Shin Kong Investment Trust Co., Ltd. Financial Statements for the Years Ended December 31, 2014 and 2013 and Independent Auditors Report

Transcription

1 Shin Kong Investment Trust Co., Ltd. Financial Statements for the Years Ended, 2014 and 2013 and Independent Auditors Report

2 INDEPENDENT AUDITORS REPORT The Board of Directors and stockholder Shin Kong Investment Trust Co., Ltd. We have audited the accompanying balance sheets of Shin Kong Investment Trust Co., Ltd. as of, 2014 and 2013, and the related statements of comprehensive income, changes in equity and cash flows for the years ended, 2014 and 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 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 financial statements referred to above present fairly, in all material respects, the financial position of Shin Kong Investment Trust Co., Ltd. as of, 2014 and 2013, and its financial performance and its cash flows for the years ended, 2014 and 2013, in conformity with International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed by the Financial Supervisory Commission of the Republic of China. February 25, 2015 Notice to Readers The accompanying financial statements are intended only to present the financial position, financial performance 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 financial statements are those generally applied in the Republic of China. For the convenience of readers, the independent 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. 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 independent auditors report and financial statements shall prevail

3 SHIN KONG INVESTMENT TRUST CO., LTD. BALANCE SHEETS DECEMBER 31, 2014 AND 2013 (In New Taiwan Dollars) ASSETS Amount % Amount % CURRENT ASSETS Cash and cash equivalents (Notes 4, 6 and 25) $ 86,428, $ 129,396, Available-for-sale financial assets - current (Notes 4, 7 and 25) 20,614, ,524,338 5 Debt investments with no active market - current (Notes 4, 8 and 25) 462,838, ,813, Trade receivables, net (Notes 4 and 9) 14,920, ,002,519 3 Trade receivables - related parties (Notes 4, 9 and 25) 1,059,452-1,050,000 - Other receivables (Notes 4 and 9) 352, ,289 - Other current assets (Notes 4 and 13) 5,017, ,869,964 - Total current assets 591,230, ,969, NON-CURRENT ASSETS Financial assets measured at cost - non-current (Notes 4 and 10) Property and equipment (Notes 4 and 11) 8,242, ,581,358 1 Computer software (Notes 4 and 12) 4,515, ,455,852 1 Refundable deposits (Notes 13 and 25) 104,730, ,602, Deferred tax assets (Notes 4 and 19) 16,120, ,167,473 2 Total non-current assets 133,609, ,806, TOTAL $ 724,840, $ 646,776, LIABILITIES AND EQUITY CURRENT LIABILITIES Other payables (Note 14) $ 39,175,787 6 $ 29,502,521 5 Current tax liabilities (Notes 4 and 19) 29,569, ,126,131 4 Other current liabilities (Note 14) 9,000, ,561 - Total current liabilities 77,746, ,586,213 9 NON-CURRENT LIABILITIES Accrued pension liabilities (Notes 2 and 15) 10,744, ,238,997 1 Deferred revenue non-current (Note 14) 49,538, Total non-current liabilities 60,283, ,238,997 1 Total liabilities 138,029, ,825, EQUITY (Note 16) Common stock 400,000, ,000, Additional paid-in capital 123,082, ,082, Retained earnings Legal reserve 25,877, ,025,140 3 Special reserve 17,947, ,242,474 2 Unappropriated earnings 20,915, ,771,466 5 Total retained earnings 64,740, ,039, Other equity (1,012,321) - (5,170,180) (1) Total equity 586,810, ,951, TOTAL $ 724,840, $ 646,776, The accompanying notes are an integral part of the financial statements

