CGPC — Annual Report 2018

Dec 24, 2018

China General Plastics Corporation

Financial Statements for the Years Ended December 31, 2018 and 2017 and Independent Auditors’ Report

勤業眾信聯合會計師事務所 11073 台北市信義區松仁路 100 號 20 樓

Deloitte & Touche 20F, Taipei Nan Shan Plaza No. 100, Songren Rd., Xinyi Dist., Taipei 11073, Taiwan Tel : + 886 (2) 2725 - 9988 Fax: + 886 (2) 4051 - 6888 www.deloitte.com.tw

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders China General Plastics Corporation

Opinion

We have audited the accompanying financial statements of China General Plastics Corporation (the Company), which comprise the balance sheets as of December 31, 2018 and 2017, and the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2018. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters of the Company’s financial statements for the year ended December 31, 2018 are stated as follows:

Validity of Specific Revenue

The amount of revenue derived from partial customers was NT$1,581,634 thousand, representing 19% of total revenue of the Company for the year ended December 31, 2018. Most of these customers were distributors, and the amount of revenue derived from specific regions significantly increased compared to the figure as of December 31, 2017. Therefore, the validity of the revenue derived from these customers has been identified as a key audit matter.

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For the accounting policy of the validity of the revenue derived from these customers, refer to Notes 4 and 21 to the accompanying financial statements.

Our main audit procedures performed to assess the validity of the revenue derived from the above-mentioned customers are as follows:

1. We obtained an understanding and tested the internal control design and operating effectiveness of the validity of revenue derived from the above-mentioned customers.

2. We sampled the transaction documents related to revenue derived from the above-mentioned customers, including sales order, shipping, customs and receipt documents, to verify that the revenue was recognized while completing the performance obligation.

3. We sampled sales returns, provisions and cash collections occurred subsequent to the balance sheet date to verify the reasonableness of revenue recognition.

Valuation of Inventory

As of December 31, 2018, the carrying amount of the Company’s inventory was NT$820,821 thousand (i.e. the gross amount of inventory of NT$863,881 thousand with a deduction of the allowance for inventory valuation of NT$43,060 thousand), representing 7% of the Company’s total assets. As the Company’s inventory was stated at the lower of cost or net realizable value in accordance with IAS 2 “Inventories”, which involved critical judgement and accounting estimates by the management, the valuation of inventory has been identified as a key audit matter.

Refer to Notes 4, 5 and 11 to the Company’s financial statements for the related accounting policies and disclosures on inventory valuation.

The main audit procedures we performed for valuation of inventory are as follows:

1. We obtained an understanding of the reasonableness of the Company’s policies and methods of the allowance for inventory valuation.

2. By performing a year-end inventory observation, we understood the inventory status and evaluated the reasonableness of the allowance for inventory valuation.

3. We tested the inventory aging and net realizable value report used in valuation, including verification of the completeness, net realizable value and recalculation of the accuracy of the reports. Besides, we also performed the retrospective test to verify the validity of the impairment items and value decline in subsequent period.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

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Those charged with governance, including the audit committee, are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2018 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Shih-Tsung Wu and Tzu-Jung Kuo.

Deloitte & Touche Taipei, Taiwan Republic of China

March 6, 2019

Notice to Readers

The accompanying financial statements are intended only to present the financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and financial statements shall prevail.

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CHINA GENERAL PLASTICS CORPORATION

BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss (FVTPL) - current (Notes 4 and 7) Notes receivable (Notes 4 and 10) Trade receivables (Notes 4 and 10) Trade receivables from related parties (Notes 4, 10 and 28) Other receivables (Notes 4 and 10) Other receivables from related parties (Notes 4, 10 and 28) Inventories (Notes 4 and 11) Prepayments Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through other comprehensive income (FVTOCI) - non-current (Notes 4, 8 and 20) Financial assets measured at cost - non-current (Notes 4 and 9) Investments accounted for using equity method (Notes 4 and 12) Property, plant and equipment (Notes 4, 13, 28 and 29) Investment properties (Notes 4, 14 and 25) Intangible assets (Notes 4 and 15) Deferred tax assets (Notes 4 and 23) Refundable deposits (Note 29) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Financial liabilities at FVTPL - current (Notes 4 and 7) Notes payable (Note 16) Trade payables (Note 16) Trade payables to related parties (Notes 16 and 28) Other payables (Note 17) Other payables to related parties (Note 28) Current tax liabilities (Notes 4 and 23) Provisions - current (Notes 4 and 18) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities (Notes 4 and 23) Net defined benefit liabilities - non-current (Notes 4 and 19) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY (Notes 4, 8, 9, 12, 19, 20 and 23) Ordinary Shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity TOTAL		2018 Amount % $ 150,729 1 405,396 4 190,380 2 832,697 8 101,570 1 26,985 - 2,407 - 820,821 7 17,348 - 1,040 - 2,549,373 23 121,047 1 - - 4,910,191 45 3,046,423 28 135,277 1 1,640 - 251,089 2 2,474 - 8,468,141 77 $ 11,017,514 100 $ - - 288 - 226,463 2 777,387 7 394,539 4 4,162 - 63,552 1 - - 61,363 - 1,527,754 14 484,666 4 627,435 6 3,019 - 1,115,120 10 2,642,874 24 5,067,596 46 8,929 - 512,954 5 408,223 4 2,334,921 21 3,256,098 30 42,017 - 8,374,640 76 $ 11,017,514 100		2017
				Amount % $ 86,856 1 968,999 9 175,609 2 692,568 7 118,613 1 25,070 - 1,979 - 681,785 6 18,188 - 388 - 2,770,055 26 - - 91,000 1 4,405,384 42 2,914,824 28 140,260 1 4,178 - 260,296 2 2,474 - 7,818,416 74 $ 10,588,471 100 $ 508 - 183 - 210,127 2 712,689 7 340,506 3 1,796 - 88,007 1 27,849 - 50,074 - 1,431,739 13 484,890 5 863,130 8 2,371 - 1,350,391 13 2,782,130 26 4,919,996 47 8,236 - 385,973 4 408,223 4 2,063,146 19 2,857,342 27 20,767 - 7,806,341 74 $ 10,588,471 100

The accompanying notes are an integral part of the financial statements.

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CHINA GENERAL PLASTICS CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

NET REVENUE (Notes 4, 21 and 28) COST OF REVENUE (Notes 4, 11, 22 and 28) GROSS PROFIT REALIZED GAIN ON TRANSACTIONS WITH SUBSIDIARIES (Note 4) REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 22 and 28) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES (Notes 4, 7, 12, 14, 22 and 28) Other income Other gains and losses Interests expense Share of profit or loss of subsidiaries and associates Total non-operating income and expenses PROFIT BEFORE INCOME TAX FROM CONTINUING OPERATIONS INCOME TAX EXPENSE (Notes 4 and 23) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) (Notes 4, 8, 12, 19, 20 and 23) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Unrealized gain on investments in equity instruments at FVTOCI		2018 Amount % $ 8,248,176 100 7,184,172 87 1,064,004 13 8,150 - 1,072,154 13 318,651 4 151,862 2 31,586 - 502,099 6 570,055 7 27,818 1 18,012 - (14) - 767,701 9 813,517 10 1,383,572 17 107,416 1 1,276,156 16 3,712 - 20,947 -		2017
				Amount % $ 8,110,347 100 6,936,238 86 1,174,109 14 7,002 - 1,181,111 14 295,934 4 153,109 2 31,581 - 480,624 6 700,487 8 24,328 - (56,210) - (60) - 747,150 9 715,208 9 1,415,695 17 145,887 2 1,269,808 15 (3,299) - - - (Continued)

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CHINA GENERAL PLASTICS CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Share of the other comprehensive loss of subsidiaries and associates accounted for using the equity method-unrealized loss on investments in equity instruments at FVTOCI Share of other comprehensive loss of subsidiaries and associates accounted for using the equity method - remeasurement of defined benefit plans Income tax relating to items that will not be reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations Unrealized loss on available-for-sale financial assets Share of other comprehensive loss of associates accounted for using the equity method - exchange differences on translating foreign operations Share of other comprehensive income of subsidiaries and associates accounted for using the equity method - unrealized gain on available-for-sale financial assets Income tax relating to items that may be reclassified subsequently to profit or loss Other comprehensive income (loss) for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR EARNINGS PER SHARE (Note 24) Basic Diluted		2018 Amount % $ (20,017) - (3,291) - 7,778 - 9,129 - 7,723 - - - (400) - - - (3,565) - 3,758 - 12,887 - $ 1,289,043 16 $ 2.52 $ 2.51		2017
				Amount % $ - - (3,821) - 561 - (6,559) - (38,607) - (60) - (151) - 11,884 - 6,563 - (20,371) - (26,930) - $ 1,242,878 15 $ 2.51 $ 2.50
		$		$

The accompanying notes are an integral part of the financial statements.

(Concluded)

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CHINA GENERAL PLASTICS CORPORATION

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

BALANCE AT JANUARY 1, 2017 Appropriation of the 2016 earnings Legal reserve Cash dividends distributed by the Company Share dividends distributed by the Company Other changes in capital surplus Net profit for the year ended December 31, 2017 Other comprehensive income (loss) for the year ended December 31, 2017, net of income tax Total comprehensive income (loss) for the year ended December 31, 2017 BALANCE AT DECEMBER 31, 2017 Effect of retrospective restatement BALANCE AT JANUARY 1, 2018, AS RESTATED Appropriation of the 2017 earnings Legal reserve Cash dividends distributed by the Company Share dividends distributed by the Company Other changes in capital surplus Net profit for the year ended December 31, 2018 Other comprehensive income for the year ended December 31, 2018, net of income tax Total comprehensive income for the year ended December 31, 2018 BALANCE AT DECEMBER 31, 2018	Share Capital (Note 20) Ordinary Shares $ 4,776,695 - - 143,301 - - - - 4,919,996 - 4,919,996 - - 147,600 - - - - $ 5,067,596		Capital Surplus (Notes 4and 20) Unpaid Dividend Others Total $ 7,913 $ 307 $ 8,220 - - - - - - - - - 16 - 16 - - - - - - - - - 7,929 307 8,236 - - - 7,929 307 8,236 - - - - - - - - - 693 - 693 - - - - - - - - - $ 8,622 $ 307 $ 8,929	Capital Surplus (Notes 4and 20) Unpaid Dividend Others Total $ 7,913 $ 307 $ 8,220 - - - - - - - - - 16 - 16 - - - - - - - - - 7,929 307 8,236 - - - 7,929 307 8,236 - - - - - - - - - 693 - 693 - - - - - - - - - $ 8,622 $ 307 $ 8,929	Retained Earnings (Notes 4, 19, 20 and 23) Special Unappropriated Legal Reserve Reserve Earnings Total $ 241,661 $ 408,223 $ 1,899,548 $ 2,549,432 144,312 - (144,312) - - - (812,038) (812,038) - - (143,301) (143,301) - - - - - - 1,269,808 1,269,808 - - (6,559) (6,559) - - 1,263,249 1,263,249 385,973 408,223 2,063,146 2,857,342 - - - - 385,973 408,223 2,063,146 2,857,342 126,981 - (126,981) - - - (737,999) (737,999) - - (147,600) (147,600) - - - - - - 1,276,156 1,276,156 - - 8,199 8,199 - - 1,284,355 1,284,355 $ 512,954 $ 408,223 $ 2,334,921 $ 3,256,098	Retained Earnings (Notes 4, 19, 20 and 23) Special Unappropriated Legal Reserve Reserve Earnings Total $ 241,661 $ 408,223 $ 1,899,548 $ 2,549,432 144,312 - (144,312) - - - (812,038) (812,038) - - (143,301) (143,301) - - - - - - 1,269,808 1,269,808 - - (6,559) (6,559) - - 1,263,249 1,263,249 385,973 408,223 2,063,146 2,857,342 - - - - 385,973 408,223 2,063,146 2,857,342 126,981 - (126,981) - - - (737,999) (737,999) - - (147,600) (147,600) - - - - - - 1,276,156 1,276,156 - - 8,199 8,199 - - 1,284,355 1,284,355 $ 512,954 $ 408,223 $ 2,334,921 $ 3,256,098	Other Equity (Notes 4, 8, 12, 20 and 23)	Total $ 41,138 - - - - - (20,371) (20,371) 20,767 16,562 37,329 - - - - - 4,688 4,688 $ 42,017	Total Equity $ 7,375,485 - (812,038) - 16 1,269,808 (26,930) 1,242,878 7,806,341 16,562 7,822,903 - (737,999) - 693 1,276,156 12,887 1,289,043 $ 8,374,640
							Exchange Differences Unrealized on Translating Unrealized Gain (Loss) on the Financial Gain (Loss) on Investments in Statements of Available-for- Equity Foreign sale Financial Instruments at Operations Assets FVTOCI $ 12,612 $ 28,526 $ - - - - - - - - - - - - - - - - (32,195) 11,824 - (32,195) 11,824 - (19,583) 40,350 - - (40,350) 56,912 (19,583) - 56,912 - - - - - - - - - - - - - - - 3,758 - 930 3,758 - 930 $ (15,825) $ - $ 57,842
			Unpaid Dividend $ 7,913 - - - 16 - - - 7,929 - 7,929 - - - 693 - - - $ 8,622	Others $ 307 - - - - - - - 307 - 307 - - - - - - - $ 307	Legal Reserve $ 241,661 144,312 - - - - - - 385,973 - 385,973 126,981 - - - - - - $ 512,954	Special Unappropriated Reserve Earnings $ 408,223 $ 1,899,548 - (144,312) - (812,038) - (143,301) - - - 1,269,808 - (6,559) - 1,263,249 408,223 2,063,146 - - 408,223 2,063,146 - (126,981) - (737,999) - (147,600) - - - 1,276,156 - 8,199 - 1,284,355 $ 408,223 $ 2,334,921

The accompanying notes are an integral part of the financial statements.

