IMPORTANT NOTICE

NOT FOR DISTRIBUTION OR TO US PERSONS OR OTHERWISE THAN TO PERSONS TO WHOM IT CAN LAWFULLY BE DISTRIBUTED

IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the attached offering memorandum. You are advised to read this disclaimer carefully before accessing, reading or making any other use of the attached offering memorandum. In accessing the attached offering memorandum, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from us as a result of such access.

CONFIRMATION OF YOUR REPRESENTATION

You have accessed the attached document on the basis that you have confirmed your representation to Asia Cement Corporation (the "Company") and to Goldman Sachs International, UBS AG, Hong Kong Branch and Citigroup Global Markets Limited (together, the "Initial Purchasers") that (1) you are a person outside the United States, as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act") and, to the extent you purchase the securities described in the attached offering memorandum, you will be doing so pursuant to Regulation S under the Securities Act, (2) the electronic mail address to which the attached offering memorandum has been delivered is not located in the United States (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction; and its possessions include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands, and (3) you consent to delivery of the attached offering memorandum and any amendments or supplements thereto by electronic transmission. The attached document has been made available to you in electronic form.

You are reminded that documents transmitted via this medium may be altered or changed during the process of transmission and consequently none of the Company, the Initial Purchasers and their respective affiliates, directors, officers, employees, representatives and agents or any other person controlling the Company, the Initial Purchasers or any of their respective affiliates accepts any liability or responsibility whatsoever in respect of any discrepancies between the document distributed to you in electronic format and the hard copy version.

ANY SECURITIES TO BE ISSUED HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES (AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER THE SECURITIES ACT) UNLESS REGISTERED UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION. YOU ARE NOT AUTHORISED TO AND YOU MAY NOT FORWARD OR DELIVER THE ATTACHED OFFERING MEMORANDUM, ELECTRONICALLY OR OTHERWISE, TO ANY OTHER PERSON OR REPRODUCE SUCH OFFERING MEMORANDUM IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT AND THE ATTACHED OFFERING MEMORANDUM IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.

The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. No action has been or will be taken in any jurisdiction by the Initial Purchasers or the Company that would or is intended to, permit a public offering of the securities, or possession or distribution of the offering memorandum (in preliminary, proof or final form) or any other offering or publicity material relating to the securities, in any country or jurisdiction where action for that purpose is required. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Initial Purchasers or any affiliate of the Initial Purchasers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the Initial Purchasers or such affiliate on behalf of the Company in such jurisdiction.

This offering memorandum is being distributed only to and directed only at (i) persons who are outside the United Kingdom, (ii) persons who have professional experience in matters relating to investments falling within Article 19(5) of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or (iii) those persons to whom it may otherwise lawfully be distributed (all such persons together being referred to as "relevant persons"). This offering memorandum is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this offering memorandum relates is available only to relevant persons and will be engaged in only with relevant persons.

You are reminded that the attached offering memorandum has been delivered to you on the basis that you are a person into whose possession this offering memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not nor are you authorised to deliver this document, electronically or otherwise, to any other person. If you receive this document by e-mail, you should not reply by e-mail to this announcement. Any reply e-mail communications, including those you generate by using the "Reply" function on your e-mail software, will be ignored or rejected. If you receive this document by e-mail, your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature.

^{}[] OFFERING MEMORANDUM

^{}[] CONFIDENTIAL

Asia Cement Corporation

(incorporated as a company limited by shares in Taiwan, the Republic of China)

US$375,000,000 Zero Coupon Exchangeable Bonds Due 2016

The US$375,000,000 Zero Coupon Exchangeable Bonds Due 2016 (the "Bonds") will be issued by Asia Cement Corporation (referred to in this offering memorandum as "ACC" or the "Company"), a company limited by shares incorporated in Taiwan, the Republic of China, with common shares at a par value of NT$10 per share (the "Shares"). Unless previously redeemed, repurchased and canceled or exchanged, the Bonds will be redeemed by the Company at 100.0% of the principal amount on January 27, 2016. Except during any Closed Period (as defined herein), the Bonds are exchangeable, at the option of the holder thereof, at any time on or after March 9, 2011 and prior to the close of business on December 28, 2015 into common shares of Far Eastern New Century Corporation ("FENC"), a company limited by shares incorporated in Taiwan, the Republic of China, with a par value of NT$10 per common share (the "Reference Shares") owned or to be owned by ACC, at an exchange price per Reference Share (subject to adjustment as described herein) of NT$63.51, determined on the basis of a fixed exchange rate of NT$29.0320 = US$1.00. The Company directly and indirectly owned 25.29% of the issued and outstanding common shares of FENC as of December 31, 2010. The common shares of FENC are listed on the Taiwan Stock Exchange Corporation ("TWSE"). On January 20, 2011, the closing price of the common shares of FENC was NT$48.85 per share.

The Company may, at its option at any time on or after January 27, 2014, redeem the Bonds, in whole or in part, at the Early Redemption Amount (as defined herein; an "Early Redemption Amount") under the circumstances described in this offering memorandum. The Company may also, at its option at any time, redeem the Bonds, in whole but not in part, at the Early Redemption Amount if at least 90% of the principal amount of the Bonds has already been redeemed, repurchased and cancelled or exchanged. In addition, the Bonds may be redeemed in whole but not in part at any time at the option of the Company at the relevant Early Redemption Amount in the event of certain changes relating to taxation in the Relevant Jurisdiction (as defined herein) have occurred.

Each holder of the Bonds has the right, at such holder's option, to require the Company to redeem all or a portion of such holder's Bonds (i) on January 27, 2014 at 100.0% of their principal amount or (ii) at the Early Redemption Amount in the event that the Reference Shares cease to be listed on the TWSE for a period of at least five trading days or (iii) at the Early Redemption Amount in the event of a Change of Control of FENC (as defined herein). For a more detailed description of the Bonds, see "Description of the Bonds."

Investing in the Bonds involves risks. See "Risk Factors" beginning on page 20.

Approval in-principle has been received for the listing of the Bonds on the Singapore Exchange Securities Trading Limited (the "SGX-ST"). The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained herein. Admission of the Bonds to the Official List of the SGX-ST is not to be taken as an indication of the merits of the Bonds, the Company or FENC. Currently, there is no public market for the Bonds.

ISSUE PRICE 100.0%

The Bonds and the Reference Shares have not been and will not be, and the Exchange Property Securities (as defined herein) may not be, registered under the United States Securities Act of 1933, as amended (the "Securities Act"), and are being offered and sold only outside the United States in reliance on Regulation S under the Securities Act ("Regulation S"). For a description of certain restrictions on resale or transfer, see "Plan of Distribution" and "Transfer Restrictions."

The Bonds will be represented by one or more global certificates (each a "Global Certificate") and will be fully issued in registered form, which will be registered in the name of The Bank of New York Depository (Nominees) Limited, as the nominee for, and shall be deposited with, The Bank of New York Mellon, acting through its London Branch, as common depositary for Euroclear Bank S.A./N.Y. ("Euroclear") and Clearstream Banking, société anonyme ("Clearstream"). Beneficial interests in the Bonds will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream and their participants. Except as described herein, individual definitive certificates for the Bonds will not be issued in exchange for interests in the Bonds. The Initial Purchasers expect to deliver the Bonds to purchasers on or about January 27, 2011.

Sole Global Coordinator

Goldman Sachs International

Joint Bookrunners and Joint Lead Managers

Goldman Sachs International

UBS AG, Hong Kong Branch

Citi

Co-Managers

BNP Paribas Capital (Asia Pacific) Limited

Mizuho International plc

^{}[] The date of this offering memorandum is January 20, 2011

Having made all reasonable inquiries, we confirm that this offering memorandum is true and accurate in all material respects and is not misleading and that the opinions and intentions expressed herein are honestly held and we accept full responsibility for all the information set out in this offering memorandum. Notwithstanding the foregoing, certain market and industry data used in this offering memorandum were obtained from publicly available information, such as newspapers, statistical data from the TWSE, Bloomberg, L.P. and the Federal Reserve Bank of New York and industry publications, and we take responsibility for correctly reproducing such information only. Certain information provided herein with respect to the Republic of China ("ROC") and its political status and economy has been derived from governmental and other public sources, including the Financial Supervisory Commission ("FSC"), and with respect to such information, we accept responsibility only for extracting such information from such sources. Nothing has come to our attention that would cause us to believe either that such information is not correct and complete in all material respects or that there have been any developments of a material nature affecting ACC or FENC which are not described in this offering memorandum.

No person has been or is authorized to give any information or to make any representation concerning the Company, its respective subsidiaries and affiliates, the Bonds, the Reference Shares or the Exchange Property Securities, other than as contained herein and, if given or made, any such other information or representation should not be relied upon as having been authorized by us or the purchasers of the Bonds under the purchase agreement dated January January 20, 2011 (the "Initial Purchasers"). Neither the delivery of this offering memorandum nor any offering, sale or delivery made in connection with the issue of the Bonds shall, under any circumstance, constitute a representation that there has been no change or development in the affairs of the Company or its subsidiaries and affiliates or any of them since the date hereof or create any implication that the information contained herein is correct as of any date subsequent to the date thereof.

No representation or warranty, express or implied, is made or given by the Initial Purchasers, the Trustee, the Principal Paying Agent, the Exchange Agent, the Registrar or the Transfer Agent as to the accuracy, completeness or sufficiency of the information contained in this offering memorandum, and nothing contained in this offering memorandum is, or shall be relied upon as, a promise, representation or warranty by the Initial Purchasers. This offering memorandum is not intended to provide the basis of any credit or other evaluation and it should not be considered as a recommendation by either us or the Initial Purchasers, the Trustee or the Agents that any recipient of this offering memorandum should purchase the Bonds. Each potential investor in the Bonds should determine for itself the relevance of the information contained in this offering memorandum and its investment in the Bonds should be based upon such investigations as it deems necessary.

The Bonds have not been recommended by any United States federal or state or foreign securities commission or regulatory authority. Furthermore, the foregoing authorities have not reviewed or passed on the accuracy or adequacy of this offering memorandum, and any representation to the contrary may be a criminal offense.

The distribution of this offering memorandum and the offering of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this offering memorandum comes are required by us and the Initial Purchasers to inform themselves about and to observe any such restrictions. This offering memorandum does not constitute an offer of, or any invitation by or on behalf of us or the Initial Purchasers to subscribe for or purchase, any of the Bonds, the Reference Shares or the Exchange Property Securities and may not be used for the purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in which such offer or solicitation is not authorized or is unlawful. No action is being taken to permit a public offering of the Bonds, the Reference Shares or the Exchange Property Securities or the distribution of this document in any jurisdiction where action would be required for such purposes.

There are restrictions on the offer and sale of the Bonds and/or the Reference Shares and/or the Exchange Property Securities, if applicable, and on the circulation of documents relating thereto in certain jurisdictions, including the United States, Canada, the United Kingdom, Hong Kong, Singapore, Japan and the ROC, and to persons connected therewith. For a description of certain further restrictions on offers, sales and resales of the Bonds, the Reference Shares or the Exchange Property Securities and distribution of this offering memorandum, see "Plan of Distribution."

Recipients of this offering memorandum shall not reissue, circulate or distribute this offering memorandum or any part thereof in any manner whatsoever. Each prospective investor, by accepting delivery of this offering memorandum, agrees to the foregoing and to make no photocopies of this offering memorandum or any documents referred to in this offering memorandum.

In making an investment decision, investors must rely on their own examination of the Company, FENC and the terms of this offering, including the merits and risks involved. See “Risk Factors” for a discussion of certain factors to be considered in connection with an investment in the Bonds.

Each person receiving this offering memorandum acknowledges that such person has not relied on the Initial Purchasers or any person affiliated with the Initial Purchasers in connection with its investigation of the accuracy of such information or its investment decision. Prospective investors in the Bonds are hereby notified that the seller of any Bonds may be relying on the exemption from the registration requirements of Section 5 of the Securities Act provided by Regulation S.

Each person receiving this offering memorandum acknowledges that (i) this offering memorandum does not contain all the information that would be included in an offering memorandum for this offering were this offering registered under the Securities Act, (ii) the financial statements included herein have been prepared in accordance with generally accepted accounting principles in the ROC (“ROC GAAP”), which differ in many significant respects from accounting principles generally accepted internationally and (iii) no person has been authorized to give any information or to make any representation concerning us, the Bonds, the Reference Shares or the Exchange Property Securities other than as contained herein and, if given or made, any such information or representation should not be relied upon as having been authorized by us.

Statements contained in this offering memorandum as to the contents of any contract or other document referred to in this offering memorandum may not set forth all of the terms and conditions of such contracts or other documents.

^{}[] iii

Section	Page
Presentation of Information	1
Forward-Looking Statements	2
Enforceability of Foreign Judgments in the ROC	3
Summary	4
The Offering	10
Summary Financial and Operating Data	15
Risk Factors	20
Recent Developments	40
Use of Proceeds	41
Dividend Policy of FENC	42
Market Price Information for Common Shares of FENC	44
Capitalization of ACC	45
Exchange Rates	46
Management's Discussion and Analysis of Financial Condition and Results of Operations of ACC	47
Relationship with the Far Eastern Group	56
Description of ACC	57
Our Business	57
Management	71
Related Party Transactions	76
Ownership of ACC	77
Description of FENC	78
Our Business	78
Management	89
Related Party Transactions	93
Ownership of FENC	94
Description of the Share Capital of FENC	95
Description of the Bonds	101
The Global Certificate	130
The Securities Market of the ROC	132
Foreign Investment and Exchange Controls in the ROC	135
Taxation	139
Plan of Distribution	142
Transfer Restrictions	148
Legal Matters	149
Independent Accountants	150
General Information	151
Glossary	152

^{}[] 1

PRESENTATION OF INFORMATION

The references to "ACC" and "the Company" in this offering memorandum refer to Asia Cement Corporation, and references to "we," "us" and "our" in this offering memorandum refer to Asia Cement Corporation or Asia Cement Corporation and its subsidiaries, as the context requires, unless specifically indicated. The references to "ACC China" in this offering memorandum refer to Asia Cement (China) Holdings Corporation or Asia Cement (China) Holdings Corporation and its subsidiaries, as the context requires, unless specifically indicated. Except for references to FENC's market capitalization and share capital information or specifically specified, the references to "FENC" in this offering memorandum refer to Far Eastern New Century Corporation and its subsidiaries. The references to "Shares" refer to the common shares of ACC, par value NT$10 per common share. The references to "Reference Shares" refer to the common shares of FENC, par value NT$10 per common share. The references to "Taiwan" and "ROC" refer to Taiwan, the Republic of China. The references to "PRC" and "China" refer to the People's Republic of China. The references to "the ROC Company Law" refer to the Company Law of the ROC. The references to "MT" mean metric ton or metric tons. The references to "FSC" refer to the Financial Supervisory Commission, ROC Executive Yuan of the ROC. The references to "TWSE" refer to the Taiwan Stock Exchange Corporation.

Unless expressly stated otherwise, all financial data as of and for the years ended December 31, 2007, 2008, and 2009 included in this offering memorandum are presented on an audited consolidated basis for ACC and FENC; and all financial data as of and for the nine months ended September 30, 2009 and 2010 included in this offering memorandum are presented on an unaudited consolidated basis for ACC and FENC in accordance with ROC GAAP.

The audited and unaudited consolidated financial statements of ACC and FENC are published in New Taiwan dollars, the lawful currency of the ROC. All references to "United States dollars," "US dollars" and "US$" are to United States dollars, all references to "New Taiwan dollars," "NT dollars" and "NT$" are to New Taiwan dollars and all references to "HK$" are to Hong Kong dollars. Unless otherwise noted, all translations from NT dollars to US dollars were made at the noon buying rate in The City of New York for cable transfers in NT dollars per US dollar as certified for customs purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate") as of September 30, 2010, which was NT$31.19 = US$1.00. All amounts translated into US dollars in this offering memorandum are provided solely for your convenience and no representation is made that the NT dollar or US dollar amounts referred to herein could have been or could be converted into US dollars or NT dollars, as the case may be, at any particular rate or at all. For further information relating to exchange rates, see "Exchange Rates." On January 14, 2011, the Noon Buying Rate was NT$29.02 = US$1.00.

In this offering memorandum, where information has been presented in thousands or millions of units, amounts may have been rounded up or down. Accordingly, the total of columns or rows of numbers in tables may not be equal to the apparent total of the individual items and actual numbers may differ from those contained herein due to rounding.

^{}[] 2

FORWARD-LOOKING STATEMENTS

This offering memorandum contains forward-looking statements about ACC and FENC, including, but not limited to, statements regarding:

their respective business and operating strategy;
their respective production capacity expansion plans;
their respective business, operations and prospects;
their respective financial condition and results of operations;
expected growth in demand for their respective products;
market supply of and average selling prices for their respective products;
other expected trends in their respective industries; and
other matters described in this offering memorandum regarding matters that are not historical facts.

These forward-looking statements are generally indicated by the use of forward-looking terminology such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "may," "will" or other similar words and expressions or negatives thereof or other variations thereof or comparable terminology that express an indication of actions or results of actions that may, or are expected to, occur in the future. These statements are subject to risks, uncertainties and assumptions, many of which are beyond our control or the control of FENC. You should not place undue reliance on these statements. These forward-looking statements are based on our own information and on information from other sources we believe to be reliable. Actual results may differ materially from those expressed or implied by these forward-looking statements. Factors that could cause differences include, but are not limited to, those discussed under "Risk Factors." These forward-looking statements speak only as of the date of this offering memorandum. Each of ACC and FENC expressly disclaims any obligation or undertaking to update or revise publicly any forward-looking statements in this offering memorandum, whether as a result of new information, future events or otherwise. Because of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this offering memorandum might not occur in the way ACC and FENC expect, or at all.

^{}[] 3

ENFORCEABILITY OF FOREIGN JUDGMENTS IN THE ROC

Each of the Company and FENC is a company limited by shares and incorporated under the ROC Company Law. Substantially all of the directors, supervisors and executive officers of each of the Company, FENC and certain other parties named in this offering memorandum are residents of the ROC, and certain portion of the assets of each of the Company, FENC and such persons are located in the ROC. As a result, it may not be possible to effect service of process upon the Company, FENC or such persons outside of the ROC, or to enforce against any of them judgments obtained in courts outside of the ROC. The Company's ROC counsel has advised that any final judgment obtained against the Company, FENC or such persons in any court other than the courts of the ROC in respect of any legal suit or proceeding arising out of or relating to the Bonds, the Reference Shares or the Exchange Property Securities to be delivered upon exchange of the Bonds will be enforced by the courts of the ROC without further review of the merits only if the court of the ROC in which enforcement is sought is satisfied with the following:

the court rendering the judgment has jurisdiction over the subject matter according to the laws of the ROC;
the judgment and the court procedure resulting in the judgment are not contrary to the public order or good morals of the ROC;
if the judgment was rendered by default by the court rendering the judgment, (i) the Company, FENC or such persons were duly served within a reasonable period of time within the jurisdiction of such court in accordance with the laws and regulations of such jurisdiction, or (ii) process was served on the Company, FENC or such persons with judicial assistance of the ROC; and
judgments of the courts of the ROC are recognized in the jurisdiction of the court rendering the judgment on a reciprocal basis.

A party seeking to enforce a foreign judgment in the ROC would, except under limited circumstances, be required to obtain foreign exchange approval from the Central Bank of the Republic of China (Taiwan) ("CBC"), Taiwan's central bank, for the remittance out of the ROC of any amounts recovered in respect of the judgment denominated in a currency other than NT dollars. See "Foreign Investment and Exchange Controls in the ROC."

^{}[] 4

SUMMARY

You should read the following summary together with the more detailed information regarding ACC, the Bonds, FENC, the Reference Shares, the respective audited and unaudited consolidated financial statements of ACC, FENC and notes to those statements included elsewhere in this offering memorandum. This summary is not complete and does not contain all the information you should consider before investing in the Bonds. You should carefully read this entire offering memorandum before investing, including the section of this offering memorandum entitled "Risk Factors"; our audited consolidated financial statements and related notes as of and for the years ended December 31, 2007, 2008 and 2009 included in this offering memorandum for ACC and FENC in accordance with ROC GAAP; and our unaudited consolidated financial statements and related notes as of and for the nine months ended September 30, 2009 and 2010 included in this offering memorandum for ACC and FENC in accordance with ROC GAAP.

Our Business

Established in 1957 and later listed on the TWSE in 1962, we are a manufacturer and seller of cement, clinker, cement-related products and ready-mixed concrete ("RMC"). With two integrated cement manufacturing facilities and two major RMC subsidiaries, we are the second largest cement producer in Taiwan with total annual cement production of approximately 4.6 million MT in 2009. We are also the controlling shareholder of ACC China which is the entity through which we hold cement manufacturers in the PRC, primarily in our core markets in Sichuan, Jiangxi and Hubei provinces, and the Yangzhou and Shanghai areas. As of December 31, 2010 we effectively held 72.29% of ACC China. ACC China's annual cement production in 2009 and 2010 was approximately 14.4 million MT and 20.0 million MT, respectively. Our cement sales accounted for approximately 75% and 76% of our consolidated operating revenue for the year ended December 31, 2009 and the nine months ended September 30, 2010, respectively.

Our long-term investments totaled NT$55.6 billion (US$1.8 billion) as of December 31, 2009, and NT$57.9 billion (US$1.9 billion) as of September 30, 2010, accounting for 34.0% and 35.0% of our total consolidated assets, respectively. As of December 31, 2010, our major investment holdings included, directly and indirectly, 25.29% of FENC and 39.74% of U-Ming Marine Transport Corp. ("UMTC"). FENC is an affiliated company of ACC and is one of the leading manufacturers of polyester and related products in Asia. UMTC provides marine transportation for cement, dry commodities and industrial raw materials.

Dividend contributions from UMTC and FENC represented approximately 64% and 28%, respectively, of our 2009 total cash dividends received from equity-method investees.

For the years ended December 31, 2007, 2008 and 2009, and the nine months ended September 30, 2010, our consolidated net income was NT$10,096.0 million, NT$7,472.6 million, NT$8,955.0 million (US$287.1 million) and NT$5,375.7 million (US$172.4 million), respectively. As of December 31, 2010, ACC had a market capitalization of approximately NT$99.18 billion.

Our Strengths

We operate in a competitive industry. We believe our historical success and our potential for future growth are based on the following:

our leading market positions in the Taiwan cement market as both a leading domestic- and export capable producer, and through ACC China, in the PRC cement market which is experiencing rapid growth;
our experienced management team and its solid operational track record driven by production efficiency, competitive cost structure and an extensive sales network;
our commitment to more environmentally-friendly production processes;
our early entry into specific regional areas in the PRC through ACC China, which helps position the Company for growth; and
our synergistic integration and collaboration with subsidiaries and affiliates in the Far Eastern Group.

Our Strategies

Our goal is to be a leading provider of cement products and further increase our presence in the international cement markets through continued expansion in the PRC through ACC China. We aim to achieve this by executing the following strategic initiatives:

maintain a solid position as a market leader in Taiwan;
strategically invest in capacity expansion and increase our scale in selected regions in the PRC through ACC China;
strengthen our sales network and broaden marketing channels both domestically and internationally;
enhance profitability by increasing production efficiency through cost reductions and process improvements;
evaluate and pursue attractive strategic cooperation opportunities that may lead to acquisitions or joint ventures; and
extend our global market by expanding in emerging markets.

FENC's Business

Established in 1954, FENC is a leading producer of polyester and related products in Asia and is one of the largest producers of polyester polymer, including PET resin, in the world. With an expanding business scope which now includes real estate and equities, FENC changed its name from Far Eastern Textile Limited ("FETL") to Far Eastern New Century Corporation on October 20, 2009 to better reflect its current business scope. FENC's common shares have been listed on the TWSE since 1967. It changed its stock symbol from FETL to FENC to reflect its name change in January 2010.

FENC has extensive interests in other member companies of the Far Eastern Group which engage in cement production, property development, retailing, finance and chemicals. The following table sets forth FENC's main investments through direct and indirect holdings as of January 19, 2011.

Investee	Holdings	Market value (NT$ million)(1)
ACC	24.05%	23,557
Everest Textile	27.06%	899
Oriental Union Chemical	22.74%	7,517
Far Eastern International Bank	15.82%	4,652
Far Eastern Department Stores	18.98%	12,409
Far EasTone	41.28%	57,503

(1) Market value of FENC's holding based on the closing price as quoted on the TWSE on January 19, 2011.

In line with its new business scopes and strategies, FENC recently purchased through a subsidiary 70% of Martens Beer Trading (Shanghai) Limited Corporation on March 24, 2010.

For the years ended December 31, 2007, 2008, 2009 and the nine months ended September 30, 2010, FENC had consolidated net income of approximately NT$17,331.3 million, NT$10,317.6 million, NT$14,623.8 million (US$468.86 million) and NT$14,084.7 million (US$451.6 million), respectively. FENC had a market capitalization of approximately NT$239.88 billion as of December 31, 2010.

FENC's Strengths

FENC believes its success to date can be attributed to the following competitive strengths:

leadership in the polyester industry and strong relationships with branded customers;
superior research and development capabilities for new and improved products;
established presence in the PRC;
experienced management team; and
portfolio of investments across a wide variety of industries such as telecommunications, cement, retailing, banking and real estate development, which provides diversified sources of cash flow and growth opportunities.

FENC's Strategies

FENC's principal goal is to maintain and strengthen its position as one of the world's leading polyester companies and to enhance shareholder value. FENC aims to accomplish this through the following strategies:

invest in product development to maintain industry leadership and improve on margins;
strategically expand FENC's presence in overseas markets;
improve operating efficiency and enhance profits;
continually upgrade its product mix;
leverage synergies with the Far Eastern Group; and
realize the untapped value of idle land through selective real estate development projects.

FENC aims to continually upgrade its product mix and enhance its research and development ability to maintain its leading position in the polyester industry. Furthermore, FENC will expand its green energy business by developing more recyclable materials, such as chips, bottles and fibers, as well as biodegradable polymers made from polylactic acid. FENC has been focusing on the production of higher margin non-textile polyester products. In the next five years, FENC plans to build two PTA production facilities, one in Guanyin, Taoyuan County, Taiwan, and the other in Shanghai, China, in order to raise the annual production capacity of PTA to 4.0 million tons from the current capacity of 1.6 million tons.

Our Relationship with FENC

We had an effective 25.29% stake in FENC, of which 23.77% was directly held and 1.44% and 0.08% were indirectly held through our 99.99% and 100.00% owned subsidiaries, Der Ching Investment Corp. and Asia Investment Corp., respectively, as of December 31, 2010. In addition, several of our directors and executive officers also serve as directors or supervisors or in other executive capacities at FENC. See "Related Party Transactions" and "Ownership of FENC."

Recent Developments

Potential Joint Venture with China Shanshui

On November 19, 2010, ACC and ACC China entered into a non-legally binding Memorandum of Understanding ("MOU") with China Shanshui, a company which also manufactures and sells cement and clinker in the PRC.

Pursuant to the MOU the parties have indicated their intentions to enter into a cooperative arrangement ("Possible Cooperative Arrangement") to carry out cement-related businesses in the provinces of Liaoning and Inner Mongolia in the PRC. In order to implement the Possible Cooperative Arrangement, ACC China, or through its HK or PRC incorporated subsidiaries, will invest in China Shanshui through the acquisition of existing and/or new equity interests in various subsidiaries of China Shanshui or their holding company ("JV Companies"). ACC China intends to invest in not more than 30% of the equity interests in the JV Companies. In addition, ACC intends to purchase less than 10% of the entire issued share capital of China Shanshui from existing shareholders of China Shanshui.

The parties agreed not to negotiate with any third parties relating to any matters under the MOU before May 1, 2011, or such later date as agreed among the parties. Detailed terms and conditions for the Possible Cooperative Arrangement will be subject to further negotiations and due diligence.

^{}[] 6

ACC or ACC China may be able to generate sufficient profits to justify the costs of such expansion. See “Risk Factors—Risks Relating to both ACC and FENC—ACC, ACC China and FENC may undertake mergers, acquisitions or investments to expand their businesses that may pose risks to their businesses and dilute the ownership of existing shareholders, and neither may be able to realize the anticipated benefits of these mergers, acquisitions or investments.”

Potential Joint Venture between FENC and Sinopec Yizheng Chemical Fibre Company Limited

On December 20, 2010, FENC entered into a Letter of Intent (“LOI”) with Yangzhou Chemical Industry Park and Sinopec Yizheng Chemical Fibre Company Limited (“YCF”). YCF, a listed company on the Hong Kong Stock Exchange and the Shanghai Stock Exchange, belongs to China Petrochemical Corporation (or Sinopec Group) and is the second largest polyester producer in the PRC. FENC and YCF aim to ensure supply sufficiency through this project to meet the increasing demand for PTA. While details of the cooperation remain subject to further discussions between FENC and YCF, FENC will apply for the investment approval from the MOEA.

Pursuant to the LOI, FENC and YCF agreed to establish a joint venture company in Yizheng city, Jiangsu province of the PRC to construct a green-field PTA plant located in the Yangzhou Chemical Industrial Park. This project is based on the license granted to YCF by the National Development and Reform Commission of the PRC to construct a PTA plant with an annual capacity of 1.0 million MT. FENC plans to hold 60% while YCF holds 40% of the equity interests in this joint venture company, the total invested capital of which is estimated at RMB 3.8 billion.

There can be no assurance that any conclusive agreement will be signed between the parties. Even if such agreement is later entered into, FENC may not fully realize all of the anticipated benefits of this cooperative arrangement. We cannot assure you that this joint venture will be successful and that FENC may be able to generate sufficient profits to justify the costs of expanding their business in the PRC. See “Risk Factors — Risks Relating to both ACC and FENC—ACC, ACC China and FENC may undertake mergers, acquisitions or investments to expand their businesses which may pose risks to their businesses and dilute the ownership of existing shareholders, and neither may be able to realize the anticipated benefits of these mergers, acquisitions or investments.”

Corporate and Other Information

Our registered office is located at 31st Floor, Taipei Metro Tower, 207 Tun Hwa South Road, Section 2, Taipei, Taiwan (R.O.C.), and our telephone number is +886-2-2733-8000. Our Shares have been listed on the TWSE since 1962 under the ticker “1102.”

The following charts illustrate the major subsidiaries and affiliates of ACC and FENC as of December 31, 2010. All the percentages shown in the charts include both direct and indirect holdings.

^{}[] 7

^{}[] Corporate Structure Chart — ACC

(1) ACC has an effective 25.29% stake in FENC, of which 23.77% is directly held and 1.44% and 0.08% are indirectly held through our 99.99% and 100.00% owned subsidiaries, Der Ching Investment Corp. and Asia Investment Corp., respectively.
(2) ACC has an effective 39.74% stake in UMTC, of which 38.66% is directly held and 0.17% and 0.91% are indirectly held through our 99.99% and 100.00% owned subsidiaries, Der Ching Investment Corp. and Asia Investment Corp., respectively.
(3) ACC has an effective 72.29% stake in ACC China, of which 68.19% is directly held and 4.10% is indirectly held through our 99.96% owned subsidiary, Asia Cement (Singapore) Pte. Ltd.

^{}[] Corporate Structure Chart — FENC

(1) FENC has an effective 24.05% stake in ACC, of which 22.33% is directly held and 1.72% is indirectly held through its 100% owned subsidiaries as follows:
(i) 0.17% through Yuan Ding Investment Co., Ltd.
(ii) 0.55% through Yuan Tong Investment Co., Ltd.
(iii) 0.52% through Kai Yuan Investment Co., Ltd.
(iv) 0.39% through Ding Yuan International Investment Co., Ltd.
(v) 0.09% through An Ho Garment Co., Ltd.

(2) FENC has an effective 41.28% stake in Far EasTone which is indirectly held through its 100% owned subsidiaries as follows:
(i) 32.73% through Yuan Ding Investment Co., Ltd.
(ii) 3.20% through Yuan Tong Investment Co., Ltd.
(iii) 2.84% through Kai Yuan Investment Co., Ltd.
(iv) 2.46% through An Ho Garment Co., Ltd.
(v) 0.03% through Ding Yuan International Investment Co., Ltd.
as well as 0.02% through a 99.99% owned subsidiary, Fu Kwok Garment Manufacturing Co., Ltd.

^{}[] 10

THE OFFERING

The following is only a summary and is qualified in its entirety by reference to the "Description of the Bonds." Capitalized terms used and not defined have the meaning given to them in "Description of the Bonds."

Company	Asia Cement Corporation
Bonds offered	US$375,000,000 Zero Coupon Exchangeable Bonds due 2016.
Offering type	The Bonds are being offered by the Initial Purchasers outside the United States in reliance on Regulation S under the Securities Act. The Company has not registered, and will not register, under the Securities Act, the Bonds, the Reference Shares or the Exchange Property Securities deliverable upon exchange of the Bonds (as defined herein), if applicable. See “Transfer Restrictions.”
Issue Price	100% of the principal amount.
Closing Date	January 27, 2011.
Maturity Date	January 27, 2016.
Status	The Bonds will (i) be direct, unconditional and unsubordinated and, subject to our negative pledge covenant, unsecured obligations of the Company, (ii) rank pari passu without any preference or priority among themselves and (iii) at all times rank at least equally with all other present and future direct, unsecured and unsubordinated obligations of the Company, except as may be required by mandatory provisions of law. In addition, the Reference Shares deliverable upon the exchange of the Bonds will rank pari passu with all of FENC’s common shares outstanding as of the date of this offering memorandum.
Exchange	Subject to prior redemption and as otherwise provided herein, the Bonds are exchangeable into Reference Shares or Exchange Property Securities, if applicable, at any time on or after March 9, 2011 and prior to the close of business (at the place at which the Bond is deposited for exchange) on December 28, 2015, except during any Closed Period (as defined under “Description of the Bonds—Exchange—Exchange Right”) (the “Exchange Right”). The exchange price (subject to adjustment as described herein) (the “Exchange Price”) is NT$63.51 per Reference Share, determined on the basis of a fixed exchange rate of NT$29.0320 = US$1.00.

^{}[] 11

Delivery of the Exchange Property following a Change of Control of FENC	Following a Change of Control of FENC (as defined herein), the Exchange Right attaching to each Bond shall entitle the holder of such Bond only to the Exchange Property (the "Exchange Property") which shall consist solely of either (i) the Reference Shares, if FENC is the surviving entity, or (ii) such securities or assets (including cash) as are receivable by the Company as the holder of the Reference Shares in connection with such Change of Control of FENC, if FENC is not the surviving entity. On the exercise of Exchange Rights following a Change of Control of FENC, holders of the Bonds shall be entitled to a pro rata share of the Exchange Property per US$200,000 principal amount of the Bonds outstanding as of the Exchange Date (as defined herein) and at the Exchange Price in effect at the time of the Change of Control of FENC. The Exchange Property is subject to certain adjustments. See "Description of the Bonds—Exchange—Exchange Right—Delivery of Exchange Property Following a Change of Control of FENC."
Cash in lieu of insufficient Reference Shares	If we do not have sufficient Reference Shares or Exchange Property Securities to satisfy the exchange of any Bond, then, on or before the fifth ROC Business Day after the applicable Exchange Date, the Company will pay to the exchanging holder of the Bonds an amount in US dollars equal to the product of (x) the volume-weighted average closing price of the Reference Shares or Exchange Property Securities on the TWSE or other applicable exchange for the five consecutive Trading Days starting from the applicable Exchange Date (or such fewer number of Trading Days as available prior to the fifth ROC Business Day after the applicable Exchange Date) converted to US dollars at the Prevailing Rate (as defined herein) and (y) the number of Reference Shares or Exchange Property Securities that the Company is unable to deliver.
Final Redemption	Unless previously redeemed, repurchased and canceled, or exchanged, the Bonds will be redeemed on the Maturity Date at a redemption price equal to 100.0% of the unpaid principal amount thereof.
Redemption at the Option of the Company	At any time on or after January 27, 2014, the Company may redeem the Bonds in whole, or from time to time in part, at the Early Redemption Amount (as defined herein) if the Closing Price (as defined herein) of the Reference Shares, as applicable, translated into US dollars at the Prevailing Rate, during a period of 30 consecutive Trading Days, the last of which occurs not more than five Trading Days immediately preceding the date of such notice of redemption, is at least 130% of the quotient of the Early Redemption Amount divided by the number of Reference Shares to be delivered upon exchange of US$200,000 principal amount of Bonds on the applicable Trading Day based on the Exchange Price then in effect, translated into US dollars at the Fixed Exchange Rate.

^{}[] 12

Notwithstanding the foregoing, at any time, the Company may redeem the Bonds in whole, but not in part, at the Early Redemption Amount in US dollars if at least 90% in principal amount of the relevant tranche of Bonds has already been redeemed, repurchased and cancelled or exchanged.

Redemption at the Option of the Holders

Unless previously redeemed, repurchased and canceled or exchanged, each holder will have the right to require the Company to redeem all or a portion (in an aggregate principal amount of at least US$200,000 and integral multiples of US$1,000 in excess thereof) of the Bonds held by such holder on January 27, 2014 (the "Holders' Put Date") at a redemption price equal to 100.0% of the principal amount thereof.

Redemption in the Event of a Delisting or a Change of Control of the Company or FENC

Unless previously redeemed, repurchased and canceled, or exchanged, in the event that the Reference Shares are officially delisted from the TWSE for at least five Trading Days (a "Delisting") or upon the occurrence of a Change of Control of FENC (as defined under "Description of the Bonds—Exchange—Exchange Right"), each holder of the relevant Bond will have the right to require the Company to redeem such holder's Bonds, in whole or in part, on the 20th business day after the Company notifies the holders regarding the Delisting or the Change of Control of FENC, at a redemption price equal to the Early Redemption Amount. See "Description of the Bonds—Redemption, Repurchase and Cancellation—Redemption at the Option of Holders."

Tax Redemption

If, as a result of certain changes relating to the tax laws in the ROC or such other jurisdiction in which the Company is then organized or resident for tax purposes, the Company becomes obligated to pay Additional Amounts (as defined under "Description of the Bonds—Taxation"), the Bonds may be redeemed at any time at the option of the Company, in whole but not in part, at a redemption price equal to the Early Redemption Amount (as defined herein). See "Description of the Bonds—Redemption, Repurchase and Cancellation—Redemption for Taxation Reasons."

Early Redemption Amount

The Early Redemption Amount (an "Early Redemption Amount") is equal to 100% of the principal amount of the Bonds redeemed plus the Redemption Premium (as defined below) on the relevant redemption date.

Redemption Premium

In relation to a redemption date, the Redemption Premium means the amount that together with the principal amount would provide a holder of the Bonds who purchased the Bonds at the issue price on the Closing Date with a gross compound yield of 0% per annum (calculated on a semi-annual basis).

^{}[] 13

Withholding Tax
Payments of interest or premium (if any) on the Bonds to a Non-ROC Holder (as defined under “Taxation—ROC Taxation of Non-residents”) constitute interest income and are subject to ROC withholding tax, currently at the rate of 15%. The Company has agreed to pay Additional Amounts in respect of such withholding tax on the payments of interest and to be responsible for withholding such taxes at source.

Form and Denomination of the Bonds
The Bonds will be issued in principal amounts of US$200,000 or any integral multiple of US$1,000 in excess thereof. Subject to the conditions set forth in the Indenture, a Bond may not be offered, transferred or sold to parties other than the Company unless the principal amount is at least US$200,000. The Bonds will be represented by one or more global bonds (each, a “Global Bond,” and collectively, “Global Bonds”) in fully registered form without coupons. Each Global Bond will be deposited with and registered in the name of The Bank of New York Depository (Nominees) Limited, a nominee of the Common Depositary for Euroclear and Clearstream, which initially will be The Bank of New York Mellon, acting through its London Branch. Ownership of beneficial interests in a Global Bond will be shown on, and the transfer of that ownership will be effected only through, the records maintained by Euroclear and Clearstream (with respect to interests of their respective accountholders) and the records of such accountholders (with respect to interests of persons other than such accountholders). Except as described herein, definitive certificates with respect to the Bonds will not be issued in exchange for Global Bonds.

Negative Pledge
The Company will not, and will not permit any of its Principal Subsidiaries (as defined under “Description of the Bonds—Certain Covenants—Negative Pledge”) to, create security for the benefit of holders of any International Investment Securities (as defined under “Description of the Bonds—Certain Covenants—Negative Pledge”) or for any guarantee thereof without granting equivalent security in respect of the Bonds. See “Description of the Bonds—Certain Covenants—Negative Pledge.”

Lock-up
Each of the Company and FENC has agreed not to, without the prior written consent of the Initial Purchasers, subject to certain exceptions, sell or otherwise dispose of any Shares or Reference Shares for a period of 90 days following the date of this offering memorandum. See “Plan of Distribution.”

Events of Default
Certain events will permit acceleration of payment of the principal of the Bonds. These events include default with respect to payment of principal of, or Additional Amounts upon, the Bonds. See “Description of the Bonds—Events of Default.”

^{}[] 14

Use of Proceeds
The net proceeds of this offering, after deducting the Initial Purchasers' commissions and other estimated expenses of this offering, will be approximately US$370,900,000 and will be used by the Company to (i) purchase coal and raw materials and (ii) repay part of our outstanding consolidated long-term and short-term debt.

Trustee
The Bank of New York Mellon, acting through its London Branch.

Principal Paying Agent, Exchange Agent and Transfer Agent
The Bank of New York Mellon, acting through its London Branch.

Registrar
The Bank of New York Mellon (Luxembourg) S.A.

Transfer Restrictions
The Bonds and the Reference Shares deliverable upon exchange of the Bonds, have not been registered under the Securities Act and are subject to certain restrictions on transfer. See “Transfer Restrictions.”

Listing
Approval in-principle has been obtained for listing of the Bonds on the SGX-ST. The Bonds will be traded on the SGX-ST in a minimum board lot size of US$200,000 for so long as the Bonds are listed on the SGX-ST. The Reference Shares are listed and traded on the TWSE.

Governing Law
The laws of the State of New York.

^{}[] 15

SUMMARY FINANCIAL AND OPERATING DATA

The following tables present the summary consolidated financial and operating data of the Company and the summary consolidated financial data for FENC. The summary consolidated income statement, balance sheet and statement of cash flow data for the Company as of and for the nine months ended September 30, 2009 and 2010 are derived from our unaudited consolidated financial statements that have been reviewed by Deloitte & Touche, independent auditors, and included elsewhere in this offering memorandum. The readers should note that Deloitte & Touche's review report to the Company's unaudited consolidated financial statements as of and for the nine months ended September 30, 2009 and 2010 states that the financial statements of certain consolidated subsidiaries, which account for a substantial majority of the consolidated net operating revenue and about a half of the consolidated net income for the nine months ended September 30, 2010, have not been reviewed. The summary consolidated income statement, balance sheet and statement of cash flow data for the Company as of and for the years ended December 31, 2007, 2008, and 2009 are derived from our consolidated financial statements that have been audited by Deloitte & Touche, independent auditors, and included elsewhere in this offering memorandum.

The summary consolidated income statement, balance sheet and statement of cash flow data for FENC as of and for the nine months ended September 30, 2009 and 2010 are derived from FENC's unaudited consolidated financial statements that have been reviewed by Deloitte & Touche, independent auditors, and included elsewhere in this offering memorandum. The readers should note that Deloitte & Touche's review report to FENC's unaudited consolidated financial statements as of and for the nine months ended September 30, 2009 and 2010 states that the financial statements of certain consolidated subsidiaries, which account for a substantial percentage of the consolidated net operating revenue for the nine months ended September 30, 2010, have not been reviewed. The summary consolidated income statement, balance sheet and statement of cash flow data for FENC as of and for the years ended December 31, 2007, 2008, and 2009 are derived from FENC's consolidated financial statements that have been audited by Deloitte & Touche, independent auditors, and included elsewhere in this offering memorandum.

The unaudited consolidated financial statements of the Company and of FENC for the first and third quarters of each fiscal year are generated internally by us and by FENC, respectively, and is not subject to the same review and scrutiny to which we and FENC subject our and its audited consolidated annual financial statements, respectively. Any evaluation of the unaudited interim consolidated financial information presented in this offering memorandum should also take into account the audited consolidated financial statements and the notes thereto included in this offering memorandum.

ACC (Consolidated)

	Year Ended December 31,				Nine Months Ended September 30,
	2007	2008	2009	2009(1)	2009	2010	2010(1)
(in millions, except per share data)
Income Statement Data:
Net operating revenues	NT$35,946.5	NT$44,005.5	NT$48,079.7	US$1,541.5	NT$35,605.4	NT$36,792.9	US$1,179.6
Operating costs	(30,058.9)	(37,738.1)	(39,052.7)	(1,252.1)	(28,549.5)	(32,708.1)	(1,048.6)
Gross profit	5,887.6	6,267.4	9,027.0	289.4	7,055.9	4,084.8	131.0
Operating expenses	(1,926.8)	(2,748.6)	(3,098.6)	(99.3)	(2,183.4)	(2,034.0)	(65.2)
Operating income	3,960.8	3,518.8	5,928.4	190.1	4,872.5	2,050.8	65.8
Net nonoperating income and gains (expenses and losses)
Investment income from equity-method investees	7,173.3	5,088.5	4,361.1	139.8	3,175.9	4,730.1	151.7
Interest Expenses	(1,160.4)	(1,685.4)	(1,417.2)	(45.4)	(1,123.4)	(1,056.7)	(33.9)
Others	792.2	947.6	800.7	25.6	1,073.5	(86.0)	(2.8)
Net nonoperating income and gains	6,805.1	4,350.7	3,744.6	120.0	3,126.0	3,587.4	115.0
Income before income tax	10,765.9	7,869.5	9,673.0	310.1	7,998.5	5,638.2	180.8
Income tax expense	(669.9)	(396.9)	(718.0)	(23.0)	(550.2)	(262.5)	(8.4)
Consolidated net income	NT$10,096.0	NT$ 7,472.6	NT$ 8,955.0	US$ 287.1	NT$ 7,448.3	NT$ 5,375.7	US$ 172.4
Attributable to:
Stockholders of parent company	NT$10,100.4	NT$ 7,314.6	NT$ 7,885.0	US$ 252.8	NT$ 6,614.5	NT$ 5,234.3	US$ 167.8
Minority interest	(4.4)	158.0	1,070.0	34.3	833.8	141.4	4.6
Basic earnings per share(2)	NT$ 3.38	NT$ 2.45	NT$ 2.64	US$ 0.08	NT$ 2.15	NT$ 1.70	US$ 0.05

	As of December 31,				As of September 30,
	2007	2008	2009	2009(1)	2009	2010	2010(1)
(in millions, except per share data)
Balance Sheet Data:
Current assets	NT$22,915.4	NT$34,745.9	NT$36,791.6	US$1,179.6	NT$32,988.2	NT$29,745.0	US$953.7
Long-term investments	54,178.1	46,222.1	55,598.6	1,782.6	52,679.4	57,943.4	1,857.8
Net properties	41,976.8	53,781.5	60,585.4	1,942.4	56,970.0	65,647.8	2,104.8
Intangible assets	2,209.7	2,364.1	3,271.0	104.9	3,090.1	4,654.6	149.2
Other assets	6,886.7	7,119.0	7,481.6	239.9	7,533.7	7,515.7	240.9
Total assets	128,166.7	144,232.6	163,728.2	5,249.4	153,261.4	165,506.5	5,306.4
Current liabilities	14,883.4	20,994.3	26,181.9	839.4	20,156.2	21,836.8	700.1
Long-term liabilities	33,737.9	42,791.7	46,154.3	1,479.8	45,477.6	51,956.9	1,665.8
Reserve for land value increment tax	1,466.3	1,466.3	1,466.3	47.0	1,466.3	1,466.3	47.0
Other liabilities	1,779.3	1,776.0	1,857.9	59.6	1,723.2	1,664.4	53.4
Total liabilities	51,866.9	67,028.3	75,660.4	2,425.8	68,823.3	76,924.4	2,466.3
Total stockholders' equity	76,299.8	77,204.3	88,067.8	2,823.6	84,438.1	88,582.1	2,840.1

	Year Ended December 31,				Nine Months Ended September 30,
	2007	2008	2009	2009(1)	2009	2010	2010(1)
	(in millions, except per share data)
Statement of Cash Flow Data:
Capital expenditures	NT$(6,134.3)	NT$(12,264.2)	NT$(11,823.2)	US$(379.1)	NT$(7,500.1)	NT$(7,900.2)	US$(253.3)
Depreciation and amortization	2,455.6	2,907.6	3,768.8	120.8	2,730.3	2,932.9	94.0
Cash flows from operating activities	7,247.0	10,129.8	11,642.0	373.3	8,176.9	3,567.5	114.4
Cash flows from investing activities	(7,007.3)	(15,523.1)	(13,156.4)	(421.8)	(8,867.5)	(8,068.0)	(258.7)
Cash flows from financing activities	(895.2)	17,348.9	2,483.0	79.6	(3,295.9)	(6,347.7)	(203.5)
Cash and cash equivalents, beginning of period	6,860.5	6,207.1	16,931.4	542.8	16,931.4	17,838.1	571.9
Cash and cash equivalents, end of period	6,207.1	16,931.4	17,838.1	571.9	13,708.3	5,830.6	186.9
Operating Data:
Gross margin	16.4%	14.2%	18.8%	18.8%	19.8%	11.1%	11.1%
Operating margin	11.0%	8.0%	12.3%	12.3%	13.7%	5.6%	5.6%
Adjusted EBITDA(3)	NT$ 6,416.4	NT$ 6,426.4	NT$ 9,697.2	US$ 310.9	NT$ 7,602.8	NT$ 4,983.7	US$ 159.8
Adjusted EBITDA margin(4)	17.8%	14.6%	20.2%	20.2%	21.4%	13.5%	13.5%

(1) Translated solely for the convenience of the reader into US dollars at the Noon Buying Rate on September 30, 2010 of NT$31.19 = US$1.00.
(2) Based on the average number of common shares outstanding during the relevant periods.
(3) Adjusted EBITDA is defined as operating income plus depreciation and amortization. You should not consider adjusted EBITDA as:

an alternative to net income or operating income;
an indicator of our combined operations or cash flow data; or
an alternative to cash flow as a measure of liquidity.

The items of net income excluded from adjusted EBITDA are significant components in understanding and assessing our financial performance, and our computation of adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

(4) Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by net operating revenues.

FENC (Consolidated)

	Year Ended December 31,				Nine Months Ended September 30,
	2007	2008	2009	2009(1)	2009	2010	2010(1)
(in millions, except per share data)
Income Statement Data:
Net operating revenues	NT$163,890.9	NT$172,999.7	NT$166,973.3	US$5,353.4	NT$120,171.2	NT$144,638.6	US$4,637.3
Operating cost	(122,222.9)	(133,909.5)	(127,980.0)	(4,103.2)	(91,777.9)	(111,419.8)	(3,572.3)
Gross profit excluding realized construction income	41,668.0	39,090.2	38,993.3	1,250.2	28,393.3	33,218.8	1,065.0
Realized construction income	0.6	0.6	0.6	0.0	0.3	0.3	0.01
Gross Profit	41,668.6	39,090.8	38,993.9	1,250.2	28,393.6	33,219.1	1,065.1
Operating expenses	(23,928.1)	(24,262.6)	(23,352.1)	(748.7)	(17,294.7)	(18,413.8)	(590.4)
Operating income	17,740.5	14,828.2	15,641.8	501.5	11,098.9	14,805.3	474.7
Net nonoperating income and gains (expenses and losses)
Investment income from equity-method investees	4,473.4	(168.0)	3,921.1	125.7	3,134.5	1,955.7	62.7
Interest Expenses	(2,372.9)	(2,791.8)	(1,449.7)	(46.5)	(1,130.7)	(799.3)	(25.6)
Others	798.2	1,153.7	(27.0)	(0.9)	155.1	302.7	9.7
Net nonoperating income and gains	2,898.7	(1,638.1)	2,444.4	78.4	2,158.9	1,459.1	46.8
Income before income tax	20,639.2	13,190.1	18,086.2	579.9	13,257.8	16,264.4	521.5
Income tax expenses	(3,307.9)	(2,926.2)	(3,462.4)	(111.0)	(2,593.5)	(2,179.7)	(69.9)
Extraordinary gain	—	53.7	—	—	—	—	—
Net income	NT$ 17,331.3	NT$ 10,317.6	NT$ 14,623.8	US$ 468.9	NT$ 10,664.3	NT$ 14,084.7	US$ 451.6
Attributable to:
Stockholders of parent company	11,367.1	4,621.9	8,088.7	259.3	5,894.6	8,760.4	280.9
Minority interest	5,964.2	5,695.7	6,535.1	209.5	4,769.7	5,324.3	170.7
Basic earnings per share(2)	NT$ 2.44	NT$ 0.99	NT$ 1.74	US$ 0.1	NT$ 1.24	NT$ 1.84	US$ 0.06

	As of December 31,				As of September 30,
	2007	2008	2009	2009(1)	2009	2010	2010(1)
(in millions, except per share data)
Balance Sheet Data:
Current assets	NT$ 75,971.4	NT$ 73,120.2	NT$ 73,862.8	US$2,368.2	NT$ 63,460.3	NT$ 85,795.7	US$2,750.8
Funds and investments	58,307.1	50,561.2	56,036.5	1,796.6	54,331.7	45,959.4	1,473.5
Net properties	113,074.7	120,502.4	111,483.9	3,574.3	113,273.5	127,816.0	4,098.0
Intangible assets	20,391.6	19,760.3	19,512.7	625.6	20,290.3	19,729.6	632.6
Other assets	5,164.3	6,877.8	6,523.7	209.2	7,015.6	7,627.0	244.5
Total assets	272,909.1	270,821.9	267,419.7	8,573.9	258,371.4	286,927.7	9,199.4
Current liabilities	63,547.9	71,369.5	69,961.0	2,243.1	64,365.1	83,268.0	2,669.7
Long-term liabilities	56,549.9	55,627.7	45,788.5	1,468.1	46,944.6	47,119.2	1,510.7
Other liabilities	9,880.2	11,010.6	10,162.4	325.7	11,025.8	11,017.4	353.3
Total liabilities	129,978.0	138,007.8	125,911.9	4,036.9	122,335.5	141,404.6	4,533.7
Total stockholders' equity	NT$142,931.1	NT$132,814.1	NT$141,507.8	US$4,537.0	NT$136,035.9	NT$145,523.1	US$4,665.7

	Year Ended December 31,				Nine Months Ended September 30,
	2007	2008	2009	2009(1)	2009	2010	2010(1)
	(in millions, except per share data)
Cash Flow Data:
Capital expenditures	NT$16,436.7	NT$12,375.0	NT$ 9,905.6	US$ 317.6	NT$ 7,507.7	NT$12,842.1	US$411.7
Depreciation and amortization	15,276.2	15,695.5	16,554.8	530.8	12,871.3	12,256.8	393.0
Cash flows from operating activities	25,869.0	27,736.1	30,084.1	964.5	23,731.7	28,379.7	909.9
Cash flows from investing activities	(13,174.6)	(9,644.3)	(10,800.9)	(346.3)	(7,494.7)	(26,801.9)	(859.3)
Cash flows from financing activities	(7,396.9)	(19,823.6)	(21,887.1)	(701.7)	(24,126.1)	(5,950.2)	(190.8)
Cash and cash equivalents, beginning of year	17,570.2	24,206.2	22,946.5	735.7	22,946.5	21,142.0	677.8
Cash and cash equivalents, end of year	24,206.2	22,946.5	21,142.0	677.8	14,995.5	21,481.7	688.7
Operating Data:
Gross margin	25.4%	22.6%	23.4%	23.4%	23.6%	23.0%	23.0%
Operating margin	10.8%	8.6%	9.4%	9.4%	9.2%	10.2%	10.2%
Adjusted EBITDA(3)	NT$33,016.8	NT$30,523.6	NT$32,196.7	US$1,032.3	NT$23,970.3	NT$27,062.1	US$867.7
Adjusted EBITDA margin(4)	20.1%	17.6%	19.3%	19.3%	19.9%	18.7%	18.7%

an alternative to net income (loss) or operating income (loss);
an indicator of our combined operations or cash flow data; or
an alternative to cash flow as a measure of liquidity.

The items of net income (loss) excluded from adjusted EBITDA are significant components in understanding and assessing our financial performance, and our computation of adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

(4) Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by net operating revenues.

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RISK FACTORS

You should carefully consider the risks and uncertainties described below and other information contained in this offering memorandum before investing in the Bonds. The risks and uncertainties described below may not be the only ones that we face. Additional risks and uncertainties that we are not aware of or that we currently believe are immaterial may also adversely affect our business, financial condition or results of operations. If any of the risks described below actually occurs, the business, financial condition and results of operations of ACC or those of FENC could be seriously harmed, the trading price of the Bonds or the Reference Shares could decline, and you may lose all or part of your investment. Capitalized terms used but not defined herein have the meanings given to them elsewhere in this offering memorandum.

Risks Relating to ACC

Our business is affected by the level of activity in the construction industry which is affected by the general economic conditions in Taiwan and the PRC.

Our and ACC China's cement business is substantially affected by the general level of activity in the construction industry in Taiwan and the PRC. General economic conditions, mortgage and interest rate levels, inflation, unemployment, demographic trends, gross domestic product growth and consumer confidence are some of the factors which may influence the performance of the construction industry. A downturn in the construction industry in Taiwan, the PRC or in any of the regional markets in which we operate could materially and adversely affect our financial condition and results of operations.

In particular, our business in the PRC through ACC China depends significantly on the level of activity and growth in the construction industry of ACC China's core markets in Jiangxi, Sichuan and Hubei provinces, and Yangzhou and Shanghai areas. Any slowdown in the growth of these provinces and areas, or a general downturn in the construction industry, particularly any decrease in activities related to the government infrastructure projects, could affect the demand for our and ACC China's products, which in turn could have a material and adverse effect on our and ACC China's business, financial condition and results of operations.

We are exposed to the risks of increasing energy and raw material costs, and the inability to secure a steady supply of such resources.

Our and ACC China's energy costs in connection with the purchase of coal and electricity contribute a significant portion to our costs in the cement business. The energy costs relating to our cement business accounted for approximately 47% of the total production cost in ACC's Taiwan cement business and 50% of the total cost of sales in ACC China's cement business in 2009. In the nine months ended September 30, 2010, the energy costs related to both of our cement business accounted for approximately 49% and 50% of total production cost in Taiwan and the cost of sales in the PRC, respectively.

Coal is one of the principal sources of energy used by both companies to fuel the cement operations, and we rely heavily on being able to procure a steady supply of coal. We and ACC China use a substantial amount of electricity in our production. Therefore any shortage or interruption in the supply of coal or electricity could disrupt our operations and increase the costs of sale for both ACC China and us. In both Taiwan and China, we and ACC China have implemented waste heat recovery systems in order to generate electricity and reduce the power costs.

With the exception of limestone, which is sourced from our own limestone quarries, raw materials used in the production and operations, such as fly ash and iron sand, are purchased from external suppliers. These materials are subject to a high degree of price volatility caused by external conditions such as fluctuations in commodity prices and changes in government policies and programs. In the past the prices we and ACC China had to pay for such raw materials have experienced volatile fluctuations. The costs of raw materials accounted for approximately 14% of the total production cost in our Taiwan cement business and 22% of the total cost of sales in the PRC cement business in 2009, and 14% of the total production cost in our Taiwan business and 25% of the total cost of sales in the PRC business for the nine months ended September 30, 2010. We cannot assure you that our or ACC China's key suppliers will continue to provide us with raw materials at reasonable prices, or that the prices we pay for raw material or energy will

remain stable in the future. In addition, we and ACC China may not be able to transfer some or all of the increase in costs to the customers. As a result, any increase or material fluctuations in the prices of the raw materials or energy could have a material adverse effect on our and ACC China's business, financial condition and results of operations.

We are subject to cement price fluctuations, and our competitiveness depends on our ability to control costs and maintain high levels of operational efficiency.

Our and ACC China's financial performances are highly dependent on the prevailing prices of cement and other related materials in the markets in which we operate. Historically, such prices have been influenced by the forces of supply and demand dynamics, market conditions, overall economic growth as well as a variety of other factors beyond our control. Government actions may also affect cement prices. These external factors, in addition to the volatility of the markets in which we and ACC China operate, render cement prices difficult to predict. Any substantial or extended decline in cement prices would adversely affect the results of our operations and financial condition.

Our and ACC China's competitiveness, long-term profitability and ability to undertake the capital expenditures necessary to expand our business depend on whether we are able to control our costs and maintain high levels of operational efficiency. Such efforts include minimizing the costs of extracting raw materials and managing other costs such as power, labor and transportation. The production costs of us and ACC China are also affected by production volumes, and thus our ability to maintain production levels and maximize capacity utilization is a key factor in determining our overall competitiveness.

There can be no assurance that either we or ACC China will be able to maintain or increase our production volumes in the future. A sustained and material decline in our product prices, a significant rise in our production costs, or a decline in our production volumes or capacity utilization could each have a material adverse effect on our business, financial condition and results of operations.

We may have difficulty in managing our future growth in the PRC if our business operations and construction of new facilities are disrupted by reasons beyond our control.

We have been expanding our cement business in the PRC through ACC China. We will continue to expand our production, distribution, and processing network for cement products in our target markets through ourselves and/or through our subsidiaries and/or affiliates. As part of this growth strategy, ACC China is currently constructing new rotary kilns for cement production as well as new grinding facilities at various plant locations. All of these new production facilities are expected to commence production within the next few years.

During the construction of these new production and grinding facilities, ACC China may face various risks, such as cost overruns, delays in completion or other factors that are beyond their control. Factors which may contribute to delays and cost overruns include price changes and availability of key equipment or materials, the cost and availability of financing, risks relating to construction, changes in safety and/or environmental requirements, changes in the economic conditions, adverse weather conditions, natural disasters, accidents and unforeseen circumstances and problems in the PRC. In addition, this planned future growth will require significant managerial, operational and financial resources.

If we cannot manage the growth of ACC China effectively, or if there are any significant delays in the completion of any of these projects or a material increase in the costs of any of these projects, the implementation of our business strategy in the PRC and our financial performance may be adversely affected.

If the capital resources required for the future expansion of our capacity in the PRC through ACC China are not available, we may be unable to successfully implement our business strategy.

Our ability to expand the PRC manufacturing facilities operated under ACC China will continue to depend largely on our and ACC China's ability to obtain sufficient cash flow from operations and/or external funding. We expect ACC China to make substantial capital expenditures in connection with the expansion of their manufacturing capacity in the PRC,

^{}[] 21

including the investments in the Jiangxi province in 2012 and in the two new cement and clinker production lines of Jiangxi Yadong Cement Co., which are planned to be completed by 2014. These capital expenditures will be made well in advance of any additional sales generated from the results of these expenditures. Our profitability may be adversely affected if ACC China does not have the capital resources to complete the expansion plans or if their actual expenditures exceed planned expenditures for any number of reasons which can include changes in:

their growth plan;
market conditions;
prices of equipment; and
interest rates and foreign exchange rates.

We cannot assure you that the required additional financing will be available to us or ACC China on satisfactory terms, if at all. If adequate funds are not available on satisfactory terms at appropriate times, ACC China may have to curtail its expansion plans, which could result in a loss of customers and adversely affect our ability to implement our business strategy successfully and in turn limit the growth of our business.

If we fail to attract and retain skilled technical personnel, our operations and expansion plans would be adversely affected.

Our success depends on our and ACC China's ability to attract and retain skilled employees, particularly engineering and technical personnel within the research and development and manufacturing processing divisions. Without a sufficient number of skilled employees, our and ACC China's operations and manufacturing quality would suffer. Competition for qualified technical personnel and operators in Taiwan and the PRC is intense and replacing or finding new skilled employees is difficult. We and ACC China may encounter this problem in the future as we require increased numbers of skilled employees for our expansion. Any failure to attract and retain our technical personnel and other employees may adversely affect our business, and our operating efficiency may deteriorate.

We, along with many of our customers and suppliers, are vulnerable to events beyond our control, which may seriously disrupt our operations.

Disruptions of the operations at our facilities, ACC China's facilities or the facilities of our customers and suppliers for any reason, including work stoppages, power outages, water supply shortages, fire or other events, could cause delays in the manufacturing and shipment of our and ACC China's products. We believe that both we and ACC China are able to manage our sources of raw materials to respond to any such events. Any delays or disruptions of our operations could cause our customers to seek their supply of cement products from other manufacturers.

We and ACC China depend on seaborne freight, rail, trucking, overland conveyor and other systems to deliver our products to the market. Disruptions of these transportation services due to weather-related problems, key equipment failures, strikes, lock-outs or other events could temporarily impair our ability to supply commodities to our customers and thus could adversely affect our results of operations and financial condition. Even though both we and ACC China seek to coordinate our delivery logistics to improve our turnover performance, our ability to increase export sales, for example, may be restricted by available port capacity which may adversely affect our ability to increase turnover.

A large proportion of our operating revenue is derived from the PRC market through ACC China.

Sales from the PRC have consistently made substantial contributions to our operating revenue in the past three years. For the years ended December 31, 2007, 2008 and 2009, the revenue contribution from the PRC market accounted for approximately $35.5\%$, $45.7\%$ and $56.6\%$, respectively, of our corresponding total cement-related operating revenue in Taiwan and the PRC Market. Moreover, most of our current expansion plans in the cement business, including our investments in Jiangxi province and in the two new cement and clinker production lines of Jiangxi Yadong Cement Co., are focused on increasing production capacity in the PRC.

^{}[] 1 Before adjustments and eliminations.

Therefore, we expect that our reliance on the Chinese market and ACC China, through which we now conduct all of our Chinese business and operations, will increase in the future. Any factors that may adversely impact the Chinese cement market or ACC China's business will have an increasing influence over our overall business, operational results and financial position.

We rely on income from our interests in other member companies of the Far Eastern Group.

Historically, we have derived a substantial portion of our net income from our equity interests in other member companies of the Far Eastern Group, including FENC and UMTC. For the years ended December 31, 2007, 2008, 2009 and the nine months ended September 30, 2010, our investment income from equity-method investees was NT$7,173.3 million, NT$5,088.5 million, NT$4,361.1 million (US$139.8 million) and NT$4,730.1 million (US$151.7 million), respectively, accounting for approximately 71.1%, 68.1%, 48.7% and 88.0%, respectively, of our corresponding consolidated net income. The results of operations of other Far Eastern Group companies in which we do not have a controlling interest may be adversely affected by a variety of factors beyond our control. There can be no assurance that our investment income from equity-method investees will continue to contribute positively to our total consolidated net income.

Our largest shareholder is FENC, which may be able to exert significant influence on our management, policies and corporate actions.

FENC directly and indirectly owned 24.05% of our issued and outstanding common shares as of December 31, 2010 and is a substantial shareholder of ACC. In addition, several directors, supervisors and executive officers of FENC, including its chairman, also serve in official capacities at the Company. As a result, FENC may be able to exert influence on our management, policies and the outcome of most corporate actions through their voting at shareholders' meetings or at board meetings. FENC may take actions that you may not agree with or that are not in the best interests of us or our public shareholders.

Insurance coverage for us and ACC China may not be sufficient to cover the risks related to both of our operations and losses.

We may experience major accidents in the course of our operations. Although we maintain liability insurance, such an insurance program does not cover, or may not cover adequately, every potential risk associated with our operations and the consequences resulting from them. In accordance with customary practice in Taiwan and the PRC, neither we nor ACC China carry any business interruption insurance arising from accidents on either of our properties or relating to our operations. In addition, as a result of market conditions, premiums and deductibles for our existing insurance policies can increase substantially and, in some instances, our existing insurance may become unavailable or available only for reduced amounts of coverage. Furthermore, we and ACC China may not be able to obtain meaningful coverage at reasonable rates for certain types of environmental hazards. The occurrence of an accident, the losses and damages of which are not fully covered by insurance, could have a material adverse effect on our and ACC China's business, financial condition and results of operations.

Any failure to maintain an effective quality control system at our product facilities could have a material and adverse effect on our business, financial condition and results of operations.

The quality of our and ACC China's products is critical to the success of our business. The quality of our products depends on the effectiveness of our quality control system, which in turn depends on a number of factors, including the design of the system, the quality control training program and our ability to ensure that our employees adhere to our quality control policies and guidelines. Any failure of our quality control system could result in the production of defective or substandard products, which in turn may result in delays in the delivery of our products, the need to replace defective or substandard products and damage to our reputation, which could have a material and adverse effect on our business, financial condition and results of operations.

^{}[] 23

PRC government control over currency conversion may limit ACC China's ability to utilize their cash effectively.

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of the PRC. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade related transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange of the PRC ("SAFE"), by complying with certain procedural requirements. However, foreign exchange transactions in the capital account, including the foreign currency capital in any foreign-invested enterprise in the PRC, the repayment of the principal amount of foreign currency loans and the payment pursuant to foreign currency guarantees, continue to be subject to significant foreign exchange controls and require prior approval from SAFE or its local branch. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions.

All ACC China's revenue are in RMB which is not a freely convertible currency. Limits in the PRC on conversion of RMB into foreign currency, in particular, the NT dollar and the Hong Kong dollar, may restrict their ability to pay dividends or other payments, or otherwise satisfy their foreign currency-denominated obligations. If restrictions imposed by the PRC government prevent ACC China from obtaining sufficient foreign currency to satisfy their currency demands, ACC China may not be able to pay dividends in foreign currencies to their shareholders, including us.

In addition, since ACC China's revenue has been and will continue to be denominated in RMB, any existing and future restrictions on currency exchange may limit their ability to purchase goods and services outside the PRC or otherwise fund their business activities that are conducted in foreign currencies. This could affect the ability of their subsidiaries in the PRC to obtain foreign exchange through debt or equity financing, including by means of loans or capital contributions from us, which could have a material and adverse effect on our business, financial condition and results of operations.

Risks Relating to the Cement Industry

We operate in highly competitive markets and may not be able to compete successfully.

The cement industry is highly competitive both in Taiwan and the PRC. Although we control a significant share of Taiwan's cement market, we face intense competition from other market participants, primarily Taiwan Cement Corp. In the PRC, the market is increasingly competitive and ACC China faces competition from domestic participants with large international cement manufacturers seeking to expand their operations. We and ACC China have to compete with other manufacturers for customers, raw materials, energy and distribution resources. Many of our current and potential competitors may have better brand recognition in local markets, better pricing or greater financial, technical or marketing resources than we do. We and ACC China compete primarily on the basis of our product pricing, variety of product offerings, access to resources, sales and marketing network, production efficiency and brand image.

Recently, large cement manufacturing companies in the PRC have started to acquire smaller competitors, and further consolidation is expected to continue in this industry, which is likely to further increase market competition. Accordingly, there is no assurance that we or ACC China will be able to compete successfully with others in the future in light of the changing and competitive market environment. If we are unable to compete successfully, our business, financial condition and results of operations could be materially and adversely affected.

Cement-related mining activities are extensively regulated. Changes in policy or regulations may cause us and ACC China to incur significant compliance costs. ACC China and us may also be unable to procure the necessary exploration or mining rights with respect to our planned projects.

Cement-related mining activities in Taiwan and the PRC are subject to governmental regulations, policies and controls, including mining safety regulations, environmental protection policies and regulations with respect to exploration rights and mining rights. The liabilities, costs, obligations and requirements associated with these laws and regulations may be significant and may delay the commencement of, or cause interruptions to, our and ACC China's mining production. For example, in June 2010, the Ministry of Economic Affairs, ROC Executive Yuan

^{}[] 24

("MOEA") refused to extend ACC's mining license because our Hsinchu plant was located in a reservation area. ACC has since filed a petition with the ROC Executive Yuan on July 1, 2010 and the petition is currently under review by the ROC Executive Yuan. We believe that the Company have complied in all material respects with the relevant laws and regulations in relation to our mining activities. There is no assurance that we will obtain a decision in our favor with respect to ACC's mining license for the Hsinchu Plant or that we will not be in any material violation of the relevant laws and regulations in the future.

In the PRC under the Mineral Resources Law, all mineral resources in the PRC are owned by the state. ACC China is required to obtain mining rights before undertaking any mining activities, and the mining rights are limited to a specific area during a fixed license period. We cannot assure you that any of ACC China's or its licenses will be renewed upon expiration or that upon expiration, ACC China will be able to renew on terms that are commercially reasonable. Failure to obtain an extension of our mining license for the Hsinchu plant, or a failure to comply with the relevant laws and regulations applicable to our mining operations, could result in the reduction of our capacity or the suspension of our cement business operations, and thus adversely and materially affect our business. In addition, there is no assurance that the relevant government agencies will not change such laws or regulations or impose additional or more stringent laws or regulations in the future.

Cement operations are subject to environmental laws and regulations, compliance of which can be expensive, and any failure to comply with these regulations could result in adverse publicity, significant monetary damages and fines and suspension of our business operations.

The cement industry is subject to national and local environmental protection laws and regulations both in Taiwan and in the PRC. Governmental requirements that affect our operations include those relating to noise, soil, air quality, solid waste management and waste water treatment. Failure to comply with these regulations may result in the assessment of damages or imposition of penalties, fines, administrative sanctions, proceedings and/or suspension of production or cessation of our operations or revocation of our licenses or permits to conduct our business. There can be no assurance that such environmental laws and regulations will not have a material adverse effect on our business, financial condition or results of operations. Stricter laws and regulations, or stricter interpretation of the existing laws and regulations, may result in the imposition of new liabilities on ACC and/or ACC China, or result in the need for additional investment in pollution control equipment. We cannot assure you that ACC or ACC China will be able to comply with any additional environmental regulations in the future, or enhanced implementation of existing environmental regulations, on a cost-effective manner, or at all. In such circumstances, our business, financial condition and results of operations could be adversely and materially affected.

The cement industry is subject to significant regulation by the PRC government and subsequent introduction of new policies may affect the current and future development plans of our business.

The cement industry has traditionally been subject to government control with respect to production method and volume, product mix and environmental protection. It is an industry heavily regulated by a number of PRC government authorities including the Ministry of Land and Resources and the General Administration of Quality Supervision Inspection and Quarantine. ACC China is required to maintain certain licenses and permits in the PRC such as the cement production permit and the production safety permit. In addition, projects involving significant capital investment are subject to approval or filing requirements at different levels of the PRC government.

While the PRC government's current policies in respect of the domestic cement industry are generally market-oriented, it is expected to continue its austerity control measures within the cement industry, implementing a number of policies and measures to regulate the production of cement. This includes tightening the controls over the volume of total production, closing down smaller cement production plants to encourage efficiency and reduce pollution, further establishing stringent barriers regulations to entry and imposing strict bans on illegal production of cement. Compliance with these government regulations and policies and efforts to obtain such approvals and permits may result in significant adjustments to ACC China's current or future

^{}[] 25

development plans, increase its costs and divert its management resources, which may adversely affect its, and in turn our, profitability and growth aspects. Any changes to the existing requirements may result in additional expenses for ACC China's operations, and we cannot assure you that it can meet all future requirements on a timely manner, or at all.

Risks Relating to FENC

FENC operates in a highly competitive industry and may lose market share if it does not compete successfully.

The polyester business is highly competitive. FENC competes with large, vertically-integrated polyester manufacturers and numerous smaller manufacturers. FENC faces both domestic and foreign competitors, which include many companies that are larger in size and have greater financial resources. The principal factors that influence the purchasing decisions of FENC's customers include service, product quality and price. The importance of these factors is determined by the needs of particular customers and the characteristics of particular products. In addition, companies of any size, more specialized manufacturers or multinationals with greater financial resources, may enter the polyester market in the future which would further intensify the competitive environment. There may also be significant consolidation in the polyester industry. Furthermore, FENC's competitors may price their products aggressively resulting in more intense competition. Increased competition may result in price reductions, reduced margins and losses of market share, any of which could materially and adversely affect FENC's results of operations.

FENC has to be able to introduce new products or find new applications in order to meet the ever changing customer needs on a timely basis.

New applications of non-fiber polyester has been FENC's key focus in recent years, as it has gradually shifted its focus of production from polyester fibres to more value-adding materials such as packaging materials and industrial fibres to counter intense competition from PRC manufacturers. The amorphous PET sheet with anti-static characteristics is widely accepted by the electronic industry for the purposes of packaging LCD panels, computer hard drives, and other computer peripheral equipments. These products have better profit margin and have less competition as the entry barrier is higher and the ingredients required for these products take more R&D work to discover. FENC currently produces recycled fibre and chips from recycling bottle-chips and owns the only, and the biggest, recycled chip production line in Taiwan. FENC also produces bio-chips from bio-based MEG, which is derived from the fermentation of plants instead of crude oil. With this capacity FENC is currently also the largest provider globally of low-melt staple fiber, which is used for thermal bonding purposes.

By introducing new products and applications, FENC was able to counter the challenges it has faced in the conventional polyester business. FENC's continued success will depend greatly on its ability to respond quickly to emerging customer requirements and to develop new products in anticipation of future demand amidst a rapidly changing competitive environment. Any delay in FENC's development of commercially successful products offering reliable quality and advanced features may adversely affect its business.

FENC generally does not enter into long-term contracts with its apparel and textile customers, which exposes FENC to uncertainty and potential volatility with respect to its revenue from period to period.

FENC typically only enters into short-term purchase orders with its apparel and textile customers. Its customers may cancel, reduce or defer purchase orders at will. Accordingly, the volume of its customers' purchase orders and its product mix may vary significantly from period to period, and it is difficult for FENC to forecast future order quantities. No assurance can be given that any of FENC's customers will continue to place purchase orders in the future at the same level as in the current or previous periods, or at all. Furthermore, the actual volume of the purchase orders of FENC's customers may be inconsistent with FENC's expectations. As a result, its results of operations may vary from period to period and may fluctuate significantly in the future.

^{}[] 26

FENC is subject to volatility in key raw material prices and depends on access to such materials.

FENC uses purified terephthalic acid ("PTA") and mono ethylene glycol ("MEG") as the principal raw materials in the manufacture of polyester chips. Both PTA and MEG are products derived from the processing of crude oil. Accordingly, the prices of PTA or MEG are dependent on various factors, including oil prices and natural economic forces. The prices that FENC pays for PTA and MEG tend to be cyclical and subject to significant volatility. If FENC is no longer able to purchase PTA and MEG at reasonable prices, its margins will be adversely affected. In addition, any interruption of FENC's supply of PTA or MEG would adversely affect its ability to manufacture polyester chips. FENC cannot predict worldwide supply and demand for PTA and MEG with certainty and, therefore, it cannot be assured that it will be able to obtain adequate supplies of PTA and MEG at acceptable prices in the future.

Cyclical changes in product pricing may adversely affect FENC's results of operations.

The markets for polyester products are sensitive to changes in industry capacity and output levels, cyclical changes in regional and global economic conditions and changes in consumers' demand for particular fibers or packaging materials, all of which can have a significant impact on selling prices and on FENC's results of operations. Prices for most of FENC's products, particularly commodity textile polyester products, PET bottle resins, and PET bottles are based on, or affected by, regional and global prices, which tend to be cyclical and subject to significant fluctuations. In addition, the supplies of PTA and its principal feed stock paraxylene ("PX"), an ancillary by-product of the crude oil refining process, have been inelastic in recent years, mainly because (i) large capital investment is required to build a PX facility; and (ii) the time to construct a green field PX plant takes more than three years due to the time it takes for engineering design and procurement of the equipments. As a result, there were many PX projects launched during 2005 and 2006 which did not commence commercial operations until the end of 2009. Compared to 2007, margins for some of FENC's products in 2008 and 2009, principally polyester staple fiber, polyester filament and yarn, declined significantly, reflecting excess capacity in the polyester industry and FENC's inability to pass the raw material costs to downstream customers. There can be no assurance that prices or margins for FENC's products will continue to improve or be maintained at current levels.

Changes in environmental regulations could adversely affect FENC's results of operations.

FENC is subject to a variety of laws and regulations relating to the use, storage, discharge and disposal of chemical by-products of, and water used in, its manufacturing process. Although FENC has not suffered from material environmental claims in the past, environmental claims in the future or the failure to comply with any present or future regulations could result in the assessment of damages or imposition of fines against FENC, a suspension of production or a cessation of operations. New regulations could require FENC to acquire costly equipment or to incur other significant expenses. Any failure by FENC to control the use of, or adequately restrict the discharge of, hazardous substances, could incur future liabilities.

Some of the brand owners with whom FENC has relationships are sensitive about environmental and social responsibility standards and any perception on their part that FENC fails to meet those standards could adversely affect its operations and profitability.

Some brand owners of apparel and beverage have become increasingly sensitive about their reputation with respect to environmental and social responsibility. Accordingly, brand owners (including some with whom FENC has relationships) may require manufacturers to fulfill certain environmental standards, corporate social responsibility standards and/or social responsibility standards set forth by governmental or non-governmental labor organizations. In the event that FENC fails to fulfill these standards or if it is publicly perceived to have failed to fulfill those standards or if it is otherwise publicly associated with poor environmental or social responsibility standards, FENC may experience a decrease in business which could adversely affect FENC's profitability.

Anti-dumping issues and potential emerging trade protection could adversely affect FENC's business, financial condition and results of operations.

FENC exports its products to nearly fifty countries. While FENC faced anti-dumping investigations from time to time in the past several years, FENC had managed to minimize the impact. For anti-dumping tariffs which FENC incurred over its products, the level of tariff was often lower than FENC's competitors. There is no assurance that FENC will be able to resolve all anti-dumping issues in the future. If FENC incurs a substantial amount of anti-dumping tariff, it may adversely affect FENC's market share in their major export markets, which in turn can have an adverse impact on FENC's business, financial condition and results of operations.

FENC derives a significant portion of its income from its telecommunications and other investments.

FENC derives a substantial portion of its consolidated operating income from its telecommunications service income mainly through its major subsidiary, Far EasTone Telecommunications Co. Ltd. ("Far EasTone"). As of October 29, 2010, FENC effectively owned approximately 41.28% of Far EasTone. For the years ended December 31, 2007, 2008, 2009 and the nine months ended September 30, 2010, FENC's telecommunications service revenue contributed 35.5%, 32.9%, 32.6% and 28.4%, respectively, of FENC's total consolidated operating revenue. The telecommunication market in Taiwan is highly competitive as the ROC government has gradually opened up different segments of the telecommunications industry for competition. There are three GSM operators, one PHS operator, five 3G operators and six WiMAX operators. Two of the 3G operators are new entrants to the wireless market, and the remaining three are the existing GSM operators. Wireless market growth rates in Taiwan have slowed recently as customer penetration has increased and the industry has matured. In response to the declining growth in the market, wireless operators have increased handset subsidies and offered other voice plus data bundling packages to customers in an effort to retain market share and minimize customer churn rates. Competition is based primarily on network quality and coverage, the range of services offered and customer service. In order to compete, Far EasTone may have to reduce its prices and increase its handset subsidies. Increases in churn rates and marketing and distribution expenses could adversely affect Far EasTone's results of operations. There can be no assurance that FENC's telecommunications service income will continue to contribute positively to FENC's total operating revenue.

Historically, FENC has also derived a substantial portion of its consolidated net income from its interests in other member companies of the Far Eastern Group and from gains on sales of investments, principally by the selling shares of other Far Eastern Group companies. For the years ended December 31, 2007, 2008, 2009 and the nine months ended September 30, 2010, FENC's investment income from equity-method investees was NT$4,473.4 million, negative NT$168.0 million and NT$3,921.1 million (US$125.7 million), and NT$1,955.7 million (US$62.7 million), respectively. For the years ended December 31, 2007, 2008, 2009 and the nine months ended September 30, 2010, FENC's gain on sales of investments was NT$1,998.5 million, NT$3,077.3 million, NT$1,549.5 million (US$49.7 million) and NT$317.6 million (US$10.2 million), respectively. The results of operations of other Far Eastern Group companies in which FENC does not have a controlling interest may be adversely affected by a variety of factors beyond FENC's control. There can be no assurance that FENC's sales of investments or investment income will continue to contribute positively to FENC's total consolidated net income.

Exchange rate fluctuations could adversely affect FENC's results of operations.

For the past three years a substantial amount of FENC's net sales were denominated in currencies other than the NT Dollar, primarily the US dollar. For the same periods, a substantial amount of FENC's expenses incurred in purchasing raw materials were denominated in the NT dollar. FENC attempts to mitigate the effect of exchange rate fluctuations primarily through the use of foreign currency borrowings and forward exchange rate contracts. However, fluctuations in exchange rates between the US dollar or other currencies and the NT dollar may still have an adverse impact on its operating margins and results of operations. See "Exchange Rates."

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FENC's insurance coverage may not be sufficient to cover the risks related to its operations and losses.

FENC's operations are subject to hazards and risks associated with its manufacturing operations, which may cause significant harm to persons or damage to property. FENC can give no assurance that its operations will be free of accidents or that its insurance policies will be adequate to cover all losses incurred. Losses incurred and associated liabilities may have a material adverse effect on FENC's results of operations if such losses or liabilities are not covered by its insurance policies.

FENC's property development business through FERD depends heavily on the performance of the property market in Taiwan.

In 2003, FENC established Far Eastern Resources Development Co., Ltd ("FERD"), a company incorporated under ROC law, to actively manage FENC's idle properties in Taiwan. Currently, FERD is in the process of developing its idle land in Panchiao, Taiwan. As a result, FERD's business is and will be heavily dependent on the continued growth of the property market in Taiwan. Any adverse developments in the supply and demand or prices of property in Taiwan would have an adverse effect on FERD's results of operations.

The success of FERD's property development business strategy is subject to a number of risks that are beyond its control and difficult to predict, in part because the property market in Taiwan is very competitive. FERD cannot be certain of potential customer interest for its Far Eastern Telecom Park project in Taiwan and the sensitivity of potential customers to changes in real estate price, among other factors. FERD has limited established track record as a property developer and can provide no assurance that the development of its idle land in Taiwan will be attractive to customers or will produce positive cash flow or operating profits. In addition, future demand for different types of residential and commercial properties in Taiwan is uncertain. If FERD does not respond to changes in market conditions or customer preferences in a timely manner, it would have a negative impact on FERD's results of operation.

Telecommunications services are highly dependent on advancement in technology. FENC's investment in telecommunications, in particular through Far EasTone's business, is subject to various risks relating to the advent of these new technologies, including the following:

Changes in technology may render Far EasTone's current technologies obsolete or require Far EasTone to make substantial capital investments in new licenses or technologies.

If Far EasTone fails to develop, or obtain timely access to, new technologies and equipment, or if it fails to obtain the necessary licenses and spectrum to provide services using these new technologies, Far EasTone may lose customers and market share. This would have an adverse effect on Far EasTone's financial condition and results of operations. In addition, the cost of implementing new technologies, upgrading Far EasTone's networks or expanding capacity could be significant.

Financing for these new licenses or technologies may not be available to Far EasTone on commercially acceptable terms.

If the costs of implementing new technologies, including upgrading Far EasTone's networks or expanding its capacity, exceed Far EasTone's cash resources, Far EasTone will be required to seek additional debt or equity financing. Although Far EasTone currently does not expect difficulties in obtaining capital for future implementation or upgrade of technologies, if Far EasTone fails to obtain funding for its capital investments on commercially acceptable terms, it may not be able to implement or upgrade new technologies as they become available.

Far EasTone's business prospects could be adversely affected if new technologies adopted in the future do not perform as expected or if Far EasTone is unable to effectively deliver new services based on these technologies in a commercially viable manner.

Far EasTone is pursuing a number of new growth opportunities in the wireless telecommunications industry, including non-voice data services based on 3G technologies and WiMAX. These opportunities involve new services for which there are no proven markets. Far

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EasTone's ability to deploy and deliver these services will depend on, in many instances, new and unproven technologies, and will also require it to incorporate several key elements into each of its new service, including compelling applications, effective navigation, a data-ready network and attractive handsets.

There are many risks inherent in pursuing these opportunities, including, but not limited to, the following:

New technologies, such as W-CDMA and WiMAX, may not generate an acceptable rate of return.
The success of Far EasTone's new data services is substantially dependent on the availability of data applications and devices that are being developed by third-party developers. These applications or devices may not be sufficiently developed to support the deployment of Far EasTone's data services, or may not be available in sufficient supply.
Far EasTone may not be able to develop new applications to deliver these services effectively and economically, or Far EasTone may not be able to compete successfully in the delivery of telecommunications services based on new technologies.
Far EasTone may not be able to generate sufficient customer demand for applications using these new technologies, for instance, consumers may find the applications too difficult to navigate with a handheld device.
There may not be sufficient spectrum available for Far EasTone to support these new services.

Far EasTone can neither guarantee that it will know when these services will be widely introduced and fully implemented, nor can it guarantee that such services will be successful or that customers will purchase the services offered.

Extensive regulation of the telecommunications industry may limit Far EasTone's flexibility to respond to market conditions and competition, and as a result its business may suffer.

As a telecommunications service provider in Taiwan, Far EasTone is subject to extensive regulation. Any changes in the regulatory environment applicable to Far EasTone may adversely affect its business, financial condition and results of operations.

Far EasTone is under the supervision of the National Communications Commission (the "NCC"). Far EasTone has been designated by the government as a dominant provider of cellular services under the meaning provided within the applicable telecommunications regulations, and as a result, it is subject to special additional requirements imposed by the NCC. For example, the regulation regarding the setting and changing of tariffs allows non-dominant telecommunications service providers greater freedom to set and change tariffs within the range set by the government. If Far EasTone is unable to respond effectively to tariff changes by its competitors, then its competitiveness, market position and profitability will be materially and adversely affected.

The regulatory framework within which Far EasTone operates may limit its flexibility to respond to market conditions, competition or changes in the cost structure. In particular, future changes in tariff policies and rates could immediately and substantially decrease its revenue. In particular, as a Type I service provider under the Telecommunications Act, Far EasTone is constrained in its ability to raise tariffs.

In addition, Far EasTone operates its businesses with approvals and licenses granted by the government. If these approvals or licenses are revoked, suspended or not renewed, or if Far EasTone is unable to obtain any additional licenses that it may need to operate or expand its business in the manner it desires, then Far EasTone's results of operations as well as its prospects, will suffer. In addition, we cannot assure you that we will be successful in obtaining other licenses in the future as they are awarded by the NCC.

All Type I telecommunications service providers, including Far EasTone, are subject to foreign ownership restrictions under the Telecommunications Act. Pursuant to the Telecommunications Act, with the exception of Chunghwa Telecom Co., Ltd., the total shareholding directly owned by foreigners in any Type I telecommunications service provider may not exceed $49\%$ of its total issued shares. The total shareholding directly and indirectly owned by foreigners may not exceed $60\%$ of its total issued shares on a combined basis. There is no

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automated mechanism for ensuring compliance with indirect foreign ownership limits, nor is there any way for any Type I telecommunications service provider in Taiwan to monitor changes in the nationality or jurisdiction of incorporation of domestic shareholders (for example, when an ROC individual changes citizenship). Under the Telecommunication Act, if any Type I telecommunications service provider in Taiwan fails to comply with the foreign ownership restriction, the NCC may request such provider to rectify the failure within the period prescribed by the NCC. If there is no rectification within such period, an administrative fine may be imposed and rectification may be requested within another period prescribed by the NCC. The NCC may revoke such provider's license if any such violations continue.

Increasing competition from other technologies or rapid changes in market trends, could have an adverse effect on Far EasTone's financial condition and results of operations.

New technologies, such as voice over internet protocol services, which allow users to make international voice calls over the internet, and wireless local area networks ("LANs"), which allow users to send and receive data quickly and efficiently, are attracting users and thereby increasing competition for Far EasTone. Competition from these developing technologies may cause Far EasTone to lower prices in order to retain existing customers and wireless telecommunications traffic or otherwise result in lower average revenue per user as customers use Far EasTone's services less frequently than in the past.

Many of Far EasTone's competitors are in alliances with leading international telecommunications service providers and have access to financial resources as well as other resources or technologies that may not be available to Far EasTone. Moreover, as the government continues to liberalize the telecommunications market, such as through the issuance of new licenses or the establishment of additional networks, Far EasTone's market position and competitiveness could be materially and adversely affected. Furthermore, the effect of emerging and future technological changes on the viability or competitiveness of Far EasTone's services is unpredictable.

Risks Relating to both ACC and FENC

ACC, ACC China and FENC may undertake mergers, acquisitions or investments to expand their businesses which may pose risks to their businesses and dilute the ownership of existing shareholders, and neither may be able to realize the anticipated benefits of these mergers, acquisitions or investments.

As part of the growth strategy of ACC, ACC China and FENC to increase scale in selected regions in the PRC, they may continue to evaluate opportunities to acquire or invest in other companies in the PRC. For examples, on November 19, 2010, ACC signed a non-legally binding MOU with ACC China and Shanshui which indicate the intention to enter into a cooperative arrangement to carry out cement-related businesses in the regions of Liaoning and Inner Mongolia. On December 20, 2010, FENC signed an Letter of Intent with Sinopec Yizheng Chemical Fibre Company Limited and Yangzhou Chemical Industry Park, which indicates FENC's intention to establish a joint venture company with YCF to construct a green-field PTA plant in Yizheng city, Jiangsu province of the PRC.

Mergers, acquisitions or investments that ACC, ACC China and FENC have entered in, and may enter into in the future, entail a number of risks that could materially and adversely affect their businesses, operating and financial results, including, among others:

problems integrating the acquired the acquired operations, technologies or products into our existing business and products;
diversion of management's time and attention from our other businesses;
conflicts with joint venture partners;
adverse effects on their existing business relationships with customers;
need for financial resources above their planned investment levels;
failures in recognizing anticipated synergies;
difficulties in retaining business relationships with suppliers and customers of the acquired company;
risks associated with entering markets in which they lack experience;

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potential loss of key employees of the acquired company; and
potential write-offs of acquired assets.

Their failure to address these risks successfully may have a material adverse effect on their financial condition and results of operations. Any such acquisition or investment will likely require a significant amount of capital investment, which would decrease the amount of cash available for working capital or capital expenditures. In addition, if FENC uses its equity securities to pay for acquisitions, the value of your Reference Shares may be diluted. If FENC borrows funds to finance acquisitions, such debt instruments may contain restrictive covenants that can, among other things, restrict FENC from distributing dividends.

Operations are subject to the laws and regulations of the PRC.

Our and FENC's business in the PRC are subject to PRC laws and regulations applicable to foreign investment in the PRC and, in particular, laws applicable to wholly-foreign owned companies. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in the PRC. However, since these laws and regulations are relatively new and the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations and rules are not always uniform, and enforcement of these laws, regulations and rules involves uncertainties, which may limit the legal protections available to us or FENC. The application of such laws may differ from court to court, so that even within the PRC, we and FENC cannot be certain that similar cases will have similar results. In addition, any litigation in the PRC may be protracted and result in substantial costs and diversion of our resources and management attention. Any expansion of our or FENC's operations in the PRC will increase our exposure to this risk.

Strained relations between Taiwan and the PRC could negatively affect our business and the market value of your investment.

ACC's and FENC's principal executive offices and part of ACC's and FENC's production and transportation facilities are located in Taiwan, which has a unique international political status. Although Taiwan has its own government and a political system separate from that of the PRC, the PRC government claims sovereignty over all of China, which in their view include Taiwan. The PRC government does not recognize the legitimacy of the ROC government. In the past there was tension between the Taiwan Strait over sovereignty issues which had the potential to provoke the PRC government into exercising their military force against Taiwan. In recent years, however, significant economic and cultural relations have been established between Taiwan and the PRC, and there are more talks and discussions between the Straits in recent years. Nonetheless, relations may become strained without prior warning. Past developments in relations between Taiwan and the PRC have on occasion depressed the market price of the securities of ROC companies. Relations between Taiwan and the PRC and other factors could have a material adverse effect on both economies and in turn affect our financial condition and results of operations, as well as the market price and the liquidity of the Bonds or the Reference Shares.

Earthquakes, typhoons, floods and other natural disasters could severely disrupt the normal operation of our business and adversely affect our earnings.

Both Taiwan and the PRC are susceptible to earthquakes and have experienced severe earthquakes in the past, which caused significant property damage and loss of life. In Taiwan, earthquakes usually hit the central and eastern regions. For the PRC, which has very densely-populated cities, earthquakes can inflict massive damage and casualties. For example, the 2008 Sichuan earthquake measured 7.9 on the Richter scale and killed at least 68,000 people. The earthquake did not have a material effect on ACC China's operations as it returned to full production within a week. However, these earthquakes have the potential to severely damage production facilities and adversely affect the operations of many companies.

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Taiwan and the PRC are also susceptible to typhoons, which may cause damage and business interruptions to companies. For example in 2009, Taiwan experienced severe damage from typhoons, including typhoon Morakot on August 7 that caused over 600 deaths, severe flooding and extensive property damage. We and FENC have not experienced any material damage or business interruption from the typhoon activities in Taiwan or the PRC.

In August 2009, Taiwan experienced a severe flood in the southern region of Taiwan. As ACC and FENC are mainly located in northern region of Taiwan, we were not affected by the flood directly. However, a flood may disrupt the operations of some of ACC's or FENC's customers, and this could result in a decline in the demand for our respective products or services. Any temporary or sustained adverse impact from any future floods may adversely affect the economic, social or political conditions in Taiwan and/or the PRC, and may lead to fluctuations in the market price of the Bonds and the Reference Shares.

If our or FENC's or any of the major subsidiaries' customers are affected by an earthquake, a typhoon, a flood or other natural disasters, it could result in a decline in the demand for our respective products or services. If our respective suppliers and providers of complementary raw materials or transport services are affected, our respective operations could be interrupted or delayed. As a result, a major earthquake, typhoon, flood, or other natural disaster in Taiwan or the PRC could severely disrupt our normal business operations and have a material adverse effect on our respective financial conditions and results of operations.

Corporate governance standards in the ROC differ from those in other jurisdictions.

ACC and FENC are companies organized under ROC law. The corporate governance rules in the ROC differ from those applicable to companies in certain other jurisdictions. For example, there is no ROC requirement that a majority of the board of directors must be comprised of independent directors. Under ROC law, shareholders' approval is required for the distribution of employee bonuses, while the board of directors has the authority, subject to the approval of the FSC, to approve employee stock option plans and to grant options to employees pursuant to such plans. Directors of ROC companies are required to conduct business faithfully and to act with the care of a good administrator. However, such duty of care as required of ROC companies' directors may not be the same as the fiduciary duty of directors of non-ROC companies. In addition, a director or supervisor who serves as a representative of a legal entity under the ROC law may be removed or replaced at any time at the discretion of that legal entity, and the replacement director or supervisor may serve the remainder of the term of the office of the replaced director or supervisor.

Also, except for matters such as mergers, disposal of major assets or amendment of articles of incorporation, that the ROC Company Law or the company's articles of incorporation otherwise require, the board and the shareholders could adopt resolution by simple majority approval.

There are no laws or regulations that require a special approval threshold or process for related party transactions. Shareholders of ROC companies may receive less protection from corporate governance standards than shareholders of companies incorporated in other jurisdictions.

Both of our business depends substantially on the continuing efforts of our executive directors, senior management, key personnel, and our ability to maintain a skilled labor force.

We and FENC are dependent on our respective board of directors and senior management for our daily business operations and for formulating and implementing our business strategies and future plans. Our success is, to a large extent, attributable to the experience, expertise and managerial skills of our respective boards of directors and senior management. If one or more of our executive directors or senior management were unable or unwilling to continue in their present positions, we may be unable to identify and recruit suitable replacements in a timely manner, or at all. In addition, if any member of our senior management were to join a competitor or form a competing company, we may lose some of our know-how and customers. There is no assurance that any of our senior management members will not discontinue their service for whatever reason in the future.

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For example, on October 2, 2006, the ROC Taipei District Prosecutors Office indicted six defendants, including Mr. Douglas Tong Hsu, who served on the board of directors at ACC and FENC as Chairman, and Mr. Champion Lee, who served on the board of directors at FENC and as senior manager for ACC and FENC. The prosecution was in connection with the takeover by the Far Eastern Group of the Sogo Department Stores. Mr. Hsu and Mr. Lee were prosecuted for offenses including criminal breach of trust, forgery, conspiracy to commit breach of trust and conspiracy to commit forgery. The Taipei District Court rendered its verdict of not guilty for both Mr. Hsu and Mr. Lee in August 2008. In response to a subsequent appeal by the prosecutors, the Taiwan High Court overruled that appeal on September 7, 2010. This verdict made by the Taiwan High Court is final and binding, and no appeal could be presented to the ROC Supreme Court pursuant to the ROC Code of Criminal Procedures except under limited circumstances (such as discovery of new material evidence).

Furthermore, recruiting and retaining capable personnel, for example experienced engineers and technicians familiar with ACC China's production processes, are vital to maintaining the quality of our products, continuously improving our production processes and supporting the expansion of our production capacity. Both we and FENC need to recruit personnel with relevant experience to maintain and strengthen our internal control systems and procedures. We may also need to employ and retain more management personnel to support our expansion in the future. We cannot assure you that either we or FENC will be able to attract or retain qualified personnel. If we and FENC are unable to attract and retain qualified employees, key personnel and senior management, our business, financial condition and results of operations may be materially and adversely affected.

ACC and FENC are subject to ROC GAAP.

ACC and FENC are subject to financial reporting requirements in Taiwan that are significantly different to those applicable to companies in certain other countries. In addition, ACC's financial statements and FENC's are prepared in accordance with ROC GAAP. Potential investors should consult their own professional advisors for an understanding of such differences and how they might affect the financial information contained herein when making investment decisions.

You may not be able to enforce a judgment of a foreign court in the ROC.

We and FENC are companies limited by shares and incorporated under the ROC Company Law. Most of the directors, executive officers and supervisors of our company and FENC and certain of the parties named herein are residents of the ROC, and certain portion of the assets of our company are located in the ROC. As a result, it may be difficult for investors to enforce judgments obtained outside the ROC against us or such persons in the ROC, including those predicated upon the civil liability provisions of the federal securities laws of the United States. See "Enforceability of Foreign Judgments in the ROC."

The recent global market fluctuations and economic downturn could materially and adversely affect our business, financial condition and results of operations.

The global capital and credit markets have experienced extreme volatility and disruption in recent periods. Concerns over inflation and deflation, energy costs, geopolitical issues, the availability and cost of credit, the health of financial institutions, a declining residential real estate market in the U.S. and elsewhere and the European debt crisis have contributed to market volatility and diminished expectations of growth for the global economy and the capital and consumer markets in the future. These factors, combined with volatile oil prices, declining business activities and consumer confidence and increased unemployment, have contributed to the global economic slowdown and a possible prolonged global recession. These events have led to uncertainties in the PRC and Taiwan economy, which could materially and adversely affect the building and infrastructure industry in the PRC. As a result, customer demand for our products may significantly decrease, thereby materially and adversely affecting our business, financial condition and results of operations.

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^{}[] Risks Relating to Ownership of the Bonds and the Reference Shares

The Bonds will be effectively subordinated to all of the liabilities of the Company's subsidiaries.

The Company operates a significant portion of its business through its subsidiaries. As a result, the Company's obligations under the Bonds will be effectively subordinated to all existing and future obligations of the existing or future subsidiaries so that all claims of creditors of the existing or future subsidiaries, including trade creditors, lenders and other creditors, and preferential shareholders of such entities (if any) will have priority over the Company's claims and those of its creditors, including the holders of Bonds. The Company and its subsidiaries may incur significant additional secured or unsecured indebtedness and other liabilities, including off balance sheet obligations, for project development or other purposes in the future, subject to the terms and conditions set forth in "Description of the Bonds."

The Company's subsidiaries and affiliates may be restricted from paying dividends or repaying intercompany loans or advances.

The Company depends on the receipt of dividends and the repayment of intercompany loans or advances from its subsidiaries and affiliates to satisfy certain obligations. The ability of its subsidiaries and affiliates to pay dividends and repay intercompany loans or advances to their shareholders (including the Company) is subject to applicable law, relevant shareholders' agreements or constitutive documents and restrictions contained in debt instruments of such subsidiaries and affiliates. The Company's subsidiaries and affiliates are separate legal entities and will have no obligation, contingent or otherwise, to pay any dividends or make any distributions to the Company or otherwise to pay amounts due with respect to its indebtedness, including the Bonds, or to make funds available for such payments. Accordingly, there can be no assurance that the Company will have sufficient cash flows from distributions by its subsidiaries and affiliates to satisfy certain of its obligations, including obligations under the Bonds. Although the Company believes that it will be able to meet its obligations in respect of the Bonds, if distributions from its subsidiaries and affiliates are not sufficient to meet its obligations, any shortfall would have to be made up from other sources of cash, such as a sale of investments or any available financing to it.

In addition, PRC regulations require that payment of dividends be made only out of accumulated profits as determined in accordance with PRC accounting standards and regulations. The Company's subsidiaries in the PRC are also required to set aside a portion of their after-tax profits according to PRC accounting standards and regulations to fund certain statutory reserve funds that are not distributable as cash dividends. PRC regulations also states that approval from the State Administration of Foreign Exchange (the "SAFE") is required prior to making any shareholder loan and such loan has to be registered with SAFE. Prior to the payment of interest and principal on any such shareholder loan, subsidiaries in the PRC must present evidence of payment of the 10% withholding tax on the interest payable and the evidence of registration with SAFE, as well as any other documents that SAFE or its local branch may require. Accordingly, the Company may not receive sufficient cash flow from the PRC subsidiaries in the form of dividends or repayment of intercompany loans or advances to satisfy its obligations, including obligations under the Bonds.

The Reference Shares or the Exchange Property to be delivered to an exchanging holder of Bonds will be held in one or more designated accounts but will not be charged in favor of the holder of Bonds.

The Company will deposit sufficient Reference Shares or Exchange Property, when applicable (as defined in the "Description of the Bonds"), in a designated account at the Taiwan Depository & Clearing Corporation to ensure that the total number of Reference Shares or the total amount of the Exchange Property (as the case may be) deposited in such designated accounts are in aggregate sufficient to satisfy the Exchange Rights (as defined in the "Description of the Bonds") relating to the outstanding Bonds at the relevant Exchange Price in effect at that time. Under ROC law, the aforementioned arrangement does not create a charge in

favor of the holders of Bonds. In addition, the Reference Shares remain an asset of the Company subject to third party claims. Moreover, there can be no assurance that the holders of Bonds will receive the Reference Shares or the Exchange Property (as the case may be) upon exchange of the Bonds if the Company fails to comply with the Conditions of the Bonds.

Exchange rate fluctuations between the NT dollar and the US dollar may adversely affect the value of the Bonds and the Reference Shares represented thereby.

Investors purchasing the Bonds will be required to pay in US dollars. The Reference Shares to be delivered upon exchange of the Bonds are currently listed on the TWSE, where shares are quoted and traded in NT dollars. Any cash dividends on the Reference Shares will be paid to the holders thereof in NT dollars, subject to certain conditions. Fluctuations in the exchange rate between NT dollars and US dollars will affect, among other things: (i) the secondary market price of the Bonds, (ii) the US dollar value of the Reference Shares to be delivered upon exchange of the Bonds and (iii) the amount to be received by holders of the Reference Shares upon any distribution, liquidation, merger, tender offer or similar transaction, in relation to FENC denominated in NT dollars. See "Exchange Rates."

An active trading market for the Bonds may not develop.

The Bonds are a new issue of securities for which there is currently no trading market. If such a market were to develop, the Bonds could trade at prices that may be higher or lower than the initial issue price depending on many factors, including prevailing interest rates, the operations of the Company and FENC and the market for similar securities. The Initial Purchasers are not obliged to make a market in the Bonds and any such market making, if commenced, may be discontinued at any time at the sole discretion of the Initial Purchasers. Accordingly, no assurance can be given as to the liquidity of, or trading market for, the Bonds.

Holders have limited anti-dilution protection.

The exchange price of the Bonds will be adjusted in the event that there is a free distribution, bonus issue, division, consolidation and reclassification, declaration of dividends, rights issue, warrants issue, capital distribution or other adjustment, but only in the circumstances and only to the extent provided in "Description of the Bonds—Exchange." There is no requirement that there should be an adjustment for every corporate or other event that may affect the value of the Reference Shares. Events in respect of which no adjustment is made may adversely affect the value of the Reference Shares and, therefore, adversely affect the value of the Bonds.

The Company may be unable to redeem the Bonds.

In certain circumstances, such as (i) a Change of Control of FENC (as defined in "Description of the Bonds") or (ii) a delisting the Reference Shares from the TWSE or (iii) upon the exercise of Holders' Put Right (as defined in "Description of the Bonds"), the holders of the Bonds may require the Company to redeem all of the holders' Bonds. Upon the occurrence of such an event, or at maturity of the Bonds, no assurance can be given that the Company will have enough funds or would be able to arrange financing to pay the redemption amount for all tendered Bonds. The Company's ability to redeem the Bonds in such an event may be limited by law or the terms of its other debt instruments. The Company may be required to refinance its debt in order to make such payments.

The trading prices of the Reference Shares may fluctuate due to the volatility of the ROC securities market and the results of operations of FENC.

The trading share prices of the Reference Shares may be affected by the general activities of the TWSE. The TWSE is smaller and more volatile than the securities markets in the United States and in certain European and other countries. The TWSE has experienced substantial fluctuations in prices and volumes of trading of securities. From time to time, the ROC regulatory agencies have intervened in the Taiwan stock market during periods of extreme volatility. The TWSE Index experienced a 7.4% increase in 2007, a 44.8% decrease in 2008, a 78.3% increase in 2009 and a 9.3% increase in 2010. During the period from January 1, 2010 to December 31, 2010, the TWSE Index reached a low of 7,071.67 on June 9, 2010, and peaked at 8,972.50 on

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December 31, 2010. The daily closing value of the Shares ranged from NT$25.83 to NT$34.51 per Share over the same period, and the daily closing value of the Reference Shares ranged from NT$29.07 to NT$50.00 per Reference Share. On January 19, 2011, the TWSE Index closed at 9,086.02 and the closing value of the Reference Shares was NT$49.30 per share.

The TWSE is particularly volatile during times of political instability, including when relations between Taiwan and the PRC are strained. Several investment funds affiliated with the ROC government have also from time to time purchased securities from the TWSE to support the trading level of the TWSE. Moreover, the TWSE has experienced problems, including market manipulation, insider trading and settlement defaults. The recurrence of these or similar problems could have an adverse effect on the market price and liquidity of the Bonds and the Reference Shares.

In addition, the market price of the Bonds at any time will be affected by fluctuations in the price of the Reference Shares. There can be no certainty as to the effect, if any, that future issues or sales of the Reference Shares, or the availability of such Reference Shares for future issue or sale, will have on the market price of the Reference Shares prevailing from time to time and therefore on the price of the Bonds. Sales of a substantial number of the Reference Shares in the public market, or a perception in the market that such sales could occur, could adversely affect the prevailing market price of the Reference Shares and the Bonds. The results of operations, financial condition, future prospects and business strategy of FENC could affect the value of the Reference Shares. The trading price of the Reference Shares will be influenced by the operational results of FENC (which in turn are subject to the various risks the businesses and operations are subject to, which may or may not be described herein) and by other factors such as changes in the regulatory environment that may affect the markets in which FENC operates and the capital markets in general. Corporate events such as share sales, reorganizations, takeovers or share buy-backs may also adversely affect the value of the Reference Shares. Any decline in the price of the Reference Shares would adversely affect the market price of the Bonds.

Bondholders have less protection under the ROC laws as compared to the laws of the United States

While the Bonds will be issued under an indenture governed by New York law, FENC and us are both incorporated under ROC law. Both companies are governed by their articles of incorporation and by the laws governing corporations incorporated in the ROC. The shareholders may have more difficulty in protecting their interests in connection with actions taken by the management or directors than they would as public shareholders of a European or US corporation. Moreover, while we have irrevocably appointed an agent in New York to receive service of process in any proceedings in the State of New York based on any of the Bonds, it may be difficult to enforce in the ROC courts judgments obtained against us and our directors, supervisors and executive officers in non-ROC courts, including those obtained against us in a New York court based upon the civil liability provisions of United States securities laws. See "Enforceability of Foreign Judgments in the ROC."

Our ability to fulfill our obligations under the Bonds is dependent upon our future financial and operating performance.

Our ability to make the principal payments on the Bonds when due and to satisfy our other debt obligations depends in part upon our future financial performance and upon our ability to renew or refinance our debt obligations or to raise additional equity capital. Prevailing economic conditions and financial, business and other factors, many of which are beyond our control, will affect our ability to make these payments. While we believe that cash flow from our operations will provide an adequate source of liquidity, a significant drop in our operating cash flow would increase our need for alternative sources of liquidity.

If we are unable to generate sufficient cash flow to meet our debt service obligations, we will have to pursue one or more alternatives, such as:

reducing our operating expenses;
reducing or delaying capital expenditures;

^{}[] 2 The day before printing.

refinancing existing debt facilities;
selling assets; or
raising additional equity capital.

We cannot assure you that any of these alternatives could be accomplished on satisfactory terms, if at all, or that those actions would provide sufficient funds to retire the Bonds and our other debt obligations.

No assurance can be given that the market for the Reference Shares will be active and liquid, or that the offering of the Bonds will not result in additional liquidity of the Reference Shares until the commencement of the Exchange Period, if at all.

The average daily trading volume for the Reference Shares on the TWSE in 2010 was approximately 13,756 thousand shares. No assurance can be given that the liquidity of the Reference Shares will be maintained or enhanced after the offering of the Bonds. Market prices of the Reference Shares have been and continue to be extremely volatile. From January 1, 2010 to December 31, 2010, daily closing price of the Reference Shares ranged from NT$29.07 per share to NT$50.00 per share. As a result, volatility in the price of the Reference Shares may be caused by factors beyond FENC's control and may be unrelated or disproportionate to the operating results of FENC.

We may not be able to deliver Reference Shares or Exchange Property Securities upon exchange of the Bonds.

In the event that we do not have sufficient Reference Shares or Exchange Property Securities to deliver to exchanging holders of Bonds, we will pay to the exchanging holders of Bonds the Cash Equivalent (as defined herein). We cannot assure you that we will have enough cash to pay such Cash Equivalent. We may also choose to make purchases of the necessary securities in the open market to satisfy exchange requests, but this may require making applicable notice filings with the FSC. We cannot assure you that we will be able to make open market purchases at any time to satisfy the requests of the holders of Bonds to exchange their Bonds. Even if such Reference Shares or Exchange Property Securities are available on the open market, we may not have sufficient funds available to purchase those Reference Shares or Exchange Property Securities. Finally, large open market purchases of Reference Shares or Exchange Property Securities could have a material adverse effect on our financial condition and the market price of the Bonds.

The Bonds and Reference Shares deliverable upon exchange of the Bonds are subject to restrictions on transfer.

The Bonds and Reference Shares deliverable upon exchange of the Bonds are subject to restrictions on transfer as described under "Transfer Restrictions." These transfer restrictions may adversely affect the liquidity of the Bonds and Reference Shares. To exercise the right of exchange with respect to a Bond, a holder must make certain representations and agreements in the exchange notice as described in "Description of the Bonds—Exchange."

Future offers or sales of Reference Shares by shareholders of FENC may hurt the value of your investment.

The market price of the Bonds and the Reference Shares could decline as a result of future sales of a large number of the Reference Shares or the perception that such sales could occur. If any existing shareholders offer or sell a large number of the Reference Shares, the market price for the Bonds or the Reference Shares could be depressed. Pursuant to certain lock-up agreements relating to this offering, ACC and FENC have agreed, subject to certain exceptions, not to offer, sell or agree to sell, directly or indirectly, or otherwise dispose of any directly and indirectly held Shares or Reference Shares without the prior written consent of the Initial Purchasers until 90 days following the date of this offering memorandum. Nevertheless, the Initial Purchasers may lift or waive all or some of these restrictions at their sole discretion, and when the applicable restrictive period expires, ACC and FENC will be able to sell directly and indirectly held Shares or Reference Shares in the public market, subject to legal restrictions. See "Plan of Distribution."

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There are limitations on your ability to exercise exchange rights.

The Bonds are exchangeable at the option of the holders pursuant to the terms of the Bonds, but only within the Exchange Period and not during any Closed Periods. Under current ROC law, regulations and policy, a PRC person is not permitted to exchange the Bonds or to register as a shareholder of FENC unless it is a qualified domestic institutional investor (a "QDII"). See "Description of the Bonds—Exchange—Exchange Right."

Holders of the Bonds will have no rights as shareholders of FENC until they acquire the Reference Shares upon exchange of the Bonds.

Unless and until the holders of the Bonds acquire the Reference Shares upon exchange of the Bonds and are registered on FENC's shareholder register (as applicable), the holders of the Bonds will have no rights with respect to the Reference Shares, including any voting rights or rights to receive regular dividends or other distributions with respect to the Reference Shares. Holders of the Bonds who acquire the Reference Shares upon the exercise of an Exchange Right will be entitled to exercise the rights of holders of Reference Shares only as to actions for which the applicable record date occurs after the Exchange Delivery Date.

Holders of the Bonds will be required to appoint local agents in Taiwan and will be subject to other requirements if they exchange the Bonds and become the shareholders of FENC or another ROC entity, which may make ownership burdensome.

Under current ROC law, an exchanging holder of the Bonds is required to register with the TWSE and appoint a local agent in the ROC to open a securities trading account with a local securities brokerage firm and an NT dollar bank account, remit funds, exercise a shareholder's rights and perform such other matters as may be designated by the exchanging holder. Further, the exchanging holder must appoint a local bank to act as custodian for confirmation and settlement of trades, safekeeping of securities and cash proceeds and reporting of information.

In addition, when a non-ROC holder of the Bonds exercises its exchange rights and registers as a shareholder of FENC or another ROC entity, such holder will be required to appoint an agent as a tax guarantor in Taiwan. Such tax guarantor will be required to meet the qualifications set by the Ministry of Finance of the ROC and will act as the guarantor of such holder's tax payment obligations. Evidence of the appointment of a tax guarantor and the approval of such appointment is required as conditions to receiving such holder's profits derived from the sale of the Reference Shares. There can be no assurance that such holder will be able to appoint and obtain approval for a tax guarantor in a timely manner. Without satisfying these requirements, the exchanging holder would not be able to hold, sell or otherwise transfer its shares on the TWSE.

A holder of the Bonds or its designee requesting the exchange of its Bonds may be required to provide certain information to us, and failure to provide such information may prevent the exchange or cause the exchange to be delayed.

A holder of the Bonds or its designee requesting the exchange of its Bonds may be required to provide certain information to us or the Exchange Agent, including the name and nationality of the person to be registered as the holder and the number of the securities such person is acquiring and has acquired in the past as a result of the exchange of the Bonds it holds, and supporting documents, before such exchange is effected. See "Description of the Bonds—Exchange—Exchange Right." Under applicable ROC laws, an ROC entity is required to report to the FSC if the person to be registered as a shareholder (i) is a "related party" as defined in SFAS No. 6 of the ROC or (ii) will hold, immediately following such exchange, more than 10% of the total number of the shares deliverable upon exchange of the aggregate principal amount of all Bonds at the time of issue. The exchange of the Bonds may be delayed or prevented if such information is not provided.

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RECENT DEVELOPMENTS

Potential Joint Venture with China Shanshui

On 19 November 2010, ACC and ACC China entered into a non-legally binding MOU with China Shanshui, a company which also manufactures and sells cement and clinker in the PRC.

There can be no assurance that any binding agreement(s) will be signed among the parties. Even if binding agreements are later entered into, ACC and ACC China may not be able to fully realize all of the anticipated benefits of this cooperative arrangement. We cannot assure you that the proposed expansion into the Liaoning and Inner Mongolia regions will be successful and that ACC or ACC China may be able to generate sufficient profits to justify the costs of such expansion. See "Risk Factors—Risks Relating to both ACC and FENC—ACC, ACC China and FENC may undertake mergers, acquisitions or investments to expand their businesses that may pose risks to their businesses and dilute the ownership of existing shareholders, and neither may be able to realize the anticipated benefits of these mergers, acquisitions or investments."

Potential Joint Venture between FENC and Sinopec Yizheng Chemical Fibre Company Limited

On December 20, 2010, FENC entered into a Letter of Intent ("LOI") with Yangzhou Chemical Industry Park and Sinopec Yizheng Chemical Fibre Company Limited ("YCF"). YCF, a listed company on the Hong Kong Stock Exchange and the Shanghai Stock Exchange, belongs to China Petrochemical Corporation (or Sinopec Group) and is the second largest polyester producer in the PRC. FENC and YCF aim to ensure supply sufficiency through this project to meet the increasing demand for PTA. While details of the cooperation remain subject to further discussions between FENC and YCF, FENC will apply for the investment approval from the MOEA.

There can be no assurance that any conclusive agreement will be signed between the parties. Even such agreement is later entered into, FENC may not fully realize all of the anticipated benefits of this cooperative arrangement. We cannot assure you that this joint venture will be successful and that FENC may be able to generate sufficient profits to justify the costs of expanding their business in the PRC. See "Risk Factors — Risks Relating to both ACC and FENC—ACC, ACC China and FENC may undertake mergers, acquisitions or investments to expand their businesses which may pose risks to their businesses and dilute the ownership of existing shareholders, and neither may be able to realize the anticipated benefits of these mergers, acquisitions or investments."

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USE OF PROCEEDS

We estimate that the net proceeds from this offering, after deducting the Initial Purchasers' commissions and other estimated expenses of this offering will be approximately US$370,900,000. We intend to use the net proceeds of this offering for the following purposes:

to purchase coal and raw materials; and
to repay part of our outstanding consolidated long-term and short-term debt.

As of September 30, 2010, the total outstanding principal amount of consolidated long-term and short-term debt was NT$64,410.9 million (US$2,065.1 million).

The Initial Purchasers have agreed to pay an amount of approximately US$430,000 towards the expenses related to the offering of the Bonds.

DIVIDEND POLICY OF FENC

The form, frequency and amount of future dividends, if any, will depend on FENC's earnings, cash flow, financial condition, reinvestment opportunities, capital expenditures and other factors. Accordingly, FENC cannot assure you that it will pay any dividends on the Reference Shares in the future.

The following table sets forth the cash dividends per Reference Share and stock dividends per Reference Share as a percentage of Reference Shares outstanding paid during each of the years indicated in respect of Reference Shares outstanding at the end of each such year:

	Cash Dividend Per Reference Share	Stock Dividend Per Reference Share(1)	Total Reference Shares Issued as Stock Dividends	Total Issued Reference Shares(2)
			(in millions)
2006	NT$1.00	NT$0.60	246.2	4,349.9
2007	1.30	0.30	130.5	4,480.3
2008	1.80	0.20	89.6	4,570.0
2009	0.80	0.20	91.4	4,661.4

(1) Holders of Reference Shares receive as stock dividend the number of Reference Shares equal to the NT dollar value per Reference Share of the declared dividend multiplied by the number of Reference Shares owned and divided by the par value of NT$10 per Reference Share. Fractions of Reference Shares are not issued.

(2) The numbers set forth in this column denote the aggregate number of Reference Shares issued and outstanding on the record date for the payment of the dividend in the indicated year.

All dividend payments are subject to a legally required minimum reserve. FENC may distribute dividends either in cash or in the form of Reference Shares, provided that the cash dividends shall not be less than 10% of the total amount of bonuses and dividends distributed to shareholders in that year. The ratio between any cash dividend and stock dividend is proposed by the FENC Board of Directors and approved by the shareholders at the shareholders' meeting. Dividends are paid to shareholders, in respect of both cash dividends and stock dividends, on shareholder approval being received.

FENC is generally not permitted under the ROC Company Law to distribute dividends or make other distributions to shareholders for any year in which FENC has no current or retained earnings (excluding reserves). Before FENC can distribute a dividend or make any other distribution to shareholders from net income, FENC must first apply FENC's net income to any losses incurred in previous years and pay all outstanding taxes, set aside a legal reserve equal to 10% of its net income until the reserve reaches an amount equal to at least 100% of its paid-in capital. In addition, FENC may set aside a special reserve in accordance with applicable laws and regulations.

FENC shall, based on the market condition and taking into consideration of its need for cash according to the life cycle of each of the products and services and the influence of the taxation, distribute the dividends pursuant to its articles of incorporation and under the objective of maintenance of a stable dividend policy. Unless there is a capital need to improve its financial structure or support for investments, expand the capacity or other important capital expenditure, the cash dividends shall, in principle, not be less than 10% of the total amount of bonuses and dividends distributed to shareholders in that year.

The articles of incorporation of FENC provide that, after FENC pays all the income taxes, recovers any losses incurred in prior years and sets aside 10% of its net income as legal reserve and a special reserve in accordance with applicable laws and regulations, it may, subject to its business conditions, retain a portion of the remainder, together with the undistributed profits of previous year, and distribute the remaining balance in the following percentage:

60% as shareholder dividends, to be distributed based on shareholdings. However, in the case of an increase in FENC's capital, unless otherwise stipulated by law, the shareholder dividends to be distributed to the shareholders of the increased shares for the year shall be decided at the shareholders' meeting;
33% as shareholder bonuses, to be distributed based on shareholdings. However in the case of an increase in FENC's capital, the shareholder bonuses to be distributed to the shareholders of the increased shares for the year shall be decided at the shareholders' meeting;
4% as employees' bonuses (where the bonuses are in the form of shares, the distribution shall be made in accordance with the rules adopted by the board of directors); and
3% as remuneration for directors and supervisors, the manner which distribution is made is to be decided by the board of directors.

For information relating to ROC withholding taxes payable on dividends, see "Taxation—Reference Shares—Dividends."

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MARKET PRICE INFORMATION FOR COMMON SHARES OF FENC

FENC's common shares have been listed on the TWSE since 1967 under the ticker "1402." The table below sets forth, for the periods indicated, the high and low closing prices and the average daily volume of trading activity on the TWSE of the common shares and the highest and lowest of the daily closing values of the TWSE Index. On January 19, 2011, the closing price per common share on the TWSE was NT$49.30.

	TWSE
	Closing price per Share		Average daily trading volume	Taiwan Stock Exchange Index
	High	Low	Average daily trading volume	High	Low
			(in thousands of shares)
2005	NT$22.39	NT$16.07	13,394.00	6,575.53	5,632.97
2006	28.35	19.37	13,893.00	7,823.72	6,257.80
2007	47.60	24.37	15,092.00	9,809.88	7,344.56
2008	54.28	15.86	21,210.35	9,295.20	4,089.93
2009	41.76	18.69	16,663.94	8,188.11	4,242.61
2010
First quarter	40.88	30.34	14,666.73	8,356.89	7,215.88
Second quarter	37.25	29.07	10,954.87	8,171.94	7,071.67
Third quarter	43.00	31.57	10,779.91	8,240.89	7,254.06
October	47.00	42.25	19,888.14	8,354.05	8,046.23
November	50.00	43.55	19,793.55	8,450.63	8,240.65
December	49.40	46.15	16,326.70	8,972.50	8,520.11
2011
January (through January 19, 2011)	51.50	47.90	13,812,846	9,086.02	8,782.72

Source: http://www.twse.com.tw, market data as at January 19, 2011.

The TWSE has experienced significant fluctuations in the prices of listed securities and there are currently limits on the range of daily price movements. See "The Securities Market of the ROC—Price Limits, Commissions, Transaction Tax and Other Matters."

CAPITALIZATION OF ACC

The following table sets forth our capitalization, on a consolidated basis, as of September 30, 2010 and as adjusted for this offering as determined under the ROC GAAP. The adjustment reflects the sale of US$375,000,000 aggregate principal amount of the Bonds in this offering. You should read this table together with our reviewed consolidated financial statements and their notes included elsewhere in this offering memorandum.

As of September 30, 2010

	Actual		Adjusted
	(in millions)
Long-term Liabilities(1):
Bonds payable	NT$ 14,176.3	US$ 454.5	NT$ 25,746.1(4)	US$ 825.4(4)
Bank loans	37,780.6	1,211.3	37,780.6	1,211.3
Total long-term liabilities	NT$ 51,956.9	US$1,665.8	NT$ 63,526.7	US$2,036.7
Stockholders' Equity:
Capital stock(2)	NT$ 30,753.1	US$ 986.0	NT$ 30,753.1	US$ 986.0
Capital surplus	8,256.4	264.7	8,256.4	264.7
Retained earnings	21,277.5	682.2	21,277.5	682.2
Other equity	15,278.6	489.9	15,278.6	489.9
Stockholders' equity of parent	75,565.6	2,422.8	75,565.6	2,422.8
Minority interest	13,016.6	417.3	13,016.6	417.3
Total stockholders' equity	NT$ 88,582.2	US$2,840.1	NT$ 88,582.2	US$2,840.1
Total capitalization(3)	NT$140,539.1	US$4,505.9	NT$152,108.9	US$4,876.8

Note: Translations of amounts from NT dollars into US dollars for the convenience of the reader have been made at the rate prevailing on September 30, 2010 of NT$31.19 = US$1.00.

(1) Net of current portions and excluding "Reserve for land value increment tax" and "Other liabilities" such as Deferred income and miscellaneous liabilities.

(2) As of September 30, 2010, our authorized capital stock was NT$33 billion divided into 3.3 billion common shares, par value NT$10 each, of which 3.0753 billion common shares were issued and outstanding. All of these shares have been fully paid.

(3) Total capitalization is long-term liabilities plus total stockholders' equity.

(4) Such amount includes the Bonds of NT$11,696.3 million (US$375.0 million) after deducting issuance cost of approximately NT$126.5 million (US$4.1 million) related to this offering. In addition, the fair value of the exchange option related to the Bonds has not been determined at this time.

EXCHANGE RATES

The consolidated financial statements of ACC and FENC are published in New Taiwan dollars, the lawful currency of the ROC.

For your convenience, NT dollar amounts used in this offering memorandum for, and as of, the year ended December 31, 2009 and the nine months ended September 30, 2010 have been translated into US dollar amounts using NT$31.19 = US$1.00, the Noon Buying Rate for this currency on September 30, 2010. The US dollar translations appear in parentheses next to the relevant NT dollar amounts. The Noon Buying Rate for NT dollars on January 14, 2011 was NT$29.02 = US$1.00.

The following table sets forth, for the periods indicated, information concerning the number of NT dollars for which one US dollar could be exchanged based on the noon buying rate for cable transfers in NT dollars as certified for customs purposes by the Federal Reserve Bank of New York.

Noon Buying Rate (NT$ per US$1.00)
	Period-end	Average	High	Low
2003	NT$33.99	NT$34.40	NT$34.98	NT$33.72
2004	31.74	33.37	34.16	31.74
2005	32.80	32.13	33.77	30.65
2006	32.59	32.51	33.31	31.28
2007	32.43	32.85	33.41	32.26
2008	32.76	31.52	33.58	29.99
2009	31.95	33.02	35.21	31.95
2010
August	32.01	31.87	32.02	31.65
September	31.19	31.64	31.99	31.15
October	30.62	30.88	31.30	30.60
November	30.47	30.31	30.52	30.05
December	29.14	29.90	30.37	29.14
2011
January (through January 14, 2011)	29.02	29.16	29.36	28.98

Source: Federal Reserve Statistical Release, Board of Governors of the Federal Reserve System.

No representation is made that the NT dollar amounts actually represent such US dollar amounts or could have been, or could be, converted into US dollars at the rate indicated, at any other rate or at all.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ACC

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the interim consolidated financial statements included elsewhere in this offering memorandum. All financial information as of and for the years ended December 31, 2007, 2008 and 2009 set forth below is given on an audited consolidated basis. All financial information as of and for the nine-month periods ended September 30, 2009 and 2010 set forth below is given on an unaudited consolidated basis. The consolidated financial statements of the Company as of and for the years ended December 31, 2007, 2008, 2009 are, hereinafter, referred to as the "Consolidated Financial Statements," and the unaudited consolidated financial statements of the Company as of and for the nine months ended September 30, 2009 and 2010 are, hereinafter, referred to as the "Interim Consolidated Financial Statements."

The following discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in the forward-looking statements as a result of any number of factors, such as those set forth under "Risk Factors" and elsewhere in this offering memorandum. See "Special Note Regarding Forward-Looking Statements."

Overview

Established in 1957 and later listed on the TWSE in 1962, we are a manufacturer and seller of cement, clinker, cement-related products and RMC. With two integrated cement manufacturing facilities and two major RMC subsidiaries, we are the second largest cement producer in Taiwan with total annual cement production of approximately 4.6 million MT in 2009. We are also the controlling shareholder of ACC China which is the entity through which we hold cement manufacturers in the PRC, primarily in our core markets in Sichuan, Jiangxi and Hubei provinces, and the Yangzhou and Shanghai areas. As of December 31, 2010 we effectively held 72.29% of ACC China. ACC China's annual cement production in 2009 and 2010 was approximately 14.4 million MT and 20.0 million MT, respectively. Our cement sales accounted for approximately 75% and 76% of our consolidated operating revenue for the year ended December 31, 2009 and the nine months ended September 30, 2010, respectively.

Our long-term investments totaled NT$55.6 billion (US$1.8 billion) as of December 31, 2009, and NT$57.9 billion (US$1.9 billion) as of September 30, 2010, accounting for 34.0% and 35.0% of our total consolidated assets, respectively. As of December 31, 2010, our major investment holdings included, directly and indirectly, 25.29% of FENC and 39.74% of UMTC. FENC is an affiliated company of ACC and is one of the leading manufacturers of polyester and related products in Asia. UMTC provides marine transportation for cement, dry commodities and industrial raw materials.

Dividend contributions from UMTC and FENC represented approximately 64% and 28%, respectively, of our 2009 total cash dividends received from equity-method investees.

Industry environment in Taiwan and the PRC

Taiwan's cement market is mature with only limited growth prospects, reflecting slowing economic growth, a maturing real estate market and a reduction in spending on public infrastructure projects. As a result, Taiwan's cement consumption amounted to 10.3 million MT in 2009, an average of 448 kg per capita, which is a decrease of 12.7% from 512 kg per capita in 2008. We believe that domestic cement consumption is likely to have limited growth in the near future. Notwithstanding the mature state of the cement market in Taiwan, domestic cement prices, which fell to historic lows in 2001 because of competition from Philippine and Korean imports, have recovered and have since remained relatively steady. This is attributable to leading cement manufacturers' supply discipline and the introduction of an anti-dumping tariff in July 2002. Taiwan Cement Corporation and ACC are the top two domestic cement manufacturers whose cement production represented approximately 29% and 25%, respectively, of total cement

consumption in Taiwan in 2009. Starting from the second half of 2009, the PRC began to export cheap cement to Taiwan which put pressure on local cement prices. The Taiwan Cement Manufacturers' Association is considering initiating legal proceedings against the PRC exporters for anti-dumping.

The cement industry in the PRC is fragmented with the ten largest manufacturers accounting for less than a quarter of total production capacity. High entry barriers remain for smaller players as the market is shifting away from low-grade to high-grade cement, which is more capital and technology-intensive. As a result, companies with established operations and financial capacity, as well as proximity to raw materials and end markets, are emerging to expand their presence regionally. The pricing environment is divergent and cement prices are affected by proximity to coastal regions, which typically are more price-competitive compared to pricing in inland regions because there are more suppliers in the coastal regions. Generally, competition has been limited among regional players, due to localization characteristics and the high weight-to-value ratio of cement products. In addition, property developers and contractors require a certain level of cement quality and therefore the larger producers have a competitive edge over the smaller producers.

The PRC government has introduced policy measures to close down less efficient and smaller producers in recent years. Although low-grade cement, which is inefficiently produced by hundreds of government-subsidized and small-scale cement producers, still accounts for about a quarter of total production volume in the PRC, high-grade cement output, which is more efficiently produced and more environmentally-friendly, has risen rapidly over the past few years and accounted for a substantial majority of total production in the PRC in 2009. The increased demand for high-grade cement is generally driven by complex infrastructure projects throughout the country such as bridges, expressways, skyscrapers, sporting facilities, pipelines and dams. As demand for high-grade cement increases, the PRC cement industry is expected to further consolidate among regional players, and large-scale operators are expected to benefit from an improving industry environment where the smaller players are squeezed out and better pricing discipline is introduced.

Capacity expansion in the PRC

Realizing the limited growth prospects of the domestic cement industry, we have expanded into the PRC with several investments commencing in 1995. Our subsidiary, ACC China, is the company through which we conduct our PRC businesses. It was listed on the Main Board of the Hong Kong Stock Exchange on 20 May 2008 under the ticker "743." As of December 31, 2010, we owned 72.29% of ACC China directly and indirectly. The operations of ACC China's subsidiaries are mainly in Jiangxi, Sichuan, Hubei, Yangzhou and Shanghai, as we concentrated our PRC expansion on the inland areas given the more favourable competitive dynamics. Among our current PRC-based operating entities, Jiangxi Yadong Cement Co. is the largest entity with a rated capacity of approximately 4.1 million MT of clinker and 6.0 million MT of cement in 2009. The aggregate output of clinker of our PRC-based operating entities in 2009 amounted to 9.9 million MT compared to 6.8 million MT in 2008, an increase of 46%. The aggregate sales of cement, clinker and slag powder by these operating entities in 2009 amounted to 14.4 million MT compared to 10.3 million MT in 2008, an increase of 40%. The net income of our business in the PRC (through ACC China) in 2009 amounted to RMB615 million.

Our goal is for ACC China to become a leading producer of high-quality cement in the PRC, which we believe is more profitable than the lower-quality cement. The Company aims to achieve a total production volume of 13.4 million MT of clinker and 19.5 million MT of cement in the PRC through ACC China, with estimated sales of 20.0 million MT of cement related products by the end of 2010. However, our investments in the PRC are affected by significant economic and political developments, uncertainties or changes in the PRC as well as any tension between Taiwan and the PRC. See "Risk Factors—Risks Relating to both ACC and FENC—Strained relations between Taiwan and the PRC could negatively affect our business and the market value of your investment" and "Risk Factors—Risks Relating to the Cement Industry—The cement industry is subject to significant regulation by the PRC government and subsequent introduction of new policies may affect the current and future development plans of our business."

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Results of Operations

The following table sets forth, for the periods indicated, certain financial data.

	Year Ended December 31,(audited)							Nine Months Ended September 30,(unaudited)
	2007		2008		Change		2009	Change		2009		2010
	NT$	%	NT$	%	%	NT$	%	%	NT$	%	NT$	%	%
Net operating revenues	35,946.5	100	44,005.5	100	22.4	48,079.7	100	9.3	35,605.4	100	36,792.9	100	3.3
Operating costs	(30,058.9)	(84)	(37,738.1)	(86)	25.5	(39,052.7)	(81)	3.5	(28,549.5)	(80)	(32,708.1)	(89)	14.6
Gross profit	5,887.6	16	6,267.4	14	6.5	9,027.0	19	44.0	7,055.9	20	4,084.8	11	(42.1)
Operating expenses	(1,926.8)	(5)	(2,748.6)	(6)	42.7	(3,098.6)	(7)	12.7	(2,183.4)	(6)	(2,034.0)	(5)	(6.8)
Operating income	3,960.8	11	3,518.8	8	(11.2)	5,928.4	12	68.5	4,872.5	14	2,050.8	6	(57.9)
Net nonoperating incomeand gains (expense andlosses)	6,805.1	19	4,350.8	10	(36.1)	3,744.6	8	(13.9)	3,126.0	9	3,587.4	10	14.8
Incomes before income tax	10,765.9	30	7,869.5	18	(26.9)	9,673.0	20	22.9	7,998.5	23	5,638.2	16	(29.5)
Income tax expense	(669.9)	(2)	(396.9)	(1)	(40.8)	(718.0)	(1)	80.9	(550.2)	(2)	(262.5)	(1)	(52.2)
Consolidated net income	NT$10,096.0	28	NT$7,472.6	17	(26.0)	NT$8,955.0	19	19.8	NT$7,448.3	21	NT$5,375.7	15	(27.8)

Operating Revenues

Our consolidated net operating revenues consist primarily of sales of cement and clinker, cement products (principally RMC), electricity and other products. Generally, we recognize sales revenues upon our shipment of products. In certain circumstances, we receive advance payments or prepayments from our customers. In these circumstances, we record amounts paid prior to our shipping of products as prepayments, and reduce the amount of prepayments and recognize corresponding sales revenues upon shipping. Electric power revenue is calculated according to the volume of electric power sold and the per unit price. We also own 51% of Yuan Long Stainless Steel Co., Ltd. which has a capacity of 130,000 MT of BA cold-rolled stainless steel coil. In addition to the local market, we also sell our products to Europe.

Our net sales revenues are derived after excluding sales returns and allowances on cement and clinker and cement products from our total sales revenues. Historically, we have not had substantial amounts of sales returns. Our sales returns and allowances have consisted principally of volume discounts to certain of our large customers.

Our net operating revenues also include other operating revenues. These other operating revenues differ from sales included in our total sales revenues in that they comprise revenues derived from sources which we do not consider to be part of our principal business operations such as, for example, income from investment activities, engineering income and transportation income. A substantial majority of our other operating revenues are attributable to our consolidated subsidiaries.

Operating Costs

Our operating costs include actual costs and commodity taxes (which in the ROC is NT$320 per tonne of Taiwan local cement sales and in the PRC is 17% of the selling price which are paid through to PRC tax authorities). Commodity taxes account for approximately 9.7% of our operating costs in Taiwan. In the production of cement, clinker and cement products, our operating costs include principally raw materials, electricity, depreciation and direct labor expenses. Operating costs in the production of electricity include, among others, coal, labor and depreciation. Procurement of stainless steel roll contributes the most to the operating costs of a stainless steel company because the price of the stainless steel rolls can vary greatly in the global market.

Raw material costs relate mainly to the purchase of limestone, sandstone, clay, sulfate slag, fly-ash and gypsum and represent approximately 14% to 27% of our operating costs. Raw material prices have been and will be affected by overall economic conditions and the level of construction activity in Taiwan and the PRC. Our results of operations may be adversely affected if prices of raw materials rise in the future and if we are unable to make corresponding increases in the prices of our products, improve our efficiency or adopt alternate types of raw materials used in our production.

We also include other operating costs as part of our overall operating costs which, like other operating revenues, are derived principally from sources outside our principal business areas. As is the case with our other operating revenues, other operating costs relate principally to the operations of our consolidated subsidiaries.

Operating Expenses

Our operating expenses consist primarily of general and administrative costs including, among others, salaries and wages, pensions and retirement benefits and depreciation. A substantial portion of our operating expenses are attributable to our consolidated subsidiaries.

Nonoperating Income and Gains

Nonoperating income includes interest income, dividends, rental income, gains on disposal of properties and equipment and nonoperating properties, and others. The largest contribution to nonoperating income in our consolidated financial statements, however, is derived from the investment income of equity-method investees, in particular FENC and UMTC. The largest difference in nonoperating income between our consolidated and unconsolidated financial statements is primarily attributable to the financial results of ACC China, which contributes to investment income of equity-method investees on an unconsolidated basis, but not on a consolidated basis.

Nonoperating Expenses and Losses

Our nonoperating expenses comprise interest expense, impairment loss, rental costs and expenses, financial expenses, and others.

Consolidated Results of Operations

Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009

Operating Revenues

Our net cement sales revenues increased to NT$28,134.9 million (US$902.0 million) for the nine months ended September 30, 2010, an increase of 5.1% from NT$26,759.0 million for the nine months ended September 30, 2009. The increase was principally attributable to an increase in sales volume as a result of our capacity expansion in the PRC. Our electric power revenue decreased 17.3% due to a decrease in the utilization rate of our power plants. Our net operating revenues were NT$36,792.9 million (US$1,179.6 million) for the nine months ended September 30, 2010, a 3.3% increase from NT$35,605.4 million for the nine months ended September 30, 2009.

Operating Costs

Operating costs increased to NT$32,708.1 million (US$1,048.7 million) for the nine months ended September 30, 2010, an increase of 14.6% from NT$28,549.5 million for the nine months ended September 30, 2009. The increase was principally attributable to an increase in sales volume and the expansion of production capacity in the PRC through ACC China.

Gross Profit

As a result of the foregoing, our gross profit decreased to NT$4,084.8 million (US$131.0 million) for the nine months ended September 30, 2010, a decrease of 42.1%, from NT$7,055.9 million for the nine months ended September 30, 2009. Our gross margins for the periods decreased to 11.1% from 19.8%.

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Operating Expenses, Operating Income and Operating Margin

Our operating expenses decreased to NT$2,034.0 million (US$65.2 million) for the nine months ended September 30, 2010, a decrease of 6.8% from NT$2,183.4 million for the nine months ended September 30, 2009. The decrease was principally due to a lower level of other expenses and losses in our PRC subsidiaries. As a result, our operating income decreased to NT$2,050.8 million (US$65.8 million) for the nine months ended September 30, 2010 from NT$4,872.5 million for the nine months ended September 30, 2009, and our operating margin decreased to 5.6% for the nine months ended September 30, 2010 from 13.7% for the nine months ended September 30, 2009.

Nonoperating Income and Gains

Our non operating income increased to NT$5,971.9 million (US$191.5 million) for the nine months ended September 30, 2010, an increase of 25.9% from NT$4,744.8 million for the nine months ended September 30, 2009. The increase was principally due to an increase in investment income from equity-method investees, especially from FENC and UMTC.

Nonoperating Expenses and Losses

Non operating expenses were NT$2,384.4 million (US$76.4 million) for the nine months ended September 30, 2010, an increase of 47.3% from NT$1,618.7 million for the nine months ended September 30, 2009. The increase was primarily attributable to an asset impairment that took place in 2010 that was related to damages caused to an independent power plant.

Income Tax Expense

We had income tax expenses of NT$262.5 million (US$8.4 million) for the nine months ended September 30, 2010, compared to NT$550.2 million for the nine months ended September 30, 2009. Our effective tax rate for the first nine months ended September 30, 2010 decreased to 4.7% from 6.9% of the corresponding period in the preceding year. The decrease in income tax expense was primarily due to a decrease in taxable income.

Consolidated Net Income and Net Income Margin

As a result of the foregoing, our consolidated net income was NT$5,375.7 million (US$172.4 million) for the nine months ended September 30, 2010, a decrease of 27.8% from NT$7,448.3 million for the nine months ended September 30, 2009. Our consolidated net income margin was 14.6% for the nine months ended September 30, 2010 and 20.9% for the nine months ended September 30, 2009.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Operating Revenues

Our net operating revenues were NT$48,079.7 million (US$1,541.5 million) in 2009, a 9.3% increase from NT$44,005.5 million in 2008. This increase was mainly due to the increase in our net cement sales revenues, which recorded NT$36,013.1 million (US$1,154.6 million) in 2009, an increase of 11.6% from NT$32,257.9 million in 2008. The increase in cement sales was principally attributable to our expansion of production capacity in the PRC.

Operating Costs

Operating costs increased to NT$39,052.7 million in 2009 (US$1,252.1 million), an increase of 3.5% from NT$37,738.1 million in 2008. The increase was principally attributable to higher cement sales revenues in the PRC through ACC China and, to a lesser extent, an increase in raw material costs, including coal, and depreciation costs.

Gross Profit

As a result of the foregoing, our gross profit increased to NT$9,027.0 million (US$289.4 million) in 2009 from NT$6,267.4 million in 2008, and our gross margins for the same period increased to 18.8% from 14.2%.

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Operating Expenses, Operating Income and Operating Margin

Our operating expenses increased 12.7% to NT$3,098.6 million (US$99.3 million) in 2009 from NT$2,748.6 million in 2008. The increase was mainly due to higher general and administrative costs as we expanded our production facilities in the PRC. Our operating income was NT$5,928.4 million (US$190.1 million) in 2009, a 68.5% increase from NT$3,518.8 million in 2008, and our operating margin was 12.3% in 2009 compared to 8.0% in 2008.

Nonoperating Income and Gains

Our nonoperating income and gains decreased 16.3% to NT$6,200.3 million (US$198.8 million) in 2009 from NT$7,405.3 million in 2008. The decrease was principally due to investment income from equity-method investees, which decreased to NT$4,361.1 million (US$139.8 million) from NT$5,088.5 million, and the gain on valuation of financial liabilities, which decreased to nil from NT$572.4 million during the same period.

Nonoperating Expenses and Losses

Nonoperating expenses were NT$2,455.6 million (US$78.7 million) in 2009, a decrease of 19.6% from NT$3,054.5 million in 2008. The decrease was primarily attributable to loss on valuation of financial assets, which decreased to nil in 2009 from NT$478.6 million in 2008, and interest expenses, which decreased to NT$1,417.2 million (US$45.4 million) from NT$1,685.4 million in 2008.

Income Tax Expense

Our income tax expense in 2009 was NT$718.0 million (US$23.0 million) and NT$396.9 million in 2008. The 2009 income tax expense increase related principally to an increase in taxable income.

