluded in the consolidated financial statements.

Note 2：As of December 31, 2011, Prince Apartment Management Maintain Co., Ltd. and PrinceSecurity Co., Ltd. own 50% of voting shares of Prince Property Management Co., Ltd.,respectively.

Investor Subsidiary Main activities 2012 2011 NotePrince Housing & Development

Corp.Prince Real Estate Appraisal Co., Ltd. Real estate appraisal - 83.33 6

Cheng-Shi Investment Holdings Co., Ltd. General investments 100.00 - 7

Prince Apartment Management MaintainCo., Ltd.,

Management of apartment - 100.00 8

Prince Housing Investment Co., Ltd Overseas investment 100.00 100.00

Prince Biotechnology Co., Ltd. Research and development ofbiological preparation

100.00 100.00 3

BioSun Technology Co., Ltd. Anti-mildew's import andexport

100.00 100.00

Prince Ta-Chen Investment Co., Ltd. General investments 99.97 99.97

Dong-Feng Enterprises Co., Ltd. Housebuilders and sales 100.00 100.00

Prince Security Co., Ltd. Security - 100.00 4、8

Cheng-Shi Construction Co., Ltd. Construction - 100.00 5

The Splendor Hotel Taichung Hotels and catering 50.00 50.00 1

Time Square International Co., Ltd. Hotels and catering 100.00 100.00

Jin-Yi-Xing Plywood Co., Ltd. Manufacture of plywood 99.65 99.65

Early Success Investments Ltd. Overseas investment 100.00 100.00

Prince Assets Management LLC. Overseas investment 100.00 87.60

Splendor Assets Management Co., Ltd. Management consulting 50.00 50.00 1

Ta-Chen Construction& Engineering Corp.

Prince Entertainment Co., Ltd. Management of entertainment - 98.00 6

Ta-Chen International (Brunei) Corp. Overseas investment 100.00 100.00

Cheng-Shi Investment HoldingsCo., Ltd.

Ta-Chen Construction & EngineeringCorp.

Construction 100.00 - 5

Prince Utility Co., Ltd. Electricity and water pipemaintenance

100.00 - 5

Cheng-Shi Construction Co., Ltd. Construction 100.00 - 5

Prince Property ManagementConsulting Co., Ltd.(formerlyPrince Real Estate AgentCo., Ltd.)

Prince Apartment ManagementMaintain Co., Ltd.,

Management of apartment 100.00 - 8

Prince Security Co., Ltd. Security 100.00 - 4、8

Prince Ta-Chen InvestmentCo., Ltd.

Prince Capital Inc. Overseas investment 100.00 100.00

Prince Capital Inc. Prince Ventures USA Inc. Overseas investment 100.00 100.00

Prince Apartment ManagementMaintain Co., Ltd.,

Prince Property Management Co., Ltd. Development of publichousing and building and

- 100.00 2、6

Ta-Chen International(Brunei)Corp.

Ta Chen Construction & Engineering(Vietnam) Corp.

Construction 100.00 100.00

Ownership(%)December 31,

Note 1: The Company does not directly or indirectly own 50% above of voting shares of The Splendor Hotel Taichung and Splendor Assets Management Co., Ltd. However, as the Company has control over the finance and operations of the two companies, they are included in the consolidated financial statements.

Note 2: As of December 31, 2011, Prince Apartment Management Maintain Co., Ltd. and Prince Security Co., Ltd. own 50% of voting shares of Prince Property Management Co., Ltd., respectively.

Note 3:`As of December 31, 2012 and 2011, the Company, Ta-Chen Construction & Engineering Corp., Prince Utility Co., Ltd., Prince PropertyManagement Consulting

148

Co., Ltd. ( formerly Prince Real Estate Agent Co., Ltd.), Prince Real Estate Appraisal Co., Ltd., Prince Apartment Management Maintain Co., Ltd. and Prince Entertainment Co., Ltd. owned 50%, 45%, 1%, 3%, 0%, 1%, 0% and 50%, 45%, 1%, 1%, 1%, 1%, 1% of voting shares of Prince Biotechnology Co., Ltd., respectively.

Note 4: As of December 31, 2011, the Company, Ta-Chen Construction & Engineering Corp., Prince Utility Co., Ltd., Prince Property Management Consulting Co., Ltd. (formerly Prince Real Estate Agent Co., Ltd.) Prince Real Estate Appraisal Co., Ltd., Prince Apartment Management Maintain Co., Ltd., Prince Entertainment Co., Ltd. owned 25%, 25%, 12%, 1%, 2%, 25% and 10% of voting shares of Prince Security Co., Ltd.

Note 5: Due to the investment structure adjustments in the Group, Ta-Chen Construction & Engineering Corp., Cheng-Shi Construction Co., Ltd. and Prince Utility Co., Ltd. became the consolidated entities of Cheng-Shi Investment Holdings Co., Ltd.

Note 6: Due to the investment structure adjustments in the Group, Prince Real Estate Agent Co., Ltd. as the surviving company merged with Prince Real Estate Appraisal Co., Ltd., Prince Entertainment Co., Ltd. and Prince Property Management Co., Ltd., and was renamed Prince Property Management Consulting Co., Ltd.

Note 7: Newly incorporated in the fourth quarter, 2011.Note 8: Due to the investment structure adjustments in the Group, Prince Apartment Management

Maintain Co., Ltd. and Prince Security Co., Ltd. became the consolidated entities of Prince PropertyManagement Consulting Co., Ltd.

C. Subsidiaries not included in the consolidated financial statementsNone.

D. Adjustments for subsidiaries with different balance sheet datesNone.

E. Special operating risk of foreign subsidiariesNone.

F. Nature and extent of the restrictions on fund remittance from subsidiaries to the parent companyNone.

G Contents of subsidiaries' securities issued by the parent companyAs of December 31, 2012 and 2011, the total number of the Company’s shares held by its subsidiaries, Ta-Chen Construction & Engineering Corp. and Prince Apartment Management Maintain Co., Ltd., was 35,014 thousand shares and 31,831 thousand shares with an average book value of $1.73 and $1.90 (in dollars), respectively. These shares have been included in the Company’s treasury stock.

H Information on convertible bonds and common stock issued by subsidiaries(a) Subsidiary, Cheng-Shi Construction Co., Ltd. made capital increase by cash amounting to

$40,000, as resolved by the Board of Directors in April, 2012.(b) Subsidiary, Prince Property Management Consulting Co., Ltd. (formerly Prince Real Estate

Agent Co., Ltd.) made capital increase by cash amounting to $130,000, as resolved by the Board of Directors in August, 2012.

(2) Foreign currency transactions Assets and liabilities of foreign subsidiaries are translated into New Taiwan dollars using the exchange rates at the balance sheet date. Equity accounts are translated at historical rates except for beginning retained earnings, which are carried forward from prior year’s balance. Dividends


149

are translated at the rates prevailing at the date of declaration. Profit and loss accounts are translated at weighted-average rates of the year. The resulting translation differences are includedin “cumulative translation adjustments” under stockholders’ equity.

(3) Foreign currency transactionsA. Transactions denominated in foreign currencies are translated into functional currency at the

spot exchange rates prevailing at the transaction dates. Exchange gains or losses due to the difference between the exchange rate on the transaction date and the exchange rate on the date of actual receipt and payment are recognized in current year’s profit or loss.

B. Receivables, other monetary assets and liabilities denominated in foreign currencies are translated at the spot exchange rates prevailing at the balance sheet date. Exchange gains or losses are recognized in profit or loss.

C. When a gain or loss on a non-monetary item is recognized directly in equity, any exchange component of that gain or loss shall be recognized directly in equity. Conversely, when a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss shall be recognized in profit or loss. However, non-monetary items that are measured on a historical cost basis are translated using the exchange rate at the date of the transaction.

(4) Classification of current and non-current itemsA. If assets and liabilities are related to the construction business, they are classified as current

or non-current according to their operating cycle; if they are not related to the construction business, they are classified by annual basis.

B. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:(a) Assets arising from operating activities that are expected to be realized or consumed, or

are intended to be sold 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 arising from operating activities 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.(5) Cash and cash equivalents

A. Cash and cash equivalents include cash on hand and in banks and other short-term highly liquid investments which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value resulting from fluctuations in interest rate.

B. The Group’s statement of cash flows is prepared on the basis of cash and cash equivalents.(6) Financial assets and financial liabilities at fair value through profit or loss

150

A. Financial assets and financial liabilities at fair value through profit or loss are recognized and derecognized using settlement date accounting and are recognized initially at fair value.

B. These financial instruments are subsequently remeasured and stated at fair value, and the gain or loss is recognized in profit or loss. The fair value of listed stocks, OTC stocks and closed-end mutual funds is based on latest quoted fair prices of the accounting period. The fair value of open-end and balanced mutual funds is based on the net asset value at the balance sheet date.

C. When a derivative is an ineffective hedging instrument, it is initially recognized at fair value on the date a derivative contract is entered into and is subsequently remeasured at its fair value. If a derivative is a non-option derivative, the fair value initially recognized is zero.

D. Financial assets and financial liabilities at fair value through profit and loss are classified into asset or liability held for trading and those designated at fair value through profit or loss at inception. Financial assets and financial liabilities are classified as held for trading if acquired principally for the purpose of selling in the short term. Financial assets and financial liabilities designated as at fair value through profit or loss at inception are those that are managed and whose performance is evaluated on a fair value basis, in accordance with a documented Company’s investment strategy. Information about these financial assets and financial liabilities are provided internally on a fair value basis to the Company’s management. The Company’s investment strategy is to invest free cash resources in equity securities or convertible bonds as part of the Company’s long-term capital growth strategy. The Company has designated almost all of its compound debt instruments as financial liability at fair value through profit and loss.

(7) Available-for-sale financial assetsA. Available-for-sale financial assets in equity and debt are recognized and derecognized using

trade date accounting and settlement date accounting, respectively, and are initially stated at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.

B. The financial assets are remeasured and stated at fair value, and the gain or loss is recognized in equity, until the financial asset is derecognized, at which time the cumulative gain or loss previously recognized in equity shall be recognized in profit or loss. The fair value of listed stocks, OTC stocks and closed-end mutual funds are based on latest quoted fair prices of the accounting period. The fair values of open-end and balanced mutual funds are based on the net asset value at the balance sheet date.

C. If there is any objective evidence that the financial asset is impaired, the cumulative loss that had been recognized directly in equity shall be transferred from equity to profit or loss. When the fair value of an equity instrument subsequently increases, impairment losses recognized previously in profit or loss shall not be reversed. When the fair value of a debt instrument subsequently increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed to the extent of the loss recognized in profit or loss.

(8) Financial assets carried at costA. Investment in unquoted equity instruments is recognized or derecognized using trade date

accounting and is stated initially at its fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.

B. The investments in equity instruments, including unlisted stocks and emerging stocks, are


151

measured at cost since their fair value cannot be measured reliably.C. If there is any objective evidence that the financial asset is impaired, the impairment loss is

recognized in profit or loss. Such impairment loss shall not be reversed when the fair value of the asset subsequently increases.

(9) Notes, accounts and other receivablesA. Notes and accounts receivable are claims resulting from the sale of goods or services.

Receivables arising from transactions other than the sale of goods or services are classified as other receivables. Notes, accounts and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

B. The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. If such evidence exists, a provision for impairment of financial asset is recognized. The amount of impairment loss is determined based on the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the fair value of the asset subsequently increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. Such recovery of impairment loss shall not result to the asset’s carrying amount greater than its amortized cost where no impairment loss was recognized. Subsequent recoveries of amounts previously written off are recognized in profit or loss.

(10) InventoriesThe inventories include “land held for construction”, “construction in progress”, “buildings and land held for sale”. Gains or losses occurring from construction contracts are recognized using the percentage of completion method. Inventories are stated at cost and evaluated at the lower of cost or net realizable value at the end period. The individual item approach is used in the comparison of cost and net realizable value. The calculation of net realizable value is based on the estimated selling price in the normal course of business, net of estimated costs of completion and estimated selling expenses. The interest costs related to construction in progress are capitalized during the construction.

(11) Accounting for constructionA. Effective January 1, 2009, for the ‘off plan’ housing projects where the Company engages the

construction firm to construct, the profit or loss of the ‘off plan’ housing projects is recognized on a percentage-of-completion basis if the projects meet the criteria of the percentage-of-completion method recognition; for other projects of the ‘off plan’ housing projects, the costs and profit or loss of the projects are recognized using the completed-contract method when the ownership of the houses are transferred and the houses are handed over, or when the houses are handed over before the balance sheet date (or when the ownership of the houses are transferred before the balance sheet date), but the ownership of the houses are transferred subsequently after the balance sheet date (but the houses are handed over subsequently after the balance sheet date).

B. For the costs associated with the acquisition of the assets to be allocated over the period when the underlying assets will produce economic benefit to meet the revenue-cost (expense) matching principle, effective January 1, 2001, the Company capitalized interest incurred in

152

accordance with ROC SFAS No. 3, “Borrowing Cost”.C. The construction-use land refers to the land that is under construction or under planning to be

constructed. Such land is stated at the acquisition costs, including the purchase proceeds of the land and all necessary costs to acquire the land.

D. The selling expenses incurred on the ‘off plan’ housing sale are recognized initially as “deferred selling expenses”, and are reclassified to “operating expenses” when revenue is recognized after the construction of houses is completed.

E. At the end of year, inventories are evaluated at the lower of cost or net realizable value, and the individual item approach is used in the comparison of cost and net realizable value. The calculation of net realizable value is based on the estimated selling price in the normal course of business, net of estimated costs of completion and estimated selling expenses.

(12) Long-term equity investments accounted for under the equity methodA. Long-term equity investments in which the Company holds more than 20% of the investee

Company’s voting shares or has the ability to exercise significant influence on the investee’s operational decisions are accounted for under the equity method.

B. Effective January 1, 2005, investment loss on the non-controlled entities over which the Group has the ability to exercise significant influence is recognized to the extent that the amount of long-term investments in such investees is written down to zero. However, if the Group continues to provide endorsements, guarantees or financial support for such investees, the investment loss is recognized continuously in proportion to the Group’s equity interest in such investees. In the case of controlled entities, the Group recognizes all the losses incurred by such entities that will not be covered by other stockholders. When the operations of such investees become profitable, the Group recognizes the profits until the amount of losses previously recognized by the Group is fully recovered.

C. Exchange differences arising from translation of the financial statements of overseas investee companies accounted for under the equity method are recorded as “cumulative translation adjustments” under stockholders’ equity.

D. Long-term equity investments in which the Company hold more than 50% of the investee Company’s voting shares or has the ability to control the investee’s operational decision, in accordance with Statement of Financial Accounting Standards (SFAS) No. 7, “Consolidated Financial Statements”, are accounted for under the equity method and included in the quarterly consolidated financial statements.

(13) Property, plant and equipmentA. Property, plant and equipment are stated at cost. Interests incurred on the loans used to bring

the assets to the condition and location necessary for their intended uses are capitalized.B. Depreciation is provided under the straight-line method based on the assets’ estimated

economic service lives. The estimated economic service lives of property, plant and equipment are 44~60 year for property held for lease-buildings, 50~60 years for buildings, and 5~15 years for other property, plant and equipment.

C. Major improvements and renewals are capitalized and depreciated accordingly. Maintenance and repairs are expensed as incurred.

D. When an asset is sold or retired, the cost and accumulated depreciation are removed from the respective accounts and any resulting gain or loss on disposal is recorded as non-operating income or expense.


153

(14) Deferred assetsDeferred assets are stated at cost and are amortized on a straight-line basis over 5 years.

(15) Impairment of non-financial assetsThe Group recognizes impairment loss when there is indication that the recoverable amount of an asset is less than its carrying amount. The recoverable amount is the higher of the fair value less costs to sell and value in use. The fair value less costs to sell is the amount obtainable from the sale of the asset in an arm’s length transaction after deducting any direct incremental disposal costs. The value in use is the present value of estimated future cash flows to be derived from continuing use of the asset and from its disposal at the end of its useful life. When the impairment no longer exists, the impairment loss recognized in prior years shall be recovered.

(16) Pension planUnder the defined benefit pension plan, net periodic pension costs are recognized in accordance with the actuarial calculations. Net periodic pension costs include service cost, interest cost, expected return on plan assets, and amortization of unrecognized net transition obligation and gains or losses on plan assets. Under the defined contribution pension plan, net periodic pension costs are recognized as incurred.

(17) Income taxA. Provision for income tax includes deferred income tax resulting from temporary differences,

investment tax credits and loss carryforward. Valuation allowance on deferred tax assets is provided to the extent that it is more likely than not that the tax benefit will not be realized. Over or under provision of prior years’ income tax liabilities is included in current year’s income tax. When a change in the tax laws is enacted, the deferred tax liability or asset is recomputed accordingly in the period of change. The difference between the new amount and the original amount, that is, the effect of changes in the deferred tax liability or asset, is recognized as an adjustment to current income tax expense (benefit).

B. Adjustments of prior years' income tax liabilities are included in the current year's income tax expense.

C. 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.

D. If the amount of regular income tax is more than or equal to the amount of basic tax, the income tax payable shall be calculated in accordance with the Income Tax Act and other relevant laws. Whereas if the amount of regular income tax is less than the amount of basic tax, the income tax payable shall also include the difference between the amount of regular income tax and basic tax, in addition to the amount as calculated in accordance with the “Income Tax Act” and other relevant laws. The balance calculated in accordance with the provisions shall not allow for deductions claimed in regard to investment tax credits granted under the provisions of other laws.

E. The income tax of subsidiaries reflected in the consolidated financial statements is in accordance with the local relevant laws and regulations.

(18) Treasury stockA. When the Company acquires its issued and outstanding shares as treasury stocks, the book

value of those treasury stocks is computed respectively on a weighted-average basis according to the type of shares (common shares) and the reason for reacquisition. Treasury stock transactions should be dealt with in the following ways:

154

(a) Reacquisition: if the shares are purchased, they are stated at the acquisition cost; if the shares are donated, they are stated at fair value.

(b) Disposal: when treasury stocks are sold, if the selling price is above the book value, the difference should be credited to the capital surplus-from treasury stock transactions account. If the selling price is below the book value, the difference should first be offset against capital surplus from the same class of treasury stock transactions, and the remainder, if any, debited to retained earnings.