4 SHIN KONG INVESTMENT TRUST CO., LTD. STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In New Taiwan Dollars, Except Earnings Per Share) Amount % Amount % REVENUES (Notes 17 and 25) $ 207,793, $ 200,646, OPERATING EXPENSES (Notes 18 and 25) (185,822,818) (89) (174,079,297) (87) GROSS PROFIT 21,970, ,567, NON-OPERATING INCOME AND EXPENSES (Notes 18 and 25) Other income 8,179, ,426,733 3 Other gains and losses (3,144,263) (2) 1,506,057 1 Total non-operating income and expenses 5,035, ,932,790 4 PROFIT BEFORE INCOME TAX 27,005, ,500, INCOME TAX EXPENSE (Notes 4 and 19) (6,295,750) (3) (5,975,775) (3) PROFIT FOR THE YEAR 20,709, ,524, OTHER COMPREHENSIVE INCOME (Notes 15 and 16) Unrealized gain on available-for-sale financial assets 4,157, ,603 - Actuarial gain and loss arising from defined benefit plans (1,008,285) (1) 1,097,416 1 Total other comprehensive income for the year 3,149, ,448,019 1 TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 23,859, $ 29,972, EARNINGS PER SHARE (Note 20) Basic $0.52 $0.71 The accompanying notes are an integral part of the financial statements

5 SHIN KONG INVESTMENT TRUST CO., LTD. STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In New Taiwan Dollars) Other Equity Unrealized Gains Retained Earnings (Losses) on Addition paid-in Unappropriated Available-for-sale Capital Stock Capital Legal Reserve Special Reserve Earnings Financial Assets Total Equity BALANCE AT JANUARY 1, 2013 $ 400,000,000 $ 123,082,504 $ 19,584,941 $ 5,362,075 $ 32,470,181 $ (5,520,783) $ 574,978,918 Appropriation of 2012 earnings Legal reserve - - 3,440,199 - (3,440,199) - - Special reserve ,880,399 (6,880,399) - - Cash dividends (22,000,000) - (22,000,000) Profit for the year ended, ,524,467-28,524,467 Other comprehensive income for the year ended, ,097, ,603 1,448,019 BALANCE AT DECEMBER 31, ,000, ,082,504 23,025,140 12,242,474 29,771,466 (5,170,180) 582,951,404 Appropriation of 2013 earnings Legal reserve - - 2,852,447 - (2,852,447) - - Special reserve ,704,893 (5,704,893) - - Cash dividends (20,000,000) - (20,000,000) Profit for the year ended, ,709,768-20,709,768 Other comprehensive income for the year ended, (1,008,285) 4,157,859 3,149,574 BALANCE AT DECEMBER 31, 2014 $ 400,000,000 $ 123,082,504 $ 25,877,587 $ 17,947,367 $ 20,915,609 $ (1,012,321) $ 586,810,746 The accompanying notes are an integral part of the financial statements

6 SHIN KONG INVESTMENT TRUST CO., LTD. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In New Taiwan Dollars) CASH FLOWS FROM OPERATING ACTIVITIES Profit before income tax $ 27,005,518 $ 34,500,242 Adjustments for: Depreciation 1,137, ,461 Amortization 1,336,525 1,615,153 Interest income (8,179,466) (6,355,753) Gain on disposal of property and equipment - (100,000) Gain on sale of available-for-sale financial assets (887,272) (32,499) Changes in operating assets and liabilities Trade receivables, net 1,081,669 2,213,237 Trade receivables - related parties, net (9,452) 270,000 Other current assets (3,147,279) 145,473 Other payables 9,693,274 3,375,673 Deferred revenue 49,538,862 - Other current liabilities 8,043,262 (405,290) Accrued pension liabilities 496, ,925 Cash generated from operations 86,110,303 36,427,622 Interest received 8,139,737 6,289,651 Income tax paid (804,955) (619,198) Net cash generated from operating activities 93,445,085 42,098,075 CASH FLOWS FROM INVESTING ACTIVITIES Payments for available-for-sale financial assets (2,000,000) (21,153,145) Proceeds on sale of available-for-sale financial assets 17,955,230 4,117,686 Purchase of debt investments with no active market (462,838,878) (335,813,753) Proceeds on sale of debt investments with no active market 335,813, ,700,000 Payment for property and equipment (3,819,139) (1,496,573) Proceeds from disposal of property and equipment - 220,000 Increase in refundable deposits (301,105) - Decrease in refundable deposits 172,560 15,000 Increase in computer software (1,396,125) (1,483,095) Net cash (used in) generated from investing activities (116,413,704) 106,120 CASH FLOWS FROM FINANCING ACTIVITY Cash dividends (20,000,000) (22,000,000) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (42,968,619) 20,204,195 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 129,396, ,192,587 CASH AND CASH EQUIVALENTS, END OF YEAR $ 86,428,163 $ 129,396,782 The accompanying notes are an integral part of the financial statements