Consolidated Net Income and Net Income Margin

As a result of the foregoing, our consolidated net income was NT$8,955.0 million (US$287.1 million) in 2009 and NT$7,472.6 million in 2008, and our consolidated net income margin was 18.6% in 2009 and 17.0% in 2008.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Our net cement sales revenues increased 17.7% to NT$32,257.9 million in 2008 from 2007, because of our expansion of production capacity in the PRC. We also started to sell stainless steel in 2008 which recorded NT$2,180.2 million in 2008. As a result, our net operating revenues increased 22.4% to NT$44,005.5 million in 2008 from NT$35,946.5 million in 2007.

Operating costs increased 25.5% to NT$37,738.1 million in 2008 from NT$30,058.9 million in 2007. This increase was principally attributable to the start of selling stainless steel, and an increase in raw material costs and higher depreciation costs as a result of our sales volume increase and our PRC expansion.

Gross Profit

Due to the foregoing factors, our gross profit increased 6.5% to NT$6,267.4 million in 2008 from NT$5,887.6 million in 2007. Our gross margin, however, decreased to 14.2% in 2008 from 16.4% in 2007.

Our operating expenses increased 42.7% to NT$2,748.6 million in 2008 from NT$1,926.8 million in 2007, mainly due to increases in depreciation and employee-related expenses. Under ROC GAAP, all employee bonuses must be recognized as expenses from 2008 onwards, and this was the main factor that contributed to the increase in employee-related expenses in 2008. Our operating income declined to NT$3,518.8 million in 2008 from NT$3,960.8 million in 2007, and our operating margin declined to 8.0% in 2008 from 11.0% in 2007.

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Our nonoperating income and gains decreased 14.4% to NT$7,405.3 million in 2008 from NT$8,652.4 million in 2007. The principal factor in the decrease was investment income from equity-method investees which decreased to NT$5,088.5 million in 2008 from NT$7,173.3 million in 2007, partially offset by the valuation gain on financial liabilities which increased to NT$572.4 million in 2008 from nil in 2007.

Our nonoperating expenses and losses increased to NT$3,054.5 million in 2008, an increase of 65.3% from NT$1,847.3 million in 2007. The overall increase was mainly attributable to interest expenses, which increased to NT$1,685.4 million in 2008 from NT$1,160.4 million in 2007, and valuation loss on financial assets, which increased to NT$478.6 million in 2008 from NT$85.7 million in 2007.

We had an income tax expense of NT$396.9 million in 2008, compared to income tax expense of NT$669.9 million in 2007. The lower effective tax rate of 5.0% in 2008 compared to 6.2% in 2007 was due to a higher percentage of tax-exempt income to pre-tax income in 2008.

Due to the foregoing factors, our consolidated net income was NT$7,472.6 million in 2008 and NT$10,096.0 million in 2007, and our consolidated net income margin was 17.0% in 2008 and 28.1% in 2007.

Liquidity and Capital Resources

Our principal uses of cash have been to finance the expansion of our cement, clinker and cement products manufacturing businesses in the PRC. For the foreseeable future, our financial objectives are to further invest (largely through ACC China) in cement-related opportunities in the PRC.

The following table shows our consolidated cash flows from operating activities, investing activities and financing activities in the years ended December 31, 2007, 2008, and 2009 and for the nine months ended September 30, 2009 and 2010.

Cash flows from operating activities. Our net cash provided by operating activities from 2007 to 2009 and during the nine months ended September 30, 2010 was primarily the result of recording a net income over this period. Our net cash provided by operating activities over the years ended December 31, 2007, 2008, 2009 and the nine months ended September 30, 2010 was positively affected by an adjustment for depreciation and amortization of NT$2,455.6 million, NT$2,907.6 million, NT$3,768.8 million (US$120.8 million) and NT$2,932.9 million (US$94.0 million), respectively. Our net cash position was further improved by cash dividends received from equity-method investees by NT$3,572.5 million, NT$5,446.7 million, NT$3,100.8 million (US$99.4 million) and NT$3,475.2 million (US$111.4 million) in the years ended December 31, 2007, 2008, 2009 and the nine months ended September 30, 2010, respectively. This increase was offset by a non-cash adjustment of the investment income from equity-method investees of NT$7,173.3 million, NT$5,088.5 million, NT$4,361.1 million (US$139.8 million) and NT$4,730.1 million (US$151.7 million) over the corresponding periods respectively. Investment income from equity-method investees and cash dividends received were mainly derived from our investments in FENC and UMTC.

Cash used in investing activities. Our net cash used in investing activities from 2007 to 2009 and during the nine months ended September 30, 2010 mainly reflected purchases of properties and equipment in connection with our facility build-out and capacity expansion of our PRC businesses, which increased significantly from NT$6,134.3 million in 2007 to NT$12,264.2 million in 2008 and NT$11,823.2 million (US$379.1 million) in 2009. For the nine months ended September 30, 2010, purchases of properties and equipment comprised NT$7,900.2 million (US$253.3 million) of our cash used in investing activities.

Cash flows from financing activities. Our net cash provided by financing activities was primarily affected by increases in long-term liabilities, net of repayment of long-term liabilities, which were NT$3,694.2 million in 2007, NT$11,199.6 million in 2008 and NT$10,150.0 million (US$325.4 million) in 2009. In the nine months ended September 30, 2010, long-term borrowing was a factor that contributed to net cash outflows, as repayments of long-term borrowings exceeded increase in long-term borrowings in the amount of NT$3,205.0 million (US$102.8 million) in the nine months ended September 30, 2010. Another factor that affected our cash flows from financing activities was cash dividends paid out, which amounted to NT$3,798.0 million in 2007, NT$6,563.0 million in 2008, NT$5,217.8 million (US$167.3 million) in 2009 and NT$5,374.3 million (US$172.3 million) in the nine months ended September 30, 2010. As a result of the foregoing, our cash and cash equivalents balance increased by NT$906.7 million in 2009 to NT$17,838.1 million (US$571.9 million) as of December 31, 2009 and decreased by NT$12,007.5 million in the nine months ended September 30, 2010 to NT$5,830.6 million (US$186.9 million) as of September 30, 2010.

Our current liabilities increased 24.7% from NT$20,994.3 million as of December 31, 2008 to NT$26,181.9 million (US$839.4 million) as of December 31, 2009. Although short-term loans and short-term bills payable decreased in 2009, accounts payable and accrued expenses and financial liabilities increased during this period. As of September 30, 2010, our current liabilities increased to NT$21,836.8 million (US$700.1 million) from NT$20,156.2 million as of September 30, 2009, an increase of 8.3%. Our long-term bank loans increased to NT$39,154.4 million (US$1,255.4 million) as of December 31, 2009 from NT$32,083.8 million as of December 31, 2008, while our bonds payable decreased to NT$7,000.0 million (US$224.4 million) from NT$10,707.9 million during the same period.

Taxation

The statutory income tax rate applicable to us in the ROC is 17%. The income of our foreign subsidiaries is not subject to ROC income tax.

We are entitled to a number of different types of income tax benefits in the ROC, including both tax holidays and tax credits. We recognize tax benefits, upon receipt, as deferred tax assets. To the extent that we are able to utilize tax benefits by offsetting them against taxable income or taxes payable, we reduce our deferred tax assets account accordingly. If and when deferred tax assets expire or otherwise become unavailable for our use, we reverse the applicable amount from our deferred tax assets, and recognize it on our statement of income as income tax expense. As a result, our income tax expenses comprise substantial amounts of unrealizable income tax assets, as well as income tax payments.

Our earnings from our operations in the PRC are subject to certain investment tax incentives. For example, certain tax credits apply with respect to purchases of equipment. Certain of our PRC subsidiaries currently enjoy a lower preferential tax rate but in the future will become subject to the standard tax rate of 25%.

As a result of those factors, our effective income tax rate for the years ended 2007, 2008 and 2009 was 6.2%, 5.0% and 7.4%, respectively. In September 30, 2010, our effective income tax rate was 4.7%.

Market Risk

Our exposure to financial market risks relates primarily to changes in interest rates and, to a lesser extent, foreign currency exchange rates. To mitigate these risks, we utilize derivative financial instruments, the application of which is primarily to manage these exposures, and not for speculative purposes. See Notes 6 and 10, "Information on Derivative Transactions," in the Notes to the Consolidated Financial Statements and Note 5 in the Notes to the Interim Consolidated Financial Statements.

Critical Accounting Policies and Practices

The preparation of financial statements and disclosure in conformity with ROC GAAP requires our management to make certain judgments, assumptions and estimates that affect the amounts reported in our financial statements and the accompanying notes. The amounts of assets and liabilities reported in our balance sheets and the amounts of revenues and expenses reported for each of the periods are affected by estimates and assumptions which are used for, but not limited to, impairment loss on assets and allowance for doubtful receivables, as well as the following:

(1) allowance for loss on inventory;
(2) depreciation of properties and equipment and nonoperating properties;
(3) amortization of deferred charges and intangible assets;
(4) pension; and
(5) bonuses to employees, directors and supervisors.

Actual results may differ from these estimates. For a description of our significant accounting policies and methods used in the preparation of our financial statements, see Note 2 to our audited consolidated financial statements for the years ended December 31, 2007, 2008 and 2009 included elsewhere in this offering memorandum.

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RELATIONSHIP WITH THE FAR EASTERN GROUP

The Far Eastern Group is one of the largest business groups in the ROC. The Far Eastern Group does not exist as an independent legal entity, and it acts as a virtual holding company with a diversified group of companies which engage in activities including, among others, petrochemicals, cement production, manufacturing, retailing, shipping, transportation, finance, telecommunications, investment and real estate. Member companies of the Far Eastern Group also engage in manufacturing and sales operations in the Philippines, Singapore, Hong Kong, Thailand, Japan, the PRC, Malaysia and Canada, and export to over 50 countries around the world.

Although there are companies within the Far Eastern Group that are consolidated for financial reporting purposes with their corporate parent or subsidiary companies, the Far Eastern Group is not a consolidated entity for accounting purposes or for any other purpose, and references herein to the Far Eastern Group and to statistics regarding the Far Eastern Group are for convenience of presentation only and are not intended to have any legal significance.

The largest member of the Far Eastern Group in terms of both assets and revenues is FENC, which is one of the largest manufacturers of polyester and related products in the ROC. FENC is listed on the TWSE and the market value of its outstanding capital stock was approximately NT$234.88 billion (US$7.74 billion) as of December 31, 2010.

The Company, the Far Eastern Group's first venture outside of the textile area and one of its largest members in terms of both assets and revenues, owned directly and indirectly approximately 25.29% of FENC as of December 31, 2010. See "Ownership of FENC."

Certain member companies of the Far Eastern Group, including the Company and FENC, are engaged in transactions with related parties and derive a portion of their income from equity in earnings and the sale of securities of subsidiaries and affiliates. See "Description of ACC—Related Party Transactions" and "Description of FENC—Related Party Transactions." In addition, certain companies of the Far Eastern Group have members of their Boards of Directors in common. See "Description of ACC—Management" and "Description of FENC—Management."

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DESCRIPTION OF ACC

Our Business

Overview

Our Strengths

We operate in a competitive industry. We believe our historical success and our potential for future growth are based on the following:

our leading market positions in the Taiwan cement market as both a leading domestic- and export capable producer, and through ACC China, in the PRC cement market which is experiencing rapid growth;
our experienced management team and its solid operational track record driven by production efficiency, competitive cost structure and an extensive sales network;
our commitment to more environmentally-friendly production processes;
our early entry into specific regional areas in the PRC through ACC China, which helps position the Company for growth; and
our synergistic integration and collaboration with subsidiaries and affiliates in the Far Eastern Group.

Our Strategies

maintain a solid position as a market leader in Taiwan;
strategically invest in capacity expansion and increase our scale in selected regions in the PRC through ACC China;
strengthen our sales network and broaden marketing channels both domestically and internationally;
enhance profitability by increasing production efficiency through cost reductions and process improvements;
evaluate and pursue attractive strategic cooperation opportunities that may lead to acquisitions or joint ventures; and
extend our global market by expanding in emerging markets.

Products

Our products can be classified into four principal categories: clinker, cement products, RMC and blast-furnace slag powder. We also began to manufacture and sell stainless steel in 2008. We market our cement and clinker products under the "Skyscraper" brand name in the domestic market and overseas markets, which include Singapore, Malaysia, Hong Kong, Vietnam, the United States, Middle East and Africa. We sell our RMC products through our subsidiary Ya Tung Ready-Mixed Concrete Co. Ltd., which earned a sales revenue of NT$5,653 million (US$191.2 million) in 2009.

Clinker

Clinker is a semi-finished product which can be used to produce different types of cement products by mixing in different additives during the grinding process. Most of the clinker output that we produce is used in our cement production, and we sell the remainder to our customers. See "—Production Volume and Utilization."

Cement products

We sell three varieties of Portland cement products, consisting of ordinary Portland cement ("OPC"), Portland blast-furnace slag cement ("PBFSC") and composite Portland cement ("CPC"). We sell PBFSC and CPC in the PRC only through ACC China. These three varieties of cement products mainly differ in the percentage of clinker used and the blending of other ingredients during the grinding stage. For our PBFSC and CPC, the grinding mix includes blast-furnace slag powder, which is derived from a non-metallic byproduct of steel production.

Cement products are graded by compressive strength on a three-day and 28-day aging basis. The range of applications is discussed in the table below.

Cement type	Applications
OPC	OPC is used in the construction of buildings and infrastructure which require high strength, and for structures constructed within a short period of time, such as highways, bridges, piers and airports. It is also used in general construction projects, such as residential buildings and high-rise buildings. OPC is suitable for all applications where the special properties of other cement products are not required.
PBFSC	PBFSC is used to construct sulfate-exposed structures of considerable mass, such as piers, foundations, heavy retaining walls, port facilities and bridges.
CPC	CPC is used in the construction of low-rise buildings.

RMC

RMC is a downstream cement product used in a variety of construction projects. Our RMC products are made from cement sourced within the Company, and are produced in accordance with the different requirements of our customers. RMC is produced by mixing cement with water, and adding certain aggregates and additives, such as sand and gravel, at our RMC batching facilities. RMC products are delivered to our customers on mixer trucks.

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Blast-furnace slag powder

We use blast-furnace slag, a byproduct of steel production which we process into a powder, during our production of PBFSC. Most of the blast-furnace slag powder we produce is used in our cement production, while the remainder is sold to our customers. See “—Production Volume and Utilization.”

Other products

Yuan Long Stainless Steel Co., Ltd., a 51%-owned subsidiary of ours, which was founded on December 9, 2005, manufactures a variety of stainless steel products. The maximum annual capacity of its production facility is 130,000 MT, and the facility encompasses a land area of 73,000 square meters. The major product that it manufactures is BA cold-rolled stainless steel coil, but it also manufactures many different types of merchant stainless steel coils for a variety of uses. The sales revenue of Yuan Long Stainless Steel Co., Ltd. was NT$3,038 million (US$97.4 million) in 2009.

Cement Production Process

We produce clinker and cement using the dry process, which is more fuel-efficient than the wet process. The major stages involved in the manufacturing of cement by the dry process are described as follows:

Limestone is mined from the captive quarry by open cast blasting. A secondary blasting (in addition to the primary blasting) is required if the rock size is very large. Dozers are used for collecting the scattered rocks, and shovels are subsequently used for transferring the rock pieces from the ground to a dumper. The rock pieces are moved to the crusher hopper for crushing the limestone boulder into a uniform and usable size. Crushing is done in a closed circuit where the ground material is filtered as it emerges from the grinding mill and the coarser material is sent back into the mill for grinding.

The limestone is blended with certain additives and discharged on to a roller mill where the raw materials are ground to fine powder. An electrostatic precipitator de-dusts the raw mill gases and collects the raw meal for a series of further blending. The homogenized raw meal is extracted and pumped to the top of a pre-heater by air lift pumps.

In the pre-heaters the material is heated to approximately 1,200°C to 1,400°C. Subsequently, the raw meal undergoes a process of calcination in a pre-calcinator (in which the carbonates present are reduced to oxides) and is then fed to the kiln. Processed coal is used as a feed to the kiln, and is pumped into the kiln and the calciner lines of the pre-heater. The remaining calcination and clinkerization reactions are completed in the kiln where the temperature is raised to approximately 1,450°C. The clinker formed is cooled and conveyed to the clinker silo, where it is extracted and transported to our cement mills. Clinker is one of the intermediate products used in the manufacturing of cement. We use most of our clinker production output in producing our cement products.

In our cement mills, clinker, gypsum, iron sand and pozzolanic materials, such as fly ash and granulated blast furnace slag, are extracted in the required proportion for the desired cement product, mixed, and then fed for grinding. The final grinding is done in a vertical roller mill. The fine cement that emerges from the high efficiency separator is transported to cement silos by bucket elevator. Cement is stored in concrete silos and is extracted from the bottom of the silos by screw conveyors and packed into bags by rotary multi-spout packers. The packed cement is then loaded onto trucks by bag loading machines.

To produce RMC, cement and water are mixed with certain aggregates and additives such as sand and gravel.

Production Volume and Utilization

Total production volume

The following table sets forth a geographical breakdown of the total production volume of our products for the periods indicated.

	Year Ended December 31,			Nine Months Ended September 30,
	2007	2008	2009	2009	2010
	(in thousand tons, except for cubic meters for RMC)
Clinker products
Taiwan	4,999	4,825	4,597	3,439	3,215
PRC*	5,724	6,765	9,920	7,314	10,107
Cement products
Taiwan	4,877	4,652	4,767	3,325	3,183
PRC*	8,196	10,106	13,975	10,002	13,533
RMC
Taiwan	4,222	3,893	3,021	2,172	2,803
PRC*	811	1,433	1,735	1,201	1,297
Blast furnace slags
Taiwan	817	829	654	482	374
PRC*	1,286	1,310	1,256	899	1,011
Stainless Steel
Taiwan	29.5	32.9	48.3	32.6	54.7

Facilities in the PRC are owned and operated by ACC China and/or its subsidiaries.

Production Facilities

The following table sets forth the location of our integrated production facilities of clinker manufacturing, the number of rotary kilns for clinker production, production capacity and the number of employees, each as of December 31, 2010.

Production Facility	Product	Numbers of rotary kilns	Production capacity per year	Number of Employees
Taiwan facilities
Hualien facility	Clinker and cement	3	Cement: 4.4 million MT	347
Hsinchu plant	Clinker and cement	1	Cement: 1.0 million MT	164
PRC facilities*
Jiangxi Yadong facility	Clinker and cement	4	Cement: 8.0 million MT	664
Sichuan Yadong facility	Clinker and cement	3	Cement: 6.0 million MT	579
Hubei Yadong facility	Clinker and cement	2	Cement: 4.0 million MT	436
Wuhan Ya Sin facility	Clinker and cement	1	Cement: 2.0 million MT	430
Huanggang Yadong Cement facility	Clinker and cement	1	Cement: 2.0 million MT	378

Facilities in the PRC are owned/leased and operated by ACC China and/or its subsidiaries.

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Raw Materials

Raw materials used in our operations consist mainly of limestone, clay, gypsum, pyrite and raw coal for fuel. The price and quality of raw materials have remained stable since we rely mostly on long-term contracts. We have not experienced any major interruptions in the availability of raw materials for our operations. We and ACC China source most of our limestone from mines located adjacent to our integrated production facilities. Based on our current production levels, we estimate that our limestone reserves in Taiwan are sufficient for over 50 years. In the PRC, based on ACC China's current production levels, we estimate that our limestone reserves are sufficient for between 20 to 60 years, depending on the mine. We and ACC China procure other ancillary raw materials from suppliers at the prevailing market price. Clay is purchased from Taiwanese suppliers through short-term contracts. Gypsum and pyrite are supplied by qualified domestic and foreign manufacturers. We believe that the established business relationships we and ACC China have with the suppliers enable us to enjoy a consistent supply of the raw materials we need, and given that we source from a variety of suppliers, we are not dependent on any specific supplier for the raw materials we purchase.

Energy

The production of cement is an energy intensive process. Both we and ACC China rely primarily on coal and electricity to meet our energy needs. Our cost of coal accounted for approximately 31% to 36% of the total production cost in our Taiwan business and approximately 26% to 38% of the total cost of production in our PRC business for the past three years. Our electricity costs accounted for approximately 12% to 13% of the total production cost in our Taiwan business and approximately 14% to 16% of the total cost of sales in our PRC business in the past three years. Both we and ACC China have not experienced any shortage or delays in our supply of coal, and have not experienced any stoppage or reduction in production due to an interruption in our electricity supply.

Taiwan

We currently purchase coal, which is not widely available in Taiwan, from suppliers in Australia and the PRC. We also purchase a small portion of fuel oil to meet our energy needs.

We have traditionally met our electricity requirements through purchases from Taiwan Power Company ("Taipower"). Our supply of electricity from Taipower is subject to periodic power reductions during periods of peak demand. However, we have not experienced any stoppage or reduction in production due to an interruption in our electricity supply.

We installed waste heat recycling power generators at each of our Hualien and Hsinchu facilities. These generators utilize waste heat generated from our production facilities to produce electricity for our own use and to reduce reliance on electricity supply from third-party power producers.

PRC

ACC China primarily obtains coal from local mines in the PRC. The coal used in our production process is predominantly in the form of thermal coal, which is highly combustible compared to other types of coal.

ACC China obtains its electricity requirements from power producers, and has not experienced any stoppage or reduction in production due to an interruption in the electricity supply.

ACC China installed several waste heat recycling power generators at each of the Jiangxi, Hubei and Sichuan facilities. ACC China expects similar waste heat recycling power generators to be installed in other integrated clinker and cement production facilities.

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Sales and Marketing

In the case of ACC, the principal markets in which we sell our cement products are in Hualien and northern and central Taiwan; in the case of ACC China, the principal markets are in the central and western Yangtze River Region, including Jiangxi, Hubei, Sichuan, as well as Shanghai and Zhejiang. The following table sets forth our cement-related domestic and export sales revenues for the years ended December 31, 2007, 2008, 2009 and the nine months ended September 30, 2010.

	Year Ended December 31,			Nine Months Ended September 30,
	2007	2008	2009	2009	2010
	(in millions)
Taiwan domestic sales	NT$8,151	NT$7,575	NT$6,683	NT$5,178	NT$4,539
Taiwan export sales	2,595	2,941	3,279	2,493	2,187
PRC sales*	10,373	14,941	19,352	14,076	16,910
Total sales	21,119	25,457	29,314	21,748	23,636

Sales in the PRC are through ACC China and/or its subsidiaries.

Sales and marketing team

We and ACC China aim to strengthen our ongoing business relationships with our existing customers in both Taiwan and the PRC, maintain a high level of customer satisfaction and attract potential new customers through the continuous promotion of our products and market research. We and ACC China coordinate our sales operations among the different regions. As of December 31, 2010, we and ACC China employed 170 sales professionals, of which 33 are stationed in Taiwan and the remainder are stationed in the PRC.

Our and ACC China's overall marketing activities are overseen and coordinated by a central marketing department in Taiwan and the PRC. With our current sales and marketing structure, we believe that we can respond promptly and positively to any changes in market demand.

Customers

The customers of ACC China and us mainly include government construction and infrastructure project companies, RMC mixing plants, general distributors and other construction project companies. In overseas markets, ACC China and us have customers in Nigeria, Malaysia, Singapore, the United States and the Middle East. We have set up cement terminals and sales channels in those countries to ensure stable supply and distribution of our cement products.

In the PRC, the key construction and infrastructure project companies are primarily government entities that are responsible for government infrastructure projects, for which ACC China bids to provide cement. For its sales to RMC mixing plants, ACC China sells high grade cement in bulk. The general distributors are primarily companies engaged principally in the distribution of building materials. Other construction project companies to which we sell products are usually involved in real estate development. ACC China also supplies cement products directly to their customers or to the RMC mixing plants designated by their customers.

Pricing

Pricing for our products is determined by various factors, including the costs of raw materials, operating expenses, market demand and competition. We also apply different pricing methods depending on the customer, considering market conditions as well as the customer's creditworthiness and location.

Terms of Sales and Credit Policy

Generally, sales are settled through bank transfer, check or bank draft. Some of our sales are settled by pre-payment by our customers, on a cash-on-delivery basis, or by a balance by

way of credit sales. With regards to credit sales, we have implemented a strict credit control policy under which the credit terms are only granted following an appraisal of the creditworthiness and credit history of our customers. Our credit policies are consistent with industry practice.

Competition

The cement industry is primarily a regional industry. Cement sales tend to be concentrated within the local market, as the weight, bulk and volume of cement makes it expensive to transport. As a result, our and ACC China's competitiveness is not only determined by the price and quality of our cement products, but also by distribution capabilities, product development capabilities, customer relationships and the competitive environment at the locations of our and ACC China's cement plants.

Taiwan

The Taiwan cement industry is mature and subject to various competitive pressures, while being dominated by two major market participants, namely Taiwan Cement Corp. and us. The level of imported cement is relatively low compared to domestically produced cement, but may increase if current prices in other countries are lower than in Taiwan, as the decrease in prices can offset the additional transportation costs.

The bulk of cement produced in Taiwan has been sold domestically. This is due to a variety of factors, including intense competition in the overseas markets to which we export and the high transportation costs resulting in reduced pricing power.

PRC

Competition in the PRC cement industry is intensified by the expansion of major cement companies which benefit from the policy initiatives of the PRC government. There have been an increasing number of mergers and acquisitions across provinces, involving large cement manufacturers expanding their production capacities rapidly through acquisitions of smaller manufacturers and existing production facilities. In addition, the entrance of foreign cement companies has also heightened the competition in the PRC cement industry.

In the last several years, PRC government policies encouraged the development of large-scale cement companies while imposing more stringent rules that required small-scale companies to make improvements and close low-technology production plants compulsorily. The policies are aimed at leading the cement industry to healthy development through measures such as stringent control over new cement projects, accelerating the elimination of obsolete capacity and raising barriers to entry. The PRC government also encouraged the use of high-grade cement and discouraged the use of low-grade cement. Such government policies created opportunities for consolidation among cement companies and the adoption of new and advanced technologies.

We believe that we and ACC China and us are competitively positioned in both markets due to our experienced management team, high-quality cement products, production efficiency, cost-effectiveness, extensive sales and transportation network, and satisfactory after-sales services.

Distribution Network

We and ACC China have distribution terminals, including silos and other ancillary facilities, at different locations in Taiwan and the PRC for the storage of our cement products. Each of the storage silos is equipped with automated uploading and environmental-friendly facilities for the efficient transport and storage of the cement products.

We and ACC China have engaged distributors to distribute our cement products in order to fully utilize our production capacities. We believe our and ACC China's extensive network of distributors in Taiwan and the PRC forms an integral and vital part of our business model. We and ACC China have entered into distribution agreements with these various distributors for terms ranging from one year to three years. In selecting the distributors, we and ACC China have agreed with the distributors on detailed arrangements on the geographical coverage of each distributor so as to minimize competition among the distributors. We believe that we and ACC China have a good working relationship with all of our distributors.

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Quality Control

Our and ACC China's quality control departments in Taiwan and the PRC perform quality control functions throughout the entire production process, from the excavation of raw materials to the transportation of the products, in order to ensure that the cement products and clinker can meet their respective industry standards.

In addition to satisfying the basic industry standards, we and ACC China have implemented a comprehensive quality control and production tracking system with respect to the raw materials we source and at every stage of the production process. Every stage of the production process is automated and constantly monitored by the engineers. Our and ACC China's production lines are regularly inspected and maintained by the engineers to ensure that they are in proper working condition.

Product and Process Development

We strive to place a strong emphasis on product and process development activities in both Taiwan and the PRC; these activities are performed by our and ACC China's quality control department.

We and ACC China focus on improving the production process and product quality by:

selecting and analyzing principal raw materials, such as limestone, sandstone and clay, and other supplementary raw materials, such as blast-furnace slag and gypsum, and improving the use of different combinations of raw materials so as to ensure the quality of our products and the production efficiency;
improving the efficiency in the production and grinding processes;
developing different combinations of raw materials and additives for upgrading the quality of cement products;
developing and modifying the production process, including full automation and adoption of new production techniques with modern production equipment and advanced production technologies;
developing cement storage and delivery facilities; and
developing technologies and measures to reduce emissions and pollution.

We believe that our continued efforts to improve our and ACC China's product and process development will help maintain our competitive position in both Taiwan and the PRC.

Environmental Protection

The two main environmental concerns in the cement industry are (a) the air pollution from dust generated by the crushing, grinding and production processes and (b) the destruction of the environment through the process of extracting limestone. In accordance with the government regulations, we and ACC China have set up a continuous emission monitoring system to monitor the pollutant opacity of nitrogen oxides, sulfur oxides and other pollutants. We and ACC China have also adopted the necessary measures to prevent all types of industrial risks, as mandated through our compliance with ISO9001:2000 standards. Such measures include fire prevention, explosion prevention, industrial safety and construction safety for our production facilities in Taiwan and the PRC. We and ACC China also meet ISO14001:2007 standards in relation to our environmental management systems and OHSAS 18000 standards in relation to our health and safety management systems.

Air Pollution Prevention

Dust disposal is an important duty, not only to prevent air pollution, but also to reduce the loss of raw materials and finished products. Consequently, we and ACC China have focused our efforts on the efficiency of dust collection equipment. For instance, in Taiwan, the Hsinchu plant has 2 electrostatic precipitators and 35 bag filters, while the Hualien plant has 9 electrostatic precipitators and 75 bag filters.

In the PRC, ACC China's subsidiary Jiangxi Yadong Cement Co. was certified by the PRC's Zhong-Huan United Recognition Center in April 2005 and received ISO-14001 certification in May

With the construction of an environmentally friendly new dry notary kiln underway, ACC China will be able to incinerate urban sludge upon the completion of this kiln. We believe ACC China will not only minimize environmental pollution, but also bring in additional revenue from municipal waste treatment.

Our Environmental Achievements and Initiatives

In Taiwan, both Hsinchu and Hualien plants have implemented measures for soil conservation and have taken actions to green the environment by planting trees and other vegetation. In August 1996, the Hualien plant was granted certification by the Bureau of Commodity Inspection and Quarantine of the MOEA. In November of the same year, we became one of the first organizations in Taiwan to receive ISO-14001 certification. In 2003, the Hualien Plant was awarded for the merits of its environment beautification and greening efforts by the Environment Greenery Association R.O.C. In 2007, it was awarded for its excellent performance in the project of "promoting green communities" by the Environmental Protection Administration, ROC Executive Yuan.

We are planning to carry out the following environmental protection initiatives in the future:

reinforcing and ensuring the normal operation of environmental facilities;
practicing in industry waste reduction; avoiding pollution;
improving the greening rate in factory and quarry areas;
utilizing wastes as resources to take social responsibilities;
enhancing environmentally-friendly measures and techniques.

We and ACC China have not encountered any material fire and industrial accidents, serious injury or death to personnel, and have not received claims for material damages resulting from occupational hazards or injuries relating to our operations. In addition, we believe that both we and ACC China are in compliance with all material environmental regulations in Taiwan and the PRC and enjoy good relationships with environmental groups who monitor the impact of cement factories on the environment. We also believe that we and ACC China are leaders among cement producers in the effort to reduce air pollution from dust caused by the production of cement and to restore quarries after the extraction of limestone through the planting of trees and other plants.

Repairs and Maintenance

We and ACC China have implemented a comprehensive system for the repair and maintenance of each of our production facilities for the purposes of optimizing production efficiency and to maintaining the safety of our industrial plants for our employees in Taiwan and the PRC. Pursuant to the established procedures, we and ACC China conduct an annual overhaul of certain major mechanical equipment, such as for our rotary kilns and grinding facilities.

Insurance

Our and ACC China's significant insurance policies for ongoing operations cover fire and third-party liability insurance. Consistent with customary practice in Taiwan and the PRC, we and ACC China do not carry any business interruption insurance or product liability insurance against claims or liabilities that may arise from products sold by us. To control our product liability risk, we and ACC China place significant emphasis on quality control. See "— Quality Control."

We and ACC China also maintain insurance for our employees as required by the applicable laws and regulations in Taiwan and the PRC.

Most of our and ACC China's operations-related insurance policies are renewed annually. We believe that we and ACC China have maintained adequate insurance policies for our production facilities and our employees which help reduce our risk exposure. We believe that our and ACC China's insurance coverage is appropriate and consistent with industry practice in Taiwan and the PRC given the nature of our business and the risks we face.

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Employees

As of December 31, 2009 and September 30, 2010, ACC had approximately 662 and 660 employees, respectively, in Taiwan, and ACC China had 3,397 and 3,544 employees, respectively, in the PRC.

Property

ACC owns the property where our manufacturing facilities are located in Taiwan. In Hualien where we have a limestone mine, ACC was granted rights by the ROC government to use the land until November 2017. An extension for the mining license of the Hsinchu plant, however, was refused by the MOEA in June 2010 because the plant is located in a reservation area. We have filed a petition on July 1, 2010 which is currently being reviewed by the ROC Executive Yuan. Nonetheless, we have sufficient limestone inventory in the Hsinchu plant at the moment, and, alternatively, we can purchase limestone from third-party suppliers. Thus, there is no significant impact on our business, financial condition or results of operation as a result of this dispute. In the PRC, land use rights for most of the lands are valid for 40 to 50 years. A portion of the properties that ACC China uses in the PRC are granted under temporary land use rights certificates, and ACC China is in the process of obtaining renewal for such certificates. (See "Risk Factors—Risk Relating to the Cement Industry - Cement-related mining activities are extensively regulated. Changes in policy or regulations may cause us and ACC China to incur significant compliance costs. We and ACC China may also be unable to procure the necessary exploration or mining rights with respect to our planned projects.")

Power Production

In a joint venture with J-POWER Netherlands B.V., we acquired Chiahui Power in 1999, which constructed and now operates a 670MW gas-fired thermal power plant in Chiayi, Taiwan. The plant was commissioned in December 2003.

Under a power purchase agreement with Taipower, after deducting about 2% of its electrical output for its internal use, Chiahui Power is obligated to sell its entire electricity production output to Taipower for 25 years beginning from the date of Chiahui Power's first commercial production of electricity, and Taipower is obligated to purchase such electricity production output. According to the agreement with Taipower, Chiahui Power guarantees approximately 3,500 hours of annual electricity production. The agreement may be extended by the two parties two years prior to its expiration for a five-year term. Under the agreement, Taipower may also request that Chiahui Power suspend electricity production during a period of economic recession in Taiwan, provided that Taipower and Chiahui Power reach an agreement on the terms of compensation during such period.

Legal Proceedings

We are not involved in any material litigation or legal proceedings which could be expected to have a material adverse effect on its business or operations.

Our Principal Subsidiaries and Affiliates

We have significant investments in a number of our subsidiaries and affiliates.

The following table sets forth certain information relating to our direct and indirect shareholdings and investment amounts in our principal subsidiaries and affiliates and the principal business scopes of these subsidiaries and affiliates as of December 31, 2010.

Subsidiary/Affiliate	Nature of Business	Effective Ownership as of December 31, 2010 (%)	Incorporated Jurisdiction
Far Eastern New Century Corporation	Manufactures and sells polyester and related products.	25.29	ROC
U-Ming Marine Transport Corp.	Engages in transportation activities.	39.74	ROC
Asia Cement (China) Holdings Corp.	Engages in investment activities.	72.29	Cayman Islands
Asia Cement (Singapore) Pte. Ltd.	Manufactures and sells cement and related products.	99.96	Singapore
Chiahui Power Corp.	Engages in power generation, planning and designing power equipment, importing and exporting spare parts for power generation equipment, etc.	59.59	ROC
Yuan Long Stainless Steel Co., Ltd.	Stainless steel plant.	51.00	ROC
Ya Tung Ready-Mixed Concrete Co., Ltd.	Manufactures and sells RMC and cement-related products.	99.99	ROC
Der Ching Investment Corp.	Engages in investment activities.	99.99	ROC
Asia Investment Corp.	Engages in investment activities.	100.00	ROC

The following set forth the details of ACC China, a major subsidiary, and UMTC, a significant affiliate.

ACC China

As of December 31, 2010, ACC effectively owned 72.29% of ACC China, the entity through which ACC conducts its business in the PRC. Together with its subsidiaries, ACC China manufactures and sells cement, concrete and related products. ACC China was listed on the Main Board of Hong Kong Stock Exchange on May 20, 2008 with a market capitalization of HK$6,412 million as of January 19, 2011.

The manufacturing activities of ACC China are mainly based in the Jiangxi, Sichuan, Hubei, Yangzhou and Shanghai areas. The overall operating strategies are deployed through a number of subsidiaries located in the various regions; Jiangxi Yadong Cement Co., Sichuan Yadong Cement Co., Hubei Yadong Cement Co., Yangzhou Yadong Cement Co., Huanggang Yadong Cement Co. and Wuhan Ya Sin Cement Co. are the core production bases in Southeast China, Southwest China, Middle China and East Coast respectively. ACC China has a network for production of three grinding factories, five clinker manufacturing companies, three transportation companies and six RMC Companies. It aims to continue to expand its capacity through building new production lines or through mergers and acquisitions.

In 2010, ACC China continued to increase its production capacity and market coverage. With various new transportation, rural development and infrastructure projects launched in

Sichuan, and the central and lower Yangtze River regions, ACC China continued to experience significant production sales volume growth. The reasons for this growth can be attributed to, among others, (i) many infrastructure projects in the PRC continued to receive sufficient investment for their on-going operations despite the downturn in the world economy; (ii) further market development in the rural areas of the PRC; and (iii) increasing efforts from the PRC government to push ahead with social welfare housing and renovation projects in under-developed areas. All of these contributed to the continued growth in demand for cement in the PRC. In addition, the PRC government accelerated the elimination of obsolete production capacity and closed down 762 outdated cement enterprises with a combined total production capacity of 107.3 million MT by the end of September 2010, thus improving the balance of supply and demand for cement.

For the year ended December 31, 2009, the consolidated revenue of ACC China and its subsidiaries amounted to RMB4,207.4 million, which represents an increase of 30% from RMB3,248.2 million in the previous year. This increase in revenue was mainly attributable to an overall increase in total production output as a result of increased market demand, the full operation of the No.2 new dry process rotary kiln at Sichuan Yadong Plant and the No.1 new dry process rotary kiln at Hubei Yadong Plant, which commenced operation in December 2008 and March 2009, respectively. Sales of cement products accounted for 87%, and sales of concrete accounted for 10% of ACC China's revenue in the year ended December 31, 2009. During the first nine months of 2010, ACC China's sales volume of cement products amounted to 14.0 million MT, representing an increase of 40% as compared to that of the corresponding period in 2009. The increase in sales was due to the commencement of operation of the No.3 new dry process rotary kiln at Sichuan Yadong Plant in March 2010, the No.1 new dry process rotary kiln at Huanggang Yadong Plant, the No.4 new dry process rotary kiln at Jiangxi Yadong Plant in May 2010, as well as the recent completion of acquisition of the set of production facilities of Wuhan Yaxin Cement Co., Ltd.

ACC China's consolidated revenue in the first nine months of 2010 amounted to RMB3,675.8 million, representing an increase of 20.1% over the corresponding period last year. The growth in revenue was attributable to the increase in sales volume driven by the enhanced production capacity. The No.2 new dry process rotary kiln at Hubei Yadong Plant which was completed in early October 2010 has commenced operation. The rated production capacity of clinker of ACC China has increased to 14.8 million MT per year, with actual clinker production capacity reaching 17.5 million MT per year.

ACC China manufactures and sells its cement products in the PRC through the plants operated by the following major subsidiaries.

Jiangxi Yadong Cement Co.

This subsidiary has 4 kilns, each with an annual clinker capacity of 1.7 million MT, with an annual output of 6.6 million MT clinker, which can produce 8.0 million MT cement. With the full support of the Jiangxi Province government, there are plans to build the fifth and sixth production lines for cement and clinker. If the additional production lines are completed as planned, each kiln can increase its capacity to 2.4 million MT clinker, which can produce 3.0 million MT cement.

Sichuan Yadong Cement Co.

The construction of the 3 kilns has been completed by Sichuan Yadong Cement Co., resulting in an annual output of 5.0 million MT clinker, which can produce 6.0 million MT cement. The construction and production goal of this subsidiary is to serve the demand from Chengdu areas and the earthquake recovery plan. The continuous post-earthquake infrastructure development and reconstruction efforts have driven up the market demand.

After more than three years in operation in the cement market of Chengdu, the "洋房" brand name of the subsidiary has gained recognition from customers for its high quality and effective after-sales services. The "洋房" brand cement is extensively used in key construction projects in Chengdu, including Chengdu Airport, power stations, expressways, express railways, large-scale property projects and batching plants.

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Hubei Yadong Cement Co.

The construction of two kilns with an annual clinker capacity of 1.7 million MT has been completed in October 2010. The annual output of clinker is 3.3 million MT, which can produce 4.0 million MT cement.

Yangzhou Yadong Cement Co.

The major markets of ACC China in the Yangtze River Delta Region include Yangzhou, Shanghai and Zhejiang. Upon full operation of all three cement grinding facilities in Yangzhou Yadong Plant at the end of 2008, it generated output and sales of over 1.8 million MT cement for the year ended December 31, 2009. Yangzhou Yadong Plant has been contracted to supply cement and commodity concrete for the construction of pre-fabricated housing in the economic development region of Yangzhou.

Huanggang Yadong Cement Co.

The construction of 1 kiln with an annual clinker capacity of 1.7 million MT has been completed in May 2010. The annual output of clinker is 1.7 million MT, which can product 2.0 million MT cement.

Wuhan Ya Sin Cement Co.

From the third quarter of 2010, Wuhan Ya Sin Cement Co. was consolidated with ACC China and has an annual output of 1.5 to 2.0 million MT cement.

ACC China's Market

Sichuan Region

The post-earthquake infrastructure development and reconstruction efforts had driven the strong market demand for cement. Economic conditions began to pick up later in 2009 due to national policies that increased domestic demand, and in addition the property market in Chengdu recovered, leading to a gradual recovery in the cement industry and a distinct rebound in cement prices.

Central Yangtze River Region

ACC China is well-regarded in the Central Yangtze River Region through its continuous expansion efforts and its involvement in key projects in Wuhan such as express railways, commodity concrete stations and piping plants. In the rural market of Eastern Hubei, ACC China's sales network and strategic planning had led to high penetration of neighbouring markets as well as the extension of its market coverage to Henan Xinyang region. ACC China has been contracted to supply cement to various key construction projects including Hanyi Railway, Shiwu Railway Line, Da Guang South Expressway, Nanchang Changbei Airport, Jiujiang Yangtze River Bridge No.2, Changfeng Expressway, Jiurui Expressway and Hangrui Expressway. These orders consist of over 3.0 million MT cement in total and are to be delivered in 2010.

Yangtze River Delta Region

The major markets in this region include Yangzhou, Shanghai and Zhejiang. Upon full operation of all of the three cement grinding facilities in Yangzhou Yadong Plant at the end of 2008, their production capacity was fully leveraged and generated output and sale of cement of over 1.8 million MT in 2009. Since the cement markets in Shanghai and Zhejiang are highly developed, the cement prices and profit margins are relatively lower than other markets of ACC China. In light of this, ACC China only supplied cement to these areas for optimisation of its capacity.

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UMTC

As of December 31, 2010, ACC effectively owned 39.74% of UMTC, formerly known as Yue Ming Transportation Co., which was reorganised in 1984 to provide marine transportation of bulk cement, dry industrial raw materials and commodities, sell and purchase of vessels, and provide vessel husbanding and agency services. UMTC was listed on the TWSE on December 8, 1990. UMTC owns and operates ships that transport dry bulk cargoes, principally cement, crude oil, coal, iron ore and grain, but it also runs an investment business.

Employees of UMTC

UMTC, including its offshore subsidiaries, had 647 employees as of September 30, 2010.

As at December 31, 2009, UMTC along with its subsidiaries owned and operated a fleet of 25 bulk carriers, 6 cement carriers and 1 crude oil tanker with a total tonnage of about 3.37 million DWT of which 2 cape-sized and 1 panamax bulkers are joint venture-owned. The 6 cement carriers are equipped with advanced self-loading/unloading facilities to provide comprehensive network coverage and logistical support to ACC's west-bound cement shipments and exports to Asian markets. In order to diversify and expand their operating realms into the global market, UMTC acquired a Very Large Crude Carrier ("VLCC") to start in the crude oil transportation business. Currently UMTC has a backlog of newbuilding orders for 8 bulkers and one cape-sized bulk carrier with joint venture companies.

In addition to two newbuilding orders for 58,000 DWT Supramax placed in 2007, UMTC began its fleet-renewal programme with additional six newbuilding orders in July 2010: four 206,000-DWT cape-sized bulk carriers from Shanghai Waigaoqiao Shipbuilding Co. Ltd. and two 82,000-DWT Kamsarmax bulkers from CSSC Guangzhou Longxue Shipbuilding Co. Ltd. UMTC plans to carry out its renewal plan in the next five years not only through newbuildings but also through the acquisition of the resale tonnages and purchase of modern secondhand vessels. In addition it has a joint venture with Taiwan's state-run petro-chemical company, CPC Corporation, Taiwan and another local drybulk operator, Chinese Maritime Transport Ltd to set up an oil tanker company. The new company is expected to operate in January 2011. The joint venture company plans to purchase 6 VLCCs and 1 LR1-type product tanker.

UMTC will continue its fleet expansion. They are also looking to enter businesses which involve other types of ships. UMTC also has in place an effective training plan to groom quality crew members and cultivate professionalism of talents within the Company.

Prospects and Strategy

Bulk shipping is closely linked to the global economic climate. With the implementation of the PRC government's stimulus package, the number of infrastructure projects increased and the demand for steel recovered gradually in the second half of 2009. This in turn increased the demand for raw materials such as iron ore, and also placed pressure on the demand and the price for coal, leading the PRC to import more coal from overseas. These changes in the past year have led to an increase in the demand for bulk shipping. This trend may continue in the PRC, India and other emerging economies as domestic demand continues to rise with ongoing infrastructure projects. In light of this projected growing demand, UMTC's principal goal is to become a world-class transportation and logistics company while maintaining its core competency in dry bulk shipping. Currently it has an internal E-based market intelligence knowledge base which closely monitors and analyses market changes which is used as an information sharing platform to enhance operational efficiency. UMTC continues to upgrade its product mix and looks to expand its investment activities through strategic alliance and joint ventures. It selects customers carefully and considers the reputation and the operational stability as factors for developing partnerships. UMTC is able to leverage on its local and overseas subsidiaries' advantages in terms of preferential taxation, exchange control and interest rate risk, thereby seeking to lower corporate taxes. It aims to keep its fleet young and competitive by fine-tuning the fleet operational structure, making timely replacements and considering plans to carry on fleet expansion.

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Management

Directors and Supervisors

Our board of directors is responsible for the management of our business. The board consists of thirteen directors and five supervisors as of April 30, 2010, who are elected by our shareholders at an ordinary shareholders' meeting by means of cumulative voting. Our directors serve three-year terms and may be re-elected for any number of consecutive terms. Our articles of incorporation provides for a board comprising thirteen directors. The chairman of the board is elected by our directors.

The ROC Company Law requires a public company to have at least two supervisors at all times, and a supervisor cannot concurrently serve as a director, managerial officer or other staff member. Supervisors are required under the ROC Company Law to perform supervisory and oversight functions that are independent of the authority of the board of directors of an ROC company. The main responsibilities of supervisors are to supervise the business operations of the company and to examine and review the accounting books, records and other related documents of the company. Supervisors also have certain oversight duties with respect to the internal control systems of public companies. The supervisors' duties and powers include: investigating our business and financial conditions; inspecting our corporate records; attending board meetings; verifying some statements by our board of directors prior to the regular shareholders' meetings; calling shareholders' meetings when our board of directors does not or cannot call such a meeting and/or when such a meeting is necessary for the benefit of the Company; and representing us in negotiations with our directors. When necessary, supervisors have the authority to direct the board of directors to cease acting in violation of any applicable law or regulation, or in contravention to our articles of incorporation or the resolutions adopted at our shareholders' meetings. In performing his or her duties, a supervisor may retain, on behalf of the Company and without the approval of the board of directors, practicing lawyers and/or certified public accountants to examine or audit the business operations, financial results, accounting books and financial statements of the Company.

Our supervisors are typically elected by shareholders at the time when the directors are elected. Like the directors, they also serve three-year terms and may be re-elected for any number of consecutive terms.

Pursuant to the ROC Securities and Exchange Law, a public company is required to have either an audit committee or supervisors, provided that the FSC may, after considering the scale, business nature and other essential conditions, require the company to establish an audit committee in place of its supervisors. A public company's audit committee should include every one of their independent directors but there cannot be less than three members, of which at least one member should have accounting or related financial management expertise. The relevant provisions under the ROC Securities and Exchange Law, the ROC Company Law and other laws applicable to the supervisors are also applicable to the audit committee. Currently, ACC does not have an audit committee.

A director or a supervisor serving as a representative of a legal entity may be removed or replaced at any time at the discretion of that legal entity, and the replacement director or supervisor may serve the remainder of the term in place of that director or supervisor.

The present members on the board of directors and our supervisors took office on June 17, 2008 for a 3-year term.

The following table sets forth certain specified information with respect to each director and supervisor of ACC as of April 30, 2010.

Name	Position	Age	Position Held Since	Number of Shares Held Directly and Indirectly
Douglas Tong Hsu	Chairman	69	04/28/1975	27,892,769⁽⁹⁾
T.H. Chang⁽¹⁾	Director	86	04/24/1981	667,078,296⁽¹⁰⁾
Johnny Shih⁽¹⁾	Director	63	04/25/1984	675,219,888⁽¹¹⁾
H.S. Ying⁽²⁾	Director	93	04/30/1969	21,258,165⁽¹²⁾
C.V. Chen⁽¹⁾	Director	66	04/16/1987	666,933,321⁽¹³⁾
Peter Hsu	Director	65	06/07/2002	10,821,858⁽¹⁴⁾
K.T. Li	Director	65	04/21/1978	571,076
Connie Hsu⁽³⁾	Director	70	04/12/1990	16,967,109⁽¹⁵⁾
Chin-Der Ou⁽¹⁾	Director	66	06/09/2005	666,632,716⁽¹⁶⁾
Ta-Chou Huang⁽⁴⁾	Director	74	08/18/2006	1,337,306⁽¹⁶⁾
Kao Chao Lee	Director	72	06/09/2005	0
K.Y. Lee⁽⁵⁾	Director	70	06/09/2005	3,780,923⁽¹⁷⁾
S.Y. Wang⁽⁶⁾	Supervisor	71	05/07/1993	161,410,463⁽¹⁸⁾
T.Y. Tung	Supervisor	51	06/07/2002	3,565,255
Champion Lee⁽⁷⁾	Supervisor	63	06/07/2002	3,419,213⁽¹⁶⁾
L.T. Chang⁽⁸⁾	Supervisor	71	05/14/1999	15,626,918⁽¹⁶⁾
Eli C. Wang	Supervisor	71	06/07/2002	0

(1) T.H. Chang, Johnny Shih, C.V. Chen and Chin-Der Ou are representatives of FENC.
(2) H.S. Ying is a representative for X.Z. Ying-Chai Memorial Foundation.
(3) Connie Hsu is a representative of Huey Kang Investment Corp.
(4) Ta-Chou Huang is a representative of U-Ming Corporation.
(5) K.Y. Lee is a representative of U-Ding Corp.
(6) S.Y. Wang is a representative for the Far Eastern Medical Foundation.
(7) Champion Lee is a representative for Bai-Yang Investment Holdings Corp.
(8) L.T. Chang is a representative for Kai-Yuan International Investment Holdings Corp.
(9) Includes 7,216,270 shares held by spouse & minor.
(10) Includes 666,632,716 shares held by institutional investors represented by T.H. Chang and 37,570 shares by spouse and minor.
(11) Includes 666,632,716 shares held by institutional investors represented by Johnny Shih and 7,873,260 shares by spouse and minor.
(12) Includes 11,746,250 shares held by institutional investors represented by H.S. Ying.
(13) Includes 666,632,716 shares held by institutional investors represented by C.V. Chen.
(14) Includes 2,202,198 shares held by spouse and minor.
(15) Includes 4,296,754 shares held by institutional investors represented by Connie Hsu.
(16) All shareholdings were held on behalf of institutional investors.
(17) Includes 1,683,318 shares held by institutional investors represented by K.Y. Lee.
(18) Includes 161,272,929 shares held by institutional investors represented by W.Y. Wang.

Purchases and sales of our shares by our directors and supervisors are reported by such persons on the Market Observation Post System website of the TWSE at newmops.twse.com.tw.

The business address of each director and supervisor is our registered office. Set forth below is a short biography of our directors and supervisors:

Douglas Tong Hsu is our chairman. He is also the chairman of FENC, Far Eastern Department Stores Ltd., Oriental Union Chemical Corp., Far EasTone, New Century InfoComm Tech Co., Ltd. and UMTC. Mr. Hsu has more than 40 years of experience managing the businesses of the Far Eastern Group. Mr. Hsu holds a masters degree in arts from Notre Dame University and also studied economics at Columbia University. Mr. Hsu holds a honorary doctorate degree in management from National Chiao Tung University. Mr. Hsu is the brother of Mr. Peter Hsu and Ms. Connie Hsu.

T.H. Chang is our director. He is also the director of UMTC, supervisor of FENC, Chairman of Jiangxi Oriental Cement Co., Ltd and an executive director and the chief executive officer of ACC China. He has more than 40 years of experience in the cement industry in both Taiwan and the PRC.

Johnny Shih is our director. He is also the vice chairman and president of FENC, and the vice chairman of Oriental Union Chemical Corp. Mr. Shih holds a bachelor degree in electrical engineering from McGill University and a masters degree in computer science and business administration from Columbia University. Mr. Shih is the husband to Connie Hsu and the brother-in-law of Mr. Douglas Tong Hsu and Mr. Peter Hsu.

H.S. Ying is our director. Mr. Ying also served as the chairman of Ying Zhar Shu Jon Memorial Foundation.

C.V. Chen is our director. He is also the Chairman and managing partner at Lee and Li, Attorneys-at-Law. Mr. Chen holds a bachelor degree from National Taiwan University and a juris doctorate degree from Harvard Law School.

Peter Hsu is our director. He is also a director/senior executive vice president of FENC and a director of Far EastTone. Mr. Hsu has also been in charge of the purchasing department of the Far Eastern Group. Mr. Hsu holds a masters degree in operation research from Stanford University and a masters degree in computer science from the University of California, Los Angeles. Mr. Hsu is also the brother of Mr. Douglas Tong Hsu and Ms. Connie Hsu.

K.T. Li is our director. He is also the chief counselor at Lee and Li, Attorneys-at-Law. Mr. Li holds a bachelor degree in law from National Taiwan University, a masters degree in law from New York University and a masters degree in business administration from the Hong Kong University of Science and Technology.

Connie Hsu is our director. She is also the director of the Oriental Institute of Technology. Ms. Hsu holds a bachelor degree in biology from the University of California, Berkeley. Ms. Hsu is also the sister of Mr. Douglas Tong Hsu and Mr. Peter Hsu.

Chin-Der Ou is our director. He is also the chairman of Taiwan Rail Holdings Co., Ltd. Mr. Ou holds a bachelors degree in civil engineering from National Cheng Kung University and a doctorate degree in soil mechanics from Case Western Reserve University.

Ta-Chou Huang is our director. He is also the honorary director of the ROC Olympics Committee. Mr. Huang holds a bachelor degree in agriculture economics from National Taiwan University and a doctorate degree in agriculture from Cornell University.

Kao Chao Lee is our director. He is also a consultant with the Council for Economic Planning and Development of the ROC Executive Yuan. Mr. Lee holds a masters degree in economics from Vanderbilt University.

K.Y. Lee is our director. He is also the president of ACC and the chairman of Ya Tang Ready-Mixed Concrete Co., Ltd. Mr. Lee has more than 40 years of experience in the cement industry.

S.Y. Wang is our supervisor. He is also the director of FENC. Mr. Wang holds a bachelor degree in business administration from National Chung Hsing University.

T.Y. Tung is our supervisor. He is also the Vice Chairman of Tai Guang Electronic Materials Co., Ltd. He holds a doctorate degree in building structure from Stanford University.

Champion Lee is our supervisor. He is also the director of FENC. Mr. Lee holds a masters degree in enterprise administration from Texas A&I University and has extensive experience in the area of financial planning.

L.T. Chang is our supervisor. He is the chairman of Yuan Fang Industry (Shanghai) Co., Ltd. Mr. Chang holds a bachelor degree in chemistry from Zhong Yuan University.

Eli C. Wang is our supervisor. He is also the director of Yuan Zhi University. Mr. Wang holds a bachelor degree in business from National Cheng Kung University and a masters degree in accounting from Illinois University.

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Executive Officers

The following table sets forth certain information relating to our senior executive officers as of April 30, 2010. Our executive officers are appointed by our board of directors.

Name	Position	Age	Position Held Since	Number of Shares Held*
K.Y. Lee	President	70	08/01/2000	2,097,605
Y.F. Chang	Chief Executive Vice President	68	08/01/2000	724
R.H. Shao	Executive Vice President	63	08/01/2000	68,051
Y.M. Shih	Chief Auditor	66	07/25/2007	—
Doris Wu	Vice President	44	07/25/2007	—
C.M. Chen	Vice President	62	07/01/2007	35,354
W.K. Chou	Vice President	57	07/01/2007	4,410
Z.P. Chang	General Plant Manager	61	07/01/2009	30,201
Z.F. Lin	Manager of the Hsinchu Plant	66	05/01/2003	8,786
C.P. Sue	Assistant Vice President	61	11/01/2008	12,146
T.L. Yu	Assistant Vice President	60	09/01/2009	35
T.W. Huang Fu	Manager of IT Dept.	60	09/01/2004	18,235
W.H. Yeh	Manager of Accounting Dept.	52	07/25/2007	—
Manfred Wang	Manager of Secretarial Dept.	56	09/01/2008	—
M.C. Cheng	Manager of Domestic Sales Dept.	55	11/01/2008	—

All shareholdings are less than 1.0%.

Purchases and sales of our shares by our executive officers are reported by such persons on the Market Observation Post System website of the TWSE at newmops.twse.com.tw.

The business address of each executive officer is our registered office. Set forth below is a short biography of our executive officers and significant employees:

K.Y. Lee is our president. For a short biography of Mr. Lee, see “—Management—Directors and Supervisors.”

Y.F. Chang is our chief executive vice president. Mr. Chang has more than 40 years of experience in our Company. He holds a bachelor degree in chemical engineering from Tunghai University.

R.H. Shao is our executive vice president and is also a supervisor of UMTC. She holds a bachelor degree in accounting from Soochow University in Taiwan.

Y.M. Shih is our chief auditor and is also a supervisor of Ya Li Transportation Co. Ltd. He holds a bachelor degree in accounting from Soochow University in Taiwan.

Doris Wu is our vice president and is also a director of Yu Yuan Investment Co., Ltd. She holds a bachelor degree in accounting, California State University.

C.M. Chen is our vice president and is also the chairman of Yu Yuan Investment Corp. He holds a bachelor degree in international trade from Tamkang University.

W.K. Chou is our vice president. He holds a bachelor degree in law from Soochow University in Taiwan.

Z.P. Chang is our general plant manager and is also a supervisor of UMTC. He holds a bachelor degree in Electrical Engineering from National Taiwan University.

Z.F. Lin is our manager of the Hsinchu plant and is also a director of Nan Hwa Cement Corp. He holds a bachelor degree in mechanical engineering from National Taipei Institute of Technology.

C.P. Sue is our assistant vice president and is also a director of Asia Cement (Singapore) Pte. Ltd. He holds a bachelor degree in marine engineering from National Taiwan Ocean University.

T.L. Yu is our assistant vice president and is also a director of Yu Yuan Investment Co., Ltd. He holds a bachelor degree in business administration from University of the Philippines.

T.W. Huang Fu is our manager of IT department and is also a director of Yu Yuan Investment Co., Ltd. He holds a bachelor degree in accounting from Chinese Culture University.

W.H. Yeh is our manager of accounting department and is also a supervisor of Nan Hwa Cement Corp. He holds a bachelor degree in accounting from Soochow University.

Manfred Wang is our manager of secretarial department and is also a director of Fu Shan Mineral Stone Co. Ltd. He holds a bachelor degree in law from Soochow University.

M.C. Cheng is our manager of domestic sales department and is also a director of Ya Li Transport Corp. He holds a bachelor degree in business administration from Feng Chia University.

Compensation of Directors, Supervisors and Executive Officers

We pay salaries to our directors and supervisors but we do not issue stock options or pay stock compensation to them. We paid our directors and supervisors, in aggregate, NT$14.4 million, NT$16.6 million and NT$14.8 million (US$0.5 million), respectively, in 2007, 2008 and 2009, which included salaries, bonuses and other compensation. We paid our executive officers, in aggregate, NT$31.8 million, NT$64.6 million and NT$44.4 million (US$1.4 million), respectively, in 2007, 2008 and 2009, which included salaries, bonuses and other compensation. Currently, we do not have a remuneration committee.

Interests of Management in Certain Transactions

We did not conduct any transactions that had unusual terms with our directors, supervisors or executive officers in 2007, 2008, 2009 or in the nine months ended September 30, 2010. There are no conflicts of interests and no potential conflicts of interest between their duties as our directors and their private interest, and/or other duties. There are no outstanding loans or loan guarantees granted by us to members of the administrative, management or supervisory bodies. Pursuant to the ROC Company Law, interested directors are required to abstain from voting on any transactions in which he or she, or their respective corporate shareholders that they represent, may have a potential conflict of interest.

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Related Party Transactions

We have from time to time entered into a variety of transactions with our affiliates. Our policy on transactions with affiliates is to conduct these transactions on terms substantially as favorable to us as are obtainable in a comparable arm's-length transaction with a third party. For a list of all of our related party transactions presented on a consolidated basis, see note 27 in the Notes to the Consolidated Financial Statements and note 22 in the Notes to the Interim Consolidated Financial Statements. The transactions among us and our subsidiaries were eliminated during the consolidation process.

Since September 30, 2010, ACC has provided loan guarantees to Asia Investment Corp. in several transactions. As of December 31, 2010, the aggregate amount of such guarantees were NT$4.6 billion. As of the date hereof, Asia Investment Corp. had drawn down NT$718 million from loans and facilities guaranteed by ACC.

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OWNERSHIP OF ACC

The following table sets forth certain information as of December 31, 2010 with respect to the common shares owned by each person who, according to our records, owned 5% or more of our common shares and by all our directors, supervisors and executive officers as a group. Such ownership includes ownership by such person's spouse and minor children.

Name of Shareholder	Numbers of Common Shares Held	Percentage of Share Capital
FENC	686,631,697	22.33%⁽¹⁾
Far Eastern Medical Foundation	166,111,116	5.40%
Yu Yuan Investment Co., Ltd.	163,469,554	5.32%
Directors, Supervisors and executive officers as a group⁽²⁾	83,300,545	2.71%

(1) FENC had an effective holding of 24.05% of ACC as of December 31, 2010.
(2) Calculated by aggregating shares held by such persons individually and their spouse and minor children as of December 31, 2010.

Other than FENC, Far Eastern Medical Foundation, and Yu Yuan Investment Co., Ltd, none of our shareholders own more than 5% of our outstanding shares.

None of our holders of common shares have different voting rights from those of our other holders of common shares.

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DESCRIPTION OF FENC

Overview

Established in 1954, FENC is a leading producer of polyester and related products in Asia and is one of the largest producers of polyester polymer, including PET resin, in the world. With an expanding business scope which now includes real estate and equities, FENC changed its name from Far Eastern Textile Limited to Far Eastern New Century Corporation on October 20, 2009 to better reflect its current business scope. FENC's common shares have been listed on the TWSE since 1967. It changed its stock symbol from FETL to FENC to reflect its name change in January 2010.

Investee	Holdings	Market value (NT$ million)⁽¹⁾
ACC	24.05%	23,557
Everest Textile	27.06%	899
Oriental Union Chemical	22.74%	7,517
Far Eastern International Bank	15.82%	4,652
Far Eastern Department Stores	18.98%	12,409
Far EasTone	41.28%	57,503

(1) Market value of FENC's holding based on the closing price as quoted on the TWSE on January 19, 2011.

In line with its new business scopes and strategies, FENC recently purchased through a subsidiary 70% of Martens Beer Trading (Shanghai) Corporation on March 24, 2010.

For the years ended December 31, 2007, 2008, 2009 and the nine months ended September 30, 2010, FENC had consolidated net income of approximately NT$17,331.3 million, NT$10,317.6 million, NT$14,623.8 million (US$468.9 million) and NT$14,084.7 million (US$451.6 million), respectively. FENC had a market capitalization of approximately NT$234.9 billion (US$7.7 billion) as of December 31, 2010.

FENC's Strengths

FENC believes its success to date can be attributed to the following competitive strengths:

leadership in the polyester industry and strong relationships with branded customers;
superior research and development capabilities for new and improved products;
established presence in the PRC;
experienced management team; and
portfolio of investments across a wide variety of industries such as telecommunications, cement, retailing, banking and real estate development, which provides diversified sources of cash flow and growth opportunities.

FENC's Strategies

invest in product development to maintain industry leadership and improve on margins;
strategically expand FENC's presence in overseas markets;
improve operating efficiency and enhance profits;
continually upgrade its product mix;
leverage synergies with the Far Eastern Group; and
realize the untapped value of idle land through selective real estate development projects.

FENC aims to continually upgrade its product mix and enhance its research and development ability to maintain its leading position in the polyester industry. Furthermore, FENC will expand its green energy business by developing more recyclable materials, such as chips, bottles and fibers, as well as biodegradable polymers made from polylactic acid. FENC has been focusing on the production of higher margin non-textile polyester products. In the next five years, FENC plans to build two PTA production facilities, one in Guanyin, Taipei County, Taiwan, and the other in Shanghai, China, in order to raise the annual production capacity of PTA to 4.0 million tons from the current capacity of 1.6 million tons.

FENC's Business Operations

FENC conducts its polyester business through two operation centers in Taiwan: the Polyester Business Operation Center and the Textile Business Operation center. Within the Polyester Business Operation Centre are the Fiber Division, Solid-State Polymer Division and Functional Material Division. Under the Textile Business Operation Center are the Textile Division and Knitting Fabric & Apparel Division. These operation centers, along with a number of FENC subsidiaries and affiliates, provide a substantial degree of vertical integration throughout the textile and non-textile polyester operations of FENC.

Polyester Business Operation Center ("Polyester Center") of FENC

FENC is a leading producer of polyester in Asia. FENC's basic unfinished product is polyester chip, a material used in the manufacture of all of the division's textile and non-textile products. FENC is also one of the world's largest producers of polyester textile products. FENC's two principal polyester textile products are polyester staple fiber, a generic commodity used in the manufacture of products ranging from fine cotton-blending yarn to carpet pile, and polyester filament, a raw material used for woven and knitted fabrics.

The Polyester Center currently produces a majority of its products in its production facility located in Hsinpu and Kuanyin, Taiwan. The Kuanyin production line is one of the world's largest single polyester polymer production facilities. The Kuanyin facility manufactures SSP products and polyester filament. In addition, FENC has developed polyester polymer and polyester filament capacity in Shanghai through a subsidiary outside the Polyester Division. See "International Operations of FENC's Polyester, Textile and Apparel Businesses." FENC believes that its high degree of vertical integration, advanced process technology and modern facilities have enabled it to become an efficient and low-cost producer of a broad range of polyester products.

Several new production lines were being constructed in 2009 and 2010. Six production lines for amorphous PET sheets are located in Wuhan, Hubei Province in the PRC, and another six lines are located in Shanghai. Once completed, FENC will be the largest producer of this product type in the PRC. FENC also constructed a PET-made beer bottle plant in Suzhou, China in order to produce PET bottle chips, bottle pre-forms, as well as fill and bottle beer. The first bottle that they launched, named CoolerPak™, was licensed by Martens Beer, and FENC has secured other beer companies to use this product.

The following table sets forth the principal end-uses of FENC's various textile and non-textile products.

Product	End Use
Polyester Chips	intermediate raw material
Non-Textile
SSP
PET resin	bottle grade chips, high intrinsic viscosity chips for HDI yarn
PET bottles	packaging for carbonated and non-carbonated beverages and food
PET sheets	rigid and flexible sheets for packaging
HDI yarn	automotive engine belts, conveyor belts, seat belts, tire cord, fishnet, geotextiles
Non-Woven Polyester Staple
Fiber	fiber-fill for pillows, carpeting, insulation, toys, upholstery, sleeping bags, sport shoes, diapers
Textile
Textile Polyester Staple Fiber	Apparel, home furnishings
Polyester filament
Partially oriented yarn	fully oriented yarn, drawn twisted yarn
Fully oriented yarn	suiting, sewing thread
Draw twisted yarn	shirting, dress material

For the year ended December 31, 2009 and the nine months ended September 30, 2010, approximately 78% and 77%, respectively, of FENC's total unconsolidated operating revenue came from the Polyester Center, making it FENC's largest business segment.

Polyester Chips

Polyester chips are the basic raw material used by FENC in manufacturing all of its polyester products. As of September 30, 2010, FENC had an annual chip production capacity of approximately 910,000 tons, substantially all of which was used internally. FENC also produces recycled PET and bio-PET chips.

SSP

FENC's principal non-textile products are SSP products, principally PET bottle resin and high intrinsic viscosity chips, preform and finished PET bottles, HDI yarn and PET sheets. PET bottle resin is used to produce PET bottles and high intrinsic viscosity chips are used to produce HDI yarn. PET bottles are used for the storage of carbonated and non-carbonated liquids, primarily beverages. HDI yarn is used for conveyor belts, geotextiles, automobile seat belts and fishnet. In addition, FENC produces polyester sheet and film, all of which require different quality chips than PET bottles and HDI yarn.

Most of FENC's SSP production consists of PET bottle resin and PET preform bottles, with the remainder consisting of HDI yarn, polyester sheet and various other products. Bottle manufacturers generally purchase PET bottle resin from FENC in the form of chips rather than preform or finished PET bottles. FENC generally sells HDI yarn to end-product manufacturers rather than weaving the yarn itself.

Polyester Staple Fiber

Polyester staple fiber is used in the manufacture of clothing as well as in non-woven form to be used as fiber-fill for pillows, carpeting and insulation. In addition, it is sometimes used in manufacturing other specialty items such as toys, upholstery, sleeping bags, sport shoes, and diapers. Textile polyester staple fiber is used for apparel and home furnishings. It has physical

characteristics which are similar to natural fibers, such as cotton and wool, and is typically spun, dyed and woven. Textile polyester staple fiber can be used in their pure form or be blended with cotton, wool, acrylic or viscose. FENC has also been active in developing new applications for its polyester staple fiber, including microfibers used for synthetic leathers, and spins microfibers with characteristics similar to fine cotton. Currently, FENC produces bi-component fibers, fibers in which the core and outer band are made from different polymers, which can be used for fiber-fill and for products requiring absorbent materials, such as diapers.

Approximately 50% of FENC's polyester staple fiber was used in non-textile applications in 2009. Since margins and demands are relatively stable on non-textile products for its broad diversity, FENC has gradually shifted its product mix towards non-textile products.

Polyester Filament

Although polyester filament has some non-textile uses, it is primarily used for apparel. The relatively low cost as well as durability of polyester filament has made it especially popular, where polyester filament competes successfully with traditional natural fibers. The products resulting from the production of polyester filament are unfinished yarn, which must be immediately processed further, or be sold as an intermediate product called partially oriented yarn ("POY") which has a shelf life ranging from 6 months to 2 years to complete the yarn-making process. Unfinished yarn and POY are either texturized or drew twisted during the production process to give the fibers a more "natural" feel. Texturized filament yarn (fully oriented yarn) has a texture similar to wool and is used in knitting and weaving, primarily in the production of suiting and for sewing thread. Drawn twisted filament yarn has a texture similar to silk and is also used for knitting and weaving, primarily for producing dress materials.

The trend in the textile industry is to develop specialty yarns; that is, yarns with special properties. The specialty yarns sold by FENC include various types of "microfilament" (yarns with deniers per filament of less than 1), flame-retardant yarns, and yarns with functional characteristics of anti-UV, anti-bacteria and/or regulating body temperature. FENC produces a variety of yarns with deniers per filament of 0.2 and 0.5. These microfilaments have a texture similar to natural silk and can be used in a wide range of products ranging from stockings to ties and dress materials. Microfilament yarns are somewhat more time consuming and costly to produce, but generally yield a higher profit margin.

Raw Materials for FENC's Polyester Products

Approximately 69% to 74% of the polyester segment's production cost is for raw materials, principally the costs of PTA and MEG. PTA and MEG are obtained in powder and liquid forms, respectively, and both are petrochemical derivatives. Approximately 0.83 tons of PTA and 0.33 tons of MEG are required to produce one ton of polyester polymer, although the actual rate is affected slightly by the type of equipment used and the product manufactured. With the exception of PTA and MEG, the raw materials required for the production of polyester are generally available from many sources worldwide at relatively stable prices. Nearly all requirements of PTA for FENC are satisfied domestically.

In 2009, the Polyester Center obtains approximately 24% of its PTA requirements from Taiwan-based China American Petrochemical Co., Ltd. and approximately 29% of its requirements from Oriental Petrochemical (Taiwan) Co., Ltd. The Polyester Center obtains its MEG requirements from Oriental Union Chemical Corp., FENC's subsidiary and one of three MEG producers in Taiwan and Saudi Basic Industries Corporation ("SABIC"). FENC's Shanghai operations purchase their PTA and MEG requirements from Oriental Petrochemical (Shanghai) Corporation, one of its subsidiaries in the PRC, and SABIC, respectively.

Competition in the Polyester Business

FENC faces significant competition in both its domestic and export markets, primarily on the basis of price and product quality. Internationally, FENC's most significant competitors for PET resins and other SSP products are the major chemical manufacturers. PET bottles compete with other forms of packaging, such as glass bottles and aluminum cans. PET bottle prices are most competitive, as its price is comparable to other forms of packaging in the larger sizes, such as 2-liter bottles. In recent years, FENC has been active in developing new types of PET containers, including light-weight bottles, hot-fill bottles and PET beer bottles and has been investing in new facilities, which have lower unit cost of production.

In the microfiber and non-woven fiber markets, FENC's leading competitors are the European, U.S. and Japanese fiber producers. In the commodity polyester textile market, FENC's major competitors are the other Taiwanese, PRC and Korean producers and the local producers in the countries to which FENC exports. The textile polyester market is very competitive, with numerous large and small producers.

Textile Business Operation Center ("Textile Center") of FENC

For the year ended December 31, 2009 and the nine months ended September 30, 2010, approximately 22% and 23%, respectively, of FENC's total unconsolidated operating revenue came from the Textile Center. FENC believes that it is the largest producer of yarn in Taiwan and the only vertically integrated producer of sportswear in Taiwan. In recent years, FENC has expanded the capability of this division by developing new types of yarns and fabrics, particularly through the application of microfibers. The Textile Center also produces garments, including shirts, sportswear, casual wear and outerwear, and home furnishings, mainly bed sheets and pillow cases.

Raw Materials for FENC's Textile and Apparel Products

The principal raw materials used by the Textile Center are polyester staple fiber and cotton fiber. The Textile Division obtains substantially all of its polyester staple fiber from the Fiber Division under the Polyester Center. All of FENC's cotton requirements are met through spot or short-term contract purchases from major international traders and cooperatives.

Yarn is the basic raw material in the production of woven cloth. FENC currently produces a broad range of yarns, including pure polyester, pure cotton, polyester-cotton and polyester-rayon blended yarns, dyed yarns and various types of specialty yarns. Yarn is produced by spinning the short fibers found in bales of polyester staple fiber and cotton staple fiber into long strands and then combining these polyester and cotton strands in predetermined ratios into threads. These threads are then wound around spindles, which can be sold to outside customers or used internally by FENC to produce either unfinished cloth or apparels.

FENC produces internally approximately 80% of the knits and 20% of the woven fabrics used by the Textile Center. Dress shirts, suits, casual wear, sportswear, boxer shorts and home furnishings are generally made from woven cloth while underwear and sportswear are made from knitted fabrics. FENC believes that its licensing arrangements enable it to keep abreast of contemporary fashions and acquire modern design capability. The Center purchases almost all of its suitings externally. The Center imports specialty fabrics, such as fabrics incorporating microfibers and wrinkle-free fibers.

Competition in the Textile and Apparel Business

In recent years, the Textile Center has responded to increasing competition with respect to its traditional commodity products by emphasizing specialty products. In the Taiwan market, the Textile Center is increasingly competitive in terms of product quality as well as price, against other Taiwanese manufacturers as well as low-cost yarn producers in other Southeast Asian countries which take advantage of Taiwan's low customs tariff for yarn. In the international market, FENC believes that the principal competitive factors, in addition to price and product quality, are an awareness of fashion trends and the ability to respond to buyer orders quickly and in quantity.

FENC now focuses on the designs and inventions of new raw materials for international sportswear brands and the newly emerging Chinese brands. It has provided sports shirts made of recycled materials to Nike for the 2010 World Cup. FENC has sub-contracted out part of the production processes such as dyeing and finishing to co-operative firms. This new business model should reduce the Company's capital expenditures and labor costs thus increasing the return on invested capital for the Company.

FENC has a larger share of the Taiwan underwear market through its Active and Paul Simon labels than the market share of its two principal competitors. FENC believes that its dress shirts, sold under the Manhattan label, have a slightly smaller share of the Taiwan dress shirt market than FENC's principal competitor. FENC believes that it also has the third largest market share in the Taiwan suit market through its Society Brand and Hart Schaffner Marx suits. In recent years, FENC has been expanding its presence in the corporate and military uniform segments which have traditionally been dominated by small-scale domestic producers. Furthermore, FENC plans to strengthen its sales efforts in the PRC by promoting high value-added products, such as fibers or fabrics for industrial purposes and high-end sports apparel, in order to boost overall market share across the PRC. FENC believes that it competes primarily on the basis of price, quality and product differentiation.

International Operations of FENC's Polyester, Textile and Apparel Businesses

In recent years, FENC has been developing production facilities outside Taiwan primarily through majority-owned companies. FENC has 100% interests in apparel manufacturing companies, such as Far Eastern Apparel (Vietnam) Ltd. in Vietnam and Far Eastern Apparel (Suzhou) in the PRC. In certain instances, FENC has relocated equipment from its production facilities in Taiwan to these international facilities. FENC also plans to build a PTA production facility in Shanghai, China, with the goal of raising the annual production capacity of PTA in the next five years as well as boosting its market share in the PRC.

Far EasTone

FENC, as of December 31, 2010, owns effectively 41.28% of Far EasTone, and the results of operations of Far EasTone are consolidated into FENC's consolidated financial statements. Far EasTone had approximately 6.32 million customers as of September 30, 2010. Far EasTone provides wireless communications, domestic long-distance land cable leased circuit services, Internet and international simple resale (ISR) services, tailor-made fixed and mobile integrated communications services, or enterprise solutions, for corporate users; Far EasTone also sells wireless devices and accessories associated with the services offered. Far EasTone owns two island-wide GSM 1800 licenses and a regional GSM 900 license covering the northern region of Taiwan, which includes Taipei. Far EasTone is also the owner of one of the five island-wide 3G licenses awarded by the ROC government in February 2002. This license gives Far EasTone the right to offer multimedia services across Taiwan using its 3G network. Far EasTone began offering 3G multimedia services in Taiwan in July 2005, targeting on the rising market of non-voice services.

Far EasTone offers a wide selection of handsets, ranging from voice-centric devices to high-end multimedia devices, to its post-paid and pre-paid customers. Its wireless communications service offerings include services and products for a broad spectrum of consumer segments, ranging from tailor-made solutions for corporate customers to lifestyle and entertainment-oriented services for individual customers. Far EasTone also partnered with leading phone makers and launched full ranges of smartphones and tablet devices to meet the strong demand for non-voice products as well as capture the rapid growth of non-voice services.

In 2009, Far EasTone became the first mobile company to launch WiMAX service in Taichung, central Taiwan, offering a wide range of services including wireless broadband movies and music, digital multimedia, digital advertising, and mobile Internet access with upgraded network performance featuring higher speed and enhanced transmission quality to customers. Far EasTone has also launched "S Mart" which is an independent Chinese language-based mobile application store offering fully localized experiences. "S Mart" provides applications to its subscribers so that they can download games, news, music and much more.

More recently in 2010, Far EasTone acquired through a subsidiary the remaining shares that it did not own of its fixed-line affiliate, New Century InfoComm Tech Co. ("NCIC"). Far EasTone already held a 26.74% stake in NCIC under the brand name Sparq before the acquisition, and it aims to improve the telecom service through better cooperation between its fixed-line and mobile units. Facing the trend of fixed-mobile-convergence of the telecommunication industry, Far EasTone has committed resources to the development of

value-added broadband services, digital products and multi-media integrated services, and has established an IMS platform to integrate mobile, wire and wireless services for consumers, enterprises and home users who enjoying communications, information, entertainment and business services.

Far EasTone Services and Products

Far EasTone offers a broad range of telecommunications services in Taiwan, including:

wireless voice services;
wireless multimedia services and other value-added services;
domestic long-distance land cable leased circuit services;
Internet and international simple resale (ISR) services;
tailor-made fixed and mobile integrated communications services, or enterprise solutions, for corporate users; and
wireless devices and accessories associated with the services offered.

Far EasTone Customers

Far EasTone commenced commercial operations in January 1998, approximately one year after it was awarded its licenses. As of September 30, 2010, according to internal estimates, Far EasTone had more than 6.32 million customers based on the total number of SIM cards.

Telecommunications Licenses

GSM 900/1800 Cellular Licenses

Far EasTone was awarded a GSM 1800 license and a GSM 900 license in January 1997. The GSM 1800 license permits Far EasTone to offer nationwide wireless services within the 2x11.25 MHz (or 2x13.25 MHz in the northern region) spectrum allocated at the 1800 MHz frequency band, including the ability to establish and maintain an island-wide network. The GSM 900 license permits Far EasTone to offer, in the northern region of Taiwan which includes Taipei, wireless services within the 2x5 MHz of spectrum allocated at the 900 MHz frequency band.

The GSM 1800 license and the GSM 900 license will expire in December 2012 and January 2013, respectively. Under the terms of these licenses, Far EasTone is required to satisfy certain roll-out requirements, all of which Far EasTone has achieved. The ROC government charges an annual license fee equal to 2% of total service revenue.

Far EasTone also acquired KG Telecom's GSM 1800 which was awarded in January 1997 to KG Telecom. The GSM 1800 license is similar to Far EasTone's GSM 1800 license and will expire in December 2012.

Far EasTone is currently offering services pursuant to both its and KG Telecom's licenses. Recently, the ROC government has agreed operators to renew its 2G licenses and use them until June 2017.

3G License

In early 2002, the ROC government sold by auction five 3G licenses, each of which permits the licensee to offer 3G services across Taiwan upon the satisfaction of certain roll-out requirements. Far EasTone was awarded one of the five 3G licenses. Far EasTone offers 3G services at the 2GHz frequency band within a spectrum of 2x15 MHz using Frequency Division Duplex data transmission technology and within a spectrum of 5MHz using Time Division Duplex data transmission technology.

Far EasTone paid an upfront cost for its 3G license to satisfy certain roll-out requirements. Far EasTone was required to complete the construction of a 3G network covering at least 50% of the population of Taiwan, which it did in 2005. Far EasTone offers its wireless services at higher transmission speed in this new spectrum through W-CDMA technology.

WiMAX

In 2009, Far EasTone became the first mobile company to launch the WiMAX service in Taichung, central Taiwan, offering a wide range of services, including wireless broadband movies and music, digital multimedia, digital advertising, and mobile Internet access with upgraded network performance of higher speed and enhanced transmission quality to customers.

Leased Circuit License

Far EasTone was licensed to provide local/domestic long-distance land cable leased circuit services for 15 years from January 2003 for an annual license fee equal to 1% of its leased circuit service revenue. KG Telecom was awarded a similar Type I license in September 2000. This license expires in September 2015.

Other Licenses

In December 1999, Far EasTone was awarded a Type II telecommunications license, which permits it to offer internet access service, intra-corporation communication service and electronic mail service. The ROC government charges an annual license fee of NT$90,000 except that, in the case of simple voice resale and internet telephony services, the license fee is charged at an amount equal to 0.5% of the revenue from such services.

In December 2001, Far EasTone was awarded a telecommunications resale business license, which permits it to offer telecommunications services that Far EasTone procures from another operator and to offer a range of data communications services that are built on the infrastructure of others, such as voice over Internet protocol. The ROC government charges an annual license fee equal to 0.5% of total service revenue from such services for this license.

Far EasTone Competition

The telecommunications market in Taiwan is highly competitive. Competition in the market is based principally on network quality and coverage, the range of services offered, tariff packages and customer service. There are three GSM operators; one PHS operator; five 3G operators; and 6 Wimax operators. Wireless market growth rates in Taiwan have slowed recently as customer penetration has increased and the industry has matured. In response to the declining growth in the market, wireless operators have increased handset subsidies and offered other voice plus data bundling packages to customers in an effort to retain market share and minimize customer churn rates. Far EasTone also aims to focus on the rising market of Smartphone and non-voice services by building alliances with mobile device providers to launch a variety of products and services.

Far EasTone Research and Development

The telecommunication industry is characterized by rapid technological advances, changes in customer requirements and frequent introductions of new products and enhancements. Far EasTone's research and development focus is to develop value-added services in anticipation of future customer demand.

Far EasTone conducts joint research programs with network equipment suppliers and academic institutions and sponsors research projects in academic institutions. In addition, Far EasTone established Far EasTone Laboratory in 1997 to focus on enhancing the quality of existing wireless transmission technology. Far EasTone participates in consortiums with domestic and international academic and research institutions, hosts conferences and regularly publishes its RD Lab Journal.

Far EasTone Properties

Properties used to provide Far EasTone's wireless communications services primarily consist of the following: (i) switching, transmission and receiving equipment and the associated software systems; (ii) connecting lines; (iii) land and buildings, or easements, on or in which its equipment is installed; and (iv) land and buildings on or in which its administration, research and development and distribution centers are located.

Far EasTone owns or controls through long-term leases or licenses, a plant, equipment and software systems used in its network, including its convergent billing system, operations support system, base station equipment and pre-paid billing system.

Far EasTone leases properties that support equipment used to provide wireless communications services, including land, interior and rooftop space and space on existing structures of various types. The majority of the lines connecting its services to other telecommunications services and power sources are on or under public roads, highways and streets. Others are on or under private property.

Far EasTone also owns the land and building used for its headquarters, which is located in Neihu, Taipei, purchased in April 2003. Far EasTone leases space for its customer care centers and all of its directly owned stores.

Far EasTone Intellectual Property

As of September 30, 2010, Far EasTone registered 32 patents in Taiwan, 10 patents in the United States, 12 patents in the PRC, 44 domain names in Taiwan and the United States, and 403 trademarks in Taiwan and 10 other countries, including the PRC, Japan, and Singapore. Far EasTone is also processing applications to register 10 additional patents and 17 trademarks in Taiwan, the PRC and the United States.

Far EasTone Employees

Far EasTone and its consolidated subsidiaries had approximately 4,812 and 5,052 employees as of December 31, 2009 and September 30, 2010, respectively. A substantial number of its employees have college or graduate degrees, and many members of its management had prior work experience in multi national corporations.

Far EasTone has not experienced any strikes or work stoppages. Far EasTone considers its relationship with its employees to be good.

Development of FENC's Idle Land Holdings in Taiwan

As of September 30, 2010, FENC had approximately 655,000 sq.m. of idle land and approximately 884,000 sq.m. of land used in FENC's manufacturing businesses in Taiwan. The substantial majority of FENC's idle land in Taiwan is located in Panchiao. FENC also owns idle land in Taipei City, Keelung, Yilan, Hualien, Taishan and Taoyuan. Any realisation of the value of its idle land through property development, securitization or through disposal or renting, will depend on the market conditions. In 2003, FENC established FERD, a company incorporated under ROC law, to actively manage its land bank of idle properties in Taiwan. FENC has started developing the land holdings in Yilan into a combination of a hotel resort and a shopping center.

Taipei Far Eastern Telecom Park

The Taipei Far Eastern Telecom Park has been under construction for two years. It is located in Panchiao, which is in the west of Taipei City, an area that has experienced rapid urban development due to governmental policy initiatives. Separated from Taipei City by the Danshui River, Panchiao is an alternative to Taipei City, offering relatively affordable housing prices to local residents. Panchiao has also benefited from the improved transportation system. The MRT's Far Eastern Memorial Hospital Station was completed in June 2006 and is located on FERD's Panchiao land. A High Speed Railway station, which has been in operation since early 2007, is also nearby.

Taipei Far Eastern Telecom Park is a specialized zone tailored for the telecommunications industry, integrated with residential and commercial areas and a medical service center. It will encompass a land area of approximately 245,000 sq.m. and the development will have a plot ratio of 300%.

The pre-sale of the first residential product and the pre-rent of the first commercial office building were both launched at the end of 2009. The pre-sale of the part of the first residential complex, named "California Dream," has already taken place and its construction is expected to be completed by the end of 2010. The construction for the second residential complex is scheduled to begin by the end of 2010.

FERD plans to offer several buildings, totaling a gross floor area of 330,000 sq.m., laid out as offices, laboratories and exhibition halls for telecommunications and network companies. By providing a convenient platform for the testing of telecom devices, networks and other

equipment, FERD plans to target telecommunications-related companies. FERD has completed the remodeling of an existing building in the third quarter of 2008. In addition, FERD completed the construction of a second building in 2009, and the said building is launched in the market for rent.

FERD has three pieces of land adjacent to the Taipei Far Eastern Telecom Park site. FERD plans to develop the land into residential housing units.

Environmental Protection Relating to the Development of FENC's Idle Land

As required by ROC laws and regulations, each project developed by a property developer is required to undergo an environmental assessment, and an environmental impact assessment report is required to be submitted to the relevant government authorities for approval before commencement of construction. When there is a material change with respect to the construction site, scale or nature of a given project, a new environmental impact assessment report must be submitted for approval. During the course of the construction, the property developer and the construction companies must take measures to prevent air pollution, noise emissions and water and waste discharge.

FERD believes that its property development operations are in compliance with currently applicable environmental and safety laws and regulations in all material respects.

Employees of FENC

As of December 31, 2009 and September 30, 2010, FENC (excluding Far EastTone) had approximately 4,445 and 4,544 employees, respectively.

Environmental Protection Relating to FENC

FENC believes it is in compliance with all material environmental regulations and enjoys good relationships with environmental groups who monitor the impact of FENC's production facilities on the environment.

Legal Proceedings Relating to FENC

FENC is not involved in any material litigation or legal proceedings which could be expected to have a material adverse effect on its business or operations.

Insurance Relating to FENC

FENC has fire and third party liabilities insurance which it considers to be adequate. The majority of FENC's insurance policies do not cover business interruption or damage as a result of earthquakes or typhoons. Significant damage to, or other interruption of production at, any of FENC's major production facilities, whether as a result of fire, flooding, earthquakes or other causes, would have a material adverse effect on FENC's results of operations.

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FENC's Principal Subsidiaries and Affiliates

FENC has significant investments in a number of subsidiaries and affiliates.

The following table sets forth certain information relating to FENC's direct and indirect shareholdings and investment amounts in its principal subsidiaries and affiliates and the principal business scope of these subsidiaries as of December 31, 2010.

Subsidiary	Nature of Business	Effective Ownership as of December 31, 2010 (%)	Incorporated Jurisdiction
Far Eastern Construction Co., Ltd.	Real estate construction and selling	65.11⁽¹⁾	R.O.C.
Far Eastern Resources Development Co. Ltd.	Development, sales, and lease of real estate	100.00⁽¹⁾	R.O.C.
Oriental Petrochemical (Taiwan) Ltd.	Petrochemical materials production	80.76⁽²⁾	R.O.C.
Yuan Ding Investment Corp. Co., Ltd.	Investment	100.00⁽³⁾	R.O.C.
Far Eastern Polychem Industries Ltd.	Investment	100.00⁽⁴⁾	Bermuda
Far Eastern Investment (Holding) Ltd.	Investment	100.00⁽¹⁾	Bermuda
Far Eastern Polytex (Holding) Limited	Investment	100.00⁽¹⁾	Bermuda
Everest Textile	Textile	27.06⁽⁵⁾	R.O.C.
Oriental Union Chemical Corp.	Chemical	22.74⁽⁶⁾	R.O.C.
Far Eastern International Bank	Finance	15.82⁽⁷⁾	R.O.C.
Far Eastern Department Stores Ltd.	Retail	18.98⁽⁸⁾	R.O.C.
Asia Cement Corporation	Cement manufacturer	24.05⁽⁹⁾	R.O.C.

(1) All are direct holdings.
(2) Consists of 75.56% direct holding and 5.20% indirect holding.
(3) Consists of 99.70% direct holding and 0.30% indirect holding.
(4) Consists of 63.02% direct holding and 36.98% indirect holding.
(5) Consists of 0.03% direct holding and 27.03% indirect holding.
(6) Consists of 9.17% direct holding and 13.57% indirect holding.
(7) All are indirect holdings.
(8) Consists of 16.80% direct holding and 2.18% indirect holding.
(9) Consists of 22.33% direct holding and 1.72% indirect holding.

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Management

Directors and Supervisors

FENC's board of directors is responsible for the management of its business. FENC's articles of incorporation provide for a board comprising eleven directors. Currently, FENC's board of directors consists of eleven directors who are elected by FENC's shareholders at an ordinary shareholders' meeting by means of cumulative voting. The chairman of the board is elected by FENC's directors. FENC's directors serve three-year terms, and may be re-elected for any number of consecutive terms but can be removed from office at any time by a resolution adopted at a shareholders' meeting.

The ROC Company Law requires a public company to have at least two supervisors at all times, and a supervisor cannot concurrently serve as a director, managerial officer or other staff member. We currently have three supervisors. Supervisors are required under the ROC Company Law to perform supervisory and oversight functions that are independent of the authority of the board of directors of an ROC company. The main responsibilities of the supervisors are to supervise the business operations of the company and to examine and review the accounting books, records and other related documents of the company. Supervisors also have certain oversight duties with respect to the internal control systems of public companies. The supervisors' duties and powers include investigating FENC's business and financial condition, inspecting FENC's corporate records, attending meetings of the board of directors, verifying some statements by FENC's board of directors prior to the regular shareholders' meetings, calling shareholders' meetings when FENC's board of directors does not or cannot call such a meeting and/or when such meeting is necessary for FENC's benefit, representing shareholders in negotiations with FENC's directors. When necessary, supervisors have the authority to direct the board of directors to cease acting in violation of any applicable law or regulation or in contravention of FENC's articles of incorporation or the resolutions adopted at FENC's shareholders' meetings. In performing his or her duties, a supervisor may retain, on behalf of FENC and without the approval of the board of directors, practicing lawyers and/or certified public accountants to examine or audit the business operations, financial results, accounting books and financial statements of FENC.

FENC's supervisors are typically elected by shareholders at the time that directors are elected. Like directors, they also serve three-year terms and may be re-elected for any number of consecutive terms but can be removed from office at any time by a shareholders' resolution.

Pursuant to the amended ROC Securities and Exchange Law, a public company is required to have either an audit committee or supervisors, provided that the FSC may, after considering the scale, business nature and other essential conditions, require the company to establish an audit committee in place of its supervisors. A public company's audit committee should include every one of their independent directors but there cannot be less than three members, of which at least one member should have accounting or related financial management expertise. The relevant provisions under the ROC Securities and Exchange Law, the ROC Company Law and other laws applicable to the supervisors are also applicable to the audit committee. Currently, FENC does not have an audit committee.

The present members of the board of directors and supervisors took office on June 26, 2009 for a three-year term.

The following table sets forth certain specified information with respect to each director and supervisor of FENC as of April 24, 2010.

Name	Position	Age	Position Held Since	Number of Reference Shares Held Directly and Indirectly
Douglas Tong Hsu	Chairman	69	12/23/1967	52,939,865
Johnny Shih⁽¹⁾	Vice-Chairman	63	02/09/1979	26,439,285⁽⁷⁾
Raymond Hsu⁽¹⁾	Director	67	04/14/1976	42,419,722⁽⁸⁾
Peter Hsu⁽²⁾	Director	65	04/14/1976	1,066,132,806⁽⁹⁾
S.Y. Wang⁽²⁾	Director	71	05/10/1985	1,040,259,617⁽¹⁰⁾
Champion Lee⁽²⁾	Director	63	04/20/1988	1,040,115,113⁽¹¹⁾
G.M. Wang⁽²⁾	Director	66	05/15/2000	1,039,915,325⁽¹²⁾
Y.H. Tseng⁽³⁾	Director	70	06/13/2006	17,656,051⁽¹³⁾
Richard Yang⁽³⁾	Director	41	06/13/2006	17,763,418⁽¹⁴⁾
K.T. Li⁽³⁾	Director	65	06/13/2006	17,385,234⁽¹²⁾
Tonia Katherine Hsu⁽⁴⁾	Director	42	06/13/2006	1,930,176⁽¹²⁾
Alice Hsu⁽⁵⁾	Supervisor	64	04/20/1988	51,958,640⁽¹⁵⁾
T.H. Chang⁽⁵⁾	Supervisor	86	06/26/2009	27,232,276⁽¹⁵⁾
Ching-Ing Hou⁽⁶⁾	Supervisor	78	06/13/2006	678,692⁽¹²⁾

(1) Johnny Shih and Raymond Hsu are representatives of Yue Ding Industries Co., Ltd.
(2) Peter Hsu, S.Y. Wang, Champion Lee and G.M. Wang are representatives of ACC.
(3) Y.H. Tseng, Richard Yang and K.T. Li are representatives of Far Eastern Department Stores Ltd.
(4) Tonia Katherine Hsu is a representative of Bai Yang Investments Corp.
(5) Alice Hsu and T.H. Chang are representatives of UMTC.
(6) Ching-Ing Hou is a representative of Yuan Ding Investments Co., Ltd.
(7) Includes 1,642,610 shares held by Yue Ding Industries Co., Ltd. represented by J.Y. Shih and 22,797,093 shares held by spouse & minor.
(8) Includes 1,642,610 shares held by Yue Ding Industries Co., Ltd. represented by Raymond Hsu and 20,111,871 shares held by spouse & minor.
(9) Includes 1,039,915,325 shares held by ACC represented by Peter Hsu and 4,021,830 shares held by spouse and minor.
(10) Includes 1,039,915,325 shares held by ACC represented by Shaw Y. Wang.
(11) Includes 1,039,915,325 shares held by ACC represented by Champion Lee.
(12) All shareholdings were held by G.M. Wang, Kwan-Tao Li, Tonia Katherine Hsu and Ching-Ing Hou on behalf of ACC, Far Eastern Department Stores Ltd., Bai Yang Investment and Yuan Ding Co., Ltd., respectively.
(13) Includes 17,385,234 shares held by Far Eastern Department Stores Ltd. by Y.H. Tseng.
(14) Includes 17,044,348 shares held by Far Eastern Department Stores Ltd. by Richard Yang.
(15) Each includes 26,620,814 shares held on behalf of UMTC.

Purchases and sales of our shares by our directors and supervisors are reported by such persons on the Market Observation Post System website of the TWSE at newmops.twse.com.tw.

The business address of each director and supervisor is our registered office. Set forth below is a short biography of our directors and supervisors:

Douglas Tong Hsu is FENC's chairman. For a short biography of Mr. Hsu, see "Description of ACC—Management—Directors and Supervisors."

Johnny Shih is FENC's vice-chairman and its president. For a short biography of Mr. Shih, see "Description of ACC—Management—Directors and Supervisors."

Raymond Hsu is FENC's director and its chief auditor. Mr. Hsu graduated from the Australian Mining and Metallurgy College in Australia. He is the brother of Mr. Douglas Tong Hsu, Mr. Peter Hsu and Ms. Alice Hsu, and the brother-in-law of Mr. Johnny Shih.

Peter Hsu is FENC's director and its senior executive vice president who is responsible for the purchasing department. For a short biography of Mr. Hsu, see "Description of ACC—Management—Directors and Supervisors."

S.Y. Wang is FENC's director and its chief senior executive vice president. For a short biography of Mr. Wang, see "Description of ACC—Management—Directors and Supervisors."

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Champion Lee is FENC's director, its senior vice president and the chief of its finance and chairman's offices. For a short biography of Mr. Lee, see "Description of ACC—Management—Directors and Supervisors."

G.M. Wang is FENC's director. Mr Wang graduated from the Kansa State University in the US, and holds a degree of Ph.D in industrial engineering. Mr Wang is also the President of Nan Kai University of Technology.

Y.H. Tseng is FENC's director. He is also a senior executive vice president of FENC. Mr. Tseng holds a bachelor degree in chemical engineering from Tung Hai University.

Richard Yang is FENC's director. Mr. Yang graduated from the American Graduate School of International Management.

K.T. Li is FENC's director. For a short biography of Mr. Li, see "Description of ACC—Management—Directors and Supervisors."

Tonia Katherine Hsu is FENC's director. She is also an art consultant of KooNewYork. Ms. Hsu holds a bachelor degree in arts from Sarah Lawrence College. Ms. Hsu is the daughter of Mr. Douglas Tong Hsu.

Alice Hsu is FENC's supervisor. Ms. Hsu holds a bachelor degree in retail management from Heaton College. Ms. Hsu is the sister of Mr. Douglas Tong Hsu, Mr. Peter Hsu and Mr. Raymond Hsu.

T.H. Chang is FENC's supervisor. For a short biography of Mr. Chang, see "Description of ACC—Management—Directors and Supervisors."

Ching-Ing Hou is FENC's supervisor and is also the chairman of Far Eastern International Bank. Ms. Hou was the chairman of the Taiwan Academy of Banking and Finance and a professor in the money and banking department of National Chengchi University. Ms. Hou holds a bachelor degree in economics from National Taiwan University and a master degree in economics from National Taiwan University and Vanderbilt University.

Executive Officers

The following table sets forth certain information relating to FENC's senior executive officers as of April 24, 2010. FENC's executive officers are appointed by its board of directors.

Name	Position	Age	Position Held Since	Number of Reference Shares Held *
Johnny Shih	President	63	01/01/1995	2,031,790
S.Y. Wang	Chief Senior Executive Vice President, Chairman's Office	71	01/01/2005	344,292
Y.H. Tseng	Polyester Business Operation Center, Senior Executive Vice President	70	01/01/2005	270,817
Eric Hu	Textile Business Operation Center, Senior Executive Vice President	67	01/01/2005	244
Champion Lee	Chief of Finance Office & Chairman's Office, Senior Vice President	63	01/01/2005	199,788
Raymond Hsu	Chief Auditor	67	03/01/1996	20,697,449
Peter Hsu	Purchasing Department, Senior Executive Vice President	65	01/01/2005	22,195,651

All have less than 1.0% of total issued and outstanding Reference Shares.
(1) Calculated by dividing the number of shares held by such person and such person's spouse and minor children as indicated above, by the number of total issued and outstanding shares, in each case as of April 24, 2010.

Purchases and sales of our shares by our executive officers are reported by such persons on the Market Observation Post System website of the TWSE at newmops.twse.com.tw.

The business address of each executive officer is our registered office. Set forth below is a short biography of our executive officers and significant employees.

Johnny Shih is FENC's president. For a short biography of Mr. Shih, see "Description of ACC—Management—Directors and Supervisors."

S.Y. Wang is FENC's chief senior executive vice president in the chairman's office. For a short biography of Mr. Wang, see "Description of ACC—Management—Directors and Supervisors."

Y.H. Tseng is FENC's senior executive vice president responsible for the Polyester Business Operation Centre. For a short biography of Mr. Tseng, see “—Directors and Supervisors.”

Eric Hu is FENC's senior executive vice president responsible for its Textile Business Operation Center. Mr. Hu has been with FENC for over 30 years. He holds a bachelor degree in engineering from Tung Hai University.

Champion Lee is FENC's senior vice president and the chief of its finance and chairman's offices. For a short biography of Mr. Lee, see "Description of ACC—Management—Directors and Supervisors."

Raymond Hsu is the chief auditor of FENC. For a short biography of Mr. Hsu, see "—Directors and Supervisors."

Peter Hsu is FENC's senior executive vice president responsible for the purchasing department. For a short biography of Mr. Hsu, see "Description of ACC—Management—Directors and Supervisors."

Compensation of Directors, Supervisors and Executive Officers

FENC does not pay salaries to its directors and supervisors, nor does it issue stock options or pay stock compensation to them. FENC paid its executive officers, in aggregate, NT$102.7 million, NT$93.5 million and NT$93.3 million (US$3.0 million), respectively, in 2007, 2008, and 2009, which included salaries, bonuses and other compensation. Currently, FENC does not have a remuneration committee.

Interests of Management in Certain Transactions

FENC did not conduct any transactions that had unusual terms with their directors, supervisors or executive officers in 2007, 2008 or 2009.

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Related Party Transactions

FENC has from time to time entered into a variety of transactions with its affiliates. FENC's policy on transactions with affiliates is to conduct these transactions on terms substantially as favorable to FENC as are obtainable in a comparable arm's-length transaction with a third party. For a list of all FENC's related party transactions presented on a consolidated basis, see note 29 in the Notes to the Consolidated Financial Statements and note 21 in the Notes to the Interim Consolidated Financial Statements. The transactions among FENC and its subsidiaries were eliminated during the consolidation process.

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OWNERSHIP OF FENC

The following table sets forth certain information as of December 31, 2010 with respect to the common shares owned by each person who, according to FENC's records, owned 5% or more of FENC's common shares and by all its directors, supervisors and executive officers as a group. Such ownership includes ownership by such person's spouse and minor children.

Name of Shareholder	Numbers of Common Shares Held	Percentage of Share Capital
ACC	1,060,713,631	23.77%⁽¹⁾
Directors, Supervisors and executive officers as a group⁽²⁾	127,670,350	2.69%

(1) ACC had an effective holding of 25.29% of FENC as of December 31, 2010.
(2) Calculated by aggregating shares held by such persons individually and their spouse and minor children as of December 31, 2010.

Other than ACC, none of FENC's shareholders own more than 5% of FENC's outstanding shares.

None of FENC's holders of common shares have different voting rights from those of FENC's other holders of common shares.

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DESCRIPTION OF THE SHARE CAPITAL OF FENC

Set forth below is a summary of information relating to FENC's share capital, including brief summaries of the relevant provisions of FENC's articles of incorporation, the ROC Securities and Exchange Law and the ROC Company Law all as currently in effect.

General

FENC's authorized share capital is NT$49.5 billion divided into 4.95 billion shares, and the paid-in share capital was 4,754,579,959 common shares as of December 8, 2010. The paid-in share capital is issued and outstanding and is held by public shareholders and other investors in Taiwan and overseas. FENC does not have any equity in the form of preferred shares. Authorized but unissued shares may also be issued at such times and, subject to the provisions of the applicable laws and the approval of, or registration with, the MOEA and the FSC.

All shares presently issued are fully paid and in registered form, and existing shareholders are not subject to any capital calls. In addition, none of FENC's share capital is subject to any option to purchase.

Common Shares

As of December 8, 2010, FENC had 4,754,579,959 common shares at a par value of NT$10 per share issued and outstanding. Common shareholders may enjoy the right to attend and vote at the shareholders' meetings, the right to subscribe for new shares when FENC issues new shares for cash, and the right to receive distributions with respect to FENC's net income, less the prior years' losses, taxes, and any legal or special reserves in accordance with FENC's articles of incorporation. Common shareholders may also enjoy the right to receive the distribution of the residual assets when FENC goes into liquidation.

The rights of shareholders are set forth in the ROC Company Law and in general may not be changed by a company's articles of incorporation or shareholders' meetings. However, a company may issue preferred shares and holders of preferred shares may be entitled to different rights from common shareholders, subject to the company's articles of incorporation.

Dividends and Distributions

Dividend payments and distributions are generally governed by ROC Company Law and a company's articles of incorporation.

FENC is generally not permitted under the ROC Company Law to distribute dividends or to make any other distributions to shareholders unless it has current or retained earnings (excluding reserves) at the end of the relevant fiscal year. In addition, before distributing a dividend or making any other distributions, FENC must use the net income to pay all outstanding taxes, recover any past losses and set aside a legal reserve equal to 10% of its net income until the reserve reaches an amount equal to at least 100% of its paid-in capital, and set aside special reserves if required by laws and regulations.

The articles of incorporation of FENC provides that, after FENC pays all the income taxes, recovers any losses incurred in prior years and sets aside 10% of its net income as legal reserve and a special reserve in accordance with applicable laws and regulations, FENC may, subject to its business conditions, retain a portion of the remainder, together with the undistributed profits of previous year, and distribute the remaining balance in the following percentage:

60% as shareholder dividends, to be distributed based on shareholdings. However, in the case of increase in the FENC's capital, unless otherwise stipulated by law, the shareholder dividends to be distributed to the shareholders of the increased shares for the year shall be decided by the shareholders' meeting;
33% as shareholder bonuses, to be distributed based on shareholdings. However in the case of increase in the FENC's capital, the shareholder bonuses to be distributed to the shareholders of the increased shares for the year shall be decided by the shareholders' meeting;
4% as employees' bonuses (where the bonuses are in the form of shares, the distribution shall be made in accordance with the rules adopted by the board of directors); and
3% as remuneration for directors and supervisors, the distribution manner is to be decided by the board of directors.

All shares outstanding as of the relevant record date are entitled to any distribution of dividends approved by the shareholders. Dividends may be distributed to the shareholders in the form of cash, common shares, or a combination of the two, as proposed by the board of directors and determined at the general shareholders' meeting. According to FENC's articles of incorporation, unless there is any capital needs for improvement of financial structure, investments, expansion of capacity or other material capital expenditures, the cash dividends to be distributed in a year shall be in principle no less than 10% of the aggregate of shareholder dividends and shareholder bonuses to be distributed in that year.

Shareholders registered at FENC's register on the distribution record date are entitled to receive dividends or other distributions from FENC.

In addition to dividends paid out of net income of a company, the ROC Company Law also permits a company to make distributions to shareholders in the form of additional shares from reserves (including its legal reserve referred to above and certain other reserves). For information as to ROC taxes on cash and stock dividends, see "Taxation." However, the capitalized portion payable out of FENC's legal reserve is limited to 50% of the total accumulated legal reserve and the capitalization of the legal reserve can only be effected when the accumulated legal reserve exceeds 50% of FENC's paid-in capital.

Changes in Share Capital

Any change in the authorized share capital of a public company limited by shares, such as FENC, requires an amendment to its articles of incorporation, which requires approval at a shareholders' meeting, and the approval of the competent authority, such as, in FENC's case, MOEA.

Authorized but unissued shares may also be issued at such times and, subject to the provisions of the applicable laws, upon such terms as the board of directors may determine and, the approval of the FSC and the MOEA.

The following table sets forth changes in FENC's issued share capital for the previous three years.

Record date	Type of issue	Number of shares issued (in thousands)	Number of shares outstanding after issue (in thousands)
August 2008	Stock dividend	89,607	4,569,954
August 2009	Stock dividend	91,399	4,661,353
August 2010	Stock dividend	93,227	4,754,580

New Shares and Preemptive Rights

Under the ROC Company Law, when a company issues new shares for cash, 10% to 15% of the issue must be offered to its employees. In addition, the ROC Securities and Exchange Law and relevant securities regulations require that, if a public company, such as a company listed on the TWSE, or whose shares are traded on the GreTai Securities Market, intends to offer new shares for cash, at least 10% of the issue must be offered to the public, except under certain circumstances or when exempted by the FSC. This percentage can be increased by a resolution passed at a shareholders' meeting, thereby reducing the number of new shares subject to the preemptive rights of existing shareholders. Unless the percentage of shares to be offered to the public is increased by the shareholders, existing shareholders who are listed on the shareholders' register as of the record date have a preemptive right to acquire the remaining 75% to 80% of the issue. The shares not subscribed for by the employees and shareholders at the expiration of the period for the exercise of their rights may be sold to the public or specified persons at the direction of the board of directors. The preemptive rights provision will not apply to an offering of new shares by a public company through a private placement approved at a shareholders' meeting.

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Meetings of Shareholders

Meetings of shareholders may be ordinary or extraordinary. Ordinary meetings of shareholders will generally be held in Taipei, Taiwan, within six months following the end of each of FENC's fiscal year. FENC's fiscal year commences from January 1 and ends on December 31.

In contrast, extraordinary shareholders' meetings may be convened by resolution of the board of directors or by the board of directors upon the written request of any shareholder who holds 3% or more of the outstanding shares for more than one year. Shareholders' meetings may also be convened by a supervisor or by the shareholders, subject to the ROC Company Law.

Notice in writing of meetings of shareholders, stating the place, time, date and agenda, must be dispatched to each shareholder at least 30 days, in the case of ordinary shareholders' meetings, and 15 days, in the case of extraordinary shareholders' meetings, before the date set for each meeting.

The ROC Company Law allows shareholders holding more than 1% or more of the total issued shares of a company to submit, during the period of time prescribed by the company, one proposal in writing for discussion at the ordinary meeting of the shareholders.

Voting Rights

A holder of common shares has one vote for each common share. There is cumulative voting for the election of directors and supervisors. Ballots for the election of directors are cast separately from those for the election of supervisors.

Except as otherwise provided by the applicable laws, a resolution can be adopted by the holders of at least a majority of the common shares represented at a shareholders' meeting at which the holders of a majority of all issued and outstanding common shares are present.

In order for certain major corporate actions to be approved, including:

any amendment to the articles of incorporation;
entering into, modification or termination of any contracts regarding leasing of FENC's business, or mandate of operations or joint operations;
the removal of any director or supervisor from his or her position;
corporate spin-off, merger or share swap;
dissolution or amalgamation;
the transfer of the whole or an important part of FENC's business or properties;
the taking over of the whole business or property of any other company that would have a significant impact on FENC; and
the distribution of any share dividend,

a meeting of the shareholders must be convened with a quorum of holders of at least two-thirds of all issued and outstanding common shares at which the holders of at least a majority of the common shares represented at the meeting vote in favor of the resolution.

Alternatively, in the case of a public company, such as FENC, such a resolution may be adopted by the holders of at least two-thirds of the common shares represented at a meeting of shareholders at which holders of at least a majority of issued and outstanding common shares are present.

A shareholder may be represented at an ordinary or extraordinary shareholders' meeting by proxy if a valid proxy form is delivered to it five days before the ordinary or extraordinary shareholders' meeting. Voting rights attached to FENC's common shares exercised by its shareholders' proxy are subject to the proxy regulation promulgated by the FSC. Except for trust enterprises or share registrars approved by the ROC Securities & Futures Bureau, where one person is appointed as proxy by two or more shareholders who together hold more than 3% of FENC's total issued shares, the proxy shall be treated as if it owned only 3% of FENC's issued shares.

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Register of Shareholders and Record Dates

FENC only recognizes persons registered in its company register as its shareholders.

FENC's share registrar maintains the register of FENC's shareholders at its offices located at Taipei, Taiwan, and enters transfers of shares in such register upon presentation of, among other documents, certificates representing the shares transferred other than those transferred through book-entry system.

FENC may, by giving advance public notice, set a record date and close the register of shareholders for a specified period in order for it to determine the shareholders that are entitled to rights pertaining to the shares. The relevant periods are:

60 days prior to each ordinary shareholders' meeting;
30 days prior to each extraordinary shareholders' meeting; and
5 days prior to a record date for a distribution of shares or other distribution.

Annual Financial Statements

At least ten days before the annual ordinary shareholders' meeting, FENC's annual financial statements will be made available at FENC's principal office in Taipei, Taiwan and at FENC's share registrar for inspection by the shareholders. According to the regulations of the FSC, FENC is required to publish its annual, semi-annual and quarterly financial statements on a consolidated basis from January 1, 2008.

Transfer of Common Shares

The transfer of common shares in registered form is effected by endorsement and delivery of the related share certificates. However, in order to assert shareholders' rights against FENC, the transferee must have its name and address registered on the register of shareholders. Shareholders are required to file their respective specimen seals, also known as chops, with FENC. The settlement of trading of the common share is normally carried out on the book-entry system maintained by Taiwan Depositary & Clearing Corporation.

Repurchase of Common Shares by FENC

With minor exceptions, FENC cannot acquire its own common shares under the ROC Company Law.

Under the ROC Securities and Exchange Law, FENC may, in accordance with the FSC procedures and a resolution adopted by a majority of the board of directors at a meeting where more than two-thirds of the directors are present, purchase its common shares:

for delivery upon conversion of bonds with warrants, preferred shares with warrants, convertible bonds, convertible preferred shares and warrants issued by FENC into capital stock;
to transfer to its employees; or
if necessary, to maintain its credit and its shareholders' equity, provided that the common shares so purchased shall be cancelled thereafter.

The total common shares purchased by FENC may not exceed 10% of its total issued common shares. In addition, the total cost of the purchased common shares may not exceed the aggregate amount of FENC's retained earnings, any premium from share issuance and the realized portion of its capital reserve. Common shares repurchased in the first two instances are to be transferred to the intended transferee within three years from the repurchase, failing which they will be cancelled. FENC is required to complete and file an amended registration with the MOEA in the event of cancellation. In the third instance, the common shares purchased by FENC must be cancelled within six months after the purchase. The common shares purchased by FENC may not be pledged or hypothecated. In addition, FENC may not exercise any of the shareholders' rights attached to these repurchased common shares. FENC's affiliates, as defined in Article 369-1 of the ROC Company Law, directors, supervisors, managers and their respective spouses and minor children and nominees are prohibited from selling such common shares until FENC's repurchase period has lapsed.

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Liquidation Rights

In the event of liquidation of FENC, the assets remaining after payment of all debts, liquidation expenses and taxes and distributions to holders of preferred shares (if any) will be distributed pro rata to the holders of common shares in accordance with the relevant provisions of applicable laws and the articles of incorporation.

Transfer Restrictions

Under the ROC Securities and Exchange Law:

each director, supervisor, manager, as well as their respective spouses, minor children and nominees, and any shareholder who, together with his or her spouse, minor children or nominees, holds more than 10% of the common shares of a public company (i.e., a major shareholder), must report, on a monthly basis, any change in that person's shareholding to the issuer of the common shares (i.e., FENC); and
each director, supervisor, manager or major shareholder holding such common shares for more than a six-month period may transfer any common shares listed on the TWSE or traded on the Gre Tai Securities Market and should report to the FSC his or her intent to transfer such common shares at least three days before the intended transfer, unless the number of common shares to be transferred is less than 10,000 common shares.

Rights to Bring Shareholders' Suits

Under the ROC Company Law, a shareholder may bring suit against FENC in the following events:

Within 30 days from the date on which a shareholders' resolution is adopted, a shareholder may file a lawsuit to annul a shareholders' resolution if the procedure for convening a shareholders' meeting or the method of resolution violates any law or regulation or the articles of incorporation. However, if the court is of the opinion that such violation is not material and does not affect the result of the resolution, the court may reject the shareholder's claim.
If the substance of a resolution adopted at a shareholders' meeting contradicts any applicable law or regulation or the articles of incorporation, a shareholder may bring a suit to determine the validity of such resolution.

Shareholders may bring suit against FENC's directors and supervisors under the following circumstances:

Shareholders who have continuously held 3% or more of FENC's total issued common shares for a period of one year or longer may request in writing that a supervisor institute an action against a director on FENC's behalf. In case the supervisor fails to institute an action within 30 days after receiving such request, the shareholders may institute an action on FENC's behalf. In the event shareholders institute an action, a court may, upon application of the defendant, order such shareholders to furnish appropriate security.
Shareholders who hold 3% or more of FENC's total issued common shares may institute an action with a court to remove a director who has materially violated the applicable laws or the articles of incorporation or has materially damaged FENC's interests if a resolution for removal on such grounds has first been voted on and rejected by the shareholders and such suit is filed within 30 days of such shareholders' vote.
In the event that any director, supervisor, manager or major shareholder or any respective spouses or minor children and/or nominees of any of them sells FENC's common shares within six months after acquisition of such common shares, or repurchases the common shares within six months after the sale, FENC may claim for recovery any profits realized from the sale and purchase. If the board of directors or supervisors fail to claim for recovery, any shareholder may request the board of directors or supervisors to exercise the right of claim within 30 days. After such 30-day period, such requesting shareholder shall have the right to claim such recovery on FENC's behalf. FENC's directors and supervisors shall be jointly and severally liable for damages suffered by FENC as a result of their failure to exercise the right of claim.

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DESCRIPTION OF THE BONDS

The following is a description of the terms and conditions (the "Conditions") of the Bonds (subject to amendment and except for the sentences in italics), which includes summaries of, and are subject to, the more detailed provisions of the Indenture referred to below.

The issue of US$375,000,000 aggregate principal amount of Zero Coupon Exchangeable Bonds Due 2016 (the "Bonds"), to the extent permitted by the laws of the ROC, of Asia Cement Corporation (the "Company," "us" or "we") was authorized by a resolution of the Company's board of directors adopted on November 2, 2010. The Bonds will be issued on or about January 27, 2011 (the "Issue Date") pursuant to an indenture (the "Indenture") to be dated the Issue Date between the Company and The Bank of New York Mellon, acting through its London Branch, as trustee (the "Trustee," which term shall include all persons for the time being appointed as trustee under the Indenture) for the holders of the Bonds. The Company will also enter into an agency agreement (the "Agency Agreement") to be dated the Issue Date among the Trustee, The Bank of New York Mellon (Luxembourg) S.A., as the registrar (the "Registrar"), The Bank of New York Mellon, acting through its London Branch, as principal paying agent, exchange agent and transfer agent (the "Principal Paying Agent," "Exchange Agent" and "Transfer Agent" together with the Registrar, the "Agents" and each an "Agent").

Capitalized terms not defined herein will have the meanings given to them in the Indenture.

Copies of the Indenture and the Agency Agreement are available for inspection during normal business hours by prior arrangement at the specified office of the Trustee and at the specified offices of the Principal Paying Agent. The holders of the Bonds are entitled to the benefit of the Indenture and are bound by, and are deemed to have notice of, all of the provisions of the Indenture and the Agency Agreement.

1. Status

The Bonds constitute direct, unconditional, unsubordinated and, subject to the provisions of Condition 3, unsecured obligations of the Company and shall at all times rank pari passu and without any preference or priority among themselves and, subject to the provisions of Condition 3, with all other present and future direct, unconditional, unsubordinated and unsecured obligations of the Company, except as may be required by mandatory provisions of law.

2. Form, Denomination and Title

(A) Form and denomination

The Bonds shall be issued in registered form, without coupons, and shall be offered, sold and transferred in denominations of US$200,000 and integral multiples of US$1,000 in excess thereof. The Bonds shall initially be represented by a global certificate (the "Global Certificate"), and only under the limited circumstances described in the Global Certificate and the Indenture shall definitive bond certificates (each a "Definitive Certificate") be issued to holders of the Bonds in respect of their individual holdings. Each Definitive Certificate, if issued, shall be serially numbered and shall have an identifying number which shall be recorded on the relevant certificate and in the register of holders of the Bonds, which the Company shall procure to be kept by the Registrar.

The Bonds shall be represented by the Global Certificate and deposited with, and registered in the name of, a nominee of a common depositary for Euroclear and Clearstream. The Global Certificate shall contain or incorporate by reference these Conditions. Except in the limited circumstances described in the Global Certificate, owners of interests in the Bonds represented by the Global Certificate will not be entitled to receive Definitive Certificates in respect of their individual holdings of the Bonds. The Bonds are not issuable in bearer form.

(B) Title

The Bonds shall be registered instruments, and title to the Bonds shall pass by transfer and registration of title in the register of holders of the Bonds. The holder of any Bond shall, except as otherwise required by law, be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it or any writing on, or the theft or loss of, the Definitive Certificate issued in respect of it), and no person shall be liable for so treating the holder. In these Conditions, "holder of the Bonds" shall mean the person in whose name a Bond is registered in the register of holders of the Bonds.

The Company may from time to time without the consent of the holders of the Bonds, to the extent permitted under the laws of the ROC, create and issue further securities having the same terms and conditions as the Bonds in all respects (except for the issue date, issue price and to the extent necessary, certain temporary securities law transfer restrictions) so that such further issues shall be consolidated and form a single series with the outstanding Bonds.

Certain Covenants

(A) Negative pledge

So long as any of the Bonds remain outstanding (as defined in the Indenture), the Company will not, and will not permit any of its Principal Subsidiaries (as defined below) to, create or permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest ("Security") upon the whole or any part of the property, assets or revenues of the Company or such Principal Subsidiary, as the case may be, present or future, to secure for the benefit of the holders of any International Investment Securities (as defined below) any payment of any sum due in respect of or under any guarantee of or payment indemnity or other like obligation relating to any such International Investment Securities, unless, in any such case, at the same time or prior thereto, either (i) the same Security is granted to the holders of the Bonds or (ii) there is outstanding any guarantee, indemnity or other like obligation or such other security that is not materially less beneficial to the holders of the Bonds or as shall be approved by holders of the Bonds holding not less than 50% of the principal amount of the outstanding Bonds.

For the purposes of these Conditions:

"Business Day" means a day (other than Saturday or Sunday) on which commercial banks are open for business in London, New York City, Taipei and the city in which the specified office of the relevant Agent is located and in the case of surrender of Certificates, the place where such Certificates are surrendered.

"International Investment Securities" mean bonds, debentures, notes or other similar investment securities of the Company or any of its Principal Subsidiaries evidencing indebtedness with a maturity of not less than one year that (a) either (i) are by their terms payable, or confer a right to receive payment, in any currency other than NT dollars or (ii) are denominated or payable in NT dollars and more than 50% of the aggregate principal amount thereof is initially distributed outside the ROC by the Company or with its authorization; and (b) are for the time being, or are capable of being, quoted, listed, ordinarily dealt in or traded on any stock exchange, quotation system or over-the-counter or other similar securities market outside the ROC.

"Principal Subsidiary" means any corporation or other business entity, more than 50% of the outstanding voting stock of which is for the time being owned directly or indirectly by the Company and either (a) the net sales or net operating revenues of which, as shown by the accounts (consolidated in the case of an entity which itself has subsidiaries) of such entity upon which the most recent audited consolidated accounts of the Company have been based, are at least 10% of its consolidated net sales or net operating revenues, as the case may be, as shown by such audited consolidated accounts or (b) the gross assets of which, as shown by the aforementioned accounts, are at least 10% of its consolidated gross assets as shown by such audited consolidated accounts.

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(B) Mergers and disposals

The Company shall not merge, amalgamate or consolidate with or into any other corporation or entity (if the Company is not the surviving entity) or sell or transfer all, or substantially all, of its assets, whether as a single transaction or a number of transactions, related or not, to any corporation, entity or person or to one or more members of any group under the common control of any corporation, entity or person unless:

(i) the Company has notified the holders of the Bonds of such event in accordance with Condition 14;

(ii) the Company and such corporation, entity or person (“successor”) have executed an indenture supplemental to the Indenture, in form and substance satisfactory to the Trustee, and the supplemental indenture includes the following: (a) the express assumption by such corporation, entity or person of the Company’s obligations under the Bonds, the Indenture and the Agency Agreement, including the covenants contained in this Condition 3(B) relating to subsequent mergers, amalgamations, consolidations, sales or transfers; (b) provisions for the exchangeability of each Bond then outstanding into the class and amount of Reference Shares and other securities, cash and other property receivable upon such consolidation, amalgamation, merger, sale or transfer by a holder of the number of Reference Shares into which such Bonds would have been exchangeable immediately prior to such consolidation, amalgamation, merger, sale or transfer (assuming for such purpose that the Bonds were exchangeable at the time of such consolidation, amalgamation, merger, sale or transfer) at the Exchange Price (as defined in Condition 5(A) below) as adjusted from time to time pursuant to the Indenture; and (c) provisions for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in the provisions of Condition 5(C); and

(iii) no Event of Default has occurred and, if applicable, is continuing.

So long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, the Company shall submit a copy of the supplemental indenture to the SGX-ST as soon as practicable and shall make such supplemental indenture available for inspection during normal business hours at the specified office of the Trustee and the Principal Paying Agent.

(C) Preserving the right to exchange into Reference Shares

So long as any of the Bonds remain outstanding (as defined in the Indenture), we will, upon becoming aware of any event or circumstance that is reasonably likely to lead to an Event of Default or an event of default under any outstanding International Investment Securities, take all necessary steps to (i) preserve, to the extent permitted by applicable law, the holders of the Bonds’ right to exchange any or all of the principal amount of Bonds held by holders of the Bonds into Reference Shares (as deposited with the Taiwan Depositary & Clearing Corporation pursuant to Condition 5(A)(vi)) or Exchange Property (as defined in Condition 5(A) below), as applicable, and (ii) to the extent permitted by applicable law, prevent claims of any other creditors upon the Reference Shares from ranking equal or senior to those of the holders of the Bonds.

4. Transfers of Bonds; Issue of Certificates

(A) Transfers

Subject to Condition 4(D), a Bond may be transferred as follows: (i) in the case of a Bond represented by an Definitive Certificate, by depositing such certificate at the specified offices of any Transfer Agent, with the form of transfer on the back of such certificate duly completed and signed, or (ii) in the case of a Bond represented by the Global Certificate, by delivery at such office of a form of transfer duly completed and executed, and any other evidence that such Transfer Agent may require.

The forms of transfer are available at the specified offices of any Transfer Agent during normal business hours. Transfers of interests in the Bonds evidenced by the Global Certificate shall be effected in accordance with the rules of the relevant clearing systems.

(B) Delivery of new Definitive Certificates

Each new Definitive Certificate to be issued upon transfer of the Bonds shall, within seven Business Days of receipt by the Transfer Agent of the original Definitive Certificate and the duly signed and completed form of transfer, be mailed by uninsured mail at the risk of the holder entitled to the Bonds to the address specified in the form of transfer.

Where some but not all the Bonds in respect of which a Definitive Certificate is issued are to be transferred, exchanged or redeemed, a new Definitive Certificate in respect of the Bonds not so transferred, exchanged or redeemed shall, within seven Business Days of deposit or surrender of the original certificate with or to the relevant Agent, be mailed by uninsured mail at the Company's expense and at the risk of the holder of the Bonds not so transferred, exchanged or redeemed to the address of such holder appearing on the register of holders of the Bonds.

Registration of transfer of the Bonds and issuance of a new Definitive Certificates shall be effected without charge to the holders by or on behalf of the Company or any of the Agents, subject to payment (and the giving of such indemnity as the Company or any of the Agents may require) in respect of any tax or other governmental charges which may be imposed in relation to it.

(D) Restricted transfer period

No holder of the Bonds may require the transfer of a Bond to be registered (i) during the period of 15 days ending on (and including) the due date for any payment in respect of the Bond pursuant to Condition 6, (ii) after the Bond has been selected for redemption pursuant to Condition 7(B) or Condition 7(C), (iii) following exercise by the holder of its option to require the Company to redeem the Bond pursuant to Condition 7(D) or (iv) following exercise by the holder of its option to exchange the Bond pursuant to Condition 5(A).

(E) Provisions on transfer

All transfers of the Bonds and entries on the register of holders of the Bonds shall be made subject to the detailed provisions concerning transfer of the Bonds set forth in the Agency Agreement. Such provisions may not be changed without the prior written approval of the Trustee and the Registrar. A copy of the current provisions shall be available for inspection during normal business hours at the specified office of the Transfer Agent and shall be mailed by the Registrar to any holder of the Bonds, free of charge to such holder but at the Company's expense, upon written request.

Exchange

Within five ROC Business Days (as defined below) from each Exchange Date (as defined in Condition 5(B)(i)), we will deliver or procure the delivery of the Reference Shares (as defined below) or the Exchange Property (as defined below), as applicable, to the exchanging holder or its designee, subject to applicable law and the provisions of the Indenture relating to the exchange. We currently own 1,060,713,631 Reference Shares that will be available for transfer and delivery to the holders of the Bonds.

(A) Exchange Right

(i) Exchange Period. Each holder of the Bonds has the right hereunder to exchange any or all of the principal amount of Bonds held by such holder into Reference Shares or Exchange Property, as applicable (the "Exchange Right"). Subject to and upon compliance with the provisions of this Condition 5, the Exchange Right attaching to any Bond may be exercised, at the option of the holder of the Bonds and to the extent provided herein, at any time (i) on or after March 9, 2011 and prior to the close of business (at the place where such Bond is deposited for exchange) on December 28, 2015 (or if such day shall not be a Business Day at such place, on the immediately preceding Business Day at such place) (but in no event thereafter) or (ii) if such Bond shall have been called for redemption on a redemption date on or prior to January 27, 2016 (or if such day shall not be a Business Day at the place where such Bond is deposited for exchange, on the immediately preceding Business Day at such place), then up to the close of business (at the place aforesaid) on the fifth day prior to the date fixed for redemption thereof (or if such day shall not be a Business Day at such place, on the immediately preceding Business

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Day at such place) (the "Exchange Period"); provided, however, that the Exchange Right during any Closed Period (as defined below) shall be suspended and the Exchange Period shall not include any such Closed Period. Holders of the Bonds shall be given not less than 10 and not more than 60 days' notice in accordance with Condition 14 of the commencement of any Closed Period.

For the purposes of these Conditions:

"Closed Period" means (i) the 60-day period prior to the date of any general shareholders' meetings of FENC (as defined below) or an issuer of Exchange Property Securities organized in the ROC; (ii) the 30-day period prior to the date of any special shareholders' meetings of FENC or any such issuer of Exchange Property Securities; (iii) the period beginning from the fifteenth ROC Business Day (as defined below) prior to the five-calendar day period preceding the record date for the determination of shareholders entitled to the receipt of dividends, subscription of new Reference Shares (as defined below) or equity shares of any such issuer of Exchange Property Securities due to capital increase or other benefits and bonuses to such record date; (iv) the period from the record date for the determination of the shareholders participating in any capital reduction of FENC or an issuer of Exchange Property Securities to the first Trading Day (as defined below) immediately prior to the date on which Reference Shares or the relevant Exchange Property Security resume trading after such capital reduction; and (v) such other periods during which FENC or any such issuer of Exchange Property Securities may be required to close its stock transfer books under ROC laws and regulations applicable from time to time.

"Exchange Property Securities" means any securities (including, without limitation, any options, warrants, rights or evidences of indebtedness) of the one or more series constituting the Exchange Property (as defined below) from time to time.

"FENC" means Far Eastern New Century Corporation.

"Offer" means an offer to acquire Exchange Property Securities of any series, whether expressed as a legal offer, an invitation to tender or in any other way, in circumstances where such offer is available to all holders of the applicable Exchange Property Securities or all such holders other than any holder who is, or is connected with, or is deemed to be acting in concert with, the person making such offer (or is excluded from the offer by reason of being connected with one or more specific jurisdictions).

"Reference Shares" shall mean (a) fully-paid and non-assessable shares of the capital stock of FENC, which at the Issue Date are designated as common capital stock of FENC, par value NT$10 per share, together with shares of any class or classes resulting from any subdivision, consolidation or reclassification of those shares, and (b) fully-paid and non-assessable shares of any class or classes of the capital stock of FENC authorized after the date of the Indenture, which in either case, as between themselves, have no preference in respect of dividends or amounts payable in the event of any voluntary or involuntary liquidation or winding-up of FENC.

"ROC Business Day" means a day on which commercial banks are open for business in Taipei, ROC.

"Scheme" means a scheme of arrangement, merger, amalgamation, reorganization, reconstruction, demerger, compromise, liquidation, dissolution, or similar matter (whether or not involving liquidation or dissolution).

"Trading Day" means a day when the Taiwan Stock Exchange Corporation is open for business.

Under current ROC law, regulation and policy, a PRC person is not permitted to hold or exchange the Bonds or to register as a shareholder of FENC or any other entity incorporated in the ROC unless it is a qualified domestic institutional investor ("QDII"). However, QDIIs are currently prohibited from investing in certain industries, and their investment in a given company of certain other industries is restricted to a certain percentage pursuant to a list promulgated by the FSC and amended from time to time. In addition, there are restrictions on the amount remitted to Taiwan for investments by QDIIs, separately and jointly. Accordingly, the qualification criteria for a PRC person to make investment, the restrictions on investment in certain industries and the investment cap imposed by the FSC might cause a holder of the Bonds who is a PRC person to be unable to exchange and hold the Reference Shares delivered upon exchange of the Bonds. Under current ROC law, "PRC person" means an individual holding a passport issued by the PRC; a resident of any area of the PRC under the effective control or jurisdiction of the PRC

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(but not including a special administrative region of the PRC such as Hong Kong or Macau, if so excluded by applicable laws of the ROC); and save as aforesaid, any agency or instrumentality of the PRC; and any corporation, partnership or other entity organized under the laws of any such area or controlled by or, directly or indirectly, having more than 30% of its capital owned by or beneficially owned by any such person, resident, agency or instrumentality.

Under current ROC law, a non-ROC exchanging holder of the Bonds, before exercising its exchange right to exchange the Bonds, is required to register with the Taiwan Stock Exchange Corporation and to appoint a local agent in the ROC with such qualifications as are set by the FSC. The local agent has the power to take the following actions on behalf of and as agent for the exchanging holder: open a securities trading account with a local brokerage firm and a NT Dollar bank account, pay ROC withholding taxes, remit funds, exercise shareholders' rights and perform such other matters as may be designated by the exchanging holder. In addition, such non-ROC exchanging holder must also appoint a custodian bank to hold the securities and any cash proceeds for safekeeping, confirm and settle trades and report all relevant information. Furthermore, the exchanging holder is required to appoint a tax guarantor for filing tax returns and making tax payments. Without meeting these requirements, the exchanging holder would not be able to receive, hold, sell or otherwise transfer the Reference Shares into which the Bonds may have been exchanged on the Taiwan Stock Exchange Corporation or otherwise. Neither the Trustee nor the Agents shall have any duty as to whether the exchanging holder has appointed a local agent or a tax guarantor.

(ii) Number of Reference Shares Deliverable on Exchange. Assuming that a Change of Control of FENC has not occurred, the number of Reference Shares deliverable upon exchange of any Bond shall be determined by dividing the principal amount of the Bond (translated into NT dollars at a fixed exchange rate of NT$29.0320 = US$1.00, the "Fixed Exchange Rate") by the Exchange Price (as defined in Condition 5(A)(iii)) in effect on the Exchange Date (as defined in Condition 5(B)(i)). If more than one Bond shall be deposited for exchange at any one time by the same holder of the Bonds, the number of Reference Shares to be delivered upon exchange thereof shall be calculated on the basis of the aggregate principal amount of the Bonds so deposited. Fractions of Reference Shares shall not be delivered on exchange, and cash adjustments shall be made in respect thereof by the Company net of remittance fee, rounding to one dollar with 0.5 being rounded upwards. Notwithstanding the foregoing, in the event of a consolidation or reclassification of Reference Shares by operation of law or otherwise that occurs after the date of the original issuance of the Bonds, the Company shall upon exchange of the Bonds pay in US dollars a sum equal to such portion of the principal amount of the Bonds deposited for exchange as corresponds to any fraction of a Reference Share not delivered as aforesaid if such sum exceeds US$10. For the purpose of calculating the amount of such payment, the Company shall use the Fixed Exchange Rate. Any such sum shall be paid not later than 14 Business Days after the Exchange Date (as defined in Condition 5(B)(i)) by transfer to a US dollar account with a bank in New York City specified in the Exchange Notice (as defined in Condition 5(B)(i)).

(iii) Initial Exchange Price. The price at which Reference Shares shall be delivered upon exchange (the "Exchange Price") shall initially be NT$63.51 per Reference Share, but shall be subject to adjustment in the manner provided in Condition 5(C).

(iv) Revival on Default. Notwithstanding the provisions of Condition 5(A)(i), if an Event of Default (as defined in Condition 9) occurs, the Exchange Right attaching to a Bond shall continue to be exercisable up to and including the close of business at the place where the relevant Exchange Notice (as defined in Condition 5(B)(i)) is deposited for exchange on the date upon which the full amount of the monies payable in respect of such Bond has been duly received by the Trustee or the Principal Paying Agent and notice of such receipt has been duly given to the holders of the Bonds.

(v) Delivery of the Exchange Property Following a Change of Control of FENC. Following the effective date of a Change of Control of FENC, the Exchange Right attaching to each Bond shall entitle the holder of such Bond only to the Exchange Property (the "Exchange Property"). The Exchange Property shall consist solely of either (i) Reference Shares, if FENC is the surviving entity, or (ii) such securities or assets (including cash) as are receivable by the Company as the holder of the Reference Shares in connection with such Change of Control of FENC, if FENC is not the surviving entity. On the exercise of Exchange Rights following a

106

Change of Control of FENC, holders of the Bonds shall be entitled to the delivery or transfer to, or to the order of, each relevant holder of the Bonds of a pro rata share of the Exchange Property per US$200,000 principal amount of Bonds outstanding as of the Exchange Date and at the Exchange Price in effect at the time of the Change of Control of FENC.

(a) To the extent that (1) any Exchange Property Securities are subject to subdivision, consolidation or reclassification, (2) any warrants, options or rights are issued with respect to Exchange Property Securities, or (3) any Exchange Property Securities are subject to bonus or dividend issues of securities, FENC Capital Distributions or Schemes, such assets shall be included in the Exchange Property as set forth in the Indenture.

(b) The Company shall monitor all corporate actions by the issuers of securities constituting Exchange Property, including, but not limited to, the declaration and distribution of dividends, interest, rights issues, bonus issues, capital distributions, reorganizations, subdivisions, consolidations, reclassifications, and Offers and Schemes. The Company shall give notice to the Trustee and the Calculation Agent (as defined below), containing details of any change in composition of the Exchange Property as soon as reasonably practicable following such change. Notice of any such change will be provided to the holders of the Bonds as soon as practicable.

(c) The Company hereby agrees that, following a Change of Control of FENC and for so long as any of the Bonds remain outstanding, there will at all times be a calculation agent (the "Calculation Agent"), which shall be an investment bank of international repute, appointed by the Company and at the Company's expense to check the Company's calculation of, among other things, the pro rata share of the Exchange Property with respect to each US$200,000 in principal amount of the Bonds to be delivered to an exchanging holder of the Bonds. The Calculation Agent is not obliged to check any such calculation unless, and until, the Company provides to the Calculation Agent such calculation. The Calculation Agent shall from time to time, or when requested, notify the Trustee and the Exchange Agent of such calculation. The Trustee and the Agents (other than the Calculation Agent) are not obliged to check any such calculation and shall not be responsible or liable to any person for any failure to do so.

For the purpose of these Conditions:

"Change of Control of FENC" means any of the following events with respect to FENC:

(a) any Person or related Persons, other than the Company together with its Affiliates, becomes the beneficial owner, directly or indirectly, of more than 50% of the total voting power of FENC, provided, however, that, following such event, the Company together with its Affiliates, do not have the right or ability by voting power, contract, or otherwise to control FENC; or

(b) the merger or consolidation of FENC with or into another Person or the merger of another Person with or into FENC, or the sale of all or substantially all the assets of FENC to another Person (other than a Person that is controlled by the Company together with its Affiliates), and, in the case of any such merger or consolidation, the securities of FENC that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of FENC are changed into or exchanged for cash, securities or property, provided, however, that, following such event, the Company together with its Affiliates, do not have the right or ability by voting power, contract, or otherwise, to control FENC.

"Affiliate" of any specified person means any other person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified person.

(vi) Share Deposit. We will agree to deposit the Reference Shares with the Taiwan Depositary & Clearing Corporation within thirty (30) days after the Issue Date. We will further agree not to transfer, pledge or deliver the Reference Shares to any third party except for the purpose of delivering the Reference Shares to exchanging holders of the Bonds or except as may otherwise be required by law or legal proceedings or in the event of a Change of Control of FENC. Under ROC law, this is not an escrow arrangement nor does it create a charge in favor of the holders of the Bonds. In addition, the Reference Shares remain an asset of ours subject to third party claims.

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(B) Exchange procedures

(i) Exercise Procedures; Exchange Notice; Deposit Date; Exchange Date. To exercise the Exchange Right attaching to any Bond, a holder of the Bond shall deposit the following at its own expense between 9:00 a.m. to 3:00 p.m. on any Business Day on which the Bond is presented for exchange during the Exchange Period at the specified office of an Exchange Agent outside the ROC:

(a) a notice of exchange (an “Exchange Notice”) in duplicate, duly completed and signed, in the then current form obtainable from the specified office of any Exchange Agent, together with the relevant Definitive Certificate, if issued, in respect of the relevant Bond; the Exchange Notice must include a certification that, at the time of such exchange, the exchanging holder is not in the United States, is not a US person (as defined in Regulation S under the Securities Act) and is not exchanging Bonds on behalf of a US person;

(b) any certificates and other documents as may be required under the law of the ROC or the jurisdiction in which such Exchange Agent shall be located; and

(c) any certification that any amount required to be paid by the holder of the Bond referred to in Condition 5(B)(ii) below has been made.

Any of the above items deposited outside the hours specified above or on a day that is not a Business Day shall for all purposes be deemed to have been deposited with that Agent on the immediately succeeding Business Day. The Exchange Notice shall contain, among other things, (A) the appointment of a local agent; (B) an irrevocable instruction to exchange the Bonds into Reference Shares or Exchange Property, as applicable; and (C) other information required by ROC laws and regulations. Once deposited, the Exchange Notice may not be withdrawn without the Company's consent in writing. The price at which such Bond shall be exchanged shall be the Exchange Price in effect on the Exchange Date (as defined below).

We will covenant in the Indenture that we will send to the Trustee an officer’s certificate, which certificate the Trustee may exclusively rely on, certifying to the best knowledge of such officer, there has been no change in the laws or regulations of the ROC affecting the exchange of the Bonds, including the change in the ROC laws or regulations in connection with any certificates or other documents required for the exchange of the Bonds.

“Deposit Date” means the first date on which (i) the Definitive Certificate, if issued, in respect of the Bond to be exchanged, (ii) a duly signed and completed Exchange Notice (in duplicate), (iii) any certificates or other documents, as may be required, relating thereto, and (iv) the payments referred to in Condition 5(B)(ii) below, as may be required, have all been deposited with an Exchange Agent.

“Exchange Date” means the next ROC Business Day following the Deposit Date and if within an Closed Period, the next ROC Business Day following the last day of such Closed Period.

“Exchange Delivery Date” means the date on which the exchanging holder of Bonds or its designee is registered as the owner of the relevant Reference Shares or Exchange Property Securities in the shareholders’ register of FENC or the issuer of Exchange Property Securities, as applicable (as set forth in Condition 5(B)(iv) below); provided that the Exchange Delivery Date shall not be later than the fifth ROC Business Day from the Exchange Date.

(ii) Taxes and Expenses. As conditions precedent to the exercise of the Exchange Right attaching to any Bond, together with the delivery of the Exchange Notice, the Definitive Certificate, if issued, and any certificates or other documents as may be required, the holder of the Bond must pay all stamp, issue, registration and similar taxes and duties directly to the relevant authorities, if any, arising on exchange in the country in which the Bond is deposited for exchange or payable in any jurisdiction upon delivery of Reference Shares or Exchange Property, as applicable, or any other property or cash upon exchange to or to the order of the exchanging holder of the Bond or any other person. Except as aforesaid, the Company shall pay the expenses arising in the ROC on the delivery of Reference Shares or Exchange Property, as applicable, upon exchange of the Bond and all charges and expenses of the Exchange Agents in

connection therewith. The holder of the Bond must provide the Exchange Agent with confirmation of (as provided in the Exchange Notice) payment to the relevant tax authorities in settlement of taxes payable pursuant to this Condition 5(B)(ii) at or before the time of deposit of the Exchange Notice.

Neither the Trustee nor any of the Agents is under any obligation to determine whether a holder of the Bonds is liable to pay any taxes including stamp, issue, registration or similar taxes or duties or the amounts payable (if any) in connection with this Condition 5(B)(ii) and shall not be liable for any failure by any holder or the Company to make any such payment to the relevant authorities or determine the sufficiency or insufficiency of any amount so paid.

(iii) Transfer of Beneficial Ownership in Reference Shares or Exchange Property Securities. As soon as practicable after the Exchange Date but no later than the opening of business in the ROC on the Exchange Delivery Date, the Company will use its best efforts to cause FENC, or any issuer of Exchange Property Securities, as applicable, to deem the exchanging holder of a Bond as indicated in the Exchange Notice to be the beneficial owner of the number of Reference Shares, or the relevant Exchange Property, as applicable, to be delivered upon such exchange, disregarding any retroactive adjustment of the Exchange Price referred to below prior to the time such retroactive adjustment shall have become effective. At such time, subject to Condition 5(B)(iv), the rights of such exchanging holder with respect to the Bond deposited for exchange shall cease, except rights arising under Condition 5(B)(v).

