CPDC — Annual Report 2018

Jun 11, 2019

Stock Code: 1314

The annual report information can be found at the following address: 1. http://mops.twse.com.tw (MOPS) 2. http://www.cpdc.com.tw (Website of China Petrochemical Development Corporation)

CPDC

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION

Annual Report of 2018

Published in 2019/05/14

Report to shareholders

• I Company spokesman and deputy spokesman:

Speaker Deputy Speaker Deputy Speaker Name: Chen Yingjun Huang Guocai Zou Xudong Job: Assistant Vice President Vice President Assistant Vice President Phone: (02) 8787-8187 Extension 8370 ext. 1022 ext. 8322

e-mail: investors@cpdc.com.tw

• II Company and Plant address and Tel. Nos:

Name	Location	Tel. No.
Taipei Office	11F., No. 12, Dongxing Rd., Songshan Dist., Taipei City	(02)8787-8187
Toufen Plant	No. 217, Sec. 2, Ziqiang Rd., Toufen City, Miaoli County	(037)623-381
Dashe Plant	No. 1, Jingjian Rd., Dashe Dist., Kaohsiung City (Head office)	(07)351-3521
Xiaogang Plant	No. 34, Zhonglin Rd., Xiaogang Dist., Kaohsiung City	(07)871-1161

III Shares Registrar:

Name :CPDC stock Office

Address: 3F., No. 12, Dongxing Rd., Songshan Dist., Taipei City Tel. No.: (02)8978-2589

Website ：http://www.cpdc.com.tw

• IV External Auditors in the most recent year

Accountant Name: Melody Chen, Chung Dan-Dan Firm Name: KPMG Certified Public Accountants Address: 68F., No. 7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei City Tel. No.: (02)8101-6666

Websitehttp://www.kpmg.com.tw

• V Query the name and inquiry method of the listed trading institution for overseas securities trading: None.

VI. The Company Website: http://www.cpdc.com.tw

One. Message to Shareholders .......................................................................................................... 1 Two. Introduction to Company I. The Date of Establishment ....................................................................................................... 7 II. The Company History ............................................................................................................ 7 Three. Report on Corporate Governance I.Organizational System .............................................................................................................. 9 II. Director, supervisor, general manager, deputy general manager, associate, department and branch directors ................................................................................................. 13 III. Status of Corporate Governance ........................................................................................... 28 IV. Information About CPA Professional Fee ............................................................................. 75 V. Replacement of Accountant Information ................................................................................ 76 VI. The chairman of the company, the general manager and the manager responsible for financial or accounting affairs, in the last year has not served in the visa accounting firm or its relationship with the enterprise information ....................................................... 76 VII. Changes in equity transfer and equity pledge of directors, supervisors, managers and shareholders with a shareholding ratio of more than 10% in the most recent year and as of the published date of the annual report ........................................................ 76 VIII. The shareholding ratio of the top 10 shareholders, its relationship with the other data ...................................................................................................................................... 83 IX. Ratio of Combined Shareholding ......................................................................................... 85 Four. Status of Fund Raising I. Capital Stock and Shares ......................................................................................................... 86 II. The company's debt handling situation ................................................................................. 93 III. The Special unit processing situation ................................................................................. 95 IV. The overseas depository voucher processing situation ......................................................... 95 V. Employee recognition certificate processing situation .......................................................... 95 VI. Restrict the employee's rights new stock processing situation ............................................ 95 VII. Merger or acquisition or transfer of shares of the company to issue new shares ................ 95 VIII. Implementation of the funds utilization plan ..................................................................... 95 Five. Operating Overview I. Business Contents .................................................................................................................... 96 II. Market and Sales Overview ................................................................................................... 104 III. Employees ............................................................................................................................. 110 IV. Environmental Protection Expenses ...................................................................................... 110 V. Labor-Management Relations ................................................................................................ 112

Report to shareholders

VI. Major Contracts .................................................................................................................. 119 Six. Financial Status I. Condensed balance sheet, income statement, external auditor’s name and audit opinion for the most recent five years ................................................................................. 121 II. Financial Analysis for the most recent five years ................................................................... 125 III. Audit Committee’s Audit Report on the Financial Statement for the Most Recent Year ..................................................................................................................................... 129 IV. Recent annual financial reports. ........................................................................................... 130 V. Individual financial reports of companies whose visas have been checked by accountants in the most recent year ................................................................................... 252 VI. The company and its related enterprises in the most recent year and up to the publication date of the annual report, in the event of financial turnaround difficulties, should indicate their impact on the financial position of the company .......... 360 Seven. Review and Analysis of the Financial Position and Financial Performance and Risk Management I. Review and analysis of the financial situation ........................................................................ 360 II. Review and analysis of the financial performance ................................................................ 361 III. Review and analysis of the cash flow .................................................................................. 362 IV. Impact of major capital expenditure on the financial operations in the recent year .............. 362 V. Direct investment policy, the main reasons for profit or loss and corrective action plan for the most recent year and investment plans in the next year .......................................... 362 VI. Analysis and assessment of risk matters related to the most recent year and the publication date of the annual report .................................................................................. 364 VII. Other important matters ....................................................................................................... 392 Eight. Special Note I. Information about Affiliates .................................................................................................... 393 II. In the most recent year and the end of the annual report, the issue of private equity securities ............................................................................................................................. 506 III. In the most recent year and the end of the annual report, the company holds or disposes of the company's stock. ........................................................................................ 506 IV. Other necessary additional information matters .................................................................... 506 V. Matters which have a significant impact on shareholders’ equity or the price of securities in Subparagraph 2, Paragraph 2, Article 36 of the Securities and Exchang Act ....................................................................................................................................... 506

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One. Message to Shareholders

Ms. and Mr. Shareholders:

The 2018 CPDC's business climate is better than expected, but under the continuous impact of Sino-US trade conflicts, the global economy is turbulent, coupled with the expansion of caprolactam and acrylonitrile capacity in China, the industry's economic uncertainty has increased. In recent years, CPDC has actively transformed into an offensive enterprise. The petrochemical industry continues to develop and introduce high-quality products, and aims to complete integration. The land development actively takes advantage of China's one-way strategy and the new opportunities brought by the rise of emerging markets in Southeast Asia. The layout of areas with overseas land development investment potential has a view to effectively reducing the risk of fluctuations in the petrochemical industry in the future. Today's overall business environment faces many challenges and CPDC will continue to be cautious.

I. Business results for 2018

The Company reported the 2018 consolidated revenues of NT$38.503 billion, net operating profit of NT$3.075 billion and net profit after tax of NT$4.281 billion. The detailed breakdown of the Company’s 2018 operating performance is as follows:

1. Sales of Major Products

Major Product Production & Sales Volumes in the Past 2 Years

Unit: Tons

Major Produc	t Production & Sales	t Production & Sales	Volumes in the Past	Volumes in the Past	Years Unit: Tons	Years Unit: Tons	Years Unit: Tons	Years Unit: Tons
Production Volume Major Product	FY 2018		FY 2017		Increase (Decrease) Volume
	Production	Sales	Production	Sales	Production	%	Sales	%
Acrylonitrile (AN)	208,420	210,412	207,108	206,428	1,312	1%	3,984	2%
Caprolactam (CPL), Nylon Chips	374,390	355,680	379,708	365,260	(5,318)	(1%)	(9,580)	(3%)

The decrease of Caprolactam (CPL) production and sales was mainly due to the adjustment of production and sales in 2018 in cooperation with overall industry supply and demand and execution of sales plan.

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Report to shareholders

1. Operating Revenue and Expense and Profitability Analysis Operating Revenue and Expense: Annual Income Statement Annual Income Statement

Unit: NT$ thousands

Year Line Item	FY 2018 (Consolidated)	FY 2017 (Consolidated)	Increase (Decrease)	%
Revenues	38,503,121	33,335,970	5,167,151	16%
Gross Profit	5,176,159	5,371,581	(195,422)	(4%)
OperatingProfit	3,075,082	3,584,036	(508,954)	(14%)
Non-Operating Profit and Loss	1,601,868	2,713,685	(1,111,817)	(41%)
Pre-Tax Profit	4,676,950	6,297,721	(1,620,771)	(26%)
Net Profit after Tax	4,280,995	6,087,322	(1,806,327)	(30%)
EPS(After Tax)	1.59	2.55	(0.96)	(38%)

1. Operating revenue

2. The 2018 Operating revenues was increased by 16% versus the previous year, mainly due to the following reasons:

3. (1) The revenues from Acrylonitrile (AN) and related byproducts were NT$12.011 billion in 2018, increased 24% or NT$2.346 billion from NT$9.665 billion versus the previous year. The increase was mainly from a 2% increase in sales volumes and a 28% increase in unit prices versus the previous year for Acrylonitrile (AN) products.

4. (2) The revenues from Caprolactam (CPL) and byproduct were NT$23.157 billion in 2018, increased 10% or NT$2.065 billion from NT$21.092 billion versus the previous year. The increase was mainly from a 13% increase in unit price versus the previous year for Caprolactam (CPL) products.

5. (3) The revenues from other departments (including subsidiaries) were NT$3.335 billion, increased 29% or NT$757 million from NT$2.578 billion versus the previous year. It is mainly resulted from an increase in subsidiary revenues from trading versus the previous year.

6. Operating Profit

Net operating profit in 2018 decreased by NT$509 million, or 14% versus the previous year due to the following reasons:

• (1) For Caprolactam (CPL) products, affected by the high level price of main raw material phenol, and the trade conflict between China and the United States in the fourth quarter has aggravated weakness for the macroeconomic, impacted the downstream market demand and the willingness for delivering the products, decreased the profitability of Caprolactam (CPL) series products by NT$1.861 billion versus the previous year.

• (2) For Acrylonitrile (AN) products, the demand grew normally, but for the supply in the first three quarters, global manufacturers were focused in maintenance resulted in increase in Acrylonitrile (AN) price and the profitability was increased by NT$1.314 billion.

• (3) In 2018, overall operating expenses increased by NT$314 million versus the previous year, mainly due to the increase in marketing expenses by approximately NT$167 million caused by the increase of export volumes and sales tax expenses, the management

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expenses increased by NT$147 million versus the previous year due to overseas factory construction expansion and research and development expenses due to project execution.

1. Non-Operating Profit and Loss

Non-operating profit, decreased by NT$1.112 billion in 2018, or by 41%, due to the following reasons:

• (1) A decrease of NT$2.668 billion from the disposal of equity interests during the year versus the previous year.

• (2) A decrease of NT$921 million from the revaluation loss of financial debt instruments (ECB) versus the previous year.

• (3) An increase of NT$574 million from cost method dividends income versus the previous year.

• (4) An increase of NT$111 million from equity method profits from subsidiaries and related companies.

• (5) An increase of NT$78 million from investment real estate evaluation profit during the year versus the previous year.

• Net profit (loss) before and after taxes

2018 reported pre-tax profits were NT$4.677 billion, or NT$1.621 billion decrease versus the previous year, a decrease of 26%. 2018 reported net profits after tax were NT$4.281 billion (NT$1.59 per share), a decrease of NT$1.806 billion, or decrease of 30% from the net profits after tax of NT$6.087 billion (NT$2.55 per share) reported in the previous year.

• (3) Financial Performance Analysis:

• Financial Status:

At the end of 2018, total consolidated assets amounted to NT89.7 billion; total liabilities were NT$22.5 billion; and shareholder equity was NT$67.2 billion.

1. Key Financial Ratios:

Current Ratio at the end of 2018 was 289%, Quick Ratio was 244%, and Debt Ratio (Debt to Total Assets) was 25%.

1. Cash and Cash Equivalents Status:

   • Cash and cash equivalents inflow from operating, investing and financing activities was NT$340 million during 2018. The year-end cash and cash equivalent balance was NT$13.5 billion.

2. (4) Key Management Work and Implementation Overview:

3. Production Management: The Company continues its plans to invest at the Port of Kaohsiung for transportation and storage special areas of liquid ammonia (NH3) and Phenols to improve raw material purchasing flexibility. We also continued to promote smart automation and establish video monitoring systems for factory forecast management, improving production process efficiency and lowering production costs. We continue to promote our value-added Nylon Chips project, entering the high-end Nylon Chips market and expand our product lines to improve profitability. The Dashe Factory implemented the Acrylonitrile (AN) plant repair and maintenance project and the main production process compressor performance improvement project to improve the production capacity and reduce energy consumption, and move toward the objective of one repair for every two years; The Toufen Factory implemented a smoke-free emission project for coal-burning heat and power plant, in addition to improving combustion efficiency, improving the perception of chimney smoke,

4. 3 -

Report to shareholders

and achieving the goal of natural gas emission standards.

1. Labor Safety and Environmental Protection: In order to ensure the factory management systems in compliance with the latest international standards, all three of our factory sites have implemented quality, environmental protection, occupational safety and health, and energy management, all have passed certification of ISO 9001, ISO 14001, OHSAS18001/ TOSHMS, ISO50001 standards, and continued tracking certification; in order to further improve our production process safety management procedures, we established a production process safety promotion organization and implemented the production process safety analysis technology, production process accident investigator training, to improve factory safety. In addition, we continue to promote various health and wellness programs aggressively, building a healthy work environment, and all three factory sites have been awarded the Badge of Accredited Healthy Workplace (Smoke Free and Health Promotion). In order to adhere to the trends of global energy conservation and carbon reduction, the Toufen and Dashe Factory were also certified for Green Factory in 2018, continue to move toward the goal of cyclical economy and sustainable developments as our corporate vision.

2. Corporate Social Responsibility: Since 2013, CPDC has established a CSR Committee and issued a CSR report on an annual basis to disclose sustainable development management achievements. In 2018, the Company continued to participate in the Corporate Sustainability Award organized by Taiwan Institute for Sustainable Energy and received the 11th TCSA Taiwan Corporate Sustainability Award - Top50 CSR Report Platinum Award, actively moving toward the realization of "Green Petrochemical Enterprise" as the purpose with the spirit of innovation and change to practice Corporate Sustainable Management with actions. In addition. Also, CPDC continues to proactively resolve the environmental pollution issues at the Taiwan Alkaline An-Shun Factory, which was acquired during the government-controlled period in the Company history. For this historical burden, the Company has put in significant resources to research and develop the pollution remediation technology, establish a dedicated responsible team to promote the remediation task and revitalize the land, and the Company is followed by the request of Tainan City to continue the remediation so that there are still large expenditures, which affect the shareholders' rights. The Company will adopt all necessary means to strive for the rights of the Company and shareholders and also hopes to receive the support of shareholders and endeavor after legal right from the Tainan City Government, expecting to reproduce the vitality of the land and recreate the quality living environment for the area.

3. Future Prospect and R&D: For the existing manufacturing process improvement, we aim for continuing improvements of existing manufacturing process technology towards improving efficiency, lowering manufacturing costs, and developing cyclical production and green production process technologies with energy conservation, carbon reduction as our key objectives. In the related product development, we implement related byproducts and derivatives development on the current manufacturing processes, controlling the raw material advantages, and strengthening the integration of raw material supplies from up and downstream supply chains, developing cyclic ketone derivatives, nylon 6 downstream niche products and blending modified products, etc., and developing special chemicals and nylon engineering plastics and other multi-aspect applications; In new product development, we have combined market intelligence, worked with existing development technology surveys, evaluated our advantages to produce high value products with market development potential (such as: established a special project development team, targeting high value products with market development potential (such as high refractive optical materials, lipid derivatives,

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hydrogenated products, and functional polymers, etc.). Based on the core technology and existing products, we increase the sales of high-value products and expand the layout of our industrial chain. At the same time, we actively communicate with downstream customers and provide all aspects of the product chain.

II.Future Operating Outlook

• (I) The Company shall focus on expanding the two-pronged business approaches of “Petrochemical Industry” and “Land Development” as the primary management principles.The future operating prospects of the Company's two-pronged focus in the petrochemical core business and land development are illustrated described as follows:

• 1 Petrochemical Core Business:

  • (1). Short-term Planning:

Optimize the existing operation capabilities: In addition to increase the raw material and product troughs, expand own-product capacity and improve manufacturing efficiency, promote greenhouse gas reduction, also continue our efforts towards optimization of factory operations, accelerate our efforts in factory smart automation, and gradually introduce AI technologies, moving towards building a fully-automated factory.

Develop Multiple High Value Products: In addition to continuously launch new products, increase added value for nylon products, and develop specialty chemical products with wide applications, lipid derivatives, and functional polymers, also engage in development of biomass raw materials, and move towards green production process development.

• (2). Long-term Planning:

Build an Integrated On-stop Overseas Production Base: To prevent price of intermediate raw materials from volatility that negatively affects the stability of profitability, the intermediate raw materials can be balanced locally and lower storage and transportation costs, integrating the energy and materials to reduce the energy consumption costs, and improve the advantage of cost competitiveness.

Introduce New Products and New Technology: In addition to establishing our own technologies and launching new products sales, the Company will move toward biomass, green environmental protection manufacturing process development; in addition, we will develop our own AI application technologies through promotion of Smart Factory Automation systems, build the AI foundation for the petrochemical core business, and further develop AI applications, products, and services specifically for the petrochemical industry in the future to establish the advantages for technological competition.

Establish Smart Management Systems: Improve the synergy of the Company's Command Center, plan to build the business intelligence management platform, where we expect to increase the quality of decisions and establish the advantage of management competitiveness through integration of market analysis, supply and production forecasts and adjustments, production monitoring and operating efficiency analysis and other information.

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Report to shareholders

• (2) Land Development:

• (1). Short-term Planning:

Aiming at planning and revitalizing the existing land assets of "Taiwan" as the goal: The Company is located in the 5A and 6th Special Zones of Kaohsiung Multi-Functional Commerce and Trade Park, and will follow the construction of the Asia New Bay Area developed by the Kaohsiung City Government and the relocation of the 205 Arsenal, to promote related development plans and move toward the direction of investment leasing, expecting to create the highest value for the Company’s land assets.

Aiming at penetrating "overseas" real estate development through layout: Follow the new business opportunities brought by China “The Belt and Road Initiative” strategy, and the South East Asia emerging market, the Company will aggressively pursue overseas land development projects with investment potential in Vietnam and Myanmar, and purchase land with development value.

• (2). Long-term Planning:

Promote the “Taiwan” Land-related Development Plan in Phases and Area: Responding to the government's greening and energy-conservation policies, the Company aims at constructing buildings with carbon absorbing and suitable for living when develop and plan the programs.

Develop the "Overseas" real estate development: Combining agricultural farming in Vietnam, Myanmar or other Southeast Asian development areas, obtaining petrochemical biomass raw materials, establishing a petrochemical core business production base and promoting residential and commercial development, with the ultimate goal of sustainable operation, production, loving and ecological wisdom town as the objective.

In the future, CPDC will not forget the corporate social responsibility that it shoulders and fulfill the mission of a global citizen and the vision of a green petrochemical company and strive to achieve sustainable development and create a happy life for mankind.

We thank you, our shareholders, for the many years of support.

I sincerely wish you good health and fortune,

Regards, Chairman Ko Ming Lin

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Two. Introduction to Company

I. Date of Establishment

1. Date of establishment: April 24, 1969

2. Date of registration of incorporation: July 8, 1969

II. The Company History

The Company was founded on April 24, 1969 and the incorporation of the Company was approved by the Ministry of Economic Affairs on July 8, 1969. The Company’s registered address is 11F., No. 12, Dongxing Rd., Songshan Dist., Taipei City. The head offices were relocated to No.1, Jingjian Rd., Dashe Dist., Kaohsiung City on July 18, 2016. The Company and its subsidiaries are principally engaged in the business lines of the production of petrochemical products, sodium chloride and phosphoric acid and their derivatives, and in the storage, transportation, purchase and marketing of related chemical products and raw materials and supplies. Its main products are Caprolactam (CPL), Acrylonitrile (an), Nylon (CHIP) and so on. The company's important milestones in the year are as follows:

1969 April 24th The company was founded, for the Ministry of Economic Affairs as a state-owned business. 1973 May Production of ethane cracking plant on behalf of processing; 1990/09 shut down the factory to stop production.

• 1973 June Production of DMT plant started; 1982/07 shut down of the factory to stop production.

• 1976 June No.1 Acrylonitrile unit of Dashe on stream. 1979 January No.2 Acrylonitrile unit of Dashe on stream.

• 1982 May Following the mandate from the Ministry of Economic Affairs, CPDC

was merged with another State-Owned Enterprise, Chungtai Chemical Co., Ltd.

• 1982 July Following the mandate from the Ministry of Economic Affairs, CPDC also took over the Kaohsiung plant of Taiwan Alkali Co., Ltd and changed the name to CPDC Chen-Jen plant; Shut down production in May, 1988.

• 1983 January Following the mandate from the Ministry of Economic Affairs, CPDC was merged with another State-Owned Enterprise, China Phosphate Co., Ltd.

• 1983 April Following the mandate from the Ministry of Economic Affairs, CPDC was merged with another State-Owned Enterprise, Taiwan Alkali Co., Ltd.

• 1985 March GAC unit of DaShe Plant on stream.

• 1991 July 12th CPDC stocks were listed at the Taiwan Stock Exchange Corporation, and CPDC released a 20% per cent stake in the company.

• 1993 July The company's Kaohsiung plant cyclohexanone plant has ceased operations until today.

1993 December The Budget Economic Joint Committee of the Legislative Yuan passed the proposal of CPDC's privatization.

• 7 -

Company Profile

1994	June 20th	After the company's equity was released again by CNPC, the proportion
		of public stock fell to 36.63%. The registration of change in the roster of
		shareholders was completed on the date, and the Company was
		privatized from being a state-owned enterprise.
1999	September	Nylon chip unit on stream.
2001	January	CPL Plant No. 3 on stream( Hsiaokang Plant) and Co-gen unit of Toufen
		Plant and Hsiaokang Plant on stream.
2002	December	Full implementation of ERP system (Oracle ERP).
2003	December	Kaohsiung plant (CPL Plant No. 1 ) was shut down.
2011	April	CPL expansion project of Hsiaokang Plant completed trial run.
2012	April	CPL expansion project of Toufen Plant completed trial run.
2012	June	Acrylonitrile expansion project of Dashe Plant completed trial run.
2012	October	CPL expansion project of Toufen Plant completed trial run.
2012	December	The GAC unit of Dashe Plant was shut down.
2015	August	Phenol unit of Toufen Plant completed trial run.
2016	June	100,000 tons of CPL unit of Toufen Plant on stream officially started
		production.
2016	July	Head office relocation to No. 1, Jingjian Rd., Dashe Dist., Kaohsiung
		City
2016	December	Hsiaokang Plant obtained the Clean Production Certification from the
		Industrial Bureau of the Ministry of Economic Affairs
2017	April	Dashe Plant obtained the Clean Production Certification from the
		Industrial Bureau of the Ministry of Economic Affairs
2017	October	Toufen Plant obtained the Clean Production Certification from the
		Industrial Bureau of the Ministry of Economic Affairs
2017	December	Won the 2017 10th "TCSA Taiwan Corporate Sustainability Award"-
		Gold Award for TOP50 Report of the traditional manufacturing group
2017	December	Won the 2017 BSI British Standards Association International Standard
		Management Annual conference "Sustainable Practice Award"
2018	March	Dashe Plant's new control room building received the
		Green Building Diamond Grade' certification
2018	July	Toufen Plant nylon factory won the 'Green Building Silver' certification
2018	September	Dashe Plant obtained the "Green Factory Seal" issued by the industry
		Bureau
2018	September	Toufen plant obtained the "Green Factory Seal" issued by the industry
		Bureau
2018	October	Toufen plant obtained ISO 14046 water Footprint Verification statement
2018	December	2018 won the 11th " TCSA Taiwan Corporate Sustainability Award"--the
		traditional manufacturing TOP50 Report Platinum Award

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Three. Report on Corporate Governance

I. Organization

• (I) Organizational Chart

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----- Start of picture text -----

Shareholders’
Audit Committee
Secretariat
Remuneration Board of
Audit Office
CSR
Shareholder
CEO Office CEO
President’s President
Environment Safety & Environmental Protection &
l h C
Legal Counsel R&D Center
Real Time Video
Division Division Division
Finance Division
Administration Division Production Division Business and Trade Land Development China Business
----- End of picture text -----

Data Deadline : March, 2019

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Corporate Governance Report

• (II) Operations and functions

• President’s Office:

Responsible for assisting the General Manager in execution, policy promotion, supervisory and management. Responsible for communication, research, analysis, planning and making overall operating plans to ensure development, evaluation and planning of domestic and international industrial cooperation projects and investment opportunities are effective. Develop related products, technology, environmental, economic and social environment business intelligence for current and newly developed products and derivative products market research to ensure that production, supply, and sales are integrated. Execution of other identified projects and specified business developments.

1. Environment Safety and Health Center

Responsible for the Company’s safety, health and environmental, fire emergency and safety, energy conservation, water conservation and waste management policies. Assist each plant in planning, promotion, execution, supervision, and management of production safety management (PSM) systems. Collect Company and industry specific health and safety regulatory changes and technology. Participate and discuss with government parties to ensure that the standards are in compliance. .

1. Environmental Protection and Pollution Control Center

Responsible for planning, execution and operations that relate to environmental protection, energy savings and carbon reduction, waste water savings and management, pollution, and recycling. The planning, execution, supervision and management of environmental-related ISO systems, responsible for evaluation, planning and execution of land remediation plans. Collect company and industry-specific environmental regulatory changes and remediation technology. Participate and discuss with government parties to ensure that standards are in compliance.

1. Legal Counsel

Responsible for providing legal advice and opinion to the Company, reviewing and revising the Company’s contracts, legal instruments and internal regulations, executing litigation and non-litigation cases.

1. R&D Center

Responsible for planning and execution of the Company’s R&D strategies, development, test, technology transfer, production, sales, technology service and promotion of new product. Design, planning and management of pilot plant and manufacturing process, and improvement, execution and setting of intellectual property rights rules; investigation, research, application, maintain, security and management of intellectual properties.

1. Trade Department

Plan and execute the marketing strategy and sales policies, including the sale and purchase,

and re-sale trading business of company products and by-products, the business of supply

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and inventories management, credit assessment, provision of credit, follow up of overdue receivables management, contracting operations of production, factory construction, factory expansion and operations related to raw materials and factory machinery procurement, insurance, compensation, customs and tax returns, repair and maintenance of facilities, supplier database management, organizational regulations, and any other appointed tasks from the general manager.

7. Production Department

Responsible for the production, transportation and management of products, by- products and derivatives, planning and execution of production strategy, collecting, analyzing, researching engineering data to improve production and efficiency, planning and execution of core engineering technique, designing, planning, managing and improving manufacturing process and facilities, operating activities and regulations related to technical services.

1. Finance Department

Responsible for planning and execution of financial, accounting, tax business, managing securities positions, capital budgeting policies, cost of capital and capital structure planning, internal auditing, corporate communications with external stakeholders, maintaining and managing stakeholder relations activities, information disclosure, improving corporate transparency, and annual review and recommendation of improvements to corporate governance evaluations.

1. Department of ManageResponsible for information systems, network systems, office automation systems,

computerized standard operating procedures, information security polices, planning, building, promotion, and maintenance of software program authorization and terms of use. The planning of human resources, recruitment, compensation and benefits planning, management of job positions, performance management, talent training and development, employee relations and fixed asset, operating assets, asset insurance, and general affairs. Production, construction, plant expansion plans and construction project bids, procurement of raw materials and machinery, supply, materials, and machinery related insurance, claims, customs tax returns, refunds, and guarantee deposit returns and related matters. Construction development, raw material, and machinery supplier database maintenance and creation.

10. Land Development Department

Responsible for Company real estate investment planning, procurement, disposal and management. Development strategy establishment and execution, evaluation of land development, planning and project management. Market research, land permit rezoning, public relations and institutional negotiations. Land development purchasing and procurement, construction progress management and quality management, development project sales planning and business development, commercial real estate operations and facilities management, including modern residential construction and sales.

1. China Division

2. 11 -

Corporate Governance Report

Responsible for planning, assessment, research, execution and management of the Company’s business lines in Mainland China. Responsible for cross-straits governmental applications, establishment, and approvals, including negotiations of contracts and favorable terms, production methodology, selection and procurement of construction contracts. Continue to monitor and communicate progress and factory construction.

1. Real Time Video Monitoring Center

Pro-actively confirm site work status, according to SOP daily notification/identification, according to SOP on abnormal alarm processing and response notification, regular image screen inspection, factory real-time operation information monitoring, head office area security management, according to the plan to implement emergency response drills, support management units to carry out image access work, Integration of unexpected events and SOP deficiencies, such as the discovery of the process or environment to be improved, to provide units to improve the work, the factory abnormal notification, to assist theplant emergency response as and other business.

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II. Information About Director, President, Vice President, Assistant Vice President and Head of Department and Branch

(I) Information about directors

1. Information about directors

1. Information about directors	1. Information about directors	1. Information about directors	1. Information about directors	1. Information about directors	1. Information about directors	1. Information about directors
																		March 26,2019 Other Chiefs, Supervisors or Directors with Spouses or Relatives Within the Second Degree of Kinship Job Title Name Relationship Not Applicable None
Job Title (Note 1)	Nationality or registered country	Name	Gender	Election Date	Term of Office	Date of first election (Note 2)	Time during election Status of Shareholding		Now Status of Shareholding		Current Shares Held by Spouse and Children of Minor Age		Shareholding Under the Name of a Third Party		Major (Academic Degree) Experience (Note 3)	Currently serves the company and Duties in other companies		Other Chiefs, Supervisors or Directors with Spouses or Relatives Within the Second Degree of Kinship
							Quantity	Shareholding Ratio	Quantity	Shareholding Ratio	Quantity	Shareholding Ratio	Quantity	Shareholding Ratio				Job Title	Name	Relationship
Chairman	Republic of China Republic of China	The Core Pacific Co.,Ltd.	Not Applicable	2018/04/11	Three years to 2021/04/10	830726	39,285,806	1.455%	39,285,806	1.455%	0	0.000%	0	0.000%	Not Applicable		Not Applicable	Not Applicable
		The Core Pacific Co., Ltd. Representative: Ko Ming Lin	Male	2018/04/11	Three years to 2021/04/10	1001122	0	0.000%	98,896	0.004%	0	0.000%	0	0.000%	NCCU Department of International business Director and General Manager of Core Pacific - Yamachi	Director of Kaohsiung Monomer Co., Ltd. (Legal Representative) Supervisor of Handy Chemical Corporation, Ltd. Director of Tsou Seen Chemical Industries Corporation (Legal Representative) Director of Tao Zhu Construction and Development Co., Ltd. Director of BES Engineering Corporation Director of Taiex Therapeutics Corporation Supervisor of BES Twin Towers Development Co., Ltd. Director and Vice Chairman of Weihua (Rudong) Trade Co., Ltd. Director and Vice Chairman of Weiqiang International Trade (Shanghai) Co., Ltd. Director of Zhangzhou Weida Petrochemical Corporation. Chairman and GM of Weida (Zhangzhou) Consulting Corporation Chairman of Kunshan Weichin Management Consulting Corporation Director of Weiming (Jiangsu) Petrochemical Company Director of Changzhou Weicai New Material Science & Technology Co., Ltd. Director and Chairman of Unichem Development Limited Director and Chairman of Rich Equities Ltd. Executive Director of Core Pacific Twin Towers (Myanmar) Investment Co. Ltd. Director of Core Pacific Pioneer (Myanmar) Co., Ltd. Director of Thanh Phong Construction Investment Co., Ltd. Director of Core Pacific Twin Star (Myanmar) Investment Co., Ltd.		None

==> picture [70 x 182] intentionally omitted <==

Job Title (Note 1)	Nationality or registered country	Name	Gender	Election Date	Term of Office	Date of first election (Note 2)	Time during election Status of Shareholding	Time during election Status of Shareholding	Now Status of Shareholding	Now Status of Shareholding	Current Shares Held by Spouse and Children of Minor Age	Current Shares Held by Spouse and Children of Minor Age	Shareholding Under the Name of a Third Party	Shareholding Under the Name of a Third Party	Major (Academic Degree) Experience (Note 3)	Major (Academic Degree) Experience (Note 3)	Currently serves the company and Duties in other companies	Currently serves the company and Duties in other companies	Other Chiefs, Supervisors or Directors with Spouses or Relatives Within the Second Degree of Kinship	Other Chiefs, Supervisors or Directors with Spouses or Relatives Within the Second Degree of Kinship	Other Chiefs, Supervisors or Directors with Spouses or Relatives Within the Second Degree of Kinship
							Quantity	Shareholding Ratio	Quantity	Shareholding Ratio	Quantity	Shareholding Ratio	Quantity	Shareholding Ratio					Job Title	Name	Relationship
Vice Chairman Vice Chairman	Republic of China Republic of China	BES Machinery Co.,Ltd	Not Applicable	2018/04/11	Three years to 2021/04/10	890524	12,486,043	0.462%	12,486,043	0.462%	0	0.000%	0	0.000%	Not Applicable			Not Applicable	Not Applicable
		BES Machinery Co., Ltd Representative: Bai Jiun-Nan	Male	2018/04/11	Three years to 2021/04/10	890524	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Master Degree Department of Economics of NTU Ph.D. in Law, Institute of Economics, Chinese Culture University Vice Chairman of BES Engineering Corporation		Director of Core Pacific City Co., Ltd. Director of BES Engineering Corporation Director of Taivex Therapeutics Corporation Independent Director of Concord Security Co., Ltd. Independent Director of MEGAFORCE COMPANY LIMITED Chairman of First Leasing Co. Ltd. (Legal Representative) Chairman of Bo-Mong Investment Co. Ltd. Director of Weili Food Industries (Legal Representative) Director of Jiansu Core Pacific Yamachi Commercial Insurance Co. Ltd.		None	None	None
Independent Director Independent Director	Republic of China Republic of China	Steve Chen Ruey-Long	Male	2018/04/11	Three years to 2021/04/10	1010630	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Department of Applied Economics in NCHU Minister, Ministry of Economic Affairs Chairman, Institute for Information Industry Chairman, Sinocon Industrial Standards Foundation Secretary-General, Cross-Strait Entrepreneur Summit		Independent Director of Formosa Chemicals & Fibre Corporation Independent Director of Wahsin Liwha Corporation Independent Director of Inventec Corporation. Director of HANNSTAR BOARD CORPORATION Director of Asia Cement Corporation Director of TEKNOWLEDGE DEVELOPMENT CORP. Chairman of Powerchip Technology Co., Ltd. Director of Maxchip Director of Bank of Panhsin		None	None	None
Independent Director Independent Director	Republic of China Republic of China	Chu Yun-Peng	Male	2018/04/11	Three years to 2021/04/10	1010630	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Department of Economics in NTU. Ph. Economics, University of Maryland, USA Administrative Committee of the Executive Yuan Professor of Department of Economics in NCU Chairman, Taiwan Insurance GuarantyFound		Independent Director, Nan Ya Plastic Corporation Independent Director, Taiwan Land Development Corporation Chairman, Bozhen Service Co., Ltd.		None	None	None
Independent Director Independent Director	Republic of China Republic of China	Pan Wen-Yen	Male	2018/04/11	Three years to 2021/04/10	2013/06/28	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Master’s degree and Ph.D, Department of Chemical Engineering in University of Wyoming. Senior Research Engineer, Monsanto Company -Chairman, Kuo Kuang Power Co., Ltd. Chairman, CPC Corporation Chairman, CTCI Foundation		Independent Director, UPC Group Director, CTCI		None	None	None
Independent Director	Republic of China Republic of China	The Core Pacific Co.,Ltd.	Not Applicable	2018/04/11	Three years to 2021/04/10	830726	39,285,806	1.455%	39,285,806	1.455%	0	0.000%	0	0.000%		Not Applicable	Not Applicable		Not Applicable
		The Core Pacific Co., Ltd. Representative: Shen Hwa-yeang	Male	2019/02/11	2019/02/11 to 2021/04/10	2019/02/11	0	0.000%	145,800	0.005%	0	0.000%	0	0.000%	Master, Asian Institute of Technology of Water resources engineering Chairman of BES Engineering Corporation		Chairman of BES Engineering Corporation Director of BES Machinery Co., Ltd Director of Coreasia Director of CKS Guard Co. Ltd. Director of Core Pacific City Co., Ltd. Director of CHINATOWN Director of Overseas Investment & Development Corp. Director of ANPORT COLD CHAIN Supervisor of Cinemark Supervisor of Cinemark Ximen Supervisor of HRDDL Director of BES Construction Corporation (U.S.A.) Director of Global BES Engineering (Myanmar) Co.,Ltd		None	None	None

Job Title (Note 1)	Nationality or registered country	Name	Gender	Election Date	Term of Office	Date of first election (Note 2)	Time during election Status of Shareholding	Time during election Status of Shareholding	Now Status of Shareholding	Now Status of Shareholding	Current Shares Held by Spouse and Children of Minor Age	Current Shares Held by Spouse and Children of Minor Age	Shareholding Under the Name of a Third Party	Shareholding Under the Name of a Third Party	Major (Academic Degree) Experience (Note 3)	Currently serves the company and Duties in other companies	Currently serves the company and Duties in other companies	Other Chiefs, Supervisors or Directors with Spouses or Relatives Within the Second Degree of Kinship	Other Chiefs, Supervisors or Directors with Spouses or Relatives Within the Second Degree of Kinship	Other Chiefs, Supervisors or Directors with Spouses or Relatives Within the Second Degree of Kinship
							Quantity	Shareholding Ratio	Quantity	Shareholding Ratio	Quantity	Shareholding Ratio	Quantity	Shareholding Ratio				Job Title	Name	Relationship
Independent Director	Republic of China Republic of China	Jen Huei Enterprise Co., Ltd	Not Applicable	2018/04/11	Three years to 2021/04/10	2006/06/30	16,123,959	0.597%	16,123,959	0.597%	0	0.000%	0	0.000%	Not Applicable		Not Applicable	Not Applicable
		Jen Huei Enterprise Co. Ltd Representative: Guo Jiun-Huei	Male	2018/04/11	Three years to 2021/04/10	2004/06/11	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Department of Accounting Soochow University General manager of Taiwan Power Company	Director of CM Director of SU Director of AR	CNET MAGH IMA	None	None	None
Independent Director	Republic of China Republic of China	Sheen Chuen-Chi Cultural and Educational Foundation	Not Applicable	2018/04/11	Three years to 2021/04/10	890524	1,781,269	0.066%	1,781,269	0.066%	0	0.000%	0	0.000%	Not Applicable	Not Applicable		Not Applicable
		Representative of Sheen Chueh-Chi Cultural and Educational Foundation: Lian-Sheng Tsai	Male	2018/04/11	Three years to 2021/04/10	1010630	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Master Degree of Graduate Institute of China Studies TKU Department of International Trade FCU Director General, Intellectual Property Office, Ministry of Economic Affairs, R.O.C. Executive Secretary, Investment Commission, MOEA Secretary General, Bureau of Foreign Trade, MOEA Deputy Secretary General, Cross-Strait CEO Summit	Secretary-General of The Chinese National Federation of Industries Director of The Research and Development Institute of Vocational Training Republic of China Director of Asia Pacific Intellectual Property Association Deputy Secretary General, Cross-Strait CEO Summit		None	None	None
Independent Director	Republic of China Republic of China	Sheen Chuen-Chi Cultural and Educational Foundation	Not Applicable	2018/04/11	Three years to 2021/04/10	890524	1,781,269	0.066%	1,781,269	0.066%	0	0.000%	0	0.000%	Not Applicable	Not Applicable		Not Applicable
		Representative of Sheen Chueh-Chi Cultural and Educational Foundation: Kuen-Ming Lin	Male	2018/04/11	Three years to 2021/04/10	1010630	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Department of Electrical Engineering NTU Chairman of TVCA Director of Haixia Deputy Secretary General, Cross-Strait CEO Summit	Chairman and GM of Premier VC Chairman of Premier Capital Management Corporation General Manager and Director of Kunji Venture Capital Co., Ltd. Chairman of RUBY TECH CORPORATION Director of DEXIN CORPORATION Director of AMIT Director of Zipcom corporation. Director of Lung Hwa Electronics Co., Ltd. DIrector of TERAWINS,INC Director of DELTAMAC(TAIWAN)CO.,LTD Director of UISCO Independent Director of Getac Technology Corp		None	None	None

Note 1: The institutional shareholder shall be identified by name and representative (in the case of institutional representative, please specify the institutional shareholder’s name) and also complete the following Table 1. Note 2: Please also specify if the initial term of office for the Company’s director or supervisor is interrupted.

The Core Pacific Co., Ltd. Representative: Shen Hwa-yeang. Term of office: 2019/02/11~2021/04/10

Note 3: Refers to experiences related to the current post. If the officer once assumed a post in a CPA Office or as an affiliate of the Company, please specify the job title and responsibilities.

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Corporate Governance Report

2. Major shareholders of corporate shareholders

March 26, 2019

	March 26,2019
Corporate shareholder name (Note 1)	Major Shareholders of Corporate Shareholders (Note 2)
Jen Huei Enterprise Co., Ltd	Ruan Sheng-Yuan (9.38%), Chen Shu-Chen (0.62%), Hsu Rue-Ping (9.38%), Hsu Ai-Chu (8.75%), Wu Ting (10.00%), Tsou Jing Technology Co., Ltd. (9.38%), Tien JingInvestment Co.,Ltd.(8.75%)
The Core Pacific Co., Ltd.	Jinghua Investment Co., Ltd. (9.11%), Chen Chi Enterprise Co., Ltd. (9.29%), Jinghua Supermarket Co., Ltd. (8.49%), Hung Yi Construction Co., Ltd. (6.67%), Tang Lin-Mei (9.11%), Wu Ting (6.67%), Wu Chun-Feng (6.67%), Ching Ding TechnologyCo.,Ltd.(7.74%),Hsu Rue-Ping (13.30%),ChangTung-An(5.56%)
Sheen Chuen-Chi Cultural and Educational Foundation	(An established non-profit organization)
BES Machinery Co., Ltd.	BES ENGINEERING CORPORATION(98.96%), Chen Wuxiong (0.06%), Yang Wenlie (0.03%), Lai Ruiqi (0.02%), Zeng Weiliang (0.02%), Cai Zhiwen (0.02%), Lin Jiahe(0.02%),Gao Zhengyang (0.02%),JiangZhongyu(0.01 %)

Note 1: For director or supervisor who acts as a corporate shareholder’s representative, please specify the corporate shareholder’s name.

Note 2: Please specify names of the major shareholders of the given corporate shareholder (top ten shareholders) and the ratio of shareholding. Where the major shareholder is a corporation, please complete the following Table 2.

3. Major Shareholders of Major Corporate Shareholder

3. Major Shareholders of Major Corporate Shareholder	3. Major Shareholders of Major Corporate Shareholder
March 26,2019
Corporate shareholder name(Note 1)	Major Shareholders of Corporate Shareholders (Note 2)
BES ENGINEERING CORPORATION	China Petrochemical Development Corporation (CPDC) (9.748%), The Core Pacific Development & Investment Co. Ltd. (2.237%), Datong Trust Advanced Starlight Advanced General International Stock Index Fund Investment Account (1.461%), Tong Development Industrial Co., Ltd. (1.391%), Kuo Ching Investment Co., Ltd. (1.378%), Lin Wenyang (1.299%),Morgan Hosts Vanguard's Emerging Market Stock Index Fund Account(1.197%), Sheen Chuen-Chi Cultural and Educational Foundation (0.835%), Tien Jing Investment Co., Ltd. (0.795%), Kyoto Construction and Development Co.,Ltd.(0.718%)
Jinghua Investment Co., Ltd.	Tianjing Investment Co., Ltd. (6.75%), Kyoto Construction and Development Co., Ltd. (9.94%), KUO CHING CHEMICAL CO., LTD.(9.00%), Zhiyong Development Industrial Co., Ltd. (9.00%), WuTing (30.00%), Ching Ding Technology Co., Ltd.(24.00%), Chen Chi Enterprise Co.,Ltd.(11.25%)
Jinghua Supermarket Co., Ltd.	Fu Hsing Management Consultation Co., Ltd. (0.59%), Yuan Wei Enterprise Co., Ltd. (1.73%), Hsu Rue-Ping (0.85%), Cheng Li-Feng (1.30%), Chen Chi Enterprise Co., Ltd. (0.33%), Chang An-Tung (0.47%), Yu Fan-Lang (1.04%), Asia Pacific Industrial & Commercial Joint Admission Co.,Ltd.(41.25%)

• 16 -

==> picture [182 x 70] intentionally omitted <==

Corporate shareholder name(Note 1)	Major Shareholders of Corporate Shareholders (Note 2)
Hung Yi Construction Co., Ltd.	Tianjing Investment Co., Ltd. (17.42%), Kyoto Construction and Development Co., Ltd. (24.17%), Ching Ding Technology Co., Ltd.(2.53%), Jinghua Department Store Co., Ltd. (5.05%), Zhang Dongan (2.53%), Xu Yibin (2.53%), Yao Zhesheng (6.06%),Wu Zhuan(12.63%),Chen Chi Enterprise Co.,Ltd.(15.15%)
Ching Ding Technology Co., Ltd.	Hongyi Construction Co., Ltd. (9.07%), Chen Chi Enterprise Co., Ltd.(14.67%), Fuxing Management Consultant (share) company(8.13%), Tsou Jing Technology Co., Ltd.(8.14%), Jingzheng Industrial Co., Ltd.(9.76%), Tan Lingmei (0.52%), Zhang Dongan (0.96%), Xu Yibin (1.57%), Fan Zhenqun (3.21%), Zibo Enterprise Co.,Ltd.(8.95%)
Chen Chi Enterprise Co., Ltd.	Ching Ding Technology Co., Ltd.(15.00%), Jingguo Housing Agency (shares) company (33.60%),FanyangIndustrial Co.,Ltd.(15.00%),Wu Chunfeng (36.40%)
Tsou Jing Technology Co., Ltd.	Kuo Ching Investment Co., Ltd. (27.50%), Wu Ting (2.50%), Hsu Rue-Ping (33.75%), Wu Hsueh-Ming (1.25%), Tang Lin-Mei (2.50%), Yu Fan-Lang (5.00%), Chen Chi Enterprise Co.,Ltd.(27.50%)
Tien Jing Investment Co., Ltd.	Wu Ting (17%), Yao Che-Sheng (5.56%), Hsu Rue-Ping (5.96%), Kuo Ching Investment Co., Ltd. (20.74%), Chen Chi Enterprise Co., Ltd. (2.91%), Ching Ding TechnologyCo.,Ltd.(10.53%),HungYi Construction Co.,Ltd.(21.42%)

Note 1: The names of the major corporate shareholders referred to in Table 1, if any, shall be specified. Note 2: Please specify names of the major shareholders of the given shareholder (top ten shareholders) and the ratio of shareholding.

• 17 -

Corporate Governance Report

4. Expertise and independence of directors

March 26, 2019

Qualifications Name (Note 1)	Whether or not having more than five years of work experience And the following professionalqualifications	Whether or not having more than five years of work experience And the following professionalqualifications	Whether or not having more than five years of work experience And the following professionalqualifications	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Number of public companies where the person holds the title as an independent director
	Lecturer or above in commerce, law, finance, accounting or subjects required by the business of the company in public or private colleges or universities	Pass the qualification examination with proper licensing by the national Government Apparatus as court judge, prosecutor, lawyers, certified public accountant or other professional designations required by the business of the Company	Required Work experience in commerce, law, finance, accounting or others required by the Company	1	2	3	4	5	6	7	8	9	10
Ko-MingLin														0
Bai Jiun-Nan														2
Steve Chen Ruey-Long														3
Chu Yun-Peng														2
Pan Wen-Yen														1
Guo Jiun-Huei														0
Lian-ShengTsai														0
Lin Kuen-Ming														1
Kuan Ren Soong														0
Shen Hwa-yeang														0

• Note 1: The number of spaces shall be adjusted subject to the actual circumstances.

• Note 2: Each of the directors and supervisors meets the following conditions during the two years prior to the election and during the term of office. Please type each condition code in the space below “  ”。

• (1) Not an employee of the Company or its affiliates.

• (2) Not a director or supervisor of the Company or its affiliates (excluding the capacity of the independent director of the Company or its parents, or a subsidiary directly or indirectly held by the Company with more than a 50% stake).

• (3) Not a natural person, spouse, underage children, or under the title of a third party who holds more than 1% of the outstanding shares issued by the Company or among the top 10 natural person shareholders.

• (4) Not a spouse, kin at the second tier under the Civil Code, or a lineal blood relative within the third tier under the Civil Code as specified in (1) through (3).

• (5) Not a director, supervisor or employee of a corporate shareholder who holds more than 5% of the outstanding shares issued by the Company or a director, supervisor or employee of a corporate shareholder who is among the top 5 shareholders.

• (6) Not a director, supervisor, manager or shareholder holding more than 5% of the outstanding shares of a specific company or institution in a business or financial relationship with the Company.

• (7) Not a professional, owner, partner, director, supervisor, manager of proprietorship, partnership, company or institution that provides business, legal, financial and accounting services to the Company or its affiliates or a spouse to the persons. However, in accordance with the listing of shares or the establishment and exercise of the terms of reference of the Corporate Pay Committee of the Securities Commercial premises, the members of the Pay compensation committee for the performance of their functions under rule seventh.

• (8) Not a spouse to or a kin to the second tier under the Civil Code to any other director.

• (9) Not under any of the categories stated in Article 30 of the Company Law.

• (10) No Government Apparatus agency, juristic person or its representative is elected under Article 27 of the Company Act.

• Note 3: At 2019/02/11 The Core Pacific Co., Ltd. Representative changes from Kuan Ren Soong to hen Hwa-yeang.

• 18 -

(II) Information about President, Vice President, Assistant Vice President and Head of Department and Branch

March 26, 2019

(II)	Inform	ation ab	out	Presid	ent, Vice P	ent, Vice P	resident, A	resident, A	ssistant Vic	ssistant Vic	e President and Head of De	partment and Branch	March 26, 2019	March 26, 2019	March 26, 2019
Job Title	Nationality or Registry	Name	Gender	Take office	Status of Shareholding		Current Shares Held by Children of Minor Age		Shareholding Under the Name of a Third Party		Major (Academic Degree) Experience	Positions Held Concurrently in any Other Companies	Managerial Officers with Spouses or Relatives Within the Second Degree of Kinship
				Date
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
CEO	Republic of China Republic of China	Ko-Ming Lin	Male	2018/10/01	98,896	0.004%	0	0.000%	0	0.000%	NCCU Department of International business Director and General Manager of Core Pacific - Yamachi	Director of Kaohsiung Monomer Co., Ltd. (Legal Representative) Supervisor of Handy Chemical Corporation ,Ltd. Director of Tsou Seen Chemical Industries Corporation (Legal Representative) Director of Tao Zhu Construction & Development Co., Ltd. Director of BES Engineering Corporation Director of Taiex Therapeutics Corporation Supervisor of BES Twin Towers Development Co., Ltd. Director and Vice Chairman of Weihua (Rudong) Trade Co., Ltd. Director and Vice Chairmanof Weiqiang International Trade (Shanghai) Co., Ltd. Director of Zhangzhou Weida Petrochemical Corporation. Chairman and GM of Weida (Zhangzhou) Consulting Corporation Chairman of Kunshan Weichin Management Consulting Corporation Director of Weiming (Jiangsu) Petrochemical Company Director of Changzhou Weicai New Material Science & Technology Co., Ltd. Director and Chairman of Unichem Development Limited Director and Chairman of Rich Equities Ltd. Executive Director of Core Pacific Twin Towers (Myanmar) Investment Co. Ltd. Director of Core Pacific Pioneer (Myanmar) Co., Ltd. Director of Thanh Phong Construction Investment Co., Ltd. Director of Core Pacific Twin Star(Myanmar)Investment Co.,Ltd.	None	None	None
President	Republic of China Republic of China	Janson Yu	Male	20171110	34,000	0.001%	917	0.000%	0	0.000%	Director and Chief financial officer of Yangzhou Core Pacific City Co., Ltd. Chief financial officer of Core Pacific City Co., Ltd. Project Manager of Core Pacific Securities Co., Ltd EMBA, Xiamen University Department of Accounting in Fu-Jen Catholic University	Director representative of Kaohsiung Monomer Co., Ltd. Supervisor of Tsou Seen Chemical Industries Corporation Director of CPDC Investment (BVI) Co., Ltd. Director of Rich Equities Ltd. Director of Zhangzhou Weida Petrochemical Co., Ltd. Director of Taivex Therapeutics Corporation Director Representative and GM of Tao Zhu Construction & Development Co., Ltd. Director Representative of CPDC Green Technology Corporation Director and GM of Weida(Zhangzhou) Consultant Service Co., Ltd. Director and GM of BES Twin Towers Development Co., Ltd. Chairman of Daying Construction Director of Core Pacific Twin Star (Myanmar) Investment Co., Ltd. GM of Changzhou Weicai New Material Science and Technology Co., Ltd. Director of Weihua (Rudong) Trade Co., Ltd. Director and GM of Kunshan Weichin Management Consulting Corporation GM of Weiqiang International Trade (Shanghai) Co., Ltd. Director of Core Pacific Pioneer(Myanmar)Co.,Ltd.	None	None	None
Vice President	Republic of China Republic of China	Huang Kuo-Tsai	Male	2017/02/24	0	0.000%	0	0.000%	0	0.000%	Investigation Officer of Ministry of Justice Section Chief of Civil Service Protection and Training Commission Senior Executive Officer of National Academy of Civil Service Secretary General of National Academy of Civil Service Deputy Director of National Academy of Civil Service Counselor of Civil Service Protection & Training Commission Deputy General Manager in Management Department of BES Master Degree in Public Administration of NCCU	None	None	None	None

==> picture [69 x 181] intentionally omitted <==

Job Title	Nationality or Registry	Name	Gender	Take office	Status of Shareholding	Status of Shareholding	Current Shares Held by Children of Minor Age	Current Shares Held by Children of Minor Age	Shareholding Under the Name of a Third Party	Shareholding Under the Name of a Third Party	Major (Academic Degree) Experience	Positions Held Concurrently in any Other Companies	Managerial Officers with Spouses or Relatives Within the Second Degree of Kinship	Managerial Officers with Spouses or Relatives Within the Second Degree of Kinship	Managerial Officers with Spouses or Relatives Within the Second Degree of Kinship
				Date
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
Vice President	Republic of China Republic of China	Liu Yun Zhi	Male	2018/08/01	0	0.000%	0	0.000%	0	0.000%		Thanh Phong Construction Investment Co., Ltd. GM Core Pacific Twin Star (Vietnam) Investment Co., Ltd. President	None	None	None
Vice President	Republic of China Republic of China	Chi-Chun Chia	Male	2018/11/01	164	0.000%	0	0.000%	0	0.000%	Engineer of Chunglin Corporation Engineer, Supervisor, Manager of CPDC Chemical Fiber in National Taipei University of Technology	Director Representative of CPDC Green Technology Corporation Director of Weiming (Jiangsu) Petrochemical Company Director of Changzhou Weicai New Material Science & Technology Co., Ltd. Director of Gemini Star(India)Private Limited.	None	None	None
Chairman's Office Special Assistant	Republic of China Republic of China	Lin Ching	Male	20160713	0	0.000%	0	0.000%	0	0.000%	Team leader of Construction and Planning Agency Director of Administration of Yushan National Park Director of Administration of Shueipa National Park Director of Administration of Kenting National Park Master degree in Urban Planningin NCHU	Director of Living Mall Chairman of Touyuan Investment	None	None	None
President Special Assistant	Republic of China Republic of China	Yuan-Long Chen	Male	2016/07/01	73,200	0.003%	0	0.000%	0	0.000%	Factory Chief of CCP Manager of CTTIC Group Corporation Chief Engineer of Taiwan Industrial and Mine Corporation Assistant of ARCHWELL Corporation Manager, Factory Chief of CPDC Master,NTU Chemical Engineering	Representative of the Director of legal person , CKSGUARD Director of Zhangzhou Weida Petrochemical Co., Ltd. General Manager, JiangSu WeiMing Petrochemical Co. Ltd.	None	None	None
Lead Auditor	Republic of China Republic of China	Yang Huei-Fan	Female	20130108	0	0.000%	0	0.000%	0	0.000%	Administrator and Manager of CPDC Department of Business Administration of Fu-Jen Catholic University	None	None	None	None
Assistant Vice President	Republic of China Republic of China	Zuo Shu-Tong	Male	20180102	0	0.000%	0	0.000%	0	0.000%	AVP, Global Brands Manufacturing Product Manager, DuPont Taiwan Six Sigma Black Belt AVP, Production Division MBA Fu Jen Catholic University	Director, WEIQIANG International Trading (Shanghai) CO., LTD.	None	None	None
Assistant Vice President	Republic of China Republic of China	Chen Ying-Chun	Male	2016/07/01	0	0.000%	0	0.000%	0	0.000%	Senior Administrator, Specialist, Manager and Assistant Vice President of CPDC Accounting of Chinese Culture University	Supervisor of Taivex Therapeutics Corporation Supervisor of Kaohsiung Monomer Co., Ltd. Director Representative of CKS Guard Co. Ltd. Director of CPDC Investment (BVI) Co., Ltd. Director of Rich Equities Ltd. Supervisor of CPDC Green Technology Corporation Supervisor of Weihua (Rudong) Trade Co., Ltd. Supervisor of Weiqiang International Trade (Shanghai) Co., Ltd. Supervisor of Zhangzhou Weida Petrochemical Corporation Supervisor of Weida(Zhangzhou) Consultant Service Co., Ltd. Supervisor of Kunshan Weichin Management Consulting Corporation Supervisor of Jiangsu (Weiming) Petrochemical Company Supervisor of Changzhou Weicai New Material Science & TechnologyCo.,Ltd.	None	None	None
Assistant Vice President	Republic of China	Tsai Chia-Wei	Male	2015/05/01	16,585	0.001%	18,344	0.001%	0	0.000%	Engineer, Specialist, Manager, Assistant Vice President in CPDC Ph.D. in MOES of National Sun Yat-sen University	None	None	None	None
Assistant Vice President	Republic of China	Tsai Wen-Chih	Male	20160713	21,587	0.001%	0	0.000%	0	0.000%	Section Manager of Project Section in Toufen factory Vice President in Engineering Center of Manufacture Section Chemical Engineering of National Taiwan University of Science and Technology	None	None	None	None
Assistant Vice President	Republic of China	Lin Chin-Hsiang	Male	2018/03/27	7,833	0.000%	0	0.000%	0	0.000%	Manager, CPDC Hsiaokang Plant, Environmental Team Masters in Chemical Engineering, National Taiwan University	None	None	None	None
Assistant Vice President	Republic of China	Li Guan	Male	2018/09/17	0	0.000%	0	0.000%	0	0.000%	Assistant Manager of CPDC National Taipei University of Technology Chemical Engineering	None	None	None	None
Factory Manager	Republic of China Republic of China	Chien hsien Li	Male	2016/07/01	98,597	0.004%	43,000	0.002%	0	0.000%	Supervisor, Specialist, Manager and Factory Chief of CPDC Master Degree of Chemical and Materials Engineering Department in National Central University	None	None	None	None

Job Title	Nationality or Registry	Name	Gender	Take office	Status of Shareholding	Status of Shareholding	Current Shares Held by Children of Minor Age	Current Shares Held by Children of Minor Age	Shareholding Under the Name of a Third Party	Shareholding Under the Name of a Third Party	Major (Academic Degree) Experience	Positions Held Concurrently in any Other Companies	Managerial Officers with Spouses or Relatives Within the Second Degree of Kinship	Managerial Officers with Spouses or Relatives Within the Second Degree of Kinship	Managerial Officers with Spouses or Relatives Within the Second Degree of Kinship
				Date
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
Factory Manager	Republic of China Republic of China	Kao Chi-Tsung	Male	2016/07/01	0	0.000%	0	0.000%	0	0.000%	CPDC CPLIII Plant Engineering Department engineer, CPDC Hsiaokang Plant production of a group of Cyclohexanone workshop duty supervisor, senior engineer, director, technical team manager Master Degree of Chemical and Materials Engineering in TamkangUniversity	None	None	None	None
Factory Manager	Republic of China Republic of China	Cheng Jung-Wen	Male	2016/07/01	28,313	0.001%	0	0.000%	0	0.000%	Sinopec Kaohsiung Factory Manufacturing Department engineer, CPL III Plant Engineering Department engineer, Xiaogang Plant amide factory engineer, senior engineering factory director, production team manager Master’s Degree in Chemical Engineering in National Taiwan Universityof Science and Technology	None	None	None	None
Manager	Republic of China Republic of China	Wang Yen-Li	Male	20180101	47,470	0.002%	0	0.000%	0	0.000%	Manager, CPDC Business and Trade Division, Raw Materials Procurement Master’s in HR,National Central University	None	None	None	None
Manager	Republic of China Republic of China	Li Chi-Chang	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC Admin Division, HR Department Fiber Engineering, National Taiwan University of Science and Technology	None	None	None	None
Manager	Republic of China Republic of China	Chen Yung-Long	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC Admin Division, IT Department Master’s in IT,TamkangUniversity	None	None	None	None
Manager	Republic of China Republic of China	Yang Peiyu	Female	2018/08/01	9,000	0.000%	0	0.000%	0	0.000%	CPDC Stock Office Senior Manager, Commissioner, Manager CUTE International Trade Section	None	None	None	None
Manager	Republic of China Republic of China	Yang Shou-Chin	Female	20180101	14,377	0.001%	0	0.000%	0	0.000%	Manager, CPDC Finance Division, Cash Management Department Textile Engineering,Taipei Institute of Technology	None	None	None	None
Manager	Republic of China Republic of China	Chang Chi-Wei	Female	20180101	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC R&D Center, R&D Department Master’s in Materials Engineering,NSYSU	None	None	None	None
Manager	Republic of China Republic of China	Chen Chi-Ho	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC R&D, Materials Development Department PhD, Institute of Materials and Optoelectronics National Sun Yat-sen University	None	None	None	None
Manager	Republic of China Republic of China	Yang Ming-Ling	Female	20180101	0	0.000%	5,000	0.000%	0	0.000%	Manager, CPDC Legal Counsel JD, National Taipei University	None	None	None	None
Manager	Republic of China Republic of China	Yang Chi-Yuan	Male	20180101	6,327	0.000%	0	0.000%	0	0.000%	Manager, CPDC, China Business Division, Construction Department Chemistry and Engineering, National Taiwan University of Science and Technology	None	None	None	None
Manager	Republic of China Republic of China	Chen Jian-Ming	Male	20180101	90	0.000%	0	0.000%	0	0.000%	Manager, CPDC, Toufen Plant, Production 2nd Team Chemical Engineering, National Taiwan University of Science and Technology	None	None	None	None
Manager	Republic of China Republic of China	Chen Hong-Long	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC Toufen Plant, Public Department Masters in Textile Engineering, Feng Chia University	None	None	None	None
Manager	Republic of China Republic of China	Li Chiao-Pin	Male	20180101	184	0.000%	0	0.000%	0	0.000%	Manager, CPDC Toufen Plant, Production 1st Team Master’s in Chemical Engineering,Yuntech University	None	None	None	None
Manager	Republic of China Republic of China	Wang Chi-Fong	Male	20180101	5,875	0.000%	0	0.000%	0	0.000%	Manager, CPDC Toufen Plant, Nylon Team Chemical Engineering, National Taiwan University of Science and Technology	None	None	None	None
Manager	Republic of China Republic of China	Chien Chang-Mo	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC Dashe Plant, Production Team Master’s in Chemical Engineering, NCKU	None	None	None	None
Manager	Republic of China Republic of China	Wang Chong-Chien	Male	20180101	20,330	0.001%	0	0.000%	0	0.000%	Manager, CPDC Dashe Plant, Technical Team Master’s in Chemical Engineering,Yuan Zhe University	None	None	None	None
Manager	Republic of China Republic of China	Li Chin-Yi	Male	20180101	32,000	0.001%	0	0.000%	0	0.000%	Manager, CPDC Dashe Plant, Administrative Department Master’s in Chemistry,NCKU	None	None	None	None

==> picture [69 x 181] intentionally omitted <==

Job Title	Nationality or Registry	Name	Gender	Take office	Status of Shareholding	Status of Shareholding	Current Shares Held by Children of Minor Age	Current Shares Held by Children of Minor Age	Shareholding Under the Name of a Third Party	Shareholding Under the Name of a Third Party	Major (Academic Degree) Experience	Positions Held Concurrently in any Other Companies	Managerial Officers with Spouses or Relatives Within the Second Degree of Kinship	Managerial Officers with Spouses or Relatives Within the Second Degree of Kinship	Managerial Officers with Spouses or Relatives Within the Second Degree of Kinship
				Date
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
Manager	Republic of China Republic of China	Huang Chien-Yuan	Male	20180101	392	0.000%	0	0.000%	0	0.000%	Manager, CPDC Dashe Plant, Safety Team Master’s in Chemical Engineering,TamkangUniversity	None	None	None	None
Manager	Republic of China Republic of China	Li Kun-Nan	Male	20180101	171,161	0.006%	555	0.000%	0	0.000%	Manager, CPDC Hsiaokang Plant, Production 2nd Team Master’s in Mechanical Engineering, Tsinghua University	None	None	None	None
Manager	Republic of China Republic of China	Li Kung-Da	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC Hsiaokang Plant, Technical Team Master’s in Chemical Engineering, National Taiwan University	None	None	None	None
Manager	Republic of China Republic of China	Jian Zhanghong	Male	2018/05/10	0	0.000%	0	0.000%	0	0.000%	CPDC Equipment Purchasing Office Manager Department of Industrial Engineering Management, Yuan Ze University	None	None	None	None
Manager	Republic of China Republic of China	Chien Kuan-Der	Male	20180101	10,397	0.000%	305	0.000%	0	0.000%	Manager, CPDC Hsiaokang Plant, Administrative Team Masters in IT, Kaohsiung University of Applied Sciences	None	None	None	None
Manager	Republic of China Republic of China	Tsai Chau-Yuan	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC Hsiaokang Plant, Production 1st Team Masers in Chemical Engineering,Tunghai University	None	None	None	None
Manager	Republic of China Republic of China	Wu Junxian	Male	2018/11/01	0	0.000%	0	0.000%	0	0.000%	CPDC Corporate Planning Group Manager Department of Chemical Engineering National Cheng KungUniversity	None	None	None	None
Manager	Republic of China Republic of China	Zhang Chenglong	Male	2018/07/01	18,000	0.001%	0	0.000%	0	0.000%	CPDC Information Center Senior Engineer, Information Systems Management Group senior engineer, Commissioner, data application Office Manager Department of Information Engineering Management National PingtungInstitute of Commerce	None	None	None	None
Manager	Republic of China Republic of China	Gao Tianshui	Male	2018/11/05	0	0.000%	0	0.000%	0	0.000%	CPDC Project Control Team Master’s of Business Management Institute National Chengchi University	None	None	None	None
Manager	Republic of China	Chen Yi Yan	Male	20180101	13,745	0.001%	0	0.000%	0	0.000%	CPDC Manager, Director, Project associate Chemical Engineering, National Taiwan University of Science and Technology	None	None	None	None
Manager	Republic of China	Wei Ren	Male	20180101	1,281	0.000%	0	0.000%	0	0.000%	Supervisor, Specialist, Manager and Factory Chief of CPDC Department of ChemistryChinese Culture University	None	None	None	None
Manager	Republic of China	Liu Yung-Fu	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Assistant manager of SAMPO Securities Co. Ltd Assistant manager of Core Pacific Securities Co., Ltd. GM of Zhipin（Fuzhou）Technology Engineering Co.,Ltd. GM of Waterland Financial Holding Co., Ltd. Associate of Masterlink Securities Corp. MBA from Indiana State University	None	None	None	None
Manager	Republic of China	Ho Mu-Chuan	Male	20180101	45,000	0.002%	62,740	0.002%	0	0.000%	Engineer of Manufacture Section in CPDC Engineer of Utilities Section in Toufen factory of CPDC Factory Chief in CPL factory in Toufen factory of CPDC Manager of Environmental Engineering Section in Toufen factory of CPDC Degree in Textile from the National Taiwan University of Science and Technology	None	None	None	None

1 Shareholding data deadline: Until 2019, shareholders ' regular stop transfer date and Published date

(iii) honorariums for directors (including independent directors), general managers and deputy general managers

• 1.Remuneration to Directors (including independent directors) (names and remuneration thereof to be disclosed individually)

December 31, 2018; unit: thousand dollars

Job Title	Name	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	The total amount of four items A, B, C and D as a percentage of net profit after tax(Note 10)	The total amount of four items A, B, C and D as a percentage of net profit after tax(Note 10)	Remuneration in the capacityas employees	Remuneration in the capacityas employees	Remuneration in the capacityas employees	Remuneration in the capacityas employees	Remuneration in the capacityas employees	Remuneration in the capacityas employees	Remuneration in the capacityas employees	Remuneration in the capacityas employees	The total amount of seven items A, B, C, D, E, F and G as a percentage of net profit after tax(Note 10)	The total amount of seven items A, B, C, D, E, F and G as a percentage of net profit after tax(Note 10)	Remuneration from investees other than subsidiaries (Note 11)
		Remuneration (A) (Note 2)		Retirement Pension (B)		Director’s remuneration (C) (Note 3)		Business execution costs (D) (Note 4)				Salary, bonus and special fee, etc. (E) (Note 5)		Retirement Pension (F)		Employee remuneration (G) (Note 6)
		The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company		All companies in the financial report (Note 7)		The Company	All companies in the financial report (Note 7)
																Cash dividend	Stock dividend	Cash dividend	Stock dividend
Chairman	The Core Pacific Co., Ltd. Representative: Ko-MingLin	0	0	0	0	16,267	17,616	0	407	0.3792%	0.4201%	14,723	14,723	0	0	0	0	0	0	0.7223%	0.7633%	143
Independent Director	The Core Pacific Co., Ltd. Representative : Kuan Ren Soong	0	0	0	0	16,267	16,267	284	284	0.3858%	0.3858%	0	0	0	0	0	0	0	0	0.3858%	0.3858%	108
Director & Vice Chairman	BES Machinery Co., Ltd Representative: Bai Jiun-Nan	0	0	0	0	16,267	16,267	0	15	0.3792%	0.3795%	4,952	4,952	0	0	0	0	0	0	0.4946%	0.4949%	0
Independent Director	Jen Huei Enterprise Co., Ltd Representative: Guo Junhui	0	0	0	0	16,267	16,267	288	288	0.3859%	0.3859%	0	0	0	0	0	0	0	0	0.3859%	0.3859%	0
Independent Director (2018/04/11 Expiration of term of office)	Representative of Jen Huei Enterprise Co., Ltd.: Wu Ting	0	1,492	0	0	0	0	67	97	0.0016%	0.0370%	0	0	0	0	0	0	0	0	0.0016%	0.0370%	10
Independent Director	Representative of Sheen Chueh-Chi Cultural and Educational Foundation: Lian-ShengTsai	0	0	0	0	16,267	16,267	284	284	0.3858%	0.3858%	0	0	0	0	0	0	0	0	0.3858%	0.3858%	0
Independent Director	Representative of Sheen Chueh-Chi Cultural and Educational Foundation: Kuen-MingLin	0	0	0	0	16,267	16,267	284	284	0.3858%	0.3858%	0	0	0	0	0	0	0	0	0.3858%	0.3858%	0
Independent Director	Steve Chen Ruey-Long	3,410	3,410	0	0	0	0	0	0	0.0795%	0.0795%	0	0	0	0	0	0	0	0	0.0795%	0.0795%	0
Independent Director	Chu Yun-Peng	2,400	2,400	0	0	0	0	0	0	0.0559%	0.0559%	0	0	0	0	0	0	0	0	0.0559%	0.0559%	0
Independent Director	Pan Wen-Yen	2,400	2,400	0	0	0	0	0	0	0.0559%	0.0559%	0	0	0	0	0	0	0	0	0.0559%	0.0559%	0
*In addition to the disclosures in the above table, the remuneration of directors fromprovidingservices(e.g., as the consultant of non-employees)to all companies in financial statements in the recentyear: None.

Note 1: Directors’ names shall be identified one by one (corporate shareholders shall be identified by the corporate shareholder’s name and representative individually), and the various payments shall be summarized and then disclosed. Note 2: The remuneration to directors in the most recent year (including director’s salary, duty allowance, severance pay, bonus and rewards, et al.). Note 3: The remuneration to directors approved by the Board of Directors prior to the motion for the allocation of earnings submitted to the shareholders' meeting in the most recent year. Note 4: The directors’ professional practicing fees in the most recent year (including transportation allowance, special allowance, various allowances and provision of such tangible objects as dormitory and car, et al.). If a house, car and any other transportation means or exclusive personal allowance is provided, please disclose the nature and cost of the assets, rent inputted based on the actual value or fair value, fuel expenses and other benefits. If a driver is assigned, please specify the pay made by the Company to the driver, but exclude the same from the remuneration. Note 5: It means the salary, duty allowance, severance pay, bonus, reward, transportation allowance, special allowance, various allowances and provision of such tangible objects as dormitory and car received by the directors who acted as employees concurrently (including the president, vice president, managerial officer and employee) in the most recent year. If a house, car and any other transportation means or exclusive personal allowance is provided, please disclose the nature and cost of the assets, rent imputed based on the actual value or fair value, fuel expenses and other benefits. If a driver is assigned, please specify the pay made by the Company to the driver, but exclude the same from the remuneration. The salary expenses recognized in accordance with IFRS 2 “Share-based payment” including obtaining employee stock option certificates, restricting employee rights, new shares and participating in cash increase subscription shares, shall also be included in the remuneration. Note 6: If the directors who acted as employees concurrently (including the president, vice president, managerial officer and employee) received employee bonus (including stock dividends and cash dividends) in the most recent year, please disclose the employee bonus approved

==> picture [69 x 181] intentionally omitted <==

by the Board of Directors prior to the motion for allocation of earnings submitted to the shareholders' meeting in the most recent year. If it is impossible to impute the same, the amount to be allocated this year shall be based on that allocated physically last year, and please also specify the table 1-3.

Note 7: The aggregate of the remuneration to directors in the Company from the companies included into the consolidated financial reports (including the Company) should be disclosed.

Note 8: The aggregate of the remuneration to each director by the Company shall include the director’s name disclosed in the relevant space of the following table.

Note 9: The aggregate of the remuneration paid to each of the Company’s directors by the companies included into the consolidated financial reports (including the Company) shall include the director’s name disclosed in the relevant space of the following table. Note 10: The earnings after tax refers to the earnings after tax in the most recent year. If the IFRSs are adopted, the earnings after tax shall refer to the earnings after tax identified in the entity or individual financial statement for the most recent year. Note 11: a.To specify whether or not the Company’s directors have received remuneration from investees beyond subsidiaries.

b. If the Company’s directors have received remuneration form investees beyond subsidiaries, please include the same into Section J in the following table and changed the name of the section into “all investees.”

• c. The remuneration shall refer to the remuneration, compensation, employee bonus and professional practicing fees received by the Company’s directors who acted as the directors, supervisors or managerial officers of investees other than subsidiaries.

• The remuneration disclosed herein is different from the income referred to in the Income Tax Law conceptually. Therefore, the breakdown is only intended for disclosure of information, instead of taxation.

• The remuneration disclosed herein is disclosed based on estimations and on an accrual basis.

2. Remuneration to the President and Vice President (Summarized in accordance with the Range of Remuneration disclosed)

								December 31, 2018 unit: thousand dollar	December 31, 2018 unit: thousand dollar	December 31, 2018 unit: thousand dollar	December 31, 2018 unit: thousand dollar	December 31, 2018 unit: thousand dollar	December 31, 2018 unit: thousand dollar	December 31, 2018 unit: thousand dollar
Job Title	Name	Salary (A) (Note 2)		Retirement Pension (B)		Bonus and special fee, etc. (C) (Note 3)		Employee remuneration Amount (D) (Note 4)				A, the total amount of four items, C and D, as a proportion of the net benefits after tax(%) (Note 8)		Remuneration from investees other than subsidiaries (Note 9)
		The Company	All companies included into the financial statement (Note 5)	The Company	All companies included into the financial statement (Note 5)	The Company	All companies included into the financial statement (Note 5)	The Company		All companies included into the financial statement (Note 5)		The Company	All companies included in the financial statement (Note 5)
								Cash dividend	Stock dividend	Cash dividend	Stock dividend
CEO	Ko-MingLin	20,613	22,758	0	0	23,718	24,230	11,811	0	11,811	0	1.308%	1.371%	302
President	Janson Yu
Vice President of the ManufacturingDivision	Chi-Chun Chia
Vice president of the Management Division	Huang Kuo-Tsai
Deputy Director of the Land Development Division	Liu Yun Zhi
Special Assistant of Chairman	Lin Ching
General manager	Yuan-LongChen

• Any positions correspondent to president or vice president (e.g. President, CEO or Director, et al.) shall be disclosed, irrelevant with job titles.

Reward level table

Reward level table
Payment The general manager and deputy general manager of the company Remuneration level	Name of President or Vice President
	The Company (Note 7)	All companies included into the financial statement (Note 8) E
Less than NT$ 2,000,000	Liu Yun Zhi	Liu Yun Zhi
NT$2,000,000 thousand (inclusive) ~ NT$5,000,000 (exclusive)	Lin Qing, Jia Zhizhong	Lin Qing
NT$5,000,000 (inclusive) ~ NT$10,000,000 (exclusive)	Yuan Long, Huang Guocai,	Yuan Long, Huang Guocai, Jia Zhizhong
NT$10,000,000 (inclusive) ~ NT$15,000,000 (exclusive)	Ko Ming Lin, Janson Yu	Ko Ming Lin, Janson Yu
NT$15,000,000 (inclusive) ~ NT$30,000,000 (exclusive)
NT$30,000,000 (inclusive) ~ NT$50,000,000 (exclusive)
NT$5,000,000 (inclusive) ~ NT$100,000,000 (exclusive)
NT$100,000,000 or more
Total	7 people	7 people

• Note 1: The name of the president or vice presidents shall be identified specifically and the various payments shall be summarized and then disclosed.

• Note 2: Please specify the salary, duty allowance and severance paid to the presidents and vice presidents in the most recent year.

• Note 3: Please specify the bonus, reward, transportation allowance, special allowance, various allowances and provision of such tangible objects as dormitory and car, as well as other remunerations, received by the presidents and vice presidents in the most recent year. If a house, car and any other transportation means or exclusive personal allowance is provided, please disclose the nature and cost of the assets, rent imputed based on the actual value or fair value, fuel expenses and other benefits. If a driver is assigned, please specify the pay made by the Company to the driver, but exclude the same from the remuneration. The salary expenses recognized in accordance with IFRS 2 “Share-based payment”, including obtaining employee stock option certificates, restricting employee rights, new shares and participating in cash increase subscription shares, shall also be included in the remuneration.

• Note 4: The amount of compensation (proposed number) of employees assigned by the board of directors in the most recent year by the general manager and deputy general manager is calculated. If it is not possible, the proposed distribution amount will be calculated according to the proportion of the actual distribution amount last year, and should be filled in separately. In addition, the third paragraph of Schedule 1 should be filled out. The earnings after tax refers to the earnings after tax in the most recent year. If the IFRSs are adopted, the earnings after tax shall refer to the earnings after tax identified in the entity or individual financial statement for the most recent year.

• Note 5: Please disclose the aggregate of the remuneration paid to the Company’s presidents and vice presidents by all companies included into the consolidated financial reports (including the Company).

• Note 6: The aggregate of the remuneration to each president or vice president by the Company shall include the president’s or vice president’s name disclosed in the relevant space of the following table.

• Note 7: The aggregate of the remuneration paid to each of the Company’s presidents and vice presidents by the companies included into the consolidated financial reports (including the Company) shall include the president’s and vice president’s names disclosed in the relevant space of the following table.

• Note 8: After tax net profit refers to the net profit after tax in the most recent year; if the international financial reporting standard has been adopted, the net profit after tax is the net profit after tax of individual or individual financial reports in the most recent year.

• Note 9: a. To specify whether or not the Company’s presidents and vice presidents have received remuneration from investees beyond the subsidiaries.

• b. If the Company’s presidents and vice presidents have received remuneration from investees beyond the subsidiaries, please include the same into Section E in the following table and change the name of the section into “all investees.”

• c. The remuneration shall refer to the remuneration, compensation, employee bonus and professional practicing fees received by the Company’s presidents and vice presidents who acted as directors, supervisors or managerial officers of investees other than the subsidiaries.

• The remuneration disclosed herein is different from the income referred to in the Income Tax Law conceptually. Therefore, the breakdown is only intended for disclosure of information, instead of taxation.

• The remuneration disclosed herein is disclosed based on estimations and on an accrual basis.

==> picture [69 x 181] intentionally omitted <==

Corporate Governance Report

3.Employee bonus amount paid to managerial officers:

	3.Employee bonus amount paid to managerial officers:	3.Employee bonus amount paid to managerial officers:	3.Employee bonus amount paid to managerial officers:	3.Employee bonus amount paid to managerial officers:	3.Employee bonus amount paid to managerial officers:	3.Employee bonus amount paid to managerial officers:
	December 31,2018;Unit: thousands of dollars
	Job Title (Note 1)	Name (Note 1)	Stock dividend	Cash Amount	Total	Total amount of after tax net profit Proportion(%)
Manager	President	Janson Yu	0	14,641	14,641	0.34%
	Vice President	Huang Kuo-Tsai
	Vice President	Liu Yun Zhi
	Vice President	Chi-Chun Chia
	Special Assistant	Lin Ching
	Special Assistant	Yuan-Long Chen
	Lead Auditor	Yang Huei-Fan
	Assistant Vice President	Zuo Shu-Tong
	Assistant Vice President	Tsai Chia-Wei
	Assistant Vice President	Chen Ying-Chun
	Assistant Vice President	Tsai Wen-Chih
	Assistant Vice President	Lin Chin-Hsiang
	Assistant Vice President	Li Guan
	Factory Chief	Cheng Jung-Wen
	Factory Chief	Kao Chi-Tsung
	Factory Chief	Chien hsien Li

Note 1: Please disclose the name and job title individually, while the allocation of earnings may be summarized and then disclosed.

Note 2: Fill in the amount of remuneration (proposed) for employees assigned by the Board of directors in the most recent year, and the proposed allocation for this year will be calculated in proportion to the actual amount allocated last year. After tax pure benefit refers to the most recent annual after-tax benefits; Those who have adopted the international Financial reporting guidelines refer to the net benefit of the most recent annual individual or individual financial reports after tax.

• Note 3: The scope of managerial officers shall be defined in the following manner, per the Board’s decree under Tai-Tsai-Cheng-3-Tze No. 0920001301 dated March 27, 2003:

• (1) President and equivalents;

• (2) Vice president and equivalents;

• 26 -

==> picture [182 x 70] intentionally omitted <==

  - (3) Assistant vice president and equivalents;

  - (4) Chief of Financial Dept.;

  - (5) Chief of Accounting Dept.;

• (6) Any other persons in charge of the Company’s affairs and entitled to sign instruments on behalf of the Company.

• Note 4: If any director, president or vice president has received employee bonus (including stock dividends and cash dividends), please complete table 1-2 and also this table.

• (IV) Specify and compare the salary to directors, presidents and vice presidents of the Company in proportion to the earnings after tax from the Company and companies included in the consolidated financial statements in the most recent 2 years, and specify the policies, standards, combinations, procedure of decision-making of remunerations and their relation to business performance and future risks:

  1. Total compensation paid to directors, presidents, and vice presidents (calculated based on estimations and on an accrual basis) as a percent of earnings after tax:

FY 2018	FY 2018	FY 2017	FY 2017
The Company	In the consolidated statement All companies	The Company	In the consolidated statement All companies
3.803%	3.942%	2.668%	2.674%

1. Total remuneration paid to directors, presidents, and vice presidents of the Company in proportion to the earnings after tax is analyzed as following:

2. Two percent of the Chairman (full-time) and directors ' remuneration of the Company shall be taken into account in the remuneration, supervisors, attendance fee level and consideration of performance and risk of the domestic and foreign industries and in accordance with the provisions of Article 28th of the Articles of Association 32nd;

3. The remuneration to the Company’s presidents and vice presidents (including salary, allowance and bonus, et al.) will be evaluated based on market intelligence, seniority, responsibilities, experience, performance and risk, and paid in accordance with Article 29 of the Company Act. The Company established the Remuneration Committee in September 2011. As the companies included into the consolidated financial statements are invested and wholly owned by the Company, the Company’s remuneration policy shall apply to them.

4. Regarding the procedures for establishing remuneration, in addition to considerations of the overall operating performance, industry outlook, risk management, and future development, we also consider personal performance and contributions to the company’s overall performance in the remuneration. Related performance evaluation and remuneration considerations are submitted to the remuneration committee and the board of directors for approval. Depending on operating conditions and related regulations, we also further review and revise our remuneration as necessary, with the aim in achieving a balance between sustainable management and risk controls.

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Corporate Governance Report

III. Status of Corporate Governance

(I) Operations of the Board

The 2018 Board of Directors met a total of 12 times [A]. The attendance record of directors & supervisors is listed below:

Job Title	Name( Note 1)	Representat ive	Actual attendance (B)	Attendance by proxy	Actual (column) rate (%)【Ｂ/Ａ】(Note 2)	Remarks
Chairman	The Core Pacific Co., Ltd. 1	Ko-Ming Lin	11	1	91.6
Independent Director	The Core Pacific Co., Ltd. 2	Kuan Ren Soong	11	1	91.6	On February 11, 2019, Mr. Song Yuren was reassigned as Mr. Shen Huayang.
Vice Chairman	BES Machinery Co., Ltd.	Bai Jiun-Nan	9	3	75
Independent Director	Steve Chen Ruey-Long		12	0	100
Independent Director	Chu Yun-Peng		11	1	91.6
Independent Director	Pan Wen-Yen		10	2	83.3
Independent Director	Shen Chunchi Culture and Education Foundation 1	Lian-Sheng Tsai	11	1	91.6
Independent Director	Shen Chunchi Culture and Education Foundation 2	Lin Kuen-Ming	11	1	91.6
Independent Director	Zhen Hui (shares) Co., Ltd. 1	Guo Jiun-Huei	12	0	100
Independent Director	Zhen Hui (shares) Co., Ltd. 2	Wu Ting	0	3	0	The term of office of the director expires on April 11,2018.
Other notes: I. If the operations of board of directors has one of the following situations, the minutes shall clearly state the meeting date, period, content of the resolution, opinions of all independent directors and the Company’s handling of the opinions of the independent directors: (Ⅰ) Items listed in Article 14-3 of the Securities and Exchange Act. 1 Establishment or revision of internal control according to Article 14-1: (1) Date of board: January 23, 2018 period: 20th session, 32nd time Motion content: Revise the Company "Board performance evaluation Method". Resolution: Approved by all attended directors. (2) Date of board: May 10, 2018 period: 21st session, 2nd time Motion content: Revise the company's "internal control system of stock units" (including the Internal Audit Regulations of unit units). Resolution: Approved by all attended directors. (3) Date of board: May 10, 2018 period: 21st Session 2nd Motion: Revision of the "Research cycle" section of the company's internal control. Resolution: Approved by all attended directors. (4) Date of board: June 28, 2018: The 21st session of the 3rd Motion: Revision of the company's "board of Directors and managers division of responsibilities" section of the provisions. Resolution: Approved by all attended directors. (5) Date of board: July 30, 2018 period: 21st Session, 4th time Motion: Revision of the company's "Pay compensation committee organizational procedures" section of the provisions. Resolution: Approved by all attended directors. 2. Procedures for the acquisition or disposition of assets, the trading of derivative commodities, the loan of funds to others, the endorsement of others or the provision of guarantees of significant financial business conduct in accordance with article 36th, 1: None. 3. Matters relatingto the directors ' own interests:

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(1) Date of board: January 23, 2018 period: 20th session, 32nd time
Motion: The Board of Directors of the Company shall nominate a list of independent directors and candidates for
directors.
Resolution: Approved by all attended directors.
(2) Date of board: February 26, 2018 period: 20th session, 33rd time
Motion: The company's 2017 director compensation assignment.
Resolution: Approved by all attended directors.
(3) Date of board: February 26, 2018 period: 20th session, 33rd time
Motion: The Board reviews the list of independent directors and directors nominated for election.
Resolution: Approved by all attended directors.
(4) Date of board: February 26, 2018 period: 20th session, 33rd time
Motion: To request the 2018 general meeting of shareholders to release the 21st term of directors of the company
(including independent directors) and representatives of corporate directors on the Prohibition of restrictions on
competition.
Resolution: Approved by all attended directors.
(5) Date of board: March 27, 2018 period: 20th session, 34rd time
Motion: The remuneration case of the Chairman of the company.
Resolution: Approved by all attended directors.
(6) Date of board: July 30, 2018 period: 21st Session, 4th time
Motion: The compensation case of the 21st term of the chairman of the company.
Resolution: Approved by all attended directors.
(7) Date of board: 107 July 30 Period: 21st Session, 4th time
Motion: The compensation case of the 21st term of the chairman of the company.
Resolution: Approved by all attended directors.
(8) Date of board: 107 July 30 Period: 21st Session, 4th time
Motion: The remuneration case of the 21st director of the company (excluding independent directors).
Resolution: Approved by all attended directors.
(9) Date of board: 107 July 30 Period: 21st Session, 4th time
Motion: The compensation case of the 21st term of the chairman of the company.
Resolution: Approved by all attended directors.
4. Significant asset or derivative commodity transactions:
(1) Date of board: February 26, 2018 period: 20th session, 33rd time
The content of the proposal: The company participates in the Jinghua City (stock) company is expected to be issued in
March 2018, the privately-issued special name can be transferred to special shares, the number of issued shares is
156,000 shares, the annual dividends interest rate is 8%, and the subscription price per share is NT$10. The total amount
is NT$1.56 billion.
(2) Date of board: August 10, 2018 period: 21st Session, 5th time
Motion: Recognition of the company's original index equity funds sold in batches between January 2018 and February.
Resolution: Approved by all attended directors.
(3) Date of board: September 17, 2018 period: 21st Session, 6th time
Motion content: The company obtained a 90% stake in Sheng Fung Company in Vietnam.
Resolution: Approved by all attended directors.
(4) Date of board: October 25, 2018 period: 21st Session, 7th time
Motion: The company directly or indirectly obtained a 100% stake in the Vietnam regional Sheng Fung Company.
Resolution: Approved by all attended directors.
(5) Date of board: December 27, 2018 period: 21st Session, 9th time
The content of the proposal: The Company disposed of the 97.86% equity of Shengfeng Company in Vietnam to
Singapore Tuofeng Investment Co., Ltd., which is indirectly invested by the Company.
Resolution: Approved by all attended directors.
5. Significant funds are loaned, endorsed or provided with assurances: none.
6. The collection, distribution or private equity of securities of an equity nature:
Date of board: May 10, 2018 period: 21st session, 2nd time
Motion: In order to enrich the working capital and the capital demand for future development, the Company intends to apply
for the domestic cash replenishment issue of common stock or cash replenishment to issue common stock in the case of the
limit of 500 million shares of common stock to issue overseas depository receipts.
Resolution: Approved by all attended directors.
7. Appointment, dismissal or remuneration of a visa accountant:
Date of board: May 10, 2018 period: 21st session, 2nd time
Motion: Renewing the accountant of the joint accounting firm of Hou Jianye for the company 2018
Financial and tax reports check visa accountants.
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Corporate Governance Report

	Resolution: Approved by all attended directors.
	8. Appointment and removal of the head of finance, accounting or internal audit: none.
	(II) In addition to the pre-opening situation, other directors' resolutions that have been opposed or retained by independent directors
	and have a record or written statement: None.
II.	The directors shall state the name of the directors, the content of the proposal and the interests of the parties to avoid the
	implementation of the interest-related motion avoidance.Due to participation and voting:
	(I) Proposal: The list of candidates for independent directors and directors nominated by the board of directors of the Company.
	Directors' avoidance situation: In case of discussing and voting on the list of candidates for independent directors, Chen
	Ruilong's independent director and Zhu Yunpeng's independent directors were absent from the company because of their own
	interests; when discussing and voting on the list of director candidates, Chairman Lin Keming and Bai Junnan Vice Chairman,
	Director Guo Junhui, Director Cai Nengsheng, Director Lin Kunming, and Director Song Yiren were absent from the company
	because of their own interests.
	(II) Content of the proposal: The Company participates in Beijing Huacheng Co., Ltd. It is expected that the private placement in
	March 2018 can be transferred to special shares, the number of shares issued is 156,000 shares, the dividend annual interest rate
	is 8%, and the subscription price per share is NT$10. Yuan, the total amount is NT$1.56 billion.
	Directors' avoidance situation: Vice Chairman Bai Junnan and Director Song Yongren are directors of Jinghua City Co., Ltd.,
	and they abstained when they discussed and voted on this case.
	(III) Content of the proposal: The special shares of Jinghuacheng Co., Ltd., which is held by the Company, will be transferred to the
	special period on March 11, 2018. It is proposed to exercise the right of extension to protect the interests of special shareholders.
	Directors' avoidance situation: Vice Chairman Bai Junnan and Director Song Yongren are directors of Jinghua City Co., Ltd.,
	and they absconded when they discussed and voted in this case.
	(IV) The content of the motion: The company's 2017 annual director’s compensation assignment.
	Directors' avoidance situation: Chairman Lin Keming, Vice Chairman Bai Junnan, Director Guo Junhui, Director Cai
	Nengsheng, Director Ko Ming Lin and Director Song Yiren had their own interests and abstained from the discussion and voting
	in this case.
	(V) The contents of the motion: The Remuneration case of Ko Ming Lin
	June, chairman of the company.
	Director avoidance situation: Ko Ming Lin chairman because of his own interests in this case abstained from discussing or voting
	on this issue.
	(VI) Content of the proposal: The board of directors reviews the list of candidates for independent directors and directors nominated.
	Directors' avoidance situation: The case Chairman of Ko Ming Lin, Vice Chairman of Bai Junnan, Independent Director Chen
	Ruilong, Independent Director Zhu Yunpeng, Independent Director of Pan Wenyan, Director of Guo Junhui, Director of Cai
	Liansheng, Director of Lin Kunming and Song Directors of Huanren have their own interests, taking turns to abstain during the
	discussions and voting.
	(VII) Content of the proposal: The 2018 Standing Committee of Shareholders is invited to agree to lift the restrictions on the
	non-competition of the 21st directors (including independent directors) of the Company.
	Directors Avoidance situation: Chairman Ko Ming Lin, Vice Chairman Bai Junnan, Independent Director Chen Ruilong,
	Independent Director Zhu Yunpeng, Independent Director of Pan Wenyan, Director of Guo Junhui, Director Cai Ningsheng,
	Director Lin Kunming and Director of Song Yiren had has its own interests and took turns to abstain during the discussions and
	voting.
	(VIII.) Content of the proposal: Sinochem Industrial Co., Ltd. (destroyed), a subsidiary of the Company, merged with Zhaoxin
	Chemical Industry Co., Ltd. Company (survival).
	Directors' evasion situation: The chairman Ko Ming Lin, a director of Zhonghuaxing Industrial Co., Ltd. and Zhaoxin Chemical
	Industry Co., Ltd., abstained from the discussion and voting in this case.
	(IX) Content of the proposal: The second phase investment plan of the first phase of the Jiangsu Rudong Petrochemical Base of the
	Company.
	Directors' evasion situation : Chairman Ko Ming Lin is a director of Weiming Company, and he abtained when discussing and
	voting in this case.
	(X) Content of the motion : Appointed independent directors of Chen Ruilong, Mr. Chen Songyong and Ms. Pan Weigang as members
	of the fourth salary compensation committee of the Company.
	Directors' avoidance situation: Chen Ruilong's independent directors have their own interests and were absent during the
	discussion and voting on the case.
	(XI.) Proposal: The remuneration case of Ko Ming Lin, the 21st Chairman of the Company.
	Directors' avoidance situation: Chairman Ko Ming Lin had his own interests and abstains from the discussion in the case of
	discussion and in the voting.
	(XII.) Proposal: The remuneration case of Bai Junnanjun, the 21st Vice Chairman of the Company.
	Directors' avoidance situation: Vice Chairman Bai Junnan his own interests and will withdraw from the case when discussing and
	voting on this case.
	(XIII>) Proposal: The 21st directors' remuneration of the Company (excluding independent directors).
	Directors' avoidance situation : Chairman Ko MingLin,Vice Chairman Bai Junnan,Director Guo Junhui,Director Cai

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		Nengsheng, Director Lin Kunming and Director Song Yiren had their own interests and will abstain from the discussion and
		voting in this case.
	(XIV)	Proposal: The 21st Independent Director's Remuneration Case of the Company.
		Directors' avoidance situation : Chen Ruilong's independent director, Zhu Yunpeng's independent director, and Pan Wenyan's
		independent directors had their own interests and abstain from the discussion in this case and in the voting.
	(XV) Content of the proposal: Ko Ming Lin, the chairman of the company, concurrently serves as the chief executive of the company.
		Directors' avoidance situation : Chairman Ko Ming Lin has his own interests and absconds from the discussion in the case of
		discussion and voting.
	(XVI)	The contents of the motion: The company holds the B and Geng registered special shares of Jinghua City Co., Ltd. will be
		converted into common stock depending on the application for real estate disposition in Jinghua City.
		Directors' avoidance situation: Vice Chairman Bai Junnan and Director Song Yongren were directors of Jinghuacheng Co., Ltd.,
		and they abstained when they discussed and voted in this case.
	(XVII) Proposal: In order to adjust the investment structure of Vietnam, the 97.86% equity of Vietnam Shengfeng Construction
		Investment Co., Ltd. held by the Company was transferred to Singapore Tuofeng Investment Co., Ltd., which is indirectly invested
		in by the Company.
		In addition, the investment approved by the board of directors for Shengfeng Company and the investment of Core Pacific Twin
		Star (Vietnam) Investment Co., Ltd.u003c1} will be fully increased by BES Twin Towers Development Co., Ltd. Indirect
		investment.
		Directors' evasion situation : Chairman of the Board of Directors Ko Ming Lin is the supervisor of BES Twin Towers
		Development Co., Ltd., who abstained from the discussion and voting in this case.
	(XVIII)Proposal: Donate NT$10 million to the Shenchunchi Culture and Education Foundation.
		Directors' avoidance situation: Chairman of the Board of Directors Ko Ming Lin and Vice Chairman Bai Junnan are the directors
		of the Shen Chunchi Culture and Education Foundation, directors of Cai Liansheng and Lin Kunming, directors of the legal
		director of the Shen Chunchi Culture and Education Foundation, and the four directors participated in discussing this case but
		abstained from voting at the time of voting.
	(XIX)The contents of the motion: Special bonus case of Ko Ming Lin, CEO of the company.
		Director avoidance situation : This case Ko Ming Lin The chairman had his own interests in this case and abstained from the
		discussion and the voting to avoid conflict of interest.
III	Measures undertaken during the current year and past year in order to strengthen the functions of the board of directors (such as the
	establishment of an audit committee and improvement of information transparency, etc.) and assessment of their implementation:
	(I)	In 2018, the company handled the internal evaluation of the overall board of directors, individual directors and audit committee
		performance in accordance with the “Board Performance Evaluation Method” and entrusted the corporate governance company
		of the China Corporate Governance Association to conduct external evaluation of board performance.
	(II) The implementation results of the internal evaluation of the performance of the Board of Directors in 2018 were: 94 points for
		the overall board of directors, 95.6 points for individual directors, and 99 points for the audit committee (the total score was 100
		points). The board of directors and the audit committee operated well.
	(III) The Corporate Governance Association of China has assessed the performance of the Board of Directors of the Company for
		2018. The results are good. The overall evaluation is as follows: 1. The company requires directors to have professional
		willingness to speak freely to fully exercise the functions of the board.
		2. the company's board of directors Operating Communication is in good condition. 3. the company can humbly accept the
		advice of outside expert consultants. 4. the company attaches importance to the training and succession of senior talent, the
		high-order successor should have the ability and characteristics, but also be clearly defined.
	(IV) The above assessment results and improvement suggestions were reported on the 22nd 12th Board of Directors on March 22,
		2019.
	(V) In order to further strengthen the operating effectiveness of the board of directors and functional committees of the Company, the
		Company plans to implement the annualperformance evaluation of the Compensation Committee from 2019 onwards.
Note 1:		For director or supervisor who is a corporation representative, please specify the corporate shareholder’s
		name and its representative’s name.
Note 2:		(1) Where a specific director or supervisor may be relieved from duties before the end of the fiscal year,
		please specify their date of discharge in the ‘Remarks” Section. Their actual attendance rate (%) to
		the Board sessions shall be calculated based on the number of meetings called and actual number of
		sessions he/she attended, during his/her term of office.
		(2) Where an election may be held for filling the vacancies of director or supervisor before the end of
		the fiscal year, please list out the names of both the new and the discharged directors or supervisors,
		and specify if they are the former director or supervisor, or newly elected, re-elected, and the date of
		the reelection. Their attendance rate (%) to the Board sessions shall be calculated based on the
		number of meetings called and the actual number of sessions they attended, during their term of
		office.

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Corporate Governance Report

• (II) The function of the Audit Committee or supervisors’ participation in the function of Board of Directors

The 2018 annual audit committee met 10 times (A) and the independent directors attended the

following cases:

Job Title	Name	Actual attendance (B)	Attendance by proxy	Actual attendance rate (%) (B/A) (Note)	Remark
Independent	Steve Chen	10	0	100.00
Director	Ruey-Long
Independent	Chu Yun-Peng	9	1	90.00
Director
Independent	Pan Wen-Yen	7	3	70.00
Director

Other notes:

I. If the operations of audit committee has one of the following situations, the minutes shall clearly state the meeting date, period, content of the resolution, opinions of all audit committee members and the Company’s handling of said opinions.

(Ⅰ) Items listed in Article 14-5 of the Securities and Exchange Act:

The resolutions approved by the Audit Committee which are in accord with Article 14-5 of the Securities and Exchange Act. are as follows:

• (1) Establishment or revision of internal control according to Article 14-1:

• Dates of the Board of Trustees: May 10, 2018:21st session, 2nd time

The contents of the motion: in conjunction with the provisions of the "Internal control system of unit units" in March (2018) of the collection and Settlement Institute, revise the company's "internal control system of stock units" (including the Internal Audit Regulations of the units). Resolution: Approved by all attending members.

Dealing with the opinions from the Audit Committee: Presented to the Board Meeting.

1. Date of board: May 10, 2018: The 21st session of the 2nd Motion: The amendment of the company's internal control of the "Research cycle" part of the provisions. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

2. Date of board: June 28, 2018: The 21st session of the 3rd Motion: amendments to the company's "board of Directors and managers division of responsibilities" section of the provisions. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 4. Dates of the Board of Trustees: June 28, 2018:21st Session, 3rd time Motion content: The duration of the company can be as soon as possible with the industry 4.0 and the trend of IoT applications and with the Times to accelerate the development of independent AI technology application capabilities, to the management department to organize the establishment of a "Data application Office" while cooperating with the revision of the "Company's organizational procedures." Resolution: Approved by all attended members.

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Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

1. Dates of the Board of Trustees: July 30, 2018:21st Session, 4th time Motion: Amend the provisions of the company's "pay compensation committee" organizational procedures. Resolution: Approved by all attended members.

Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. Assessment of the validity of internal control:

1. Dates of the Board of Trustees: February 26, 2018:20th session, 33rd time Motion content: The company of the Republic of China 2017 annual internal control system self-assessment (hereinafter referred to as the control self-assessment) operation has been completed, in accordance with the internal control self-assessment results, issued a statement of the system, according to the audit committee after the approval of the Board of Directors to report through.

Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: After being approved by the board of directors, the management’s reports on internal control signed by the chairman and the president were announced to the public.

1. Dates of the Board of Trustees: December 27, 2018:21st session, 9th time Motion content: The company's 2019 internal control audit plan, to be referred to the nuclear discussion. Resolution: Approved by all attended members.

The company's treatment of the audit Committee's opinion: by the Audit unit to report the current board of Directors resolution.

• (2) Procedures for the acquisition or disposition of assets, the trading of derivative commodities, the loan of funds to others, the endorsement of others or the provision of guarantees of significant financial business conduct in accordance with regulation 36th of the Certificate of Law: None of this is the case.

(3) Matters relating to the directors ' own interests: Board Date: December 27, 2018 period: 21st session 9th Motion content: Donate NT$1000 million yuan to the consortium Shen Chunchi Cultural and Educational Foundation, continue to promote the "relocation of Taiwan Historical Memory" related projects.

Resolution: Approved by all attended members.

Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. Trading of major assets or derivatives:

1. Dates of the Board of Trustees: February 26, 2018:20th session, 33rd time Content of the proposal: Application for the implementation of the “Nylon 6 Engineering Plastic Mixing Plant and Materials Development Building Construction Project” investment plan. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

2. Dates of the Board of Trustees: May 10, 2018:21st session, 2nd time Motion content: The company's subsidiary, Zhongjian Xing Industrial Co., Ltd. Business shrinkage year by year, in order to improve investment efficiency and efficient allocation of resources, the assessment proposed to build the company (elimination) and Mega Xin Company (survival) merger. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

3. 33 -

Corporate Governance Report

1. Dates of the Board of Trustees: May 10, 2018:21st session, 2nd time Motion content: In response to the company's vertical integration development strategy, it is proposed to purchase a 100% stake in Changzhou Huiyuan New Material Technology Co., Ltd. with a total investment of capital increase not exceeding RMB 295 million and sign a memorandum of cooperation to be submitted for approval. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 4. Dates of the Board of Trustees: May 10, 2018:21st session, 2nd time Motion: "Kaohsiung Port Intercontinental two warehousing logistics area investment and construction plan" project budget amount is proposed to be added NTD497,740K, the total investment amount increased to NTD2,411,905K. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 5. Dates of the Board of Trustees: June 28, 2018:21st Session, 3rd time The content of the proposal: In order to continue to promote the intelligent production of the third plant, it is planned to start the second phase of the “factory intelligent production management project” for the project capital expenditure. The estimated cost is NTD 349,903K. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 6. Dates of the Board of Trustees: June 28, 2018:21st Session, 3rd time Motion content: The company Jiangsu Rudong Petrochemical Base Phase I two-stage investment plan case. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 7. Dates of the Board of Trustees: July 30, 2018:21st Session, 4th time Motion content: The company Kaohsiung City Shang four land development plan case. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 8. Dates of the Board of Trustees: August 10, 2018:21st session, 5th time The content of the proposal: The index stock funds originally held by the company sold NT$624 million in batches from January to February 2018, and the sale proceeds totaled NT$134 million, of which the daily trading amount exceeded NT$1 billion for a total of three pens, for ratification. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 9. Dates of the Board of Trustees: November 13, 2018:21st Session, 8th time Motion content: In order to make Toufen Plant sustainable operation, reduce PM2.5 emissions, at the same time eliminate visual pollution, good corporate social responsibility, to implement the "Toufen Plant auto electrician smoke and power supply stability improvement project" planned capital expenditure case, the total cost of NT dollar (with the same) ginseng Ba Bai million yuan (NTD338, 000,000). Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. (4) Raising, issuing and private placement of equity-based securities: Date of board: May 10, 2018 period: 21st session, 2nd time Motion: In order to enrich the working capital and the capital demand for future development,

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the Company intends to apply for the domestic cash replenishment issue of common stock or cash replenishment to issue common stock in the case of the limit of 500 million shares of common stock to issue overseas depository receipts. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. (5) Appointment, discharge and compensation of certified CPAs: 1. Date of board: May 10, 2018: 21st session, 2nd Motion: The accountant of the joint accounting firm of the company is to be renewed to check the Visa accountant for the 2018 annual financial and tax report. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 2. Dates of the Board of Trustees: May 10, 2018:21st session, 2nd time The content of the proposal: Chen Junguang, accountant of the company's financial report and visa accountant Anhou Jianye United Certified Public Accountants, was changed to Chen Meifang accountant for internal rotation and submitted to the Audit Committee for consideration. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. (6) Annual financial report and half-year financial report: Date of board: February 26, 2018; August 10, 2018 Period: 20th session 33rd; 21st Session 5th Motion: Preparation of the company's 2017 individual financial statements and consolidated financial statements for review by the Board of Auditors; Proposed consolidated financial statements for the second quarter of 2018 of the company, Referred to the Board of Auditors for review. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. (7) Other major information: 1. Dates of the Board of Trustees: February 26, 2018:20th session, 33rd time Motion contents: The company intends to participate in the private offering of Jinghua City Co., Ltd. Geng registered special shares, the number of shares issued 156,000 shares, the dividend annual interest rate of 8%, the subscription price per share NT $10, the total amount issued is NT $1.56 billion. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 2. Dates of the Board of Trustees: February 26, 2018:20th session, 33rd time Motion content: The company holds the Beijing City Co., Ltd. b registered Special unit will be duration on March 11, 2018, to exercise the right of extension to preserve the interests of special shareholders. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 3. Dates of the Board of Trustees: May 10, 2018:21st session, 2nd time Motion content: In order to cooperate with the company petrochemical and land development double spindle strategy, expand the business layout and master the investment opportunity, it is proposed to set up an Indian subsidiary to carry out investment development business and related research. Resolution: Approved by all attended members.

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Corporate Governance Report

	Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.
	4. Date of the board: September 17, 2018 period: The 21st session of the 6th
	Motion content: The company intends to Kaohsiung multi-functional economic and Trade Park
	specific District area 5th A area to handle investment.
	Resolution: Approved by all attended members.
	Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.
	5. Dates of the Board of Trustees: October 25, 2018:21st Session, 7th time
	Motion: Vietnam's "First New Town Street profile Land" to obtain the right to use and
	development operations, assessed to invest 48 million of dollars in its own funds.
	It is proposed to handle the land development in this case and the equity
	transaction and capital increase of Vietnam Sheng Fung Company, and provide the
	option of equity purchase of 20% Sheng Fung Investment and Construction Co.,
	Ltd., Changshu Keisei Real Estate Co., Ltd.
	Resolution: Approved by all attended members.
	Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.
	6. Dates of the Board of Trustees: October 25, 2018:21st Session, 7th time
	Motion content: "Vietnam Ho Chi Minh City Second County base development case," to
	indirect investment, for the case of the project company to increase the capital of
	114 million U.S. dollars to develop this case, and provide Changshu Keisei Real
	Estate Co., Ltd. 20% of the project company Equity purchase option.
	Resolution: Approved by all attended members.
	Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.
	7. Date of board: November 13, 2018 period: 21st session 8th
	Motion content: The company holds Jinghua City Co., Ltd. B and Geng registered can be
	transferred to special
	The shares will be converted into ordinary shares based on the price of the real estate of
	Jinghua City.
	Resolution: Approved by all attended members.
	Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.
	8. Dates of the Board of Trustees: December 27, 2018:21st session, 9th time
	Motion: In order to adjust the investment structure of Vietnam, it is proposed to transfer the
	97.86% stake of Vietnam Sheng Fung Construction Investment Liability Co., Ltd.,
	which is held by the company, to the company's indirect investment in Singapore
	Hongfeng Investment Co., Ltd.
	It is also proposed to call for the approval of the second and third cases adopted by
	the 21st session of the Board of Trustees of the 7th, respectively, for the
	investment of the company BA million dollars, Wiking Gemini (Vietnam)
	Investment Co., Ltd. invested hundreds of millions of dollars, the total investment
	in the two cases of hundreds of millions of million dollars. All indirect
	investments are made in the form of a capital increase of China Gemini
	Development Co., Ltd.
	Resolution: Approved by all attended members.
	Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.
	(Ⅱ) Resolution(s) not passed by the Audit Committee but receiving the consent of two thirds of the board
	of directors’ members: None.
II.	In instances where an independent director recused himself/herself due to a conflict of interest, the minutes
	shall clearlystate the independent director's name,contents of the motion and resolution thereof,reason for

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not voting and actual voting counts: None

• III. Communication between independent director and internal auditing officers as well as CPAs on company finances and business situation (such as items discussed, means of communication and results, etc.): (1) The Company shall, in accordance with the regulations, deliver the internal audit report and tracking report to all independent directors, the internal audit supervisor and attend the Audit Committee, provide information about independent directors, and communicate well with independent directors.

• (2) Independent directors communicate with Visa accountants on a regular basis in a written or meeting manner, and the 2018 Audit Committee communicates well with the visa accountant

  • 2018 the company's audit committee and Visa accountants to communicate the key points are as follows: (a) Check the communication of key verification matters in the report.

Note:

• Where an independent director may be relieved from duties before the end of the fiscal year, please specify the date of his/her discharge in the ‘Remarks” Section. His/her actual attendance rate (%) to the Board session shall be calculated on the basis of the number of meetings called and actual number of sessions he/she attended, during his/her term of office.

• Where an election may be held for filling the vacancies of independent directors before the end of the fiscal year, please list both the new and the discharged independent directors and specify if they are the former independent directors or newly elected, re-elected, and also the date of the reelection. Their actual attendance rate (%) to Board session shall be calculated on the basis of the number of meetings called and the actual number of sessions they attended, during the term of office.

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Corporate Governance Report

(III.) The operations of corporate governance and its differences and reasons with the code of Practice on corporate governance in listed cabinets:

Assessment Item			Operatingconditions(Note)	Deviation from the Corporate Governance Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
I. Conformity to the Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies and disclosure of Corporate Governance Best-Practice Principles	V		The company on December 24, 2015 20th session of the 7th Board of Directors through the "Code of Corporate Governance", and has been exposed in the company's official website.	No deviation
II. Equity structure and shareholders’ equity (I) Internal procedures for suggestions, questions, disputes and litigation from shareholders. (II) Control over the list of major shareholders and the controlling parties of such shareholders (III) Establishment and implementation of risk control mechanism and firewall between the Company and its affiliates (IV) Internal regulations prohibiting insider trading	V V V V		The company, in accordance with the laws and regulations of the company, under the norms of compliance with the law, the shareholder's recommendations are respected and carefully assessed and handled with a view to the implementation of shareholder rights and interests, the establishment of a spokesman, acting spokesperson and the Business relations Office system to correspond to the communication mechanism to ensure shareholder equity, the website also has an investor liaison platform , Doubts and disputes or inquiries. There have been no lawsuits with shareholders this year. The Company submits the report as required based on the information updated and made available by directors, managerial officers and major shareholders from time to time. The Company established the Shareholder Services Office in 2012 to deal with the shareholders’ affairs, and controlled the distribution of major shareholders’’ equity and changes in equity of the controlling party of the major shareholders. The assets, liabilities, financial management responsibilities between the Company and its affiliates were all handled in accordance with the relevant laws and the Company’s internal control system. Article 10 of the company’s Guiding Rules of Moral Behaviorsprohibits insider trading.	No deviation No deviation No deviation No deviation
III. Organization of the Board and its duties (I) Establishment and implementation of guidelines for diversity of the composition of the board of directors	V		Article 20th of the Code of Practice on corporate governance adopted by the Board of Directors of December 24, 2015 and article II of the "Measures for the election of directors" adopted by the shareholders' meeting of June 25, 2015 all stipulate that the composition of the Board shall be considered forpluralism.	No deviation

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Assessment Item	Operatingconditions(Note)	Operatingconditions(Note)	Operatingconditions(Note)	Deviation from the Corporate Governance Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
(II) Other functional committees other than a remuneration committee or audit committee required by laws (III) Rule establishment and annual assessment of performance of the Board of Directors (IV) Regular review and assessment of the impartiality and independence of the external auditor	V V	V	- 39 - Members of the Board of Directors of the company have the necessary knowledge, skills and literacy to perform their duties, covering business management, leadership decision-making, industrial knowledge, financial accounting, legal and environmental protection, respectively. The Board of Directors has a policy of diversity and is disclosed on the company's website. The company has established remuneration and audit committee as required, establishment of other functional committees are being planned. On April 21, 2016, the Company has established the “Measures for the Performance Evaluation of the Board of Directors.” According to the provisions of the Measures, the Company conducts an internal evaluation of the performance of the Board of Directors every year, performs an external evaluation every three years, and ends in the first quarter of the following year. Complete before. In 2018, the company implemented an internal evaluation (including the overall board of directors, individual directors, audit committees) and commissioned the China Corporate Governance Association, a corporate body, to carry out an external evaluation, and the results of the evaluation were reported at the 12th Board of Directors at its 21st session, on March 22, 2019. The audit committee of the company and the Board of Directors regularly evaluate the independence of the visa accountant every year (Note 2), capricious and professional, and require the visa accountant to provide a transcendental declaration of independence, through the company to confirm the accountant and the company in addition to the cost of visa and fiscal cases, no other financial interests and business relations ; Family members of accountants also report to the Board of Auditors and the board of directors after not violating the requirements of independence. When discussing the independence and appointment of a visa accountant, the board of Directors of the company also checks the personal history of the accountant and the statement of independence of each accountant for discussion on the evaluation of its independence by the board of Directors. The accounting department of the company evaluates the independence of the visa accountant on its own once a year and reports the results to the Board of Auditors and the Board of Directors for consideration. The most recent date of presentation was	The Company has not yet established other committees, other functional committees are being planned. No deviation No deviation

Corporate Governance Report

Assessment Item			Operatingconditions(Note)	Deviation from the Corporate Governance Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
IV. Has the Company established a full- (or part-) time corporate governance unit or personnel to oversee corporate governance affairs (including but not limited to furnish information required for business execution by directors, handle matters relating to board meetings and shareholders’ meetings according to laws, handle corporate registration and amendment registration, produce (or record?) minutes of board meetings and shareholders’ meetings, etc.)?	V		The company currently has a part-time unit for corporate governance. The secretary of the board of directors is responsible for providing the information required by the directors to conduct business, handling matters related to the board of directors and shareholders’ meeting, handling company registration and change registration, and producing the board of directors and shareholders' meeting. Assist the company to comply with the relevant laws and regulations of the board of directors and shareholders meeting. Also has a stock office and Finance Department Business relations Group in conjunction with corporate governance related matters. The company was appointed by the Board of Directors on April 10, 2019 through the establishment of the head of corporate governance, by the chief Financial Officer Chen Yingjun associate concurrently, to co-ordinate the handling of matters related to the board of directors and shareholders ' meetings, the production of board of Directors and shareholders' meeting proceedings, to assist directors in taking up and continuing education, to provide directors with the necessary assistant directors to comply with corporate governance related matters such as decrees. Chen Yingjun Associate has held the position of finance supervisor of a public offering company for more than three years. Regarding the company's annual business execution in 2019, the company will be presented on the company's website. In addition, the number of training hours for the head of corporate governance will be scheduled for completion in 2019.	No deviation
V. Communication channels with stakeholders, establishment of investors’ relations office on websites and proper response to stakeholders’ concerns of corporate social responsibility	V		The company's external website has a stakeholder area, which is: investors, customers, suppliers, community residents, employees and other interested parties, and separately sets out the contact person and contact information. The company has responded appropriately to important corporate social responsibility issues of concern to stakeholders. The recent annual communication performance of various categories of stakeholders has been revealed in the Corporate social Responsibilityreport.	No deviation

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Assessment Item	Operatingconditions(Note)	Operatingconditions(Note)	Operatingconditions(Note)	Deviation from the Corporate Governance Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
VI. Commission of professional organizations for general meetings		V	The company has established a share office in 2012 to handle shareholder affairs on its own.	The company has established a share office in 2012 to handle shareholder affairs on its own.
VII. Disclosure (I) Establishment of a website for the disclosure of its financial Status and status of corporate governance. (II) Adoption of other means for disclosure such as setting up an English website, appointing personnel to gather and disclose relevant information, properly implementing the spokesman system, and posting the meetings minutes with institutional investors on websites	V V		The Company’s website fully disclosed the Company’s management philosophy, corporate governance, product & business lines and financial information. The Company has established the spokesman system and installed the investors’ relations office dedicated to gathering and releasing the Company’s messages and updated the information posted on the website pursuant to the relevant laws periodically and disclosed important messages from time to time, and linked with TWSE "MOPS” to fulfill the disclosure.	No deviation No deviation
VIII. Other important information facilitating understanding of the functioning of corporate governance (such as the state of employees’ rights and interests, concerning employees, investor relations, vendor relations, rights of interested parties, continuing education of directors and supervisors, implementation of risk management policy and risk assessment criteria, implementation of customer policy and liability insurance purchased by the Company for directors and supervisors)	V		The company has set up an enterprise relations group to deal with all kinds of information collection and release of the company and according to the relevant laws and regulations to regularly update the company's website information. The annual study of directors in the "Open Information Observatory" and annual report revealed, but also in accordance with the company's "Articles of association" article 19th and the "Code of Practice on corporate governance of listed cabinets" under article 39th to handle directors ' liability insurance.	No deviation
IX. Please indicate the improvement of the company's corporate governance evaluation results issued by the Corporate Governance Center of the Taiwan Stock Exchange Co., Ltd. in the past year, and propose priority strengthening measures and measures for those who have not yet improved: 1. In the year of 1.2018, the company's corporate governance evaluation did not score a total of 13 items (excluding the questions that are not applicable and no points and no points). In 2018, the company strengthened the internal and external education related to the management of honesty and integrity. The training results are revealed on the company's website. 2. In the year of 2019, we will continue to focus on strengthening investment in energy-saving or green energy-related environmentally sustainable equipment, and continue to safeguard shareholders' equity and treat shareholders equally, implement corporate social responsibility, and enhance information transparency. These efforts are to establish a culture of corporate governance to boost shareholder activism, strengthen disclosure quality of corporate governance information and non-financial information. 3. 2018 in order to reserve high-quality manpower to form a combat team, the appointment of managers after-hours cross-domain learning courses, rapid strengthening of cross-domain functions, and with the factory organization adjustment strategy, for the production plant manager level appointed managers, cross-position, cross-step learning, and timely expatriate overseas study, To ensure that the future plant management and outposted support for the construction of plant engineering personnel complete, the use of Cadre manpower scheduling flexible, but also to enhance the smooth development of manpower to promote the pipeline, in order to achieve the company's sustainable business objectives. 4. In order to establish a secure and reliable electronic Exchange environment to ensure the securityof data,systems,

• 41 -

Corporate Governance Report

Assessment Item	Operatingconditions(Note)	Operatingconditions(Note)	Operatingconditions(Note)	Deviation from the Corporate Governance Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
equipment and networks, the proper placement of information and the feasibility and effectiveness of information security practice operations, the company has established an "information security policy" and "Network security Regulations",and regularlyreviews changes to facilitate compliance with.