7 SHIN KONG INVESTMENT TRUST CO., LTD. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In New Taiwan Dollars, Unless Stated Otherwise) 1. GENERAL INFORMATION Shin Kong Investment Trust Co., Ltd. (the Company ), formerly Taiwan Securities Investment Trust Co., was organized on May 29, 1992 and granted a business license on September 19, The Company changed its name to Shinkong Investment Trust Co., Ltd. in January The Company is engaged in securities investments trust business, securities investments consulting business, full discretion fiduciary investment business and futures trust business. To expand its assets management areas and enhance synergy and resources sharing benefit, Shin Kong Financial Holding Co., Ltd. (SKFHC) acquired the Company through share purchase in July 2006 and became the Company s parent company. Responding to financial development trend, in the extraordinary meeting on August 22, 2006, the stockholder resolved to merge New Light Asset Management Co., Ltd. On September 25, 2006, the Company obtained approval of the transaction from the Financial Supervisory Commission (FSC). On October 9, 2006, this transaction was completed. The functional currency of the Company is New Taiwan dollars. 2. APPROVAL OF FINANCIAL STATEMENTS The financial statements were approved by the board of directors and authorized for issue on February 25, APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS AND INTERPRETATIONS a. The amendments to the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC not yet effective Rule No and Rule No issued by the FSC on April 3, 2014, stipulated that the Group should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the IFRSs ) endorsed by the FSC and the related amendments to the Guidelines Governing the Preparation of Financial Reports by Securities Issuers starting January 1, New, Amended and Revised Standards and Interpretations (the New IFRSs ) Effective Date Announced by IASB (Note) Improvements to IFRSs (2009) - amendment to IAS 39 January 1, 2009 and January 1, 2010, as appropriate Amendment to IAS 39 Embedded Derivatives Effective for annual periods ending on or after June 30, 2009 (Continued) - 6 -

8 New, Amended and Revised Standards and Interpretations (the New IFRSs ) Effective Date Announced by IASB (Note) Improvements to IFRSs (2010) July 1, 2010 and January 1, 2011, as appropriate Annual Improvements to IFRSs Cycle January 1, 2013 Amendment to IFRS 1 Limited Exemption from Comparative IFRS 7 July 1, 2010 Disclosures for First-time Adopters Amendment to IFRS 1 Severe Hyperinflation and Removal of Fixed July 1, 2011 Dates for First-time Adopters Amendment to IFRS 1 Government Loans January 1, 2013 Amendment to IFRS 7 Disclosure - Offsetting Financial Assets and January 1, 2013 Financial Liabilities Amendment to IFRS 7 Disclosure - Transfer of Financial Assets July 1, 2011 IFRS 10 Consolidated Financial Statements January 1, 2013 IFRS 11 Joint Arrangements January 1, 2013 IFRS 12 Disclosure of Interests in Other Entities January 1, 2013 Amendments to IFRS 10, IFRS 11 and IFRS 12 Consolidated January 1, 2013 Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance Amendments to IFRS 10 and IFRS 12 and IAS 27 Investment January 1, 2014 Entities IFRS 13 Fair Value Measurement January 1, 2013 Amendment to IAS 1 Presentation of Other Comprehensive Income July 1, 2012 Amendment to IAS 12 Deferred tax: Recovery of Underlying January 1, 2012 Assets IAS 19 (Revised 2011) Employee Benefits January 1, 2013 IAS 27 (Revised 2011) Separate Financial Statements January 1, 2013 IAS 28 (Revised 2011) Investments in Associates and Joint January 1, 2013 Ventures Amendment to IAS 32 Offsetting Financial Assets and Financial January 1, 2014 Liabilities IFRIC 20 Stripping Costs in Production Phase of a Surface Mine January 1, 2013 (Concluded) Note: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after the respective effective dates. Except for the following, whenever applied, the initial application of the above 2013 IFRSs version and the related amendments to the Guidelines Governing the Preparation of Financial Reports by Securities Issuers would not have any material impact on the Group s accounting policies: Amendments to IAS 1 Presentation of Items of Other Comprehensive Income The amendments to IAS 1 requires items of other comprehensive income to be grouped into those items that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified subsequently to profit or loss. Income taxes on related items of other comprehensive income are grouped on the same basis. Under current IAS 1, there were no such requirements. The Group will retrospectively apply the above amendments starting from Items not expected to be reclassified to profit or loss are remeasurements of the defined benefit plans. Items expected to be reclassified to profit or loss are unrealized gains (loss) on available-for-sale financial assets. However, the application of the above amendments will not result in any impact on the net profit for the year, other comprehensive income for the year (net of income tax), and total comprehensive income for the year