(iv) Delivery of Reference Shares, Exchange Property or Cash Equivalent. As soon as practicable after the Exchange Date, the Company will use its best efforts to ensure that FENC or the issuer of Exchange Property Securities, as applicable, registers the exchanging holder of Bonds or such exchanging holder's designee in the shareholders' register of FENC or such other issuer as the owner of the number of Reference Shares to be delivered pursuant to Condition 5(A)(ii), or Exchange Property Securities to be delivered pursuant to Condition 5(A)(v), upon exchange of such Bond; provided that such registration shall be completed no later than five ROC Business Days from the Exchange Date. Subject to any applicable limitations then imposed by ROC laws and regulations, the Company shall deliver in accordance with the Indenture and the request made in the relevant Exchange Notice as soon as practicable, and in any event within five ROC Business Days (subject to applicable law) from the Exchange Date, for the benefit of the exchanging holder, the following:

(a) the relevant Reference Shares or Exchange Property Securities, through book-entry transfer to an account registered in the name of the exchanging holder or its designee at Taiwan Depository & Clearing Corporation;

(b) any other property or cash (including, without limitation, the Cash Equivalent (as defined below) and any cash payable pursuant to Condition 5(A)(ii)) required to be delivered upon exchange; and

"Cash Equivalent" means, if, for any reason, the Company does not have sufficient Reference Shares or Exchange Property Securities to satisfy the exchange of any Bond, then, on or before the fifth ROC Business Day after the relevant Exchange Date, the Company will pay to the exchanging holder of the Bonds an amount in US dollars equal to the product of (x) the volume-weighted average closing price of the Reference Shares or the Exchange Property Securities on the Taiwan Stock Exchange Corporation or other applicable exchange for the five consecutive Trading Days starting from the applicable Exchange Date (or such fewer number of Trading Days as available prior to the fifth ROC Business Day after the applicable Exchange Date) converted to US dollars at the Prevailing Rate (as defined below) and (y) the number of Reference Shares or Exchange Property Securities that the Company is unable to deliver.

"Prevailing Rate" for any Trading Day means the last available buying rate for the purchase of US dollars against the sale of NT dollars quoted by Taipei Forex Inc. (or a replacement agency of equivalent standing selected and appointed by the Company, at its own cost) on such Trading Day or, if no buying rate is quoted on such Trading Day, the last available buying rate quoted on the immediately preceding Trading Day.

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If the exchanging holder of the Bonds or its designee does not have an account at the Taiwan Depository & Clearing Corporation, the relevant Reference Shares or Exchange Property Securities, as the case may be, shall only be delivered after such an account has been opened by such exchanging holder of the Bonds or its designee.

Neither the Trustee nor the Agents shall be responsible or liable for making such payment on behalf of the Company, for determining the amount of the Cash Equivalent payable, for monitoring the due date for such payment or for any failure by the Company to make such payment.

The Company has certain disclosure obligations and reporting obligations under ROC law and regulations if:

(A) the person to be registered as a shareholder is a "related party" of the Company or FENC under Statement of Financial Accounting Standard No. 6 of the ROC and such person beneficially owns Reference Shares exchanged from the Bonds, or

(B) the person to be registered as a holder of Reference Shares owns Reference Shares received on exchange of his Bonds, and the Reference Shares exchanged exceed 10% of the total number of Reference Shares expected to be exchanged based on the exchange price at the time of issue of the Bonds.

(C) These obligations may also apply to issuers of Exchange Property Securities. Due to these obligations, the Indenture provides that we may ask exchanging holders of the Bonds to disclose the name of the person to be registered as the shareholder of FENC or the issuer of the Exchange Property Securities and to provide proof of identity and genuineness of any signature and other documents before it exchanges the Bonds. The exchange of the Bonds may be delayed until we receive the required information and evidence of compliance with relevant laws and regulations by the exchanging holder of the Bonds. The information that an exchanging holder of the Bonds is required to provide includes the name and nationality of the person to be registered as shareholder and the total number of Reference Shares, or Exchange Property Securities, as applicable, such person has or will receive as a result of the exchange of the Bonds it holds.

(D) In the event the exchange of a Bond shall result in a payment to the exchanging holder as provided above, the Company shall deliver a notice setting forth the above details to the address of the exchanging holder appearing on the register of holders of the Bonds.

(v) Retroactive Adjustment of Exchange Price. If (a) the Exchange Date in relation to any Bond shall be on or after a date on which an adjustment to the Exchange Price takes retroactive effect pursuant to any of the provisions referred to in Condition 5(C) and the Indenture and (b) the relevant Exchange Date falls on a date when the relevant adjustment has not been reflected in the Exchange Price, the Company shall, within 20 days after the date of such adjustment of the Exchange Price, deliver to the local agent appointed by the exchanging holder of the Bond such number of Reference Shares as is equal to the excess of (1) the number of Reference Shares that would have been required to be delivered on exchange of such Bond if the relevant retroactive adjustment had been made as of the said Exchange Date over (2) the number of Reference Shares previously delivered pursuant to such exchange, or such number of Exchange Property Securities as would otherwise be appropriate; and in such event and in respect of such number of Reference Shares or Exchange Property Securities, references in Conditions 5(B)(iii) and 5(B)(iv) to the Exchange Date shall be deemed to refer to the date upon which such retroactive adjustment becomes effective disregarding the fact that it becomes effective retroactively. Fractions of shares shall not be delivered, and cash adjustment shall be made in respect thereof net of remittance fee, rounding to one dollar with 0.5 being rounded upwards.

(vi) Entitlements on Exchange. With effect from, and including, the Exchange Delivery Date, the exchanging holder of the Bonds shall, as between it and FENC or the issuer of Exchange Property Securities, be entitled to exercise all rights in respect of the Reference Shares or Exchange Property Securities, as applicable, and receive all income or other assets arising out of the Reference Shares or Exchange Property Securities, as applicable (except where such rights, income or other assets accrue by reference to a record date which precedes the Exchange Delivery Date). The rights of an exchanging holder of the Bonds in respect of the Reference Shares or Exchange Property Securities, as applicable, as between it and any other

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person shall be as provided by applicable law or regulation. In particular, the rights of the exchanging holder of the Bonds with respect to Reference Shares or Exchange Property Securities, as applicable, as between it and FENC or the issuer of the Exchange Property Securities, as applicable (assuming that the issuer is an ROC corporation), will be determined by the date on which the name of the holder of the Bonds (or its designee) is registered as owner of the Reference Shares or Exchange Property Securities, as applicable, in the applicable shareholders' register.

Subject to Condition 5(B)(iv) and the following paragraph and assuming no Change of Control of FENC has occurred, the Company will ensure that the Reference Shares delivered on exchange of Bonds (if applicable) will in all respects rank pari passu with the Reference Shares in issue on the relevant Exchange Delivery Date (except for any right the record date for which precedes the date on which the exchanging holder of the Bonds (or its designee) is registered as the owner of the Reference Shares in the shareholders' register of FENC, and except for any other right excluded by mandatory provisions of applicable law).

The Reference Shares or the Exchange Property Securities, as applicable, to be delivered on exercise of Exchange Rights shall not include any dividends or other income thereon declared or paid by reference to a record date prior to the Exchange Delivery Date. The Reference Shares or the Exchange Property Securities, as applicable, delivered pursuant to exercise of Exchange Rights shall qualify for dividends or other distributions declared or paid by reference to any record date in respect of such dividends or distributions falling after the Exchange Delivery Date.

(vii) Exchange Agents. The Company reserves the right, subject to the provisions of the Agency Agreement and with the prior written consent of the Trustee, to vary or terminate the appointment of any Exchange Agent and to appoint other Exchange Agents at any time; provided that the Company shall at all times maintain an Exchange Agent having a specified office in London and, so long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, in Singapore. Notice of any such termination or appointment and of any changes in the specified offices of the Exchange Agents shall be given promptly by the Company to the holders of the Bonds and, so long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, the SGX-ST, in accordance with Condition 14.

(viii) Adjustment of Global Certificate on the Exchange of Bonds. Where Exchange Rights are exercised in respect of only some of the Bonds represented by an Global Certificate, the principal amount of such Bonds shall be noted on the relevant schedule to such Global Certificate and, on the Exchange Date the principal amount of such Global Certificate shall be reduced accordingly.

The Exchange Price shall be subject to adjustment in the manner set forth in the Indenture (the "Antidilution Adjustments") upon the occurrence of certain events set out in the Indenture, including:

(i) Declaration of Dividend in Reference Shares or Free Distribution or Bonus Issue of Reference Shares. If FENC shall declare a dividend in Reference Shares or make a free distribution or bonus issue of Reference Shares which is treated as a capitalization issue for accounting purposes (including but not limited to capitalization of retained earnings or capital reserves), then the Exchange Price in effect on the date when such dividend and/or distribution is declared (or, if FENC has fixed a prior record date for the determination of shareholders entitled to receive such dividend and/or distribution, on such record date) shall be adjusted in accordance with the following formula:

$$
NEP = OEP \times [N/(N+n)]
$$

where:

NEP = the Exchange Price after such adjustment.
OEP = the Exchange Price before such adjustment.
N = the number of Reference Shares outstanding, at the time of declaration of such dividend and/or distribution (or at the close of business in Taipei on such record date as the case may be).
n = the number of Reference Shares to be distributed to the shareholders as a dividend and/or free distribution;

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provided that no adjustment of the Exchange Price in respect of such dividend, bonus issue or free distribution shall be made under this subsection (i), but in lieu thereof an adjustment shall be made under subsection (iii), (iv), (v), (vi), (vii), (ix) or (x) below (as the case may require) in certain cases as set forth in the Indenture.

An adjustment made pursuant to this Condition 5(C)(i) shall become effective immediately on the relevant event referred to in this Condition 5(C)(i) becoming effective or, if a record date is fixed therefor, immediately after such record date; provided that in the case of a free distribution or bonus issue of Reference Shares or dividend in Reference Shares which must, under applicable laws of the ROC, be submitted for approval to a general meeting of shareholders or be approved by a meeting of the board of directors of FENC before being legally paid or made, and which is so approved after the record date fixed for the determination of shareholders entitled to receive such distribution, bonus issue or dividend, such adjustment shall, immediately upon such approval being given by such meeting, become effective retroactively to immediately after such record date.

(ii) Subdivision, Consolidation and Reclassification of Reference Shares. If FENC shall (a) subdivide its outstanding Reference Shares, (b) consolidate its outstanding Reference Shares into a smaller number of Reference Shares, or (c) reclassify any of its Reference Shares into other securities of FENC, then the Exchange Price shall be appropriately adjusted so that the holder of any Bond, on the Exchange Date which occurs after the coming into effect of the adjustment described in this subsection (ii), shall be entitled to receive the number of Reference Shares and/or other securities of FENC which it would have held or have been entitled to receive after the happening of any of the events described above had such Bond been exchanged immediately prior to the happening of such event (or, if FENC has fixed a prior record date for the determination of shareholders entitled to receive any such securities issued upon any such subdivision, consolidation or reclassification, immediately prior to such record date), but without prejudice to the effect of any other adjustment to the Exchange Price made with effect from the date of the happening of such event (or such record date) or any time thereafter.

An adjustment made pursuant to this Condition 5(C)(ii) shall become effective immediately on the relevant event referred to in this Condition 5(C)(ii) becoming effective or, if a record date is fixed therefor, immediately after such record date; provided that in the case of a division, consolidation or reclassification of Reference Shares which must, under applicable laws of the ROC, be submitted for approval to a general meeting of shareholders or be approved by a meeting of the board of directors of FENC before being legally paid or made, and which is so approved after the record date fixed for the determination of shareholders entitled to receive such distribution or bonus issue of Reference Shares or other securities issued upon such consolidation or reclassification, such adjustment shall, immediately upon such approval being given by such meeting, become effective retroactively to immediately after such record date.

(iii) Issuance of Rights to Purchase Reference Shares. If FENC shall grant, issue or offer to the holders of Reference Shares rights entitling them to subscribe for or purchase Reference Shares (a "FENC Rights Issue," which includes the rights to subscribe for Reference Shares that are required to be offered to employees and persons other than shareholders in connection with such grant, issue or offer) at a consideration per Reference Share receivable by FENC (as determined in the Indenture) which is fixed (a) on or prior to the record date for the determination of shareholders entitled to receive such rights and is less than the Current Market Price (as defined below) per Reference Share on such record date or (b) after such record date and is less than the Current Market Price per Reference Share on the date FENC fixes the said consideration, then the Exchange Price in effect (in the case of (a) above) on such record date or (in the case of (b) above) on the date FENC fixes the said consideration shall be adjusted in accordance with the following formula:

$$
NEP = OEP \times \left[ \frac{(N + v)}{(N + n)} \right]
$$

where:

NEP and OEP have the meanings ascribed thereto in subsection (i) above (which may be further adjusted pursuant to the provisions of subsection (ii) above).
N = the number of Reference Shares outstanding at the close of business in the ROC (in the case of (a) above) on such record date or (in the case of (b) above) on the date FENC fixes the said consideration.

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n = the number of Reference Shares to be issued in connection with such Rights Issue at the said consideration.

v = the number of Reference Shares which the aggregate consideration receivable by FENC (as determined in the Indenture) would purchase at such Current Market Price per Reference Share specified in (a) or, as the case may be, (b) above.

Subject to the provisions of the Indenture, such adjustment shall become effective immediately upon the issue of Reference Shares pursuant to the Rights Issue but retroactively to immediately after the record date mentioned above.

(iv) Employee Stock Bonus. If FENC issue Reference Shares as employee stock bonuses, then the Exchange Price shall be adjusted in accordance with the following formula:

$$
NEP = OEP \times [(N + v) / (N + n)]
$$

where:

NEP and OEP have the meanings ascribed thereto in subsection (i) above (which may be further adjusted pursuant to the provisions of subsection (ii) above).

N = the number of Reference Shares outstanding on the date prior to the date of the shareholders' meeting approving such employee stock bonuses.

v = (n x P) / M

P = the Closing Price of Reference Shares on the Trading Day prior to the date of the shareholders' meeting approving such employee stock bonuses.

M = the Current Market Price per Reference Share on the record date for the determination of the shareholders that are entitled to receive the rights or dividends for the same fiscal year.

n = the number of Reference Shares to be issued to employees as employee stock bonuses.

Notwithstanding the above, no adjustment shall be made if "M" is less than "P." Subject to the provisions of the Indenture, such adjustment shall become effective on the record date.

(v) Issuance of Warrants to Purchase Reference Shares. If FENC shall grant, issue or offer to all holders of Reference Shares warrants entitling them to subscribe for or purchase Reference Shares at a consideration per Reference Share receivable by FENC (as determined in the Indenture) which is fixed (a) on or prior to the record date for the determination of shareholders entitled to receive such warrants and is less than the Current Market Price per Reference Share at such record date or (b) after the record date mentioned above and is less than the Current Market Price per Reference Share on the date FENC fixes the said consideration, then the Exchange Price in effect (in the case of (a) above) on such record date or (in the case of (b) above) on the date FENC fixes the said consideration shall be adjusted in accordance with the following formula:

$$
NEP = OEP \times [(N + v) / (N + n)]
$$

where:

NEP and OEP have the meanings ascribed thereto in subsection (i) above (which may be further adjusted pursuant to the provisions of subsection (ii) above).

N = the number of Reference Shares outstanding at the close of business in the ROC (in the case of (a) above) on such record date or (in the case of (b) above) on the date FENC fixes the said consideration.

n = (x) the number of Reference Shares initially to be issued upon exercise of such warrants at the said consideration, where no applications by shareholders entitled to such warrants are required. Where applications by shareholders entitled to such warrants are required, n = the number of such Reference Shares that equals (aa) the number of warrants which underwriters have agreed to underwrite as referred to below or, as the case may be, (bb) the number of warrants for which applications are received from shareholders as referred to below except to the extent already adjusted for under (aa).

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Subject to the provisions of the Indenture, such adjustment shall become effective (A) where no applications for such warrants are required from shareholders entitled to the same, upon their issue or (B) where applications by shareholders entitled to the same are required as aforesaid, immediately after the latest date for the submission of such applications or (if later) immediately after FENC fixes the said consideration but in all cases retroactively to immediately after the record date mentioned above.

(vi) Issues of Rights or Warrants for Equity-Related Securities of FENC to Holders of Reference Shares. If FENC shall grant, issue or offer to the holders of Reference Shares rights or warrants entitling them to subscribe for or purchase any securities convertible into or exchangeable for Reference Shares at a consideration per Reference Share receivable by FENC (as determined in the Indenture) which is fixed (a) on or prior to the record date mentioned below and is less than the Current Market Price per Reference Share at such record date or (b) after the record date mentioned below and is less than the Current Market Price per Reference Share on the date FENC fixes the said consideration, then the Exchange Price in effect (in a case within (a) above) on the record date for the determination of shareholders entitled to receive such rights or warrants or (in a case within (b) above) on the date FENC fixes the said consideration shall be adjusted in accordance with the following formula:

$$
NEP = OEP \times \left[ \frac{(N + v)}{(N + n)} \right]
$$

where:

N = the number of Reference Shares outstanding at the close of business in the ROC (in a case within (a) above) on such record date or (in a case within (b) above) on the date FENC fixes the said consideration.

n = the number of Reference Shares initially to be issued upon exercise of such rights or warrants and conversion or exchange of such convertible or exchangeable securities at the said consideration which, in the case of rights, equals (aa) the number of Reference Shares initially to be issued upon conversion or exchange of the number of such convertible or exchangeable securities which the underwriters have agreed to underwrite as referred to below or, as the case may be, (bb) the number of Reference Shares initially to be issued upon conversion or exchange of the number of such convertible or exchangeable securities for which applications are received from shareholders as referred to below save to the extent already adjusted for under (aa), and which, in the case of warrants where no applications by shareholders entitled to such warrants are required, equals such number of Reference Shares initially to be issued upon such exercise and conversion or exchange. Where applications by shareholders entitled to such warrants are required, n = the number of such Reference Shares that equals (x) the number of warrants which underwriters have agreed to underwrite as referred to below or, as the case may be, (y) the number of warrants for which applications are received from shareholders as referred to below save to the extent already adjusted for under (x).

Subject to the provisions of the Indenture, such adjustment shall become effective (a) where no applications for such warrants are required from shareholders entitled to the same, upon their issue and (b) where applications by shareholders entitled to the warrants are required as aforesaid and in the case of convertible or exchangeable securities by shareholders entitled to the same pursuant to such rights, immediately after the latest date for the submission of such applications or (if later) immediately after FENC fixes the said consideration; but in all cases retroactively to immediately after the record date mentioned above.

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(vii) FENC Capital Distributions, Other Distributions to Holders of FENC Common Stock. (a) If FENC shall make any FENC Capital Distribution (as defined below) or distribution to all holders of Reference Shares (i) evidences of indebtedness or other assets of FENC (excluding any cash dividend described in (b) below) or (ii) Shares of capital stock of FENC (other than Reference Shares) or (iii) rights or warrants to subscribe for or purchase any shares of capital stock of the Company of FENC (other than Reference Shares)(other than those mentioned in (iii), (v) or (vi) above at less than the fair market value of such evidence of indebtedness, assets, capital stock or rights or warrants (determined as of the date on which the FENC Board of Directors approves such distribution, then in each such case the Exchange Price shall be adjusted in accordance with the following formula:

$$
NEP = OEP \times [(CMP - fmv)/CMP]
$$

NEP and OEP have the meanings ascribed thereto in subsection (i) above (which may be further adjusted pursuant to the provisions of subsection (ii) above).
CMP = the Current Market Price per Reference Share on the record date for determining holders of Reference Shares entitled to receive such distribution.
fmv = the then fair market value on the date of such approval by the FENC Board of Directors (as determined by FENC and notified to the Trustee or, if pursuant to applicable law of the ROC such determination is to be made by application to a court of competent jurisdiction, as determined by such court or by an appraiser appointed by such court) of the evidences of indebtedness or other assets or the portion of capital stock or of such subscription rights or warrants so distributed applicable to one Reference Share (less any consideration payable for the same by the relevant holder of Reference Shares). In making a determination of the fair market value of any such evidences of indebtedness, shares of capital stock, assets, rights or warrants, FENC shall consult a leading independent securities company or bank or accounting firm in Taipei selected by FENC in good faith and shall take fully into account the advice received from such company or bank or accounting firm.

(b) If FENC shall make distribution of cash to all holders of Reference Shares, by dividend or otherwise, the Exchange Price will be adjusted in accordance with the following formula:

$$
NEP = OEP \times [(CMP-C)/CMP]
$$

CMP = the Current Market Price per Reference Share on the record date for the determination of holders of Reference Shares entitled to receive such distribution.
C = the amount of cash distributed per Reference Share.

Any adjustment required by a FENC Capital Distribution or other distribution shall become effective immediately after the record date for the determination of shareholders entitled to receive such FENC Capital Distribution or other distribution; provided that (a) in the case of such a FENC Capital Distribution or other distribution which must, under applicable law of the ROC, be submitted for approval to a general meeting of shareholders or be approved by a meeting of the Board of Directors of FENC before such FENC Capital Distribution or other distribution may legally be made and is so approved after the record date fixed for the determination of shareholders entitled to receive such FENC Capital Distribution or other distribution, such adjustment shall, immediately upon such approval being given by such meeting, become effective retroactively to immediately after such record date and (b) if the fair market value of such FENC Capital Distribution or other distribution cannot be determined until the record date fixed for the determination of shareholders entitled to receive such FENC Capital Distribution or other distribution, such adjustment shall, immediately upon such fair market value being determined, become effective retroactively to immediately after such record date.

(viii) Issue of Convertible or Exchangeable Securities of FENC Other than to Holders of Reference Shares or on Exercise of Warrants. If FENC shall issue any securities convertible into or exchangeable for Reference Shares (other than the Bonds, or in any of the circumstances described in subsection (vi) above and subsection (x) below) and the consideration per

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Reference Share receivable by FENC (as determined in the Indenture) shall be less than the Current Market Price per Reference Share on the date in the ROC on which FENC fixes the said consideration (or, if the issue of such securities is subject to approval by a meeting of shareholders, on the date on which the Board of Directors of FENC fixes the consideration to be recommended at such meeting), then the Exchange Price in effect immediately prior to the date of issue of such convertible or exchangeable securities shall be adjusted in accordance with the following formula:

$$
NEP = OEP \times [(N+v)/(N+n)]
$$

Such adjustment shall become effective as of the calendar day in the ROC corresponding to the calendar day at the place of issue on which such convertible or exchangeable securities are issued.

(ix) Other Issues of Reference Shares. If FENC shall issue any Reference Shares (other than Reference Shares issued upon conversion or exchange of any convertible or exchangeable securities (including the Bonds) issued by FENC or upon exercise of any rights or warrants granted, offered or issued by FENC or in any of the circumstances described in subsection (i), (ii) or (iii) above) for a consideration per Reference Share receivable by FENC (as determined in the Indenture) less than the Current Market Price per Reference Share on the date in the ROC on which FENC fixes the said consideration (or, if the issue of such Reference Shares is subject to approval by a meeting of shareholders, on the date on which the Board of Directors of FENC fixes the consideration to be recommended at such meeting), then the Exchange Price in effect immediately prior to the issue of such additional Reference Shares shall be adjusted in accordance with the following formula:

$$
NEP = OEP \times [(N+v)/(N+n)]
$$

Such adjustment shall become effective as of the calendar day in the ROC of the issue of such additional Reference Shares.

(x) Issue of Equity Related Securities by FENC. If FENC shall grant, issue or offer options, rights or warrants (excluding those rights and warrants referred to in subsections (iii), (iv), (v) and (vi)) to subscribe for or purchase Reference Shares or securities convertible into or exchangeable for Reference Shares and the consideration per Reference Share receivable by

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FENC (as determined in the Indenture) shall be less than the Current Market Price per share on the date in the ROC on which FENC fixes the said consideration (or, if the offer, grant or issue of such rights, options or warrants is subject to approval by a meeting of shareholders, on the date on which the Board of Directors of FENC fixes the consideration to be recommended at such meeting), then the Exchange Price in effect immediately prior to the date of the offer, grant or issue of such options, rights or warrants shall be adjusted in accordance with the following formula:

Such adjustment shall become effective as of the calendar day in the ROC corresponding to the calendar day at the place of issue on which such rights or warrants are issued.

(xi) Capital Reduction of FENC. If FENC shall reduce its share capital (other than by means of canceling any shares repurchased by FENC as treasury shares or by means of cancelling any Reference Shares and returning capital in cash to shareholders) then the Exchange Price shall be adjusted in accordance with the following formula:

$$
NEP = OEP \times (N / n)
$$

Where:

Such adjustment shall become effective on the record date for the determination of the shareholders participating in such capital reduction.

(xii) Offers by FENC for Reference Shares. In case a tender or exchange offer made by FENC or any Subsidiary (as defined below) of FENC for all or any portion of the Reference Shares shall expire and such tender or exchange offer shall involve the payment by FENC or such Subsidiary of consideration per Reference Share having a fair market value (as determined by the FENC Board of Directors or such Subsidiary of FENC, whose determination shall, if made in good faith, be conclusive evidence of such fair market value) at the last time (the "FENC Expiration Date") tenders or exchanges could have been made pursuant to such tender or exchange offer (as it shall have been amended) that exceeds the Current Market Price per Reference Share, as of the FENC Expiration Date, the Exchange Price shall be adjusted in accordance with the following formula:

$$
NEP = OEP \times [(N \times CMP) / [fmv + [(N - n) \times CMP]]]
$$

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fmv = the fair market value of the aggregate consideration payable to the holders of Reference Shares based on the acceptance (up to a maximum specified in the terms of the tender or exchange offer) of all Reference Shares validly tendered or exchanged and not withdrawn as of the FENC Expiration Date (the Reference Shares deemed so accepted up to any such maximum, being referred to as the "FENC Purchased Shares").

n = the number of FENC Purchased Shares.

Such adjustment shall become retroactively effective immediately prior to the opening of business on the day following the FENC Expiration Date.

(xiii) any other event or circumstance which would have an effect analogous to any of the events in (i) to (xii) above including, but not limited to, issues of receipts or certificates entitling holders to receive Reference Shares at less than the then Current Market Price.

No adjustment of the Exchange Price will be made where such adjustment would be less than 1% of the Exchange Price then in effect, but any adjustment that otherwise would be required to be made will be carried forward and taken into account in determining any subsequent adjustment, provided that the Company will make any carried forward adjustments (a) on each anniversary of the Issue Date and (b) prior to the redemption date in connection with the exercise of the option to redeem by the Company pursuant to Condition 7(B) or the exercise of the option to redeem by the holders of the Bonds pursuant to Condition 7(D). All calculation relating to conversion, including adjustments of the Exchange Price, will be made to the lower 0.001 of a share of securities or other property or nearest cent, as the case may be. Any adjustment will be notified promptly by the Company to the holders of the Bonds, the Trustee, the Agents and, so long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, the SGX-ST, in accordance with Condition 14. Any such notice relating to an adjustment of the Exchange Price should set forth the event giving rise to the adjustment, the Exchange Price prior to the adjustment, the effective date of such adjustment and the Exchange Price after the adjustment.

The Trustee and the Agents shall not be obliged to calculate any adjustment or monitor whether any event has occurred that might fall within (i) to (xiii) above and may assume that no such event has occurred until acquiring actual knowledge by way of notice in writing from the Company to the contrary and shall not be responsible or liable to the holders of the Bonds or any persons for any loss arising from any failure by it to do so or for any adjustment or lack of adjustment of the Exchange Price.

"Closing Price," in relation to the Reference Shares, for any Trading Day means the last reported transaction price or, if no transaction takes place on such day, the last available reported transaction price of the Reference Shares on the Taiwan Stock Exchange Corporation in effect on the Trading Day immediately preceding such day or, if the Reference Shares are not at that time listed or admitted to trading on the Taiwan Stock Exchange Corporation, the average of the closing bid and offered prices of Reference Shares for such day as furnished by a leading independent securities firm licensed to trade on the Taiwan Stock Exchange Corporation selected by the Company for that purpose.

"Current Market Price," in relation to the Reference Shares, for any day means (a) the average of the Closing Prices for the 10 consecutive Trading Days ending immediately before such day and (b) when used with respect to any issuance or distribution, the average of the Closing Prices for the 10 consecutive Trading Days ending immediately before the first day on which the Reference Shares without the right to receive such issuance or distribution trade in a regular way on the Taiwan Stock Exchange Corporation, other applicable securities exchange or any applicable securities market; provided, however, if no Closing Price is available for one or more Trading Days, such day or days shall be disregarded in any relevant calculation and shall be deemed not to have existed when ascertaining any period of consecutive Trading Days.

"FENC Capital Distribution" means any cash dividend, distribution of cash, distribution of assets in specie or payment on redemption, or for the purchase of, capital stock of FENC for any fiscal year.

"Subsidiary" in relation to FENC means any corporation or other business entity of which FENC owns or controls (either directly or indirectly) more than 50% of the issued share capital or other ownership interest having ordinary voting power to elect directors, managers or trustees of

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such company or other business entity (whether or not capital stock or other ownership interest of any other class or classes shall or might have a voting power upon the occurrence of any contingency) or any company or other business entity which at the relevant time has its accounts consolidated with those of such Person as a subsidiary company, or which, under ROC law or generally accepted accounting principles of the ROC from time to time in effect, should have its accounts consolidated with those of FENC as a subsidiary company.

(D) Voting and other rights

Pending exercise of the Exchange Rights, the Company will be entitled to exercise the voting and other rights attaching to the Reference Shares or the Exchange Property Securities, as applicable, in accordance with the terms of the Indenture on all matters submitted to the shareholders of FENC or any Exchange Property issuer. The holders of the Bonds shall have no voting or other rights attaching to the Reference Shares or Exchange Property Securities prior to their registration as shareholders of FENC or any Exchange Property issuer.

In exercising such voting rights, the Company may regard its own interests to the exclusion of the interests of holders of the Bonds or any of them.

(E) Undertakings

The Company has undertaken in the Indenture that, so long as any Bond remains outstanding:

(i) it will use its best efforts to ensure that FENC maintains a listing for all the Reference Shares on the Taiwan Stock Exchange Corporation;

(ii) it will pay all costs and expenses arising in the ROC of the transfer and delivery of any Reference Shares or any Exchange Property Securities on exchange of Bonds;

(iii) to the extent permitted by applicable laws, it will use its best efforts to ensure that any Reference Shares or Exchange Property Securities deliverable on exchange of Bonds may be transferred to any person, corporation, partnership or association, regardless of nationality (except for the persons of the PRC unless it is a QDII); and

(iv) it will not create or purport or attempt to create, assume or permit to subsist, any mortgage, charge, pledge, hypothecation, lien, interest under a trust or other encumbrance over the Reference Shares or any Exchange Property Securities or any part thereof.

The Company has also given certain other undertakings in the Indenture for the protection of the Exchange Rights.

(F) Trustee and Agents not responsible for Company's failure

Neither the Trustee nor the Agents shall be responsible or liable to the holder of the Bonds or any person for:

(A) any failure of the Company to make such cash payment or to issue, transfer or deliver any Reference Shares or Exchange Property Securities upon the surrender of any Bond for the purposes of Exchange; or

(B) any failure of the Company to comply with any of its covenants set out in Condition 5.

(G) Calculations

All calculations under these Conditions, the Indenture and the Agency Agreement shall be performed by the Company or to the extent specifically stated, the Calculation Agent. Neither the Trustee nor the Agents shall be liable in any respect for the accuracy or inaccuracy in any mathematical calculation or formula under these Conditions, the Agency Agreement or the Indenture, whether by the Company, its auditors or any other person so nominated or authorized by the Company for the purposes of these Conditions, the Agency Agreement or the Indenture.

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Payments

(A) Manner of payment

Payment in respect of a Bond shall be made (i) by transfer to the registered account of the holder of the Bond or (ii) if such holder does not have a registered account, by a US dollar check mailed to its registered address. The registered account and address of a holder of the Bonds mean its account and address appearing on the register of holders of the Bonds at the close of business on the second Business Day (as defined below) before the due date for payment.

References in these Conditions, the Indenture and the Agency Agreement to payment in respect of a Bond shall, where the context so permits, be deemed to include not only a reference to the principal of, but also to any premium, interest and other amounts payable on, such Bond.

(B) Commissions and expenses

All payments are subject in all cases to any applicable fiscal or other laws and regulations, but without prejudice to the provisions of Condition 8. No commissions or expenses shall be charged to the holders of the Bonds in respect of such payments.

Where payment is to be made by transfer to a registered account, payment instructions for value on the due date (or, if that date is not a Business Day, for value the next Business Day) shall be initiated. Where payment is to be made by check, the check shall be mailed on the due date for payment or, if such date is not a Business Day, on the first following day that is a Business Day (at the risk and, if mailed at the request of the holder of the Bonds otherwise than by ordinary mail, expense of the holder of the Bonds). Notwithstanding the above, payment of principal of a Bond represented by an Definitive Certificate shall not be made earlier than the Business Day on which the relevant Certificate is surrendered at the specified office of an Agent.

(D) Default interest and payment delay

If the Company fails to pay any sum in respect of the Bonds when the same becomes due and payable under these Conditions, interest shall accrue on the overdue sum at the rate of 3.0% per annum from the due date and ending on the date that actual payment is made (both dates inclusive) as stated in a notice given to the holders of the Bonds in accordance with Condition 14. Such default interest shall accrue on the basis of the actual number of days elapsed and a 360-day year consisting of 12 months of 30 days each.

A holder of the Bonds shall not be entitled to any interest or other payment for any delay in receiving the amount due if (i) the due date is not a Business Day, (ii) the Bond is represented by a Definitive Certificate and the holder is late in surrendering its Bond Definitive Certificate (if required to do so) or (iii) a check mailed in accordance with this Condition 6 arrives after the due date for payment. Any default interest payable under this Condition 6(D) shall be payable by the Company directly to the relevant holder of the Bonds in the manner specified in Condition 6(A).

Redemption, Repurchase and Cancellation

(A) Redemption at maturity

Unless the Bonds have been previously redeemed, repurchased and cancelled, or exchanged as herein provided, the Company shall redeem the Bonds at 100.0% of their principal amount in US dollars on January 27, 2016 (the "Maturity Date") or if such day shall not be a Business Day, on the immediately preceding Business Day. The Bonds may be redeemed prior to that date only as provided in Conditions 7(B), (C) and (D) below, but without prejudice to Condition 9.

(B) Redemption at the option of the Company

At any time on or after January 27, 2014, the Company may, having given not less than 30 or more than 60 days' notice to the holders of the Bonds (which notice shall be irrevocable and delivered in accordance with Condition 7(H) and Condition 14), redeem the Bonds in whole, or from time to time in part (being US$200,000 in principal amount and integral multiples of

120

US$1,000 in excess thereof), at their Early Redemption Amount (as defined below) if the Closing Price (as defined in Condition 5(C)) of the Reference Shares, translated into US dollars at the Prevailing Rate (as defined in Condition 5(B)(iv)), during a period of 30 consecutive Trading Days (the "Calculation Period"), the last of which occurs not more than five (5) Trading Days immediately preceding the date of such notice of redemption, is at least 130% of the quotient of the Early Redemption Amount divided by the number of Reference Shares to be delivered upon exchange of US$200,000 principal amount of Bonds on the applicable Trading Day based on the Exchange Price then in effect, translated into US dollars at the Fixed Exchange Rate. If there shall occur an event giving rise to a change in the Exchange Price during any Calculation Period, appropriate adjustments for the relevant days, determined by an opinion of an independent, internationally recognized investment bank selected by the Company and notified to the Trustee, shall be made for the purpose of calculating the Closing Price of Reference Shares for such days. Notice of any such adjustments in the Exchange Price will be given promptly by the Company to the Trustee and the Principal Paying Agent.

Notwithstanding the conditions to the Company's right to redeem the Bonds set forth in the paragraph above, at any time, the Company may, having given not less than 30 or more than 60 days' notice to the holders of the Bonds (which notice shall be irrevocable and delivered in accordance with Condition 7(H) and Condition 14), redeem the Bonds in whole, but not in part, at their Early Redemption Amount in US dollars if at least 90% in principal amount of the Bonds has already been redeemed, repurchased and cancelled or exchanged.

"Early Redemption Amount" means, for each US$200,000 principal amount of Bonds, the amount calculated in accordance with the following formula, rounded (if necessary) to three decimal places with 0.0005 being rounded upwards; provided that the Early Redemption Amount shall be 100.0% of principal amount of the Bonds on the Maturity Date:

Early Redemption Amount = I × (1 + r/2)^{d/180}

I = Issue price (100% of principal amount) of the Bonds.

r = 0% expressed as a decimal.

d = number of days from and including January 27, 2011 to but excluding, the date for redemption, calculated on the basis of a 360-day year consisting of 12 months of 30 days each, and in the case of an incomplete month, the actual number of days elapsed.

Notwithstanding the right of the Company to redeem the Bonds as set forth in this Condition 7(B), the Company may not specify a date for redemption that falls in an Closed Period or within 15 days following the last day of an Closed Period.

At any time, the Company may, having given not less than 30 or more than 60 days notice to the holders of the Bonds (which notice shall be irrevocable and delivered in accordance with Condition 7(H) and Condition 14), redeem the Bonds in whole, but not in part (subject to the provisions of Condition 7(E) below), at the Early Redemption Amount, provided that, immediately prior to the giving of such notice:

(i) the Company (or successor) has become obliged to pay Additional Amounts (as defined in Condition 8) as a result of any change in, or amendment to, the laws or regulations of a Relevant Taxing Jurisdiction (as defined in Condition 8), or any change in the general application or official interpretation of such laws or regulations, which change or amendment in the case of the Company, becomes effective after the date of the original issuance of the Bonds or, in the case of a successor, becomes effective after the date such surviving person becomes obligated under the Bonds, and would require the Company (or successor) pay Additional Amounts, in respect of Taxes (as defined in Condition 8) imposed, if any, at a rate greater than 15%; and

(ii) such obligation cannot be avoided by the Company (or successor) taking reasonable measures available to it.

Notwithstanding the foregoing, no such notice of redemption shall be given earlier than 45 days prior to the earliest date on which the Company (or successor) would be obliged to pay such Additional Amounts.

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Prior to the delivery of any notice of redemption pursuant to this Condition 7(C), the Company shall deliver to the Trustee (1) a certificate signed by two of its authorized officers stating that the obligation referred to in (i) above cannot be avoided by taking reasonable measures available to it and (2) an opinion addressed to the Trustee by an independent law firm of recognized standing admitted to practice in the Relevant Jurisdiction, or a written advice of a qualified tax advisor of recognized standing in the Relevant Jurisdiction, to the effect that the Company (or successor) has or will become obliged to pay such Additional Amounts as a result of such change or amendment, and the Trustee shall be entitled to accept such certificate and opinion or advice as sufficient and conclusive evidence thereof in which event it shall be conclusive and binding on the holders of the Bond. The Bonds in respect of which a notice of redemption has been given under Condition 7(B) or 7(D) shall not be affected by any notice given subsequently under this Condition 7(C).

Notwithstanding the right of the Company to redeem the Bonds as set forth in this Condition 7(C), the Company may not specify a date for redemption that falls in an Closed Period or within 15 days following the last day of an Closed Period.

(D) Redemption at the option of the holders

Each holder of the Bonds shall have a put right (the "Holders' Put Right") to require the Company to redeem in whole, or in part only (being US$200,000 in principal amount and integral multiples $1,000 in excess thereof), the Bonds held by such holder, on January 27, 2014 at 100.0% of their principal amount in US dollars. Not less than 30 or more than 60 days prior to this date, the Company shall notify the holders of the Holders' Put Right, which notice shall be delivered in accordance with Condition 7(H) and Condition 14.

If a Change of Control of FENC occurs, the Company shall notify the holders promptly (which notice shall be delivered in accordance with Condition 7(H) and Condition 14), and each holder of the Bonds shall have the right (the "Change of Control Put Right") at such holder's option, to require the Company to redeem such holder's Bonds in whole, or in part only (being US$200,000 in principal amount and integral multiples of US$1,000 in excess thereof), at the Early Redemption Amount on the 20th Business Day after the date of such notice.

In the event that the Reference Shares cease to be listed or admitted to trading on the Taiwan Stock Exchange Corporation (a "FENC Delisting") for a period of at least five Trading Days (as defined in Condition 5(A)), the Company shall notify the holders promptly (which notice shall be delivered in accordance with Condition 7(H) and Condition 14), and each holder of the Bonds shall have the right (the "Delisting Put Right") to require the Company to redeem such holder's Bonds in whole, or in part only (being US$200,000 in principal amount and integral multiples of US$1,000 in excess thereof), at the Early Redemption Amount on the 20th Business Day after the date of such notice.

(E) Non-redemption option of the holders

If the Company (or successor) gives a notice of redemption of the Bonds under Condition 7(C), each holder of the Bonds shall have the right (the "Non-Redemption Right") to elect that all or a portion (being US$200,000 in principal amount and integral multiples of US$1,000 in excess thereof) of its Bonds not be redeemed. Upon the exercise of the Non-Redemption Right with respect to such Bonds, no Additional Amounts referred to in Condition 8 shall be payable on the payments due after the relevant date in respect of such Bonds and, subject to Condition 8, such payments shall be made subject to the deduction or withholding required under the laws or regulations of the Relevant Taxing Jurisdiction. For the avoidance of doubt, any increased amounts that had been payable in respect of the Bonds under Condition 8 as a result of the laws or regulations of the Relevant Taxing Jurisdiction in effect on the original date of their issuance shall continue to be payable to such holders of the Bonds. To exercise such right, the holder must give notice to the Company in the manner set out in the Indenture no later than 15 days prior to the relevant Redemption Date.

(F) Repurchase and cancellation

The Company or any Principal Subsidiary may at any time and from time to time repurchase the Bonds in the open market or otherwise at any price. The Company shall promptly surrender any Bonds so repurchased to the Principal Paying Agent for cancellation.

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(G) Cancellation

All Bonds that are redeemed, repurchased or exchanged and surrendered to any Agent shall forthwith be cancelled. In the case of Bonds represented by Definitive Certificates, certificates in respect of all Bonds cancelled shall be forwarded to or to the order of the Principal Paying Agent. Bonds cancelled may not be reissued or resold.

(H) Redemption procedures

In the event that the Company is required to deliver a notice to the holders of the Bonds under this Condition 7, the Company shall provide such information to the Trustee in sufficient time to permit the Trustee to give notice to the holders of the Bonds in accordance with Condition 14, which notice shall state, to the extent applicable:

(i) the relevant redemption date;
(ii) in the case of a FENC Delisting, the date of such FENC Delisting and, briefly, the events that resulted in such FENC Delisting;
(iii) in the case of a Change of Control of FENC, the date of such Change of Control of FENC and, briefly, the events causing such Change of Control of FENC;
(iv) the date by which the Exercise Notice (as defined below) must be given by the holder;
(v) the applicable redemption price of a Bond on the redemption date and the method by which such redemption price will be paid;
(vi) the names and addresses of all Paying Agents;
(vii) the Exchange Price then in effect;
(viii) the procedures that holders must follow and the requirements they must satisfy in order to exercise their Holders' Put Right, Delisting Put Right, Change of Control Put Right, Non-Redemption Right, and/or Exchange Right, as the case may be;
(ix) that an Exercise Notice, once validly given, may not be withdrawn;
(x) the principal amount of the Bonds outstanding as of the latest practicable date prior to the delivery of the notice;
(xi) the Closing Price of the Reference Share on the most recent practicable Trading Day for which such Closing Price can be provided;
(xii) the place of payment; and
(xiii) that payment will be made upon presentation and surrender of the Bonds to be redeemed.

The Company shall also provide to the Trustee an officers' certificate certifying the applicable redemption price on the redemption date.

So long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, the Company shall submit a copy of the redemption notice to the SGX-ST as soon as practicable.

To exercise its Holders' Put Right, Delisting Put Right, Change of Control Put Right or Non-Redemption Right, as the case may be, a holder of the Bonds must deliver a written irrevocable notice of the exercise of such right (an "Exercise Notice") in the form obtainable during normal business hours from the specified office of any of the Agents, to any Paying Agent on any Business Day that is not fewer than fifteen (15) Business Days prior to the relevant redemption date.

Payment of the redemption price upon exercise of the Holders' Put Right, Delisting Put Right or Change of Control Put Right attaching to any Bond represented by a Definitive Certificate for which an Exercise Notice has been delivered is conditioned upon the delivery of such Definitive Certificate (together with any necessary endorsements) to any Paying Agent on any Business Day, together with the delivery of such Exercise Notice, and shall be made promptly following the later of the relevant redemption date and the time of delivery of such Definitive Certificate. If the Paying Agent holds on a redemption date monies sufficient to pay the redemption price for a Bond for which an Exercise Notice has been delivered, then, whether or not the Definitive Certificate representing such Bond is delivered to the Paying Agent, on and after such redemption date (i) such Bond shall cease to be outstanding; (ii) such Bond shall be deemed paid; and (iii) all rights of the holder shall terminate, other than the right to receive the redemption price.

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(I) Partial redemption

In the event of the proposed redemption of some but not all of the Bonds pursuant to Condition 7(B), the Bonds to be so redeemed shall be determined individually by the drawing of lots by the Trustee or such persons, agents, delegates or nominees which the Trustee may approve or such other method in such place as the Trustee shall approve and in such manner as the Trustee shall deem to be fair and reasonable in the circumstances, taking into account prevailing market practices, subject to compliance with any applicable laws and stock exchange requirements. The identifying numbers of the Bonds drawn for redemption shall be published in accordance with Condition 14 by the Company not less than 30 days prior to the date fixed for redemption. The Trustee will not be liable for selections made by it in accordance with this Condition 7.

(J) No duty to determine, calculate or verify

Neither the Trustee nor the Agents shall be under any duty to determine or verify whether a Bond is to be accepted for redemption under this Condition 7 nor shall it be responsible or liable to any holder of the Bonds for any loss arising from any failure by it to do so. Neither the Trustee nor the Agents shall be under any duty to determine, calculate or verify the redemption amount payable under this Condition 7 nor shall it be responsible or liable to any holder of the Bonds for any loss arising from any failure by it to do so.

Taxation

Interest and premium (if any) payable on the Bonds to non-residents of the ROC is currently subject to a withholding tax in the ROC equal to 15% of the gross amount of such interest and premium (if any), though this tax may not necessarily be applicable to such non-residents who reside in countries that have entered into the Double Tax Treaty with the ROC. A securities transaction tax of 0.3% levied on proceeds from the sale of common shares will be payable by the seller of the common shares.

All payments in respect of the Bonds by the Company (or successor) and the delivery of the Reference Shares and Exchange Property shall be made free and clear of and without any deduction or withholding for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature ("Taxes") imposed, levied, collected, withheld or assessed by or on behalf of the government of the ROC or any jurisdiction in which the Company or a successor is organized or resident for tax purposes or any authority thereof or therein having power to tax (each, as applicable, a "Relevant Taxing Jurisdiction"), or any jurisdiction through which payments or delivery of Reference Shares or Exchange Property is made (each such jurisdiction along with each Relevant Taxing Jurisdiction, a "Relevant Jurisdiction"), unless required by law. In the event of any such deduction or withholding from any such payment or delivery, the Company (or successor) shall pay such additional amounts ("Additional Amounts") as will result in the receipt by the holders of the Bonds of the amounts or Reference Shares or Exchange Property, as applicable, that would have been receivable in the absence of any such deduction or withholding, except that no Additional Amounts shall be payable in respect of any Bond:

(i) to, or on behalf of, a holder or beneficial owner who is subject to such taxes, duties, assessments or governmental charges in respect of such Bond by reason of its being connected with a Relevant Jurisdiction otherwise than merely by holding such Bond or by the receipt of payments in respect of the Bond;

(ii) to or on behalf of a holder or beneficial owner of a Bond to the extent that such holder or beneficial owner would not be liable for or subject to such deduction or withholding by making a declaration of non-residence or other claim for exemption or deduction in such tax to the relevant tax authorities if such holder or beneficial owner is eligible to make such declaration or claim, and after being requested to do so by the Company, such holder or beneficial owner fails to timely do so;

(iii) if the Definitive Certificate, if issued, in respect of the Bond is presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder would have been entitled to such additional amount on surrendering the relevant certificate for payment on the last day of such 30-day period;

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(iv) when such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings income or any law implementing or complying with, or introduction in order to conform to, such Directive; or
(v) in the case of a Definitive Certificate, by or on behalf of a holder of the Bonds who would have been able to avoid such withholding or deduction by presenting the relevant Definitive Certificate to another Paying Agent.

Further, no payments of Additional Amounts will be made with respect to any payment on a Bond to a holder, if the holder is a fiduciary, partnership or person other than the sole beneficial owner of such payment to the extent that such payment would be required to be included in the income under the laws of a Relevant Jurisdiction, for tax purposes, of a beneficiary or settlor with respect to the fiduciary, or a member of that partnership or another beneficial owner who would not have been entitled to such Additional Amounts had that beneficiary, settlor, partner, or beneficial owner been the holder thereof.

References in these Conditions to payments in respect of the Bonds shall be deemed also to refer to any Additional Amounts that may be payable in respect thereof under this Condition 8.

"Relevant Date" in relation to any Bonds means (a) the due date for payment in respect thereof, or (b) if the full amount of the monies payable on such due date has not been received by the Trustee or the Principal Paying Agent on or prior to such due date, the date on which notice is duly given to the holders of the Bonds that such monies have been so received.

9. Events of Default

The Trustee at its discretion may, and if so requested in writing by the holders of the Bonds of not less than 25% in principal amount of the Bonds then outstanding shall (in each case subject to the Trustee being indemnified and/or secured by the holders of the Bonds to its satisfaction), give notice in writing to the Company that the Bonds are immediately due and payable, if an Event of Default (as defined below) shall have occurred and be continuing. Upon any such notice being given to the Company, the Bonds shall immediately become due and payable at 100% of their principal amount plus any default interest payable in accordance with Condition 6(D). Notwithstanding the foregoing, if any of the events specified in subsections (vi), (vii) and (viii) shall have occurred, the Bonds shall forthwith become immediately due and payable at 100% of their principal amount, plus any default interest payable in accordance with Condition 6(D), without regard to the giving of any such notice. An "Event of Default" occurs if:

(i) the Company fails to pay the principal of any of the Bonds after the same shall become due and payable;
(ii) the Company fails to deliver Reference Shares or Exchange Property as and when such Reference Shares or Exchange Property are required to be delivered upon the exchange of a Bond (subject to the limited circumstances under which cash may be delivered in lieu of Reference Shares or Exchange Property as specified in Condition 5(B)(iv));
(iii) the Company defaults in performance or observance of or compliance with any of its other obligations set out in the Bonds or the Indenture, which default is incapable of remedy or, if in the opinion of the Trustee such default is capable of remedy, such default is not remedied within 45 days after written notice of such default shall have been given to the Company by the Trustee;
(iv) (a) any other present or future indebtedness of the Company or any of its Principal Subsidiaries (as defined in Condition 3) for or in respect of monies borrowed or raised becomes due and payable prior to its stated maturity by reason of an event of default, howsoever described, or any such indebtedness is not paid when due or, as the case may be, within any applicable grace period originally provided for or (b) the Company or any of its Principal Subsidiaries fails to pay when due any amount payable by the Company or such Principal Subsidiary, as the case may be, under any present or future guarantee or indemnity or arrangement or obligation having a like or similar

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effect, howsoever described, for any monies borrowed; provided that the aggregate amount of the relevant indebtedness or amount payable in respect of which one or more events mentioned above in this paragraph (iv) have occurred equals or exceeds US$10,000,000 or its equivalent in any other currency;

(v) any person entitled to the benefit thereof shall institute legal proceedings to enforce any mortgage, charge, pledge, lien or other encumbrance upon all or a material portion of the assets, property or revenues of the Company and its Principal Subsidiary, taken as a whole, unless the Company or such Principal Subsidiary, as the case may be, are contesting such proceedings in good faith by appropriate legal proceedings and have established reserves adequate in the Company's judgment with respect thereto;

(vi) a decree or order by a court having jurisdiction shall have been entered adjudging the Company or any of its Principal Subsidiaries bankrupt or insolvent, or approving a petition seeking the Company's reorganization or that of any of its Principal Subsidiaries under any applicable bankruptcy, insolvency or reorganization law, or for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of, or all or substantially all of the business or assets of, or for the winding-up or liquidation of the affairs of, the Company or any of its Principal Subsidiaries;

(vii) an effective resolution shall be passed for the winding-up or liquidation of the Company or that of any of its Principal Subsidiaries, or the Company or any of its Principal Subsidiaries shall institute proceedings to be adjudicated as a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization or arrangement under any applicable bankruptcy, insolvency or reorganization law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of all or substantially all of its business or assets, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or corporate action shall be taken by the Company or any of its Principal Subsidiaries in furtherance of any of the aforesaid purposes;

(vii) proceedings shall have been initiated against the Company or any of its Principal Subsidiaries under any applicable bankruptcy, insolvency, or reorganization law and such proceedings shall not have been discharged or stayed within a period of 90 days; or

(ix) it is or will become unlawful for the Company to perform or comply with one or more of its material obligations under any of the Bonds, the Indenture or the Agency Agreement.

Neither the Trustee nor the Agents shall be responsible or liable for monitoring whether an Event of Default has occurred and is continuing. Unless and until the Trustee or the Agents otherwise has actual notice in writing to the contrary, each of the Trustee and the Agents may assume that no such event has occurred and that the Company is performing all its obligations under the Indenture and the Bonds.

10. Prescription

Claims against any payment in respect of the Bonds shall be prescribed unless made within six years from the relevant date of payment in respect thereof.

Under the laws of the ROC, claims in respect of the (i) payment of principal would become unenforceable after 15 years and (ii) payment of interest and premium would become unenforceable after 5 years, each measured from the relevant date for payment in respect thereof.

11. Enforcement

At any time after the Bonds have become due and payable, the Trustee may, at its discretion and without further notice, take such proceedings against the Company as it may think fit to enforce payment in respect of the Bonds, including any premium and interest, and to enforce the provisions of the Indenture; provided, however, that the Trustee shall not be bound to

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take any such actions unless (a) it shall have been so requested in writing by the holders of at least 25% in principal amount of the Bonds then outstanding and (b) it shall have been indemnified and/or secured to its satisfaction. No holder of the Bonds shall be entitled to proceed directly against the Company, unless (a) the Trustee, having become bound to take proceedings against the Company, fails to do so and such failure shall have continued for a period of 60 days and (b) no direction inconsistent with the Trustee taking such proceedings has been given to the Trustee during such 60-day period by the holders of not less than a majority in principal amount of the Bonds then outstanding.

12. Meetings of Holders of the Bonds, Modification and Waiver

(A) Meetings; Modification Requiring Consent of Each Holder

The Indenture will contain provisions for convening meetings of holders of the Bonds to consider any matter affecting their interests, including the approval of amendments or modifications of the terms and conditions of the Bonds or the provisions of the Indenture upon either the written consent of the holders of not less than a majority in principal amount of the Bonds then outstanding or the approval at a meeting of holders duly called by persons entitled to vote not less than a majority in principal amount of the Bonds then outstanding, with a quorum of two or more persons, holding or representing over 50% in principal amount of the Bonds then outstanding; provided that no such modification of the terms and conditions of the Bonds or the provisions of the Indenture may, without the consent of each holder of the Bonds affected thereby:

(i) modify the Maturity Date;
(ii) reduce the principal, redemption price of, the rate of interest, if any, on, any Bond or increase the Exchange Price (as adjusted in accordance with the provisions of the Indenture);
(iii) change the place or currency of payment of principal of, or interest, if any, on, any Bond or the method of calculating any such payment;
(iv) impair the right to institute suit for the enforcement of any payment on any Bond;
(v) alter the Company's obligations relating to mergers and disposals, and the payment of Additional Amounts, as described in Conditions 3(B) and 8, respectively;
(vi) except to the extent permitted by Condition 12(B) below, modify, cancel or adversely affect the Exchange Right, Holders' Put Right, Delisting Put Right, Change of Control Put Right or Non-Redemption Right;
(vii) reduce the above-stated percentage of outstanding Bonds the consent of whose holders of the Bonds is necessary to modify or amend the Indenture;
(viii) reduce the percentage or aggregate principal amount of outstanding Bonds the consent of whose holders of the Bonds is necessary for waiver of compliance with provisions of the Indenture or for waiver of Defaults under the Indenture;
(ix) modify the provisions concerning the voting and quorum required at any meeting of holders of the Bonds; or
(x) release the Company from any obligation under the Indenture other than in accordance with the provisions of the Indenture, or amend or modify any provision relating to such release.

(B) Modification Without Consent

The Company is permitted to modify the Bonds, the Indenture and the Agency Agreement without the consent of the holders of the Bonds if it would:

(a) modify any of the provision of the Bonds, the Indenture, the Agency Agreement that is not materially prejudicial to the interests of the holders of the Bonds; or
(b) evidence the succession of another corporation to the Company and the assumption by such successor of the covenants and obligations of the Company with respect to the Bonds, in the event of any merger, consolidation or other action in accordance with Condition 3(B); or
(c) add to the covenants of the Company for the benefit of the holders of Bonds; or

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(d) surrender any right or power conferred upon the Company; or
(e) reduce the Exchange Price, provided that such reduction in the Exchange Price shall not adversely affect the interest of the holders of the Bonds taken as a whole in any material respect; or
(f) cure any ambiguity, correct or supplement any provision in the Bonds, the Indenture, the Agency Agreement which may be inconsistent with any other provision herein or which is otherwise defective, provided such action pursuant to this clause (f) shall not adversely affect the interest of the holders of the Bonds taken as a whole; or
(g) make any modification of any of the provisions of the Bonds, this Indenture or the Agency Agreement that is of a formal, minor or technical nature or necessary to correct a manifest error or is to comply with mandatory provisions of law; or
(h) make any modification to the Exchange Rights that (i) is necessary or desirable to effect or facilitate the exercise of Exchange Rights and (ii) is not materially prejudicial to the interests of the holders of the Bonds taken as a whole.

In connection with such modification, waiver or authorization, the Trustee may require a certificate from the Company certifying, and a legal opinion from a legal advisor of recognized international standing advising the Trustee, that the modification, waiver or authorization is of a formal, minor or technical nature or to correct a manifest error or to comply with mandatory provision of law. Any such modification, waiver or authorization shall be binding on the holders of the Bonds. Any such modification, waiver or authorization shall be notified by the Company to the holders of the Bonds as soon as practicable thereafter in accordance with Condition 14.

13. Replacement of Certificates

Any replacement of mutilated, defaced, destroyed, stolen or lost Definitive Certificates shall take place at the specified offices of the Registrar and Paying Agents in accordance with the provisions of the Indenture, which provisions include the following:

(i) replacement certificates shall only be issued upon payment by the claimant of such costs as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Company and the Registrar may require;
(ii) mutilated or defaced certificates must be surrendered before replacements will be issued; and
(iii) in the event any Bonds represented by a mutilated, destroyed, lost or stolen Definitive Certificate has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Definitive Certificate representing such Bonds, make payment as consideration for the cancellation of the Bonds represented thereby in accordance with the Conditions.

14. Notices

All notices to holders of the Bonds shall be validly given if (i) made in writing in English and mailed to them at their respective addresses in the register of holders of the Bonds maintained by the Registrar; (ii) published in a leading English language newspaper having general circulation in Europe (which is expected to be the Financial Times, London Edition); and (iii) so long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, published in a leading newspaper having general circulation in Singapore (which is expected to be the Financial Times, Asian Edition).

Any such notice shall be deemed to have been given on the later of the date of such publication and the seventh day after being so mailed.

So long as the Bonds are in global form held on behalf of Euroclear, Clearstream or any other clearing system, notices to holders of the Bonds may be given by delivery of the relevant notice to such clearing system in substitution for notification as required by these Conditions.

15. Indemnification

The Indenture and the Agency Agreement contain provisions for the indemnification and disclaiming of liability of the Trustee, the Agents and other persons such as delegates and for their relief from responsibility, including provisions relieving the Trustee from taking proceedings to enforce payment unless indemnified and/or secured to its satisfaction.

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Agents

The Company reserves the right, subject to the provisions of the Agency Agreement, at any time to vary or terminate the appointment of Agents; provided that it shall at all times maintain an Agent having a specified office in London and so long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, an Agent in Singapore. Notice of any such termination or appointment, of any changes in the specified offices of the Agents, or of any change in the identity or specified office of any Exchange Agent, Paying Agent or Transfer Agent shall be given promptly by the Company to the holders of the Bonds in accordance with Condition 14.

The Indenture and the Agency Agreement contain provisions setting out rights of the Trustee, the Agents and other persons such as co-trustees for the benefit and protection of such parties.

Governing Law and Jurisdiction

(A) Governing law

The Indenture, the Agency Agreement and the Bonds are governed by and shall be construed in accordance with the laws of the State of New York.

(B) Jurisdiction

The courts of the State of New York sitting in the Borough of Manhattan, The City of New York, and the federal courts of the United States sitting in the Borough of Manhattan, The City of New York, are to have jurisdiction to settle any disputes that may arise out of or in connection with the Bonds and accordingly any legal action or proceedings arising out of or in connection with the Bonds ("Proceedings") may be brought in such courts. The Company has in the Indenture irrevocably submitted to the jurisdiction of such courts for the benefit of the holders of the Bonds and the Trustee and waived any right to trial by jury and any immunity from jurisdiction of any court or from any legal process.

The Company has irrevocably appointed Law Debenture Corporate Services Inc. as its agent in the State of New York to receive service of process in any Proceedings in the State of New York based on any of the Bonds.

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THE GLOBAL CERTIFICATE

Capitalized terms used in this section and not otherwise defined shall have the meanings given to them in "Description of the Bonds."

The Global Certificates

One or more Global Certificates will be deposited with a common depositary for Euroclear and Clearstream (the "Common Depositary") and registered in the name of a nominee common to Euroclear and Clearstream. Euroclear and Clearstream will credit their respective account holders with the respective principal amounts of the individual interests represented by the Global Certificates. Such accounts will be designated initially by, or on behalf of, the Initial Purchasers. Ownership of beneficial interests in the Global Certificates will be limited to persons who have accounts with Euroclear or Clearstream, or persons who hold interests through such account holders. Ownership of beneficial interests in the Global Certificates will be shown on, and the transfer of that ownership will be effected only through, the records maintained by Euroclear and Clearstream (with respect to interests of their respective account holders) and the records of such account holders (with respect to interests of persons with beneficial interests in the Global Certificates other than such account holders).

The laws of certain jurisdictions require that certain purchasers of Bonds take physical delivery of such Bonds in definitive form. Accordingly, the ability of beneficial owners to own, transfer or pledge beneficial interests in the Global Certificate may be limited by such laws.

Payments of the principal of, and any premium on, the Global Certificates will be made to the Common Depositary or its nominee as the registered owner thereof. None of us, the Trustee, the Common Depositary, the Agents or any other agent of ours will have any responsibility or liability for the accuracy of any of the records relating to, or payments made on account of, ownership interests in the Global Certificates or for any notice permitted or required to be given to persons with beneficial interests in the Global Certificates or any consent given or actions taken by such persons. We expect that upon receipt of any payment in respect of the Global Certificates representing any Bonds held by it or its nominee, the Common Depositary will promptly credit the accounts of the participants of Euroclear and Clearstream with payments proportionate to their respective interests in the amount of the principal of the Global Certificates as shown on its records.

Transfers between account holders in Euroclear and Clearstream will be effected through the records of Euroclear and Clearstream and their respective participants in accordance with the rules and procedures of Euroclear and Clearstream and their respective direct and indirect participants.

Subject to the requirements of Euroclear and Clearstream, the Exchange Right attaching to the Bonds in respect of which the Global Certificate is issued may be exercised by the presentation of one or more Exchange Notices duly completed by, or on behalf of, a holder of a book-entry interest in such Bonds. Deposit of the Global Certificate with the Exchange Agent together with the relevant Exchange Notice shall not be required. The provisions of Condition 5 of the Bonds will otherwise apply.

Although Euroclear and Clearstream have agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Certificates among participants and account holders of Clearstream and Euroclear, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of us, the Trustee, the Common Depositary, the Agents or any other agents of ours will have any responsibility for the performance by Euroclear or Clearstream, or their respective participants, indirect participants or account holders, of their respective obligations under the rules and procedures governing their operations.

Euroclear and Clearstream each holds the Bonds for participating organizations and facilitates the clearance and settlement of Bond transactions between its respective participants through electronic book-entry changes in accounts of such participants. Euroclear and Clearstream provide to their respective participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream participants are financial institutions throughout the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access to Euroclear and Clearstream is also available to others, such as banks, brokers, dealers and trust companies which clear through, or maintain a custodial relationship with, a Euroclear or Clearstream participant, either directly or indirectly.

Definitive Certificates

We will issue Definitive Certificates in registered form in exchange for the Global Certificates if:

(i) the Common Depositary or any successor to the Common Depositary notifies us in writing that it is at any time unwilling or unable to continue as a depositary, and a successor depositary is not appointed by us within 90 days of the date of receipt of such notice;

(ii) either Euroclear or Clearstream or a successor clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so; or

(iii) an Event of Default under the Bonds or the Indenture has occurred and is continuing.

Upon receipt of such notice from Euroclear, Clearstream or the Registrar, as the case may be, we will make arrangements for the exchange of interests in the Global Certificate for Definitive Certificates representing individual definitive Bonds and cause such relevant Definitive Certificates to be executed and delivered to the relevant Registrar in sufficient quantities and authenticated by the relevant Registrar for delivery to the holders of the Bonds. Each person exchanging interests in the Global Certificates for one or more of these Definitive Certificates will be required to provide to the Trustee through the relevant clearing system, written instructions and other information required by us and the relevant Registrar to complete, execute and deliver the relevant certificates. Any Definitive Certificates delivered in exchange for the Global Certificates or beneficial interests therein will be registered in the names requested, and issued in any denominations approved, by the relevant clearing system.

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^{}[] THE SECURITIES MARKET OF THE ROC

The information presented in this section has been extracted from publicly available documents which have not been prepared or independently verified by us, the Initial Purchaser, the Trustee, the Principal Paying Agent, the Exchange Agent, the Transfer Agent, the Registrar or any of our respective affiliates or advisors in connection with this offering. References to the FSC in this section include both ROC Securities and Futures Commission and the ROC Securities and Exchange Commission, the predecessors of the Securities and Futures Bureau of the FSC.

In September 1960, the ROC government established the ROC Securities and Exchange Commission to supervise and control all aspects of the existing domestic securities market and the TWSE began to take shape soon thereafter. In the 1970s and the early 1980s, the ROC government implemented a number of steps designed to upgrade the quality and importance of the ROC securities markets, such as encouraging listing on the TWSE and establishing an over-the-counter securities exchange. In the mid-1980s, the ROC government began to revise its laws and regulations in a manner designed to facilitate the gradual internationalization of the ROC securities markets. In 1997, the ROC Securities and Exchange Commission was renamed the ROC Securities and Futures Commission. Effective July 1, 2004, the ROC Securities and Futures Commission has been renamed the ROC Securities and Futures Bureau, which is under the FSC.

The TWSE

In 1961, the FSC established the TWSE to provide a marketplace for securities trading. The TWSE is a corporation owned by government-controlled and private banks and enterprises. The TWSE is independent of the entities transacting business through it, each of which pays to the TWSE a user's fee. Subject to limited exceptions, all transactions in listed securities by brokers, traders and integrated securities firms must be made through the TWSE.

The TWSE commenced operations in 1962. During the early 1980s, the FSC actively encouraged new listings on the TWSE and the number of listed companies has grown from 119 in 1983 to 758 as of December 31, 2010. As of December 31, 2010, the market capitalization of companies listed on the TWSE was approximately NT$23.8 trillion.

Historically, ROC companies have listed only shares and bonds on the TWSE. However, the FSC has encouraged companies to list other types of securities. In 1988, the Ministry of Finance permitted the issuance of ROC's first exchangeable bonds. Since 1989, there have been offerings of domestic convertible bonds and convertible preferred shares. In addition, beneficiary units evidencing beneficiary interests in closed-end investment funds and bonds issued by supra-national financial institutions are also listed on the TWSE or traded on the GTSM (which is discussed below). The FSC also has promulgated regulations which permit foreign issuers to list certain securities on the TWSE.

The TWSE considers the following factors when evaluating a company for listing:

the number of shareholders and the distribution of shareholdings among such shareholders;
the length of time in business;
the amount of paid-in capital; and
profitability.

However, special listing criteria apply to technology companies and key businesses engaging in national economic development.

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The following table sets forth, for the periods indicated, information relating to the TWSE Index.

Period Ended December 31,	Number of Listed Companies at the Period End	Stock Trading Values	Index High(1)	Index Low(1)	Index at Period End
(NT$ in billions)
1996	382	12,907.56	6,982.81	4,690.22	6,933.94
1997	404	37,241.15	10,116.84	6,820.35	8,187.27
1998	437	29,618.97	9,277.09	6,251.38	6,418.43
1999	462	29,291.53	8,608.91	5,474.79	8,448.84
2000	531	30,526.57	10,202.20	4,614.63	4,739.09
2001	584	18,354.94	6,104.24	3,446.26	5,551.24
2002	638	21,873.95	6,462.30	3,850.04	4,452.45
2003	669	20,333.24	6,142.32	4,139.50	5,890.69
2004	697	23,875.37	7,034.10	5,316.87	6,139.69
2005	691	18,818.90	6,575.53	5,632.97	6,548.34
2006	688	23,900.36	7,823.72	6,257.80	7,823.70
2007	698	33,043.85	9,809.88	7,344.56	8,506.28
2008	718	26,115.41	9,295.20	4,089.93	4,591.22
2009	741	29,680.47	8,188.11	4,242.61	8,188.11
2010	758	28,218.68	8,972.50	8,520.11	8,972.50

Source: http://www.twse.com.tw

The ROC GreTai Securities Market ("GTSM")

To complement the TWSE, the GTSM was established in September 1982 on the initiative of the FSC to encourage the trading of securities of companies who do not qualify for listing on the TWSE. As of November 30, 2010, the market capitalization of companies listed on the GTSM was approximately NT$1,882.32 billion.

The GTSM has established specific requirements for trading securities on the GTSM based on the history of a company, the number and distribution of a company's shareholders, amount of capital, profitability and capital structure.

Price Limits, Commissions, Transaction Tax and Other Matters

The TWSE has placed limits on block trading and on the range of daily price movements. According to the TWSE's block trading guidelines, an order for sale or purchase of 500 or more trading lots of one class of securities, or securities of five or more different classes and trading amounts exceeding NT$15 million, must be registered and executed in accordance with the guidelines. Fluctuations in the price of stock traded on the TWSE are currently subject to a restriction of 7% above and below the previous day closing price (or reference price set by the TWSE if the previous day closing price is not available because of lack of trading activity). However, these restrictions have been modified from time to time by the FSC based on market conditions. Brokerage commission can be set at any rate of the transaction price provided that any rate exceeding 0.1425% shall be reported to the TWSE and notify the client in advance. A securities transaction tax, currently levied at 0.3% of the transaction price, is payable by the seller of equity securities. Such securities transaction taxes are withheld at the time of the transaction giving rise to such tax. Sales of shares of companies listed on the TWSE are currently sold in round lots of 1,000 shares. Investors who desire to sell less than 1,000 shares of a listed company occasionally experience delays in effecting such sales.

Regulation and Supervision

The FSC has extensive regulatory authority over public companies. Public companies are generally required to obtain the deemed approval from the FSC for all securities offerings. The FSC has promulgated regulations requiring, unless otherwise exempted, periodic reporting of financial and operating information by all public companies. In addition, the FSC establishes standards for financial reporting and carries out licensing and supervision of participants in the ROC securities market.

The FSC has responsibility for implementing ROC Securities and Exchange Law and for overall administration of governmental policies in the ROC securities market. It has extensive regulatory authority over the offering, issuance and trading of securities. In addition, ROC Securities and Exchange Law specifically empowers the FSC to promulgate necessary rules. ROC Securities and Exchange Law prohibits market manipulation. For example, it permits an issuer to recover short-swing trading profits made through purchases and sales within six months by directors, managerial personnel, supervisors, as well as the spouses, minor children and nominees of these parties, and shareholders (together with their spouses, minor children and nominees) who hold 10% or more of the shares of the issuer. ROC Securities and Exchange Law prohibits trading by "insiders" based on nonpublic information that materially affects share price movement prior to publication of such information and within 18 hours after publication of such information. "Insiders" include:

directors, supervisors, managers, as well as the spouses, minor children and nominees of these parties, and shareholders (together with their spouses, minor children and nominees) who hold 10% or more of the issuing company's shares and any individual designated by a governmental or corporate director or supervisor to act on its behalf;
any person who has learned material nonpublic information due to an occupational or controlling relationship with the issuing company;
any person who has discharged from the status or position in the first and second bullet points for not more than six months; and
any person who has learned material non-public information from any of the above.

Sanctions include imprisonment. In addition, damages may be awarded to persons injured by the transaction. ROC Securities and Exchange Law also imposes criminal liability on certified public accountants and lawyers who make false certifications in their examination and audit of an issuer's contracts, reports and other documents related to securities transactions. The FSC regulations require that financial reports of listed companies be audited by accounting firms consisting of at least three certified public accountants and be signed by at least two certified public accountants.

In addition, ROC Securities and Exchange Law provides for civil liability for material misstatements or omissions made by issuers and regulation of tender offers. The FSC does not have criminal or civil enforcement powers under ROC Securities and Exchange Law. Criminal actions may be pursued only by government prosecutors. Civil actions may only be brought by plaintiffs who assert that they have suffered damages. The FSC is empowered to curb abuses and violations of laws and regulations only through administrative measures including:

issuance of warnings;
temporary suspension of operation;
imposition of administrative fines; and
revocation of licenses.

In addition to providing a market for securities trading, the TWSE reviews applications by ROC and foreign issuers to list securities on the TWSE. If issuers of listed securities violate laws and regulations or encounter significant difficulties, the TWSE may, with the approval of the FSC, delist the securities of these issuers.

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^{}[] FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN THE ROC

Foreign Investment

Historically, foreign investment in the ROC securities markets has been restricted. Since 1983, the ROC government has periodically enacted legislation and adopted regulations to permit foreign investment in the ROC securities market.

Regulations Governing Investment in Securities By Overseas Chinese and Foreign Nationals (the "Foreign Regulations"), which was approved by the ROC Executive Yuan on May 26, 1983 and has been amended from time to time, and the Regulations Governing Mainland Chinese Investors' Securities Investments and Futures Trading in Taiwan (the "PRC Regulations"), which was announced by the FSC on April 30, 2009, are two of the major regulations governing foreign investment in companies listed on TWSE or GTSM in Taiwan.

Under the Foreign Regulations, foreign investors are classified as either "onshore foreign investors" or "offshore foreign investors" according to their respective geographical location. Unless otherwise specified in the laws and regulations, both onshore and offshore foreign investors are allowed to invest in ROC securities after they register with the TWSE. The Foreign Regulations further classify foreign investors into foreign institutional investors and foreign individual investors. "Foreign institutional investors" refer to those investors incorporated and registered in accordance with foreign laws outside of the ROC (i.e., offshore foreign institutional investors) or their branches set up and recognized within the ROC (i.e., onshore foreign institutional investors). Offshore overseas Chinese and foreign individual investors may be subject to a maximum investment ceiling that will be separately determined by the FSC after consultation with the CBC. Currently, there is no maximum investment ceiling for offshore overseas Chinese and foreign individual investors. On the other hand, foreign institutional investors are not subject to any ceiling for investment in the ROC securities market.

In the past, PRC persons were prohibited from investing, whether directly or indirectly, in the ROC. The PRC Regulations promulgated by the FSC on April 30, 2009 loosen these restrictions. Under the PRC Regulations, PRC qualified domestic institutional investors ("QDII") are allowed to invest in ROC securities (including less than 10% shareholding of an ROC company listed on TWSE or GTSM). Nevertheless, the total investment amount of QDIIs cannot exceed US$500 million. For each QDII, the custodians of such QDIIs must apply with the TWSE for the remittance amount for each QDII, which cannot exceed US$100 million, and QDII can only invest in the ROC securities market with the amount approved by the TWSE. In addition, QDIIs are currently prohibited from investing in certain industries, and their investment of certain other industries in a given company is restricted to a certain percentage pursuant to a list promulgated by the FSC and amended from time to time. The Company and FENC currently does not engage in prohibited or restricted industries.

Depositary Receipts

In April 1992, the FSC enacted regulations permitting ROC companies with securities listed on the TWSE, with the prior approval of the FSC, to sponsor the issue and sale to foreign investors of depositary receipts. Depositary receipts represent deposited shares of ROC companies. In December 1994, the FSC allowed companies whose shares are traded on the GTSM or listed on the TWSE, upon approval of the FSC, to sponsor the issue and sale of depositary receipts.

A holder of depositary receipts may, after the issuance of the depositary receipts representing new shares and upon the listing of the underlying shares and (in practice, typically four to seven business days thereafter), request the depositary to either cause the underlying shares to be sold in the ROC and to distribute the sale proceeds to the holder or to withdraw from the depositary receipt facility the shares represented by the depositary receipts and deliver the shares to the holder. For depositary shares that represent previously issued and existing shares, a holder of the depositary receipts could, immediately after the issuance of the depositary receipts, request the depositary to conduct the foregoing. Currently, a holder of depositary shares who is a PRC person may not withdraw and hold shares unless (i) it is a QDII

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or (ii) if all the businesses of the issuer are in the positive list promulgated by the ROC Executive Yuan, the holder withdraws shares which accounts for 10% or more of the issuer's issued shares and it otherwise obtains the approval of the Investment Commission of the MOEA. However, QDIIs are currently prohibited from investing in certain industries, and their investment of certain other industries in a given company is restricted to a certain percentage pursuant to a list promulgated by the FSC and amended from time to time. In addition, there are restrictions on the amount remitted to Taiwan for investments by QDIIs, separately and jointly. Accordingly, the qualification criteria for a PRC person to make investment, the restrictions on investment in certain industries and the investment threshold imposed by the FSC might accordingly cause a holder of depositary shares who is a PRC person to be unable to withdraw and hold the underlying shares.

Under existing laws and regulations relating to foreign exchange control, a depositary or a holder of depositary receipts may, without obtaining further approvals from the CBC or any other governmental authority or agency of the ROC, convert NT dollars into other currencies, including U.S. Dollars, in respect of the following: (1) proceeds of the sale of shares represented by depositary receipts, (2) proceeds of the sale of shares received as stock dividends and deposited into the depositary receipt facility and (3) any cash dividends or cash distributions received. In addition, a depositary, also without any of these approvals, may convert inward remittances of payments into NT dollars for purchases of underlying shares for deposit into the depositary receipt facility against the creation of additional depositary receipts. A depositary may be required to obtain foreign exchange approval from the CBC on a payment-by-payment basis for conversion from NT dollars into foreign currencies relating to the sale of subscription rights for new shares if the proceeds are in excess of US$100,000 per remittance. Proceeds from the sale of the underlying shares withdrawn from the depositary receipt facility may be used for reinvestment in the TWSE or the GTSM securities, subject to relevant regulations.

Under current ROC laws, a non-ROC holder of depositary receipts, when withdrawing the shares underlying the depositary receipts, will be required to register with the TWSE and appoint a local agent to open a securities trading account with a local brokerage firm and an NT dollar bank account, pay taxes, remit funds, exercise rights relating to the securities and perform such other matters as may be designated by such holder of depositary receipts on behalf of and as an agent for such holder of depositary receipts. Any such holder of depositary receipts is also required to appoint a custodian bank to hold the securities and any cash proceeds in safekeeping, to make confirmations, to settle trades and to report all relevant information. In addition, such holder of depositary receipts is required to appoint a tax guarantor for filing tax returns and making tax payments. Without meeting the foregoing requirements, the withdrawing holder of depositary receipts would be unable to hold and subsequently sell or otherwise transfer the underlying shares withdrawn from the depositary receipt facility on the TWSE or otherwise.

Overseas Corporate Bonds

Since 1989, the FSC has approved a series of overseas bonds issued by ROC companies listed on the TWSE in offerings outside the ROC. Under current ROC law, such overseas corporate bonds (i) can be converted by bondholders into shares of ROC companies or (ii) subject to FSC approval, may be converted into depositary receipts issued by the same ROC company or by the issuing company of the exchange shares, in the case of exchangeable bonds. A PRC holder of convertible or exchangeable bonds may not convert or exchange bonds unless (i) it is a QDII or (ii) if all the businesses of the issuer are in the positive list promulgated by the ROC Executive Yuan, the shares converted from overseas convertible bonds which accounts for 10% or more of the issuer's issued shares and it otherwise obtains the approval of the Investment Commission of the MOEA. However, QDIIs are currently prohibited from investing in certain industries, and their investment of certain other industries in a given company is restricted to a certain percentage pursuant to a list promulgated by the FSC and amended from time to time. In addition, there are restrictions on the amount remitted to Taiwan for investments by QDIIs, separately and jointly. Accordingly, the qualification criteria for a PRC person to make investment, the restrictions on investment in certain industries and the investment threshold imposed by the FSC might accordingly cause a holder of the corporate bonds who is a PRC person to be unable to convert or exchange the bonds and hold the shares. The relevant

136

regulations also permit public issuing companies to issue corporate debt in offerings outside the ROC. Proceeds from the sale of the shares converted or exchanged from overseas convertible or exchangeable bonds may be used for reinvestment in securities listed on the TWSE or traded on the GTSM, subject to relevant regulations.

Under current ROC law, a non-ROC converting or exchanging bondholder, when exercising his conversion or exchange right to convert or exchange bonds into common shares, is required to register with the TWSE and appoint a local agent to open a securities trading account with a local brokerage firm and an NT dollar bank account, pay taxes, remit funds, exercise rights relating to the securities and perform such other matters as may be designated by such converting or exchanging bondholder on behalf of and as agent for such converting or exchanging bondholder. Also, any such converting or exchanging bondholder is also required to appoint a custodian bank to hold the securities and any cash proceeds in safekeeping, to make confirmations, to settle trades and to report all relevant information. In addition, such converting or exchanging bondholder is required to appoint a tax guarantor for filing tax returns and making tax payments. Without meeting these requirements, the converting or exchanging holder would not be able to receive, hold, or subsequently sell or otherwise transfer the shares into which the overseas bonds may have been converted or exchanged on the TWSE or otherwise.

Unless otherwise limited by the CBC, an ROC company may, without obtaining further approvals from the CBC or any other government authority of the ROC, convert NT dollars to other non-ROC currencies, including U.S. Dollars, for making payments in respect of redemption of the bonds or repayment of principal of and interest on the bonds. A non-ROC converting or exchanging bondholder may, through its local agent and without obtaining prior approval from the CBC, convert into foreign currencies net proceeds realized from the sale of converted or exchanged common shares or any stock dividends relating to such shares, or any cash dividend or other cash distribution in respect of such common shares and, after becoming a shareholder, inward remittances of subscription payments in connection with a rights offering. However, a converting or exchanging bondholder must obtain prior approval from the CBC on a payment-by-payment basis for conversion from NT dollars into other currencies in respect of the proceeds from the sale of subscription rights for newly issued shares if the proceeds are in excess of US$100,000 per remittance.

Other Foreign Investment

In addition to investments permitted under the Foreign Regulations and PRC Regulations, foreign investors (other than PRC persons) who wish to make (i) direct investments in the shares of ROC private companies or (ii) investment in 10% or more of the equity interest of an ROC company listed on the TWSE or the GTSM in any single transaction and PRC investors who wish to make (i) direct investment in the shares of ROC private companies or (ii) investments, individually or aggregately, in 10% or more of the equity interest of an ROC company listed on the TWSE or the GTSM are required to submit an Investment Approval application to the Investment Commission of the MOEA or other government authority. The Investment Commission or such other government authority reviews Investment Approval application and approves or disapproves each application after consultation with other governmental agencies (such as the CBC and the FSC). PRC investors other than QDII are prohibited from making investments in an ROC company listed on the TWSE or the GTSM if the investment is less than 10% of the equity interest of such ROC company.

Under current law, any non-ROC person possessing an Investment Approval may remit capital for the approved investment and is entitled to repatriate annual net profits, interest and cash dividends attributable to such investment. Dividends attributable to such investment may be repatriated upon submitting certain required documents to the remitting bank, and investment capital and capital gains attributable to such investment may be repatriated after approvals of the Investment Commission or other authorities have been obtained.

In addition to the general restriction against direct investment by foreign investors in securities of ROC companies, foreign investors (except in certain limited cases) are currently prohibited from investing in certain industries in the ROC pursuant to a Negative List, as amended by the ROC Executive Yuan. The prohibition on foreign investment in the prohibited industries specified in the Negative List is absolute in the absence of specific exemption from the application of the Negative List. Pursuant to the Negative List, certain other industries are

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restricted so that foreign investors (except in certain limited cases) may invest in such industries only up to a specified level and with the specific approval of the relevant competent authority which is responsible for enforcing the relevant legislation which the Negative List is intended to implement.

On the other hand, in addition to the general restriction against direct investment by PRC investment by PRC investors in securities of ROC companies, PRC investors may only invest in certain industries in the Positive List, as promulgated by the ROC Executive Yuan. In addition, PRC investor who wishes to be elected as an ROC company's director or supervisor shall also submit an Investment Approval application to the Investment Commission of the ROC MOEA or other government authority for approval.

Exchange Controls

The ROC Foreign Exchange Control Statute and regulations provide that all foreign exchange transactions must be executed by banks designated by the FSC and the CBC to handle foreign exchange transactions. Current regulations favor trade-related foreign exchange transactions. Consequently, foreign currency earned from exports of merchandise and services may now be retained and used freely by exporters. All foreign currency needed for the importation of merchandise and services may be purchased freely from the designated foreign exchange banks.

Aside from trade-related foreign exchange transactions, ROC companies and individual residents of the ROC may, without foreign exchange approval, remit to and from Taiwan foreign currencies of up to US$50 million, or its equivalent, and US$5 million, or its equivalent, respectively, in each calendar year. These limits apply to remittances involving a conversion between NT dollars and U.S. Dollars or other foreign currencies. In addition, all private enterprises are required to register all medium- and long-term foreign debt with the CBC. In addition, a foreign person may, subject to certain requirements but without foreign exchange approval, remit to and from Taiwan foreign currencies of up to US$100,000 (or its equivalent) per remittance if the required documentation is provided to the ROC authorities. This limit applies to remittances involving a conversion between NT dollars and U.S. Dollars or other foreign currencies.

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TAXATION

Prospective investors should consult their own advisers concerning the tax consequences of an investment in the Bonds or the Reference Shares.

The following summary addresses the principal ROC tax consequences of the ownership and disposition of the Bonds or the Reference Shares to a non-resident individual or non-resident entity that holds such Bonds or Reference Shares (a "Non-ROC Holder"). A "non-resident individual" (a "Non-ROC Individual Holder") is a foreign national individual who is not physically present in the ROC for 183 days or more during any calendar year in which he or she owns the Bonds or the Reference Shares and a "non-resident entity" (a "Non-ROC Entity Holder") is a corporation or a non-corporate body that is organized under the laws of a jurisdiction other than the ROC and does not have a fixed place of business or business agent in the ROC.

Bonds

Interest

Payments of stated interest or premium (if any) on a Bond to a Non-ROC Holder constitute interest income and, therefore, are subject to ROC withholding tax at the rate of 15% at the time of payment unless a lower withholding rate is provided under a tax treaty between the ROC and the jurisdiction where the Non-ROC Holder is a resident. The Company has agreed to pay Additional Amounts in respect of such withholding tax on the payments of interest or premium. See "Description of the Bonds." In addition, should withholding tax be payable, the Company will be responsible for withholding such taxes at source.

Sale

According to the ROC Securities Tax Act, no securities transaction tax will be imposed on the transfer of corporate bonds and financial debentures, including the Bonds, until December 31, 2016.

However, securities transaction tax, gift tax and/or income tax may be imposed in relation to the exchangeable holder's designation of other persons to be the holder of the Reference Shares upon the exchange of the Bonds.

Under current ROC laws, capital gains generated from transactions of securities issued by ROC companies are exempt from income tax. This exemption applies to capital gains derived from the sale of the Bonds.

Exchange into Reference Shares

For Non-ROC Entity Holders, the exchange of the Bonds into Reference Shares will be deemed as exchange under the same asset category and thus will not generate any gain or incur any loss. For Non-ROC Individual Holders, any gain or loss generated or incurred from the exchange of the Bonds into the Reference Shares will be deemed as capital gain or loss from securities transactions, and thus is not taxable (in the case of capital gain) or deductible (in the case of securities transaction loss) pursuant to the current ROC income tax law. Upon the exchange of the Bonds, a transaction tax of 0.3% will be imposed on the Company in connection with the delivery and transfer of the Reference Shares to the exchanging holder of the Bonds.

Stamp Duty

There is no ROC stamp tax, issue or registration fee imposed on the delivery of the Reference Shares upon exchange of the Bonds.

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Reference Shares

Dividends

Dividends (whether in cash or Reference Shares) declared by FENC out of its retained earnings and distributed to a Non-ROC Holder in respect of the Reference Shares are subject to ROC withholding tax, currently at the rate of 20%, on the amount of the distribution (in the case of cash dividends) or on the par value of the Reference Shares (in the case of stock dividends) unless a lower withholding rate is provided under a tax treaty between the ROC and the jurisdiction where the Non-ROC Holder is a resident.

A 10% retained earnings tax is imposed on ROC company's after-tax earnings generated after January 1, 1998 that are not distributed in the following year. The retained earnings tax so paid reduces the retained earnings available for future distribution. When the company declares a dividend out of those retained earnings, a maximum amount of up to 10% of the declared dividend is credited against the 20% withholding tax imposed on the Non-ROC Holders so that the actual withholding tax imposed on the non-ROC Holders may be less than 20%.

Distributions of stock dividends declared by FENC out of its capital reserves are not subject to withholding tax, except under limited circumstances.

Sale

Securities transaction tax will be withheld at the rate of 0.3% of the transaction price upon a sale of the Reference Shares.

Under current ROC laws, capital gains on transactions in securities issued by ROC companies are exempt from income tax. This exemption applies to capital gains derived from the sale of the Reference Shares.

Pre-emptive Rights

Distributions of statutory subscription rights for the Reference Shares in compliance with the ROC Company Law are not subject to ROC tax. Proceeds derived from sales of statutory subscription rights evidenced by securities are currently exempted from income tax but are subject to securities transaction tax, currently at the rate of 0.3% of the gross amount received. Proceeds derived from sales of statutory subscription rights which are not evidenced by securities are subject to income tax at the rate of 20% of the gains realized. Subject to compliance with ROC laws, the Company has the sole discretion to determine whether statutory subscription rights shall be evidenced by the issuance of securities.

Estate Tax and Gift Tax

Subject to allowable exclusions, deductions and exemptions, ROC estate tax is payable on any property located within the ROC of a deceased Non-ROC Individual, and ROC gift tax is payable on any property located within the ROC donated by a Non-ROC Individual. Estate tax and gift tax are currently imposed at the rate of 10%. Under ROC estate and gift tax law, bonds and shares issued by ROC companies are deemed located within the ROC regardless of the location of the owner.

Tax Treaties

The United States does not have an income tax treaty with the ROC. At present, the ROC has income tax treaties with Australia, Gambia, Indonesia, Malaysia, Macedonia, the United Kingdom, the Netherlands, New Zealand, Singapore, South Africa, Swaziland, Vietnam, Senegal, Belgium, Sweden, Denmark, Israel, Paraguay, Hungary and France which limit the rate of withholding tax on dividends or interest paid by ROC companies to residents of these countries. Accordingly, holders of the Bonds or the Reference Shares who are otherwise entitled to the benefits of a relevant income tax treaty should consult their own tax advisers concerning their eligibility for benefits under the treaty with respect to the Bonds or the Reference Shares.

EU Directive on the Taxation of Savings Income

The Council of the European Union has adopted a new directive regarding the taxation of savings income. Member States are required from January 1, 2008 to provide to the tax authorities of other Member States details of payments of interest (or other similar income) paid by a person within its jurisdiction to or for the benefit of an individual resident in that other Member State, except that Belgium, Luxembourg and Austria will instead operate a withholding system for a transitional period in relation to such payments unless during such period they elect otherwise.

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PLAN OF DISTRIBUTION

We and the Initial Purchasers named below have entered into a purchase agreement dated January 20, 2011 with respect to the Bonds (the "Purchase Agreement"). Goldman Sachs International, UBS AG, Hong Kong Branch and Citigroup Global Markets Limited are acting as join book running managers of the offering and as representatives of the Initial Purchasers. Subject to certain conditions set out in the Purchase Agreement, each of the Initial Purchasers has, severally but not jointly, agreed to purchase from us, and we have agreed to sell to each of the Initial Purchasers, the amount of Bonds indicated in the following table.

Initial Purchasers	Principal Amount
Goldman Sachs International	US$300,000,000
UBS AG, Hong Kong Branch	56,250,000
Citigroup Global Markets Limited	18,750,000
BNP Paribas Capital (Asia Pacific) Limited.	0
Mizuho International plc	0
Total	US$375,000,000

The Purchase Agreement provides that the obligation of the Initial Purchasers to pay for and accept delivery of the Bonds is subject to certain conditions, including delivery of certain legal opinion. The Initial Purchasers are committed to purchase and pay for all of the Bonds if any are purchased. If an Initial Purchaser defaults, the purchase agreement provides that the purchase commitments of the non-defaulting Initial Purchasers may be increased or the purchase agreement may be terminated.

The purchase price for the Bonds will be the initial offering price set forth on the cover of this offering memorandum, less underwriting discounts and commissions. The Initial Purchasers have agreed to pay the Company an amount of approximately US$430,000 towards the expenses related to the offering of the Bonds. The Initial Purchasers propose to offer the Bonds at the initial offering price. After the initial offering, the Initial Purchasers may vary the offering price and other selling terms from time to time without notice. The Initial Purchasers reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

We have agreed to indemnify each of the Initial Purchasers against certain losses, claims, damages or liabilities under the Securities Act in accordance with the Purchase Agreement.

The Bonds, the Reference Shares and Exchange Property Securities have not been and will not be registered under the Securities Act for offer or sale as part of their distribution and may not be offered or sold within the United States except in certain transactions exempt from the registration requirements of the Securities Act.

We have been advised by the Initial Purchasers that each of the Initial Purchasers proposes to resell the Bonds outside the United States in offshore transactions in reliance on Regulation S and in accordance with applicable law. Terms used above have the meanings given to them by Regulation S.

The Bonds are a new issue of securities with no established trading market. Approval in-principle has been received for the listing of the Bonds on the SGX-ST. The offering and settlement of the Bonds is not conditioned on approval in-principle being received for the listing of the Bonds on the SGX-ST. We have been advised by the Initial Purchasers that they intend to make a market in the Bonds but are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Bonds.

We have agreed that until 90 days after the date hereof, we will not, without the Initial Purchasers' prior written consent, offer, sell, contract to sell or otherwise dispose of any securities of us and FENC that are substantially similar to the Bonds, the Shares or the

Reference Shares, including but not limited to any securities that are convertible into or exchangeable for, or that represent the right to receive, the Shares or the Reference Shares or any such substantially similar securities.

The foregoing restrictions will not apply to any such offer, sale or disposal:

pursuant to employee stock option plans existing on the date hereof; or
upon the conversion or exchange of convertible or exchangeable securities outstanding on the date hereof.

In addition, FENC has also agreed that, without the Initial Purchasers' prior written consent, it will not directly or indirectly offer, pledge, sell or enter into an option, swap, right, warrant or other arrangement that transfers or disposes of any Shares or Reference Shares or transfers all or a portion of the economic consequences associated with the ownership of any Shares or Reference Shares until 90 days after the date hereof.

In connection with this offering, the Initial Purchasers may purchase and sell Bonds in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the Initial Purchasers of a greater principal amount of Bonds than they are required to purchase in this offering. "Covered" short sales are sales made in an amount not greater than the Initial Purchasers' option to purchase additional Bonds from us in this offering. The Initial Purchasers may close out any covered short position by either exercising their option to purchase additional Bonds or purchasing Bonds in the open market. In determining the source of Bonds to close out the covered short position, the Initial Purchasers will consider, among other things, the price of Bonds available for purchase in the open market as compared to the price at which they may purchase Bonds through the over allotment option. "Naked" short sales are any sales in excess of such option. The Initial Purchasers must close out any naked short position by purchasing Bonds in the open market. A naked short position is more likely to be created if the Initial Purchasers are concerned that there may be downward pressure on the price of the Bonds in the open market after pricing that could adversely affect investors who purchase in this offering. Stabilizing transactions consist of various bids for or purchases of the Bonds or the Shares or the Reference Shares made by the Initial Purchasers in the open market prior to the completion of the offering.

Purchases to cover a short position and stabilizing transactions may have the effect of preventing or retarding a decline in the market price of our Bonds and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the Bonds. As a result, the price of the Bonds may be higher than the price that otherwise might exist in the open market. Neither we nor any of the Initial Purchasers make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Bonds. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the SGX-ST and in other jurisdictions when it is permissible to do so, in each case in compliance with all applicable laws and regulations.

In connection with this offering, the Initial Purchasers or any of their affiliates may purchase the Bonds for their own account and enter into transactions, including (i) credit derivatives (including convertible asset swaps, repackaging transactions and credit default swaps) relating to the Bonds and/or our securities or the Reference Shares, and (ii) equity derivatives and stock loan transactions relating to our shares or the Reference Shares. Such transactions may occur either at the same time as the offer and sale of the Bonds, or in secondary market transactions. Such transactions would be carried out as bilateral transactions with selected counter-parties and separately from any existing sale or resale of the Bonds to which this offering memorandum relates (notwithstanding that such selected counter-parties may also be purchasers of the Bonds).

The effect, if any, of any of these transactions and activities on the market price of the Bonds or the Reference Shares will depend in part on market conditions and cannot be ascertained as of the date of this offering memorandum, but any of these activities could adversely affect the value of the Reference Shares and the Bonds and, as a result, the number of shares and value of the consideration that you will receive upon the exchange of the Bonds and, under certain circumstances, your ability to exchange the Bonds.

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United States

The Bonds have not been and will not be registered under the Securities Act and may only be offered, sold or delivered outside the United States in offshore transactions in reliance on Regulation S under the Securities Act.

The Initial Purchasers have represented and agreed that, except as permitted by the Purchase Agreement, they will not offer, sell or deliver any Bonds within the United States.

In addition, until 40 days after the commencement of the offering of the Bonds an offer or sale of Bonds within the United States by a dealer that is not participating in the offering may violate the registration requirements of the Securities Act.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each Initial Purchaser has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of Bonds which are the subject of the offering contemplated by this offering memorandum to the public in that Relevant Member State other than:

(a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;
(b) to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of Goldman Sachs International for any such offer; or
(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of Notes shall require us or any Initial Purchaser to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an "offer of Bonds to the public" in relation to any Bonds in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Bonds to be offered so as to enable an investor to decide to purchase or subscribe for the Bonds, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

United Kingdom

Each Initial Purchaser has severally represented and agreed that:

(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the Bonds in circumstances in which Section 21(1) of the FSMA does not apply to us; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom.

Singapore

Each of the Initial Purchasers for the Bonds has acknowledged that this offering memorandum has not been, and will not be, registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each of the Initial Purchasers has represented, warranted and agreed that it has not offered or sold any Bonds or caused the Bonds to be made the subject of an invitation for subscription or purchase and will not offer or sell any Bonds or cause the Bonds to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this offering memorandum or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Bonds, whether directly or indirectly, to persons in Singapore other than (a) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (b) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA or (c) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the Bonds are subscribed or purchased in reliance of an exemption under Sections 274 or 275 of the SFA, the Bonds and/or the Reference Shares deliverable upon exchange of the Bonds shall not be sold within the period of six months from the date of the initial acquisition of the Bonds, except to any of the following persons:

(a) an institutional investor (as defined in Section 4A of the SFA);
(b) a relevant person (as defined in Section 275 (2) of the SFA); or
(c) any person pursuant to an offer referred to in Section 275 (1A) of the SFA, unless expressly specified otherwise in Section 276(7) of the SFA.

Where the Bonds are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Bonds pursuant to an offer made under Section 275 of the SFA except:

(1) to an institutional investor (under Section 274 of the SFA), or to a relevant person (as defined in Section 275 (2) of the SFA) and in accordance with the conditions specified in Section 275 of the SFA;
(2) (in the case of a corporation) where the transfer arises from an offer referred to in Section 276(3)(i)(B) of the SFA or (in the case of a trust) where the transfer arises from an offer referred to in Section 276(4)(i)(B) of the SFA;
(3) where no consideration is or will be given for the transfer;
(4) where the transfer is by operation of law; or
(5) as specified in Section 276(7) of the SFA.

145

^{}[] 146

Hong Kong

The Bonds may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the Bonds may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to Bonds which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Japan

The Bonds have not been and will not be registered under the Financial Instruments and Exchange Law of Japan, as amended (the "Financial Instruments and Exchange Law"), and the Bonds will not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to any exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

ROC

Each of the Initial Purchasers for the Bonds offering has agreed that, as part of the distribution of the Bonds, it has not offered or sold, and will not offer or sell, any Bond directly or indirectly in the ROC; each of the Initial Purchasers also understands and has acknowledged that the Bonds may not be sold to any related person of us (as defined in the ROC SFAS No. 6) or any person listed in Article 36 of the Chinese Securities Association Regulations Governing Underwriting and Resale of Securities by Securities Firms.

No action is being taken or is contemplated by us that would, or is intended to, permit a public offering of the Bonds or possession or distribution of any preliminary offering memorandum or offering memorandum or any amendment thereof, any supplement thereto or any other offering material relating to the Bonds in any jurisdiction where, or in any other circumstance in which, action for those purposes is required.

Investors who purchase Bonds from an Initial Purchaser may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the offering price set forth on the cover page of this offering memorandum.

The Initial Purchasers and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the Initial Purchasers and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.

An affiliate of Goldman Sachs has provided, and may continue to provide, certain financial advisory services to us and ACC China in connection with the MOU entered into by ACC China and us with China Shanshui for which it may receive customary fees and expense reimbursements.

In the ordinary course of their various business activities, the Initial Purchasers and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of us. The Initial Purchasers and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

In connection with this offering, each of the Initial Purchasers (or an affiliate) may has, for its own accounts, entered into asset swaps, credit derivatives or other derivative transactions relating to the Bonds at the same time as the offer and sale of the Bonds or in secondary market transactions. As a result of such transactions, each of the Initial Purchasers may hold long or short positions in such Bonds or derivatives. No disclosure will be made of any such positions. Each of the Initial Purchasers (or an affiliate) may have purchased Bonds and been allocated Bonds for asset management and/or proprietary purposes and not with a view to distribution.

^{}[] 147

^{}[] 148

TRANSFER RESTRICTIONS

Because of the following restrictions, we encourage you to consult legal counsel prior to making any offer, resale, pledge or other transfers of the Bonds or the Reference Shares.

By purchasing the Bonds, you will be deemed to have made the following acknowledgements, representations to, and agreements with, us and the Initial Purchasers:

You understand and acknowledge that:
the Bonds and the Reference Shares deliverable upon exchange of the Bonds have not been registered under the Securities Act or any other applicable securities laws;
the Bonds are being offered for resale in transactions that do not require registration under the Securities Act or any other securities laws; and
the Bonds are being offered and sold only outside of the United States, in offshore transactions in reliance on Regulation S under the Securities Act.
You represent that you are not an affiliate (as defined in Rule 144 under the Securities Act) of ours and that you are not acting on our behalf and you are purchasing the Bonds in an offshore transaction in accordance with Regulation S.
You acknowledge that neither we nor the Initial Purchasers nor any person representing us or the Initial Purchasers have made any representation to you with respect to us or the offering of the Bonds, other than the information contained in this offering memorandum. You represent that you are relying only on this offering memorandum in making your investment decision with respect to the Bonds.
You represent that you are purchasing the Bonds for your own account, or for one or more investor accounts for which you are acting as a fiduciary or agent, in each case not with a view to, or for offer or sale in connection with, any distribution of the Bonds in violation of the Securities Act.
You acknowledge that we, the Initial Purchasers and others will rely upon the truth and accuracy of the above acknowledgments, representations and agreements. You agree that if any of the acknowledgments, representations or agreements you are deemed to have made by your purchase of the Bonds is no longer accurate, you will promptly notify us and the Initial Purchasers. If you are purchasing any Bonds as a fiduciary or agent for one or more investor accounts, you represent that you have sole investment discretion with respect to each of those accounts and that you have full power to make the above acknowledgments, representations and agreements on behalf of each account.

^{}[] 149

LEGAL MATTERS

Certain legal matters with respect to the Bonds as to New York State law and United States Federal securities law will be passed upon for the Initial Purchasers by Davis Polk & Wardwell LLP. Certain legal matters with respect to the Bonds and the Reference Shares as to ROC law will be passed upon for us by Lee and Li, Attorneys-at-Law. Davis Polk & Wardwell LLP, will rely upon Lee and Li, Attorneys-at-Law with respect to certain matters of ROC law. Lee and Li, Attorneys-at-Law, will rely upon Davis Polk & Wardwell LLP with respect to certain matters of New York State Law and United States Federal securities law.

^{}[] INDEPENDENT ACCOUNTANTS

The audited consolidated financial statements of ACC prepared in accordance with ROC GAAP as of and for the years ended December 31, 2007, 2008, and 2009 included in this offering memorandum have been audited by Deloitte & Touche, independent auditors, as indicated in their report with respect thereto included herein, which report express unqualified opinions on such financial statements and include explanatory paragraphs referring to (i) changes in accounting policies and (ii) convenience translation of New Taiwan dollar amounts into U.S. dollar amounts.

With respect to the unaudited consolidated interim financial information of ACC as of and for the nine-month periods ended September 30, 2009 and 2010 included in this offering memorandum, Deloitte & Touche, independent auditors have reported that they have applied limited procedures in accordance with professional standards for a review of such information in accordance with ROC Statement on Auditing Standards No. 36, "Review of Financial Statements." However, their separate review report included in this offering memorandum state that they did not audit and they do not express an opinion on that interim financial information. In addition, such review report are qualified because of the omission of procedures related to certain accounts supporting the subsidiaries and the investments accounted for by the equity-method and include an explanatory paragraph referring to (i) a change in accounting policies and (ii) convenience translation of New Taiwan dollar amounts into U.S. dollar amounts. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied.

The audited consolidated financial statements of FENC prepared in accordance with ROC GAAP as of and for the years ended December 31, 2007, 2008, and 2009 included in this offering memorandum have been audited by Deloitte & Touche, independent auditors, as indicated in their report with respect thereto included herein, which reports express unqualified opinions on such financial statements and include explanatory paragraphs referring to (i) change in accounting policies, (ii) a statement that the financial statements of certain subsidiaries and investee companies included in the consolidated financial statements are based on the reports of these other auditors, (iii) a lawsuit for the investment of Pacific Liu Tung Investment Corporation and (iv) convenience translation of New Taiwan dollar amounts into U.S. dollar amounts.

With respect to the unaudited consolidated interim financial information of FENC as of and for the nine-month periods ended September 30, 2009 and 2010 included in this offering memorandum, Deloitte & Touche, independent auditors have reported that they have applied limited procedures in accordance with professional standards for a review of such information in accordance with ROC Statement on Auditing Standards No. 36, "Review of Financial Statements." However, their separate review report included in this offering memorandum state that they did not audit and they do not express an opinion on that interim financial information. In addition, such review report are qualified because of the omission of procedures related to certain accounts supporting the subsidiaries and the investments accounted for by the equity-method and include an explanatory paragraph referring to (i) a change in accounting policies, (ii) a lawsuit for the investment of Pacific Liu Tung Investment Corporation and (iii) convenience translation of New Taiwan dollar amounts into U.S. dollar amounts. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied.

150

^{}[] 151

GENERAL INFORMATION

Listing

Approval in-principle has been received for the listing of the Bonds on the SGX-ST. For so long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, we will appoint and maintain a paying agent in Singapore where the Bonds may be presented or surrendered for payment or redemption, in the event that a Global Certificate is exchanged for relevant Definitive Certificates. In addition, in the event that a Global Certificate is exchanged for relevant Definitive Certificates, an announcement of such exchange shall be made by or on behalf of us through the SGX-ST and such announcement will include all material information with respect to the delivery of the relevant Definitive Certificates, including details of the paying agent in Singapore.

The Bonds will be traded on the SGX-ST in a minimum board lot size of US$200,000 for so long as the Bonds are listed on the SGX-ST.

Authorizations

We have obtained all necessary consents, approvals and authorizations in connection with the issue of the Bonds. The issue of the Bonds was authorized by resolutions of our board of directors on November 2, 2010.

Clearing Systems

The Bonds have been accepted for clearance through the facilities of Euroclear and Clearstream. The ISIN Number and the Common Code for the Bonds are:

	ISIN Number	Common Code
Bonds	XS0569334682	056933468

^{}[] GLOSSARY

^{}[] Terms Relating to ACC's Business

"aggregates"
A mixture which generally consists of river sand, gravel or crushed stone, that is used as concrete raw materials.

"burst-furnace slag"
A by-product from the production of steel, which is used as inherent hydraulic materials when mixed with Portland cement.

"cement"
A mixture of cement clinker, limestone, clay, silica and gypsum. It is a fine powder which sets to a hard mass when mixed with water as a result of hydration. "Cement" is also known as "hydraulic cement."

"clinker"
Grayish-black pellets predominantly the size of marbles, which is a main ingredient in Portland cement produced largely from limestone, clay and a variety of minerals and iron oxide at high temperatures which consists primarily of hydraulic calcium silicates.

"clay"
A natural mineral having plastic properties and composed of very fine particles, moldable when wet and fused into permanent form at very high temperatures.

"concrete"
A mixture of aggregates, cements and water that will harden because of cement's hydration, generally used in the construction industry.

"composite Portland cement"
A kind of Portland cement with two or more different kinds of inter-related additives and of lower compressive strength, which is mainly used for construction projects which require low quality concrete, such as small buildings and farm houses.

"fly ash"
The ash by-product of burning coal in thermal power plants, which is used as inherent hydraulic materials when mixed with Portland cement.

"gypsum"
A mineral consisting of hydrous calcium sulfate that is used as a set-controlling agent when added to solid amendment and in making plaster of paris.

"ISO 14001"
A cornerstone standard of the ISO 14000 series that represents a series of international standards on environmental management, providing a framework for the development of an environmental management system and the supporting audit program.

"ISO 9001: 2000"
A standard used for certification or registration and contractual purposes by organizations seeking recognition of their quality management, which specified the requirements for quality management systems for any organization that needs to demonstrate its ability to consistently provide products that meet the applicable regulator requirements.

"MT"
metric ton or metric tons.

152

^{}[] 153

“limestone”
A sedimentary rock, mainly composed of mineral calcite.

“ordinary Portland cement”
A kind of Portland cement which is also known as gray cement used in normal construction which consists of 80% of cement clinker, 5% gypsum, 15% of interground additives and other materials. Ordinary Portland cement also includes white cement that is commonly used for decorative purposes.

“Portland blast-furnace slag cement”
A kind of Portland cement which consists of 25-75% of cement clinker, 20-70% of blast-furnace slag and 5% of gypsum, which is specially used in construction of dams and massive construction, as well as for normal construction.

“Portland cement”
A kind of hydraulic cement which consists of 90-95% of cement clinker, 0-5% of interground additives and 5% gypsum, which is used for normal construction.

“raw meal”
A mixture of limestone, clay, sandstone and iron sand, which is ground and dried to a fine powder, then heated for decarbonation in a pre-heater with calciner and sintering in a dry process rotary kiln to produce cement clinker.

“RMC”
Ready-mixed concrete.

“rotary kiln”
An oven that is used for sintering, burning or drying raw materials.

“sandstone”
A sedimentary rock formed mainly of quartz grains cemented with aluminosilicates or iron compounds or both.

“silo(s)”
Warehouse for storage of cement in transit.

“sq.m.”
Square meter/square meters.

Terms Relating to FENC's Business

“3G”	Third generation of mobile phone standards and technology.
“churn”	The percentage of cellular customers who are disconnected from a network over a given period out of the total number of customers at the start of that period.
“draw twisted yarn”	A polyester product with a texture similar to silk which is used principally for shirting and dress material.
“fully oriented yarn”	A polyester product with a texture similar to wool which is used principally for suiting and sewing thread.
“HDI”	High denier industrial yarn, a polyester product made with PET resin which is used principally for automotive engine belts, seat belts, tire cord, fishnet and geotextiles.
“GPRS”	General Packet Radio Service, a technology enhancement for GSM networks enabling higher data transmission speeds.
“GSM”	Global System for Mobile Communications, a standard for digital wireless telecommunications.
“MEG”	Mono ethylene glycol, a principal raw material for the manufacture of polyester.
“MHz”	Mega hertz
“non-woven fiber”	A polyester product made from polyester staple fiber which is used principally for fiber-fill for pillows, carpeting, insulation, toys, upholstery, sleeping bags, sport shoes and diapers.
“PET”	Polyethylene terephthalate, an intermediate product formed by blending PTA and MEG, which is then processed into a range of end products.
“PET bottle”	A bottle made with PET resins which is used principally for packaging for carbonated and non-carbonated beverages and food.
“PET resin”	One of three principal forms of processed polyester, which is produced through a solid stating process and is used primarily for the manufacture of PET bottles and other forms of packaging and HDI.
“polymer melt”	A viscous paste of PET formed during the polymerization stage of the polyester manufacturing reaction process by blending PTA and MEG.
“polyester”	A synthetic polymer formed by the reaction between two petrochemical derivatives, usually PTA, an organic acid, and MEG, an organic alcohol.
“polyester chip”	An Intermediate raw material in the polyester production process formed by allowing the polymer melt to solidify into grain sized chips. Polyester chips can be later reheated into polymer melt and further processed.

154

“polyester fiber”	One of three principal forms of processed polyester, which is produced by extruding the polymer melt through a perforated steel plate. The resultant fiber is drawn into continuous strands of several kilometers in length known as polyester filament or into bundles of' strands which are cut into short lengths (approximately 1 to 11/2 inches) known as polyester staple fiber.
“polyester filament”	A Polyester product used to produce POY which is sold as an intermediate product to yarn manufacturers and which is used to produce draw twisted filament yarn and fully oriented yarn.
“polyester film”	A form of processed polyester which is mainly used to produce computer, audio and video magnetic tape and disks, photographic materials, and packaging.
“polyester sheets”	A PET resin product which is used for both rigid and. flexible packaging.
“polyester staple fiber”	A polyester product similar to raw cotton and is shipped in bales to yarn spinners who can use it in pure form or in blends with other fibers such as cotton, rayon, acrylic and wool to produce products such as textile fiber and non-woven fiber.
“POY”	Partially-oriented yarn, a product produced from polyester filament that is sold as an intermediate product to yarn manufacturers and made into fully oriented yarn and draw twisted yarn.
“PTA”	Purified terephthalic acid, a principal raw material for the manufacture of polyester.
“PVC”	Polyvinyl chloride, a principal competing product of PET bottles.
“PX”	Paraxylene, a principal feed stock for the manufacture of PTA.
“SSP”	Solid state polymerization, a process by which polyester chip is made into PET resin.
“SSP Products”	Products made with polyester that has been processed by SSP.
“W-CDMA”	Widebank Code Division Multiple Access, a wideband spread- spectrum mobile air interface that utilizes the direct sequence Code Division Multiple Access signaling method to achieve higher speeds and support more users.
“4G WiMAX”	Worldwide Interperability for Microwave Access, a standards- based technology providing high-speed mobile data and telecommunications services and enabling wireless delivery of last mile broadband access as an alternative to cable and digital subscriber line.

^{}[] INDEX TO FINANCIAL STATEMENTS

Page

ASIA CEMENT CORPORATION AND SUBSIDIARIES

Audited Consolidated Financial Statements

Independent Auditors' Report ... F-2
Consolidated Balance Sheets as of December 31, 2007, 2008 and 2009 ... F-4
Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2007, 2008 and 2009 ... F-7
Consolidated Statements of Changes in Stockholders' Equity for each of the years in the three-year period ended December 31, 2007, 2008 and 2009 ... F-9
Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2007, 2008 and 2009 ... F-13
Notes to Consolidated Financial Statements ... F-16

Unaudited Consolidated Financial Statements

Independent Accountants' Review Report ... F-164
Consolidated Balance Sheet as of September 30, 2009 and 2010 ... F-166
Consolidated Statements of Income for the nine months ended September 30, 2009 and 2010 ... F-170
Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2010 ... F-172
Notes to Consolidated Financial Statements ... F-175

FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES

Audited Consolidated Financial Statements

Independent Auditors' Report ... F-252
Consolidated Balance Sheets as of December 31, 2007, 2008 and 2009 ... F-254
Consolidated Statements of Income for each of the years in the three-year period ended December 31, 2007, 2008 and 2009 ... F-258
Consolidated Statements of Changes in Stockholders' Equity for each of the years in the three-year period ended December 31, 2007, 2008 and 2009 ... F-261
Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2007, 2008 and 2009 ... F-264
Notes to Consolidated Financial Statements ... F-272

Unaudited Consolidated Financial Statements

Independent Accountants' Review Report ... F-485
Consolidated Balance Sheet as of September 30, 2009 and 2010 ... F-487
Consolidated Statements of Income for the nine months ended September 30, 2009 and 2010 ... F-491
Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2010 ... F-493
Notesto Consolidated Financial Statements ... F-498

F-1

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Asia Cement Corporation

We have audited the accompanying consolidated balance sheets of Asia Cement Corporation (the "Corporation") and its subsidiaries as of December 31, 2007, 2008 and 2009, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the years then ended. 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 audit 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated 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 financial position of the Corporation and its subsidiaries as of December 31, 2007, 2008 and 2009, and the results of their operations and their cash flows for the years then ended, in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China.

As stated in Note 3 to the consolidated financial statements, the Corporation and its subsidiaries adopted Interpretation No. 2007-052 issued by the Accounting Research and Development Foundation of the Republic of China in March 2007 and recognized bonuses to employees and remuneration to directors and supervisors as compensation expenses beginning January 1, 2008. These bonuses and remuneration were previously recorded as appropriations from earnings. On July 1, 2008, the subsidiaries of the Corporation adopted the newly amended Statement of Financial Accounting Standards (SFAS) No. 34, "Financial Instruments: Recognition and Measurement" and reclassified certain financial instruments in accordance with the standards. On January 1, 2009, the Corporation and its subsidiaries adopted the newly revised SFAS No. 10, "Accounting for Inventories."

F-2

Our audits also comprehended the translation of the 2009 New Taiwan dollar amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 4. Such U.S. dollar amounts are presented solely for the convenience of readers.

Deloitte & Touche
Taipei, Taiwan
Republic of China

March 5, 2010 (except for Note 4 - Translation into U.S. dollars, as to which the date is September 30, 2010)

Notice to Readers

The accompanying consolidated financial statements are intended only to present the 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.

F-3

^{}[] ASIA CEMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2007, 2008 AND 2009

(In Thousands, Except Par Value)

	2007	2008	2009
ASSETS	NT$	NT$	NT$	US$ (Note 4)
CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 5)	$ 6,207,117	$16,931,368	$17,838,133	$ 571,918
Financial assets at fair value through profit or loss - current (Notes 2, 3, 6 and 25)	2,265,793	898,366	1,343,252	43,067
Available-for-sale financial assets - current (Notes 2, 3, 7, 26 and 28)	2,159,941	2,333,060	2,660,961	85,315
Hedging derivative financial assets - current (Notes 2 and 10)	—	12,928	—	—
Financial assets carried at cost - current (Notes 2 and 11)	30,271	271	—	—
Notes receivable (Note 2)	2,249,397	2,382,653	2,748,195	88,112
Accounts receivable
Affiliates (Note 27)	271,413	476,128	664,633	21,309
Third parties, net of allowance for doubtful accounts - 2007:
NT$162,944 thousand, 2008: NT$182,738 thousand, 2009:
NT$277,395 thousand (US$8,894 thousand) (Note 2)	3,808,332	4,667,937	4,455,030	142,835
Other receivables (Note 27)	258,204	365,976	886,553	28,424
Inventories (Notes 2, 3 and 8)	4,314,233	4,830,812	4,311,451	138,232
Restricted assets (Notes 5 and 28)	503,104	806,838	688,803	22,084
Others (Notes 2, 22 and 27)	847,622	1,039,615	1,194,614	38,301
Total current assets	22,915,427	34,745,952	36,791,625	1,179,597
LONG-TERM INVESTMENTS (Notes 2 and 28)
Investments accounted for by equity-method (Note 9)	40,848,522	36,945,103	41,170,895	1,320,003
Available-for-sale financial assets - noncurrent (Note 7)	10,594,377	5,464,373	10,758,775	344,943
Hedging derivative financial assets - noncurrent (Note 10)	14,553	—	—	—
Financial assets carried at cost - noncurrent (Note 11)	2,720,665	3,812,618	3,668,888	117,630
Total long-term investments	54,178,117	46,222,094	55,598,558	1,782,576
PROPERTIES AND EQUIPMENT (Notes 2, 12 and 28)
Cost
Land	1,518,919	1,559,800	1,567,010	50,241
Buildings and improvements	10,070,747	10,715,209	13,193,328	422,999
Machinery and equipment	46,024,446	50,791,953	58,892,440	1,888,183
Other equipment	5,339,909	5,747,449	6,031,366	193,375
Total cost	62,954,021	68,814,411	79,684,144	2,554,798
Revaluation increment	2,321,308	2,320,664	2,303,532	73,855

F-4

^{}[] F-5

ASSETS	2007	2008	2009	US$ (Note 4)
Total cost and revaluation increment	$ 65,275,329	$ 71,135,075	$ 81,987,676	$2,628,653
Less: Accumulated depreciation	27,182,530	30,033,240	32,726,180	1,049,252
Construction in progress and prepayments on equipment	3,883,927	12,679,684	11,323,908	363,062
Net properties and equipment	41,976,726	53,781,519	60,585,404	1,942,463
INTANGIBLE ASSETS (Note 2)
Deferred pension cost (Note 24)	35,732	18,683	29,649	951
Others (Note 13)	2,173,990	2,345,407	3,241,313	103,921
Total intangible assets	2,209,722	2,364,090	3,270,962	104,872
OTHER ASSETS (Notes 2, 14 and 28)
Nonoperating properties, net	4,832,231	4,687,207	4,666,311	149,609
Deferred charges, net	1,319,626	1,340,174	1,618,610	51,895
Miscellaneous (Notes 24 and 27)	734,815	1,091,583	1,196,721	38,369
Total other assets	6,886,672	7,118,964	7,481,642	239,873
TOTAL	$128,166,664	$144,232,619	$163,728,191	$5,249,381
	2007	2008	2009
LIABILITIES AND STOCKHOLDERS’ EQUITY	NT$	NT$	NT$	US$ (Note 4)
CURRENT LIABILITIES
Short-term loans (Notes 15 and 28)	$ 3,697,189	$ 6,507,829	$ 4,947,872	$ 158,636
Short-term bills payable (Notes 16 and 28)	450,148	1,812,420	1,312,362	42,076
Accounts payable and accrued expenses (Notes 27 and 29)	4,148,602	5,385,842	6,349,865	203,587
Income tax payable (Notes 2 and 22)	264,592	244,609	295,941	9,488
Financial liabilities at fair value through profit or loss - current (Notes 2 and 6)	—	137,485	311,723	9,994
Other notes payable (Notes 9 and 27)	1,292,000	—	—	—
Hedging derivative financial liabilities - current (Notes 2 and 10)	25,836	—	—	—
Dividends and bonuses payable	142,064	211,883	219,263	7,030
Customers’ deposits and advances	276,770	619,363	449,528	14,413
Current portion of long-term liabilities (Notes 17 and 28)	4,586,197	6,074,886	12,295,316	394,207
Total current liabilities	14,883,398	20,994,317	26,181,870	839,431
LONG-TERM LIABILITIES, NET OF CURRENT PORTION (Notes 17 and 28)
Bonds payable	4,500,000	10,707,945	7,000,000	224,431
Bank loans	29,219,285	32,083,765	39,154,354	1,255,350
Hedging derivative financial liabilities - noncurrent (Notes 2 and 10)	18,602	—	—	—
Total long-term liabilities	33,737,887	42,791,710	46,154,354	1,479,781

	2007	2008	2009
LIABILITIES AND STOCKHOLDERS' EQUITY	NT$	NT$	NT$	US$ (Note 4)
RESERVE FOR LAND VALUE INCREMENT TAX
(Note 12)	$1,466,299	$1,466,299	$1,466,299	$47,012
OTHER LIABILITIES
Deferred income (Notes 2, 14 and 18)	1,611,772	1,543,687	1,475,601	47,310
Miscellaneous (Notes 2, 22 and 29)	167,555	232,256	382,261	12,256
Total other liabilities	1,779,327	1,775,943	1,857,862	59,566
Total liabilities	51,866,911	67,028,269	75,660,385	2,425,790
STOCKHOLDERS' EQUITY (Notes 2, 12, 19 and 22)
Stockholders' equity of parent
Capital stock - $10 par value per share
Authorized - 2007: 3,000,000 thousand shares,
2008 and 2009: 3,300,000 thousand shares
Issued - 2007: 2,734,691 thousand shares,
2008: 2,898,772 thousand shares, 2009:
2,985,736 thousand shares	27,346,909	28,987,723	29,857,355	957,273
Capital surplus	6,885,839	8,080,494	8,197,276	262,817
Retained earnings
Legal reserve	7,672,810	8,679,226	9,391,500	301,106
Unappropriated	14,516,179	11,810,912	12,872,324	412,707
Total retained earnings	22,188,989	20,490,138	22,263,824	713,813
Other equity
Cumulative translation adjustments	2,494,245	4,479,430	3,201,493	102,645
Unrecognized net loss on pension cost	(78,026)	(225,463)	(115,672)	(3,709)
Unrealized gains on financial instruments	10,695,704	241,642	8,894,624	285,176
Unrealized revaluation increments	2,786,131	2,786,131	2,786,131	89,328
Total other equity	15,898,054	7,281,740	14,766,576	473,440
Total stockholders' equity of parent	72,319,791	64,840,095	75,085,031	2,407,343
Minority interest	3,979,962	12,364,255	12,982,775	416,248
Total stockholders' equity	76,299,753	77,204,350	88,067,806	2,823,591
TOTAL	$128,166,664	$144,232,619	$163,728,191	$5,249,381
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated March 5, 2010 (except for Note 4 - Translation into U.S. dollars, as to which the date is September 30, 2010))

^{}[] ASIA CEMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009

(In Thousands, Except Earnings Per Share)

	2007	2008	2009
	NT$	NT$	NT$	US$ (Note 4)
OPERATING REVENUE (Notes 2, 21 and 27)
Sales of cement, net	$27,415,966	$32,257,864	$36,013,063	$1,154,635
Electric power revenue	6,647,657	8,101,805	7,236,404	232,010
Sales of stainless steel, net	—	2,180,234	3,038,420	97,416
Other operating income	1,882,902	1,465,585	1,791,829	57,449
Total operating revenue	35,946,525	44,005,488	48,079,716	1,541,510
OPERATING COSTS (Notes 8, 20, 25 and 27)	30,058,907	37,738,096	39,052,747	1,252,092
GROSS PROFIT	5,887,618	6,267,392	9,026,969	289,418
OPERATING EXPENSES (Notes 20, 25 and 27)	1,926,803	2,748,642	3,098,549	99,344
OPERATING INCOME	3,960,815	3,518,750	5,928,420	190,074
NONOPERATING INCOME AND GAINS
Investment income from equity-method investees (Notes 2 and 9)	7,173,329	5,088,466	4,361,064	139,822
Valuation gain on financial assets, net (Note 2)	—	—	409,603	13,133
Rental income (Note 27)	367,899	376,212	407,547	13,066
Dividends (Note 2)	311,138	414,369	262,486	8,416
Interest	174,000	407,611	202,794	6,502
Valuation gain on financial liabilities, net (Note 2)	—	572,398	—	—
Others (Notes 2 and 11)	625,993	546,226	556,777	17,851
Total nonoperating income and gains	8,652,359	7,405,282	6,200,271	198,790
NONOPERATING EXPENSES AND LOSSES
Interest (Notes 2 and 12)	1,160,376	1,685,438	1,417,210	45,438
Impairment loss (Notes 2, 11 and 14)	28,233	134,029	187,540	6,013
Valuation loss on financial liabilities, net (Note 2)	—	—	184,826	5,926
Rental costs and expenses (Notes 25 and 27)	176,771	160,599	168,288	5,395
Valuation loss on financial assets, net (Note 2)	85,726	478,604	—	—
Exchange loss, net (Notes 2 and 11)	—	257,847	—	—
Others (Notes 25 and 27)	396,163	338,001	497,768	15,959
Total nonoperating expenses and losses	1,847,269	3,054,518	2,455,632	78,731
INCOME BEFORE INCOME TAX	10,765,905	7,869,514	9,673,059	310,133
INCOME TAX EXPENSE (Notes 2 and 22)	669,949	396,879	718,049	23,021
CONSOLIDATED NET INCOME	$10,095,956	$7,472,635	$8,955,010	$287,112
ATTRIBUTABLE TO:
Stockholders of parent	$10,100,422	$7,314,642	$7,885,009	$252,806
Minority interest	(4,466)	157,993	1,070,001	34,306
	$10,095,956	$7,472,635	$8,955,010	$287,112

F-7

	2007		2008		2009
	Before Income Tax	After Income Tax	Before Income Tax	After Income Tax	Before Income Tax		After Income Tax
	NT$	NT$	NT$	NT$	NT$	US$(Note 4)	NT$	US$(Note 4)
EARNINGS PER SHARE (Note 23)
Basic	$ 3.63	$ 3.38	$ 2.58	$ 2.45	$ 2.88	$ 0.09	$ 2.64	$ 0.08
Diluted			$ 2.58	$ 2.44	$ 2.87	$ 0.09	$ 2.63	$ 0.08

The accompanying notes are an integral part of the consolidated financial statements.

(With Deloitte & Touche audit report dated March 5, 2010 (except for Note 4 - Translation into U.S. dollars, as to which the date is September 30, 2010))

F-8

ASIA CEMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In Thousands, Except Per Share Amounts)

	Capital Stock Issued		Capital Surplus (Notes 2 and 19)		Retained Earnings (Notes 2 and 19)			Unrealized Gains (Losses) on Available-for-sale Financial Assets		Unrealized Gains (Losses) of Cash Flow Hedge		Unrealized Revaluation Stockholders'		Minority Interest	Total Stockholders' Equity
	Shares	Amount	Donations	From Long-term Investments	Total	Legal Reserve	Unappropriated	Total	Cumulative Translation Adjustments (Note 2)	Net Loss on Pension Cost (Note 2)	Total	Unrealized Revaluation Stockholders' Income (Note 12)	Equity of Parent	Minority Interest	Total Stockholders' Equity
BALANCE, JANUARY 1, 2007	2,532,121,170	$25,321,211	$41,790	$6,846,264	$6,888,054	$6,956,709	$11,430,348	$18,387,057	$1,412,830	$(69,636)	$5,009,390	$(50,161)	$4,959,229	$2,786,131	$59,684,876	$2,328,145
Appropriation of 2006 earnings
Legal reserve	—	—	—	—	—	716,101	(716,101)	—	—	—	—	—	—	—	—	—
Cash dividends - $1.5 per share	—	—	—	—	—	—	(3,798,182)	(3,798,182)	—	—	—	—	—	(3,798,182)	—	(3,798,182)
Stock dividends - $0.8 per share	202,569,693	2,025,698	—	—	—	—	(2,025,698)	(2,025,698)	—	—	—	—	—	—	—	—
Remuneration to directors and supervisors	—	—	—	—	—	—	(187,867)	(187,867)	—	—	—	—	—	(187,867)	—	(187,867)
Employee bonuses	—	—	—	—	—	—	(250,489)	(250,489)	—	—	—	—	—	(250,489)	—	(250,489)
Balance after appropriation	2,734,690,863	27,346,909	41,790	6,846,264	6,888,054	7,672,810	4,452,011	12,124,821	1,412,830	(69,636)	5,009,390	(50,161)	4,959,229	2,786,131	55,448,338	2,328,145
Adjustments due to change in investee's equity	—	—	—	(5,747)	(5,747)	—	(36,254)	(36,254)	136,896	(8,390)	3,540,938	4,400	3,545,338	—	3,631,843	—
Effect of change in ownership percentage due to investees' issuance of capital stock for cash	—	—	—	3,532	3,532	—	—	—	—	—	—	—	—	3,532	—	3,532
Translation adjustments on foreign-currency equity-method investments	—	—	—	—	—	—	—	—	944,519	—	—	—	—	944,519	—	944,519

Unrealized Gains (Losses) on Financial Instruments (Note 2)

	Capital Stock Issued		Capital Surplus (Notes 2 and 19)		Retained Earnings (Notes 2 and 19)			Unrecognized Net Loss on Available-for-sale Financial Assets		Unrealized Gains (Losses) on Cash Flow Hedge		Unrealized Revaluation Stockholders'		Minority Interest	Total Stockholders' Equity
	Shares	Amount	Donations	From Long-term Investments	Total	Legal Reserve	Unappropriated	Total	Cumulative Translation Adjustments (Note 2)	Pension Cost (Note 2)	Total	Investment (Losses) of Cash Flow Hedge	Total	Investment (Losses) of Cash Flow Hedge	Total	Stockholders' Equity
Adjustments due to change in unrealized gains of available-for-sale financial assets	-	$ -	$ -	$ -	$ -	$ -	$ -	$ -	$ -	$ 2,163,390	$ -	$ 2,163,390	$ -	$ 2,163,390	$ -	$ 2,163,390
Adjustments due to change in unrealized gains of cash flow hedge	-	-	-	-	-	-	-	-	-	27,747	27,747	-	27,747	-	27,747
Impact of first-time consolidation of some subsidiaries	-	-	-	-	-	-	-	-	-	-	-	-	-	1,514,523	1,514,523
Increase in minority interest	-	-	-	-	-	-	-	-	-	-	-	-	-	141,760	141,760
Consolidated net income in 2007	-	-	-	-	-	-	10,100,422	10,100,422	-	-	-	-	10,100,422	(4,466)	10,095,956
BALANCE, DECEMBER 31, 2007	2,734,690,863	27,346,909	41,790	6,844,049	6,885,839	7,672,810	14,516,179	22,188,989	2,494,245	(78,026)	10,713,718	(18,014)	10,695,704	2,786,131	72,319,791	3,979,962	76,299,753
Appropriation of 2007 earnings
Legal reserve	-	-	-	-	-	1,006,416	(1,006,416)	-	-	-	-	-	-	-	-	-
Cash dividends - $2.4 per share	-	-	-	-	-	-	(6,563,258)	(6,563,258)	-	-	-	-	-	(6,563,258)	-	(6,563,258)
Stock dividends - $0.6 per share	164,081,451	1,640,814	-	-	-	-	(1,640,814)	(1,640,814)	-	-	-	-	-	-	-	-
Remuneration to directors and supervisors	-	-	-	-	-	-	(264,648)	(264,648)	-	-	-	-	-	(264,648)	-	(264,648)
Employee bonuses	-	-	-	-	-	-	(352,863)	(352,863)	-	-	-	-	-	(352,863)	-	(352,863)
Balance after appropriation	2,898,772,314	28,987,723	41,790	6,844,049	6,885,839	8,679,226	4,688,180	13,367,406	2,494,245	(78,026)	10,713,718	(18,014)	10,695,704	2,786,131	65,139,022	3,979,962	69,118,984
Adjustments due to change in investee's equity	-	-	-	395,484	395,484	-	(191,910)	(191,910)	599,184	(147,437)	(7,285,803)	-	(7,285,803)	-	(6,630,482)	-	(6,630,482)

Unrealized Gains (Losses) on Financial Instruments (Note 2)

Note: The remuneration to directors and supervisors of NT$196,368 thousand (US$6,296 thousand) and the bonuses to employees of NT$261,825 thousand (US$8,394 thousand) have been expensed and deducted from 2008 earnings.
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated March 5, 2010 (except for Note 4 - Translation into U.S. dollars, as to which the date is September 30, 2010))

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In Thousands)

	2007	2008	2009
	NT$	NT$	NT$	US$ (Note 4)
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	$10,095,956	$ 7,472,635	$ 8,955,010	$ 287,112
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Investment income from equity-method investees	(7,173,329)	(5,088,466)	(4,361,064)	(139,822)
Depreciation and amortization	2,455,587	2,907,644	3,768,818	120,834
Cash dividends received from equity-method investees	3,572,452	5,446,711	3,100,760	99,415
Provision (recovery of) for losses on inventories	—	402,779	(582,964)	(18,691)
Impairment loss	28,233	134,029	187,540	6,013
Unrealized foreign exchange loss (gain) on Euro exchangeable bonds	—	265,650	(170,100)	(5,454)
Gain on disposal of available-for-sale financial assets, net	(18,438)	(61,498)	(166,794)	(5,348)
Amortization of discount on Euro exchangeable bonds	—	139,491	161,809	5,188
Provision for doubtful accounts	12,885	19,794	94,657	3,035
Realized deferred income	(68,085)	(68,085)	(68,086)	(2,183)
Deferred income taxes	88,696	13,588	30,919	991
Others	(67,509)	12,139	59,071	1,894
Net changes in operating assets and liabilities
Financial assets held for trading	(439,736)	41,238	(444,886)	(14,264)
Notes receivable	(409,202)	(133,256)	(365,542)	(11,720)
Accounts receivable	(259,931)	(1,084,114)	(70,255)	(2,252)
Other receivables	(86,547)	(107,772)	(520,577)	(16,691)
Inventories	(390,388)	(919,358)	1,102,325	35,342
Other current assets	(60,202)	(166,777)	(97,265)	(3,118)
Financial liabilities held for trading	(2,471)	(572,398)	174,238	5,586
Accounts payable and accrued expenses	287,398	1,237,385	973,140	31,201
Income tax payable	(308,215)	(19,983)	51,332	1,646
Customers' deposits and advances	(3,436)	342,593	(169,835)	(5,445)
Accrued pension cost	(6,698)	(84,168)	(267)	(9)
Net cash provided by operating activities	7,247,020	10,129,801	11,641,984	373,260

F-13

	2007	2008	2009
	NT$	NT$	NT$	US$ (Note 4)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of properties and equipment and nonoperating properties	$(6,134,336)	$(12,264,180)	$(11,823,224)	$(379,071)
Acquisition of available-for-sale financial assets	(38,888)	(2,279,832)	(3,314,277)	(106,261)
Proceeds from disposal of available-for-sale financial assets	28,224	2,396,938	3,237,844	103,811
Acquisition of intangible assets	(743,327)	(120,038)	(832,000)	(26,675)
Increase in deferred charges	(279,963)	(280,920)	(268,853)	(8,620)
Acquisition of equity-method investments	—	—	(163,759)	(5,250)
Decrease (increase) in restricted assets	(282,091)	(303,734)	118,035	3,784
Increase in miscellaneous assets	(23,445)	(255,551)	(115,837)	(3,714)
Proceeds from disposal of properties and equipment and nonoperating properties	171,780	15,936	62,146	1,993
Acquisition of financial assets carried at cost - noncurrent	(132,211)	(1,244,119)	(58,821)	(1,886)
Proceeds from investees' capital return	426,913	78,095	1,761	56
Proceeds from disposal of financial assets carried at cost	—	26,252	632	20
Decrease in other notes payable	—	(1,292,000)	—	—
Net cash used in investing activities	(7,007,344)	(15,523,153)	(13,156,353)	(421,813)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term liabilities	7,538,708	30,439,974	24,973,473	800,688
Repayments of long-term liabilities	(3,844,465)	(19,240,416)	(14,823,462)	(475,263)
Cash dividends paid	(3,797,950)	(6,562,998)	(5,217,790)	(167,290)
Increase (decrease) in short-term loans	(31,987)	2,810,640	(1,559,957)	(50,015)
Increase (decrease) in short-term bills payable	(480,015)	1,362,272	(500,058)	(16,033)
Increase (decrease) in minority interest	141,760	9,062,624	(451,481)	(14,475)
Increase (decrease) in miscellaneous liabilities	(4,836)	34,401	71,713	2,299
Capital lease payment	(8,149)	(8,150)	(9,430)	(302)
Bonus paid to employees and remuneration paid to directors and supervisors	(408,290)	(549,463)	—	—
Net cash (used in) provided by financing activities	(895,224)	17,348,884	2,483,008	79,609
EFFECT OF EXCHANGE RATE CHANGES	585,441	(1,231,281)	(61,874)	(1,984)
IMPACT OF FIRST-TIME CONSOLIDATION OF SOME SUBSIDIARIES	(583,247)	—	—	—
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(653,354)	10,724,251	906,765	29,072
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	6,860,471	6,207,117	16,931,368	542,846

	2007	2008	2009
	NT$	NT$	NT$	US$ (Note 4)
CASH AND CASH EQUIVALENTS, END OF YEAR	$6,207,117	$16,931,368	$17,838,133	$571,918
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid (excluding capitalized interest)	$1,176,906	$1,470,423	$1,222,627	$39,199
Income taxes paid	$842,295	$439,667	$678,428	$21,751
NONCASH INVESTING AND FINANCING ACTIVITIES
Current portion of long-term liabilities	$4,586,197	$6,074,886	$12,295,316	$394,207
Fair values of assets and liabilities of Yuan Long Stainless Steel Co., Ltd., a subsidiary, at the date of acquisition in 2007 are summarized as follows:
Cash				$62,753
Other current assets				1,907,309
Properties and equipment, net				3,929,920
Other assets				21,393
Current liabilities				(2,121,375)
				3,800,000
Percentage of equity interest (%)				×51%
				1,938,000
Less: Other notes payable as of December 31, 2007				1,292,000
Cash paid for acquisition of Yuan Long Stainless Steel Co., Ltd.				$646,000
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated March 5, 2010 (except for Note 4 - Translation into U.S. dollars, as to which the date is September 30, 2010))

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. ORGANIZATION AND OPERATIONS

Asia Cement Corporation (the "Corporation") was incorporated in March 1957. It manufactures and sells cement, clinker, cement-related products and ready-mixed concrete. The Corporation is also required undertake reforestation activities in designated areas. The Corporation's stock has been listed on the Taiwan Stock Exchange since June 1962.

In June 1992 and September 1996, certain shares of the Corporation were sold by Far Eastern New Century Corporation (FENC, used to be known as Far Eastern Textile Ltd.) in the form of Global Depositary Shares (GDSs). Such GDSs have been quoted through the SEAQ system of the London Stock Exchange and traded through the PORTAL system of the National Association of Securities Dealers, Inc. As of December 31, 2009, the issued and outstanding GDSs aggregated 714,819 units, representing 7,148,198 shares of the Corporation.

As of December 31, 2007, 2008 and 2009, the Corporation and its subsidiaries had 4,179, 4,382 and 5,081 employees, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China. In preparing financial statements in conformity with these guidelines and principles, the Corporation and its subsidiaries are required to make certain estimates and assumptions that could affect the amounts of allowance for doubtful receivables, allowance for loss on inventory, depreciation of properties and equipment and nonoperating properties, amortization of deferred charges and intangible assets, impairment loss on assets, pension and bonuses to employees, directors and supervisors, etc. Actual results may differ from these estimates.

The Corporation and its subsidiaries' significant accounting policies are summarized as follows:

Consolidation

a. Basis of consolidation

The consolidated financial statements include the financial statements of the Corporation, its direct and indirect subsidiaries with at least 50% stockholding and other investees controlled by the Corporation.

b. Under the above basis of consolidation, the consolidated financial statements include the accounts of 41 subsidiaries in 2007 and those of 42 subsidiaries in both 2008 and 2009 as follows:

Investor	Subsidiary	Nature of Business	Percentage of Ownership as of December 31			Note
Investor	Subsidiary	Nature of Business	2007	2008	2009	Note
The Corporation	Der Ching Investment Crop. (DCI)	It engages in investment activities.	99.99%	99.99%	99.99%	—
The Corporation	Nan Hwa Cement Corp. (NHC)	It manufactures and sells cement and granulated blas - furnace slag.	99.96%	99.96%	99.96%	—

F-16

			Percentage of Ownershipas of December 31
Investor	Subsidiary	Nature of Business	2007	2008	2009	Note
	Ya Tung Ready Mixed Concrete Co., Ltd. (YTRMC)	It manufactures and sells ready-mixed concrete and cement-related products.	99.99%	99.99%	99.99%	—
	Chiahuiz Power Corp. (CHP)	It engages in power generation, planning and designing power equipment, importing and exporting of spare parts of power generation equipment, etc.	59.59%	59.59%	59.59%	—
	Asia Cement (Singapore) Pte. Ltd. (ACSPL)	It manufactures and sells cement and related products.	99.96%	99.96%	99.96%	—
	Asia Cement (China) Holdings Corp. (ACCHC)	It engages in investment activities.	93.83%	68.19%	68.19%	—
	Yali Precast and Prestressed Concrete Industrial Corp. (YLPPC)	It manufactures and sells cement and related products.	83.81%	83.81%	83.81%	—
	Asia Investment Corp. (AIC)	It engages in investment activities.	100.00%	100.00%	100.00%	—
	Fu Ming Transport Corp. (FMT)	It engages in transportation activities.	99.83%	99.83%	99.83%	—
	Asia Engineering Enterprise Corp. (AEE)	It engages in engineering activities.	98.06%	98.06%	98.06%	—
	Sunrise Industrial Holdings Ltd. (SIHL)	It engages in investment activities.	100.00%	100.00%	100.00%	—
	Yuan Long Stainless Steel Co., Ltd. (YLSS)	Stainless steel plant	51.00%	51.00%	51.00%	—
DCI	Kowloon Cement Corp. Limited (KCC)	It manufactures and sells cement and related products.	49.00%	49.00%	49.00%	Controlled by the Corporation
	Fu Shan Mineral Stone Co., Ltd. (FSMS)	It mines and sells limestone and cement-related products	99.49%	99.49%	99.49%	—
	Sichuan Yadong Cement Co., Ltd. (SIYDCCL)	It manufactures and sells cement and related products.	36.84%	—	—	DCI sold 36.84% ownership to OIHPL
CHP	Sunshine Investment Holdings Pte. Ltd. (SIHRL)	It engages in investment activities.	100.00%	—	—	SIHPL was liquidated in 2008
YTRMC	Ya Shin Ready Mixed Concrete Co., Ltd. (YSRMC)	It manufactures and sells cement and related products.	69.98%	69.98%	69.98%	—
FMT	Fu Dar Transport Corp. (FDT)	It engages in transportation activities.	99.90%	99.90%	99.90%	—
AEE	Asia Engineering Enterprise Pte. Ltd. (AEEPL)	It engages in engineering activities.	100.00%	100.00%	100.00%	—

			Percentage of Ownershipas of December 31
Investor	Subsidiary	Nature of Business	2007	2008	2009	Note
AIC	Chiahuiz Power Corp. (CHP)	It engages in power generation, planning and designing power equipment, importing and exporting of spare parts of power generation equipment, etc.	0.01%	0.01%	0.01%	Note 1
	Asia Cement Explorer Investment Ltd. (ACEIL)	It engages in investment activities.	—	100.00%	100.00%	ACEIL was incorporated in 2008
	Asia Cement Pioneer Investment Ltd. (ACPIL)	It engages in investment activities.	—	100.00%	100.00%	ACPIL was incorporated in 2008
YLPPC	Ya Li Precast Concrete India Pvt. Ltd. (YLPCIP)	It manufactures and sells cement and related products.	99.90%	99.90%	99.90%	—
ACSPL	Oriental Concrete Private Ltd. (OCPL)	It manufactures and sells ready-mixed concrete and cement-related products.	100.00%	100.00%	100.00%	—
ACSPL	ACCHC	It engages in investment activities.	6.17%	4.10%	4.10%	Note 1
ACCHC	Perfect Industrial Holdings Pte. Ltd. (PIHPL)	It engages in investment activities.	100.00%	100.00%	100.00%	—
PIHPL	Asia Continent Investment Holdings Pte. Ltd. (ACIHPL)	It engages in investment activities.	100.00%	100.00%	100.00%	—
PIHPL	Oriental Industrial Holdings Pte. Ltd. (OIHPL)	It engages in investment activities.	99.99%	99.99%	99.99%	—
ACIHPL	Jiangxi Yadong Cement Co., Ltd. (JYDC)	It manufactures and sells cement and related products.	85.00%	85.00%	85.00%	—
OIHPL	Wuhan Yadong Cement Co., Ltd. (WYDC)	It manufactures and sells cement and related products.	90.00%	90.00%	90.00%	—
	Shanghai Yadong Investment Holdings Ltd. (SHYDIHL)	It engages in investment activities.	100.00%	100.00%	100.00%	—
	Shanghai Yafu Cement Products Co., Ltd. (SHYFCP)	It manufactures and sells cement and related products.	50.00%	50.00%	50.00%	—
	Shanghai Yali Cement Products Co., Ltd. (SHYLCP)	It manufactures and sells cement and related products.	90.00%	90.00%	90.00%	—
	Hubei Yadong Cement Co., Ltd. (HYDCCL)	It manufactures and sells cement and related products.	90.00%	90.00%	90.00%	—

^{}[] F-20

Investor	Subsidiary	Nature of Business	Percentage of Ownership as of December 31			Note
			2007	2008	2009
	Yangzhou Yadong Cement Co., Ltd. (YYDCCL)	It manufactures and sells cement and related products.	10.00%	10.00%	10.00%	Note 1
	Chengdu Yali Cement Products Co., Ltd. (CYCPCL)	It manufactures and sells cement and related products.	48.78%	48.78%	48.78%	Note 1
	Hubei Yadong Cement Co., Ltd. (HYDCCL)	It manufactures and sells cement and related products.	10.00%	10.00%	10.00%	Note 1
	Sichuan Yali Concrete Produce Co., Ltd. (SYCPCL)	It manufactures and sells cement and related products.	10.00%	10.00%	10.00%	Note 1
WYDC	Huanggang Yadong Cement Co., Ltd. (HGYDC)	It manufactures and sells cement and related products.	19.51%	10.14%	—	—
	Wuhan Yali Cement Products Co., Ltd. (WYCPCL)	It manufactures and sells cement and related products	100.00%	100.00%	100.00%	—
HYDCCL	Hubei Yali Transport Co., Ltd. (HYTCL)	It engages in transportation activities.	100.00%	100.00%	100.00%	—
KCC	Kowloon Concrete Corporation Limited (KCCL)	It manufactures and sells ready-mixed concrete and cement-related products.	100.00%	100.00%	100.00%	—
SHYLCP	Shanghai Yafu Cement Products Co., Ltd. (SHYFCP)	It manufactures and sells cement and related products.	35.00%	35.00%	35.00%	Note 1

Note 1: By considering the direct and indirect ownership of shares, the investees were controlled by the Corporation.

c. Subsidiaries not included in the consolidated financial statements: None.

d. All significant transactions among the consolidated entities were eliminated in the consolidated financial statements.