Note 1: Regardless of whether or not the operation is checked 'Yes' or 'No', it should be stated in the summary description field.

Note 2: Independent evaluation project for accountants

Item	Evaluation results	Yes	No	Evaluation results
1	Whether or not the accountant or his or her spouse or minor children have direct or significant indirect financial interest relationship with the audit client, such as the relationship with the company or the sharing of interests.			No violation of independence
2	Whether or not the accountant or his/her spouse or minor children have financing or guarantee behavior with the audit client or audit client director, such as capital borrowing. However, this is not the normal exchange withthefinancial industry.			No violation of independence
3	Whether or not an accountant has a close business relationship with an audit client, such as collecting commissions related to the business or establishing a potentialemployment relationship.			No violation of independence
4	Whether or not the accountant and his assistant members have regular jobs and positions in the current or last two years that audit clients as directors, managers or have a significant impact on visa cases, and receive afixed salary.			No violation of independence
5	Whether or not an accountant has non-audit services that provide audit clients that may directly affect the audit work, such as performing management consulting or other non-visa operations, is sufficient to affect independence.			No violation of independence
6	Whether or not the accountant holds an intermediary to audit the shares orothersecuritiesissued bythe client.			No violation of independence
7	Whetheror not the accountant has acted as a defender of the audit client or on behalf of the audit client to coordinate conflicts with other third rooms.			No violation of independence
8	Whether or not an accountant has a relationship with a director, manager of an audit client or a person who has a significant influence on the audit case, such as a person in charge or manager, such as a spouse, direct blood, directin-laws, ora two-relatives bloodrelative.			No violation of independence
9	Whether or not an accountant has continuously appointed visa services for up to seven years is inconsistent with the provisions of the Business Incident Authority for the rotation of accountants, the handling of accounting matters on behalf of others, or the disposition or damage and independence of them.			No violation of independence
10	The company obtained an independent statement issued by an accountant.			Has obtained the independent statement issued by An Hou Jianye Joint Certified Public Accountants Chen Meifang and Zhong Dandan Accountant, which has been independent.

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(IV) Establishment, functions and operations of the Remuneration Committee, if any:

• (1) Information about Remuneration Committee Members

ID (Note 1)	Qualifications Name	Whether having more than five years of work experience And the following professional qualifications	Whether having more than five years of work experience And the following professional qualifications	Whether having more than five years of work experience And the following professional qualifications	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Status of independence (Note 2)	Number of public companies where the person holds the title as Remunerati on Committee member	Remark
		Lecturer or above in commerce, law, finance, accounting or subjects required by the business of the company in public or private colleges or universities	Judges, prosecutors, lawyers, accountants or other national examinations required for business with the company.	Required Work experience in commerce, law, finance, accounting or others required by the Company	1	2	3	4	5	6	7	8
Independent Director	Steve Chen Ruey-Long												3	Convenor
Others	Chen Sung-Yong												0
Others	Pan Weigang												1	1. New. Member of the 4th Remuneration Committee from June 28, 2018.
Others	Gao Kong-Lian												0	Dismissal (term of office expires)

• Note 1: Please specify director, independent director or others.

• Note 2: Members who meet the following conditions two years before the election and during their term of office are requested to play "  " in the space below each condition code.

• (1) Not an employee of the Company or its affiliates.

• (2) Directors and supervisors of non-companies or related companies. However, if it is an independent director set up by the company or its parent company or subsidiary in accordance with this Law or local country law, this is not the case.

• (3) Not a natural person, spouse, underage children, or under the title of a third party who holds more than 1% of the outstanding shares issued by the Company or among the top 10 natural person shareholders.

• (4) Not a spouse, kin at the second pillar under the Civil Code, or the lineal blood relatives within the third tier under the Civil Code as specified in (1) through (3).

• (5) Not a director, supervisor or employee of a corporate shareholder who holds more than 5% of the outstanding shares issued by the Company, or a director, supervisor or employee of a corporate shareholder who is among the top 5 shareholders.

• (6) Not a director, supervisor, manager or shareholder holding more than 5% of the outstanding shares of a specific company or institution in a business or financial relationship with the Company.

• (7) Business owners, partners, directors (directors), supervisors (supervisors), managers of professionals, sole proprietorships, partnerships, companies or institutions that do not provide business, legal, financial, accounting, or consulting services for companies or their affiliates and their spouse.

• (8) Not under any of the categories stated in Article 30 of the Company Law.

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Corporate Governance Report

• (2) Functions of the Remuneration Committee:

• Regularly review the organizational procedures of the remuneration committee and make recommendations for amendments.

• To set and regularly review the performance evaluation criteria, annual and long-term performance objectives of directors and managers, and the policies, systems, standards and structure of payroll compensation, and to expose the performance evaluation criteria in the annual report.

• Regularly assess the achievement of the performance targets of the directors and managers of the company, and determine the content and amount of individual salary remuneration based on the evaluation results obtained from the performance evaluation criteria.

The Remuneration Committee shall perform the functions referred to in the preceding paragraph in the following manners:

1. Ensure that the company's salary compensation arrangements are in compliance with relevant laws and regulations and are sufficient to attract talents.

2. Performance evaluation and salary compensation of directors and managers shall be subject to the usual level of support given by the interbank, taking into account the performance of the individual, the time invested, the responsibilities assumed, the achievement of personal goals, the performance of other positions, the remuneration paid by the company in recent years to the same position, and the achievement of the company's short-and long-term goals. The company's financial position and other assessment of personal performance and the company's operating performance and the risk of the future is reasonable.

3. Directors and managers should not be guided to engage in the pursuit of salary payments that exceed the company's risk appetite.

4. The proportion of remuneration paid by directors and senior managers for short-term performance and the timing of payment of partial changes in pay should be determined taking into account the characteristics of the industry and the nature of the company's business.

5. The content and amount of salary remuneration of directors and managers shall be taken into account for their reasonableness and the decision on the remuneration of directors and managers should not be significantly contrary to the performance of financial performance, and if there is a major recession or long-term loss, their remuneration should not be higher than that of the previous year.

6. Members of the remuneration committee shall not be included in the discussion and vote in their decisions on the remuneration of their personal salaries.

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• (3) Information on the operation situation of the pay compensation committee

• The Company’s Remuneration Committee consists of 3 members.

Term of office of the members: the fourth session of the Pay Compensation Commission shall expire from June 28, 2018 to April 10, 2021 (the same term as the 21st session of the Board). The 2018 annual pay committee met 5 times (A) and the members were present at the following circumstances:

Job Title	Name	Actual attendance Number of times(B)	Delegate attendance Number of times	Actual attendance rate (%) (B/A) (Note)	Remark
Convenor	Steve Chen Ruey-Long	5	0	100	The term of office of the members of the third remuneration committee shall expire and be elected to the fourth remuneration committee.
Member	Chen Sung-Yong	5	0	100	The term of office of the members of the third remuneration committee shall expire and be elected to the fourth remuneration committee.
Member	Pan Weigang	4	1	80	New; Member of the fourth remuneration committee
Member	Gao Kong-Lian	1	0	100	Old; The term of the third salary remuneration committee expires
Other notes: 1. If the Board of Directors does not adopt or amend the recommendations of the Compensation and Remuneration Committee, it shall state the date and time of the Board of Directors, the content of the proposal, the results of the resolutions of the Board of Directors and the company's handling of the opinions of the Compensation and Remuneration Committee (e.g. the salary remuneration approved by the Board of Directors is better than the Remuneration Committee) The recommendations should state the difference and the reasons for this: No such situation. 2. The resolutions of the Compensation and Remuneration Committee, if the members have objections or reservations and have a record or written statement, the date, period, contents of the proposal, the opinions of all members and the opinions of the members shall be stated: no such situation. 3. The date of the meeting, the period of the meeting, the content of the proposal, the outcome of the resolution, and the company's comments on the Compensation and Remuneration Committee in the most recent year are as follows:

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Corporate Governance Report

Salary compensati on Committee	The content of the motion and its follow-up	Resolution results	The company's handling of the opinions of the Compensation and Compensation Committee
3rd 9th time 2018/02/26	I. The company's 2017 annual employee remuneration allocation case. II. The company's 2017 annual director remuneration allocation case. III. The company's chairman Lin Junzhi's compensation case. IV. The compensation case of Yu Jun, the general manager of the company. V. Chen Jun, deputy general manager of the production department of the Company and 11 other members appointed managers (listed as attached). VI. The new manager of the company has a total of 23 appointed managers (list as attached) compensation case. VII. The remuneration case of Zou Junzhi, the new general manager of the company. VIII. The new land development department of the company is in contact with ZhangJunzhi's compensation case.	All members of the Committee agreed to pass the motion	The Board of Directors agreed to pass by all the directors present
4th 1th time 2018/07/30	I. It is proposed to amend some provisions of the “Regulations of the Compensation and Remuneration Committee” of the Company for review. II. The 21st session of the company's chairman Lin Junzhi's compensation case. III. The 21st Vice Chairman of the Company, Bai Junzhi's compensation case. IV. The 21st directors' remuneration of the Company (excluding independent directors). V. The 21st Independent Directors' Compensation Case of the Company. VI. The compensation case of Lin Junzhi of the Company's Occupational Safety and Health Center. VII. The compensation plan of the company's equipment procurement department. VIII. The compensation case of Huang Junzhi of the Company's Office of Human Resources Administration IX. The company's data application department Zhang Jun's compensation case.	All members of the Committee agreed to pass the motion	The Board of Directors agreed to pass the motion by all the directors present
4th 2th time 2018/09/17	I. Liu Junzhi, deputy general manager of the Land Development Department of the Company. II. The compensation case of Fan Jiangjun, special assistant to the chairman of the company. III. The company's shareholder manager Yang Junzhi's compensation case. IV. The company's mainland business department associate Li Junzhi's compensation case. V. The employee's compensation distribution case for the company's appointed managers in 2017.	All members of the Committee agreed to pass	The Board of Directors agreed to pass by all the directors present

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Salary compensati on Committee	The content of the motion and its follow-up	Resolution results	The company's handling of the opinions of the Compensation and Compensation Committee
4th 3th time 2018/10/25	1. The amendments to the employee compensation distribution of the company's 2017 appointed managers.	All members of the Committee agreed to pass	The Board of Directors agreed to pass by all the directors present
4th 4th time 2018/12/27	I. The special bonus case of Lin Junzhi, the chairman of the company. II. The Company renewed the remuneration of the highest adviser Shen Jun. III. The company's new production department deputy general manager Jia Junzhi's compensation case. IV. The compensation case of Lin Junzhi, the new manager of the company's manpower administration department. V. The new general manager of the company's new general manager's office planning group manager-level special assistant Wu Junzhi's compensation case.	All members of the Committee agreed to pass	The Board of Directors agreed to pass by all the directors present

Note:

1. For those who have resigned from the salary remuneration committee before the end of the year, the resignation date should be indicated in the remarks column. The actual attendance rate (%) is calculated based on the number of meetings of the remuneration committee during their employment and their actual attendance.

2. Before the end of the year, if the salary remuneration committee is re-elected, the new and old remuneration committee members shall be filled in and the remarks column shall indicate the member as old, new or re-election and re-elected date. Their actual attendance rate (%) to the committee meetings shall be calculated based on the number of meetings called and the actual number of meetings they attended, during the term of office.

3. 47 -

Corporate Governance Report

(V) Implementation of Corporate Social Responsibility:

Assessment Item	Status(Note 1)	Status(Note 1)	Status(Note 1)	Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
I. Implementation of corporate governance (I) Policy of corporate social responsibility and review on results of implementation (II) Periodic education of social responsibility (III) Promotion of social responsibility by the Company’s full-time (part-time) functional units, Handling by and reports to Board of Directors (IV) Policy of reasonable salaries, combination of staff performance evaluation and social responsibility systems, and establishment of reward and punishment system	V V V V		The Company established a “Corporate Social Responsibility Committee.” With the establishment of the committee, coordination and integration of different departments is enabled for sustainable development. The governance structure of the committee is divided into three categories: "Management Governance Group," "Social Relations Unit" and "Environmental Sustainability Group." It also has an executive secretariat responsible for implementing and promoting the relevant matters of the committee and reporting the situation to the board of directors every year. The company has established its own corporate social responsibility guidelines, which is submitted to the chairman and subject to the board of directors and audit committee for a resolution. The company annually promotes or conducts education about social responsibility, which is focused on the economic, environmental and social issues generated by operating activities. The Company established a “Corporate Social Responsibility Committee” in September, 2013. The chairman was appointed as the commissioner and another three executives were responsible for supervising and promoting related projects of the three CSR aspects, respectively. Establishment of the CSR Executive Secretariat, with the joint responsibility of the Occupational Safety Centre and the Business Relations Unit of the Finance Department, to implement and promote the relevant matters of the Committee and to report to the Board of directors in 2018.11 on the results of CSR implementation and future directions for the 2019 2018 (Note). The relevant operations and execution are disclosed on the company's website. The company’s incentive plans have a reasonable salary plan, as well as integrates a staff performance evaluation system, corporate social responsibility system and national labor policy. The company has established a distinct and effective reward and penalty system onpersonnel management.	Conformity to Article 4 and Article 5 of the Principles Conformity to Article 8 of the Principles Conformity to Article 7 of the Principles Conformity to Article 9 of the Principles
II. Development of a sustainable environment (I) Striving to raise resource usage effectiveness, reduce environmental impact and improve the use of recyclable materials (II) Establishment of an environmental management	V V		(I) In addition to the use of recycled paper and the separation and recycling of wastes, the company also re-uses waste gas and wastewater in a segmented manner to improve the utilization efficiency of various resources and maintain/improve productivity. Reducing the generation of waste; every month, the company's supervisory meeting will conduct various productivity efficiency report discussions to confirm the control of the energy utilization efficiency of each energy source. (II) The company's environmental management system is established in accordance with the ISO	Conformity to Article 12 of the Principles Conformity to Article 13 of the Principles

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Assessment Item	Status(Note 1)	Status(Note 1)	Status(Note 1)	Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
system appropriate to the characteristics of its industry. (III) Environmental management units and staff dedicated to improving environmental performance	V		14001 standard of the International Standards Organization, and is verified by the third unit of the notary (for example, the Bureau of Standards and Inspection of the Ministry of Economic Affairs, BSI). (III) 1. The Company pays attention to the impact of climate change on its operational activities. All three affiliated companies have requested qualified certification companies to complete the greenhouse gas emissions inventory inspection in accordance with ISO 14064-1 and obtain a verification statement. 2. In order to promote greenhouse gas reduction, the Company and neighboring China Steel Corporation jointly promote regional energy integration, thereby improving energy use efficiency, reducing pollution emissions and fulfilling corporate social responsibility. 3. In 2015, the company introduced an energy management system at the No. 3 Plant and obtained ISO 50001 certification. 4. In response to climate change, the company established the Energy Conservation and Carbon Reduction Group in 2005 to set a goal of 2% energy saving, carbon reduction and water saving reduction per year and hold energy saving and carbon reduction meetings every quarter to report and review the progress of each plant reduction project. Collect the results and the relevant domestic and foreign information, assess its trends, to plan the company's overall future strategicplan.	Conformity to Article 17 of the Principles
III. Social welfare (I) Management policy and procedure in accordance with relevant regulations, laws and the International Bill of Human Rights (II) Establishment of employee complaint channels and proper handling (III) Safe and healthy work environment, and regular employee safety and health education	V V V		The Company established work rules in accordance with the relevant labor laws to protect employees’ legal interests and rights. The rules were approved by the city government for future reference. For cases of harm to labor rights and interests, the company provides effective and appropriate grievance mechanisms in accordance with the provisions of Articles 24 and 25 of the Integrity Operating Procedures and Conduct Guide to ensure the equality and transparency of the appeal process. The complaints pipeline should be concise, convenient and smooth and the employees’ complaints should be properly responded to. 1. The Company implements the safety and health management system of the Taiwan Occupational Safety and Health Management System (TOSHMS/CNS 15506) and OHSAS 18001, which is implemented by the Department of Safety and Security and is notarized by the third unit (for example, the Bureau of Standards and Inspection of the Ministry of Economic Affairs, BSI). Verification passed. The Company provides its employees with a safe and healthy work environment and regularly implements employee safetyand health education	Conformity to Article 18 of the Principles Conformity to Article 18 of the Principles Conformity to Article 20 of the Principles

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Corporate Governance Report

Assessment Item	Status(Note 1)	Status(Note 1)	Status(Note 1)	Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
(IV) Establishment of the mechanism for periodic communication with employees, and notification to employees of the circumstances which might materially affect the operation in a reasonable manner (V) Plans of effective career and capacity development (VI) Establishment of policies protecting consumer rights and interests and complaint platforms based on R&D, purchase, production, operation and service procedures (VII) Marketing and labeling of products and service in accordance with relevant laws and international standards (VIII) Evaluation of suppliers with environmental and social impacts before cooperation	V V V V V		measures. 2. The company is committed to providing medical and health service staff planning, including resident doctors and nurses to handle on-the-spot services, to promote various physical and mental protection programs, a medical room in the factory area, and simple ambulance facilities in each site area. Both the company and the third factory have an AED (Automated External Defibrillator) "automated external cardiac defibrillator" and arranged annual health checkups for all employees, providing relevant health guidance and health education. 1.The three plants have established their own labor-employee committees. Meanwhile, a corporate labor-employee committee was established throughout the Company, which convened a meeting once every three months. All the resolutions made at the meeting were executed upon being reviewed and approved. The Company would also communicate important messages to employees via the computer network and emails. 2. The representative acting on behalf of the labors in the employee-labor committee shall be elected by the labor union. The company creates a friendly environment for the employees’ career and provides them with effective capacity training programs to enrich the employees’ professional and management skills. The company’s purchase, production, operations and service procedures shall ensure transparency and security of its products and service and implementation in operating activities. The company’s products are marked in accordance with the relevant laws and international standards. Prior to business dealings, the company would evaluate if suppliers have records of environmental and social impacts to prevent transactions with companies that violate its corporate social responsibility policy.	Conformity to Article 22 of the Principles Conformity to Article 21 of the Principles Conformity to Article 23 of the Principles Conformity to Article 24 of the Principles Conformity to Article 26 of the Principles
(IX) Contracts including terms of rights to terminate or rescind a contract at any time when suppliers violate its social responsibility policy and cause major impacts on the environment and the society	V		When signing contracts, the Company would ensure that both sides comply with its social responsibility policies and include terms of rights to terminate or rescind a contract at any time when suppliers violate its social responsibility policy and cause major impact on the environment and the society.	Conformity to Article 26 of the Principles
IV. Strengthening information disclosure (I) Disclosure of information related to the relevance and reliability of the company’s commitment to corporate social responsibility on its website or on TWSE "MOPS.”	V		On the company's website, set up the Corporate CSR Zone to expose relevant corporate social responsibility policies, systems or related management policies and specific promotional plans, as well as key stakeholders and their concerns to expose and provide information such as stakeholder feedback channels.	Conformity to Articles 28 and 29 of the Principles

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Assessment Item	Status(Note 1)	Status(Note 1)	Status(Note 1)	Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
5. If the company has its own corporate social responsibility code based on the Code of Practice for Corporate Social Responsibility of Listed Companies, please describe the difference between its operations and the code: The Corporate Social Responsibility Committee is in accordance with the Code of Corporate Social Responsibility. At the end of each year, after a discussion by the Corporate Social Responsibility Committee, the next year's CSR implementation plan will be submitted to the Board of Directors, and the implementation results reported and stakeholder concerns will be fixed to the Board of Directors at the end of theyear.
VI. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices: The Company’s Welfare Committee will organize the employees’ travels periodically to keep employees healthy, both physically and mentally. Co-sponsors environmental protection workshops, e.g. organization of the Environmental Protection Administration Soil and Groundwater Environmental Protection Law and Regulation System and Technology Workshop (visit to An-Shun Site).
VII. Verification of Company products or the Corporate Social Responsibility Report per the standards of relevant certifying organizations, if any: 2017Year CSR report, based on the GRI Sustainability Reporting guidelines (GRI Standards) core options of the Global Reporting Initiative, GRI (the World) and the International IR Framework (Integrated), published by the International Commission for Integrated Reporting (Reporting Council), The independent and credible United accounting firm (KPMG) has been entrusted with the limited assurance of the Republic of China on the basis of the first guideline of the Guidelines bulletin, and the Independent and limited assurance report issued by KPMG is also included in the present report. The financial data of the operational performance was obtained from the CPDC financial report after the audit by the accountant and the greenhouse gas emission data was obtained from the statement issued by the third-partyverification agency.

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Corporate Governance Report

Note:

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----- Start of picture text -----

CPDC Social Responsibility Framework
Board of
Regular Directors Suggested
return Feedback
CSR
Chairman: Secretary Lin
Committee Secretariat
Secretaries-General: General Manager
Executive Secretary
Industrial and Security Environmental Protection
Center/Enterprise Relations Group
Business Governance Section Social Relations Group Environmental Sustainability Group
Sustainable Development Vision and Feedback / Public Welfare Activities Energy and Climate Change
Strategy
Labor Human Rights/ethics Product Quality / Innovation
Operations / Financial Risk and
Performance Regulatory Compliance/Information Green Process and Products
Purchasing and Supply Chain Management Disclosure
Lauanwei/pollution prevention and control
Market/Customer Analysis survey
Stakeholder Communication Community Environment and community participation
----- End of picture text -----

The main tasks of the three major groups are as follows:

Group	Job title description
Business	• Coordinating the development and promotion of sustainable Development vision
Governance	and Strategy, disclosure of operational and financial risks and performance
Section	• Procurement process and supply chain management, as well as stakeholder
	communication and other matters
	• Market and customer analysis and investigation
Social	• Promoting community feedback and social welfare activities, labor human rights
Relations	and ethics
Group	• Social Compliance and information disclosure
Environmental	• Manage energy and climate change related issues
Sustainability	• Product quality control and Innovation Research, Green products
Group	• Labor safety and health issues, pollution remediation and environmental and social
	participation

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Implementation effectiveness of the CPDC Commission on Social Responsibility, 2018

2018 Report of the CPDC Committee on Social Responsibility to the Board of Directors	2018 Report of the CPDC Committee on Social Responsibility to the Board of Directors
Annual implementation focus  Continue to echo the United Nations Sustainable Development Goals (SDGs)  Continue to promote plant energy saving and carbon reduction projects and apply for relevant certification.  Voluntary initiative to participate in international sustainable performance evaluation.  Strengthen communication with stakeholders through multiple channels.  CSR Public welfare activities that continue to promote social care.	Next year work plan  Follow the climate Change Property Disclosure Guidelines (TCFD) to assess the potential financial impact of climate change on the company.  Strengthen performance management of supplier governance, Environment and society (ESG).  Import the real value assessment (True values) of an organization-based enterprise to internalize the environmental and social external costs.  Actively participate in the DJSI rating, comprehensively review CPDC ESG performance, identify gaps with global sustainability standards and continue to strengthen CPDC's physique.  A CSR event is held once a season
2018 CPDC Social Responsibility Commission results performance
 On August 14, 2018, the CDP Climate Change Questionnaire was formally submitted to review the effectiveness of carbon management measures by responding to the CDP questionnaire.  In July 2018, institutional investors were invited to fill out the questionnaire “Institutional Investors Pay Attention to CPDC to Promote Corporate Social Responsibility”. Samples of questionnaires were collected continuously, followed by questionnaire analysis, which will serve as a reference for stakeholder communication and corporate social responsibility promotion. One of the bases.  Complete the 2017 Corporate Social Responsibility Report and verify it through a third party.  Participated in the Taiwan Enterprise Perpetual Award organized by the Taiwan Sustainable Energy Research Foundation of the Consortium, and won the 11th session of the TCSA Taiwan Enterprise Perpetual Award-Top50 the White Gold Award for sustainable reporting.  The new control room building of CPDC Dashe Plant was awarded the “Green Building Diamond Grade” certification on March 27, 2018. The first factory nylon pellet factory was awarded the “Green Building Silver Grade” certification on July 26, 2018.  Dashe Plant and Toufen Plant September 15, 2018 both obtained the industry bureau "Green Factory seal."  Toufen Plant obtained the ISO 14046 Water Footprint Verification statement on October 16, 2018.  Hsiaokang Plant was awarded the Excellent Manufacturer of Greenhouse Gas Voluntary Reduction by the Industrial Bureau of the Ministry of Economic Affairs.  A total of 4 large-scale charity events were held in 4 quarters. A total of 331 CPDC colleagues served as volunteers, serving 10,183 people and establishing the volunteer culture of CPDC. [For related information, please refer to the company's official website and corporate social responsibility report].

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Corporate Governance Report

• (VI) The company to fulfill the integrity of the business situation and the implementation of measures:

• Implementation of good faith business situation

Evaluate the project	Status(Note 1)	Status(Note 1)	Status(Note 1)	Deviation from the Ethical Corporate Management Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
I. Establish ethical business policies and programs (I) The Company has the ethical business policy expressed explicitly in the Company’s regulations and external documents, as well as the active implementation committed by the board of directors and management. (II) Prevention program for unethical behavior regulated by the Company, as well as the carrying out of operating procedures, behavior guidelines, discipline of violation and complaint system, and implementation of the program. (III) Does the company adopt preventive measures for the business activities of the seventh paragraph of Article 7 of the “Code of Integrity of Listed Companies” or other business activities with high risk of dishonesty?	V V V		On 15 May 2012, the Board of Directors passed the “Integrity Code of Practice” and the “Code of Ethical Conduct” which clearly stated that the directors, managers and all colleagues of the Company are required to abide by the policy of good faith management. On April 25, 2013, the Company promulgated “China Petroleum Chemical Industry Development Co., Ltd. Integrity Operating Procedures and Behavior Guidelines” and “China Petroleum Chemical Industry Development Co., Ltd. Ethical Code of Conduct and Programs of All Levels.” The company's directors, managers and all colleagues should pay attention to matters when implementing the business and actively implement and ensure the policy of integrity management. In addition to the above regulations, the company's external website has already stated the corporate social responsibility commitment letter, revealing the principle of good faith management. On April 25, 2013, the Company promulgated the “Integrity Operating Procedures and Behavior Guidelines” which clearly stated the handling procedures, reporting channels and punishment and appeal procedures for company employees involved in dishonesty and implemented them. The company promulgated integrity operating Procedures and conduct guide on April 25, 2013, and in accordance with the principles of the industry procedures and conduct guidelines, to declare the integrity of the business policy, the establishment of business relations before the integrity of business evaluation and business objects to explain the integrity of business policy. Avoid dealing with dishonest operators and contracts to specify the integrity of the operation and other terms are indeed implemented. Meanwhile, the Company should organize the ethical business education and training program or propagation for the Company’s staff at least once ayear, to enable the staff to fully	No deviation No deviation No deviation

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Evaluate the project	Status(Note 1)	Status(Note 1)	Status(Note 1)	Deviation from the Ethical Corporate Management Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
			comprehend the Company’s determination to implement the Company’s ethical business, the Company’s ethical business policy, prevention measures and consequence for commitment of unethical conduct.
II. Implement ethical business (I) Evaluation of individuals that have a record of unethical behavior and regulation of the ethical code of conduct in the business contract. (II) Promotion of ethical business by the Company’s full-time (part-time) functional units’ subject to Board of Directors, and regular reports of status of the supervision to Board of Directors (III) The implementation of the Company’s prevention of interest conflict policy and the appropriate reporting channel (IV) The implementation of the Company’s effective accounting system and internal control system for the implementation of ethical business, as well as periodical audits by internal auditors or committed accountants (V) Does the company regularly hold educational training inside and outside on integrity management?	V V V V V		When entering a contract with another party, the Company should verify the overview of the other party’s ethical business and would expressly state, at least, the following terms in the contract by including ethical business into the contract terms and conditions: 1. If either party is involved in any unethical conduct in business activities, the other party may terminate or rescind the contract unconditionally. 2. Define definite and reasonable payment terms, including place of payment, mode thereof and the relevant taxation laws and regulations to be met, et al. The establishment of the company to promote corporate integrity management department is set by the Legal Affairs Center and the Human Resources Administrative Office, and the human resources administrative department handles the revision, implementation, interpretation, consulting services and notification of the operation procedures and behavior guides. It is supervised by the auditing office and reports to the board of directors on a regular basis. Relevant operations and implementation are disclosed on the company's website. The company's " integrity operating procedures and code of conduct" article 11th already sets out the policy and handling of the interests of the directors and all the staff of the company, and the 7th provides that the personnel of the Company shall, in the event of an undue interest received by another person, report to the immediate supervisor, and inform the Special Unit that they have implemented it. The Company has already defined an effective accounting system and internal control system, and executed and implemented the same as required. The Company will have the audit department conduct the auditperiodicallyand report the audit	No deviation No deviation No deviation No deviation No deviation

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Corporate Governance Report

Evaluate the project	Status(Note 1)	Status(Note 1)	Status(Note 1)	Deviation from the Ethical Corporate Management Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
			result to the board of directors. The company at least once a year to the directors to promote the company's "Code of Good faith" and the company "Code of Ethical conduct, in order to ensure the implementation of corporate governance. At least once another year by the Legal Center as a lecturer on the factory and office colleagues to carry out "integrity business code" and the company "Code of Ethical conduct" advocacy.
III. The operations of the reporting system (I) Specific reporting and reward systems, reporter friendly channels and representative assigned to deal with the reporting issues (II) Does the company stipulate the operating procedures for investigation and the relevant confidentiality mechanism for accepting the report? (III) Protection of whistleblower from improper discipline	V V V		the company " integrity operating procedures and code of conduct" article 24th specifies the specific way of reporting, there is a clear whistle-blower telephone and e-mail and the audit room as the receiving task unit. Article 25 stipulates that integrity management is included in employee performance appraisal and human resources policies, and a clear and effective reward and punishment system is established. Article 11 of the Company's "Code of Ethical Conduct" (reporting obligations and guarantees): The company will handle the reported cases in a confidential manner and will do its utmost to protect the information security of the presenters. Threats or revenge against whistleblowers are not allowed. Another " integrity operating procedures and code of conduct" article 21st provides that the company discovers or receives the handling procedure of the person involved in the dishonest behavior of the company's personnel and article 22nd stipulates that the other person is engaged in the handling of dishonest acts against the company. Article 11th of the Company's Code of Ethical Conduct (reporting obligations and guarantees): The company will handle the reported cases in a confidential manner and will make every effort to protect the information security of the submitter. Threats or revenge against whistleblowers are not allowed.	No deviation No deviation No deviation
IV. Strengthening information disclosure IV. Disclosure of ethical business principals and implementation results on its website or TWSE “MOPS”	V		The information posted on the Company website would be updated from time to time subject to the amendments made bythe competent authority.	No deviation

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----- Start of picture text -----

Status (Note 1) Deviation from
the Ethical
Corporate
Management
Best-Practice
Evaluate the project
Yes No Summary Description Principles for the
TWSE/GTSM
Listed
Companies, and
reasons thereof
The internal regulations would be amended and
updated from time to time and the importance
thereof would be propagated with due diligence.
V. If the Company has established its own ethical business principles based on “Ethical Business Best Practice Principles
for TWSE/GTSM Listed Companies”, please describe any discrepancy between the principles and their
implementation: No discrepancy.
----- End of picture text -----

VI. Other important information that helps to understand the company's integrity management operation: (If the company reviews and amends its established code of conduct, etc. Situation ) According to the Code of Integrity Code, on April 25, 102, CPDC Chief Executive Letter No. 2013040027 promulgated 'China Petrochemical Development Co., Ltd. Integrity Operation Procedures and Behavior Guidelines' and implemented the integrity management policy. The subsidiaries have not yet defined their own ethical business principles. Notwithstanding, they will implement the same, step by step, by taking into consideration the current overview and relevant laws and regulations.

2. Implementation of measures

The Company has defined a “fair trade policy” in the first paragraph of the “Business Conduct Policy” to enable the public interest to deserve the best protection under fair competition if no collusion or conspiracy is created among the competitors. The Fair-Trade Act benefits all parties of various economic, political and social groups. The Company’s Administration department has restated its adherence in all philosophies under the fair-trade principles. Therefore, under the principle of encouraging the staff to seek profit through legal and valid means, any acts of the Company are conducted pursuant to the laws.

For the sake of ethical business and sustainable development, the Company complies with laws and regulations and social requirements and remains fully committed to fulfilling its corporate social responsibility. To enable customers to received high-quality products, the Company ensures that a quality control procedure is followed during the acquisition of raw materials, storage, production and output. The Company realizes that pursuing excellence in product quality remains the best weapon against strong competitors in the world and also supports the Company’s ethical business philosophy. Therefore, the company in the early stages of the implementation of "5S," "TPM," "TQM," "HAZOP," and " SHAPE-UP" and other comprehensive quality control campaigns, and in 1997 by the Ministry of Economy Commodity Inspection Bureau ISO9002 Quality Management System certification, further in 1998 access to the Commodity Inspection Bureau ISO14001 Environmental Management System certification.

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Corporate Governance Report

• (VII) Please disclose access to the Company’s Corporate Governance Best Practice Principles and related rules and regulations, if any:

• The Company prepared the relevant regulations and status in accordance to the “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies” and disclosed the following important regulations or status on the Company’s website:

• (1)Articles of Incorporation

• (2)Rules Governing the Proceedings of the Shareholders’ Meeting

• (3)Rules Governing the Duties and Responsibilities of Independent Directors

• (4)Rules for the Election of Directors

• (5)Rules Governing the Review of Information about Directors

• (6) Rules of procedure of the Board of Directors

• (7) Situation of director's training

• (8) The organizational procedures of the Board of Auditors

• (9) Organizational procedures of the Pay Compensation Commission

• (10) CPDC Business Behavior Policy Book

• (11) CPDC Code of Ethical conduct

• (12) CPDC Integrity Code of Practice

• (13) Integrity management procedures and behavior guide

• (14) Internal major information processing procedures

• (15) The company holds the education and training situation inside and outside the integrity management

• (16) Operating procedures for speakers and acting spokespersons

• (17) Fund loan and endorsement guarantee procedures

• (18) Obtain or dispose of asset handling procedures

• (19) Accounts Receivable Evaluation Policy

• (20) Shareholder attendance at the shareholders ' meeting on-site check-in operating procedures

• (21) CPDC code of Practice on corporate social responsibility

• (22) CPDC Code of governance

• (23) CPDC implementation of the diversity policy of the Board of Directors

• (24) CPDC operating procedures for suspension and resumption of trading

• (25) Organizational procedures of the Board of Directors

• (26) Measures for the evaluation of Board performance

• (27) Results of the most recent annual board performance evaluation

(28) Communication between independent directors and audit supervisors and accountants

1. Access to the Company website at http://www.cpdc.com.tw, where the information about the Company’s finance and corporate governance is disclosed.

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• (VIII) Other information enabling better understanding of the Company’s corporate governance:

• The “Operating Procedures for the Handling of Internal Material Information” was prepared in order to manage the Company’s internal material information and this procedure has been communicated to all directors, managerial officers and employees. The procedures are posted on the Company’s intranet to be bound by all employees to prevent any violations of laws and regulations.

• The new directors of the company, at the time of their appointment, download and transmit the directors ' advocacy data and manuals and the securities market specifications that should be noted by the Taiwan Stock Exchange, and distribute the latest version of the insider's equity trading advocacy manual and the company's important regulations to all insiders, such as directors and managers, to facilitate compliance and understanding.

• The situation of the directors' training in 2018

Job Title	Name	Take office	Date of Continuing Education	Date of Continuing Education	Organizer	Class Name	Training hours	Whether or not the training is in compliance with the regulations (Note)
			From	Until
		Date
Independent Director Independent Director	Steve Chen Ruey-Long	2018/04/11	2018/09/21	2018/09/21	Securities and Future Institute	Analysis on the important issues of the latest company law revision	3.0	Yes
			2018/09/21	2018/09/21	Securities and Future Institute	Development trends and important standards of money laundering and financial terrorism prevention system	3.0	Yes
			2018/04/13	2018/04/13	Taiwan Corporate Governance Association	On the change of tax environment and the trend of tax reform on both Sides of the Taiwan Strait and the United States from the tide ofglobal anti-tax avoidance	3.0	Yes
Independent Director Independent Director	Chu Yun-Peng	2018/04/11	2018/10/24	2018/10/24	Chung-Hua Association For Financial And Economic Strategies	How to protect shareholders' rights and interests: Who stole the shareholder's money?	2.0	Yes
			2018/10/24	2018/10/24	Chung-Hua Association For Financial And Economic Strategies	How to protect shareholders' equity: independent directors ' due diligence and minority shareholder protection mechanism in global corporate governance trend	2.0	Yes
			2018/10/24	2018/10/24	Chung-Hua Association For Financial And Economic Strategies	Introduction of large investment case review principles and compensation system	2.0	Yes
Independent			2018/05/04	2018/05/04	TAISE	Sustainable Development Strategy of the engineering service industry	3.0	Yes
Director Independent Director	Pan Wen-Yen	2018/04/11	2018/05/14	2018/05/14	Securities and Future Institute	Discussion on the prevention and control of money laundering, the countermeasures against financing terrorism and the act to follow the law.	3.0	Yes

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Corporate Governance Report

Job Title	Name	Take office	Date of Continuing Education	Date of Continuing Education	Organizer	Class Name	Training hours	Whether or not the training is in compliance with the regulations (Note)
			From	Until
		Date
Chairman	Ko-Ming Lin	2018/04/11	2018/08/21	2018/08/21	Taiwan Corporate Governance Association	CSR and sustainable governance in the general trend	3.0	Yes
			2017/10/25	2017/10/25	Taiwan Corporate Governance Association	The latest revision trend and analysis of company law	3.0	Yes
Vice Chairman Vice Chairman	Bai Jiun-Nan	2018/04/11	2018/05/18	2018/05/18	Taiwan Corporate Governance Association	How directors do a good "duty of care"	3.0	Yes
			2018/08/29	2018/08/29	Taiwan Corporate Governance Association	Enterprise transformation and upgrading innovation and social responsibility	3.0	Yes
Independent Director	Guo Jiun-Huei	2018/04/11	2018/08/09	2018/08/09	Taiwan Corporate Governance Association	Brief introduction and case sharing of Director’s and Supervisor's liability insurance	3.0	Yes
			2018/11/08	2018/11/08	Taiwan Corporate Governance Association	Discussion on the legal problems of real-time communication	3.0	Yes
Independent Director	Lian-Shen g Tsai	2018/04/11	2018/03/29	2018/03/29	Chinese National Association of Industry and Commerce	The development trend and model practice of corporate governance and corporate social responsibility	3.0	Yes
			2018/05/23	2018/05/23	Chinese National Association of Industry and Commerce	The cognition and response of enterprises to climate change and global warming	3.0	Yes
Independent Director	Lin Kuen-Min g	2018/04/11	2018/06/21	2018/06/21	Taiwan Corporate Governance Association	Obligations and responsibilities of companies and Directors and Supervisors under the Law of Securities trading	3.0	Yes
			2018/11/09	2018/11/09	Taiwan Corporate Governance Association	The response of anti-tax avoidance policies and measures	3.0	Yes
Independent	Kuan Ren	2018/04/11	2018/08/21	2018/08/21	Taiwan Corporate Governance Association	CSR and sustainable governance in the general trend	3.0	Yes
Director	Soong		2018/11/21	2018/11/21	Taiwan Corporate Governance Association	The latest revision trend and analysis of company law	3.0	Yes

Note: Whether or not it complies with the hours, scope, system and arrangement of continuing education and information disclosure defined in the “the Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and GTSM Listed Companies.”

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1. The situation of directors’ and managers’ training:

2. (1) 2018/08 Appoint TAIWAN Corporate Governance Association to invite instructors to teach the company's directors and managers the "general trend in CSR and sustainable governance" course which reads as follows:

Date/time: 2018/8/21 morning 9:00~12:00

Title: general trend in CSR and sustainable governance

Lecturer: Niven Huang, The General Manager of KPMG Sustainability Consulting Co.,

Ltd.

Name list of directors/managerial officers attending the continuing education programs:

Job Title	Name
Chairman	Ko-MingLin
President	Janson Yu
Vice President	Yuan-LongChen
Vice President	HuangKuo-Tsai
Special Assistant of Chairman	FAN, JIANG, JIANCHENG
Special Assistant of Chairman	Lin Ching
Lead Auditor	YangHuei-Fan
Assistant Vice President	Chen Ying-Chun
Assistant Vice President	Zuo Shu-Tong
Assistant Vice President	Lin Chin-Hsiang
Assistant Vice President	ChangWen-Hou
FactoryChief	Chien hsien Li
FactoryChief	Kao Chi-Tsung
FactoryChief	ChengJung-Wen
Manager	YangShou-Chin
Manager	Venessa Chi
Manager	Jian Zhanghong
Manager	HUANG,YIZHEN
Manager	YangMing-Ling
Manager	Chen Yung-Long
Manager	ZhangChenglong

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Corporate Governance Report

• (2) 2018/11 Appoint TAIWAN Corporate Governance Association to invite instructors to teach the company's directors and managers on the "The latest revision trend and analysis of company law " course, which reads as follows:

Lecture Date/Time: 2018/11/21 morning 9:00~12:00

Title: The latest revision trend and analysis of company law

Lecturer: Cai, Chaoan, Lawyer of PwC Legal

Name list of directors/managerial officers attending the continuing education programs:

Job Title	Name
Independent Director	Kuan Ren Soong
President	Janson Yu
Special Assistant of Chairman	Lin Ching
Special Assistant to General manager's office	Gao Tianshui
Special Assistant to General manager's office	Wu Junxian
Lead Auditor	YangHuei-Fan
Assistant Vice President	Chen Ying-Chun
Assistant Vice President	Zuo Shu-Tong
Assistant Vice President	Tsai Wen-Chih
Assistant Vice President	Lin Chin-Hsiang
FactoryChief	ChengJung-Wen
Manager	YangPeiyu
Manager	YangMing-Ling

1. M.O.P.S.: http://mops.twse.com.tw/

2. The company's website: http://www.cpdc.com.tw Investor Zone

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• (IX) Status of implementation of the internal control system:

• Statement of Internal control

China Petrochemical Development Corporation

Declaration of International Control System

March 22, 2019

China Petrochemical Development Corporation (CPDC) had inspected the 2018 internal control system autonomously with the results illustrated as follows:

• I. CPDC is fully aware that the board of directors and the management are responsible for the establishment, implementation, and maintenance of the internal control system and it is established accordingly. The purpose of establishing the internal control system is to reasonably ensure the fulfillment of operation effect and efficiency (including profit, performance, and protection of assets safety), financial report reliability, instantaneity, transparency and compliance.

• II. The internal control system is designed with inherent limitations. No matter how perfect the internal control system is, it can only provide a reasonable assurance to the fulfillment of the three objectives referred to above. Moreover, the effectiveness of the internal control system could be affected by the changes of environment and circumstances. The internal control system of CPDC is designed with a self-monitoring mechanism; therefore, corrective actions will be activated upon identifying any nonconformity.

• III. CPDC has assessed the effectiveness of the internal control system design and implementation in accordance with the criteria provided in the “Regulations Governing the Establishment of Internal Control Systems by Service Enterprises in Securities and Futures Markets” (referred to as “the Regulations” hereinafter). The criteria defined in “the Regulations” include five elements depending on the management control process: (1) environment control, (2) risk assessment, (3) control process, (4) information and communication, and (5) supervision. Each of the five elements is then divided into a sub-category. Please refer to “the Regulations” for details.

• IV. CPDC has implemented the criteria of the internal control system referred to above to

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inspect the effectiveness of internal control system design and implementation.

• V. CPDC based on the inspection result referred to above has concluded that the internal control system (including the supervision and management over the subsidiaries) on December 31, 2017 is reasonably effective in achieving the objectives of operation effect and efficiency, instantaneity, transparency, financial report reliability, and compliance.

• VI. The Declaration of Internal Control System is the main content of the Company’s annual report and published prospectus. Any falsification and concealment of the published content referred to above involves the liability illustrated in Article 20, Article 32, Article 171, and Article 174 of the Securities and Exchange Act.

• VII. The Declaration of Internal Control System was resolved in the board meeting with the objection of 0 board directors out of the 9 attending board directors on March 22, 2019. The content of the declaration has been accepted without any objection.

China Petrochemical Development Corporation

Chairman: Ko-Ming Lin

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President: Janson Yu

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1. Entrusted accountant project to review the internal control system should expose the Accountant Review report: 2018 The company did not entrust accountants to carry out the project review.

2. (X) Punishment of the Company or its internal personnel in accordance with the law, the Company's punishment of its internal personnel for violating internal control system regulations, main deficiencies, and improvements during the most recent year and up to the date of publication of this annual report:

Date of manufacture: March 26, 2019

Date	Entity	Case	Main Deficiency	Improvement	Penalties Types
2018/01/02	Toufen Plant	Toufen Plant public works in the Waste Water Treatment unit operations and licensing content registration does not match, violation of the "Water pollution prevention and control law."	The Central Inspection Brigade of the Environmental Protection Department inspected the Toufen Plant on July 24, 2017 to check the reverse wash pool A and B of the wastewater treatment unit and set up 2 sets of 3 activated carbon adsorption towers in series, each operating only 1 set, and the flow of the reverse washing wastewater generated by the activated carbon adsorption tower was not registered with the contents of the Water pollution Prevention license, and the license Water Pollution Prevention and Control Act "14th, 1st, provides for the punishment of absentia and environmental lectures.	According to the design of each set of the three activated carbon tower operations of one for adsorption operations, one for standby, one for the regeneration stage, the equipment is not idle, the inspection should be the license and the current operating records do not match, have been reviewed and handled changes in water measures.	Subject to the penalty imposed by the competent authorities’ absentia NT $300,000 and environmental workshop for 2 hours.
2018/01/02	Toufen Plant	Toufen Plant vapor power plant due to the operations of the wastewater treatment Unit and licensing content registration does not conform to the "Water pollution prevention and control law."	Bureau of Environmental Inspection inspected the Toufen Plant on July 23, 2017 to inspect the discharge port (D02) in the water pollution prevention and control permit matters for 24 hours of continuous discharge.The inspection of the discharge mouth without waste water discharge and the contents of the permit do not match, contrary to the " Water Pollution Prevention and Control Act "14th, 1st, provides for the punishment of absentia and environmental lectures.	Due to the original waste water pump design high and low level control start and stop, after the inspection has been adjusted immediately to comply with the license continuous emission specification.	Subject to the penalty imposed by the competent authorities absentia NT $300,000 and environmental workshop for 2 hours.
2018/01/02	Toufen Plant	Toufen Plant is in violation of the "Water pollution prevention and control law" because it collects the overflow working environment of the ditch by collecting the waste water from the coal storage site.	Bureau of Environmental Inspection inspected the Toufen Plant on July 18, 2017, and the overflow operating Environment of the self-collecting ditch in the coal storage site was not collected and disposed of, in violation of article 18th of the "Water pollution prevention and control law" and the administrative measures 69, and the penalty absentia and environmental lectures were laid down.	Coal storage yard has been equipped with car washing wastewater recovery treatment device and anti-waste water overflow embankment barrier, but the length is not enough; the next day we have immediately increased the length of the embankment barrier and effectively prevented the waste water overflow.	Fined NT $60,000 by the competent authority and 2 hours of remedial seminars.

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Date	Entity	Case	Main Deficiency	Improvement	Penalties Types
2018/01/02	Toufen Plant	Toufen Plant wastewater Treatment facilities Each unit name is unclear, in violation of the "Water pollution prevention and control law."	Bureau of Environmental Inspection at July 24, 2017 inspected the Toufen Plant, checked the waste water treatment facilities Each unit name is unclear, violates the "Water pollution prevention and control Law" 18th and management measures, the punishment of absentia and environmental lectures.	It has been marked immediately in accordance with the contents of the water pollution control measures permit.	Subject to the penalty imposed by the competent authorities absentia NT $40,000 and environmental workshop for 2 hours.
2018/01/12	Dashe Plant	Dashenh Plant public second plant Wastewater (liquid) incineration process (M07) some unit operations and license registration scope is not consistent, in violation of the "Air pollution Control law."	Kaohsiung City Department of Environmental Protection in December 15, 2017 inspected the establishment and operation of fixed pollution sources in the factory, checked the waste water incinerator (E062) Distributed Control System (DCS) showed the export oxygen content at 80%, the license approved for 8%; the second washing tower (A007) did not have a PH meter, the license approval should be set; wet EP ( A006) Discharge current part of the period did not meet the scope of the license 10~200mA, in violation of the "Air Pollution Control Law" 24th article 2nd provision, the penalty absentia and environmental lectures.	1. The Waste water incinerator (E062) Distributed Control System (DCS) displayed failure so that the error was recorded and the correction was completed. 2. The second washing tower has PH monitoring equipment added. 3. Has completed the wet EP maintenance improvement, and handled the license to apply for the next repair current operating range.	Fined NT $100,000 by the competent authority, and 2 hours of remedial seminars.
2018/03/01	Toufen Plant	Toufen Plant production of a group of exhaust gas combustion tower (A003) concentration monitoring facilities effective monitoring of the percentage of hours did not reach 95%, in violation of the "Air pollution Control law."	Miaoli County Department of Environmental Protection inspected the Toufen Plant on January 12, 2018. The implementation of the exhaust gas combustion tower (A003) Monitoring facility quarterly effective monitoring of the percentage of hours of check results, to check the 3rd quarter of 2017 C2 total concentration monitoring facilities effective monitoring of the number of hours did not reach 95%, not in line with the "volatile organic air pollution control and emission standards," article 6th 2nd, in violation of the " Air Pollution Prevention and Control Act "23rd, article 1st, provides for the punishment of absentia and environmental workshops	1. To stipulate that the maintenance manufacturers of waste burning towers after the maintenance of routine equipment need to sign with the head of the factory to recognize the results of the day and abnormal returns. 2. Improve the data collection function of the waste burning tower, add the abnormal active alarm mechanism, and calculate the effective monitoring hours retrieval rate function in the quarter on a daily basis. 3. The trainer's judgment of the reading value of the system.	Fined NT $100,000 by the competent authority, and 2 hours of remedial seminars.
2018/04/9-10	Toufen Plant	Toufen Plant did not rely on water pollution prevention and Control permission content normal operations; spot checked discharge	Bureau of Environmental Inspection at July 23, 2017, the same year August 7 to inspect Toufen Plant, found that due to the lack of water pollution prevention and control permit content normal operations, resulted in the bovine factoryrunningwater over the	The case was approved by the Government of Miaoli County on January 30, 2018 to complete the improvement	Total Tribunal. The company was fined in absentia NT $6,290,001, 283 the benefits of the recoveryof

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Date	Entity	Case	Main Deficiency	Improvement	Penalties Types
		water exceeded the standards of the discharge water in violation of the "Water pollution prevention and control law."	water discharge standards in violation of the "Water pollution prevention and Control Law" 7th, 1st and 18th 1 1st provisions, the penalty absentia, benefit recovery and environmental workshops.		NT$ 450,002, 272 and the Environmental Workshop 2 hours were completed.
2018/07/10	Toufen Plant	Toufen Plant fire Automatic alarm Trusted switchboard part of the circuit failure did not repair completed, violation of the "Fire law."	The Miaoli County Fire Department inspection on April 25, 2018 found that the fire automatic alarm trusted switchboard had some circuit failure and was unresponsive,. During the June 15 review of the same year, although the original missing has been improved, but it was still found that other circuit failures have not been repaired, in violation of the "Fire Law" 6th of the 1st provisions of thepenaltyabsentia.	A comprehensive overhaul of the fire automatic alarm equipment Trusted switchboard circuit and detector was needed.	Subject to the penalty imposed by the competent authorities absentia NT $12,000.
2018/07/20	Toufen Plant	Toufen Plant set up a group of exhaust gas combustion tower (A003) emission flow rate monitoring facilities. The effective monitoring of the percentage hours did not reach 95%, in violation of the "Air pollution Control law."	Miaoli County Environmental Protection Bureau at 2018 /05/21 checked the Toufen Plant to implement the results of the quarterly effective monitoring of the hourly percentage of the exhaust gas combustion tower (A003) monitoring facility and to check the effective monitoring hours of the emission flow rate monitoring facilities for the 4th quarter of 2017 and the 1st quarter of 2018, which did not meet the 95% "inflation control and emission standards for volatile organic compounds," article 6th 2nd, in violation of the " Air Pollution Prevention and Control Act "23rd, article 1tst, provides for the punishment of absentia and environmental workshops.	1. Correct card replacement, trigger action of the fuse terminal has been locked back; improved after the test can trigger the normal automatic correction. 2. Increased the flowmeter Daily automatic correction check notice settings, correction failure will automatically send a notification newsletter to the relevant personnel for them to know.	Fined NT $100,000 by the competent authority, and 2 hours of remedial seminars.
2018/10/12	Toufen Plant	Toufen Plant production of a group of exhaust gas combustion tower (A003) concentration monitoring facilities effective monitoring of the percentage of hours did not reach 95%, in violation of the "Air pollution Control law."	Miaoli County Environmental Protection Bureau in 2018 /08/08 checked the Toufen Plant on the implementation of the results of the quarterly effective monitoring of the hourly percentage of the exhaust gas combustion tower (A003) monitoring facility, 80.70 per cent of the quarterly effective monitoring of the emission flow rate monitoring facility for the 2nd quarter of 2018, in 2nd line with regulation 6th of the "Air pollution control and emission standards for volatile organic compounds" which violates the " Air Pollution Prevention and Control Act "23rd, article 1st, provides for the punishment of absentia and environmental workshops.	1. Because the ultrasonic probe failure has been reported to the Environmental Protection Bureau in accordance with the law, and urgently requested manufacturers by the China air secondment, after the replacement of the normal value. 2. When the probe spare parts are purchased, a high-temperature probe (260℃) will be used to prevent the probe from becoming deformed. 3. Establish ultrasonic flowmeter system equipment spare parts, to ensure that equipment	Punished by the competent authority, NT$200,000 and environmental lectures for 2 hours

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Date	Entity	Case	Main Deficiency	Improvement	Penalties Types
				damage is repaired with real-time replacement of spare parts, in order to comply with environmental regulations.

• (XI) Resolutions reached in the shareholder’s meeting or by the board of directors during the most recent year and up to the date publication of this annual report:

(1)Important resolutions of the shareholders ' meeting

Type of Meeting	Date	Summary of Motion
Shareholders ’ Meeting	2018/04/11	1. To recognize the business report and financial statements during 2017. 2. To recognize the surplus distribution during 2017. 3. Common stock limit of 500 million shares to deal with domestic cash replenishment issued common stock or cash replenishment issued common stock in the case of overseas depository receipts program. 4. Re-elected the Company's 21st-term director program. 5. Terminating the Company's new directors banning restrictions on competitionprogram.

(2)Important resolutions made by the Board of Directors

Type of Meeting	Date	Summary of Motion
Board of Directors	2018/1/23	1. Date, time, place and other related matters of the Company's stockholders meeting in 2018. 2. The Company will fully reelect the director and separated the director's program. 3. The Company's nomination of nominees of directors of shareholders, independent directors, and operating matters related to the acceptance of shareholder proposals in the year of 2018. 4. The list of the Company's nominated independent directors and candidates for directors 5. Amend some of the provisions and schedules of the Company's "Board performance evaluation measures". 6. The Company's oversea second security is changeable to corporate debt conversion issuance of common shares. To apply for change of capital amount, registration shall be in accordance with the conversion company Debt Office regulations during the year 2014. The date for capital increase is set to be on the 31st of December 2017. 7. The NT 5 million short-term comprehensive credit line renewal case the Company signed with financial institutions. 8. The Company donated NT $10 million to the consortium Shen Chunchi Culturaland educational Foundation.

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Type of Meeting	Date	Summary of Motion
Board of Directors	2018/02/26	1. The Company's internal control regulations self-assessment of operating cases during the year 2017. 2. The Company's individual financial statements and consolidated financial statements during the year 2017. 3. The company's business report cases during the year 2017. 4. The Company's dividends are not intended to be distributed for surplus allocation cases during the year 2017. 5. In order to enrich the working capital and the capital demand for future development, the Company intends to apply for the issuance of overseas depository receipts in the form of common stock or cash replenishment of common shares with a limit of 500 million shares of common stock. 6. The Company intends to participate in the case of the special shares of the G-type registered by Jinghua City Co., Ltd., which is expected to be issued by private equity in March 2018. Issuing 156,000 shares, dividend annual interest rate of 8% and the subscription price per share NT $10. The total amount is NT $1.56 billion. 7. The Company's holdings Core Pacific City Co., Ltd. E-type register convertible special shares will be up to date on the 11th of March 2018. The Company proposed to exercise the right of extension to preserve the interests of special shareholders. 8. The NT 6 billion renewal case of the comprehensive credit contract the Company signed with financial institutions. 9. The 4 billion renewal case guarantees the issuance of commercial promissory note contract that the Company signed with financial institutions. 10. The Company's employee remuneration allocation case during the year of 2017. 11. The Company's distribution of remuneration of directors case during the year 2017. 12. The Company's new president's office associate Zou's remuneration case. 13. The Company's new Ministry of Land Development Associate Zhang's remuneration case. 14. The special assistant of the Company's chairman's office, Zhu's employment termination compensation case. 15. The resignation of the Company's corporate relation division manager of the department of finance Ren's new appointee case. 16. The case of reviews submitted to the board of directors for the nomination of independent directors and candidates for directors. 17. The submission of shareholders’ meeting of the year 2018 on the agreement of termination of the Company's 21st director (including independent director) and director of the legal person representatives' case of restrictions on the prohibition of competition. 18. The agenda draft case of the Company's board of shareholders for the year 2018. 19. Nylon 6 Engineering Plastics Mixing Plant and Materials Development Building Construction project Investment plan case.
Board of Directors	2018/03/27	1. The NT 5 billion comprehensive letter of credit, including short-term borrowing, domestic and foreign purchase of materials and others that the Company signed with financial institutions. 2. The Company's chairman Lin's compensation case. 3. The Company's president Yu's remuneration case. 4.Theremunerationcase ofthe Company's vice president Chenand11

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Type of Meeting	Date	Summary of Motion
		other appointed managers of the production department. 5. The appointed managers' pay case of the Company's newly appointed managers totaling 23. 6. The Company's manager of Occupational Safety and Health Centre Lin's promotion to associate manager of this department and be in charge of the Environmental protection and Pollution Prevention Center.
Board of Directors	2018/04/11	1. The Company's 21st Board of Directors re-elected Lin Ke-Ming as the chairman and director Bai Jun-Nan as the vice chairman of the Company.
Board of Directors	2018/05/10	1. The Company's "Kaohsiung Port intercontinental warehousing logistics area investment and construction plan phase 2" Project supplementary budget of NT four hundred ninety-seven million, seven hundred forty thousand. The total budget of this project increased to NT two billion, four hundred eleven million, nine hundred five thousand. 2. The Memorandum of Understanding that the Company signed with mainland regional units. 3. The Company set up an Indian subsidiary for Investment and Development business and related research with a capital amount of $300,000 trillion. 4. The merger of the subsidiary of the Company, Zhonghuaxing Industrial Co., Ltd. (terminated) and Zhaoxin Chemical Industry Co., Ltd. (Existing) 5. Renew the accountant of KPMG Taiwan to be the visa accountant for the Company's financial and tax report. 6. The Company's financial report certified accountant Chen Jun-guang of KPMG Taiwan, changed to accountant Chen Mei-fang. 7. The short-term comprehensive credit line signed by the Company and the financial institution NT$ eight hundred million and export transfer amount US$ eight million to renew the original amount and apply for a reduction in the interest rate. 8. The renewal of the original amount of NT two hundred million on the issuance of commercial promissory notes contract the Company signed with financial institution. 9. The renewal by original amount of NT 1,200,000,005 million on the issuance of commercial promissory notes contract that the Company signed with a financial institution. 10. Revised some provisions of the Company's "Internal control system for unit units" (including internal audit Regulations of units). 11. Revision of the "research & development cycle" section of the company's internal controls. 12. Promotion of Jian as manager of the equipment purchasing office of the Company. 13. Appointment of Huang as manager of the Manpower Administration Department of the company's Ministry of Management. 14. Approves the appointment of Huang as the company's corporate strategy adviser.
Board of Directors	2018/06/28	1. The Company's Jiangsu Rudong Petrochemical Base Phase two investment plan case. 2. Started the second phase of the planned capital expenditure "factory intelligent production Management Project" with an estimated cost of NT $349.903 million. 3. Revised the provisions of the company's "board of Directors’ and managers’ Division of responsibilities" section. 4. The Company's management department prepared a "Data application Office"withtherevisionofthe Company's"organizationalprocedures."

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Type of Meeting	Date	Summary of Motion
		5. Appointed independent director of Chen Ruilong, Chen Songlong and Pan Weigang as members of the fourth pay committee of the company. 6. Appointment of Li June as associate of the China division of the Company. 7. Promotion of Zhang, Corporation Information Service, as the "Data Application Service" manager. 8. The Company applied to financial institutions for a new short-term consolidated credit line of NT $200 million. 9. The original short-term comprehensive credit line signed by the Company and financial institutions NT $1 billion contract is renewed according to the original terms of the original amount. 10. The Company and financial institutions signed a short-term comprehensive credit line and export transfer amount in accordance with the NT $500 million and USD 3 million renewal. 11. Approval of the consolidated credit line with financial institutions renewed at NT $500 million. 12. The company and the mainland regional units signed a memorandum of cooperation case, approved the change of investment plan period.
Board of Directors	2018/07/30	1. The Company's Kaohsiung City Shang Si Land Development plan case. 2. The collection of land in Qianzhen District, 356-14 and 356-30, of the Company, Kaohsiung City, is applied to the Kaohsiung government for payment of the CIF. 3. Amend the provisions of the Company's "pay compensation committee" procedures. 4. The Company and financial institutions signed the export transfer amount of US $20 million renewal. 5. The Company signed an appointment with a financial institution to guarantee the issuance of a commercial promissory note contract for the renewal of NT $800 million. 6. Appointed Liu as vice general manager of the Company's land development department. 7. Lifted the ban on competition of the vice general manager of the company's land development department. 8. Appointed FanJiang as special assistant to the Chairman's office of the Company. 9. The Company's board of director unit Yang promoted to the unit manager. 10. Compensation case of Lin, 21st chairman of the Company. 11. The remuneration case of Bai, 21st vice chairman of the Company. 12. The compensation case of the Company's 21st term director (excluding independent directors). 13. The compensation case of the Company's 21st term independent director. 14. The remuneration case of the associate Lin of the company's Occupational Safety and Health center. 15. The remuneration case of Jian, manager of the company's equipment purchasing office. 16. The remuneration case of Huang, manager of the company's Manpower Administration office. 17. The remuneration case of Zhang, manager of the company's data application office. 18. Establishment of the Vietnam subsidiary case.
Board of	2018/08/10	1.Acknowledged that theindexequityfund originallyheld by the company

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Type of Meeting	Date	Summary of Motion
Directors		was sold in batches between January and February of 2018.
Board of Directors	2018/09/17	1. The Company obtained the 90% Equity case of Vietnam Regional company. 2. Authorized the Chairman to conduct commercial negotiations on the land development case in Vietnam. 3. The Company "Kaohsiung Multifunctional Economic and Trade Park 5th area A" partial land rental case. 4. The Company and financial institutions signed a short-term comprehensive credit line NT $150 million contract case. 5. The Company and financial institutions signed a short-term comprehensive credit line NT $300 million renewal case. 6. The Company and financial institutions signed a short-term comprehensive credit line NT $600 million and export transfer amount of US $20 million renewal case. 7. Lin, chairman of the Company, also served as the CEO of the Company. 8. The remuneration case of Liu, vice general manager of the Company's land development department. 9. The remuneration case of FanJian, Special assistant to the chairman's office of the Company. 10. The remuneration case of Yang, manager of the Company's stock office. 11. The remuneration case of the associate Li of China division of the Company. 12. The Company's appointment of managers of the staff remuneration allocation case in the year 2017 . 13. Recognition of the company and Kaohsiung Plastic Ester Chemical Industry Office lease Contract Expiration Extension signed an additional contract.
Board of Directors	2018/10/25	1. The Company's "annual business Plan of 2019." 2. The Company's Vietnam area Land development case and Vietnam Sheng Fung Company equity transactions and capital increase matters, and provided Changshu Keisei Real Estate Co., Ltd. 20% Sheng Fung Company Equity purchase option. 3. The Company's Vietnam area Land development case and the case of the project company capital increase and provided Changshu Keisei Real Estate Co., Ltd. 20% of the project company equity purchase options. 4. The Company's appointed managers of the staff remuneration allocation case of the year 2018. 5. Chen, vice general manager of the production department of the Company's head office, was reassigned to the general Manager's office and succeeded as the CEO of JiangSu WeiMing Petrochemical Co. Ltd. 6. Associate Jia of the China division of the Company promoted to vice general manager of the production department of the Company. 7. Appointed Wu as the company's General Manager Room Enterprise Planning team manager level Special assistant.
Board of Directors	2018/11/13	1. The Company's "head factory of auto electrician smoke and power supply stability Improvement project" plan Type capital expenditure plan. 2. The Company holds the B-type and G-type registered special shares of Jinghua City Co., Ltd. will be converted into common stock depending on the application for real estate disposition in Jinghua City. 3. The Company's Land Development Department associate Zhang's dismissal case. 4. The dismissal case of the Company's general manager office project management team managerJi,research& development centerdesign

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Type of Meeting	Date	Summary of Motion
		team manager Chen and Management Department Office of Human Resources Administration Manager Huang and other three people. 5. Appointed Lin as manager of the Office of Human Resources Administration of the Company's management department. 6. Through the continuous employment of Shen as the top adviser to the Company. 7. Through the continued employment of the lawyer Cha as the Company's perennial legal counsel. 8. The arbitration case between the Company and American company Praxair, the International Chamber of Commerce of the arbitration institution, made an arbitration judgment on September 3, 2018, which confirmed that the company had filed an action to set aside the arbitration with the Taipei District Court on October 2, 2018. 9. The Company's request for the return of fish farm land litigation settlement matters.
Board of Directors	2018/12/27	1. The Company's annual budget case of 2019. 2. The Company's internal control audit plan of 2019. 3. The 97.86% equity of Vietnam Sheng Fung Construction Investment Liability Co., Ltd. held by the Company is transferred to the Company's indirect investment by Singapore Hongfeng Investment Co., Ltd. The Board has also adopted a resolution to invest indirectly in the amount of investment made by Sheng Fung Corporation and Veolia Gemini (Vietnam) Investment Co., Ltd., respectively, in the form of a capital increase of China Gemini Development Co., Ltd. 4. The Company and financial institutions signed a comprehensive amount of short-term credit NT $1 billion Joint renewal case. 5. The company donated NT $10 million to the consortium Shen Chunchi Cultural and educational foundation to continuously promote the processing of the "Historical memory of the relocation platform" related projects. 6. Special bonus case of Lin, CEO of the Company. 7. Compensation case of Shen, the Company's top consultant. 8. The remuneration case of Jia, vice general manager of the Company's production department. 9. The remuneration case of Lin, manager of the company's Office of Human Resources Administration. 10. The remuneration case of Wu, Special Assistant to the Enterprise Planning Group of the general manager of the Company. 11. Contract renewal of the house lease contract between the Company and the consortium Taiwan Province Miaoli County head factory of Petrochemical Industry park fire department.

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Corporate Governance Report

• (3) Annual general Meeting of Shareholders important resolutions and implementation of shareholders ' meeting resolutions of 2018

Summaryof Motion

Status of Resolutions Made byShareholders’ Meetings

1. Recognition of the annual business Report and the financial statements of 2017. 2. Recognition of the surplus allocation case of 2017. 3. To be involved in the issuance of overseas depositary vouchers through the issuance of common shares in domestic cash or the issuance of common shares in cash to be financed within the limit of 500 million shares. 4. Reelection of the company's 21st-term director case. 5. Rescission of the restrictions on the prohibition of competition by the new directors of the Company.

The resolution was approved. The resolution was approved and handled in accordance with the resolution of the shareholders ' meeting The Company did not allocate a surplus of $0 at the end of 2017, so there is no subsequent distribution of dividends. The resolution was approved. In order for the Company to cooperate with the investment and development plan, adjust the investment schedule, resulting in the capital market financing case has not been issued, related matters in 2019 regular meeting of shareholders to report. Reelection was completed. Handled the relevant registration, declaration operations. The resolution was approved. Major information declaration operations have been handled in accordance with the law.

• (XII) Recorded or written statements made by any director or supervisor which specified dissent to important resolutions passed by the board of directors during the most recent year and up to the date of publication of this annual report: None

(XIII) Summary of discharge and resignation of parties related to the financial report:

Summary of discharge and resignation of parties related to the financial report:	Summary of discharge and resignation of parties related to the financial report:	Summary of discharge and resignation of parties related to the financial report:	Summary of discharge and resignation of parties related to the financial report:	Summary of discharge and resignation of parties related to the financial report:
March 26, 2019
Job Title	Name	Date of Appointment	Date of Discharge	Reasons for resignation or dismissal
None

Note: The parties relating thereto include the chairman, president, accounting officer, finance officer, internal audit officer and R&D officer

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IV. Information About CPA Professional Fee

• (I) Breakdown of CPA Professional Fee

Firm Name	CPA Name	CPA Name	Duration of Audit	Remarks
KPMG Certified Public Accountants	Melody Chen	Chung Dan-Dan	Full year of 2018

Unit: NT$ thousands

Fees Price Range	Fees Price Range	Audit Fees	Non-Audit Fees	Total
1	Less than NT$2,000 thousand		
2	NT$2,000 thousand (inclusive)~NT$4,000 thousand
3	NT$4,000 thousand (inclusive)~NT$6,000 thousand
4	NT$6,000 thousand (inclusive)~NT$8,000 thousand
5	NT$8,000 thousand (inclusive)~NT$10,000 thousand	
6	NT$10,000 thousand(inclusive)or more			

(II) Information about CPA Professional Fee

Currency Unit: NTD Thousand

Firm Name	CPA Name	CPA Name	Audit Fees	Non-Audit Fees	Non-Audit Fees	Non-Audit Fees	Non-Audit Fees	CPA Duration of Audit	Remark
				System Design	Commercial and Industrial Registration	Human Resource s	Others
KPMG Certified Public Accountants	Melody Chen	Chung Dan-Dan	9,359				1,060	2018 Full year	The other titles refer to reviews on the investment property report and annual reports
KPMG Certified Public Accountants					70		210		Other projects for overseas Investment Review services and project tax services

1. Non-audit fees paid to the CPA, CPA firm and their affiliates exceeded the audit fees more than twenty-five percent: None.

2. Change of CPA firm and the audit fees for the year of the change less than that of the previous year and the amount of audit fees before and after the change and reasons for the change: None

3. Audit fees were 15% less than that of the previous year: None.

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Corporate Governance Report

• V. Information About Replacement of CPA: None

• VI. Information About Chairman, President, and Financial or Accounting Manager of the Company Who Has Worked with the CPA Firm Which Conducts the Audit of the Company or Affiliate to Said Firm in the Most Recent Year: N/A

• VII. Any transfer of equity interests and pledge of or change in equity interests by a director, managerial officer, or shareholder with a stake of more than 10 percent in the most recent year and up to the date of publication of the annual report.

Change in equity of directors, managerial officers, and major shareholders

Job Title (Note 1)	Name	FY 2018 Status of Shareholding Increase(decrease)in number	FY 2018 Status of Shareholding Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number
		Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number	Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number
Chairman	The Core Pacific Co., Ltd.	0	6,500,000	0	3,000,000
Chairman Institutional representative of The Core Pacific Co.,Ltd.	Ko-Ming Lin (CEO inauguration on October 10th, 2018)	0	0	0	0
Vice Chairman	BES Machinery Co., Ltd	0	2,000,000	0	0
Vice Chairman Institutional Representative of BES MachineryCo.,Ltd.	Bai Jiun-Nan	0	0	0	0
Director Institutional representative of The Core Pacific Co.,Ltd.	Kuan Ren Soong (Dismissal on February 11th, 2019)	0	0	0	0
Director Institutional representative of The Core Pacific Co.,Ltd.	Shen Hwa-yeang (Inaugurated on February 11th, 2019)	0	0	0	0
Director	Sheen Chuen-Chi Cultural and Educational Foundation	0	0	0	0

• 76 -

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Job Title (Note 1)	Name	FY 2018 Status of Shareholding Increase(decrease)in number	FY 2018 Status of Shareholding Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number
		Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number	Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number
Director Sheen Chuen-Chi Cultural and Educational Foundation Legal representative of the foundation	Lian-Sheng Tsai	0	0	0	0
Director Sheen Chuen-Chi Cultural and Educational Foundation Legal representative of the foundation	Lin Kuen-Ming	0	0	0	0
Director	Jen Huei Enterprise Co.,Ltd	0	2,000,000	0	2,000,000
Director Institutional Representative of Jen Huei enterprise Co., Ltd.	Wu Ting (Dismissal on April 11th, 2018)	0	0	0	0
Director Jen Huei Enterprise Co., Ltd Representative of the legalperson	Guo Jiun-Huei	0	0	0	0
Independent Director	Steve Chen Ruey-Long	0	0	0	0
Independent Director	Chu Yun-Peng	0	0	0	0
Independent Director	Pan Wen-Yen	0	0	0	0
President	Janson Yu	0	0	0	0
Vice President	Lin Ching	0	0	0	0
Vice President	Yuan-LongChen	0	0	0	0
Vice President	HuangKuo-Tsai	0	0	0	0
Vice President	Liu Yun Zhi (Inaugurated on August 1st,2018)	0	0	0	0
Vice President	Chi-Chun Chia (Promoted on November 11th, 2018)	0	0	0	0
Assistant Vice President	Yang Hui-fen (Auditor General)	0	0	0	0
Assistant Vice President	Tsai Chia-Wei	0	0	0	0

• 77 -

Corporate Governance Report

Job Title (Note 1)	Name	FY 2018 Status of Shareholding Increase(decrease)in number	FY 2018 Status of Shareholding Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number
		Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number	Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number
Assistant Vice President	Chen Ying-Chun (Also Chief of Accounting Dept. Finance Dept.)	0	0	0	0
Assistant Vice President	Tsai Wen-Chih	0	0	0	0
Assistant Vice President	Zuo Shu-Tong (Inaugurated on January2nd,2018)	0	0	0	0
Assistant Vice President	Lin Chin-Hsiang (Promoted on March 27th,2018)	0	0	0	0
Assistant Vice President	Li Guan (Inaugurated on September 17th, 2018)	0	0	0	0
Assistant Vice President	Zhang Wen-Hou (Inaugurated on January 2nd, 2018) (Dismissal on November 17th, 2018)	0	0	0	0
Assistant Vice President	FAN, JIANG, JIANCHENG (Inaugurated on August 1st, 2018) (Dismissal on January31st,2019)	0	0	0	0
Associate (Factory director)	Chien hsien Li	0	0	0	0
Associate (Factory director)	Cheng Jung-Wen	0	0	0	0
Associate (Factory director)	Kao Chi-Tsung	0	0	0	0
Manager	Venessa Chi (Inaugurated on January 1st, 2018) (Dismissal on November 13th, 2018)	0	0	0	0
Manager	Wang Yen-Li (Inaugurated on January1st,2018)	44,181	0	0	0

• 78 -

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Job Title (Note 1)	Name	FY 2018 Status of Shareholding Increase(decrease)in number	FY 2018 Status of Shareholding Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number
		Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number	Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number
Manager	Li Chi-Chang (Inaugurated on January1st,2018)	0	0	0	0
Manager	Chen Yung-Long (Inaugurated on January1st,2018)	0	0	0	0
Manager	Ren Wan-Yin (Inaugurated on January 1st, 2018) (Dismissal on February26th,2018)	0	0	0	0
Manager	Yang Peiyu (Inaugurated on August 1st,2018)	0	0	0	0
Manager	Yang Shou-Chin (Inaugurated on January1st,2018)	0	0	0	0
Manager	Chang Chi-Wei (Inaugurated on January1st,2018)	0	0	0	0
Manager	Chen Chi-Ho (Inaugurated on January1st,2018)	56,000	0	(56,000)	0
Manager	Chen Yin-Dien (Inaugurated on January 1st, 2018) (Dismissal on November 13th, 2018)	0	0	0	0
Manager	Yang Ming-Ling (Inaugurated on January1st,2018)	0	0	0	0
Manager	Yang Chi-Yuan (Inaugurated on January1st,2018)	0	0	0	0
Manager	Chen Jian-Ming (Inaugurated on January1st,2018)	0	0	0	0
Manager	Chen Hong-Long (Inaugurated on January1st,2018)	0	0	0	0
Manager	Li Chiao-Pin (Inaugurated on January1st,2018)	0	0	0	0

• 79 -

Corporate Governance Report

Job Title (Note 1)	Name	FY 2018 Status of Shareholding Increase(decrease)in number	FY 2018 Status of Shareholding Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number
		Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number	Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number
Manager	Wang Chi-Fong (Inaugurated on January1st,2018)	0	0	0	0
Manager	Chien Chang-Mo (Inaugurated on January1st,2018)	0	0	0	0
Manager	Wong Zhong-Chian (Inaugurated on January1st,2018)	0	0	0	0
Manager	Li Chin-Yi (Inaugurated on January1st,2018)	0	0	0	0
Manager	Huang Chien-Yuan (Inaugurated on January1st,2018)	0	0	0	0
Manager	Li Kun-Nan (Inaugurated on January1st,2018)	0	0	0	0
Manager	Li Kung-Da (Inaugurated on January1st,2018)	0	0	0	0
Manager	Jian Zhanghong (Inaugurated on May 10th,2018)	0	0	0	0
Manager	Chien Kuan-Der (Inaugurated on January1st,2018)	0	0	0	0
Manager	Tsai Chau-Yuan (Inaugurated on January1st,2018)	0	0	0	0
Manager	Wu Junxian (Inaugurated on November 1st,2018)	0	0	0	0
Manager	Ho Mu-Chuan (Change of duties on January1st,2018)	0	0	0	0
Manager	Wei Ren (Change of duties on January1st,2018)	0	0	0	0
Manager	Chen Yi Yan (Change of duties on January1st,2018)	0	0	0	0

• 80 -

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Job Title (Note 1)	Name	FY 2018 Status of Shareholding Increase(decrease)in number	FY 2018 Status of Shareholding Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number	Ending on March 26th, 2019 Number of pledged shares Increase(decrease)in number
		Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number	Status of Shareholding Increase (decrease) in number	Number of pledged shares Increase (decrease) in number
Manager	Su Shih-Sheng (Change of duties on January 1st, 2018) (Dismissal on August 15th,2018)	0	0	0	0
Manager	Liu Yung-Fu (Change of duties on January1st,2018)	0	0	0	0
Manager	HUANG, YIZHEN (Inaugurated on May 10th, 2018) (Dismissal on November 13th, 2018)	0	0	0	0
Manager	Zhang Chenglong (Inaugurated on July 1st,2018)	0	0	0	0
Manager	Gao Tianshui (Inaugurated on November 5th,2018)	0	0	0	0
Manager	Lin Jing-Wen (Inaugurated on November 15th, 2018) (Dismissal on April 1st,2019)	0	0	0	0
Chief Consultant	Ching-JingSheen	0	0	0	0
Note 1: The shareholders who hold more than 10% of the Company’s shares shall be identified as major shareholders and stated separately. Note 2: Where the counterparts of shares through transfer and pledged under lien are related parties, it is also necessary to complete the following table.

Information about Equity Transfer

Name (Note 1)	Reasons for the transfer of equity (note 2)	Transaction Date	Transactio n Responde nt	Respondent of transaction, the Company, and director , supervisor and shareholding ratio is more than the 10% relationshipof Shareholders	Number of shares	Transacti on Price
None

Note 1: Please specify the names of directors, supervisors, managerial officers and shareholders who hold more than 10% of the Company’s shares.

Note 2: Please specify acquisition or disposal.

• 81 -

Corporate Governance Report

Information about Equity Pledged Under Lien

Name (Note 1)	Change of pledge Reasons (Note 2)	Date of Change	Transact ion Respond ent	Relationship between trading counterpart and the Company, directors, supervisors and shareholders who hold more than 10% of the Company’s shares	Number of shares	Share holdin g Ratio	Pledg e Ratio	Quality Lending (Redempt ion) Amount
None

Note 1: Please specify the names of directors, supervisors, managerial officers, and shareholders who hold more than 10% of the Company’s shares.

Note 2: Please specify pledge or redemption.

• 82 -

VIII. Information about the relationship among the Company's 10 largest shareholders:

March 26, 2019

Name( Note 1)	Oneself Status of Shareholding	Oneself Status of Shareholding	Current Shares Held by Spouse or Children of Minor Age	Current Shares Held by Spouse or Children of Minor Age	Total Shareholding Under the Name of a Third Party	Total Shareholding Under the Name of a Third Party	Information on top 10 shareholders in proportion of shareholdings, who are related to one another, or are kin at the second tier under the Civil Code related to one another, their names and relationship (Note 3)	Information on top 10 shareholders in proportion of shareholdings, who are related to one another, or are kin at the second tier under the Civil Code related to one another, their names and relationship (Note 3)	Remark
	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholdin g	Quantity	Ratio of Shareholding	Title (or name)	Relation
Core Pacific - Yamaichi International (H.K.) Ltd. - House Account Representative: N/A	77,274,570 -	2.86% -	0 -	0 -	0 -	0 -	BES Engineering Corporation	Substantial related party
JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds Representative: N/A VANGUARD EMERGING MARKETS STOCK INDEX FUND, A SERIES OF VANGUARD INTERNATIONAL EQUITY INDEX FUNDS Representative: N/A	43,097,647 0 41,209,000 0	1.60% 0 1.53% 0	0 0 0 0	0 0 0 0	0 0 0 0	0 0 0 0	None None	None None
The Core Pacific Co. Ltd. Representative: Ran Sheng-Yuan	39,285,806 250	1.46% 0%	0 0	0 0	0 0	0 0	None None	None None
BES Engineering Corporation Representative: Shen Hwa-Yang	38,775,000 140,800	1.44% 0.01%	0 0	0 0	0 0	0 0	The Core Pacific Co., Ltd. None	Substantial related party None
EMERGING MARKETS CORE EQUITY PORTFOLIO OF DFA INVESTMENT DIMENSIONS GROUP INC. Representative: N/A	28,832,324 -	1.07% -	0 -	0 -	0 -	0 -	None	None
Dimensional Emerging Markets Value Fund Representative: N/A	27,733,397 -	1.03% -	0 -	0 -	0 -	0 -	None	None

Name( Note 1)	Oneself Status of Shareholding	Oneself Status of Shareholding	Current Shares Held by Spouse or Children of Minor Age	Current Shares Held by Spouse or Children of Minor Age	Total Shareholding Under the Name of a Third Party	Total Shareholding Under the Name of a Third Party	Information on top 10 shareholders in proportion of shareholdings, who are related to one another, or are kin at the second tier under the Civil Code related to one another, their names and relationship (Note 3)	Information on top 10 shareholders in proportion of shareholdings, who are related to one another, or are kin at the second tier under the Civil Code related to one another, their names and relationship (Note 3)	Remark
	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholdin g	Quantity	Ratio of Shareholding	Title (or name)	Relation
Yuanta Securities (Hong Kong) Company Limited-PSHK Clients Representative: N/A Polunin Developing Countries Fund, LLC Representative: N/A	23,700,000 - 23,487,842 -	0.88% - 0.87% -	0 - 0 -	0 - 0 -	0 - 0 -	0 - 0 -	None	None
							None	None
Norges Bank Representative: N/A	22,964,952 -	0.85% -	0 -	0 -	0 -	0 -	None	None

• Note 1: The top ten shareholders’ names shall be identified separately (in the case of corporate shareholders, the corporate shareholders’ names and representatives’ names shall be identified separately).

Note 2: The ratio of shareholding is calculated in terms of own shareholdings, shares held by spouse and children under age or shareholdings under the title of a third party.

Note 3: The shareholders identified above include juristic persons and natural persons and the relationship among them shall be disclosed in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

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IX. Ratio of Combined Shareholding

	Document Date : 2018/12/31;Unit : Share; %	Document Date : 2018/12/31;Unit : Share; %	Document Date : 2018/12/31;Unit : Share; %	Document Date : 2018/12/31;Unit : Share; %	Document Date : 2018/12/31;Unit : Share; %	Document Date : 2018/12/31;Unit : Share; %
Reinvestment.	Invested by the Company		Invested by directors, supervisors, management, and enterprises controlled by the Company directlyor indirectly		Combined Investment
	Number of shares	Ratio of Shareholdi ng	Number of shares	Ratio of Sharehold ing	Number of shares	Ratio of Sharehold ing
Tao Zhu Construction and Development Co., Ltd.	10,000,000	100％	0	0％	10,000,000	100％
CPDC Investment (BVI)Co., Ltd.	26,580,000	100％	0	0％	26,580,000	100％
Sinopec Green Energy Technology Co.,Ltd.	15,000,000	100％	0	0％	15,000,000	100％
Tsou Seen Chemical Industries Corporation	96,000,000	100％	0	0％	75,000,000	100％
Rich Equities Ltd.	180,000	100%	0	0％	180,000	100%
Unichem Development Limited	191,477,752	100%	0	0％	191,477,752	100%
Chunghwa Twin Towers Co. Ltd.	200,000,000	90.87%	100,000	0.005％	200,100,000	90.91%
CKS Guard	1,440,000	24％	0	0％	1,440,000	24％
Kaohsiung Monomer Co.,Ltd.	20,000,000	40％	0	0％	20,000,000	40％
Shengfeng Construction Investment Co., Ltd.	458,637,500,000	97.87%	0	0%	458,637,500,0 00	97.87%

Note : Equity Method Long Term Investments

• 85 -

Status of Fund Raising

Four. Status of Fund Raising

I. Capital Stock and Shares

(I) Source of Capital Stock

Year and Mont h	Pub lica tion Pric e	Authorized Capital Stock	Authorized Capital Stock	Paid-in Capital	Paid-in Capital	Remark	Remark	Remark
		Number of shares	Price	Number of shares	Price	Capital stock Source	Offset by any property other than cash	Other
1969/ 04	100	8,000,000	800,000,000	8,000,000	800,000,000	Fund raising in cash	None
1980/ 05	100	25,000,000	2,500,000,000	25,000,000	2,500,000,000	Capital increase in cash	None
1983/ 02	10	800,000,000	8,000,000,000	630,140,000	6,301,400,000	Capital increase in cash Capital increase upon consolidation	None
1983/ 11	10	800,000,000	8,000,000,000	748,724,700	7,487,247,000	Capital increase in cash Capital increase upon consolidation	None
1984/ 02	10	890,000,000	8,900,000,000	823,058,900	8,230,589,000	Capital increase upon consolidation	None
1985/ 10	10	890,000,000	8,900,000,000	846,878,900	8,468,789,000	Capital increase in cash	None
1986/ 07	10	890,000,000	8,900,000,000	856,878,900	8,568,789,000	Capital increase in cash	None
1991/ 05	10	1,100,000,000	11,000,000,000	959,704,400	9,597,044,000	Capital surplus	None
1997/ 08	10	1,362,900,000	13,629,000,000	1,115,731,588	11,157,315,880	Capital surplus Recapitalizatio n of earnings	None
1998/ 08	10	1,840,000,000	18,400,000,000	1,283,091,327	12,830,913,270	Capital surplus Recapitalizatio n of earnings	None
1999/ 02	10	1,840,000,000	18,400,000,000	1,283,869,156	12,838,691,560	Convertible Corporate Debt Conversion	None
1999/ 09	10	1,840,000,000	18,400,000,000	1,412,256,072	14,122,560,720	Capital surplus Recapitalizatio n of earnings	None	SEC (88) Tai-Tsai-Cheng (1) No. 63778 dated July 12,1999
2000/ 08	10	1,840,000,000	18,400,000,000	1,482,868,876	14,828,688,760	Capital surplus	None	SEC (89) Tai-Tsai-Cheng (1) No. 52477 dated June 17,2000
2002/ 12	10	1,840,000,000	18,400,000,000	1,482,943,830	14,829,438,300	Convertible Corporate Debt Conversion	None
2004/ 02	10	2,600,000,000	26,000,000,000	1,689,999,459	16,899,994,590	Convertible Corporate Debt Conversion	None

• 86 -

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Year and Mont h	Pub lica tion Pric e	Authorized Capital Stock	Authorized Capital Stock	Paid-in Capital	Paid-in Capital	Remark	Remark	Remark
		Number of shares	Price	Number of shares	Price	Capital stock Source	Offset by any property other than cash	Other
2008/ 11	10	2,600,000,000	26,000,000,000	1,794,962,992	17,949,629,920	Recapitalizatio n of earnings	None	FSC approval letter under Ching-Kuan-Cheng Yi-Tze No. 0970049317 dated September 17,2008
2011/ 09	10	2,600,000,000	26,000,000,000	1,974,459,291	19,744,592,910	Recapitalizatio n of earnings	None	FSC approval letter under Ching-Kuan-Cheng Yi-Tze No. 1000031761 dated July8,2011
2012/ 12	10	2,600,000,000	26,000,000,000	2,319,989,666	23,199,896,660	Recapitalizatio n of earnings	None	FSC approval letter under Ching-Kuan-Cheng Yi-Tze No. 1010046102 dated October 15,2012
2017/ 05	10	2,600,000,000	26,000,000,000	2,355,258,954	23,552,589,540	Convertible Corporate Debt Conversion	None
2017/ 08	10	2,600,000,000	26,000,000,000	2,363,353,546	23,633,535,460	Convertible Corporate Debt Conversion	None
2017/ 11	10	2,600,000,000	26,000,000,000	2,524,667,174	25,246,671,740	Convertible Corporate Debt Conversion	None
2018/ 03	10	3,600,000,000	36,000,000,000	2,699,857,267	26,998,572,670	Convertible Corporate Debt Conversion	None

Note 1: Please specify the information for the current year available until the date of the publication of the annual report. Note 2:The capital increase part shall be identified by effective (approval) date and document No. additionally. Note 3:The stock issued at the price less than the par value shall be identified prominently.

Note 4:Please specify the offset by monetary creditor’s rights and technology, if any, and note the type and amount of offset. Note 5:The private placement, if any, shall be identified prominently.

Type of Share	Authorized Capital Stock	Authorized Capital Stock	Authorized Capital Stock	Remark
	OutstandingShares	Unissued Shares	Total
Common Stock	2,699,857,267	900,142,733	3,600,000,000

Note: Please specify whether or not the stock refers to TWSE or GTSM stock (the stock forbidden from being traded in TWSE or GTSM, if any, shall be identified).

Information About Shelf Registration System

Securities Type	Quantity of Shares	Quantity of Shares	Quantity of	Quantity of	Purpose and Expected Benefit of Issued Shares	Period in Which Unissued Shares will be Issued	Remark
	Total Quantity	Approved Amount	Quant ity	Price
None

• 87 -

Status of Fund Raising

(II) Composition of Shareholders

March 26, 2019

Composition of Shareholders Quantity	Government Apparatus	Financial Organization	Other Juristic Persons	Individual	Foreign institutions Foreigners	Total
Number of persons (persons)	5	17	332	191,182	303	191,839
Number of shares held (shares)	2,239,739	16,749,600	163,345,522	1,906,980,956	610,541,450	2,699,857,267
Ratio of Shareholding (%)	0.08	0.62	6.05	70.64	22.61	100.00

(III) Diversification of equity

March 26, 2019

			March 26,2019
Range of Shares	Number of shareholders	Number of shares held	Shareholding ratio
1~999	58,750	12,018,499	0.45%
1,000~5,000	78,261	188,917,386	7.00%
5,001~10,000	23,999	191,630,995	7.10%
10,001-15,000	8,830	110,981,532	4.11%
15,001-20,000	6,159	115,378,808	4.27%
20,001-30,000	5,442	140,072,654	5.19%
30,001-40,000	2,554	91,508,779	3.39%
40,001-50,000	2,016	94,897,188	3.51%
50,001-100,000	3,325	243,049,716	9.00%
100,001~200,000	1,426	205,282,040	7.60%
200,001-400,000	591	167,792,992	6.21%
400,001-600,000	176	86,564,678	3.21%
600,001-800,000	60	41,921,416	1.55%
800,001~1,000,000	60	54,752,296	2.03%
1,000,001 or more	190	955,088,288	35.38%
Total	191,839	2,699,857,267	100.00%

• 88 -

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Special stock

			March 26,2019
Range of Shares	Number of Shareholders	Status of Shareholding	Ratio of Shareholding
None
Total

(IV) Roster of Major Shareholders

March 26, 2019

(IV) Roster of Major Shareholders		March 26,2019
Shares Main Name of shareholder	Status of Shareholding	Ratio of Shareholding
Core Pacific - Yamaichi International (H.K.) Ltd. - House Account JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds VANGUARD EMERGING MARKETS STOCK INDEX FUND, A SERIES OF VANGUARD INTERNATIONAL EQUITY INDEX FUNDS The Core Pacific Co., Ltd. BES Engineering Corporation EMERGING MARKETS CORE EQUITY PORTFOLIO OF DFA INVESTMENT DIMENSIONS GROUP INC. Dimensional Emerging Markets Value Fund Yuanta Securities (Hong Kong) Company Limited-PSHK Clients Polunin Developing Countries Fund, LLC Norges Bank t	77,274,570 43,097,647 41,209,000 39,285,806 38,775,000 28,832,324 27,733,397 23,700,000 23,487,84 22,964,952	2.86% 1.60% 1.53% 1.46% 1.44% 1.07% 1.03% 0.88% 0.87% 0.85%

• 89 -

Status of Fund Raising

(V) Information on market value, net value, earnings and dividends per share

Unit: NTD, except weighted average quantity of shares and analysis on ROE

Year Category 目			2017	2018	Terminates on the year of 2019/04/30 (Note 8)
Per share Price (Note 1)	The Highest		16.5	16.45	12.35
	The Lowest		9.95	10.80	10.20
	Average		12.62	13.17	11.36
Per share Net Value (Note 2)	Before distribution		26.06	24.78	Not Suitable For use
	After distribution		（註9）	（註9）
Per share Surplus	Weighted average shares		2,390,817,335	2,699,857,267
	Surplus per share (Note 3)		2.55	1.59
	Surplus per share-adjustment (Note 3)		2.55	(Note 9)
Per share Dividends	Cash dividends		-	(Note 9)
	Free-Gra tis dividend s	Stock dividends from earnings	-	-
		Stock dividends from paid-in capital	-	-
	Accumulated unpaid dividends (Note 4)		-	-
Return on investment	Price-Earnings Ratio（Note 5）		4.95	8.28
	Profit ratio (Note 6)		-	-
analysis	Cash dividendsyield(Note 7)		-	-

• In the case of retained shares distribution or capital surplus shares distribution, please also disclose the

• information about the market value and cash dividends adjusted retroactively based on the quantity of shares as distributed.

• Note 1: Please identify the highest market value and the lowest market value of the common stock in various years, and calculate the average market price for each year based on the trading value and turnover for each year.

• Note 2: Please apply the quantity of shares already issued at the end of the year and identify the status of distribution according to the resolution made by the shareholders' meeting held in the following year.

• Note 3: If it is necessary to make adjustment retro-actively due to Free-Gratis dividends, please identify the EPS before and after adjustment.

• Note 4: If the terms and conditions under which the equity securities are issued provide that the stock dividend retained in the year may be accumulated until the year in which there are allocable earnings available, please disclose the retained stock dividends accumulated until the then year.

• Note 5: Price-Earnings Ratio = Average Closing Price Per Share in current year/Earnings Per Share

• Note 6: Dividend Yield=Average Closing Price Per Share in current year/Cash Dividend Per Share

• Note 7: Cash Dividend Yields = Cash Dividend Per Share/Average Closing Price Per Share in current year Note 8: Please identify the net value per share and EPS available in the latest quarterly financial information audited (reviewed) by the independent auditor before the date of publication of the annual report, and the information available until the date of publication of the annual report in the other sections.

Note 9 : Surplus allocation of 2018 is pending resolution of the regular session of the general Meeting (2019).

• 90 -

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• (VI) Dividends Policy and the Status of Implementation

• Dividends policy in the Articles of Incorporation:

The Company may duly use its reserve to distribute dividends, appropriate capital and issue new shares in accordance with relevant laws and regulations. If the Company has earnings, after payment of taxation, it shall offset the losses in previous years, and set aside a legal capital reserve and special capital in accordance with relevant laws and regulations or requested by the authorities in charge. With respect to any balance herein together with the undistributed cumulative profits from previous years and from current year, the Board of Directors shall prepare an earnings distribution proposal and submit to the shareholder meeting for approval per the following dividend policy.

The Company positions itself amid a highly capital intensive, volatile and competitive industry. Where the Company is subject to the influence of the global economy and changes in industrial performance, the Company should consider the Company’s business operations, capital needs and status of competition, interests of shareholders and the Company’s own financial planning in allotment of its profits. Under such circumstances, the Company may reserve the profits into special reserve either in whole or in part to assure financial stability and sustainability. The Company may allot dividends in the form of cash dividends or stock dividends. In case the allotment is made by way of stock dividends, the ratio for stock dividend shall not exceed 50% of total distribution unless the ratio of the Company’s total liabilities to total assets is equivalent or above 50%, unless otherwise prescribed in the relevant laws and regulations.

1. Allocation of dividends proposed at the shareholders’ meeting:

The 2018 surplus allocation case was approved by the Board of Directors of March 22, 2019, the proposed distribution of common stock dividends of 2,699,857,267 yuan (each share of the dividend of 1 yuan, including cash dividend 0.5 yuan, stock dividend 0.5 yuan). The distribution of this cash dividend and stock dividend shall, after passing by the shareholders ' meeting and submitting it to the competent authority for approval, authorize the Board of Directors to specify the basis date for the issue of ex-dividend rights.

In the event of a subsequent change in the share capital of the Shareholders ' equity (interest) rate, the President shall authorize the Chairman to grant the full amount of the dividend in accordance with the general meeting of the shareholders, if the return of the shares is changed by means of the number of shares issued and in circulation in the name of the company, common stock is adjusted on the basis of the base date for the exclusion of the right interest.

• (VII) Effect of allocation of Free-Gratis Dividends proposed at the shareholders’ meeting on the operational performance of the Company and the Earnings Per Share:

• The company does not disclose the 2019 annual financial forecast information, so it does not apply.

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Status of Fund Raising

(VIII) Remuneration of employees and directors

1. Proportion or scope of employee bonus and remuneration to directors as stated in the Company’s Articles of Incorporation Article 32:

If the Company is profitable in the year, it shall be paid 3% for the remuneration of its employees and not more than 2% for the remuneration of its directors. However, when the Company has accumulated losses, it should pre-reserve the amount of the repair code.

Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements are entitled to receive shares or cash. The remuneration to directors entitled will receive them in cash only. The earnings refer to the pre-tax income minus the remuneration to directors and employee.

The earnings refer to the pre-tax income minus the remuneration to directors and employee.

The distribution as employees’ compensation and directors’ remuneration should be adopted by resolution which the majority vote at a meeting of the board of directors attended by two-thirds of the total number of directors, and the report of such distribution shall be submitted to the shareholders’ meeting.

1. The accounting in the case of deviation from the basis for stating employees bonus and remuneration to directors, the basis for calculating the quantity of stock dividends to be allocated and the actual allocation:

The Company's 2018 employee remuneration is estimated on the basis of the amount of the employee's remuneration and directors ' remuneration before the current year's pre-tax net profit, and in accordance with the estimated amount to the date of the shareholders' meeting, if there is any change, it shall be treated according to the changes in the accounting estimates and recorded in the annual adjustment of the shareholders' meeting

1. Information about allocation of bonus resolved by the Directors’ Meeting:

2. (1) The Company's staff remuneration and directors ' remuneration for 2018 were approved by the Board of Directors on March 22, 2019 and the distribution is as follows:

The remuneration of employees and directors for 2018 is proposed in accordance with the Articles of Association of the Company, the remuneration of employees is 3%, the amount is NT $146,408,521, and the remuneration of directors is not higher than 2%, the amount is NT $97,605,681, which is paid in cash.

• (2) The amount of remuneration paid by the employee in the stock and the proportion of the total value of the individual or individual financial reports after the current period of net remuneration and employee compensation: not applicable.

• The actual allocation of remuneration of employees and directors in the previous year (including the number of shares allocated, the amount and the share price), the difference between the remuneration of the employees and those who are recognized, and the reasons for the difference, the cause and the handling of the situation:

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(1) The actual distribution of directors ' remuneration in 2017 is the same as the proposed allocation of board resolutions.

(2) The actual 2017 assigned staff remuneration, according to all colleagues in profession contribution and when the actual performance of colleagues of the year results issued.

• (IX) Re-purchase of the Company’s shares:

The Company has not bought back the shares of the company as of the printed date of the annual report.

II, the Company's debt handling situation:

(I) Issuance of Overseas Convertible Corporate Bonds

Corporate Bonds	Second Overseas Secured Convertible Corporate Bonds in 2014
Date of Issuance	Dec 17th 2014
Denomination	USD $200,000 or multiples thereof
Location	Singapore
Price of Issuance	100% issuance based onpar value
Total	USD $132,000,000
Interest rates	0% coupon rate
Term	5years,endingon Dec 17,2019
Insurance Agency	CTBC Bank,Taiwan Cooperative Bank
Trustee	The Bank of New York Mellon,London Branch
Underwriting Agency	Foreign: Barclays Bank PLC Domestic: Yuanta Securities Co.,Ltd.
Lawyer	Baker & McKenzie
External Auditor	KPMG Certified Public Accountants
Method of reimbursement	Apart from callable, puttable bonds for cancellation and conversion, the corporate bond is based on half year calculation of a 100% par value with a premium of 1.75%, annually. The redemption will be 109.10% frompar value.
Non-reimbursable Principal	USD $0
Redemption or early Terms of Settlement	Refer to the issuance and conversion guidance of the Second Overseas Secured Convertible Corporate Bonds in 2014, disclosed in the Market Observation Post System.
Restricted Clause	None
The name, evaluation and other date of credit evaluation and other organizations, Results of corporate debt assessment,etc.	Not Applicable

• 93 -

Status of Fund Raising

Corporate Bonds	Corporate Bonds	Second Overseas Secured Convertible Corporate Bonds in 2014
Other attached rights	Converted (exchange or subscription) common stock, depository receipts or other price of securities as of the annual reportpublish date.	Converted common Shares 379,867,601 shares
	Distribution & conversion (exchange Or subscription)method	Refer to the Market Observation Post System
The method of issuing and converting, exchanging or subscription, the conditions under which the terms of issue may dilute the equity and Impact on existing shareholder equity		Converted common stock 379,867,601 shares, the balance of $0 in United States dollars; According to the current price of conversion is 10.80 per share (Reference exchange rate of NT$31.222 to US$1), the dilution rate would be 14.07%, assuming full conversion into common stock,an increase of 379,867,601 shares.
Name of Exchange		Not Applicable
Implementation of the funds utilization plan		The amount of USD $107,147 thousands has been spent as at March 31, 2019, and the amount has not yet been spent in United States dollars of $24,853 thousands; the implementation of funds is implemented in accordance with the project schedule.

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(II) Information of Overseas Convertible Corporate Bonds

Corporate Bonds	Corporate Bonds	Second Overseas Secured Convertible Corporate Bond in 2014	Second Overseas Secured Convertible Corporate Bond in 2014	Second Overseas Secured Convertible Corporate Bond in 2014	Second Overseas Secured Convertible Corporate Bond in 2014
Year Item		2014	2015	2016	As of 2017 12/19
Dedicated debt Exchange price Company	Highest (Note 1)	Note 1	Note 1	Note 1	Note 1
	Lowest (Note 1)	Note 1	Note 1	Note 1	Note 1
	Average (Note 1)	Note 1	Note 1	Note 1	Note 1
Convert Price		10.80	10.80	10.80	10.80
Issuance date and conversion price		Dec 17th 2014 10.80	Dec 17th 2014 10.80	Dec 17th 2014 10.80	Dec 17th 2014 10.80
Obligation of conversion		0 converted common stock in the fiscal year and 0 accumulated converted common stock	0 converted common stock in the fiscal year and 0 accumulated converted common stock	0 converted common stock in the fiscal year and 0 accumulated converted common stock	379,867,601 converted common stock as of December 19, 2017 379,867,601 accumulated converted common stock.

Note: 1. No transactions record.

1. The Company has redeemed the company's debt in advance on December 19, 2017. The amount of USD $107,147 thousand has been spent as at March 31, 2019, and the amount has not yet been spent in USD $24,853 thousand; the implementation of funds is implemented in accordance with the project schedule.

III. Issuance of Preferred Shares: N/A

IV. Status of Participation in Issuance of “Global Depository Receipts (GDRs)”:

The 2018 shareholders' meeting of the company approved the issuance of ordinary shares in the cash increase through the cash increase approved on April 11, 2018, to participate in the issuance of overseas depositary receipts, and the adjustment of the investment schedule was made in conjunction with the transfer of investment and development plans.

V. Status of Employee Stock Option: N/A

• VI. Restrictions on Employee Share Subscription Warrant: N/A

• VII. Mergers and Acquisitions, or as Assignee of New Shares Issued by Another Company: N/A

VIII.Implementation of Capital Utilization Plan

Until the deadline of providing hardcopy of annual report, no unissued shares or private placement of securities have not yet been complete, nor has existing plans within the last three years generated significant changes.

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Operations Overview

Five. Operations Overview

I. Business contents

• (I) Scope of business

• The scope of major business items:

• (1)Manufacture of petroleum, alkali-chlorine and phosphoric acid and derivatives.

• (2)Import-export including storage, transportation, procurement, and sales of the products in the forgoing item and their raw materials, chemicals, and chemical materials.

• (3)Business related to the procurement and sales in the foregoing item and the import and export trade of general commodities.

• (4)Provision of related technical services of products (by-products) in the foregoing items, processes, and equipment operations.

• (5)Research and development of chemicals.

• (6)Trade, classified processing, and distribution of goods (clothing, electrical, books and stationery, auto products, houseware, and entertainment and leisure facilities).

• (7)Restaurant and hotel operations.

• (8)Design and sales of computer software and operation of data registration and processing.

• (9)Development of commercial buildings; lease and sales of public housing; development of factory buildings on general industrial land; lease and sales of warehouses; and development, lease, sales, and management of industrial parks commissioned by industrial authorities.

• (10)Operations of recreational areas and golf practice ranges (under five holes).

• (11)Investment in parking lots within the scope of urban planning.

• (12)Operation of gas stations; sales of diesel and dedicated LPG; and simple auto maintenance services (such as lubrication).

• (13)Operations of new power plants.

• (14) Undertaking environmental engineering work (removal, disposal and engineering of general waste, general industrial waste, and hazardous industrial waste).

• (15)Import, export, and sales of feed and feed additives.

• (16)Business items not prohibited or restricted by the law in addition to the approved business items.

• Major products and sales mix

Currently, the major products of this company include acrylonitrile (AN), caprolactam (CPL), and nylon chip (NY6 or PA6). Others including electricity, cyanate, ammonium sulfate, industrial sulfuric acid, refined sulfuric acid and other by-products, its 2018 product accounted for the proportion of business as follows:

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Product Acrylonitrile (AN) and by-products Caprolactam (CPL) and by-products Other sectors	Sales share(%)
	31.20% 60.14% 8.66%

3. Current products

Current products include acrylonitrile (AN), caprolactam (CPL), nylon chip (NY6 or PA6), ammonium sulfate (AS), sulfuric acid (including fuming sulfuric acid (oleum) and refined sulfuric acid), hydrogen cyanide (HCN), and electricity.

4. New products to be developed

We will evaluate the development of plasticized raw materials, functional polymers, nylon engineering plastics, ester derivatives, ans special chemical. We also use raw materials, products and by-products to develop high value-added products.

(II) Industry overview

1. Current status and development

(1)Acrylonitrile (AN or ACN)

In Taiwan, there are only two AN suppliers: CPDC and Formosa Plastics Corporation (Formosa Plastics). The Company has already expanded production capacity in 2010 and 2011. In 2018 the production capacity was 224,000 metric tons. Although the production capacity of Formosa Plastics was 280,000 metric tons, for the most part of its AN output is for internal use to produce ABS and AF products.

In 2018 the total AN demand in Taiwan was about 475,000 metric tons/year, which was close to that in 2017.

(2)Caprolactam (CPL)

The Company is the only CPL manufacturer in Taiwan, 2018 annual production capacity of 400,000 tons, 2018 production of 357,000 tons, including 351,000 tons of CPL in Taiwan, a small amount of export, the number of 5,000 tons, domestic CPL self-sufficiency rate of about 64.3%. Although the production capacity of the downstream drawing in the mainland region has increased, but the aggregate capacity has also increased significantly, compressing the export space of Taiwan polymerization manufacturers, the consumption of CPL in Taiwan in 2018 was almost no increase compared with 2017, with an apparent demand of about 546,000 metric tonnes/year, and the Asian region's demand for nylon was increasing and concentrated in the mainland. In mainland China, CPL production capacity has been significantly expanded since 2012, and since 2014-2018, the expansion has slowed down under oversupply, with a total output of 3.55 million tons in 2018. The new capacity was manageable in 2018, with an increase of 280,000 tonnes in 2018, an increase of 7% per cent over 2017 and a total capacity of 3.55 million tons. The total demand for CPL in mainland China in 2018 was about 3.2 million metric tonnes/year, up from 2.69 million metric tonnes/year in 2017, and the number of self-produced CPL increased by about 580,000 tons compared with

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Operations Overview

2017, with an annual increase rate of 23%. In the past two years, the growth rate of CPL in mainland China is slightly larger than that of supply, and the growth ratio of terminal demand exceeds 10%, so the profit return of CPL industry is better. In 2018, the CPL industry entered the upward cycle, the manufacturers returned to the profit situation. In 2019, the demand for Asian CPL was estimated to continue to grow by about 6-8%, but new CPL was still actively invested, and the Asian CPL market operating forecast was conservatively close to 2018 under the conservative start of mainland and international installations.

(3)Nylon Chips (NY6 or PA6)

The production of nylon grains in Taiwan has been in decline for more than 2016-2018 years, mainly because the new production capacity of nylon grains in mainland China has continued to be put into production and the number of exports to mainland China has decreased. As production capacity is greater than Taiwan's local demand, more than 50% of the output has to be exported for export, while the share of exports to the mainland in the past accounted for nearly 80% of the total exports of nylon grains, which fell to 57% in 2017, and continued to decline in 2018 to 50%;2018 other areas outside sales increased by about 20,000 tonnes, at 137,000 tonnes/year Gradually transfer to the mainland market dependence; the company vertically integrated to CPL production of nylon granules, for downstream produce nylon wire, engineering plastics and nylon film, and through the production and sales of nylon granules to maintain the sensitivity to the nylon market, due to the separation of nylon downstream products and different growth, and gradually adjust the sales of downstream customers proportional structure , Although facing increasing competition in the market, it is estimated that 2019 years can maintain the profit-making sales with CPL.

(4) O-phenylphenol (OPP)

After the completion of the construction of 2000 tons of test workshop in 2016, the company became the only OPP manufacturer in Taiwan, the third largest producer in the world. This product for the company's vertical integration of special products projects, to cyclohexanone as the main production raw materials, related to the catalyst technology and process design development are developed by our own. The product mainly provides production of flame-resistant agents, optical materials and anti-corrosion sterilization. Sinopec through the production and sales of OPP to carry out the special market development operations, through the separation of downstream products and different growth, the continuous development of related OPP derivatives, and gradually adjust the sales of downstream customers proportional structure, the development of Sinopec special new products.

1. Supply Chain Relationships between Products

2. (1)Acrylonitrile (AN or ACN)

Propene and ammonia anhydrous are the major raw materials of AN. AN is produced by ammoxidation with a specific amount of air and steam. Propene is mainly

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supplied by CPC Corporation Taiwan, with a small amount from imports. All liquid ammonia is imported.

Downstream AN applications include acrylic fiber and ABS plastics production. Acrylic fiber is also called AN fiber. It is mainly used in producing fabrics, wool, woolen fabrics, blankets, carpets, and stuffed toys. ABS is usually used to produce briefcases, cosmetics containers, computers, mobile phones, home appliance shells, and auto parts. ABS plastics: Briefcases, cosmetics containers, computers, mobile phones, home appliance shells, and auto parts.

• (2)Caprolactam (CPL)

The main raw materials for caprolactam are benzene or cyclohexane or phenol and liquid ammonia. Benzene is partly supplied by CPC Corporation, Taiwan, partially imported, phenol by domestic or imported, and cyclohexane and liquid ammonia are fully imported.

Caprolactam is an important raw material for the production of nylon 6 fiber and resin. The downstream products of NY6 thread include general textile fibers, such as sports jackets, lining, stockings, undergarments, and fabrics, and industrial fabrics such as umbrella fabrics, fishing lines, fishing nets, tire carcass, handbags and home carpets.

(3)Nylon Chips (NY6 or PA6)

Nylon chips are made of CPL through polymerization into solid high molecules for use by downstream spinning industry or engineering plastics industry. The downstream application of nylon chips has been mentioned in the CPL section. The product relations are as follows:

Nylon → downstream processing

benzene or cyclohexane or phenol

→ caprolactam → nylon granules

• Compounding and Modification→Engineering Plastics 3. Development Trend and Competition Status of Major Projects

• (1)Acrylonitrile (AN or ACN)

Favorable conditions:

• NBR Nitrile Rubber: The automotive industry will continue to grow in 2019, with a small increase in demand for tires (NBR), but the growth rate of medical latex (Latex) has accelerated, especially in the mainland market there is a large growth space. Are indirectly beneficial to production and price stability.

• AM acrylamide: Sewage treatment and two oil recovery demand is increasing, AM demand is expected to grow, conducive to the stability of an production and price.

• ABS Plastics: Home appliances, car demand still maintain growth, indirectly to an production and price stability favorable.

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Operations Overview

Unfavorable conditions:

• AF:2019 Annual AF Demand estimates are flat or slightly reduced, and Polyester

• (polyester fiber) continues to be replaced by a small portion, which will be detrimental to an production and price stability.

• China continues to expand its new capacity, causing the balance of supply and

• demand in an industry and the impact on prices.

• Continental conservation policy (such as tariff protection, or the inclusion of an as a

• processing ban) has also had an impact on the operations of an Asian producer, and Sino-US trade conflicts have also affected the mainland's demand.

• ○4 China has reduced VAT to 13% since April 2019, and there are no tariff barriers to export of mainland competing factories in the future, and competition for export has intensified.

Countermeasures for unfavorable conditions:

To develop the current growth rate of the NBR (Latex) and AM acrylamide Market, and expand South Asia India, the Middle East and other export regions, reduce the export dependence on the mainland market, beginning to bear fruit.

• (2)Caprolactam (CPL)

Favorable conditions:

• Nylon is the key development industry in China, so while supporting the expansion of

• domestic production capacity, the Government also presents multiple protection strategies, such as tariff barriers and anti-dumping duty collection, in order to protect the survival and development of new entrants to the country. The company is not included in the anti-dumping list and the barriers to entry are lower than those of other international

• Due to the complexity of the CPL process, high operational difficulties, new participants in the quality of stability is difficult to control, so the Qiulong still enjoy short-term quality advantage.

• Taiwan Nylon Industry quality is still better than China, in the nylon demand is still growing, Taiwan region will continue to occupy a place.

Unfavorable conditions:

• There has been a significant expansion of CPL capacity in mainland China, which has been oversupplied since 2013, and price competition and profit instability will continue under the active expansion of market share by CPL manufacturers.

• In recent years, Asian PTA significantly expanded production, overcapacity of polyester wire to low prices and high market share of the replacement of nylon, affecting the development of nylon in the people's livelihood textile market.

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Countermeasures for unfavorable conditions:

• Focus on upstream and downstream industrial chain environment, market boom changes and other factors, flexible adjustment of sales strategy and support downstream industries to improve the starting rate, and jointly face competition.

• Strengthen customer development in engineering plastics and film market, reduce the risk of selling single nylon textile industry, cooperate with the development and production of functional nylon granules of the company, increase the flexibility of sales deployment.

• (3)Nylon Chips (NY6 or PA6)

Favorable conditions:

• Economies are growing rapidly in China, and under the influence of domestic demands and export growth demands, the spinning industry has significantly expanded production, accelerating the improvement of nylon granules.

