Chung-Hsin Electric and Machinery Manufacturing Corp. and Subsidiaries

Transcription

1 Chung-Hsin Electric and Machinery Manufacturing Corp. and Subsidiaries Consolidated Financial Statements for the Year Period Ended December 31, 2013 and 2012 and Independent Auditors Report

2 INDEPENDENT AUDITORS REPORT To The Board of Directors and the Stockholders Chung-Hsin Electric and Machinery Manufacturing Corp. We have audited the accompanying consolidated balance sheets of Chung-Hsin Electric and Machinery Manufacturing Corp. and its subsidiaries as of December 31, 2013, December 31, 2012 and January 1, 2012 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2013 and These consolidated financial statements are the responsibility of the Corporation s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards 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 provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chung-Hsin Electric and Machinery Manufacturing Corp. and its subsidiaries as of December 31, 2013, December 31, 2012 and January 1, 2012 and the results of their consolidated operations and their consolidated cash flows for the years then ended in conformity with the Guidelines Government the Preparation of Financial Reports by Securities Issuers, the International Financial Reporting Standards, International Accounting Standards, interpretation as well as related guidance translated by Accounting Research and Development Foundation endorsed by the Financial Supervisory Commission of the Republic of China with the effective dates. We have also audited, in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China, the parent company only financial statements of Chung-Hsin Electric and Machinery Manufacturing Corp. as of and for the years ended December 31, 2013 and 2012 on which we have issued an unqualified opinion. March 27, 2014 Notice to Reader The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China. For the convenience of readers, the auditors report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors report and consolidated financial statements shall prevail.

3 CHUNG-HSIN ELECTRIC AND MACHINERY MANUFACTURING CORPS. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF BALANCE SHEETS (In Thousands of New Taiwan Dollars) December 31, 2013 December 31, 2012 January 1,2012 December 31, 2013 December 31, 2012 January 1,2012 ASSETS Amount % Amount % Amount % LIABILITIES AND SHAREHOLDERS' EQUITY Amount % Amount % Amount % CURRENT ASSETS: CURRENT LIABILITIES: Cash and cash equivalents (Notes 4 and 6) $ 536,538 4 $ 658,536 5 $ 647,275 5 Short-term debts (Note 6) $ 664,182 5 $ 340,268 3 $ 293,790 2 Financial assets at fair value through profit and loss current (Notes 4 and 6) 256, , ,274 2 Short-term bonds payable (Note 6) 49, ,974 - Notes payable 12,260-53,725-14,844 - Available for sale financial assets current (Notes 4, 6 and 8) 246, , ,991 1 Notes payable - related parties (Note 7) 7, Held to maturity financial assets current (Note 4) , Accounts payable 719, , ,082 5 Derivative financial assets for hedging current (Notes 4 and 6) 3, Accounts payable - related parties (Note 7) 26,308-53,287-7,101 - Investments in bonds without active markets current (Notes 4 and 6) 88, Construction contracts payables(notes 4 and 6) 2,647, ,168, ,887, Notes receivable, net (Notes 4 and 6) 59, , ,702 1 Other payables (Note 6) 513, , ,557 4 Notes receivable- related parties (Notes 4 and 7) , Other payables-related parties (Note 7) 964-3,838-1,358 - Accounts receivable, net(notes 4 and 6) 1,191, , ,250,493 9 Current tax liabilities (Notes 4 and 6) 56,199-63,616-74,786 - Accounts receivables-related parties (Notes 4 and 7) 381, , ,757 1 Receipts in advance (Note 7) 72, , ,974 1 Construction contracts receivables(notes 4 and 6) 615, , ,621 6 Other current liabilities 62,764-20,219-14,867 - Other accounts receivables, net (Note 4) 56,029-61,703-94,884 1 Total current liabilities 4,833, ,182, ,519, Other accounts receivables-related parties (Notes 4 and 7) 239, , ,522 1 NONCURRENT LIABILITIES: Current tax assets 4,060-2,502-2,728 - Derivative financial liabilities for hedging- non current(notes 4 and 6) Inventory - manufactory(notes 4 and 6) 2,527, ,771, ,568, Long-term debts (Note 6) 499, , ,822 2 Inventory - Construction(Notes 4 and 6) 101, ,611-74,871 1 Deferred income tax liabilities (Notes 4 and 6) 332, , ,503 2 Prepayments (Note 6) 995, ,064, ,334 4 Rental payable - non current Non-current assets as held for sale (Note 4) 54,766-48, Other non current liabilities (Notes 4 and 6) 553, , ,498 4 Other current assets (Notes 6 and 8) 589, , ,396 2 Total noncurrent liabilities 1,385, , ,072,387 8 Total current assets 7,946, ,884, ,112, Total liabilities 6,218, ,180, ,591, NONCURRENT ASSETS: Equity attributable to owners of parent Held to maturity financial assets non current (Note 4) ,413 - Common stock (Note 6) 4,800, ,800, ,800, Derivative financial assets for hedging non current (Notes 4 and 6) 1, Capital surplus (Note 6) 371, , ,257 3 Financial assets carried at cost - non current (Notes 4 and 6) 506, , ,312 4 RETAINED EARNINGS (Note 6) Investments in bonds without active markets non current (Notes 4 and 6) 73, Legal reserve 807, , ,715 5 Investments under equity method (Notes 4 and 6) 977, , ,054 5 Special reserve 881, , ,678 7 Property, plant and equipment(notes 4, 6, 7 and 8) 3,472, ,270, ,506, Unappropriated earnings 596, , ,906 5 Investment property, net(notes 4, 6 and 8) 573, , ,582 4 Total retained earnings 2,285, ,165, ,191, ~1~