(c) Write off: when a Company’s treasury stock is retired, the treasury stock account should be credited, and the capital surplus-premium on stock account and capital stock account should be debited proportionately according to the share ratio. Any excess of the carrying value of treasury stock over the sum of its par value and premium on stock should first be offset against capital surplus from the same class of treasury stock transactions, and the remainder, if any, debited to retained earnings. Any excess of the sum of the par value and premium on stock of treasury stock over its carrying value should be credited to capital surplus from the same class of treasury stock transactions.

B. The Company adopted the Statement of Financial Accounting Standards No. 30, “Accounting for Treasury Stocks” since January 1, 2002, which requires the Company’s stock held by subsidiaries should be treated as treasury stock when the Company recognizes investment income or loss and prepares financial statements.

(19) Employees’ bonuses and directors’ and supervisors’ remunerationEffective January 1, 2008, pursuant to EITF 96-052 of the Accounting Research and Development Foundation, R.O.C., dated March 16, 2007, “Accounting for Employees’ Bonuses and Directors’ and Supervisors’ Remuneration”, the costs of employees’ bonuses and directors’ and supervisors’ remuneration are accounted for as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and the amounts can be estimated reasonably. However, if the accrued amounts for employees’ bonuses and directors’ and supervisors’ remuneration are significantly different from the actual distributed amounts resolved by the stockholders at their annual stockholders’ meeting subsequently, the differences shall be recognized as gain or loss in the following year. In addition, according to EITF 97-127 of the Accounting Research and Development Foundation, R.O.C., dated March 31, 2008, “Criteria for Listed Companies in Calculating the Number of Shares of Employees’ Stock Bonus”, the Company calculates the number of shares of employees’ stock bonus based on the closing price of the Company’s common stock 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.

(20) Use of estimatesThe preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses during the reporting period. Actual results could differ from those assumptions and estimates.

(21) Operating segmentsOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for


155

~20~

4. DETAILS OF SIGNIFICANT ACCOUNTS(1). Cash and cash equivalents

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

1.The Group recognized net (loss) gain of ($14,426) and $26,447 for the years ended December 31,2012 and 2011, respectively.

2. For details of pledged assets, please refer to Note 6.(3). Notes receivable

2012 2011Cash:

Cash on hand 12,706$ 9,495$Checking accounts 2,412,193 352,637Savings deposits 1,649,391 692,195Time deposits 21,943 3,547

4,096,233 1,057,874Cash equivalents:

Repurchase of bonds 256,000 65,0004,352,233$ 1,122,874$

December 31,


Financial assets held for tradingListed (TSE and OTC) stocks 263,029$ 264,955$Mutual funds 17,665 93,778

280,694 358,733Valuation adjustments 20,458)( 6,072)(

260,236$ 352,661$Non-Current items:

Financial assets held for tradingMutual funds 76,000$ -$Valuation adjustments 593 -

76,593$ -$

December 31,

2012 2011

Notes receivable 144,397$ 62,348$Less: Allowance for doubtful accounts 3,703)( 3,703)(

140,694$ 58,645$

December 31,

allocating resources and assessing performance of the operating segments. In accordance with R.O.C. SFAS No. 41, “Operating Segments”, segment information is disclosed in the consolidated financial statements rather than in the separate financial statements of the Company.

(22) Settlement date accountingIf an entity recognizes financial assets using settlement date accounting, any change in the fair value of the asset to be received during the period between the trade date and the settlement date is not recognized for assets carried at cost or amortized cost. For financial assets or financial liabilities classified as at fair value through profit or loss, the change in fair value is recognized in profit or loss. For available-for-sale financial assets, the change in fair value is recognized directly in equity.

3. CHANGES IN ACCOUNTING PRINCIPLES

A. Notes, accounts and other receivablesEffective January 1, 2011, the Group prospectively adopted the amendments to R.O.C. SFAS No. 34, “Financial Instruments: Recognition and Measurement.” The Group recognizes impairment loss on notes, accounts and other receivables when there is an objective evidence of impairment. This accounting change has no significant effect on the Group’s consolidated financial statements as of and for the year ended December 31, 2011.

B. Operating segmentsEffective January 1, 2011, the Group adopted R.O.C. SFAS No. 41, “Operating Segments” to replace the original R.O.C. SFAS No. 20, “Segment Reporting”. In accordance with such standard, the Group restated the segment information for 2010 upon the first adoption of R.O.C. SFAS No. 41. This change in accounting principle had no significant effect on net income and earnings per share for the year ended December 31, 2011.

4. DETAILS OF SIGNIFICANTACCOUNTS

(1). Cash and cash equivalents

156

~20~





2012 2011Cash:




December 31,






76,593$ -$

December 31,

2012 2011


140,694$ 58,645$

December 31,

1. The Group recognized net (loss) gain of ($14,426) and $26,447 for the years ended December 31, 2012 and 2011, respectively.


~21~

(4). Accounts receivable

(5). Inventories

A.For details of pledged assets, please refer to Note 6.B.For the years ended December 31, 2012 and 2011, the interest capitalized as cost of inventory

are as follows:

2012 2011

Accounts receivable 2,433,470$ 1,245,008$

Less: Allowance for doubtful accounts 7,239)( 7,136)(2,426,231$ 1,237,872$

December 31,

2012 2011

Construction in progress 26,256,361$ 32,464,832$Less: Advance construction receipts 23,301,771)( 22,268,433)(

Construction in progress, net 2,954,590 10,196,399

Land held for construction site 10,153,301 13,495,155

Buildings and land held for sale 1,677,831 781,227

Prepayment for land 162,269 579,573

Prepayment for buildings and land 702,134 488,861Merchandise 28,136 34,045

Total inventories 15,678,261 25,575,260Less：Allowance for decline in market

value and obsolescence 155,390)( 183,642)(

15,522,871$ 25,391,618$

December 31,

2012 2011

Interest paid before capitalization 579,981$ 593,778$Interest capitalized 152,134$ 91,210$

Annual interest rate used for capitalization 1.25%~3.32% 1.68%～3.18%

(4). Accounts receivable~20~





2012 2011Cash:




December 31,






76,593$ -$

December 31,

2012 2011


140,694$ 58,645$

December 31,



157

~21~


(5). Inventories


are as follows:

2012 2011



December 31,

2012 2011









15,522,871$ 25,391,618$

December 31,

2012 2011



~21~


(5). Inventories


are as follows:

2012 2011



December 31,

2012 2011









15,522,871$ 25,391,618$

December 31,

2012 2011



(5). Inventories

A. For details of pledged assets, please refer to Note 6.B. For the years ended December 31, 2012 and 2011, the interest capitalized as cost of inventory

are as follows:

158

~22~

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159

~23~

(6). Available-for-sale financial assets


(7). Financial assets carried at cost

(a)The Company was committed to invest US$10,000,000 in President Energy Development Ltd. OnJune 17, 2010 , July 8, 2011 and July 4, 2012, President Energy Development Ltd. reduced its capitaland returned share capital amounting to US$127,500, US$85,000 and US$85,000, respectively. As ofreporting date, the Company had paid US$1,275,000 for the shares investment.

(b)The investments were measured at cost since its fair value cannot be measured reliably.

(c) Certain financial assets carried at cost had been impaired. Accordingly, the Group recognizedimpairment loss of $330 and $5,581 for the years ended December 31, 2012 and 2011, respectively.


Items 2012 2011

Non-current items:

Listed ( TSE and OTC ) stock 161,146$ 161,146$Adjustment of financial assets heldfor trading 1,419,941 855,909

1,581,087$ 1,017,055$

December 31,

Items 2012 2011

Non-current items:

Unlisted stocks 958,610$ 1,027,513$Emerging stocks 7,341 7,341

965,951$ 1,034,854$

December 31,


(a) The Company was committed to invest US$10,000,000 in President Energy Development Ltd. On June 17, 2010 , July 8, 2011 and July 4, 2012, President Energy Development Ltd. reduced its capital and returned share capital amounting to US$127,500, US$85,000 and US$85,000, respectively. As of reporting date, the Company had paid US$1,275,000 for the shares investment.

(b) The investments were measured at cost since its fair value cannot be measured reliably.(c) Certain financial assets carried at cost had been impaired. Accordingly, the Group recognized

impairment loss of $330 and $5,581 for the years ended December 31, 2012 and 2011, respectively.

(d) Certain financial assets carried at cost were pledged as security for short-term and commercial papers payable. For details of pledged assets, please refer to Note 6.

~23~




(a)The Company was committed to invest US$10,000,000 in President Energy Development Ltd. OnJune 17, 2010 , July 8, 2011 and July 4, 2012, President Energy Development Ltd. reduced its capitaland returned share capital amounting to US$127,500, US$85,000 and US$85,000, respectively. As ofreporting date, the Company had paid US$1,275,000 for the shares investment.

(b)The investments were measured at cost since its fair value cannot be measured reliably.

(c) Certain financial assets carried at cost had been impaired. Accordingly, the Group recognizedimpairment loss of $330 and $5,581 for the years ended December 31, 2012 and 2011, respectively.


Items 2012 2011

Non-current items:

Listed ( TSE and OTC ) stock 161,146$ 161,146$Adjustment of financial assets heldfor trading 1,419,941 855,909

1,581,087$ 1,017,055$

December 31,

Items 2012 2011

Non-current items:

Unlisted stocks 958,610$ 1,027,513$Emerging stocks 7,341 7,341

965,951$ 1,034,854$

December 31,

Certain available-for-sale financial assets were pledged as security for short-term and commercial papers payable. For details of pledged assets, please refer to Note 6.


160

~24~

(8). Long-term equity investments accounted for under the equity methodA.Details of long-term equity investments accounted for under the equity method are set forth below:

B.Details of investment income accounted for under the equity method are set forth below:

C.The investment income of certain investees for the years ended December 31, 2012 and 2011,accounted for under the equity method, was based on their financial statements for thecorresponding periods, which were audited by other auditors. The investment income recognizedfor these investees for the years ended December 31, 2012 and 2011 was $63,192 and $31,553,respectively. As of December 31, 2012 and 2011, long-term equity investments in these investeeswere $810,735 and $760,609, respectively.The investees whose financial statements were audited by other auditors for the years endedDecember 31, 2012 and 2011 were as follows：Geng-Ding Co., Ltd., Amida Trustlink AssetsManagement Co., Ltd., PPG Investment Inc. and Queen Holdings Ltd.

D. Certain long-term equity investments were pledged as security for short-term loans andcommercial papers payable. For details of pledged assets, please refer to Note 6.



Geng-Ding Co., Ltd. 317,735$ 30.00% 305,165$ 30.00%

Uni-President Development Corp. 980,708 30.00% 911,199 30.00%Amida Trustlink Assets

Managemnt Co., Ltd. 164,806 45.21% 131,407 45.21%

PPG Investment Inc. 57,077 27.27% 63,512 27.27%

Queen Holdings Ltd. 271,117 27.27% 260,525 27.27%


1,923,896$ 1,805,826$

December 31,

2012 2011

Investee companies 2012 2011

Geng-Ding Co., Ltd. 12,571$ 13,719$

Uni-President Development Corp. 69,509 30,454

32,818 5,873)(

PPG Investment Inc. 3,908)( 8,056

Queen Holdings Ltd. 21,711 15,651

Ming-Da Enterprise Co., Ltd. 1,566)( 8,967

131,135$ 70,974$

Amida Trustlink Assets Management Co., Ltd.

(8) Long-term equity investments accounted for under the equity methodA. Details of long-term equity investments accounted for under the equity method are set forth

below.

B. Details of investment income accounted for under the equity method are set forth below:

~24~

(8). Long-term equity investments accounted for under the equity methodA.Details of long-term equity investments accounted for under the equity method are set forth below:

B.Details of investment income accounted for under the equity method are set forth below:

C.The investment income of certain investees for the years ended December 31, 2012 and 2011,accounted for under the equity method, was based on their financial statements for thecorresponding periods, which were audited by other auditors. The investment income recognizedfor these investees for the years ended December 31, 2012 and 2011 was $63,192 and $31,553,respectively. As of December 31, 2012 and 2011, long-term equity investments in these investeeswere $810,735 and $760,609, respectively.The investees whose financial statements were audited by other auditors for the years endedDecember 31, 2012 and 2011 were as follows：Geng-Ding Co., Ltd., Amida Trustlink AssetsManagement Co., Ltd., PPG Investment Inc. and Queen Holdings Ltd.

D. Certain long-term equity investments were pledged as security for short-term loans andcommercial papers payable. For details of pledged assets, please refer to Note 6.



Geng-Ding Co., Ltd. 317,735$ 30.00% 305,165$ 30.00%

Uni-President Development Corp. 980,708 30.00% 911,199 30.00%Amida Trustlink Assets

Managemnt Co., Ltd. 164,806 45.21% 131,407 45.21%

PPG Investment Inc. 57,077 27.27% 63,512 27.27%

Queen Holdings Ltd. 271,117 27.27% 260,525 27.27%


1,923,896$ 1,805,826$

December 31,

2012 2011

Investee companies 2012 2011

Geng-Ding Co., Ltd. 12,571$ 13,719$

Uni-President Development Corp. 69,509 30,454

32,818 5,873)(

PPG Investment Inc. 3,908)( 8,056

Queen Holdings Ltd. 21,711 15,651

Ming-Da Enterprise Co., Ltd. 1,566)( 8,967

131,135$ 70,974$

Amida Trustlink Assets Management Co., Ltd.

C. The investment income of certain investees for the years ended December 31, 2012 and 2011, accounted for under the equity method, was based on their financial statements for the corresponding periods, which were audited by other auditors. The investment income recognized for these investees for the years ended December 31, 2012 and 2011 was $63,192 and $31,553, respectively. As of December 31, 2012 and 2011, long-term equity investments in these investees were $810,735 and $760,609, respectively. The investees whose financial statements were audited by other auditors for the years ended December 31, 2012 and 2011 were as follows:Geng-Ding Co., Ltd., Amida Trustlink Assets Management Co., Ltd., PPG Investment Inc. and Queen Holdings Ltd.

D. Certain long-term equity investments were pledged as security for short-term loans and commercial papers payable. For details of pledged assets, please refer to Note 6.


161

~25~

(9). Investments in real estateA. Details of real estate investments are set forth below:


(10).Property, plant and equipment

2012 2011

Beitou District, Zhenxing Section 3, No. 122,etc., Taipei City

162,426$ 162,426$


271,118$ 271,118$

December 31,

Initial costAccumulateddepreciation Net book value

Land 2,775,597$ -$ 2,775,597$

Buildings 4,233,465 605,617)( 3,627,848

Machinery and equipment 12,008 1,896)( 10,112

51,719 29,696)( 22,023

Transportation equipment 29,115 6,093)( 23,022

Office equipment 909,717 369,762)( 539,955

Leased assets 71,848 - 71,848

Property held for lease - Land 3,205,959 - 3,205,959

6,629,884 863,179)( 5,766,705

Leasehold improvements 47,000 37,600)( 9,400

Other equipment 90,620 11,893)( 78,727Coustruction in progress and

prepayments for equipment 7,277 - 7,27718,064,209$ 1,925,736)($ 16,138,473$

December 31, 2012

Property held for lease - Buildings

Computer and communication equipment

(9) Investments in real estateA. Details of real estate investments are set forth below:

~25~

(9). Investments in real estateA. Details of real estate investments are set forth below:


(10).Property, plant and equipment

2012 2011

Beitou District, Zhenxing Section 3, No. 122,etc., Taipei City

162,426$ 162,426$


271,118$ 271,118$

December 31,


Land 2,775,597$ -$ 2,775,597$

Buildings 4,233,465 605,617)( 3,627,848

Machinery and equipment 12,008 1,896)( 10,112

51,719 29,696)( 22,023

Transportation equipment 29,115 6,093)( 23,022

Office equipment 909,717 369,762)( 539,955

Leased assets 71,848 - 71,848

Property held for lease - Land 3,205,959 - 3,205,959

6,629,884 863,179)( 5,766,705

Leasehold improvements 47,000 37,600)( 9,400

Other equipment 90,620 11,893)( 78,727Coustruction in progress and


December 31, 2012

Property held for lease - Buildings


B. For details of pledged assets, please refer to Note 6.(9) Property, plant and equipment

162

~26~

For details of pledged assets, please refer to Note 6.(11).Short-term loans

For details of pledged assets, please refer to Note 6.(12).Notes and bills payable

(a) The above commercial papers were issued by banks and bills financial institutions.(b) For details of pledged assets, please refer to Note 6.


Land 2,780,311$ -$ 2,780,311$Buildings 3,379,320 444,484)( 2,934,836Machinery and equipment 15,344 1,859)( 13,485

56,995 29,510)( 27,485Transportation equipment 17,232 11,980)( 5,252Office equipment 866,404 245,007)( 621,397Property held for lease - Land 3,267,922 - 3,267,922Property held for lease - Buildings 6,662,160 724,587)( 5,937,573Leasehold improvements 47,000 28,553)( 18,447Other equipment 88,749 7,789)( 80,960Coustruction in progress and


December 31, 2011



4,360,000$ 5,586,400$Range of inerest rate 1.50%~2.69% 2.00%~2.75%

December 31,

2012 2011Commercial papers 1,955,000$ 1,883,000$Less: Unamortized discount 2,113)( 2,823)(


December 31,

~26~








December 31, 2011




December 31,



December 31,

For details of pledged assets, please refer to Note 6.(11) Short-term loans

~26~








December 31, 2011




December 31,



December 31,

For details of pledged assets, please refer to Note 6.(12) Notes and bills payable



163~27~

(13).Receipts in advance

(14).Bonds payable

Note: Please refer to Note 4(14)A(g).The Company issued secured ordinary bonds payable in July 2012. The significant terms of thebonds are as follows:(a)Total issue amount: $2,000,000(b)Issue price: At pay value of $100 per bond.(c)Coupon rate: 1.33%(d)Terms of interest repayment: The bonds interest is calculated on simple rate every year starting

July 2012 based on the coupon rate.(e)Repayment term: The bonds are repaid upon the maturity of the bonds.(f)Period: 5 years, from July 12, 2012 to July 12, 2017.(g)The way of security: The Bonds are secured by Bank of Taiwan.(h)Guarantee Bank: The Bonds are guaranteed by Mega International Commercial Bank.