• China’s booming automotive and IoT packaging industry, the achievement of engineering plastics nylon and thin film nylon and other needs.

• Unfavorable conditions:

• Taiwan's nylon downstream industry is nearly 55% concentrated in clothing and industrial textile fiber and export sales are excessively concentrated in the mainland market, vulnerable to the single industry and market influence, and the Sino-US trade conflicts also affect the mainland nylon demand.

Countermeasures for unfavorable conditions:

Taiwan's polymerization equipment after the expansion, its sales direction to increase the export of mainland textile market mainly, in order to avoid the bloody competition in China's Red Sea market, the company will strengthen the signing of Taiwan Island Customer materials contract, in order to consolidate sales, and the development of domestic and foreign engineering plastics market access, beginning to bear fruit.

• (4)OPP (ortho-phenylphenol)

Favorable conditions:

• Taiwan, the world's third largest manufacturer, is the only supplier to the ground, its downstream demand is mostly concentrated in the Asian region, the location of the land, accelerated the improvement of the de-benzene phenol.

• Using new catalyst and purification technology to significantly reduce three wastes and improve quality.

Unfavorable conditions:

• Major competitors have a market share of more than 50% and enjoy preferential tax rates in major demand markets. It has an impact on the operation of special products in Taiwan.

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Operations Overview

Countermeasures for unfavorable conditions:

To avoid price-driven competition with China, the CPDC will develop OPP derivatives to enhance the market share for Asia region and creative new business market area and customers, example for Europe and the United States.

1. Domestic Market Share of Major Products

In 2018, Caprolactam domestic market share of about 64%, acrylonitrile domestic market share of about 30%, nylon grain domestic market share of about 6%, the domestic market share of benzene phenol is about 50%.

• (III) Technology and R&D

• In, 2018, investment in r & d expenditure is $335,436 thousand; As of February, 28th, 2019: $28,226 thousand.

• Major Research Outcomes

From catalyst development, process design, and plant construction, we can ensure 100% independent development for ortho-phenyl phenol (OPP). OPP is an important fine organic chemical generally used to produce flame retardant, fungicide, preservative, coating, photosensitive materials, mordant or surfactant.

Nylon Engineering Plastics with different functional demands, has developed nylon enhancement, toughening, enhancement toughening, flame retardant, weather resistance, antistatic and easy injection molding and other modified products, the development of its own performance formula and series of products, the establishment of customized commodity technology, can be used for car parts, tool chassis, people's livelihood furniture and sports supplies. With the design concept of an integrated production line, we developed a combination of acrylic products, with derivative monomers that have wide applications as synthetic dyes, plants, plastics and adhesives production, cosmetics, food processing, and as a PU paint modifier.

3. Current Patent Status

In 2018, the Company has been approved for seven new patents and completed the licensing procedures, the application of patent content in addition to the company's existing process to improve, but also for the future planning of products for technical protection and development layout.

• (IV) Long- and Short-Term Business Development Plans

Sinopec body recognition enterprises on the environment, society, and corporate governance issues of the response and management policy is also an important performance, in the face of the rapid changes in the future business environment, the company will uphold the concept of respect for natural ecology to achieve green petrochemical enterprises, to a more proactive attitude, seeking breakthroughs and enhance the competitiveness of self-development.

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The future operation Outlook of petrochemical profession and land development dual-spindle business is summarized according to short-term and long-term planning as follows:

A, Petrochemical Industry:

• A-1 Short-term planning:

• Optimize existing operating capabilities: in addition to adding raw materials and product shoreline, expanding production capacity and increasing productivity, and implementing greenhouse gas reduction, we are also committed to optimizing plant operations, accelerating factory intelligence, and gradually introducing artificial intelligence technology towards unmanned chemical plants.

• Create a variety of high-value new products: In addition to the continuous introduction of new products, improve the added value of nylon products, the development of a wide range of applications, esters and functional polymer products, but also set out to layout the development of biomass materials, and to the green environmental protection process for development.

A-2 Long-term planning:

• The establishment of overseas consistent production base: in order to avoid fluctuations in the price of intermediate raw materials, affect profit stability, intermediate raw materials in situ balance to reduce storage and transportation costs, material and energy a high degree of integration of energy costs to establish cost competitive advantage.

• Development of new products and technologies: in addition to the establishment of their own technology and the introduction of new product sales, the future will be oriented towards biomass, green environmental protection process development, in addition, through the promotion of factory intelligence, the gradual development of their own AI application technology, the construction of petrochemical Profession AI Foundation, In the future, we can further develop AI application products and services specifically designed for the petrochemical industry in order to establish a competitive advantage in technology.

• To build an intelligent management system: Improve the command center comprehensive efficiency, planning the establishment of enterprise intelligent management platform, hoping to improve the quality of decision-making and establish management competitive advantage through the integration of market analysis, production forecasting and scheduling, production monitoring and business performance analysis.

• B. Land Development:

B-1 Short-term planning:

• To plan and activate " Taiwan's "existing land assets as the goal: the company is located in Kaohsiung Multi-functional economic and Trade Park, the v A Special

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Operations Overview

District and the sixth special district, with Kaohsiung Province to promote the construction of New Asia Bay District and 205 Arsenal migration time, promote the relevant development plans, short-term direction for investment and leasing, hoping to create the highest value for the company's land assets

• To cut into the "overseas" real estate development as the goal: in line with China's strategy and the rise of emerging markets in Southeast Asia brought about by new business opportunities, and actively explore Vietnam and Myanmar with land development investment potential areas, and the purchase of development value land.

B-2 Long-term planning:

• District by district promoting "Taiwan’s" land-related development program in : In response to the government's greening and energy conservation policy, in the development planning program, the goal is to absorb carbon civilization and livable construction commodities.

• Development of "overseas" real estate development: In Vietnam, Myanmar or other Southeast Asia can develop regions combined with agricultural farming, access to petrochemical raw materials, the establishment of petrochemical profession production base and drive residential and commercial development, the ultimate goal of sustainable management, production, life and ecological smart Town as the goal.

II, market and production and marketing overview

• (I) Market Analysis of Major Products

[Acrylonitrile (AN or ACN)]

On the demand side, the impact of Sino-US trade conflicts, conservative view of the 2019 ABS market situation, estimated 2019 demand will be 2~3% than the 2018 micro-growth, the 2019 AF demand estimated flat or small reduction, AM and NBR demand growth rate of about 4.5% and 3.5%, Overall an demand growth rate of about 2~3%.

On the supply side, the mainland is expected to add 260,000 tons of new capacity in 2019. In 2020, it is estimated that the mainland's additional production capacity of about 260,000 tons will be put into the market, the industry will still have a short-term oversupply trend.

The Company has completed the operation test of a go bottleneck project at the end of 2012, the capacity of 2014 has reached about 224,000 tons, conducive to enhancing Taiwan's domestic market share, the overall consideration of supply and demand situation, the 2019 Asian start rate is expected to be flat in 2018, the construction rate maintained at more than 90%.

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[Caprolactam (CPL)]

The Company's CPL production capacity of 400,000 tons/year in 2018, the main sales target for Taiwan domestic nylon polymerization industry, nylon polymerization industry to nylon grain, nylon type sales to the Chinese mainland nylon Terminal market; 2018 Taiwan CPL Total demand 546,000 tons/year, The total demand for CPL in mainland China reached 3.2 million tons/year, the demand for the overall nylon industry on both sides of the Taiwan Strait exceeded 3.7 million tonnes/year, and the demand for CPL on both sides of the Taiwan Strait years about 10%.

Nylon for mainland China's key support industries, in order to enhance the domestic self-sufficiency rate of CPL raw materials, in recent years a significant expansion of CPL production capacity, 2017 for the new production capacity production peak, 2017 a total increase of 800,000 tons of annual production capacity, production in 2018 slightly slower about 280,000 tons. 2019 is expected to continue to focus on new production capacity in China, will put into production capacity of about 800,000 tons, estimated to have wing Rong 200,000 tons/year new line, Ba Ling Heng yi 100,000 tons/year new line and Inner Mongolia Kyung Hua and Pingdingshan Shenma 200,000 tons/year.

The nylon polymerization capacity in Taiwan has long been greater than the domestic CPL capacity, due to the lack of self-sufficiency rate in CPL, the demand for downstream production of nylon is highly dependent on imports; Since the second quarter of 2016, the company has flexibly adjusted its output in view of its profitability, which is expected to meet the self-sufficiency rate of 50~65% in Taiwan , Its self-sufficiency rate is close to the demand, but in the quality difference and processing demand, the forecast still needs to rely partly on the import CPL source, about 5%, this situation forces Europe and the US to reduce the excess production of CPL sold to Asia, some devices have expanded downstream nylon grain production capacity.

In addition to the continuous expansion of China's CPL production capacity, in order to ensure the survival and development of the domestic nylon industry, CPL, nylon grain marketed import levy anti-dumping duty and high CPL import duties, increase the import cost of raw materials, and even increase export tax rebates to increase the competitiveness of mainland exports, it is expected that the 2018 CPL market challenges will continue, Part of the device will be conservative to start the response.

[Nylon Chips (NY6 or PA6)]

The domestic demand market size of nylon is different due to economic, demographic and geographical factors. Taiwan has the world's second largest PA6 production capacity only behind China. However, nearly 50% of the production of PA6 rely on export and the largest export market is China.

China's nylon industry chain despite the continued growth of downstream demand, but by the rapid expansion of production capacity and other effects, the number of imports of PA6 will be reduced by year, China's total imports of about 379,000 tonnes in 2018 were close to about 364,000 tonnes of imports in 2017, but 141,000 tonnes of Taiwan's mainland exports

• 105 -

Operations Overview

accounted for 36% of the mainland's total imports, 167,000 tonnes of the decline of 18% tons in Taiwan's exports to the mainland in 2017.

To consolidate the existing nylon market, the Company continues to cultivates channels and customers of functional PA6 and downstream engineering plastics, to effectively consume CPL and disperse the risk of the high and low seasons of a single market and to create higher value-added products for customers.

[OPP (ortho-phenylphenol)]

On the supply side, as China's environmental policy forces local OPP producers to stop production, the first half of 2019 is expected to still show the phenomenon of imbalance between supply and demand, will be conducive to our sale to OPP related application market.

In terms of demand, not only the existing demand area for flame retardant, optical material and anti-microbial remain steady growth, but a lot of companies pay more attention to develop novel OPP derivatives and applications. On the whole, the demand of OPP will steady increase.

CPDC shall proactively develop specialty markets, continue to optimize the OPP production process, downstream OPP sales channels, and client base and concurrently develop greater high value products.

• (II) Major applications and processes of major products

• Acrylonitrile (AN or ACN)

• (1)AN is mainly used to produce acrylic fiber (AN fiber) and ABS plastics. Major downstream AN products include:

  • polyacrylonitrile Fiber: garment fabrics, acrylic wool, woolen flannel, stuffed toys, blankets, carpets, decorative cloth.

  • ABS Plastic: suitcase, cosmetic packaging containers, computers, mobile phones, household appliances and other housings, auto parts.

  • NBR rubber: Oil-resistant, heat-resistant rubber industrial supplies.

  • ○4 acrylamide: Oilfield Oil flooding agent, wastewater treatment agent, soil water absorbent, improvers, pulp toughening agent, coating dressing, coagulant.

• (2) Production process:

Propene Air Ammoxidation AN Ammonia anhydrous

1. Caprolactam (CPL)

2. General textile fiber: Sports coat, lining, stockings, underwear, etc.

3. Industrial fibers: Umbrella cloth, fishing line, fishnet, tire curtain, handbag, nonwovens, household carpets, etc.

4. 106 -

==> picture [182 x 70] intentionally omitted <==

 Engineering Plastics: Automotive parts, high-pressure tubes, surfboards, gears and other industrial supplies.

(2)Process:

==> picture [437 x 123] intentionally omitted <==

----- Start of picture text -----

Hydrogen Air Fuming Sulfuric Acid
Phenol Cyclohexanone Cyclohexanone oxime
Beckmann
Oxidation Oximation rearrangement CPL
Hydrogen
Phosphoric Ammonia Ammonium hydroxide
acid anhydrous
----- End of picture text -----

1. Nylon Chips (NY6 or PA6)

2. (1)Nylon chip is a direct CPL downstream product. Its application is the same as in CPL.

(2) Production process:

CPL Polymerization Nylon Chips

(III) Supply and demand of major materials:

In addition to ammonia anhydrous and coal which are 100% imported, all other major raw materials used by the Company are obtainable from related domestic suppliers with long-term supply contracts. For example, propene, toluene, sulfur and natural gas are supplied by CPC Taiwan; sodium hydroxide is supplied by Taiwan Chlorine Industries; cyclohexane is supplied by Taiwan Prosperity Chemical; and phenol is supplied by FCFC and Taiwan Prosperity Chemical. If domestic supply is inadequate, we will replenish the insufficiency with imports. Because the major raw materials sources increased and the costs of raw materials declined, the competitive advantage of the products could be strengthened.

• 107 -

(IV) Customers sharing 10% of total sales in the past two years and their sales amount and proportion

Major suppliers in the past two years

Unit: NT$ thousands

									Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Item	FY 2017				FY 2018				As of the first season,2019
	Supplier Number (Note 2)	Amounts	Percentage in Annual Purchasing Amount(%)	Relationship with the issuer	Supplier Number (Note 2)	Amounts	Percentage in Annual Purchasing Amount(%)	Relationship with the issuer	Supplier Number (Note 2)	Amount s	Percentage in Annual Purchasing Amount(%)	Relationsh ip with the issuer
1	660	7,448,776	30.12		660	8,768,637	29.90		Not Applicable
2	688	2,692,701	10.89		688	3,577,975	12.20
3	9357	2,024,216	8.19		4081	2,638,226	8.99
	Others	12,563,562	50.80		Others	14,343,430	48.91
	Net Purchase	24,729,255	100.00		Net Purchase	29,328,268	100.00

Note: 1. Cause of increase or reduction: Change of market price and purchasing quantity. 2.

Replaced by supplier ID for business consideration.

Major customers in the past two years

Unit: NT$ thousands

									Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Item	FY 2017				FY 2018				As of first season, 2019
	Sales Clients Number (note 2)	Amounts	Percentage in Annual Sales Value (%)	Relations hip with Issuer	Sales Customer number (note 2)	Amounts	Percentage in Annual Sales Value (%)	Relations hip with Issuer	Sales Clients Number (note 2)	Amounts	Percentage of net sales as at the first quarter of the year (%)	Relations hip with the issuer
1	1018	6,434,882	19.30		1018	5,502,844	14.29		Not Applicable
2	1020	5,133,183	15.40		1020	5,259,325	13.66
3	1011	3,914,702	11.74		1019	4,799,812	12.47
4	1001	3,844,332	11.53		1011	4,675,062	12.14
5	1019	3,646,217	10.94		1001	2,868,527	7.45
	Others	10,362,654	31.09		Others	15,397,551	39.99
	Net Sales	33,335,970	100.00		Net Sales	38,503,121	100.00

Note: 1. Reasons for change or decrease: changes in market prices and sales volume. 2.

Replaced by customer ID for business consideration.

==> picture [181 x 70] intentionally omitted <==

(V) Production Quantity and Value in the Past 2 Years

				Unit of measure: metric tonnes Unit of Value: NT thousands FY 2017 Capability Production Value 220,000 207,108 26,358,881 426,000 379,708 26,358,881	Unit of measure: metric tonnes Unit of Value: NT thousands FY 2017 Capability Production Value 220,000 207,108 26,358,881 426,000 379,708 26,358,881	Unit of measure: metric tonnes Unit of Value: NT thousands FY 2017 Capability Production Value 220,000 207,108 26,358,881 426,000 379,708 26,358,881
Year Production Value Major Product (Or department)	FY 2018			FY 2017
	Capability	Production	Value	Capability	Production	Value
AN	220,000	208,420	31,491,624	220,000	207,108	26,358,881
Caprolactam (CPL), Nylon Chips	426,000	374,390		426,000	379,708
Other By-products
Total			31,491,624			26,358,881

Note: Capacity refers to the company after measuring the necessary downtime, holidays and other factors, the use of existing production equipment, under normal operation The quantity that can be produced.

(VI) Sales Quantity and Value in the Past 2 Years

Volume: Ton Value: NT$1,000

						Volume: Ton Value: NT$1,000	Volume: Ton Value: NT$1,000	Volume: Ton Value: NT$1,000	Volume: Ton Value: NT$1,000
Year Sales Value Main Product (Or department)			2018_Consolidated			2017_Consolidated
			_
	Domestic			Export		Domestic		Export
	Quantity	Value		Quantity	Value	Quantity	Value	Quantity	Value
AN,acetic acid	115,229	28,747,803		100,582	9,755,318	150,385	28,467,024	59,745	4,868,946
Caprolactam (CPL), Nylon Chips	341,369			14,311		360,198		5,062
Other By-products				917
Total		28,747,803			9,755,318		28,467,024		4,868,946

• 109 -

Operations Overview

III. Employees

Number of employees in the Past 2 Years up to the Report Printing Date

	2019/03/29	2019/03/29	2019/03/29	2019/03/29
	Year	2017	2018	Terminates the year of 2019/03/29(Note)
Number Of Employees	Taipei Office	242	302	321
	Toufen Plant	387	395	393
	Dashe Plant	299	302	299
	HsiaokangPlant	297	277	285
	Subsidiaries	276	319	319
	Total	1501	1595	1617
Average Age(year)		40.69	39.73	39.72
Average Length of service		11.69	10.3	10
Distribution Of Level Of Education	PhD’s	11	19	19
	Master’s	253	298	299
	Bachelor’s	1060	1138	1153
	High school or below	177	140	146

Note:1.Data in the year of the printing date.

1. Statistical information for the end of December of the year, respectively in 2017 and 2018.

IV. Environmental Protection Expenses

• (I) Damage from Polluting Environment in the Past 2 Years

		Unit: NT$ thousands
	FY 2018	FY 2017
Pollution status (type, extent)	Violation of the Air	Violation of the Air
	Pollution Control Act and	Pollution Control Act and
	Water Pollution Prevention	Waste Disposal Act.
	Act.
Compensation Target or	Local environmental	Local environmental
Punishing Unit	protection authorities	protection authorities
Fine Amount	7,856	1,008
Other Loss	___	___

(II) Responsive Action

1. Improvement Plan

2. (1)Aggressively comply with environmental protection laws and regulations.

3. 110 -

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• (2) To strengthen the maintenance and abnormal management of treatment facilities and monitoring equipment.

• Estimated environmental protection expenses in the next three years

Unit: NT$ thousands

			Unit: NT$ thousands
	2019	2020	2021
‧Content of pollution	Prevention and	Prevention and	Prevention and
control equipment or	improvement of air,	improvement of air, water, soil and underwater pollution in all plants improvement of air, water, soil, and underwater pollution in all plants
expenditure to be
	water, soil and
acquired
	underwater pollution in
	all plants
‧Expected	Pollution and waste	Pollution and waste	Pollution and waste
Improvement	reduction and
situation
	compliance with
	environmental protection
	standards
Amounts	101,637 thousand	111,801 thousand 122,981 thousand

Note: In 2019, annual expenditure amount of $101,637 thousand system projected, the following two years of the forecast number.

3. Impact after improvement

	2019	2020	2021
‧Impact on net profit	Depreciation year	The depreciation year	The depreciation year
	increased by 9,240	increased by 10,164 thousand yuan, the maintenance year increased by about 1,016.4 thousand yuan. . increased by 11,180 thousand yuan, the maintenance year increased by about 1,180 thousand yuan.
	thousand yuan,
	maintenance year
	increased by about
	924,000 yuan.
‧Impact on	Comply with	Comply with
Competitive position	environmental standards
	Good social
	Responsibility
Note: Depreciable assets will be depreciated over 10 years. 2020, 2021 are estimates.

• 111 -

Operations Overview

V. Labor-Management Relations

• (I) Employee welfare benefits, continuing education, training, retirement system and implementation thereof:

The Company has established the worker welfare commissions in its Taipei office and plants. The Company will organize local and overseas travels, ball games, mountain-claiming activities and other competitions from time to time, some of which may be attended by the employees and their family members.

The Company also prepares budget and plans to arrange for various training programs needed by the employees to meet their duties each year, and defines the relevant rules governing incentives and subsidies to employees who wish to attend continuing education programs to learn other languages at their leisure time or various professional programs.

1. Employee welfare benefits:

The employee benefits were processed in 2018 as follows:

2018 Employee Activity data

Item	Welfare matters (New Year condolences, tail tooth lottery, birthday gift, and other benefits) (Thousand Yuan)	Recreational activities (Travel grants, ball games, mountaineering, other employee activities,etc.) (Thousands Yuan)
Taipei Office	5,383	1,619
Toufen Plant	7,111	7,000
Dashe Plant	12,932	1,419
Hsiaokang Plant	10,092	2,329
Total	35,518	12,367

2. Continuing Education/Training

Staff training hours and budget implementation for 2018 are as follows:

Training data of 2018 employees

Item	Total TrainingHours	Average Hour per Person	Budget Implementation Efficiency
Taipei Office	11,076.5	41.33	39%
Toufen Plant	24,745	63.78	90%
Dashe Plant	24,528.5	80.16	80%
HsiaokangPlant	12,307	43.18	49%

• 112 -

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2018 subsidy incentive staff to use the working language or various professional course data after work

after work
Item	Subsidy (NTD)
Taipei Office	0
Other Subsidiaries	153,627
Total	153,627

1. Retirement system

The Company has established the Labor Pension Supervisory Committee, which will contribute to a reserve for pension monthly pursuant to laws. Other than employees who were hired after the enforcement of Labor Pension Act in 2005 or those who chose the new system, any employees who retire pursuant to Labor Standard Law will deposit the reserve for pension into the account opened by the Labor Pension Supervisory Committee at the Bank of Taiwan monthly pursuant to laws.

Employee pension and retirement data for 2018

Employee pension and retirement data for 2018
Item	Amount or Number of Person
Retirement Account Opened by Labor Pension Supervisory Committee at Bank of Taiwan	$139,274 thousand
Number of retirements in 2018	56

• (II) Labor-management agreements and employees’ interest and right protection measures:

• To enable employees to know about the Company’s code of conduct or ethical principles, the Company has defined a “CPDC Business Conduct Policy” (see Attachment), which will be distributed to employees when they are hired. Employees shall sign to acknowledge that they have read and understood the “business conduct policy” adopted by CPDC.

• 113 -

Operations Overview

Business conduct Policy book

• I. Fair trade policy

• The Company complies with the Fair-Trade Act (the same act applicable in any of offshore areas) consistently. The Company understands that to build the goodwill requires the efforts through years, while the goodwill earned by efforts through years might be ruined due to one single person’s conduct. For fair trade, any colleague's misconduct may cause significant expenses and material litigation to their supervisors as well as the Company and the management, and fine, injunction and even imprisonment sentence.

• The fair-trade policy aims at maintaining a free competition system among enterprises. The fair-trade policy is established to enable the public to deserve the best protection under fair competitions if no conspiracy or collusion is existing among the competitors. It is undisputable that the Fair-Trade Act benefits maintenance of the economic, political and social groups. The Company’s Administration Dept. has also re-stated its confidence in the fair trade philosophy. Therefore, under the principles encouraged to seek profit through legal and valid means, any acts of the Company are conducted pursuant to laws. Particularly, reaching agreement or understanding against fair trade is against the Company’s policy.

• The Company’s executive officers at each level shall educate colleagues to comply with the fair trade requirements, so that colleagues may know how to deal with any situation involving fair trade issues.

• II. Conflict of Interest Policy

• 1.Each colleague shall be obligated to deal with the relationship between them and the Company, honestly and fairly. None of the colleagues may engage in any activities against said obligation for personal interest, or allow the circumstances against the obligation to exist.

• If, in any transactions involving the Company and any colleague or a third party, the colleague or his/her spouse or direct blood relative within the second level under the Civil Code might seek profit therefrom, the conflict of interest should be held sustained:

If any colleague contributes to or affects the transaction between the Company and any enterprise and the colleague or his spouse or direct blood relative within the second pillar under the Civil Code holds the shares in the enterprise which are sufficient to influence the enterprise’s policy making, the conflict of interest should also be held sustained.

Under said circumstances, if any colleague has any question about the validity of some case or business relation, he/she shall report the same to the Company via the reporting channel applicable to him/her, so that the Company may research relevant solutions.

1. None of the colleagues is allowed to ask any supplier, customer or competitors for gifts, entertainment or other personal benefit, or accept any gifts, entertainment or other personal benefits that might affect their duties adversely from any supplier, customer or competitor.

2. 114 -

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III. Payment and Spending Policy

1. The bank account opened by the Company or the fund owned by the Company shall not be disclosed (made public) or recorded without justified reasons.

2. All of the Company’s payment or spending records shall be able to precisely reflect the purchasing behavior or fact for the spending.

3. None of the colleagues may make any payment, grant any gift or money, service or valuable goods, privately and directly or indirectly, that cause adverse influence to the Company or its stakeholder.

IV. Non-Disclosure and Non-Competition

1. The employee shall keep confidential any of the Company’s technical or business secrets accessed by him/her in the duration of his/her employment in the Company and any information to be kept confidential under the contract signed by the Company and a third party, in the duration of the employment. The employee shall not utilize confidential information to seek his/her personal interest or engage in the same business, or disclose the same to a third party without authorization.

2. The employee shall not publish the confidential information referred to in the preceding paragraph, or disclose or utilize the same to engage in the business identical with the Company’s out of the intent to seek illegal profit, upon his/her resignation.

3. The computer program, literal work and graphic work created by the employee in performing his/her duty under the Company’s planning in the duration of his/her employment shall be vested in the Company as agreed. Without the Company’s prior written consent, the employee shall not use the same arbitrarily within the effective time limit defined in the Copyright Act.

4. V. Internal Information Control Policy

Any colleague who holds the Company’s internal information shall not engage in trading the Company’s securities, directly or indirectly, or disclose the same to a third party without authorization. Internal information refers to the information that shall not be made public. If it is impossible for any colleague to make sure whether the information held by him/her is internal information, he/she shall consult with the department which owns the information.

VI. Compliance

1. When granting some voluntary authority, the colleague and agent shall note and advise the licensee of compliance with the “Business Conduct Policy.”

2. Each colleague shall report to his/her supervisor or executive officer any violation or suspected violation of the Company’s “Business Conduct Policy” or other regulations. None of the colleagues may intimidate or retaliate the co-worker who submits the report. The colleague shall be obligated to report any suspected violation of the Company’s “Business Conduct Policy” or other regulations, and shall acknowledge that he/she shall be obligated to avoid

3. 115 -

Operations Overview

ignoring the fact and circumstance for any misconduct and shall alert such fact and circumstance and submit the report to his/her supervisor or executive officer.

VII. Communication and Negotiation

1. Each supervisor and colleague shall work together with each one to create and acknowledge the importance for establishment of a high-efficiency team, and shall get along with each other well. Should any colleague have any problem, private or for business, he/she may talk with his/her supervisor, and the supervisor shall communicate with the colleague from time to time to seek the resolution together with the colleague, so as to boost the team’s performance.

2. The factory and company labor-employer meetings will serve as a communication channel between labor and the employer. In addition to the representatives from labor and the employer, any colleagues who has positive suggestions may propose their suggestions via the representatives, so that both parties may research and resolve the same at the meetings to reach agreement and implement resolutions.

3. Should any colleague have any question about the personal interest or management system, he/she may learn about the same through his/her supervisor or the HR unit and communicate through the administrative system channels from time to time. He/she may also communicate with the factory and company welfare committees about employee fringe benefits or cultural and entertainment activities at any time.

4. The whistleblower reporting system is designed to enable colleagues to report his/her problems at work and avoid the supervisor’s adverse influence. The colleague may maintain his/her interests and rights through this channel.

5. The colleague and supervisor may also take advantage of other administrative measures, such as nomination system, personal interview, meetings, and quarterly and yearly performance appraisal, as communication channels. If any colleague cannot apply said communication channels as the case involves any personal rule breaking or delinquency, he/she shall also present the relevant evidence supported by the facts. In case of any false accusation, intentional harassment and alienation, the Company will ignore the complaint and the recipient may tear down the complaint directly but shall not circulate the same, unless some concrete fact and evidence shows that the anonymous complainant is one of the Company’s colleagues or any person instigated by the complainant, in which case the colleague and the person shall be disciplined pursuant to the Articles of Incorporation.

6. Said communication channels under the normal system will be protected and valued. Aside from the above-mentioned policies, any activity engaged in attacking the Company’s operation or failure to seek personal interest and solution through legal procedure under the name of any outsider, authority or group or by taking advance of or colluding with outsiders, authority or groups shall be held against the Company’s policy and material requirements.

7. 116 -

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VIII. Enforcement Rules

Each of the Company’s departmental supervisor shall ask each of the colleagues subordinated to him/her for the written report, and ask new employees for the written report within one week after the new employees are hired. In the case of any changes in the Company’s “Business Conduct Policy”, he/she shall ask each of colleagues subordinated to him/her for the written report again. The written report shall contain the following:

1. The colleague has read the Company’s:

Fair trade policy

Conflict of Interest Policy

Payment and Spending Policy

Non-Disclosure and Non-Competition

Internal Information Control Policy

Comply with regulatory Policies

Communication and Negotiation

1. The colleague has understood and is willing to comply with said policies;

2. The colleagues and other co-workers under his/her supervision have already read and understood, and are willing to comply with said policies.

Meanwhile, various supervisors shall supervise their immediate subordinates’ compliance with said policies. Upon receipt of the written report from each immediate supervisor and colleague, the departmental supervisor shall submit one copy of the written report showing compliance of him/her and all colleagues subordinated to him/her with said policies.

Business Conduct Policy Compliance Certificate (for the general colleagues)

It is certified that:

1. I have already read and understood the “Business Conduct Policy” adopted by CPDC:

2. Fair trade policy

Conflict of Interest Policy

Payment and Spending Policy

Non-Disclosure and Non-Competition

Internal Information Control Policy

Comply with regulatory Policy

Communication and Negotiation

1. I hereby undertake that I will comply with the Business Conduct Policy accordingly.

2. 117 -

Operations Overview

(Date) (Printed Name)

Business Conduct Policy compliance certificate (supervisor)

It is certified that:

1. I have already read and understood the “Business Conduct Policy” adopted by CPDC:

2. Fair trade policy

Conflict of Interest Policy

Payment and Spending Policy

Non-Disclosure and Non-Competition

Internal Information Control Policy

Comply with regulatory Policy

Communication and Negotiation

1. The Business Conduct Policy has been read by me and the other colleagues under my supervision.

2. Guarantee that one will comply with this business conduct policy.

(Date) (Printed Name)

• 4.Each of the Company’s plants have entered into the group agreement with various labor unions. The Company has also defined its work rules, which were reviewed and approved by the city government, and made public, and distributed to all colleagues via email. The Company will call a labor-employer meeting to negotiate labor-employer issues once per quarter to facilitate the cooperation between labor and the employer and to create and maintain a harmonic relationship between labor and employer and create a safe and friendly working environment.

• The Company has never suffered loss due to dispute over labor and employer relationships in the most recent year until the date of publication of the annual report.

• 118 -

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VI. Major Contracts

(I) Engineering Contract:

Contract Nature	Contract Party	Contract commencem ent and termination Date	Summary Content	Restricted Clause
Kaohsiung Intercontinental Wharf Project separate case outsourcing project equipment production and engineering	Luojisi Technology Industrial Co., Ltd.	2018/08/28~ 2020/06/30	In order to cooperate with the "Intercontinental Wharf liquid ammonia and phenol storage and transportation project," it is necessary to make relevant important equipment and engineering work, in order to reduce the engineering interface problems and benefit the construction period control.	None
	BES	2018/07/24~ 2020/12/17	The first stage of the geological improvement project of the liquid ammonia and phenol storage and transportation project at the Intercontinental Wharf of Kaohsiung, the pile head treatment and the gravel-grade matching project need to be combined with the main construction of the liquid ammonia storage tank. The two construction periods have been extended to December 17, 2020. The remaining work was completed on January 21, 2019.	None
First stage geological
improvement project
of liquid ammonia and phenol storage and transportation
project of Kaohsiung
Intercontinental Wharf

(II) Supply Contract

1. With respect to the major products of the Company, such as AN and CPL, the Company has created a permanent and stable sales relationship with the Company’s down-stream customers, e.g. CHIMEI, Grand Pacific Petrochemical Corporation, NANTEX Industry Co., Ltd., Li Peng Enterprise, Zig Sheng Industrial Co., Ltd. and Chain Yarn Co., Ltd., and also entered into the supply contract with some of them.

2. The main raw materials needed and procured by the Company locally include propylene, sulfur and industrial natural gas, for which the Company has entered into the long-term purchase contract with CPC. To procure liquid caustic soda, the Company entered into a purchase contract with Taiwan Chlorine Industries Ltd. The raw materials for which the Company has entered into the long-term contract with foreign suppliers include phenol and liquid ammonia.

3. 119 -

Operations Overview

(III) Technical Cooperation Contract

Contract Nature	Contract Party	Date of contract commencement and termination	Summary Content	Restricted Clause
Outsourced Analysis Project	I-Shou University	2018/02/15~ 2019/02/28~	Detection & Analysis Services	The intellectual property ownership shall be determined subject to contract.
Outsourced Analysis Project	Far East University	2018/03/01~ 2019/02/28~	Far East University of Science and Technology Cooperation program	The intellectual property ownership shall be determined subject to contract.
Cooperation Plan case	Cheng Shiu University	2018/06/01~ 2019/05/31	Contract for the work of chemical structure identification and analysis of production and service	The intellectual property ownership shall be determined subject to contract.
Outsourcing research Cases	Foundation for the research and Development of National Cheng Kung University Corporation	2018/07/01~ 2019/06/30	Key monomer Biomass method commissioned research cooperation contract book	The intellectual property ownership shall be determined subject to contract.
Outsourced Analysis Project	Far East University	2018/08/01~ 2019/07/31	Contract of the Far East University of Science and Technology Cooperation program	The intellectual property ownership shall be determined subject to contract.
Outsourced Analysis Project	Far East University	2018/10/01~ 2019/10/31	Contract of the Far East University of Science and Technology Cooperation program	The intellectual property ownership shall be determined subject to contract.

(IV) Long-Term Loan Contract

Contract Nature	Contract Party	Date of contract commencement and termination	Summary Content	Restricted Clause
Long-Term Loan	Mega International Commercial Bank,Offshore BankingBranch	2016.12 ~ 2019.12	Working capital increase	None
Long-Term Loan	First Commercial Bank, Business Office	2017.3 ~ 2020.3	Working capital increase	None
Long-Term Loan	Mega International Commercial Bank, Offshore Banking Branch. Syndicated Loan	2016.3 ~ 2021.3	Roll over and Working capital increase	None

• 120 -

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Six. Financial Status

• I. Condensed balance sheet, income statement, external auditor’s name and audit opinion for the most recent five years

• (I) Condensed balance sheet and comprehensive income statement - IFRSs

Condensed balance sheet - IFRSs

Unit: NT$ thousands

Year Item	Year Item	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years		Terminates the year of Financial data of March 31, 2019
		2014	2015	2016	2017		2018
Current Assets		12,072,676	9,786,343	11,686,011	14,685,286		15,148,831	Not Suitable For use
Property, plant and equipment		16,487,850	15,206,121	14,252,235	14,240,101		14,585,386
Intangible assets		-	-	-	-		-
Other assets		48,133,190	49,937,921	49,694,427	51,260,892		56,143,645
Total assets		76,693,716	74,930,385	75,632,673	80,186,279		85,877,862
Current liabilities	Before distribution	5,572,313	4,911,877	10,197,827	4,030,444		6,049,686
	After distribution	5,572,313	4,911,877	10,197,827	4,030,444		Note 1
Non-current liabilities		17,930,442	16,977,121	14,616,237	13,848,110		12,931,286
Total liabilities	Before distribution	23,502,755	21,888,998	24,814,064	17,878,554		18,980,972
	After distribution	23,502,755	21,888,998	24,814,064	17,878,554		Note 1
Equity attributable to theparent company		53,190,961	53,041,387	50,818,609	62,307,725		66,896,890
Capital stock		23,199,897	23,199,897	23,199,897	26,998,573		26,998,573
Capital surplus		-	18,141	18,141	1,260,386		1,260,386
Retained surplus	Before distribution	31,005,657	31,081,107	29,122,523	35,229,878		40,374,642
	After distribution	31,005,657	31,081,107	29,122,523	35,229,878		Note 1
Other equities		(1,014,593)	(1,257,758)	(1,521,952)	(1,181,112)		(1,736,711)
Treasurystock		-	-	-	-		-
Non-controllingequity		-	-	-	-		-
Rights Total	Before distribution	53,190,961	53,041,387	50,818,609	62,307,725		66,896,890
	After distribution	53,190,961	53,041,387	50,818,609	62,307,725		Note 1

Note1 ： Earnings Appropriation for 2018 shall be ratified at the 2019 annual general shareholders’ meeting.

• 121 -

Financial Status

Individual concise consolidated income Statement-International Financial reporting guidelines

Unit: NT$ thousands

Year Item	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Terminates the year of Financial data of March 31, 2019
	2014	2015	2016	2017	2018
Operating revenue	31,851,565	23,146,767	22,526,791	32,160,867	36,969,800	Not Suitable For use
Gross Profit	(1,384,891)	(1,093,257)	(728,326)	4,630,315	4,312,688
Operating profit or loss	(2,181,317)	(1,894,726)	(1,481,032)	3,471,361	3,017,875
Non-Operating Profit and Loss	2,476,408	1,990,257	(388,689)	2,803,380	1,618,395
Net profit before tax (loss)	295,091	95,531	(1,869,721)	6,274,741	4,636,270
Continuing business Units This issue of the balance of profit	304,449	95,531	(1,869,721)	6,091,656	4,290,269
Loss of discontinued department	-	-	-	-	-
Net profit (loss)	304,449	95,531	(1,869,721)	6,091,656	4,290,269
Other consolidated gains and losses for the current period (NET after tax)	24,775	(263,246)	(345,732)	356,539	(526,461)
Total comprehensive income	329,224	(167,715)	(2,215,453)	6,448,195	3,763,808
Net profit (loss) attributable to Parent company owner	-	-	-	-	-
Net profit (loss) attributable to Non-controlling equity	-	-	-	-	-
Total comprehensive income attributable to parent company	-	-	-	-	-
Total comprehensive income attributable to non-controlling equity	-	-	-	-	-
EPS	0.13	0.04	(0.81)	2.55	1.59

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(II)Consolidated condensed balance sheet - IFRSs

Unit: NT$ thousands

Year Item	Year Item	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Terminates the year of Financial data of March 31, 2019
		2014	2015	2016	2017	2018
Current Assets		18,168,124	15,118,402	16,082,533	18,839,149	21,622,587		Not Suitable For use
Real Estate, plant And equipment		16,980,407	16,279,497	15,669,918	16,935,430	19,501,534
Intangible assets		20,169	21,451	31,256	24,338	188,061
Other assets		42,259,715	44,335,453	44,671,558	45,830,043	48,392,772
Total assets		77,428,415	75,754,803	76,455,265	81,628,960	89,704,954
Current liabilities	Before distribution	5,668,509	5,278,759	10,462,969	4,241,699		7,488,055
	After distribution	5,668,509	5,278,759	10,462,969	4,241,699		Note 1
Non-current liabilities		18,340,615	17,218,026	14,929,630	14,838,802	15,026,145
Total liabilities	Before distribution	24,009,124	22,496,785	25,392,599	19,080,501	22,514,200
	After distribution	24,009,124	22,496,785	25,392,599	19,080,501		Note 1
Equity attributable to the parent company		53,190,961	53,041,387	50,818,609	62,307,725	66,896,890
Equity		23,199,897	23,199,897	23,199,897	26,998,573	26,998,573
Capital surplus		-	18,141	18,141	1,260,386	1,260,386
Retained surplus	Before distribution	31,005,657	31,081,107	29,122,523	35,229,878	40,374,642
	After distribution	31,005,657	31,081,107	29,122,523	35,229,878		Note 1
Other equities		(1,014,593)	(1,257,758)	(1,521,952)	(1,181,112)	(1,736,711)
Treasury stock		-	-	-	-	-
Non-controlling equity		228,330	216,631	244,057	240,734	293,864
Rights Total value	Before distribution	53,419,291	53,258,018	51,062,666	62,548,459	67,190,754
	After distribution	53,419,291	53,258,018	51,062,666	62,548,459		Note 1

Note1：Earnings Appropriation for 2018 shall be ratified at the 2019 annual general shareholders’ meeting.

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Financial Status

Consolidated concise consolidated income Statement-International Financial reporting guidelines

Unit: NT$ thousands

Year Item	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Financial data for the last five years	Terminates the year of 2019/03/31 Financial Data
	2014	2015	2016	2017	2018
Operatingrevenue	33,249,482	26,155,995	25,376,683	33,335,970	38,503,121	Not Suitable For use
Gross Profit	(763,163)	(442,748)	(89,861)	5,371,581	5,176,159
Operating profit or loss	(2,174,632)	(1,793,801)	(1,395,078)	3,584,036	3,075,082
Non-Operating Profit and Loss	2,527,223	1,936,032	(409,018)	2,713,685	1,601,868
Net profit before tax (loss)	352,591	142,231	(1,804,096)	6,297,721	4,676,950
Continuing business Units This issue of the balance ofprofit	294,532	82,770	(1,878,145)	6,087,322	4,280,995
Loss of discontinued department	-	-	-	-	-
Netprofit(loss)	294,532	82,770	(1,878,145)	6,087,322	4,280,995
Other consolidated gains and losses for the current period (NET after tax)	25,641	(264,007)	(344,987)	357,550	(521,612)
Total comprehensive income	320,173	(181,237)	(2,223,132)	6,444,872	3,759,383
Net profit (loss) attributable to Parent companyowner	304,449	95,531	(1,869,721)	6,091,656	4,290,269
Net profit (loss) attributable to Non-controllingequity	(9,917)	(12,761)	(8,424)	(4,334)	(9,274)
Total comprehensive income attributable to parent company	329,224	(167,715)	(2,215,453)	6,448,195	3,763,808
Total comprehensive income attributable to non-controllingequity	(9,051)	(13,522)	(7,679)	(3,323)	(4,425)
EPS	0.13	0.04	(0.81)	2.55	1.59

(III) The names of CPA conducting financial audits in the most recent five years and their audit

opinions

Year	2014	FY 2015	FY 2016	FY 2017	FY 2018
External Auditor	MelodyChen	MelodyChen	Jeff Chen	Jeff Chen	MelodyChen
	Jeff Chen	Jeff Chen	ChungDan-Dan	ChungDan-Dan	ChungDan-Dan
Audit Opinion	Modified unqualified opinions	Modified unqualified opinions	Unqualified opinions	Unqualified opinions	Unqualified opinions

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ii. Financial Analysis for the last five years

(I) Individual financial analysis for the most recent five years - IFRSs

Unit: NT$ thousands

Year Target of analysis	Year Target of analysis		Financial analysis for the last five years	Financial analysis for the last five years	Financial analysis for the last five years	Financial analysis for the last five years	Financial analysis for the last five years	Financial analysis for the last five years	Financial analysis for the last five years	Terminates the year of 2019/03/31
			2014		2015		2016	2017	2018	Not Suitable For use
Financial structure %	Liabilities to total assets		30.64		29.21		32.81	22.30	22.10
	Long-term fund to property, plant and equipment		431.36		460.46		459.12	534.80	547.32
Insolvency %	Current ratio		216.65		199.24		114.59	364.36	250.41
	Quick ratio		164.67		148.40		92.32	294.30	208.49
	Times Interest Earned		486		151		(731)	3,662	8,999
Operating performance	Receivables turnover(time)		11.98		10.27		10.88	10.31	10.58
	Average number of days’ receivables outstanding		30.46		35.54		33.54	35.40	34.50
	Inventoryturnover(time)		13.47		10.99		12.40	14.40	14.79
	Payables turnover(time)		18.65		19.46		17.63	15.57	18.07
	Average number of days of sales		27.09		33.21		29.43	25.34	24.68
	Property, plant and equipment turnover(time)		1.81		1.46		1.53	2.26	2.57
	Total assets turnover(time)		0.43		0.31		0.30	0.41	0.45
Profitability	ROA(%)		0.50		0.33		(2.24)	8.01	5.22
	ROE(%)		0.57		0.18		(3.60)	10.77	6.64
	Ratio of net benefits to paid-in capital before tax(%) (Note 6)		1.27		0.41		(8.06)	23.24	17.17
	Profit margin(%)		0.96		0.41		(8.30)	18.94	11.60
	Basic earningsper share(NT$)		0.13		0.04		(0.81)	2.55	1.59
Cash flow	Cash flow ratio(%)		(19.17)		(10.38)		0.11	83.94	96.41
	Cash flow adequacyratio(%)		57.26		21.33		(39.35)	22.67	148.10
	Cash flow reinvestment ratio (%)		(1.60)		(0.77)		0.02	4.55	7.41
Leverage	Operatingleverage		Note 1		Note 1		Note 1	1.92	2.53
	Financial leverage		Note 1		Note 1		Note 1	1.05	1.02
	The causes resulting in changes in financial rates in the most recent two years by more than 20%: 1. The 2018 annual turnover ratio and the speed ratio were both lower than in 2017, mainly due to long-term borrowing due to long-term liabilities maturing in one year or one business cycle and short-term borrowing. 2, 2018 annual interest protection multiples increased compared to 106 years, the main department of the company 2017 in accordance with the issue of the early redemption of all overseas secured convertible corporate debt caused by the reduction of interest costs. 3. The financial ratios of profitability in 2018 were lower than in 2017, due to the decrease in the prices of Caprolactam and acrylonitrile in the main products, and the decrease in the number of external income and expenditure was due to the investment in the 2017 law on the exploitation of equity. The ratio of cash flow ratios in 2018 to 4 was higher than in 2017, as a result of the increase in net cash inflows to business activities in 2018 over 2017.

Note 1: The financial ratio is not calculated because the operating interest is negative.

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Financial Status

(II) Consolidated financial analysis for the most recent five years - IFRSs

Unit: NT$ thousands

Year Target of analysis (Note 2)	Year Target of analysis (Note 2)	Financial analysis for the last fiveyears	Financial analysis for the last fiveyears	Financial analysis for the last fiveyears	Financial analysis for the last fiveyears	Financial analysis for the last fiveyears	Terminates the year of 2019/03/31
		2014	2015	2016	2017	2018
Financial Structure %	Liabilities to total assets	31.01	29.70	33.21	23.37	25.10	Not Suitable For use
	Long-term fund to property, plant and equipment	422.60	432.91	421.14	456.95	421.59
Debt servicing Ability %	Current ratio	320.51	286.40	153.71	444.14	288.76
	Quick ratio	260.65	236.01	130.52	370.18	243.52
	Times Interest Earned	524	175	(689)	3,442	5,982
Operate Ability	Receivables turnover(time)	11.98	10.52	11.13	10.31	10.84
	Average number of days’ receivables outstanding	30.46	34.69	32.79	35.40	33.67
	Inventoryturnover(time)	12.91	11.48	13.21	14.14	14.02
	Payables turnover(time)	18.17	18.87	17.29	15.04	17.27
	Average number of days of sales	28.27	31.79	27.63	25.81	26.03
	Property, plant and equipment turnover(time)	1.86	1.57	1.59	2.04	2.11
	Total assets turnover(time)	0.45	0.34	0.33	0.42	0.45
Profit Ability	ROA(%)	0.49	0.31	(2.22)	7.90	5.07
	ROE(%)	0.55	0.16	(3.60)	10.72	6.60
	Ratio of net benefits to paid-in capital before tax (%) (Note 6)	1.52	0.61	(7.78)	23.33	17.32
	Profit margin(%)	0.89	0.32	(7.40)	18.26	11.12
	Basic earnings per share (NT$)	0.13	0.04	(0.81)	2.55	1.59
Cash Flow	Cash flow ratio(%)	(32.65)	9.28	2.50	82.58	83.83
	Cash flow adequacy ratio (%)	53.33	23.75	(31.43)	24.44	78.89
	Cash flow reinvestment ratio (%)	(2.73)	0.73	0.41	4.61	7.69
Leverage	Operatingleverage	Note 1	Note 1	Note 1	2.19	2.98
	Financial leverage	Note 1	Note 1	Note 1	1.05	1.03
The causes resulting in changes in financial rates in the most recent two years by more than 20%: 1. The 2018 annual turnover ratio and the speed ratio were both lower than in 2017, mainly due to long-term borrowing due to long-term liabilities maturing in one year or one business cycle and short-term borrowing. 2, 2018 annual interest protection multiples increased compared to 106 years, the main department of the company 2017 in accordance with the issue of the early redemption of all overseas secured convertible corporate debt caused by the reduction of interest costs. 3. The financial ratios of profitability in 2018 were lower than in 2017, due to the decrease in the prices of Caprolactam and acrylonitrile in the main products, and the decrease in the number of external income and expenditure was due to the investment in the 2017 law on the exploitation of equity.

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The ratio of cash flow ratios in 2018 to 4 was higher than in 2017, as a result of the increase in net cash inflows to business activities in 2018 over 2017. Note 1: The financial ratio is not calculated because the operating interest is negative. NOTE 2: Annual report at the end of this table, the following calculation formula should be presented: 1. Financial structure (1) Liabilities to total assets =Total liabilities/total assets (2) long-term funds as a proportion of property, plant and equipment = (Total equity + non-current liabilities)/Net property, plant and equipment. 2. Insolvency (1) Current ratio=current assets/current liabilities (2) Quick ratio= (current assets-inventory-prepayment)/current liabilities (3) Times Interest Earned = income tax and interest expenses net income before income tax/interest expenses in the current period 3. Operating performance (1) Receivables (including accounts receivable and notes receivable resulting from operation) turnover = net sales / balance (gross) of average accounts receivable (including accounts receivable and notes receivable resulting from operation) (2) Average number of days receivable outstanding = 365 /accounts receivable turnover (3) Inventory turnover=sale cost/average inventory (4) Payables (including accounts payable and notes payable resulting from operation) turnover = net sales / balance (gross) of average accounts payable (including accounts payable and notes payable resulting from operation) (5) Average number of days of sales=365/inventory turnover (6) Property, plant and equipment turnover=net sales/average property, plant and equipment, net (7) Total assets turnover rate = net sales/average total assets 4. Profitability (1) ROA = [income after income tax+interest expense*(1-tax rate)]/average total assets. (2) ROE = Income after income tax/average total equity (3) Profit margin = Income After income tax/net sales (4) Earnings per Share = (income attributable to parent company – dividends from preferred shares)/weighed average quantity of outstanding shares (Note 4) 5. Cash flow

• (1) Cash flow ratio=Net cash flow from operating activities/current liabilities

• (2) Net cash flow adequacy ratio= Net cash flow from operating activities in the most recent five years/ (capital spending + increase in inventory + cash dividends) in the most recent five years

• (3) Cash reinvestment ratio= (Net cash flow from operating activities-cash dividends) (gross of property, plant and equipment+ long-term investment+ other non-current assets+ working capital) (Note 5)

• Leverage:

• (1) Operating leverage= (Net operating revenue-changed operating costs and expenses)/operating income (2) Financial leverage=Operating income/ (operating income-interest expenses)

• Note 3: The formula for calculating the surplus per share should be measured with particular attention to the following matters:

• Weighted average quantity of shares is on the basis of common stock, not the outstanding shares as of the end of the year.

• The quantity of new shares for raising new capital or treasury stock trade shall be included in the weighted average quantity of shares during their effective term.

• Where the shares may be issued through the capitalization of retained earnings or capital surplus, make adjustment in proportion to the quantity of shares issued in calculating the semi-annual or annual EPS of the year. The period for the release of such new shares may be omitted.

• If the preferred stock is a non-convertible cumulative preferred stock, dividends for the year (issued or not) shall be subtracted from the net profit after tax or added to net loss after tax. If the preferred stock

• 127 -

Financial Status

is not cumulative, dividend thereon shall be subtracted from net profit after tax if net profit after tax is earned, or no adjustment is required if loss arises.

Note 4: Consider the followings in conducting cash flow analysis:

1. Net cash flow from operating activities refers to net cash inflow from operating activities as stated in the Statement of Cash Flow.

2. Capital expenditures are from the annual cash flow statements on capital expenditure outflows.

3. 3.The increase in inventory is included only when the balance at the ending is more than that at beginning. If the inventory decreases at the end of the year, it shall be calculated as “zero”.

4. Cash dividends includes common stock and preferred shares dividends.

5. Property, plant, and machinery balance is after subtracting accumulative depreciation.

6. Note 5: The issuer shall include operating costs and operating expenses as fixed or variable. If estimates or judgements are applied, shall be deemed reasonable and consistent.

7. Note 6: Company stocks that have no par value or have par value different from NT$10/share, shall be calculated based upon percentage of paid in capital or as a percentage of parent company equity in the balance sheet.

8. 128 -

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• III. Audit Committee’s Audit Report on the Financial Statement for the Most Recent Year

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Audit Committee’s Review Report

The Board of Directors has prepared the Company’s 2018 Business Report, Financial Statements, Consolidated Financial Statements and Earnings Appropriation Statements for 2018. The CPA firm of KPMG was retained to audit China Petrochemical Development Corporation’s Financial Statements and Ms. Melody Chen and Ms. Dan-Dan Chung have issued an audit report relating to the Financial Statements. The Business Report, Financial Statements, Consolidated Financial Statements and Earnings Appropriation Statements have been reviewed and determined to be correct and accurate by the Audit Committee of China Petrochemical Development Corporation. In accordance with Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act, I hereby submit this report.

China Petrochemical Development Corporation

Convener of the Audit Committee:

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March 22, 2019

• 129 -

IV. Recent financial report

(English Translation of Consolidated Financial Statements Originally Issued In Chinese) INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

To the Board of Directors of China Petrochemical Development Corporation:

Opinion

We have audited the consolidated financial statements of China Petrochemical Development Corporation and its subsidiaries (“the Group”), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of the other auditors, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), interpretations as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the 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 Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

• 130 -

Emphasis of Matter

As described in Notes 6.g and 6.l of the notes to the consolidated financial statements, the Tainan City Government and Environment Protection Administration, the Executive Yuan publicly announced that a portion of the land at the Anshun plant was polluted and designated it as under pollution control. As China Petrochemical Development Corporation (CPDC) never used the land since it took over from its merger with Taiwan Alkali Industrial Corporation (TAIC), CPDC still has a dissenting view on the government perception about the condition of pollution. Aside from cooperating with the government in its control and management procedure, CPDC is seeking a way to define its responsibilities. In addition, CPDC submitted for approval a remediation project proposal to the Tainan City Government in accordance with the related regulations and accrued relevant remediation project expenses in June 2008. This remediation project proposal was approved in May 2009. CPDC also performed related remediation work according to the remediation project proposal. The first phase of remediation project was completed in September 2014. The management of CPDC is expecting that the second phase of remediation project will be completed in the next decade. Likewise, CPDC has accrued relevant remediation project expenses for the second phase of remediation project in December 2014. Our opinion is not modified in respect of this matter.

Other Matter

CPDC has prepared its parent-company-only financial statements as of and for the years ended December 31, 2018 and 2017, on which we have issued an unmodified opinion. We have not audited certain investments, which were accounted for under the equity method. The financial statements as of and for the years then ended December 31, 2018 and 2017 of those of the investees accounted for under the equity method were audited by other auditors, whose reports have been furnished to us, and our opinion in so far as it relates to the amounts for the equity method investees were based solely on the reports of other auditors. These investments accounted for under the equity method represented 1.05% and 1.36% of consolidated total assets as of December 31, 2018 and 2017, respectively. The related shares of investment income from these investees including subsidiaries, associates and joint ventures accounted for using equity method represented (2.21)% and (0.06)% of consolidated net income before income tax for the years ended December 31, 2018 and 2017, respectively.

Key Audit Matters

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

1. Revenue recognition

Operating revenue is the most important source of cash flow for the Group, and it is a significant risk accounting subject in the consolidated financial statements. So revenue recognition is one of the key audit matters for our audit. Please refer to Note 4 “Revenue Recognition” and Note 6 “Revenue” in the consolidated financial statements.

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How the matter was addressed in our audit

Our key audit procedures included:

• Testing the Group’s internal accounting controls surrounding revenue recognition and key manual and systems-based controls in the order-to-cash transaction cycle. In addition, checking and reconciling the sales data recorded between the sales systems and general ledger; selecting samples to assess whether appropriate revenue recognition policies are applied through comparison with accounting standards;

• Analyzed and compared the sales amounts and volumes for the major customers of the Group. Based on samples selected, vouched significant transactions from both internal and external documents, to verify the authenticity of the transactions.

2. Assessment of the fair value of investment property

The book value of investment property of the Group represented 43% of consolidated total assets as of December 31, 2018, which is deemed to be significant. The Group evaluate the fair value of investment property according to IAS40, and re-measure such fair value on the reporting date. Because the valuation of investment property at fair value demands significant professional judgments, the assessment of fair value of investment property is considered one of the key audit matters. Please refer to Note 4 “Investment Property”, Note 5 “Significant Accounting Judgments, Estimation, Assumptions, and Sources of Estimation Uncertainty”, and Note 6.h “Investment Property” of the consolidated financial statements for details of the information about fair value information on investment property.

How the matter was addressed in our audit

Our key audit procedures included:

• Obtain from the Group management the real estate appraisal report on investment property;

• Engage another appraiser to review such real estate appraisal report, and to evaluate the propriety of the ~~e~~ valuation method used, and the reasonableness of its main assumptions or input values (ex. discount rate and final rate of return);

• Evaluate the propriety of the disclosure of fair value of investment property.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRSs, IASs, interpretations as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

• 132 -

In preparing the consolidated financial statements, management is responsible for assessing the Group’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 Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including the Audit Committee) are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated 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 consolidated financial statements. As part of an audit in accordance with 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 consolidated 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 Group’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 Group’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 consolidated 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 Group to cease to continue as a going concern.

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

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

7. 133 -

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.

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 consolidated financial statements of the current period 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 accountants’ audit report are Chen Mei Fang and Chung Tan Tan.

KPMG

Taipei, Taiwan (Republic of China) March 22, 2019

• 134 -

		%		-	-	3	2	-	-	-	-	5		4	3		11		-	-	18	23				33	2		1	34	8		43		-	-		(1)	(1)	77	-	77		100
December 31,	2017	Amount		250,000	-	1,959,985	1,298,374	202,703	174,007	-	356,630	4,241,699		3,269,165	2,437,684		8,754,736		299,882	77,335	14,838,802	19,080,501				26,998,573	1,260,386		1,099,137	28,023,386	6,107,355		35,229,878		(392,378)	-		(788,734)	(1,181,112)	62,307,725	240,734	62,548,459		81,628,960
		%		1	-	2	3	-	1	1	-	8		5	2		10		-	-	17	25				30	1		2	38	6		46		(1)	(1)		-	(2)	75	-	75		100
December 31,	2018	Amount		913,732	5,578	1,848,774	2,973,010	352,910	480,171	863,801	50,079	7,488,055		3,810,129	1,992,284		8,758,989		349,729	115,014	15,026,145	22,514,200				26,998,573	1,260,386		1,708,303	33,521,575	5,144,764		40,374,642		(488,212)	(1,248,499)		-	(1,736,711)	66,896,890	293,864	67,190,754		89,704,954
				$																																								$
		LIABILITIES AND EQUITY	Current liabilities	Short-term loans (Note 6 j.)	Current contract liabilities (Note 6 s.)	Accounts payable	Other payables (Note 7)	Current tax liabilities (Notes 4 and 6 p.)	Provisions�current (Notes 4, 6 m. and 6 o.)	Long-term liabilities-current portion (Notes 4 and 6 j.)	Other current liabilities, others	Total current liabilities	Non-current liabilities	Long-term bank loans (Note 6 j.)	Provisions�non-current (Notes 4, 6 m. and 6 o.)		Deferred tax liabilities (Notes 4 and 6 p.)		Long-term bills payable (Note 6 k.)	Other non-current liabilities, others	Total non-current liabilities	Total liabilities		Equity attributable to shareholders of the parent	Share capital	Common stock (Note 6 q.)	Capital surplus (Note 6 q.)	Retained earnings: (Note 6 q.)	Legal reserve	Special reserve	Unappropriated earnings			Others (Notes 4 and 6 q.)	Exchange differences arising on translation of foreign operations	Unrealized gain or loss on financial assets at fair value	through other comprehensive income	Changes in fair value of available-for-sale financial assets		Total equity attributable to shareholders of the parent	Non-controlling interests	Total equity		TOTAL LIABILITIES AND EQUITY
		�		13	2		-		-	4	-	-	3	1	-		23			-		-		2	3	3	21	47	-	-	1		77											100
December 31,	2017	Amount		10,111,495	1,368,657		-		196,132	3,479,623	67,984	45,763	2,281,084	856,100	432,311		18,839,149			-		-		1,677,346	2,992,035	2,241,041	16,935,430	38,226,532	24,338	9,372	683,717		62,789,811											81,628,960
		�		15	1		-		-	3	-	-	3	1	1		24			5		2		-	-	3	22	43	-	-	1		76											100
December 31,	2018	Amount		13,469,938	1,300,897		251,629		-	2,575,850	60,233	118,382	2,243,840	1,143,583	458,235		21,622,587			4,861,274		1,978,339		-	-	2,405,411	19,501,534	38,350,359	188,061	11,023	786,366		68,082,367											89,704,954
				$																																								$
		ASSETS	Current assets	Cash and cash equivalents (Notes 4 and 6 a.)	Financial assets at fair value through profit or loss�current	(Notes 4 and 6 b.)	Current financial assets at fair value through other comprehensive	income (Notes 4 and 6 b.)	Available-for-sale financial assets�current (Notes 4 and 6 b.)	Notes and accounts receivable, net (Notes 4 and 6 c.)	Accounts receivable�related parties, net (Notes 4, 6 c. and 7)	Other receivables (Notes 4 and 6 c. and 7)	Inventories (Notes 4 and 6 d.)	Prepayments	Other current assets		Total current assets		Non-current assets	Non-current financial assets at fair value through profit or loss	(Note 6 b.)	Non-current financial assets at fair value through other comprehensive	income (Note 6 b.)	Available-for-sale financial assets�non-current (Notes 4 and 6 b.)	Financial assets carried at cost�non-current (Notes 4 and 6 b.)	Investments accounted for using equity method (Notes 4 and 6 e.)	Property, plant and equipment (Notes 4 and 6 g.)	Investment property, net (Notes 4 and 6 h.)	Intangible assets (Notes 4 and 6 i.)	Deferred tax assets (Notes 4 and 6 p.)	Other non-current assets (Note 8)		Total non-current assets											TOTAL ASSETS

• 135 -

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2018 and 2017

(Expressed in thousands of New Taiwan Dollars)

Operating revenue (Notes 4 and 6 s.) Operating costs (Notes 4 and 6 d.) Less: Unrealized (profit) loss on intercompany transactions Add: Realized profit (loss) on intercompany transactions Gross profit Operating expenses Selling expenses Administrative expenses Research and development expenses Impairment loss (impairment gain and reversal of impairment loss) determined in accordance with IFRS 9 Profit from operations Non-operating income and expenses Other income (Notes 6 v. and 7) Other gains and losses (Notes 6 l. and 6 v.) Finance costs (Notes 6 m. and 6 v.) Share of profit of associates and joint ventures accounted for using equity method (Notes 4 and 6 e.) Total non-operating income and expenses Income before income tax Less: Income tax expense (Notes 4 and 6 p.) Net income Other comprehensive income (loss): Items that will not be reclassified subsequently to profit or loss: Actuarial loss from defined benefit plans Unrealized losses from investments in equity instruments measured at fair value through other comprehensive income Share of other comprehensive loss of associated and joint ventures Allocation of income tax to the above items Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Changes in fair value of available-for-sale financial assets Share of other comprehensive income (loss) of associates and joint ventures Allocation of income tax to the above items Other comprehensive (loss) income for the year, net of income tax Total comprehensive income for the year Net income attributable to： Shareholders of the parent Non-controlling interests Comprehensive income (loss) attributable to： Shareholders of the parent Non-controlling interests Earnings per share (NTD) (Notes 4 and 6 r.) Basic earnings per share Diluted earnings per share	For the Years Ended December 31,	For the Years Ended December 31,	For the Years Ended December 31,	For the Years Ended December 31,
	2018	％ 100 87 13 - - 13 2 2 1 - 5 8 3 (1) - 2 4 12 1 11 - (1) - - (1) - - - - - (1) 10 11 - 11 10 - 10 1.59 1.58	2017
	Amount		Amount	％
	$ 38,503,121 33,326,959 5,176,162 - (3) 5,176,159 794,518 971,123 335,436 - 2,101,077 3,075,082 1,044,485 (251,071) (79,516) 887,970 1,601,868 4,676,950 395,955 4,280,995 16,731 (372,169) (70,122) - (425,560) (96,052) - - - (96,052) (521,612) $ 3,759,383 4,290,269 (9,274) $ 4,280,995 $ 3,763,808 (4,425) $ 3,759,383 $		33,335,970 27,964,951 5,371,019 - 562 5,371,581 627,746 923,451 236,348 - 1,787,545 3,584,036 530,773 1,594,771 (188,416) 776,557 2,713,685 6,297,721 210,399 6,087,322 13,416 - 2,283 - 15,699 (98,616) 403,037 37,430 - 341,851 357,550 6,444,872 6,091,656 (4,334) 6,087,322 6,448,195 (3,323) 6,444,872	100 84
				16 - -
				16
				2 2 1 -
				5
				11
				1 5 (1) 2
				8
				19 1
				18
				- - - -
				-
				- 1 - -
				1
				1
				19
				18 -
				18
				19 -
				19
				2.55
	$			2.53

• 136 -

													Total Equity	51,062,666	6,087,322	357,550		6,444,872		-	5,040,921	62,548,459	866,540	63,414,999	4,280,995	(521,612)		3,759,383		-	-	16,373	(1)		67,190,754
											Non-	controlling	interests	244,057	(4,334)	1,011		(3,323)		-	-	240,734	41,182	281,916	(9,274)	4,849		(4,425)		-	-	16,373	-		293,864
													Total	50,818,609	6,091,656	356,539		6,448,195		-	5,040,921	62,307,725	825,358	63,133,083	4,290,269	(526,461)		3,763,808		-	-	-	(1)		66,896,890
									Changes in fair	value of	available-	for-sale financial	assets	(1,228,183)	-	439,449		439,449		-	-	(788,734)	788,734	-	-	-		-		-	-	-	-		-
(English Translation of Consolidated Financial Statements Originally Issued in Chinese)	CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES	CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY	For the years ended December 31, 2018 and 2017	(Expressed in thousands of New Taiwan Dollars)	Equity Attributable to Shareholders of the Parent	Others	Retained earnings Unrealized gains	Exchange (losses) from	differences financial assets	arising on measured at fair	translation of value through other	Common Capital Legal Special Unappropriated foreign comprehensive	Stock Surplus Reserve Reserve earnings operations income	23,199,897 18,141 1,099,137 29,981,970 (1,958,584) (293,769) -	- - - - 6,091,656 - -	- - - - 15,699 (98,609) -		- - - - 6,107,355 (98,609) -		- - - (1,958,584) 1,958,584 - -	3,798,676 1,242,245 - - - - -	26,998,573 1,260,386 1,099,137 28,023,386 6,107,355 (392,378) -	- - - - 844,326 - (807,702)	26,998,573 1,260,386 1,099,137 28,023,386 6,951,681 (392,378) (807,702)	- - - - 4,290,269 - -	- - - - 10,170 (95,834) (440,797)		- - - - 4,300,439 (95,834) (440,797)		- - 609,166 - (609,166) - -	- - - 5,498,189 (5,498,189) - -	- - - - - - -	- - - - (1) - -		26,998,573 1,260,386 1,708,303 33,521,575 5,144,764 (488,212) (1,248,499)
														$																					$
														Balance on January 1, 2017	Net income for the year ended December 31, 2017	Other comprehensive income (loss) for the year ended	December 31, 2017	Total comprehensive income (loss)	Appropriations and distribution of 2016 earnings�	Special reserve used to cover accumulated deficits	Conversion of convertible bonds	Balance on December 31, 2017	Effects of retrospective application	Balance on January 1, 2018 after adjustments	Net income for the year ended December 31, 2018	Other comprehensive income (loss) for the year ended	December 31, 2018	Total comprehensive income (loss)	Appropriations and distribution of 2017 earnings�	Legal reserve	Special reserve	Changes in non-controlling equities	Disposal of investments in equity instruments designated	at fair value through other comprehensive income	Balance on December 31, 2018

• 137 -

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2018 and 2017 (Expressed in thousands of New Taiwan Dollars)

Cash flows from operating activities: Income before income tax Adjustments to reconcile income before income tax to net cash provided by operating activities: Depreciation expense Amortization expense Net profit on financial assets or liabilities at fair value through profit or loss Interest expense Loss on reassessment of embedded derivatives at fair value through profit or loss Interest income Effect of exchange rate changes on bonds payable Shares of gain of subsidiaries and associates accounted for using equity method Loss on disposal of property, plant and equipment Gain on disposal of investments Impairment loss on financial assets Impairment loss (reversal of) on non-financial assets Realized gain or loss on intercompany transactions Gain on redemption of bonds payable Gain arising from adjusting fair value of investment property Amortization of bond issued expense Total adjustments to reconcile income before income tax Change in operating assets and liabilities： Change in operating assets： Decrease (increase) in accounts receivable Decrease (increase) in receivables－related parties (Increase) decrease in other receivables Increase in inventories Increase in prepayments (Increase) decrease in other current assets Total changes in operating assets Change in operating liabilities： Increase in contract liabilities (Decrease) increase in accounts payable Decrease in accounts payables－related parties Increase in other payables Decrease in provisions (Decrease) increase in other current liabilities Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash provided by operations Interest received Interest paid Income taxes paid Net cash provided by operating activities Cash flows from investing activities: Acquisition of current financial assets at fair value through profit or loss Proceeds from current financial assets at fair value through profit or loss Acquisition of financial assets carried at cost Proceeds from disposal of financial assets carried at cost Return of capital of financial assets under cost method due to capital reduction Proceeds from disposal of Investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Increase in other non-current assets Dividend received Net cash (used in) from investing activities Cash flows from financing activities: Increase in short-term loans Decrease in short-term loans Repayment of bond payable Increase in long-term bank loans Repayment of long-term bank loans Increase (decrease) in long-term bills payable Increase in other non-current liabilities Changes in non-controlling interests Net cash provided (used in) by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents, beginning of the year Cash and cash equivalents, end of the year	For theyears ended December 31,	For theyears ended December 31,
	2018 $ 4,676,950 1,364,687 19,536 (242,864) 79,516 - (197,636) - (887,970) 6,998 (6,094) - 150,541 3 - (119,574) - 167,143 903,773 7,751 (78,301) (102,860) (287,483) (25,924) 416,956 5,578 (111,211) - 1,694,851 (139,236) (306,551) 1,143,431 1,560,387 1,727,530 6,404,480 203,318 (77,134) (253,419) 6,277,245 (3,267,115) 1,846,810 - - - - (4,046,481) 14,410 (188,697) (108,908) 653,668 (5,096,313) 3,349,694 (2,680,470) - 3,823,144 (2,560 ,000) 50,000 37,679 16,373 2,036,420 141,091 3,358,443 10,111,495 $ 13,469,938	2017
		6,297,721 1,234,460 19,669 (171,897) 188,416 920,915 (206,644) (276,247) (776,557) 737 (2,674,450) 1,137 (22,875) (562) (10,091) (41,244) 83,552
		(1,731,681)
		(1,555,926) (13,965) 107,534 (677,191) (10,803) 35,626
		(2,114,725)
		- 249,718 (10,703) 772,572 (120,742) 71,689
		962,534
		(1,152,191)
		(2,883,872)
		3,413,849 203,196 (96,847) (17,341)
		3,502,857
		(8,221) 8,867 (500,000) 1,419 10,635 3,052,814 (2,500,402) - (697) (92,846) 248,920
		220,489
		6,352,857 (8,998,839) (19,158) 2,449,949 (2,572,500) (470,000) 4,442 -
		(3,253,249)
		(36,668) 433,429 9,678,066
		10,111,495

• 138 -

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2018 and 2017 (Amounts expressed in thousands of New Taiwan Dollars, except for per share information or unless otherwise specified)

1. HISTORICAL HIGHLIGHTS AND SCOPE OF BUSINESS

China Petrochemical Development Corporation (hereinafter referred to as the Company) was founded on July 8, 1969 under the approval of Ministry of Economic Affairs, R.O.C. Its registered address is 11th floor, No.12, Dongxing Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C.). The Company migrated to No.1, Jingjian Rd., Dashe Dist., Kaohsiung City 815, Taiwan (R.O.C.) on July 18, 2016. The Company and its subsidiaries (hereinafter referred to as the “Consolidated Company”) primarily engage in the production of petroleum, alkali-chlorine, phosphoric acid and other petrochemical products and by-products and the storage, transportation, purchase and sale of these products, related chemicals and their raw materials. The primary products are acrylonitrile, caprolactam, acetic acid and nylon.

2. APPROVAL DATE AND PROCEDURES OF THE CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements for the years ended December 31, 2018 and 2017 were authorized for issue by the Board of Directors on March 22, 2019.

3. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

• a. The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018:

New, Revised or Amended Standards and Interpretations Amendment to IFRS 2 “Classification and Measurement of Share-based Payment Transactions” Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts” IFRS 9 “Financial Instruments” IFRS 15 “Revenue from Contracts with Customers” Amendment to IAS 7 “Statement of Cash Flows -Disclosure Initiative” Amendment to IAS 12 “Income Taxes- Recognition of Deferred Tax Assets for Unrealized Losses” Amendments to IAS 40 “Transfers of Investment Property” Annual Improvements to IFRS Standards 2014–2016 Cycle: Amendments to IFRS 12 Amendments to IFRS 1 and Amendments to IAS 28 IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

Effective date **per IASB **

January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1,2017 January 1, 2017 January 1, 2018 January 1, 2017 January 1, 2018 January 1, 2018

• 139 -

Except for the following items, the Group believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of signification changes are as follows:

1. IFRS 15 “Revenue from Contracts with Customers”

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces the existing revenue recognition guidance, including IAS 18 “Revenue” and IAS 11 “Construction Contracts”. The Group applies this standard retrospectively with the cumulative effect, it need not restate those contracts, but instead, continues to apply IAS 11, IAS 18 and the related Interpretations for comparative reporting period. The Group recognizes the cumulative effect upon the initially application of this Standard as an adjustment to the opening balance of retained earnings on January 1, 2018.

The following are the nature and impacts on changing of accounting policies:

(1) Sales of goods

For the sale of products, revenue is currently recognized when the goods are delivered to the customers’ premises, which is taken to be the point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue is recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods. For some made-to-order paper product contracts, the customer controls all of the work in progress as the products are being manufactured. When this is the case, revenue will be recognized as the products are being manufactured.

(2) Rending of services

The Group is involved in performing services. If the services under a single arrangement are rendered in different reporting periods, then the consideration is allocated on a relative fair value basis between the different services. Revenue is currently recognized using the stage-of-completion method. Under IFRS 15, the total consideration in the service contracts will be allocated to all services based on their stand-alone selling prices. The stand-alone selling prices will be determined based on the list prices at which the Group sells the services in separate transactions.

(3) Commission

For commissions earned by the Group, the Group has determined that it acts in the capacity of an agent for certain transactions. Under IFRS 15, the assessment will be based on the whether the Group controls the specific goods before transferring to the end customer, rather than whether it has exposure to significant risks and rewards associated with the sale of goods.

• 140 -

(4) Construction contracts

Contract revenue currently includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. When a claim or variation is recognized, the measure of contract progress or contract price is revised and the cumulative contract position is reassessed at each reporting date. Under IFRS 15, claims and variations will be included in the contract accounting when they are approved.

• (5) Impacts on financial statements

The adoption of IFRS 15 did not have any a significant impact on its consolidated financial statements.

2. IFRS 9 “Financial Instruments”

IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and Measurement” which contains classification and measurement of financial instruments, impairment and hedge accounting.

As a result of the adoption of IFRS 9, the Group adopted the consequential amendments to IAS 1 “Presentation of Financial Statements” which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCI. Previously, the Group’s approach was to include the impairment of trade receivables in administrative expenses. Additionally, the Group adopted the consequential amendments to IFRS 7 Financial Instruments: Disclosures that are applied to disclosures about 2018 but generally have not been applied to comparative information

The detail of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

• (1) Classification of financial assets and financial liabilities

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Group classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please see note 4.

The adoption of IFRS 9 did not have any a significant impact on its accounting policies on financial liabilities.

• 141 -

(2) Impairment of financial assets

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with the ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than they are under IAS 39 – please see note 4.

(3) Transition

The adoption of IFRS 9 have been applied retrospectively, except as described below,

• Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as on January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9.

• The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application.

• The determination of the business model within which a financial asset is held.

• The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.

• The designation of certain investments in equity instruments not held for trading as at FVOCI.

• If an investment in a debt security had low credit risk at the date of initial application of IFRS 9, then the Group assumed that the credit risk on its asset will not increase significantly since its initial recognition.

• 142 -

• (4) Classification of financial assets on the date of initial application of IFRS 9

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

assets as of	January 1, 2018.
Financial assets Cash and cash equivalents Equity instruments Equity instruments Equity instruments Equity instruments Trade and other receivables	IAS 39 Measurement categories Carrying amount Loans and receivables 10,111,495 Designated as at FVTPL 1,368,657 Available-for-sale 1,873,478 Carried at cost 703,521 Carried at cost 2,288,514 Loans and receivables 3,593,370	IFRS 9 Measurement categories Carrying amount Amortized cost 10,111,495 Mandatorily at FVTPL 1,368,657 FVOCI 1,873,478 FVOCI 728,660 Mandatorily at FVTPL 3,136,224 Amortized cost 3,593,370	Note
	Measurement categories Loans and receivables Designated as at FVTPL Available-for-sale Carried at cost Carried at cost Loans and receivables	Measurement categories Amortized cost Mandatorily at FVTPL FVOCI FVOCI Mandatorily at FVTPL Amortized cost	(a) (b) (c) (d)

• a. Under IAS 39, these equity securities were designated as at FVTPL because they were managed on a fair value basis and their performance was monitored on this basis. These assets have been classified as mandatorily measured at FVTPL under IFRS 9.

• b. These equity securities represent investments that the Group intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Group has designated these investments at the date of initial application as measured at FVOCI; therefore the carrying amount of these equity securities were $1,873,478 thousand on January 1, 2018.

• c. These equity securities represent investments that the Group intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Group has designated these investments at the date of initial application as measured at FVOCI, resulting in a decrease of $16,979 thousand and an increase of $42,118 thousand in other equity and retained earnings respectively and the carrying amount $728,660 thousand were recognized on January 1, 2018.

• d. These equity securities, as permitted by IFRS 9, the Group has designated these investments at the date of initial application as measured at FVTPL, resulting carrying amount of $3,136,224 thousand in those assets recognized, and an increase of $847,710 thousand in the retained earnings, which was attributed to the Parents and the non-controlling for $806,529 thousand and $41,182 thousand respectively.

The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 upon transition to IFRS 9 on January 1, 2018.

• 143 -

Fair value through profit or loss Beginning balance of FVTPL (IAS 39) Additions – equity instruments: From available for sale From financial assets carried at cost Total Fair value through other comprehensive income Beginning balance of available for sale (including carried at cost) (IAS 39) Addition – equity instruments: From available for sale From financial assets carried at cost Subtraction – equity instruments: Recognized by equity method Total Amortized cost Beginning balance of bond investment without an active market, held to maturity, trade and other receivables, and other financial assets Total	December 31, 2017 IAS 39 Carrying amount $ 3,657,171 - - $ 3,657,171 $ 2,576,999 - - - $ 2,576,999 $13,704,865 $ 13,704,865	Reclassi- fications (2,288,514) - 2,288,514 - (2,576,999) 1,873,478 703,521 - - - -	Remeasure- ments - - 847,710 847,710 - - 25,139 - 25,139 - -	January 1, 2018 IFRS 9 Carrying amount 4,504,881 2,602,138 13,704,865	January 1, 2018 Retained earnings (attributable to the Parents) - 1,989 806,529 808,518 - - 42,118 (6,310) 35,808 - -	January 1, 2018 Other equity - (1,989) - (1,989) - - (16,979) - (16,979) - -	January 1, 2018 Retained earnings (attributable to the Non- controlling)
							- - 41,182
							41,182
							- - - -
							-
							-
							-

b. The impact of IFRS endorsed by FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019 in accordance with Ruling No. 1070324857 issued by the FSC on July 17, 2018:

New, Revised or Amended Standards and Interpretations IFRS 16 “Leases” IFRIC 23 “Uncertainty over Income Tax Treatments” Amendments to IFRS 9 “Prepayment features with negative compensation“ Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term interests in associates and joint ventures“ Annual Improvements to IFRS Standards 2015–2017 Cycle	Effective date **per IASB **
	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

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Except for the following items, the Group believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of signification changes are as follows:

1. IFRS 16“Leases”

IFRS 16 replaces the existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

IFRS 16 introduces a single and an on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of expenses related to those leases will now be changed since IFRS 16 replaces the straightline operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of low-value items. The lessor accounting remains similar to the current standard – i.e. the lessors will continue to classify leases as finance or operating leases.

• (1) Determining whether an arrangement contains a lease

On transition to IFRS 16, the Group can choose to apply either of the following:

• IFRS 16 definition of a lease to all its contracts; or

• a practical expedient that does not need any reassessment whether a contract is, or contains, a lease.

The Group plans to apply the practical expedient to grandfather the definition of a lease upon transition. This means that it will apply IFRS 16 to all contracts entered into before January 1, 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.

(2) Transition

As a lessee, the Group can apply the standard using either of the following:

• retrospective approach; or

• modified retrospective approach with optional practical expedients.

The lessee applies the election consistently to all of its leases. On January 1, 2019, the Group plans to initially apply IFRS 16 using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information.

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When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Group chooses to elect the following practical expedients:

  - apply a single discount rate to a portfolio of leases with similar characteristics.

  - adjust the right-of-use assets, based on the amount reflected in IAS 37 onerous contract provision, immediately before the date of initial application, as an alternative to an impairment review.

  - apply the exemption not to recognize the right-of-use assets and liabilities to leases with lease term that ends within 12 months of the date of initial application.

  - exclude the initial direct costs from measuring the right-of-use assets at the date of initial application.

  - use hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

• (3) So far, the most significant impact identified is that the Group will have to recognize the new assets and liabilities for the operating leases of its offices, warehouses, and factory facilities. The Group estimated that the right-of-use assets and the lease liabilities to increase by $299,236 thousand and $299,236 thousand respectively on January 1, 2019. No significant impact is expected for the Group’s finance leases. Besides, The Group does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant. The above impact may change due to any changes of future circumstances and conditions.

• c. The impact of IFRS issued by IASB but not yet endorsed by the FSC

As of the date the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but not yet endorsed by the FSC:

New, Revised or Amended Standards and Interpretations 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 per IASB January 1, 2020 Effective date to be determined by IASB January 1, 2021 January 1, 2020

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Those which may be relevant to The Group are set out below:

Issuance/ Release Standards or Dates Interpretations Content of amendment September 11, 2014 Amendments to IFRS The amendments address an 10 and IAS 28 "Sale or acknowledged inconsistency between the Contribution of Assets requirements in IFRS 10 and those in IAS Between an Investor 28 (2011) in dealing with the sale or and Its Associate or contribution of assets between an Joint Venture" investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.

The Group is evaluating the impact of its initial adoption of the above mentioned standards or interpretations on its consolidated financial position and consolidated financial performance. The results thereof will be disclosed when the Group completes its evaluation.

4. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies, which have been applied consistently to all periods presented in these consolidated financial statements, except when otherwise indicated, are as follows:

• a. Statement of compliance

These consolidated annual financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to the Regulations) and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by FSC (hereinafter referred to as the IFRSs endorsed by FSC).

• b. Basis of Preparation

• Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for the following material items in the balance sheets:

• (1) Financial instruments at fair value through profit or loss are measured at fair value (including derivative financial instruments);

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• (2) Fair value through other comprehensive income (Available-for-sale financial assets) are measured at fair value;

• (3) The net defined benefit liability (assets) is recognized as the present value of the defined benefit obligation less the fair value of plan assets and the effect of the asset ceiling (please see note 6 o.);

• (4) Investment properties are measured at fair value.

• Functional and presentation currency

The functional currency of the Consolidated Company is determined based on the primary economic environment in which the entities operate. The consolidated financial statements are presented in New Taiwan Dollar, which is the Company’s functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

• c. Basis of Consolidation

• Principle of preparation of the consolidated financial statements

The consolidated financial statements comprise the Company and subsidiaries.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the noncontrolling interests even if doing so causes the non-controlling interests to have a deficit balance.

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

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2. List of subsidiaries in the consolidated financial statements

The subsidiaries included in the consolidated financial statements were as follows:

Name of investors The Company The Company The Company The Company The Company The Company The Company	Name of subsidiaries Chemax International Corp. (CIC) Tsou Seen Chemical Industries Corporation (TSCIC) CPDC Green Technology Corp.(CPDC GT) (Original name: CPDC Engineering Co., Ltd.) CPDC Investment (BVI) Co Ltd. (CPDC (BVI)) Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. (CHSTH) Unichem Development Limited (UDL) Jiangsu Weiming Petrochemical Corporation (Weiming)	Nature of business Announcement energy products besides petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading. Manufacture of chemical products and their derivatives of phosphoric acid and fertilizer storage, transport, purchase, marketing business. Water treatment works, plumbing works, apparatus and instrument installation work, refrigeration and air conditioning engineering and tank car repair and other services. Holding company Real estate investment and development Holding company Petrochemical supporting facility construction	Shareholding ratio 2018.12.31 2017.12.31 - % 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 90.87% 90.87% 100.00% 100.00% 0.77% 0.93%	Notes
			2018.12.31 - % 100.00% 100.00% 100.00% 90.87% 100.00% 0.77%
				CIC was established on September 1, 1995. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. As of December 31, 2018 and 2017 CIC’s issued capital amounted to $0 and $160,000. TSCIC was established on June 16, 1998. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. As of December 31, 2018 and 2017, TSCIC’s share capital amounted to $960,000 and $750,000, respectively. CPDC GT (Original name : CPDC EC) was established on May 31, 1999. As of December 31, 2018 and 2017, CPDC GT’s share capital amounted to $150,000. CPDC (BVI) was established on January 9, 1998, registered in the British Virgin Islands, and is an international investment company. As of December 31, 2018 and 2017, CPDC (BVI)’s issued capital amounted to US$26,580. Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. was established on March 1, 2011. As of December 31, 2018 and 2017, Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd.’s issued capital amounted to $2,201,000. UDL was established on May 20, 2008. As of December 31, 2018 and 2017, UDL’s issued capital amounted to US$191,478 and US $128,920, respectively. Weiming was established on May 16, 2013. It increased its capital through UDL amounting to RMB$ 130,000, RMB$109,000 and RMB$110,000 on June 25, 2018, June 16 and December 27, 2017, respectively. The said amounts were verified on June 28,2018, June 30 and December 28, 2017, respectively. Its paid in capital amounted to RMB$775,000 and RMB$645,000 for the years ended December 31, 2018 and 2017, respectively.

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Name of investors The Company The Company Chemax International Corp. Chemax International Corp. Tsou Seen Chemical Industries Corporation Tsou Seen Chemical Industries Corporation	Name of subsidiaries Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang) Cong Ty Tnhh Dau Tu Xay Dung Thanh Phong (Thanh Phong) Weihua (Rudong) Trade Co., Ltd (Weihua) Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang) Weihua (Rudong) Trade Co., Ltd (Weihua) Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang)	Nature of business Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub- fitted trading Engaged in construction, real estate, building constructional consulting, lease equipment and wholesale of building materials Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted tradingre Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted tradingre	Shareholding ratio 2018.12.31 2017.12.31 44.52% - % 97.87% - % - % 4.02% - % 100.00% 4.02% - % 55.48% - %	Notes
			2018.12.31 44.52% 97.87% - % - % 4.02% 55.48%
				Weiqiang was established on May 9, 2013. It increased its capital through the Company amounting to RMB$ 20,000 on February 24, 2018 and verified on February 27, 2018. As of December 31, 2018 and 2017, the paid in capital of Weiqiang amounted to RMB$44,920 and RMB$24,920. Thanh Phong was established on May 22, 2017. Its capital originally invested was VND$90,000,000 and increased VND$368,637,500 on December 20, 2018 and verified on December 20, 2018. As of December 31, 2018 and 2017, the paid in capital of Thanh Phong amounted to VND$468,637,500. Weihua was established on December 10, 2012. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. The shares hold by CIC were transferred to Tsou Seen after the combination. As of December 31, 2018 and 2017, the paid in capital of Weihua amounted to RMB$156,289. Weiqiang was established on May 9, 2013. It increased its capital through the Company amounting to RMB$ 20,000 on February 24, 2018 and verified on February 27, 2018. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. The shares hold by CIC were transferred to Tsou Seen after the combination. As of December 31, 2018 and 2017, the paid in capital of Weiqiang amounted to RMB$44,920 and RMB$24,920. Weihua was established on December 10, 2012. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. The shares hold by CIC were transferred to Tsou Seen after the combination. As of December 31, 2018 and 2017, the paid in capital of Weihua amounted to RMB$156,289. Weiqiang was established on May 9, 2013. It increased its capital through the Company amounting to RMB 20,000 on February 24, 2018 and verified on February 27, 2018. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. The shares hold by CIC were transferred to Tsou Seen after the combination. As of December 31, 2018 and 2017, the paid in capital of Weiqiang amounted to RMB$44,920 and RMB$24,920.

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Name of investors Tsou Seen Chemical Industries Corporation Unichem Development Limited (UDL) Unichem Development Limited(UDL) Unichem Development Limited(UDL) Unichem Development Limited(UDL) Unichem Development Limited(UDL) Unichem Development Limited(UDL) Unichem Development Limited(UDL) Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. (CHSTH) Frontier Fortune Investment Pte. Ltd.	Name of subsidiaries Taivex Therapeutics Inc. (Taivex) Jiangsu Weiming Petrochemical Corporation (Weiming) Weihua (Rudong) Trade Co., Ltd (Weihua) Weida (Zhangzhou) Consultant Service Co., Ltd. (Weida) Zhangzhou Weida Petrochemical Co., Ltd (Weida PC) Kunshan Weiqin Management consultant Co., Ltd (Weiqin) Zhejiang Wedge new material Co., Ltd (Wedge) Changzhou Huijie new material Co., Ltd Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd	Nature of business Engaged in biotechnology, pharmaceutical research and development and marketing Petrochemical supporting facility construction Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Consultancy Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Management consultant Engaged in trading of Synthetic fiber material Engaged in engineering plastic and high valued petroleum chemical products Holding company Engineering, construction contracting business	Shareholding ratio 2018.12.31 2017.12.31 91.10% 91.10% 99.23% 99.07% 95.98% 95.98% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% - % 100.00% 100.00% 100.00% 100.00%	Notes
			2018.12.31 91.10% 99.23% 95.98% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
				Taivex was established on February 11, 2010. TSCIC invested in Taivex on August 18, 2010. As of December 31, 2018 and 2017, Taivex’s share capital amounted to $507,399. Weiming was established on May 16, 2013. It increased its capital through UDL amounting to RMB$130,000, RMB$109,000 and RMB$110,000 on June 25, 2018, June 16 and December 27, 2017, respectively. The said amounts were verified on June 28, 2018, June 30 and December 28, 2017, respectively. Its paid in capital amounted to RMB$775,000 and RMB$645,000 for the years ended December 31, 2018 and 2017, respectively. Weihua was established on December 10, 2012. As of December 31, 2018 and 2017, the paid in capital of Weihua amounted to RMB$156,289. Weida was established on November 26, 2012. As of December 31, 2018 and 2017, the paid in capital of Weida amounted to US$450. Weida PC was established on December 23, 2014. As of December 31, 2018 and 2017, the paid in capital of Weida PC amounted to RMB$6,000. Weiqin was established on April 29, 2016. As of December 31, 2018 and 2017, the paid in capital amounted of Weiqin to RMB$6,000. Wedge PC was established on July 25, 2016. As of December 31, 2018 and 2017, the paid in capital of Wedge amounted to RMB$6,500. Huijie was established on January 6, 2015, and acquired by UDL on November 5, 2018. The investment was made through UDL amounted RMB$214,955 and was verified on December 27, 2018. As of December 31, 2018 and 2017, the paid in capital of Huijie amounted to RMB$414,955 and RMB$200,000, respectively. Frontier Fortune was established on November 23, 2016. It increased its capital through CHSTH amounting to USD$5,670 on November 30, 2018. As of December 31, 2018 and 2017, its actual paid in capital amounted to USD$5,870 and US$200, respectively. Core Pacific Twin Star (Myanmar) was established on February 16, 2017. It increased its capital through Frontier Fortune amounting to USD$5,320 on November 30, 2018. As of December 31, 2018 and 2017 , its actual paid in capital amounted to USD$5,500 and US$180, respectively.

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Name of investors Core Pacific Twin Star (Myanmar) Investment Company Ltd	Name of subsidiaries Core Pacific Pioneer (Myanmar) Company Ltd	Nature of business Building construction, real estate management, development and sale	Shareholding ratio 2018.12.31 2017.12.31 80.00% %	Notes
			2018.12.31 80.00%
				Core Pacific Pioneer was established on May 24, 2018. As of December 31, 2018, its actual paid in capital amounted to MMK$757,310.

3. Subsidiaries not included in the consolidated financial statements

Name of investors The Company The Company Tao Zhu Construction & Development Co., Ltd.	Name of subsidiaries Tao Zhu Construction & Development Co., Ltd. Rich Equrties Ltd. Da-ying Construction Ltd.	Nature of business Commissioned to create a vendor to build the housing, commercial buildings and plant rental business, management of land development and playgrounds and other related business investment Holding company Engineering, construction contracting business	Shareholding ratio 2018.12.31 2017.12.31 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%	Notes
			2018.12.31 100.00% 100.00% 100.00%
				Tao Zhu Construction & Development Co., Ltd. was established on October 11, 1995. As of December 31, 2018 and 2017, its actual paid-in capital amounted to $100,000 and its total assets represented 0.09% and 0.10% of the consolidated total assets. Rich Equrties Ltd. was established on March 21, 2007. As of December 31, 2018 and 2017, its actual paid-in capital amounted to US$180 and its total assets represented 0.01% of consolidated total assets. Da-ying Construction Ltd. was established on November 24, 1972. As of December 31, 2018 and 2017, its actual paid-in capital amounted to $22,500 and its total assets represented 0.03% of consolidated total assets.

d. Foreign currency

1. Foreign currency transaction

Transactions in foreign currencies are translated to the respective functional currencies of the Consolidated Company entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are remeasured to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are remeasured using the exchange rate at the date of transaction.

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Foreign currency differences arising on remeasurement are recognized in profit or loss, except for the following differences which are recognized in other comprehensive income:

• Fair value through other comprehensive income (Available-for-sale )equity investment;

• A financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or

• Qualifying cash flow hedges to the extent the hedge is effective.

• Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Company’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Company’s functional currency at average rate. Foreign currency differences are recognized in other comprehensive income, and are presented as exchange differences arising on translation of foreign operations in equity.

However, if the foreign operation is a non-wholly owned subsidiary, then the relevant proportion of the translation difference is allocated to non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. If the Company disposes of only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planed nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the exchange differences arising on translation of foreign operations in equity.

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

An asset is classified as current if:

1. It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

2. It is held primarily for the purpose of trading;

3. It is expected to be realized within twelve months after the reporting period; or

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5. The asset is cash and cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

A liability is classified as current if:

1. It is expected to be settled during the in its normal operating cycle;

2. It is held primarily for the purpose of trading;

3. It is due to be settled within twelve months after the reporting period; or

4. It does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

5. f. Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to cash at the known amounts and subject to insignificant risk of value changes. Time deposits that fit the definition above and are used by the Group in the management of its short-term commitments are comprised in cash equivalents.

Bank overdrafts that are repayable on demand and form an integral part of the Consolidated Company, are recorded in cash and cash equivalents in statements of cash flows.

• g. Construction contracts

Construction contracts in progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognized to date less progress billings and recognized losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract activities based on normal operating capacity.

Construction contracts in progress is presented in the balance sheets as the amount due from customers for contract work for all contracts in which costs incurred plus recognized profits exceed progress billings. If progress billings exceed costs incurred plus recognized profits, then the difference is presented as amount due to customers for contract work in the balance sheets.

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h. Financial instruments

1. Financial assets (policy applicable from January 1, 2018)

Financial assets are classified into the following categories: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL).

The Group shall reclassify all affected financial assets only when it changes its business model for managing its financial assets.

• (i) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL ：

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

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

A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

• (ii) Fair value through other comprehensive income (FVOCI )

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL ：

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

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

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

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A financial asset measured at FVOCI is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses, and impairment losses, deriving from debt investments are recognized in profit or loss; whereas dividends deriving from equity investments are recognized as income in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses of financial assets measured at FVOCI are recognized in OCI. On derecognition, gains and losses accumulated in OCI of debt investments are reclassified to profit or loss. However, gains and losses accumulated in OCI of equity investments are reclassified to retain earnings instead of profit or loss.

Dividend income derived from equity investments is recognized on the date that the Group’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date.

• (iii) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets and accounts receivable, which is presented as accounts receivable. On initial recognition, the Group may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss.

• (iv) Business model assessment

The Group makes an assessment of the objective of the business model in which a financial asset is held at portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes ：

• the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;

• how the performance of the portfolio is evaluated and reported to the Group’s management;

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• the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

• how managers of the business are compensated ─ e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

• the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

• Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, and are consistent with the Group’s continuing recognition of the assets.

• Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

• (v) Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial assets on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers ：

• contingent events that would change the amount or timing of cash flows ；

• terms that may adjust the contractual coupon rate, including variable rate features ；

• prepayment and extension features ； and

• terms that limit the Group’s claim to cash flows from specified assets （ e.g. nonrecourse features ）

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(vi) Impairment of financial assets

The Group recognizes loss allowances for expected credit losses on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and accounts receivable, other receivable, leases receivable, guarantee deposit paid and other financial assets), debt investments measured at FVOCI, accounts receivable measured at FVOCI and contract assets.

The Group measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL ：

• debt securities that are determined to have low credit risk at the reporting date ； and

• other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Group’s historical experience and informed credit assessment as well as forward-looking information.

The Group considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings’.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Group considers a financial asset to be in default when the financial asset is more than 90 days past due or the borrower is unlikely to pay its credit obligations to the Group in full.

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ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data ：

• significant financial difficulty of the borrower or issuer ；

• a breach of contract such as a default or being more than 90 days past due ；

• the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider ；

• it is probable that the borrower will enter bankruptcy or other financial reorganization ； or

• the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Group recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss.

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

(vii) Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the assets expire, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets.

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On derecognition of a debt instrument in its entirety, the Group recognizes the difference between its carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in “other equity – unrealized gains or losses on fair value through other comprehensive income”, in profit or loss, and presented it in the line item of non-operating income and expenses in the statement of comprehensive income.

On derecognition of a financial asset other than in its entirety, the Group allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss, and presented in the line item of non-operating income and expenses. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

1. Financial assets (policy applicable before January 1, 2018)

Financial assets are classified into the following categories: financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity financial assets, and loans and receivables.

• (i) Financial assets at fair value through profit or loss

A financial asset is classified in this category if it is classified as held for trading or is designated as such on initial recognition.

Financial assets are classified as held for trading if they are acquired principally for the purpose of selling in the short term. The Group designates financial assets, other than those classified as held for trading, as at fair value through profit or loss at initial recognition under one of the following situations ：

• Designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;

• Performance of the financial asset is evaluated on a fair value basis;

• A hybrid instrument contains one or more embedded derivatives.

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At initial recognition, financial assets classified under this category are measured at fair value. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend and interest income, are recognized in profit or loss, under other income of nonoperating income and expense. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at amortized cost, and are included in financial assets measured at cost.

(ii) Available-for sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated available-for-sale or are not classified in any of the other categories of financial assets. Available-for-sale financial assets are recognized initially at fair value, plus, any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, interest income calculated using the effective interest method, dividend income, and foreign currency differences on monetary financial assets, are recognized in other comprehensive income and presented in the unrealized gains or losses on available for sale financial assets in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, under other gains and losses of non-operating income and expense. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at amortized cost, and are included in financial assets measured at cost.

Dividend income is recognized in profit or loss on the date that the Consolidated Company’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. Such dividend income is included in other income account in statements of comprehensive income.

Interest income from investment in bond security is recognized in profit or loss, under other income of non-operating income and expenses.

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(iii) Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise trade receivables and other receivables. At initial recognition, these assets are recognized at fair value, plus, any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses, other than insignificant interest on short-term receivables. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Interest income is recognized in profit or loss, under other income.

(iv) Impairment of financial assets

The impairment loss of financial assets not measured at fair value is assessed on the report date. A financial asset is impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a loss event) that occurred subsequent to the initial recognition of the asset and that a loss event (or events) has an impact on the future cash flows of the financial assets that can be estimated reliably.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Consolidated Company on terms that the Consolidated Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is accounted for as objective evidence of impairment.

All individually significant receivables are assessed for specific impairment. Receivables that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Consolidated Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or lesser than the one suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of its estimated future cash flows discounted at the asset’s original effective interest rate. Such impairment loss is not reversible in subsequent periods.

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An impairment loss in respect of a financial asset is reduced from the carrying amount, except for trade receivables, in which an impairment loss is reflected in an allowance account against the receivables. When it is determined a receivable is uncollectible, it is written off from the allowance account. Any subsequent recovery of receivable written off is recorded in the allowance account. Changes in the amount of the allowance accounts are recognized into profit or loss.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss.

If, in a subsequent period, the amount of the impairment loss of a financial assets measured at amortized cost decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the decrease in impairment loss is reversed through profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost before impairment was recognized at the reversal date.

Impairment losses recognized on available-for-sale equity security are not reversed through profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income, and accumulated in other equity. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognized, then the impairment loss is reversed, with the amount of the reversal recognized in profit or loss.

Bad debt losses and recoveries of receivables are recognized in profit or loss as administrative expense. Impairment losses and recoveries of financial assets other than receivables are recognized in profit or loss under non-operating revenues and expenses.

(v) Derecognition of financial assets

The Consolidated Company derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Consolidated Company transfers substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in other equity – unrealized gains or losses from available for sale financial assets is recognized in profit or loss, under other income of non-operating income and expenses.

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On partial derecognition of a financial assets, the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in other equity account as unrealized gains or losses from available for sale financial assets is reclassified to profit or loss, under other gains and losses of non-operating income and expenses.

3. Financial liabilities and equity instruments

• (i) Classification of debt or equity instruments

Debt or equity instruments issued by the Consolidated Company are classified as financial liabilities or equity instruments in accordance with the substance of the contractual agreement.

Equity instruments refer to surplus equities of the assets after the deduction of all the debts for any contracts. Equity instruments issued are recognized based on amount of consideration received less the direct issuance cost.

Compound financial instruments issued by the Consolidated Company comprise convertible bonds payable that can be converted to share capital at the option of the holder, where the number of shares to be issued is fixed.

The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

Interest related to the financial liability is recognized in profit or loss, under other gains and losses of non-operating income and expenses.

On conversion, the financial liability is reclassified to equity, and no gain or loss is recognized.

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• (ii) Financial liabilities at fair value through profit or loss

A financial liability is classified in this category if it is classified as held-for-trading or is designated as such on initial recognition. A financial liability is classified as held-for-trading if it is acquired principally for the purpose of selling in the short term. Financial liabilities, other than the ones classified as held-for-trading, are designated as at fair value through profit or loss at initial recognition under one of the following situations:

• A. Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on a different basis;

• B. Performance of the financial liabilities is evaluated on a fair value basis;

• C. A hybrid instrument contains one or more embedded derivatives.

Attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value, and changes therein, which take into account any interest expense, are recognized in profit or loss, under other gains and losses of non-operating income and expenses.

Financial liabilities at fair value through profit or loss are measured at cost if it is a short sale of unquoted equity investment whose fair value cannot be reliably measured and that the short seller is obligated to deliver the equity instrument.

The Consolidated Company issues and designates financial guarantee contracts and loan commitments as at fair value through profit or loss. Any gains and losses are recognized in profit or loss, under other gains and losses of non-operating income and expenses.

• (iii) Other financial liabilities

At initial recognition, financial liabilities not classified as held-for-trading, or designated as at fair value through profit or loss, which comprise of loans and borrowings, and trade and other payables, are measured at fair value, plus, any directly attributable transaction cost. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, under other gains and losses of non-operating income and expenses.

(iv) Derecognition of financial liabilities

A financial liability is derecognized when its contractual obligation has been discharged or cancelled or expires. 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, under other gains and losses of non-operating income and expenses.

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• (v) Offsetting of financial assets and liabilities

Financial assets and liabilities are presented on a net basis when the Consolidated Company has the legally enforceable rights to offset, and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

4. Derivative financial instruments

The Group holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are recognized initially at fair value, and attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss and included in statement of comprehensive income. When a derivative is designated as a hedging instrument, its timing of recognition in profit or loss is determined based on the nature of the hedging relationship. When the fair value of a derivative instrument is positive, it is classified as a financial asset, and when the fair value is negative, it is classified as a financial liability.

Embedded derivatives are separated from the host contract and accounted for separately when the economic characteristics and risk of the host contract and of the embedded derivatives are not closely related.

i. Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted average method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

• j. Investments in associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over their financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill which is arising from the acquisition less any accumulated impairment losses.

The Consolidated Company’s share of the profit or loss and other comprehensive income of investments accounted for using equity method are included, after adjustments to align the said investees’ accounting policies with those of the Consolidated Company, in the consolidated financial statements from the date that significant influence commences until the date that significant influence ceases.

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Unrealized profits resulting from the transactions between the Consolidated Company and an associate are eliminated to the extent of the Consolidated Company’s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.

If the Consolidated Company’s share of losses exceeds its interest in associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Consolidated Company has an obligation or has made payments on behalf of the investee.

k. Investment property

Investment property is the property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently via cost less accumulated depreciation and accumulated impairment losses. Depreciation expense is calculated based on the depreciation method, useful life and residual value which are the same as those adopted for property, plant and equipment.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of raw materials and direct labor, and any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalized borrowing costs. Investment property is subsequently measured at fair value, with any change therein recognized in profit or loss.

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

• l. Property, plant and equipment

• Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset.

The cost of a self-constructed asset comprises material, labor, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost that eligible for capitalization. Cost also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. The cost of the software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating.

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Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately, unless the useful life and the depreciation method of the significant part of an item of property, plant and equipment are the same as the useful life and depreciation method of another significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment is determined on the difference between the net disposal proceeds, if any, and the carrying amount of the item, and is recognized in profit or loss account as other gains and losses.

1. Reclassification to investment property

An item of property, plant and equipment is reclassified to investment property at its carrying amount when the use of the property changes from owner-occupied to investment property. Any difference at the date of the change in use between the carrying amount of the property and its fair value is recognized as a revaluation of property, plant and equipment. Any existing or arising revaluation surplus previously recognized in OCI is not transferred to profit or loss at the date of transfer or on subsequent disposal of the investment property.

1. Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Consolidated Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance is expensed as incurred.

1. Depreciation

The depreciable amount of an asset is determined after deducting its residual amount and is allocated using the straight line method over its useful life. The items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period is recognized in profit or loss.

If there is reasonably certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.

Land has an unlimited useful life and therefore is not depreciated.

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The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

Land improvement	2~10 years
Buildings and constructions	2~60 years
Machine equipment	2~17 years
Transportation equipment	2~ 5 years
Other equipment	2~13 years

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change(s) is accounted for as a change in an accounting estimate.

• m. Intangible assets

• Goodwill

  • (1) Initial recognition

The goodwill generated from the Consolidated Company is accounted for as an intangible asset. Please refer to Note 6 i. for details of the accounting policy on the initial recognition of goodwill.

• (2) Subsequent measurement

Goodwill is measured at cost less accumulated impairment. In terms of investment under equity method, the carrying amount of goodwill is included in the investment amount. In addition, the impairment loss of such investment is not distributed to goodwill or any asset and is recognized as part of the carrying amount of the investment.

1. Research & Development

During the research phase, activities are carried out to obtain and understand new scientific or technical knowledge. Expenditures during this phase are recognized in profit or loss as incurred.

Expenditures arising from development phase are recognized as an intangible asset if all the conditions described below can be demonstrated; otherwise, they are recognized in profit or loss as incurred.

• (1) The technical feasibility of the intangible asset is completed so that it will be available for use or sale;

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• (2) It intends to complete the intangible asset and use or sell it;

• (3) It has ability to use or sell the intangible asset;

• (4) The intangible asset is more likely than not generate future economic benefits;

• (5) It has adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

• (6) The expenditure attributable to the intangible asset during its development can be measured reliably.

• Other intangible asset

Other intangible assets that are acquired by the Consolidated Company are measured at cost less accumulated amortization and any accumulated impairment losses.

1. Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

1. Amortization

Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual values.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and intangible assets with indefinite useful life, from the date that they are made available for use. The estimated useful lives for the current and comparative periods are as follows:

Technology 5~13 years

The residual value, the amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least annually at each financial year-end. Such change is accounted for as a change in accounting estimate.

• n. Impairment ─ non-derivative financial assets

The Consolidated Company evaluates the impairment losses and estimates the recoverable amounts of the impaired assets on each reporting date in terms of inventories, deferred tax assets, assets arising from employee benefits and non-financial assets other than non-current assets held for sale. If it is not possible to determine the recoverable amount (fair value less cost to sell and value in use) for the individual asset, then the Consolidated Company determines the recoverable amount for the asset's cash-generating unit (CGU).

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The recoverable amount for individual asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss is recognized immediately in profit or loss.

The Consolidated Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the Consolidated Company estimates the recoverable amount of that asset.

Notwithstanding whether indicators exist, recoverability of goodwill and intangible assets with indefinite useful lives or those not yet in use are tested at least annually. Impairment loss is recognized if the recoverable amount is less than the carrying amount.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the acquirer’s cash-generating units, or groups of cashgenerating units, that is expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units or group of units.

If the carrying amount of the cash-generating units exceeds the recoverable amount of the unit, the Consolidated Company recognizes the impairment loss and the impairment loss is allocated to reduce the carrying amount of each asset in the unit.

Reversal of an impairment loss for goodwill is prohibited.

o. Provisions

A provision is recognized if, as a result of a past event, the Consolidated Company has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

1. Site dismantling

The estimated obligation on the dismantling, relocation or restoration of property, plant and equipment is recognized as decommissioning cost and liability of property, plant and equipment. The relevant costs of assets are adjusted by subsequent price variation for dismantling and restoration. Depreciation is provided per the remaining useful life of the adjusted cost.

2. Site restoration

In accordance with the Consolidated Company’s published environmental policy and applicable legal requirements, a provision for site restoration in respect of contaminated land, and the related expense, is recognized when the land is contaminated.

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p. Revenue

1. Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement. For an export transaction, usually it is via free on board shipping point, and the risk transfer occurs upon loading the goods onto the relevant carrier at the port; however, for an import transaction, risk transfer occurs upon receipt by the customer.

2. Services

Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction at the reporting date.

1. Construction contracts

Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can be estimated reliably, contract revenue is recognized in profit or loss in proportion to the stage of completion of the contract. Contract expenses are recognized as incurred unless they create an asset related to future contract activity.

The stage of completion is assessed by reference to the proportion that contract cost incurred for work performed to date bear to the estimated total contract cost; survey of work performed; or completion of a physical proportion of the contract work. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognized immediately in profit or loss.

1. Commissions

When the Consolidated Company acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognized is the net amount of commission made by the Consolidated Company, and is recognized in proportion to the stage of completion of the transaction.

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5. Rental income

Rental income from investment property is recognized in non-operating incomes and expenses on a straight-line basis over the lease term.

6. Financing components

The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the group does not adjust any of the transaction prices for the time value of money.

q. Employee benefits

1. Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

1. Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Consolidated Company’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on (market yields of high quality corporate bonds or government bonds) bonds that have maturity dates approximating the terms of the Consolidated Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Consolidated Company, the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Consolidated Company. An economic benefit is available to the Consolidated Company if it is realizable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognized immediately in profit or loss.

• 173 -

Re-measurement of net defined benefit liability (asset) (including actuarial gains, losses and the return on plan asset and changes in the effect of the asset ceiling, excluding any amounts included in net interest) is recognized in other comprehensive income (loss). The effect of re-measurement of the defined benefit plan is charged to retained earnings.

The Consolidated Company recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit obligation and any related actuarial gains or losses and past service cost that had not previously been recognized.

1. Short term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

• r. Income taxes

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations, or are recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date, or the actual legislated tax rate; as well as tax adjustments related to prior years.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are not recognized for the following:

1. Assets and liabilities that are initially recognized but not related to the business combination, and have no effect on net income or taxable gains (losses) during the transaction.

2. Temporary differences arising from equity investments on subsidiaries or joint ventures, where there is a high probability that such temporary differences will not reverse.

3. Initial recognition of goodwill.

Deferred taxes are measured based on the statutory tax rate on the reporting date; or the actual legislated tax rate, during the year of expected asset realization or debt liquidation.

• 174 -

Deferred tax assets and liabilities may be offset against each other if, and only if, the following criteria are met:

1. if the Consolidated Company has the legal right to settle tax assets and liabilities on a net basis; and

2. the taxing of deferred tax assets and liabilities fulfill one of the below scenarios:

3. (1) levied by the same taxing authority; or

4. (2) levied by different taxing authorities, but where each such authority intend to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation; or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset is recognized for the carry-forward of unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits and deductible temporary differences are also re-evaluated every year on the financial reporting date, and adjusted based on the probability that future taxable profit will be available against which the unused tax losses, unused tax credits and deductible temporary differences can be utilized.

• s. Business combination

Goodwill is measured at the consideration transferred less the amounts of the identifiable assets acquired and liabilities assumed (generally at fair value) at the acquisition date. If the amount of net assets acquired and liabilities assumed exceeds the acquisition price, the Group reassesses whether it has correctly identified all of the assets acquired and liabilities assumed, and recognizes a gain for the excess.

The Group shall measure any non-controlling interests in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets, if the non-controlling interests are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation.

In a business combination achieved in batches, the previously held equity interest in the acquiree at its acquisition date fair value is remeasured, and the resulting gain or loss, if any, is recognized in profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, provisional amounts for the items for which the accounting is incomplete are reported in the Group’s financial statements. During the measurement period, the provisional amounts recognized at the acquisition date are retrospectively adjusted, or additional assets or liabilities are recognized to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period shall not exceed one year from the acquisition date.

• 175 -

All transaction costs relating to a business combination are recognized immediately as expenses when incurred, except for the issuance of debt or equity instruments.

t. Earnings per share

The Consolidated Company discloses the Company basic and diluted earnings per share attributable to ordinary equity holders of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary shareholder of the Company divided by weighted average number of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders of the Company, divided by weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as convertible bonds and employee bonus.

u. Government Grants

A government grant receivable to the Consolidated Company as compensation for costs already incurred or for immediate financial support, with no future related costs, should be recognized as income in the period in which it is receivable.

v. Operating segments

An operating segment is a component of the Consolidated Company that engages in business activities from which it may incur revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Consolidated Company). Operating results of the operating segment are regularly reviewed by the Consolidated Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. Each operating segment consists of stand-alone financial information.

5. MAJOR SOURCES OF SIGNIFICANT ACCOUNTING ASSUMPTIONS, JUDGMENTS AND ESTIMATION UNCERTAINTY

The preparation of the consolidated financial statements in conformity with the IFRS as endorsed by the FSC requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The management continuously reviews the estimates and basic assumptions. Changes in accounting estimates are recognized in the period of change.

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is as follows:

• (a) Fair valuation of investment property

The Group’s accounting policies include measuring financial and non-financial assets and liabilities at fair value through profit or loss.

• 176 -

The Company’s financial instrument valuation group conducts independent verification on fair value by using data sources that are independent, reliable, and representative of exercise prices. This financial instrument valuation group also periodically adjusts valuation models, conducts back-testing, renews input data for valuation models, and makes all other necessary fair value adjustments to assure the rationality of fair value. The Company strives to use market observable inputs when measuring assets and liabilities. Different levels of the fair value hierarchy to be used in determining the fair value of financial instruments are as follows:

• (i) Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.

• (ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).

• (iii) Level 3: inputs for the assets or liability that are not based on observable market data.

Information on valuation use hypothesis factors was as follows:

• (i) Note 6 h. - Investment property;

• (ii) Note 6 w. - Financial Instruments.

6. EXPLANATION TO SIGNIFICANT ACCOUNTS

• a. Cash and cash equivalents

Cashand cash equivalents
Cash on hand Checking and demand deposits Time deposits Cash equivalents Cash and cash equivalents	December 31, 2018 $ 140,459 2,972,985 7,987,415 2,369,079 $ 13,469,938	December 31, 2017
		7,890 1,454,824 7,387,143 1,261,638
		10,111,495

Time deposits which are held for the purpose of meeting short-term cash commitments, rather than for investment or other purposes, that are readily convertible to cash at the known amounts and subject to insignificant risk of value changes, are reported as cash equivalents.

Please refer to Note 6 v. for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Consolidated Company.

• 177 -

b. Financial assets

1. The components of financial assets were as follows:

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss－current Financial assets at fair value through profit or loss－non-current Financial assets held for trading－current Financial assets reported at fair value through profit or loss－current Sub-total Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income－current Financial assets at fair value through other comprehensive income－non-current Sub-total Available-for-sale financial assets－current Available-for-sale financial assets－non-current Financial assets carried at cost－non-current Total	December 31, 2018 $ 1,300,897 4,861,274 - - 6,162,171 251,629 1,978,339 2,229,968 - - - $ 8,392,139	December 31, 2017
		- - 620,710 747,947
		1,368,657
		- -
		-
		196,132 1,677,346 2,992,035
		6,234,170

Please refer to Note 6 v and Note q. for the gain or loss on financial assets recognized at fair value through profit or loss and other comprehensive income.

Core Pacific City Co., Ltd held a provisional shareholders’ meeting on January 17, 2018 in order to cover its deficit of $7,698,679, which represented 37.7% of its actual paid-in capital. The reduction record date was January 17, 2018. Based on its articles of incorporation, there is no significant impact on the issuance of its shareholders’ preferred stock concerning the matter.

During the year ended December 31, 2018, the dividends of $625,787 thousand, related to equity investments at fair value through other comprehensive income held on December 31, 2018, were recognized.

On February 26, 2018, the Company’s board of directors approved a resolution to invest in Core Pacific City Co., Ltd by issuing 156,000 thousand preferred shares amounting to NT$1,560,000 thousand and accounted in financial assets at fair value through profit or loss － non-current.