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CHINA GENERAL PLASTICS CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Net (gain) loss on fair value change on financial assets carried at FVTPL Interest expense Interest income Dividend income Share of profit of subsidiaries and associates Gain on disposal of property, plant and equipment Net gain on disposal of available-for-sale financial assets Write-downs of inventories Reversal of impairment loss recognized on property, plant and equipment Realized gain on the transactions with subsidiaries Changes in operating assets and liabilities Financial assets held for trading Financial assets mandatorily classified as at FVTPL Notes receivable Trade receivables Trade receivables from related parties Other receivables Other receivables from related parties Inventories Prepayments Other current assets Notes payable Trade payables Trade payables to related parties Other payables Other payables to related parties Provisions Other current liabilities Net defined benefit liabilities Cash generated from operations Interest received Interest paid Income tax paid Net cash generated from operating activities	2018 $ 1,383,572 176,198 2,813 (7,829) 14 (6,670) (1,649) (767,701) (1,384) - 866 - (8,150) (17,777) 588,701 (14,771) (140,129) 17,043 (1,863) (428) (139,902) 840 (652) 105 16,336 64,698 29,946 2,366 - (16,560) (231,983) 926,050 6,618 (14) (118,675) 813,979	2017 $ 1,415,695 146,961 3,889 18,058 60 (6,607) (13) (747,150) (1,427) (2,936) 2,192 (951) (7,002) 8,867 - (32,224) (16,159) 2,804 (5,748) 1,371 15,834 7,486 318 (168) (19,892) 365,419 (2,436) (7,034) 10,266 (5,897) (356,540) 787,036 6,649 (60) (90,445) 703,180 (Continued)

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CHINA GENERAL PLASTICS CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from capital reduction of financial assets at FVTOCI Proceeds from sale of available-for-sale financial assets Refunds of financial assets measured at cost by capital reduction Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Payments for intangible assets Dividends received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from guarantee deposits received Refunds of guarantee deposits received Increase (decrease) in other non-current liabilities Dividends paid Net cash used in financing activities NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2018 $ 7,462 - - (278,787) 2,140 - (275) 256,708 (12,752) 925 (278) 1 (738,002) (737,354) 63,873 86,856 $ 150,729	2017 $ - 5,948 9,000 (644,671) 1,686 (21) (160) 373,725 (254,493) 732 (2,192) (70) (812,040) (813,570) (364,883) 451,739 $ 86,856

The accompanying notes are an integral part of the financial statements.

(Concluded)

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NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA GENERAL PLASTICS CORPORATION

1. GENERAL INFORMATION

China General Plastics Corporation (the “Company”) was incorporated and began operations on April 29 1964. The Company mainly engages in the production and sale of PVC films, PVC leather, PVC pipes, PVC compounds, PVC resins, construction products, chlor-alkali products and other related products.

The Company’s ordinary shares have been listed on the Taiwan Stock Exchange since March 1973.

The financial statements are presented in the Company’s functional currency, the New Taiwan dollar (NT$).

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Company’s board of directors on March 6, 2019.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

• a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the FSC

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Company’s accounting policies:

1) IFRS 9 “Financial Instruments” and related amendments

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

The requirements for classification, measurement and impairment of financial assets have been applied retrospectively starting from January 1, 2018. IFRS 9 is not applicable to items that have already been derecognized as of December 31, 2017.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as of January 1, 2018, the Company has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

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The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Company’s financial assets and financial liabilities as of January 1, 2018.

Financial Asset Cash and cash equivalents Derivatives Equity securities Fund beneficiary certificates Notes receivable, trade receivables and other receivables Refundable deposits Financial Asset FVTOCI Equity instruments Add: Reclassification from available-for-sale (IAS 39) Amortized cost Add: Reclassification from loans and receivables (IAS 39) Total	Measurement Category

• a) Cash and cash equivalents, notes receivable, trade receivables, other receivables and refundable deposits previously classified as loans and receivables under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9.

• b) As equity securities previously classified as available-for-sale financial assets under IAS 39 were not held for trading, the Company elected to designate these securities as at FVTOCI and FVTPL under IFRS 9. As a result, the related other equity - unrealized gain (loss) on available-for-sale financial assets of $40,350 thousand was reclassified to other equity - unrealized gain (loss) on financial assets at FVTOCI.

Investments in unlisted shares, respectively, previously measured at cost under IAS 39 have been classified at FVTPL and designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an increase of $16,562 thousand was recognized in both financial assets at FVTOCI and other equity - unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018.

• 2) IFRS 15 “Revenue from Contracts with Customers” and related amendments

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. Refer to Note 4 for the related accounting policies.

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In identifying performance obligations, IFRS 15 and the related amendments require that a good or service is distinct if it is capable of being distinct and the promise to transfer it is distinct within the context of the contract. The application of IFRS 15 is not expected to have a material impact on the Company.

The Company elected only to retrospectively apply IFRS 15 to contracts that were not complete as of January 1, 2018 and to reclassify the advances received of $33,748 thousand to contract liabilities and the provision for customer returns and rebates of $27,849 thousand to refund liabilities.

• b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019

New, Amended or Revised Standards and Interpretations (the “New IFRSs”) Annual Improvements to IFRSs 2015-2017 Cycle Amendments to IFRS 9 “Prepayment Features with Negative Compensation” IFRS 16 “Leases” Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” IFRIC 23 “Uncertainty over Income Tax Treatments”	Effective Date Announced by IASB (Note 1)
	January 1, 2019 January 1, 2019 (Note 2) January 1, 2019 January 1, 2019 (Note 3) January 1, 2019 January 1, 2019

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

• Note 2: The FSC permits the election for early adoption of the amendments starting from January 1, 2018.

• Note 3: The Company shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

Except for the above impact, as of the date the financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

• c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

New IFRSs Amendments to IFRS 3 “Definition of a Business” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 and IAS 8 “Definition of Material”	Effective Date Announced by IASB (Note)
	January 1, 2020 (Note 2) To be determined by IASB January 1, 2021 January 1, 2020 (Note 3)

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

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• Note 2: The Company shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

• Note 3: The Company shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

As of the date the parent company only financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the parent company only financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

The parent company only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (the “Regulations”).

• b. Basis of preparation

The financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

• 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• 3) Level 3 inputs are unobservable inputs for an asset or liability.

When preparing these parent company only financial statements, the Company used the equity method to account for its investments in subsidiaries and associates. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only financial statements to be the same with the amounts attributable to the owners of the Company in its consolidated financial statements, adjustments arising from the differences in accounting treatments between the parent company only basis and the consolidated basis were made to “investments accounted for using the equity method”, “share of profit or loss of subsidiaries and associates”, “share of other comprehensive income of subsidiaries and associates” and the related equity items, as appropriate, in these parent company only financial statements.

• c. Classification of current and non-current assets and liabilities

Current assets include:

• 1) Assets held primarily for the purpose of trading;

• 2) Assets expected to be realized within 12 months after the reporting period; and

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• 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

• 1) Liabilities held primarily for the purpose of trading;

• 2) Liabilities due to be settled within 12 months after the reporting period; and

• 3) Liabilities for which the Company does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

Assets and liabilities that are not classified as current are classified as non-current.

• d. Foreign currencies

In preparing the Company’s financial statements, transactions in currencies other than the Company’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

On the disposal of a foreign operation (i.e. a disposal of the Company’s entire interest in a foreign operation, or a disposal involving the loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an associate that includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation which are attributable to the owners of the Company are reclassified to profit or loss.

• e. Inventories

Inventories consist of raw materials, finished goods and work in progress and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The 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 the weighted-average cost on the balance sheet date.

• f. Investments in subsidiaries

The Company uses the equity method to account for its investments in subsidiaries.

A subsidiary is an entity that is controlled by the Company.

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Under the equity method, an investment in a subsidiary is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary. The Company also recognizes the changes in the Company’s share of equity of subsidiaries attributable to the Company.

When the Company’s share of losses of a subsidiary exceeds its interest in that subsidiary (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Company’s net investment in the subsidiary), the Company continues recognizing its share of further losses.

The Company assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the entire financial statements of the investee. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Company recognizes the reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount that would have been recognized (net of amortization or depreciation) had no impairment loss been recognized in prior years. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

When the Company loses control of a subsidiary, it recognizes the investment retained in the former subsidiary at its fair value at the date when control is lost. The difference between the fair value of the retained investment plus any consideration received and the carrying amount of the previous investment at the date when control is lost is recognized as a gain or loss in profit or loss. Besides, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Company had directly disposed of the related assets or liabilities.

Profits or losses resulting from downstream transactions are eliminated in full only in these parent company only financial statements. Profits and losses resulting from upstream transactions and transactions between subsidiaries are recognized only in the parent company only financial statements only to the extent of interests in the subsidiaries that are not related to the Company.

• g. Investments in associates

An associate is an entity over which the Company has significant influence and that is not a subsidiary.

The Company uses the equity method to account for its investments in associates.

Under the equity method, investments in an associate are initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. The Company also recognizes the changes in the Company’s share of the equity of associates attributable to the Company.

When the Company subscribes for additional new shares of an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates accounted for using the equity method. If the Company’s ownership interest is reduced due to its additional subscription of the new shares of the associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

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When the Company’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Company’s net investment in the associate), the Company discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Company has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

The entire carrying amount of an investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Company discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities.

When the Company transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Company’s financial statements only to the extent that interests in the associate are not related to the Company.

h. Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment loss.

Property, plant and equipment in the course of construction are measured at cost less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such assets are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for their intended use.

Depreciation on property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. If a lease term is shorter than the assets’ useful lives, such assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

• i. Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

Investment properties are initially measured at cost, including transaction cost. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss.

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j. Intangible assets

• 1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, and amortization methods are reviewed at the end of each year, with the effects of any changes in the estimates accounted for on a prospective basis.

2) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset are recognized in profit or loss.

• k. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered any impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the smallest group of cash-generating units on a reasonable and consistent basis of allocation.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

l. Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to an acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

1) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

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a) Measurement categories

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost and investments in equity instruments at FVTOCI.

• i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and derivative instruments and fund beneficiary certificates that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 27.

• ii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

• The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, notes receivable at amortized cost, trade receivables, other receivables and refundable deposits, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for:

• Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such a financial asset; and

• Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such a financial asset.

Cash equivalents include time deposits and reverse repurchase agreements collateralized by bonds which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

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iii. Investments in equity instruments at FVTOCI

On initial recognition, the Company may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, they will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

Financial assets are classified into the following categories: Financial assets at FVTPL, available-for-sale financial assets and loans and receivables.

• i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such financial assets are held for trading.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividends or interest earned on the financial asset. Fair value is determined in the manner described in Note 27.

• ii. Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at FVTPL.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets (relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments) are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when such investments are disposed of or are determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established.

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Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets measured at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

iii. Loans and receivables

Loans and receivables (including cash and cash equivalents, notes receivable, trade receivables and other receivables) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalents include time deposits and repurchase agreements collateralized by bonds which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

• b) Impairment of financial assets

2018

The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables) and investments in debt instruments that are measured at FVTOCI.

The Company always recognizes lifetime expected credit losses (i.e. ECLs) for trade receivables. For all other financial instruments, the Company recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

Expected credit losses reflect the weighted average of credit losses with the respective risks of a default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Company recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of the respective financial asset.

2017

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, as a result of one or more events that occurred after the initial recognition of the financial assets, that the estimated future cash flows of the investment have been affected.

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For financial assets measured at amortized cost, such as notes receivable, trade receivables and other receivables, such assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

For financial assets measured at amortized cost, the amount of the impairment loss recognized is the difference between such an asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment (at the date the impairment is reversed) does not exceed what the amortized cost would have been had the impairment not been recognized.

For any available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for those financial assets because of financial difficulties.

When an available-for-sale financial asset is considered to be impaired, cumulative losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income.

For financial assets that are measured at cost, the amount of the impairment loss is measured as the difference between such an asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of a financial asset is reduced by the impairment loss directly for all financial assets, with the exception of notes receivable, trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. When notes receivable, trade receivables and other receivables are considered uncollectable, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectable notes receivable, trade receivables and other receivables that are written off against the allowance account.

• c) Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

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Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2) Financial liabilities

a) Subsequent measurement

Except the derivative instruments, all financial liabilities are measured at amortized cost using the effective interest method.

b) Derecognition of financial liabilities

The difference between the carrying amount of a financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

• 3) Derivative financial instruments

The Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts.

Derivatives are initially recognized at fair value at the date on which the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately. When the fair value of a derivative financial instrument is positive, the derivative is recognized as a financial asset; when the fair value of a derivative financial instrument is negative, the derivative is recognized as a financial liability.

Before 2018, derivatives embedded in non-derivative host contracts were treated as separate derivatives when they met the definition of a derivative; their risks and characteristics were not closely related to those of the host contracts; and the contracts were not measured at FVTPL. Starting from 2018, derivatives embedded in hybrid contracts, which contain financial asset hosts within the scope of IFRS 9, are not separated; instead, the classification is determined in accordance with the entire hybrid contract. Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of IFRS 9 (e.g. financial liabilities) are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.

m. Provisions

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

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• n. Revenue recognition

2018

The Company identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied. The refund liabilities are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

• Revenue from the sale of goods

Revenue from the sale of goods comes from the sale of chlor-alkali products, PVC resins, PVC compounds and other related products. The sale of goods above is recognized as revenue when the goods are delivered to a customer because it is the time when the customer has full discretion over the manner of distribution and the price to sell the goods, has the primary responsibility for sales to future customers and bears the risks of obsolescence. Trade receivables are recognized concurrently.

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar provisions. Allowances for sales returns and liabilities for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

• 1) Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

• a) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

• b) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• c) The amount of revenue can be measured reliably;

• d) It is probable that the economic benefits associated with the transaction will flow to the Company; and

• e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

• 2) Dividend and interest income

Dividend income from investments is recognized when a shareholder’s right to receive payment has been established and provided that it is probable that the economic benefits will flow to the Company and that amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the applicable effective interest rate.

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o. Leasing

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

1) The Company as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

2) The Company as lessee

Operating lease payments are recognized as expenses on a straight-line basis over the lease term.

p. Borrowing costs

Borrowing costs directly attributable to an acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

• q. Employee benefits

• 1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered service entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expenses in the period in which they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Company’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

• r. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

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1) Current tax

According to the Income Tax Law, an additional tax at unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

• 2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profit against which to utilize the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

• 3) Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity, respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company’s accounting policies, management is required to make judgments, estimations and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

• 26 -

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the revisions affect both current and future periods.

Write-down of Inventories

The net realizable value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value is based on current market conditions and historical experience with product sales of a similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value.

Associate’s Estimated Damage Compensation for Kaohsiung Gas Explosions

The Company’s associate, China General Terminal & Distribution Corporation (“CGTD”), recognized a provision caused by the Kaohsiung gas explosions. The management estimated the provision based on the progress of civil/criminal judgements, settlement, and the legal advice. However, the difference between the estimated compensation and the actual amount may exist.

