CPDC — Annual Report 2019

Jun 8, 2020

Stock Code: 1314

Website: 1.http://mops.twse.com.tw (MOPS)

2.http://www.cpdc.com.tw (Website of China Petrochemical Development Corporation)

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Annual Report 2019

Published on April 30, 2020

Notice to readers

This English version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail.

I. Company spokesman and deputy spokespersons: Spokesman Deputy spokesman Name: Chen Ying-Chun Huang Kuo-Tsai Job Title: Assistant Vice President Vice President Tel. No.: (02)8787-8187, Ext. 8370 (02)8787-8187, Ext. 1566 e-mail:investors@cpdc.com.tw e-mail:investors@cpdc.com.tw Deputy spokesman Zuo Shu-Tong Assistant Vice President (02)8787-8187, 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 Tunghsing Road, (02)8787-8187 Songshan District, Taipei City Toufen Plant No. 217 Sec.2 Tzyh-Chyang Road, (037)623-381 Tou-Fen township, Miaoli County, Dashe Plant No. 1 Chinchian Road, Da-Sheh (07)351-3521 district, Kaohsiung City Hsiaokang Plant No. 34 Chunglin Road, Hsiaokang (07)871-1161 District, Kaohsiung City III. Shares Registrar: Name: Shareholder Services Office of CPDC Address: 3F, No. 12, Tunghsing Road, Taipei City Tel. No.: (02)8978-2589 Website: http://www.cpdc.com.tw IV. External Auditors in the most recent year CPA Name: Melody Chen & Chung Tan Tan Firm Name: KPMG Certified Public Accountants Address: 68F, No. 7, Sinyi Road, Sec. 5, Taipei City Tel. No.: (02)8101-6666 Website: http://www.kpmg.com.tw

• V. Offshore secondary exchange and disclosure information available at: None.

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

One. Message to Shareholders ................................................................................................ 1	One. Message to Shareholders ................................................................................................ 1
Two. Introduction to Company ............................................................................................. 13
I.	Date of Incorporation .......................................................................................... 13
II.	Company Profile .................................................................................................. 13
Three. Report on Corporate Governance ............................................................................ 17
I.	Organization ........................................................................................................ 17
II.	Information About Director, President, Vice President, Assistant Vice
	President, and Head of Department and Branch ............................................. 23
III.	Remuneration to Directors (including Independent Directors),
	Supervisors, President and Vice Presidents ...................................................... 43
**IV. **	Status of Corporate Governance ........................................................................ 51
V.	Information About CPA Professional Fee ...................................................... 106
**VI. **	Information About Replacement of CPA ........................................................ 107
**VII. **	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 .............................................................................................. 107
VIII. 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. ..................................................................... 107
IX、Information abou the relationship among the Company's 10 largest
	shareholders………………………………………………………….................112
X.	Ratio of Combined Shareholding ..................................................................... 114
Four. Status of Fund Raising .............................................................................................. 115
I.	Capital Stock and Shares .................................................................................. 115
II.	Issuance of Corporate Bonds ............................................................................ 123
**III. **	Issuance of Preferred Shares ............................................................................ 124
**IV. **	Status of Participation in Issuance of “Global Depository Receipts
	(GDRs)” .............................................................................................................. 125
V.	Status of Employee Stock Option ..................................................................... 125
**VI. **	Restriction on Employee Share Subscription Warrant ................................. 125
**VII. **	Mergers and Acquisitions, or as Assignee of New Shares Issued by
	Another Company ............................................................................................. 125
VIII. Implementation of Capital Utilization Plan .................................................... 125
Five. Operations Overview .................................................................................................. 127
I.	Business contents ............................................................................................... 127
II.	Market and Sales Overview .............................................................................. 136
**III. **	Employees ........................................................................................................... 143

**IV. **	Environmental Protection Expenses ................................................................ 143
V.	Labor-Management Relations .......................................................................... 145
**VI. **	Major Contracts ................................................................................................ 153
Six. Financial Status ............................................................................................................. 155
I.	Condensed balance sheet, income statement, external auditor’s name
	and audit opinion for the most recent five years ............................................ 155
II.	Financial Analysis for the most recent five years ........................................... 159
**III. **	Audit Committee’s Audit Report on the Financial Statement for the
	Most Recent Year .............................................................................................. 162
IV.	Independent Accountants’ Audit Report (Consolidated) .............................. 163
V.	Independent Accountants’ Audit Report ........................................................ 279
VI.	In the case of any insolvency of the Company and its affiliates, specify
	its effect on the Company’s financial position ................................................ 379
Seven. Review and Analysis of Financial Position and Financial Performance, and
Risk Management ................................................................................................................. 380
I.	Financial status comparison and analysis ....................................................... 381
II.	Analysis on financial performance .................................................................. 382
III.	Review and Analysis of Cash Flow .................................................................. 382
**IV. **	Major capital expenditure for the most recent year and its effect on
	financial position and operation of the Company .......................................... 382
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 ....................................................................................................... 383
**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 .................................................................................................................. 384
**VII. **	Other important notes ....................................................................................... 405
Eight、Special Note ............................................................................................................. 406
I.	Information about Affiliates .............................................................................. 406
II.	Private placement of securities for the most recent year and until the
	date of publication of the annual report .......................................................... 516
**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 ............... 516
**IV. **	Supplementary Disclosure ................................................................................ 516
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 .............................................................................................. 516

One. Message to Shareholders

To All Shareholders:

Due to the slowing growth in the global economy, and the continued US-China trade war and weaker demand, 2019 CPDC suffered weaker results, as the overall economic environment continued its trend of uncertainty. CPDC has restructured and aimed to become a pro-active corporation. In its petrochemical core business, we are integrating research and development, continued developing unique, high-value nylon products, and gradually increase our exposure to optics, and halogen-free flame retardant, high technology and environmental applications, in an effort to develop high value products and integrated production as our goal. In the land development business, we proactively target the South East Asian, emerging market opportunities, aggressively pursuing opportunities for large scale real estate development. We also continue to revitalize the domestic land bank, and also obtained the permanent land rights for the international Core Pacific City tender, which shall contribute to future profits. We also continue to increase our exposure to overseas, high potential land development and investment areas, in an effort to lower the cyclical risk from the petrochemical industry.

Currently, the overall economic environment is challenged due to an imbalance between supply and demand, international trade conflict, and the recent covid-19 coronavirus pandemic. Our Company continues to actively develop high value added products to fulfill the demands of our customer stakeholders, and the industry will continue to face many challenges and uncertainties. Nonetheless, we shall continue to proactively move towards high value products, and the development of our dual engine strategy, to strengthen our profit potential, and to provide returns to our shareholders.

I. 2019 Operating Report

The Company reported 2019 consolidated revenues of NT$29.624 billion, net operating profit of NT$0.409 billion and net profit after tax of NT$1.734 billion. The detailed breakdown of the Company’s 2019 operating performance is as follows:

• 1 -

2. Sales of Major Products:

2. Sales of Major Products:	2. Sales of Major Products:	2. Sales of Major Products:	2. Sales of Major Products:	2. Sales of Major Products:	2. Sales of Major Products:	2. Sales of Major Products:	2. Sales of Major Products:	2. Sales of Major Products:
Major Product Production & Sales Volumes in the Past 2 Years Unit: Tons
Production Volume Major Product	FY2019		FY 2018		Increase (Decrease) Volume
	Production	Sales	Production	Sales	Production	%	Sales	%
Acrylonitrile (AN)	211,188	208,368	208,420	210,412	2,768	1%	(2,044)	(1%)
Caprolactam (CPL), Nylon Chips	310,561	297,252	374,390	355,680	(63,829)	(17)%	(58,428)	(16%)

The decrease of Caprolactam (CPL) production and sales was mainly due to the adjustment of production and sales in 2019 in cooperation with overall industry supply and demand and execution of sales plan.

1. Operating Revenue and Expense and Profitability Analysis Operating Revenue and Expense:

Expense:	Expense:	Expense:	Expense:	Expense:
Annual Income Statement Unit: NT$ thousands
Year Line Item	FY 2019 (Consolidated)	FY 2018 (Consolidated)	Increase (Decrease)	%
Revenues	29,624,094	38,503,121	(8,879,087)	(23%)
Gross Profit	1,627,580	5,176,159	(3,548,579)	(69%)
Operating Profit	(409,020)	3,075,082	(3,484,102)	(113%)
Non-Operating Profit and Loss	2,272,492	1,601,868	670,624	42%
Pre-Tax Profit	1,863,472	4,676,950	(2,813,478)	(60%)
Net Profit after Tax	1,733,635	4,280,995	(2,547,360)	(60%)
EPS (After Tax)	0.61	1.59	(0.98)	(62%)

(1) Operating revenue

The 2019 operating revenues decreased by 23% versus the previous year, mainly due to the following reasons:

A. The revenues from Acrylonitrile (AN) and related byproducts were NT$10.257 billion in 2019, decreased 15% or NT$1.754 billion from NT$12.011 billion versus the previous year. The decrease was mainly from 18% decrease in unit prices versus the previous year for Acrylonitrile (AN) products.

B. The revenues from Caprolactam (CPL) and byproduct were NT$15.158 billion in 2019, decreased 35% or NT$7.999 billion from NT$23.157 billion versus the previous year. The decrease was mainly from a 16% decrease in sales volumes

• 2 -

and a 27% decrease in unit prices versus the previous year for Caprolactam (CPL) products.

C. The revenues from other departments (including subsidiaries) were NT$4.209 billion, increased 26% or NT$0.874 million from NT$3.335 billion versus the previous year. It is mainly resulted from an increase in subsidiary revenues from trading versus the previous year.

(2) Operating Profit

Net operating profit in 2019 decreased by NT$3.484 billion, or 13% versus the previous year due to the following reasons:

A. For Caprolactam (CPL) products, the new production capacity in Mainland China has continued to be put into production and resulted in the increase of supply, and the trade conflict between China and the United States has aggravated weakness for the macroeconomic; thus, impacted the downstream market demand, sales prices and sales volumes, and decreased the profitability of Caprolactam (CPL) series products by NT$2.445 billion versus the previous year.

B. For Acrylonitrile (AN) products, the trade conflict caused the slowdown of terminal demand. As the spread between Acrylonitrile (AN) and raw material narrowed down, the profitability was decreased by NT$761 million versus the previous year.

C. In 2019, overall operating expenses decreased by NT$64 million versus the previous year.

(3) Non-Operating Profit and Loss

Non-operating profit, increased by NT$671 million in 2019, or by 42%, due to the following reasons:

A. An increase of NT$3.888 billion from the revaluation gain of financial assets versus the previous year.

B. An increase of NT$2.901 billion from the asset impairment loss versus the previous year.

C. A decrease of NT$394 million from equity method profits from subsidiaries and related companies.

D. A decrease of NT$389 million from the expense of the An-Shun Factory, Chen-Jen District, and other units

• 3 -

E. A decrease of NT$344 million from cost method dividends income versus the previous year.

• (4) Net profit (loss) before and after taxes

2019 reported pre-tax profits were NT$1.863 billion, decreased NT$2.813 billion or 60% versus the previous year. 2019 reported net profits after tax were NT$1.734 billion (NT$0.61 per share), decreased NT$2.547 billion or 60% from NT$4.281 billion (NT$1.59 per share) versus the previous year.

1. Financial Performance:

2. (1) Financial Status:

At the end of 2019, total consolidated assets amounted to NT96.5 billion; total liabilities were NT$29.3 billion; and shareholder equity was NT$67.2 billion.

• (2) Key Financial Ratios:

Current Ratio at the end of 2019 was 274%, Quick Ratio was 146%, and Debt Ratio (Debt to Total Assets) was 30%.

• (3) Cash and Cash Equivalents Status:

Cash and cash equivalents outflow from operating, investing and financing activities was NT$4.4 billion during 2019. The year-end cash and cash equivalent balance was NT$9.1 billion.

1. Key Management Work and Implementation Overview:

2019 key management work and implementation overview are categorized into the following 6 categories: Production Management, Labor Safety and Environmental Protection, IT Management, HR Management, Financial Planning, and Corporate Social Responsibility. Descriptions are as follows:

(1) Production Management:

The Company continues its plans to invest at the Port of Kaohsiung for transportation and storage special areas of liquid ammonia (NH3), Phenols, and other major raw materials to improve raw material purchasing flexibility. We also continue to promote smart automation and establish video monitoring systems for factory forecast management, improving production process efficiency, and lowering production costs. We have smoothly finished our value-added Nylon Chips project and succeeded in entering the high-end Nylon Chips market. The Acrylonitrile (AN) plant repair and maintenance project of the Da-Sheh Factory

• 4 -

has completed, and we continue to promote the main production process compressor performance improvement project so as to improve the production capacity, reduce energy consumption, and move toward the objective of one repair for every two years. The Tou-Fen 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, and achieving the goal of natural gas emission standards.

(2) Labor Safety and Environmental Protection:

The Company contributes to the innovative research and development of low-pollution process and low-toxic alternatives, reducing the application of toxic chemical substances, implementing hazard prevention and management, and strengthening emergency disaster response capabilities. In order to ensure the factory management systems in compliance with the latest international standards, all three of our factory sites have passed certification of ISO 9001, ISO 14001, ISO 45001, ISO50001 standards with regard to quality, environmental protection, occupational safety and health, and energy management, and continued tracking certification. As for environmental protection, in response to the global trends of energy conservation, carbon reduction and waste reduction, the Da-Sheh Factory and Hsiaokang Factory have been awarded the Outstanding Contribution Award for Air Quality Purification Zones Adoption and the Certificate of Appreciation for Promoting Environmental Protection (Summer Power-Saving and Light-Off Activity). We continue to move toward the goal of cyclical economy and sustainable developments as our corporate vision.

Occupational Safety and Health:

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 and production process accident investigator training, to improve factory safety. The Hsiaokang Factory and Tou-Fen Factory have been awarded the National Occupational Safety and Health Award in 2019; the Da-Sheh Factory have been awarded the 1st Green Chemical Application and Innovation Award, and the Excellence Award for Industrial Area Local Joint Prevention and Drainage Local Joint Prevention. In addition, we continue to promote various health and wellness programs aggressively, build a healthy work environment, and all three factory sites have been awarded the Badge of Accredited Healthy Workplace (Smoke Free and

• 5 -

Health Promotion).

(3) IT Management:

In order to improve overall operational and management performance, the Company introduces the Oracle intermittent manufacturing management system to meet the requirement of batch production management of new products; promotes the global human resources management system, collocates the electronic form signing and approval system, integrates the intelligent access control management system and command management platform; strengthens the information host security protection mechanism, implements Mobile Office and cloud video communication channel at the same time, builds the cornerstone for business operation communication, and simultaneously strengthens the procurement system integration management benefits. In order to keep up with the time and grasp the spirit of times and trends, the AI team deployment has completed, and the Company continues to introduce external top institutional resources, enhances the technological autonomy competence, invests in researching the AI innovation applied to the petrochemical industry, and gradually deepens and expands AI applications to create value.

(4) HR Management:

In response to the Company’s two major business, petrochemicals and land development, and development strategy of overseas expansion, we actively recruit and cultivate global talents; the appointed managers lead the Company toward south and west to explore territories, and duplicate the standardize operation mode rapidly with local success experiences. When recruiting talents, we strengthen the professional skills tests, select proactive, positive, enthusiastic and open-minded manpower, and distinguish them by professional aptitude test. For people with rare technical skills, we properly arrange appropriate positions for them, so as to achieve the goal of “right person in the right place, choose none but the best”. In terms of cultivating and retaining talents, the Company actively create a self-learning environment so that personnel can learn and grow continuously through the Internet. With the rotation of jobs and succession plans, we quickly improve the multi-competence of personnel. The Company adopts the principle of fair treatment and high reward and severe punishment, awards rewards and implements the “rank and yank” system, eliminates the weak, and strengthens the competitiveness of the enterprise; in addition, makes the performing evaluation system fair and rational, so that young employees can be quickly promoted based

• 6 -

on their ability, and promote the organization's continuous innovation and growth.

(5) Financial Planning:

In response to the requirement of funds for the Company’s two major business development, petrochemicals and land development, we increase cooperation with financial institution, raise fund through the capital market, effectively utilize company-owned real estate assets and resources, obtain lower cost of capital loans, and maintain a reasonable and safe cash flow. In addition, through treasury management, invest in short-term financing products or trade of currency funds to increase profitability.

(6) Corporate Social Responsibility:

With the vision of "becoming a leader in green petrochemical integrating with the environment and society", CPDC continued to actively promote various ESG projects in 2019, laying a solid foundation for the sustainable development of the enterprise, and won many recognitions from the exterior. In terms of research and development and products, CPDC won the Green Chemical Application Innovation Award and Outstanding Research and Development Award and continued to deepen the momentum of research and development. In terms of employee care, CPDC was awarded the 2019 Happiness Enterprise Award by 1111 Job Bank. In terms of external information disclosure and environmental protection, CPDC won the “Corporate Sustainability Report - Gold Award”, “Individual Performance - Climate Leadership Award” and “Individual Performance - Sustainable Water Management Award” of the 12th TCSA Taiwan Corporate Sustainability Award, and was ranked as “6% to 20%” in the results of the 5th Corporate Governance Evaluation (868 listed companies have been evaluated). In addition, CPDC independently participated in international sustainability assessments, such as the Dow Jones Sustainability Index (DJSI), Carbon Disclosure Project (CDP), etc., and accepted the test of all sectors of stakeholders in a positive, transparent, and accountable manner.

In the face of the wounds of history of the Dioxin pollution at the Taiwan Alkaline An-Shun Factory during the state-run period, from the polluted land to the hearts of local residents, CPDC has the courage to take on the task of remediation and continues to be inspected by the competent authority. We hope that after the completion of the remediation in the future, we can find the vitality of this land and create local prosperity with the residents and the city governmenty.

• 7 -

6. Future Prospect and R&D:

Innovation and R&D has always been CPDC’s core objective of moving toward the development of sustainable management. Currently, the Company's research and development are mainly focused on the following directions:

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 multi-aspect applications of special chemicals and new blending modified products of nylon engineering plastics. The developing series includes engineering plastics, such as nylon 66 engineering plastics, PC composite materials, ABS composite materials, PC/ABS alloys, etc. The Company also develops products with good mechanical properties, flame retardant properties, low temperature resistance, heat resistance, weather resistance, antibacterial, conductive, antistatic, and other characteristics, which can be used in industrial fields including automobiles/locomotives, machinery, electronic parts, 3C household appliances, sports requisites, etc.

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, 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.

In order to consolidate the technological leadership of the existing product market, as well as to break through the technical barriers of new products and manifest the strong research and development energy, the Company has obtained 191 invention patents thus far. With the accumulation and growth of patents, the protection of intellectual

• 8 -

property must continue to be implemented. The Company is also leading the industry and has introduced the TIPS (Taiwan Intellectual Property Management System) of the Ministry of Economic Affairs, Industrial Development Bureau, and passed certification in 2010, to establish a comprehensive and complete intellectual property protection system, continue to improve, to effectively and securely protect the Company’s key assets and R&D core technology.

In adherence to the global attention towards environmental protection issues, CPDC actively promotes and engages on environmental protection issues. Currently, we are embarking on the development of the biomass material field, devoting ourselves to product research and development, and conducting research and development on new process paths including green environmental protection, cycle production, reducing generation of pollutants, etc. We hope that by directing our efforts, we shall be able to reduce the hazards on environment, combined with cyclical economic system and achieve our core objective of sustainable management.

1. Management Principles and Future Operational Outlook:

Management Principles:

The Company focuses on expanding the two-pronged business approaches of “Petrochemical Industry” and “Land Development” as the primary management principles and demonstrates our sustainable development performance in four aspects: Intelligence Production, Forward-Looking Governance, Communication and Dialogue, and Enterprise Care. In our core petrochemical industry, we shall optimize the production capabilities of our current products and develop multiple high value new products for the short term; and establish overseas one-stop production base for the long term to develop new products and new technologies, and build the intelligent management system as the primary development strategy. We hope to establish a long-term and stable profitable operating niche and maintain overall competitiveness. For land development, our short-term domestic goal is to plan and activate the Company's land assets; while through the layout to penetrate overseas real estate development; for the long-term domestic and overseas goals are to promote relevant development plans through the phased zoning, through the layout in areas with land development and investment potential domestically and overseas, to develop green building products that are in compliance with environmentally friendly, energy-conservation and carbon-reduction, hoping to create a new triple win situations for shareholders, corporation and society, and demonstrate CPDC’s vision of shouldering corporate social responsibility and moving towards green petrochemical.

• 9 -

Future Operating Outlook:

CPDC believes that the response and management policies of environmental, social and corporate governance are important performance indicators. In facing the frequently changing management environment, the Company will adhere to the principle of respecting for the natural ecology and strive towards achievement as a green petrochemical industrial company, even with more aggressive and active attitude to breakthroughs and improve the competitiveness of self-development. The future operating prospects of the Company's two-pronged focus in the petrochemical core business and land development are described as follows:

(1) Petrochemical Core Business:

A. Short-term Planning:

a. Optimize the Existing Operation Capabilities: Increase the raw material and product troughs, expand own-product capacity and improve manufacturing efficiency, promote greenhouse gas reduction, constantly contribute to the optimization of factory operations, accelerate the promotion of factory smart automation, and gradually introduce AI technologies so as to move towards building a fully-automated factory.

b. Develop Multiple High Value New Product Markets: Continuously develop specialty chemical products with wide applications, esters, and functional high polymer products, enhance the added value of compound nylon, and engage in development of biomass raw materials and move towards the trend of green environmental protection.

B. Long-term Planning:

a. Build an Integrated One-stop Overseas Production Base: Avoid the impact of intermediate raw material price fluctuations and the effect of stable profits, and accelerate the integration of production; 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.

b. Introduce the Application of AI Technology: Continue to develop multiple high-value new product markets, and, through the promotion of intelligent factories, gradually develop AI application and build the AI foundation for the petrochemical core business. The company hopes to develop intelligent systems specifically for the petrochemical industry with AI application

• 10 -

products and services, so as to establish superior technological competitiveness.

c. Establish Smart Management Systems: Improve the synergy of the Company's Command Center, and plan to build the business intelligence management platform. We hope that by integrating data such as production monitoring, supply and demand analysis, market scheduling, price forecasting, business performance analysis, etc. for a long time, it will provide complete information to improve the quality of decision-making and establish a competitive management advantage.

The Company strives to achieve intelligent, green petrochemical corporation and hopes to improve the quality of the Company's operating infrastructure through the aforementioned short-term and long-term planning to become a global leader in Caprolactam (CPL), Acrylonitrile (AN), and their high value derivative products.

(2) Land Development:

A. Short-term Planning:

a. Aim at Planning and Revitalizing the Existing Land Assets of Taiwan: The Company is located in the 5A and 6th Special Zones of Kaohsiung Multi-Functional Commerce and Trade Park, and will follow the Kaohsiung City Government’s promotion of the "Asian New Bay Area" construction and the relocation of the 205 arsenal, promote the development of related development plans, and strengthen the direction of investment leasing. In addition to complying with the urban development plan strategy, we hope to create the highest value for the Company's land assets

b. Aim at Cutting Into Overseas Real Estate Development: Follow the new business opportunities brought by China’s “The Belt and Road Initiative” strategy and the South East Asia emerging market, the Company will aggressively pursue land with potential for land development and investment in Vietnam, Myanmar, Philippines, and other relative countries. We will carry out land development and existing case cooperation evaluation strategies, and purchase land with development value at the same time.

B. Long-term Planning:

a. Promote Taiwan Land-related Development Plans by Stages by Areas: In response to and cooperating with the government's green energy conservation and urban development planning policies, in addition to enhancing the

• 11 -

development planning strength for large-scale land development, based on the principle of value-added utilization, the Company will combine carbon-absorbing civilization with AI technology in pursuance of developing livable building products.

b. 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 production base for the petrochemical core business, and promoting residential and commercial development, with the ultimate goal of sustainable operation, production, loving and ecological wisdom town as the objective.

CPDC upholds the development concept of sustainable business and environmental symbiosis, and continuously promotes the process of the petrochemical and land development two-pronged strategy. We never forget the corporate social responsibility we shoulder, fulfill the mission of the global citizen and the vision towards green petrochemicals, and achieve the sustainable development of the Company and strive to create a happy life for humanity.

We thank you, our shareholders, for the many years of support. Sincerely with good health and fortune,

By Ruey-Long Chen, Chairman of Board

==> picture [44 x 44] intentionally omitted <==

• 12 -

Two. Introduction to Company

I. Date of Incorporation

1. Date of incorporation: April 24, 1969

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

II. Company Profile

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, Tunghsing Road, Songshan District, Taipei City. Headquarter was 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 storage, transportation, purchase and marketing of related chemical products and raw materials & supplies. The Company’s principal product lines include CPL, AN, Nylon Chips and others.

Key Milestones:

1969 April 24 The Company was established as a State-Owned Enterprise, under the supervision of the Ministry of Economic Affairs. 1973 May The ethane cracker was brought on stream, and shut down in September 1990. 1973 June DMT Plant was brought on stream, and shut down in July 1982. 1976 June No.1 Acrylonitrile unit of Dashe on stream. 1979 January No. 2 Acrylonitrile unit of Dashe brought on stream. 1982 May Following the mandate from Ministry of Economic Affairs, the Company was merged with another State-Owned Enterprise, Chungtai Chemical Co., LTD.

• 13 -

• 1982 July Following a mandate from the Ministry of Economic Affairs, the Company took over the Kaohsiung plant of Taiwan Alkali Co., Ltd. (changing the name to CPDC Chen-Jen Plant), which was shut down in May 1988.

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

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

• 1985 March Methanol and GAC units of Da-Sheh Plant were brought on stream.

• 1991 July 12 The Company’s stocks were listed on the Taiwan Stock Exchange Corporation (TWSE), and CPC released 20% of the Company’s stocks held by it.

• 1993 July The Company’s Kaohsiung Anone Plant was shut down.

• 1993 December The Budget Economic Joint Committee of the Legislative Yuan passed a proposal for the Company's privatization.

• 1994 June 20 CPC released the Company’s stock held by it once again, and the government-owned shareholding was reduced to 36.63% accordingly. The registration of change in the roster of shareholders was completed on the date, and the Company was privatized from a state-owned enterprise.

• 1999 September The nylon chip unit was brought on stream. 2001 January CPL Plant No. 3 (Hsiaokang Plant) and Co-gen units of Hsiaokang Plant and Tou-Fen Plant were brought on stream.

• 14 -

2002	November	Full implementation of an ERP System (Oracle ERP)
2003	December	Kaohsiung Plant (CPL Plant No. 1) was shut down.
2011	April	Hsiaokang Plant CPL Expansion Project test-run
		completed
2012	April	Hsiao Plant phenolic ketone unit test-run completed
2012	June	Dashe Plant Acrylonitrile unit expansion project
		test-run completed
2012	October	Toufen Plant CPL Expansion Project test-run
		completed
2012	November	The GAC unit was shut down.
2015	August	Tou-Fen Plant Tropolone factory test-run completed
2016	June	New production line of 100,000-ton capacity of CPL
		at the Tou-Fen Plant were brought on stream.
2016	July	Headquarter was relocated to No.1, Jingjian Rd.,
		Dashe Dist., Kaohsiung City
2016	November	Hsiaokang Plant receives the Industrial Development
		Bureau, Cleaning Production Certification
2017	April	Dashe Plant receives the Industrial Development
		Bureau, Cleaning Production Certification
2017	October	Toufen Plant receives the Industrial Development
		Bureau, Cleaning Production Certification
2017	November	CPDC wins the 2017 Tenth Annual “Taiwan
		Corporate Sustainability Awards” – Traditional
		Manufacturing TOP50 Report Award
2017	November	CPDC wins the 2017 BSI “Sustainability
		Implementation Award”
2018	March	Dashe Plant's new control room building received the
		“Green Building Diamond Grade” certification

• 15 -

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 the ISO 14046 water Footprint
		Verification statement
2018	November	Won the 2018 11th“TCSA Taiwan Corporate
		Sustainability Award” – Traditional Manufacturing
		TOP50 Report Award
2019	April	Dashe Plant obtained the 1st “Green Chemical
		Application and Innovation Award” from the
		Environmental Protection Administration of the
		Executive Yuan.
2019	November	Won the “2019 Happiness Enterprise Award –
		Manufacturing and Construction Consignment”
		Chemical Industry TOP20 held by the 1111Job Bank.
2019	November	Won the 2019 12th“TCSA Taiwan Corporate
		Sustainability Awards” – Traditional Manufacturing
		TOP50 Report Gold Award and Individual
		Performance – “Climate Leadership Award” &
		“Sustainable Water Management Award”

• 16 -

Three. Report on Corporate Governance

I. Organization

(I) Organizational Chart

==> picture [417 x 492] intentionally omitted <==

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

Shareholders’
Meeting
Audit Committee
Secretariat
Board of
Remuneration
Directors
Committee
Audit Office
CPDC CSR
Committee
Shareholder
CEO Services Office
President’s President Audio/Visual
Office Command Center
Environmental Protection &
Environment Safety &
Health Center Pollution Control Center
Legal Counsel R&D Center
Department Department Department
Finance Department Land Development
Administratiive Resources Petrochemical Production Business Trading Division New Venture Department
----- End of picture text -----

Data updated as of March 2020

• 17 -

(II) Operations and functions

1. President’s Office

Responsible for research, analysis, planning and making overall operational plans, ensuring the integration of production, supply and sales, assisting the General Manager in execution, policy promotion, supervisory and management, and assisting all units in promoting business. Responsible for communication and coordination between all units. Provide a command platform for decision information to improve the quality of decision. Through the collection of operation and management data, integrate the management processes, analysis reports, decision information, etc. of each unit; through data and innovative technology management models, establish the optimization of business process, and further link the mechanism of performance evaluation. Responsible for various identified projects assigned by the General Manager. Other business in accordance with the Article of Incorporation and general manager’s assignments.

1. Environmental, Safety & Health Center

Responsible for the Company’s safety, health & environmental, fire emergency & safety, energy conservation, water conservation and waste management policies. Assist each plant in planning, promotion, execution, supervision, and manasgement 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 standards are in compliance.

1. Environmental Protection & Pollution Control Center

Responsible for planning, execution, and operations that relates 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 standards are in compliance.

• 18 -

4. 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.

5.

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. And investigation, research, application, maintain, security and management of intellectual properties.

6.

Business Trading Division

Plan and execute the marketing strategy and sales policies. Responsible for matters related to the sale and purchase and resale trading business of the Company’s products and by-products. Responsible for matters related to the Company’s raw materials and minor raw materials procurement, supply, and inventories management. Responsible for matters related to customer credit extension operations, credit assessment, handling sales on account business, accounts collection, etc. Responsible for the overseas branch units’ (factories) procurement of raw materials, product sales, trade, credit and other related matters governed by the above four points, as well as unifying, coordinating, and integrating the Company’s domestic and overseas business synergy.

7.

Petrochemical Production Department

Production, storage, transportation, and management of the Company’ and its subsidiaries’ petrochemical products. The evaluation of production technology and equipment update, and the design, planning, and execution of project engineering for the Company’ and its subsidiaries’ petrochemical products. The engineering management and the collection, analysis, and research of engineering data for the Company’ and its subsidiaries’ petrochemical products. The technical services for the Company’ and its subsidiaries’ petrochemical products, and enhance the production capacity

• 19 -

and production performance of each plant. Establish the planning and execution of core engineering technology. The design, planning, management, and improvement of the pilot plants, manufacturing processes, and manufacturing equipments. Handling matters related to technical regulations of technical authorization. The review and selection of process method and the preparation of project contracting for overseas petrochemical investment projects. The collation of technical data of factory construction, collation of drawings, and establishing standards of various factory construction for overseas petrochemical investment projects. The operation management and execution of actual factory construction, progress control, and coordination and communication of work for overseas petrochemical investment projects.

8.

Finance Department

Planning and execution of financial business; planning and execution of accounting business; planning and execution of tax business; handle the internal auditing business; planning of the Audit Committee agenda and meeting execution; manage securities positions; planning, research and promotion of capital budgeting policies, cost of capital, and capital structure; responsible for the Company’s communication with external stakeholders and the establishment, maintenance and management of related activities. Responsible for handling external information disclosure, strengthening the transparency of Company information, and regularly reviewing corporate governance evaluation projects every year and proposing improvements; provide various financial support in accordance with the Company’s operating performance and global investment strategy; evaluation of long-term and short-term investment in financial commodities and financial risk review on executing each project investment plan, and supervision and management on the accounting and operating performance of domestic and overseas reinvestment projects; preparation and implementation of the investment exit plan.

1. Administratiive Resources Department

Responsible for information systems, network systems, office automation systems, computerized standard operating procedures, information security

• 20 -

polices, planning, building, promotion, and maintenance of software program authorization and terms of use. The planning of human resources, recruitment, compensation & 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 maintainence and creation.

10. Land Development Department

Responsible for Company real estate investment planning, procurement, disposal, and management. Development strategy establishment and execution, evaluation of domestic and overseas 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.

11. New Venture Department

Coordination, reporting and tracking of the Company’s annual business plan; business information analysis and advice on the Company’s operation and development of related industries, technology, environmental protection, economic and social environment, etc.; market research analysis and recommendations on the Company’s existing products and new raw materials, new products, and derivative products; discover, evaluate, plan, execute and manage domestic and foreign industrial cooperation plans and investment opportunities; government application, project establishment and approval of investment plans; application procedures and document preparation of Company establishment; comprehensive assistance in contracts and negotiation of preferential conditions of investment plans;

• 21 -

handle matters of technical authorization business conditions; operation and management of production plants in overseas non-petrochemical industries.

1. Audio/Visual Command Center

Proactively verify real time working conditions, reporting in daily reports and identity verification in accordance to standard operating procedures (SOP). Follow SOP and report abnormal alarms. Regularly audit and verify video monitoring systems, factory real time operational information monitoring, headquarter office space safety management, and establish emergency response procedures. Support management units to review video records, collect and categorize unexpected events and review SOPs for areas of improvement or environmental change. Provide improvement plans for each plant, and reporting of abnormal events. Support each factory location in emergency response and other business matters.

• 22 -

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

(I) Information about directors

1. Information about directors

March 30, 2020

Job Title (Note 1)	Nationality or registered country	Name	Gender	Election (Appoint ment) Date	Term of Office	Date of First Election (Note 2)	Shares at Election	Shares at Election	Current Shareholding	Current 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)	Position(s) Held Concurrently in the Company and/or in any Other Company	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	Note (Note 4)
							Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding			Job Title	Name	Relation
Chairman	Republic of China	Core Pacific Co., Ltd.	N/A	20190411	Three years until April 10,2021	19940726	39,285,806	1.455%	45,625,096	1.389%	0	0.000%	0	0.000%	N/A	N/A	N/A			N/A
		Institutional Representative: Chen Ruey-Long	male	20200131	Three years until April 10,2021	20120630	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	Director of Kaohsiung Monomer Co., Ltd. (Legal Representative) 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 CORPORATION Director of Powerchip Semiconductor Manufacturing Corp. Director of Panshin Commercial Bank	None			None
Vice Chairman	Republic of China	BES Machinery Co., Ltd	N/A	20180411	Three years until April 10,2021	20000524	12,486,043	0.462%	13,110,345	0.399%	0	0.000%	0	0.000%	N/A	N/A	N/A			N/A
Vice Chairman	Republic of China	Institutional Representative: Bai Jiun-Nan	male	20180411	Three years until April 10,2021	20000524	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Master Degree Department of Economics of NTU Vice Chairman of BES ENGINEERING CORPORATION Ph.D. in Law, Institute of Economics, Chinese Culture University	Director of Core Pacific City Ltd. Director of BES ENGINEERING CORPORATION Director of Taivex Therapeutics Corporation Independent Director of Concord Securities 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	None

Job Title (Note 1)	Nationality or registered country	Name	Gender	Election (Appoint ment) Date	Term of Office	Date of First Election (Note 2)	Shares at Election	Shares at Election	Current Shareholding	Current 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)	Position(s) Held Concurrently in the Company and/or in any Other Company	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	Note (Note 4)
							Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding			Job Title	Name	Relation
Independent Director	Republic of China	Chu Yun-Peng	male	20180411	Three years until April 10,2021	20120630	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Master Degree Department of Economics of NTU Master degree in Department of Economics in University of Maryland Minister of State, Executive Yuan Professor of Department of Economics in NCU Chairman, Taiwan Insurance GuarantyFund	Independent Director, Nan Ya Plastic Corporation Independent Director, Taiwan Land Development Corporation Chairman, Bozhen Service Co., Ltd.	None	None	None	None
Independent Director	Republic of China	Pan Wen-Yen	male	20180411	Three years until April 10,2021	20130628	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Master degree and P.h.D in Department of Chemical Engineering in University of Wyoming Senior Research Engineer, Monsanto Company, a US-based company Chairman, Kuo Kuang Power Co. Ltd. Chairman, CPC Chairman, CTCI Foundation	Independent Director, UPC Technology Corporation Director, CTCI U-Ming marine Independent Director	None	None	None	None
Director	Republic of China	Core Pacific Group	N/A	20180411	Three years until April 10,2021	19940726	39,285,806	1.455%	45,625,096	1.389%	0	0.000%	0	0.000%	N/A	N/A	N/A			N/A
		Institutional Representative: Shen Hwa-Yeang	male	20190211	February 11,2019 to April 10,2021	20190122	0	0.000%	153,090	0.005%	0	0.000%	0	0.000%	Master, Department of Water Resources Engineering in Asian Institute of Technology Chairman, 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	None
Director	Republic of China	Jen Huei Enterprise Co., Ltd	N/A	20180411	Three years until April 10,2021	20060630	16,123,959	0.597%	19,431,156	0.592%	0	0.000%	0	0.000%	N/A	N/A	N/A			N/A
		Institutional Representative: Guo Jiun-Huei	male	20180411	Three years until April 10,2021	20040611	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Department of Accounting Soochow University General Manager of TPC	Director of CMC Magnetic Co., Ltd.	None	None	None	None
Director	Republic of China	Sheen Chuen-Chi Cultural and Educational Foundation	N/A	20180411	Three years until April 10,2021	20000524	1,781,269	0.066%	1,870,332	0.057%	0	0.000%	0	0.000%	N/A	N/A	N/A			N/A

Job Title (Note 1)	Nationality or registered country	Name	Gender	Election (Appoint ment) Date	Term of Office	Date of First Election (Note 2)	Shares at Election	Shares at Election	Current Shareholding	Current 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)	Position(s) Held Concurrently in the Company and/or in any Other Company	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	Note (Note 4)
							Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding			Job Title	Name	Relation
		Institutional Representative: Tsai Lian-Sheng	male	20180411	Three years until April 10,2021	20120630	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 Independent Director, Yi Shin Textile Industrial Co., Ltd. Independent Director, AbonMax	None	None	None	None
Director	Republic of China	Sheen Chuen-Chi Cultural and Educational Foundation	N/A	20180411	Three years until April 10,2021	20000524	1,781,269	0.066%	1,870,322	0.057%	0	0.000%	0	0.000%	N/A	N/A	N/A			N/A
		Institutional Representative: Lin Kuen-Ming	male	20180411	Three years until April 10,2021	20120630	0	0.000%	0	0.000%	0	0.000%	0	0.000%	Department of Electrical Engineering NTU Chairman, Premier Capital Management Corp. Chairman, Taiwan Venture Capital Association Director, Straits Economics & Cultural Interchange Association Vice Secretary of CSCS	Chairman and General Manager of Premier Venture Capital Corp. Chairman of Premier Capital Management Corp. General Manager and Director of Kun Chi Venture Capital Corp. Chairman of Ruby Tech Corp. Director of Dexin Corp. Director of AMIT, Inc. 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	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.

• (1) The term of office for Chen Ruey-Long serving as chairman of the Core Pacific Co., Ltd. is from 2020/01/31 to 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 an affiliate of the Company, please specify the job title and responsibilities.

Note 4: Where the chairperson of the board of directors and the general manager or person of an equivalent post (the highest level manager) of the Company are the same person, spouses, or relatives within the first degree of kinship, an explanation shall be given of the reason for, reasonableness, necessity thereof, and the measures adopted in response thereto (for example, increase the number of independent directors, and there shall be more than half of the directors who do not concurrently serve as employees or managers). Note 5: When elected, the total shares issued was 2,699,857,267 shares.

Note 6: As of the record date, the total shares issued was 3,284,850,130 shares.

2. Major shareholders of corporate shareholders

March 30, 2020

	March 30, 2020
Name of Corporate Shareholder (Note 1)	Major Shareholders of Corporate Shareholders (Note 2)
Jen Huei Enterprise Co., Ltd	Fang Yang Industrial Co., Ltd. (20%), Chang Po Enterprise Co., Ltd. (015%), Tsou Jing Technology Co., Ltd. (14.37%), Tien Jing Investment Co., Ltd. (13.75%), Hsu Rue-Ping (9.38%), Hsu Ai-Chu (8.75%)
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 Chun-Feng (6.67%), Ching Ding Technology Co., Ltd. (7.74%), Hsu Rue-Ping (13.30%), Chang Tung-An (5.56%)
Sheen Chuen-Chi Cultural and Educational Foundation	(An established non-profit organization)
BES Machinery Co., Ltd.	BES Engineering Corporation (99.29%), Chen Wu-Hsiung (0.06%), Yang Wun-Lie (0.03%), Zeng Wei-Liang (0.02%), Tsai Chih-Wen (0.02%), Lin Jia-He (0.02%), Gao Jheng-Yang (0.02%), Jiang Jhong-Rong (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.

Note 3: If the legal person shareholder is not organized as a company, the “names of shareholders” and the “ratio of shareholding” in the preceding paragraph shall be “names of funders or donors” and the “ratio of fund or donation”.

3. Major Shareholders of Major Corporate Shareholder

3. Major Shareholders of Major Corporate Shareholder	3. Major Shareholders of Major Corporate Shareholder
March 30, 2020
Name of Corporate Shareholder (Note 1)	Major Shareholders of Corporate Shareholders (Note 2)
BES Engineering Co. Ltd.	CPDC 10.735%; The Core Pacific Development & Investment Co. Ltd. 2.237%;Lin Wenyang 2.189%; Datong Trust Advanced Starlight Advanced General International Stock Index Fund Investment Account 1.555%;Tong Development Industrial Co., Ltd. 1.391%;Kuo Ching Investment Co., Ltd. 1.378%;、Morgan Hosts Vanguard's Emerging Market Stock Index Fund Account 1.100%; EMERGING MARKETS CORE EQUITY PORTFOLIO OF DFA INVESTMENT DIMENSIONS GROUP INC. 0.940%; Dimensional Emerging Markets Value Fund 0.846%;Sheen Chuen-Chi Cultural and Educational Foundation 0.835%

• 26 -

Name of Corporate Shareholder (Note 1)	Major Shareholders of Corporate Shareholders (Note 2)
Jinghua Investment Co., Ltd.	Tien Jing Investment Co., Ltd. (16.75%), Jingdu Construction Development Co., Ltd. (9.94%), Kuo Ching Investment Co., Ltd. (19.00%), Chi Yong Development Industrial Co., Ltd. (19.00%), 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 (0.57%), 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%)
Hung Yi Construction Co., Ltd.	Tien Jing Investment Co., Ltd. (17.42%), Jingdu Construction Development Co., Ltd. (24.17%), Ching Ding Technology Co., Ltd. (15.15%), Living Mall (5.05%), Chang Tung-An (2.53%), Hsu Rue-Ping (2.53%), Yao Che-Sheng (6.06%), Chen Chi Enterprise Co., Ltd. (15.15%)
Ching Ding Technology Co., Ltd.	Hung Yi Construction Co., Ltd. (9.07%), Chen Chi Enterprise Co., Ltd. (14.67%), Fu Hsing Management Consultation Co., Ltd. (8.13%), Tsou Jing Technology Co., Ltd. (8.14%), Ching Chen Industrial Co., Ltd. (9.76%), Tang Lin-Mei (0.52%), Chang Tung-An (0.96%), Hsu Rue-Ping (1.57%), Fan Chen-Chun (3.21%), Chang Po Enterprise Co., Ltd. (8.95%)
Chen Chi Enterprise Co., Ltd.	Ching Ding Technology Co., Ltd. (15.00%), Jing Kuo Real Estate Agency Co., Ltd. (33.60%), Fang Yang Industrial Co., Ltd. (15.00%), Wu Chun-Feng (30.84%)
Tsou Jing Technology Co., Ltd.	Kuo Ching Investment Co., Ltd. (27.50%), Hsu Rue-Ping (33.75%), Chen Chi Enterprise Co., Ltd. (27.50%)
Tien Jing Investment Co., Ltd.	Kuo Ching Investment Co., Ltd. (20.74%), Chang Po Enterprise Co., Ltd. (10.89%), Ching Ding Technology Co., Ltd. (10.53%), Hung Yi Construction Co., Ltd. (21.42%)
Fang Yang Industrial Co., Ltd.	Lin Ke-Ming (30%), Wu Wang Hsiu-Ching (20%), Hong Hsiu-Feng (20%), Song Kun-Ren (20%)
Chang Po Enterprise Co., Ltd.	Fang Yang Industrial Co., Ltd. (29.59%), Jinghua Lease Co., Ltd. (17.52%), Jheng Chao-Wun (9.73%), Hung Yi Construction Co., Ltd. (9.00%), Wu Chun-Feng (7.95%)

• 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.

• Note 3: If the legal person shareholder is not organized as a company, the “names of shareholders” and the “ratio of shareholding” in the preceding paragraph shall be “names of funders or donors” and the “ratio of fund or donation”.

• 27 -

• Information on Directors and Supervisors in professionalism and independence

March 30, 2020

Qualifications Name (Note 1)	More than 5 years of experience and the following professional qualifications	More than 5 years of experience and the following professional qualifications	More than 5 years of 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)	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 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	11	12
Ruey-LongChen			✓	✓		✓	✓	✓	✓		✓	✓	✓	✓		3
Jiun-Nan Bai			✓	✓		✓	✓	✓	✓	✓	✓	✓	✓	✓		2
Yun-PengChu			✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	2
Pan Wen-Yen			✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	2
Jiun-Huei Guo			✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓		0
Lian-ShengTsai			✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓		0
Kuen-MingLin			✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓		2
Hwa-YeangShen			✓	✓		✓	✓	✓	✓	✓	✓	✓	✓	✓		0
Ko-MingLin			✓	✓		✓	✓	✓	✓		✓	✓	✓	✓		0

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

• Note 2: Respective directors and supervisors who meet the following qualifications 2 years before assumption of office and at the time of assumption office shall put a “  ” in the appropriate space.

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

• (2) Not a director or supervisor of the Company or its affiliates (excluding the independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a company and its parent or subsidiary or a subsidiary of the same parent).

• (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, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of a managerial officer under subparagraph 1 or any of the persons in the preceding two subparagraphs.

• (5) Not a director, supervisor, or employee of a corporate shareholder that directly holds five percent or more of the total number of issued shares of the company, or that ranks among the top five in shareholdings, or that designates its representative to serve as a director or supervisor of the company under Article 27, paragraph 1 or 2 of the Company Act (excluding the independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a company and its parent or subsidiary or a subsidiary of the same parent).

• (6) Not a director, supervisor, or employee of that other company which a majority of the company's director seats or voting shares and those of any other company are controlled by the same person (excluding the independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a company and its parent

• 28 -

or subsidiary or a subsidiary of the same parent).

• (7) Not a director (or governor), supervisor, or employee of that other company or institution which the chairperson, general manager, or person holding an equivalent position of the company and a person in any of those positions at another company or institution are the same person or are spouses (excluding the independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a company and its parent or subsidiary or a subsidiary of the same parent).

• (8) Not a director, supervisor, officer, or shareholder holding five percent or more of the shares, of a specified company or institution that has a financial or business relationship with the company (excluding the independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a specified company or institution holds 20 percent or more and no more than 50 percent of the total number of issued shares of the public company, and the company and its parent or subsidiary or a subsidiary of the same parent).

• (9) Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides auditing services to the company or any affiliate of the company, or that provides commercial, legal, financial, accounting or related services to the company or any affiliate of the company for which the provider in the past 2 years has received cumulative compensation exceeding NT$500,000, or a spouse thereof; provided, this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Securities and Exchange Act or to the Business Mergers and Acquisitions Act or related laws or regulations.

• (10) Not a spouse or relative within the second degree of kinship of any other directors.

• (11) Not under any of the categories stated in Article 30 of the Company Act.

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

• Note 3: The representative of Director, Core Pacific Co., Ltd., was reassigned from Lin Ko-Ming to Chen Ruey-Long on January 31, 2020.