4 Intangible property (Notes 4 and 6) 78, , ,188 1 Other equity(notes 4 and 6) 471, , ,151 1 Deferred income tax assets (Notes 4 and 6) 82, , ,501 1 Treasury stock (Notes 4 and 6) ( 129,793 ) ( 1 ) ( 129,793 ) ( 1 ) ( 129,793 ) ( 1 ) Deposit out (Note 8) 143, , ,293 1 Total Equity attributable to owners of parent 7,799, ,283, ,347, Other noncurrent assets (Notes 6 and 8) 424, , ,660 3 Non-controlling interests (Notes 4 and 6) 262, , ,800 2 Total noncurrent assets 6,333, ,842, ,075, Total equity 8,061, ,546, ,596, TOTAL ASSETS $ 14,280, $ 13,727, $ 13,188, TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 14,280, $ 13,727, $ 13,188, ( Th e accompan ying not es a re an integral part of the c on solidated financial stat em en t s.) ~2~

5 CHUNG-HSIN ELECTRIC AND MACHINERY MANUFACTURING CORPS. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) For the Years ended December 31, Amount % Amount % OPERATING REVENUE (Notes 4, 6 and 7) $ 10,095, $ 9,720, OPERATING COST (Notes 4, 6 and 7) ( 8,195,457 ) ( 81 ) ( 7,769,067 ) ( 80 ) GROSS PROFIT 1,899, ,951, OPERATING EXPENSES (Notes 6 and 7) Marketing expenses ( 382,598 ) ( 4 ) ( 355,777 ) ( 4 ) General and administrative expenses ( 648,201 ) ( 6 ) ( 683,696 ) ( 7 ) Research and development expenses ( 280,408 ) ( 3 ) ( 269,763 ) ( 3 ) Total operating expenses ( 1,311,207 ) ( 13 ) ( 1,309,236 ) ( 14 ) OPERATING INCOME 588, ,807 6 NON-OPERATING INCOME AND EXPENSES Other revenues (Notes 6 and 7) 172, ,705 1 Other incomes and losses(note 6) 1,007 - ( 221,640 ) ( 2 ) Financial cost (Note 6) ( 16,798 ) - ( 11,020 ) - Share of profit (loss) of associates and joint ventures accounted ( 2,223 ) - 88,014 1 for using equity method (Notes 4 and 6) Total non-operating income and expenses 154,392 2 ( 14,941 ) - PROFIT BEFORE INCOME TAX 743, ,866 6 INCOME TAX (Notes 4 and 6) ( 161,638 ) ( 2 ) ( 113,055 ) ( 1 ) PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS 581, ,811 5 OTHER COMPREHENSIVE INCOME (Note 6) Exchange differences on translating 162,783 2 ( 105,897 ) ( 1 ) foreign operations Unrealized gain on Available for sale 82, ,248 - financial assets 3, Cash flow hedge 12,360 - ( 59,734 ) - Share of other comprehensive income of associates and joint ventures 148, ,304 - accounted for using equity method TOTAL OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX 409,641 4 ( 123,755 ) ( 1 ) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD $ 991, $ 390,056 4 Income attributable to: Owners of parent $ 588,060 6 $ 513,929 5 Non-controlling interests ( 6,643 ) - ( 118 ) - $ 581,417 6 $ 513,811 5 COMPREHENSIVE INCOME attributable to: Owners of parent $ 985, $ 395,590 4 Non-controlling interests 5,577 - ( 5,534 ) - $ 991, $ 390,056 4 BASIC EARNINGS PER SHARE (Note 6) $ 1.25 $ 1.09 (The accompanying notes are an integral part of financial statements.) ~3~