(15).Long-term loans


2012 2011Advance real estate receipts 1,421,450$ 4,719,446$Advance construction receipts 633,630 953,023Advance rent 148,012 82,263Other advance receipts 128,259 95,964

2,331,351$ 5,850,696$

December 31,


2012 1st secured ordinary bonds payable 2,000,000$ -$ Note

December 31,

2012 2011Secured bank loans 10,060,561$ 16,987,039$Unsecured loans 3,490,000 300,000Long-term commercial paper 400,000 400,000


Current portion 3,777,505)( 4,068,868)(10,171,369$ 13,617,609$



December 31,

~27~


(14).Bonds payable






2,331,351$ 5,850,696$

December 31,



December 31,



Current portion 3,777,505)( 4,068,868)(10,171,369$ 13,617,609$



December 31,


~27~


(14).Bonds payable






2,331,351$ 5,850,696$

December 31,



December 31,



Current portion 3,777,505)( 4,068,868)(10,171,369$ 13,617,609$



December 31,

(14) Bonds payable

Note: Please refer to Note 4(14)A(g).The Company issued secured ordinary bonds payable in July 2012. The significant terms of the bonds are as follows:(a) Total issue amount: $2,000,000(b) Issue price: At pay value of $100 per bond.(c) Coupon rate: 1.33%(d) Terms of interest repayment: The bonds interest is calculated on simple rate every year

starting July 2012 based on the coupon rate.(e) Repayment term: The bonds are repaid upon the maturity of the bonds.(f) Period: 5 years, from July 12, 2012 to July 12, 2017.(g) The way of security: The Bonds are secured by Bank of Taiwan.(h) Guarantee Bank: The Bonds are guaranteed by Mega International Commercial Bank.


164

~28~

(16).Pension plansThe Company and its R.O.C. subsidiaries have a non-contributory and funded defined benefitpension plan in accordance with the Labor Standards Law, covering all regular employees. Underthe defined benefit pension plan, two units are accrued for each year of service for the first 15years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pensionbenefits are based on the number of units accrued and the average monthly salaries and wages ofthe last 6 months prior to retirement. The Company contributes monthly an amount equal to 8% ofthe 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.The following sets forth the pension information based on the actuarial report:(a)Actuarial assumptions

(b)The funded status of the plans as of December 31, 2012 and 2011 is as follows:

2012 2011

Discount rate 1.50%~1.75% 1.90%

Rate of compensation increase 1.50%~2.00% 1.50%~2.00%

Expected rate of return on plan assets 1.50%~1.75% 1.50%~1.90%


Benefit obligation:

Vested benefit obligation 39,542)($ 45,769)($Non-vested benefit obligation 105,893)( 106,402)(

Accumulated benefit obligation 145,435)( 152,171)(

25,356)( 25,864)(

Projected benefit obligation 170,791)( 178,035)(Fair value of plan assets 49,064 65,598

Funded status 121,727)( 112,437)(

Unrealized net transition obligation 11,668 13,126

Unrecognized loss on plan assets 47,904 40,748Complement recognized accrued pension

liabilities 40,646)( 37,764)(

Accrued pension liabilities 102,801)($ 96,327)($

Additional benefit based on future salaries

(16) Pension plansThe Company and its R.O.C. subsidiaries have a non-contributory and funded defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees. 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 8% 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. The following sets forth the pension information based on the actuarial report:(a) Actuarial assumptions

~28~

(16).Pension plansThe Company and its R.O.C. subsidiaries have a non-contributory and funded defined benefitpension plan in accordance with the Labor Standards Law, covering all regular employees. Underthe defined benefit pension plan, two units are accrued for each year of service for the first 15years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pensionbenefits are based on the number of units accrued and the average monthly salaries and wages ofthe last 6 months prior to retirement. The Company contributes monthly an amount equal to 8% ofthe 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.The following sets forth the pension information based on the actuarial report:(a)Actuarial assumptions

(b)The funded status of the plans as of December 31, 2012 and 2011 is as follows:

2012 2011

Discount rate 1.50%~1.75% 1.90%

Rate of compensation increase 1.50%~2.00% 1.50%~2.00%

Expected rate of return on plan assets 1.50%~1.75% 1.50%~1.90%


Benefit obligation:

Vested benefit obligation 39,542)($ 45,769)($Non-vested benefit obligation 105,893)( 106,402)(

Accumulated benefit obligation 145,435)( 152,171)(

25,356)( 25,864)(

Projected benefit obligation 170,791)( 178,035)(Fair value of plan assets 49,064 65,598

Funded status 121,727)( 112,437)(

Unrealized net transition obligation 11,668 13,126

Unrecognized loss on plan assets 47,904 40,748Complement recognized accrued pension

liabilities 40,646)( 37,764)(

Accrued pension liabilities 102,801)($ 96,327)($

Additional benefit based on future salaries

(b) The funded status of the plans as of December 31, 2012 and 2011 is as follows:


165

~29~

(c)Net pension cost comprises the following:

Effective July 1, 2005, the Company and its R.O.C. subsidiaries have established a fundeddefined contribution pension plan (the “New Plan”) under the Labor Pension Act. Employeeshave the option to be covered under the New Plan. Under the New Plan, the Company and itsR.O.C. subsidiaries contribute monthly an amount based on 6% of the employees’ monthlysalaries and wages to the employees’ individual pension accounts at the Bureau of LaborInsurance. The benefits accrued are portable upon termination of employment. The pensioncosts under the defined contribution pension plan for the years ended December 31, 2012 and2011 were $61,243 and $55,780, respectively.

(17).Common stockThe stockholders at their annual stockholders’ meeting on June 17, 2011 adopted a resolution toincrease capital for 89,660 thousand shares through capitalization of unappropriated retainedearnings of $896,605. Pursuant to the approval by the Financial Supervisory Commission,Securities and Futures Bureau, No. 1000035447, the capital increase was effective on July 29,2011. After the capital increase, the paid-in capital was $ 10,858,877.The stockholders at their annual stockholders’ meeting on June 20, 2012 adopted a resolution toincrease capital for 108,589 thousand shares through capitalization of unappropriated retainedearnings of $1,085,888. Pursuant to the approval by the Financial Supervisory Commission,Securities and Futures Bureau, No. 1010034424, the capital increase was effective on August 6,2012. After the capital increase, the paid-in capital was $ 11,944,765.

(18).Capital reservesPursuant to the R.O.C. Company Law, capital reserve arising from paid-in capital in excess of parvalue on issuance of common stocks and donations can be used to cover accumulated deficit or toissue new stocks or cash to shareholders in proportion to their share ownership, provided that theCompany has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requiresthat the amount of capital reserve to be capitalized mentioned above should not exceed 10% of thepaid-in capital each year. Capital reserve should not be used to cover accumulated deficit unlessthe legal reserve is insufficient.

2012 2011Service cost 1,506$ 1,898$Interest cost 3,383 3,410Expected return on plan assets 1,246)( 1,161)(Amortization of unrecognized net

transition obligation 1,458 1,458Amortization of unrecognized loss in

plan assets 2,377 2,588Net pension cost 7,478$ 8,193$

For the years ended December 31,(C) Net pension cost comprises the following:

Effective July 1, 2005, the Company and its R.O.C. subsidiaries have established a funded defined contribution pension plan (the “New Plan”) under the Labor Pension Act. Employees have the option to be covered under the New Plan. Under the New Plan, the Company and its R.O.C. 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 portable upon termination of employment. The pension costs under the defined contribution pension plan for the years ended December 31, 2012 and 2011 were $61,243 and $55,780, respectively.

(17) Common stockThe stockholders at their annual stockholders’meeting on June 17, 2011 adopted a resolution to increase capital for 89,660 thousand shares through capitalization of unappropriated retained earnings of $896,605. Pursuant to the approval by the Financial Supervisory Commission, Securities and Futures Bureau, No. 1000035447, the capital increase was effective on July 29, 2011. After the capital increase, the paid-in capital was $ 10,858,877.The stockholders at their annual stockholders’meeting on June 20, 2012 adopted a resolution to increase capital for 108,589 thousand shares through capitalization of unappropriated retained earnings of $1,085,888. Pursuant to the approval by the Financial Supervisory Commission, Securities and Futures Bureau, No. 1010034424, the capital increase was effective on August 6, 2012. After the capital increase, the paid-in capital was $ 11,944,765.

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

166

(19) Retained earningsA. In accordance with the Company’s Articles of Incorporation, the Company will take into

consideration its future business plans and capital expenditures in determining the amounts of earnings to be retained and to be distributed. In accordance with the Company Law, 10% of the current year’s earnings, after payment of all taxes and after offsetting accumulated deficits, shall be set aside as legal reserve until the balance of legal reserve is equal to that of issued share capital. Afterwards, an amount shall be appropriated as special reserve in accordance with applicable legal or regulatory requirements, and then distribution should be in the following order:(a) 3% as remuneration to directors and supervisors;(b At least 2% as bonuses to employees; and(c) Appropriation of the remainder plus prior year’s accumulated unappropriated retained

earnings shall be proposed by the Board of Directors, taking into consideration the cash requirements for future business and investments and other factors. In principle, cash and stock dividends shall account for 50% and 50%, respectively, of the total dividends distributed. While, in case the Company has the need for reserving cash for a significant capital expenditure plan, or intends to adopt the high cash dividends policy instead to avoid capital inflation, the Board of Directors may adjust the cash and stock dividends payout ratios; however, cash and stock dividends shall account for at least 30% and 30%, respectively, of the total dividends distributed, and the final adjustments shall be approved by the stockholders. The parties entitled to the employees’ stock bonus may include the employees of the Company’s affiliates who meet certain criteria.

B. According to the R.O.C. Company Law, except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.

C. As of December 31, 2012 and 2011, the balance of unappropriated retained earnings is as follows:

~30~

(19).Retained earningsA. In accordance with the Company’s Articles of Incorporation, the Company will take into

consideration its future business plans and capital expenditures in determining the amounts ofearnings to be retained and to be distributed. In accordance with the Company Law, 10% of thecurrent year’s earnings, after payment of all taxes and after offsetting accumulated deficits, shall beset aside as legal reserve until the balance of legal reserve is equal to that of issued share capital.Afterwards, an amount shall be appropriated as special reserve in accordance with applicable legalor regulatory requirements, and then distribution should be in the following order:(a) 3% as remuneration to directors and supervisors;(b) At least 2% as bonuses to employees; and(c) Appropriation of the remainder plus prior year’s accumulated unappropriated retained

earnings shall be proposed by the Board of Directors, taking into consideration the cashrequirements for future business and investments and other factors. In principle, cash andstock dividends shall account for 50% and 50%, respectively, of the total dividendsdistributed. While, in case the Company has the need for reserving cash for a significantcapital expenditure plan, or intends to adopt the high cash dividends policy instead to avoidcapital inflation, the Board of Directors may adjust the cash and stock dividends payoutratios; however, cash and stock dividends shall account for at least 30% and 30%,respectively, of the total dividends distributed, and the final adjustments shall be approvedby the stockholders.The parties entitled to the employees’ stock bonus may include the employees of theCompany’s affiliates who meet certain criteria.

B. According to the R.O.C. Company Law, except for covering accumulated deficit or issuing newstocks or cash to shareholders in proportion to their share ownership, the legal reserve shall notbe used for any other purpose. The use of legal reserve for the issuance of stocks or cash toshareholders in proportion to their share ownership is permitted, provided that the balance ofthe reserve exceeds 25% of the Company’s paid-in capital.

C. As of December 31, 2012 and 2011, the balance of unappropriated retained earnings is asfollows:

2012 2011

Unappropriated retained earnings in and after 1998 2,364,465$ 2,448,137$

December 31,


167

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D.(a)The appropriation of 2011 and 2010 earnings had been resolved at the stockholders’ meetings onJune 20, 2012 and June 17, 2011, respectively. Details are summarized below:

(b)The appropriation of 2012 earnings had been proposed by the Board of Directors on March15, 2013. Details are summarized below:

As of report day, the abovementioned 2012 earnings appropriation had not been approved bythe stockholders.

E. Employees’ bonus for 2012 and 2011 are estimated and accrued at $31,640 and $41,654,respectively, and directors’ and supervisors’ remuneration for 2012 and 2011 are estimated andaccrued at $47,460 and $62,482, respectively. The basis of estimates is based on a certainpercentage of net income taking into account the legal reserve and other factors prescribed by theCompany’s Articles of Incorporation (2% and 3% of after-tax earnings of 2011 and 2010,respectively). The estimated amounts were recognized as operating expenses for the years endedDecember 31, 2012 and 2011. If the estimated amounts differ from the amounts approved by thestockholders, the difference is recognized as income or expenses in the following year.

F. The actual distribution of 2011 and 2010 earnings was as stated in the previous paragraph. Thedifference of $328 between the amounts recognized in 2010 (cash bonus to employees of $38,224and remunerations to directors and supervisors of $57,335) and the amount resolved by thestockholders was adjusted in the statement of income of 2011. There was no difference for 2011.

Dividends per Dividends pershare share

Amount (in dollars) Amount (in dollars)Legal reserve 231,413$ -$ 213,082$ -$Stock dividends 1,085,888 1.00 896,605 0.90Cash dividends 542,944 0.50 896,605 0.90Employees' cash bonus 41,654 - 38,355 -Directors' and supervisors'

remuneration 62,482 - 57,532 -1,964,381$ 1.50$ 2,102,179$ 1.80$

2011 2010

Dividends pershare


48,220 -2,050,674$ 1.50$

2012


(b) The appropriation of 2012 earnings had been proposed by the Board of Directors on March 15, 2013. Details are summarized below:

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D.(a)The appropriation of 2011 and 2010 earnings had been resolved at the stockholders’ meetings onJune 20, 2012 and June 17, 2011, respectively. Details are summarized below:

(b)The appropriation of 2012 earnings had been proposed by the Board of Directors on March15, 2013. Details are summarized below:


E. Employees’ bonus for 2012 and 2011 are estimated and accrued at $31,640 and $41,654,respectively, and directors’ and supervisors’ remuneration for 2012 and 2011 are estimated andaccrued at $47,460 and $62,482, respectively. The basis of estimates is based on a certainpercentage of net income taking into account the legal reserve and other factors prescribed by theCompany’s Articles of Incorporation (2% and 3% of after-tax earnings of 2011 and 2010,respectively). The estimated amounts were recognized as operating expenses for the years endedDecember 31, 2012 and 2011. If the estimated amounts differ from the amounts approved by thestockholders, the difference is recognized as income or expenses in the following year.

F. The actual distribution of 2011 and 2010 earnings was as stated in the previous paragraph. Thedifference of $328 between the amounts recognized in 2010 (cash bonus to employees of $38,224and remunerations to directors and supervisors of $57,335) and the amount resolved by thestockholders was adjusted in the statement of income of 2011. There was no difference for 2011.

Dividends per Dividends pershare share

Amount (in dollars) Amount (in dollars)Legal reserve 231,413$ -$ 213,082$ -$Stock dividends 1,085,888 1.00 896,605 0.90Cash dividends 542,944 0.50 896,605 0.90Employees' cash bonus 41,654 - 38,355 -Directors' and supervisors'

remuneration 62,482 - 57,532 -1,964,381$ 1.50$ 2,102,179$ 1.80$

2011 2010

Dividends pershare


48,220 -2,050,674$ 1.50$

2012


D. (a) The appropr ia t ion o f 2011 and 2010 ea rn ings had been reso lved a t the stockholders’meetings on June 20, 2012 and June 17, 2011, respectively. Details are summarized below:


E. Employees’ bonus for 2012 and 2011 are estimated and accrued at $31,640 and $41,654, respectively, and directors’ and supervisors’ remuneration for 2012 and 2011 are estimated and accrued at $47,460 and $62,482, respectively. The basis of estimates is based on a certain percentage of net income taking into account the legal reserve and other factors prescribed by the Company’s Articles of Incorporation (2% and 3% of after-tax earnings of 2011 and 2010, respectively). The estimated amounts were recognized as operating expenses for the years ended December 31, 2012 and 2011. If the estimated amounts differ from the amounts approved by the stockholders, the difference is recognized as income or expenses in the following year.

F. The actual distribution of 2011 and 2010 earnings was as stated in the previous paragraph. The difference of $328 between the amounts recognized in 2010 (cash bonus to employees of $38,224 and remunerations to directors and supervisors of $57,335) and the amount resolved

168 ~32~

(20).Treasury stockA. Treasury stocks bought back by the Company:

(a)For the years ended December 31, 2012 and 2011: None.(b)Pursuant to the R.O.C. Securities and Exchange Law, the number of shares bought back as treasury

stock should not exceed 10% of the number of the Company’s issued and outstanding shares and theamount bought back should not exceed the sum of retained earnings, paid-in capital in excess of parvalue and realized capital reserve. Treasury stocks to enhance the Company’s credit rating and thestockholders’equity should be retired within six months of acquisition.

(c)Pursuant to the R.O.C. Securities and Exchange Law, treasury stock should not be pledged ascollateral and is not entitled to dividends before it is reissued to the employees.

B. Stocks of the Company held by its subsidiaries:(a)Effective January 1, 2002, the stocks of the Company held by its subsidiaries are regarded as

treasury stocks. Those treasury stocks should be eliminated from the calculation of theCompany’s weighted-average outstanding shares of EPS.

(b)As of December 31, 2012 and 2011, the total number of the Company’s shares held by itssubsidiaries was 35,014 thousand shares and 31,831 thousand shares with an average book valueof $1.73 and $1.90 (in dollars) per share and market value of $20.70 and $16.20 (in dollars) pershare, respectively.

(21).Deferred income tax and income tax expenseA. Income tax expense and income tax payable are reconciled as follows:

2012 2011Income tax at statutory tax rate 309,156$ 384,807$Tax effect of permanent and temporary differences 151,827)( 410,192)(Tax effect of investment tax credits 41,523)( 6,227)(Tax effect of loss carryforwards 108,021)( 36,889Net change in deferred income tax 20,851)( -Under provision of prior year’s income tax 10,396 -10% tax on unappropriated retained earnings 45,389 14,017Income tax expense 42,719 19,294Under provision of prior year’s income tax 10,396)( -Net change in deferred income tax 20,851 -Prepaid income tax 12,333)( 11,709)(Income tax payable (Note) 40,841$ 7,585$Note: Income tax payable 42,477$ 9,039$

Income tax refundable 1,636)( 1,454)(Income tax payable, net 40,841$ 7,585$


by the stockholders was adjusted in the statement of income of 2011. There was no difference for 2011.