• 29 -

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

March 30,2020

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
CEO	Republic of China	Chen Ruey-Long	Male	20200327	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	Director of Kaohsiung Monomer Co., Ltd. (Legal Representative) 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 CORPORATION Director of Powerchip Semiconductor Manufacturing Corp. Director of Panshin Commercial Bank	None	None	None	None
President	Republic of China	Janson Yu	Male	20171110	127,107	0.004%	962	0.000%	0	0.000%	Director and Chief Financial Officer of Living Mall Chief Financial Officer of Living Mall Co. Ltd. Project Manager of Ching-Hua Securities Co., Ltd. Department of	Director of Kaohsiung Monomer Co., Ltd. (Legal Representative) Supervisor of Tsou Seen Chemical Industries Corporation Director of CPDC(BVI) Company. Director of SHIFU Company Director of Weida (Zhangzhou) Consulting Corporation Director of Taivex Therapeutics Corporation (Legal Representative) Director of Dingyue Development Co., Ltd. (Legal Representative) Director of CPDC Green Technology Corporation (Legal Representative)	None	None	None	None

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
											Accounting in Fu-Jen Catholic University	Director and President of Zhangzhou Weida Petrochemical Corporation President of Chunghwa Gemini Development Corporation Ltd. (Legal Representative) Chairman of Daying Construction Director of Core Pacific Twin Tower (Myanmar) Investment Director of ChangzhouWeicai New Material Science & Technology Co.,Ltd. Director of Weihua (Rudong) Trade Co.,Ltd. Director and GM of Kunshan Weichin Management Consulting Corporation President of WeiQiang International Trading (Shanghai) Co., Ltd. Director of Weifong (Myanmar) Co., Ltd. Director of Tuofong Investment Co., Ltd. Sheng Fong Construction Investment Limited (Legal Representative) Core Pacific Gemini (Vietnam) Investment Co. (Legal Representative)
Vice President	Republic of China	Huang Kuo-Tsai	Male	20170224	0	0.000%	9,000	0.000%	0	0.000%	Investigation Officer of Ministry of Justice Section Chief of Civil Service Protection & 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 DeputyGeneral	Director of CPDC Green Technology Corporation (Legal Representative) Director of CKS Guard Co., Ltd. (Legal Representative)	None	None	None	None

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
											Manager in Management Department of BES Master Degree in Public Administration of NCCU
Vice President	Republic of China	Liu Yun-Chih	Male	20180801	0	0.000%	0	0.000%	0	0.000%	Vice President of Land Development Department of CPDC Department of Law in Fu Jen Catholic University	President of Dingyue Development Co., Ltd. Director of Chunghwa Gemini Development Corporation Ltd. (Legal Representative) Director of Jingjie Construction Co., Ltd. (Legal Representative) President of Shengfong Construction Investment Co., Ltd. President of Core Pacific Twin Tower (Vietnam) Investment President of Changshou Jing Huei Landmark Co. Ltd. President of An Shan Jing Huei LandmarkCo.Ltd.	None	None	None	None
Vice President	Republic of China	Yuan-Long Chen	Male	20160701	76,860	0.002%	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 Degree in Chemical Engineering of NTU	Director of Weida (Zhangzhou) Consulting Corporation President of Jiangsu Weiming Petrochemical Corporation	None	None	None	None

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
Special Assistant of President	Republic of China	Chi-Chun Chia	Male	20181101	172	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 of Tsou Seen Chemical Industries Corporation (Legal Representative) Chairman and Director of CPDC Green Technology Corporation (Legal Representative) Director of Kunshan Weichin Management Consulting Corporation Director of Jiangsu Weiming Petrochemical Corporation Director of CPDC Gemini (India) Development Corporation Ltd.	None	None	None
Vice President	Republic of China	Tsai Chia-Wei	Male	20191225	17,414	0.001%	19,261	0.001%	0	0.000%	P.h.D. in MOES of National Sun Yat-sen University Engineer, Specialist, Manager, Assistant Vice President inCPDC	None	None	None	None	None
Vice President	Republic of China	Shu-Tong Zou	Male	20200327	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 of WeiQiang International Trading (Shanghai) Co., Ltd. Director of ChangzhouWeicai New Material Science & Technology Co.,Ltd.	None	None	None	None
Vice President	Republic of China	Chen Ying-Chun	Male	20200327	0	0.000%	0	0.000%	0	0.000%	Senior Administrator, Specialist, Manager and Assistant Vice President of CPDC Department of Accountingof Chinese	Supervisor of Taivex Therapeutics Corporation Supervisor of Kaohsiung Monomer Co., Ltd. Director of CKS Guard Co., Ltd. (Legal Representative) Director of CPDC (BVI)	None	None	None	None

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
											Culture University	Investment Co., Ltd. Director of SHIFU Company Director of CPDC Green Technology Corporation (Legal Representative) Supervisor of Dingyue Development Co., Ltd. Director of Chunghwa Gemini Development Corporation Ltd. (Legal Representative) Supervisor of Jingjie Construction Co., Ltd. (Legal Representative) Supervisor of Weihua (Rudong) Trade Co., Ltd. Supervisor of WeiQiang International Trading (Shanghai) Co., Ltd. Supervisor of Zhangzhou Weida Petrochemical Corporation Supervisor of Weida (Zhangzhou) Consulting Corporation Supervisor of Kunshan Weichin Management Consulting Corporation Supervisor of Jiangsu Weiming Petrochemical Corporation Supervisor of ChangzhouWeicai New Material Science & Technology Co.,Ltd. Director of Core Pacific-Yamaichi Financial Group Limited Director of Core Pacific-Yamaichi International(H.K.)Limited

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
												Director of Core Pacific - Yamaichi Commercial Factoring (Jiangsu) Holding Limited Director of Guangxi Beibu Gulf Innovation Development Investment Fund ManagementCo.,Ltd.
Lead Auditor	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	None
Assistant Vice President	Republic of China	Lin Chin-Hsiang	Male	20180327	28,741	0.001%	0	0.000%	0	0.000%	Manager, CPDC Hsiaokang Plant, Environmental Team Masters in Chemical Engineering, National TaiwanUniversity	None	None	None	None	None
Assistant Vice President	Republic of China	Lee Guan-Lu	Male	20180717	0	0.000%	0	0.000%	0	0.000%	Assistant Vice President of CPDC Chemical Engineering Department of National Taipei Institute of Technology	None	None	None	None	None
Assistant Vice President	Republic of China	Lee Chien-Hsien	Male	20160701	115,526	0.004%	45,150	0.001%	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	None

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
Assistant Vice President	Republic of China	Kao Chi-Tsung	Male	20160701	0	0.000%	0	0.000%	0	0.000%	Engineer in CPLIII factory of CPDC Supervisory, Senior Engineer, Manager in Xiaogang factory of CPDC Master Degree of Chemical and Materials Engineering in Tamkang University	None	None	None	None	None
Assistant Vice President	Republic of China	Huang Chien-Yuan	Male	20190812	411	0.000%	0	0.000%	0	0.000%	Manager, CPDC Dashe Plant, Safety Team Masters in Chemical Engineering, Tamkang University	None	None	None	None	None
Assistant Vice President	Republic of China	Chang Chia-Wen	Male	20191028	0	0.000%	0	0.000%	0	0.000%	Manager and Assistant Vice President of Pacific Construction Co., Ltd. Vice President of Taijia Development Co., Ltd. Chief Operating Officer of SOFR3SH Co., Ltd. Special Assistant of Chairman of Sun-Jet Construction Ltd. Assistant Vice President of Land Development Department of CPDC Department of Civil Engineering in Minghsin University of ScienceandTechnology	None	None	None	None	None
Factory Chief	Republic of China	Lee Chiao-Pin	Male	20190613	193	0.000%	0	0.000%	0	0.000%	Manager, CPDC Toufen Plant, Production 1st Team Masters in Chemical Engineering, Yuntech University	None	None	None	None	None
Factory	Republic of	Tsai	Male	20190812	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC	None	None	None	None	None

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
Chief	China	Chau-Yuan									Hsiaokang Plant, Production 1st Team Masers in Chemical Engineering, Tunghai University
Factory Chief	Republic of China	Wang Chong-Chie n	Male	20190812	21,346	0.001%	0	0.000%	0	0.000%	Manager, CPDC Dashe Plant, Technical Team Masters in Chemical Engineering, Yuan Zhe University	None	None	None	None	None
Manager	Republic of China	Wang Yen-Li	Male	20180101	49,843	0.002%	0	0.000%	0	0.000%	Manager, CPDC Business and Trade Division, Raw Materials Procurement Masters in HR, National Central University	None	None	None	None	None
Manager	Republic of China	Lee Chi-Chang	Male	20180101	23,694	0.001%	0	0.000%	0	0.000%	Manager, CPDC Admin Division, HR Department Fiber Engineering, National Taiwan University of Science andTechnology	None	None	None	None	None
Manager	Republic of China	Chen Yung-Long	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC Admin Division, IT Department Masters in IT, Tamkang University	None	None	None	None	None
Manager	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 Masters in Materials Engineering,NSYSU	None	None	None	None	None
Manager	Republic of China	Yang Ming-Ling	Female	20180101	0	0.000%	5,250	0.000%	0	0.000%	Manager, CPDC Legal Counsel JD, National Taipei University	None	None	None	None	None
Manager	Republic of China	Yang Chi-Yuan	Male	20180101	6,643	0.000%	0	0.000%	0	0.000%	Manager, CPDC, China Business Division, Construction Department	None	None	None	None	None

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
											Chemistry and Engineering, National Taiwan University of ScienceandTechnology
Manager	Republic of China	Chen Jian-Ming	Male	20180101	94	0.000%	0	0.000%	0	0.000%	Manager, CPDC, Toufen Plant, Production 2ndTeam Chemical Engineering, National Taiwan University of Science and Technology	None	None	None	None	None
Manager	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	None
Manager	Republic of China	Wang Chi-Fong	Male	20180101	6,168	0.000%	0	0.000%	0	0.000%	Manager, CPDC Toufen Plant, Nylon Team Chemical Engineering, National Taiwan University of Science andTechnology	None	None	None	None	None
Manager	Republic of China	Chien Fang-Mo	Male	20180101	39,475	0.001%	918	0.000%	0	0.000%	Manager, CPDC Dashe Plant, Production Team Masters in Chemical Engineering,NCKU	None	None	None	None	None
Manager	Republic of China	Lee Chin-Yi	Male	20180101	66,000	0.002%	0	0.000%	0	0.000%	Manager, CPDC Dashe Plant, Administrative Department Masters in Chemistry, NCKU	None	None	None	None	None
Manager	Republic of China	Lee Kun-Nan	Male	20180101	179,719	0.005%	582	0.000%	0	0.000%	Manager, CPDC Hsiaokang Plant, Production 2ndTeam Masters in Mechanical Engineering, Tsinghua University	None	None	None	None	None

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
Manager	Republic of China	Lee Kung-Da	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC Hsiaokang Plant, Technical Team Masters in Chemical Engineering, National Taiwan University	None	None	None	None	None
Manager	Republic of China	Chien Kuan- Der	Male	20180101	10,916	0.000%	320	0.000%	0	0.000%	Manager, CPDC Hsiaokang Plant, Administrative Team Masters in IT, Kaohsiung University of Applied Sciences	None	None	None	None	None
Manager	Republic of China	Chien Chang-Hung	Male	20180510	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC Equipment Perchase Office Department of Industrial Engineering and Management, Yuan Zhe University	None	None	None	None	None
Manager	Republic of China	Chang Cheng-Lung	Male	20180701	18,900	0.001%	0	0.000%	0	0.000%	Senior Engineer of CPDC Information Office; Senior Engineer and Specialist of Information System Management Team; Manager of Data Application Office Computer Science and Information Engineering and Management, National Pingtung Institute ofCommerce	None	None	None	None	None
Manager	Republic of China	Yang Pei-Yu	Female	20180801	9,450	0.000%	0	0.000%	0	0.000%	Senior Administrator, Specialist, Manager of CPDC Shareholder Services Office Department of International Trade in Advanced College of China University of Technology	None	None	None	None	None

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
Manager	Republic of China	Wu Chun-Hsien	Male	20181101	0	0.000%	0	0.000%	0	0.000%	Manager, CPDC Business Management Team Chemicla Engineering, National Cheng Kung University	None	None	None	None	None
Manager	Republic of China	Kao Tien-Shui	Male	20181105	0	0.000%	162	0.000%	0	0.000%	CPDC Project Control Team EMBA, National ChengchiUniversity	None	None	None	None	None
Manager	Republic of China	Chen Yi-Yen	Male	20180101	14,432	0.001%	0	0.000%	0	0.000%	Manager, Factory Chief and Project Assistant Vice President of CPDC Chemical Engineering, NTU	None	None	None	None	None
Manager	Republic of China	Liu Yung-Fu	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Assistant Manager, SAMPO Securities Co. Ltd. Assistant Manager, Jinghua Securities Co. Ltd. Technical Engineering Audit Manager, Cotech Engineering Corporation Manager, IBF Securities Assistant Vice President, MasterLink Securities MBA, Indiana State University (USA)	None	None	None	None	None
Manager	Republic of China	Ho Mu-Chuan	Male	20180101	0	0.000%	0	0.000%	0	0.000%	Engineer of Manufacture Section in CPDC Engineer of Utilities Section in Tou-Fen factory of CPDC Factory Chief in CPL factory in Tou-Fen factory of CPDC Manager of Environmental	None	None	None	None	None

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
											Engineering Section in Tou-Fen factory of CPDC Textile of National Taiwan University of Science and Technology
Manager	Republic of China	Hsu Po-Cheng	Male	20190617	0	0.000%	0	0.000%	0	0.000%	Branch Manager, Ta Chong Commercial Bank Co., Ltd. Financial Supervisor, Fund Management Committee for Private Schools Faculties Manager, Financial Resources Office of Financial Department Master in Financial Management, Fu Jen Catholic University	None	None	None	None	None
Manager	Republic of China	Tseng Wen-Yuan	Male	20190701	152	0.000%	0	0.000%	0	0.000%	Sales Manager, Taiwan Cement Corporation, China Huanan Region. CPDC Product Trading Department, Sales, Deputy Manager. CPDC Product Trading Department Branch Manager. Soochow University, Business BA Tamkang University, IMBA International Business	None	None	None	None	None
Manager	Republic of China	Hsu Yung-Sen	Male	20190812	3,150	0.000%	3,150	0.000%	0	0.000%	CPDC, Da-Sheh Plant, Factory Manager's Office, Environmental Section, Section Manager. HQ Environmental Protection & Pollution Preventioni Center	None	None	None	None	None

Job Title (Note 1)	Nationality or Registry	Name	Gender	Election Date	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 (Note 2)	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	Note (Note 3)
					Quantity	Ratio %	Quantity	Ratio %	Quantity	Ratio %			Job Title	Name	Relation
											Manager. National Sun Yat Sen University, Environmental Engineering,Doctorate.

• Note 1: It shall include information of president, vice president, assistant vice president, supervisors of various departments and branches; any position equivalent to president, vice president, assistant vice president, regardless of job title, shall also be disclosed.

• Note 2: For the experience related to holding the current position, if one has worked in the CPA firm conducting the auditing and attesting business or related company, he/she shall state the job title and responsible position. Assistant vice president, regardless of job title, should also be disclosed.

• Note 3: Where the chairperson of the board of directors and the general manager or person of an equivalent post (the highest level manager) of the Company are the same person, spouses, or relatives within the first degree of kinship, an explanation shall be given of the reason for, reasonableness, necessity thereof, and the measures adopted in response thereto (for example, increase the number of independent directors, and there shall be more than half of the directors who do not concurrently serve as employees or managers).

III.Remuneration to Directors (including Independent Directors), Supervisors, President and Vice Presidents

1. Remuneration to Directors and Independent Directors (names and remuneration thereof to be disclosed individually)

December 31, 2019 Currency Unit: NTD Thousand

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 sum of A, B, C and D in proportion to Earnings After Tax (%) (Note 10)	The sum of A, B, C and D in proportion to Earnings After Tax (%) (Note 10)	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	The sum of A, B, C, D, E, F and G to Earnings after Tax (%) (Note 10)	The sum of A, B, C, D, E, F and G to Earnings after Tax (%) (Note 10)	Remuneration from investees other than subsidiaries (Note 11)
		Remuneration (A) (Note 2)		Pension (B)		Remuneration of Directors (C) (Note 3)		For Services (D) (Note 4)				Salaries, bonus and special subsidies (E) (Note 5)		Pension (F)		Remuneration of Employee (G) (Note 6)
		The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company		All companies included into the financial statement (Note 7)		The Company	All companies included into the financial statement (Note 7)
																Cash dividend	Stock dividend	Cash dividend	Stock dividend
Chairman	Representative of the Core Pacific Co., Ltd.: Ko-MingLin	0	0	0	0	6,417	6,957	0	39	0.3691%	0.4024%	26,648	26,648	0	0	0	0	0	0	1.9020%	1.9353%	308
Director (Resign on February 11, 2019)	Representative of the Core Pacific Co., Ltd.: Kuan-Ren Soong	0	0	0	0	0	0	20	20	0.0012%	0.0012%	0	0	0	0	0	0	0	0	0.0012%	0.0012%	20
Director (Take office on February 11, 2019)	Representative of the Core Pacific Co., Ltd.: Hwa-Yeang Shen	0	0	0	0	6,417	6,417	268	268	0.3845%	0.3845%	0	0	0	0	0	0	0	0	0.3845%	0.3845%	None
Director & Vice Chairman	Representative of BES Machinery Co., Ltd.: Jiun-Nan Bai	0	0	0	0	6,417	6,417	0	20	0.3691%	0.3703%	4,722	4,722	0	0	0	0	0	0	0.6407%	0.6419%	None
Director	Representative of Jen Huei Enterprise Co., Ltd.: Jiun-Huei Guo	0	0	0	0	6,417	6,417	288	288	0.3857%	0.3857%	0	0	0	0	0	0	0	0	0.3857%	0.3857%	None
Director	Representative of Sheen Chueh-Chi Cultural and Educational Foundation: Lian-ShengTsai	0	0	0	0	6,417	6,417	284	284	0.3855%	0.3855%	0	0	0	0	0	0	0	0	0.3855%	0.3855%	None

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 sum of A, B, C and D in proportion to Earnings After Tax (%) (Note 10)	The sum of A, B, C and D in proportion to Earnings After Tax (%) (Note 10)	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	Remuneration in the capacity as employees	The sum of A, B, C, D, E, F and G to Earnings after Tax (%) (Note 10)	The sum of A, B, C, D, E, F and G to Earnings after Tax (%) (Note 10)	Remuneration from investees other than subsidiaries (Note 11)
		Remuneration (A) (Note 2)		Pension (B)		Remuneration of Directors (C) (Note 3)		For Services (D) (Note 4)				Salaries, bonus and special subsidies (E) (Note 5)		Pension (F)		Remuneration of Employee (G) (Note 6)
		The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company	All companies included into the financial statement (Note 7)	The Company		All companies included into the financial statement (Note 7)		The Company	All companies included into the financial statement (Note 7)
																Cash dividend	Stock dividend	Cash dividend	Stock dividend
Director	Representative of Sheen Chueh-Chi Cultural and Educational Foundation: Kuen-Ming Lin	0	0	0	0	6,417	6,417	276	276	0.3850%	0.3850%	0	0	0	0	0	0	0	0	0.3850%	0.3850%	None
Independent Director	Ruey-long Chen	3,600	3,600	0	0	0	0	0	0	0.2071%	0.2071%	0	0	0	0	0	0	0	0	0.2071%	0.2071%	None
Independent Director	Yun-Peng Chu	3,600	3,600	0	0	0	0	0	0	0.1898%	0.1898%	0	0	0	0	0	0	0	0	0.1898%	0.1898%	None
Independent Director	Pag Wen-Yen	2,400	2,400	0	0	0	0	0	0	0.1381%	0.1381%	0	0	0	0	0	0	0	0	0.1381%	0.1381%	None
1. Please state the policy, system, standards and structure of independent directors’ remuneration payment, and describe the relevance between the amount of remuneration and the factors including responsibilities, risks, the time spent by the individual, etc.: The remuneration of the Company’s Directors shall be distributed by the Board of Directors in accordance with the authorization of the Articles of Incorporation, and shall shall take into account the pay levels in the domestic and overseas industry. The Board of Directors shall, in accordance with the Articles of Incorporation, decide the amount of Directors’ remuneration in the event of profits. Independent directors are ex officio members of the Audit Committee; in addition to paying the remuneration of general directors, different reasonable remunerations may be determined in consideration of the responsibilities, risks and the time spent by the individual. 2. In addition to the disclosures in the above table, the remuneration of directors from providing services (e.g., as the consultant of non-employee) to all companies in financial statements in recent year: 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 shall list the general directors and independent directors separately and disclose the amount of various payments in summary.

• Note 2: The remuneration to directors in the most recent year (including director’s salary, duty allowance, severance pay, bonus and reward, et al.).

• Note 3: The remuneration to directors approved by the Board of Directors prior to the motion for 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 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.

• 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 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.

• Note 6: If the directors who acted as employees concurrently (including president, vice president, managerial officer and employee) received employee bonus (including stock dividend and cash dividend) in the most recent year, please disclose the employee bonus approved 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 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 the Company’s directors have received remuneration from investees beyond subsidiaries (If there is none, please fill in "none").

• 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.

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

December 31, 2019 Currency Unit: NTD Thousand

Job Title	Name	Salary (A) (Note 2)	Salary (A) (Note 2)	Pension (B)	Pension (B)	Cash incentives and special discretionary allowance etc. (C) (Note 3)	Cash incentives and special discretionary allowance etc. (C) (Note 3)	Amount for employee remuneration (D) (Note 4)	Amount for employee remuneration (D) (Note 4)	Amount for employee remuneration (D) (Note 4)	Amount for employee remuneration (D) (Note 4)	The sum of A, B, C and D in proportion to Earnings After Tax (%) (Note 8)	The sum of A, B, C and D in proportion to Earnings 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 into the financial statement (Note 5)
								Cash Dividend	Stock Dividend	Cash Dividend	Stock Dividend
CEO	Ko-Ming Lin	33,753	35,254	0	0	62,298	62,891	9,127	0	9,127	0	6.050%	6.171%	595
President	Janson Yu
Vice President of the Petrochemical Production Department	Yuan-Lung Chen
Vice President of the Administrative Resources Department	Huang Kuo-Tsai
Vice President of the Land Development Department	Liu Yun-Chih
Vice President of the Finance Department	Chen Ying-Chun
Vice President of the New Venture Department	Shu-Tong Zou
Vice President of the R&D Center	Tsai Chia-Wei
Special Assistant of Chairman	Chi-Chun Chia
Special Assistant of Chairman	Lin Ching

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

Breakdown of Remuneration

Breakdown of Remuneration
Breakdown of remuneration paid to president and vice president	Name of President or Vice President
	The Company (Note 7)	All companies included into the financial statement (Note 8) E
Less than NT$1,000,000
NT$1,000,000 (inclusive) ~ NT$2,000,000 (exclusive)
NT$2,000,000 (inclusive) ~ NT$3,500,000 (exclusive)	Liu Yun-Chih	Liu Yun-Chih
NT$3,500,000 (inclusive) ~ NT$5,000,000 (exclusive)	Yuan-Lung Chen
NT$5,000,000 (inclusive) ~ NT$10,000,000 (exclusive)	Lin Ching, Tsai Chia-Wei, Shu-Tong Zou, Chen Ying-Chun, Huang Kuo-Tsai, Chi-Chun Chia	Lin Ching, Tsai Chia-Wei, Shu-Tong Zou, Chen Ying-Chun, Huang Kuo-Tsai, Chi-Chun Chia, Yuan-Lung Chen
NT$10,000,000 (inclusive) ~ NT$15,000,000 (exclusive)
NT$15,000,000 (inclusive) ~ NT$30,000,000 (exclusive)	Ko-Ming Lin, Janson Yu	Ko-Ming Lin, Janson Yu
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	10 persons	10 persons

• Note 1: The name of 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.

• Note 4: Please specify the employee bonus (proposed amount). to be allocated to the presidents and vice presidents as approved 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. 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: The earnings after tax refers to the earnings after tax in the most recent year. If IFRSs is 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 9: a. To specify whether the Company’s presidents and vice presidents have received remuneration from investees beyond subsidiaries (If there is none, please fill in "none").

• b. If the Company’s presidents and vice presidents have received remuneration form investees beyond subsidiaries, please include the same into Section E 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 presidents and vice presidents 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.

3. Employee bonus amount paid to managerial officers:

December 31, 2019 Currency Unit: NTD Thousand

	Job Title (Note 1)	Name (Note 1)	Stock Dividend	Cash Dividend	Total	Proportion to Earnings After Tax (%)
Managerial Officer	President	Janson Yu	0	12,831	12,831	0.74%
	Vice President	Huang Kuo-Tsai
	Vice President	Liu Yun-Chih
	Vice President	Yuan Lung Chen
	Vice President	Shu-Tong Zou
	Vice President	Tsai Chia-Wei
	Vice President	Chen Ying-Chun
	Special Assistant	Chi-Chun Chia
	Special Assistant	Lin Ching
	Lead Auditor	Yang Huei-Fen
	Assistant Vice President	Huang Chien-Yuan
	Assistant Vice President	Lin Chin-Hsiang
	Assistant Vice President	Lee Guan-Lu
	Factory Manager	Lee Chiao-Pin
	Factory Manager	Tsai Chau-Yuan
	Factory Manager	Wang Chong-Chien

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

• Note 2: Please specify the employee bonus (proposed amount) to be allocated to the managerial officers as approved 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. 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 3: The scope of managerial officers shall be defined in the following manner, as 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;

• (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 dividend and cash dividend), please complete table 1-2 and also this table.

• 49 -

• (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 risk:

• Total compensation paid to directors, presidents, and vice presidents as a percent of earnings after tax in the most recent 2 years (calculated based on estimations and on an accrual basis):

accrual basis):	accrual basis):
2019		2018
The Company	All companies included into the consolidated financial statements	The Company	All companies included into the consolidated financial statements
8.865%	9.021%	3.803%	3.942%

Total compensation paid to directors, presidents, and vice presidents as a percentage of earnings after tax, explanations is as follows:

In 2019, total compensation paid as a percentage of pre-tax earnings increased is due to a change in the 2019 remuneration committee represented by independent directors, and also an increase of 3 new vice presidents, resulting in an increase in total compensation paid to directors, presidents, and vice presidents of the Company.

1. The policies, standards, combinations, procedure of decision-making of remunerations, and their relation to business performance and future risk:

2. The remuneration to the Company’s (Executive) Chairman and directors was based on remuneration, transportation allowance and attendance allowance applicable in the same industry domestically and overseas, taking the performance and risk into consideration, and paid in accordance with Article 28 of the Company’s Articles of Incorporation. According to Article 32 of the Articles of Incorporation, 2% of the earnings shall be allocated as remuneration to directors according to the motion for allocation of shareholders' dividend.

3. The remuneration to the Company’s presidents and vice presidents (including salary, allowance and bonus, etc.) 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.

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.

5. 50 -

V. Status of Corporate Governance

(I) Operations of the Board

1. A total of 13 board meetings were held in 2019. The attendance record of directors & supervisors is listed below:

Job Title	Name (Note 1)	Representative	Actual attendance (B)	Attendance by proxy	Actual attendance rate (%) (B/A) (Note 2)	Remark
Chairman	Core Pacific Co., Ltd 1	Ko-Ming Lin	13	0	100	Ko-Ming Lin was reassigned to Ruey-long Chen on January 31, 2020.
Director	Core Pacific Co., Ltd 2	Shen Hwa-Yeang	12	0	100	Kuan-Ren Soong was reassigned to Shen Hwa-Yeang on January 31, 2020.
Director	Core Pacific Co., Ltd 2	Kuan-Ren Soong	0	1	0	Former term
Vice Chairman	BES Machinery Co., Ltd	Jiun-Nan Bai	11	2	84.6
Independent Director	Ruey-Long Chen		13	0	100
Independent Director	Yun-Peng Chu		12	1	92.3
Independent Director	Pan Wen-Yen		11	2	84.6
Director	Sheen Chuen-Chi Cultural and Educational Foundation 1	Lian-Sheng Tsai	11	2	84.6
Director	Sheen Chuen-Chi Cultural and Educational Foundation 2	Kuen-Ming Lin	9	4	69.2
Director	Jen Huei Enterprise Co., Ltd 1	Jiun-Huei Guo	12	1	92.3
Other notes: I. If the operation 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. The resolutions in the Board meeting are in accordance with Article 14-3 of the Securities and Exchange Act. are as follows: (1) Establishment or revision of internal control according to Article 14-1: 1. Date of the board meeting: Feb 27, 2019 11thsession of the 21stBoard of Directors Motion: Amendment of the Company’s “Regulations of Performance Evaluation for Board of Directors” selected articles and appendix. Resolution: Approved by all attended directors. 2. Date of the board meeting: Mar 22, 2019 12thsession of the 21stBoard of Directors Motion: Amendment of the Company’s “Shareholder Services Internal Control Policy” (including the Shareholder Services Internal Control Operational Guidelines). Resolution: Approved byall attended directors.

• 51 -

3. Date of the board meeting: Apr 10, 2019 13thsession of the 21stBoard of Directors
Motion: Establishment of the Company’s “Standard Operating Procedures for Handling Requests of
Directors”.
Resolution: Approved by all attended directors.
4. Date of the board meeting: May 9, 2019 14thsession of the 21stBoard of Directors
Motion: Amendment of the Company’s “Remuneration Committee Charter”.
Resolution: Approved by all attended directors.
5. Date of the board meeting: Jun 11, 2019 15thsession of the 21stBoard of Directors
Motion: Amendment of the Company’s “Corporate Governance Best Practice Principles”.
Resolution: Approved by all attended directors.
6. Date of the board meeting: Jun 11, 2019 15thsession of the 21stBoard of Directors
Motion: Amendment of the Company’s “Working Guidelines for Distribution of Employee’s
Compensation”.
Resolution: Approved by all attended directors.
7. Date of the board meeting: Aug 12, 2019 17thsession of the 21stBoard of Directors
Motion: Adjustment of the Company organization and amendment of the Company’s “Article of
Incorporation”.
Resolution: Approved by all attended directors.
8. Date of the board meeting: Sep 23, 2019 18thsession of the 21stBoard of Directors
Motion: Amendment of the Company’s “Division of Responsiblilities for Board of Directors and
Managers”.
Resolution: Approved by all attended directors.
9. Date of the board meeting: Sep 23, 2019 18thsession of the 21stBoard of Directors
Motion: Amendment of the Company’s “Regulations for the Distribution of Annual Performance Bonus”.
Resolution: Approved by all attended directors.
10. Date of the board meeting: Oct 24, 2019 20thsession of the 21stBoard of Directors
Motion: Amendment of the Company’s “Division of Responsiblilities for Board of Directors and
Managers”.
Resolution: Approved by all attended directors.
11. Date of the board meeting: Dec 25, 2019 22ndsession of the 21stBoard of Directors
Motion: Amendment of the Company’s “Regulations of Performance Evaluation for Board of Directors”.
Resolution: Approved by all attended directors.
(2) In accordance to Article 36-1 regulations on the establishment or revision of the acquisition or disposal of
assets, the trading of derivatives, corporate loans to others, guaurantees or warrants to others, and relevant
operating procedures:
1. Date of board meeting: Mar 22, 2019 12thsession of the 21stBoard of Directors
Motion: Amendment of the Company’s “Procedures for the Acquisition or Disposal of Assets”.
Resolution: Approved by all attended directors.
(3) Matters involving the self-interests of the Directors:
1. Date of board meeting: Jan 23, 2019 10thsession of the 21stBoard of Directors
Motion: The Company’s retroactive admission case of the appointed managers’ bonus in 2018.
Resolution: Approved by all attended directors
2. Date of board meeting: Jan 23, 2019 10thsession of the 21stBoard of Directors
Motion: The Company’s distribution of year-end performance bonus for the appointed managers in 2018.
Resolution: Approved by all attended directors
3. Date of board meeting: Feb 27, 2019 11thsession of the 21stBoard of Directors
Motion: Proposing to the 2019 Annual Shareholders Meeting for releasing the business strife limitation on
the 21stIndependent Directors.
Resolution: Approved by all attended directors
4. Date of board meeting: Mar 22, 2019 12thsession of the 21stBoard of Directors
Motion: The Company’s distribution of remuneration for the Directors in 2018.
Resolution: Approved by all attended directors
5. Date of board meeting: Mar 22, 2019 12thsession of the 21st Board of Directors
Motion: Engaging the independent director, Yun-Peng Chu, as a member of the Company’s 4th
“Remuneration Committee”.
Resolution: Approved by all attended directors
6. Date of board meeting: May 9, 2019 14thsession of the 21stBoard of Directors
Motion: The remuneration case of the Company’s independent director, Yun-Peng Chu, who concurrently
acts as a member of the Remuneration Committee.
Resolution: Approved by all attended directors
7. Date of board meeting: May 9, 2019 14thsession of the 21stBoard of Directors
Motion: The reward case for the personnel above the head of the relevant business of the Company’s
finance department, who created disposal benefits due to timely disposal of ETF (Exchange Traded Funds).
Resolution: Approved by all attended directors
8. Date of board meeting: Sep23,2019 18th session of the 21st Board of Directors

• 52 -

Motion: The Company’s distribution of personnel remuneration for the appointed Managers in 2018. Resolution: Approved by all attended directors 9. Date of board meeting: Oct 24, 2019 20[th] session of the 21[st] Board of Directors Motion: Amendment of the Company’s “Division of Responsiblilities for Board of Directors and Managers”. Resolution: Approved by all attended directors 10. Date of board meeting: Dec 25, 2019 22[nd] session of the 21[st] Board of Directors Motion: The Company’s distribution of performance bonus for the appointed managers in the 2[nd] quarter of 2019. Resolution: Approved by all attended directors (4) Trading of major assets or derivatives: 1. Date of meeting: Feb 27, 2019 11[th] session of the 21st Board of Directors Motion: The Company participated in the subscription of the Class H registered convertible special shares of the Core Pacific City Co., Ltd., which was expected to issue under private placement in March 2019. The number of subscribed shares shall not exceed 125 million shares; the subscription price per share was NT$10; the dividend annual interest rate was 9.5%. The total investment amount shall not exceed NT$1.25 billion. Resolution: Approved by all attended directors 2. Date of meeting: Feb 27, 2019 11[th] session of the 21st Board of Directors Motion: The Company acquired 20,100 thousand shares (9.13%) of the Chunghwa Gemini Development Co., Ltd. For NT$10.78 per share; the total investment amount was NT$216,678 thousand. After acquisition, the Company holds 100% control of the Chunghwa Gemini Development Co., Ltd. Resolution: Approved by all attended directors 3. Date of meeting: Apr 10, 2019 13[th] session of the 21st Board of Directors Motion: In response to the policy adjustments of the local competent authority, the land transaction mode of the Company’s “Development of the 2.79-hectare base next to the Thảo Điền MRT Station in the District 2 of Ho Chi Minh City, Vietnam” has changed from application for investment to open tendering procedures. Resolution: Approved by all attended directors 4. Date of meeting: Jun 11, 2019 15[th] session of the 21st Board of Directors Motion: Authorizing the Chairman to negotiate and sign investment agreements with the units in Mainland China, and increasing the capital of Unichem Development Limited by RMB 6.5 million. Resolution: Approved by all attended directors 5. Date of meeting: Jul 12, 2019 16[th] session of the 21st Board of Directors Motion: Transferring 35% stock shares of Praxair Chemax Semiconductor Materials Co., Ltd. held by the Company to the Company’s subsidiary, Chunghwa Gemini Development Co., Ltd. The amount of the disposition was NT$351,290 thousand. Resolution: Approved by all attended directors 6. Date of meeting: Aug 12, 2019 17[th] session of the 21st Board of Directors Motion: The Company’s 2019 annual shareholders meeting approved the proposal of handling the Global Depositary Receipts within 500 million ordinary shares, and the expected offering amount was USD1,350 ~ USD2,025 thousand. Entrusted Yuanta Securities as the foreign underwriter and the underwriting fee was about USD1,350 ~ USD2,025 thousand; entrusted Yuanta Securities as the domestic underwriter and the underwriting fee was about NTD3,000 thousand. Resolution: Approved by all attended directors 7. Date of meeting: Aug 12, 2019 17[th] session of the 21st Board of Directors Motion: The Company and the JEAN GROUP jointly established a joint venture and signed a joint venture agreement. The joint venture will subsequently execute the “Land Development Project of Nanya E. Rd., Banqiao Dist., New Taipei City”. Resolution: Approved by all attended directors 8. Date of meeting: Aug 12, 2019 17[th] session of the 21st Board of Directors Motion: The Company's proposal to lease ”Kaohsiung Multipurpose Economic Zone 5A Special Zone, 32,000 ping land to HK Meiguan Creative Living Mall for 6 months. Resolution: Approved by all attended directors 9. Date of meeting: Sep 23, 2019 18[th] session of the 21st Board of Directors Motion: Revise the Company's Phase 1, Rudong Investment Plan and capital budget progress update and investment evaluation assessment. Resolution: Approved by all attended directors 10. Date of meeting: Sep 23, 2019 18[th] session of the 21st Board of Directors Motion: The Company's investment plan “Construction Project of Fine Chemical Plant - Phase 0 Construction Project”. Resolution: Approved by all attended directors 11. Date of meeting: Sep 25, 2019 19[th] session of the 21st Board of Directors Motion: The Company increased the capital of its 100% subsidiary, Dingyue Development Co., Ltd.,by NT$1 billion, and Dingyue Development Co., Ltd. participated in the bid for the “International Bid for the Land Permanent Ownership of Core Pacific City Co., Ltd.”.

• 53 -

	Resolution: Approved by all attended directors
	12. Date of meeting: Oct 24, 2019 20thsession of the 21st Board of Directors
	Motion: Increasing the capital of its 100% subsidiary, Dingyue Development Co., Ltd.,by NT$6.44 billion.
	Resolution: Approved by all attended directors
	(5) Material monetary loan, endorsement, or provision of guarantee: None.
	(6) Raising, issuing and private placement of equity-based securities:
	1. Date of meeting: Feb 27, 2019 11thsession of the 21stBoard of Directors
	Motion: In order to increase the working capital and meet the capital needs of future development, the
	Company proposed to handle the domestic issuance of ordinary shares by cash capital increase within 500
	million ordinary shares, or participate in the issuance of GDR by cash capital increase of ordinary shares.
	Resolution: Approved by all attended directors
	2. Date of meeting: Aug 12, 2019 17thsession of the 21stBoard of Directors
	Motion: The Company’s 2019 annual shareholders meeting approved the proposal of handling the Global
	Depositary Receipts within 500 million ordinary shares, and the expected offering amount was USD1,350 ~
	USD2,025 thousand. Entrusted Yuanta Securities as the foreign underwriter and the underwriting fee was
	about USD1,350 ~ USD2,025 thousand; entrusted Yuanta Securities as the domestic underwriter and the
	underwriting fee was about NTD3,000 thousand.
	Resolution: Approved by all attended directors
	3. Date of meeting: Sep 23, 2019 18thsession of the 21stBoard of Directors
	Motion: The Company handled the participation in issuance of GDR by cash capital increase within 500
	million ordinary shares; the maximum amount was USD160,317 thousand. Authorizing the Chairman or an
	assigned personnel, on behalf of the Company, to negotiate and sign all contracts and documents related to
	the issuance, and handle all matters related to the issuance.
	Resolution: Approved by all attended directors
	(7) Appointment, dischargement and compensation of certified CPAs:
	Date of meeting: April 10, 2019 13thsession of the 21st Board of Directors
	Motion: The evaluation shows that KPMG has positive performance on external audits, and thus the Company
	approved to reappoint the CPAs from KPMG as the finance and tax auditor.
	Resolution: Approved by all attended directors.
	(8) Appointment or discharge of a financial, accounting, or internal auditing officer: None.
	(Ⅱ) Items in board resolutions regarding which independent directors have voiced opposing or qualified opinions on
	the record or in writing: None for this year.
II.	In instances where a director recused himself/herself due to a conflict of interest, the minutes shall clearly state the
	director's name, contents of the motion and resolution thereof, reason for not voting and actual voting counts:
	(1) Motion: The Company’s retroactive admission case of the appointed managers’ bonus in 2018.
	Recusal: Since Chairman Lin Ko-Ming concurrently acts as the Company’s CEO (appointed manager), the
	director was recused during discussion and voting.
	(2) Motion: The Company’s distribution of year-end performance bonus for the appointed managers in 2018.
	Recusal: Since Chairman Lin Ko-Ming concurrently acts as the Company’s CEO (appointed manager), the
	director was recused during discussion and voting.
	(3) Motion: The Class B registered convertible special shares of the Core Pacific City Co., Ltd. held by the
	Company will expire on March 11, 2018. Proposal of exercising the extension rights to preserve the rights and
	interests of shareholders of special shares.
	Recusal: Since Vice Chairman Bai Chung-Nan and Director Soong Kuen-Ren are directors of the Core Pacific
	City Co., Ltd., the two directors were recused during discussion and voting.
	(4) Motion: The Company acquired 20,100 thousand shares (9.13%) of the Chunghwa Gemini Development Co.,
	Ltd. For NT$10.78 per share; the total investment amount was NT$216,678 thousand. After the acquirement,
	the Company held 100% control of the Chunghwa Gemini Development Co., Ltd.
	Recusal: Since Chairman Lin Ko-Ming, Vice Chairman Bai Chung-Nan and Director Shen Hwa-Yeang are
	directors of the BES Engineering Corporation, the three directors were recused during discussion and voting.
	(5)Motion: Proposingto the 2019 Annual Shareholders Meeting for releasing the business strife limitation on the

• 54 -

21[st] Independent Directors. Recusal: Since Chairman Lin Ko-Ming and Director Shen Hwa-Yeang have conflict of interest, the two directors were recused during discussion and voting. (6) Motion: The Company’s distribution of remuneration for the Directors in 2018. Recusal: Since Chairman Lin Ko-Ming, Vice Chairman Bai Chung-Nan, Director Guo Jiun-Huei, Director Tsai Liang-Sheng, Director Lin Kuen-Ming and Director Shen Hwa-Yeang have conflict of interest, the six directors were recused during discussion and voting. (7) Motion: Engaging the independent director, Yun-Peng Chu, as a member of the Company’s 4th “Remuneration Committee”. Recusal: Since Independent Director Yun-Peng Chu has conflict of interest, the director was recused during discussion and voting. (8) Motion: Engaging the independent director, Yun-Peng Chu, as a member of the Company’s 4th “Remuneration Committee”. Recusal: Since Independent Director Yun-Peng Chu has conflict of interest, the director was recused during discussion and voting. (9) Motion: The reward case for the personnel above the head of the relevant business of the Company’s finance department, who created disposal benefits due to timely disposal of ETF (Exchange Traded Funds). Recusal: Since Chairman Lin Ko-Ming has conflict of interest, the director was recused during discussion and voting. (10) Motion: Authorizing the Chairman to negotiate and sign investment agreements with the units in Mainland China, and increasing the capital of Unichem Development Limited by RMB 6.5 million. Recusal: Since Chairman Lin Ko-Ming is a director of the Unichem Development Limited, the director was recused during discussion and voting. (11) Motion: Transferring 35% stock shares of Praxair Chemax Semiconductor Materials Co., Ltd. held by the Company to the Company’s subsidiary, Chunghwa Gemini Development Co., Ltd. The amount of the disposition was NT$351,290 thousand. Recusal: Since Chairman Lin Ko-Ming is a supervisor of BES Twin Towers Development Co., Ltd., the director was recused during discussion and voting. (12) Motion: The Company’s distribution of personnel remuneration for the appointed Managers in 2018. Recusal: Since Chairman Lin Ko-Ming has conflict of interest, the director was recused during discussion and voting. (13) Motion: The Company increased the capital of its 100% subsidiary, Dingyue Development Co., Ltd.,by NT$1 billion, and Dingyue Development Co., Ltd. participated in the bid for the “International Bid for the Land Permanent Ownership of Core Pacific City Co., Ltd.”. Recusal: Since the Core Pacific Co, Ltd. represented by Chairman Lin Ko-Ming is the corporate shareholder of the Core Pacific City Co., Ltd., and has a controlling relation with the Jinghua Investment Co, Ltd. represented by two directors of the Core Pacific City Co., Ltd.; Vice Chairman Bai Chung-Nan and Director Shen Hwa-Yeang are directors of the Core Pacific City Co., Ltd.; the Sheen Chuen-Chi Cultural and Educational Foundation represented by Director Tsai Liang-Sheng and Director Lin Kuen-Ming is the corporate shareholder of the Core Pacific City Co., Ltd., and assigns representative to elect as a director of the Core Pacific City Co., Ltd., the five directors were recused during discussion and voting.

(14) Motion: Increasing the capital of its 100% subsidiary, Dingyue Development Co., Ltd.,by NT$6.44 billion.

Recusal: Since the Core Pacific Co, Ltd. represented by Chairman Lin Ko-Ming is the corporate shareholder of the Core Pacific City Co., Ltd., and has a controlling relation with the Jinghua Investment Co, Ltd. represented by two directors of the Core Pacific City Co., Ltd.; Vice Chairman Bai Chung-Nan and Director Shen Hwa-Yeang are directors of the Core Pacific City Co., Ltd.; the Sheen Chuen-Chi Cultural and Educational Foundation represented by Director Tsai Liang-Sheng and Director Lin Kuen-Ming is the corporate shareholder of the Core Pacific City Co., Ltd., and assigns representative to elect as a director of the Core Pacific City Co.,

• 55 -

Ltd., the five directors were recused during discussion and voting. (15) Motion: Amendment of the Company’s “Division of Responsiblilities for Board of Directors and Managers”. Recusal: Since Chairman Lin Ko-Ming concurrently acts as the Company’s CEO, the director was recused during discussion and voting. (16) Motion: Handling the process of liquidation for the Company’s reinvestment company Rich Equities Ltd. Recusal: Since Chairman Lin Ko-Ming is the chairman of Rich Equities Ltd., the director was recused during discussion and voting. (17) Motion: Donating NT$18 million to the Sheen Chuen-Chi Cultural and Educational Foundation, continuing to promote relevant events of the “Memories of Cross-Strait Relations”, and assisting in the promotion of the Company's green petrochemical. Recusal: Since Chairman Lin Ko-Ming, Vice Chairman Bai Chung-Nan and Director Shen Hwa-Yeang are directors of the Sheen Chuen-Chi Cultural and Educational Foundation, and Director Tsai Liang-Sheng, representative of the Sheen Chuen-Chi Cultural and Educational Foundation , was elected as the Company’s director, the four directors were recused during discussion and voting. Director Lin Kuen-Ming (attended by his proxy, Director Guo Jiun-Huei), representative of the Sheen Chuen-Chi Cultural and Educational Foundation , was elected as the Company’s director and has conflict of interest; Director Guo Jiun-Huei did not represent Director Lin Kuen-Ming in expressing opinions or voting. (18) Motion: The Company’s distribution of performance bonus for the appointed managers in the 2nd quarter of 2019. Recusal: Since Chairman Lin Ko-Ming has conflict of interest, the director was recused during discussion and voting. III. The evaluation cycles, evaluation periods, scope and method of evaluation, and contents of evaluation for evaluating the performance of the board members (on themselves or peers). The implementation of evaluation for the Board of Directors: Evaluation Evaluation Method of Scope of Evaluation Content of Evaluation Cycle Period Evaluation Once a year. Evaluating the Board of Directors, Internal evaluation 1. Evaluation of performance for the Board of performance Functional of the Board of Directors: Including participation in the from January Committees Directors, operation of the Company, the quality of the 1, 2019 to (including Audit Functional Board of Directors’ decision making, December 31, Committee and Committees composition and structure of the Board of 2019. Remuneration (including Audit Directors, election and continuing education of Committee) and Committee and the directors, and internal control; a total of 45 individual members. Remuneration questions for the five major aspects. Committee) and individual 2. Evaluation of performance for the individual members. board members: Including alignment of the goals and missions of the Company, awareness of the duties of a director, participation in the operation of the Company, management of internal relationship and communication, the director’s professionalism and continuing education, and internal control; a total of 23 questions for the six major aspects. 3. Evaluation of performance for the Audit Committee: Including participation in the operation of the Company, awareness of the duties of the functional committee, the quality of decisions made by the functional committee, makeup of the functional committee and election of its members, and internal control; a total of 22 questions for the five major aspects. 4. Evaluation of performance for the Remuneration Committee: Including participation in the

• 56 -

operation of the Company, awareness of the duties of the functional committee, the quality of decisions made by the functional committee, makeup of the functional committee and election of its members, and internal control; a total of 18 questions for the five major aspects.

• IV. 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: 1. In 2019, the Company conducted internal evaluation of the performance of the Board of Directors, individual directors and Audit Committee in accordance with the “Regulations of Performance Evaluation for Board of Directors”.

• The results of the internal performance evaluation of the Board of Directors in 2019 are: Board of Directors/95 points, individual directors/94 points, Audit Committee/95 points, and Remuneration Committee/94 points (out of 100 points). The operation of the Board of Directors, the Audit Committee and the Remuneration Committee is in good condition.