6 CHUNG-HSIN ELECTRIC AND MACHINERY MANUFACTURING CORPS. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) RETAINED EARNINGS Other equity Common Stock Capital surplus Legal reserve Special reserve Unappropriated earnings Total Retained earnings Exchange differences on translating foreign operations Unrealized gain (loss) on Available for sale financial assets Gain or loss on the hedging instrument relating to the effective portion of cash flow hedge Total Other equity Treasury stock Total Equity attributable to owners of parent Non-controlling interests Total Equity BALANCE, JANUARY 1, 2012 $ 4,800,000 $ 341,257 $ 695,715 $ 858,678 $ 636,906 $ 2,191,299 $ ( 180 ) $ 145,331 $ - $ 145,151 $ ( 129,793 ) $ 7,347,914 $ 248,800 $ 7,596,714 Appropriation and distribution of retained earnings Legal reserve ,205 - ( 57,205 ) Common stock cash dividends ( 480,000 ) ( 480,000 ) ( 480,000 ) - ( 480,000 ) PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS , , ,929 ( 118 ) 513,811 OTHER COMPREHENSIVE INCOME ( 59,734 ) ( 59,734 ) ( 99,318 ) 40, ( 58,605 ) - ( 118,339 ) ( 5,416 ) ( 123,755 ) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD , ,195 ( 99,318 ) 40, ( 58,605 ) - 395,590 ( 5,534 ) 390,056 Adjustments of capital surplus for company's cash dividends received by subsidiaries - 10, ,329-10,329 Difference between consideration and carrying amount arising from acquisition ( 10 ) ( 10 ) ( 10 ) or disposal of subsidiaries Changes in Non-controlling interests ,652 19,652 Other - 9, ,617-9,617 BALANCE, December 31, ,800, , , , ,886 2,165,484 ( 99,498 ) 185, ,546 ( 129,793 ) 7,283, ,097 7,546,537 Legal reserve ,600 - ( 54,600 ) Special reserve ,927 ( 22,927 ) Common stock cash dividends ( 480,000 ) ( 480,000 ) ( 480,000 ) - ( 480,000 ) PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS , , ,060 ( 6,643 ) 581,417 OTHER COMPREHENSIVE INCOME ,360 12, , ,220 3, , ,421 12, ,641 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD , , , ,220 3, , ,481 5, ,058 Adjustments of capital surplus for company's cash dividends received by subsidiaries - 10, ,329-10,329 Difference between consideration and carrying amount arising from acquisition ~4~

7 or disposal of subsidiaries Changes in Non-controlling interests ( 6,443 ) ( 6,443 ) BALANCE, December 31, 2013 $ 4,800,000 $ 371,532 $ 807,520 $ 881,605 $ 596,779 $ 2,285,904 $ 54,555 $ 412,940 $ 4,112 $ 471,607 $ ( 129,793 ) $ 7,799,250 $ 262,237 $ 8,061,487 (The accompanying notes are an integral part of the consolidated financial statements.) ~5~

8 CHUNG-HSIN ELECTRIC AND MACHINERY MANUFACTURING CORPS. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) For the Years ended December 31, CASH FLOWS FROM OPERATING ACTIVITIES Profit Before Income Tax $ 743,055 $ 626,866 Adjustments to reconcile profit to net cash provided by (used in) operating activities Depreciation 306, ,968 Amortization 50,248 43,371 Allowance (recovery income) for doubtful account ( 14,469 ) 13,554 Net gain on financial assets or financial ( 17,347 ) ( 797 ) liability at fair value through profit or loss Interest expenses 16,798 11,020 Interest income ( 22,729 ) ( 18,498 ) Dividends revenue ( 41,021 ) ( 34,279 ) Share of loss (profit) of associates and joint ventures accounted for using equity method 2,223 ( 88,014 ) CASH FLOWS FROM OPERATING ACTIVITIES Gain on disposal of property, plant and equipment ( 869 ) ( 224 ) Loss on disposal of investment 7, Impairment loss on financial assets 15,920 29,281 Impairment loss on non-financial assets - 136,057 Others ( 2,592 ) - Net changes in operating incomes and losses which do not affect cash flows 300, ,816 Net changes in operating assets and liabilities (Increase) Decrease in financial assets - trading 97,212 ( 142,298 ) Decrease in notes receivable 80,673 18,284 (Increase) decrease in notes receivable - related parties 18,346 ( 18,346 ) (Increase) decrease in accounts receivables ( 234,775 ) 290,994 (Increase) decrease in accounts receivable - related parties ( 214,996 ) 9,097 Decrease in construction contracts receivables 157,146 32,747 Decrease in other accounts receivables 6,022 34,428 Decrease (Increase) in other accounts receivable - related parties 65,382 ( 180,879 ) (Increase) decrease in inventory 260,578 ( 244,029 ) Decrease (Increase) in prepayments 68,897 ( 504,245 ) (Increase) Decrease in other current assets ( 339,936 ) 60,786 (Decrease) increase in notes payable ( 41,465 ) 38,881 Increase in notes payable- related parties 7,893 - Increase (Decrease) in accounts payable ( 278,801 ) 376,053 (Decrease) increase in accounts payable - related parties ( 26,979 ) 46,185 (Decrease) increase in construction contracts payables ( 521,232 ) 280,925 Increase (Decrease) in other payables 163,816 ( 144,560 ) Increase (Decrease) in other payables - related parties ( 2,874 ) 2,480 (Decrease) increase in receipts in advance ( 59,137 ) 41,684 Increase in other current liabilities 42,545 5,352 Decrease in accrued pension liabilities ( 5,884 ) ( 3,567 ) Cash generated from operating activities 286,124 1,028,654 Cash received for interest 23,934 15,484 Cash received for dividend 87,056 87,793 ~6~