6. CASH AND CASH EQUIVALENTS

Cash on hand and petty cash Checking accounts and demand deposits Time deposits		December 31	December 31
		2018 $ 192 81,428 69,109 $ 150,729	2017 $ 145 74,807 11,904 $ 86,856

The market rate intervals of cash in banks at the end of the reporting period was as follows:

Cash in banks	December 31
	2018 2017 0.001%-2.50% 0.001%-0.28%

7. FINANCIAL INSTRUMENTS AT FVTPL - CURRENT

Financial assets held for trading Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts Non-derivative financial assets Open-end fund beneficiary certificates Closed-end fund beneficiary certificates		December 31	December 31
		2018 $ - - - -	2017 $ 1,450 777,343 190,206 968,999 (Continued)

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Financial assets mandatorily classified as at FVTPL Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts Non-derivative financial assets Open-end fund beneficiary certificates Closed-end fund beneficiary certificates Financial liabilities held for trading Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts			December 31	December 31
		2018 $ 627 195,562 209,207 405,396 $ 405,396 $ -		2017 $ - - - - $ 968,999 $ 508 (Concluded)

At the end of the reporting period, outstanding foreign exchange forward contracts not under hedge accounting were as follows:

					Contract Amount
			Currency	Maturity Date	(In Thousands)
December	31,	2018
Sell			USD/NTD	2019.01.03-2019.03.15	USD12,360/NTD379,620
December	31,	2017
Sell			USD/NTD	2018.01.03-2018.03.30	USD10,830/NTD323,535
			JPY/USD	2018.01.19-2018.01.26	JPY40,000/USD354
			EUR/USD	2018.01.26-2018.02.26	EUR340/USD405
			AUD/USD	2018.01.26-2018.03.23	AUD600/USD461

The Company entered into foreign exchange forward contracts to manage exposures to exchange rate fluctuations of foreign currency denominated assets and liabilities. These contracts did not meet the criteria for hedge accounting. Therefore, the Company did not apply a hedge accounting treatment for these contracts.

8. FINANCIAL ASSETS AT FVTOCI - 2018

Investments in Equity Instruments at FVTOCI

December 31, 2018 Non-current Domestic equity investments Unlisted ordinary shares KHL IB Venture Capital Co., Ltd. $ 121,047

• 28 -

In order to adjust its capital structure, KHL returned part of its capital to shareholders pursuant to the resolution made in the shareholders meeting in June 2018. The return was made by reducing 8.2% of the capital, in aggregation of 12,536 thousand shares (proportionately reducing 82 shares per 1,000 shares) and refunding $820 per 1,000 shares to shareholders. The capital reduction was officially registered on August 16, 2018, and the Company received the capital refund of $7,462 thousand in August 2018.

These investments in equity instruments are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as it believes that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Company’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale financial assets and financial assets measured at cost under IAS 39. Refer to Notes 3 and 9 for information relating to their reclassification and comparative information for 2017.

9. FINANCIAL ASSETS MEASURED AT COST - NON-CURRENT

	December 31,
	2017
Domestic equity investments
KHL IB Venture Capital Co., Ltd. (“KHL”)	$ 91,000

Management believes that the above unlisted equity investments held by the Company have fair values which cannot be reliably measured, because the range of reasonable fair value estimates are so significant. Therefore, they are measured at cost less impairment at the end of each reporting period.

In order to adjust its capital structure, KHL returned part of its capital to shareholders pursuant to the resolution made in the shareholders meeting in June 2017. The return was made by reducing 9% capital, in aggregation to 15,120 thousand shares (proportionately reducing 90 shares per 1,000 shares) and refunding to shareholders at $900 per 1,000 shares. The capital reduction was officially registered on August 15, 2017, and the Company received the capital refund of $9,000 thousand in September 2017.

10. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

Notes receivable Notes receivable-operating Trade receivables At amortized cost Gross carrying amount Less: Allowance for impairment loss Trade receivables from related parties (Note 28)		December 31	December 31
		2018 $ 190,380 $ 843,349 (10,652) $ 832,697 $ 101,570	2017 $ 175,609 $ 703,220 (10,652) $ 692,568 $ 118,613 (Continued)

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Other receivables Tax refund receivables Others Other receivables from related parties (Note 28)		**December 31 **	**December 31 **
		2018 $ 26,615 370 $ 26,985 $ 2,407	2017 $ 24,724 346 $ 25,070 $ 1,979 (Concluded)

a. Trade receivables

2018

The Company’s credit period for the sale of goods ranges from 10 days to 60 days. In order to minimize credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. Before accepting a new customer, the Company surveys the customers’ credit history and measures the potential customer’s credit quality to set a credit limit. A customer’s credit limit and rating are reviewed annually. In addition, the Company reviews the recoverable amount of trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Company’s credit risk was significantly reduced.

The Company applies the simplified approach to the recognition of allowances for expected credit losses during the reporting as prescribed by IFRS 9, which permits the use of a lifetime expected losses allowance for all trade receivables. The expected credit losses on trade receivables are estimated using an allowance matrix by reference to past default experience with the respective debtors and an analysis of the debtors’ current financial positions, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecasted direction of economic conditions at the reporting date.

The Company writes off a trade receivable when there is information indicating that the debtor is experiencing severe financial difficulty and there is no realistic prospect of recovery. For trade receivables that have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivables which are due.

The following table details the loss allowance of trade receivable based on the Company’s allowance matrix.

December 31, 2018

Credit Rating A Credit Rating B Credit Rating C Gross carrying amount $ 9,292 $ 312,448 $ 112,252 Loss allowance (lifetime ECLs) - (3,888) (2,576) Amortized cost $ 9,292 $ 308,560 $ 109,676	Others $ 409,357 (4,188) $ 405,169	Total $ 843,349 (10,652) $ 832,697

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The aging of notes receivable and trade receivables was as follows:

	December 31,
	2018
Not past due	$ 1,118,061
Less than and including 60 days	17,238
Over 60 days	-
	$ 1,135,299

The above aging schedule was based on the number of days past due from the end of credit term.

The movements of the loss allowance of trade receivables were as follows:

	For the Year	For the Year
	Ended
	December	31,
	2018
Balance at January 1, 2018 per IAS 39	$ 10,652
Adjustment on initial application of IFRS 9		-
Balance at January 1, 2018 per IFRS 9	10,652
Add: Net remeasurement of loss allowance		-
Less: Amounts written off		-
Foreign exchange gains and losses		-
Balance at December 31, 2018	$ 10,652
2017

The Company applied the same credit policy in 2018 and 2017.

For the balance of trade receivables that were past due at the end of the reporting period, the Company did not recognize an allowance for impairment loss, because there was no significant change in credit quality and the Company’s management still considered such receivables to be recoverable. For part of the trade receivables, the Company entered into credit insurance contracts to enhance its guarantee. Therefore, the Company considered the recoverable amount of the insurance contracts when determining the amount of allowance for impairment loss. In addition, the Company did not have the legal right to offset any amounts owed by the Company against those payables to the respective counterparties.

The aging of notes receivable and trade receivables was as follows:

	December 31,
	2017
Not past due	$ 982,488
Less than and including 60 days	14,148
Over 60 days	806
	$ 997,442

The above aging schedule was based on the number of past due days from the end of the credit term.

• 31 -

The aging of trade receivables that were past due but not impaired was as follows:

		December 31,
		2017
Less	than and including 60 days	$ 14,148
Over	60 days	806
		$ 14,954

The above aging schedule was based on the number of past due days from the end of the credit term.

The movements of the allowance for doubtful notes receivable and trade receivables were as follows:

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2017 $ - $ 10,652 Less: Amounts written off during the period - - Foreign exchange translation gains or losses - - Balance at December 31, 2017 $ - $ 10,652	Total $ 10,652 - - $ 10,652

b. Other receivables

As of December 31, 2018, the Company assessed the impairment loss of other receivables using expected credit losses. There were no other receivables which were past due and for which there was an unrecognized allowance for the respective doubtful accounts as of December 31, 2017.

11. INVENTORIES

Finished goods Work in progress Raw materials		**December 31 **	**December 31 **
		2018 $ 491,471 45,025 284,325 $ 820,821	2017 $ 354,113 39,207 288,465 $ 681,785

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017, was $7,184,172 thousand and $6,936,238 thousand, respectively.

The cost of goods sold included inventory write-downs of $866 thousand and $2,192 thousand for the years ended December 31, 2018 and 2017, respectively.

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12. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in subsidiaries Investments in associates		December 31	December 31
		2018 $ 4,656,193 253,998 $ 4,910,191	2017 $ 4,106,640 298,744 $ 4,405,384

a. Investments in subsidiaries

Unlisted company Taiwan VCM Corporation (“TVCM”) CGPC Polymer Corporation (“CGPCPOL”) CGPC (BVI) Holding Co., Ltd. (“CGPC (BVI)”) CGPC America Corporation (“CGPC America”) Krystal Star International Corporation (“Krystal Star”)		December 31	December 31
		2018 $ 2,919,181 1,103,222 353,757 203,543 76,490 $ 4,656,193	2017 $ 2,642,545 845,548 347,575 198,483 72,489 $ 4,106,640

At the end of the reporting periods, the percentage of ownership and voting rights held by the Company in the subsidiaries were as follows:

Name of Subsidiaries TVCM CGPCPOL CGPC (BVI) CGPC America Krystal Star	**December 31 **
	2018 2017 87.22% 87.22% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

On May 23, 2018 and May 22, 2017, the board of directors of CGPCPOL, on behalf of the shareholders, resolved to increase its capital by declaring a share dividend of $223,810 thousand and $243,465 thousand, representing 22,381 thousand shares and 24,347 thousand shares, respectively. The record date of the capital increase was July 6, 2018 and July 7, 2017, respectively.

On April 23, 2018 and May 4, 2017, the TVCM shareholders in their meeting passed a resolution to increase TVCM’s capital by declaring a share dividend of $112,476 thousand and $107,120 thousand, representing 11,248 thousand shares and 10,712 thousand shares, respectively. The record date of the capital increase was July 6, 2018 and July 7, 2017, respectively.

As of December 31, 2018, CGPC (BVI) remitted a total amount of US$33,606 thousand to invest mainly in Teratech Corporation, SOHOware, Inc., Continental General Plastics (Zhong Shan) Co., Ltd. (“CGPC (ZS)”) and CGPC Consumer Products Corporation (“CGPC (CP)”). The board of directors of the Company resolved to dissolve CGPC (ZS) and CGPC (CP) in October 2011. As of December 31, 2018, the dissolution procedures have not yet been completed.

The investment accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2018 and 2017 were based on the subsidiaries’ financial statements which have been audited for the same years.

• 33 -

b. Investments in associates

• 1) Associates that are not individually material

Listed company Acme Electronics Corporation (“ACME”) Unlisted company China General Terminal & Distribution Corporation (“CGTD”) Thintec Materials Corporation (“TMC”)		**December 31 **	**December 31 **
		2018 $ 24,296 228,250 1,452 $ 253,998	2017 $ 23,731 272,509 2,504 $ 298,744

• 2) Aggregate information of associates that are not individually material

The Company’s share of: Gain (loss) from continuing operations Other comprehensive income (loss) Total comprehensive income (loss) for the year	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ (25,315) (19,431) $ (44,746)	2017 $ 15,898 11,492 $ 27,390

At the end of the reporting periods, the percentage of ownership and voting rights held by the Company in the associates were as follows:

Name of Associates ACME CGTD TMC	**December 31 **
	2018 2017 1.74% 1.74% 33.33% 33.33% 10.00% 10.00%

The Company with its affiliates jointly held more than 20% of the shareholdings of ACME and TMC and had significant influence over each entity. Therefore, the Company adopted the equity method to evaluate the above investments.

Fair values (Level 1) of investments in associates with available published price quotations are summarized as follows:

Name of Associate ACME		**December **	**31 **
		2018 $ 42,241	2017 $ 58,439

All associates are accounted for using the equity method.

The investments accounted for using the equity method and the share of profit or loss and other comprehensive income or loss of those investments for the years ended December 31, 2018 and 2017 were based on the associates’ financial statements which have been audited for the same years.

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13. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Reclassification Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Depreciation expenses Disposals Impairment losses reversed Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Disposals Reclassification Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Depreciation expenses Disposals Balance at December 31, 2018 Carrying amounts at December 31, 2018	Freehold Land Buildings and Improvements Machinery and Equipment Transportation Equipment $ 1,629,671 $ 735,204 $ 4,489,273 $ 48,423 - - - - - (1,618 ) (62,927 ) (1,546 ) 14,511 212,949 266,218 6,752 $ 1,644,182 $ 946,535 $ 4,692,564 $ 53,629 $ - $ 587,636 $ 4,070,236 $ 35,180 - 28,447 107,147 4,389 - (1,532 ) (62,756 ) (1,545 ) - - (951) - $ - $ 614,551 $ 4,113,676 $ 38,024 $ 1,644,182 $ 331,984 $ 578,888 $ 15,605 $ 1,644,182 $ 946,535 $ 4,692,564 $ 53,629 - - - - - (7,572 ) (61,445 ) (2,281 ) - 22,362 310,523 4,602 $ 1,644,182 $ 961,325 $ 4,941,642 $ 55,950 $ - $ 614,551 $ 4,113,676 $ 38,024 - 32,498 130,051 4,817 - (7,190) (61,218) (2,280) $ - $ 639,859 $ 4,182,509 $ 40,561 $ 1,644,182 $ 321,466 $ 759,133 $ 15,389	Miscellaneous Equipment C $ 171,965 - (5,209 ) 3,267 $ 170,023 $ 161,091 4,487 (5,208 ) - $ 160,370 $ 9,653 $ 170,023 - (2,847 ) 3,197 $ 170,373 $ 160,370 3,849 (2,701) $ 161,518 $ 8,855	onstruction in Progress and Machinery in Transit $ 314,603 638,642 - (618,733) $ 334,512 $ - - - - $ - $ 334,512 $ 334,512 303,570 - (340,684) $ 297,398 $ - - - $ - $ 297,398	Total $ 7,389,139 638,642 (71,300 ) (115,036) $ 7,841,445 $ 4,854,143 144,470 (71,041 ) (951) $ 4,926,621 $ 2,914,824 $ 7,841,445 303,570 (74,145 ) - $ 8,070,870 $ 4,926,621 171,215 (73,389) $ 5,024,447 $ 3,046,423

In order to expand storage capacity, the board of directors of the Company passed a resolution on February 22, 2017 to acquire the plant and electricity equipment attached to the plant located in Toufen at $290,000 thousand from its land lessee, USI Optronics Corporation (“USIO”). The title of the plant purchased by the Company was transferred in June 2017. Some of the facilities were then leased to USIO, with the rest used as storage.