Current/Noncurrent Assets and Liabilities

Current assets include cash and cash equivalents, and those assets held primarily for trading purposes or to be realized, sold or consumed within one year from the balance sheet date. All other assets such as properties, plant and equipment and intangible assets are classified as noncurrent. Current liabilities are obligations incurred for trading purposes or to be settled within one year from the balance sheet date. All other liabilities are classified as noncurrent.

YLPPC, AEE and AEEPL engage in construction related business, which have operating cycles of over one year. The assets and liabilities of the aforementioned companies related to the construction contracts are classified as current or noncurrent according to their operating cycles.

Cash Equivalents

Commercial papers and bonds sold under repurchase agreements acquired with maturities of up to three months from the date of purchase are classified as cash equivalents, whose carrying value approximates fair value.

Financial Assets and Liabilities at Fair Value through Profit or Loss

Financial instruments at fair value through profit or loss include financial assets or liabilities held for trading. On initial recognition, the financial instruments are recognized at fair value plus transaction costs and are

subsequently measured at fair value with fair value changes recognized in profit or loss. Cash dividends received, including those received in the year of investment, are recognized as current income. All regular way purchases or sales of the financial instruments are recognized and derecognized on a trade date basis.

A derivative that does not meet the criteria for hedge accounting is classified as held for trading financial assets or liabilities. When the fair value of the derivative is positive, the financial instrument is recognized as financial asset; otherwise, it is recognized as financial liability.

The fair value of financial instruments at fair value through profit or loss is determined as follows: (a) listed stocks were based on the closing price on the balance sheet date; (b) beneficiary certificates - open-end-funds were based on the net asset value on the balance sheet date; (c) financial assets and financial liabilities without quoted prices in an active market - at values determined using valuation techniques.

Available-for-sale Financial Assets

On initial recognition, available-for-sale financial assets are recognized at fair value plus transaction costs. When subsequently measured at fair value, the fair value changes are recognized directly in equity. The cumulative gain or loss that was recognized in equity is recognized in profit or loss when an available-for-sale financial asset is derecognized from the balance sheet. All regular way purchases or sales of the financial instruments are recognized and derecognized on a trade date basis.

The recognition, derecognition and the fair value bases of available-for-sale financial assets are the same with those of financial assets at fair value through profit or loss.

Cash dividends are recognized as dividend income upon the date of resolution of the stockholders, but are accounted for as reductions to the original cost of investments if such dividends are declared on the earnings of investees attributable to periods prior to the purchase of investments. Stock dividends are not recognized as current income but are accounted for only as an increase in the number of shares held. The total number of shares subsequent to the increase is used for recalculation of cost per share.

An impairment loss is recognized when there is objective evidence that the financial asset is impaired. If the amount of impairment loss decreases in the subsequent period, such decrease is recognized in equity.

Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts

Revenues are recognized when the earnings process is completed or virtually completed, and earnings are realizable and measurable. Related costs of providing services are concurrently recognized as incurred.

Sales revenues are determined at fair value under price negotiated between the Corporation and its subsidiaries and their respective buyers. Electric power revenues are calculated according to the volume of electric power sold and unit price. If the terms of sales receivables are within one year, the amount of receivables is not significantly different from fair value, and the transaction is frequent, then the sales revenues are not discounted to fair value.

Allowance for doubtful receivables is provided on the basis of review of the collectibility of individual notes receivable and accounts receivable according to the aging of receivables, credit records, and economic circumstances of the customers.

Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process. Before January 1, 2009, inventories were stated at the lower of cost or market value (replacement cost or net realizable value). Any write-down was made on a category by category basis. Market value meant replacement cost for raw materials and supplies and net realizable value for finished goods and work in process. As stated in Note 3, effective January 1, 2009, inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made item by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are stated at weighted-average cost.

F-21

Accounting for Construction Contracts

YLPPC, AEE and AEEPL undertake construction contracts extending over periods of more than one year. For these contracts, construction revenues, construction costs, and construction-in-progress are recognized at the percentage of completion measured by the units-of-work-performed - the ratio of the output achieved to date to the total expected output of contract.

Construction contracts extending over period of less than one year are accounted for by the completed-contract method. Construction revenues and construction costs are recognized only when the contract is completed.

Construction-in-progress is defined as the costs incurred to date on construction contracts being undertaken. Advance Construction Receipts is defined as the proceeds received from the customers for particular contracts not yet completed.

On the balance sheet date, for each contract, excess of construction-in-progress over the related advance construction receipts is classified as current asset; otherwise, excess of advance construction receipts over construction-in-progress is classified as current liability.

Investments Accounted for by Equity-Method

A long-term investment in which the Corporation and its subsidiaries exercise significant influence on the investee is accounted for by equity-method. Under this method, the investment is initially stated at cost and subsequently adjusted for the Corporation's share in the net income or net loss and other changes in stockholders' equity of the investee companies. Cash dividends received are accounted for as reductions in the carrying value of the investments; while stock dividends received are accounted for only as increases in the number of shares held.

As required, however, by the revised Statement of Financial Accounting Standard No. 5, "Long-term Investments in Equity Securities," starting on January 1, 2006, the cost of acquisition is subject to an initial analysis. The investment cost in excess of the fair value of identifiable net assets of the investee is recognized as goodwill. Goodwill is no longer amortized but instead tested annually for impairment. An impairment test is also required when there is evidence indicating that goodwill might be impaired due to an event or a change in the economic environment. If the equity in the fair value of the identifiable net assets of the investee exceeds the cost of investments, the excess should be assigned to noncurrent assets proportionate to their respective fair values (except for financial assets not under the equity-method, assets for disposal, deferred income tax assets and prepaid pension costs or other retirement benefit costs). If these assets are all reduced to zero, the remaining excess should be recognized as extraordinary gain. Starting on January 1, 2006, the unamortized balance of the investment cost in excess of the equity in investee's net assets is no longer amortized and is instead subject to the same accounting treatment as that for goodwill; the negative goodwill previously acquired should be amortized over the remaining estimated economic life.

When the Corporation and its subsidiaries subscribe for its investee's newly issued shares at a percentage different from its percentage of ownership in the investee, the Corporation and its subsidiaries record the change in its equity in the investee's net assets as an adjustment to investments, with a corresponding amount credited or charged to capital surplus. When the capital surplus arising from long-term investments is insufficient to cover the changes, the shortage is debited to unappropriated earnings.

The Corporation's equity in equity-method investees' net income or net loss is recognized using the treasury stock method if there are reciprocal holdings between investors and investees.

Costs of stock investments sold are determined using the moving-average method.

Financial Assets Carried at Cost

If there is no active market for an equity instrument and a reliable fair value can not be estimated, the equity instrument, including unlisted stocks, emerging stocks and private placement of securities, etc., is measured at original cost upon initial recognition. Any cash dividends received are recognized as income on the ex-dividend date. Stock dividends received are accounted for only as an increase in the number of shares held but are not recognized as investment income.

Impairment loss should be recognized and charged to current income if there is objective evidence that a financial asset is impaired. This loss can not be reversed.

F-22

^{}[] F-23

Properties and Equipment and Nonoperating Assets

Properties are stated at cost or cost plus revaluation increment, less accumulated depreciation and less accumulated impairment. Major renewals and betterments are capitalized, while maintenance and repairs are expensed currently.

When properties are retired or disposed of, their costs or costs plus revaluation increment and related accumulated depreciation are removed from the accounts, and the resulting gains or loss are credited or charged to nonoperating income or loss. Borrowing costs directly attributable to the acquisition or construction of properties, plant and equipment are capitalized as part of the cost of those assets.

Depreciation is provided on the basis of the fixed-percentage-on-declining-balance method or the straight-line method over the following estimated service lives: buildings and improvements, 3 to 60 years; machinery and equipment, 2 to 25 years; and other equipment, 1 to 25 years. Depreciation of revaluated assets is provided over the remaining service lives of the assets subsequent to the date of the revaluation. The properties that have reached their residual values but are still in use are depreciated over their newly estimated service lives.

Idle assets are stated at the lower of carrying value or net realizable value.

Intangible Assets

Intangible assets acquired are initially recorded at cost and are amortized over their estimated useful life except those with indefinite useful life which are not amortized, but instead tested for impairment annually. The useful life of such assets is reviewed at each balance sheet date to determine whether events and circumstances continue to support the indefinite useful life assessment for that asset.

Assets under Lease Contracts

Under a capital lease contract, the present value of the rent to be paid is recognized as a lease asset. Lease payable is classified as other liability. Lease assets are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over 5 to 8 years rental term. Under the interest method, the amortization of the rent paid periodically is accounted for as lease payable and interest expense.

Under an operating lease contract, rent paid is accounted for as rent expense.

Deferred Charges

Deferred charges are amortized on a straight-line method over the useful life of the respective items.

Asset Impairment

An impairment loss should be recognized if the carrying value of assets (including properties and equipment, nonoperating assets, deferred charges, and equity-method investments) exceeds their recoverable amount, and this impairment loss should be charged to current income. An impairment loss recognized in prior years can be reversed if there is a subsequent recovery in the estimates used to determine recoverable amount since the last impairment loss was recognized. However, an impairment loss is reversed only to the extent that the increased amount due to reversal does not exceed the carrying amount of an asset (net of depreciation) had no impairment loss been recognized in prior years. If an asset has been revalued in accordance with the laws, its impairment loss should first be deducted from the unrealized revaluation increments under stockholders' equity. The excess loss, if any, will then be recognized as loss in the income statement. However, to the extent that an impairment loss on the same revalued asset was previously recognized as a loss in the income statement because of insufficient revaluation surplus, a reversal of that impairment loss is recognized as a gain in the income statement. Any excess in reversal will be recognized as unrealized revaluation increment under stockholders' equity. However, an impairment loss recognized on goodwill cannot be reversed.

Exchangeable Bonds

Exchangeable bonds (i.e., bonds that can be exchanged for Far Eastern New Century Corporation's (FENC, used to be known as Far Eastern Textile Ltd.)) shares; see Note 17) are measured at total issuance price less the fair value of embedded derivatives. The liability component of bonds is measured at amortized cost

using the straight-line method. Interest and gain (loss) on bond redemption are recognized as current gain or loss. When bonds are exchanged for FENC's shares, the disposal gain or loss is measured at the book value of the liability components (including embedded derivatives). Before the maturity of the bonds, change in fair value of the embedded derivatives is recognized as current gain or loss.

Stock-based Compensation

Employee stock options granted on or after January 1, 2008 are accounted for under SFAS No. 39, "Accounting for Share-based Payment." Under the statement, the value of the stock options granted, which is equal to the best available estimate of the number of stock options expected to vest multiplied by the grant-date fair value, is expensed on a straight-line basis over the vesting period, with a corresponding adjustment to capital surplus - employee stock options. The estimate is revised if subsequent information indicates that the number of stock options expected to vest differs from previous estimates.

Pension Costs

Pension costs under defined benefit pension plan are recognized on the basis of actuarial calculations and pension costs under defined contribution pension plan are recognized on the basis of actual contributions to the individual pension accounts of employees.

If the defined benefit plan is curtailed or settled, the curtailment or settlement gain or loss is recognized as part of the net pension cost for the period.

Government Grants

Government grants are not recognized until there is reasonable assurance that the Corporation and its subsidiaries will comply with the conditions attaching to them and the grants will be received.

Government grants whose primary condition is that the Corporation and its subsidiaries should purchase or construct noncurrent assets are recognized as deferred income in the balance sheet and transferred to profit and loss on a systematic and rational basis over the useful lives of the related assets.

Other government grants are recognized as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Corporation and its subsidiaries with no future related costs are recognized in profit and loss in the period in which they become receivable.

Reserve for Settlement of Claims on Traffic Accident

Reserve for settlement of claims on traffic accident is made on the basis of past experience. The reserve is used to settle valid traffic accident claims not covered by insurance. Any payment made in excess of the reserve is charged to current expenses.

Income Tax

The Corporation and its subsidiaries adopted interperiod tax allocation and intraperiod tax allocation. Deferred income tax assets and liabilities are recognized for the tax effects of temporary differences, unused operating loss carryforwards and unused investment tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or noncurrent according to the classification of its related asset or liability. However, if a deferred asset or liability cannot be related to an asset or liability in the financial statements, then it is classified as current or noncurrent based on the expected reversal date of the temporary difference.

Tax credits for certain purchase of equipment and technology, research and development expenditures, personnel training expenditures, and equity investment acquisitions are accounted for by the flow-through method.

Adjustments of prior years' tax liabilities are added to or deducted from the current year's tax expense.

Income taxes of 10% on undistributed earnings are recorded as expense in the year when the stockholders resolve to retain the earnings.

F-24

^{}[] Foreign Currency Transactions and Translation of Foreign-currency Financial Statements

Non-derivative foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange differences arising from settlement of foreign currency assets and liabilities are recognized in profit or loss.

If the functional currency of an equity-method investee is a foreign currency, translation adjustments will result from the translation of the investee's financial statements into the reporting currency of the Corporation and its subsidiaries. Such adjustments are accumulated and reported as a separate component of stockholders' equity.

Hedging Derivative Financial Instruments

Hedging derivative financial instruments are measured at fair value. The changes in fair values of these instruments are debited or charged to either stockholders' equity or current income depending on the hedged items. The interest rate swap contracts engaged by the Corporation are for cash flow hedge purpose. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized in stockholders' equity. The amount recognized in stockholders' equity is recognized in profit or loss in the same year or years during which the hedged forecast transaction or an asset or liability arising from the hedged forecast transaction affects profit or loss. However, if all or a portion of a loss recognized in stockholders' equity is not expected to be recovered in the future, the amount that is not expected to be recovered is reclassified into profit or loss.

Reclassifications

Certain accounts in the consolidated financial statements as of and for the year ended December 31, 2007 and 2008 have been reclassified to be consistent with the presentation of the consolidated financial statements as of and for the year ended December 31, 2009.

3. REASONS AND EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE

Effect of the First Time Adoption of the Newly Issued and Revised SFASs

In March 2007, the Accounting Research and Development Foundation of Republic of China (the "ARDF") issued Interpretation No. 2007-052, which requires companies to recognize bonuses to employees and remuneration to directors and supervisors as compensation expenses beginning January 1, 2008. These bonuses and remuneration were previously recorded as appropriations from earnings. The adoption of this interpretation resulted in a decrease of NT$359,326 thousand in consolidated net income and a decrease in after income tax basic earnings per share of NT$0.12 for the year ended December 31, 2008.

On July 1, 2008, DCI and AIC adopted the newly amended SFAS No. 34, "Financial Instruments: Recognition and Measurement." The amendments to SFAS 34 mainly deal with reclassifications of financial assets at fair value through profit or loss that are held for trading. Please see Note 26 for relevant information regarding reclassifications of financial instruments.

Accounting for Inventories

On January 1, 2009, the Corporation and its subsidiaries adopted the newly revised SFAS No. 10, "Accounting for Inventories." The main revisions are (1) inventories are stated at the lower of cost or net realizable value, and inventories are written down to net realizable value item-by-item except when the grouping of similar or related items is appropriate; (2) unallocated overheads are recognized as expenses in the period in which they are incurred; and (3) abnormal costs, write-downs of inventories and any reversal of write-downs are recorded as cost of goods sold for the period. The adoption resulted in a decrease of NT$115,258 thousand (US$3,695 thousand) in net income and a decrease of NT$0.04 (US$0.001) in after income tax basic earnings per share for the year ended December 31, 2009.

4. TRANSLATION INTO U.S. DOLLARS

The consolidated financial statements are stated in New Taiwan dollars. The translations of the 2009 New Taiwan dollar amounts into U.S. dollars are included solely for the convenience of readers, using the noon buying rate of NT$31.19 to US$1.00 published by the Federal Reserve Bank of New York on September 30, 2010. The convenience translations should not be construed as representations that the New Taiwan dollar amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other exchange rate.

F-25

^{}[] 5. CASH AND CASH EQUIVALENTS

	December 31
	2007	2008	2009
	NT$	NT$	NT$	US$(Note 4)
Time deposits	$ 2,961,560	$ 9,297,610	$11,230,209	$ 360,058
Checking accounts and demand deposits	2,719,575	7,454,846	6,344,194	203,404
Commercial paper and government bondsacquired under repurchase agreements	517,504	168,988	257,932	8,270
Petty cash	7,975	9,461	5,485	176
Cash on hand	503	463	313	10
	$ 6,207,117	$16,931,368	$17,838,133	$ 571,918

As of December 31, 2007, 2008 and 2009, the balances of CHP's bank deposits, which had been pledged to China Trust Commercial Bank and China Development Industrial Bank under a syndicated loan agreement, were NT$26,106 thousand, NT$312,715 thousand and NT$300,002 thousand (US$9,618 thousand), respectively. Thus, these bank deposits were reclassified as restricted assets.

As of December 31, 2007, 2008 and 2009, the balances of JYDC's, WYDC's, SIYDCCL's, NYDC's, NYLC's, HGYDC's and HYDCCL's bank deposits, which had been mortgaged as collaterals for loans to financial institutions, were NT$476,998 thousand, NT$494,123 thousand and NT$385,222 thousand (US$12,351 thousand), respectively. Thus, these bank deposits were reclassified as restricted assets.

As of December 31, 2009, the balances of YLSS's bank deposit, which had been pledged as collateral for bank's guarantee, was NT$3,579 thousand (US$115 thousand). Thus, the bank deposit was reclassified as restricted asset.

^{}[] 6. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS - CURRENT

	December 31
	2007	2008	2009
	NT$	NT$	NT$	US$(Note 4)
Financial assets held for trading
Beneficiary certificates - open-end funds	$ 1,216,996	$ 470,398	$ 885,462	$ 28,389
Listed stocks	1,038,224	427,968	457,176	14,658
Non-delivery forward contracts	—	—	614	20
Interest rate swap contracts	10,573	—	—	—
	$ 2,265,793	$ 898,366	$ 1,343,252	$ 43,067
Financial liabilities held for trading
Exchangeable bonds' exchange option	$ —	$ 126,897	$ 269,349	$ 8,636
Cross-currency swap contracts	—	—	42,374	1,358
Forward exchange contracts	—	10,588	—	—
	$ —	$ 137,485	$ 311,723	$ 9,994

The Corporation entered into derivative contracts during the year ended December 31, 2009 to manage exposures due to exchange rate and interest rate fluctuations. The financial risk management objective of the Corporation is to minimize risks due to changes in cash flows.

F-26

Outstanding cross-currency swap contracts as of December 31, 2009 were as follows:

Contract Amount (In Thousands)	Maturity Date	Range of Interest Rates Paid	Range of Interest Rates Received
US$80,000	2010.8.18	—	0.78%-0.8%

ACCHC entered into non-delivery forward contracts during the year ended December 31, 2009 to manage exposures to exchange rate fluctuations.

Outstanding non-delivery forward contracts as of December 31, 2009 were as follows:

	Currency	Maturity Date	Contract Amount (In Thousands)
Non-delivery forward contracts	RMB/USD	2010.5.10	US$22,000

YLSS entered into forward exchange contracts during the years ended December 31, 2009 and 2008 to manage exposures due to exchange rate fluctuations. There was no outstanding contracts as of December 31, 2009. Outstanding forward exchange contracts as of December 31, 2008 was as follows:

	Currency	Maturity Date	Contract Amount (In Thousands)
Sell	EUR/USD	2009.1.12	EUR650/US$843
Sell	EUR/USD	2009.2.17	EUR1,630/US$2,166
Sell	EUR/USD	2009.3.16	EUR1,630/US$2,165

DCI entered into interest rate swap contracts during the year ended December 31, 2007 to hedge the effect of interest rate fluctuation on its liabilities with floating interest rates. There was no outstanding contracts as of December 31, 2008.

As of December 31, 2007, the information of derivative financial instrument before maturity was as follows:

Type of Transaction	December 31, 2007
Type of Transaction	Notional Amount	Fair Value	Fixed Rate	Fair Rate	Settlement Date	Maturity
Interest rate swap contracts	NT$1,000,000	$10,573	2%-2.01%	1.705%-2.39%	Quarterly	September 6, 2010

AVAILABLE-FOR-SALE FINANCIAL ASSETS

	December 31
	2007		2008		2009
	Current	Non-current	Current Non-current		Current		Non-current
	NT$	NT$	NT$	NT$	NT$	US$(Note 4)	NT$	US$(Note 4)
Listed stocks
Far Eastern New Century
Corp. (FENC)	$1,444,744	$43,454	$1,135,538	$31,940	$1,179,155	$37,806	$32,668	$1,047
U-Ming Marine Transport
Corp. (U-Ming)	268,237	2,542,494	584,249	1,430,887	586,843	18,815	2,780,014	89,132
Far Eastern International
Bank Corp. (FEIB)	331,295	678,470	268,026	294,082	313,153	10,040	494,463	15,853
Oriental Union Chemical Corp.
(OUCC)	2,571	775,260	179,947	422,869	312,897	10,032	735,297	23,575
Everest Textile Co., Ltd.
(ETCL)	4,323	2,722,243	91,137	992,089	178,025	5,708	1,840,398	59,006
Far Eastern Department
Stores Co., Ltd. (FEDS)	—	3,081,792	—	1,531,874	—	—	3,094,346	99,210
China Hi-Ment Corp. (CHC)	—	750,664	—	760,632	—	—	1,056,851	33,884
	2,159,941	10,594,377	2,317,620	5,464,373	2,660,961	85,315	10,034,037	321,707
Beneficiary certificates
Opas Fund Segregated
Portfolio Company - Opas
Fund Segregated Portfolio
Tranche B	—	—	—	—	—	—	724,738	23,236
Deutsche Far Eastern DWS
Taiwan Thematic Fund	—	—	15,440	—	—	—	—	—
	$2,159,941	$10,594,377	$2,333,060	$5,464,373	$2,660,961	$85,315	$10,758,775	$344,943

INVENTORIES

As of December 31, 2007, 2008 and 2009, the allowance for inventory devaluation was NT$196,779 thousand, NT$599,558 thousand and NT$16,594 thousand (US$532 thousand), respectively.

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2007, 2008 and 2009 was NT$23,504,945 thousand, NT$29,559,713 thousand and NT$31,843,180 thousand (US$1,020,942

thousand), respectively. The cost of inventories recognized as cost of goods sold for the year ended December 31, 2008 included NT$402,779 thousand loss on write-downs of inventories. The cost of inventories recognized as cost of goods sold for the year ended December 31, 2009 included NT$582,964 thousand (US$18,691 thousand) gain on reversal of write-downs of inventories. Previous write-downs had been reversed as a result of increased selling price in markets.

9. INVESTMENTS ACCOUNTED FOR BY EQUITY-METHOD

	December 31
	2007		2008		2009
	Carrying Amount	% of Ownership	Carrying Amount	% of Ownership	Carrying Amount	% of Ownership
	NT$		NT$		NT$	US$(Note 4)
Listed stocks
Far Eastern New Century Corporation (FENC)	$17,883,750	23.77	$16,554,474	23.77	$17,683,949	$566,975	23.77
U-Ming Marine Transport Corp. (U-Ming)	9,564,030	38.66	10,357,276	38.66	10,895,472	349,326	38.66
	27,447,780		26,911,750		28,579,421	916,301
Unlisted stocks
Yuan Ding Co., Ltd. (YDC)	4,574,384	49.99	3,792,273	49.99	4,296,837	137,763	49.99
Yue Yuan Investment Corp. (YYI)	4,090,359	36.42	2,086,491	36.42	3,540,625	113,518	36.42
Oriental Securities Corp. (OSC)	2,288,055	18.93	1,604,067	18.93	1,984,896	63,639	18.93
Far Eastern Construction Co., Ltd. (FEC)	650,613	33.55	918,155	33.55	838,866	26,895	33.55
FEDS Development Ltd. (FEDSDL)	551,276	25.00	554,222	25.00	558,888	17,919	25.00
Yuan Ding Leasing Corp. (YDLC)	362,170	43.60	336,917	43.60	340,685	10,923	43.60
Yali Transport Corp. (YLT)	354,131	49.39	198,295	49.39	286,952	9,200	49.39
Yue Ding Enterprise Corp. (YDEC)	115,246	30.84	55,942	30.84	217,845	6,984	30.84
Alliance Concrete Singapore Pte. Ltd.	142,445	33.33	180,722	33.33	150,408	4,822	33.33
Chengdu Yaxin Slag Powder Co., Ltd. (CYSPC)	38,768	49.00	48,952	49.00	120,591	3,866	49.00
Wuhan Asia Marine Transport Co., Ltd. (WAMTC)	86,491	50.00	96,687	50.00	94,747	3,038	50.00
Everstrong Iron & Steel Foundry Ltd. (EISF)	60,172	41.67	66,097	41.67	63,956	2,051	41.67
Universal Exchange Corp.	48,350	30.34	55,749	30.34	57,232	1,835	30.34
Pao-Good Industry Co., Ltd. (PGIC)	38,282	31.00	38,784	31.00	38,946	1,249	31.00
	13,400,742		10,033,353		12,591,474	403,702
	$40,848,522		$36,945,103		$41,170,895	$1,320,003

F-29

As of December 31, 2009, the investments in Mainland China refer to Table 8 (attached).

As of December 31, 2007, 2008 and 2009, the information of other investees was as follows:

a. In June 2007, the stockholders of Gold & S Corp. resolved to liquidate Gold & S Corp. The income of Gold & S Corp. for the period up to the liquidation date was included in the Corporation net income. The Corporation had received NT$40,923 thousand in June 2007.

b. In 2007 and February 2008, the Corporation invested US$40,356 thousand, equivalent to NT$1,323,545 thousand, and US$40,594 thousand, equivalent to NT$1,278,497 thousand, respectively, to acquire new shares for capital increase of ACCHC. In May 2008, ACCHC increased its capital by listing its shares on the Hong Kong Exchanges and Clearing Limited. The Corporation did not subscribe for any share, thus the Corporation's ownership of ACCHC was reduced to 68.19%.

c. In June and July 2007, the Corporation acquired outstanding shares of CHP from other individual stockholders and paid the cost amounted to NT$359,595 thousand for transferring the equity. In December 2007, the Corporation invested NT$239,005 thousand to acquire new shares for capital increase of CHP. The Corporation held 59.59% stockholding in CHP as of December 31, 2007.

d. In order to extend its business and create the benefit for stockholders, the Corporation acquires 51% stockholding in YLSS from its related party, Far Eastern Asset Management Co., Ltd., in December 2007. The acquisition cost amounted to NT$1,938,000 thousand.

e. In July 2009, OIHPL invested SGD3,131 thousand (US$2,284 thousand) to acquire new shares for capital increase of Chengdu Yaxin Slag Powder Co., Ltd. (CYSPC).

f. In July 2009, FDT and YLPPC totally invested NT$92,520 thousand (US$2,966 thousand) to acquire new shares for capital increase of YDEC.

g. The aggregate market value of the investments in listed stocks accounted for by equity-method was as follows:

December 31
	2007	2008	2009
	NT$	NT$	NT$	US$ (Note 4)
Equity-method - listed stocks	$69,907,924	$35,845,877	$65,877,188	$2,112,125

h. The investment income from equity-method investees for the years ended December 31, 2007, 2008 and 2009 were based on audited financial statements as follows:

	2007	2008	2009
	NT$	NT$	NT$	US$ (Note 4)
U-Ming	$3,453,804	$4,002,269	$2,189,588	$ 70,202
FENC	2,091,539	704,851	1,553,902	49,821
OSC	256,812	(328,445)	199,972	6,411
YYI	401,560	110,391	190,585	6,110
YDC	725,367	101,464	78,417	2,514
FEC	57,035	350,358	77,652	2,490
Others, net	187,212	147,578	70,948	2,274
	$7,173,329	$5,088,466	$4,361,064	$ 139,822

^{}[] 10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

	December 31
	2007	2008
Assets
Interest rate swap contracts	$14,553	$12,928
Liabilities
Interest rate swap contracts	$44,438	$ —

The Corporation used interest rate swap contracts to hedge fluctuation of interest rate of corporate bonds (54th and 55th tranches). The overall purpose of these contracts is to hedge the Corporation's exposure to cash flows risks. The Corporation used interest rate swap contracts to hedge interest rate fluctuation risk and periodically evaluates the effectiveness of the hedging instruments.

As of December 31, 2007 and 2008, the information of outstanding derivative financial instrument was as follows:

Type of Transaction	December 31, 2007
Type of Transaction	Notional Amount	Fair Value	Fixed Rate	Fair Rate	Settlement Date	Maturity
Interest rate swap contracts	$2,000,000	$(25,836)	1.29%-1.39%	—	Annually	From April 23, 2008 to June 8, 2009
	900,000	(18,602)	1.45%-1.75%	—
	1,100,000	14,553	1.45%	2.08044%-2.2%
	December 31, 2008
Type of Transaction	Notional Amount	Fair Value	Fixed Rate	Fair Rate	Settlement Date	Maturity
Interest rate swap contracts	$2,000,000	$12,928	1.45%-1.75%	0%-2.704918%	Annually	From February 10, 2009 to June 8, 2009

There was no outstanding contracts as of December 31, 2009.

The Corporation entered into interest rate swap contracts to hedge the effect of interest rate fluctuation on its liabilities with floating interest rates. There were no material gains or losses generated from the above for the years ended December 31, 2007 and 2008.

F-31

^{}[] FINANCIAL ASSETS CARRIED AT COST

December 31

	2007		2008		2009
	Current	Non-current	Current	Non-current	Non-current
	NT$	NT$	NT$	NT$	NT$	US$(Note 4)
Private stocks
Far Eastern International Bank (FEIB)	$ —	$ —	$ —	$1,200,205	$1,200,205	$ 38,480
Unlisted stocks
New Century InfoComm Tech Co., Ltd. (NCIC)	—	1,432,969	—	1,310,563	1,310,563	42,019
Far Eastern International Leasing Corp.	—	508,794	—	545,574	602,814	19,327
Kaohsiung Rapid Transit Corp. (KRT)	—	400,000	—	389,859	216,627	6,945
Shih Hsin Storage & Transportation Co., Ltd. (SHSTC)	—	202,061	—	202,061	202,061	6,478
Yi Tong Fiber Co., Ltd.	—	47,531	—	47,531	47,531	1,524
Ding Ding Hotel Corp. (DDH)	—	54,028	—	54,028	29,128	934
Others	271	75,282	271	62,797	59,959	1,923
	271	2,720,665	271	3,812,618	3,668,888	117,630
Beneficiary certificates
FEA Long-Short Private Placement Fund	30,000	—	—	—	—	—
	$30,271	$2,720,665	$271	$3,812,618	$3,668,888	$117,630

a. The Corporation and its subsidiaries' holding of marketable equity securities and fund with no quoted market prices and with fair values that could not be reliably measured were evaluated at cost.
b. The Corporation invested NT$400,000 thousand in KRT, which started operation in April 2008. The investment cost is amortized during the period of the chartered right. The accumulated amortization amount was NT$23,662 thousand (US$759 thousand) as of December 31, 2009.
c. The stockholders of NCIC resolved to reduce capital in 2007, DCI and AIC were entitled to receive NT$374,590 thousand from NCIC.
d. The Corporation, DIC and AIC subscribed for 157,831 thousand shares of the private placement of Far Eastern International Bank (FEIB). These stocks are restricted to be transferred according to the Securities and Exchange Act Article 43-8.
e. DCI invested NT$132,211 thousand in January 2007, NT$36,780 thousand in April 2008 and NT$57,240 thousand (US$1,835 thousand) in July 2009, respectively, to acquire new shares for capital increase of Far Eastern International Leasing Corp.
f. In 2007 and 2008, due to investees' capital reduction, FMT received NT$11,399 thousand and NT$7,704 thousand, respectively, from Fu Yu (Cayman) Venture Capital Fund, Cheng Yang Venture Capital Investment Co. and China Technology Venture Company Limited. FMT received NT$3,491 thousand from Pac-Link Fund's capital reduction in July 2008; for the amount of NT$3,491 thousand received, NT$291 thousand was recorded as deduction of book value and NT$3,200 thousand was recognized as other nonoperating income and exchange loss. In 2009, FMT received NT$1,602 thousand (US$51 thousand) from Fu Yu (Cayman) Venture Capital Fund because of capital reduction; remaining book value of NT$2,658 thousand (US$85 thousand) was recognized as impairment loss.

F-32

g. In 2009, the Corporation recognized impairment losses of NT$159,711 thousand (US$5,121 thousand) and NT$18,000 thousand (US$577 thousand) on its investment in KRT and DDH, respectively.

h. In 2007 and 2008, DCI and AIC recognized impairment losses of NT$14,444 thousand and NT$122,406 thousand on its investment in NCIC. In 2009, DCI recognized impairment losses of NT$6,900 thousand (US$221 thousand) and NT$271 thousand (US$9 thousand) on its investment in DDH and Picvue Electronics, Ltd, respectively.

i. In 2008, FDT recognized impairment losses of NT$11,623 thousand on its investment in Ding Ding Consultation Corp.

12. PROPERTIES AND EQUIPMENT, NET

	December 31
	2007	2008	2009
	NT$	NT$	NT$	US$(Note 4)
Cost
Land	$ 1,518,919	$ 1,559,800	$ 1,567,010	$ 50,241
Buildings and improvements	10,070,747	10,715,209	13,193,328	422,999
Machinery and equipment	46,024,446	50,791,953	58,892,440	1,888,183
Other equipment	5,339,909	5,747,449	6,031,366	193,375
	62,954,021	68,814,411	79,684,144	2,554,798
Accumulated depreciation
Buildings and improvements	3,216,848	3,571,001	3,831,803	122,854
Machinery and equipment	20,180,763	22,293,905	24,442,418	783,662
Other equipment	2,916,400	3,299,969	3,600,265	115,430
	26,314,011	29,164,875	31,874,486	1,021,946
Net cost	36,640,010	39,649,536	47,809,658	1,532,852
Revaluation increment
Land	1,446,161	1,446,161	1,446,161	46,366
Buildings and improvements	281,533	281,533	281,517	9,026
Machinery and equipment	575,134	574,699	558,278	17,899
Other equipment	18,480	18,271	17,576	564
	2,321,308	2,320,664	2,303,532	73,855
Accumulated depreciation
Buildings and improvements	274,905	275,395	275,841	8,844
Machinery and equipment	575,134	574,699	558,278	17,899
Other equipment	18,480	18,271	17,575	563
	868,519	868,365	851,694	27,306
Net revaluation increment	1,452,789	1,452,299	1,451,838	46,549
Construction in progress and prepayments on equipment	3,883,927	12,679,684	11,323,908	363,062
	$41,976,726	$53,781,519	$60,585,404	$1,942,463

F-33

The above properties and equipment mainly included the following:

a. The Corporation revalued its operating and nonoperating properties (Note 14) in accordance with government regulations as follows: Land, in 1983 and 1996; and other properties, in 1974, 1975 and 1981. NHC and YTRMC revalued their land in accordance with government regulations in 1982 and 1998, respectively. NHC revalued its other properties in accordance with government regulations in 1975. Portion of its properties held for lease and idle properties have been reclassified as nonoperating properties (Note 14). The revaluation increment less the reserve for land value increment tax was credited to unrealized revaluation increments. Reserve for land value increment tax was recognized as long-term liabilities.

The Land Tax Act was amended on January 30, 2005, and the decrease of land value increment tax effective February 1, 2005. Thus, the reserve for land value increment tax of NT$563,673 thousand was transferred to unrealized revaluation increment in accordance with the revised Land Tax Law.

b. YTRMC entered into a lease agreement with Gang Shan Mixed Concrete Co., Ltd. for the factory site in Gang Shan on June 1, 2006. The monthly rental payment is NT$600 thousand (US$19 thousand) starting from June 1, 2006 to May 31, 2011. Upon the expiration of lease term, the ownership of the plants and facilities will be transferred to YTRMC. The lease of land is covered by separate agreements and accounted for as operating lease transaction.

c. YTRMC entered into a lease agreement with Da Yuan Concrete Ltd. for the factory site in Yangmei on May 1, 2005. The monthly rental payment is NT$400 thousand (US$13 thousand) starting from May 1, 2005 to April 30, 2010. Upon the expiration of lease term, the ownership of all facilities will be transferred to YTRMC. The lease of land, factories and offices is covered by separate agreements and accounted for as operating lease transaction.

d. YTRMC entered into a lease agreement with Dong Tai Construction Corp. for the factory site in Hwalien Melrun on January 1, 2001. The monthly rental payment was NT$1,350 thousand starting from January 1, 2001 to December 31, 2005. Upon the expiration of lease term, the ownership of all facilities were transferred to YTRMC. The lease term of land, factories and offices was renewed until December 31, 2010 and accounted for as operating lease transaction.

e. As of December 31, 2007, 2008 and 2009, the title of land with carrying value of NT$21,450 thousand, NT$50,211 thousand and NT$57,420 thousand (US$1,841 thousand), respectively, was temporarily registered in the name of trustees who had either signed an agreement or had pledged the land to the Corporation and FSMS.

f. The capitalized interests were NT$119,162 thousand, NT$277,538 thousand and NT$251,084 thousand (US$8,050 thousand) in 2007, 2008 and 2009, respectively. The interest rates were 2.12% to 6.5%, 1.785% to 7% and 1.215% to 7.94% for 2007, 2008 and 2009, respectively.

INTANGIBLE ASSETS - OTHERS

	December 31
	2007	2008	2009
	NT$	NT$	NT$	US$(Note 4)
Land use rights	$1,480,155	$1,542,069	$2,134,938	$ 68,449
Quarry right	353,754	457,515	764,072	24,497
Others	340,081	345,823	342,303	10,975
	$2,173,990	$2,345,407	$3,241,313	$103,921

^{}[] 14. OTHER ASSETS

	December 31
	2007	2008	2009
	NT$	NT$	NT$	US$ (Note 4)
Nonoperating properties
Pledged for land use rights	$2,176,985	$2,176,985	$2,176,985	$ 69,797
For future development	1,621,965	1,545,171	1,542,501	49,455
For lease	1,483,848	1,341,764	1,287,917	41,293
Others	71,549	138,786	168,959	5,417
	5,354,347	5,202,706	5,176,362	165,962
Less: Allowance for decline in value	411,647	405,030	399,582	12,811
Accumulated impairment	110,469	110,469	110,469	3,542
	4,832,231	4,687,207	4,666,311	149,609
Deferred charges	1,319,626	1,340,174	1,618,610	51,895
Miscellaneous
Spare parts	397,829	424,026	483,110	15,489
Refundable deposits	138,314	168,907	315,204	10,106
Long-term accounts receivable	123,049	254,732	262,706	8,423
Prepaid pension	36,985	138,202	127,503	4,088
Pledged time deposits	9,821	5,000	5,000	160
Others	28,817	100,716	3,198	103
	734,815	1,091,583	1,196,721	38,369
	$6,886,672	$7,118,964	$7,481,642	$239,873

F-35

The details of nonoperating properties were as follows:

Deferred charges consisted of:

The above nonoperating land and buildings mainly included the following:

a. Asia Cement Building and Pao-Ching Building - leased to FEDS;
b. Land and building in Hwalien - leased to YLT;
c. Undeveloped parcel of land in Ling-Ya, Kaohsiung;

The lease terms of the above a-c were 1-10 years and the rents were paid monthly.

d. The Corporation granted FEDSDL the right to construct a shopping center on a parcel of land it owned with an area of 6,976 square meters located in Lin-Ya, Kaohsiung. In consideration for the foregoing and the continued use of the land for fifty years, FEDSDL shall pay the following: (a) land use right amounting to NT$1,073,000 thousand (US$34,402 thousand), and (b) annual rental amounting to 5% of the reference price of such land announced by the local government. The land use right payment received by the Corporation was recognized as an asset and as deferred income (Note 18).

e. The Corporation and FENC equally owned a parcel of land located on Tun Hwa South Road, Taipei City. Under an agreement entered into with YDC, the Corporation and FENC had agreed on the following: (a) construction by YDC of a twin towers building (Taipei Metro) on the said land, (b) continued use of the land without additional compensation for 30 years starting from the date of the completion of the building, (c) transfer to each of the Corporation and FENC 12% of the usable area of the building, and (d) transfer to FENC and the Corporation of the remaining usable area of the building after the end of 30 years in exchange for the book value of the property. In view of the foregoing agreement, the Corporation recorded the 12% of the building construction cost or NT$1,402,753 thousand (US$44,974 thousand) as building acquired and as deferred rental income from YDC (Note 18).

15. SHORT-TERM LOANS

16. SHORT-TERM BILLS PAYABLE

^{}[] Short-term bills payable were issued under guarantee obtained from financial institutions.

LONG-TERM LIABILITIES

	Current NT$	Long-Term NT$	Total NT$	US$ (Note 4)
December 31, 2007
Long-term debt
Bank loans	$ 2,186,197	$29,219,285	$31,405,482
Bonds	2,400,000	4,500,000	6,900,000
	$ 4,586,197	$33,719,285	$38,305,482
December 31, 2008
Long-term debt
Bank loans	$ 4,074,886	$32,083,765	$36,158,651
Bonds
Domestic bonds	2,000,000	4,500,000	6,500,000
Euro exchangeable bonds	—	6,611,850	6,611,850
Add: Unrealized loss	—	265,650	265,650
Less: Unamortized discount on exchangeable bonds	—	669,555	669,555
	—	6,207,945	6,207,945
	2,000,000	10,707,945	12,707,945
	$ 6,074,886	$42,791,710	$48,866,596
December 31, 2009
Long-term debt
Bank loans	$ 3,595,662	$39,154,354	$42,750,016	$1,370,632
Bonds
Domestic bonds	2,500,000	7,000,000	9,500,000	304,585
Euro exchangeable bonds	6,611,850	—	6,611,850	211,986
Add: Unrealized loss	95,550	—	95,550	3,064
Less: Unamortized discount on exchangeable bonds	507,746	—	507,746	16,279
	6,199,654	—	6,199,654	198,771
	8,699,654	7,000,000	15,699,654	503,356
	$12,295,316	$46,154,354	$58,449,670	$1,873,988

a. Domestic bonds are repayable in installments at varying amounts or in one lump-sum on maturity, with the latest maturity in September 2014. Interest rates were 0% to 2.2% in 2007, and both 0% to 3.05% for the years ended December 31, 2008 and 2009.

b. Bank loans are repayable in installments at varying amounts or in one lump-sum payment on maturity, with the latest maturity in May 2018. Interest rates were 1.7% to 7.47%, 1.412% to 7.83% and 0.312% to 7.83% for the years ended December 31, 2007, 2008 and 2009, respectively.

c. The Corporation issued US$210,000 thousand (equivalent to NT$6,611,850 thousand) zero coupon Euro exchangeable bonds due 2013 on February 20, 2008. The bonds are exchangeable, at the option of the holder thereof, into common shares of Far Eastern New Century Corporation (FENC).

The offering included the following terms:

1) The bonds are exchangeable at any time on or after March 21, 2008 and prior to the close of business on February 5, 2013. The initial exchange price per FENC's share ("Reference Share") was NT$59.09 (subject to adjustment and determined on the basis of a fixed exchange rate of NT$31.87=US$1.00).

2) Final redemption

Unless previously redeemed, purchased or exchanged, the bond will be redeemed at 104.5% on February 20, 2013.

3) Redemption at the option of the bondholders

Unless previously redeemed, purchased or exchanged, bondholders shall have the right to require the Corporation to redeem all or part of the bonds held on August 20, 2010 at 102.2%.

Bondholders can require the Corporation to redeem their holdings at 100% of the principal amount plus a premium equal to the yield (0.875%) per annum from 2.5 years after the issuance date to the redemption date on August 20, 2010.

Because bondholders have the right to require the Corporation to redeem all or part of the bonds within one year, according to Interpretation 2006-290 issued by the Accounting Research and Development Foundation, the Corporation reclassified these euro exchangeable bonds from long-term liabilities to current portion of long-term liabilities in 2009.

4) Redemption at the option of the Corporation

At any time on or after February 20, 2011 and prior to February 20, 2013, redeem the bonds in whole or in part at the early redemption amount, if the closing price of the shares, translated into U.S. dollars at the prevailing rate, for 20 out of 30 consecutive trading days, the last of which occurs not more than five trading days immediately preceding the date of redemption notice, is at least 130% of the quotient of the early redemption amount divided by the number of reference shares to be delivered upon exchange of US$100,000 principal amount of bonds on the applicable Trading Day based on the exchange price then in effect, translated into U.S. dollars at a fixed exchange rate of NT$31.87=US$1.00. The Corporation may, at its option at any time, redeem, in whole but not in part, the bonds at the early redemption amount if at least 90% of the principal amount of the bonds has already been redeemed, repurchased and cancelled, or exchange.

5) The exchange price shall be subject to adjustment in the manner, including (but not limited to):

a) The making by FENC of a free distribution of FENC common shares;

b) Subdivisions, consolidations or reclassifications of FENC common shares;

c) A dividend or an employee bonus in FENC common shares; and

d) Grant, issue or offer by FENC to the holders of FENC common shares or employees of rights or warrants to subscribe for or purchase FENC common shares at less than the then current market price or to subscribe for or purchase any securities convertible into or exchangeable for new FENC common shares at less than the then current market price. The exchange price was NT$53.08 as of December 31, 2009.

F-39

As of December 31, 2009, the bonds outstanding amounted to US$210,000 thousand and had not been converted into common shares of FENC.

d. The above bank loans included CHP's syndicated loan agreement with China Development Industrial Bank and 15 other financial institutions. The credit lines obtained amounted to NT$8,148,000 thousand and US$8,500 thousand.

As of December 31, 2009, CHP had used its credit lines as follows:

Item	Category	Amount (In Thousands)	Interest Rate/ Guarantee Fee Rate (%)	Term (Years)
A	Bank loan	NT$7,122,410 (US$228,356)	1.20-2.67	10
B	Contract bonding	NT$184,252 (US$5,907)	0.5	10
C	Contract bonding	US$6,260	0.5	7

The financial ratios that should be maintained by CHP under the syndicated loan agreement are as follows:

1) Debt ratio as of year-end (total debt/total stockholders' equity);

a) Under 250% from 2008 to 2009
b) Under 180% from 2010 to 2018.

2) Interest coverage ratio should be at least 110% from 2008 to 2018.

The above financial ratios are based on the audited financial statements. If CHP cannot meet the required ratios or their multipliers it should inform the administrator bank immediately and pay the default penalty to the syndication bank group.

18. DEFERRED INCOME

a. The deferred land-use-right on land in Ling Ya, Kaohsiung used by FEDSDL (Note 14) is amortized to income over fifty years.
b. The deferred rental on land in Taipei used by YDC (Note 14) is amortized to income over thirty years.
c. Income arising from sale of stock Investments accounted for by equity-method between the Corporation and its affiliates is deferred and recognized as income when subsequently realized.

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^{}[] 19. STOCKHOLDERS' EQUITY

a. Capital surplus

Under government regulations, capital surplus can only be used to offset deficit or for transfer to capital from capital surplus of donation and issue stocks to stockholders on the percentage they owned. The above transfer is restricted to a certain percentage of the capital surplus within one year.

Capital surplus generated from adjustments of investee's equity is restricted to be used.

Dividends payable that remained unclaimed for over five years is reversed to "Capital surplus - donations" account in the stockholders' equity section of the balance sheets.

b. Appropriation of earnings and dividend policy

The Corporation's Articles of Incorporation provide that appropriation for legal reserve should be made at 10% of annual net income after deductions for any deficit. The remainder, less special reserve based on relevant laws and regulations and any portion decided to be retained, together with unappropriated earnings of prior years, should be distributed as follows:

1) Dividends 60%
2) Bonus of stockholders 33%
3) Remuneration to directors and supervisors 3%
4) Employees bonuses 4%

The Corporation's Articles of Incorporation provide that the Corporation shall determine dividend payments taking into account cycles of the industry, capital demand in relation to specific products and services, and changes in taxation regulations. The cash dividend should not be less than 10% of the total of the aforementioned dividends and bonus of stockholders.

These appropriations shall be resolved by the stockholders in the following year and given effect to in the financial statements of that year.

The employees bonus and remuneration to directors and supervisors which estimated 4% and 3% of net income (net of the bonus to employees and bonus to directors and supervisors), respectively, were recognized for the years ended December 31, 2008 and 2009. Material differences between such estimated amounts and the amounts proposed by the Board of Directors in the following year are adjusted for in the current year. If the actual amounts subsequently resolved by the stockholders differ from the proposed amounts, the differences are recorded in the year of stockholders' resolution as a change in accounting estimate. If bonus shares are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonus by the closing price (after considering the effect of cash and stock dividends) of the shares of the day preceding the stockholders' meeting.

Legal reserve shall be appropriated until it has reached the Corporation's paid-in capital. This reserve may be used to offset a deficit. When the legal reserve has reached 50% of the Corporation's paid-in capital, up to 50% thereof may be transferred to paid-in capital.

Based on a directive issued by the Securities and Futures Bureau, an amount equal to the net debit balance of certain stockholders' equity accounts (including unrealized revaluation increment, unrealized gain or loss on financial instruments, unrecognized loss on pension cost, cumulative transaction adjustments) shall be transferred from unappropriated earnings to a special reserve. Any special reserve appropriated may be reversed to the extent of the decrease in the net debit balance.

Under the Integrated Income Tax System, ROC-resident stockholders are allowed tax credit for the income tax paid by the Corporation on earnings generated since 1998. Tax credits allocated to stockholders are based on the balance of Imputation Credit Account (ICA) on the dividend distribution date.

F-41

The appropriations of the earnings and dividends per share of 2006, 2007 and 2008 were approved in the stockholders' meeting on June 7, 2007, June 7, 2008 and June 9, 2009, respectively, as follows:

	Appropriation of Earnings				Dividend Per Share (Dollars)
	2006	2007	2008		2006	2007	2008
	NT$	NT$	NT$	US$(Note 4)	NT$	NT$	NT$	US$(Note 4)
Legal reserve	$ 716,101	$1,006,416	$ 712,274	$ 22,837
Dividends and bonus of stockholders - cash	3,798,182	6,563,258	5,217,790	167,290	$1.50	$2.40	$1.80	$0.06
Dividends and bonus of stockholders - stock	2,025,698	1,640,814	869,632	27,882	0.80	0.60	0.30	0.01
Remuneration to directors and supervisors - cash	187,967	264,648	—	—
Employees bonus - cash	250,489	352,863	—	—

The remuneration to directors and supervisors of NT$196,368 thousand (US$6,296 thousand) and the bonus to employees of NT$261,825 thousand (US$8,394 thousand) for 2008 were approved in the stockholders' meeting on June 9, 2009. The approved amounts of the remuneration to directors and supervisors were and the bonus to employees different from the accrual amounts of NT$196,691 thousand (US$6,306 thousand) and NT$262,255 thousand(US$8,408 thousand), respectively, reflected in the financial statements for the year ended December 31, 2008, and the differences of NT$323 thousand (US$10 thousand) and NT$430 thousand (US$14 thousand), respectively, resulted from estimates differences and had been adjusted in profit and loss for the year ended December 31, 2009.

As of March 5, 2010, the date of the accompanying auditors' report, the Board of Directors had not yet resolved the appropriation of the 2009 earnings. Information on earnings appropriation can be accessed through the Market Observation Post System on the Taiwan Stock Exchange Corporation's website.

20. EMPLOYEES STOCK OPTION PLANS

In April 2008, 11,578 thousand units of ACCHC options were granted to qualified employees of ACCHC and its subsidiaries. Each option entitles the holder to subscribe for one common shares of ACCHC when exercisable. The options granted are valid for 6 years and exercisable at certain percentages after the first anniversary year from the grant date. The options were granted at an exercise price equal to the closing price of ACCHC's common shares listed on the Hong Kong Exchanges and Clearing Limited on the grant date. For any subsequent changes in ACCHC's paid-in capital, the exercise price and the number of options are adjusted accordingly.

F-42

Information about employee stock options was as follows:

	2008 Number of Options (In Thousands)	2009 Number of Options (In Thousands)
Balance, beginning of year	—	11,578
Options granted	11,578
Options forfeited	—	—
Options exercised	—	—
Options expired	—	—
Balance, end of year	11,578	11,578
Options exercisable, end of year	11,578	11,578
Weighted-average fair value of options granted (HK$)	$ —	$ —

Information about outstanding options as of December 31, 2009 was as follows:

December 31, 2009

Range of Exercise Price (HK$)	Weighted-average Remaining Contractual Life (Years)
HK$4.2075	4.3
Options granted during the year ended December 31, 2009 were priced using the binomial option pricing model and the inputs to the model were as follows:
Market price	HK$ 4.95
Exercise price	HK$ 4.2075
Expected volatility	52%
Expected life (years)	1.5-2
Expected dividend yield	0.95%
Risk-free interest rate	2.318%

Compensation cost recognized was NT$35,155 thousand and NT$39,642 thousand (US$1,271 thousand) for the years ended December 31, 2008 and 2009, respectively.

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^{}[] F-44

21. OTHER OPERATING INCOME

Operating income of the Corporation and its subsidiaries (as presented in their separate income statements) not classified into their main operations (as presented in the consolidated income statements) is presented as other operating income in the consolidated income statements as follows:

22. INCOME TAX

a. A reconciliation of income tax on pretax income at statutory rate and current income tax expense was as follows:

b. Income tax expense consisted of:

c. Net deferred income taxes assets (liabilities) consisted of:

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d. As of December 31, 2009, income tax credits of CHP, YLPPC and YLSS consisted of the following:

Regulatory Basis of Tax Credits	Items	Total Creditable Amounts		Remaining Creditable Amounts		Expiry Year
Regulatory Basis of Tax Credits	Items	NT$	US$ (Note 4)	NT$	US$ (Note 4)	Expiry Year
CHP
Income Tax Law	Loss carryforwards	$ 12,618	$ 405	$ 12,618	$ 405	2013
		25,830	828	25,830	828	2016
		32,685	1,048	32,685	1,048	2017
		$ 71,133	$2,281	$ 71,133	$2,281
YLPPC
Income Tax Law	Loss carryforwards	$ 8,243	$ 264	$ 8,243	$ 264	2016
		9,265	297	9,265	297	2019
		$ 17,508	$ 561	$ 17,508	$ 561
YLSS
Statute for Upgrading	Purchase of machinery and equipment	$ 414	$ 13	$ 414	$ 13	2010
Industries No. 7		198	7	198	7	2011
Industries No. 7		$ 612	$ 20	$ 612	$ 20
Income Tax Law	Loss carryforwards	$ 2,957	$ 95	$ 2,957	$ 95	2016
		104,641	3,355	104,641	3,355	2018
		111,759	3,583	111,759	3,583	2019
		$219,357	$7,033	$219,357	$7,033
YSRMC
Income Tax Law	Loss carryforwards	$ 5,346	$ 171	$ 5,346	$ 171	2019
DCI
Income Tax Law	Loss carryforwards	$ 5,785	$ 186	$ 5,785	$ 186	2019
KCC
Income Tax Law	Loss carryforwards	$ 4,001	$ 128	$ 4,001	$ 128	2019

On January 6, 2009, the Legislative Yuan of the Republic of China passed the amendment of Article 39 of the Income Tax Law, which extends the operating losses carryforward period from five years to ten years. CHP, YLPPC and YLSS evaluated the realization of deferred tax assets according to the amended Article.

Under the Statute for Upgrading Industries No. 8, CHP's sales are exempt from income tax for five years from January 1, 2007 to December 31, 2011.

F-46

e. Information on the Imputed Income Tax System is as follows:

1) Balances of imputation credit account (ICA):

Company	December 31
Company	2007	2008	2009
	NT$	NT$	NT$	US$ (Note 4)
ACC	$1,157,282	$1,145,730	$911,142	$29,213
DCI	176,455	101,589	203,197	6,515
YTRMC	72,229	47,594	66,688	2,138
YSRMC	16,611	24,716	26,238	841
FMT	5,366	5,945	15,650	502
AEE	14,990	11,104	15,029	482
AIC	7,072	3,042	9,043	290
FDT	3,521	3,788	7,669	246
YLPPC	6,241	6,241	6,241	200
FSMS	1,268	2,560	5,454	175
NHC	10,782	5,531	2,461	79
CHP	1,680	2,514	1,596	51
YLSS	41	41	748	24

2) Imputation tax credit ratio (ICA ratio):

Company	December 31
Company	2007	2008	2009
	(Actual)	(Actual)	(Expected)
ACC	10.47%	14.34%	9.36%
DCI	33.88%	—	33.88%
YTRMC	33.55%	34.39%	33.36%
YSRMC	33.49%	33.60%	—
FMT	16.00%	—	12.64%
AEE	24.48%	19.61%	14.77%
AIC	15.83%	—	9.77%
FDT	28.43%	—	18.43%
YLPPC	—	—	—
FSMS	—	33.33%	40.60%
NHC	35.39%	36.01%	30.12%
CHP	—	—	—
YLSS	—	—	—

Certain entities did not have ICA ratio due to their net loss or all their earnings were distributed.

The imputation credits allocated to the stockholders are based on the ICA balance as of the date of dividend distribution. The estimated creditable ratio for the 2009 earnings appropriation may be adjusted when the imputation credits are distributed.

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^{}[] Unappropriated earnings of the Corporation

December 31

	2007	2008	2009
	NT$	NT$	NT$	US$ (Note 4)
Unappropriated earnings generated before January 1, 1998	$ 1,841,713	$1,841,713	$ 1,841,713	$ 59,048
Unappropriated earnings generated on and after January 1, 1998	$12,674,466	$9,969,199	$11,030,611	$353,659

f. The latest years of income tax returns which had been examined and cleared by the tax authorities were as follows:

Company	Year
ACC	2006
DCI	2007
YTRMC	2005
YSRMC	2007
FMT	2007
AEE	2007
AIC	2007
FDT	2007
YLPPC	2007
FSMS	2006
NHC	2007
CHP	2007(Note1)
YLSS	2007(Note2)

Note 1: The tax returns through 2007 of CHP had been examined by the tax authorities. However, CHP disagreed with the examination result on the income tax returns from 2001 to 2003. CHP filed administrative proceedings to settle matters on the 2001 to 2005 tax returns and application for reexamination of 2006 and 2007 tax returns during 2007 to 2009. The said administrative proceedings were declined by the administrative court and petition for review has been filed with the authorized commission. Justifies as a result of 2001 to 2003 and 2005 were brought up the appeal of the administration litigation. Appeals for 2002 and 2003 tax returns were declined by the Supreme Court. CHP accrued the related income tax expense.

Note 2: The tax returns of 2006 of YLSS hadn't been examined by the tax authorities.

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EARNINGS PER SHARE

	Amount (Numerator)				Shares (Denominator) (Thousands)	EPS (Dollars)
	Before Income Tax		After Income Tax		Shares (Denominator) (Thousands)	Before Income Tax		After Income Tax
	NT$	US$ (Note 4)	NT$	US$ (Note 4)		NT$	US$ (Note 4)	NT$	US$ (Note 4)
2007
Basic earnings per share
Consolidated net income	$10,765,905		$10,095,956
Less: Minority interest in net loss	(64,155)		(4,466)
Basic earnings per share
Consolidated net income of common stockholders	$10,830,060		$10,100,422		2,985,736	$3.63		$3.38
2008
Consolidated net income	$ 7,869,514		$ 7,472,635
Less: Minority interest in net income	151,856		157,993
Basic earnings per share
Consolidated net income of common stockholders	7,717,658		7,314,642		2,985,736	$2.58		$2.45
Add: Effect of potential dilutive common stock	—		—		9,218
Diluted earnings per share
Income for the year attributable to common stockholders plus effect of potential dilutive common stock	$ 7,717,658		$ 7,314,642		2,994,954	$2.58		$2.44
2009
Consolidated net income	$ 9,673,059	$310,133	$ 8,955,010	$287,112
Less: Minority interest in net income	1,087,181	34,856	1,070,001	34,306
Basic earnings per share
Consolidated net income of common stockholders	8,585,878	275,277	7,885,009	252,806	2,985,736	$2.88	$0.09	$2.64	$0.08
Add: Effect of potential dilutive common stock	—	—	—	—	10,207
Diluted earnings per share
Income for the year attributable to common stockholders plus effect of potential dilutive common stock	$ 8,585,878	$275,277	$ 7,885,009	$252,806	2,995,943	$2.87	$0.09	$2.63	$0.08

F-49

The weighted average number of shares outstanding for EPS calculation has been retroactively adjusted for the issuance of stock dividends. This adjustment caused the basic after income tax EPS for the years ended December 31, 2007 and 2008 to decrease from NT$3.69 to NT$3.38 and NT$2.52 to NT$2.45, respectively.

The ARDF issued Interpretation 2007-052 that requires companies to recognize bonuses paid to employees and remuneration to directors and supervisors as compensation expenses beginning January 1, 2008. These bonuses were previously recorded as appropriations from earnings. If the Corporation may settle the bonus to employees by cash or shares, the Corporation should presume that the entire amount of the bonuses will be settled in shares and the resulting potential shares should be included in the weighted average number of shares outstanding used in the calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the entire amount of the bonuses by the closing price of the shares at the balance sheet date. Such dilutive effect of the potential shares should be included in the calculation of diluted EPS until the stockholder resolve the number of shares to be distributed to employees at their meeting in the following year.

24. PENSION

The Pension Plan under the Labor Pension Act (the "LPA") is a defined contribution pension plan. Starting from July 1, 2005, the Corporation, NHC, CHP, YTRMC, FMT, YLPPC, AEE, YLSS, YSRMC and FDT contribute monthly an amount equal to 6% of the employees' monthly wages to the employees' individual pension accounts. Pension costs under the defined contribution pension plan for the years ended December 31, 2007, 2008 and 2009 were summarized as follows:

	December 31
	2007	2008	2009
Company	NT$	NT$	NT$	US$(Note 4)
ACC	$ 8,551	$ 9,760	$ 9,202	$ 295
YTRMC	7,787	8,343	8,283	266
FMT	3,690	4,481	4,223	135
FDT	2,713	2,521	4,081	131
CHP	1,987	2,029	2,038	65
YSRMC	803	782	705	23
YLPPC	760	894	1,069	34
NHC	147	173	166	5
YLSS	—	4,470	4,648	149
	$26,438	$33,453	$34,415	$1,103

The Pension Plan under the Labor Standards Law (the "LSL") provides for a defined benefit pension plan. This pension plan provides benefits based on the employee's length of service and average salary or wage of six months or last month before retirement. The Corporation and its subsidiaries mentioned above contribute monthly to their respective pension funds amounts equal to 2% to 15% of monthly salaries and wages. The funds are administered by the employees' pension fund committees and deposited in committees' name in the Bank of Taiwan.

The Corporation makes contributions to a pension fund that is deposited in financial institutions or invested in listed stocks by the employees' pension fund committee before October 1986.

The employees of DCI, AIC and FSMS are the same as those of the Corporation. Therefore, DCI, AIC and FSMS had neither pension plans nor actuarial calculations. Subsidiaries incorporated in Hong Kong, Singapore and Mainland China had recognized pension cost under their government's regulations of NT$24,227 thousand, NT$40,525 thousand and NT$48,307 thousand (US$1,549 thousand) for the years ended December 31, 2007, 2008 and 2009, respectively.

F-50

^{}[] Defined benefit pension information is summarized as follows:

a. Pension cost

	2007	2008	2009
	NT$	NT$	NT$	US$(Note 4)
Service cost	$ 46,201	$ 45,720	$ 43,050	$ 1,380
Interest cost	50,244	50,371	46,407	1,488
Expected return on pension assets	(61,986)	(93,326)	(63,906)	(2,049)
Amortization	7,880	(67,595)	13,393	430
Loss on curtailment or settlement	(564)	2,544	296	9
Net pension cost (gain)	$ 41,775	$(62,286)	$ 39,240	$ 1,258

b. Reconciliation of the funded status of the plan and accrued pension cost or prepaid pension:

d. Actuarial assumptions

	December 31
	2007	2008	2009
Discount rate used in determining present values	3%-3.5%	2.5%-3.5%	2.25%-3.5%
Future salary increase rate	1%-3%	1%-2%	1%-3%
Expected rate of return on plan assets	2.5%-3.5%	2.5%-3.5%	2%-3.5%

e. The changes in the pension fund are summarized as follows:

As of December 31, 2007, 2008 and 2009, the fund included investments of NT$160,579 thousand (US$5,148 thousand) in listed stocks with market values of NT$2,494,881 thousand, NT$1,489,477 thousand and NT$2,366,780 thousand (US$75,882 thousand), respectively.

EMPLOYEES-RELATED EXPENSES, DEPRECIATION AND AMORTIZATION EXPENSES

	2007
	Classified as Operating Cost	Classified as Operating Expenses	Classified as Nonoperating Expenses and Losses	Total
	NT$	NT$	NT$	NT$
Employees - related expenses
Salary	$1,359,935	$591,030	$ —	$1,950,965
Labor and health insurance	78,625	31,125	—	109,750
Pension	64,801	27,563	2,218	94,582
Others	47,826	20,977	—	68,803
	$1,551,187	$670,695	$ 2,218	$2,224,100
Depreciation	$1,911,605	$210,059	$54,871	$2,176,535
Amortization	252,935	22,341	3,776	279,052

2008
	Classified as Operating Cost	Classified as Operating Expenses	Classified as Nonoperating Expenses and Losses	Total
	NT$	NT$	NT$	NT$
Employees - related expenses
Salary (Note)	$1,504,206	$658,228	$ —	$2,162,434
Labor and health insurance	97,377	29,620	—	126,997
Pension	5,371	6,544	(223)	11,692
Others	125,256	72,595	—	197,851
	$1,732,210	$766,987	$ (223)	$2,498,974
Depreciation	$2,098,233	$394,854	$42,047	$2,535,134
Amortization	320,895	16,377	35,238	372,510
2009
	Classified as Operating Cost	Classified as Operating Expenses	Classified as Nonoperating Expenses and Losses	Total
	NT$ US$(Note 4)	NT$ US$(Note 4)	NT$ US$(Note 4)	NT$ US$(Note 4)
Employees - related expenses
Salary (Note)	$1,912,544	$61,319	$795,513	$25,506	$ — $2,708,057
Labor and health insurance	107,255	3,439	32,829	1,052	— — 140,084
Pension	87,878	2,818	34,084	1,092	— — 121,962
Others	183,111	5,870	59,657	1,914	— — 242,768
	$2,290,788	$73,446	$922,083	$29,564	$ — $3,212,871
Depreciation	$3,025,663	$97,007	$293,295	$9,404	$38,642
Amortization	377,746	12,111	31,370	1,006	2,102

Note: The salary expense for the years ended December 31, 2008 and 2009 included bonuses paid to employees of NT$267,446 thousand and NT$255,030 thousand (US$8,177 thousand), respectively.

^{}[] 26. FINANCIAL INSTRUMENTS

a. Fair value information

	December 31
	2007		2008		2009
	Carrying Value	Fair Value	Carrying Value	Fair Value	Carrying Value		Fair Value
	NT$	NT$	NT$	NT$	NT$	US$ (Note 4)	NT$	US$ (Note 4)
Assets
Investments accounted for by equity-method
Quoted Market price	$27,447,780	$69,907,924	$26,911,750	$35,845,877	$28,579,421	$916,301	$65,877,188	$2,112,125
Liabilities
Bonds payable (including current portion)	6,900,000	6,777,553	12,707,945	12,521,237	15,699,654	503,355	16,392,776	525,578

b. The methods and significant assumptions applied in determining fair values of financial instruments were as follows:

1) Short-term financial instruments (other than short-term investments) - the carrying amounts of cash and cash equivalents, notes and accounts receivable, other receivables, restricted assets, short-term loans, short-term bills payable, accounts payable and accrued expense, other notes payable, dividends and bonuses payable and lease payment, approximate their fair values because of the short maturities of these instruments.

2) If quoted market prices are available, these are used as fair values of financial instruments at fair value through profit or loss, available-for-sale financial assets and investment in listed stocks accounted for by equity-method.

For those instruments with no quoted market prices, their fair values are determined using valuation techniques incorporating estimates and assumptions consistent with those generally used by other market participants to price financial instruments.

3) The fair values of financial assets carried at cost and investment in unlisted stocks accounted for by equity-method with no quoted market prices can not be estimated because related stocks have no active market and a reliable determination of their fair value entails an unreasonably high cost.

4) The fair value of long-term liabilities is measured at present value of expected cash flows. Since the interest rate is floating, fair value approximates carrying value.

5) The fair values of domestic bonds payable and exchangeable bond are based on the over-the-counter quotations and closing prices of Singapore Exchange Ltd. at the end of December, respectively.

6) For refundable deposits paid and guarantee deposits received, fair values are estimated at their carrying amounts.

7) Derivative financial instruments - based on valuation results provided by banks.

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c. Fair values of financial assets and liabilities based on quoted market prices or valuation technique were as follows:

	Quoted Market Prices				Valuation Techniques
	December 31				December 31
	2007	2008	2009		2007	2008	2009
	NT$	NT$	NT$	US$(Note4)	NT$	NT$	NT$	US$(Note4)
Assets
Financial assets at fair value through profit or loss	$ 2,255,220	$ 898,366	$ 1,343,252	$ 43,067	$10,573	—$	—$	—
Available-for-sale financial assets	12,754,318	7,797,433	13,419,736	430,258	—	—	—	—
Hedging derivative financial assets	—	—	—	—	14,553	12,928	—	—
Liabilities
Financial liabilities at fair value through profit or loss	—	10,588	—	—	—	126,897	311,723	9,994
Hedging derivative financial liabilities	—	—	—	—	44,438	—	—	—

d. Valuation gains and losses arising from changes in fair value of financial instruments determined using valuation techniques were gains of NT$13,044 thousand, gains of NT$582,986 thousand and losses of NT$184,826 thousand (US$5,926 thousand) for the years ended December 31, 2007, 2008 and 2009, respectively.

e. The financial assets exposed to fair value interest rate risk amounted to NT$3,350,190 thousand, NT$8,353,682 thousand and NT$12,343,870 thousand (US$395,764 thousand) as of December 31, 2007, 2008 and 2009, respectively, and the financial liabilities exposed to fair value interest rate risk amounted to NT$15,260,781 thousand, NT$22,042,781 thousand and NT$24,994,512 thousand (US$801,363 thousand) as of December 31, 2007, 2008 and 2009, respectively. The financial assets exposed to cash flow interest rate risk amounted to NT$3,275,008 thousand, NT$8,840,787 thousand and NT$5,709,207 thousand (US$183,046 thousand) as of December 31, 2007, 2008 and 2009, respectively, and the financial liabilities exposed to cash flow interest rate risk amounted to NT$27,236,463 thousand, NT$35,144,064 thousand and NT$39,715,392 thousand (US$1,273,337 thousand) as of December 31, 2007, 2008 and 2009, respectively.

f. Information on financial risks:

1) Market risk

The Corporation and its subsidiaries are exposed to market risk since the fair value of financial assets held for trading and available for sale assets held by the Corporation and its subsidiaries are influenced by market price. Interest rates of long term liabilities are floating, thus interest expense is influenced by interest rate fluctuation. The fair value of exchangeable bonds with fixed interest rate is affected by changes in market interest rates.

The interest rate swap ("IRS") contracts are used to hedge interest rate fluctuations on liabilities with fixed interest rates. Since the interest receivable and payable are settled at net amounts on the settlement date, the market risk is immaterial.

2) Credit risk

F-55

risk exposure on each financial instrument are the same as the carrying value. The Corporation and its subsidiaries' evaluation of credit risk exposure as of December 31, 2007, 2008 and 2009 was immaterial because all counter-parties are reputable financial institutions with good credit ratings.

3) Liquidity risk

The Corporation and its subsidiaries have sufficient operating capital to meet cash flow requirements. Thus, the Corporation and its subsidiaries do not have significant liquidity risk.

The Corporation and its subsidiaries are exposed to liquidity risk because of financial assets carried at cost held by the Corporation and its subsidiaries with no active market. The Corporation and its subsidiaries estimate that the effect is not material since it is a small portion of consolidated assets. The financial assets held for trading and available for sale assets held by the Corporation and its subsidiaries have active markets, thus, the Corporation and its subsidiaries could sell them easily.

4) Cash flow risk from interest rate fluctuations

The Corporation and its subsidiaries have short-term loans and long-term liabilities with floating interest rates. As a result, the effective interest rates on these loans will change as the market interest rates change.

The Corporation and its subsidiaries have sufficient operating capital to meet cash demand, so there is no material fund raising risk. The interest rates of interest rate swap contracts have been fixed, so there is no material cash flow risk.

g. Reclassifications

On July 1, 2008, DCI and AIC reclassified its financial assets in accordance with the newly amended SFAS No. 34, "Financial Instruments: Recognition and Measurement." The fair values at the reclassification date were as follows:

	Before Reclassifications	After Reclassifications
	NT$	NT$
Financial assets at fair value through profit or loss - held for trading	$768,601	$ —
Available-for-sale financial assets	—	768,601
	$768,601	$768,601

In view of DCI's and AIC's intention of not selling the abovementioned financial assets held for trading within a short period of time as a result of the economic instability and deterioration of the world's financial markets that has occurred during the third quarter of 2008, DCI and AIC reclassified these held for trading financial assets to available-for-sale financial assets.

The carrying amounts and fair values of the reclassified financial assets (excluding those that had been derecognized) as of December 31, 2008 and 2009 were as follows:

	2008		2009
	Years Ended December 31
	Carrying Amount	Fair Value	Carrying Amount		Fair Value
	NT$	NT$	NT$	US$ (Note 4)	NT$	US$ (Note 4)
Available-for-sale financial assets	$475,453	$475,453	$605,676	$19,419	$605,676	$19,419

The gains or losses recorded for the reclassified financial assets (excluding those that had been derecognized before December 31, 2008 and 2009, respectively) for the years ended December 31, 2008 and 2009 and the pro forma gains or losses assuming no reclassifications had been made were as follows:

Years Ended December 31
	2008		2009
	Gains (Losses) Recorded	Pro Forma Gains (Losses)	Gains (Losses) Recorded		Pro Forma Gains (Losses)
	NT$	NT$	NT$	US$ (Note 4)	NT$	US$ (Note 4)
Available-for-sale financial assets	$—	$(293,148)	$—	$—	$332,632	$10,665

27. RELATED-PARTY TRANSACTIONS

a. The related parties and their relationships with the Corporation and its subsidiaries are as follows:

Related Party	Relationship with the Consolidated Entities as of December 31, 2009
Far Eastern New Century Corp. (FENC)	Major stockholder and equity-method investee of the Corporation
U-Ming Marine Transport Corp. (U-Ming)	Equity-method investee
Yuan Ding Co., Ltd. (YDC)	Equity-method investee
Yali Transport Corp. (YLT)	Equity-method investee
Oriental Securities Corp. (OSC)	Equity-method investee
FEDS Development Ltd. (FEDSDL)	Equity-method investee
Everstrong Iron & Steel Foundry Ltd. (EISF)	Equity-method investee
Yuan Ding Leasing Corp. (YDLC)	Equity-method investee
Far Eastern Construction Co., Ltd. (FEC)	Equity-method investee
Alliance Concrete Singapore Pte. Ltd. (Alliance)	Equity-method investee
Chengdu Yaxin Slag Powder Co., Ltd. (CYSPC)	Equity-method investee
Wuhan Asia Marine Transport Co., Ltd. (WAMTC)	Equity-method investee
U-Ming Marine Transport (Singapore) Pte. Ltd. (UMS)	Subsidiary of U-Ming
Far EasTone Telecommunications Co., Ltd. (Far EasTone)	Same chairman as the Corporation
Far Eastern Department Stores Ltd. (FEDS)	Same chairman as the Corporation
Oriental Union Chemical Corp. (OUCC)	Same chairman as the Corporation
Far Eastern Medical Foundation (FETMF)	Same chairman as the Corporation
Far Eastern Y. Z. Hsu Science and Technology Memorial Foundation (FETSTMH)	Same chairman as the Corporation
Yuan-Ze University	Same chairman as the Corporation
New Century InfoComm Tech Co., Ltd. (NCIC)	Same chairman as the Corporation
Far Eastern Resources Development Co. (FERD)	Same chairman as the Corporation
Far Eastern International Bank Corp. (FEIB)	The chairman of the Corporation is its vice-chairman
China Hi-Ment Corp. (CHC)	The Corporation is one of its directors
Far Eastern General Contractor Inc. (FEGC)	Related party in substance
Air Liquide Far Eastern Ltd. (ALFE)	Related party in substance
Ding Ding Hotel Co., Ltd. (DDH)	Related party in substance
Ding Ding Management Consultants Co., Ltd. (DDMC)	Related party in substance
Far Eastern Asset Management Co., Ltd.	Related party in substance

^{}[] Related Party

^{}[] Relationship with the

^{}[] Consolidated Entities as of December 31, 2009

Oriental Resources Development Ltd.	Related party in substance
Oriental Institute of Technology	Related party in substance
Far Eastern International Leasing Corp.	Related party in substance
Far Eastern Fibertech Co., Ltd. (FEF)	Related party in substance
J-Power Investment Netherlands B.V. (J-Power)	The stockholder of CHP
Oriental Petrochemicals Co., Ltd.	The chairman of the Corporation is its director
Nan Gong Corp. (NGC)	Stockholder of YSRMC
Jwu Jiang Corp. (JJC)	Stockholder of YSRMC
Lian Fang Corp. (LFC)	Stockholder of YSRMC
He Huei Corp. (HHC)	Stockholder of YSRMC
Others	Others are the chairman, general manager, directors and supervisors of the consolidated entities and its affiliates in Mainland China.

b. The related-party transactions were conducted under normal terms. The significant balances and transactions with related parties except those disclosed in the consolidated financial statements and in other notes, are summarized as follows:

Years Ended December 31

	2007		2008		2009
	NT$	% to Total	NT$	% to Total	NT$	US$(Note 4)	% to Total
1) Net sales
FEGC	$ 289,878	1	$ 341,344	1	$ 746,556	$23,936	2
Alliance	312,189	1	510,298	2	369,397	11,843	1
Others	119,041	—	239,859	—	397,705	12,751	1
	$ 721,108	2	$1,091,501	3	$1,513,658	$48,530	4
2) Other operating income
Transportation revenue
FENC	$ 209,755	27	$ 223,753	43	$ 177,649	$ 5,696	21
ALFE	114,437	14	91,669	17	81,470	2,612	10
Others	68,027	9	106,378	20	136,374	4,372	17
	$ 392,219	50	$ 421,800	80	$ 395,493	$12,680	48
3) Cost of sales
Freight expense
U-Ming	$ 544,275	2	$ 527,044	2	$ 719,033	$23,053	2
YLT	229,553	1	205,042	1	206,789	6,630	1
UMS	378,903	1	473,205	1	205,732	6,596	—
Others	109,820	—	118,170	—	162,184	5,200	—
	$1,262,551	4	$1,323,461	4	$1,293,738	$41,479	3

F-58

Years Ended December 31

	2007		2008		2009
	NT$	% to Total	NT$	% to Total	NT$	US$ (Note 4)
Purchase
CHC	$ 87,516	1	$ 82,708	1	$ 63,645	$ 2,041
EISF	40,365	—	50,443	—	34,203	1,097
OUCC	51,781	—	43,818	—	25,006	802
Others	1,442	—	25,595	—	30,472	976
	$181,104	1	$202,564	1	$153,326	$ 4,916
Factory overhead
NGC	$ 20,863	—	$ 21,327	—	$ 19,151	$ 614
JJC	19,048	—	19,129	—	17,004	545
Others	19,640	—	20,114	—	22,003	706
	$ 59,551	—	$ 60,570	—	$ 58,158	$ 1,865
4) Operating expenses - rental
YDC	$ 46,136	2	$ 45,211	2	$ 45,067	$ 1,445
Others	15,982	1	7,344	—	11,611	372
	$ 62,118	3	$ 52,555	2	$ 56,678	$ 1,817
5) Rental income
YDC	$208,291	57	$209,284	56	$206,243	$ 6,612
FEDS	87,203	24	87,204	23	87,203	2,796
Others	56,137	15	71,150	19	66,589	2,135
	$351,631	96	$367,638	98	$360,035	$11,543
6) Rental costs and expenses
YDC	$ 36,922	21	$ 33,372	21	$ 38,236	$ 1,226
Others	10,099	6	10,099	6	10,659	342
	$ 47,021	27	$ 43,471	27	$ 48,895	$ 1,568
7) Donation (accounted for under other nonoperating expenses and losses)
FETSTMH	$ 1,394	—	$ 2,015	—	$ 90,571	$ 2,904
FETMF	130,000	33	70,000	21	—	—
Yuan-Ze University	15,000	4	—	—	—	—
	$146,394	37	$ 72,015	21	$ 90,571	$ 2,904

F-59

	2007		2008		2009
	NT$	% to Total	NT$	% to Total	NT$	US$ (Note 4)
8) Accounts receivable
FEGC	$ 64,874	2	$131,505	3	$269,174	$ 8,630
FEDS	—	—	74,271	1	134,135	4,301
Alliance	81,655	2	111,940	2	60,731	1,947
Others	124,884	3	158,412	3	200,593	6,431
	$ 271,413	7	$476,128	9	$664,633	$21,309
9) Other receivables
ALFE	$ —	—	$ —	—	$ 28,767	$ 922
YDC	26,978	10	27,284	7	26,659	855
Others	8,882	4	9,465	3	7,816	251
	$ 35,860	14	$ 36,749	10	$ 63,242	$ 2,028
10) Other current assets
Prepaid selling cost
U-Ming	$ 15,000	1	$ 15,000	1	$ 15,000	$ 481
Others	—	—	—	—	141	4
	$ 15,000	1	$ 15,000	1	$ 15,141	$ 485
11) Miscellaneous assets - refundable deposits
YDC	$ 10,811	1	$ 10,811	1	$ 10,811	$ 347
Others	12	—	187	—	188	6
	$ 10,823	1	$ 10,998	1	$ 10,999	$ 353
12) Accounts payable and accrued expenses
U-Ming	$ 78,288	2	$103,547	2	$ 94,306	$ 3,024
Others	113,381	3	113,020	2	152,819	4,899
	$ 191,669	5	$216,567	4	$247,125	$ 7,923
13) Other notes payable (Note 9)
Far Eastern Asset Management Co., Ltd.
	$1,292,000	100	$ —	—	$ —	$ —

F-60

c. Compensation of directors, supervisors and management personnel:

	Years Ended December 31
	2007	2008	2009	US$
	NT$	NT$	NT$	(Note 4)
Salaries	$ 68,435	$ 44,939	$ 33,914	$1,087
Incentives	17,441	14,853	13,379	429
Special compensation	960	960	960	31
Bonus	136,875	240,746	219,168	7,027
	$223,711	$301,498	$267,421	$8,574

Note: The estimated compensation of directors, supervisors and bonuses to management personnel for the years ended December 31, 2007, 2008 and 2009 were included.

ASSETS PLEDGED OR MORTGAGED

The following assets are pledged or mortgaged as collaterals for certain commercial paper issued, short-term loans and long-term liabilities and as refundable deposits for the construction contract.

	December 31
	2007	2008	2009	US$
	NT$	NT$	NT$	(Note 4)
Properties and equipment, net	$13,809,039	$13,247,279	$12,688,725	$406,820
Investments accounted for by equity-method	6,628,211	5,109,507	5,360,596	171,869
Nonoperating properties, net (land and buildings)	2,831,189	2,829,452	2,827,801	90,664
Available-for-sale financial assets - current	533,000	440,076	400,704	12,847
Restricted assets - bank deposits	503,104	806,838	688,803	22,084
Financial assets carried at cost - noncurrent	—	656,000	648,316	20,786
Available-for-sale financial assets - noncurrent	1,491,450	1,246,800	1,927,741	61,807
Pledged fixed deposit (accounted for as miscellaneous assets)	9,821	5,000	5,000	160
	$25,805,814	$24,340,952	$24,547,686	$787,037

^{}[] COMMITMENT AND CONTINGENCIES AS OF DECEMBER 31, 2009

a. Unused letters of credit of NT$641,406 thousand (US$20,564 thousand), JPY98,314 thousand, US$184 thousand, EUR944 thousand and CHF56 thousand of the Corporation, NHC, AEE and YLSS.

b. Guarantees of notes issued by related parties:

	NT$	US$ (Note 4)
The Corporation
DCI	$4,572,200	$146,592
YTRMC	740,000	23,726
NHC	694,944	22,281
YLPPC	509,081	16,322
AEE	496,120	15,906
YSRMC	150,000	4,809
AIC	50,000	1,603
	$7,212,345	$231,239
DCI
FSMS	$ 50,000	$ 1,603
YLPPC
YLPCIP	$ 9,500	$ 305
FMT
FDT	$ 100,000	$ 3,206
JYDC
NYDC (RMB15,000 thousand)	$ 70,177	$ 2,250
NYLC (US$2,500 thousand)	79,850	2,560
	$ 150,027	$ 4,810

c. To construct plants and build related facilities, CHP entered into an operating lease (December 2001 to December 2021) and pledge land use rights (December 2001 to December 2051) with Taiwan Sugar Corporation (TSC) to rent TSC's lands. Rental and royalty is paid annually and adjusted at the latest values announced by the government. If land use rights expire, the operating lease agreement will end at the same time. Rental and royalty in 2007, 2008 and 2009 were as follows:

	Years Ended December 31
	2007	2008	2009
	NT$	NT$	NT$	US$ (Note 4)
Factory overhead	$1,738	$1,775	$1,756	$56
Operating expenses	364	364	364	12
	$2,102	$2,139	$2,120	$68

d. CHP signed land lease contracts with several companies. According to all land lease contracts, future rental and royalty are as follows:

Year	NT$	US$ (Note 4)
2010	$ 2,208	$ 71
2011	2,208	71
2012	2,208	71
2013	2,208	71
2014	2,208	71
	$11,040	$355

Rental and royalty are estimated by the latest actual rental and royalty expenditure amounts.

e. CHP entered into agreements on the following transactions:

1) Purchase of natural gas from Chinese Petroleum Corporation.
2) Electricity purchase from and sale to Taiwan Power Company.
3) Acquire operating and maintenance, long-term service and operating guarantee from General Electric International, Inc.

f. All the land, factories, offices and machines of YTRMC are rental properties. The term of the lease is from two to ten years through June 30, 2017. Future minimum rentals under the aforementioned operating leases are as follows:

Year	Rental
Year	NT$	US$ (Note 4)
2010	$122,363	$ 3,923
2011	85,717	2,748
2012	81,017	2,598
2013	81,017	2,598
2014	71,932	2,306
	$442,046	$14,173

The aggregate estimated lease payments under a capital lease arrangement for the next two years are as follows:

Year	Lease Payments
Year	NT$	US$ (Note 4)
2010	$ 8,800	$282
2011	3,000	96
	$11,800	$378

g. YLSS was under contracts to acquire properties for NT$7,189 thousand (US$230 thousand); of which NT$280 thousand (US$9 thousand) have been paid and accounted for prepayments on equipment.

h. FSMS signed lease contracts for operating with Hualien Forest District Office. According to lease contracts, future rental are as follows:

Year	Rental
	NT$	US$ (Note 4)
2010	$2,020	$64
2011	432	14
2012	236	8
2013	236	8
2014 and after	98	3
	$3,022	$97

i. FSMS signed a contract of limestone transportation for business need in 2009. This transporting expense is charged by actual transport quantity and estimated payments amounts to NT$21,647 thousand (US$694 thousand) for the year ended 2010.

j. The estimated payments for construction of building plants, land access, plant and machinery of JYDC, NYLC, JYLTC, HYDCCL, HGYDC, YYDCCL and SIYDCCL in the future amount to RMB500,837 thousand.

k. ACCHC, OIHPL, JYDC, CYCDCL, WYDC, SYTCL, HYDCCL, SHYLCP, YYDCCL and SHYFCP signed operating lease contracts for operations. The aggregate estimated lease payments under the operating lease contracts for the next years are as follows:

Year	Lease Payments (In Thousands of RMB)
2010	$ 5,689
2011	3,209
2012	3,209
2013	3,209
2014 and after	50,972
	$66,288

30. SUBSEQUENT EVENTS

The registration of the capital increase of Pacific Liu-Tung Investment Corporation (PLT) had been nullified by the Department of Commerce, Ministry of Economic Affairs, ROC on February 3, 2010. The matter has no significant impact on the Corporation and its subsidiaries since they did not have direct stockholdings in PTL or participate in the management of PLT.

In order to strengthen financial structure and fulfill mid-long term operating capital; on February 5, 2010, the Corporation issued five-year nonconvertible bond amounting to NT$5,000,000 thousand (US$160,308 thousand), with 1.9% interest calculated and paid annually.

31. ADDITIONAL DISCLOSURES REQUIRED FOR PUBLIC COMPANIES

Following are the additional disclosures required by the Securities and Futures Bureau for the Corporation and investees:

a. Financing provided: Table 1 (attached).

b. Endorsement/guarantee provided: Table 2 (attached).

c. Marketable securities held: Table 3 (attached).

d. Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: Table 4 (attached).

e. Acquisition of individual real estate at costs of at least NT$100 million or 20% of the paid-in capital: None.

f. Disposal of individual real estate at prices of at least NT$100 million or 20% of the paid-in capital: None.

g. Total purchase from or sale to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 5 (attached).

h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 6 (attached).

i. Names, locations, and related information of investees on which the Company exercises significant influence: Table 7 (attached).

j. Derivative financial instrument transactions

1) The Corporation: Please refer to Notes 6, 10 and 26.

2) YLSS entered into derivative contracts during the year ended December 31, 2008 and 2009, and to manage exposures due to exchange rate fluctuations. There are no due contracts as of December 31, 2009.

Outstanding forward exchange contracts as of December 31, 2008 were as follows:

	Currency	Maturity Date	Contract Amount (In Thousands)
Sell	EUR/USD	2009.1.12	EUR650/US$843
Sell	EUR/USD	2009.2.17	EUR1,630/US$2,166
Sell	EUR/USD	2009.3.16	EUR1,630/US$2,165

3) ACCHC entered into Non-Delivery Forward (NDF) contracts during the year ended December 31, 2009 to manage exposures due to exchange rate fluctuations. Outstanding NDF contracts as of December 31, 2009 were as follows:

	Currency	Maturity Date	Contract Amount (In Thousands)
NDF	RMB/USD	2010.5.10	US$22,000

4) DCI entered into interest rate swap contracts to hedge fluctuations on floating interest rates. Certain information was as follows:

December 31, 2007

Financial assets held for trading

Interest rate swap contracts

$10,573

DCI didn't enter into derivative financial instrument transaction in 2008 and 2009. As of December 31, 2007, the information of the outstanding derivative financial instrument was as follows:

Type of Transaction	December 31, 2007
Type of Transaction	Notional Amount	Fair Value	Fixed Rate	Fair Rate	Settlement Date	Maturity
Interest rate swap contracts	NT$1,000,000	$10,573	2%-2.01%	1.705%-2.39%	Quarterly	September 6, 2010

DCI entered into interest rate swap contract to hedge the effect of interest rate fluctuation on its liabilities with floating interest rates. Thus, no material gains or losses generated from the above for the year ended December 31, 2007.

k. Investment in Mainland China

1) Investee company name, the description of the primary business activity and products, issued capital, nature of the relationship, capital inflow or outflow, ownership interest, gain or loss on investment, amounts received on investment, and the limitation on investment: Table 8 (attached).

2) Significant direct or indirect transactions with investee, prices, payment terms, and unrealized gain or loss: None.

l. Business relationships and significant intercompany transactions: Table 9, 10 and 11 (attached).

F-66

^{}[] F-67

32. SEGMENT INFORMATION

a. The Corporation and its subsidiaries engage in six industry segments - cement, electric power, investment, engineering, transportation and stainless steel.

The industry segment information for the years ended December 31, 2007, 2008 and 2009 were as follows:

	2007
	Cement	Electric Power	Investment	EngineeringTransportation		Stainless Steel	Total
	NT$	NT$	NT$	NT$	NT$	NT$	NT$
Operating revenue from segment	$27,415,966	$6,647,657	$262,506	$789,519	$830,877	—	$35,946,525
Operating income (loss) from segment	$3,622,945	$96,101	$233,123	$34,233	$(25,587)	—	$3,960,815
Nonoperating income and gains							8,652,359
Nonoperating expenses and losses							1,847,269
Income before income tax							$10,765,905
Identifiable assets	$49,123,819	$12,376,005	$2,623,307	$878,761	$1,203,035	$5,573,898	$71,778,825
Intangible assets							2,209,722
Long-term investments							54,178,117
Total assets							$128,166,664
Depreciation and amortization							$2,455,587
Capital expenditure							$6,134,336

^{}[] F-68

	2008
	Cement	Electric Power	Investment	Engineering Transportation		Stainless Steel	Total
	NT$	NT$	NT$	NT$	NT$	NT$	NT$
Operating revenue from segment	$32,257,864	$8,101,805	$119,721	$524,049	$821,815	$2,180,234	$44,005,488
Operating income (loss) from segment	$3,999,549	$557,279	$(175,281)	$39,718	$2,851	$(905,366)	$3,518,750
Nonoperating income and gains							7,405,282
Nonoperating expenses and losses							3,054,518
Income before income tax							$7,869,514
Identifiable assets	$71,074,925	$12,317,557	$5,604,263	$848,780	$958,878	$4,842,032	$95,646,435
Intangible assets							2,364,090
Long-term investments							46,222,094
Total assets							$144,232,619
Depreciation and amortization							$2,907,644
Capital expenditure							$12,264,180

^{}[] F-69

	2009
	Cement	Electric Power	Investment	Engineering Transportation		Stainless Steel	Total
	NT$	NT$	NT$	NT$	NT$	NT$	NT$
Operating revenue from segment	$36,013,063	$7,236,404	$339,337	$626,714	$825,778	$3,038,420	$48,079,716
Operating income (loss) from segment	$5,255,029	$635,569	$19,100	$(19,730)	$43,598	$(5,146)	$5,928,420
Nonoperating income and gains							6,200,271
Nonoperating expenses and losses							2,455,632
Income before income tax							$9,673,059
Identifiable assets	$81,957,601	$12,300,922	$3,838,750	$898,673	$1,245,157	$4,617,568	$104,858,671
Intangible assets							3,270,962
Long-term investments							55,598,558
Total assets							$163,728,191
Depreciation and amortization							$3,768,818
Capital expenditure							$11,823,224

^{}[] F-70

	2009
	Cement	Electric Power	Investment	EngineeringTransportation		Stainless Steel	Total
	US$(Note 4)	US$(Note 4)	US$(Note 4)	US$(Note 4)	US$(Note 4)	US$(Note 4)	US$(Note 4)
Operating revenue from segment	$1,154,635	$232,010	$10,880	$20,093	$26,476	$97,416	$1,541,510
Operating income (loss) from segment	$168,484	$20,378	$612	$(633)	$1,398	$(165)	$190,074
Nonoperating income and gains							198,790
Nonoperating expenses and losses							78,731
Income before income tax							$310,133
Identifiable assets	$2,627,688	$394,387	$123,076	$28,813	$39,922	$148,047	$3,361,933
Intangible assets							104,872
Long-term investments							1,782,576
Total assets							$5,249,381
Depreciation and amortization							$120,834
Capital expenditure							$379,071

b. The information on geographic areas is disclosed for the years ended December 31, 2007, 2008 and 2009 were as follows:

	2007
	Mainland China	Taiwan	Other Foreign Area	Adjustment and Eliminating Entry	Consolidated
	NT$	NT$	NT$	NT$	NT$
Geographic area
Net sales to unaffiliated customers	$ 9,741,243	$16,989,217	$685,506	$ —	$ 27,415,966
Transfer between consolidated parties	2,859,356	2,952,607	—	(5,811,963)	—
	12,600,599	19,941,824	685,506	(5,811,963)	27,415,966
Electric power revenue	—	6,647,657	—	—	6,647,657
Other operating income	304,929	1,794,265	308,323	(524,615)	1,882,902
Total operating revenue	$12,905,528	$28,383,746	$993,829	$(6,336,578)	$ 35,946,525
Segment income (loss)	$ 1,740,240	$ 2,218,131	$ (12,170)	$ 14,614	$ 3,960,815
Nonoperating income and gains					8,652,359
Nonoperating expenses and losses					1,847,269
Income before income tax					$ 10,765,905
Identifiable assets					$ 71,778,825
Intangible assets					2,209,722
Long-term investments					54,178,117
Total assets					$128,166,664

	2008
	Mainland China	Taiwan	Other Foreign Area	Adjustment and Eliminating Entry	Consolidated
	NT$	NT$	NT$	NT$	NT$
Geographic area
Net sales to unaffiliated customers	$14,737,749	$16,541,630	$978,485	$—	$32,257,864
Transfer between consolidated parties	4,481,988	3,272,371	—	(7,754,359)	—
	19,219,737	19,814,001	978,485	(7,754,359)	32,257,864
Electric power revenue	—	8,101,805	—	—	8,101,805
Sales of stainless steel	—	2,180,234	—	—	2,180,234
Other operating income	422,487	1,805,029	678,264	(1,440,195)	1,465,585
Total operating revenue	$19,642,224	$31,901,069	$1,656,749	$(9,194,554)	$44,005,488
Segment income (loss)	$2,743,515	$813,187	$(181,393)	$143,441	$3,518,750
Nonoperating income and gains					7,405,282
Nonoperating expenses and losses					3,054,518
Income before income tax					$7,869,514
Identifiable assets					$95,646,435
Intangible assets					2,364,090
Long-term investments					46,222,094
Total assets					$144,232,619

	2009
	Mainland China	Taiwan	Other Foreign Area	Adjustment and Eliminating Entry	Consolidated
	NT$	NT$	NT$	NT$	NT$
Geographic area
Net sales to unaffiliated customers	$20,369,835	$14,944,753	$698,475	$—	$36,013,063
Transfer between consolidated parties	4,661,524	2,323,698	94,790	(7,080,012)	—
	25,031,359	17,268,451	793,265	(7,080,012)	36,013,063
Electric power revenue	—	7,236,404	—	—	7,236,404
Sale of stainless steel	—	3,038,420	—	—	3,038,420
Other operating income	471,266	2,162,860	515,905	(1,358,202)	1,791,829
Total operating revenue	$25,502,625	$29,706,135	$1,309,170	$(8,438,214)	$48,079,716
Segment income (loss)	$4,112,126	$2,114,995	$(309,889)	$11,188	$5,928,420
Nonoperating income and gains					6,200,271
Nonoperating expenses and losses					2,455,632
Income before income tax					$9,673,059
Identifiable assets					$104,858,671
Intangible assets					3,270,962
Long-term investments					55,598,558
Total assets					$163,728,191

	2009
	Mainland China	Taiwan	Other Foreign Area	Adjustment and Eliminating Entry	Consolidated
	US$ (Note 4)	US$ (Note 4)	US$ (Note 4)	US$ (Note 4)	US$ (Note 4)
Geographic area
Net sales to unaffiliated customers	$653,089	$479,152	$22,394	$—	$1,154,635
Transfer between consolidated parties	149,455	74,502	3,039	(226,996)	—
	802,544	553,654	25,433	(226,996)	1,154,635
Electric power revenue	—	232,010	—	—	232,010
Sale of stainless steel	—	97,416	—	—	97,416
Other operating income	15,110	69,345	16,541	(43,547)	57,449
Total operating revenue	$817,654	$952,425	$41,974	$(270,543)	$1,541,510
Segment income (loss)	$131,841	$67,810	$(9,936)	$359	$190,074
Nonoperating income and gains					198,790
Nonoperating expenses and losses					78,731
Income before income tax					$310,133
Identifiable assets					$3,361,933
Intangible assets					104,872
Long-term investments					1,782,576
Total assets					$5,249,381
c. Export sales in 2007, 2008 and 2009 were less than 10% of the aggregate net sales.
d. Information of major customers
	2007		2008		2009
	NT$	%	NT$	%	NT$ US$(Note 4) %
Taiwan Power Company	$6,647,657	19	$8,101,805	19	$7,236,404

^{}[] TABLE 1

ASIA CEMENT CORPORATION AND INVESTEES

FINANCING PROVIDED

YEAR ENDED DECEMBER 31, 2009

(IN THOUSANDS OF NEW TAIWAN DOLLARS, UNLESS STATED OTHERWISE)

No.

Financier

Counter-party

Financial Statement Account

Maximum Balance for the Period

Ending Balance

Interest Rate

Type of Financing

Transaction Amounts

Reasons for Short-term Financing

Allowance for Doubtful Accounts

Collateral

Financing Limit for Each Borrowing Company

Financing Company's Financing Amount Limits

Item

Value

ACCHC

YYDCCL

Other receivables

US$30,000 thousand

US$10,000 thousand

2.553%

Necessary for short-term financing

$—

Operating capital

$—

—

$—

10% of net worth (US$101,260 thousand)

50% of net worth (US$506,301 thousand)

JYDC

Other receivables

US$30,000 thousand

US$20,000 thousand

2.486%

Necessary for short-term financing

—

Operating capital

—

Same as above

HYDCCL

Other receivables

US$20,000 thousand

2.598%

Necessary for short-term financing

—

Operating capital

—

Same as above

SIYDCCL

Other receivables

US$30,000 thousand

US$20,000 thousand

2.266%

Necessary for short-term financing

—

Operating capital

—

Same as above

Note: The net value was calculated based on audited financial statement as of December 31, 2009.

^{}[] TABLE 2

ASIA CEMENT CORPORATION AND INVESTEES

ENDORSEMENT/GUARANTEE PROVIDED

YEAR ENDED DECEMBER 31, 2009

(IN THOUSANDS OF NEW TAIWAN DOLLARS, UNLESS STATED OTHERWISE)

No.	Endorsement/ Guarantee Provider	Guaranteed Party		Limits on Each Guaranteed Party's Endorsement/ Guarantee Amounts	Maximum Balance for the Period	Ending Balance	Value of Collaterals Property, Plant, or Equipment	Ratio of Accumulated Amount of Collateral to Net Equity of the Latest Financial Statement	Maximum Collateral/ Guarantee Amounts Allowable
No.	Endorsement/ Guarantee Provider	Name	Nature of Relationship		Maximum Balance for the Period	Ending Balance	Value of Collaterals Property, Plant, or Equipment		Maximum Collateral/ Guarantee Amounts Allowable
0	ACC	DCI	A subsidiary of the Corporation	50% of net worth ($37,542,516)	$4,577,300	$4,572,200	None	6	100% of net worth ($75,085,031)
		YTRMC	A subsidiary of the Corporation	Same as above	740,000	740,000	None	1	Same as above
		NHC	A subsidiary of the Corporation	Same as above	717,947	694,944	None	1	Same as above
		YLPPC	A subsidiary of the Corporation	Same as above	963,844	509,081	None	1	Same as above
		AEE	A subsidiary of the Corporation	Same as above	604,799	496,120	None	1	Same as above
		YSRMC	A subsidiary of the Corporation	Same as above	150,000	150,000	None	—	Same as above
		AIC	A subsidiary of the Corporation	Same as above	50,000	50,000	None	—	Same as above
1	DCI	FSQE	A subsidiary of the Corporation	100% of net worth ($9,330,252)	50,000	50,000	None	1	200% of DCI's net worth ($18,660,503)
2	YLPPC	Ya Li Precast Concrete India Pvt. Ltd.	A subsidiary of the Corporation	100% of net worth ($85,948)	9,500	9,500	None	11	200% of YLPPC's net worth ($171,896)

No.	Endorsement/ Guarantee Provider	Guaranteed Party		Limits on Each Guaranteed Party's Endorsement/ Guarantee Amounts	Maximum Balance for the Period	Ending Balance	Value of Collaterals Property, Plant, or Equipment	Ratio of Accumulated Amount of Collateral to Net Equity of the Latest Financial Statement	Maximum Collateral/ Guarantee Amounts Allowable
No.	Endorsement/ Guarantee Provider	Name	Nature of Relationship		Maximum Balance for the Period	Ending Balance	Value of Collaterals Property, Plant, or Equipment		Maximum Collateral/ Guarantee Amounts Allowable
3	FMT	FDT	A subsidiary of the Corporation	100% of net worth ($1,101,538)	$100,000	$100,000	None	9	200% of FMT's net worth ($2,203,076)
4	JYDC	NYDC	A subsidiary of the Corporation	100% of net worth (RMB2,035,294 thousand)	RMB40,000 thousand	RMB15,000 thousand	None	1	200% of JYDC's net worth (RMB4,070,589 thousand)
4	JYDC	NYLC	A subsidiary of the Corporation	Same as above	RMB20,000 thousand and US$2,500 thousand	US$2,500 thousand	None	1	Same as above

Note: The net value was calculated based on audited financial statement as of December 31, 2009.

^{}[] TABLE 3

MARKETABLE SECURITIES HELD

DECEMBER 31, 2009

Holding Company Name	Marketable Securities Type and Investee Name	Relationship with the Holding Company	Financial Statement Account	December 31, 2009				Note
Holding Company Name	Marketable Securities Type and Investee Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
ACC	Beneficiary certificates
	Deutsche Far Eastern DWS Taiwan Flagship Security Investment Trust Fund	—	Financial assets at fair value through profit or loss - current	10,000,000	$161,200	—	$161,200	Note 3
	Common stocks
	Far EasTone	The same chairman	Available-for-sale financial assets - current	28,470,372	1,086,145	0.87	1,086,145	Notes 2 and 3
	FEDS	The same chairman	Available-for-sale financial assets - noncurrent	67,433,685	2,474,816	5.56	2,474,816	Note 3
	OUCC	The same chairman	Same as above	57,969,566	1,484,021	7.20	1,484,021	Note 3
	CHC	The Company is its director	Same as above	20,728,350	872,663	9.17	872,663	Note 3
	FEIB	The chairman of the Corporation is its vice-chairman	Same as above	40,052,004	480,624	2.07	480,624	Notes 2 and 3
	KRT	—	Financial assets carried at cost - noncurrent	40,000,000	216,627	4.00	216,627	Note 4
	FEIB	The chairman of the Corporation is its vice-chairman	Same as above	14,088,124	110,870	0.73	151,262	Notes 2 and 4
	DDH	Related party in substance	Same as above	3,891,637	21,079	13.73	20,926	Note 4
	Taiwan Stock Exchange Corporation	—	Same as above	6,589,714	23,752	1.16	332,170	Note 5

^{}[] F-79

Holding Company Name	Marketable Securities Type and Investee Name	Relationship with the Holding Company	Shares or Units	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
C.T. International LTD. (original Sino-American Development Corp.)	—	Same as above	355,296	$8,133	0.37	$10,965	Note 5
China Trade & Development Corp.	—	Same as above	250,003	3,902	0.38	5,738	Note 5
Pan Asia Engineer & Constructors Corp.	The Corporation is its director	Same as above	1,184,356	2,250	1.36	18,435	Note 5
ACCHC	A subsidiary of the Corporation	Investments accounted for by equity-method	1,061,209,202	22,054,344	68.19	20,212,215	Note 3
FETL	An investee accounted for by equity-method	Same as above	1,107,915,325	17,683,949	23.77	44,316,613	Notes 2 and 3
U-Ming	An investee accounted for by equity-method	Same as above	331,701,152	10,895,472	38.66	21,560,575	Notes 2 and 3
DCI	A subsidiary of the Corporation	Same as above	520,069,685	9,329,319	99.99	9,329,319	Note 4
YYI	An investee accounted for by equity-method	Same as above	179,587,463	3,540,625	36.42	3,540,625	Note 4
CHP	A subsidiary of the Corporation	Same as above	280,093,521	3,112,072	59.59	2,785,772	Note 4
YDC	An investee accounted for by equity-method	Same as above	178,707,648	3,050,754	35.50	3,050,754	Note 4
ACSPL	A subsidiary of the Corporation	Same as above	10,495,495	2,248,204	99.96	2,248,204	Note 4
AIC	A subsidiary of the Corporation	Same as above	118,145,000	1,996,989	100.00	1,996,989	Note 4
OSC	An investee accounted for by equity-method	Same as above	135,092,154	1,984,896	18.93	1,984,896	Note 4
YLSS	A subsidiary of the Corporation	Same as above	102,000,000	1,434,245	51.00	1,110,650	Note 4
YTRMC	A subsidiary of the Corporation	Same as above	119,382,860	1,379,967	99.99	1,379,967	Note 4
FMT	A subsidiary of the Corporation	Same as above	29,518,518	1,099,593	99.93	1,099,593	Note 4
FEDSDL	An investee accounted for by equity-method	Same as above	50,000,000	558,888	25.00	558,888	Note 4
NHC	A subsidiary of the Corporation	Same as above	26,132,827	521,809	99.96	521,809	Note 4
AEE	A subsidiary of the Corporation	Same as above	6,630,831	461,128	98.06	461,128	Note 4

December 31, 2009

^{}[] F-80

Holding Company Name	Marketable Securities Type and Investee Name	Relationship with the Holding Company	Financial Statement Account	December 31, 2009				Note
Holding Company Name	Marketable Securities Type and Investee Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
	YDLC	An investee accounted for by equity-method	Same as above	34,640,189	$340,685	43.60	$340,685	Note 4
	YLT	An investee accounted for by equity-method	Same as above	4,939,183	286,952	49.39	286,952	Note 4
	YLPPC	A subsidiary of the Corporation	Same as above	16,241,083	72,033	83.81	72,033	Note 4
	EISF	An investee accounted for by equity-method	Same as above	3,300,000	63,956	41.67	63,956	Note 4
	SIHL	A subsidiary of the Corporation	Same as above	90,000	45,590	100.00	45,590	Note 4
DCI	Beneficiary certificates
	Deutsche Far Eastern DWS Taiwan Thematic Fund	—	Financial assets at fair value through profit or loss - current	10,000,000	135,200	—	135,200
	DFE DWS Global Multi-asset Income Plus FOF	—	Same as above	5,000,000	52,150	—	52,150
	Polaris Taiwan Top 50 Tracker Fund	—	Same as above	610,000	34,434	—	34,434
	Deutsche Far Eastern DWS Taiwan Bond Security Investment Trust Fund	—	Same as above	1,833,036	20,478	—	20,478
	UPAMC Pentium Fund	—	Same as above	444,445	12,942	—	12,942
	FSITC Europe Dynamic Blanced Fund	—	Same as above	1,000,000	10,000	—	10,000
	TIIM Prime-Balance Fund	—	Same as above	818,331	10,286	—	10,286
	PCA Asia Pacific Infrastructure Fund	—	Same as above	1,000,000	10,030	—	10,030
	ING CHB Asia Pacific High Dividend Fund Accumulate	—	Same as above	1,000,000	10,560	—	10,560
	ING Global High Dividend Fund Accumulate	—	Same as above	628,536	8,184	—	8,184
	Fubon China Growth Fund	—	Same as above	1,500,000	7,500	—	7,500

^{}[] F-81

^{}[] F-82

Holding Company Name	Marketable Securities Type and Investee Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units	Carrying Value	Percentage of Ownership
China Steel Corporation	—	Same as above	250,000	$8,250	—	$8,250
Greatwall Ent	—	Same as above	225,000	7,920	0.05	7,920
Hiwin Technologies Corp.	—	Same as above	190,000	7,952	0.09	7,952
Sinopac Financial Holdings Company Limited	—	Same as above	600,000	7,740	0.01	7,740
Nantex Industry Co., Ltd.	—	Same as above	312,000	7,613	0.10	7,613
Creative Sensor Inc.	—	Same as above	300,000	7,560	0.24	7,560
Dynapack International Technology Corporation	—	Same as above	64,000	7,232	0.05	7,232
Holiday Entertainment Co., Ltd.	—	Same as above	190,000	6,204	0.10	6,204
Hu Lane Associate Inc.	—	Same as above	80,000	5,584	0.11	5,584
Yeun Chyang Industrial Co., Ltd.	—	Same as above	200,000	5,500	0.05	5,500
Channel Well Technology Co., Ltd.	—	Same as above	150,000	4,867	0.08	4,867
Txc Corporation	—	Same as above	80,000	4,712	0.03	4,712
Want Want China Holdings Limited	—	Same as above	200,000	4,630	0.02	4,630
Au Optronics Corp.	—	Same as above	104,000	4,035	—	4,035
Asia Vital Components Co., Ltd.	—	Same as above	88,000	3,520	0.03	3,520
Goldsun Development & Construction Co., Ltd.	—	Same as above	220,155	3,247	0.02	3,247
Chunghwa Picture Tubes, Ltd.	—	Same as above	698,385	2,870	0.01	2,870
Taiwan Sakura Corporation	—	Same as above	163,000	2,738	0.06	2,738
Lelon Electronics Corp.	—	Same as above	120,000	2,034	0.08	2,034
Vanguard International Semiconductor Corporation	—	Same as above	77,610	1,250	—	1,250
Taiwan Cooperative Bank	—	Same as above	50,000	1,005	—	1,005
FEIB	The chairman of the Corporation is its vice-chairman by the major stockholder	Available-for-sale financial assets - current	25,871,567	310,459	1.34	310,459

^{}[] F-83

^{}[] F-84

^{}[] F-85

Holding Company Name	Marketable Securities Type and Investee Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
YSRMC		A subsidiary of the Corporation	Investments accounted for by equity-method	6,998,000	$52,469	69.98	$52,469
FMT	Beneficiary certificates
	Deutsche Far Eastern DWS Taiwan Bond Security Investment Trust Fund	—	Financial assets at fair value through profit or loss - current	2,477,320	27,675	—	27,675
	Deutsche Far Eastern DWS Taiwan Thematic Fund	—	Same as above	1,054,350	14,255	—	14,255
	DFE DWS Global Multi-asset Income Plus FOF	—	Same as above	1,000,000	10,410	—	10,410
	Common stocks
	Tong Yang Industry Co., Ltd.	—	Financial assets at fair value through profit or loss - current	50,000	2,940	0.01	2,940
	Sanyo Electric (Taiwan) Co., Ltd.	—	Same as above	130,000	4,433	0.04	4,433
	Lien Chang Electronic Enterprise Co., Ltd.	—	Same as above	224,000	5,611	0.23	5,611
	E.Sun Financial Holding Company, Ltd.	—	Same as above	150,000	2,003	—	2,003
	Elite Semiconductor Memory Technology Inc.	—	Same as above	90,000	5,094	—	5,094
	Asia Vital Components Co., Ltd.	—	Same as above	70,000	2,800	0.03	2,800
	Channel Well Technology Co., Ltd	—	Same as above	180,000	5,841	0.10	5,841
	Chinese Gamer International Corporation	—	Same as above	5,000	2,120	0.01	2,120
	Ardentec Corporation	—	Same as above	80,000	1,700	0.02	1,700
	Shenmao Technology Inc.	—	Same as above	63,000	4,442	0.07	4,442
	Entire Technology Co., Ltd.	—	Same as above	10,000	2,300	0.01	2,300

^{}[] F-86

Holding Company Name	Marketable Securities Type and Investee Name	Relationship with the Holding Company	Financial Statement Account	December 31, 2009				Note
Holding Company Name	Marketable Securities Type and Investee Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
	Lite-On Semiconductor Corp.	—	Same as above	250,000	$6,038	0.06	$6,038
	Thye Ming Industrial Co., Ltd.	—	Same as above	170,000	8,126	0.10	8,126
	Holiday Entertainment Co., Ltd.	—	Same as above	130,000	4,245	0.07	4,245
	FENC	The chairman of the Corporation is its vice-chairman	Available-for-sale financial assets - current	4,719,815	188,792	0.10	188,792
	Everest Textile Co., Ltd.	The same chairman	Same as above	12,272,666	83,577	2.60	83,577
	OUCC	The chairman of the Corporation is its chairman	Same as above	1,051,620	26,921	0.13	26,921
	FEDS	—	Available-for-sale financial assets - noncurrent	842,338	30,914	0.07	30,914
	Yi Tong Fiber Co., Ltd.	—	Financial assets carried at cost - noncurrent	5,840,505	47,531	5.94	58,137
	Cheng Yang Venture Capital Investment Co.	—	Same as above	2,200,000	7,552	3.67	7,022
	China Technology Venture Company Limited	—	Same as above	250	3,479	3.38	1,095
	FDT	A subsidiary of the Corporation	Investments accounted for by equity-method	19,524,141	343,533	99.90	343,533
FDT	Common stocks
	AU Optronics Corp.	—	Financial assets at fair value through profit or loss - current	243,336	9,441	—	9,441
	Chi Mei Optoelectronics Corp.	—	Same as above	249,900	5,623	—	5,623
	Inotera Memories, Inc.	—	Same as above	96,000	2,587	—	2,587
	Everest Textile Co., Ltd.	The same chairman	Available-for-sale financial assets - current	1,073,507	7,311	0.23	7,311
	U-Ming	—	Same as above	50,000	3,250	0.01	3,250
	FEIB	The chairman of the Corporation is its vice-chairman by the ultimate parent company	Same as above	203,182	2,438	0.01	2,438

^{}[] F-87

				December 31, 2009
Holding Company Name	Marketable Securities Type and Investee Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
AIC	Beneficiary certificates
	Allianz Global Investors Global Eco Trends Fund	—	Financial assets at fair value through profit or loss - current	1,000,000	$9,530	—	$9,530
	Fuh Hwa Digital Economy Fund	—	Same as above	742,391	14,105	—	14,105
	PCA Asia-Pacific High Yield Equity Fund	—	Same as above	1,000,000	11,190	—	11,190
	TIIM Asia Win-Win Fund	—	Same as above	742,942	11,070	—	11,070
	HSBC Global Themes Fund of Funds	—	Same as above	1,000,000	8,930	—	8,930
	ING Global Biotech & Health Care Fund	—	Same as above	1,000,000	8,660	—	8,660
	PCA Asia Pacific Infrastructure Fund	—	Same as above	1,000,000	10,030	—	10,030
	HSBC Global Emerging Markets Equity Fund	—	Same as above	1,000,000	10,380	—	10,380
	TIIM Concept Fund	—	Same as above	524,934	14,441	—	14,441
	Cathay Global Infrastructure Fund	—	Same as above	1,000,000	8,580	—	8,580
	JF (Taiwan) Japan Brilliance Fund	—	Same as above	1,000,000	6,910	—	6,910
	Prudential Financial European Selection Fund	—	Same as above	1,000,000	8,100	—	8,100
	Fubon China Growth Fund	—	Same as above	1,500,000	7,500	—	7,500
	NITC Global REITs Fund-A type	—	Same as above	1,000,000	5,730	—	5,730
	IBT North America Income Trust Fund	—	Same as above	500,000	5,205	—	5,205
	Prudential Financial Small & Medium Capital Fund	—	Same as above	92,064	5,790	—	5,790
	UBS Dragon Fund	—	Same as above	611,995	6,805	—	6,805
	Reliance Dah Fa Fund	—	Same as above	316,456	5,785	—	5,785

^{}[] F-89

				December 31, 2009
Holding Company Name	Marketable Securities Type and Investee Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value	Note
	Asia Cement Pioneer Investment Ltd.	A subsidiary of the Corporation	Investments accounted for by equity-method	50,000	$1,461	100.00	$1,461
	CHP	An investee accounted for by equity-method	Same as above	37,574	467	0.01	467
FSQE	Common stocks
	Stone Industry Resource System Corp.	—	Financial assets carried at cost - noncurrent	5,000	—	0.17	—
YLSS	Common stocks
	Far EasTone	Same chairman with the major stockholder	Available-for-sale financial assets - current	130,000	4,959	—	4,959
KCC	Common stocks
	KCCL	A subsidiary of the Corporation	Investments accounted for by equity-method	10,000	HK$30,390 thousand	100.00	HK$30,390 thousand
ACSPL	Common stocks
	OCPL	A subsidiary of the Corporation	Investment in subsidiaries	17,000,000	SGD8,009 thousand	100.00	SGD8,009 thousand
	ACCHC	An investee accounted for by equity-method	Investment in corporations	63,790,798	SGD58,288 thousand	4.10	US$41,517 thousand
	Alliance Concrete Singapore Pte. Ltd.	An investee accounted for by equity-method	Same as above	2,000,000	SGD6,611 thousand	33.33	SGD6,611 thousand
	DBS Group	—	Marketable securities	29,283	SGD451 thousand	—	SGD451 thousand
	Hong Leong Asia	—	Same as above	20,000	SGD58 thousand	—	SGD58 thousand
	Guocoland Ltd.	—	Same as above	20,000	SGD45 thousand	—	SGD45 thousand

^{}[] F-91

^{}[] F-92

December 31, 2009

^{}[] F-93

^{}[] F-94

Note 1: This is not a company limited by shares.
Note 2: 202,082 thousand of FENC common shares (carrying value $3,225,524 thousand), 65,000 thousand of U-Ming common shares (carrying value $2,135,072 thousand), 10,503 thousand of Far EasTone common shares (carrying value $400,704 thousand) and 6,608 thousand FEIB common shares (carrying value $79,291 thousand) were pledged or mortgaged as collaterals for short-term loans and long-term liabilities. Also, the Corporation consigns 68,000 thousands of FENC shares to the china trust Bank and 121,100 thousands shares to the Asia Cement Exchangeable bonds Fund for the target of the Euro exchangeable bonds.
Note 3: The market value was calculated as follows: Open-end funds were the net asset values at balance sheet date; listed stocks were the average daily closing price at balance sheet date provided by the Taiwan Stock Exchange.
Note 4: The net asset value was calculated based on investees' audited financial statements as of December 31, 2009.
Note 5: The net asset value was calculated based on investees' unaudited financial statements as of December 31, 2009 or calculated from the net value of the most recent financial statement.

(Concluded)

^{}[] TABLE 4

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2009 (IN THOUSANDS OF NEW TAIWAN DOLLARS, UNLESS STATED OTHERWISE)

Acquiring or Selling Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter-party	Nature of Relationship	Beginning Balance		Acquisition		Disposal				Amounts Addition (Deduction) Recognized under the Equity- Method	Ending Balance
Acquiring or Selling Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter-party	Nature of Relationship	Shares/ Units	Amount	Shares/ Units	Amount	Shares/ Units	Amount	Carrying Value	Gain (Loss) on Disposal		Shares/ Units	Amount
DCI	Common stocks
	FENC	Available-for-sale financial assets - current	—	—	16,964,940	$356,264	165,358	$—	8,697,000	$294,089	$204,474	$89,615	$—	8,433,298	$337,332 (Note 2)
	U-Ming	Available-for-sale financial assets - current	—	—	3,094,486	121,613	—	—	1,862,000	124,582	109,077	15,505	—	1,232,486	80,111 (Note 2)
	Beneficiary certificates
	Opas Fund Segregated Portfolio Company - Opas Fund Segregated Portfolio Tranche B	Available-for-sale financial assets - noncurrent	—	—	—	—	20,000	658,290	—	—	—	—	—	20,000	724,738 (Note 2)

Acquiring or Selling Company Name

Marketable Securities Type and Name

Financial Statement Account

Counter-party

Nature of Relationship

Beginning Balance

Acquisition

Disposal

Amounts Addition (Deduction) Recognized under the Equity- Method

Ending Balance

Shares/ Units

Amount

Shares/ Units

Amount

Shares/ Units

Amount

Carrying Value

Gain (Loss) on Disposal

Shares/ Units

Amount

ACCHC

Common stocks

PIHPL

Investment in subsidiaries

Cash capital increase

—

6,039,161

US$748,801 thousand

903,637

US$111,010 thousand

—

US$41,899 thousand

6,942,798

US$901,710 thousand

PIHPL

Common stocks

OIHPL

Investment in subsidiaries

Cash capital increase

—

425,786,396

US$493,475 thousand

86,062,183

US$98,760 thousand

—

US$53,163 thousand

511,848,579

US$645,398 thousand

ACIHPL

Investment in subsidiaries

Cash capital increase

—

235,590,472

US$254,491 thousand

11,971,806

US$12,250 thousand

—

US$(10,611) thousand

247,562,278

US$256,130 thousand

OIHPL

Common stocks

SIYDCCL

Investment in subsidiaries

Cash capital increase

—

(Note 1)

SGD268,362 thousand

(Note 1)

SGD38,539 thousand

—

SGD52,877 thousand

(Note 1)

SGD359,778 thousand

YYDCCL

Investment in subsidiaries

Cash capital increase

—

(Note 1)

SGD24,274 thousand

(Note 1)

SGD17,516 thousand

—

SGD125 thousand

(Note 1)

SGD41,915 thousand

SHYDIHL

Investment in subsidiaries

Cash capital increase

—

(Note 1)

SGD115,796 thousand

(Note 1)

SGD10,161 thousand

—

SGD11,989 thousand

(Note 1)

SGD137,946 thousand

HYDCCL

Investment in subsidiaries

Cash capital increase

—

(Note 1)

SGD118,185 thousand

(Note 1)

SGD52,140 thousand

—

SGD7,415 thousand

(Note 1)

SGD177,740 thousand

HGYDC

Investment in subsidiaries

Cash capital increase and WYDC

A subsidiary of the Company

(Note 1)

SGD46,623 thousand

(Note 1)

SGD20,276 thousand

—

SGD(4,611) thousand

(Note 1)

SGD62,288 thousand

Note 1: This is not a company limited by shares.
Note 2: The amount included the valuation gain (loss) on financial assets.

(Concluded)

^{}[] TABLE 5

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2009

Purchasing or (Selling) Company Name	Related Party	Nature of Relationship	Transaction Details				Abnormal Transaction		Notes/Accounts (Payable) or Receivable		Note
Purchasing or (Selling) Company Name	Related Party	Nature of Relationship	Purchase/ (Sale)	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	Purchase/ (Sale)	Note
ACC	YTRMC	A subsidiary of the Company	Sales	$(947,980)	(10)	45 days after monthly closing	$—	—	$203,751	31
	ACSPL	A subsidiary of the Company	Sales	(443,866)	(5)	Average 30 days	—	—	27,267	4
	YSRMC	A subsidiary of the Company	Sales	(217,479)	(2)	Within 45 days	—	—	40,992	6
	U-Ming	An investee accounted for by equity-method	Sales freight	422,024	5	Average 60 days	—	—	(48,996)	(3)
	UMS	A subsidiary of U-Ming	Sales freight	205,732	2	Average 10 days	—	—	—	—
	YLT	An investee accounted for by equity-method	Sales freight	206,789	3	Average 30 days	—	—	(41,658)	(3)
	NHC	A subsidiary of the Company	Purchase	602,697	7	Within 45 days	—	—	(64,585)	(5)
YTRMC	ACC	Parent company	Purchase	947,980	18	45 days after monthly closing	—	—	(203,751)	(23)
	FEGC	Related party in substance	Sales	(673,519)	(12)	108 days after monthly closing	—	—	269,174	20
	FEDS	Parent company is its corporation director	Sales	(200,958)	(4)	120 days after monthly closing	—	—	134,135	10
NHC	ACC	Parent company	Sales	(602,697)	(75)	Within 45 days	—	—	64,585	69
NHC	U-Ming	An investee accounted for by equity-method by parent company	Purchase freight	297,009	37	Average 55 days	—	—	(45,310)	61

Purchasing or (Selling) Company Name	Related Party	Nature of Relationship	Transaction Details				Abnormal Transaction		Notes/Accounts (Payable) or Receivable		Note
Purchasing or (Selling) Company Name	Related Party	Nature of Relationship	Purchase/ (Sale)	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	Purchase/ (Sale)	Note
ACSPL	ACC	Parent company	Purchase	$443,866	69	Average 30 days	$—	—	$(27,267)	99
ACSPL	Alliance Concrete Singapore Pte. Ltd.	An investee accounted for by equity-method	Sales	SGD(16,252 thousand)	(60)	60 days	—	—	SGD2,559 thousand	52
YSRMC	ACC	Parent company	Purchase	217,479	28	Within 45 days	—	—	(40,992)	(27)
AEE	AEEPL	A subsidiary of the Company	Sales	(472,660)	(99)	180 days after monthly closing	—	—	63,621	99
AEEPL	AEE	Parent company	Purchase	472,660	100	180 days after monthly closing	—	—	(63,621)	(100)
WYDC	JYDC	The same ultimate parent company	Purchase	RMB154,492 thousand	24	Within 90 days	—	—	RMB(6,790 thousand)	(4)
WYDC	HYDCCL	The same parent company	Purchase	RMB239,248 thousand	37	Within 90 days	—	—	—	—
JYDC	WYDC	The same ultimate parent company	Sales	RMB(154,492 thousand)	(11)	Within 90 days	—	—	RMB6,790 thousand	9
	HYDCCL	The same ultimate parent company	Sales	RMB(29,507 thousand)	(2)	Within 90 days	—	—	—	—
	YYDCCL	The same ultimate parent company	Sales	RMB(146,202 thousand)	(11)	Within 90 days	—	—	RMB18,952 thousand	26
	HGYDC	The same ultimate parent company	Sales	RMB(34,458 thousand)	(3)	Within 90 days	—	—	RMB10,057 thousand	14
	NYDC	A subsidiary of the Company	Sales	RMB(38,872 thousand)	(3)	Average 15 days	—	—	RMB2,252 thousand	3

^{}[] TABLE 6

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
YEAR ENDED DECEMBER 31, 2009
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Name of Company Having Receivable	Related Party	Nature of Relationship	Ending Balance	Turnover Rate	Overdue		Amounts Received in Subsequent Period	Allowance for Bad Debts
Name of Company Having Receivable	Related Party	Nature of Relationship	Ending Balance	Turnover Rate	Amount	Action Taken	Amounts Received in Subsequent Period	Allowance for Bad Debts
ACC	YTRMC	A subsidiary of the Corporation	$203,751	4.4 times	$—	—	$203,751	$—
YTRMC	FEGC	Related party in substance	269,174	3.38 times	—	—	166,325	—
YTRMC	FEDS	Parent company is its corporation director	134,135	1.93 times	—	—	66,905	—
HYDCCL	JYDC	The same ultimate parent company	RMB23,738 thousand	1.71 times	—	—	RMB23,738 thousand	—
ACCHC	JYDC	A subsidiary of the Corporation	US$20,000 thousand	None	—	—	—	—
	SIYDCCL	A subsidiary of the Corporation	US$20,000 thousand	None	—	—	—	—
	HYDCCL	A subsidiary of the Corporation	US$20,000 thousand	None	—	—	—	—
	YYDCCL	A subsidiary of the Corporation	US$10,000 thousand	None	—	—	—	—

Note: The accounts receivable from financing.

^{}[] F-102

^{}[] TABLE 7

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE YEAR ENDED DECEMBER 31, 2009

Investor Company	Investee Company	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2009			Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
Investor Company	Investee Company	Location	Main Businesses and Products	December 31, 2009	December 31, 2008	Shares	Percentage of Ownership	Carrying Value	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
ACC	ACCHC	Cayman	Investment	$13,660,636	$13,660,636	1,061,209,202	68.19	$22,054,344	$3,012,789	$2,054,421	A subsidiary of the Corporation
	FENC	Taipei, Taiwan	Textile	3,459,787	3,459,787	1,107,915,325	23.77	17,683,949	8,088,696	1,553,902
	U-Ming	Taipei, Taiwan	Marine transportation	510,236	510,236	331,701,152	38.66	10,895,472	5,663,831	2,189,588
	DCI	Taipei, Taiwan	Investment	2,555,073	2,555,073	520,069,685	99.99	9,329,319	555,101	555,046	A subsidiary of the Corporation
	YYI	Taipei, Taiwan	Investment	1,108,985	1,108,985	179,587,463	36.42	3,540,625	523,297	190,585
	CHP	Chiangi, Taiwan	Power plant	3,119,492	3,119,492	280,093,521	59.59	3,112,072	511,792	304,977	A subsidiary of the Corporation
	YDC	Taipei, Taiwan	Construction	2,232,220	2,232,220	178,707,648	35.50	3,050,754	156,835	55,676
	ACSPL	Singapore	Cement	186,958	186,958	10,495,495	99.96	2,248,204	140,635	140,578	A subsidiary of the Corporation
	AIC	Taipei, Taiwan	Investment	1,212,679	1,212,679	118,145,000	100.00	1,996,989	92,077	92,077	A subsidiary of the Corporation
	OSC	Taipei, Taiwan	Broker	154,207	154,207	135,092,154	18.93	1,984,896	1,056,378	199,972
	YLSS	Kaohsiung, Taiwan	Stainless steel	1,938,000	1,938,000	102,000,000	51.00	1,434,245	20,635	(8,508)	A subsidiary of the Corporation
	YTRMC	Taipei, Taiwan	Ready-mixed concrete, cement - related products	1,042,290	1,042,290	119,382,860	99.99	1,379,967	125,576	125,576	A subsidiary of the Corporation
	FMT	Taipei, Taiwan	Transportation	68,297	68,297	29,518,518	99.83	1,099,593	139,957	139,718	A subsidiary of the Corporation
	FEDSDL	Taipei, Taiwan	Retails	500,000	500,000	50,000,000	25.00	558,888	133,201	33,300
	NHC	Taichung, Taiwan	Cement, granulated blast-furnace slag	411,067	411,067	26,132,827	99.96	521,809	4,138	4,137	A subsidiary of the Corporation

^{}[] F-104

Investor Company	Investor Company	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2009			Net Income (Loss) of the Investor	Investment Gain (Loss)	Note
				December 31, 2009	December 31, 2008	Shares	Percentage of Ownership	Carrying Value
	AEE	Hwalien, Taiwan	Engineering	$4,776	$4,776	6,630,831	98.06	$461,128	$72,926	$71,511	A subsidiary of the Corporation
	YDLC	Taipei, Taiwan	Leasing	309,049	309,049	34,640,189	43.60	340,685	15,195	6,625
	YLT	Hwalien, Taiwan	Transportation	13,670	13,670	4,939,183	49.39	286,952	49,926	24,659
	YLPPC	Taipei, Taiwan	Cement - related products	144,961	144,961	16,241,083	83.81	72,033	(52,812)	(44,263)	A subsidiary of the Corporation
	EISF	Kaohsiung, Taiwan	Iron and steel	32,380	32,380	3,300,000	41.67	63,956	10,703	4,460
	SIHL	B.V.I.	Investment	2,898	2,898	90,000	100.00	45,590	517	517	A subsidiary of the Corporation
DCI	YDC	Taipei, Taiwan	Construction	289,982	289,982	72,989,090	14.50	1,246,083	156,835	Not applicable
	Far Eastern Construction Co., Ltd. (FEC)	Taipei, Taiwan	Construction	131,288	131,288	79,535,966	33.55	838,866	274,648	Not applicable
	KCC	Hong Kong	Cement	36,024	36,024	1,127,000	49.00	377,395	14,474	Not applicable	A subsidiary of the Corporation
	FSQE	Hwalien, Taiwan	Mining excavation, mineral processing and sales	110,448	110,448	1,293,410	99.49	130,216	5,477	Not applicable	A subsidiary of the Corporation
	Universal Exchange Inc.	Kaohsiung, Taiwan	Information software and industrial consulting	106,773	106,773	5,643,730	30.34	57,232	4,891	Not applicable
NHC	Pao-Good Industrial Co., Ltd.	Kaohsiung, Taiwan	Granulated blast-furnace slag	36,771	36,771	3,287,550	31.00	38,946	15,431	Not applicable
YTRMC	YSRMC	Hsinchu, Taiwan	Ready-mixed concrete	69,980	69,980	6,998,000	69.98	52,469	(28,522)	Not applicable	A subsidiary of the Corporation
FMT	FDT	Taipei, Taiwan	Transportation	30,485	30,485	19,524,141	99.90	343,533	58,455	Not applicable	A subsidiary of the Corporation
FDT	Yue Ding Enterprise Corp.	Taipei, Taiwan	Retail	194,350	113,500	19,772,500	26.95	190,367	20,074	Not applicable

Investor Company	Investee Company	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2009			Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
Investor Company	Investee Company	Location	Main Businesses and Products	December 31, 2009	December 31, 2008	Shares	Percentage of Ownership	Carrying Value	Net Income (Loss) of the Investee	Investment Gain (Loss)	Note
AEE	AEEPL	B.V.I.	Engineering	US$50 thousand	US$50 thousand	50,000	100.00	$55,500	US$708 thousand	Not applicable	A subsidiary of the Corporation
YLPPC	Yue Ding Enterprise Corp.	Taipei, Taiwan	Retail	25,170	13,500	2,854,500	3.89	27,478	20,074	Not applicable
YLPPC	Ya Li Precast Concrete India Pvt. Ltd.	India	Segments	815	815	(Note1)	99.90	9,685	(1,019)	Not applicable	A subsidiary of the Corporation
AIC	CHP	Chiangi, Taiwan	Power plant	376	376	37,574	0.01	467	511,792	Not applicable	A subsidiary of the Corporation
	Asia Cement Explorer Investment Ltd.	B.V.I.	Investment	2,169	1,661	65,000	100.00	(32,610)	US$(1,083 thousand)	Not applicable	A subsidiary of the Corporation
	Asia Cement Pioneer Investment Ltd.	B.V.I.	Investment	1,661	1,661	50,000	100.00	1,461	US$(1 thousand)	Not applicable	A subsidiary of the Corporation
KCC	KCCL	Hong Kong	Ready-mixed concrete	HK$10 thousand	HK$10 thousand	10,000	100.00	HK$30,390 thousand	HK$491 thousand	Not applicable	A subsidiary of the Corporation
ACSPL	OCPL	Singapore	Ready-mixed concrete	SGD17,000 thousand	SGD17,000 thousand	17,000,000	100.00	SGD8,009 thousand	SGD189 thousand	Not applicable	A subsidiary of the Corporation
	ACCHC	Cayman	Investment	US$20,000 thousand	US$20,000 thousand	63,790,798	4.10	SGD58,288 thousand	3,012,789	Not applicable	A subsidiary of the Corporation
	Alliance Concrete Singapore Pte. Ltd.	Singapore	Ready-mixed concrete	SGD2,000 thousand	SGD2,000 thousand	2,000,000	33.33	SGD6,611 thousand	SGD(1,900 thousand)	Not applicable
ACCHC	PIHPL	B.V.I.	Investment	US$436,901 thousand	US$325,891 thousand	6,942,798	100.00	US$901,710 thousand	US$97,607 thousand	Not applicable	A subsidiary of the Corporation

Note: This is not a company limited by shares.

^{}[] TABLE 8

INVESTMENT IN MAINLAND CHINA

YEAR ENDED DECEMBER 31, 2009

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type	Accumulated Outflow of Investment from Taiwan as of Jan. 1, 2009	Investment Flows		Accumulated Outflow of Investment from Taiwan as of Dec. 31, 2009	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 1)	Carrying Value as of Dec. 31, 2009	Accumulated Inward Remittance of Earnings as of Dec. 31, 2009
Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type		Outflow	Inflow		% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 1)	Carrying Value as of Dec. 31, 2009
SHYLCP	It manufactures and sells ready-mixed concrete and cement - related products	US$15,000 (the amount equals to NT$479,100 thousand)	The investor company was incorporated in the area other than Taiwan and Mainland China in order to invest in Mainland China.	US$11,227 (the amount equals to NT$358,590 thousand) (Notes 3)	$—	$—	US$11,227 (the amount equals to NT$358,590 thousand) (Note 3)	72.28%	US$(212) (the amount equals to NT$(7,000) thousand)	US$14,091 (the amount equals to NT$450,064 thousand)	US$773 (the amount equals to NT$24,690 thousand)
JYDC	It manufactures and sells cement, clinker and ready-mixed concrete (including cement - related products).	US$221,104 (the amount equals to NT$7,062,062 thousand)	The investor company was incorporated in the area other than Taiwan and Mainland China in order to invest in Mainland China.	US$142,311 (the amount equals to NT$4,545,413 thousand) (Notes 4)	—	US$8,096 (the amount equals to NT$258,586 thousand)	US$134,215 (the amount equals to NT$4,286,827 thousand) (Note 4)	68.67%	US$5,908 (the amount equals to NT$195,217 thousand)	US$204,722 (the amount equals to NT$6,538,819 thousand)	US$9,602 (the amount equals to NT$306,688 thousand)
WYDC	It manufactures and sells cement, slag powder and slag cement.	US$36,140 (the amount equals to NT$1,154,312 thousand)	The investor company was incorporated in the area other than Taiwan and Mainland China in order to invest in Mainland China.	US$26,550 (the amount equals to NT$848,007 thousand) (Notes 5)	—	US$2,221 (the amount equals to NT$70,939 thousand)	US$24,329 (the amount equals to NT$77,068 thousand) (Note 5)	72.28%	US$4,229 (the amount equals to NT$139,725 thousand)	US$42,350 (the amount equals to NT$1,352,662 thousand)	US$2,221 (the amount equals to NT$70,939 thousand)

Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type	Accumulated Outflow of Investment from Taiwan as of Jan. 1, 2009	Investment Flows		Accumulated Outflow of Investment from Taiwan as of Dec. 31, 2009	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 1)	Carrying Value as of Dec. 31, 2009	Accumulated Inward Remittance of Earnings as of Dec. 31, 2009
Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type		Outflow	Inflow		% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 1)	Carrying Value as of Dec. 31, 2009
SHYFCP	It manufactures and sells ready-mixed concrete and cement - related products	US$2,540 (the amount equals to NT$81,128 thousand)	The investor company was incorporated in the area other than Taiwan and Mainland China in order to invest in Mainland China.	US$1,270 (the amount equals to NT$40,564 thousand) (Note 6)	$—	$—	US$1,270 (the amount equals to NT$40,564 thousand) (Note 6)	72.28%	US$572 (the amount equals to NT$18,892 thousand)	US$1,685 (the amount equals to NT$53,820 thousand)	$—
SHYDIHL	Investment	US$62,000 (the amount equals to NT$1,980,280 thousand)	The investor company was incorporated in the area other than Taiwan in order to invest in Mainland China.	US$55,000 (the amount equals to NT$1,756,700 thousand)	—	—	US$55,000 (the amount equals to NT$1,756,700 thousand)	72.28%	US$6,330 (the amount equals to NT$209,139 thousand)	US$71,019 (the amount equals to NT$2,268,351 thousand)	—
NYLC	Cement, clinker, slag powder and ready-mixed concrete (including cement - related products)	RMB60,000 (the amount equals to NT$280,709 thousand)	The investor companies were incorporated in Mainland China by the Company which was incorporated in the area other than Taiwan and Mainland China in order to invest in Mainland China.	(Note 7)	—	—	(Note 7)	68.67%	RMB3,347 (the amount equals to NT$16,190 thousand)	RMB47,581 (the amount equals to NT$222,609 thousand)	—

Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type	Accumulated Outflow of Investment from Taiwan as of Jan. 1, 2009	Investment Flows		Accumulated Outflow of Investment from Taiwan as of Dec. 31, 2009	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 1)	Carrying Value as of Dec. 31, 2009	Accumulated Inward Remittance of Earnings as of Dec. 31, 2009
Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type		Outflow	Inflow		% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 1)	Carrying Value as of Dec. 31, 2009
SYTCL	Transportation	US$3,500 (the amount equals to NT$111,790 thousand)	The investor company was incorporated in the area other than Taiwan and Mainland China in order to invest in Mainland China.	US$3,150 (the amount equals to NT$100,611 thousand) (Note 15)	$—	$—	US$3,150 (the amount equals to NT$100,611 thousand) (Note 15)	72.28%	US$743 (the amount equals to NT$24,540 thousand)	US$4,389 (the amount equals to NT$140,188 thousand)	$—
YYDCCL	Cement, clinker, slag powder and ready-mixed concrete (including cement - related products)	US$30,448 (the amount equals to NT$972,509 thousand)	The investor company was incorporated in the area other than Taiwan and Mainland China in order to invest in Mainland China.	US$15,849 (the amount equals to NT$506,217 thousand) (Note 16)	—	—	US$15,849 (the amount equals to NT$506,217 thousand) (Note 16)	72.28%	US$656 (the amount equals to NT$21,675 thousand)	US$23,977 (the amount equals to NT$765,815 thousand)	—
HGYDC	Cement, clinker, slag powder and ready-mixed concrete (including cement - related products)	US$50,450 (the amount equals to NT$1,611,373 thousand)	The investor company was incorporated in the area other than Taiwan and Mainland China in order to invest in Mainland China.	US$15,350 (the amount equals to NT$490,279 thousand) (Note 17)	—	—	US$15,350 (the amount equals to NT$490,279 thousand) (Note 17)	72.28%	US$(2,020) (the amount equals to NT$66,729) thousand)	US$35,631 (the amount equals to NT$1,138,058 thousand)	—

Note 1: The accrual basis is based on the financial statements audited by the accounting firms.
Note 2: The Corporation gets the No. 09800022341 certificate from Industrial Development Bureau, Ministry of Economic Affairs, according to the "Regulations Governing the Approval of Investment or Technical Cooperation in Mainland China," the accumulation of fund is not limited.

US$415,748 (The amount equals to NT$13,278,991 thousand)

US$608,185 (The amount equals to NT$19,425,429 thousand)

(Note 2)

^{}[] F-112

Note 3: As of December 31, 2009, accumulated investment in SHYLCP of the Corporation was US$16,127 thousand (the amount equals to NT$515,096 thousand) which included US$2,450 thousand (the amount equals to NT$78,253 thousand) and US$2,450 thousand (the amount equals to RMB18,992 thousand and NT$78,253 thousand) of OIHPL's and SHYDIHL's increase of common stock.

Note 4: As of December 31, 2009, accumulated investment in JYDC of the Corporation was US$184,384 thousand (the amount equals to NT$5,889,225 thousand) which included US$20,419 thousand (the amount equals to RMB163,380 thousand and NT$652,183 thousand) and US$29,750 thousand (the amount equals to NT$950,215 thousand) of SHYDIHL's and ACCHC's increase of common stock.

Note 5: As of December 31, 2009, accumulated investment in WYDC of the Corporation was US$27,279 thousand (the amount equals to NT$871,291 thousand) which included US$2,950 thousand (the amount equals to RMB24,416 thousand and NT$94,223 thousand) of SHYDIHL's increase of common stock.

Note 6: As of December 31, 2009, accumulated investment in SHYFCP of the Corporation was US$2,675 thousand (the amount equals to NT$85,440 thousand) which included US$381 thousand (the amount equals to RMB3,153 thousand and NT$12,169 thousand) and US$1,024 thousand (the amount equals to RMB8,089 thousand and NT$32,707 thousand) of SHYDIHL's and SHYLCP's increase of common stock.

Note 7: As of December 31, 2009 accumulated investment in NYLC of JYDC was RMB60,000 thousand (the amount equals to NT$280,709 thousand).

Note 8: As of December 31, 2009, accumulated investment in NYDC of JYDC and SHYDIHL were RMB45,000 thousand (the amount equals to NT$210,532 thousand) and RMB22,500 thousand (the amount equals to NT$105,266 thousand), respectively.