9 Cash paid for interest ( 15,952 ) ( 10,397 ) Income tax paid ( 167,529 ) ( 116,769 ) Net cash provided by operating activities 213,633 1,004,765 (Continued) ~7~

10 CASH FLOWS FROM INVESTING ACTIVITIES For the Years ended December 31, Proceeds on sale of available for sale financial assets 9,789 1,820 Acquisition of investments in bonds without active markets ( 162,241 ) - Proceeds from repayments of held-to-maturity financial assets 43,560 - Acquisition of financial assets at cost ( 15,000 ) ( 298 ) Refund from capital reduction of financial assets at cost 4,165 8,350 Acquisition of investments at equity ( 45,000 ) ( 95,256 ) Acquisition of property, plant and equipment ( 464,473 ) ( 201,626 ) Proceeds from disposal of property, plant and equipment 24,878 4,165 Increase in deposit out ( 10,790 ) - Decrease in deposit out - 22,883 Acquisition of intangible assets - ( 3,930 ) Acquisition of Investment property ( 316 ) - Increase in other noncurrent assets ( 82,571 ) ( 130,735 ) Other investment activities 10,122 1,853 Net cash used in investing activities ( 687,877 ) ( 392,774 ) CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term debts 323,914 46,479 Increase in short-term bonds payable 50,053 - Decrease in short-term bonds payable - ( 20,155 ) Increase in long-term debts 407,947 - Repayment of long-term debts - ( 137,845 ) Increase in guarantee deposit received 1,053 - Increase in other noncurrent liabilities - 8,030 Decrease in other noncurrent liabilities ( 4,036 ) - Cash Dividends Paid ( 480,000 ) ( 480,000 ) Net change in non-controlling interests 4,344 22,861 Net cash provided by (used in) financing activities 303,275 ( 560,630 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 48,971 ( 40,100 ) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 121,998 ) 11,261 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 658, ,275 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 536,538 $ 658,536 (The accompanying notes are an integral part of the consolidated financial statements.) ~8~

11 CHUNG-HSIN ELECTRIC AND MACHINERY MANUFACTURING CORPS. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 and 2012 (Expressed in New Taiwan dollars, except as otherwise indicated) 1. HISTORY AND ORGANIZATION The Corporation Chung-Hsin Electric and Machinery Manufacturing Corp. (the Corporation), a Republic of China (R.O.C.) corporation, registered in Chung Ho city of Taipei county, main business operated at No. 25, Wen-Te Rd., Lo Shan Tsun, Guishan Township, Taoyuan county. (a)the Corporation starts in May, 1956 as name in Chung-Hsin factory before and reorganizes to Chung-Hsin Electric and Machinery Manufacturing Corps. in (b)the Corporation is engaged mainly in manufacturing equipments and machinery for power supplying, transmission and distribution; power automation system; generators, air conditioning; incinerator, ash recycling plant; pollution prevent project; turn key project for power supply and control, wind power generator, hydro power generator; producing and trading wireless and microwave communication product; parking management and constructing automatic parking facility, sale and rental residence and building and Energy Technology Services. (c)the common shares of the Corporation have been listed on Taiwan Stock Exchange since March 8, (d)the Corporation s function currency is New Taiwan dollars. 2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION The consolidated financial statements were approved by the board of directors and authorized for issue on March 27, APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS (1) New accounting standards, amendments and interpretations issued during the period and not yet effective The Corporation and its subsidiaries (The Group) have not applied the following International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs), International Financial Reporting Interpretations, and Standing Interpretations Committee (SIC) that have been issued by International Accounting Standards Board (IASB). On January 28, 2014, the Financial Supervisory Commission (FSC) announced the framework for the adoption of updated IFRSs version in the ROC. Under this framework the previous version of IFRSs endorsed by the FSC (the 2010 IFRSs version) currently applied by companies with shares listed on the Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market will be replaced by the updated IFRSs without IFRS 9 (the 2013 IFRSs version) should be adopted by the Corporation starting However, as of the date that the consolidated financial statements were authorized for issue, the FSC has not endorsed the following new, amended and revised standards and interpretations issued by the IASB (the New IFRSs ) included in the 2013 IFRSs version. Furthermore, the FSC has not announced the effective date for the following New IFRSs that are not included in the 2013 IFRSs version. ~9~