• 178 -

• The director of Praxair Chemax Semiconductor Materials Co., Ltd. (hereinafter referred to as “PRAXAIR”) delegated by the Company, was elected as the new Chairman in the directors’ meeting on Jan. 30th, 2013. However, Praxair Inc. did not recognize the director delegated by the Company as the Chairman, resulting in the new Chairman being unable to exercise his authority. Also, the supervisor appointed by the Company was prevented from auditing the accounts and records pursuant to the Company Law, hence, the new Chairman and the designated supervisor representing PRAXAIR, filed an action asking the vice chairman and general manager to provide the accounts and records and requested to return the seal, business invasion and others in a civil lawsuit. The vice chairman delegated by Praxair Inc. claimed privilege to act as the Chairman and filed legal actions declaring the non-existence of the new Chairman’s commission of authority and also sent a letter to the court requesting a dissolution of PRAXAIR, which was rejected by the courts. The supervisor appointed by Praxair Inc. illegally called a temporary shareholders’ meeting in 2013 to propose the dissolution of the Company and reelection of directors and supervisors. Hence, the Company filed legal actions declaring the withdrawn of the resolution from the illegal temporary shareholders’ meetings and the resolutions from the temporary shareholders’ meeting was not established. Currently, the supervisor filed the legal action against the manager for submitting the accounts and the records, after winning the 1st and 2nd trial, the defendant appealed but was dismissed by the 3rd trial instance. This case was remanded to the Taipei High Court but the verdict was dismissed in 2015, the Company was not satisfied with the appeal and filed the legal action. On the other side, the vice chairman designated by Praxair Inc. filed legal action declaring the non-existence of the new Chairman’s commission of authority, after the judgment from the High Court that the Chairman designated by the Company won the verdict, the defendant appealed to the 3rd instance, with the Supreme Court dismissing the appeal. The whole case confirms the appointed relationship between the Chairman designated by the Company and PRAXAIR exists. On Nov. 19th 2016, the letter from Ministry of Economic Affairs states that Lin KeMing, appointed by the Company, is the Chairman of PRAXAIR, and restored the representative duty per the judgment No. 2455 from the Supreme High Court in 2015. However, according to the requirement from Ministry of Economic Affairs, both sides were not able to hold the legitimate reelection prior to Jan. 9th 2017 which resulted in vacancy of directors and supervisors of PRAXAIR. In order to strive for the rights and interests of the shareholders, the Company immediately brought the arbitration per joint venture agreement of both sides and applied for an auditor and provisional administrator to instruct the central section office of the Ministry of Economic Affairs to allow Praxair Inc. to conduct the change of registration on July 6th 2017. The Company has filed a request for the arbitration of International Chamber of Commerce in 2017 and received the award issued by the International Court of International Chamber of Commerce on September 3, 2018. A part of the award favored for the Company and confirmed that the Company was entitled to receive the dividends from PCSM for the year of 2013. In order to protect the Company’s right, the Company submitted a lawsuit regarding to withdrawing a part of such Arbitration award against the Company to Taipei District Court.

As of December 31, 2018, and 2017, the Consolidated Company provided as collateral portion of its financial assets. Please refer to Note 8 for details of the related assets pledged as collateral.

• 179 -

• －

• 1. Sensitivity analysis equity price risk:

If the equity price changes, and if it is based on the same basis for both years and assumes that all other variables remain the same, the impact to comprehensive income will be as follows:

Equity price at reporting date Increase of 1% Decrease of 1%	For the Years Ended December 31,	For the Years Ended December 31,	For the Years Ended December 31,
	2018 After-tax other comprehensive income After-tax Profit(loss) $ 22,300 61,622 $ (22,300) (61,622)	2017
	After-tax other comprehensive income $ 22,300 $ (22,300)	After-tax other comprehensive income 18,735 (18,735)	After-tax Profit(loss)
			13,687
			(13,687)

• c. Notes and accounts receivable, net

Notes receivable Accounts receivable Other receivables Less：Allowance for doubtful receivables Net book value	December 31, 2018 $ 687,341 2,399,163 123,898 (455,937) $ 2,754,465	December 31, 2017
		1,756,028 2,262,263 51,398 (476,319)
		3,593,370

Movements of the allowance for doubtful receivables for the years ended December 31, 2018 and 2017 were as follows:

Balance on January 1, 2018 and 2017 per IAS 39 Adjustment on initial application of IFRS 9 Balance on January 1, 2018 per IFRS 9 Impairment losses reversed Foreign exchange gains/(losses) Balance on December 31, 2018 and 2017	December 31, 2018 $ 476,319 - 476,319 - (20,382) $ 455,937	December 31, 2017	December 31, 2017
		Individually assessed impairment 382,697 (23) (1,572) 381,102	Collectively assessed impairment
			95,570 (23) -
			95,217

The consolidated subsidiaries, Weihua (Rudong) Trade Co., Ltd. and Weiqiang International Trade (Shanghai) Co., Ltd., filed civil complaints against Shanghai Tongye Coal Chemical Group Co. Ltd. in Shanghai to claim for the delay of payment of their accounts receivable from Shanghai Tongye Coal Chemical Group Co., Ltd. However, both of these consolidated subsidiaries have recognized impairment loss on the said accounts receivable as of December 31, 2018. Please refer to Note 9 f. for further details relating to litigation and evaluation of collectability.

There are no notes and trade receivable and other receivables of the Group had been pledged as collateral for long-term borrowings as of December 31, 2018 and 2017.

• 180 -

d. Inventories

Finished goods Work-in-process Raw materials Fuel Merchandise inventory Construction in progress Total	December 31, 2018 $ 494,735 291,312 1,319,204 23,040 104,709 10,840 $ 2,243,840	December 31, 2017
		540,557 605,670 1,046,748 20,067 68,042 -
		2,281,084

For the years ended December 31, 2018 and 2017, the components of cost of goods sold were as follows:

Cost of goods sold Loss (gain) on inventory market price decline and obsolescence Gain on physical inventories, net Unallocated fixed production overheads from idle facilities Revenue from sale of scraps Net amount	**For the Years Ended December 31 **	**For the Years Ended December 31 **
	2018 $ 32,896,647 140,104 22,881 295,345 (28,018) $ 33,326,959	2017
		27,687,729 (22,875) 5,196 306,914 (12,013)
		27,964,951

As of December 31, 2018 and 2017, the aforesaid inventories were not pledged as collateral.

e. Investments accounted for using equity method

1. The Group’s investments accounted for using the equity method at the reporting date were classified as follows:

Subsidiaries Associates Total	December 31, 2018 $ 81,666 2,323,745 $ 2,405,411	December 31, 2017
		89,027 2,152,014
		2,241,041

1. The Group’s investments accounted for using the equity method that are individually insignificant were as follows:

Carrying value of insignificant subsidiaries Carrying value of insignificant associates Attribution to the Consolidated Company Net income Other comprehensive income Total comprehensive income	December 31, 2018 December 31, 2017 $ 81,666 89,027 $ 5,576,913 5,099,030 **For the Years Ended December 31 **	December 31, 2017
		89,027
		5,099,030
	2018 $ 887,970 - $ 887,970	2017
		776,557 37,430
		813,987

• 181 -

• Share of profit (loss) of subsidiaries and associates for the years ended December 31, 2018 and 2017 was as follows:

Share of profit (loss) of subsidiaries and associates

For the Years Ended December 31	For the Years Ended December 31
2018 $ 887,970	2017
	776,557

1. The key financial information of subsidiaries and associates in which the Consolidated Company has equity investments was as follows (before adjustment for the Consolidated Company’s proportionate share):

Company’s proportionate share):
Total assets Total liabilities Revenue Net income	December 31, 2018 December 31, 2017 $ 7,245,850 6,698,484 (1,588,376) (1,515,260) $ 5,657,474 5,183,224 For the Years Ended December 31	December 31, 2017
		6,698,484 (1,515,260)
		5,183,224
	2018 $ 7,244,503 $ 2,256,289	2017
		**6,366,231 **
		1,796,142

The Consolidated Company does not guarantee any contingent liabilities of an associate jointly with other investors. Likewise, the Consolidated Company does not guarantee alone any other contingent liabilities of an associate.

1. The resolution, implementation of singed tripartite supplemental agreement between the Company and PPG&GGC (which had been merged as the Axiall company), from the Company’s board meeting on April 21st 2016: trading of equity shares of Taiwan Chi chlorine Chemical Co., Ltd, total 6,400,000 shares at the sale price, US$100,000 thousand, which was equivalent to NT$3,225,000 thousand. After the expectation of the disposal interests, NT$2,838,761 thousand, the Company instantly informed Axiall company to carry out the equity trading of Taiwan Chi Chlorine Chemical Co., Ltd. The Company issued the letter many times to ask Axiall to implement the agreement, however, Axiall company repeatedly delayed such actions. Hence, the Company filed the arbitration to American Arbitration Association in August 2016. Axiall submitted the pleadings in Sept. 2016 and asked PPG to participate in the lawsuit. Outside lawyers of PPG, in the Oct. of same year, represented that PPG is willing to negotiate the contract of equity trading. PPG signed the contract with the Company at the end of February 2017 and handled the equity transactions subsequently. The Company completed the trading on April 11st 2017, the total selling price: $100,000 thousand, equivalent to about NT$3,062,000 thousand. The disposal of investment benefit recognized after the deduction of the securities trading taxes: NT$2,673,076 thousand, which was listed on the other benefits and losses of NonOperating Income and Expense Accounts.

2. 182 -

6. Collateral

As of December 31, 2018 and 2017, the Consolidated Company provided as collateral portion of its investments in aforesaid equity-accounted investees. Please refer to Note 8 for details of the related assets pledged as collateral.

• f. Business Combination

• The Company acquired Changzhou Huijie new material Co., Ltd on November 5, 2018 for 100% fully control of the entity. The entity engages in manufacturing engineering plastics.

The transfer price is $356,869 thousand in cash, the fair value of assets acquired and liabilities assumed on the acquisition date were as below:

Cash and cash equivalents Notes and accounts receivables Other receivables Inventories Other current assets Property, plant and equipment Intangible assets Short-term loans Accounts payable Other payables Other current liabilities, Long-term bank loans Fair value of identifiable assets Goodwill derived from acquisition: Transfer price Fair value of identifiable assets Goodwill	$ 47,222 4,032 6,090 4,994 100,137 1,200,245 156,655 (265,345) (219) (860,584) (142) (179,895)
	$ 213,190
	$ 356,869 (213,190) $ 143,679

1. The Company acquired Thanh Phong construction and investment Ltd. 90% of its shares and obtained controlling power of the entity. The entity engages in real estate and construction.

The transfer price is $119,573 thousand in cash, the fair value of assets acquired and liabilities assumed on the acquisition date were as below:

Cash and cash equivalents Fair value of identifiable assets	$ 132,857 $ 132,857

• 183 -

Goodwill derived from acquisition:

Transfer price Non-controlling equity (fair value of identifiable assets measured at the percentage of non-controlling equity) Fair value of identifiable assets Goodwill	$ 119,573 13,284 (132,857)
	$ -

• g. Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Consolidated Company for the years ended December 31, 2018 and 2017 were as follows:

Cost or deemed cost: Balance as of January 1, 2018 Acquisition from business combination Additions Disposal Reclassification Effect of movements in exchange rate Balance as of December 31,2018 Balance as of January 1, 2017 Additions Disposals Reclassification Effect of movements in exchange rate Balance as of December 31, 2017 Depreciation and impairment loss: Balance as of January 1, 2018 Acquisition from business combination Depreciation for the period Disposals Reclassification Effect of movements in exchange rate Balance as of December 31, 2018 Balance as of January 1, 2017 Depreciation for the period Disposals Effect of movements in exchange rate Balance as of December 31, 2017 Carrying amounts: Balance as of December 31, 2018 Balance as of January 1, 2017 Balance as of December 31, 2017	Land $ 5,730,777 - - - - - $ 5,730,777 $ 5,730,777 - - - - $ 5,730,777 $ - - - - - - $ - $ - - - - $ - $ 5,730,777 $ 5,730,777 $ 5,730,777	Land improvements 271,654 - - (3,465) 19,599 - 287,788 266,699 - - 4,955 - 271,654 214,969 - 4,981 (3,465) - - 216,485 210,611 4,358 - - 214,969 71,303 56,088 56,685	**Buildings **	Machinery and equipment 41,644,060 706,580 1,897 (464,862) 931,770 (22,138) 42,797,307 40,933,661 22,554 (121,010) 813,214 (4,359) 41,644,060 33,221,690 166,795 1,212,101 (444,446) (510) (6,988) 34,148,642 32,206,760 1,135,274 (120,285) (59) 33,221,690 8,648,665 8,726,901 8,422,370	Vehicles 72,017 - 1,285 (5,388) 4,755 (291) 72,378 70,128 1,837 (373) 563 (138) 72,017 58,441 - 5,148 (4,725) 386 (200) 59,050 53,372 5,891 (373) (449) 58,441 13,328 16,756 13,576	Other facilities 203,396 33,427 19,262 (3,313) 11,451 (1,337) 262,886 193,889 2,561 (2,065) 9,363 (352) 203,396 155,845 9,998 19,564 (2,796) 124 (529) 182,206 146,622 11,319 (1,975) (121) 155,845 80,680 47,267 47,551	Construction inprogress 3,284.476 - 2,719,648 (13,593) (1,331,868) (59,648) 4,599,015 1,673,672 2,468,866 - (864,623) 6,561 3,284.476 - - - - - - - - - - - - 4,599,015 1,673,672 3,284,476	Accumulated impairment - - - - - - - - - - - - - 2,154,331 - - (16,365) - - 2,137,966 2,154,331 - - - 2,154,331 (2,137,966) (2,154,331) (2,154,331)	Total
			2,630,166 812,580 2,574 (25,640) 364,293 (21,335)						53,836,546 1,552,587 2,744,666 (516,261) - (104,749)
			3,762,638						57,512,789
			2,595,686 4,969 (4,664) 36,528 (2,353)						51,464,512 2,500,787 (128,112) - (641)
			2,630,166						53,836,546
			1,095,840 73,979 122,893 (22,745) - (3,061)						36,901,116 250,772 1,364,687 (494,542) - (10,778)
			1,266,906						38,011,255
			1,022,898 77,618 (4,664) (12)						35,794,594 1,234,460 (127,297) (641)
			1,095,840						36,901,116
			2,495,732						19,501,534
			1,572,788						15,669,918
			1,534,326						16,935,430

As of December 31, 2018 and 2017, the Consolidated Company provided as collateral portion of its property, plant and equipment, please refer to Note 8 for details of the related assets pledged as collateral.

• 184 -

On November 26, 2013, the plan to invest in China was approved during the meeting of the board of directors of the Company. On March 25, 2014 and November 1, 2018, the Investment Commission, MOEA approved the investment of the Company in JIANGSU WEIMING Petrochemical Corporation in Chin ~~a o~~ f RMB$2,388,000 thousand (equivalent to $11,200,000 thousand) mainly to establish a manufacturing operations for petrochemical products (including hydrorefining crude benzol, cyclohexanone, nylon 6, etc.). As of December 31, 2018 and 2017, accumulated investment remittance from Taiwan to Mainland China was RMB$775,000 thousand and RMB$645,000 thousand. The amount invested in manufacturing plant and machinery was RMB$670,251 thousand and RMB$437,183 thousand, respectively.

h. Investment property

Cost or deemed cost: Balance as of January 1, 2018 Net gains and losses due to fair value adjustments Balance as of December 31, 2018 Balance as of January 1, 2017 Net gains and losses due to fair value adjustments Balance as of December 31, 2017 Carrying amounts: Balance as of December 31, 2018 Balance as of January 1, 2017 Balance as of December 31, 2017	Land $ 38,211,181 120,452 $ 38,331,633 $ 38,148,494 62,687 $ 38,211,181 $ 38,331,633 $ 38,148,494 $ 38,211,181	Buildings 15,351 3,375 18,726 3,859 11,492 15,351 18,726 3,859 15,351	Total
			38,226,532 123,827
			38,350,359
			38,152,353 74,179
			38,226,532
			38,350,359
			38,152,353
			38,226,532

1. Evaluation by income approach

The fair value of some investment properties of the Consolidated Company was determined using the income approach. Under this income approach, the key terms of the rental contracts for these investment properties and certain other factors considered were as follows:

December 31, 2018

Subject Qianjin Dist., Kaohsiung City Important contract terms None. The range of rental in the area where the $550 ~ $700( NT dollars) investment property is located The rental range of similar investment property $549 ~ $596( NT dollars) The current status of the investment property Unused Past earnings $0 ~ $0 Income capitalization rate 5.415% Discount rate 4.380% Outsourcing or self-valuation Outsourcing Evaluation office Colliers International Taiwan Appraiser name Feng-ru, Ke Evaluation date December 31 , 2018 Outsourcing fair value $10,640

• 185 -

December 31, 2017

December 31, 2017
Subject Important contract terms The range of rental in the area where the investment property is located The rental range of similar investment property The current status of the investment property Past earnings Income capitalization rate Discount rate Outsourcing or self-valuation Evaluation office Appraiser name Evaluation date Outsourcing fair value	Qianjin Dist.,KaohsiungCity
	None. $400 ~ $450( NT dollars) $408 ~ $433( NT dollars) Unused $0 ~ $0 3.700% 3.045% Outsourcing Euro-Asia Real Estate Appraisers Firm Shi-yuan, Chou December 31 , 2017 $7,602

In accordance with Article34 of the Regulations on Real Estate Appraisal, the income approach procedures include estimating the effective gross income and total expenses, computing the net operating income, determining the capitalization rate or discount rate, and computing the income. The attributes used by the Group for the estimations above were the last three years’ data from the subject property and comparable properties which have similar characteristics, and these data were assessed and adjusted based on their persistency, stability, and growth to ensure the availability and reasonableness of these data. The movement of income (cash inflows) and expenditure (cash outflows) for future periods was based on the vacancies or losses, existing or future cash flow plans of the Group, and historical cash flows from the subject property, identical properties, or properties in the same industry. The estimation and computation of the net income were based on the highest and best use of the subject property and have taken into consideration the income generated from comparable properties in the same location based on their highest and best use.

External appraisers use the risk premium method to decide on the direct capitalization rate and discount rate. The fixed deposit interest rate, government bonds rate, real estate investment risk, money supply-demand variation, the trend of real estate value and etc. are taken into consideration to decide the likely rate of return on the most common investment as a basis in order to derive the capitalization rate or discount rate. The differences in individual characteristics between the above most common investment and the subject property are compared in terms of their liquidity, risk, appreciation, and management. As of December 31, 2018 and 2017, the discount rate was 4.380% and 3.045%, respectively, based on 2-year time deposit of a small amount, as posted by the Chunghwa Post Co., Ltd., plus 0.75 percentage points (1.845%), adjusted for a risk premium of 1.2%, to reflect the status of operating income, liquidity, risk, appreciation, management and etc. As of December 31, 2018 and 2017, the weighted average capitalization rate was 5.415% and 3.700%, respectively, derived as the ratio of annual net operating income of comparable properties divided by reasonable price.

• 186 -

• Evaluation through land development analysis

As the Consolidated Company’s investment property is undeveloped, the income approach cannot be used for purposes of the evaluation. Consequently, the investment property was evaluated using the land development analysis, under which, the following factors were considered:

December 31, 2018

Subject Estimate total sales price Rate of return Capital interest rate Evaluation office Appraiser name Evaluation date Outsourcing fair value December 31, 2017 Subject Estimate total sales price Rate of return Capital interest rate Evaluation office Appraiser name Evaluation date Outsourcing fair value	Annan Dist., TainanCity $7,968,120 23% 1.790% CCIS Real Estate Joint Appraisers Firm Huo-ming, Huang December31, 2018 $5,020,755 Annan Dist., TainanCity $7,257,090 20% 1.820% CCIS Real Estate Joint Appraisers Firm Huo-ming, Huang December31, 2017 $4,499,943	Qianzhen Dist., Kaohsiung City Others 9,612,970 2,717,238 18% 12% ~ 25% 3.810% ~3.930% 0.71% ~4.38% CCIS Real Estate Joint Appraisers Firm, Colliers International Taiwan Hon Bun Real Estate Appraisers Firm and Colliers International Taiwan, Shiou-ying, Jan , Jian-hui,Gu Yu-xian, Houng , Jian-hui,Gu , hShiou-ying, Jan and Feng-ru, Ke December 31, 2018 December 31, 2018 31,970,281 1,348,683 Qianzhen Dist., Kaohsiung City Others 161,129,789 2,741,768 20% ~ 40% 10% ~ 15% 3.120% ~7.42% 1.69% ~1.95% Euro-Asia Real Estate Appraisers Firm Euro-Asia Real Estate Appraisers Firm, Colliers International Taiwan, and CCIS Real Estate Joint Appraisers Firm Shih-yuan, Chou Shih-yuan, Chou ,Feng-ru, Ke , Shiou-ying, Jan and Huo-ming, Huang December 31, 2017 December 31, 2017 32,271,818 1,447,169	Others
			2,741,768 10% ~ 15% 1.69% ~1.95% Euro-Asia Real Estate Appraisers Firm, Colliers International Taiwan, and CCIS Real Estate Joint Appraisers Firm Shih-yuan, Chou ,Feng-ru, Ke , Shiou-ying, Jan and Huo-ming, Huang December 31, 2017 1,447,169

The land development analysis included procedures such as identifying the content of land development and estimating the required period of development ; investigating individual cost and related expenses, collecting current market prices, etc.; on-site survey and investigating and analyzing the degree of development in the local environment; estimating the marketable area of land or building after construction or building; estimating the total sales price of properties after completion of construction or building; estimating individual cost and related expenses; deciding an appropriate rate of return and an overall capital interest rate; calculating land development analysis value.

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Investment property included several rentals of real property to others. Each lease contract all include the original non-cancellable lease and the subsequent lease is negotiated with the lessee without collection of contingent rental. Please refer to Note 6 n. for the relevant information including rent revenue and the direct operating expenses incurred.

As of December 31, 2018, and 2017, the Consolidated Company provided as collateral portion of its investment property. Please refer to Note 8 for details of the related assets pledged as collateral.

In the era of pre-Taiwan Alkali Industrial Corporation (TAIC), TAIC had leased the lands located in Tainan and Chiayi area to the local peasants and fishermen, and the surviving tenants shall continue paying the rent to the Company according to the agreements. In the circumstance of the resumption for self- business use or the sale of the lands, the leases shall be terminated under the contractual agreements and Land Laws. If there is any redemption in some cases, the Company will recognize and evaluate the possible expenses and costs case by case.

The Company has terminated the some agreements with partial peasants and fishermen at the first quarter of 2014 by paying the redemption in the amount of $50,425 thousand.

An Shun Land Located in Tainan City Annan District:

1. History

• (1) The land where the An-Shun Alkali plants located was originally established by Japanese company Kanegafuchi Soda “in 1938 under Japanese Colonial Rule.

• (2) The Government undertake the construction after the Retrocession of Taiwan, and established a state-owned company, Taiwan Alkali Industrial Corporation (TAIC) and operated at the An-Shun Site. In 1961, the competent authorities in charge of the relevant state-owned enterprises approved the investment plan and budget for producing Pentachlorophenol and sodium pentachlorophenol products used on herbicides and wood preservative fungicides.

• (3) Due to operational factors, the plant was ordered to be closed by Executive Yuan Department of Economic Affairs in early 1982.

• (4) In April 1983, Executive Yuan Department of Economic Affairs ordered China Petrochemical Development Corp., the state-owned Company, the subsidiary of CPC at the time, to merge with TAIC. The Company took charge of An-shun land of TAIC.

• (5) Since the said merger, the Company takeover the An-shun land, the Company itself has never had any act of production, operations, development, use or pollution occurred at the site. According to subsequent investigation and research, parts of the area has been detected dioxin and mercury contamination in soil. The land was designated by the Tainan City Government and the Environmental Protection Department of the Executive Yuan as a “Soil Pollution Control Site” and “Soil pollution remediation site” in April 2002 and March 2004 separately, per the Soil and Groundwater Pollution Remediation Act.

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• (6) Tainan city government and other government authorities cited Article 75 of Taiwan’s Company Law that since the Company merged with TAIC, and was regarded as the surviving company, the Company should take all responsibilities for the rights and obligations of TAIC, and so are the treatment projects and remediation plan. As the Company never used the land of TAIC after being ordered to take charge by the Executive Yuan Department of Economic Affairs (MOEA), the Company thus objected and carried out the following administrative or judicial remedies to identify the government conception of the “Polluters” and the condition of pollution:

• A. The Company filed a plea of State Compensation claim to Ministry of Economic Affairs, Administration Yuan (MOEA), but MOEA refused.

• B. In January 2006, the Company filed a complaint against MOEA in the Taiwan Taipei District Court in the amount of $10,077 thousand to reimbursement for compensation,

• C. The complaint was dismissed by the Supreme Court In February, 2008. Upon the application of Constitution Interpretation by the Company, J.Y. No.714 Interpretation of the Grand Justice was issued in November, 2013, and considered that Soil and Groundwater Pollution Remediation Act (SGPR Act )does not violate the principle of prohibition against retroactive law, or the principle of proportionality the retroactive rule; however, the holding didn’t mention whether the successor of the Polluter entity should be responsible for the treatment projects and remediation plan under SGPR Act was not in the scope of the regulation.

• D. The Company has filed series of complaint on those issues according to this Constitutional Interpretation.

• (7) Tainan City Government issued the letter No. 09722000130 and No. 09722003360 in January and February 2008 respectively, and requested the Company to propose a remediation plan for the soil and groundwater pollution of the An-shun plant in accordance with the Soil and Groundwater Pollution Remediation Act.

• A. The Company proposed the “Tainan City, CPDC former Taiwan Alkali An-shun site and 2nd class number nine road on the eastern side of the grass area of the site, soil pollution remediation pollution remediation plan” per the regulation at the end of June 2008 and the plan was submitted to Tainan city government for review and formally approved in May 2009. In 2012, the remediation plan was put forward and approved on July 2, 2012. The 1st instance was completed in September 2014 and entered the second phase of the remediation, which will last 10 years. A second revision of the remediation plan was proposed and submitted to Tainan City Government for review, and the approval letter issued by Tainan City Government informed of the approval of the 2nd remediation plan, which shall be publicly displayed per regulations. Currently, the Tainan City Environmental Protection Bureau reviewed and adopted the plan on April 14, 2015 and the assessment was announced by Tainan City Government on May 4th, 2015. According to the remediation technology and the actual implementation of the subsequence adjustment, the 3rd remediation change plan

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was proposed on March 2nd 2017, which remediation plan was focus on the remediation plan of 2nd phase and brought in the unfinished items in the 2nd change plan. Currently, the 3rd plan was reviewed and adopted on Jan. 3rd, 2018.

• B. The remediation expense about NT$1,600,000 thousand has engaged in the 1st phase until Sept. 2014. Simultaneously, the following 10-year remediation work, after the 2nd change plan was adopted, needed to be started, the funding was estimated in Dec., 2014: NT$1,356,000 thousand.

2. Extension legislation:

• (1) Remediation prepay

• A. Tainan city government on Feb. 27[th] , 2008 with the letter No. 09722004430 asked the Company to pay each expense: NT$88,786 thousand, coming from investigation assessments and strain necessary measures, which was prepaid by Tainan city government and EPA of Executive Yuan on behalf of land polluters, within deadline. The expense would double and transfer to court for enforcement if overdue. This expense was adjusted to list in 2007 per Financial Accounting Standards and the Company prepaid on behalf of land relations based on the law regulations in July 2008. The Company had the objection on the prepaid expense and land polluter, hence, the administrative remedy was proposed in July 2008, Kaohsiung High Administrative court sentenced the Company shall pay the expense NT$88,430 thousand in Jan. 2008. The Company proposed the appeal in March 2008 and Supreme Administrative Court sent back to Kaohsiung High Administrative Court for further trial. Kaohsiung High Administrative court sentenced the original punishment and the petition decision beyond NT$76,066 thousand was withdrawn. In Dec. 2013, both parties proposed the appeal for the unfavorable parts and Supreme Administrative Court sentenced the amount beyond NT$203 thousand and lawsuit expenses are all abandoned in April 2015 and sent back to Kaohsiung High Administrative court for continued trial. The determined withdrawn amount NT$356 thousand had all been returned back to the account by Tainan city government. Kaohsiung High Administrative court rejected the appeal of the Company on Dec. 2016. The Company proposed the appeal remedy for the unsatisfied sentenced contents on Jan. 2017. Supreme Administrative Court sentenced on Jan. 2018 that the expenses NT$1,135 thousand didn’t need to be undertaken by the Company.

• B. Tainan city government on May 22, 2009 with the letter No. 09822013680 asked the Company pay the expenses NT$17,962 thousand, which resulted from the relevant working plan of An Shun Land Site soil pollution remediation and was prepaid by Tainan city government on behalf of the Company, and Tainan city government in Dec. 2009 with the letter No. 09822035440 asked the Company to pay the above fees prior to Jan. 31[st] , 2010. The Company estimated such expense at the end of 2009 and proposed the administrative remedy in Jan. 2010 and prepaid the above fees within the deadline inquired by Tainan city government based on the law regulations. The petition was rejected in March 2011, thus, the administrative lawsuit was proposed according to the law. Kaohsiung High Administrative court sentenced that the amount beyond

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NT$17,867 thousand was withdrawn. After the appeal, Supreme Administrative Court sentenced to return back to Kaohsiung High Administrative court for further trial in Sept. 2013. Kaohsiung High Administrative court sentenced the amount beyond NT$7,068 thousand was withdrawn on Oct. 7[th] , 2015 and this case had been appealed for the remedy. The determined withdrawn amount NT$95 thousand had been returned back to the account by Tainan city government. The verdict from Supreme Administrative Court had been received on Feb. 18[th] , 2017, the fact was again returned back to Kaohsiung High Administrative court for the trial.

• C. Tainan city government in Sept. 2011 with the letter No.1000700466 inquired the Company to pay the expense NT$16,095 thousand, which resulted from the relevant working plan of An Shun Land Site soil pollution remediation and was prepaid by Tainan city government on behalf of the Company. In March 2012, Tainan city government, with the letter No.1010242670, asked the Company to pay the above expense prior to April 30[th] , 2012. Based on the law regulation, the Company was inquired by Tainan city government to prepay the above expense within deadline and proposed the appeal for remedy in April 2012, which was rejected. The Company proposed the administrative litigation in Nov. 2012 and Kaohsiung High Administrative court sentenced to decide the amount of the original expense beyond NT$119 thousand were all withdrawn. The Company proposed the appeal in Sept. 2014, but Supreme Administrative Court sentenced to return back to Kaohsiung high Administrative court for further trial in Nov. 2015. Kaohsiung High Administrative court sentenced the amount beyond NT$6,498 thousand which Tainan city ordered the Company to pay was all withdrawn. Final verdict confirmed by Supreme Administrative Court in April 2018.

• D. Tainan City Government, in May 2013, issued the letter No. 1020383681B to request the Company to pay site soil pollution remediation related work plan on behalf of An-shun plant, with the cost of NT$26,530 thousand and requested for the Company to pay the fee prior to June 30th 2013. The Company paid the fee in advance within the requested deadline by the Tainan City Government based on applicable laws. The Company filed a petition for remedy in July 2013, which was rejected. The Company filed an administrative litigation in March 2014. The judgment was declared in April 2016. The Company proposed to appeal for remedy on the portions that were unfavorable. However, the appeal was sentenced to be rejected in March 2017. The Company had proposed for retrial remedy in April 2017, which was rejected by court in Oct. of the same year. This case was closed.

• E. The Tainan City Government, in February 2014, litigated that the Company was the polluters per judgment No. 1953 which was pass down in 2007 and asked the Company to pay the 2011 advanced payment of supervision and management on behalf of An-shun factory, to the amount of NT$27,444 thousand. The Company paid the fee in advance as previous mention within the requested deadline by the Tainan City Government based on the law regulations and filed the petition for remedy in March 2014, which was rejected by the petition authorities. The Company was not satisfied with the result, and filed the administrative legal

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appeal in September of same year. The Kaohsiung High Administrative Court sentenced the Company to pay NT$154 thousand. However, Tainan City Government was not satisfied with the verdict and filed the appeal for remedy, the Company also filed an appeal based on the Company’s claims to Supreme Administrative High Court. The Supreme Administrative High Court suspended the original verdict in February 2018, and currently the case is under hearing by the Kaohsiung High Administrative Court.

• F. Tainan City Government, in May 2016, issued the letter No. 10504498726, requested the Company to pay a fee for the “supervision management and audit work plan of 2013 CPDC (Taiwan Alkali) An-shun plant site remediation” and requested the Company to pay the fee of NT$63,271 thousand prior to July 20th 2016, per paragraph 4 of article 14, article 15 and paragraph 1 of article 43. The Company paid the fee within the requested deadline by the Tainan City Government based on applicable regulations. After the rejection of the petition for the remedy in June 2016, the Company filed for administrative litigation in December 2016 and received parts of the winning judg

• G. ment in July 2017. In order to maintain the Company’s right and interest, the Company had proposed the appeal to Supreme Administrative Court for remedy of the unfavorable parts in August 2017.

• (2) Tainan city government claimed that the Company didn’t implement per the remediation process.

• A. Tainan City Government issued the letter No. 1030133470 on February 12[th] 2014 to order the Company to pay a penalty of NT$200 thousand prior to March 24[th] 2014 since the Company was deemed not to implement the content per the approved “Site soil pollution remediation pollution remediation plan” and violated the regulation subparagraph 3 of paragraph 2 of Article 38 and paragraph 1 of Article 22 of the Soil and Groundwater Pollution Remediation Act. However, the disposition authority determined that this was a factual error and it was clear that the punishment was illegal. Hence, the Company filed a petition for remedy in March 2014, but the petition was rejected by Executive Yuan Environmental Protection Agency in June 2014. The Company filed for administrative litigation remedy in August 2014, the litigation remedy was rejected by the judgment from the simple court of Tainan District court and Kaohsiung High Administrative Court in April and August 2015. The Company filed the retrial for remedy, which was rejected by the Kaohsiung High Administrative Court in April 2016. The Company would continue to file an appeal for remedy. However, the rejection of the Company’s request was received in June 2017. The Company proposed the retrial appeal for remedy in July of the same year. After the retrial, the court rejected the Company’s request in Oct. of the same year and this case was closed.

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• B. Tainan City Government issued the letter No. 104060004 on June 12th, 2015 declaring that the Company didn’t execute the plan per the approved “Site soil pollution remediation pollution remediation plan”, which violated the regulation subparagraph 3 of paragraph 2 of Article 38 and paragraph 1 of Article 22 of the Soil and Groundwater Pollution Remediation Act and ordered the Company to pay a penalty of NT$1,000 thousand prior to July 27th 2015. After verification, it was clear that the fine was illegal. Hence, the Company filed a petition for remedy in August 2015, which was rejected by the Executive Yuan Environmental Protection Agency. The Company was not satisfied with the verdict and filed for administrative litigation with the Kaohsiung High Administrative Court, the Company won the verdict in January 2017. This case was closed.

• C. Tainan City Government issued a letter No. 105050004 for administrative sanctions on May 23, 2016 and deemed that the Company didn’t execute the plan according to the remedy plan since the reduction rate of dioxin pollution was less than 41% in the Soil and groundwater pollution inspection records, which violated the regulation paragraph 1 of Article 22 of the Soil and Groundwater Pollution Remediation Act (hereinafter referred to as the “Remediation Act”) and ordered the Company to pay a penalty of NT$2,000 thousand according to subparagraph 3 of paragraph 2 of Article 38 of Remediation Act and the Company had to participate in environment seminars for 2 hours according to the provisions of Article 23, paragraph 2 of the Environmental Education Law. After verification, the previous punishment content was not audited at the time point of the remediation plan, which violated the punishment principle. The Company filed a petition in June 2016, which was rejected by Executive Yuan Environmental Protection Agency in Oct. 2016. The Company was not satisfied, proposing the administrative litigation to Kaohsiung High Administrative court and received the rejection jurisdiction by court in July 2017. The Company proposed the appeal for the remedy in August of the same year per law, but Supreme Administrative Court rejected the Company’s request in Jan. 2018. This case was determined to be closed.

• D. Tainan city government, on May 23rd, 2016, required the Company to complete the correction (which means the reduction rate of dioxin pollution reaches to 41%) prior to Oct. 31st, 2016 with letter No. 1050527601 and attached with No. 105050004 issued on May 19th, 2016, otherwise; the Company would be punished continuously per time. Since the Company violated the regulation paragraph 1 of Article 22, paragraph 2 of Article 38 of the Soil and Groundwater Pollution Remediation Act and paragraph 11 of Penalty criteria list, it was fined NT$600 thousand and was ordered to participate in environment seminars for 4 hours (premier NT$200 thousand plus added NT$400 thousand). After verification, the previous punishment content was not audited at the time point of the remediation plan, which violated the punishment principle and this case had necessary relation with the administrative sanction which of letter No. 105050004. The petition remedy was proposed per law in Feb. 2017, which was rejected by Executive Yuan Department of Economic Affairs in May 2017. The Company had proposed the appeal for remedy in June of the same year. Through the rejection of the Company’s request by Kaohsiung High Administrative court

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in Nov. of the same year, the Company had declared the appeal in Dec. of the same year. The Supreme Administrative Court rejected the Company’s request on July 10, 2018. This case was determined to be closed.

• E. Tainan city government considered the Company’s remediation progress for the reduction rate of dioxin pollution had not reached 82% and judged the Company for the penalty NT$200 thousand. After verification, the Company had finished 13.51 hectares (symbolizing Pollution area reduction ratio 36.4%), which had been beyond the target of 2nd change plan. Tainan city government with merely single project not reaching to the examined target penalized the Company without considering such factor, which obviously violated the ratio principle. The petition remedy was proposed in June 2017 and was rejected by Executive Yuan Department of Economic Affairs in August of the same year. Considering the legislation economy, the Company decided not to continue the remedy in August of the same year. This case was closed.

• F. Tainan city government, in June 2017, with the letter No. 1060630217 attached with sanction letter No. 106060012 determined the 3rd remediation change plan not proposed and took it as reason and judged the Company for the penalty NT$1,000 thousand. After the verification, there is no ‘take it as’ such term in Soil pollution law and Implementation rules, which violated the principle of administration. The petition remedy had been proposed in July 2017 and the rejection of petition was received in Oct. of the same year. The Company proposed to Kaohsiung High Administrative court for the administrative remedy in Dec. of the same year.

3. Others

• (1) The Company still has the objection on the adscription of pollution responsibility for An Shun land located in Tainan City Annan District and would continue to strive for the possible administrative and law remedy actively.

In view of the jurisdiction explanation No.714, which indicated whether the general successors of polluters had to burden of remediation responsibilities, was not in the scope of the Soil and Groundwater Pollution Remediation Act. Also, considering the previous Taiwan Alkali Co. Ltd. was a state-owned enterprise, and the An-shun plant was controlled, supervised, and assigned operations and gained beneficially by the Ministry of Economic Affairs, Taiwan Provincial Government and CPC, such actions should be part of national behavior, yet, the resulting pollution and remediation was asked to be borne by the private legal person. The Company applied to the Tainan city government to determine the beginning of the actual pollution or potential pollution of the perpetrators, and who should pay the relevant costs and return the Company’s cost over the years. The rejection was made by the Tainan City Government in November 2014. The Company filed a legal petition in December 2014 and the original disposal authorities revoked the original punishment in March 2014, hence, the Executive Yuan Environmental Protection Agency made a decision not to proceed with the case. The original disposal authorities revoked the previous punishment but simultaneously made a new one, the Company also filed a petition to the new punishment. The Company's petition was decided not to proceed in August

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2015 and the Company filed an administrative legal appeal instead, due to multiple errors, which was under hearing by the Kaohsiung High Administrative Court. Through the rejection of the Company’s request by Kaohsiung High Administrative court, the Company proposed the appeal for remedy in Nov. 2017. This case was under hearing in Supreme Administrative Court.

The cumulative fee of invested and estimated control & management cost and remediation fee were NT$3,428,237 thousand until Dec. 31st, 2018. The preceding remediation fee was estimated according to the current possible situations by the Company. However, if it was affected by the inside and outside factors in future, which resulted in the possible big differences on the whole remediation fee, it would be evaluated for adjustment.

(2) An-shun dormitory designated monuments case

Original Kagakude Negai O Ka Corporation’s dormitories of Tainan plant belonging to the Company was designated by the Tainan City Government, under the letter No. 1031053448A issued on November 17, 2014, as a municipal historic site. However, the administrative sanction has various areas of dispute, thus the Company was not satisfied with the judgment. Hence, the Company filed a legal petition for remedy in December 2014. The petition decision report from the Ministry of Culture revoked the designated land of the Company as a historical site including 4 area in August 2015. The Company appealed for the administrative remedy of the remaining areas, which was under hearing by the Kaohsiung High Administrative Court.

The An-shun dormitory was announced by the Tainan City Government, on Nov. 17th 2014, as a historical site. The Company was not satisfied with this issue and filed the petition. The petition decision from the Ministry of Culture revoked 4 areas of land on August 14, 2015 and the Ministry of Culture re-announced it in accordance with this petition decision on Dec. 17th 2015. The Company was not satisfied with the 2nd announcement and re-appealed the petition for remedy. The Company received the rejection of the petition in July 2016. The Company appealed for remedy within the statutory period, which was rejected by the court’s verdict in January 2017. The Company examined the reasons for the refusal of the court, which reason complied with the required target of the Company. Hence, this case was closed without appeal for remedy.

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• (3) An shun historical site theft case

Original Kagakude Negai O Ka Corporation’s dormitories of Tainan plant belonging to the Company was designated by Tainan City Government as a municipal historic site. However, the defendant, Mr. Wu Ming, put a lot of his personal belonging on the Company’s land beside to the dormitories located on No.15, Aly. 3, Ln. 661, Beishanwei 2nd Rd., Annan Dist., Tainan City 709, Taiwan (R.O.C.), and was suspected being involved with the theft of the property. The Company filed for criminal action. This case was sent to the Tainan District Prosecutors Office for mediation but without success, the Company received the indictment from Prosecutors Office in May 2016 and received the verdict from the court in September of the same year: Mr. Wu was sentenced to five months and was charged NT$5,973 thousand due to the crime. However, the defendant appealed for remedy. The sentence was declared on June 28th, 2017: Mr. Wu was imprisoned for 4 months and confiscated NT$176 thousand acquired from the crime (this case was closed).

Xincun Land of Taiwan Alkali Co., Ltd.:

1. History

On the premise that the residents obeyed the agreement, the Company signed an agreement with the local communities that land within Feng Shan District, Kaohsiung City shall be granted free of charge for public use.

2. Extension legislation

Business inspector found that the land was occupied by residents that built illegal construction, which violated the agreement. After communicating with the residents' multiple times, the situation still did not improve. To be responsible for asset management and reach the expectation of the Company’s shareholders, the Company filed a legal appeal in February 2013 to require to dismantle the illegal construction and return the land, which was judged by Kaohsiung District Court to reject the Company’s petition. Due to the previous judgment against the law, the Company filed a legal appeal for remedy in September 2014, which was rejected by the Kaohsiung High Court in July 2016. The Company filed the appeal for remedy to Supreme Court in August of same year.

Shulin Land of Taiwan Alkali Co., Ltd.:

1. History:

• (1) No. 540, 541 and 543, Dongshan Section, Shulin District, Xinbei City and No. 498, Weiwang Section, Shulin Dist., New Taipei City 238, Taiwan including 4 area of lands originally belonged to Shulin plant of Taiwan Alkali Co. Ltd. Taiwan Alkali Co. Ltd. established the plant in 1962 and closed the plant in 1975. The Executive Yuan Department of Economic Affairs in April 1983 ordered the government-owned Company which at the time was also a subsidiary of CPC to merge with Taiwan Alkali Co. Ltd

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• (2) Then the plant was subsequently sold to CPC. The New Taipei City Government Environmental Protection Bureau, on August 16th, 2010, announced the land as “soil pollution control site”.

• (3) The New Taipei City Government Environmental Protection Bureau issued the letter No. 1000010000 in March 2011 declaring that the Company merging with Taiwan Alkali Co. Ltd. was regarded as the survival company and shall take the responsibilities for the rights and obligations of Taiwan Alkali Co. Ltd. for soil pollution remediation according to article 75 of Company Act and was deemed as the polluters, who are required to propose subsequent disposal and remediation.

• (4) The New Taipei City Government Environmental Protection Bureau issued the letter No. 1001001329 in August 2011 and asked the Company to complete the investigation and proposed a pollution control plan and send to New Taipei City Government Environmental Protection Bureau for approval. The Company was ordered to take responsible of all, non-production operations, development, and the resulting usage or pollution. The Company had a disagreement of the identification of the polluters and filed the administrative appeal in August 2011. This case was closed due to the determined sentence in August 2017.

Since the change of predetermined place of CNPC’s warehouse, the relocation schedule had to be extended to 24 quarters. The remediation work schedule were postponed so that the soil pollution control pan (change plan) of Shulin Land of former Taiwan Alkali Co., Ltd (part of the sites) was proposed in April 2017. New Taipei City Government sent the letter to agree for future reference and it’s implemented per the change plan currently. The relevant remediation expense NT$273,750 thousand was estimated and listed in 2011 according to Financial accounting standards related regulations. However, it will be assessed to adjust to recognition if there were changes due to internal and external factors in future, which resulted in the significant differences on the entire remediation expenses.

2. Extension legislation:

The Company was ordered to take responsible of all, non-production operations, development, and the resulting usage or pollution. The Company had a disagreement of the identification of the polluters and filed the administrative appeal in August 2011. Taipei High Administrative Court judged to revoke the administrative punishment and the petition decision in August 2012. However, New Taipei City Government Environmental Protection Bureau appealed for retrial, the Supreme Administrative Court discarded the original judgment and remanded the case to the Taipei High Administrative Court. The judgment was claimed to be illegal, hence, the Company filed for legal appeal in December 2013, which was rejected by the Supreme Administrative Court in January 2015. The Company filed for retrial remedy in February 2015, which was rejected in June 2015. The ruling on the parts where important evidence was missed and not considered was remanded to Taipei High Administrative Court. But Taipei High Administrative court sentenced the rejection in August 2016, which the Company was not satisfied with so as to appeal for remedy in Sept. of the same year. In August 2017, the rejection was adjudicated. This case was closed.

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Moreover, in consideration of the No. 714 explanation from the judge, the Company applied to New Taipei City Government Environmental Protection Bureau for the identification of polluters, but it was subsequently refused. The Company filed for the petition and administrative litigation remedy. After the trial from Supreme Administrative Court, the rejection was adjudicated. This case was closed.

i. Intangible assets

The components of the costs of intangible assets, amortization, and impairment loss thereon or the years ended December 31, 2018 and 2017 were as follows:

Costs： Balance as of January 1, 2018 Acquisition from business combination Acquisition in 2018 Disposals Effect of movement in exchange rates Balance as of December 31, 2018 Balance as of January 1, 2017 Acquisition in 2017 Effect of movement in exchange rates Balance as of December 31, 2017 Amortization and Impairment Loss: Balance as of January 1, 2018 Acquisition from business combination Amortization for the period Disposals Effect of movement in exchange rates Balance as of December 31, 2018 Balance as of January 1, 2017 Amortization for the period Effect of movement in exchange rates Balance as of December 31, 2017 Carrying value: Balance as of December 31, 2018 Balance as of January 1, 2017 Balance as of December 31, 2017	Goodwill $ 5,444 - 143,679 - (1,133) $ 147,990 $ 5,444 - - $ 5,444 Goodwill		Computer software 5,233 908 1,579 - (147) 7,573 5,465 602 (834) 5,233 Computer software 1,089 59 945 - (20) 2,073 1,288 583 (782) 1,089 5,500 4,177 4,144		Patents and trademark 68,389 50,883 141 (16,815) - 102,598 67,370 1,019 - 68,389 Patents and trademark 53,639 8,434 12,332 (6,378) - 68,027 45,735 7,904 - 53,639 34,571 21,635 14,750	**Total **
						79,066 51,791 145,399 (16,815) (1,280)
						258,161
						78,279 1,621 (834)
						79,066
						Total
	$ - - - - -					54,728 8,493 13,277 (6,378) (20)
	$ -					70,100
	$ - - -					47,023 8,487 (782)
	$ -					54,728
	$ 147,990					188,061
	$ 5,444					31,256
	$ 5,444					24,338

As of December 31, 2018 and 2017, the aforesaid intangible assets were not pledged as collateral.

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j. Short-term and long-term loans

Short-term and long-term loans
Secured bank loans-the Company Secured bank loans-Huijie Unsecured bank loans-the Company Secured bank loans- Weihua Secured bank loans- Weiming Letters of credit loans-the Company Total Current Non-current Total		December 31, 2018
	Currency NTD RMB NTD RMB RMB NTD	Interest Rate Range 1.43%~1.9556% 5.655%~6.2225% 1.38%~1.814% 4.9%~5.047% 5.047%~5.488% 1.4945%	Year of Expiration 2019~2021 2019 2019 2024 2023 2019	Amount
				$ 2,480,000 442,533 600,000 300,569 1,714,560 50,000
				$ 5,587,662
				$ 1,777,533 3,810,129
				$ 5,587,662

Secured bank loans-the Company Unsecured bank loans-the Company Secured bank loans- Weihua Secured bank loans- Weiming Total Current Non-current Total	December 31, 2017
	Currency Interest Rate Range Year of Expiration NTD 1.5%~1.9556% 2019~2021 NTD 1.4885%~1.64% 2018 RMB 4.49%~5.047% 2024 RMB 5.047%~5.39% 2023	Amount
		$ 2,370,000 250,000 301,422 597,743
		$ 3,519,165
		$ 250,000 3,269,165
		**$ 3,519,165 **

On February 2, 2016, the Company signed a syndicated loan agreement for 5 years with Mega International Commercial Bank, the lead bank of the syndicated loan, and 7 other banks in order to raise funds to build the plant and accessory equipment and meet funding requirement. The aggregate amount of credit line of the syndicated loan was $4,350,000 thousand.

1. Syndicated loan A: The credit line is $2,900,000 thousand consisting of medium-term secured loans and non-revolving credit facility, which were used to finance the building of the plant and purchase of accessory equipment.

2. Syndicated loan B: The credit line is $1,450,000 thousand consisting of medium-term loans and revolving credit facility, which were used to meet funding requirement.

3. The financial covenants under the loan agreement include the requirement to maintain certain financial ratios based on the reviewed semi-annual consolidated financial report and audited annual consolidated financial reports. If the Company breaches these financial covenants, the syndicated banks may determine to declare the unpaid principal, interest, fees and other sums payable by the Company under the loan agreement to be immediately due and payable. These financial ratios are as follows:

4. 199 -

5. (1) Current Ratio (total current assets divided by total current liabilities): not lower than 100%.

6. (2) Leverage Ratio (total liabilities plus contingent liabilities to tangible net worth): not higher than 100%.

7. (3) Times Interest Earned (income before tax plus depreciation expense plus amortization expense divided by interest expenses): not lower than 2 times.

As of December 31, 2018 and 2017, the unused credit line amounted to $2,250,000 thousand. Please refer to Note 8 for details of the related assets pledged as collateral.

The Company signed a contract for secured bank credit facilities totaling $1,200,000 thousand in order to finance its operating requirement. As of December 31, 2018 and 2017, credit facilities of $380,000 thousand and $270,000 thousand were used. The unused amounted to $820,000 thousand and $930,000 thousand. The current portion of the longterm bank loans obtained from such credit facilities amounted to $380,000 thousand and $0 thousand, respectively. Please refer to Note 8 for details of the related assets pledged as collateral.

As of December 31, 2018 and 2017, the Company was granted by banks short-term credit lines of $6,650,000 thousand, and $5,754,000 thousand, of which $3,650,445 thousand and $3,237,817 thousand, respectively, were unused.

As of December 31, 2018, the short term credit lines of the subsidiaries amounted to $130,000 thousand, US$6,000 thousand and RMB$1,083,840 thousand; of which, $0 thousand, US$0 thousand, and RMB$683,706 thousand, respectively, were used.

As of December 31, 2017, the short term credit lines of the subsidiaries amounted to $155,000 thousand, US$12,500 thousand and RMB$785,000 thousand; of which, $0 thousand, US$0 thousand, and RMB$196,883 thousand, respectively, were used.

Please refer to Note 8 for details of the related assets pledged as collateral.

• k. Long-term bills payable

The components of long-term bills payable were as follows:

Bills payable Bills payable Bills payable Bills payable Bills payable Less: Discount on long- term bills payable Total	December 31, 2018	December 31, 2018
	Acceptance institution China Bills Finance Corporation China Bills Finance Corporation International Bills Finance Corporation Taching Bills Finance Corporation Mega Bills Finance Corporation	Period 2018.11.09~2019.01.08 2018.11.16~2019.01.15 2018.11.30~2019.01.18 2018.11.26~2019.02.25 2018.12.20~2019.03.20	Amount
			$ 100,000 50,000 50,000 50,000 100,000
			350,000 (271)
			$ 349,729

• 200 -

Bills payable Less: Discount on long- term bills payable Total	December 31, 2017	December 31, 2017
	Acceptance institution China Bills Finance Corporation	Period 2017.12.08~2018.02.06	Amount
			$ 300,000
			300,000 (118)
			$ 299,882

The Company had revolving commercial promissory note agreements with bills finance companies in order to finance its operating requirement. The bills payable bear interest at annual rates ranging from 0.5%~1.1513% and 0.38%~0.70% for the years ended December 31, 2018 and 2017, respectively.

Please refer to Note 8 for details of the related assets pledged as collateral.

l. Bonds payable

Total amount of convertible bonds issued Cumulative converted amount Cumulative redeemed amount Balance of bonds payable Loss (gain) on fair value measurement of embedded derivatives such as buy back right, sell back right and Conversion Right Interest expense Amortization of issuance cost	December 31, 2018 $ - - - $ - For the Year Ended December 31,2018 $ - - $ -	December 31, 2017
		4,127,904 (4,109,141) (18,763)
		-
		For the Year Ended December 31,2017
		920,915
		92,745
		83,552

The convertible bond issued by the Company was treated as a compound financial instrument, for which the liability and equity components were accounted for separately. The call and put option embedded in bonds payable were separated from bonds payable, and were recognized as “Financial liabilities at fair value through profit or loss.” For the years ended December 31, 2018 and 2017, the Company recognized a gain (loss) on financial liability reported at fair value through profit or loss of $0 thousand and $(920,915) thousand, respectively.

On December 17, 2014, the Company issued Credit Enhanced Zero Coupon Convertible Bonds with aggregate principal amount of US$132,000 thousand, which are due in 2019. These bonds bear effective interest rate of 3.2082%. On conversion of the Bonds to the Company’s common shares of stock, the conversion price is $10.80 (NT dollars) per share with a fixed exchange rate of NT$31.222 = US$1.00. If the price for the conversion of the Bonds is adjusted as defined in the issuance terms, the conversion price adjustment is made according to a definite formula. The bonds bear no conditions. Unless previously redeemed, repurchased and cancelled, or converted, the Bonds will mature, and are redeemable on December 17, 2019 at 109.10% of the unpaid principal amount thereof.

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The Company will redeem the Bonds in whole or in part early under the following conditions:

1. The Company may redeem the Bonds, in whole or in part, at the early redemption amount on the date of redemption if the Market Price (translated into US Dollars at the Prevailing Rate) for 20 out of 30 consecutive Trading Days, the last of which occurs not more than five trading days prior to the date on which notice of such redemption is given, is at least 125% of the quotient of the Early Redemption Amount divided by the Conversion Ratio.

2. If more than 90% in principal amount of the Bonds originally outstanding has been redeemed, repurchased and cancelled or converted, the Company can redeem the remaining outstanding bonds.

3. If, as a result of certain changes relating to the tax laws in the ROC or such other jurisdiction in which the Company are then organized or resident for tax purposes, the Company becomes obligated to pay Additional Amounts. The Bonds, may be redeemed at the option of the Company, in whole but not in part, at the Early Redemption Amount Bondholders may elect not to have their Bonds redeemed but with no entitlement to any Additional Amounts or reimbursement of additional tax.

4. Upon the occurrence of an LC Redemption Event and to the extent permitted by applicable law, the Company shall redeem all and not some only of the outstanding Bonds at the Early Redemption Amount to such date, subject to the right of each holder of the Bonds to elect that such holder’s Bonds shall not be redeemed, but shall remain outstanding without the benefit of the Letters of Credit.

Except for the following circumstances, a Bondholder should not request the Company to redeem the bond, in whole or in part, before maturity date.

1. Unless the Bonds have been previously redeemed, repurchased and cancelled, or converted, each Bondholder shall have the right, at such Bondholder’s option, to require the Company to repurchase, in whole or in part (being US$200,000 in principal amount and integral multiples thereof), of such Bondholder’s Bonds on December 17, 2017 at 105.37% of their principal amount

2. In the event that the Common Shares cease to be listed or admitted to trading on the TWSE, each Bondholder shall have the right, at such Bondholder’s option, to require the Company to repurchase, in whole or in part.

3. Upon the occurrence of an LC Redemption Event and to the extent permitted by applicable law, each Bondholder shall have the right, at such Bondholder’s option, to require the Company to repurchase, in whole or in part.

Payments of (i) the principal of and premium on the Bonds at maturity or upon redemption or repurchase; or (ii) the principal of and premium and default interest (if any) on the Bonds in the case of an Event of Default will have the benefit of irrevocable standby letters of credit (the ‘‘Letters of Credit’’) issued severally but not jointly by CTBC Bank Co., Ltd. and Taiwan Cooperative Bank, Ltd. in accordance with their respective committed percentage to the total principal amount of the Bonds.

• 202 -

During the period when Bonds are outstanding, the Company is required to comply with the following financial covenants:

1. Current ratio (current assets/current liabilities): should not be less than 120%.

2. Debt ratio ((total liabilities + contingent liabilities)/tangible net assets): should not be higher than 70%.

3. Interest coverage ratio (EBITDA/interest expense): should not be less than 3%.

4. Tangible net assets (stockholders’ equity (including minority shareholders) - intangible assets): should not be less than $25,000,000 thousand.

Based on its 2016 reviewed semi-annual consolidated financial report, the Company did not meet its financial covenant with regard to time interest earned as prescribed in its agreement. Therefore, the Company deposited USD time deposits to the compensation bank account as defined in the agreement. The Company negotiated with the banks continuously. The Company got exemption of the financial ratio of time interest earned violation on November 1, 2016, and took the USD time deposits back from the compensation bank account. As of December 31, 2016, the Company did not meet its financial covenant with regard to time interest earned as prescribed in its agreement. However, after the negotiating with the banks, the Company was given an exemption on March 31, 2017.

After the bond has been issued for over 36 months, if the closing price of the Group’s common shares listed on the Taiwan Stock Exchange exceeds or equals 125% of the conversion price for 20 consecutive days, the Company may redeem the bonds using the early redemption price. Because the Company has met the conditions on early redemption, it was able to redeem all the bonds on December 19, 2017.

Please refer to Note 8 for details of the related assets pledged as collateral.

m. Provisions

Provisions
Balance as of January 1, 2018 Provisions made during the year Provisions used during the year Provisions reversed during the year Effect of movements in exchange rate Balance as of December 31, 2018 Current Non-current Balance as of January 1, 2017 Provisions made during the year Provisions used during the year Provisions reversed during the year Unwinding of discount Balance as of December 31, 2017 Current Non-current	Decommissioning $ 1,269,971 - - - (2,751) $ 1,267,220 $ - 1,267,220 $ 1,267,220 $ 1,270,084 - - - (113) $ 1,269,971 $ - 1,269,971 $ 1,269,971	Remediation project 1,087,851 - (120,437) - - 967,414 473,629 493,785 967,414 1,192,927 - (105,076) - - 1,087,851 164,493 923,358 1,087,851	Employee benefits 253,869 9,870 (24,232) (1,686) - 237,821 6,542 231,279 237,821 269,422 8,400 (23,873) (80) - 253,869 9,514 244,355 253,869	**Total **
				2,611,691 9,870 (144,669) (1,686) (2,751)
				2,472,455
				480,171 1,992,284
				2,472,455
				2,732,433 8,400 (128,949) (80) (113)
				2,611,691
				174,007 2,437,684
				2,611,691

• 203 -

• To comply with the Order of the Tainan City Government, the Company submitted a remediation plan proposal and accrued relevant remediation plan for approval before June 30, 2008 and evaluated the relating remediation expense of $1,647,200 thousand. In May 2009 and on July 2, 2012, the Company was granted official approval of its remediation proposal and amended remediation proposal, respectively. In September 2014, the Company has completed the first phase of the implementation of its plan. It is expected to launch the second phase of the implementation of its remediation plan during the next. The Company has submitted the second phase of its amended remediation plan to the Tainan City Government for approval. On December 24, 2014, Tainan City Government notified the Company its approval and now is under public tender review.

The aforementioned remediation costs of the Company were recognized in the total amount of $1,600,000 thousand for the first stage before September, 2014. With the launch of the subsequence of the second remediation stage, the Company estimated the cost based on the situation of December, 2014 is $1,356,000 thousand. (Note 6 h for more details)

1. (1) The Company’s four parcels of land at Dongshan section , Shulin district, New Taipei City were the original location of TAIC’s Shulin plants , but then sold to the Taiwan Chinese Petroleum Corporation (CPC). On August 16, 2010, the Environmental Protection Department of New Taipei City Government has declared that such land as "Soil Pollution Control Site”. In March 2011, the Environmental Protection Department of New Taipei City Government has issued its letter No. 1000010000. In that letter, the Company is deemed to be the surviving entity, which assumed the rights and obligations of TAIC following its merger with TAIC and TAIC ceased to exist. As the surviving entity from this merger, the Company was therefore declared as the polluter and was required to submit a remedial measuring plan.

2. (2) In August 2011, the Environmental Protection Department of New Taipei City Government has issued its Letter No. 1001001329 requiring the Company to complete its investigation and propose a pollution control plan to the Environmental Protection Department of New Taipei City Government for approval and then adopt its implementation. Following its said merger with Taiwan Alkali Company under the government‘s mandatory order, the Company itself has neither performed any act of production, operation, development, use nor initiated act to cause pollution. For this reason, the Company objected with being tagged as “the polluter” and filed a complaint for administration remedy in August 2011. In 2011, the Company estimated and accrued relevant remediation expenses ~~o~~ f $273,750 thousand in accordance with the relevant provisions of Financial Accounting Standards.

3. 204 -

n. Operating lease

The Consolidated Company leases out some of its property, plant and equipment under operating leases. The future minimum lease receivable under these non-cancellable operating leases were as follows:

leases were as follows:
Less than one year Between one and five years Over five years	December 31, 2018 $ 16,094 19,904 38,019 $ 74,017	December 31, 2017
		16,094 19,119 39,652
		74,865

For the years then ended December 31, 2018 and 2017, the income from the rental of property, plant and equipment amounted to $18,569 thousand and $17,790 thousand, respectively.

o. Employee benefits

1. Defined benefit plans

The Consolidated Company’s defined benefit obligations and fair value of plan assets were as follows:

were as follows:
Present value of funded defined benefit obligation Fair value of plan assets Net defined benefit liabilities	December 31, 2018 $ 594,797 (369,809) $ 224,988	December 31, 2017
		726,159 (481,804)
		244,355

The provision consists of net defined benefit liabilities and accrued pension liabilities for professional managements. The accrued pension liabilities for professional managements was $5,759 thousand and $0 thousand as of December 31, 2018 and 2017, respectively.

The Consolidated Company makes defined benefit plans contributions to the pension fund account with Bank of Taiwan that provides pension benefits for employees upon retirement. Plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average monthly salary for six months prior to retirement.

(1) Composition of plan assets

The Company and its subsidiaries in Taiwan set aside pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund and such funds are managed by the Labor Pension Fund Supervisory Committee. Under these regulations, the minimum earnings from these pension funds shall not be less than the earnings from two-year time deposits with the interest rates offered by local banks.

• 205 -

As of December 31, 2018, the balance of the Consolidated Company’s contributions to the pension funds in Bank of Taiwan was $372,440 thousand. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Labor Pension Fund Supervisory Committee.

• (2) Movements in present value of the defined benefit obligations

The movements in the present value of the defined benefit obligations for the years ended December 31, 2018 and 2017 were as follows:

Defined benefit obligation, January 1 Benefits paid from plan assets Current service costs and interest Past service credit Re-measurements of the net defined benefit liability (assets) Defined benefit obligation, December 31	2018 $ 726,159 (151,121) 24,703 (2,638) (2,306) $ 594,797	2017
		845,083 (132,065) 27,647 - (14,506)
		726,159

• (3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit assets for the year ended December 31, 2018 and 2017 were as follows:

Fair value of plan assets, January 1 Employer contributions Benefits paid by the plan Expected return on plan assets Re-measurements of the net defined benefit liability Fair value of plan assets, December 31	2018 $ 481,804 11,578 (144,241) 6,242 14,425 $ 369,808	2017
		585,256 20,833 (129,417) 6,222 (1,090)
		481,804

• (4) Expenses recognized in profit or loss

The Consolidated Company’s pension expenses recognized in profit or loss for the years ended December 31, 2017 and 2016 were as follows:

Current service cost Past servicecost Net interest on net defined benefit liability Operating costs Selling expenses Administrative expenses Research and development expenses Actual return on plan assets	For the Years Ended December 31	For the Years Ended December 31
	2018 $ 15,231 (2,638) 3,230 $ 15,823 $ 16,579 (1,053) 289 8 $ 15,823 $ 20,667	2017
		18,630 - 2,795
		21,425
		19,471 302 1,477 175
		21,425
		5,132

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• (5) Re-measurement of net defined benefit liability recognized in other comprehensive income

The Consolidated Company’s net defined benefit liability recognized in other comprehensive income was as follows:

Accumulated balance, January 1 Recognized during this year Accumulated balance, December 31	For the Years Ended December 31	For the Years Ended December 31
	2018 $ (155,055) 16,731 $ (138,324)	2017
		(168,471) 13,416
		(155,055)

• (6) Actuarial assumptions

The following are the key actuarial assumptions at the reporting date:

Discount rate Future salary increases	**For the Years Ended December 31 **	**For the Years Ended December 31 **
	2018 0.75~1.125% 0.3~1.5%	2017
		0.75~1.75% 0.3~2%

Base on the actuarial report, the Consolidated Company is expected to make a contribution payment of $11,475 thousand to the defined benefit plans for the one year period after the reporting date. The weighted-average duration of the defined benefit plans is between 1.00 to 12.73 years.

(7) Sensitivity analysis

In determining the present value of the defined benefit obligation, the Consolidated Company’s management makes judgments and estimates in determining certain actuarial assumptions on the balance sheet date, which includes employee turnover rate and future salary changes. Changes in actuarial assumptions may have significant impact on the amount of defined benefit obligation.

As of December 31, 2018 and 2017, the changes in the principal actuarial assumptions will impact the present value of defined benefit obligation as follows:

December 31, 2018 Discount rate Increase in future wage December 31, 2017 Discount rate Increase in future wage	Impact on the present value of defined benefit obligation	Impact on the present value of defined benefit obligation
	Increase by 0.25% $ (11,116) 32,269 $ (16,003) 16,859	Decrease by 0.25%
		32,617 (10,854) 16,679 (15,737)

• 207 -

The sensitivity analysis assumed all other variables remain constant during the measurement. This may not be representative of the actual change in defined benefit obligation as some of the variables may be correlated in the actual situation. The model used in the sensitivity analysis is the same as the defined benefit obligation liability.

The analysis is performed on the same basis for prior year.

1. Defined contribution plans

The Consolidated Company contributes an amount at the rate of 6% of the employee’s monthly wages to the Labor Pension personal account with the Bureau of the Labor Insurance and Council of Labor Affairs in R.O.C. in accordance with the provisions of the Labor Pension Act. The Company’s contributions to the Bureau of the Labor Insurance and Social Security Bureau for the employees’ pension benefits require no further payment of additional legal or constructive obligations.

The cost of the pension contributions to the Labor Insurance Bureau for the years ended December 31, 2018 and 2017 amounted to $43,210 thousand and $36,573 thousand, respectively.

1. The pension recognized consists of pension expenses and pensions for professional management. The pension expenses for professional management was $5,759 thousand and $0 thousand as of December 31, 2018 and 2017, respectively.

2. Short-term compensated absences liabilities

As of December 31, 2018 and 2017, the Consolidated Company’s short-term compensated absences liabilities amounted to $6,542 thousand and $9,514 thousand, respectively.

• p. Income Tax

The components of income tax expense for the years ended December 31, 2017 and 2016 were as follows:

Current income tax expense Currently incurred Adjustment to prior year’s income tax charged to current income tax Deferred tax expense The origination and reversal of temporary differences Unrecognized changes of deductible temporary differences Income tax expense	For the Years Ended December 31,	For the Years Ended December 31,
	2018 $ (395,359) (596) (395,955) (570,690) 570,690 - $ (395,955)	2017
		(210,107) (292)
		(210,399)
		(435,180) 435,180
		-
		(210,399)

For the years ended December 31, 2018 and 2017, income tax expenses recognized under other comprehensive income were both $0 thousand.

• 208 -

Income tax calculated on pre-tax financial income was reconciled with income tax expense for the years ended December 31, 2018 and 2017 as follows:

Profit (loss) before income tax Income tax on pre-tax financial income calculated at the domestic rate Tax-free income Income basic tax Unrecognized deferred tax assets Changes of permanent differences Prior years income tax adjustment 10% surtax on undistributed earnings Income tax expense		For the Years Ended December 31,	For the Years Ended December 31,
		2018 $ 4,676,950	2017
			6,297,721
		(971,773) 1,479 - 564,986 358,215 (596) (348,266) $ (395,955)	(1,099,035) 905 (183,085) 413,628 657,469 (281)
			-
			(210,399)

1. Unrecognized deferred tax assets and (liabilities)

Decommissioning liabilities Remediation project Extraordinary loss Allowance for doubtful receivables Property, plant and equipment, investment property Pension Tax loss Others	December 31, 2018 $ 71,366 239,744 727,670 319,484 782,907 (641) 6,192,964 465,528 $ 8,799,022	December 31, 2017
		59,517 240,050 847,801 319,484 910,306 1,213 7,107,974 114,886
		9,601,231

The Company’s income tax returns through 2016 have been assessed and approved by the Tax Authority. Tax loss ratified by Tax Administration could be carried forward for ten consecutive years in accordance with Income Tax Act. The Consolidated Company did not recognize aforesaid tax loss as deferred tax assets because it is not expecting enough taxable profit in the near future.

As of December 31, 2018, the expiration years of tax loss unrecognized as deferred tax assets were as follows:

(1) The Company

Year incurred 2014 2015 2016	Amount $ 331,035 2,132,246 1,815,587	Effective Period
		2015-2024 2016-2025 2017-2026

• 209 -

• (2) Taivex Therapeutics Inc.

Year incurred 2010 2011 2012 2013 2014 2015 2016 2017 2018(estimated)	Amount $ 14,388 16,878 29,657 50,227 27,419 43,032 44,291 52,322 76,894	Effective Period
		2011-2020 2012-2021 2013-2022 2014-2023 2015-2024 2016-2025 2017-2026 2018-2027 2019-2028

• (3) Chung Hua Shuang Tzu Hsing Kai Fa Co., Ltd.

Year incurred 2013 2014 2018(estimated)	Amount $ 10,195 44,139 445,328	Effective Period
		2014-2023 2015-2024 2019-2028

• (4) CPDC Green Technology Corp.

Year incurred 2016 2017 2018(estimated)	Amount $ 5,646 30,270 38,049	Effective Period
		2017-2026 2018-2027 2019-2028

• (5) Weihua (Rudong) Trade Co., Ltd

Year incurred 2013 2015 2016 2017(estimated)	Amount $ 86 36,740 45,975 21,869	Effective Period
		2014-2018 2016-2020 2017-2021 2018-2022

• (6) Weiqiang International Trade (Shanghai) Co., Ltd.

Year incurred 2013 2014 2015 2016	Amount $ 9,398 9,238 17,892 21,170	Effective Period
		2014-2018 2015-2019 2016-2020 2017-2021

• 210 -

• (7) Weida (zhangzhou) Consultant Service Co., Ltd.

Year incurred 2014 2015 2016 2017 2018(estimated)	Amount $ 1,148 1,062 1,168 1,442 410	Effective Period
		2015-2019 2016-2020 2017-2021 2018-2022 2019-2023

• (8) Jiangsu Weiming Petrochemical Corporation

Year incurred 2017 2018(estimated)	Amount $ 47,766 28,128	Effective Period
		2018-2022 2019-2023

• (9) Zhangzhou Weida Petrochemical Co.,Ltd

Year incurred 2015 2016 2017 2018(estimated)	Amount $ 570 2,065 1,991 5,830	Effective Period
		2016-2020 2017-2021 2018-2022 2019-2023

• (10) Kunshan Weiqin Management consultant Co., Ltd

Year incurred 2016 2017 2018(estimated)	Amount $ 1,351 6,311 9,901	Effective Period
		2017-2021 2018-2022 2019-2023

• (11) Zhejiang Wedge new material Co., Ltd

Year incurred 2016 2018(estimated)	Amount $ 1,886 1,129	Effective Period
		2017-2021 2019-2023

• (12) Changzhou Huijie new material Co., Ltd

Year incurred 2015 2016 2017 2018(estimated)	Amount $ 413 287,896 218,472 204,054	Effective Period
		2016-2020 2017-2021 2018-2022 2019-2023

• 211 -

2. Deferred tax liabilities:

Balance, January 1, 2018 Recognized in profit or loss Balance, December 31, 2018 Balance, January 1, 2017 Recognized in profit or loss Balance, December 31, 2017	Reserve for Land Revaluation Increment Tax
	$ 8,754,736 4,253
	$ 8,758,989
	$ 8,721,807 32,935
	$ 8,754,736

1. Deferred tax assets:

Deferred tax assets:
Balance, January 1, 2018 Recognized in profit or loss Balance, December 31, 2017(equal to January 1)		Taxable Loss $ 9,358 1,651 $ 11,009 $ 9,358	Defined benefit plans 14 - 14 14	**Total **
				9,372 1,651
				11,023
				9,372

1. Stockholders’ imputation tax credit account and tax rate:

According to the amendments to the "Income Tax Act" enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, effective January 1, 2018, companies will no longer be required to establish, record, calculate, and distribute their ICA due to the abolishment of the imputation tax system.

q. Capital and reserves

As of December 31, 2018 and 2017, the authorized, issued and outstanding capital of the Company amounted to $26,998,573, divided into 2,699,857 thousand shares, with par value of $10 (NT dollars) per share.

Balance, January 1 Conversion of convertible bonds Balance, December 31	(In thousands of shares) Common Stock	(In thousands of shares) Common Stock
	2018 2,699,857 - 2,699,857	2017
		2,319,990 379,867
		2,699,857

Due to the conversion of the convertible bonds between January 1 and March 31, 2017, the Company issued 35,269 thousand shares amounting to $352,693 thousand, at a par value of NT$10 per share, with the issuance date on March 31, 2017, which was approved by and registered with the competent authority on June 28, 2017.

• 212 -

Due to the conversion of the convertible bonds between April 1 and June 30, 2017, the Company issued 8,095 thousand shares amounting to $80,946 thousand, at a par value of NT$10 per share, with the issuance date on June 30, 2017, which was approved by and registered with the competent authority on August 8, 2017.

Due to the conversion of the convertible bonds between July 1 and September 30, 2017, the Company issued 161,313 thousand shares amounting to $1,613,136 thousand, at a par value of NT$10 per share, with the issuance date on September 30, 2017, which was approved by and registered with the competent authority on November 27, 2017.

Due to the conversion of the convertible bonds between October 1 and December 31, 2017, the Company issued 175,190 thousand shares amounting to $1,751,901 thousand, at a par value of NT$10 per share, with the issuance date on December 31, 2017 and be approved by the competent authority on March 28, 2018.

1. Capital Surplus

Capital Surplus
Premium of share issue Other Total	December 31, 2018 $ 1,242,245 18,141 $ 1,260,386	December 31, 2017
		1,242,245 18,141
		1,260,386

In accordance with the ROC Company Act, as amended in January 2012, capital surplus cannot be used to distribute cash dividends or be used to increase capital unless it offsets the deficit first. The realized capital surplus includes those arising from donation and the excess of the issuance price over the par value of capital stock issued. In accordance with the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, if capital surplus is capitalized in batches, the combined amount of capital surplus capitalized in batches in any one year cannot exceed 10 % of paid-in capital.

2. Retained earnings

The Company distributes dividends depending on the level of earnings of each year, funding needs, industrial environment, and status of competition, long-term operating plan and interests of shareholders. Under such circumstances, the Company may appropriate for special reserve either in whole or in part to assure financial stability and sustainability. The Company may distribute dividends in cash or stock. If the earnings distribution is made in the form of by stock dividend, the ratio for the stock dividend shall not exceed 50% of the total distribution unless the ratio of the Company’s total liabilities to total assets is equivalent or above 50% or otherwise prescribed in relevant laws and regulations.

(1) Legal reserve

In accordance with the Amended Company Act 2012, 10 percent of net income is set aside as legal reserve, until it is equal to share capital. If the Company experiences profit for the year, the meeting of shareholders decides on the distribution of the statutory earnings reserve either by issuing new shares or by cash, of up to 25 percent of the actual share capital.

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(2) Special reserve

By adopting the exemptions allowed under IFRS 1 First-time Adoption of International Financial Reporting Standards during the Company’s first-time adoption of the International Financial Reporting Standards approved by the Financial Supervisory Commission (IFRSs), unrealized asset revaluation gains in shareholders’ equity of $5,281,790 thousand was reclassified to retained earnings. The net increase in retained earnings due to the first-time adoption of IFRSs amounted to $4,235,076 thousand. In accordance with Ruling No. 1010012865 issued by the Financial Supervisory Commission on 6 April 2012, a special reserve is appropriated from the distribution of retained earnings as a result of an increase in retained earnings due to the first-time adoption of IFRSs. When the related assets are used, disposed of, or reclassified, this special reserve is reversed as distributable earnings proportionately. The carrying amount of special reserve amounted to $4,235,076 thousand as of December 31, 2018 and 2017.

In 2014, the Consolidated Company changed the subsequent measurement of investment properties from cost model to fair value model. In accordance with Ruling No. 1030006415 issued by the Financial Supervisory Commission on 18 March 2014, on the first-time adoption of fair value model for the subsequent measurement of investment properties, the Consolidated Company set aside an equal amount of special reserve when the fair value increment of investment properties is transferred to retained earnings. The Consolidated Company appropriated to the special reserve an amount of $21,224,233 thousand as of December 31, 2013. The company held a shareholder meeting on June 8, 2017, in order to use the special reserve amounted to $1,958,584 thousand to cover accumulated deficits. On April 11, 2018, the Company’s shareholders resolved during their meeting, to reimburse $1,958,584 thousand into the special reserve. The carrying amount of such special reserve amounted to $21,224,233 thousand and $19,265,649 thousand as of December 31, 2018 and 2017, respectively.

For every year the Company distributes earnings, a special reserve is appropriated in the following order:

• A. Each year, a special reserve is appropriated from current year’s net income and prior years’ undistributed earnings for the same amount as the net increase in the fair value of investment property using the fair value model. A special reserve is also appropriated for the same amount as the cumulated net increase in the fair value for the year when the undistributed earnings are not distributed. When the investment property is disposed of, this special reserve is reverted proportionately to distributable earnings. As of December 12, 2018 and 2017, the Company appropriated to the special reserve an amount of $3,867,293 thousand and $327,688 thousand, respectively.

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• B. In accordance with Ruling No. 1010047490 issued by the Financial Supervisory Commission on 21 November 2012, a special reserve is appropriated by the parent company for the difference between market value and book value of parent company shares being held by a subsidiary times the percentage of the parent company’s equity investment in the said subsidiary, if the stock price of the parent company is lower than the its value. If the market value recovers subsequently, this special reserve is reverted proportionately to distributable earnings.

• C. In accordance with Ruling No. 1010012865 issued by the Financial Supervisory Commission on 6 April 2012, a portion of current-period earnings and undistributed prior-period earnings is appropriated as a special reserve during earnings distribution. Such appropriation of special reserve is based on the difference between the total net amount of contra accounts in the shareholders’ equity and the carrying amount of special reserve. Similarly, a portion of undistributed prior period earnings (which does not qualify for earnings distribution) is likewise appropriated as a special reserve on account of cumulative changes to other shareholders’ equity pertaining to prior periods. The subsequent reversals of the contra accounts in the shareholders’ equity shall qualify for additional earnings distributions.

• (3) Earnings Distribution

On April 11, 2018 and June 8, 2017, the Company’s shareholders resolved during their meeting, not to distribute dividend to shareholders out of the earnings.

3. Other equity accounts

Other equity accounts
Balance, January 1, 2018 Retrospective adjustments Exchange differences on foreign operation Exchange difference on subsidiary accounted for using equity method Exchange difference on affiliated accounted for using equity method Unrealized losses from financial assets measured at fair value through other comprehensive income Unrealized gains from financial assets measured at fair value through other comprehensive income for subsidiaries accounted for using equity method Unrealized gains from financial assets measured at fair value through other comprehensive income for affiliated companies accounted for using equity method Balance, December 31, 2018	Exchange differences on foreign operation $ (392,378) - (74,880) 161 (21,115) - - - $ (488,212)	Unrealized gain or loss on financial assets at fair value through other comprehensive income
		(788,734) (18,968) - - - (408,318) 31,082 (63,561)
		(1,248,499)

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Balance, January 1, 2017 Exchange differences on foreign operation Exchange difference on subsidiary accounted for using equity method Exchange difference on affiliated accounted for using equity method Unrealized gain for available-for-sale financial assets Unrealized gain for available-for-sale financial assets for subsidiary accounted for using equity method Unrealized gain for available-for-sale financial assets for affiliated companies accounted for using equity method Balance, December 31, 2017	Exchange differences on foreign operation $ (293,769) (118,323) (425) 20,139 - - - $ (392,378)	Available-for-sale financial assets
		(1,228,183) - - - 402,018 45 37,386
		(788,734)

r. Earnings per share

The basic earnings per share and diluted earnings per shares for the years ended December 31, 2018 and 2017 were calculated as follows:

Basic earnings per share (NT dollars) Profit attributable to ordinary shareholders Weighted-average number of ordinary shares Diluted earnings per share (NT dollars) Profit attributable to ordinary shareholders (diluted) Weighted-average number of ordinary shares (basic) Effect of potentially dilutive ordinary shares of Employee stock bonus Weighted-average number of ordinary shares (diluted)	For the Years Ended December 31	For the Years Ended December 31
	2018 $ 4,290,269 2,699,857 $ 1.59 $ 4,290,269 2,699,857 13,371 2,713,228 $ 1.58	2017
		6,091,656
		2,390,817
		2.55
		6,091,656
		2,390,817 12,909
		2,403,726
		2.53

s. Revenue from contracts with customers

1. The Company primarily engages in the production of petroleum, alkali-chlorine, phosphoric acid and other petrochemical products and by-products and the storage, transportation, purchase and sale of these products, related chemicals and their raw materials. The details of products and sales area, please refer to Notes 14.

2. Contract balances

Notes receivable Accounts receivable (including related parties) Less: allowance for doubtful account Contract liabilities		2018.12.31 $ 687,341 2,399,163 (450,421) $ 2,636,083 $ 5,578	**2018.01.01 **
			1,756,028 2,262,263 (470,684)
			**3,547,607 **
			5,253

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Please refer to Note 6 for disclosure of accounts receivable and allowance for doubtful accounts.

The amount of revenue recognized for the year ended December 31, 2018 that was included in the contract liability balance at the beginning of the period was $5,253 thousand.

t. Revenue

Revenue
Sales of goods	For the Years Ended December 31
	2018 $ 38,503,121	2017
		33,335,970

u. Remuneration of employees and directors

In accordance with the Articles of incorporation, the Company should contribute no less than 3% of the profit as employee compensation and less than 2% as directors' and supervisors' remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The amount of remuneration of each director and supervisor and of compensation for employees entitled to receive the abovementioned employee compensation is approved by the board of directors. The recipients of shares and cash may include the employees of the Company's affiliated companies who meet certain conditions.

For the years ended December 31, 2018 and 2017, remuneration of employees of $146,409 thousand and $ 198,150 thousand, respectively, and directors of $97,606 thousand and $132,100 thousand, respectively, were estimated and recognized as current expense. These amounts were calculated using the Company’s profit before tax before remuneration of employees and directors for the years ended December 31, 2018 and 2017. These benefits were charged to profit or loss under operating costs or operating expenses for the years ended December 31, 2018 and 2017. Related information would be available at the Market Observation Post System website. The actual distribution of remuneration of employees was amounted for $118,850 thousand as of December 31, 2018. The amounts, as stated in the individual financial statements, are identical to those of the actual distributions for 2018 and 2017.

v. Non-operating income and expense

1. Other income

Other income
Interest income Repurchase agreement Imputed interests of security deposits Bank deposits Dividends income Rental income Government grants Other income	**For the Years Ended December 31 **
	2018 $ 7,130 364 190,142 647,745 18,569 56,340 124,195 $ 1,044,485	2017
		16,414 6 190,224 73,213 17,790 - 233,126
		530,773

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2. Other gains and losses

Foreign exchange (losses)gains Gain on disposal of investments Loss on disposal of property, plant and equipment Gain (loss) on evaluation of investment property Net gains on evaluation of financial assets (liabilities) measured at fair value through profit or loss Embedded Derivatives- Gain(loss) on fair value Measurement of buy back right, sell back right and Conversion Right Gain on redemption of bonds payable Bank fees Impairment loss on financial assets Other losses	For the Years Ended December 31	For the Years Ended December 31
	2018 $ (1,063) 6,094 (6,998) 119,574 242,864 - - (51,443) - (560,099) $ (251,071)	2017
		21,519 2,674,450 (737) 41,244 171,897 (920,915) 10,091 (165,653) (1,137) (235,988)
		1,594,771

3. Finance costs

Interest expenses Bank loans Imputed interests of security deposits Amortization of bonds payable, discount Interest compensation of bonds payable Others	For the Years Ended December 31	For the Years Ended December 31
	2018 $ 77,237 16 - - 2,263 $ 79,516	2017
		90,147 16 28,838 63,907 5,508
		188,416

w. Financial Instruments

1. Categories of financial instruments

(1) Financial assets

Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Available-for-sale financial assets Financial assets carried at cost Cash and cash equivalents Notes receivable, accounts receivable and other receivables Other assets Total	December 31, 2018 $ 6,162,171 2,229,968 - - 13,469,938 2,754,465 131,493 $ 24,748,035	December 31, 2017
		1,368,657 - 1,873,478 2,992,035 10,111,495 3,593,370 130,935
		20,069,970

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(2) Financial liabilities

Short-term loans Long-term bank loans-current portion Payables Long-term bank loans Long-term bills payable Other liabilities Total	December 31, 2018 $ 913,732 863,801 3,045,226 3,871,583 349,729 149,012 $ 9,193,083	December 31, 2017
		250,000 - 2,407,778 3,269,165 299,882 415,462
		6,642,287

2. Credit risk

(1) Exposure to credit risk

The carrying amount of financial assets represents the Company’s maximum credit exposure. As of December 31, 2018 and 2017, the maximum exposures to credit risk amounted to $24,748,035 thousand and $20,069,970 thousand respectively.

(2) The concentration of credit risk

The sales of the Consolidated Company are significantly concentrated in a small number of customers. For the years ended December 31, 2018 and 2017, 84% and 86%, respectively, of the total amount of accounts receivable is composed of 11 customers and 8 customers, respectively. Under the Consolidated Company’s credit policy, customers are requested to provide the Consolidated Company certain financial information like audited financial report, or other related documents for purposes of evaluating their credit worthiness. Credits are granted to these customers according to the result the Consolidated Company’s credit evaluation.

(3) Impairment losses

The Consolidated Company uses simple method to evaluate expected credit loss for notes receivable and accounts receivable, which means using the existing life time to measure the expected credit loss. For the purpose of measuring, the notes receivable and accounts receivable are grouped based on the characteristic of mutual credit risk, which is the ability for customers to honor the contract and be able to settle the receivables when due. Expected losses of the receivables on December 31, 2018 was as follows:

Not past due Over 0~30 Over 31~120 days Over 121~365 days Past due more than 1 year	Carrying amount of account receivables $ 2,722,338 733 7,320 909 355,204 $ 3,086,504	Weighted average expected credit loss 0~4% - - - 100%	Allowance for expected credit loss
			(95,217) - - - (355,204)
			(450,421)

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Expected losses of the receivables on the reporting date was as follows:

Not past due Over 0~30 Over 31~120 days Over 121~365 days Past due more than 1 year	December 31, 2017	December 31, 2017
	Total amount $ 3,666,635 14,146 4,831 2,975 381,102 $ 4,069,689	Impairment
		(95,217) - - - (381,102)
		(476,319)

3. Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

December 31, 2018 Non-derivative financial liabilities Accounts payable Other payables Other financial liabilities－ current Other non-current liabilities－ other Floating-rate loans Fixed-rate loans Long-term bills payable December 31, 2017 Non-derivative financial liabilities Accounts payable Other payables Other financial liabilities－ current Other non-current liabilities－ other Floating-rate loans Fixed-rate loans Long-term bills payable	Carrying amount $ 1,848,774 1,718,537 11,282 110,735 1,550,000 4,037,662 349,729 $ 9,626,719 $ 1,956,985 261,212 324,306 73,058 1,350,000 2,169,165 299,882 $ 6,434,608	Contractual cash flows 1,848,774 1,718,537 11,282 110,735 1,607,245 4,591,889 350,000 10,238,462 1,956,985 261,212 324,306 73,058 1,432,337 2,450,744 300,000 6,798,642	Within 6 months 1,848,774 1,528,979 11,282 99,201 411,652 867,678 350,000 5,117,566 1,956,985 259,089 324,306 20,412 - 250,718 - 2,811,510	6-12 months - 189,558 - 9,023 210,987 316,672 - 726,240 - - - 38,503 - - - 38,503	1-2years - - - 226 421,974 100,394 - 522,594 - 63 - 11,738 - 220,371 300,000 532,172	2-5years - - - 765 562,632 2,388,072 - 2,951,469 - 2,060 - 50 1,432,337 800,400 - 2,234,847	More than 5years
							- - - 1,520 - 919,073 -
							920,593
							- - - 2,355 - 1,179,255 -
							1,181,610

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4. Currency risk

• (1) Currency risk exposure

The Consolidated Company’s exposures to significant currency risk were those from its foreign currency denominated financial assets and liabilities as follows:

Financial assets Monetary items USD HKD EUR VND MKK RMB Long-term share investment using equity method USD Financial liabilities Monetary items USD RMB	December 31, 2018	December 31, 2018	December 31, 2018	December 31, 2017	December 31, 2017	December 31, 2017
	Foreign Currency $ 83,697 - - 547,757,982 567,650 1,034,171 30,320 $ 12,497 549,812	Exchange rate 30.710 - - 0.0013 0.0199 4.470 30.710 30.710 4.470	NTD	Foreign Currency	Exchange rate	NTD
			2,570,357 - - 725,068 11,353 4,622,754 931,121 383,783 2,457,660	51,644 11,359 1 - - 1,195,083 36,765 9,621 196,883	29.765 3.8110 35.540 - - 4.5670 29.765 29.765 4.5670	1,537,198 43,293 39 - - 5,457,947 1,094,305 286,368 899,165

• (2) Sensitivity analysis

The Consolidated Company’s exposure to foreign currency risk arises from the foreign currency exchange rate fluctuations on cash and cash equivalents, receivables and payables, which are denominated in foreign currency. A 1% of appreciation of NTD against USD, EUR, HKD, VND, MKK and RMB would have increased net income after tax by $40,705 thousand and increased $48,579 thousand for the years ended December 31, 2018 and 2017, respectively; other comprehensive income would have increased $9,311 thousand and increased $10,943 thousand for the years ended December 31, 2018 and 2017, respectively. The analysis between these two periods was based on the same criteria.

5. Interest rate analysis

The following sensitivity analysis is based on the risk exposure to interest rates on the derivative and non-derivative financial instruments on the reporting date. For financial instruments bearing floating-rate, the sensitivity analysis assumes the floating-rate liabilities are outstanding for the whole year on the reporting date. The Consolidated Company’s internal management reported the increases/decreases in the interest rates and the exposure to changes in interest rates of 1% is considered by management to be a reasonable change of interest rate.

If the interest rate increases by 1%, the Consolidated Company’s net income will decrease by $16,500 thousand and $13,500 thousand for the years ended December 31, 2018 and 2017, respectively, assuming all other variable factors remain constant. This is due mainly to the fact that the Consolidated Company’s borrowings bear floating interest rate.

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• Fair value information

Consolidated companies use their market observations as much as possible when measuring their assets and liabilities. The level of fair value is based on the input value of the evaluation technique as follows:

• (1) Level 1: quoted prices (unadjusted) in active markets for identified assets or liabilities.

• (2) Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• (3) Level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

• (A) Fair value of financial instruments

The fair value of financial assets and liabilities were as follows (including information on fair value hierarchy, but excluding measurements that have similarities to fair value but are not fair value and those fair value cannot be reliably measured or inputs are unobservable in active markets):

December 31, 2018 Financial Assets Cash and cash equivalent Current financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income-current Non-current financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income-non-current Note receivables, accounts receivable and other accounts receivable Other assets Non-financial Assets Investment property Financial Liabilities Short-term loans Long-term loans-current portion Long-term loans Long-term accounts payable Long-term bills payable Other liabilities	Book value $ 13,469,938 1,300,897 251,629 4,861,274 1,978,339 2,754,465 131,493 38,350,359 $ 63,098,394 $ 913,732 863,801 3,810,129 3,871,583 349,729 149,012 $ 9,957,986		Fair	value
		Level 1 - 1,165,590 251,629 - 1,539,419 - - - 2,956,638 - - - - - - -	Level 2 - - - - - - - - - - - - - - - -	Level 3 - 135,307 - 4,861,274 438,920 - - 38,350,359 43,785,860 - - - - - - -	Total
					- 1,300,897 251,629 4,861,274 1,978,339 - - 38,350,359
					46,742,498
					- - - - - -
					-

• 222 -

December 31, 2017 Financial Assets Cash and cash equivalent Current financial assets at fair value through profit or loss Current available-for-sale financial assets Current financial assets at cost Note receivables, accounts receivable and other accounts receivable Other assets Non-financial Assets Investment property Financial Liabilities Short-term loans Long-term loans Long-term accounts payable Long-term notes payable Other liabilities	Book value $ 10,111,495 1,368,657 1,873,478 2,992,035 3,593,370 130,935 38,226,532 $ 58,296,502 $ 250,000 3,269,165 2,407,778 299,882 415,462 $ 6,642,287		Fair	value
		Level 1 - 1,212,054 1,873,478 - - - - 3,085,532 - - - - - -	Level 2 - - - - - - - - - - - - - -	Level 3 - 156,603 - - - - 38,226,532 38,383,135 - - - - - -	Total
					- 1,368,657 1,873,478 - - - 38,226,532
					41,468,667
					- - - - -
					-

• (B) Valuation techniques for financial instruments which is not measured at fair value:

The carrying amount of loans and receivables, financial assets carried at cost and financial liabilities measured after amortization cost in the consolidated financial statements of the Consolidated Company is close to its fair value.

• (C) Valuation techniques for financial instruments measured at fair value:

The merger company determines the input value with reference to the analysis of the financial status and operating results, recent transaction price, related equity instruments are quoted in non-active markets, similar tools offer in the active market and comparable company evaluation multiplier of the investee company and periodically updates the input value and information and any other necessary fair value adjustments to ensure that the evaluation results are reasonable.

• (i) Non-derivative financial instruments

Financial instruments, if there is a public market offer, then the public market offer for the fair value, Such as listing (cabinet) company stock and open-end fund beneficiary certification.

The fair value of the financial instruments held by the merging company in the case of a non-active market is as follows:

No public offer debt investment tools: The discounted cash flow model is used to estimate fair value, it is mainly assumed that it is measured by discounting the expected future cash flows of the investee by the rate of return of the monetary time value and the investment risk.

No public offer equity instruments: Use the net asset value method, The main assumptions are based on the net per share of the investor.

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(ii) Derivative financial instruments

• Is evaluated according to the evaluation model accepted by the market users, such as the discount method and the option pricing model.

• (D) There have been no transfers from each level for the years ended December 31, 2018 and 2017.

• (E) Statements of changes in fair value measurements of financial assets in Level 3

January 1, 2018 Adjustments for initial application of IFRS 9 January 1, 2018, adjusted Purchase Disposal Effects on deferred income tax liabilities Total gain and losses recognized in profit or loss December 31, 2018 January 1, 2017 Loss on Revaluation of investment property Effects on deferred income tax liabilities Purchase Disposal Total gain and losses recognized in profit or loss December 31, 2017	Financial assets reported at fair value through profit or loss Investment Property Designated at initial recognition Derivative financial assets $ 38,226,532 156,603 - - 3,136,225 - 38,226,532 3,292,828 - - 1,998,060 - - (455,940) - 4,253 - - 119,574 161,633 - $ 38,350,359 4,996,581 - $ 38,152,353 157,216 - 41,244 - - 32,935 - - - 310,556 - - (310,556) - - (613) - $ 38,226,532 156,603 -	Financial assets reported at fair value through profit or loss Investment Property Designated at initial recognition Derivative financial assets $ 38,226,532 156,603 - - 3,136,225 - 38,226,532 3,292,828 - - 1,998,060 - - (455,940) - 4,253 - - 119,574 161,633 - $ 38,350,359 4,996,581 - $ 38,152,353 157,216 - 41,244 - - 32,935 - - - 310,556 - - (310,556) - - (613) - $ 38,226,532 156,603 -	Financial assets reported at fair value through other comprehensive income
	Investment Property $ 38,226,532 - 38,226,532 - - 4,253 119,574 $ 38,350,359 $ 38,152,353 41,244 32,935 - - - $ 38,226,532	Designated at initial recognition 156,603 3,136,225 3,292,828 1,998,060 (455,940) - 161,633 4,996,581 157,216 - - 310,556 (310,556) (613) 156,603	Non-public quoted equity instruments
			- 666,841
			666,841 - - - (227,921)
			438,920
			- - - - - -
			-

• (F) Quantitative information on the measurement of fair value of significant unobservable input values(Level 3)

Level 3 refers to the measurement of the fair value of the input parameters are not based on market availability of information, must be based on the assumption that the appropriate estimates and adjustments. If the evaluation model can not be developed on its own, the fair value of the counterparty is used as the fair value. According to IFRS13,for the fair value of the third level classified at the fair value level, the firm shall provide quantitative information about the significant unobservable input values used for the fair value measure. Businesses do not need to create quantitative information to comply with this disclosure, if quantified unobservable input value is not built when enterprises are measuring fair value (Such as when a firm uses an unadjusted previous transaction price or a third party pricing information). Consolidated part of the Company's investment No active market open interest and debt instrument investment. The fair value of the merged company is classified as the third level of investment real estate, the determination of its fair value is subject to IFRSs, commissioned by the professional valuation agencies in accordance with market 。 evidence to support the value of the assessment (Please refer to note 6 (h.)). Due to the practice cannot fully grasp the significance observable input value and the relationship between the fair values, it did not expose the quantitative information. The fair value of the aforesaid assets at December 31, 2018 and 2017 is $43,785,860 thousand and $38,226,532 thousand, respectively.

• 224 -

The Group holds an investment in equity shares, which is classified as fair value through profits or losses in the level 3.

Most of fair values are classified in the level 3 based on single significant unobservable input values, only the equity instruments with inactive market may result in multiple unobservable input values which are all independent from each other.

Quantified information of significant unobservable inputs was as follows:

Item Financial assets at fair value through profits or losses and financial assets at fair value through other comprehensive income	Valuation technique Net Asset Value Method	Significant unobservable inputs  Net Asset Value  Lack of market liquidity discount rate 10%~30%	Inter-relationship between significant unobservable inputs and fair value measurement
			 Not applicable  Lack of market liquidity Higher discount, lower fair market value

• (G) The fair value is classified in the level 3 of the evaluation process

Consolidated company fair value measures the use of unobservable input values, and the input value can be observed must be based on not observable parameters for major adjustments, its fair value is classified in the level 3. The input source for this level is mainly issued by an external evaluation of the price report (Price letter).And then check the results of the evaluation to ensure consistency with the source of the evaluation and to ensure that the evaluation results are reasonable.

Investment real estate is based on financial supervisory commission announcement of the evaluation methods and parameters of the assumption of commissioned by external values.

• (H) Fair value measurements in Level 3 – sensitivity analysis of reasonably possible alternative assumptions

The fair value of the financial instruments is reasonable, and the self-built evaluation model is not used for the fair value of the level 3. Therefore, it is not necessary to perform the sensitivity analysis of the possible alternative assumptions.

• 225 -

• x. Financial risk management

• Overview

The Consolidated Companies are exposed to the following risks due to the use of financial instruments:

• (1) Credit Risk

• (2) Liquidity risk

• (3) Market risk

The following discusses the Consolidated Company’s objectives, policies and processes for measuring and managing the risks mentioned above. For more quantitative information about the financial instruments, please refer to other related notes of the notes to the financial statements.

1. Risk management framework

The Board of Directors has overall responsibility for the oversight of the risk management framework in order to develop and monitor the Consolidated Company’s risk management policies and to report regularly on its activities.

The Consolidated Company’s risk management policies are established to identify and analyze the risks faced by the Consolidated Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Consolidated Company’s activities. The Consolidated Company, through their training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit Committee of the Consolidated Company oversees how management monitors compliance with the Consolidated Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Consolidated Company. The Audit Committee of the Consolidated Company is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

• 226 -

3. Credit Risk

Credit risk means the potential loss of the Consolidated Company if the clients or counterparties involved in that transaction default. The primary potential credit risk is from cash and accounts receivable.

(1) Accounts receivable and other receivables

The Consolidated Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Consolidated Company’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk, particularly in the current deteriorating economic circumstances.

The Consolidated Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Consolidated Company’s standard payment and delivery terms and conditions are offered. The Consolidated Company’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval from the Risk Management Committee; these limits are reviewed quarterly. Customers that fail to meet the Consolidated Company’s benchmark creditworthiness may transact with the Consolidated Company only on a prepayment basis.

The Consolidated Company establishes an impairment allowance that represents its estimate of incurred losses in respect of trade receivables. The two components of this impairment allowance are specific loss component that relates to individually significant exposure and collective loss component which the loss was incurred but not identified. The collective component is based on historical payment experience of similar financial assets.

(2) Bank deposits

The credit risk exposure in the bank deposits is measured and monitored by the Consolidated Company’s finance department. As the Consolidated Company deals with the banks and other external parties with good credit standing and financial institutions, corporate organization and government agencies which are graded above investment level, management believes that the Consolidated Company do not have compliance issues and significant credit risk.

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• Liquidity risk

Liquidity risk is the risk that the Consolidated Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Consolidated Company’s approach to managing liquidity is to ensure, as far as possible, that it always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Consolidated Company’s reputation. The management believes that the Consolidated Company do not have significant liquidity risk.

1. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Consolidated Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Consolidated Company buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out within the guidelines set by the Risk Management Committee.

(1) Currency risk

The Consolidated Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Consolidated Company’s entities, primarily the New Taiwan Dollars (NTD). The currencies used in these transactions are denominated in NTD, USD and RMB.

The Consolidated Company’s currency risk is not hedged as some of the currencies of the Consolidated Company’s foreign currency receivables and payables are the same, producing a natural hedge effect.

• (2) Interest rate risk

The Consolidated Company’s Interest rate risk comes from long-term and short-term bank loans. The long-term bond issued by our company is fixed-rate loan, so there is no risk caused by the fluctuations of interest rates and fair value interest rate. The longterm and short-term bank loans calculated in floating-rate were made our company suffered cash flow interest rate risk, but most of risk were covered by cash and cash equivalents holding in floating-rate.

(3) Other market price risk

The Consolidated Company does not enter into any commodity contracts other than to meet the Consolidated Company’s expected usage and sales requirements; such contracts are not settled on the net basis.

• 228 -

y. Capital management

The Consolidated Company meets its objectives for managing capital to safeguard the capacity to continue to operate, to continue to provide a return on shareholders, interest of other related parties and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Consolidated Company may adjust the dividend payment to the shareholders, reduce the capital for redistribution to shareholders, issue new shares or sell assets to settle any liabilities. The Consolidated Company and other entities in the similar industry use the debt-to-equity ratio to manage capital. This ratio is determined using the total net debt and divided by the total capital. The net debt from the balance sheet is derived from the total liabilities less cash and cash equivalents. The total capital and equity include share capital, capital surplus, retained earnings, other equity and non-controlling interest plus net debt.

The Consolidated Company’s debt to equity ratios at the end of the reporting period as of December 31, 2018 and 2017 were as follows:

Total liabilities Less: cash and cash equivalents Net debt Total equity Total liabilities and equity Debt to equity ratio	December 31, 2018 $ 22,514,200 (13,469,938) $ 9,044,262 $ 67,190,754 $ 76,235,016 11.86%	December 31, 2017
		19,080,501 (10,111,495)
		8,969,006
		62,548,459
		71,517,465
		12.54%

7. RELATED PARTY TRANSACTIONS

• a. Names and relationship with related parties

The followings are entities that have had transactions with related party during the periods covered in the consolidated financial statements.

Name of related party Relationship with the Group Taiwan Chlorine Industries Ltd. Investee as accounted for using equity method (not an investee since April 11, 2017) Praxair Chemax Semiconductor Materials Co., Investee as accounted for using equity method (not an Ltd. investee since January 9, 2017) Kaohsiung Monomer Company Investee as accounted for using equity method Zhong Gong Baoquan Ltd Investee as accounted for using equity method BES Engineering Corporation The board of the entity is the key management of the Company Core Pacific City Co., Ltd Same board with the Company Chung Kung Management and Maintenance of Investee as accounted for using equity method of Zhong Apartments Co., Ltd Gong Baoquan Ltd Coreasia Human Resources management Co., Ltd Subsidiary of BES Engineering Capital Machinery Co., Ltd The board of the entity is the key management of the Company All board of directors, general manager and deputy The main managements of the Company

All board of directors, general manager and deputy general manager

• 229 -

• b. The ultimate parent company

The Company is the ultimate parent company.

• c. Significant Transactions with related parties

• Sale of Goods and Services to Related Parties

Associates	For the Year Ended December 31	For the Year Ended December 31
	2018 $ 644,031	2017
		586,021

The terms for related party sale transactions were the same as those of other unrelated customers.

1. Purchase of Goods from Related Parties

Associates	**For the Year Ended December 31 **	**For the Year Ended December 31 **
	2018 $ -	2017
		78,021

The terms for related party purchase transactions were the same as those of other unrelated vendors.

1. Receivables

Accounts Accounts receivable Other receivables Other receivables	Types of relatedparties Associates Associates Other related parties	December 31, 2018 $ 60,233 9,793 4 $ 70,030	December 31, 2017
			67,984 9,237 6
			77,227

1. Payables

Accounts Other payables Other payables	Types of relatedparties Associates Other related parties	December 31, 2018 $ 4,976 4,548 $ 9,524	December 31, 2017
			3,998 126
			4,124

• 230 -

5. Other

Associates Rental income Other revenues Security service fees Other related parties Rental income Other revenues Other expense Rental expense	For the Year Ended December 31	For the Year Ended December 31
	2018 $ 5,235 17,809 (23,978) 4 1,043 (882) (4,814)	2017
		5,187 18,413 (23,863) 28 1,074 (2,967) (4,880)

Please refer to Note 6 h. for lease of land and buildings to related parties.

1. The Company had contracts with one of other related parties, for building construction projects. The land is provided by the Company and the related party is responsible for designing, constructing, sales and warranties. The Company pays constructional management fee on the basis of contract, and the related party pays the actual expenditures for every single month. As of December 31, 2018, no constructional management fee is paid by the Company.

2. The Company had contracts with BES Engineering, for mechanical engineering services projects and paid commission on the basis of actual construction. As of December 31, 2018 and 2017, the construction project in-progress amounted to $1,532,800 thousand and $1,377,800 thousand, respectively. As of December 31, 2018 and 2017, the unpaid fees amounted to $1,376,787 thousand and $1,102,240 thousand, respectively. The refundable deposit at December 31, 2018 and 2017 both amounted to $22,850 thousand.

3. The Company had contracts with Capital Machinery, for mechanical engineering services projects and paid commission on the basis of actual construction. As of December 31, 2018 and 2017, the construction project in-progress amounted to $17,700 thousand and $13,769 thousand, respectively. As of December 31, 2018 and 2017, the unpaid fee amounted to $14,497 thousand and $11,809 thousand, respectively.

4. d. Key management personnel compensation

Key management personnel compensation
Short-term employee benefits Post-employment benefits	**For the Year Ended December 31 **
	2018 $ 257,498 7,533 $ **265,031 **	2017
		229,601 741
		230,342

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8. PLEDGED ASSETS

The Consolidated Company pledged assets are as follows:

As of December 2018 and December 31, 2017, the consolidated Company provided the following assets and other items as a comprehensive credit contract and other purposes of the collateral.

Asset Time deposits Property, plant and equipment Investment property Investments accounted for using equity method Available-for-sale financial assets – non-current Financial assets reported at fair value through other comprehensive income Financial assets reported at fair value through profit or loss Refundable deposit Use Right of Sea Areas	Purpose ofpledge Guarantee for purchases, collateral for long-term and short- term financial credit Collateral for long-term and short-term financial credit, United guarantee amount of convertible Bond United guarantee amount of convertible Bond Long-term bills payable Long-term bills payable Long-term bills payable Long-term bills payable Deposit for lawsuit Collateral for long-term financial credit	December 31, 2018 $ 10,038 4,453,343 5,995,969 1,378,279 - 915,400 477,405 91,557 625,190 $ 13,947,181	December 31, 2017
			10,037 4,806,666 11,703,324 1,043,709 1,008,300 - 426,420 91,557 531,339
			19,621,352

As of December 31, 2018 and 2017, 4,000 thousand shares of a subsidiary of the Consolidated Company were pledged as collateral for long-term bills payable.

9. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

• a. As of December 31, 2018 and 2017, the Consolidated Company had the following unused letters of credit:

USD NTD RMB	December 31, 2018 $ 43,631 1,095,000 32,264	December 31, 2017
		43,950 958,000 -

• b. As of December 31, 2018 and 2017, the Consolidated Company had issued guaranty notes for bank loans, issued Euro-Convertible Bond (ECB), sales and purchases, and development plan aggregating to $13,748,669 thousand, US$20,000 thousand and $12,898,200 thousand, US$28,219 thousand, respectively.

• c. At December 31, 2018 and 2017, the Consolidated Company had contracts for various construction projects in-progress amounting to $8,511,323 thousand and $6,752,113 thousand, respectively. As of December 31, 2018 and 2017, the remaining future obligations under these contracts amounted to $4,219,235 thousand and $3,911,582 thousand, respectively.

• 232 -

• d. As of December 31, 2018 and 2017, the Company signed an agreement to purchase raw materials such as benzene, hydrogen and methylbenzene from Chinese Petroleum Corporation (CPC). Under this contract, the Company may purchase specified monthly volume of these raw materials at current month prices announced by the Chinese Petroleum Corporation with prepayment or domestic letter of credit.

• e. Important matters

• Land tax

  • (1) The Company successively received notice by the tax offices in September 2005 that the land tax of the training center in Cianjhen will be changed to another rate since 2000. The Company questioned the applicability of the law, thus, filed for the relevant administrative appeal procedures pursuant to article 35 of Tax Collection Act, which was rejected by the Supreme Administrative Court. The Company paid fully for the land tax which was mentioned in previous and was filed for the administrative appeal, in accordance with the law.

  • (2) On the other hand, the Kaohsiung tax authority was against the land tax which was mentioned in previous and was filed for the administrative appeal and prohibited the registration of parts of the Company’s land pursuant to paragraph 1 of article 24 of Tax Collection Act. The prohibition was cancelled in January 2011.

  • (3) All lands located in No.356, Xiande section, Qianzhen Dist., Kaohsiung City 806 including 20 parcels of land and No. 4 Xingbang section including 14 parcels of lands were announced as “Soil Pollution Control Site” and “Site soil pollution remediation” by Kaohsiung City Government pursuant to Soil and Groundwater Pollution Remediation Act (hereafter refer as Remediation Act), which resulted in all lands of the Company being unable to be used. In accordance with article 12 of Land tax relief rules, the Company applied for land tax relief and review of 2009, 2010, 2011, 2012, 2013 and 2014 respectively, Kaohsiung taxing authority replied that it didn’t match with the regulation and issued the tax bill. The Company filed the administrative appeal, which was rejected and determined in 2009, 2010, 2011, 2012, 2013 and 2014. The Company asked the judges for explanation after collecting the relevant information.

• Case of Kaohsiung gas explosion forced disconnected pipeline

On July 31[st] 2014, there was an underground pipeline explosion incident in Kaohsiung city. Due to the post - disaster reconstruction project, Kaohsiung City Government issued a penalty letter No. 10335137100 on August 18[th] 2014 to order, the Company was forced to stop operations and prohibited the use of all petrochemical pipelines in the disaster area. The Company was not satisfied with the preceding penalty and filed a legal petition to the Administrative court for revoking the original claims for petition remedy in Sept. 2014. The case was rejected by the Kaohsiung High Administrative Court, which the Company was not satisfied with. Hence, the Company submitted an appeal in Feb. 2017.

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• Abolishment of the permission for Kaohsiung road and underground pipeline excavation and pipeline

Due to the August 1st Kaohsiung gas explosion, the Kaohsiung City Government Bureau of Water Resources issued the letter to Refining Division of CPC: abolishing the permission letter No. 950129 issued on Dec. 15th, 1990 and permission letter No. 050076 issued on April 13, 1991, and prohibited the roads for underground pipeline excavation and pipeline use. Since the pipeline prohibited for use belonged to the Company and assigned CPC to build, the Company, as the interested party, filed a petition to the Kaohsiung City Government to revoke the original punishment, which was rejected by Kaohsiung City Government Appeal Committee on Feb. 16th 2015. The Company filed the administrative legal action to Kaohsiung High Administrative Court in April 2015. Through the rejection sentenced by Kaohsiung High Administrative court in March 2017, the Company was unsatisfied with and proposed for the appeal in April of the same year. The supreme administrative court rejected the appeal in May 2018 and the case was closed.

1. Damage of Kaohsiung gas explosion

The above mentioned cases of Kaohsiung gas explosion and abolishment of the permission for Kaohsiung road and underground pipeline excavation were concerned with being legally forced to suspend by administrative executives, which were eligible for damage indemnity. For the interests of the Company, the Company filed the administrative legal action to Kaohsiung High Administrative Court in February 2018.

1. Equity trading dispute

The resolution, implementation of a signed tripartite supplemental agreement between the Company and PPG&GGC (which had been merged as Axiall company now), from the Company’s board meeting on April 21st 2016: trading the equity of Taiwan Chi chlorine Chemical Co., Ltd, total 6,400,000 shares at the sales price, US$100,000 thousand, which was equivalent to NT $ 3,225,000 thousand. After the expectation of the disposal interests, NT$2,838,761 thousand, the Company instantly informed Axiall company to carry out the equity trading of Taiwan Chi chlorine Chemical Co., Ltd. The Company issued the letter many times to ask Axiall to implement the agreement, however, Axiall repeatedly delayed actions. Hence, the Company filed the arbitration to American Arbitration Association in August 2016. Axiall submitted the pleadings in Sept. 2016 and asked PPG to participate in the lawsuit. Outside lawyers of PPG, in the Oct. of same year, represented that PPG is willing to negotiate the contract of equity trading. PPG signed the contract with the Company at the end of February 2017 and handled the equity transactions subsequently. The Company had received US$100,000 thousand in April of the same year and transferred the stock to finish the transaction. However, Axiall continued to be arbitrated against related claims such as the interest.

• 234 -

• f. Contingent liabilities

• The Company signed total three areas of land lease contracts with Kaohsiung branch of Taiwan International Ports Corporation, Ltd. In December 2013 and February 2014. The Kaohsiung Port Intercontinental Container Center 2nd Phase Project Petrochemical Oil Storage and Transportation Center S12 S15 Pier Post line Land was leased and the Company invested to build the construction of petrochemical oil storage and transportation facilities for the purpose of import and export and transport of petrochemical oil handling, storage and transportation etc... Kaohsiung branch of Taiwan International Ports Corporation, Ltd. delivered the land to the Company prior to the end of Dec. 2017. The term of the lease was 25 years from the date of delivery and the Company had the right to renew the lease at the end of the period. Per the contract, the Company had to pay rent of NT$1,650 thousand, NT$2,565 thousand, and NT$1,493 thousand respectively since the land was delivered. From the land delivery date of 3 years 6 months, the Company paid management fees of, NT$10,654 thousand, NT$24,605 thousand and NT$12,329 thousand respectively. The Company also placed Certificate of Deposits of NT$5,000 thousand and NT$13,000 thousand as performance bonds in December 2013 and February 2014 respectively. The Company, in August 2015, shortened the operating scale based on the adjustment of investment plan, which resulted in one of the performance bonds of NT$8,000 thousand, to not being able to be returned. Taiwan International Ports Corporation, Ltd. completed the transaction procedure prior to Nov. 2017. The Company started to implement land drilling and geological improvement project and started paying the land rent of those projects, which was NT$1,650 thousand and NT$1,493 thousand respectively each year.

• Dispute from the senior manager

  • (1) Labor Dispute

The previous senior manager, who left the Company without transferring the duties and authorization, didn’t perform the duties since July 1[st] 2013 and the Company issued the letter to request to fulfill the agreement without any response from manager. Hence, the board of the Company dismissed the manager in October 2013. The manager asked the Company to pay pensions pursuant to Labor Standards Act as a labor worker, which was not reconciled through mediation.

The Civil litigation of Mr. Liu was filed in Taipei District Court and Kaohsiung District Court respectively in January 2014. Taipei District Court, in August 2015, considered that the contract of senior manager was ended for both side, and Expired Employee Retirement Policies of the Company is applicable, the Company shall pay NT$4,572 thousand to Mr. Liu. The Company was not satisfied with the original verdict and appealed for the 2[nd] sentence court. The 2[nd] sentence court sentenced to reject request from the Company in March 2017. The Company was not satisfied and proposed the appeal in April of the same year, which was under remedy trial in the Supreme Court.

• 235 -

For the part of Mr. Zhang, Kaohsiung District Court considered that the assigned relationship did not end, which means that the Expired Employee Retirement Policies of the Company does not apply. Mr. Zhang request for pension is without any basis, but according to the contract of both side, the Company shall pay salaries of NT$35 thousand, to Mr. Zhang, which was not satisfied by Mr. Zhang and this case was appealed to the 2[nd] sentence court. In July 2016, the 2[nd] sentence court rejected the request from Mr. Zhang but he re-appealed to the 3[rd] sentence in August of the same year.

(2) Disclosure Secret Case

Managers who left the office without authorization was suspected to be involve in business encroachment, theft of business secrets. To protect Company interests, the Company filed criminal appeal. The case was concluded by the Taiwan Miaoli Local Court in January 2017 and the relevant defendants were prosecuted. The civil litigation derived from the case is waiting for hearing by the Taipei District Court and Miaoli District Court. The supreme administrative court rejected the appeal in June 2018. Please refer to Note8 for details of deposit for lawsuit.