(20) Treasury stockA. Treasury stocks bought back by the Company:

(a) For the years ended December 31, 2012 and 2011: None.(b) Pursuant to the R.O.C. Securities and Exchange Law, the number of shares bought back

as treasury stock should not exceed 10%of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital reserve. Treasury stocks to enhance the Company’s credit rating and the stockholders’ equity should be retiredwithin sixmonths of acquisition.

(c) Pursuant to the R.O.C. Securities and Exchange Law, treasury stock should not be pledged as collateral and is not entitled to dividends before it is reissued to the employees.

B. Stocks of the Company held by its subsidiaries: (a) Effective January 1, 2002, the stocks of the Company held by its subsidiaries are regarded

as treasury stocks. Those treasury stocks should be eliminated from the calculation of the Company’s weighted-average outstanding shares of EPS.

(b) As of December 31, 2012 and 2011, the total number of the Company’s shares held by its subsidiaries was 35,014 thousand shares and 31,831 thousand shares with an average book value of $1.73 and $1.90 (in dollars) per share and market value of $20.70 and $16.20 (in dollars) per share, respectively.



169

~33~

The difference between financial income and taxable income is mainly due to the tax-exemptincome of land.

B. Details of temporary differences, loss carryforwards and investment rax credits resulting indeferred income tax assets and liabilities are as follows:

C. As of December 31, 2012, unused loss carryforwards amounted to $257,299, which will expirefrom 2016 to 2022.

D. As of December 31, 2012, the Company’s investment tax credits consisted of the following:

E. As of December 31, 2012 and 2011, the imputation tax credit account balance amounted to $43,935and $1,777, respectively. The Company distributed unappropriated earnings in 2011 and 2010 asdividends in accordance with the resolution adopted at the stockholders’ meeting on June 20, 2012 andJune 17, 2011, respectively. The 2012 and 2011creditable ratio were 2.73% and 0.16%, respectively.The 2012 estimated creditable ratio was 1.86%. The amount of deductible tax distributable by theCompany to its shareholders shall be limited to an amount not exceeding the amount of the imputationtax credit account balance on the date of distribution of the dividends. Accordingly, the actualcreditable ratio for the distribution of 2012 undistributed earnings will be based on the imputation taxcredit account balance up to the date of distribution of the dividends.

F. As of December 31, 2012, the Company’s income tax returns through 2011 have been assessed bythe Tax Authority and there were no disputes existing between the Company and the Tax Authority.

Current: Amount Tax effect Amount Tax effectTemporary difference:Employee benefits 1,200$ 204$ 2,280$ 388$Loss carryforwards 117,852 20,035 - -Less: Valuation allowance - 388)(

20,239$ -$Non-Current:

Temporary difference:Employee benefits 3,600$ 612$ 4,800$ 816$Loss on investment 3,496 594 - -Loss carryforwards 1,395,637 237,264 3,470,973 590,065Investment tax credits - 92,625 - 14,148


612$ -$


RegulationQualifying

itemTotal taxcredits

Unusedtax credits

Final year taxcredits are due

Act for Promotion of PrivateParticipation in Infrastructure Projects Investment 120,000$ 92,625$ 2016


B. Details of temporary differences, loss carryforwards and investment rax credits resulting in deferred income tax assets and liabilities are as follows:

~33~


B. Details of temporary differences, loss carryforwards and investment rax credits resulting indeferred income tax assets and liabilities are as follows:

C. As of December 31, 2012, unused loss carryforwards amounted to $257,299, which will expirefrom 2016 to 2022.


E. As of December 31, 2012 and 2011, the imputation tax credit account balance amounted to $43,935and $1,777, respectively. The Company distributed unappropriated earnings in 2011 and 2010 asdividends in accordance with the resolution adopted at the stockholders’ meeting on June 20, 2012 andJune 17, 2011, respectively. The 2012 and 2011creditable ratio were 2.73% and 0.16%, respectively.The 2012 estimated creditable ratio was 1.86%. The amount of deductible tax distributable by theCompany to its shareholders shall be limited to an amount not exceeding the amount of the imputationtax credit account balance on the date of distribution of the dividends. Accordingly, the actualcreditable ratio for the distribution of 2012 undistributed earnings will be based on the imputation taxcredit account balance up to the date of distribution of the dividends.

F. As of December 31, 2012, the Company’s income tax returns through 2011 have been assessed bythe Tax Authority and there were no disputes existing between the Company and the Tax Authority.

Current: Amount Tax effect Amount Tax effectTemporary difference:Employee benefits 1,200$ 204$ 2,280$ 388$Loss carryforwards 117,852 20,035 - -Less: Valuation allowance - 388)(

20,239$ -$Non-Current:

Temporary difference:Employee benefits 3,600$ 612$ 4,800$ 816$Loss on investment 3,496 594 - -Loss carryforwards 1,395,637 237,264 3,470,973 590,065Investment tax credits - 92,625 - 14,148


612$ -$


RegulationQualifying

itemTotal taxcredits

Unusedtax credits

Final year taxcredits are due

Act for Promotion of PrivateParticipation in Infrastructure Projects Investment 120,000$ 92,625$ 2016

C. As of December 31, 2012, unused loss carryforwards amounted to $257,299, which will expire from 2016 to 2022.


E. As of December 31, 2012 and 2011, the imputation tax credit account balance amounted to $43,935 and $1,777, respectively. The Company distributed unappropriated earnings in 2011 and 2010 as dividends in accordance with the resolution adopted at the stockholders’meeting on June 20, 2012 and June 17, 2011, respectively. The 2012 and 2011creditable ratio were 2.73% and 0.16%, respectively. The 2012 estimated creditable ratio was 1.86%. The amount of deductible tax distributable by the Company to its shareholders shall be limited to an amount not exceeding the amount of the imputation tax credit account balance on the date of distribution of the dividends. Accordingly, the actual creditable ratio for the distribution of 2012 undistributed earnings will be based on the imputation tax credit account balance up to the date of distribution of the dividends.

F. As of December 31, 2012, the Company’s income tax returns through 2011 have been assessed by the TaxAuthority and there were no disputes existing between the Company and the TaxAuthority.

170


~34~

(22).Earnings per share

A. The above weighted-average outstanding common shares have been adjusted retroactively inproportion to retained earnings as of December 31, 2010.

B. Effective January 1, 2008, as employees’ bonus could be distributed in the form of stock, thediluted EPS computation shall include those estimated shares that would be increased fromemployees’ stock bonus issuance in the calculation of the weighted-average number of commonshares outstanding during the reporting year, which taking into account the dilutive effects ofstock bonus on potential common shares; whereas, basic EPS shall be calculated based on theweighted-average number of common shares outstanding during the reporting year that includethe shares of employees’ stock bonus for the appropriation of prior year earnings, which havealready been resolved at the stockholders’ meeting held in the reporting year. Sincecapitalization of employees’ bonus no longer belongs to distribution of stock dividends (or

Weighted averagenumber of shares

outstanding duringthe year

Before tax After tax (in thousands) Before tax After taxBasic earnings per share

Net income 1,828,649$ 1,785,930$ 1,159,462 1.57$ 1.54$Dilutive effect of common

stock equivalents:

Employees' bonus - - 1,723Diluted earnings per share

Consolidated net income plusdilutive effect of commonstock equivalents 1,828,649$ 1,785,930$ 1,161,185$ 1.57$ 1.54$

2012

Amount Earnings per share (in dollars)

Weighted averagenumber of shares

outstanding duringthe year



Net income 2,333,425$ 2,314,131$ 1,159,462 2.01$ 1.99$Dilutive effect of common

stock equivalents:


Diluted earnings per shareConsolidated net income plus

dilutive effect of commonstock equivalents 2,333,425$ 2,314,131$ 1,162,673$ 2.01$ 1.99$

2011

Amount Earnings per share (in dollars)

A. The above weighted-average outstanding common shares have been adjusted retroactively in proportion to retained earnings as of December 31, 2010.

B. Effective January 1, 2008, as employees’ bonus could be distributed in the form of stock, the diluted EPS computation shall include those estimated shares that would be increased from employees’ stock bonus issuance in the calculation of the weighted-average number of common shares outstanding during the reporting year, which taking into account the dilutive effects of stock bonus on potential common shares; whereas, basic EPS shall be calculated based on the weighted-average number of common shares outstanding during the reporting year that include the shares of employees’ stock bonus for the appropriation of prior year earnings, which have already been resolved at the stockholders’ meeting held in the reporting year. Since capitalization of employees’ bonus no longer belongs to distribution of stock dividends (or retained earnings and capital reserve capitalized), the calculation of basic EPS and diluted EPS for all periods presented shall not be adjusted retroactively. However, the accounting treatment for the appropriation of employees’ bonus for 2007 earnings resolved


171

at the stockholders’ meeting held in 2008 is still in accordance with the regulations on capitalization of employees’ bonus under paragraphs 19 and 39 of R.O.C. SFAS No. 24, “Earnings per Share”.

(23) Personnel expenses, depreciation and amortizationPersonnel expenses, depreciation and amortization are summarized as follows:

~35~

retained earnings and capital reserve capitalized), the calculation of basic EPS and diluted EPSfor all periods presented shall not be adjusted retroactively. However, the accounting treatmentfor the appropriation of employees’ bonus for 2007 earnings resolved at the stockholders’meeting held in 2008 is still in accordance with the regulations on capitalization of employees’bonus under paragraphs 19 and 39 of R.O.C. SFAS No. 24, “Earnings per Share”.

(23).Personnel expenses, depreciation and amortization

Personnel expenses, depreciation and amortization are summarized as follows:

Operating costs Operating expenses TotalPersonnel expenses:

Salaries 852,525$ 724,155$ 1,576,680$Insurance 58,391 54,436 112,827Pension 32,321 36,400 68,721Others 22,680 46,378 69,058

965,917$ 861,369$ 1,827,286$Depreciation 274,940$ 182,744$ 457,684$Amortization 7,219$ 1,781$ 9,000$


Operating costs Operating expenses TotalPersonnel expenses:

Salaries 778,881$ 740,269$ 1,519,150$Insurance 46,707 50,723 97,430Pension 26,183 37,790 63,973Others 19,604 32,324 51,928

871,375$ 861,106$ 1,732,481$Depreciation 313,166$ 146,757$ 459,923$Amortization 5,587$ 3,367$ 8,954$


172~36~



(a)On July 8, 2009, the Company signed a house sale contract with the spouse of its chairman, Ms.Chung, Wu-Chuan, in the amount of $270,060. The Company recognized sale revenue for thiscontract on a percentage-of-completion basis, amounting to $50,530 and $87,760, for the yearsended December 31, 2012 and 2011, respectively. As of December 31, 2012 and 2011,accumulated sales revenue recognized for this contract on a percentage-of-completion basisamounted to $265,944 and $215,414, respectively. The sale terms of this contract are notsignificantly different from other sale contracts of the same building transaction.

(b)

Names of related parties Relationship with the CompanyAmida Trustlink Assets Management

Co., Ltd. (Amida Trustlink Assets)Subsidiary accounted for under the equity method

Uni-President Development Corp.(Uni-President Development)

Subsidiary accounted for under the equity method

Ming-Da Enterprise Co., Ltd.(Ming-Da Enterprise)


Chuang, Nan-Tien The Company’s chairman

Hsieh, Ming-Fan The Company’s general manager

Chung, Wu-Chuan The Chairman’s spouse

Percentage Percentage

Amount of net sales Amount of net sales

Ming-Da Enterprise 210,573$ 1$ 8,031$ -$Uni-President Development 31,468)($ - 285,968$ 2

179,105$ 1$ 293,999$ 2$


2012 2011

5. RELATED PARTY TRANSACTIONS

A. Names of related parties and their relationship with the Company

~36~



(a)On July 8, 2009, the Company signed a house sale contract with the spouse of its chairman, Ms.Chung, Wu-Chuan, in the amount of $270,060. The Company recognized sale revenue for thiscontract on a percentage-of-completion basis, amounting to $50,530 and $87,760, for the yearsended December 31, 2012 and 2011, respectively. As of December 31, 2012 and 2011,accumulated sales revenue recognized for this contract on a percentage-of-completion basisamounted to $265,944 and $215,414, respectively. The sale terms of this contract are notsignificantly different from other sale contracts of the same building transaction.

(b)

Names of related parties Relationship with the CompanyAmida Trustlink Assets Management

Co., Ltd. (Amida Trustlink Assets)Subsidiary accounted for under the equity method

Uni-President Development Corp.(Uni-President Development)


Ming-Da Enterprise Co., Ltd.(Ming-Da Enterprise)


Chuang, Nan-Tien The Company’s chairman

Hsieh, Ming-Fan The Company’s general manager

Chung, Wu-Chuan The Chairman’s spouse

Percentage Percentage

Amount of net sales Amount of net sales

Ming-Da Enterprise 210,573$ 1$ 8,031$ -$Uni-President Development 31,468)($ - 285,968$ 2

179,105$ 1$ 293,999$ 2$


2012 2011


(a) On July 8, 2009, the Company signed a house sale contract with the spouse of its chairman, Ms. Chung, Wu-Chuan, in the amount of $270,060. The Company recognized sale revenue for this contract on a percentage-of-completion basis, amounting to $50,530 and $87,760, for the years ended December 31, 2012 and 2011, respectively. As of December 31, 2012 and 2011, accumulated sales revenue recognized for this contract on a percentage-of-completion basis amounted to $265,944 and $215,414, respectively. The sale terms of this contract are not significantly different from other sale contracts of the same building transaction.

(b)


173

As of December 31, 2012 and 2011, status of the construction of the related party undertaken by Ta-Chen Construction & Engineering Corp. was as follows:

~37~

As of December 31, 2012 and 2011, status of the construction of the related party undertakenby Ta-Chen Construction & Engineering Corp. was as follows:

c. Accounts receivable

d.On June 20, 2006, the Company and CHINA METAL PRODUCTS CO., LTD (“A party”) jointlysigned a creditor’s rights transfer contract with AMIDA TRUSTLINK ASSETS MANAGEMENTCO., LTD. (“B party”). Under the contract, the Company and A party should pay $2,100,000 each(totaling $4,200,000) to jointly acquire whole creditor’s rights of mortgages, security interests andother dependent claims (collectively referred herein as the creditor’s rights) on the Splendor HotelTaichung Building, and each bears 50% rights and obligations of this acquisition; when allcreditor’s rights of this object turn into property rights, the Company and A party should pay Bparty totaling $1,000,000 as the cost and reward of B party for it is entrusted with the task to helpturn the creditor’s rights as stated above into property rights, but any excess cost over $1,000,000if incurred on this task shall be borne by B party on its own; the Company should pay B party$300,000 before June 30, 2006, and the Company and A party should jointly issue a promissorynote of $1,800,000 to B party on the signing date; payment should be done before July 15, 2006.The title to the creditor’s rights as stated above had been transferred to the Company and A partyon August 2, 2006. On December 29, 2006, the Company and A party signed an additionalcontract following the original contract with B party to raise total acquisition price of thecreditor’s rights to $4,750,000 (the Company and A party bear 50% of the price each). As of

Uni-President Development 2012 2011

4,611,634$ 4,833,457$Construction payments received 4,580,097)( 4,474,573)(

Construction payments receivable 31,537$ 358,884$

Ming-Da Enterprise

292,642$ 8,030$Construction payments received 190,809)( 5,168)(

Construction payments receivable 101,833$ 2,862$

December 31,

Total amount of construction contractsthat were signed but had not been settled yet

Total amount of construction contractsthat were signed but had not been settled yet

Amount % Amount %Chung, Wu-Chuan 185,560$ 8 -$ -Uni-President Development 36,608 2 95,031 8Ming-Da Enterprise 18,021 - - -

240,189$ 10 95,031$ 8

December 31,2012 2011

c. Accounts receivable

d. On June 20, 2006, the Company and CHINA METAL PRODUCTS CO., LTD (“A party”) jointly signed a creditor’s rights transfer contract with AMIDATRUSTLINK ASSETS MANAGEMENT CO., LTD. (“B party”). Under the contract, the Company and A party should pay $2,100,000 each (totaling $4,200,000) to jointly acquire whole creditor’s rights of mortgages, security interests and other dependent claims (collectively referred herein as the creditor’s rights) on the Splendor Hotel Taichung Building, and each bears 50% rights and obligations of this acquisition; when all creditor’s rights of this object turn into property rights, the Company and A party should pay B party totaling $1,000,000 as the cost and reward of B party for it is entrusted with the task to help turn the creditor’s rights as stated above into property rights, but any excess cost over $1,000,000 if incurred on this task shall be borne by B party on its own; the Company should pay B party $300,000 before June 30, 2006, and the Company and A party should jointly issue a promissory note of $1,800,000 to B party on the signing date; payment should be done before July 15, 2006. The title to the creditor’s rights as stated above had been transferred to the Company and A party on August 2, 2006. On December 29, 2006, the Company and A party signed an additional contract following the original contract with B party to raise total acquisition price of the creditor’s rights to $4,750,000 (the Company and A party bear 50% of the price each). As of December 31, 2012, the Company had paid its price.

e. Certain short and long-term loans of the Company were guaranteed by its chairman, Chuang, Nan-Tien, and general manager, Hsieh, Ming-Fan.

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December 31, 2012, the Company had paid its price.e. Certain short and long-term loans of the Company were guaranteed by its chairman, Chuang,

Nan-Tien, and general manager, Hsieh, Ming-Fan.f. Salaries/rewards information of key management

Note：(a) Salaries and bonuses include regular wages, special responsibility allowances, pensions,


various allowances, housing and vehicle benefit, etc.(c) Directors' and supervisors' remuneration and employees' bonuses were those amounts

estimated and accrued in the statement of income for the current year.

2012 2011Salaries and bonuses 115,140$ 100,845$

Service execution fees 6,480 6,710

Directors' and supervisors' remuneration and 47,460 62,482employees' bonus

169,080$ 170,037$

f. Salaries/rewards information of key management



various allowances, housing and vehicle benefit, etc.(c) Directors' and supervisors' remuneration and employees' bonuses were those amounts

estimated and accrued in the statement of income for the current year.