Note 9: As of December 31, 2009, accumulated investment in SIYDCCL of the Corporation were US$146,048 thousand (the amount equals to NT$4,664,773 thousand) which included US$10,834 thousand (the amount equals to RMB80,446 thousand and NT$346,038 thousand) and US$43,506 thousand (the amount equals to NT$1,389,582 thousand) of SHYDIHL's and ACCHC's increase of common stock.

Note 10: As of December 31, 2009, accumulated investment in CYCPCL of the Corporation was US$4,100 thousand (the amount equals to NT$130,954 thousand) which included US$2,000 thousand (the amount equals to RMB15,508 thousand and NT$63,880 thousand) of SHYDIHL's increase of common stock.

Note 11: As of December 31, 2009, accumulated investment in JYLTC of JYDC and SHYDIHL were RMB5,109 thousand (the amount equals to NT$23,902 thousand) and RMB6,000 thousand (the amount equals to NT$28,071 thousand), respectively.

Note 12: As of December 31, 2009, accumulated investment in HYDCCL of the Corporation was US$115,700 thousand (the amount equals to NT$3,695,458 thousand) which included US$7,880 thousand (the amount equals to RMB59,333 thousand and NT$251,687 thousand) and US$50,220 thousand (the amount equals to NT$1,604,027 thousand) of SHYDIHL's and ACCHC's increase of common stock.

Note 13: As of December 31, 2009, accumulated investment in CYSPC of the Corporation was US$3,136 thousand (the amount equals to NT$100,164 thousand) which included US$2,156 thousand (the amount equals to NT$68,863 thousand) of ACCHC's increase of common stock.

Note 14: As of December 31, 2009, accumulated investment in SYCPCL of the Corporation was US$3,300 thousand (the amount equals to NT$105,402 thousand) which included US$330 thousand (the amount equals to RMB2,495 thousand and NT$10,540 thousand) of SHYDIHL's increase of common stock.

Note 15: As of December 31, 2009, accumulated investment in SYTCL of the Corporation was US$3,500 thousand (the amount equals to NT$111,790 thousand) which included US$350 thousand (the amount equals to RMB2,801 thousand and NT$11,179 thousand) of SHYDIHL's increase of common stock.

Note 16: As of December 31, 2009, accumulated investment in YYDCCL of the Corporation was US$30,448 thousand (the amount equals to NT$972,509 thousand) which included US$2,431 thousand (the amount equals to RMB18,058 thousand and NT$77,646 thousand) and US$12,168 thousand (the amount equals to NT$388,646 thousand) of SHYDIHL's and ACCHC's increase of common stock.

Note 17: As of December 31, 2009, accumulated investment in HGYDC of the Corporation was US$50,450 thousand (the amount equals to NT$1,611,373 thousand) which included US$4,000 thousand (the amount equals to RMB32,000 thousand and NT$127,760 thousand), US$3,992 thousand (the amount equals to RMB28,326 thousand and NT$127,504 thousand) and US$27,108 thousand (the amount equals NT$865,830 thousand) of WYDC's, SHYDIHL's and ACCHC's increase of common stock. In December 2009, OIHPL acquired stockholding of US$4,000 thousand from WYDC.

Note 18: As of December 31, 2009, accumulated investment in HYTCL of HYDCCL was RMB8,000 thousand (the amount equals to NT$37,428 thousand).

Note 19: As of December 31, 2009, accumulated investment in WYLCP of WYDC was RMB20,000 thousand (the amount equals to NT$93,570 thousand).

Note 20: The foreign currency amounts of original investment amount and carrying value are expressed in New Taiwan dollars at exchange rate as of December 31, 2009; the foreign currency amounts of net income is expressed in New Taiwan dollars at average exchange rate for the year ended December 31, 2009.

^{}[] TABLE 9

BUSINESS RELATIONSHIP AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

YEAR ENDED DECEMBER 31, 2007

(In Thousands of New Taiwan Dollars)

Number	Company Name	Counterparty	Nature of Relationship (Note 1)	Transaction Details			Percentage of Consolidation Total Operating Revenue or Total Asset
Number	Company Name	Counterparty	Nature of Relationship (Note 1)	Account	Amount	Transaction Terms
0	The Corporation	NHC	1	Cost of sales	$717,056	Based on regular terms	2%
		NHC	1	Rental income	1,361	Based on regular terms	—
		NHC	1	Other revenue	304	Based on regular terms	—
		NHC	1	Accounts payable and accrued expense	59,892	Based on regular terms	—
		NHC	1	Other receivables	320	Based on regular terms	—
		FMT	1	Cost of sales	87,853	Based on regular terms	—
		FMT	1	Rental income	1,461	Based on regular terms	—
		FMT	1	Other receivables	194	Based on regular terms	—
		FMT	1	Accounts payable and accrued expense	13,354	Based on regular terms	—
		YSRMC	1	Sales	329,252	Based on regular terms	1%
		YSRMC	1	Other revenue	14	Based on regular terms	—
		YSRMC	1	Accounts receivable	68,625	Based on regular terms	—
		YSRMC	1	Other receivables	14	Based on regular terms	—
		DCI	1	Other revenue	6,622	Based on regular terms	—
		DCI	1	Other receivables	6,953	Based on regular terms	—
		YLPPC	1	Sales	17,231	Based on regular terms	—
		YLPPC	1	Rental income	2,591	Based on regular terms	—
		YLPPC	1	Other revenue	2,994	Based on regular terms	—
		YLPPC	1	Accounts receivable	374	Based on regular terms	—
		YLPPC	1	Other receivables	3,134	Based on regular terms	—

Number	Company Name	Counterparty	Nature of Relationship (Note 1)	Transaction Details			Percentage of Consolidation Total Operating Revenue or Total Asset
Number	Company Name	Counterparty	Nature of Relationship (Note 1)	Account	Amount	Transaction Terms
		YLPPC	1	Accounts payable and accrued expense	$879	Based on regular terms	—
		YTRMC	1	Sales	1,456,209	Based on regular terms	4%
		YTRMC	1	Cost of sales	7,861	Based on regular terms	—
		YTRMC	1	Rental income	24,051	Based on regular terms	—
		YTRMC	1	Other revenue	477	Based on regular terms	—
		YTRMC	1	Accounts receivable	211,408	Based on regular terms	—
		YTRMC	1	Other receivables	18,536	Based on regular terms	—
		YTRMC	1	Accounts payable and accrued expense	1,008	Based on regular terms	—
		AEE	1	Rental income	60	Based on regular terms	—
		AEE	1	Other revenue	455	Based on regular terms	—
		AEE	1	Other receivables	2,690	Based on regular terms	—
		FSMS	1	Cost of sales	50,032	Based on regular terms	—
		FSMS	1	Other receivables	45	Based on regular terms	—
		FSMS	1	Accounts payable and accrued expense	6,572	Based on regular terms	—
		CHP	1	Accounts payable and accrued expense	52	Based on regular terms	—
		PIHPL	1	Interest income	364	Based on regular terms	—
		ACSPL	1	Sales	364,226	Based on regular terms	1%
		ACSPL	1	Refundable deposits	622,689	Based on regular terms	—
		ACSPL	1	Accounts receivable	47,581	Based on regular terms	—
		ACCHC	1	Other receivables	26,450	Based on regular terms	—
1	YTRMC	The Corporation	2	Cost of sales	1,456,209	Based on regular terms	4%
		The Corporation	2	Sales	7,861	Based on regular terms	—
		The Corporation	2	Manufacturing expenses	24,528	Based on regular terms	—
		The Corporation	2	Accounts payable and accrued expense	229,944	Based on regular terms	—
		The Corporation	2	Accounts receivable	1,008	Based on regular terms	—
		YSRMC	1	Sales	8,531	Based on regular terms	—
		YSRMC	1	Cost of sales	2,209	Based on regular terms	—

				Transaction Details			Percentage of Consolidation Total Operating Revenue or
Number	Company Name	Counterparty	Nature of Relationship (Note 1)	Account	Amount	Transaction Terms	Percentage of Consolidation Total Operating Revenue or
		JYLTC	1	Accounts payable and accrued expense	$16,639	Based on regular terms	—
		JYLTC	1	Accounts payable and accrued expense	1,761	Based on regular terms	—
		NYDC	1	Cost of sales	618,605	Based on regular terms	2%
		NYDC	1	Sales	158,316	Based on regular terms	—
		NYDC	1	Other revenue	40	Based on regular terms	—
		NYDC	1	Accounts receivable	31,988	Based on regular terms	—
		NYDC	1	Accounts payable and accrued expense	99,922	Based on regular terms	—
		WYDC	1	Sales	973,267	Based on regular terms	3%
		WYDC	3	Other revenue	117	Based on regular terms	—
		WYDC	3	Accounts receivable	125,863	Based on regular terms	—
		WYDC	3	Other receivables	583	Based on regular terms	—
		WYDC	3	Accounts payable and accrued expense	94	Based on regular terms	—
		SIYDCCL	3	Sales	4,138	Based on regular terms	—
		SIYDCCL	3	Other revenue	702	Based on regular terms	—
		SIYDCCL	3	Accounts receivable	537	Based on regular terms	—
		SIYDCCL	3	Other receivables	859	Based on regular terms	—
		SIYDCCL	3	Accounts payable and accrued expense	88	Based on regular terms	—
		SHYLCP	3	Sales	25,043	Based on regular terms	—
		SHYLCP	3	Cost of sales	1,264	Based on regular terms	—
		SHYLCP	3	Other revenue	706	Based on regular terms	—
		SHYLCP	3	Accounts receivable	4,063	Based on regular terms	—
		SHYLCP	3	Accounts payable and accrued expense	909	Based on regular terms	—
		SHYFCP	3	Sales	38,233	Based on regular terms	—
		SHYFCP	3	Accounts receivable	14,378	Based on regular terms	—
		NYLC	1	Cost of sales	37,263	Based on regular terms	—
		NYLC	1	Sales	6,521	Based on regular terms	—
		NYLC	1	Other revenue	925	Based on regular terms	—
		NYLC	1	Accounts receivable	7,830	Based on regular terms	—

^{}[] TABLE 10

BUSINESS RELATIONSHIP AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

YEAR ENDED DECEMBER 31, 2008

(IN THOUSANDS OF NEW TAIWAN DOLLARS)

				Transaction Details			Percentage of Consolidation Total Operating Revenue or
Number	Company Name	Counterparty	Nature of Relationship (Note 1)	Account	Amount	Transaction Terms	Percentage of Consolidation Total Operating Revenue or
		NYDC	1	Other receivables	$617	Based on regular terms	—
		NYDC	1	Accounts payable and accrued expense	39,987	Based on regular terms	—
		WYDC	3	Sales	1,017,803	Based on regular terms	2%
		WYDC	3	Other revenue	4,396	Based on regular terms	—
		WYDC	3	Accounts receivable	112,014	Based on regular terms	—
		WYDC	3	Other receivables	2,694	Based on regular terms	—
		WYDC	3	Other payable	38	Based on regular terms	—
		SIYLTC	3	Rental income	439	Based on regular terms	—
		SIYLTC	3	Other receivables	244	Based on regular terms	—
		SIYDCCL	3	Sales	287,619	Based on regular terms	1%
		SIYDCCL	3	Rental income	10,889	Based on regular terms	—
		SIYDCCL	3	Accounts receivable	1,430	Based on regular terms	—
		SIYDCCL	3	Other receivables	6,420	Based on regular terms	—
		SIYLCP	3	Rental income	468	Based on regular terms	—
		SIYLCP	3	Other receivables	261	Based on regular terms	—
		HYDCCL	3	Sales	829,736	Based on regular terms	2%
		HYDCCL	3	Other revenue	8,585	Based on regular terms	—
		HYDCCL	3	Accounts receivable	66,995	Based on regular terms	—
		HYDCCL	3	Other receivables	1,665	Based on regular terms	—
		HYDCCL	3	Other payable	51	Based on regular terms	—
		HYLTC	3	Other receivables	120	Based on regular terms	—
		HYLTC	3	Rental income	216	Based on regular terms	—
		YYDCCL	3	Sales	168,213	Based on regular terms	—
		YYDCCL	3	Cost of sales	2,161	Based on regular terms	—
		YYDCCL	3	Other revenue	2,941	Based on regular terms	—
		YYDCCL	3	Other receivables	48	Based on regular terms	—
		HGYDC	3	Sales	16,778	Based on regular terms	—
		HGYDC	3	Other revenue	3,156	Based on regular terms	—

Note:
1. Parent to subsidiary.
2. Subsidiary to parent.
3. Between subsidiaries.

^{}[] TABLE 11

(IN THOUSANDS OF NEW TAIWAN DOLLARS)

^{}[] F-164

INDEPENDENT ACCOUNTANTS' REVIEW REPORT

The Board of Directors and Stockholders
Asia Cement Corporation

We have reviewed the accompanying consolidated balance sheets of Asia Cement Corporation (the "Corporation") and its subsidiaries as of September 30, 2009 and 2010, and the related consolidated statements of income and cash flows for the nine months then ended. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to issue a report on these financial statements based on our reviews.

Except as the matters stated in the next paragraph, we conducted our reviews in accordance with Statement of Auditing Standards No. 36, "Review of Financial Statements," of the Republic of China. A review consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

As stated in Note 1 to the consolidated financial statements, the financial statements of certain consolidated subsidiaries as of and for the nine months ended September 30, 2010 and 2009 have not been reviewed. As of September 30, 2009 and 2010, the total assets of these subsidiaries were 61% (NT$ 93,192,024 thousand) and 64% (NT$105,549,744 thousand (US$ 3,384,089 thousand)) and total liabilities of these subsidiaries were 55% (NT$37,946,121 thousand) and 61% (NT$47,037,966 thousand (US$ 1,508,110 thousand) of the related consolidated amounts as of September 30, 2009 and 2010, respectively. The total net operating revenue of these subsidiaries were 82% (NT$29,147,999 thousand) and 86% (NT$31,681,773 thousand (US$1,015,767 thousand), respectively, of consolidated net operating revenue for the nine months ended September 30, 2009 and 2010 and their net incomes were 59% (NT$4,421,627 thousand) and 49% (NT$2,647,264 thousand (US$84,875 thousand), respectively, of consolidated net income for the nine months ended September 30, 2009 and 2010. Furthermore, as stated in Note 8 to the consolidated financial statements, the financial statements of certain equity-method investments as of and for the nine months ended September 30, 2009 and 2010 have not been reviewed. The aggregate carrying value of these equity-method investments were NT$12,188,096 thousand and NT$13,095,589 thousand (US$419,865 thousand) as of September 30, 2009 and 2010, respectively, and the investment income from equity-method investees were NT$491,957 thousand and NT$770,855 thousand (US$24,715 thousand), for the nine months ended September 30, 2009 and 2010, respectively. The additional disclosures of the aforementioned subsidiaries in Note 25 were also based on the unreviewed financial statements.

Based on our reviews, except for the effects of such adjustments, if any, that might have been determined to be necessary had the subsidiaries' and investees' financial statements mentioned in the preceding paragraph been reviewed, we are not aware of any material modifications that should be made to the consolidated financial statements referred to in the first paragraph for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, Order No. VI-0960064020 issued by the Financial Supervisory Commission of the ROC Executive Yuan on November 15, 2007, and accounting principles generally accepted in the Republic of China.

As stated in Note 2 to the consolidated financial statements, on January 1, 2009, the Corporation and its subsidiaries adopted the newly revised Statement of Financial Accounting Standards (SFAS) No. 10, "Accounting for Inventories."

Our reviews also comprehended the translation of the New Taiwan dollar amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 3. Such U.S. dollar amounts are presented solely for the convenience of readers.

Deloitte & Touche
Taipei, Taiwan
Republic of China

October 25, 2010

Notice to Readers

The accompanying consolidated financial statements are intended only to present the 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 review such consolidated financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the accountants' review 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 accountants' review report and consolidated financial statements shall prevail.

F-165

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2009 AND 2010

(In Thousands, Except Par Value)

(Reviewed, Not Audited)

	2009	2010
	NT$	NT$	US$(Note 3)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 4)	$13,708,331	$5,830,557	$186,937
Financial assets at fair value through profit or loss - current (Note 5)	1,018,005	1,270,308	40,728
Available-for-sale financial assets - current (Notes 6, 21 and 23)	2,501,873	2,677,274	85,838
Notes receivable	2,539,968	3,893,969	124,847
Accounts receivable
Affiliates (Note 22)	516,282	769,670	24,677
Third parties, net of allowance for doubtful accounts - 2009: NT$265,460 thousand; 2010:NT$290,988 thousand (US$9,330 thousand)	4,629,172	5,385,427	172,665
Other receivables (Note 22)	817,472	1,527,374	48,970
Inventories (Notes 3 and 7)	4,594,364	5,440,743	174,439
Restricted assets (Notes 4 and 23)	909,327	294,365	9,438
Others (Note 22)	1,753,401	2,655,300	85,132
Total current assets	32,988,195	29,744,987	953,671
LONG-TERM INVESTMENTS
Investments accounted for by equity-method (Notes 8, 21 and 23)	39,327,275	42,209,516	1,353,303
Available-for-sale financial assets - noncurrent (Notes 6 and 23)	9,490,970	12,660,841	405,926
Financial assets carried at cost - noncurrent (Note 9)	3,861,148	3,073,067	98,527
Total long-term investments	52,679,393	57,943,424	1,857,756

F-166

	2009	2010
	NT$	NT$	US$(Note 3)
PROPERTIES AND EQUIPMENT
(Notes 10 and 23)
Cost
Land	1,567,010	1,587,400	50,895
Buildings and improvements	12,946,749	15,568,236	499,142
Machinery and equipment	57,507,178	69,058,304	2,214,117
Other equipment	6,433,887	7,326,602	234,902
Total cost	78,454,824	93,540,542	2,999,056
Revaluation increment	2,303,629	2,303,532	73,855
Total cost and revaluation increment	80,758,453	95,844,074	3,072,911
Less: Accumulated depreciation	32,086,389	35,366,492	1,133,905
Construction in progress and prepayments on equipment	8,297,976	5,170,211	165,765
Net properties and equipment	56,970,040	65,647,793	2,104,771
INTANGIBLE ASSETS
Deferred pension cost	18,683	29,649	951
Others (Notes 8 and 11)	3,071,399	4,624,901	148,281
Total intangible assets	3,090,082	4,654,550	149,232
OTHER ASSETS (Note 12)
Nonoperating properties, net (Note 23)	4,658,660	4,613,856	147,927
Deferred charges, net	1,561,094	1,549,423	49,677
Miscellaneous (Note 22)	1,313,929	1,352,456	43,362
Total other assets	7,533,683	7,515,735	240,966
TOTAL	$153,261,393	$165,506,489	$5,306,396

	2009	2010
	NT$	NT$	US$(Note 3)
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Short-term loans (Notes 13 and 23)	$6,240,293	$7,365,308	$236,143
Short-term bills payable (Notes 14 and 23)	2,555,728	1,475,000	47,291
Accounts payable and accrued expenses - third parties (Notes 9 and 24)	4,665,749	7,714,184	247,329
Accounts payable and accrued expenses - affiliates (Note 22)	192,058	377,887	12,115
Income tax payable	272,591	190,827	6,118
Financial liabilities at fair value through profit or loss - current (Note 5)	264,191	247,457	7,934
Dividends and bonuses payable	231,364	225,869	7,242
Customers’ deposits and advances	698,504	626,634	20,091
Current portion of long-term liabilities (Notes 15 and 23)	5,035,741	3,613,644	115,859
Total current liabilities	20,156,219	21,836,810	700,122
LONG-TERM LIABILITIES, NET OF CURRENT PORTION
Bonds payable (Notes 15 and 21)	14,695,952	14,176,323	454,515
Bank loans (Notes 15 and 23)	30,781,621	37,780,597	1,211,305
Total long-term liabilities	45,477,573	51,956,920	1,665,820
RESERVE FOR LAND VALUE INCREMENT TAX(Note 10)	1,466,299	1,466,299	47,012
OTHER LIABILITIES
Deferred income (Notes 12 and 16)	1,492,623	1,424,537	45,673
Miscellaneous (Note 24)	230,552	239,794	7,688
Total other liabilities	1,723,175	1,664,331	53,361
Total liabilities	68,823,266	76,924,360	2,466,315

CONSOLIDATED STATEMENTS OF INCOME

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010

(In Thousands, Except Earnings Per Share)

(Reviewed, Not Audited)

	2009	2010
	NT$	NT$	US$ (Note 3)
OPERATING REVENUE (Notes 9, 19 and 22)
Sales of cement, net	$26,759,013	$28,134,866	$ 902,048
Electric power revenue	5,380,784	4,448,779	142,635
Sales of stainless steel, net	2,079,751	2,644,980	84,802
Other operating income	1,385,889	1,564,304	50,154
Total operating revenue	35,605,437	36,792,929	1,179,639
OPERATING COSTS (Notes 7, 18 and 22)	28,549,512	32,708,111	1,048,673
GROSS PROFIT	7,055,925	4,084,818	130,966
OPERATING EXPENSES (Notes 18 and 22)	2,183,450	2,034,050	65,215
OPERATING INCOME	4,872,475	2,050,768	65,751
NONOPERATING INCOME AND GAINS
Investment income from equity-method investees (Note 8)	3,175,929	4,730,108	151,655
Dividends	261,069	337,635	10,825
Rental income (Note 22)	299,282	267,718	8,583
Interest	159,075	79,583	2,551
Valuation gains on financial assets, net	326,429	—	—
Others	523,010	556,806	17,852
Total nonoperating income and gains	4,744,794	5,971,850	191,466
NONOPERATING EXPENSES AND LOSSES
Interest (Note 10)	1,123,449	1,056,662	33,878
Impairment loss (Notes 9, 10 and 12)	—	628,978	20,166
Loss on redemption of bonds payable (Note 15)	—	356,345	11,425
Rental costs and expenses (Note 22)	128,375	123,287	3,953
Valuation losses on financial liabilities, net	137,294	—	—
Others (Note 22)	229,623	219,177	7,027
Total nonoperating expenses and losses	1,618,741	2,384,449	76,449

F-170

	2009	2010
	NT$	US$ (Note 3)
INCOME BEFORE INCOME TAX	7,998,528	5,638,169
INCOME TAX EXPENSE	550,185	262,509
CONSOLIDATED NET INCOME	$7,448,343	$5,375,660
ATTRIBUTABLE TO:
Stockholders of parent	$6,614,476	$5,234,328
Minority interest	833,867	141,332
	$7,448,343	$5,375,660
	2009	2010

	Before Income Tax	After Income Tax	Before Income Tax		After Income Tax
	NT$	NT$	NT$	US$ (Note 3)	NT$	US$ (Note 3)
CONSOLIDATED EARNINGS PER SHARE (Note 20)
Basic	$ 2.33	$ 2.15	$ 1.80	$ 0.06	$ 1.70	$ 0.05
Diluted	$ 2.32	$ 2.14	$ 1.79	$ 0.06	$ 1.70	$ 0.05

The accompanying notes are an integral part of the consolidated financial statements.

(With Deloitte & Touche review report dated October 25, 2010)

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010

(In Thousands)

	2009	2010
	NT$	NT$	US$ (Note 3)
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	$ 7,448,343	$ 5,375,660	$ 172,352
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Investment income from equity-method investees	(3,175,929)	(4,730,108)	(151,655)
Cash dividends received from equity-method investees	2,951,100	3,475,152	111,419
Depreciation and amortization	2,730,262	2,932,851	94,032
Impairment loss on properties and equipment and nonoperating properties	11,699	579,100	18,567
Amortization of discount on euro exchangeable bonds	121,357	371,408	11,908
Gain on disposal of available-for-sale financial assets, net	(155,364)	(106,786)	(3,424)
Deferred income taxes	(93,081)	(100,431)	(3,220)
Losses (gains) on disposal of properties and equipment and nonoperating properties	1,474	(64,838)	(2,079)
Unrealized foreign exchange gains on euro exchangeable bonds	(133,350)	(59,121)	(1,896)
Gain on disposal of financial assets carried at cost	—	(52,666)	(1,689)
Realized deferred income	(51,064)	(51,064)	(1,637)
Impairment loss on financial assets carried at cost	271	49,878	1,599
Others	(412,668)	22,114	710
Net changes in operating assets and liabilities:
Financial assets held for trading	(119,639)	72,944	2,339
Notes receivable	(157,315)	(1,072,499)	(34,386)
Accounts receivable	(84,111)	(913,532)	(29,289)
Other receivables	(451,496)	(640,063)	(20,521)
Inventories	742,906	(1,017,380)	(32,619)
Other current assets	(724,306)	(1,333,085)	(42,741)
Accounts payable and accrued expenses	(501,561)	1,016,285	32,584
Income tax payable	27,982	(179,111)	(5,743)
Financial liabilities held for trading	126,706	(64,266)	(2,060)
Customers' deposits and advances	79,141	112,328	3,601
Accrued pension cost	(4,477)	(55,304)	(1,773)
Net cash provided by operating activities	8,176,880	3,567,466	114,379

F-172

	2009	2010
	NTS	NTS	US$ (Note 3)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of properties and equipment and nonoperating properties	$(7,500,136)	$(7,900,197)	$(253,292)
Increase in available-for-sale financial assets	(3,078,625)	(1,200,035)	(38,475)
Proceeds from disposal of financial assets carried at cost	—	714,911	22,921
(Increase) decrease in restricted assets	(102,489)	394,438	12,646
Proceeds from disposal of available-for-sale financial assets	2,948,008	266,582	8,547
Increase in deferred charges	(141,570)	(152,107)	(4,877)
Increase in intangible assets	(710,026)	(137,332)	(4,403)
Increase in miscellaneous assets	(210,066)	(100,431)	(3,220)
Proceeds from disposal of properties and equipment and nonoperating properties	149,525	46,170	1,480
Acquisition of equity-method investments	(163,477)	—	—
Increase in financial assets carried at cost - noncurrent	(58,829)	—	—
Proceeds from investees' capital return	158	—	—
Net cash used in investing activities	(8,867,527)	(8,068,001)	(258,673)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term liabilities	17,153,445	22,634,577	725,700
Repayments of long-term liabilities	(15,394,348)	(25,839,550)	(828,456)
Cash dividends paid	(5,217,790)	(5,374,324)	(172,309)
(Decrease) increase in short-term loans	(267,536)	2,370,101	75,989
Decrease in minority interest	(403,231)	(265,580)	(8,515)
Increase in short-term bills payable	743,308	162,638	5,214
Increase (decrease) in miscellaneous liabilities	97,238	(29,494)	(946)
Payment of capital lease	(6,907)	(6,059)	(194)
Net cash used in financing activities	(3,295,821)	(6,347,691)	(203,517)
EFFECT OF EXCHANGE RATE CHANGES	763,431	(129,538)	(4,153)
IMPACT OF FIRST-TIME CONSOLIDATION OF SOME SUBSIDIARIES	—	(1,029,812)	(33,017)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
(Reviewed, Not Audited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, Order No. VI-0960064020 issued by the Financial Supervisory Commission of the ROC Executive Yuan on November 15, 2007, and accounting principles generally accepted in the Republic of China. The accounting policies adopted by the Corporation and its subsidiaries as of and for the nine months ended September 30, 2009 and 2010 and are the same as those as of and for the six months ended June 30, 2009 and 2010.

The Corporation and its subsidiaries' significant accounting policies are summarized as follows:

Consolidation

a. Basis of consolidation

The consolidated financial statements include the financial statements of the Corporation, its direct and indirect subsidiaries with at least 50% shareholding and other investees controlled by the Corporation.

b. Under the above basis of consolidation, the consolidated financial statements as of and for the nine months ended September 30, 2009 and 2010 include the accounts of 42 subsidiaries and 44 subsidiaries, respectively, as follows:

Investor	Subsidiary	Nature of Business	Percentage of Ownership as of September 30		Note
Investor	Subsidiary	Nature of Business	2009	2010	Note
The Corporation	Der Ching Investment Crop. (DCI)	It engages in investment activities.	99.99%	99.99%	—
	Nan Hwa Cement Corp. (NHC)	It manufactures and sells cement and granulated blast - furnace slag.	99.96%	99.96%	—
	Ya Tung Ready-Mixed Concrete Co., Ltd. (YTRMC)	It manufactures and sells ready-mixed concrete and cement-related products.	99.99%	99.99%	—
	Chiahuiz Power Corp. (CHP)	It engages in power generation, planning and designing power equipment, importing and exporting of spare parts of power generation equipment, etc.	59.59%	59.59%	—
	Asia Cement (Singapore) Pte. Ltd. (ACSPL)	It manufactures and sells cement and related products.	99.96%	99.96%	—
	Asia Cement (China) Holdings Corp. (ACCHC)	It engages in investment activities.	68.19%	68.19%	—
	Yali Precast and Prestressed Concrete Industrial Corp. (YLPPC)	It manufactures and sells cement and related products.	83.81%	83.81%	—

F-175

Investor	Subsidiary	Nature of Business	Percentage of Ownership as of September 30		Note
Investor	Subsidiary	Nature of Business	2009	2010	Note
	Asia Investment Corp. (AIC)	It engages in investment activities.	100.00%	100.00%	—
	Fu Ming Transport Corp. (FMT)	It engages in transportation activities.	99.83%	99.83%	—
	Asia Engineering Enterprise Corp. (AEE)	It engages in engineering activities.	98.06%	98.06%	—
	Sunrise Industrial Holdings Ltd. (SIHL)	It engages in investment activities.	100.00%	100.00%	—
	Yuan Long Stainless Steel Co., Ltd. (YLSS)	Stainless steel plant	51.00%	51.00%	—
DCI	Kowloon Cement Corp. Limited (KCC)	It manufactures and sells cement and related products.	49.00%	49.00%	Controlled by the Corporation
	Fu Shan Mineral Stone Co., Ltd. (FSMS)	It mines and sells limestone and cement-related products	99.49%	99.49%	—
YTRMC	Ya Shin Ready-Mixed Concrete Co., Ltd. (YSRMC)	It manufactures and sells cement and related products.	69.98%	69.98%	—
	Ya Tung Vietnam Co., Ltd. (YTV)	It manufactures and sells ready-mixed concrete and cement-related products.	—	100.00%	YTV was incorporated in 2010
FMT	Fu Dar Transport Corp. (FDT)	It engages in transportation activities.	99.90%	99.90%	—
AEE	Asia Engineering Enterprise Pte. Ltd. (AEEPL)	It engages in engineering activities.	100.00%	100.00%	—
AIC	Chiahuiz Power Corp. (CHP)	It engages in power generation, planning and designing power equipment, importing and exporting of spare parts of power generation equipment, etc.	0.01%	0.01%	Note 1
	Asia Cement Explorer Investment Ltd. (ACEIL)	It engages in investment activities.	100.00%	100.00%	—
	Asia Cement Pioneer Investment Ltd. (ACPIL)	It engages in investment activities.	100.00%	100.00%	—
YLPPC	Ya Li Precast Concrete India Pvt. Ltd. (YLPCIP)	It manufactures and sells cement and related products.	99.90%	99.90%	—
ACSPL	Oriental Concrete Private Ltd. (OCPL)	It manufactures and sells ready-mixed concrete and cement-related products.	100.00%	100.00%	—
	ACCHC	It engages in investment activities.	4.10%	4.10%	Note 1
ACCHC	Perfect Industrial Holdings Pte. Ltd. (PIHPL)	It engages in investment activities.	100.00%	100.00%	—
PIHPL	Asia Continent Investment Holdings Pte. Ltd. (ACIHPL)	It engages in investment activities.	100.00%	100.00%	—

Investor	Subsidiary	Nature of Business	Percentage of Ownership as of September 30		Note
Investor	Subsidiary	Nature of Business	2009	2010	Note
	Oriental Industrial Holdings Pte. Ltd. (OIHPL)	It engages in investment activities.	99.99%	99.99%	—
ACIHPL	Jiangxi Yadong Cement Co., Ltd. (JYDC)	It manufactures and sells cement and related products.	85.00%	85.00%	—
OIHPL	Wuhan Yadong Cement Co., Ltd. (WYDC)	It manufactures and sells cement and related products.	90.00%	90.00%	—
	Shanghai Yadong Investment Holdings Ltd. (SHYDIHL)	It engages in investment activities.	100.00%	100.00%	—
	Shanghai Yafu Cement Products Co., Ltd. (SHYFCP)	It manufactures and sells cement and related products.	50.00%	50.00%	—
	Shanghai Yali Cement Products Co., Ltd. (SHYLCP)	It manufactures and sells cement and related products.	90.00%	90.00%	—
	Hubei Yadong Cement Co., Ltd. (HYDCCL)	It manufactures and sells cement and related products.	90.00%	90.00%	—
	Sichuan Yali Concrete Produce Co., Ltd. (SYCPCL)	It manufactures and sells cement and related products.	90.00%	90.00%	—
	Sichuan Yali Transport Co., Ltd. (SYTCL)	It engages in transportation activities.	90.00%	90.00%	—
	Yangzhou Yadong Cement Co., Ltd. (YYDCCL)	It manufactures and sells cement and related products.	90.00%	90.00%	—
	Sichuon Yadong Cement Co., Ltd. (SIYDCCL)	It manufactures and sells cement and related products.	92.44%	92.44%	—
	Chengdu Yali Cement Products Co., Ltd. (CYCPCL)	It manufactures and sells cement and related products.	51.22%	51.22%	—
	Huanggang Yadong Cement Co., Ltd. (HGYDC)	It manufactures and sells cement and related products	79.98%	90.00%	—
JYDC	Jiangxi Yali Transport Co., Ltd. (JYLTC)	It engages in transportation activities.	51.99%	51.99%	—
	Nanchang Yadong Cement Products Co., Ltd. (NYDC)	It manufactures and sells cement and related products.	50.00%	50.00%	—
	Nanchang Yali Cement Co., Ltd. (NYLC)	It manufactures and sells cement and related products.	100.00%	100.00%	—
SHYDIHL	Jiangxi Yadong Cement Co., Ltd. (JYDC)	It manufactures and sells cement and related products.	10.00%	10.00%	Note 1
	Wuhan Yadong Cement Co., Ltd. (WYDC)	It manufactures and sells cement and related products.	10.00%	10.00%	Note 1
	Shanghai Yafu Cement Products Co., Ltd. (SHYFCP)	It manufactures and sells cement and related products.	15.00%	15.00%	Note 1

Note 1:
By considering the direct and indirect ownership of shares, the investees were controlled by the Corporation.

The financial statements of certain consolidated subsidiaries as of and for the nine months ended September 30, 2010 and 2009 have not been reviewed. As of September 30, 2009 and 2010, the total assets of these subsidiaries were 61% (NT$ 93,192,024 thousand) and 64% (NT$105,549,744 thousand (US$ 3,384,089 thousand)) and total liabilities of these subsidiaries were 55% (NT$37,946,121 thousand) and 61% (NT$47,037,966 thousand (US$ 1,508,110 thousand) of the related consolidated amounts as of September 30, 2009 and 2010, respectively. The total net operating revenue of these subsidiaries were 82% (NT$29,147,999 thousand) and 86% (NT$31,681,773 thousand (US$1,015,767 thousand), respectively, of consolidated net operating revenue for the nine months ended September 30, 2009 and 2010 and their net incomes were 59% (NT$4,421,627 thousand) and 49% (NT$2,647,264 thousand (US$84,875 thousand), respectively, of consolidated net income for the nine months ended September 30, 2009 and 2010.

c. Subsidiaries not included in the consolidated financial statements: None.

d. All significant transactions among the consolidated entities were eliminated in the consolidated financial statements.

2. REASONS AND EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE

Accounting for Inventories

On January 1, 2009, the Corporation and its subsidiaries adopted the newly revised SFAS No. 10, "Accounting for Inventories." The main revisions are (1) inventories are stated at the lower of cost or net realizable value, and inventories are written down to net realizable value item-by-item except when the grouping of similar or related items is appropriate; (2) unallocated overheads are recognized as expenses in the period in which they are incurred; and (3) abnormal costs, write-downs of inventories and any reversal of write-downs are recorded as cost of goods sold for the period. The adoption of SFAS No. 10 had no material effect on the consolidated net income for the nine months ended September 30, 2009.

3. TRANSLATION INTO U.S. DOLLARS

The consolidated financial statements are stated in New Taiwan Dollars. The translations of the 2010 New Taiwan dollar amounts into U.S. dollars are included solely for the convenience of readers, using the noon buying rate of NT$31.19 to US$1.00 published by the Federal Reserve Bank of New York on September 30, 2010. The convenience translations should not be construed as representations that the New Taiwan dollar amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other exchange rate.

4. CASH AND CASH EQUIVALENTS

	September 30
	2009	2010
	NT$	NT$	US$(Note 3)
Time deposits	$ 8,386,684	$2,949,944	$ 94,580
Checking accounts and demand deposits	5,021,171	2,480,777	79,538
Commercial paper and government bonds acquired under repurchase agreements	295,212	395,245	12,672
Petty cash	4,751	4,114	132
Cash on hand	513	477	15
	$13,708,331	$5,830,557	$ 186,937

As of September 30, 2009 and 2010, the bank deposits of NT$300,001 thousand and NT$25,685 thousand (US$823 thousand), respectively, of CHP which had been pledged to Chinatrust Commercial Bank under a syndicated loan agreement, were reclassified as restricted assets.

As of September 30, 2009 and 2010, the bank deposits of NT$609,326 thousand and NT$265,102 thousand (US$8,500 thousand), respectively, of JYDC, WYDC, SIYDCCL, NYDC, NYLC, HGYDC, HYDCCL and WYXC, which had been pledged to financial institutions as collaterals for loans, were reclassified as restricted assets.

F-179

As of September 30, 2010, the balances of YLSS's bank deposit, which had been pledged as collateral for bank's guarantee, was NT$3,578 thousand (US$115 thousand). Thus, the bank deposit was reclassified as restricted asset.

5. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS - CURRENT

	September 30
	2009	2010
	NT$	NT$	US$ (Note 3)
Financial assets held for trading
Beneficiary certificates - open-end funds	$ 699,101	$ 755,409	$ 24,220
Listed stocks	318,904	514,899	16,508
	$1,018,005	$1,270,308	$ 40,728
Financial liabilities held for trading
Exchangeable bonds' exchange option	$ 238,048	$ 209,617	$ 6,721
Non-delivery cross-currency swap contracts	—	37,840	1,213
Cross-currency swap contracts	26,143	—	—
	$ 264,191	$ 247,457	$ 7,934

a. The Corporation entered into derivative contracts during the nine months ended September 30, 2009 and 2010 to manage exposures due to exchange rate and interest rate fluctuations. The financial risk management objective of the Corporation is to minimize risks due to changes in cash flows.

There was no outstanding derivative contract as of September 30, 2010. The outstanding cross-currency swap contracts as of September 30, 2009 were as follows:

Contract Amount (In Thousands)	Maturity Date	Range of Interest Rates Paid	Range of Interest Rates Received
US$80,000	2010.8.18	—	0.78%-0.8%

b. ACCHC entered into non-delivery cross-currency swap contracts during the nine months ended September 30, 2010 to manage exposures to exchange rate fluctuations. The outstanding non-delivery forward contracts as of September 30, 2010 were as follows:

	Currency	Maturity Date	Contract Amount (In Thousands)	Range of Interest Rates Paid	Range of Interest Rates Received
Non-delivery cross - currency swap contracts	RMB/USD	2011.3.19	US$50,000	—	1M LIBOR plus 100 bps (1.25625%)
Non-delivery cross - currency swap contracts	RMB/USD	2011.3.25	US$20,000	—	Fixed rate (0.5%) and 3M LIBOR plus 50 bps (0.78938%)
Non-delivery cross - currency swap contracts	USD/RMB	2011.3.25	US$20,000	Fixed rate (0.4%) and 3M LIBOR plus 50 bps (0.78938%)	—

AVAILABLE-FOR-SALE FINANCIAL ASSETS

	September 30
	2009		2010
	Current	Non-current	Current		Non-current
	NT$	NT$	NT$	US$(Note 3)	NT$	US$(Note 3)
Listed stocks
Far Eastern New Century Corp. (FENC)	$1,162,155	$32,197	$1,352,242	$43,355	$37,463	$1,201
U-Ming Marine Transport Corp. (U-Ming)	553,097	2,620,164	378,562	12,137	3,048,286	97,733
Far Eastern International Bank Corp. (FEIB)	273,029	409,476	311,290	9,981	466,394	14,953
Oriental Union Chemical Corp. (OUCC)	247,710	582,110	375,088	12,026	881,445	28,261
Everest Textile Co., Ltd. (ETCL)	139,082	1,437,810	162,398	5,207	1,933,855	62,002
Far Eastern Department Stores Co., Ltd. (FEDS)	82,213	—	97,694	3,132	—	—
China Hi-Ment Corp. (CHC)	—	2,652,893	—	—	3,396,403	108,894
China Shanghai Cement Group Ltd.	—	1,079,445	—	—	896,190	28,733
Chunghwa Telecom Co., Ltd.	15,112	—	—	—	—	—
Taiwan Mobile Co., Ltd.	5,355	—	—	—	—	—
	2,477,753	8,814,095	2,677,274	85,838	11,512,546	369,110
Beneficiary certificates
Opas Fund Segregated Portfolio Company
-Opas Fund Segregated Portfolio Tranche B	—	676,875	—	—	710,890	22,792
-Opas Fund Segregated Portfolio Tranche D	—	—	—	—	437,405	14,024
Others	24,120	—	—	—	—	—
	24,120	676,875	—	—	1,148,295	36,816
	$2,501,873	$9,490,970	$2,677,274	$85,838	$12,660,841	$405,926

INVENTORIES

F-181

As of September 30, 2009 and 2010, the allowance for inventory devaluation was NT$2,573 thousand and NT$16,904 thousand (US$542 thousand), respectively.

The cost of inventories recognized as cost of goods sold for the nine months ended September 30, 2009 and 2010 was NT$23,719,833 thousand and NT$28,435,091 thousand (US$911,673 thousand), respectively. The cost of inventories recognized as cost of goods sold for the nine months ended September 30, 2009 included NT$506,458 thousand gain on reversal of write-downs of inventories. Previous write-downs had been reversed as a result of increased selling price in markets. The cost of inventories recognized as cost of goods sold for the nine months ended September 30, 2010 included NT$310 thousand (US$10 thousand) loss on write-downs of inventories.

8. INVESTMENTS ACCOUNTED FOR BY EQUITY-METHOD

	September 30
	2009		2010
	Carrying Amount	% of Ownership	Carrying Amount		% of Ownership
	NT$		NT$	US$ (Note 3)
Listed stocks
Far Eastern New Century Corporation (FENC)	$16,882,436	23.77	$18,019,610	$ 577,737	23.77
U-Ming Marine Transport Corp. (U-Ming)	10,256,743	38.66	11,094,317	355,701	38.66
	27,139,179		29,113,927	933,438
Unlisted stocks
Yuan Ding Co., Ltd. (YDC)	4,100,466	49.99	4,282,816	137,314	49.99
Yue Yuan Investment Corp. (YYI)	3,335,326	36.42	3,712,749	119,036	36.42
Oriental Securities Corp. (OSC)	1,920,730	18.93	1,914,395	61,378	18.93
Far Eastern Construction Co., Ltd. (FEC)	930,043	33.55	1,264,951	40,556	33.55
FEDS Development Ltd. (FEDSDL)	550,877	25.00	555,174	17,800	25.00
Yuan Ding Leasing Corp. (YDLC)	337,851	43.60	358,110	11,482	43.60
Yali Transport Corp. (YLT)	250,033	49.39	276,495	8,865	49.39
Yue Ding Enterprise Corp. (YDEC)	210,403	30.84	253,980	8,143	30.84
Chengdu Yaxin Slag Powder Co., Ltd. (CYSPC)	120,613	49.00	115,900	3,716	49.00
Alliance Concrete Singapore Pte. Ltd.	184,567	33.33	103,470	3,317	33.33
Wuhan Asia Marine Transport Co., Ltd. (WAMTC)	89,097	50.00	93,505	2,998	50.00
Everstrong Iron & Steel Foundry Ltd. (EISF)	62,627	41.67	69,358	2,224	41.67
Universal Exchange Corp.	57,655	30.34	56,275	1,804	30.34
Pao-Good Industry Co., Ltd. (PGIC)	37,808	31.00	38,411	1,232	31.00
	12,188,096		13,095,589	419,865
	$39,327,275		$42,209,516	$1,353,303

As of and for the nine months ended September 30, 2009 and 2010, the information of other investees was as follows:

a. In July 2009, OIHPL invested SGD3,131 thousand to acquire new shares for capital increase of Chengdu Yaxin Slag Powder Co., Ltd. (CYSPC).

b. In July 2009, FDT and YLPPC totally invested NT$92,520 thousand to acquire new shares for capital increase of YDEC.

c. The aggregate market value of the investments in listed stocks accounted for by equity-method was as follows:

September 30
	2009	2010
	NT$	NT$	US$ (Note 3)
Equity-method - listed stocks	$59,713,440	$57,437,163	$1,841,525

d. The investment income from equity-method investees for the nine months ended September 30, 2009 and 2010 were categorized by whether their financial statements have been reviewed as follows:

Nine Months Ended September 30
	2009	2010
	NT$	NT$	US$ (Note 3)
Reviewed
U-Ming	$1,625,870	$2,099,129	$ 67,301
FENC	1,058,102	1,860,124	59,639
	2,683,972	3,959,253	126,940
Unreviewed
FEC	11,888	426,085	13,661
YYI	187,408	179,009	5,739
YDC	61,377	125,958	4,039
OSC	170,754	21,686	695
Others, net	60,530	18,117	581
	491,957	770,855	24,715
	$3,175,929	$4,730,108	$ 151,655

Because the financial statements of some investees have not been reviewed, the independent accountant's issued qualified review reports on the financial statements of U-Ming and FENC as of and for the nine months ended September 30, 2009 and 2010.

e. Movements of goodwill for the nine months ended September 30, 2010 were as follows:

Nine Months Ended September 30, 2010
	NT$	US$ (Note 3)
Balance, beginning of period	$ —	$ —
Amount recognized on business combinations	700,501	22,459
Balance, end of period	$ 700,501	$ 22,459

^{}[] 9. FINANCIAL ASSETS CARRIED AT COST

	September 30
	2009	2010
	Non-current	Non-current
	NT$	NT$	US$(Note 3)
Private stocks
Far Eastern International Bank (FEIB)	$1,200,205	$1,200,205	$ 38,480
Unlisted stocks
New Century InfoComm Tech Co., Ltd. (NCIC)	1,310,563	648,318	20,786
Far Eastern International Leasing Corp.	602,814	602,814	19,327
Kaohsiung Rapid Transit Corp. (KRT)	379,718	161,368	5,174
Shih Hsin Storage & Transportation Co., Ltd.(SHSTC)	$ 202,061	$ 202,061	$ 6,478
Cemention on Micronesia LLC	—	121,719	3,903
Others	165,787	136,582	4,379
	$3,861,148	$3,073,067	$ 98,527

a. The Corporation and its subsidiaries' holding of marketable equity securities with no quoted market prices and with fair values that could not be reliably measured were evaluated at cost.

b. The Corporation invested NT$400,000 thousand in KRT, which started operation in April 2008. The investment cost is amortized during the period of the chartered right. The accumulated amortization amount was NT$29,043 thousand (US$931 thousand) as of September 30, 2010.

c. The Corporation, DIC and AIC subscribed for 157,831 thousand shares of the private placement of Far Eastern International Bank (FEIB). These stocks are restricted to be transferred according to the Securities and Exchange Act Article 43-8.

d. DCI invested NT$57,240 thousand in July 2009, to acquire new shares for capital increase of Far Eastern International Leasing Corp.

e. In December 2009, FMT received NT$1,602 thousand from Fu Yu (Cayman) Venture Capital Fund because of capital reduction; the remaining carrying value of NT$2,658 thousand was recognized as impairment loss as the recovery of the carrying value is remote.

f. In 2009, the Corporation recognized impairment losses of NT$159,711 thousand and NT$18,000 thousand on its investments in KRT and DDH, respectively. For the nine months ended September 30, 2010, the Corporation recognized impairment loss of NT$49,878 thousand (US$1,599 thousand) on KRT.

g. In 2009, DCI recognized impairment losses of NT$6,900 thousand and NT$271 thousand on its investments in DDH and Picvue Electronics, Ltd., respectively.

h. DCI and AIC sold the stocks of New Century InfoComm Tech Co., Ltd. (NCIC) to related party, Yuan Cing Infocomm Tech., Ltd. (YCIC), in August 2010 at a consideration of NT$714,911 thousand (US$22,921 thousand) and gain of NT$52,666 thousands (US$1,689 thousand) was recognized as other operating income - sale of investments.

i. ACEIL acquired the stocks of Cemention on Micronesia LLC for US$3,900 thousand in September 2010. As of September 30, 2010, the investment consideration have not been paid and accounted for as accounts payable and accrued expenses - third parties.

F-184

^{}[] 10. PROPERTIES AND EQUIPMENT, NET

The above properties and equipment mainly included the following:

a. The Corporation revalued its operating and nonoperating properties (Note 12) in accordance with government regulations as follows: Land, in 1983 and 1996; and other properties, in 1974, 1975 and 1981. NHC and YTRMC revalued their land in accordance with government regulations in 1982 and 1998, respectively. NHC revalued its other properties in accordance with government regulations in 1975. Portion of its properties held for lease and idle properties have been reclassified as nonoperating properties (Note 12). The revaluation increment less the reserve for land value increment tax was credited to unrealized revaluation increments. Reserve for land value increment tax was recognized as long-term liabilities.

F-185

e. As of September 30, 2009 and 2010, the title of land with carrying value of NT$50,211 thousand and NT$77,490 thousand (US$2,484 thousand), respectively, was temporarily registered in the name of trustees who had either signed an agreement or had pledged the land to the Corporation and FSMS.

f. The generator parts in subsidiary, CHP, encountered damage in May and June 2010, which made the machine set incapable of operation. In order to resume operation as soon as possible, CHP determined to replace the parts after evaluation. The difference between the net replacement value and carrying value of the old parts has been recognized as an impairment loss of NT$578,619 thousand (US$18,551 thousand) for the second quarter 2010. CHP completed the replacement of the parts in September 2010 and recognized a disposal gain on old parts of NT$65,009 thousand (US$2,084 thousand). CHP took out the insurance on abovementioned properties and business interruption. However, CHP cannot estimate the amount of claim settlement as of September 30, 2010.

g. The capitalized interests were NT$117,101 thousand and NT$198,132 thousand (US$6,352 thousand) for the nine months ended September 30, 2009 and 2010, respectively. The interest rates were 1.196%-5.94% and 1.286%-5.61% for the nine months ended September 30, 2009 and 2010, respectively.

INTANGIBLE ASSETS - OTHERS

^{}[] 12. OTHER ASSETS

The details of nonoperating properties were as follows:

F-187

^{}[] Deferred charges consisted of:

	September 30
	2009	2010
	NT$	NT$	US$ (Note 3)
Major repairs	$ 737,748	$ 740,674	$23,747
Storage terminal and wharf warehouse	586,656	548,175	17,576
Facilities - use rights	162,385	153,934	4,935
Others	74,305	106,640	3,419
	$1,561,094	$1,549,423	$49,677

The above nonoperating land and buildings mainly included the following:

a. Asia Cement Building and Pao-Ching Building - leased to FEDS;
b. Land and building in Hwalien - leased to YLT;
c. Undeveloped parcel of land in Ling-Ya, Kaohsiung;

The lease terms of the above a-c were 1-10 years and the rents were paid monthly.

f. YTRMC recognized an impairment losses of NT$481 thousand (US$15 thousand) on the nonoperating properties for the nine months ended September 30, 2010.

F-188

^{}[] F-189

13. SHORT-TERM LOANS

14. SHORT-TERM BILLS PAYABLE

Short-term bills payable were issued under guarantee obtained from financial institutions.

LONG-TERM LIABILITIES

	Current	Long-term	Total
	NT$	NT$	NT$	US$ (Note 3)
September 30, 2009
Long-term debt
Bank loans	$4,035,741	$30,781,621	$34,817,362
Bonds
Domestic bonds	$1,000,000	$ 8,500,000	$ 9,500,000
Euro exchangeable bonds	—	6,611,850	6,611,850
Add: Unrealized loss	—	132,300	132,300
Less: Unamortized discount on exchangeable bonds	—	548,198	548,198
	—	6,195,952	6,195,952
	1,000,000	14,695,952	15,695,952
	$5,035,741	$45,477,573	$50,513,314
September 30, 2010
Long-term debt
Bank loans	$2,113,644	$37,780,597	$39,894,241	$1,279,072
Bonds
Domestic bonds	1,500,000	12,000,000	13,500,000	432,831
Euro exchangeable bonds	—	2,276,232	2,276,232	72,980
Add: Unrealized loss	—	36,429	36,429	1,168
Less: Unamortized discount on exchangeable bonds	—	136,338	136,338	4,372
	—	2,176,323	2,176,323	69,776
	1,500,000	14,176,323	15,676,323	502,607
	$3,613,644	$51,956,920	$55,570,564	$1,781,679

a. Domestic bonds are repayable in installments at varying amounts or in one lump-sum on maturity, with the latest maturity in February 2015. Interest rates were both 1.89%-3.05% for the nine months ended September 30, 2009 and 2010.

b. Bank loans are repayable in installments at varying amounts or in one lump-sum payment on maturity, with the latest maturity in May 2018. Interest rates were both 0.312%-6.318% for the nine months ended September 30, 2009 and 2010, respectively.

F-190

The offering included the following terms:

2) Final redemption

Unless previously redeemed, purchased or exchanged, the bond will be redeemed at 104.5% on February 20, 2013.

3) Redemption at the option of the bondholders

Unless previously redeemed, purchased or exchanged, bondholders shall have the right to require the Corporation to redeem all or part of the bonds held on August 20, 2010 at 102.2%.

4) Redemption at the option of the Corporation

At any time on or after February 20, 2011 and prior to February 20, 2013, the Corporation may redeem the bonds in whole or in part at the early redemption amount, if the closing price of the shares, translated into U.S. dollars at the prevailing rate, for 20 out of 30 consecutive trading days, the last of which occurs not more than five trading days immediately preceding the date of redemption notice, is at least 130% of the quotient of the early redemption amount divided by the number of reference shares to be delivered upon exchange of US$100,000 principal amount of bonds on the applicable Trading Day based on the exchange price then in effect, translated into U.S. dollars at a fixed exchange rate of NT$31.87=US$1.00. The Corporation may, at its option at any time, redeem, in whole but not in part, the bonds at the early redemption amount if at least 90% of the principal amount of the bonds has already been redeemed, repurchased and cancelled, or exchange.

5) The exchange price shall be subject to adjustment in the manner, including (but not limited to):

a) The making by FENC of a free distribution of FENC common shares;

b) Subdivisions, consolidations or reclassifications of FENC common shares;

c) A dividend or an employee bonus in FENC common shares; and

Bondholders had exercised put option; the Corporation had redeemed the principal amount of US$135,900 thousand (US$138,890 thousand including interest premium of) on August 20, 2010. As of September 30, 2010, the bonds outstanding amounted to US$74,100 thousand and had not been exchanged into the common shares of FENC.

d. On April 25, 2008, CHP signed syndicated loan agreement with Chinatrust Commercial Bank and 15 other financial institutions to reimburse syndicated loans with China Development Industrial Bank. The credit lines obtained amounted to NT$8,148,000 thousand and US$8,500 thousand.

F-191

As of September 30, 2010, CHP had used its credit lines as follows:

Item	Category	Amount (In Thousands)	Interest Rate/ Guarantee Fee Rate (%)	Term (Years)
A	Bank loan	NT$6,843,880	1.21-1.23	10
A	Bank loan	(US$219,425)	1.21-1.23	10
		NT$184,252
B	Contract bonding	(US$5,907)	0.5	10
C	Contract bonding	US$6,260	0.5	7

The financial ratios that should be maintained by CHP under the syndicated loan agreement are as follows:

1) Debt ratio as of year-end (total debt/total stockholders' equity);

a) Under 250% from 2008 to 2009
b) Under 180% from 2010 to 2018.

2) Interest coverage ratio should be at least 110% from 2008 to 2018.

The above financial ratios are based on the audited financial statements. If CHP cannot meet the required ratios or their multipliers, it should inform the administrator bank immediately and pay the default penalty to the syndication bank group.

DEFERRED INCOME

	2009	2010
	September 30
	NT$	NT$	US$ (Note 3)
Land-use-right on land in Ling Ya, Kaohsiung used by an affiliate	$ 820,024	$ 798,585	$ 25,604
Deferred rental on land in Taipei used by an affiliate	668,602	621,955	19,941
FEC - income arising from sale of SHSTC stocks to DCI	3,997	3,997	128
	$1,492,623	$1,424,537	$ 45,673

a. The deferred land-use-right on land in Ling Ya, Kaohsiung used by FEDSDL (Note 12) is amortized to income over fifty years.
b. The deferred rental on land in Taipei used by YDC (Note 12) is amortized to income over thirty years.
c. Income arising from sale of stock investments accounted for by equity-method between the Corporation and its affiliates is deferred and recognized as income when subsequently realized.

F-192

^{}[] 17. STOCKHOLDERS' EQUITY

a. Capital surplus

Capital surplus comprised of the following:

Capital surplus generated from adjustments of investee's equity is restricted to be used.

Dividends payable that remained unclaimed for over five years is reversed to "capital surplus - donations" account in the stockholders' equity section of the balance sheets.

b. Appropriation of earnings and dividend policy

1) Dividends 60%
2) Bonus of stockholders 33%
3) Remuneration to directors and supervisors 3%
4) Employees' bonuses 4%

These appropriations shall be resolved by the stockholders in the following year and given effect to in the financial statements of that year.

The employees' bonus and remuneration to directors and supervisors which estimated 4% and 3% of net income (net of the bonus to employees and bonus to directors and supervisors), respectively, were recognized for the nine months ended September 30, 2009 and 2010. Material differences between such estimated amounts and the amounts proposed by the Board of Directors in the following year are adjusted for in the current year. If the actual amounts subsequently resolved by the stockholders differ from the proposed amounts, the differences are recorded in the year of stockholders' resolution as a change in accounting estimate. If bonus shares are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonus by the closing price (after considering the effect of cash and stock dividends) of the shares of the day preceding the stockholders' meeting.

F-193

The appropriations of the earnings and dividends per share of 2008 and 2009 were approved in the stockholders' meetings on June 9, 2009 and June 8, 2010, respectively, as follows:

	Appropriation of Earnings			Dividend Per Share (Dollars)
	2008	2009		2008	2009
	NT$	NT$	US$ (Note 3)	NT$	NT$	US$ (Note 3)
Legal reserve	$ 712,274	$ 786,110	$ 25,204
Dividends and bonus of stockholders - cash	5,217,790	5,374,324	172,309	$ 1.80	$ 1.80	$ 0.06
Dividends and bonus of stockholders - stock	869,632	895,720	28,718	0.30	0.30	0.01

The bonus to employees and the remuneration to directors and supervisors for 2008 and 2009 approved in the stockholders' meetings on June 9, 2009 and June 8, 2010, respectively, were as follows:

	2008		2009
	Cash	Stock	Cash		Stock
	NT$	NT$	NT$	US$ (Note 3)	NT$	US$ (Note 3)
Bonus to employees	$ 261,825	$ —	$ 269,679	$ 8,646	$ —	$ —
Remuneration to directors and supervisors	196,368	—	202,260	6,485	—	—
	2008		2009
	Remuneration to Directors and Supervisors		Bonus to Employees		Remuneration to Directors and Supervisors
	NT$	NT$	NT$	US$ (Note 3)	NT$	US$ (Note 3)
Amounts approved in stockholders' meetings	$261,825	$196,368	$269,679	$8,646	$202,260	$6,485
Amounts recognized in respective financial statements	262,255	196,691	243,996	7,823	182,997	5,867
	$ (430)	$ (323)	$ 25,683	$ 823	$ 19,263	$ 618

The differences between the approved amounts of the bonus to employees and the remuneration to directors and supervisors and the accrual amounts reflected in the financial statements for the years ended December 31, 2008 and 2009 which were primarily due to changes in estimates had been adjusted in profit and loss for the nine months ended September 30, 2009 and 2010, respectively.

The Corporation's appropriation of earnings in 2009 had been approved by Financial Supervisory Commission and the board of directors had decided ex-dividend date is August 30, 2010.

Information on earnings appropriation can be accessed through the Market Observation Post System on the Taiwan Stock Exchange Corporation's website.

c. Cumulative translation adjustments

For the nine months ended September 30, 2009 and 2010, movements of cumulative translation adjustments were as follows:

	Equity-method Investments		Translation of Foreign-currency Financial Statements		Total
	NT$	US$(Note 3)	NT$	US$(Note 3)	NT$	US$(Note 3)
Nine months endedSeptember 30,2009
Balance, beginningof period	$ 991,936		$3,487,494		$4,479,430
Recognized instockholders' equity	(257,472)		(494,467)		(751,939)
Balance, end ofperiod	$ 734,464		$2,993,027		$3,727,491
Nine months endedSeptember 30,2010
Balance, beginningof period	$317,699	$ 10,186	$2,883,794	$ 92,459	$3,201,493	$ 102,645
Recognized instockholders' equity	(312,784)	(10,028)	(86,186)	(2,763)	(398,970)	(12,791)
Balance, end ofperiod	$ 4,915	$ 158	$2,797,608	$ 89,696	$2,802,523	$ 89,853

d. Unrealized gain (loss) on financial instruments

For the nine months ended September 30, 2009 and 2010, movements of unrealized gain or loss on financial instruments were as follows:

	Available-for-saleFinancial Assets		Equity-methodInvestments		Gain (Loss) on CashFlow Hedges		Total
	NT$	US$(Note 3)	NT$	US$(Note 3)	NT$	US$(Note 3)	NT$	US$(Note 3)
Nine months endedSeptember 30, 2009
Balance, beginning ofperiod	$1,219,717		$(987,771)		$ 9,696		$241,642

^{}[] F-196

	Available-for-sale Financial Assets		Equity-method Investments		Gain (Loss) on Cash Flow Hedges		Total
	NT$	US$(Note 3)	NT$	US$(Note 3)	NT$	US$(Note 3)	NT$	US$(Note 3)
Recognized in stockholders' equity	1,668,690		4,477,106		(9,696)		6,136,100
Balance, end of period	$2,888,407		$3,489,335		$ —		$6,377,742
Nine months ended September 30, 2010
Balance, beginning of period	$3,633,851	$116,507	$5,260,773	$168,668	$ —	$ —	$8,894,624	$285,175
Recognized in stockholders' equity	439,243	14,083	483,615	15,505	—	—	922,858	29,588
Balance, end of period	$4,073,094	$130,590	$5,744,388	$184,173	$ —	$ —	$9,817,482	$314,763

18. EMPLOYEES STOCK OPTION PLANS

Information about employee stock options was as follows:

	Number of Options (In Thousands)
	Nine Months Ended September 30
	2009	2010
Balance, beginning of period	11,578	11,578
Options granted	—	—
Options forfeited	—	—
Options exercised	—	—
Options expired	—	—
Balance, end of period	11,578	11,578
Options exercisable, end of period	11,578	11,578
Weighted-average fair value of options granted (HK$)	$ —	$ —

^{}[] Information about outstanding options as of September 30, 2010 was as follows:

September 30, 2010
Range of Exercise Price (HK$) Weighted-average Remaining Contractual Life (Years)
HK$4.2075
3.53

Options granted during the nine months ended September 30, 2009 were priced using the binomial option pricing model and the inputs to the model were as follows:

Market price	HK$ 4.95
Exercise price	HK$ 4.2075
Expected volatility	52%
Expected life (years)	1.5-2
Expected dividend yield	0.95%
Risk-free interest rate	2.318%

Compensation cost recognized was NT$29,962 thousand and NT$17,146 thousand (US$550 thousand) for the nine months ended September 30, 2009 and 2010, respectively.

19. OTHER OPERATING INCOME

	Nine Months Ended September 30
	2009	2010
	NT$	NT$	US$(Note 3)
Sale of investments	$1,808,787	$2,243,415	$ 71,927
Cost of investments sold	1,676,091	2,089,279	66,985
Gain on sale of investments, net	132,696	154,136	4,942
Dividends	167,961	239,510	7,679
Income of investment for operating, net	300,657	393,646	12,621
Engineering revenue	615,017	740,970	23,757
Transportation revenue	470,215	429,688	13,776
Other operating income	$1,385,889	$1,564,304	$ 50,154

20. EARNINGS PER SHARE

	Amount (Numerator)				Shares (Denominator) (Thousands)	EPS (Dollars)
	Before Income Tax		After Income Tax		Shares (Denominator) (Thousands)	Before Income Tax		After Income Tax
	NT$	US$(Note 3)	NT$	US$(Note 3)		NT$	US$(Note 3)	NT$	US$(Note 3)
Nine months ended September 30, 2009
Consolidated net income	$7,998,528		$7,448,343
Less: Minority interest in net income	845,708		833,867
Basic earnings per share
Consolidated net income of common stockholders	7,152,820		6,614,476		3,075,308	$ 2.33		$ 2.15

	Amount (Numerator)				Shares (Denominator) (Thousands)	EPS (Dollars)
	Before Income Tax		After Income Tax		Shares (Denominator) (Thousands)	Before Income Tax		After Income Tax
	NT$	US$(Note 3)	NT$	US$(Note 3)		NT$	US$(Note 3)	NT$	US$(Note 3)
Add: Effect of potential dilutive common stock	—		—		9,474
Diluted earnings per share
Income for the period attributable to common stockholders plus effect of potential dilutive common stock	$7,152,820		$6,614,476		3,084,782	$2.32		$2.14
Nine months ended September 30, 2010
Consolidated net income	$5,638,169	$180,769	$5,375,660	$172,352
Less: Minority interest in net income	103,412	3,316	141,332	4,531
Basic earnings per share
Consolidated net income of common stockholders	5,534,757	177,453	5,234,328	167,821	3,075,308	$1.80	$0.06	$1.70	$0.05
Add: Effect of potential dilutive common stock	—	—	—	—	8,763
Diluted earnings per share
Income for the period attributable to common stockholders plus effect of potential dilutive common stock	$5,534,757	$177,453	$5,234,328	$167,821	3,084,071	$1.79	$0.06	$1.70	$0.05

The weighted average number of stocks outstanding for EPS calculation has been retroactively adjusted for the issuance of stock dividends. This adjustment caused the basic after income tax EPS for the nine months ended September 30, 2009 to decrease from NT$2.22 to NT$2.15.

F-198

^{}[] 21. FINANCIAL INSTRUMENTS

a. Fair value information

	September 30
	2009		2010
	Carrying Value	Fair Value	Carrying Value		Fair Value
	NT$	NT$	NT$	US$ (Note 3)	NT$	US$ (Note 3)
Assets
Investments accounted for by equity-method
Quoted Market price	$27,139,179	$59,713,440	$29,113,927	$933,438	$57,437,163	$1,841,525
Liabilities
Bonds payable (including current portion)	15,695,952	16,324,525	15,676,323	502,607	15,982,414	512,421

b. The methods and significant assumptions applied in determining fair values of financial instruments were as follows:

1) Short-term financial instruments (other than short-term investments) - the carrying amounts of cash and cash equivalents, notes and accounts receivable, other receivables, restricted assets, short-term loans, short-term bills payable, accounts payable and accrued expenses, dividends and bonus payable and lease payment, approximate their fair values because of the short maturities of these instruments.

4) The fair value of long-term liabilities is measured at present value of expected cash flows. Since the interest rate is floating, fair value approximates carrying value.

5) The fair values of domestic bonds payable and exchangeable bond are based on the over-the-counter quotations and closing prices of Singapore Exchange Ltd. at the end of September, respectively.

6) For refundable deposits paid and guarantee deposits received, fair values are estimated at their carrying amounts.

7) Derivative financial instruments - based on valuation results provided by banks.

F-199

c. Fair values of financial assets and liabilities based on quoted market prices or valuation technique were as follows:

	Quoted Market Prices			Valuation Techniques
	September 30			September 30
	2009	2010		2009	2010
	NT$	NT$	US$ (Note 3)	NT$	NT$	US$ (Note 3)
Assets
Financial assets at fair value through profit or loss	$ 1,018,005	$ 1,270,308	$ 40,728	$ —	$ —	$ —
Available-for-sale financial assets	11,992,843	15,338,115	491,764	—	—	—
Liabilities
Financial liabilities at fair value through profit or loss	—	—	—	264,191	247,457	7,934

d. Valuation gains and losses arising from changes in fair value of financial instruments determined using valuation techniques were losses of NT$137,294 thousand and gains of NT$45,066 thousand (US$1,445 thousand) for the nine months ended September 30, 2009 and 2010, respectively.

e. The financial assets exposed to fair value interest rate risk amounted to NT$8,686,896 thousand and NT$2,125,650 thousand (US$68,152 thousand) as of September 30, 2009 and 2010, respectively, and the financial liabilities exposed to fair value interest rate risk amounted to NT$27,907,336 thousand and NT$27,396,940 thousand (US$878,389 thousand) as of September 30, 2009 and 2010, respectively. The financial assets exposed to cash flow interest rate risk amounted to NT$4,933,398 thousand and NT$3,446,067 thousand (US$110,486 thousand) as of September 30, 2009 and 2010, respectively, and the financial liabilities exposed to cash flow interest rate risk amounted to NT$31,401,999 thousand and NT$37,013,932 thousand (US$1,186,724 thousand) as of September 30, 2009 and 2010, respectively.

f. Information on financial risks:

1) Market risk

The cross-currency swap ("CCS") contracts are used to hedge exposures due to exchange rate fluctuations on probable transaction.

2) Credit risk

Credit risk represents the potential impacts to financial assets that the Corporation and its subsidiaries might encounter if counter-parties or third parties breach the contracts. Factors that affect the impacts include credit risk concentration, components of financial instruments, contract amount and other receivables. The Corporation and its subsidiaries' maximum credit risk exposure on each financial instrument are the same as the carrying value. The Corporation and its subsidiaries' evaluation of credit risk exposure as of September 30, 2009 and 2010 was immaterial because all counter-parties are reputable financial institutions with good credit ratings.

F-200

^{}[] F-201

3) Liquidity risk

The Corporation and its subsidiaries have sufficient operating capital to meet cash flow requirements. Thus, the Corporation and its subsidiaries do not have significant liquidity risk.

4) Cash flow risk from interest rate fluctuations

g. Reclassifications

	Before Reclassifications	After Reclassifications
	NT$	NT$
Financial assets at fair value through profit or loss - held for trading	$ 768,601	$ —
Available-for-sale financial assets	—	768,601
	$ 768,601	$ 768,601

The carrying amounts and fair values of the reclassified financial assets (excluding those that had been derecognized) as of September 30, 2009 and 2010 were as follows:

	2009		2010
	September 30
	Carrying Amount	Fair Value	Carrying Amount		Fair Value
	NT$	NT$	NT$	US$ (Note 3)	NT$	US$ (Note 3)
Available-for-sale financial assets	$ 455,727	$ 455,727	$ 591,007	$ 18,949	$ 591,007	$ 18,949

The gains or losses recorded for the reclassified financial assets (excluding those that had been derecognized before September 30, 2009 and 2010, respectively) for the nine months ended September 30, 2009 and 2010 and the pro forma gains or losses assuming no reclassifications had been made were as follows:

Nine Months Ended September 30
	2009		2010
	Gains (Losses) Recorded	Pro Forma Gains	Gains Recorded		Pro Forma Gains
	NT$	NT$	NT$	US$ (Note 3)	NT$	US$ (Note 3)
Available-for-sale financial assets	$—	$138,464	$—	$—	$5,905	$189

22. RELATED-PARTY TRANSACTIONS

a. The related parties and their relationships with the Corporation and its subsidiaries are as follows:

Related Party	Relationship with the Consolidated Entities as of September 30, 2010
Far Eastern New Century Corp. (FENC)	Major stockholder and equity-method investee of the Corporation
U-Ming Marine Transport Corp. (U-Ming)	Equity-method investee
Yuan Ding Co., Ltd. (YDC)	Equity-method investee
Yali Transport Corp. (YLT)	Equity-method investee
Oriental Securities Corp. (OSC)	Equity-method investee
FEDS Development Ltd. (FEDSDL)	Equity-method investee
Everstrong Iron & Steel Foundry Ltd. (EISF)	Equity-method investee
Yuan Ding Leasing Corp. (YDLC)	Equity-method investee
Far Eastern Construction Co., Ltd. (FEC)	Equity-method investee
Alliance Concrete Singapore Pte. Ltd. (Alliance)	Equity-method investee
Chengdu Yaxin Slag Powder Co., Ltd. (CYSPC)	Equity-method investee
Wuhan Asia Marine Transport Co., Ltd. (WAMTC)	Equity-method investee
Pao-Good Industry Co., Ltd. (PGIC)	Equity-method investee
U-Ming Marine Transport (Singapore) Pte. Ltd. (UMS)	Subsidiary of U-Ming
Far EasTone Telecommunications Co., Ltd. (Far EasTone)	Same chairman as the Corporation
Far Eastern Department Stores Ltd. (FEDS)	Same chairman as the Corporation
Oriental Union Chemical Corp. (OUCC)	Same chairman as the Corporation
Yuan-Ze University	Same chairman as the Corporation
New Century InfoComm Tech Co., Ltd. (NCIC)	Same chairman as the Corporation
Far Eastern Resources Development Co. (FERD)	Same chairman as the Corporation
Far Eastern Y. Z. Hsu Science and Technology Memorial Foundation (FETSTMH)	Same chairman as the Corporation
China Hi-Ment Corp. (CHC)	The Corporation is one of its directors
Far Eastern General Contractor Inc. (FEGC)	Related party in substance
Air Liquide Far Eastern Ltd. (ALFE)	Related party in substance
Ding Ding Hotel Co., Ltd. (DDH)	Related party in substance

F-202

^{}[] F-203

Related Party

Relationship with the Consolidated Entities as of September 30, 2010

Ding Ding Management Consultants Co., Ltd. (DDMC)	Related party in substance
Oriental Resources Development Ltd.	Related party in substance
Oriental Institute of Technology	Related party in substance
Far Eastern International Leasing Corp.	Related party in substance
Ya Tung Department Store Ltd.	Related party in substance
Far Eastern Memorial Hospital	Related party in substance
Yuan Cing Infocomm Tech., Ltd. (YCIC)	Related party in substance
J-Power Investment Netherlands B.V. (J-Power)	The stockholder of CHP
Oriental Petrochemicals Co., Ltd. (OPCL)	The chairman of the Corporation is its director
Nan Gong Corp. (NGC)	Stockholder of YSRMC
Jwu Jiang Corp. (JJC)	Stockholder of YSRMC
Lian Fang Corp. (LFC)	Stockholder of YSRMC
He Huei Corp. (HHC)	Stockholder of YSRMC
Others	Others are the chairman, general manager, directors and supervisors of the consolidated entities and its affiliates in Mainland China.

Nine Months Ended September 30

	2009		2010
	NT$	% to Total	NT$	US$ (Note 3)	% to Total
1) Net sales
FEGC	$ 489,023	2	$ 479,256	$ 15,366	1
Alliance	280,846	1	225,092	7,217	1
FEDS	101,859	—	194,481	6,235	1
Others	130,295	1	254,275	8,152	1
	$1,002,023	4	$1,153,104	$ 36,970	4
2) Other operating income
Transportation revenue
FENC	$ 158,394	26	$ 180,071	$ 5,773	24
OPCL	50,167	9	75,843	2,432	10
ALFE	57,568	9	70,769	2,269	10
Others	39,356	6	71,916	2,306	10
	$ 305,485	50	$ 398,599	$ 12,780	54
Engineering revenue
FEGC	$ 51,268	11	$ 132,218	$ 4,239	31
Others	—	—	2,743	88	—
	$ 51,268	11	$ 134,961	$ 4,327	31

Nine Months Ended September 30

	2009		2010
	NT$	% to Total	NT$	US$ (Note 3)	% to Total
3) Cost of sales
Freight expense
U-Ming	$ 501,393	2	$ 533,245	$ 17,097	2
UMS	119,615	—	221,218	7,092	1
YLT	147,962	1	205,005	6,573	—
Others	109,122	—	71,834	2,303	—
	$ 878,092	3	$1,031,302	$ 33,065	3
Purchase
CHC	$ 46,223	—	$ 47,268	$ 1,516	—
EISF	27,687	—	42,776	1,371	—
Others	39,322	—	25,644	822	—
	$ 113,232	—	$ 115,688	$ 3,709	—
Factory overhead
NGC	$ 15,191	—	$ 14,912	$ 478	—
Others	30,608	—	24,163	775	—
	$ 45,799	—	$ 39,075	$ 1,253	—
4) Operating expenses - rental
YDC	$ 33,812	2	$ 33,918	$ 1,087	2
Others	8,591	—	12,250	393	—
	$ 42,403	2	$ 46,168	$ 1,480	2
5) Rental income
YDC	$ 155,953	52	$ 149,744	$ 4,801	56
FEDS	65,403	22	65,403	2,097	24
FEDSDL	31,775	11	31,775	1,019	12
Others	17,531	5	6,899	221	3
	$ 270,662	90	$ 253,821	$ 8,138	95
6) Rental costs and expenses
YDC	$ 28,595	21	$ 26,295	$ 843	21
Others	7,924	6	7,921	254	7
	$ 36,519	27	$ 34,216	$ 1,097	28

F-204

^{}[] F-205

2009		2010
NT$	% to Total	NT$	US$ (Note 3)	% to Total

7) Donation (accounted for under other nonoperating expenses and losses)

FETSTMH

$ — — $ 2,088 $ 67 —

September 30

2009

2010

8) Accounts receivable

FEGC	$ 266,032	5	$ 328,234	$ 10,524	6
FEDS	53,933	1	119,122	3,819	2
Alliance	56,189	1	58,798	1,885	1
Others	140,128	3	263,516	8,449	4

$ 516,282 10 $ 769,670 $ 24,677 13

9) Other receivables

Dividend receivables
FEDSDL	$ 28,007	4	$ 30,000	$ 962	2
Others	27,718	3	23,985	769	2
	55,725	7	53,985	1,731	4
Others
YDC	28,005	3	26,012	834	2
Others	24,154	3	23,030	738	1
	$ 107,884	13	$ 103,027	$ 3,303	7

10) Other current assets

Prepaid selling cost
U-Ming	$ 15,000	1	$ 15,000	$ 481	1
Others	141	—	593	19	—
	$ 15,141	1	$ 15,593	$ 500	1

11) Miscellaneous assets - refundable deposits

YDC	$ 10,811	1	$ 10,814	$ 347	1
Others	12	—	13	—	—
	$ 10,823	1	$ 10,827	$ 347	1

	September 30
	2009		2010
12) Accounts payable and accrued expenses
U-Ming	$ 99,143	2	$ 273,341	$ 8,763	3
Others	92,915	2	104,546	3,352	2
	$ 192,058	4	$ 377,887	$ 12,115	5

23. ASSETS PLEDGED OR MORTGAGED

The following assets are pledged or mortgaged as collaterals for certain commercial paper issued, short-term loans and long-term liabilities and as refundable deposits for the construction contract.

24. COMMITMENT AND CONTINGENCIES AS OF SEPTEMBER 30, 2010

a. Unused letters of credit of JPY45,551 thousand, US$20,635 thousand, EUR4,709 thousand and CHF56 thousand of the Corporation, NHC, AEE and YLSS.

b. Guarantees of notes issued by related parties:

	NT$	US$ (Note 3)
The Corporation
DCI	$3,567,150	$ 114,368
AIC	1,400,000	44,886
YTRMC	733,630	23,521
NHC	586,260	18,797
AEE	493,630	15,827
YLPPC	459,551	14,734
YSRMC	150,000	4,809
	$7,390,221	$ 236,942
DCI
FSMS	$ 50,000	$ 1,603

^{}[] F-207

	NT$	US$ (Note 3)
FMT
FDT	$ 50,000	$ 1,603
JYDC
NYDC (RMB15,000 thousand)	$ 69,965	$ 2,243
NYLC (US$2,500 thousand)	78,025	2,502
	$ 147,990	$ 4,745

c. To construct plants and build related facilities, CHP entered into an operating lease (December 2001 to December 2021) and pledge land use rights (December 2001 to December 2051) with Taiwan Sugar Corporation (TSC) to rent TSC's lands. Rental and royalty is paid annually and adjusted at the latest values announced by the government. If land use rights expire, the operating lease agreement will end at the same time. For the nine months ended September 30, 2009 and 2010, rental and royalty were as follows:

Nine Months Ended September 30
	2009	2010
	NT$	NT$	US$ (Note 3)
Factory overhead	$ 1,386	$ 1,316	$ 42
Operating expenses	300	273	9
	$ 1,686	$ 1,589	$ 51

d. CHP signed land lease contracts with several companies. According to all land lease contracts, future rental and royalty are as follows:

Year	NT$	US$ (Note 3)
2010 (from October to December)	$ 553	$ 17
2011	2,210	71
2012	2,210	71
2013	2,210	71
2014	2,210	71
2015 and after	2,210	71
	$ 11,603	$ 372

Rental and royalty are estimated by the latest actual rental and royalty expenditure amounts.

e. CHP entered into agreements on the following transactions:

Year	Rental
	NT$	US$ (Note 3)
2010 (from October to December)	$ 26,635	$ 854
2011	78,879	2,529
2012	55,299	1,773
2013	32,729	1,049
2014 and after	69,684	2,234
	$ 263,226	$ 8,439

The aggregate estimated lease payments under a capital lease arrangement are as follows:

Year	Lease Payments
	NT$	US$ (Note 3)
2010 (from October to December)	$ 1,209	$ 39
2011	3,637	117
2012	37	1
2013	33	1
2014 and after	16	—
	$ 4,932	$ 158

g. YLSS was under contracts to acquire properties for NT$7,189 thousand (US$230 thousand); of which NT$2,800 thousand (US$90 thousand) have been paid and accounted for as prepayments on equipment.

h. FSMS signed lease contracts for operating with Hualien Forest District Office. According to lease contracts, future rentals are as follows:

Year	Rental
	NT$	US$ (Note 3)
2010 (from October to December)	$ 998	$ 32
2011	1,996	64
2012	1,996	64
2013	1,996	64
2014 and after	1,996	64
	$ 8,982	$ 288

i. FSMS signed contract of limestone transportation for business need in 2010. This transportation expense is charged by actual transport quantity and estimated payments amounted to NT$43,262 thousand (US$1,387 thousand) for the nine months ended September 30, 2010.

j. The estimated payments for construction of building plants, land access, plant and machinery of JYDC, HYDCCL, HGYDC and SIYDCCL in the future amounted to RMB476,605 thousand.

F-208

k. ACCHC, OIHPL, JYDC, CYCDCL, WYDC, SYTCL, SHYLCP, YYDCCL and SHYFCP signed operating lease contracts for operations. The aggregate estimated lease payments under the operating lease contracts for the next years are as follows:

Year	Lease Payments (In Thousands of RMB)
2010 (from October to December)	$ 818
2011	3,243
2012	3,160
2013	2,885
2014 and after	43,094
	$ 53,200

l. The registration of the capital increase of Pacific Liu-Tung Investment Corporation (PLT) had been nullified by the Department of Commerce, Ministry of Economic Affairs, ROC on February 3, 2010. The matter has no significant impact on the Corporation and its subsidiaries since they did not have direct stockholdings in PTL or participate in the management of PLT.

ADDITIONAL DISCLOSURES

Business relationships and significant intercompany transactions: Table 1 and Table 2 (attached).

F-209

^{}[] TABLE 1

NINE MONTHS ENDED SEPTEMBER 30, 2009

(In Thousands of New Taiwan Dollars)

^{}[] F-216

Number	Company Name	Counterparty	Nature of Relationship (Note )	Transaction Details			Percentage of Consolidation Total Operating Revenue or Total Asset
				Account	Amount	Transaction Terms
13	JYDC	JYDC	2	Other expense	$358	Based on regular terms	—
		JYDC	2	Accounts payable and accrued expense	2,706	Based on regular terms	—
		JYDC	2	Accounts receivable	10,854	Based on regular terms	—
		JYDC	2	Other revenue	5,187	Based on regular terms	—
		JYDC	2	Cost of sales	14,220	Based on regular terms	—
		JYDC	2	Sales	53,551	Based on regular terms	—
		NYDC	3	Cost of sales	6,288	Based on regular terms	—
		HGYDC	3	Accounts receivable	41	Based on regular terms	—
		HGYDC	3	Rental income	43	Based on regular terms	—
		SHYLCP	3	Customers' deposits and advances	130	Based on regular terms	—
		SHYLCP	3	Other receivables	304	Based on regular terms	—
		SHYLCP	3	Other revenue	940	Based on regular terms	—
		SHYLCP	3	Accounts payable and accrued expense	9,151	Based on regular terms	—
		SHYLCP	3	Sales	14,750	Based on regular terms	—
		SHYLCP	3	Prepayment for purchases and expense	88,839	Based on regular terms	—
		SHYLCP	3	Other expense	9,476	Based on regular terms	—
		SHYFCP	3	Customers' deposits and advances	662	Based on regular terms	—
		SHYFCP	3	Other revenue	326	Based on regular terms	—
		SHYFCP	3	Sales	19,419	Based on regular terms	—
		SYCPCL	3	Other receivables	259	Based on regular terms	—
		SYCPCL	3	Rental income	156	Based on regular terms	—
		SYTCL	3	Other receivables	99	Based on regular terms	—
		SYTCL	3	Rental income	201	Based on regular terms	—
		SIYDCCL	3	Other receivables	2,216	Based on regular terms	—
		SIYDCCL	3	Rental income	6,315	Based on regular terms	—

^{}[] F-221

Number	Company Name	Counterparty	Nature of Relationship (Note )	Transaction Details			Percentage of Consolidation Total Operating Revenue or Total Asset
				Account	Amount	Transaction Terms
17	WYDC	JYDC	3	Cost of sales	$19,419	Based on regular terms	—
		YYDCCL	3	Prepayment for purchases and expense	369	Based on regular terms	—
		YYDCCL	3	Cost of sales	13,979	Based on regular terms	—
		HYTCL	3	Accounts payable and accrued expense	14	Based on regular terms	—
		HYTCL	3	Cost of sales	163	Based on regular terms	—
		JYDC	3	Other payable	169	Based on regular terms	—
		JYDC	3	Prepayment for purchases and expense	2,844	Based on regular terms	—
		JYDC	3	Operating expenses	1,889	Based on regular terms	—
		JYDC	3	Other receivables	37,966	Based on regular terms	—
		JYDC	3	Accounts payable and accrued expense	88,969	Based on regular terms	—
		JYDC	3	Cost of sales	640,510	Based on regular terms	2%
		WYCPCL	1	Accounts receivable	663	Based on regular terms	—
		WYCPCL	1	Sales	7,535	Based on regular terms	—
		YYDCCL	3	Prepayment for purchases and expense	6,925	Based on regular terms	—
		YYDCCL	3	Cost of sales	9,967	Based on regular terms	—
		HYTCL	3	Other receivables	247	Based on regular terms	—
		HYTCL	3	Rental income	988	Based on regular terms	—
		HYTCL	3	Accounts payable and accrued expense	5,600	Based on regular terms	—
		HYTCL	3	Prepayment for purchases and expense	47,046	Based on regular terms	—
		HYTCL	3	Cost of sales	18,340	Based on regular terms	—
		HYDCCL	3	Other receivables	1,131	Based on regular terms	—
		HYDCCL	3	Other payable	2,975	Based on regular terms	—

^{}[] TABLE 2

NINE MONTHS ENDED SEPTEMBER 30, 2010

^{}[] F-252

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Far Eastern New Century Corporation

We have audited the accompanying consolidated balance sheets of Far Eastern New Century Corporation (the "Company," formerly Far Eastern Textile Ltd.) and subsidiaries as of December 31, 2007, 2008 and 2009 and the related consolidated statements of income, changes in stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the management of the Company. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. However, we did not audit the financial statements of certain consolidated subsidiaries. These subsidiaries' total assets, as shown in their financial statements, were 2.08% (NT$5,670,484 thousand), 0.44% (NT$1,184,885 thousand) and 0.62% (NT$1,665,591 thousand (US$53,401 thousand)) of the consolidated total assets as of December 31, 2007, 2008 and 2009, respectively. Their total net operating revenues were 0.63% (NT$1,026,337 thousand), 0.80% (NT$1,386,838 thousand) and 1.17% (NT$1,945,364 thousand (US$62,371 thousand)) of the consolidated net operating revenues in 2007, 2008 and 2009, respectively. We also did not audit the financial statements of certain equity-method investees. As shown in the accompanying consolidated financial statements, the carrying values of these investments were 1.00% (NT$2,715,202 thousand), 0.61% (NT$1,638,901 thousand) and 0.63% (NT$1,679,783 thousand (US$53,856 thousand)) of the consolidated total assets as of December 31, 2007, 2008 and 2009, respectively. The Company's investment loss from equity-method investees was (0.97%) (NT$200,641 thousand), investment income from equity-method investees was 1.18% (NT$155,901 thousand) and 0.95% (NT$172,676 thousand (US$5,536 thousand)) of the consolidated income before income tax in 2007, 2008 and 2009, respectively. The financial statements of the foregoing consolidated subsidiaries and equity-method investees were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the consolidated subsidiaries and other equity-method investees, is based solely on the reports of the other auditors.

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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company and subsidiaries as of December 31, 2007, 2008 and 2009 and the results of their operations and their cash flows for the years then ended, in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China.

As disclosed in Note 5 to the consolidated financial statements, on January 1, 2007, the Company and subsidiaries adopted the newly released Statement of Financial Accounting Standards ("Statement" or SFAS) No. 37 - "Intangible Assets" and related revisions of previously released Statements. In addition, in March 2007, the Accounting Research and Development Foundation issued Interpretation 2007-052, which requires companies to recognize bonuses paid to employees, directors and supervisors as compensation expenses beginning January 1, 2008. These bonuses were previously recorded as appropriations from earnings. This accounting change resulted in decreases of NT$431,123 thousand in consolidated net income attributable to stockholders of parent company and of NT$0.09 in basic earnings per share after income tax in 2008. On January 1, 2009, the Company and subsidiaries adopted the newly revised SFAS No. 10 - "Inventories." This accounting change resulted in decreases of NT$132,664 thousand (US$4,253 thousand) in consolidated net income attributable to stockholders of parent company and of NT$0.03 (US$0.001) in basic earnings per share after income tax in 2009.

Note 34 describes a case related to the Department of Commerce's nullification of Pacific Liu Tung Investment Corporation's (PLT, an equity-method investee of the Company) registration of capital increase and other relevant registrations and the impact of this case on the Company's controlling interest and several share subscriptions done by the Company and its subsidiaries, which are the investors of PLT, will depend on the final judgment of the court.

Our audits also comprehended the translation of the 2009 New Taiwan dollar amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 3. Such U.S. dollar amounts are presented solely for the convenience of readers.

March 5, 2010 (except for Note 3 - translation into
U.S. Dollars, as to which the date is September 30, 2010)

F-253

^{}[] F-254

FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES

(Formerly Far Eastern Textile Ltd. and Subsidiaries)

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2007, 2008 AND 2009
(In Thousands, Except Par Value)

	2007	2008	2009
ASSETS	NT$	NT$	NT$	US$ (Note 3)
CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 6)	$24,206,234	$22,946,534	$21,141,998	$ 677,845
Financial assets at fair value through profit or loss (Notes 2 and 7)	901,379	507,594	1,791,338	57,433
Derivative assets - current (Notes 2 and 23)	—	8,070	2,750	88
Available-for-sale financial assets - current (Notes 2, 8 and 32)	1,833,155	1,988,763	2,815,770	90,278
Bond investments with no active market - current (Notes 2 and 9)	3,000	3,000	—	—
Notes and accounts receivable, net (Notes 2, 24, 27 and 32)	22,457,546	23,639,761	21,805,366	699,114
Notes and accounts receivable from affiliates (Notes 2, 24 and 31)	1,320,065	1,356,264	1,264,013	40,526
Inventories, net (Notes 2, 5 and 10)	16,003,733	13,695,819	12,073,494	387,095
Available-for-sale - buildings and land, net (Notes 2 and 24)	20,070	30,339	30,339	973
Available for construction - land (Notes 2, 11, 24 and 32)	620,013	620,013	620,013	19,879
Construction-in-progress (net of billings on construction-in-progress) (Notes 2,12, 24, 31 and 32)	2,804,316	2,986,412	5,137,539	164,718
Other receivables	1,165,169	1,548,275	1,030,483	33,039
Long-term equity investments for disposal (Note 13)	—	—	241,519	7,743
Deferred income tax assets - current (Notes 2 and 26)	957,727	915,583	606,274	19,438
Restricted assets	716,038	381,566	1,902,048	60,983
Prepayments and other current assets (Notes 2, 12, 24 and 32)	2,962,959	2,492,180	3,399,888	109,006
Total current assets	75,971,404	73,120,173	73,862,832	2,368,158
FUNDS AND INVESTMENTS
(Notes 2, 8, 9, 13, 14, 15 and 32)
Investments accounted for by the equity-method	56,201,529	48,681,533	49,975,648	1,602,297
Available-for-sale financial assets - noncurrent	117,355	56,682	2,593,229	83,143
Held-to-maturity financial assets - noncurrent	—	—	199,567	6,398
Financial assets carried at cost - noncurrent	1,988,200	1,822,973	2,974,623	95,371
Bond investments with no active market - noncurrent	—	—	293,454	9,409
Total funds and investments	58,307,084	50,561,188	56,036,521	1,796,618

	2007	2008	2009
ASSETS	NT$	NT$	NT$	US$ (Note 3)
PROPERTIES (Notes 2, 16, 28, 31 and 32)
Cost
Land	3,663,085	5,173,998	5,138,368	164,744
Buildings	16,624,668	17,813,835	17,845,711	572,161
Machinery and equipment	66,516,257	90,275,865	93,496,605	2,997,647
Telecommunication equipment	102,139,535	106,295,730	110,140,318	3,531,270
Computer equipment	15,056,290	16,010,904	17,335,723	555,810
Leasehold improvements	1,710,028	1,737,877	1,998,292	64,068
Operating and miscellaneous equipment	6,057,676	6,358,794	6,480,577	207,778
Total cost	211,767,539	243,667,003	252,435,594	8,093,478
Revaluation increment	19,781,089	19,706,480	19,023,754	609,931
Total cost and revaluation increment	231,548,628	263,373,483	271,459,348	8,703,409
Less: Accumulated depreciation	127,619,641	153,762,709	166,779,427	5,347,208
	103,928,987	109,610,774	104,679,921	3,356,201
Construction in progress and prepayments for equipment	9,145,700	10,891,635	6,803,984	218,146
Net properties	113,074,687	120,502,409	111,483,905	3,574,347
INTANGIBLE ASSETS
Deferred pension cost (Notes 2 and 30)	6,463	90,592	17,061	547
Goodwill (Notes 2 and 17)	11,196,447	11,084,911	11,721,599	375,813
3G license fee (Notes 1, 2 and 18)	8,037,772	7,307,065	6,576,358	210,848
Land use rights, net (Notes 2 and 32)	958,563	1,128,796	1,108,875	35,552
Other intangible assets (Notes 2, 5 and 28)	192,369	148,982	88,813	2,848
Total intangible assets	20,391,614	19,760,346	19,512,706	625,608
OTHER ASSETS
Nonoperating properties, net (Notes 2, 16 and 32)	3,756,095	3,796,652	3,718,091	119,208
Deferred income tax assets, net (Notes 2 and 26)	124,634	1,165,110	647,261	20,752
Refundable deposits (Notes 24 and 31)	482,291	484,400	471,180	15,107
Deferred charges, net (Notes 2 and 28)	380,465	750,994	636,370	20,403
Restricted assets	17,185	16,572	423,003	13,562
Farmland (Note 19)	276,661	276,661	276,661	8,870
Miscellaneous (Notes 2, 30, 32 and 33)	127,028	387,433	351,137	11,258
Total other assets	5,164,359	6,877,822	6,523,703	209,160
TOTAL	$272,909,148	$270,821,938	$267,419,667	$8,573,891

	2007	2008	2009
LIABILITIES AND STOCKHOLDERS' EQUITY	NT$	NT$	NT$	US$ (Note 3)
CURRENT LIABILITIES
Short-term bank loans (Notes 20, 31 and 32)	$17,497,734	$27,698,393	$24,146,138	$774,163
Short-term bills payable (Notes 21 and 32)	3,060,630	5,233,968	5,099,750	163,506
Financial liabilities at fair value through profit or loss - current (Notes 2 and 7)	401,668	105,353	20,750	665
Derivative liabilities - current (Notes 2 and 23)	21,601	7,656	—	—
Notes and accounts payable, net (Note 24)	10,763,048	11,322,395	11,167,451	358,046
Notes and accounts payable to affiliates (Notes 24 and 31)	3,644,544	1,690,702	1,171,896	37,573
Income tax payable (Notes 2 and 26)	1,661,599	2,497,375	1,398,249	44,830
Accrued expenses (Note 31)	6,581,972	7,813,933	7,360,097	235,976
Guarantee deposits received - current	837,648	713,367	561,727	18,010
Payables for acquisition of properties	1,722,988	1,989,528	1,696,017	54,377
Advance sales receipts	616,119	694,820	706,034	22,637
Advances on real estate receipts (Notes 2, 12 and 24)	122,801	10,371	988,818	31,703
Unearned revenue (Note 2)	999,361	1,154,126	1,207,211	38,705
Billings on construction-in-progress (net of construction-in-progress) (Notes 2,22, 24 and 32)	20,441	30,151	291,098	9,333
Current portion of long-term liabilities (Notes 23 and 32)	13,604,156	9,175,340	11,961,296	383,498
Other current liabilities (Note 2)	1,991,547	1,232,019	2,184,488	70,037
Total current liabilities	63,547,857	71,369,497	69,961,020	2,243,059
LONG-TERM LIABILITIES, NET OF CURRENT PORTION (Notes 2, 23, 31 and 32)
Long-term debt	42,933,380	41,733,220	35,999,796	1,154,210
Bonds payable	13,322,299	13,881,849	9,788,724	313,841
Lease payable - noncurrent	228,029	12,618	—	—
Derivative financial liabilities for hedging - noncurrent	66,186	—	—	—
Total long-term liabilities	56,549,894	55,627,687	45,788,520	1,468,051
RESERVE FOR LAND VALUE INCREMENT TAX (Note 16)	6,510,782	6,510,782	6,310,976	202,340
OTHER LIABILITIES
Accrued pension cost (Notes 2 and 30)	1,657,518	2,570,012	1,731,977	55,530
Guarantee deposits received - noncurrent	253,824	318,539	470,784	15,094
Deferred income (Notes 2, 16 and 31)	1,129,742	1,078,588	1,024,856	32,858
Miscellaneous (Note 2)	328,430	532,713	623,764	19,999
Total other liabilities	3,369,514	4,499,852	3,851,381	123,481
Total liabilities	129,978,047	138,007,818	125,911,897	4,036,931

	2007	2008	2009
LIABILITIES AND STOCKHOLDERS’ EQUITY	NT$	NT$	NT$	US$ (Note 3)
STOCKHOLDERS’ EQUITY OF PARENT COMPANY
Capital stock - NT$10.00 par value
Authorized - 4,950,000 thousand shares
Issued and outstanding - 4,480,347 thousand shares in 2007, 4,569,954 thousand shares in 2008 and 4,661,353 thousand shares in 2009	44,803,469	45,699,538	46,613,529	1,494,502
Capital surplus
Premium on capital stock	932,814	932,814	932,814	29,907
Equity in capital surplus reported by investees	8,386,464	9,120,172	9,240,917	296,278
Others	8,719	7,672	7,672	246
Total capital surplus	9,327,997	10,060,658	10,181,403	326,431
Retained earnings
Legal reserve	7,061,162	8,196,285	8,602,110	275,797
Special reserve	3,034,766	3,034,766	3,034,766	97,299
Unappropriated earnings	13,247,308	6,535,276	9,672,105	310,103
Total retained earnings	23,343,236	17,766,327	21,308,981	683,199
Other stockholders’ equity
Unrealized gains (loss) on financial instruments	4,268,337	(866,020)	3,276,309	105,044
Cumulative translation adjustments	1,706,254	3,696,557	2,490,010	79,834
Unrealized revaluation increment	8,566,640	8,843,128	8,721,219	279,616
Unrecognized loss on pension cost	(69,966)	(656,261)	(80,263)	(2,573)
Total other stockholders’ equity	14,471,265	11,017,404	14,407,275	461,921
Total stockholders’ equity of parent company	91,945,967	84,543,927	92,511,188	2,966,053
MINORITY INTEREST	50,985,134	48,270,193	48,996,582	1,570,907
Total stockholders’ equity	142,931,101	132,814,120	141,507,770	4,536,960
TOTAL	$272,909,148	$270,821,938	$267,419,667	$8,573,891
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated March 5, 2010 (except for Note 3 - translation into U.S. Dollars, as to which the date is September 30, 2010)

^{}[] F-258

FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES

(Formerly Far Eastern Textile Ltd. and Subsidiaries)

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In Thousands, Except Earnings Per Share)

	2007		2008		2009
	Before Income Tax	After Income Tax	Before Income Tax	After Income Tax	Before Income Tax		After Income Tax
	NT$	NT$	NT$	NT$	NT$	US$(Note 3)	NT$	US$(Note 3)
EARNINGS PER SHARE (Notes 5 and 29)
Basic	$ 2.42	$ 2.44	$ 0.99	$ 0.99	$ 1.75	$ 0.06	$ 1.74	$ 0.06
Diluted			$ 0.99	$ 0.99	$ 1.74	$ 0.06	$ 1.73	$ 0.06

(With Deloitte & Touche audit report dated March 5, 2010 (except for Note 3 - translation into U.S. Dollars, as to which the date is September 30, 2010)

^{}[] F-260

^{}[] F-261

FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES

(Formerly Far Eastern Textile Ltd. and Subsidiaries)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In Thousands, Except Dividends Per Share)

	Capital Stock Issued and Outstanding (Note 25)		Other Stockholders' Equity
	Shares in Thousands	Amount	Capital Surplus (Notes 2 and 25)	Retained Earnings (Notes 2, 25 and 26)				Unrealized Gain (Loss) on Financial Instruments (Note 2)	Cumulative Translation Adjustments (Note 2)	Net Loss not Recognized as Pension Cost (Note 2)	Minority Interests	Total Stockholders' Equity
	Shares in Thousands	Amount	Capital Surplus (Notes 2 and 25)	Legal Reserve	Special Reserve	Unappropriated Earnings	Total	Unrealized Gain (Loss) on Financial Instruments (Note 2)	Cumulative Translation Adjustments (Note 2)	Net Loss not Recognized as Pension Cost (Note 2)	Minority Interests	Total Stockholders' Equity
BALANCE, JANUARY 1, 2007	4,349,851	$43,498,513	$7,820,117	$6,231,874	$3,378,850	$9,864,900	$19,475,624	$1,823,497	$845,490	$8,848,431	$(60,797)	$46,083,257	$128,334,132
Provision for special reserve	—	—	—	—	(344,084)	344,084	—	—	—	—	—	—	—
Appropriation of the 2006 earnings
Legal reserve	—	—	—	829,288	—	(829,288)	—	—	—	—	—	—	—
Stock dividends - NT$0.3 per share	130,496	1,304,956	—	—	—	(1,304,956)	(1,304,956)	—	—	—	—	—	—
Cash dividends - NT$1.3 per share	—	—	—	—	—	(5,654,807)	(5,654,807)	—	—	—	—	—	(5,654,807)
Remuneration to directors and supervisors and bonus to employees	—	—	—	—	—	(523,853)	(523,853)	—	—	—	—	—	(523,853)
Balance after appropriations	4,480,347	44,803,469	7,820,117	7,061,162	3,034,766	1,896,080	11,992,008	1,823,497	845,490	8,848,431	(60,797)	46,083,257	122,155,472
Consolidated net income in 2007	—	—	—	—	—	11,367,097	11,367,097	—	—	—	—	5,964,187	17,331,284
Adjustments due to changes in investees' equity in long-term investments	—	—	1,507,880	—	—	(15,869)	(15,869)	2,419,658	750,972	(281,791)	(9,169)	—	4,371,681
Change in unrealized gain (loss) on cash flow hedging financial instruments	—	—	—	—	—	—	—	25,182	—	—	—	—	25,182
Translation adjustment on foreign-currency equity-method investments	—	—	—	—	—	—	—	—	109,792	—	—	—	109,792
Increase in minority interest	—	—	—	—	—	—	—	—	—	—	—	5,804,461	5,804,461
Cash dividends distributed by subsidiaries to the minority interest	—	—	—	—	—	—	—	—	—	—	—	(6,866,771)	(6,866,771)

^{}[] F-262

	Capital Stock Issued and Outstanding (Note 25)		Other Stockholders' Equity
	Shares in Thousands	Amount	Capital Surplus (Notes 2 and 25)	Legal Reserve	Special Reserve	Unappropriated Earnings	Total	Unrealized Gain (Loss) on Financial Instruments (Note 2)	Cumulative Translation Adjustments (Note 2)	Unrealized Revaluation Increment on Properties (Notes 2 and 16)	Net Loss not Recognized as Pension Cost (Note 2)	Minority Interests	Total Stockholders' Equity
BALANCE, DECEMBER 31, 2007	4,480,347	44,803,469	9,327,997	7,061,162	3,034,766	13,247,308	23,343,236	4,268,337	1,706,254	8,566,640	(69,966)	50,985,134	142,931,101
Appropriation of the 2007 earnings:
Legal reserve	—	—	—	1,135,123	—	(1,135,123)	—	—	—	—	—	—	—
Stock dividends - NT$0.2 per share	89,607	896,069	—	—	—	(896,069)	(896,069)	—	—	—	—	—	—
Cash dividends - NT$1.8 per share	—	—	—	—	—	(8,064,624)	(8,064,624)	—	—	—	—	—	(8,064,624)
Remuneration to directors and supervisors and bonus to employees	—	—	—	—	—	(674,461)	(674,461)	—	—	—	—	—	(674,461)
Balance after appropriations	4,569,954	45,699,538	9,327,997	8,196,285	3,034,766	2,477,031	13,708,082	4,268,337	1,706,254	8,566,640	(69,966)	50,985,134	134,192,016
Consolidated net income in 2008	—	—	—	—	—	4,621,944	4,621,944	—	—	—	—	5,695,655	10,317,599
Adjustments due to changes in investees' equity in long-term investments	—	—	696,871	—	—	(323,039)	(323,039)	(5,191,265)	1,761,305	276,491	(1,086)	—	(2,780,723)
Effect of changes in ownership percentage due to investees' issuance of capital stock for cash	—	—	(9,971)	—	—	(240,880)	(240,880)	—	—	—	—	—	(250,851)
Translation adjustment on foreign-currency equity-method investments	—	—	—	—	—	—	—	—	229,496	—	—	—	229,496
Change in net loss not recognized as pension cost	—	—	—	—	—	—	—	—	—	—	(585,239)	—	(585,239)
Change in unrealized gain (loss) on cash flow hedging financial instruments	—	—	—	—	—	—	—	56,160	—	—	—	—	56,160
Adjustments on stockholders' equity for sale of long-term equity investments	—	—	45,761	—	—	220	220	748	(498)	(3)	30	—	46,258
Decrease in minority interest	—	—	—	—	—	—	—	—	—	—	(8,410,596)	(8,410,596)	(8,410,596)
BALANCE, DECEMBER 31, 2008	4,569,954	45,699,538	10,060,658	8,196,285	3,034,766	6,535,276	17,766,327	(866,020)	3,696,557	8,843,128	(656,261)	48,270,193	132,814,120
Appropriation of the 2008 earnings (Note)
Legal reserve	—	—	—	405,825	—	(405,825)	—	—	—	—	—	—	—
Stock dividends - NT$0.2 per share	91,399	913,991	—	—	—	(913,991)	(913,991)	—	—	—	—	—	—
Cash dividends - NT$0.8 per share	—	—	—	—	—	(3,655,963)	(3,655,963)	—	—	—	—	—	(3,655,963)

^{}[] F-263

	Capital Stock Issued and Outstanding (Note 25)		Retained Earnings (Notes 2, 25 and 26)					Other Stockholders' Equity
	Shares in Thousands	Amount	Capital Surplus (Notes 2 and 25)	Legal Reserve	Special Reserve	Unappropriated Earnings	Total	Unrealized Gain (Loss) on Financial Instruments (Note 2)	Cumulative Translation Adjustments (Note 2)	Unrealized Revaluation Increment on Properties (Notes 2 and 16)	Net Loss not Recognized as Pension Cost (Note 2)	Minority Interests	Total Stockholders' Equity
Balance after appropriations	4,661,353	46,613,529	10,060,658	8,602,110	3,034,766	1,559,497	13,196,373	(866,020)	3,696,557	8,843,128	(656,261)	48,270,193	129,158,157
Consolidated net income in 2009	—	—	—	—	—	8,088,696	8,088,696	—	—	—	—	6,535,073	14,623,769
Adjustments due to changes in investees' equity in long-term investments	—	—	194,351	—	—	18,862	18,862	4,000,948	(789,566)	(121,909)	(13,090)	—	3,289,596
Change in unrealized gain (loss) on available-for-sale financial assets	—	—	—	—	—	—	—	146,473	—	—	—	—	146,473
Translation adjustment on foreign-currency equity-method investments	—	—	—	—	—	—	—	—	(332,652)	—	—	—	(332,652)
Reversal of net loss not recognized as pension cost	—	—	—	—	—	—	—	—	—	—	585,239	—	585,239
Change in unrealized gain (loss) on cash flow hedging financial instruments	—	—	—	—	—	—	—	7,656	—	—	—	—	7,656
Adjustments on stockholders' equity due to the sale of long-term equity investments	—	—	(73,606)	—	—	5,050	5,050	(12,748)	(84,329)	—	3,849	—	(161,784)
Decrease in minority interest	—	—	—	—	—	—	—	—	—	—	—	(5,808,684)	(5,808,684)
BALANCE, DECEMBER 31, 2009	4,661,353	$46,613,529	$10,181,403	$8,602,110	$3,034,766	$9,672,105	$21,308,981	$3,276,309	$2,490,010	$8,721,219	$(80,263)	$48,996,582	$141,507,770
BALANCE, DECEMBER 31, 2009 (IN US$— Note 3)	4,661,353	$1,494,502	$326,431	$275,797	$97,299	$310,103	$683,199	$105,044	$79,834	$279,616	$(2,573)	$1,570,907	$4,536,960

Note: Remuneration to directors and supervisors of NT$147,418 thousand and bonus to employees of NT$196,557 thousand had been deducted from the income statement of 2008.

(With Deloitte & Touche audit report dated March 5, 2010 (except for Note 3 - translation into U.S. Dollars, as to which the date is September 30, 2010)

^{}[] F-264

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In Thousands)

^{}[] SUPPLEMENTARY INFORMATION ON SUBSIDIARIES ACQUIRED

a. In July 2007, the Company's subsidiary, Far EasTone Telecommunications Co., Ltd. ("Far EasTone") bought 51% of Q-ware Communications Co., Ltd.'s common stock; the fair value of total assets and total liabilities at the time of acquisition was as follows:

	Amount
	NT$
Cash and cash equivalents	$ 496,860
Accounts and notes receivable, net	6,212
Prepaid expenses	3,811
Other current assets	2,601
Properties, net	617,161
Prepayments for equipment	7,174
Refundable deposits	12,498
Accounts payable	(5,457)
Accrued expenses	(15,103)
Unearned revenues	(2,670)
Other current liabilities	(263,066)
Other liabilities	(13,864)
	846,157
Percentage of ownership acquired	51.00%
	431,540
Goodwill	64,315
Cash payment due to merger	$ 495,855

F-267

b. In 2008, a Company subsidiary, Yuan Ding Investment Co., Ltd., acquired about 42% equity in Oriental Petrochemical (Taiwan) Co., Ltd. ("OPTC"). As a result, the Group's equity in OPTC became about 60%, including the Company's own holding of 18%.

The fair values of OPTC's total assets and total liabilities at the time of acquisition were as follows:

	Amount
	NT$
Cash and cash equivalents	$ 8,818
Accounts and notes receivable, net	385,035
Prepaid expenses	1,426,956
Inventories	350,602
Other current assets	2,358
Properties, net	6,878,697
Refundable deposits	4,714
Other assets	5,085
Notes payable and accounts payable	(1,227,668)
Accrued expenses	(327,626)
Current portion of long-term liabilities	(4,416,434)
Other current liabilities	(62,622)
Long-term liabilities	(2,255,000)
Accrued pension liabilities	(203,677)
Total	569,238
Percentage of ownership acquired	42%
Common equity acquired, net	239,080
The difference between fair value of net assets and acquisition cost	(13,757)
Total acquisition cost of OPTC	$ 225,323
Total acquisition cost of OPTC Gain on donated equity-method investments	$ 225,323

c. In 2008, Yuan Ding Investment Co., Ltd. acquired 50% equity in Far Eastern Fibertech Co., Ltd. ("FEFC"). The fair values of FEFC's total assets and liabilities at the time of acquisition were as follows:

	Amount
	NT$
Cash and cash equivalents	$ 113,580
Accounts and notes receivable, net	203,629
Prepaid expenses	15,630
Inventories	180,532
Other current assets	7,369
Properties, net	1,576,354
Other assets	1,563
Notes payable and accounts payable, net	(266,168)
Accrued expenses	(37,728)
Short-term liabilities	(960,000)
Long-term liabilities	(100,000)
Accrued pension liabilities	(3,168)
Total	731,593
Percentage of ownership acquired	50%
Common equity acquired, net	365,797
Total acquisition cost of Far Eastern Fibertech Co., Ltd.	$ 365,797
Total acquisition cost of Far Eastern Fibertech Co., Ltd. Gain on donated equity-method investments	$ 365,797

F-269

d. In the year ended December 31, 2008, the subsidiaries of Far EasTone and Far EasTron Holding Ltd. swapped their holdings of Far EasTron's common shares for ADCast Interactive Marketing Co., Ltd.'s ("ADCast") common shares. KG Telecommunication Co., Ltd. also bought ADCast's common shares by cash. As a result, the Far EasTone and its subsidiaries acquired about 69.08% of ADCast's common stock; the fair value of ADCast's total assets and total liabilities at the time of acquisition was as follows:

	Amount
	NT$
Cash and cash equivalents	$ 22,434
Accounts and notes receivable, net	32,673
Prepaid expenses	2,306
Other current assets	4,054
Properties, net	1,725
Goodwill	3,417
Refundable deposits	907
Deferred charges, net	30
Other assets	1,307
Notes payable and accounts payable	(10,902)
Accrued expenses	(12,038)
Unearned revenues	(865)
Other current liabilities	(1,091)
Guarantee deposits received	(171)
Total	43,786
Percentage of ownership acquired	69.08%
Common equity acquired, net	30,248
Goodwill	1,717
Total acquisition cost of ADCast	$ 31,965
Total acquisition cost of ADCast
Carrying value of swapped equity-method investments	$ 28,313
Cash payment	3,652
	$ 31,965

F-270

e. In the first quarter of 2009, the Company's subsidiary, Yuan Tong Investment Co., Ltd., acquired 70% equity in Martens Beer Trading (Shanghai) Ltd.

The fair values of Martens Beer Trading (Shanghai) Ltd.'s total assets and total liabilities at the time of acquisition were as follows:

	Amount
	NT$	US$ (Note 3)
Cash and cash equivalents	$66,494	$2,132
Accounts receivable	4,117	132
Inventories	312	10
Other current assets	10,001	321
Properties, net	1,797	58
Accounts payable	(4,929)	(158)
Accrued expenses	(2,323)	(75)
Other current liabilities	(1,349)	(44)
Total	74,120	2,376
Percentage of ownership acquired	70%	70%
Common equity acquired, net	51,884	1,663
Goodwill	26,382	846
Total acquisition cost of Martens Beer Trading (Shanghai) Ltd.	$78,266	$2,509
Total acquisition cost of Martens Beer Trading (Shanghai) Ltd.
Cash payment	$78,266	$2,509

F-271

^{}[] F-272

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In Thousands, Unless Stated Otherwise)

1. ORGANIZATION AND OPERATIONS

Far Eastern New Century Corporation (formerly Far Eastern Textile Ltd.) ("FENC" or the "Company"), established in 1954, manufactures and sells polyester materials, semifinished products and finished goods such as cotton, synthetic or blended fabrics, towels and bedsheets, and woven and knitted garments; PET (polyethylene terephthalate) bottles and PET sheets; and natural, synthetic or blended yarns and polyester textured yarns. It also does yarn, silk and cloth printing and dyeing, as well as manufactures optoelectronics films mainly used for LCD touch panels.

The Company's stock is listed on the Taiwan Stock Exchange. On October 19, 1999, the Company issued global depositary receipts (GDRs), which became listed on the Luxembourg Stock Exchange. On October 13, 2009, the stockholders resolved to change their company's name of Far Eastern Textile Ltd. to Far Eastern New Century Corporation; thus, the original stock symbol of FETL was changed to FENC.

Following are FENC's consolidated subsidiaries:

Far EasTone Telecommunications Co., Ltd. ("Far EasTone") was incorporated in the Republic of China on April 11, 1997 and began commercial operations on January 20, 1998. Far EasTone's shares began to be traded on the Taiwan Over-the-Counter Securities Exchange (known as Gre Tai Securities Market) on December 10, 2001. Later, Far EasTone's shares ceased to be traded on the Gre Tai Securities Market and became listed on the Taiwan Stock Exchange on August 24, 2005. Far EasTone provides wireless communications, leased circuit, Internet and international simple resale (ISR) services and also sells cellular phone equipment and accessories.

Far EasTone provides 2G (second-generation wireless communications services) by geographical sector under two type I licenses - GSM900 for the northern region of Taiwan and GSM1800 island-wide ("GSM" means "global system for mobile communications") - issued by the Directorate General of Telecommunications (DGT) of the Republic of China ("ROC"). These licenses allow Far EasTone to provide services for 15 years from 1997, with an annual license fee of 2% of total 2G wireless communications service revenues.

The DGT also issued to Far EasTone a type II license in 1999, allowing it to provide Internet and ISR services until December 2012 and requiring it to pay annual license fees based on the regulations for each service. Far EasTone is also licensed to provide local/domestic long-distance land cable leased circuit services for 15 years from January 2003 for an annual license fee of 1% of leased circuit service revenues.

On December 28, 2009, the National Communications Commission (NCC) awarded Far EasTone a six-year WiMAX (worldwide interoperability for microwave access) license in the southern region of Taiwan, and Far EasTone began its commercial operation of WiMAX service. Far EasTone has to pay an annual license fee that is equal to WiMAX service revenues multiplied by the bidding percentage (4.18%), but the annual license fee should not be less than a specified minimum amount.

Far EasTone merged with Yuan-Ze Telecommunications Co., Ltd. ("Yuan-Ze Telecom") on May 2, 2005. Earlier, in 2002, Yuan-Ze Telecom received from the DGT the 3G (third-generation wireless communications system) concession, with a bidding price of NT$10,169,000 thousand, included in intangible assets - 3G concession. On January 24, 2005, the DGT issued to Yuan-Ze Telecom a 3G license, which is valid through December 31, 2018. Through the completion of the merger with Yuan-Ze Telecom, Far EasTone became licensed to provide 3G wireless communications service and began commercial operations on July 13, 2005.

To enhance the return of stockholders' equities, Far EasTone's board of directors proposed on April 30, 2007 to reduce capital by returning NT$7,745,326 thousand in cash to stockholders and decreasing common stock by 774,532 thousand shares. The capital reduction was approved by the stockholders' meeting on June 12, 2007. The capital reduction ratio was 19.204715% and the cash return per share was around NT$1.9204715. Paid-in capital after the capital reduction was NT$32,585,008 thousand. Far EasTone's

board of directors resolved January 15, 2008 as the record date of the capital reduction. On January 22, 2008, this capital reduction was registered with the Ministry of Economic Affairs (MOEA). The authority also approved March 17, 2008 as the share exchange date of the capital reduction. The foregoing payable amounts due to the capital reduction were fully paid.

On June 16, 2009, the stockholders resolved that Far EasTone could issue up to 444,341 thousand common shares by private placement, with a total issuance amount of up to NT$17,773,641 thousand (US$569,851 thousand), to catch up on industry development trends and to meet Far EasTone's future operating needs. The subscriber for these privately placed shares is China Mobile Limited's 100% indirect subsidiary incorporated in the ROC. On June 26, 2009, Far EasTone's board of directors resolved to set the private placement price at NT$40.00 (US$1.28) per share. However, based on certain agreements, if the volume weighted-average price of the common shares of Far EasTone within 14 consecutive trading days on or before the date on which either China Mobile Limited or Far EasTone sends the notice to the other party of the settlement date of the private placement falls below NT$35.00 (US$1.12) or exceeds NT$50.00 (US$1.6), the stockholders' meeting of Far EasTone's had resolved to designate the board of directors to negotiate with China Mobile Limited in good faith to set a new private placement price per share of Far EasTone, but any upward or downward adjustments of Far EasTone's private placement price per share should not be more than NT$5.00 (US$0.16). Far EasTone will proceed the private placement after obtaining the authorities' approval under the related regulation.

KG Telecommunication Co., Ltd. ("KG Telecom"), formerly Yuan Ho Telecommunications Co., Ltd., was incorporated in the ROC on September 25, 2003. It is a wholly owned subsidiary of Far EasTone. On January 1, 2004, KG Telecom merged with the former KG Telecommunications Co., Ltd. (the "former KGT") through a two-step merger agreement. The merger was completed on May 20, 2004 after the registration with the MOEA.

The former KGT provides 2G wireless communications services under a type I license - GSM1800 for the northern region of Taiwan issued by the DGT. The license allows the former KGT to provide services for 15 years from 1997, with an annual license fee at 2% of total 2G wireless communications service revenues. Moreover, the merger of former KGT with TUNTEX (with a license of 2G to provide wireless communications service under a type I license - GSM1800 for the central and southern region of Taiwan issued by the DGT) is effective from January 1, 2000. Thus, the former KGT provided island-wide 2G wireless communications services under a type I license - GSM1800. The DGT also issued the former KGT a type I license, allowing it to provide local/domestic long distance land cable leased circuit services for 15 years from September 2000, with an annual license fee of 1% of leased circuit service revenues.

To integrate the resources and enhance the operating efficiency of Far EasTone and KG Telecom, the boards of directors of both companies resolved their merger on February 26, 2009, with Far EasTone as the successor entity. On August 28, 2009, the National Communications Commission approved this merger, and the record date of this merger was January 1, 2010. The merger was completed on January 18, 2010 after the registration with the MOEA.

Q-ware Communication Corp. ("Q-ware Com.") was incorporated on February 13, 2007. It mainly provides Type II telecommunications services. On February 14, 2007, the board of directors of Far EasTone approved a cooperation plan with Q-ware System Inc. ("Q-ware") to operate WiFly and other businesses agreed upon by both Far EasTone and Q-ware. After obtaining the authorities' approval of this agreement, Far EasTone, as a specific person, subscribed for 36,460 thousand newly issued shares (NT$13.60 per share) of Q-ware Com. for NT$495,855 thousand on July 2, 2007. On July 3, 2007, Q-ware spun off its WiFly business, with a net worth of NT$349,301 thousand, to Q-ware Com. and received 34,930 thousand new shares of Q-ware Com. for this spin-off. Q-ware Com. got the right to provide WiFly business in Taipei City through this spin-off until September 7, 2013 with an annual fee at 3% of total WiFly revenues. Moreover, the NCC issued to Q-ware Com. a Type II license, allowing it to provide Internet services for three years from May 2007 for a fixed annual license fee based on Q-ware Com.'s paid-in capital. After the completion of this spin-off, Far EasTone owned approximately 51% of Q-ware Com.'s common stock and thus became its parent company. Q-ware's revenues and expenses were included in the consolidated financial statements since the acquisition date.

Far EasTron was incorporated in the R.O.C. on August 12, 2005. Far EasTron mainly provides Internet content providing services. To enhance the Group's (Company and consolidated subsidiaries) market share of Internet advertisements and integrate the Group's resources, the stockholders of Far EasTron resolved on April 21, 2008 for Far EasTron to have a share swap with ADCast Interactive Marketing Co., Ltd. ("ADCast"), a subsidiary of New Century Infocomm Tech Co., Ltd. ("NCIC"), with ADCast as the successor entity. After ADCast's capital reduction, Far EasTron's stockholders will receive 1 share of ADCast for every 4.8526 shares of Far EasTron. However, in their special meeting on August 29, 2008, Far EasTron's stockholders revised the share swap ratio to 5.4490:1. In addition, Far EasTron's board of directors resolved

F-273

to have September 3, 2008 as the merger date. The share swap was completed on September 30, 2008 after the related registration with the Taipei City Government. After the share swap, Far EasTone, Far EasTron Holding and KG Telecom owned 69.08% of ADCast's common stock; thus, Far EasTone became ADCast's parent company. The accounts of ADCast's revenues and expenses were included in the consolidated financial statements since September 3, 2010 and the accounts of Far EasTron's revenues and expenses for the period from January 1, 2008 to September 2, 2010 were also included in the consolidated statements.

On May 7, 2008, KGTI's stockholders approved the board of directors' proposal to dissolve KGTI, and on May 27, 2008, the authorities of the British Virgin Islands approved this dissolution. The dissolution was also approved by ROC Investment Commission of the MOEA on August 21, 2008. In addition, KG Telecom recognized this equity-method investment using KGTI's liquidation value.

Arcoa Communication Co., Ltd. ("ARCOA") was incorporated in the ROC on May 4, 1981. ARCOA sells cellular phones and other telecommunications equipment or accessories and provides related maintenance services. The DGT issued to ARCOA a Type II license, allowing it to provide mobile virtual network operator services for three years from July 13, 2006 for a fixed annual fee based on ARCOA's paid-in capital. The validity of Arcoa's Type II license was approved in July 2009 to be extended until July 12, 2013. Far EasTone has become ARCOA's parent company starting from February 2005 and owned 61.07% equity in ARCOA as of December 31, 2009.

On August 22, 2007, Far Eastern Electronic Toll Collection Co. ("FEETC"), which is owned by Yuan Tong Investment Co., Ltd. ("Yuan Tong") and Far EasTone, and the Taiwan Area National Freeway Bureau signed the Electronic Toll Collection BOT Project contract, which allows FEETC to run this project for 18 years and 4 months.

The Company issued new shares to acquire 100% equity in Far Eastern Resources Development Co. ("FERD"), a spin-off of the Company's real estate development business, including some fixed assets, nonoperating assets and farmland for investment purposes. FERD aims to carry out the following projects:

a. Taipei Far Eastern Telecom Park Project: FERD has an approximately 73.7 thousand pings land located in Banciao. To use this property productively, FERD signed a public construction BOO (build-own-operate) contract with the Ministry of Economic Affairs of the ROC. It is the first private-development BOO project in the telecom field in northern Taiwan. The Taipei Far Eastern Telecom Park plans to recruit tenants of new generation CPE (customer premises equipment), broadband service and equipment providers, digital content service providers, and broadband equipment providers. This project has been approved by the Urban Planning Commission of the Ministry of the Interior of the ROC and is now under construction. The first building is expected to operate in the second quarter of 2010.

b. The Yilan Jiaosi Resort hotel project: This project involves land rezoning so that industrial/ commercial areas can be established. After a land rezoning process, the construction was cleared to start in 2009.

On December 3 and 11, 2007, Oriental Resources Development Ltd. ("ORDL," the former TRC) conducted a capital reduction to offset the deficit of NT$20,000 thousand and a capital increase of NT$250,000 thousand. Since Yuan Ding Investment Co., Ltd. ("YDI") acquired 16,000 thousand shares under the premise of non-proportional investment in ORDL's increase in capital, the percentage of ownership was decreased from 100% to 70.32%.

In March 21, 2007, the Company bought 600 thousand common shares that were newly issued by Far Eastern Investment (Holding) Ltd. ("FEIH") for NT$1,592,160 thousand at US$80.00 per share.

On June 28, 2007, the board of directors of the Company's subsidiary, Yuan Tong decided to invest US$18,000 thousand on Sino Belgium Beer (Suzhou) Limited ("SBBZ") in China through Sino Belgium (Holding) Ltd..

In 2007, the Company and its subsidiaries bought 224,835 thousand common shares that were newly issued by Far Eastern Polychem Industries Ltd. ("FEPI") for NT$2,143,882 thousand. In May and July 2008, the Company bought 51,124 thousand common shares for NT$444,888 thousand and 198,816 thousand common shares for NT$1,703,800 thousand, respectively, which were newly issued by FEPI at US$0.28 per share. In addition, in September 2009, the Company bought 42,155 thousand common shares newly issued by FEPI at US$0.27 per share for NT$373,364 thousand (US$11,971 thousand). As a result, the Company's interest in FEPI increased from 57.65% to 59.81%.

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When Far Eastern Polytex (Holding) Ltd. issued new shares, the Company bought 2.5 thousand shares of the new shares amounting to NT$151,675 thousand at US$2 thousand per share in April 2008 and also bought 5 thousand new shares amounting to NT$330,150 thousand (US$10,585 thousand) at US$2 thousand per share in July 2009.

In July 2008, the Company bought 117 thousand shares of PET Far Eastern (Holding) Ltd. ("PETH") at US$423.98 per share, or a total amount of NT$1,509,008 thousand, representing 49.42% equity interest.

In January 2008, the Company sold to YDI its holding in Yuan Faun Ltd. of 200 thousand shares for NT$3,660 thousand.

To simplify investment structure, integrate investment resources and management, and control the subsidiaries in China, the board of directors of the Company made the resolution on December 21, 2007 to acquire the shares of the existing off-shore investment companies through subsidiaries and Oriental Union Chemical Corporation ("OUCC"). Related proposal is as follows:

a. Acquired 63 thousand shares of Far Eastern Apparel (Holding) Ltd. ("FEAH") from YDI totaling US$34,513 thousand with each share priced at US$546.09.
b. Acquired 487 thousand shares of FEDP (Holding) Ltd. ("FEDP") totaling US$49,961 thousand from Yuan Tong, FEPI, and Far Eastern Polytex (Holding) Ltd. with each share priced at US$102.65.
c. Acquired 119 thousand shares of PETH totaling US$50,945 thousand from Ding Yuan International Investment Corp., FEPI, and affiliate OUCC with each share priced at US$426.6.

The above transactions will have to be approved by Investment Commission (MOEA) and the actual transaction amount, however, will be adjusted by the present net value of the shares of the acquiring or the acquired companies.

FENC and its consolidated subsidiaries (collectively, the "Group") had 18,434, 21,170 and 20,834 employees as of December 31, 2007, 2008 and 2009, respectively.

The intercompany relationships, percentages of ownership and major operations of subsidiaries as of December 31, 2009 are shown in Schedules A and B.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements have been prepared in conformity with Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China. In preparing consolidated financial statements in conformity with these guidelines and principles, the Group is required to make certain estimates and assumptions that could affect the allowance for doubtful accounts, provision for loss on decline in value of inventories, depreciation of fixed asset and rental properties, impairment loss on asset, duty on decommissioned asset, warranty reserve income tax, pension cost, employee bonus, remuneration to directors and supervisors and so on. Actual results could differ from these estimates.

The Group's significant accounting policies are summarized as follows:

FENC's direct and indirect subsidiaries (i.e., investees with more than 50% of their voting shares owned by FENC or defacto control) are included in the consolidated financial statements. For subsidiaries acquired during the reporting period, their revenues and expenses generated before the acquisition date need not be consolidated. If FENC loses control over its subsidiaries during the reporting period, their revenues and expenses generated after the control lose date need not be consolidated.

All significant intercompany transactions and balances were excluded from the consolidation.

The Group lost control on Pacific Petrochemical (Holding) Ltd. and the percentage of ownership had decreased from 39.40% to 24.63% since they did not purchased any common share newly issued in 2008.

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The Company and its related party Invista S.à r.l. established a joint venture, Invista-Far Eastern Petrochemicals Co., Ltd. ("Invista"), to produce purified terephthalic acid (PTA). In March 2008, the Company sold to Yue Ding Industry Co., Ltd. 14,235 thousand shares, part of its holding in Oriental Petrochemical (Taiwan) Co., Ltd. ("OPTC," the former Invista) for NT$135,532 thousand. However, PTA production was no longer the strategic core business of Invista in Taiwan, so, on October 6, 2008, Invista sold its remaining 70% equity in Invista for US$1.00 to YDI (60%), Yue Ding Industry Co., Ltd. (10%), and OUCC (30%). On October 6, 2008, YDI then acquired 42% equity interest for NT$19 and Invista was later renamed OPTC. As of October 6, 2008, the Group had totally 60% of OPTC's ownership and started to include OPTC's accounts in the consolidation financial statements. After the entire equity of Invista S.à r.l. was sold off, Invista S.à r.l. continued giving its technical support to OPTC. On October 21, 2008, OPTC's stockholders resolved to reduce its capital to offset its deficits of NT$4,208,367 thousand and then raise capital by NT$3,800,000 thousand cash. Thus, the Company's holding of OPTC shares declined by 252,501 thousand shares, but the Company's purchase of 318,000 thousand shares of OPTC's newly issued common stock for NT$3,180,000 thousand resulted in an increase in the Company's equity in OPTC from 60% to 80.76%.

At the same time, a related party of Invista sold its 50% equity interest in Far Eastern-Invista Co., Ltd. ("Far Eastern-Invista," a manufacturer of Nylon-66) to YDI for US$1.00. YDI acquired 50% equity interest in Far Eastern-Invista Co., Ltd. for NT$31.00 and then Far Eastern-Invista was renamed Far Eastern Fibertech Co., Ltd. ("FEFC"). The percentage of YDI's equity interest of Far Eastern Fibertech Co., Ltd., increased from 50% to 100%, and the accounts of this investee was thus included in the consolidated financial statements as of October 6, 2008.

In February 2009, an FENC subsidiary, Sino Belgium (Holding) Ltd. ("SINO"), acquired 30% ownership of Martens Beer Trading (Shanghai) Ltd. ("Martens Shanghai") from another subsidiary, Far Eastern Industries (Wuxi) Ltd. ("FEIW"), and then bought the rest of the 70% ownership from the original stockholder, Martens HK Ltd. Thus, the interest of the Company and the subsidiary in Martens Shanghai increased from 30% to 100% and the accounts of this investee were included in the consolidated financial statements beginning from March 2009.

Yuan Cing Infocomm Tech Co., Ltd. ("YCIC") was incorporated on December 30, 2009. It is wholly owned by Far EasTone. YCIC provides production and sales of communications products.

An FENC subsidiary, SINO issued 2,415 new shares at US$2 thousand per share amounting to US$4,830 thousand. Another subsidiary, Yuan Tong didn't buy any shares; thus, Yuan Tong's holding in SINO decreased from 100% to 87.5%.

On July 31, 2009, the board of Far Eastern Industries (Jujiang) Ltd. ("FEIJ," an FENC subsidiary), decided to liquidate FEIJ, and the government of the People's Republic of China approved this liquidation on December 14, 2009. As of December 31, 2009, the liquidation amounts had been returned to the original stockholders.

In the consolidation, the financial statements of the foreign subsidiaries are translated from their respective functional currencies into New Taiwan dollars as follows:

a. All assets and liabilities at the exchange rates prevailing on the balance sheet date.
b. Share capital, retained earnings and/or accumulated deficit at their historical exchange rates.
c. All items in the statement of income at the average exchange rates for the periods.

The entities in the "Consolidated Financial Statements of Affiliates" are the same as those in the consolidated financial statements as required under Statement of Financial Accounting Standards ("Statement" or "SFAS") No. 7 - "Consolidated Financial Statements"; thus, no consolidated financial statements of affiliates will be compiled. That is, the information needed in the combined financial statements of affiliates is enclosed in the consolidated financial statements.

Current and Noncurrent Assets and Liabilities

Current assets are cash or cash equivalents, assets held mainly for trading and other assets to be converted into cash or consumed within 12 months after the balance sheet date. All other assets such as properties and intangible assets are classified as noncurrent. Current liabilities are obligations to be settled within 12 months after the balance sheet date. All other liabilities are classified as noncurrent.

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Far Eastern Construction Co., Ltd. ("FECC") authorizes constructors to build houses for sale or rent. Far Eastern General Contractor Inc. ("FEGC") engages in civil engineering construction. The operating cycles of the two companies' contracts are over one year. Thus, the contract-related assets and liabilities are classified as current or noncurrent depending on their operating cycles.

Cash Equivalents

Commercial paper and bonds purchased under resell agreements acquired with maturities of up to three months from the date of purchase are classified as cash equivalents. Their carrying values approximate their fair values.

Financial Instruments at Fair Value through Profit or Loss

Financial instruments at fair value through profit or loss include financial assets or liabilities held for trading and those designated on initial recognition as measured at fair value with fair value changes in profit or loss.

The Company recognizes a financial asset or a financial liability on its balance sheet when the Company becomes a party to the contractual provisions of the financial instrument. A financial asset is derecognized when the Company has lost control of its contractual rights over the financial asset. A financial liability is derecognized when the obligation specified in the relevant contract is discharged, cancelled or expired.

On initial recognition, the financial instruments are measured at fair value plus transaction costs directly attributable to the acquisition of the assets. Subsequent changes in fair value are recognized as current gain or loss. Cash dividends received within a year from the investment acquisition date and received in subsequent years are all accounted for as investment income. When the financial instruments are derecognized, the difference between selling price and carrying value or the amount paid and carrying amount is recognized as current gain or loss. The regular purchase or sale of financial instruments is recognized or de-recognized using trade date accounting.

If derivative financial instruments do not meet the criteria for hedge accounting, they were classified as financial assets or liabilities held for trading purposes. They were classified as financial assets when the fair value was positive; otherwise they were classified as financial liabilities.

The fair values of listed securities and mutual funds are determined at their closing prices and net asset values, respectively, as of the balance sheet date. The fair values of cotton futures contracts, currency option contracts and forward exchange contracts are determined at their market quotation on the balance sheet date. The fair values of financial instruments with no quoted market prices are determined at values determined using valuation techniques.

Available-for-sale Financial Assets

On initial recognition, available-for-sale financial assets are recorded at fair values plus transaction costs directly attributable to the acquisition of the assets. Gain or loss due to changes in fair value is recognized as adjustments to stockholders' equity, and the related cumulative gain or loss should be recognized in profit or loss in the period when the financial asset is de-recognized. The regular purchase or sale of financial assets is recognized or de-recognized using trade date accounting.

The timing of recognition and derecognition of available-for-sale financial assets is the same as that of financial instruments at fair value through profit or loss.

The fair values of listed securities and mutual funds are determined at their closing prices and net asset values, respectively, as of the balance sheet date.

Any cash dividends received are recognized as income on the date of the stockholders' meeting or on the ex-dividend date, but dividends declared from earnings before investment acquisition are recognized as a reduction of the carrying value of the investments. Stock dividends received are accounted for only as an increase in the number of shares held but are not recognized as investment income. The carrying amount of shares held is recalculated on the basis of the total number of shares held after stock dividends are received.

An impairment loss should be recognized if there is objective evidence showing that an available-for-sale financial asset is impaired. This impairment loss can be reversed to the extent of the original carrying value and recognized as an adjustment to stockholders' equity.

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^{}[] Bond Investments with No Active Market

Bonds with fixed or determinable payments that are not quoted in an active market are carried at amortized cost using the effective interest method. Bonds are initially measured fair value plus transaction costs directly attributable to bond acquisition. Gains or losses are recognized when the bonds are derecognized, impaired or amortized. All regular purchases or sales of bonds are recognized and derecognized on a trade date basis.

An impairment loss should be recognized if there is objective evidence that bonds are impaired. The impairment loss is reversed if an increase in the bonds' recoverable amount is due to an event which occurred after the impairment loss was recognized; however, the adjusted carrying amount of the bonds may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the bonds in prior years.

Revenue Recognition, Accounts Receivable and Allowance for Doubtful Accounts

Revenue is recognized when the earnings process is completed or virtually completed and the revenue is realized or realizable. The costs of providing services are recognized as incurred. Usage revenues (equal to the excess of minutes of traffic included in the fixed monthly service fees) from wireless services and mobile virtual network operator services, international simple resale services, internet access services and interconnection calls, net of any applicable discount, are billed according to customers' usage and are recognized on the basis of minutes of traffic processed. Other revenues are recognized as follows: (a) fixed monthly service fees and leased-circuit service revenues are accrued each month; (b) prepaid call and recharge call services are recognized as income based upon customer usage; (c) one-time commission and subsidy revenue of a bundled contract (which covers both the purchase of a cellular phone and a mobile phone number) or merely sales of mobile phone number as an agent for the telecommunications providers are accrued as activated; and (d) commission revenues are accrued monthly on the basis of related airtime revenue. The revenues from and cost for the sale of cellular phone equipment and accessories are recognized when the products are delivered to and accepted by the customers. This sale is considered a separate earnings process from the sale of wireless services.

Operating revenues are measured at fair values based on the prices negotiated between the Group and the customers. If the terms of sales receivables are within one year, the amount of receivables is not significantly different from fair value and the transaction is frequent; therefore, the sales receivables are not discounted to fair value.

Rental revenues are recognized when the service is rendered and the earnings process is virtually completed and revenues are realized or realizable.

The Company and Far Eastern Apparel Co., Ltd. do not recognize revenues when the transactions involving the delivery of materials to subcontractors for further processing since these transactions do not involve a transfer of ownerships and the risks of materials.

An allowance for doubtful accounts is provided on the basis of the review of the collectibility of accounts receivable. The Group assesses the probability of collectibility of accounts receivable by examining the aging analysis of the outstanding receivables, assessing the value of the collateral provided by customers, credit ratings and economic environments.

Promotion Expenses

Commissions and cellular phone equipment subsidy costs related to the Group's promotions are treated as marketing expenses or cost of telecommunications service in the year when the service to a subscriber is activated.

Inventories

Inventory includes raw materials, supplies, finished products, work-in-process and and merchandise. Before January 1, 2009, inventory was stated at lower of cost or market. Market value meant replacement cost for raw materials and supplies and net realizable value for finished goods and work in process. Any write-down was made on as a whole basis. As stated in Note 5, inventory is now stated at the lower of cost or net realizable value beginning January 1, 2009. Any write-down was made on item by item basis. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date.

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Government Grant

When received, the government grant is included in the restricted assets and in deferred revenue at the same time. The restricted asset is reclassified as cash or cash equivalent when Far EasTone uses the grant under the terms of the related agreement. The deferred revenue is recognized as follows: (1) if the grant is related to depreciable assets, it should be recognized as revenue over the asset economic lives in proportion to the depreciation expenses for these assets; or (2) if the grant is related to income, the grant should be deducted from the related expense when the expenses are incurred.

Financial Assets Carried at Cost

Investments in equity instruments without quoted market prices in an active market, including investments in unlisted stocks and emerging stocks, are measured at cost upon initial recognition. Any cash dividends received are recognized as income on the date of the meeting of stockholders or on the ex-dividend date, but dividends declared from earnings before investment acquisition are recognized as a reduction of the carrying value of the investments. Stock dividends received are accounted for only as an increase in the number of shares held but are not recognized as investment income. The carrying amount of shares held is recalculated on the basis of the total number of shares held after stock dividends are received. An impairment loss should be recognized as a charge to current income if there is objective evidence that a financial asset is impaired. This loss cannot be reversed.

Real Estate

FENC's subsidiary, FECC, uses the completed-contract method for its construction projects. Pre-sold real estate is recognized as advances on land and building. After completion of the construction, the ownership is transferred to a proprietor or owner, and the proceeds of this transfer are recognized as current revenues. The calculation of the construction cost is based on the size of the land used, the actual size of the house and the construction cost incurred. House ownership fully or partly transferred to customers is recognized as current construction cost; any remaining construction costs are recognized as available for sale - building and land.

Pre-sold property under the percentage-of-completion method of FECC is recognized in the balance sheet and is calculated on an accrual basis. If the accumulated construction gain exceeds total construction gain, the excess will be recognized as current revenues; otherwise, current loss is recognized. If the construction is estimated to result in a loss, the full loss has to be recognized immediately. When the estimated loss decreases in the following periods, the cumulative loss recognized in excess of the estimated loss is recognized as revenues.

For subsidiary, FECC, construction is recognized by the percentage-of-completion method, the construction account is calculated depending on the construction cost actually incurred (such as construction land, costs and capitalized interests) plus or minus the estimated construction revenues or losses. After each construction completion, the sold parts of construction and related advances on land and building are netted out; the net amount is recognized as operating revenue. The unsold parts under the current construction projects are reclassified as real estate ready for sale.

FECC stated its property as available for sale - building and land or available for construction - land at the lower of cost or market.

FECC treated its marketing expenses related to pre-sold real estate as deferred marketing expenses and recognized as current expenses when the construction is completed except for the ownership of real estate has not yet been transferred to customers.

Long-term Construction Contracts

Revenues and costs of long-term construction contracts of FECC are recognized by the percentage-of-completion method. Under this method, the stage of completion of each contract is measured as a ratio of cumulative construction costs to total estimated contract costs. If contract price or construction contract costs cannot be reasonably estimated, the completed method is required.

Construction revenues and costs for the current year of FECC are the cumulative construction revenue and costs, determined using the percentage-of-completion method, in excess of the cumulative construction revenue and costs recognized in prior years. An estimated loss on a construction contract is recognized immediately; any adjustment of this loss is recognized as either income or loss in the year of adjustment.

The adjustment of the construction contract price of the prior year's completed construction is added to or deducted from the construction profit or loss of the year of adjustments. Under the completed-contract method, when construction is completed, the balance of billings on construction-in-progress and construction-in-progress is charged to construction revenue and costs.

Long-term construction in progress of FECC is carried at cost plus estimated construction profit or less estimated losses. Installment payments or collections received on construction projects are credited to advances from construction. Upon completion of each project, these advances are offset against construction-in-progress.

At year-end, the balances of construction-in-progress and advances on construction of FECC are netted out, and the result is classified as current asset or current liability.

Held-to-maturity Financial Assets

Held-to-maturity financial assets are carried at amortized cost using the straight line method. Held-to-maturity financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition. Profit or loss is recognized when the financial assets are derecognized, impaired, or amortized. All regular way purchases or sales of financial assets are accounted for using a trade date basis.

An impairment loss is recognized when there is objective evidence that the investment is impaired. The impairment loss is reversed if an increase in the investment's recoverable amount is due to an event which occurred after the impairment loss was recognized; however, the adjusted carrying amount of the investment may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the investment in prior years.

Equity-method Investments

Long-term investments in which the Group owns at least 20% of investees' common stock or exercises significant influence over their operating and financial policy decisions are accounted for by the equity-method.

On the acquisition date or the adoption of the equity-method for the first time, the difference between investment cost and underlying equity in net assets is amortized using the straight-line method over 3 to 20 years. As required, however, by the revised SFAS No. 5 - "Long Term Investments in Equity Securities," starting on January 1, 2006, the cost of acquisition is subjected to an initial analysis. The investment cost in excess of the fair value of identifiable net assets is recognized as goodwill and goodwill is no longer amortized. If the fair value of identifiable net assets acquired exceeds the cost of investments, the excess should be assigned to noncurrent assets in proportion to their respective fair values (except for financial assets not under the equity-method, assets for disposal, deferred income tax assets and prepaid pension costs or other retirement benefit costs). If these assets are all reduced to zero, the remaining excess should be recognized as extraordinary gain. Starting on January 1, 2006, the unamortized balance of the investment cost in excess of the equity in investee's net assets is no longer amortized and is instead subject to the same accounting treatment as that for goodwill; the negative goodwill previously acquired should be amortized over the remaining estimated economic lives.

Profits from downstream transactions with an equity-method investee are eliminated in proportion to the Group's percentage of ownership in the investee; however, if the Group has control over the investee, all the profits are eliminated. Profits from upstream transactions with an equity-method investee are eliminated in proportion to the Group's percentage of ownership in the investee.

An increase in the Group's proportionate share in the net assets of its investee resulting from its subscription for additional shares of stock issued by the investee at a rate different from its existing equity ownership in the investee is credited to capital surplus. If the subscription results in a decrease in the Group's equity in an investee's net assets, capital surplus is debited. If capital surplus is not enough for debiting purposes, the difference is debited to unappropriated earnings.

The Group's equity in equity-method investees' net income or net loss is recognized using the treasury stock method if there are reciprocal holdings between investors and investees.

For both equity-method and cost-method investments, stock dividends received are accounted for as increases in the number of shares held, which result in lower carrying value per share.