9 b. New IFRSs in issue but not yet endorsed by the FSC The Group has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced their effective dates. New IFRSs Effective Date Announced by IASB (Note 1) Annual Improvements to IFRSs Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs Cycle July 1, 2014 Annual Improvements to IFRSs Cycle January 1, 2016 (Note 4) IFRS 9 Financial Instruments January 1, 2018 Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of January 1, 2018 IFRS 9 and Transition Disclosures Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets January 1, 2016 (Note 3) between an Investor and its Associate or Joint Venture Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: January 1, 2016 Applying the Consolidation Exception Amendment to IFRS 11 Accounting for Acquisitions of Interests in January 1, 2016 Joint Operations IFRS 14 Regulatory Deferral Accounts January 1, 2016 IFRS 15 Revenue from Contracts with Customers January 1, 2017 Amendment to IAS 1 Disclosure Initiative January 1, 2016 Amendments to IAS 16 and IAS 38 Clarification of Acceptable January 1, 2016 Methods of Depreciation and Amortization Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants January 1, 2016 Amendment to IAS 19 Defined Benefit Plans: Employee July 1, 2014 Contributions Amendment to IAS 27 Equity Method in Separate Financial January 1, 2016 Statements Amendment to IAS 36 Impairment of Assets: Recoverable Amount January 1, 2014 Disclosures for Non-financial Assets Amendment to IAS 39 Novation of Derivatives and Continuation of January 1, 2014 Hedge Accounting IFRIC 21 Levies January 1, 2014 Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after the respective effective dates. Note 2: The amendment to IFRS 2 applies to share-based payment transactions for which the grant date is on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date is on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, Note 3: Prospectively applicable to transactions occurring in annual periods beginning on or after January 1, Note 4: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1,

10 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Statement of compliance The financial statements have been prepared in accordance with Securities Investment Trust and Consulting Act, the Regulations Governing Securities Investment Trust Enterprises and IFRSs as endorsed by the FSC. b. Basis of preparation The financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets. c. Classification of current and non-current assets and liabilities Current assets include: 1) Assets held primarily for the purpose of trading; 2) Assets expected to be realized within twelve months after the reporting period; and 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. Current liabilities include: 1) Liabilities held primarily for the purpose of trading; 2) Liabilities due to be settled within twelve months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorized for issue; and 3) Liabilities for which the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. Assets and liabilities that are not classified as current are classified as non-current. d. Foreign currencies In preparing the financial statements, transactions in currencies other than the Company 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. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise except for: 1) Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; 2) Exchange differences on transactions entered into in order to hedge certain foreign currency risks; and - 9 -

11 3) Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (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 disposal of the net investments. Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated. e. Property and equipment Property and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss. Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such properties are depreciated and classified to the appropriate categories of property and equipment when completed and ready for intended use. Depreciation is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Any gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. f. Intangible assets 1) Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless the Company expects to dispose of the intangible asset before the end of its economic life. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss. 2) Derecognition of intangible assets Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized

12 g. Impairment of tangible and intangible assets other than goodwill At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation. Corporate assets are allocated to the smallest group of cash-generating units on a reasonable and consistent allocation basis. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss. h. Financial instruments Financial assets and financial liabilities are recognized when an entity becomes a party to the contractual provisions of the instruments. 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. 1) Financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. a) Measurement category Financial assets are classified into the following categories: available-for-sale financial assets, and loans and receivables. Financial assets at i. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other

13 comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired. Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company s right to receive the dividends is established. Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss. ii. Loans and receivables Loans and receivables (including trade receivables, cash and cash equivalent, debt investments with no active market, and other receivables) are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial. Cash equivalent includes time deposits with original maturities within three months from the date of acquisition, highly liquid, readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. b) Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. For financial assets carried at amortized cost, such as trade receivables and other receivables, assets 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 Company s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 90 days, as well as observable changes in national or local economic conditions that correlate with default on receivables, and other situation. For financial assets carried at amortized cost, the amount of the impairment loss recognized is 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 amortized 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 was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized

14 For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for that financial asset because of financial difficulties. When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period. In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss. For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable and other receivables are 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 except for uncollectible trade receivables and other receivables that are written off against the allowance account. c) Derecognition of financial assets The Company derecognizes 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 to another party. On derecognition of a financial asset in its entirety, the difference between the asset s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. 2) Equity instruments Debt and equity instruments issued by an entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity instruments issued by an entity are recognized at the proceeds received, net of direct issue costs. Repurchase of the Company s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company s own equity instruments

15 3) Financial liabilities a) Subsequent measurement All the financial liabilities are measured at amortized cost using the effective interest method. b) Derecognition of financial liabilities The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss. i. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated rebates and other similar allowances. Rebates and allowance can reliably estimate based on previous experience and other relevant factors. 1) Rendering of services Service income including that from operating service provided under service concession arrangements is recognized when services are provided. 2) Dividend and interest income Dividend income from investments is recognized when the shareholder s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. j. Retirement benefit costs Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method. All actuarial gains and losses on the defined benefit obligation are recognized immediately in other comprehensive income. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognized in the balance sheets represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the unrecognized and past service cost, plus the present value of available refunds and reductions in future contributions to the plan. Curtailment or settlement gains or losses on the defined benefit plan are recognized when the curtailment or settlement occurs

16 k. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. 1) Current tax According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings. Adjustments of prior years tax liabilities are added to or deducted from the current year s tax provision. 2) Deferred tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the entity expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. 3) Current and deferred tax for the year Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. 5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Company's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods

17 6. CASH AND CASH EQUIVALENTS Checking accounts and demand deposits $ 39,663,163 $ 17,796,782 Time deposits with original maturities less than three months 46,765, ,600,000 $ 86,428,163 $ 129,396,782 As of, 2014 and 2013, the interest rates on time certificates of deposit were 0.75%-2.60% and 0.65%-0.94%, respectively. 7. AVAILABLE-FOR-SALE FINANCIAL ASSETS Mutual fund investments $ 20,614,239 $ 31,524,338 Current $ 20,614,239 $ 31,524,338 Non-current - - $ 20,614,239 $ 31,524,338 Net gain on valuation of available for sale financial assets as of, 2014 and 2013 amounted to $4,157,859 and $350,603 and recognized as unrealized gain on financial assets. Net gain arising from sale of available for sale financial assets for the years ended, 2014 and 2013 amounted to $887,272 and $32,499 and recognized as gain on sales of financial assets, net. 8. DEBT INVESTMENTS WITH NO ACTIVE MARKET Time deposits with original maturities more than three months $ 462,838,878 $ 335,813,753 Current $ 462,838,878 $ 335,813,753 Non-current - - $ 462,838,878 $ 335,813,753 As of, 2014 and 2013, the interest rates of time deposits with original maturities over three months were 0.80%-3.20% and 0.81%-3.25%, respectively