• The above evaluation results and improvement suggestions were reported at the 23[rd] session of the 21[st] Board of Director on the January 31, 2020,

• Note 1: For director or supervisor who is a corporation, 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 session 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 both the new and the discharged directors or supervisors, and specify if they are the former directors or supervisor, or newly elected, re-elected, and the date of the reelection. Their attendance rate (%) to Board session shall be calculated based on the number of meetings called and the actual number of sessions they attended, during the term of office.

• 57 -

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

The Audit Committee held 10 meetings (A) during 2019; the attendance of independent directors is summarized as follows:

Job Title	Name	Actual attendance (B)	Attendance by proxy	Actual attendance rate (%) (B/A) (Note)	Remark
Independent Director	Chen Ruey-Long	10	0	100.00	Resigned at 5:35 P.M. on January 31st, 2020.
Independent Director	Yun-Peng Chu	9	1	90.00
Independent Director	Pan Wen-Yen	8	2	80.00
Other notes: I. If the operation 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 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: 1. Date of the board meeting: Mar 22, 2019 12thsession of the 21stBoard of Directors meeting Motion: In response to the amendment of the TDDC’s “Shareholder Services Internal Control Policy”, amend the Company’s “Shareholder Services Internal Control Policy” (including the Shareholder Services Internal Control Operational Guidelines). Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 2. Date of the board meeting: Jun 11, 2019 15thsession of the 21stBoard of Directors meeting Motion: Amendment of the Company’s “Corporate Governance Best Practice Principles”. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 3. Date of the board meeting: Aug 12, 2019 17thsession of the 21stBoard of Directors meeting Motion: In order to meet the needs of optimization for the Company’s overall operating strategy, it is proposed to adjust the Company’s organization and amend the Company’s Articles of Incorporation. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 4. Date of the board meeting: Sep 23, 2019 18thsession of the 21stBoard of Directors meeting Motion: Amendment of the Company’s “Division of Responsiblilities for Board of Directors and Managers”. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. 5. Date of the board meeting: Oct 24, 2019 20thsession of the 21stBoard of Directors meeting Motion: Amend the Company’s “Division of Responsiblilities for Board of Directors and Managers”, and add the provision “The assessment, rewards and punishments of Chief Executive Office shall be approved by the Board of Directors”. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting. (2) Assessment of the validity of internal control: 1. Date of the board meeting: Mar 22, 2019 12thsession of the 21stBoard of Directors meeting Motion: The 2018 self-assessment of internal control system (hereafter, “control self-assessment”) has been completed. According to the results of control self-assessment, issue a statement of internal control system. After beingapproved bythe Audit Committee,the audit unit shall report to the Board of Directors

• 58 -

• for approval. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting by the audit unit.

• 1. Date of the board meeting: Dec 25, 2019 22[nd] session of the 21[st] Board of Directors meeting Motion: The Company’s internal control audit plan for 2020. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting by the audit unit.

• (3) In accordance to Article 36-1 regulations on the establishment or revision of the acquisition or disposal of assets, the trading of derivatives, corporate loans to others, guaurantees or warrants to others, and relevant operating procedures:

• Date of meeting: Mar 16, 2017, 23rd session of the 20th board of directors meeting Motion: The Company in accordance to FSC directives, on Feb 9, 2017, FSC announcement number 1060001296 and on Feb 14, 2017, FSC announcement number 10600045236, to revised selected articles in the “Operating Procedures of the Acquisition or Disposal of Assets”. Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

• (4) The items relating to interests of directors: Date of meeting: Dec 25, 2019, 22nd session of the 21th board of directors meeting Motion: Proposal to donate NT$18 million to the Sheen Chun Chi Cultural Foundation, to continue the related works on ”Taiwan Migration Historical Memory Database”, and assist the Green Petrochemical Cultural Promotion for the Company. Audit Committee Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

• (5) Items related to trading of assets or derivative products

• Date of meeting: Feb 27, 2019 11[th] session of the 21st Board of Directors Motion: The Company acquired 20,100 thousand shares (9.13%) of the Chunghwa Gemini Development Co., Ltd. with the total investment amount of NT$216,678 thousand. After the acquisition, the Company holds 100% control of the Chunghwa Gemini Development Co., Ltd. Audit Committee Resolution: Approved by all attended members.

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

1. Date of meeting: Feb 27, 2019 11[th] session of the 21st Board of Directors Motion: The Company participated in the subscription of the Class H registered convertible special shares of the Core Pacific City Co., Ltd., which was expected to issue under private placement in March 2019. The number of subscribed shares shall not exceed 125 million shares; the subscription price per share was NT$10; the dividend annual interest rate was 9.5%. The total investment amount shall not exceed NT$1.25 billion. Audit Committee Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

2. Date of meeting: Jul 12, 2019 16[th] session of the 21st Board of Directors Motion: Transferring 35% stock shares of Praxair Chemax Semiconductor Materials Co., Ltd. held by the Company to the Company’s subsidiary, Chunghwa Gemini Development Co., Ltd. The amount of the disposition was NT$351,290 thousand. Audit Committee Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

3. Date of meeting: Aug 12, 2019 17[th] session of the 21st Board of Directors Motion: The Company and the JEAN GROUP jointly established a joint venture and signed a joint venture agreement. The joint venture will subsequently execute the “Land Development Project of Nanya E. Rd., Banqiao Dist., New Taipei City”. Audit Committee Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

4. Date of meeting: Sep 23, 2019 18[th] session of the 21st Board of Directors Motion: The Company's investment plan “Construction Project of Fine Chemical Plant - Phase 0 Construction Project”. Audit Committee Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

5. Date of meeting: Sep 25, 2019 19[th] session of the 21st Board of Directors Motion: The Company increased the capital of its 100% subsidiary, Dingyue Development Co., Ltd.,by

6. 59 -

NT$1 billion, and Dingyue Development Co., Ltd. participated in the bid for the “International Bid for the Land Permanent Ownership of Core Pacific City Co., Ltd.”. Audit Committee Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

1. Date of meeting: Oct 24, 2019 20[th] session of the 21st Board of Directors Motion: Increasing the capital of its 100% subsidiary, Dingyue Development Co., Ltd.,by NT$6.44 billion. Audit Committee Resolution: Approved by all attended members. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

(6) Raising, issuing and private placement of equity-based securities: 1. Date of meeting: Feb 27, 2019 11[th] session of the 21[st] Board of Directors Motion: In order to increase the working capital and meet the capital needs of future development, the Company proposed to handle the domestic issuance of ordinary shares by cash capital increase within 500 million ordinary shares, or participate in the issuance of GDR by cash capital increase of ordinary shares. Resolution: Approved by all attended directors. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

1. Date of meeting: Aug 12, 2019 17th session of the 21st Board of Directors Motion: The Company’s 2019 annual shareholders meeting approved the proposal of handling the Global Depositary Receipts within 500 million ordinary shares, and the expected offering amount was USD1,350 ~ USD2,025 thousand. Entrusted Yuanta Securities as the foreign underwriter and the underwriting fee was about USD1,350 ~ USD2,025 thousand; entrusted Yuanta Securities as the domestic underwriter and the underwriting fee was about NTD3,000 thousand. Resolution: Approved by all attended directors Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

2. Date of meeting: Sep 23, 2019 18th session of the 21st Board of Directors Motion: The Company handled the participation in issuance of GDR by cash capital increase within 500 million ordinary shares; the maximum amount was USD160,317 thousand. Authorizing the Chairman or an assigned personnel, on behalf of the Company, to negotiate and sign all contracts and documents related to the issuance, and handle all matters related to the issuance. Resolution: Approved by all attended directors Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

(7) Appointment, dischargement and compensation of certified CPAs: Date of meeting: April 10, 2019 13th session of the 21st Board of Directors Motion: The evaluation shows that KPMG has positive performance on external audits, and thus the Company approved to reappoint the CPAs from KPMG as the finance and tax auditor. Resolution: Approved by all attended directors. Resolution: Approved by all attended directors. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

(8) Annual financial report and half-year financial report: Date of the board meeting: March 22, 2019; August 12, 2019 12 and 17[h] session of the 21[th] board of directors meetings Motion: Reviewing for 2018 consolidated and separate financial statements, and 2019 Q2 consolidated financial statement. Resolution: Approved by all attended directors. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

• (9) Other major information: 1. Date of the board meeting: Feb 27, 2019 11th session of the 21st Board of Directors Motion: Amendment of the Company’s “Regulations of Performance Evaluation for Board of Directors” selected articles and appendix. Resolution: Approved by all attended directors. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

• Date of meeting: Jun 11, 2019 15[th] session of the 21st Board of Directors Motion: Authorizing the Chairman to negotiate and sign investment agreements with the units in Mainland China, and increasing the capital of Unichem Development Limited by RMB 6.5 million. Resolution: Approved by all attended directors. Dealing with the opinion from the Audit Committee: Presented to the Board Meeting.

• Date of meeting: Aug 12, 2019 17[th] session of the 21st Board of Directors Motion: The Company's proposal to lease ”Kaohsiung Multipurpose Economic Zone 5A Special Zone, 32,000 ping land to HK Meiguan Creative Living Mall for 6 months.

• 60 -

Resolution: Approved by all attended directors. 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 clearly state the independent director's name, contents of the motion and resolution thereof, reason for 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 provides internal audit report and follow-up reports for all independent directors. And internal audit chief attends audit committee to offer information about independent directors. The communication channel between the audit committee and the independent director’s functions well.

• (2) Independent directors communicate with certified CPAs regularly with reports and meetings. The communication channel between the audit committee and the certified CPAs functions well. The points of communication between the audit committee and the certified CPAs in 2019 are as follows:

• (a) Communication of key audit matters of audit report.

Note:

• Where an independent 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 director before the end of the fiscal year, please list out 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.

• 61 -

(III) Status of Corporate Governance, and any nonconformity to the

Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies , and reasons thereof:

Assessment Item			Status (Note 1)	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			The Company has adopted ” Corporate Governance Best Practice Principles”, focused on shareholder rights, strengthening board scope, respect stakeholders and human rights, improve transparency and other related rules. For related rules and guidelines, and operational records, we have disclosed the relevant information on our website, or on MOPS for your reference.	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 implement of risk control mechanism and firewall between the Company and its affiliates (IV) Internal regulations prohibitinginsider	   		The Company has established its own corporate governance principles in accordance with the Company Act to respect and estimate the suggestions from shareholders, to protect shareholders’ rights. The Company’s website also provides a platform of contacting with investors to deal with suggestions, entanglement or other requesting items. None of above has occurred in this annual year. All above are in accordance with Article 13. in Corporate Governance, Best Principles for TWSE/GTSM Listed Company. 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. Conformity to the Article 19 of the Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies. 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. Conformity to the Article 14 of the Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies. Article 10 of the Company’s “Standards of Ethical Conduct”stipulates that“Where the personnelofthe	No deviation No deviation No deviation No deviation

• 62 -

Assessment Item	Status (Note 1)	Status (Note 1)	Status (Note 1)	Deviation from the Corporate Governance Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
trading			Company obtain information which would significantly influence the prices of stock transaction of the Company, until such information is publicly disclosed, all personnel shall hold such information in strict confidence as required under the Securities and Exchange Act and shall be prohibited from using such information for insider trading purposes.” This year, on November 22, 2019, we have held the course on practical issues of non arms-length transaction that directors and supervisors should pay attention to. Relevant education and promotion have been conducted for current directors, independent directors, senior managers and employees.
III. Organization of the Board and its duties (I) Establishment and implement of guidelines for diversity of the composition of the board of directors (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	 		According to Article 20 of the “Corporate Governance Best Practice Principles” and Article 2 of the “Election Rules for the Directors” adopted by the Board of Directors on December 24, 2015, the composition of the Board of Directors shall be considered for diversity. All members of the board have the knowledge, skills, and experiences necessary to perform their duties for the achievement of corporate governance. The 2019 implementation of the diversification policy for the Company’s Board of Directors has been disclosed on the Company’s website. The company has established remuneration and audit committee as required, establishment of other functional committees are being planned. The Company has already established the “Regulations of Performance Evaluation for Board of Directors” According to the Regulations, the Company performs an internal evaluation for the Board of Directors’ performance once a year and an external evaluation every three years, and completes them before the end of the first quarter of the following year. As for the evaluation methods, please refer to III.Status of Corporate Governance (I) Operations of the Board (2) The implementation of evaluation for the Board of Directors. The Company has conducted the internal evaluations (including the Board of Directors, individual directors, and Audit Committee) in 2019, and has reported the results of the evaluation to the 23rd session of the 21st Board of Directors (Note 2).	No deviation The Company has not yet established other committees, other functional committees are being planned. No deviation

• 63 -

Assessment Item			Status (Note 1)	Deviation from the Corporate Governance Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
(IV) Regular review and assessment of the impartiality and independence of the external auditor			The Audit Committee and the Board of Directors evaluate independence, competence and expertise of the certified CPAs annually, requiring them to offer statement of independence to make sure that except for certification and fees of financial and tax cases, there is no other interests relationship with the Company. Also, procedural reviews are done to ensure family relationships of CPAs do not violate independence, and results are reported to the Audit Committee and the Board of Directors. When the Board of Directors discuss independence and the appointment of the certifying CPA, the resumes and statement of independence of each CPAs should be also offered to them. The Self-assessment by the accounting department for independence of the certifying CPAs is done once a year and the results were presented to the Audit Committee and the Board of Directors on April 15, 2020, and the resolution was adopted.	No deviation
IV. Does 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.			The Company currently has a part-time unit for corporate governance. The Secretariat 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 meeting and shareholders’ meeting, handling company registration and change registration, producing meeting minutes of the Board of Directors meeting and shareholders’ meeting, and assisting the Company to comply with relevant laws and regulations of the Board of Directors and shareholders meeting. The Company also establishes the Shareholder Services Office and Finance Department Corporate Relation Office to jointly handle corporate governance related matters. Passed by the Board of Directors, the Company established a chief of corporate governance on April 10, 2019, which is served by the vice president of Financial Officer, Chen Ying-Chun. The chief of corporate governance is responsible for handling matters related to the Board of Directors meeting and shareholders’ meeting, producing meeting minutes of the Board of Directors meeting and shareholders’ meeting, assisting directors in taking office and continuing education, providing the information required by the directors to conduct business, assisting the directors to comply with laws and regulations, and other corporate governance related matters. The key points of corporate governance related matters are as follows 1. A total of 13 board meetings and 10 audit committee meetings were held in 2019.	No deviation

• 64 -

Assessment Item	Status (Note 1)	Status (Note 1)	Status (Note 1)	Deviation from the Corporate Governance Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
			2. Held 1 annual shareholders meeting in 2019. 3. Board members have completed at least 6 credits of advanced courses. 4. The Company insured liability insurance for directors and important staff, and reported to the Board of Directors after renewal. 5. Handled the performance evaluation for the Board of Directors and functional committees. The evaluation results of the Board of Directors, Audit Committee and Remuneration Committee were all beyond the standards. 6. The Company’s 5th corporate governance evaluation results were among the top 6 ~ 20%. 7.A total of 18 training hours for the chief of corporate governance in 2019, and the declaration on MOPS has been completed.
V. Communication channels with stakeholders, establishment of investors’ relations office on websites and proper response to stakeholders’ concerns of corporate social responsibility			The website of the Company includes a stakeholder relations section, which services investor relations, customer relations, supplier relations, community relations, employee relations and other stakeholders. The company responds to important issues about CSR to relevant stakeholders.	No deviation
VI. Commission of professional organizations for general meetings			In 2012, the Company established the Shareholders’ Service Committee in charge of shareholders’ services.	In 2012, the Company established Shareholders’ Service Committee in charge of shareholders’ services.
VII. Disclosure (I) Establishment of a website for the disclosure of its financial Status and status of corporate governance.			The Company’s website fully disclosed the Company’s management philosophy, corporate governance, product & business lines and financial information. Conformity to the Article 10 of the Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies	No deviation

• 65 -

Assessment Item			Status (Note 1)	Deviation from the Corporate Governance Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
(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			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. Conformity to the Article 10 of the Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies	No deviation
(III) Announcing and declaring the annual financial report within two months after the end of the fiscal year, and announcing and declaring the first, second, and third quarter financial reports and the monthly operating status within the prescribed deadline			The Company’s 2018 annual consolidated and individual financial reports were announced and declared on March 27, 2019; the financial reports for the first, second, and third quarters of 2019 and the monthly revenue status were also announced and declared at the MOPS before the prescribed period, and simultaneously uploaded to the Company’s website.
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)			The Company has installed the Enterprise Relationship 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. The Company sets different and diverse interaction methods for different stakeholders, and it is disclosed in the corporate social responsibility report every year. Directors’ annual trainings are disclosed on TWSE "MOPS” to fulfill disclosure requirements. Liability insurance for directors is in accordance with the Article 19 of the Company’s Article of Incorporation and the Article 39 of the Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies.	No deviation

• 66 -

Assessment Item	Status (Note 1)	Status (Note 1)	Status (Note 1)	Deviation from the Corporate Governance Best-Practice Principles for the TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary Description
Ⅸ. The Composition of the Board of Directors and Senior Management Succession Plan and Related Operations			In prepration of high quality human resources and succession preparation, in 2019, we continue to hold cross-departmental learning courses after working hours, strengthening quickly cross-departmental skills, and in coordination with factory organization adjustment strategy, targeting multiple managerial level factory production managers, enabling cross sector learning, and appropriately deploy personnel overseas for learning opportunities, to ensure that our factory management and outside support of factory buildout personnel and talent remains sufficient. We flexibly maintain our human resources, and provide training so that our people can continue on a career path with the common goal of developing a sustainable business.	No deviation
X. The improvement plan from the results of the Corporate Governance Evaluation announced by Taiwan Stock Exchange: 1. The company did not receive 13 points in the 2019 Corporate Governance Evaluation (Excluding not applicable, extra points and non-relevant deductions of points). In 2019, the Company improved rules in regards to prevention of insider trading and the disclosure of energy management certification and related information on the Company's website. 2. In 2020, the Company shall maintain its focus in strengthening investments in energy saving, green energy, and other environmental protection related equipment, and continue to protect shareholder equity and fairness to all shareholder groups, while continuing our resolve in corporate social responsibility, improve information transparency, and strengthen the culture of corporate governance to boost shareholder activism, and strengthen the disclosure quality of corporate governance information and non-financial information. 3. To establish safe and reliable electronic data environment, and to ensure the safety of data, systems, equipment, and networks, information and safe storage of data and data safety operations, the Company established the "Information Safety Policy" and "Network Safety Operating Procedures", and regularly revaluate for compliance.

Note 1: Reasons for checks of “Yes” or “No” of status should be specified in “Summary Description” column.

Note 2：2019 Board of Director Performance Evaluation as follows:

2019 Board of Directors Performance Evaluation

	Indicators for Self-Evaluation	Items	Points	Rating
Board of Directors	1. Participation in the operation of the Company. 2. Improvement of the quality of the Board of Directors’ decision making. 3. Composition and structure of the Board of Directors. 4. Election and continuing education of the directors. 5. Internal control.	45	95	Good

• 67 -

Board Members	1. Alignment of the goals and missions of the Company. 2. Awareness of the duties of a director. 3. Participation in the operation of the Company. 4. Management of internal relationship and communication. 5. The director’s professionalism and continuing education. 6. Internal control.	23	94	Good
Remuneration Committee	1. Participation in the operation of the Company.	18	94	Good
Audit Committee	2. Awareness of the duties of the functional committee. 3. Improvement of quality of decisions made by the functional committee. 4. Makeup of the functional committee and election of its members. 5. Internal control.	22	95	Good

Note 3：Independent CPA Evaluation Items

(1)Evaluated Personnel：KPMG Certified Public Accountants, Melody Chen & Chung Tan Tan and Team, as follows:

Item	Indicators	Standard	Results
1	The accountant has no direct or significant indirect financial interest with the Company.	Whether there is no interestedperson	
2	The accountant has no inappropriate interests with the Company.。	Whether there is no inappropriate interest。	
3	The accountant has no close business relationship with the Company, such as gaining commissions related to the business or establishingapotential employment relationship.	Whether there is no.	
4	Whether the members of the audit service team have served as the Company’s directors, managers or other positions that have a significant impact on visa cases in thepast twoyears .	Whether there is no.	
5	Non-audit services provided by the accountant have no important items that directlyaffect the visa cases.	Whether there is no.	
6	The accountant holds shares of the Company.	Whether there is no shareholding.	
7	There is no loan between the accountant and the Company.	Whether there is no.	
8	Whether the term of the principal and deputy accountant exceeds seven consecutiveyears.	Whether there is no exceeding.	
9	The accountant has no contingent expenses related to the Company's examination cases.	Whether there is no.	
10	There is no financing or guarantee between the accountant and the Company.	Whether there is no.	
11	No publicity or intermediary of stocks or other securities issued bythe Company.	Whether there is no.	
12	No defense of legal cases or other disputes with the third parties on behalf of the Company.	Whether there is no.	
13	There is no kinship relationship with the Company's directors, supervisors,orpersonnel who have a significant influence on	Whether there is no.	

• 68 -

	the visa case.
14	No unloading of a joint certified public accountant within one year as a director, supervisor or manager of the Company or a position that has a significant influence on a visa case.	Whether there is no.	
15	No acceptance of gifts or special offers of great value from the Company directors, supervisors, managers or major shareholders.	Whether there is no.	
16	The Company has no threat to appoint or renew the accountant of visa case.	Whether there is no.	
17	The Company obtained an independent statement issued by the accountant.	Whether getting.	

(2) Evaluated Personnel：PwC Certified Public Accountants, Alvis Lin and Team, as follows:

Item	Indicators	Standard	Results
1	The accountant has no direct or significant indirect financial interest with the Company.	Whether there is no interested person	
2	The accountant has no inappropriate interests with the Company.。	Whether there is no inappropriate interest。	
3	The accountant has no close business relationship with the Company, such as gaining commissions related to the business or establishing a potential employment relationship.	Whether there is no.	
4	Whether the members of the audit service team have served as the Company’s directors, managers or other positions that have a significant impact on visa cases in the past two years .	Whether there is no.	
5	Non-audit services provided by the accountant have no important items that directly affect the visa cases.	Whether there is no.	
6	The accountant holds shares of the Company.	Whether there is no shareholding.	
7	There is no loan between the accountant and the Company.	Whether there is no.	
8	Whether the term of the principal and deputy accountant exceeds seven consecutive years.	Whether there is no exceeding.	
9	The accountant has no contingent expenses related to the Company's examination cases.	Whether there is no.	
10	There is no financing or guarantee between the accountant and the Company.	Whether there is no.	
11	No publicity or intermediary of stocks or other securities issued by the Company.	Whether there is no.	
12	No defense of legal cases or other disputes with the third parties on behalf of the Company.	Whether there is no.	
13	There is no kinship relationship with the Company's directors, supervisors, or personnel who have a significant influence on the visa case.	Whether there is no.	
14	No unloading of a joint certified public accountant within one year as a director, supervisor or manager of the Company or a position that has a significant influence on a visa case.	Whether there is no.	
15	No acceptance of gifts or special offers of great value from the Company directors, supervisors, managers or major shareholders.	Whether there is no.	
16	The Company has no threat to appoint or renew the accountant of visa case.	Whether there is no interested person	
17	The Company obtained an independent statement issued by the accountant.	Whether getting.	

• 69 -

(IV) Establishment, functions, and operations of Remuneration

Committee, if any:

ID (Note 1)	Qualifications Name	More than 5 years of experience and the following professional qualifications	More than 5 years of experience and the following professional qualifications	More than 5 years of 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)	Status of independence (Note 2)	Status of independence (Note 2)	Number of public companies where the person holds the title as Remuneratio n Committee member	Remark (Note 3)
		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
Independent Director	Ruey-Long Chen															Convenor
Others	Chen Sung-Yong													
Independent Director	Chu Yun-Peng															New member (Note 3)
Others	Pan Wei-Gang															Dismissal (Note 3)

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

• Note 2: Respective members who meet the following qualifications 2 years before assumption of office and at the time of assumption office shall put a “  ” in the appropriate space.

• (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 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 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 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.

• (8) Does not have financial or business relationships with the Company or with directors (executive), supervisors, managers, or major shareholders with over 5% shareholdings (but specific companies or institutions with 20% of issued shares held, but no more than 50%, and

• 70 -

are a related company to the parent, subsidiary, or associated company in accordance to local rules & regulations, as independent directors of related companies, are excluded).

• (9) Does not provide the Company or associated companies with auditing or in the past 2 years, obtained compensation cumulated over NT$500,000 in business, legal, financial, accounting services, by professionals, sole proprietorships, partnerships, companies, or institutional owners, partners, directors, supervisors, managers, and spouses. However, remuneration committee, M&A audit committee members, established in accordance with local securities regulations or mergers & acquisition regulations, are not included.

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

• Note 3: In accordance to the TWSE regulatory paper No. 1070025395 on December 27, 2018, the Company is required to establish a remuneration committee before June 30, 2019. The Company in its 3rd Board of Directors meeting of the 21st term, voted and appointed Steve Chen Ruey Long Independent Director, Sung-Yung Chen, and Way Kang Pan, as the 4th Remuneration Committee, and is in accordance with regulatory requirements. On the resignation by Ms. Pan Way Kang, we proposed Chu Yung Pong, independent director to the 4th Remuneration Committee.

Functions of the Remuneration Committee:

1. Periodically reviewing the Remuneration Committee Charter and making recommendations for amendments.

2. Establishing and periodically reviewing the performance assessment standards, annual and long-term performance goals, and the policies, systems, standards, and structure for the compensation of the directors, supervisors, and managerial officers of this Corporation, and disclose the contents of the performance assessment standards in the annual report.

3. Periodically assessing the degree to which performance goals for the directors, supervisors, and managerial officers of this Corporation have been achieved, setting the types and amounts of their individual compensation based on the results of the reviews conducted in accordance with the performance assessment standards.

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

1. Ensuring that the compensation arrangements of this Corporation comply with applicable laws and regulations and are sufficient to recruit outstanding talent.

2. Performance assessments and compensation levels of directors, supervisors, and managerial officers shall take into account the general pay levels in the industry, individual performance assessment results, the time spent by the individual and their responsibilities, the extent of goal achievement, their performance in other positions, and the compensation paid to employees holding equivalent positions in recent years. Also to be evaluated are the reasonableness of the correlation between the individual's performance and this Corporation's operational performance and future risk exposure, with respect to the achievement of short-term and long-term business goals and the financial position of this Corporation.

3. There shall be no incentive for the directors or managerial officers to pursue compensation by engaging in activities that exceed the tolerable risk level of this Corporation.

4. 71 -

5. For directors and senior managerial officers, the percentage of remuneration to be distributed based on their short-term performance and the time for payment of any variable compensation shall be decided with regard to the characteristics of the industry and the nature of this Corporation's business.

6. Reasonableness shall be taken into account when the contents and amounts of the compensation of the directors, supervisors, and managerial officers are set. It is not advisable for decisions on the compensation of the directors, supervisors, and managerial officers to run contrary to financial performance to a material extent. It is not advisable for said compensation to be higher than that in the preceding year in the event of a material decline in profits or of long-term losses. If it is still higher than that in the preceding year, the reasonableness shall be explained in the annual report and reported at a shareholders' meeting.

7. No member of the Committee may participate in discussion and voting when the Committee is deciding on that member's individual compensation.

Information about Remuneration Committee Members:

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

2. Current term of office:

The current of office commences from June 28, 2018 until April 10, 2021 (at the same time when the term of office of the board member of the 21[th] term expires)

The Committee held 6 meetings (A) in 2019, and the attendance of the Committee

members is summarized as follows:

Job Title	Name	Actual attendance (B)	Attendance by proxy	Actual attendance rate (%) (B/A) (Note)	Remark
Convenor	Steve Ruey-Long Chen	6	0	100	Reelected to the 4thremuneration committee after the 3rdterm.
Member	Chen Sung-Yong	6	0	100	Reelected to the 4thremuneration committee after the 3rdterm.
Member	Chu Yun-Peng	3	1	75	New member: Elected to the 4th remuneration committee
Member	Gao Kong-Lian	2	0	100	Resigned March 22, 2019, 4th remuneration committee
Other notes: I. If the board of directors does not adopt, or amends, the Remuneration Committee’s suggestions, please specify the meeting date, term, contents of motion, resolution of the board of directors, and the Company's handling of the Remuneration Committee’s opinions (If the remuneration ratified by the board of directors is superior than that suggested by the Remuneration Committee, please specify the deviation and reasons thereof): None II. For resolution(s) made by the Remuneration Committee with the Committee members voicing opposing or qualified opinions on the record or in writing, please state the meeting date, term, contents of motion, and opinions of all members and the Company's handling of said opinions: None.

• 72 -

III. Remuneration committee meetings held in the last year, session, discussion remuneration committee member comments . Remuneration Committee Proposal content and subsequent treatment Resolution 4thCommittee 5thsession 2019/01/23 Reporting item 1. The remuneration system of the Company's appointed managers. Discusion item 1. The recognition case of the Company's 2018 appointed manager bonus. 2. The distribution case of the Company’s 2018 year-end performance bonus. Paseeed by the agreement of all committee members. 4thCommittee 6thsession 2019/03/22 Discusion item 1. The distribution case of the Company’s 2018 directors’ remuneration. 2. The distribution case of the Company’s 2018 employees’ remuneration. 3. The reward case of Mr. Jian, the manager of the Company's equipment procurement department. 4. The reward case of Mr. Lin, the manager of the Company's human resources management office. Paseeed by the agreement of all committee members. 4thCommittee 7thsession 2019/05/09 1. Amendment of the Company’s “Remuneration Committee Charter”. 2. The remuneration case of Chu Yun-Peng, an independent director of the Company who concurrently serves as a member of the Remuneration Committee. 3. The remuneration case of Mr. Chen, the special assistant of President’s Office. 4. The reward case for the personnel above the head of the relevant business of the Company’s finance department, who created disposal benefits due to timely disposal of ETF (Exchange Traded Funds). Paseeed by the agreement of all committee members. 4thCommittee 8thsession 2019/06/11 1. Amendment of the Company’s “Guidelines of Distribution of Employees’ Remuneration”. 2. The performance bonus case of the Company’s appointed managers in the 4th quarter of 2018. 3. The remuneration case of Mr. Yang, the manager of Shareholder Services Office. 4. The pension case of Mr.Yang, the former manager of the fund management team of the Finance Department. Paseeed by the agreement of all committee members. 4thCommittee 9thsession 2019/09/23 1. Amendment of the Company’s “Regulations Governing the Distribution of Annual Performance Bonus”. 2. The employees’ remuneration case of the Company’s appointed managers in 2018. 3. The special bonus case of Mr. Shen, the Company's top consultant. 4. The remuneration case of Mr. Lin, the special assistant of Chairman’s Office. 5. The remuneration case of Mr. Hsu, the manager of financial resources office of the Finance Department. 6. Mr.Chen, the vice general manager of the Paseeed by the agreement of all committee members.	III. Remuneration committee meetings held in the last year, session, discussion remuneration committee member comments . Remuneration Committee Proposal content and subsequent treatment Resolution 4thCommittee 5thsession 2019/01/23 Reporting item 1. The remuneration system of the Company's appointed managers. Discusion item 1. The recognition case of the Company's 2018 appointed manager bonus. 2. The distribution case of the Company’s 2018 year-end performance bonus. Paseeed by the agreement of all committee members. 4thCommittee 6thsession 2019/03/22 Discusion item 1. The distribution case of the Company’s 2018 directors’ remuneration. 2. The distribution case of the Company’s 2018 employees’ remuneration. 3. The reward case of Mr. Jian, the manager of the Company's equipment procurement department. 4. The reward case of Mr. Lin, the manager of the Company's human resources management office. Paseeed by the agreement of all committee members. 4thCommittee 7thsession 2019/05/09 1. Amendment of the Company’s “Remuneration Committee Charter”. 2. The remuneration case of Chu Yun-Peng, an independent director of the Company who concurrently serves as a member of the Remuneration Committee. 3. The remuneration case of Mr. Chen, the special assistant of President’s Office. 4. The reward case for the personnel above the head of the relevant business of the Company’s finance department, who created disposal benefits due to timely disposal of ETF (Exchange Traded Funds). Paseeed by the agreement of all committee members. 4thCommittee 8thsession 2019/06/11 1. Amendment of the Company’s “Guidelines of Distribution of Employees’ Remuneration”. 2. The performance bonus case of the Company’s appointed managers in the 4th quarter of 2018. 3. The remuneration case of Mr. Yang, the manager of Shareholder Services Office. 4. The pension case of Mr.Yang, the former manager of the fund management team of the Finance Department. Paseeed by the agreement of all committee members. 4thCommittee 9thsession 2019/09/23 1. Amendment of the Company’s “Regulations Governing the Distribution of Annual Performance Bonus”. 2. The employees’ remuneration case of the Company’s appointed managers in 2018. 3. The special bonus case of Mr. Shen, the Company's top consultant. 4. The remuneration case of Mr. Lin, the special assistant of Chairman’s Office. 5. The remuneration case of Mr. Hsu, the manager of financial resources office of the Finance Department. 6. Mr.Chen, the vice general manager of the Paseeed by the agreement of all committee members.	III. Remuneration committee meetings held in the last year, session, discussion remuneration committee member comments . Remuneration Committee Proposal content and subsequent treatment Resolution 4thCommittee 5thsession 2019/01/23 Reporting item 1. The remuneration system of the Company's appointed managers. Discusion item 1. The recognition case of the Company's 2018 appointed manager bonus. 2. The distribution case of the Company’s 2018 year-end performance bonus. Paseeed by the agreement of all committee members. 4thCommittee 6thsession 2019/03/22 Discusion item 1. The distribution case of the Company’s 2018 directors’ remuneration. 2. The distribution case of the Company’s 2018 employees’ remuneration. 3. The reward case of Mr. Jian, the manager of the Company's equipment procurement department. 4. The reward case of Mr. Lin, the manager of the Company's human resources management office. Paseeed by the agreement of all committee members. 4thCommittee 7thsession 2019/05/09 1. Amendment of the Company’s “Remuneration Committee Charter”. 2. The remuneration case of Chu Yun-Peng, an independent director of the Company who concurrently serves as a member of the Remuneration Committee. 3. The remuneration case of Mr. Chen, the special assistant of President’s Office. 4. The reward case for the personnel above the head of the relevant business of the Company’s finance department, who created disposal benefits due to timely disposal of ETF (Exchange Traded Funds). Paseeed by the agreement of all committee members. 4thCommittee 8thsession 2019/06/11 1. Amendment of the Company’s “Guidelines of Distribution of Employees’ Remuneration”. 2. The performance bonus case of the Company’s appointed managers in the 4th quarter of 2018. 3. The remuneration case of Mr. Yang, the manager of Shareholder Services Office. 4. The pension case of Mr.Yang, the former manager of the fund management team of the Finance Department. Paseeed by the agreement of all committee members. 4thCommittee 9thsession 2019/09/23 1. Amendment of the Company’s “Regulations Governing the Distribution of Annual Performance Bonus”. 2. The employees’ remuneration case of the Company’s appointed managers in 2018. 3. The special bonus case of Mr. Shen, the Company's top consultant. 4. The remuneration case of Mr. Lin, the special assistant of Chairman’s Office. 5. The remuneration case of Mr. Hsu, the manager of financial resources office of the Finance Department. 6. Mr.Chen, the vice general manager of the Paseeed by the agreement of all committee members.	III. Remuneration committee meetings held in the last year, session, discussion remuneration committee member comments . Remuneration Committee Proposal content and subsequent treatment Resolution 4thCommittee 5thsession 2019/01/23 Reporting item 1. The remuneration system of the Company's appointed managers. Discusion item 1. The recognition case of the Company's 2018 appointed manager bonus. 2. The distribution case of the Company’s 2018 year-end performance bonus. Paseeed by the agreement of all committee members. 4thCommittee 6thsession 2019/03/22 Discusion item 1. The distribution case of the Company’s 2018 directors’ remuneration. 2. The distribution case of the Company’s 2018 employees’ remuneration. 3. The reward case of Mr. Jian, the manager of the Company's equipment procurement department. 4. The reward case of Mr. Lin, the manager of the Company's human resources management office. Paseeed by the agreement of all committee members. 4thCommittee 7thsession 2019/05/09 1. Amendment of the Company’s “Remuneration Committee Charter”. 2. The remuneration case of Chu Yun-Peng, an independent director of the Company who concurrently serves as a member of the Remuneration Committee. 3. The remuneration case of Mr. Chen, the special assistant of President’s Office. 4. The reward case for the personnel above the head of the relevant business of the Company’s finance department, who created disposal benefits due to timely disposal of ETF (Exchange Traded Funds). Paseeed by the agreement of all committee members. 4thCommittee 8thsession 2019/06/11 1. Amendment of the Company’s “Guidelines of Distribution of Employees’ Remuneration”. 2. The performance bonus case of the Company’s appointed managers in the 4th quarter of 2018. 3. The remuneration case of Mr. Yang, the manager of Shareholder Services Office. 4. The pension case of Mr.Yang, the former manager of the fund management team of the Finance Department. Paseeed by the agreement of all committee members. 4thCommittee 9thsession 2019/09/23 1. Amendment of the Company’s “Regulations Governing the Distribution of Annual Performance Bonus”. 2. The employees’ remuneration case of the Company’s appointed managers in 2018. 3. The special bonus case of Mr. Shen, the Company's top consultant. 4. The remuneration case of Mr. Lin, the special assistant of Chairman’s Office. 5. The remuneration case of Mr. Hsu, the manager of financial resources office of the Finance Department. 6. Mr.Chen, the vice general manager of the Paseeed by the agreement of all committee members.	item, decisions, and The Company's treatment of the Remuneration Committee's opinion Reported to the Board of Directors and approved by all the directors present. Reported to the Board of Directors and approved by all the directors present. Reported to the Board of Directors and approved by all the directors present. Reported to the Board of Directors and approved by all the directors present. Reported to the Board of Directors and approved by all the directors present.
	Remuneration Committee	Proposal content and subsequent treatment	Resolution	The Company's treatment of the Remuneration Committee's opinion
	4thCommittee 5thsession 2019/01/23	Reporting item 1. The remuneration system of the Company's appointed managers. Discusion item 1. The recognition case of the Company's 2018 appointed manager bonus. 2. The distribution case of the Company’s 2018 year-end performance bonus.	Paseeed by the agreement of all committee members.	Reported to the Board of Directors and approved by all the directors present.
	4thCommittee 6thsession 2019/03/22	Discusion item 1. The distribution case of the Company’s 2018 directors’ remuneration. 2. The distribution case of the Company’s 2018 employees’ remuneration. 3. The reward case of Mr. Jian, the manager of the Company's equipment procurement department. 4. The reward case of Mr. Lin, the manager of the Company's human resources management office.	Paseeed by the agreement of all committee members.	Reported to the Board of Directors and approved by all the directors present.
	4thCommittee 7thsession 2019/05/09	1. Amendment of the Company’s “Remuneration Committee Charter”. 2. The remuneration case of Chu Yun-Peng, an independent director of the Company who concurrently serves as a member of the Remuneration Committee. 3. The remuneration case of Mr. Chen, the special assistant of President’s Office. 4. The reward case for the personnel above the head of the relevant business of the Company’s finance department, who created disposal benefits due to timely disposal of ETF (Exchange Traded Funds).	Paseeed by the agreement of all committee members.	Reported to the Board of Directors and approved by all the directors present.
	4thCommittee 8thsession 2019/06/11	1. Amendment of the Company’s “Guidelines of Distribution of Employees’ Remuneration”. 2. The performance bonus case of the Company’s appointed managers in the 4th quarter of 2018. 3. The remuneration case of Mr. Yang, the manager of Shareholder Services Office. 4. The pension case of Mr.Yang, the former manager of the fund management team of the Finance Department.	Paseeed by the agreement of all committee members.	Reported to the Board of Directors and approved by all the directors present.
	4thCommittee 9thsession 2019/09/23	1. Amendment of the Company’s “Regulations Governing the Distribution of Annual Performance Bonus”. 2. The employees’ remuneration case of the Company’s appointed managers in 2018. 3. The special bonus case of Mr. Shen, the Company's top consultant. 4. The remuneration case of Mr. Lin, the special assistant of Chairman’s Office. 5. The remuneration case of Mr. Hsu, the manager of financial resources office of the Finance Department. 6. Mr.Chen, the vice general manager of the	Paseeed by the agreement of all committee members.	Reported to the Board of Directors and approved by all the directors present.

• 73 -

		Petrochemical Production Department, had a job change, and eight other appointed managers were promoted. The remuneration change case of a total of nine appointed managers.
	4thCommittee 10thsession 2019/12/25	1. Amend the Company’s “Regulations of Performance Evaluation for Board of Directors” and update the performance evaluation system and questionnaires of the Remuneration Committee. 2. The abroad part-time bonus adjustment case of Mr.Yu, the general manager, Mr. Zou, the deputy vice president of New Venture Department, and Mr.Gao, the assistant vice president of the Overseas Production Division of the Petrochemical Production Department. 3. The remuneration adjustment case of Mr. Chen, the vice president of the Petrochemical Production Department. 4. The remuneration adjustment case of Mr. Lee, the factory manager of theToufen Plant. 5. The remuneration adjustment case of Mr. Hsu, the manager of financial resources office of the Finance Department. 6. The remuneration case of Mr. Chang, the assistant vice president of the Land Development Department. 7. The remuneration difference case of Mr. Lee, the assistant vice president of the Mainland Business Department. 8. The performance bonus case of the Company’s appointed managers in the 2nd quarter of 2019. 9. The remuneration case of Mr. Chen, the vice president of the Finance Department, Mr. Liu, the vice president of the Land Development Department, Mr. Hsu, the manager of financial resources office of the Finance Department, and Mr. Yang, the manager of the Legal Council. 10. The remuneration case of Mr. Jian, the manager of the purchase division of the Administrative Resources Department.	Paseeed by the agreement of all committee members.	Reported to the Board of Directors and approved by all the directors present.

Note:

• (1) Where a committee member 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 committee meeting shall be calculated based on the number of meetings called and actual number of meetings he/she attended, during his/her term of office.

• (2) Where an election may be held for filling the vacancies of committee member before the end of the fiscal year, please list out both the new and the discharged committee members, and specify if they are former members or newly elected, re-elected, and the date of the reelection. Their actual attendance rate (%) to 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.

• 74 -

(V) Implementation of Corporate Social Responsibility and Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies and reasons thereof:

Assessment Item	Status (Note1)	Status (Note1)	Status (Note1)	Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies, andreasons thereof
	Yes	No	Summary Description (Note 2)
I. Has the Company conducted risk assessment on environmental, social and corporate governance issues that are relevant to its operations, and implemented risk management policies or strategies based on principles of materiality? (Note 3)			The risks faced by enterprises are becoming more and more diverse and complex. With the convenience of globalization and the threat of climate change, enterprise risk management shall not only aim at non-systemic risks, but also face up to various systemic risks. In 2019, following the principle of materiality and the ISO 31000 risk management standards and guidelines, the Company established a systematic risk response policy and process. After the risk identification is completed, the Company will establish a special organization, "Risk Management Committee", so as to systematically grasp and manage the risks that have a significant impact on the operation and profitability of the enterprise.	No deviation
II. Whether the Company establishes a dedicated unit (concurrently engaged in) to promote corporate social responsibility under supervision by the high-rank management authorized by the Board of Directors who shall be responsible for reporting the status thereof to the Board of Directors?			The Company established the Corporate Social Responsibility Committee in September 2013. The chairman serves as the chairman of committee, and three senior executives are responsible for supervising and promoting relevant projects of the three major aspects of corporate social responsibility. The Company established the CSR executive secretariat. The Occupational Safety and Environmental Protection Center and the Corporate Relations Division of the Finance Department are jointly responsible for the implementation and promotion of the committee’s related affairs, and shall report to the Board of Directors on the achievements and the future direction of promotion from 2019 to 2020 in December 2019 (Note 4). Status of relevant operations and implementation is disclosed on the Company's website.	No deviation
III. Environmental issues (I) Has the Company established environmental policies suitable for the Company’s industrial characteristics?			The Company's environmental management system is established in accordance with the International Organization for Standardization’s ISO 14001 standard, and passed the verification by a notary third unit (such as the Metal Industries Research & Development Center,AFNOR Asia,etc.)	No deviation

• 75 -

Assessment Item	Status (Note1)	Status (Note1)	Status (Note1)	Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies, andreasons thereof
	Yes	No	Summary Description (Note 2)
(II) Does the Company endeavor to upgrade the efficient use of available resources, and the use of environmental-friendly materials? (III) Does the Company assess potential risks and opportunities associated with climate change, and undertake measures in response to climate issues?	 		In addition to measures such as using recycled paper and recycling and reusing waste, the Company also reuses waste gas and waste water in stages, contributes to improving the efficiency of the use of various resources, and relatively reduces waste while maintaining / improving productivity. Each month, the Company’s executive meeting conducts various report and discussion on production efficiency, so as to confirm and control the efficiency of the use of energy resources. 1. In order to understand the potential opportunities and risks of climate change for the Company, and to respond to the international sustainable trends of disclosing financial information related to climate change, in 2019, the Executive Secretariat of CSR Comittee is responsible for analyzing risks and opportunities related to climate change, and using the Task Force on Climate‐related Financial Disclosures (TCFD) to identify major climate change risks and opportunities for CPDC. 2. Based on the risk list, relevant international research reports, industry characteristics and benchmark analysis recommended by TCFD, the Company established a climate risk list, in which transition risks include policies and regulations, technology, market, and commercial reputation; physical risks include acute and chronic climate risks. After completing the list, the Company conducts assessment based on the three aspects of potential impact, potential vulnerability, and risk occurrence probability, and classifies climate risk into three levels: high, medium, and low. The method of classification mainly refers to three calculated risk values and their distribution positions in the risk matrix. 3. The biggest climate change risk the Company faced is the threat of substitution of green products; followed by the increasing costs of greenhouse gas emissions, and the drought caused by changes in rainfall patterns. In response to these risks, the Company will continue to research and develop high-valueproducts,increasegreen	No deviation No deviation

• 76 -

Assessment Item	Status (Note1)	Status (Note1)	Status (Note1)	Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies, andreasons thereof
	Yes	No	Summary Description (Note 2)
			awareness of products by reducing carbon emissions and conserving energy, and promote water-saving and recycling programs of reclaimed water to constantly move toward the goal of zero waste water. Please refer to the Company’s corporate social responsibility report.	No deviation
(IV) Does the Company maintain statistics on greenhouse gas emission, water usage and total waste volume in the last two years, and implement policies aimed at reducing energy, carbon, greenhouse gas, water, and waste?			For the Company's annual results, status of environmental goals and related data of greenhouse gas emissions, water resources management and waste reduction due to climate change, the Company discloses them in the Environmental Sustainability Chapter of CSR Report every year. In response to climate change, the Company has established an energy-saving and carbon-reduction team in 2005, and set up the goal of 2% for annual energy-saving, carbon-reduction, and water-saving. The Company holds an energy-saving and carbon-reduction meeting every quarter, reports and reviews the progress and achievement of each plant's reduction project, and collects relevant domestic and overseas information, so as to assess the trends and plan the Company's overall future strategic plan.
IV. Social issues (I) Whether the Company establishes the related management policies and procedures in accordance with the relevant laws and international human right conventions?			Each operating base of the Company strictly abides by local laws and labor orders, establishes various internal standards, contributes to creating a workplace environment that protects human rights, and respects the basic rights of formal employees, contract workers, temporary staff, and interns. At the same time, all cooperating manufacturers are required to sign the supplier's corporate social responsibility agreement and follow the regulation of human rights and labor, so as to make the Company and its partners have a consistent commitment. In response to the operating characteristics of the petrochemical industry, the Company pays attention to the following human rights issues and proposes corresponding policies to implement the emphasis on human rights: 1. Respect workplace human rights. 2. Provide a safe and healthy working environment. 3. Prohibit child labor, and reasonable workinghours.	No deviation

• 77 -

Assessment Item	Status (Note1)	Status (Note1)	Status (Note1)	Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies, andreasons thereof
	Yes	No	Summary Description (Note 2)
(II) Has the Company developed and implemented reasonable employee welfare measures (including compensation, leave of absence and other benefits), and appropriately reflected business performance or outcome in employees' compensations? (III) Whether the Company provides the existence of a safe and healthy work environment; regular safety and health training to company employees?	 		4. Support employees to organize labor unions and maintain the labor-management communication channels. 5. Periodically review relevant human rights systems and actions. 1. According to the Article 32 of the Articles of Incorporation, if the Company has earnings, it shall set aside 3% of the balance as remuneration to the employees. 2. According to the Company's “Regulations of Distributing Rewards” and taking into account the performance of each business unit and individual, after being approved by the responsible supervisor, the Company will give reasonable compensation to employees. 3. The Company regularly participates in international market salary surveys to adjust salary levels and provide competitive salary in the market; adjusts salary based on the operations of Company, price index, economic growth rate and individual performance, etc. In 2019, the salary was adjusted according to individual performance. 4. For the measures and implementation status of the Company's employee welfare, please refer to the labor-management relations of Five. Operations Overview. 1. In accordance with the Taiwan Occupational Safety and Health Management System (TOSHMS/CNS 15506 / OHSAS 1800) and ISO 45001 standards implemented by the Occupational Safety Administration, the Company established a safety and health management system and passed the verification by a notary third unit (such as the Metal Industries Research & Development Center, AFNOR Asia, etc.) 2. The Company provides employees with a safe and healthy working environment, regularly implements safety and health education for employees, and provides health care services plans for employees, including special occupational medical specialists, doctors specializing in labor health services, and employment of nursing staff specializing in labor health services to handle the health service in the factory. The Company promotes

• 78 -

Assessment Item	Status (Note1)	Status (Note1)	Status (Note1)	Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies, andreasons thereof
	Yes	No	Summary Description (Note 2)
(IV) Has the Company established some effective career development training plan for employees? (V) Has the Company complied with laws and international standards with respect to customers' health, safety and privacy, marketing and labeling in all products and services offered, and implemented consumer protection policies and complaint procedures?	 		various health promotion and health management. The factory area has a medical room; each site has simple ambulance facilities; the headquarter and the three plants all have the AED (Automated External Defibrillator). The Company also arranges annual health examinations for all employees and provides relevant health guidance and health education. The Company formulates training plans for the employees’ career development, and systematically develops the employees’ career. For the employees’ professional competence development, the internal lecturers carry out the effective inheritance of professional and technical. 1. The Company has set up the “Operating Procedures for Handling After-Sales Service and Customers’ Complaint” to track and ensure that the quality of products meets customers’ needs and maintain customer relations. Every year at the end of the year, the Company sends questionnaires to customers for customer satisfaction surveys. The questionnaire survey includes the product quality, shipping status, after-sales service, product image, etc. For the items less than 70 points, we will communicate with customers to confirm what shall be improved, and then review and propose improvement measures to improve product quality and service. We also provide customer complaint channels, and establish internal procedures for handling customer complaints and improvement to ensure that customers’ opinions can be included in the review and actually improved. In 2019, CPDC received several customer complaint cases related to quality management improvement, and all improvements have been completed after thorough communication with customers. 2. The Company’s products are all marked in accordance with relevant regulations and international standards.