F-280

The costs of investments sold are determined as follows: (i) by the Company - weighted average method and (ii) by subsidiaries - moving-average method.

Properties and Rental Assets

Properties and rental assets are stated at cost or cost plus appreciation, less accumulated depreciation. Major additions, renewals and betterments are capitalized, while maintenance and repairs are expensed currently.

Interest on borrowings used to finance the acquisition of properties and the construction of production facilities up to the time those properties are ready for their intended use is capitalized and included in the cost of the related assets.

Depreciation expenses for properties and rental assets are calculated by the Group using the fixed-percentage-of- declining-balance method and straight-line method, respectively.

Depreciation expenses are computed over service lives originally estimated as follows: buildings and equipment, 3 to 55 years; machinery and equipment, 3 to 20 years; and telecommunication equipment, 2 to 15 years; computer equipment, 3 to 10 years; and leasehold improvements and miscellaneous equipment, 3 to 15 years. Depreciation on appreciation is computed over the remaining service lives of the assets on the revaluation date. When properties and rental assets reach their residual value and are still being used, they are further depreciated over their newly estimated service lives.

When properties are retired or disposed of, their costs or costs plus appreciation and related accumulated depreciation are removed from the accounts, and the resulting gains or losses are credited or charged to nonoperating income or loss.

Equipment covered by capital lease agreements are stated at the lower of (1) the fair value of the equipment at the beginning of the lease or (2) the total present value of future lease payments and the bargain purchase price. Implicit interest included in the periodic lease payments is treated as current interest expenses.

Idle Assets

Properties not currently used in operations are transferred to other assets at the lower of net carrying value or net realizable value, with the difference charged to nonoperating expenses. However, starting from January 1, 2006, based on related regulations, depreciation is calculated using the straight-line method over the estimated useful lives of the properties.

Intangible Assets

Goodwill is the difference (the source of which cannot be identified) between investment costs and the equity in investees' net assets, which is amortized using the straight-line method over 3 to 15 years. However, under the revised SFAS No. 5 - "Long-term Investments in Equity Securities" goodwill is no longer amortized starting from January 1, 2006.

The 3G concession, which was stated at cost, is amortized on a straight-line basis from January 24, 2005, the issuance date of the concession license, until the license expiry date on December 31, 2018.

Land use rights are amortized over 50 years.

Patents and computer software costs were stated at cost and amortized over 5 to 10 years on a straight-line basis.

Deferred Charges

Deferred charges, which are derived mainly from costs of routers provided to customers, retail store renovation and computer software of Far EasTone are amortized using the straight-line method over the terms of lease. The cost of issuing corporate bonds before December 31, 2005 should be amortized by the straight-line method between the issuance date and the redemption date at the option of the bondholder. Other deferred charges are amortized by the straight-line method over five to seven years.

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^{}[] F-282

Impairment Loss

An impairment loss should be recognized if the carrying value of assets (including properties, intangible assets, idle properties, rental assets, 3G concession, goodwill, deferred charges and equity-method investments) exceeds their recoverable amount, and this impairment loss should be charged to current loss. For investees which Far EasTone exercises significant influence but not control, the recoverable amount and the investment value are compared to calculate the impairment loss from the investment based on investee's individual investment value (goodwill is included). The accumulated impairment loss of an asset recognized in prior years can be reversed if, later on, the estimate of the asset's recoverable amount later has changed so as to increase the recoverable amount. Then, the asset's carrying amount can be increased to its recoverable amount; however, the recoverable amount should not exceed the carrying amount that would have been after the deduction of depreciation or amortization if it had not been impaired. If an asset has been revalued in accordance with the laws, its impairment loss should first be used to reduce the unrealized appreciation of revaluation under stockholders' equity. The excess loss, if any, may then be recognized as loss in the income statement. However, to the extent that an impairment loss on the same revalued asset was previously recognized as a loss in the income statement because of insufficient revaluation surplus, a reversal of that impairment loss is recognized as a gain in the income statement. The excess part, if any, may then be reversed to the unrealized appreciation of revaluation under stockholders' equity.

To test for impairment, goodwill should be allocated to each of the cash-generating units that are expected to benefit from the synergies of the combinations. A cash-generating unit should be tested for impairment at least annually by comparing the carrying amount of the unit with its recoverable amount. If the carrying amount exceeds the recoverable amount of the unit, the impairment loss is allocated to reduce the carrying amount of the unit in the following order: (a) reduce the carrying amount of any goodwill allocated to the unit; and (b) reduce the carrying amounts of other assets of the unit proportionally. A reversal of an impairment loss on goodwill is disallowed.

For investees which Far EasTone exercises significant influence but not control, the recoverable amount and the investment value are compared to calculate the impairment loss from the investment based on investee's individual investment value (goodwill is included).

Deferral of Unrealized Intercompany Profits

Deferral of unrealized intercompany profits refers to downstream transactions with investees under the equity-method, and these profits are realized and recognized when related products are sold to third parties.

Exchangeable Bonds

If bond holders have the right to exchange bonds with the Company's holdings of agreed target in fixed price or amount, the convertible bonds are measured at issued price after deducting the fair value of embedded derivatives. The liability component of non-derivative instruments are measured at amortized cost using the effective interest method (straight-line method if difference is not material) and the related interest or redemption loss or gain is charged to profit or loss. If bond holders exercise exchange right before the maturity date, the bonds should be adjusted with their liability components. The Company uses the aggregate carrying amount of the liability and equity components of the bonds at the time of conversion as a basis to record the target exchanged. If the bonds are redeemed at the maturity date, the Company should recognize the fair value of embedded derivatives as gain of current year.

Pension Costs

FENC and its domestic subsidiaries have two types of pension plans: Defined benefit and defined contribution.

Under the defined benefit plan, pension costs are recognized on the basis of actuarial calculations. Under the defined contribution pension plan, monthly contributions by the Group to the employees' individual pension accounts are recognized as pension costs.

The pension plans of subsidiaries in China are based on the Chinese government's regulations. The subsidiaries make monthly contributions to employees' individual pension accounts at a fixed percentage of salaries and wages and recognize these contributions as pension costs. The domestic and overseas holding companies which do not have any employees do not have pension plans.

^{}[] F-283

Income Tax

The inter-period and intra-period allocation methods are used for income taxes. Deferred income tax assets are recognized for the tax effects of deductible temporary differences, unused operating loss carryforwards and unused investment tax credits, and deferred tax liabilities are recognized for the tax effects of taxable temporary differences. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. Deferred income tax assets and liabilities are classified as current or noncurrent on the basis of the classification of the related assets and liabilities for financial reporting. A deferred asset or liability not related to an asset or a liability in the financial statements is classified as current or noncurrent on the basis of the expected length of the realization period.

Tax credits for certain purchases of telecommunications and other equipment, research and development expenses, personnel training expenses and investments in shares of stock are accounted for as a reduction of the current period's income tax expense.

Adjustments of prior years' tax payables include the current period's income tax expenses.

Income taxes (10%) on undistributed earnings generated since January 1, 1998 are recorded as expense in the year when the stockholders resolve to retain the earnings.

The Company and FERD adopted the linked-tax system for tax filings. Differences between current and deferred income tax expenses on consolidated entity basis and those on nonconsolidated entity basis are adjusted in the Company's income tax expenses. Related reimbursement and appropriation are recognized as receivables or payables.

Foreign-currency Transactions and Translation of Foreign-currency Financial Statements

Nonderivative foreign-currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of prevailing foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars or when nonmonetary foreign-currency-denominated assets and liabilities are settled, are credited or charged to income in the period of settlement.

On the balance sheet date, the balances of nonmonetary foreign currency-denominated assets and liabilities evaluated at fair value, such as equity instruments, are restated at the prevailing exchange rates, and the resulting differences are recorded as adjustment to stockholders' equity or as profit or loss in the current period. Financial assets and liabilities carried at cost are stated at historical exchange rates; while equity-method investments are recorded as cumulative translation adjustments under stockholders' equity.

Hedging Derivative Financial Instruments

Hedge Accounting

Hedge accounting involves the recognition of the offsetting effects on profit or loss of changes in fair values of the hedging instrument and the hedged item.

Some derivative instruments held by the Group are for cash flow hedge purposes. Thus, the gains or losses from the changes in fair values of the hedging instruments are recognized under stockholders' equity and are recognized as current income if the hedged forecast transaction affects net gains or losses. If hedging would give rise to a nonfinancial asset or liability, the gain or loss will be recognized as an adjustment to the original cost or carrying amount of the hedged asset or liability. If recognized adjustments to stockholders' equity result in irreversible losses, these losses should be immediately charged to current income.

Reclassifications

Certain accounts in the consolidated financial statements as of and for the years ended December 31, 2007 and 2008 have been reclassified to be consistent with the presentation of the consolidated financial statements as of and for the year ended December 31, 2009.

^{}[] F-284

3. TRANSLATION INTO U.S. DOLLARS

The consolidated financial statements are stated in New Taiwan dollars. The translations of the New Taiwan dollars into U.S. dollars are included solely for the convenience of readers, using the noon buying rate of NT$31.19 to US$1.00 published by US Federal Reserve on September 30, 2010. The convenience translations should not be construed as representations that the New Taiwan dollar amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other exchange rate.

4. PRO-FORMA FINANCIAL INFORMATION

As of December 31, 2009, based on the assumption that the Group acquired the majority in Martens Shanghai, OPTC, FEFC and ADCast on January 1, 2007. The pro forma financial information of the Group in 2007, 2008 and 2009 would have been as follows:

(In Thousands, Except EPS)

	Years Ended December 31
	2007	2008	2009
	NT$	NT$	NT$	US$ (Note 3)
Operating revenue	$176,151,152	$180,918,000	$166,976,183	$5,353,517
Income before income tax	18,527,693	9,208,724	18,081,093	579,708
Consolidated net income	15,198,334	6,328,812	14,618,678	468,698
After tax basic earnings per share	2.10	0.45	1.75	0.06

The pro forma financial information above is only for reference. It does not completely represent both the financial results of the Company after acquiring a majority stake in Martens Shanghai, OPTC, FEFC and ADCast on January 1, 2007 and the future consolidated financial status.

5. CHANGES IN ACCOUNTING PRINCIPLES

Accounting for Intangible Assets

On January 1, 2007, the Group adopted the newly released SFAS No. 37 - "Accounting for Intangible Assets" and related revisions of previously released Statements. The Group thus reevaluated its use of the amortization method and useful lives of related assets. This accounting change had no effect on income before income tax, consolidated net income and earnings per share after income tax for the year ended December 31, 2007.

Accounting for Bonuses to Employees and Remuneration to Directors and Supervisors

In March 2007, the Accounting Research and Development Foundation issued Interpretation 2007-052 that requires companies to recognize bonuses paid to employees, directors and supervisors as compensation expenses. These bonuses were previously recorded as appropriations from earnings. This accounting change resulted in decreases of NT$431,123 thousand in consolidated net income attributable to stockholders of parent company and of NT$0.09 in basic earnings per share after income tax for the year ended December 31, 2008.

Accounting for Inventories

On January 1, 2009, the Group adopted the newly revised SFAS No. 10 - "Accounting for Inventories." The main revisions are (a) inventories are stated at the lower of cost or net realizable value, and inventories are written down to net realizable value item-by-item except when the grouping of similar or related items is appropriate; (b) unallocated overheads are recognized as expenses in the period in which they are incurred; and (c) abnormal costs, write-downs of inventories and any reversal of write-downs should be classified as cost of goods sold. This accounting change resulted in decreases of NT$132,664 thousand (US$4,253 thousand) in consolidated net income attributable to stockholders of parent company and NT$0.03 (US$0.001) in basic earnings per share after income tax for the year ended December 31, 2009. For comparison purposes, the Group also reclassified nonoperating gains of NT$91,047 thousand and nonoperating losses of NT$720,032 thousand to cost of goods sold for the years ended December 31, 2007 and 2008, respectively.

^{}[] 6. CASH AND CASH EQUIVALENTS

As of December 31, 2007, demand deposits in foreign banks were as follows:

Deposits in Foreign Bank	NT$
Belgium (US$516 thousand)	$16,734
China - Hong Kong (US$16 thousand)	519
U.S.A. - New York (US$11 thousand)	344
	$17,597

As of December 31, 2008, demand deposits in foreign banks were as follows:

Deposits in Foreign Bank	NT$
Belgium (US$752 thousand)	$24,666
China - Hong Kong (US$10 thousand)	328
U.S.A. - New York (US$10 thousand)	321
	$25,315

F-285

As of December 31, 2009, demand deposits in foreign banks were as follows:

Deposits in Foreign Bank	NT$
Belgium (US$5,163 thousand)	$165,172
China - Hong Kong (US$3 thousand)	96
U.S.A. - New York (US$19 thousand)	623
	$165,891

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS - CURRENT

Financial assets held for trading and financial assets at fair value through profit or loss were as follows:

YDI, KG Telecom and Yuan Tong, respectively contracted with and fully authorized Oriental Securities Investment Advisory Co., Ltd. (trustee) to manage discretionary funds. As of December 31, 2007, the capital fully authorized to the trustee was NT$300,000 thousand, NT$300,000 thousand and NT$450,000 thousand and as of December 31, 2008 and 2009, the capital fully authorized to the trustee were NT$300,000 thousand (US$9,618 thousand), NT$350,000 thousand (US$11,222 thousand), and NT$450,000 thousand (US$14,428 thousand) for each year. Investment target excluded shares of related parties, shares of domestic companies within telecommunication industry (except for Chunghwa Telecom Co., Ltd.) and their related derivative instruments. Deposits among those fully authorized were NT$193,038 thousand, NT$141,115 thousand and NT$316,407 thousand (US$10,145 thousand) in 2007, 2008 and 2009, respectively and were classified under cash equivalents (Note 6).

The Company entered into cotton futures contracts and forward exchange contracts to hedge the fluctuation of cotton prices and exchange rates on account receivables during the years ended December 31, 2007, 2008 and 2009. The strategy is to hedge the Company's market risk exposure. Since these transactions do not meet the criteria for hedge accounting, they were classified as held for trading.

F-286

The Company had no outstanding cotton futures contracts as of December 31, 2009. The outstanding cotton futures contracts as of December 31, 2007 and 2008 were as follows:

	December 31, 2007
Outstanding Derivative Contract	Maturity Date	Units	Contract Amount (Thousands)
Cotton futures contracts	March 2008	110	USD3,593/NTD116,521
Cotton futures contracts	May 2008	40	USD1,308/NTD42,418
	December 31, 2008
Outstanding Derivative Contract	Maturity Date	Units	Contract Amount (Thousands)
Cotton futures contracts	March 2009	60	USD1,408/NTD46,176

The main purpose that the Company entered into put option contracts and non-hedging purpose forward exchange contracts was to profit on royalties and the difference between exchange rate fluctuation in 2007, 2008 and 2009.

The Company had no outstanding option contracts as of December 31, 2007, 2008 and 2009, respectively.

The outstanding forward exchange contracts as of December 31, 2007, 2008 and 2009 were as follows:

	Currency	Maturity Date	Contract Amount (Thousands)
December 31, 2007
Sell	EUR/USD	2008.2.27	EUR2,000/USD2,871
Sell	USD/NTD	2008.1.4-2008.3.12	USD77,000/NTD2,481,255
December 31, 2008
Sell	EUR/USD	2009.1.23-2009.3.30	EUR7,000/USD8,918
December 31, 2009
Sell	EUR/USD	2010.3.29-2010.4.29	EUR2,000/USD2,857
Sell	USD/NTD	2010.1.15-2010.3.25	USD78,000/NTD2,512,528

The subsidiary, FEIH entered into forward exchange contracts to hedge the effect of adverse exchange rate fluctuations on liabilities denominated in foreign currencies in 2007, 2008 and 2009. In addition, FEIH was authorized by affiliates Oriental Industries (Suzhou) Ltd. ("OTIZ"), Far Eastern Industries (Shanghai) Ltd. ("FEIS"), FEIW, and SBBZ in 2007 and 2008 and Wuhan Far Eastern New Material Ltd. in 2009 to enter into forward exchange contracts to hedge against the exchange rate risk on foreign currency denominated assets and liabilities.

F-287

FEIH had no outstanding forward exchange contracts as of December 31, 2009. The outstanding forward exchange contracts as of December 31, 2007 and 2008 were as follows:

	Currency	Maturity Date	Contract Amount (Thousands)
December 31, 2007
Sell	USD/CAD	2008.1.25-2008.3.25	USD10,000/CAD9,779
Sell	USD/JPY	2008.1.30	USD7,000/JPY752,737
Buy	EUR/USD	2008.1.30	EUR4,000/USD5,954
December 31, 2008
Sell	USD/CAD	2009.1.23-2009.2.25	USD2,000/CAD2,339

An FENC subsidiary, FECC entered into forward exchange contracts in 2008 to hedge against foreign exchange risks on foreign currency-denominated assets. All forward exchange contracts had been settled as of the end of 2008.

An FENC subsidiary, FEGC entered into forward exchange contracts in 2008 to hedge against foreign exchange risks on foreign currency-denominated assets. All forward exchange contracts had been settled as of the end of 2008.

An FENC subsidiary, OPTC entered into forward exchange contracts in 2009 to hedge against foreign exchange risks on foreign currency-denominated assets and liabilities. All forward exchange contracts had been settled as of the end of 2009.

An FENC subsidiary, FEFC entered into forward exchange contracts in 2009 to hedge against foreign exchange risks on foreign currency-denominated assets and liabilities. All forward exchange contracts had been settled as of the end of 2009.

An FENC subsidiary, Yuan Tong, entered into forward exchange contracts in 2008 and 2009 to hedge against foreign exchange risks on foreign currency-denominated assets and liabilities. All forward exchange contracts had been settled as of the end of 2008 and 2009.

An FENC subsidiary, Far Eastern Polytex (Holding) Ltd., entered into forward exchange contracts in 2009 to hedge against foreign exchange risks on foreign currency-denominated assets and liabilities. All forward exchange contracts had been settled as of the end of 2009.

For the exchangeable bonds issued in 2007, the Company separately recognized the embedded derivatives and the host debt instruments. In addition, the derivatives were measured at fair value and recognized as financial assets and liabilities at fair value through profit or loss.

The Group's net gains (losses) on financial assets were NT$189,847 thousand in 2007, NT$(389,929) thousand in 2008 and NT$280,941 thousand (US$9,007 thousand) in 2009. The net gains (losses) on financial liabilities were NT$(49,579) thousand in 2007, NT$411,653 thousand in 2008 and NT$93,123 thousand (US$2,986 thousand) in 2009.

F-288

^{}[] F-289

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

The available-for-sale financial assets of NT$25,349 thousand in 2007 was recognized as an impairment loss as the recovery of the financial assets is remote.

9. BONDS INVESTMENTS WITH NO ACTIVE MARKET

On July 16, 2004, ARCOA bought five-year corporate bond at par value, amounting to NT$3,000 thousand with coupon interest rate of 2.55%. The interest was payable on July 16 annually. The maturity date of the bond was July 16, 2009. The bond was redeemed at par value on the maturity date.

On February 26, 2009, an FENC subsidiary, Yuan Tong, bought convertible bonds amounted to EUR$6,670 thousand issued by Bockhold N.V. The maturity date of the bond was February 26, 2014. The maturity date of the bond was February 26, 2014. The 7.5% interest on these three-year convertible bonds was payable semiannually, and the bonds can be converted to 933 common stock shares of Bockhold N.V. proportionally. The amount on the host debt contract was recognized as bond investment with no active market.

^{}[] 10. INVENTORIES, NET

The allowances for inventory devaluation as of December 31, 2007, 2008 and 2009 were NT$1,032,838 thousand, NT$1,752,870 thousand and NT$684,151 thousand (US$21,935 thousand), respectively.

The costs of goods sold were NT$90,932,324 thousand, NT$102,098,293 thousand and NT$94,094,317 thousand (US$3,016,810 thousand) for the years ended December 31, 2007, 2008 and 2009, respectively. Reversals of allowance for losses on decline in value of inventories amounting to NT$91,047 thousand and NT$1,068,719 thousand (US$34,265 thousand) were included in the cost of goods sold for the years ended December 31, 2007 and 2009, respectively. Previous write-downs had been reversed as a result of increased selling prices in certain markets. Allowance for losses on decline in value of inventories amounting to NT$720,032 thousand was included in the cost of goods sold for the year ended December 31, 2008.

11. AVAILABLE FOR CONSTRUCTION - LAND

	Area(SquareMeters)	December 31
		2007	2008	2009
		NT$	NT$	NT$	US$(Note 3)
Guang Ming Section No. 201,Shi Tuen, Taichung	12,036	$411,629	$411,629	$411,629	$13,197
Bai An Section No. 877, Ta Chih,Taipei	472	125,099	125,099	125,099	4,011
B5 Xin Yi section	199	75,555	75,555	75,555	2,422
Jen Ai Section No. 732, Taipei	19	7,730	7,730	7,730	249
		$620,013	$620,013	$620,013	$19,879

12. CONSTRUCTION-IN-PROGRESS (NET OF BILLINGS ON CONSTRUCTION-IN-PROGRESS)

Construction-in-progress, advances on land and building and deferred marketing expenses (included in other current assets) of FECC as of December 31, 2007, 2008 and 2009 were as follows:

Project by Accounting Method	Contract Price	Estimated Construction Cost	Construction-in-Progress				Deferred Marketing Expense	Billings on Construction-in-progress	Percentage of Completion	Expected Year of Completion
Project by Accounting Method	Contract Price	Estimated Construction Cost	Land	Construction Cost	Recognized Cumulative (Loss) Profit	Total	Deferred Marketing Expense	Billings on Construction-in-progress	Percentage of Completion	Expected Year of Completion
	NT$	NT$	NT$	NT$	NT$	NT$	NT$	NT$
December 31, 2007
Completed-contract method
Shi Lin Quang Hua - Section No. 1043-1045	$ 567,730	$ 459,980	$ 297,105	$ 12,107	$ —	$ 309,212	$ 32,714	$122,801	61	2008
Ban Ciao - New Section No. 9	—	—	675,792	272,516	—	948,308	—	—	—	2012
Ban Shin Headquarter	—	—	—	7,197	—	7,197	—	—	—	2010
			$ 972,897	$291,820	$ —	$1,264,717	$ 32,714	$122,801
December 31, 2008
Completed-contract method
Ban Shin Headquarter	—	—	$ —	$ 15,579	$ —	$ 15,579	$ 1,786	$ 10,371	—	2010
Ban Ciao - New Section No. 9	—	—	693,173	356,090	—	1,049,263	—	—	—	2012
			$ 693,173	$371,669	$ —	$1,064,842	$ 1,786	$ 10,371
December 31, 2009
Completed-contract method
Yuan Yang California	—	—	$ 404,040	$ 67,432	$ —	$ 471,472	$222,529	$515,478	—	2011
Ban Ciao - New Section No. 9	—	—	710,554	429,065	—	1,139,619	—	—	—	2012
Percentage of completion method
Ban Shin Headquarter	2,441,844	2,219,150	—	24,808	198,198	223,006	2,029	473,340	89	2010
			$1,114,594	$521,305	$198,198	$1,834,097	$224,558	$988,818
			Construction-in-Progress
Project by Accounting Method	Contract Price	Estimated Construction Cost	Land	Construction Cost	Recognized Cumulative (Loss) Profit	Total	Deferred Marketing Expense	Billings on Construction-in-progress	Percentage of Completion	Expected Year of Completion
	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
December 31, 2009
Completed-contract method
Yuan Yang California	$ —	$ —	$12,954	$ 2,162	$ —	$15,116	$7,135	$16,527	—	2011
Ban Ciao - New Section No. 9	—	—	22,781	13,757	—	36,538	—	—	—	2012
Percentage of completion method
Ban Shin Headquarter	78,289	71,149	—	795	6,355	7,150	65	15,176	89	2010
			$35,735	$16,714	$6,355	$58,804	$7,200	$31,703

The land in section number 9 of the new station in Ban Ciao ("Ban Ciao Zhong Ben") was developed using the joint construction and allocation of housing units method for FECC and Far Eastern Department Store Co., Ltd. ("FEDS"). The allocation of housing units was based on percentages of land ownership (36.07% for FECC and 63.93% for FEDS).

For the years ended December 31, 2007, 2008 and 2009, FECC's capitalized interest which generally referred to construction-in-progress and prepaid construction, was NT$38,118 thousand, NT$36,872 thousand and NT$21,090 thousand (US$676 thousand), respectively. The capitalization rates were 1.658%-2.8908% in 2007, 1.5552%-3.7416% in 2008 and 1.4249%-4.218% in 2009.

F-291

Construction-in-progress (net of billings on construction-in-progress) of FEGC as of December 31, 2007, 2008 and 2009 was as follows:

Project by Accounting Method	Contract Price	Estimated Construction Cost	Construction-in-progress	Billings on Construction-in-progress	Percentage of Completion	Expected Year of Completion	Recognized Cumulative (Loss) Gain
	NT$	NT$	NT$	NT$			NT$
December 31, 2007
Percentage of completion method
Kaohsiung Rapid Transit	$7,457,051	$6,658,861	$ 7,313,450	$6,873,851	98	2008	$782,227
Min Yi Camp (1)	388,557	399,720	392,152	381,052	—	2008	(11,163)
Min Yi Camp (2)	484,010	498,016	485,674	463,368	—	2008	(14,006)
Er-chung flood spillway bridge	130,133	132,381	135,380	130,366	—	2009	(2,248)
Yuan-Yang new station	750,688	713,153	58,721	—	93	2008	34,024
Tainan science park - Taipower Company	792,381	788,340	738,194	551,138	93	2008	3,758
Zhong-Ben	1,857,059	1,800,378	342,397	204,507	18	2012	6,591
Yuan-Yang famous building	140,815	136,714	86,317	—	61	2008	—
Zhong-Long Storage	225,000	213,493	92,403	53,558	41	2009	4,718
Zhong-Long fireplace	258,800	255,014	189,160	105,415	73	2009	2,764
Headquarter, Bank of Panhsin	3,687,619	3,514,324	1,018,645	679,680	28	2010	29,953
			10,852,493	9,442,935
Completed-contract method
Bin-Chiang market Sin-ban	—	—	141,634	24,819	—	2008	—
Co-construct	—	—	23,868	23,643	—	2008	—
Taichung C706	—	—	7,860	—	—	2011	—
Miscellaneous	—	—	9,591	4,450	—	2008	—
			182,953	52,912
			11,035,446	$9,495,847			$836,618
			$ 1,539,599

Project by Accounting Method	Contract Price	Estimated Construction Cost	Construction-in-progress	Billings on Construction-in-progress	Percentage of Completion	Expected Year of Completion	Recognized Cumulative (Loss) Gain
	NT$	NT$	NT$	NT$			NT$
December 31, 2008
Percentage of completion method
Kaohsiung Rapid Transit	7,921,849	7,105,296	$ 7,831,648	$ 7,645,471	99	2009	$ 808,387
Min Yin Camp (1)	388,557	399,720	395,443	381,052	—	2009	(11,163)
Min Yin Camp (2)	484,010	498,016	485,674	463,368	—	2009	(14,006)
Hua-Jiang Express	2,415,682	2,373,423	2,259,705	2,183,092	94	2009	39,724
Er-chung flood spillway bridge	130,133	132,381	136,028	130,366	—	2009	(2,248)
Headquarter, Bank of Panhsin	3,687,619	3,424,324	2,522,495	1,595,506	70	2010	113,773
Taichung C706	2,939,048	2,927,665	730,682	704,170	25	2011	2,846
Tainan science park - Taipower Company	792,381	908,571	713,313	663,429	91	2009	(116,190)
Zhong-Ben	1,857,059	1,857,059	562,069	312,061	30	2012	—
Yuan-Yang famous building	154,605	145,854	14,127	—	99	2009	8,664
Zhong-Long Storage	327,789	305,339	302,007	238,571	92	2009	20,654
Zhong-Long fireplace	506,861	504,356	438,467	399,180	87	2009	2,179
			16,391,658	14,716,266
Completed-contract method
Taichung C709A	—	—	10,573	—	—	2011	—
Yuan Yang California	—	—	232,155	—	—	2011	—
Miscellaneous	—	—	10,757	7,307	—	2009	—
			253,485	7,307
			16,645,143	$14,723,573			$ 852,620
			$ 1,921,570

F-293

F-294

FEGC obtained a Kaohsiung MRT project contract and signed a syndicate loan contract with syndicate banks, with Chinatrust Commercial Bank as the lead and managing bank. According to the contract, the cash project fund appropriated by Kaohsiung Rapid Transit Corporation ("KRTC," the proprietor) should be deposited to the lead bank's special account. Before withdrawing the amounts from the project fund, FEGC must submit a detailed statement of expenditures to the managing bank, which will appropriate the project fund after processing and approving this statement. When the fund exceeds a certain amount, FEGC can buy bond fund or time deposit, but FEGC should pledge the above bond fund or time deposit as security for the managing bank. The contract was due in October 2007 and the special account was not restricted since then.

F-295

FINANCIAL ASSETS CARRIED AT COST - NONCURRENT

	December 31
	2007		2008		2009
	Carrying Value	% of Ownership	Carrying Value	% of Ownership	Carrying Value	% of Ownership
	NT$		NT$		NT$	US$ (Note 3)
Domestic quoted stocks
Far Eastern International Bank
(Note 14)	$ —	—	$ —	—	$1,286,376	$41,243
Domestic unquoted stocks
Yue Yuan Investment Corp.	637,577	19	637,577	19	637,577	20,442
Bockhold N.V.	—	—	—	—	223,533	7,167
Kaohsiung Rapid Transit Corporation	200,000	2	194,929	2	108,313	3,473
Alberta and Orient Glycol Co., Ltd.	195,430	25	169,422	25	137,698	4,415
Hantech Venture Capital Corp.	104,714	7	104,714	7	104,714	3,357
Chung Nan Textile Corp.	81,405	5	81,405	5	81,405	2,610
Nippon Parison Co.	70,424	10	71,712	10	69,899	2,241
Yi Tong Fiber Co., Ltd.	28,519	4	28,519	4	28,519	914
Ya-Li Precast Prestressed Concrete Industries Corp.	25,142	16	25,142	16	25,142	806
Taiwan Stock Exchange	22,493	—	22,493	—	22,493	721
Ya Li Transport Corp.	16,240	10	16,240	10	16,240	521
Universal Venture Capital Investment Corporation	14,000	1	14,000	1	14,000	449
Thi Consultants Inc.	13,729	18	13,729	18	13,729	440
Overseas Investment Corp.	10,000	1	10,000	1	10,000	321
VIBO Telecom Inc.	20,000	—	8,400	—	8,400	269
Others	27,056		27,056		28,690	920
	1,466,729		1,425,338		1,530,352	49,066
Fund
Domestic private mutual fund	250,000	—	150,000		150,000	4,809
Kai Yuang Trust Fund	271,471	—	247,635		—	—
	521,471		397,635		150,000	4,809
Convertible bond
Bockhold N.V.	—		—		7,895	253
	$1,988,200		$1,822,973		$2,974,623	$95,371

F-296

The above equity and fund investments, which had no quoted prices in an active market and of which fair values could not be reliably measured, were carried at cost.

In January 2009, an FENC subsidiary, Yuan Tong, acquired 13% equity in Bockhold N.V. for NT$223,533 thousand (US$7,167 thousand) and then bought a convertible bond issued by Bockhold N.V. (Note 9) on February 26, 2009. However, since the bond was an investment in an inactive market, it was recognized as a financial asset carried at cost amounting to NT$7,895 thousand (US$253 thousand).

Investment in Alberta and Orient Glycol Co., Ltd. was accounted for by the cost method since the Group could not exercise significant influence over this investee although the Group owned more than 20% of his investees' voting stock.

The value of the cost-method investees had been considered impaired and the chance for recovery is remote. Thus, a permanent impairment loss on these investments was recognized in 2007 and 2008, as follows:

	December 31
	2007	2008
Kai Yuang Trust Fund	$ 61,512	$25,890
NCIC	48,879	—
	$110,391	$25,890

Kai Yuang Trust Fund was invested by an FENC subsidiary, FEIH. However, FEIH planned to dispose of Kai Yuang Trust Fund within one year, so the investment was reclassified as a long-term equity investment held for sale in 2009.

NCIC conducted capital reduction in August 2007. NT$1,198,873 thousand was returned to the Group.

Hantech Venture Capital Corp. conducted capital reduction in November 2007. NT$32,088 thousand was returned to the Group.

Far EasTone issued common shares to exchange for NCIC's common shares, and this share swap took place after NCIC's capital reduction. The Group thus indirectly exercised significant influence on NCIC and changed its accounting method for NCIC to the equity-method from December 31, 2007.

According to Interpretation 1998-150 issued by the Accounting Research and Development Foundation, FEGC, the build-operate-transfer (BOT) chartered investor of KRTC will have to transfer all assets to the government without any condition at the end of the chartered period and amortize this investment within the chartered period. KRTC started the construction of the KRTC system on October 31, 2001 and then began the commercial operation in April 2008. The chartered period will end on October 31, 2037 for a total of 36 years. The amortization period of this investment started in April 2008, will be lasting for 29 years and 7 months. The amortization expenses for 2008 and 2009 were NT$5,071 thousand and NT$6,760 thousand (US$217 thousand), respectively. However, because of the poor performance by KRTC for many years, FEGC recognized an impairment loss of NT$79,856 thousand (US$2,560 thousand) on KTRC after the assessment in 2009.

F-297

^{}[] 14. EQUITY-METHOD INVESTMENTS

	December 31
	2007		2008		2009
	Carrying Value	% of Ownership	Carrying Value	% of Ownership	Carrying Value	% of Ownership
	NT$		NT$		NT$	US$(Note 3)
Listed companies
Asia Cement Corporation	$15,368,690	27	$12,830,049	26	$13,749,534	$440,831
Far Eastern Department
Stores Co., Ltd.	4,965,770	21	3,903,181	20	4,229,574	135,607
Oriental Union Chemical Corporation	3,057,746	23	2,755,152	23	3,073,670	98,547
Everest Textile Co., Ltd.	1,292,905	26	1,151,023	26	1,232,584	39,518
Far Eastern International Bank	2,470,668	12	3,380,708	16	—	—
	27,155,779		24,020,113		22,285,362	714,503
Unlisted companies
New Century InfoComm Tech Co., Ltd.	10,648,225	40	9,625,721	40	10,158,936	325,711
Oriental Securities Corp.	5,725,845	46	4,045,195	46	4,978,006	159,603
Yuan Ding Co., Ltd.	4,376,870	50	3,595,194	50	4,099,707	131,443
Pacific Liu Tong Investment Corp.	2,651,420	40	2,480,248	40	2,602,982	83,456
Far Eastern International Leasing Corp.	1,729,247	33	1,760,425	33	2,004,473	64,267
Air Liquide Far Eastern Ltd.	1,113,303	35	1,130,451	35	1,136,367	36,434
Pacific Petrochemical (Holding) Ltd.	—	—	506,998	25	709,847	22,759
Da Ju Fiber Co., Ltd.	141,874	42	263,490	42	423,755	13,586
Kowloon Cement Corp.	365,113	49	382,976	49	380,159	12,188
Far Eastern Leasing Corp.	382,207	46	355,328	46	359,363	11,522
Yue Ding Industry Co., Ltd.	104,305	28	94,345	28	319,952	10,258
Freudenberg Far Eastern Spunweb Co., Ltd.	251,011	30	245,218	30	274,931	8,815
Yu Ming Co., Ltd.	65,024	46	35,941	46	70,195	2,251
Malaysia Garment Manufactures PTE Ltd.	(3,634)	—	(27,686)	38	45,051	1,444
Ding Ding Integrated Marketing Service Co., Ltd.	17,300	15	5,744	15	39,519	1,267
iScreen Corp.	26,534	40	28,765	40	30,030	963
Ding Ding Hotel Co., Ltd.	58,939	19	53,029	19	28,962	929
Com 2B Corp.	30,097	20	29,674	20	28,051	898
Martens Beer Trading (Shanghai) Ltd.	—	—	22,678	30	—	—
Invista Far Eastern Co., Ltd.	959,542	21	—	—	—	—
Far Eastern-Invista Co., Ltd.	391,345	50	—	—	—	—
Far Eastern International Garments Inc.	(10,243)	41	(22,592)	41	(27,098)	(869)
Cemtex Apparel, Inc.	7,549	50	(2,634)	50	(4,588)	(147)
	29,031,873		24,608,508		27,658,600	886,778
Credit balance on carrying values of long-term investments reclassified to other liabilities - other
	13,877		52,912		31,686	1,016
	29,045,750		24,661,420		27,690,286	887,794
	$56,201,529		$48,681,533		$49,975,648	$1,602,297

F-298

Investments in Far Eastern International Bank ("FEIB"), Ding Ding Hotel Co., Ltd., and Ding Ding Integrated Marketing Service Co., Ltd. ("DDIMS") in 2007, investments in FEDS, FEIB, Ding Ding Hotel Co., Ltd., and DDIMS in 2008 and FEDS, Ding Ding Hotel Co., Ltd. and DDIMS in 2009 were accounted for by the equity-method since the Group exercised a significant influence over them even though the Group owned less than 20% of each investee's voting stock.

The Group committed to provide further financial support to Malaysia Garment Manufactures PTE Ltd., Far Eastern International Garments Inc. and Cemtex Apparel Inc. and recognized credit balances on the book values of the related long-term investments, and these balances were recognized under other liabilities - other.

The market prices of equity-method investments in listed companies were NT$54,429,317 thousand, NT$30,862,539 thousand and NT$38,215,850 thousand (US$1,225,260 thousand) as of December 31, 2007, 2008 and 2009, respectively. They were calculated by the closing prices on December 31, 2007, 2008 and 2009.

On January 23, 2007, YDI, an FENC subsidiary, participated in ACC's global depositary receipts offering and sold its holding of 84,000 thousand shares of ACC for NT$2,734,372 thousand, which was at about NT$32.65 per share. Additionally, YDI disposed of 13,013 thousand shares of ACC for NT$472,410 thousand and of 7,620 thousand shares of Far Eastern Department Stores for NT$298,408 thousand in 2007.

The Group bought 13,908 thousand shares of ACC for NT$300,423 thousand and sold 34,135 thousand shares of ACC for NT$1,841,544 thousand in 2008. Thus, the Group's equity interest in ACC decreased from 26.64% to 25.90%. In 2009, The Group bought 7,352 thousand shares of ACC for NT$219,167 thousand (US$7,027 thousand) and sold 67,631 thousand shares of ACC for NT$2,215,557 thousand (US$71,034 thousand); thus, the Group's equity interest in ACC decreased from 25.90% to 23.85%.

In 2009, two FENC subsidiaries, YDI and Ding Yuan International Investment Corp., bought 12,279 thousand shares of OUCC for NT$194,978 thousand (US$6,251 thousand) and sold 10,810 thousand shares of OUCC for NT$260,224 thousand (US$8,343 thousand). Thus, the Group's equity interest in OUCC increased from 22.56% to 22.74%.

Two FENC subsidiaries, Yuan Tong and Kai Yuan International Investment Co., Ltd. bought 26,951 thousand shares of FEDS for NT$601,072 thousand and the subsidiary, YDI sold 47,181 thousand FEDS shares for NT$2,542,482 thousand in 2008. Thus, the Group's equity interest in FEDS decreased from 21.49% to 19.58%. YDI bought 2,419 thousand shares of FEDS for NT$86,231 thousand (US$2,765 thousand) in 2009. Yuan Tong, Kai Yuan International Investment Co., Ltd. and Ding Yuan International Investment Corp. sold 20,674 thousand shares of FEDS for NT$649,752 thousand (US$20,832 thousand) in 2009. The Group's equity interest in FEDS thus decreased from 19.58% to 18.04%.

On June 10, 2009, the stockholders of FEIB decided to offset deficits of NT$4,075,208 thousand (US$130,658 thousand) through capital reduction on June 30, 2009, which is the record date of the capital reduction. Thus, the Group's holding in FEIB was decreased by 65,341 thousand shares.

In 2008, the Group participated in FEIB's private placement for 127,601 thousand shares for NT$829,407 thousand, and this investment was treated in the category of restriction of transfer of ownership as stated in Section 8 of Article 43 of the ROC Securities and Exchange Act. In addition, the Group bought 21,493 thousand shares of FEIB for NT$122,197 thousand, resulting in an increase in the Group's equity interest in FEIB from 11.83% to 15.87%. On June 10, 2009, FEIB had a board of directors' election. FENC and one of its subsidiaries, YDI, lost their three seats in the board and no longer had significant influence over FEIB since the new board's term began on June 27, 2009. Thus, the Group reclassified the carrying value of the shares privately issued by FEIB to financial assets carried at cost, and the remaining carrying value of FEIB was reclassified to available-for-sale financial assets - noncurrent.

In 2009, Everest Textile Co., Ltd. purchased its shares from the open market, and this treasury stock transaction caused the Group's holding in this company to increase from 25.99% to 27.07%.

In February 2007, the Company and its subsidiary, YDI, acquired 9,846 thousand shares amounting to NT$118,152 thousand through the capital increase by cash of Far Eastern International Leasing Corp. ("FEILC"). Thus, the combined ownership percentage of FEILC increased from 31.87% to 32.77%. In April 2008, the Company and YDI acquired 10,174 thousand shares issued by FEILC for NT$122,094 thousand, and their equity interest in FEILC increased from 32.77% to 33.12%. In November 2009, the Group acquired 19,001 thousand shares of FEILC's newly issued shares for NT$190,008 thousand (US$6,092 thousand), and their equity interest in FEILC increased from 33.12% to 33.67%.

F-299

On June 5, 2009, NCIC's stockholders decided to offset deficits of NT$14,005,510 thousand (US$449,038 thousand) through capital reduction, with August 1, 2009 as the record date of capital reduction. Thus, the Group's holding of NCIC decreased by 596,147 thousand shares.

Far EasTone issued 100,637 thousand and 59,733 thousand common shares to exchange for 615,179 thousand and 365,137 thousand, respectively, of NCIC's common shares after NCIC's capital reduction from Infocom Holding Company Pte Ltd. and SingTel Taiwan Limited on December 31, 2007 (the record date of the share swap). The ratio for this share swap was 1:6.11282174. The share swap was approved by the Financial Supervisory Commission under the ROC Executive Yuan on December 26, 2007 and registered with the MOEA on January 14, 2008. After the share swap, Far EasTone acquired about 24.51% of NCIC's issued shares. The Group indirectly has a significant influence on NCIC through the share swap, so NCIC started to be accounted for by equity-method from December 31, 2007.

A Company subsidiary, FEIW, acquired 30% ownership of Martens Shanghai in 2008. An FENC subsidiary, Sino acquired 70% ownership of Martens Shanghai in the first quarter of 2009. Thus, the accounts of Martens Shanghai were included in the consolidated financial statements of 2009.

In July 2009, an FENC subsidiary, YDI, acquired 5,302 thousand shares issued by Da Ju Fiber Co., Ltd. for NT$127,258 thousand (US$4,080 thousand).

In 2009, an FENC subsidiary, Ding Yuan International Investment Corp. acquired 9,120 thousand shares of the shares newly issued by Yue Ding Industry Co., Ltd. for NT$91,200 thousand (US$2,924 thousand). Thus, the Group's equity in Yue Ding Industry Co., Ltd. increased from 27.81% to 28.87%.

The difference between investment cost and equity in the investees' net assets as of December 31, 2007, 2008 and 2009 is as follows:

	Beginning Balance	Increase	Decrease	Ending Balance
	NT$	NT$	NT$	NT$
2007
Goodwill	$ 620,698	$ 209,938	$ —	$ 830,636
Amortizable assets	—	924,029	—	924,029
	$ 620,698	$1,133,967	$ —	$1,754,665
2008
Goodwill	$ 830,636	$ 160,647	$112,691	$ 878,592
Amortizable assets	924,029	—	115,356	808,673
	$1,754,665	$ 160,647	$228,047	$1,687,265
2009
Goodwill	$ 878,592	$ 61,888	$354,042	$ 586,438
Amortizable assets	808,673	197,575	138,713	867,535
	$1,687,265	$ 259,463	$492,755	$1,453,973

	Beginning Balance	Increase	Decrease	Ending Balance
	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
2009
Goodwill	$28,169	$1,984	$11,351	$18,802
Amortizable assets	25,927	6,335	4,447	27,815
	$54,096	$8,319	$15,798	$46,617

15. HELD-TO-MATURITY FINANCIAL ASSETS - NONCURRENT

In September 2009, the subsidiary, KG Telecom bought 5-year corporate bonds for NT$199,540 thousand (US$6,398 thousand) issued by ACC with an effective interest rate of 2.004% and coupon interest rate of 1.95%.

16. PROPERTIES

a. Accumulated depreciation consisted of:

Under government regulations, the Company revalued the properties (excluding land) in 1983 and the lands in 1994. The resulting appreciation was accounted for as an increase in the carrying value of the properties and properties leased to others. A reserve for land value increment tax was also recognized and the net appreciation was credited to unrealized revaluation increment on properties.

The Company and ACC co-own a parcel of land located on Dunhua South Road in Taipei. Under an agreement with the Company and ACC on March 31, 1989, Yuan Ding Co., Ltd. ("Yuan Ding") paid for the construction of a multi-functional building on this land and owned the 30-year right of superficies. However, the ownership of the building should have been registered on the Company, ACC and Yuan Ding by 12%, 12% and 76%. Upon expiration of the agreement, the Company and ACC will acquire Yuan Ding's 76% ownership of the building with the carrying value of the building.

On September 2, 2003, the Company transferred the real estate development rights (including those on operating and nonoperating properties and farmland) from investment department to its wholly owned subsidiary, FERD, which was a newly set-up company. When the contract described in the preceding paragraph is terminated, the property right of the co-owned building will be also transferred to FERD.

The subsidiary, FERD granted Far Eastern Y. Z. Hsu Science and Technology Memorial Foundation a superficies right of 9 parcels of lands in Yongfeng Road, Bade City, Taoyuan County for 35 year and received royalties of NT$228,571 thousand for right of superficies which was recognized as deferred incomes. The royalties are recognized as rent revenue over the superficies period.

In 2009, three FENC subsidiaries, FEIS, Far Eastern Industries (Suzhou) Ltd. ("FEIZ") and SBBZ recognized impairment losses of NT$59,322 thousand (US$1,902 thousand), NT$19,514 thousand (US$626 thousand) and NT$49,388 thousand (US$1,583 thousand), respectively.

Capitalized interests on properties were NT$195,175 thousand in 2007, with an interest rate of 1.56% to 6.02%, NT$148,329 thousand in 2008, with an interest rate of 1.35% to 6.61% and NT$32,840 thousand (US$1,053 thousand) in 2009, with an interest rate of 0.6% to 6.38%.

Depreciation expenses were NT$14,885,634 thousand in 2007, NT$15,246,961 thousand in 2008 and NT$15,931,931 thousand (US$510,803 thousand) in 2009.

17. GOODWILL

If acquisition cost of an investment exceeds its fair value of identifiable net assets acquired, and the source of this excess cannot be identified, this excess should be recorded as goodwill. Goodwill mainly resulted from the mergers and acquisitions of majority ownerships by its subsidiary, Far EasTone.

Under SFAS No. 35 - "Accounting for Asset Impairment" the Far EasTone and its subsidiaries are identified identifiable cash-generating units as follows:

In 2007, the identifiable cash-generating units were defined by company as Far EasTone, KG Telecom, ARCOA and Q-ware Com to do the asset impairment test. To enhance the operating effectiveness, Far EasTone integrated its telecommunications resources actively in 2008 and 2009. Thus, the identifiable cash-generating units were defined by business as mobile telecommunications service business, telecommunication equipment business and WiFly business, which were divided by distinct business functions.

On December 31, 2007, 2008 and 2009, the carrying values of the tangible and intangible assets used by Far EasTone and its subsidiaries were NT$68,221,128 thousand, NT$63,927,354 thousand and NT$57,910,640 thousand (US$1,856,705 thousand), respectively. Far EasTone's management took value in use to assets its recoverable amounts of core assets and took the expected useful lives in to consideration for the cash flow forecast. Therefore, the discount rates on December 31, 2007, the discount rate are 13.38% for Far EasTone, 14.48% for KG Telecom, 15.60% for ARCOA and 10.00% for Q-ware Com. on December 31, 2008 are 12.64% for mobile telecommunications service business and 16.88% for telecommunication equipment business, and 10.00% for WiFly business, and on December 31, 2009 are 10.61% for the mobile telecommunications service business, 10.42% for the telecommunication equipment business and 10.00% for WiFly business. The operating revenue forecast was based on the expected future growth rate of the telecom industry along with the prospective advancement of the business.

F-302

The principal assumptions and the relevant measurement of the recoverable amounts of Far EasTone and its subsidiaries are summarized as follows:

a. Expected future growth rate of the telecommunications industry

1) Mobile voice service (MVS): The anticipated MVS growth rate is based on the actual effective customer and revenues in prior years. Since the market of 2G telecommunications services is mature and there will be an increased use of 3G telecommunications services, the growth rate is expected to be stable.

2) Mobile data service (MDS): The demand for MDS is expected to grow. However, given the cycle in the industry, the growth rate for MDS will gradually decrease annually.

3) Business of telecommunication equipment: Based on past experience, plans and the trend in the overall market, the anticipated growth rate is expected to decrease gradually.

4) WiFly business: Based on the current WiFly business operation model and the demand of WiFly, the growth rate is expected to be stable.

b. Expected ratio of service EBITDA (earnings before interest, taxes, depreciation and amortization) to operating revenue:

The ratio was around 50% in 2007, 2008 and 2009; this ratio is expected to decrease slightly in future years.

In 2007, 2008 and 2009, impairment losses were NT$10,211 thousand, NT$20,000 thousand and NT$44,315 thousand (US$1,421 thousand) respectively, and were classified under impairment loss on assets.

INTANGIBLE ASSETS - 3G CONCESSION, NET
FARMLAND

The titles to the land are temporarily registered in the name of trustees who have either signed an agreement showing the farmlands belong to the Company or have pledged the land to the Company.

20. SHORT-TERM BANK LOANS

An FENC subsidiary, FECC, obtained a loan of NT$1,000,000 thousand from Taiwan Cooperative Bank for a residential building construction named Twin Star Garden Square. The first drawdown was in February 2009, and this loan was fully repaid in December 2009. FECC obtained another loan of NT$430,000 thousand (US$13,786 thousand) from the Bank of Panhsin, and this loan amount had been fully drawdown at the end of 2009.

In addition, on December 17, 2009, FECC got a syndicated loan of NT$4,000,000 thousand (US$128,246 thousand) from Mega International Commercial Bank and three other banks. A lot under development (17 parcels of land in the Shin Ya Section) for a new residential area named Far Eastern California was pledged to the creditor banks to guarantee FECC's debt repayment NT$4,800,000 thousand (US$153,895 thousand). The conditions of the loan are presented below:

	Amount Limit	Period	Interest Rate	Remark
	NT$
A	$1,800,000	Two years from the first drawdown	Interest rate is fixed during the interest period	The entire loan should be used only once, i.e., it cannot be used as a revolving credit during the contract period.
B	2,200,000	Two years from the first drawdown	Interest rate is fixed during the interest period	Multiple drawdowns on the loan are allowed but the loan cannot be used as a revolving credit during the contract period.
	$4,000,000

21. COMMERCIAL PAPER

Commercial papers were issued at discount rates ranging from 1.838% to 2.548% in 2007, from 1.45% to 3.0% in 2008 and from 0.17% to 1.90% in 2009.

F-304

BILLINGS ON CONSTRUCTION-IN-PROGRESS (NET OF CONSTRUCTION-IN-PROGRESS)

Billings on construction-in-progress of FEGC were as follows:

Contract Name	Contract Price	Estimated Construction Cost	Construction in Progress	Billings on Construction-in-progress	Percentage of Completion	Expected Completion Year	Recognized Cumulative Construction Profit (Loss)
	NT$	NT$	NT$	NT$			NT$
December 31, 2007
Completed-contract method
Hua Jiang Express	$2,404,129	$2,478,835	$1,827,240	$1,827,389	77	2009	$(74,706)
Zhong-Xiao Fu-Sing	311,638	292,940	274,706	294,998	88	2008	16,454
			$2,101,946	2,122,387
				$ 20,441			$(58,252)
December 31, 2008
Completed-contract method
Zhong-long	—	—	$ 53,508	$ 54,040	—	2009	$ —
Manhattan	—	—	88,223	93,265	—	2009	—
Ban-Shin	—	—	52,417	61,252	—	2009	—
Banciao
Communication	—	—	23,471	39,213	—	2009	—
			$ 217,619	247,770
				$ 30,151			$ —
December 31, 2009
Percentage of completion method
Er-Chung	136,551	138,799	$ 136,278	$ 136,551	—	2010	$ (2,248)
Taichung C706	3,018,591	2,927,665	1,804,665	1,936,471	60	2011	54,556
Taichung C704	2,314,286	2,159,356	361,161	516,844	16	2011	24,789
			2,302,104	2,589,866
Completed-contract method
Manhattan	—	—	90,216	93,265	—	2010	—
Others	—	—	2,392	2,679	—	2010	—
			92,608	95,944
			$2,394,712	2,685,810
				$ 291,098			$ 77,097

F-305

Contract Name	Contract Price	Estimated Construction Cost	Construction in Progress	Billings on Construction-in-progress	Percentage of Completion	Expected Completion Year	Recognized Cumulative Construction Profit (Loss)
	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)			US$ (Note 3)
December 31, 2009
Percentage of completion method
Er-Chung	$ 4,378	$ 4,450	$ 4,369	$ 4,378	—	2010	$ (72)
Taichung C706	96,781	93,866	57,860	62,086	60	2011	1,749
Taichung C704	74,200	69,232	11,580	16,571	16	2011	795
			73,809	83,035
Completed-contract method
Manhattan	—	—	2,892	2,990	—	2010	—
Others	—	—	77	86	—	2010	—
			2,969	3,076
			$76,778	86,111
				$ 9,333			$2,472

F-306

LONG-TERM LIABILITIES

	Due Within One Year	Due After One Year	Total
	NT$	NT$	NT$
December 31, 2007
Long-term debts
Bank loans	$ 4,234,156	$38,889,179	$43,123,335
Commercial paper	—	4,044,201	4,044,201
	4,234,156	42,933,380	47,167,536
Bonds
Nonconvertible bonds	9,370,000	11,096,619	20,466,619
Exchangeable bonds	—	2,500,000	2,500,000
Exchangeable bonds discount	—	(274,320)	(274,320)
	—	2,225,680	2,225,680
	9,370,000	13,322,299	22,692,299
	$13,604,156	$56,255,679	$69,859,835
December 31, 2008
Long-term debts
Bank loans	$ 3,876,468	$39,635,050	$43,511,518
Commercial paper	998,945	2,098,170	3,097,115
	4,875,413	41,733,220	46,608,633
Bonds
Nonconvertible bonds	4,299,927	11,597,837	15,897,764
Exchangeable bonds	—	2,500,000	2,500,000
Exchangeable bonds discount	—	(215,988)	(215,988)
	—	2,284,012	2,284,012
	4,299,927	13,881,849	18,181,776
	$ 9,175,340	$55,615,069	$64,790,409

F-307

	Due Within One Year	Due After One Year	Total
	NT$	NT$	NT$
December 31, 2009
Long-term debts
Bank loans	$ 3,819,255	$34,000,960	$37,820,215
Commercial paper	—	1,998,836	1,998,836
	3,819,255	35,999,796	39,819,051
Bonds
Nonconvertible bonds	5,799,698	9,788,724	15,588,422
Exchangeable bonds	2,500,000	—	2,500,000
Exchangeable bonds discount	(157,657)	—	(157,657)
	2,342,343	—	2,342,343
	8,142,041	9,788,724	17,930,765
	$11,961,296	$45,788,520	$57,749,816
	Due Within One Year	Due After One Year	Total
	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
December 31, 2009
Long-term debts
Bank loans	$122,451	$1,090,124	$1,212,575
Commercial paper	—	64,086	64,086
	122,451	1,154,210	1,276,661
Bonds
Nonconvertible bonds	185,948	313,841	499,789
Exchangeable bonds	80,154	—	80,154
Exchangeable bonds discount	(5,055)	—	(5,055)
	75,099	—	75,099
	261,047	313,841	574,888
	$383,498	$1,468,051	$1,851,549

Bank Loans

The foregoing loans are repaid quarterly or in lump sum on maturity in New Taiwan dollars and will be fully repaid in December 2014. Bank interest rates were 2.297% to 7.35% in 2007, 1.60% to 7.353% in 2008, and 0.50% to 6.966% in 2009.

F-308

On September 12, 2008, the Company signed a medium-term syndicated loan agreement with banks led by Hua Nan Commercial Bank amounting to NT$5,700,000 thousand. Under this agreement, the Company committed to keep its current ratio, tangible asset-equity ratio and EBIT ratios within certain ranges.

There is nothing against the agreement described above in the Company's stand-alone financial statements of 2008 and 2009.

On July 1, 2008, a Company subsidiary, SINO, signed a medium-term syndicated loan agreement with banks led by Chinatrust Commercial Bank amounting to US$50,000 thousand. Under this agreement, another subsidiary of the Company, Yuan Tong assumed the guarantor of SINO and thus committed to keep its current ratio, tangible asset-equity ratio and EBIT ratios within certain ranges. There is nothing against the agreement described above in the Yuan Tong's stand-alone financial statements of 2008 and 2009.

On January 4, 2007, a Company subsidiary, FECC, signed a NT$4,000,000 thousand credit agreement with Hua Nan Bank and another six financial institutions. FECC pledged its land of Zhong Ben project (Ban Ciao - New Section No. 9) amounting to NT$4,800,000 thousand as first mortgage to the creditor banks. The agreement terms are as follows:

	Credit Line	Period	Interest Rate	Redemption
A	NT$2,000,000 thousand	Three years and six months after use of the credit	Reference interest rate plus 0.35%-0.40%	Revolving credit within the period, and redemption at lump sum on maturity
B	NT$1,000,000 thousand	One year after use of the credit	Reference interest rate plus 0.30%	Revolving credit within the period, and redemption at lump sum on maturity
C	NT$1,000,000 thousand	Three years and six months after use of the credit	Reference interest rate plus 0.35%-0.40%	No revolving credit within the period, and redemption at lump sum on maturity

Note: The reference interest rate is based on the fixing rate of 90-day commercial paper of Taiwan's second market on page 6,165 of the monitor at 11:00 AM of Telerate.

On December 4, 2009, an FENC subsidiary, OPTC, signed a five-year syndicated loan of NT$4,200,000 thousand (US$134,659 thousand) from Mega International Commercial Bank ("Mega") and Chinatrust Commercial Bank ("Chinatrust"). OPTC committed that, during the contract period, its financial statements committed to keep its liability ratio within a certain range. The ratio is based on the audited financial statements. Once OPTC fails to meet its commitment, it should issue new shares for cash, fully repay the loan, or reduce the liability ratio back to the required range by the end of next October. Otherwise, OPTC will be fined monthly at 0.2% per day of the outstanding amounts during the period between the end of next October and one day before the remidation action is taken. Depending on the conditions and circumstances, the banks could request OPTC to repay the principal and the interests immediately.

There is nothing against the agreement described above in the OPTC's stand-alone financial statements of 2009.

Commercial Paper

Commercial paper with one-year maturity had an annual discount rate ranging from 2.480% to 2.577% as of December 31, 2007, an annual discount rate ranging from 1.473% to 1.838% as of December 31, 2008 and an annual discount rate at 1.998% as of December 31, 2009. Under this agreement, the Company was allowed to issue revolving commercial papers within the credit line limit.

An FENC subsidiary, YDI signed a revolving credit agreement with financial institutions to issue commercial papers in fixed interest rate on August 10, 2006. They reached an agreement to allow YDI to issue revolving commercial papers within the credit line in three years, with 2.2% fixed interest rate.

In addition, YDI, signed a "Secured Revolving Commercial Paper Issuance Facility Agreement" with financial institutions and agreed to issue revolving commercial papers within the credit line limit in three years on August 14, 2009. The discount rate at the end of 2009 was 0.692%.

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The commercial paper with one-year maturity of a FENC's subsidiary, FECC, had an annual discount rate at 2.462% -2.571% as of December 31, 2007. Under this agreement, the Company was allowed to issue revolving commercial papers within the credit line limit.

Bonds

FENC

The Company issued five-year nonconvertible bonds (the 69th tranche) amounting to NT$1,000,000 thousand with face value of NT$1,000 thousand on January 28, 2003. These bonds consisted of Type 1, Type 2, Type 3 and Type 4 and would be paid in lump sum on maturity at the face value. The interests were calculated by simple interest method semiannually starting from the issuance dates and paid annually. The bonds were fully paid off in January 2008.

The Company issued five-year nonconvertible bonds (the 70th tranche) amounting to NT$2,000,000 thousand with face value of NT$10,000 thousand from August 4 to August 6, 2003. These bonds consisted of Type A, Type B, Type C, Type D and Type E and would be paid in lump sum on maturity at the face value. The interests were calculated by simple interest method semiannually starting from the issuance dates and paid semiannually. The bonds were fully paid off in August 2008.

The Company issued five-year nonconvertible bonds (the 71st tranche) amounting to NT$1,000,000 thousand with face value of NT$10,000 thousand on October 22, 2003. These bonds consisted of Type 1 and Type 2 and were paid at the face value in lump sum on maturity. The interests were calculated by simple interest method semiannually starting from the issuance dates and paid annually. The bonds were fully paid off in October 2008.

The Company issued five-year secured nonconvertible bonds (the 72nd tranche) amounting to NT$1,500,000 thousand with face value of NT$10,000 thousand on August 13, 2004. These bonds consisted of Type 1, Type 2 and Type 3 and were paid at the face value in lump sum on maturity. The interests were calculated by simple interest method quarterly starting from the issuance dates and paid annually. The bonds were fully paid off in August 2009.

The Company entered into interest rate swap contracts to hedge against the risks resulting from interest fluctuations on the 69th, 70th, 71st, and 72nd secured nonconvertible bonds and all contracts mentioned above had been expired.

The Company issued three-year unsecured bonds (the 1st tranche of 2007) amounting NT$800,000 thousand with face value of NT$1,000 thousand on October 31, 2007. The bonds will be paid in lump sum on maturity at face value with the interest rate of 2.62%. The interests have been calculated by simple interest method quarterly starting from the issuance dates and paid annually.

The Company issued three-year unsecured bonds (the 2nd tranche of 2007) amounting NT$2,000,000 thousand with face value of NT$1,000 thousand on November 22, 2007. The bonds will be paid in lump sum on maturity at face value with the interest rate of 2.80%. The interests have been calculated by simple interest method annually starting from the issuance dates and paid annually.

The Company issued three-year unsecured bonds (the 1st tranche of 2008) amounting NT$2,600,000 thousand with face value of NT$1,000 thousand on May 28, 2008. The bonds will be paid in lump sum on maturity at face value with the interest rate of 2.67%. The interests have been calculated by simple interest method annually starting from the issuance dates and paid annually.

The Company issued five-year unsecured bonds (the 2nd tranche of 2008) amounting NT$1,000,000 thousand with face value of NT$1,000 thousand on June 20, 2008. The bonds will be paid at 30% of the total amount in the third year starting from the issuance date, 30% in the fourth year and 40% in the fifth year with the interest rate of 2.83%. The interests have been calculated by simple interest method (based on the net balance of the bonds) annually starting from the issuance dates and paid annually.

The Company issued five-year unsecured bonds (the 3rd tranche of 2008) amounting NT$1,200,000 thousand with face value of NT$1,000 thousand on July 18, 2008. The bonds will be paid at 30% of the total issuance amount in the third year starting from the issuance date, 30% in the fourth year and 40% in the fifth year with the interest rate of 2.95%. The interests have been calculated by simple interest method (based on the net balance of the bonds) annually starting from the issuance dates and paid annually.

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The Company issued five-year unsecured bonds (the 1st tranche of 2009) amounting NT$3,000,000 thousand (US$96,185 thousand) with face value of NT$1,000 thousand (US$32 thousand) on October 29, 2009. The bonds will be paid at 50% of the total issuance amount in the fourth year starting from the issuance date and 50% in the fifth year with the interest rate of 1.85%. The interests have been calculated by simple interest method (based on the net balance of the bonds) annually starting from the issuance dates and paid annually.

Exchangeable Bonds

On September 14, 2007 the Company issued five-year unsecured exchangeable bonds amounting to NT$2,500,000 thousand, with 0% coupon rate and the bond will mature on September 14, 2012. The bond is repayable in lump sum on maturity with an interest rate of 2.512%. Under SFAS No. 36 - "Financial Instruments: Disclosure and Presentation," the Company separated the exchangeable options, call options and put options from the liability of these bonds and respectively recognized as assets and liabilities (Note 7).

Other bond issuance terms are as follows:

a. Exchangeable period:

The bondholders would exchange their bonds for ACC common shares, under the bond terms, at any time between October 15, 2007, the 31st day after the issuance date, and September 4, 2012, the 10th day before the maturity date, except for the period starting from (a) the third day before the ex-dividend date of stock dividend issuance, (b) the third day before the ex-dividend date of cash dividend issuance, (c) the third day before the ex-dividend date of new share issuance, or (d) the third day before the ex-dividend date of capital decrease to the effective date of dividend (or new share) distribution. In addition, bondholders are not allowed to convert the bonds for ACC's common shares in the period when it is suspended by law.

b. Exchange price:

1) The exchange price was NT$57.88 per share on the issuance date.

2) After issuing these exchangeable bonds, except for the convertible or exchangeable securities issued by ACC, the exchange price of the issued bonds will be adjusted in any one of these situations: (a) if the quantity of the ACC's common shares increases in the market (including capital increase for cash, capital increase through capitalization of earnings, capital increase through capitalization of capital reserve, capital increase through capitalization of employee bonus, capital increase through enterprise merger and acquisition, stock split and capital increase through issuing global depositary receipts); (b) ACC issues new convertible or exchangeable securities with the price lower than market conversion price; (c) if the quantity of ACC's common shares decreases due to capital reduction (excluding the cancellation of ACC's treasury shares); (d) if the ratio of cash dividends to the market value of the common stock is higher than 1.5%. As of December 31, 2009, the exchange price of these exchangeable bonds was NT$47.70 (US$1.53).

c. Call option:

If the closing price of ACC's shares in each of the 30 consecutive trading days on the Taiwan Stock Exchange reach more than 50% of the exchange price during the period between October 15, 2007, one month after the issuance date of the exchangeable bonds, and August 5, 2012, the 40th day before the maturity date of the exchangeable bonds, the Company will send a bond redemption notice to the bondholders and redeem the outstanding bonds at the face value within 30 business days. In addition, if total amount of the outstanding bonds is less than NT$250,000 thousand (10% of total amount of the bonds), the Company has the right send a bond redemption notice to the bondholders and redeem the outstanding bonds at face value in cash at any time.

d. Put option:

Bondholders may request the Company to redeem their bond holdings at 100% of the face value on September 14, 2010, three years after the issuance date and the Company would redeem them in cash within five business days after September 14, 2010. Since the bondholders have the right exercise the put option in 2010, the exchangeable bonds are reclassified as current portion of long-term liabilities.

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e. As of December 31, 2009, total amount of the outstanding exchangeable bonds was NT$2,500,000 thousand (US$80,154 thousand) and all of the bonds have not been converted to ACC's common shares.

YDI's issuance of domestic bonds is summarized as follows:

YDI issued secured nonconvertible bonds (the 6th tranche) amounting to NT$2,000,000 thousand with face value of NT$1,000 thousand from July 23 to July 27, 2001. The bonds consisted of Type 1 (with total amount of NT$1,000,000 thousand) and Type 2 (with total amount of NT$1,000,000 thousand). Type 1 (five-year bond) was paid at 80% of face value in July 2005 and 20% in July 2006 and Type 2 (seven-year bond) was paid at 80% of face value in July 2006 and 20% in July 2007. Both bonds were paid on maturity.

YDI issued five-year secured nonconvertible bonds (the 7th tranche) amounting to NT$2,300,000 thousand with face value of NT$1,000 thousand from July 8 to July 9, 2002. The bonds consisted of Type 1 (with total amount of NT$1,000,000 thousand), Type 2 (with total amount of NT$500,000 thousand) and Type 3 (with total amount of NT$800,000 thousand). Type 1 and Type 2 were paid at 15% of face value in January 2006, 15% of face value in July 2006, 35% in January 2007, and 35% in July 2007; Type 3 was paid at the face value in 2007. Type 1, Type 2, and Type 3 were paid on maturity in 2007.

YDI issued five-year secured nonconvertible bonds (the 8th tranche) amounting to NT$1,000,000 thousand with face value of NT$1,000 thousand from July 28 to 31, 2003. These bonds consisted of Type 1 (with total amount of NT$200,000 thousand), Type 2 (with total amount of NT$200,000 thousand), Type 3 (with total amount of NT$300,000 thousand) and Type 4 (with total amount of NT$300,000 thousand). All bonds were paid in lump sum on maturity at the face value in 2008.

YDI issued five-year nonconvertible bonds (the 9th tranche) amounting to NT$1,000,000 thousand with face value of NT$10,000 thousand on June 10, 2004. These bonds consisted of Type A (with total amount of NT$500,000 thousand) and Type B (with total amount of NT$500,000 thousand). Both were paid in lump sum on maturity at the face value in 2009.

YDI entered into interest rate swap contracts to hedge against the risk which resulted from interest rate fluctuations of nonconvertible bonds (the 9th tranche) and these bonds had been paid on maturity in 2009.

YDI issued three-year unsecured nonconvertible bonds (the 1st tranche) amounting to NT$1,500,000 thousand with face value of NT$10,000 thousand on January 20, 2005. These bonds consisted of Type A (with total amount of NT$500,000 thousand), Type B (with total amount of NT$500,000 thousand) and Type C (with total amount of NT$500,000 thousand). All bonds were paid in lump sum on maturity at the face value in 2008.

YDI issued five-year unsecured nonconvertible bonds (the 2nd tranche) amounting to NT$2,000,000 thousand with face value of NT$10,000 thousand from June 13 to June 16, 2005. These bonds consisted of Type A (with total amount of NT$500,000 thousand), Type B (with total amount of NT$500,000 thousand), Type C (with total amount of NT$500,000 thousand) and Type D (with total amount of NT$500,000 thousand). All bonds were paid in lump sum on maturity at the face value. The interest was calculated by simple interest method starting from the issuance date and was paid annually with the annual rate of 2.01%.

YDI issued three-year unsecured nonconvertible bonds (the 3rd tranche) amounting to NT$1,000,000 thousand with face value of NT$1,000 thousand on January 16, 2006. All bonds were paid in lump sum on maturity at the face value in 2009.

YDI issued three-year unsecured nonconvertible bonds (the 4th tranche) amounting to NT$800,000 thousand with face value of NT$1,000 thousand on June 22, 2006. All bonds were paid in lump sum on maturity at the face value in 2009.

YDI issued five-year unsecured nonconvertible bonds (the 5th tranche) amounting to 2,000,000 thousand with face value of NT$1,000 thousand on October 11, 2006. YDI will pay 50% of the principal for each in the 4th year and 5th year starting from the issuance date. The interest was calculated by simple interest method starting from the issuance date and was paid annually with the annual rate of 2.30%.

On August 14, 2009, an FENC subsidiary, YDI, issued three-year unsecured bonds through a domestic private amounting to NT$1,000,000 thousand (US$32,062 thousand) with face value of NT$10,000 (US$ 321 thousand) thousand. YDI will pay the principal in lump sum on maturity at face value. The interest was

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calculated by simple interest method starting from the issuance date and was paid annually with the annual rate of 2.00%. ARCOA, an FENC subsidiary, bought NT$10,000 thousand of the bonds, which was not included in the consolidated financial statements, and New Century Infocomm Tech Co., Ltd. bought the rest portion of the bonds.

Far EasTone's issuance of domestic bonds is summarized as follows:

Far EasTone issued Five-year unsecured domestic bonds (the 2nd tranche) amounting to NT$1,470,000 thousand at face value of NT$1,000 thousand from March 28, 2003 to April 3, the interest were paid semiannually with the coupon rate of 2.6% in the first year and the coupon rate of 3.2% minus the index rate (USD six-month LIBOR) starting from the second year to the fifth year. The maturity dates depended on different issuance terms of each bond, but they were paid in lump sum on maturity by April 3, 2008.

Far EasTone issued unsecured domestic bonds (the 3rd tranche) at face value of NT$5,000 thousand amounting to NT$ 3,000,000 thousand on December 12, 2003. According to the different terms and issuance dates, these bonds consisted of twelve different types: Type 1-A to Type 1-C (3 years), Type 2-A to Type 2-C (4 years) and Type 3-A to Type 3-F (5 years). Both of Type 1 and Type 2 were paid in lump sum on maturity and the interests were paid annually starting from the issuance dates and Type 3 was paid in lump sum on maturity and the interest was paid semiannually starting from the issuance date. The coupon rates of Type 1 and Type 2 were 1.83% and 1.92%, respectively and the coupon rate of Type 3 was the index rate (USD six month LIBOR) plus 1% while the index rate was less than 1.05% or the annual rate was 5.2% minus the index rate while the index rate was more than 1.05%. These bonds were fully paid off by December 18, 2008.

24. MATURITY ANALYSIS OF ASSETS AND LIABILITIES

The assets and liabilities related to the operating businesses of FECC and FEGC are classified as current or noncurrent on the basis of the operating cycle. Amounts expected to be received or paid within one year or more than one year was presented as follows:

	December 31, 2007
	Within One Year	Over One Year	Total
	NT$	NT$	NT$
Assets
Accounts and notes receivable	$ 113,509	$ —	$ 113,509
Receivable from affiliates	44,131	—	44,131
Available-for-sale - buildings and land	20,070	—	20,070
Available for construction - land	—	620,013	620,013
Construction in progress, net	1,236,492	1,567,824	2,804,316
Restricted assets	8,615	92,639	101,254
Refundable deposits - current (Note)	1,394	—	1,394
Refundable deposits - noncurrent	—	6,412	6,412
Liabilities
Accounts and notes payable	795,514	5,685	801,199
Payable to affiliates	41,152	—	41,152
Advances on land and building	122,801	—	122,801
Billings on construction-in-progress (net of construction-in-progress)	20,292	149	20,441

	December 31, 2008
	Within One Year	Over One Year	Total
	NT$	NT$	NT$
Assets
Accounts and notes receivable	$298,302	$—	$298,302
Receivable from affiliates	9,463	—	9,463
Available-for-sale - buildings and land	30,339	—	30,339
Available for construction - land	—	620,013	620,013
Construction in progress, net	475,333	2,511,079	2,986,412
Prepayment for land	—	214,771	214,771
Prepayment for construction	55,045	—	55,045
Restricted assets	6,219	36,621	42,840
Refundable deposits - current (Note)	21,244	—	21,244
Refundable deposits - noncurrent	—	2,743	2,743
Liabilities
Accounts and notes payable	685,512	—	685,512
Payable to affiliates	111,315	—	111,315
Advances on land and building	—	10,371	10,371
Billings on construction-in-progress (net of construction-in-progress)	30,151	—	30,151
	December 31, 2009
	Within One Year	Over One Year	Total
	NT$	NT$	NT$
Assets
Accounts and notes receivable	$209,378	$78,522	$287,900
Receivable from affiliates	44,180	—	44,180
Available-for-sale - buildings and land	30,339	—	30,339
Available for construction - land	—	620,013	620,013
Construction in progress, net	2,347,904	2,789,635	5,137,539
Prepayment for construction (Note)	2,856	—	2,856
Restricted assets	132,562	176,457	309,019
Refundable deposits - current (Note)	1,177	—	1,177
Refundable deposits - noncurrent	—	3,151	3,151
Liabilities
Accounts and notes payable	1,131,479	—	1,131,479
Payable to affiliates	176,038	—	176,038
Advances on land and building	473,340	515,478	988,818
Billings on construction-in-progress (net of construction-in-progress)	3,609	287,489	291,098

	Within One Year	Over One Year	Total
	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
Assets
Accounts and notes receivable	$ 6,713	$ 2,518	$ 9,231
Receivable from related parties	1,416	—	1,416
Available-for-sale - land and building	973	—	973
Available for construction - land	—	19,879	19,879
Construction in progress, net	75,278	89,440	164,718
Prepayment for construction (Note)	92	—	92
Restricted assets	4,250	5,658	9,908
Refundable deposits - current (Note)	38	—	38
Refundable deposits - noncurrent	—	101	101
Liabilities
Accounts and notes payable	36,277	—	36,277
Payable to affiliates	5,644	—	5,644
Advances on land and building	15,176	16,527	31,703
Billings on construction-in-progress (net of construction-in-progress)	116	9,217	9,333

Note: Prepayments and other current assets.

25. STOCKHOLDERS' EQUITY

Under the Company Law, capital surplus can only be used to offset a deficit. However, capital surplus from share issued in excess of par (additional paid-in capital from issuance of common shares, premiums on capital stocks resulting from newly issued stocks after enterprise merger and acquisition and treasury stock transaction) and donations enables to be capitalized and then proportionately issues new shares to the stockholders; the new capital is limited within a certain amount in each year. In addition, capital surplus from equity-method investments may not be used for any purpose.

According to the Company's articles of incorporation, the net income should make up the accumulated deficits after paying its business income tax. If there is still a surplus, it will be used for appropriation with last year's unappropriated earnings after recognizing 10% of the surplus as legal reserve and recognizing special reserve under government regulations. The Company would remain a certain amount for future expansion plans and then appropriate in the percentage presented as follows:

		%
a.	Dividends	60.0
b.	Bonus for stockholders	33.0
c.	Bonus for employees	4.0
d.	Remuneration for directors and supervisors	3.0

All appropriations are approved by the stockholders in the next year and disclose them in the financial statements of the year after the next year. The Company's dividend policy should take the future economic condition and the future cash demands and taxation into account and should be appropriated in the percentage on the basis of the Company's articles of incorporation to retain stable periodical dividend to stockholders. Dividend appropriation is not only to improve the financial structure of the Company and deal with the cash demands such as supporting the investments, expanding the productivity and significant capital expenditures, but also to keep the cash dividend remain not less than 10% of the aggregation of stock dividend and stockholders' bonus in the year.

The bonuses to employees were estimated to be NT$196,557 thousand in 2008 and NT$300,732 thousand (US$9,642 thousand) in 2009 and the remuneration to directors and supervisors were estimated to be NT$147,418 thousand in 2008 and NT$225,549 thousand (US$7,231 thousand) in 2009. According to the Company's articles of Incorporation, the bonus to employees and the remuneration to directors and supervisors are respectively calculated by 4% and 3% of the estimated earning appropriation. If the actual

F-315

amounts subsequently resolved by the stockholders differ from the estimates, the differences are recorded as a change in accounting estimate. If bonus shares are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonus by the closing price (after considering the effect of cash and stock dividends) of the shares at the date preceding the stockholders' meeting.

Legal reserve should be appropriated until it has reached the Company's paid-in capital. This reserve may be used to offset a deficit. When the legal reserve has reached 50% of the Company's paid-in capital, up to 50%, thereof the rest part may be transferred to capital.

The appropriations of earnings for 2006, 2007 and 2008 had been approved by the stockholders' meeting on June 21, 2007, June 18, 2008 and June 26, 2009, respectively. The appropriations and dividends per share were as follows:

	Appropriation and Distribution				Dividend Per Share (Dollars)
	2006	2007	2008		2006	2007	2008
	NT$	NT$	NT$	US$(Note 3)	NT$	NT$	NT$	US$(Note 3)
Legal reserve	$ 829,288	$ 1,135,123	$ 405,825	$ 13,011
Cash dividend	5,654,807	8,064,624	3,655,963	117,216	$1.3	$1.8	$0.8	$0.03
Stock dividend	1,304,956	896,069	913,991	29,304	0.3	0.2	0.2	0.01
Remuneration of directors and supervisors - cash	224,508	289,055	—	—
Bonus of employees - cash	299,345	385,406	—	—
	$8,312,904	$10,770,277	$4,975,779	$159,531

In the appropriation and distribution of 2008, capital increase from retained earnings of NT$913,991 thousand had been approved by Financial Supervisory Commission, ROC Executive Yuan on July 21, 2009. The effective date of this distribution is August 31, 2009 and approved by the Company's board of directors and registered on October 19, 2009.

The bonus to employees of NT$196,557 thousand and the remuneration to directors and supervisors of NT$147,418 thousand for 2008 were approved in the shareholders' meeting on June 26, 2009. The approved amounts of the bonus to employees and the remuneration to directors and supervisors were the same as accrual amounts, reflected in the financial statements for the year ended December 31, 2008. The Company settled the bonus to employees by cash.

Information about the bonus to employees, directors, and supervisors are available on the Market Observation Post System website of the Taiwan Stock Exchange Corporation (http://mops.tse.com.tw).

26. INCOME TAX

Under pronouncement No. 9145839 issued by the Ministry of Finance, R.O.C. on Article 49 of the Financial Holding Company Act and Article 40 of the Business Mergers and Acquisitions Law (the "Law"), if a company carries out a merger, spin-off or acquisition in accordance with Articles 27 through 29 of this Law and the subsidiary's shares held by the Company are 90 percent or more of the total number of the subsidiary's issued shares, the Company may opt, from after a year of acquiring the subsidiary's shares, to serve as taxpayer for both itself and the subsidiary (i.e., use the linked-tax system) and file a combined final business income tax return.

Since 2005, the Company adopted the linked tax system for tax filing with subsidiary Far Eastern Resources Development Co.

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a. Income tax expense consisted of:

In May 2009, the Legislative Yuan passed the amendment of Article 5 of the Income Tax Law, which reduces a profit-seeking enterprise's income tax rate from 25% to 20%, effective 2010. The Company recalculated its deferred tax assets and liabilities in accordance with the amended Article and recorded the resulting difference as a deferred income tax benefit or expense.

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b. Deferred income taxes:

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	December 31
	2007	2008	2009
	NT$	NT$	NT$	US$(Note 3)
	$2,389,481	$5,558,915	$4,013,646	$128,684
Less: Valuation allowance	(1,844,346)	(3,776,389)	(2,713,745)	(87,007)
	545,135	1,782,526	1,299,901	41,677
Deferred income tax liabilities
Expected earnings appropriated from foreign investees	(25,000)	(25,000)	(20,000)	(641)
Goodwill amortization	(395,501)	(592,416)	(632,024)	(20,264)
Others	—	—	(616)	(20)
	(420,501)	(617,416)	(652,640)	(20,925)
Deferred income tax assets, net	$124,634	$1,165,110	$647,261	$20,752

c. Investment tax credits and loss carryforwards as of December 31, 2009 were as follows:

The unused investment tax credits of the Group as of December 31, 2009 were summarized as follows:

FENC

Regulatory Basis of Tax Credits	Items	Deductible Amount		Remaining Deductible Amount		Expiry Year
		NT$	US$(Note 3)	NT$	US$(Note 3)
Statute for Upgrading Industries	Purchase of automated machinery and equipment	$101,656	$3,259	$101,656	$3,259	2010-2012
	Research development	202,964	6,507	202,964	6,507	2010-2012
	Personnel training	9,610	308	9,610	308	2010-2012
	Purchase of automated technology	48	2	48	2	2010
		$314,278	$10,076	$314,278	$10,076

ARCOA

Regulatory Basis of Tax Credits	Items	Total Investment Tax Credits		Unused Investment Tax Credits		Expiry Year
Regulatory Basis of Tax Credits	Items	NT$	US$ (Note 3)	NT$	US$ (Note 3)	Expiry Year
Statute for Upgrading Industries	Personnel training expenses	$ 487	$ 16	$ 376	$ 12	2010
	Personnel training expenses	420	13	420	13	2011
	Personnel training expenses	798	26	798	26	2012
	Purchase of automated equipment or technology	351	11	351	11	2012
	Purchase of automated equipment or technology	440	14	440	14	2013
		$ 2,496	$ 80	$ 2,385	$ 76
ADCast
Regulatory Basis of Tax Credits	Items	Total Investment Tax Credits		Unused Investment Tax Credits		Expiry Year
Regulatory Basis of Tax Credits	Items	NT$	US$ (Note 3)	NT$	US$ (Note 3)	Expiry Year
Statute for Upgrading Industries	Purchase of automated equipment or technology	$ 264	$ 8	$ 2	$ —	2010
Q-ware Com.
Regulatory Basis of Tax Credits	Items	Total Investment Tax Credits		Unused Investment Tax Credits		Expiry Year
Regulatory Basis of Tax Credits	Items	NT$	US$ (Note 3)	NT$	US$ (Note 3)	Expiry Year
Statute for Upgrading Industries	Purchase of automated equipment or technology	$ 1,642	$ 53	$ 1,642	$ 53	2010
	Purchase of automated equipment or technology	526	17	526	17	2012
		$ 2,168	$ 70	$ 2,168	$ 70

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^{}[] ORDL

Regulatory Basis of Tax Credits	Items	Total Investment Tax Credits		Unused Investment Tax Credits		Expiry Year
		NT$	US$ (Note 3)	NT$	US$ (Note 3)
Statute for Upgrading Industries	Machinery equipment	$ 304	$ 10	$ 304	$ 10	2011
Statute for Upgrading Industries	Machinery equipment	1,546	50	1,546	49	2012
		$ 1,850	$ 60	$ 1,850	$ 59

OPTC

Regulatory Basis of Tax Credits	Items	Total Investment Tax Credits		Unused Investment Tax Credits		Expiry Year
		NT$	US$ (Note 3)	NT$	US$ (Note 3)
Statute for Upgrading Industries	Machinery equipment	$ 1,677	$ 54	$ 1,677	$ 54	2011
Statute for Upgrading Industries	Machinery equipment	50	2	50	2	2012
		$ 1,727	$ 56	$ 1,727	$ 56

Loss carryforwards as of December 31, 2009 were as follows:

Expiry Year	ARCOA, KGEX.com, Q-ware Com. and ADCast		FEETC		FECC
Expiry Year	NT$	US$ (Note 3)	NT$	US$ (Note 3)	NT$	US$ (Note 3)
2013	$ 42,673	$ 1,368	$ 12,495	$ 401	$ 8,986	$ 288
2014	58,325	1,870	35,218	1,129	—	—
2015	31,654	1,015	64,419	2,065	—	—
2016	75,303	2,414	178,611	5,727	4,553	146
2017	105,990	3,398	129,328	4,146	—	—
2018	85,438	2,740	121,867	3,907	—	—
2019	71,617	2,296	88,484	2,837	—	—
	$ 471,000	$ 15,101	$ 630,422	$ 20,212	$ 13,539	$ 434

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Expiry Year	OPTC		ORDL
	NT$	US$(Note 3)	NT$	US$(Note 3)
2013	$ —	$ —	$ 1,922	$ 62
2014	—	—	2,883	92
2015	—	—	4,544	146
2016	104,081	3,337	4,050	130
2017	374,400	12,004	3,316	106
2018	556,776	17,851	13,569	435
2019	—	—	2,770	89
	$1,035,257	$ 33,192	$ 33,054	$ 1,060

On January 6, 2009, the Legislative Yuan of the Republic of China passed the amendment of Article 39 of the Income Tax Law, which extends the operating losses carryforward period from five years to ten years. The Company recalculated deferred tax assets according to the amended Article and recorded the resulting difference as a deferred income tax benefit.

^{}[] F-322

d. Information about integrated income tax was as follows:

	FENC (Formerly FETL)	Fu Kwok Garment Manufacturing Co.	OPTC	FEFC	YDI
	NT$	NT$	NT$	NT$	NT$
Balances of imputation credit account (ICA)
December 31, 2007	$ 457,845	$ 12,638	$ 45,608	$ 58,739	$ 303,363
December 31, 2008	$ 525,510	$ 21,459	$ 45,608	$ 27,485	$ 197,510
December 31, 2009	$ 475,496	$ 21,361	$ 1	$ 27,781	$ 16,044
December 31, 2009 (Note 3)	US$15,245	US$685	US$—	US$891	US$514
Creditable tax ratios of imputation tax credits to undistributed earnings
2007 (actual)	17.02%	41.78%	—	33.33%	18.00%
2008 (actual)	32.69%	44.64%	30.95%	33.33%	32.95%
2009 (estimated)	5.04%	44.61%	—	33.33%	0.91%
Unappropriated earnings generated before January 1, 1998
December 31, 2007	$ 236,793	$ —	$483,474	$ —	$1,114,000
December 31, 2008	$ 236,793	$ —	$ —	$ —	$ 377,012
December 31, 2009	$ 236,793	$ —	$ —	$ —	$ 189,735
December 31, 2009 (Note 3)	US$7,592	US$—	US$—	US$—	US$6,083
Latest year of income tax returns examined by tax authorities	2004	2006	2007	2007	2007

	Far EasTone	Yuan Faun Ltd.	Far Eastern Apparel Co., Ltd.	KG Telecom	Yuan Cheng Human Resources Consultant Corp.	Yuan Cin Infocomm Tech Co., Ltd.
	NT$	NT$	NT$	NT$	NT$	NT$
Balances of imputation credit account (ICA)
December 31, 2007	$ 201,975	$ 14,188	$ 9,201	$ 9,856	$ 566	$ —
December 31, 2008	$ 264,186	$ 14,918	$ 11,698	$ 6,781	$ 313	$ 3,047
December 31, 2009	$ 293,676	$ 17,071	$ 23,513	$ 1,741	$ 408	$ 4,287
December 31, 2009 (Note 3)	US$9,416	US$547	US$754	US$56	US$13	US$137
Creditable tax ratios of imputation tax credits to undistributed earnings
2007 (actual)	25.53%	—	—	0.62%	32.85%	—
2008 (actual)	29.45%	—	33.33%	1.15%	32.93%	—
2009 (estimated)	25.70%	48.15%	33.33%	—	29.79%	—
Unappropriated earnings generated before January 1, 1998
December 31, 2007	$ —	$ —	$ —	$ —	$ —	$ —
December 31, 2008	$ —	$ —	$ —	$ —	$ —	$ —
December 31, 2009	$ —	$ —	$ —	$ —	$ —	$ —
December 31, 2009 (Note 3)	US$—	US$—	US$—	US$—	US$—	US$—
Latest year of the tax returns examined by the tax authorities	2004	2007	2007	2004	2007	2007

	Kai Yuan International Investment Co., Ltd.	Ding Yuan International Investment Corp.	Yuan Tong	An Ho Garment Co., Ltd.	FERD
	NT$	NT$	NT$	NT$	NT$
Balances of imputation credit account (ICA)
December 31, 2007	$ 12,604	$ 56,406	$ 9,844	$ 13,896	$ 101
December 31, 2008	$ 12,261	$ 74,932	$ 25,199	$ 25,122	$ 6
December 31, 2009	$ 5,468	$ 80,972	$ 119,545	$ 20,706	$ —
December 31, 2009 (Note 3)	US$175	US$2,596	US$3,833	US$664	US$—
Creditable tax ratios of imputation tax credits to undistributed earnings
2007 (actual)	30.85%	33.33%	33.41%	28.36%	0.10%
2008 (actual)	2.44%	—	—	28.88%	—
2009 (estimated)	1.04%	33.33%	—	6.42%	—
Unappropriated earnings generated before January 1, 1998
December 31, 2007	$ —	$ —	$ —	$ —	$ —
December 31, 2008	$ —	$ —	$ —	$ —	$ —
December 31, 2009	$ —	$ —	$ —	$ —	$ —
December 31, 2009 (Note 3)	US$—	US$—	US$—	US$—	US$—
Latest year of the tax returns examined by the tax authorities	2007	2007	2007	2007	2004

^{}[] F-325

	ARCOA	FEETC	FECC	FEGC	ORDL
	NT$	NT$	NT$	NT$	NT$
Balances of imputation credit account (ICA)
December 31, 2007	$ 11,595	$ 1,823	$ 1,259	$ 9,848	$ —
December 31, 2008	$ 12,584	$ 1,823	$ 4,984	$ 10,708	$ —
December 31, 2009	$ 11,583	$ 1,823	$ 4,924	$ 15,455	$ —
December 31, 2009 (Note 3)	US$371	US$58	US$158	US$496	US$—
Creditable tax ratios of imputation tax credits to undistributed earnings
2007 (estimated)	—	—	5.19%	19.77%	—
2008 (actual)	33.33%	—	9.88%	9.90%	—
2009 (estimated)	9.88%	—	1.77%	10.63%	—
Unappropriated earnings generated before January 1, 1998
December 31, 2007	$ —	$ —	$ 64,872	$ 906	$ —
December 31, 2008	$ —	$ —	$ 64,872	$ 84	$ —
December 31, 2009	$ —	$ —	$ —	$ —	$ —
December 31, 2009 (Note 3)	US$—	US$—	US$—	US$—	US$—
Latest year of the tax returns examined by the tax authorities	2007	2007	2007	2007	2007

As of December 31, 2007, 2008 and 2009, some companies listed above had no appropriated earnings. (2007: ARCOA, Yuan-Cing Co., Ltd., ORDL, KG Telecom, Q-ware Com., and Far Eastern Apparel Co., Ltd.; 2008: ARCOA, Yuan-Cing Co., Ltd., ORDL, KG Telecom, Q-ware Com., ADCast and FEETC. And; 2009: Yuan Cing Co., Ltd., ORDL, KG Telecom, Q-ware Com., ADCast, YCIC and FEETC) Thus, their ICA balances will be accumulated until the date of dividend distribution.

Based on the Income Tax Law, the imputation tax credits distributed to each stockholder are based on the ICA balance as of the date of dividend distribution. Thus, the estimated creditable ratios for the 2009 earnings appropriation may be adjusted hen the imputation credits are distributed. While the distribution ratios for the earnings appropriation of 2008 had been determined, the actual ratios were disclosed.

e. The appeal status of income tax returns is as follows:

Far EasTone

Income tax returns through 2004 of Far EasTone had been examined by the tax authorities. However, Far EasTone disagreed with the tax authorities' assessment of its 2000 to 2004 returns. Thus, Far EasTone filed appeals for the reexamination of its 2000 to 2004 returns. Nevertheless, Far EasTone accrued the related tax.

^{}[] KG Telecom

Income tax returns through 2004 of KG Telecom and the former KG Telecom had been examined by the tax authorities. However, KG Telecom disagreed with the tax authorities' assessment of its 2001 to 2004 returns and thus filed appeals for the reexamination of these returns. Nevertheless, KG Telecom accrued the related tax.

ARCOA

ARCOA disagreed with the tax authorities' assessment of its 2002 return and thus filed appeals for a reexamination. Nevertheless, ARCOA accrued the related taxes.

OPTC

The tax authorities examined the 2002 income tax return of OPTC and assessed that OPTC's tax exemption claim amounts and investment tax credits should be decreased. The assessment resulted in an increase in tax payable by NT$23,974 thousand. However, OPTC thought that the basis and reason of the assessment was not in accordance with general accounting principles and tax laws and thus filed appeals for reexamination. In March 2009, the tax authorities declared that OPTC not only had to recognize the investment 2002 tax credits of NT$8,102 thousand but was also liable for a tax underpayment of NT$15,873 thousand. Since OPTC still had tax deductibles resulting from prior operating losses and investment tax credits, OPTC applied on March 17, 2009 for approval to offset the income tax balance of 2002 against prior years' deficits and later got the authorities' approval. Thus, OPTC was longer required to pay the income tax of 2002.

On OPTC's 2003 income tax return, the tax authorities declared in February 2006 that OPTC's operating cost, operating expense, other expenses, interest expense, investment tax credits - researchers' salaries and other reported items should be decreased. This assessment resulted in an increase in tax payable by NT$7,551 thousand and a decrease in investment tax credits by NT$3,810 thousand. In addition, the assessment result on the 2002 tax return showed that OPTC should pay additional NT$6,556 thousand. OPTC disagreed with the tax authorities' assessment and thus filed an appeal for reexamination. On August 11, 2008, the tax authorities agreed that OPTC could recognize additional NT$5,000 thousand in operating cost and additional NT$3,311 thousand more in transportation expense than the assessed amounts but rejected the other items that were reexamined after OPTC's appeal. On September 12, 2008, OPTC filed an appeal on the additional tax payable but the tax authorities again rejected this appeal on March 31, 2009. On April 10, 2009, OPTC filed an administrative suit with the Taiwan High Administrative Court but lost the suit on December 24, 2009. On February 22, 2010, OPTC filed an appeal with the Supreme Administrative Court (SAC), but, as of March 5, 2010, the date of the accompanying auditors' report, the SAC had not handed down its decision. Believing it will win this lawsuit, OPTC did not show the related accrued tax expense in its 2009 financial statements.

On OPTC's 2004 tax return, the tax authorities assessed in March 2007 that OPTC should decrease other expenses, tax-exempt income, investment tax credits - researchers' salaries, investment tax credits - personnel training and other reported items. The assessment resulted in an increase in tax payable by NT$268,485 thousand and a decrease in investment tax credits by NT$3,076 thousand. OPTC disagreed the tax authorities' assessment and filed an appeal for reexamination. On June 4, 2009, the tax authorities decided to allow OPTC to recognize the tax-exemption income of NT$905,356 thousand and rejected other items claimed in the reexamination. In addition, OPTC was required to settle an underpayment of NT$42,146 thousand. OPTC filed an appeal for the reduction of the other tax liabilities but the tax authorities rejected it on October 27, 2009. On December 25, 2009, OPTC filed an administrative suit with the Taiwan High Administrative Court (SAC), but as of March 5, 2010, the date of the accompanying auditors' report, the SAC had not handed down its decision. Believing it will win this lawsuit, OPTC did not accrued tax expense in its 2009 financial statements.

On OPTC's 2005 tax return, the tax authorities assessed in January 2008 that OPTC should decrease other expense, tax-exempt income, investment tax credits - researchers' salaries and other certain reported items. The assessment resulted in decreases in loss carryforward by NT$13,122 thousand and in investment tax credits by NT$2,859 thousand. OPTC refused the tax authorities' assessment and filed for a reexamination. On June 4, 2009, the tax authorities rejected the reexamination. OPTC filed an appeal for the reversal of the authorities' decision to reduce tax deductibles resulting from prior operating losses, but the tax authorities rejected the appeal on October 27, 2009. On December 25, 2009, OPTC filed an administrative suit with the Taiwan High Administrative Court, but as of March 5, 2010, the date of the accompanying auditors' report, the Taiwan High Administrative Court had not handed down its decision. Believing it will win this lawsuit, OPTC did not accrued tax expense in its 2009 financial statements.

F-327

On OPTC's 2006 income tax return, the tax authorities declared in December 2008 that OPTC's other expenses should have been reduced and that the tax deductibles resulting from prior operating losses should decrease by NT$11,984 thousand. OPTC refused the tax authorities' assessment and filed for a reexamination. On July 15, 2009, the tax authorities rejected the reexamination. OPTC filed an appeal for the reversal of the decision to cut tax deductibles given its fiscal losses but the tax authorities rejected the appeal on October 27, 2009. On December 25, 2009, OPTC filed an administrative suit with the Taiwan High Administrative Court, but as of March 5, 2010, the date of the accompanying auditors' report, the Taiwan High Administrative Court had not handed down its decision. Nevertheless, OPTC decreased the amount of deferred income tax assets in compliance with the result of the tax examination.

On OPTC's 2007 tax return, the tax authorities declared on July 6, 2009 that OPTC's other expenses should be reduced; thus, the tax deductions resulting from the fiscal losses decreased by NT$9,716 thousand after the tax examination. OPTC refused the tax authorities' assessment and filed for a reexamination. On October 8, 2009, the tax authorities rejected the appeal for reexamination. OPTC filed an appeal for the reversal of the decision to reduce its tax deductibles resulting from prior operating losses but the tax authorities rejected the appeal on December 28, 2009. On February 26, 2010, OPTC filed an administrative suit with the Taiwan High Administrative Court, but as of March 5, 2010, the date of the accompanying auditors' report, the Taiwan High Administrative Court had not handed down its decision. Nevertheless, OPTC decreased the amount of deferred income tax assets in compliance with the result of the tax examination.

Income tax returns through 2007 of Q-ware Com., Far EasTron, KGEx.com and ADCast had been examined by the tax authorities. YCIC has not filed an income tax return since its incorporation in 2009.

27. FACTORING OF NONPERFORMING ACCOUNTS RECEIVABLE

Far EasTone and KG Telecom wrote off certain overdue/nonperforming accounts receivables. Under agreements signed in March 2007, Far EasTone and KG Telecom factored these receivables, i.e., sold them without recourse, to an asset management company. Thus, Far EasTone and KG Telecom were no longer responsible for collecting these receivables.

Related information as of December 31, 2007 was as follows:

Counter Party	Amount of Accounts Receivable Sold	Proceeds from Sale of Accounts Receivable
	NT$	NT$
Year ended December 31, 2007
Hui Cheng First Asset Management Co., Ltd.
- Far EasTone	$1,158,871	$26,979
- KG Telecom	1,864,698	29,285
	$3,023,569	$56,264

^{}[] EMPLOYEE, DEPRECIATION AND AMORTIZATION EXPENSES

	2007
	Operating Costs	Operating Expenses	Total
	NT$	NT$	NT$
Employee expenses
Salaries	$ 3,911,179	$3,817,871	$ 7,729,050
Insurance	254,693	263,700	518,393
Pension	289,928	267,220	557,148
Miscellaneous	313,917	400,231	714,148
	$ 4,769,717	$4,749,022	$ 9,518,739
Depreciation	$13,180,143	$1,705,491	$14,885,634
Amortization	$ 24,926	$ 211,897	$ 236,823
	2008
	Operating Costs	Operating Expenses	Total
	NT$	NT$	NT$
Employee expenses
Salaries	$ 4,711,548	$4,345,721	$ 9,057,269
Insurance	246,426	267,350	513,776
Pension	218,689	217,875	436,564
Miscellaneous	432,705	438,208	870,913
	$ 5,609,368	$5,269,154	$10,878,522
Depreciation	$13,765,081	$1,481,880	$15,246,961
Amortization	$ 125,362	$ 132,977	$ 258,339

F-329

	2009
	Operating Costs	Operating Expenses	Total
	NT$	NT$	NT$
Employee expenses
Salaries	$ 4,408,288	$4,376,458	$ 8,784,746
Insurance	253,936	279,873	533,809
Pension	349,354	262,016	611,370
Miscellaneous	350,848	529,853	880,701
	$ 5,362,426	$5,448,200	$10,810,626
Depreciation	$14,646,805	$1,285,126	$15,931,931
Amortization	$ 212,503	$ 203,143	$ 415,646
	2009
	Operating Costs	Operating Expenses	Total
	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
Employee expenses
Salaries	$141,337	$140,316	$281,653
Insurance	8,142	8,973	17,115
Pension	11,200	8,401	19,601
Miscellaneous	11,249	16,988	28,237
	$171,928	$174,678	$346,606
Depreciation	$469,599	$ 41,203	$510,803
Amortization	$ 6,813	$ 6,513	$ 13,326

29. EARNINGS PER SHARE

The numerators and denominators used in calculating earnings per share (EPS) were as follows:

	Amounts (Numerator)		Shares in Thousands (Denominator)	Earnings Per Share
	Income Before Income Tax	Net Income	Shares in Thousands (Denominator)	Income Before Income Tax	Net Income
	NT$	NT$		NT$	NT$
2007
Basic EPS
Earning for the year attributable to the Company's stockholders	$11,273,814	$11,367,097	4,661,353	$2.42	$2.44

	Amounts (Numerator)		Shares in Thousands (Denominator)	Earnings Per Share
	Income Before Income Tax	Net Income		Income Before Income Tax	Net Income
	NT$	NT$		NT$	NT$
2008
Basic EPS
Earning for the year attributable to the Company's stockholders	$4,614,504	$4,621,944	4,661,353	$0.99	$0.99
Add: Effect of potential dilutive common stock	—	—	9,546
Diluted EPS
Earning for the year attributable to the Company's stockholders plus effect of potential dilutive common stock	$4,614,504	$4,621,944	4,670,899	$0.99	$0.99
2009
Basic EPS
Earning for the year attributable to the Company's stockholders	$8,135,707	$8,088,696	4,661,353	$1.75	$1.74
Add: Effect of potential dilutive common stock	—	—	7,518
Diluted EPS
Earning for the year attributable to the Company's stockholders plus effect of potential dilutive common stock	$8,135,707	$8,088,696	4,668,871	$1.74	$1.73

	Amounts (Numerator)		Shares in Thousands (Denominator)	Earnings Per Share
	Income Before Income Tax	Net Income	Shares in Thousands (Denominator)	Income Before Income Tax	Net Income
	US$ (Note 3)	US$ (Note 3)		US$ (Note 3)	US$ (Note 3)
2009
Basic EPS
Earning for the year attributable to the Company's stockholders	$260,843	$259,336	4,661,353	$0.06	$0.06
Add: Effect of potential dilutive common stock	—	—	7,518
Diluted EPS
Earning for the year attributable to the Company's stockholders plus effect of potential dilutive common stock	$260,843	$259,336	4,668,871	$0.06	$0.06

The Accounting Research and Development Foundation issued Interpretation 2007-052, which requires companies to recognize bonuses to employees, directors and supervisors as expenses instead of earning appropriations from January 1, 2008. If the Company decides to settle the employee bonus in cash or stock, it should presume that the entire amount of the bonus would be settled in the form of stock, and if the resulting potential shares would have a dilutive effect, these shares should be included in the weighted-average number of shares outstanding to be used in the calculation of the diluted EPS. The number of shares is estimated by dividing the entire amount of the bonus by the closing price of the shares at the balance sheet date. The dilutive effect of the potential shares should be included in the calculation of the diluted EPS until the stockholders resolve the number of shares to be distributed to employees at their meeting in the following year.

The weighted average number of shares outstanding for EPS calculation has been retroactively adjusted for the issuance of employee stock bonuses distributed out of earnings for the year ended December 31, 2008 and stock dividends. This adjustment caused the basic before and after income tax EPS for the year ended December 31, 2007 to decrease from NT$2.52 to NT$2.42 and from NT$2.54 to NT$2.44, respectively. In addition, the basic and diluted after income tax EPS for the year ended December 31, 2008 decreased from NT$1.01 to NT$0.99.

30. PENSION PLAN

a. Except for the Company, Far EasTone, KG Telecom, KGEx.com, ARCOA, Yuan Cing Co., Ltd., Far EasTron, Q-ware Com., Far Eastern Apparel Co., Ltd., ORDL, Yuan Faun Ltd., Yuan Cheng Human Resources Consultant Corp., Fu Kwok Garment Manufacturing Co., Ltd., FECC, FEGC, FERD and FEETC in 2007, 2008 and 2009 and ADCast, FEFC and OPTC in 2008, and 2009, the rest entities included in the consolidated financial statements had no pension plans. Under the government's regulations, subsidiaries incorporated in mainland China had recognized pension costs. Other holding companies had no pension plans because they had no employees.

b. The pension plan under the Labor Pension Act (LPA) is a defined contribution plan. Based on the LPA, rate of monthly contributions by the Group to the employees' individual pension fund accounts starting on July 1, 2005 is at 6% of monthly wages and salaries. The pension costs under the defined contribution plan amounted to NT$219,324 thousand, NT$207,216 thousand and NT$244,068 thousand (US$7,825 thousand) for the years ended December 31, 2007, 2008 and 2009, respectively. The subsidiary, Far Eastern Tech-Info (Shanghai) Ltd., under its government's regulations, had recognized pension costs of NT$4,256 thousand, NT$3,378 thousand and NT$3,635 thousand (US$117 thousand) for the years ended December 31, 2007, 2008 and 2009, respectively.

F-332

c. The Company, Far EasTone, KG Telecom, KGEx.com, ARCOA, Yuan Cing Co., Ltd., Far EasTron, Q-ware Com., Far Eastern Apparel Co., Ltd., ORDL, Yuan Faun Ltd., Yuan Cheng Human Resources Consultant Corp., Fu Kwok Garment Manufacturing Co., FERD, FECC, FEGC, and FEETC in 2007, 2008 and 2009 and FEFC and OPTC in 2008 and 2009, have a defined benefit pension plan for all regular employees under the Labor Standards Law. Under this pension plan, employees can accumulate two base points for every service year within the first 15 service years and one base point for every service year thereafter. Employees can accumulate up to 45 base points. Except for 4% for the Company, 3.4% for Far Eastern Apparel Co., Ltd., 6% for FEFC 13.5% for OPTC and 0% for Yuan Faun Ltd. and Yuan Cheng Human Resources Consultant Corp., the rest of the aforementioned subsidiaries accrued pension costs on the basis of actuarial calculations and make monthly contributions, at 2% of salaries and wages, to their respective pension funds, which are administered by their respective pension plan committees and deposited in each committee's name in the Bank of Taiwan.

In July 2008, two subsidiaries, OPTC and FEFC, adopted SFAS No. 18 - "Accounting for Pensions." Based on SFAS No. 18, the actuarial valuation was calculated on the basis of the measurement date, July 1, 2008. OPTC and FEFC recognized deferred pension cost and accrued pension liabilities and disclosed related information at balance sheet date. OPTC and FEFC recognized net pension cost amounting to NT$10,326 thousand and NT$1,858 thousand for the year ended December 31, 2008, respectively.

In addition, the Company and FEFC paid extra pension expenses amounting to NT$2,038 thousand (US$65 thousand) and NT$1,292 thousand (US$41 thousand) in 2009, respectively.

F-333

d. Other information on the defined benefit pension is as follows:

1) Net pension cost consisted of:

2007

	FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far EasTron and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	ORDL
	NT$	NT$	NT$	NT$
Service cost	$ 126,173	$ 30,579	$ 3,558	$ 28
Interest cost	123,866	28,567	1,495	61
Expected return on plan assets	(136,872)	(11,405)	(978)	(96)
Amortization of net transition assets and unrecognized pension gain	132,185	12,120	(89)	(78)
Net pension cost (benefit)	$ 245,352	$ 59,861	$ 3,986	$ (85)
	ARCOA	Fu Kwok Garment Manufacturing Co.	FEETC	Yuan Cheng Human Resources Consultant Corp.
	NT$	NT$	NT$	NT$
Service cost	$ 524	$ 644	$ —	$ 119
Interest cost	1,218	545	118	29
Expected return on plan assets	(1,589)	(1,072)	(61)	(138)
Amortization of net transition obligations (assets) and unrecognized pension loss (gain)	422	(105)	—	(228)
Net pension cost (benefit)	$ 575	$ 12	$ 57	$ (218)
	FECC	FEGC	Yuan Faun Ltd.	FERD
	NT$	NT$	NT$	NT$
Service cost	$ 306	$ 1,687	$ 46	$ 105
Interest cost	486	1,804	7	14
Expected return on plan assets	(40)	(189)	6	—
Amortization of net transition obligations (assets) and unrecognized pension loss (gain)	965	1,271	2	23
Net pension cost	$ 1,717	$ 4,573	$ 61	$ 142

^{}[] 2008

	FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far EasTron, ARCOA and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	FERD
	NT$	NT$	NT$	NT$
Service cost	$ 108,335	$ 31,659	$ 3,106	$ 137
Interest cost	133,247	35,721	1,298	13
Expected return on plan assets	(204,237)	(15,483)	(975)	—
Amortization of net transition obligations (assets) and unrecognized pension loss (gain)	108,151	13,890	(89)	23
Net pension cost	$ 145,496	$ 65,787	$ 3,340	$ 173
	Fu Kwok Garment Manufacturing Co.	FEETC	Yuan Cheng Human Resources Consultant Corp.	FECC
	NT$	NT$	NT$	NT$
Service cost	$ 484	$ —	$ 138	$ 330
Interest cost	298	112	37	510
Expected return on plan assets	(830)	(88)	(142)	(46)
Amortization of net transition obligations (assets) and unrecognized pension loss (gain)	(105)	(6)	(228)	937
Deferred pension cost	95	—	—	—
Net pension cost (benefit)	$ (58)	$ 18	$ (195)	$ 1,731
	FEGC	Yuan Faun Ltd.	ORDL
	NT$	NT$	NT$
Service cost	$ 1,738	$ 66	$ 51
Interest cost	1,965	11	94
Expected return on plan assets	(232)	6	(106)
Amortization of net transition obligations (assets) and unrecognized pension loss (gain)	1,307	6	(18)
Net pension cost	$ 4,778	$ 89	$ 21

^{}[] F-335

^{}[] 2009

	FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far EasTron, ARCOA and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	OPTC
	NT$	NT$	NT$	NT$
Service cost	$ 112,392	$ 35,127	$ 2,594	$ 25,736
Interest cost	112,712	35,277	1,620	8,610
Expected return on plan assets	(128,438)	(15,303)	(1,033)	(2,973)
Amortization of net transition obligations (assets) and unrecognized pension loss (gain)	175,230	13,271	(89)	2,404
Net pension cost	$ 271,896	$ 68,372	$ 3,092	$ 33,777
	Fu Kwok Garment Manufacturing Co.	FEETC	Yuan Cheng Human Resources Consultant Corp.	FECC
	NT$	NT$	NT$	NT$
Service cost	$ 595	$ —	$ 136	$ 356
Interest cost	263	93	42	401
Expected return on plan assets	(587)	(117)	(148)	(58)
Amortization of net transition obligations (assets) and unrecognized pension loss (gain)	(105)	—	(228)	937
Deferred pension cost	290	—	—	—
Net pension cost (benefit)	$ 456	$ (24)	$ (198)	$ 1,636
	Yuan Faun Ltd.	ORDL	FERD	FEFC
	NT$	NT$	NT$	NT$
Service cost	$ 1,753	$ 83	$ 35	$ 158
Interest cost	1,629	16	77	19
Expected return on plan assets	(256)	—	(113)	—
Amortization of net transition obligations (assets) and unrecognized pension loss (gain)	1,455	15	(77)	25
Net pension cost (benefit)	$ 4,581	$ 114	$ (78)	$ 202

^{}[] F-336

^{}[] 2009

	FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far EasTron, ARCOA and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	OPTC
	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
Service cost	$ 3,603	$ 1,126	$ 83	$ 825
Interest cost	3,614	1,131	52	276
Expected return on plan assets	(4,118)	(491)	(33)	(95)
Amortization of net transition obligations (assets) and unrecognized pension loss (gain)	5,618	426	(3)	77
Net pension cost	$ 8,717	$ 2,192	$ 99	$ 1,083
	Fu Kwok Garment Manufacturing Co.	FEETC	Yuan Cheng Human Resources Consultant Corp.	FECC
	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
Service cost	$ 19	$ —	$ 4	$ 11
Interest cost	8	3	1	13
Expected return on plan assets	(19)	(4)	(5)	(2)
Amortization of net transition obligations (assets) and unrecognized pension loss (gain)	(3)	—	(6)	30
Deferred pension cost	10	—	—	—
Net pension cost (benefit)	$ 15	$ (1)	$ (6)	$ 52
	Yuan Faun Ltd.	ORDL	FERD	FEFC
	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
Service cost	$ 56	$ 3	$ 1	$ 4
Interest cost	52	1	2	1
Expected return on plan assets	(8)	—	(4)	—
Amortization of net transition obligations (assets) and unrecognized pension loss (gain)	47	—	(2)	1
Net pension cost (benefit)	$ 147	$ 4	$ (3)	$ 6

^{}[] F-337

2) Reconciliation of the fund status of the plan and accrued pension cost (prepaid pension cost) was as follows:

2007

	FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far EasTron and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	FERD
	NT$	NT$	NT$	NT$
Benefit obligation
Vested benefit obligation	$ 2,407,645	$ 6,016	$ 11,930	$ —
Non-vested benefit obligation	1,957,444	606,646	35,911	313
Accumulated benefit obligation	4,365,089	612,662	47,841	313
Additional benefits based on projected and future salaries	882,824	543,716	11,479	157
Projected benefit obligation	5,247,913	1,156,378	59,320	470
Fair value of plan assets	(3,476,515)	(444,996)	(35,365)	—
Fund status	1,771,398	711,382	23,955	470
Unrecognized net transition obligation (asset)	(488,718)	(28)	623	(301)
Unamortization of pension (loss) gain	—	(396,550)	584	—
Unrecognized pension gain (loss)	(14,591)	—	—	(17)
Additional liability	—	—	—	161
Accrued pension cost	$ 1,268,089	$ 314,804	$ 25,162	$ 313

F-338

^{}[] F-339

	ARCOA	Fu Kwok Garment Manufacturing Co.	FEETC	Yuan Cheng Human Resources Consultant Corp.
	NT$	NT$	NT$	NT$
Benefit obligation
Vested benefit obligation	$ —	$ 2,861	$ —	$ —
Non-vested benefit obligation	24,854	5,937	2,155	1,001
Accumulated benefit obligation	24,854	8,798	2,155	1,001
Additional benefits based on projected and future salaries	9,375	1,947	1,043	355
Projected benefit obligation	34,229	10,745	3,198	1,356
Fair value of plan assets	(50,286)	(27,487)	(2,969)	(5,176)
Fund status	(16,057)	(16,742)	229	(3,820)
Unrecognized net transition obligation (asset)	(2,108)	1,258	—	3,652
Unamortization of pension (loss) gain	8,926	(4,107)	—	—
Unrecognized pension gain (loss)	—	—	431	(325)
Accrued pension cost (prepaid pension cost)	$ (9,239)	$ (19,591)	$ 660	$ (493)
	FECC	FEGC	Yuan Faun Ltd.	ORDL
	NT$	NT$	NT$	NT$
Benefit obligation
Vested benefit obligation	$ 10,796	$ 18,048	$ —	$ —
Non-vested benefit obligation	2,449	28,078	221	2,537
Accumulated benefit obligation	13,245	46,126	221	2,537
Additional benefits based on projected and future salaries	1,567	10,425	184	865
Projected benefit obligation	14,812	56,551	405	3,402
Fair value of plan assets	(2,013)	(9,089)	—	(3,714)
Fund status	12,799	47,462	405	(312)
Unrecognized net transition obligation (asset)	(3,152)	(3,033)	(135)	1,083
Unamortization of pension (loss) gain	—	—	—	(1,102)
Unrecognized pension (gain) loss	(3,423)	(23,091)	(166)	—
Additional liability	5,008	15,699	117	—
Accrued pension cost (prepaid pension cost)	$ 11,232	$ 37,037	$ 221	$ (331)

^{}[] 2008

	FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far EasTron, ARCOA and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	OPTC	FERD
	NT$	NT$	NT$	NT$	NT$
Benefit obligation
Vested benefit obligation	$ 2,219,204	$ 5,605	$ 13,045	$ 94,629	$ —
Non-vested benefit obligation	1,921,612	645,232	32,331	231,614	398
Accumulated benefit obligation	4,140,816	650,837	45,376	326,243	398
Additional benefits based on projected and future salaries	984,231	639,283	14,158	62,598	301
Projected benefit obligation	5,125,047	1,290,120	59,534	388,841	699
Fair value of plan assets	(2,206,901)	(545,450)	(34,567)	(129,796)	—
Fund status	2,918,146	744,670	24,967	259,045	699
Unrecognized net transition obligation (asset)	(366,537)	(803)	534	(34,856)	(278)
Unamortization of previous service cost	300,251	27,891	—	—	—
Unamortization of pension (loss) gain	(1,569,470)	(434,891)	(1,103)	(34,507)	(96)
Additional liability	651,525	—	—	6,765	73
Included in prepaid pension cost	—	9,461	—	—	—
Accrued pension cost	$ 1,933,915	$ 346,328	$ 24,398	$ 196,447	$ 398

^{}[] F-340

	FEFC	Fu Kwok Garment Manufacturing Co.	FEETC	Yuan Cheng Human Resources Development Corp.	FECC
	NT$	NT$	NT$	NT$	NT$
Benefit obligation
Vested benefit obligation	$ —	$ 3,270	$ —	$ —	$ 10,270
Non-vested benefit obligation	60,743	5,731	3,109	1,128	3,297
Accumulated benefit obligation	60,743	9,001	3,109	1,128	13,567
Additional benefits based on projected and future salaries	25,567	2,700	596	397	2,699
Projected benefit obligation	86,310	11,701	3,705	1,525	16,266
Fair value of plan assets	(44,656)	(25,944)	(4,125)	(5,365)	(2,358)
Fund status	41,654	(14,243)	(420)	(3,840)	13,908
Unrecognized net transition obligation (asset)	(37,059)	1,153	—	3,424	(2,364)
Unamortization of prior service cost	—	402	—	—	—
Unamortization of pension (loss) gain	(823)	(7,318)	45	(273)	(3,860)
Additional liability	12,315	—	—	—	3,526
Accrued pension cost (prepaid pension cost)	$ 16,087	$ (20,006)	$ (375)	$ (689)	$ 11,210

	FEGC	Yuan Faun Ltd.	ORDL
	NT$	NT$	NT$
Benefit obligation
Vested benefit obligation	$ 15,782	$ —	$ —
Non-vested benefit obligation	34,307	287	2,053
Accumulated benefit obligation	50,089	287	2,053
Additional benefits based on projected and future salaries	15,542	304	817
Projected benefit obligation	65,631	591	2,870
Fair value of plan assets	(9,146)	—	(4,053)
Fund status	56,485	591	(1,183)
Unrecognized net transition obligation (asset)	(2,695)	(129)	1,006
Unamortization of pension (loss) gain	(30,029)	(269)	(335)
Additional liability	17,181	94	—
Accrued pension cost (prepaid pension cost)	$ 40,942	$ 287	$ (512)

F-342

^{}[] 2009

	FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far Eastern, ARCOA and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	OPTC	FERD
	NT$	NT$	NT$	NT$	NT$
Benefit obligation
Vested benefit obligation	$ 2,232,105	$ 15,096	$ 20,965	$ 88,040	$ —
Non-vested benefit obligation	1,485,556	730,251	35,271	246,889	519
Accumulated benefit obligation	3,717,661	745,347	56,236	334,929	519
Additional benefits based on projected and future salaries	852,431	446,868	13,750	63,683	294
Projected benefit obligation	4,570,092	1,192,215	69,986	398,612	813
Fair value of plan assets	(3,465,176)	(595,907)	(38,677)	(127,982)	—
Fund status	1,104,916	596,308	31,309	270,630	813
Unrecognized net transition obligation (asset)	(244,356)	530	445	(32,452)	(254)
Unamortization of prior service cost	277,802	26,729	(8,985)	—	—
Unamortization of pension (loss) gain	(87,970)	(265,025)	—	(19,993)	(31)
Additional liability	—	9,198	—	—	—
Accrued pension cost	$ 1,050,392	$ 367,740	$ 22,769	$ 218,185	$ 528

^{}[] F-343

	FEFC	Fu Kwok Garment Manufacturing Co.	FEFC	Yuan Cheng Human Resources Development Corp.	FECC
	NT$	NT$	NT$	NT$	NT$
Benefit obligation
Vested benefit obligation	$ —	$ 3,423	$ —	$ —	$ 10,469
Non-vested benefit obligation	68,309	6,445	3,730	1,128	4,169
Accumulated benefit obligation	68,309	9,868	3,730	1,128	14,638
Additional benefits based on projected and future salaries	20,505	2,788	664	397	2,888
Projected benefit obligation	88,814	12,656	4,394	1,525	17,526
Fair value of plan assets	(50,546)	(37,872)	(5,190)	(5,365)	(2,765)
Fund status	38,268	(25,216)	(796)	(3,840)	14,761
Unrecognized net transition obligation (asset)	(35,251)	1,048	—	3,424	(1,576)
Unamortization of prior service cost	—	374	—	—	—
Unamortization of pension (loss) gain	1,741	4,140	(629)	(273)	(4,948)
Additional liability	13,005	—	—	—	3,637
Accrued pension cost (prepaid pension cost)	$ 17,763	$ (19,654)	$ (1,425)	$ (689)	$ 11,874

F-344

	FEGC	Yuan Faun Ltd.	ORDL
	NT$	NT$	NT$
Benefit obligation
Vested benefit obligation	$ 20,696	$ —	$ —
Non-vested benefit obligation	34,721	451	2,621
Accumulated benefit obligation	55,417	451	2,621
Additional benefits based on projected and future salaries	16,598	470	864
Projected benefit obligation	72,015	921	3,485
Fair value of plan assets	(13,142)	—	(4,176)
Fund status	58,873	921	(691)
Unrecognized net transition obligation (asset)	(2,357)	(123)	928
Unamortization of pension (loss) gain	(32,098)	(491)	(924)
Additional liability	17,857	144	—
Accrued pension cost (prepaid pension cost)	$ 42,275	$ 451	$ (687)

^{}[] 2009

	FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far EasTron, ARCOA and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	OPTC	FERD
	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
Benefit obligation
Vested benefit obligation	$ 71,565	$ 484	$ 672	$ 2,823	$ —
Non-vested benefit obligation	47,629	23,413	1,131	7,914	17
Accumulated benefit obligation	119,194	23,897	1,803	10,737	17
Additional benefits based on projected and future salaries	27,330	14,327	441	2,042	9
Projected benefit obligation	146,524	38,224	2,244	12,779	26
Fair value of plan assets	(111,099)	(19,106)	(1,240)	(4,103)	—
Fund status	35,425	19,118	1,004	8,676	26
Unrecognized net transition obligation (asset)	(7,834)	17	14	(1,040)	(8)
Unamortization of prior service cost	8,907	857	(288)	—	—
Unamortization of pension (loss) gain	(2,821)	(8,497)	—	(641)	(1)
Additional liability	—	295	—	—	—
Accrued pension cost	$ 33,677	$ 11,790	$ 730	$ 6,995	$ 17

^{}[] F-346

	FEFC	Fu Kwok Garment Manufacturing Co.	FEETC	Yuan Cheng Human Resources Development Corp.	FECC
	US$(Note 3)	US$(Note 3)	US$(Note 3)	US$(Note 3)	US$(Note 3)
Benefit obligation
Vested benefit obligation	$—	$110	$—	$—	$335
Non-vested benefit obligation	2,190	207	120	36	134
Accumulated benefit obligation	2,190	317	120	36	469
Additional benefits based on projected and future salaries	658	89	21	13	93
Projected benefit obligation	2,848	406	141	49	562
Fair value of plan assets	(1,621)	(1,214)	(167)	(172)	(89)
Fund status	1,227	(808)	(26)	(123)	473
Unrecognized net transition obligation (asset)	(1,130)	34	—	110	(51)
Unamortization of prior service cost	—	12	—	—	—
Unamortization of pension (loss) gain	56	132	(20)	(9)	(159)
Additional liability	418	—	—	—	118
Accrued pension cost (prepaid pension cost)	$571	$(630)	$(46)	$(22)	$381

	FEGC	Yuan Faun Ltd.	ORDL
	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
Benefit obligation
Vested benefit obligation	$ 664	$ —	$ —
Non-vested benefit obligation	1,113	14	84
Accumulated benefit obligation	1,777	14	84
Additional benefits based on projected and future salaries	532	15	28
Projected benefit obligation	2,309	29	112
Fair value of plan assets	(421)	—	(134)
Fund status	1,888	29	(22)
Unrecognized net transition obligation (asset)	(76)	(4)	30
Unamortization of pension (loss) gain	(1,029)	(16)	(30)
Additional liability	572	5	—
Accrued pension cost (prepaid pension cost)	$ 1,355	$ 14	$ (22)

3) Vested benefit

2007

FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far EasTron and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	ARCOA	Fu Kwok Garment Manufacturing Co.
NT$	NT$	NT$	NT$	NT$
$3,015,224	$ 7,465	$ 16,677	$ —	$ 3,193
FEETC	Yuan Cheng Human Resources Consultant Corp.	FECC	FEGC	Yuan Faun Ltd.
NT$	NT$	NT$	NT$	NT$
$ —	$ —	$ 11,925	$ 20,668	$ —
		ORDL		FERD
		NT$		NT$
		$ —		$ —

^{}[] 2008
^{}[] F-349

FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far Eastern, ARCOA and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	OPTC	FERD
NT$	NT$	NT$	NT$	NT$
$2,946,852	$ 7,752	$ 19,237	$ 300,940	$ —
FEFC	Fu Kwok Garment Manufacturing Co.	FEETC	Yuan Cheng Human Resources Consultant Corp.	FECC
NT$	NT$	NT$	NT$	NT$
$ —	$ 4,150	$ —	$ —	$ 11,925
	FEGC	Yuan Faun Ltd.		ORDL
	NT$	NT$		NT$
	$ 18,819	$ —		$ —

^{}[] 2009

FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far Eastern, ARCOA and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	OPTC	FERD
NT$	NT$	NT$	NT$	NT$
$2,921,130	$ 18,330	$ 26,205	$ 340,641	$ —
FEFC	Fu Kwok Garment Manufacturing Co.	FEETC	Yuan Cheng Human Resources Consultant Corp.	FECC
NT$	NT$	NT$	NT$	NT$
$ —	$ 4,334	$ —	$ —	$ 11,778
	FEGC	Yuan Faun Ltd.		ORDL
	NT$	NT$		NT$
	$ 24,024	$ —		$ —

^{}[] 2009

FENC (Formerly FETC)	Far EasTone (Including KG Telecom, KGEx.com, Far Eastern, ARCOA and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	OPTC	FERD
US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
$ 93,656	$ 588	$ 840	$ 10,921	$ —
FEFC	Fu Kwok Garment Manufacturing Co.	FEETC	Yuan Cheng Human Resources Consultant Corp.	FECC
US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
$ —	$ 139	$ —	$ —	$ 378
FEGC	Yuan Faun Ltd.	ORDL
US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
$ 770	$ —	$ —

^{}[] F-350

^{}[] 4) Actuarial assumptions were as follows:

2007

	FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far EasTron and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	FERD
Discount rate used in determining present value	2.75%	3.00%	2.75%	2.75%
Future salary increase rate	2.00%	3.50%	2.00%	3.00%
Expected rate of return on plan asset	6.00%	3.00%	2.75%	2.75%
	ARCOA	Fu Kwok Garment Manufacturing Co.	FEETC	Yuan Cheng Human Resources Consultant Corp.
Discount rate used in determining present value	3.25%	3.00%	3.50%	2.75%
Future salary increase rate	2.00%	3.00%	3.00%	2.00%
Expected rate of return on plan asset	3.25%	2.00%	2.50%	2.75%
	FECC	FEGC	Yuan Faun Ltd.	ORDL
Discount rate used in determining present value	3.50%	3.50%	2.75%	2.75%
Future salary increase rate	2.00%	2.00%	3.00%	2.50%
Expected rate of return on plan asset	2.50%	2.50%	2.75%	2.75%

2008

	FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far EasTron, ARCOA and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	OPTC
Discount rate used in determining present value	2.25%	2.25-2.75%	2.75%	2.25%
Future salary increase rate	2.00%	1.00-3.50%	2.00%	1.50%
Expected rate of return on plan asset	6.00%	2.25-2.75%	2.75%	2.25%

^{}[] F-352

	ARCOA	Far Eastern Fibertech Co., Ltd.	Fu Kwok Garment Manufacturing Co.	FEETC
Discount rate used in determining present value	2.75%	2.70%	2.25%	2.50%
Future salary increase rate	3.50%	2.00%	2.00%	1.00%
Expected rate of return on plan asset	2.75%	2.70%	2.25%	2.50%
	Yuan Cheng Human Resources Consultant Corp.	FECC	FEGC	Yuan Faun Ltd.
Discount rate used in determining present value	2.75%	2.50%	2.50%	2.75%
Future salary increase rate	2.00%	2.00%	2.00%	3.25%
Expected rate of return on plan asset	2.75%	2.50%	2.50%	2.75%
				ORDL
Discount rate used in determining present value				2.75%
Future salary increase rate				2.25%
Expected rate of return on plan asset				2.75%
2009
	FENC (Formerly FETL)	Far EasTone (Including KG Telecom, KGEx.com, Far EasTron, ARCOA and Yuan Cing Co., Ltd.)	Far Eastern Apparel Co., Ltd.	OPTC
Discount rate used in determining present value	2.25%	2.25%	2.00%	2.25%
Future salary increase rate	2.00%	1.00-2.50%	2.00%	1.50%
Expected rate of return on plan asset	6.00%	1.50-2.25%	2.00%	1.50%
	FERD	FEFC.	Fu Kwok Garment Manufacturing Co.	FEETC
Discount rate used in determining present value	2.00%	2.00%	2.25%	2.50%
Future salary increase rate	3.50%	1.50%	2.00%	1.00%
Expected rate of return on plan asset	2.00%	2.00%	1.50%	2.00%

^{}[] F-353

Yuan Cheng Human Resources Consultant Corp.	FECC	FEGC	Yuan Faun Ltd.
Discount rate used in determining present value	2.00%	2.25%	2.25%
Future salary increase rate	2.00%	2.00%	2.00%
Expected rate of return on plan asset	2.00%	2.00%	2.00%
			ORDL
Discount rate used in determining present value			2.00%
Future salary increase rate			2.00%
Expected rate of return on plan asset			2.00%

31. RELATED-PARTY TRANSACTIONS

The Group had significant transactions with related parties. These transactions in 2007, 2008 and 2009 and the related balances as of the balance sheet dates are summarized in the accompanying Schedules C, D, and E.

32. ASSETS PLEDGED OR MORTGAGED

The following assets had been pledged or mortgaged as collaterals for short-term bank loans, commercial paper, credit lines, and long-term liabilities or for meeting requirements for certain projects or tariff duties.

In April 2004, YDI, an FENC subsidiary, placed with the Taipei District Court the common shares of Far EasTone in line with the withdrawal of the order for the provisional seizure of the property of Pacific SOGO Department Store Co., Ltd. as demanded by Cathay United Bank. As of December 31, 2007 and 2008, YDI had furnished the Taipei District Court with 165,000 thousand and 133,312 thousand common shares, respectively and obtained back all of the shares in 2009. Additionally, also as of December 31, 2007, 2008 and 2009, FENC and some of its subsidiaries had provided 273,050 thousand, 248,225 thousand and 235,932 thousand common shares of Far EasTone respectively, as collaterals for short-term bank loans, commercial paper, long-term liabilities and credit lines of related parties.

^{}[] F-354

33. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

Significant commitments and contingencies of the Group as of December 31, 2009:

a. Issued but unused letters of credit aggregated approximately NT$2,500,927 thousand (US$80,184 thousand).

b. Unpaid building construction and equipment installation contracts approximately NT$5,641,167 thousand (US$180,865 thousand); acquired but not yet accepted cellular phone equipment amounted to NT$366,632 thousand (US$11,755 thousand).

c. Undelivered cotton contracts amounted to NT$705,310 thousand (US$22,613 thousand).

d. Project contracts already signed by FEGC amounted to NT$30,180,252 thousand (US$967,626 thousand).

e. Endorsement and guarantees provided to the related parties: Schedule G (attached).

f. The tax authorities of Taipei County imposed a land tax from 1999 to 2003 on the land in Banciao and penalized the Company with a triple fine, totaling NT$252,442 thousand, because the authorities believed that this land, which FENC registered as a property for manufacturing purposes, was being used for general purposes instead and that FENC did not register the change in purpose of the land. The Company disagreed with the tax authorities' decision and applied for reexamination on December 27, 2004. However, after the reexamination, the tax authorities did not reverse their decision. Thus, the Company filed a appeal against the authorities on June 1, 2005. Afterwards, the authorities rejected the appeal; the Company accrued the losses for this case in 2005. On January 18, 2006, the Company filed a lawsuit with the Taipei High Administrative Court but still lost the lawsuit. The Company appealed to the Supreme Administrative Court ("SAC") on January 3, 2007. The SAC rejected this appeal on May 31, 2007. On August 30, 2007, the Company paid the required land tax. Despite this payment, the Company again applied with SAC for reexamination on July 13, 2007. On May 27, 2009, the SAC rejected the appeal for a reexamination. Nevertheless, the Company is continuing to look for other ways to assert its rights.

g. On December 29, 2005, the board of directors of Tai Ya International Telecommunications Co., Ltd. ("TYIT") resolved to merge Mobitai communications Ltd. ("Mobitai") in accordance with Article 19 of the Business Mergers and Acquisitions Act and set January 1, 2006 as the record date of the merger. TYIT is the successor company after the merger. Under the resolution of TYIT's board, the Company received NT$167,863 thousand (US$5,382 thousand) from Mobitai in exchange for Mobitai's 11,469 thousand common shares (NT$14.68 (US$0.47) per share) held by the Company. The Company disposed the investment in Mobitai and recognized a disposal gain of NT$31,814 thousand (US$1,020 thousand). However, the Company regarded Mobitai's purchase price was too low and raised an objection to Mobitai. Afterwards, the Company filed a lawsuit against TYIT. As of the report date the lawsuit was still in the procedure at the Taipei district court.

h. Ming-chiung Chang filed an incidental civil suit, in connection with the criminal case of forgery, against Ming-chung Kuo (an FENC employee) and Hua-de Lin, Hung-Long Li and Yung-gi Lai (the fiduciaries of Pacific Liu Tong Investment Corp. ("PLT"). Chang claimed that Kuo and Hua-de Lin, Hung-Long Li and Yung-gi Lai colluded and used their positions to carry out transactions that resulted in his losses and asked the Taiwan High Court to declare that the ownership of PLC held by (FEDS), FEDS's subsidiaries and the Company was just a fabrication, i.e., it never existed. In October 2009, Chang lost the suit and then appealed to SAC. As of March 5, 2010, the date of the accompanying independent auditors' report, this appeal was still in the procedure at the Supreme Court.

i. The Group's rental payments for land, buildings and cell sites for the next five years under effective lease agreements are summarized as follows:

Year	NT$	US$ (Note 3)
2010	$2,756,283	$88,371
2011	2,757,783	88,419
2012	2,803,050	89,870
2013	2,867,706	91,943
2014	2,957,988	94,838

j. Under the National Communications Commission's policy, effective April 1, 2007, Far EasTone had provided performance guarantees amounting to NT$450,000 thousand (US$14,428 thousand) to KG Telecom and NT$45,000 thousand (US$1,443 thousand) to KGEx com. for prepaid cards and international direct dialing calling cards already bought by customers. KG Telecom had also provided Far EasTone with a similar guarantee amounting to NT$850,000 thousand (US$27,252 thousand). Moreover, KG Telecom provided certificates of deposits amounting to NT$390,000 thousand (US$12,504 thousand) to the National Tax Administration of Taipei as collaterals for Far EasTone's administrative tax appeals for certain tax assessments.

k. A subsidiary of FENC, FEGC, undertook from the Southern Taiwan Science Park ("STSP") an underground cable construction. On June 28, 2007, FEGC's excavating machines were damaged because the unclear blueprints provided by STSP did not indicate the pipeline routes clearly. The accident resulted in the suspension of FEGC's construction until the pipes were dug out. FEGC applied for mediation to Complaint Review Board for Government Procurement, Public Construction Commission ("PCC") in 2008 and claimed for a loss in the amount of NT$23,360 thousand (US$749 thousand). Such loss from the additional costs was incurred for reasons not attributable to the FEGC but due to the fact that STSP failed to perform an its obligations. Although the claimed amount was reduced to NT$13,797 thousand (US$442 thousand), the mediation failed because both parties failed to reach an agreement. FEGC will initiate an action demanding performance with the Tainan District Court following service of the certificate of unsuccessful mediation. Additionally, during the construction period, material costs rose to NT$300,000 thousand (US$9,618 thousand) because of adverse economic factors and the rising prices of stainless steel and cable material. Although the contract amount had been adjusted for price inflation, FEGC still incurred a great loss in 2008 and got no indemnification. Thus, in 2008, FEGC again filed for mediation with the PCC and claimed that STSP should pay NT$125,100 thousand (US$4,011 thousand) in damages. However, the mediation still failed because STSP and FEGC could not reach any compromise. FEGC will file a suit for indemnification to the Tainan District Court after receiving the certification of mediation failure.

Further, the construction contract stated that the construction should be conducted by manual excavation. However, based on the request of local residents, STSP instructed FEGC to obtain an evaluation report made by a third-party unbiased institution on tunnel construction safety before starting the construction. The evaluation report showed that manual excavation may result in land collapse. In consideration of public safety, FEGC requested STSP to modify the original design to mechanical excavation instead. But STSP rejected the request because it insisted that the contractor should take all the responsibilities and related expenses for any change in the contract. Nevertheless, FEGC commenced the construction with mechanical excavation and an additional operating expense of NT$26,313 thousand (US$844 thousand) incurred. FEGC applied for mediation to Complaint Review Board for Government Procurement, PCC but the mediation failed because both parties could not reach a compromise. FEGC will initiate an action demanding performance with the Tainan District Court following service of the certificate of unsuccessful mediation.

Furthermore, because of several problems, not attributable to FEGC, involved in the pipe jacking required for this construction, FEGC suggested that the construction should be extended to April 6, 2009. However, STSP disagreed and refused to pay the extra costs of NT$3,080 thousand (US$99 thousand) for FEGC's removal of the scrap piles. Thus FEGC applied for mediation to Complaint Review Board for Government Procurement, PCC but the mediation failed because both parties could not reach a compromise. FEGC will initiate an action demanding performance with the Tainan District Court following service of the certificate of unsuccessful mediation.

In 2008, FEGC accrued a construction loss of NT$119,949 thousand (US$3,846 thousand).

l. An FENC subsidiary, FEGC, together with Pan Asia Corporation ("Pan Asia") and Iwata Chizaki Construction Corporation, Taipei Branch ("Iwata") entered into a contract to undertake "Area CR3 of Kaohsiung Rapid Transit-Red line" ("KRT"). FEGC claimed that, although the entire construction had been completed and KRT has been operating for two years, it had not received the payment balance of NT$284,187 thousand (US$9,111 thousand). Thus, FEGC, Pan Asia and Iwata have initiated an action demanding performance with the Kaohsiung District Court.

FEGC also claimed that, under Article 20.2 of the contract, KRT should pay an amount of NT$312,844 thousand (US$10,030 thousand) subject to the price adjustment clause and paid extra costs such as the management fees of NT$164,857 thousand (US$5,286 thousand) resulting from several problems, not attributable to FEGC, delaying the completion date for 277 days. Since KRT did not make the foregoing payments, FEGC, Pan Asia and Iwata have applied for mediation in the Kaohsiung District Court. But after the mediation was carried out one time, both parties have agreed the proceedings pending the outcome of the arbitration between the KRT and Kaohsiung City Government.

Moreover, FEGC claimed that: (1) FEGC, Pan Asia and Iwata were requested by KRT to include four additional items into the construction of Stations R8 and R9, the works which were not in the original construction contract; these four additional items entailed a cost increase of NT$75,205 thousand (US$2,411 thousand). (2) FEGC, Pan Asia and Iwata were requested by KRT to add seven items into the construction of Station R8 and Station R7, the works which were not in the original construction

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contract; these seven additional items entailed an extra cost of NT$219,730 thousand (US$7,045 thousand). (3) FEGC, Pan Asia and Iwata were requested by KRC to include 53 additional items in the constructions of water and electricity facilities, the works which were not in the original construction contract. These additional items entailed an additional cost of NT$142,082 thousand (US$4,555 thousand). KRT, however, refused to amend the original construction contract and refused to pay all the above mentioned additional costs. Thus, FEGC, Pan Asia and Iwata have initiated an action demanding performance in the Kaohsiung District Court.

m. For the construction Taiwan Power Company (TPC) subcontracted to FEGC, FEGC had to pay a certain fine of NT$23,000 thousand (US$737 thousand) for a bid deposit call. This fine was based on the Government Procurement Act and TPC's construction contract. FEGC has applied for mediation to Complaint Review Board for Government Procurement, PCC but, on October 24, 2008, PCC made a decision of case not entertained. TPC thus requested the Administrative Enforcement Agency to enforce the penalty concerned. As of March 5, 2010, the date of the accompanying independent auditors' report, this case was still in the procedure in the Administrative Enforcement Agency.

n. For the issues related to the contract that FEGC undertook the construction of the Taipei City Market Administrative Office, an action was brought before the Taipei District Court to claim that Taipei City Market Administrative Office should pay the delayed payment of NT$150,177 thousand (US$4,815 thousand) and the interest from September 14, 2007 to January 18, 2009 amounted to NT$10,032 thousand (US$322 thousand). In 2009, the Taipei District Courts rendered its judgment to reject the all suits filed by FEGC. FEGC has filed an appeal which was currently in the procedure in the Taiwan High Court.

o. FEETC was entrusted by the Taiwan Area National Freeway Bureau to collect electronic tolls on freeways and has signed a third-party benefit trust contract with FEIB to manage the tolls collected. The trust property for this agreement amounted to NT$933,899 thousand (US$29,942 thousand) as of December 31, 2009.

34. SUBSEQUENT EVENTS

a. The registered capital of PLT, an investee of the Company, was previously NT$4,010,000 thousand (US$128,567 thousand), representing 401,000 thousand shares at a par value of NT$10.00 (US$0.32). On February 3, 2010, following a letter from the Taiwan High Prosecutors Office, the MOEA decided to nullify the registrations of several tranches of capital increases given to PLT, the registrations of amendments of Articles of Incorporation, the registrations of elected and appointed representatives of Board of Directors and Supervisors on November 13, 2002, May 1, 2003, August 8, 2005, August 3, 2006, June 6, 2007 and July 16, 2008. As a result, the capital amount of PLT reverted to the original NT$10,000 thousand (US$321 thousand), representing 1 million common shares.

After consulting its legal counsel on the MOEA's decision, the Company was advised that the MOEA's nullification of the registration of capital increase and other relevant registrations did not change the Company's controlling interests in PLT. Any doubt about the Company's interests in PLT should be brought to the court and decided under a civil litigation process. Based on these legal opinions, the MOEA's decision has not invalidated the capital increases made by the Company and the Company's subsidiaries. Thus, the Company retains its economic control over PLT.

The percentage ownership of PLT held by the Group reached 39.68%. Based on the local GAAP, these holdings were accounted for by the equity-method.

On January 27, 2010, PLT filed an appeal with the Taiwan High Prosecutors Office and pleaded for the withdrawal of the notice letter and cessation of the enforcement. On February 10, 2010, PLT filed an appeal to the MOEA to withdraw the decision and pleaded for ceasing of the enforcement of such decision; on February 24, 2010, FEDS, the parent company of PLT, also filed an appeal to MOEA to withdraw the decision and pleaded for ceasing of the enforcement of such decision. On February 10, 2010, FEDS filed a suit with the Taipei District Court to ensure the validity of FEDS's ownership of PLT.

b. The Company had obtained the approval for its new investments from Investment Commission under MOEA, ROC Executive Yuan on December 25, 2009. In February 2010, the Company purchased 42 thousand shares of PETH from its subsidiary, Ding Yuan International Investment Corp., for NT$659,422 thousand (US$21,142 thousand) and purchase another 42 thousand shares of PETH from its related party, OUCC, for NT$659,422 thousand (US$21,142 thousand). Thus, the Company's percentage of ownership over PETH increased from 49.42% to 85.28%.