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6. PLEDGED ASSETSThe details of pledged assets were as follows:

7. COMMITMENTS AND CONTINGENT LIABILITIESA. According to the sale contracts, the Company should provide warranty on the house structure and

major facilities for one year from the handover day for the houses it sold. However, any damage tothe houses caused by disasters, additions to the houses made by the buyers, or events that are notattributed to the Company is not included in the scope of warranty.

B. Information on the commitments of the Company on investments and related share capitalpayment status is described in Note 4(7).

C. As of December 31, 2012 and 2011, the real estate sale contracts which were signed by theCompany and buyers but wherein the ownership of the real estate had not been transferred to thebuyers both amounted to $483,321; payments already made for those contracts both amounted to$471,166; and future payments required from the buyers under those contracts both amounted to

Pledged asset 2012 2011 PurposeDemand deposits, certificate of

deposit and checking deposit(shown as "other financial assets -current" and "other financialassets - non-current")

1,963,973$ 920,884$ To obtain a higher credit for client,performance gurantee, constructionperformance gurantee, short-term andlong-term loans, short-term commercialpapers issue, member reward pointsand gift coupons trust account

Financial assets at fair valuethrough profit or loss - current

154,391 256,195 Construction performance guarantees,short-term and long-term loans

Land held for construction 7,087,276 8,632,631 Short-term loans, notes and bills payableand long-term loans

Prepayment for land purchases 146,789 526,209 Short-term loans, notes and bills payable

Buildings and land held for sale 330,592 15,330 Short-term loans, notes and bills payable

Available-for-sale financial assets 1,282,523 843,516 Short-term loans, notes and bills payable

Financial assets carried at cost 575,426 575,426 Short-term loans, notes and bills payable

Long-term equity investmentsaccounted for under the equity

method

1,192,440 203,443 Short-term loans, notes and bills payable

Investments in real estate 162,426 162,426 Short-term loans, notes and bills payable andlong-term loans

Land 4,402,493 4,366,081 Construction performance gurantee,short-term loans, notes and bills payableand long-term loans

Buildings 2,481,091 2,142,808 Short-term loans, notes and bills payable andlong-term loans

Property held for lease 4,598,727 4,296,762 Construction performance gurantee,short-term loans, notes and bills payableand long-term loans

24,378,147$ 22,941,711$

Book value

December 31,

6. PLEDGED ASSETS

The details of pledged assets were as follows:

7. COMMITMENTS AND CONTINGENT LIABILITIES

A. According to the sale contracts, the Company should provide warranty on the house structure and major facilities for one year from the handover day for the houses it sold. However, any damage to the houses caused by disasters, additions to the houses made by the buyers, or events that are not attributed to the Company is not included in the scope of warranty.

B. Information on the commitments of the Company on investments and related share capital payment status is described in Note 4(7).

C. As of December 31, 2012 and 2011, the real estate sale contracts which were signed by the Company and buyers but wherein the ownership of the real estate had not been transferred to the buyers both amounted to $483,321; payments already made for those contracts both amounted to $471,166; and future payments required from the buyers under those contracts both amounted to $12,155.

176

D. On March 17, 2005, the Company (“A party”) signed a contract with National Taiwan University (“B party”) relating to the construction and operation of dormitories in Changxing St. Campus and Shuiyuan Campus. The major terms of the contract are as follows:(a) Under the contract, B party should be responsible for acquiring the ownership or land-use

right for this project, and let A party use the land; A party must complete the construction within 3 years from the registration of the superficies, and may operate the dormitories for 44 years, (the Company reached an agreement with B party that the operating period be changed from the original 32 years to 44 years), collect dormitory rentals and use fees of other facilities from students, and should return the related assets to B party on the expiry of the contract.

(b) A party should give B party a performance guarantee of $60,000 for the construction on the signing date and $30,000 for operations before the start of operation. As of December 31, 2012 and 2011, A party had provided performance guarantee with a guarantee letter issued by the bank, both amounting to $30,000.

(c) A party should pay B party land rentals from the registration of the superficies, according to the terms of the contract, and pay B party operating royalties from the third year of the operation, based on 0.5% of dormitory rentals and use fees of other facilities collected from students.

(d) Terms of restrictions for A party:i) The ratio of A party’s own capital utilized in this project to total construction cost of this

project should be at least 30%;ii) During the operation period, the ratio of shareholders’ equity to total assets should be at

least 25%; and current ratio (current assets/current liabilities) should be at least 100%;iii) All rights acquired by A party under the contract, except other conditions specified in

the contract and approved by B party, should not be transferred, leased, registered as a liability/obligation or become an executed object of civil litigation.

E. On May 10, 2005, the Company (“A party”) signed a contract with National Cheng Kung University (“B party”) relating to the construction and operation of student dormitories and alumni hall. The major terms of the contract are as follows:(a) Under the contract, B party should be responsible for acquiring the ownership or land-use

right for this project, and let A party use the land by way of registration of the superficies; A party must obtain the user license within 3 years after the signing date, and may operate the student dormitories and motorcycle parking lots for 35 years from the start of operation and collect dormitory rentals and use fees of other facilities from students for 50 years from the start of construction, and should return the related assets to B party on the expiry of the contract.

(b) A party should give B party performance guarantee of $50,000 for this project on the signing date, which will be returned in installment according to the contractual terms. As of December 31, 2012 and 2011, A party had provided performance guarantee with a guarantee letter issued by the bank, both amounting to $20,000.

(c) During the operation period, A party should pay B party dormitory operating royalties based on 2% of annual operating revenue of the dormitories and auxiliary facilities operating royalties based on 4% of annual operating revenue of the auxiliary facilities. A party should pay such operating royalties for prior year before the end of June every year. Further,


177

according to the superficies contract signed by the two parties, A party should pay B party land rentals from the registration of superficies.

(d) All rights acquired by A party under the contract, except other conditions specified in the contract and approved by B party, should not be transferred, leased, registered as a liability/obligation or become an executed object of civil litigation.

F. The Company signed a syndicated loan contract with 9 banks - Ta Chong Bank as the lead bank for a credit line of $2.5 billion. The syndicated loans include medium-term (secured) loans, commercial paper guarantees and long-term (secured) loans. During the loan period, the Company should maintain financial commitments such as current ratio, liability ratio and interest coverage; those financial ratios/restrictions shall be reviewed at least once every year, based on the Company’s audited annual consolidated financial statements. If the Company violates the above financial commitments, it might be requested to stop drawing down all or part of the loans, and all or part of the loans might be asked to mature early, as resolved by the majority of the consortium.

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

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

I. The Company signed a syndicated loan contract with 9 banks - Mega International Commercial Bank as the lead bank for a credit line of $3.6 billion. The syndicated loans are medium-term

178

(secured) loans. During the loan period, the Company should maintain financial commitments such as current ratio, liability ratio and interest coverage; those financial ratios/restrictions shall be reviewed at least once every year, based on the Company’s audited annual consolidated financial statements. If the Company violates the above financial commitments, it shall improve its financial position before June 30 of the year when it presents the underlying financial statements; it would not be regarded as a default if the Company’s semiannual consolidated financial statements of that year reviewed by independent auditors show that the financial ratios/restrictions conform to the commitments. In case of violation, interest on the loans would be charged at the loan rate of 0.80% per annum from the notification date of the managing bank to the completion date of financial improvement or to the date the Company obtains a waiver from the consortium for its violation.

J. On May 18, 2007, the Company signed a contract with Taiwan Sugar Corporation (“TSC”) in relation to cooperative construction of houses. According to the contract, TSC shall provide Lot Nos. 12-12 and 601-1, Guo-An Sec., Xitun District, Taichung City and Lot No. 44, He-Guan Sec., Annan District, Tainan City; the Company shall provide funding for those projects and repurchase houses and land allocated to TSC amounting to $1,810,889 and $927,889, respectively, and shall bear all improvement fees of houses, public facilities and land, selling expenses, and other expenses or contributed expenses required under the decrees. The Company shall not ask for any compensation for price fluctuations or other reasons. Further, under the contract, the Company shall give TSC performance guarantee amounting to $181,090 and $92,780, respectively, on the signing date, which will be returned in installments according to the contractual terms. As of December 31, 2012 and 2011, the Company had provided performance guarantee with a guarantee letter of the bank amounting to $181,090, $0 and $181,090, $24,160, respectively. The development of Lot No. 44, He-Guan Sec., Annan District, Tainan City has been postponed because of the consideration of capital planning, as approved by TSC. According to the Nan-Tu-Kai-Zi Letter No. 0980001113 of Tainan Office of TSC, the Company shall pay compensation fee amounting to $6,344 for this postponed development. The Company had paid such fee in 2010.

K. On July 11, July 22 and September 2, 2011, the Company signed a contract with Taiwan Sugar Corporation (“TSC”) in relation to cooperative construction of houses. According to the contracts, TSC shall provide Lot Nos. 11 and 12, Ming-Ding Sec., Fongshan District, Kaohsiung City and Lot Nos. 48 and 51, Hou-Bi-Tian Sec., Ciaotou District, Kaohsiung City and Lot Nos. 117 and 118, Qiao-Zhong Sec., Ciaotou District, Kaohsiung City, respectively; the Company shall provide funding for those projects and repurchase houses and land allocated to TSC amounting to $273,680, $634,880 and $157,960, respectively, and shall bear all improvement fees of houses, public facilities and land, selling expenses, and other expenses or contributed expenses required under the decrees. The Company shall not ask for any compensation for price fluctuations or other reasons. Further, under the contract, the Company shall give TSC performance guarantee amounting to $27,370, $63,480 and $15,790, respectively, on the signing date, which will be returned in installments according to the contractual terms. As of December 31, 2012, the Company had provided such performance guarantee with guarantee letter of the bank amounting to $27,370,$63,480, $0and $27,370, $63,480, $15,790, respectively.

L. The Company signed an agreement with Mr. Tsai Shuei-Pin on July 12, 2012 for joint construction of houses. Under those agreements, Mr. Tsai Shuei-Pin, the owner of land, shall provide the land located at No. 52 Yu-Shien Lot, Tai-Pian Dist. Taichung City, and the Company is responsible for the construction; the houses built would be allocated to both sides based on the specified


179

proportion. In addition, the Company shall give performance bond in the amount $83,930, which would be returned to the Company in installments. As of December 31, 2012 and 2011, balance of the performance bond was $83,930 and $66,000, respectively.

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

N. As of December 31, 2012 and 2011, performance guarantee letters issued for construction undertaking, warranty and leases of subsidiary, Ta-Chen Construction & Engineering Corp., amounted to $1,339,546 and $1,485,232, respectively.

O. Subsidiary, Ta-Chen Construction & Engineering Corp., undertook the construction of Kaohsiung Rapid Transit Corporation and subcontracted the red line CR2 section utility environmental control project to TECO Electric and Machinery Co., Ltd. on January 20, 2003. TECO Electric and Machinery Co., Ltd. claimed that as the prices relating to construction rose considerably one year after the start of this project, it had the right to ask for additional project payments from Ta-Chen Construction & Engineering Corp. in accordance with Article 227-2 of Civil Code and the original evidence letters 4 & 5, in which TECO Electric and Machinery Co., Ltd. claimed that the two sides had had the agreement on additional project payments. Therefore, TECO Electric and Machinery Co., Ltd. filed a civil lawsuit for the dispute and asked for payments from Ta-Chen Construction & Engineering Corp. amounting to $83,891. On March 3, 2010, TECO Electric and Machinery Co., Ltd. revised the payments asked for to $70,894. In December, 2010, the two sides reached an out-of-court settlement that Ta-Chen Construction & Engineering Corp. was not required to give any additional payment. However, in the out-of-court settlement Ta-Chen Construction & Engineering Corp. agreed that for the case a subcontractor of TECO Electric and Machinery Co., Ltd. filed a lawsuit against TECO Electric and Machinery Co., Ltd., asking for additional project payments from TECO Electric and Machinery Co., Ltd. amounting to $122,072, it would subsidize for TECO Electric and Machinery Co., Ltd. as far as 10% of additional project payments (the scope of 10% is limited only to the principal of additional project payments asked for) the subcontractor has the right to ask for after the lawsuit above was finalized or an out-of-court settlement was reached. As the final judgment of the lawsuit has not come out, Ta-Chen Construction & Engineering Corp. did not accrue any losses for this case.

P. Subsidiary, Ta-Chen Construction & Engineering Corp., undertook the construction of Kaohsiung Rapid Transit Corporation and subcontracted the red line CR2 section utility environmental control project to TECO Electric and Machinery Co., Ltd. on January 20, 2003. TECO Electric and Machinery Co., Ltd. filed a civil lawsuit against Ta-Chen Construction & Engineering Corp., asking for project payments from Ta-Chen Construction & Engineering Corp. amounting to $41,785. In December, 2010, the two sides reached an out-of-court settlement that Ta-Chen Construction & Engineering Corp. shall pay TECO Electric and Machinery Co., Ltd. $25,071 (including taxes) after the lawsuit was withdrawn (such amount was accrued in the financial

180

statements of Ta-Chen Construction & Engineering Corp. and had been paid as of December 31, 2011). The remaining $16,714 would be paid by Ta-Chen Construction & Engineering Corp. according to the contractual terms after Ta-Chen Construction & Engineering Corp. received payments from Kaohsiung Rapid Transit Corporation.

Q. Subsidiary, Ta-Chen Construction & Engineering Corp. (“Ta-Chen”), undertook the project of “The Transbasin Diversion Tunnel of Tsengwen Reservoir”. This project has been stopped by the occurrence of Typhoon Morakot (88 Flood). The Southern Region Water Resources Office, WRA, MOEA (“SRWRO”) has reached an out-of-court settlement with Ta-Chen for part of the litigation and has compensated Ta-Chen $26,300 for additional costs incurred during the stoppage period. While, the loss compensation litigation against SRWRO regarding the contract termination is still on-going.

R. Subsidiary, Ta-Chen Construction & Engineering Corp. (“Ta-Chen”), and Hung-Yi Construction Corp. and Evergreen International Engineering Corp. (collectively referred herein as the joint constructors) jointly undertook the construction of the new office building of the American Institute in Taiwan. As the joint constructors and the owner of this project both claim the counterparty defaulted on the contract, they terminated the contract and referred the dispute to arbitration. Through the first-phase arbitration in USA during September 4, 2012 and November 6, 2012, the arbitral court rendered a decision that the project owner’s reasons to terminate the contract are acceptable. However, the issues on loss compensation and construction payment the project owner was seeking will be put into the second-phase arbitration. The court date of the second-phase arbitration is to be decided by the arbitrators. Ta-Chen has appointed attorneys to handle this case. As this case has not yet gone into the second-phase arbitration, the rights and obligations of both sides have not been confirmed. So Ta-Chen did not accrue any losses for this case.

S. Certain construction contracts undertaken by subsidiary, Ta-Chen Construction & Engineering Corp., specify that default penalty shall be computed according to the contractual terms if the construction is not completed in the prescribed period.

T. As of December 31, 2012 and 2011, subsidiary, The Splendor Hotel Taichung, had signed fixed assets purchase and repair contracts totaling $894,055 and $942,938, respectively; unpaid amount for those contracts was $111,991 and $405,802, respectively.

U. As of December 31, 2012 and 2011, unpaid rental for lease contracts of subsidiary, The Splendor Hotel Taichung, amounted to $15,517 and $13,097, respectively.

V. As of December 31, 2012 and 2011, subsidiary, The Splendor Hotel Taichung, had signed gift coupon performance guarantee contract with banks amounting to $25,689 and $28,581, respectively, of which $25,689 and $28,184, respectively, had been drawn down.

W. On May 27, 2011, subsidiary, The Splendor Hotel Taichung, signed a syndicated loan contract with 3 banks, SinoPac Bank, etc., in the amount of $3.3 billion, with Prince Housing & Development Corp. and China Metal Products Co., Ltd. as guarantors. Under the contract, the subsidiary promised its tangible net equity shall not be negative and current ratio, liability ratio, tangible net equity and interest coverage of Prince Housing & Development Corp. and China Metal Products Co., Ltd. shall conform to certain criteria as specified in the contract. If the subsidiary violates above financial commitments, the managing bank has the right to take the following actions, including but not limited, according to the contract or the resolution of majority of the consortium: 1) request the subsidiary to stop drawing down all or part of the loans; 2) cancel all or part of the


181

~46~

8. SIGNIFICANT CATASTROPHENone.

9. SUBSEQUENT EVENTSNone.

10. OTHERSA. Financial statement presentation

Certain accounts in the 2011 consolidated financial statements were reclassified to conform withthe 2012 consolidated financial statement presentation.

Year Minimum rental payments

2013 304,625$

2014 383,932

2015 397,174

Total amount from 2016~2020 1,988,896




credit line of the contract which has not been drawn down yet; 3) announce that all outstanding principal, interest and other accrued expenses payable to the consortium in relation to the loan contract should mature immediately; 4) demand the subsidiary’s payment of the promissory note acquired under the loan contract; 5) exercise creditor’s right of mortgage, pledge right, other rights or contract transfer right; 6) exercise other rights given by the laws, the loan contract and other relevant documents; 7) take other actions as resolved by the majority of the consortium.

X. Subsidiary, Time Square International Co., Ltd., has leased offices and operational places by way of operating leases starting from February 14, 2011 with lease term of 25 years. Future minimum payments required under those leases according to the contractual terms are as follows:

8. SIGNIFICANT CATASTROPHE

None.

9. SUBSEQUENT EVENTS

None.

10. OTHERS

A. Financial statement presentationCertain accounts in the 2011 consolidated financial statements were reclassified to conform with the 2012 consolidated financial statement presentation.

182

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183

The methods and assumptions used to estimate the fair values of financial instruments aresummarized as follows:

(a) The due dates of short-term financial instruments are near the balance sheet date. Accordingly, the fair value of short-term financial instruments are estimated based on the amount at the balance sheet date which include the accounts of cash and cash equivalents, notes and accounts receivable, other receivables, other financial assets-current, short-term loans, notes and bills payable, notes and accounts payable, accrued expenses, and other payables.

(b) The fair value of pledged deposits (shown as “other financial assets - non-current”) is estimated at its book value since its future maturity value will be affected by interest rate changes.

(c) The fair value of refundable deposits is based on the discounted value of expected future cash inflows, which is discounted based on the interest rate of one-year time deposit of the Postal Savings System at December 31, 2012 and 2011.