The above items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings and improvements
Dormitories, restaurants and office buildings	26 to 60 years
Cell room and improvements	5 to 21 years
General plants and improvements	3 to 45 years
Machinery and equipment
Chemical industry equipment	5 to 8 years
Machinery manufacturing equipment	5 to 8 years
Electrical equipment and tanks	10 to 26 years
Other equipment	2 to 15 years
	(Continued)

• 35 -

Transportation equipment
Cars	2 to 7 years
Forklifts	5 to 7 years
Other vehicles	2 to 15 years
Other equipment	2 to 10 years
Miscellaneous equipment
General office computers	2 to 5 years
Industrial computers	3 to 15 years
Other miscellaneous equipment	3 to 21 years
	(Concluded)

The Company set out the property, plant and equipment pledged as collateral for bank borrowings in Note 29.

14. INVESTMENT PROPERTIES

Cost Balance at January 1, 2017 Reclassification from properties, plant and equipment Reclassification to properties, plant and equipment Balance at December 31,2017 Accumulated depreciation Balance at January 1, 2017 Depreciation expense Balance at December 31,2017 Carrying amount at December 31, 2017 Cost Balance at January 1 and December 31, 2018 Accumulated depreciation Balance at January 1, 2018 Depreciation expense Balance at December 31,2018 Carrying amount at December 31, 2018	Land Building and improvements $ 27,715 $ - - 142,751 (14,511) (13,204) $ 13,204 $ 129,547 $ - $ - - 2,491 $ - $ 2,491 $ 13,204 $ 127,056 $ 13,204 $ 129,547 $ - $ 2,491 - 4,983 $ - $ 7,474 $ 13,204 $ 122,073	Total $ 27,715 142,751 (27,715) $ 142,751 $ - 2,491 $ 2,491 $ 140,260 $ 142,751 $ 2,491 4,983 $ 7,474 $ 135,277

• 36 -

The Company’s investment properties are located in Toufen Industrial District. Due to the characteristics of the district, the market for comparable properties is inactive and alternative reliable measurements of fair value were not available. Therefore, the Company determined that the fair value of its investment properties is not reliably measurable. The Company entered into a mutual lease agreement with USIO after the Company acquired the plant located at Toufen and its attached equipment in June 2017.

As the Company leased portion of the facilities acquired from USIO, the leased facilities were reclassified as investment property in proportion to the acres leased.

Regarding the lease on the land in Toufen Industrial District between the Company and USIO, refer to Note 25 for the related disclosures.

15. INTANGIBLE ASSETS

Cost Balance at January 1 Additions Disposals Balance at December 31 Accumulated amortization Balance at January 1 Amortization expenses Disposals Balance at December 31 Carrying amounts at December 31	Computer Software	Computer Software	Computer Software
	For the Year Ended December 31
		2018 $ 15,123 275 (5,488) 9,910 10,945 2,813 (5,488) 8,270 $ 1,640	2017 $ 14,963 160 - 15,123 7,056 3,889 - 10,945 $ 4,178

Intangible assets were amortized on a straight-line basis over their estimated useful lives of 3 years.

16. NOTES PAYABLE AND TRADE PAYABLES

Notes payable Operating Trade payables (including related parties) Operating		**December 31 **	**December 31 **
		2018 $ 288 $ 1,003,850	2017 $ 183 $ 922,816

The average payment period of trade payables was 2 months. The Company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

• 37 -

17. OTHER PAYABLES

Payables for salaries or bonuses Payables for purchases of equipment Payables for utilities Payables for freight Others		December 31	December 31
		2018 $ 219,020 44,868 34,567 33,136 62,948 $ 394,539	2017 $ 227,287 20,085 32,258 27,998 32,878 $ 340,506

18. PROVISIONS-CURRENT

Provision for customer returns and rebates		December	31
		2018 $ -	2017 $ 27,849

For contracts with customers in 2017, the provision for customer returns and rebates was based on historical experience, management’s judgments and other known reasons for which estimated product returns and rebates may occur in the year. The provision was recognized as a reduction of operating income in the periods of the sales of the related goods. Starting from January 1, 2018, the Company applied IFRS 15 and recognized estimated sales returns and rebates as refund liabilities (presented in other current liabilities).

19. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

b. Defined benefit plans

The defined benefit plans adopted by the Company in accordance with the Labor Standards Law is operated by the government of the ROC. Pension benefits are calculated on the basis of the length of service and average monthly salaries of a specific period before retirement. The Company contribute amounts equal to 9% (the percentage increased to 10% since February 2017) of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Company has no right to influence the investment policy and strategy.

• 38 -

The amounts included in the balance sheets in respect of the Company’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities		December 31	December 31
		2018 $ 1,337,890 (710,455) $ 627,435	2017 $ 1,355,238 (492,108) $ 863,130

Movements in net defined benefit liabilities (assets) were as follows:

Present Value of the Defined Benefit Obligation Fair Value of the Plan Assets Balance at January 1, 2017 $ 1,376,635 $ (160,264) Service cost Current service cost 14,996 - Net interest expense (income) 15,234 (1,841) Recognized in profit or loss 30,230 (1,841) Remeasurement Return on plan assets (excluding amounts included in net interest) - (1,062) Actuarial loss - changes in demographic assumptions 26 - Actuarial loss - changes in financial assumptions 28,515 - Actuarial gain - experience adjustments (24,180) - Recognized in other comprehensive income 4,361 (1,062) Contributions from the employer - (384,929) Benefits paid (55,988) 55,988 Balance at December 31, 2017 1,355,238 (492,108) Service cost Current service cost 12,521 - Net interest expense (income) 14,977 (6,656) Recognized in profit or loss 27,498 (6,656) Remeasurement Return on plan assets (excluding amounts included in net interest) - (10,330) Actuarial loss - changes in financial assumptions 27,133 - Actuarial gain - experience adjustments (20,515) - Recognized in other comprehensive income 6,618 (10,330) Contributions from the employer - (252,825) Benefits paid (51,464) 51,464 Balance at December 31, 2018 $ 1,337,890 $ (710,455)

Net Defined Benefit Liabilities (Assets) $ 1,216,371 14,996 13,393 28,389 (1,062) 26 28,515 (24,180) 3,299 (384,929) - 863,130 12,521 8,321 20,842 (10,330) 27,133 (20,515) (3,712) (252,825) - $ 627,435

• 39 -

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans is as follows:

Operating costs Selling and marketing expenses General and administrative expenses Research and development expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 16,481 2,017 1,551 793 $ 20,842	2017 $ 22,509 2,694 2,184 1,002 $ 28,389

The Company accumulated net losses after taxes of the remeasurement of the defined benefit plans in other comprehensive loss, which were $115,000 thousand and $126,490 thousand as of December 31, 2018 and 2017, respectively.

Through the defined benefit plans under the Labor Standards Law, the Company is exposed to the following risks:

• 1) Investment risk: The plan assets are invested in domestic or foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate of a 2-year time deposit with local banks.

• 2) Interest risk: A decrease in government and corporate bond interest rates will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plans’ debt investments.

• 3) Salary risk: The present value of the defined benefit obligation is calculated with reference to the future salaries of plan participants. As such, an increase in the salaries of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate Expected rate of salary increase	December 31
	2018 2017 0.875% 1.125% 2.500% 2.500%

If possible reasonable changes in each of the significant actuarial assumptions were to occur and all other assumptions were to remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rates 0.25% increase 0.25% decrease Expected rates of salary increase 0.25% increase 0.25% decrease		**December **	**31 **
		2018 $ (27,133) $ 28,017 $ 27,084 $ (26,370)	2017 $ (29,269) $ 30,255 $ 29,318 $ (28,515)

• 40 -

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that changes in the assumptions would occur in isolation of one another as some of the assumptions may be correlated.

The Company expects to make contributions of $60,437 thousand to the defined benefit plans in the next year starting from January 1, 2019. The weighted average duration of defined benefit obligation is 8.4 years.

20. EQUITY

a. Ordinary shares

Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31
		2018 650,000 $ 6,500,000 506,760 $ 5,067,596	2017 500,000 $ 5,000,000 492,000 $ 4,919,996

The holders of issued ordinary shares with a par value of $10 are entitled to the right to vote and to receive dividends.

b. Capital surplus

The capital surplus generated from donations and the excess of the issuance price over the par value of share capital (including the shares issued from new capital) may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or share dividends up to a certain percentage of the Company’s paid-in capital.

The capital surplus arising from investments accounted for using the equity method may not be used for any purpose.

c. Retained earnings and dividends policy

Under the dividends policy as set forth in the Company’s Articles of Incorporation, where the Company made a net income in a fiscal year, the profit shall be used first for offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. The industry that the Company operates in is in the maturity stage. Consequently, in order to take R&D needs and diversification into consideration, shareholders’ dividends shall not be less than 10% of the distributable earnings in the current year, of which the cash dividends shall not be less than 10% of the total dividends. However, if the distributable earnings of the year is less than $0.1 per share, it shall not be distributed. For the policies on the distribution of employees’ compensation and remuneration of directors after amendment, refer to “Employees’ compensation and remuneration of directors” in Note 22-e.

The appropriation of earnings to the legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. The legal reserve may be used to offset deficits. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

• 41 -

Items referred to under Rule No. 1010012865, Rule No. 1010047490 and Rule No. 1030006415 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Company.

The appropriations of earnings for 2017 and 2016 approved in the shareholders’ meetings on June 22, 2018 and June 8, 2017, respectively, were as follows:

Legal reserve Cash dividends Share dividends	Appropriation of Earnings For the Year Ended December 31 2017 2016 $ 126,981 $ 144,312 737,999 812,038 147,600 143,301	Dividends Per Share (NT$)
		For the Year Ended December 31
		2017 2016 $1.5 $1.7 0.3 0.3

The appropriation of earnings for 2018 was proposed by the Company’s board of directors on March 6, 2019. The appropriation and dividends per share were as follows:

	Appropriation	Dividends Per
	of Earnings	Share (NT$)
Legal reserve	$ 127,616
Cash dividends	760,139	$1.5
Share dividends	202,704	0.4

The appropriation of earnings for 2018 are subject to resolution in the shareholders’ meeting to be held on June 21, 2019.

d. Special reserve

The Company appropriated a special reserve in the amount of $408,223 thousand after offsetting a deficit of $428,727 thousand, which was from the net increase of retained earnings arising from the initial adoption of IFRSs. As of December 31, 2018, there was no change.

e. Other equity items

• 1) Exchange differences on translating the financial statements of foreign operations

Balance at January 1 Effect of change in tax rate Recognized for the year Exchange differences on translating the financial statements of foreign operations Related income tax Share of exchange differences of associates accounted for using the equity method Balance at December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ (19,583) (2,020) 7,723 (1,545) (400) $ (15,825)	2017 $ 12,612 - (38,607) 6,563 (151) $ (19,583)

• 42 -

• 2) Unrealized gain (loss) on available-for-sale financial assets

	For	the Year
	Ended 2017
Balance at January 1, 2017	$	28,526
Recognized for the year
Unrealized gain on revaluation of available-for-sale financial assets		832
Share of profit of associates accounted for using the equity method		11,884
Reclassification adjustments
Net (gain)/loss on disposal of available-for-sale financial assets		(892)
Balance at December 31, 2017	$	40,350
Balance at January 1 per IAS 39	$	40,350
Adjustment on initial application of IFRS 9		(40,350)
Balance at January 1 per IFRS 9	$	-

3) Unrealized gain (loss) on financial assets at FVTOCI s

	For the Year	For the Year
		Ended
	December 31,
		2018
Balance at January 1 per IAS 39	$	-
Adjustment on initial application of IFRS 9		56,912
Balance at January 1 per IFRS 9		56,912
Recognized during the period
Unrealized gain on equity instruments		20,947
Share of loss of subsidiaries and associates accounted for using the equity
method		(20,017)
Other comprehensive income for this year		930
Balance at December 31	$	57,842

21. REVENUE

Revenue from sale of goods PVC products	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 8,248,176	2017 $ 8,110,347

Refer to Schedule 8 for information related to revenue from sale of goods.

• 43 -

22. NET PROFIT FROM CONTINUING OPERATIONS

a. Other income

Interest income Bank deposits Financial assets at FTVPL Others Rental income Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 481 5,981 208 6,670 12,480 8,668 $ 27,818	2017 $ 573 5,941 93 6,607 10,333 7,388 $ 24,328

b. Other gains and losses

Gain on disposal of property, plant and equipment Gross foreign exchange gains Gross foreign exchange losses Loss on financial assets held for trading (see Note 7) Loss on financial liabilities held for trading (see Note 7) Gain on financial assets mandatorily classified as at FVTPL (see Note 7) Depreciation expense of investment properties Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,384 38,698 (20,347) - (17,269) 28,388 (4,983) (7,859) $ 18,012	2017 $ 1,427 13,972 (55,755) (8,399) (3,391) - (2,491) (1,573) $ (56,210)

c. Depreciation and amortization

Property, plant and equipment Investment properties Intangible assets An analysis of depreciation by function Operating costs Operating expenses Non-operating expenses An analysis of amortization by function General and administrative expenses	For the Year Ended	For the Year Ended	December 31
		2018 $ 171,215 4,983 2,813 $ 179,011 $ 168,717 2,498 4,983 $ 176,198 $ 2,813	2017 $ 144,470 2,491 3,889 $ 150,850 $ 141,696 2,774 2,491 $ 146,961 $ 3,889

• 44 -

d. Employee benefits expense

Post-employment benefits Defined contribution plans Defined benefit plans (see Note 19) Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended	For the Year Ended	December 31
		2018 $ 14,897 20,842 35,739 872,462 $ 908,201 $ 732,446 175,755 $ 908,201	2017 $ 13,990 28,389 42,379 879,817 $ 922,196 $ 739,629 182,567 $ 922,196

Refer to Schedule 12 for information related to employee benefits expense.

• e. Employees’ compensation and remuneration of directors

The Company accrued employees’ compensation and remuneration of directors at rates of no less than 1% and no higher than 1%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors. The employees’ compensation and remuneration of directors for the years ended December 31, 2018 and 2017, which have been approved by the Company’s board of directors on March 6, 2019 and March 12, 2018, respectively, were as follows:

Accrual rate

Employees’ compensation Remuneration of directors Amount Employees’ compensation	**For the Year Ended December 31 **
	2018 2017 1% 1% - - For the Year Ended December 31
	2018 2017 $ 13,975 $ 14,300

If there is a change in the amounts after the annual financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate.