18 9. TRADE RECEIVABLES (INCLUDED RELATED PARTIES) AND OTHER RECEIVABLES Trade receivables Management fees receivable $ 14,514,456 $ 15,482,926 Selling charges receivable 406, ,593 Adviser charges receivable - 210,000 Less: Allowances for doubtful debts - - Trade receivables - related parties $ 14,920,850 $ 16,002,519 Adviser charges receivable $ 1,050,000 $ 1,050,000 Selling charges receivable 9,452 - Less: Allowances for doubtful debts - - Other receivables $ 1,059,452 $ 1,050,000 Interest receivables $ 352,018 $ 312,289 Less: Allowances for doubtful debts - - $ 352,018 $ 312,289 The credit period on service revenue is days. In determining the recoverability of a trade receivable, the Company considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. The Company recognized an allowance for impairment loss of 100% against all receivables over 365 days because historical experience had been that receivables that are past due beyond 365 days were not recoverable. Allowance for impairment loss were recognized against trade receivables between 45 days and 365 days based on estimated irrecoverable amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position. Before accepting any new customer, the Company evaluates the potential customer s credit quality and defines credit limits and scorings by customer. The factor of overdue attributed to customers are reviewed once a year. For the trade receivables balances that were not past due at the end of the reporting period, the Company did not recognize any allowance for doubtful debts. The Company did not hold any collateral or other credit enhancements for these balances. 10. FINANCIAL ASSETS MEASURED AT COST Domestic unlisted common shares $ - $

19 In May 1999, the Company invested in bonds of Taichung Machinery Works Co. Principal payments are due on May 15, 1999, 2000 and According to the financial statements of Taichung Machinery Works Co. and understanding of its financial condition and the actual payment status, the Company evaluated the payment realization of its principal and interest and estimated a loss. In October 2004, the Company transferred the bonds into the stocks due to the restructure plan. 11. PROPERTY AND EQUIPMENT Carrying amounts Transportation equipment $ 1,732,513 $ 2,165,953 Office equipment 4,920,721 2,753,526 Leasehold improvements 1,589, ,379 Prepayments for business facilities - 129,500 $ 8,242,772 $ 5,581,358 Movement of property and equipment for the years ended, 2014 and 2013 were as follows: Transportation Equipment Office Equipment Leasehold Improvements Prepayments for Business Facilities Total Cost Balance, beginning of year 2013 $ 3,092,173 $ 18,209,994 $ 27,200,166 $ - $ 48,502,333 Additions 1,290, , ,500 1,639,538 Disposal (450,000) (450,000) Balance, end of year 2013 $ 3,932,173 $ 18,430,032 $ 27,200,166 $ 129,500 $ 49,691,871 Balance, beginning of year 2014 $ 3,932,173 $ 18,430,032 $ 27,200,166 $ 129,500 $ 49,691,871 Additions - 2,569,570 1,229,561-3,799,131 Disposal Reclassified - 129,500 - (129,500) - Balance, end of year 2014 $ 3,932,173 $ 21,129,102 $ 28,429,727 $ - $ 53,491,002 Accumulated depreciation Balance, beginning of year 2013 $ 1,694,208 $ 15,346,428 $ 26,487,416 $ - $ 43,528,052 Depreciation expense 402, , , ,461 Disposal (330,000) (330,000) Balance, end of year 2013 $ 1,766,220 $ 15,676,506 $ 26,667,787 $ - $ 44,110,513 Balance, beginning of year 2014 $ 1,766,220 $ 15,676,506 $ 26,667,787 $ - $ 44,110,513 Depreciation expense 433, , ,402-1,137,717 Disposal Balance, end of year 2014 $ 2,199,660 $ 16,208,381 $ 26,840,189 $ - $ 45,248,230 The above items of property and equipment were depreciated on a straight-line basis over the estimated useful life as follows: Transportation equipment Office equipment Leasehold improvements 5-7 years 3-5 years 3-6 years