(d) The fair value of ordinary bonds issued by the Company is based on the present value of expected cash flow amount. The discount rate is the effective interest rate of bonds payable in the current market, whose contractual terms are similar to those of ordinary bonds issued by the Company.

(e) Since long-term liabilities’ interest rates are approximate market interest rates and the discounted value of expected future cash flows are equivalent to the book value, the fair value is estimated at the book value basis.

C. The Company recognized the amount of $564,615 and $740,565 as addition to stockholders’ equity for the changes in fair value of available-for-sale financial assets as of December 31, 2012 and 2011, respectively.

D. As of December 31, 2012 and 2011, the Group’s financial assets subjected to fair value risk due to the change in interest rate amounted to $1,963,973 and $920,884, respectively. The financial liabilities subjected to cash flow risk due to the change in interest rate amounted to $20,261,761 and $25,153,054, respectively.

E. Procedures of financial risk control and hedge The Group’s activities expose it to a variety of financial risks: market risk, credit risk, liquidity

risk and cash flow interest rate risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. In order to achieve the goal of risk management, the Group’s hedging activities are concentrated in the market value risk and cash flow risk.

F. Information of financial riska. Equity financial intruments: including financial assets at fair value through profit or loss,

available-for-sale financial assets and financial assets carried at cost.(a) Market risk

The equity financial instruments held by the Group were subject to the fluctuations in market prices. However, since the investment amount was not significant to the Group, it was assessed that the Group was not exposed to significant market risk.

(b) Credit riskFor financial assets at fair value through profit or loss, the Group had carried out the transactions through the Taiwan Stock Exchange and GreTai Securities Market. These

184

transactions are carried out only with counterparties with good credit standing and breaches of agreements is not expected. Thus, the likelihood that credit risk would arise is remote. The Group also assesses the credit ratings of the counterparties when they trade. Thus, thepossibility of default by those parties is low.

(c) Liquidity riskThe equity financial instruments were traded in active markets and it was expected that these financial instruments would be readily sold at amounts approximate to their fair values. In the case of financial assets carried at cost without active market, the liquidity risk is material.

(d) Cash flow risk due to the fluctuation of interest rateThe equity financial instruments held by the Group were not interest-bearing instruments. Thus, the Group was not subject to cash flow risk arising from the fluctuation of the interest rate.

b. Notes and account receivable(a) Market risk

As the notes and accounts receivable held by the Group was due within one year, it was assessed that the Group was not exposed to significant market risk.

(b) Credit riskThe Group’s debtors of receivables have good credit standing and banks would verify debtors’ credit appropriately before they release loans. Therefore, it was assessed that the Group was not exposed to significant credit risk from receivables.

(c) Liquidity riskIt was assessed that Group was not exposed to significant liquidity risk as the Group’s notes and accounts receivable were all due within one year.

(d) Cash flow risk due to the fluctuation of interest rateIt was assessed that theGroup was not exposed to significant cash flow risk due to change in interest rate as the notes and accounts receivable of Group’s receivables were all due within one year.

c. Loans: including short-term loans, short-term notes and bills payable, long-term loans (including current portion).(a) Market risk

Loans of the Group were with floating interest rate and mostly due within one year. Thus, theGroup did not expect to be exposed to significant market risk.

(b) Credit riskThe Group has good credit standing and the transactions with banks were normal. It was assessed that the Group was not exposed to credit risk.

(c) Liquidity riskThe Group’s loans are mostly due within one year, and the cycle of housing construction to receivables is within a year. Thus, the working capital of the Group was considered sufficient to support its funding needs. The Group did not expect to be exposed to significant liquidity risk.

(d) Cash flow risk due to the fluctuation of interest rateLoans of the Group, except bonds payable, are floating interest rate bearing. Thus, theeffective interest rate on the loan fluctuated according to changes in market interest rate. As a result, the future cash flow is expected to fluctuate.


185

~51~

11.A

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NA

LD

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RES

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UIR

EDBY

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ded

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embe

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eas

follo

ws：

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oans

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hers

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bute

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cing

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ities

asof

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embe

r31,

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：

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ea：

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umbe

rrep

rese

ntst

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ture

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anci

ngac

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adin

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pany

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ote

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ote

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ote

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ote

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AN

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Rel

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r the

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ecem

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1, 2

012

wer

e as

follo

ws:

A.

Loan

s to

oth

ers

attri

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d to

fina

ncin

g ac

tiviti

es a

s of

Dec

embe

r 31,

201

2:

~51~

11.A

DD

ITIO

NA

LD

ISC

LOSU

RES

REQ

UIR

EDBY

THE

SECU

RITI

ESA

ND

FUTU

RES

BURE

AU

(1)R

elat

edin

form

atio

nof

signi

fican

ttra

nsac

tions

Purs

uant

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edi

sclo

sure

requ

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ents

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rthe

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sand

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ange

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latio

ns,s

igni

fican

ttra

nsac

tions

fort

heye

aren

ded

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embe

r31,

2012

wer

eas

follo

ws：

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oans

toot

hers

attri

bute

dto

finan

cing

activ

ities

asof

Dec

embe

r31,

2012

：

Not

ea：

Then

umbe

rrep

rese

ntst

hena

ture

offin

anci

ngac

tiviti

esas

follo

ws：

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adin

gpa

rtner

.2.

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t-ter

mfin

anci

ng.

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e1：

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cord

ance

with

the

Com

pany

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late

dre

gula

tions

,the

tota

lam

ount

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oan

is40

%of

itsne

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th.

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e2：

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cord

ance

with

Prin

ceA

partm

entM

anag

emen

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.,Lt

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late

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gula

tions

,the

tota

lam

ount

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oan

is40

%of

itsne

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th.

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e3：

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cord

ance

with

Don

g-Fe

ngEn

terp

rises

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rela

ted

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latio

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heto

tala

mou

ntfo

rloa

nis

40%

ofits

netw

orth

.N

ote

4：In

acco

rdan

cew

ithTa

-Che

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nstru

ctio

n&

Engi

neer

ing

Corp

.,Lt

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,the

tota

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ount

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oan

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th.H

owev

er,t

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mou

ntfo

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nnot

exce

ed40

%of

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thfo

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ort-

term

finan

cing

.N

ote

5：A

sofD

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ber3

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ote

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sofD

ecem

ber3

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heCo

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awn

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,195

,615

.N

ote

7：Pr

ince

Prop

erty

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agem

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o.,L

td.h

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endi

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ved

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ctob

er1,

2012

beca

use

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erge

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Gro

up.

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ber

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ince

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orp.

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ition

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ing

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tal

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ince

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sing

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evel

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orp.

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rties

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atin

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ition

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imum

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ount

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ledg

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cing

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imun

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nce

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ure

offin

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ea)

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186

~52~

B.E

ndor

sem

ents

and

guar

ante

espr

ovid

eddu

ring

the

year

ende

dD

ecem

ber3

1,20

12：

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ea：

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inve

stee

com

pany

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guar

ante

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ere

prov

ided

base

don

the

Com

pany

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opor

tiona

tesh

are

inth

ein

vest

eeco

mpa

ny.

Not

e1：

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cord

ance

with

thec

ompa

ny’s

relat

edre

gulat

ions

,thet

otal

amou

ntof

trans

actio

nsof

endo

rsem

ents

and

guar

antee

sand

thel

imit

ofen

dorse

men

tsan

dgu

aran

teesf

oran

ysin

gleo

fthe

nen

tity

is20

%of

thec

ompa

ny’s

netw

orth

.N

ote

2：In

acco

rdan

cew

ithth

eC

ompa

ny’s

rela

ted

regu

latio

ns,t

heto

tala

ccum

ulat

edam

ount

oftra

nsac

tions

ofen

dors

emen

tsan

dgu

aran

tees

cann

otex

ceed

50%

ofth

eC

ompa

ny’s

netw

orth

.N

ote

3：In

acco

rdan

cew

ithTa

-Che

nC

onst

ruct

ion

&En

gine

erin

gC

orp.

’sre

late

dre

gula

tions

,the

limit

ofen

dors

emen

tsan

dgu

aran

tees

fora

nysi

ngle

entit

yis

$1,5

00,0

00,t

heto

tala

ccum

ulat

edam

ount

is$3

,000

,000

.N

ote

4：In

acco

rdan

cew

ithD

ong-

Feng

Ente

rpris

esC

o.,L

td.r

elat

edre

gula

tions

,the

limit

ofen

dors

emen

tsan

dgu

aran

tees

fora

nysi

ngle

entit

yis

$2,0

00,0

00,t

heto

tala

ccum

ulat

edam

ount

is$4

,000

,000

.N

ote

5：In

acco

rdan

cew

ithPr

ince

Util

ityC

o.,L

td.r

elat

edre

gula

tions

,the

limit

ofen

dors

emen

tsan

dgu

aran

tees

fora

nysi

ngle

entit

yis

$1,0

00,0

00,t

heto

tala

ccum

ulat

edam

ount

is$2

,000

,000

.N

ote

6：In

acco

rdan

cew

ithJin

-Yi-X

ing

plyw

ood

Co.

,Ltd

.rel

ated

regu

latio

ns,t

helim

itof

endo

rsem

ents

and

guar

ante

esfo

rany

sing

leen

tity

is$2

,500

,000

,the

tota

lacc

umul

ated

amou

ntis

$5,0

00,0

00.

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e7：

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cord

ance

with

Chen

g-Sh

iCon

struc

tion

Co.

,Ltd

.rel

ated

regu

latio

ns,t

helim

itof

endo

rsem

ents

and

guar

ante

esfo

rany

sing

leen

tity

is$1

00,0

00,t

heto

tala

ccum

ulat

edam

ount

is$2

00,0

00.

Not

e8：

Endo

rsem

ents

and

guar

ante

esam

ount

isth

eam

ount

ofth

een

dors

emen

tand

guar

ante

eco

ntra

ctsi

gned

with

the

bank

.Aso

fDec

embe

r31,

2012

,the

Com

pany

had

draw

ndo

wn

$309

,084

.N

ote

9：En

dors

emen

tsan

dgu

aran

tees

amou

ntis

the

amou

ntof

the

endo

rsem

enta

ndgu

aran

tee

cont

ract

sign

edw

ithth

eba

nk.A

sofD

ecem

ber3

1,20

12,t

heC

ompa

nyha

ddr

awn

dow

n$0

.N

ote

10：

Endo

rsem

ents

and

guar

ante

esam

ount

isth

eam

ount

ofth

een

dors

emen

tand

guar

ante

eco

ntra

ctsig

ned

with

the

bank

.Aso

fDec

embe

r31,

2012

,the

Com

pany

had

draw

ndo

wn

$1,7

17,7

20.

Not

e11：

Aso

fDec

embe

r31,

2012

,the

Com

pany

had

draw

ndo

wn

$1,8

10,8

89.

Not

e12：

Aso

fDec

embe

r31,

2012

,the

Com

pany

had

draw

ndo

wn$5

40,65

1.

Not

e13：

Aso

fDec

embe

r31,

2012

,the

Com

pany

had

draw

ndo

wn

$1,246,889.

Num

ber

Nam

eof

endo

rser

sN

ame

ofen

dors

ees

Rel

atio

nshi

pN

ote

0Pr

ince

Hou

sing

&D

evel

opm

entC

orp.

Ta-C

hen

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stru

ctio

n&

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neer

ing

Cor

p.

Subs

idia

ry3,

389,

965

$1,

200,

000

$1,

200,

000

$-

$7

8,47

4,91

3$

1、2、

8

0Pr

ince

Hou

sing

&D

evel

opm

entC

orp.

Tim

eSq

uare

Inte

rnat

iona

lCo.

,Lt

d.

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389,

965

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spos

also

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tabl

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curit

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ceed

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ion

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%of

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pany

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sitio

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ceed

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tal:

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e：Pl

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rto

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e7.

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ount

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ulat

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also

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ceed

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pany

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sitio

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ceed

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ithth

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tal:

~59~

D.A

ccum

ulat

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nsan

ddi

spos

also

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ivid

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arke

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ese

curit

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ceed

ing

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or20

%of

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Com

pany

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uted

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tal:

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cqui

sitio

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ount

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ount

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/11/

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also

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ese

curit

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ceed

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Com

pany

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sitio

nof

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ceed

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e：Pl

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rto

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e7.

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dO

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k(lo

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ount

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ndan

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ketv

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ount

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heng

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stru

ctio

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diffe

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nth

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e(lo

ss)o

fthe

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and

the

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ome

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veste

ere

cogn

ized

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eCo

mpa

nyis

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stmen

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ome

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mpa

nyin

prop

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nto

the

shar

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ners

hip

and

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aliz

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in(lo

ss)f

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elim

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ofin

ter-c

ompa

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tions

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ote

2：Su

bsid

iary.

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endi

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ved

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ctob

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2012

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use

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rin

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diff

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etw

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the

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ncom

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vest

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ecog

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e in

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aliz

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ain

(loss

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m e

limin

atio

n of

inte

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ny tr

ansa

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sidi

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ad b

een

diss

olve

d on

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beca

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ount

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Tran

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e: O

ne s

ide

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ansa

ctio

ns a

re d

iscl

osed

am

ong

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com

pany

and

sub

sidi

arie

s.

Not

e1: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 1

.78%

.

Not

e2: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 9

.91%

.

Not

e3: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 1

0.45

%.

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e4: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 3

.12%

.

Not

e5: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 7

.19%

.

(4)

Inte

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pany

Rel

atio

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ps a

nd S

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fican

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mpa

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nt b

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Com

pany

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Sign

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ount

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19%

.

Tran

sact

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Not

e: O

ne s

ide

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ansa

ctio

ns a

re d

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osed

am

ong

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com

pany

and

sub

sidi

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Not

e1: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 3

.07%

.

Not

e2: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 9

.36%

.

Not

e3: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 1

.96%

.

Not

e4: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 2

.72%

.

Not

e5: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 1

1.64

%.

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e6: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 1

.54%

.

Not

e7: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 3

.47%

.

Not

e8: P

erce

ntag

e of

con

solid

ated

tota

l sto

ckho

lder

s' eq

uity

is 8

.01%

.

For t

he y

ear e

nded

Dec

embe

r 31,

201

1:

202

~68~

12.S

egm

enti

nfro

mat

ion

A.G

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alin

form

atio

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edth

ere

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atin

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sed

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ere

ports

revi

ewed

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ech

ief

oper

atin

gde

cisi

on-m

aker

that

are

used

tom

ake

stra

tegi

cde

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chie

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aker

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ider

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busi

ness

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spec

tive.

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ento

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men

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the

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udes

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Dec

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r31,

2012

12. S

egm

ent i

nfro

mat

ion

A.

Gen

eral

info

rmat

ion

Man

agem

ent h

as d

eter

min

ed th

e re

porta

ble

oper

atin

g se

gmen

ts b

ased

on

the

repo

rts re

view

ed b

y th

e ch

ief o

pera

ting

deci

sion

-mak

er th

at a

re u

sed

to m

ake

stra

tegi

c de

cisi

ons.

The

chi

ef o

pera

ting

deci

sion

-mak

er c

onsi

ders

the

busi

ness

from

a p

rodu

ct p

ersp

ectiv

e.B

. M

easu

rem

ent o

f seg

men

t inf

orm

atio

nTh

e ch

ief o

pera

ting

deci

sion

-mak

er a

sses

ses

the

perf

orm

ance

of t

he o

pera

ting

segm

ents

bas

ed o

n th

e pr

ofit (

loss

) bef

ore

taxe

s. T

his

mea

sure

men

t ba

sis

excl

udes

the

effe

cts

of n

on-r

ecur

ring

reve

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/exp

endi

ture

s fr

om th

e op

erat

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ents

. Acc

ount

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ting

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ents

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the

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e as

the

sum

mar

y of

sig

nific

ant a

ccou

ntin

g po

licie

s in

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e 2

to th

e co

nsol

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nanc

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tate

men

ts.

C.

Info

rmat

ion

on s

egm

ent p

rofit

(los

s) a

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sset

sTh

e se

gmen

t inf

orm

atio

n pr

ovid

ed to

the

chie

f ope

ratin

g de

cisi

on-m

aker

for t

he re

porta

ble

segm

ents

is a

s fo

llow

s:


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D.R

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asse

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928,

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183,

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Dec

embe

r31,

2011

D.

Rec

onci

liatio

n fo

r seg

men

t pro

fit (l

oss)

and

ass

ets

Sale

s be

twee

n se

gmen

ts a

re c

arrie

d ou

t at a

rm’s

leng

th. T

he r

even

ue f

rom

ext

erna

l par

ties

repo

rted

to th

e ch

ief

oper

atin

g de

cisi

on-m

aker

is

mea

sure

d in

a m

anne

r co

nsis

tent

with

that

in th

e in

com

e st

atem

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204

13. DISCLOSURES RELATING TO THE ADOPTION OF IFRSs

Pursuant to the regulations of the Financial Supervisory Commission, Executive Yuan, R.O.C., effective January 1, 2013, a public company whose stock is listed on the Taiwan Stock Exchange Corporation or traded in the GreTai Securities Market should prepare financial statements in accordance with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), and relevant interpretations and interpretative bulletins that are ratified by the Financial Supervisory Commission.The Company discloses the following information in advance prior to the adoption of IFRSs under the requirements of Jin-Guan-Zheng-Shen-Zi Order No. 0990004943 of the Financial Supervisory Commission, dated February 2, 2010:A. Major contents and status of execution of the Company’s plan for IFRSs adoption:

The Company has formed an IFRSs group headed by the Company’s General Manager, which is responsible for setting up a plan relative to the Company’s transition to IFRSs. The major contents and status of execution of this plan are outlined below:

Working Items for IFRSs Adoption Status of Execution

1. Formation of an IFRSs group Completed Completed 2. Setting up a plan relative to the Company’s transition to

IFRSs CompletedCompleted

3. Identification of the differences between current accounting policies and IFRSs

Completed

4. Identification of consolidated entities under the IFRSs framework Completed

Completed

5. Evaluation of the impact of each exemption and option of the Company under IFRS 1 - First-time Adoption of International Financial Reporting Standards

Completed

6. Evaluation of needed information system adjustments Completed

Completed

7. Evaluation of needed internal control adjustments Completed Completed

8. Establish IFRSs accounting policies Completed Completed 9. Selection of exemptions and options available under IFRS

1 - First-time Adoption of International Financial Reporting Standards

Completed

10. Preparation of statement of financial position on the date of transition to IFRSs

Completed

11. Preparation of IFRSs comparative financial information for 2012 In progress

In progress

12. Completion of relevant internal control (including financial reporting process and relevant information system) adjustments

Completed

B. Material differences that may arise between current accounting policies used in the preparation of financial statements and IFRSs and “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be used in the preparation of financial statements in the future:


205

The Company uses the IFRSs already ratified currently by the Financial Supervisory Commission and the “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be applied in 2013 as the basis for evaluation of material differences in accounting policies as mentioned above. However, the Company’s current evaluation results may be different from the actual differences that may arise when new issuances of or amendments to IFRSs are subsequently ratified by the Financial Supervisory Commission or relevant interpretations or amendments to the “Rules Governing the Preparation of Financial Statements by Securities Issuers” come in the future. The impact of material differences identified by the Company that may arise between the current accounting policies used in the preparation of financial statements and the IFRSs and “Rules Governing the Preparation of Financial Statements by Securities Issuers” that will be used in the preparation of financial statements in the future, and the effects of exemptions selected by the Company under IFRS 1 - First-time Adoption of International Financial Reporting Standards (refer to Note 13(3)) are set forth below:1. Reconciliation of balance sheet accounts with material differences between different accounting

policies adopted as at January 1, 2012:

AccountingStandardsin R.O.C.