There was no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the financial statements for the years ended December 31, 2017 and 2016.

Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

• 45 -

23. INCOME TAXES RELATING TO CONTINUING OPERATIONS

a. Major components of income tax expense recognized in profit or loss

For the Year Ended December 31 2018 2017 Current tax In respect of the current year $ 69,726 $ 61,771 Income tax on unappropriated earnings 25,067 28,159 Adjustments for prior years (573) 931 94,220 90,861 Deferred tax In respect of the current year 48,769 56,170 Effect of different tax rates 3,564 910 Unrecognized deductible temporary differences (670) (1,229) Adjustments for prior years 671 (825) Adjustments to deferred tax attributable to changes in tax rates and laws (39,138) - 13,196 55,026 Income tax expense recognized in profit or loss $ 107,416 $ 145,887 A reconciliation of accounting profit and income tax expense is as follows: For the Year Ended December 31 2018 2017 Profit before tax from continuing operations $ 1,383,572 $ 1,415,695 Income tax expense calculated at the statutory rate $ 276,714 $ 240,668 Domestic investment gains accounted for using the equity method (153,666) (126,094) Others (4,553) 3,367 Income tax on unappropriated earnings 25,067 28,159 Unrecognized deductible temporary differences (670) (1,229) Effect of different tax rates 3,564 910 Adjustments to deferred tax attributable to changes in tax rates and laws (39,138) - Adjustments for prior years’ tax 98 106 Income tax expense recognized in profit or loss $ 107,416 $ 145,887	**For the Year Ended **	**For the Year Ended **	**For the Year Ended **	December 31
				2017 $ 61,771 28,159 931 90,861 56,170 910 (1,229) (825) - 55,026 $ 145,887 December 31
		2018 $ 1,383,572 $ 276,714 (153,666) (4,553) 25,067 (670) 3,564 (39,138) 98 $ 107,416	2017 $ 1,415,695 $ 240,668 (126,094) 3,367 28,159 (1,229) 910 - 106 $ 145,887

In 2017, the applicable corporate income tax rate used by the Company in the ROC is 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings will be reduced from 10% to 5%.

As the status of the 2019 appropriation of earnings is uncertain, the potential income tax consequences of the 2018 unappropriated earnings are not reliably determinable.

• 46 -

b. Income tax recognized in other comprehensive income

Deferred tax Adjustments to deferred tax attributable to changes in tax rates and law In respect of the current year Translation of foreign operations Remeasurement on defined benefit plans Income tax recognized in other comprehensive income	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 6,500 (1,545) (742) (2.287) $ 4,213	2017 $ - 6,563 561 7,124 $ 7,124

c. Current tax liabilities

Current tax liabilities
Current tax liabilities Income tax payable		December	31
		2018 $ 63,552	2017 $ 88,007

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2018

Deferred tax assets Temporary differences Allowance for inventory valuation Share of profit of subsidiaries and associates accounted for using the equity method Unrealized losses on property, plant and equipment Deferred revenue Provisions Refund liabilities Defined benefit plans Payables for annual leave Unrealized foreign exchange losses Others	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehensive Income Closing Balance $ 7,173 $ 1,439 $ - $ 8,612 78,351 16,644 (3,565) 91,430 188 (157) - 31 15,578 (2,444) - 13,134 4,898 (4,898) - - - 4,666 - 4,666 145,157 $ (29,300) 7,778 $ 123,635 5,644 943 - 6,587 532 (196) - 336 2,775 (117) - 2,658 $ 260,296 $ (13,420) $ 4,213 $ 251,089

(Continued)

• 47 -

					Recognized in	Recognized in	Recognized in
						Other
	Opening		Recognized in		Comprehensive
	Balance		Profit or Loss			Income		Closing Balance
Deferred tax liabilities
Temporary differences
Differences on
depreciation period
between finance and
tax	$	1,517	$	(189)	$		-	$	1,328
FVTPL financial assets		160		(35)			-		125
Revaluation increments
of land		483,213		-			-		483,213
	$	484,890	$	(224)	$		-	$	484,666
									(Concluded)
For the year ended December	31,	2017
					Recognized in
						Other
	Opening		Recognized in		Comprehensive
	Balance		Profit or Loss			Income		Closing Balance
Deferred tax assets
Temporary differences
Allowance for
inventory valuation	$	6,801	$	372	$		-	$	7,173
Share of profit of
subsidiaries and
associates accounted
for using the equity
method		71,480		308		6,563			78,351
Unrealized losses on
property, plant and
equipment		510		(322)			-		188
Deferred revenue		17,679		(2,101)			-		15,578
FVTPL financial assets		453		(453)			-		-
Provisions		2,990		1,908			-		4,898
Defined benefit plans		205,208		(60,612)		561			145,157
Payables for annual
leave		4,616		1,028			-		5,644
Unrealized foreign
exchange losses		-		532			-		532
Others		322		2,453			-		2,775
	$	310,059	$	(56,887)	$	7,124		$	260,296
									(Continued)

• 48 -

Deferred tax liabilities Temporary differences Unrealized foreign exchange gains Differences on depreciation period between finance and tax FVTPL financial assets Revaluation increments of land	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehensive Income Closing Balance $ 1,230 $ (1,230) $ - $ - 2,308 (791) - 1,517 - 160 - 160 483,213 - - 483,213 $ 486,751 $ (1,861) $ - $ 484,890 (Concluded)

• e. Deductible temporary differences for which no deferred tax assets have been recognized in the balance sheets

As of December 31, 2018 and 2017, the deductible temporary differences for which no deferred tax assets have been recognized in the Company’s balance sheets were respectively $215,617 thousand and $218,969 thousand.

f. Income tax assessments

The income tax returns of the Company through 2016 have been assessed by the tax authorities.

24. EARNINGS PER SHARE

Basic earnings per share Diluted earnings per share	**For **	Unit: NT$ Per Share the Year Ended December 31	Unit: NT$ Per Share the Year Ended December 31
		2018 $ 2.52 $ 2.51	2017 $ 2.51 $ 2.50

• 49 -

The weighted average number of shares outstanding used for the earnings per share computation was adjusted retroactively for the issuance of bonus shares on August 3, 2018. The basic and diluted earnings per share adjusted retrospectively for the year ended December 31, 2017 were as follows:

	Unit:	NT$ Per Share
	Before	After
	Retrospective	Retrospective
	Adjustment	Adjustment
Basic and diluted earnings per share	$ 2.58	$ 2.51
Diluted earnings per share	$ 2.58	$ 2.50

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

Net Profit for the Year

For the Year Ended December 31 2018 2017 Earnings used in the computation of basic and diluted earnings per share $ 1,276,156 $ 1,269,808 Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares) For the Year Ended December 31 2018 2017 Weighted average number of ordinary shares used in computation of basic earnings per share 506,760 506,760 Effect of potentially dilutive ordinary shares: Employees’ compensation 724 568 Weighted average number of ordinary shares used in the computation of diluted earnings per share 507,484 507,328	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 506,760 724 507,484	2017 506,760 568 507,328

If the Company offered to settle compensation paid to employees in cash or shares, the Company assumed the entire amount of the compensation would be settled in shares, and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

25. OPERATING LEASE AGREEMENTS

The Company’s board of directors passed a resolution to pledge the right of superficies for the land leased to USIO as collateral in order to assist USIO to make borrowings from Chang Hwa Commercial Bank, Nankang Science Industrial Park Branch (“CHCB”) in March 2012. The Company also promised CHCB that the Company shall not transfer or concede the land nor set the land as a trust asset to others. Additionally, the Company shall not provide a creation of mortgage, a lien or other rights of securities to other creditors, and the Company shall not terminate the lease contract. The Company leased the land in Toufen to USIO with a lease term from October 1, 2010 to June 30, 2027. USIO does not have a bargain purchase option to acquire the leased land at the expiry of the lease period.

• 50 -

The Company acquired the plant and some electricity equipment located on the leased land from USIO in June 2017, and also agreed to terminate the lease contract. In the meantime, USIO canceled the right of superficies and the creation of mortgage mentioned above. The two parties entered into a new lease wherein the Company leased part of the plant to USIO with a lease term from June 16, 2017 to June 15, 2018. After the lease contract expired, it was resigned with a new lease term from June 16, 2018 to June 15, 2020. USIO does not have a bargain purchase option to acquire the leased factory at the expiry of the lease period.

26. CAPITAL MANAGEMENT

The Company manages its capital to ensure that it will be able to continue as going concerns while maximizing the return to shareholders through the optimization of the debt and equity balance.

27. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments not measured at fair value

The management of the Company believes the carrying amounts of financial assets and financial liabilities recognized in the financial statements approximate their fair value or their fair value cannot be reliably measured.

• b. Fair value of financial instruments measured at fair value on a recurring basis

• 1) Fair value hierarchy

December 31, 2018

Financial assets at FVTPL Derivative financial assets Fund beneficiary certificates Financial assets at FVTOCI Investments in equity instruments Domestic unlisted equity investments	Level 1 $ - 404,769 $ 404,769 $ -	Level 2 $ 627 - $ 627 $ -	Level 3 $ - - $ - $ 121,047	Total $ 627 404,769
				$ 405,396
				$ 121,047

• 51 -

December 31, 2017

Financial assets at FVTPL Derivative financial assets Non-derivative financial assets held for trading Financial liabilities at FVTPL Derivatives financial liabilities	Level 1 $ - 967,549 $ 967,549 $ -	Level 2 $ 1,450 - $ 1,450 $ 508	Level 3 $ - - $ - $ -	Total $ 1,450 967,549
				$ 968,999
				$ 508

There were no transfers between Levels 1 and 2 for the years ended December 31, 2018 and 2017.

• 2) Reconciliation of Level 3 fair value measurements of financial instruments

For the year ended December 31, 2018

	Financial Assets
Financial Assets	at FVTOCI
Balance at January 1, 2018	$ 107,562
Recognized in other comprehensive income (included in unrealized gain on
financial assets at FVTOCI)	20,947
Return of capital	(7,462)
Balance at December 31, 2018	$ 121,047

• 3) Valuation techniques and inputs applied for Level 2 fair value measurement

Financial Instruments Valuation Techniques and Inputs

Derivatives - foreign exchange Discounted cash flow: forward contracts

Future cash flows are estimated based on observable forward exchange rates at the end of the reporting period and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.

• 4) Valuation techniques and inputs applied for Level 3 fair value measurement

To determine the fair value for Level 3 financial instruments, the Company’s financial department conducts independent fair value verification using independent resources so as to better reflect the market conditions, as well as periodically reviewing the valuation results in order to guarantee the rationality of the measurement. For unlisted domestic equity investments, the Company utilizes the asset approach and takes into account the most recent net asset value, observable financial status as well as the financing activities of investees in order to determine their net asset value. The unobservable input used was a discount for the lack of marketability of 15% on December 31, 2018. When other inputs remain unchanged, the fair value will decrease by $1,424 thousand if the discount for lack of marketability increases by 1%.

• 52 -

c. Categories of financial instruments

Financial assets Financial assets at FVTPL Mandatorily classified at FVTPL Held for trading Loans and receivables Cash and cash equivalents Notes receivable Trade receivables (including related parties) Other receivables (including related parties and excluding tax refund receivable) Refundable deposits Available-for-sale financial assets (including financial assets measured at cost) Financial assets at amortized cost Cash and cash equivalents Notes receivable Trade receivables (including related parties) Other receivables (including related parties and excluding tax refund receivable) Refundable deposits Financial assets at FVTOCI Equity instruments Financial liabilities Financial liabilities at FVTPL Held for trading Financial liabilities measured at amortized cost Notes payable Trade payables (including related parties) Other payables (including related parties) Guarantee deposits

December 31

2018 2017 $ 405,396 $ - - 968,999 - 86,856 - 175,609 - 811,181 - 2,325 - 2,454 - 91,000 150,729 - 190,380 - 934,267 - 2,777 - 2,454 - 121,047 - - 508 288 183 1,003,850 922,816 398,701 342,302 2,688 2,041

• d. Financial risk management objectives and policies

The Company’s conduct of risk controlling and hedging strategy is influenced by the operational environment. The Company monitors and manages the financial risk by business nature and risk dispersion.

These risks include market risk (including foreign currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

1) Market risk

The Company’s operating activities exposed itself primarily to the market risks of changes in foreign currency exchange rates and interest rates.

There has been no change to the Company’s exposure to market risks or the manner in which these risks were managed and measured.

• 53 -

a) Foreign currency risk

The Company conducted foreign currency sales and purchases, which exposed the Company to foreign currency risk. In order to avoid the impact of foreign currency exchange rate changes, which lead to deductions in foreign currency denominated assets and fluctuations in their future cash flows, the Company maintains a balance of hedged net foreign currency denominated assets and liabilities. The Company also utilizes foreign exchange forward contracts to hedge the currency exposure. The use of foreign exchange forward contracts is regulated by the policies passed by the Company’s board of directors. Internal auditors focus on reviewing the observance of the policies and the quota of risk exposures. The foreign exchange forward contracts that the Company engaged in were not for speculation purposes.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are set out in Note 31.

Sensitivity analysis

The Company’s sensitivity analysis mainly focuses on the foreign currency risk of U.S. dollars at the end of the reporting period. Assuming a 3% strengthening/weakening of the functional currency against U.S. dollars, the net income before tax for the years ended December 31, 2018 and 2017 would have decreased/increased by $21,236 thousand and $13,205 thousand, respectively.

In management’s opinion, the sensitivity analysis was unrepresentative of the inherent foreign currency risk because the exposure at the end of the reporting period did not reflect the exposure during the period.

b) Interest rate risk

The Company was exposed to the fair value risk of interest rate fluctuations for the fixed interest rate bearing financial assets; the Company was exposed to the cash flow risk of interest rate fluctuations for the floating interest rate bearing financial assets. The Company’s management regularly monitors the fluctuations on market rates and then adjusted its balance of floating rate bearing financial liabilities to make the Company’s interest rates more closely approach market rates in response to the interest rate risk.

The carrying amount of the Company’s financial assets with exposure to interest rates at the end of the reporting period were as follows:

Fair value interest rate risk Financial assets Cash flow interest rate risk Financial assets Sensitivity analysis	December 31
	2018 2017 $ 71,263 $ 14,058 65,649 59,394

The fixed-rate financial assets held by the Company are not included in the analysis as they are all measured at amortized cost. For floating rate assets, the analysis was prepared assuming that the amount of the assets and liabilities outstanding at the end of the reporting period was outstanding for the whole year. A 50 point fluctuation in interest rate was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

• 54 -

If interest rates had been 50 points higher/lower and all other variables were held constant, the Company’s pre-tax profit for the years ended December 31, 2018 and 2017 would have increased/decreased by $328 thousand and $297 thousand, respectively.

c) Other price risk

The Company was exposed to equity price risk through its investments in domestic listed shares, mutual fund beneficiary certificates and other equity securities investments. The Company manages this exposure by maintaining a portfolio of investments with different risks. In addition, the Company has appointed a special team to monitor price risk.