3. Accusation of business failures

A Gas explosion happened in Heng Yi chemical plant next to the Toufen plant and caused workers to be burned on Jan. 28[th] 2013, which evolved into accusations of business failures. Since the incident happened in the public discharged area of the industrial site, it was suspected to contain excessive value of the company's emissions with the sampling identification and the Company’s manager was prosecuted as defendant per the victim’s request. This case was not prosecuted after the judgment decision from Miaoli District Attorney, hence, the victims filed the reconsideration and Taichung High Prosecutor's Office remanded the case back to the Miaoli District Attorney for review. The victims of Heng Yi chemical plant only prosecuted the Company and managers in Feb. 2015 and asked for the joint damaged compensation NT$6,920 thousand, which awaits hearing by Miaoli local court. In September of the same year, both sides agreed to withdraw the litigations. Trial procedure was recovered in Feb. 2016 and criminal litigation was determined not to be prosecuted in March 2016. The verdict of civil litigation was won in March 2016, with the formal decision awaiting final judgment. The Company proposed the appeal for remedy focus on the unsatisfied parts. This case was under hearing in High Court Taichung Branch currently.

1. Contract Fraud of Shanghai industry

On August 6th 2014, the reinvestment company, Weihua and Weiqiang, filed the civil appeal to Yangpu District Court to ask Coal Chemical Group Co., Ltd of shanghai industry to pay all overdrafts of the contract. However, Coal Chemical Group Co., Ltd of shanghai industry didn’t perform the first phase of repayment according to Court’s mediation report, Weihua and Weiqiang, on Sept. 2nd 2014, applied to Yangpu District Court for the enforcement and sealed all coal tar of Coal Chemical Group Co., Ltd of shanghai industry, the total coal tar sealed was 5,216 tons and 4,777 tons were sold. Subsequently, Weihua and Weijiang Company and Coal Chemical Group Co., Ltd of shanghai industry would continue negotiations on unrealized creditors and requested Coal Chemical Group Co., Ltd

• 236 -

of shanghai industry to propose the more specific repayment plan. Weihua and Weiqiang estimated depreciation of the accounts receivable to be, RMB19,274 thousand and RMB8,276 thousand respectively. Besides, Weihua and Weijiang Company reported to the police the relevant persons of Coal Chemical Group Co., Ltd of shanghai industry that are suspected to be involve with the contract fraud and other criminal matters. The police rejected the report due to insufficient evidences, therefore Weihua hired a local lawyer to assist with Shanghai police and Shanghai economics investigation group. The case is now under investigation.

1. The Company reinvested in China Gemini Development Co., Ltd. in conjunction with the Chinese engineering company to apply for selection "C1, D1 joint development investment case”. Since Taipei City Express Bureau issued the letter without expectation in requiring the Company to open financing guarantee report of development funds within 30 days and other unreasonable validation conditions, resulted in the Taipei City Government using the reason of the China Gemini Development Co., Ltd. team being unable to sign the contract in the specified period, thus unilaterally announced the annulment. Based on this issue, China Gemini Development Co., Ltd. filed a petition and request for administrative remedies to the Ministry of Communications and High Administrative Court., which was under hearing and was rejected by Supreme Administrative Court in August 2017. This case was closed.

2. Petition for Violation of gender equality law

Mr. Wu was an employee of the China Paint Material Corporation, the Company’s reinvested subsidiary, and was assigned to perform the duties in China. But later he asked for leave without complying with the Company’s regulation and left the position for more than three days, hence, the labor contract was terminated. The employee applied to Taipei City Government for the labor dispute mediation as the reason that the Company violated the gender equality law. After the mediation of Taipei City Government, China Paint Material Corporation was considered to violate the gender equality law and was sentenced to pay the penalty of NT$300 thousand on August 27[th] 2015. China Paint Material Corporation was not satisfied with the judgment and filed a petition to Labor Department of the Executive Yuan. The Labor Department of the Executive Yuan decided the original punishment withdrawn and did the other punishment in March 2016. The Company was filing the administrative remedy to the new punishment. A statement was made in advance in April of the same year. After the Taipei city government maintained the original punishment, it filed another petition in September of the same year. The Company’s petition was rejected by Appeal committee in June 2017 so that the Company proposed the administrative legislation in August of the same year per law, which was been ruling to prevail by Taipei supreme administrative court. The case was closed.

• 237 -

• civil compensation for Residents living in An shun

• (1) The 1[st] case

In 2008 and 2009, Mr. Wu and others filed civil and national compensation lawsuit to the Ministry of Economic Affairs, Tainan City Government, Tainan City Environmental Protection Bureau and the Company (Hereinafter referred to as 1st case of Tainan An shun plant civil compensation) and they claimed that during 1942 and 1983, the previous Taiwan Alkali Co. Ltd. An-shun plant, produced mercury and dioxins in its production operations and polluted the living environment, which resulted in the population consuming contaminated fish and shellfish over time, which resulted in long term health issues. The Ministry of Economic Affairs had control and management responsibility of the previous Taiwan Alkali Co. Ltd, and whether due to illegal actions, or a lack of attention in performing their duties, the Ministry of Economic Affairs as the ultimate employer of the chairman of CPDC, should take responsibility. Hence, the prosecutors claim that the Ministry of Economic Affairs shall take the responsibility for the compensation. Mr. Wu and others also claimed that Tainan City Government and Tainan City Environmental Protection Agency were the competent authorities and executive authorities of the waste disposal law but the authorities didn’t supervise and require the An-shun plant to implement pollution prevention and control acts, thus should be jointly responsible for any recompensation. Also, Mr. Wu and others claim that the Company did not perform any removal and remediation of pollutants after being ordered to merge with the previous Taiwan Alkali An-shun plant, so they claimed the Company shall also take joint responsibility on the compensation. Mr. Wu and others asked the Ministry of Economic Affairs, Tainan City Government, Tainan City Environmental Protection Bureau and the Company to jointly bore the cost of medical expenses and mental compensation for NT$370,800 thousand and the interest was calculated by an annual interest rate 5% from the date when the litigation was initiated by the defendants until the final payment of compensation. Due to unpaid referee fees, due from the plaintiff, the Tainan District Court rejected the litigation claims from these 17 persons in January 2010. Mr. Chen appealed to the Tainan District Court asking the Company for medication, health examination fee and reparations, to the amount of NT$2,300 thousand, which was incorporated into this case, the total compensation amount was NT$351,750 thousand. This case was tried by the Tainan District Court in December 2015 and judged that the Company and the Ministry of Economic Affairs to be jointly responsible for NT$160,000 thousand payable to the plaintiff. The Company was not satisfied with the result and filed an appeal. In August of 2017, the High court sentenced to order the Company to compensate the plaintiff for NT$190,000 thousand by self, which the Company was not satisfied with and had proposed the appeal for remedy in Sept. of the same year. The supreme court held oral argument on September 28, 2018, and judgment was sentenced on November 11, 2018, the supreme court sentenced to order the Company to compensate the plaintiff for NT$190,000 thousand. The Company made a payment of compensation and related interests to 143 plaintiffs before the end of January 2019. The part related to medical remedy of the case was abandoned for secondary trial.

• 238 -

• (2) The 2[nd] case

Mr. Chen and others filed civil and national compensation lawsuit to the Company and the Ministry of Economic Affairs on March 14th 2017 (Hereinafter referred to as 1st case of the Tainan An-shun plant civil compensation), they claimed the Company and the Ministry of Economic Affairs had to jointly compensate the plaintiff NT$80,915 thousand. The verdict of the 3rd national compensation in 2008 of the Tainan An-shun plant civil compensation 1st case was cited as the reason to be litigated. However, the Company claimed that there was a misunderstanding of the theoretical and practical nature of epidemiology causality versus the verdict and the infringement that may be created. There were disputable factors on both factual and legal matters. During the 1st and 2nd instance of the An-shun plant Civil Compensation litigation under hearing, the Company once again put forward the relevant academic articles to prove that there was no causality between pollution from Tainan An-shun plant and diabetes. Moreover, the plaintiffs in this case, despite the reasonableness of their claims, did not put forth any litigation before the expiry of the statutes of limitations. Thus, in this 2nd case of the Tainan An-shun plant civil compensation, the Company continued to seek for the jurisdiction remedies to protect the Company and shareholder interests.

• g. The Company leases plant assets, and vehicles for operating uses. The lease payment was $71,422 thousand and $51,705 thousand for the year of 2018 and 2019. The expected least payments for future are as below:

payments for future are as below:
Year 1 year 1~5 years 5 years above	Amounts
	$ 69,049 75,082 163,171
	$ **307,302 **

10. Major disaster losses: None

11. Significant matters after the event

• a. On March 11, 2019, the Company invested in Core Pacific City Co., Ltd by issuing 123,528 thousand preferred shares amounting to NT$1,235,278 thousand.

• 239 -

12. OTHER

• a. The nature of operating costs and expenses were as follows:

By function By nature	For theyear ended December 31,2018	For theyear ended December 31,2018	For theyear ended December 31,2018	For theyear ended December 31,2018	For theyear ended December 31,2017	For theyear ended December 31,2017	For theyear ended December 31,2017	For theyear ended December 31,2017
	Operating cost	Operating expense	Non-Operating expense	Total	Operating cost	Operating expense	Non-Operating expense	Total
Employee benefit
Salary	1,147,548	693,924	246	1,841,718	1,160,832	493,348	-	1,654,180
Health and labor insurance	93,076	46,408	-	139,484	89,638	32,891	-	122,529
Pension	45,132	22,761	-	67,893	45,317	12,681	-	57,998
Others	29,380	12,591	-	41,971	29,375	10,970	-	40,345
Depreciation	1,163,078	195,640	5,969	1,364,687	1,118,095	103,058	13,308	1,234,461
Depletion	-	-	-	-	-	-	-	-
Amortization	5,199	14,337	-	19,536	4,956	14,712	-	19,668

13. OTHER DISCLOSURE

• a. Information on significant transactions

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Group:

1. Loans to other parties:

==> picture [494 x 142] intentionally omitted <==

----- Start of picture text -----

(In Thousands of New Taiwan Dollars)
Transacti Collateral
Highest on
balance of Range of amount
financing Actual interest Purposes of for
to other usage rates fund business Reasons Maximum
parties amount during financing between for short- Individual limit of
Name of Account Related during the Ending during the the for the two term Loss funding fund
Number Name of lender borrower name party period balance period period borrower parties financing allowance Item Value loan limits financing
1 Core Pacific Twin Core Pacific Other Yes 7,069 7,069 7,069 0 2 - Operating - - 67,613 67,613
Star (Myanmar) Pioneer Receivable
Investment (Myanmar)
Company Ltd Company
Ltd
----- End of picture text -----

Note 1: Numbering nature of borrowing as follows:

Transaction for business between two parties－1

Short-term financing－2

Note 2: The financing limit was 40% of Core Pacific Twin Star (Myanmar) shares.

Note 3: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statements.

• 240 -

2. Guarantees and endorsements for other parties:

										(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
No	Name of **guarantor **	Counter-party and endor	of guarantee sement	Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during the period	Balance of guarantees and endorsements as of reporting date	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and endorsements	Parent company endorsements/ guarantees to third parties on behalf of subsidiary	Subsidiary endorsements/ guarantees to third parties on behalf of parent company	Endorsements/ guarantees to third parties on behalf of companies in Mainland China
		Name	Relationship with the Company
1	Changzhou Huijie new material Co., Ltd	Changzhou Suhwen environmental habitant construction Co.,Ltd	6	280,320	280,320	280,320	-	-	0.42%	280,320	N	N	Y

Note 1: The information of guarantees and endorsements for other parties of the Company and its subsidiaries are disclosed separately and numbering as follows:

Parent company－0

Subsidiary starts from 1

Note 2: Seven types of the relationship between Counter-party of guarantee and endorsement as follows:

Transaction for business between two parties

The Company directly or indirectly holds over 50% of voting rights of shares of entities

The entities directly or indirectly hold over 50% of voting rights of shares of the Company

The relationship between entities which are all held over 90% of voting rights of shares of these entities by the Company

Mutual guarantees or endorsements in accordance with contracts

The entities are proportionally endorsed by all shareholders from mutual investments

• 241 -

• Securities held as of December 31, 2018 (excluding investment in subsidiaries, associates and joint ventures):

					(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of holder	Category and name of security	Relationship with company	Account title		Ending balance			Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
CPDC Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd Jiangsu Weiming Petrochemical Corporation	Yuanta Financial Holdings Yuanta/P-shares SSE50 ETF Guotai A50 ETF BES Engineering Co. CHINA DEVELOPMENT FINANCIAL HOLDING CORP. Handy Chemical Corparation .ltd Overseas Investment & Development Corp Core Pacific City Co., Ltd. Praxair Chemax Semiconductor Materials ZOWIE Technology Corporation showroom Electronics Co., Ltd. Aetas Technology Inc. Taiwan Business Bank Core Pacific City Co., Ltd. Yuntong wealth increasing profits	None None None The Company is a director of the investee company None The Company is a director of an investee company None Same board with the company The Company is a director of the investee company 〞 〞 〞 None Same board with the company None	Financial assets designated at fair value through profit or loss－ current 〞 〞 Financial assets at fair value through other comprehensive income－non- current 〞 〞 〞 Financial assets designated at fair value through profit or loss－ non-current Financial assets at fair value through other comprehensive income－non- current 〞 〞 〞 Financial assets at fair value through other comprehensive income－current Financial assets designated at fair value through profit or loss－ non-current Financial assets designated at fair value through profit or loss- current	30,938,819 10,313,000 16,378,000 149,243,449 44,684,712 407,000 2,600,000 298,723,070 9,455,778 8,815 41,670 287,961 24,311,960 160,111,000 -	478,005 267,932 271,056 1,062,613 434,335 1,461 26,000 3,248,545 438,920 358 - - 251,629 1,612,729 135,307	0.26 - - 9.75 0.30 4.52 2.89 20.92 49.00 0.03 0.21 0.58 - 11.21 -	478,005 267,932 271,056 1,062,613 434,335 1,461 26,000 3,248,545 438,920 358 - - 251,629 1,612,729 135,307

• 242 -

Name of holder	Category and name of security	Relationship with company	Account title		Ending balance	Ending balance		Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
Tsou Seen Chemical Industries Corporation	TAIWAN TEA CORPORATION Good Company TaiRx, Inc. Total	The Company is a director of an investee company 〞 〞	Financial assets designated at fair value through profit or loss- current Financial assets at fair value through other comprehensive income－non- current 〞	9,618,000 750,000 850,000	148,598 - 14,652	1.22 - -	148,598 - 14,652	〞
					8,392,140		8,392,140

1. Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:

										(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of company	Category and name of security	Account name	Name of counter- party	Relationship with the company	Beginning Balance		Pu	rchase		Sa	les		Ending Balance
					Shares	Amount	Shares	Amount	Shares	Price	Cost	Gain (loss) on **disposal **	Shares	Amount
The Company	Securities sold under repurchase agreements	Cash equivalents	Taching Bills Finance Co., Ltd.	None	-	190,000	-	20,079,547	-	19,470,362	19,470,362	-	-	799,185
			Mega Bills Finance Co., Ltd.	〞	-	261,966	-	7,230,860	-	7,122,795	7,122,795	-	-	370,031
			International Bills Finance Co.,Ltd.	〞	-	-	-	9,215,159	-	8,685,335	8,685,335	-	-	529,824
			China Bills Finance Corporation	〞	-	809,672	-	20,232,382	-	20,372,015	20,372,015	-	-	670,039
	ETF	Financial assets at fair value through profits or losses－ current	Yuanta/P- shares SSE50 ETF	〞	9,091,000	249,590	10,313,000	289,332	9,091,000	328,531	249,590	78,941	10,313,000	289,332

1. Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None.

2. Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None.

3. 243 -

4. Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

								(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of company	Related party	Nature of relationships		Transaction Details			Transact terms d **from **	ions with ifferent others	Notes/Accounts receivable (payable)		Note
			Purchase/ Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company	Tsou Seen Chemical Industries Corporation Weihua (Rudong) Trade Co., Ltd Weiqiang International Trade (Shanghai) Co., Ltd. Kaohsiung Monomer Company Ltd Chemax International Corp.	Subsidiary Sub-subsidiary Sub-subsidiary Affiliated company accounted for using equity method Subsidiary	Sales Sales Sales Sales Sales	(1,188,874) (397,722) (111,863) (644,031) (102,962)	3% 1% - % 2% - %	3 Month 3 Month 3 Month 1 Month 1 Month	-	OA 90 days OA 90 days OA 90 days - OA 30 days	65,945 5,423 112,586 60,233 -	3% -% 4% 2% -%	(Note) 〞 〞 〞

Note: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statements.

1. Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of capital stock:

Name of company	Related party	Nature of relationship	Ending balance	Turnover days	Overdue Amount Action taken	Overdue Amount Action taken	Amounts received in subsequent period (Note 1)	Allowance for bad debts
					Amount
The Company	Weiqiang International Trade (Shanghai) Co.,Ltd.	Sub-subsidiary	112,586	1.99	-	-	107,535	-

Note: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statement

1. Trading in derivative instruments: Please refer to notes 6

2. Business relationships and significant intercompany transactions:

				(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)
No. (Note 1)	Name of company	Name of counter-party	Nature of relationship	Intercompany		Transactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0 0 0 0	The Company The Company The Company The Company	Weihua (Rudong) Trade Co., Ltd (Weihua) Tsou Seen Chemical Industries Corporation(TSCIC) Chemax International Corp. (CIC) Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang)	1 1 1 1	Sales revenue Sales revenue Sales revenue Sales revenue	397,722 1,188,874 102,962 111,863	OA 90 days OA 90 days OA 30 days OA 90 days	1.03% 3.09% 0.27% 0.29%

• 244 -

No. (Note 1)	Name of company	Name of counter-party	Nature of relationship	**Intercompany **	**Intercompany **	Transactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0 1 2 3 4 5	The Company Weihua (Rudong) Trade Co., Ltd (Weihua) Tsou Seen Chemical Industries Corporation(TSCIC) Chemax International Corp. (CIC) CPDC Green Technology Corp. (CPDC GT) (Original name: CPDC Engineering Co., Ltd.) Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang)	CPDC Green Technology Corp. (CPDC GT) (Original name: CPDC Engineering Co., Ltd.) The Company The Company The Company The Company The Company	1 2 2 2 2	Repair expense Cost of goods sold Cost of goods sold Cost of goods sold Sales revenue Cost of goods sold	238,291 397,722 1,188,874 102,962 238,291 111,863	Base on contract OA 90 days OA 90 days OA 30 days Base on contract OA 90 days	0.62% 1.03% 3.09% 0.27% 0.62% 0.29%

Note 1: Company numbering as follows:

Parent company－0 Subsidiary starts from 1 Note 2: The numbering of the relationship between transaction parties as follows: Parent company to subsidiary－1 Subsidiary to parent company－2 Subsidiary to subsidiary－3 Subsidiary to sub-subsidiary－4 Sub-subsidiary to sub-subsidiary－5

Note 3: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statement

• 245 -

b. Information on investees:

The following is the information on investees for the year 2018 (excluding information on investees in Mainland China):

(In Thousands of New Taiwan Dollars)

**Name of investor **	Name of investee	**Location **	Main businesses and products	Original inves	tment amount	Balance	**as of December **	31, 2018	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2018	December 31, 2017	Shares (thousands)	Percentage of ownership	Carrying value
The Company 〞 〞 〞 〞 〞 〞 〞 〞 〞 〞 CPDC Investment (BVI) Co Ltd.	Kaohsiung Monomer Company Ltd Zhong gong baoquan Ltd. Tao Zhu Construction & Development Co., Ltd. Chemax International Corp. CPDC Investment (BVI) Co Ltd. Tsou Seen Chemical Industries Corporation CPDC Green Technology Corp. (Original name: CPDC Engineering Co., Ltd.) Rich Equrties Ltd. Unichem Development Limited Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. Cong Ty Tnhh Dau Tu Xay Dung Thanh Phong Core Pacific Overseas Holdings Ltd	1,Hsing Kung Road,Ta She P O Box 6-25 Nantze,Kaohsiung (815), Taiwan 6F., No.12, Dongxing Rd., Taipei City 105, Taiwan 8F., No.12, Dongxing Rd., Taipei City 105, Taiwan 8F., No.12, Dongxing Rd., Taipei City 105, Taiwan Citco Building, Wickhams Cay, P.O. Box662 No.1, Jingjin Rd., Fangliao Township, Pingtung County 940, Taiwan 14F.-16, No.61, Wufu 3rd Rd., Qianjin Dist., Kaohsiung City 801, Taiwan Level3,Alexander House,35 Cybercity,Ebene, Mauritius Room 511, 5/F, Tower 1 Silvercord 30 Canton Road TSIM SHA TSUI KOWLOON 16F., No.12, Dongxing Rd., Taipei City 105, Taiwan 338/18, Anyang Wang Road , the fifth county of Ho Chi Minh City, Vietnam Akra Bldg., 24 De Castro Street, Wickhams Cay I, Road Town,Tortola,British Virgin Islands	Methyl Methacrylate Monomer Security consultants Commissioned to create a vendor to build the housing, commercial buildings and plant rental business, management of land development and playgrounds and other related business investment Announcement energy products besides petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other Holding company Dicalcium phosphate Mechanical engineering Holding company Holding company Real estate investment and development Engaged in construction, real estate, building constructional consulting, lease equipment and wholesale of building materials Holding company	- 14,400 100,000 - 904,946 760,000 100,000 5,996 5,894,124 2,000,000 609,347 808,564	- 14,400 100,000 145,000 904,946 550,000 100,000 5,996 3,961,611 2,000,000 - 808,564	20,000,000 1,440,000 10,000,000 - 26,580,000 96,000,000 15,000,000 180,000 191,477,752 200,000,000 458,637,500,00 0 26,580,000	40.00% 24.00% 100.00% -% 100.00% 100.00% 100.00% 100.00% 100.00% 90.87% 97.87% 45.19%	1,378,279 19,598 76,412 - 931,828 1,610,294 140,183 5,254 5,223,987 2,395,160 607,203 925,868	2,482,675 9,884 (1,924) 19,800 (105,703) 173,826 (20,983) 45 (94,327) (25,603) 8,615 (233,662)	993,070 2,372 (1,924) 19,800 (105,703) 173,826 (20,983) 45 (94,327) (23,266) 8,431 (105,592)	Note 1 Note 1 Note 2 Note 2&5&6 Note 2&4 Note 2&5&6 Note 2&5 Note 2&4 Note 2&4&5 Note 2&5 Note 2&4&5 Note 2&4

• 246 -

**Name of investor **	Name of investee	**Location **	Main businesses and products	Original inves	tment amount	Balance	as of December	31, 2018	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2018	December 31, 2017	Shares (thousands)	Percentage of ownership	Carrying value
Tao Zhu Construction & Development Co., Ltd. Tsou Seen Chemical Industries Corporation Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd	Da-ying Construction Ltd. Taivex Therapeutics Inc. Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd Core Pacific Pioneer (Myanmar) Company Ltd	10F.-5, No.51, Fuxing Rd., Taoyuan Dist., Taoyuan City 330, Taiwan 8F., No.12, Dongxing Rd., Taipei City 105, Taiwan 112 ROBINSON ROAD #05-01 ROBINSON 112 SINGAPORE (068902) NO.153/Ka,Kyun Shwe Mmyaing Lane (2) ,23 ward, Thingangyun Townshin Yangon NO.153/Ka,Kyun Shwe Mmyaing Lane (2) ,23 ward, Thingangyun Townshin Yangon	Engineering, construction contracting business Engaged in biotechnology, pharmaceutical research and development and marketing Holding company Engineering, construction contracting business Building construction, real estate management, development and sale	22,500 462,246 180,817 169,921 12,355	22,500 462,246 6,036 5,355 -	- 46,224,551 200,000 5,500,001 400,000	100.00% 91.10% 100% 100% 80%	24,628 384,867 169,919 162,704 11,627	(107) (76,894) (9,781) (5,622) (466)	(107) (7,051) (9,781) (5,622) (378)	Note 2&3 Note 2 Note 2&4 Note 2&4 Note 2&4
								14,067,811	2,119,773	822,810

Note1: The Company adopts the equity method to evaluate the investment company.

Note2: The Company has direct or indirect control of the invested company. If the invested company has direct or indirect control, it shall expose the relevant information of the following 2 to 10 transactions of the investee company.

Note3: Limited company expressed by the amount of capital, no shares issued.

Note4: The original investment amount is the foreign currency, at the prevailing exchange rate.

Note5: This transaction has been written off when the consolidated statement has been prepared.

Note6: The Company re-structured the business organization on August 1 2018, which was a combination of Chemax and Tsou Seen, Chemax was dissolved company and Tsou Seen was continuing company.

• 247 -

• c. Information on investment in mainland China:

• The names of investees in Mainland China, the main businesses and products, and other information:

								(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)
Name of investee	Main businesses and products	Total amount of **paid-incapital **	Method of investment (Note1)	Accumulated outflow of investment from Taiwan as of January 1, 2017	Investm	ent flows	Accumulated outflow of investment from Taiwan as of December 31, 2017	Net income (losses) of the investee (Note 2)	Percentage of ownership	Investment income (losses)	Book value	Accumulated remittance of earnings in current period
					Out- flow	In- flow
Weihua (Rudong) Trade Co., Ltd (Weihua)	Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading	763,460	(b)、(c)	763,460	-	-	763,460	24	100.00%	24	486,683	-
Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang)	Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading.	211,560	(a)、(c)	119,300	92,260	-	211,560	13,864	100.00%	13,864	120,233	-
Weida (Zhangzhou) Consultant Service Co.,Ltd.(Weida)	Consultancy	13,171	(b)	13,171	-	-	13,171	(428)	100.00%	(428)	2,544	-
Jiangsu Weiming Petrochemical Corporation (Weiming)	Petrochemical supporting facility construction	3,135,734	(a)、(b)	3,743,354	607,620	-	3,743,354	(28,273)	100.00%	(28,273)	3,442,445	-
Zhangzhou Weida Petrochemical Co., Ltd (Weida PC)	Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading	30,648	(b)	30,648	-	-	30,648	(5,679)	100.00%	(5,679)	16,445	-
Kunshan Weiqin Management consultant Co., Ltd (Weiqin)	Management consultant	29,664	(b)	29,664	-	-	29,664	(10,048)	100.00%	(10,048)	8,632	-
Zhejiang Wedge new material Co., Ltd (Wedge)	Engaged in trading of Synthetic fiber material	31,278	(b)	31,278	-	-	31,278	(1,159)	100.00%	(1,159)	25,973	-
Changzhou Huijie new material Co., Ltd	Engaged in engineering plastic and high valued petroleum chemical products	1,860,113	(b)	-	1,324,893		1,324,893	(47,176)	100.00%	(47,176)	1,128,883

• 248 -

2. Limitation on investment in Mainland China:

==> picture [434 x 53] intentionally omitted <==

----- Start of picture text -----

Accumulated Investment in Investment Amounts
Upper Limit on
Mainland China as of December Authorized by
Investment
31, 2018 Investment Commission, MOEA
6,937,208 9,135,021 Note4
----- End of picture text -----

Note1: There are three ways to invest as follows:

• (a) The Company direct investment to China.

• (b) The Company through third regional company (UDL) investment to China.

• (c) Others. (The Company through subsidiary investment to China.)

• Note2: In the field “net income (losses) of the investee”:

• (a) If it is in preparation, no investment profit or loss, should be explained.

• (b) There are three ways to identify the basis of investment profit or loss, should be explained.

  • (b.1) financial statements audit by international accounting firm with a relationship with Taiwan accounting firm.

  • (b.2) financial statements audit by the Company’s audit CPA.

  • (b.3) others.

Note3: The amount in this table should be presented in New Taiwan Dollar.

• Note4: The cumulative investment amount or investment proportion to China cannot over the Company’s net value of 60%. The Company got certified documents of operating headquarters issued by Industrial Development Bureau, Ministry of Economic Affairs on October 18, 2018, so not subject to the above regulations. Valid period to October 14, 2021.

3. Significant transactions: None

The significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions”.

14. SEGMENT INFORMATION

a. General Information

The Consolidated Company identifies Arylonitrile & acetic acid department and Caprolactam department as reportable segments based on factors such as product types, manufacturing procedure, customer types, and operating activities.

The reportable segments of the Consolidated Company are independent business units which offer different products and services. Each business unit needs different technologies, resources and marketing strategies, thus should administer separately. The operating segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial results, forecasts, or plans for the segment.

• 249 -

• b. Information for each segment’s revenue / expense, asset, liability, measurement basis , and adjustment

Non-operating income and loss, income tax expense and non-recurring gain or loss is not allocated to reportable segments. In addition, not all of the profit or loss of the reportable segments include significant non-cash items other than depreciation and amortization. Total reportable segments’ profit or loss is reconciled with the continuing operations’ profit or loss before tax.

There was no material inconsistency between the accounting policies adopted for the operating segment and the accounting policies described in Note 2. The Consolidated Company use the operating profit as the measurement for segment profit and the basis of performance assessment. Operating segments’ profit and loss and total assets exclude operating expenses and assets of the corporate management.

For the Year Ended December 31, 2018 Revenue Revenues from external customers Revenues from transactions with other operating segments of the same entity Total segment revenue Depreciation and amortization Reported segment profit or loss Assets Capital expenditure of non- current assets Segment assets Segment liabilities For the Year Ended December 31, 2017 Revenue Revenues from external customers Revenues from transactions with other operating segments of the same entity Total segment revenue Depreciation and amortization Reported segment profit or loss Assets Capital expenditure of non- current assets Segment assets Segment liabilities	Acrylonitrile & Acetic Acid $ 12,011,203 - $ 12,011,203 $ ,143,171 $ 2,808,901 $ ,363,188 $ 5,173,756 $ 2,868,366 $ 9,665,220 - $ 9,665,220 $ 144,181 $ 1,494,922 $ 103,750 $ 4,332,468 $ 2,895,773	Caprolactam 23,157,176 - 23,157,176 1,188,632 1,211,110 663,248 13,500,076 5,527,184 21,092,386 - 21,092,386 974,199 3,072,505 908,463 14,784,340 5,536,436	Other 3,334,742 238,291 3,573,033 52,420 656,939 3,020,045 71,031,122 14,118,650 2,578,364 170,047 2,748,411 135,749 1,730,294 1,488,189 62,512,152 10,648,292	Adjustment and eliminations - (238,291) (238,291) - - - - - - (170,047) (170,047) - - - - -	Total
					38,503,121 -
					38,503,121
					1,384,223
					4,676,950
					4,046,481
					89,704,954
					22,514,200
					33,335,970 -
					33,335,970
					1,254,129
					6,297,721
					2,500,402
					81,628,960
					19,080,501

• 250 -

c. Geographical Areas

The Consolidated Company’s noncurrent assets located overseas are immaterial. Revenues from domestic and overseas customers for 2018 and 2017 were as follows:

Region Operating revenue from domestic sales Asia Other (individual area under 10%) Total operating revenue	**For the Years Ended December 31 **	**For the Years Ended December 31 **
	2018 $ 28,747,803 9,351,505 403,813 $ 38,503,121	2017
		28,467,024 4,866,496 2,450
		33,335,970

d. Major Customers

Customers generating over 10% of total revenue for 2018 and 2017 were as follows:

Customers 1018 1020 1001 1019 1011	**For the Years Ended December 31 **	**For the Years Ended December 31 **
	2018 $ 5,502,844 5,259,325 4,799,812 4,675,062 2,868,527	2017
		$ 6,434,882 5,133,183 3,646,217 3,914,702 3,844,332

• 251 -

(English Translation of Financial Statements Originally Issued In Chinese) INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

To the Board of Directors of China Petrochemical Development Corporation:

Opinion

We have audited the financial statements of China Petrochemical Development Corporation (CPDC), which comprise the balance sheets as of December 31, 2018 and 2017, the statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of the other auditors, the accompanying financial statements present fairly, in all material respects, the financial position of the CPDC as at 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 and with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), interpretations as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the 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 CPDC in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

• 252 -

Emphasis of Matter

As described in Notes 6.h and 6.l of the notes to the financial statements, the Tainan City Government and Environment Protection Administration, the Executive Yuan publicly announced that a portion of the land at the Anshun plant was polluted and designated it as under pollution control. As China Petrochemical Development Corporation (CPDC) never used the land since it took over from its merger with Taiwan Alkali Industrial Corporation (TAIC), CPDC still has a dissenting view on the government perception about the condition of pollution. Aside from cooperating with the government in its control and management procedure, CPDC is seeking a way to define its responsibilities. In addition, CPDC submitted for approval a remediation project proposal to the Tainan City Government in accordance with the related regulations and accrued relevant remediation project expenses in June 2008. This remediation project proposal was approved in May 2009. CPDC also performed related remediation work according to the remediation project proposal. The first phase of remediation project was completed in September 2014. The management of CPDC is expecting that the second phase of remediation project will be completed in the next decade. Likewise, CPDC has accrued relevant remediation project expenses for the second phase of remediation project in December 2014. Our opinion is not modified in respect of this matter.

Other Matter

We have not audited certain investments, which were accounted for under the equity method. The financial statements as of and for the years then ended December 31, 2018 and 2017 of those of the investees accounted for under the equity method were audited by other auditors, whose reports have been furnished to us, and our opinion in so far as it relates to the amounts for the equity method investees were based solely on the reports of other auditors. These investments accounted for under the equity method represented 1.10% and 1.38% of total assets as of December 31, 2018 and 2017, respectively. The related shares of investment income from these investees including subsidiaries, associates and joint ventures accounted for using equity method represented (2.23)% and (0.06)% of consolidated net income before income tax for the years ended December 31, 2018 and 2017, respectively.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were significant in our audit of the financial statements as of and for the year then 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.

1. Revenue recognition

Operating revenue is the most important source of cash flow for the CPDC, and it is a significant risk accounting subject in the financial statements. So revenue recognition is one of the key audit matters for our audit. Please refer to Note 4“Revenue Recognition” and Note 6 “Revenue” in the financial statements.

• 253 -

How the matter was addressed in our audit

Our key audit procedures included:

• Testing the CPDC’s internal accounting controls surrounding revenue recognition and key manual and systems-based controls in the order-to-cash transaction cycle. In addition, checking and reconciling the sales data recorded between the sales systems and general ledger; selecting samples to assess whether appropriate revenue recognition policies are applied through comparison with accounting standards;

• Analyzed and compared the sales amounts and volumes for the major customers of the CPDC. Based on samples selected, vouched significant transactions from both internal and external documents, to verify the authenticity of the transactions.

2. Assessment of the fair value of investment property

The book value of investment property of the CPDC represented 45% of total assets as of December 31, 2018, which is deemed to be significant. The CPDC evaluate the fair value of investment property according to IAS40, and re-measure such fair value on the reporting date. Because the valuation of investment property at fair value demands significant professional judgments, the assessment of fair value of investment property is considered one of the key audit matters. Please refer to Note 4 “Investment Property”, Note 5 “Significant Accounting Judgments, Estimation, Assumptions, and Sources of Estimation Uncertainty”, and Note 6.h “Investment Property” of the financial statements for details of the information about fair value information on investment property.

How the matter was addressed in our audit

Our key audit procedures included:

• Obtain from the CPDC management the real estate appraisal report on investment property;

• Engage another appraiser to review such real estate appraisal report, and to evaluate the propriety of the ~~e~~ valuation method used, and the reasonableness of its main assumptions or input values (ex. discount rate and final rate of return);

• Evaluate the propriety of the disclosure of fair value of investment property.

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 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.

• 254 -

In preparing the financial statements, management is responsible for assessing the CPDC’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 CPDC or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the CPDC’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 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 CPDC’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 CPDC’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 CPDC 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 and appropriate audit evidence regarding the financial information of the entities or business activities within the investees accounted for under the equity method to express an opinion on the financial statements. We are responsible for the direction, supervision and performance audit. We remain solely responsible for our audit opinion.

7. 255 -

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.

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 of the current period 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 accountants’ audit report are Chen Mei Fang and Chung Tan Tan.

KPMG

Taipei, Taiwan (Republic of China) March 22, 2019

• 256 -

		%		-	-	3	2	-	-	-	-	5		3	3	11	-	-	17	22			33	2			1	35	8	44		-	-		(1)	(1)	78	100
December 31,	2017	Amount		250,000	-	1,835,136	1,260,073	164,358	173,350	-	347,527	4,030,444		2,370,000	2,357,202	8,754,736	299,882	66,290	13,848,110	17,878,554			26,998,573	1,260,386			1,099,137	28,023,386	6,107,355	35,229,878		(392,378)	-		(788,734)	(1,181,112)	62,307,725	80,186,279
		%		1	-	2	3	-	1	1	-	8		2	2	10	-	-	14	22			32	1			2	39	6	47		(1)	(1)		-	(2)	78	100
December 31,	2018	Amount		650,000	2,674	1,728,481	2,159,721	331,606	479,514	685,000	12,690	6,049,686		1,795,000	1,923,233	8,758,989	349,729	104,335	12,931,286	18,980,972			26,998,573	1,260,386			1,708,303	33,521,575	5,144,764	40,374,642		(488,212)	(1,248,499)		-	(1,736,711)	66,896,890	85,877,862
				$																																		$
		LIABILITIES AND EQUITY	Current liabilities	Short-term loans (Note 6 i.)	Current contract liabilities (Note 6 r.)	Accounts payable	Other payables (Note 7)	Current tax liabilities (Notes 4 and 6 o.)	Provisions�current (Notes 4, 6 l. and 6 n.)	Long-term liabilities-current portion (Notes 4 and 6 i.)	Other current liabilities	Total current liabilities	Non-current liabilities	Long-term bank loans (Note 6 i.)	Provisions�non-current (Notes 4, 6 l. and 6 n.)	Deferred tax liabilities (Notes 4 and 6 o.)	Long-term bills payable (Note 6 j.)	Other non-current liabilities, others	Total non-current liabilities	Total liabilities	Equity attributable to shareholders of the parent	Share capital	Common stock (Note 6 p.)	Capital surplus (Note 6 p.)		Retained earnings: (Note 6 p.)	Legal reserve	Special reserve	Unappropriated earnings		Others (Notes 4 and 6 p.)	Exchange differences arising on translation of foreign operations	Unrealized gain or loss on financial assets at fair value through other	comprehensive income	Changes in fair value of available-for-sale financial assets		Total equity	TOTAL LIABILITIES AND EQUITY
		�		9	1		4	-	-	3	1	-	18		-	-		2	2	12	18	48	-	-		82												100
December 31,	2017	Amount		6,912,818	990,664		3,412,086	200,806	42,802	2,213,042	610,604	302,464	14,685,286		-	-		1,677,346	1,772,035	9,440,338	14,240,101	38,226,532	9,358	135,283		65,500,993												80,186,279
		�		10	1		3	-	-	2	1	1	18		4	2		-	-	14	17	45	-	-		82												100
December 31,	2018	Amount		8,465,372	1,016,992 ,		2,466,935	244,187	106,181	1,973,971	561,673	313,520	15,148,831		3,248,545	1,963,687		-	-	12,436,188	14,585,386	38,350,359	11,009	133,857		70,729,031												85,877,862
				$																																		$
		ASSETS	Current assets	Cash and cash equivalents (Notes 4 and 6 a.)	Current financial assets at fair value through profit or loss	(Notes 4 and 6 b.)	Notes and accounts receivable, net (Notes 4 and 6 c.)	Accounts receivable�related parties, net (Notes 4, 6 c. and 7)	Other receivables (Notes 4 and 6 c. and 7)	Inventories (Notes 4 and 6 d.)	Prepayments	Other current assets	Total current assets	Non-current assets	Non-current financial assets at fair value through profit or loss (Notes 6 b.)	Non-current financial assets at fair value through other comprehensive income	(Notes 6 b.)	Available-for-sale financial assets�non-current (Notes 4 and 6 b.)	Financial assets carried at cost�non-current (Notes 4 and 6 b.)	Investments accounted for using equity method (Notes 4 and 6 e.)	Property, plant and equipment (Notes 4 and 6 g.)	Investment property, net (Notes 4 and 6 h.)	Deferred tax assets (Notes 4 and 6 o.)	Other non-current assets (Notes 8)		Total non-current assets												TOTAL ASSETS

(English Translation of Financial Statements Originally Issued in Chinese) CHINA PETROCHEMICAL DEVELOPMENT CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2018 and 2017

(Expressed in thousands of New Taiwan Dollars)

Operating revenue (Notes 4 and 6 s.) Operating costs (Notes 4 and 6 d.) Less: Unrealized (profit) loss on intercompany transactions Add: Realized profit (loss) on intercompany transactions Gross profit Operating expenses Selling expenses Administrative expenses Research and development expenses Impairment loss (impairment gain and reversal of impairment loss) determined in accordance with IFRS 9 Profit from operations Non-operating income and expenses Other income (Notes 6 u. and 7) Other gains and losses (Notes 6 k. and 6 u.) Finance costs (Notes 6 l. and 6 u.) Share of profit of subsidiaries, associates and joint ventures accounted for using equity method (Notes 4 and 6 e.) Total non-operating income and expenses Income before income tax Less: Income tax expense (Notes 4 and 6 o.) Net income Other comprehensive income (loss): Items that will not be reclassified subsequently to profit or loss: Actuarial loss from defined benefit plans Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income Share of other comprehensive income of subsidiaries, associates and joint ventures Allocation of income tax to the above items Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Changes in fair value of available-for-sale financial assets Unrealized gains (losses) from investments in debt instruments measured at fair value through other comprehensive income Share of other comprehensive income of subsidiaries ,associates and joint ventures Allocation of income tax to the above items Other comprehensive (loss) income for the year, net of income tax Total comprehensive income for the year Earnings per share (NTD) (Notes 4 and 6 q.) Basic earnings per share Diluted earnings per share	For the Years Ended December 31,	For the Years Ended December 31,	For the Years Ended December 31,	For the Years Ended December 31,
	2018	％ 100 88 12 - - 12 1 2 1 - 4 8 3 (1) - 2 4 12 1 11 - (1) - - (1) - - - - - - (1) 10 1.59 1.58	2017
	Amount		Amount	％
	$ 36,969,800 32,624,724 4,345,076 (31,639) (749) 4,312,688 324,917 703,708 266,188 - 1,294,813 3,017,875 950,933 (230,055) (52,100) 949,617 1,618,395 4,636,270 346,001 4,290,269 14,866 (408,318) (37,175) - (430,627) (95,834) - - - - (95,834) (526,461) $ 3,763,808 $		32,160,867 27,530,090 4,630,777 749 (1,211) 4,630,315 211,936 755,511 191,507 - 1,158,954 3,471,361 496,269 1,625,690 (176,150) 857,571 2,803,380 6,274,741 183,085 6,091,656 14,928 - 771 - 15,699 (98,609) 391,878 - 47,571 - 340,840 356,539 6,448,195	100 86
				14 - -
				14
				1 2 - -
				3
				11
				2 5 (1) 3
				9
				20 1
				19
				- - - -
				-
				- 1 - - -
				1
				1
				20
				2.55
	$			2.53

• 258 -

						Total	Equity	50,818,609	6,091,656	356,539	6,448,195		-	5,040,921	62,307,725	825,358	63,133,083	4,290,269	(526,461)	3,763,808		-	-	(1)		66,896,890
				Changes in fair	value of	available-for-sale	financial assets	(1,228,183)	-	439,449	439,449		-	-	(788,734)	788,734	-	-	-	-		-	-	-		-
Others	Unrealized gain	or loss on	financial assets at	fair value through	other	comprehensive	income	-	-	-	-		-	-	-	(807,702)	(807,702)	-	(440,797)	(440,797)		-	-	-		(1,248,499)
			Exchange	differences	arising on	translation of	foreign operations	(293,769)	-	(98,609)	(98,609)		-	-	(392,378)	-	(392,378)	-	(95,834)	(95,834)		-	-	-		(488,212)
						Unappropriated	earnings	(1,958,584)	6,091,656	15,699	6,107,355		1,958,584	-	6,107,355	844,326	6,951,681	4,290,269	10,170	4,300,439		(609,166)	(5,498,189)	(1)		5,144,764
	Retained earnings					Special	Reserve	29,981,970	-	-	-		(1,958,584)	-	28,023,386	-	28,023,386	-	-	-		-	5,498,189	-		33,521,575
						Legal	Reserve	1,099,137	-	-	-		-	-	1,099,137	-	1,099,137	-	-	-		609,166	-	-		1,708,303
						Capital	Surplus	18,141	-	-	-		-	1,242,245	1,260,386	-	1,260,386	-	-	-		-	-	-		1,260,386
						Common	Stock	23,199,897	-	-	-		-	3,798,676	26,998,573	-	26,998,573	-	-	-		-	-	-		26,998,573
								$																		$
								Balance – January 1, 2017	Net income for the year ended December 31, 2017	Other comprehensive income (loss) for the year ended December 31, 2017	Total comprehensive income (loss)	Appropriations and distribution of 2016 earnings�	Special reserve used to cover accumulated deficits	Conversion of convertible bonds	Balance – December 31, 2017	Effects of retrospective application	Balance on January 1, 2018 after adjustments	Net income for the year ended December 31, 2018	Other comprehensive income (loss) for the year ended December 31, 2018	Total comprehensive income (loss)	Appropriations and distribution of 2017 earnings�	Legal Reserve	Special Reserve	Disposal of investments in equity instruments designated at fair value	through other comprehensive income	Balance – December 31, 2018

(English Translation of Financial Statements Originally Issued in Chinese) CHINA PETROCHEMICAL DEVELOPMENT CORPORATION STATEMENTS OF CASH FLOWS For the years ended December 31, 2018 and 2017 (Expressed in thousands of New Taiwan Dollars)

Cash flows from operating activities: Income before income tax Adjustments to reconcile income before income tax to net cash provided by operating activities: Depreciation expense Amortization expense Profit on Financial assets at fair value through profit or loss Interest expense Loss on reassessment of embedded derivatives at fair value through profit or loss Interest income Effect of exchange rate changes on bonds payable Share of profit of subsidiaries, associates and joint ventures accounted for using equity method Loss on disposal of property, plant and equipment Gain on disposal of investments Reversal of impairment loss on financial assets Impairment loss (reversal of) on non-financial assets Unrealized profit or loss on intercompany transactions Realized gain or loss on intercompany transactions Gain on redemption of bonds payable Gain arising from adjusting fair value of investment property Amortization of bond issued expense Total adjustments to reconcile income before income tax Change in operating assets and liabilities： Decrease (increase) in accounts receivable Increase in receivables－related parties (Increase) decrease in other receivables Decrease (increase) in inventories Decrease in prepayments Increase in other current assets Total changes in operating assets Increase current contract liabilities (Decrease) increase in accounts payable Decrease in payables－related parties Increase in other payables Decrease in provisions (Decrease) increase in other current liabilities Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash provided by operations Interest received Interest paid Income taxes paid Net cash provided by operating activities Cash flows from investing activities: Acquisition of current financial assets at fair value through profit or loss Proceeds from current financial assets at fair value through profit or loss Proceeds from disposal of financial assets carried at cost Return of capital of financial assets under cost method due to capital reduction Acquisition of investments accounted for using equity method Proceeds from disposal of investments accounted for using equity method Acquisition of property, plant and equipment Increase in other non-current assets Dividend received Net cash (used in) from investing activities Cash flows from financing activities: Increase in short-term loans Decrease in short-term loans Repayment of bond payable Increase in long-term bank loans Repayment of long-term bank loans Increase (decrease) in long-term bills payable Increase in other non-current liabilities Net cash provided (used in) by financing activities Net increase in cash and cash equivalents Cash and cash equivalents, beginning of the year Cash and cash equivalents, end of the year	For the years ended December 31,	For the years ended December 31,
	2018 $ 4,636,270 1,202,591 2,522 (261,643) 52,100 - (164,358) - (949,617) 6,941 - - 140,104 31,639 749 - (119,574) - (58,546) 945,151 (43,381) (73,370) 98,967 48,931 (11,056) 965,242 2,674 (106,655) - 918,652 (127,805) (334,837) 352,029 1,317,271 1,258,725 5,894,995 174,349 (56,391) (180,404) 5,832,549 (2,138,319) 624,255 - - (2,634,121) - (1,554,817) (1,096) 826,058 (4,878,040) 2,500,000 (2,100,000) - 2,650,000 (2,540,000) 50,000 38,045 598,045 1,552,554 6,912,818 $ 8,465,372	2017
		6,274,741 1,191,594 525 - 176,150 920,915 (185,457) (276,247) (857,571) 465 (2,674,417) (156,062) (22,875) (749) 1,211 (10,091) (41,244) 83,552
		(1,850,301)
		(1,580,451) (71,732) 24,436 (668,361) 138,888 (14,596)
		(2,171,816)
		- 179,782 (10,703) 797,208 (122,114) 187,628
		1,031,801
		(1,140,015)
		(2,990,316)
		3,284,425 188,858 (89,929) -
		3,383,354
		- - 1,419 10,635 (993,882) 3,052,814 (1,179,620) (89,444) 398,595
		1,200,517
		6,352,857 (8,998,839) (19,158) 1,770,000 (2,572,500) (470,000) 5,807
		(3,931,833)
		652,038 6,260,780
		6,912,818

• 260 -

(English Translation of Financial Statements Originally Issued in Chinese) CHINA PETROCHEMICAL DEVELOPMENT CORPORATION NOTES TO FINANCIAL STATEMENTS December 31, 2018 and 2017 (Amounts expressed in thousands of New Taiwan Dollars, except for per share information or unless otherwise specified)

1. HISTORICAL HIGHLIGHTS AND SCOPE OF BUSINESS

China Petrochemical Development Corporation (hereinafter referred to as the Company) was founded on July 8, 1969 under the approval of Ministry of Economic Affairs, R.O.C. Its registered address is 11th floor, No.12, Dongxing Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C.). The Company migrated to No.1, Jingjian Rd., Dashe Dist., Kaohsiung City 815, Taiwan (R.O.C.) on July 18, 2016. The Company primarily engage in the production of petroleum, alkali-chlorine, phosphoric acid and other petrochemical products and by-products and the storage, transportation, purchase and sale of these products, related chemicals and their raw materials. The primary products are acrylonitrile, caprolactam, acetic acid and nylon.

2. APPROVAL DATE AND PROCEDURES OF THE FINANCIAL STATEMENTS

The accompanying financial statements for the years ended December 31, 2018 and 2017 were authorized for issue by the Board of Directors on March 22, 2019.

3. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

• a. The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018:

New, Revised or Amended Standards and Interpretations Amendment to IFRS 2 “Classification and Measurement of Share-based Payment Transactions” Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts” IFRS 9 “Financial Instruments” IFRS 15 “Revenue from Contracts with Customers” Amendment to IAS 7 “Statement of Cash Flows -Disclosure Initiative” Amendment to IAS 12 “Income Taxes- Recognition of Deferred Tax Assets for Unrealized Losses” Amendments to IAS 40 “Transfers of Investment Property” Annual Improvements to IFRS Standards 2014–2016 Cycle: Amendments to IFRS 12 Amendments to IFRS 1 and Amendments to IAS 28 IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

Effective date **per IASB **

January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2017 January 1, 2018 January 1, 2018

• 261 -

Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of signification changes are as follows:

1. IFRS 15 “Revenue from Contracts with Customers”

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces the existing revenue recognition guidance, including IAS 18 “Revenue” and IAS 11 “Construction Contracts”. The Company applies this standard retrospectively with the cumulative effect, it need not restate those contracts, but instead, continues to apply IAS 11, IAS 18 and the related Interpretations for comparative reporting period. The Company recognizes the cumulative effect upon the initially application of this Standard as an adjustment to the opening balance of retained earnings on January 1, 2018.

The following are the nature and impacts on changing of accounting policies:

(1) Sales of goods

For the sale of products, in the past, revenue was recognized when the goods are delivered to the customers’ premises, which is taken to be the point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue is recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods. Under IFRS 15, revenue is recognized when a customer obtains control of the goods. For some made-to-order paper product contracts, the customer controls all of the work in progress as the products are being manufactured. When this is the case, revenue will be recognized as the products are being manufactured.

(2) Rending of services

The Company is involved in managing forest resources, as well as performing related services. If the services under a single arrangement are rendered in different reporting periods, then the consideration is allocated on a relative fair value basis between the different services. Revenue is currently recognized using the stage-of-completion method. Under IFRS 15, the total consideration in the service contracts is allocated to all services based on their stand-alone selling prices. The stand-alone selling prices will be determined based on the list prices at which the Company sells the services in separate transactions.

(3) Commission

For commissions earned by the Company, the Company has determined that it acts in the capacity of an agent for certain transactions. Under IFRS 15, the assessment will be based on the whether the Company controls the specific goods before transferring to the end customer, rather than whether it has exposure to significant risks and rewards associated with the sale of goods.

• 262 -

(4) Construction contracts

Contract revenue used to be includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. When a claim or variation is recognized, the measure of contract progress or contract price is revised and the cumulative contract position is reassessed at each reporting date.

Under IFRS 15, claims and variations will be included in the contract accounting when they are approved.

(5) Impacts on financial reporting

The adoption of IFRS 15 did not have any a significant impact on its financial statements.

1. IFRS 9 “Financial Instruments”

IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and Measurement” which contains classification and measurement of financial instruments, impairment and hedge accounting.

As a result of the adoption of IFRS 9, the Company adopted the consequential amendments to IAS 1 “Presentation of Financial Statements” which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCI. Previously, the Company’s approach was to include the impairment of trade receivables in administrative expenses. Additionally, the Company adopted the consequential amendments to IFRS 7 Financial Instruments: Disclosures that are applied to disclosures about 2018, but generally have not been applied to comparative information

The detail of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

• (1) Classification of financial assets and financial liabilities

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Company classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please see note 4.

• 263 -

The adoption of IFRS 9 did not have any a significant impact on its accounting policies on financial liabilities.

• (2) Impairment of financial assets

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with the ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than they are under IAS 39 – please see note 4.

• (3) Transition

The adoption of IFRS 9 have be applied retrospectively, except as described below,

• Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as on January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9.

• The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application.

• The determination of the business model within which a financial asset is held.

• The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.

• The designation of certain investments in equity instruments not held for trading as at FVOCI.

• If an investment in a debt security had low credit risk at the date of initial application of IFRS 9, then the Company assumed that the credit risk on its asset will not increase significantly since its initial recognition.

• 264 -

• (4) Classification of financial assets on the date of initial application of IFRS 9

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

assets as of	January 1, 2018.
Financial assets Cash and cash equivalents Equity instruments Equity instruments Equity instruments Equity instruments Trade and other receivables	IAS 39 Measurement categories Carrying amount Loans and receivables 6,912,818 Designated as at FVTPL 990,664 Available-for-sale 1,677,346 Carried at cost 669,521 Carried at cost 1,102,514 Loans and receivables 3,655,694	IFRS 9 Measurement categories Carrying amount Amortized cost 6,912,818 Mandatorily at FVTPL 990,664 FVOCI 1,677,346 FVOCI 694,660 Mandatorily at FVTPL 1,499,165 Amortized cost 3,655,694	Note
	Measurement categories Loans and receivables Designated as at FVTPL Available-for-sale Carried at cost Carried at cost Loans and receivables	Measurement categories Amortized cost Mandatorily at FVTPL FVOCI FVOCI Mandatorily at FVTPL Amortized cost	(a) (b) (c) (d)

• a. Under IAS 39, these equity securities were designated as at FVTPL because they were managed on a fair value basis and their performance was monitored on this basis. These assets have been classified as mandatorily measured at FVTPL under IFRS 9.

• b. These equity securities represent investments that the Company intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Company has designated these investments at the date of initial application as measured at FVOCI; therefore the carrying amount of these equity securities were $1,677,346 thousand on January 1, 2018.

• c. These equity securities represent investments that the Company intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Company has designated these investments at the date of initial application as measured at FVOCI, resulting in a increase of $13,020 thousand and an increase of $12,119 thousand in other equity and retained earnings respectively and the carrying amount $694,660 thousand were recognized on January 1, 2018.

• d. These equity securities, as permitted by IFRS 9, the Company has designated these investments at the date of initial application as measured at FVTPL, resulting carrying amount of $1,499,165 thousand in those assets recognized, and an increase of $396,651 thousand in the retained earnings.

The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 upon transition to IFRS 9 on January 1, 2018.

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Fair value through profit or loss Beginning balance of FVTPL (IAS 39) Additions – equity instruments: From financial assets carried at cost Recognized by equity method Total Fair value through other comprehensive income Beginning balance of available for sale (including carried at cost) (IAS 39) Addition – equity instruments: From available for sale From financial assets carried at cost Recognized by equity method Subtraction – equity instruments: Recognized by equity method Total Amortized cost Beginning balance of bond investment without an active market, held to maturity, trade and other receivables, and other financial assets Total	December 31, 2017 IAS 39 Carrying amount $ 2,762,699 - - $ 2,762,699 $ 1,677,346 - - - $ 1,677,346 $ 10,568,512 $ 10,568,512	Reclassi- fications (669,521) - - (669,521) (1,677,346) 1,677,346 669,521 - - 669,521 - -	Remeasure- ments - 396,651 - 396,651 - - 25,139 - 25,139 - -	January 1, 2018 IFRS 9 Carrying amount 2,489,829 2,372,006 10,568,512	January 1, 2018 Retained earnings (attributable to the Parents) - 396,651 411,867 808,518 - - 12,119 29,999 (6,310) 35,808 - -	January 1, 2018 Other equity - - (1,989) (1,989) - - 13,020 (29,999) - (16,979) - -	January 1, 2018 Retained earnings (attributable to the Non- controlling)
							- - -
							-
							- - - - -
							-
							-
							-

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• b. The impact of IFRS endorsed by FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019 in accordance with Ruling No. 1070324857 issued by the FSC on July 17, 2018:

Ruling No. 1070324857 issued by the FSC on July 17, 2018:
New, Revised or Amended Standards and Interpretations IFRS 16 “Leases” IFRIC 23 “Uncertainty over Income Tax Treatments” Amendments to IFRS 9 “Prepayment features with negative compensation“ Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term interests in associates and joint ventures“ Annual Improvements to IFRS Standards 2015–2017 Cycle	Effective date **per IASB **
	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of signification changes are as follows:

1. IFRS 16“Leases”

IFRS 16 replaces the existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

IFRS 16 introduces a single and an on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of expenses related to those leases will now be changed since IFRS 16 replaces the straightline operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of low-value items. The lessor accounting remains similar to the current standard – i.e. the lessors will continue to classify leases as finance or operating leases.

• (1) Determining whether an arrangement contains a lease

On transition to IFRS 16, the Company can choose to apply either of the following:

• IFRS 16 definition of a lease to all its contracts; or

• a practical expedient that does not need any reassessment whether a contract is, or contains, a lease.

The Company plans to apply the practical expedient to grandfather the definition of a lease upon transition. This means that it will apply IFRS 16 to all contracts entered

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into before January 1, 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.

• (2) Transition

As a lessee, the Company can apply the standard using either of the following:

• retrospective approach; or

• modified retrospective approach with optional practical expedients.

The lessee applies the election consistently to all of its leases.

On January 1, 2019, the Company plans to initially apply IFRS 16 using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information.

When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Company chooses to elect the following practical expedients:

• apply a single discount rate to a portfolio of leases with similar characteristics.

• adjust the right-of-use assets, based on the amount reflected in IAS 37 onerous contract provision, immediately before the date of initial application, as an alternative to an impairment review.

• apply the exemption not to recognize the right-of-use assets and liabilities to leases with lease term that ends within 12 months of the date of initial application.

• exclude the initial direct costs from measuring the right-of-use assets at the date of initial application.

• use hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

• (3) So far, the most significant impact identified is that the Company will have to recognize the new assets and liabilities for the operating leases of its offices, warehouses, and factory facilities. The Company estimated that the right-of-use assets and the lease liabilities to increase by $299,236 thousand and $299,236 thousand respectively on January 1, 2019. No significant impact is expected for the Company’s finance leases. Besides, The Company does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant. The above impact may change due to any changes of future circumstances and conditions.

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• c. The impact of IFRS issued by IASB but not yet endorsed by the FSC

As of the date the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but not yet endorsed by the FSC:

New, Revised or Amended Standards and Interpretations 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 per IASB January 1, 2020 Effective date to be determined by IASB January 1, 2021 January 1, 2020

Those which may be relevant to The Company are set out below:

Issuance/ Release Standards or Dates Interpretations Content of amendment September 11, 2014 Amendments to IFRS The amendments address an 10 and IAS 28 "Sale or acknowledged inconsistency between the Contribution of Assets requirements in IFRS 10 and those in IAS Between an Investor 28 (2011) in dealing with the sale or and Its Associate or contribution of assets between an Joint Venture" investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.

The Company is evaluating the impact on its financial position and financial performance of the initial adoption of the above-mentioned standards or interpretations. The results thereof will be disclosed when the Company completes its evaluation.

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4. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies, which have been applied consistently to all periods presented in these financial statements, except for notes to Note 3, 4 (f.) and 4 (n.) on accounting changes.

• a. Statement of compliance

These annual financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to the Regulations) and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by FSC (hereinafter referred to as the IFRSs endorsed by FSC).

• b. Basis of Preparation

• Basis of measurement

The financial statements have been prepared on a historical cost basis except for the following material items in the balance sheets:

• (1) Financial instruments at fair value through profit or loss are measured at fair value (including derivative financial instruments);

• (2) Fair value through other comprehensive income (Available-for-sale financial assets) are measured at fair value;

• (3) The net defined benefit liability (assets) is recognized as the present value of the defined benefit obligation less the fair value of plan assets and the effect of the asset ceiling (please see note 6 n.);

• (4) Investment properties are measured at fair value.

• Functional and presentation currency

The functional currency of the Company is determined based on the primary economic environment in which the entities operate. The financial statements are presented in New Taiwan Dollar, which is the Company’s functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand

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• c. Foreign currency

• Foreign currency transaction

Transactions in foreign currencies are translated to the respective functional currencies of the Company entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are remeasured to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are remeasured using the exchange rate at the date of transaction.

Foreign currency differences arising on remeasurement are recognized in profit or loss, except for the following differences which are recognized in other comprehensive income:

• Fair value through other comprehensive income (Available-for-sale )equity investment;

• A financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or

• Qualifying cash flow hedges to the extent the hedge is effective.

• Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Company’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Company’s functional currency at average rate. Foreign currency differences are recognized in other comprehensive income, and are presented as exchange differences arising on translation of foreign operations in equity.

However, if the foreign operation is a non-wholly owned subsidiary, then the relevant proportion of the translation difference is allocated to non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. If the Company disposes of only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

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When the settlement of a monetary item receivable from or payable to a foreign operation is neither planed nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the exchange differences arising on translation of foreign operations in equity.

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

An asset is classified as current if:

1. It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

2. It is held primarily for the purpose of trading;

3. It is expected to be realized within twelve months after the reporting period; or

4. The asset is cash and cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

A liability is classified as current if:

1. It is expected to be settled during the in its normal operating cycle;

2. It is held primarily for the purpose of trading;

3. It is due to be settled within twelve months after the reporting period; or

4. It does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

5. e. Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to cash at the known amounts and subject to insignificant risk of value changes. Time deposits that fit the definition above and are used by the Company in the management of its short-term commitments are comprised in cash equivalents.

Bank overdrafts that are repayable on demand and form an integral part of the Company, are recorded in cash and cash equivalents in statements of cash flows.

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• f. Financial instruments

• Financial assets (policy applicable from January 1, 2018)

Financial assets are classified into the following categories: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL).

The Company shall reclassify all affected financial assets only when it changes its business model for managing its financial assets.

• (i) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL ：

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

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

A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

• (ii) Fair value through other comprehensive income (FVOCI )

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL ：

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

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

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an instrumentby-instrument basis.

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A financial asset measured at FVOCI is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses, and impairment losses, deriving from debt investments are recognized in profit or loss; whereas dividends deriving from equity investments are recognized as income in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses of financial assets measured at FVOCI are recognized in OCI. On derecognition, gains and losses accumulated in OCI of debt investments are reclassified to profit or loss. However, gains and losses accumulated in OCI of equity investments are reclassified to retain earnings instead of profit or loss.

Dividend income derived from equity investments is recognized on the date that the Company’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date.

(iii) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets and accounts receivable, which is presented as accounts receivable. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss.

(iv) Business model assessment

The Company makes an assessment of the objective of the business model in which a financial asset is held at portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes ：

• the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;

• how the performance of the portfolio is evaluated and reported to the Company’s management;

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• the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

• how managers of the business are compensated ─ e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

• the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

• Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, and are consistent with the Company’s continuing recognition of the assets.

• Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

• (v) Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial assets on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers ：

• contingent events that would change the amount or timing of cash flows ；

• terms that may adjust the contractual coupon rate, including variable rate features ；

• prepayment and extension features ； and

• terms that limit the Company’s claim to cash flows from specified assets （ e.g. non-recourse features ）

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(vi) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and accounts receivable, other receivable, leases receivable, guarantee deposit paid and other financial assets), debt investments measured at FVOCI, accounts receivable measured at FVOCI and contract assets.

The Company measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL ：

• debt securities that are determined to have low credit risk at the reporting date ； and

• other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company’s historical experience and informed credit assessment as well as forward-looking information.

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings’.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

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The Company considers a financial asset to be in default when the financial asset is more than 90 days past due or the borrower is unlikely to pay its credit obligations to the Company in full.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data ：

• significant financial difficulty of the borrower or issuer ；

• a breach of contract such as a default or being more than 90 days past due ；

• the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider ；

• it is probable that the borrower will enter bankruptcy or other financial reorganization ； or

• the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Company recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss.

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

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(vii) Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the assets expire, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a debt instrument in its entirety, the Company recognizes the difference between its carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in “other equity – unrealized gains or losses on fair value through other comprehensive income”, in profit or loss, and presented it in the line item of non-operating income and expenses in the statement of comprehensive income.

On derecognition of a financial asset other than in its entirety, the Company allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss, and presented in the line item of non-operating income and expenses. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

1. Financial assets (policy applicable before January 1, 2018)

Financial assets are classified into the following categories: financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity financial assets, and loans and receivables.

• (i) Financial assets at fair value through profit or loss

A financial asset is classified in this category if it is classified as held for trading or is designated as such on initial recognition.

Financial assets are classified as held for trading if they are acquired principally for the purpose of selling in the short term. The Company designates financial assets, other than those classified as held for trading, as at fair value through profit or loss at initial recognition under one of the following situations ：

• Designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;

• Performance of the financial asset is evaluated on a fair value basis;

• A hybrid instrument contains one or more embedded derivatives.

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At initial recognition, financial assets classified under this category are measured at fair value. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend and interest income, are recognized in profit or loss, under other income of nonoperating income and expense. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at amortized cost, and are included in financial assets measured at cost.

(ii) Available-for sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated available-for-sale or are not classified in any of the other categories of financial assets. Available-for-sale financial assets are recognized initially at fair value, plus, any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, interest income calculated using the effective interest method, dividend income, and foreign currency differences on monetary financial assets, are recognized in other comprehensive income and presented in the unrealized gains or losses on available for sale financial assets in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, under other gains and losses of non-operating income and expense. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at amortized cost, and are included in financial assets measured at cost.

Dividend income is recognized in profit or loss on the date that the Company’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. Such dividend income is included in other income account in statements of comprehensive income.

Interest income from investment in bond security is recognized in profit or loss, under other income of non-operating income and expenses.

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• (iii) Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise trade receivables and other receivables. At initial recognition, these assets are recognized at fair value, plus, any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses, other than insignificant interest on short-term receivables. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Interest income is recognized in profit or loss, under other income.

• (iv) Impairment of financial assets

The impairment loss of financial assets not measured at fair value is assessed on the report date. A financial asset is impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a loss event) that occurred subsequent to the initial recognition of the asset and that a loss event (or events) has an impact on the future cash flows of the financial assets that can be estimated reliably.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is accounted for as objective evidence of impairment.

All individually significant receivables are assessed for specific impairment. Receivables that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or lesser than the one suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of its estimated future cash flows discounted at the asset’s original effective interest rate. Such impairment loss is not reversible in subsequent periods.

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An impairment loss in respect of a financial asset is reduced from the carrying amount, except for trade receivables, in which an impairment loss is reflected in an allowance account against the receivables. When it is determined a receivable is uncollectible, it is written off from the allowance account. Any subsequent recovery of receivable written off is recorded in the allowance account. Changes in the amount of the allowance accounts are recognized into profit or loss.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss.

If, in a subsequent period, the amount of the impairment loss of a financial assets measured at amortized cost decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the decrease in impairment loss is reversed through profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost before impairment was recognized at the reversal date.

Impairment losses recognized on available-for-sale equity security are not reversed through profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income, and accumulated in other equity. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognized, then the impairment loss is reversed, with the amount of the reversal recognized in profit or loss.

Bad debt losses and recoveries of receivables are recognized in profit or loss as administrative expense. Impairment losses and recoveries of financial assets other than receivables are recognized in profit or loss under non-operating revenues and expenses.

(v) Derecognition of financial assets

The Company derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in other equity – unrealized gains or losses from available for sale financial assets is recognized in profit or loss, under other income of non-operating income and expenses.

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On partial derecognition of a financial assets, the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in other equity account as unrealized gains or losses from available for sale financial assets is reclassified to profit or loss, under other gains and losses of non-operating income and expenses.

3. Financial liabilities and equity instruments

• (i) Classification of debt or equity instruments

Debt or equity instruments issued by the Company are classified as financial liabilities or equity instruments in accordance with the substance of the contractual agreement.

Equity instruments refer to surplus equities of the assets after the deduction of all the debts for any contracts. Equity instruments issued are recognized based on amount of consideration received less the direct issuance cost.

Compound financial instruments issued by the Company comprise convertible bonds payable that can be converted to share capital at the option of the holder, where the number of shares to be issued is fixed.

The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

Interest related to the financial liability is recognized in profit or loss, under other gains and losses of non-operating income and expenses.

On conversion, the financial liability is reclassified to equity, and no gain or loss is recognized.

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• (ii) Financial liabilities at fair value through profit or loss

A financial liability is classified in this category if it is classified as held-for-trading or is designated as such on initial recognition. A financial liability is classified as held-for-trading if it is acquired principally for the purpose of selling in the short term. Financial liabilities, other than the ones classified as held-for-trading, are designated as at fair value through profit or loss at initial recognition under one of the following situations:

• A. Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on a different basis;

• B. Performance of the financial liabilities is evaluated on a fair value basis;

• C. A hybrid instrument contains one or more embedded derivatives.

Attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value, and changes therein, which take into account any interest expense, are recognized in profit or loss, under other gains and losses of non-operating income and expenses.

Financial liabilities at fair value through profit or loss are measured at cost if it is a short sale of unquoted equity investment whose fair value cannot be reliably measured and that the short seller is obligated to deliver the equity instrument.

The Company issues and designates financial guarantee contracts and loan commitments as at fair value through profit or loss. Any gains and losses are recognized in profit or loss, under other gains and losses of non-operating income and expenses.

(iii) Other financial liabilities

At initial recognition, financial liabilities not classified as held-for-trading, or designated as at fair value through profit or loss, which comprise of loans and borrowings, and trade and other payables, are measured at fair value, plus, any directly attributable transaction cost. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, under other gains and losses of non-operating income and expenses.

(iv) Derecognition of financial liabilities

A financial liability is derecognized when its contractual obligation has been discharged or cancelled or expires. 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, under other gains and losses of non-operating income and expenses.

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• (v) Offsetting of financial assets and liabilities

Financial assets and liabilities are presented on a net basis when the Company has the legally enforceable rights to offset, and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

4. Derivative financial instruments

The Company holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are recognized initially at fair value, and attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss and included in statement of comprehensive income. When a derivative is designated as a hedging instrument, its timing of recognition in profit or loss is determined based on the nature of the hedging relationship. When the fair value of a derivative instrument is positive, it is classified as a financial asset, and when the fair value is negative, it is classified as a financial liability.

Embedded derivatives are separated from the host contract and accounted for separately when the economic characteristics and risk of the host contract and of the embedded derivatives are not closely related.

g. Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted average method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

• h. Investments in associates

Associates are those entities in which the Company has significant influence, but not control or joint control, over their financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill which is arising from the acquisition less any accumulated impairment losses.

The Company’s share of the profit or loss and other comprehensive income of investments accounted for using equity method are included, after adjustments to align the said investees’ accounting policies with those of the Company, in the financial statements from the date that significant influence commences until the date that significant influence ceases.

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Unrealized profits resulting from the transactions between the Company and an associate are eliminated to the extent of the Company’s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.

If the Company’s share of losses exceeds its interest in associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the investee.

i. Investment in subsidiary

In the preparation of financial reports, the Company adopts the equity method assessment method for the investee companies that can be controlled. Under the equity method, in the financial report, the current profit and loss and other comprehensive gains and losses, and in the financial report of the consolidated basis, the current profit and loss and other comprehensive gains and losses are attributable to the owners of the parent company, and the financial reporting owners' equity and consolidated basis the interests of the owners of the parent company in the financial report are the same. The Company's changes in the ownership interest of the subsidiaries did not result in loss of control and were treated as an interest transaction with the owners.

• j. Investment property

Investment property is the property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently via cost less accumulated depreciation and accumulated impairment losses. Depreciation expense is calculated based on the depreciation method, useful life and residual value which are the same as those adopted for property, plant and equipment.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of raw materials and direct labor, and any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalized borrowing costs. Investment property is subsequently measured at fair value, with any change therein recognized in profit or loss.

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

• k. Property, plant and equipment

• Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset.

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The cost of a self-constructed asset comprises material, labor, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost that eligible for capitalization. Cost also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. The cost of the software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately, unless the useful life and the depreciation method of the significant part of an item of property, plant and equipment are the same as the useful life and depreciation method of another significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment is determined on the difference between the net disposal proceeds, if any, and the carrying amount of the item, and is recognized in profit or loss account as other gains and losses.

1. Reclassification to investment property

An item of property, plant and equipment is reclassified to investment property at its carrying amount when the use of the property changes from owner-occupied to investment property. Any difference at the date of the change in use between the carrying amount of the property and its fair value is recognized as a revaluation of property, plant and equipment. Any existing or arising revaluation surplus previously recognized in OCI is not transferred to profit or loss at the date of transfer or on subsequent disposal of the investment property.

1. Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance is expensed as incurred.

4. Depreciation

The depreciable amount of an asset is determined after deducting its residual amount and is allocated using the straight line method over its useful life. The items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period is recognized in profit or loss.

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If there is reasonably certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.

Land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

Land improvement	2~10 years
Buildings and constructions	2~60 years
Machine equipment	2~17 years
Transportation equipment	2~ 5 years
Other equipment	2~13 years

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change(s) is accounted for as a change in an accounting estimate.

• l. Impairment ─ non-derivative financial assets

The Company evaluates the impairment losses and estimates the recoverable amounts of the impaired assets on each reporting date in terms of inventories, deferred tax assets, assets arising from employee benefits and non-financial assets other than non-current assets held for sale. If it is not possible to determine the recoverable amount (fair value less cost to sell and value in use) for the individual asset, then the Company determines the recoverable amount for the asset's cash-generating unit (CGU).

The recoverable amount for individual asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss is recognized immediately in profit or loss.

The Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the Company estimates the recoverable amount of that asset.

Notwithstanding whether indicators exist, recoverability of goodwill and intangible assets with indefinite useful lives or those not yet in use are tested at least annually. Impairment loss is recognized if the recoverable amount is less than the carrying amount.

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For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the acquirer’s cash-generating units, or groups of cashgenerating units, that is expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units or group of units.

If the carrying amount of the cash-generating units exceeds the recoverable amount of the unit, the Company recognizes the impairment loss and the impairment loss is allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited.

m. Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

1. Site dismantling

The estimated obligation on the dismantling, relocation or restoration of property, plant and equipment is recognized as decommissioning cost and liability of property, plant and equipment. The relevant costs of assets are adjusted by subsequent price variation for dismantling and restoration. Depreciation is provided per the remaining useful life of the adjusted cost.

2. Site restoration

In accordance with the Company’s published environmental policy and applicable legal requirements, a provision for site restoration in respect of contaminated land, and the related expense, is recognized when the land is contaminated.

n. Revenue

1. Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

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The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement. For an export transaction, usually it is via free on board shipping point, and the risk transfer occurs upon loading the goods onto the relevant carrier at the port; however, for an import transaction, risk transfer occurs upon receipt by the customer.

2. Commissions

When the Company acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognized is the net amount of commission made by the Company, and is recognized in proportion to the stage of completion of the transaction.

1. Rental income

Rental income from investment property is recognized in non-operating incomes and expenses on a straight-line basis over the lease term.

4. Financial composition

The Company expected the time period of delivering goods or rendering services to customers and payment received from those customers would be under one year; therefore the time value of currency used during transactions would not be adjusted.

• o. Employee benefits

• Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

1. Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on (market yields of high quality corporate bonds or government bonds) bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid.

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The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An economic benefit is available to the Company if it is realizable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognized immediately in profit or loss.

Re-measurement of net defined benefit liability (asset) (including actuarial gains, losses and the return on plan asset and changes in the effect of the asset ceiling, excluding any amounts included in net interest) is recognized in other comprehensive income (loss). The effect of re-measurement of the defined benefit plan is charged to retained earnings.

The Company recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit obligation and any related actuarial gains or losses and past service cost that had not previously been recognized.

1. Short term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

• p. Income taxes

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations, or are recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date, or the actual legislated tax rate; as well as tax adjustments related to prior years.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are not recognized for the following:

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• Assets and liabilities that are initially recognized but not related to the business combination, and have no effect on net income or taxable gains (losses) during the transaction.

• Temporary differences arising from equity investments on subsidiaries or joint ventures, where there is a high probability that such temporary differences will not reverse.

• Initial recognition of goodwill.

Deferred taxes are measured based on the statutory tax rate on the reporting date; or the actual legislated tax rate, during the year of expected asset realization or debt liquidation.

Deferred tax assets and liabilities may be offset against each other if, and only if, the following criteria are met:

1. if the Company has the legal right to settle tax assets and liabilities on a net basis; and

2. the taxing of deferred tax assets and liabilities fulfill one of the below scenarios:

3. (1) levied by the same taxing authority; or

4. (2) levied by different taxing authorities, but where each such authority intend to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation; or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset is recognized for the carry-forward of unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits and deductible temporary differences are also re-evaluated every year on the financial reporting date, and adjusted based on the probability that future taxable profit will be available against which the unused tax losses, unused tax credits and deductible temporary differences can be utilized.

• q. Business combination

Goodwill is measured at the consideration transferred less the amounts of the identifiable assets acquired and liabilities assumed (generally at fair value) at the acquisition date. If the amount of net assets acquired and liabilities assumed exceeds the acquisition price, the Company reassesses whether it has correctly identified all of the assets acquired and liabilities assumed, and recognizes a gain for the excess.

The Company shall measure any non-controlling interests in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets, if the non-controlling interests are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation.

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In a business combination achieved in batches, the previously held equity interest in the acquiree at its acquisition date fair value is remeasured, and the resulting gain or loss, if any, is recognized in profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, provisional amounts for the items for which the accounting is incomplete are reported in the Company’s financial statements. During the measurement period, the provisional amounts recognized at the acquisition date are retrospectively adjusted, or additional assets or liabilities are recognized to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period shall not exceed one year from the acquisition date.

All transaction costs relating to a business combination are recognized immediately as expenses when incurred, except for the issuance of debt or equity instruments.

r. Earnings per share

The Company discloses the Company basic and diluted earnings per share attributable to ordinary equity holders of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary shareholder of the Company divided by weighted average number of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders of the Company, divided by weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as convertible bonds and employee bonus.

s. Operating segments

An operating segment is a component of the Company that engages in business activities from which it may incur revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Company). Operating results of the operating segment are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. Each operating segment consists of stand-alone financial information.

5. MAJOR SOURCES OF SIGNIFICANT ACCOUNTING ASSUMPTIONS, JUDGMENTS AND ESTIMATION UNCERTAINTY

The preparation of the financial statements in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers as endorsed by the FSC requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The management continuously reviews the estimates and basic assumptions. Changes in accounting estimates are recognized in the period of change.

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Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements is as follows:

• (a) Fair valuation of investment property

The Company’s accounting policies include measuring financial and non-financial assets and liabilities at fair value through profit or loss.

The Company’s financial instrument valuation group conducts independent verification on fair value by using data sources that are independent, reliable, and representative of exercise prices. This financial instrument valuation group also periodically adjusts valuation models, conducts back-testing, renews input data for valuation models, and makes all other necessary fair value adjustments to assure the rationality of fair value. The Company strives to use market observable inputs when measuring assets and liabilities. Different levels of the fair value hierarchy to be used in determining the fair value of financial instruments are as follows:

• (i) Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.

• (ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).

• (iii) Level 3: inputs for the assets or liability that are not based on observable market data.

Information on valuation use hypothesis factors was as follows:

• (i) Note 6 h. - Investment property;

• (ii) Note 6 v. - Financial Instruments.

6. EXPLANATION TO SIGNIFICANT ACCOUNTS

• a. Cash and cash equivalents

Cashand cash equivalents
Cash on hand Checking and demand deposits Time deposits Cash equivalents Cash and cash equivalents	December 31, 2018 $ 704 117,007 5,978,582 2,369,079 $ 8,465,372	December 31, 2017
		693 111,466 5,539,021 1,261,638
		6,912,818

Time deposits which are held for the purpose of meeting short-term cash commitments, rather than for investment or other purposes, that are readily convertible to cash at the known amounts and subject to insignificant risk of value changes, are reported as cash equivalents.

Please refer to Note 6 w. for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Company.

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b. Financial assets

1. The components of financial assets were as follows:

The components of financial assets were as follows:
Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss -Non- current Financial assets held for trading－current Financial assets reported at fair value through profit or loss－current Sub-total Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income-non-current Sub-total Available-for-sale financial assets－non-current Financial assets carried at cost－non-current Total	December 31, 2018 $ 1,.016,992 3,248,545 - - 4,265,537 1,963,687 1,963,687 - - $ 6,229,224	December 31, 2017
		- - 563,708 426,956 990,664 - - 1,677,346 1,772,035 4,440,045

Please refer to Note 6 u. and 6 p. for the gain or loss on financial assets recognized at fair value through profit or loss and other comprehensive income.

Core Pacific City Co., Ltd held a provisional shareholders’ meeting on January 17, 2018 in order to cover its deficit of $7,698,679 thousand, which represented 37.7% of its actual paid-in capital. The reduction record date was January 17, 2018. Based on its articles of incorporation, there is no significant impact on the issuance of its shareholders’ preferred stock concerning the matter.

During the year ended December 31, 2018, the dividends of $619,522 thousand, related to equity investments at fair value through other comprehensive income held on December 31, 2018, were recognized.

On February 26, 2018, the Company’s board of directors approved a resolution to invest in Core Pacific City Co., Ltd by issuing 156,000 thousand preferred shares amounting to NT$1,560,000 thousand and accounted in financial assets at fair value through profit or － loss non-current.

1. The director of Praxair Chemax Semiconductor Materials Co., Ltd. (hereinafter referred to as “PRAXAIR”) delegated by the Company, was elected as the new Chairman in the directors’ meeting on Jan. 30th, 2013. However, Praxair Inc. did not recognize the director delegated by the Company as the Chairman, resulting in the new Chairman being unable to exercise his authority. Also, the supervisor appointed by the Company was prevented from auditing the accounts and records pursuant to the Company Law, hence, the new Chairman and the designated supervisor representing PRAXAIR, filed an action asking the vice chairman and general manager to provide the accounts and records and requested to return the seal, business invasion and others in a civil lawsuit. The vice chairman delegated by Praxair Inc. claimed privilege to act as the Chairman and filed legal actions declaring

2. 294 -

the non-existence of the new Chairman’s commission of authority and also sent a letter to the court requesting a dissolution of PRAXAIR, which was rejected by the courts. The supervisor appointed by Praxair Inc. illegally called a temporary shareholders’ meeting in 2013 to propose the dissolution of the Company and reelection of directors and supervisors. Hence, the Company filed legal actions declaring the withdrawn of the resolution from the illegal temporary shareholders’ meetings and the resolutions from the temporary shareholders’ meeting was not established. Currently, the supervisor filed the legal action against the manager for submitting the accounts and the records, after winning the 1st and 2nd trial, the defendant appealed but was dismissed by the 3rd trial instance. This case was remanded to the Taipei High Court but the verdict was dismissed in 2015, the Company was not satisfied with the appeal and filed the legal action. On the other side, the vice chairman designated by Praxair Inc. filed legal action declaring the non-existence of the new Chairman’s commission of authority, after the judgement from the High Court that the Chairman designated by the Company won the verdict, the defendant appealed to the 3rd instance, with the Supreme Court dismissing the appeal. The whole case confirms the appointed relationship between the Chairman designated by the Company and PRAXAIR exists. On Nov. 19th 2016, the letter from Ministry of Economic Affairs states that Lin KeMing, appointed by the Company, is the Chairman of PRAXAIR, and restored the representative duty per the judgement No. 2455 from the Supreme High Court in 2015. However, according to the requirement from Ministry of Economic Affairs, both sides were not able to hold the legitimate reelection prior to Jan. 9th 2017 which resulted in vacancy of directors and supervisors of PRAXAIR. In order to strive for the rights and interests of the shareholders, the Company immediately brought the arbitration per joint venture agreement of both sides and applied for an auditor and provisional administrator to instruct the central section office of the Ministry of Economic Affairs to allow Praxair Inc. to conduct the change of registration on July 6th 2017. Ignoring the purpose of joint venture agreement of both sides, the Company has filed a request for the arbitration of International Chamber of Commerce in 2017 and received the award issued by the International Court of International Chamber of Commerce in September 3, 2018. A part of the award favored for the Company and confirmed that the Company was entitled to receive the dividends from PCSM for the year of 2013. In order to protect the Company’s right, the Company submitted a lawsuit regarding to withdrawing a part of such Arbitration award against the Company to Taipei District Court.

As of December 31, 2018, and 2017, the Company provided as collateral portion of its financial assets. Please refer to Note 8 for details of the related assets pledged as collateral.

• －

• 1. Sensitivity analysis equity price risk:

If the equity price changes, and if it is based on the same basis for both years and assumes that all other variables remain the same, the impact to comprehensive income will be as follows:

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Equity price at reporting date Increase of 1% Decrease of 1%	For the Years Ended December 31,	For the Years Ended December 31,	For the Years Ended December 31,
	2018 After-tax other comprehensive income After-tax Profit(loss) $ 19,637 42,655 $ (19,637) (42,655)	2017
	After-tax other comprehensive income $ 19,637 $ (19,637)	After-tax other comprehensive income 16,773 (16,773)	After-tax Profit(loss)
			9,907
			(9,907)

c. Notes and accounts receivable, net

Accounts receivable Other receivables Less：Allowance for doubtful receivables Net book value	December 31, 2018 $ 3,043,618 106,181 (332,496) $ 2,817,303	December 31, 2017
		3,945,388 42,802 (332,496)
		3,655,694

Movements of the allowance for doubtful receivables for the years ended December 31, 2018 and 2017 were as follows:

Balance on January 1, 2018 and 2017 per IAS 39 Adjustment on initial application of IFRS 9 Balance on January 1, 2018 per IFRS 9 Balance on December 31, 2018 and 2017	December 31, 2018 $ 332,496 - 332,496 $ 332,496	December 31, 2017	December 31, 2017
		Individually assessed impairment 237,590 237,590	Collectively assessed impairment
			94,906
			94,906

d. Inventories

Finished goods Work-in-process Raw materials Fuel Total	December 31, 2018 $ 494,735 291,312 1,164,884 23,040 $ 1,973,971	December 31, 2017
		540,557 605,670 1,046,748 20,067
		2,213,042

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For the years ended December 31, 2018 and 2017, the components of cost of goods sold were as follows:

Cost of goods sold Loss (gain) on inventory market price decline and obsolescence Loss (gain) on physical inventories, net Unallocated fixed production overheads from idle facilities Revenue from sale of scraps Net amount	**For the Years Ended December 31 **	**For the Years Ended December 31 **
	2018 $ 32,201,453 140,104 15,840 295,345 (28,018) $ 32,624,724	2017
		27,259,698 (22,875) (1,634) 306,914 (12,013)
		27,530,090

As of December 31, 2018 and 2017, the aforesaid inventories were not pledged as collateral.

• e. Investments accounted for using equity method

• The company's investments accounted for using the equity method at the reporting date were classified as follows:

The company's investments accounted for using the eq were classified as follows:	uity method at th	e reporting date
Subsidiaries Associates Total	December 31, 2018 $ 11,038,311 1,397,877 $ 12,436,188	December 31, 2017
		8,377,582 1,062,756
		9,440,338

1. Share of profit (loss) of subsidiaries and associates for the years ended December 31, 2018 and 2017 was as follows:

Share of profit (loss) of subsidiaries and associates

December 31, 2018 $ 949,617	December 31, 2017
	857,571

1. The key financial information of subsidiaries and associates in which the Company has equity investments was as follows (before adjustment for the Company’s proportionate share):

Total assets Total liabilities Revenue Net income	December 31, 2018 $ 22,199,195 (3,865,359) $ 18,333,836 December 31, 2018 $ 10,684,086 $ 2,421,564	December 31, 2017
		16,693,291 (2,513,037)
		14,180,254
		December 31, 2017
		**8,590,797 **
		1,862,471

The Company does not guarantee any contingent liabilities of an associate jointly with other investors. Likewise, the Company does not guarantee alone any other contingent liabilities of an associate.

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• The resolution, implementation of singed tripartite supplemental agreement between the Company and PPG&GGC (which had been merged as the Axiall company), from the Company’s board meeting on April 21st 2016: trading of equity shares of Taiwan Chi chlorine Chemical Co., Ltd, total 6,400,000 shares at the sale price, US$100,000 thousand, which was equivalent to NT$3,225,000 thousand. After the expectation of the disposal interests, NT$2,838,761 thousand, the Company instantly informed Axiall company to carry out the equity trading of Taiwan Chi Chlorine Chemical Co., Ltd. The Company issued the letter many times to ask Axiall to implement the agreement, however, Axiall company repeatedly delayed such actions. Hence, the Company filed the arbitration to American Arbitration Association in August 2016. Axiall submitted the pleadings in Sept. 2016 and asked PPG to participate in the lawsuit. Outside lawyers of PPG, in the Oct. of same year, represented that PPG is willing to negotiate the contract of equity trading. PPG signed the contract with the Company at the end of February 2017 and handled the equity transactions subsequently. The Company completed the trading on April 11st 2017, the total selling price: $100,000 thousand, equivalent to about NT$3,062,000 thousand. The disposal of investment benefit recognized after the deduction of the securities trading taxes: NT$2,673,076 thousand, which was listed on the other benefits and losses of NonOperating Income and Expense Accounts.

• On November 26, 2013, the plan to invest in China was approved during the meeting of the board of directors of the Company. On March 25, 2014 and November 1,2018, the Investment Commission, MOEA approved the investment of the Company in JIANGSU WEIMING Petrochemical Corporation in China of RMB2,388,000 thousand (equivalent to NT$11,200,000 thousand) mainly to establish a manufacturing operations for petrochemical products (including hydrorefining crude benzol, cyclohexanone, nylon 6, etc.).

• Collateral

As of December 31, 2018 and 2017, the Company provided as collateral portion of its investments in aforesaid equity-accounted investees. Please refer to Note 8 for details of the related assets pledged as collateral.

• f. Business combination

The Company acquired Thanh Phong construction and investment Ltd. 90% of its shares, and obtained controlling power of the entity. The entity engages in real estate and construction.

The transfer price is $119,573 thousand in cash, the fair value of assets acquired and liabilities assumed on the acquisition date were as below:

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Cash and cash equivalents Fair value of identifiable assets Goodwill derived from acquisition: Transfer price Non-controlling equity (fair value of identifiable assets measured at the percentage of non-controlling equity) Fair value of identifiable assets Goodwill	$ 132,857
	$ 132,857
	$ 119,573 13,284 (132,857)
	$ -

g. Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Company for the years ended December 31, 2018 and 2017 were as follows:

Cost or deemed cost: Balance as of January 1, 2018 Additions Disposal Reclassification Balance as of December 31,2018 Balance as of January 1, 2017 Additions Disposals Reclassification Balance as of December 31, 2017 Depreciation and impairment loss: Balance as of January 1, 2018 Depreciation for the period Disposals Balance as of December 31, 2018 Balance as of January 1, 2017 Depreciation for the period Disposals Balance as of December 31, 2017 Carrying amounts: Balance as of December 31, 2018 Balance as of January 1, 2017 Balance as of December 31, 2017	Land $ 5,647,642 - - - $ 5,647,642 $ 5,647,642 - - - $ 5,647,642 $ - - - $ - $ - - - $ - $ 5,647,642 $ 5,647,642 $ 5,647,642	Land improvements 262,023 - (3,464) 699 259,258 257,067 - - 4,956 262,023 208,460 4,981 (3,465) 209,976 204,102 4,358 - 208,460 49,282 52,965 53,563	**Buildings **	Machinery and equipment 41,265,787 - (464,841) 921,620 41,722,566 40,573,230 - (120,575) 813,132 41,265,787 33,139,241 1,117,302 (444,429) 33,812,114 32,149,063 1,110,289 (120,111) 33,139,241 7,910,452 8,424,167 8,126,546	Vehicles 52,798 - (2,400) 4,458 54,856 52,609 - (374) 563 52,798 45,849 2,740 (2,400) 46,189 43,788 2,434 (373) 45,849 8,667 8,821 6,949	Other facilities 160,911 - (1,473) 7,914 167,352 154,609 - (1,722) 8,024 160,911 124,628 9,028 (1,473) 132,183 117,709 8,641 (1,722) 124,628 35,169 36,900 36,283	Construction inprogress 1,112,729 1,554,817 - (1,062,605) 1,604,941 792,587 1,179,925 - (859,783) 1,112,729 - - - - - - - - 1,604,941 792,587 1,112,729	Accumulated impairment - - - - - - - - - - 1,994,784 - (16,365) 1,978,419 1,994,784 - - 1,994,784 (1,978,419) (1,994,784) (1,994,784)	Total
			2,252,349 - (25,640) 127,914						50,754,239 1,554,817 (497,818) -
			2,354,623						51,811,238
			2,223,905 - (4,664) 33,108						49,701,649 1,179,925 (127,335) -
			2,252,349						50,754,239
			1,001,176 68,540 (22,745)						36,514,138 1,202,591 (490,877)
			1,046,971						37,225,852
			939,968 65,872 (4,664)						35,449,414 1,191,594 (126,870)
			1,001,176						36,514,138
			1,307,652						14,585,386
			1,283,937						14,252,235
			1,251,173						14,240,101

As of December 31, 2018 and 2017, the Company provided as collateral portion of its property, plant and equipment, please refer to Note 8 for details of the related assets pledged as collateral.

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h. Investment property

Investment property
Cost or deemed cost: Balance as of January 1, 2018 Net gains and losses due to fair value adjustments Balance as of December 31, 2018 Balance as of January 1, 2017 Net gains and losses due to fair value adjustments Balance as of December 31, 2017 Carrying amounts: Balance as of December 31, 2018 Balance as of January 1, 2017 Balance as of December 31, 2017	Land $ 38,211,181 120,452 $ 38,331,633 $ 38,148,494 62,687 $ 38,211,181 $ 38,331,633 $ 38,148,494 $ 38,211,181	Buildings 15,351 3,375 18,726 3,859 11,492 15,351 18,726 3,859 15,351	**Total **
			38,226,532 123,827
			38,350,359
			38,152,353 74,179
			38,226,532
			38,350,359
			38,152,353
			38,226,532

1. Evaluation by income approach

The fair value of some investment properties of the Company was determined using the income approach. Under this income approach, the key terms of the rental contracts for these investment properties and certain other factors considered were as follows:

December 31, 2018

Subject Important contract terms The range of rental in the area where the investment property is located The rental range of similar investment property The current status of the investment property Past earnings Income capitalization rate Discount rate Outsourcing or self-valuation Evaluation office Appraiser name Evaluation date Outsourcing fair value	Qianjin Dist., Kaohsiung City
	None. $550 ~ $700( NT dollars) $549 ~ $596( NT dollars) Unused $0 ~ $0 5.415% 4.380% Outsourcing Colliers International Taiwan Feng-ru,Ke December 31 , 2018 $10,640

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December 31, 2017

December 31, 2017
Subject Important contract terms The range of rental in the area where the investment property is located The rental range of similar investment property The current status of the investment property Past earnings Income capitalization rate Discount rate Outsourcing or self-valuation Evaluation office Appraiser name Evaluation date Outsourcing fair value	Qianjin Dist., Kaohsiung City
	None. $400 ~ $450( NT dollars) $408 ~ $433( NT dollars) Unused $0 ~ $0 3.700% 3.045% Outsourcing Euro-Asia Real Estate Appraisers Firm Shi-yuan, Chou December 31 , 2017 $7,602

In accordance with Article34 of the Regulations on Real Estate Appraisal, the income approach procedures include estimating the effective gross income and total expenses, computing the net operating income, determining the capitalization rate or discount rate, and computing the income. The attributes used by the Company for the estimations above were the last three years’ data from the subject property and comparable properties which have similar characteristics, and these data were assessed and adjusted based on their persistency, stability, and growth to ensure the availability and reasonableness of these data. The movement of income (cash inflows) and expenditure (cash outflows) for future periods was based on the vacancies or losses, existing or future cash flow plans of the Company, and historical cash flows from the subject property, identical properties, or properties in the same industry. The estimation and computation of the net income were based on the highest and best use of the subject property and have taken into consideration the income generated from comparable properties in the same location based on their highest and best use.

External appraisers use the risk premium method to decide on the direct capitalization rate and discount rate. The fixed deposit interest rate, government bonds rate, real estate investment risk, money supply-demand variation, the trend of real estate value and etc. are taken into consideration to decide the likely rate of return on the most common investment as a basis in order to derive the capitalization rate or discount rate. The differences in individual characteristics between the above most common investment and the subject property are compared in terms of their liquidity, risk, appreciation, and management. As of December 31, 2018 and 2017, the discount rate was 4.380% and 3.045%, respectively, based on 2-year time deposit of a small amount, as posted by the Chunghwa Post Co., Ltd., plus 0.75 percentage points (1.845%), adjusted for a risk premium of 1.2% and 1.2%, respectively, to reflect the status of operating income, liquidity, risk, appreciation, management and etc. As of December 31, 2018 and 2017, the weighted average capitalization rate was 5.415% and 3.700%, derived as the ratio of annual net operating income of comparable properties divided by reasonable price.

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• Evaluation through land development analysis

As the Company’s investment property is undeveloped, the income approach cannot be used for purposes of the evaluation. Consequently, the investment property was evaluated using the land development analysis, under which, the following factors were considered:

December 31, 2018

Subject Estimate total sales price Rate of return Capital interest rate Evaluation office Appraiser name Evaluation date Outsourcing fair value December 31, 2017	Annan Dist., TainanCity $7,968,120 23% 1.790% CCIS Real Estate Joint Appraisers Firm Huo-ming, Huang December31, 2018 $5,020,755	Qianzhen Dist., Kaohsiung City 9,612,970 18% 3.810% ~3,.930% CCIS Real Estate Joint Appraisers Firm and Colliers International Taiwan Shiou-ying, Jan, Jian-hui,Gu December 31, 2018 31,970,281	Others
			2,717,238 12% ~ 25% 0.71% ~4.38% Hongbang Real Estate Appraiser Joint Office ,Colliers International Taiwan Yu-Hsuan, Huang, Jian-hui,Gu, Shiou-ying, Jan and Feng-ru, Ke December 31, 2018 1,348,683

Subject Estimate total sales price Rate of return Capital interest rate Evaluation office Appraiser name Evaluation date Outsourcing fair value	Annan Dist., TainanCity $7,257,090 20% 1.820% CCIS Real Estate Joint Appraisers Firm Huo-ming, Huang December31, 2017 $4,499,943	Qianzhen Dist., Kaohsiung City 161,129,789 20% ~ 40% 3.120% ~7.420% Euro-Asia Real Estate Appraisers Firm Shih-yuan, Chou December 31, 2017 32,271,818	Others
			2,741,768 10% ~ 15% 1.69% ~1.95% Euro-Asia Real Estate Appraisers Firm, Colliers International Taiwan, and CCIS Real Estate Joint Appraisers Firm Shih-yuan, Chou ,Feng-ru, Ke , Shiou-ying, Jan and Huo-ming, Huang December 31, 2017 1,447,169

The land development analysis included procedures such as identifying the content of land development and estimating the required period of development ; investigating individual cost and related expenses, collecting current market prices, etc.; on-site survey and investigating and analyzing the degree of development in the local environment; estimating the marketable area of land or building after construction or building; estimating the total sales price of properties after completion of construction or building; estimating individual cost and related expenses; deciding an appropriate rate of return and an overall capital interest rate; calculating land development analysis value.

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Investment property included several rentals of real property to others. Each lease contract all include the original non-cancellable lease and the subsequent lease is negotiated with the lessee without collection of contingent rental. Please refer to Note 6 m. for the relevant information including rent revenue and the direct operating expenses incurred.

As of December 31, 2018, and 2017, the Company provided as collateral portion of its investment property. Please refer to Note 8 for details of the related assets pledged as collateral.

In the era of pre-Taiwan Alkali Industrial Corporation (TAIC), TAIC had leased the lands located in Tainan and Chiayi area to the local peasants and fishermen, and the surviving tenants shall continue paying the rent to the Company according to the agreements. In the circumstance of the resumption for self- business use or the sale of the lands, the leases shall be terminated under the contractual agreements and Land Laws. If there is any redemption in some cases, the Company will recognize and evaluate the possible expenses and costs case by case.

The Company has terminated the some agreements with partial peasants and fishermen at the first quarter of 2014 by paying the redemption in the amount of $50,425 thousand.

An Shun Land Located in Tainan City Annan District:

1. History

• (1) The land where the An-Shun Alkali plants located was originally established by Japanese company Kanegafuchi Soda “in 1938 under Japanese Colonial Rule.

• (2) The Government undertake the construction after the Retrocession of Taiwan, and established a state-owned company, Taiwan Alkali Industrial Corporation (TAIC) and operated at the An-Shun Site. In 1961, the competent authorities in charge of the relevant state-owned enterprises approved the investment plan and budget for producing Pentachlorophenol and sodium pentachlorophenol products used on herbicides and wood preservative fungicides.

• (3) Due to operational factors, the plant was ordered to be closed by Executive Yuan Department of Economic Affairs in early 1982.

• (4) In April 1983, Executive Yuan Department of Economic Affairs ordered China Petrochemical Development Corp., the state-owned Company, the subsidiary of CPC at the time, to merge with TAIC. The Company took charge of An-shun land of TAIC.

• (5) Since the said merger, the Company takeover the An-shun land, the Company itself has never had any act of production, operations, development, use or pollution occurred at the site. According to subsequent investigation and research, parts of the area has been detected dioxin and mercury contamination in soil. The land was designated by the Tainan City Government and the Environmental Protection Department of the Executive Yuan as a “Soil Pollution Control Site” and “Soil pollution remediation site” in April 2002 and March 2004 separately, per the Soil and Groundwater Pollution Remediation Act.

• 303 -

• (6) Tainan city government and other government authorities cited Article 75 of Taiwan’s Company Law that since the Company merged with TAIC, and was regarded as the surviving company, the Company should take all responsibilities for the rights and obligations of TAIC, and so are the treatment projects and remediation plan. As the Company never used the land of TAIC after being ordered to take charge by the Executive Yuan Department of Economic Affairs (MOEA), the Company thus objected and carried out the following administrative or judicial remedies to identify the government conception of the “Polluters” and the condition of pollution:

• A. The Company filed a plea of State Compensation claim to Ministry of Economic Affairs, Administration Yuan (MOEA), but MOEA refused.

• B. In January 2006, the Company filed a complaint against MOEA in the Taiwan Taipei District Court in the amount of $10,077 thousand to reimbursement for compensation,

• C. The complaint was dismissed by the Supreme Court In February, 2008. Upon the application of Constitution Interpretation by the Company, J.Y. No.714 Interpretation of the Grand Justice was issued in November, 2013, and considered that Soil and Groundwater Pollution Remediation Act (SGPR Act )does not violate the principle of prohibition against retroactive law, or the principle of proportionality the retroactive rule; however, the holding didn’t mention whether the successor of the Polluter entity should be responsible for the treatment projects and remediation plan under SGPR Act was not in the scope of the regulation.

• D. The Company has filed series of complaint on those issues according to this Constitutional Interpretation.

• (7) Tainan City Government issued the letter No. 09722000130 and No. 09722003360 in January and February 2008 respectively, and requested the Company to propose a remediation plan for the soil and groundwater pollution of the An-shun plant in accordance with the Soil and Groundwater Pollution Remediation Act.

• A. The Company proposed the “Tainan City, CPDC former Taiwan Alkali An-shun site and 2nd class number nine road on the eastern side of the grass area of the site, soil pollution remediation pollution remediation plan” per the regulation at the end of June 2008 and the plan was submitted to Tainan city government for review and formally approved in May 2009. In 2012, the remediation plan was put forward and approved on July 2, 2012. The 1st instance was completed in September 2014 and entered the second phase of the remediation, which will last 10 years. A second revision of the remediation plan was proposed and submitted to Tainan City Government for review, and the approval letter issued by Tainan City Government informed of the approval of the 2nd remediation plan, which shall be publicly displayed per regulations. Currently, the Tainan City Environmental Protection Bureau reviewed and adopted the plan on April 14, 2015 and the assessment was announced by Tainan City Government on May 4th, 2015. According to the remediation technology and the actual implementation of the subsequence adjustment, the 3rd remediation change plan

• 304 -

was proposed on March 2nd 2017, which remediation plan was focus on the remediation plan of 2nd phase and brought in the unfinished items in the 2nd change plan. Currently, the 3rd plan was reviewed and adopted on Jan. 3rd, 2018.

• B. The remediation expense about NT$1,600,000 thousand has engaged in the 1st phase until Sept. 2014. Simultaneously, the following 10-year remediation work, after the 2nd change plan was adopted, needed to be started, the funding was estimated in Dec., 2014: NT$1,356,000 thousand.

2. Extension legislation:

• (1) Remediation prepay

• A. Tainan city government on Feb. 27[th] , 2008 with the letter No. 09722004430 asked the Company to pay each expense: NT$88,786 thousand, coming from investigation assessments and strain necessary measures, which was prepaid by Tainan city government and EPA of Executive Yuan on behalf of land polluters, within deadline. The expense would double and transfer to court for enforcement if overdue. This expense was adjusted to list in 2007 per Financial Accounting Standards and the Company prepaid on behalf of land relations based on the law regulations in July 2008. The Company had the objection on the prepaid expense and land polluter, hence, the administrative remedy was proposed in July 2008, Kaohsiung High Administrative court sentenced the Company shall pay the expense NT$88,430 thousand in Jan. 2008. The Company proposed the appeal in March 2008 and Supreme Administrative Court sent back to Kaohsiung High Administrative Court for further trial. Kaohsiung High Administrative court sentenced the original punishment and the petition decision beyond NT$76,066 thousand was withdrawn. In Dec. 2013, both parties proposed the appeal for the unfavorable parts and Supreme Administrative Court sentenced the amount beyond NT$203 thousand and lawsuit expenses are all abandoned in April 2015 and sent back to Kaohsiung High Administrative court for continued trial. The determined withdrawn amount NT$356 thousand had all been returned back to the account by Tainan city government. Kaohsiung High Administrative court rejected the appeal of the Company on Dec. 2016. The Company proposed the appeal remedy for the unsatisfied sentenced contents on Jan. 2017. Supreme Administrative Court sentenced on Jan. 2018 that the expenses NT$1,135 thousand didn’t need to be undertaken by the Company.

• B. Tainan city government on May 22, 2009 with the letter No. 09822013680 asked the Company pay the expenses NT$17,962 thousand, which resulted from the relevant working plan of An Shun Land Site soil pollution remediation and was prepaid by Tainan city government on behalf of the Company, and Tainan city government in Dec. 2009 with the letter No. 09822035440 asked the Company to pay the above fees prior to Jan. 31[st] , 2010. The Company estimated such expense at the end of 2009 and proposed the administrative remedy in Jan. 2010 and prepaid the above fees within the deadline inquired by Tainan city government based on the law regulations. The petition was rejected in March 2011, thus, the administrative lawsuit was proposed according to the law. Kaohsiung High Administrative court sentenced that the amount beyond

• 305 -

NT$17,867 thousand was withdrawn. After the appeal, Supreme Administrative Court sentenced to return back to Kaohsiung High Administrative court for further trial in Sept. 2013. Kaohsiung High Administrative court sentenced the amount beyond NT$7,068 thousand was withdrawn on Oct. 7[th] , 2015 and this case had been appealed for the remedy. The determined withdrawn amount NT$95 thousand had been returned back to the account by Tainan city government. The verdict from Supreme Administrative Court had been received on Feb. 18[th] , 2017, the fact was again returned back to Kaohsiung High Administrative court for the trial.

• C. Tainan city government in Sept. 2011 with the letter No.1000700466 inquired the Company to pay the expense NT$16,095 thousand, which resulted from the relevant working plan of An Shun Land Site soil pollution remediation and was prepaid by Tainan city government on behalf of the Company. In March 2012, Tainan city government, with the letter No.1010242670, asked the Company to pay the above expense prior to April 30[th] , 2012. Based on the law regulation, the Company was inquired by Tainan city government to prepay the above expense within deadline and proposed the appeal for remedy in April 2012, which was rejected. The Company proposed the administrative litigation in Nov. 2012 and Kaohsiung High Administrative court sentenced to decide the amount of the original expense beyond NT$119 thousand were all withdrawn. The Company proposed the appeal in Sept. 2014, but Supreme Administrative Court sentenced to return back to Kaohsiung high Administrative court for further trial in Nov. 2015. Kaohsiung High Administrative court sentenced the amount beyond NT$6,498 thousand which Tainan city ordered the Company to pay was all withdrawn. Final verdict confirmed by Supreme Administrative Court in April 2018.

• D. Tainan City Government, in May 2013, issued the letter No. 1020383681B to request the Company to pay site soil pollution remediation related work plan on behalf of An-shun plant, with the cost of NT$26,530 thousand and requested for the Company to pay the fee prior to June 30th 2013. The Company paid the fee in advance within the requested deadline by the Tainan City Government based on applicable laws. The Company filed a petition for remedy in July 2013, which was rejected. The Company filed an administrative litigation in March 2014. The judgement was declared in April 2016. The Company proposed to appeal for remedy on the portions that were unfavorable. However, the appeal was sentenced to be rejected in March 2017. The Company had proposed for retrial remedy in April 2017, which was rejected by court in Oct. of the same year. This case was closed.

• E. The Tainan City Government, in February 2014, litigated that the Company was the polluters per judgement No. 1953 which was pass down in 2007 and asked the Company to pay the 2011 advanced payment of supervision and management on behalf of An-shun factory, to the amount of NT$27,444 thousand. The Company paid the fee in advance as previous mention within the requested deadline by the Tainan City Government based on the law regulations and filed the petition for remedy in March 2014, which was rejected by the petition authorities. The Company was not satisfied with the result, and filed the

• 306 -

administrative legal appeal in September of same year. The Kaohsiung High Administrative Court sentenced the Company to pay NT$154 thousand. However, Tainan City Government was not satisfied with the verdict and filed the appeal for remedy, the Company also filed an appeal based on the Company’s claims to Supreme Administrative High Court. The Supreme Administrative High Court suspended the original verdict in February 2018 and currently the case is under hearing by the Kaohsiung High Administrative Court.

• F. Tainan City Government, in May 2016, issued the letter No. 10504498726, requested the Company to pay a fee for the “supervision management and audit work plan of 2013 CPDC (Taiwan Alkali) An-shun plant site remediation” and requested the Company to pay the fee of NT$63,271 thousand prior to July 20th 2016, per paragraph 4 of article 14, article 15 and paragraph 1 of article 43. The Company paid the fee within the requested deadline by the Tainan City Government based on applicable regulations. After the rejection of the petition for the remedy in June 2016, the Company filed for administrative litigation in December 2016 and received parts of the winning judgement in July 2017. In order to maintain the Company’s right and interest, the Company had proposed the appeal to Supreme Administrative Court for remedy of the unfavorable parts in August 2017.

• (2) Tainan city government claimed that the Company didn’t implement per the remediation process.

• A. Tainan City Government issued the letter No. 1030133470 on February 12[th] 2014 to order the Company to pay a penalty of NT$200 thousand prior to March 24[th] 2014 since the Company was deemed not to implement the content per the approved “Site soil pollution remediation pollution remediation plan” and violated the regulation subparagraph 3 of paragraph 2 of Article 38 and paragraph 1 of Article 22 of the Soil and Groundwater Pollution Remediation Act. However, the disposition authority determined that this was a factual error and it was clear that the punishment was illegal. Hence, the Company filed a petition for remedy in March 2014, but the petition was rejected by Executive Yuan Environmental Protection Agency in June 2014. The Company filed for administrative litigation remedy in August 2014, the litigation remedy was rejected by the judgement from the simple court of Tainan District court and Kaohsiung High Administrative Court in April and August 2015. The Company filed the retrial for remedy, which was rejected by the Kaohsiung High Administrative Court in April 2016. The Company would continue to file an appeal for remedy. However, the rejection of the Company’s request was received in June 2017. The Company proposed the retrial appeal for remedy in July of the same year. After the retrial, the court rejected the Company’s request in Oct. of the same year and this case was closed.

• 307 -

• B. Tainan City Government issued the letter No. 104060004 on June 12th, 2015 declaring that the Company didn’t execute the plan per the approved “Site soil pollution remediation pollution remediation plan”, which violated the regulation subparagraph 3 of paragraph 2 of Article 38 and paragraph 1 of Article 22 of the Soil and Groundwater Pollution Remediation Act and ordered the Company to pay a penalty of NT$1,000 thousand prior to July 27th 2015. After verification, it was clear that the fine was illegal. Hence, the Company filed a petition for remedy in August 2015, which was rejected by the Executive Yuan Environmental Protection Agency. The Company was not satisfied with the verdict and filed for administrative litigation with the Kaohsiung High Administrative Court, the Company won the verdict in January 2017. This case was closed.

• C. Tainan City Government issued a letter No. 105050004 for administrative sanctions on May 23, 2016 and deemed that the Company didn’t execute the plan according to the remedy plan since the reduction rate of dioxin pollution was less than 41% in the Soil and groundwater pollution inspection records, which violated the regulation paragraph 1 of Article 22 of the Soil and Groundwater Pollution Remediation Act (hereinafter referred to as the “Remediation Act”) and ordered the Company to pay a penalty of NT$2,000 thousand according to subparagraph 3 of paragraph 2 of Article 38 of Remediation Act and the Company had to participate in environment seminars for 2 hours according to the provisions of Article 23, paragraph 2 of the Environmental Education Law. After verification, the previous punishment content was not audited at the time point of the remediation plan, which violated the punishment principle. The Company filed a petition in June 2016, which was rejected by Executive Yuan Environmental Protection Agency in Oct. 2016. The Company was not satisfied, proposing the administrative litigation to Kaohsiung High Administrative court and received the rejection jurisdiction by court in July 2017. The Company proposed the appeal for the remedy in August of the same year per law, but Supreme Administrative Court rejected the Company’s request in Jan. 2018. This case was determined to be closed.

• D. Tainan city government, on May 23rd, 2016, required the Company to complete the correction (which means the reduction rate of dioxin pollution reaches to 41%) prior to Oct. 31st, 2016 with letter No. 1050527601 and attached with No. 105050004 issued on May 19th, 2016, otherwise; the Company would be punished continuously per time. Since the Company violated the regulation paragraph 1 of Article 22, paragraph 2 of Article 38 of the Soil and Groundwater Pollution Remediation Act and paragraph 11 of Penalty criterial list, it was fined NT$600 thousand and was ordered to participate in environment seminars for 4 hours (premier NT$200 thousand plus added NT$400 thousand). After verification, the previous punishment content was not audited at the time point of the remediation plan, which violated the punishment principle and this case had necessary relation with the administrative sanction which of letter No. 105050004. The petition remedy was proposed per law in Feb. 2017, which was rejected by Executive Yuan Department of Economic Affairs in May 2017. The Company had proposed the appeal for remedy in June of the same year. Through the rejection of the Company’s request by Kaohsiung High Administrative court

• 308 -

in Nov. of the same year, the Company had declared the appeal in Dec. of the same year. The Supreme Administrative Court rejected the Company’s request on July 10, 2018. This case was determined to be closed.

• E. Tainan city government considered the Company’s remediation progress for the reduction rate of dioxin pollution had not reached 82% and judged the Company for the penalty NT$200 thousand. After verification, the Company had finished 13.51 hectares (symbolizing Pollution area reduction ratio 36.4%), which had been beyond the target (reduction ratio of 36%) of 2nd change plan. Tainan city government with merely single project not reaching to the examined target penalized the Company without considering such factor, which obviously violated the ratio principle. The petition remedy was proposed in June 2017 and was rejected by Executive Yuan Department of Economic Affairs in August of the same year. Considering the legislation economy, the Company decided not to continue the remedy in August of the same year. This case was closed.

• F. Tainan city government, in June 2017, with the letter No. 1060630217 attached with sanction letter No. 106060012 determined the 3rd remediation change plan not proposed and took it as reason and judged the Company for the penalty NT$1,000 thousand. After the verification, there is no ‘take it as’ such term in Soil pollution law and Implementation rules, which violated the principle of administration. The petition remedy had been proposed in July 2017 and the rejection of petition was received in Oct. of the same year. The Company proposed to Kaohsiung High Administrative court for the administrative remedy in Dec. of the same year.

3. Others

• (1) The Company still has the objection on the adscription of pollution responsibility for An Shun land located in Tainan City Annan District and would continue to strive for the possible administrative and law remedy actively.

In view of the jurisdiction explanation No.714, which indicated whether the general successors of polluters had to burden of remediation responsibilities, was not in the scope of the Soil and Groundwater Pollution Remediation Act. Also, considering the previous Taiwan Alkali Co. Ltd. was a state-owned enterprise, and the An-shun plant was controlled, supervised, and assigned operations and gained beneficially by the Ministry of Economic Affairs, Taiwan Provincial Government and CPC, such actions should be part of national behavior, yet, the resulting pollution and remediation was asked to be borne by the private legal person. The Company applied to the Tainan city government to determine the beginning of the actual pollution or potential pollution of the perpetrators, and who should pay the relevant costs and return the Company’s cost over the years. The rejection was made by the Tainan City Government in November 2014. The Company filed a legal petition in December 2014 and the original disposal authorities revoked the original punishment in March 2014, hence, the Executive Yuan Environmental Protection Agency made a decision not to proceed with the case. The original disposal authorities revoked the previous punishment but simultaneously made a new one, the Company also filed a petition to the new punishment. The Company's petition was decided not to proceed in August

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2015 and the Company filed an administrative legal appeal instead, due to multiple errors, which was under hearing by the Kaohsiung High Administrative Court. Through the rejection of the Company’s request by Kaohsiung High Administrative court, the Company proposed the appeal for remedy in Nov. 2017. This case was under hearing in Supreme Administrative Court.