Adjustment IFRSs Remark

ASSETS：Construction contracts receivable $ - $ 1,196,132 $ 1,196,132 (1)Inventories 25,391,618 ( 8,262,042) 17,129,576 (1)、(2)、(4)Available-for-sale financial assets - non-current 1,017,055 381,613 1,398,668 (3)Other current assets 23,336 688,395 711,731 (2)Property, plant and equipment, net 16,228,126 ( 9,383,227) 6,844,899 (4)、(5)Investment property - 7,784,047 7,784,047 (4)Other intangible assets - 3,397,138 3,397,138 (5)Others 8,561,616 ( 245,289) 8,316,327 (2)、(3)、(4)、(7)Total assets 51,221,751 ( 4,443,233) 46,778,518Liabilities：Construction contracts payable - 953,023 953,023 (1)Receipts in advance 5,850,696 ( 953,023) 4,897,673 (1)Land value incremental reserve 495,328 ( 495,328) - (6)Deferred tax liabilities - 496,717 496,717 (6)Other liabilities - other 65,991 404,504 470,495 (7)Others 29,250,848 92,933 29,343,781Total liabilities 35,662,863 498,826 36,161,689Stockholders’ equityUndistributed earnings (accumulated deficit) 2,448,137 ( 5,246,617) ( 2,798,480) (2)、(5)、(7)、(8)Others 13,110,751 304,558 13,415,309 (3)、(8)Total stockholders’ equity 15,558,888 ( 4,942,059) 10,616,829Total liabilities and stockholders’ equity 51,221,751 ( 4,443,233) 46,778,518

206

Reasons for differences are outlined below:(1) In accordance with IAS 11, ‘Construction Contracts’, an entity should present the considerations

received from or paid to customers due to construction contracts as assets or liabilities. Therefore, the Company increased due from customers on construction contracts and due to customers on construction contracts by $1,196,132 and $953,023, respectively, and decreased inventories and advances received by $1,196,132 and $953,023, respectively, on the date of transition to IFRSs.

(2) If the Company is required to provide construction services together with construction materials in order to perform its contractual obligation to deliver real estate to the buyers, the revenue from the ‘off plan’ houses sale transactions is recognized on a percentage-of-completion basis, simultaneously when it meets the recognition criteria specified in EITF 78-099. An agreement for the construction of real estate is a construction contract within the scope of IAS 11, “Construction Contracts”, and IAS 11 applies only when the buyer is able to specify the major structural elements of the design of the real estate before construction begins and/or specify major structural changes once construction is in progress. The buyers of the Company’s ‘off plan’ houses sale contracts have only limited ability to affect the design of the real estate or have ability to specify minor changes to the basic design of the real estate only. Therefore, in accordance with IFRIC 15,“Agreements for the Construction of Real Estate”, the Company’s ‘off plan’ houses sale contracts belong to the agreements of sale of goods, which are within the scope of IAS 18,“Revenue” and, accordingly, revenue from those ‘off plan’ houses sale contracts is accounted for as sale of goods under IAS 18. In addition, In accordance with EITF 74-083 and EITF 84-025, selling expenses the Company paid for the construction contract shall be deferred first, and then shall be reclassified as expenses on a percentage-of-completion basis. Those selling expenses which are not probable to produce the inflow of future economic benefit shall be expensed as incurred. The Company, therefore, decreased “Inventories” (Constructionin progress)by$5,548,154, decreased “prepayments (deferred selling expenses)” (shown as“ assets - others” above) by $91,061, increased“ other current assets” (deferred selling expenses) by $688,395 and decreased “ Undistributed earnings” by $4,950,820 at the opening IFRS balance sheet date.

(3) In accordance with the amended “Rules Governing the Preparation of Financial Statements by Securities Issuers”, dated July 7, 2011, unlisted stocks and emerging stocks held by the Company should be measured at cost and recognized in “Financial assets carried at cost”. However, in accordance with IAS 39, “Financial Instruments: Recognition and Measurement”, investments in equity instruments without an active market but with reliable fair value measurement (i.e. the variability of the estimation interval of reasonable fair values of such equity instruments is insignificant, or the probability for these estimates can be made reliably) should be measured at fair value. Therefore, theCompany decreased “financial assets carried at cost - non-current” (shown as “ assets - others” above), increased “available-for-sale financial assets - non-current” by $140,301, and designated such financial assets carried at cost as available-for-sale financial assets, and increased other comprehensive income by $241,312, which was the difference between the fair value and the carrying amount, at the opening IFRS balance sheet date in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” amended on December 22, 2011.

(4) In accordance with current accounting standards in R.O.C., the Company’s real estate that is leased to others and land held for gaining long-term capital increment and not for normal business or sale in short-term and land held whose future use purpose has not been determined


207

are presented in the “Fixed assets”, “Inventory” and “Investment in real estate” accounts accordingly. In accordance with IAS 40, “Investment Property”, property that meets the definition of investment property is classified and accounted for as “Investment property”. Therefore, the Company reclassified “inventories” (Land held for construction site) amounting to $1,517,756, “property, plant and equipment – Property held for lease – Land” amounting to $3,267,922, “property, plant and equipment – Property held for lease –Buildings” amounting to $2,727,251 and “Investment in real estate” (shown as “assets- others”) amounting to $271,118 to “Investment property” by $7,784,047.

(5) The Company contracted with National Taiwan University to provide construction of the government’s infrastructure assets for public services and operate those assets for Changxing St. Campus for 32 years and 6 months, and for Shuiyuan Campus for 32 years and 4 months after construction is completed. When the term of operating period expires, the underlying infrastructure assets will be transferred to National Taiwan University without consideration. The 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 costs of a service concession arrangement shall be allocated to construction services and operating services based on their relative fair values, 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 values are determined based on the way the grantor pays considerations to the operator specified in the agreement, and are recognized as intangible assets or financial assets. The Company therefore reclassified “property, plant and equipment – Property held for lease –Buildings” amounting to $3,213,345 and “property, plant and equipment – Machinery and equipment” amounting to $150,146 to “other intangible assets” by $3,397,138, and increased “Undistributed earnings” by $33,647 at the opening IFRS balance sheet date.

(6) The current accounting standards in R.O.C. regulate that reserve for land revaluation increment tax should be presented under ‘Reserves - reserve for land revaluation increment tax’. However, in accordance with IAS 12, ‘Income Taxes’, land revaluation increment tax is within the scope of income taxes, and should be presented under ‘Deferred income tax liabilities’. Therefore, the Company increased deferred income tax liabilities and decreased reserves - reserve for land revaluation increment tax both by $495,328 on the date of transition to IFRSs.

(7) In accordance with current accounting standards in R.O.C., for the Company’s long-term lease contracts with variable rents which are adjusted year by year, the lease payment is recognised as an expense for each period based on each rent agreement. However, in accordance with IAS 17, ‘Leases’, all lease payments stipulated in the lease contracts should be recognised as an expense over the lease term on a straight-line basis. Therefore, the Company increased deferred income tax assets (shown within ‘Assets-others’ in the table above) and other liabilities-others by $68,766 and $404,504, respectively, and decreased undistributed earnings by $335,738 on the date of transition to IFRSs.

(8) The Company has elected to reset the cumulative translation differences arising on the translation of the financial statements of foreign operations under R.O.C. GAAP to zero on the date of transition to IFRSs, and to deal with translation differences arising subsequent to the transition date in accordance with IAS 21, ‘The Effects of Changes in Foreign Exchange Rates’. Therefore, the Company increased cumulative translation adjustment by $30,317 (shown within

208

‘Shareholders’ equity-others’ in the table above) and decreased undistributed earnings by $30,317 on the date of transition to IFRSs.

2. Reconciliation of balance sheet accounts with material differences between different accounting policies adopted as at December 31, 2012:



ASSETS：Construction contracts receivable $ - $ 914,634 $ 914,634 (1)Inventories 15,522,871 ( 2,432,390) 13,090,481 (1)、(4)Available-for-sale financial assets - non-current 1,581,087 239,919 1,821,006 (3)Other current assets 24,825 494,014 518,839 (2)Property, plant and equipment, net 16,138,473 ( 9,104,510) 7,033,963 (4)、(5)Investment property - 7,625,630 7,625,630 (4)Other intangible assets - 3,315,404 3,315,404 (5)Others 15,157,265 ( 595,540) 14,561,725 (2)、(3)、(4)、(7)Total assets 48,424,521 457,161 48,881,682Liabilities：Construction contracts payable - 633,630 633,630 (1)Receipts in advance 2,331,351 ( 633,630) 1,697,721 (1)Land value incremental reserve 495,328 ( 495,328) - (6)Deferred tax liabilities - 496,139 496,139 (6)Other liabilities - other 67,226 542,875 610,101 (7)Others 28,196,670 124,564 28,321,234Total liabilities 31,090,575 668,250 31,758,825Stockholders’ equityUndistributed earnings (accumulated deficit) 578,535 ( 5,258,278) ( 4,679,743) (2)、(5)、(7)Net income 1,785,930 4,803,225 6,589,155 (2)、(5)、(7)Others 14,969,481 243,964 15,213,445 (3)Total stockholders’ equity 17,333,946 ( 211,089) 17,122,857Total liabilities and stockholders’ equity 48,424,521 457,161 48,881,682

Reasons for differences are outlined below:(1) In accordance with IAS 11, ‘Construction Contracts’, an entity should present the

considerations received from or paid to customers due to construction contracts as assets or liabilities. Therefore, the Company increased due from customers on construction contracts and due to customers on construction contracts both by $914,634, and decreased inventories and advances received both by $633,630, on the date of transition to IFRSs.

(2) If the Company is required to provide construction services together with construction materials in order to perform its contractual obligation to deliver real estate to the buyers, the revenue from the ‘off plan’ houses sale transactions is recognized on a percentage-of-completion basis, simultaneously when it meets the recognition criteria specified in EITF 78-


209

099. An agreement for the construction of real estate is a construction contract within the scope of IAS 11, “Construction Contracts”, and IAS 11 applies only when the buyer is able to specify the major structural elements of the design of the real estate before construction begins and/or specify major structural changes once construction is in progress. The buyers of the Company’s ‘off plan’ houses sale contracts have only limited ability to affect the design of the real estate or have ability to specify minor changes to the basic design of the real estate only. Therefore, in accordance with IFRIC 15, “Agreements for the Construction of Real Estate”, the Company’s ‘off plan’ houses sale contracts belong to the agreements of sale of goods, which are within the scope of IAS 18, “Revenue” and, accordingly, revenue from those ‘off plan’ houses sale contracts is accounted for as sale of goods under IAS 18. In addition, In accordance with EITF 74-083 and EITF 84-025, selling expenses the Company paid for the construction contract shall be deferred first, and then shall be reclassified as expenses on a percentage-of-completion basis. Those selling expenses which are not probable to produce the inflow of future economic benefit shall be expensed as incurred. The Company, therefore, decreased “Undistributed earnings” by $4,950,820, decreased “prepayments (deferred selling expenses)” (shown as “assets - others” above) by $532,596, increased “other current assets - other” (deferred selling expenses) by $494,014, increased “operating revenue” by $10,972,512, increased “operating costs” by $635,916 and decreased “other revenues” by $1,709 at the opening IFRS balance sheet date.

(3) In accordance with the amended “Rules Governing the Preparation of Financial Statements by Securities Issuers”, dated July 7, 2011, unlisted stocks and emerging stocks held by the Company

should be measured at cost and recognized in “Financial assets carried at cost”. However, in accordance with IAS 39, “Financial Instruments: Recognition and Measurement”, investments in equity instruments without an active market but with reliable fair value measurement (i.e. the variability of the estimation interval of reasonable fair values of such equity instruments is insignificant, or the probability for these estimates can be made reliably) should be measured at fair value. Therefore, the Company decreased “financial assets carried at cost - non-current” (shown as “assets - others” above), and increased “available-for-sale financial assets - non-current” both by $74,907, and designated such financial assets carried at cost as available-for-sale financial assets, and increased other comprehensive income by $165,012, which was the difference between the fair value and the carrying amount, at the opening IFRS balance sheet date in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” amended on December 22, 2011.

(4) In accordance with current accounting standards in R.O.C., the Company’s real estate that is leased to others and land held for gaining long-term capital increment and not for normal business or sale in short-term and land held whose future use purpose has not been determined are presented in the “Fixed assets”, “Inventory” and “Investment in real estate” accounts accordingly. In accordance with IAS 40, “Investment Property”, property that meets the definition of investment property is classified and accounted for as “Investment property”. Therefore, the Company reclassified “inventories” (Land held for construction site) amounting to $1,517,756, “property, plant and equipment – Property held for lease – Land” amounting to $3,205,959, “property, plant and equipment – Property held for lease –Buildings” amounting to $2,630,797 and “Investment in real estate” (shown as “assets-

210

others”) amounting to $271,118 to “Investment property” by $7,625,630.(5) The Company contracted with National Taiwan University to provide construction of the

government’s infrastructure assets for public services and operate those assets for Changxing St. Campus for 32 years and 6 months, and for Shuiyuan Campus for 32 years and 4 months after construction is completed. When the term of operating period expires, the underlying infrastructure assets will be transferred to National Taiwan University without consideration. The 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 costs of a service concession arrangement shall be allocated to construction services and operating services based on their relative fair values, 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 values are determined based on the way the grantor pays considerations to the operator specified in the agreement, and are recognized as intangible assets or financial assets. The Company, therefore, reclassified “property, plant and equipment – Property held for lease –Buildings” amounting to $3,135,908 and “property, plant and equipment – Machinery and equipment” amounting to $131,846 to “other intangible assets” by $3,315,404, increased “Undistributed earnings” by $33,647, decreased “operating costs” by $77,436 and increased “operating expenses” by $63,433 at the opening IFRS balance sheet date.

(6) The current accounting standards in R.O.C. regulate that reserve for land revaluation increment tax should be presented under ‘Reserves - reserve for land revaluation increment tax’. However, in accordance with IAS 12, ‘Income Taxes’, land revaluation increment tax is within the scope of income taxes, and should be presented under ‘Deferred income tax liabilities’. Therefore, the Company increased deferred income tax liabilities and decreased reserves - reserve for land revaluation increment tax both by $495,328 on the date of transition to IFRSs.

(7) In accordance with current accounting standards in R.O.C., for the Company’s long-term lease contracts with variable rents which are adjusted year by year, the lease payment is recognised as an expense for each period based on each rent agreement. However, in accordance with IAS 17, ‘Leases’, all lease payments stipulated in the lease contracts should be recognised as an expense over the lease term on a straight-line basis. Therefore, the Company increased deferred income tax assets (shown within ‘Assets-others’ in the table above) and other liabilities-others by $92,288 and $542,875, respectively, decreased undistributed earnings by $335,738, increased operating expenses by $138,371 and decreased tax expenses by $23,522, on the date of transition to IFRSs.

3. Reconciliation of income statement accounts with material differences between different accounting policies adopted for the three-month period ended March 31, 2012:


211



Operating revenue $ 14,657,742 $ 10,972,512 $ 25,630,254 (1)Operating costs ( 9,984,097) ( 5,345,213) ( 15,329,310) (1)Operating expenses ( 2,783,795) ( 614,257) ( 3,398,052) (2)、(3)Net operating income 1,889,850 5,013,042 6,902,892 (2)Non-operating revenue and expenses ( 71,286) 15,109 ( 56,177) (4)、(5)Income before tax 1,818,564 5,028,151 6,846,715 (4)Income tax expense ( 42,719) ( 226,487) ( 269,206) (3)、(4)Minority interest 10,085 1,561 11,646Net income 1,785,930 4,803,225 6,589,155

(1) Adjustment of operating revenue and operating costs, please refer to Note 13B2.(2) and (5).(2) Adjustment of operating expenses, please refer to Note 13B2.(2), (5) and (7).(3) The current accounting standards in R.O.C. regulate that the land revaluation increment tax

paid by the Company for the sale of land should be presented under ‘Operating expenses’. However, in accordance with IAS 12, ‘Income Taxes’, land revaluation increment tax is within the scope of income taxes, and should be presented under ‘Income tax expense’. Therefore, the Company increased income tax expense and decreased operating expenses both by $249,873 on the date of transition to IFRSs.

(4) Adjustment of operating expenses, please refer to Note 13B2. (7).C. The Company has elected the following exemptions in accordance with IFRS 1, “First-time

Adoption of International Financial Reporting Standards” and “Rules Governing the Preparation of Financial Statements by Securities Issuers” that are expected to be applicable in 2013:1. Business combinations

The Company has elected not to apply the requirements in IFRS 3, “Business Combinations”,retrospectively to business combinations that occurred prior to transition to IFRSs.

2. Share-based payment transactionsThe Company has elected not to apply the requirements in IFRS 2, “Share-based Payment”, retrospectively to equity instruments that were vested arising from share-based payment transactions prior to transition to IFRSs.