20 12. INTANGIBLE ASSETS Carrying amounts Computer software $ 4,515,452 $ 4,455,852 Movement of intangible assets for the years ended, 2014 and 2013 were as follows: Cost Balance, beginning of the year 2013 $ 40,202,896 Additions 1,483,095 Disposal - Balance, end of the year 2013 $ 41,685,991 Balance, beginning of the year 2014 $ 41,685,991 Additions 1,396,125 Disposal - Balance, end of the year 2014 $ 43,082,116 Accumulated amortization Balance, beginning of the year 2013 $ (35,614,986) Amortization expense (1,615,153) Disposal - Balance, end of the year 2013 $ (37,230,139) Balance, beginning of the year 2014 $ (37,230,139) Amortization expense (1,336,525) Disposal - Balance, end of the year 2014 $ (38,566,664) 13. OTHER ASSETS Refundable deposits $ 104,730,831 $ 104,602,286 Prepaid expense 4,411,728 1,264,449 Tax refund receivable 605, ,515 $ 109,748,074 $ 106,472,250 Current $ 5,017,243 $ 1,869,964 Non-current 104,730, ,602,286 $ 109,748,074 $ 106,472,

21 Detail of non-current refundable deposits: Refundable deposits for operations $ 100,000,000 $ 100,000,000 Other refundable deposits 4,730,831 4,602,286 $ 104,730,831 $ 104,602,286 In compliance with Ruling No. Tai-Tsai Pao , the Company has deposited in reputable banks $25,000,000 refundable deposits for full discretion fiduciary investment business operations in 2014 and Additionally, the Company has deposited in reputable banks $50,000,000 for operations to act as an agent of offshore funds in 2014 and Moreover, $25,000,000 for futures trusts business in 2014 and OTHER LIABILITIES Other payables Salaries and bonuses $ 19,901,982 $ 20,051,628 Professional fees 2,279,475 2,687,189 Sales commission 2,120,000 2,723,850 Insurance 827, ,889 Pension 739, ,379 VAT 680, ,921 Employees bonus 144, ,671 Equipment purchased 122, ,965 Compensation 9,952,400 - Others 2,405,323 1,416,029 Other liabilities $ 39,175,787 $ 29,502,521 Advance receipts $ 58,105,992 $ 542,500 Receipts under custody 433, ,061 $ 58,539,685 $ 957,561 Current Other payables $ 39,175,787 $ 29,502,521 Other liabilities $ 9,000,823 $ 957,561 Non-current Other payables $ - $ - Other liabilities $ 49,538,862 $ - As of, 2014, compensation for fund beneficiaries was accrued due to the inappropriate investment made by the manager of Shin Kong Fu Kuei Fund and Shin Kong Conventional Industries Fund

22 As of, 2014, management fee was received in advance from Shin Kong AUD Principal Protected Fund and Shin Kong 10-Year Principal Protected Fund was recognized as advance receipts. 15. RETIREMENT BENEFIT PLANS Defined Contribution Plans The pension plan under the Labor Pension Act (the LPA ) is a defined contribution plan. Based on the LPA, the Company makes monthly contributions to employees individual pension accounts at 6% of monthly salaries and wages. The total expenses recognized in the statement of comprehensive income were $4,051,415 and $4,103,181, representing the contributions payable to these plans by the Company at the rates specified in the plans for the years ended, 2014 and 2013, respectively. As of, 2014 and 2013, the amounts of contributions payable were $739,844 and $732,379, respectively, representing contributions not yet paid for the reporting period. Defined Benefit Plans Based on the defined benefit plan under the Labor Standards Law ( LSL ), pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company contributed amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. The pension fund is deposited in Bank of Taiwan in the committee s name. The actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out by qualifying actuaries. The principal assumptions used for the purposes of the actuarial valuations were as follows: Discount rates 2.125% 2.000% Expected return on plan assets 1.750% 2.000% Expected rates of salary increase 2.875% 2.750% Amounts recognized in profit or loss in respect of these defined benefit plans were as follows: For the Year Ended Service cost $ 267,827 $ 229,788 Interest cost 337, ,778 Expected return on plan assets (128,162) (158,504) Prior service cost 290, ,780 $ 767,638 $ 594,842 Actuarial gain (loss) recognized in other comprehensive income were $(1,008,285) and $1,097,416 for the years ended, 2014 and 2013, respectively