The cumulative fee of invested and estimated control & management cost and remediation fee were NT$3,428,237 thousand until Dec. 31st, 2018. The preceding remediation fee was estimated according to the current possible situations by the Company. However, if it was affected by the inside and outside factors in future, which resulted in the possible big differences on the whole remediation fee, it would be evaluated for adjustment.

• (2) An-shun dormitory designated monuments case

Original Kagakude Negai O Ka Corporation’s dormitories of Tainan plant belonging to the Company was designated by the Tainan City Government, under the letter No. 1031053448A issued on November 17, 2014, as a municipal historic site. However, the administrative sanction has various areas of dispute, thus the Company was not satisfied with the judgement. Hence, the Company filed a legal petition for remedy in December 2014. The petition decision report from the Ministry of Culture revoked the designated land of the Company as a historical site including 4 area in August 2015. The Company appealed for the administrative remedy of the remaining areas, which was under hearing by the Kaohsiung High Administrative Court.

The An-shun dormitory was announced by the Tainan City Government, on Nov. 17th 2014, as a historical site. The Company was not satisfied with this issue and filed the petition. The petition decision from the Ministry of Culture revoked 4 areas of land on August 14, 2015 and the Ministry of Culture re-announced it in accordance with this petition decision on Dec. 17th 2015. The Company was not satisfied with the 2nd announcement and re-appealed the petition for remedy. The Company received the rejection of the petition in July 2016. The Company appealed for remedy within the statutory period, which was rejected by the court’s verdict in January 2017. The Company examined the reasons for the refusal of the court, which reason complied with the required target of the Company. Hence, this case was closed without appeal for remedy.

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• (3) An shun historical site theft case

Original Kagakude Negai O Ka Corporation’s dormitories of Tainan plant belonging to the Company was designated by Tainan City Government as a municipal historic site. However, the defendant, Mr. Wu Ming, put a lot of his personal belonging on the Company’s land beside to the dormitories located on No.15, Aly. 3, Ln. 661, Beishanwei 2nd Rd., Annan Dist., Tainan City 709, Taiwan (R.O.C.), and was suspected being involved with the theft of the property. The Company filed for criminal action. This case was sent to the Tainan District Prosecutors Office for mediation but without success, the Company received the indictment from Prosecutors Office in May 2016 and received the verdict from the court in September of the same year: Mr. Wu was sentenced to five months and was charged NT$5,973 thousand due to the crime. However, the defendant appealed for remedy. The sentence was declared on June 28th, 2017: Mr. Wu was imprisoned for 4 months and confiscated NT$176 thousand acquired from the crime (this case was closed).

Xincun Land of Taiwan Alkali Co., Ltd.:

1. History

On the premise that the residents obeyed the agreement, the Company signed an agreement with the local communities that land within Feng Shan District, Kaohsiung City shall be granted free of charge for public use.

2. Extension legislation

Business inspector found that the land was occupied by residents that built illegal construction, which violated the agreement. After communicating with the residents' multiple times, the situation still did not improve. To be responsible for asset management and reach the expectation of the Company’s shareholders, the Company filed a legal appeal in February 2013 to require to dismantle the illegal construction and return the land, which was judged by Kaohsiung District Court to reject the Company’s petition. Due to the previous judgement against the law, the Company filed a legal appeal for remedy in September 2014, which was rejected by the Kaohsiung High Court in July 2016. The Company filed the appeal for remedy to Supreme Court in August of same year.

Shulin Land of Taiwan Alkali Co., Ltd.:

1. History:

• (1) No. 540, 541 and 543, Dongshan Section, Shulin District, Xinbei City and No. 498, Weiwang Section, Shulin Dist., New Taipei City 238, Taiwan including 4 area of lands originally belonged to Shulin plant of Taiwan Alkali Co. Ltd. Taiwan Alkali Co. Ltd. established the plant in 1962 and closed the plant in 1975. The Executive Yuan Department of Economic Affairs in April 1983 ordered the government-owned Company which at the time was also a subsidiary of CPC to merge with Taiwan Alkali Co. Ltd

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• (2) Then the plant was subsequently sold to CPC. The New Taipei City Government Environmental Protection Bureau, on August 16th, 2010, announced the land as “soil pollution control site”.

• (3) The New Taipei City Government Environmental Protection Bureau issued the letter No. 1000010000 in March 2011 declaring that the Company merging with Taiwan Alkali Co. Ltd. was regarded as the survival company and shall take the responsibilities for the rights and obligations of Taiwan Alkali Co. Ltd. for soil pollution remediation according to article 75 of Company Act and was deemed as the polluters, who are required to propose subsequent disposal and remediation.

• (4) The New Taipei City Government Environmental Protection Bureau issued the letter No. 1001001329 in August 2011 and asked the Company to complete the investigation and proposed a pollution control plan and send to New Taipei City Government Environmental Protection Bureau for approval. The Company was ordered to take responsible of all, non-production operations, development, and the resulting usage or pollution. The Company had a disagreement of the identification of the polluters and filed the administrative appeal in August 2011. This case was closed due to the determined sentence in August 2017.

Since the change of predetermined place of CNPC’s warehouse, the relocation schedule had to be extended to 24 quarters. The remediation work schedule were postponed so that the soil pollution control pan (change plan) of Shulin Land of former Taiwan Alkali Co., Ltd (part of the sites) was proposed in April 2017. New Taipei City Government sent the letter to agree for future reference and it’s implemented per the change plan currently. The relevant remediation expense NT$273,750 thousand was estimated and listed in 2011 according to Financial accounting standards related regulations. However, it will be assessed to adjust to recognition if there were changes due to internal and external factors in future, which resulted in the significant differences on the entire remediation expenses.

2. Extension legislation:

The Company was ordered to take responsible of all, non-production operations, development, and the resulting usage or pollution. The Company had a disagreement of the identification of the polluters and filed the administrative appeal in August 2011. Taipei High Administrative Court judged to revoke the administrative punishment and the petition decision in August 2012. However, New Taipei City Government Environmental Protection Bureau appealed for retrial, the Supreme Administrative Court discarded the original judgment and remanded the case to the Taipei High Administrative Court. The judgement was claimed to be illegal, hence, the Company filed for legal appeal in December 2013, which was rejected by the Supreme Administrative Court in January 2015. The Company filed for retrial remedy in February 2015, which was rejected in June 2015. The ruling on the parts where important evidence was missed and not considered was remanded to Taipei High Administrative Court. But Taipei High Administrative court sentenced the rejection in August 2016, which the Company was not satisfied with so as to appeal for remedy in Sept. of the same year. In August 2017, the rejection was adjudicated. This case was closed.

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Moreover, in consideration of the No. 714 explanation from the judge, the Company applied to New Taipei City Government Environmental Protection Bureau for the identification of polluters, but it was subsequently refused. The Company filed for the petition and administrative litigation remedy. After the trial from Supreme Administrative Court, the rejection was adjudicated. This case was closed.

• i. Short-term and long-term loans

Secured bank loans Unsecured bank loans Letter of credit loans Total Current Non-current Total		**December **	31, 2018
	Currency NTD NTD NTD	Interest Rate Range 1.4300%~1.9556% 1.3800%~1.814% 1.4945%	Year of Expiration 2019~2021 2019 2019	Amount
				$ 2,480,000 600,000 50,000
				$ 3,130,000
				$ 1,335,000 1,795,000
				$ 3,130,000

Secured bank loans Unsecured bank loans Total Current Non-current Total		**December **	31, 2017
	Currency NTD NTD	Interest Rate Range 1.5%~1.9556% 1.4885%~1.64%	Year of Expiration 2019~2021 2018	Amount
				$ 2,370,000 250,000
				$ 2,620,000
				$ 250,000 2,370,000
				$ 2,620,000

On February 2, 2016, the Company signed a syndicated loan agreement for 5 years with Mega International Commercial Bank, the lead bank of the syndicated loan, and 7 other banks in order to raise funds to build the plant and accessory equipment and meet funding requirement. The aggregate amount of credit line of the syndicated loan was $4,350,000 thousand.

1. Syndicated loan A: The credit line is $2,900,000 thousand consisting of medium-term secured loans and non-revolving credit facility, which were used to finance the building of the plant and purchase of accessory equipment.

2. Syndicated loan B: The credit line is $1,450,000 thousand consisting of medium-term loans and revolving credit facility, which were used to meet funding requirement.

3. The financial covenants under the loan agreement include the requirement to maintain certain financial ratios based on the reviewed semi-annual financial report and audited annual financial reports. If the Company breaches these financial covenants, the syndicated banks may determine to declare the unpaid principal, interest, fees and other sums payable by the Company under the loan agreement to be immediately due and payable. These financial ratios are as follows:

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5. (1) Current Ratio (total current assets divided by total current liabilities): not lower than 100%.

6. (2) Leverage Ratio (total liabilities plus contingent liabilities to tangible net worth): not higher than 100%.

7. (3) Times Interest Earned (income before tax plus depreciation expense plus amortization expense divided by interest expenses): not lower than 2 times.

As of December 31, 2018 and 2017, both of the unused credit line amounted to $2,250,000 thousand. Please refer to Note 8 for details of the related assets pledged as collateral.

The Company signed a contract for secured bank credit facilities totaling $1,200,000 thousand in order to finance its operating requirement. As of December 31, 2018 and 2017, credit facilities of $380,000 thousand and $270,000 thousand were used. The unused amounted to $820,000 thousand and $930,000 thousand. The current portion of the longterm bank loans obtained from such credit facilities amounted to $380,000 thousand and $0 thousand, respectively. Please refer to Note 8 for details of the related assets pledged as collateral.

As of December 31, 2018 and 2017, the Company was granted by banks short-term credit lines of $6,650,000 thousand and $5,754,000 thousand, of which $3,565,104 thousand and $3,237,817 thousand, respectively, were unused.

Please refer to Note 8 for details of the related assets pledged as collateral.

• j. Long-term bills payable

The components of long-term bills payable were as follows:

Bills payable Bills payable Bills payable Bills payable Bills payable Less: Discount on long- term bills payable Bills payable Less: Discount on long- term bills payable Total	December 31, 2018	December 31, 2018
	Acceptance institution Period China Bills Finance Corporation 2018.11.09~2019.01.08 China Bills Finance Corporation 2018.11.16~2019.01.15 International Bills Finance Co., Ltd. 2018.11.30~2019.01.18 Taching Bills Finance Co., Ltd. 2018.11.26~2019.02.25 Mega Bills Finance Co., Ltd. 2018.12.20~2019.03.20 December 31, 2017		Amount
			$ 100,000 50,000 50,000 50,000 100,000
			350,000 (271)
			$ 349,729
	Acceptance institution China Bills Finance Corporation	Period 2017.12.08~2018.02.06	Amount
			$ 300,000
			300,000 (118)
			$ 299,882

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The Company had revolving commercial promissory note agreements with bills finance companies in order to finance its operating requirement. The bills payable bear interest at annual rates ranging from 0.5%~1.1513% and 0.38%~0.70% for the years ended December 31, 2018 and 2017, respectively.

Please refer to Note 8 for details of the related assets pledged as collateral.

k. Bonds payable

Bonds payable
Total amount of convertible bonds issued Cumulative converted amount Cumulative redeemed amount Embedded derivative-call option、put option and Conversion Right Loss (gain) on fair value measurement of embedded derivatives such as buy back right, sell back right and Conversion Right Interest expense Amortization of issuance cost	December 31, 2018 $ - - - $ - For the Year Ended December 31,2018 $ - - $ -	December 31, 2017
		4,127,904 (4,109,141) (18,763)
		-
		For the Year Ended December 31,2017
		920,915
		92,745
		83,552

The convertible bond issued by the Company was treated as a compound financial instrument, for which the liability and equity components were accounted for separately.

The call and put option embedded in bonds payable were separated from bonds payable, and were recognized as “Financial liabilities at fair value through profit or loss.” For the years ended December 31, 2018 and 2017, the Company recognized a gain (loss) on financial liability reported at fair value through profit or loss of $0 thousand and $(920,915) thousand, respectively.

On December 17, 2014, the Company issued Credit Enhanced Zero Coupon Convertible Bonds with aggregate principal amount of US$132,000 thousand, which are due in 2019. These bonds bear effective interest rate of 3.2082%. On conversion of the Bonds to the Company’s common shares of stock, the conversion price is $10.80 (NT dollars) per share with a fixed exchange rate of NT$31.222 = US$1.00. If the price for the conversion of the Bonds is adjusted as defined in the issuance terms, the conversion price adjustment is made according to a definite formula. The bonds bear no conditions. Unless previously redeemed, repurchased and cancelled, or converted, the Bonds will mature, and are redeemable on December 17, 2019 at 109.10% of the unpaid principal amount thereof.

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The Company will redeem the Bonds in whole or in part early under the following conditions:

1. The Company may redeem the Bonds, in whole or in part, at the early redemption amount on the date of redemption if the Market Price (translated into US Dollars at the Prevailing Rate) for 20 out of 30 consecutive Trading Days, the last of which occurs not more than five trading days prior to the date on which notice of such redemption is given, is at least 125% of the quotient of the Early Redemption Amount divided by the Conversion Ratio.

2. If more than 90% in principal amount of the Bonds originally outstanding has been redeemed, repurchased and cancelled or converted, the Company can redeem the remaining outstanding bonds.

3. If, as a result of certain changes relating to the tax laws in the ROC or such other jurisdiction in which the Company are then organized or resident for tax purposes, the Company becomes obligated to pay Additional Amounts. The Bonds, may be redeemed at the option of the Company, in whole but not in part, at the Early Redemption Amount Bondholders may elect not to have their Bonds redeemed but with no entitlement to any Additional Amounts or reimbursement of additional tax.

4. Upon the occurrence of an LC Redemption Event and to the extent permitted by applicable law, the Company shall redeem all and not some only of the outstanding Bonds at the Early Redemption Amount to such date, subject to the right of each holder of the Bonds to elect that such holder’s Bonds shall not be redeemed, but shall remain outstanding without the benefit of the Letters of Credit.

Except for the following circumstances, a Bondholder should not request the Company to redeem the bond, in whole or in part, before maturity date.

1. Unless the Bonds have been previously redeemed, repurchased and cancelled, or converted, each Bondholder shall have the right, at such Bondholder’s option, to require the Company to repurchase, in whole or in part (being US$200,000 thousand in principal amount and integral multiples thereof), of such Bondholder’s Bonds on December 17, 2017 at 105.37% of their principal amount

2. In the event that the Common Shares cease to be listed or admitted to trading on the TWSE, each Bondholder shall have the right, at such Bondholder’s option, to require the Company to repurchase, in whole or in part.

3. Upon the occurrence of an LC Redemption Event and to the extent permitted by applicable law, each Bondholder shall have the right, at such Bondholder’s option, to require the Company to repurchase, in whole or in part.

Payments of (i) the principal of and premium on the Bonds at maturity or upon redemption or repurchase; or (ii) the principal of and premium and default interest (if any) on the Bonds in the case of an Event of Default will have the benefit of irrevocable standby letters of credit (the ‘‘Letters of Credit’’) issued severally but not jointly by CTBC Bank Co., Ltd. and Taiwan Cooperative Bank, Ltd. in accordance with their respective committed percentage to the total principal amount of the Bonds.

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During the period when Bonds are outstanding, the Company is required to comply with the following financial covenants:

1. Current ratio (current assets/current liabilities): should not be less than 120%.

2. Debt ratio ((total liabilities + contingent liabilities)/tangible net assets): should not be higher than 70%.

3. Interest coverage ratio (EBITDA/interest expense): should not be less than 3%.

4. Tangible net assets (stockholders’ equity (including minority shareholders) - intangible assets): should not be less than $25,000,000 thousand.

Based on its 2016 reviewed semi-annual financial report, the Company did not meet its financial covenant with regard to time interest earned as prescribed in its agreement. Therefore, the Company deposited USD time deposits to the compensation bank account as defined in the agreement. The Company negotiated with the banks continuously. The Company got exemption of the financial ratio of time interest earned violation on November 1, 2016, and took the USD time deposits back from the compensation bank account. As of December 31, 2016, the Company did not meet its financial covenant with regard to time interest earned as prescribed in its agreement. However, after the negotiating with the banks, the Company was given an exemption on March 31, 2017.

After the bond has been issued for over 36 months, if the closing price of the Company’s common shares listed on the Taiwan Stock Exchange exceeds or equals 125% of the conversion price for 20 consecutive days, the Company may redeem the bonds using the early redemption price. Because the Company has met the conditions on early redemption, it was able to redeem all the bonds on December 19, 2017.

Please refer to Note 8 for details of the related assets pledged as collateral.

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l. Provisions

Provisions
Balance as of January 1, 2018 Provisions made during the year Provisions used during the year Balance as of December 31, 2018 Current Non-current Balance as of January 1, 2017 Provisions made during the year Provisions used during the year Balance as of December 31, 2017 Current Non-current	Decommissioning $ 1,200,529 - (2,179) $ 1,198,350 $ - 1,198,350 $ 1,198,350 $ 1,200,529 - - $ 1,200,529 $ - 1,200,529 $ 1,200,529	Remediation project 1,087,851 - (120,437) 967,414 473,629 493,785 967,414 1,192,928 - (105,077) 1,087,851 164,493 923,358 1,087,851	Employee benefits 242,175 11,620 (16,809) 236,983 5,885 231,098 236,983 259,209 6,124 (23,161) 242,172 8,857 233,315 2421,72	**Total **
				2,530,552 11,620 (139,425)
				2,402,747
				479,514 1,923,233
				2,402,747
				2,652,666 6,124 (128,238)
				2,530,552
				173,350 2,357,202
				2,530,552

1. To comply with the Order of the Tainan City Government, the Company submitted a remediation plan proposal and accrued relevant remediation plan for approval before June 30, 2008 and evaluated the relating remediation expense of $1,647,200 thousand. In May 2009 and on July 2, 2012, the Company was granted official approval of its remediation proposal and amended remediation proposal, respectively. In September 2014, the Company has completed the first phase of the implementation of its plan. It is expected to launch the second phase of the implementation of its remediation plan during the next. The Company has submitted the second phase of its amended remediation plan to the Tainan City Government for approval. On December 24, 2014, Tainan City Government notified the Company its approval and now is under public tender review.

The aforementioned remediation costs of the Company were recognized in the total amount of $1,600,000 thousand for the first stage before September, 2014. With the launch of the subsequence of the second remediation stage, the Company estimated the cost based on the situation of December, 2014 is $1,356,000 thousand. (Note 6 h. for more details)

1. (1) The Company’s four parcels of land at Dongshan section , Shulin district, New Taipei City were the original location of TAIC’s Shulin plants , but then sold to the Taiwan Chinese Petroleum Corporation (CPC). On August 16, 2010, the Environmental Protection Department of New Taipei City Government has declared that such land as "Soil Pollution Control Site”. In March 2011, the Environmental Protection Department of New Taipei City Government has issued its letter No. 1000010000. In that letter, the Company is deemed to be the surviving entity, which assumed the rights and obligations of TAIC following its merger with TAIC and TAIC ceased to exist. As the surviving entity from this merger, the Company was therefore declared as the polluter and was required to submit a remedial measuring plan.

2. 318 -

3. (2) In August 2011, the Environmental Protection Department of New Taipei City Government has issued its Letter No. 1001001329 requiring the Company to complete its investigation and propose a pollution control plan to the Environmental Protection Department of New Taipei City Government for approval and then adopt its implementation. Following its said merger with Taiwan Alkali Company under the government‘s mandatory order, the Company itself has neither performed any act of production, operation, development, use nor initiated act to cause pollution. For this reason, the Company objected with being tagged as “the polluter” and filed a complaint for administration remedy in August 2011. In 2011, the Company estimated and accrued relevant remediation expenses ~~o~~ f $273,750 thousand in accordance with the relevant provisions of Financial Accounting Standards.

4. m. Operating lease

The Company leases out some of its property, plant and equipment under operating leases. The future minimum lease receivable under these non-cancellable operating leases were as follows:

Less than one year Between one and five years Over five years	December 31, 2018 $ 16,094 19,904 38,019 $ 74,017	December 31, 2017
		16,094 19,119 39,652
		74,865

For the years then ended December 31, 2018 and 2017, the income from the rental of property, plant and equipment amounted to $19,491 thousand and $19,806 thousand, respectively.

n. Employee benefits

1. Defined benefit plans

The Company’s defined benefit obligations and fair value of plan assets were as follows:

Present value of funded defined benefit obligation Fair value of plan assets Net defined benefit liabilities	December 31, 2018 $ 581,583 (356,244) $ 225,339	December 31, 2017
		699,020 (465,705)
		233,315

The provision consists of net defined benefit liabilities and accrued pension liabilities for professional managements. The accrued pension liabilities for professional managements was $5,759 thousand and $0 thousand as of December 31, 2018 and 2017, respectively.

The Company makes defined benefit plans contributions to the pension fund account with Bank of Taiwan that provides pension benefits for employees upon retirement. Plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average monthly salary for six months prior to retirement.

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(1) Composition of plan assets

The Company and its subsidiaries in Taiwan set aside pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund and such funds are managed by the Labor Pension Fund Supervisory Committee. Under these regulations, the minimum earnings from these pension funds shall not be less than the earnings from two-year time deposits with the interest rates offered by local banks.

As of December 31, 2018, the balance of the Company’s contributions to the pension funds in Bank of Taiwan was $358,940 thousand. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Labor Pension Fund Supervisory Committee.

• (2) Movements in present value of the defined benefit obligations

The movements in the present value of the defined benefit obligations for the years ended December 31, 2018 and 2017 were as follows:

Defined benefit obligation, January 1 Benefits paid from plan assets Current service costs and interest Re-measurements of the net defined benefit liability (assets) Defined benefit obligation, December 31	2018 $ 699,020 (140,457) 24,038 (1,018) $ 581,583	2017
		814,474 (126,141) 26,682 (15,995)
		699,020

• (3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit assets for the year ended December 31, 2018 and 2017 were as follows:

The movements in the present value of the define December 31, 2018 and 2017 were as follows:	d benefit assets fo	r the year ended
Fair value of plan assets, January 1 Employer contributions Benefits paid by the plan Expected return on plan assets Re-measurements of the net defined benefit liability (assets) Fair value of plan assets, December 31	2018 $ 465,705 11,036 (140,457) 6,112 13,848 $ 356,244	2017
		564,123 20,121 (123,493) 6,021 (1,067)
		465,705

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(4) Expenses recognized in profit or loss

The Company’s pension expenses recognized in profit or loss for the years ended December 31, 2018 and 2017 were as follows:

Current service cost Net interest on net defined benefit liability Operating costs Selling expenses Administrative expenses Research and development expenses Actual return on plan assets	**For the Years Ended December 31 **	**For the Years Ended December 31 **
	2018 $ 14,845 3,081 $ 17,926 $ 16,473 56 1,254 143 $ 17,926 $ 19,960	2017
		17,967 2,694
		**20,661 **
		19,336 79 1,074 142
		20,661
		4,954

• (5) Re-measurement of net defined benefit liability recognized in other comprehensive income

The Company’s net defined benefit liability recognized in other comprehensive income was as follows:

Accumulated balance, January 1 Recognized during this year Accumulated balance, December 31	For the Years Ended December 31	For the Years Ended December 31
	2018 $ (153,844) 14,866 $ (138,978)	2017
		(168,772) 14,928
		(153,844)

• (6) Actuarial assumptions

The following are the key actuarial assumptions at the reporting date:

Discount rate Future salary increases	For the Years Ended December 31	For the Years Ended December 31
	2018 1.125% 1.500%	2017
		1.375% 1.500%

Base on the actuarial report, the Company is expected to make a contribution payment of $50,440 thousand to the defined benefit plans for the one year period after the reporting date. The weighted-average duration of the defined benefit plans is 12.73 years.

(7) Sensitivity analysis

In determining the present value of the defined benefit obligation, the Company’s management makes judgments and estimates in determining certain actuarial assumptions on the balance sheet date, which includes employee turnover rate and future salary changes. Changes in actuarial assumptions may have significant impact on the amount of defined benefit obligation.

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As of December 31, 2018 and 2017, the changes in the principal actuarial assumptions will impact the present value of defined benefit obligation as follows:

December 31, 2018 Discount rate Increase in future wage December 31, 2017 Discount rate Increase in future wage	Impact on the present value of defined benefit obligation	Impact on the present value of defined benefit obligation
	Increase by 0.25% $ (13,948) 14,186 $ (15,762) 16,067	Decrease by 0.25%
		14,531 (13,689) 16,426 (15,496)

The sensitivity analysis assumed all other variables remain constant during the measurement. This may not be representative of the actual change in defined benefit obligation as some of the variables may be correlated in the actual situation. The model used in the sensitivity analysis is the same as the defined benefit obligation liability.

The analysis is performed on the same basis for prior year.

1. Defined contribution plans

The Company contributes an amount at the rate of 6% of the employee’s monthly wages to the Labor Pension personal account with the Bureau of the Labor Insurance and Council of Labor Affairs in R.O.C. in accordance with the provisions of the Labor Pension Act. The Company’s contributions to the Bureau of the Labor Insurance and Social Security Bureau for the employees’ pension benefits require no further payment of additional legal or constructive obligations.

The cost of the pension contributions to the Labor Insurance Bureau for the years ended December 31, 2018 and 2017 amounted to $40,539 thousand and $33,690 thousand, respectively.

1. The pension recognized consists of pension expenses and pensions for professional management. The pension expenses for professional management was $5,759 thousand and $0 thousand as of December 31, 2018 and 2017, respectively.

2. Short-term compensated absences liabilities

As of December 31, 2018 and 2017, the Company’s short-term compensated absences liabilities amounted to $5,885 thousand and $8,857 thousand, respectively.

• o. Income Tax

According to the amendments to the “Income Tax Act” enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, an increase in the corporate income tax rate from 17% to 20% is applicable upon filing the corporate income tax return commencing FY 2018.

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1. Income tax expense

The components of income tax expense for the years ended December 31, 2018 and 2017 were as follows:

Current income tax expense Currently incurred Adjustment to prior year’s income tax charged to current income tax Deferred tax expense The origination and reversal of temporary differences Unrecognized changes of deductible temporary differences Income tax expense	For the Years Ended December 31,	For the Years Ended December 31,
	2018 $ (346,315) 614 (346,001) (570,690) 570,690 - $ (346,001)	2017
		(183,085) -
		(183,085)
		(435,180) 435,180
		-
		(183,085)

For the years ended December 31, 2018 and 2017, income tax expenses recognized under other comprehensive income were both $0 thousand.

Income tax calculated on pre-tax financial income was reconciled with income tax expense for the years ended December 31, 2018 and 2017 as follows:

Profit (loss) before income tax Income tax on pre-tax financial income calculated at the domestic rate Unrecognized deferred tax assets Changes of permanent differences Prior years income tax adjustment 10% surtax on undistributed earnings Income basic tax Income tax expense		For the Years Ended December 31,	For the Years Ended December 31,
		2018 $ 4,636,270	2017
			6,274,741
		(972,254) 570,690 358,215 614 (348,266) - $ (346,001)	(1,066,706) 435,180 631,526 - - (183,085)
			(183,085)

2. Unrecognized Deferred tax assets

Decommissioning liabilities Remediation project Extraordinary loss Allowance for doubtful receivables Property, plant and equipment, investment property Tax loss Others	December 31, 2018 $ 67,683 239,744 727,670 319,484 750,998 4,278,868 415,439 $ 6,799,866	December 31, 2017
		56,386 240,050 847,801 319,484 883,183 6,974,595 87,506
		9,409,005

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The Company’s income tax returns through 2016 have been assessed and approved by the Tax Authority. Tax loss ratified by Tax Administration could be carried forward for ten consecutive years in accordance with Income Tax Act. The Company did not recognize aforesaid tax loss as deferred tax assets because it is not expecting enough taxable profit in the near future.

As of December 31, 2018, the expiration years of tax loss unrecognized as deferred tax assets were as follows:

As of December 31, 2018, the exp assets were as follows:	iration years of tax loss	unrecognized as deferred tax
Year incurred 2014 2015 2016	Amount $ 331,035 2,132,246 1,815,587	Effective Period
		2015-2024 2016-2025 2017-2026

• 3 Deferred tax liabilities:

As of December 2018 and December 31, 2017, the balance of deferred income tax liabilities for the provision of land value-added tax was $8,758,989 thousand an $8,754,736 thousand, respectively.

1. Deferred tax assets:

The changes in the deferred income tax assets recognized in the Republic of China in 2018 and 2017 are as follows:

The changes in the deferred income tax assets recognized in the Republic 2018 and 2017 are as follows:	of China in
Balance, January 1, 2018 Recognized in profit or loss Balance, December 31, 2018 Balance, December 31, 2017(equal to January 1)	Taxable Loss
	$ 9,358 1,651
	$ 11,009
	$ 9,358

1. Stockholders’ imputation tax credit account and tax rate:

According to the amendments to the "Income Tax Act" enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, effective January 1, 2018, companies will no longer be required to establish, record, calculate, and distribute their ICA due to the abolishment of the imputation tax system.

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• p. Capital and reserves

As of December 31, 2018 and 2017, the authorized, issued and outstanding capital of the Company amounted to $26,998,573 thousand, divided into 2,699,857 thousand shares, with par value of $10 (NT dollars) per share.

Balance, January 1 Conversion of convertible bonds Balance, December 31	(In thousands of shares) Common Stock	(In thousands of shares) Common Stock
	2018 2,699,857 - 2,699,857	2017
		2,319,990 379,867
		2,699,857

Due to the conversion of the convertible bonds between January 1 and March 31, 2017, the Company issued 35,269 thousand shares amounting to $352,693 thousand, at a par value of NT$10 per share, with the issuance date on March 31, 2017, which was approved by and registered with the competent authority on June 28, 2017.

Due to the conversion of the convertible bonds between April 1 and June 30, 2017, the Company issued 8,095 thousand shares amounting to $80,946 thousand, at a par value of NT$10 per share, with the issuance date on June 30, 2017, which was approved by and registered with the competent authority on August 8, 2017.

Due to the conversion of the convertible bonds between July 1 and September 30, 2017, the Company issued 161,313 thousand shares amounting to $1,613,136 thousand, at a par value of NT$10 per share, with the issuance date on September 30, 2017, which was approved by and registered with the competent authority on November 27, 2017.

Due to the conversion of the convertible bonds between October 1 and December 31, 2017, the Company issued 175,190 thousand shares amounting to $1,751,901 thousand, at a par value of NT$10 per share, with the issuance date on December 31, 2017, and be approved by the competent authority on March 28, 2018.

1. Capital Surplus

Premium of share issue Other Total	December 31, 2018 $ 1,242,245 18,141 $ 1,260,386	December 31, 2017
		1,242,245 18,141
		1,260,386

In accordance with the ROC Company Act, as amended in January 2012, capital surplus cannot be used to distribute cash dividends or be used to increase capital unless it offsets the deficit first. The realized capital surplus includes those arising from donation and the excess of the issuance price over the par value of capital stock issued. In accordance with the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, if capital surplus is capitalized in batches, the combined amount of capital surplus capitalized in batches in any one year cannot exceed 10 % of paid-in capital.

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2. Retained earnings

The Company distributes dividends depending on the level of earnings of each year, funding needs, industrial environment, and status of competition, long-term operating plan and interests of shareholders. Under such circumstances, the Company may appropriate for special reserve either in whole or in part to assure financial stability and sustainability. The Company may distribute dividends in cash or stock. If the earnings distribution is made in the form of by stock dividend, the ratio for the stock dividend shall not exceed 50% of the total distribution unless the ratio of the Company’s total liabilities to total assets is equivalent or above 50% or otherwise prescribed in relevant laws and regulations.

(1) Legal reserve

In accordance with the Amended Company Act 2012, 10 percent of net income is set aside as legal reserve, until it is equal to share capital. If the Company experiences profit for the year, the meeting of shareholders decides on the distribution of the statutory earnings reserve either by issuing new shares or by cash, of up to 25 percent of the actual share capital.

(2) Special reserve

By adopting the exemptions allowed under IFRS 1 First-time Adoption of International Financial Reporting Standards during the Company’s first-time adoption of the International Financial Reporting Standards approved by the Financial Supervisory Commission (IFRSs), unrealized asset revaluation gains in shareholders’ equity of $5,281,790 thousand was reclassified to retained earnings. The net increase in retained earnings due to the first-time adoption of IFRSs amounted to $4,235,076 thousand. In accordance with Ruling No. 1010012865 issued by the Financial Supervisory Commission on 6 April 2012, a special reserve is appropriated from the distribution of retained earnings as a result of an increase in retained earnings due to the first-time adoption of IFRSs. When the related assets are used, disposed of, or reclassified, this special reserve is reversed as distributable earnings proportionately. The carrying amount of special reserve amounted to $4,235,076 thousand as of December 31, 2018 and 2017.

In 2014, the Company changed the subsequent measurement of investment properties from cost model to fair value model. In accordance with Ruling No. 1030006415 issued by the Financial Supervisory Commission on 18 March 2014, on the first-time adoption of fair value model for the subsequent measurement of investment properties, the Company set aside an equal amount of special reserve when the fair value increment of investment properties is transferred to retained earnings. The Company appropriated to the special reserve an amount of $21,224,233 thousand as of December 31, 2013. The company held a shareholder meeting on June 8, 2017, in order to use the special reserve amounted to $1,958,584 thousand to cover accumulated deficits. On April 11, 2018, the Company’s shareholders resolved during their meeting, to reimburse $1,958,584 thousand into the special reserve. The carrying amount of such special reserve amounted to $21,224,233 thousand and $19,265,649 thousand as of December 31, 2018 and 2017, respectively.

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For every year the Company distributes earnings, a special reserve is appropriated in the following order:

• A. Each year, a special reserve is appropriated from current year’s net income and prior years’ undistributed earnings for the same amount as the net increase in the fair value of investment property using the fair value model. A special reserve is also appropriated for the same amount as the cumulated net increase in the fair value for the year when the undistributed earnings are not distributed. When the investment property is disposed of, this special reserve is reverted proportionately to distributable earnings. As of December 12, 2018 and 2017, the Company appropriated to the special reserve an amount of $3,867,293 thousand and $327,688 thousand, respectively.

• B. In accordance with Ruling No. 1010047490 issued by the Financial Supervisory Commission on 21 November 2012, a special reserve is appropriated by the parent company for the difference between market value and book value of parent company shares being held by a subsidiary times the percentage of the parent company’s equity investment in the said subsidiary, if the stock price of the parent company is lower than the its value. If the market value recovers subsequently, this special reserve is reverted proportionately to distributable earnings.

• C. In accordance with Ruling No. 1010012865 issued by the Financial Supervisory Commission on 6 April 2012, a portion of current-period earnings and undistributed prior-period earnings is appropriated as a special reserve during earnings distribution. Such appropriation of special reserve is based on the difference between the total net amount of contra accounts in the shareholders’ equity and the carrying amount of special reserve. Similarly, a portion of undistributed prior period earnings (which does not qualify for earnings distribution) is likewise appropriated as a special reserve on account of cumulative changes to other shareholders’ equity pertaining to prior periods. The subsequent reversals of the contra accounts in the shareholders’ equity shall qualify for additional earnings distributions.

(3) Earnings Distribution

On April 11, 2018 and June 8, 2017, the Company’s shareholders resolved during their meeting, not to distribute dividend to shareholders out of the earnings.

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3. Other equity accounts

Balance, January 1, 2018 Retrospective adjustments Exchange difference on subsidiary accounted for using equity method Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income Unrealized gains from financial assets measured at fair value through other comprehensive income for subsidiaries accounted for using equity method Unrealized gains from financial assets measured at fair value through other comprehensive income for affiliated companies accounted for using equity method Balance, December 31, 2018 Balance, January 1, 2017 Exchange difference on subsidiary accounted for using equity method Unrealized gain for available-for-sale financial assets Unrealized gain for available-for-sale financial assets for subsidiary accounted for using equity method Unrealized gain for available-for-sale financial assets for affiliated companies accounted for using equity method Balance, December 31, 2017	Exchange differences on foreign operation $ (392,378) - (95,834) - - - $ (488,212) Exchange differences on foreign operation $ (293,769) (98,609) - - - $ (392,378)	Unrealized gain or loss on financial assets at fair value through other comprehensive income
		(788,734) (18,968) - (408,318) (32,387) (92)
		(1,248,499)
		Available-for-sale financial assets
		(1,228,183) - 39,1878 47,136 435
		(788,734)

q. Earnings per share

The basic earnings per share and diluted earnings per shares for the years ended December 31, 2018 and 2017 were calculated as follows:

Basic earnings per share (NT dollars) Profit attributable to ordinary shareholders Weighted-average number of ordinary shares Diluted earnings per share (NT dollars) Profit attributable to ordinary shareholders (diluted) Weighted-average number of ordinary shares (basic) Effect of potentially dilutive ordinary shares of Employee stock bonus Weighted-average number of ordinary shares (diluted)	For the Years Ended December 31	For the Years Ended December 31
	2018 $ 4,290,269 2,699,857 $ 1.59 $ 4,290,269 2,699,857 13,371 2,713,228 $ 1.58	2017
		6,091,656
		2,390,817
		2.55
		6,091,656
		2,390,817 12,909
		2,403,726
		2.53

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r. Revenue from contracts with customers

1. Details of revenue

The Company primarily engages in the production of petroleum, alkali-chlorine, phosphoric acid and other petrochemical products and by-products and the storage, transportation, purchase and sale of these products, related chemicals and their raw materials. The details of products and sales area, please refer to Notes 14.

2. Contract balances

Accounts receivable (including related parties) Less: allowance for doubtful account Contract liabilities	December 31, 2018 $ 3,043,618 (332,496) $ 2,711,122 $ 2,674	January 1, 2018
		3,954,388 (332,496)
		**3,612,892 **
		5,253

Please refer to Note 6 v. for disclosure of accounts receivable and allowance for doubtful accounts.

The amount of revenue recognized for the year ended December 31, 2018 that was included in the contract liability balance at the beginning of the period was $5,253 thousand.

s. Revenue

Sales of goods	For the Years Ended December 31	For the Years Ended December 31
	2018 $ 36,969,800	2017
		32,160,867

t. Remuneration of employees and directors

In accordance with the Articles of incorporation, the Company should contribute no less than 3% of the profit as employee compensation and less than 2% as directors' and supervisors' remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The amount of remuneration of each director and supervisor and of compensation for employees entitled to receive the abovementioned employee compensation is approved by the board of directors. The recipients of shares and cash may include the employees of the Company's affiliated companies who meet certain conditions.

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For the years ended December 31, 2018 and 2017, remuneration of employees of $146,409 thousand and $198,150 thousand, respectively, and directors of $97,606 thousand and $132,100 thousand, respectively, were estimated and recognized as current expense. These amounts were calculated using the Company’s profit before tax before remuneration of employees and directors for the years ended December 31, 2018 and 2017. These benefits were charged to profit or loss under operating costs or operating expenses for the years ended December 31, 2018 and 2017. These benefits were charged to profit or loss under operating costs or operating expenses for the years ended December 31, 2018 and 2017. Related information would be available at the Market Observation Post System website. The actual distribution of remuneration of employees amounted to $118,850 thousand as of December 31, 2018. The amounts, as stated in the financial statements, are identical to those of the actual distributions for 2018 and 2017.

• u. Non-operating income and expense

1. Other income

Interest income Repurchase agreement Imputed interests of security deposits Bank deposits Dividends income Other income Rental income	**For the Years Ended December 31 **	**For the Years Ended December 31 **
	2018 $ 7,130 364 156,865 636,733 130,351 19,491 $ 950,933	2017
		16,414 5 169,038 65,578 225,428 19,806
		496,269

1. Other gains and losses

Other gains and losses
Foreign exchange (losses) gains Gain on disposal of investments Loss on disposal of property, plant and equipment Gain on evaluation of investment property Gain on redemption of bonds payable Net gains on evaluation of financial assets (liabilities) measured at fair value through profit or loss Embedded Derivatives- loss on fair value Measurement of buy back right, sell back right and Conversion Right Bank fees Impairment gain on financial assets Other losses	For the Years Ended December 31
	2018 $ (15,866) - (6,941) 119,574 - 261,643 - (50,859) - (537,606) $ (230,055)	2017
		68,706 2,674,417 (465) 41,244 10,091 - (920,915) (165,411) 156,252 (238,229)
		1,625,690

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3. Finance costs

Interest expenses Bank loans Imputed interests of security deposits Amortization of bonds payable, discount Interest compensation of bonds payable Others	For the Years Ended December 31 2018 2017 $ 49,821 77,881 16 16 - 28,838 - 63,907 2,263 5,508 $ 52,100 176,150	For the Years Ended December 31 2018 2017 $ 49,821 77,881 16 16 - 28,838 - 63,907 2,263 5,508 $ 52,100 176,150
		2017
		77,881 16 28,838 63,907 5,508
		176,150

v. Financial Instruments

1. Categories of financial instruments

(1) Financial assets

Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Available-for-sale financial assets Financial assets carried at cost Cash and cash equivalents Notes receivable, accounts receivable and other receivables Other assets Total	December 31, 2018 $ 4,265,537 1,963,687 - - 8,465,372 2,817,303 127,646 $ 17,639,545	December 31, 2017
		990,664 - 1,677,346 1,772,035 6,912,818 3,655,694 126,949
		15,135,506

(2) Financial liabilities

Short-term loans Long-term bank loans-current portion Payables Long-term bank loans Long-term bills payable Other liabilities Total	December 31, 2018 $ 650,000 685,000 2,967,746 1,795,000 349,729 101,861 $ 6,549,336	December 31, 2017
		250,000 - 2,268,922 2,370,000 299,882 -
		5,188,804

2. Credit risk

• (1) Exposure to credit risk

The carrying amount of financial assets represents the Company’s maximum credit exposure. As of December 31, 2018 and 2017, the maximum exposures to credit risk amounted to $17,639,545 thousand and $15,133,506 thousand, respectively.

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(2) The concentration of credit risk

The sales of the Company are significantly concentrated in a small number of customers. For the years ended December 31, 2018 and 2017, 82% and 84%, respectively, of the total amount of accounts receivable is composed of 11 customers and 8 customers, respectively. Under the Company’s credit policy, customers are requested to provide the Company certain financial information like audited financial report, or other related documents for purposes of evaluating their credit worthiness. Credits are granted to these customers according to the result the Company’s credit evaluation.

(3) Impairment losses

The Company uses simple method to evaluate expected credit loss for notes receivable and accounts receivable, which means using the existing life time to measure the expected credit loss. For the purpose of measuring, the notes receivable and accounts receivable are grouped based on the characteristic of mutual credit risk, which is the ability for customers to honor the contract and be able to settle the receivables when due. Aging analysis of the receivables on the reporting date was as follows:

Not past due Past due more than 1 year	Carrying amount of account receivables $ 2,806,028 237,590 $ 3,043,618	Weighted average expected credit loss 0~4% 100%	Allowance for expected credit loss
			94,906 237,590
			332,496

Aging analysis of the receivables on the reporting date was as follows:

Not past due Past due more than 1 year	December 31, 2017	December 31, 2017
	Total amount $ 3,750,600 237,590 $ 3,988,190	Impairment
		(94,906) (237,590)
		(332,496)

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3. Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

December 31, 2018 Non-derivative financial liabilities Accounts payable Other payables Other financial liabilities－ current Other non-current liabilities－ other Floating-rate loans Fixed-rate loans Long-term bills payable December 31, 2017 Non-derivative financial liabilities Accounts payable Other payables Other financial liabilities－ current Other non-current liabilities－ other Floating-rate loans Fixed-rate loans Long-term bills payable	Carrying amount $ 1,728,481 935,006 10,848 100,057 1,550,000 1,580,000 349,729 $ 6,254,121 $ 1,835,136 233,840 341,923 62,012 1,350,000 1,270,000 299,882 $ 5,392,793	Contractual cash flows 1,728,481 935,006 10,848 100,057 1,607,245 1,584,731 350,000 6,316,368 1,835,136 233,840 341,923 62,012 1,432,337 1,271,489 300,000 5,476,737	Within 6 months 1,728,481 745,448 10,848 88,523 411,652 551,332 350,000 3,886,284 1,835,136 231,717 341,923 13,467 - 250,718 - 2,672,961	6-12 months - 189,558 - 9,023 210,987 180,128 - 589,696 - - - 38,503 - - - 38,503	1-2years - - - 226 421,974 100,394 - 6,434,608 - 63 - 8,522 - 220,371 300,000 528,956	2-5years - - - 765 562,632 752,877 - 6,798,642 - 2,060 - - 1,432,337 800,400 - 2,234,797	More than 5years
							- - - 1,520 - - -
							1,520
							- - - 1,520 - - -
							1,520

4. Currency risk

• (1) Currency risk exposure

The Company’s exposures to significant currency risk were those from its foreign currency denominated financial assets and liabilities as follows:

Financial assets Monetary items USD HKD RMB EUR VND Long-term share investment using equity method USD Financial liabilities Monetary items USD RMB	December 31, 2018	December 31, 2018	December 31, 2018	December 31, 2017 Foreign Currency Exchange rate NTD 36,824 29.765 1,096,069 11,359 3.8110 43,293 903,705 4.567 4,127,221 1 35.540 39 - - - 170 29.765 5,048 9,621 29.765 286,368 - - -	December 31, 2017 Foreign Currency Exchange rate NTD 36,824 29.765 1,096,069 11,359 3.8110 43,293 903,705 4.567 4,127,221 1 35.540 39 - - - 170 29.765 5,048 9,621 29.765 286,368 - - -	December 31, 2017 Foreign Currency Exchange rate NTD 36,824 29.765 1,096,069 11,359 3.8110 43,293 903,705 4.567 4,127,221 1 35.540 39 - - - 170 29.765 5,048 9,621 29.765 286,368 - - -
	Foreign Currency $ 44,564 - 475,179 - 4,786,000 170 $ 12,497 -	Exchange rate 30.710 3.924 4.470 35.150 0.0013 30.710 30.710 -	NTD		Exchange rate 29.765 3.8110 4.567 35.540 - 29.765 29.765 -	NTD
			1,368,570 - 2,124,050 - 1,954,813 5,254 383,797 -			1,096,069 43,293 4,127,221 39 - 5,048 286,368 -

• 333 -

(2) Sensitivity analysis

The Company’s exposure to foreign currency risk arises from the foreign currency exchange rate fluctuations on cash and cash equivalents, receivables and payables, which are denominated in foreign currency. A 1% of appreciation of NTD against USD, EUR, HKD, VND, and RMB would have increased net income after tax by $24,921 thousand and increased $41,336 thousand for the years ended December 31, 2018 and 2017, respectively; other comprehensive income would have increased $53 thousand and increased $50 thousand for the years ended December 31, 2018 and 2017, respectively. The analysis between these two periods was based on the same criteria.

• (3) Foreign exchange gain and loss on monetary items

Since the Company has many kinds of functional currency, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. For years 2018 and 2017, foreign exchange gain (loss) (including realized and unrealized portions) amounted to lossed $15,866 thousand and gained $68,706 thousand, respectively.

5. Interest rate analysis

The following sensitivity analysis is based on the risk exposure to interest rates on the derivative and non-derivative financial instruments on the reporting date. For financial instruments bearing floating-rate, the sensitivity analysis assumes the floating-rate liabilities are outstanding for the whole year on the reporting date. The Company’s internal management reported the increases/decreases in the interest rates and the exposure to changes in interest rates of 1% is considered by management to be a reasonable change of interest rate.

If the interest rate increases by 1%, the Company’s net income will decrease by $16,500 thousand and $13,500 thousand for the years ended December 31, 2018 and 2017, respectively, assuming all other variable factors remain constant. This is due mainly to the fact that the Company’s borrowings bear floating interest rate.

1. Fair value information

The company use their market observations as much as possible when measuring their assets and liabilities. The level of fair value is based on the input value of the evaluation technique as follows:

• (1) Level 1: quoted prices (unadjusted) in active markets for identified assets or liabilities.

• (2) Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

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• (3) Level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

• (A) Fair value hierarchy

The fair value of financial assets and liabilities were as follows (including information on fair value hierarchy, but excluding measurements that have similarities to fair value but are not fair value and those fair value cannot be reliably measured or inputs are unobservable in active markets):

December 31, 2018 Financial Assets Cash and cash equivalent Current financial assets at fair value through profit or loss Non-current financial assets at fair value through profit or loss Non-current financial assets at fair value through other comprehensive income Note receivables, accounts receivable and other accounts receivable Other assets Non-financial Assets Investment property Financial Liabilities Short-term loans Long-term liabilities-current portion Long-term loans Long-term accounts payable Long-term notes payable Other liabilities December 31, 2017 Financial Assets Cash and cash equivalent Current financial assets at fair value through profit or loss Current available-for-sale financial assets Current financial assets at cost Note receivables, accounts receivable and other accounts receivable Other assets Non-financial Assets Investment property Financial Liabilities Short-term loans Long-term loans Long-term accounts payable Long-term notes payable	Book value $ 8,465,372 1,016,992 3,248,545 1,963,687 2,817,303 127,646 38,350,359 $ 55,989,904 $ 650,000 685,000 1,795,000 2,967,746 349,729 101,861 $ 6,549,336 $ 6,912,818 990,664 1,677,346 1,772,035 3,655,694 124,949 38,226,532 $ 53,360,038		Fair	value
		Level 1 - 1,016,992 - 1,524,767 - - - 2,541,759 - - - - - - - - 990,664 1,677,346 - - - - 2,668,010	Level 2 - - - - - - - - - - - - - - - - - - - - - - -	Level 3 - - 3,248,545 438,920 - - 38,350,359 42,037,824 - - - - - - - - - - - - - 38,226,532 38,226,532 - - - - -	Total
					- 1,016,992 3,248,545 1,963,687 - - 38,350,359
					44,579,583
					- - - - - -
					-
					- 990,664 1,677,346 - - - 38,226,532
					40,894,542
	$ 250,000 2,370,000 2,268,922 299,882 $ 5,188,804	- - - - -	- - - - -		- - - -
					-

(B) Valuation techniques for financial instruments which is not measured at fair value:

The carrying amount of loans and receivables, financial assets carried at cost and financial liabilities measured after amortization cost in the financial statements of the Company is close to its fair value.

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• (C) Valuation techniques for financial instruments measured at fair value:

The company determines the input value with reference to the analysis of the financial status and operating results, recent transaction price, related equity instruments are quoted in non-active markets, similar tools offer in the active market and comparable company evaluation multiplier of the investee company and periodically updates the input value and information and any other necessary fair value adjustments to ensure that the evaluation results are reasonable.

• (i) Non-derivative financial instruments

Financial instruments, if there is a public market offer, then the public market offer for the fair value, Such as listing (cabinet) company stock and open-end fund beneficiary certification.

The fair value of the financial instruments held by the company in the case of a non-active market is as follows:

No public offer debt investment tools: The discounted cash flow model is used to estimate fair value, it is mainly assumed that it is measured by discounting the expected future cash flows of the investee by the rate of return of the monetary time value and the investment risk.

No public offer equity instruments: Use the net asset value method, The main assumptions are based on the net per share of the investor.

• (ii) Derivative financial instruments

Is evaluated according to the evaluation model accepted by the market users, such as the discount method and the option pricing model.

• (D) There have been no transfers from each level for the years ended December 31, 2018 and 2017.

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(E) Statements of changes in fair value measurements of financial assets in Level 3

January 1, 2018 Adjustment on initial application of IFRS 9 Balance on January 1 per IFRS 9 Purchase Effects on deferred income tax liabilities Total gain and losses recognized in profit or loss December 31, 2018 January 1, 2017 Gain on Revaluation of investment property Effects on deferred income tax liabilities December 31, 2017	Investment Property $ 38,226,532 - 38,226,532 - 4,253 119,574 $ 38,350,359	Financial assets reported at fair value through profit or loss	Financial assets reported at fair value through profit or loss		Financial assets at fair value through other comprehensive income
		Designated at initial recognition 1,102,515 396,650 1,499,165 1,560,000 - 189,380 3,248,545	Derivative financial assets - -		Unquoted equity instruments
					- 666,841
			- - - -		666,841 - - (227,921)
			-		438,920
					Investment Property
					$ 38,152,353 41,244 32,935
					$ 38,226,532

• (F) Quantitative information on the measurement of fair value of significant unobservable input values(Level 3)

Level 3 refers to the measurement of the fair value of the input parameters are not based on market availability of information, must be based on the assumption that the appropriate estimates and adjustments. If the evaluation model can not be developed on its own, the fair value of the counterparty is used as the fair value. According to IFRS13,for the fair value of the third level classified at the fair value level, the firm shall provide quantitative information about the significant unobservable input values used for the fair value measure. Businesses do not need to create quantitative information to comply with this disclosure, if quantified unobservable input value is not built when enterprises are measuring fair value (Such as when a firm uses an unadjusted previous transaction price or a third party pricing information). The Company's investment No active market open interest and debt instrument investment. The fair value of the company is classified as the third level of investment real estate, the determination of its fair value is subject to IFRSs, commissioned by the professional valuation agencies in accordance with market evidence to support the value of the assessment (Please refer to note 。 6 h.). Due to the practice cannot fully grasp the significance observable input value and the relationship between the fair values, it did not expose the quantitative information. The fair value of the aforesaid assets at December 31, 2018 and 2017 is $42,037,824 thousand and $38,226,532 thousand, respectively.

The Company’s financial instruments that use Level 3 inputs to measure fair value include “financial assets measured at fair value through profit or loss – equity investments”.

Most of fair values are classified in the level 3 based on single significant unobservable input value, only the equity instruments with inactive market may result in multiple unobservable input values which are all independent from each other.

• 337 -

Quantified information of significant unobservable inputs was as follows:

Item Financial assets at fair value through profits or losses and financial assets at fair value through other comprehensive income	Valuation technique Net Asset Value Method	Significant unobservable inputs  Net Asset Value  Lack of market liquidity discount rate 10%~30%	Inter-relationship between significant unobservable inputs and fair value measurement
			 Not applicable  Lack of market liquidity higher discount, lower fair market value

• (G) The fair value is classified in the level 3 of the evaluation process

The company fair value measures the use of unobservable input values, and the input value can be observed must be based on not observable parameters for major adjustments, its fair value is classified in the level 3. The input source for this level is mainly issued by an external evaluation of the price report (Price letter).And then check the results of the evaluation to ensure consistency with the source of the evaluation and to ensure that the evaluation results are reasonable.

Investment real estate is based on financial supervisory commission announcement of the evaluation methods and parameters of the assumption of commissioned by external values.

• (H) Fair value measurements in Level 3 – sensitivity analysis of reasonably possible alternative assumptions

The fair value of the financial instruments is reasonable, and the self-built evaluation model is not used for the fair value of the level 3. Therefore, it is not necessary to perform the sensitivity analysis of the possible alternative assumptions.

• w. Financial risk management

• Overview

The company are exposed to the following risks due to the use of financial instruments:

• (1) Credit Risk

• (2) Liquidity risk

• (3) Market risk

The following discusses the Company’s objectives, policies and processes for measuring and managing the risks mentioned above. For more quantitative information about the financial instruments, please refer to other related notes of the notes to the financial statements.

• 338 -

• Risk management framework

The Board of Directors has overall responsibility for the oversight of the risk management framework in order to develop and monitor the Company’s risk management policies and to report regularly on its activities.

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through their training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit Committee of the Company oversees how management monitors compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee of the Company is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

3. Credit Risk

Credit risk means the potential loss of the Company if the clients or counterparties involved in that transaction default. The primary potential credit risk is from cash and accounts receivable.

• (1) Accounts receivable and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk, particularly in the current deteriorating economic circumstances.

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval from the Risk Management Committee; these limits are reviewed quarterly. Customers that fail to meet the Company’s benchmark creditworthiness may transact with the Company only on a prepayment basis.

• 339 -

The Company establishes an impairment allowance that represents its estimate of incurred losses in respect of trade receivables. The two components of this impairment allowance are specific loss component that relates to

ly significant exposure and collective loss component which the loss was incurred but not identified. The collective component is based on historical payment experience of similar financial assets.

(2) Bank deposits

The credit risk exposure in the bank deposits is measured and monitored by the Company’s finance department. As the Company deals with the banks and other external parties with good credit standing and financial institutions, corporate organization and government agencies which are graded above investment level, management believes that the Company do not have compliance issues and significant credit risk.

4. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The management believes that the Company do not have significant liquidity risk.

5. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Company buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out within the guidelines set by the Risk Management Committee.

(1) Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Company’s entities, primarily the New Taiwan Dollars (NTD). The currencies used in these transactions are denominated in NTD, USD and RMB.

The Company’s currency risk is not hedged as some of the currencies of the Company’s foreign currency receivables and payables are the same, producing a natural hedge effect.

• 340 -

(2) Interest rate risk

The Company’s Interest rate risk comes from long-term and short-term bank loans. The long-term bond issued by our company is fixed-rate loan, so there is no risk caused by the fluctuations of interest rates and fair value interest rate. The long-term and shortterm bank loans calculated in floating-rate were made our company suffered cash flow interest rate risk, but most of risk were covered by cash and cash equivalents holding in floating-rate.

• (3) Other market price risk

The Company does not enter into any commodity contracts other than to meet the Company’s expected usage and sales requirements; such contracts are not settled on the net basis.

x. Capital management

The Company meets its objectives for managing capital to safeguard the capacity to continue to operate, to continue to provide a return on shareholders, interest of other related parties and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the dividend payment to the shareholders, reduce the capital for redistribution to shareholders, issue new shares or sell assets to settle any liabilities. The Company and other entities in the similar industry use the debt-to-equity ratio to manage capital. This ratio is determined using the total net debt and divided by the total capital. The net debt from the balance sheet is derived from the total liabilities less cash and cash equivalents. The total capital and equity include share capital, capital surplus, retained earnings, other equity and non-controlling interest plus net debt.

The Company’s debt to equity ratios at the end of the reporting period as of December 31, 2018 and 2017 were as follows:

and 2017 were as follows:
Total liabilities Less: cash and cash equivalents Net debt Total equity Total liabilities and equity Debt to equity ratio	December 31, 2018 $ 18,980,972 (18,465,372) $ 10,515,600 $ 66,896,890 $ 77,412,490 13.58%	December 31, 2017
		17,878,554 (6,912,818)
		10,965,736
		62,307,725
		73,273,461
		14.97%

• 341 -

7. RELATED PARTY TRANSACTIONS

• a. Names and relationship with related parties

The followings are entities that have had transactions with related parties during the periods covered in the financial statements.

Name of related party Relationship with the Company Taiwan Chlorine Industries Ltd. Investee as accounted for using equity method (not an investee since April 11, 2017) Praxair Chemax Semiconductor Materials Co., Investee as accounted for using equity method (not an Ltd. investee since January 9, 2017) Kaohsiung Monomer Company Investee as accounted for using equity method Zhong Gong Baoquan Ltd Investee as accounted for using equity method BES Engineering Corporation The board of the entity is the key management of the Company Core Pacific City Co., Ltd Same board with the Company Chung Kung Management and Maintenance of Investee as accounted for using equity method of Zhong Apartments Co., Ltd Gong Baoquan Ltd Coreasia Human Resources management Co., Ltd Subsidiary of BES Engineering Capital Machinery Co., Ltd The board of the entity is the key management of the Company Tao Zhu Construction & Development Co., Ltd. Subsidiary of the company Chemax International Corporation Subsidiary of the company (Merging with the Tsou Company since April 1, 2018) CPDC Investment (BVI) Co Ltd. Subsidiary of the company Tsou Seen Chemical Industries Corporation Subsidiary of the company (Merging with the Chemax Company since April 1, 2018) CPDC Green Technology Corp. Subsidiary of the company

CPDC Green Technology Corp. (Original name: CPDC Engineering Co., Ltd.) Rich Equrties Ltd. Unichem Development Limited Chung Hua Shuang Tzu Hsing Kai Fa Co., Ltd. Weiming (Jiangsu) Petrochemical Company Weiqiang International Trading (Shanghai) Co., Ltd.

Subsidiary of the company Subsidiary of the company Subsidiary of the company Subsidiary of the company Sub-Subsidiary of the company

Weihua (Rudong) Trading (Shanghai) Co., Ltd. Cong Ty Tnhh Dau Tu Xay Dung Thanh Phong

Sub-Subsidiary of the company Subsidiary of the company

• b. The ultimate parent company

The Company is the ultimate parent company.

c. Significant Transactions with related parties

1. Sale of Goods and Services to Related Parties

Subsidiary Sub- Subsidiary Associates	For the Year Ended December 31	For the Year Ended December 31
	2018 $ 1,291,836 509,585 646,031 $ 2,445,452	2017
		1,316,049 - 586,021
		1,902,070

• 342 -

The terms for related parties sale transactions were the same as those of other unrelated customers excluded Tsou Seen Chemical Industries Corporation, Weihua (Rudong) Trade Co., Ltd., and Weiqiang International Trade (Shanghai) Co., Ltd., which has the terms for 3 month.

1. Purchase of Goods from Related Parties

Associates	For the Year Ended December 31	For the Year Ended December 31
	2018 $ -	2017
		78,021

The terms for related parties purchase transactions were the same as those of other unrelated vendors.

3. Receivables

Accounts Accounts receivable Accounts receivable Accounts receivable Other receivables Other receivables Other receivables	Types of relatedparties Subsidiary Sub- Subsidiary Associates Subsidiary Associates Other related parties	December 31, 2018 $ 65,945 118,009 60,233 13,653 9,793 4 $ 267,637	December 31, 2017
			132,822 - 67,984 2,624 9,237 6
			212,673

1. Payables

Accounts Other receivables Other receivables Other receivables	Types of relatedparties Subsidiary Associates Other related parties	December 31, 2018 $ 27,085 4,976 4,548 $ 36,609	December 31, 2017
			41,247 3,998 126
			45,371

1. Revenue from sale of scraps (Accounting for operating cost deduction)

Subsidiary	For the Year Ended December 31	For the Year Ended December 31
	2018 $ 12,044	2017
		10,922

• 343 -

6. Other

Subsidiary and Sub- Subsidiary Rental income Other revenues Associates Rental income Other revenues Security service fees Other related parties Rental income Other revenues Other expense Rental expense	For the Year Ended December 31	For the Year Ended December 31
	2018 $ 1,563 14,693 5,235 17,809 (23,978) 4 1,043 (882) (4,814)	2017
		2,063 2,534 5,187 18,413 (23,863) 28 1,074 (2,967) (4,880)

Please refer to Note 6 h. for lease of land and buildings to related parties.

1. The Company's equipment maintenance services and commissioned fees for the subsidiaries in 2018 and 2017 were $238,291 thousand and $167,479 thousand, respectively. As of 2018 and December 31, 2017, the Company has yet to pay for its subsidiaries were recorded under other payables. The total contract price (excluding tax) of the Company's uncompleted contracts for the projects issued to the subsidiaries as of 2018 and 31 December 2017 was $444,608 thousand and $ 262,602 thousand, respectively, and the payment was $121,087 thousand and $28,965 thousand, respectively.

2. The Company had contracts with other related parties, for mechanical engineering services projects and paid commission on the basis of actual construction. As of December 31, 2018 and 2017, the construction project in-progress amounted to $1,532,800 thousand and $1,377,800 thousand, respectively. As of December 31, 2018 and 2017, the unpaid fee amounted to $1,376,787 thousand and $1,102,240 thousand, respectively.

3. The Company had contracts with one of other related parties, for building construction projects. The land is provided by the Company and the related party is responsible for designing, constructing, sales and warranties. The Company pays constructional management fee on the basis of contract and the related party pays the actual expenditures for every single month. As of December 31, 2018, no constructional management fee is paid by the Company.

4. d. Key management personnel compensation

Short-term employee benefits Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31
	2018 $ 226,502 653 $ 227,155	2017
		195,993 697
		196,690

• 344 -

8. PLEDGED ASSETS

The Company pledged assets are as follows:

Asset Time deposits Property, plant and equipment Investment property Investments accounted for using equity method Available-for-sale financial assets – non-current Non-current financial assets at fair value through other comprehensive income Financial assets reported at fair value through profit or loss Guarantee deposits paid	Purpose ofpledge Guarantee for purchases, collateral for long-term and short- term financial credit Collateral for long-term and short-term financial credit, United guarantee amount of convertible Bond United guarantee amount of convertible Bond Long-term bills payable Long-term bills payable Long-term bills payable Long-term bills payable Deposit for lawsuit	December 31, 2018 $ 10,038 3,734,754 5,995,969 1,445,374 - 915,400 477,405 91,557 $ 12,670,497	December 31, 2017
			10,037 4,772,491 11,703,324 1,110,663 1,008,300 - 426,420 91,557
			19,122,792

9. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

• a. As of December 31, 2018 and 2017, the Company had the following unused letters of credit:

USD NTD	December 31, 2018 $ 43,631 1,095,000	December 31, 2017
		43,950 958,000

• b. As of December 31, 2018 and 2017, the Company had issued guaranty notes for bank loans, sales and purchases, and development plan aggregating to $13,784,000 thousand, US$20,000 thousand and $12,795,206 thousand, US$ 23,000 thousand, respectively.

• c. At December 31, 2018 and 2017, the Company had contracts for various construction projects in-progress amounting to $3,296,924 thousand and $1,849,612 thousand, respectively. As of December 31, 2018 and 2017, the remaining future obligations under these contracts amounted to $2,772,572 thousand and $1,483,994 thousand, respectively.

• d. As of December 31, 2018 and 2017, the Company signed an agreement to purchase raw materials such as benzene, hydrogen and methylbenzene from Chinese Petroleum Corporation (CPC). Under this contract, the Company may purchase specified monthly volume of these raw materials at current month prices announced by the Chinese Petroleum Corporation with prepayment or domestic letter of credit.

• 345 -

• e. Important matters

• Land tax

  • (1) The Company successively received notice by the tax offices in September 2005 that the land tax of the training center in Cianjhen will be changed to another rate since 2000. The Company questioned the applicability of the law, thus, filed for the relevant administrative appeal procedures pursuant to article 35 of Tax Collection Act, which was rejected by the Supreme Administrative Court. The Company paid fully for the land tax which was mentioned in previous and was filed for the administrative appeal, in accordance with the law.

  • (2) On the other hand, the Kaohsiung tax authority was against the land tax which was mentioned in previous and was filed for the administrative appeal and prohibited the registration of parts of the Company’s land pursuant to paragraph 1 of article 24 of Tax Collection Act. The prohibition was cancelled in January 2011.

  • (3) All lands located in No.356, Xiande section, Qianzhen Dist., Kaohsiung City 806 including 20 parcels of land and No. 4 Xingbang section including 14 parcels of lands were announced as “Soil Pollution Control Site” and “Site soil pollution remediation” by Kaohsiung City Government pursuant to Soil and Groundwater Pollution Remediation Act (hereafter refer as Remediation Act), which resulted in all lands of the Company being unable to be used. In accordance with article 12 of Land tax relief rules, the Company applied for land tax relief and review of 2009, 2010, 2011, 2012, 2013 and 2014 respectively, Kaohsiung taxing authority replied that it didn’t match with the regulation and issued the tax bill. The Company filed the administrative appeal, which was rejected and determined in 2009, 2010, 2011, 2012, 2013 and 2014. The Company asked the judges for explanation after collecting the relevant information.

• Case of Kaohsiung gas explosion forced disconnected pipeline

On July 31[st] 2014, there was an underground pipeline explosion incident in Kaohsiung city. Due to the post - disaster reconstruction project, Kaohsiung City Government issued a penalty letter No. 10335137100 on August 18[th] 2014 to order, the Company was forced to stop operations and prohibited the use of all petrochemical pipelines in the disaster area. The Company was not satisfied with the preceding penalty and filed a legal petition to the Administrative court for revoking the original claims for petition remedy in Sept. 2014. The case was rejected by the Kaohsiung High Administrative Court, which the Company was not satisfied with. Hence, the Company submitted an appeal in Feb. 2017.

• 346 -

• Abolishment of the permission for Kaohsiung road and underground pipeline excavation and pipeline

Due to the August 1st Kaohsiung gas explosion, the Kaohsiung City Government Bureau of Water Resources issued the letter to Refining Division of CPC: abolishing the permission letter No. 950129 issued on Dec. 15th, 1990 and permission letter No. 050076 issued on April 13, 1991, and prohibited the roads for underground pipeline excavation and pipeline use. Since the pipeline prohibited for use belonged to the Company and assigned CPC to build, the Company, as the interested party, filed a petition to the Kaohsiung City Government to revoke the original punishment, which was rejected by Kaohsiung City Government Appeal Committee on Feb. 16th 2015. The Company filed the administrative legal action to Kaohsiung High Administrative Court in April 2015. Through the rejection sentenced by Kaohsiung High Administrative court in March 2017, the Company was unsatisfied with and proposed for the appeal in April of the same year. The supreme administrative court rejected the appeal in May 2018 and the case was closed.

1. Damage of Kaohsiung gas explosion

The above mentioned cases of Kaohsiung gas explosion and abolishment of the permission for Kaohsiung road and underground pipeline excavation were concerned with being legally forced to suspend by administrative executives, which were eligible for damage indemnity. For the interests of the Company, the Company filed the administrative legal action to Kaohsiung High Administrative Court in February 2018.

1. Equity trading dispute

The resolution, implementation of a signed tripartite supplemental agreement between the Company and PPG&GGC (which had been merged as Axiall company now), from the Company’s board meeting on April 21st 2016: trading the equity of Taiwan Chi chlorine Chemical Co., Ltd, total 6,400,000 shares at the sales price, US$100,000 thousand, which was equivalent to NT $ 3,225,000 thousand. After the expectation of the disposal interests, NT$2,838,761 thousand, the Company instantly informed Axiall company to carry out the equity trading of Taiwan Chi chlorine Chemical Co., Ltd. The Company issued the letter many times to ask Axiall to implement the agreement, however, Axiall repeatedly delayed actions. Hence, the Company filed the arbitration to American Arbitration Association in August 2016. Axiall submitted the pleadings in Sept. 2016 and asked PPG to participate in the lawsuit. Outside lawyers of PPG, in the Oct. of same year, represented that PPG is willing to negotiate the contract of equity trading. PPG signed the contract with the Company at the end of February 2017 and handled the equity transactions subsequently. The Company had received US$100,000 thousand in April of the same year and transferred the stock to finish the transaction. However, Axiall continued to be arbitrated against related claims such as the interest.

• 347 -

• f. Contingent liabilities

• The Company signed total three areas of land lease contracts with Kaohsiung branch of Taiwan International Ports Corporation, Ltd. In December 2013 and February 2014. The Kaohsiung Port Intercontinental Container Center 2nd Phase Project Petrochemical Oil Storage and Transportation Center S12 S15 Pier Post line Land was leased and the Company invested to build the construction of petrochemical oil storage and transportation facilities for the purpose of import and export and transport of petrochemical oil handling, storage and transportation etc... Kaohsiung branch of Taiwan International Ports Corporation, Ltd. delivered the land to the Company prior to the end of Dec. 2017. The term of the lease was 25 years from the date of delivery and the Company had the right to renew the lease at the end of the period. Per the contract, the Company had to pay rent of NT$1,650 thousand, NT$2,565 thousand, and NT$1,493 thousand respectively since the land was delivered. From the land delivery date of 3 years 6 months, the Company paid management fees of, NT$10,654 thousand, NT$24,605 thousand and NT$12,329 thousand respectively. The Company also placed Certificate of Deposits of NT$5,000 thousand and NT$13,000 thousand as performance bonds in December 2013 and February 2014 respectively. The Company, in August 2015, shortened the operating scale based on the adjustment of investment plan, which resulted in one of the performance bonds of NT$8,000 thousand, to not being able to be returned. Taiwan International Ports Corporation, Ltd. completed the transaction procedure prior to Nov. 2017. The Company started to implement land drilling and geological improvement project and started paying the land rent of those projects, which was NT$1,650 thousand and NT$1,493 thousand respectively each year.

• Dispute from the senior manager

  • (1) Labor Dispute

The previous senior manager, who left the Company without transferring the duties and authorization, didn’t perform the duties since July 1[st] 2013 and the Company issued the letter to request to fulfill the agreement without any response from manager. Hence, the board of the Company dismissed the manager in October 2013. The manager asked the Company to pay pensions pursuant to Labor Standards Act as a labor worker, which was not reconciled through mediation.

The Civil litigation of Mr. Liu was filed in Taipei District Court and Kaohsiung District Court respectively in January 2014. Taipei District Court, in August 2015, considered that the contract of senior manager was ended for both side, and Expired Employee Retirement Policies of the Company is applicable, the Company shall pay NT$4,572 thousand to Mr. Liu. The Company was not satisfied with the original verdict and appealed for the 2[nd] sentence court. The 2[nd] sentence court sentenced to reject request from the Company in March 2017. The Company was not satisfied and proposed the appeal in April of the same year, which was under remedy trial in the Supreme Court.

• 348 -

For the part of Mr. Zhang, Kaohsiung District Court considered that the assigned relationship did not end, which means that the Expired Employee Retirement Policies of the Company does not apply. Mr. Zhang request for pension is without any basis, but according to the contract of both side, the Company shall pay salaries of NT$35 thousand, to Mr. Zhang, which was not satisfied by Mr. Zhang and this case was appealed to the 2[nd] sentence court. In July 2016, the 2[nd] sentence court rejected the request from Mr. Zhang but he re-appealed to the 3[rd] sentence in August of the same year.

(2) Disclosure Secret Case

Managers who left the office without authorization was suspected to be involve in business encroachment, theft of business secrets. To protect Company interests, the Company filed criminal appeal. The case was concluded by the Taiwan Miaoli Local Court in January 2017 and the relevant defendants were prosecuted. The civil litigation derived from the case is waiting for hearing by the Taipei District Court and Miaoli District Court. The supreme administrative court rejected the appeal in June 2018. Please refer to Note8 for details of deposit for lawsuit.

3. Accusation of business failures

A Gas explosion happened in Heng Yi chemical plant next to the Toufen plant and caused workers to be burned on Jan. 28[th] 2013, which evolved into accusations of business failures. Since the incident happened in the public discharged area of the industrial site, it was suspected to contain excessive value of the company's emissions with the sampling identification and the Company’s manager was prosecuted as defendant per the victim’s request. This case was not prosecuted after the judgement decision from Miaoli District Attorney, hence, the victims filed the reconsideration and Taichung High Prosecutor's Office remanded the case back to the Miaoli District Attorney for review. The victims of Heng Yi chemical plant only prosecuted the Company and managers in Feb. 2015 and asked for the joint damaged compensation NT$6,920 thousand, which awaits hearing by Miaoli local court. In September of the same year, both sides agreed to withdraw the litigations. Trial procedure was recovered in Feb. 2016 and criminal litigation was determined not to be prosecuted in March 2016. The verdict of civil litigation was won in March 2016, with the formal decision awaiting final judgement. The Company proposed the appeal for remedy focus on the unsatisfied parts. This case was under hearing in High Court Taichung Branch currently.

• 349 -

• Civil compensation for Residents living in An shun

• (1) The 1[st] case

In 2008 and 2009, Mr. Wu and others filed civil and national compensation lawsuit to the Ministry of Economic Affairs, Tainan City Government, Tainan City Environmental Protection Bureau and the Company (Hereinafter referred to as 1st case of Tainan An shun plant civil compensation) and they claimed that during 1942 and 1983, the previous Taiwan Alkali Co. Ltd. An-shun plant, produced mercury and dioxins in its production operations and polluted the living environment, which resulted in the population consuming contaminated fish and shellfish over time, which resulted in long term health issues. The Ministry of Economic Affairs had control and management responsibility of the previous Taiwan Alkali Co. Ltd, and whether due to illegal actions, or a lack of attention in performing their duties, the Ministry of Economic Affairs as the ultimate employer of the chairman of CPDC, should take responsibility. Hence, the prosecutors claim that the Ministry of Economic Affairs shall take the responsibility for the compensation. Mr. Wu and others also claimed that Tainan City Government and Tainan City Environmental Protection Agency were the competent authorities and executive authorities of the waste disposal law but the authorities didn’t supervise and require the An-shun plant to implement pollution prevention and control acts, thus should be jointly responsible for any re-compensation. Also, Mr. Wu and others claim that the Company did not perform any removal and remediation of pollutants after being ordered to merge with the previous Taiwan Alkali An-shun plant, so they claimed the Company shall also take joint responsibility on the compensation. Mr. Wu and others asked the Ministry of Economic Affairs, Tainan City Government, Tainan City Environmental Protection Bureau and the Company to jointly bore the cost of medical expenses and mental compensation for NT$370,800 thousand and the interest was calculated by an annual interest rate 5% from the date when the litigation was initiated by the defendants until the final payment of compensation. Due to unpaid referee fees, due from the plaintiff, the Tainan District Court rejected the litigation claims from these 17 persons in January 2010. Mr. Chen appealed to the Tainan District Court asking the Company for medication, health examination fee and reparations, to the amount of NT$2,300 thousand, which was incorporated into this case, the total compensation amount was NT$351,750 thousand. This case was tried by the Tainan District Court in December 2015 and judged that the Company and the Ministry of Economic Affairs to be jointly responsible for NT$160,000 thousand payable to the plaintiff. The Company was not satisfied with the result and filed an appeal. In August of 2017, the High court sentenced to order the Company to compensate the plaintiff for NT$190,000 thousand by self, which the Company was not satisfied with and had proposed the appeal for remedy in Sept. of the same year. The supreme court trialed oral argument on September 28, 2018 and judgment was sentenced on November 28, 2018, the supreme court sentenced to order the Company to compensate the plaintiff for NT$190,000 thousand. The Company made a payment of compensation and related interests to 143 plantiffs before the end of January 2019. The medical remedy was remanded a case appeal.

• 350 -

(2) The 2[nd] case

Mr. Chen and others filed civil and national compensation lawsuit to the Company and the Ministry of Economic Affairs on March 14th 2017 (Hereinafter referred to as 1st case of the Tainan An-shun plant civil compensation), they claimed the Company and the Ministry of Economic Affairs had to jointly compensate the plaintiff NT$80,915 thousand. The verdict of the 3rd national compensation in 2008 of the Tainan An-shun plant civil compensation 1st case was cited as the reason to be litigated. However, the Company claimed that there was a misunderstanding of the theoretical and practical nature of epidemiology causality versus the verdict and the infringement that may be created. There were disputable factors on both factual and legal matters. During the 1st and 2nd instance of the An-shun plant Civil Compensation litigation under hearing, the Company once again put forward the relevant academic articles to prove that there was no causality between pollution from Tainan An-shun plant and diabetes. Moreover, the plaintiffs in this case, despite the reasonableness of their claims, did not put forth any litigation before the expiry of the statutes of limitations. Thus, in this 2nd case of the Tainan An-shun plant civil compensation, the Company continued to seek for the jurisdiction remedies to protect the Company and shareholder interests.

• g. The Company leases plant assets, and vehicles for operating uses. The lease payment was $45,467 thousand and $28,068 thousand for the year of 2018 and 2017, respectively. The expected least payments for future are as below:

expected least payments for future are as below:
Year Less than one year Between one and five years Over five years	Amounts
	$ 49,931 53,672 58,951
	$ 162,554

10. Major disaster losses: None

11. Significant matters after the event

• a. On March 11, 2019, the Company invested in Core Pacific City Co., Ltd. by issuing 123,528 thousand preferred shares amounting to NT$1,235,278 thousand.

• 351 -

12. OTHER

• a. The nature of operating costs and expenses were as follows:

By function By nature	For theyear ended December 31,2018	For theyear ended December 31,2018	For theyear ended December 31,2018	For theyear ended December 31,2018	For theyear ended December 31,2017	For theyear ended December 31,2017	For theyear ended December 31,2017	For theyear ended December 31,2017
	Operating cost	Operating expense	Non-Operating expense	Total	Operating cost	Operating expense	Non-Operating expense	Total
Employee benefit
Salary	1,103,552	541,464	-	1,645,016	1,118,193	514,189	-	1,632,382
Health and labor insurance	86,961	26,726	-	113,687	84,323	21,925	-	106,248
Pension	43,857	20,367	-	64,224	44,122	10,229	-	54,351
Remuneration of directors	-	106,013	-	106,013	-	140,205	-	140,205
Others	28,220	7,920	-	36,140	28,308	6,758	-	35,066
Depreciation	1,132,123	64,499	5,969	1,202,591	1,113,903	64,383	13,308	1,191,594
Depletion	-	-	-	-	-	-	-	-
Amortization	-	2,522	-	2,522	-	525	-	525

For the years then ended December 31, 2018 and 2017, the number of employees of the Company was 1,251 and 1,214, respectively. The number of directors who have not served as employees is 8.

13. OTHER DISCLOSURE

• a. Information on significant transactions

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company:

1. Loans to other parties

											(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Number	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower	Transacti on amount for business between two parties	Reasons for short- term financing	Loss allowance	Collat	eral	Individual funding loan limits	Maximum limit of fund financing
													Item	Value
1	Core Pacific Twin Star (Myanmar) Investment Company Ltd	Core Pacific Pioneer (Myanmar) Company Ltd O R	ther eceivable	Yes	7,069	7,069	7,069	0	2	-	Operating	-		-	67,613	67,613

==> picture [187 x 48] intentionally omitted <==

----- Start of picture text -----

Note 1: Numbering nature of borrowing as follows:
Transaction for business between two parties－1
Short-term financing－2
----- End of picture text -----

Note 2: The financing limit was 40% of Core Pacific Twin Star (Myanmar) shares.

Note 3: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statements.

• 352 -

2. Guarantees and endorsements for other parties:

==> picture [484 x 180] intentionally omitted <==

----- Start of picture text -----

(In Thousands of New Taiwan Dollars)
Counter-party of guarantee Ratio of
and endorsement accumulated
amounts of
guarantees Parent Endorsements/
and company guarantees
Limitation on Highest balance endorsements endorsements/ Subsidiary to third parties
amount of for guarantees Balance of to Maximum guarantees endorsements/ on
guarantees and and guarantees and Property pledged net worth of the amount to third parties guarantees behalf of
Relationship endorsements endorsements endorsements Actual usage for guarantees and latest for guarantees on to third parties on companies
Name of with the for a specific during the as of reporting amount during endorsements financial and behalf of behalf of parent in Mainland
No guarantor Name Company enterprise period date the period (Amount) statements endorsements subsidiary company China
1 Changzhou Changzhou 6 280,320 280,320 280,320 - - 0.42% 280,320 N N Y
Huijie new Suhwen
material Co., Ltd environmental
habitant
construction
Co., Ltd
----- End of picture text -----

Note 1: The information of guarantees and endorsements for other parties of the Company and its subsidiaries are disclosed separately and numbering as follows:

Parent company－0

Subsidiary starts from 1

Note 2: Seven types of the relationship between Counter-party of guarantee and endorsement as follows:

Transaction for business between two parties

The Company directly or indirectly hold over 50% of voting rights of shares of entities

The entities hold directly or indirectly hold over 50% of voting rights of shares of the company

The relationship between entities which are all held over 90% of voting rights of shares of these entities by the Company

Mutual guarantees or endorsements in accordance with contracts

The entities are proportionally endorsed by the all shareholders from mutual investments

1. Securities held as of December 31, 2018 (excluding investment in subsidiaries, associates and joint ventures):

					(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of holder	Category and name of security	Relationship with company	Account title		Ending balance			Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fairvalue
CPDC	Yuanta Financial Holdings Yuanta/P-shares SSE50 ETF Cathay China A50ETF BES Engineering Co. CHINA DEVELOPMENT FINANCIAL HOLDING CORP.	None None None The Company is a director of the investee company None	Financial assets at fair value through profit or loss-current 〞 〞 Financial assets at fair value through other comprehensive income-non- current 〞	30,938,819 10,313,000 16,378,000 149,243,449 44,684,712	478,005 267,932 271,056 1,062,613 434,335	0.26 - - 9.75 0.30	478,005 267,932 271,056 1,062,613 434,335

• 353 -

Name of holder	Category and name of security	Relationship with company	Account title		Ending balance	Ending balance	Ending balance	Ending balance	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fairvalue
Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd Jiangsu Weiming Petrochemical Corporation Tsou Seen Chemical Industries Corporation	Handy Chemical Corparation .ltd Overseas Investment & Development Corp Core Pacific City Co., Ltd. Praxair Chemax Semiconductor Materials ZOWIE Technology Corporation Showroom Electronics Co., Ltd. Aetas Technology Inc. Taiwan Business Bank Core Pacific City Co., Ltd. Yuntong wealth increasing profits TAIWAN TEA CORPORATION Good Company TaiRx, Inc. Total	The Company is a director of an investee company None Same board with the company The Company is a director of the investee company 〞 〞 〞 〞 Same board with the company None The Company is a director of an investee company 〞 〞	Financial assets at fair value through other comprehensive income-non- current 〞 Financial assets at fair value through profit or loss -non-current Financial assets at fair value through other comprehensive income-non- current 〞 〞 〞 Financial assets at fair value through other comprehensive income-current Financial assets at fair value through profit or loss -non-current Financial assets at fair value through profit or loss -current Financial assets at fair value through profit or loss -current Financial assets at fair value through other comprehensive income-non- current 〞	407,000 2,600,000 298,723,070 9,455,778 8,815 41,670 287,961 24,311,960 160,111,000 - 9,618,000 750,000 850,000	1,461 26,000 3,248,545 438,920 358 - - 251,629 1,612,729 135,307 148,598 - 14,652	4.52 2.89 20.92 49.00 0.03 0.21 0.58 - 11.21 - 1.22 - -		1,461 26,000 3,248,545 438,920 358 - - 251,629 1,612,729 135,307 148,598 - 14,652
					8,392,140			8,392,140

• 354 -

• Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:

										(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of company	Category and name of security	Account name	Name of counter- party	Relationship with the company	Beginning Balance		Pu	rchase		Sa	les		Ending Balance
					Shares	Amount	Shares	Amount	Shares	Price	Cost	Gain (loss) on **disposal **	Shares	Amount
The Company	Securities sold under repurchase agreements	Cash equivalents	Taching Bills Finance Co., Ltd.	None	-	190,000	-	20,079,547	-	19,470,362	19,470,362	-	-	799,185
			Mega Bills Finance Co., Ltd.	〞	-	261,966	-	7,230,860	-	7,122,795	7,122,795	-	-	370,031
			International Bills Finance Co.,Ltd.	〞	-	-	-	9,215,159	-	8,685,335	8,685,335	-	-	529,824
			China Bills Finance Corporation	〞	-	809,672	-	20,232,382	-	20,372,015	20,372,015	-	-	670,039
	ETF	Financial assets at fair value through profits or losses－ current	Yuanta/P- shares SSE50 ETF	〞	9,091,000	249,590	10,313,000	289,332	9,091,000	328,531	249,590	78,941	10,313,000	289,332

1. Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None.

2. Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None.

3. Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

								(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of company	Related party	Nature of relationships		Transaction Details			Transact terms d **from **	ions with ifferent others	Notes/Accounts receivable (payable)		Note
			Purchase/ Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company	Tsou Seen Chemical Industries Corporation Weihua (Rudong) Trade Co., Ltd Weiqiang International Trade (Shanghai) Co., Ltd. Kaohsiung Monomer Company Ltd Chemax International Corp.	Subsidiary Sub-subsidiary Sub-subsidiary Affiliated company accounted for using equity method Subsidiary	Sales Sales Sales Sales Sales	(1,188,874) (397,722) (111,863) (644,031) (102,962)	3% 1% - % 2% - %	3 Month 3 Month 3 Month 1 Month 1 Month	-	OA 90 days OA 90 days OA 90 days - OA 30 days	65,945 5,423 112,586 60,233 -	3% -% 4% 2% -%	(Note) 〞 〞 〞

Note: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statements.

• 355 -

• Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of capital stock:

Name of company	Related party	Nature of relationship	Ending balance	Turnover days	Overdue	Overdue	Amounts received in subsequent period (Note 1)	Allowance for bad debts
					Amount	Action taken
The Company	Weiqiang International Trade (Shanghai) Co.,Ltd.	Sub-subsidiary	112,586	1.99	-	-	107,535	-

Note: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statements.

1. Trading in derivative instruments: Please refer to notes 6

b. Information on investees:

The following is the information on investees for the year 2018 (excluding information on investees in Mainland China):

								(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
**Name of investor **	Name of investee	**Location **	Main businesses and products	Original inves	tment amount	Balance	**as of December **	31, 2018	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2018	December 31, 2017	Shares (thousands)	Percentage of ownership	Carrying value
The Company 〞 〞 〞 〞 〞 〞 〞	Kaohsiung Monomer Company Ltd Zhong gong baoquan Ltd. Tao Zhu Construction & Development Co., Ltd. Chemax International Corp. CPDC Investment (BVI) Co Ltd. Tsou Seen Chemical Industries Corporation CPDC Green Technology Corp. (Original name: CPDC Engineering Co., Ltd.) Rich Equrties Ltd.	1,Hsing Kung Road,Ta She P O Box 6-25 Nantze,Kaohsiung (815), Taiwan 6F., No.12, Dongxing Rd., Taipei City 105, Taiwan 8F., No.12, Dongxing Rd., Taipei City 105, Taiwan 8F., No.12, Dongxing Rd., Taipei City 105, Taiwan Citco Building, Wickhams Cay, P.O. Box662 No.1, Jingjin Rd., Fangliao Township, Pingtung County 940, Taiwan 14F.-16, No.61, Wufu 3rd Rd., Qianjin Dist., Kaohsiung City 801, Taiwan Level3,Alexander House,35 Cybercity,Ebene, Mauritius	Methyl Methacrylate Monomer Security consultants Commissioned to create a vendor to build the housing, commercial buildings and plant rental business, management of land development and playgrounds and other related business investment Announcement energy products besides petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other Holding company Dicalcium phosphate Mechanical engineering Holding company	- 14,400 100,000 - 904,946 760,000 100,000 5,996	- 14,400 100,000 145,000 904,946 550,000 100,000 5,996	20,000,000 1,440,000 10,000,000 - 26,580,000 96,000,000 15,000,000 180,000	40.00% 24.00% 100.00% -% 100.00% 100.00% 100.00% 100.00%	1,378,279 19,598 76,412 - 931,828 1,610,294 140,183 5,254	2,482,675 9,884 (1,924) 19,800 (105,703) 173,826 (20,983) 45	993,070 2,372 (1,924) 19,800 (105,703) 173,826 (20,983) 45	Note 1 Note 1 Note 2 Note 2&5&6 Note 2&4 Note 2&5&6 Note 2&5 Note 2&4

• 356 -

**Name of investor **	Name of investee	**Location **	Main businesses and products	Original inves	tment amount	Balance	**as of December **	31, 2018	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2018	December 31, 2017	Shares (thousands)	Percentage of ownership	Carrying value
The Company 〞 〞 CPDC Investment (BVI) Co Ltd. Tao Zhu Construction & Development Co., Ltd. Tsou Seen Chemical Industries Corporation Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd	Unichem Development Limited Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. Cong Ty Tnhh Dau Tu Xay Dung Thanh Phong Core Pacific Overseas Holdings Ltd Da-ying Construction Ltd. Taivex Therapeutics Inc. Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd Core Pacific Pioneer (Myanmar) Company Ltd	Room 511, 5/F, Tower 1 Silvercord 30 Canton Road TSIM SHA TSUI KOWLOON 16F., No.12, Dongxing Rd., Taipei City 105, Taiwan 338/18, Anyang Wang Road , the fifth county of Ho Chi Minh City, Vietnam Akra Bldg., 24 De Castro Street, Wickhams Cay I, Road Town,Tortola,British Virgin Islands 10F.-5, No.51, Fuxing Rd., Taoyuan Dist., Taoyuan City 330, Taiwan 8F., No.12, Dongxing Rd., Taipei City 105, Taiwan 112 ROBINSON ROAD #05-01 ROBINSON 112 SINGAPORE (068902) NO.153/Ka,Kyun Shwe Mmyaing Lane (2) ,23 ward, Thingangyun Townshin Yangon NO.153/Ka,Kyun Shwe Mmyaing Lane (2) ,23 ward, Thingangyun Townshin Yangon	Holding company Real estate investment and development Engaged in construction, real estate, building constructional consulting, lease equipment and wholesale of building materials Holding company Engineering, construction contracting business Engaged in biotechnology, pharmaceutical research and development and marketing Holding company Engineering, construction contracting business Building construction, real estate management, development and sale	5,894,124 2,000,000 609,347 808,564 22,500 462,246 180,817 169,921 12,355	3,961,611 2,000,000 - 808,564 22,500 462,246 6,036 5,355 -	191,477,752 200,000,000 458,637,500,00 0 26,580,000 - 46,224,551 200,000 5,500,001 400,000	100.00% 90.87% 97.87% 45.19% 100.00% 91.10% 100% 100% 80%	5,223,987 2,395,160 607,203 925,868 24,628 384,867 169,919 162,704 11,627	(94,327) (25,603) 8,615 (233,662) (107) (76,894) (9,781) (5,622) (466)	(94,327) (23,266) 8,431 (105,592) (107) (7,051) (9,781) (5,622) (378)	Note 2&4&5 Note 2&5 Note 2&4&5 Note 2&4 Note 2&3 Note 2 Note 2&4 Note 2&4 Note 2&4
								14,067,811	2,119,773	822,810

Note1: The Company adopts the equity method to evaluate the investment company.

Note2: The Company has direct or indirect control of the invested company. If the invested company has direct or indirect control, it shall expose the relevant information of the following 2 to 10 transactions of the investee company.

Note3: Limited company expressed by the amount of capital, no shares issued.

Note4: The original investment amount is the foreign currency, at the prevailing exchange rate.

Note5: This transaction has been written off when the consolidated statement has been prepared.

Note6: The Company re-structured the business organization on August 1 2018, which was a combination of Chemax and Tsou Seen, Chemax was dissolved company and Tsou Seen was continuing company.

• 357 -

• c. Information on investment in mainland China:

• The names of investees in Mainland China, the main businesses and products, and other information:

								(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)
Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment (Note1)	Accumulated outflow of investment from Taiwan as of January 1, 2017	Investm	ent flows	Accumulated outflow of investment from Taiwan as of December 31, 2017	Net income (losses) of the investee (Note 2)	Percentage of ownership	Investment income(losses)	Book value	Accumulated remittance of earnings in current period
					Out- flow	In- flow
Weihua (Rudong) Trade Co., Ltd (Weihua)	Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading	763,460	(b)、(c)	763,460	-	-	763,460	24	100.00%	24	486,683	-
Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang)	Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading.	211,560	(a)、(c)	119,300	92,260	-	211,560	13,864	100.00%	13,864	120,233	-
Weida (Zhangzhou) Consultant Service Co.,Ltd.(Weida)	Consultancy	13,171	(b)	13,171	-	-	13,171	(428)	100.00%	(428)	2,544	-
Jiangsu Weiming Petrochemical Corporation (Weiming)	Petrochemical supporting facility construction	3,135,734	(a)、(b)	3,743,354	607,620	-	3,743,354	(28,273)	100.00%	(28,273)	3,442,445	-
Zhangzhou Weida Petrochemical Co., Ltd (Weida PC)	Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading	30,648	(b)	30,648	-	-	30,648	(5,679)	100.00%	(5,679)	16,445	-
Kunshan Weiqin Management consultant Co., Ltd (Weiqin)	Management consultant	29,664	(b)	29,664	-	-	29,664	(10,048)	100.00%	(10,048)	8,632	-
Zhejiang Wedge new material Co., Ltd (Wedge)	Engaged in trading of Synthetic fiber material	31,278	(b)	31,278	-	-	31,278	(1,159)	100.00%	(1,159)	25,973	-
Changzhou Huijie new material Co., Ltd	Engaged in engineering plastic and high valued petroleum chemical products	1,860,113	(b)	-	1,324,893		1,324,893	(47,176)	100.00%	(47,176)	1,128,883

2. Limitation on investment in Mainland China:

Limitationon investment in Mainlan	d China:
Accumulated Investment in Mainland China as of December 31, 2018	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
6,937,208	9,135,021	Note4

• 358 -

Note1: There are three ways to invest as follows:

• (a) The Company direct investment to China.

• (b) The Company through third regional company (UDL) investment to China.

• (c) Others. (The Company through subsidiary investment to China.)

• Note2: In the field “net income (losses) of the investee”:

• (a) If it is in preparation, no investment profit or loss, should be explained.

• (b) There are three ways to identify the basis of investment profit or loss, should be explained.

  • (b.1) financial statements audit by international accounting firm with a relationship with Taiwan accounting firm.

  • (b.2) financial statements audit by the Company’s audit CPA.

  • (b.3) others.

Note3: The amount in this table should be presented in New Taiwan Dollar.

• Note4: The cumulative investment amount or investment proportion to China cannot over the Company’s net value of 60%. The Company got certified documents of operating headquarters issued by Industrial Development Bureau, Ministry of Economic Affairs on October 18, 2018, so not subject to the above regulations. Valid period to October 14, 2021.

3. Significant transactions:

The significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions”.

14. SEGMENT INFORMATION

Please refer to the 2018 consolidated financial statements.

• 359 -

Review and Analysis of Financial Position and Financial Performance, and Risk Management

• VI, the company and its related enterprises in the most recent year and up to the annual report, in the event of financial turnover difficulties, should set out its impact on the financial position of the company: none

Seven. Review and Analysis of Financial Position and Financial Performance, and Risk Management

• I. Comparative analysis of the financial situation (adoption of international reporting guidelines-merger)

Unit: NT$ thousands

			Unit: NT$ thousands	Unit: NT$ thousands
Year Item	FY 2018	FY 2017	Variance
			Amounts	%
Current Assets	21,622,587	18,839,149	2,783,438	14.77
Property, plant and equipment	19,501,534	16,935,430	2,566,104	15.15
Intangible assets	188,061	24,338	163,723	672.71
Other assets	48,392,772	45,830,043	2,562,729	5.59
Total assets	89,704,954	81,628,960	8,075,994	9.89
Current Liabilities	7,488,055	4,241,699	3,246,356	76.53
Non-current liabilities	15,026,145	14,838,802	187,343	1.26
Total liabilities	22,514,200	19,080,501	3,433,699	18.00
Capital stock	26,998,573	26,998,573	-	-
Capital surplus	1,260,386	1,260,386	-	-
retained surplus	40,374,642	35,229,878	5,144,764	14.60
Other equities	(1,736,711)	(1,181,112)	(555,599)	(47.04)
Non-controlling equity	293,864	240,734	53,130	22.07
Total shareholders’ equity	67,190,754	62,548,459	4,642,295	7.42
Notes to significant changes: 1, The increase in current assets is due to China and Southeast Asia Overseas investment cases, to financial institutions to handle long, short-term financing loans, and the sale of goods to recover, cash flow of business activities and fund-raising activities generated cash inflow, resulting in cash and about when the cash increase. 2. The increase in property, plant and equipment is due to the unfinished works of the mainland subsidiary's construction plant in 2018 and the acquisition of the assets of Subsidiary company. 3. The increase in intangible assets was due to the goodwill of Subsidiary company in 2018. 4. The increase in intangible assets was due to the goodwill of Subsidiary company in 2018. 5. the increase in current liabilities in 2018 to financial institutions to deal with short-term financing loans, the provision of the Anshun case compensation preparation, the acquisition of the Huize company's payables due. 6. Retained earnings increased due to higher profits in this reporting period. 7. The increase in other equity is due to unrealized gains and losses on financial assets measured at fair value through other consolidatedgains and losses.

• 1, The increase in current assets is due to China and Southeast Asia Overseas investment cases, to financial institutions to handle long, short-term financing loans, and the sale of goods to recover, cash flow of business activities and fund-raising activities generated cash inflow, resulting in cash and about when the cash increase.

• The increase in property, plant and equipment is due to the unfinished works of the mainland subsidiary's construction plant in 2018 and the acquisition of the assets of Subsidiary company.

• the increase in current liabilities in 2018 to financial institutions to deal with short-term financing loans, the provision of the Anshun case compensation preparation, the acquisition of the Huize company's payables due.

• The increase in other equity is due to unrealized gains and losses on financial assets measured at fair value through other consolidated gains and losses.

• 360 -

==> picture [181 x 70] intentionally omitted <==

II. Analysis on financial performance

Unit: NT$ thousands

Year Item	FY 2018	FY 2018	FY 2017	FY 2017	Increase/Decreas e		Changes Ratio	Changes Ratio
	Subtotal	Total	Subtotal	Total
Total operating revenue Less: Sales return and discount Operating revenue, net Operating cost Add: Realized sales profit and loss Operating margin Operating expenses Operating profit or loss Non-Operating Profit and Loss Net profit before tax Decrease: Income tax benefits Fees Net profit for the current period Other comprehensive income (after tax) Total comprehensive income Net profit attributable to parent company in current period Net profit attributable to non-controlling equity in the current period Total comprehensive income attributable to parent company Comprehensive income attributable to non-controllingequity	38,503,121 0	38,503,121 33,326,959	33,335,970 0	33,335,970 27,964,951	5,167,151 5,167,151 5,362,008 (565) (195,422) 313,532 (508,954) (1,111,817) (1,620,771) (185,556) (1,806,327) (879,162) (2,685,489) (1,801,387) (4,940) (2,684,387) (1,102)			15.50 15.50 19.17 (100.53) (3.64) 17.54 (14.20) (40.97) (25.74) (88.19) (29.67) (245.89) (41.67) (29.57) (113.98) 41.63 (33.16)
		(3)		562
		5,176,159 2,101,077		5,371,581 1,787,545
		3,075,082 1,601,868 4,676,950 (395,955)		3,584,036 2,713,685 6,297,721 (210,399)
		4,280,995		6,087,322
		(521,612)		357,550
		3,759,383		6,444,872
		4,290,269 (9,274) 3,763,808 (4,425)		6,091,656 (4,334) 6,448,195 (3,323)

Analysis of the change in proportion of increase or decrease shows:

1. Operating income: the increase in operating income due to the main product acrylonitrile 2018 sales unit price increased by 28% compared to the previous year, the main product caprolactam 2018 sales unit price increased by 13% compared to the previous year.

2. Operating margin:

3. (1) in the main product acrylonitrile part, 2018 demand normal growth, but the supply surface of one to three seasons manufacturers centralized maintenance, tight supply, resulting in price rise all the way, the price increased by 28% from 2017, resulting in an increase in acrylonitrile profit of 1.31 billion yuan compared to the previous year.

4. (2) In the main product Caprolactam part, by the main raw material phenol price to maintain high-grade and the fourth quarter Sino-US trade conflict intensified, impact downstream market demand and willingness to pick up the goods, sales decreased by 3% in 106 years and the 2017 selling price increased by 13% over the previous year, the profit of Caprolactam series decreased by 1.86 billion yuan.

5. 361 -

Review and Analysis of Financial Position and Financial Performance, and Risk Management

1. Operating costs and operating gains and losses: the increase in operating costs is the 2018 annual export volume and investment in R &D programs to increase marketing costs and R & amp; d costs.

2. Out-of-business income and expenditure: The decrease was due to the investment in the equity method of 106 years, which was not caused by this situation.

3. Income tax costs: an increase in income tax costs is the result of an undistributed surplus and income tax.

4. Other consolidated gains and losses (net after-tax): Other consolidated profit and loss reductions are due to unrealized evaluation gains and losses on investments in equity instruments measured at fair value through other consolidated gains and losses.

III. Review and analysis of cash flows (international reporting

guidelines-merger)

Unit: NT$ thousands

				Unit: NT$ thousands	Unit: NT$ thousands
Balance of cash – beginning (1)	Net cash flow from operating activities in the year (2)	Annual cash Inflow Capacity (3)	Cash surplus (Shortfall) Amount (1) + (2)-(3)	Remedyfor deficit in cash
				Investment project	Wealth management project
10,111,495	6,277,245	(2,918,802)	13,469,938	-	-
(I) Analysis of variance in cash flows: 1, Business activities: Net cash inflow of 6,277,245 thousand yuan, the main cause is market factors, industrial environmental impact driven by the annual profession profit caused. 2, Investment activities: Net cash outflow of 5,096,313 thousand yuan, mainly through the profit and loss at fair value measured by financial assets, capital expenditure investment and access to the rights and profits caused. 3. Financing activities: Net cash inflow of 2,036,420 thousand yuan, mainly due to the borrowing of long-term loans. (II) Remedy for deficit in cash and liquidity analysis: 1. Remedy for deficit in cash: None (surplus) 2, Liquidity Analysis: 2018 annual turnover ratio and speed ratio are reduced from 2017, mainly due to long-term borrowing as a year or a business cycle due long-term liabilities and borrowing short-term loans. (III) Analysis of variance in cash flows for the future year: 1. Business activities: Net cash inflows are expected to flow 2,984,168 thousand yuan. 2. Investment activities: The projected net cash outflow of 12,314,507 thousand yuan, mainly due to the acquisition of fixed assets and the increase in long-term investment. 3, financing activities: the projected net cash inflow of 6,145,396 thousand yuan, mainly due to the increase in short-term borrowing. 4. Remedies for Insufficient cash: none (cash surplus).

(I) Analysis of variance in cash flows: 1, Business activities: Net cash inflow of 6,277,245 thousand yuan, the main cause is market factors, industrial environmental impact driven by the annual profession profit caused. 2, Investment activities: Net cash outflow of 5,096,313 thousand yuan, mainly through the profit and loss at fair value measured by financial assets, capital expenditure investment and access to the rights and profits caused. 3. Financing activities: Net cash inflow of 2,036,420 thousand yuan, mainly due to the borrowing of long-term loans. (II) Remedy for deficit in cash and liquidity analysis: 1. Remedy for deficit in cash: None (surplus) 2, Liquidity Analysis: 2018 annual turnover ratio and speed ratio are reduced from 2017, mainly due to long-term borrowing as a year or a business cycle due long-term liabilities and borrowing short-term loans. (III) Analysis of variance in cash flows for the future year: 1. Business activities: Net cash inflows are expected to flow 2,984,168 thousand yuan. 2. Investment activities: The projected net cash outflow of 12,314,507 thousand yuan, mainly due to the acquisition of fixed assets and the increase in long-term investment. 3, financing activities: the projected net cash inflow of 6,145,396 thousand yuan, mainly due to the increase in short-term borrowing. 4. Remedies for Insufficient cash: none (cash surplus).

• IV. Major capital expenditure for the most recent year and its effect on financial position and operation of the Company: N/A

• 362 -

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V. Direct investment policy, the main reasons for profit or loss, and corrective action plan for the most recent year, and investment plan in the next year

Sinopec's transfer investment policy, mainly focused on the core competitiveness of petrochemical related industries, the choice of investment target, must have upstream and downstream or vertical integration, business development, technology upgrading, asset activation and other benefits.

The company is currently operating in the mainland Jiangsu Sunshine Island Liquid Chemical storage tanks and chemicals trade, has been stable operation profit, in the future will strive to increase cargo throughput in order to enhance profits, and actively increase commodity projects to enhance the share of the mainland market.

Located in the first phase of Jiangsu Rudong Petrochemical Plant, the planned cyclohexanone plant has been completed and is expected to start production in 2019, the same year the Nylon 6 plant will also be commissioning in the second half of the production. The company in the future will be able to integrate the two main products CPL and AN up and down streams, to obtain cost competitive advantage, integrated production base benefits are within reach.

The integrated production base will not only improve the company's downstream cost competitive advantage, because close to the mainland market, with the advantages of land development, will be beneficial products to high-value high-margin application development. Planning to Taiwan R & D Center as the core, with the company's 2018 acquisition is located in Changzhou, Jiangsu modified plastic production base, with excellent nylon modification molding as the core products, horizontal expansion to the rest of the major pan-employment plastic materials, and actively establish a production integration of the product market competitive advantage.

The axis of the global economy is shifting from west to east, thus pulling the focus of demand for chemicals eastward. The Asia-Pacific region has become the driving force behind the growth of global demand for petrochemicals, with higher purchasing power, a large number of people, and rising urbanization, which means that the rapid growth of demand will continue in the future. The Company to long-term development and sustainable management goals, the next year will continue to see the needs and strategies of business expansion, always pay attention to the development of domestic and foreign related industries, carefully assess the search for suitable investment targets, mainly focused on the acquisition of production technology, new energy, special chemicals, precision chemicals and green products technology applications and other related industries.

At the same time, in line with the government's southward policy, we have been assessing investment land development opportunities in Southeast Asian countries and replicating the group's early successful investment strategies in mainland China.

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Review and Analysis of Financial Position and Financial Performance, and Risk Management

• VI. Analysis of risk factors: analyze and assess the following circumstances for the most recent year and until the date of publication of the annual report

• (I) Impact of interest and exchange rate changes and inflation, and their future countermeasures:

  1. Impact on the Company’s income:

Impact on the Company’s income:
Item	2018 (NT $ thousand;﹪)
Netinterestincome (expenditure)	118,120
NetExchangeBenefits (losses)	(1,063)
Net interest income (expenditure) as a percentage of netrevenue	0.31%
Net interest income (expenditure) as a net pre-tax ratio	2.53%
Net exchange of benefits (losses) as a percentage of netrevenue	0.00%
Net exchange of benefits (losses) as a net pre-tax ratio	-0.02%

• (1) Interest rate

The Company’s interest rate risk primarily derives from interest accrued based on a floating interest rate arising from long-term/short-term debt. To hedge interest fluctuation risk, the Company undertakes transactions when the interest rate stays low after carefully evaluating the financial market trends. Therefore, even if the interest rate fluctuates due to uncertain factors, no material impact would be caused to the Company.

• (2) Exchange rate

The Company’s major product lines and raw materials are mostly priced at USD and the payment thereof is collected or made in NTD (other than those for import/export). The exchange rate fluctuation would affect the cost and revenue of such petrochemical products as CPL and AN. The balance of derivative financial commodity transactions for which there is no risk of exchange rate change at the end of 2018 is also outstanding.

• (3) Inflation

The Company primarily procures petrochemical raw material locally or domestically, or imports raw materials and supplies. The Company would be primarily affected by the change of the international raw material price, while the domestic inflation would render less impact to the Company comparatively.

2. Future countermeasures:

• (1) Countermeasures against interest rate fluctuations

The Company will continue to make every effort to ask financing banks for preferential interest rates to reduce the Company’s interest expenses, and will try to reduce its average cost of capital through multiple fund-raising channels.

• (2) Countermeasures against exchange rate fluctuations

The Company adopts a natural hedge against exchange rate fluctuations, and selects optimal timing to engage in spot foreign exchanges primarily based on the net foreign

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exchange position after the offset of sales revenue priced based on foreign exchange rate against the sales expenses, subject to the market condition and position, to hedge exchange rate fluctuation risks.

• (3) Countermeasures against inflation

The largest niche for the Company’s competition with others is based on the stable supply of most the Company’s major raw materials, including such international petrochemical raw materials and supplies as propylene, benzene, sulfur, natural gas, carbon monoxide and fuel oil, by CPC and other local suppliers, as the price is calculated based on specific equations and international price. Although domestic inflation renders a lesser impact to the Company, the Company continues to boost various resolutions through the market mechanism and process improvement, to reduce its cost.

• (II) Policy on high-risk, high-leverage investments, loaning of funds, endorsements and guarantees

as well as derivatives transactions, major causes for profits or losses and future countermeasures:

The Company has not granted loan to others or made endorsement/ guarantee for others, nor has it engaged in investment of high-risk or high-leverage derivatives.

Derivative Financial Commodity trading policy: The company did not have outstanding derivative financial commodity trading balance at the end of 2018.

• (III) R & d costs for future R & d projects and projected inputs:

Innovation and development has always been Sinopec's desire to move towards sustainable management of the core objectives, at present, Sinopec in the research and development, the main areas are divided into three directions: the existing process improvement, related product development and new product development three directions.

• (1) Improvement of the existing production process:

In the existing process improvement, continuous improvement of the existing product process technology, the introduction of intelligent production management to improve efficiency, reduce production costs and develop energy-saving and carbon-reducing green process as the primary goal.

• (2) Development of related products:

Focusing on developing byproducts and related products, strengthen material supply chain from upstream to downstream by taking advantage of the material.

• (3) New product development:

Setting up the project development group, and focus on high-value products with market potential (e.g., special chemical products, ester derivate and functional high polymer) by market information collecting and existing survey technique. Furthermore, the Company evaluates developing advantage and develops own core technique to increase items of high-value products and broaden industry chain.

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Review and Analysis of Financial Position and Financial Performance, and Risk Management

2019 is expected to invest about 453,892 thousand in R & D activities, and future projected annual investment will also be subject to progress in the development of the R & D program.

Statistics of R&D expenses invested by CPDC and its subsidiaries in the past years.

Year	103	2015	2016	2017	2018	2019 (estimate) (note 1)
Amount (NTD thousand)	196,090	216,793	198,273	236,348	335,436	453,892

Note 1: Contains the 2019 estimate of the subsidiary Tai Wei Life Technology (shares) company

• (IV) Changes in important policies and legal environment at home and abroad, and the effect on the financial status and operation of the Company, and Countermeasures: N/A

• (V) The effect of technological and industrial changes on financial status and operation of the Company, and countermeasures: N/A

• (VI) Impact of changes in corporate identity on the Company’s crisis management, and countermeasures: N/A

• (VII) Expected benefits and possible risks of merger and acquisition, and countermeasures: N/A

• (VIII) Expected benefits and possible risks of facilities expansion, and countermeasures:

The company in order to enhance the main raw materials liquid ammonia and phenol operational scheduling elasticity, with the consent of the Board of directors in Kaohsiung Port Intercontinental two storage area to invest in the construction of its own liquid ammonia and phenol storage equipment, the planning period from October 2015 to June 2020, the case continues. In order to enhance the company's nylon grain quality and enter the high-end market, the Board agreed to transform the bovine plant nylon grain Factory, has now completed the transformation into the high-value product promotion stage. In addition, in order to improve the capacity and market share of the three plants, in the production of Caprolactam, with the agreement of the Board of Directors to implement the bovine plant hydrogen expansion and phenolic ketone reconstruction project to achieve the bovine plant 200,000 tons of capacity scale, the plan is expected to be completed in June 2019, in the production of Acrylonitrile, With the agreement of the Board of Directors to promote the expansion of the acrylonitrile plant and the improvement of the performance of the air compressor for key equipment, the two projects, when completed in December 2019, will increase the number of operating hours per year and enhance production capacity. In order to improve the combustion efficiency of the coal-fired vapor farm in bovine plant and to improve the view of chimney smoke discharge, in November 2018, the board of directors

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through the launch of the bovine factory coal-fired vapor farm smoke-free emission project, the period to meet the natural gas emission standards as the goal, reduce the impact on the environment.

Looking at the changes in supply and demand in Caprolactam market, Taiwan's dependence on the import of Caprolactam has continued to decline as a result of the company's full sales efforts, and the supply and demand situation of caprolactam in mainland China has been greatly reduced due to its large increase in self-production capacity, and even faced with over capacity. In order to reduce the impact of the changes in the Caprolactam market on the company, the company will continue to respond to market changes, flexible adjustment of caprolactam production and actively seek a variety of reducing raw materials, production costs and the development of high-end nylon products, in order to increase the company's revenue, but also actively layout overseas and new product development.

(IX) Risk from centralized purchasing or selling, and countermeasures:

The primary raw materials for the AN produced by the Company refers to propylene, and one of the important raw materials for CPL produced by the Company refers to natural gas. If the supply of primary raw materials is defective, the Company’s production of AN and CPL will be affected.

Another Taiwan CNOOC Company's Kaohsiung Factory has moved to plant or shut down the factory in 2015, the company is located in the Metropolitan Petrochemical Industrial zone in accordance with the former Kaohsiung County government November 7, 1998 (1998) Capital Word No. 211694, "Change the Metropolis plan (third comprehensive review) case" in the seventh case of the conditional requirements: "Manufacturers in special industrial areas should complete the relocation of factories by 2018, and the county government will change to B industrial zone in accordance with the legal procedures ...," and the Kaohsiung administration in the Republic of China on the January 13, 2011, the high-city capital issued letter 10,130,250,600th, requested the Ministry of the Interior to approve the " Change of Metropolis Plan (fourth comprehensive review) case." On March 22, 2019, the Kaohsiung Council considered the conversion of the Metropolitan Industrial Zone from special to E type, which could continue to be produced, but could not be expanded or rebuilt. At present, the continuous United Society Industrial Zone Manufacturers and the Government to communicate and strive for the reduction of the methylenetin, at the same time, please draw up the sunset provisions, with supporting measures to enable the operators to timely response and as a relocation of the factory solution package.

The company's main products Caprolactam and acrylonitrile system supply downstream nylon, acrylic cotton and ABS plastic industry, the main raw materials, because caprolactam and acrylonitrile are bulk petrochemical downstream products of the basic raw materials, customers are concentrated in several chemical fiber textile mills, the number of factories are not many, the characteristics of the industry. In the Caprolactam part, the company has increased its domestic market share by 64% through the advantages of increased capacity and lower costs.

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Review and Analysis of Financial Position and Financial Performance, and Risk Management

• (X) Impact and risk associated with large share transfers or changes in shareholdings of directors, supervisors, or shareholders who hold more than 10% of the Company’s shares, and countermeasures: N/A

• (XI) Impact and risk associated with changes in management rights, and countermeasures: N/A

• (XII) Litigation and non-litigation matters:

  • § Against

  • “Administrative disposition under Nan-Shih-Fu Huan-Shui-Tze No. 09722014930”

  • (1) Fact at issue:

Tainan City Government ordered the appellant, via its official letter under Nan-Shih-Fu Huan-Shui-Tze No. 09722014930 dated June 20, 2008, to pay NT$88,786,006, as advanced by Environmental Protection Administration and Tainan City Government for An-Shun Site, to the Soil and Underground Water Pollution Remediation Fund account before July 31, 2008.

• (2) Claimed value: NT$88,786,006

• (3) Date of initiation: June 2008

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

The judgement rendered by Kaohsiung High Administrative Court holding that part of the expenses payable by the Company exceed NT$88,430,139 was revoked. The Company filed an appeal with the Supreme Administrative Court. As a result, the original judgement was revoked and remanded to Kaohsiung High Administrative Court for another judgement. Meanwhile, the part of the original judgement rendered in November 2013 holding that the amount exceeds NT$76,060,447 was revoked. Both sides appealed against their negative injunctions. After hearing by the Supreme Administrative Court, in March 2015, a further judgement was announced, abandoning the previous trial and litigation costs, and judgements that exceed NT$203,316, and remanded to Kaohsiung High Administrative Court for next hearing. The judgement rendered by the Kaohsiung High Administrative Court in December 2016 holds that the portion of the NT$12,160,345 fine that exceeds the amount beyond NT$11,584,810 is revoked. Both sides appealed against their negative injunctions, respectively. After the examination by the Supreme Administrative Court in January 2018, the judgement was rendered holding that the Company need not to pay the expenses NT$1,134,718. The judgement was finalized.

The confirmed part of the revoked NT$355,867 fine has been refunded by the Tainan City Government. The Company planned to recall the remaining amount of NT$778,851 from the Tainan City Government.

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1. Damages to An Shun residents (the first case)

2. (1) Fact at issue:

The plaintiffs including Wu initiated the complaint alleging that Taiwan Soda Ash Co., Ltd., An Shun Plant, as consolidated by CPDC pursuant to the order of Ministry of Economic Affairs, produced such material as dioxin due to production of PCP prior to the consolidation, thereby causing damage to the plaintiffs. Therefore, CPDC should be liable for the damages due to the consolidation.