Sensitivity analysis

The sensitivity analysis below was determined based on the exposure to equity price risk at the end of the reporting period.

If marketable equity securities prices had fluctuated by 5%, the pre-tax profit for the years ended December 31, 2018 would have increased/decreased by $20,238 thousand as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income for the years ended December 31, 2018 would have increased/decreased by $6,052 thousand as a result of the changes in fair value of financial assets at FVTOCI.

If equity prices had fluctuated by 5%, the pre-tax profit for the years ended December 31, 2017 would have increased/decreased by $48,377 thousand as a result of the changes in fair value of held-for-trading investments.

2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. As at the end of the reporting period, the Company’s maximum exposure to credit risk, which would cause a financial loss to the Company due to the failure of counterparties to discharge an obligation and financial guarantees provided by the Company, could arise from:

• a) The carrying amount of the respective recognized financial assets as stated in the balance sheets; and

• b) The amount of contingent liabilities in relation to financial guarantees issued by the Company.

The Company adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Company’s exposure and the credit ratings of its counterparties are continuously monitored.

The counterparties of the Company’s trade receivable included numerous clients distributed over a variety of areas, and were not centered on a single client or location. Furthermore, the Company continuously assesses the financial condition of its clients, and then the Company’s credit risk was limited. At the end of the reporting period, the Company’s largest exposure on credit risk approximates to the carrying amounts of its financial assets.

• 3) Liquidity risk

The Company managers mitigate liquidity risk by maintaining a level of cash and cash equivalents and financing facilities deemed adequate.

• 55 -

• a) Liquidity and interest rate risk tables

The following table details the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The table was drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows.

December 31, 2018

On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing liabilities $ 1,183,819 December 31, 2017 On Demand or Less than 1 Year Non-derivative financial liabilities Non-interest bearing liabilities $ 1,038,014	1-5 Years $ - 1-5 Years $ -	5+ Years $ -
		5+ Years $ -

• b) Financing facilities

The Company relies on bank loans as a significant source of liquidity. As of December 31, 2018 and 2017, the unused amounts of bank loan facilities were as follows:

Bank loan facilities Amount unused		December 31	December 31
		2018 $ 2,491,134	2017 $ 2,186,877

28. TRANSACTIONS WITH RELATED PARTIES

As of December 31, 2018 and 2017, USI Corporation held through its subsidiary, Union Polymer Int’l Investment Corporation 24.97% of the Company’s outstanding ordinary shares.

Besides information disclosed elsewhere in the other notes, details of transactions between the Company and other related parties are disclosed below.

• a. Related party names and categories

Related Party Name USI Corporation (“USI”) Taiwan VCM Corporation (“TVCM”) CGPC Polymer Corporation (“CGPCPOL”) Krystal Star International Corporation (“Krystal Star”)	Related Party Category
	Parent company Subsidiary Subsidiary Subsidiary

(Continued)

• 56 -

Related Party Name

Related Party Category

CGPC America Corporation (“CGPC America”)	Subsidiary
CGPC (BVI) Holding Co., Ltd.	Subsidiary
Taita Chemical Company, Limited (“TTC”)	Investor with significant influence
Asia Polymer Corporation (“APC”)	Investor with significant influence
China General Terminal & Distribution Corporation	Associate
Acme Electronics Corporation	Associate
Thintec Materials Corporation	Associate
USI Optronics Corporation (“USIO”)	Fellow subsidiary
USI Management Consulting Corporation (“UM”)	Fellow subsidiary
Swanson Plastics Corporation	Fellow subsidiary
Taiwan United Venture Management Corporation	Fellow subsidiary
Chong Loong Trading Co., Ltd.	Fellow subsidiary
Dynamic Ever Investments Limited	Fellow subsidiary
USIFE Investment Co., Ltd.	Fellow subsidiary
INOMA Corporation (“INOMA”)	Fellow subsidiary
APC Investment Corporation	Subsidiary of investor with significant
	influence
USI Educational Foundation (“USIF”)	Related party in substance
	(Concluded)

• b. Sales of goods

Related Party Category/Name Subsidiary Investor with significant influence Fellow subsidiary Parent company USI	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 374,307 2,341 222 - $ 376,870	2017 $ 437,187 5,169 501 2,133 $ 444,990

Sales of goods to related parties had no material differences from those of general sales transactions.

• c. Purchases of goods

Related Party Category/Name Subsidiary TVCM Others Fellow subsidiary Parent Company USI Investor with significant influence	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 4,230,003 19,239 985 56 13 $ 4,250,296	2017 $ 3,970,741 2,584 712 - - $ 3,974,037

The Company signed a VCM purchase contract with TVCM. The purchase price was negotiated by both parties according to the current domestic price of PVC, the spot price of VCM, EDC and ethylene in Asia.

• 57 -

Purchases from related parties had no material differences from those of general purchases transactions.

• d. Trade receivables from related parties

Related Party Category/Name Subsidiary CGPC America Investor with significant influence Fellow subsidiary		December 31	December 31
		2018 $ 101,245 325 - $ 101,570	2017 $ 118,018 493 102 $ 118,613

The outstanding trade receivables from related parties were unsecured. For the years ended December 31, 2018 and 2017, no impairment loss was recognized for trade receivables from related parties.

• e. Trade payables to related parties

Related Party Category/Name Subsidiary TVCM Others Fellow subsidiary		December 31	December 31
		2018 $ 774,140 3,247 - $ 777,387	2017 $ 710,651 1,988 50 $ 712,689

The outstanding trade payables to related parties were unsecured.

f. Other receivables from related parties

Related Party Category/Name Subsidiary CGPCPOL Others Investor with significant influence TTC Others Fellow subsidiary Parent company USI Associate Subsidiary of investor with significant influence		December 31	December 31
		2018 $ 1,691 28 615 17 49 4 2 1 $ 2,407	2017 $ 1,410 14 490 3 39 10 12 1 $ 1,979

• 58 -

g. Other payables to related parties

Related Party Category/Name Parent company USI Subsidiary TVCM Investor with significant influence Fellow subsidiary		December 31	December 31
		2018 $ 2,156 1,681 216 109 $ 4,162	2017 $ 1,291 290 9 206 $ 1,796

• h. Acquisition of property, plant and equipment (for the year ended December 31, 2018: None)

Related Party Category/Name Fellow subsidiary USIO Endorsements and guarantees Related Party Category/Name Subsidiary CGPCPOL Rental expenses Related Party Category/Name Parent company USI Investor with significant influence APC		Purchase Price For the Year Ended December 31, 2017 $ 290,000 **December 31 **	Purchase Price	Purchase Price
	2018 2017 $ 2,907,150 $ 3,297,600 For the Year Ended December 31
		2018 $ 5,644 2,412 $ 8.056		2017 $ 5,282 2,380 $ 7,662

• i. Endorsements and guarantees

• j. Rental expenses

The Company leases offices in Neihu from USI and APC. The leases will expire in April 2019 and December 2018, respectively, and the rentals are paid on a monthly basis.

• 59 -

k. Management service expenses

Related Party Category/Name Fellow subsidiary UM Others Parent company USI	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 46,226 114 3,786 $ 50,126	2017 $ 41,530 114 3,981 $ 45,625

Contracts stating that UM and parent company should provide labor support, equipment and other related services to the Company were effective starting from July 1, 2001. The service expenses were based on the actual quarterly expenses which should be paid in the subsequent quarter.

l. Donations (classified as general and administrative expenses)

Related Party Category/Name Related party in substance USIF Rental income Related Party Category/Name Fellow subsidiary USIO Investor with significant influence	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2018 2017 $ 1,500 $ 1,000 **For the Year Ended December 31 **
		2018 $ 12,011 89 $ 12,100	2017 $ 9,841 116 $ 9,957

m. Rental income

USIO leased the land and facility located in Toufen from the Company, the detailed lease term can be referred to Note 25.

n. Other revenue

Related Party Category/Name Investor with significant influence TTC Subsidiary	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,002 580 $ 2,582	2017 $ 1,565 1,422 $ 2,987

• 60 -

o. Other expense

Related Party Category/Name Subsidiary Compensation of key management personnel Related Party Category/Name Salaries and others Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2018 2017 $ 1,729 $ - For the Year Ended December 31
		2018 $ 19,150 220 $ 19,370	2017 $ 18,336 194 $ 18,530

• p. Compensation of key management personnel

The compensation of directors and key executives of the Company was determined by the remuneration committee based on the performance of individuals and market trends.

29. ASSETS PLEDGED AS COLLATERAL

The following assets were provided as collaterals for bank borrowings, endorsement guarantees and the tariffs of imported raw materials:

Pledge deposits (classified as refundable deposits) Property, plant and equipment Land Buildings and improvements, net		December 31	December 31
		2018 $ 2,154 1,517,928 64,987 $ 1,585,069	2017 $ 2,154 1,517,928 72,678 $ 1,592,760

The Company signed a long-term secured loan contract with a revolving credit limit of $1,000,000 thousand for 5 years with Chang Hwa Commercial Bank to enrich working capital. The Company set the land and plants which is owned by the Company as collateral. As of December 31, 2018 and 2017, the Company has not used its revolving credit.

The Company pledged its land and plant to Taishin International Bank as collateral for its revolving credit limit. The financing contract with Taishin International Bank expired, and the fixed assets which were pledged as collateral were released in July 2017.

30. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Company as of the end of the reporting period were as follows:

• a. As of December 31, 2018 and 2017, the Company’s unused letters of credit amounted to $18,866 thousand and $23,123 thousand, respectively.

• 61 -

• b. Description of Kaohsiung explosions:

Regarding the associate, China General Terminal & Distribution Corporation (hereinafter “CGTD”), who was commissioned to operate the LCY Chemical Corp.’s propene pipeline resulting in a gas explosion on July 31, 2014, and the first instance judgment of the criminal procedures, which was reached on May 11, 2018, whereby three employees of CGTD were each sentenced to four years and six months of imprisonment, and CGTD assisted the employees in appealing against the judgment.

CGTD arrived at an agreement with the Kaohsiung City Government on February 12, 2015, pledging certificates of bank deposits of $227,167 thousand, interests included, to the Kaohsiung City Government as collateral for the loss caused by the gas explosion. The Kaohsiung City Government also filed civil procedure requests in succession against LCY Chemical Corp., CGTD and CPC Corporation, Taiwan (“CPC”). Taiwan Power Company applied for provisional attachment against CGTD’s property on August 27 and November 26, 2015. Taiwan Water Corporation also applied for provisional attachment against CGTD’s property on February 3 and March 2, 2017. At the end of February 2019, the provisionally attached property was worth $141,255 thousand.

As for the victims, CGTD, LCY Chemical Corp. and the Kaohsiung City Government signed a tripartite agreement for the compensation of the 32 victims’ families on July 17, 2015. Each victim’s family received $12,000 thousand, and the compensation was $384,000 thousand in total, which was paid in four annual payments by LCY Chemical Corp. LCY Chemical Corp. was in charge of negotiating the compensation with the victims’ families and signing the settlement agreement on behalf of the three parties.

As for the seriously injured, CGTD, LCY Chemical Corp. and the Kaohsiung City Government signed a tripartite agreement for the compensation of the 65 seriously injured victims’ families on October 25, 2017. Compensation was paid by CGTD and the Kaohsiung City Government, and CGTD was in charge of negotiating the compensation with the seriously injured victims’ families and signing the settlement agreement on behalf of the three parties with the 64 seriously injured victims’ families.

As of February 28, 2019, victims and their families have filed civil (including supplementary civil action) lawsuits against LCY Chemical Corp., CGTD and CPC for compensation. To reduce the lawsuit costs, CGTD had reached a settlement on the original claim of $23,919 thousand, and the amount of the settlement was $3,899 thousand. Along with the case still under litigation and the above-mentioned compensation, the accumulated amount of compensation is $3,881,291 thousand. The first-instance judgments of some of the above-mentioned civil cases (with a total amount of compensation of approximately $1,177,192 thousand) have been gradually announced, starting from June 22, 2018. The proportion of fault liability of the Kaohsiung City Government, LCY Chemical Corp. and CGTD is 4:3:3 in most judgments. The total amount of compensation that CGTD, LCY Chemical Corp. and the other defendants should pay is around $383,831 thousand. In particular, CGTD was exempted to pay $6,194 thousand according to the court’s judgement. $188,818 thousand is estimated to be the portion of compensation that CGTD should afford according to the first-instance judgment for the moment. CGTD has appealed some civil cases which were announced but were not yet settled and gradually entered into the second-instance trials. In addition, with regard to the above-mentioned compensation, CGTD estimated and recognized the amount of $136,375 thousand based on its fault liability proportion announced in the first-instance judgment. The actual payment of CGTD still depends on the judgments of the remaining civil cases in the future.

• 62 -

31. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Company’s significant financial assets and liabilities denominated in foreign currencies and aggregated by foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows:

Unit: Foreign Currencies and Carry Amounts in Thousands

December 31, 2018

Financial assets Monetary items USD EUR AUD Non-monetary items Subsidiaries accounted for using the equity method USD Financial liabilities Monetary items USD December 31, 2017 Financial assets Monetary items USD EUR JPY AUD Non-monetary items Subsidiaries accounted for using the equity method USD Financial liabilities Monetary items USD	December 31, 2018
	Foreign Currencies Exchange Rate (In Single Dollars) NT$ (Carry Amount) $ 23,339 30.715 (USD:NTD) $ 716,866 312 35.200 (EUR:NTD) 10,991 687 21.665 (AUD:NTD) 14,885 20,635 30.715 (USD:NTD) 633,790 293 30.715 (USD:NTD) 8,987 December 31, 2017
	Foreign Currencies Exchange Rate (In Single Dollars) NT$ (Carry Amount) $ 15,158 29.760 (USD:NTD) $ 451,104 663 35.570 (EUR:NTD) 23,567 86,158 0.2642 (JPY:NTD) 22,763 754 23.185 (AUD:NTD) 17,492 20,785 29.760 (USD:NTD) 618,549 367 29.760 (USD:NTD) 10,930

• 63 -

For the years ended December 31, 2018 and 2017, net foreign exchange gain (losses) were $18,351 thousand and $(41,783) thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the entities.

32. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees:

• 1) Financing provided to others: See Table 1 attached;

• 2) Endorsements/guarantees provided: See Notes 28 and Table 2 attached;

• 3) Marketable securities held (not included investment subsidiary and affiliated companies): See Table 3 attached;

• 4) Marketable securities acquired and disposed of costs or prices of at least NT$300 million or 20% of the paid-in capital: See Table 4 attached;

• 5) Acquisitions of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None;

• 6) Disposals of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None;

• 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: See Table 5 attached;

• 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: See Table 6 attached;

• 9) Trading in derivative instruments: See Note 7 attached; and

• 10) Information on investees: See Table 7 attached.

• b. Information on investments in mainland China

• 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area: See Table 8 attached; and

• 2) The following information on any of the significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses: See Table 1 attached.

  • a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.

  • b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.

  • c) The amount of property transactions and the amount of the resultant gains or losses.

• 64 -

• d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.

• e) The highest balance during the period, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.

• f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receipt of services.

• 65 -

TABLE 1

CHINA GENERAL PLASTICS CORPORATION

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Period (Note 4)	Ending Balance (Note 4)	Actual Borrowing Amount	Interest Rate	Nature of Financing (Note 3)	Business Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower (Notes 2 and 4)	Aggregate Financing Limits (Notes 2 and 4)
													Item	Value
1	CGPC (BVI) Holding Co., Ltd. (“CGPC (BVI)”)	Continental General Plastics (Zhong Shan) Co., Ltd.	Other receivables from related parties	Yes	$ 122,860 (US$ 4,000 thousand)	$ -	$ -	-	b	$ -	Operating capital needed	$ -	-	-	$ 353,757	$ 353,757

• Note 1: The total amount of financing by the Company to others shall not exceed 40% of the net worth of the Company. The Company has no financing provided to others as of December 31, 2018.

Note 2: The total amount of financing provided by the CGPC (BVI) to others collectively and to any individual entity shall not exceed 40% of its net worth. However, the total amount of financing provided to any subsidiary which is not located in Republic of China wholly-owned by the Company shall not exceed 100% of the net worth of the CGPC (BVI) according to the most recent audit.

• Note 3: The alphabetic indications for the nature of financing are described as follows:

• a. Existing transactions.

• b. Needed short-term operating capital.

Note 4: The amount is calculated using the spot exchange rate as on December 31, 2018.

• 66 -

TABLE 2

CHINA GENERAL PLASTICS CORPORATION

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

No.	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party (Note 2)	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period (Note 3)	Actual Borrowing Amount (Note 3)	Amount Endorsed/ Guaranteed by Collateral	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%) (Note 1)	Aggregate Endorsement/ Guarantee Limit (Note 2)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China
		Name	Relationship
0	China General Plastics Corporation	CGPC Polymer Corporation	Subsidiary	$ 8,374,640	$ 3,307,150	$ 2,907,150	$ 515,358	None	34.71	$ 8,374,640	Yes	No	No

Note 1: The ratio is calculated using the ending balance of equity of the Company as of December 31, 2018.

• Note 2: In June 2018, a revision to the regulations governing endorsements/guarantees provided by the Company was approved in the shareholders’ meeting, and the total amount of guarantee that may be provided by the Company to any individual entity and in aggregate shall not exceed 100% of the Company’s net worth.

• Note 3: The amount is calculated using the spot exchange rate of December 31, 2018.

• 67 -

TABLE 3

CHINA GENERAL PLASTICS CORPORATION

MARKETABLE SECURITIES HELD DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Maximum Shares/Units Held During the Year	Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
China General Plastics Corporation Taiwan VCM Corporation	Closed-end fund beneficiary certificates Cathay No. 1 Real Estate Investment Trust Fubon No. 2 Real Estate Investment Trust Shin Kong No. 1 Real Estate Investment Trust Cathay No. 2 Real Estate Investment Trust Open-end fund beneficiary certificates Taishin 1699 Money Market Fund Jih Sun Money Market Fund Hua Nan Phoenix Money Market Fund FSITC Taiwan Money Market Fund Yuanta Wan Tai Money Market Fund Ordinary shares KHL IB Venture Capital Co., Ltd. Open-end fund beneficiary certificates Jih Sun Money Market Fund FSITC Taiwan Money Market Fund Yuanta De-Li Money Market Fund Prudential Financial Money Market Fund	- - - - - - - - - - - - - -	Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets measured at FVTOCI - non-current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current	4,268,000 5,000,000 3,000,000 2,500,000 3,702,173 3,143,272 2,466,700 2,226,387 1,653,002 8,353,800 12,193,440 8,534,572 3,081,056 3,174,885	$ 63,422 63,000 45,210 37,575 50,007 46,500 40,041 34,011 25,003 121,047 180,384 130,378 50,162 50,144	- - - - - - - - - 5.95 - - - -	$ 63,422 63,000 45,210 37,575 50,007 46,500 40,041 34,011 25,003 121,047 180,384 130,378 50,162 50,144	4,268,000 5,000,000 3,000,000 2,500,000 7,418,233 9,368,793 3,092,509 9,518,158 3,881,805 9,100,000 12,193,440 8,534,572 3,085,429 3,180,641	1 1 1 1 1 1 1 1 1 1 1 1 1 1

(Continued)

• 68 -

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Maximum Shares/Units Held During the Year	Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
Taiwan VCM Corporation CGPC Polymer Corporation CGPC (BVI) Holding Co., Ltd.	Taishin 1699 Money Market Fund Yuanta Wan Tai Money Market Fund Open-end fund beneficiary certificates Hua Nan Kirin Money Market Fund Hua Nan Phoenix Money Market Fund UPAMC James Bond Money Market Fund Ordinary shares Asia Polymer Corporation Open-end fund beneficiary certificates Taishin 1699 Money Market Fund FSITC Money Market Fund Yunata Wan Tai Money Market Fund Jih Sun Money Market Fund Capital Money Market Fund Hua Nan Phoenix Market Fund Nomura Taiwan Money Market Fund Ordinary shares Teratech Corporation SOHOware, Inc. - preference shares	- - - - - The major shareholders are the same as the those of the Company - - - - - - - - -	Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTOCI - non-current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - non-current Financial assets at FVTPL - non-current	3,705,515 3,306,310 4,182,735 2,529,381 2,397,737 121,611 5,670,905 4,755,891 4,561,990 3,355,891 2,793,539 2,523,727 1,903,908 112,000 100,000	$ 50,052 50,010 50,009 41,058 40,008 1,593 76,600 72,653 69,003 49,645 45,006 40,967 31,020 - -	- - - - - 0.02 - - - - - - - 0.67 -	$ 50,052 50,010 50,009 41,058 40,008 1,593 76,600 72,653 69,003 49,645 45,006 40,967 31,020 - -	5,201,566 6,629,475 8,386,307 3,085,963 3,008,695 121,611 5,670,905 4,755,891 4,561,990 15,404,760 2,793,539 2,523,727 1,903,908 112,000 100,000	1 1 1 1 1 1 1 1 1 1 1 1 1 1 and 3 1, 2 and 3

Note 1: The marketable securities were not pledged as guarantees or collateral for borrowings and are not subject to restrictions.

Note 2: The preference shares are not used in the calculation of the shareholding ratio and net worth.

Note 3: As of December 31, 2018, the Company evaluates the fair value of the equity investment as $0.

(Concluded)

• 69 -

TABLE 4

CHINA GENERAL PLASTICS CORPORATION

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counter-party	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Ending	Balance
					Number of Shares	Amount (Note)	Number of Shares	Amount	Number of Shares	Amount	Carrying Amount	Gain (Loss) on **Disposal **	Number of Shares	Amount (Note)
China General Plastics Corporation Taiwan VCM Corporation CGPC Polymer Corporation	Beneficiary certificates Taishin 1699 Money Market Fund Jih Sun Money Market Fund FSITC Taiwan Money Market Fund Capital Money Market Fund Fubon Chi-Hsiang Money Market Fund Beneficiary certificates Jih Sun Money Market Fund Hua Nan Kirin Money Market Fund Yuanta Wan Tai Money Market Fund UPAMC James Bond Money Market Fund Yuanta De-Bao Money Market Fund Shin Kong Chi-Shin Money Market Fund Beneficiary certificates Jih Sun Money Market Fund	Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current	- - - - - - - - - - - -	- - - - - - - - - - - -	6,249,509 - 9,518,158 2,431,581 1,378,417 - 4,200,022 - 1,805,815 - - -	$ 84,000 - 144,000 39,000 21,500 - 50,000 - 30,000 - - -	31,986,466 27,217,007 21,470,093 16,355,138 31,756,270 23,728,131 45,256,139 29,154,730 27,027,086 25,052,723 19,429,019 28,460,472	$ 431,300 401,500 327,500 263,000 496,000 350,000 540,000 440,000 450,000 300,000 300,000 419,500	34,533,802 24,073,735 28,761,864 18,786,719 33,134,687 11,534,691 45,273,426 25,848,420 26,435,164 25,052,723 19,429,019 25,104,581	$ 465,565 355,114 438,447 302,200 517,628 170,049 540,105 390,104 440,112 300,131 300,066 370,263	$ 465,300 355,000 437,500 302,000 517,500 170,000 540,000 390,000 440,000 300,000 300,000 370,000	$ 265 114 947 200 128 49 105 104 112 131 66 263	3,702,173 3,143,272 2,226,387 - - 12,193,440 4,182,735 3,306,310 2,397,737 - - 3,355,891	$ 50,000 46,500 34,000 - - 180,000 50,000 50,000 40,000 - - 49,500

Note: The amount as of December 31, 2018 was accounted for as the original cost.

• 70 -

TABLE 5

CHINA GENERAL PLASTICS CORPORATION

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Buyer/Seller	Related Party	Relationship		Transaction Details	Transaction Details		Abnormal Transaction	Abnormal Transaction	Notes/Trade Receivables (Payables)
			Purchase/ Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Financial Statement Account and Ending Balance	% of Total
China General Plastics Corporation Taiwan VCM Corporation CGPC Polymer Corporation CGPC America Corporation	Taiwan VCM Corporation CGPC America Corporation China General Plastics Corporation CGPC Polymer Corporation Taiwan VCM Corporation China General Plastics Corporation	Subsidiary Subsidiary Parent company Fellow subsidiary Fellow subsidiary Parent company	Purchase Sale Sale Sale Purchase Purchase	$ 4,230,003 (374,307) (4,230,003) (4,410,087) 4,410,087 374,307	72 (5) (43) (45) 96 83	45 days 90 days 45 days 45 days 45 days 90 days	No major difference No major difference No major difference No major difference No major difference No major difference	No major difference No major difference No major difference No major difference No major difference No major difference	Trade payables to related parties $ (774,140) Trade receivables from related parties 101,245 Trade receivables from related parties 774,140 Trade receivables from related parties 778,034 Trade payables to related parties (778,034) Trade payables to related parties (101,245)	(77) 9 45 45 (97) (97)

• 71 -

TABLE 6

CHINA GENERAL PLASTICS CORPORATION

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Financial Statement Account and Ending Balance	Financial Statement Account and Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period (Note 2)	Allowance for Impairment Loss
						Amount	Actions Taken
China General Plastics Corporation Taiwan VCM Corporation	CGPC America Corporation China General Plastics Corporation CGPC Polymer Corporation	Subsidiary Parent company Fellow subsidiary	Trade receivables from related parties Trade receivables from related parties Trade receivables from related parties	$ 101,245 $ 774,140 $ 778,034	3.41 5.70 5.87	$ - - -	- - -	$ 63,311 774,140 778,034	Note 1 Note 1 Note 1

Note 1: There is no allowance for impairment loss after an impairment assessment.

Note 2: The subsequent period is between January 1 and February 27, 2019.

• 72 -

TABLE 7

CHINA GENERAL PLASTICS CORPORATION

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company	Investee Company	Location	Business Content	Original Investment Amount	Original Investment Amount	As of December 31, 2018	As of December 31, 2018	As of December 31, 2018	Net Income (Loss) of Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares	%	Carrying Amount
China General Plastics Corporation	Taiwan VCM Corporation CGPC Polymer Corporation CGPC (BVI) Holding Co., Ltd. China General Terminal & Distribution Corporation CGPC America Corporation Krystal Star International Corporation Acme Electronics Corporation Thintec Materials Corporation	No. 1, Gongye 1st Rd., Linyuan Dist., Kaohsiung City 832, Taiwan (R.O.C.) 12F., No. 37, Jihu Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.) Citco Building, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands No. 1, Jianji St., Qianzhen Dist., Kaohsiung City 806, Taiwan (R.O.C.) 1181 California Ave., Suite 235 Corona, CA 92881 U.S.A. Citco Building, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands 8F., No. 39, Jihu Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.) 12F., No. 37, Jihu Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.)	Manufacturing and marketing of VCM Manufacturing and marketing of PVC resins Reinvestment Warehousing and transportation of petrochemical raw materials Marketing of PVC film and leather products Marketing of PVC film and consumer products Manufacturing and marketing of Mn-Zn and Ni-Zn ferrite cores Manufacturing and marketing of reinforced plastic products	$ 2,930,995 800,000 1,073,906 41,106 648,931 283,502 33,995 15,000	$ 2,930,994 800,000 1,073,906 41,106 648,931 283,502 33,995 15,000	206,008,832 78,859,281 16,308,258 18,667,465 100 5,780,000 3,176,019 600,000	87.22 100.00 100.00 33.33 100.00 100.00 1.74 10.00	$ 2,919,181 1,103,222 353,757 228,250 203,543 76,490 24,296 1,452	$ 625,587 257,674 8,843 (75,720) (11,119) 1,646 56,187 (10,525)	$ 535,972 257,674 8,843 (25,241) (11,119) 1,646 978 (1,052)	Subsidiary Subsidiary Subsidiary Associate accounted for using the equity method Subsidiary Subsidiary Associate accounted for using the equity method Associate accounted for using the equity method

• 73 -

TABLE 8

CHINA GENERAL PLASTICS CORPORATION

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Business Content	Paid-in Capital (Note 1)	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2018 (Note 1)	Investment Flows	Investment Flows	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2018 (Note 1)	Net Income (Loss) of Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 5)	Carrying Amount as of December 31, 2018 (Note 1)	Accumulated Repatriation of Investment Income as of December 31, 2018
					Outflow	Inflow
Continental General Plastics (ZhongShan) Co., Ltd. (“CGPC (ZS)”) (Note 4) CGPC Consumer Products Corporation (“CGPC (CP)”) (Note 4)	Manufacturing and marketing of PVC film and consumer products Manufacturing and marketing of PVC consumer products	$ 614,300 (US$ 20,000 thousand) 46,073 (US$ 1,500 thousand)	Investment through CGPC (BVI) Holding Co., Ltd. (“CGPC (BVI)”) Investment through CGPC (BVI) Holding Co., Ltd. (“CGPC (BVI)”)	$ 614,300 (US$ 20,000 thousand) 46,073 (US$ 1,500 thousand)	$ - -	$ - -	$ 614,300 (US$ 20,000 thousand) 46,073 (US$ 1,500 thousand)	$ 7,455 (US$ 247 thousand) 12 (US$ - thousand)	100.00 100.00	$ 7,455 (US$ 247 thousand) 12 (US$ - thousand)	$ 264,486 (US$ 8,611 thousand) 13,932 (US$ 454 thousand)	$ - -

Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2018 (Notes 1 and 3)	Investment Amounts Authorized by Investment Commission, MOEA (Note 1)	Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$831,824 (US$27,082 thousand)	$1,053,371 (US$34,295 thousand)	(Note 2)

Note 1: The calculation was based on the spot exchange rate as on December 31, 2018.