12 The New IFRSs Included in the 2013 IFRSs Version Amendments of IFRSs Improvement of IFRSs which Amends International Accounting Standard No. 39 ( IAS 39 ), reissued in Effective Date of IASB (Note) January 1, 2009 or January 1, 2010 Amendments of IAS 39 Embedded Derivatives Effective for annual periods beginning on or after June 30,2009 Amendments of IFRSs Improvement of IFRSs - which Amends IAS 39 (2010) July 1, 2010 or January 1, 2011 Amendments of IFRSs Annual Improvements to IFRSs Cycle January 1,2013 Amendments of IFRS 1 Limited exemption from July 1, 2010 comparative IFRS 7 disclosures for first-time adopters Amendments of IFRS 1 Government loans January 1,2013 Amendments of IFRS 1 Severe hyperinflation and July 1, 2011 removal of fixed dates for first-time adopters Amendments of IFRS 7 Disclosures - offsetting January 1, 2013 financial assets and financial liabilities Amendments of IFRS 7 Disclosures - transfers of July 1, 2011 financial assets IFRS 10 Consolidated financial January 1, 2013 statements IFRS 11 Joint arrangements January 1, 2013 IFRS 12 Disclosure of interests in January 1, 2013 other entities Amendments of IFRS 10, 11 and 12 Consolidated financial statements, joint arrangements and disclosure of interests in other entities: transition guidance January 1, 2013 Amendments of IFRS 10, 12 and IAS Investment Entities January 1, IFRS 13 Fair value measurements January 1, 2013 Amendments of IAS 1 Presentation of items of other July 1,2012 comprehensive income Amendments of IAS 12 Deferred tax: recovery of January 1, 2012 underlying assets Amendments of IAS 19 Employee benefits January 1, 2013 Amendments of IAS 27 Separate financial statements January 1, 2013 Amendments of IAS 28 Investments in associates and January 1, 2013 joint ventures Amendments of IAS 32 Offsetting financial assets and January 1, 2014 financial liabilities IFRIC 20 Stripping Costs in Production Phase of a Surface Mine January 1, 2013 ~10~

13 Effective Date of The New IFRSs Not Included in the 2013 IFRSs Version IASB (Note) IFRS 9 Financial Instruments Not yet determined Amendments of IFRS 9 and 7 Mandatory Effective Date and Not yet determined Transition Disclosures Amendments of IAS 36 Recoverable Amount January 1, 2014 Disclosures for Non-Financial Assets Amendments of IAS 39 Novation of Derivatives and Continuation of Hedge January 1, 2014 Accounting IFRIC 21 Levies January 1, 2014 Amendments of IFRS Annual Improvements to July 1, 2014 IFRSs Cycle Amendments of IFRS Annual Improvements to IFRSs Cycle July 1, 2014 IFRS 14 Regulatory Deferral Accounts January 1, 2016 Amendments of IFRS 19 Defined Benefit Plans: July 1, 2014 Employee Contributions Note: Unless otherwise stated, the above new standards, amendments and interpretations are effective for annual periods beginning on or after the date mentioned. (2) Stated on new accounting standards, amendments and interpretations issued during the period and not yet effective have a significant effect on the accounting policies Except for the notes listed below, the first-time adoption of the new standards, amendments and interpretations adopted by the Group will not has significant impact on the consolidated financial statements. (A) IFRS 9, Financial Instruments Recognition and measurement of financial assets As financial assets, all financial assets in IAS 39, Financial Instruments : Classification and measurement of financial assets are subsequent measured by amortized cost or fair value. If the Group held the financial assets by getting cash flow in contract and the cash flow is used in principle and interest payment. The financial assets are subsequent measured by amortized cost. Others will be measured by fair value of balance date. The Group specifies that the fair value changes in the equity instruments that meet certain criteria may be reported in other comprehensive income, and such amount that has been recognized in other comprehensive income should not be reclassified to profit or loss when such assets are derecognized at beginning. Hedge accounting The main changes in hedge accounting amended the application requirements for hedge accounting to better reflect the entity s risk management activities. Compared with IAS 39, the main changes include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening the risk eligible for hedge accounting of non-financial items; (2) changing the way hedging derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing effectiveness assessment with the principle of economic relationship between the hedging instrument and the hedged item. (B)Consolidated, Joint arrangements and Associates with new accounting standards and amendments A. IFRS 10, Consolidated financial statements IFRS 10 was issued to replace IAS 27 Separate financial statements and SIC ~11~