• (2) Claimed value: NT$351,750,000

• (3) Date of initiation: July 2008

• (4) The main litigation parties:

Plaintiff: Wu and others

Defendant: CPDC, MOEA, Tainan City Government, and Environmental Protection Bureau of Tainan City Government

• (5) Current processing situation:

The 1st instance was rendered on December 2015 that CPDC and MOEA shall bear joint and several liability for compensation NT$168,170,000 to An Shun residents. The Company filed an appeal on December 2015 pursuant to laws. After examination by the Tainan Branch of High Administrative Court, the judgement was upheld, so that CPDC should wholly compensate the An Shun residents with NT$191,578,366. In disagreement with the decision, the Company filed an appeal pursuant to laws in September 2017. In November 2018, the Supreme Court ordered us to compensate the plaintiff for a total of 190,000 thousand yuan in the original case about medical expenses, such as part of the abandonment sent back to the more trial.

1. Damages to An Shun residents (the second case)

2. (1) Fact at issue:

The same fact with the Damages to An Shun residents (the first case).

• (2) Claimed value: NT$80,915,000

• (3) Date of initiation: March 2016

• (4) The main litigation parties:

Plaintiff: Yo and others

Defendant: CPDC and MOEA

• (5) Current processing situation:

Pursuant to laws, the Company will respond to legal actions due to the facts of these two cases being the same. Currently, the case is pending trial by the Tainan District Court.

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Review and Analysis of Financial Position and Financial Performance, and Risk Management

• 4.Land tax for 2009, 2010, 2011, 2012, 2013, and 2014 payable by the Company on the land in Qianzhen

• (1) Fact at issue:

All of the company is located in Kaohsiung Qianzhen District Section No. 356, such as 20 Land and Hing Bang section 4th and other land 14 land a total of 34 land, due to pollution, by the Kaohsiung government according to the soil and Groundwater pollution Regulation (hereinafter referred to as soil pollution) announced as "Soil contamination control site" and " Soil pollution Control Zone," to all of the company's land in accordance with the law can not be used for remediation operations, is in accordance with the provisions of the Land Tax relief rules 12th of the application for a reduction in the price of taxes, by Kaohsiung taxes reprioritizing back review and provisions do not match, and open tax returns, the company in accordance with the law to initiate administrative relief

• (2) Claimed value:

• A. Tax payment 2009: NT$63,480,644

• B. Tax payment 2010: NT$58,602,921

• C. Tax payment 2011: NT$58,904,456

• D. Tax payment 2012: NT$59,197,831

• E. Tax payment 2013: NT$64,173,474

• E. Tax payment 2013: NT$64,173,474

• (3) Date of initiation: December 2008

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Revenue Service District Office of Kaohsiung City

• (5) Current progress:

• A. Tax payment 2009:

  • (a)Application for land tax credit/exemption: Kaohsiung High Administrative Court rendered a judgement that was unfavorable to the Company. After the Company filed an appeal, the Supreme Administrative Court remanded the case for another judgement. The Kaohsiung High Administrative Court and the Supreme Administrative Court rendered a judgement revoking the application. In August 2014 the Company initiated a petition for reexamination pursuant to laws. On January 14, 2016 the Supreme Administrative overruled part of the judgement and remanded other parts of judgement to the Kaohsiung High Administrative Court. Subsequently, in July 2016 the Kaohsiung High Administrative Court and the Supreme Administrative Court overruled the remanded parts of the judgement. (The full case is now closed.)

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• (b)Reexamination of land tax: The Company initiated administrative remedies pursuant to laws. The Kaohsiung High Administrative Court and the Supreme Administrative Court overruled the re-examination and determined a final judgement. (The full case is now closed.)

• B. Tax payment 2010:

• (a)Application for land tax credit/exemption: The Company initiated the administrative remedy pursuant to laws, and Kaohsiung High Administrative Court rendered a judgement revoking the petition. In December 2014 the Company filed an appeal, and the appeal was overruled and a judgement rendered by the Supreme Administrative Court in July 2015. The Company filed for reexamination in August 2015, and was over-ruled by the Kaohsiung High Administrative Court in March 2016. The case was closed.

• (b)Reexamination of land tax: The Company initiated the administrative remedy pursuant to laws. Kaohsiung High Administrative Court and Supreme Administrative Court rendered the judgement in disfavor of the Company. The company filed a retrial relief, which was rejected by a decision of the Supreme Administrative Court in June 2013 (the end of the whole case).

• C. 2011 Tax Case: The company filed administrative relief in accordance with the law in the case of application for reduction of land price tax, which was rejected by the High Administrative Court of Kaohsiung and the Supreme Administrative Court, and the company filed a retrial relief in August 2014 in accordance with the law, which was rejected by the Supreme Administrative Court in March 2015 and decided to be transferred to Kaohsiung High Administrative Court. The decision of the Kaohsiung High Administrative court was rejected in May 2015, and the company appealed the factual part in June 2015, and the decision of the Supreme Administrative Court of September 2015 was rejected (the end of the case).

• D. Tax payment 2012:

• (a)Application for land tax credit/exemption: The Company petitioned for the administrative remedy pursuant to laws. Kaohsiung High Administrative Court and the Supreme Administrative Court rendered a judgement revoking the petition. In April 2015 the Company initiated the petition for reexamination, and in May 2015 the Supreme Administrative revoked part of the judgement and remanded other parts of judgement to the Kaohsiung High Administrative Court. In October 2015 the Kaohsiung High Administrative Court revoked the judgement. The Company filed an appeal in November 2015, and it was overruled by the judgement rendered by the Kaohsiung High Administrative Court in January 2016. The case was closed.

• (b)Re-examination of the land tax: The Company filed an appeal pursuant to laws. Notwithstanding, the appeal was revoked and the judgement became final and irrevocable.

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Review and Analysis of Financial Position and Financial Performance, and Risk Management

E. Tax payment 2013:

The company on the application for the reduction of land price tax in October 2013 to file an appeal, after the Kaohsiung government in February 2015 to appeal rejected the decision, the company in April 2015 in accordance with the law to initiate litigation relief (and with the 2014 tax case combined trial, follow-up litigation progress with the following: 2014 tax case).

F. Tax payment 2014:

The company on the application for the reduction of land price tax cases, in October 2014 in accordance with the law to file an appeal, after the Kaohsiung government in February 2015 to appeal the decision to dismiss, the company in April 2015 in accordance with the law to initiate litigation relief.

• (a)Application for land tax credit/exemption:

The Company initiated the administrative remedy pursuant to laws, and Kaohsiung High Administrative Court rendered a judgement revoking the petition. In December 2014 the Company filed an appeal, and the appeal was overruled and a judgement rendered by the Supreme Administrative Court in July 2015. The Company filed for reexamination in August 2015, and was overruled by the Kaohsiung High Administrative Court in March 2016. The case was closed.

1. “Administrative disposition under Nan-Shih-Fu Huan-Shui-Tze No. 09722014930”

2. (1) Fact at issue:

Tainan City Government ordered the Company, via its official letter under Nan-Shih-Fu Huan-Shui-Tze No. 09822035440 dated December 17, 2009, to pay the out-of-pocket expenses for the project related to An Shun Site soil pollution remediation to the account of Soil and Groundwater Pollution Remediation before January 31, 2010. The decision was served to the appellant in December 2009.

• (2) Claimed value: NT$17,961,679

• (3) Date of initiation: January 2010

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

The Company paid said expenses within the specific time limit and filed an appeal. Notwithstanding, the appeal was overruled upon judgement. The Company filed an administrative suit with Kaohsiung High Administrative Court. The Court ruled in September 2012 that the part of the judgement about the amount exceeding NT$17,867,012 should be revoked, while the other claims filed by the Company were over-ruled. The Company filed an appeal against the judgement over-ruling the Company’s claims pursuant to laws. In September 2013, the Supreme Administrative Court remanded the case for another judgement. In October 2015, the Kaohsiung High

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Administrative Court revoked the judgement of the payment amount exceeding NT$7,067,702. Both parties filed an appeal again with the Supreme Administrative Court in November 2015. The Company’s appeal was overruled in February 2017 and part of the facts was remanded to the Kaohsiung High Administrative Court for further hearing.

1. Anshun Fish Ponds Land rental case

2. A. Case 1

3. (1) Fact at issue:

An Shun fish farm is owned by the Company, but some tenants have terminated their rental contract. Thus, the Company demanded the return of the land from those tenants.

• (2) Claimed value: NT$79,999,432

• (3) Date of initiation: November 2015

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: 11 people, including Wu Jen-Tz, et al .

• (5) Current processing situation:

The Company filed a suit in November 2015, and the case now is under hearing by District Court.

• B. Case 2

• (1) Fact at issue:

Same as case 1

• (2) Claimed value: None

• (3) Commencement of litigation: September 2017

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: four tenants

• (5) Current processing situation:

The Company filed a suit in September 2017, and the case is now under hearing by the District Court.

1. Civil action against An Shun Old Dormitory

2. (1) Fact at issue:

Taiwan Alkali An Shun Dormitory is owned by the Company, but some residents have occupied the dormitory for many years as their registered households. However, the Cultural Affairs Bureau of Tainan City Government designated the area as a municipal archaeology site on November 17, 2014. Since the Company has responsibility for managing and maintaining that area and protects its own property rights for the stipulated use or for the collection of profits of the property, the Company filed this suit.

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Review and Analysis of Financial Position and Financial Performance, and Risk Management

• (2) Claimed value: NT$19,566,120 and added interest

• (3) Date of initiation: January 2016

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Residents of the Taiwan Alkali An Shun Dormitory

• (5) Current processing situation:

The Company filed a suit in January 2016, and the case is now under hearing by the District Court.

1. Shu Lin Pollution by Taiwan Alkali Co., Ltd.

2. (1) Fact at issue:

The land Nos. 540, 541 & 543, Tungshan Section, Shulin District, New Taipei City and the land No. 489, Wei Wang Section, Shulin District, New Taipei City owned by Taiwan Alkali Co., Ltd. were succeeded to by the Company upon the consolidation. Afterward, CPC purchased the land from the Company. New Taipei City Government published via its official letter under Pei-Huan-Shui-Tze No. 0990071085 dated August 16, 2010 that the land should be identified as the soil pollution control site and also soil pollution control zone. The Government also held that the pollution was caused by the Company, and the Company should submit the pollution control plan.

• (2) Claimed value: None

• (3) Date of initiation: August 2011

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: New Taipei City Government

• (5) Current processing situation:

• (A)Person committing pollution of Shulin Plant: The original decision against the case was revoked by the judgement rendered by Taipei High Administrative Court. New Taipei City Government filed an appeal. The Supreme Administrative Court ruled that the 1st instance judgement should be revoked, and remanded the case for another judgement. However, the case was overruled by Taipei High Administrative Court and the Supreme Administrative Court in November 2013. The Company initiated the petition for reexamination pursuant to laws. In June 2015, the Supreme Administrative Court overruled the reexamination, while remanded the fact finding to the Taipei High Administrative Court. The Taipei High Administrative Court overruled the judgement in August 2016. In disagreement with the decision, the Company filed an appeal with the Supreme Administrative Court, and it was overruled by the Supreme Administrative Court in August 2017. The case was closed.

• (B)Shulin Plant’s application for suspension of the execution: To declare the effect of the original decision, the Company petitioned for suspension of the execution pursuant to

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laws in March 2013. The petition was overruled by Taipei High Administrative Court in May 2013, and the following appeal against the Court’s judgement was also overruled in August 2013.

• (C) Shulin Plant application:

New Taipei City Government rejected the application in June 2015, and the Company initiated a petition for remedy. New Taipei City Government rejected the application in June 2015, and the Company initiated a petition for remedy. The petition was overruled in September 2015. The Company filed the 1st instance for remedy and was overruled by Taipei High Administrative Court in September 2016. In disagreement with the decision, the Company filed an appeal with the Supreme Administrative Court, and it was overruled by the judgement in August 2017.

1. The right of passing through Toufen land and adjacent land

2. (1) Fact at issue:

This suit was between the plaintiff, Wan Wen-Cheng, and the defendant, “Huang Chang-Yuan of Miaoli County’s Guild of Ancestor Worship” about the right of passing through the east adjacent land of the Company’s Toufen factory. The Defendant claimed that the plaintiff could obtain the right of passing through the adjacent land from the Company’s dormitory areas. Thus, the plaintiff added the Company as co-defendant on January 18, 2016 and demanded to confirm the right of access.

• (2) Claimed value: None

• (3) Date of initiation: January 2016

• (4) The main litigation parties:

Plaintiff: Wang Wen-Cheng

Defendant: CPDC (another defendant is the “Huang Chang-Yuan of Miaoli County’s Guild of Ancestor Worship”)

• (5) Current processing situation:

The Company received the claim of the action in January 2016, and issued pleadings in February 2016. After examination of the 1st instance, the Company won the case by judgement and the plaintiff filed an appeal. However, in December 2015, the plaintiff revoked the appeal, and the case was closed.

1. Managers Tsai, Liu and Chen et al. prosecuted under civil and criminal law for violation of trade secrets. The Company has appointed relevant attorneys to clarify the facts in order to protect the Company's interests.

2. (1) Fact at issue:

The Company believed that Tsai et al . stole secrets through their duties for the purpose of provide relevant organizations in Mainland China that were planning petrochemical construction projects. Taking advantage of the acquisition of Dah Shyang Chemical Co. Ltd., who used high-value chemical products, which were researched, developed, and manufactured by the Company. The reproduction of such trade secrets were without

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Review and Analysis of Financial Position and Financial Performance, and Risk Management

authorization, and a breach of trust occurred by stealing the Company’s trade secrets and providing such to the third party caused the theft of the Company’s business secrets and damages to its competitiveness.

• (2) Claimed value: NT$7 billion, etc.

• (3) Date of initiation:

• a. Civil action: October 2016

• b. Criminal prosecution: January 2017

• c. Claim for returns of unjust enrichment of pension: March 2017

• (4) The main litigation parties:

Plaintiff and complainant: CPDC

Defendant: Managers Tsai, Liu and Chen et al.

• (5) Current processing situation:

After the mediation was not successfully concluded, the civil action is under hearing by the Taipei District Court. In regards to criminal law, after prosecution by the Miaoli District Prosecutors Office, the case was transferred to the Miaoli District Court. The Company initiate an ancillary civil action for compensation, and is now assisting the Miaoli District Prosecutors Office with inspection of related evidence. In defense of the claim for returns of unjust enrichment of pension, the board of directors of the Company made a formal resolution resigning Tsai et al. retrospectively. The Company filed a suit to the court for returns of unjust enrichment in March 2017, and the petition was overruled by the judgement rendered by the Taipei District Court in December 2017. In disagreement with the decision, the Company filed an appeal for remedy with the High Court in January 2018.

1. Occupation of An Shun archaeology

2. (1) Fact at issue:

Tainan City Government designated the Company’s “Original Kagakude Negai O Ka Corporation’s Dormitories in Tainan Factory” as a municipal archaeology site. On January 27, 2015, the defendant, Wu, piled numerous personal belongings on the land next to the dormitory at No.15, Aly. 3, Ln. 661, Beishanwei 2nd Rd., Annan Dist., Tainan City on suspicion of occupying the real estate.

• (2) Claimed value: None

• (3) Date of initiation: January, 2015

• (4) The main litigation parties:

Complainant: CPDC

Defendant: Wu

• (5) Current processing situation:

After investigation and prosecution by the District Prosecutors Office, the case was transferred to the Tainan District Court. In September 2016 the court ruled that Wu shall

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be imprisoned for five months and return the Company the proceeds of the crime, which amounted to NT$5,973,044. The defendant filed an appeal. After the examination by the High Court, in June 2017, the judgement was determined that Wu was imprisoned for five months and returned the Company the proceeds of the crime, which amounted to NT$176,226. The case was closed.

1. “Administrative disposition under Fu-Huan-Shui-Tze No. 1000700466”

2. (1) Fact at issue:

Tainan City Government ordered the Company, via its official letter under Fu-Huan-Shui-Tze No. 1000700466 dated September 16, 2011, to pay the out-of-pocket expenses for An-Shun Site-related work projects to the Soil and Underground Water Pollution Remediation Fund account. After the Company stated its own opinion, Tainan City Government ordered the Company to make the payment within a specific time limit via its official letter under Nan-Shih-Fu-Huan-Shui-Tze No. 1010242670 dated March 26, 2012.

• (2) Claimed value: NT$16,095,318

• (3) Date of initiation: April 2012

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

The Company paid said expenses within the specific time limit and filed an appeal. Notwithstanding, the appeal was overruled upon judgement. The Company filed the administrative remedy pursuant to the law. The Kaohsiung High Administrative Court rendered a judgement and rescinded the petition decision and the original fine regarding the fine amount that exceeded NT$119,000. Both parties filed an appeal in September 2014. The Supreme Administrative Court remanded the case to the Kaohsiung High Administrative Court on November 17, 2015. Kaohsiung High Administrative Court in March 2017 rendered a judgement and rescinded the fine exceeded NT$6,498,455, which the Tainan City Government requested payment from the Company. Both parties disagreed with the decision, and filed an appeal for remedy. Currently, the case is pending trial by the Supreme Administrative Court.

1. Petition for removal of buildings and refund of land by Taiwan Alkali Co., Ltd. to village residents

2. (1) Fact at issue:

The Company consolidated Taiwan Alkali Co., Ltd. in 1983 and generally succeeded to its right and obligation. In 1986, the Company entered an agreement with all of Taiwan Alkali Village residents to make the land Nos. 1323-259 and 1323-261 available to them to accommodate the utilities, such as public roads and water towers, continuously used by them. Upon investigation on occupation of the public utilities, some residents were found

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violating the agreement by constructing private buildings thereon, changing the purpose of the utility arbitrarily and misappropriating the land used for the utilities. The Company planned to recall said land and asked them to refund unjust enrichment to secure the Company’s assets and all shareholders’ interests and rights.

• (2) Claimed value: NT$5,506,370

• (3) Date of initiation: February 2013

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Taiwan Alkali Co., Ltd. Village Management Committee, et al.

The Company filed a suit pursuant to the law and petitioned for removal of buildings and the return of the land. Kaohsiung District Court rendered a judgement revoking the petition. In September 2014, the Company filed an appeal pursuant to laws. After the Kaohsiung, High Court rendered a judgement overruling the Company’s petition in July 2016, the Company was unwilling to accept the judgement and filed an appeal for remedy with the Supreme Court in September 2016.

1. Civil action against high-rank management

2. (1) Fact at issue:

The Company’s high-ranking managers, Liu and Chang, resigned directly without completing the handover procedures. They have stopped performing duties as of July 1, 2013. The Company issued a letter demanding that they should perform duties, but they refused to do so. The Board of Directors relieved them from the post in October 2013. The Company filed a suit against Liu pursuant to laws because he severely violated the work rules of the Company. Later, Liu and Chang claimed the pension against the Company pursuant to Labor Standard Law. Both parties failed to reach settlement upon negotiation. Liu and Chang initiated a civil action for payment of pension with Taipei District Court and Kaohsiung District Court in January 2014.

• (2) Claimed value: NT$8,044,460 and NT$6,110,000

• (3) Date of initiation: December 2016

• (4) The main litigation parties:

Plaintiff: Liu and Chang

Defendant: CPDC

• (5) Current processing situation:

The Plaintiffs initiated the actions, which are under examination by Taipei District Court and Kaohsiung District Court respectively. Taipei District Court in September 2015 rendered the judgement that the Company shall give Liu NT$4,572,150, while the Kaohsiung District Court in September 2015 rendered the judgement that the Company shall give Chang NT$35,393. The Company filed an appeal against Liu in September 2015. The High Court rendered the judgment overruling both parties’ appeal in March

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1. The Company was unwilling to accept it, and filed an appeal for remedy in April within the same year. For the latter case, the High Court overruled the plaintiff Chang's petition in July 2016, and he was unwilling to accept the judgement and filed an appeal. The issue is under examination by the Supreme Court.

2. Employee Wang's overtime pay against Labor Standard Law

3. (1) Fact at issue:

The entity rendering the original decision, Labor Affairs Bureau of Kaohsiung City, performed the labor inspection on Hsiaokang Plant and issued the written decision under Kao-Shi-Lao-Tiao-Tze No. 10233232500 holding that Employee Wang’s overtime pay did not include the meal allowance and the Company should be fined NT$20,000. For disagreement with the administrative disposition, the Company filed an appeal.

• (2) Claimed value: None

• (3) Date of initiation: June 2013

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Kaohsiung City Government

• (5) Current processing situation:

The Company initiated the petition pursuant to the law in June 2013, and the petition was revoked. The Company filed an administrative suit in February 2014, and the Kaohsiung District Court rendered a judgement revoking the suit. The Company filed an appeal pursuant to laws, and the Kaohsiung High Court overruled the appeal in a judgement in July 2015. The Company petitioned for reexamination in August 2015, and was still overruled. The Company filed an appeal for reexamination on January 21 2016. After the appeal was overruled by the judgement rendered by the Administrative court of the Kaohsiung District Court in July 2016, the Company filed an appeal for remedy again. After the Kaohsiung, High Administrative Court overruled the Company’s petition in December 2016, the case was closed.

1. “Administrative disposition under Fu-Huan-Shui-Tze No. 1020383681B”

2. (1) Fact at issue:

Tainan City Government ordered the Company, via its official letter under Nan-Shih-Fu Huan-Shui-Tze No. 1020383681B dated May 2013, to pay the out-of-pocket expenses for the project related to An Shun Site soil pollution remediation, NT$26,535,852, within a specific time limit.

• (2) Claimed value: NT$26,535,852

• (3) Date of initiation: July 2013

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

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• (5) Current processing situation:

The Company paid said expenses within the specific time limit and filed an appeal. Notwithstanding, the appeal was overruled upon judgement. The Company filed the administrative remedy pursuant to laws. The Kaohsiung High Administrative Court in April 2016 claimed that the Company would appeal for remedy against negative injunctions pursuant to laws. The appeal was overruled by the Supreme Administrative Court in March 2017. In disagreement with the decision, the Company initiated a rehearing action for remedy in April within the same year. The judgement was determined in October 2017 holding that the Company was not liable for NT$ 61,126 of remediation expenses. Thus, the Company applied for the return of the overpayment in January 2018.

1. “Administrative disposition under Fu-Huan-Shui-Tze No. 1000700466”

2. (1) Fact at issue:

Tainan City Government ordered the Company, via its official letter under Nan-Shih-Fu Huan-Shui-Tze No. 1030098879 dated February 2014, to pay the out-of-pocket expenses for the project related to An Shun Site soil pollution remediation, NT$27,444,217, within a specific time limit.

• (2) Claimed value: NT$27,444,217

• (3) Date of initiation: March 2014

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

The Company paid said expenses within the specific time limit and filed an appeal. Notwithstanding, the appeal was overruled upon judgement in July 2014. The Company filed the administrative remedy pursuant to laws. After examination by the Kaohsiung High Administrative Court, the judgement was rendered in August 2016 that the Company only needed to pay NT$153,657 and the rest was overruled. Considering the overall interests, the Company filed an appeal against the part overruling the Company’s claims. The issue now is under hearing by the Supreme Administrative Court.

1. “Administrative disposition under Nan-Shih-Fu-Huan-Chi-Tze No. 1040225873”

2. (1) Fact at issue:

Tainan City Government ordered the Company, via its official letter under Nan-Shih-Fu-Huan-Chi-Tze No. 1030133470 dated February 2014, to pay the fine NT$200,000 within a specific time limit because of violation of Soil and Groundwater Pollution Remediation Act, which the Company failed to execute following the “Remediation Plans of Soil Pollution and Site Pollution” and reach the remediation goals in December 2013. For disagreement with the administrative disposition above, the Company initiated the administrative remedy pursuant to laws.

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• (2) Claimed value: NT$200,000

• (3) Date of initiation: March 2014

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

The Company initiated the petition pursuant to laws in March 2014, and in June within the same year the Environmental Protection Administration, Executive Yuan rendered a judgement revoking the petition. The Company filed an administrative suit in August 2014, and the case was under examination by the summary court of the Tainan District Court. In disagreement with the decision, the Company appealed to the Kaohsiung High Administrative Court in May 2015. After the appeal was overruled in August 2015, the Company petitioned for reexamination in September 2015. The Kaohsiung High Administrative Court agreed the argument is well grounded and revoked the original decision. The whole case was referred to Taiwan Tainan District Court, Taiwan Tainan District Court in June 2017 rejected the company's request, the company in July of the same year filed a retrial appeal relief, in October of the same year by the Kaohsiung High Administrative Court rejected the determination, the end of the case.

1. “Administrative disposition under Nan-Shih-Fu-Huan-Chi-Tze No. 1030815405”

2. (1) Fact at issue:

Tainan City Government ordered the Company, via its official letter under Nan-Shih-Fu-Huan-Chi-Tze No. 1030815405 dated August 2014, to pay the fine NT$600,000 within a specific time limit because of violation of Soil and Groundwater Pollution Remediation Act, which the Company failed to execute following the “Remediation Plans of Soil Pollution and Site Pollution.” For disagreement with the administrative disposition above, the Company initiated the administrative remedy pursuant to laws.

• (2) Claimed value: NT$600,000

• (3) Date of initiation: September 2014

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

The Company initiated the petition pursuant to laws in September 2014, and in December within the same year the Environmental Protection Administration, Executive Yuan rendered a judgement revoking the petition. The Company filed an administrative suit in February 2015, and was examined by Kaohsiung High Administrative Court. The judgement was unfavorable to the Company, thus the Company filed an appeal with the

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Supreme Administrative Court in December 2015. The appeal was overruled by the Supreme Court in May 2016. The Company was unwilling to accept the judgement and petitioned for reexamination pursuant to laws. In December within the same year, the petition was overruled by the Supreme Administrative Court, and the case was closed.

1. Administrative disposition under Kao-Shih-Fu-Shui-Shih-Yi-Tze No. 10335137100 (Turn off the pipelines with enforcement because of Kaohsiung gas explosion)

2. (1) Fact at issue:

Kaohsiung City had an underground pipeline explosion in July 2014. Kaohsiung City Government ordered the Company in August 2014 to turn off the pipeline, and prohibited the Company from restoring to use all the petrochemical pipelines in affected areas. For disagreement with the administrative disposition above, the Company initiated the administrative remedy pursuant to laws.

• (2) Claimed value: None

• (3) Date of initiation: September 2014

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Kaohsiung City Government

• (5) Current processing situation:

The Company initiated the petition pursuant to laws in September 2014, and MOEA overruled the petition in December 2015. The Company filed an administrative appeal with Kaohsiung High Administrative Court in January 2016 and the part of petition was overruled upon judgement in January 2017 In disagreement with the decision, the Company filed an appeal for remedy in February within the same year. Currently, the case is pending trial by the Supreme Administrative Court.

1. Administrative disposition under Kao-Shih-Kung-Wu-Kung-Tze No. 1033652500 and No. 1033766200 (Repeal of permission to mine and use the road for underground pipelines in Kaohsiung)

2. (1) Fact at issue:

Due to the Kaohsiung gas explosion on August 1st, Public Works Bureau of Kaohsiung City Government, via its official letter to CPC Corp., the person subject to the disposition, repealed the Company’s right to use the land of all the pipelines. Some pipelines mentioned in the repeal disposition belonged to the Company, and the Company commissioned CPC Corp. to build the pipelines at first, thus the Company, as the stakeholder, initiated a remedy with Public Works Bureau of Kaohsiung City Government pursuant to laws in September and November 2014.

• (2) Claimed value: None

• (3) Date of initiation: September 2014

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(4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Public Works Bureau of Kaohsiung City Government

• (5) Current processing situation:

The Company initiated a petition pursuant to laws in September and November 2014, and the Petition Committee of Kaohsiung City Government over-ruled the petition. In April 2015 the Company filed an administrative suit against two administrative disposition. The petition was over-ruled upon judgement by the Kaohsiung High Administrative Court in March 2017. In disagreement with the decision, the Company initiated an appeal for remedy in April within the same year.

31. An Shun application

(1) Fact at issue:

Fact at issue: Summary of J. Y. Interpretation No. 714 indicates that whether polluters’ general successors bear the remedial obligation does not belong the range of Soil and Groundwater Pollution Remediation Act. Meanwhile, ex-Taiwan Alkali Corp. was a state-owned enterprise and its affiliated An Shun Factory was commanded and supervised under the Ministry of Economic Affairs, Taiwan Provincial Government, and CPC Corp., etc., and they also dominated operations and obtained profits from it. These foresaid actions should belong to the acts of state, but the government asked a private company to bear the pollution which it had caused. Thus, the Company applied for the confirmation from Tainan City Government that those were actual polluters or potentially responsible for pollution and they should pay for the relevant costs and refund the money the Company had already paid over the years.

• (2) Claimed value: None

• (3) Date of initiation: December 2014

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

In November 2014 Tainan City Government made a rejection and the Company initiated a petition for remedy. In March 2015 Tainan City Government revoked the preceding disposition and made a new one. Considering the litigation strategy, the Company initiated a petition with the new disposition in April 2015. Environmental Protection Administration of Executive Yuan decided not to proceed with the case, because the original disposition had been revoked. New disposition was overruled in July 2015. The Company filed a 1st instance for remedy in September 2015, but it was over-ruled upon judgement by the Kaohsiung High Administrative Court in November 2017. In disagreement with the decision, the Company filed an appeal within the same year.

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32. Lawsuit of Business negligent injury from Heng-I Inc.

• (1) Fact at issue:

January 28, 2013 bovine factory next to the Hengxin chemical field caused by gas explosion causing workers burns, and then turned into business negligence injury cases. Because the accident occurred in the industrial area of the public large row, after sampling and identification of suspected excess of the company's emissions, should be told to call the manager of the company as the defendant, Miaoli the inspection department to hear. In February 2015, injured workers from Heng-I Chemical Inc. applied for joint liability to pay compensation of NT$6,920,000.

• (2) Claimed value: NT$6,920,000

• (3) Date of initiation: February 2015

• (4) The main litigation parties:

Plaintiff: Injured workers from Heng-I Chemical Inc.

Defendant: CPDC and its manager

• (5) Current processing situation:

The civil action case is pending trial by the Miaoli District Court, and in March 2017 the judgement was rendered that the Company and the manager won the case. The Company will handle subsequent issues after receiving a formal judgment. As for criminal actions, a ruling was rendered to not prosecute in March 2016.

1. An Shun Dormitory assigned as an archaeology

2. (1) Fact at issue:

Fact at issue: Tainan City Government, via its official letter under Jih-Fu-Wen-Tzu-Chu-Tze No. 1031053448A dated November 17th, 2014, designated the Company’s “Original Kagakude Negai O Ka Corporation’s Dormitories in Tainan Factory” as a municipal archaeology. For disagreement with the preceding administrative disposition, with two units occupied and destroyed dormitories has been found, the Company filed a suit for remedy pursuant to laws.

• (2) Claimed value: None

• (3) Date of initiation: December 2014

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

The Company initiated the petition for remedy. In August 2015, a decision was made that the disposition of four lands among An Shun Dormitory were revoked, while the rest parts of disposition were over-ruled. In disagreement with the decision, the Company filed an administrative appeal in September 2015. However, Tainan City Government on December 18, 2015 re-announced the rulings according to MOEA’s petition decision. In

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disagreement with the reannouncement (abbr. “2rd petition of archaeology assigned”), the Company initiated the petition on February 5, 2016. After the petition was over-ruled in July 2016, the Company filed an administrative suit with the Kaohsiung High Administrative Court to maintain the Company’s interests. The court determined that a re-announcement is not a sufficient reason for an administrative disposition and rendered a judgement overruling the Company’s lawsuit. The case was closed.

1. Civil action against company managers

2. (1) Fact at issue:

The Company’s manager, Wang, violated the company’s regulation during the working period. The Company acquitted Wang after it has been discovered and filed a suit against Wang pursuant to laws. However, Wang claimed that the company made him redundant illegally and requested for severance pay of NT$188,733.

• (2) Claimed value: NT$188,733

• (3) Date of initiation: March 2015

• (4) The main litigation parties:

Plaintiff: Wang Wen-Cheng

Defendant: CPDC

The Company won the 1st instance, and the judgement was finalized.

1. Application of joint Occupational Accident from an employee of Chung-Yen Engineering Co., Ltd.

2. (1) Fact at issue:

The plaintiff, Mr. Wang, for the employees employed by the company's Shangzhongyan Engineering Co., Ltd., fell during the Rust prevention operation of the ceiling pipeline paint at the company's great social factory in February 2013, resulting in partial contusion and fracture of the body. In February 2015, the plaintiff requested to add CPDC to the list of defendants, in addition to the original defendant, Chung-Yen Engineering Co. Ltd.

• (2) Claimed value: NT$3,151,594

• (3) Date of initiation: April 2015

• (4) The main litigation parties:

Plaintiff: Wang Wen-Cheng

Defendant: Chung-Yen Engineering Co., Ltd. and CPDC

• (5) Current processing situation:

The case was pending trial by the civil division of Kaohsiung District Court and the judgement was rendered in June 2017. In disagreement with the decision, the Company initiated an appeal in July within the same year.

1. “Administrative disposition under Nan-Shih-Fu-Huan-Tu-Tze No. 1050327521”

2. (1) Fact at issue:

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Review and Analysis of Financial Position and Financial Performance, and Risk Management

Tainan City Government ordered the Company to pay for the “2013 CPDC’s (Taiwan Alkali Co., Ltd.) supervision and auditing project for An Shun Site remediation”. According to Article 14, Paragraph 4, Article 15, and Article 43, Paragraph 1 of the Soil and Groundwater Pollution Remediation Act (hereinafter referred to as Soil Pollution Act), the Company was requested to pay NT$63,270,582.

• (2) Claimed value: NT$63,270,582

• (3) Date of initiation: December 2016

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

The Company initiated the petition in June 2016, and the agency with jurisdiction of administrative appeals overruled the petition. The Company filed an appeal for remedy in December 2016. The issue now is under hearing by the Kaohsiung High Administrative Court. The two sides pleaded not guilty to the appeal in July 2017, and then sent back to the higher trial, which is currently the high Administrative Court of Kaohsiung.

1. “Administrative disposition under Fu-Huan-Tu-Tu-Tsai-Tze No. 105050004”

2. (1) Fact at issue:

(1)Fact at issue: According to the Tainan City Government’s records of soil and groundwater pollution audits, dated on January 8, 2016, the quality of dioxin decreasing rate was less than 41%. Thus, considering that the Company did not implement the remediation plan and violated Article 22, Paragraph 1, Article 38, Paragraph 2, Subparagraph 3 of Soil Pollution Act, and Point 2, Item 11 of Sanction Benchmark attached in the same Act, the Government punishes the Company with a fine NT$200,000. The Company also is required to receive an environmental seminar for two hours according to Article 23, Paragraph 2 of the Environmental Education Act.

• (2) Claimed value: NT$200,000

• (3) Date of initiation: December 2016

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

Status: The Company initiated the petition in June 2016, and the agency with jurisdiction of administrative appeals overruled the petition in October 2016. In disagreement with the decision, the Company filed an appeal in December 2016 and it was overruled upon judgement by the Kaohsiung High Administrative Court in July 2017. The Company filed an appeal for remedy in August within the same year and then it was overruled upon judgement by the Supreme Administrative Court in January 2018. The case was closed.

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1. “Administrative disposition under Fu-Huan-Tu-Tu-Tsai-Tze No. 105050004”

2. (1) Fact at issue:

Fact at issue: Based on the administrative disposition under Fu-Huan-Tu-Tu-Tsai-Tze No. 106010003 dated on January 18, 2017, Tainan City Government determined that the Company knows that the heat treatment (rotary kiln) for decreasing the quality of dioxin was still under a testing phase and actual remediation decreasing percentage remains at 0%, and the Company did not make any actual progress before October 31, 2016, according to the records of soil and groundwater pollution audits. This Violates Article 22, Paragraph 1, Article 38, Paragraph 2, Subparagraph 3 of Soil Pollution Act, and Point 2, Item 11 of the Sanction Benchmarks attached in the same Act, the Company was fined NT$600,000, and is required to receive an environmental seminar for four hours according to Article 23, Paragraph 2 of the Environmental Education Act.

• (2) Claimed value: NT$600,000

• (3) Date of initiation: August 2014

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

Status: The Company was imposed sanctions based on the same fact at issue with “Administrative disposition under Fu-Huan-Tu-Tu-Tsai-Tze No. 105050004”. The Company believes that the Tainan City Government did not take into consideration the difficulties of the remediation project into account, nor give the Company objective and an achievable time frame to implement further improvements, and placed unreasonable sanctions. In disagreement with the decision, the Company initiated a petition in February 2017 and it was overruled. The Company initiated for administrative remedy in June within the same year and it was overruled upon judgement by the Kaohsiung High Administrative Court in November in 2017. In disagreement with the decision, the Company filed an appeal with the Supreme Administrative Court in December within the same year.

1. One million fine on the non-proposal for a 3rd revision of the pollution remediation plan

2. (1) Fact at issue:

On May 4, 2017, the Tainan government, in its letter 1,060,456,103th, the Tainan Environmental Protection Bureau (EPA) determined that the scheme did not meet the requirements for lifting capacity, and that it would take 8 hours to absentia and the environment in accordance with NT $1 million of the soil and groundwater Pollution remediation 4th 22nd Act. That is, the third change plan proposed by the company is deemed not to have been proposed.

• (2) Claimed value: NT$1,000,000

• (3) Date of initiation: June 2017

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• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Tainan Government

• (5) Current processing situation:

Status: In disagreement with the disposition, the Company initiated an administrative remedy in December 2017, while revised the pollution remediation plan as requested by Environmental Protection Bureau of Tainan City Government. The plan was approved in January 2018 and will be carried out in the future.

§ Against affiliates

• 2.Reinvestment entity – Legal action against declaration of the capacity of Chairman of Praxair Chemax Semiconductor Materials Co., Ltd.

• (1) Fact at issue:

The director of Praxair Chemax Semiconductor Materials Co., Ltd. (hereinafter referred to as “Praxair”) delegated by the Company, was elected as the new Chairman at the directors’ meeting of Praxair 2013. However, the Vice Chairman and supervisor appointed by the joint venture shareholder, Praxair Inc., failed to keep their promise and stopped the supervisor of Praxair appointed by the Company from auditing the accounts and records pursuant to the Company Law, and filed a legal action declaring non-existence of the new Chairman’s commission of authority.

• (2) Claimed value: None

• (3) Date of initiation: May 2013

• (4) The main litigation parties:

• a. action of non-existence of the new Chairman’s commission of authority:

Plaintiff: Supervisor Taimur Sharih of Praxair, and Vice Chairman Anne Roby of Praxair

Defendant: New Chairman of Praxair, Lin Ke-Ming.

• b. action of claims for collection of books:

Plaintiff: Supervisor of Praxair, Yu Chien-Sung

Defendant: General Manager of Praxair, Chen Chun-Liang

• c. action of claims for collection of Seal / Signature:

Plaintiff: Chairman of Praxair, Lin Ke-Ming

Defendant: General Manager of Praxair, Chen Chun-Liang, et al.

• (5) Current processing situation:

Taiwan High Court ruled that the action of existence Chairman’s commission of authority did exist. For disagreement with the judgement, the Defendant filed an appeal with Taiwan Supreme Court. The appeal was overruled by the judgement rendered by the Court on December 23, 2015, and this case determined that Lin Ke-Ming was the

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Chairman of Praxair. However, the intervener filed an appeal. The judgement was rendered by the Supreme Court in September 2017 determining again that Lin Ke-Ming was the Chairman of Praxair. Taiwan High Court ruled that the Supervisor of Praxair, Yu Chien-Sung, won the case of action of claims for collection of books. For disagreement with the judgement, the Defendant filed an appeal with Taiwan Supreme Court which is now pending trial. Taiwan Hsinchu District Court stopped the trial on the case of action of claims for collection of Seal / Signature until the Chairman’s commission of authority is determined. The Chairman’s appointment was confirmed on December 23, 2015, and relevant information was reported for the continuation of the proceedings. After successfully changing the seal registration on December 27, 2016, the Company dismiss the action. International arbitration on January 23, 2018 to make a judgment, the company in a successful defeat, at present, according to the results of the judgment in December 2018 from 2014 to 2017 dividend, About NT $560 million, and the avoidance of arbitration proceedings against some of the Taiwan courts is now in the Taipei District Court of Taiwan.

1. Reinvestment – Praxair shareholders’ meeting

2. (1) Fact at issue:

The supervisor, Taimur Sharih, appointed by the joint venture shareholder of Praxair invested by the Company, Praxair INC., privately called a temporary shareholders’ meeting on January 15, 2015 and submitted the temporary motion at the meeting.

• (2) Claimed value: None

• (3) Date of initiation: February 2015

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Chairman of Praxair, Lin Ke-Ming, and Supervisor Taimur Sharih

• (5) Current processing situation:

The Miaoli District Court rendered a judgement in September 2016 that the Company won the case. The opposite side filed an appeal with the High Court in October 2016 and the judgement was rendered holding that the Company still won the case. The opposite side filed an appeal again with the Supreme Court in September 2017. Currently, the issue now is under hearing by the Supreme Court.

• 4.Reinvestment – Praxair revocation of all the resolutions made by the board of directors and denial of financial statements

• (1) Fact at issue:

Because some relevant judgements had determined that Lin Ke-Ming, appointed by the Company, was the Chairman of Praxair, the resolution, which Praxair voluntarily called a meeting of directors, was illegal and should have been revoked. On the other hand, considering that the financial statements submitted by Praxair may affect shareholders’ right and interest, the Company brought a suit for remedy.

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• (2) Claimed value: None

• (3) Date of initiation: September 2016

• (4) The main litigation parties:

Plaintiff: Yu Chien-Sung

Defendant: Praxair

(5) Status: Pending trial by Taiwan Miaoli District Court.

1. Reinvestment – non-existence of the resolution of Praxair extraordinary shareholders' meeting on 21 February, 2017

2. (1) Fact at issue:

Because some relevant judgements had determined that Lin Ke-Ming, appointed by the Company, was the Chairman of Praxair, the resolution, which Praxair voluntarily called an extraordinary shareholders' meeting in February 2017, was illegal and should have been revoked.

• (2) Claimed value: None

• (3) Date of initiation: August 2014

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

Defendant: Praxair

• (5) Status: Pending trial by Taiwan Miaoli District Court.

• Reinvestment – Praxair absence of directors and supervisors

• (1) Fact at issue:

After dismissal of Praxair directors and supervisors on January 9, 2017, the Company brought a lawsuit to elect the interim managers and inspectors in order to maintain the regular operation of Praxair and reduce damages to shareholders’ rights and interest.

• (2) Claimed value: None

• (3) Date of initiation: January 2017

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

• (5) Current processing situation:

Status: Due to the complexity of the case, the Company made an application for sending the case to trial with the Taiwan Miaoli District Court in order to protect the legitimate rights and interests in Praxair.

1. Reinvestment –Rental payment of Praxair

2. (1) Fact at issue: Praxair did not comply with the contract and pay for the rent since March 2013.

3. (2) Claimed value: NT$40,823,556

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• (3) Date of initiation: August 2017

• (4) The main litigation parties:

Plaintiff: Sinopec Ltd.

• (5) Current processing situation:

Status: After the examination, the Miaoli District Court was of the opinion that the Company’s request had no reason and overruled the Company’s suit. In disagreement with the decision, the Company filed an appeal for remedy in January 2018.

1. Reinvestment – Payment of Praxair Chang Ming-Zhong’s Pension

2. (1)Fact at issue: In his tenure, Chang did not properly safeguard the rights and interests of the Company and resulted in Praxair becoming the subject to illegal actions, such as unconventional transactions, etc., and caused considerable damage to the Company. Therefore, the Company dismissed his position.

3. (2) Claimed value: NT$1,670,130

4. (3) Date of initiation: June 2017

5. (4) The main litigation parties:

Defendant: CPDC

Plaintiff: Chang Ming-Zhong

• (5) Current processing situation: Taiwan Qiaotou District Court heard.

• Reinvestment – Praxair determination action for Chairman Lin Ke-Ming’s existence of commission of authority

• (1) Fact at issue:

March 8, 2017 Praxair filed a lawsuit against chairman Lin Ke-Ming confirmation of the existence of the appointment relationship and other litigation, because Praxair's supervisor at that time are absent.

• (2) Claimed value: None

• (3) Date of initiation: March 2017

• (4) The main litigation parties:

Defendant: CPDC

Plaintiff: Praxair Inc.

• (5) Status: Pending trial by Taiwan Miaoli District Court.

• Reinvestment – Contract disputation with Shanghai Tongye Coal Chemical Group Co. Ltd

• (1) Fact at issue:

Shanghai Tongye Coal Chemical Group Co. Ltd purchased anthracene oils from Weihua (Rudong) Trading Co., Ltd and Weiqiang International Trading (Shanghai) Co., Ltd. However, the payment of the contract was paid with only 10% of total amount which is equal to deposit premium in May, 2014. In June, 2014, both sides of the companies

• 391 -

Review and Analysis of Financial Position and Financial Performance, and Risk Management

signed complement action agreement to extend payment terms. However, Shanghai Tongye Coal Chemical Group Co. Ltd still not paid the remainder payment on the due date. Weihua and Weiqiang filed a suit for remedy pursuant to laws.

• (2) Claimed value: RMB$ 3.5 million

• (3) Date of initiation: August 2014

• (4) The main litigation parties:

Plaintiff: Weihua (Rudong) Trading Co., Ltd. and Weiqiang International Trading (Shanghai) Co., Ltd.

Defendant: Shanghai Tongye Coal Chemical Group Co. Ltd

• (5) Current processing situation:

• Subsidiaries of CPDC, Weihua and Weiqiang, filed a civil suit with Yangpu District Court against Shanghai Tongye Coal Chemical Group Co. Ltd for the remainder payment of contract on August 6, 2014. The mediation of both sides was sustained by the Court. However, due to the failure of Shanghai Interbank Coal Group Co., Ltd. to perform the first issue of repayment in accordance with the Court's mediation, Weihua and Wei Qiang applied to the Yangpu District Court on September 2, 2014 for enforcement and sealed off all coal tar from Shanghai Interbank Group Co., Ltd. At present, waiting for the court to re-seal, sell debt or auction, follow-up Weihua and Wei Qiang Company and Shanghai Interbank Coal Group Co., Ltd. continue to negotiate negotiations, and ask the company to propose a more specific repayment plan. Authorities concerned is proceeding with criminal investigation of relevant people which engage in contract fraud from Shanghai Tongye Coal Chemical Group Co. Ltd.

(XIII) Other major risks and countermeasures: N/A

VII. Other important notes

• 392 -

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、 Eight Special Note

I. Information about Affiliates

1. Consolidated operating report of affiliate

(1)

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• Note: 1. Data updated as of March 29, 2019

• Substantially identified companies constitutes controlling and affiliates relationships as defined in Article 369-2 of the Company Law.

• 393 -

Special Note

(2) Profiles of affiliates

Unit ： NTD Thousand

					Unit：NTD Thousand
Name of business	Date of Incorporation	Address	Paid-in Capital		Principle Business
Tao Zhu Construction & Development Co., Ltd.	1995.10.11	8F, No. 12 Tunghsing Road, Songshan District, Taipei City	NTD100,000		Research and analysis on land utilization and planning and consultation services, and lease and sale of factory premises and commercial buildings, et al.
Weiqiang International Trade (Shanghai) Co., Ltd.	2019.01.08	Suite 401, No., 718, Kuan Ming Road, Pudong New District, Shanghai City	NTD 211,560	(Note 3)	Wholesale of chemical raw materials and products (exclusive of hazardous goods), commissioned distribution (exclusive of auction), and import and export and related alternatives
Weihua (Rudong) Trade Co., Ltd.	2019.01.08	No. 9, Kang Cheng Village, Changsha Township, Rudong Township, Chiangsu Province	NTD 763,460	(Note 3)	Wholesale of chemical raw materials and products (exclusive of hazardous goods and toxic chemical products), export and import, and import and export of technology, and commissioned distribution
Rich Equities Ltd.	2007.03.21	Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius	NTD 5,996	(Note 3)	Reinvestment.
CPDC Investment (BVI) Co., Ltd.	1998.01.09	Citco Building, Wickhams Cay, P.O Box 662	NTD 904,944	(Note 3)	Reinvestment.
Tsou Seen Chemical Industries Corporation	1998.06.16	No. 1, Chin Ching Road, Tunghai Village, Fanliao Hsiang, Pintung County	NTD 960,000		Manufacturing of phosphoric acid-related chemical products and derivatives, and Storage, transportation, procurement and marketing of fertilizer
Taivex therapeutics Inc.	2010.02.11	8F, No. 12 Tunghsing Road, Songshan District, Taipei City	NTD 507,399		R&D of bio-tech medicines.
Sinopec Green Energy Technology Co., Ltd. (formerly Sinopec Engineering Co., Ltd.)	1999.05.31	No. 34 Chunglin Road, Hsiaokang District, Kaohsiung City	NTD 150,000		Mechanical and environmental related projects.
Da Yin Construction Engineering Co., Ltd.	1972.11.24	No. 5, 10F, 51, Fuxing Road, Taoyuan City	NTD 22,500		Civil engineering contractor.

• 394 -

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Name of business	Date of Incorporation	Address	Paid-in Capital	Paid-in Capital	Principle Business
Kaohsiung Monomer Co., Ltd.	1976.06.10	No. 1 Xinkung Road, Dashe District, Kaohsiung City	NTD 500,000		Production and sale of methyl methacrylate (MMA)
Unichem Development Limited	2008.05.20	Room 1405-1406, No. 43-59, Dominion Centre, Queen's Road East, Wan-chai District, Hong Kong	NTD 6,337,164	(Note 3)	Reinvestment.
WEIDA (ZHANGZHOU) CONSULTANT SERVICE CO., LTD.	2012.11.26	Shop front at No. 06, Block 8, West District, Hsin Rong Hsiao Zone, Hsiang Cheng Ping Tsang Yuan Road, Changchou City	NTD 13,171	(Note 3)	Consultation services
Jiangsu Weiming Petrochemical Corporation	2013.05.16	No. 9, Kang Cheng Village, Changsha Township, Rudong Township, Chiangsu Province	NTD 4,186,394	(Note 3)	Petrochemical project related facilities construction
Chunghwa Twin Towers Co. Ltd.	2011.03.01	16F, No. 12 Tunghsing Road, Songshan District, Taipei City	NTD 3,337,705		Investment in construction of infrastructure, real property trading, international trading, real property lease, and hotel services
WEIDA (ZHANGZHOU) Petrochemical CO., LTD.	2014.12.23	No.1 Gulei Road.,Du Xun Town, Zhangpu County, Zhangzhou City, Fujian Province	NTD 30,648	(Note 3)	Petrochemical project related facilities construction
Kunshan Wei-Chin Management Consulting Co., Ltd.	2016.01.21	Room 2006, Building 5th, Asia Pacific Plaza, Huaqiao Town Road, Kunshan, Jiangsu Province	NTD 29,664	(Note 3)	Business management consultation services, investment consultation, and marketing planning.
Zhejiang Wei-Chi Material Co.,Ltd.	2016.01.21	Sian Township Industrial Zone,ChangxingCounty	NTD 31,278	(Note 3)	Wholesale of synthetic fiber materials(Nylonproducts.)
Zhejiang Wei-Chi Material Co., Ltd.	2016.01.21	112 Robinson Road#05-01Robinson 112 Singapore(068902)	NTD 1,326 ,796	(Note 3)	Reinvestment.
Core Pacific Twin Tower (Myanmar) Co. Ltd.	2016.01.21	No.153/Ka,Kyun Shwe Myaing Lane(2), 23 Ward,Thingangyun Township,Yangon	NTD 169,921	(Note 3)	Reinvestment and advisory services.
Shengfeng Construction Investment Co., Ltd.	2016.01.21	No. 338/18, Anyang Wang Road, Fourth District, Ho Chi Minh City, Vietnam	NTD 622,633	(Note 3)	Construction projects, real estate management, construction related technical consultants, leasing machinery and equipment, building materials wholesale and so on.

• 395 -

Special Note

Name of business	Date of Incorporation	Address	Paid-in Capital	Paid-in Capital	Principle Business
Supervisor of Changzhou Weicai New Material Science and Technology Co., Ltd.	2016.01.21	No. 68, Daoxiang Road, Wujin Economic Development Zone, Changzhou, Jiangsu, China	NTD1,860,113	(Note 3)	Engineering plastics, production of high value petrochemical downstream products
Director of Core Pacific Pioneer (Myanmar) Co., Ltd.	2016.01.21	No.153/Ka,Kyun Shwe Myaing Lane(2), 23 Ward,Thingangyun Township,Yangon	NTD 15,434	(Note 3)	Construction Engineering, real estate management, development and sales services.
Core Pacific Twin Star (Vietnam) Investment Co., Ltd.	2016.01.21	No.18 Dong Nai, Ward 2, Tan Binh District, HCMC	NTD1,157,997	(Note 3)	Improve the construction project, real estate management, construction activities related consultants
Sinopec Twin Star (India) Co., Ltd.	2019.01.08	Level 7, The Capital, Plot No. C-70, G Block, Bandra Kurla Complex, Bandra MUMBAI Mumbai City MH 400051 IN	INR 9,274	(Note 3)	Engaged in real estate and
					petrochemical market research and
					consulting business.

Note 1: All of the affiliates should be disclosed, irrelevant to scale and size.

Note 2: Where each affiliate has established its own plant, and the sales of the products manufactured by the plant exceed 10% of the Company’s operating revenue, the name, date of incorporation, address and principle business of the plant shall be included herein.

Note 3: Where the affiliate refers to a foreign company, the name and address may be stated in English, and the date of incorporation may be expressed in the form of MM/DD/YY. The paid-in capital may be expressed in foreign currency (but the exchange rate on the reporting date shall be specified).

Note 4: Data deadline: March 29, 2019.

Note 5: Changzhou Huize New Material Technology Co., Ltd. was renamed Changzhou Weicai New Material Technology Co., Ltd. in February 2019.

• 396 -

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(3)Overview of affiliate operation

Currency Unit: NTD Thousand

Name of business	Capital	Total assets	Total liabilities	Net Value	Operating revenue	Operating income (Loss)	Operating income (Loss)	Profit (loss) (after tax)	EPS (NT$) (after tax)
Tsou Seen Chemical Industries Corporation	960,000	1,741,839	131,950	1,609,889	2129,175		272,429	193,626	2.02
Taivex therapeutics Inc.	507,399	434,098	17,608	416,490	0		(81,446)	(76,894)	(1.52)
Sinopec Green Energy Technology Co.,Ltd.	150,000	226,892	86,710	140,182	251,147		(21,020)	(20, 983)	(1.40)
Tao Zhu Construction & Development Co., Ltd.	100,000	76,581	169	76,412	0		(1,990)	(1,924)	(0.19)
Da Yin Construction Engineering Co., Ltd.	22,500	24,710	82	24,628	0		(225)	(107)	--
CPDC Investment (BVI)Co.,Ltd.	904,944	931,841	14	931,827	0		(132)	(105,703)	(3.98)
Kaohsiung Monomer Co.,Ltd.	500,000	4,979,272	1,533,575	3,445,697	6,922,742	3,095,699		2,482,675	49.65
Rich Equities Ltd.	5,996	5,254	0	5,254	0	45		45	0.25
Weiqiang International Trade (Shanghai) Co., Ltd.	211,560	278,396	158,164	120,233	1,059,261	12,661		13,864	--
Weihua (Rudong) Trade Co.,Ltd.	763,460	848,590	361,907	486,683	652,991	16,767		24	--
WEIDA (ZHANGZHOU) CONSULTANT SERVICE CO., LTD.	13,171	2,562	18	2,544	0	(514)		(428)	--
Jiangsu Weiming Petrochemical Corporation	3,743,354	5,225,281	1,782,863	3,442,445	0	(107,091)		(28,273)	--
Chunghwa Twin Towers Co. Ltd.	2,201,000	2,635,930	120	2,635,810	0	(164)		(25,603)	0.00
Unichem Development Limited	5,894,124	5,269,972	58	5,269,914	0	(2,536)		(94,327)	--
WEIDA (ZHANGZHOU) Petrochemical CO., LTD.	30,648	16,532	87	16,445	0	(5,763)		(5,679)	--
Kunshan Wei-Chin Management Consulting Co., Ltd.	29,664	8,674	42	8,632	10,751	(10,301)		(10,048)	--

• 397 -

Special Note

Name of business	Capital	Total assets	Total liabilities	Net Value	Operating revenue	Operating income (Loss)	Operating income (Loss)	Profit (loss) (after tax)	EPS (NT$) (after tax)
Zhejiang Wei-Chi Material Co.,Ltd.	31,278	25,994	21	25,973	0		(996)	(1,159)	--
Zhejiang Wei-Chi Material Co.,Ltd.	180,817	169,920	1	169,919	0		(4,189)	(9,781)	(0.05)
Core Pacific Twin Tower (Myanmar) Co. Ltd.	169,921	162,734	30	162,704	0		(5,901)	(5,622)	(1.75)
Director of Core Pacific Pioneer (Myanmar) Co., Ltd.	15,434	22,782	8,247	14,535	0		(1,025)	(466)	--
Shengfeng Construction Investment Co., Ltd.	622,633	739,621	119,178	620,442	0		(31)	9	--
Changzhou Huize New Material Technology Co., Ltd.	1,860,113	2,216,980	1,088,098	1,128,883	2,985		(21,330)	(47,176)

Note 1: All of the affiliates should be disclosed, irrelevant to scale and size. Note 2: For relational enterprises such as foreign companies, the relevant figures should be shown in the conversion of NT dollars.

Note 3:--listed Co., Ltd. does not apply to this entry.

Note 4: Changzhou Huiyuan new material Technology Co., Ltd. was renamed Changzhou Weichai new material Technology Co., Ltd. in February 2019.

• 398 -

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• (II) Consolidated financial statements of related corporations

Declaration

• I. The Company's relationship with the Enterprise consolidated financial statements in 2018 (from January 1st, 2018 to December 31st, 2018) is based on the "Relationship Enterprise Merger Business Report Relationship Enterprise Consolidated financial Statements and relationship Report preparation guidelines", securities issuers financial reporting guidelines and related laws and regulations prepared.

• Our company declare that no information relevant to our affiliates consolidated financial statement has been falsified or concealed.

Hereby certify

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Company name：China Petrochemical Development Corporation
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Chairman : Lin Ke-Ming
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Date : 2019/03/20

• 399 -

Independent Auditors’ Review Report

To the Board of Directors of China Petrochemical Development Corporation:

We have reviewed the accompanying consolidated financial statements of China Petrochemical Development Corporation (CPDC) and its affiliates as of and for the year ended December 31, 2018 by applying the review procedures in accordance with "Guidelines for the Review of Consolidated Financial Statements of Affiliated Enterprises", which are necessary to conduct the review. The review is substantially less in scope than an audit conducted in accordance with the generally accepted auditing standards. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that no material amendments or adjustments of the consolidated financial statements needed in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises” and with Regulations Governing the Preparation of Financial Reports by Securities Issuers.

As disclosed in Note 5, the Case of portion land polluted at the Anshun plant in Tainan, CPDC submitted for approval a remediation project proposal to the Tainan City Government in accordance with the related regulations and accrued relevant remediation project expenses in June 2008. This remediation project proposal was approved in May 2009. CPDC also performed related remediation work according to the remediation project proposal. The first phase of remediation project was completed in September 2014. The management of CPDC is expecting that the second phase of remediation project will be completed in the next decade. Likewise, CPDC has accrued relevant remediation project expenses for the second phase of remediation project in December 2014. CPDC is still seeking possible legal and administrative remedies to define its responsibilities of land pollution.

The engagement partners on the reviews resulting in this independent auditors’ review report are Chen Mei Fang and Chung Tan Tan.

KPMG

Taipei, Taiwan (Republic of China) March 22, 2019

• 400 -

December 31, 2018	Amount %		913,732 1	5,578 -	2,255,481 2	2,491	3,074,747 3	801,429 1	489,579 1	863,801 1	50,079 -	8,456,917 8		3,810,129 4	2,486,971 3	8,758,989 9	349,729 -	115,014 -	15,520,832 16	23,977,749 25				26,998,573 29	1,260,386 1		1,708,303 2	33,521,575 36	5,144,764 6	40,374,642 44		(488,212) (1)	(1,248,499) (1)	(1,736,711) (2)	2,361,282 3	69,258,172 75	69,258,172 75	93,235,921 100
			$																																			$
	LIABILITIES AND EQUITY	Current liabilities	Short-term loans (Note 6 j.)	Current contract liabilities (Note 6 s.)	Accounts payable	Accounts payable-Affiliate	Other payables (Note 7)	Current tax liabilities (Notes 4 and 6 p.)	Provisions�current (Notes 4, 6 m. and 6 o.)	Long-term liabilities-current portion (Notes 4 and 6 j.)	Other current liabilities, others	Total current liabilities	Non-current liabilities	Long-term bank loans (Note 6 j.)	Provisions�non-current (Notes 4, 6 m. and 6 o.)	Deferred tax liabilities (Notes 4 and 6 p.)	Long-term bills payable (Note 6 k.)	Other non-current liabilities, others	Total non-current liabilities	Total liabilities		Equity attributable to shareholders of the parent	Share capital	Common stock (Note 6 q.)	Capital surplus (Note 6 q.)	Retained earnings: (Note 6 q.)	Legal reserve	Special reserve	Unappropriated earnings		Others (Notes 4 and 6 q.)	Exchange differences arising on translation of foreign operations	Unrealized gain or loss on financial assets at fair value through other comprehensive income		Non-controlling interests	Total equity		TOTAL LIABILITIES AND EQUITY
	�		18	1	-	3	-	-	3	1	1	27		6	2	1	22	41	-	-	1	73																100
December 31, 2018	Amount		16,587,624	1,300,897	251,629	3,017,333	108,662	118,382	2,489,581	1,146,112	589,910	25,491,748		4,861,274	1,978,339	1,027,133	20,487,969	38,350,359	188,061	63,221	787,817	67,744,173																93,235,921
			$																																			$
	ASSETS	Current assets	Cash and cash equivalents (Notes 4 and 6 a.)	Financial assets at fair value through profit or loss�current (Notes 4 and 6 b.)	Current financial assets at fair value through other comprehensive income (Notes 4 and 6 b.)	Notes and accounts receivable, net (Notes 4 and 6 c.)	Accounts receivable�related parties, net (Notes 4, 6 c. and 7)	Other receivables (Notes 4 and 6 c. and 7)	Inventories (Notes 4 and 6 d.)	Prepayments	Other current assets	Total current assets	Non-current assets	Non-current financial assets at fair value through profit or loss (Note 6 b.)	Non-current financial assets at fair value through other comprehensive income (Note 6 b.)	Investments accounted for using equity method (Notes 4 and 6 e.)	Property, plant and equipment (Notes 4 and 6 g.)	Investment property, net (Notes 4 and 6 h.)	Intangible assets (Notes 4 and 6 i.)	Deferred tax assets (Notes 4 and 6 p.)	Other non-current assets (Note 8)	Total non-current assets																TOTAL ASSETS

• 401 -

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2018

(Expressed in thousands of New Taiwan Dollars)

Operating revenue (Notes 4 and 6 s.) Operating costs (Notes 4 and 6 d.) Add: Realized profit (loss) on intercompany transactions Gross profit Operating expenses Selling expenses Administrative expenses Research and development expenses Profit from operations Non-operating income and expenses Other income (Notes 6 v. and 7) Other gains and losses (Notes 6 l. and 6 v.) Finance costs (Notes 6 m. and 6 v.) Share of profit of associates and joint ventures accounted for using equity method (Notes 4 and 6 e.) Total non-operating income and expenses Income before income tax Less: Income tax expense (Notes 4 and 6 p.) Net income Other comprehensive income (loss): Items that will not be reclassified subsequently to profit or loss: Actuarial loss from defined benefit plans Unrealized losses from investments in equity instruments measured at fair value through other comprehensive income Share of other comprehensive loss of associated and joint ventures Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Other comprehensive (loss) income for the year, net of income tax Total comprehensive income for the year Net income attributable to� Shareholders of the parent Non-controlling interests Comprehensive income (loss) attributable to� Shareholders of the parent Non-controlling interests Earnings per share (NTD) (Notes 4 and 6 r.) Basic earnings per share Diluted earnings per share	For the Years Ended December 31, 2018	For the Years Ended December 31, 2018
	Amount $ 44,781,832 36,249,815 8,532,017 (3) 8,532,014 1,031,676 971,123 335,436 2,338,235 6,193,779 1,035,458 (246,038) (85,913) (105,099) 598,408 6,792,187 1,021,587 5,770,600 10,170 (372,169) (63,561) (425,560) (96,052) (96,052) (521,612) $ 5,248,988 $ 4,290,269 1,480,331 $ 5,770,600 $ 3,763,808 1,485,180 $ 5,248,988 $	�
		100 81
		19 -
		19
		2 2 1
		5
		14
		2 (1) -
		1
		15 2
		13
		- (1) -
		(1)
		-
		-
		(1)
		12
		10 3
		13
		9 3
		12
		1.59
	$	1.58

• 402 -

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2018 (Amounts expressed in thousands of New Taiwan Dollars, except for per share information or unless otherwise specified)

1. HISTORICAL HIGHLIGHTS AND SCOPE OF BUSINESS

China Petrochemical Development Corporation (hereinafter referred to as the Company) was founded on July 8, 1969 under the approval of Ministry of Economic Affairs, R.O.C. Its registered address is 11th floor, No.12, Dongxing Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C.). The Company migrated to No.1, Jingjian Rd., Dashe Dist., Kaohsiung City 815, Taiwan (R.O.C.) on July 18, 2016. The Company and its subsidiaries (hereinafter referred to as the “Consolidated Company”) primarily engage in the production of petroleum, alkali-chlorine, phosphoric acid and other petrochemical products and by-products and the storage, transportation, purchase and sale of these products, related chemicals and their raw materials. The primary products are acrylonitrile, caprolactam, acetic acid and nylon.

2. APPROVAL DATE AND PROCEDURES OF THE CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements for the years ended December 31, 2018 and 2017 were authorized for issue by the Board of Directors on March 22, 2019.

3. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

• a. The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018:

New, Revised or Amended Standards and Interpretations Amendment to IFRS 2 “Classification and Measurement of Share-based Payment Transactions” Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts” IFRS 9 “Financial Instruments” IFRS 15 “Revenue from Contracts with Customers” Amendment to IAS 7 “Statement of Cash Flows -Disclosure Initiative” Amendment to IAS 12 “Income Taxes- Recognition of Deferred Tax Assets for Unrealized Losses” Amendments to IAS 40 “Transfers of Investment Property” Annual Improvements to IFRS Standards 2014–2016 Cycle: Amendments to IFRS 12 Amendments to IFRS 1 and Amendments to IAS 28 IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

Effective date per IASB

January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1,2017 January 1, 2017 January 1, 2018 January 1, 2017 January 1, 2018 January 1, 2018

• 403 -

Except for the following items, the Group believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of signification changes are as follows:

1. IFRS 15 “Revenue from Contracts with Customers”

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces the existing revenue recognition guidance, including IAS 18 “Revenue” and IAS 11 “Construction Contracts”. The Group applies this standard retrospectively with the cumulative effect, it need not restate those contracts, but instead, continues to apply IAS 11, IAS 18 and the related Interpretations for comparative reporting period. The Group recognizes the cumulative effect upon the initially application of this Standard as an adjustment to the opening balance of retained earnings on January 1, 2018.

The following are the nature and impacts on changing of accounting policies:

(1) Sales of goods

For the sale of products, revenue is currently recognized when the goods are delivered to the customers’ premises, which is taken to be the point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue is recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods. For some made-to-order paper product contracts, the customer controls all of the work in progress as the products are being manufactured. When this is the case, revenue will be recognized as the products are being manufactured.

(2) Rending of services

The Group is involved in performing services. If the services under a single arrangement are rendered in different reporting periods, then the consideration is allocated on a relative fair value basis between the different services. Revenue is currently recognized using the stage-of-completion method. Under IFRS 15, the total consideration in the service contracts will be allocated to all services based on their stand-alone selling prices. The stand-alone selling prices will be determined based on the list prices at which the Group sells the services in separate transactions.

(3) Commission

For commissions earned by the Group, the Group has determined that it acts in the capacity of an agent for certain transactions. Under IFRS 15, the assessment will be based on the whether the Group controls the specific goods before transferring to the end customer, rather than whether it has exposure to significant risks and rewards associated with the sale of goods.

• 404 -

(4) Construction contracts

Contract revenue currently includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. When a claim or variation is recognized, the measure of contract progress or contract price is revised and the cumulative contract position is reassessed at each reporting date. Under IFRS 15, claims and variations will be included in the contract accounting when they are approved.

• (5) Impacts on financial statements

The adoption of IFRS 15 did not have any a significant impact on its consolidated financial statements.

2. IFRS 9 “Financial Instruments”

IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and Measurement” which contains classification and measurement of financial instruments, impairment and hedge accounting.

As a result of the adoption of IFRS 9, the Group adopted the consequential amendments to IAS 1 “Presentation of Financial Statements” which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCI. Previously, the Group’s approach was to include the impairment of trade receivables in administrative expenses. Additionally, the Group adopted the consequential amendments to IFRS 7 Financial Instruments: Disclosures that are applied to disclosures about 2018 but generally have not been applied to comparative information

The detail of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

• (1) Classification of financial assets and financial liabilities

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Group classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please see note 4.

The adoption of IFRS 9 did not have any a significant impact on its accounting policies on financial liabilities.

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(2) Impairment of financial assets

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with the ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than they are under IAS 39 – please see note 4.

• (3) Transition

The adoption of IFRS 9 have been applied retrospectively, except as described below,

• Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as on January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9.

• The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application.

• The determination of the business model within which a financial asset is held.

• The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.

• The designation of certain investments in equity instruments not held for trading as at FVOCI.

• If an investment in a debt security had low credit risk at the date of initial application of IFRS 9, then the Group assumed that the credit risk on its asset will not increase significantly since its initial recognition.

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• (4) Classification of financial assets on the date of initial application of IFRS 9

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

assets as of	January 1, 2018.
Financial assets Cash and cash equivalents Equity instruments Equity instruments Equity instruments Equity instruments Trade and other receivables	IAS 39 Measurement categories Carrying amount Loans and receivables 12,454,235 Designated as at FVTPL 1,368,657 Available-for-sale 1,873,478 Carried at cost 703,521 Carried at cost 2,288,514 Loans and receivables 3,946,586	IFRS 9 Measurement categories Carrying amount Amortized cost 12,454,235 Mandatorily at FVTPL 1,368,657 FVOCI 1,873,478 FVOCI 728,660 Mandatorily at FVTPL 3,136,224 Amortized cost 3,946,586	Note
	Measurement categories Loans and receivables Designated as at FVTPL Available-for-sale Carried at cost Carried at cost Loans and receivables	Measurement categories Amortized cost Mandatorily at FVTPL FVOCI FVOCI Mandatorily at FVTPL Amortized cost	(a) (b) (c) (d)

• a. Under IAS 39, these equity securities were designated as at FVTPL because they were managed on a fair value basis and their performance was monitored on this basis. These assets have been classified as mandatorily measured at FVTPL under IFRS 9.

• b. These equity securities represent investments that the Group intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Group has designated these investments at the date of initial application as measured at FVOCI; therefore the carrying amount of these equity securities were $1,873,478 thousand on January 1, 2018.

• c. These equity securities represent investments that the Group intends to hold for the long term for strategic purposes. As permitted by IFRS 9, the Group has designated these investments at the date of initial application as measured at FVOCI, resulting in a decrease of $16,979 thousand and an increase of $42,118 thousand in other equity and retained earnings respectively and the carrying amount $728,660 thousand were recognized on January 1, 2018.

• d. These equity securities, as permitted by IFRS 9, the Group has designated these investments at the date of initial application as measured at FVTPL, resulting carrying amount of $3,136,224 thousand in those assets recognized, and an increase of $847,710 thousand in the retained earnings, which was attributed to the Parents and the non-controlling for $806,529 thousand and $41,182 thousand respectively.

The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 upon transition to IFRS 9 on January 1, 2018.

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Fair value through profit or loss Beginning balance of FVTPL (IAS 39) Additions – equity instruments: From available for sale From financial assets carried at cost Total Fair value through other comprehensive income Beginning balance of available for sale (including carried at cost) (IAS 39) Addition – equity instruments: From available for sale From financial assets carried at cost Subtraction – equity instruments: Recognized by equity method Total Amortized cost Beginning balance of bond investment without an active market, held to maturity, trade and other receivables, and other financial assets Total	December 31, 2017 IAS 39 Carrying amount $ 3,657,171 - - $ 3,657,171 $ 2,576,999 - - - $ 2,576,999 $16,400,821 $ 16,400,821	Reclassi- fications (2,288,514) - 2,288,514 - (2,576,999) 1,873,478 703,521 - - - -	Remeasure- ments - - 847,710 847,710 - - 25,139 - 25,139 - -	January 1, 2018 IFRS 9 Carrying amount 4,504,881 2,602,138 16,400,821	January 1, 2018 Retained earnings (attributable to the Parents) - 1,989 806,529 808,518 - - 42,118 (6,310) 35,808 - -	January 1, 2018 Other equity - (1,989) - (1,989) - - (16,979) - (16,979) - -	January 1, 2018 Retained earnings (attributable to the Non- controlling)
							- - 41,182
							41,182
							- - - -
							-
							-
							-

• b. The impact of IFRS endorsed by FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019 in accordance with Ruling No. 1070324857 issued by the FSC on July 17, 2018:

New, Revised or Amended Standards and Interpretations IFRS 16 “Leases” IFRIC 23 “Uncertainty over Income Tax Treatments” Amendments to IFRS 9 “Prepayment features with negative compensation“ Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term interests in associates and joint ventures“ Annual Improvements to IFRS Standards 2015–2017 Cycle	Effective date **per IASB **
	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

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Except for the following items, the Group believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of signification changes are as follows:

1. IFRS 16“Leases”

IFRS 16 replaces the existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

IFRS 16 introduces a single and an on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of expenses related to those leases will now be changed since IFRS 16 replaces the straightline operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of low-value items. The lessor accounting remains similar to the current standard – i.e. the lessors will continue to classify leases as finance or operating leases.

• (1) Determining whether an arrangement contains a lease

On transition to IFRS 16, the Group can choose to apply either of the following:

• IFRS 16 definition of a lease to all its contracts; or

• a practical expedient that does not need any reassessment whether a contract is, or contains, a lease.

The Group plans to apply the practical expedient to grandfather the definition of a lease upon transition. This means that it will apply IFRS 16 to all contracts entered into before January 1, 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.

• (2) Transition

As a lessee, the Group can apply the standard using either of the following:

• retrospective approach; or

• modified retrospective approach with optional practical expedients.

The lessee applies the election consistently to all of its leases. On January 1, 2019, the Group plans to initially apply IFRS 16 using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information.

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When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Group chooses to elect the following practical expedients:

  - apply a single discount rate to a portfolio of leases with similar characteristics.

  - adjust the right-of-use assets, based on the amount reflected in IAS 37 onerous contract provision, immediately before the date of initial application, as an alternative to an impairment review.

  - apply the exemption not to recognize the right-of-use assets and liabilities to leases with lease term that ends within 12 months of the date of initial application.

  - exclude the initial direct costs from measuring the right-of-use assets at the date of initial application.

  - use hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

• (3) So far, the most significant impact identified is that the Group will have to recognize the new assets and liabilities for the operating leases of its offices, warehouses, and factory facilities. The Group estimated that the right-of-use assets and the lease liabilities to increase by $299,236 thousand and $299,236 thousand respectively on January 1, 2019. No significant impact is expected for the Group’s finance leases. Besides, The Group does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant. The above impact may change due to any changes of future circumstances and conditions.

• c. The impact of IFRS issued by IASB but not yet endorsed by the FSC

As of the date the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but not yet endorsed by the FSC:

Standards Board (IASB), but not yet endorsed by the FSC:
New, Revised or Amended Standards and Interpretations 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 per IASB
	January 1, 2020 Effective date to be determined by IASB January 1, 2021 January 1, 2020

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Those which may be relevant to The Group are set out below:

Issuance/ Release Dates September 11, 2014	Standards or Interpretations Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture"	Content of amendment
		The amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011) in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.

The Group is evaluating the impact of its initial adoption of the above mentioned standards or interpretations on its consolidated financial position and consolidated financial performance. The results thereof will be disclosed when the Group completes its evaluation.

4. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies, which have been applied consistently to all periods presented in these consolidated financial statements, except when otherwise indicated, are as follows:

• a. Statement of compliance

These consolidated annual financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to the Regulations) and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by FSC (hereinafter referred to as the IFRSs endorsed by FSC).

• b. Basis of Preparation

• Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for the following material items in the balance sheets:

• (1) Financial instruments at fair value through profit or loss are measured at fair value (including derivative financial instruments);

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• (2) Fair value through other comprehensive income (Available-for-sale financial assets) are measured at fair value;

• (3) The net defined benefit liability (assets) is recognized as the present value of the defined benefit obligation less the fair value of plan assets and the effect of the asset ceiling (please see note 6 o.);

• (4) Investment properties are measured at fair value.

• Functional and presentation currency

The functional currency of the Consolidated Company is determined based on the primary economic environment in which the entities operate. The consolidated financial statements are presented in New Taiwan Dollar, which is the Company’s functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

• c. Basis of Consolidation

• Principle of preparation of the consolidated financial statements

The consolidated financial statements comprise the Company and subsidiaries.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the noncontrolling interests even if doing so causes the non-controlling interests to have a deficit balance.

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

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2. List of subsidiaries in the consolidated financial statements

The subsidiaries included in the consolidated financial statements were as follows:

Name of investors The Company The Company The Company The Company The Company The Company The Company The Company The Company Chemax International Corp.	Name of subsidiaries Chemax International Corp. (CIC) Tsou Seen Chemical Industries Corporation (TSCIC) CPDC Green Technology Corp.(CPDC GT) (Original name: CPDC Engineering Co., Ltd.) CPDC Investment (BVI) Co Ltd. (CPDC (BVI)) Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. (CHSTH) Unichem Development Limited (UDL) Jiangsu Weiming Petrochemical Corporation (Weiming) Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang) Cong Ty Tnhh Dau Tu Xay Dung Thanh Phong (Thanh Phong) Weihua (Rudong) Trade Co., Ltd (Weihua)	Nature of business Announcement energy products besides petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading. Manufacture of chemical products and their derivatives of phosphoric acid and fertilizer storage, transport, purchase, marketing business. Water treatment works, plumbing works, apparatus and instrument installation work, refrigeration and air conditioning engineering and tank car repair and other services. Holding company Real estate investment and development Holding company Petrochemical supporting facility construction Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub- fitted trading Engaged in construction, real estate, building constructional consulting, lease equipment and wholesale of building materials Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading	Shareholding ratio 2018.12.31 -% 100.00% 100.00% 100.00% 90.87% 100.00% 0.77% 44.52% 97.87% -%	Notes
				CIC was established on September 1, 1995. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. As of December 31, 2018 CIC’s issued capital amounted to $0. TSCIC was established on June 16, 1998. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. As of December 31, 2018 , TSCIC’s share capital amounted to $960,000 . CPDC GT (Original name : CPDC EC) was established on May 31, 1999. As of December 31, 2018 , CPDC GT’s share capital amounted to $150,000. CPDC (BVI) was established on January 9, 1998, registered in the British Virgin Islands, and is an international investment company. As of December 31, 2018 , CPDC (BVI)’s issued capital amounted to US$26,580. Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. was established on March 1, 2011. As of December 31, 2018 , Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd.’s issued capital amounted to $2,201,000. UDL was established on May 20, 2008. As of December 31, 2018 , UDL’s issued capital amounted to US$191,478 . Weiming was established on May 16, 2013. It increased its capital through UDL amounting to RMB$ 130,000, RMB$109,000 and RMB$110,000 on June 25, 2018, June 16 and December 27, 2017, respectively. The said amounts were verified on June 28,2018, June 30 and December 28, 2017, respectively. Its paid in capital amounted to RMB$775,000 for the years ended December 31, 2018 . Weiqiang was established on May 9, 2013. It increased its capital through the Company amounting to RMB$ 20,000 on February 24, 2018 and verified on February 27, 2018. As of December 31, 2018, the paid in capital of Weiqiang amounted to RMB$44,920. Thanh Phong was established on May 22, 2017. Its capital originally invested was VND$90,000,000 and increased VND$368,637,500 on December 20, 2018 and verified on December 20, 2018. As of December 31, 2018 , the paid in capital of Thanh Phong amounted to VND$468,637,500. Weihua was established on December 10, 2012. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. The shares hold by CIC were transferred to Tsou Seen after the combination. As of December 31, 2018, the paid in capital of Weihua amounted to RMB$156,289.

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Name of investors Chemax International Corp. Tsou Seen Chemical Industries Corporation Tsou Seen Chemical Industries Corporation Tsou Seen Chemical Industries Corporation Unichem Development Limited (UDL) Unichem Development Limited(UDL) Unichem Development Limited(UDL) Unichem Development Limited(UDL) Unichem Development Limited(UDL) Unichem Development Limited(UDL)	Name of subsidiaries Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang) Weihua (Rudong) Trade Co., Ltd (Weihua) Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang) Taivex Therapeutics Inc. (Taivex) Jiangsu Weiming Petrochemical Corporation (Weiming) Weihua (Rudong) Trade Co., Ltd (Weihua) Weida (Zhangzhou) Consultant Service Co., Ltd. (Weida) Zhangzhou Weida Petrochemical Co., Ltd (Weida PC) Kunshan Weiqin Management consultant Co., Ltd (Weiqin) Zhejiang Wedge new material Co., Ltd (Wedge)	Nature of business Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted tradingre Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted tradingre Engaged in biotechnology, pharmaceutical research and development and marketing Petrochemical supporting facility construction Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Consultancy Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Management consultant Engaged in trading of Synthetic fiber material	Shareholding ratio 2018.12.31 -% 4.02% 55.48% 91.10% 99.23% 95.98% 100.00% 100.00% 100.00% 100.00%	Notes
				Weiqiang was established on May 9, 2013. It increased its capital through the Company amounting to RMB$ 20,000 on February 24, 2018 and verified on February 27, 2018. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. The shares hold by CIC were transferred to Tsou Seen after the combination. As of December 31, 2018 , the paid in capital of Weiqiang amounted to RMB$44,920 . Weihua was established on December 10, 2012. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. The shares hold by CIC were transferred to Tsou Seen after the combination. As of December 31, 2018 , the paid in capital of Weihua amounted to RMB$156,289. Weiqiang was established on May 9, 2013. It increased its capital through the Company amounting to RMB 20,000 on February 24, 2018 and verified on February 27, 2018. Due to the business combination on August 1, 2018, CIC became a dissolved company and Tsou Seen became a surviving company. The shares hold by CIC were transferred to Tsou Seen after the combination. As of December 31, 2018, the paid in capital of Weiqiang amounted to RMB$44,920 . Taivex was established on February 11, 2010. TSCIC invested in Taivex on August 18, 2010. As of December 31, 2018, Taivex’s share capital amounted to $507,399. Weiming was established on May 16, 2013. It increased its capital through UDL amounting to RMB$130,000, RMB$109,000 and RMB$110,000 on June 25, 2018, June 16 and December 27, 2017, respectively. The said amounts were verified on June 28, 2018, June 30 and December 28, 2017, respectively. Its paid in capital amounted to RMB$775,000 for the years ended December 31, 2018. Weihua was established on December 10, 2012. As of December 31, 2018, the paid in capital of Weihua amounted to RMB$156,289. Weida was established on November 26, 2012. As of December 31, 2018 , the paid in capital of Weida amounted to US$450. Weida PC was established on December 23, 2014. As of December 31, 2018, the paid in capital of Weida PC amounted to RMB$6,000. Weiqin was established on April 29, 2016. As of December 31, 2018 , the paid in capital amounted of Weiqin to RMB$6,000. Wedge PC was established on July 25, 2016. As of December 31, 2018 , the paid in capital of Wedge amounted to RMB$6,500.

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Name of investors Unichem Development Limited(UDL) Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. (CHSTH) Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd	Name of subsidiaries Changzhou Huijie new material Co., Ltd Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd Core Pacific Pioneer (Myanmar) Company Ltd	Nature of business Engaged in engineering plastic and high valued petroleum chemical products Holding company Engineering, construction contracting business Building construction, real estate management, development and sale	Shareholding ratio 2018.12.31 100.00% 100.00% 100.00% 80.00%	Notes
				Huijie was established on January 6, 2015, and acquired by UDL on November 5, 2018. The investment was made through UDL amounted RMB$214,955 and was verified on December 27, 2018. As of December 31, 2018 , the paid in capital of Huijie amounted to RMB$414,955 . Frontier Fortune was established on November 23, 2016. It increased its capital through CHSTH amounting to USD$5,670 on November 30, 2018. As of December 31, 2018 , its actual paid in capital amounted to USD$5,870 . Core Pacific Twin Star (Myanmar) was established on February 16, 2017. It increased its capital through Frontier Fortune amounting to USD$5,320 on November 30, 2018. As of December 31, 2018 , its actual paid in capital amounted to USD$5,500 . Core Pacific Pioneer was established on May 24, 2018. As of December 31, 2018, its actual paid in capital amounted to MMK$757,310.

1. Subsidiaries not included in the consolidated financial statements

Name of investors The Company The Company Tao Zhu Construction & Development Co., Ltd.	Name of subsidiaries Tao Zhu Construction & Development Co., Ltd. Rich Equrties Ltd. Da-ying Construction Ltd.	Nature of business Commissioned to create a vendor to build the housing, commercial buildings and plant rental business, management of land development and playgrounds and other related business investment Holding company Engineering, construction contracting business	Shareholding ratio 2018.12.31 100.00% 100.00% 100.00%	Notes
				Tao Zhu Construction & Development Co., Ltd. was established on October 11, 1995. As of December 31, 2018 , its actual paid-in capital amounted to $100,000 and its total assets represented 0.09% of the consolidated total assets. Rich Equrties Ltd. was established on March 21, 2007. As of December 31, 2018 , its actual paid- in capital amounted to US$180 and its total assets represented 0.01% of consolidated total assets. Da-ying Construction Ltd. was established on November 24, 1972. As of December 31, 2018, its actual paid-in capital amounted to $22,500 and its total assets represented 0.03% of consolidated total assets.

1. According to the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises, KMC had qualified for substantial related parties.

Name of investors Kaohsiung Monomer Company	Nature of business Sales and production of methyl methacrylate	Shareholding ratio 2018.12.31 40%	Notes
			Note 1

NOTE 1: The chairman is assigned by The Company

1. All of the important internal transaction between the Consolidated Group had been eliminated.

2. 415 -

d. Foreign currency

1. Foreign currency transaction

Transactions in foreign currencies are translated to the respective functional currencies of the Consolidated Company entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are remeasured to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are remeasured using the exchange rate at the date of transaction. Foreign currency differences arising on remeasurement are recognized in profit or loss, except for the following differences which are recognized in other comprehensive income:

• Fair value through other comprehensive income (Available-for-sale )equity investment;

• A financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or

• Qualifying cash flow hedges to the extent the hedge is effective.

• Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the Company’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Company’s functional currency at average rate. Foreign currency differences are recognized in other comprehensive income, and are presented as exchange differences arising on translation of foreign operations in equity.

However, if the foreign operation is a non-wholly owned subsidiary, then the relevant proportion of the translation difference is allocated to non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. If the Company disposes of only part of investment in an associate of joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

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When the settlement of a monetary item receivable from or payable to a foreign operation is neither planed nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the exchange differences arising on translation of foreign operations in equity.

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

An asset is classified as current if:

1. It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

2. It is held primarily for the purpose of trading;

3. It is expected to be realized within twelve months after the reporting period; or

4. The asset is cash and cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

A liability is classified as current if:

1. It is expected to be settled during the in its normal operating cycle;

2. It is held primarily for the purpose of trading;

3. It is due to be settled within twelve months after the reporting period; or

4. It does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

5. f. Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to cash at the known amounts and subject to insignificant risk of value changes. Time deposits that fit the definition above and are used by the Group in the management of its short-term commitments are comprised in cash equivalents.

Bank overdrafts that are repayable on demand and form an integral part of the Consolidated Company, are recorded in cash and cash equivalents in statements of cash flows.

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• g. Construction contracts

Construction contracts in progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognized to date less progress billings and recognized losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract activities based on normal operating capacity.

Construction contracts in progress is presented in the balance sheets as the amount due from customers for contract work for all contracts in which costs incurred plus recognized profits exceed progress billings. If progress billings exceed costs incurred plus recognized profits, then the difference is presented as amount due to customers for contract work in the balance sheets.

• h. Financial instruments

• Financial assets (policy applicable from January 1, 2018)

Financial assets are classified into the following categories: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL).

The Group shall reclassify all affected financial assets only when it changes its business model for managing its financial assets.

• (i) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL ：

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

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

A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

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• (ii) Fair value through other comprehensive income (FVOCI )

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL ：

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

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

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

A financial asset measured at FVOCI is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses, and impairment losses, deriving from debt investments are recognized in profit or loss; whereas dividends deriving from equity investments are recognized as income in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses of financial assets measured at FVOCI are recognized in OCI. On derecognition, gains and losses accumulated in OCI of debt investments are reclassified to profit or loss. However, gains and losses accumulated in OCI of equity investments are reclassified to retain earnings instead of profit or loss.

Dividend income derived from equity investments is recognized on the date that the Group’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date.

(iii) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets and accounts receivable, which is presented as accounts receivable. On initial recognition, the Group may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss.

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(iv) Business model assessment

The Group makes an assessment of the objective of the business model in which a financial asset is held at portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes ：

• the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;

• how the performance of the portfolio is evaluated and reported to the Group’s management;

• the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

• how managers of the business are compensated ─ e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

• the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

• Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, and are consistent with the Group’s continuing recognition of the assets.

• Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

• (v) Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial assets on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin.

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In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers ：

• contingent events that would change the amount or timing of cash flows ；

• terms that may adjust the contractual coupon rate, including variable rate features ；

• prepayment and extension features ； and

• terms that limit the Group’s claim to cash flows from specified assets （ e.g. nonrecourse features ）

(vi) Impairment of financial assets

The Group recognizes loss allowances for expected credit losses on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and accounts receivable, other receivable, leases receivable, guarantee deposit paid and other financial assets), debt investments measured at FVOCI, accounts receivable measured at FVOCI and contract assets.

The Group measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL ：

• debt securities that are determined to have low credit risk at the reporting date ； and

• other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

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When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Group’s historical experience and informed credit assessment as well as forward-looking information.

The Group considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings’.

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Group considers a financial asset to be in default when the financial asset is more than 90 days past due or the borrower is unlikely to pay its credit obligations to the Group in full.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data ：

• significant financial difficulty of the borrower or issuer ；

• a breach of contract such as a default or being more than 90 days past due ；

• the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider ；

• it is probable that the borrower will enter bankruptcy or other financial reorganization ； or

• the disappearance of an active market for a security because of financial difficulties.

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Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Group recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss.

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

(vii) Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the assets expire, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a debt instrument in its entirety, the Group recognizes the difference between its carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in “other equity – unrealized gains or losses on fair value through other comprehensive income”, in profit or loss, and presented it in the line item of non-operating income and expenses in the statement of comprehensive income.

On derecognition of a financial asset other than in its entirety, the Group allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss, and presented in the line item of non-operating income and expenses. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

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• Financial assets (policy applicable before January 1, 2018)

Financial assets are classified into the following categories: financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity financial assets, and loans and receivables.

• (i) Financial assets at fair value through profit or loss

A financial asset is classified in this category if it is classified as held for trading or is designated as such on initial recognition.

Financial assets are classified as held for trading if they are acquired principally for the purpose of selling in the short term. The Group designates financial assets, other than those classified as held for trading, as at fair value through profit or loss at initial recognition under one of the following situations ：

• Designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise;

• Performance of the financial asset is evaluated on a fair value basis;

• A hybrid instrument contains one or more embedded derivatives.

At initial recognition, financial assets classified under this category are measured at fair value. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend and interest income, are recognized in profit or loss, under other income of nonoperating income and expense. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at amortized cost, and are included in financial assets measured at cost.

(ii) Available-for sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated available-for-sale or are not classified in any of the other categories of financial assets. Available-for-sale financial assets are recognized initially at fair value, plus, any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, interest income calculated using the effective interest method, dividend income, and foreign currency differences on monetary financial assets, are recognized in other comprehensive income and presented in the unrealized gains or losses on available for sale financial assets in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, under other gains and losses of non-operating income and expense. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

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Investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are measured at amortized cost, and are included in financial assets measured at cost.

Dividend income is recognized in profit or loss on the date that the Consolidated Company’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. Such dividend income is included in other income account in statements of comprehensive income.

Interest income from investment in bond security is recognized in profit or loss, under other income of non-operating income and expenses.

• (iii) Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise trade receivables and other receivables. At initial recognition, these assets are recognized at fair value, plus, any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses, other than insignificant interest on short-term receivables. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade date accounting.

Interest income is recognized in profit or loss, under other income.

(iv) Impairment of financial assets

The impairment loss of financial assets not measured at fair value is assessed on the report date. A financial asset is impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a loss event) that occurred subsequent to the initial recognition of the asset and that a loss event (or events) has an impact on the future cash flows of the financial assets that can be estimated reliably.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Consolidated Company on terms that the Consolidated Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is accounted for as objective evidence of impairment.

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All individually significant receivables are assessed for specific impairment. Receivables that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Consolidated Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or lesser than the one suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of its estimated future cash flows discounted at the asset’s original effective interest rate. Such impairment loss is not reversible in subsequent periods.

An impairment loss in respect of a financial asset is reduced from the carrying amount, except for trade receivables, in which an impairment loss is reflected in an allowance account against the receivables. When it is determined a receivable is uncollectible, it is written off from the allowance account. Any subsequent recovery of receivable written off is recorded in the allowance account. Changes in the amount of the allowance accounts are recognized into profit or loss.

Impairment losses on available-for-sale financial assets are recognized by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss.

If, in a subsequent period, the amount of the impairment loss of a financial assets measured at amortized cost decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the decrease in impairment loss is reversed through profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost before impairment was recognized at the reversal date.

Impairment losses recognized on available-for-sale equity security are not reversed through profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income, and accumulated in other equity. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognized, then the impairment loss is reversed, with the amount of the reversal recognized in profit or loss.

Bad debt losses and recoveries of receivables are recognized in profit or loss as administrative expense. Impairment losses and recoveries of financial assets other than receivables are recognized in profit or loss under non-operating revenues and expenses.

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(v) Derecognition of financial assets

The Consolidated Company derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Consolidated Company transfers substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in other equity – unrealized gains or losses from available for sale financial assets is recognized in profit or loss, under other income of non-operating income and expenses.

On partial derecognition of a financial assets, the difference between the carrying amount and the sum of the consideration received or receivable and any cumulative gain or loss that had been recognized in other comprehensive income and presented in other equity account as unrealized gains or losses from available for sale financial assets is reclassified to profit or loss, under other gains and losses of non-operating income and expenses.

1. Financial liabilities and equity instruments

• (i) Classification of debt or equity instruments

Debt or equity instruments issued by the Consolidated Company are classified as financial liabilities or equity instruments in accordance with the substance of the contractual agreement.

Equity instruments refer to surplus equities of the assets after the deduction of all the debts for any contracts. Equity instruments issued are recognized based on amount of consideration received less the direct issuance cost.

Compound financial instruments issued by the Consolidated Company comprise convertible bonds payable that can be converted to share capital at the option of the holder, where the number of shares to be issued is fixed.

The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

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Interest related to the financial liability is recognized in profit or loss, under other gains and losses of non-operating income and expenses.

On conversion, the financial liability is reclassified to equity, and no gain or loss is recognized.

• (ii) Financial liabilities at fair value through profit or loss

A financial liability is classified in this category if it is classified as held-for-trading or is designated as such on initial recognition. A financial liability is classified as held-for-trading if it is acquired principally for the purpose of selling in the short term. Financial liabilities, other than the ones classified as held-for-trading, are designated as at fair value through profit or loss at initial recognition under one of the following situations:

• A. Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on a different basis;

• B. Performance of the financial liabilities is evaluated on a fair value basis;

• C. A hybrid instrument contains one or more embedded derivatives.

Attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value, and changes therein, which take into account any interest expense, are recognized in profit or loss, under other gains and losses of non-operating income and expenses.

Financial liabilities at fair value through profit or loss are measured at cost if it is a short sale of unquoted equity investment whose fair value cannot be reliably measured and that the short seller is obligated to deliver the equity instrument.

The Consolidated Company issues and designates financial guarantee contracts and loan commitments as at fair value through profit or loss. Any gains and losses are recognized in profit or loss, under other gains and losses of non-operating income and expenses.

(iii) Other financial liabilities

At initial recognition, financial liabilities not classified as held-for-trading, or designated as at fair value through profit or loss, which comprise of loans and borrowings, and trade and other payables, are measured at fair value, plus, any directly attributable transaction cost. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, under other gains and losses of non-operating income and expenses.

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• (iv) Derecognition of financial liabilities

A financial liability is derecognized when its contractual obligation has been discharged or cancelled or expires. 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, under other gains and losses of non-operating income and expenses.

• (v) Offsetting of financial assets and liabilities

Financial assets and liabilities are presented on a net basis when the Consolidated Company has the legally enforceable rights to offset, and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

2. Derivative financial instruments

The Group holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are recognized initially at fair value, and attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss and included in statement of comprehensive income. When a derivative is designated as a hedging instrument, its timing of recognition in profit or loss is determined based on the nature of the hedging relationship. When the fair value of a derivative instrument is positive, it is classified as a financial asset, and when the fair value is negative, it is classified as a financial liability.

Embedded derivatives are separated from the host contract and accounted for separately when the economic characteristics and risk of the host contract and of the embedded derivatives are not closely related.

i. Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted average method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

j. Investments in associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over their financial and operating policies.

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Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill which is arising from the acquisition less any accumulated impairment losses.

The Consolidated Company’s share of the profit or loss and other comprehensive income of investments accounted for using equity method are included, after adjustments to align the said investees’ accounting policies with those of the Consolidated Company, in the consolidated financial statements from the date that significant influence commences until the date that significant influence ceases.

Unrealized profits resulting from the transactions between the Consolidated Company and an associate are eliminated to the extent of the Consolidated Company’s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.

If the Consolidated Company’s share of losses exceeds its interest in associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Consolidated Company has an obligation or has made payments on behalf of the investee.

k. Investment property

Investment property is the property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently via cost less accumulated depreciation and accumulated impairment losses. Depreciation expense is calculated based on the depreciation method, useful life and residual value which are the same as those adopted for property, plant and equipment.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of raw materials and direct labor, and any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalized borrowing costs. Investment property is subsequently measured at fair value, with any change therein recognized in profit or loss.

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

• l. Property, plant and equipment

• Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset.

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The cost of a self-constructed asset comprises material, labor, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost that eligible for capitalization. Cost also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. The cost of the software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately, unless the useful life and the depreciation method of the significant part of an item of property, plant and equipment are the same as the useful life and depreciation method of another significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment is determined on the difference between the net disposal proceeds, if any, and the carrying amount of the item, and is recognized in profit or loss account as other gains and losses.

2. Reclassification to investment property

An item of property, plant and equipment is reclassified to investment property at its carrying amount when the use of the property changes from owner-occupied to investment property. Any difference at the date of the change in use between the carrying amount of the property and its fair value is recognized as a revaluation of property, plant and equipment. Any existing or arising revaluation surplus previously recognized in OCI is not transferred to profit or loss at the date of transfer or on subsequent disposal of the investment property.

3. Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Consolidated Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance is expensed as incurred.

4. Depreciation

The depreciable amount of an asset is determined after deducting its residual amount and is allocated using the straight line method over its useful life. The items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately. The depreciation charge for each period is recognized in profit or loss.

If there is reasonably certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.

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Land has an unlimited useful life and therefore is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

Land improvement 2~10 years Buildings and constructions 2~60 years Machine equipment 2~17 years Transportation equipment 2~ 5 years Other equipment 2~13 years

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change(s) is accounted for as a change in an accounting estimate.

• m. Intangible assets

1. Goodwill

• (1) Initial recognition

The goodwill generated from the Consolidated Company is accounted for as an intangible asset. Please refer to Note 6 i. for details of the accounting policy on the initial recognition of goodwill.

• (2) Subsequent measurement

Goodwill is measured at cost less accumulated impairment. In terms of investment under equity method, the carrying amount of goodwill is included in the investment amount. In addition, the impairment loss of such investment is not distributed to goodwill or any asset and is recognized as part of the carrying amount of the investment.

1. Research & Development

During the research phase, activities are carried out to obtain and understand new scientific or technical knowledge. Expenditures during this phase are recognized in profit or loss as incurred.

Expenditures arising from development phase are recognized as an intangible asset if all the conditions described below can be demonstrated; otherwise, they are recognized in profit or loss as incurred.

• (1) The technical feasibility of the intangible asset is completed so that it will be available for use or sale;

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• (2) It intends to complete the intangible asset and use or sell it;

• (3) It has ability to use or sell the intangible asset;

• (4) The intangible asset is more likely than not generate future economic benefits;

• (5) It has adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

• (6) The expenditure attributable to the intangible asset during its development can be measured reliably.

• Other intangible asset

Other intangible assets that are acquired by the Consolidated Company are measured at cost less accumulated amortization and any accumulated impairment losses.

1. Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

1. Amortization

Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual values.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and intangible assets with indefinite useful life, from the date that they are made available for use. The estimated useful lives for the current and comparative periods are as follows:

Technology

5~13 years

The residual value, the amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least annually at each financial year-end. Such change is accounted for as a change in accounting estimate.

n. Impairment ─ non-derivative financial assets

The Consolidated Company evaluates the impairment losses and estimates the recoverable amounts of the impaired assets on each reporting date in terms of inventories, deferred tax assets, assets arising from employee benefits and non-financial assets other than non-current assets held for sale. If it is not possible to determine the recoverable amount (fair value less cost to sell and value in use) for the individual asset, then the Consolidated Company determines the recoverable amount for the asset's cash-generating unit (CGU).

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The recoverable amount for individual asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss is recognized immediately in profit or loss.

The Consolidated Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the Consolidated Company estimates the recoverable amount of that asset.

Notwithstanding whether indicators exist, recoverability of goodwill and intangible assets with indefinite useful lives or those not yet in use are tested at least annually. Impairment loss is recognized if the recoverable amount is less than the carrying amount.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the acquirer’s cash-generating units, or groups of cashgenerating units, that is expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units or group of units.

If the carrying amount of the cash-generating units exceeds the recoverable amount of the unit, the Consolidated Company recognizes the impairment loss and the impairment loss is allocated to reduce the carrying amount of each asset in the unit.

Reversal of an impairment loss for goodwill is prohibited.

• o. Provisions

A provision is recognized if, as a result of a past event, the Consolidated Company has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

1. Site dismantling

The estimated obligation on the dismantling, relocation or restoration of property, plant and equipment is recognized as decommissioning cost and liability of property, plant and equipment. The relevant costs of assets are adjusted by subsequent price variation for dismantling and restoration. Depreciation is provided per the remaining useful life of the adjusted cost.

2. Site restoration

In accordance with the Consolidated Company’s published environmental policy and applicable legal requirements, a provision for site restoration in respect of contaminated land, and the related expense, is recognized when the land is contaminated.

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p. Revenue

1. Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement. For an export transaction, usually it is via free on board shipping point, and the risk transfer occurs upon loading the goods onto the relevant carrier at the port; however, for an import transaction, risk transfer occurs upon receipt by the customer.

1. Services

Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction at the reporting date.

3. Construction contracts

Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can be estimated reliably, contract revenue is recognized in profit or loss in proportion to the stage of completion of the contract. Contract expenses are recognized as incurred unless they create an asset related to future contract activity.

The stage of completion is assessed by reference to the proportion that contract cost incurred for work performed to date bear to the estimated total contract cost; survey of work performed; or completion of a physical proportion of the contract work. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognized immediately in profit or loss.

1. Commissions

When the Consolidated Company acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognized is the net amount of commission made by the Consolidated Company, and is recognized in proportion to the stage of completion of the transaction.

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5. Rental income

Rental income from investment property is recognized in non-operating incomes and expenses on a straight-line basis over the lease term.

6. Financing components

The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the group does not adjust any of the transaction prices for the time value of money.

q. Employee benefits

1. Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

2. Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Consolidated Company’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on (market yields of high quality corporate bonds or government bonds) bonds that have maturity dates approximating the terms of the Consolidated Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Consolidated Company, the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Consolidated Company. An economic benefit is available to the Consolidated Company if it is realizable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognized immediately in profit or loss.

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Re-measurement of net defined benefit liability (asset) (including actuarial gains, losses and the return on plan asset and changes in the effect of the asset ceiling, excluding any amounts included in net interest) is recognized in other comprehensive income (loss). The effect of re-measurement of the defined benefit plan is charged to retained earnings.

The Consolidated Company recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value of defined benefit obligation and any related actuarial gains or losses and past service cost that had not previously been recognized.

1. Short term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

• r. Income taxes

Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business combinations, or are recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes include tax payables and tax deduction receivables on taxable gains (losses) for the year calculated using the statutory tax rate on the reporting date, or the actual legislated tax rate; as well as tax adjustments related to prior years.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are not recognized for the following:

1. Assets and liabilities that are initially recognized but not related to the business combination, and have no effect on net income or taxable gains (losses) during the transaction.

2. Temporary differences arising from equity investments on subsidiaries or joint ventures, where there is a high probability that such temporary differences will not reverse.

3. Initial recognition of goodwill.

Deferred taxes are measured based on the statutory tax rate on the reporting date; or the actual legislated tax rate, during the year of expected asset realization or debt liquidation.

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Deferred tax assets and liabilities may be offset against each other if, and only if, the following criteria are met:

1. if the Consolidated Company has the legal right to settle tax assets and liabilities on a net basis; and

2. the taxing of deferred tax assets and liabilities fulfill one of the below scenarios:

3. (1) levied by the same taxing authority; or

4. (2) levied by different taxing authorities, but where each such authority intend to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation; or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset is recognized for the carry-forward of unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits and deductible temporary differences are also re-evaluated every year on the financial reporting date, and adjusted based on the probability that future taxable profit will be available against which the unused tax losses, unused tax credits and deductible temporary differences can be utilized.

• s. Business combination

Goodwill is measured at the consideration transferred less the amounts of the identifiable assets acquired and liabilities assumed (generally at fair value) at the acquisition date. If the amount of net assets acquired and liabilities assumed exceeds the acquisition price, the Group reassesses whether it has correctly identified all of the assets acquired and liabilities assumed, and recognizes a gain for the excess.

The Group shall measure any non-controlling interests in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets, if the non-controlling interests are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation.

In a business combination achieved in batches, the previously held equity interest in the acquiree at its acquisition date fair value is remeasured, and the resulting gain or loss, if any, is recognized in profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, provisional amounts for the items for which the accounting is incomplete are reported in the Group’s financial statements. During the measurement period, the provisional amounts recognized at the acquisition date are retrospectively adjusted, or additional assets or liabilities are recognized to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period shall not exceed one year from the acquisition date.

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All transaction costs relating to a business combination are recognized immediately as expenses when incurred, except for the issuance of debt or equity instruments.

t. Earnings per share

The Consolidated Company discloses the Company basic and diluted earnings per share attributable to ordinary equity holders of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary shareholder of the Company divided by weighted average number of ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders of the Company, divided by weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as convertible bonds and employee bonus.

u. Government Grants

A government grant receivable to the Consolidated Company as compensation for costs already incurred or for immediate financial support, with no future related costs, should be recognized as income in the period in which it is receivable.

v. Operating segments

An operating segment is a component of the Consolidated Company that engages in business activities from which it may incur revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Consolidated Company). Operating results of the operating segment are regularly reviewed by the Consolidated Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. Each operating segment consists of stand-alone financial information.

5. MAJOR SOURCES OF SIGNIFICANT ACCOUNTING ASSUMPTIONS, JUDGMENTS AND ESTIMATION UNCERTAINTY

The preparation of the consolidated financial statements in conformity with the IFRS as endorsed by the FSC requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The management continuously reviews the estimates and basic assumptions. Changes in accounting estimates are recognized in the period of change.

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is as follows:

• (a) Fair valuation of investment property

The Group’s accounting policies include measuring financial and non-financial assets and liabilities at fair value through profit or loss.

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The Company’s financial instrument valuation group conducts independent verification on fair value by using data sources that are independent, reliable, and representative of exercise prices. This financial instrument valuation group also periodically adjusts valuation models, conducts back-testing, renews input data for valuation models, and makes all other necessary fair value adjustments to assure the rationality of fair value. The Company strives to use market observable inputs when measuring assets and liabilities. Different levels of the fair value hierarchy to be used in determining the fair value of financial instruments are as follows:

• (i) Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.

• (ii) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).

• (iii) Level 3: inputs for the assets or liability that are not based on observable market data.

Information on valuation use hypothesis factors was as follows:

• (i) Note 6 h. - Investment property;

• (ii) Note 6 w. - Financial Instruments.

6. EXPLANATION TO SIGNIFICANT ACCOUNTS

• a. Cash and cash equivalents

Cash on hand Checking and demand deposits Time deposits Cash equivalents Cash and cash equivalents	December 31, 2018 $ 140,459 3,003,463 11,006,015 2,437,587 $ 16,587,624

Time deposits which are held for the purpose of meeting short-term cash commitments, rather than for investment or other purposes, that are readily convertible to cash at the known amounts and subject to insignificant risk of value changes, are reported as cash equivalents.

Please refer to Note 6 v. for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Consolidated Company.

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b. Financial assets

1. The components of financial assets were as follows:

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss－current Financial assets at fair value through profit or loss－non-current Sub-total Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income－current Financial assets at fair value through other comprehensive income－non- current Sub-total Total

December 31, 2018 $ 1,300,897 4,861,274 6,162,171 251,629 1,978,339 2,229,968 $ 8,392,139

Please refer to Note 6 v and Note q. for the gain or loss on financial assets recognized at fair value through profit or loss and other comprehensive income.

Core Pacific City Co., Ltd held a provisional shareholders’ meeting on January 17, 2018 in order to cover its deficit of $7,698,679, which represented 37.7% of its actual paid-in capital. The reduction record date was January 17, 2018. Based on its articles of incorporation, there is no significant impact on the issuance of its shareholders’ preferred stock concerning the matter.

During the year ended December 31, 2018, the dividends of $625,787 thousand, related to equity investments at fair value through other comprehensive income held on December 31, 2018, were recognized.

On February 26, 2018, the Company’s board of directors approved a resolution to invest in Core Pacific City Co., Ltd by issuing 156,000 thousand preferred shares amounting to NT$1,560,000 thousand and accounted in financial assets at fair value through profit or loss － non-current.

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• The director of Praxair Chemax Semiconductor Materials Co., Ltd. (hereinafter referred to as “PRAXAIR”) delegated by the Company, was elected as the new Chairman in the directors’ meeting on Jan. 30th, 2013. However, Praxair Inc. did not recognize the director delegated by the Company as the Chairman, resulting in the new Chairman being unable to exercise his authority. Also, the supervisor appointed by the Company was prevented from auditing the accounts and records pursuant to the Company Law, hence, the new Chairman and the designated supervisor representing PRAXAIR, filed an action asking the vice chairman and general manager to provide the accounts and records and requested to return the seal, business invasion and others in a civil lawsuit. The vice chairman delegated by Praxair Inc. claimed privilege to act as the Chairman and filed legal actions declaring the non-existence of the new Chairman’s commission of authority and also sent a letter to the court requesting a dissolution of PRAXAIR, which was rejected by the courts. The supervisor appointed by Praxair Inc. illegally called a temporary shareholders’ meeting in 2013 to propose the dissolution of the Company and reelection of directors and supervisors. Hence, the Company filed legal actions declaring the withdrawn of the resolution from the illegal temporary shareholders’ meetings and the resolutions from the temporary shareholders’ meeting was not established. Currently, the supervisor filed the legal action against the manager for submitting the accounts and the records, after winning the 1st and 2nd trial, the defendant appealed but was dismissed by the 3rd trial instance. This case was remanded to the Taipei High Court but the verdict was dismissed in 2015, the Company was not satisfied with the appeal and filed the legal action. On the other side, the vice chairman designated by Praxair Inc. filed legal action declaring the non-existence of the new Chairman’s commission of authority, after the judgment from the High Court that the Chairman designated by the Company won the verdict, the defendant appealed to the 3rd instance, with the Supreme Court dismissing the appeal. The whole case confirms the appointed relationship between the Chairman designated by the Company and PRAXAIR exists. On Nov. 19th 2016, the letter from Ministry of Economic Affairs states that Lin KeMing, appointed by the Company, is the Chairman of PRAXAIR, and restored the representative duty per the judgment No. 2455 from the Supreme High Court in 2015. However, according to the requirement from Ministry of Economic Affairs, both sides were not able to hold the legitimate reelection prior to Jan. 9th 2017 which resulted in vacancy of directors and supervisors of PRAXAIR. In order to strive for the rights and interests of the shareholders, the Company immediately brought the arbitration per joint venture agreement of both sides and applied for an auditor and provisional administrator to instruct the central section office of the Ministry of Economic Affairs to allow Praxair Inc. to conduct the change of registration on July 6th 2017. The Company has filed a request for the arbitration of International Chamber of Commerce in 2017 and received the award issued by the International Court of International Chamber of Commerce on September 3, 2018. A part of the award favored for the Company and confirmed that the Company was entitled to receive the dividends from PCSM for the year of 2013. In order to protect the Company’s right, the Company submitted a lawsuit regarding to withdrawing a part of such Arbitration award against the Company to Taipei District Court.

As of December 31, 2018, and 2017, the Consolidated Company provided as collateral portion of its financial assets. Please refer to Note 8 for details of the related assets pledged as collateral.

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－ 3. Sensitivity analysis equity price risk:

If the equity price changes, and if it is based on the same basis for both years and assumes that all other variables remain the same, the impact to comprehensive income will be as follows:

follows:
Equity price at reporting date Increase of 1% Decrease of 1%	For the Years Ended December 31, 2018
	After-tax other comprehensive income $ 22,300 $ (22,300)	After-tax Profit (loss)
		61,622
		(61,622)

• c. Notes and accounts receivable, net

Notes receivable Accounts receivable Other receivables Less：Allowance for doubtful receivables Net book value	December 31, 2018 $ 692,778 2,780,070 114,178 (461,031) $ 3,125,995

Movements of the allowance for doubtful receivables for the years ended December 31, 2018 were as follows:

Balance on January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance on January 1, 2018 per IFRS 9 Impairment losses reversed Foreign exchange gains/(losses) Balance on December 31, 2018	December 31, 2018 $ 488,001 - 488,001 (6,588) (20,382) $ 461,031

The consolidated subsidiaries, Weihua (Rudong) Trade Co., Ltd. and Weiqiang International Trade (Shanghai) Co., Ltd., filed civil complaints against Shanghai Tongye Coal Chemical Group Co. Ltd. in Shanghai to claim for the delay of payment of their accounts receivable from Shanghai Tongye Coal Chemical Group Co., Ltd. However, both of these consolidated subsidiaries have recognized impairment loss on the said accounts receivable as of December 31, 2018. Please refer to Note 9 f. for further details relating to litigation and evaluation of collectability.

There are no notes and trade receivable and other receivables of the Group had been pledged as collateral for long-term borrowings as of December 31, 2018.

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d. Inventories

Finished goods Work-in-process Raw materials Fuel Merchandise inventory Construction in progress Total	December 31, 2018 $ 699,993 313,838 1,335,480 24,721 104,709 10,840 $ 2,489,581

For the years ended December 31, 2018, the components of cost of goods sold were as follows:

Cost of goods sold Loss (gain) on inventory market price decline and obsolescence Gain on physical inventories, net Unallocated fixed production overheads from idle facilities Revenue from sale of scraps Net amount	For the Years Ended December 31, 2018
	$ 35,821,429 140,104 22,881 295,345 (29,944)
	$ 36,249,815

As of December 31, 2018 , the aforesaid inventories were not pledged as collateral.

• e. Investments accounted for using equity method

• The Group’s investments accounted for using the equity method at the reporting date were classified as follows:

Subsidiaries Associates Total	December 31, 2018 $ 81,666 945,467 $ 1,027,133

1. Share of profit (loss) of subsidiaries and associates for the years ended December 31, 2018 was as follows:

Share of profit (loss) of subsidiaries and associates

	For the Years Ended December 31, 2018
	$ (105,099)

1. The key financial information of subsidiaries and associates in which the Consolidated Company has equity investments was as follows (before adjustment for the Consolidated Company’s proportionate share):

Total assets Total liabilities	December 31, 2018 $ 2,266,578 (54,801) $ 2,211,777

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Revenue Net income	For the Years Ended December 31, 2018
	$ **321,761 **
	$ (226,387)

The Consolidated Company does not guarantee any contingent liabilities of an associate jointly with other investors. Likewise, the Consolidated Company does not guarantee alone any other contingent liabilities of an associate.

1. Collateral

As of December 31, 2018, the Consolidated Company provided as collateral portion of its investments in aforesaid equity-accounted investees. Please refer to Note 7 for details of the related assets pledged as collateral.

• f. Business Combination

• The Company acquired Changzhou Huijie new material Co., Ltd on November 5, 2018 for 100% fully control of the entity. The entity engages in manufacturing engineering plastics.

The transfer price is $356,869 thousand in cash, the fair value of assets acquired and liabilities assumed on the acquisition date were as below:

Cash and cash equivalents Notes and accounts receivables Other receivables Inventories Other current assets Property, plant and equipment Intangible assets Short-term loans Accounts payable Other payables Other current liabilities, Long-term bank loans Fair value of identifiable assets Goodwill derived from acquisition: Transfer price Fair value of identifiable assets Goodwill	$ 47,222 4,032 6,090 4,994 100,137 1,200,245 156,655 (265,345) (219) (860,584) (142) (179,895)
	$ 213,190
	$ 356,869 (213,190)
	$ 143,679

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• The Company acquired Thanh Phong construction and investment Ltd. 90% of its shares and obtained controlling power of the entity. The entity engages in real estate and construction.