• Note 2: As the Company has obtained the certificate of qualification for operating headquarters issued by the Industrial Development Bureau, MOEA No. 10620424930 on September 22, 2017, the upper limit on investment in mainland China pursuant to the “Principle of Investment or Technical Cooperation in Mainland China” is not applicable.

• Note 3: QuanZhou Continental General Plastics Co., Ltd. (“CGPC (QZ)”) and Union (Zhong Shan) Co., Ltd. (“Union (ZS)”) completed dissolution procedures, and CGPC (BVI) retrieved the residual assets. The shares of Continental General Plastics (San He) Co., Ltd. (“CGPC (SH)”) were fully sold, and CGPC (BVI) retrieved the residual assets. However, the amount of capital has not been wired back to Taiwan. The accumulated amount includes the investment amount of CGPC (QZ) of $21,009 thousand (US$684 thousand), the investment amount of Union (ZS) of $27,582 thousand (US$898 thousand) and the investment amount of CGPC (SH) of $122,860 thousand (US$4,000 thousand).

Note 4: The board of directors of the Company passed a resolution to dissolve CGPC (ZS) and CGPC (CP) on October 24, 2011. As of December 31, 2018, the dissolution procedures have not yet been completed.

• Note 5: The investment income (loss) recognition in 2018 is based on the financial statements audited by the parent company’s CPA.

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CHINA GENERAL PLASTICS CORPORATION

THE CONTENTS OF SCHEDULES OF MAJOR ACCOUNTING ITEMS

Item	Schedule Index
Major Accounting Items in Assets, Liabilities and Equity
Schedule of cash and cash equivalents	1
Schedule of financial assets at FVTPL - current	2
Schedule of notes receivable and trade receivables	3
Schedule of inventories	4
Schedule of financial assets at FVTOCI- non-current	Note 8
Schedule of changes in investments accounted for using the equity method	5
Schedule of changes in property, plant and equipment	Note 13
Schedule of changes in investment properties	Note 14
Schedule of changes in intangible assets	Note 15
Schedule of deferred income tax assets	Note 23
Schedule of notes payable and trade payables	6
Schedule of other payables	Note 17
Schedule of other current liabilities	7
Schedule of deferred income tax liabilities	Note 23
Major Accounting Items in Profit or Loss
Schedule of net revenue	8
Schedule of cost of revenue	9
Schedule of production overheads	10
Schedule of operating expenses	11
Schedule of other revenue	Note 22
Schedule of other profit and loss	Note 22
Schedule of labor, depreciation and amortization by function	12

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SCHEDULE 1

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Item Description Cash on hand and petty cash Cash in bank Demand deposits Checking accounts Foreign currency deposits US$1,999,473, US$1=NT$30.715 EUR3,301, EUR1=NT$35.200 AUD61,074, AUD1=NT$21.665 GBP4,654, GBP1=NT$38.880 JPY373,355, JPY1=NT$0.2782 HK$31,164, HK$1=NT$3.921 Time deposits Foreign time deposits US$1,400,000, US$1=NT$30.715, expired by 2018.12.24-2019.01.03, interest rate at 2.50% US$850,000, US$1=NT$30.715, expired by 2018.12.28-2019.01.04, interest rate at 2.00%

Amount $ 192 2,389 15,779 63,260 81,428 69,109 $ 150,729

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SCHEDULE 2

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF FINANCIAL ASSETS AT FVTPL - CURRENT DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Type and Name of Financial Instruments Number of Shares Acquisition Cost Financial assets mandatorily classified as at FVTPL Non-derivative financial assets Open-end fund beneficiary certificates Taishin 1699 Money Market Fund 3,702,173 $ 50,000 Jih Sun Money Market Fund 3,143,272 46,500 Hua Nan Phoenix Money Market Fund 2,466,700 40,000 FSITC Taiwan Money Market Fund 2,226,387 34,000 Yuanta Wan Tai Money Market Fund 1,653,002 25,000 195,500 Closed-end fund beneficiary certificates Cathay No. 1 Real Estate Investment Trust 4,268,000 43,289 Fubon No. 2 Real Estate Investment Trust 5,000,000 50,000 Shin Kong No. 1 Real Estate Investment Trust 3,000,000 30,000 Cathay No. 2 Real Estate Investment Trust 2,500,000 25,000 148,289 $ 343,789 Derivative financial instruments Foreign exchange forward contracts	Fair value	Fair value
	Unit Price (Dollar) 13.51 14.80 16.23 15.28 15.13 14.86 12.06 15.07 15.03	Amount $ 50,007 46,500 40,041 34,011 25,003 195,562 63,422 63,000 45,210 37,575 209,207 404,769 627 $ 405,396

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SCHEDULE 3

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF NOTES RECEIVABLE AND TRADE RECEIVABLES DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Notes receivable Zheng Yi Plastic Co., Ltd. San Yanier Chemical Co., Ltd. Avatack Co., Ltd. Yonghuade Industrial Materials Co., Ltd. Globe Industries Corporation Others (Note) Trade receivables from unrelated parties Tricon Energy UK, Ltd. Others (Note) Less: Allowance for impairment loss Trade receivables from related parties CGPC America Corporation Others (Note)	Amount $ 27,687 26,973 21,695 16,472 13,168 84,385 190,380 157,352 685,997 843,349 (10,652) 832,697 101,245 325 101,570 $ 1,124,647

Note: The amount of individual client included in others does not exceed 5% of the account balance.

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SCHEDULE 4

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF INVENTORIES DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Finished goods Work in progress Raw materials Less: Allowance for impairment loss (Note 2)		Amount
		Cost Net Realizable Value (Note 1) $ 514,139 $ 547,656 52,422 44,809 297,320 284,695 863,881 $ 877,160 (43,060) $ 820,821

• Note 1: The net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale.

• Note 2: The impairment loss on inventory resulted from the obsolete and slow moving items; impairment loss is the excess of cost over net realizable value.

• Note 3: The amount of insured inventories is NT$1,238,537 thousand.

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SCHEDULE 5

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Investee Company Listed Company Acme Electronics Corporation Unlisted Company Taiwan VCM Corporation CGPC Polymer Corporation CGPC (BVI) Holding Co., Ltd. China General Terminal & Distribution Corporation CGPC America Corporation Krystal Star International Corporation Thintec Materials Corporation Adjustments resulting from translation of the financial statement of foreign operations	Balance at January 1, 2018 Shares Amount 3,176,019 $ 25,463 196,198,860 2,642,545 56,478,291 845,548 16,308,258 363,371 17,079,108 272,509 100 203,603 5,780,000 73,081 600,000 2,504 4,428,624 (23,240) $ 4,405,384	Additions (Decrease) Shares Amount - $ 965 9,809,972 276,636 22,380,990 257,674 - 8,843 1,588,357 (44,259) - (2,969) - 1,646 - (1,052) 497,484 7,323 $ 504,807	Balance at December 31, 2018 Market Value/ Net Assets Endorsement/ Guarantee Shares Amount % Value Collateral Note 3,176,019 $ 26,428 1.74 $ 42,241 None Note 2 206,008,832 2,919,181 87.22 2,978,155 None Note 3 78,859,281 1,103,222 100.00 1,103,222 Note 1 Note 6 16,308,258 372,214 100.00 353,757 None Note 7 18,667,465 228,250 33.33 228,250 None Note 4 100 200,634 100.00 247,323 None Note 5 5780,000 74,727 100.00 76,490 None Note 7 600,000 1,452 10.00 1,452 None Note 7 4,926,108 (15,917) $ 4,910,191
	Shares 3,176,019 196,198,860 56,478,291 16,308,258 17,079,108 100 5,780,000 600,000	Shares - 9,809,972 22,380,990 - 1,588,357 - - -	Shares 3,176,019 206,008,832 78,859,281 16,308,258 18,667,465 100 5780,000 600,000

• Note 1: Refer to Schedule 2.

• Note 2: The changes mainly included share of profit of associates amounting to $978 thousand less remeasurement of defined benefit plans of $13 thousand.

• Note 3: The shares additions was due to appropriation of the earnings as share dividends; the changes mainly included share of profits derived from subsidiaries amounting to $535,972 thousand less unrealized loss on investments in equity investments at FVTOCI that amounted to $524 thousand, remeasurement of defined benefit plans of $3,753 thousand and cash dividends payment of $225,059 thousand.

• Note 4: The shares additions was due to appropriation of the earnings as share dividends; the changes mainly included remeasurement of defined benefit plans of $475 thousand less share of loss of associates amount to $22,541 thousand and unrealized loss on investments in equity investments at FVTOCI that amounted of $19,493 thousand.

• Note 5: The change mainly included the realized gain on the transactions with subsidiaries of $8,150 thousand less share of loss of subsidiaries of $11,119 thousand.

Note 6: The shares additions was due to appropriation of the earnings as share dividends; the changes resulted from the share of profit of subsidiaries.

• Note 7: The changes resulted from the share of profit of subsidiaries and associates.

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SCHEDULE 6

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF NOTES PAYABLE AND TRADE PAYABLES DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Notes payable Formosa Plastics Corporation Trade payables from unrelated parties Nan Ya Plastics Corporation Others (Note) Trade payables from related parties Taiwan VCM Corporation Others (Note)	Amount $ 288 31,528 194,935 226,463 774,140 3,247 777,387 $ 1,004,138

Note: The amount of individual vendor included in others does not exceed 5% of the account balance.

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SCHEDULE 7

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF OTHER CURRENT LIABILITIES DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Refund liabilities Receipts in advance Withholding Labor Insurance and National Health Insurance Others (Note)	Amount $ 23,329 21,118 14,242 2,674 $ 61,363

Note: The amount of each item included in others does not exceed 5% of the account balance.

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SCHEDULE 8

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF NET REVENUE FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Item Unit (PVC Leather Are Stated in Thousands of YD; Others Are Stated in Tone) Revenue PVC resin/compound 151,609 PVC film 35,929 Chlor-alkali products 62,536 PVC leather 6,505 Construction products 17,834	Amount $ 4,165,075 1,964,917 788,140 682,671 647,373 $ 8,248,176

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SCHEDULE 9

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF COST OF REVENUE FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Raw materials Balance, beginning of year Raw materials purchased Transferred to other accounts Balance, end of year Raw materials used in current year Direct labor Production overheads (Schedule 10) Manufacturing cost Work in progress, beginning of year Other accounts transferred to work in progress Work in progress, end of year Cost of finished goods Finished goods, beginning of year Other accounts transferred to finished goods Finished goods purchased Transferred to other accounts Finished goods, end of year Cost of revenue before adjustment Inventory write-down Others Cost of revenue

Amount $ 304,682 5,855,565 (358,520) (297,320) 5,504,407 333,719 1,513,315 7,351,441 44,714 239 (52,422) 7,343,972 374,583 17,853 15,509 (35,338) (514,139) 7,202,440 866 (19,134) $ 7,184,172

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SCHEDULE 10

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF PRODUCTION OVERHEADS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Utilities expense Payroll and other personnel expense Depreciation expense Repair and maintenance expense Packaging materials Fuel expense Others (Note)	Amount $ 426,093 398,632 168,717 167,931 119,956 115,305 116,681 $ 1,513,315

Note: The amount of each item included in others does not exceed 5% of the account balance.

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SCHEDULE 11

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

	Selling and	General and	General and	Research and	Research and
	Marketing	Administrative		Development
Item	Expenses	Expenses		Expenses
Freight	$ 204,279	$	-	$	15
Payroll and personnel expense (Note 1)	75,641		72,900		27,214
Rental expense	1,727		7,573		14
Depreciation expense	271		953		1,274
Management service expense	-		50,011		-
Others (Note 2)	36,733		20,425		3,069
	$ 318,651	$	151,862	$	31,586

• Note 1: The amount of payroll and personnel expense includes salary, pension, insurance and other personnel expenses.

Note 2: The amount of each item included in others does not exceed 5% of the account balance.

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SCHEDULE 12

CHINA GENERAL PLASTICS CORPORATION

SCHEDULE OF EMPLOYEE BENEFITS, DEPRECIATION AND AMORTIZATION BY FUNCTION FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Employee benefits expense Salary Labor and health insurance Pension Director’s remuneration Other employees’ benefit Depreciation expense Amortization expense	2018	2018	Total $ 780,519 57,140 35,739 5,518 29,285 $ 908,201 $ 176,198 $ 2,813	2017	2017
	Classified as Cost of Revenue Classified as Operating Expenses $ 632,992 $ 147,527 47,407 9,733 28,742 6,997 - 5,518 23,305 5,980 $ 732,446 $ 175,755 $ 168,717 $ 2,498 $ - $ 2,813	Other Incomes and Expenses $ - - - - - $ - $ 4,983 $ -		Classified as Cost of Revenue Classified as Operating Expenses $ 634,342 $ 151,334 46,250 9,734 33,934 8,445 - 5,496 25,103 7,558 $ 739,629 $ 182,567 $ 141,696 $ 2,774 $ - $ 3,889	Other Incomes and Expenses $ - - - - - $ - $ 2,491 $ -	Total $ 785,676 55,984 42,379 5,496 32,661 $ 922,196 $ 146,961 $ 3,889

Note: As of December 31, 2018 and 2017, the Company had 761 and 743 employees, respectively, and the number of directors who did not served concurrently as employees were both 8.

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