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FINANCIAL INSTRUMENTS

a. The fair values of financial instruments were as follows:

Nonderivative Financial Instruments	2007		2008		2009
	Carrying Value	Fair Value	Carrying Value	Fair Value	Carrying Value		Fair Value
	NT$	NT$	NT$	NT$	NT$	US$(Note 3)	NT$	US$(Note 3)
Assets
Cash and cash equivalents	$24,206,234	$24,206,234	$22,946,534	$22,946,534	$21,141,998	$677,845	$21,141,998	$677,845
Financial assets at fair value through profit or loss - current	752,593	752,593	424,722	424,722	1,738,110	55,726	1,738,110	55,726
Available-for-sale financial assets - current	1,833,155	1,833,155	1,988,763	1,988,763	2,815,770	90,278	2,815,770	90,278
Bond investments with no active market - current	3,000	—	3,000	—	—	—	—	—
Notes and accounts receivable, net	22,457,546	22,457,546	23,639,761	23,639,761	21,805,366	699,114	21,805,366	699,114
Receivable from affiliates - current	1,320,065	1,320,065	1,356,264	1,356,264	1,264,013	40,526	1,264,013	40,526
Other receivables	1,165,169	1,165,169	1,490,495	1,490,495	971,154	31,137	971,154	31,137
Available-for-sale financial assets - noncurrent	117,355	117,355	56,682	56,682	2,593,229	83,143	2,593,229	83,143
Financial assets carried at cost - noncurrent	1,988,200	—	1,822,973	—	2,974,623	95,371	—	—
Held-to-maturity financial assets - noncurrent	—	—	—	—	199,567	6,398	199,172	6,386
Bond investments with no active market - noncurrent	—	—	—	—	293,454	9,409	—	—
Restricted assets (including current portion)	733,223	733,223	398,138	398,138	2,325,051	74,545	2,325,051	74,545
Refundable deposits	482,291	482,291	484,400	484,400	471,180	15,107	471,180	15,107
Liabilities
Short-term bank loans	17,497,734	17,497,734	27,698,393	27,698,393	24,146,138	774,163	24,146,138	774,163
Short-term bills payable	3,060,630	3,060,630	5,233,968	5,233,968	5,099,750	163,506	5,099,750	163,506
Notes and accounts payable	10,763,048	10,763,048	11,322,395	11,322,395	11,167,451	358,046	11,167,451	358,046
Payable to affiliates - current	3,644,544	3,644,544	1,690,702	1,690,702	1,171,896	37,573	1,171,896	37,573
Accrued expenses	6,581,972	6,581,972	7,813,933	7,813,933	7,360,097	235,976	7,360,097	235,976
Payable for acquisition of properties	1,722,988	1,722,988	1,989,528	1,989,528	1,696,017	54,377	1,696,017	54,377
Bonds payable (including current portion)	22,692,299	22,839,064	18,181,776	18,267,515	17,930,765	574,888	18,115,193	580,801
Long-term bank loans (including current portion)	47,167,536	47,167,536	46,608,633	46,608,633	39,819,051	1,276,661	39,819,051	1,276,661
Leases payable (including current portion)	269,268	269,268	31,919	31,919	8,555	274	8,555	274
Guarantee deposits (including current portion)	1,091,472	1,091,472	1,031,906	1,031,906	1,032,511	33,104	1,032,511	33,104

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	2007		2008		2009
Derivative Financial Instruments	Carrying Value	Fair Value	Carrying Value	Fair Value	Carrying Value		Fair Value
	NT$	NT$	NT$	NT$	NT$	US$(Note 3)	NT$	US$(Note 3)
Cotton futures contracts
- FENC (formerly FETL)	$38,955	$38,955	$29,941	$29,941	$32,768	$1,051	$32,768	$1,051
- FEIH	5,331	5,331	3,431	3,431	—	—	—	—
Forward exchange contracts
- FENC (formerly FETL)	(13,031)	(13,031)	(30,362)	(30,362)	11,460	367	11,460	367
- FEIH	(9,887)	(9,887)	(2,491)	(2,491)	—	—	—	—
Interest rate swap contract
- FENC (formerly FETL)	(63,816)	(63,816)	(7,656)	(7,656)	—	—	—	—
- YDI	(2,370)	(2,370)	8,070	8,070	—	—	—	—
- Far EasTone	(21,601)	(21,601)	—	—	—	—	—	—
Cross currency swap contract
- KG Telecom	—	—	—	—	2,750	88	2,750	88
Exchangeable bonds exchange right
- FENC (formerly FETL)	(347,750)	(347,750)	(30,500)	(30,500)	—	—	—	—
Exchangeable bonds redemption right
- FENC (formerly FETL)	(31,000)	(31,000)	(42,000)	(42,000)	(20,750)	(665)	(20,750)	(665)
Exchangeable bonds collection right
- FENC (formerly FETL)	104,500	104,500	49,500	49,500	9,000	289	9,000	289

b. The methods and assumptions used in estimating fair values are as follows:

1) The carrying values of short-term instruments reported in the balance sheet approximate the fair values of these assets because of the short maturities of these instruments, including cash, notes and accounts receivable, net, receivables from related parties, other receivables, short-term bank loans, commercial paper, notes and accounts payable, net, payable to related parties, accrued expense and payable to supplies of machinery and equipment.

If quoted market prices are available, these are used as fair values of derivatives. Otherwise, the fair value is evaluated by the Group using the same estimates and assumptions used by other market participants (e.g., banks or derivative sellers) to value the derivatives. These estimates and assumptions are available to the Group.

The Group uses the exchange rate quotations of the Reuters (or the Associated Press) to calculate the fair value of each interest rate swap and forward contract based on the net cash flows and the exchange rates, respectively.

3) The fair values of financial assets carried at cost — noncurrent and bonds carried at amortized cost, which have no quoted prices in an active market and entail an unreasonably high cost to obtain verifiable fair values. Therefore, fair values cannot be reasonably measured.

4) If quoted market prices are available, these are used as fair values of held-to-maturity financial assets - noncurrent; otherwise, fair values will be measured by carrying values.

5) Fair values of bonds payable, lease payable and long-term loans (all including current portion) are measured at the present values of expected cash flows, which are discounted at the interest rates for bank loans with similar maturities. Public traded bonds are measured at traded prices.

6) Refundable deposits and guarantee deposits (including the current portion) receivable are recorded at their carrying values because the fair value approximates the carrying value.

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c. The fair values of financial assets and financial liabilities, which were determined at their quoted prices in an active market or at estimated prices, were as follows:

Derivative Financial Instruments	Quoted Price				Estimated Price
	December 31				December 31
	2007	2008	2009		2007	2008	2009
	NT$	NT$	NT$	US$(Note 3)	NT$	NT$	NT$	US$(Note 3)
Assets
Cotton futures contracts
- FENC (formerly FETL)	$ 38,955	$ 29,941	$32,768	$1,051	$ —	$ —	$ —	$ —
- FEIH	5,331	3,431	—	—	—	—	—	—
Exchangeable bonds collection right
- FENC (formerly FETL)	—	—	—	—	104,500	49,500	9,000	289
Interest rate swap contract
- YDI	—	—	—	—	—	8,070	—	—
Forward exchange contract
- FENC (formerly FETL)	—	—	11,460	367	—	—	—	—
Cross currency swap contract
- KG Telecom	—	—	—	—	—	—	2,750	88
Liabilities
Forward exchange contract
- FENC (formerly FETL)	(13,031)	(30,362)	—	—	—	—	—	—
- FEIH	(9,887)	(2,491)	—	—	—	—	—	—
Interest rate swap contract
- FENC (formerly FETL)	—	—	—	—	(63,816)	(7,656)	—	—
- YDI	—	—	—	—	(2,370)	—	—	—
- Far EasTone	—	—	—	—	(21,601)	—	—	—
Exchangeable bonds exchange right
- FENC (formerly FETL)	—	—	—	—	(347,750)	(30,500)	—	—
Exchangeable bonds redemption right
- FENC (formerly FETL)	—	—	—	—	(31,000)	(42,000)	(20,750)	(665)

d. As of December 31, 2007, 2008 and 2009, financial assets exposed to fair value interest rate risk amounted to NT$19,124,250 thousand and NT$16,017,578 thousand and NT$10,345,774 thousand (US$331,702 thousand), respectively, financial liabilities exposed to fair value interest rate risk amounted to NT$78,795,939 thousand, NT$62,482,356 thousand and NT$75,074,427 thousand (US$2,407,003 thousand), respectively, financial assets exposed to cash flow interest rate risk amounted to NT$5,519,193 thousand, NT$7,406,438 thousand and NT$13,337,273 thousand (US$427,614 thousand), respectively, financial liabilities exposed to cash flow interest rate risk amounted to NT$13,055,609 thousand, NT$34,121,843 thousand and NT$13,160,971 thousand (US$421,961 thousand), respectively.

e. Financial risks

Forward exchange contracts and currency option contracts

The Group entered into forward exchange contracts and currency option contracts to hedge the effect of adverse exchange rate fluctuations on foreign-denominated assets or liabilities (Note 7).

Interest rate swap contracts

The Company entered into interest rate swap contracts to hedge against adverse fluctuations of interest rates of secured unconvertible bonds (69th, 70th, 71st and 72nd tranches), and these bonds were all fully repaid before the end of 2009.

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YDI entered into in interest rate swap contracts to hedge against adverse interest rate fluctuations of secured unconvertible bonds - 9th tranche. These bonds had all been redeemed at their full amount by the end of 2009. The gain or loss arising from interest rate fluctuation is expected to be offset gain or loss arising from hedged items. Therefore, the market risk is not material.

In 2007, 2008 and 2009, Far EasTone used interest rate swap contracts to hedge against the adverse effects of interest rate fluctuations on its obligations with floating interest rates. The contracts are settled at net amounts. Thus, the market risk is not material.

Cross currency swap contracts

An FENC subsidiary, KG Telecom, entered into cross-currency swap contracts to hedge against the adverse effects of exchange rate fluctuations on foreign-denominated assets in 2009. The gains or losses on the changes in fair values on these contracts is expected to offset the results of the exchange rate fluctuations of the hedged items. Thus, market risk is expected to be immaterial.

Cotton futures contracts

The Group entered into cotton futures contracts to hedge fluctuations of cotton prices (Note 7).

Others

Fair values of mutual funds and domestic quoted stocks held by YDI, Yuan Tong, FECC, FEGC, Far EasTone, KG Telecom and ARCOA are determined at their quoted prices in an active market; thus, market price fluctuations would cause changes in the fair values of these investments. However, market risk is expected to be immaterial because the performance of these investments were periodically evaluated by the foregoing subsidiaries.

2) Credit risk

Credit risk represents the potential loss that would be incurred by the Group if the counter-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The counter-parties to the foregoing financial instruments are reputable financial institutions and business organizations. Management does not expect the Group's exposure to default by those parties to be material.

3) Liquidity risk

The exchange rates of forward exchange contracts and currency option contracts, interest of interest rate swap contracts and prices of cotton futures contracts are fixed and certain. In addition, the Group has sufficient operating capital to meet cash flow requirements. Thus, the Group does not have liquidity risk. However, financial assets carried at cost have no active market; thus, material liquidity risk on these assets is anticipated.

Some investments in equity instruments have no active markets; therefore, the liquidity risk is expected to be high.

On February 26, 2009, an FENC subsidiary, Yuan Tong bought convertible bonds issued by Bockhold N.V. The purchase amount was recognized as investment in an inactive market - bonds; the value of the conversion right was recognized as financial assets carried at cost because it has no quoted price in active market. Thus, material liquidity risk on this investment is expected to be high.

Some FENC subsidiaries, YDI, Yuan Tong, FECC, FEGC, Far EasTone Telecom Co., Ltd., KG Telecom and ARCOA, invested in domestic quoted stocks, bonds and mutual funds that have quoted prices in active markets and can be sold immediately at prices close to their fair values. However, KG Telecom also invested in some private fund with no quoted prices in an active market; thus, this investment was expected to have material liquidity risks.

ARCOA also invested in financial bonds and equity instruments with no quoted prices in active market; thus, these investments could expose ARCOA to material liquidity risks.

F-360

The subsidiaries of YDI and Kai-Yuan Investment Co., Ltd. participated in private placement of the shares in FEIB. Under the Securities and Exchange Law, Article 43-8 specifies that the privately placed securities are subjected to the restrictions of holding period and trading volume. As a result, liquidity risk on these securities is anticipated.

An FENC subsidiary, KG Telecom, engaged in cross-currency swap contracts in 2009, which resulted in simultaneous cash inflows and outflows upon maturity; thus, the cash demand is not expected to be significant.

4) Cash-flow risk from interest rate fluctuations

In 2009, an FENC subsidiary, Far EasTone and its subsidiary had short-term and long-term debts with floating interest rates change. As a result, the effective interest rates on these loans will change as the market interest rates change.

f. Cash flow hedge

The Company's 69th, 70th, 71st and 72nd tranches of secured nonconvertible bonds, YDI's 9th tranche of secured nonconvertible bond and the liability of Far EasTone Telecom Co., Ltd. may cause material cash flow risks because of these instruments have floating interest rates; thus, these companies used interest rate swaps to hedge against the risks.

The Company's 69th, 70th, 71st, and 72nd tranches of secured nonconvertible bonds and YDI's 9th tranche of secured nonconvertible bonds had been redeemed at the end of 2009.

KG Telecom used cross-currency swaps to hedge against cash flow fluctuations on its foreign-denominated assets.

Hedged Items	Designated Hedging Instruments					Expected Period of Cash Flows	Expected Period for Realization of Gains or Losses
	Designated Financial Instruments	Fair Value December 31
	Designated Financial Instruments	2007	2008	2009
		NT$	NT$	NT$	US$(Note 3)
Bonds with floating interest rate	Interest rate swap contract
	FENC (formerly FETL)	$(63,816)	$(7,656)	$ —	$ —	2003-2009	2003-2009
	YDI	(2,370)	8,070	—	—	2005-2009	2005-2009
	Far EasTone	(21,601)	—	—	—	2003-2008	2003-2008
Foreign currency denominated assets	Cross currency swap contract
	KG Telecom	—	—	2,750	88	2010	2010

ADDITIONAL DISCLOSURES

a. Important transactions and b. information on the Group's investees.

1) Financing provided: Schedule F (attached).
2) Endorsement/guarantee provided: Schedule G (attached).
3) Marketable securities and investments in share of stock held: Schedule H (attached).
4) Securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the capital stock: Schedule I (attached).

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5) Real states acquired amounting to at least NT$100 million or 20% of the capital stock: Schedule J (attached).

6) Real states sold amounting to at least NT$100 million or 20% of the capital stock: Schedule K (attached).

7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the capital stock: Schedule L (attached).

8) Receivables from related parties amounting to at least NT$100 million or 20% of the capital stock: Schedule M (attached).

9) Names, locations, and related information of investees on which the Company exercises significant influence: Schedule N (attached).

10) Derivative financial transactions: Notes 7 and 35.

c. Investments in Mainland China

2) Significant direct or indirect transactions with the investee company, prices, payment terms, and unrealized gain or loss: Note 31 and Schedule L, M (attached).

d. Additional disclosure for consolidated financial statements:

1) Significant transactions between the Group and among subsidiaries: Schedule P (attached).

2) Reasons, amounts, number of shares held and subsidiaries' names, which owns FENC's shares: None.

SEGMENT INFORMATION

a. Industry Segment information. Summarized segment information is shown in Schedule Q.

b. Segment information by region. Summarized segment information is shown in Schedule R.

c. Export sales

The export sales of the Group were less than 10% of consolidated net sales.

d. Major customers

There were no major customers in 2007, 2008 and 2009.

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^{}[] SCHEDULE A

^{}[] FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES

^{}[] (Formerly Far Eastern Textile Ltd. and Subsidiaries)

^{}[] INTERCOMPANY RELATIONSHIPS AND PERCENTAGES OF OWNERSHIP

^{}[] DECEMBER 31, 2009

F-363

^{}[] SCHEDULE B

^{}[] FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES

^{}[] (Formerly Far Eastern Textile Ltd. and Subsidiaries)

^{}[] OPERATIONS

^{}[] DECEMBER 31, 2009

Consolidated Entity	Setup Date	Location	Operations
Far Eastern New Century Corporation	1954/01/13	36F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Manufacture and distribution of petrochemical-fiber materials, semifinished and finished goods of spinning yarn (fabric), blended yarn (fabric), draw textured yarn, pre-oriented yarn, PET filament, PET staple and various knitted and woven garments.
Yuan Ding Investment Co., Ltd.	1986/11/07	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Investment.
Kai Yuan International Investment Co., Ltd.	1998/10/06	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Investment.
Ding Yuan International Investment Corp.	1998/10/02	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Investment.
Yuan Tong Investment Co., Ltd.	1999/12/03	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Investment.
An Ho Garment Co., Ltd.	1977/01/24	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Manufacture and distribution of various knit and woven garments.
Fu Kwok Garment Manufacturing Co., Ltd.	1971/03/06	No. 110, Neihuan S. Rd., Nanzi District, Kaohsiung City 811, Taiwan, ROC	Manufacture and distribution of various woven garments.
Far Eastern Construction Co., Ltd.	1978/09/04	5F., No. 267, Dunhua S. Rd., Sec. 2, Da-an District, Taipei City 106, Taiwan, ROC	Real estate construction and selling.
Far Eastern General Contractor Inc.	1982/10/04	5F., No. 267, Dunhua S. Rd., Sec. 2, Da-an District, Taipei City 106, Taiwan, ROC	Real estate construction and selling.
Far Eastern Resources Development Co.	2003/09/30	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Real estate construction, industrial park construction and leasing, participating in public infrastructure projects.
Far Eastern Apparel Co., Ltd.	1976/02/27	36F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Selling of underwear, sportswear, shirts, towels, fabrics, suits, beddings and casual wear.
Ming Ding Co., Ltd.	1990/08/07	1F., No. 389, Sihchuan Rd., Sec. 1, Banciao City, Taipei County 220, Taiwan, ROC	Selling of underwear, sportswear, shirts, towels, fabrics, suits, beddings and casual wear.
Oriental Resources Development Ltd.	1988/06/27	34F., No. 207, Sec. 2, Dunhua S. Rd., Taipei City 106, Taiwan, ROC	Waste recycling and processing.

F-364

Consolidated Entity	Setup Date	Location	Operations
Yuan Faun Ltd.	1980/12/13	33F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	International trading, business consulting, machinery design and installation and computer software.
Yuan Cheng Human Resources Consultant Corp.	1999/06/08	19F.-1, No. 1, Baosheng Rd., Yonghe City, Taipei County 234, Taiwan, ROC	Providing manpower services.
Oriental Textile (Holding) Ltd.	2002/07/15	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
Sino Belgium (Holding) Ltd.	2007/08/15	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
Far Eastern Investment (Holding) Ltd.	1989/08/29	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
PET Far Eastern (Holding) Ltd.	1996/10/01	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
FEDP (Holding) Ltd.	2002/03/22	Clarendon House 2 Church street Hamilton HM 11, Bermuda	Investment.
F.E.T.G. Investment Antilles N.V.	1989/10/05	Kaya W.F.G Mensing 14, Curacao, Nederlandse Antillen	Investment.
Waldorf Services B.V.	1990/01/10	Naritaweg 165, 1043 BW Amsterdam, The Netherlands	Investment.
PET Far Eastern (M) Sdn. Bhd.	1995/07/22	Plo 69, Kawasan Perindustrian Senai 3, 81400 Senai, Johor Bohru, Johor, Malaysia	Manufacture and distribution of PET bottle and PET perform.
Far Eastern Polytex (Holding) Ltd.	2006/03/22	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
Far Eastern Apparel (Holding) Ltd.	1996/10/01	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
Far Eastern Polychem Industries Ltd.	1995/04/13	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
Far Eastern Industries (Shanghai) Ltd.	1996/09/25	Mainland China	Manufacture and distribution of PET staple, PET filament, polyester top, PET performs, raw textured yarns, spinning yarns, and knitted and woven fabrics and garments.
Far Eastern Apparel (Vietnam) Ltd.	2002/07/04	No. 11, VSIP Street 4, Vietnam Singapore Industrial Park Thuan An District, Binh Duoug Province, Vietnam	Manufacture and distribution of various knitted and woven garments, beddings garments and accessories.

F-365

Consolidated Entity	Setup Date	Location	Operations
Wu Han Far Eastern New Material Ltd.	2003/07/09	Mainland China	Retail and wholesale of PET staple, PET filament, polyester top, PET performs, raw textured yarns, spinning yarns, and knitted and woven fabrics and garments.
Shanghai Far Eastern IT Ltd.	2003/04/15	Mainland China	Computer software programming and MIS maintenance and consultancy.
Far Eastern Apparel (Suzhou) Ltd.	1996/10/21	Mainland China	Manufacture and distribution of various knitted and woven garments, beddings, garments and accessories.
Far Eastern Spinning Weaving and Dyeing (Suzhou) Ltd.	2003/10/22	Mainland China	Manufacture and distribution of woven, dyed and novelty fabrics, high-value engineered textiles, industrial woven fabrics and scraps.
Sino Belgium Beer (Suzhou) Ltd.	2007/09/04	Mainland China	Brewer.
Far Eastern New Century (China) Investment Corp.	2007/06/18	Mainland China	Investment.
Far Eastern Industries (Wuxi) Ltd.	2002/06/05	Mainland China	Manufacture and distribution of combed cotton yarn, 60/40 poly/cotton blended yarns, 65/35 poly/cotton blended yarns, spun yarns, and woven, greige woven, print woven, piece dyed woven and bleached woven fabric.
Oriental Industries (Suzhou) Ltd.	2005/06/24	Mainland China	Manufacturing and distribution of PET performs, industrial fabrics and related products.
Oriental Petrochemical (Shanghai) Corp.	2003/01/21	Mainland China	Manufacture and distribution of PTA and its by-products.
Far Eastern Industries (Suzhou) Ltd.	2004/03/22	Mainland China	Manufacture and distribution of polyester chips and partially oriented, fully oriented and polyester yarns.
Shanghai Far Eastern Petrochemical Logistic Ltd.	2006/03/02	Mainland China	Logistic.
Suzhou An He Apparel Ltd.	2008/01/31	88 Tian Ling Rd. Wuzhong District Economic Development Zone. Su Zhou	Manufacture and distribution of various woven garments.
Far Eastern Fibertech Co., Ltd.	1995/04/10	No. 17, Gongye 5th Rd., Gonyin Industry District Gonyin Township, Taoyuan County 328, Taiwan, ROC	Manufacture and distribution of nylon-fiber materials.
Oriental Petrochemical (Taiwan) Co., Ltd.	1987/01/26	No. 47, Jingjian 4th Rd., Shuren Village Gonyin Township, Taoyuan County 328, Taiwan, ROC	Manufacture and distribution of PTA
Martens Beer Trading (Shanghai) Ltd.	2007/10/26	Mainland China	Beer sales
Far EasTone Telecommunication Co., Ltd.	1997/04/11	28F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Wireless communications service.

F-366

Consolidated Entity	Setup Date	Location	Operations
KG Telecommunication Co., Ltd.	2003/09/25	28F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Wireless communications service under a Type 1 license.
Far Eastern Info Service Holding Ltd.	2002/07/17	Clarendon House 2 Church Street Hamilton HM11 Bermuda	International investment holding business.
Far Eastern Tech-Info (Shanghai) Ltd.	2002/11/18	Mainland China	Computer software production, data processing and acting as Internet content service provider.
E. World (Holdings) Ltd.	2000/04/07	4F, One Capital Place. P.O. Box 847 G.T., Grand, Cayman Island	International investment holding business.
Yuan Cing Co., Ltd.	2000/08/05	28F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Data processing service and retail of computer software.
KGEx.com Co., Ltd.	2000/08/09	4F., No. 468, Ruiguang Rd., Neihu Dist., Taipei City 114, Taiwan, ROC	Providing Type II communications service.
Far Eastern Electronic Toll Collection Co., Ltd.	2004/04/07	28F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Providing services on information software, electronic information, auto controlling equipment engineering.
Arcoa Communication Co., Ltd.	1981/05/04	36F., No. 207, Sec. 2, Dunhua S. Rd., Taipei City 106, Taiwan, ROC	Distribution of cellular phones and other communications equipment and accessories and providing related maintenance services.
ADCast Interactive Marketing Co., Ltd.	2000/06/12	1F., No. 220 Gangqian Rd., Neihu Dist., Taipei City 114, Taiwan, ROC	Providing services on internet advertisement and marketing.
Far EasTron Holding Ltd.	2005/08/30	Marguee Place, Suite 300, 430 West Bay Road, P.O. Box 30691 SMB, Grand Cayman, Cayman Islands, British West Indies	International investment holding business.
Q-Ware Communication Corp.	2007/02/13	8F., No. 220 Gangqian Rd., Neihu Dist., Taipei City 114, Taiwan, ROC	Providing Type II communications service.
Yuan Cing InfoComm Tech Co., Ltd.	2009/12/30	4F., No. 468, Ruiguang Rd., Neihu Dist., Taipei City 114, Taiwan, ROC	Sale of communication products

^{}[] F-367

^{}[] SCHEDULE C

^{}[] RELATED PARTIES

^{}[] DECEMBER 31, 2007, 2008 AND 2009

No.	Related Party	Relationship with Far Eastern New Century Corporation (Note)
1	Oriental Securities Corp.	a
2	Yuan Ding Co., Ltd.	a
3	Frendenberg Far Eastern Spunweb Co., Ltd.	a
4	Everest Textile Co., Ltd.	a
5	Pacific Liu Tong Investment Co.	a
6	Air Liquide Far Eastern Co.,Ltd.	a
7	Yue Ding Industry Co., Ltd.	a
8	Far Eastern International Leasing Corp.	a
9	Ding Ding Hotel Co., Ltd.	a
10	Da Ju Fiber Co., Ltd.	a
11	iScreen Corp.	a
12	Yu Ming Co., Ltd.	a
13	Pacific Petrochemical (Holding) Ltd.	a
14	Ding Ding Integrated Marketing Service Co., Ltd.	a
15	Malaysia Garment Manufactures PTE. Ltd.	a
16	Chiahui Power Corporation	b
17	Far Eastern Medical Foundation	b
18	Far Eastern. Y. Z. Hsu Science and Technology Memorial Foundation	b
19	U-Ming Marine Transport Corp.	b
20	Tranquil Enterprise Ltd.	b
21	New Tranquil Enterprise Ltd.	b
22	Yuan-Ze University	b
23	Oriental Institute of Technology	b
24	Far Eastern Memorial Hospital	b
25	Bai Ding Investment Corp.	b
26	New Century InfoComm Tech Co.	a and b
27	Far Eastern Department Stores Co., Ltd.	a and b
28	Oriental Union Chemical Corporation	a and b
29	Asia Cement Corporation	a and b
30	Yu Chang Vocational School	c
31	Huey Kang Investment Co., Ltd.	c
32	Pacific SOGO Department Stores Co., Ltd.	d
33	Far Eastern International Garments Inc.	e
34	Far Eastern Recreation Center Employee's Welfare Committee	f
35	Far Eastern Recreation Center Employee's Welfare Committee of FENC Golf Club	f
36	Far Eastern Technical Consultants Co., Ltd.	g
37	Hung Ton Development Corporation	h
38	TECO Electric & Machinery Co., Ltd.	i
39	Systex Corporation	i
40	MITAC Inc.	i
41	Telecommunication & Transportation Foundation	j
42	NTT DoCoMo Inc.	k

F-368

^{}[] No. Related Party Relationship with Far Eastern New Century Corporation (Note)

43 Everest Textile (Shanghai) Ltd. 1
44 Everest Investment (Holding) Ltd. 1
45 Far Eastern Asset Management Co., Ltd. m
46 Far Eastern International Bank n
47 Fu Da Transportation Co., Ltd. o
48 Ya Tung Ready-Mixed Concrete Co., Ltd. p
49 Fu Ming Transport Co., Ltd. p
50 Asia Investment Corp. p
51 Ya-Li Precast Prestressed Concrete Industries Corp. p
52 Ya Tung Department Stores Co., Ltd. q
53 Far Eastern Geant Co., Ltd. q
54 FEDS Development Ltd. (BVI) q
55 Far Eastern Citysuper Ltd. q
56 Deutsche Far Eastern Asset Management Co., Ltd. r
57 Ding Ding Management Consultants Co. r
58 Digital United Inc. s
59 Information Security Service Digital United Co., Ltd. t
60 Alberta and Orient Glycol Co., Ltd. u

Note:
a. Equity-method investee and the share holding is less than 50%.
b. Same Chairman or general manager.
c. The chairman is the relative of the Company's chairman.
d. The subsidiary of Pacific Liu Tong Investment Co.
e. Equity-method investee of the subsidiary.
f. The principal of the organization is the Company's senior manager.
g. The subsidiary of Yuan Ding Co., Ltd.
h. The chairman of the Company is the investee's director.
i. The institutional director of Far Eastern Electronic Toll Collection Co., Ltd.
j. Far EasTone's donation is over one third of the foundation's fund.
k. The director of Far EasTone Telecommunication Co., Ltd. (it was not the related-party since June 2009).
l. The subsidiary of Everest Textile Co., Ltd.
m. Far Eastern International Bank is the institutional director of the investee.
n. The vice chairman of the investee is the chairman of the Company.
o. The subsidiary of Fu Ming Transport Corp.
p. The subsidiary of Asia Cement Corporation.
q. The subsidiary of Far Eastern Department Stores Ltd.
r. The chairman of the investee is the vice president of the Company.
s. The subsidiary of New Century InfoComm Tech Co., Ltd. (merged with New Century InfoComm Tech Co., Ltd. on March 16, 2009).
t. The subsidiary of New Century InfoComm Tech Co., Ltd.
u. An FENC subsidiary classified under financial assets carried at cost.

F-369

^{}[] SCHEDULE D

FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES

(Formerly Far Eastern Textile Ltd. and Subsidiaries)

CONSOLIDATED RELATED-PARTY TRANSACTIONS

YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009

(In Thousands)

	Notes	2007		2008		2009
		Amount	%	Amount	%	Amount	Amount	%
		NT$		NT$		NT$	US$(Note 3)
Sales
New Century InfoComm Tech Co.		$ 609,106	—	$1,153,120	1	$1,235,854	$ 39,624	1
Others	b.	1,743,757	1	2,304,082	1	1,649,493	52,885	1
		$ 2,352,863	1	$3,457,202	2	$2,885,347	$ 92,509	2
Purchases
Alberta & Orient Glycol Company		$ 2,396,405	2	$2,711,205	2	$1,647,146	$ 52,810	1
Oriental Union Chemical Corp.		3,342,205	3	2,199,195	2	935,955	30,008	1
Oriental Petrochemical (Taiwan) Co., Ltd. (formerly Invista Far Eastern Petrochemicals Co., Ltd.)		8,811,541	7	—	—	—	—	—
Others	b.	642,743	1	1,528,775	1	2,138,137	68,552	2
		$15,192,894	13	$6,439,175	5	$4,721,238	$151,370	4
Operating expense
Ding Ding Integrated Marketing Service Co., Ltd.		$ 142,220	1	$ 165,573	1	$ 163,760	$ 5,250	1
Yuan Ding Corp.		164,314	1	157,238	1	158,336	5,077	1
Others	b.	359,924	2	299,998	1	342,627	10,985	1
		$ 666,458	4	$ 622,809	3	$ 664,723	$ 21,312	3
Nonoperating revenue
New Century Info Comm Tech Co.		$ 2,173	—	$ 11,585	—	$ 31,603	$ 1,013	1
Asia Cement Co., Ltd.		45,115	1	—	—	—	—	—
Others	b.	144,960	2	128,027	4	46,517	1,492	1
		$ 192,248	3	$ 139,612	4	$ 78,120	$ 2,505	2

F-370

Note:
a. The relationships between the Group and the related parties. Please refer to Schedule C.
b. The transaction amount with the related-parties was not over 5% of the total amount of the account.
c. The terms of significant transactions given to the related parties were the same as the third parties.
d. Salaries and bonuses of directors, supervisors and management executives:

SCHEDULE E

FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES
(Formerly Far Eastern Textile Ltd. and Subsidiaries)

CONSOLIDATED RELATED-PARTY TRANSACTIONS
YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In Thousands)

	2007		2008		2009
Notes	Amount	%	Amount	%	Amount	Amount	%
	NT$		NT$		NT$	US$ (Note 3)
Notes and accounts receivable from affiliates
New Century InfoComm Tech Co.	$ 3,578	—	$131,588	10	$279,911	$ 8,973	22
Everest Textile (Shanghai) Ltd.	89,807	7	53,880	4	135,678	4,350	11
Fresdenberg Far Eastern Spunweb Co., Ltd.	70,363	5	53,890	4	110,225	3,533	9
Pacific Sogo Department Stores Co., Ltd.	55,614	4	66,852	5	80,364	2,576	6
Yuan Ding Co., Ltd.	27,055	2	27,230	2	79,329	2,542	6
Everest Textile Ltd.	60,219	5	43,437	3	48,590	1,557	4
Far Eastern Department Stores Co., Ltd.	33,746	3	61,981	5	44,180	1,415	3
Oriental Union Chemical Corp.	—	—	92,513	7	—	—	—
Pacific Liu Tong Investment Co.	367,372	28	30,498	2	533	16	—
Others	13,331	1	122,334	9	58,944	1,897	5
	$721,085	55	$684,203	51	$837,754	$26,859	66

F-371

^{}[] F-372

	Notes	2007		2008		2009
		Amount	%	Amount	%	Amount	Amount	%
		NT$		NT$		NT$	US$(Note 3)
Refundable deposits
Ding Ding Integrated Marketing Services Co., Ltd.		$ 48,922	10	$ 43,693	9	$ 43,233	$ 1,386	9
Yuan Ding Co.		33,382	7	33,410	7	33,355	1,070	7
Others	e.	21,796	4	22,384	5	19,747	633	4
		$ 104,100	21	$ 99,487	21	$ 96,335	$ 3,089	20
Notes and accounts payable to affiliates
New Century InfoComm Tech Co.		$ 102,855	3	$218,998	13	$ 263,997	$ 8,464	23
Alberta & Orient Glycol Company		209,768	6	128,863	8	176,317	5,653	15
Everest Textile (Shanghai) Ltd.		109,714	3	92,340	5	173,984	5,578	15
Ya Tung Ready-Mixed Concrete Co., Ltd.		40,539	1	140,462	8	172,799	5,540	15
Oriental Union Chemical Corp.		549,497	15	57,903	3	96,450	3,093	8
Ding Ding Integrated Marketing Service Co.		69,889	2	72,795	4	75,280	2,414	6
MITAC Inc.		31,875	1	39,855	2	—	—	—
Oriental Petrochemical (Taiwan) Co., Ltd. (Formerly Invista Far Eastern Petrochemicals Co., Ltd.)		728,744	20	—	—	—	—	—
Others	e.	124,302	3	158,846	10	110,701	3,549	9
		$1,967,183	54	$910,062	53	$1,069,528	$34,291	91
Advance construction receipts
Far Eastern Department Stores Co., Ltd.		$ 204,507	2	$312,061	2	$ 473,037	$15,166	3
Far Eastern Memorial Hospital		—	—	—	—	2,679	86	—
New Tranquil Enterprise Ltd.		2,895	—	2,895	—	—	—	—
FEDS Development Ltd. (BVI)		23,643	—	2,857	—	—	—	—
Wen Jing Corp.		1,555	—	1,555	—	—	—	—
Hong-Ton Comprehensive Commerce Development Co., Ltd.		294,998	2	—	—	—	—	—
		$ 527,598	4	$319,368	2	$ 475,716	$15,252	3

^{}[] F-373

Financing to affiliates:

Year Ended December 31, 2007

	Highest Outstanding Balance	Balance on December 31, 2007	Interest Rate (%)	Interest Revenue
	NT$	NT$	NT$
Da Ju Fiber Corporation	$586,000	$280,000	2.17-4.1	$ 7,811
Malaysia Garment Manufactures PTE Ltd.	256,196	256,196	0-6.38786	4,474
Flying Dutchman Ltd.	62,784	62,784	0-6.38786	1,522
Yue Ding Industry Co., Ltd.	6,000	—	2.49-2.87	20
		$598,980		$13,827
	Year Ended December 31, 2008
	Highest Outstanding Balance	Balance on December 31, 2008	Interest Rate (%)	Interest Revenue
	NT$	NT$	NT$
Da Ju Fiber Corporation	$280,000	$277,000	2.55-2.83	$ 7,268
Malaysia Garment Manufactures PTE Ltd.	275,061	275,061	0-5.6248	3,862
Yue Ding Industry Co., Ltd.	152,000	120,000	2.55-2.83	2,281
Pacific Petrochemical (Holding) Ltd.	891,420	—	2.55-5.6248	3,144
		$672,061		$16,555

Year Ended December 31, 2009

	Highest Outstanding Balance		Balance on December 31, 2009		Interest Rate (%)	Interest Revenue
	NT$	US$ (Note 3)	NT$	US$ (Note 3)		NT$	US$ (Note 3)
Da Ju Fiber Corporation	$277,000	$8,881	$148,000	$ 4,745	1.05-2.69	$3,322	$107
Malaysia Garment
Manufactures PTE Ltd.	268,259	8,601	268,259	8,601	0-2.78917	2,630	84
Yue Ding Industry Co., Ltd.	160,000	5,130	10,000	321	1.05-2.69	1,935	62
			$426,259	$13,667		$7,887	$253

Financing from affiliates:

Year Ended December 31, 2007

	Highest Outstanding Balance	Balance on December 31, 2007	Interest Rate (%)	Interest Expense
	NT$	NT$		NT$
Notes and accounts payable to affiliates
Oriental Union Chemical Corp.	$979,021	$ 973,826	3	$27,404
Far Eastern International Leasing Corp. (BVI)	703,537	703,537	3.9	23,792
		$1,677,363		$51,196
	Year Ended December 31, 2008
	Highest Outstanding Balance	Balance on December 31, 2008	Interest Rate (%)	Interest Expense
	NT$	NT$		NT$
Notes and accounts payable to affiliates Pacific Petrochemical (Holding) Ltd.	$780,640	$780,640	—	$—

Year Ended December 31, 2009

	Highest Outstanding Balance		Balance on December 31, 2009		Interest Rate (%)	Interest Expense
	NT$	US$ (Note 3)	NT$	US$ (Note 3)		NT$	US$ (Note 3)
Notes and accounts payable to affiliates Pacific Petrochemical (Holding) Ltd.	$658,994	$21,128	$102,368	$3,282	—	$—	$—

a. The relationship between the Group and the related parties. Please refer to schedule C.
b. The Company, Asia Cement Corporation ("ACC") and Yuan Ding Co., Ltd. ("Yuan Ding") proportionally co-own the ownership of the building named Metro Tower. Under the agreement, Yuan Ding was authorized to construct the building on this land. In addition, Yuan Ding proportionally registered the ownership of the building and distributed the rents from the lessees of the building to the Company and ACC instead of land rent. Since the Company acquired 12% of ownership of the building, the Company has recognized as deferred income and as rent revenue over the right of superficies period. The ownership of the building had been transferred on September 2, 2003. Please refer to Note 16.
c. The unrealized gain from the right of superficies which Far Eastern Resources Development Co. granted to Far Eastern Y.Z. Science and Technology Memorial Foundation was presented on Note 16.

d. The unrealized gain resulted from the sale of lands and buildings to Oriental Securities Corp.

e. The transaction with the related-parties was not over 5% of total amount of the account.

f. On March 3, 2009, the subsidiary, Far Eastern Resources Development Co., sold the land in Ya-Tung Section of Banciao to Far Eastern Medical Foundation for NT$448,329 thousand (US$ 14,374 thousand) in order to start the construction of its new medical building. The gain on this transaction brought NT$331,124 thousand (US$ 10,616 thousand) to the subsidiary.

g. Except for the description in Note 15, New Century InfoComm Tech Co., Ltd. bought the bond issued by the subsidiary, Yuan Ding Investment Co., Ltd., through private placement on August 14, 2009 for NT$990,000 thousand (US$31,741 thousand) (Please refer to Note 23). As of December 31, 2009, the interest payable amounted to NT$7,594 thousand (US$243 thousand), and the interest expense amounted to NT$7,594 thousand (US$243 thousand) for the year ended December 31, 2009.

h. The terms of significant transactions given to the related parties were the same as the third parties.

F-375

^{}[] SCHEDULE F

^{}[] FINANCING PROVIDED

^{}[] YEAR ENDED DECEMBER 31, 2009

^{}[] (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Financier

Counter-party

Financial Statement Account

Highest Balance for the Period

Ending Balance

Interest Rate (%)

Nature of Financing (Note A)

Transaction Amount

Reason for the Financing

Allowance for Doubtful Accounts

Collateral

Amount of Individual Company's Financial Limits

Amount of Financing Company's Financial Limits

Item

Value

Yuan Ding Investment Co., Ltd.

An Ho Garment Co., Ltd.

Receivables from related parties

$16,000

$—

2.13%-2.69%

$—

For revolving fund

$—

Promissory note

$—

$1,831,628 (Note B)

$18,316,280 (Note E)

Da Ju Fiber Co., Ltd.

277,000

—

2.13%-2.69%

—

For revolving fund

—

Promissory note

—

1,831,628 (Note B)

18,316,280 (Note E)

Oriental Textile (Holding) Ltd.

868,571

—

2.69%

—

For revolving fund

—

Promissory note

—

1,831,628 (Note B)

18,316,280 (Note E)

Yue Ding Industry Co., Ltd.

160,000

—

1.53%-2.69%

—

For revolving fund

—

Promissory note

—

1,831,628 (Note B)

18,316,280 (Note E)

Yuan Tong Investment Co., Ltd.

226,000

—

1.53%-1.67%

—

For revolving fund

—

Promissory note

—

1,831,628 (Note B)

18,316,280 (Note E)

Far Eastern Investment (Holding) Ltd.

Waldorf Services B.V.

Receivables from affiliates

US$800

—

For revolving fund

—

Promissory note

—

4,625,559 (Note C)

23,127,797 (Note G)

Far Eastern Polytex (Holding) Ltd.

US$12,000

2.11%

—

For revolving fund

—

Promissory note

—

4,625,559 (Note C)

23,127,797 (Note G)

Flying Dutchman Ltd.

Other receivables

US$1,936

0%-2.78917%

—

For revolving fund

—

Promissory note

—

4,625,559 (Note C)

23,127,797 (Note G)

F.E.T.G. Investment Antilles N.V.

Receivables from affiliates

US$11,397

US$6,292

2.11%-2.78917%

—

For revolving fund

—

Promissory note

—

4,625,559 (Note C)

23,127,797 (Note G)

Oriental Textile (Holding) Ltd.

US$30,400

US$23,400

2.11%-2.78917%

—

For revolving fund

—

Promissory note

—

4,625,559 (Note C)

23,127,797 (Note G)

Pet Far Eastern (Holding) Ltd.

US$20,000

US$2,666

2.11%-2.78917%

—

For revolving fund

—

Promissory note

—

4,625,559 (Note C)

23,127,797 (Note G)

Malaysia Garment

US$3,786

0%-2.78917%

—

For revolving fund

—

Promissory note

—

4,625,559 (Note C)

23,127,797 (Note G)

PET Far Eastern (M) Sdn. Bhd.

US$5,739

MYR19,206

2.11%-2.78917%

—

For revolving fund

—

Promissory note

—

4,625,559 (Note C)

23,127,797 (Note G)

Financier	Counter-party	Financial Statement Account	Highest Balance for the Period	Ending Balance	Interest Rate (%)	Nature of Financing (Note A)	Transaction Amount	Reason for the Financing	Allowance for Doubtful Accounts	Collateral Item	Value	Amount of Individual Company's Financial Limits	Amount of Financing Company's Financial Limits
	Far Eastern Polychem Industries Ltd.	Receivables from affiliates	US$50,000	US$50,000	2.11%-2.78917%	2	—	For revolving fund	—	Promissory note	—	$4,625,559 (Note C)	$23,127,797 (Note G)
	Far Eastern Apparel (Vietnam) Ltd.	”	US$2,500	US$2,500	0%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	23,127,797 (Note G)
Ding Yuan International Investment Co., Ltd.	An Ho Garment Co., Ltd.	Receivables from related parties	100,000	—	1.03%-2.12%	2	—	For revolving fund	—	Promissory note	—	121,198 (Note B)	1,211,984 (Note E)
Ding Yuan International Investment Co., Ltd.	Yuan Tong Investment Co., Ltd.	”	90,000	90,000	1.56%	2	—	For revolving fund	—	Promissory note	—	121,198 (Note B)	1,211,984 (Note E)
Far Eastern Polychem Industries Ltd.	Far Eastern Industries (Shanghai) Ltd.	Receivables from affiliates	US$69,000	US$69,000	0%	1	HK$1,747,476	—	—	Promissory note	—	46,255,594 (Note H)	46,255,594 (Note H)
Far Eastern Polychem Industries Ltd.	Far Eastern Industries (Suzhou) Ltd.	”	US$10,000	US$10,000	0%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)
Far Eastern Apparel (Holding) Ltd.	Far Eastern Spinning Waving and Dyeing (Suzhou) Ltd.	Receivables from affiliates	US$11,500	US$8,000	0%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)
	Far Eastern Apparel (Suzhou) Ltd.	”	US$8,000	—	0%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)
	Far Eastern Investment (Holding) Ltd.	”	US$19,600	US$12,600	2.11%-2.78917%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)
F.E.T.G. Investment Antilles N.V.	Waldorf Services B.V.	Receivables from affiliates	US$11,519	US$6,406	2.11%-2.78917%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	$13,876,678 (Note D)
Waldorf Services B.V.	Malaysia Garment	Receivables from affiliates	US$4,600	US$4,600	0%	2	—	Set up PFEM funding	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)
Waldorf Services B.V.	Chuang Yuan Co. Ltd.	Other receivables	US$6,380	US$6,380	2.11%-2.78917%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)

Financier	Counter-party	Financial Statement Account	Highest Balance for the Period	Ending Balance	Interest Rate (%)	Nature of Financing (Note A)	Transaction Amount	Reason for the Financing	Allowance for Doubtful Accounts	Collateral		Amount of Individual Company's Financial Limits	Amount of Financing Company's Financial Limits
Financier	Counter-party	Financial Statement Account	Highest Balance for the Period	Ending Balance	Interest Rate (%)	Nature of Financing (Note A)	Transaction Amount	Reason for the Financing	Allowance for Doubtful Accounts	Item	Value	Amount of Individual Company's Financial Limits	Amount of Financing Company's Financial Limits
Oriental Textile (Holding) Ltd.	Far Eastern Industries (WuXi) Ltd.	Receivables from affiliates	US$36,800	US$25,000	0%	2	—	For revolving fund	—	Promissory note	—	$4,625,559 (Note C)	$13,876,678 (Note D)
	Oriental Industries (Suzhou) Ltd.	✓	US$20,000	US$4,000	0%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)
	Far Eastern Polychem Industries Ltd.	✓	US$16,000	US$7,000	2.11%-2.78917%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)
PET Far Eastern (Holding) Ltd.	Oriental Petrochemical (Shanghai) Ltd.	Receivables from affiliates	US$28,700	—	0%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)
F.E.D.P. (Holding) Ltd.	Far Eastern Industries (Suzhou) Ltd.	Receivables from affiliates	US$18,800	US$14,800	0%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)
Far Eastern Resources Development Co	An Ho Garment Co., Ltd.	Receivables from related parties	440,000	400,000	1.05%-2.48%	2	—	For revolving fund	—	Promissory note	—	873,173 (Note B)	8,731,733 (Note E)
	Kai Yuan International Investment Co., Ltd.	✓	400,000	400,000	1.05%-2.48%	2	—	For revolving fund	—	Promissory note	—	873,173 (Note B)	8,731,733 (Note E)
	Yuan Tong Investment Co., Ltd.	✓	400,000	400,000	1.05%-1.6%	2	—	For revolving fund	—	Promissory note	—	873,173 (Note B)	8,731,733 (Note E)
	Da Ju Fiber Co., Ltd.	✓	277,000	148,000	1.05%-1.6%	2	—	For revolving fund	—	Promissory note	—	873,173 (Note B)	8,731,733 (Note E)
	Yuan Ding Investment Co., Ltd.	✓	361,000	361,000	1.05%-1.25%	2	—	For revolving fund	—	Promissory note	—	873,173 (Note B)	8,731,733 (Note E)
	Yue Ding Industry Co., Ltd.	✓	10,000	10,000	1.05%	2	—	For revolving fund	—	Promissory note	—	873,173 (Note B)	8,731,733 (Note E)
Sino Belgium (Holding) Ltd.	Sino Belgium (Suzhou) Ltd.	Receivables from affiliates	US$29,000	US$26,500	0%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)
	Martens Beers Trading (Shanghai) Ltd.	✓	US$1,800	US$1,800	0%	2	—	For revolving fund	—	Promissory note	—	4,625,559 (Note C)	13,876,678 (Note D)

Financier

Counter-party

Financial Statement Account

Highest Balance for the Period

Ending Balance

Interest Rate (%)

Nature of Financing (Note A)

Transaction Amount

Reason for the Financing

Allowance for Doubtful Accounts

Collateral

Amount of Individual Company's Financial Limits

Amount of Financing Company's Financial Limits

Item

Value

Far Eastern Polytex (Holding) Ltd.

Wuhan Far Eastern New Material Ltd.

US$12,000

—

For revolving fund

—

Promissory note

—

$4,625,559 (Note C)

$13,876,678 (Note D)

Far Eastern Apparel (Suzhou) Ltd.

Sino Belgium (Suzhou) Ltd.

Receivables from affiliates

US$7,000

—

2.88%

—

For revolving fund

—

Promissory note

—

4,625,559 (Note C)

13,876,678 (Note D)

Oriental Petrochemical (Shanghai) Ltd.

Far Easter Industries (Shanghai) Ltd.

Receivables from affiliates

RMB100,000

—

4.86%

RMB1,540,069

—

Promissory note

—

RMB818,037 (Note F)

Notes:
A. Reasons for financing are as follows:
1. Business relationship.
2. For short-term financing.
B. The upper limit is equivalent to 5% of the net value of the financier (after the auditor's review) as of December 31, 2009.
C. The upper limit is equivalent to 5% of the net value of FENC (after the auditor's review) as of December 31, 2009.
D. The upper limit is equivalent to 15% of the net value of FENC (after the auditor's review) as of December 31, 2009.
E. The upper limit is equivalent to 50% of the net value of the financier (after the auditor's review) as of December 31, 2009. If necessary for short-term financing, the upper limit is equivalent to 15%.
F. The upper limit is the lower amount of 50% of the net value of the financier (after the auditor's review) or business transaction amount between both parties as of December 31, 2009.
G. The upper limit is equivalent to 25% of the net value of FENC (after the auditor's review) as of December 31, 2008.
H. The upper limit is the lower amount of 50% of the net value of FENC (after the auditor's review) or business transaction amount between both parties as of December 31, 2009.

^{}[] SCHEDULE G

^{}[] ENDORSEMENT/GUARANTEE PROVIDED

^{}[] YEAR ENDED DECEMBER 31, 2009

^{}[] (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Endorsement/Guarantee Provider	Counter-party		Limits on Each Counter-party's Endorsement/ Guarantee Amounts	Maximum Balance for the Period	Ending Balance	Value of Collateral Property, Plant, or Equipment	Ratio of Accumulated Amount of Collateral to Net Equity of the Latest Financial Statements (%) (Note O)	Maximum Collateral/ Guarantee Amounts Allowable
Endorsement/Guarantee Provider	Name	Nature of Relationship		Maximum Balance for the Period	Ending Balance	Value of Collateral Property, Plant, or Equipment		Maximum Collateral/ Guarantee Amounts Allowable
Far Eastern New Century Corporation	Yuan Ding Investment Co., Ltd.	(Note A)	$46,255,594 (Note G)	$9,646,300	$9,646,300	$—	10	$92,511,188 (Note H)
Far Eastern New Century Corporation	Pacific SOGO Department Store Co., Ltd.	(Note C)	46,255,594 (Note G)	280,719	—	—	—	92,511,188 (Note H)
Yuan Ding Investment Co., Ltd.	Pacific SOGO Department Store Co., Ltd.	(Note C)	18,316,280 (Note G)	1,650,000	—	—	—	36,632,559 (Note H)
	Da Ju Fiber Co., Ltd.	(Note B)	18,316,280 (Note G)	144,000	144,000	—	—	36,632,559 (Note H)
	Oriental Resources Development Ltd.	(Note A)	18,316,280 (Note G)	139,000	89,000	—	—	36,632,559 (Note H)
	Far Eastern Apparel Co., Ltd.	(Note A)	18,316,280 (Note G)	135,000	135,000	—	—	36,632,559 (Note H)
	Oriental Textile (Holding) Ltd. (O.T (H))	(Note A)	18,316,280 (Note G)	1,236,900	1,223,980	—	1	36,632,559 (Note H)
	Far Eastern Apparel (Holding) Ltd.	(Note A)	18,316,280 (Note G)	1,063,755	901,880	—	1	36,632,559 (Note H)
	Oriental Industries (Suzhou) Ltd.	(Note A)	18,316,280 (Note G)	1,256,190	1,256,190	—	1	36,632,559 (Note H)

Counter-party			Limits on Each Counter-party's Endorsement/ Guarantee Amounts	Maximum Balance for the Period	Ending Balance	Value of Collateral Property, Plant, or Equipment	Ratio of Accumulated Amount of Collateral to Net Equity of the Latest Financial Statements (%) (Note O)	Maximum Collateral/ Guarantee Amounts Allowable
Endorsement/Guarantee Provider	Name	Nature of Relationship		Maximum Balance for the Period	Ending Balance	Value of Collateral Property, Plant, or Equipment		Maximum Collateral/ Guarantee Amounts Allowable
Far Eastern Industries (Suzhou) Ltd.	Oriental Industries (Suzhou) Ltd.	(Note P)	$46,255,594 (Note O)	US$6,000	US$6,000	—	—	$92,511,188 (Note M)
Ding Yuan International Investment Co., Ltd.	Pacific SOGO Department Store Co., Ltd.	(Note C)	46,255,594 (Note K)	37,629	—	—	—	92,511,188 (Note I)
Kai Yuan International Investment Co., Ltd.	Pacific SOGO Department Store Co., Ltd.	(Note C)	46,255,594 (Note K)	37,629	—	—	—	92,511,188 (Note I)
Far Eastern Polychem Industries Ltd.	Far Eastern Industries (Shanghai) Ltd.	(Note P)	46,255,594 (Note O)	RMB510,000	RMB420,000	—	2	92,511,188 (Note M)
Far Eastern Polychem Industries Ltd.	Far Eastern Industries (Suzhou) Ltd.	(Note E)	46,255,594 (Note O)	US$67,500	US$27,500	—	—	92,511,188 (Note M)
Far Eastern Construction Co., Ltd.	Far Eastern General Contractor Co., Ltd.	(Note A)	9,832,410 (Note L)	2,450,600	2,101,000	—	2	9,832,410 (Note L)
Far Eastern Apparel (Holding) Ltd.	Far Eastern Spinning Wearing and Dyeing (Suzhou) Ltd.	(Note A)	46,255,594 (Note O)	RMB41,500	—	—	—	92,511,188 (Note M)
Far Eastern General Contractor Ltd.	Far Eastern Construction Co., Ltd.	(Note D)	4,560,939 (Note L)	100,000	—	—	—	4,560,939 (Note L)
An Ho Garment Co., Ltd.	Pacific SOGO Department Store Co., Ltd.	(Note C)	46,255,594 (Note K)	20,313	—	—	—	92,511,188 (Note I)

Endorsement/Guarantee Provider	Name	Nature of Relationship	Limits on Each Counter-party's Endorsement/ Guarantee Amounts	Maximum Balance for the Period	Ending Balance	Value of Collateral Property, Plant, or Equipment	Ratio of Accumulated Amount of Collateral to Net Equity of the Latest Financial Statements (%) (Note O)	Maximum Collateral/ Guarantee Amounts Allowable
Yuan Tong Investment Co., Ltd.	Pacific SOGO Department Store Co., Ltd.	(Note C)	$46,255,594 (Note K)	$37,629	$—	—	—	$92,511,188 (Note I)
Yuan Tong Investment Co., Ltd.	Sino Belgium (Holding) Ltd.	(Note A)	46,255,594 (Note K)	1,748,250	1,610,500	—	2	92,511,188 (Note I)
Far EasTone Telecommunications Co., Ltd.	KG Telecommunications Co., Ltd.	(Note A)	35,771,294 (Note G)	450,000	450,000	—	—	71,542,587 (Note H)
	KGEx.com	(Note A)	35,771,294 (Note G)	45,000	45,000	—	—	71,542,587 (Note H)
	Q-Ware Communication Corp.	(Note A)	35,771,294 (Note G)	149,840	149,840	—	—	71,542,587 (Note H)
Far Eastern Apparel (Suzhou) Ltd.	Far Eastern Spinning Weaving and Dyeing (Suzhou) Ltd.	(Note E)	46,255,594 (Note O)	RMB140,400	RMB110,000	—	1	92,511,188 (Note M)
Far Eastern Industries (Shanghai) Ltd.	Far Eastern Industries (Suzhou) Ltd.	(Note E)	RMB1,413,975 (Note H)	RMB280,000	RMB160,000	—	1	RMB2,827,949 (Note Q)
	Wuhan Far Eastern New Material Ltd.	(Note P)	RMB1,413,975 (Note H)	RMB110,000	RMB110,000	—	1	RMB2,827,949 (Note Q)
	Everest Textile (Shanghai) Ltd.	(Note P)	RMB1,413,975 (Note H)	RMB100,000	RMB80,000	—	—	RMB2,827,949 (Note Q)
Oriental Textile (Holding) Ltd. (O.T (H))	Far Eastern Industries (Wuxi) Ltd.	(Note A)	46,255,594 (Note O)	US$30,000 RMB425,500	US$3,750 RMB195,000	—	1	92,511,188 (Note M)
Oriental Textile (Holding) Ltd. (O.T (H))	Oriental Industries (Suzhou) Ltd.	(Note A)	46,255,594 (Note O)	US$93,000 RMB50,000	US$69,000 RMB50,000	—	3	92,511,188 (Note M)

Endorsement/Guarantee Provider	Counter-party		Limits on Each Counter-party's Endorsement/ Guarantee Amounts	Maximum Balance for the Period	Ending Balance	Value of Collateral Property, Plant, or Equipment	Ratio of Accumulated Amount of Collateral to Net Equity of the Latest Financial Statements (%) (Note O)	Maximum Collateral/ Guarantee Amounts Allowable
Endorsement/Guarantee Provider	Name	Nature of Relationship		Maximum Balance for the Period	Ending Balance	Value of Collateral Property, Plant, or Equipment		Maximum Collateral/ Guarantee Amounts Allowable
PET Far Eastern (Holding) Ltd.	Oriental Petrochemical (Shanghai) Co., Ltd.	(Note F)	$46,255,594 (Note O)	US$40,226 RMB122,500	US$28,166	$—	1	$92,511,188 (Note M)
Far Eastern Polytex (Holding) Ltd.	Far Eastern Apparel (Suzhou) Ltd.	(Note A)	46,255,594 (Note O)	RMB30,400	RMB30,000	—	—	92,511,188 (Note M)
KG Telecommunications Co., Ltd.	Far EasTone Telecommunications Co., Ltd.	(Note D)	15,286,749 (Note G)	1,240,000	1,240,000	—	1	30,573,498 (Note H)
Far Eastern Resources Development Co	Far Eastern New Century Corp.	(Note D)	46,255,594 (Note K)	12,311,748	10,001,748	9,887,598	11	92,511,188 (Note I)
Far Eastern New Century (China) Investment Ltd.	Oriental Petrochemical (Shanghai) Co., Ltd.	(Note F)	46,255,594 (Note O)	US$1,217	US$1,217	—	—	92,511,188 (Note M)
FEDP (Holding) Ltd.	Far Eastern Industries (Suzhou) Ltd.	(Note A)	46,255,594 (Note O)	RMB50,000	RMB50,000	—	—	92,511,188 (Note M)
Wuhan Far Eastern New Material Ltd.	Far Eastern Industries (Shanghai) Ltd.	(Note P)	US$20,777 (Note J)	RMB100,000	RMB100,000	—	1	US$20,777 (Note J)
Far Eastern Spinning Weaving and Dyeing (Suzhou) Ltd.	Far Eastern Apparel (Suzhou) Ltd.	(Note P)	46,255,594 (Note O)	RMB30,000	RMB30,000	—	—	92,511,188 (Note M)

^{}[] F-384

Notes:

A. The subsidiary whose more than 50% of the common shares holding is directly or indirectly owned by the parent company.
B. Equity-method investees.
C. Investee of an equity-method investee.
D. Parent company of the investee.
E. The subsidiary has the same ultimate parent company owning 100% of the ownership and direct or indirect votes.
F. The subsidiary is proportionally guaranteed by the investors with different percentage of the ownership.
G. Collateral/guarantee is equivalent to 50% of the net value of the guarantor (after the auditor's review) as of December 31, 2009.
H. Limit is calculated using the net value of the guarantor (after the auditor's review) as of December 31, 2009.
I. Limit is computed using the net value of parent company (after the auditor's review) as of December 31, 2009.
J. Collateral/guarantee is equivalent to 20% of the net value of the parent company (after the auditor's review) as of December 31, 2009.
K. Collateral/guarantee is equivalent to 50% of the net value of FENC (after the auditor's review) as of December 31, 2009.
L. Collateral/guarantee is equivalent to 300% of the net value of the guarantor (after the auditor's review) as of December 31, 2009.
M. Collateral/guarantee is equivalent to the net value of FENC (after the auditor's review) as of December 31, 2009.
N. The ratio is calculated is in accordance with the Regulations Governing Loaning of Funds and Marking of Endorsements/Guarantees by Public Companies.
O. Collateral/guarantee is equivalent to 50% of the net value of FENC (after the auditor's review) as of December 31, 2009.
P. Business relationship.
Q. Collateral/guarantee is equivalent to 200% of the net value of the guarantor (after the auditor's review) as of December 31, 2009.

^{}[] SCHEDULE H

MARKETABLE SECURITIES AND INVESTMENTS IN SHARES OF STOCK HELD

DECEMBER 31, 2009

Holding Company	Securities Type and Issuer/Name	Relationship with the Holding Company	Financial Statement Account	December 31, 2009				Note
Holding Company	Securities Type and Issuer/Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units (All Common Shares unless Stated Otherwise) (Thousands)	Carrying Value	Percentage of Ownership (%)	Market Value or Net Asset Value	Note
Far Eastern New Century Corporation	Asia Cement Corporation	(Note A)	Equity-method investments	666,632	$12,500,165	22.33	$23,065,492	22,288 thousand shares pledged or mortgaged as collaterals for loans
	Far Eastern Department Stores Co., Ltd.	(Note A)	Equity-method investments	203,659	3,877,699	16.80	7,474,248	—
	Oriental Union Chemical Corporation	(Note A)	Equity-method investments	73,833	1,155,372	9.17	1,890,116	—
	Everest Textile Co., Ltd.	(Note A)	Equity-method investments	129	1,540	0.03	880	—
	Yuan Ding Investment Co., Ltd.	(Note A)	Equity-method investments	1,828,323	36,155,036	99.7	36,424,157	—
	Far Eastern Resources Development Co.	(Note A)	Equity-method investments	283,797	15,693,512	100.00	17,463,466	—
	Yuan Tong Investment Co., Ltd.	(Note A)	Equity-method investments	705,147	7,296,064	100.00	7,296,064	—
	Far Eastern Investment (Holding) Ltd.	(Note A)	Equity-method investments	1,700	5,238,743	100.00	5,238,743	—
	Far Eastern Polychem Industries Ltd.	(Note A)	Equity-method investments	493,631	4,185,668	59.81	4,185,668	—

^{}[] F-386

Securities Type and Issuer/Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units (All Common Shares unless Stated Otherwise) (Thousands)	Carrying Value	Percentage of Ownership (%)	Market Value or Net Asset Value	Note
Kai Yuan International Investment Co., Ltd.	(Note A)	Equity-method investments	291,196	$4,366,102	100.00	$4,366,102	—
Oriental Petrochemical (Taiwan) Co., Ltd.	(Note A)	Equity-method investments	337,678	3,875,245	75.56	3,922,249	—
Far Eastern Polytex (Holding) Ltd.	(Note A)	Equity-method investments	46	3,323,320	100.00	3,323,320	—
Yuan Ding Co., Ltd.	(Note A)	Equity-method investments	186,926	3,180,506	37.13	3,242,218	—
Far Eastern Construction Co., Ltd.	(Note A)	Equity-method investments	154,372	2,078,321	65.11	2,133,961	—
Ding Yuan International Investment Co., Ltd.	(Note A)	Equity-method investments	205,000	2,412,433	100.00	2,423,968	—
Oriental Securities Corp.	(Note A)	Equity-method investments	140,278	2,066,710	19.65	2,060,391	40,000 thousand shares pledged or mortgaged as collaterals for loans
PET Far Eastern (Holding) Ltd.	(Note A)	Equity-method investments	117	1,996,083	49.42	1,996,083	—
An Ho Garment Co., Ltd.	(Note A)	Equity-method investments	66,346	1,537,449	100.00	1,606,426	—
Pacific Liu Tung Investment Corp.	(Note A)	Equity-method investments	67,500	1,165,944	16.83	1,073,855	—
Fu Kwok Garment Manufacturing Co., Ltd.	(Note A)	Equity-method investments	3,999	128,923	99.99	132,253	—
Ding Ding Hotel Co., Ltd.	(Note A)	Equity-method investments	5,386	28,962	19.00	28,962	—
New Century InfoComm Tech Co., Ltd.	(Note A)	Equity-method investments	2,605	26,078	0.10	25,831	—

^{}[] F-387

Holding Company	Securities Type and Issuer/Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units (All Common Shares unless Stated Otherwise) (Thousands)				Market Value or Net Asset Value	Note
Holding Company	Securities Type and Issuer/Name	Relationship with the Holding Company	Financial Statement Account	Carrying Value	Percentage of Ownership (%)			Market Value or Net Asset Value	Note
Yuan Ding Investment Co., Ltd.	Hantech Venture Capital Corp.	—	Financial assets carried at cost	4,939	$53,667	3.73	$62,740	—
	Far Eastern International Bank	(Note C)	Available-for-sale financial assets - noncurrent	60,241	722,890	2.57	722,890	—
	Oriental Union Chemical Corporation	(Note A)	Equity-method investments	73,614	1,234,120	9.14	1,884,525	—
	Everest Textile Co., Ltd.	(Note A)	Equity-method investments	118,869	1,156,375	25.23	809,500	—
	Asia Cement Corporation	(Note A)	Equity-method investments	4,135	66,207	0.14	143,056	—
	Far Eastern Department Stores Co., Ltd.	(Note A)	Equity-method investments	4,806	132,492	0.40	176,366	—
	Far EasTone Telecommunications Co., Ltd.	(Note A)	Equity-method investments	1,066,658	23,371,725	32.73	40,692,988	43,145 thousand shares pledged or mortgaged as collaterals for short-term loans
	Oriental Textile (Holding) Ltd.	(Note A)	Equity-method investments	90	5,277,067	100.00	5,277,067	—
	Far Eastern Polychem Industries Ltd.	(Note A)	Equity-method investments	331,717	2,812,608	40.19	2,812,608	—
	Oriental Securities Corp.	(Note A)	Equity-method investments	185,040	2,831,933	25.93	2,718,878	112,850 thousand shares pledged or mortgaged as collaterals for short-term loans
	Far Eastern Apparel (Holding) Ltd.	(Note A)	Equity-method investments	95	1,934,377	100.00	1,934,377	—
	Air Liquide Far Eastern Ltd.	(Note A)	Equity-method investments	69,115	1,136,367	35.00	1,134,000	—

^{}[] F-388

Holding Company	Securities Type and Issuer/Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units (All Common Shares unless Stated Otherwise) (Thousands)	Carrying Value	Percentage of Ownership (%)	Market Value or Net Asset Value	Note
	New Century InfoComm Tech Co., Ltd.	(Note A)	Equity-method investments	100,694	$1,007,911	3.87	$1,006,944	—
	Yuan Ding Co., Ltd.	(Note A)	Equity-method investments	64,759	1,099,336	12.86	1,122,944	43,500 thousand shares pledged or mortgaged as collaterals for short-term loans
	Pacific Liu Tung Investment Corp. (Note G)	(Note A)	Equity-method investments	59,827	946,933	14.92	951,985	—
	Far Eastern International Leasing Corp.	(Note A)	Equity-method investments	75,269	1,001,832	16.87	1,013,369	—
	Far Eastern Fibertech Co., Ltd.	(Note A)	Equity-method investments	66,673	726,257	100.00	716,293	—
	Pacific Petrochemical (Holding) Ltd.	(Note A)	Equity-method investments	20	709,848	24.63	709,848	—
	Yuan Ding Leasing Co.	(Note A)	Equity-method investments	36,706	359,363	46.20	361,001	—
	Far Eastern Apparel Co., Ltd.	(Note A)	Equity-method investments	19,664	356,448	100.00	356,346	—
	Da Ju Fiber Co., Ltd.	(Note A)	Equity-method investments	17,182	513,180	41.86	523,395	—
	Freudenberg Far Eastern Spunweb Co., Ltd.	(Note A)	Equity-method investments	13,053	274,931	29.80	274,647	—
	Oriental Resources Development Ltd.	(Note A)	Equity-method investments	21,322	130,963	70.32	134,885	—
	Oriental Petrochemical (Taiwan) Co., Ltd.	(Note A)	Equity-method investments	23,222	258,218	5.20	269,927	—
Yuan Faun Ltd.	(Note A)	Equity-method investments	5,000	104,778	100.00	102,755	—

^{}[] F-389

^{}[] F-390

^{}[] F-391

^{}[] F-392

^{}[] F-393

^{}[] F-394

^{}[] F-395

^{}[] F-396

^{}[] F-397

Holding Company	Securities Type and Issuer/Name	Relationship with the Holding Company	Financial Statement Account	Shares or Units (All Common Shares unless Stated Otherwise) (Thousands)	Carrying Value	Percentage of Ownership (%)	Market Value or Net Asset Value	Note
Holding Company	Capital Income Fund	—	Financial assets at fair value through profit or loss - current	8,629	$133,009	—	$133,009	—
	PAC Well Pool Fund	—	Financial assets at fair value through profit or loss - current	11,554	150,011	—	150,011	—
F.E.T.G. Investment Antilles N.V.	Waldorf Services B.V.	(Note A)	Equity-method investments	2	US$9,846	100.00	US$9,846	—
Waldorf Services B.V.	Cemtex Apparel Inc.	(Note A)	Equity-method investments	90	US$(143)	50.00	PHP(6,461)	—
	Malaysia Garment Manufactures Pte. Ltd.	(Note A)	Equity-method investments	30	US$1,408	37.90	SGD1,972	—
	Far Eastern International Garments	(Note A)	Equity-method investments	59	US$(847)	41.00	PHP(38,156)	—
	Alberta & Orient Glycol Co., Ltd.	—	Financial assets carried at cost	0.3	US$4,304	25.00	US$—	—
	Filsyn Corporation	—	Financial assets carried at cost	20,513	US$—	9.95	PHP(1,103)	—
An Ho Garment Co., Ltd.	Far Eastone Telecommunications Co., Ltd.	(Note A)	Equity-method investments	80,172	1,943,414	2.46	3,058,524	44,329 thousand shares pledged or mortgaged as collaterals for loans

^{}[] F-398

^{}[] F-399

^{}[] F-400

^{}[] F-401

^{}[] F-402

^{}[] F-403

^{}[] F-404

^{}[] F-405

^{}[] F-406

^{}[] F-407

^{}[] F-408

^{}[] F-409

^{}[] F-410

^{}[] F-411

Notes:

A. Equity-method investee.
B. Investor company and investee have the same chairman.
C. The vice chairman of investee is the chairman of FENC.
D. The investee of the investee 100% owned by the Group.
E. Under assets management contract and the financial assets can be sold in open market by the investee, Oriental Securities Corp.
F. The chairman of the investee is the board directors of FENC.
G. The holding company opened a trust account in Shanghai Bank on September 26, 2002 to buy the share holding of Pacific Liu Tung Investment Corp.
H. The private company.
I. Institutional director of the investee is FENC.
J. Equity-method investee of the parent company.

^{}[] SCHEDULE I

SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE CAPITAL STOCK

Company Name	Securities Type and Issuer	Financial Statement Account	Counter-party	Nature of Relationship	Beginning Balance		Acquisition		Disposal				Investment Income under the Equity- Method	Ending Balance
Company Name	Securities Type and Issuer	Financial Statement Account	Counter-party	Nature of Relationship	Shares (Thousands)/ Thousand Units	Amount	Shares (Thousands) (Note A)	Amount	Shares (Thousands)	Price	Book Value	Disposal Gain	Investment Income under the Equity- Method	Shares (Thousands)/ Thousand Units	Amount
Far Eastern New Century Corporation	Asia Cement Corporation	Equity-method investments	Open market	—	697,216	$11,522,853	—	$—	50,000	$1,581,150	$891,500	$689,650	$1,868,812	666,632	$12,500,165
	Asia Cement Corporation	Equity-method investments	Stock dividend	—	—	—	19,416	—	—	—	—	—	—	—	—
	Far Eastern Polytex (Holding) Ltd.	Equity-method investments	Issuance of stock by cash	—	41	2,900,781	5	330,150	—	—	—	—	92,389	46	3,323,320
	Far Eastern Polychem Industries Ltd.	Equity-method investments	Issuance of stock by cash	—	451,476	4,142,822	42,155	373,364	—	—	—	—	(330,518)	493,631	4,185,668
Yuan Ding Investment Co., Ltd.	Asia Cement Corporation	Equity-method investments	Open market	—	14,782	284,046	6,350	184,732	17,631	634,407	412,502	221,757	9,931	4,135	66,207
	Asia Cement Corporation	Equity-method investments	Stock dividend	—	—	—	634	—	—	—	—	—	—	—	—
	Oriental Union Chemical Corporation	Equity-method investments	Open market	—	73,373	1,104,978	5,949	90,806	5,708	138,372	92,251	48,623	130,587	73,614	1,234,120
	Da Ju Fiber Co., Ltd.	Equity-method investments	Issuance of stock by cash	—	11,880	263,490	5,302	127,258	—	—	—	—	122,432	17,182	513,180
	Shin Kong Financial Holding Co., Ltd.	Available-for-sale financial assets-current	Open market	—	10,000	76,928	—	—	10,000	109,181	76,929	32,252	—	—	—

Company Name	Securities Type and Issuer	Financial Statement Account	Counter-party	Nature of Relationship	Beginning Balance		Acquisition		Disposal				Investment Income under the Equity- Method	Ending Balance
Company Name	Securities Type and Issuer	Financial Statement Account	Counter-party	Nature of Relationship	Shares (Thousands)/ Thousand Units	Amount	Shares (Thousands) (Note A)	Amount	Shares (Thousands)	Price	Book Value	Disposal Gain	Investment Income under the Equity- Method	Shares (Thousands)/ Thousand Units	Amount
Far Eastern Construction Co., Ltd.	Mega Bond Fund	Financial assets at fair value through profit or loss - current	—	—	—	$—	25,211	$300,000	25,211	$300,164	$300,000	$164	$—	—	$—
	Sino Pac Bond Fund	Financial assets at fair value through profit or loss - current	—	—	—	—	7,509	100,000	7,509	100,002	100,000	2	—	—	—
	UPAMC James Bond Fund	Financial assets at fair value through profit or loss - current	—	—	—	—	6,272	100,000	6,272	100,027	100,000	27	—	—	—
	Fubon Bond Fund	Financial assets at fair value through profit or loss - current	—	—	—	—	11,142	167,000	11,142	167,074	167,000	74	—	—	—
	Hua Nan Phoenix Bond Fund	Financial assets at fair value through profit or loss - current	—	—	—	—	11,176	174,000	11,176	174,028	174,000	28	—	—	—
	Capital Bond Fund	Financial assets at fair value through profit or loss - current	—	—	—	—	11,030	236,000	11,030	236,009	236,000	9	—	—	—
Far Eastern General Constructor Inc.	Invesco ROC Bond Fund	Financial assets at fair value through profit or loss - current	—	—	—	—	13,046	200,000	—	—	—	—	—	13,046	200,001
	UPAMC James Bond Fund	Financial assets at fair value through profit or loss - current	—	—	—	—	3,128	50,000	—	—	—	—	—	3,128	50,002
	Taishin Lucky Fund	Financial assets at fair value through profit or loss - current	—	—	—	—	9,408	100,000	—	—	—	—	—	9,408	100,001

^{}[] F-415

Company Name	Securities Type and Issuer	Financial Statement Account	Counter-party	Nature of Relationship	Shares (Thousands) / (Thousand Units)	Amount	Shares (Thousands) (Note A)	Amount	Shares (Thousands)	Price	Book Value	Disposal Gain	Investment Income under the Equity- Method	Shares (Thousands) / (Thousand Units)	Amount
Yuan Tong Investment Co., Ltd.	Fubon Bond Fund	Financial assets at fair value through profit or loss - current	—	—	—	$—	13,312	$199,500	13,312	$199,522	$199,500	$22	$—	—	$—
	Shin Kong Chi-Li Fund	Financial assets at fair value through profit or loss - current	—	—	—	—	6,986	120,000	6,986	120,001	120,000	1	—	—	—
	KGI Bond Fund	Financial assets at fair value through profit or loss - current	—	—	—	—	9,031	100,000	9,031	100,004	100,000	4	—	—	—
Bockhold N.V.	Bonds investments with no active market	Bookhold N.V.	—	—	—	—	293,454	—	—	—	—	—	—	—	293,454
	Bockhold N.V.	Financial assets carried at cost	Bookhold N.V.	—	—	—	1	223,533	—	—	—	—	—	1	223,533
	Far EasTone Telecommunications Co., Ltd.	Equity-method investments	Open market	—	91,088	2,286,401	20,914	789,519	—	—	—	—	(18,962)	112,002	3,056,958
	Far Eastern Department Stores Co., Ltd.	Equity-method investments	Open market	—	10,998	208,132	—	—	9,370	287,000	181,798	86,948	11,775	1,685	38,109
	Equity-method investments	Stock dividend	—	—	—	57	—	—	—	—	—	—	—	—	—
Far EasTone Telecommunications Co., Ltd.	New Century InfoComm Tech Co., Ltd.	Equity-method investments	Hantech Venture Capital Co., Ltd. and Han Yo Investment and Consultant Co., Ltd.	—	980,315	5,490,024	83,051	333,041	372,270 (NoteB)	—	—	—	176,953	691,096	6,000,018

^{}[] F-417

Notes:
A. The stock dividends were included in the shares acquired.
B. The shares is the holding shares of Far EasTone which have been sold by New Century InfoComm Tech Co., Ltd. to offset the deficit in August 2009.
C. The same chairman.

^{}[] SCHEDULE J

REAL ESTATE ACQUIRED AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE CAPITAL STOCK

Company Name	Real Estate	Trading Date	Trading Amount	Payment	Related Party	Nature of Relationship	Owner	Nature of Relationship	Date of Previous Estate Transfer	Trading Amount	Price Basis of the Transfer	Purpose or Existing Condition	Other Contract Items
Far Eastern Construction Co., Ltd.	Lot Number 1019 of the Hsin-Ya Section in Banciao, Taipei County	2009.12.23 (Note A)	$2,147,715	The full amount had been paid off by the end of 2009 (Note B)	Far Eastern Resources Development Co.	The same parent company	Far Eastern New Century Corp.	The Parent Company	2003.09.02	None	Refer to Appraisal Report provided by Great Eastern Real Estate Appraisers Firm and TeamCan Real Estate Appraisers Firm	Construction development	None

Notes:
A. The contract was signed on August 29, 2008 and the ownership had been transferred on December 23, 2009..
B. $214,771 thousand had been paid in 2008 and the rest of the payment was paid off in 2009.

F-418

^{}[] SCHEDULE K

REAL ESTATE SOLD AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE CAPITAL STOCK

Company Name	Real Estate	Trading Date	Acquiring Date	Trading Amount	Payment Amount	Payment	Gain (Loss)	Related Party	Nature of Relationship	Price Basis of the Transfer	Purpose	Other Contract Items
Far Eastern Resources Development Co.	Lot Number 988, 1007 of the Ya-Tong Section in Banciao, Taipei County	2009.03.09	2003.09.02	$167,336	$448,329	The full amount had been paid off by the end of 2009	$331,124 (Note A)	Far Eastern Y.Z. Hsu Science and Technology Memorial Foundation	The same chairman	A new medical building of Far Eastern Memorial Hospital	Refer to Appraisal Report provided by Great Eastern Real Estate Appraisers Firm and TeamCan Real Estate Appraisers Firm	None
	Lot Number 1019 of the Hsin-Ya Section in Banciao, Taipei County	2009.12.23 (Note B)	2003.09.02	554,010	2,147,715	The full amount had been paid off by the end of 2009 (Note C)	1,745,800 (Note D)	Far Eastern Construction Co., Ltd.	The same parent company	Construction development	Refer to Appraisal Report provided by Great Eastern Real Estate Appraisers Firm and TeamCan Real Estate Appraisers Firm	None

Note
A. The net income of deducting the sale amount $167,336 thousand and the land value increment tax $54,205 thousand from the payment amount $448,329 and reversing the allowance for land value increment tax $44,581 thousand and the unrealized revaluation increments $59,755 thousand.
B. The contract was signed on August 29, 2008 and the ownership had been transferred by December 23, 2009.
C. $214,771 thousand had been paid in 2008 and the rest of the payment was paid off by 2009.
D. The net income of deducting the trading amount $554,010 thousand and the land value increment tax $188,960 thousand from the payment amount $2,147,715 thousand and reversing the allowance for land value increment tax $146,332 thousand and the unrealized revaluation increments $194,723 thousand; the income (loss) from side-stream trading had been deferred.

^{}[] SCHEDULE L

^{}[] TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE CAPITAL STOCK

^{}[] (In Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship	Transaction Details				Abnormal Transaction		Notes Payable or Receivable		Accounts Payable or Receivable		Note
Company Name	Related Party	Nature of Relationship	Purchase/Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total	Ending Balance	% to Total	Note
Far Eastern New Century Corporation	Everest Textile Co., Ltd.	(Note A)	Sale	$(192,959)	—	30 to 90 days	$—	—	$21,792	4	$16,061	—
	Oriental Union Chemical Corporation	(Note A)	Purchase	931,735	3	Average 45 days	—	—	—	—	(94,962)	(3)
	Oriental Resources Development Ltd.	(Note F)	Purchase	155,580	—	30 days	—	—	—	—	—	—
	Freudenberg Far Eastern Spunweb Co., Ltd.	(Note H)	Sale	(288,165)	(1)	45 days	—	—	—	—	80,580	1
	Far Eastern Apparel (Suzhou) Ltd.	(Note H)	Sale	(131,020)	—	90 days	—	—	—	—	26,778	—
	Oriental Petrochemicals (Taiwan) Co., Ltd. (the former "INVISTA Far Eastern Petrochemicals Co., Ltd.")	(Note F)	Purchase	8,250,881	29	45 days	—	—	—	—	(572,155)	(18)
Far Eastern Polychem Industries Ltd.	Far Eastern Industries (Shanghai) Ltd.	(Note F)	Purchase	5,194,056	88	60 days	—	—	—	—	(1,552,726)	(96)
	Far Eastern Industries (Shanghai) Ltd.	(Note F)	Sale	(665,525)	(11)	60 days	—	—	—	—	—	—
	Oriental Petrochemicals (Taiwan) Co., Ltd. (the former "INVISTA Far Eastern Petrochemicals Co., Ltd.")	(Note G)	Purchase	666,948	11	60 days	—	—	—	—	—	—

Company Name	Related Party	Nature of Relationship	Transaction Details				Abnormal Transaction		Notes Payable or Receivable		Accounts Payable or Receivable		Note
Company Name	Related Party	Nature of Relationship	Purchase/Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total	Ending Balance	% to Total	Note
Far Eastern Construction Co., Ltd.	Far Eastern General Constructor Inc.	(Note F)	Purchase	$1,442,448	41	30 days	$—	—	$(194,926)	(99)	$—	—
Far Eastern General Constructor Inc.	Ya Tung Ready-Mixed Concrete Co., Ltd.	(Note N)	Purchase	593,662	11	45 days	—	—	(83,266)	(17)	(89,533)	(11)
	Far Eastern Construction Co., Ltd.	(Note E)	Construction income	(1,432,812)	(25)	60 days	—	—	2,308,339 (Note K)	12	194,926	37
	Far Eastern Department Stores Co., Ltd.	(Note O)	Construction income	(220,935)	(4)	30 days	—	—	473,037 (Note K)	2	44,180	8
	Far Eastern Resources Development Co.	(Note G)	Construction income	(178,057)	(3)	60 days	—	—	126,333 (Note K)	1	—	—
Far Eastern Apparel (Suzhou) Ltd.	Far Eastern New Century Corporation	(Note B)	Purchase	131,020	38	90 days	—	—	—	—	(26,778)	(44)
Far Eastern Apparel (Suzhou) Ltd.	Far Eastern Spinning Wearing and Dyeing (Suzhou) Ltd.	(Note G)	Purchase	317,283	10	60 days	—	—	—	—	(183,719)	(25)
Far EasTone Telecommunications Co., Ltd.	KG Telecommunication Co., Ltd.	(Note F)	Operating revenue	(3,128,129)	(6)	For contract	—	—	—	—	438,482	7
	KG Telecommunication Co., Ltd.	(Note F)	Operating cost	1,073,889	5	For contract	—	—	—	—	(142,806)	(6)
	Arcoa Communication Co., Ltd.	(Note F)	Operating commissions, revenue, and service revenue	(315,215)	(1)	For contract	—	—	—	—	203,027	3
	Arcoa Communication Co., Ltd.		Purchase and service cost	2,325,811	6	For contract	—	—	—	—	Accounts payable and accrued expense (225,755)	(4)
	KGEx.com Co., Ltd.	(Note I)	Operating revenue	(198,362)	—	For contract	—	—	—	—	32,649	1
New Century InfoComm Tech Co., Ltd.	(Note A)	Operating revenue	(603,718)	(1)	For contract	—	—	—	—	—	Accounts receivable (Note C)	—

Company Name	Related Party	Nature of Relationship	Transaction Details				Abnormal Transaction		Notes Payable or Receivable		Accounts Payable or Receivable
			Purchase/Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total	Ending Balance	% to Total
			Operating cost	$532,217	2	For contract	$—	—	$—	—	Accounts payable and accrued expense (Note C) (206,153)	(4)
	Ding Ding Integrated marketing Service Co., Ltd.	(Note A)	Marketing expense	140,535	2	For contract	—	—	—	—	Accrued expense (63,021)	(2)
	Far Eastern Tech-info Ltd. (Shanghai)	(Note I)	Operating expense	144,930	50	For contract	—	—	—	—	Accrued expense (24,755)	(1)
Far Eastern Fibertech Co., Ltd.	Everest Textile Co., Ltd.	(Note L)	Sale	(103,480)	(7)	30 days	—	—	—	—	10,737	7
Far Eastern Apparel (Holding) Ltd.	Far Eastern Spinning Wearing and Dyeing (Suzhou) Ltd.	(Note F)	Purchase	273,423	99	60 days	—	—	—	—	(20,025)	(89)
Far Eastern Industries (Shanghai) Ltd.	Wu Han Far Eastern New Material Ltd.	(Note G)	Sale	(957,264)	(4)	60 days	—	—	—	—	366,844	10
	Wu Han Far Eastern New Material Ltd.	(Note G)	Purchase	113,969	1	60 days	—	—	—	—	(51,007)	(1)
	Oriental Industries (Suzhou) Ltd.	(Note G)	Purchase	1,729,210	9	60 days	—	—	—	—	(215,214)	(5)
	Oriental Petrochemical (Shanghai) Ltd.	(Note G)	Purchase	8,084,484	41	60 days	—	—	(1,434,764)	(100)	(896,691)	(24)
	Far Eastern Polychem Industries Ltd.	(Note E)	Sale	(5,194,056)	(23)	60 days	—	—	—	—	1,552,726	48
	Far Eastern Polychem Industries Ltd.	(Note E)	Purchase	665,525	3	60 days	—	—	—	—	—	—
	Oriental Petrochemicals (Taiwan) Co., Ltd. (the former "INVISTA Far Eastern Petrochemicals Co., Ltd.")	(Note G)	Purchase	2,715,896	14	90 days	—	—	—	—	(879,654)	(23)

Company Name	Related Party	Nature of Relationship	Transaction Details				Abnormal Transaction		Notes Payable or Receivable		Accounts Payable or Receivable
			Purchase/Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total	Ending Balance	% to Total
	Far Eastern Spinning Wearing and Dyeing (Suzhou) Ltd.	(Note G)	Sale	$(151,843)	(1)	60 days	$—	$—	$—	—	$42,716	1
	Far Eastern Industries (Suzhou) Ltd.	(Note G)	Purchase	806,610	5		—	—	—	—	(56,984)	(1)
	Everest Textile (Shanghai) Ltd.	(Note J)	Purchase	363,693	2	60 days	—	—	—	—	(173,838)	(5)
KG Telecommunication Co., Ltd.	Far EasTone Telecommunications Co., Ltd.	(Note E)	Operating revenue	(1,073,889)	(14)	For contract	—	—	—	—	Account receivable 142,806	17
			Operating cost	3,128,129	40	For contract	—	—	—	—	Account payable (438,482)	(60)
Arcoa Communication Co., Ltd.	Far EasTone Telecommunications Co., Ltd.	(Note E)	Operating commissions, revenue, and service revenue	(2,325,811)	(44)	For contract	—	—	—	—	Account receivable 225,755	72
			Purchase and service cost	315,215	7	For contract	—	—	—	—	Account payable (203,027)	(43)
KGEx.com Co., Ltd.	New Century InfoComm Tech Co., Ltd.	(Note L)	Operating revenue	(592,431)	(48)	For contract	—	—	—	—	Account receivable 113,439	53
	Far EasTone Telecommunications Co., Ltd.	(Note E)	Operating cost	198,362	15	For contract	—	—	—	—	Account payable (32,649)	(16)
Far Eastern Tech-info Ltd. (Shanghai)	Far EasTone Telecommunications Co., Ltd.	(Note E)	Service revenue	(144,930)	(93)	For contract	—	—	—	—	Account receivable 24,755	86

Company Name	Related Party	Nature of Relationship	Transaction Details				Abnormal Transaction		Notes Payable or Receivable		Accounts Payable or Receivable
Company Name	Related Party	Nature of Relationship	Purchase/Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total	Ending Balance	% to Total
Oriental Petrochemical (Taiwan) Co., Ltd. (the former "INVISTA Far Eastern Petrochemicals Co., Ltd.")	Far Eastern New Century Corporation	(Note B)	Sale	$(8,250,881)	36	45 days	$—	—	$—	—	$572,155	14
	Far Eastern Polychem Industries Ltd.	(Note G)	Sale	(666,948)	3	90 days	—	—	—	—	—	—
	Far Eastern Industries (Shanghai) Ltd.	(Note G)	Sale	(2,715,896)	12	90 days	—	—	—	—	879,654	21
	Far Eastern Industries (Suzhou) Ltd.	(Note G)	Sale	(113,743)	1	90 days	—	—	—	—	47,850	1
Oriental Industries (Suzhou) Ltd.	Far Eastern Industries (Suzhou) Ltd.	(Note G)	Purchase	3,073,071	82	90 days	—	—	(832,920)	100	(375,746)	(78)
	Oriental Textile (Holding) Ltd.	(Note E)	Sale	(747,733)	(19)	60 days	—	—	—	—	65,321	3
	Far Eastern Industries (Shanghai) Ltd.	(Note G)	Sale	(1,729,210)	(51)	90 days	—	—	—	—	215,214	39
Oriental Textile (Holding) Ltd.	Oriental Industries (Suzhou) Ltd.	(Note F)	Purchase	747,733	83	90 days	—	—	—	—	(65,321)	(40)
	Far Eastern Industries (Wuxi) Ltd.	(Note F)	Purchase	146,440	17	60 days	—	—	—	—	(97,129)	(60)
Far Eastern Apparel Co., Ltd.	Far Eastern Department Stores Co., Ltd.	(Note L)	Sale	(181,469)	(14)	45 to 90 days	—	—	—	—	—	—
	Pacific SOGO Department Stores Co., Ltd.	(Note M)	Sale	(157,068)	(12)	45 to 90 days	—	—	—	—	80,364	28
Oriental Resources Development Ltd.	Far Eastern New Century Corp.	(Note B)	Sale	(155,580)	(47)	90 days	—	—	—	—	—	—
Wu Han Far Eastern New Material Ltd.	Far Eastern Industries (Shanghai) Ltd.	(Note G)	Purchase	957,264	93	60 days	—	—	—	—	(366,844)	(85)
	Far Eastern Industries (Shanghai) Ltd.	(Note G)	Sale	(113,969)	(10)	90 days	—	—	—	—	51,007	48
Oriental Petrochemical (Shanghai) Ltd.	Far Eastern Industries (Shanghai) Ltd.	(Note G)	Sale	(8,084,484)	(43)	90 to 180 days	—	—	1,434,764	53	896,691	77
	Far Eastern Industries (Suzhou) Ltd.	(Note G)	Sale	(2,612,270)	(14)	90 to 180 days	—	—	520,210	19	270,327	23

Notes:
A. Equity-method investee.
B. The ultimate parent company.
C. The revenues and the costs resulting from the internet hook-up and international phone call service between Far EastOne and NCIC were paid (received) at net amount and the net amount was recognized as Account payable-related parties.
D. The same parent company.
E. The parent company.
F. The subsidiary.
G. The same ultimate parent company.
H. The equity-method investee of the subsidiary.
I. The sub-affiliate.
J. The subsidiary of Everest Textile Co., Ltd.

K. The advance construction receipts of Far Eastern General Contractor Co., Ltd. which were received from Far Eastern Department Stores Co., Ltd. and Far Eastern Construction Co., Ltd.

L. The equity-method investee of the parent company.

M. The subsidiary of Pacific Liu Tung Investment Corp.

N. The subsidiary of Asia Cement Corporation.

O. The chairman of the related party is the chairman of FENC.

^{}[] F-426

^{}[] SCHEDULE M

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE CAPITAL STOCK

Company Name	Related Party	Nature of Relationship	Ending Balance (Note F)	Turnover Rate	Overdue		Amounts Received in Subsequent Period	Allowance for Bad Debts
Company Name	Related Party	Nature of Relationship	Ending Balance (Note F)	Turnover Rate	Amount	Action Taken	Amounts Received in Subsequent Period	Allowance for Bad Debts
Far EasTone Telecommunications Co., Ltd.	KG Telecommunication Co., Ltd.	(Note E)	$449,328	(Note B)	$—	—	$449,328	$—
	Arcoa Communication Co., Ltd.	(Note E)	205,974	8.01	—	—	137,616	—
	New Century InfoComm Tech Co., Ltd.	(Note H)	161,962	(Note B)	—	—	64,982	—
KG Telecommunication Co., Ltd.	Far EasTone Telecommunications Co., Ltd.	(Note F)	1,192,570	(Note C)	—	—	1,192,570	—
Arcoa Communication Co., Ltd.	Far EasTone Telecommunications Co., Ltd.	(Note F)	225,755	12.64	—	—	186,186	—
KG Ex.com Co., Ltd.	New Century InfoComm Tech Co., Ltd.	(Note J)	113,439	7.86	—	—	55,373	—
Oriental Petrochemicals (Taiwan) Co., Ltd. (the former "INVISTA Far Eastern Petrochemicals Co., Ltd.")	Far Eastern New Century Corporation	(Note F)	572,155	14.28	—	—	572,155	—
	Far Eastern Industries (Shanghai) Ltd.	(Note D)	879,654	6.17	—	—	879,654	—
Far Eastern Industries (Shanghai) Ltd.	Wu Han Far Eastern New Material Ltd.	(Note D)	366,844	1.74	—	—	—	—
	Far Eastern Polychem Industries Ltd.	(Note F)	1,552,726	3.03	—	—	—	—
	Everest Textile (Shanghai) Ltd.	(Note K)	115,232	3.41	—	—	—	—
Oriental Petrochemicals (Shanghai) Ltd.	Far Eastern Industries (Shanghai) Ltd.	(Note D)	2,331,455	11.83	—	—	2,331,455	—

Note A: Receivables from the financier in the Group provided weren't included in Schedule M, and please refer to Schedule D.
Note B: The turnover rate is unavailable because the receivables from related parties were mainly from the advances in operating expenses for KG Telecommunication Co., Ltd (KG Telecommunication Co., Ltd. will be merged by Far EasTone on January 1,2010) and New Century InfoComm Tech Co., Ltd.
Note C: The turnover rate is unavailable because the receivable of telecommunication bills is mainly handled by Far EasTone Telecommunications Co., Ltd.
Note D: The same ultimate parent company.
Note E: The subsidiary.
Note F: The parent company.
Note G: The turnover rate is not calculated, because the amount is the expense Far Eastern Investment (Holding) Ltd. paying for Far Eastern Polychem Industries Ltd..
Note H: The equity-method investee.
Note I: KG Telecom will be merged by Far Eastone on January 1, 2010, so the accounts receivable between both parties will be eliminated.
Note J. The equity-method investee of the parent company.
Note K. The subsidiary of Everest Textile Co., Ltd.
Note L. The turnover rate is not calculated because the income of Far Eastern General Constructor Inc. is recognized by "Percentage-of-completion method" and "Completed-contract method."

^{}[] SCHEDULE N

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE YEAR ENDED DECEMBER 31, 2009
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor	Investee	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2009			Net Income (Loss) of the Investee	Investment Gain (Loss)	Notes
Investor	Investee	Location	Main Businesses and Products	December 31, 2009	December 31, 2008	Shares (Thousands)	Percentage of Ownership	Carrying Value	Net Income (Loss) of the Investee	Investment Gain (Loss)	Notes
Far Eastern New Century Corporation	Asia Cement Corporation	Taipei, Taiwan	Cement production	$2,652,282	$2,857,181	666,632	22.33	$12,500,165	$7,885,009	$1,440,960	Gain or loss recognized under the treasury stock method
	Far Eastern Department Stores Co., Ltd.	Taipei, Taiwan	Department store operations	1,254,158	1,254,158	203,659	16.80	3,877,699	1,932,776	324,706
	Oriental Union Chemical Corporation	Taipei, Taiwan	Petrochemical materials production	1,176,211	1,176,211	73,833	9.17	1,155,372	1,434,703	129,725	Including write off by upstream transactions $1,837
	Everest Textile Co., Ltd.	Tainan, Taiwan	Chemical fiber production	1,689	1,689	129	0.03	1,540	6,135	2
	Yuan Ding Investment Co., Ltd.	Taipei, Taiwan	Investment	100,294	100,539	1,828,323	99.70	36,155,036	3,882,827	3,851,592	Including write off by side-stream transactions $19,587
	Far Eastern Resources Development Co.	Taipei, Taiwan	Real estate Investment	14,931,733	14,931,733	283,797	100.00	15,693,512	2,263,926	518,125	Including write off by side-stream transactions $1,745,801
	Yuan Tong Investment Co., Ltd.	Taipei, Taiwan	Investment	5,850,000	5,850,000	705,147	100.00	7,296,064	156,952	156,952
	Far Eastern Investment (Holding) Ltd.	Clarendon House, Hamilton HM 11, Bermuda	Investment	5,833,333	5,833,333	1,700	100.00	5,238,743	6,753	6,753
	Far Eastern Polychem Industries Ltd.	Clarendon House, Hamilton HM 11, Bermuda	Investment	4,306,228	3,932,864	493,631	59.81	4,185,668	(351,796)	(210,249)	Including write off by side-stream transactions $5,539
	Kai Yuan International Investment Co., Ltd.	Taipei, Taiwan	Investment	999,993	999,993	291,196	100.00	4,366,102	517,921	517,921

^{}[] F-430

Investee	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2009			Net Income (Loss) of the Investee	Investment Gain (Loss)	Notes
			December 31, 2009	December 31, 2008	Shares (Thousands)	Percentage of Ownership	Carrying Value
Oriental Petrochemicals (Taiwan) Co., Ltd. (the former "INVISTA Far Eastern Petrochemicals Co., Ltd.")	Taoyuan, Taiwan	Petrochemical materials production	$4,875,315	$4,875,315	337,678	75.56	$3,875,245	$707,058	$470,174	Including write off by upstream transactions $37,857 and including write off by side-stream transactions $26,222
Far Eastern Polytex (Holding) Ltd.	Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda	Investment	2,984,602	2,654,452	46	100.00	3,323,320	241,957	232,106	Including write off by side-stream transactions $9,851
Yuan Ding Co., Ltd.	Taipei, Taiwan	Real estate construction and selling	857,447	857,447	186,926	37.13	3,180,506	156,920	58,265
Far Eastern Construction Co., Ltd.	Taipei, Taiwan	Real estate construction and selling	143,450	143,450	154,372	65.11	2,078,321	275,768	179,553
Ding Yuan International Investment Co., Ltd.	Taipei, Taiwan	Investment	2,000,062	2,000,062	205,000	100.00	2,412,433	324,746	313,151	Including write off by side-stream transactions $11,595
Oriental Securities Corp.	Taipei, Taiwan	Broker	159,823	159,823	140,278	19.65	2,066,710	1,056,378	207,578
PET Far Eastern (Holding) Ltd.	Clarendon House, 2 Church St. Hamilton HM 11, Bermuda	Investment	1,509,008	1,509,008	117	49.42	1,966,083	1,242,597	582,132	Including write off by side-stream transactions $31,959
An Ho Garment Co., Ltd.	Taipei, Taiwan	Garment production	1,023	1,023	66,346	100.00	1,537,449	253,887	253,887
Pacific Liu Tung Investment Corp.	Taipei, Taiwan	Investment	810,000	810,000	67,500	16.83	1,165,944	1,113,445	187,393
Fu Kwok Garment Manufacturing Co., Ltd.	Kaohsiung, Taiwan	Garment production	9,129	9,129	3,999	99.99	128,923	2,411	2,411
Ding Ding Hotel Co., Ltd.	Taipei, Taiwan	Hotel	249,795	249,795	5,386	19.00	28,962	(118,737)	(22,560)
New Century Information Communication Co., Ltd.	Taipei, Taiwan	Telecommunications	40,560	40,560	2,605	0.10	26,078	6,078	6

^{}[] F-431

Investor	Investee	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2009			Net Income (Loss) of the Investee	Investment Gain (Loss)	Notes
Investor	Investee	Location	Main Businesses and Products	December 31, 2009	December 31, 2008	Shares (Thousands)	Percentage of Ownership	Carrying Value	Net Income (Loss) of the Investee	Investment Gain (Loss)	Notes
Yuan Ding Investment Co., Ltd.	Asia Cement Corporation	Taipei, Taiwan	Cement production	$81,967	$310,065	4,135	0.14	$66,207	$7,885,009	$37,982	Gain or loss recognized under the treasury stock method, including discount amortization of $2,528
	Far EastTone Telecommunications Co., Ltd.	Taipei, Taiwan	Telecommunications	2,723,598	2,723,598	1,066,658	32.73	23,371,725	9,230,107	3,021,014
	Everest Textile Co., Ltd.	Tainan, Taiwan	Chemical fiber production	470,103	470,103	118,869	25.23	1,156,375	6,135	1,538
	Oriental Union Chemical Corporation	Taipei, Taiwan	Petrochemical materials production	1,132,851	1,129,885	73,614	9.14	1,234,120	1,434,703	138,056	Including discount amortization of $468
	Far Eastern Department Stores Co., Ltd.	Taipei, Taiwan	Department store operations	123,123	36,892	4,806	0.40	132,492	1,932,776	4,832
	Oriental Textile (Holding) Ltd.	Clarendon House, 2 Church Street, Hamilton HM11, Bermuda	Investment	5,861,253	5,861,253	90	100.00	5,277,067	(399,500)	(399,500)
	Far Eastern Polychem Industries Ltd.	Clarendon House, Hamilton HM11, Bermuda	Investment	1,620,452	1,620,452	331,717	40.19	2,812,608	(351,796)	(147,086)
	Oriental Securities Corp.	Taipei, Taiwan	Broker	253,359	252,031	185,040	25.93	2,831,933	1,056,378	274,512	Including discount amortization of $593
	Far Eastern Apparel (Holding) Ltd.	Clarendon House, Hamilton Hm 11, Bermuda	Sale of textile, garments, and clothing	1,858,657	1,858,657	95	100.00	1,934,377	85,231	85,231
	Air Liquide Far Eastern Ltd.	Taipei, Taiwan	Industrial gas production and selling	329,814	329,778	69,115	35.00	1,136,367	440,547	154,191
	New Century InfoComm Tech Co., Ltd.	Taipei, Taiwan	Telecommunications	1,549,473	1,549,473	100,694	3.87	1,007,911	6,078	235
	Yuan Ding Co., Ltd.	Taipei, Taiwan	Real estate construction and selling	188,846	188,846	64,759	12.86	1,099,336	156,920	20,180
	Pacific Liu Tung Investment Corp. (Note C)	Taipei, Taiwan	Investment	796,491	796,491	59,827	14.92	946,933	1,113,445	166,126
Far Eastern International Leasing Corp.	Taipei, Taiwan	Leasing of real estate and movable property, etc.	1,012,057	916,865	75,269	16.87	1,001,832	123,489	20,549

^{}[] F-432

Investor	Investee	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2009			Net Income (Loss) of the Investee	Investment Gain (Loss)	Notes
Investor	Investee	Location	Main Businesses and Products	December 31, 2009	December 31, 2008	Shares (Thousands)	Percentage of Ownership	Carrying Value	Net Income (Loss) of the Investee	Investment Gain (Loss)	Notes
	Far Eastern Fibertech Co., Ltd.	Taoyuan, Taiwan	Nylon production	$585,000	$585,000	66,673	100.00	$726,257	$6,243	$6,243
	Pacific Petrochemical (Holding) Ltd.	P.O. Box 3140 Tortola British Virgin Islands	Investment	681,000	681,000	20	24.63	709,848	903,820	222,611
	Yuan Ding Leasing Corp.	Taipei, Taiwan	Real estate construction and selling	319,380	319,380	36,706	46.20	359,363	15,195	7,020
	Far Eastern Apparel Co., Ltd.	Taipei, Taiwan	Sale of textile, garments, and clothing	287,984	287,984	19,664	100.00	356,448	51,766	51,766
	Da Ju Fiber Co., Ltd.	Taipei, Taiwan	Polyester production	263,790	136,532	17,182	41.86	513,180	409	171
	Freudenberg Far Eastern Spunweb Co., Ltd.	Taoyuan, Taiwan	Production of nonwoven industrial fabrics	144,797	144,797	13,053	29.80	274,931	171,462	51,096
	Oriental Resources Development Ltd.	Taipei, Taiwan	Waste recycling and processing	279,901	279,901	21,322	70.32	130,963	(24,711)	(17,377)
	Oriental Petrochemicals (Taiwan) Co., Ltd. (the former "INVISTA Far Eastern Petrochemicals Co., Ltd.")	Taoyuan, Taiwan	PTA production and sale	—	—	23,222	5.20	258,218	707,058	38,405	Including discount amortization of $1,638
	Yuan Faun Ltd.	Taipei, Taiwan	PET bottle production and selling	51,671	51,671	5,000	100.00	104,778	329	329
	Yu Ming Co., Ltd.	Taipei, Taiwan	Trading	36,482	36,482	1,280	45.50	70,195	1,472	670
	Far Eastern General Constructor Inc.	Taipei, Taiwan	Real estate construction	14,682	14,682	1,205	1.00	16,466	145,264	1,479	Including discount amortization of $26
Far Eastern Investment (Holding) Ltd.	F.E.T.G. Investment Antilles N.V.	Kaya W.F.G. Mensing 14, Curacao, Nederlandse Antillen	Investment	US$6	US$6	6	100.00	US$9,678	US$3,497	—
	Filsyn Corporation	Unit 8, 5B Pearlbank Centre 146 Valero St. Makati City 1227, Philippines	Polychemical products	PESO225,324	PESO225,324	45,066	21.85	US$—	US$(10,701)	—

^{}[] F-433

Investor	Investor	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2009			Net Income (Loss) of the Investee	Investment Gain (Loss)
				December 31, 2009	December 31, 2008	Shares (Thousands)	Percentage of Ownership	Carrying Value
PET F.E. (M) Sdn Bhd.	P.O. Box 69, Kawasaki Perindustrian Senai 3, 81400 Senai, Johor Bahru, Johor Malaysia	Bottle production	MYR8,000	MYR8,000	(NoteA)	50.00	US$6,141	US$2,917	$—
Com 2B	Cayman Islands	E-business	US$3,375	US$3,375	9,000	20.00	US$877	US$(139)	—
Far Eastern Apparel (Vietnam) Ltd.	11 VSIP Street 4, Vietnam Singapore Industrial Park, Thuan An District, Binh Duong Province, Vietnam	Clothing production	US$6,000	US$6,000	(NoteB)	100.00	US$5,122	US$621	—
Ding Yuan International Investment Co., Ltd.	Far Eastern Department Stores Co., Ltd.	Taipei, Taiwan	Department store operations	34,795	38,179	2,988	0.25	56,000	1,932,776	—
	Everest Textile Co., Ltd.	Tainan, Taiwan	Chemical fiber production	146,283	146,283	8,506	1.81	74,668	6,135	—
	Oriental Union Chemical Corporation	Taipei, Taiwan	Petrochemical materials production	200,463	200,473	9,815	1.22	206,368	1,434,703	—
	Far EastTone Telecommunications Co., Ltd.	Taipei, Taiwan	Telecommunications	38,457	26,509	920	0.03	40,361	9,230,107	—
	Pacific Liu Tung Investment Corp. (Note C)	Taipei, Taiwan	Investment	90,000	90,000	9,000	2.24	137,356	1,113,445	—
	PET Far Eastern (Holding) Ltd.	Clarendon House, 2 Church St. Hamilton HM 11, Bermuda	Investment	795,762	795,762	42	17.93	724,196	1,242,597	—
	Yue Ding Industry Co., Ltd.	Taipei, Taiwan	Department store operations	95,624	4,424	9,683	13.20	191,516	11,161	—
	Asia Cement Corporation	Taipei, Taiwan	Cement production	100,711	79,989	2,806	0.09	107,182	7,885,009	—
Kai Yuan International Investment Co., Ltd.	Asia Cement Corporation	Taipei, Taiwan	Cement production	151,277	151,277	11,377	0.38	241,143	7,885,009	—

^{}[] F-434

Investor	Investor	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2009			Net Income (Loss) of the Investee	Investment Gain (Loss)
				December 31, 2009	December 31, 2008	Shares (Thousands)	Percentage of Ownership	Carrying Value
Far Eastern Polychem Industries Ltd.	Far EasTone Telecommunications Co., Ltd.	Taipei, Taiwan	Telecommunications	$2,135,682	$1,559,293	100,057	3.07	$2,612,199	$9,230,107	—
	Oriental Union Chemical Corporation	Taipei, Taiwan	Petrochemical materials production	569,344	569,344	25,463	3.16	468,179	1,434,703	—
	Far Eastern Department Stores Co., Ltd.	Taipei, Taiwan	Department store operations	133,316	372,724	5,497	0.45	125,275	1,932,776	—
	Kowloon Cement Co., Ltd.	Hong Kong	Cement production	226,896	226,896	1,127	49.00	380,159	14,474	—
	Far Eastern International Leasing Corp.	Taipei, Taiwan	Leasing	1,026,489	931,673	74,970	16.80	1,002,640	123,489	—
	Pacific Liu Tung Investment Corp. (Note C)	Taipei, Taiwan	Investment	90,000	90,000	9,000	2.24	137,356	1,113,445	—
Far Eastern Polychem Industries Ltd.	Far Eastern Industries (Shanghai) Ltd.	China	Chemical fiber production	HK$604,500	HK$604,500	(NoteB)	87.03	HK$1,384,528	RMB61,263	—
	PET Far Eastern (Holding) Ltd.	Claredon House, 2 Church St. Hamilton HM 11, Bermuda	Investment	US$17,622	US$17,622	35	14.72	HK$144,965	US$37,608	—
	FEDP (Holding) Ltd.	Claredon House, 2 Church St. Hamilton HM 11, Bermuda	Investment	US$29,240	US$29,240	240	49.57	HK$179,719	US$(4,655)	—
Far Eastern Construction Co., Ltd.	Far Eastern General Constructor Inc.	Taipei, Taiwan	Construction	271,587	271,587	119,202	98.95	1,451,879	145,264	—
Far Eastern Construction Co., Ltd.	Asia Cement Corporation	Taipei, Taiwan	Cement production	216,959	216,959	15,745	0.53	396,699	7,885,009	—
Far Eastern Apparel (Holding) Ltd.	Far Eastern Apparel (Suzhou) Ltd.	China	Garment production	US$10,000	US$10,000	(NoteB)	38.46	US$14,826	RMB30,572	—
Far Eastern Apparel (Holding) Ltd.	Far Eastern Spinning Wearing and Dyeing (Suzhou) Ltd.	China	Dyeing and finishing	US$20,000	US$20,000	(NoteB)	100.00	US$25,672	RMB14,644	—

^{}[] F-435

Investor	Investee	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2009			Net Income (Loss) of the Investee	Investment Gain (Loss)	Notes
Investor	Investee	Location	Main Businesses and Products	December 31, 2009	December 31, 2008	Shares (Thousands)	Percentage of Ownership	Carrying Value	Net Income (Loss) of the Investee	Investment Gain (Loss)	Notes
Far Eastern Apparel Co., Ltd.	Ming Ding Co.	Taipei, Taiwan	Underwear selling	$2,174	$2,174	448	44.80	$6,523	$118	$—
Far Eastern Apparel Co., Ltd.	Yue Ding Industry Co., Ltd.	Taipei, Taiwan	Department store operations	29	29	6	0.01	50	11,161	—
F.E.T.G. Investment Antilles N.V.	Waldorf Services B.V.	Leidesplein 9, 1017 PS Amsterdam, The Netherland	Investment	US$19	US$19	2	100.00	US$9,846	US$3,506	—
Waldorf Services B.V.	Cemtex Apparel Inc.	#100 Marc Alvarez Ave. Talon Las Pinas City Filipino	Clothing O.E.M.	PESO9,000	PESO9,000	90	50.00	US$(143)	US$(98)	—
	Malaysia Garment Manufactures Pte. Ltd.	No. 5-9, Little Rd, Singapore (536985)	Garment production	SGD3,000	SGD3,000	30	37.90	US$1,408	US$(2,052)	—
	Far Eastern International Garments	Bldg. #5 Cor. Sirloinand Bagsakan Ave, FTI Taguig, MM Filipino	Garment production	US$290	US$290	59	41.00	US$(847)	PESO(1,550)	—
An Ho Garment Co., Ltd.	Far Eastone Telecommunications Co., Ltd.	Taipei, Taiwan	Telecommunications	1,469,123	1,469,123	80,172	2.46	1,943,414	9,230,107	—
	Asia Cement Corporation	Taipei, Taiwan	Cement production	99,925	99,925	2,760	0.09	106,314	7,885,009	—
	Oriental Securities Corp.	Taipei, Taiwan	Broker	86,200	86,200	5,000	0.70	79,363	1,056,378	—
	Yue Ding Industry Co., Ltd.	Taipei, Taiwan	Department store operations	111,997	111,997	11,494	15.66	128,387	11,161	—
	Pacific Liu Tung Investment Corp. (Note C)	Taipei, Taiwan	Investment	67,285	67,285	4,841	1.21	78,841	1,113,445	—
	Yuan Ding Investment Co., Ltd.	Taipei, Taiwan	Investment	148,994	148,994	5,502	0.30	152,569	3,882,827	—
Yuan Faun Ltd.	Yuan Cheng Human Resources Consultant Co., Ltd.	Taipei, Taiwan	Personnel recruitment	6,271	4,222	278	55.56	6,271	3,925	—

^{}[] F-436

^{}[] F-437

^{}[] F-438

Investor	Investee	Location	Main Businesses and Products	Investment Amount		Balance as of December 31, 2009			Net Income (Loss) of the Investee	Investment Gain (Loss)
				December 31, 2009	December 31, 2008	Shares (Thousands)	Percentage of Ownership	Carrying Value
Oriental Textile (Holding) Ltd.	Far Eastern Industries (WuXi) Ltd.	China	Fiber and textile production	US$59,960	US$59,960	(Note B)	100.00	US$71,285	RMB7,127	$—
Oriental Industries (Suzhou) Ltd.	China	Textile production	US$138,000	US$138,000	(Note B)	100.00	US$87,237	RMB(77,781)	—
Far Eastern Apparel (Suzhou) Ltd.	Wu Han Far Eastern New Material Ltd.	China	Garment production and sales	RMB350	RMB350	(Note B)	0.17	RMB350	RMB3,634	—
Far Eastern Apparel (Suzhou) Ltd.	Shanghai Yuan Zi Information Co., Ltd.	China	Software development, equipment maintenance and consulting	RMB100	RMB100	(Note B)	5.00	RMB100	RMB4	—
Far Eastern Apparel (Suzhou) Ltd.	An Ho Garment (Suzhou) Ltd.	China	Garment production	RMB1,000	RMB1,000	(Note B)	100.00	RMB2,173	RMB486	—
FEDP (Holding) Ltd.	Far Eastern Industries (Suzhou) Ltd.	China	Garment production	US$49,800	US$49,800	(Note B)	100.00	US$37,682	RMB(30,241)	—
Far Eastern Polytex (Holding) Ltd.	Wu Han Far Eastern New Material Ltd.	China	Garment production and sales	US$22,000	US$12,000	(Note B)	96.20	US$24,079	RMB3,634	—
Far Eastern Apparel (Suzhou) Ltd.	Far Eastern Apparel (Suzhou) Ltd.	China	Garment production	US$16,000	US$16,000	(Note B)	61.54	US$23,721	RMB30,572	—
Far Eastern Apparel (Suzhou) Ltd.	FEDP (Holding) Ltd.	Clarendon House 2 Church Street, Hamilton HM11, Bermuda	Investment	US$6,408	US$6,408	49	10.10	US$4,774	US$4,655	—
FEDP (Holding) Ltd.	Far Eastern New Century (China) Investment Ltd.	China	Investment	US$48,000	US$48,000	(Note B)	100.00	US$50,792	RMB(86)	—
KG Telecommunications Co., Ltd.	KGEx.com Co., Ltd.	Taiwan	Type II telecommunications services	2,355,649	2,355,649	89,088	79.25	794,752	(121,296)	—
KG Telecommunications Co., Ltd.	iScreen	Taiwan	Information and software services	100,000	100,000	4,000	40.00	30,030	3,161	—
KG Telecommunications Co., Ltd.	ADCast Interactive Marketing Co., Ltd.	Taiwan	Internet service	3,652	3,652	369	8.16	3,501	1,065	—

Notes:
A. 5,000 thousand of the common shares and 3,000 thousand of the preferred shares were included.
B. The private company.
C. The holding company opened a trust account in Shanghai Bank in Taipei on September 26, 2002 to acquire the ownership of Pacific Liu Tung Investment Corp.

^{}[] SCHEDULE O

^{}[] INVESTMENT IN MAINLAND CHINA

^{}[] (In Thousands of New Taiwan Dollars, Renminbi and U.S. Dollars)

Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital	Accumulated Outflow of Investment from Taiwan as of January 1, 2009	Investment Flows		Accumulated Outflow of Investment from Taiwan as of December 31, 2009	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note A)	Carrying Value as of December 31, 2009 (Note B)	Accumulated Inward Remittance of Earnings as of December 31, 2009
Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital		Outflow	Inflow		% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note A)	Carrying Value as of December 31, 2009 (Note B)
Far Eastern Spinning Wearing and Dyeing (Suzhou) Ltd.	Manufacture and distribution of weaving, dyeing and finishing of novelty fabrics, high-value engineered textiles industrial woven fabrics and scraps.	$768,451 (RMB165,543)	$1,342,854 (Note D)	$—	$—	$1,342,854 (Note D)	100.00%	$70,059	$813,569	$—
Far Eastern Industries (Suzhou) Ltd.	Manufacture and distribution of polyester chips, partially oriented yarn, fully oriented yarn, and polyester yarn	1,830,664 (RMB394,370)	422,978 666,026 (Note K)	—	—	422,978 666,026 (Note K)	100.00%	(144,673)	1,194,174	—
Wu Han Far Eastern New Material Ltd.	Manufacture and distribution of PET chips, FET sheets, PET performs and garments and its by-product.	794,003 (RMB171,048)	393,960	330,150	—	724,110	100.00%	17,383	793,314	—
Oriental Industries (Suzhou) Ltd.	Manufacture and distribution of PET performs and high-value engineered textiles industrial woven fabrics and scraps	3,653,626 (RMB787,080)	3,421,559 (Note D)	—	—	3,421,559 (Note D)	100.00%	(372,103)	2,764,626	—
Far Eastern Industries (Jiujiang) Ltd. (Note M)	Manufacture of cotton yarns, natural fibers and chemical fibers and its by-product.	—	258,880 (Note D)	—	—	258,880 (Note D)	100.00%	(6)	—	—
Far Eastern New Century (China) Investment Ltd.	Investment	1,692,195 (RMB364,540)	1,577,040	—	—	1,577,040	100.00%	(411)	1,637,386	—
Sino Belgium (Suzhou) Ltd.	Brewer	1,014,182 (RMB218,480)	962,577 (Note J)	—	—	962,577 (Note J)	87.5%	(210,633)	627,485	—
Martens Beer Trading (Shanghai) Ltd.	Beer sales	161,050 (RMB25,000)	—	123,565 (Note J)	—	123,565 (Note J)	87.5%	(82,776)	17,613	—

^{}[] F-442

Investment Amounts
Authorized by Investment Commission, MOEA
US$253,349 (Note H)
US$328,058 (Note I)
(Note N)

Notes:
A. Recognition of gains/loss was based on the investee's audited financial statements.
B. Recognition of the investment amount was based on the investee's audited financial statements.
C. This was the amount of cash dividends the Company and Yuan Ding Investment receiving from FEPI over the years.
D. The amount was remitted by the Company's subsidiary, Yuan Ding Investments.
E. The amount was remitted by the Company's subsidiaries, Yuan Ding Investments and Ding Yuan International Investment.
F. Far EastTone's subsidiary.
G. The amount was remitted by the FENC's subsidiary, Far EastTone Telecommunications Co., Ltd.
H. It was the actual amount remitted for the investments in Mainland China by FENC.
I. The investment amounts approved by the Investment Commission under the Ministry of Economic Affairs.
J. The amount was remitted by the FENC's subsidiary, Yuan Tong Investment Corporation.
K. The amount was remitted by the FENC's subsidiary, Yuan Ding Investment and Yuan Tong Investment.
L. The Company has been approved by the Ministry of Economic Affairs to invest FEIS through FEPI and will start the investment in the February of 2010.
M. The liquidation of Far Eastern Industries (Jiujiang) Ltd. had been done by the December of 2009 and the liquidation amount had been returned to the stockholders.
N. The Company was allowed to invest in Mainland China without the restriction of maximum amount was based on MOEA Approval Letter No. 09701098660.

^{}[] SCHEDULE O-1

^{}[] INVESTMENT IN MAINLAND CHINA - INVESTMENT TYPE

^{}[] (In Thousands of U.S. Dollars)

Investee Company	Authorized by Investment Commission, MOEA					Investment Type
Investee Company	Investor Company	Date	MOEA Approval Letter No.	Through Investor Company in Third Area	Investment Amount (US$)	Investor Company's Own Capital	Investor Company in Third Area Using Dividends Received from Investee (US$)	Financed from Financial Institutions in Third Area	Investor Company in Third Area Using Its Own Capital to Invest (US$)
Far Eastern Industries (Shanghai) Ltd.	Far Eastern New Century Corporation	1996.07.09	No. 84015136	Far Eastern Polychem Industries Ltd.	$ 6,000	$ 6,000
	Yuan Ding Investment Co., Ltd.			Far Eastern Polychem Industries Ltd.	24,000	24,000
	Far Eastern New Century Corporation	2004.12.29	No. 093032400	Far Eastern Polychem Industries Ltd.	1,712		$ 1,712
	Far Eastern New Century Corporation	2004.12.30	No. 093032090	Far Eastern Polychem Industries Ltd.	1,540			$1,540
	Far Eastern New Century Corporation	2004.11.03	No. 093032240	Far Eastern Polychem Industries Ltd.	3,879		3,879
	Yuan Ding Investment Co., Ltd.	2004.12.29	No. 093032402	Far Eastern Polychem Industries Ltd.	7,014		7,014
	Yuan Ding Investment Co., Ltd.	2004.11.02	No. 093032239	Far Eastern Polychem Industries Ltd.	15,898		15,898
	Yuan Ding Investment Co., Ltd.	2004.12.29	No. 093032089	Far Eastern Polychem Industries Ltd.	6,313			6,313
	Far Eastern New Century Corporation	2006.11.01	No. 09500287850	Far Eastern Polychem Industries Ltd.	31,779	31,779
	Far Eastern New Century Corporation	2008.06.27	No. 09700163440	Far Eastern Polychem Industries Ltd.	56,000	56,000

^{}[] F-444

Authorized by Investment Commission, MOEA						Investment Type
Investee Company	Investor Company	Date	MOEA Approval Letter No.	Through Investor Company in Third Area	Investment Amount (US$)	Investor Company's Own Capital	Investor Company in Third Area Using Dividends Received from Investee (US$)	Financed from Financial Institutions in Third Area
F	Far Eastern New Century Corporation	2008.04.18	No. 09700045490	Far Eastern Polychem Industries Ltd.	$ 4,800	$ 4,800
F	Far Eastern New Century Corporation	2009.09.18	No. 09800283970	Far Eastern Polychem Industries Ltd.	12,000	12,000
Far Eastern Apparel (Suzhou) Ltd. (FEAS)	Yuan Ding Investment Co., Ltd.	1996.10.16	No. 85016219	Far Eastern Apparel (Holding) Ltd.	10,000	10,000
	Yuan Ding Investment Co., Ltd.	2003.10.30	No. 092033299	Far Eastern Apparel (Holding) Ltd.	5,000	5,000
	Far Eastern New Century Corporation	2006.05.23	No. 09500112650	Far Eastern Polytex (Holding) Ltd.	11,000	11,000
	Far Eastern New Century Corporation	2008.03.31	No. 09700038490	Far Eastern Polytex (Holding) Ltd.	5,000	5,000
Far Eastern Industries (Wuxi) Ltd. (FEIW)	Yuan Ding Investment Co., Ltd.	2002.06.21	No. 091011903	Oriental Textile (Holding) Ltd.	19,960	19,960
Far Eastern Industries (Wuxi) Ltd. (FEIW)	Yuan Ding Investment Co., Ltd.	2005.11.03	No. 094024169	Oriental Textile (Holding) Ltd.	40,000	40,000
Oriental Petrochemical (Shanghai) Ltd. (OPSC)	Yuan Ding Investment Co., Ltd.	2003.11.04	No. 092028575	Pacific Petrochemical (Holding) Co., Ltd.	20,000	20,000
	Ding Yuan International Investment Co., Ltd.	2003.02.26	No. 091039560	PET Far Eastern (Holding) Ltd.	20,000	20,000
	Far Eastern New Century Corporation	2009.11.17	No. 09800408170 (Note B)	Far Eastern Polychem Industries Ltd.	1,228			$ 1,228
				PET Far Eastern (Holding) Ltd.
	Far Eastern New Century Corporation	2009.11.17	No. 09800408170	Far Eastern Investment (Holding) Ltd.	10,755			10,755
			HSBC International Trustee Ltd. (B.V.)

^{}[] F-445

Authorized by Investment Commission, MOEA						Investment Type
Investee Company	Investor Company	Date	MOEA Approval Letter No.	Through Investor Company in Third Area	Investment Amount (US$)	Investor Company's Own Capital	Investor Company in Third Area Using Dividends Received from Investee (US$)	Financed from Financial Institutions in Third Area
	Yuan Ding Investment Co., Ltd.	2009.11.17	No. 09800408160 (Note C)	Pacific Petrochemical (Holding) Ltd. (B.V.)				$6,592
				Far Eastern Polychem Industries Ltd.	$ 6,592
				PET Far Eastern (Holding) Ltd.
	Far Eastern New Century Corporation	2008.06.27	No. 09700163430	PET Far Eastern (Holding) Ltd.	49,500	$49,500
	Far Eastern New Century Corporation	2008.04.18	No. 09700045500	Far Eastern Polychem Industries Ltd.	4,800	4,800
	Far Eastern New Century Corporation	2009.12.25	No. 09800456740	PET Far Eastern (Holding) Ltd.	41,171	41,171
Far Eastern Spinning Wearing and Dyeing (Suzhou) Ltd.	Yuan Ding Investment Co., Ltd.	2003.10.31	No. 092033525	Far Eastern Apparel (Holding) Ltd.	20,000	20,000
	Yuan Ding Investment Co., Ltd.	2008.10.13	No. 09700348610	Far Eastern Apparel (Holding) Ltd.	30,000	30,000
Far Eastern Industries (Suzhou) Ltd.	Yuan Ding Investment Co., Ltd.	2002.11.26	No. 091035216	Far Eastern Polychem Industries Ltd. FEDP (Holding) Ltd.	9,352			9,352
	Far Eastern New Century Corporation	2004.10.11	No. 093025506	Far Eastern Polychem Industries Ltd. FEDP (Holding) Ltd.	1,569		$1,569
	Far Eastern New Century Corporation	2004.10.14	No. 093030298	Far Eastern Polychem Industries Ltd. FEDP (Holding) Ltd.	713			713
	Far Eastern New Century Corporation	2007.3.13	No. 09600059830	Far Eastern Polytex (Holding) Ltd. FEDP (Holding) Ltd.	5,288	5,288
	Far Eastern New Century Corporation	2006.11.01	No. 09500287850	Far Eastern Polychem Industries Ltd. FEDP (Holding) Ltd.	4,524	4,524

^{}[] F-446

^{}[] F-447

Notes:
A. Far Eastern New Century (China) Investment Ltd. invested US$30,000,000 in Far Eastern Industries (Shanghai) Ltd. and US$16,000,000 in Oriental Petrochemical (Shanghai) Ltd.
B. The document of No. 092035971 has been eliminated and renewed to be the document of No. 09800408170.
C. The document of No. 092035970 has been eliminated and renewed to be the document of No. 09800408160 and then claimed NT$1,561 thousand.
D. The liquidation of Far Eastern Industries (Jinjiang) Ltd. had been done by December of 2009 and the liquidation amount had been returned to the stockholders.
E. The document of No. 091039560 has been eliminated after submitting the investment implement information to MOEA. Please refer to Note 32.

^{}[] SCHEDULE P

^{}[] (FORMERLY FAR EASTERN TEXTILE LTD. AND SUBSIDIARIES)

^{}[] SIGNIFICANT TRANSACTIONS BETWEEN FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES

^{}[] YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009

^{}[] (IN THOUSANDS OF NEW TAIWAN DOLLARS)

No. (Note A)	Company Name	Related Party	Flow of Transaction (Note B)	Transaction Detail
No. (Note A)	Company Name	Related Party	Flow of Transaction (Note B)	Financial Statement Account	Amount	Term	% to Consolidated Revenue or Assets (Note C)
	2007
0	Far Eastern New Century Corporation	Oriental Resources Development Ltd. (The former "Taiwan Recycling Corp.")	1	Accounts payable	$25,586	Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Accounts receivable	(117,310)	Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Accounts payable	81,043	Based on agreement	—
		Yuang Tong Investment Co., Ltd.	1	Accounts payable	59,955	Based on agreement	—
		Oriental Resources Development Ltd. (The former "Taiwan Recycling Corp.")	1	Cost of goods sold	(195,198)	Based on agreement	—
		Far Eastern Industries (Suzhou) Ltd.	1	Cost of goods sold	(38,803)	Based on agreement	—
		Yuang Tong Investment Co., Ltd.	1	Administrative expenses-rent expense	(31,065)	Based on agreement	—
		Fu Kwok Garment Manufacturing Co. Ltd.	1	Sales revenue	40,517	Based on agreement	—
		Far Eastern Apparel (Suzhou)	1	Processing expense	(491,588)	Based on agreement	—
		Oriental Textile (Holding) Ltd.	1	Interest revenue	4,967	Based on agreement	—
		Far Eastern Polychem Industries Ltd.	1	Interest revenue	30,659	Based on agreement	—

Transaction Detail

No. (Note A)	Company Name	Related Party	Flow of Transaction (Note B)	Financial Statement Account	Amount	Term	% to Consolidated Revenue or Assets (Note C)
1	Yuan Ding Investment Co., Ltd.	Pacific Petrochemical (Holding) Ltd.	3	Interest revenue	$3,019	Based on agreement	—
		An Ho Garment Co., Ltd.	3	Interest revenue	16,383	Based on agreement	—
		Kai Yuan International Investment Co., Ltd.	3	Interest revenue	761	Based on agreement	—
		Yuang Tong Investment Co., Ltd.	3	Interest revenue	14,169	Based on agreement	—
		Pacific Petrochemical (Holding) Ltd.	3	Other receivables	(312,992)	Based on agreement	—
		An Ho Garment Co., Ltd.	3	Other receivables	(320,000)	Based on agreement	—
2	Kai Yuan International Investment Co., Ltd.	Yuan Ding Investment Co., Ltd.	3	Interest expense	(761)	Based on agreement	—
3	Shanghai Far Eastern IT Ltd.	Oriental Petrochemical (Shanghai) Corp.	3	Processing revenue	8,479	Based on agreement	—
4	Far Eastern Polychem Industries Ltd.	Far Eastern Investment (Holding) Ltd.	3	Accounts payable	132,439	Based on agreement	—
		Far Eastern Industries (Suzhou) Ltd.	3	Cost of goods sold	(36,070)	Based on agreement	—
		Far Eastern Investment (Holding) Ltd.	3	Nonoperating expenses	(60,071)	Based on agreement	—
		Far Eastern Investment (Holding) Ltd.	3	Interest expense	(41,975)	Based on agreement	—
		Far Eastern New Century Corporation	2	Interest expense	(30,659)	Based on agreement	—
		Far Eastern Industries (Suzhou) Ltd.	3	Other receivables	(346,320)	Based on agreement	—
		Oriental Petrochemical (Shanghai) Corp.	3	Other receivables	(138,528)	Based on agreement	—

Transaction Detail

No. (Note A)	Company Name	Related Party	Flow of Transaction (Note B)	Financial Statement Account	Amount	Term	% to Consolidated Revenue or Assets (Note C)
5	Far Eastern Investment (Holding) Ltd.	Oriental Industries (Suzhou) Ltd.	3	Accounts receivable	$(24,069)	Based on agreement	—
		Oriental Textile (Holding) Ltd.	3	Guarantee deposits received	33,500	Based on agreement	—
		Far Eastern Polychem Industries Ltd.	3	Accounts receivable	(132,439)	Based on agreement	—
		Far Eastern Polychem Industries Ltd.	3	Nonoperating revenue	60,071	Based on agreement	—
		Oriental Textile (Holding) Ltd.	3	Other receivables	(494,525)	Based on agreement	—
		Pacific Petrochemical (Holding) Ltd.	3	Other receivables	(53,052)	Based on agreement	—
		Far Eastern Industries (Suzhou) Ltd.	3	Other receivables	(504,430)	Based on agreement	—
		Sino Belgium (Suzhou) Ltd.	3	Other receivables	(560,083)	Based on agreement	—
		Oriental Textile (Holding) Ltd.	3	Interest revenue	10,456	Based on agreement	—
		Pacific Petrochemical (Holding) Ltd.	3	Interest revenue	188	Based on agreement	—
		Far Eastern Polychem Industries Ltd.	3	Interest revenue	41,975	Based on agreement	—
		PET Far Eastern (Holding) Ltd.	3	Interest revenue	7,298	Based on agreement	—
6	An Ho Garment Co., Ltd.	Yuang Tong Investment Co., Ltd.	3	Interest expense	(11,226)	Based on agreement	—
		Yuang Tong Investment Co., Ltd.	3	Accounts payable	500,000	Based on agreement	—
		Yuan Ding Investment Co., Ltd.	3	Interest expense	(16,383)	Based on agreement	—
		Yuan Ding Investment Co., Ltd.	2	Other payable	320,000	Based on agreement	—
7	Yuang Tong Investment Co., Ltd.	An Ho Garment Co., Ltd.	3	Interest revenue	11,226	Based on agreement	—
		Far Eastern New Century Corporation	2	Accounts receivable	(59,955)	Based on agreement	—
		An Ho Garment Co., Ltd.	3	Accounts receivable	(500,000)	Based on agreement	—

^{}[] F-469

No. (Note A)	Company Name	Related Party	Flow of Transaction (Note B)	Financial Statement Account	Amount	Term
	2009
0	Far Eastern New Century Corporation	Oriental Resources Development Ltd.	1	Cost of goods sold	$(155,580) Based on agreement	—
		Far Eastern Apparel (Vietnam) Ltd.	1	Process expenses	(161,386) Based on agreement	—
		Oriental Petrochemical (Taiwan) Co., Ltd.	1	Cost of goods sold	(8,250,881) Based on agreement	1
		Oriental Petrochemical (Taiwan) Co., Ltd.	1	Accounts payable	(572,155) Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Sales	131,020 Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Process expenses	(910,245) Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Accounts receivable	26,778 Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Payment in advance	379,504 Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Accrued expense - outsourced process	(73,092) Based on agreement	—
1	Far Eastern Polychem Industries Ltd.	Far Eastern Investment (Holding) Ltd.	3	Other payables	(1,610,002) Based on agreement	—
		Far Eastern Investment (Holding) Ltd.	3	Accounts payable	(222,417) Based on agreement	—
		Far Eastern Investment (Holding) Ltd.	3	Interest expenses	(40,054) Based on agreement	—
		Far Eastern Industries (Suzhou) Ltd.	3	Other receivables	321,828 Based on agreement	—
		Oriental Petrochemical (Taiwan) Co., Ltd.	3	Cost of goods sold	(666,948) Based on agreement	—
		Oriental Textile (Holding) Ltd.	3	Other payables	(224,219) Based on agreement	—

^{}[] Transaction Detail

No. (Note A)	Company Name	Related Party	Flow of Transaction (Note B)	Financial Statement Account	Amount	Term	% to Consolidated Revenue or Assets (Note C)
29	Far Eastern Polytex (Holding) Ltd.	Wu Han Far Eastern New Material Ltd.	3	Other receivables	$383,880	Based on agreement	—
		Far Eastern Investment (Holding) Ltd.	3	Other payables	(387,349)	Based on agreement	—
		Far Eastern Investment (Holding) Ltd.	3	Interest expenses	(3,583)	Based on agreement	—
30	Sino Belgium (Holding) Ltd.	Sino Belgium (Suzhou) Ltd.	3	Other receivables	847,735	Based on agreement	—
30	Sino Belgium (Holding) Ltd.	Martens Beers Trading (Shanghai) Ltd.	3	Other receivables	575,820	Based on agreement	—
31	Kai Yuan International Investment Co., Ltd.	Far Eastern Resources Development Co.	3	Other payables	(400,000)	Based on agreement	—
31	Kai Yuan International Investment Co., Ltd.	Far Eastern Resources Development Co.	3	Interest expenses	(584)	Based on agreement	—

Note A: The numbers of column:
a. The Company: 0
b. The subsidiary: from 1

Note B: The relationship:
1. The Company to subsidiary.
2. The subsidiary to the Company.
3. Between subsidiaries.

Note C: The number presenting in this column is the ratio of ending balance to consolidated asset or the ratio of cumulative amount to consolidated revenue.

^{}[] SCHEDULE Q

^{}[] INDUSTRY SEGMENT INFORMATION

^{}[] YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009

^{}[] (In Thousands)

Industry Information	2007								2008
Industry Information	Polyester	Spinning, Weaving and Dyeing	Real Estate Development	Investment communications	Construction	Adjustment and Eliminations	Total (Note A)	Polyester	Spinning, Weaving and Dyeing	Real Estate Development	Investment communications	Construction	Adjustment and Eliminations	Total (Note A)
	NTS	NTS	NTS	NTS	NTS	NTS	NTS	NTS	NTS	NTS	NTS	NTS	NTS	NTS	NTS
Sales from outside companies	$78,652,563	$14,891,216	$455,594	$1,998,549	$64,431,990	$3,460,969	$-	$163,890,881	$85,176,282	$17,032,074	$384,585	$3,077,251	$63,218,425	$4,111,131	$-	$172,999,748
Intracompany sales (Note B)	13,078,097	942,607	—	—	—	—	(14,020,704)	—	22,041,434	577,346	82,679	—	6,054	—	(22,707,513)	—
Total revenue	$91,730,660	$15,833,823	$455,594	$1,998,549	$64,431,990	$3,460,969	$(14,020,704)	$163,890,881	$107,217,716	$17,609,420	$467,264	$3,077,251	$63,224,479	$4,111,131	$(22,707,513)	$172,999,748
Segment operating income (Note C)	$670,325	$216,670	$172,054	$1,870,387	$14,429,920	$290,087	$-	$17,649,443	$933,065	$484,490	$224,804	$1,885,011	$14,297,135	$206,474	$-	$18,000,979
Investment income/(loss) from equity-method investees								4,473,374							(168,042)
General income, net								2,826,603							3,239,383
Interest expense								(2,372,921)							(2,791,776)
General expenses (Note D)								(1,937,268)							(5,080,451)
Income before income tax								$20,639,231							$13,190,093
Identifiable assets (Note E)	$61,345,250	$26,040,036	$21,435,433	$940,306	$91,762,281	$4,727,136	$-	$206,250,452	$79,258,587	$19,934,281	$21,917,013	$3,556,777	$84,788,175	$5,281,015	$-	$214,735,848
Long-term stock investments								56,201,529							48,681,533
General assets								10,457,167							7,404,557
Total assets								$272,909,148							$270,821,938
Depreciation expense	$1,450,088	$1,899,620	$33,669	$13,277	$11,483,917	$5,063			$3,646,187	$429,959	$32,135	$-	$11,133,754	$4,926
Capital expenditures	$7,199,789	$3,891,317	$137,572	$-	$6,058,316	$14,351			$3,735,160	$678,982	$667,105	$1,988,674	$7,198,774	$-

Industry Information	2009
Industry Information	Polyester	Spinning, Weaving and Dyeing	Real Estate Development	Investment communications	Construction	Adjustment and Eliminations	Total (Note A)	Polyester	Spinning, Weaving and Dyeing	Real Estate Development	Investment communications	Construction	Adjustment and Eliminations	Total (Note A)
	NTS	NTS	NTS	NTS	NTS	NTS	NTS	USS (Note 3)	USS (Note 3)	USS (Note 3)	USS (Note 3)	USS (Note 3)	USS (Note 3)	USS (Note 3)
Sales from outside companies	$79,777,541	$18,052,088	$387,465	$1,549,493	$60,912,666	$6,294,114	—	$166,973,367	$2,557,791	$578,778	$12,424	$49,679	$1,952,955	$201,799	—
Intracompany sales (Note B)	37,000,999	3,375,497	79,127	—	—	178,057	(40,633,680)	—	1,186,310	108,224	2,536	—	5,708	(1,302,779)	—
Total revenue	$116,778,540	$21,427,585	$466,592	$1,549,493	$60,912,666	$6,472,171	$(40,633,680)	$166,973,367	$3,744,101	$687,002	$14,960	$49,679	$1,952,955	$207,508	(1,302,779)
Segment operating income (Note C)	$3,921,971	$742,615	$246,679	$1,532,113	$12,209,710	$493,833	—	$19,146,921	$125,745	$23,809	$7,909	$49,122	$391,462	$15,833	—
Investment income from equity-method investees								3,921,059							125,715
General income, net								1,708,025							54,762
Interest expense								(1,449,745)							(46,481)
General expenses (Note D)								(5,240,076)							(168,005)
Income before income tax								$18,086,184							$579,871
Identifiable assets (Note E)	$67,879,652	$22,193,626	$22,113,457	$4,375,090	$82,536,716	$8,722,826	—	$207,821,367	$2,176,328	$711,562	$708,992	$140,272	$2,646,256	$279,667	—
Long-term stock investments								49,975,648							1,602,297
General assets								9,622,652							308,517
Total assets								$267,419,667							$8,573,891
Depreciation expense	$4,383,166	$575,534	$33,770	$—	$10,934,347	$5,114			$140,531	$18,453	$1,083	—	$350,572	$164
Capital expenditures	$2,433,515	$371,158	$713,592	$1,122,626	$6,853,288	$3,334			$78,022	$11,900	$22,879	$35,993	$219,727	$107

Note A: The operation of the Group are classified into five segments: Polyester, spinning, weaving and dyeing and apparels; real estate development; investment; telecommunications; and construction.
Note B: Inter-division revenue from goods and services.
Note C: It represents revenue minus costs and operating expenses. Operating expenses include costs and expenses directly pertaining to an industry segment, i.e., excluding general, administrative and interest expenses.
Note D: It represents general, administrative and sales expenses that cannot be allocated to each division.
Note E: It represents tangible assets and intangible assets used by the industry segment, excluding:
a. Assets maintained for general corporate purposes;
b. Advances or loans to another industry segment; and
c. Long-term stock investments under the equity-method.

^{}[] SCHEDULE R

^{}[] FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES
^{}[] (Formerly Far Eastern Textile Ltd. and Subsidiaries)
^{}[] SEGMENT INFORMATION BY REGION
^{}[] YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
^{}[] (In Thousands)

Segment Information	2007					2008
	R.O.C.	P.R.C.	Other Oversea Areas	Adjustment and Eliminations	Total (Note A)	R.O.C.	P.R.C.	Other Oversea Areas	Adjustment and Eliminations	Total (Note A)
	NT$	NT$	NT$	NT$	NT$	NT$	NT$	NT$	NT$	NT$
Sales from outside companies	$121,889,797	$38,054,254	$3,946,830	—	$163,890,881	$123,999,317	$44,979,917	$4,020,514	—	$172,999,748
Sales from the group (Note B)	273,742	13,746,962	—	(14,020,704)	—	5,368,063	17,131,878	207,572	(22,707,513)	—
Total revenue	$122,163,539	$51,801,216	$3,946,830	$(14,020,704)	$163,890,881	$129,367,380	$62,111,795	$4,228,086	$(22,707,513)	$172,999,748
Segment operating income (Note C)	$18,234,961	$(939,890)	$354,372	—	$17,649,443	$17,956,492	$(423,431)	$467,918	—	$18,000,979
Investment income(loss) from equity-method investees					4,473,374					(168,042)
General income, net					2,826,603					3,239,383
Interest expense					(2,372,921)					(2,791,776)
General expenses (Note D)					(1,937,268)					(5,090,451)
Income before income tax					$20,639,231					$13,190,093
Identifiable assets (Note E)	$153,947,391	$48,442,334	$3,860,727	—	$206,250,452	$155,766,207	$55,056,986	$3,912,655	—	$214,735,848
Long-term stock investments					56,201,529					48,681,533
General assets					10,457,167					7,404,557
Total assets					$272,909,148					$270,821,938
Depreciation expense	$13,332,634	$1,539,773	$13,227			$13,686,344	$1,471,831	$88,786
Capital expenditures	$8,482,960	$8,680,813	$137,572			$11,265,762	$2,961,071	$241,862

^{}[] F-483

Segment Information	2009					2009
	R.O.C.	P.R.C.	Other Oversea Areas	Adjustment and Eliminations	Total (Note A)	R.O.C.	P.R.C.	Other Oversea Areas	Adjustment and Eliminations	Total (Note A)
	NT$	NT$	NT$	NT$	NT$	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)	US$ (Note 3)
Sales from outside companies	$121,376,502	$42,498,049	$3,098,816	$—	$166,973,367	$3,891,520	$1,362,553	$99,353	$—	$5,353,426
Sales from the group (Note B)	17,400,296	23,064,463	168,921	(40,633,680)	—	557,880	739,483	5,416	(1,302,779)	—
Total revenue	$138,776,798	$65,562,512	$3,267,737	$(40,633,680)	$166,973,367	$4,449,400	$2,102,036	$104,769	$(1,302,779)	$5,353,426
Segment operating income (Note C)	$16,764,594	$2,440,174	$(57,847)	$—	$19,146,921	$537,499	$78,236	$(1,855)	$—	$613,880
Investment income from equity-method investees					3,921,059					125,715
General income, net					1,708,025					54,762
Interest expense					(1,449,745)					(46,481)
General expenses (Note D)					(5,240,076)					(168,005)
Income before income tax					$18,086,184					$579,871
Identifiable assets (Note E)	$156,211,264	$47,868,856	$3,741,247	$—	$207,821,367	$5,008,377	$1,534,750	$119,950	$—	$6,663,077
Long-term stock investments					49,975,648					1,602,297
General assets					9,622,652					308,517
Total assets					$267,419,667					$8,573,891
Depreciation expense	$13,551,135	$2,265,632	$115,164			$434,471	$72,640	$3,692
Capital expenditures	$10,016,791	$1,156,822	$323,900			$321,154	$37,090	$10,384

Note A: The Far Eastern New Century Corporation and subsidiaries operate in three regions: R.O.C., P.R.C. and other overseas areas.

Note B: The group's revenue from goods and services.

Note C: It represents revenue minus costs and operating expenses. Operating expenses include costs and expenses directly pertaining to an industry segment, i.e., excluding general, administrative and interest expenses.

Note D: It represents general, administrative and sales expenses that cannot be allocated to each division.

Note E: It represents tangible assets and intangible assets used by the industry segment, excluding:
a. Assets maintained for general corporate purposes;
b. Advances or loans to another industry segment; and
c. Long-term stock investments under the equity-method.

F-484

^{}[] F-485

INDEPENDENT ACCOUNTANTS' REVIEW REPORT

The Board of Directors and Shareholders
Far Eastern New Century Corporation

We have reviewed the accompanying consolidated balance sheets of Far Eastern New Century Corporation (the "Company," formerly Far Eastern Textile Ltd.) and subsidiaries as of September 30, 2009 and 2010, and the related consolidated statements of income and cash flows for the nine months then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to issue a report based on our reviews.