14 12, Consolidation-Special Purpose Entities. The Group considers the power of control to other entities for consolidation other entities. The Group has (1)the power to investee, (2)risks or rights in investmentee, (3)influences in rewards decisions, which is the Group has power of control in investee. Besides, the judgment in control has more guides in new standards. B. IFRS 12, Disclosure of interests in other entities IFRS 12 is a standard that requires a broader disclosure in an entity s interests in subsidiaries, joint arrangements, associates and unconsolidated entities. C. Amendments of IAS 28, Investments in associates and joint ventures According to amendments of IAS 28, the Group only classified investments in associates to assets as held for sale which matches criterions of assets as held for sale. Others were under equity method. The investment in associates which matches criterions of assets as held for sale, the Group reclassified to assets as held for sale and stop to use equity method before amendments of IAS 28 effectively. (C)IFRS 13, Fair value measurements IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The current standards ask to disclosure three levels of fair value in financial instruments measurement at fair value. According to IFRS 13, all of assets and liabilities which match these criteria should be disclosured by three levels of fair value. (D) Amendments of IAS 1, Presentation of items of other comprehensive income The amendments to IAS 1 require additional disclosures in other comprehensive income. The items of other comprehensive income will be grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. In addition, income tax on items of other comprehensive income is also required to be allocated on the same basis. (E) Amendments of IAS 36, Recoverable Amount Disclosures for Non-Financial Assets IASB issued IFRSs 13, Fair value measurements and amended IAS 36, Impairment of Assets at the same time. The amendments to IAS 36 clarify that the Group is only required to disclose the recoverable amount in the period of impairment accrual or reversal. Moreover, if the recoverable amount of impaired assets is based on fair value less costs of disposal, the Group should also disclose the discount rate used. The Group expects the aforementioned amendments will result in a broader disclosure of recoverable amount for non-financial assets. (3) Stated on new accounting standards, amendments and interpretations issued during the period and not yet effective have a significant effect on the Group s the financial statements The Group is assessing the potential impact of the new standards and amendments above continuously. The related impact will be disclosed when the Group completes the evaluation. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Group s consolidated financial statements for the years ended December 31, 2013 is its first IFRS consolidated financial statements. Except for the notes listed. The summary of significant accounting policies listed below is consistent adopted in all reporting periods. The date of transition to IFRSs is January 1, Please refer to Note 15 for the impact of transitioning from R.O.C. GAAP to the IFRSs. ~12~

15 (1) Compliance statement The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed by the FSC. (2) Basis of preparation Except for the financial instruments that are measured at fair value, these consolidated financial statements have been prepared under the historical cost convention. Historical cost is generally based on the fair value of the consideration given in exchange for assets. IFRS 1, First-time Adoption of International Financial Reporting Standards, establishes the procedures for the Group s first consolidated financial statements prepared in accordance with IFRSs. Except for optional exemptions and mandatory exceptions to such retrospective application provided under IFRS 1, the Group has been retrospective application provide under IFRSs. The Group elected optional exemptions please refer to note 15. (3)Classification of current and non-current assets and liabilities Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations incurred for trading purposes and obligations expected to be settled within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively. (4) Basis of consolidation (A)Basis for preparation of consolidated financial statements: The consolidated financial statements incorporate the financial statements of the Corporation and entities (subsidiaries) controlled by the Corporation. Control is achieved where the Corporation has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The consolidated statements of comprehensive income included the subsidiaries operation profit or loss until their acquisition or disposal dates. Adjustments are made to the financial statements of subsidiaries to bring their accounting policies into consistency with the policies adopted by the Corporation. Inter-company transactions, balances and unrealized gains or losses on transactions between companies within the Corporation and its subsidiaries are eliminated in consolidated financial statements. The subsidiaries total comprehensive income attributed to the Corporation and non-controlling interests, even though non-controlling becomes lossed. Changes in a parent s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions. The carrying amounts of the Corporation s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity. When the Group lose control of a subsidiary, a profit or loss is calculated as the difference between (i) the Group remeasures any investment retained in the former subsidiary at its fair value; (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognized in other comprehensive income in ~13~