• 79 -

Assessment Item	Status (Note1)	Status (Note1)	Status (Note1)	Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies, andreasons thereof
	Yes	No	Summary Description (Note 2)
(VI) Has the Company implemented a supplier management policy that regulates suppliers' conducts with respect to environmental protection, occupational safety and health or work rights/human rights issues, and tracked suppliers' performance on a regular basis?			All the Company's main supplier contracts complying with local laws and regulations is the most basic condition; all suppliers must comply with local laws and regulations on corporate governance, environmental protection, and labor and human rights. The Company promotes the suppliers to sign the “Suppliers’ Corporate Social Responsibility Agreement”, incorporates the suppliers’ CSR agreement into the contracts, and expects the suppliers to accept, implement and assist the principles of “Environmental, Social, Governance” (ESG). All suppliers who have signed contracts with the Company after July 2016 have also signed the suppliers’ corporate social responsibility agreement, with a signing rate of 100%. After the stage of work covers all target suppliers, the Company will gradually deepen management through regular and irregular assessments or on-site audits.
V. Does the Company prepare corporate social responsibility reports or any report of non-financial information based on international reporting standards or guidelines? Are the above mentioned reports supported by assurance or opinion ofa third-party certifier?			The Company published the first corporate social responsibility report in 2013. The CSR report prepared thereafter refers to the GRI Standards of the Global Reporting Initiative (GRI) and the International IR Framework published by the International Integrated Reporting Council, and obtains the guarantee opinion of the third-party verificationunit.
VI. If the Company has established its own corporate social responsibility principles based on “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies”, please describe any discrepancy between the principles and their implementation: According to the “Corporate Social Responsibility Best Practice Principles”, the Corporate Social Responsibility Committee reports to the Board of Directors on the following annual CSR implementation plan after discussion at the end of each year by the CSR Committee, and regularly reports to the Board of Directors ontheimplementation results and stakeholders’concerns at the end ofthefollowing year.
VII. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices: “Community management that coexists with the local community” has always been the core of the Company's social care. Adhering to the original intention of “Taken from society, Give back to society”, we take the business base as the core and incorporate the three aspects of “petrochemical professional education”, “care for students from rural areas” and “elderly care”. We hope to take care of the groups at both ends of the pyramid through practical actions, and use our professional to irrigate the young and middle-aged groups, so as to create an exclusive social welfare strategy of the Company. Please refer to the Company’s CSR report. The main contents of various social activities in 2019 are as follows: Christmas happiness car Wishes of kids from rural areas come true Christmas is a day for spreading joy and love. No matter kids or youngsters, everyone is looking forward to receiving gifts from Santa Claus. CPDC launched the “Happy Christmas-CPDC Welfare Car” activity in 2019. CPDC’s personnel spontaneously claimed the wishes of the children of Jin-Hu Elementary School and Zhu-Pu Elementary School in Tainan, and presented the Christmas gifts the children on 2019/12/19 and 2019/12/20. At the same time, took these children to enjoy a rich Christmas dinner including roast chicken and Pizza, and also went to the sightseeing factory to experience hand-made frosting cookies. We hope that the students in rural areas can feel the warmth and blessings.

• 80 -

	Assessment Item	Status (Note1)	Status (Note1)	Status (Note1)	Deviation from the Corporate Social Responsibility Best-Practice Principles for the TWSE/GTSM Listed Companies, andreasons thereof
		Yes	No	Summary Description (Note 2)
	Gifts for new semester Charity subscription of 4,000 tickets Inviting the underprivileged kids to explore the world of dinosaurs On Sep 7, 2019, CPDC held the third season charity event “Fossil Adventure Fun Summer”, subscribed 4,000 tickets for “Tainan City Zuojhen Fossil Park”, and called for “Donating Invoices for Tickets” to invite parents to take their children to the fossil park and donate invoices for charity during the weekend. All invoices raised were donated to the Tainan District A of Huashan Social Welfare Foundation after the event. The Company hopes to combine the public welfare with activities, and gather the power of the public to improve care for vulnerable groups. Collaborating with the Tainan Astronomical Education Area Taking children to explore the mysteries of the
	universe In order to let the students have unforgettable field trip memories at the end of the semester, CPDC and the Tainan Astronomical Education Area jointly arranged for students from SianGong Elementary School and Jhenhai Elementary School in Tainan to visit the Tainan Astronomical Education Area on June 21stand June 27th. We hope to lead children to understand the vast universe, inspire thier interest in earth sciences, and encourage them to practice their dreams. Caring for the elders in the countryside Accompanying 230 elders to visit the WanpiWorld Safari Zoo Continuing the care for the elderly in rural areas in Tainan of the 2018 Q3 charity events, the Company’s 2019 Q1 charity event also focuses on serving vulnerable solitary elders. The Company especially negotiated with the Tainan District A of the Huashan Social Welfare Foundation which has focused on caring for the elderly, who are physically challenged, or suffer from dementia, or live alone, for a long time; we enthusiastically responded to the “Elderly Love Spring Outing” event held by the Foundation on March 21st. CPDC fully sponsored the 360 elders and volunteers for nearly NT$100,000 in ticket fees, and additionally gave each participant a delicate gift. CPDC personnel who undertook the activity also personally attended as an one-day volunteer, and accompanied more than 200 elders to visit the WanpiWorld Safari Zoo. Under the warm sunshine of the spring, we left many warm memories with the elders. Aiming to become a chemical worker 100 students from National Taiwan University Chemical Camp visiting the Toufen Plant To strengthen the link of industrial-academia collaboration and cultivate chemical talents, the students of the 14thNTU Chemical Camp visited the Company's Toufen Plant on July 24thand went to the factory to understand the operation process and safety protection equipment. The Factory Chief of the Toufen Plant, Lee Chiao-Pin, also encouraged students to uphold the spirit of “Chemist”, apply what they have learned to every aspect of life, and practice them in the future career development.

• Note 1: If Implementation Status is specified “Yes,” please explain the key policies, strategies and measures taken and the current progress; if Implementation Status is specified “No,” please provide reasons and explain any policy, strategy and measure planned for the future.

• Note 2: If the Company has prepared a CSR report, Implementation Status may be completed by providing page references to the CSR report instead.

• Note 3: Materiality principle refers to environmental, social and corporate governance issues that are of material impact to the Company's investors and stakeholders.

• 81 -

Note 4:

==> picture [357 x 226] intentionally omitted <==

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

CPDC CSR Framework
Board of
Regular Directors Suggested
return Feedback
CSR
Chairman
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 Governance Section	 Coordinating the development and promotion of sustainable development vision and strategy, disclosure of operational and financial risks and performance  Procurement process and supply chain management, as well as stakeholder communication and other matters  Market and customer analysis and investigation
Social Relations Group	 Promoting community feedback and social welfare activities, labor human rights and ethics  Social compliance and information disclosure
Environmental Sustainability Group	 Manage energy and climate change related issues  Product quality control and innovation research, green products  Labor safety and health issues, pollution remediation and environmental and social participation

Implementation effectiveness of the CPDC CSR Committee in 2019:

Issues reported to the Board of Directors by the CPDC CSR Committee in 2019 Executive focus of the year Work plan for the following year

• Continue to promote the energy-saving and carbon According to the TCFD climate risk identification reduction project for plants and apply for relevant results, select one high-impact and high-probability certification. transformation risk and one physical risk for

• Continue to promote CSR charity activities of social financial impact assessment, and provide the care. forecast of climate risk factors affecting financial

• Actively participate in international sustainable performance to the Finance Department and performance evaluation, CDP and DJSI. relevant units and the climate risk management

• Maintain smooth communication with stakeholders authority units as a reference for subsequent through multiple channels. response.

• Maintain smooth communication with stakeholders through multiple channels.

• Promote sustainable supply chain management.  Incorporate human rights issues into the supplier

• Promote corporate sustainability projects such as evaluation indicators and strengthen the supplier financial risk assessment of climate change and ESG performance management; share the results corporate true value. and analysis of supply chain risk assessment with

• 82 -

supply chain partners.

  - Deepen the Company's internal CSR culture and promote the establishment of ESG-related annual goals.

  - Coordinate risks and set up cross-departmental risk management committees.

  - Formulate the CSR Comittee Charter in detail and submit it to the Board of Directors for approval. Strengthen the operational efficiency and legitimacy of the CSR Committee, normalize the operation, and establish the CSR consensus and the awareness of duties for CPDC’s mid-level executives so as to to facilitate the subsequent determination of relevant KPIs.

  - Promotr the CPDC human rights due diligence report.

  - Continue to hold CSR activities.

• 2019 CPDC CSR Committee performance

• Submit the CDP climate change questionnaire for the second time, review the implementation of carbon management measures by replying to the CDP questionnaire, and obtain grade B as a result.

• Volunteer to participate in the RobecoSAM Enterprise Sustainability Assessment (CSA) for the first time, with a total score of 61 points and a percentage rating of 68% for the chemical industry.

• Identify the climate risk factors and draw a CPDC climate risk matrix.

• Complete the 2018 CSR report, which is the first CSR report of Taiwan petrochemical industry prepared in accordance with the GRI Standards and the Integrated Reporting (IR) Framework and verified by a third party.

• Participate in the 12[th] Taiwan Corporate Sustainability Awards (TCSA) held by the Taiwan Institute for Sustainable Energy, and win the Corporate Sustainability Report Award-Gold Award, the Individual Performance Award-Climate Leadership Award and the Individual Performance Award-Sustainable Water Management Award.

• Issue questionnaires to suppliers with an annual purchase amount of more than 15 million and high irreplaceability, conduct surveys of supply chain risk assessment, and find ESG high-risk suppliers.

• Dashe Factory have been awarded the 1[st] “Green Chemical Application and Innovation Award”held by the Environmental Protection Administration of Executive Yuan in April, 2019.

• The Office Building of Dashe Factory have been awarded the “Green Building Diamond Grade” certification in May, 2019.

• Hsiaokang Factory have been awarded the Outstanding Contribution Award for Air Quality Purification Zones Adoption in March, 2019.

• The design and construction of the South Gate Office of the Storage & Transportation Section of Hsiaokang Factory obtained the candidate green building certificate in July, 2019.

• The Administration Building and Control Building of Hsiaokang Factory separately obtained the “Green Building Bronze Grade” and the “Green Building Qualification Grade” in November, 2019. The extension of clean production certification has been approved.

• The Toufen Factory’s major products, CPL and Nylon 6, obtained the ISO 14067: 2018 Carbon Footprint Verification Statement.

• Hold many public welfare activities, with a total of 242 CPDC employees served as volunteers and a total service time of 1,638 hours, to establish CPDC’s volunteer culture.

• [For related information, please refer to the Company's official website and CSR report]

• 83 -

(VI) Corporate observance of ethical business practices and deviation from the Ethical Corporate Management Best-Practice Principles for the TWSE/GTSM Listed Companies and reasons thereof:

Assessment Item	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. Enactment of ethical management policy and program (I) Has the Company established a set of board-approved business integrity policy, and stated in its Memorandum or external correspondence about the policies and practices it implements to maintain business integrity? Are the Board of Directors and the senior management committed to fulfilling this commitment? (II) Has the Company developed systematic practices for assessing integrity risks? Does the Company perform regular analyses and assessments on business activities that are prone to higher risk of dishonesty, and implement preventions against dishonest conducts that include at least the measures mentioned in Paragraph 2, Article 7 of “Ethical Corporate Management Best Practice Principles for TWSE/TPEX Listed Companies”? (III) Has the Company defined and enforced operating procedures, behavioral guidelines, penalties and grievance systems as part of its preventive measures	  		The Company reveals the “Procedures for Ethical Management and Guidelines for Conduct” and the “Standards of Ethical Conduct” approved by the Board of Directors on its website, in which specifically regulates matters that directors, managers and all staff shall pay attention to when carrying out business. We actively implement and ensure the policy of ethical management. In addition to disclosing the regulations menteioned above, the Company also sets out the corporate social responsibility agreement and reveals the principle of ethical management on the website. When the Company formulates the prevention plan, it shall include the analysis of business activities within their business scope which are at a higher risk of being involved in unethical conduct, and shall strengthen relevant prevention measures. The Company establishes the prevention programs, which shall at least include preventive measures against the following: 1. Offering and acceptance of bribes. 2. Illegal political donations. 3. Improper charitable donations or sponsorship. 4. Offering or acceptance of unreasonable presents or hospitality, or other improper benefits. 5. Misappropriation of trade secrets and infringement of trademark rights, patent rights, copyrights, and other intellectual property rights. 6. Engaging in unfair competitive practices. The Company promulgated the “Procedures for Ethical Management and Guidelines for Conduct”on April 25th, 2013 and, according to the Procedures and Guidelines, indeed implemented the terms of announcement of policy of ethical management to outside parties, ethical managementevaluationprior to	No deviation No deviation No deviation

• 84 -

Assessment Item	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
against dishonest conducts? Are the above measures reviewed and revised on a regular basis?			development of commercial relationships, statement of ethical management policy to counterparties in commercial dealings, avoidance of commercial dealings with unethical operators, stipulation of terms of ethical management in contracts, etc. In addition, the Company shall hold ethical management education training or promotion for the personnel of the Company at least once a year, so that they can fully understand the Company's determination, policies, prevention programs and consequences ofunethicalconduct.
II. Implement of ethical management (I) Has the Company assesse a trading counterpart’s ethical management record, and expressly states the ethical management clause in the contract to be signed with the trading counterpart? (II) Does the Company have a unit that enforces business integrity directly under the Board of Directors? Does this unit report its progress (regarding implementation of business integrity policy and prevention against dishonest conducts) to the Board of Directors on a regular basis (at least once a year)? (III) Has the Company defined any policy against conflict of interest, provides adequate channel thereof, and fulfills the same precisely?	  		Before entering into a contract with another party, the Company shall gain a thorough knowledge of the status of the other party's ethical management, and shall make observance of the ethical management policy of the Company part of the terms and conditions of the contract, stipulating at the least the following matters: 1. Where a party is discovered to be engaged in unethical conduct in its commercial activities, the other party may terminate or rescind the contract unconditionally at any time. 2. Specific and reasonable payment terms, including the place and method of payment and the requirement for compliance with related tax laws and regulations. The establishment and promotion of the ethical management is jointly determined by the Legal Councel and the Human Resources Management Office; the Human Resources Management Office shall handle the amendment, implementation, interpretation, advisory services with respect to these Procedures and Guidelines, and the recording and filing of reports; the Audit Office shall be in charge of the monitoring of implementation and regularly report to the Board of Directors. Relevant operations and status of implementation are disclosed on the Company's website. Article 11 of the Company's “Procedures for Ethical Management and Guidelines for Conduct” stipulates the recusal and actions taken in response of the Company’s directors and all personnel. Article 7 of the Company's “Procedures for Ethical Management and Guidelines for Conduct” stipulates that when any	No deviation No deviation No deviation

• 85 -

Assessment Item	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
(IV) Has the Company implemented an effective accounting policy and internal control system to maintain business integrity? Has an internal or external audit unit been assigned to devise audit plans based on the outcome of integrity risk assessment, and to audit employees' compliance with various preventions against dishonest conduct? (V) Has the Company organized internal/external education training program for ethical management periodically?	 		personnel of the Company are provided with improper benefits by a third party, the personnel shall report to their immediate supervisor and and the responsible unit shall be notified.In addition, the Company's new employees shall sign the “Business Conduct Policy” to avoid damage to the Company due to interest conflicts. The Company has established an effective accounting system and internal control system, implemented in accordance with the regulations. The audit department conducts regular audits and reports the audit results to the Audit Committee and the Board of Directors on a regular basis, so that the management can control the implementation of internal control so as to achieve management purposes. The Company promotes the “Procedures for Ethical Management and Guidelines for Conduct” and the “Standards of Ethical Conduct” to the directors at least once a year to ensure the implementation of corporate governance. In addition, the Company holds the promotion of the “Procedures for Ethical Management and Guidelines for Conduct” and the “Standards of Ethical Conduct” for the personnel in the factory and office at least once a year, and the legal Councel serves as lecturer. In 2019, the number of employees received the ethical management training reached 332, with a total of 1198 hours.	No deviation No deviation
III. Status of the Company’s complaint system (I) Has the Company defined a specific complaints andrewards system, and established some convenient complaint channel, and assigned competent dedicated personnel to deal with the situation?			Anyone who discovers any personnel of the Company involved in unethical conduct in the course of their duties, may file a whistleblower report with time of the violation, facts or evidence to the Audit Office via in writing, over the phone or email. The Company shall keep confidential the identity of whistle-blowers and the content of reported cases. Whistleblowers can report through the following channels:  Dedicated hotline: 02-8787-1003  Report mailbox:honest@cpdc.com.tw	No deviation

• 86 -

Assessment Item	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
(II) Has the Company implemented any standard procedures for handling reported misconducts, and subsequent actions and confidentiality measures to be undertaken upon completion of an investigation? (III) Has the Company adopted any measures to prevent the complainants from being abused after filing complaints?	 		Article 25 of the Company's “Procedures for Ethical Management and Guidelines for Conduct” stipulates that the Company shall link ethical management to employee performance evaluations and human resources policy, and establish clear and effective systems for rewards, penalties and complaints Article 11 of the Company's “Standards of Ethical Conduct” (Reporting obligations and protection of whistleblowers): The Company shall process the case through classified documents and put forth maximum possible efforts to safeguard the personal data as well as the safety of the reporting personnel. An accused person shall not in any way intimidate or retaliate against the reporter aforementioned in the preceding paragraph. Atricle 21 of the Company's “Procedures for Ethical Management and Guidelines for Conduct” stipulates the handling procedures for discovering, or receiving a whistle-blowing report, that any personnel of the Company is involved in unethical conduct; Atricle 22 stipulates the actions upon event of unethical conduct by others towards the Company; Atricle 24 stipulates that the Company shall keep confidential the identity of whistle-blowers and the content of reported cases.	No deviation No deviation
IV. Enhancing Information Disclosure Has the Company disclosed the Ethical Management Principles and effect of implementation thereof on its website and Market Observation Post System?			The “Corporate Social Responsibility Report” on the Company's website sets out the content and results of promotion of the “Procedures for Ethical Management and Guidelines for Conduct”. The Company's “Procedures for Ethical Management and Guidelines for Conduct” is also disclosed on the Company's website, and the results of ethical management are regularlyupdated every year.	No deviation
V. If the Company has established ethical management principles based on “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies”, please describe any discrepancy between the principles and their implementation: The Company’s “Procedures for Ethical Management and Guidelines for Conduct” is adopte pursuant to the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies”,and there is no material discrepancybetween the twoprinciples.
VI. Other information material to the understanding of ethical management operation (e.g. discussion of an amendment to the ethical management best practice principles defined by the Company): In accordance with the “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies”,the

• 87 -

Status (Note 1) Deviation from the Ethical Corporate Management Assessment Item Best-Practice Principles Yes No Summary Description for the TWSE/GTSM Listed Companies, and reasons thereof Company issued the “Procedures for Ethical Management and Guidelines for Conduct” in the CPDC Chief Executive letter No. 2013040027 issued on April 25, 2013, and implemented the ethical management policy. The Company formally adopted the “Procedures for Ethical Management and Guidelines for Conduct” and the “Standards of Ethical Conduct” in the 2012 Board of Directors meeting. In addition to disclosing the Company’s policy of ethical management in internal rules, annual reports, on the Company's websites, or disclosing externally, the Company shall make its suppliers, customers, and other stakehoders fully aware of its principles and rules with respect to ethical management. In addition, the Company conducts relevant education training or promotion at least once a year for employees in all operation bases, and establishes detailed procedures, guidelines, and reward and punishment systems so as to make all personnel fully aware of the Company’s ethical management policy, prevention programs and consequences of unethical conduct. If any employee has questions about the principles of integrity and ethical conduct, or wants to report related illegal matters, he/she can raise them through the whistle-blowing channel. The Company strictly requires the high-level managers, supervisors, employees and on-site operators to observe the “Procedures for Technical Document Management” and other regulations of information security, and regularly organizes education and training. In addition, all employees are required to sign a a non-disclosure agreement when they take office and resign.

Note : Regardless “Yes” or “No”, the status shall be stated in the Remarks section.

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

1. The Company has the “Corporate Governance Best Practice Principles”, which has relevant regulations for protecting shareholders' rights, strengthening the functions of the Board of Directors, respecting the rights and interests of stakeholders, and improving information transparency. The Company's “Corporate Governance Best Practice Principles” and related important regulations or the operating status are disclosed on the Company's website or the M.O.P.S..

2. Access to the Company website at http://www.cpdc.com.tw, where the information about the Company’s finance and corporate governance is disclosed. M.O.P.S.: http://mops.twse.com.tw/

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

4. 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

5. 88 -

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.

1. For every newly elected director, on their appointment, a director’s manual and handbook and the latest announcements are distributed to each director of the Company. Also, the latest manual for insider trading prepared by TWSE and the Company’s important policies and procedures will also be distributed to each insider including directors and managerial officers.

2. Continuing education of directors 2019:

Job Title	Name	Election Date	Date of Continuing Education	Date of Continuing Education	Organizer	Class Name	Hours	Whether Continuing Education Complies with Regulations (Note)
			From	Until
Legal Representa tive	Chen Ruey-Long	2020/01/31	2019/09/03	2019/09/03	Securities and Future Institute	Principles of Executive Duties and Business Judgment of Directors and Supervisors	3.0	YES
			2019/04/09	2019/04/09	Taiwan Corporate Governance Association	Digital Decision - Example of the Business Model of Board Products	3.0
			2019/01/23	2019/01/23	Taiwan Corporate Governance Association	Evaluation of Board of Directors’ Effectiveness	3.0
Legal Representa tive	Bai Jiun-Nan	2018/04/11	2019/08/28	2019/08/28	Taiwan Institute of Directors	Preventing Money Laundering and Insider Trading and Stablishing Corporate Governance	3.0	YES
			2019/08/28	2019/08/28	Taiwan Corporate Governance Association	Discussion on the Operation of the Remuneration Committee of the Board of Directors and the Remuneration of Directors and Supervisors (New)	3.0
			2019/05/03	2019/05/03	Taiwan Institute of Directors	The Rise of the Innovative Economy: Changes and Challenges in Business Management	3.0
Independe nt Director	Chu Yun-Peng	2018/04/11	2019/10/30	2019/10/30	Chinese Finance and Economy Development Association	Discussion on Reward Strategies and Tools of Employees for Enterprise	3.0	YES
			2019/08/28	2019/08/28	Chinese Finance and Economy Development Association	New Challenges of Legal Issues in Business Operations	3.0
			2019/01/23	2019/01/23	Taiwan Corporate Governance Association	Evaluation of Board of Directors’ Effectiveness	3.0

• 89 -

Job Title	Name	Election Date	Date of Continuing Education	Date of Continuing Education	Organizer	Class Name	Hours	Whether Continuing Education Complies with Regulations (Note)
			From	Until
Independe nt Director	Pan Wen-Yen	2018/04/11	2019/05/03	2019/05/03	Taiwan Corporate Governance Association	New Trends in Sustainable Decision Making-TCFD Climate-Related Financial Disclosure	3.0	YES
			2019/01/23	2019/01/23	Taiwan Corporate Governance Association	Evaluation of Board of Directors’ Effectiveness	3.0
Legal Representa tive	Guo Jiun-Huei	2018/04/11	2019/12/23	2019/12/23	Taiwan Corporate Governance Association	Directors' Due Knowledge of Tax Laws and Legal Responsibilities	3.0	YES
			2019/11/07	2019/11/07	Taiwan Corporate Governance Association	How Can Enterprises Innovate and Break Through Profitability in the Era of Digital Economy	3.0
Legal Representa tive	Tsai Lian- Sheng	2018/04/11	2019/08/28	2019/08/28	Taiwan Corporate Governance Association	Discussion on the Operation of the Remuneration Committee of the Board of Directors and the Remuneration of Directors and Supervisors (New)	3.0	YES
			2019/08/20	2019/08/20	Chinese National Association of Industry and Commerce	Discussion on Practice of Enterprise Innovation Model	3.0
Legal Representa tive	Lin Kueng- Ming	2018/04/11	2019/11/01	2019/11/01	Taiwan Corporate Governance Association	Impact of China-US Trade War on Taiwan-Funded Enterprises and the Countermeasures	3.0	YES
			2019/05/08	2019/05/08	Taiwan Corporate Governance Association	Trends and Challenges in Information Security Governance	3.0
Legal Representa tive	Shen Hwa- Yeang	2019/02/11	2019/11/22	2019/11/22	Taiwan Corporate Governance Association	Practical Problems of Irregular Transaction that Directors and Supervisors Shall Pay Attention to	3.0	YES
			2019/08/28	2019/08/28	Taiwan Corporate Governance Association	Discussion on the Operation of the Remuneration Committee of the Board of Directors and the Remuneration of Directors and Supervisors(New)	3.0

Note: Whether 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”.

• 90 -

• Continuing education of directors/managers:

• (1) The Company entrusted the Taiwan Corporate Governance Association to invite lecturers, so as to teach the Company’s directors and managerial officers about “Discussion on the Operation of the Remuneration Committee of the Board of Directors and the Remuneration of Directors and Supervisors” in August 2019.

Date/Time: 9:00 A.M. ~ 12:00 P.M., August 28, 2019

Topic: Discussion on the Operation of the Remuneration Committee of the Board of Directors and the Remuneration of Directors and Supervisors

Trainer: Guei Chu-An Senior Vice President / PwC

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

education programs:
Job Title	Name
Chairman	Ko-MingLin
Vice Chairman	Jiun-Nan Bai
Director	Lian-ShengTsai
Director	Shen Hwa-Yeang
President	Janson Yu
Vice President and Chief of Corporate Governance	Chen Ying-Chun
Vice President	Shu-TongZou
Special Assistant of Chairman	Lin Ching
Lead Auditor	YangHuei-Fan
Special Assistant of Chairman	Wu Chun-Hsien
Special Assistant of Chairman	Gao Tian-Shuei
Manager	YangPei-Yu
Manager	YangMing-Ling

• (2) The Company entrusted the Taiwan Corporate Governance Association to invite lecturers, so as to teach the Company’s directors and managerial officers about “Practical Problems of Irregular Transaction that Directors and Supervisors Shall Pay Attention to” in November 2019.

Date/Time: 9:00 A.M. ~ 12:00 P.M., November 22, 2019

Topic: Practical Problems of Irregular Transaction that Directors and Supervisors Shall Pay Attention to

Trainer: Chao Chi-Hsi Senior Consultant / LCS&Partners

Name list of directors/managerial officers attending the continuing

• 91 -

education programs:

education programs:
Job Title	Name
President	Janson Yu
Vice President	HuangKuo-Tsai
Vice President	Yuan LungChen
Lead Auditor	YangHuei-Fan
Special Assistant of President	Wu Chun-Hsien
Special Assistant of President	Gao Tian-Shuei
Factory Chief	WangChong-Chien
Manager	YangMing-Ling

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

2. The Company website: http://www.cpdc.com.tw Investor Relations

3. 92 -

(IX) Disclosure of internal control system:

1. Internal control declaration

2. China Petrochemical Development Corporation Declaration of International Control System March 27, 2020

3. China Petrochemical Development Corporation (CPDC) had inspected the 2019 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.

4. 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.

5. 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.

6. IV. CPDC has implemented the criteria of the internal control system referred to above to inspect the effectiveness of internal control system design and implementation.

7. 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.

8. 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.

9. VII. The Declaration of Internal Control System was resolved in the board meeting with the objection of 0 board directors out of the 8 attending board directors on March 27, 2020. The content of the declaration has been accepted without any objection.

China Petrochemical Development Corporation

Chairman: Chen Ruey-Long President: Janson Yu

==> picture [44 x 44] intentionally omitted <==

• 93 -

• The internal control audit report issued by the CPA commissioned to conduct an internal control audit, if any: The Company did not commission any CPA to conduct an audit of internal controls in 2019.

• (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:

Prepared on March 30, 2020

Date	Entity	Case	Main Deficiency	Improvement	Type of Punishment
2019.4.15	An-Shun Plant	The cumulative progress of the An-Shun Plant soil remediation and heat treatment volume did not reach the audited requirements.	In accordance to the 3rd revision of the remediation plan, by 2018, a cumulative amount of 168,200 tons (25% of total volume) was required. Heat treatment completed 33,000 tons of soil remediation. On 2019.1.3 the Tainan city government completed audit work, confirming a cumulative 155,085.62 tons of remediated soil, representing 23.35% of the required volumes. Heat treatment represented 19,711.09 tons. Cumulative amount did not fulfill the progress required.	1. Taiwan City Government Environment Memo #1080392766 Letter, required compliance by 2020.4.15. 2. Insufficient heat treatment volumes, to be completed by wet treatment soil remediation method.	Regulatory agency fined NT$200,000, and 4 hours of environment remedial seminar classes.
2019.3.21	An-Shun Plant	Waste Water Treatment Plant at the Anshun Plant performed water testing, the results indicated solid PM and Mercury content to be 46mg/L and 0.0463mg/L, respectively, both above the required amount in the 3rd remediation plan requirement of 25mg/L and 0.02mg/L.	Tainan City Government contracted Huan Shin Technology to perform the ”2018 CPDC (Taiwan Alkaline) Anshun Remediation Monitoring Management and Audit Work”, on 2019.2.11 contracted the EPA approved testing agency, Shang Chun Environmental Technology Company, to perform sample collection at the Anshun Plant, for water quality sample testing, the solid PM and Mercury content to be 46mg/L and 0.0463mg/L, respectively, both above the required amount in the 3rdremediation plan requirement of 25mg/L and 0.02mg/L.	On 2019.4.9 to 2019.5.31, the Waste Water Treatment Plant was ordered to stop operations for improvements. On 2019.6.1 to 2019.6.10, performed equipment testing, and EPA Letter 1080076402 on 2019.6.6 and 2019.6.12 performed sample testing, confirming water overflow now conforms to remedial plant standards.	Regulatory agency fined NT$200,000, and 4 hours of environment remedial seminar classes.

• 94 -

Date	Entity	Case	Main Deficiency	Improvement	Type of Punishment
2019.4.11	An-Shun Plant	Waste Water Treatment Plant at the Anshun Plant performed water testing, the results indicated solid PM, Mercury, and Dioxin content to be 58mg/L, 0.510mg/L and 352pg I-TEQ/L, respectively, above the required amount in the 3rd remediation plan requirement of 25mg/L, 0.02mg/L, and 10pg I-TEQ/L.	Tainan City Government contracted Huan Shin Technology to perform the ”2018 CPDC (Taiwan Alkaline) Anshun Remediation Monitoring Management and Audit Work”, on 2019.3.15 contracted the EPA approved testing agency, Shang Chun Environmental Technology Company, to perform sample collection at the Anshun Plant, for water quality sample testing, indicating the solid PM, Mercury, and Dioxin content to be 58mg/L, 0.510mg/L and 352pg I-TEQ/L, respectively, above the required amount in the 3rd remediation plan requirement of 25mg/L, 0.02mg/L, and 10pg I-TEQ/L.	On 2019.4.9 to 2019.5.31, the Waste Water Treatment Plant was ordered to stop operations for improvements. On 2019.6.1 to 2019.6.10, performed equipment testing, and EPA Letter 1080076402 on 2019.6.6 and 2019.6.12 performed sample testing, confirming water overflow now conforms to remedial plant standards.	Regulatory agency fined NT$600,000, and 8 hours of environment remedial seminar classes.
2019.9.22	An-Shun Plant	Waste Water Treatment Plant at the Anshun Plant performed water testing, the results indicated solid PM, Mercury, to be 37.1mg/L, 0.0373mg/L, respectively, above the required amount in the 3rd remediation plan requirement of 25mg/L, 0.02mg/L.	Tainan City Government on 2019.9.23 contracted the EPA approved testing agency, Shang Chun Environmental Technology Company, to perform sample collection at the Anshun Plant, for water quality sample testing, indicating the solid PM, Mercury, to be 37.1mg/L, 0.0373mg/L, respectively, above the required amount in the 3rdremediation plan requirement of 25mg/L, 0.02mg/L.	Due to difficulty in quality control after cleaning of filters, continued modification and cleaning of filters were performed, and processed water was refiltered and treated after cleaning of filters.	Regulatory agency fined NT$600,000, and 8 hours of environment remedial seminar classes.
2019.1.11	Dashe Plant	On 2019.1.11, Dashe Plant received notice from the Kaohsiung EPA (letter 10830276700), petrochemical manufacturing parts after testing were below specifications, in violation of the ”air pollution control act” article 20, item 1, and fined as per article 62,NT$100,000.	EPA auditors in accordance to ”Kaohsiung Equipment Parts for VOC control and emission standards” article 4, audit equipment parts. 2 parts tested values were greater than 2000ppm (details below), outside of specifications required by Kaohsiung Equipment Parts for VOC control and emission standards” requirements, article 20, item 1. 1. Z09-V01 fluid type: emissions. Tested value 2328ppm. 2. A12-F06 fluid type: AN. Tested value 2329ppm.	Excessive emissions were fixed and improved.	Regulatory agency fined NT$100,000.

• 95 -

Date	Entity	Case	Main Deficiency	Improvement	Type of Punishment
2019.1.11	Dashe Plant	1. On 2019.1.19, Dashe Plant received notice from the Kaohsiung EPA, WWI did not comply with approval certificate of pollution control, in violation of ”air pollution control act” article 24, item 2, and as per article 62, fine NT$100,000. 2. This fine was assessed as per a factory visit on 2018.10.22, finding WWI static dust collection phase 1 electrical output was out of service, DCS indicating 0mA, outside of the requirement of 4~200mA, stated in the approval certificate.	Violation of the ”Air Pollution Control Act” article 24, item 2, and fined as per article 62, of NT$100,000	1. Public Factory #2 on Oct 22, 11:10am, was immediately shut down, and repair works on the static dust collector and anode was immediately performed. 2. During repair, the reason for the breakdown was due to the artching position and anode frame being too close, resulting in EP, room 1, generating an electrical arc, that resulted in computer board and transformer signal breakdowns. 3. 10/24, WWI restarted operations, static dust collector electrical flow is now normal.	Regulatory agency fined NT$100,000.
2019.1.29	Dashe Plant	On 2019.1.29, Dashe Plant received notice from the Kaohsiung EPA (letter 10830276700), petrochemical manufacturing parts after testing were below specifications, in violation of the ”air pollution control act” article 20, item 1, and fined as per article 62, NT$100,000.	EPA auditors in accordance to ”Kaohsiung Equipment Parts for VOC control and emission standards” article 4, audit equipment parts. 2 parts tested values were greater than 2000ppm (details below), outside of specifications required by Kaohsiung Equipment Parts for VOC control and emission standards” requirements, article 20, item 1. 1. A15-R01 fluid type: waste emissions. Tested value 4947ppm. 2. A12-R20 fluid type: waste emissions Tested value 10,218ppm. 3. A16-F07 fluid type: AN. Tested value 2190ppm.	1. AN plant immediately performed repairs, A15-R01 and A12-R20 due to ineffectiveness of repairs, escalated to repair electrical conductor. A16-F07, repairs were ineffective, and escalated to external supplier to troubleshoot leakage, and now fully repaired and listed for daily observations for 4 months. 2. Follow up AN factory, planning a circulation recycling pressure system, reportingchanges to	Regulatory agency fined NT$100,000.

• 96 -

Date	Entity	Case	Main Deficiency	Improvement	Type of Punishment
				the control room. Continue to follow up with manual and valve checks.
2019.7.10	Toufen Plant	1. EPA in regards to 2019.7.10 EPA Audit Team, South Section EPA audit personnel, visited the factory and tested the WWI CMES system for the 2018 4Q, RATA testing, confirming non-compliance in violation of the regular air pollution automatic monitoring equipment operational rules. 2. Pending the Kaohsiung EPA, official instructions from the Executive Yuan EPA for filing compliants.	In violation of regular air pollution control automatic monitoring equipment operational rules.	1. Violations due to equipment, in accordance to the Dashe Plant CEMS equipment maintenance contract, the fines will be covered by the equipment manufacturer. 2. RATA Quarterly testing, to be adjusted to each Jan, April, July, and October of each year, allocating sufficient times for testing. 3. New supervision and testing work, check list should include dry base, wet base data, calculation procedures, and confirmed data. 4. The environmental team has drafted a CEMS operational SOP, including operational hours, checklists approvals, procedures for abnormal operations, and strict monitoring of CEMS operations.	Regulatory agency fined NT$100,000.
2019.4.15	Toufen Plant	Miaoli EPA on 2019.4.15 sent personnel to audit A005 emission tower on a quarterly basis. In 4Q 2018, the fire temperature monitoring equipment operational hours indicated 92.5% uptime, which is not compliant with the ”VOC Air Emissions Standards” Article 6, item 2 (over 95%).	Not compliant with VOC Air Emission Standards” Article 6, item 2 (>95%).	1. Contracted Ruey Pu Company to optimize the computer operating system, targeting operational status adding in passwords and approvals. 2. Add temperature increase status as an abnormal indicator alert item. 3. On 2019.5.2 tempurature records were provided indicated that monitoring equipment between 2018.10.5 and 2018.10.12 was	Regulatory agency applied a fine of NT$100,000.

• 97 -

Date	Entity	Case	Main Deficiency	Improvement	Type of Punishment
				operating abnormally, but the the A005 emission tower temperature was operating nominally, and continued to be monitored. Only the transmission data was in error. However, the EPA did not accept this explanation.
2019.4.23	Toufen Plant	Executive Yuan EPA Central Section Audit Team on 2019.4.23 sent auditors to the factory for checks. In 2018, Toufen Plant Sodium Sulfate Chemical Processes (M07) Sodium Hydroxide annual consumption of 5114.2 tons, sodium sulfate annual production of 48355.2 tons, is in excess of the approved volumes of 4228.3 tons and 29760 tons, respectively, in violation of the air emission control act, article 24, item 2, and a fine of NT$100,000.	Violation of the ”Air Emissions Control Act”, article 24, item 2.	1. On 5.27, submitted a change in the Sodum sulfate production process (M07) certificate, increasing production volumes of sodium sulfate, and strengthen checking and paperwork audits. 2. The person in charge for the factory resulted in this deficiency, and has been punished in accordance to factory rules and regulations.	Regulatory Agency fined NT$100,000.
2019.3.13	Hsiaokan g Plant	1. EPA auditors on 2018.12.6 performed Hsiaokang Plant Cyclohexanone Production Procedure (M13) regular pollution operating certificate audits, identified in 2017 PD01 emission output exceeded the approved amount of 120 days / year, in violation of	In violation of the ”Air Pollution Control Act” Article 24, item 2.	1. On 2019.2.23 CPDC environment memo #1080204 sent to the EPA for explanation, but was not accepted by the EPA. 2. In March 2019, a revised operating certificate of the M13, Cyclohexanone Production Procedure was submitted, removing PD01 emission output, to be replaced by when the incinerator is	Regulatory Agency fined NT$100,000.

• 98 -

Date	Entity	Case	Main Deficiency	Improvement	Type of Punishment
		the ”Air Pollution Control Act”, article 24, item 2.		non-operational, to be processed by CATOX and then discharged by P406.
2019.7.29	Hsiaokan g Plant	1. EPA Noise Complaint Auditors and Company, on 2019.7.29 audited the cyclohexanone factor (M04 and M13) equipment parts, which contained 5000 section )T-8003 part for the M04 process, with lightweight liquid tank testing point, with 2 locations exceeding 2000ppm, in excess of the amount allowed in the Kaohsiung VOC Emission Control Standards, article 20, item 1. 2. Testing results: VOC >2000ppm as below. 1) A06-N01, fluid type: light oil, value 13,289ppm. 2. A06-R01, fluid type: light oil, value: 10,234ppm.	In violation of the ”Air Pollution Control Act” Article 20, item 1.	1. After audit checks, the VOC testing point of A06-N01 carbon steel pipeing due to recent rain resulted in corrosion. A06-R01 confirmed no leakage, and possible due to impact from AN06-N01 leakage resulting in abnormal data. 2. Temporary repairs using AB cement glue, after self-testing results are below 2,000ppm. 3. Plan during annual maintannce to repair T-8033 cone shaped top and related piping.	Regulatory Agency fined NT$100,000.

• 99 -

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

(1) Important resolutions made by shareholders’ meeting

Type of Meeting	Date	Summary of Motion
Shareholders’ Meeting	2019/05/24	1. Ratification of the Company’s 2018 business report and financial statements. 2. Ratification of the 2019 Earnings Distribution Proposal. 3. Issue new shares by capital increase from surplus. 4. Discussion of the capital raising proposal by public share issuance (cash offering) or participating in global depositary receipt (“GDR”) issuance with an issue size no greater than 500 million common shares. 5. Removal of the 21stDirector of the Company’s Prohibition of Competition Proposal. 6. Amendment to the “Procedures for the Acquisition or Disposal of Assets”.

(2) Important resolutions made by the Board of Directors

Type of Meeting	Date	Summary of Motion
Board of Directors	2019/01/23	1. Taiwan Alkaline Anshun Plant Dioxin Civil Lawsuit, payment of fines after the Supreme Court decision. 2. 2018 managers bonuses confirmation. 3. 2018 managers annual and performance bonus payments.
Board of Directors	2019/02/27	1. Participation in the capital raising of Core Pacific City Company Limited, planned private placement Series H Convertible Preferred Shares, no more than 125 million shares, each share NT$10/share, annual coupon 9.5%, total investment amount to not exceed 1.25 billion NTD. 2. Company to purchase NT$10.78 per share, to obtain Chunghwa Gemini Development Co. Ltd. minority interest of 20.1 million shares (9.13%), total investment amount NT$216.678 million. After investment, Chunghwa Gemini Development Co. to become a 100% wholly-owned subsidiary. 3. Company to issue no more than 500 million shares, domestic cash common stock capital raising, or issuance of GDR. 4. Company to sign renewal contract with financial institutions for guarantee of commercial bills. 5. Discussion of 2019 shareholders meeting, date, time, location, and other matters. 6. Discussion of 2019 shareholders meeting, accepted shareholder motions and related procedures. 7. Proposal at 2019 shareholders meeting, to remove the non-compete restrictions for the 21stboard of directors. 8. Revise the Company ”Board Performance Evaluation rules”, selected articles and appendixes. 9. Company owned property, Miaoli County, Toufen City, Luzhu section number 165 land renew lease to Praxair Materials Co. Ltd, lease term of 5 years. 10. Chairman's office, special assistant, Fan, resignation.
Board of	2019/03/22	Discussion items: 1. 2018 Internal Control, Procedures for internal audit operations. 2. 2018 Individual financial statement and consolidated financial

• 100 -

Directors		statement. 3. 2018 Business Operations Report. 4. Approved 2018 earnings distribution, NT$1 per share dividend (cash NT$0.5/share, and stock shares NT$0.5/share) 5. 2018 earnings distribution, shares reinvested to new capital shares. 6. Revise Company's ”Operating Procedures governing Asset Acquisition and Disposals”, selected articles. 7. To renew company's agreement with financial institutions for short-term credit facilities. 8. 2018 Directors remuneration. 9. 2018 employee remuneration. 10. 2019 shareholders meeting agenda and items. 11. Revise ”Shareholder Services Internal Control Policies”, (including shareholder services, internal auditing guidelines and rules) 12. Appoint Chu Yun Peng, independent director, to the 4th remuneration committee. 13. Equipment procurement branch manager, Chien, bonus discussion. 14. Bonus discussion for HR and Administration Section, Manager Lin.
Board of Directors	2019/04/10	1. Approved ”Vietnam HCMC 2ndgrass land MRT Station 2.79 acres land development project” due to local government policy change, the land transaction method was modified from an investment application to an open tender. 2. ”Nylon 6 Construction Factory and Materials Development Building Construction Project” project extension. 3. Evaluation of independence of external CPA. 4. Reappointment of KPMG as external auditors for 2019 financial and tax reports. 5. Company and financial institutions renewal contract for short-term lending facilities. 6. Finance Department Assistant Manager Chen, to be appointed Corporate Governance Manager. 7. Establish ”Board of Directors Requests SOP”. 8. Resignation of HR and administration branch Manager Lin. 9. ”Smart Management Phase 1” Project. 1) due to new catalytic product performance below expectations, resulting in lower expected returns, applied for hold on future developments. Project due to planning, execution, and other reasons to request an extention to 2019.12.31.
Board of Directors	2019/05/09	1. Revised ”Remuneration Committee Charter”. 2. Resignation of Finance Treasury Management Manager Yang. 3. Appointment of Wu from Special Assistant to GM, to Special Assistant for China Business. 4. Remuneration for Chu Yun Peng, independent director, for his appointment to the remuneration committee. 5. Remuneration for Special Assistant to GM Chen. 6. Bonus for Finance Department Personnel, who contributed to the appropriate disposal of ETF resulting in disposal gains.
Board of Directors	2019/06/11	1. Approve Chairman and China Business Units to negotiate and sign investment agreements to increase capital investments to Lien Hwa Development Co. of 6.5 million RMB. 2. Establish 2018 Earnings Distribution to reinvestment in new shares and distribution of cash dividends. 3. Approval of renewal for short-term credit facilities with financial institutions.