Except for the matters disclosed in the next paragraph, we conducted our reviews in accordance with Statement of Auditing Standards No. 36 - "Review of Financial Statements" of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

As discussed in Note 1 to the consolidated financial statements, the financial statements of certain subsidiaries as of and for the nine months ended September 30, 2009 and 2010 have not been reviewed. The total assets of these subsidiaries were 57.65% (NT$148,951,048 thousand) and 56.12% (NT$161,013,720 thousand (US$ 5,162,351 thousand)), and the total liabilities of these subsidiaries were 47.40% (NT$57,983,807 thousand) and 41.16% (NT$58,200,963 thousand (US$ 1,866,014 thousand)), of the related consolidated amounts as of September 30, 2009 and 2010, respectively. The total operating revenues of these subsidiaries were 37.25% (NT$44,762,133 thousand) and 42.27% (NT$61,133,175 thousand (US$ 1,960,025 thousand)) of the related consolidated operating revenues for the nine months ended September 30, 2009 and 2010, respectively. Further, as discussed in Note 13 to the consolidated financial statements, the financial statements of certain equity-method investees as of and for the nine months ended September 30, 2009 and 2010 have not been reviewed. The aggregate carrying values of these equity-method investees were NT$33,889,613 thousand and NT$35,210,806 thousand (US$1,128,913 thousand) as of September 30, 2009 and 2010, respectively, and investment incomes from equity-method investees were NT$2,110,935 thousand and NT$1,555,997 thousand (US$49,888 thousand) for the nine months ended September 30, 2009 and 2010, respectively.

Based on our reviews, except for the effects of any adjustments, if any, as might have been determined to be necessary had we reviewed the financial statement of certain subsidiaries and equity-method investees referred to in the preceding paragraph, we are not aware of any material modifications that should be made to the consolidated financial statements of the Company and subsidiaries referred to above for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, Order No. VI-0960064020 issued by the Financial Supervisory Commission of the ROC Executive Yuan on November 15, 2007, and accounting principles generally accepted in the Republic of China.

As discussed in Note 4 to the consolidated financial statements, on January 1, 2009, the Company and its subsidiaries have adopted the newly revised Statement of Financial Accounting Standards ("Statement" or SFAS) No. 10 - "Inventories." This accounting change resulted in decreases of NT$202,377 thousand in consolidated net income attributable to stockholders' of parent company and a decrease of NT$0.04 in basic earnings per share after income tax for the nine months ended September 30, 2009.

Note 30 (j) to the financial statements discussed a case related to the Department of Commerce's nullification of Pacific Liu Tung Investment Corporation's (PLT, an equity-method investee of the Company) registration of capital increase and relevant registrations. The impact of this case on Far Eastern New Century Corporation's controlling interest and several share subscriptions done by the Company and its subsidiaries, which are the investors of PLT, will depend on the final judgment of the court.

Our reviews also comprehended the translation of the New Taiwan dollar amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2. Such U.S. dollar amounts are presented solely for the convenience of readers.

October 25, 2010

F-486

^{}[] F-487

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2009 AND 2010
(In Thousands, Except Par Value)
(Reviewed, Not Audited)

	2009	2010
ASSETS	NT$	NT$	US$ (Note 2)
CURRENT ASSETS
Cash and cash equivalents (Note 5)	$ 14,995,523	$ 21,481,680	$ 688,736
Financial assets at fair value through profit or loss - current (Note 6)	705,208	2,730,168	87,533
Available-for-sale financial assets - current (Notes 7 and 29)	2,653,950	3,777,010	121,097
Hedging derivative assets - current	7,050	34,140	1,095
Notes and accounts receivable, net (Notes 25 and 29)	22,315,482	25,878,264	829,697
Notes and accounts receivable from affiliates (Notes 25 and 28)	1,025,049	755,405	24,219
Inventories, net (Note 9)	12,058,482	13,475,597	432,049
Available for sale - buildings and land, net (Note 25)	30,339	30,339	973
Available for construction - land, net (Notes 10, 25 and 29)	620,013	620,013	19,879
Construction-in-progress (net of billings on construction-in-progress) (Notes 11, 25 and 29)	3,152,867	8,262,232	264,900
Other receivables	1,364,104	592,483	18,996
Deferred income tax assets - current	639,408	510,530	16,368
Restricted assets (Notes 25 and 29)	629,346	2,692,421	86,323
Prepayments and other current assets (Notes 11, 25 and 29)	3,263,449	4,955,422	158,879
Total current assets	63,460,270	85,795,704	2,750,744
FUNDS AND INVESTMENTS (Notes 7, 8, 12, 13, 14 and 29)
Available-for-sale financial assets - noncurrent	2,027,172	3,095,369	99,242
Equity-method investments	48,504,474	39,486,918	1,266,012
Held-to-maturity financial assets - noncurrent	199,542	199,641	6,401
Financial assets carried at cost - noncurrent	3,307,117	2,883,994	92,465
Bond investments with no active market - noncurrent	293,454	293,454	9,409
Total funds and investments	54,331,759	45,959,376	1,473,529
PROPERTIES (Notes 15 and 29)
Cost
Land	5,118,698	10,665,989	341,968
Buildings	17,723,862	21,002,732	673,380
Machinery and equipment	95,181,959	97,968,498	3,141,023
Telecommunication equipment	109,735,618	132,898,902	4,260,946
Computer equipment	17,570,530	22,025,541	706,173
Leasehold improvements	1,852,259	2,456,410	78,756
Operating and miscellaneous equipment	6,128,107	7,620,532	244,327
Total cost	253,311,033	294,638,604	9,446,573
Appreciation	19,514,814	19,013,452	609,601

	2009	2010
ASSETS	NT$	NT$	US$ (Note 2)
Total cost and appreciation	272,825,847	313,652,056	10,056,174
Less: Accumulated depreciation	163,472,913	190,519,846	6,108,363
Less: Accumulated impairment	2,445,055	5,342,439	171,287
	106,907,879	117,789,771	3,776,524
Construction in progress and prepayments for equipment	6,365,641	10,026,268	321,458
Net properties	113,273,520	127,816,039	4,097,982
INTANGIBLE ASSETS
Deferred pension costs	90,592	17,061	547
Goodwill (Note 16)	12,026,649	11,861,669	380,304
3G license fee (Note 17)	6,759,035	6,028,328	193,278
Land use rights, net (Note 29)	1,360,235	1,213,978	38,922
Other intangible assets (Note 16)	53,769	608,577	19,512
Total intangible assets	20,290,280	19,729,613	632,563
OTHER ASSETS
Nonoperating properties, net (Note 29)	3,830,297	3,696,890	118,528
Refundable deposits (Notes 25 and 28)	455,994	531,728	17,048
Deferred charges, net	643,870	932,105	29,885
Deferred income taxes - noncurrent	1,034,612	887,708	28,461
Farmland (Note 18)	276,661	276,661	8,870
Restricted assets(Note 29)	409,164	548,801	17,595
Other	365,020	753,124	24,146
Total other assets	7,015,618	7,627,017	244,533
TOTAL	$258,371,447	$286,927,749	$9,199,351

^{}[] F-489

	2009	2010
LIABILITIES AND STOCKHOLDERS' EQUITY	NT$	NT$	US$ (Note 2)
CURRENT LIABILITIES
Short-term bank loans (Notes 19 and 29)	$ 23,512,882	$ 28,149,520	$ 902,517
Short-term bills payable (Notes 20 and 29)	6,567,114	7,772,159	249,188
Financial liabilities at fair value through profit or loss - current (Note 6)	77,871	29,466	945
Notes and accounts payable, net (Note 25)	11,120,978	15,343,938	491,951
Notes and accounts payable to affiliates (Notes 25 and 28)	776,519	1,318,513	42,274
Income tax payable	701,233	1,358,160	43,545
Accrued expenses (Note 28)	6,855,137	8,625,651	276,552
Guarantee deposits received - current	622,273	505,076	16,194
Payables for acquisition of properties	948,522	1,820,679	58,374
Sales revenue received in advance	871,632	802,408	25,726
Advances on land and building (Notes 11 and 25)	440,016	3,363,621	107,843
Revenue received in advance (Note 21)	1,149,313	1,834,183	58,807
Billings on construction-in-progress (net of construction-in-progress) (Notes 22, 25 and 28)	489,335	878,887	28,179
Current portion of long-term liabilities (Notes 23 and 29)	7,654,532	8,591,782	275,466
Deferred income tax liabilities - current	22,836	—	—
Other current liabilities (Note 28)	2,554,891	2,873,961	92,144
Total current liabilities	64,365,084	83,268,004	2,669,705
LONG-TERM LIABILITIES
Long-term debts, net of current portion (Notes 23 and 29)	36,356,208	26,933,045	863,515
Bonds payable, net of current portion (Notes 23, 28 and 29)	10,588,210	20,186,160	647,200
Lease payable - noncurrent	195	—	—
Total long-term liabilities	46,944,613	47,119,205	1,510,715
RESERVE FOR LAND VALUE INCREMENT TAX (Note 15)	6,460,128	6,299,324	201,966
OTHER LIABILITIES
Accrued pension cost	2,326,950	1,869,069	59,925
Guarantee deposits received - noncurrent	315,607	515,097	16,515
Deferred income tax liabilities - noncurrent	335,455	293,838	9,421
Deferred income (Notes 15 and 28)	1,038,430	984,695	31,571
Others (Notes 13 and 24)	549,235	1,055,422	33,838
Total other liabilities	4,565,677	4,718,121	151,270
Total liabilities	122,335,502	141,404,654	4,533,656

	2009	2010
LIABILITIES AND STOCKHOLDERS’ EQUITY	NT$	NT$	US$ (Note 2)
SHAREHOLDERS’ EQUITY OF PARENT COMPANY (Note 26)
Capital stock of parent company - NT$10.00 par value
Authorized - 4,950,000 thousand shares
Issued and outstanding - 4,754,580 thousand shares in 2010; 4,661,353 thousand shares in 2009	46,613,529	47,545,800	1,524,392
Capital surplus
Additional paid-in capital from share issuance in excess of par value	932,814	932,814	29,907
From long-term investment	9,078,724	9,314,491	298,637
Others	7,672	7,672	246
Total capital surplus	10,019,210	10,254,977	328,790
Retained earnings
Legal reserve	8,602,110	9,413,371	301,807
Special reserve	3,034,765	3,034,765	97,299
Unappropriated earnings	7,342,346	10,733,854	344,144
Total retained earnings	18,979,221	23,181,990	743,250
Other shareholders’ equity
Unrealized gains on financial instruments	1,727,350	3,694,195	118,442
Cumulative translation adjustments	2,835,906	2,168,558	69,527
Unrealized revaluation increment on properties	8,852,930	8,711,423	279,302
Unrecognized loss on pension cost	(652,291)	(81,891)	(2,626)
Total other shareholders’ equity	12,763,895	14,492,285	464,645
Total shareholders’ equity of parent company	88,375,855	95,475,052	3,061,077
MINORITY INTEREST	47,660,090	50,048,043	1,604,618
Total shareholders’ equity	136,035,945	145,523,095	4,665,695
TOTAL	$258,371,447	$286,927,749	$9,199,351
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated October 25, 2010)

^{}[] F-491

CONSOLIDATED STATEMENTS OF INCOME

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(In Thousands, Except Earnings Per Share)
(Reviewed, Not Audited)

	2009	2010
	NT$	NT$	US$ (Note 2)
OPERATING REVENUES (Note 28)
Net sales	$ 74,869,809	$ 95,782,996	$ 3,070,952
Telecommunications service income	40,979,086	41,071,867	1,316,828
Gain on disposal of investments, net	1,185,860	317,631	10,184
Net construction income	2,229,816	6,493,797	208,201
Other operating income	906,618	972,301	31,174
Total operating revenues	120,171,189	144,638,592	4,637,339
OPERATING COSTS (Notes 4, 9 and 28)
Cost of sales	68,663,608	85,529,568	2,742,211
Cost of telecommunications services	20,464,762	20,341,376	652,176
Construction cost	2,123,003	4,850,607	155,518
Other operating cost	526,509	698,270	22,388
Total operating costs	91,777,882	111,419,821	3,572,293
GROSS PROFIT EXCLUDING REALIZED CONSTRUCTION INCOME	28,393,307	33,218,771	1,065,046
REALIZED CONSTRUCTION INCOME	277	277	9
GROSS PROFIT	28,393,584	33,219,048	1,065,055
OPERATING EXPENSES (Note 28)
Marketing	11,481,447	12,539,567	402,038
General and administrative	5,326,184	5,397,201	173,043
Research and development	487,011	476,982	15,293
Total operating expenses	17,294,642	18,413,750	590,374
OPERATING INCOME	11,098,942	14,805,298	474,681

	2009	2010
	NT$	NT$	US$ (Note 2)
NONOPERATING INCOME AND GAINS
investment income from equity-method investees	3,134,498	1,955,701	62,703
Dividend income	134,733	297,099	9,525
Valuation gain on financial assets, net (Note 6)	214,977	82,533	2,646
Interest income (Note 28)	128,884	116,949	3,750
Valuation gain on financial liabilities, net (Note 6)	67,460	67,489	2,164
Rental income (Notes 15 and 28)	50,175	57,269	1,836
Exchange gain	—	97,820	3,136
Other (Note 28)	597,629	464,303	14,886
Total nonoperating income and gains	4,328,356	3,139,163	100,646
NONOPERATING EXPENSES AND LOSSES
Interest expense (Notes 11, 15 and 28)	1,130,740	799,277	25,626
Exchange loss, net	161,324	—	—
Impairment loss on assets (Note 12)	143,816	70,560	2,262
Loss on disposal of properties, net	40,226	51,755	1,659
Other (Note 28)	693,383	758,424	24,316
Total nonoperating expenses and losses	2,169,489	1,680,016	53,863
CONSOLIDATED INCOME BEFORE TAX	13,257,809	16,264,445	521,464
INCOME TAX	2,593,518	2,179,769	69,887
NET CONSOLIDATED INCOME	$10,664,291	$14,084,676	$ 451,577
ATTRIBUTABLE TO:
Shareholders of parent company	$ 5,894,642	$ 8,760,378	$ 280,871
Minority interest	4,769,649	5,324,298	170,706
	$10,664,291	$14,084,676	$ 451,577

	2009		2010
	Before Income Tax	After Income Tax	Before Income Tax		After Income Tax
	NT$	NT$	NT$	US$(Note 2)	NT$	US$(Note 2)
EARNINGS PER SHARE (Note 27)
Basic	$ 1.25	$ 1.24	$ 1.85	$ 0.06	$ 1.84	$ 0.06
Diluted	$ 1.25	$ 1.24	$ 1.84	$ 0.06	$ 1.84	$ 0.06

(With Deloitte & Touche review report dated October 25, 2010)

^{}[] F-493

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(In Thousands)
(Reviewed, Not Audited)

	2009	2010
	NT$	NT$	US$ (Note 2)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in receivables from related parties	223,325	34,290	1,100
Proceeds of the sale of available-for-sale financial assets - current	1,729,074	3,858,454	123,708
Increase in available-for-sale financial assets	(2,069,847)	(1,989,003)	(63,771)
Proceeds of the sale of financial assets carried at cost	—	509,642	16,340
Acquisition of financial assets carried at cost	(233,101)	(30,669)	(983)
Acquisition of bond investments with no active market	(293,454)	—	—
Proceeds of the sale of investments with no active markets	3,000	—	—
Increase in restricted assets	(621,696)	(677,505)	(21,722)
Increase in other intangible assets	(42,931)	(25,005)	(802)
Acquisition of held-to-maturity financial assets	(199,540)	—	—
Proceeds of the sale of equity-method investments	2,108,475	654,289	20,978
Acquisition of equity-method investments	(976,531)	(15,785,325)	(506,102)
Proceeds of the disposal of properties	466,485	70,941	2,274
Acquisition of properties	(7,507,703)	(12,842,094)	(411,738)
Decrease in refundable deposits	27,271	25,429	815
Increase in deferred charges	(102,229)	(112,828)	(3,617)
Increase in other assets	(5,275)	(492,547)	(15,792)
Net cash used in investing activities	(7,494,677)	(26,801,931)	(859,312)
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in short-term bank loans	(4,185,511)	4,003,382	128,355
Increase in short-term notes and bills payable	1,333,146	2,672,409	85,682
(Decrease) increase in payables to affiliates	(677,672)	959,692	30,769
Decrease in long-term bank loans and bonds payable	(10,191,459)	(2,038,829)	(65,368)
Decrease in guarantee deposits received	(94,026)	(41,863)	(1,343)
Increase (decrease) in other liabilities	36,560	(22,858)	(733)
Subsidiaries' capital increase for cash	163,785	25,000	802
Cash dividends, remuneration to directors and supervisors and bonuses to employees	(9,125,280)	(11,419,130)	(366,115)
Decrease in minority interest	(1,385,620)	(87,992)	(2,821)
Net cash used in financing activities	(24,126,077)	(5,950,189)	(190,772)
EFFECTS OF EXCHANGE RATE CHANGES	(128,415)	88,534	2,839
NET DECREASE IN CASH AND CASH EQUIVALENTS	(8,017,505)	(4,283,839)	(137,346)
EFFECT OF INCREASE IN SUBSIDIARIES	66,494	4,623,521	148,237
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	22,946,534	21,141,998	677,845
CASH AND CASH EQUIVALENTS, END OF PERIOD	$14,995,523	$21,481,680	$688,736

	2009	2010
	NT$	NT$	US$ (Note 2)
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid	$1,232,939	$841,180	$26,970
Less: Capitalized interest	50,348	45,927	1,472
Interest paid (excluding capitalized interest)	$1,182,591	$795,253	$25,498
Income tax paid	$3,952,338	$1,955,670	$62,702
NONCASH FINANCING ACTIVITIES
Current portion of long-term liabilities	$7,654,532	$8,591,782	$275,466

^{}[] F-496

SUPPLEMENTARY INFORMATION ON SUBSIDIARIES ACQUIRED:

In the first quarter of 2009, an FENC subsidiary, Yuan Tong Investment Co., Ltd. acquired 70% common equity in Martens Beer (Shanghai) Ltd.

The fair values of the total assets and total liabilities of Martens Beer (Shanghai) Ltd. at the time of acquisition were as follows:

Cash and cash equivalents	$66,494
Accounts and notes receivable, net	4,117
Inventories	312
Other current assets	10,001
Properties, net	1,797
Accounts payable	(4,929)
Accrued expenses	(2,323)
Other current liabilities	(1,349)
Total	74,120
Percentage of ownership acquired	70%
Common equity acquired	51,884
Goodwill	26,382
Total acquisition cost of Martens Beer (Shanghai) Ltd.	$78,266
Total acquisition cost of Martens Beer (Shanghai) Ltd. Cash payment	$78,266

In August 2010, an FENC subsidiary, Yuan Cing Infocomm Tech Co., Ltd., acquired about 67.82% common equity in New Century InfoComm Tech Co., Ltd ("NCIC").

The fair values of the total assets and liabilities of NCIC at the time of acquisition were as follows:

	NT$	US$ (Note 2)
Cash and cash equivalents	$ 4,623,521	$ 148,237
Financial assets at fair value through profit or loss - current	1,678,320	53,810
Available-for-sale financial assets - current	1,573,567	50,451
Held-to-maturity financial assets - current	800,000	25,649
Notes receivable	46,320	1,485
Accounts receivable, net	843,165	27,033
Accounts receivable from related parties, net	175,455	5,625
Other receivables from related parties	59,128	1,896
Other financial assets — current	1,297,860	41,612
Inventories, net	122,057	3,913
Prepayments	90,825	2,912
Restricted assets — current	113,991	3,655
Other current assets	204,907	6,570
Equity-method investments	21,362	685
Held-to-maturity financial assets - noncurrent	1,008,000	32,318
Financial assets carried at cost - noncurrent	4,500	144
Properties, net	17,344,557	556,094
Intangible assets, net	904,000	28,984
Rental properties, net	169,995	5,450
Idle properties, net	7,219	232
Refundable deposits	86,032	2,758
Deferred charges, net	125,927	4,038
Pledged certificates of deposits - noncurrent	124,675	3,997
Notes payable	(7,349)	(236)
Accounts payable	(652,829)	(20,931)
Accounts payable to related parties	(139,915)	(4,486)
Accrued Expenses	(679,271)	(21,778)
Other payables to related parties	(197,579)	(6,335)
Payables to suppliers of machinery and equipment	(605,343)	(19,408)
Hedging derivative liabilities - current	(6,200)	(199)
Unearned revenues	(300,887)	(9,647)
Other current liabilities	(187,263)	(6,004)
Accrued pension liabilities	(143,384)	(4,597)
Deferred revenues	(154,930)	(4,967)
Guarantee deposits receivable - noncurrent	(29,525)	(947)
Other liabilities	(309,084)	(9,910)
Total	28,011,824	898,103
Percentage of ownership acquired	67.82%	67.82%
Common equity acquired	18,997,972	609,104
Goodwill	274,991	8,817
Total acquisition cost of NCIC - cash payment	$19,272,963	$ 617,921

^{}[] F-498

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(In Thousands, Unless Stated Otherwise)
(Reviewed, Not Audited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Group's significant accounting policies are summarized as follows:

FENC's direct and indirect subsidiaries (i.e., investees with more than 50% of their voting shares owned by FENC or defacto control) are included in the consolidated financial statements. For subsidiaries acquired during the reporting period, the accounts of their revenues and expenses generated before the acquisition date need not be consolidated. If FENC loses control over its subsidiaries during the reporting period, their revenues and expenses generated after the control lose date need not be consolidated.

All significant intercompany transactions and balances were excluded from the consolidation.

In February 2009, an FENC subsidiary, Sino Belgium (Holding) Ltd. ("Sino"), issued 2,415 new shares at US$2 thousand per share amounting to US$4,830 thousand but another subsidiary and also an investor of Sino, Yuan Tong Investment Co., Ltd. ("Yuan Tong"), did not buy any of Sino's newly issued shares. Thus, the interest of Yuan Tong in Sino decreased from 100% to 87.5%.

In February 2009, an FENC subsidiary, Sino, acquired 30% equity in Martens Beer (Shanghai) Ltd. ("Martens Shanghai") from another subsidiary, Far Eastern Industries (Wuxi) Ltd. and then bought the remaining 70% equity from an original shareholder, Martens HK Ltd.. With the Group thus acquiring 100% equity in Martens Shanghai, this investee began to be included in the consolidated financial report in March 2009.

In February 2010, the Company acquired 42.347 thousand shares of PET Far Eastern (Holding) Ltd. ("PETH") from a related party, Oriental Union Chemical Corporation ("OUCC"), for NT$659,422.5 thousand (US$21,142 thousand). Thus, the Group's holding in PETH increased from 87.07% to 100%.

An FENC subsidiary, Yuan Cing Infocomm Tech Co., Ltd. ("YCIC"), was incorporated on December 30, 2009. It is wholly owned by Far EasTone. YCIC mainly provides sales of communications products.

To integrate the resources and enhance the operating efficiency of the subsidiary, Far EasTone Telecommunications Co., Ltd. ("Far EasTone"), and KG Telecommunications Co., Ltd. ("KG Telecom," formerly Far EasTone's 100% subsidiary), the boards of directors of both companies resolved to approve their merger on February 26, 2009, with Far EasTone as the successor entity. On August 28, 2009, National Communications Commission (NCC) approved this merger, and the record date of this merger was January 1, 2010. The merger was approved on January 1, 2010, after the registration with the ministry of Economic Affairs (MOEA).

To prepare for the era of service convergence, Far EasTone aims to enhance the business cooperation between its mobile and fixed-line components by group integration to provide more comprehensive telecom services to consumers as well as to reach the long-term synergy in operating costs. On June 25, 2010, the board of directors of YCIC resolved to conduct a tender offer to acquire the common shares of New Century InfoComm Tech Co., Ltd. ("NCIC") with the price at NT$10.93 (US$0.35) per share.

As of August 16, 2010, the expiry date of the tender offer, YCIC had acquired 1,762,945 thousand shares of NCIC's common shares, which included 577,732 thousand shares acquired from related parties for NT$6,314,615 thousand (US$202,456 thousand), as follows: Yuang Tong - 312,221 thousand shares; Yuan Ding Investment Co., Ltd. ("YDI") - 100,694 thousand shares; Der Ching Investment Corporation - 63,000 thousand shares; Bai Ding Investment Ltd. - 24,386 thousand shares; New Diligent Co., Ltd. - 16,822 thousand shares; Yuan Ding Co., Ltd. - 16,337 thousand shares; Vai Yang Investment Co. - 11,251 thousand shares; Tranquil Enterprise Ltd. - 10,945 thousand shares; Yue-Tung Investment Corporation - 8,800 thousand shares; the Company - 8,000 thousand shares; Far Eastern New Century Corporation - 2,605 thousand shares; Asia Investment Corp. - 2,605 thousand shares and Yue Ding Industry Co., Ltd. - 66 thousand shares.

The shares acquired through the tender offer in addition to Far EasTone's own holding of 695,096 thousand shares of NCIC, Far EasTone and YCIC jointly owned 94.56% of NCIC's common shares. Thus, the accounts of NCIC's and its subsidiaries' revenues and expenses were included in the consolidated financial statements since August 16, 2010.

Moreover, on August 31, 2010, the boards of directors of Far EasTone and YCIC resolved to merge NCIC through a two-stage process. In the first stage, YCIC will conduct a share swap with NCIC based on Article 29 of the Enterprise Merger and Acquisition Law (EM&A Law). As a result, NCIC will become a 100% owned subsidiary of YCIC. The expected share swap ratio of 1:1 and the expected record date of the share swap is February 25, 2011. The share swap was resolved in the special stockholders' meetings of both YCIC and NCIC on October 5, 2010. After the share swap, Far EasTone will conduct a merger with YCIC at the target price of NT$10.93 (US$0.35) per share, with Far EasTone as the successor entity in the second stage. Thus, NCIC will become a 100% owned subsidiary of Far EasTone. Far EasTone and YCIC would hold the meetings of board of directors separately to resolve the proposals at each phase of merger in accordance with the related laws and regulations.

To meet YCIC's capital needs for the tender offer and enhance its working capital, Far EasTone's board of directors resolved on June 25, 2010 that Far EasTone subscribed for YCIC's shares issued for capital increase at NT$15,000,000 thousand (US$480,923 thousand) in cash and would provide a loan to YCIC a maximum of NT$6,000,000 thousand (US$192,369 thousand). Far EasTone's board of directors also approved to authorize the chairman of board of directors of Far EasTone to allow YCIC to make a drawdown on the loan within the credit line of NT$6,000,000 thousand (US$192,369 thousand) within one year from the loan grant date. As of October 25, 2010, Far EasTone had lent NT$4,300,000 thousand (US$137,865 thousand) to YCIC.

For the intercompany relationships, percentages of ownership and operations of subsidiaries for the nine months ended September 30, 2010, refer to Schedules A and B (attached).

Except for the financial statements of Far EasTone, Arcoa Communication Co., Ltd. ("ARCOA"), YCIC as of and for the nine months ended September 30, 2009 and 2010 and the financial statements of NCIC as of and for the nine months ended September 30, 2010 had been reviewed, the financial statements of the remaining subsidiaries included in the consolidated financial statements had not been reviewed by independent accountants. The total assets of these subsidiaries were 57.65% (NT$148,951,048 thousand) and 56.12% (NT$161,013,720 thousand (US$5,162,351 thousand)), and the total liabilities of these subsidiaries were 47.40% (NT$57,983,807 thousand) and 41.16% (NT$58,200,963 thousand (US$1,866,014 thousand)), of the related consolidated amounts as of September 30, 2009 and 2010, respectively. The total operating revenues of these subsidiaries were 37.25% (NT$44,762,133 thousand) and 42.27% (NT$61,133,175 thousand (US$1,960,025 thousand)) of the related consolidated operating revenues for the nine months ended September 30, 2009 and 2010, respectively.

F-499

In the consolidation, the financial statements of the foreign subsidiaries are translated from their respective functional currencies into New Taiwan dollars as follows:

a. All assets and liabilities - at the exchange rates prevailing on the balance sheet date;
b. Share capital, retained earnings and/or accumulated deficit - at their historical exchange rates;
c. All items in the statement of income - at the average exchange rates for the periods.

Reclassifications

Certain accounts in the consolidated financial statements as of and for the nine months ended September 30, 2009 have been reclassified to be consistent with the presentation of the consolidated financial statements as of and for the nine months ended September 30, 2010.

2. TRANSLATION INTO U.S. DOLLARS

The consolidated financial statements are stated in New Taiwan dollars. The translations of the New Taiwan dollar amounts into U.S. dollars are included solely for the convenience of readers, using the noon buying rate of NT$31.19 to US$1.00 published by US Federal Reserve on September 30, 2010. The convenience translations should not be construed as representations that the New Taiwan dollar amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other exchange rate.

3. PRO FORMA FINANCIAL INFORMATION

Assuming that the Group acquired a majority holding in NCIC and Martens Shanghai on January 1, 2009. The pro forma financial information of the Group for the nine months ended September 30, 2009 and 2010 would have been as follows:

The pro forma financial information above is only for reference. It does not completely represent the financial status of the Group after acquiring majority ownership in NCIC and Martens Shanghai on January 1, 2009 and the future consolidated financial status.

4. CHANGE IN ACCOUNTING PRINCIPLES

On January 1, 2009, the Group adopted the newly revised SFAS No. 10 - "Accounting for Inventories." The main revisions are (a) inventories are stated at the lower of cost or net realizable value, and inventories are written down to net realizable value item-by-item except when the grouping of similar or related items is appropriate; (b) unallocated overheads are recognized as expenses in the period in which they are incurred; and (c) abnormal costs, write-downs of inventories and any reversal of write-downs should be classified as cost of goods sold. This accounting change resulted in decreases of NT$202,377 thousand in consolidated net income attributable to stockholders' of parent company and of NT$0.04 in basic earnings per share after income tax for the nine months ended September 30, 2009.

F-500

^{}[] 5. CASH AND CASH EQUIVALENTS

As of September 30, 2009 and 2010, demand deposits overseas were as follows:

	September 30
	2009	2010
	NT$	NT$
U.S.A. - New York (US$19 thousand in 2009 and US$2,666 thousand in 2010)	$ 623	$ 83,159
Belgium (US$1,922 thousand in 2009 and US$1,106 thousand in 2010)	61,821	34,574
China-Hong Kong (HK$568 thousand in 2010)	—	2,288
China-Hong Kong (US$3 thousand in 2009 and US$1 thousand in 2010)	96	32
	$ 62,540	$ 120,053

F-501

^{}[] 6. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS - CURRENT

Financial instruments classified as held for trading were as follows:

YDI, KG Telecom (no longer existed after the merger with Far EasTone on January 1, 2010) and Yuan Tong contracted and fully authorized Oriental Securities Investment Advisory Co., Ltd. (trustee) to manage discretionary funds. In addition, for the nine months ended September 30, 2010, NCIC and its subsidiaries signed the contracts with Oriental Securities Investment Advisory Co., Fuh Hwa Securities Investment Trust Co., Ltd., SinoPac Securities Investment Trust Co., Ltd., Prudential Financial Securities Investment Trust Enterprise, Jin Sun Securities Investment Trust Co. Ltd. and Yuanta Securities Investment Trust Co. Ltd. to manage their discretionary funds. The trustees were authorized by the subsidiaries to manage discretionary funds of NT$1,100,000 thousand and NT$3,000,000 thousand (US$96,185 thousand) as of September 30, 2009 and 2010, respectively. The investment target excluded shares of related parties, shares of domestic companies within the telecommunications industry (except Chunghwa Telecom Co., Ltd.) and their related derivative instruments. Deposits on fully authorized funds were NT$278,965 thousand and NT$1,043,868 thousand (US$33,468 thousand) as of September 30, 2009 and 2010, respectively and were classified under cash and cash equivalents (Note 5 to the financial statements).

The Company entered into cotton futures contracts and forward exchange contracts to hedge the fluctuation of cotton prices and exchange rates on account receivables during the years ended September 30, 2009 and 2010. The strategy is to hedge the Company's market risk exposure. Since these transactions do not meet the criteria for hedge accounting, they were classified as held for trading.

The Company entered into put option contracts and non-hedging purpose forward exchange contracts mainly to profit on royalties and the difference between exchange rate fluctuations for the nine months ended September 30, 2009 and 2010.

The Company had no outstanding cotton future contract as of September 30, 2010. The outstanding cotton futures contracts as of September 30, 2009 were as follows:

Outstanding Derivative Contract	September 30, 2009
Outstanding Derivative Contract	Maturity Date	Units	Contract Amount (Thousands)
Cotton futures contracts	December 2009	20	USD571/NTD18,806

The Company had no outstanding option contracts as of September 30, 2009 and 2010.

The outstanding forward exchange contracts as of September 30, 2009 and 2010 were as follows:

	Currency	Maturity Date	Contract Amount (Thousands)
September 30, 2009
Sell	USD/NTD	2009.10.05-2009.11.05	USD39,000/NTD1,261,164
Sell	EUR/USD	2009.11.27-2009.12.29	EUR7,000/USD10,007
September 30, 2010
Sell	EUR/USD	2010.10.29-2010.12.29	EUR9,000/USD11,529

On the exchangeable bonds issued in 2007, the Company separately recognized the embedded derivatives and the host debt instruments. In addition, the derivatives were measured at fair value and recognized as financial assets and liabilities at fair value through profit or loss.

For the nine months ended September 30, 2009 and 2010, Far Eastern Investment (Holding) Ltd. (FEIH) entered into forward exchange contracts not only to hedge against the exchange rate risk on foreign-currency liabilities, but also to hedge against the risk on foreign currency investments made on behalf of a related party, Wuhan Far Eastern New Material Ltd., for the nine months ended September 30, 2010.

FEIH had no outstanding forward exchange contracts as of September 30, 2009. The outstanding forward exchange contracts as of September 30, 2010 were as follows:

	Currency	Maturity Date	Contract Amount (Thousands)
September 30, 2010
Sell	USD/CAD	2010.10.25	USD2,000/CAD2,042

An FENC subsidiary, Oriental Petrochemical (Taiwan) Co., Ltd. ("OPTC") entered into forward exchange contracts to hedge against the exchange rate risk on foreign currency assets and liabilities in the nine months ended September 30, 2009 and 2010.

As of September 30, 2009, OPTC had no outstanding forward exchange contract; as of September 30, 2010, the outstanding forward exchange contracts were as follows:

For the nine months ended September 30, 2009 and 2010, an FENC subsidiary, Far Eastern Fibertech Co. ("FEFC"), entered into forward exchange contracts to hedge against the exchange rate risk on foreign currency assets and liabilities. FEFC had no outstanding contracts as of September 30, 2009. The outstanding forward exchange contracts were as follows:

For the nine months ended September 30, 2009, an FENC subsidiary, Yuan Tong, entered into forward exchange contracts to hedge against the exchange rate risk on foreign currency assets and liabilities. Yuan Tong had no outstanding contracts as of September 30, 2009.

On the financial assets held for trading, there were net gains of NT$206,452 thousand and NT$94,868 thousand (US$3,042 thousand) for the nine months ended September 30, 2009 and 2010, respectively. On financial liabilities held for trading, there were net gains of NT$67,460 thousand and NT$67,489 thousand (US$2,164 thousand) for the nine months ended September 30, 2009 and 2010, respectively.

AVAILABLE-FOR-SALE FINANCIAL ASSETS
BOND INVESTMENTS WITH NO ACTIVE MARKET

On July 16, 2004, ARCOA bought five-year corporate bonds at par value of NT$3,000 thousand with coupon interest rate of 2.55% and the interest was payable on July 16 annually. The maturity date of the bond was July 16, 2009. The bond was redeemed at par value on the maturity date.

On February 26, 2009, an FENC subsidiary, Yuan Tong, bought convertible bonds amounted to EUR6,670 thousand issued by Bockhold N.V. The maturity date of the bond was February 26, 2014. The interest of this three-year convertible bonds was payable semiannually at coupon rate of 7.5%, and the bond can be converted to 933 common stock shares of Bockhold N.V. proportionally. The amount on the host debt contract was recognized as a bond investment with no active market.

F-504

^{}[] F-505

9. INVENTORIES, NET

The allowances for inventory devaluation as of September 30, 2009 and 2010 were NT$908,177 thousand and NT$636,298 thousand (US$20,401 thousand), respectively.

The costs of goods sold were NT$68,663,608 thousand and NT$85,529,568 thousand (US$2,742,211 thousand) for the nine months ended September 30, 2009 and 2010, respectively. Reversals of allowance for losses on decline in value of inventories amounting to NT$844,693 thousand and NT$47,853 thousand (US$1,534 thousand) were included in the cost of goods sold for the nine months ended September 30, 2009 and 2010. Previous write-downs had been reversed as a result of increased selling prices in certain markets.

10. AVAILABLE FOR CONSTRUCTION - LAND

	Area (Square Meters)	September 30
		2009	2010
		NT$	NT$	US$ (Note 2)
Guang Ming Section No. 201, Shi Tuen, Taichung	12,036	$ 411,629	$ 411,629	$ 13,197
Bai An Section No. 877, Ta Chih, Taipei	472	125,099	125,099	4,011
B5 Xin Yi section	199	75,555	75,555	2,422
Jen Ai Section No. 732, Taipei	19	7,730	7,730	249
		$ 620,013	$ 620,013	$ 19,879

11. CONSTRUCTION-IN-PROGRESS (NET OF BILLINGS ON CONSTRUCTION-IN-PROGRESS)

Construction-in-progress, advances on land and building and deferred marketing expenses of Far Eastern Construction Co., Ltd. ("FECC") as of September 30, 2009 and 2010 were as follows:

Project by Accounting Method	September 30, 2009
	Contract Price	Estimated Construction Cost	Construction-in-Progress				Deferred Marketing Expense	Billings on Construction-in-progress	Percentage of Completion	Expected Year of Completion
	Contract Price	Estimated Construction Cost	Land	Construction Cost	Recognized Cumulative (Loss) Gain	Total	Deferred Marketing Expense	Billings on Construction-in-progress	Percentage of Completion	Expected Year of Completion
	NT$	NT$	NT$	NT$	NT$	NT$	NT$	NT$
Completed-contract method
Yuan Yang California	$ —	$ —	$ 215,899	$ 33,568	$ —	$ 249,467	$ 256	$ 54,409	—	2011
Ban Xin Head Office	—	—	—	133,757	—	133,757	96,795	385,607	—	2010
Ban Ciao New Section No. 9 (Zhong Ben)	—	—	693,173	357,594	—	1,050,767	—	—	—	2012
			$ 909,072	$ 524,919	$ —	$1,433,991	$ 97,051	$ 440,016
Project by Accounting Method	September 30, 2010
	Contract Price	Estimated Construction Cost	Construction-in-Progress				Deferred Marketing Expense	Billings on Construction-in-progress	Percentage of Completion	Expected Year of Completion
	Contract Price	Estimated Construction Cost	Land	Construction Cost	Recognized Cumulative (Loss) Gain	Total	Deferred Marketing Expense	Billings on Construction-in-progress	Percentage of Completion	Expected Year of Completion
	NT$	NT$	NT$	NT$	NT$	NT$	NT$	NT$
Completed-contract method
Ban Ciao New Section No. 9 (Zhong Ben)	$ —	$ —	$ 710,554	$ 539,596	$ —	$1,250,150	$ —	$ —	—	2012
Percentage of completion method
Ban Xin Head Office	2,430,952	2,219,150	—	47,232	208,614	255,846	1,901	2,270,015	92	2010
Yuan Yang California	9,116,210	5,207,620	976,488	113,928	1,434,675	2,525,091	104,919	1,093,606	50	2011
			$1,687,042	$ 700,756	$1,643,289	$4,031,087	$ 106,820	$3,363,621
Project by Accounting Method	September 30, 2010
	Contract Price	Estimated Construction Cost	Construction-in-Progress				Deferred Marketing Expense	Billings on Construction-in-progress	Percentage of Completion	Expected Year of Completion
	Contract Price	Estimated Construction Cost	Land	Construction Cost	Recognized Cumulative (Loss) Gain	Total	Deferred Marketing Expense	Billings on Construction-in-progress	Percentage of Completion	Expected Year of Completion
	US$ (Note 2)	US$ (Note 2)	US$ (Note 2)	US$ (Note 2)	US$ (Note 2)	US$ (Note 2)	US$ (Note 2)	US$ (Note 2)
Completed-contract method
Ban Ciao New Section No. 9 (Zhong Ben)	$ —	$ —	$22,782	$17,300	$ —	$ 40,082	$ —	$ —	—	2012
Percentage of completion method
Ban Xin Head Office	77,940	71,149	—	1,514	6,688	8,202	61	72,780	92	2010
Yuan Yang California	292,280	166,964	31,308	3,653	45,998	80,959	3,364	35,063	50	2011
			$54,090	$22,467	$52,686	$129,243	$3,425	$107,843

F-506

The land in section number 9 of the new station section in Ban Ciao (Ban Ciao Zhong Ben) was developed using the joint construction and allocation of housing units method for FECC and Far Eastern Department Stores Ltd. ("FEDS"). The allocation of housing units was based on percentages of land ownership (36.07% for FECC and 63.93% for FEDS).

For the nine months ended September 30, 2009 and 2010, FECC's capitalized interest which generally referred to construction-in-progress and prepaid construction, was NT$14,453 thousand and NT$28,718 thousand (US$921 thousand), respectively. The capitalization rates were 0.8748% to 2.632% at the end of September 2009 and 0.4352% to 1.5216% at the end of September 2010.

Construction-in-progress (net of billings on construction-in-progress) of Far Eastern General Contractor Inc. ("FEGC") as of September 30, 2009 and 2010 was as follows:

Project by		Estimated Construction Cost	Construction- in-progress	Billings on Construction- in-progress	Percentage of Completion	Expected Year of Completion	Recognized Cumulative (Loss) Gain
Accounting Method	Contract Price	Estimated Construction Cost	Construction- in-progress	Billings on Construction- in-progress	Percentage of Completion	Expected Year of Completion	Recognized Cumulative (Loss) Gain
	NTS	NTS	NTS	NTS			NTS
September 30, 2010
a. Percentage of completion method
Kaohsiung Rapid Transit	7,921,849	7,105,296	$7,903,257	$7,658,624	99	2011	$808,387
Min Yi Camp (1)	395,368	406,531	395,368	390,540	—	2011	(11,163)
Min Yi Camp (2)	484,010	498,016	485,674	481,175	—	2011	(14,006)
Zhong-Ben	2,568,919	2,618,919	1,393,156	766,318	55	2012	(50,000)
Yuan Yang California	2,914,631	2,798,046	1,420,630	—	50	2011	58,293
Ban Xin Head Office	3,687,619	3,458,324	3,388,563	2,156,162	92	2010	210,952
Ban Xin repair	1,701,724	1,605,249	1,266,268	883,644	75	2010	72,356
BanCiao communication park	234,286	223,500	224,405	—	96	2010	3,613
Zhong-Long storage	314,931	321,298	314,587	306,852	99	2010	(6,367)
Zhong-Long fireplace	501,908	501,189	502,000	494,894	99	2010	712
Wu-Yang C905	2,723,810	2,647,055	171,250	149,904	6	2012	4,605
			17,465,158	13,288,113			1,077,382
b. Completed-contract method
Flora Exposition	—	—	121,428	118,030	—	2010	—
OIT Car Park	—	—	97,742	59,710	—	2010	—
Zhong-Ben (2)	—	—	8,220	—	—	2012	—
Hsin Chu Windance Shopping Mall	—	—	3,039	—	—	2012	—
Miscellaneous	—	—	4,090	2,679	—	2011	—
			234,519	180,419			—
			17,699,677	$13,468,532			$1,077,382
			$4,231,145

Project by Accounting Method	Contract Price	Estimated Construction Cost	Construction- in-progress	Billings on Construction- in-progress	Percentage of Completion	Expected Year of Completion	Recognized Cumulative (Loss) Gain
	US$(Note 2)	US$(Note 2)	US$(Note 2)	US$(Note 2)			US$(Note 2)
September 30, 2010
a. Percentage of completion method
Kaohsiung Rapid Transit	253,987	227,807	$253,390	$245,548	99	2011	$25,918
Min Yi Camp (1)	12,676	13,034	12,676	12,521	—	2011	(358)
Min Yi Camp (2)	15,518	15,967	15,571	15,427	—	2011	(449)
Zhong-Ben	82,364	83,967	44,667	24,570	55	2012	(1,603)
Yuan Yang California	93,448	89,710	45,548	—	50	2011	1,869
Ban Xin Head Office	118,231	110,879	108,643	69,130	92	2010	6,763
Ban Xin repair	54,560	51,467	40,598	28,331	75	2010	2,320
BanCiao communication park	7,512	7,166	7,195	—	96	2010	116
Zhong-Long storage	10,097	10,301	10,086	9,838	99	2010	(204)
Zhong-Long fireplace	16,092	16,069	16,095	15,867	99	2010	23
Wu-Yang C905	87,330	84,869	5,491	4,806	6	2012	148
			559,960	426,038			34,543
b. Completed-contract method
Flora Exposition	—	—	3,893	3,784	—	2010	—
OIT Car Park	—	—	3,134	1,914	—	2010	—
Zhong-Ben (2)	—	—	264	—	—	2012	—
Hsin Chu Windance Shopping Mall	—	—	97	—	—	2012	—
Miscellaneous	—	—	131	86	—	2011	—
			7,519	5,784			—
			567,479	$431,822			$34,543
			$135,657

^{}[] 12. FINANCIAL ASSETS CARRIED AT COST - NONCURRENT

	September 30
	2009		2010
	Carrying Value	% of Ownership	Carrying Value	% of Ownership
	NT$		NT$	US$(Note 2)
Domestic quoted stocks
Far Eastern International Bank (Note 13)	$1,286,376	5	$1,286,376	$41,243	5
Domestic unquoted stocks
Yue Yuan Investment Corp.	637,577	19	637,577	20,442	19
Bockhold N.V.	223,533	13	223,533	7,167	13
Kaohsiung Rapid Transit Corporation	189,859	2	157,664	5,055	5
Alberta & Orient Glycol Company Ltd.	145,374	25	114,299	3,665	25
Hantech Venture Capital Corp.	104,714	7	104,714	3,357	7
Chung Nan Textile Corp.	81,405	5	81,405	2,610	5
Nippon Parison Co., Ltd.	70,323	10	68,188	2,186	10
Dah Chung Bills Finance Corp.	—	—	30,669	983	1
Yi Tong Fiber Co., Ltd.	28,519	4	28,519	914	4
Ya Li Precast and Prestressed Concrete
Industries Corp.	25,142	16	25,142	806	16
Taiwan Stock Exchange Corp.	22,493	—	22,493	721	—
Others	91,067		95,520	3,063
	1,620,006		1,589,723	50,969
Fund
Domestic private mutual fund	150,000		—	—
Kai Yuang Trust Fund	242,840		—	—
	392,840		—	—
Conversion option embedded into convertible bonds Bockhold N.V.	7,895		7,895	253
	$3,307,117		$2,883,994	$92,465

The above investments, which had no quoted prices in an active market and of which fair values could not be reliably measured, were carried at cost.

Investment in Alberta & Orient Glycol Company Ltd. was accounted for by the cost method since the Group could not exercise significant influence over this investee although the Group owned more than 20% of his investees' voting stock.

In January 2009, an FENC subsidiary, Yuan Tong, acquired 13% equity in Bockhold N.V. for NT$223,533 thousand and then bought a convertible bond issued by Bockhold N.V. (Note 8) on February 26, 2009. However, since the bond was an investment in an inactive market, it was recognized as a financial asset carried at cost amounting to NT$7,895 thousand.

Kai Yuang Trust Fund, which was invested by an FENC subsidiary, FEIH, had completed its liquidation process and returned the proceeds to its investors in the first quarter of 2010 with a gain of NT$104,675 thousand (US$3,356 thousand).

According to interpretation 1998-150 issued by the Accounting Research and Development Foundation, FEGC, the build-operate-transfer (BOT) chartered investor of Kaohsiung Rapid Transit Corporation ("KRTC") will have to transfer all assets to the government without any condition at the end of the chartered period and amortize this investment within the chartered period. KRTC started the construction of its high-speed train system on October 31, 2001 and then began the commercial operation in April 2008. The 36-year charter period will end on October 31, 2037. The amortization period of this investment started in April 2008 for 29 years and 7 months. The amortization expenses were NT$5,070 thousand and NT$2,919 thousand (US$94 thousand) which were recognized as impairment loss on assets for the nine months ended

F-510

^{}[] September 30, 2009 and 2010, respectively. However, because of poor performance of KRTC in many years, FEGC recognized impairment losses of NT$79,856 thousand for the year ended December 31, 2009 and NT$24,939 thousand (US$800 thousand) for the nine months ended September 30 2010 after the assessment of KRTC.

13. EQUITY-METHOD INVESTMENTS

F-511

Investments in FEDS and Ding Ding Hotel Co., Ltd. for the nine months ended September 30, 2009 and 2010, Far Eastern International Bank for the six months ended June 30, 2009 and Ding Ding Integrated Marketing Service Co., Ltd. ("DDIMS") for the nine months ended September 30, 2009 were accounted for by the equity-method since the Group exercised a significant influence over them, even though the Group owned less than 20% of each Investee's voting stock.

The Group committed to provide continuous financial support to Far Eastern International Garments Inc. and Cemtex Apparel Inc. and recognized credit balances on the carrying values of the related long-term investments under Other liabilities - other.

In 2009, the Group bought 7,352 thousand shares of Asia Cement Corporation ("ACC") for NT$219,167 thousand and sold 67,631 thousand ACC shares for NT$2,215,557 thousand. Thus, the Group's equity interest in ACC decreased from 25.90% to 23.85%. For the nine months ended September 30, 2010, the subsidiaries, YDI, Yuan Tong, Kai Yuan International Investment Co., Ltd. ("Kai Yuan") and Ding Yuan International Investment Co., Ltd. ("Ding Yuan"), bought 21,688 thousand shares of ACC for NT$664,145 thousand (US$21,294 thousand); thus, the Group's equity interest in ACC increased from 23.85% to 24.55%.

In 2009, two FENC subsidiaries, YDI and Ding Yuan, bought 12,279 thousand shares of OUCC for NT$194,978 thousand and sold 10,810 thousand shares for NT$260,224 thousand. Thus, the Group's equity interest in OUCC increased from 22.56% to 24.08% and then decreased to 22.74%. For the nine months ended September 30, 2010, YDI and Kai Yuan, sold 320 thousand shares of OUCC for NT$9,241 thousand (US$296 thousand); Ding Yuan bought 230 thousand shares of OUCC for NT$5,780 thousand (US$185 thousand); thus, the Group's equity interest in OUCC decreased from 22.74% to 22.72%.

For the nine months ended September 30, 2009, Yuan Tong, Kai Yuan and Ding Yuan, sold 20,674 thousand shares of FEDS for NT$649,752 thousand. YDI, bought 2,419 thousand shares of FEDS for NT$86,231 thousand. Thus, the Group's equity interest in FEDS decreased from 19.58% to 18.04%. For the nine months ended September 30, 2010, Yuan Tong, Kai Yuan and Ding Yuan bought 11,419 thousand shares of FEDS for NT$341,089 thousand (US$10,936 thousand); thus, the Group's equity interest in FEDS increased from 18.04% to 18.99%.

On June 10, 2009, the shareholders of Far Eastern International Bank ("FEIB") decided to offset deficits of NT$4,075,208 thousand through capital reduction on June 30, 2009, which is the record date of the capital reduction. Thus, the Group's holding in FEIB was decreased by 65,341 thousand shares.

In 2008, the Group participated in FEIB's private placement for 127,601 thousand shares for NT$829,407 thousand, and this investment was treated in the category of restriction of transfer of ownership as stated in Section 8 of Article 43 of the ROC Securities and Exchange Act. In addition, FEIB had a board of directors' election in its shareholders' meeting on June 10, 2009. FENC and one of its subsidiaries, YDI, lost their three seats in the board and no longer had significant influence over FEIB since the new board's term began on June 27, 2009. Thus, the Group reclassified the carrying value of the shares privately issued by FEIB to Financial assets carried at cost, and the remaining carrying value of FEIB was reclassified to available-for-sale financial assets - noncurrent.

In 2009, Everest Textile Co., Ltd. ("Everest Textile") purchased its shares from the open market, and this treasury stock transaction caused the Group's holding in this company to increase from 25.99% to 27.07%. In addition, Ding Yuan bought 17 thousand shares of Everest Textile for NT$97 thousand (US$3 thousand) in March 2010.

In 2009, YDI and Kai Yuan acquired 19,001 thousand shares issued by Far Eastern International Leasing Corp. ("FEILC") for NT$190,008 thousand, and their equity interest in FEILC increased from 33.12% to 33.67%.

In July 2009, YDI, acquired 5,302 thousand shares issued by Da Ju Fiber Co., Ltd. for NT$127,258 thousand.

In July 2009, Ding Yuan acquired 9,120 thousand shares of the shares newly issued by Yue Ding Industry Co., Ltd. for NT$91,200 thousand. Thus, the Group's equity interest in Yue Ding Industry Co. increased from 27.81% to 28.87%.

In order to simplify structure of the investments, YDI sold 20 thousand shares of Pacific Petrochemical (Holding) Ltd. ("PPL") to the related parties of the Group, OUCC, for NT$645,047 thousand (US$20,681 thousand) for the nine months ended September 30, 2010.

On June 5, 2009, the stockholders of NCIC decided to offset deficits of NT$14,005,510 thousand through capital reduction, with August 1, 2009 as the record date of capital reduction. Thus, the Group's holding of NCIC decreased by 596,147 thousand shares.

F-512

As of August 16, 2010, the expiry date of the tender offer, Far EasTone and YCIC jointly own 94.56% of NCIC's common shares; thus, the accounts of NCIC's and its subsidiaries' revenues and expenses have been included in the consolidated financial statements since then. (Note 1) In addition, Far EasTone and NCIC jointly own the shares of DDIMS; thus, the Group's equity interest in DDIMS increased from 15% to 20% after inclusion the accounts of NCIC in the consolidated financial statements.

The earnings from equity-method investments was based on the reviewed financial statements of ACC, FEDS, OUCC, Everest Textile and NCIC as of and for the nine months ended September 30, 2009 and 2010 and the reviewed financial statements of FEIB as of and for the six months ended June 30, 2009. Except for the financial statements of FEIB as of and for the six months ended June 30, 2009, the accountants issued a qualified opinion on the financial statements of the rest companies presented above as of and for the nine months ended September 30, 2009 and 2010. The aggregate carrying amounts of equity-method investments, including the financial statements not been reviewed and those financial statements which had been reviewed but issued qualified opinions by their accountants, were NT$33,889,613 thousand and NT$35,210,806 thousand (US$1,128,913 thousand) as of September 30, 2009 and 2010, respectively; the earnings from these equity-method investees were NT$2,110,935 thousand and NT$1,555,997 thousand (US$49,888 thousand), respectively for the nine months ended September 30, 2009 and 2010.

Market prices of the equity-method investments were as follows:

The difference between the investment cost and the equity in the investees' net assets as of September 30, 2009 and 2010 is as follows:

The decreased of goodwill of NT$252,188 for the nine months ended September 30, 2009 was resulted from reclassification of investment on FEIB to financial assets carried at cost and available-for-sale financial assets — noncurrent after the Group lost the significant influence on FEIB.

	September 30, 2009
	Beginning Balance	Increase	Decrease	Ending Balance
	NT$	NT$	NT$	NT$
Goodwill	$ 878,592	$ 41,401	$ 318,421	$ 601,572
Amortizable assets	808,673	197,036	102,867	902,842
	$1,687,265	$ 238,437	$ 421,288	$1,504,414
	September 30, 2010
	Beginning Balance	Increase	Decrease	Ending Balance
	NT$	NT$	NT$	NT$
Goodwill	$ 586,438	$230,856	$ 67,322	$ 749,972
Amortizable assets	867,535	12,364	108,761	771,138
	$1,453,973	$243,220	$176,083	$1,521,110

	September 30, 2010
	Beginning Balance	Increase	Decrease	Ending Balance
	US$ (Note 2)	US$ (Note 2)	US$ (Note 2)	US$ (Note 2)
Goodwill	$ 18,802	$ 7,402	$ 2,159	$ 24,045
Amortizable assets	27,815	396	3,487	24,724
	$ 46,617	$ 7,798	$ 5,646	$ 48,769

14. HELD-TO-MATURITY FINANCIAL ASSETS - NONCURRENT

In September 2009 an FENC subsidiary, KG Telecom (no longer existed after the merger with Far EasTone, on January 1, 2010), bought five-year corporate bonds for NT$199,540 thousand (the face value of NT$200,000 thousand) issued by ACC with an effective interest rate of 2.004% and coupon interest rate of 1.95%.

15. PROPERTIES

a. Accumulated depreciation consisted of:

b. Accumulated impairment consisted of:

Under government regulations, the Company revalued the properties (excluding land) in 1983 and the lands in 1994. The resulting appreciation was accounted for as an increase in the carrying value of the properties and properties leased to others. A reserve for land value increment tax was also recognized, and the net appreciation was credited to unrealized appreciation under equity.

The Company and ACC co-own a parcel of land located on Dunhua South Road in Taipei. Under an agreement between the Company and ACC on March 31, 1989, Yuan Ding Co., Ltd. ("Yuan Ding") paid for the construction of a multi-functional building on this land and owned the 30 years right of superficies. However, the ownership of the building should have been registered on the Company, ACC and Yuan Ding by 12%, 12% and 76%. Upon expiration of the agreement, the Company and ACC will acquire the remaining 76% ownership of the building from Yuan Ding with the carrying value of the building.

On September 2, 2003, the Company transferred the real estate development rights (including those on operating and nonoperating properties and farmland) from its investment department to its wholly owned subsidiary, Far Eastern Resources Development Co. ("FERD"). When the contract described in the preceding paragraph is terminated, the property right of the co-owned building will be also transferred to FERD.

At the end of 2007, FERD granted Far Eastern. Y. Z. Hsu Science and Technology Memorial Foundation a right of superficies of 9 parcels of land in Yongfeng Section, Bade City, Taoyuan County for 35 years and received royalties of NT$228,571 thousand for right of superficies, which was recognized as deferred incomes. The royalties are recognized as rent revenue over the superficies period.

The capitalized interests on properties were NT$35,895 thousand and NT$17,209 thousand (US$552 thousand) and the capitalized interest rate was 0.6%-6.83% and 0.04%-1.69% for the nine months ended September 30, 2009 and 2010, respectively.

Depreciation expenses were NT$11,952,991 thousand and NT$11,311,657 thousand (US$362,669 thousand) for the nine months ended September 30, 2009 and 2010, respectively.

16. GOODWILL AND OPERATING RIGHTS

a. Goodwill

Under SFAS No. 35 - "Accounting for Asset Impairment," Far EasTone and its subsidiaries are identified identifiable cash-generating units as follows:

To enhance the operating effectiveness, Far EasTone integrated its telecommunications resources actively in 2008 and 2009. Thus, the identifiable cash-generating units were defined as mobile telecommunications service business, telecommunication equipment business and WiFly business, which were divided by distinct business functions.

On December 31, 2008 and 2009, the carrying values of the tangible and intangible assets used by Far EasTone and its subsidiaries were NT$63,927,354 thousand and NT$57,910,640 thousand, respectively. Far EasTone's management took value in use to assess its recoverable amounts of core assets and took the expected useful lives into consideration for the cash flow forecast. Therefore, the discount rates on December 31, 2008 are 12.64% for mobile telecommunications service business, 16.88% for telecommunications equipment business and 10.00% for WiFly business and the discount rates on December 31, 2009 are 10.61% for the mobile telecommunications service business, 10.42% for the telecommunications equipment business and 10.00% for WiFly business. The operating revenue forecast was based on the expected future growth rate of the telecom industry along with the prospective advancement of the business.

The principal assumptions and the relevant measurement of the recoverable amounts of Far EasTone and its subsidiaries are summarized as follows:

1) Expected future growth rate of the telecommunications industry

a) Mobile voice service (MVS): The anticipated MVS growth rate is based on the actual effective customer and revenues in prior years. Since the market of 2G telecommunications services market is mature and there will be increased use of 3G telecommunications services, the growth rate is expected to be stable.

b) Mobile data service (MDS): The demand for MDS is expected to grow. However, given the cycle in the industry, the growth rate for MDS will gradually decrease annually.

c) Business of selling cellular phone units: Based on past experience, plans and the trend in the overall market, the anticipated growth rate is expected to decrease gradually.

d) WiFly business: Based on the current WiFly business operation model and the demand of Wifly, the growth rate is expected to be stable.

2) Expected ratio of service EBITDA (earnings before interest, taxes, depreciation and amortization) to operating revenue:

There was no significant change in the ratio in 2008 and 2009; this ratio is expected to decrease slightly in future years.

Far EasTone's management believed that any reasonable changes in the principal assumptions would not result in the carrying values exceeding the recoverable amounts. Estimated impairment losses of NT$20,000 thousand for 2008 and NT$44,315 thousand for 2009 were recorded, respectively. As of September 30, 2010, there were no significant changes showing the indicators that goodwill was impaired.

b. Operating rights (recognized as Intangible assets-other)

On August 16, 2010, YCIC acquired 67.82% of NCIC's common shares by a tender offer at NT$10.93 (US$0.35) per share. Under SFAS No. 25 - "Business Combinations" and SFAS No. 37 - "Intangible Assets" Far EasTone and its subsidiaries should measure the fair value of the acquired net assets and identify major intangible assets as well as the amortization periods. Thus, the identifiable cash-generating units of NCIC and its subsidiaries were defined as integrated network business and network information security business. The operating rights on the integrated network business was identified and recognized accordingly.

F-516

^{}[] F-517

17. INTANGIBLE ASSETS - 3G CONCESSION, NET

18. FARMLAND

The titles to the land are temporarily registered in the names of trustees, who have either signed an agreement showing the farmlands belong to the Company or have pledged the land to the Company.

19. SHORT-TERM BANK LOANS

An FENC subsidiary, FECC, obtained a loan with credit line of NT$1,000,000 thousand from Taiwan Cooperative Bank for a residential building named Twin Star Garden Square in 2007. The first drawdown was in February 2009, and this loan was fully repaid in December 2009. FECC got another loan with credit line of NT$430,000 thousand from the Bank of Panhsin.

In addition, on December 17, 2009, FECC got a syndicated loan with credit line of NT$4,000,000 thousand from Mega International Commercial Bank and three other banks. A lot under development (17 parcels of land in Shin Ya Section) for a new residential construction named Far Eastern California amounting to NT$4,800,000 thousand was pledged to the creditor banks to guarantee FECC's responsibilities for the debt. The conditions of the loan are presented below:

	Amount Limit	Period	Interest Rate	Redemption
A	$1,800,000	Two years from the first drawdown	Interest rate is fixed during the interest period	The entire loan should be used only once, i.e., it cannot be used as a revolving credit during the contract period.
B	2,200,000	Two years from the first drawdown	Interest rate is fixed during the interest period	Multiple drawdowns on the loan are allowed but the loan cannot be used as a revolving credit during the contract period.
	$4,000,000

20. COMMERCIAL PAPER

Commercial papers within one year were issued at discount rates ranging from 0.51% to 1.738% as of September 30, 2009 and from 0.28% to 2.318% as of September 30, 2010.

21. UNEARNED REVENUES

	September 30
	2009	2010
	NT$	NT$	US$ (Note 2)
Unearned telecom revenues from prepaid cards	$1,090,308	$ 895,467	$ 28,710
Unearned telecom revenues advance receipts	42,239	473,646	15,186
Other	16,766	465,070	14,911
	$1,149,313	$1,834,183	$ 58,807

The subsidiaries, Far EasTone and NCIC, entered into contracts with FEIB in accordance with NCC's prepaid card related regulation of the mandatory and prohibitory provisions of standard contracts of telecommunication products (services) certificate. For the nine months ended September 30, 2010, Far EasTone and NCIC provided the proceeds from the sale of prepaid cards and international calling cards to FEIB as trust funds, which were included in the restricted assets - current. FEIB was designated as in charge of the trust funds to protect the rights of the cardholders for Far EasTone's prepaid cards and NCIC's international calling cards under the trust deeds. Moreover, Far EasTone provided a performance guarantee amounting to NT$450,000 thousand (by December 31, 2009) to KG Telecom and NT$45,000 thousand to KGEx.com for prepaid cards already bought by customers. KG Telecom also provided Far EasTone with a similar guarantee amounting to NT$850,000 thousand (by December 31, 2009).

F-518

^{}[] BILLINGS ON CONSTRUCTION-IN-PROGRESS (NET OF CONSTRUCTION-IN-PROGRESS)

Billings on construction-in-progress of FEGC were as follows:

F-519

^{}[] 23. LONG-TERM LIABILITIES

	September 30, 2009
	Due Within One Year	Due After One Year	Total
	NT$	NT$	NT$
Long-term debts
Bank loans	$3,246,786	$32,857,671	$36,104,457
Commercial paper	79,986	3,498,537	3,578,523
	3,326,772	36,356,208	39,682,980
Bonds payable
Nonconvertible bonds	2,000,000	10,590,000	12,590,000
Nonconvertible bonds discount	—	(1,790)	(1,790)
	2,000,000	10,588,210	12,588,210
Exchangeable bonds	2,500,000	—	2,500,000
Exchangeable bonds discount	(172,240)	—	(172,240)
	2,327,760	—	2,327,760
	4,327,760	10,588,210	14,915,970
	$7,654,532	$46,944,418	$54,598,950

	September 30, 2010
	Due Within One Year		Due After One Year		Total
	NT$	US$(Note 2)	NT$	US$(Note 2)	NT$	US$(Note 2)
Long-term debts
Bank loans	$2,331,794	$74,761	$24,933,670	$799,412	$27,265,464	$874,173
Commercial paper	—	—	1,999,375	64,103	1,999,375	64,103
	2,331,794	74,761	26,933,045	863,515	29,264,839	938,276
Bonds payable
Nonconvertible bonds	6,260,000	200,705	19,040,000	610,452	$25,300,000	811,157
Nonconvertible bonds discount	(12)	—	(36,672)	(1,176)	(36,684)	(1,176)
	6,259,988	200,705	19,003,328	609,276	25,263,316	809,981
Exchangeable bonds	—	—	1,239,300	39,734	1,239,300	39,734
Exchangeable bonds discount	—	—	(56,468)	(1,810)	(56,468)	(1,810)
	—	—	1,182,832	37,924	1,182,832	37,924
	6,259,988	200,705	20,186,160	647,200	26,446,148	847,905
	$8,591,782	$275,466	$47,119,205	$1,510,715	$55,710,987	$1,786,181

F-521

^{}[] F-522

Bank Loans

The loan agreements, with the latest expiry in December 2014, provide for various repayment terms (monthly, quarterly or annual or lump sum on maturity) at the New Taiwan dollar or other foreign currencies. Bank interest rates were 0.53% to 3.15% as of September 30, 2009 and 0.5738% to 3.2% as of September 30, 2010.

On September 12, 2008, the Company signed an agreement with banks led by Hua Nan Commercial Bank to obtain a medium-term (five years) syndicated loan of NT$5,700,000 thousand. Under this agreement, the Company committed to keep its current ratios, tangible asset - equity ratio and EBIT ratio within certain ranges as shown in its stand-alone semiannual and annual reports. There is nothing against the agreement described above in the Company's stand-alone financial statements for the year ended December 31, 2009 and for the nine months ended September 30, 2010.

On July 1, 2008, an FENC Company subsidiary, Sino, signed a medium-term (five years) syndicated loan agreement with banks led by Chinatrust Commercial Bank. The total loan agreement amounted to US$50,000 thousand. Under this agreement, another subsidiary of the Company, Yuan Tong, served as the guarantor of Sino and thus committed to keep its current, liability, tangible asset-equity and EBIT ratios within certain ranges as shown in its annual reports. There is nothing against the agreement described above in the Yuan Tong's stand-alone financial statements of 2009.

On January 4, 2007, the Company's subsidiary, FECC, signed a NT$4,000,000 thousand credit agreement with Hua Nan Bank and six other financial institutions. FECC used certain land, the site of its Zhong Ben project (Ban Ciao - New Section No. 9) and amounting to NT$4,800,000 thousand, as first mortgage to the creditor banks. The agreement terms are as follows:

	Credit Line	Period	Interest Rate	Redemption
A	NT$2,000,000 thousand	Three years and six months after use of the credit	Reference interest rate plus 0.35%-0.40%	Revolving credit within the period, and redemption at lump sum on maturity
B	NT$1,000,000 thousand	One year after use of the credit	Reference interest rate plus 0.30%	Revolving credit within the period, and redemption at lump sum on maturity
C	NT$1,000,000 thousand	Three years and six months after use of the credit	Reference interest rate plus 0.35%-0.40%	No revolving credit within the period, and redemption at lump sum on maturity

Note: The reference interest rate is based on the fixing rate of 90-day commercial paper of Taiwan's second market on page 6,165 of the monitor at 11:00 AM of Telerate.

On June 15, 2010, a subsidiary, FECC, reduced its credit line by NT$1,000,000 thousand (US$32,062 thousand). Thus, the total credit line decreased to NT$3,000,000 thousand (US$96,185 thousand).

On December 4, 2009, an FENC subsidiary, OPTC, got a five-year syndicated loan of NT$4,200,000 thousand from Mega International Commercial Bank ("Mega") and Chinatrust Commercial Bank ("Chinatrust"). OPTC committed that, during the contract period, its annual financial statements should show its liability ratio (liability/equity) is within a certain range. The ratio is based on the audited financial statements. Once OPTC fails to meet its commitment, it should issue new shares for cash, fully repay the loan, or reduce the liability ratio back to the required range by the end of the next October. Otherwise, OPTC will be fined monthly at 0.2% per day of the outstanding amounts during the period between the end of next October and one day before the remidation action is taken. Depends on the conditions and circumstances, the banks could request OPTC repay the principal and the interests immediately.

There is nothing against the agreement described above in the OPTC's stand-alone financial statements of 2009.

Commercial Paper

Commercial paper interest rates ranging from 0.826% to 1.991% as of September 30, 2009 and from 1.113% to 1.988% as of September 30, 2010 would be due within one year. Under this agreement, the Company was allowed to issue revolving within the credit line.

^{}[] F-523

Bonds

FENC

FENC issued five-year secured nonconvertible bonds (the 72nd tranche) on August 13, 2004. The total face value of the bonds was NT$1,500,000 thousand, with each unit having a face value of NT$10,000 thousand. These bonds were repayable in lump sum on maturity. Interest was calculated quarterly and paid annually. FENC redeemed these bonds in August 2009.

To hedge against the risk on interest rate fluctuation of nonconvertible bonds (the 72nd tranche), FENC entered into interest rate swap contracts. The bonds were redeemed in August 2009.

FENC issued three-year unsecured bonds (the 1st tranche) on October 31, 2007. The bonds have an aggregate face value of NT$800,000 thousand, with each unit having a face value of NT$1,000 thousand. The bonds are repayable in lump sum on maturity, with 2.62% interest payable annually. NCIC and Digital United Inc. (merged with NCIC on March 16, 2009) bought the bonds amounting to NT$600,000 thousand and NT$200,000 thousand, respectively. However, since August 2010, the aforementioned amounts were eliminated as the accounts of NCIC were included in the consolidated financial statements.

FENC issued three-year unsecured bonds (the 2nd tranche) on November 22, 2007. The bonds have an aggregate face value of NT$2,000,000 thousand, with each unit having a face value of NT$1,000 thousand. The bonds are repayable in lump sum on maturity, with 2.80% interest payable annually.

FENC issued three-year unsecured bonds (the 1st tranche) on May 28, 2008. The bonds have an aggregate face value of NT$2,600,000 thousand, with each unit having a face value of NT$1,000 thousand. The bonds are repayable in lump sum on maturity, with 2.67% interest payable annually.

FENC issued five-year unsecured bonds (the 2nd tranche) on June 20, 2008. The bonds have an aggregate face value of NT$1,000,000 thousand, with each unit having a face value of NT$1,000 thousand. Repayments are repayable at the end of the third, fourth, and fifth year from the issuance date at 30%, 30% and 40%, respectively, of the total issued amounts, with 2.83% interest payable annually.

FENC issued five-year unsecured bonds (the 3rd tranche) on July 18, 2008. The bonds have an aggregate face value of NT$1,200,000 thousand, with each unit having a face value of NT$1,000 thousand. Repayments are repayable at the end of the third, fourth, and fifth year from the issuance date at 30%, 30% and 40%, respectively, of the total issued amounts, with 2.95% interest payable annually.

On October 29, 2009, FENC issued unsecured bonds (the 1st tranche) amounting to NT$3,000,000 thousand with face value of NT$1,000 thousand. The five-year bonds will be repaid at 50% of the aggregate value at the end of the 4th and 5th year of bond issuance, and the simple interest of 1.85% is payable annually.

On May 27, 2010, FENC issued five-year unsecured bonds (the 1st tranche) amounting to NT$5,500,000 thousand (US$176,339 thousand) at a face value of NT$1,000 thousand (US$32 thousand). The five-year bonds will be repaid at 50% of the total amount at the end of the 4th year and at another 50% of the total amount at the end of the 5th year, with a 1.68% interest rate. The interest is calculated by the simple interest method (based on the outstanding balance) starting from the issuance date and is payable annually.

On September 16, 2010, FENC issued five-year unsecured bonds (the 2nd tranche) amounting to NT$6,000,000 thousand (US$192,369 thousand) at a face value of NT$1,000 thousand (US$32 thousand). These five-year bonds will be repaid at 50% of the total amount at the end of the 4th year and at another 50% of the total amount at the end of the 5th year, with a 1.59% interest rate. The interest is calculated by the simple interest method (based on the outstanding balance) starting from the issuance date and is payable annually.

Exchangeable Bonds

Other bond issuance terms are as follows:

a. Exchangeable period:

The bondholders would exchange their bonds for ACC's common shares under the bond terms at any time between October 15, 2007, the 31st day after the issuance date, and September 4, 2012, the 10th day before the maturity date, except during the period starting from (a) the third day before the ex-dividend date of stock dividend issuance, (b) the third day before the ex-dividend date of cash dividend issuance, (c) the third day before the ex-dividend date of new share issuance, or (d) the third day before the ex-right date of capital decrease, until the effective date of dividend (or new share) distribution. In addition, bondholders cannot exchange bonds for ACC's common shares in the period during which the exchange is prohibited by law.

b. Exchange price

1) The exchange price was NT$57.88 per share on the issuance date.

2) After issuing these exchangeable bonds, except for the convertible or exchangeable securities issued by ACC, the exchange price of the issued bonds will be adjusted in any one of these situations: (a) if the quantity of the ACC's common shares increases in the market (including capital increase for cash, capital increase through capitalization of earnings, capital increase through capitalization of capital reserve, capital increase through capitalization of employee bonus, capital increase through enterprise merger and acquisition, stock split and capital increase through issuing global depositary receipts); (b) ACC issues new convertible or exchangeable securities with the price lower than market conversion price; (c) if the quantity of ACC's common shares decreases due to capital reduction (excluding the cancellation of ACC's treasury shares); (d) if the ratio of cash dividends to the market value of the common stock is higher than 1.5%. As of September 30, 2010, the exchange price of these exchangeable bonds was NT$43.74 (US$1.40).

c. Call option:

d. Put option:

Bondholders can require the Company to redeem their bond holdings at 100% of the face value on September 14, 2010, three years after the issuance date. As of September 14, 2010, the bondholders had exercised their put options amounting to NT$1,260,700 thousand (US$40,420 thousand). The Company should redeem the bonds within five trading days after the bondholders' notifying the Company of their request for bond redemption. As of September 2010, the put options of the bonds had expired.

e. As of September 30, 2010, the amount of the outstanding exchangeable bonds, i.e., not yet exchanged into ACC's common shares, was NT$1,239,300 thousand (US$39,734 thousand).

YDI

YDI issued five-year secured nonconvertible bonds (the 9th tranche) on June 10, 2004. These bonds had an aggregate face value of NT$1,000,000 thousand (Bond A - NT$500,000 thousand and Bond B - NT$500,000 thousand), with each unit having a face value of NT$10,000 thousand. The bonds, repayable in lump sum on maturity, had been fully redeemed as of September 30, 2009.

To hedge against the risk adverse interest rate fluctuations of nonconvertible bonds (the 9th tranche), YDI entered into interest rate swap contracts. The bonds had been fully redeemed by September 30, 2009.

F-524

YDI issued five-year unsecured nonconvertible bonds (the 2nd tranche) on June 13 to 16, 2005. These bonds had aggregate face values of NT$2,000,000 thousand (Bond A - NT$500,000 thousand; Bond B - NT$500,000 thousand; Bond C - NT$500,000 thousand; and Bond D - NT$500,000 thousand), with each unit having a face value of NT$10,000 thousand. These bonds, repayable in lump sum on maturity, had been fully redeemed as of September 30, 2010.

YDI issued three-year unsecured nonconvertible bonds (the 3rd tranche) on January 16, 2006. These bonds had aggregate face values of NT$1,000,000 thousand, with each unit having a face value of NT$1,000 thousand. These bonds, which were repayable in lump sum on maturity, had been fully redeemed as of September 30, 2009.

YDI issued three-year unsecured nonconvertible bonds (the 4th tranche) on June 22, 2006. These bonds had aggregate face values of NT$800,000 thousand, with each unit having a face value of NT$1,000 thousand. These bonds, which were repayable in lump sum on maturity, had been fully redeemed as of September 30, 2009.

YDI issued five-year unsecured nonconvertible bonds (the 5th tranche) on October 11, 2006. These bond had aggregate face value of NT$2,000,000 thousand, with each unit having a face value of NT$1,000 thousand and annual interest of 2.30%. These bonds are repayable at half of the aggregate face value in the 4th year and the other half in the 5th year after the issuance date, and the simple interest is payable annually from the issuance date.

On August 14, 2009, an FENC subsidiary, YDI, issued three-year unsecured bonds through a domestic private amounting to NT$1,000,000 thousand with a face value of NT$10,000 thousand. YDI will pay the principal in lump sum on maturity at face value. The interest was calculated by simple interest method starting from the issuance date and was paid annually with the annual rate of 2.00%. The portion of the bonds bought by ARCOA, an FENC subsidiary, has been eliminated in the consolidated financial statements. The portion of the bonds bought by NCIC has been eliminated since the accounts of NCIC were included in the consolidated financial statement since August 2010.

On July 19, 2010, an FENC subsidiary, YDI issued five-year unsecured bonds (the 1st tranche) amounting to NT$2,000,000 thousand (US$64,123 thousand) at face value of NT$1,000 thousand (US$32 thousand). These five-year bonds will be repaid at 30%, 30% and 40% of the total amount at the end of the third year, the fourth year and the fifth year, with the interest rate of 1.62%. The interest is calculated by simple interest method (based on the outstanding balance) starting from the issuance date and is payable annually.

DEFERRED REVENUE (INCLUDED IN OTHER LIABILITIES - OTHERS)

NCIC entered into a landing party agreement (LPA) with C2C Pte., Ltd. ("C2C"). Under the LPA, NCIC (i) identified an appropriate location for cable landing; (ii) constructed landing stations, some of which were leased to C2C; (iii) helped in installation of terminal equipment and other facilities; and (iv) rendered related operation and maintenance services. NCIC also received an advance receipts from C2C for the usage of space at the landing station for 25 years. The advance receipts from C2C were recognized as rental income based on an operating lease.

F-525

^{}[] MATURITY ANALYSIS OF ASSETS AND LIABILITIES

The assets and liabilities to the operating businesses of FECC and FEGC are classified as current or noncurrent depending on the operating cycle.

Amounts expected to be received or paid within or over one year were as follows:

	September 30, 2009
	Within One Year	Over One Year	Total
	NT$	NT$	NT$
Assets
Notes and accounts receivable	$ 259,203	$ 56,114	$ 315,317
Notes and accounts receivable from affiliates	185,597	—	185,597
Available-for-sale - buildings and land	30,339	—	30,339
Available for construction - land, net	620,013	—	620,013
Construction in progress, net	1,298,649	1,854,218	3,152,867
Prepayments on land (Note)	1,128	—	1,128
Prepayment on construction (Note)	9,160	—	9,160
Restricted assets	358,857	4,810	363,667
Refundable deposits - current (Note)	1,135	—	1,135
Refundable deposits - noncurrent	2,951	276	3,227
Liabilities
Notes and accounts payable	209,200	—	209,200
Notes and accounts payable to related parties	63,284	—	63,284
Advances on land and building	385,607	54,409	440,016
Billings on construction-in-progress, net of construction-in-progress	145,854	343,481	489,335

	September 30, 2010
	Within One Year		Over One Year		Total
	NT$	US$(Note 2)	NT$	US$(Note 2)	NT$	US$(Note 2)
Assets
Notes and accounts receivable	$ 49,495	$ 1,587	$ 547,585	$ 17,556	$ 597,080	$ 19,143
Notes and accounts receivable from affiliates	82,899	2,658	—	—	82,899	2,658
Available-for-sale - buildings and land	30,339	973	—	—	30,339	973
Available for construction - land, net	620,013	19,879	—	—	620,013	19,879
Construction in progress, net	2,151,547	68,982	6,110,685	195,918	8,262,232	264,900
Prepayment on construction (Note)	102,361	3,282	19,271	618	121,632	3,900
Restricted assets	254,950	8,174	816,136	26,167	1,071,086	34,341
Refundable deposits - current (Note)	1,324	42	—	—	1,324	42
Refundable deposits - noncurrent	—	—	6,229	200	6,229	200

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September 30, 2010

	Within One Year		Over One Year		Total
	NT$	US$ (Note 2)	NT$	US$ (Note 2)	NT$	US$ (Note 2)
Liabilities
Notes and accounts payable	341,591	10,952	371,014	11,895	712,605	22,847
Notes and accounts payable to related parties	34,988	1,122	—	—	34,988	1,122
Advances on land and building	2,270,015	72,780	1,093,606	35,063	3,363,621	107,843
Billings on construction-in-progress, net of construction-in-progress$	$ 20,509	$ 658	$ 858,378	$27,521	$ 878,887	$ 28,179

Note: Recognized as prepayments and other current assets in the balance sheets.

26. SHAREHOLDERS' EQUITY

	%
a. Dividends	60.0
b. Bonus for stockholders	33.0
c. Bonus for employees	4.0
d. Remuneration for directors and supervisors	3.0

All appropriations are approved by the stockholders in the next year and disclose them in the financial statements of the year after the next year. The Company's dividend policy should take the future economic condition and the future cash demands and taxation into account and should be appropriated in the percentage on the basis of the Company's articles of Incorporation to retain stable periodical dividend to stockholders. Dividend appropriation is not only to improve the financial structure of the Company and deal with the cash demands such as supporting the investments, expanding the productivity and significant capital expenditures, but also to keep the cash dividend remain not less than 10% of the aggregation of stock dividend and stockholders' bonus in the year.

For the nine months ended September 30, 2009 and 2010, the bonuses to employees were estimated NT$247,913 thousand and NT$291,410 thousand (US$9,343 thousand), respectively, and the remunerations to directors and supervisors were NT$187,108 thousand and NT$218,558 thousand (US$7,007 thousand), respectively. According to the Company's articles of incorporation, the bonus to employees and the remuneration to directors and supervisors is respectively calculated by 4% and 3% of the estimated earning appropriation. If the actual amounts subsequently resolved by the stockholders differ from the estimates, the differences are recorded as a change in accounting estimate. If bonus shares are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonus by the closing price (after considering the effect of cash and stock dividends) of the shares of the date preceding the stockholders' meeting.

The appropriation and distribution of the 2008 and 2009 earnings were approved by the shareholders on June 26, 2009 and June 22, 2010, respectively. The appropriations and dividends per share were as follows:

	2008		2009
	Appropriation and Distribution	Dividend Per Share (Dollars)	Appropriation and Distribution		Dividend Per Share (Dollars)
	NT$	NT$	NT$	US$ (Note 2)	NT$	US$ (Note 2)
Legal reserve	$ 405,825		$ 811,261	$ 26,010
Cash dividend	3,655,963	$ 0.8	6,059,759	194,285	$ 1.3	$ 0.04
Stock dividend	913,991	0.2	932,270	29,890	0.2	0.01
	$4,975,779		$7,803,290	$ 250,185

In the appropriation and distribution of 2009, capital increase from stock dividend of NT$932,270 thousand had been approved by Financial Supervisory Commission, ROC Executive Yuan on July 14, 2010. The effective date of this distribution is August 31, 2010 and approved by the Company's board of directors and registered on September 15, 2010.

The bonus to employees and the remunerations to directors and supervisors from the 2008 and 2009 approved in the Company's stockholders' meetings on June 26, 2009 and June 22, 2010, respectively, were as follows:

	2008		2009
	Remuneration to Directors and Supervisors		Bonuses to Employees		Remuneration to Directors and Supervisors
	NT$	NT$	NT$	US$ (Note 2)	NT$	US$ (Note 2)
The amounts approved by shareholders	$ 196,557	$ 147,418	$ 300,732	$ 9,642	$ 225,549	$ 7,231
The amounts recognized in financial statement	$ 196,557	$ 147,418	$ 300,732	$ 9,642	$ 225,549	$ 7,231

The approved amounts of the bonus to employees and the remuneration to directors and supervisors were the same as accrual amounts, reflected in the financial statements. The Company settled the bonus to employees by cash.

Information about the bonus to employees, directors, and supervisors are available on the Market Observation Post System website of the Taiwan Stock Exchange Corporation (http://mops.tse.com.tw).

F-528

Unrealized Gains and Losses on Financial Instruments:

Unrealized gains and losses on financial instruments for the nine months ended September 30, 2009 and 2010 were summarized as follows:

	Available-for-sale Financial Assets		Recognized from Equity-method Investments		Unrealized Gain (Loss) on Cash Flow Hedge		Total
	NT$	US$ (Note 2)	NT$	US$ (Note 2)	NT$	US$ (Note 2)	NT$	US$ (Note 2)
Nine months ended September 30, 2009
Beginning balance	$ 1,099,524		$(1,957,888)		$ (7,656)		$ (866,020)
Recorded as adjustments to stockholders' equity	(36,625)		2,622,339		7,656		2,593,370
Ending balance	$ 1,062,899		$ 664,451		$ —		$ 1,727,350
Nine months ended September 30, 2010
Beginning balance	$ 1,877,952	$ 60,210	$ 1,398,357	$ 44,834	$ —	$ —	$ 3,276,309	$ 105,044
Recorded as adjustments to stockholders' equity	(153,361)	(4,917)	571,247	18,315	—	—	417,886	13,398
Ending balance	$ 1,724,591	$ 55,293	$ 1,969,604	$ 63,149	$ —	$ —	$ 3,694,195	$ 118,442

F-529

EARNINGS PER SHARE

	Amounts (Numerator)				Shares in Thousands (Denominator)	Earnings Per Share (Dollars)
	Income Before Income Tax		Net Income		Shares in Thousands (Denominator)	Income Before Income Tax		Net Income
	NT$	US$ (Note 2)	NT$	US$ (Note 2)		NT$	US$ (Note 2)	NT$	US$ (Note 2)
Nine months ended September 30, 2009
Basic EPS Net income attributable to the Company's stockholders	$5,952,483		$5,894,642		4,754,580	$1.25		$1.24
Add: Effect of potential dilutive common stock - bonus to employees	—		—		11,924
Diluted EPS Net income attributable to the Company's stockholders plus effect of potential dilutive common stock	$5,952,483		$5,894,642		4,766,504	$1.25		$1.24
Nine months ended September 30, 2010
Basic EPS Net income attributable to the Company's stockholders	$8,776,713	$281,395	$8,760,378	$280,871	4,754,580	$1.85	$0.06	$1.84	$0.06
Add: Effect of potential dilutive common stock - bonus to employees	—	—	—	—	15,824
Diluted EPS Net income attributable to the Company's stockholders plus effect of potential dilutive common stock	$8,776,713	$281,395	$8,760,378	$280,871	4,770,404	$1.84	$0.06	$1.84	$0.06

F-530

resulting potential shares would have a dilutive effect, these shares should be included in the weighted-average number of shares outstanding to be used in the calculation of the diluted EPS. The number of shares is estimated by dividing the entire amount of the bonus by the closing price of the shares at the balance sheet date. The dilutive effect of the potential shares should be included in the calculation of the diluted EPS until the stockholders resolve the number of shares to be distributed to employees at their meeting in the following year.

28. RELATED-PARTY TRANSACTIONS

Except for the information disclosed in Notes 1, 11, 13, 14, 15 and 23, the Group's significant transactions with related parties are summarized in the accompanying Schedules C, D, and E.

29. ASSETS PLEDGED OR MORTGAGED

In April 2004, YDI, an FENC subsidiary, provided the Taipei District Court with the common shares of Far EasTone as a collateral for the provisional seizure of the property of Pacific SOGO Department Store Co., Ltd., as requested by Cathay United Bank. As of September 30, 2009, YDI provided 133,312 thousand common shares of Far EasTone to Taipei District Court. YDI had gotten back all of its pledged common shares as of September 30, 2009. Additionally, as of September 30, 2009 and 2010, FENC and some of its subsidiaries had provided 255,275 thousand and 244,832 thousand common shares of Far EasTone, respectively, as collaterals for short-term bank loans, commercial paper, long-term liabilities and credit lines of related parties.

30. SIGNIFICANT COMMITMENTS AND CONTINGENCIES AS OF SEPTEMBER 30, 2010

a. The Group's outstanding letters of credit amounted to NT$4,091,862 thousand (US$131,191 thousand).

F-531

b. Unpaid building construction and fixed asset contracts aggregated NT$11,329,876 thousand (US$363,253 thousand), and the Group was under contracts to acquire cellular phone equipment for NT$2,040,689 thousand (US$65,428 thousand).

c. The Company was under contracts amounting to NT$723,507 thousand (US$23,197 thousand) to purchase cotton but not yet completed.

d. Project contracts already signed by FEGC amounted to NT$31,244,088 thousand (US$1,001,734 thousand).

e. The Group's guarantees and endorsements for related parties: Schedule F.

f. The Group's minimum rental payments for land, buildings and cell sites for the next five years under operating lease agreements are summarized as follows:

Period	Amount (Thousands)
Period	NT$	US$ (Note 2)
From October 1, 2010 to December 31, 2010	$ 726,010	$23,277
2011	2,899,631	92,967
2012	2,947,893	94,514
2013	2,999,990	96,184
2014	3,078,737	98,709
From January 1, 2015 to September 30, 2015	2,375,479	76,162

g. The tax authorities of Taipei County imposed a land tax from 1999 to 2003 on the land in Banciao and penalized the Company with a triple fine on October 13, 2004, totaling NT$252,442 thousand, because the authorities believed that this land, which FENC registered as a property for manufacturing purposes, was being used for general purposes instead and that FENC did not register the change in land use. The Company disagreed with the tax authorities' decision and applied for reexamination on December 27, 2004. However, after the reexamination, the tax authorities did not reverse their decision. The Company filed a lawsuit against the authorities on June 1, 2005 but lost the lawsuit. Thus, the Company already accrued the losses for this case in 2005. On January 18, 2006, the Company filed an appeal with the Taipei High Administrative Court but still lost the lawsuit. The Company appealed to the Supreme Administrative Court (SAC) on January 3, 2007. The SAC rejected this appeal on May 31, 2007. On August 30, 2007, the Company paid the required land tax. Despite this payment, the Company again applied with SAC for reexamination on July 13, 2007. On May 27, 2009, the SAC rejected the appeal for a reexamination. Nevertheless, the Company is continuing to look for other ways to assert its rights.

h. On December 29, 2005, the board of directors of Tai Ya International Telecommunications Co., Ltd. ("TYIT") resolved to merge TYIT with Mobitai Communications Ltd. ("Mobitai"), in accordance with Article 19 of the Business Mergers and Acquisitions Act and set January 1, 2006 as the record date of the merger. TYIT is the successor company after the merger. Under the resolution of TYIT's board, the Company received NT$167,863 thousand from Mobitai in exchange for Mobitai's 11,469 thousand common shares (NT$14.68 per share) held by the Company. The Company disposed the investment in Mobitai and recognized a disposal gain of NT$31,814 thousand. However, the Company regarded Mobitai's purchase price was too low and raised an objection to Mobitai. Afterwards, the Company filed a lawsuit against TYIT. As of the report date, the lawsuit was still in the procedure at the Taipei district court.

i. Ming-Chiung Chang filed an incidental civil suit, in connection with the criminal case of forgery, against Ming-Chung Kuo (an FENC employee) and Hua-De Lin, Hung-Long Li and Yung-Gi Lai (the fiduciaries of PLT). Chang claimed that Kuo and Hua-De Lin, Hung-Long Li and Yung-Gi Lai colluded and used their positions to carry out transactions that resulted in his losses and asked the Taiwan High Court to declare that the ownership of Pacific Liu Tung Investment held by FEDS, FEDS's subsidiaries and the Group was just a fabrication, i.e., it never existed. In October 2009, Chang lost the lawsuit and then appealed to a higher court, SAC. On March 25, 2010 SAC overruled the judgment on the aforementioned criminal case and treated the accompanying civil suit as one case and returned the case to the Taiwan High Court for reexamination.

F-532

j. The registered capital of PLT, an investee of the Group was originally NT$4,010 million, representing 401 million shares at a par value of NT$10.00. On February 3, 2010, following a letter received from the Taiwan High Prosecutors Office, the Department of Commerce (DOC), the MOEA decided to nullify the registrations of several tranches of capital increases given to PLT, the registrations of amendments of Articles of Incorporation, the registrations of elected and appointed representatives of Board of Directors and Supervisors on November 13, 2002, May 1, 2003, August 8, 2005, August 3, 2006, June 6, 2007 and July 16, 2008. As a result, the capital amount of PLT reverted to NT$10,000 thousand, representing 1 million common shares.

On January 27, 2010, PLT filed an administrative appeal with the DOC for the revocation of the letter sent to MOEA on the registration nullifications and requested the execution to be stayed pending such appeal. Subject to Article 77-8 of the Administrative Appeal Act, the Petitions and Appeals Committee (PAC) of the ROC Executive Yuan made a decision on March 9, 2010 that the case was not entertained on the basis that the letter was not qualified as an administrative disposition and thus beyond the scope of administrative appeal.

Moreover, on February 10, 2010, PLT again filed an administrative appeal with the MOEA pleading for the revocation of the administrative disposition and requested the execution to be stayed pending such appeal. On May 20, 2010, subject to Article 79-1 of the Administrative Appeal Act, PAC dismissed the administrative appeal considering the appeal was unsustainable. Accordingly, on July 26, 2010, PLT filed a suit with the Taipei High Administrative Court. On July 27, 2010, subject to Article 4-3 of the Administrative Procedure Law, FEDS, as an interested party of PLT, filed a suit with the Taipei High Administrative Court as well.

Furthermore, FEDS filed an administrative appeal with the MOEA on February 24, 2010 for the withdrawal of the administrative disposition and requested the execution to be stayed pending such proceedings. On April 14, 2010, subject to Article 77-3 of the Administrative Appeal Act, PAC decided that the case was not entertained because FEDS was not a party to whom an administrative disposition was issued nor an interested party at stake. Nevertheless, FEDS filed a suit with the Taipei High Administrative Court on June 15, 2010.

Also, FEDS filed a suit with the Taipei District Court to confirm the existence of FEDS's right of shareholder in PLT on February 10, 2010. However, FEDS notified the Taipei District Court on June 25, 2010 that FEDS and PLT had agreed to stay the proceeding by consent.

The Company's counsel advised that in the case the DOC has revoked the alteration of the registered capital, the following did not affect the Company's controlling interest in PLT: (a) the status and the decisions of the administrative remedies filed by FEDS and PLT, and (b) the suit in Taipei High Administrative Court stayed the proceeding by consent. Any dispute regarding the Company's interest in PLT should be brought to the court and decided through a civil litigation process. Based on this legal opinion, the MOEA's decision has not invalidated the capital increases made by the Company and the Company's subsidiaries. Thus, the Company retains its economic control over PLT.

The aggregate percentage of ownership in PLT by the Group has reached 39.68%. Based on the local GAAP, these holdings were accounted for by the equity-method.

k. An FENC subsidiary, FEGC, contracted the Southern Taiwan Science Park (STSP) to do underground cable construction. On June 28, 2007, FEGC's excavating machines were damaged because of unclear blueprints provided by STSP, which did not indicate the pipeline routes clearly. The accident resulted in the suspension of FEGC's construction until the pipes were dug out. As a result of the suspension, additional costs were incurred. FEGC regarded STSP's provision of inaccurate blueprints as a violation of the construction contract and thus filed for mediation with the Public Construction Commission (PCC) under the ROC Executive Yuan and demanded that STSP compensate FEGC by paying an additional NT$23,360 thousand. The compensation demanded by FEGC was cut down to NT$13,797 thousand, but the mediation still failed because STSP and FEGC failed to reach a consensus. FEGC then filed a suit with the Tainan District Court and the suit was decided to undertake by the court.

Additionally, during the construction period, material costs rose to NT$300,000 thousand because of adverse economic factors and the rising prices of stainless steel and cable material. Although the contract amount had been adjusted for price inflation, FEGC still incurred a great loss in 2008 and got no indemnification. Thus, in 2008, FEGC again filed for mediation with the PCC and claimed that STSP should pay NT$125,100 thousand in damages. However, the mediation still failed because STSP and FEGC could not reach any compromise. FEGC will file a suit for indemnification to the Tainan District Court after receiving the certification of mediation failure. In January 2010, Taiwan

F-533

Professional Civil Engineers Association was authorized by Tainan District Court to evaluate the rationality of the rising material costs but the evaluation report was not yet finished by August 6, 2010. The construction contract further stated that the construction would be started with manual excavation. However, on the request by people living in the vicinity of the construction, STSP instructed FEGC to obtain a third-party notarization unit's evaluation of tunnel construction safety before starting the construction. The evaluation report showed that manual excavation would result in land collapse. In consideration of public safety, FEGC requested STSP to do mechanical excavation instead. But STSP refused the request because of its insistence that the contractor should assume all the responsibility and related expenses for any contract change. Nevertheless, FEGC started the construction with mechanical excavation and incurred an additional operating expense of NT$14,315 thousand. Thus, FEGC applied for mediation with the PCC, but the mediation failed because FEGC and STSP could not reach a compromise. FEGC will file a suit for indemnification with the Tainan District Court after receiving the certification of mediation failure.

Furthermore, because of several problems involved in the pipe jacking required for this construction, FEGC suggested the change of the construction completion date to April 6, 2009. However, STSP disagreed with this extension and also refused to pay the extra costs of NT$3,080 thousand for FEGC's removal of the scrap piles and imposed a fine of NT$39,406 thousand for the construction expiration. Thus, FEGC applied for mediation with the PCC, but the mediation failed because FEGC and STSP failed to reach a compromise, FEGC will file a suit for indemnification with the Tainan District Court after receiving the certification of mediation failure and also asked STSP return all of the extra costs and the fine for the construction expiration amounting to NT$42,486 thousand.

An additional operating expense of NT$30,997 thousand was incurred to FEGC due to several new items were added to the construction. However, STSP underpaid the contract amount by NT$4,121 thousand without a reasonable explanation and rejected FEGC's request for the full payment. Therefore, FEGC filed a suit with the Tainan District Court for this dispute.

The original construction period was 840 days; however, the period was extended to have additional 601 days due to several imputable incidents (560 days out of 601 days had been approved by STSP and the rest of 41 days was still controversial). However, the extension period which had reached 80% of the original construction period incurred the related operating expenses amounting to NT$40,257 thousand (US$1,291 thousand). As extension of the construction for 601 days was not expected by FEGC at the time of signing the contract; therefore, FEGC filed a suit with the Tainan District Court to request STSP to pay for the additional expenses.

Overall, FEGC accrued a construction loss of NT$119,949 thousand (US$3,846 thousand) in 2008.

I. An FENC subsidiary, FEGC, Pan Asia Corporation ("Pan Asia") and Iwata Chizaki Construction Corporation, Taipei Branch ("Iwata") entered into a contract to build "Area CR3 of Kaohsiung Rapid Transit-Red line" (KRT). FEGC claimed that, although the entire construction had been completed and the red line has been operating for two years, it had not received the payment balance of NT$284,187 thousand. Thus, FEGC, Pan Asia and Iwata filed a suit for indemnification with the Kaohsiung District Court.

FEGC also claimed that, under paragraph No. 20.2 of the contract, KRTC should have given a construction payment of NT$312,844 thousand and paid extra costs such as the management fees of NT$164,857 thousand resulting from several problems that delayed the completion date for 277 days. Since KRTC did not make the foregoing payments, FEGC, Pan Asia and Iwata filed for a mediation with the Kaohsiung District Court. The result of the mediation process will depend on the arbitration by the KRTC and Kaohsiung City Government.

Moreover, FEGC made these claims in line with KRTC's request for design modifications: (1) FEGC, Pan Asia and Iwata should have included four items in the construction of Stations R8 and R9, which were not in the original construction contract; these four additions entailed a cost increase of NT$75,205 thousand (US$2,411 thousand). (2) FEGC, Pan Asia and Iwata should have added seven items to the construction of Station R8 and Station R7, which were not in the original construction contract. These seven additions entailed an additional cost of NT$219,730 thousand. (3) FEGC, Pan Asia and Iwata should have included 53 additional items in the constructions of water and electricity facilities, which were not in the original construction contract. These additions entailed an additional cost of NT$142,082 thousand. KRTC, however, refused to modify the original construction contract and also refused to pay all of the above additional costs; thus, FEGC, Pan Asia and Iwata filed a suit for indemnification with the Kaohsiung District Court and the suit was in process.

F-534

m. For the construction Taiwan Power Company ("TPC") subcontracted to FEGC, FEGC had to pay a certain fine of NT$23,000 thousand for a bid deposit call. This fine was based on the Government Procurement Act and TPC's construction contract. However, FEGC filed an appeal and PCC refused to pay the bid deposit after knowing TPC's disagreement. On October 24, 2008, PCC rejected the appeal filed by FEGC and instructed the Administrative Enforcement Agency to enforce the related penalty. This case was still in the procedure in the Administrative Enforcement Agency.

n. For the issues related to the contract that FEGC undertook the construction of the Taipei City Market Administrative Office, an action was brought before the Taipei District Court to claim that Taipei City Market Administrative Office should pay the delayed payment of NT$150,177 thousand and the interest from September 14, 2007 to January 18, 2009 amounted to NT$10,032 thousand. In 2009, the Taipei District Courts rendered its judgment to reject the all suits filed by FEGC. FEGC filed an appeal with the Taiwan High Court. The Taiwan High Court rendered the judgment in favor of FEGC. However, Taipei City Market Administrative Office was not satisfied with the outcome and filed an appeal with SAC.

o. Far Eastern Electronic Toll Collection Co., Ltd. was entrusted by the Taiwan Area National Freeway Bureau to collect electronic tolls on freeways and to sign a third-party benefit trust contract with Far Eastern International Bank to manage the tolls collected. The trust property for this agreement amounted to NT$984,374 thousand (US$31,561 thousand) as of September 30, 2010.

31. SUBSEQUENT EVENTS

On October 4, 2010, the Company subscribed 113,005 thousand shares of FEPI's newly issued shares at US$0.27 per share for NT$937,326 thousand (US$30,052 thousand), and its equity in FEPI increased from 63.02% to 67.15%.

On October 25, 2010, the Company acquired 48.96 thousand common shares of FEDP (Holding) Ltd. from Far Eastern Polytex (Holding) Ltd. at US$93.91 per share for NT$142,011 thousand (US$4,553 thousand), and their equity in FEDP (Holding) Ltd. increased from 0% to 10.10%.

32. FINANCIAL INSTRUMENTS

a. The fair values of financial instruments were as follows:

September 30

	2009		2010
	Carrying Value	Fair Value	Carrying Value		Fair Value
	NT$	NT$	NT$	US$(Note 2)	NT$	US$(Note 2)
Financial liabilities
Short-term bank loans	$23,512,882	$23,512,882	$28,149,520	$902,517	$28,149,520	$902,517
Short-term bills payable	6,567,114	6,567,114	7,772,159	249,188	7,772,159	249,188
Notes and accounts payable	11,120,978	11,120,978	15,343,938	491,951	15,343,938	491,951
Notes and accounts payable to affiliates	776,519	776,519	1,318,513	42,274	1,318,513	42,274
Accrued expense	6,855,137	6,855,137	8,625,651	276,552	8,625,651	276,552
Payable for acquisition of properties	948,522	948,522	1,820,679	58,374	1,820,679	58,374
Bonds payable (including current portion)	14,915,970	15,098,006	26,446,148	847,905	26,714,193	856,499
Long-term debts payable (including current portion)	39,682,980	39,682,980	29,264,839	938,276	29,264,839	938,276
Leases payable (including current portion)	8,633	8,633	—	—	—	—
Guarantee deposits received (including current portion)	937,880	937,880	1,020,173	32,709	1,020,173	32,709
Derivative financial assets (liabilities)
Cotton futures contracts - FENC	32,137	32,137	16,326	523	16,326	523
Forward exchange contracts
-FENC	(871)	(871)	(22,905)	(735)	(22,905)	(735)
-FEIH	—	—	(667)	(21)	(667)	(21)
-OPTC	—	—	(109)	(3)	(109)	(3)
-FEFC	—	—	(208)	(7)	(208)	(7)
-NCIC	—	—	21,140	678	21,140	678
Cross-currency swap contracts
-KG Telecom (merged with Far EasTone on January 1, 2010)	7,050	7,050	—	—	—	—
- Far EasTone	—	—	13,000	417	13,000	417
Exchangeable bonds collection rights - FENC	41,500	41,500	—	—	—	—
Exchangeable bonds exchange rights - FENC	(61,500)	(61,500)	(5,577)	(179)	(5,577)	(179)
Exchangeable bonds redemption rights - FENC	(15,500)	(15,500)	—	—	—	—

b. The methods and assumptions used in estimating fair values are as follows:

1) The carrying values of short-term instruments reported in the balance sheet approximate the fair values of these assets because of the short maturities of these instruments, including cash, notes and accounts receivable, net, receivables from related parties, net, other receivables, restricted assets (including the current portion), short-term bank loans, short-term bills payable, notes and accounts payable, payable to related parties, accrued expense and payable to supplies of machinery and equipment.

4) If quoted market prices are available, these are used as fair values of held-to-maturity financial assets - noncurrent; otherwise, fair values will be measured by carrying values.

6) Refundable deposits and guarantee deposits (including the current portion) receivable are recorded at their carrying values because the fair value approximates the carrying value.

c. The fair values of financial assets and financial liabilities, which were determined at their quoted prices in an active market or at estimated prices, were as follows:

September 30
Quoted Price			Estimated Price
2009	2010		2009	2010
NT$	NT$	US$ (Note 2)	NT$	NT$	US$ (Note 2)
Derivative financial instruments
Assets
Cotton futures contracts
-FENC	$32,137	$16,326	$523	$—	$—	$—
Exchangeable bonds collection rights
-FENC	—	—	—	41,500	—	—
Forward exchange contracts
-NCIC	—	21,140	678	—	—	—
Cross-currency swap contracts
-KG Telecom (merged with Far EasTone on January 1, 2010)	—	—	—	7,050	—	—
-Far EasTone	—	—	—	—	13,000	417
Liabilities
Forward exchange contracts
-FENC	(871)	(22,905)	(735)	—	—	—
-FEIH	—	(667)	(21)	—	—	—
-OPTC	—	(109)	(3)	—	—	—
-FEFC	—	(208)	(7)	—	—	—
Exchangeable bonds exchange rights
-FENC	—	—	—	(61,500)	(5,577)	(179)
Exchangeable bonds redemption rights
-FENC	—	—	—	(15,500)	—	—

d. As of September 30, 2009 and 2010, the financial assets exposed to fair value interest rate risk amounted to NT$8,446,607 thousand and NT$8,382,313 thousand (US$268,750 thousand), respectively, and the financial liabilities exposed to fair value interest rate risk amounted to NT$65,789,902 thousand and NT$81,652,471 thousand (US$2,617,905 thousand), respectively. As of September 30, 2009 and 2010, the financial assets exposed to cash flow interest rate risk amounted to NT$5,823,668 thousand and NT$15,916,667 thousand (US$510,313 thousand), respectively and the financial liabilities exposed to cash flow interest rate risk amounted to NT$20,128,914 thousand and NT$11,000,368 thousand (US$352,689 thousand), respectively.

F-537

e. Financial risks

Forward exchange contracts and currency option contracts

The Group entered into forward exchange contracts and currency option contracts to hedge the effect of adverse exchange rate fluctuations on foreign-denominated assets or net liabilities (Note 6).

The Company entered into interest rate swap contracts to hedge against adverse fluctuations of interest rates of secured unconvertible corporate bonds (the 72nd tranche), and these bonds were all fully repaid before the end of 2009. YDI entered into interest rate swap contracts to hedge against adverse interest rate fluctuations of secured unconvertible bonds - 9th tranche. These bonds had all been redeemed at their full amount by the end of 2009. The gain or loss arising from interest rate fluctuation is expected to be offset gain or loss arising from hedged items.

Cross-currency swap contracts

An FENC subsidiary, KG Telecom (no longer existed after the merger with Far EasTone on January 1, 2010), entered into cross-currency swap contracts to hedge against the adverse effects of exchange rate fluctuations on foreign-denominated assets for the nine months ended September 30, 2009 and 2010. The gains or losses on the changes in fair values on these contracts are expected to offset the results of the exchange rate fluctuations of the hedged items. Thus, market risk is expected to be immaterial.

Cotton futures contracts

The Group entered into cotton futures contracts to hedge fluctuations of cotton prices (Note 6).

Others

Fair values of mutual funds and domestic quoted stocks held by the Group are determined at their quoted prices in an active market; thus, market price fluctuations would cause changes in the fair values of these investments. However, market risk is expected to be immaterial because the performance of these investments was periodically evaluated by the Group.

The Group has sufficient operating capital to meet cash flow requirements. Thus, the Group does not have liquidity risk. However, financial assets carried at cost and equity-method investments with no quoted prices have no active market; thus, material liquidity risk on these assets and investments is anticipated. Some investments in equity instruments have no active markets; therefore, the liquidity risk is expected to be high.

On February 26, 2009, an FENC subsidiary, Yuan Tong bought convertible bonds issued by Bockhold N.V. The purchase amount was recognized as bond investments with no active market; the value of the conversion right was recognized as financial assets carried at cost because it has no quoted price in active market. Thus, material liquidity risk on this investment is expected.

The Group invested in domestic quoted stocks, bonds and mutual funds that have quoted prices in active markets and can be sold immediately at prices close to their fair values. However, Far

F-538

EasTone also invested in some private fund with no quoted prices in an active market; thus, this investment was expected to have material liquidity risks. ARCOA also invested in financial bonds and equity instruments with no quoted prices in active market; thus, these investments could expose ARCOA to material liquidity risks.

The FENC's subsidiaries, YDI and Kai-Yuan, participated in private placement of the shares in FEIB. Under the Securities and Exchange Law, Article 43-8 specifies that the privately placed securities are subjected to the restrictions of holding period and trading volume. As a result, liquidity risk on these securities is anticipated.

Two FENC subsidiaries, Far EasTone and KG Telecom (merged with Far EasTone on January 1, 2010), engaged in cross-currency swap contracts for the nine months ended September 30, 2009 and 2010 (KG Telecom: 2009; Far EasTone: 2010). These contracts will result in simultaneous cash inflows and outflows upon maturity; thus, the cash demand is not expected to be significant.

4) Cash-flow risk from interest rate fluctuations

An FENC subsidiary, Far EasTone and its subsidiary had short-term and long-term debts with floating interest rates change. As a result, the effective interest rates on these loans will change as the market interest rates change.

f. Cash flow hedge

The Company's 72nd tranche of secured nonconvertible bonds and YDI's 9th tranche of secured nonconvertible bond may cause material cash flow risks because these instruments have floating interest rates; thus, these companies used interest rate swaps to hedge against the risks.

The Company's 72nd tranche of secured nonconvertible bonds and YDI's 9th tranche of secured nonconvertible bond had been redeemed as of September 30, 2009.

FENC subsidiaries, Far EasTone, KG Telecom (merged with Far EasTone on January 1, 2010) and NCIC engaged in cross-currency swaps to hedge against risks on cash flow fluctuations on its assets for the nine months ended September 30, 2009 and 2010 (KG Telecom: 2009; Far EasTone: 2010; NCIC: 2010).

Hedged Items	Designated Hedging Instruments				Expected Period of Cash Flows	Expected Period for Realization of Gains or Losses
	Designated Financial Instruments	Fair Value September 30
		2009	2010
		NT$	NT$	US$ (Note 2)
Foreign-currency	Cross currency swap contract
denominated assets	— KG Telecom (merged with Far EasTone on January 1, 2010)	$7,050	$ —	—	2009	2009
	— Far EasTone	—	13,000	417	2010	2010
	Forward exchange contract
	— NCIC	—	21,140	678	2010	2010

ADDITIONAL DISCLOSURES

Significant direct or indirect transactions with the investee company, prices, payment terms, and unrealized gain or loss: Schedule G (attached)

^{}[] SCHEDULE A

INTERCOMPANY RELATIONSHIPS AND PERCENTAGES OF OWNERSHIP

SEPTEMBER 30, 2010

^{}[] SCHEDULE B

OPERATIONS

SEPTEMBER 30, 2010

Consolidated Entity	Setup Date	Location	Operations
Far Eastern New Century Corporation (formerly Far Eastern Textile Ltd.)	1954/01/13	36F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Manufacture and distribution of petrochemical-fiber materials, semifinished and finished goods of spinning yarn (fabric), blended yarn (fabric), draw textured yarn, pre-oriented yarn, PET filament, PET staple and various knitted and woven garments.
Yuan Ding Investment Co., Ltd.	1986/11/07	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Investment.
Kai Yuan International Investment Co., Ltd.	1998/10/06	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Investment.
Ding Yuan International Investment Corp.	1998/10/02	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Investment.
Yuan Tong Investment Co., Ltd.	1999/12/03	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Investment.
An Ho Garment Co., Ltd.	1977/01/24	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Manufacture and distribution of various knit and woven garments.
Fu Kwok Garment Manufacturing Co., Ltd.	1971/03/06	No. 110, Neihuan S. Rd., Nanzi District, Kaohsiung City 811, Taiwan, ROC	Manufacture and distribution of various woven garments.
Far Eastern Construction Co., Ltd.	1978/09/04	5F., No. 267, Dunhua S. Rd., Sec. 2, Da-an District, Taipei City 106, Taiwan, ROC	Real estate construction and selling.
Far Eastern General Contractor Inc.	1982/10/04	5F., No. 267, Dunhua S. Rd., Sec. 2, Da-an District, Taipei City 106, Taiwan, ROC	Real estate construction and selling.
Far Eastern Resources Development Co.	2003/09/30	34F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Real estate construction, industrial park construction and leasing, participating in public infrastructure projects.
Far Eastern Apparel Co., Ltd.	1976/02/27	36F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	Selling of underwear, sportswear, shirts, towels, fabrics, suits, beddings and casual wear.
Ming Ding Co., Ltd.	1990/08/07	1F., No. 389, Sihchuan Rd., Sec. 1, Banciao City, Taipei County 220, Taiwan, ROC	Selling of underwear, sportswear, shirts, towels, fabrics, suits, beddings and casual wear.
Oriental Resources Development Ltd.	1988/06/27	34F., No. 207, Dunhua S. Rd. Sec. 2, Taipei City 106, Taiwan, ROC	Waste recycling and processing.

F-541

Consolidated Entity	Setup Date	Location	Operations
Yuan Faun Ltd.	1980/12/13	33F., No. 207, Dunhua S. Rd., Sec. 2, Taipei City 106, Taiwan, ROC	International trading, business consulting, machinery design and installation and computer software.
Yuan Cheng Human Resources Consultant Corp.	1999/06/08	19F.-1, No. 1, Baosheng Rd., Yonghe City, Taipei County 234, Taiwan, ROC	Providing manpower services.
Oriental Textile (Holding) Ltd.	2001/01/10	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
Sino Belgium (Holding) Ltd.	2007/08/10	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
Far Eastern Investment (Holding) Ltd.	1989/08/29	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
PET Far Eastern (Holding) Ltd.	1996/10/01	Clarendon House 2 Church street, Hamolton HM 11, Bermuda	Investment.
FEDP (Holding) Ltd.	2002/03/20	Clarendon House 2 Church street Hamilton HM 11, Bermuda	Investment.
F.E.T.G. Investment Antilles N.V.	1989/10/05	Kaya W.F.G Mensing 14, Curacao, Nederlandse Antillen	Investment.
Waldorf Services B.V.	1990/01/10	Naritaweg 165, 1043 BW Amsterdam, The Netherlands	Investment.
PET Far Eastern (M) Sdn. Bhd.	1995/07/22	Plo 69, Kawasan Perindustrian Senai 3, 81400 Senai, Johor Bohru, Johor, Malaysia	Manufacture and distribution of PET bottle and PET perform.
Far Eastern Polytex (Holding) Ltd.	2006/03/22	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
Far Eastern Apparel (Holding) Ltd.	1996/10/01	Clarendon House 2 Church street, Hamolton HM 11, Bermuda	Investment.
Far Eastern Polychem Industries Ltd.	1995/04/13	Clarendon House 2 Church street, Hamilton HM 11, Bermuda	Investment.
Far Eastern Industries (Shanghai) Ltd.	1996/09/25	Mainland China	Manufacture and distribution of PET staple, PET filament, polyester top, PET performs, raw textured yarns, spinning yarns, and knitted and woven fabrics and garments.
Far Eastern Apparel (Vietnam) Ltd.	2002/07/04	No. 11, VSIP Street 4, Vietnam Singapore Industrial Park Thuan An District, Binh Duoug Province, Vietnam	Manufacture and distribution of various knitted and woven garments, beddings garments and accessories.

F-542

Consolidated Entity	Setup Date	Location	Operations
Wu Han Far Eastern New Material Ltd.	2003/07/09	Mainland China	Retail and wholesale of PET staple, PET filament, polyester top, PET performs, raw textured yarns, spinning yarns, and knitted and woven fabrics and garments.
Shanghai Far Eastern IT Ltd.	2003/04/15	Mainland China	Computer software programming and MIS maintenance and consultancy.
Far Eastern Apparel (Suzhou) Ltd.	1996/10/21	Mainland China	Manufacture and distribution of various knitted and woven garments, beddings, garments and accessories.
Far Eastern Spinning Weaving and Dyeing (Suzhou) Ltd.	2003/10/22	Mainland China	Manufacture and distribution of woven, dyed and novelty fabrics, high-value engineered textiles, industrial woven fabrics and scraps.
Sino Belgium Beer (Suzhou) Ltd.	2007/09/04	Mainland China	Brewer.
Far Eastern New Century (China) Investment Corp.	2007/06/18	Mainland China	Investment.
Far Eastern Industries (Wuxi) Ltd.	2002/06/05	Mainland China	Manufacture and distribution of combed cotton yarn, 60/40 poly/cotton blended yarns, 65/35 poly/cotton blended yarns, spun yarns, and woven, greige woven, print woven, piece dyed woven and bleached woven fabric.
Oriental Industries (Suzhou) Ltd.	2005/06/24	Mainland China	Manufacturing and distribution of PET performs, industrial fabrics and related products.
Oriental Petrochemical (Shanghai) Corp.	2003/01/21	Mainland China	Manufacture and distribution of PTA and its by-products.
Far Eastern Industries (Suzhou) Ltd.	2004/03/22	Mainland China	Manufacture and distribution of polyester chips and partially oriented, fully oriented and polyester yarns.
Shanghai Far Eastern Petrochemical Logistic Ltd.	2006/03/02	Mainland China	Logistic.
Suzhou An He Apparel Ltd.	2008/01/31	88 Tian Ling Rd. Wuzhong District Economic Development Zone. Su Zhou	Manufacture and distribution of various woven garments.
Far Eastern Fibertech Co., Ltd.	1995/04/10	No. 17, Gongye 5th Rd., Gonyin Industry District Gonyin Township, Taoyuan County 328, Taiwan, ROC	Manufacture and distribution of nylon-fiber materials.
Oriental Petrochemical (Taiwan) Co., Ltd.	1987/01/26	No. 47, Jingjian 4th Rd., Shuren Village Gonyin Township, Taoyuan County 328, Taiwan, ROC	Manufacture and distribution of PTA
Martens Beer Trading (Shanghai) Ltd.	2007/10/26	Mainland China	Beer sales
Far EasTone Telecommunications Co., Ltd.	1997/04/11	28F., No. 207, Dunhua S. Rd. Sec. 2, Da'an Dist., Taipei City 106, Taiwan, ROC	Telecommunication

F-543

Consolidated Entity	Setup Date	Location	Operations
Far Eastern Info Service Holding Ltd.	2002/07/17	Clarendon House 2 Church Street, Hamilton HM11, Bermuda	International investment holding business.
Far Eastern Tech-Info(Shanghai) Ltd.	2002/11/18	Mainland China	Computer software programming and MIS maintenance and consultancy.
E.World (Holdings) Ltd.	2000/04/07	4F, One Capital Place. P.O. Box 847 G.T., Grand Cayman Island	International investment holding business.
Yuan Cing Co., Ltd.	2000/08/05	28F., No. 207, Dunhua S. Rd. Sec. 2, Da'an Dist., Taipei City 106, Taiwan, ROC	Data processing service and retail of computer software.
KGEx.com Co., Ltd.	2000/08/09	4F., No. 468, Ruiguang Rd., Neihu Dist., Taipei City 114, Taiwan, ROC	Providing Type II communications service.
Far Eastern Electronic Toll Collection Co., Ltd.	2004/04/07	28F., No. 207, Dunhua S. Rd. Sec. 2, Da'an Dist., Taipei City 106, Taiwan, ROC	Providing services on information software, electronic information, auto controlling equipment engineering.
Arcoa Communication Co., Ltd.	1981/05/04	36F., No. 207, Dunhua S. Rd. Sec. 2, Da'an Dist., Taipei City 106, Taiwan, ROC	Distribution of cellular phones and other communications equipment and accessories and providing related maintenance services.
ADCast Interactive Marketing Co., Ltd.	2000/06/12	1F., No. 220, Gangqian Rd., Neihu Dist., Taipei City 114, Taiwan, ROC	Providing services on internet advertisement and marketing.
Far EasTron Holding Ltd.	2005/08/30	Marquee Place, Suite 300, 430 West Bay Road, P.O, Box 30691 SMB, Grand Cayman, Cayman Islands, British West Indies	International investment holding business.
Q-Ware Communication Corp.	2007/02/13	8F., No. 220, Gangqian Rd., Neihu Dist., Taipei City 114, Taiwan, ROC	Providing Type II communications service.
Yuan Cing Infocomm Tech Co., Ltd.	2009/12/30	4F., No. 468, Ruiguang Rd., Neihu Dist., Taipei City 114, Taiwan, ROC	Sale of communication products
New Century InfoComm Tech Co., Ltd.	2000/6/1	1F-11F., No. 218, Ruiguang Rd., Neihu Dist., Taipei City 114, Taiwan, ROC	Providing Type II communications service, integrated network business and sale of phone equipment and accessories.
New Diligent Co., Ltd.	2001/5/2	1F., No. 207, Dunhua S. Rd. Sec. 2, Da'an Dist., Taipei City 106, Taiwan, ROC	Business consulting and souvenir selling.
Simple InfoComm Co., Ltd.	2001/10/23	12F., No. 468, Ruiguang Rd., Neihu Dist., Taipei City 114, Taiwan, ROC	Providing Type II communications service.
Information Security Service Digital United Co., Ltd.	2004/12/22	6F., No.71, Zhouzi St., Neihu Dist., Taipei City 114, Taiwan, ROC	Providing Internet information security and monitoring.

F-544

Consolidated Entity	Setup Date	Location	Operations
Digital United (Cayman) Ltd.	2000/8/16	P.O.Box 2681,Zephyr House, Mary Street, George Town, Grand Cayman, British West Indies	Investment.
New Diligence Corp. (Shanghai)	2000/10/8	Mainland China	Providing business consulting and machinery selling.
Sino Lead Enterprise Ltd.	2006/4/11	Hong Kong Trade Centre,7/F 161-167 Des Voeux Road Central, Hong Kong	Providing Internet services, information software services and electronic information providing services.
Digital United Information Technology (Shanghai) Co., Ltd.	2005/8/23	Mainland China	Design and research of computer system.
O-music Co., Ltd.	2010/10/5	12F., No. 468, Ruiguang Rd., Neihu Dist., Taipei City 114, Taiwan, ROC	Providing electronic information service.

SCHEDULE C

FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES
(Formerly Far Eastern Textile Ltd. and Subsidiaries)

RELATED PARTIES
SEPTEMBER 30, 2010

No.	Related Party	Relationship with Far Eastern New Century Corporation (Note)
1	Oriental Securities Corp.	a
2	Yuan Ding Co., Ltd.	a
3	Frendenberg Far Eastern Spunweb Co., Ltd.	a
4	Everest Textile Co., Ltd.	a
5	Pacific Liu Tong Investment Corp.	a
6	Air Liquide Far Eastern Ltd.	a
7	Yue Ding Industry Co., Ltd.	a
8	Far Eastern International Leasing Corp.	a
9	Ding Ding Hotel Co., Ltd.	a
10	Da Ju Fiber Co., Ltd.	a
11	iScreen Corp.	a
12	Yu Ming Co., Ltd.	a
13	Ding Ding Integrated Marketing Service Co., Ltd.	a
14	Malaysia Garment Manufactures PTE. Ltd.	a
15	Far Eastern International Garments Inc.	a
16	Far Eastern Geant Co., Ltd.	b
17	Far Eastern Medical Foundation	b
18	Far Eastern. Y. Z. Hsu Science and Technology Memorial Foundation	b
19	U-Ming Marine Transport Corp.	b
20	Tranquil Enterprise Ltd.	b
21	New Tranquil Enterprise Ltd.	b
22	Yuan-Ze University	b
23	Oriental Institute of Technology	b
24	Far Eastern Memorial Hospital	b

F-545

^{}[] No.
^{}[] Related Party
^{}[] Relationship with Far
^{}[] Eastern New Century
^{}[] Corporation (Note)

25 Bai Ding Investment Corp. b
26 Far Eastern Department Stores Co., Ltd. a and b
27 Oriental Union Chemical Corporation a and b
28 Asia Cement Corporation b and c
29 Yu Chang Vocational School c
30 Vacon Investment Ltd. c
31 Pacific SOGO Department Stores Co., Ltd. d
32 Pacific Petrochemical (Holding) Ltd. e
33 Far Eastern Recreation Center Employee's Welfare Committee f
34 Far Eastern Recreation Center Employee's Welfare Committee of FENC Golf Club f
35 Oriental Petrochemical (Yangzhou) Corporation g
36 Hung Ton Development Corporation h
37 TECO Electric & Machinery Co., Ltd. i
38 Systex Corporation i
39 MITAC Inc. i
40 Telecommunication & Transportation Foundation j
41 NTT DoCoMo Inc. k
42 Everest Textile (Shanghai) Ltd. l
43 Everest Investment (Holding) Ltd. l
44 Far Eastern Asset Management Co., Ltd. m
45 Far Eastern International Bank n
46 Far Eastern Technical Consultants Co., Ltd. o
47 YDT Technology International Co., Ltd. o
48 Ya Tung Ready-Mixed Concrete Co., Ltd. p
49 Ya-Li Precast Prestressed Concrete Industries Corp. p
50 Chiahui Power Corporation p
51 Fu Ming Transport Co., Ltd. p
52 Fu Da Transportation Co., Ltd. p
53 Asia Investment Corp. p
54 Bai Yang Investment Co. q
55 Far Eastern Citysuper Ltd. q
56 Ya Tung Department Stores Co., Ltd. q
57 Ding Ding Management Consultants Co. r
58 Deutsche Far Eastern Asset Management Co., Ltd. r
59 New Century InfoComm Tech Co. s
60 Digital United Inc. t
61 Information Security Service Digital United Co., Ltd. u
62 U-Ming Marine Transport (Singapore) Private Ltd. v

Note:
a. Equity-method investee and the share holding is less than 50%.
b. Same Chairman or general manager.
c. The chairman is the relative of the Company's chairman.
d. The subsidiary of Pacific Liu Tong Investment Co.
e. Equity-method investee (merged by Oriental Union Chemical Corporation in February 2010).
f. The principal of the organization is the Company's senior manager.
g. The subsidiary of Oriental Union Chemical Corporation.
h. The chairman of the Company is the investee's director.
i. The institutional director of Far Eastern Electronic Toll Collection Co., Ltd.
j. Far EasTone's donation is over one third of the foundation's fund.
k. The director of Far EasTone Telecommunication Co., Ltd.
l. The subsidiary of Everest Textile Co., Ltd.
m. The subsidiary of Far Eastern International Bank.

F-546

n. The vice president is the chairman of the Company.
o. The subsidiary of Yuan Ding Co., Ltd.
p. The subsidiary of Asia Cement Corporation.
q. The subsidiary of Far Eastern Department Stores Ltd.
r. The chairman is the Company's vice president.
s. Equity-method investee and the shareholding is less than 50% (it has become the subsidiary as of August 2010).
t. The subsidiary of New Century InfoComm Tech Co., Ltd. (merged with New Century InfoComm Tech Co., Ltd. on March 16, 2009).
u. The subsidiary of New Century InfoComm Tech Co., Ltd. (included in the consolidated report as of August 2010).
v. The subsidiary of U-Ming Marine Transport Corp.

F-547

^{}[] SCHEDULE D

CONSOLIDATED RELATED-PARTY TRANSACTIONS

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010

(In Thousands, Unless Stated Otherwise)

		2009		2010
	Notes	Amount	%	Amount		%
		NT$		NT$	US$ (Note 2)
Operating revenue
New Century InfoComm Tech Co., Ltd.	e.	$ 887,124	1	$ 868,790	$27,855	1
Others	b.	1,134,692	1	1,457,890	46,742	1
		$2,021,816	2	$2,326,680	$74,597	2
Operating cost
Oriental Union Chemical Corporation		$ 634,614	1	$ 825,380	$26,463	1
Others	b.	1,218,069	1	1,306,846	41,900	1
		$1,852,683	2	$2,132,226	$68,363	2
Operating expense
Yuan Ding Co., Ltd.		$ 120,181	1	$ 118,408	$ 3,796	1
Ding Ding Integrated Marketing Service Co., Ltd.		121,886	1	104,082	3,337	1
Others	b.	253,256	1	286,476	9,185	2
		$ 495,323	3	$ 508,966	$16,318	4
Nonoperating revenue
Far Eastern International Bank		$ 19,269	—	$ 24,907	$ 799	1
Others	b.	40,130	1	41,299	1,324	1
		$ 59,399	1	$ 66,206	$ 2,123	2
Nonoperating Expense
Others	b.	$ 12,118	1	$ 8,232	$ 264	—

Note:
a. The relationships between the related parties and the Group. Please refer to schedule C.
b. The transaction amount among the related-parties was not over 5% of the total amount of the account.
c. The terms of significant transactions given to the related parties were the same as the third parties.
d. The Group donated NT$92,659 thousand (US$2,971 thousand) to Far Eastern Y.Z. Hsu Science and Technology Memorial Foundation for the nine months ended September 30, 2010 (both donations were recognized as nonoperating expenses and losses - other expenses) for technological development for the benefit of the general public.
e. The related party has been included in the consolidated report since August 16, 2010.

F-548

^{}[] SCHEDULE E

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010

(In Thousands, Unless Stated Otherwise)

		2009		2010
	Notes	Amount	%	Amount		%
		NT$		NT$	US$ (Note 2)
Notes and accounts receivable from affiliates
Fresdenberg Far Eastern Spunweb Co., Ltd.		$ 51,897	5	$ 90,659	$ 2,907	12
Far Eastern Department Stores Co., Ltd.		—	—	74,845	2,400	10
Oriental Union Chemical Corporation		57,143	6	20,316	650	3
New Century InfoComm Tech Co., Ltd.		325,633	32	—	—	—
Others	b.	141,640	14	177,616	5,695	23
		$576,313	57	$ 363,436	$11,652	48
Refundable deposits
Ding Ding Integrated Marketing Service Co., Ltd.		$ 40,096	9	$ 36,010	$ 1,155	7
Yuan Ding Co., Ltd.		33,254	7	33,550	1,076	6
Others	b.	24,974	6	8,691	279	2
		$ 98,324	22	$ 78,251	$ 2,510	15
Notes and accounts payable to affiliates
Ding Ding Integrated Marketing Service Co., Ltd.		$ 82,406	11	$ 90,507	$ 2,902	7
Oriental Union Chemical Corporation		140,385	18	52,277	1,676	4
New Century InfoComm Tech Co., Ltd.		251,497	32	—	—	—
Others	b.	199,263	26	113,669	3,644	8
		$673,551	87	$ 256,453	$ 8,222	19
Leases payable
Far Eastern International Leasing Corp.	b.	$ 8,360	97	$ —	$ —	—
Accrued expenses
Others	b.	$ 36,929	1	$ 22,320	$ 716	—
Advance construction receipts
Far Eastern Department Stores Co., Ltd.		$430,962	2	$ 766,317	$24,569	4
Others	b.	85,227	1	284,767	9,130	1
		$516,189	3	$1,051,084	$33,699	5

	2009		2010
	Notes	Amount	%	Amount
		NT$		NT$ US$ (Note 2)
Deferred income
Rent revenue
Yuan Ding Co., Ltd.	d.	$ 668,602	65	$621,955
Far Eastern Y. Z. Hsu Science and Technology Memorial Foundation	e.	217,143	21	210,612
Sales of lands and buildings
Oriental Securities Corp.	c.	116,426	11	115,870
Sales of securities
Far Eastern International Leasing Corp.		24,326	2	24,326
Others	b.	11,933	1	11,932
		$1,038,430	100	$984,695

Financing to related parties:

	Nine Months Ended September 30, 2009
	Highest Outstanding Balance	Balance on September 30, 2009	Interest Rate (%)	Interest Revenue
	NT$	NT$		NT$
Malaysia Garment Manufactures PTE. Ltd.	$ 269,736	$ 269,736	0-2.78917	$ 2,074
Da Ju Fiber Co., Ltd.	277,000	123,000	1.13-2.69	2,987
Yue Ding Industry Co., Ltd.	160,000	56,000	1.53-2.69	1,878
		$ 448,736		$ 6,939

	Nine Months Ended September 30, 2010
	Highest Outstanding Balance		Balance on September 30, 2010		Interest Rate (%)	Interest Revenue
	NT$	US$ (Note 2)	NT$	US$ (Note 2)		NT$ US$ (Note 2)
Malaysia Garment
Manufactures PTE. Ltd.	$261,969	$ 8,399	$261,969	$ 8,399	0-1.75	$ 1,201
Da Ju Fiber Co., Ltd.	238,000	7,631	90,000	2,886	0.93-1.71	785
Yue Ding Industry Co., Ltd.	40,000	1,282	40,000	1,282	0.93-1.71	362
			$391,969	$ 12,567		$ 2,348

Financing from related parties:

	Nine Months Ended September 30, 2009
	Highest Outstanding Balance	Balance on September 30, 2009	Interest Rate (%)	Interest Expense
	NT$	NT$		NT$
Pacific Petrochemical (Holding) Ltd.	$1,303,191	$ 102,968	—	$ —

Nine Months Ended September 30, 2010

	Highest Outstanding Balance		Balance on September 30, 2010		Interest Rate (%)	Interest Expense
	NT$	US$ (Note 2)	NT$	US$ (Note 2)		NT$	US$ (Note 2)
Pacific Petrochemical (Holding) Ltd.	$662,290	$ 21,234	$ 643,956	$ 20,646	—	$ —	$ —
Oriental Petrochemical (Yangzhou) Corp.	422,554	13,548	418,104	13,406	1.25	1,019	33
			$1,062,060	$ 34,052		$ 1,019	$ 33

a. The relationships between the related parties and the Group. Please refer to schedule C.
b. The transaction amount among the related-parties was not over 5% of the total amount of the account.
c. The unrealized gain resulted from the sale of lands and buildings to Oriental Securities Corp..
d. The Company, Asia Cement Corporation ("ACC") and Yuan Ding Co., Ltd. ("Yuan Ding") proportionally co-own the ownership of the building named Metro Tower. Under the agreement, Yuan Ding was authorized to construct the building on this land. In addition, Yuan Ding proportionally registered the ownership of the building and distributed the rents from the lessees of the building to the Company and ACC instead of land rent. Since the Company acquired 12% of ownership of the building, the Company has recognized as deferred income and as rent revenue over the superficies period. The ownership of the building had been transferred on September 2, 2003. Please refer to Note 15.
e. The unrealized gain resulted from the right of superficies which Far Eastern Resources Development Co. granted to Far Eastern Y.Z. Science and Technology Memorial Foundation. Please refer to Note 15.
f. An FENC subsidiary, Far Eastern Resources Development Co., sold land in Ya-Tung Section of Banciao to Far Eastern Medical Foundation for $448,329 thousand for the construction of its new medical building in March 9, 2009. The gain on this sale was $331,124 thousand.
g. On October 31, 2007, NCIC (the accounts of NCIC was included in the consolidated financial statements since August 2010) and Digital United Inc. (DUI was merged into NCIC in March 16, 2009) respectively purchased the unsecured bonds (the 1st tranche) at NT$600,000 thousand and NT$200,000 thousand issued by the Company (Note 22); On August 14, 2009, NCIC and ARCOA respectively purchased the unsecured bonds (through private placement) at NT$990,000 thousand and NT$10,000 thousand issued by an FENC subsidiary, YDI (Note 23) and the transactions between the Company and its subsidiaries presented above had been eliminated as of September, 2010. The bonds purchased by the subsidiary, ARCOA had been eliminated as of September, 2009. The companies presented above recognized the bond interest expenses of NT$30,720 thousand (NT$5,245 thousand out of NT$30,720 thousand had been eliminated) and NT$18,277 thousand (NT$26 thousand out of NT$18,277 thousand had been eliminated) for the nine months ended September 30, 2009 and 2010. The interest payables are NT$21,884 thousand (NT$21,884 thousand had been eliminated) and NT$21,770 thousand (NT$2,557 thousand out of NT$21,770 thousand had been eliminated).
h. Far EasTone bought from FEILC the Neihu switch center, the Taichung land for switch center and the Kaohsiung office space for $239,177 thousand (US$7,668 thousand; including VAT) based on appraisal reports and market prices. The ownership of these properties had been transferred to Far EasTone as of March 30, 2010.
i. The terms of given to the related parties were the same as the third parties.

F-551

^{}[] SCHEDULE F

ENDORSEMENT/GUARANTEE PROVIDED

NINE MONTHS ENDED SEPTEMBER 30, 2010

Notes:
A. The subsidiary with common stock shares held directly or indirectly equivalent to or above 50%.
B. Equity-method investees.
C. 100% ownership of the subsidiary held directly or indirectly by the same ultimate parent company.
D. Parent company.
E. Business relationship.
F. Collateral/guarantee is equivalent to 200% of the audited net value of the guarantor as of December 31, 2009.
G. Collateral/guarantee is equivalent to 50% of the reviewed net value of the guarantor as of September 30, 2010.
H. Limit is computed using the reviewed net value of the guarantor as of September 30, 2010.
I. Limit is computed using the reviewed net value of the parent company as of September 30, 2010.
J. Collateral/guarantee is equivalent to 20% of the audited net value of the parent company as of December 31, 2009.
K. Collateral/guarantee is equivalent to 50% of the reviewed net value of the parent company as of September 30, 2010.
L. Collateral/guarantee is equivalent to 300% of the audited net value of the guarantor as of June 30, 2010.
M. Collateral/guarantee is equivalent to the reviewed net value of the ultimate parent company as of September 30, 2010.
N. The calculation is based on Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies.
O. Collateral/guarantee is equivalent to 50% of the reviewed net value of the ultimate parent company as of September 30, 2010.
P. Limit is computed using the audited net value of the guarantor as of December 31, 2009.
Q. Collateral/guarantee is equivalent to 50% of the audited net value of the guarantor as of June 30, 2010.
R. Limit is computed using the audited net value of the guarantor as of June 30, 2010.

^{}[] SCHEDULE G

(Formerly Far Eastern Textile Ltd. and Subsidiaries)

SIGNIFICANT TRANSACTIONS BETWEEN FAR EASTERN NEW CENTURY CORPORATION AND SUBSIDIARIES
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2010
(In Thousands of New Taiwan Dollars)

No. (Note A)	Company Name	Related Party	Flow of Transaction (Note B)	Transaction Detail
No. (Note A)	Company Name	Related Party	Flow of Transaction (Note B)	Financial Statement Account	Amount	Term	% to Consolidated Revenue or Assets (Note C)
	Nine months ended September 30, 2009
0	Far Eastern New Century Corporation	Oriental Resources Development Ltd.	1	Cost of goods sold	$ (109,425)	Based on agreement	—
		Far Eastern Apparel (Vietnam) Ltd.	1	Cost of goods sold	(96,792)	Based on agreement	—
		Oriental Petrochemical (Taiwan) Co., Ltd.	1	Cost of goods sold	(6,206,622)	Based on agreement	5
		Oriental Petrochemical (Taiwan) Co., Ltd.	1	Materials	(10,364)	Based on agreement	—
		Oriental Petrochemical (Taiwan) Co., Ltd.	1	Accounts payable	742,075	Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Cost of goods sold	(36,131)	Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Sales	104,241	Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Process expenses	(667,104)	Based on agreement	1
		Far Eastern Apparel (Suzhou) Ltd.	1	Accounts receivable	(13,162)	Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Prepaid expenses	(106,849)	Based on agreement	—
		Far Eastern Apparel (Suzhou) Ltd.	1	Accrued expense - outsourced process	70,186	Based on agreement	—
1	Far Eastern Polychem Industries Ltd.	Far Eastern Investment (Holding) Ltd.	3	Other payables	1,193,322	Based on agreement	—
		Far Eastern Investment (Holding) Ltd.	3	Accounts payable	211,570	Based on agreement	—
		Far Eastern Investment (Holding) Ltd.	3	Interest expenses	(32,090)	Based on agreement	—
		Far Eastern Industries (Suzhou) Ltd.	3	Other receivables	(323,778)	Based on agreement	—

Note A: The numbers of column:
a. The Company: 0.
b. Subsidiaries are numbered from "1."
Note B: The relationship:
1. From the Company to subsidiary.
2. From the subsidiary to the Company.
3. Between subsidiaries.

Note C: For assets and liabilities, amount is shown as a percentage to consolidated total assets as of September 30, 2009 and 2010, respectively; while revenues, costs and expenses are shown as a percentage to consolidated total operating revenues for the nine months ended September 30, 2009 and 2010, respectively.

THE ISSUER

Asia Cement Corporation
31st Floor
Taipei Metro Tower
207 Tun Hwa South Road, Section 2
Taipei, Taiwan (R.O.C.)

TRUSTEE, PRINCIPAL PAYING AGENT,
EXCHANGE AGENT AND TRANSFER AGENT

The Bank of New York Mellon,
acting through its London Branch

40th Floor, One Canada Square
London E14 5AL
United Kingdom

REGISTRAR

The Bank of New York Mellon
(Luxembourg) S.A.

Vertigo Building - Polaris
2-4 rue Eugène Ruppert
L-2453 Luxembourg

LEGAL ADVISORS

To the Initial Purchaser
As to United States law

Davis Polk & Wardwell LLP

c/o 18th Floor, The Hong Kong Club Building
3A Chater Road, Central
Hong Kong

To the Issuer
As to the Republic of China law

Lee and Li, Attorneys-at-Law

7th Floor, 201 Tun Hwa North Road
Taipei 105, Taiwan (R.O.C.)

To the Trustee

Hogan Lovells

11th Floor, One Pacific Place
88 Queensway
Hong Kong

INDEPENDENT AUDITORS OF THE ISSUER

Deloitte & Touche

12th Floor
156 Min Sheng East Road, Section 3
Taipei, Taiwan (R.O.C.)

INDEPENDENT AUDITORS OF FENC

Deloitte & Touche

12th Floor
156 Min Sheng East Road, Section 3
Taipei, Taiwan (R.O.C.)

AI assistant

Asia Cement Corporation — Capital/Financing Update 2013

51736_rns_2013-05-13_00f5342f-eb68-4952-b3da-2dc8d221b92c.pdf

IMPORTANT NOTICE

NOT FOR DISTRIBUTION OR TO US PERSONS OR OTHERWISE THAN TO PERSONS TO WHOM IT CAN LAWFULLY BE DISTRIBUTED

CONFIRMATION OF YOUR REPRESENTATION

Asia Cement Corporation

US$375,000,000 Zero Coupon Exchangeable Bonds Due 2016

ISSUE PRICE 100.0%

TABLE OF CONTENTS

PRESENTATION OF INFORMATION

FORWARD-LOOKING STATEMENTS

ENFORCEABILITY OF FOREIGN JUDGMENTS IN THE ROC

SUMMARY

Our Business

Our Strengths

FENC's Strategies

Our Relationship with FENC

Recent Developments

Potential Joint Venture with China Shanshui

Potential Joint Venture between FENC and Sinopec Yizheng Chemical Fibre Company Limited

Corporate and Other Information

THE OFFERING

SUMMARY FINANCIAL AND OPERATING DATA

RISK FACTORS

Risks Relating to ACC

Our business is affected by the level of activity in the construction industry which is affected by the general economic conditions in Taiwan and the PRC.

We are exposed to the risks of increasing energy and raw material costs, and the inability to secure a steady supply of such resources.

We are subject to cement price fluctuations, and our competitiveness depends on our ability to control costs and maintain high levels of operational efficiency.

We may have difficulty in managing our future growth in the PRC if our business operations and construction of new facilities are disrupted by reasons beyond our control.

If the capital resources required for the future expansion of our capacity in the PRC through ACC China are not available, we may be unable to successfully implement our business strategy.

We rely on income from our interests in other member companies of the Far Eastern Group.

Our largest shareholder is FENC, which may be able to exert significant influence on our management, policies and corporate actions.

Insurance coverage for us and ACC China may not be sufficient to cover the risks related to both of our operations and losses.

Any failure to maintain an effective quality control system at our product facilities could have a material and adverse effect on our business, financial condition and results of operations.

Risks Relating to the Cement Industry

Risks Relating to FENC

Cyclical changes in product pricing may adversely affect FENC's results of operations.

Changes in environmental regulations could adversely affect FENC's results of operations.

Some of the brand owners with whom FENC has relationships are sensitive about environmental and social responsibility standards and any perception on their part that FENC fails to meet those standards could adversely affect its operations and profitability.

Extensive regulation of the telecommunications industry may limit Far EasTone's flexibility to respond to market conditions and competition, and as a result its business may suffer.

Increasing competition from other technologies or rapid changes in market trends, could have an adverse effect on Far EasTone's financial condition and results of operations.

Risks Relating to both ACC and FENC

Operations are subject to the laws and regulations of the PRC.

Strained relations between Taiwan and the PRC could negatively affect our business and the market value of your investment.

Earthquakes, typhoons, floods and other natural disasters could severely disrupt the normal operation of our business and adversely affect our earnings.

Corporate governance standards in the ROC differ from those in other jurisdictions.

Both of our business depends substantially on the continuing efforts of our executive directors, senior management, key personnel, and our ability to maintain a skilled labor force.

ACC and FENC are subject to ROC GAAP.

You may not be able to enforce a judgment of a foreign court in the ROC.

The recent global market fluctuations and economic downturn could materially and adversely affect our business, financial condition and results of operations.

The Bonds will be effectively subordinated to all of the liabilities of the Company's subsidiaries.

The Company's subsidiaries and affiliates may be restricted from paying dividends or repaying intercompany loans or advances.

The Reference Shares or the Exchange Property to be delivered to an exchanging holder of Bonds will be held in one or more designated accounts but will not be charged in favor of the holder of Bonds.

Exchange rate fluctuations between the NT dollar and the US dollar may adversely affect the value of the Bonds and the Reference Shares represented thereby.

An active trading market for the Bonds may not develop.

Holders have limited anti-dilution protection.

The Company may be unable to redeem the Bonds.

The trading prices of the Reference Shares may fluctuate due to the volatility of the ROC securities market and the results of operations of FENC.

Bondholders have less protection under the ROC laws as compared to the laws of the United States

Our ability to fulfill our obligations under the Bonds is dependent upon our future financial and operating performance.

RECENT DEVELOPMENTS

Potential Joint Venture with China Shanshui

Potential Joint Venture between FENC and Sinopec Yizheng Chemical Fibre Company Limited

USE OF PROCEEDS

DIVIDEND POLICY OF FENC

MARKET PRICE INFORMATION FOR COMMON SHARES OF FENC

CAPITALIZATION OF ACC

EXCHANGE RATES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ACC

Overview

Industry environment in Taiwan and the PRC

Capacity expansion in the PRC

Results of Operations

Operating Revenues

Operating Costs

Operating Expenses

Nonoperating Income and Gains

Nonoperating Expenses and Losses

Consolidated Results of Operations

Asia Cement Corporation Capital/Financing Update 2013