16 relation to the subsidiary are reclassified to profit or loss or transferred directly to retained earnings as appropriate, on the same basis as would be required if the related assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity. (B)Subsidiaries included in the consolidated financial statements: Name of Investor Name of Subsidiary Main Business Activities Chung-Hsin Electric And Machinery Manufacturing Corps. CHENG-HSIN Engineering & Services CO.,LTD. ~14~ December 31, 2013 Ownership (%) December 31, 2012 January 1, 2012 CHEM USA CORP. Selling and assembly of note book computers % % % Description Environmental protection incinerator set up and maintenance CHENG-HSIN Engineering & Electric power and monitor equipment Services CO.,LTD. Plan, design and maintenance for electricity, % % 99.99% water and fire fighting system of building and factory Manufacturing: Information storage and processing Parktron technology Co., equipment Ltd. Fee collection and administration equipment 40.00% 53.33% 53.33% Note 1 Automatic money change machine Automatic ticket vending machine Electric equipment installment TV-KU channel and C channel installment Etrovision technology Automatic control equipment Co.,Ltd. Communication engineering 99.99% 99.99% 99.99% CHEM Corp. Export and import goods % % % Sunrise investment Corp. General investment % % % Air pollution sample testing Global - Entech Co., Ltd. Waste water and environmental water testing Noise testing Evaluation of environmental affection 99.60% 99.60% 99.60% Tone-zoom industry Co., Intensified fiber plastic material and product Ltd. Bathing equipment Industrial plastic product 58.04% 58.04% 58.04% Manufacture machinery equipment Lift installation Bao Cheng International Co., Automation control equipment and traffic Ltd. mark % % % Jedi Energy Technologies Co., Ltd. San - feng construction Co., Ltd. Wha Dun Building Management Service Co., Ltd. Parking business management, etc. Manufacture machinery equipment, set up, sales, research & development and energy technology service etc. Civil engineering, construction, water conservancy, contract management industry Apartment managing services and consulting, etc % 50.00% - Note % % % % % % AccuMIS Inc. Optical and precision equipment manufacturing and software information services 88.89% 88.89% - CHEM Corp. CHEM POWER Corp. Export and import goods % % % CHEM POWER Corp. CHEM Power Limited CHEM Power Limited Export and import goods % % % CHEM J-V Limited Export and import goods % % % Chemly power equipment Manufacturing machinery for generating, Corp. transmitting and distributing electric power % % % Chung - Hsin Power Systems 220kV~550kV high voltage GIS/GCB (Jiangsu) Corp. assembly and manufacturing % % % Nantong Shengyi precision Processing tanks, plates,over 1.5M of machinery Co. conductors and various machinery parts 50.00% 50.00% 50.00% Shannxi baoji Yong - shin Aluminum alloy casting and related Ltd. machinery manufacturing 69.12% 69.12% 65.64% Jiangsu Chung - Hsin Alloy casting and precision manufacturing Precision Machinery Co., Parking equipment & parts manufacturing Ltd % 99.17% 99.17% Chem-tech (Shang hai) Corp. International trade % % % Chung-Hsin Power Systems (Shenyang) Inc. Jiangsu Chung - Hsin Precision Wuhan HaiXin Energy and Machinery Co., Ltd. Electronic Co. Chem-tech (Shang-hai) Zhen xing parking Corp. management Co., Ltd. Manufacturing ultra high voltage gas insulated switchgear for power transmission and distribution Aluminum casting and precision machinery manufacturing and selling Design, research, assemble, produce, sale of electronic control product % % % 51.00% 51.00% 72.86% Parking business management % % %

17 Name of Investor Name of Subsidiary Main Business Activities CHEM J-V Limited Sunrise investment Corp. Parktron technology Co., Ltd. Parktron International Holdings Limited Jiangsu Fumei Landscape & Real Estate Development Co.,Ltd. AccuMIS Inc. Parktron International Holdings Limited ~15~ December 31, 2013 Ownership (%) December 31, 2012 January 1, 2012 Resort development and management % % % Optical and precision equipment manufacturing and software information services % Description Export and import goods % % % Note 1 Parktron Malaysia Sdn Bhd Parking billing and system integration 59.20% 59.20% 59.20% Note 1 Note 1: The Group lost controlling power in Parktron technology Co., Ltd. due to without increasing investment by percentage of share when Parktron technology Co., Ltd increases capital in April, Note 2: The Group increase invested in Jedi Energy Technologies Co., Ltd. for 32.5% of voting share when Jedi Energy Technologies Co., Ltd. increases capital in July, (C)Subsidiaries not included in the consolidated financial statements: none. (5)Foreign currency In preparing the financial statements of each individual group entity, transactions in currencies other than the entity s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Foreign exchange gains and losses resulting from the settlement or arising of transactions are recognized in profit or loss in the period, except listed below: (A) Foreign exchange gains and losses that relate to borrowings, which were used in constructions for production in future. The exchange different are from this foreign interest expense shall be presented in the cost of constructions. (B)Exchange differences from hedges transaction due to avoid partial of exchange risk. (C) Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur in the foreseeable future (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. In presenting consolidated financial statements, the assets and liabilities of the Group s foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale due to lose control, join control or