• 101 -

		4. Approval of guarantee contract for commercial bills with financial institutions. 5. Approval of export letter of credit and short term credit facilities with financial institutions. 6. Approval of gurantee contracts for commercial bills with financial institutions. 7. Approval of mid-term credit facilities contract and short term credit facilities renewals. 8. Short-term credit facilities with financial institutions. 9. Revise ”Rules for Curoproate Governance” selected articles. 10. Revise ”Rules for Colleagues Staff Remuneration Distribution Guidelines”, selected articles. 11. Appoint Hsu Bo Chen as Finance Treasury Department Manager. 12. Appoint Lin Yi Teh as Land Development Manager. 13. Appoint He Chou Wei as HR and Administration Manager. 14. Approve 2018 4Q Appointed Managers, Performance Bonuses. 15. Approve Bonus for Manager Yang, of the Shareholders Services Office. 16. Approve the retirement of former manager Yang, of the Treasury Department.
Board of Directors	2019/07/12	1 .Company's holdings in Praxair Materials Co. Ltd. 35% stake to be transferred to subsidiary, Chungwa Gemini Development Corporation, disposal amount to be NT$351.29 million. 2. Company's Toufen Plant Factory Manager reappointment. 3. Resignation of Land Development Manager Lin.
Board of Directors	2019/08/12	1. 2019 shareholders meeting approved common shares 500 million GDR, expected capital raising of US$100~160 million. Approved by global underwriter, Yuanta Securities, underwriting fee US$1.35~2.025 million. Also appointed Yuanta Securities as domestic underwriter, with a fee of NT$3 million. 2. Company and Hsin Mei Chi Co. Ltd established a JV and signed a partnership agreement, to jointly develop the ”New Taipei City Banqiao Nanya East Road Land Development” project. 3. Company leased ”Kaohsiung multifunctional commerce zone 5A 32,000 poing land to Hong Kong Mei Guan Innovation Center, lease term of 6 months. 4. Adjustment of organizational structure, and revised organizational chart. 5. Adjustmant and reappointment of managers Chia, Chen, Kao, Lee, Lin, and Lee to new positions. 6. Promtion of Chou, Chen, Tsai, Wang, Huang, managers to new positions. 7. Promotion of commerce department sales deputy manager Tseng, an Dashe factory environmental section, section leader, Hsu. 8. Resignation and adjustments of responsibilities for Cheng, Tsai, and Chen managers. 9. Nylon 6 Construction Mixing Factory and Materials Development BuildingConstruction”project,solarpowergeneration equipment to be

• 102 -

		leased to Chu Hsin Optical Technology Co. for a lease term of 20 years.
Board of Directors	2019/09/23	1. Renew Rudong Phase 1 Investment Project, deployed capital progress and investment forecasts. 2. Approved 5 million common shares issuance for new cash shares to participate in GDR, with a total amount of US$160.317 million to be raised. Approve the Chairman or other appointed person to sign on behalf of the Company, and execute contracts and documents required. 3. Approve renewal of short-term credit facilities between the Company and financial institutions. 4. Approve renewal of guarantee of commercial bills between the Company and financial institutions. 5. Approve renewal of credit lending facilities between the company and financial insittutions. 6. Revise ”Board of Directors and Managers Separation of Responsiblities”. 7. Revise ”Annual Performance Bonus Allocation Guidelines”. 8. Approve promotion of Toufen Plant deputy factory manager Lee Chun Cheng to level 9 factory manager. 9. Appoint Manager Hsu from OSHA Center to Environmental Protection and Pollution Control Center Manager. 10. Resignation of Manager He, of the Adminstration Resources Group and HR Branch. 11. 2018 Employee Bonus Distribution approval. 12. Approval of special bonus to Senior Consultant Shen. 13. Approval of bonus to Lin Special Assistant to the Chairman. 14. Approval of Remuneration to Finance Treasury Department Manager Hsu. 15. Approval of Chen, Chen, Chou, Kao, Huang, Tsai, Wang, Tseng, and Hsu remuneration changes. 16. Investment Project ”Optimize Chemical Factory Construction Phase Zero Construction Project”.
Board of Directors	2019/09/25	1. Dingyue Development Co. Ltd., NT$1 billion, capital raising, for the Company's participation in the ”Core Pacific City, Permanent Land Ownership International Tender”.
Board of Directors	2019/10/24	1. 2020 CPDC Company Business Plan. 2. Capital Raising of 100% subidisary, Dingyue Development Company, NT$6.44 billion. 3. Signing contract of appointment of guarantee of commercial bills with financial institutions. 4. Contract with financial institutions for short-term credit facilities. 5. Contract with financial institutions for mid-term credit facilities, and short-term credit facilities. 6. Revise ”Board and Managers Separation of Roles”. 7. Appoint Chang Chia Wen as Land Development Assistant Manager. 8. Appointment of Hsiaokang Factory, manager Lee, and Toufen public use manager Chen.
Board of	2019/11/13	1. Company signed contract with financial institutions, to guarantee

• 103 -

Directors		corporate bills. 2. Continue to appoint Chou, as the Company's GM Office Management Consultant.
Board of Directors	2019/12/25	1. Passed 2020 Corporate Budget. 2. Passed 2018 investment tax credits from undistributed retained earnings. 3. Passed approval for company agreement with financial institutions for corporate bills guarantees. 4. Passsed approval for company agreement with financial institutions for short-term credit and mid-term secured credit terms. 5. Passed approval for company agreement with financial institutions for secured guarantees for corporate bills. 6. Approved Kaohsiung City Government application for scope of land guarantees as security. 7. Reinvested Company, Rich Equities Ltd., to apply for closure. 8. Donated NT$18 million to Sheen Chuen-Chi Cultural and Educational Foundation, to continue to promote the ”Migration Taiwan History Memorial Database”, related projects and continue to promote the Green Petrochemical and Cultural promotion of the Company. 9. 2020 Internal Control Audit Plan. 10. Revise ”Board KPI Performance Evaluation” 11. Promote R&D Center Assistant Manager Tsai, to VP. 12. GM Yu, New Innovation Department VP Chou, and Petrochemical Production Department Overseas Production Assistant Manager Kao, adjustment of overseas part-time roles and salary raise. 13. Salary adjustment of Petrochemical Production Department VP Chen. 14. Salary adjustment of Toufen plant manager, Li. 15. Salary adjustment of Finance Department, capital resources branch, Hsu. 16. Salary of Land Development Division Assistant Manager, Chang, Proposal. 17. Salary adjustment for Overseas Projection Department, Li. 18. 2019 2Q Professional Manager, performance bonuses. 19. Salary and bonuses for finance VP Chen, Land development VP Liu, Finance Capital Resource Manager Hsu, Legal Department Yang. 20. Adminstration Department, Procurement Branch Manager Chien, Bonus.

(3) Important resolutions made by the general shareholders’ meeting

and resolutions made by shareholders’ meetings in 2019

Summary of Motion	Status of Resolutions Made by Shareholders’Meetings
1. Ratification of the Company’s 2018 business report and financial statements. 2. Ratification of the 2019 Earnings Distribution Proposal.	The resolution was approved. The resolution was approved. Distribute common stock dividends of NT$2,699,857,267 (distribute cash dividends NT$0.5per share and stock dividends NT$0.5per share)and

• 104 -

• pay on July 31, 2019.

• 1. Issue new shares by capital The resolution was approved. Allocate NT$1,349,928,630 for increase from surplus. the capital increase of issuing new shares (distribute stock dividends NT$0.5 per share), which was submitted to the FSC on May 30, 2019 and declared effective, and was issued on July 31, 2019.
• 1. Discussion of the capital raising The resolution was approved. An FSC approval letter of No. proposal by public share issuance 1080335763 was issued on November 20, 2019. The GDR (cash offering) or participating in issuance case has been completed on January 10, 2020, and global depositary receipt (“GDR”) relative matters will be reported at the 2020 annual issuance with an issue size no shareholders meeting. greater than 500 million common shares.
• 1. Removal of the 21[st] Director of the The resolution was approved. The declaration of material Company’s Prohibition of information has been handled in accordance with the law. Competition Proposal
• 1. Amendment to the “Procedures for The resolution was approved. The information has been the Acquisition or Disposal of uploaded to the MOPS within 20 days according to law. Assets”. (sii.twse.com.tw/ declaration of non-formatted file electronic data / declaration of relevant information of shareholders’ meeting)

(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 relating to the financial report:

April 30, 2020

Job Title	Name	Date of Appointment	Date of Discharge	Cause
Chairman	Lin Ko-Ming	2016/04/21	2020/01/31	Retirement
Head of Internal Audit	Yang Huei-Fan	2013/01/07	2020/04/15	Job adjustment

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

• 105 -

V. Information About CPA Professional Fee

(I) Breakdown of CPA Professional Fee

Firm Name	CPA Name	CPA Name	Duration of Audit	Remark
KPMG Certified Public Accountants	Melody Chen	Chung Dan-Dan	2019
Currency Unit: NTD Thousand

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	Duration of Audit	Remark
				System Design	Commercial and Industrial Registration	Human Resources	Others
KPMG Certified Public Accountants	Melody Chen	Chung Dan-Dan	10,135				650	2019	Other items include the review of valuation reports for investment real estate, the reading service of the annual report , and the issue of accountant review opinions for investment in mainland China.
KPMG Certified Public Accountants					138		1,098		Other items include the tax advisory services of application for interpretation and the project tax services.

• 106 -

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

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

• Audit fees were 10% less than that of the previous year: None.

VI. Information About Replacement of CPA: None

VII. 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: None

VIII. 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.

• 107 -

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

Job Title (Note 1)	Name	2019	2019	Ending Mar 30, 2020	Ending Mar 30, 2020
		Increase (decrease) in shares held	Increase (decrease) in shares pledged	Increase (decrease) in shares held	Increase (decrease) in shares pledged
Chairman	The Core Pacific Co., Ltd.	6,339,290	7,500,000	0	6,375,000
Chairman Institutional representative of Core Pacific Co., Ltd.	Steve Chen Ruey-Long (Appointed on Jan 31th, 2020 for Chairman) (Concurrent Appointment on Mar 27th,2020 as CEO)	0	0	0	0
Chairman Institutional representative of Core Pacific Co.,Ltd.	Ko-Ming Lin (Concurrent Appointment on Oct 01, 2018 as CEO) (Retirement on Jan 31,2020)	4,944	0	0	0
Vice Chairman	BES Machinery Co., Ltd.	624,302	0	0	0
Vice Chairman Institutional Representative of BES Machinery Co., Ltd.	Jiun-Nan Bai	0	0	0	0
Director Institutional representative of Core Pacific Co.,Ltd.	Kuan-Ren Soong (Dismissal on Feb 11, 2019)	0	0	0	0
Director Institutional representative of Core Pacific Co.,Ltd.	Shen Hwa-Yeang (Appointed on Feb 11, 2019)	7,290	0	0	0
Director	Sheen Chuen-Chi Cultural and Educational Foundation	89,063	0	0	0
Director Institutional Representative of Sheen Chuen-Chi Cultural and Educational Foundation	Lian-Sheng Tsai	0	0	0	0
Director Institutional Representative of Sheen Chuen-Chi Cultural and Educational Foundation	Kuen-Ming Lin	0	0	0	0
Director	Jen Huei enterprise Co., Ltd.	3,307,197	5,000,000	0	1,000,000
Director Institutional Representative of Jen Huei enterprise Co., Ltd.	Guo Jiun-Huei	0	0	0	0

• 108 -

Job Title (Note 1)	Name	2019	2019	Ending Mar 30, 2020	Ending Mar 30, 2020
		Increase (decrease) in shares held	Increase (decrease) in shares pledged	Increase (decrease) in shares held	Increase (decrease) in shares pledged
Independent Director	Ruey-Long Chen (Dismissal on Jan 31, 2020)	0	0	0	0
Independent Director	Yun-Peng Chu	0	0	0	0
Independent Director	Pan Wen-Yen	0	0	0	0
President	Janson Yu	93,107	0	0	0
Vice President	Lin Ching	0	0	0	0
Vice President	Yuan-Long Chen	3,660	0	0	0
Vice President	Huang Kuo-Tsai	0	0	0	0
Vice President	Liu Yun-Chih	0	0	0	0
Vice President	Chia Chi-Chung	8	0	0	0
Vice President	Tsai Chia-Wei (Appointed on Dec 25, 2019)	829	0	0	0
Vice President	Chen Ying-Chun (Appointed on Mar 27, 2020) (Concurrent Appointment as Chief of Accounting Dept. & Finance Dept.)	0	0	0	0
Vice President	Shu-Tong Zou (Appointed on Mar 27, 2020)	0	0	0	0
Assistant Vice President	Yang Huei-Fan (Lead Auditor)	0	0	0	0
Assistant Vice President	Tsai Wen-Chih	1,079	0	0	0
Assistant Vice President	Lin Chin-Hsiang	20,908	0	0	0
Assistant Vice President	Lee Guan-Lu	0	0	0	0
Assistant Vice President	Fan Jiang Jian-Cheng (Appointed on Aug 1, 2018) (Dismissal on Jan 31,2019)	0	0	0	0
Assistant Vice President	Lee Chien-Hsien	16,929	0	0	0
Assistant Vice President	Cheng Jung-Wen	1,415	0	0	0
Assistant Vice President	Kao Chi-Tsung	0	0	0	0
Manager	Hsu Po-Cheng (Appointed on Jun 17,2019)	0	0	0	0
Manager	WangYen-Li	2,373	0	0	0
Manager	Lee Chi-Chang	23,694	0	0	0
Manager	Chen Yung-Long	0	0	0	0
Manager	YangPei-Yu	450	0	0	0

• 109 -

Job Title (Note 1)	Name	2019	2019	Ending Mar 30, 2020	Ending Mar 30, 2020
		Increase (decrease) in shares held	Increase (decrease) in shares pledged	Increase (decrease) in shares held	Increase (decrease) in shares pledged
Manager	Yang Shou-Chin (Dismissal on Jun 1,2019)	0	0	0	0
Manager	Tseng Wen-Yuan (Appointed on Aug12,2019)	0	0	0	0
Manager	ChangChi-Wei	0	0	0	0
Manager	Chen Chi-Ho (Dismissal on Aug12,2019)	(56,000)	0	0	0
Manager	He Chou-Wei (Appointed on Jun 24, 2019) (Dismissal on Sep3,2019)	0	0	0	0
Manager	YangMing-Ling	0	0	0	0
Manager	YangChi-Yuan	316	0	0	0
Manager	Chen Jian-Ming	4	0	0	0
Manager	Chen Hong-Long	0	0	0	0
Assistant Vice President (Factory Chief)	Lee Chiao-Pin	9	0	0	0
Manager	WangChi-Fong	293	0	0	0
Manager	Chien Fang-Mo	39,475	0	0	0
Assistant Vice President (Factory Chief)	Wang Chong-Chien	1,016	0	0	0
Manager	Lee Chin-Yi	34,000	0	0	0
Manager	HuangChien-Yuan	19	0	0	0
Manager	Lee Kun-Nan	8,558	0	0	0
Manager	Lee Kung-Da	0	0	0	0
Manager	Chien Chang-Hung	0	0	0	0
Manager	Chien Kuan-Der	519	0	0	0
Assistant Vice President (Factory Chief)	Tsai Chau-Yuan	0	0	0	0
Manager	Wu Chun-Hsien	0	0	0	0
Manager	Chen Yi-Yen	687	0	0	0
Manager	Jen Wei (Retirement on Oct 1,2019)	64	0	0	0
Manager	Liu Yung-Fu	0	0	0	0
Manager	Ho Mu-Chuan	(45,000)	0	0	0
Manager	Hsu Yung-Sen (Appointed on Aug12,2019)	0	0	0	0
Manager	ChangCheng-Lung	900	0	0	0
Manager	Gao Tian-Shuei	0	0	0	0
Manager	Lin Ching-Wen (Dismissal on April 1,2019)	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.

• 110 -

Information about Equity Transfer

Name (Note 1)	Cause (Note 2)	Date	Trading Counterpart	Relationship between trading counterpart and the Company, directors, supervisors, manager and shareholders who hold more than 10% of the Company’s shares	Quantity	Trading Value
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.

Information about Equity Pledged Under Lien

Name (Note 1)	Cause (Note 2)	Date of Change	Trading Counterpart	Relationship between trading counterpart and the Company, directors, supervisors, manager and shareholders who hold more than 10% of the Company’s shares	Quantity	Ratio of Shareholding	Ratio of Pledge	Pledged (redeemed) Value
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.

• 111 -

IX. Information about the relationship among the Company's 10 largest

shareholders: March 30, 2020

Name (Note 1)	Own Shareholding	Own 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)	Rem ark
	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding	Designation (or Name)	Relationship
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	54,160,290 -	1.65% -	0 -	0 -	0 -	0 -	None	None
Core Pacific - Yamaichi International (H.K.) Ltd. – Client A/C Representative: N/A	46,446,048 -	1.41% -	0 -	0 -	0 -	0 -	BES Engineering Corporation	Substantial related party
Core Pacific Co., Ltd. Representative: Shen Chin-Jing	45,625,096 0	1.39% 0	0 0	0 0	0 0	0 0	Core Pacific World Co., Limited	Substantial related party
BES Engineering Corporation Representative: Shen Hwa-Yang	40,713,750 153,090	1.24% 0.00%	0 0	0 0	0 0	0 0	Core Pacific Co., Ltd.	Substantial related party
Vanguard Emerging Markets Stock Index Fund, a Series of Vanguard International Equity Index Funds Representative: N/A	39,673,800 -	1.21% -	0 -	0 -	0 -	0 -	None	None
Dimensional Emerging Markets Value Fund Representative: N/A Norges Bank Representative: N/A	36,664,466 - 30,045,249 -	1.12% - 0.91% -	0 - 0 -	0 - 0 -	0 - 0 -	0 - 0 -	None None	None
								None
Core Pacific World Co., Limited Representative: Shen Chin-Jing	26,607,525 0	0.81% 0	0 0	0 0	0 0	0 0	Core Pacific Co., Ltd.	None

Name (Note 1)	Own Shareholding	Own 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)	Rem ark
	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding	Designation (or Name)	Relationship
Yuanta Securities (Hong Kong) Company Limited-Client Account Representative: N/A	25,575,000 -	0.78% -	0 -	0 -	0 -	0 -	None	None
CTBC Bank Trust Account Representative: Wu Jing-Yi	25,280,107 0	0.77% 0	0 0	0 0	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 & 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.

X. Ratio of Combined Shareholding

Date: December 31, 2019; Unit: shares; %

Investee	Invested by the Company	Invested by the Company	Invested by directors, supervisors, management, and enterprises controlled by the Company directly or indirectly	Invested by directors, supervisors, management, and enterprises controlled by the Company directly or indirectly	Combined Investment	Combined Investment
	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding	Quantity	Ratio of Shareholding
Dingyue Development Co., Ltd.	754,000,000	100%	0	0%	754,000,000	100%
CPDC Investment (BVI) Co., Ltd.	26,580,000	100%	0	0%	26,580,000	100%
CPDC Green Technology Corporation	15,000,000	100%	0	0%	15,000,000	100%
Tsou Seen Chemical Industries Corporation	96,000,000	100%	0	0%	96,000,000	100%
Rich Equities Ltd.	180,000	100%	0	0%	180,000	100%
Unichem Development Limited	255,367,516	100%	0	0%	255,367,516	100%
BES Twin Towers Development Co., Ltd.	368,100,910	100%	0	0%	368,100,910	100%
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%
Jean Pacific Development Co., Ltd.	48,000,000	40%	0	0%	48,000,000	40%
Thanh Phong Construction Investment Co., Ltd.	458,637,500,0 00	97.87%	0	0%	458,637,500,000	97.87%

Note : Equity Method Long Term Investments

• 114 -

Four. Status of Fund Raising

I. Capital Stock and Shares

(I) Source of Capital Stock

Year and Month	Issuing Price	Authorized Capital Stock	Authorized Capital Stock	Paid-in Capital	Paid-in Capital	Remark	Remark	Remark
		Quantity	Amount	Quantity	Amount	Source of Capital Stock	Offset by any property other than cash	Others
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	Recapitalizatio n of capital surplus	None
1998/08	10	1,840,000,000	18,400,000,000	1,283,091,327	12,830,913,270	Recapitalizatio n of capital surplus	None
1999/02	10	1,840,000,000	18,400,000,000	1,283,869,156	12,838,691,560	Conversion of convertible corporate bond	None
1999/09	10	1,840,000,000	18,400,000,000	1,412,256,072	14,122,560,720	Recapitalizatio n of capital surplus	None	SEC (88) Tai-Tsai-Cheng (1) No. 64778 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	Conversion of convertible corporate bond	None

• 115 -

2004/02	10	2,600,000,000	26,000,000,000	1,689,999,459	16,899,994,590	Conversion of convertible corporate bond	None
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-Chen g Yi-Tze No. 0970049317 dated September 17, 2008
2011/9	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-Chen g Yi-Tze No. 1000031761 dated July 8, 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-Chen g 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	Conversion of convertible corporate bond	None
2017/08	10	2,600,000,000	26,000,000,000	2,363,353,546	23,633,535,460	Conversion of convertible corporate bond	None
2017/11	10	2,600,000,000	26,000,000,000	2,524,667,174	25,246,671,740	Conversion of convertible corporate bond	None
2018/03	10	3,600,000,000	36,000,000,000	2,699,857,267	26,998,572,670	Conversion of convertible corporate bond	None
202002	10	3,600,000,000	36,000,000,000	3,284,850,130	32,848,501,300	GDR	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
	Outstanding Shares (Issued)	Unissued Shares	Total
Common Stock	3,284,850,130	315,149,870	3,600,000,000

• Note: Please specify whether the stock refers to TWSE or GTSM stock (the stock forbidden from being traded in TWSE or GTSM, if any, shall be identified).

• 116 -

Information About Shelf Registration System

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

(II) Composition of Shareholders

March 30, 2020

						March 30, 2020
Composition of Shareholders Quantity	Government Apparatus	Financial Organization	Other Juristic Persons	Individual	Foreign Institution or Foreigner	Total
Number of persons (persons)	4	10	382	220,157	265	220,818
Shareholding (shares)	6,943,021	3,682,269	242,861,431	2,507,863,456	523,499,953	3,284,850,130
Ratio of Shareholding (%)	0.21%	0.11%	7.39%	76.35%	15.94%	100.00%

(III) Diversification of equity

March 30, 2020

			March 30, 2020
Range of Shares	Number of Shareholders	Status of Shareholding	Ratio of Shareholding
1~999	64,347	12,982,523	0.40%
1,000~5,000	80,664	185,505,790	5.65%
5,001~10,000	28,735	203,416,615	6.19%
10,001~15,000	16,188	189,838,110	5.78%
15,001~20,000	6,621	117,428,603	3.57%
20,001~30,000	8,838	210,937,088	6.42%
30,001~40,000	4,196	143,706,603	4.37%
40,001~50,000	2,560	115,339,212	3.51%
50,001~100,000	4,983	345,182,897	10.51%
100,001~200,000	2,204	297,409,858	9.05%
200,001~400,000	899	245,794,703	7.48%
400,001~600,000	219	105,870,779	3.22%
600,001~800,000	105	71,705,679	2.18%
800,001~1,000,000	70	62,597,124	1.91%
1,000,001 or more	189	977,134,546	29.76%
Total	220,818	3,284,850,130	100.00%

• 117 -

Preferential Stock

March 30, 2020

			March 30, 2020
Range of Shares	Number of Shareholders	Status of Shareholding	Ratio of Shareholding
None
Total

(IV) Roster of Major Shareholders

March 30, 2020

		March 30, 2020
Shares Name of Major Shareholder	Status of Shareholding	Ratio of Shareholding
JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds Core Pacific - Yamaichi International (H.K.) Ltd. – Client A/C Core Pacific Co. Ltd. BES Engineering Corp. Vanguard Emerging Markets Stock Index Fund, a series of Vanguard International Equity Index Fund Dimensional Emerging Markets Value Fund Norges Bank Core Pacific World Co., Ltd. Yuanta Securities (Hong Kong) Company Limited-Client Account CTBC Bank Trust Account	54,160,290 46,446,048 45,625,096 40,713,750 39,673,800 36,664,466 30,045,249 26,607,525 25,575,000 25,280,107	1.65% 1.41% 1.39% 1.24% 1.21% 1.12% 0.91% 0.81% 0.78% 0.77%

• 118 -

(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 Item	Year Item	Year Item	2016	2017	Ending April 30, 2020 (Note 8)
Market value per share (Note 1)	The Highest		16.45	12.35	9.8
	The Lowest		10.80	9.21	6.28
	Average		13.17	10.64	8.17
Net value per share (Note 2)	Before distribution		24.78	23.68	N/A
	After distribution		23.20	（Note 9）
EPS	Weighted average shares		2,699,857,267	2,834,850,130
	EPS (Note 3)		1.59	0.61
	EPS-adjusted retroactively (Note 3)		1.51	（Note 9）
Dividend per share	Cash dividend		0.5	0.3（Note 9）
	Free-Gratis dividends	Stock dividend from earnings	0.5	-
		Stock dividend from paid-in capital	-	-
	Retained dividend (Note 4)		-	-
Return on investment analysis	Price-Earnings Ratio (Note 5)		8.28	17.44
	Dividend Yield (Note 6)		26.34	35.47
	Cash dividend yield (Note 7)		3.80%	2.82%

• In the case of retained shares distribution or capital surplus shares distribution, please also disclose the information about the market value and cash dividend 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 retroactively 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 dividend 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: Earnings Distribution for 2019 is still under resolution by the general shareholders’ meeting 2020.

• 119 -

(VI) Dividend Policy and the Status of Implementation

1. Dividend 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 operation, capital need 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 dividend in the form of cash dividend or stock dividend. In the case that the allotment is made by way of stock dividend, 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:

According to the resolution of the Board of Directors on March 27, 2020, the Company distributes common stock dividends of NT$985,455,039 (distribute cash dividends NT$0.3 per share). After the distribution of the cash dividends is passed by the shareholders' meeting, authorize the Board of Directors to stipulate the ex-dividends date and distribute separately.

If later on when the Company manages a capital increase by cash, re-purchases shares of the Company, transfers, converts and cancels treasury shares, converts corporate bonds and converts employee stock warrants according to issuance and conversion methods and other capital stock changes that result changes in the shareholder's stock (dividends) distribution, it is recommended to authorize the Chairman of the Board to adjust the number of shares issued and outstanding as recorded in the Company's common stock shareholders roster with full authority according to the ex-dividends date in accordance with the dividends amount in the resolution of the shareholders' annual meeting. The toal amount of cash dividend is rounded to the nearest NT$, and any amounts less than 1 NT$ is forefeited.

• 120 -

• (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:

This shareholders’ meeting has no issuance of stock dividends, which did not apply.

(VIII) Employee bonus and remuneration to directors/supervisors:

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 has earnings, it shall set aside 3% of the balance as remuneration to the employees and no greater than 2% of the balance as remuneration to directors, but the company’s accumulated losses shall have been covered.

Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements, entitled to receive shares or cash. The remuneration to directors entitled to receive cash only.

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 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 2019 remuneration of employee is estimated by a ratio of the pre-tax income before minus the remuneration to directors and employee, if the estimates differ from the resolved remuneration on the day of the shareholders meeting, the shareholder’s meeting shall refer to the new amount, and the amount adjusted in the year of the shareholders’ meeting.

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

2. (1) The 2019 remuneration of employee and directors was ratified by the Board on March 27, 2020. Allocation of remuneration is as below:

The Company in accordance to the Articles of Incorporation, propose an employee allocation of 3%, with an amount of NT$57,759,161 allocated for employees, and and directors’ allocation of no more than 2%, or an amount of NT$38,506,107, both paid out in cash.

• (2) The amount of any employee remuneration distributed in stocks, and the size of that amount as a percentage of the sum of the after-tax net income stated in the parent company only financial reports or individual financial

• 121 -

reports for the current period and total employee remuneration: N/A

1. The actual allocation of employee bonus and remuneration to directors in the previous year (including the number, amount and stock price of allocated shares), the deviation between the actual allocation and the estimated figures, if any, and cause and treatment thereof:

2. (1) The actual distribution of the 2018 directors’ remuneration is the same as the proposed distribution approved by the Board of Directors.

3. (2) The compensation for the employees in 2018 is based on the contribution of all personnel and the actual performance of the staff in the year.

(IX) Repurchase of the Company’s shares:

April 30, 2020

	April 30, 2020
Term of repurchase	1st
Purpose of repurchase	Maintain company credit and shareholders' rights
Types of shares of repurchase	Ordinary share
Limited total amount of repurchase	NT$13,715,715,064
Scheduled period of repurchase	2020/03/30 ~ 2020/05/29
Scheduled quatity of repurchase	50,000,000 shares
Price range of repurchase	NT$5.03 ~ 7.5
Type and quantity of shares repurchased	Ordinary share 0 shares
Amount of shares repurchased	NT$0
Ratio of quantity repurchased to scheduled quatity of repurchase	0%

• 122 -

II. Issuance of Corporate Bonds

(I) Issuance of Overseas Convertible Corporate Bonds

Corporate Bonds	Corporate Bonds	Second Overseas Secured Convertible Corporate Bonds in 2014
Date of Issuance		Dec 17th 2014
Par value		USD $200,000 or multiples thereof
Location		Singapore
Price of Issuance		100% issuance based on par value
Total amount		USD $132,000,000
Interest		0% coupon rate
Maturity		5 years, ending on Dec 17, 2019
Guarantee Agency		CTBC Bank Taiwan Cooperative Bank
Trustee		The Bank of New York Mellon, London Branch
Underwriters		Foreign：Barclays Bank PLC Domestic：Yuanta Securities Co., Ltd.
Lawyers		Baker & McKenzie
Accountants		KPMG
Redemption		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% from par value.
Outstanding Principle		0
Provision of prepayment and redemption		Refer to the issuance and conversion guidance of the Second Overseas Secured Convertible Corporate Bonds in 2014, disclosed in the Market Observation Post System.
Restrictive covenant		None
Company’s name, date and corporate bonds of credit rating		N/A
Others	Converted (exchange or subscription) common stock, depository receipts or other price of securities as of the annual report publish date.	379,867,601 shares has beenconverted to common stock
	Issuance and conversion (exchange or subscription)	Refer to the Market Observation Post System
The effect of current shareholder’s equity and the condition of diluted equity due to methods of issuance, conversion, exchange, subscription and issuance provision		On December 19, 2017, the Company executed a redemption, thus, no impact on shareholders' equity.
Name of Exchange		N/A
Use of Proceeds		As of December 31,2019, proceeds deployed asperplan.

• 123 -

(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 December 19, 2017
Market value of convertible corporate bonds (Note 1)	The Highest (Note1)	(Note 1)	(Note 1)	(Note 1)	(Note 1)
	The Lowest (Note 1)	(Note 1)	(Note 1)	(Note 1)	(Note 1)
	Average (Note 1)	(Note 1)	(Note 1)	(Note 1)	(Note 1)
Conversion Price		10.80	10.80	10.80	10.80
Issuance date and conversionprice		Dec 17th2014 10.80	Dec 17th2014 10.80	Dec 17th2014 10.80	Dec 17th2014 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. On December 19, 2017, the Company executed a redemption, thus, there is no outstanding corporate bonds.`

III. Issuance of Preferred Shares: N/A

• 124 -

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

(GDRs)”:	(GDRs)”:	(GDRs)”:
Issuing Date Item			2020/01/10
Date of issue			2020/01/10
Place of issue and trading			Luxembourg Stock Exchange
Total dollar amount of issue			US$129,240,000
Dollar amount per unit issued			US$7.18
Total numberof issued units			18,000,000 units
Source of underlying securities			Ordinary shares of CPDC held by shareholders of the Company (handle in accordance with the Company's “Regulations Governing the Conversion Sales of Depositary Receipt)
Number of underlying securities			450,000,000 shares
Rights and obligations of holders of the depositary receipts			Same as ordinary shares
Trustee			N/A
Depositary institution			Citibank, N.A.-New York
Custodian institution			First Commercial Bank Custody Division of Trust Department
Balance of overseas depositary receipts not yet redeemed			18,400units (Note1)
Method of allocating relevant expenses during issue period and the of the overseas depositary receipts			Paid by the issuing company
Material covenants of the depositary agreement and custody agreement			Refer to the depositary agreement and custody agreement for details
Market price per unit	2019	High	Not issued
		Low	Not issued
		Average	Not issued
	As of 2019/12/31	High	US$7.65
		Low	US$5.31
		Average	US$6.67

Note: 1. As of March 31, 2020, investors have redeemed 17,981,600 units.

V. Status of Employee Stock Option: N/A

VI. Restriction 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

As of the quarter before thepublishing date of the annual report, the content of plan and status of implementation of the previous issuance or private placement of securities that has not been complete, or those have been completed in the past three years but the

• 125 -

expected benefits have not yet shown:

• (I) The contents of the 2020 overseas depositary receipt plan:

• Total funds required: RMB1,176,000 thousand (equivalent to USD 177,002 thousand).

• Source of funds: Issuance of overseas depository receipts.

• 3.Project and the progress: Investment plan for reinvesting in Jiangsu Weiming Factory.

(II) Implementation of funs:

Unit: thousand dollars

							Unit: thousand dollars
Project	Status of implementation		1st quarter of 2020		As of 1st quarter of 2020		Reasons for progress ahead or behind and improvement plan(Note 2)
			USD	Equivalent to NT$ (Note)	USD	Equivalent to NT$ (Note)
Reinvesting in the China subsidiary- Jiangsu Weiming	Amount of expense	Expected	0	0	30,000	945,000	Since the application for the increase in the registered capital of Jiangsu Weiming, the reinvestment company, has not been completed, the relevant investment funds will be postponed until the application is completed. All the raised funds will be used to reinvest in Jiangsu Weiming's factory construction plan. In addition to considering the overall supply and demand of the CPL and its upstream and downstream markets, the expected benefit plan has also taken into accountthe future changes in the local China market and international markets,as well as the market prices of various local products. Benefits are expected to begin in 2021, thus, there is no difference between the expected benefits and the actual achievement.
		Actual	0	0	0	0
	Execution progress (%)	Expected	0	0	16.95%	16.95%
		Actual	0	0	0%	0%
Total	Amount of expense	Expected	0	0	30,000	945,000
		Actual	0	0	0	0
	Execution progress (%)	Expected	0	0	16.95%	16.95%
		Actual	0	0	0%	0%

Note 1: The exchange rate of the USD to NTD is calculated as 1 USD against 30 NTD; the investment funds of the China subsidiary are denominated in RMB, and the exchange rate of USD to RMB is calculated at the exchange rate at the time of exchange.

Note 2: At present, the equivalent of USD129,240 thousand in unspent funds is deposited in the bank's foreign currency fixed deposit account (calculated at the exchange rate at the time of exchange exchange) and the repurchase ticket.

• 126 -

Five. Operations Overview

I. Business contents

(I) Scope of business

1. 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) Operation 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.

2. Major products and sales mix

3. Currently, the major products of this company include acrylonitrile (AN), caprolactam (CPL), and nylon chip (NY6 or PA6). Other products include

4. 127 -

electricity, hydrogen cyanide (HCN); ammonium sulfate (AS), industrial sulfuric acid, refined sulfuric acid, and fuming sulfuric acid (oleum). The sales mix of these products in 2017 is as follows:

Product Acrylonitrile (AN) and by-products Caprolactam (CPL) and by-products Others	Sales Mix 34.63% 51.17% 14.20%

1. 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.

1. New products to be developed

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

(II) Industry overview

1. Current status and development

2. (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, 2011 and 2019, and the production capacity this year was 230,000 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 2019 the total AN demand in Taiwan was about 490,000 metric tons/year, which was close to that in 2018.

• (2) Caprolactam (CPL)

The Company is the only CPL supplier in Taiwan. The CPL capacity in 2019 was 400,000 metric tons, and production volume in 2019 of 296,000 metric tons, full supply to Taiwan without export, with domestic market share of 64%. With downstream production of textiles and polymerization capacity increased in China and the China-US trade conflicts causing the demand decline, it is a difficult competitive environment for Taiwanese suppliers. In Taiwan, CPL consumption during 2019 decreased by 17% versus 2018, with apparent demand at about 460,000 metric tons/year. Nylon demand in Asia continues to increase, particularly in China, CPL capacity largely increased in 2012, and reduced its capacity growth rate due to oversupply in 2019. Capacity in 2019, reached a total capacity of 4 million metric tons. 2019 capctiy increased by 500,000 tons, which is 12% versus 2018. In 2019 total CPL demand in China was 3.4 million tons a year, higher than 3.2 million tons in 2018. Self sufficiency increased by

• 128 -

7.5%. With the growth in CPL supply slightly higher than the growth in demand in the past 2 years, the CPL industry remains oversupplied. In 2020, it is estimated that CPL demand in Asia will continue to grow by 3 ~ 4%, but there still will be active investment in new CPL production capacity. Due to the impact of the epidemic and the collapse of oil prices in Asia, the operation will be more difficult.

• (3) Nylon Chips (NY6 or PA6)

Nylon chip production in Taiwan decreased in 2016~2019, due to the trade conflict and decreasing sales in China caused by oversupply in China Nylon chip production. As supply capacity remains higher than demand, about 50% of production must be exported, and 80% of nylon chip exports go to China. With the increasing self-sufficiency of China’s production capacity, Taiwan’s exports to China accounted for about 30% of total exports in 2019; sales in other regions increased year by year, gradually shifting its dependence on the China market. The Company produces nylon chips with CPL through vertical integration for downstream suppliers to produce nylon threads, engineering plastics, and nylon films. By producing and selling nylon chips, the Company maintains a link to the nylon market. To cope with segmentation and heterogeneous growth of downstream nylon products, we continuously adjust the structure of our downstream customers. Although market competition remains intense, it is estimated that nylon chip sales in 2020 will maintain at approximately the same levels relative to our CPL business.

• (4) o-phenylphenol (OPP)

  • The Company in 2016 completed a pilot factory, and is the sole supplier of OPP domestically, and is the 4th largest producer in the world. This product is a verticaly integrated, specialty product line, and uses Cyclohexanone as its main raw material. The R&D center developed catalytic converters, production design, and the currently completed factory construction. The main end product for this product line is flame retardant, optical materials, and antiseptic/sterilization purposes. Through the production and sales of OPP, we intend to further develop our operations in specialty chemicals, expanding OPP derivative products for different end markets. Through the differentiation of downstream products and growth potential, we continue to adjust our client mix, and further develop CPDC’s entry into the specialty chemical market.

• Supply Chain Relationships between Products

• (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 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

• 129 -

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.

• (2) Caprolactam (CPL)

• Benzene or cyclohexane and ammonia anhydrous are the major raw materials of CPL. Benzene is either supplied by CPC Corporation Taiwan or imported. All cyclohexane and ammonia anhydrous are imported. CPL is the major raw material for producing NY6 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:

Benzene or Cyclohexane or phenol  CPL  Nylon Chips

Nylon threads  Downstream Processing Compounding and Modification  Engineering Plastics

1. Development Trend and Competition Status of Major Projects

2. (1) Acrylonitrile (AN or ACN) Favorable conditions

   • NBR: Tire (NBR) demand will increase as the auto industry continues to grow in 2020, along with the steady growth on Medical Latex demand. These will indirectly favor AN production and stabilize AN price.

   • AM: As the demand for wastewater treatment and oil refinery treatment increases, AM demand is expected to increase to favor AN production and stabilize AN price.

   • ABS: The demand for home appliance and autos maintained growth for the company, indirectly favoring AN production and beneficial for stabilizing prices.

Unfavorable conditions

• AF:2020 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

• 130 -

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.

Response actions to unfavorable factors

Develop NBR(Latex) and AM markets which enjoy higher demand growth rates and explore other regional sales area such as south India and the Middle East to reduce the dependence on the Chinese market. These efforts are starting to show positive effects.

• (2) Caprolactam (CPL)

Favorable conditions

• Nylon is an industry for key development in China. Therefore, in addition to helping domestic nylon suppliers to expand production capability, the Chinese government has implemented tariff barriers and an anti-dumping tax to protect domestic nylon industry development. As this company is not on the anti-dumping tax list, our entry barrier is lower than other international competitors.

• As the CPL process is complicated and operation is rather difficult, it is difficult for newcomers to control quality. Therefore, current suppliers can enjoy a short-term quality advantage.

• The quality of Nylon in Taiwan remains higher than Chinese producers, thus in a continue demand growth environment, Taiwan suppliers remains a preferred choice to customers.

Unfavorable conditions

• CPL capability in China expanded extensively, and supply was higher than demand in 2013. As CPL suppliers were competing for market share, price competition and profit reduction has occurred.

• After PTA capability expansion in Asia in recent years, excessive polyester has substituted for nylon thread at a lower price point and higher market share. This affects the development of nylon thread in the general textile market.

Response actions to unfavorable factors

• Focus on the top-down supply chain environment and changes in the market situation to flexibly adjust sales strategies and support downstream industries to increase operational performance, and face competition together.

• Reinforce cultivation of engineering plastics and film markets to reduce the risk of selling products to a single market—nylon textile market. Increase the flexibility of sales adjustments with the company’s development and production of functional nylon chips.

• 131 -

• (3) Nylon Chips (NY6 or PA6)

• Favorable conditions

• China is a developing country with a fast-growing economy. As the domestic demand and export growth increase, the textile industry expands its capability to accelerate nylon chip consumption.

• The thriving auto industry in China stimulates auto nylon chip demand.

• Unfavorable conditions

• Nearly 55% of the downstream industries of nylon chips in Taiwan concentrate in clothing fibers with the export market focusing on China. Therefore, the concentration effect of a single industry and a single market is significant.

Responsive action for unfavorable factors

After capacity expansion of polymerization equipment, most Taiwan suppliers increase sales to the Chinese textile market. To avoid price-driven competition with China, the Company emphasizes material supply contracts with domestic Taiwanese customers to strengthen sales and will continue to develop engineering plastics market and channels.

• (4) OPP (ortho-phenylphenol)

• Favorable conditions

• As the third-largest manufacturer in the world and the only one supplier in Taiwan, the demand of downstream applications are mostly focused on Asia region, it’s a big benefit to promote the sale.

• Using the novel catalyst technology and purification system to reduce the wastes production and to make sure the quality of final product.

• Unfavorable conditions

• The main competitor, has a market share of over 50% and takes advantage of preferential tax rates in China, which is unfavorable for Taiwan speciality chemical product companies.. Responsive action for unfavorable factors

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

2. In 2019, the domestic market share of CPL is about 64%; AN is about 35%; and nylon chips is about 6%, and OPP domestic market share is approximately 50%.

3. 132 -

(III) Technology and R&D

1. R&D Expenses:

FY2019: NT$401,655,000

By 31 March 2020: NT$88,847,000

1. Major Research Outcomes

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

In engineering plastics compounding product series, R&D center devoted to new product development including nylon 66 engineering plastics, PC composites, ABS composites, PC / ABS composites and other engineering plastics composites.Series of products have good mechanical properties, flame retardant, toughening resistance at low temperature, heat resistance, weather resistance, antibacterial, conductive, antistatic and other characteristics, can be used in automotive / locomotive, machinery, electronic parts, 3C household appliances, sports goods and other industrial fields. R&D center is also capable to developing in-house products series with specialized formulas, and building up customized product technologies according to customer needs.

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.

1. Current Patent Status

In 2019 the company completed the registration of 9 new patents. The content of patents applied is not only for the improvement of existing manufacturing processes, but also for technical protection and developing a patent portfolio of future products.

• 133 -

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

CPDC recognizes that the Company’s responses and management policies to environmental, social, and corporate governance issues are also important performances. In the face of the rapid changes in the future operating environment, the Company will adhere to the concept of respect for natural ecology and strive to realize green petrochemical enterprises. With a more proactive attitude, we seek for breakthroughs and enhance the competitiveness of self-development.

The long and short-term business development goals for the petrochemical and land development businesses is as follows:

1. Petrochemical Core Business:

2. (1) Short-Term Plans

3. Optimize the existing operational capabilities: Add raw material and product silos, expand capacityand improve efficiency, promote green house gas reduction, continue to work on plant operation optimization, accelerate our efforts in Smart Factory management, and gradually build in artificial intelligence (AI) towards a fully automated factory.

4. Develop multiple high-value new product markets: Continue to develop special-purpose chemicals, esters and functional polymer products with a wide range of applications, increase the added value of compound nylon, and develop biodegradable materials so as to move towards the trend of green environmental protection.

(2) Long-Term Plans

• Establish overseas integrated production base: To avoid the impact of intermediate raw material price fluctuations affecting the stability of profits, accelerate the promotion of integrated production. The intermediate raw materials can be de-balanced on-site to save storage and transportation costs. The high integration of materials and energy can reduce energy consumption costs and establish a competitive cost advantage.

• Introduce the application of AI technology: Continue to develop diversified high-value new product markets, and through the intelligent promotion of factories, gradually develop AI applications and build the AI foundation of the petrochemical business. We expect to develop intelligent systems specifically for the petrochemical business by AI application products and services, and establish superior technological competitiveness

• Create an intelligent management system: Improve the comprehensive effect of the Audio/Visual Command Center and plan to build an enterprise intelligent management platform. We hope that through the long-term compilation of integration of production monitoring, supply and demand analysis, market scheduling, price forecasting, and business performance analysis, it will provide complete information to improve the

• 134 -

quality of decision-making and establish a competitive management advantage.

1. Land Development Business:

(1) Short-Term Plans

• With the goal of planning and revitalizing Taiwan’s existing land assets: The company is located in the 5[th] special area and the 6[th] special area of the Kaohsiung multifunctional economic and trade park. Following the Kaohsiung City Government’s promotion of the "Asia New Bay Area" and the relocation of the 205 arsenal, the Company promotes the development of related development plans and strengthens the direction of investment promotion and leasing. In addition to complying with the urban development plan strategy, we hope to create the highest value for the Company’s land assets.

• Aiming to cut into overseas real estate development: In line with China’s One Belt One Road strategy and the new business opportunities brought by the rise of emerging markets in Southeast Asia, the Company actively explores areas with potential for land development in relevant countries such as Vietnam, Myanmar and the Philippines, carries out evaluation strategies of land development and existing collaboration case, and purchase land with development value.

(2) Long-Term Plans

• Promote Taiwan land-related development plans by stages by areas: In response to and cooperating with the government's green energy conservation and urban development planning policies, in addition to enhancing the development planning strength for large-scale land development, based on the principle of value-added utilization, the Company will combine carbon-absorbing civilization with AI technology in pursuance of developing livable building products.

• 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 production base for the petrochemical core business, and promoting residential and commercial development, with the ultimate goal of sustainable operation, production, loving and ecological wisdom town as the objective.

• 135 -

II. Market and Sales Overview

(I) Market Analysis of Major Products

[Acrylonitrile (AN or ACN)]

On the demand side, the impact of Sino-US trade conflicts and global virus impacts, conservative view of the 2020 ABS market situation, estimated 2020 demand will be 2~3% than the 2019 micro-growth, the 2020 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, China is expected to add 260,000 tons of new capacity in 2020. The AN industry will still have a short-term oversupply trend.

The Company has completed the operation test of bottleneck removal 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 2020 Asian start rate is expected to be flat in 2019, the construction rate maintained at more than 90%.

[Caprolactam (CPL)]

The company's CPL production capacity in 2019 is 400,000 tons / year, and its main sales and supply target is Taiwan's domestic nylon polymer industry. Nylon polymer industry players are now going to China's nylon terminal market with sales of nylon chips and nylon filaments. In 2019, Taiwan's total CPL demand is about 524,000 tons / year, China's total CPL demand is 3.3 million tons / year, and the overall nylon industry demand exceeds 3.8 million tons / year.

Nylon is a key support industry in China. In order to improve the domestic self-sufficiency rate of CPL, the CPL production capacity has been significantly expanded in recent years. In 2019, new annual production capacity by 300,000 tons has been put into production. In 2020, it is expected that new capacity will still be concentrated in China. The production capacity to be put into operation is about 800,000 tons. It is estimated that there will be 200,000 tons / year new line in Fujian Shenyuan, 200,000 tons / year new line in Fujian Eversun, 200,000 tons / year new line in Pingdingshan Shenma, and 200,000 tons in Neimongu Qinghua Tons / year of new line.

For a long time, Taiwan's nylon polymer production capacity is greater than CPL production capacity. Due to insufficient self-sufficiency of CPL, the demand for nylon downstream production is highly dependent on imports. Since the second quarter of 2016, the company has flexibly adjusted its output based on profitability, and is expected to meet a self-sufficiency rate of 50 ~ 65% in Taiwan. Under the continuous expansion of CPL, Chinese self-sufficiency rate is close to demand, but under the quality difference and the processing requirements of materials, it is estimated that it still needs to rely on imported CPL sources.

• 136 -

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, anti-dumping duties and high CPL import duties are levied on the imports of CPL and nylon chips, increasing the cost of raw material imports, and even the full refund of value-added tax, which will increase competition in China's export markets. It is expected that the challenges of the CPL market will continue in 2020, and some installations will respond conservatively.

[Nylon Chip]

Due to various factors such as economy, population, and geography, the domestic market for nylon is different. Taiwan has the world's second largest PA6 production capacity. However, nearly 50% of the PA6 produced depends on export sales. The largest export market is China.

Although the downstream demand of China's nylon industry chain continues to grow, the rapid expansion of production capacity increases the self-sufficiency rate, and the number of PA6 imports is expected to decline year by year. China's total imports of PA6 in 2019 were about 340,000 tons, compared with 2018 imports of 380,000 tons, a significant decrease of 10%. Among them, Taiwan ’s exports to China of 65,000 tons accounted for about 20% of China ’s total imports, which was a sharp decline of nearly 50% from Taiwan ’s exports of China to about 140,000 tons in 2018.

The company will reduce the dependence on China and look for markets outside China. In order to consolidate the existing nylon market, the company continues to develop functional PA6, downstream engineering plastics, films and other channels and customer groups in order to effectively sell CPL, diversify the risks of changing the single market during the off-peak seasons, and create higher added value.

[OPP (ortho-phenylphenol)]

In term of supply, due to the China environmental policy, no additional capacity will be put into production, and in the first half of 2020 continued imbalance in the supply/demand continues, so this situation will contribute CPDC to increase the OPP market share.

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

• 137 -

(II) Major applications and processes of major products

1. Acrylonitrile (AN or ACN)

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

   • AN fiber: Clothing fabrics, acrylic wool, woolen fabrics, stuffed toys, blankets, carpets, and decorative fabrics.

   • ABS plastics: Briefcases, cosmetics containers, computers, mobile phones, home appliance shells, and auto parts.