The transfer price is $119,573 thousand in cash, the fair value of assets acquired and liabilities assumed on the acquisition date were as below:

Cash and cash equivalents Fair value of identifiable assets Goodwill derived from acquisition: Transfer price Non-controlling equity (fair value of identifiable assets measured at the percentage of non-controlling equity) Fair value of identifiable assets Goodwill	$ 132,857
	$ 132,857
	$ 119,573 13,284 (132,857)
	$ -

• g. Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Consolidated Company for the years ended December 31, 2018 and 2017 were as follows:

Cost or deemed cost: Balance as of January 1, 2018 Acquisition from business combination Additions Disposal Reclassification Effect of movements in exchange rate Balance as of December 31,2018 Depreciation and impairment loss: Balance as of January 1, 2018 Acquisition from business combination Depreciation for the period Disposals Reclassification Effect of movements in exchange rate Balance as of December 31, 2018 Carrying amounts: Balance as of December 31, 2018	Land $ 5,730,777 - - - - - $ 5,730,777 $ - - - - - - $ - $ 5,730,777	Land improvements 271,654 - - (3,465) 19,599 - 287,788 214,968 - 4,981 (3,463) - - 216,486 71,302	**Buildings **	Machinery and equipment 46,226,002 706,580 1,896 (552,635) 1,106,548 (22,137) 47,466,254 37,154,138 166,795 1,329,776 (532,220) (510) (6,988) 38,110,991 9,355,263	Vehicles 72,018 - 1,285 (5,389) 4,755 (290) 72,379 58,440 - 5,148 (4,725) 386 (200) 59,049 13,330	Other facilities 669,638 33,427 45,189 (3,470) 11,451 (1,336) 754,899 445,658 9,998 76,405 (2,955) 124 (528) 528,702 226,197	Construction inprogress 3,366.709 - 2,946,515 (13,593) (1,506,646) (59,650) 4,733,335 - - - - - - - 4,733,335	Accumulated impairment - - - - - - - 2,154,331 - - (16,365) - - 2,137,966 (2,137,966)	Total
			2,670,060 812,580 2,574 (25,640) 364,293 (21,335)						59,006,858 1,552,587 2,997,459 (601,192) - (104,748)
			3,802,532						62,847,964
			1,135,544 73,979 123,084 (22,745) - (3,061)						41,163,079 250,772 1,539,394 (582,473) - (10,777)
			1,306,801						42,359,995
			2,495,731						20,487,969

As of December 31, 2018 , the Consolidated Company provided as collateral portion of its property, plant and equipment, please refer to Note 8 for details of the related assets pledged as collateral.

• 446 -

On November 26, 2013, the plan to invest in China was approved during the meeting of the board of directors of the Company. On March 25, 2014 and November 1, 2018, the Investment Commission, MOEA approved the investment of the Company in JIANGSU WEIMING Petrochemical Corporation in Chin ~~a o~~ f RMB$2,388,000 thousand (equivalent to $11,200,000 thousand) mainly to establish a manufacturing operations for petrochemical products (including hydrorefining crude benzol, cyclohexanone, nylon 6, etc.). As of December 31, 2018 , accumulated investment remittance from Taiwan to Mainland China was RMB$775,000 thousand thousand. The amount invested in manufacturing plant and machinery was RMB$670,251 thousand and thousand .

h. Investment property

Investment property
Cost or deemed cost: Balance as of January 1, 2018 Net gains and losses due to fair value adjustments Balance as of December 31, 2018 Carrying amounts: Balance as of December 31, 2018	Land $ 38,211,181 120,452 $ 38,331,633 $ 38,331,633	Buildings 15,351 3,375 18,726 18,726	**Total **
			38,226,532 123,827
			38,350,359
			38,350,359

1. Evaluation by income approach

The fair value of some investment properties of the Consolidated Company was determined using the income approach. Under this income approach, the key terms of the rental contracts for these investment properties and certain other factors considered were as follows:

December 31, 2018

Subject Important contract terms The range of rental in the area where the investment property is located The rental range of similar investment property The current status of the investment property Past earnings Income capitalization rate Discount rate Outsourcing or self-valuation Evaluation office Appraiser name Evaluation date Outsourcing fair value	Qianjin Dist.,KaohsiungCity
	None. $550 ~ $700( NT dollars) $549 ~ $596( NT dollars) Unused $0 ~ $0 5.415% 4.380% Outsourcing Colliers International Taiwan Feng-ru, Ke December 31 , 2018 $10,640

• 447 -

In accordance with Article34 of the Regulations on Real Estate Appraisal, the income approach procedures include estimating the effective gross income and total expenses, computing the net operating income, determining the capitalization rate or discount rate, and computing the income. The attributes used by the Group for the estimations above were the last three years’ data from the subject property and comparable properties which have similar characteristics, and these data were assessed and adjusted based on their persistency, stability, and growth to ensure the availability and reasonableness of these data. The movement of income (cash inflows) and expenditure (cash outflows) for future periods was based on the vacancies or losses, existing or future cash flow plans of the Group, and historical cash flows from the subject property, identical properties, or properties in the same industry. The estimation and computation of the net income were based on the highest and best use of the subject property and have taken into consideration the income generated from comparable properties in the same location based on their highest and best use.

External appraisers use the risk premium method to decide on the direct capitalization rate and discount rate. The fixed deposit interest rate, government bonds rate, real estate investment risk, money supply-demand variation, the trend of real estate value and etc. are taken into consideration to decide the likely rate of return on the most common investment as a basis in order to derive the capitalization rate or discount rate. The differences in individual characteristics between the above most common investment and the subject property are compared in terms of their liquidity, risk, appreciation, and management. As of December 31, 2018, the discount rate was 4.380%, respectively, based on 2-year time deposit of a small amount, as posted by the Chunghwa Post Co., Ltd., plus 0.75 percentage points (1.845%), adjusted for a risk premium of 1.2%, to reflect the status of operating income, liquidity, risk, appreciation, management and etc. As of December 31, 2018, the weighted average capitalization rate was 5.415%, derived as the ratio of annual net operating income of comparable properties divided by reasonable price.

1. Evaluation through land development analysis

As the Consolidated Company’s investment property is undeveloped, the income approach cannot be used for purposes of the evaluation. Consequently, the investment property was evaluated using the land development analysis, under which, the following factors were considered:

December 31, 2018

	Subject Estimate total sales price Rate of return Capital interest rate Evaluation office Appraiser name Evaluation date Outsourcing fair value	Annan Dist., TainanCity $7,968,120 23% 1.790% CCIS Real Estate Joint Appraisers Firm Huo-ming, Huang December31, 2018 $5,020,755	Qianzhen Dist., Kaohsiung City Others 9,612,970 2,717,238 18% 12% ~ 25% 3.810% ~3.930% 0.71% ~4.38% CCIS Real Estate Joint Appraisers Firm, Colliers International Taiwan Hon Bun Real Estate Appraisers Firm and Colliers International Taiwan, Shiou-ying, Jan , Jian-hui,Gu Yu-xian, Houng , Jian-hui,Gu , hShiou-ying, Jan and Feng-ru, Ke December 31, 2018 December 31, 2018 31,970,281 1,348,683	Others

• 448 -

The land development analysis included procedures such as identifying the content of land development and estimating the required period of development ; investigating individual cost and related expenses, collecting current market prices, etc.; on-site survey and investigating and analyzing the degree of development in the local environment; estimating the marketable area of land or building after construction or building; estimating the total sales price of properties after completion of construction or building; estimating individual cost and related expenses; deciding an appropriate rate of return and an overall capital interest rate; calculating land development analysis value.

Investment property included several rentals of real property to others. Each lease contract all include the original non-cancellable lease and the subsequent lease is negotiated with the lessee without collection of contingent rental. Please refer to Note 5 n. for the relevant information including rent revenue and the direct operating expenses incurred.

As of December 31, 2018, the Consolidated Company provided as collateral portion of its investment property. Please refer to Note 8 for details of the related assets pledged as collateral.

In the era of pre-Taiwan Alkali Industrial Corporation (TAIC), TAIC had leased the lands located in Tainan and Chiayi area to the local peasants and fishermen, and the surviving tenants shall continue paying the rent to the Company according to the agreements. In the circumstance of the resumption for self- business use or the sale of the lands, the leases shall be terminated under the contractual agreements and Land Laws. If there is any redemption in some cases, the Company will recognize and evaluate the possible expenses and costs case by case.

The Company has terminated the some agreements with partial peasants and fishermen at the first quarter of 2014 by paying the redemption in the amount of $50,425 thousand.

An Shun Land Located in Tainan City Annan District:

1. History

• (1) The land where the An-Shun Alkali plants located was originally established by Japanese company Kanegafuchi Soda “in 1938 under Japanese Colonial Rule.

• (2) The Government undertake the construction after the Retrocession of Taiwan, and established a state-owned company, Taiwan Alkali Industrial Corporation (TAIC) and operated at the An-Shun Site. In 1961, the competent authorities in charge of the relevant state-owned enterprises approved the investment plan and budget for producing Pentachlorophenol and sodium pentachlorophenol products used on herbicides and wood preservative fungicides.

• (3) Due to operational factors, the plant was ordered to be closed by Executive Yuan Department of Economic Affairs in early 1982.

• 449 -

• (4) In April 1983, Executive Yuan Department of Economic Affairs ordered China Petrochemical Development Corp., the state-owned Company, the subsidiary of CPC at the time, to merge with TAIC. The Company took charge of An-shun land of TAIC.

• (5) Since the said merger, the Company takeover the An-shun land, the Company itself has never had any act of production, operations, development, use or pollution occurred at the site. According to subsequent investigation and research, parts of the area has been detected dioxin and mercury contamination in soil. The land was designated by the Tainan City Government and the Environmental Protection Department of the Executive Yuan as a “Soil Pollution Control Site” and “Soil pollution remediation site” in April 2002 and March 2004 separately, per the Soil and Groundwater Pollution Remediation Act.

• (6) Tainan city government and other government authorities cited Article 75 of Taiwan’s Company Law that since the Company merged with TAIC, and was regarded as the surviving company, the Company should take all responsibilities for the rights and obligations of TAIC, and so are the treatment projects and remediation plan. As the Company never used the land of TAIC after being ordered to take charge by the Executive Yuan Department of Economic Affairs (MOEA), the Company thus objected and carried out the following administrative or judicial remedies to identify the government conception of the “Polluters” and the condition of pollution:

• A. The Company filed a plea of State Compensation claim to Ministry of Economic Affairs, Administration Yuan (MOEA), but MOEA refused.

• B. In January 2006, the Company filed a complaint against MOEA in the Taiwan Taipei District Court in the amount of $10,077 thousand to reimbursement for compensation,

• C. The complaint was dismissed by the Supreme Court In February, 2008. Upon the application of Constitution Interpretation by the Company, J.Y. No.714 Interpretation of the Grand Justice was issued in November, 2013, and considered that Soil and Groundwater Pollution Remediation Act (SGPR Act )does not violate the principle of prohibition against retroactive law, or the principle of proportionality the retroactive rule; however, the holding didn’t mention whether the successor of the Polluter entity should be responsible for the treatment projects and remediation plan under SGPR Act was not in the scope of the regulation.

• D. The Company has filed series of complaint on those issues according to this Constitutional Interpretation.

• 450 -

• (7) Tainan City Government issued the letter No. 09722000130 and No. 09722003360 in January and February 2008 respectively, and requested the Company to propose a remediation plan for the soil and groundwater pollution of the An-shun plant in accordance with the Soil and Groundwater Pollution Remediation Act.

• A. The Company proposed the “Tainan City, CPDC former Taiwan Alkali An-shun site and 2nd class number nine road on the eastern side of the grass area of the site, soil pollution remediation pollution remediation plan” per the regulation at the end of June 2008 and the plan was submitted to Tainan city government for review and formally approved in May 2009. In 2012, the remediation plan was put forward and approved on July 2, 2012. The 1st instance was completed in September 2014 and entered the second phase of the remediation, which will last 10 years. A second revision of the remediation plan was proposed and submitted to Tainan City Government for review, and the approval letter issued by Tainan City Government informed of the approval of the 2nd remediation plan, which shall be publicly displayed per regulations. Currently, the Tainan City Environmental Protection Bureau reviewed and adopted the plan on April 14, 2015 and the assessment was announced by Tainan City Government on May 4th, 2015. According to the remediation technology and the actual implementation of the subsequence adjustment, the 3rd remediation change plan was proposed on March 2nd 2017, which remediation plan was focus on the remediation plan of 2nd phase and brought in the unfinished items in the 2nd change plan. Currently, the 3rd plan was reviewed and adopted on Jan. 3rd, 2018.

• B. The remediation expense about NT$1,600,000 thousand has engaged in the 1st phase until Sept. 2014. Simultaneously, the following 10-year remediation work, after the 2nd change plan was adopted, needed to be started, the funding was estimated in Dec., 2014: NT$1,356,000 thousand.

2. Extension legislation:

• (1) Remediation prepay

• A. Tainan city government on Feb. 27[th] , 2008 with the letter No. 09722004430 asked the Company to pay each expense: NT$88,786 thousand, coming from investigation assessments and strain necessary measures, which was prepaid by Tainan city government and EPA of Executive Yuan on behalf of land polluters, within deadline. The expense would double and transfer to court for enforcement if overdue. This expense was adjusted to list in 2007 per Financial Accounting Standards and the Company prepaid on behalf of land relations based on the law regulations in July 2008. The Company had the objection on the prepaid expense and land polluter, hence, the administrative remedy was proposed in July 2008, Kaohsiung High Administrative court sentenced the Company shall pay the expense NT$88,430 thousand in Jan. 2008. The Company proposed the appeal in March 2008 and Supreme Administrative Court sent back to Kaohsiung High Administrative Court for further trial. Kaohsiung High Administrative court sentenced the original punishment and the petition decision beyond NT$76,066 thousand was withdrawn. In Dec. 2013, both parties proposed the appeal for the unfavorable parts and Supreme Administrative Court sentenced the amount

• 451 -

beyond NT$203 thousand and lawsuit expenses are all abandoned in April 2015 and sent back to Kaohsiung High Administrative court for continued trial. The determined withdrawn amount NT$356 thousand had all been returned back to the account by Tainan city government. Kaohsiung High Administrative court rejected the appeal of the Company on Dec. 2016. The Company proposed the appeal remedy for the unsatisfied sentenced contents on Jan. 2017. Supreme Administrative Court sentenced on Jan. 2018 that the expenses NT$1,135 thousand didn’t need to be undertaken by the Company.

• B. Tainan city government on May 22, 2009 with the letter No. 09822013680 asked the Company pay the expenses NT$17,962 thousand, which resulted from the relevant working plan of An Shun Land Site soil pollution remediation and was prepaid by Tainan city government on behalf of the Company, and Tainan city government in Dec. 2009 with the letter No. 09822035440 asked the Company to pay the above fees prior to Jan. 31[st] , 2010. The Company estimated such expense at the end of 2009 and proposed the administrative remedy in Jan. 2010 and prepaid the above fees within the deadline inquired by Tainan city government based on the law regulations. The petition was rejected in March 2011, thus, the administrative lawsuit was proposed according to the law. Kaohsiung High Administrative court sentenced that the amount beyond NT$17,867 thousand was withdrawn. After the appeal, Supreme Administrative Court sentenced to return back to Kaohsiung High Administrative court for further trial in Sept. 2013. Kaohsiung High Administrative court sentenced the amount beyond NT$7,068 thousand was withdrawn on Oct. 7[th] , 2015 and this case had been appealed for the remedy. The determined withdrawn amount NT$95 thousand had been returned back to the account by Tainan city government. The verdict from Supreme Administrative Court had been received on Feb. 18[th] , 2017, the fact was again returned back to Kaohsiung High Administrative court for the trial.

• C. Tainan city government in Sept. 2011 with the letter No.1000700466 inquired the Company to pay the expense NT$16,095 thousand, which resulted from the relevant working plan of An Shun Land Site soil pollution remediation and was prepaid by Tainan city government on behalf of the Company. In March 2012, Tainan city government, with the letter No.1010242670, asked the Company to pay the above expense prior to April 30[th] , 2012. Based on the law regulation, the Company was inquired by Tainan city government to prepay the above expense within deadline and proposed the appeal for remedy in April 2012, which was rejected. The Company proposed the administrative litigation in Nov. 2012 and Kaohsiung High Administrative court sentenced to decide the amount of the original expense beyond NT$119 thousand were all withdrawn. The Company proposed the appeal in Sept. 2014, but Supreme Administrative Court sentenced to return back to Kaohsiung high Administrative court for further trial in Nov. 2015. Kaohsiung High Administrative court sentenced the amount beyond NT$6,498 thousand which Tainan city ordered the Company to pay was all withdrawn. Final verdict confirmed by Supreme Administrative Court in April 2018.

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• D. Tainan City Government, in May 2013, issued the letter No. 1020383681B to request the Company to pay site soil pollution remediation related work plan on behalf of An-shun plant, with the cost of NT$26,530 thousand and requested for the Company to pay the fee prior to June 30th 2013. The Company paid the fee in advance within the requested deadline by the Tainan City Government based on applicable laws. The Company filed a petition for remedy in July 2013, which was rejected. The Company filed an administrative litigation in March 2014. The judgment was declared in April 2016. The Company proposed to appeal for remedy on the portions that were unfavorable. However, the appeal was sentenced to be rejected in March 2017. The Company had proposed for retrial remedy in April 2017, which was rejected by court in Oct. of the same year. This case was closed.

• E. The Tainan City Government, in February 2014, litigated that the Company was the polluters per judgment No. 1953 which was pass down in 2007 and asked the Company to pay the 2011 advanced payment of supervision and management on behalf of An-shun factory, to the amount of NT$27,444 thousand. The Company paid the fee in advance as previous mention within the requested deadline by the Tainan City Government based on the law regulations and filed the petition for remedy in March 2014, which was rejected by the petition authorities. The Company was not satisfied with the result, and filed the administrative legal appeal in September of same year. The Kaohsiung High Administrative Court sentenced the Company to pay NT$154 thousand. However, Tainan City Government was not satisfied with the verdict and filed the appeal for remedy, the Company also filed an appeal based on the Company’s claims to Supreme Administrative High Court. The Supreme Administrative High Court suspended the original verdict in February 2018, and currently the case is under hearing by the Kaohsiung High Administrative Court.

• F. Tainan City Government, in May 2016, issued the letter No. 10504498726, requested the Company to pay a fee for the “supervision management and audit work plan of 2013 CPDC (Taiwan Alkali) An-shun plant site remediation” and requested the Company to pay the fee of NT$63,271 thousand prior to July 20th 2016, per paragraph 4 of article 14, article 15 and paragraph 1 of article 43. The Company paid the fee within the requested deadline by the Tainan City Government based on applicable regulations. After the rejection of the petition for the remedy in June 2016, the Company filed for administrative litigation in December 2016 and received parts of the winning judg

• G. ment in July 2017. In order to maintain the Company’s right and interest, the Company had proposed the appeal to Supreme Administrative Court for remedy of the unfavorable parts in August 2017.

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• (2) Tainan city government claimed that the Company didn’t implement per the remediation process.

• A. Tainan City Government issued the letter No. 1030133470 on February 12[th] 2014 to order the Company to pay a penalty of NT$200 thousand prior to March 24[th] 2014 since the Company was deemed not to implement the content per the approved “Site soil pollution remediation pollution remediation plan” and violated the regulation subparagraph 3 of paragraph 2 of Article 38 and paragraph 1 of Article 22 of the Soil and Groundwater Pollution Remediation Act. However, the disposition authority determined that this was a factual error and it was clear that the punishment was illegal. Hence, the Company filed a petition for remedy in March 2014, but the petition was rejected by Executive Yuan Environmental Protection Agency in June 2014. The Company filed for administrative litigation remedy in August 2014, the litigation remedy was rejected by the judgment from the simple court of Tainan District court and Kaohsiung High Administrative Court in April and August 2015. The Company filed the retrial for remedy, which was rejected by the Kaohsiung High Administrative Court in April 2016. The Company would continue to file an appeal for remedy. However, the rejection of the Company’s request was received in June 2017. The Company proposed the retrial appeal for remedy in July of the same year. After the retrial, the court rejected the Company’s request in Oct. of the same year and this case was closed.

• B. Tainan City Government issued the letter No. 104060004 on June 12th, 2015 declaring that the Company didn’t execute the plan per the approved “Site soil pollution remediation pollution remediation plan”, which violated the regulation subparagraph 3 of paragraph 2 of Article 38 and paragraph 1 of Article 22 of the Soil and Groundwater Pollution Remediation Act and ordered the Company to pay a penalty of NT$1,000 thousand prior to July 27th 2015. After verification, it was clear that the fine was illegal. Hence, the Company filed a petition for remedy in August 2015, which was rejected by the Executive Yuan Environmental Protection Agency. The Company was not satisfied with the verdict and filed for administrative litigation with the Kaohsiung High Administrative Court, the Company won the verdict in January 2017. This case was closed.

• C. Tainan City Government issued a letter No. 105050004 for administrative sanctions on May 23, 2016 and deemed that the Company didn’t execute the plan according to the remedy plan since the reduction rate of dioxin pollution was less than 41% in the Soil and groundwater pollution inspection records, which violated the regulation paragraph 1 of Article 22 of the Soil and Groundwater Pollution Remediation Act (hereinafter referred to as the “Remediation Act”) and ordered the Company to pay a penalty of NT$2,000 thousand according to subparagraph 3 of paragraph 2 of Article 38 of Remediation Act and the Company had to participate in environment seminars for 2 hours according to the provisions of Article 23, paragraph 2 of the Environmental Education Law. After verification, the previous punishment content was not audited at the time point of the remediation plan, which violated the punishment principle. The Company filed a petition in June 2016, which was rejected by Executive Yuan Environmental Protection Agency in Oct. 2016. The Company was not satisfied,

• 454 -

proposing the administrative litigation to Kaohsiung High Administrative court and received the rejection jurisdiction by court in July 2017. The Company proposed the appeal for the remedy in August of the same year per law, but Supreme Administrative Court rejected the Company’s request in Jan. 2018. This case was determined to be closed.

• D. Tainan city government, on May 23rd, 2016, required the Company to complete the correction (which means the reduction rate of dioxin pollution reaches to 41%) prior to Oct. 31st, 2016 with letter No. 1050527601 and attached with No. 105050004 issued on May 19th, 2016, otherwise; the Company would be punished continuously per time. Since the Company violated the regulation paragraph 1 of Article 22, paragraph 2 of Article 38 of the Soil and Groundwater Pollution Remediation Act and paragraph 11 of Penalty criteria list, it was fined NT$600 thousand and was ordered to participate in environment seminars for 4 hours (premier NT$200 thousand plus added NT$400 thousand). After verification, the previous punishment content was not audited at the time point of the remediation plan, which violated the punishment principle and this case had necessary relation with the administrative sanction which of letter No. 105050004. The petition remedy was proposed per law in Feb. 2017, which was rejected by Executive Yuan Department of Economic Affairs in May 2017. The Company had proposed the appeal for remedy in June of the same year. Through the rejection of the Company’s request by Kaohsiung High Administrative court in Nov. of the same year, the Company had declared the appeal in Dec. of the same year. The Supreme Administrative Court rejected the Company’s request on July 10, 2018. This case was determined to be closed.

• E. Tainan city government considered the Company’s remediation progress for the reduction rate of dioxin pollution had not reached 82% and judged the Company for the penalty NT$200 thousand. After verification, the Company had finished 13.51 hectares (symbolizing Pollution area reduction ratio 36.4%), which had been beyond the target of 2nd change plan. Tainan city government with merely single project not reaching to the examined target penalized the Company without considering such factor, which obviously violated the ratio principle. The petition remedy was proposed in June 2017 and was rejected by Executive Yuan Department of Economic Affairs in August of the same year. Considering the legislation economy, the Company decided not to continue the remedy in August of the same year. This case was closed.

• F. Tainan city government, in June 2017, with the letter No. 1060630217 attached with sanction letter No. 106060012 determined the 3rd remediation change plan not proposed and took it as reason and judged the Company for the penalty NT$1,000 thousand. After the verification, there is no ‘take it as’ such term in Soil pollution law and Implementation rules, which violated the principle of administration. The petition remedy had been proposed in July 2017 and the rejection of petition was received in Oct. of the same year. The Company proposed to Kaohsiung High Administrative court for the administrative remedy in Dec. of the same year.

• 455 -

3. Others

• (1) The Company still has the objection on the adscription of pollution responsibility for An Shun land located in Tainan City Annan District and would continue to strive for the possible administrative and law remedy actively.

In view of the jurisdiction explanation No.714, which indicated whether the general successors of polluters had to burden of remediation responsibilities, was not in the scope of the Soil and Groundwater Pollution Remediation Act. Also, considering the previous Taiwan Alkali Co. Ltd. was a state-owned enterprise, and the An-shun plant was controlled, supervised, and assigned operations and gained beneficially by the Ministry of Economic Affairs, Taiwan Provincial Government and CPC, such actions should be part of national behavior, yet, the resulting pollution and remediation was asked to be borne by the private legal person. The Company applied to the Tainan city government to determine the beginning of the actual pollution or potential pollution of the perpetrators, and who should pay the relevant costs and return the Company’s cost over the years. The rejection was made by the Tainan City Government in November 2014. The Company filed a legal petition in December 2014 and the original disposal authorities revoked the original punishment in March 2014, hence, the Executive Yuan Environmental Protection Agency made a decision not to proceed with the case. The original disposal authorities revoked the previous punishment but simultaneously made a new one, the Company also filed a petition to the new punishment. The Company's petition was decided not to proceed in August 2015 and the Company filed an administrative legal appeal instead, due to multiple errors, which was under hearing by the Kaohsiung High Administrative Court. Through the rejection of the Company’s request by Kaohsiung High Administrative court, the Company proposed the appeal for remedy in Nov. 2017. This case was under hearing in Supreme Administrative Court.

The cumulative fee of invested and estimated control & management cost and remediation fee were NT$3,428,237 thousand until Dec. 31st, 2018. The preceding remediation fee was estimated according to the current possible situations by the Company. However, if it was affected by the inside and outside factors in future, which resulted in the possible big differences on the whole remediation fee, it would be evaluated for adjustment.

• (2) An-shun dormitory designated monuments case

Original Kagakude Negai O Ka Corporation’s dormitories of Tainan plant belonging to the Company was designated by the Tainan City Government, under the letter No. 1031053448A issued on November 17, 2014, as a municipal historic site. However, the administrative sanction has various areas of dispute, thus the Company was not satisfied with the judgment. Hence, the Company filed a legal petition for remedy in December 2014. The petition decision report from the Ministry of Culture revoked the designated land of the Company as a historical site including 4 area in August 2015. The Company appealed for the administrative remedy of the remaining areas, which was under hearing by the Kaohsiung High Administrative Court.

• 456 -

The An-shun dormitory was announced by the Tainan City Government, on Nov. 17th 2014, as a historical site. The Company was not satisfied with this issue and filed the petition. The petition decision from the Ministry of Culture revoked 4 areas of land on August 14, 2015 and the Ministry of Culture re-announced it in accordance with this petition decision on Dec. 17th 2015. The Company was not satisfied with the 2nd announcement and re-appealed the petition for remedy. The Company received the rejection of the petition in July 2016. The Company appealed for remedy within the statutory period, which was rejected by the court’s verdict in January 2017. The Company examined the reasons for the refusal of the court, which reason complied with the required target of the Company. Hence, this case was closed without appeal for remedy.

• (3) An shun historical site theft case

Original Kagakude Negai O Ka Corporation’s dormitories of Tainan plant belonging to the Company was designated by Tainan City Government as a municipal historic site. However, the defendant, Mr. Wu Ming, put a lot of his personal belonging on the Company’s land beside to the dormitories located on No.15, Aly. 3, Ln. 661, Beishanwei 2nd Rd., Annan Dist., Tainan City 709, Taiwan (R.O.C.), and was suspected being involved with the theft of the property. The Company filed for criminal action. This case was sent to the Tainan District Prosecutors Office for mediation but without success, the Company received the indictment from Prosecutors Office in May 2016 and received the verdict from the court in September of the same year: Mr. Wu was sentenced to five months and was charged NT$5,973 thousand due to the crime. However, the defendant appealed for remedy. The sentence was declared on June 28th, 2017: Mr. Wu was imprisoned for 4 months and confiscated NT$176 thousand acquired from the crime (this case was closed).

Xincun Land of Taiwan Alkali Co., Ltd.:

1. History

On the premise that the residents obeyed the agreement, the Company signed an agreement with the local communities that land within Feng Shan District, Kaohsiung City shall be granted free of charge for public use.

2. Extension legislation

Business inspector found that the land was occupied by residents that built illegal construction, which violated the agreement. After communicating with the residents' multiple times, the situation still did not improve. To be responsible for asset management and reach the expectation of the Company’s shareholders, the Company filed a legal appeal in February 2013 to require to dismantle the illegal construction and return the land, which was judged by Kaohsiung District Court to reject the Company’s petition. Due to the previous judgment against the law, the Company filed a legal appeal for remedy in September 2014, which was rejected by the Kaohsiung High Court in July 2016. The Company filed the appeal for remedy to Supreme Court in August of same year.

• 457 -

Shulin Land of Taiwan Alkali Co., Ltd.:

1. History:

• (1) No. 540, 541 and 543, Dongshan Section, Shulin District, Xinbei City and No. 498, Weiwang Section, Shulin Dist., New Taipei City 238, Taiwan including 4 area of lands originally belonged to Shulin plant of Taiwan Alkali Co. Ltd. Taiwan Alkali Co. Ltd. established the plant in 1962 and closed the plant in 1975. The Executive Yuan Department of Economic Affairs in April 1983 ordered the government-owned Company which at the time was also a subsidiary of CPC to merge with Taiwan Alkali Co. Ltd

• (2) Then the plant was subsequently sold to CPC. The New Taipei City Government Environmental Protection Bureau, on August 16th, 2010, announced the land as “soil pollution control site”.

• (3) The New Taipei City Government Environmental Protection Bureau issued the letter No. 1000010000 in March 2011 declaring that the Company merging with Taiwan Alkali Co. Ltd. was regarded as the survival company and shall take the responsibilities for the rights and obligations of Taiwan Alkali Co. Ltd. for soil pollution remediation according to article 75 of Company Act and was deemed as the polluters, who are required to propose subsequent disposal and remediation.

• (4) The New Taipei City Government Environmental Protection Bureau issued the letter No. 1001001329 in August 2011 and asked the Company to complete the investigation and proposed a pollution control plan and send to New Taipei City Government Environmental Protection Bureau for approval. The Company was ordered to take responsible of all, non-production operations, development, and the resulting usage or pollution. The Company had a disagreement of the identification of the polluters and filed the administrative appeal in August 2011. This case was closed due to the determined sentence in August 2017.

Since the change of predetermined place of CNPC’s warehouse, the relocation schedule had to be extended to 24 quarters. The remediation work schedule were postponed so that the soil pollution control pan (change plan) of Shulin Land of former Taiwan Alkali Co., Ltd (part of the sites) was proposed in April 2017. New Taipei City Government sent the letter to agree for future reference and it’s implemented per the change plan currently. The relevant remediation expense NT$273,750 thousand was estimated and listed in 2011 according to Financial accounting standards related regulations. However, it will be assessed to adjust to recognition if there were changes due to internal and external factors in future, which resulted in the significant differences on the entire remediation expenses.

• 458 -

2. Extension legislation:

The Company was ordered to take responsible of all, non-production operations, development, and the resulting usage or pollution. The Company had a disagreement of the identification of the polluters and filed the administrative appeal in August 2011. Taipei High Administrative Court judged to revoke the administrative punishment and the petition decision in August 2012. However, New Taipei City Government Environmental Protection Bureau appealed for retrial, the Supreme Administrative Court discarded the original judgment and remanded the case to the Taipei High Administrative Court. The judgment was claimed to be illegal, hence, the Company filed for legal appeal in December 2013, which was rejected by the Supreme Administrative Court in January 2015. The Company filed for retrial remedy in February 2015, which was rejected in June 2015. The ruling on the parts where important evidence was missed and not considered was remanded to Taipei High Administrative Court. But Taipei High Administrative court sentenced the rejection in August 2016, which the Company was not satisfied with so as to appeal for remedy in Sept. of the same year. In August 2017, the rejection was adjudicated. This case was closed.

Moreover, in consideration of the No. 714 explanation from the judge, the Company applied to New Taipei City Government Environmental Protection Bureau for the identification of polluters, but it was subsequently refused. The Company filed for the petition and administrative litigation remedy. After the trial from Supreme Administrative Court, the rejection was adjudicated. This case was closed.

i. Intangible assets

The components of the costs of intangible assets, amortization, and impairment loss thereon or the years ended December 31, 2018 and 2017 were as follows:

Costs： Balance as of January 1, 2018 Acquisition from business combination Acquisition in 2018 Disposals Effect of movement in exchange rates Balance as of December 31, 2018 Amortization and Impairment Loss: Balance as of January 1, 2018 Acquisition from business combination Amortization for the period Disposals Effect of movement in exchange rates Balance as of December 31, 2018 Carrying value: Balance as of December 31, 2018	Goodwill $ 5,444 - 143,679 - (1,133) $ 147,990 Goodwill		Computer software 5,233 908 1,579 - (147) 7,573 Computer software 1,089 59 945 - (20) 2,073 5,500		Patents and trademark 68,389 50,883 141 (16,815) - 102,598 Patents and trademark 53,639 8,434 12,332 (6,378) - 68,027 34,571	**Total **
						79,066 51,791 145,399 (16,815) (1,280)
						258,161
						**Total **
	$ - - - - -					54,728 8,493 13,277 (6,378) (20)
	$ -					70,100
	$ 147,990					188,061

As of December 31, 2018, the aforesaid intangible assets were not pledged as collateral.

• 459 -

j. Short-term and long-term loans

Short-term and long-term loans
Secured bank loans-the Company Secured bank loans-Huijie Unsecured bank loans-the Company Secured bank loans- Weihua Secured bank loans- Weiming Letters of credit loans-the Company Total Current Non-current Total		December 31, 2018
	Currency NTD RMB NTD RMB RMB NTD	Interest Rate Range 1.43%~1.9556% 5.655%~6.2225% 1.38%~1.814% 4.9%~5.047% 5.047%~5.488% 1.4945%	Year of Expiration 2019~2021 2019 2019 2024 2023 2019	Amount
				$ 2,480,000 442,533 600,000 300,569 1,714,560 50,000
				$ 5,587,662
				$ 1,777,533 3,810,129
				$ 5,587,662

On February 2, 2016, the Company signed a syndicated loan agreement for 5 years with Mega International Commercial Bank, the lead bank of the syndicated loan, and 7 other banks in order to raise funds to build the plant and accessory equipment and meet funding requirement. The aggregate amount of credit line of the syndicated loan was $4,350,000 thousand.

1. Syndicated loan A: The credit line is $2,900,000 thousand consisting of medium-term secured loans and non-revolving credit facility, which were used to finance the building of the plant and purchase of accessory equipment.

2. Syndicated loan B: The credit line is $1,450,000 thousand consisting of medium-term loans and revolving credit facility, which were used to meet funding requirement.

3. The financial covenants under the loan agreement include the requirement to maintain certain financial ratios based on the reviewed semi-annual consolidated financial report and audited annual consolidated financial reports. If the Company breaches these financial covenants, the syndicated banks may determine to declare the unpaid principal, interest, fees and other sums payable by the Company under the loan agreement to be immediately due and payable. These financial ratios are as follows:

4. (1) Current Ratio (total current assets divided by total current liabilities): not lower than 100%.

5. (2) Leverage Ratio (total liabilities plus contingent liabilities to tangible net worth): not higher than 100%.

6. (3) Times Interest Earned (income before tax plus depreciation expense plus amortization expense divided by interest expenses): not lower than 2 times.

As of December 31, 2018, the unused credit line amounted to $2,250,000 thousand. Please refer to Note 8 for details of the related assets pledged as collateral.

• 460 -

The Company signed a contract for secured bank credit facilities totaling $130,000 thousand in order to finance its operating requirement. As of December 31, 2018, credit facilities of $380,000 thousand were used. The unused amounted to $6,000 thousand. The current portion of the long-term bank loans obtained from such credit facilities amounted to $380,000 thousand. Please refer to Note 7 for details of the related assets pledged as collateral.

As of December 31, 2018, the Company was granted by banks short-term credit lines of $6,650,000 thousand, of which $3,650,445 thousand, were unused.

As of December 31, 2018, the short term credit lines of the subsidiaries amounted to $130,000 thousand, US$6,000 thousand and RMB$1,083,840 thousand; of which, $0 thousand, US$0 thousand, and RMB$683,706 thousand, respectively, were used.

Please refer to Note 7 for details of the related assets pledged as collateral.

• k. Long-term bills payable

The components of long-term bills payable were as follows:

Bills payable Bills payable Bills payable Bills payable Bills payable Less: Discount on long- term bills payable Total	December 31, 2018	December 31, 2018
	Acceptance institution China Bills Finance Corporation China Bills Finance Corporation International Bills Finance Corporation Taching Bills Finance Corporation Mega Bills Finance Corporation	Period 2018.11.09~2019.01.08 2018.11.16~2019.01.15 2018.11.30~2019.01.18 2018.11.26~2019.02.25 2018.12.20~2019.03.20	Amount
			$ 100,000 50,000 50,000 50,000 100,000
			350,000 (271)
			$ 349,729

The Company had revolving commercial promissory note agreements with bills finance companies in order to finance its operating requirement. The bills payable bear interest at annual rates ranging from 0.5%~1.1513% for the years ended December 31, 2018.

Please refer to Note 8 for details of the related assets pledged as collateral.

m. Provisions

Provisions
Balance as of December 31, 2018 Current Non-current	Decommissioning $ 1,686,580 $ - 1,686,580 $ 1,686,580	Remediation project 967,414 473,629 493,785 967,414	Employee benefits 322,556 15,950 306,606 322,556	**Total **
				2,976,550
				489,579 2,486,971
				2,976,550

• 461 -

• To comply with the Order of the Tainan City Government, the Company submitted a remediation plan proposal and accrued relevant remediation plan for approval before June 30, 2008 and evaluated the relating remediation expense of $1,647,200 thousand. In May 2009 and on July 2, 2012, the Company was granted official approval of its remediation proposal and amended remediation proposal, respectively. In September 2014, the Company has completed the first phase of the implementation of its plan. It is expected to launch the second phase of the implementation of its remediation plan during the next. The Company has submitted the second phase of its amended remediation plan to the Tainan City Government for approval. On December 24, 2014, Tainan City Government notified the Company its approval and now is under public tender review.

The aforementioned remediation costs of the Company were recognized in the total amount of $1,600,000 thousand for the first stage before September, 2014. With the launch of the subsequence of the second remediation stage, the Company estimated the cost based on the situation of December, 2014 is $1,356,000 thousand. (Note 5 h for more details)

1. (1) The Company’s four parcels of land at Dongshan section , Shulin district, New Taipei City were the original location of TAIC’s Shulin plants , but then sold to the Taiwan Chinese Petroleum Corporation (CPC). On August 16, 2010, the Environmental Protection Department of New Taipei City Government has declared that such land as "Soil Pollution Control Site”. In March 2011, the Environmental Protection Department of New Taipei City Government has issued its letter No. 1000010000. In that letter, the Company is deemed to be the surviving entity, which assumed the rights and obligations of TAIC following its merger with TAIC and TAIC ceased to exist. As the surviving entity from this merger, the Company was therefore declared as the polluter and was required to submit a remedial measuring plan.

2. (2) In August 2011, the Environmental Protection Department of New Taipei City Government has issued its Letter No. 1001001329 requiring the Company to complete its investigation and propose a pollution control plan to the Environmental Protection Department of New Taipei City Government for approval and then adopt its implementation. Following its said merger with Taiwan Alkali Company under the government‘s mandatory order, the Company itself has neither performed any act of production, operation, development, use nor initiated act to cause pollution. For this reason, the Company objected with being tagged as “the polluter” and filed a complaint for administration remedy in August 2011. In 2011, the Company estimated and accrued relevant remediation expense ~~s o~~ f $273,750 thousand in accordance with the relevant provisions of Financial Accounting Standards.

3. 462 -

n. Operating lease

The Consolidated Company leases out some of its property, plant and equipment under operating leases. The future minimum lease receivable under these non-cancellable operating leases were as follows:

Less than one year Between one and five years Over five years	December 31, 2018 $ 10,980 43,560 1,815 $ 56,265

For the years then ended December 31, 2018, the income from the rental of property, plant and equipment amounted to $13,334 thousand.

• o. Employee benefits

1. Defined benefit plans

The Consolidated Company’s defined benefit obligations and fair value of plan assets were as follows:

The Consolidated Company’s defined benefit obligations and fair value were as follows:	of plan assets
Present value of funded defined benefit obligation Fair value of plan assets Net defined benefit liabilities	December 31, 2018
	$ 976,135 (675,820)
	$ 300,315

The provision consists of net defined benefit liabilities and accrued pension liabilities for professional managements. The accrued pension liabilities for professional managements was $5,759 thousand as of December 31, 2018.

The Consolidated Company makes defined benefit plans contributions to the pension fund account with Bank of Taiwan that provides pension benefits for employees upon retirement. Plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average monthly salary for six months prior to retirement.

(1) Composition of plan assets

The Company and its subsidiaries in Taiwan set aside pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund and such funds are managed by the Labor Pension Fund Supervisory Committee. Under these regulations, the minimum earnings from these pension funds shall not be less than the earnings from two-year time deposits with the interest rates offered by local banks.

• 463 -

As of December 31, 2018, the balance of the Consolidated Company’s contributions to the pension funds in Bank of Taiwan was $678,451 thousand. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Labor Pension Fund Supervisory Committee.

(2) Movements in present value of the defined benefit obligations

The movements in the present value of the defined benefit obligations for the years ended December 31, 2018 and 2017 were as follows:

Defined benefit obligation, January 1 Benefits paid from plan assets Benefits paid by company directly Current service costs and interest Past service credit Re-measurements of the net defined benefit liability (assets) Defined benefit obligation, December 31	2018
	$ 1,116,724 (198,155) (26) 31,138 (2,638) 28,092
	$ 976,135

(3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit assets for the year ended December 31, 2018 were as follows:

Fair value of plan assets, January 1 Employer contributions Benefits paid by the plan Expected return on plan assets Re-measurements of the net defined benefit liability Fair value of plan assets, December 31	2018
	$ 797,167 36,168 (191,274) 10,640 23,119
	$ 675,820

• (4) Expenses recognized in profit or loss

The Consolidated Company’s pension expenses recognized in profit or loss for the years ended December 31, 2018:

The Consolidated Company’s pension expenses recognized in years ended December 31, 2018:	profit or loss for the
Current service cost Other Past service cost Net interest on net defined benefit liability Operating costs Selling expenses Administrative expenses Research and development expenses Actual return on plan assets	For the Years Ended December 31, 2018
	$ 17,398 (114) (2,638) 4,100
	$ 18,746
	$ 18,905 (1,053) 886 8
	$ 18,746
	$ 20,667

• 464 -

(5) Actuarial assumptions

The following are the key actuarial assumptions at the reporting date:

Discount rate Future salary increases	For the Years Ended December 31, 2018
	0.75~1.12% 0.3~3%

Base on the actuarial report, the Consolidated Company is expected to make a contribution payment of $13,727 thousand to the defined benefit plans for the one year period after the reporting date. The weighted-average duration of the defined benefit plans is between 1.00 to 12.73 years.

(6) Sensitivity analysis

In determining the present value of the defined benefit obligation, the Consolidated Company’s management makes judgments and estimates in determining certain actuarial assumptions on the balance sheet date, which includes employee turnover rate and future salary changes. Changes in actuarial assumptions may have significant impact on the amount of defined benefit obligation.

As of December 31, 2018 , the changes in the principal actuarial assumptions will impact the present value of defined benefit obligation as follows:

December 31, 2018 Discount rate Increase in future wage	Impact on the present value of defined benefit obligation Increase by 0.25% Decrease by 0.25% $ (13,912) 35,045 35,445 (13,605)
	Increase by 0.25% $ (13,912) 35,445

The sensitivity analysis assumed all other variables remain constant during the measurement. This may not be representative of the actual change in defined benefit obligation as some of the variables may be correlated in the actual situation. The model used in the sensitivity analysis is the same as the defined benefit obligation liability.

The analysis is performed on the same basis for prior year.

2. Defined contribution plans

The Consolidated Company contributes an amount at the rate of 6% of the employee’s monthly wages to the Labor Pension personal account with the Bureau of the Labor Insurance and Council of Labor Affairs in R.O.C. in accordance with the provisions of the Labor Pension Act. The Company’s contributions to the Bureau of the Labor Insurance and Social Security Bureau for the employees’ pension benefits require no further payment of additional legal or constructive obligations.

• 465 -

The cost of the pension contributions to the Labor Insurance Bureau for the years ended December 31, 2018 amounted to $47,277 thousand.

1. The pension recognized consists of pension expenses and pensions for professional management. The pension expenses for professional management was $5,759 thousand as of December 31, 2018.

2. Short-term compensated absences liabilities

As of December 31, 2018, the Consolidated Company’s short-term compensated absences liabilities amounted to $15,950 thousand.

• p. Income Tax

The components of income tax expense for the years ended December 31, 2017 and 2016 were as follows:

Current income tax expense Currently incurred Adjustment to prior year’s income tax charged to current income tax Deferred tax expense The origination and reversal of temporary differences Unrecognized changes of deductible temporary differences Income tax expense	For the Years Ended December 31, 2018
	$ (1,028,337) (4,572)
	(1,032,909)
	(559,368) 570,690
	11,322
	$ (1,021,587)

For the years ended December 31, 2018, income tax expenses recognized under other comprehensive income were both $0 thousand.

Income tax calculated on pre-tax financial income was reconciled with income tax expense for the years ended December 31, 2018 as follows:

the years ended December 31, 2018 as follows:
Profit (loss) before income tax Income tax on pre-tax financial income calculated at the domestic rate Tax-free income Income basic tax Unrecognized deferred tax assets Changes of permanent differences Prior years income tax adjustment 10% surtax on undistributed earnings Others Income tax expense	For the Years Ended December 31, 2018
	$ 6,792,187
	(1,593,434) 1,479 564,986 358,215 (4,572) (348,269) 8
	$ (1,021,587)

• 466 -

1. Unrecognized deferred tax assets and (liabilities)

Unrecognized deferred tax assets and (liabilities)
Decommissioning liabilities Remediation project Extraordinary loss Allowance for doubtful receivables Property, plant and equipment, investment property Pension Tax loss Others	December 31, 2018
	$ 71,366 239,744 727,670 319,484 782,907 (641) 6,192,964 465,528
	$ 8,799,022

The Company’s income tax returns through 2016 have been assessed and approved by the Tax Authority. Tax loss ratified by Tax Administration could be carried forward for ten consecutive years in accordance with Income Tax Act. The Consolidated Company did not recognize aforesaid tax loss as deferred tax assets because it is not expecting enough taxable profit in the near future.

As of December 31, 2018, the expiration years of tax loss unrecognized as deferred tax assets were as follows:

• (1) The Company

Year incurred 2014 2015 2016	Amount $ 331,035 2,132,246 1,815,587	Effective Period
		2015-2024 2016-2025 2017-2026

• (2) Taivex Therapeutics Inc.

Year incurred 2010 2011 2012 2013 2014 2015 2016 2017 2018(estimated)	Amount $ 14,388 16,878 29,657 50,227 27,419 43,032 44,291 52,322 76,894	Effective Period
		2011-2020 2012-2021 2013-2022 2014-2023 2015-2024 2016-2025 2017-2026 2018-2027 2019-2028

• (3) Chung Hua Shuang Tzu Hsing Kai Fa Co., Ltd.

Chung Hua Shuang Tzu Hsing	Kai Fa Co., Ltd.
Year incurred 2013 2014 2018(estimated)	Amount $ 10,195 44,139 445,328	Effective Period
		2014-2023 2015-2024 2019-2028

• 467 -

(4) CPDC Green Technology Corp.

Year incurred 2016 2017 2018(estimated)	Amount $ 5,646 30,270 38,049	Effective Period
		2017-2026 2018-2027 2019-2028

• (5) Weihua (Rudong) Trade Co., Ltd

Year incurred 2013 2015 2016 2017(estimated)	Amount $ 86 36,740 45,975 21,869	Effective Period
		2014-2018 2016-2020 2017-2021 2018-2022

• (6) Weiqiang International Trade (Shanghai) Co., Ltd.

Year incurred 2013 2014 2015 2016	Amount $ 9,398 9,238 17,892 21,170	Effective Period
		2014-2018 2015-2019 2016-2020 2017-2021

• (7) Weida (zhangzhou) Consultant Service Co., Ltd.

Year incurred 2014 2015 2016 2017 2018(estimated)	Amount $ 1,148 1,062 1,168 1,442 410	Effective Period
		2015-2019 2016-2020 2017-2021 2018-2022 2019-2023

• (8) Jiangsu Weiming Petrochemical Corporation

Year incurred 2017 2018(estimated)	Amount $ 47,766 28,128	Effective Period
		2018-2022 2019-2023

• (9) Zhangzhou Weida Petrochemical Co., Ltd

Year incurred 2015 2016 2017 2018(estimated)	Amount $ 570 2,065 1,991 5,830	Effective Period
		2016-2020 2017-2021 2018-2022 2019-2023

• 468 -

(10) Kunshan Weiqin Management consultant Co., Ltd

Year incurred 2016 2017 2018(estimated)	Amount $ 1,351 6,311 9,901	Effective Period 2017-2021 2018-2022 2019-2023

• (11) Zhejiang Wedge new material Co., Ltd

Year incurred 2016 2018(estimated)	Amount $ 1,886 1,129	Effective Period 2017-2021 2019-2023

• (12) Changzhou Huijie new material Co., Ltd

Year incurred 2015 2016 2017 2018(estimated)	Amount $ 413 287,896 218,472 204,054	Effective Period 2016-2020 2017-2021 2018-2022 2019-2023

2. Deferred tax liabilities:

Balance, January 1, 2018 Recognized in profit or loss Balance, December 31, 2018	Reserve for Land Revaluation Increment **Tax **
	$ 8,754,736 4,253
	$ 8,758,989

1. Deferred tax assets:

Balance, January 1, 2018 Recognized in profit or loss Recognized in OCI Others	Taxable Loss $ 9,358 1,651 $ 11,009	Defined benefitplans 7,360 (2,329) 5,302 10,333	Others 28,227 13,652 41,879	Total
				44,945 12,974 5,302
				63,221

1. Stockholders’ imputation tax credit account and tax rate:

According to the amendments to the "Income Tax Act" enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, effective January 1, 2018, companies will no longer be required to establish, record, calculate, and distribute their ICA due to the abolishment of the imputation tax system.

• 469 -

q. Capital and reserves

As of December 31, 2018 and 2017, the authorized, issued and outstanding capital of the Company amounted to $26,998,573, divided into 2,699,857 thousand shares, with par value of $10 (NT dollars) per share.

$10 (NT dollars) per share.
	(In thousands of shares)
	Common Stock
		2018
Balance, December 31		2,699,857
1. Capital Surplus
	December 31, 2018
Premium of share issue	$	1,242,245
Other		18,141
Total	$	1,260,386

In accordance with the ROC Company Act, as amended in January 2012, capital surplus cannot be used to distribute cash dividends or be used to increase capital unless it offsets the deficit first. The realized capital surplus includes those arising from donation and the excess of the issuance price over the par value of capital stock issued. In accordance with the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, if capital surplus is capitalized in batches, the combined amount of capital surplus capitalized in batches in any one year cannot exceed 10 % of paid-in capital.

2. Retained earnings

The Company distributes dividends depending on the level of earnings of each year, funding needs, industrial environment, and status of competition, long-term operating plan and interests of shareholders. Under such circumstances, the Company may appropriate for special reserve either in whole or in part to assure financial stability and sustainability. The Company may distribute dividends in cash or stock. If the earnings distribution is made in the form of by stock dividend, the ratio for the stock dividend shall not exceed 50% of the total distribution unless the ratio of the Company’s total liabilities to total assets is equivalent or above 50% or otherwise prescribed in relevant laws and regulations.

(1) Legal reserve

In accordance with the Amended Company Act 2012, 10 percent of net income is set aside as legal reserve, until it is equal to share capital. If the Company experiences profit for the year, the meeting of shareholders decides on the distribution of the statutory earnings reserve either by issuing new shares or by cash, of up to 25 percent of the actual share capital.

• 470 -

(2) Special reserve

In 2014, the Consolidated Company changed the subsequent measurement of investment properties from cost model to fair value model. In accordance with Ruling No. 1030006415 issued by the Financial Supervisory Commission on 18 March 2014, on the first-time adoption of fair value model for the subsequent measurement of investment properties, the Consolidated Company set aside an equal amount of special reserve when the fair value increment of investment properties is transferred to retained earnings. The Consolidated Company appropriated to the special reserve an amount of $21,224,233 thousand as of December 31, 2013. The company held a shareholder meeting on June 8, 2017, in order to use the special reserve amounted to $1,958,584 thousand to cover accumulated deficits. The carrying amount of such special reserve amounted to $21,224,233 thousand and as of December 31, 2018.

For every year the Company distributes earnings, a special reserve is appropriated in the following order:

• A. Each year, a special reserve is appropriated from current year’s net income and prior years’ undistributed earnings for the same amount as the net increase in the fair value of investment property using the fair value model. A special reserve is also appropriated for the same amount as the cumulated net increase in the fair value for the year when the undistributed earnings are not distributed. When the investment property is disposed of, this special reserve is reverted proportionately to distributable earnings. As of December 12, 2018, the Company appropriated to the special reserve an amount of $3,867,293 thousand.

• B. In accordance with Ruling No. 1010047490 issued by the Financial Supervisory Commission on 21 November 2012, a special reserve is appropriated by the parent company for the difference between market value and book value of parent company shares being held by a subsidiary times the percentage of the parent company’s equity investment in the said subsidiary, if the stock price of the parent company is lower than the its value. If the market value recovers subsequently, this special reserve is reverted proportionately to distributable earnings.

• C. In accordance with Ruling No. 1010012865 issued by the Financial Supervisory Commission on 6 April 2012, a portion of current-period earnings and undistributed prior-period earnings is appropriated as a special reserve during earnings distribution. Such appropriation of special reserve is based on the difference between the total net amount of contra accounts in the shareholders’ equity and the carrying amount of special reserve. Similarly, a portion of undistributed prior period earnings (which does not qualify for earnings distribution) is likewise appropriated as a special reserve on account of cumulative changes to other shareholders’ equity pertaining to prior periods. The subsequent reversals of the contra accounts in the shareholders’ equity shall qualify for additional earnings distributions.

• 471 -

(3) Earnings Distribution

On April 11, 2018, the Company’s shareholders resolved during their meeting, not to distribute dividend to shareholders out of the earnings.

3. Other equity accounts

Balance, January 1, 2018 Retrospective adjustments Exchange differences on foreign operation Exchange difference on subsidiary accounted for using equity method Exchange difference on affiliated accounted for using equity method Unrealized losses from financial assets measured at fair value through other comprehensive income Unrealized gains from financial assets measured at fair value through other comprehensive income for subsidiaries accounted for using equity method Unrealized gains from financial assets measured at fair value through other comprehensive income for affiliated companies accounted for using equity method Balance, December 31, 2018	Exchange differences on foreign operation $ (392,378) - (74,880) 161 (21,115) - - - $ (488,212)	Unrealized gain or loss on financial assets at fair value through other comprehensive income
		(788,734) (18,968) - - - (408,318) 31,082 (63,561)
		(1,248,499)

r. Earnings per share

The basic earnings per share and diluted earnings per shares for the years ended December 31, 2018 and 2017 were calculated as follows:

Basic earnings per share (NT dollars) Profit attributable to ordinary shareholders Weighted-average number of ordinary shares Diluted earnings per share (NT dollars) Profit attributable to ordinary shareholders (diluted) Weighted-average number of ordinary shares (basic) Effect of potentially dilutive ordinary shares of Employee stock bonus Weighted-average number of ordinary shares (diluted)	For the Years Ended December 31, 2018
	$ 4,290,269
	2,699,857
	$ 1.59
	$ 4,290,269
	2,699,857 13,371
	2,713,228
	$ 1.58

• 472 -

• s. Revenue from contracts with customers

• The Company primarily engages in the production of petroleum, alkali-chlorine, phosphoric acid and other petrochemical products and by-products and the storage, transportation, purchase and sale of these products, related chemicals and their raw materials. The details of products and sales area, please refer to Notes 14.

• Contract balances

Contract balances
Notes receivable Accounts receivable (including related parties) Less: allowance for doubtful account Contract liabilities	**2018.12.31 **
	$ 692,778 2,780,070 (455,515)
	$ 3,017,333
	$ 5,578

Please refer to Note 6 for disclosure of accounts receivable and allowance for doubtful accounts.

The amount of revenue recognized for the year ended December 31, 2018 that was included in the contract liability balance at the beginning of the period was $5,253 thousand.

t. Revenue

Revenue
Sales of goods	For the Years Ended December 31, 2018
	$ 44,781,832

• u. Remuneration of employees and directors

In accordance with the Articles of incorporation, the Company should contribute no less than 3% of the profit as employee compensation and less than 2% as directors' and supervisors' remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The amount of remuneration of each director and supervisor and of compensation for employees entitled to receive the abovementioned employee compensation is approved by the board of directors. The recipients of shares and cash may include the employees of the Company's affiliated companies who meet certain conditions.

For the years ended December 31, 2018, remuneration of employees of $146,409 thousand, respectively, and directors of $97,606 thousand, were estimated and recognized as current expense. These amounts were calculated using the Company’s profit before tax before remuneration of employees and directors for the years ended December 31, 2018. These benefits were charged to profit or loss under operating costs or operating expenses for the years ended December 31, 2018. Related information would be available at the Market Observation Post System website. The actual distribution of remuneration of employees was amounted for $118,850 thousand as of December 31, 2018. The amounts, as stated in the individual financial statements, are identical to those of the actual distributions for 2018.

• 473 -

v. Non-operating income and expense

1. Other income

Interest income Repurchase agreement Imputed interests of security deposits Bank deposits Dividends income Rental income Government grants Other income	For the Years Ended December 31, 2018
	$ 7,130 364 200,898 647,745 13,334 56,340 109,647
	$ 1,035,458

2. Other gains and losses

Foreign exchange (losses)gains Gain on disposal of investments Loss on disposal of property, plant and equipment Gain (loss) on evaluation of investment property Net gains on evaluation of financial assets (liabilities) measured at fair value through profit or loss Bank fees Other losses Finance costs Interest expenses Bank loans Imputed interests of security deposits Others	For the Years Ended December 31, 2018
	$ 3,970 6,094 (6,998) 119,574 242,864 (51,443) (560,099)
	$ (246,038)
	For the Years Ended December 31, 2018
	$ (77,237) (16) (8,660)
	$ (85,913)

3. Finance costs

• 474 -

w. Financial Instruments

1. Categories of financial instruments

• (1) Financial assets

Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Cash and cash equivalents Notes receivable, accounts receivable and other receivables Other assets Total	December 31, 2018 $ 6,162,171 2,229,968 16,587,624 3,125,995 223,244 $ 28,329,002

(2) Financial liabilities

Short-term loans Long-term bank loans-current portion Payables Long-term bank loans Long-term bills payable Other liabilities Total	December 31, 2018 $ 913,732 863,801 4,338,338 3,810,129 349,729 149,012 $ 10,424,741

2. Credit risk

• (1) Exposure to credit risk

The carrying amount of financial assets represents the Company’s maximum credit exposure. As of December 31, 2018, the maximum exposures to credit risk amounted to $28,329,002 thousand.

• (2) The concentration of credit risk

The sales of the Consolidated Company are significantly concentrated in a small number of customers. For the years ended December 31, 2018, 74%, respectively, of the total amount of accounts receivable is composed of 11 customers and 8 customers, respectively. Under the Consolidated Company’s credit policy, customers are requested to provide the Consolidated Company certain financial information like audited financial report, or other related documents for purposes of evaluating their credit worthiness. Credits are granted to these customers according to the result the Consolidated Company’s credit evaluation.

• 475 -

(3) Impairment losses

The Consolidated Company uses simple method to evaluate expected credit loss for notes receivable and accounts receivable, which means using the existing life time to measure the expected credit loss. For the purpose of measuring, the notes receivable and accounts receivable are grouped based on the characteristic of mutual credit risk, which is the ability for customers to honor the contract and be able to settle the receivables when due. Expected losses of the receivables on December 31, 2018 was as follows:

Not past due Over 0~30 Over 31~120 days Over 121~365 days Past due more than 1 year	Carrying amount of account receivables $ 3,081,593 27,822 7,320 909 355,204 $ 3,472,848	Weighted average expected credit loss 0~4% - - - 100%	Allowance for expected credit loss
			100,311 - - - 355,204
			455,515

3. Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

December 31, 2018 Non-derivative financial liabilities Accounts payable Other payables Other financial liabilities－ current Other non-current liabilities－ other Floating-rate loans Fixed-rate loans Long-term bills payable	Carrying amount $ 2,257,972 1,756,527 11,282 110,735 1,550,000 4,037,662 349,729 $ 10,073,907	Contractual cash flows 2,257,972 1,756,527 11,282 110,735 1,607,245 4,591,889 350,000 10,685,650	Within 6 months 2,257,972 1,566,969 11,282 99,201 411,652 867,678 350,000 5,564,754	6-12 months - 189,558 - 9,023 210,987 316,672 - 726,240	1-2years - - - 226 421,974 100,394 - 6,917,321	2-5years - - - 765 562,632 2,388,072 - 7,281,355	More than 5years
							- - - 1,520 - 919,073 -
							920,593

• 476 -

4. Currency risk

(1) Currency risk exposure

The Consolidated Company’s exposures to significant currency risk were those from its foreign currency denominated financial assets and liabilities as follows:

Financial assets Monetary items USD VND MKK RMB Long-term share investment using equity method USD Financial liabilities Monetary items USD RMB GBP	December 31, 2018 Foreign Currency Exchange rate NTD $ 84,694 30.710 2,600,971 547,757,982 0.0013 725,068 567,650 0.0199 11,353 1,034,171 4.470 4,622,754 30,320 30.710 931,121 $ 12,497 30.710 386,971 549,812 4.470 2,457,660 3 40.11 127	December 31, 2018 Foreign Currency Exchange rate NTD $ 84,694 30.710 2,600,971 547,757,982 0.0013 725,068 567,650 0.0199 11,353 1,034,171 4.470 4,622,754 30,320 30.710 931,121 $ 12,497 30.710 386,971 549,812 4.470 2,457,660 3 40.11 127
	Foreign Currency $ 84,694 547,757,982 567,650 1,034,171 30,320 $ 12,497 549,812 3	Exchange rate 30.710 0.0013 0.0199 4.470 30.710 30.710 4.470 40.11

• (2) Sensitivity analysis

The Consolidated Company’s exposure to foreign currency risk arises from the foreign currency exchange rate fluctuations on cash and cash equivalents, receivables and payables, which are denominated in foreign currency. A 1% of appreciation of NTD against USD, EUR, HKD, VND, MKK and RMB would have increased net income after tax by $40,923 thousand and for the years ended December 31, 2018; other comprehensive income would have increased $9,311 thousand for the years ended December 31, 2018. The analysis between these two periods was based on the same criteria.

5. Interest rate analysis

The following sensitivity analysis is based on the risk exposure to interest rates on the derivative and non-derivative financial instruments on the reporting date. For financial instruments bearing floating-rate, the sensitivity analysis assumes the floating-rate liabilities are outstanding for the whole year on the reporting date. The Consolidated Company’s internal management reported the increases/decreases in the interest rates and the exposure to changes in interest rates of 1% is considered by management to be a reasonable change of interest rate.

If the interest rate increases by 1%, the Consolidated Company’s net income will decrease by $16,500 thousand for the years ended December 31, 2018, respectively, assuming all other variable factors remain constant. This is due mainly to the fact that the Consolidated Company’s borrowings bear floating interest rate.

• 477 -

6. Fair value information

Consolidated companies use their market observations as much as possible when measuring their assets and liabilities. The level of fair value is based on the input value of the evaluation technique as follows:

• (1) Level 1: quoted prices (unadjusted) in active markets for identified assets or liabilities.

• (2) Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• (3) Level 3: inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

• (A) Fair value of financial instruments

The fair value of financial assets and liabilities were as follows (including information on fair value hierarchy, but excluding measurements that have similarities to fair value but are not fair value and those fair value cannot be reliably measured or inputs are unobservable in active markets):

December 31, 2018 Financial Assets Cash and cash equivalent Current financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income-current Non-current financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income-non-current Note receivables, accounts receivable and other accounts receivable Other assets Non-financial Assets Investment property Financial Liabilities Short-term loans Long-term loans-current portion Long-term loans Long-term accounts payable Long-term bills payable Other liabilities	Book value $ 16,587,624 1,300,897 251,629 4,861,274 1,978,339 3,125,995 223,244 38,350,359 $ 66,679,361 $ 913,732 863,801 3,810,129 4,338,338 349,729 149,012 $ 10,424,741		Fair	value
		Level 1 - 1,165,590 251,629 - 1,539,419 - - - 2,956,638 - - - - - - -	Level 2 - - - - - - - - - - - - - - - -	Level 3 - 135,307 - 4,861,274 438,920 - - 38,350,359 43,785,860 - - - - - - -	Total
					- 1,300,897 251,629 4,861,274 1,978,339 - - 38,350,359
					46,742,498
					- - - - - -
					-

• (B) Valuation techniques for financial instruments which is not measured at fair value:

The carrying amount of loans and receivables, financial assets carried at cost and financial liabilities measured after amortization cost in the consolidated financial statements of the Consolidated Company is close to its fair value.

• 478 -

• (C) Valuation techniques for financial instruments measured at fair value:

The merger company determines the input value with reference to the analysis of the financial status and operating results, recent transaction price, related equity instruments are quoted in non-active markets, similar tools offer in the active market and comparable company evaluation multiplier of the investee company and periodically updates the input value and information and any other necessary fair value adjustments to ensure that the evaluation results are reasonable.

• (i) Non-derivative financial instruments

Financial instruments, if there is a public market offer, then the public market offer for the fair value, Such as listing (cabinet) company stock and open-end fund beneficiary certification.

The fair value of the financial instruments held by the merging company in the case of a non-active market is as follows:

No public offer debt investment tools: The discounted cash flow model is used to estimate fair value, it is mainly assumed that it is measured by discounting the expected future cash flows of the investee by the rate of return of the monetary time value and the investment risk.

No public offer equity instruments: Use the net asset value method, The main assumptions are based on the net per share of the investor.

• (ii) Derivative financial instruments

Is evaluated according to the evaluation model accepted by the market users, such as the discount method and the option pricing model.

• (D) There have been no transfers from each level for the years ended December 31, 2018.

• (E) Statements of changes in fair value measurements of financial assets in Level 3

January 1, 2018 Adjustments for initial application of IFRS 9 January 1, 2018, adjusted Purchase Disposal Effects on deferred income tax liabilities Total gain and losses recognized in profit or loss December 31, 2018	Financial assets reported at fair value through profit or loss Investment Property Designated at initial recognition Derivative financial assets $ 38,226,532 156,603 - - 3,136,225 - 38,226,532 3,292,828 - - 1,998,060 - - (455,940) - 4,253 - - 119,574 161,633 - $ 38,350,359 4,996,581 -	Financial assets reported at fair value through profit or loss Investment Property Designated at initial recognition Derivative financial assets $ 38,226,532 156,603 - - 3,136,225 - 38,226,532 3,292,828 - - 1,998,060 - - (455,940) - 4,253 - - 119,574 161,633 - $ 38,350,359 4,996,581 -	Financial assets reported at fair value through other comprehensive income
	Investment Property $ 38,226,532 - 38,226,532 - - 4,253 119,574 $ 38,350,359	Designated at initial recognition 156,603 3,136,225 3,292,828 1,998,060 (455,940) - 161,633 4,996,581	Non-public quoted equity instruments
			- 666,841
			666,841 - - - (227,921)
			438,920

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• (F) Quantitative information on the measurement of fair value of significant unobservable input values(Level 3)

Level 3 refers to the measurement of the fair value of the input parameters are not based on market availability of information, must be based on the assumption that the appropriate estimates and adjustments. If the evaluation model can not be developed on its own, the fair value of the counterparty is used as the fair value. According to IFRS13, for the fair value of the third level classified at the fair value level, the firm shall provide quantitative information about the significant unobservable input values used for the fair value measure. Businesses do not need to create quantitative information to comply with this disclosure, if quantified unobservable input value is not built when enterprises are measuring fair value (Such as when a firm uses an unadjusted previous transaction price or a third party pricing information). Consolidated part of the Company's investment No active market open interest and debt instrument investment. The fair value of the merged company is classified as the third level of investment real estate, the determination of its fair value is subject to IFRSs, commissioned by the professional valuation agencies in accordance with market 。 evidence to support the value of the assessment (Please refer to note 5 (h.)). Due to the practice cannot fully grasp the significance observable input value and the relationship between the fair values, it did not expose the quantitative information. The fair value of the aforesaid assets at December 31, 2018 is $43,785,860 thousand.

The Group holds an investment in equity shares, which is classified as fair value through profits or losses in the level 3.

Most of fair values are classified in the level 3 based on single significant unobservable input values, only the equity instruments with inactive market may result in multiple unobservable input values which are all independent from each other.

Quantified information of significant unobservable inputs was as follows:

Item Financial assets at fair value through profits or losses and financial assets at fair value through other comprehensive income	Valuation technique Net Asset Value Method	Significant unobservable inputs  Net Asset Value  Lack of market liquidity discount rate 10%~30%	Inter-relationship between significant unobservable inputs and fair value measurement
			 Not applicable  Lack of market liquidity Higher discount, lower fair market value

• (G) The fair value is classified in the level 3 of the evaluation process

Consolidated company fair value measures the use of unobservable input values, and the input value can be observed must be based on not observable parameters for major adjustments, its fair value is classified in the level 3. The input source for this level is mainly issued by an external evaluation of the price report (Price letter).And then check the results of the evaluation to ensure consistency with the source of the evaluation and to ensure that the evaluation results are reasonable.

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Investment real estate is based on financial supervisory commission announcement of the evaluation methods and parameters of the assumption of commissioned by external values.

• (H) Fair value measurements in Level 3 – sensitivity analysis of reasonably possible alternative assumptions

The fair value of the financial instruments is reasonable, and the self-built evaluation model is not used for the fair value of the level 3. Therefore, it is not necessary to perform the sensitivity analysis of the possible alternative assumptions.

• x. Financial risk management

• Overview

The Consolidated Companies are exposed to the following risks due to the use of financial instruments:

• (1) Credit Risk

• (2) Liquidity risk

• (3) Market risk

The following discusses the Consolidated Company’s objectives, policies and processes for measuring and managing the risks mentioned above. For more quantitative information about the financial instruments, please refer to other related notes of the notes to the financial statements.

1. Risk management framework

The Board of Directors has overall responsibility for the oversight of the risk management framework in order to develop and monitor the Consolidated Company’s risk management policies and to report regularly on its activities.

The Consolidated Company’s risk management policies are established to identify and analyze the risks faced by the Consolidated Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Consolidated Company’s activities. The Consolidated Company, through their training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

• 481 -

The Audit Committee of the Consolidated Company oversees how management monitors compliance with the Consolidated Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Consolidated Company. The Audit Committee of the Consolidated Company is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

3. Credit Risk

Credit risk means the potential loss of the Consolidated Company if the clients or counterparties involved in that transaction default. The primary potential credit risk is from cash and accounts receivable.

(1) Accounts receivable and other receivables

The Consolidated Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Consolidated Company’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk, particularly in the current deteriorating economic circumstances.

The Consolidated Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Consolidated Company’s standard payment and delivery terms and conditions are offered. The Consolidated Company’s review includes external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval from the Risk Management Committee; these limits are reviewed quarterly. Customers that fail to meet the Consolidated Company’s benchmark creditworthiness may transact with the Consolidated Company only on a prepayment basis.

The Consolidated Company establishes an impairment allowance that represents its estimate of incurred losses in respect of trade receivables. The two components of this impairment allowance are specific loss component that relates to individually significant exposure and collective loss component which the loss was incurred but not identified. The collective component is based on historical payment experience of similar financial assets.

(2) Bank deposits

The credit risk exposure in the bank deposits is measured and monitored by the Consolidated Company’s finance department. As the Consolidated Company deals with the banks and other external parties with good credit standing and financial institutions, corporate organization and government agencies which are graded above investment level, management believes that the Consolidated Company do not have compliance issues and significant credit risk.

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4. Liquidity risk

Liquidity risk is the risk that the Consolidated Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Consolidated Company’s approach to managing liquidity is to ensure, as far as possible, that it always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Consolidated Company’s reputation. The management believes that the Consolidated Company do not have significant liquidity risk.

5. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Consolidated Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Consolidated Company buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out within the guidelines set by the Risk Management Committee.

(1) Currency risk

The Consolidated Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Consolidated Company’s entities, primarily the New Taiwan Dollars (NTD). The currencies used in these transactions are denominated in NTD, USD and RMB.

The Consolidated Company’s currency risk is not hedged as some of the currencies of the Consolidated Company’s foreign currency receivables and payables are the same, producing a natural hedge effect.

(2) Interest rate risk

The Consolidated Company’s Interest rate risk comes from long-term and short-term bank loans. The long-term bond issued by our company is fixed-rate loan, so there is no risk caused by the fluctuations of interest rates and fair value interest rate. The longterm and short-term bank loans calculated in floating-rate were made our company suffered cash flow interest rate risk, but most of risk were covered by cash and cash equivalents holding in floating-rate.

(3) Other market price risk

The Consolidated Company does not enter into any commodity contracts other than to meet the Consolidated Company’s expected usage and sales requirements; such contracts are not settled on the net basis.

• 483 -

y. Capital management

The Consolidated Company meets its objectives for managing capital to safeguard the capacity to continue to operate, to continue to provide a return on shareholders, interest of other related parties and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Consolidated Company may adjust the dividend payment to the shareholders, reduce the capital for redistribution to shareholders, issue new shares or sell assets to settle any liabilities. The Consolidated Company and other entities in the similar industry use the debt-to-equity ratio to manage capital. This ratio is determined using the total net debt and divided by the total capital. The net debt from the balance sheet is derived from the total liabilities less cash and cash equivalents. The total capital and equity include share capital, capital surplus, retained earnings, other equity and non-controlling interest plus net debt.

The Consolidated Company’s debt to equity ratios at the end of the reporting period as of December 31, 2018 were as follows:

Total liabilities Less: cash and cash equivalents Net debt Total equity Total liabilities and equity Debt to equity ratio	December 31, 2018 $ 23,977,749 (16,587,624) $ 7,390,125 $ 69,258,172 $ 76,648,297 9.64%

7. RELATED PARTY TRANSACTIONS

• a. Names and relationship with related parties

The followings are entities that have had transactions with related party during the periods covered in the consolidated financial statements.

Name of related party Relationship with the Group Zhong Gong Baoquan Ltd Investee as accounted for using equity method BES Engineering Corporation The board of the entity is the key management of the Company Core Pacific City Co., Ltd Same board with the Company Chung Kung Management and Maintenance of Investee as accounted for using equity method of Zhong Apartments Co., Ltd Gong Baoquan Ltd Coreasia Human Resources management Co., Ltd Subsidiary of BES Engineering Capital Machinery Co., Ltd The board of the entity is the key management of the Company All board of directors, general manager and deputy The main managements of the Company general manager Lucite International Asia Pacific PTE. Ltd Korea Associated company Lucite International U.K.Ltd Associated company

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b. The ultimate parent company

The Company is the ultimate parent company.

• c. Significant Transactions with related parties

• Receivables

Accounts Other receivables Payables Accounts Accounts payable Other payables Other payables	Types of related parties Other related parties Types of relatedparties Other related parties Associates Other related parties	December 31, 2018 $ 4 December 31, 2018 $ 1,601 4,976 4,548 $ 11,125

1. Payables

2. Other

Associates Other revenues Security service fees Rental income Other revenues Other expense Rental expense	For the Year Ended December 31, 2018
	$ 46 (23,978) 4 1,043 (882) (4,814)

Please refer to Note 6 h. for lease of land and buildings to related parties.

1. The Company had contracts with one of other related parties, for building construction projects. The land is provided by the Company and the related party is responsible for designing, constructing, sales and warranties. The Company pays constructional management fee on the basis of contract, and the related party pays the actual expenditures for every single month. As of December 31, 2018, no constructional management fee is paid by the Company.

2. The Company had contracts with BES Engineering, for mechanical engineering services projects and paid commission on the basis of actual construction. As of December 31, 2018, the construction project in-progress amounted to $1,532,800 thousand. As of December 31, 2018, the unpaid fees amounted to $1,376,787 thousand,. The refundable deposit at December 31, 2018 amounted to $22,850 thousand.

3. 485 -

4. The Company had contracts with Capital Machinery, for mechanical engineering services projects and paid commission on the basis of actual construction. As of December 31, 2018, the construction project in-progress amounted to $17,700 thousand. As of December 31, 2018, the unpaid fee amounted to $14,497 thousand.

5. KMC had incurred 11,505 thousand of commission expense due to Lucite International Asia Pacific PTE. Ltd Korea as KMC’s sales representative in December 31, 2018. The expense above had been included in sales and administration expenses.

6. KMC had incurred 3,766 thousand of technical services expense to other related parties in December 31, 2018. The expense above had been included in sales and administration expenses.

7. d. Key management personnel compensation

Short-term employee benefits Post-employment benefits	For the Year Ended December 31, 2018
	$ 270,104 7,533
	$ 277,637

8. PLEDGED ASSETS

The Consolidated Company pledged assets are as follows:

As of December 2018 and December 31, 2017, the consolidated Company provided the following assets and other items as a comprehensive credit contract and other purposes of the collateral.

Asset Time deposits Property, plant and equipment Investment property Investments accounted for using equity method Financial assets reported at fair value through other comprehensive income Financial assets reported at fair value through profit or loss Refundable deposit Use Right of Sea Areas	Purpose ofpledge Guarantee for purchases, collateral for long-term and short-term financial credit Collateral for long-term and short-term financial credit, United guarantee amount of convertible Bond United guarantee amount of convertible Bond Long-term bills payable Long-term bills payable Long-term bills payable Deposit for lawsuit Collateral for long-term financial credit	December 31, 2018 $ 100,038 4,453,343 5,995,969 1,378,279 915,400 477,405 91,557 625,190 $ 14,037,481

As of December 31, 2018, 4,000 thousand shares of a subsidiary of the Consolidated Company were pledged as collateral for long-term bills payable.

• 486 -

9. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

• a. As of December 31, 2018 and 2017, the Consolidated Company had the following unused letters of credit:

USD NTD RMB	December 31, 2018 $ 44,131 1,095,000 32,264

• b. As of December 31, 2018, the Consolidated Company had issued guaranty notes for bank loans, sales and purchases, and development plan aggregating to $13,748,669 thousand, US$20,000 thousand.

• c. At December 31, 2018, the Consolidated Company had contracts for various construction projects in-progress amounting to $8,511,323 thousand. As of December 31, 2018, the remaining future obligations under these contracts amounted to $4,219,235 thousand.

• d. As of December 31, 2018, the Company signed an agreement to purchase raw materials such as benzene, hydrogen and methylbenzene from Chinese Petroleum Corporation (CPC). Under this contract, the Company may purchase specified monthly volume of these raw materials at current month prices announced by the Chinese Petroleum Corporation with prepayment or domestic letter of credit.

• e. Important matters

• Land tax

  • (1) The Company successively received notice by the tax offices in September 2005 that the land tax of the training center in Cianjhen will be changed to another rate since 2000. The Company questioned the applicability of the law, thus, filed for the relevant administrative appeal procedures pursuant to article 35 of Tax Collection Act, which was rejected by the Supreme Administrative Court. The Company paid fully for the land tax which was mentioned in previous and was filed for the administrative appeal, in accordance with the law.

  • (2) On the other hand, the Kaohsiung tax authority was against the land tax which was mentioned in previous and was filed for the administrative appeal and prohibited the registration of parts of the Company’s land pursuant to paragraph 1 of article 24 of Tax Collection Act. The prohibition was cancelled in January 2011.

• 487 -

• (3) All lands located in No.356, Xiande section, Qianzhen Dist., Kaohsiung City 806 including 20 parcels of land and No. 4 Xingbang section including 14 parcels of lands were announced as “Soil Pollution Control Site” and “Site soil pollution remediation” by Kaohsiung City Government pursuant to Soil and Groundwater Pollution Remediation Act (hereafter refer as Remediation Act), which resulted in all lands of the Company being unable to be used. In accordance with article 12 of Land tax relief rules, the Company applied for land tax relief and review of 2009, 2010, 2011, 2012, 2013 and 2014 respectively, Kaohsiung taxing authority replied that it didn’t match with the regulation and issued the tax bill. The Company filed the administrative appeal, which was rejected and determined in 2009, 2010, 2011, 2012, 2013 and 2014. The Company asked the judges for explanation after collecting the relevant information.

• Case of Kaohsiung gas explosion forced disconnected pipeline

On July 31[st] 2014, there was an underground pipeline explosion incident in Kaohsiung city. Due to the post - disaster reconstruction project, Kaohsiung City Government issued a penalty letter No. 10335137100 on August 18[th] 2014 to order, the Company was forced to stop operations and prohibited the use of all petrochemical pipelines in the disaster area. The Company was not satisfied with the preceding penalty and filed a legal petition to the Administrative court for revoking the original claims for petition remedy in Sept. 2014. The case was rejected by the Kaohsiung High Administrative Court, which the Company was not satisfied with. Hence, the Company submitted an appeal in Feb. 2017.

1. Abolishment of the permission for Kaohsiung road and underground pipeline excavation and pipeline

Due to the August 1st Kaohsiung gas explosion, the Kaohsiung City Government Bureau of Water Resources issued the letter to Refining Division of CPC: abolishing the permission letter No. 950129 issued on Dec. 15th, 1990 and permission letter No. 050076 issued on April 13, 1991, and prohibited the roads for underground pipeline excavation and pipeline use. Since the pipeline prohibited for use belonged to the Company and assigned CPC to build, the Company, as the interested party, filed a petition to the Kaohsiung City Government to revoke the original punishment, which was rejected by Kaohsiung City Government Appeal Committee on Feb. 16th 2015. The Company filed the administrative legal action to Kaohsiung High Administrative Court in April 2015. Through the rejection sentenced by Kaohsiung High Administrative court in March 2017, the Company was unsatisfied with and proposed for the appeal in April of the same year. The supreme administrative court rejected the appeal in May 2018 and the case was closed.

1. Damage of Kaohsiung gas explosion

The above mentioned cases of Kaohsiung gas explosion and abolishment of the permission for Kaohsiung road and underground pipeline excavation were concerned with being legally forced to suspend by administrative executives, which were eligible for damage indemnity. For the interests of the Company, the Company filed the administrative legal action to Kaohsiung High Administrative Court in February 2018.

• 488 -

5. Equity trading dispute

The resolution, implementation of a signed tripartite supplemental agreement between the Company and PPG&GGC (which had been merged as Axiall company now), from the Company’s board meeting on April 21st 2016: trading the equity of Taiwan Chi chlorine Chemical Co., Ltd, total 6,400,000 shares at the sales price, US$100,000 thousand, which was equivalent to NT $ 3,225,000 thousand. After the expectation of the disposal interests, NT$2,838,761 thousand, the Company instantly informed Axiall company to carry out the equity trading of Taiwan Chi chlorine Chemical Co., Ltd. The Company issued the letter many times to ask Axiall to implement the agreement, however, Axiall repeatedly delayed actions. Hence, the Company filed the arbitration to American Arbitration Association in August 2016. Axiall submitted the pleadings in Sept. 2016 and asked PPG to participate in the lawsuit. Outside lawyers of PPG, in the Oct. of same year, represented that PPG is willing to negotiate the contract of equity trading. PPG signed the contract with the Company at the end of February 2017 and handled the equity transactions subsequently. The Company had received US$100,000 thousand in April of the same year and transferred the stock to finish the transaction. However, Axiall continued to be arbitrated against related claims such as the interest.

f. Contingent liabilities

1. The Company signed total three areas of land lease contracts with Kaohsiung branch of Taiwan International Ports Corporation, Ltd. In December 2013 and February 2014. The Kaohsiung Port Intercontinental Container Center 2nd Phase Project Petrochemical Oil Storage and Transportation Center S12 S15 Pier Post line Land was leased and the Company invested to build the construction of petrochemical oil storage and transportation facilities for the purpose of import and export and transport of petrochemical oil handling, storage and transportation etc... Kaohsiung branch of Taiwan International Ports Corporation, Ltd. delivered the land to the Company prior to the end of Dec. 2017. The term of the lease was 25 years from the date of delivery and the Company had the right to renew the lease at the end of the period. Per the contract, the Company had to pay rent of NT$1,650 thousand, NT$2,565 thousand, and NT$1,493 thousand respectively since the land was delivered. From the land delivery date of 3 years 6 months, the Company paid management fees of, NT$10,654 thousand, NT$24,605 thousand and NT$12,329 thousand respectively. The Company also placed Certificate of Deposits of NT$5,000 thousand and NT$13,000 thousand as performance bonds in December 2013 and February 2014 respectively. The Company, in August 2015, shortened the operating scale based on the adjustment of investment plan, which resulted in one of the performance bonds of NT$8,000 thousand, to not being able to be returned. Taiwan International Ports Corporation, Ltd. completed the transaction procedure prior to Nov. 2017. The Company started to implement land drilling and geological improvement project and started paying the land rent of those projects, which was NT$1,650 thousand and NT$1,493 thousand respectively each year.

2. 489 -

2. Dispute from the senior manager

• (1) Labor Dispute

The previous senior manager, who left the Company without transferring the duties and authorization, didn’t perform the duties since July 1[st] 2013 and the Company issued the letter to request to fulfill the agreement without any response from manager. Hence, the board of the Company dismissed the manager in October 2013. The manager asked the Company to pay pensions pursuant to Labor Standards Act as a labor worker, which was not reconciled through mediation.

The Civil litigation of Mr. Liu was filed in Taipei District Court and Kaohsiung District Court respectively in January 2014. Taipei District Court, in August 2015, considered that the contract of senior manager was ended for both side, and Expired Employee Retirement Policies of the Company is applicable, the Company shall pay NT$4,572 thousand to Mr. Liu. The Company was not satisfied with the original verdict and appealed for the 2[nd] sentence court. The 2[nd] sentence court sentenced to reject request from the Company in March 2017. The Company was not satisfied and proposed the appeal in April of the same year, which was under remedy trial in the Supreme Court.

For the part of Mr. Zhang, Kaohsiung District Court considered that the assigned relationship did not end, which means that the Expired Employee Retirement Policies of the Company does not apply. Mr. Zhang request for pension is without any basis, but according to the contract of both side, the Company shall pay salaries of NT$35 thousand, to Mr. Zhang, which was not satisfied by Mr. Zhang and this case was appealed to the 2[nd] sentence court. In July 2016, the 2[nd] sentence court rejected the request from Mr. Zhang but he re-appealed to the 3[rd] sentence in August of the same year.

(2) Disclosure Secret Case

Managers who left the office without authorization was suspected to be involve in business encroachment, theft of business secrets. To protect Company interests, the Company filed criminal appeal. The case was concluded by the Taiwan Miaoli Local Court in January 2017 and the relevant defendants were prosecuted. The civil litigation derived from the case is waiting for hearing by the Taipei District Court and Miaoli District Court. The supreme administrative court rejected the appeal in June 2018. Please refer to Note8 for details of deposit for lawsuit.

• 490 -

3. Accusation of business failures

A Gas explosion happened in Heng Yi chemical plant next to the Toufen plant and caused workers to be burned on Jan. 28[th] 2013, which evolved into accusations of business failures. Since the incident happened in the public discharged area of the industrial site, it was suspected to contain excessive value of the company's emissions with the sampling identification and the Company’s manager was prosecuted as defendant per the victim’s request. This case was not prosecuted after the judgment decision from Miaoli District Attorney, hence, the victims filed the reconsideration and Taichung High Prosecutor's Office remanded the case back to the Miaoli District Attorney for review. The victims of Heng Yi chemical plant only prosecuted the Company and managers in Feb. 2015 and asked for the joint damaged compensation NT$6,920 thousand, which awaits hearing by Miaoli local court. In September of the same year, both sides agreed to withdraw the litigations. Trial procedure was recovered in Feb. 2016 and criminal litigation was determined not to be prosecuted in March 2016. The verdict of civil litigation was won in March 2016, with the formal decision awaiting final judgment. The Company proposed the appeal for remedy focus on the unsatisfied parts. This case was under hearing in High Court Taichung Branch currently.

4. Contract Fraud of Shanghai industry

On August 6th 2014, the reinvestment company, Weihua and Weiqiang, filed the civil appeal to Yangpu District Court to ask Coal Chemical Group Co., Ltd of shanghai industry to pay all overdrafts of the contract. However, Coal Chemical Group Co., Ltd of shanghai industry didn’t perform the first phase of repayment according to Court’s mediation report, Weihua and Weiqiang, on Sept. 2nd 2014, applied to Yangpu District Court for the enforcement and sealed all coal tar of Coal Chemical Group Co., Ltd of shanghai industry, the total coal tar sealed was 5,216 tons and 4,777 tons were sold. Subsequently, Weihua and Weijiang Company and Coal Chemical Group Co., Ltd of shanghai industry would continue negotiations on unrealized creditors and requested Coal Chemical Group Co., Ltd of shanghai industry to propose the more specific repayment plan. Weihua and Weiqiang estimated depreciation of the accounts receivable to be, RMB19,274 thousand and RMB8,276 thousand respectively. Besides, Weihua and Weijiang Company reported to the police the relevant persons of Coal Chemical Group Co., Ltd of shanghai industry that are suspected to be involve with the contract fraud and other criminal matters. The police rejected the report due to insufficient evidences, therefore Weihua hired a local lawyer to assist with Shanghai police and Shanghai economics investigation group. The case is now under investigation.

• 491 -

• The Company reinvested in China Gemini Development Co., Ltd. in conjunction with the Chinese engineering company to apply for selection "C1, D1 joint development investment case”. Since Taipei City Express Bureau issued the letter without expectation in requiring the Company to open financing guarantee report of development funds within 30 days and other unreasonable validation conditions, resulted in the Taipei City Government using the reason of the China Gemini Development Co., Ltd. team being unable to sign the contract in the specified period, thus unilaterally announced the annulment. Based on this issue, China Gemini Development Co., Ltd. filed a petition and request for administrative remedies to the Ministry of Communications and High Administrative Court., which was under hearing and was rejected by Supreme Administrative Court in August 2017. This case was closed.

• Petition for Violation of gender equality law

Mr. Wu was an employee of the China Paint Material Corporation, the Company’s reinvested subsidiary, and was assigned to perform the duties in China. But later he asked for leave without complying with the Company’s regulation and left the position for more than three days, hence, the labor contract was terminated. The employee applied to Taipei City Government for the labor dispute mediation as the reason that the Company violated the gender equality law. After the mediation of Taipei City Government, China Paint Material Corporation was considered to violate the gender equality law and was sentenced to pay the penalty of NT$300 thousand on August 27[th] 2015. China Paint Material Corporation was not satisfied with the judgment and filed a petition to Labor Department of the Executive Yuan. The Labor Department of the Executive Yuan decided the original punishment withdrawn and did the other punishment in March 2016. The Company was filing the administrative remedy to the new punishment. A statement was made in advance in April of the same year. After the Taipei city government maintained the original punishment, it filed another petition in September of the same year. The Company’s petition was rejected by Appeal committee in June 2017 so that the Company proposed the administrative legislation in August of the same year per law, which was been ruling to prevail by Taipei supreme administrative court. The case was closed.

1. civil compensation for Residents living in An shun

2. (1) The 1[st] case

In 2008 and 2009, Mr. Wu and others filed civil and national compensation lawsuit to the Ministry of Economic Affairs, Tainan City Government, Tainan City Environmental Protection Bureau and the Company (Hereinafter referred to as 1st case of Tainan An shun plant civil compensation) and they claimed that during 1942 and 1983, the previous Taiwan Alkali Co. Ltd. An-shun plant, produced mercury and dioxins in its production operations and polluted the living environment, which resulted in the population consuming contaminated fish and shellfish over time, which resulted in long term health issues. The Ministry of Economic Affairs had control and management responsibility of the previous Taiwan Alkali Co. Ltd, and whether due to illegal actions, or a lack of attention in performing their duties, the Ministry of Economic Affairs as the ultimate employer of the chairman of CPDC, should take responsibility. Hence, the prosecutors claim that the Ministry of Economic Affairs shall take the responsibility for the compensation. Mr. Wu and

• 492 -

others also claimed that Tainan City Government and Tainan City Environmental Protection Agency were the competent authorities and executive authorities of the waste disposal law but the authorities didn’t supervise and require the An-shun plant to implement pollution prevention and control acts, thus should be jointly responsible for any re-compensation. Also, Mr. Wu and others claim that the Company did not perform any removal and remediation of pollutants after being ordered to merge with the previous Taiwan Alkali An-shun plant, so they claimed the Company shall also take joint responsibility on the compensation. Mr. Wu and others asked the Ministry of Economic Affairs, Tainan City Government, Tainan City Environmental Protection Bureau and the Company to jointly bore the cost of medical expenses and mental compensation for NT$370,800 thousand and the interest was calculated by an annual interest rate 5% from the date when the litigation was initiated by the defendants until the final payment of compensation. Due to unpaid referee fees, due from the plaintiff, the Tainan District Court rejected the litigation claims from these 17 persons in January 2010. Mr. Chen appealed to the Tainan District Court asking the Company for medication, health examination fee and reparations, to the amount of NT$2,300 thousand, which was incorporated into this case, the total compensation amount was NT$351,750 thousand. This case was tried by the Tainan District Court in December 2015 and judged that the Company and the Ministry of Economic Affairs to be jointly responsible for NT$160,000 thousand payable to the plaintiff. The Company was not satisfied with the result and filed an appeal. In August of 2017, the High court sentenced to order the Company to compensate the plaintiff for NT$190,000 thousand by self, which the Company was not satisfied with and had proposed the appeal for remedy in Sept. of the same year. The supreme court held oral argument on September 28, 2018, and judgment was sentenced on November 11, 2018, the supreme court sentenced to order the Company to compensate the plaintiff for NT$190,000 thousand. The Company made a payment of compensation and related interests to 143 plaintiffs before the end of January 2019. The part related to medical remedy of the case was abandoned for secondary trial.

• (2) The 2[nd] case

Mr. Chen and others filed civil and national compensation lawsuit to the Company and the Ministry of Economic Affairs on March 14th 2017 (Hereinafter referred to as 1st case of the Tainan An-shun plant civil compensation), they claimed the Company and the Ministry of Economic Affairs had to jointly compensate the plaintiff NT$80,915 thousand. The verdict of the 3rd national compensation in 2008 of the Tainan An-shun plant civil compensation 1st case was cited as the reason to be litigated. However, the Company claimed that there was a misunderstanding of the theoretical and practical nature of epidemiology causality versus the verdict and the infringement that may be created. There were disputable factors on both factual and legal matters. During the 1st and 2nd instance of the An-shun plant Civil Compensation litigation under hearing, the Company once again put forward the relevant academic articles to prove that there was no causality between pollution from Tainan An-shun plant and diabetes. Moreover, the plaintiffs in this case, despite the reasonableness of their claims, did not put forth any litigation before the expiry of the statutes of limitations. Thus, in this 2nd case of the Tainan An-shun plant civil compensation, the Company continued to seek for the jurisdiction remedies to protect the Company and shareholder interests.

• 493 -

• g. The Company leases plant assets, and vehicles for operating uses. The lease payment was $71,422 thousand and $51,705 thousand for the year of 2018. The expected least payments for future are as below:

future are as below:
Year 1 year 1~5 years 5 years above	Amounts
	$ 69,049 75,082 163,171
	$ 307,302

10. Major disaster losses: None

11. Significant matters after the event

• a. On March 11, 2019, the Company invested in Core Pacific City Co., Ltd by issuing 123,528 thousand preferred shares amounting to NT$1,235,278 thousand.

12. OTHER

• a. The nature of operating costs and expenses were as follows:

By function By nature		For theyear ended December 31,2018	For theyear ended December 31,2018	For theyear ended December 31,2018
	Operating cost	Operating expense	Non-Operating expense	Total
Employee benefit
Salary	1,311,838	771,446	246	2,083,530
Health and labor insurance	101,686	50,472	-	152,158
Pension	49,809	25,273	-	75,082
Others	29,380	12,591	-	41,971
Depreciation	1,337,785	195,640	5,969	1,539,394
Depletion	-	-	-	-
Amortization	5,199	14,337	-	19,536

• 494 -

13. OTHER DISCLOSURE

• a. Information on significant transactions

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Group:

1. Loans to other parties:

==> picture [494 x 141] intentionally omitted <==

----- Start of picture text -----

(In Thousands of New Taiwan Dollars)
Transacti Collateral
Highest on
balance of Range of amount
financing Actual interest Purposes of for
to other usage rates fund business Reasons Maximum
parties amount during financing between for short- Individual limit of
Name of Account Related during the Ending during the the for the two term Loss funding fund
Number Name of lender borrower name party period balance period period borrower parties financing allowance Item Value loan limits financing
1 Core Pacific Twin Core Pacific Other Yes 7,069 7,069 7,069 0 2 - Operating - - 67,613 67,613
Star (Myanmar) Pioneer Receivable
Investment (Myanmar)
Company Ltd Company
Ltd
----- End of picture text -----

Note 1: Numbering nature of borrowing as follows:

Transaction for business between two parties－1

Short-term financing－2

Note 2: The financing limit was 40% of Core Pacific Twin Star (Myanmar) shares.

Note 3: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statements.

2. Guarantees and endorsements for other parties:

										(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
No	Name of guarantor	Counter-party and endor	of guarantee sement	Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during the period	Balance of guarantees and endorsements as of reporting date	Actual usage amount during theperiod	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and endorsements	Parent company endorsements/ guarantees to third parties on behalf of subsidiary	Subsidiary endorsements/ guarantees to third parties on behalf of parent company	Endorsements/ guarantees to third parties on behalf of companies in Mainland China
		Name	Relationship with the Company
1	Changzhou Huijie new material Co., Ltd	Changzhou Suhwen environmental habitant construction Co.,Ltd	6	280,320	280,320	280,320	-	-	0.42%	280,320	N	N	Y

Note 1: The information of guarantees and endorsements for other parties of the Company and its subsidiaries are disclosed separately and numbering as follows:

Parent company－0

Subsidiary starts from 1

• 495 -

Note 2: Seven types of the relationship between Counter-party of guarantee and endorsement as follows:

Transaction for business between two parties

The Company directly or indirectly holds over 50% of voting rights of shares of entities

The entities directly or indirectly hold over 50% of voting rights of shares of the Company

The relationship between entities which are all held over 90% of voting rights of shares of these entities by the Company

Mutual guarantees or endorsements in accordance with contracts

The entities are proportionally endorsed by all shareholders from mutual investments

3. Securities held as of December 31, 2018 (excluding investment in subsidiaries, associates and joint ventures):

(In Thousands of New Taiwan Dollars)

Name of holder	Category and name of security	Relationship with company	Account title		Ending balance	Ending balance		Highest Percentage of ownership in interim (%)	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
CPDC	Yuanta Financial Holdings Yuanta/P-shares SSE50 ETF Guotai A50 ETF BES Engineering Co. CHINA DEVELOPMENT FINANCIAL HOLDING CORP. Handy Chemical Corparation .ltd Overseas Investment & Development Corp Core Pacific City Co., Ltd. Praxair Chemax Semiconductor Materials ZOWIE Technology Corporation showroom Electronics Co., Ltd. Aetas Technology Inc.	None None None The Company is a director of the investee company None The Company is a director of an investee company None Same board with the company The Company is a director of the investee company 〞 〞 〞	Financial assets designated at fair value through profit or loss－current 〞 〞 Financial assets at fair value through other comprehensive income－non-current 〞 〞 〞 Financial assets designated at fair value through profit or loss－non-current Financial assets at fair value through other comprehensive income－non-current 〞 〞 〞	30,938,819 10,313,000 16,378,000 149,243,449 44,684,712 407,000 2,600,000 298,723,070 9,455,778 8,815 41,670 287,961	478,005 267,932 271,056 1,062,613 434,335 1,461 26,000 3,248,545 438,920 358 - -	0.26 - - 9.75 0.30 4.52 2.89 20.92 49.00 0.03 0.21 0.58	478,005 267,932 271,056 1,062,613 434,335 1,461 26,000 3,248,545 438,920 358 - -	0.26 - - 9.75 0.30 4.52 2.89 20.92 49.00 0.03 0.21 0.58

• 496 -

Name of holder	Category and name of security	Relationship with company	Account title		Ending balance	Ending balance		Highest Percentage of ownership in interim (%)	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd Jiangsu Weiming Petrochemical Corporation Tsou Seen Chemical Industries Corporation	Taiwan Business Bank Core Pacific City Co., Ltd. Yuntong wealth increasing profits TAIWAN TEA CORPORATION Good Company TaiRx, Inc. Total	None Same board with the company None The Company is a director of an investee company 〞 〞	Financial assets at fair value through other comprehensive income－current Financial assets designated at fair value through profit or loss－non-current Financial assets designated at fair value through profit or loss-current Financial assets designated at fair value through profit or loss-current Financial assets at fair value through other comprehensive income－non-current 〞	24,311,960 160,111,000 - 9,618,000 750,000 850,000	251,629 1,612,729 135,307 148,598 - 14,652	- 11.21 - 1.22 - -	251,629 1,612,729 135,307 148,598 - 14,652	- 11.21 - 1.22 - -
					8,392,140		8,392,140

1. Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:

										(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of company	Category and name of security	Account name	Name of counter- party	Relationship with the company	Beginning Balance		Pu	rchase		Sa	les		Ending Balance
					Shares	Amount	Shares	Amount	Shares	Price	Cost	Gain (loss) on **disposal **	Shares	Amount
The Company	Securities sold under repurchase agreements	Cash equivalents	Taching Bills Finance Co., Ltd.	None	-	190,000	-	20,079,547	-	19,470,362	19,470,362	-	-	799,185
			Mega Bills Finance Co., Ltd.	〞	-	261,966	-	7,230,860	-	7,122,795	7,122,795	-	-	370,031
			International Bills Finance Co.,Ltd.	〞	-	-	-	9,215,159	-	8,685,335	8,685,335	-	-	529,824
			China Bills Finance Corporation	〞	-	809,672	-	20,232,382	-	20,372,015	20,372,015	-	-	670,039
	ETF	Financial assets at fair value through profits or losses－ current	Yuanta/P- shares SSE50 ETF	〞	9,091,000	249,590	10,313,000	289,332	9,091,000	328,531	249,590	78,941	10,313,000	289,332

1. Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None.

2. 497 -

3. Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None.

4. Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

								(In Thousands of New Taiwan Dollars) ions with ifferent others Notes/Accounts receivable (payable) Note Payment terms Ending balance Percentage of total notes/accounts receivable (payable) OA 90 days 65,945 3% (Note) OA 90 days 5,423 -% 〞 OA 90 days 112,586 4% 〞 - 60,233 2% 〞 OA 30 days - -% 〞	(In Thousands of New Taiwan Dollars) ions with ifferent others Notes/Accounts receivable (payable) Note Payment terms Ending balance Percentage of total notes/accounts receivable (payable) OA 90 days 65,945 3% (Note) OA 90 days 5,423 -% 〞 OA 90 days 112,586 4% 〞 - 60,233 2% 〞 OA 30 days - -% 〞	(In Thousands of New Taiwan Dollars) ions with ifferent others Notes/Accounts receivable (payable) Note Payment terms Ending balance Percentage of total notes/accounts receivable (payable) OA 90 days 65,945 3% (Note) OA 90 days 5,423 -% 〞 OA 90 days 112,586 4% 〞 - 60,233 2% 〞 OA 30 days - -% 〞	(In Thousands of New Taiwan Dollars) ions with ifferent others Notes/Accounts receivable (payable) Note Payment terms Ending balance Percentage of total notes/accounts receivable (payable) OA 90 days 65,945 3% (Note) OA 90 days 5,423 -% 〞 OA 90 days 112,586 4% 〞 - 60,233 2% 〞 OA 30 days - -% 〞
Name of company	Relatedparty	**Nature of relationships **		Transaction Details			Transact terms d **from **	ions with ifferent others	Notes/Accounts receivable (payable)		Note
			Purchase/ Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company	Tsou Seen Chemical Industries Corporation Weihua (Rudong) Trade Co., Ltd Weiqiang International Trade (Shanghai) Co., Ltd. Kaohsiung Monomer Company Ltd Chemax International Corp.	Subsidiary Sub-subsidiary Sub-subsidiary Affiliated company accounted for using equity method Subsidiary	Sales Sales Sales Sales Sales	(1,188,874) (397,722) (111,863) (644,031) (102,962)	3% 1% - % 2% - %	3 Month 3 Month 3 Month 1 Month 1 Month	- - - - -	OA 90 days OA 90 days OA 90 days - OA 30 days	65,945 5,423 112,586 60,233 -	3% -% 4% 2% -%	(Note) 〞 〞 〞 〞

Note: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statements.

1. Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of capital stock:

Name of company	Related party	Nature of relationship	Ending balance	Turnover days	Overdue	Overdue	Amounts received in subsequent period(Note 1)	Allowance for bad debts
					Amount	Action taken
The Company	Weiqiang International Trade (Shanghai) Co.,Ltd.	Sub-subsidiary	112,586	1.99	-	-	107,535	-

Note: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statement

1. Trading in derivative instruments: Please refer to notes 6

2. 498 -

10. Business relationships and significant intercompany transactions:

(Amounts in Thousands of New Taiwan Dollars)

No. (Note 1)	Name of company	Name of counter-party	Nature of relationship	**Intercompany **	**Intercompany **	Transactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0 0 0 0 0 0 1 2 3 4 5 6	The Company The Company The Company The Company The Company The Company Weihua (Rudong) Trade Co., Ltd (Weihua) Tsou Seen Chemical Industries Corporation(TSCIC) Chemax International Corp. (CIC) CPDC Green Technology Corp. (CPDC GT) (Original name: CPDC Engineering Co., Ltd.) Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang) KaoshingMonomer Company	Weihua (Rudong) Trade Co., Ltd (Weihua) Tsou Seen Chemical Industries Corporation(TSCIC) Chemax International Corp. (CIC) Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang) CPDC Green Technology Corp. (CPDC GT) (Original name: CPDC Engineering Co., Ltd.) Kaoshing Monomer Company The Company The Company The Company The Company The Company The Company	1 1 1 1 1 1 2 2 2 2 2 2	Sales revenue Sales revenue Sales revenue Sales revenue Repair expense Sales revenue Cost of goods sold Cost of goods sold Cost of goods sold Sales revenue Cost of goods sold Cost ofgoods sold	397,722 1,188,874 102,962 111,863 238,291 644,031 397,722 1,188,874 102,962 238,291 111,863 644,031	OA 90 days OA 90 days OA 30 days OA 90 days Base on contract OA 30 days OA 90 days OA 90 days OA 30 days Base on contract OA 90 days OA 30 days	1.03% 3.09% 0.27% 0.29% 0.62% 1.44% 1.03% 3.09% 0.27% 0.62% 0.29% 1.78%

Note 1: Company numbering as follows:

Parent company－0

Subsidiary starts from 1

Note 2: The numbering of the relationship between transaction parties as follows:

Parent company to subsidiary－1

Subsidiary to parent company－2

Subsidiary to subsidiary－3

Subsidiary to sub-subsidiary－4

Sub-subsidiary to sub-subsidiary－5

Note 3: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statement

• 499 -

b. Information on investees:

The following is the information on investees for the year 2018 (excluding information on investees in Mainland China):

(In Thousands of New Taiwan Dollars)

Name of investor	Name of investee	Location	Main businesses and products	Original inves	tment amount	Balance	**as of December **	31, 2018	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2018	December 31, 2017	Shares (thousands)	Percentage of ownership	Carrying value
The Company 〞 〞 〞 〞 〞 〞 〞 〞 〞 〞 CPDC Investment (BVI) Co Ltd.	Kaohsiung Monomer Company Ltd Zhong gong baoquan Ltd. Tao Zhu Construction & Development Co., Ltd. Chemax International Corp. CPDC Investment (BVI) Co Ltd. Tsou Seen Chemical Industries Corporation CPDC Green Technology Corp. (Original name: CPDC Engineering Co., Ltd.) Rich Equrties Ltd. Unichem Development Limited Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. Cong Ty Tnhh Dau Tu Xay Dung Thanh Phong Core Pacific Overseas Holdings Ltd	1,Hsing Kung Road,Ta She P O Box 6-25 Nantze,Kaohsiung (815), Taiwan 6F., No.12, Dongxing Rd., Taipei City 105, Taiwan 8F., No.12, Dongxing Rd., Taipei City 105, Taiwan 8F., No.12, Dongxing Rd., Taipei City 105, Taiwan Citco Building, Wickhams Cay, P.O. Box662 No.1, Jingjin Rd., Fangliao Township, Pingtung County 940, Taiwan 14F.-16, No.61, Wufu 3rd Rd., Qianjin Dist., Kaohsiung City 801, Taiwan Level3,Alexander House,35 Cybercity,Ebene, Mauritius Room 511, 5/F, Tower 1 Silvercord 30 Canton Road TSIM SHA TSUI KOWLOON 16F., No.12, Dongxing Rd., Taipei City 105, Taiwan 338/18, Anyang Wang Road , the fifth county of Ho Chi Minh City, Vietnam Akra Bldg., 24 De Castro Street, Wickhams Cay I, Road Town,Tortola,British Virgin Islands	Methyl Methacrylate Monomer Security consultants Commissioned to create a vendor to build the housing, commercial buildings and plant rental business, management of land development and playgrounds and other related business investment Announcement energy products besides petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other Holding company Dicalcium phosphate Mechanical engineering Holding company Holding company Real estate investment and development Engaged in construction, real estate, building constructional consulting, lease equipment and wholesale of building materials Holding company	- 14,400 100,000 - 904,946 760,000 100,000 5,996 5,894,124 2,000,000 609,347 808,564	- 14,400 100,000 145,000 904,946 550,000 100,000 5,996 3,961,611 2,000,000 - 808,564	20,000,000 1,440,000 10,000,000 - 26,580,000 96,000,000 15,000,000 180,000 191,477,752 200,000,000 458,637,500,000 26,580,000	40.00% 24.00% 100.00% -% 100.00% 100.00% 100.00% 100.00% 100.00% 90.87% 97.87% 45.19%	1,378,279 19,598 76,412 - 931,828 1,610,294 140,183 5,254 5,223,987 2,395,160 607,203 925,868	2,482,675 9,884 (1,924) 19,800 (105,703) 173,826 (20,983) 45 (94,327) (25,603) 8,615 (233,662)	993,070 2,372 (1,924) 19,800 (105,703) 173,826 (20,983) 45 (94,327) (23,266) 8,431 (105,592)	Note 1 Note 1 Note 2 Note 2&5&6 Note 2&4 Note 2&5&6 Note 2&5 Note 2&4 Note 2&4&5 Note 2&5 Note 2&4&5 Note 2&4

• 500 -

**Name of investor **	Name of investee	**Location **	Main businesses and products	Original inves	tment amount	Balance	**as of December **	31, 2018	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2018	December 31, 2017	Shares (thousands)	Percentage of ownership	Carrying value
Tao Zhu Construction & Development Co., Ltd. Tsou Seen Chemical Industries Corporation Chung Hua Shuang Tzu Hsing Kai Fa Co.,Ltd. Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd	Da-ying Construction Ltd. Taivex Therapeutics Inc. Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd Core Pacific Pioneer (Myanmar) Company Ltd	10F.-5, No.51, Fuxing Rd., Taoyuan Dist., Taoyuan City 330, Taiwan 8F., No.12, Dongxing Rd., Taipei City 105, Taiwan 112 ROBINSON ROAD #05-01 ROBINSON 112 SINGAPORE (068902) NO.153/Ka,Kyun Shwe Mmyaing Lane (2) ,23 ward, Thingangyun Townshin Yangon NO.153/Ka,Kyun Shwe Mmyaing Lane (2) ,23 ward, Thingangyun Townshin Yangon	Engineering, construction contracting business Engaged in biotechnology, pharmaceutical research and development and marketing Holding company Engineering, construction contracting business Building construction, real estate management, development and sale	22,500 462,246 180,817 169,921 12,355	22,500 462,246 6,036 5,355 -	- 46,224,551 200,000 5,500,001 400,000	100.00% 91.10% 100% 100% 80%	24,628 384,867 169,919 162,704 11,627	(107) (76,894) (9,781) (5,622) (466)	(107) (7,051) (9,781) (5,622) (378)	Note 2&3 Note 2 Note 2&4 Note 2&4 Note 2&4
								14,067,811	2,119,773	822,810

Note1: The Company adopts the equity method to evaluate the investment company.

Note2: The Company has direct or indirect control of the invested company. If the invested company has direct or indirect control, it shall expose the relevant information of the following 2 to 10 transactions of the investee company.

Note3: Limited company expressed by the amount of capital, no shares issued.

Note4: The original investment amount is the foreign currency, at the prevailing exchange rate.

Note5: This transaction has been written off when the consolidated statement has been prepared.

Note6: The Company re-structured the business organization on August 1 2018, which was a combination of Chemax and Tsou Seen, Chemax was dissolved company and Tsou Seen was continuing company.

• 501 -

c. Information on investment in mainland China:

1. The names of investees in Mainland China, the main businesses and products, and other information:

								(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)	(Amounts in Thousands of New Taiwan Dollars)
Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment (Note1)	Accumulated outflow of investment from Taiwan as of January 1, 2017	Investm	ent flows	Accumulated outflow of investment from Taiwan as of December 31, 2017	Net income (losses) of the investee (Note 2)	Percentage of ownership	Investment income(losses)	Book value	Accumulated remittance of earnings in current period
					Out- flow	In- flow
Weihua (Rudong) Trade Co., Ltd (Weihua)	Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading	763,460	(b)、(c)	763,460	-	-	763,460	24	100.00%	24	486,683	-
Weiqiang International Trade (Shanghai) Co., Ltd. (Weiqiang)	Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading.	211,560	(a)、(c)	119,300	92,260	-	211,560	13,864	100.00%	13,864	120,233	-
Weida (Zhangzhou) Consultant Service Co.,Ltd.(Weida)	Consultancy	13,171	(b)	13,171	-	-	13,171	(428)	100.00%	(428)	2,544	-
Jiangsu Weiming Petrochemical Corporation (Weiming)	Petrochemical supporting facility construction	3,135,734	(a)、(b)	3,743,354	607,620	-	3,743,354	(28,273)	100.00%	(28,273)	3,442,445	-
Zhangzhou Weida Petrochemical Co., Ltd (Weida PC)	Engaged in trading of petroleum chemical products, electronic chemicals variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading	30,648	(b)	30,648	-	-	30,648	(5,679)	100.00%	(5,679)	16,445	-
Kunshan Weiqin Management consultant Co., Ltd (Weiqin)	Management consultant	29,664	(b)	29,664	-	-	29,664	(10,048)	100.00%	(10,048)	8,632	-
Zhejiang Wedge new material Co., Ltd (Wedge)	Engaged in trading of Synthetic fiber material	31,278	(b)	31,278	-	-	31,278	(1,159)	100.00%	(1,159)	25,973	-
Changzhou Huijie new material Co., Ltd	Engaged in engineering plastic and high valued petroleum chemical products	1,860,113	(b)	-	1,324,893		1,324,893	(47,176)	100.00%	(47,176)	1,128,883

• 502 -

2. Limitation on investment in Mainland China:

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----- Start of picture text -----

Accumulated Investment in Investment Amounts
Upper Limit on
Mainland China as of December Authorized by
Investment
31, 2018 Investment Commission, MOEA
6,937,208 9,135,021 Note4
Note1: There are three ways to invest as follows:
----- End of picture text -----

• (a) The Company direct investment to China. (b) The Company through third regional company (UDL) investment to China.

• (c) Others. (The Company through subsidiary investment to China.)

Note2: In the field “net income (losses) of the investee”:

• (a) If it is in preparation, no investment profit or loss, should be explained.

• (b) There are three ways to identify the basis of investment profit or loss, should be explained.

• (b.1) financial statements audit by international accounting firm with a relationship with Taiwan accounting firm.

• (b.2) financial statements audit by the Company’s audit CPA.

(b.3) others. Note3: The amount in this table should be presented in New Taiwan Dollar.

Note4: The cumulative investment amount or investment proportion to China cannot over the Company’s net value of 60%. The Company got certified documents of operating headquarters issued by Industrial Development Bureau, Ministry of Economic Affairs on October 18, 2018, so not subject to the above regulations. Valid period to October 14, 2021.

3. Significant transactions: None

The significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions”.

14. SEGMENT INFORMATION

a. General Information

The Consolidated Company identifies Arylonitrile & acetic acid department and Caprolactam department as reportable segments based on factors such as product types, manufacturing procedure, customer types, and operating activities.

The reportable segments of the Consolidated Company are independent business units which offer different products and services. Each business unit needs different technologies, resources and marketing strategies, thus should administer separately. The operating segment has a segment manager who is directly accountable to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial results, forecasts, or plans for the segment.

• 503 -

• b. Information for each segment’s revenue / expense, asset, liability, measurement basis , and adjustment

Non-operating income and loss, income tax expense and non-recurring gain or loss is not allocated to reportable segments. In addition, not all of the profit or loss of the reportable segments include significant non-cash items other than depreciation and amortization. Total reportable segments’ profit or loss is reconciled with the continuing operations’ profit or loss before tax.

There was no material inconsistency between the accounting policies adopted for the operating segment and the accounting policies described in Note 2. The Consolidated Company use the operating profit as the measurement for segment profit and the basis of performance assessment. Operating segments’ profit and loss and total assets exclude operating expenses and assets of the corporate management.

For the Year Ended December 31, 2018 Revenue Revenues from external customers Revenues from transactions with other operating segments of the same entity Total segment revenue Depreciation and amortization Reported segment profit or loss Assets Capital expenditure of non- current assets Segment assets Segment liabilities	Acrylonitrile & Acetic Acid $ 12,011,203 - $ 12,011,203 $ ,143,171 $ 2,808,901 $ ,363,188 $ 5,173,756 $ 2,868,366	Caprolactam 23,157,176 - 23,157,176 1,188,632 1,590,529 663,248 13,500,076 5,527,184	Other 10,257,484 238,291 10,495,775 227,127 3,385,827 3,246,912 76,010,394 15,652,225	Adjustment and eliminations (644,031) (238,291) (882,322) - (993,070) - (1,448,305) (70,026)	**Total **
					44,781,832 -
					44,781,832
					1,558,930
					6,792,187
					4,273,348
					93,235,921
					23,977,749

• c. Geographical Areas

The Consolidated Company’s noncurrent assets located overseas are immaterial. Revenues from domestic and overseas customers for 2018 and 2017 were as follows:

domestic and overseas customers for 2018 and 2017 were as follows:
Region Operating revenue from domestic sales Asia Other (individual area under 10%) Total operating revenue	For the Years Ended December 31, 2018
	$ 34,074,351 10,303,668 403,813
	$ 44,781,832

• 504 -

d. Major Customers

Customers generating over 10% of total revenue for 2018 and 2017 were as follows:

Customers 1018 1020 1019 1011	For the Years Ended December 31, 2018
	$ 5,502,844 5,259,325 4,799,812 4,675,062

• 505 -

Special Note

1. Affiliate Reports：None

2. II. Private placement of securities for the most recent year and until the date of publication of the annual report: N/A

3. III. Holding or disposal of the Company’s stock by subsidiaries for the most recent year and until the date of publication of the annual report: N/A

4. IV. Supplementary Disclosure: N/A

5. V. Conditions that will materially affect shareholders’ equity or price of securities as referred to in Paragraph 2.2 of Article 36 of the Securities and Exchange Act:

Please refer to the statement of this annual report on pages no. 369 to no. 393 on the litigation cases and pages no. 188 to no. 198 and no. 233 to no. 239 of the notes on land pollution incidents and significant contingent liabilities and outstanding contractual commitments.

• 506 -

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China Petrochemical Dev

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• Chairman : Lin Ke Ming