18 material influence in foreign operation. When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even the Group still retains partial interest in the former foreign subsidiary, associate or jointly controlled entity after losing control of the former foreign subsidiary, losing significant influence over the former foreign associate, or losing joint control of the former jointly controlled entity, such transactions should be accounted for as disposal of all interest in these foreign operations. (6)Cash and cash equivalents Cash equivalents are readily convertible to known amount of cash; and subject to an insignificant risk of changes in value which are short-term highly liquid investments. (7)Financial Instruments Financial assets and financial liabilities of the Group is meet one of financial instruments contract, are recognized in consolidated balance sheets. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. (A) Financial assets Financial assets transactions on a regular way purchase or sale are recognized and derecognized using trade date accounting. A regular way purchase or sale basis means trading due to the period of law or markets convention asked. Categories of financial assets Financial assets are including financial asset at fair value through profit or loss, held to maturity investments, available for sale financial assets and loans and receivables. Financial assets are classified in these categories base on acquired principally for the purpose and nature as initial recognition. The Group held the financial assets are following: A. Financial asset at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading or financial assets designated as at fair value through profit or loss. Financial assets that meet one of the following criteria are designated as at held for trading: a. The main purpose is selling in the short-term. b. One of identifiable financial instruments portfolio attributable to consolidate management and profit-taking evidences in operation for selling in the short-term; or c. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges and financial guarantee contracts. Financial assets at fair value through profit or loss are recognized at fair value, and any changes in the fair value of these financial assets are recognized in profit or loss. These profit or loss are not including any dividends or interests (including receivable of invest in first year). The method of adoption in fair ~16~

19 value pleases refer to Note 6(31). Financial assets at fair value through profit or loss that are unquoted market value and without reliably measured fair value in an active market, and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in financial assets measured at cost. These financial assets are reliably remeasured at their fair value and recognized the profit or loss in difference between carrying amount and fair value as subsequently remeasurement. B.Held to maturity investments Held to maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity date that the Group has the positive intention and ability to hold to maturity other than those that meet the definition of loans and receivables and those that are designated as at fair value through profit or loss or as available for sale on initial recognition. Held to maturity financial assets are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. The effective interest method is a method to calculate amortised cost of debt instrument and amortised interest income in related period. The effective interest rate is a debt instrument expects to estimate future cash flows paid or received in partial of effective interest rate and discounted at the financial asset s original effective interest rate in transaction costs and amortisation of a premium or a discount on such assets. C.Available for sale financial assets Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. The Group held listed stocks, OTC stocks and Beneficiary Certificates are classified in available for sale financial assets and based on the fair value at the balance sheet date. The method of adoption in fair value pleases refer to Note 6(31). Available for sale financial assets are recognized in profit or loss at carrying amount changed between exchange differences and interest incomes using the effective interest method, and dividends of available for sale financial assets. Others are recognized in other comprehensive income as carrying amount changed and reclassified to profit or loss as disposal of investments or impairment loss. Dividends of available for sale financial assets are recognized as the Group has received rights. Available for sale financial assets in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in financial assets measured at cost. Available for sale financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in other comprehensive income. D.Loans and receivables Loans and receivables do not have a quoted market price in an active market and non-derivative financial assets with fixative or definitive payment. Loans and receivables measured at amortized cost using the effective interest method, less provision for impairment except short-term interest of accounts receivable due to without materiality. Impairment of financial assets ~17~

20 The Group assesses at each balance sheet date whether there is objective evidence that a financial asset is impaired as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. The impairment loss had been happened. Financial assets measured at cost are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. The amount of the impairment loss in financial assets measured at cost is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the financial asset s original effective interest rate. For financial assets measured at cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognized previously. One of objectively evidences is considered to be impaired when the fair value of available for sale equity investment lower than cost and significant or prolonged decline happened. Impairment loss on available for sale financial assets happened, previously recognized in impairment allowance account under other comprehensive income is reclassified from other comprehensive income to profit or loss. Impairment loss of an investment in an equity instrument recognized in profit or loss shall not be reversed through profit or loss. Any impairment loss is previously recognized and then fair value increases, the increase amount of fair value will be recognized in other comprehensive income. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognized, then such impairment loss is reversed through profit or loss. For financial assets measured at cost, the amount of the impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognized in profit or loss. Impairment loss recognized for this category shall not be reversed subsequently. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset are transferred to another party. On derecognition of a financial asset in its entirety, the difference between the ~18~