   • NBR: Oil-resistant and heat-resistant rubber.

   • Acrylamide: oil displacement agent, wastewater treatment agent, soil water absorbent agent, soil conditioner, paper pulp toughener, coating, coagulant.

3. (2) Process

Propene Air Ammoxidation AN Ammonia anhydrous

1. Caprolactam (CPL)

   • General textile fibers: Sports jackets, lining, stockings, and undergarments.

   • Industrial fiber: Umbrella fabrics, fishing lines, fishing nets, tire carcass, handbags, nonwoven fabrics, and home carpets.

   • Engineering plastics: Auto parts, high pressure pipes, surfing boards, and gears.

2. (2) Process

==> picture [414 x 155] intentionally omitted <==

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

Hydrogen Air Fuming
Sulfuric Acid
Cyclohexanone Cyclohexanone
Phenol oxime Beckmann
Oxidation Oximation rearrangement CPL
Hydrogen
phosphoric ammonia ammonium
acid anhydrous hydroxide
----- End of picture text -----

• 138 -

• Nylon Chips (NY6 or PA6)

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

• (2) Process

==> picture [243 x 31] intentionally omitted <==

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

Polymerization
CPL Nylon Chips
----- End of picture text -----

(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.

• 139 -

(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$1,000

									Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000
Item	2018				2019				As of Q1, 2020
	Supplier ID (Note 2)	Amount	Percentage in Annual Purchasing Amount	Relationship with Issuer	Supplier ID (Note 2)	Amount	Percentage in Annual Purchasing Amount	Relationship with Issuer	Supplier ID (Note 2)	Amount	Percentage in Annual Purchasing Amount	Relationship with Issuer
1	660	8,768,637	29.90		660	7,801,858	31.12
2	688	3,577,975	12.20		3002	2,830,890	11.29
3	4081	2,638,226	8.99		9357	1,773,768	7.08
	Others	14,343,430	48.91		Others	12,661,600	50.51
	Net Purchase	29,328,268	100.00		Net Purchase	25,068,116	100.00

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

1. Replaced by supplier ID for business consideration.

2. 140 -

Major customers in the past two years

Unit: NT$1,000

Item	2018	2018	2018		2019	2019	2019	2019	As of Q1, 2020	As of Q1, 2020	As of Q1, 2020
	Customer ID (Note 2)	Amount	Percentage in Annual Sales Value	Relationship with Issuer	Customer ID (Note 2)	Amount	Percentage in Annual Sales Value	Relations hip with Issuer	Customer ID (Note 2)	Amount	Percentage in Annual Sales Value	Relations hip with Issuer
1	1018	5,502,844	14.29		1018	3,564,112	12.03
2	1020	5,259,325	13.66		1011	3,430,779	11.58
3	1019	4,799,812	12.47		1020	3,406,066	11.50
4	1011	4,675,062	12.14		1019	2,511,171	8.48
5	1001	2,868,527	7.45		1001	2,501,627	8.44
	Others	15,397,551	39.99		Others	14,210,339	47.97
	Net Sales	38,503,121	100.00		Net Sales	29,624,094	100.00

Note: 1. Cause of increase and reduction: Change of market price and sales quantity.

1. Replaced by customer ID for business consideration.

2. 141 -

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

Quantity: Metric tons

Value: NT$1,000

				Quantity: Metric tons Value: NT$1,000	Quantity: Metric tons Value: NT$1,000	Quantity: Metric tons Value: NT$1,000
Year Production Major Product ( or department)	2019			2018
	Capability	Quantity	Value	Capability	Quantity	Value
AN	220,000	211,188	24,262,076	220,000	208,420	31,491,624
CPL, Nylon Chips	426,000	310,561		426,000	374,390
Other By-products
Total			24,262,076			31,491,624

Note: Capability refers to production quantity in normal operation with the current production equipment after measuring necessary down time and holidays.

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

Quantity: Metric tons Value: NT$1,000

					Quantity: Metric tons Value: NT$1,000	Quantity: Metric tons Value: NT$1,000	Quantity: Metric tons Value: NT$1,000	Quantity: Metric tons Value: NT$1,000
Year Sales Major Product ( or department)	2019_Consolidated				2018_Consolidated
	Domestic		Export		Domestic		Export
	Quantity	Value	Domestic	Export	Domestic	Export	Domestic	Export
AN, acetic acid	115,189	20,945,478	98,881	8,678,616	115,229	28,747,803	100,582	9,755,318
CPL, Nylon Chips	287,161		10,0910		341,369		14,311
Other By-products							917
Total		20,945,478		8,678,616		28,747,803		9,755,318

• 142 -

III. Employees

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

Mar 31, 2020

					Mar 31, 2020
		Year	2018	2019	By Mar 31, 2020 (Note)
Employees		Taipei office	302	366	374
		Toufen Plant	395	395	392
		Dashe Plant	302	295	285
		Hsiaohang Plant	277	293	294
		Total	1276	1349	1345
Average Age (year)			39.73	39.04	38.87
Average Service Length (year)			10.3	9.05	8.44
Education	PhD		19	14	15
	Master’s		298	325	326
	Bachelor’s		1138	890	889
	Senior High and below		140	120	115

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

Note 2: 2018 and 2019 yearly data is as of the end of December.

IV. Environmental Protection Expenses

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

(Last years due to environmental pollution suffered losses detailed in the Annual Report

P94 ~ P99)

P94 ~ P99)
				Unit: NT$1,000
		2019		2018
Pollution (type and severity)	Violation of	the Air Pollution	Violation of	the Water Pollution
	Control Act	and Waste Disposal	Control Act	and Air Pollution
	Act.		Control Act.
Compensation Target or	Local environmental protection		Local environmental protection
Punishing Unit	authorities		authorities
Fine Amount		2,800		7,856
Other Loss		___		___

• 143 -

(II) Responsive Action

1. Improvement Plan

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

3. (2) Strengthen monitoring equipment maintenance and troubleshooting.

4. Estimated environmental protection expenses in the next three years

Unit: NT$1,000

			Unit: NT$1,000
	2020	2021	2022
Expense for purchasing	Prevention and	Prevention and	Prevention and
pollution prevention	improvement of air, water,	improvement of air, water, soil, and underwater pollution in all plants improvement of air, water, soil, and underwater pollution in all plants
equipment, etc.	soil, and underwater
	pollution in all plants
Estimated improvement	Pollution and waste	Pollution and waste	Pollution and waste
	reduction and compliance
	with environmental
	protection standards
Amount	156,682,000	172,350,000 189,585,000

Note: The 2020 expenses at NT$156,682,000 is a projected amount; the amount in the next two years are also projected.

3. Impact after improvement.

Unit: NT$1,000

			Unit: NT$1,000
	2020	2021	2022
Impact on net profit	Depreciation increases by	Depreciation increases by	Depreciation increases by
about14,243 thousand/year; repair and maintenance increases by about 1,424.3 thousand/year. about 15,668 thousand/year; repair and maintenance increases by about 1,566.8 thousand/year. about 17,235 thousand/year; repair and maintenance increases by about 1,723.5 thousand/year.
Impact of competitive	Compliance with	Compliance with

• Note: Depreciable assets will be depreciated over 10 years. Values for 2020 and 2021 are estimates.

• 144 -

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 welfare benefits available in 2019:

The employee activities in 2019

Item	Welfare benefits (bonus for Chinese New Year and major festivals, year-end party lottery, cash gift for birthday, and other allowances) (NTD)	Cultural and entertainment activities (travel allowance, ball games, mountain-climbing, and other employee activities) (NTD)
Taipei office	6,213,074	1,906,674
Tou-Fen Plant	11,013,940	1,336,845
Da-Sheh Plant	13,380,800	2,823,106
Hsiaokang Plant	10,564,075	1,061,117
Total	41,171,889	7,127,742

1. Continuing Education/Training

The employee training hours and status of budget thereof in 2019:

Information about the employees' training in 2019

Item	Total Training Hours	Average Hour per Person	Budget Implementation Efficiency
Taipei office	6,655	18.18	18.67%
Toufen Plant	20,516	50.91	86.5%
Dashe Plant	22,366	75.56	78.91%
Hsiaokang Plant	15,224.5	51.96	61.5%

• 145 -

Incentive and subsidy to employees who attended the continuing education programs to learn other languages or various professional programs in 2019

Item	Subsidy (NTD)
Taipei office	0
Other Subsidiaries	154,063
Total	154,063

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.

Information about employees’ pension and retirement in 2019

Item	Amount or Number of Person
Retirement Account Opened by Labor Pension Supervisory Committee at Bank of Taiwan	NT $288,188,000
Number of retired employees 2019	36 persons

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

1. 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 their signature to acknowledge that they have read and understood the “business conduct policy” adopted by CPDC.

2. 146 -

Business Conduct Policy

I. Fair trade policy

1. 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.

2. 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 competition 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 restated 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.

3. 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.

2. 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 pillar 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

• 147 -

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.

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.

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

• 148 -

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 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

6. 149 -

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.

1. 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.

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:

2. Fair trade policy

Conflict of Interest Policy

Payment and Spending Policy

Non-Disclosure and Non-Competition

Internal Information Control Policy

Compliance

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

• 150 -

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:

Fair trade policy

Conflict of Interest Policy Payment and Spending Policy Non-Disclosure and Non-Competition

Internal Information Control Policy Compliance

Communication and Negotiation

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

2. (Date) (Printed Name)

3. 151 -

Business Conduct Policy Compliance Certificate (for supervisors)

It is certified that:

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

Fair trade policy

Conflict of Interest Policy

Payment and Spending Policy

Non-Disclosure and Non-Competition

Internal Information Control Policy

Compliance

Communication and Negotiation

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

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

3. (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.

5. 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.

6. 152 -

VI. Major Contracts

(I) Engineering Contract:

Nature	Contract Party	Duration	Summary Content	Restricted Clause
2020 Equipment Manipulating Construction Project of Polluted Soil Heat Treatment of Anshun Plant (30,000 tons)	CPDC Green Technology Corporation	2020.01.01 ~ 2020.12.31	According to the remediation plan, conduct heat treatment to the pentachlorophenol, polluted soil in the buffer, synthetical wastewater, and sludge cake of wet treatment. After heat treatment, the total amount will be about 30,000 tons, reaching the soil qualification standards.	None
Qiaotou Engineering Plastic Mixing Plant Construction Project	Shong Yes Co., Ltd.	2019.04.30 ~ 2020.05.30	In response to the needs of plastic mixing plant, plan to build steel structure factories and material development buildings in accordance with the investment project of “Nylon 6 Engineering Plastic Mixing Plant and Material Development Building Construction” approved by the Board of Directors.	None
Improvement Project of smoke control and power supply stability for the Cogeneration Factory – Construction of Wet Electrostatic Precipitator, Gas Gas Heater and Boiler Induced-Draft Fan.	China Bluestar Lehigh Engineering Corporation Shanghai Wylde Max	2019.10.01 ~ 2020.10.09	This project is a sub-project of the planned capital expenditure project, “Improvement Project of smoke control and power supply stability for the Cogeneration Factory of Toufen Plant”, and is for making the Toufen Plant coal-fired Cogeneration Factory meet the emissions standard (reducing air pollution) and eliminating visual pollution (smokeless chimney).	None

(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. 153 -

(III) Technical Cooperation Contract

Nature	Contract Party	Duration	SummaryContent	Restricted Clause
Outsourced Research Project	Industrial Technology Research Institute	2019.01.01 ~ 2020.12.31	Collaboration on the process evaluation of microreactor feasibility	The intellectual property ownership shall be determined subject to contract.
Outsourced Research Project	Industrial Technology Research Institute	2019.01.01 ~ 2020.12.31	Design and application of continuous reactor	The intellectual property ownership shall be determined subject to contract.
Collaboration Project	Cheng Shiu University	2019.06.01 ~ 2020.05.31	Industrial-Academia Service Contract for the identification and analysis of chemical structure	The intellectual property ownership shall be determined subject to contract.
Outsourced Research Project	National Chen Kung University	2019.07.01 ~ 2020.06.30	Commission research on the small-scale trial run for nylon key monomers	The intellectual property ownership shall be determined subject to contract.
Outsourced Analysis Project	Far East University	2019.08.15 ~ 2020.04.14	Far East University Industrial-Academia Collaboration Agreement I	The intellectual property ownership shall be determined subject to contract.
Outsourced Analysis Project	Far East University	2019.08.15 ~ 2020.04.14	Far East University Industrial-Academia Collaboration Agreement II	The intellectual property ownership shall be determined subject to contract
Outsourced Research Project	Chung Yuan Christian University	2019.08.01 ~ 2020.07.31	Carbon material preparation method and its application	The intellectual property ownership shall be determined subject to contract.
Outsourced Research Project	National Kaohsiung University of Science and Technology	2019.08.01 ~ 2020.07.31	Discussion on the rheological property of nylon	The intellectual property ownership shall be determined subject to contract.
Collaboration Project	Dalian Institute of Chemical Physics	2019.09.01 ~ 2020.08.31	Material development of acid catalyst	The intellectual property ownership shall be determined subject to contract.
Outsourced Research Project	Industrial Technology Research Institute	2019.11.01 ~ 2020.10.31	New technology manufacturing process commissioned research contract	The intellectual property ownership shall be determined subject to contract.

(IV) Long-Term Loan Contract

Nature	Contract Party	Duration	SummaryContent	Restricted Clause
Long-Term Loan	Mega International Commercial Bank Syndicated Loan	2016.3~2021.3	Roll over & Working capital increase	None
Long-Term Loan	First Commercial Bank	2017.3~2020.3	Working capital increase	None
Long-Term Loan	Bank of Taiwan	2019.7~2022.7	Working capital increase	None
Long-Term Loan	Taichung Commercial Bank	2019.11~2022.10	Roll over & Working capital increase	None
Long-Term Loan	Mega International Commercial Bank	2020.2~2023.2	Working capital increase	None
Long-Term Loan	Shin Kong Commercial Bank Syndicated Loan	2020.3~2023.3	Working capital increase	None

• 154 -

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

Currency Unit: NTD Thousand

Year Item	Year Item	Financial information in the most recent five years	Financial information in the most recent five years	Financial information in the most recent five years	Financial information in the most recent five years	Financial information in the most recent five years	Financial Information ending March 31, 2020
		2015	2016	2017	2018	2019
Current Assets		9,786,343	11,686,011	14,685,286	15,148,831	8,805,200	N/A
Property, plant and equipment		15,206,121	14,252,235	14,240,101	14,585,386	13,094,097
Intangible assets		-	-	-	-	-
Other assets		49,937,921	49,694,427	51,260,892	56,143,645	69,763,543
Total assets		74,930,385	75,632,673	80,186,279	85,877,862	91,662,840
Current liabilities	Before distribution	4,911,877	10,197,827	4,030,444	6,049,686	7,503,573
	After distribution	4,911,877	10,197,827	4,030,444	7,399,615	Note 1
Non-current liabilities		16,977,121	14,616,237	13,848,110	12,931,286	17,042,498
Total liabilities	Before distribution	21,888,998	24,814,064	17,878,554	18,980,972	24,546,071
	After distribution	21,888,998	24,814,064	17,878,554	20,330,901	Note 1
Equity attributable to the parent company		53,041,387	50,818,609	62,307,725	66,896,890	67,116,769
Capital stock		23,199,897	23,199,897	26,998,573	26,998,573	28,348,502
Capital surplus		18,141	18,141	1,260,386	1,260,386	1,286,700
Retained earnings	Before distribution	31,081,107	29,122,523	35,229,878	40,374,642	39,406,739
	After distribution	31,081,107	29,122,523	35,229,878	37,674,784	Note 1
Other equities		(1,257,758)	(1,521,952)	(1,181,112)	(1,736,711)	(1,925,172)
Treasury stock		-	-	-	-	-
Non-controlling equity		-	-	-	-	-
Total equity	Before distribution	53,041,387	50,818,609	62,307,725	66,896,890	67,116,769
	After distribution	53,041,387	50,818,609	62,307,725	65,546,961	Note 1

Note 1: Earnings Appropriation for 2019 shall be ratified at the 2020 annual general shareholders’ meeting.

• 155 -

Individual Condensed Income Statement - IFRSs

Currency Unit: NTD Thousand

Year Item	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial Information ending March 31, 2020
	2015	2016	2017	2018	2019
Operating revenue	23,146,767	22,526,791	32,160,867	36,969,800	26,797,793	N/A
Gross profit	(1,093,257)	(728,326)	4,630,315	4,312,688	1,066,769
Operating profit or loss	(1,894,726)	(1,481,032)	3,471,361	3,017,875	(133,109)
Non-operating revenue and expense	1,990,257	(388,689)	2,803,380	1,618,395	1,962,149
Net profit (loss) before tax	95,531	(1,869,721)	6,274,741	4,636,270	1,829,040
Net profit of continuing department	95,531	(1,869,721)	6,091,656	4,290,269	1,738,449
Loss of discontinued department	-	-	-	-	-
Net profit (loss)	95,531	(1,869,721)	6,091,656	4,290,269	1,738,449
Other comprehensive income (after tax)	(263,246)	(345,732)	356,539	(526,461)	(194,955)
Total comprehensive income	(167,715)	(2,215,453)	6,448,195	3,763,808	1,543,494
Net profit attributable to parent company	-	-	-	-	-
Net profit attributable to non-controlling equity	-	-	-	-	-
Total comprehensive income attributable to parent company	-	-	-	-	-
Total comprehensive income attributable to non-controlling equity	-	-	-	-	-
EPS	0.04	(0.81)	2.55	1.59	0.61

• 156 -

(II) Condensed balance sheet and comprehensive income statement - IFRSs

Consolidated condensed balance sheet - IFRSs

Currency Unit: NTD Thousand

Year Item	Year Item	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial Information ending March 31, 2020
		2015	2016	2017	2018	2019
Current Assets		15,118,402	16,082,533	18,839,149	21,622,587	23,986,973	N/A
Property, plant and equipment		16,279,497	15,669,918	16,935,430	19,501,534	20,275,279
Intangible assets		21,451	31,256	24,338	188,061	177,464
Other assets		44,335,453	44,671,558	45,830,043	48,392,772	52,028,774
Total assets		75,754,803	76,455,265	81,628,960	89,704,954	96,468,490
Current liabilities	Before distribution	5,278,759	10,462,969	4,241,699	7,488,055	8,741,513
	After distribution	5,278,759	10,462,969	4,241,699	8,837,984	Note 1
Non-current liabilities		17,218,026	14,929,630	14,838,802	15,026,145	20,533,113
Total liabilities	Before distribution	22,496,785	25,392,599	19,080,501	22,514,200	29,274,626
	After distribution	22,496,785	25,392,599	19,080,501	23,864,129	Note 1
Equity attributable to the parent company		53,041,387	50,818,609	62,307,725	66,896,890	67,116,769
Capital stock		23,199,897	23,199,897	26,998,573	26,998,573	28,348,502
Capital surplus		18,141	18,141	1,260,386	1,260,386	1,286,700
Retained earnings	Before distribution	31,081,107	29,122,523	35,229,878	40,374,642	39,406,739
	After distribution	31,081,107	29,122,523	35,229,878	37,674,784	Note 1
Other equities		(1,257,758)	(1,521,952)	(1,181,112)	(1,736,711)	(1,925,172)
Treasury stock		-	-	-	-	-
Non-controlling equity		216,631	244,057	240,734	293,864	77,095
Total equity	Before distribution	53,258,018	51,062,666	62,548,459	67,190,754	67,193,864
	After distribution	53,258,018	51,062,666	62,548,459	65,840,825	Note 1

Note 1: Loss Appropriation for 2019 shall be ratified at the 2020 annual general shareholders’ meeting.

• 157 -

Consolidated Condensed Income Statement - IFRSs

Currency Unit: NTD Thousand

Year Item	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial information in the most recent five years (Note 1)	Financial Information ending March 31, 2020
	2015	2016	2017	2018	2019
Operating revenue	26,155,995	25,376,683	33,335,970	38,503,121	29,624,094	N/A
Gross profit	(442,748)	(89,861)	5,371,581	5,176,159	1,627,580
Operating profit or loss	(1,793,801)	(1,395,078)	3,584,036	3,075,082	(409,020)
Non-operating revenue and expense	1,936,032	(409,018)	2,713,685	1,601,868	2,272,492
Net profit (loss) before tax	142,231	(1,804,096)	6,297,721	4,676,950	1,863,472
Net profit of continuing department	82,770	(1,878,145)	6,087,322	4,280,995	1,733,635
Loss of discontinued department	-	-	-	-	-
Net profit (loss)	82,770	(1,878,145)	6,087,322	4,280,995	1,733,635
Other comprehensive income (after tax)	(264,007)	(344,987)	357,550	(521,612)	(193,665)
Total comprehensive income	(181,237)	(2,223,132)	6,444,872	3,759,383	1,539,970
Net profit (loss) attributable to parent company	95,531	(1,869,721)	6,091,656	4,290,269	1,738,449
Net profit (loss) attributable to non-controlling equity	(12,761)	(8,424)	(4,334)	(9,274)	(4,814)
Total comprehensive income attributable to parent company	(167,715)	(2,215,453)	6,448,195	3,763,808	1,543,494
Total comprehensive income attributable to non-controlling equity	(13,522)	(7,679)	(3,323)	(4,425)	(3,524)
EPS	0.04	(0.81)	2.55	1.59	0.61

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

Year	2015	2016	2017	2018	2019
External Auditor	Melody Chen	Jeff Chen	Jeff Chen	Melody Chen	Melody Chen
	Jeff Chen	Chung Dan-Dan	Chung Dan-Dan	Chung Dan-Dan	Chung Dan-Dan
Audit Opinion	Modified unqualified opinions	Unqualified opinions	Unqualified opinions	Unqualified opinions	Unqualified opinions

• 158 -

II. Financial Analysis for the most recent five years

(I) Individual financial analysis for the most recent five years –IFRS

Currency Unit: NTD Thousand

		Currency Unit: NTD Thousand	Currency Unit: NTD Thousand	Currency Unit: NTD Thousand	Currency Unit: NTD Thousand	Currency Unit: NTD Thousand
Items	Year	Financial information in the most recent five years
		2015	2016	2017	2018	2019
Financial structure %	Liabilities to total assets	29.21	32.81	22.30	22.10	26.78
	Long-term fund to fixed assets	460.46	459.12	534.80	547.32	642.73
Insolvency %	Current ratio	199.24	114.59	364.36	250.41	117.35
	Quick ratio	148.40	92.32	294.30	208.49	81.32
	Times Interest Earned	151	(731)	3,662	8,999	1,817
Operating perofrmance	Receivables turnover (time)	10.27	10.88	10.31	10.58	10.54
	Average number of days’ receivables outstanding	35.54	33.54	35.40	34.50	34.63
	Inventory turnover (time)	10.99	12.40	14.40	14.79	12.69
	Payables turnover (time)	19.46	17.63	15.57	18.07	17.64
	Average number of days of sales	33.21	29.43	25.34	24.68	28.76
	Fixed assets turnover (time)	1.46	1.53	2.26	2.57	1.94
	Total assets turnover (time)	0.31	0.30	0.41	0.45	0.30
Profitability	ROA (%)	0.33	(2.24)	8.01	5.22	2.05
	ROE (%)	0.18	(3.60)	10.77	6.64	2.59
	Pre-tax profit to paid-in capital (%) (Note 6)	0.41	(8.06)	23.24	17.17	6.45
	Profit margin (%)	0.41	(8.30)	18.94	11.60	6.49
	Basic earnings per share (NT$)	0.04	(0.81)	2.55	1.59	0.61
Cash flow	Cash flow ratio (%)	(10.38)	0.11	83.94	96.41	1.17
	Cash flow adequacy ratio (%)	21.33	(39.35)	22.67	148.10	108.23
	Cash flow reinvestment ratio (%)	(0.77)	0.02	4.55	7.41	(1.44)
Leverage	Operating leverage	Note 1	Note 1	1.92	2.53	Note 1
	Financial leverage	Note 1	Note 1	1.05	1.02	Note 1
The past 2 years, financial ratios that exceeds 20% are explained as follows: 1. The liabilities to total assets ratio in 2019 was higher than in 2018, mainly because the “long-term bank loans” was transferred to the “long-term liabilities-current portion” and the Company borrowed short-term loans. 2. The insolvency ratios in 2019 decreased versus 2018, mainly because the decrease in profit led to the decline of accounts receivable and the borrowing led to the increase of interest expense. 3. The fixed assets turnover (time) and the total assets turnover (time) in 2019 decreased versus 2018, due to the decrease in revenue. 4. The profitability ratios in 2019 decreased versus 2018, mainly because the trade conflict between China and the United States caused the slowdown of terminal demand and thus effected the prices and sales of major products, Caprolactam (CPL) and Acrylonitrile (AN). 5. The cash flow ratios in 2019 decreased versus 2018,due to the decrease in net cashprovided byoperatingactivities.

Note 1: The operating income were negative values and, therefore, the financial ratios thereof were excluded from the calculation.

• 159 -

(II) Consolidated financial analysis for the most recent five years – IFRS

Currency Unit: NTD Thousand

		Currency Unit: NTD Thousand	Currency Unit: NTD Thousand	Currency Unit: NTD Thousand	Currency Unit: NTD Thousand	Currency Unit: NTD Thousand
Items	Year	Financial information in the most recent five years (Note 1)
		2015	2016	2017	2018	2019
Financial structure %	Liabilities to total assets	29.70	33.21	23.37	25.10	30.35
	Long-term fund to fixed assets	432.91	421.14	456.95	421.59	432.68
Insolvency %	Current ratio	286.40	153.71	444.14	288.76	274.40
	Quick ratio	236.01	130.52	370.18	243.52	146.30
	Times Interest Earned	175	(689)	3,442	5,982	1,427
Operating performance	Receivables turnover (time)	10.52	11.13	10.31	10.84	11.31
	Average number of days’ receivables outstanding	34.69	32.79	35.40	33.67	32.27
	Inventory turnover (time)	11.48	13.21	14.14	14.02	4.52
	Payables turnover (time)	18.87	17.29	15.04	17.27	17.38
	Average number of days of sales	31.79	27.63	25.81	26.03	80.75
	Fixed assets turnover (time)	1.57	1.59	2.04	2.11	1.49
	Total assets turnover (time)	0.34	0.33	0.42	0.45	0.32
Profitability	ROA (%)	0.31	(2.22)	7.90	5.07	1.98
	ROE (%)	0.16	(3.60)	10.72	6.60	2.58
	Pre-tax profit to paid-in capital (%)	0.61	(7.78)	23.33	17.32	6.57
	Profit margin (%)	0.32	(7.40)	18.26	11.12	5.85
	Basic earnings per share (NT$)	0.04	(0.81)	2.55	1.59	0.61
Cash flow	Cash flow ratio (%)	9.28	2.50	82.58	83.83	(96.13)
	Cash flow adequacy ratio (%)	23.75	(31.43)	24.44	78.89	9.02
	Cash flow reinvestment ratio (%)	0.73	0.41	4.61	7.69	(10.69)
Leverage	Operating leverage	Note 1	Note 1	2.19	2.98	Note 1
	Financial leverage	Note 1	Note 1	1.05	1.03	Note 1
The past 2 years, financial ratios that exceeds 20% are explained as follows: 1. The liabilities to total assets ratio in 2019 was higher than in 2018, mainly because the “long-term bank loans” was transferred to the “long-term liabilities-current portion” and the Company borrowed short-term loans. 2. The quick ratio and the times interest earned in 2019 decreased versus 2018, mainly because the decrease in profit led to the decline of accounts receivable and the borrowing led to the increase of interest expense. 3. The inventory turnover (time) and the average number of days of sales in 2019 increased versus 2018, mainly due to the increase of 7.44 billion dollars in land payment for business land in 2019, which resulted in an increase of inventory versus the previous year. 4. The fixed assets turnover (time) and the total assets turnover (time) in 2019 decreased versus 2018, due to the decrease in revenue. 5. The profitability ratios in 2019 decreased versus 2018, mainly because the trade conflict between China and the United States caused the slowdown of terminal demand and thus effected the prices and sales of major products, Caprolactam (CPL) and Acrylonitrile (AN). 6. The cash flow ratios in 2019 decreased versus 2018,due to the net cash outflow from operatingactivities in 2019.

Note 1: The operating income were negative values and, therefore, the financial ratios thereof were excluded from the calculation.

• 160 -

• Note 2: The formulas of the above table are as follows:

• Financial structure

   - (1) Liabilities to total assets =Total liabilities/total assets
  
   - (2) Long-term fund to fixed assets= (total shareholders’ equity+long-term liabilities)/fixed assets, net
  

• 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
  

• 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) Total fixed assets turnover rate = net sales/net total fixed assets
  
   - (7) Total assets turnover rate = net sales/total assets
  

• Profitability

   - (1) ROA = [income after income tax+interest expense*(1-tax rate)]/average total assets.
  
   - (2) ROE = Income after income tax/average total shareholders’ equity
  
   - (3) Profit margin = Income After income tax/net sales
  
   - (4) Earnings per Share = (net profit after tax – dividends from preferred shares)/weighed average quantity of outstanding shares
  

• 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 fixed assets+ long-term investment +other assets+ working capital)
  

• 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 calculation for EPS above considers the following items:

  1. Shares outstanding is based on weighted average shares, and not based on year end shares outstanding.

  2. Cash offerings or treasury stock transactions are considered in calculating weighted average shares.

  3. Earnings appropriation or reserves to paid in capital shall be calculated and adjusted accordingly.

  4. If preferred shares are cumulative non-convertible preferred shares, dividends shall be subtracted (regardless of whether they are paid out in dividends), from after tax net profit. If preferred shares are non-cumulative, in the event of net profits, preferred shares shall be subtracted after tax, but no adjustments needed if there are losses.

• Note 4: Cash flow analysis shall consider the following items:

  1. Cash flows from operating activities refers to operating cash flows.

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

  3. Inventory increases are from period end balance greater than period beginning balanaces, if inventories are less, then zero is applied.

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

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

• 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.

• Note 6: Company stocks that are 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.

• 161 -

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 2019 Business Report, Financial Statements, Consolidated Financial Statements and Earnings Appropriation Statements for 2019. 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:

==> picture [152 x 70] intentionally omitted <==

March 27, 2020

• 162 -

IV. Independent Accountants’ Audit Report (Consolidated)

Independent Auditors’ Report

To the Board of Directors of China Petrochemical Development Corporation:

Opinion

We have audited the consolidated financial statements of China Petrochemical Development Corporation (“CPDC”) and its subsidiaries (“the Group”), which comprise the consolidated balance sheets as of December 31, 2019 and 2018, 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 other auditors (please refer to Other Matter paragraph), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2019 and 2018, 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 developed by the International Financial Reporting Interpretations Committee (“ IFRIC” ) or the former Standing Interpretations Committee (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit of the consolidated financial statements as of and for the year ended December 31, 2019 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, Rule No. 1090360805 issued by the Financial Supervisory Commission, and the auditing standards generally accepted in the Republic of China. Furthermore, we conducted our audit of the consolidated financial statements as of and for the year ended December 31, 2018 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. Based on our audits and the reports of other auditors, we believe that the audit evidence we have obtained, is sufficient and appropriate to provide a basis of our opinion.

Emphasis of Matter

As described in Notes 6(j) and 6(p) 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. 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 still has a dissenting view on the government perception about the condition of pollution and CPDC is seeking a way to define its responsibilities. Our opinion is not modified in respect of this matter.

• 163 -

Other Matter

CPDC has prepared its parent-company-only financial statements as of and for the years ended December 31, 2019 and 2018, on which we have issued an unmodified opinion with emphasis of matter and other matters paragraphs.

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, 2019 and 2018 of those 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 0.95% and 1.05% of consolidated total assets as of December 31, 2019 and 2018, respectively. The related shares of investment income from these investees including subsidiaries, associates and joint ventures accounted for using equity method represented (0.06)% and (2.21)% of consolidated net income before income tax for the years ended December 31, 2019 and 2018, respectively.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements as of and for the year then ended December 31, 2019. 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”, Note 6(v) “Revenue from contracts with customers” and Note 6(w) “Revenue” in the consolidated financial statements.

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.

• Assessment of the fair value of investment property

The book value of investment property of the Group represented 38% of consolidated total assets as of December 31, 2019, which is deemed to be significant. The Group evaluates 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(j) “Investment Property” of the consolidated financial statements for details about fair value information on investment property.

• 164 -

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 evaluation 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.

• Impairment assessment of property, plant, and equipment

The book value of property, plant, and equipment of the Group represented 21% of consolidated total assets as of December 31, 2019, which is deemed to be significant. The overall economic trend, market competition and fluctuations in the price of petroleum and petrochemical products may affect the future operation of the Group, and also affect the estimated economic benefits and recoverable amounts of these assets that the management of the Group may estimate and determine in the future of the cash generating unit (“CGU”) of the assets, and to evaluate whether there are signs of impairment. The recoverable amounts of these assets have been determined based on the discounted cash flows forecasted by the Group management which involved significant uncertainties and professional judgments. Therefore, we consider the assessment for impairment of property, plant, and equipment as one of the key audit matters for our audit. Please refer to Note 4 “Impairment of non derivative financial assets”, Note 5 “Significant Accounting Assumptions and Judgments, and Major Sources of Estimation Uncertainty” , and Note 6(h) “Property, plant and Equipment” of the financial statements for details of the information about impairment assessment on property, plant, and equipment.

How the matter was addressed in our audit

Our key audit procedures included:

• ． Obtain from the Group management the results of their valuation of fixed assets and understand the significant assumptions used in their valuation model.

• ． Review both the calculations of the value in use and the present value of the discounted cash flows forecasted. Evaluate the CGU, and external and internal impairment indicators identified by the Group management, and ascertain that all fixed assets requiring annual impairment test are covered in the assessment made by management. Likewise, evaluate the reasonableness of the method used in measuring the recoverable amount of the assets (including the realization on the financial forecast, the calculation of recoverable amount and the assumptions considered for the cash flows forecast).

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, IFRC, SIC endorsed and issued into effect 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.

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.

• 165 -

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

Auditor’s 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 auditor’s 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 auditor’s 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 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.

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.

• 166 -

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 auditors’ report are Chen Mei Fang and Chung Tan Tan.

KPMG

Taipei, Taiwan (Republic of China) March 27, 2020

Notes to Readers

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

The independent auditors’ audit report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ audit report and consolidated financial statements, the Chinese version shall prevail.

• 167 -

						December 31, 2018	Amount %			913,732 1	5,578 -	1,848,774 2	2,973,010 3	352,910 -	480,171 1	- -	863,801 1	50,079 -		7,488,055 8	7,488,055 8			3,810,129 5	1,992,284 2	8,758,989 10	- -	349,729 -	115,014 -	115,014 -	15,026,145 17	15,026,145 17	22,514,200 25	22,514,200 25			26,998,573 30	1,260,386 1	1,260,386 1		1,708,303 2	33,521,575 38	5,144,764 6		40,374,642 46		(488,212) (1)	(1,248,499) (1)	(1,248,499) (1)		(1,736,711) (2)	(1,736,711) (2)	66,896,890 75		293,864 -		67,190,754 75	67,190,754 75	89,704,954 100	89,704,954 100
						December 31, 2019	Amount %			$ 3,484,148 4	88,263 -	1,316,369 1	1,739,977 2	86,144 -	157,562 -	49,911 -	1,762,130 2	57,009 -		8,741,513 9				6,721,783 7	1,967,230 2	7,020,975 7	203,332 -	4,494,177 5	125,616 -		20,533,113 21		29,274,626 30				28,348,502 30	1,286,700 1			2,137,330 2	35,490,262 37	1,779,147 2		39,406,739 41		(804,515) (1)	(1,120,657) (1)			(1,925,172) (2)		67,116,769 70		77,095 -		67,193,864 70		$ 96,468,490 100
(English Translation of Consolidated Financial Statements Originally Issued in Chinese)	CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES		Consolidated Balance Sheets	December 31, 2019 and 2018	(Expressed in Thousands of New Taiwan Dollars)	December 31, 2019 December 31, 2018	Assets Amount % Amount % Liabilities and Equity		Current assets: Current liabilities:	Cash and cash equivalents (notes 4 and 6(a)) $ 9,116,253 9 13,469,938 15 2100 Short-term loans (note 6(l))	Current financial assets at fair value through profit or loss (notes 4 and 6(b)) 783,180 1 1,300,897 1 2130 Current contract liabilities (note 6(v))	Current financial assets at fair value through other comprehensive income 321,647 - 251,629 - 2170 Accounts payable	(notes 4 and 6(c)) 2200 Other payables (note 7)	Notes and accounts receivable, net (notes 4 and 6(d)) 1,646,764 2 2,575,850 3 2230 Current tax liabilities (notes 4 and 6(s))	Accounts receivable related parties, net (notes 4, 6(d) and 7) 57,764 - 60,233 - 2250 Provisions-current (notes 4, 6(p) and 6(r))	Other receivables (notes 4, 6(d) and 7) 253,779 - 118,382 - 2280 Lease liabilities-current (notes 4 and 6(o))	Inventories (notes 4 and 6(e)) 9,702,458 10 2,243,840 3 2320 Long-term liabilities-current portion (notes 4 and 6(m)	Prepayments 1,495,905 2 1,143,583 1 2399 Other current liabilities, others		Other current assets 609,223 2 458,235 1 Total current liabilities		Total current assets 23,986,973 26 21,622,587 24 Non-Current liabilities:		Non-current assets: 2540 Long-term bank loans (note 6(m))	Non-current financial assets at fair value through profit or loss (note 4 and 9,942,994 10 4,861,274 5 2550 Provisions-non-current (notes 4, 6(p) and (r))	6(b)) 2570 Deferred tax liabilities (notes 4 and 6(s))	Non-current financial assets at fair value through other comprehensive 2,038,393 2 1,978,339 2 2580 Lease liabilities-non-current (note 6(o))	income (note 4 and 6(c)) 2611 Long-term bills payable (note 6(n))	Investments accounted for using equity method (notes 4 and 6(f)) 2,318,796 2 2,405,411 3 2670 Other non-current liabilities, others		Property, plant and equipment (notes 4 and 6(h)) 20,275,279 21 19,501,534 22 Total non-currnet liabilities		Right-of-use assets (notes 4 and 6(i)) 848,504 1 - - Total liabilities		Investment property, net (notes 4 and 6(j)) 36,719,706 38 38,350,359 43 Equity attributable to owners of parent:	Intangible assets (notes 4 and 6(k)) 177,464 - 188,061 - Share capital	Deferred income tax assets (notes 4 and 6(s)) 11,023 - 11,023 - 3110 Common stock (note 6(t))	Other non-current assets (note 8) 149,358 - 786,366 1 3200 Capital surplus (note 6(t))		Total non-current assets 72,481,517 74 68,082,367 76 Retained earnings: (note 6(t))	3310 Legal reserve	3320 Special reserve	3350 Unappropriated earnings			Others (notes 4 and 6(t))	3410 Exchange differences arising on translation of foreign operations	3420 Unrealised gains or loss on financial assets at fair value through other		comprehensive income			Total equity attributable to shareholders of the parent:		36XX Non-controlling interests		Total assets $ 96,468,490 100 89,704,954 100 Total equity Total liabilities and equity
										1100	1110	1120		1170	1180	1200	130X	1410		1470					1510		1517		1551		1600		1755		1760	1780	1840	1900

• 168 -

(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, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Common Share)

4000 Operating revenue (notes 4 and 6(w)) 5000 Operating costs (notes 4 and 6(e)) 5920 Add:Realized loss on intercompany transactions Gross profit Operating expenses: 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses 6450 Impairment loss determined in accordance with IFRS9 Profit from operations Non-operating income and expenses: 7010 Other income (notes 6(y) and 7) 7590 Other gains and losses (note 6(y)) 7050 Finance costs (notes 6(p) and (y)) 7060 Shares of profit (loss) of associates and joint ventures accounted for using equity method, net (notes 4 and 6(f)) 7235 Gains on financial assets at fair value through profit or loss (notes 4 and 6(b)) 7673 Impairment loss on property, plant and equipment (notes 4 and 6(h)) Total non-operating income and expenses Income before income tax 7950 Less: Income tax expenses (notes 4 and 6(s)) Net income 8300 Other comprehensive income (loss): 8310 Items that may not be reclassified subsequently to profit or loss: 8311 Gains (losses) on remeasurements of defined benefit plans 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8320 Shares of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Allocation of income tax to the above items 8360 Items that may be reclassified subsequently to profit or loss: 8361 Exchange differences arising on translation of foreign operations 8399 Allocation of income tax to the above items 8300 Other comprehensive (loss) income, net 8500 Total comprehensive income Net income attributable to: 8610 Shareholders of the parent 8620 Non-controlling interests Comprehensive (loss) income attributable to: 8710 Shareholders of the parent 8720 Non-controlling interests Earnings per share (notes 4 and 6(u)) 9750 Basic earnings per share 9750 Basic earnings per share-retrospestive 9850 Diluted earnings per share 9850 Diluted earnings per share-retrospestive	2019 Amount % $ 29,624,094 100 27,996,514 95 1,627,580 5 - - 1,627,580 5 748,690 3 886,255 3 401,655 1 - - 2,036,600 7 (409,020) (2) 720,200 2 (31,271) - (140,459) - 494,301 2 4,130,817 14 (2,901,096) (10) 2,272,492 8 1,863,472 6 129,837 - 1,733,635 6 (12,224) - 130,071 - 5,719 - - - 123,566 - (317,231) (1) - - (317,231) (1) (193,665) (1) $ 1,539,970 5 $ 1,738,449 6 (4,814) - $ 1,733,635 6 $ 1,543,494 5 (3,524) - $ 1,539,970 5 $ 0.61 $ 0.61	2018 Amount % 38,503,121 100 33,326,959 87 5,176,162 13 (3) - 5,176,159 13 794,518 2 971,123 2 335,436 1 - - 2,101,077 5 3,075,082 8 1,044,485 3 (493,935) (1) (79,516) - 887,970 2 242,864 - - - 1,601,868 4 4,676,950 12 395,955 1 4,280,995 11 16,731 - (372,169) (1) (70,122) - - - (425,560) (1) (96,052) - - - (96,052) - (521,612) (1) 3,759,383 10 4,290,269 11 (9,274) - 4,280,995 11 3,763,808 10 (4,425) - 3,759,383 10 1.59 1.51 1.58 1.51

See accompanying notes to consolidated financial statements.

• 169 -

															Total equity	62,548,459	866,540		63,414,999		4,280,995	(521,612)	(521,612)		3,759,383				-	-	16,373	(1)	(1)		67,190,754	1,733,635	(193,665)	(193,665)		1,539,970				-	-	(1,349,929)	-	26,314		(213,245)	410			67,194,274
														Non-controlling	interests	240,734	41,182		281,916		(9,274)	4,849			(4,425)				-	-	16,373	-			293,864	(4,814)	1,290			(3,524)				-	-	-	-	-		(213,245)	-			77,095
													Total equity	attributable to	owners of parent	62,307,725	825,358		63,133,083		4,290,269	(526,461)			3,763,808				-	-	-	(1)			66,896,890	1,738,449	(194,955)			1,543,494				-	-	(1,349,929)	-	26,314		-	410			67,117,179
(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, 2019 and 2018	(Expressed in Thousands of New Taiwan Dollars)	Equity attributable to owners of parent	Total other equity interest	Share capital Retained earnings Unrealized gains		(losses) on	financial assets	Exchange measured at fair	differences on value through Unrealized gains	translation of other (losses) on	Ordinary Unappropriated foreign financial comprehensive available-for-sale	shares Capital surplus Legal reserve Special reserve retained earnings statements income financial assets	26,998,573 1,260,386 1,099,137 28,023,386 6,107,355 (392,378) - (788,734)	- - - - 844,326 - (807,702) 788,734		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) -	- - - - 1,738,449 - - -	- - - - (6,084) (316,303) 127,432 -			- - - - 1,732,365 (316,303) 127,432 -				- - 429,027 - (429,027) - - -	- - - 1,968,687 (1,968,687) - - -	- - - - (1,349,929) - - -	1,349,929 - - - (1,349,929) - - -	- 26,314 - - - - - -		- - - - - - - -	- - - - - - 410 -			28,348,502 1,286,700 2,137,330 35,490,262 1,779,557 (804,515) (1,120,657) -
																$																																						$
																Balance at January 1, 2018	Effects of retrospective application		Balance at January1, 2018 after adjustments		Net income for the year ended December 31, 2018	Other comprehensive income for the year ended December 31,		2018	Total comprehensive income for the year ended December 31,		2018	Appropriation and distribution of retained earnings:	Legal reserve appropriated	Special reserve appropriated	Changes in non-controlling interests	Disposal of investments in equity instruments designated at fair		value through other comprehensive income	Balance at December 31, 2018	Net income for the year ended December 31, 2019	Other comprehensive income for the year ended December 31,		2019	Total comprehensive income for the year ended December 31,		2019	Appropriation and distribution of retained earnings:	Legal reserve appropriated	Special reserve appropriated	Cash dividends of ordinary share	Stock dividends of ordinary share	Difference between consideration and carrying amount of	subsidiaries acquired or disposed	Changes in non-controlling interests	Disposal of investments in equity instruments designated at fair	value through other comprehensive income		Balance at December 31, 2019

• 170 -

(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, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities: Income before income tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Net gain on financial assets or liabilities at fair value through profit or loss Interest expense Interest income Dividend income Share of profit of associates and joint ventures accounted for using equity method Loss on disposal of property, plan and equipment Gain on disposal of investments Impairment loss on property, plan and equipment (Gain on reversal of) impairment loss on non-financial assets Realized loss (profit) on from sales Gain on lease modification Gain on fair value adjustment of investment property Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Decrease in accounts receivable Decrease in accounts receivable due from related parties Increase in other receivable Increase in inventories Increase in prepayments Increase in other current assets Total changes in operating assets Increase in contract liabilities Decrease in accounts payable (Decrease) increase in other payable Decrease in provisions Increase (decrease) in other current liabilities Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash (outflow) inflow generated from operations Interest received Interest paid Income taxes paid Net cash flows from (used in) operating activities Cash flows from (used in) investing activities: Acquisition of financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through profit or loss Acquisition 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 Cash inflows due to combination Increase in other non-current assets Dividends received Decrease in deferred tax liabilities Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase in short-term loans Decrease in short-term loans Proceeds from long-term debt Repayments of long-term debt Increase in long-term bills payable Decrease in long-term bills payable Payment of lease liabilities Increase in other non-current liabilities Cash dividends paid Change in non-controlling interests Interest paid for lease liabilities Net cash flows from (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

For the years ended December 31 2019 2018 $ 1,863,472 4,676,950 1,435,252 1,364,687 10,002 19,536 (4,130,817) (242,864) 140,459 79,516 (123,028) (197,636) (303,466) - (494,301) (887,970) 2,560 6,998 - (6,094) 2,901,096 - (78,554) 150,541 - 3 (5) - (112,421) (119,574) (753,223) 167,143 929,086 903,773 2,469 7,751 (140,146) (78,301) (7,365,613) (102,860) (352,190) (287,483) (149,481) (25,924) (7,075,875) 416,956 82,686 5,578 (532,405) (111,211) (1,250,720) 1,694,851 (347,663) (139,236) 6,923 (306,551) (2,041,179) 1,143,431 (9,117,054) 1,560,387 (9,870,277) 1,727,530 (8,006,805) 6,404,480 135,730 203,318 (136,482) (77,134) (395,955) (253,419) (8,403,512) 6,277,245 (3,761,066) (3,267,115) 3,321,452 1,846,810 (480,000) - (5,299,416) (4,046,481) 12,890 14,410 (6,681) (188,697) 41,733 - (854) (108,908) 1,292,178 653,668 (2,288) - (4,882,052) (5,096,313) 9,589,034 3,349,694 (7,009,177) (2,680,470) 8,006,120 3,823,144 (4,108,757) (2,560,000) 5,850,000 50,000 (1,700,000) - (56,778) - 10,602 37,679 (1,349,929) - (186,931) 16,373 (4,875) - 9,039,309 2,036,420 (107,430) 141,091 (4,353,685) 3,358,443 13,469,938 10,111,495 $ 9,116,253 13,469,938

See accompanying notes to consolidated financial statements.

• 171 -

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

Notes to the Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

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 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 financial statements were authorized for issue by the Board of Directors on March 27, 2020.

(3) New standards, amendments and interpretations 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, 2019.

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

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:

(i) 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.

(Continued)

• 172 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 1) Definition of a lease

Previously, the Group determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Group assesses whether a contract is or contains a lease based on the definition of a lease, as explained in Note 4(m).

On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Group applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

2) As a lessee

As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16, the Group recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases are on-balance sheet.

The Group decided to apply recognition exemptions to short-term leases of machinery and leases of IT equipment.

• Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments – the Group applied this approach to all other lease.

In addition, the Group used the following practical expedients when applying IFRS 16 to leases.

• Applied a single discount rate to a portfolio of leases with similar characteristics.