3. Deemed costFor the land which was accounted for under ‘Property, plant and equipment’ that was revalued under R.O.C. GAAP before the date of transition to IFRSs, but was later accounted for under ‘Inventories’ because its future use purpose had not been decided, and was reclassified to ‘Investment property’ on the date of transition to IFRSs, the Company has elected to use the revalued amount under R.O.C. GAAP at the date of the revaluation as the ‘deemed cost’ of the asset under IFRSs.

4. Employee benefitsThe Company has elected to recognize all cumulative actuarial gains and losses for all employee benefit plans in ‘retained earnings’ at the opening IFRS balance sheet 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

212

paragraph 120A (P), IAS 19, “Employee Benefits”, based on their prospective amounts for financial periods from the opening IFRS balance sheet date.

5. Cumulative translation differencesThe Company has elected to reset the cumulative translation differences arising on the translation of the financial statements of foreign entities under ROC GAAP to zero at the opening IFRS balance sheet date, and to deal with translation differences arising subsequent to the opening IFRS balance sheet date in accordance with IAS 21, “The Effects of Changes in Foreign Exchange Rates”.

6. Designation of previously recognized financial instrumentsThe Company has elected to designate certain “financial assets carried at cost” as available-for-sale financial assets.

7. Borrowing costsThe Company has elected to apply the transitional provisions in paragraphs 27 and 28 of IAS 23, “Borrowing Costs”, amended in 2007 from the opening IFRS balance sheet date.

The selection of exemptions above may be different from the actual selection at the date of transition to IFRSs due to the issuance of related regulations by competent authorities, changes in economic environment, or changes in the evaluation of the impact of the Company’s selection of exemptions.

Annual Report 2012VII

Review of Financial Conditions, Operating Results, and Risk

Management

214

VII. Review of Financial Conditions, Operating Results, and Risk ManagementVI. Financial Information

7.1 FAnalysis of Financial Status

2012 2011Difference

Amount % NoteCurrent Assets 21,001,978 24,919,460 (3,917,482) (15.72) 1Fund and Investment 7,100,375 6,296,090 804,285 12.77 1Other Financial Assets 808,337 147,983 660,354 446.24 2Fixed Assets 9,660,797 9,943,368 (282,571) (2.84) 1Other Assets 1,609,587 1,212,838 396,749 32.71 3Total Assets 40,181,074 42,519,739 (2,338,665) (5.50) 1Current Liabilities 13,505,717 17,059,144 (3,553,427) (20.83) 4Long-term Liabilities 9,522,182 10,102,875 (580,693) (5.75) 1 Other Liabilities 203,348 188,869 14,479 7.67 1Total Liabilities 23,231,247 27,350,888 (4,119,641) (15.06) 1Capital stock 11,944,765 10,858,877 1,085,888 10.00 1Capital surplus 521,293 521,293 0 0.00 1Retained Earnings 3,208,115 3,060,374 147,741 4.83 1Unrealized Gain or Loss on Financial Instruments 1,416,607 851,992 564,615 66.27 5

Cumulative Translation Adjustment

(43,643) (30,317) 13,326 43.96 6

Net Loss Not Recognized as Pension Cost

(36,870) (32,928) 3,942 11.97 1

Treasury Stock (60,440) (60,440) 0 0.00 1Total Stockholders' Equity 16,949,827 15,168,851 1,780,976 11.74 1

Item

Year


1. Changes do not over 20%.2. Other financial assets: decrease in pledge deposit.3. Other assets: guarantee deposits increasing4. Current liabilities: long term loans due within one year.5. Unrealized gain or loss on financial instruments: gain recognized on financial assets in available-

for-sale.6. Cumulative translation adjustment: changes in foreign exchange rate.


215

7.2 Analysis of Operating Results

2012 2011Difference

Amount %Gross Sales 9,052,719 9,807,196 (754,477) -7.69Less: Sales Returns (1,160,222) (784,091) 376,131 47.97Net Sales 7,892,497 9,023,105 (1,130,608) -12.53Cost of Sales (4,676,377) (5,360,256) (683,879) -12.76Gross Profit 3,216,120 3,662,849 (446,729) -12.20Operating Expenses (1,656,309) (1,428,003) 228,306 15.99Operating Income 1,559,811 2,234,846 (675,035) -30.20Non-operating Income and Gains 679,538 497,591 181,947 36.57Non-operating Expenses and Losses

(403,376) (412,080) (8,704) -2.11

Income Before Tax 1,835,973 2,320,357 (484,384) -20.88Tax Benefit (Expense) (50,043) (6,226) 43.817 703.77Net Income 1,785,930 2,314,131 (528,201) -22.83

Item

Year


1. Sales returns: increasing in sales return results from the return and giveaway 2. Gross Profit and Net Income decrease because of the decreasing in gross sales and increasing in

operating expenses. 3. Non-operating Income and Gains increases because of investment income.4. Tax Benefit (Expense) increases because of the increasing of undistributed earnings.

216

7.3 Analysis of Cash Flow

7.3.1 Cash Flow Analysis for the Current Year

Cash and Cash Equivalents, Beginning of

Year (1)

Net Cash Flow from Operating

Activities (2)

Cash Outflow(3)

Cash Surplus(Deficit)

(1)+(2)-(3)

Leverage of Cash Deficit

Investment Plans

Financing Plans

$281,987 $8,357,310 ($5,027,924) $3,611,373 None None

Cash flow in 2012:1. Cash outflow from operating activities: $8,357,3102. Cash inflow from investing activities: ($1,677,304)3. Cash inflow from financing activities: ($3,350,620)


2012 2011 Difference

Cash Flow Ratio (%) 61.88% (17.43%) N/ACash Flow Adequacy Ratio (%) 83.94% 22.60% 271.42%Cash Reinvestment Ratio (%) 32.84% (3.74%) N/A

Item

Year

7.3.2 Remedy for Cash Deficit and Liquidity Analysis

7.3.3 Cash Flow Analysis for the Current Year

Cash and Cash Equivalents, Beginning of

Year (1)

Net Cash Flow from Operating

Activities (2)

Cash Outflow(3)

Cash Surplus(Deficit)

(1)+(2)-(3)

Leverage of Cash Deficit

Investment Plans

Financing Plans

3,611,373 1,249,537 (4,019,663) 841,247 None None

Cash flow in 2011:1. Cash inflow from operating activities: Completion of current construction in progress.2. Cash outflow from investing activities: Increase in long term equity investment.3. Cash outflow from financing activities: Loan repayment and payment of cash dividend.


217

7.4 Major Capital Expenditure Items:

Major capital expenditure occurred recent years is coming from cash flow from operating activities.

7.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and the Investment Plans for the Coming Year:

Net income of our investments Ta-Chen Construction & Engineering Corp, and Time Square

International Co., Ltd are $292,425 thousands, and $138,779 thousands respectively. Net losses of

The Splendor Hotel Taichung is ($16,972) thousands. The main reasons of these losses are described

as following:

• The Splendor Hotel Taichung: occupation rate has raised, however, the cost of modification of

market place occurred losses.

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

(1) Interest rate

In the future, the company will carefully monitor interest rate movements and adopt proper

hedging strategies and other capital markets financing instruments to ensure that our financing

costs are at a comparatively low level.

(2) Foreign exchange rates

None.

(3) Inflation

Our strategy for inflation impact is joint procurement to achieve best cost control.

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 did not engage in any high-risk or high-leveraged investments. The transactions

and procedures related to lending and endorsement are based on the Company’s “Procedures of

Lending” and “Procedures of Endorsement Guarantee.”.

7.6.3 Future Research & Development Projects and Corresponding Budget

None.

218

7.6.4 Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales

Prince always pays close attention to any changes in local and foreign policies and makes

appropriate amendments to our systems when necessary. During 2012 and as of the date of

publication of this annual report, changes in related laws had impacted the investors’ willing to

purchase. Prince has now broadened our business to income-producing property to balance the

wave in local and foreign policies.

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

None.

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%

Director Zhoung-Jian, Wu resigned in May 02 2012.

The new director Yong-Yuan Investment Co., Ltd (Rep: Zhoung-Huo, Wu)

was elected in the shareholders meeting 2012 and taking office on Jun 20, 2012.


219

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

None.

7.6.13 Other Major Risks

None.

VIII. Special Disclosure

None.

Annual Report 2012VIII

Special Disclosure


221

VII

I. Sp

ecia

l Dis

clos

ure

I. R

elat

ed P

arty

(I)

Con

solid

ated

fina

ncia

l sta

tem

ents

of t

he re

late

d pa

rty

1. R

elat

ed p

arty

(1)

Org

aniz

atio

nal s

truct

ure

of re

late

d pa

rty:

222

(2)

Bas

ic D

ata

of A

ffilia

ted

Ente

rpris

es

Nam

e of

Cor

pora

tion

Dat

e of

E

stab

lishm

ent

Add

ress

Cap

ital

Maj

or B

usin

ess/

Prod

uctio

n It

ems

Prin

ce H

ousi

ng&

Dev

elop

men

t Cor

p.19

73.0

9.22

19F.

, No.

30, Z

hong

zhen

g S.

Rd.

, Yo

ngka

ng D

ist.,

Tai

nan

City

$ 11

,944

,764

Bui

ld p

ubic

hou

sing

, com

mer

ical

bu

ildin

gs, p

arki

ng L

ot, p

arki

ng to

wer

an

d sa

le a

nd re

ntTa

-Che

n C

onst

ruct

ion

& E

ngin

eerin

g C

orp

1959

.05.

1119

F., N

o.30

, Zho

ngzh

eng

S. R

d.,

Yong

kang

Dis

t., T

aina

n C

ity1,

240,

000

Arc

hite

ctur

e de

sign

and

con

stru

ctio

n

Prin

ce U

tility

Co.

, Ltd

1977

.03.

0119

F., N

o.30

, Zho

ngzh

eng

S. R

d.,

Yong

kang

Dis

t., T

aina

n C

ity30

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tric

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er a

nd w

ater

sup

ply

pipe

line

setu

pPr

ince

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rtmen

t Man

agem

ent M

aint

ain

Co.

, Ltd

1996

.08.

0518

F., N

o.30

, Zho

ngzh

eng

S. R

d.,

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kang

Dis

t., T

aina

n C

ity30

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rtmen

t man

agem

ent a

nd m

aint

ain

serv

ice

Prin

ce H

ousi

ng In

vest

men

t Co.

, Ltd

1997

.06.

27C

itco

Bui

ldin

g W

ickh

ams

Cay

. P.

O B

ox 6

22, R

oad

Tow

n, T

orto

l, B

ritis

h V

irgin

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nds

140,

413

Ove

rsea

s In

vest

men

ts

Prin

ce B

iote

chno

logy

Co.

, Ltd

1999

.10.

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o.11

, Son

ggao

Rd.

, Xin

yi D

ist.,

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ipei

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Sun

Tech

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gy C

o., L

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ongg

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30, Z

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ist.,

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ce T

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o., L

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, No.

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d., X

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t.,

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ity12

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vest

men

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g-Fe

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nter

pris

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o., L

td19

63.0

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, No.

30, Z

hong

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g S.

Rd.

, Yo

ngka

ng D

ist.,

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nan

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204,

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stm

ent o

f cul

ture

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h, w

ater

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nd, a

rchi

tect

ure

and

cem

ent

indu

strie

s

The

Sple

ndor

Hot

el T

aich

ung

2006

.10.

25N

o.10

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ianx

ing

Rd.

, Wes

t Dis

t.,

Taic

hung

City

1,95

0,00

0To

uris

t Hot

el

Che

ng-S

hi C

onst

ruct

ion

Co.

, Ltd

1976

.01.

2219

F., N

o.30

, Zho

ngzh

eng

S. R

d.,

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kang

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t., T

aina

n C

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indu

stry

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t ；N

T $

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223

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or B

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ce C

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.20

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o.16

1, S

ongd

e R

d., X

inyi

D

ist.,

Tai

pei C

ity26

,727

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rsea

s In

vest

men

ts

Prin

ce V

entu

res

USA

Inc.

2000

.09.

2623

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, No.

161,

Son

gde

Rd.

, Xin

yi

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t., T

aipe

i City

20,5

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vers

eas

Inve

stm

ents

Tim

e Sq

uare

Inte

rnat

iona

l Co.

, Ltd

2007

.01.

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o.10

, Sec

. 5, Z

hong

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d., X

inyi

D

ist.,

Tai

pei C

ity60

0,00

0H

otel

Jin-

Yi-X

ing

plyw

ood

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, Ltd

1969

.03.

1018

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o.30

, Zho

ngzh

eng

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d.,

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kang

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t., T

aina

n C

ity15

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rticl

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ture

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ce P

rope

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emen

t C

onsu

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199

2.11

.09

19F.

, No.

30, Z

hong

zhen

g S.

Rd.

, Yo

ngka

ng D

ist.,

Tai

nan

City

171,

466

Man

agem

ent t

he le

asin

g of

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and

com

mer

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d re

al

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cess

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stm

ents

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Cha

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ce R

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Nan

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Prin

ce B

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chno

logy

C

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td

Cha

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/Sup

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sor

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ce H

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t Cor

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Cha

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.)M

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ce R

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ng

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cess

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ts L

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100

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.)M

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ing-

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u

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230

2. Affiliates Operations Overview

Company Name Capita; Total assets

Total liabilities Equity Operating

RevenueOperating

Income

Net Income EPS

(After tax)

(After tax)

Prince Housing & Development Corp. 11,944,764 40,181,074 23,231,247 16,949,827 7,892,497 1,559,811 1,785,930 1.54

Ta Chen Construction & Engineering Corp. 1,240,000 3,327,233 2,135,642 1,191,591 4,035,216 104,292 292,425 2.36

Prince Water and Electricity Corp. 30,700 195,291 139,266 56,025 289,396 3,194 22,144 7.21

Prince Apartment management and maintenance corp.

30,000 94,385 26,532 67,853 159,575 3,522 8,039 2.68

Prince Housing Investments Corp. 140,413 335,433 18 335,415 - (51) 18,094 42.276

Prince Bioechnology Co., Ltd

5,000 4,771 - 4,771 - (107) 104 0.21

Bio Sun Technology Co., Ltd. 46,880 24,066 1,355 22,711 18,237 956 (7,633) (1.63)

Prince Security Group 131,726 212,634 51,266 161,368 378,857 20,316 19,499 3.09

Prince Ta-Chen Investments Corp. 122,738 42,604 671 41,933 - - (388) (0.03)

Don-Fung Corp. 204,002 427,702 143 427,559 15,152 14,714 64,002 1.7Splendor Hotel 1,950,000 6,054,674 5,288,519 766,155 741,241 47,867 (16,972) (0.09)

Cheng-Shi Construction Corp 101,000 301,807 193,780 108,027 762,479 1,511 7,038 0.77

Prince Capital Inc. 26,727 3,269 629 2,640 - (45) (89) (89)Prince Ventures USA Inc. 20,511 3,826 557 3,269 - (45) (45) (45)

Time Square International Hotel 600,000 1,195,398 757,209 438,189 1,909,504 128,787 138,779 2.31

Chin-I-Shin Plywood Corp. 152,000 1,517,920 1,196,702 321,218 - (125) 8,198 53.93

Prince Property Management Consulting Co.

171,466 241,563 147 241416 9 (188) 2,034 0.36

Early Success Investments Limited

51,102 40,506 - 40,506 - - 19,919 12.81



231

Company Name Capita; Total assets

Total liabilities Equity Operating

RevenueOperating

Income

Net Income EPS

(After tax)

(After tax)

Splendor Asset Management Corp. 1,000 974 - 974 - - 2 0.02

Prince Asset Management Corp. 62,632 1,300 56 1,244 - (101) 18,779 7,511.53

Ta-Chen International (Brunei) Company

5,916 2,923 - 2,923 - - (2,877) -

Ta-Chen Construction & Engineering (Vietnam) Corp.

5,770 2,636 703 1,933 - - (2,908) -

Cheng-Shi Investment Holding Co.

1,208,072 1,355,644 - 1,355,644 - - - -

232

8.1.

2 A

ffilia

tes c

onso

lidat

ed fi

nanc

ial s

tate

men

ts

Plea

se re

fer t

o th

e pa

ge 1

30–

187.

8.1.

3 R

epor

ts o

n re

latio

ns b

etw

een ：

Non

e 。8.

2 In

form

atio

n of

pri

vate

off

ered

secu

ritie

s ：N

one

8.2

The

Sha

res i

n th

e C

ompa

ny H

eld

or D

ispo

sed

of b

y Su

bsid

iari

es in

the

Mos

t Rec

ent Y

ears

:

Nam

e of s

ubsid

iary

Stoc

k ca

pita

l co

llect

ed

Fund

so

urce

Shar

ehold

ing

ratio

of th

e co

mpan

y

Date

of

acqu

isitio

n or

di

spos

ition

Shar

es a

nd

amou

nt

acqu

ired

Shar

es a

nd

amou

nt

disp

osed

of

Inve

stm

ent

gain

(los

s)

Shar

ehold

ings

& am

ount

in the

most

recen

t ye

ar

Mor

tgag

e

Endo

rseme

nt am

ount

made

for t

he

subs

idiar

y

Amou

nt

loan

ed

to th

e su

bsid

iary

Ta Ch

en Co

nstruc

tion &

En

gineer

ing Co

rp. $1

,240,0

00(N

ote)

Opera

ting

Capit

al10

0%No

ne0

00

34,43

5,720

share

sNo

ne(N

ote)

$800

,000

(Note

)$5

00,00

0(N

ote)

00

$726

,594

Princ

e Apa

rtmen

t ma

nage

ment

and

maint

enan

ce co

rp.

$30,0

00(N

ote)

Opera

ting

Capit

al10

0%No

ne0

00

578,4

86sh

ares

None

(Note

)0

(Note

)0

(Note

)0

0$1

2,206

Not

e: u

ntil

Apr

. 30,

201

3

8.4

Oth

er N

eces

sary

Sup

plem

ent:

Non

e 。

Uni

t: N

T$ th

ousa

nds;

Sha

res;

%


233

PRINCE HOUSING & DEVELOPMENT CORP.

Na-Tian, Zhuang , Chairman

Spokesperson Name: Sheng-Wei, Mai Title: Assistant Vice President Tel: 886-2-2758-9599...

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Transcript of Spokesperson Name: Sheng-Wei, Mai Title: Assistant Vice President Tel: 886-2-2758-9599...