• Adjusted the right-of-use assets by the amount of IAS 37 onerous contract provision immediately before the date of initial application, as an alternative to an impairment review.

• Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term.

• Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.

• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

(Continued)

• 173 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 3) As a lessor

The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor, except for a sub-lease. The Group accounted for its leases in accordance with IFRS 16 from the date of initial application.

4) Impacts on financial statements

On transition to IFRS 16, the Group recognized additional $298,815 thousand of right-ofuse assets and $298,815 thousand of lease liabilities. When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 1.80%. For the purpose of applying to IFRS 16, the Group reclassified right of use of land from Other Non-Current Assets to Rightof-Use Assets, which amounted for $682,373 thousand.

The explanation of differences between operating lease commitments disclosed at the end of the annual reporting period immediately preceding the date of initial application, and lease liabilities recognized in the balance sheets at the date of initial application disclosed as follows:

Operating lease commitment at December 31, 2018 as disclosed in the Group’s consolidated financial statements Recognition exemption for: short-term leases leases of low-value assets Extension and termination options reasonably certain to be exercised Discounted using the incremental borrowing rate at January 1, 2019 Finance lease liabilities recognized as at December 31, 2018 Lease liabilities recognized at January 1, 2019

January 1, 2019 $ 307,302 (9,132) (80) 55,200 353,290 298,815 - $ 298,815

• (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, 2020 in accordance with Rule No. 1080323028 issued by the FSC on July 29, 2019:

1080323028 issued by the FSC on July 29, 2019:
	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 “Definition of a Business”	January 1, 2020
Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”	January 1, 2020
Amendments to IAS 1 and IAS 8 “Definition of Material”	January 1, 2020

(Continued)

• 174 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group assesses that the adoption of the abovementioned standards would not have any material impact on its consolidated financial statements.

• (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 have yet to be endorsed by the FSC:

Effective date New, Revised or Amended Standards and Interpretations per IASB Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between Effective date to an Investor and Its Associate or Joint Venture” be determined by IASB IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” January 1, 2022

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

Issuance / Release Dates September 11, 2014

Standards or Interpretations Content of amendment Amendments to IFRS 10 and IAS 28 “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 abovementioned 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) Summary of significant accounting policies:

The significant accounting policies, which have been applied consistently to all periods presented in these financial statements, except when otherwise indicated in note 3, are as follows:

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations” ) and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations endorsed and issued into effect by the Financial Supervisory Commission, R.O.C..

(Continued)

• 175 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (b) Basis of Preparation

• (i) 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);

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

• 3) The defined benefit liabilities (assets) are measured at fair value of the plan assets less the present value of the defined benefit obligation (please see note 6(r));

• 4) Investment properties are measured at fair value.

• (ii) Functional and presentation currency

The functional currency of each Group entity is determined based on the primary economic environment in which the entity operates. The consolidated financial statements are presented in New Taiwan Dollar (NTD), which is the Company’ s functional currency. All financial information presented in NTD has been rounded to the nearest thousand.

(c) Basis of Consolidation

• (i) Principles of preparation of the consolidated financial statements

The consolidated financial statements comprise the Company and subsidiaries.

Subsidiaries are entities controlled by the Group. The Group ‘ controls’ an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The Group attributes the profit or loss and each component of other comprehensive income to the owners of the parent and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

The financial statements of subsidiaries were properly adjusted to be consistent with the accounting policies adopted by the Group.

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received will be recognized directly in equity, and the Group will attribute it to the owners of the parent.

(Continued)

• 176 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (ii) List of subsidiaries in the consolidated financial statements

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

Name of investors	Name of subsidiaries	Nature of business 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 December 31, 2019 December 31, 2018 Notes % 100.00 % 100.00 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, 2019 and 2018 , TSCIC's actual paid-in capital amounted to $960,000 thousand. % 100.00 % 100.00 CPDC GT (Original name : CPDC EC) was established on May 31, 1999. As of December 31, 2019 and 2018, CPDC GT's actual paid-in capital amounted to $150,000 thousand. % 100.00 % 100.00 CPDC (BVI) was established on January 9, 1998, registered in the British Virgin Islands, and is an international investment company. As of December 31, 2019 and 2018, CPDC (BVI)'s actual paid-in capital amounted to USD26,580 thousand. % 100.00 % 90.87 BES Twin Towers was established on March 1, 2011. The Company purchased its shares of non-controlling interest on March 12, 2019, resulting in its shareholding ratio to be 100%. It increased its capital through the Company amounting to $1,136,705 thousand on January 30, 2019, and increased its capital by retained earnings amounting to $343,304 thousand on June 24, 2019. As of December 31, 2019 and 2018, BES Twin Towers's actual paid-in capital amounted to $3,681,009 thousand and $2,201,000 thousand, respectively. % 100.00 % 100.00 UDL was established on May 20, 2008. As of December 31, 2019 and 2018, UDL's actual paid-in capital amounted to USD255,368 thousand and USD191,478 thousand, respectively. % 0.49 % 0.77 Weiming was established on May 16, 2013. It increased its capital through UDL amounting to CNY96,000 thousand, CNY100,000 thousand, CNY100,000 thousand, CNY147,000 thousand and CNY130,000 thousand on March 12, June 27, September 24, December 25, 2019, and June 25, 2018, respectively. The said amounts were verified on March 13, July 2, September 26, December 26, 2019, and June 28, 2018, respectively. As of December 31, 2019 and 2018, Weiming's actual paid- in capital amounted to CNY1,218,000 thousand and CNY775,000 thousand, respectively.
			December 31, 2019 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 0.49
The Company The Company The Company The Company The Company The Company	Tsou Seen Chemical Industries Corporation(TSCIC) CPDC GreenTechnology Corp.(CPDC GT)(Original name:CPDC Engineering Co., Ltd.) CPDC Investment (BVI) Co Ltd. (CPDC (BVI)) BES Twin Towers Development Co., Ltd. (BES Twin Towers) Unichem Development Limited (UDL) Jiangsu Weiming Petrochemical Corporation (Weiming)

(Continued)

• 177 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Name of investors	Name of subsidiaries	Nature of business Engaged in trading of petroleum chemical products, electronic chemicals, a 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 Commissioned to create a vendor to build housing, commercial buildings and plant rental business, management of land development and playgrounds and other related business investment Engaged in trading of petroleum chemical products, electronic chemicals, a variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Engaged in trading of petroleum chemical products, electronic chemicals, a variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Engaged in biotechnology, pharmaceutical research and development and marketing	Shareholding ratio December 31, 2019 December 31, 2018 Notes % 44.52 % 44.52 Weiqiang was established on May 9, 2013. It increased its capital through the Company amounting to CNY20,000 thousand on February 24, 2018 and verified on February 27, 2018. As of December 31, 2019 and 2018, Weiqiang's actual paid-in capital amounted to CNY44,920 thousand. % 97.87 % 97.87 Thanh Phong was established on May 22, 2017. Its capital originally invested was VND90,000,000 thousand and increased VND368,637,500 thousand on December 20, 2018 and verified on December 20, 2018. As of December 31, 2019 and 2018, Thanh Phong's actual paid-in capital amounted to VND468,637,500 thousand. % 100.00 % 100.00 Ding-Yue (original name: Tao Zhu) was established on October 11, 1995. As of December 31, 2018, its actual paid-in capital amounted to $100,000 thousand and its total asset represented 0.09% of consolidated total assets was not included in the consolidated financial statements. In order to comply with the business strategies of the Company's petrochemical and land development, Ding-Yue started to expand the scale of its land development business since the third quarter 2019 and expects its upcoming operating activities on construction and land development to substantially expand as compared to those of the previous years; therefore, the subsidiary is included in the consolidated financial statement since the third quarter 2019. % 4.02 % 4.02 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, 2019 and 2018, Weihua's actual paid-in capital amounted to CNY156,289 thousand. % 55.48 % 55.48 Weiqiang was established on May 9, 2013. It increased its capital through the Company amounting to CNY20,000 thousand 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, 2019 and 2018, Weiqiang's actual paid-in capital amounted to CNY44,920 thousand. % 91.10 % 91.10 Taivex was established on February 11, 2010. TSCIC invested in Taivex on August 18, 2010. As of December 31, 2019 and 2018, Taivex's actual paid-in capital amounted to $507,399 thousand.
			December 31, 2019 % 44.52 % 97.87 % 100.00 % 4.02 % 55.48 % 91.10
The Company The Company The Company Tsou Seen Chemical Industries Corporation Tsou Seen Chemical Industries Corporation Tsou Seen Chemical Industries Corporation	Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang) Thanh Phong Construction Investment Co., Ltd. (Thanh Phong) Ding-Yue Development Co., Ltd (Ding-Yue) (original name: Tao Zhu Construction & Development Co., Ltd.) (Tao Zhu) Weihua (Rudong) Trade Co., Ltd. (Weihua) Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang) Taivex Therapeutics Corporation (Taivex)

(Continued)

• 178 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Name of investors	Name of subsidiaries	Nature of business Petrochemical supporting facility construction Engaged in trading of petroleum chemical products, electronic chemicals, a variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Consultancy Engaged in trading of petroleum chemical products, electronic chemicals, a 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-value petroleum chemical products Holding company	Shareholding ratio December 31, 2019 December 31, 2018 Notes % 99.51 % 99.23 Weiming was established on May 16, 2013. It increased its capital through UDL amounting to CNY96,000 thousand, CNY100,000 thousand, CNY 100,000 thousand, CNY147,000 thousand and CNY130,000 thousand on March 12, June 27, September 24, December 25, 2019, and June 25, 2018, respectively. The said amounts were verified on March 13, July 2, September 26, December 26, 2019, and June 28, 2018, respectively. As of December 31, 2019 and 2018, Weiming's actual paid- in capital amounted to CNY1,218,000 thousand and CNY775,000 thousand, respectively. % 95.98 % 95.98 Weihua was established on December 10, 2012. As of December 31, 2019 and 2018, Weihua's actual paid-in capital amounted to CNY156,289 thousand. % 100.00 % 100.00 Weida was established on November 26, 2012. As of December 31, 2019 and 2018, Weida's actual paid-in capital amounted to USD450 thousand. % 100.00 % 100.00 Weida PC was established on December 23, 2014. As of December 31, 2019 and 2018, Weida PC's actual paid-in capital amounted to CNY6,000 thousand. % 100.00 % 100.00 Weiqin was established on April 29, 2016. As of December 31, 2019 and 2018, Weiqin's actual paid in capital amounted to CNY6,000 thousand. % - % 100.00 Wedge was established on July 25, 2016 and was dissolved on April 20, 2018. The liquidation process had been completed on January 29, 2019. As of December 31, 2019 and 2018, Wedge's actual paid-in capital amounted to CNY0 thousand and CNY6,500 thousand, respectively. % 100.00 % 100.00 Weicai (Original name : Huijie) was established on January 6, 2015, and acquired by UDL on November 5, 2018. The investment made through UDL amounted CNY214,955 thousand and was verified on December 27, 2018. As of December 31, 2019 and 2018, Weicai's actual paid-in capital amounted to CNY414,955 thousand and CNY414,955 thousand respectively. % 100.00 % 100.00 Frontier Fortune was established on November 23, 2016. It increased its capital through BES Twin Towers amounting to USD36,890 thousand, USD300 thousand and USD5,670 thousand on January 30, March 7, 2019 and November 30, 2018. As of December 31, 2019 and 2018, Frontier fortune's actual paid-in capital amounted to USD43,060 thousand and USD5,870 thousand, respectively.
			December 31, 2019 % 99.51 % 95.98 % 100.00 % 100.00 % 100.00 % - % 100.00 % 100.00
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) BES Twin Towers Development Co., Ltd.	Weiming (Jiangsu) Petrochemical Company (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 Weicai New Material Science & Technology Co., Ltd.(Weicai) (Original name:Changzhou Huijie new material Co., Ltd (Huijie)) Frontier Fortune Investment Pte. Ltd. (Frontier Fortune)

(Continued)

• 179 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Name of investors	Name of subsidiaries	Nature of business Investment and technical advisory services Real estate, research of petroleum market and consultancy Engineering, real estate and construction consultancy Building construction, real estate management, development and sale	Shareholding ratio December 31, 2019 December 31, 2018 Notes % 100.00 % 100.00 Core Pacific Twin Star (Myanmar) was established on February 16, 2017. It increased its capital through Frontier Fortune amounting to USD5,320 thousand on November 30, 2018. As of December 31, 2019 and 2018, Core Pacific Twin Star (Myanmar)'s actual paid-in capital amounted to USD5,500 thousand and USD5,500 thousand, respectively. % 99.99 % - Gemini Star (India) was established on January 8, 2019. As of December 31, 2019, its actual paid-in capital amounted to INR21,000 thousand. % 97.70 % - Core Pacific Twin Star (Vietnam) was established on November 19, 2018. It increased its capital through Core Pacific Twin Star (Myanmar) amounted to VND850,000,000 thousand on January 30, 2019. As of December 31, 2019 and 2018, its actual paid-in capital amounted to VND870,000,000 thousand and VND20,000,000 thousand, respectively. % 80.00 % 80.00 Core Pacific Pioneer was established on May 24, 2018. It increased its capital through Core Pacific Twin Star (Myanmar) amounted to MMK755,230 thousand on July 3, 2019. As of December 31, 2019 and 2018, its actual paid-in capital amounted to MMK1,512,540 thousand and MMK757,310 thousand, respectively.
			December 31, 2019 % 100.00 % 99.99 % 97.70 % 80.00
Frontier Fortune Investment Pte. Ltd. Frontier Fortune Investment Pte. Ltd. Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Co., Ltd.	Core Pacific Twin Star (Myanmar) Investment Co., Ltd.(Core Pacific Twin Star (Myanmar)) Gemini Star (India) Private Limited. (Gemini Star (India)) Core Pacific Twin Star (Vietnam) Investment Co., Ltd. (Core Pacific Twin Star (Vietnam)) Core Pacific Pioneer (Myanmar) Co., Ltd.(Core Pacific Pioneer (Myanmar))

(iii) Subsidiaries not included in the consolidated financial statements

Name of investors	Name of subsidiaries	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	Shareholding ratio December 31, 2019 December 31, 2018 Notes % 100.00 % 100.00 Ding-Yue (original name: Tao Zhu) was established on October 11, 1995. As of December 31, 2019, its actual paid-in capital amounted to $100,000 thousand and its total asset represented 0.09% of consolidated total assets was not included in the consolidated financial statements. In order to comply with the business strategies of the Company's petrochemical and land development, Ding-Yue started to expand the scale of its land development business since the third quarter 2019 and expected its upcoming operating activities on construction and land development to substantially expand as compared to those of the previous years; therefore, the subsidiary is included in the consolidated financial statement since the third quarter 2019. % 100.00 % 100.00 Rich was established on March 21, 2007. As of December 31, 2019 and 2018, its actual paid-in capital amounted to USD180 thousand and its total assets represented 0.01% of consolidated total assets.
			December 31, 2019 % 100.00 % 100.00
The Company The Company	Ding-Yue Development Co., Ltd (Ding-Yue) (original name: Tao Zhu Construction & Development Co., Ltd.) (Tao Zhu) Rich Equities Ltd. (Rich)

(Continued)

• 180 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Name of investors	Name of subsidiaries	Nature of business Engineering, construction contracting business	Shareholding ratio December 31, 2019 December 31, 2018 Notes % 100.00 % 100.00 Da Yin Construction Engineering was established on November 24, 1972. As of December 31, 2019 and 2018, its actual paid-in capital both amounted to $22,500 thousand and its total assets represented 0.02% and 0.03% of consolidated total assets, respectively.
			December 31, 2019 % 100.00
Ding-Yue Development Co., Ltd ( Ding-Yue ) (original name: Tao Zhu Construction & Development Co., Ltd.) (Tao Zhu)	Da Yin Construction Engineering Co., Ltd.(Da Yin Construction Engineering)

(d) Foreign currency

• (i) Foreign currency transaction

Transactions in foreign currencies are translated into the respective functional currencies of Group entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Nonmonetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income:

• an investment in equity securities designated as at fair value through other comprehensive income;

• 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 hedges are effective.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rate. Exchange differences are recognized in other comprehensive income.

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. When the Group disposes of only 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 noncontrolling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

(Continued)

• 181 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

When the settlement of a monetary receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, exchange differences arising from such a monetary item that are considered to form part of the net investment in the foreign operation are recognized in other comprehensive income.

• (e) Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as noncurrent.

• (i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

• (ii) It is held primarily for the purpose of trading;

• (iii) It is expected to be realized within twelve months after the reporting period; or

• (iv) The asset is cash and cash equivalent 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:

• (i) It is expected to be settled during the in its normal operating cycle;

• (ii) It is held primarily for the purpose of trading;

• (iii) It is due to be settled within twelve months after the reporting period; or

• (iv) The Group 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.

• (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 known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

Bank overdrafts that are repayable on demand and form an integral part of the Group’ s cash management are included as a component of cash and cash equivalents for the purpose of the consolidated statement 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.

(Continued)

• 182 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(i) Financial assets

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

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI) – equity investment; or fair value through profit or loss (FVTPL). Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

• 1) 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.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

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

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.

(Continued)

• 183 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Equity investments at FVOCI are subsequently measured at fair value. Dividends 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 are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Group’s right to receive payment is established.

• 3)

• 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. 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.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

• 4)

• 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.

(Continued)

• 184 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 5) 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)

• 6) Impairment of financial assets

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

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

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 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 debtor is unlikely to pay its credit obligations to the Group in full.

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

(Continued)

• 185 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

12-month ECL are the portion of ECL that result from default events that are possible within the 12 months 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 ECL is the maximum contractual period over which the Group is exposed to credit risk.

ECL 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). ECL 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 asset 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.

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written 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.

• 7) Derecognition of financial assets

The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

(Continued)

• 186 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

• (ii) Financial liabilities and equity instruments

• 1) Classification of debt or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

2) Equity instrument

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

3) Treasury shares

When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is recognized in capital surplus or retained earnings (if the capital surplus is not sufficient to be written down).

4) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

• 5) Derecognition of financial liabilities

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

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

(Continued)

• 187 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 6) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

• (i) Inventories

• (i) Manufacturing industry

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.

• (ii) Construction industry

Inventories of the construction business are measured at the lower of cost and net realizable value. The cost of inventories includes expenditure incurred in bringing them to their existing location and condition and capitalized borrowing costs.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The net realizable value is estimated as follows:

• 1) Land held for development: net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses, or estimated by recent market value (development analytical method or comparison method).

• 2) Construction-in-progress: net realizable value is the estimated selling price (current market condition) in the ordinary course of business, less the estimated costs of completion and selling expenses, or estimated by recent market value.

(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 arise from the acquisition less any accumulated impairment losses.

(Continued)

• 188 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The consolidated financial statements include the Group’ s share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Group, from the date on which significant influence commences until the date on which significant influence ceases.

Gains and losses resulting from transactions between the Group and an associate are recognized only to the extent of unrelated Group’s interests in the associate.

When the Group’s share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

When the Group subscribes to additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment will differ from the amount of the Group’s proportionate interest in the net assets of the associate. The Group records such a difference as an adjustment to investments, with the corresponding amount charged or credited to capital surplus. The aforesaid adjustment should first be adjusted under capital surplus. If the capital surplus resulting from changes in ownership interest is not sufficient, the remaining difference is debited to retained earnings. If the Group’s ownership interest is reduced due to the additional subscription to the shares of the associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate will be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities.

(k) Investment property

Investment property is 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 initially measured at cost and subsequently at fair value with any change therein recognized in profit or loss.

Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss. When investment property that was previously classified as property, plant and equipment is sold, any related amount included in ‘other equity - revaluation surplus’ is transferred to retained earnings.

Rental income from investment property is recognized as other revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental income, over the term of the lease.

(l) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

(Continued)

• 189 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

• (ii) Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Group.

• (iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

The estimated useful lives of periods are as follows:	property, plant
Land improvement	3~30 years
Buildings and constructions	2~60 years
Machine equipment	1~30 years
Transportation equipment	2~40 years
Other equipment	2~13 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

• (iv) Reclassification to investment property

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified accordingly. Any gain arising on this remeasurement is recognized in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognized in other comprehensive income and presented in ‘ other equity - revaluation surplus’ . Any loss is recognized in profit or loss. However, to the extent that an amount is included in the revaluation surplus for that property, the loss is recognized in other comprehensive income and reduces the revaluation surplus within equity.

(Continued)

• 190 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(m) Leases

Leases (applicable from January 1, 2019)

• (i) Identifying a lease

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

• 1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

• 2) the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

• 3) the Group has the right to direct the use of the asset when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of an asset if either:

• the Group has the right to operate the asset; or

• the Group designed the asset in a way that predetermines how and for what purpose it will be used.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Group has elected not to separate non-lease components and account for the lease and nonlease components as a single lease component.

• (ii) As a leasee

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

(Continued)

• 191 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments;

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• amounts expected to be payable under a residual value guarantee; and

• payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• there is a change in future lease payments arising from the change in an index or rate; or

• there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee; or

• there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or

• there is a change of its assessment on whether it will exercise a purchase, extension or termination option; or

• there is any lease modification

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Group accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Group presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

If an arrangement contains lease and non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

(Continued)

• 192 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less and leases of low-value assets, including IT equipment. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

For sale-and-leaseback transactions, the Group applies the requirements for determining when a performance obligation is satisfied in IFRS15 to determine whether the transfer of an asset is accounted for as a sale of the asset. If the transfer of an asset satisfies the requirement of IFRS15 to be accounted for as a sale of the asset, the Group derecognizes the transferred asset, then measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained. Accordingly, the Group recognizes only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. For leaseback transaction, the Group applies the lessee accounting policy. If the transfer of an asset does not satisfy the requirement of IFRS15 to be accounted for as a sale of the asset, the Group continues to recognize the transferred asset and recognizes the financial liability equal to the transfer proceeds.

(iii) As a leasor

When the Group acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, the Group applies IFRS15 to allocate the consideration in the contract.

The Group recognizes a finance lease receivable at an amount equal to its net investment in the lease. Initial direct costs, such as lessors to negotiate and arrange a lease, are included in the measurement of the net investment. The interest income is recognized over the lease term based on a pattern reflecting a constant periodic rate of return on the net investment in the lease. The Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other income’.

(Continued)

• 193 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Leases (Applicable before January 1, 2019)

(i) Lessor

A finance lease asset is recognized on a net basis as lease receivable. Initial direct costs incurred in negotiating and arranging an operating lease are added to the net investment in the leased asset. The finance income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the receivable.

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into the operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly.

Contingent rents are recognized as income in the period when the lease adjustments are confirmed.

(ii) Lessee

Leases in which the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair value or the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset.

Other leases are operating leases and are not recognized in the Group’s balance sheets.

Payments made under operating leases (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Contingent rent is recognized as expense in the period in which it is incurred.

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. The specific asset is the lease subject when depended on by the arrangement. The arrangement is the transfer of a right to use the asset when transfers control of the specific assets to the Group.

(Continued)

• 194 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

At inception or on reassessment of the arrangement, if an arrangement contains a lease, that lease shall be classified as a finance lease or an operating lease. The Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payment reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset. Subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the Group’ s incremental borrowing rate. If the Group concludes for an operating lease that it is impracticable to separate the payment reliably, then it treats all payments under the arrangement as lease payments, and discloses the situation accordingly.

(n) Intangible assets

• (i) Recognition and measurement

1) Goodwill

Goodwill arising on the acquisition of subsidiaries is measured at cost, less accumulated impairment losses. Please refer to Note 6(k) for details of the accounting policy on the initial recognition of goodwill.

• 2) Other intangible assets

Expenditure on research activities is recognized in profit or loss as incurred.

Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to, and has sufficient resources to, complete development and to use or sell the asset. Otherwise, it is recognized in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost, less accumulated amortization and any accumulated impairment losses.

Other intangible assets, including customer relationships, patents and trademarks, that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) 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.

• (iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

(Continued)

• 195 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The estimated useful lives for current and comparative periods are as follows:

Technology 5~13 years

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(o) Impairment � non-derivative financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories, contract assets, deferred tax assets and investment properties and biological assets, measured at fair value, less costs) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or Cash Generating Units (CGUs). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(p) Provisions

A provision is recognized if, as a result of a past event, the Group has a present obligation that can be estimated reliably, and it is probable 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.

(Continued)

• 196 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(i) 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.

(ii) Site restoration

In accordance with the Group’ s published environmental policy and applicable legal requirements, a provision for site restoration in respect to contaminated land, and the related expense, is recognized when the land is contaminated.

(q) Revenue

Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer. The Group recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Group’s main types of revenue are explained below.

(i) Sale of goods

The Group recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognized when the goods are delivered as this is the point in time that the Group has a right to an amount of consideration that is unconditional.

(ii) 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.

(iii) 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.

(Continued)

• 197 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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.

(iv) Commissions

When the Group 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 Group, and is recognized in proportion to the stage of completion of the transaction.

(v) 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.

(r) Employee benefits

(i) 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. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.

(ii) Defined benefit plans

The Group’s net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognized asset is limited to 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. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

(Continued)

• 198 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

• (iii) 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.

• (s) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

The Group has determined that interest and penalties related to income taxes, including uncertain tax treatment, do not meet the definition of income taxes, and therefore accounted for them under IAS37

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

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 recognized except for the following:

• (i) differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;

• (ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

(iii) taxable temporary differences arising on the initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date, and reflect uncertainty related to income taxes, if any.

(Continued)

• 199 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Deferred tax assets and liabilities are offset if the following criteria are met:

• (i) the Group has a legally enforceable right to set off current tax assets against current tax liabilities ; and

• (ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

• the same taxable entity; or

• different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Deferred tax assets are 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 profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date, and are reduced to the extent that it is no longer probable that the related tax benefits will be realized; such reductions are reversed when the probability of future taxable profits improves.

(t) Business combination

The Company accounts for business combinations using the acquisition method. The goodwill arising from an acquisition is measured as the excess of (i) the consideration transferred (which is generally measured at fair value) and (ii) the amount of non-controlling interest in the acquiree, both over the identifiable net assets acquired at the acquisition date. If the amount calculated above is a deficit balance, the Company recognized that amount as a gain on a bargain purchase in profit or loss immediately after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed.

All acquisition-related transaction costs are expensed as incurred, except for the issuance of debt or equity instruments.

For each business combination, the Group measures any noncontrolling interests in the acquiree either at fair value or at the noncontrolling interest’ s proportionate share of the acquiree’ s identifiable net assets, if the noncontrolling interests are present ownership interests and entitle their holders to a proportionate share of the Group’ s net assets in the event of liquidation. Other components of noncontrolling interests are measured at their acquisition-date fair values, unless another measurement basis is required by the IFRSs endorsed by the FSC.

(u) Earnings per share

The Group discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee bonus.

(Continued)

• 200 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(v) Government Grants

A government grant receivable to the Group 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.

(w) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Each operating segment consists of standalone financial information.

(5) Significant accounting assumptions and judgments, and major sources of 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.

Management continues to monitor the accounting estimates and assumptions. Management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

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 investment property is measured at fair value derived from external appraisal reports. When the presumed factors implemented in the evaluation process, e.g. discount rates and return on investment, change due to the evolving market and economy, the change may have an impact on the balance of the recognized assets and profit or loss. For more information regarding the valuation, please refer to note 6(j).

(b) Impairment of property, plant and equipment, and intangible assets

In the process of evaluating the potential impairment of tangible and intangible assets other than goodwill, the Company is required to make subjective judgments in determining the independent cash flows, useful lives, expected future income and expenses related to the specific asset groups considering of the nature of the industry. Any changes in these estimates based on changed economic conditions or business strategies and could result in significant impairment charges or reversal in future years. Please refer to note 6(h) for further description of the key assumptions used to determine the recoverable amount.

(Continued)

• 201 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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 (i.e. as prices) or indirectly (i.e. 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(j) - Investment property;

• (ii) Note 6(z) - Financial instruments.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Cash on hand Checking and demand deposits Time deposits Cash equivalents Cash and cash equivalents	December 31, 2019 December 31, 2018 $ 1,567 140,459 3,855,535 2,972,985 4,629,722 7,987,415 629,429 2,369,079 $ 9,116,253 13,469,938

Time deposits with original maturity within three months which are held for the purpose of meeting short-term cash commitments, rather than for investment or other purposes, and 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(z) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Group.

(Continued)

• 202 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(b) Financial assets at fair value through profit or loss

Current financial assets designated at fair value through profit or loss: Beneficiary certificates Structured deposits Stocks listed on domestic markets Subtotal Non-current financial assets designated at fair value through profit or loss: Stocks unlisted on domestic markets Total	December 31, 2019 December 31, 2018 $ - 538,987 - 135,307 783,180 626,603 783,180 1,300,897 9,942,994 4,861,274 $ 10,726,174 6,162,171

Please refer to Note 6(y) for the gain or loss on financial assets recognized at fair value through profit or loss.

The Group purchased the common and preferred stock of Core Pacific City Co., Ltd. accounted as financial assets at fair value through profit or loss - non current. 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.

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 $1,560,000 � thousand and accounted in financial assets at fair value through profit or loss non-current.

On March 31, 2019, the Company’ s Board of Directors approved a resolution to invest in Core Pacific City Co., Ltd. by issuing 123,528 thousand preferred shares amounting to $1,235,278 thousand, which were accounted for as financial assets at fair value through profit or loss� noncurrent.

The Group holds 582,362 and 458,834 shares of the common and preferred stock of Core Pacific City Co., Ltd as of the date of December 31, 2019 and 2018, respectively. The Group recognized the changes in fair value as net gain and loss based on the fair value evaluation report of the investments. According to the valuation report, fair value was measured using the net asset method and the fair value of the valuation date was determined under the assumption of relevant rate of return by the external expert. The amount accounted for gain from investments in equity instruments at fair value through profit or loss was $3,846,442 thousand and $165,049 thousand for the years ended December 31, 2019 and 2018, respectively. The increase of fair value was due to the bidding of Core Pacific City Co., Ltd, which was completed on September 25, 2019, and the contract of property transaction was signed on October 30, 2019.

(Continued)

• 203 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Please refer to Note 8 for details of the financial assets at fair value through profit or loss of the Group pledged as collateral as of December 31, 2019 and 2018.

• (c) Financial assets at fair value through other comprehensive income

Financial assets at fair value through profit or loss -current� Stock listed on domestic markets Equity investments at fair value through other comprehensive income - non current Stocks listed on domestic markets Stocks unlisted on domestic markets Subtotal Total	December 31, 2019 December 31, 2018 $ 321,647 251,629 1,595,896 1,496,948 442,497 481,391 2,038,393 1,978,339 $ 2,360,040 2,229,968

Please refer to Note 6(t) for the gain or loss on financial assets recognized at fair value through other comprehensive income.

The dividend income from the financial assets recognized at fair value through other comprehensive income for the years ended December 31, 2019 and 2018 amounted to $272,736 thousand and $625,787 thousand.

• (i) 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 withdrawal of the resolution from the illegal temporary shareholders’ meetings and the resolutions from the temporary shareholders’ meeting was not established. Currently, the supervisor filed 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. The judgment was binding and final on December 2017. 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

(Continued)

• 204 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Court dismissing the appeal. The whole case confirms the appointed relationship between the Chairman designated by the Company and PRAXAIR exists. On November 19th 2016, the letter from Ministry of Economic Affairs states that Lin Ke-Ming, 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 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 withdrawing a part of such Arbitration award against the Company to Taipei District Court. On December 13, Taipei District Court dismissed the Company’s claim of withdrawing the ICC’s decision. The Company filed an appeal on January 8, 2020, that is now adjudicated by Taiwan High Court.

As of December 31, 2019 and 2018, the Group provided as collateral portion of its financial assets. Please refer to Note 8 for details of the related assets pledged as collateral.

� (ii) 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:

all other variables remain	the same, the impact to comprehensive income will be as follows:	the same, the impact to comprehensive income will be as follows:
Equity price at reporting date	For the years ended December 31,
	2019 After-tax other comprehensive income After-taxProfit (loss) $ 23,600 107,262 $ (23,600) (107,262)	2018
	After-tax other comprehensive income $ 23,600 $ (23,600)	After-tax other comprehensive income After-taxProfit (loss) 22,300 61,622 (22,300) (61,622)
Increase of 1% Decrease of 1%

• (d) Notes, trades, and other receivables

Notes receivable Accounts receivable (including related parties) Other receivables Less: allowance for doubtful receivables Net book value	December 31, 2019 December 31, 2018 $ 506,380 687,341 1,644,359 2,399,163 259,097 123,898 (451,529) (455,937) $ 1,958,307 2,754,465

(Continued)

• 205 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Movements of the allowance for doubtful receivables for the years ended December 31, 2019 and 2018 were as follows:

Balance on January 1, 2019 and 2018 Foreign exchange losses Balance on December 31, 2019 and 2018	For the years ended December 31, 2019 2018 $ 455,937 476,319 (4,408) (20,382) $ 451,529 455,937

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, 2019. Please refer to Note 9(f) for further details relating to litigation and evaluation of collectability.

There were no notes, trade, and other receivables of the Group had been pledged as collateral as of December 31, 2019 and 2018.

(e) Inventories

Finished goods Work-in-process Raw materials Fuel Merchandise inventories Subtotal Prepayment for land Land held for construction site - compensation for levied land Payment for floor area ratio Construction in progress Subtotal Total	December 31, 2019 December 31, 2018 $ 363,659 494,735 395,249 291,312 1,338,484 1,319,204 19,350 23,040 47,505 104,709 2,164,247 2,233,000 7,440,010 - 9,423 - 13,535 - 75,243 10,840 7,538,211 10,840 $ 9,702,458 2,243,840

A resolution was made during the Board of Directors’ meeting held on September 25, 2019 for the Group to acquire Core Pacific City’s permanent land ownership. The Group won the bidding on the same date. On October 30, 2019, the Group subsequently entered into a purchase agreement with Core Pacific City Co., Ltd. to buy the land located at Songshan District, Taipei City, as a construction site, for the amount of $37,200,010 thousand. As of December 31, 2019, both parties have agreed to put the property, which includes the land and the existing construction along with an initial amount of $7,440,010 thousand, with a future payable amount of $29,760,000 thousand, into a trust.

(Continued)

• 206 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

For the years ended December 31, 2019 and 2018, the components of cost of goods sold were as follows:

follows:
	For	the years ended	December 31,
		2019	2018
Cost of goods sold	$	27,511,870	32,896,647
(Gain on reversal of) write-down or scrapping		(85,013)	140,104
Net inventory loss (profit)		41,846	22,881
Unallocated fixed production overheads from idle facilities		555,181	295,345
Revenue from sale of scraps		(27,370)	(28,018)
Net amount	$	27,996,514	33,326,959

As of December 31, 2019 and 2018, the aforesaid inventories were not pledged as collateral.

• (f) Investments accounted for using equity method

• (i) The Group’ s investments accounted for using the equity method at the reporting date were classified as follows:

Subsidiaries Associates Total	December 31, 2019 December 31, 2018 $ 34,264 81,666 2,284,532 2,323,745 $ 2,318,796 2,405,411

• (ii) 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 Group Profit from continuing operations Other comprehensive income Total comprehensive income	December 31, 2019 December 31, 2018 $ 34,264 81,666 $ 5,487,139 5,576,193 For the years ended December 31,
	2019 2018 $ 494,301 887,970 5,719 (70,122) $ 500,020 817,848

(Continued)

• 207 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (iii) Share of profit (loss) of subsidiaries and associates for the years ended December 31, 2019 and 2018 were as follows:

2018 were as follows:
Share of profit (loss) of subsidiaries and associates	For the years ended December 31,
	2019 2018 $ 494,301 887,970

• (iv) The key financial information of subsidiaries and associates in which the Group has equity investments were as follows (before adjustment for the Group’s proportionate share):

Total assets Total liabilities Revenue Net income	December 31, 2019 December 31, 2018 $ 9,853,878 7,245,850 (4,332,283) (1,588,376) $ 5,521,595 5,657,474 For the years ended December 31,
	2019 2018 $ 5,193,485 7,244,503 $ 1,228,051 2,256,289

The Group does not guarantee any contingent liabilities of an associate jointly with other investors. Likewise, the Group does not guarantee alone any other contingent liabilities of an associate.

• (v) On August 12, 2019, a resolution was made during the board meeting of the Company to invest in Jean Pacific Development Co., Ltd., in the amount of $480,000 thousand.

(vi) Collateral

As of December 31, 2019 and 2018, the Group provided as collateral a portion of its investments in aforesaid equity-accounted investees. Please refer to Note 8 for details of the related assets pledged as collateral.

(g) Business Combination

• (i) The Group acquired Changzhou Weicai New Material Science and Technology Co., Ltd. on November 5, 2018, for 100.00% of its shares and obtained controlling power of the entity. The entity engages in manufacturing plastic products.

(Continued)

• 208 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The transfer price was $356,869 thousand in cash, the fair value of assets acquired and liabilities assumed on the acquisition date was as below:

Cash and cash equivalents	$	47,222
Notes and account receivables		4,032
Other receivables		6,090
Inventories		4,994
Other assets - current		100,137
Property, palnt and equipment		1,200,245
Intangible assets		156,655
Short-term debts		(265,345)
Account payable		(219)
Other payable		(860,584)
Other liabilites - current		(142)
Long-term debts		(179,895)
Fair value of identifiable assets	$	213,190
Goodwill derived from acquisition:
Transfer price	$	356,869
Fair value of identifiable assets		(213,190)
Goodwill	$	143,679

• (ii) The Group acquired Thanh Phong Construction Investment Ltd. on December 20, 2018, for 90% of its shares and obtained controlling power of the entity. The entity engages in real estate and construction.

The transfer price was $119,573 thousand in cash, the fair value of assets acquired and liabilities assumed on the acquisition date was as below:

liabilities assumed on the acquisition date was as below:
Cash and cash equivalents	$	132,857
Fair value of identifiable assets	$	132,857
Goodwill derived from acquisition:
Transfer price	$	119,573
Non-controlling equity (fair value of identifiable assets		13,284
measured at the percentage of non-controlling equity)
Fair value of identifiable assets		(132,857)
Goodwill	$	-

(Continued)

• 209 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(h) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group for the years ended December 31, 2019 and 2018 were as follows:

Cost or deemed cost: Balance as of January 1, 2019 Acquisition through business combination Additions Disposal Reclassification Effect of movements in exchange rate Balance as of December 31, 2019 Balance as of January 1, 2018 Acquisition through business combination Additions Disposals Reclassification Effect of movements in exchange rate Balance as of December 31, 2018 Depreciation and impairment loss: Balance as of January 1, 2019 Acquisition through business combination Depreciation for the period Impairment Disposals Reclassification Effect of movements in exchange rate Balance as of December 31, 2019 Balance as of January 1, 2018 Acquisition through 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, 2019 Balance as of January 1, 2018 Balance as of December 31, 2018	Land $ 5,730,777 - - - - - $ 5,730,777 $ 5,730,777 - - - - - $ 5,730,777 $ - - - - - - - $ - $ - - - - - - $ - $ 5,730,777 $ 5,730,777 $ 5,730,777	Land improvements 287,788 - - - 5,034 - 292,822 271,654 - - (3,465) 19,599 - 287,788 216,485 - 6,536 - - - - 223,021 214,969 - 4,981 (3,465) - - 216,485 69,801 56,685 71,303	Buildings 3,762,638 - 1,493 (1,136) 13,986 (35,253) 3,741,728 2,630,166 812,580 2,574 (25,640) 364,293 (21,335) 3,762,638 1,266,906 - 129,681 - (1,136) 372 (6,941) 1,388,882 1,095,840 73,979 122,893 (22,745) - (3,061) 1,266,906 2,352,846 1,534,326 2,495,732	Machinery and equipment 42,797,307 - 4,237 (953,211) 1,291,504 (36,908) 43,102,929 41,644,060 706,580 1,897 (464,862) 931,770 (22,138) 42,797,307 34,148,642 - 1,197,138 - (949,673) 2,451 (15,453) 34,383,105 33,221,690 166,795 1,212,101 (444,446) (510) (6,988) 34,148,642 8,719,824 8,422,370 8,648,665	Vehicles 72,378 - 6,538 (7,395) 10,947 (470) 81,998 72,017 - 1,285 (5,388) 4,755 (291) 72,378 59,050 - 4,266 - (6,237) 70 (250) 56,899 58,441 - 5,148 (4,725) 386 (200) 59,050 25,099 13,576 13,328	Other facilities 262,886 88 16,885 (29,832) 21,865 (2,363) 269,529 203,396 33,427 19,262 (3,313) 11,451 (1,337) 262,886 182,206 27 23,648 - (28,408) (2,893) (1,237) 173,343 155,845 9,998 19,564 (2,796) 124 (529) 182,206 96,186 47,551 80,680	Construction in progress 4,599,015 - 5,270,263 (9,814) (1,343,336) (196,804) 8,319,324 3,284,476 - 2,719,648 (13,593) (1,331,868) (59,648) 4,599,015 - - - - - - - - - - - - - - - 8,319,324 3,284,476 4,599,015	Accumulated impairment Total - 57,512,789 - 88 - 5,299,416 - (1,001,388) - - - (271,798) - 61,539,107 - 53,836,546 - 1,552,587 - 2,744,666 - (516,261) - - - (104,749) - 57,512,789 2,137,966 38,011,255 - 27 - 1,361,269 2,901,096 2,901,096 (484) (985,938) - - - (23,881) 5,038,578 41,263,828 2,154,331 36,901,116 - 250,772 - 1,364,687 (16,365) (494,542) - - - (10,778) 2,137,966 38,011,255 (5,038,578) 20,275,279 (2,154,331) 16,935,430 (2,137,966) 19,501,534

The market price of Caprolactam (“CPL”), the main product of the Company, has declined over the past few years. Recovery of the market price is unlikely as the production capacity of CPL continues to expand. The amount of book value of the Toufen production line CGU was evaluated as higher than its recoverable amount, resulting in a impairment loss amounting to $2,901,096 thousand, which was recognized under the non-operating profit or loss section of the statement of comprehensive income. The value-in-use was discounted by using the pre-tax discount rate of 6.86% for the year ended on December 31, 2019. The recoverable amount was determined by the total of value-in-use and net fair value (fair value, less, cost of disposal), whose evaluation involved an input value belonging to level 3 and was conducted by using the market method.

(Continued)

• 210 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

As of December 31, 2019 and 2018, the Group provided as collateral, a portion of its property, plant and equipment, please refer to Note 8 for details of the related assets pledged as collateral.

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, Ministry of Economic Affairs (MOEA) approved the investment of the Company in Jiangsu Weiming Petrochemical Corporation in China in the amount of CNY2,388,000 thousand (equivalent to $11,100,000 thousand) mainly to establish manufacturing operations for petrochemical products (including hydrorefining crude benzol, cyclohexanone, nylon 6, etc.). As of December 31, 2019 and 2018, accumulated investment remittance from Taiwan to Mainland China was CNY1,218,000 thousand and CNY775,000 thousand, respectively. The amount invested in manufacturing plant and machinery was CNY1,251,456 thousand and CNY670,251 thousand, respectively.

(i) Right-of-use assets

The Group leases assets including land, land use right, buildings, machinery and equipment and vehicles. Information about leases for which the Group as a lessee is presented below:

Cost: Balance as of January 1, 2019 Effects of retrospective application Balance as of January 1, 2019 - retrospective Aquisition through business combination Additions Disposal Effect of movements in exchange rate Balance as of December 31, 2019 Accumulated depreciation and impairment losses: Balance as of January 1, 2019 Effects of retrospective application Balance as of January 1, 2019 - retrospective Depreciation for the period Disposal Effect of movements in exchange rate Balance as of December 31, 2019 Carrying amounts: Balance as of December 31, 2019	Land $ - 204,443 204,443 - 108 - - $ 204,551 $ - - - 8,012 - - $ 8,012 $ 196,539	Land-use right - 682,373 682,373 - - - (24,635) 657,738 - 47,630 47,630 13,686 - (2,353) 58,963 598,775	Buildings - 12,155 12,155 - 7,399 - - 19,554 - - - 8,901 - - 8,901 10,653	Machinery and equipment - 63,906 63,906 - - - - 63,906 - - - 33,708 - - 33,708 30,198	Vehicles - 16,537 16,537 615 4,411 (2,107) - 19,456 - - - 9,096 (621) - 8,475 10,981	Other facilities Total - - 1,774 981,188 1,774 981,188 - 615 164 12,082 - (2,107) - (24,635) 1,938 967,143 - - - 47,630 - 47,630 580 73,983 - (621) - (2,353) 580 118,639 1,358 848,504

(Continued)

• 211 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(j) Investment property

The movement of invesment property was as followed:

Cost or deemed cost: Balance as of January 1, 2019 Aquisition through business combination Decrease Net gains and losses due to fair value adjustments Balance as of December 31, 2019 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, 2019 Balance as of January 1, 2018 Balance as of December 31, 2018	Land $ 38,331,633 2,075 (9,423) (1,622,617) $ 36,701,668 $ 38,211,181 120,452 $ 38,331,633 $ 36,701,668 $ 38,211,181 $ 38,331,633	Buildings Total 18,726 38,350,359 - 2,075 - (9,423) (688) (1,623,305) 18,038 36,719,706 15,351 38,226,532 3,375 123,827 18,726 38,350,359 18,038 36,719,706 15,351 38,226,532 18,726 38,350,359

(Continued)

• 212 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (i) Evaluation by income approach

The fair value of some investment properties of the Group 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, 2019

Qianjin Dist., Qianzhen Dist., Subject Kaohsiung City Kaohsiung City Important contract terms None None The range of rental in the area where the $550~$700( NT dollars) $450( NT dollars) investment property is located

The rental range of similar investment $563~$589( NT dollars) None property

The current status of the investment Unused Leased property Past earnings $0~ $0 $0~ $0 Income capitalization rate 5.525% None Discount rate 4.380% 4.780% Outsourcing or self-valuation Outsourcing Outsourcing Evaluation office Colliers International Colliers International Taiwan Taiwan Appraiser name Feng-ru, Ke Shiou-ying, Jan Evaluation date December 31, 2019 December 31, 2019 Outsourcing fair value $ 10,530 $ 2,514,000

December 31, 2018

Subject

Qianjin Dist., Kaohsiung City

Important contract terms None

The range of rental in the area where the investment $550~$700( NT dollars) 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-Yu, Ke Evaluation date December 31, 2018 Outsourcing fair value $ 10,640

(Continued)

• 213 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

In accordance with Article 34 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 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, 2019 and 2018, the discount rate was 4.380%~4.780% and 4.380%, respectively. As of December 31, 2019 and 2018, the weighted average capitalization rate was 5.525%% and 5.415%, respectively, derived as the ratio of annual net operating income of comparable properties divided by reasonable price.

(ii) Evaluation through land development analysis

The Group classified its undeveloped land as investment property. The Group adopted the development land analysis approach to measure the fair value of the undeveloped land in accordance with Article 9 of the Regulations Governing the Preparation of Financial Reports by Securities Issuers. The input value involved in evaluation belongs to level 3. The relevant information is summarized as follows:

December 31, 2019

Subject	Annan Dist., Tainan City	Qianzhen Dist., Kaohsiung City Others 101,156,568 2,718,175 18%~30% 12%~25% 3.900%~8.930% 1.06%~3.47% Colliers International Taiwan Hon Bun Real Estate Appraisers Firm and Colliers International Taiwan, China Real Estate Appraisers Firm Shiou-ying, Jan , Jian-hui,Gu Yu-xian, Houng , Jian-hui,Gu , Shiou-ying, Jan and Dian- Ching, Hsieh December 31, 2019 December 31, 2019 27,885,380 1,352,806
Estimate total sales price Rate of return Capital interest rate Evaluation office Appraiser name Evaluation date Outsourcing fair value	7,968,120 23% 1.790% CCIS Real Estate Joint Appraisers Firm Huo-ming, Huang December 31, 2019 $ 4,956,990

(Continued)

• 214 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

December 31, 2018

December 31, 2018
Subject	Annan Dist., Tainan City	Qianzhen Dist., Kaohsiung City Others 9,612,972 (Note) 2,717,238 18% 12%~25% 3.810%~3.930% 0.710%~4.380% Colliers International Taiwan Hon Bun Real Estate Appraisers Firm and Colliers International Taiwan, Shiou-ying, Jan and Jian-hui, Gu Yu-xian, Houng, Jian-hui, Gu, and Shiou-ying, Jan December 31, 2018 December 31, 2018 31,970,281 1,348,683
Estimate total sales price Rate of return Capital interest rate Evaluation office Appraiser name Evaluation date Outsourcing fair value	7,968,120 23% 1.790% CCIS Real Estate Joint Appraisers Firm Huo-ming, Huang December 31, 2018 $ 5,020,755

Note: some of the estimated market value, as a whole, is determined based on the basic unit.

The fair value of the Group’ s investment property is outsourced. In accordance with the appraisal reports, the approach and process include selecting a section as a basic unit, whose market value is estimated through comparison approach and cost approach, wherein the time and leveling cost are then factored in to approximate the fair value of the subject.

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; 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 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(q) for the relevant information including rent revenue and the direct operating expenses incurred.

As of December 31, 2019 and 2018, the Group 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 event of the resumption of 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.

(Continued)

• 215 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

AnShun Land Located in Tainan City Annan District:

(i) History

• 1) The land where the AnShun Alkali plants located was originally established by Japanese company Kanegafuchi Soda in 1938 under Japanese Colonial Rule.

• 2) The Government undertook the construction after the Retrocession of Taiwan, and established a state-owned company, Taiwan Alkali Industrial Corporation (TAIC) and operated at the AnShun 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 in 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 Anshun land of TAIC.

• 5) Since the said merger, the Company’s takeover the Anshun land, the Company has never had any act of production, operations, development, use or pollution at the site. According to subsequent investigation and research, parts of the area had 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, respectively, 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 andobligations of TAIC, along with the treatment projects and remediation plan. As the Company never used the land after being ordered to take charge by the Executive Yuan Department of Ministry of Economic Affairs (MOEA), the Company thus objected and carried out the following administrative and 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 was rejected.

• b) In January 2006, the Company filed a complaint against MOEA in the Taiwan Taipei District Court in the amount of $10,077 thousand for reimbursement compensation.

(Continued)

• 216 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 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 did not mention whether the successor of the Polluter entity should be responsible for the treatment projects and remediation plan under SGPR Act was not within 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 propose a remediation plan for the soil and groundwater pollution of the Anshun plant in accordance with the Soil and Groundwater Pollution Remediation Act.

• a) The Company proposed the “Tainan City, CPDC former Taiwan Alkali Anshun 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 4, 2015. According to the remediation technology and the actual implementation of the subsequence adjustment, the 3rd remediation change plan was proposed on March 2, 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 Janurary 3, 2018.

• b) The related remediation expense for the first phase was estimated to be $1,647,200 thousand. The remediation expense about $1,600,000 thousand was engaged as the 1st phase until September 2014. Simultaneously, the following 10-year remediation work needed to be started after the 2nd change plan was adopted at an estimated cost of $1,356,000 thousand in December 2014.

(Continued)

• 217 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Extension legislation:

• 1) Remediation prepay

• a) Tainan city government on Feburary 27, 2008 with the letter No. 09722004430 asked the Company to pay each expense: $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 laws and regulations in July 2008. The Company objected to the prepaid expense and land polluter, hence, the administrative remedy was proposed in July 2008, with Kaohsiung High Administrative court sentencing the Company to pay the expense $88,430 thousand in Janurary 2008. The Company appealed in March 2008 and Supreme Administrative Court sent the case back to Kaohsiung High Administrative Court for further trial. Kaohsiung High Administrative court sentenced the original punishment and the petition decision beyond $76,066 thousand was withdrawn. In December 2013, both parties proposed the appeal for the unfavorable parts and Supreme Administrative Court sentenced the amountbeyond $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 $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 December 2016. The Company proposed the appeal remedy for the unsatisfied sentenced contents on Janurary 2017. Supreme Administrative Court sentenced on Janurary 2018 that the expenses $1,134,718 thousand did not 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 $17,962 thousand, which resulted from the relevant working plan of AnShun Land Site soil pollution remediation and was prepaid by Tainan city government on behalf of the Company, and Tainan city government in December 2009 with the letter No. 09822035440 asked the Company to pay the above fees prior to Janurary 31, 2010. The Company estimated such expense at the end of 2009 and proposed the administrative remedy in Janurary 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 $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 $7,068 thousand was withdrawn on October 7, 2015 and this case had been appealed for the remedy. The determined withdrawn amount $95 thousand had been returned back to the account by Tainan city government. The verdict from Supreme Administrative Court had been received on Feburary 18, 2017, the fact was again returned back to Kaohsiung High Administrative court for the trial.

(Continued)

• 218 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• c) The Tainan City Government, in February 2014, decided that the Company was the polluter 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 Anshun factory, in the amount of $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 $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. On December 19, 2019, a fine of $5,301 thousand was imposed by the court; in pursuit of the best interest of the Company, an appeal was filed with Supreme Administrative Court on January 16, 2020.

• d) Tainan City Government, in May 2016, issued the letter No. 10504498726, requesting the Company pay a fee for the “supervision management and audit work plan of 2013 CPDC (Taiwan Alkali) Anshun plant site remediation” and requesting the Company pay the fee of $63,271 thousand prior to July 20, 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 judgment 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.

• e) The Tainan City Government issued the letter No. 1080412260 in April 2019, requesting the Company to pay before June 30, 2019. The government claimed to have performed “ 2016 China Petroleum & Chemical Corporation Anshun Plant Remediation Site Supervision, Management and Checking Work Plan” on behalf of the Company, and request the Company to pay $59,624 thousand in accordance with Article 14 (4) and Article 15 of the Soil and Groundwater Pollution Remediation Act (hereinafter referred to as the “Soil Pollution Law”). Based on the laws and regulations, the Company paid the aforementioned fees first within the time limit set by the Tainan City Government, and filed an administrative appeals in May of the same year, and this case is still in the petition process.

(Continued)

• 219 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 2) Tainan city government claimed that the Company did not implement per the remediation process.

• a) Tainan City Government issued a letter No. 105050004 for administrative sanctions on May 23, 2016 and deemed that the Company did not 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 $200 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 October 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 Janurary 2018. This case was determined to be closed.

• b) Tainan city government, on May 23, 2016, required the Company to complete the correction (which means reducing the rate of dioxin pollution to 41%) prior to October 31, 2016 with letter No. 1050527601 and attached with No. 105050004 issued on May 19, 2016, otherwise; the Company would be subject to daily penalties. 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 $600 thousand and was ordered to participate in environment seminars for 4 hours (aforementioned $200 thousand plus added $400 thousand). After verification, the previous penalty was not audited at the time 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 Feburary 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 November of the same year, the Company had declared the appeal in December of the same year. The Supreme Administrative Court rejected the Company’s request on July 10, 2018. This case was determined to be closed.

(Continued)

• 220 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• c) 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 imposed a penalty of $1,000 thousand. After the verification, there is no ‘take it as’ 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 October of the same year. The Company proposed to Kaohsiung High Administrative court for the administrative remedy in December of the same year.

• d) The Tainan City Government issued the punishment notification No. 108040003 in April 2019 as a result of the concentration of the dioxin in the exhaust pipe test results not being lower than the standard set by the third change plan (less than 0.1ng-TEQ/Nm3) and would result in a fine of $200 thousand. An administrative appeals was filed in May 2019 in accordance with the laws, and the Environmental Protection Agency of the Executive Yuan dismissed in July of the same year. The Company filed an administrative lawsuit in September of the same year. The case is currently in administrative court of the Tainan District Court.

3) Others

• a) The Company still objects to the adscription of pollution responsibility for AnShun 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 bear the 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 Anshun 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 perpetrators, and who should pay the relevant costs and penalties. 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 the decision not to proceed with the case. The original disposal authorities revoked the previous punishment but simultaneously imposed 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 November 2017. This case is under hearing in Supreme Administrative Court.

(Continued)

• 221 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The cumulative fee of invested and estimated control and management cost and remediation fee was $3,433,510 thousand as of December 31, 2019. The preceding remediation fee was estimated according to the current possible situations by the Company. However, unpredictable future events may cause large fluctuations in the total expected remediation fees. This will be closely monitored and evaluated by management.

b) Anshun 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 parcels of land in August 2015. The Company appealed for the administrative remedy of the remaining areas, which is under hearing by the Supreme Court.

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 the demolition of the illegal construction and return of the land. Kaohsiung District Court rejected the Company’s petition. Due to the previous judgment, 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 and was under hearing in April 2019.

(Continued)

• 222 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Shulin Land of Taiwan Alkali Co., Ltd.:

• 1) History:

• a) No. 540, 541 and 543, Dongshan Section, Shulin District, Xinbei City and No. 489, Weiwang Section, Shulin Dist., New Taipei City 238, Taiwan including land originally belonging to Shulin plant of Taiwan Alkali Co. Ltd. Taiwan Alkali Co. Ltd., which 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.

• b) Then the plant was subsequently sold to CPC. The New Taipei City Government Environmental Protection Bureau, on August 16, 2010, announced the land as “soil pollution control site”.

• c) 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 surviving company and shall take the responsibility for the rights and obligations of Taiwan Alkali Co. Ltd. for soil pollution remediation according to Article 75 of the R.O.C. Company Act and was deemed as the polluter and required to propose subsequent disposal and remediation.

Since the change of predetermined place of CPC’s warehouse, the relocation schedule had to be extended to November 15, 2017. The remediation work schedule was postponed so that the soil pollution control plan (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 on May 18, 2017. Because of the different dynamic factors for the predetermined place of CPC’s warehouse, the relocation process was extend to December 31, 2021, and the remediation work schedule had to be postponed. Therefore, the “soil pollution control plan (the 2nd change plan) of Shulin Land of former Taiwan Alkali Co., Ltd (part of the sites)” was proposed in August 2019, and New Taipei City Government agreed for future reference on August 16, 2019. The Company is now performing this project subject to the soil pollution control plan.

The relevant remediation expense of $273,750 thousand was estimated and listed in 2011 according to financial accounting standards related regulations. However, it will be assessed to adjust for changes due to internal and external factors in future, which may result in significant differences on the entire remediation expense.

(Continued)

• 223 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(k) Intangible assets

The components of the costs of intangible assets, amortization, and impairment loss thereon for the years ended December 31, 2019 and 2018 were as follows:

Costs� Balance as of January 1, 2019 Acquisition in 2019 Disposals Other Effect of movement in exchange rates Balance as of December 31, 2019 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, 2019 Amortization for the period Disposals Effect of movement in exchange rates Balance as of December 31, 2019 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, 2019 Balance as of January 1, 2018 Balance as of December 31, 2018	Goodwill $ 147,990 - - - (3,128) $ 144,862 $ 5,444 - 143,679 - (1,133) $ 147,990 $ - - - - $ - $ - - - - - $ - $ 144,862 $ 5,444 $ 147,990	Computer software 7,573 1,979 (780) - (350) 8,422 5,233 908 1,579 - (147) 7,573 2,073 1,193 (457) (129) 2,680 1,089 59 945 - (20) 2,073 5,742 4,144 5,500	Patents and trademark Total 102,598 258,161 5,025 7,004 - (780) (6,535) (6,535) (841) (4,319) 100,247 253,531 68,389 79,066 50,883 51,791 141 145,399 (16,815) (16,815) - (1,280) 102,598 258,161 68,027 70,100 5,690 6,883 - (457) (330) (459) 73,387 76,067 53,639 54,728 8,434 8,493 12,332 13,277 (6,378) (6,378) - (20) 68,027 70,100 26,860 177,464 14,750 24,338 34,571 188,061

As of December 31, 2019 and 2018, the aforesaid intangible assets were not pledged as collateral.

(Continued)

• 224 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(l) Short-term loans

The details, terms and conditions of short-term loans were as follow:

Unsecured bank loans-the Company Letters of credit loans-the Company Secured bank loans-Weicai (Original name: Huijie) Total Unsecured bank loans-the Company Letters of credit loans-the Company Secured bank loans-Weicai (Original name: Huijie) Total		December 31, 2019	December 31, 2019	December 31, 2019
	Currency	Interest Rate Range
	NTD NTD CNY
	Currency	Interest Rate Range	Year of Expiration Amount 2019 $ 600,000 2019 50,000 2019 263,732 $ 913,732	Amount
	NTD NTD CNY	1.38%~1.814% 1.4945% 5.655%~5.9%

As of December 31, 2019 and 2018, the Company was granted by banks short-term credit lines of $6,100,000 thousand and $6,650,000 thousand, of which $1,614,920 thousand and $3,565,104 thousand, respectively, were unused.

As of December 31, 2019 and 2018, the subsidiaries were granted by banks short-term credit lines of $130,000 thousand, CNY89,000 thousand and USD6,000 thousand, and $130,000 thousand, CNY59,000 thousand and USD6,000 thousand, respectively, of which $130,000 thousand and USD6,000 thousand were unused.

(m) Long-term loans

The details, terms and conditions of long-term loans were as follow:

Secured bank loans-the Company Secured bank loans-Weihua Secured bank loans-Weiming Subtotal Less: current portion Total		December 31, 2019	December 31, 2019
	Currency	Interest Rate Range	Year of Expiration Amount 2020~2022 $ 4,830,000 2024 254,415 2023~2026 3,399,498 8,483,913 (1,762,130) $ 6,721,783
	NTD CNY CNY	1.4700%~1.9556% 4.900%~5.057% 4.900%~5.488%

(Continued)

• 225 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Secured bank loan-the Company Secured bank loan-Weicai (Original name: Huijie) Secured bank loans- Weihua Secured bank loans- Weiming Subtotal Current Total		December 31, 2018 Interest Rate Range Year of Expiration Amount 1.43%~1.9556% 2019~2021 $ 2,480,000 6.2225% 2019 178,801 4.9%~5.047% 2024 300,569 5.047%~5.488% 2023 1,714,560 4,673,930 (863,801) $ 3,810,129
	Currency	Interest Rate Range
	NTD CNY CNY CNY	1.43%~1.9556% 6.2225% 4.9%~5.047% 5.047%~5.488%

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.

• (i) 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 plants and purchase of accessory equipment.

• (ii) 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 requirements.

• (iii) 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 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:

• 1) Current ratio (total current assets divided by total current liabilities): not lower than 100%.

• 2) Leverage ratio (total liabilities plus contingent liabilities to tangible net worth): not higher than 100%.

• 3) Times interest earned (income before tax plus depreciation expense plus amortization expense divided by interest expenses): not lower than 2 times.

(Continued)

• 226 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (iv) In the event that there is a financial ratio violation in any of the fiscal years, the period from the announcement of the consolidated financial report that does not comply with the financial commitments to the announcement date of the next consolidated financial report shall be the improvement period. If the borrower resolves the vioation during the improvement period, it is not considered a breach of financial commitment. However, the borrower shall, from the date of the announcement of the consolidated financial report that does not comply with the financial commitment, to the date of interest payable after the expiration of the improvement period, the credit balance of credit cases, in accordance with Article 7 (3) of this contract, the applicable interest rate plus the annual interest rate of 0.05% is charged to interest. If the improvement is not completed within the time limit, from the expiration date of the improvement period, the next interest payable date after the date on which the borrower has filed a consolidated financial report meeting the financial commitments, for the credit balance of this credit, the interest rate shall be calculated based on the contract interest rate plus the annual interest rate of 0.05%, and may be handled in accordance with the breach of contract.

• (v) The term of the repayment of the category A credit is stipulated as: The first period will be paid off from the date of the first use of the credit application to the expiration of three years. After that, it will be a period of six months for once. Settlement of the liability divided into five phases. The first period to the fourth period, each period shall be settled separately for 15% of the outstanding principal balance of the expiration date of the credit period, and the fifth period shall be settled for 40% of the outstanding principal balance of the expiration date of the credit period.

• (vi) The term of payment of the category B credit is stipulated as: The borrower shall fully repay on the due date as set out in each application for use.

As of December 31, 2019 and 2018, unused credit lines amounted to $0 thousand and $2,250,000 thousand, respectively. Please refer to Note 8 for details of the related assets pledged as collateral.

The Company signed contracts for secured bank credit facilities in order to finance its operation. As of December 31, 2019 and 2018, the total credit lines were $1,630,000 thousand and $1,200,000 thousand, respectively. Credit facilities of $1,350,000 thousand and $380,000 thousand, respectively were used. The unused amounted to $280,000 thousand and $820,000 thousand, respectively. The current portion of the long-term bank loans obtained from such credit facilities amounted to $500,000 thousand and $380,000 thousand, respectively. Please refer to Note 8 for details of the related assets pledged as collateral.

As of December 31, 2019 and 2018, the subsidiaries were granted by banks long-term credit lines of CNY1,190,000 thousand and CNY900,000 thousand of which CNY159,617 thousand and CNY400,134 thousand were unused. Please refer to Note 8 for details of the related assets pledged as collateral.

Please refer to Note 8 for details of the related assets pledged as collateral.

(Continued)

• 227 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(n) Long-term bills payable

The components of long-term bills payable were as follows:

Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Less: Discount on long- term bills payable Total	December 31, 2019 Acceptance institution Period Amount China Bills Finance Corporation 2019.11.15~2020.02.13 $ 650,000 China Bills Finance Corporation 2019.12.23~2020.03.23 500,000 International Bills Finance Corporation 2019.12.24~2020.03.23 200,000 Taching Bills Finance Corporation 2019.12.26~2020.02.24 350,000 Taching Bills Finance Corporation 2019.11.20~2020.02.18 50,000 Mega Bills Finance Corporation 2019.11.05~2020.01.03 500,000 Mega Bills Finance Corporation 2019.11.13~2020.01.13 450,000 Mega Bills Finance Corporation 2019.11.14~2020.02.12 250,000 Mega Bills Finance Corporation 2019.11.14~2020.02.12 400,000 Mega Bills Finance Corporation 2019.11.19~2020.01.13 150,000 Mega Bills Finance Corporation 2019.11.22~2020.02.12 200,000 Mega Bills Finance Corporation 2019.12.20~2020.02.18 200,000 Mega Bills Finance Corporation 2019.12.20~2020.03.19 600,000 4,500,000 (5,823) $ 4,494,177
	Acceptance institution
	China Bills Finance Corporation China Bills Finance Corporation International Bills Finance Corporation Taching Bills Finance Corporation Taching Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation

(Continued)

• 228 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Bills payable Bills payable Bills payable Bills payable Bills payable Less: Discount on long- term bills payable Total	December 31, 2018 Acceptance institution Period Amount China Bills Finance Corporation 2018.11.09~2019.01.08 $ 100,000 China Bills Finance Corporation 2018.11.16~2019.01.15 50,000 International Bills Finance Corporation 2018.11.30~2019.01.18 50,000 Taching Bills Finance Corporation 2018.11.26~2019.02.25 50,000 Mega Bills Finance Corporation 2018.12.20~2019.03.20 100,000 350,000 (271) $ 349,729
	Acceptance institution
	China Bills Finance Corporation China Bills Finance Corporation International Bills Finance Corporation Taching Bills Finance Corporation Mega Bills Finance Corporation

The Company had revolving commercial promissory note agreements with bills finance companies in order to finance its operations. As of December 31, 2019 and 2018, the bills payable bear interest rates ranged from 0.55%~1.3400% and 0.5%~1.1513%, respectively.

Please refer to Note 8 for details of the related assets pledged as collateral.

• (o) Lease liabilities

The lease liabilities of the Group were as follows:

Current Non-Current	December 31, 2019
	$ 49,911 $ 203,332

There were no significant issues, repurchases and repayments of lease liabilities for the year ended December 31, 2019.

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities Expense relating to short-term leases	For the years ended December 31, 2019
	$ 4,875 $ 41,731

The amounts recognized in the statement of cash flows for the Group were as follows:

Total cash outflow for leases	For the years ended December 31, 2019
	$ 61,653

(Continued)

• 229 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(p) Provisions

Balance as of January 1, 2019 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, 2019 Current Non-current 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	Decommissioning $ 1,267,220 498 (1,910) - (1,806) $ 1,264,002 $ - 1,264,002 $ 1,264,002 $ 1,269,971 - - - (2,751) $ 1,267,220 $ - 1,267,220 $ 1,267,220	Remediation project 967,414 - (363,442) - - 603,972 151,417 452,555 603,972 1,087,851 - (120,437) - - 967,414 473,629 493,785 967,414	Employee benefits Total 237,821 2,472,455 32,231 32,729 (13,341) (378,693) 107 107 - (1,806) 256,818 2,124,792 6,145 157,562 250,673 1,967,230 256,818 2,124,792 253,869 2,611,691 9,870 9,870 (24,232) (144,669) (1,686) (1,686) - (2,751) 237,821 2,472,455 6,542 480,171 231,279 1,992,284 237,821 2,472,455

(i) 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 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 decade. 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 of 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 second remediation stage, the Company estimated the cost based on the situation on December 2014 at $1,356,000 thousand. 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 4, 2015. According to the remediation technology and the actual implementation of the subsequence adjustment, the 3rd remediation change plan was proposed on March 2, 2017, which was reviewed and adopted on Janurary 3, 2018. Please refer to note 6(j) for more information.

(Continued)

• 230 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (ii) 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 declared that such land as “Soil Pollution Control Site” . In March 2011, the Environmental Protection Department of New Taipei City Government issued letter No. 1000010000. In that letter, the Company was 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 plan.

• 2) Since the change of predetermined place of CPC’ s warehouse, the relocation schedule had to be extended to November 15, 2017. The remediation work schedule was postponed so that the soil pollution control plan (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 on May18, 2017. Because of the different dynamic factors for the predetermined place of CPC’s warehouse, the relocation process was extended to December 31, 2021 and the remediation work schedule had to be postponed. Therefore, the “soil pollution control plan (the 2nd change plan) of Shulin Land of former Taiwan Alkali Co., Ltd (part of the sites)” was proposed in August, 2019, and New Taipei City Government agreed for future reference on August 16, 2019. The Company is now performing this project subject to the soil pollution control plan. However, it will be assessed to adjust for changes due to internal and external factors in future, which may result in significant differences on the entire remediation expenses

(q) Operating lease

The Group leases 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, 2019 December 31, 2018 $ 20,125 16,094 132,222 19,904 291,949 38,019 $ 444,296 74,017

For the years ended December 31, 2019 and 2018, the income from the rental of property, plant and equipment amounted to $18,232 thousand and $18,569 thousand, respectively.

(Continued)

• 231 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(r) Employee benefits

(i) Defined benefit plans

Reconciliation of defined benefit obligation at present value and plan asset at fair value were as follows:

Present value of funded defined benefit obligation Fair value of plan assets Net defined benefit liabilities	December 31, 2019 December 31, 2018 $ 541,718 594,797 (301,251) (369,809) $ 240,467 224,988

The provision consists of net defined benefit liabilities and accrued pension liabilities for professional management. The accrued pension liabilities for professional management was $9,764 thousand and $5,759 thousand as of December 31, 2019 and 2018, respectively.

The Group makes defined benefit plan contributions to the pension fund account with Bank of Taiwan and provides pensions 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 the six months prior to retirement.

1) Composition of plan assets

The Group allocates 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 Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

The Group’ s Bank of Taiwan labor pension reserve account balance amounted to $301,251 thousand as of December 31, 2019. 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 Bureau of Labor Funds, Ministry of Labor.

2) Movement in present value of the defined benefit obligations

The movement in present value of the defined benefit obligations for the Group 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	For the years ended December 31, 2019 2018 $ 594,797 726,159 (98,680) (151,121) 18,279 24,703 - (2,638) 27,322 (2,306) $ 541,718 594,797

(Continued)

• 232 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 3) Movement of defined benefit plan assets

The movement in the present value of the defined benefit plan assets for the Group 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	For the years ended December 31, 2019 2018 $ 369,809 481,805 11,123 11,578 (98,680) (144,241) 3,901 6,242 15,098 14,425 $ 301,251 369,809

• 4) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Group were as follows:

Current service cost 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, 2019 2018 $ 11,912 15,231 - (2,638) 2,466 3,230 $ 14,378 15,823 $ 13,023 16,579 125 (1,053) 1,064 289 166 8 $ 14,378 15,823 $ 18,997 20,667

• 5) Remeasurement of net defined benefit liability (asset) recognized in other comprehensive income

The Group’ s remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income for the years ended December 31, 2019 and 2018, was as follows:

Accumulated balance, January 1 Recognized during this year Accumulated balance, December 31	For the years ended December 31, 2019 2018 $ (138,324) (155,055) (12,224) 16,731 $ (150,548) (138,324)

(Continued)

• 233 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 6) Actuarial assumptions

The principal actuarial assumptions at the reporting date were as follows:

Discount rate Future salary increases	For the years ended December 31, 2019 2018 1% 0.75~1.125% 1%~1.5% 0.3~1.5%

The expected allocation payment to be made by the Group to the defined benefit plans for the one-year period after the reporting date is $10,143 thousand.

The weighted average lifetime of the defined benefits plans is 1.00 year~ 13.18 years.

• 7) Sensitivity analysis

In determining the present value of the defined benefit obligation, the Group’ 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.

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2019 Discount rate Increase in future wage 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% $ (13,765) 14,328 13,974 (13,498) (11,116) 32,617 32,269 (10,854)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2019 and 2018.

(Continued)

• 234 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Defined contribution plans

The Company allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

The cost of the pension contributions to the Labor Insurance Bureau for the years ended December 31, 2019 and 2018 amounted to $50,649 thousand and $43,210 thousand, respectively.

• (iii) The pension costs incurred from the contributions to the Bureau of the Labor Insurance amounted to $6,234 thousand and $5,759 thousand for the year ended December 31, 2019 and 2018, respectively.

(iv) Short-term compensated absences liabilities

As of December 31, 2019 and 2018, the Group’s short-term compensated absences liabilities amounted to $6,145 thousand and $6,542 thousand, respectively.

(s) Income Tax

(i) Income tax expense

The components of income tax expense for the years ended December 31, 2019 and 2018 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,
	2019 2018 $ (117,556) (395,359) (12,281) (596) (129,837) (395,955) 470,679 (570,690) (470,679) 570,690 - - $ (129,837) (395,955)

For the years ended December 31, 2019 and 2018, income tax expenses recognized under other comprehensive income were both $0 thousand.

(Continued)

• 235 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Reconciliation of income tax and profit before tax for the years ended December 31, 2019 and 2018, were 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 Recognition of previously unrecognized tax gain Unrecognized deferred tax assets Changes of permanent differences Prior years income tax adjustment Undistributed earnings additional tax Income tax expense	For the years ended December 31, 2019 2018 $ 1,863,472 4,676,950 $ (384,110) (971,773) 577 1,479 (26,879) - 31 - (490,711) 564,986 835,627 358,215 (12,281) (596) (52,091) (348,266) $ (129,837) (395,955)

(ii) Deferred tax assets and liabilities

• 1) Unrecognized deferred tax assets

Decommissioning liabilities $ Remediation project Pollution remediation Allowance for doubtful receivables Investment property, property, plant and equipment Pension Tax loss Others $	December 31, 2019 December 31, 2018 82,663 71,366 239,143 239,744 364,829 727,670 319,484 319,484 3,565,240 782,907 1,322 (641) 5,336,109 6,192,964 378,486 465,528 10,287,276 8,799,022

As of December 31, 2019, the expiration years of tax loss unrecognized as deferred tax assets were as follows:

(Continued)

• 236 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

a)	The Company	The Company
		Year incurred	Amount	Expiry Date
	2014	$	353,570	2024
	2015		2,132,246	2025
	2016		1,815,587	2026
b)	Taivex Therapeutics Inc.
		Year incurred	Amount	Effective Period
	2010	$	14,388	2020
	2011		16,878	2021
	2012		29,657	2022
	2013		50,227	2023
	2014		27,419	2024
	2015		43,032	2025
	2016		44,291	2026
	2017		54,764	2027
	2018		79,334	2028
	2019(estimated)		64,909	2029
c)	BES Twin Towers Co., Ltd.
		Year incurred	Amount	Effective Period
	2013	$	10,195	2023
	2014		44,139	2024
	2018		445,328	2028
d)	CPDC	Green Technology Corp.
		Year incurred	Amount	Effective Period
	2016	$	5,646	2026
	2017		30,267	2027
	2018		38,057	2028
	2019(estimated)		38,444	2029
e)	Weihua (Rudong) Trade Co., Ltd
		Year incurred	Amount	Effective Period
	2015	$	25,772	2020
	2016		45,087	2021
	2017		22,092	2022

(Continued)

• 237 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• f) Weiqiang International Trade (Shanghai) Co., Ltd.

Year incurred	Amount Effective Period $ 2,812 2019 17,547 2020 20,761 2021
2014 2015 2016

g) Weida (zhangzhou) Consultant Service Co., Ltd.

	Year incurred	Amount	Effective Period
2015	$	1,042	2020
2016		1,145	2021
2017		1,414	2022
2018		282	2023
2019(estimated)		31	2024
Jiangs	u Weiming Petrochemical Corporation
	Year incurred	Amount	Effective Period
2017	$	46,843	2022
2018		20,510	2023
2019(estimated)		175,560	2024
Zhang	zhou Weida Petrochemical Co.,Ltd
	Year incurred	Amount	Effective Period
2015	$	559	2020
2016		2,025	2021
2017		1,953	2022
2018		5,717	2023
2019(estimated)		1,654	2024

h) Jiangsu Weiming Petrochemical Corporation

i) Zhangzhou Weida Petrochemical Co.,Ltd

j) Kunshan Weiqin Management consultant Co., Ltd

Year incurred	Amount Effective Period $ 1,325 2021 6,189 2022 9,291 2023 5,071 2024
2016 2017 2018 2019(estimated)

(Continued)

• 238 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• k) Changzhou Weicai New Material Science and Technology Co., Ltd (Original name: Huijie)

name: Huijie)
Year incurred	Amount Effective Period $ 405 2020 282,336 2021 214,252 2022 185,026 2023 51,248 2024
2015 2016 2017 2018 2019(estimated)

• 2) Deferred tax liabilities:

As of December 31, 2019 and 2018, the balance of deferred income tax liabilities for the provision of land value-added tax were $7,020,975 thousand and $8,758,989 thousand, respectively.

• 3) Deferred tax assets:

January 1, 2019 December 31, 2019 (equal to January 1) January 1, 2018 Recognition in profit or loss December 31, 2018 (equal to January 1)	Taxable Loss $ 11,009 $ 11,009 $ 9,358 1,651 $ 11,009	Defined benefit plans Total 14 11,023 14 11,023 14 9,372 - 1,651 14 11,023

• (iii) Assessment of tax

The Company's income tax return for the years through 2017 were assessed by the Tax Administration.

(Continued)

• 239 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(t) Capital and other equity

(i) The issuance of common stock

As of December 31, 2019 and 2018, the authorized, issued and outstanding capital of the Company amounted to $28,348,502 thousand and $26,998,573 thousand, respectively, divided into 2,834,850 thousand shares and 2,699,857 thousand shares, respectively, with par value of $10 (NT dollars) per share.

(In thousands of shares)

Balance, January 1 Capital increased by retained earnings Balance, December 31	Common Stock
	For the years ended December 31,
	2019 2018 2,699,857 2,699,857 134,993 - 2,834,850 2,699,857

On May 24, 2019, a resolution was made during the shareholders’ meeting for the issuance of 134,993 thousand new ordinary shares, by using the unappropriated retained earnings, amounting to $1,349,929 thousand, which had been approved by the Financial Supervisory Commission on May 30, 2019, with the record date set at July 4, 2019, based on the decision made during the board meeting held on June 11, 2019. The relevant registration procedures have been completed as of December 31, 2019.

(ii) Capital Surplus

The balances of capital surplus as of December 31, 2019 and 2018, were as follows:

Premium of common stock Difference arising from subsidiary's share price and its carrying value Other Total	December 31, 2019 December 31, 2018 $ 1,242,245 1,242,245 26,314 - 18,141 18,141 $ 1,286,700 1,260,386

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding.

(Continued)

• 240 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) 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

According to the amendment of the R.O.C. Company Act, the Company must retain 10% of its after-tax annual earnings as legal reserve until such retention equals the amount of total capital. When a company incurs no loss, it may, pursuant to a resolution by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

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 Rule No. 1010012865 issued by the Financial Supervisory Commission on April 6, 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, 2019 and 2018.

In 2014, the Group changed the subsequent measurement of investment properties from cost model to fair value model. In accordance with Rule No. 1030006415 issued by the Financial Supervisory Commission on March 18, 2014, on the first-time adoption of fair value model for the subsequent measurement of investment properties, the Group set aside an equal amount of special reserve when the fair value increment of investment properties is transferred to retained earnings. The Group 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 as of December 31, 2019 and 2018, respectively.

(Continued)

• 241 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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 31, 2019 and 2018, the Company appropriated to the special reserve an amount of $5,835,980 thousand and $3,867,293 thousand, respectively.

• b) In accordance with Rule No. 1010047490 issued by the Financial Supervisory Commission on November 21, 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 Rule No. 1010012865 issued by the Financial Supervisory Commission on April 6, 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 May 4, 2019, the shareholders' meeting decided to appropriate the Company's 2018 earnings in cash and in shares, both in the amount of $1,349,929 thousand. On April 11, 2018, the shareholders' meeting decided not to appropriate the Company's 2018 earnings.

On March 27, 2020, the Board of Directors proposed to appropriate the Company's 2019 earnings with a cash dividend of $0.3 per share, totaling $985,455 thousand.

(Continued)

• 242 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iv) Other equity accounts

Balance, January 1, 2019 Exchange differences on foreign operation Exchange difference on subsidiary accounted for using equity method Exchange difference on affiliated accounted for using equity method Unrealized gains from financial assets measured at fair value through other comprehensive income Disposal of investments in equity instruments designated at fair value through other comprehensive income Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income for affiliated companies accounted for using equity method Balance, December 31, 2019 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 gains (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 (losses) 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 Unrealized gain or loss on financial assets at fair value through other comprehensive income $ (488,212) (1,248,499) (315,666) - (117) - (520) - - 127,853 - 410 - (421) $ (804,515) (1,120,657) $ (392,378) (788,734) - (18,968) (74,880) - 161 - (21,115) - - (408,318) - 31,082 - (63,561) $ (488,212) (1,248,499)

(Continued)

• 243 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(u) Earnings per share

The basic earnings per share and diluted earnings per shares for the years ended December 31, 2019 and 2018 were calculated as follows:

Basic earnings per share (NT dollars) Profit attributable to ordinary shareholders Weighted-average number of ordinary shares (thousand shares) Weighted-average number of ordinary shares-retrospective (thousand shares) Basic earnings per share Basic earnings per share-retrospective Diluted earnings per share (NT dollars) Profit attributable to ordinary shareholders (diluted) Weighted-average number of ordinary shares (thousand shares) Effect of potentially dilutive ordinary shares of Employee stock bonus Weighted-average number of ordinary shares (diluted) (thousand shares) Weighted-average number of ordinary shares (diluted)- retrospective (thousand shares) Diluted earnings per share Diluted earnings per share-retrospective	For the years ended December 31,	For the years ended December 31,
	2019 $ 1,738,449 2,834,850 $ 0.61 $ 1,738,449 2,834,850 5,894 2,840,744 0.61	2018
		4,290,269 2,699,857 2,834,850 1.59 1.51 4,290,269 2,699,857 13,371 2,713,228 2,848,221 1.58 1.51

(v) Revenue from contracts with customers

• (i) The Company primarily engages in the production of CPL, AN, Nylon and by-products and the storage, transportation, purchase and sale of these products, related chemicals and their raw materials. For the details of products and sales area, please refer to Note 14(b) and (c) of the consolidated financial statements.

(Continued)

• 244 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Contract balances

Notes receivable Accounts receivable (including related parties) Less: allowance for doubtful account Contract liabilities	December 31, 2019 December 31, 2018 $ 506,380 687,341 1,644,359 2,399,163 (446,211) (450,421) $ 1,704,528 2,636,083 $ 88,263 5,578

Please refer to Note 6(z) for disclosure of accounts receivable and allowance for doubtful accounts.

The amounts of revenue recognized for the years ended December 31, 2019 and 2018 that were included in the contract liability balance at the beginning of the peroids were $5,578 thousand and $5,253 thousand, respectively.

(w) Revenue

The detail of revenue were as followed:

The detail of revenue were as followed:
Sales of goods	For the years ended December 31,
	2019 2018 $ 29,624,094 38,503,121

• (x) 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 remuneration of employees shall be in the form of cash or shares, whose recipients may include the employees of the Company's affiliated companies who meet certain conditions. The remuneration of directors may solely be cash. The aforesaid profit represents the income before income tax and remuneration for the period.

For the years ended December 31, 2019 and 2018, the remuneration to employees amounted to $57,759 thousand and $146,409 thousand, respectively, and the remuneration to directors amounted to $38,506 thousand and $97,606 thousand, respectively. These amounts were calculated using the Company’s income before income tax before remuneration of employees and directors for the years ended December 31, 2019 and 2018. These benefits were charged to profit or loss under operating costs or operating expenses for the years ended December 31, 2019 and 2018. When the Board of Directors decided to distribute stock dividends, the number of which shall be calculated based on the closing price of the Company’s ordinary shares one day before the date of the meeting of Board of Directors.

(Continued)

• 245 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The appropriated amount of remuneration of employees and directors was amounted to $72,812 thousand and $72,812 thousand for the year ended December 31, 2018. The actual distribution of the employee remuneration was $72,812 thousand; while the amount for directors was identical to those stated on the financial statements. Related information is available on the Market Observation Post System website.

(y) Non-operating income and expense

(i) Other income

The components of other income for the years ended December 31, 2019 and 2018 were as follows:

Interest income Rent income Dividend income Other income, others	For the years ended December 31,
	2019 2018 $ 123,028 197,636 18,232 18,569 303,466 647,745 275,474 180,535 $ 720,200 1,044,485

(ii) Other gains and losses

The components of other gains and losses for theyears ended December 31, 2019 and 2018 were as follows:

Losses on disposals of property, plants, and equipment Losses on disposal of investments Gain on amendement of lease Foreign exchange losses Gains on fair value adjustment, investment property Fee expense Losses on work stoppages Other losses	For the years ended December 31,
	2019 2018 $ (2,560) (6,998) - 6,094 5 - (16,293) (1,063) 112,421 119,574 (50,114) (51,443) (35,932) (425,116) (38,798) (134,983) $ (31,271) (493,935)

(iii) Finance costs

The components of finance costs for theyears ended December 31, 2019 and 2018 were as follows:

Interest expense	For the years ended December 31,
	2019 2018 $ (140,459) (79,516) $ (140,459) (79,516)

(Continued)

• 246 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(z) Financial Instruments

(i) 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 Loans and receivables: Cash and cash equivalents Notes receivable, accounts receivable and other receivables Other assets Total 2) Financial liabilities Short-term loans Long-term bank loans-current portion Payables Long-term bank loans Long-term bills payable Lease liabilities Other liabilities Total

December 31, 2019 December 31, 2018 $ 10,726,174 6,162,171 2,360,040 2,229,968 9,116,253 13,469,938 1,958,307 2,754,465 147,766 131,493 $ 24,308,540 24,748,035 December 31, 2019 December 31, 2018 $ 3,484,148 913,732 1,762,130 863,801 2,286,796 3,871,583 6,721,783 3,810,129 4,494,177 349,729 253,243 - 121,339 149,012 $ 19,123,616 9,957,986

(ii) Credit risk

• 1) Exposure to credit risk

The carrying amount of financial assets represents the Group’ s maximum credit exposure. As of December 31, 2019 and 2018, the maximum exposures to credit risk amounted to $24,308,540 thousand and $24,748,035 thousand, respectively.

(Continued)

• 247 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

2) The concentration of credit risk

The sales of the Group are significantly concentrated in a small number of customers. For the years ended December 31, 2019 and 2018, 83% and 84%, respectively, of the total amount of accounts receivable was owed by 10 customers and 11 customers, respectively. Under the Group’ s credit policy, customers are requested to provide the Group certain financial information such as audited financial report, or other related documents for purposes of evaluating their credit worthiness. Credits are granted to these customers according to the result of the Group’s credit evaluation. Those customers who do not satisfy the requirements shall not be offered credit.

3) Impairment losses

The Group uses a 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, 2019 and 2018 were as follows:

Not past due Over 0~30 days Over 31~120 days Past due more than 1 year Not past due Over 0~30 days Over 31~120 days Over 121~365 days Past due more than 1 year	December 31, 2019	December 31, 2019
	Carrying amount of account receivables Weighted average expected credit loss Allowance for expected credit loss $ 1,771,188 0% 93,695 19,702 1.41% 278 7,993 4.78% 382 351,856 100% 351,856 $ 2,150,739 446,211 December 31, 2018
		Weighted average expected credit loss Allowance for expected credit loss 0~4% 95,217 - - - - - - 100% 355,204 450,421

(Continued)

• 248 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

December 31, 2019 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, 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 $ 1,316,369 964,305 6,122 121,339 2,216,200 9,751,861 4,494,177 $ 18,870,373 $ 1,848,774 1,718,537 11,282 110,735 1,550,000 4,037,662 349,729 $ 9,626,719	Contractual cash flows 1,316,369 964,305 6,122 121,339 2,252,804 10,324,036 4,500,000 19,484,975 1,848,774 1,718,537 11,282 110,735 1,607,245 4,591,889 350,000 10,238,462	Within 6 months 1,316,369 850,590 6,122 105,359 537,000 3,709,309 - 6,524,749 1,848,774 1,528,979 11,282 99,201 411,652 867,678 350,000 5,117,566	6-12 months - 113,715 - 9,480 529,258 518,090 - 1,170,543 - 189,558 - 9,023 210,987 316,672 - 726,240	1-2 years - - - 4,685 1,186,546 2,163,728 4,500,000 7,854,959 - - - 226 421,974 100,394 - 522,594	2-5 years More than 5 years - - - - - - 315 1,500 - - 3,795,714 137,195 - - 3,796,029 138,695 - - - - - - 765 1,520 562,632 - 2,388,072 919,073 - - 2,951,469 920,593

• (iv) Currency risk

• 1) Currency risk exposure

The Group’s exposures to significant currency risk were those from its foreign currency denominated financial assets and liabilities as follows:

De	cember 31, 2019	NTD 1,554,461 67,344 1,722,108 4,126 2,702,755 7,253 901,116	D	ecember 31, 2018
Foreign Currency $ 51,573 2,002 1,324,699,288 203,235 627,090 17,195 30,002	Exchange rate 30.036 33.640 0.0013 0.0203 4.310 0.4281 30.036		Foreign Currency 83,697 - 547,757,982 567,650 1,034,171 - 30,320	Exchange rate NTD 30.710 2,570,357 - - 0.0013 725,068 0.0199 11,353 4.470 4,622,754 - - 30.710 931,121

(Continued)

• 249 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Fi	nancial liabilities Monetary items USD CNY	De	cember 31, 2019	NTD 176,630 3,653,912	D	ecember 31, 2018
		Foreign Currency $ 5,881 847,776	Exchange rate 30.036 4.310		Foreign Currency 12,497 549,812	Exchange rate NTD 30.710 383,783 4.4700 2,457,660

2) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the foreign currency exchange rate fluctuations on cash and cash equivalents, receivables, payables, and loans, which are denominated in foreign currency. A 1% of appreciation of NTD against USD, EUR, VND, and CNY would have increased net income by $17,820 thousand and $40,705 thousand for the years ended December 31, 2019 and 2018, respectively; other comprehensive income would have increased $9,011 thousand and $9,311 thousand for the years ended December 31, 2019 and 2018, respectively. The analysis is performed on the same basis for 2018.

3) Foreign exchange gains (losses) on monetary items

Since the Group has many kinds of functional currency, the information on foreign exchange gains (losses) on monetary items is disclosed by total amount. For the years ended December 31, 2019 and 2018, foreign exchange (losses) (including realized and unrealized portions) amounted to ($16,293) thousand and ($1,063) thousand, respectively.

(v) 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 Group’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 Group’s net income will decrease by $22,162 thousand and $16,500 thousand for the years ended December 31, 2019 and 2018, respectively, assuming all other variable factors remain constant. This is due mainly to the fact that the Group’s borrowings bear floating interest rate.

(vi) Fair value information

The Group uses market observations as much as possible when measuring 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).

(Continued)

• 250 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• 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 was 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, 2019 Financial Assets Cash and cash equivalent Financial assets at fair value through profit or loss-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 other comprehensive income-non- current Note receivables, accounts receivable and other receivables 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 Lease liabilities	Book value $ 9,116,253 783,180 321,647 9,942,994 2,038,393 1,958,307 147,766 36,719,706 $ 61,028,246 $ 3,484,148 1,762,130 6,721,783 2,286,796 4,494,177 121,339 253,243 $ 19,123,616		Fair value	Fair value
		Level 1 - 783,180 321,647 - 1,595,896 - - - 2,700,723 - - - - - - - -	Level 2 - - - - - - - - - - - - - - - - -	Level 3 Total - - - 783,180 - 321,647 9,942,994 9,942,994 442,497 2,038,393 - - - - 36,719,706 36,719,706 47,105,197 49,805,920 - - - - - - - - - - - - - - - -

(Continued)

• 251 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

December 31, 2018 Financial Assets Cash and cash equivalent Financial assets at fair value through profit or loss-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 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	Fair value
		Level 1 - 1,165,590 251,629 - 1,539,419 - - - 2,956,638 - - - - - - -	Level 2 - - - - - - - - - - - - - - - -	Level 3 Total - - 135,307 1,300,897 - 251,629 4,861,274 4,861,274 438,920 1,978,339 - - - - 38,350,359 38,350,359 43,785,860 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 financial statements of the Group is close to its fair value.

• c) Valuation techniques for financial instruments measured at fair value:

The Group 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.

(Continued)

• 252 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The fair value of the financial instruments held by the Group 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 investee.

ii) Derivative financial instruments

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, 2019 and 2018.

• e) Statements of changes in fair value measurements of financial assets in Level 3

January 1, 2019 Acquisition from business combination Purchase Decrease Effects on deferred income tax liabilities Total gain and losses recognized in profit or loss or other comprehensive income December 31, 2019	Investment Property $ 38,350,359 2,075 - (9,423) (1,735,726) 112,421 $ 36,719,706	Financial assets reported at fair value through profit or loss Financial assets reported at fair value through other comprehensive income Designated at initial recognition Derivative financial assets Non-public quoted equity instruments 4,996,581 - 481,391 - - - 1,235,278 - - (135,307) - - - - - 3,846,442 - (38,894) 9,942,994 - 442,497
		Designated at initial recognition 4,996,581 - 1,235,278 (135,307) - 3,846,442 9,942,994

(Continued)

• 253 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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 or other comprehensive income December 31, 2018	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 other comprehensive income Designated at initial recognition Derivative financial assets Non-public quoted equity instruments 156,603 - - 3,136,225 - 666,841 3,292,828 - 666,841 1,998,060 - - (455,940) - - - - - 161,633 - (227,921) 4,996,581 - 438,920
		Designated at initial recognition 156,603 3,136,225 3,292,828 1,998,060 (455,940) - 161,633 4,996,581

• 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 (for instance, when a firm uses an unadjusted previous transaction price or a third-party pricing information), e.g. part of the the Group's investment in non-active market equity and debt instruments. The fair value of the Group's investment property belongs to the third level, which is determined in accordance with IFRSs, i.e., outsourcing to external appraisors for assessment based on market evidence (please refer to Note 6(j)). Due to the impracticability to evaluate the relationship between the unobservable input value and fair value, the quantitative information is not disclosed. The fair value of the aforesaid assets at December 31, 2019 and 2018 was $36,719,706 thousand and $38,350,359 thousand, respectively.

The Group holds investments in equity shares, which is classified as financial assets at fair value through profit or losses, whose fair value belongs to level 3.

(Continued)

• 254 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Most of fair value assets belonging to level 3 possesses no more than one significant unobservable input value. Only the equity instruments with inactive market may result in multiple unobservable input values which are all independent from each others.

Quantified information of significant unobservable inputs was as follows:

Item	Valuation technique	Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement • Net Asset Value • Lack of market liquidity, discount rate 10%~30% • Not applicable • Lack of market liquidity, the more the discount, the lower the fair value
Financial assets at fair value through profits or losses and financial assets at fair value through other comprehensive income	Net Asset Value Method

• g) The evaluation process for fair value belonging to level 3

The Group's fair value evaluation involves observable input value requiring unobservable parameters for significant adjustments or unobservable input value, both of which belong to level 3. The main source of such input value is external appraisors' reports. The results of the evaluation are then reviewed to assure the consistency with the source of the evaluation and the reasonability.

The evaluation of investment property complies with FSC's regulations of the evaluation methods and parameters, and is conducted by external appraisors.

• h) Fair value measurements of 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.

• (aa) Financial risk management

• (i) Overview

The Group are exposed to the following risks due to the use of financial instruments:

• 1) Credit Risk

• 2) Liquidity risk

• 3) Market risk

(Continued)

• 255 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The following discusses the Group’ 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 financial statements.

(ii) 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 Group’s risk management policies and to report regularly on its activities.

The Group’s risk management policies are established to identify and analyze the risks faced by the Group, 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 Group’ s activities. The Group, 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 Group oversees how management monitors compliance with the Group’ s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee of the Group 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.

(iii) Credit Risk

Credit risk means the potential loss of the Group 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 Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Group’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 Group has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Group’ s standard payment and delivery terms and conditions are offered. The Group’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 Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis.

(Continued)

• 256 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group 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 Group’s finance department. As the Group 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 Group do not have compliance issues and significant credit risk.

(iv) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’ 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 Group’s reputation. The management believes that the Group do not have significant liquidity risk.

(v) 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 Group’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 returns.

The Group 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 Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group’s entities, primarily the New Taiwan Dollar (NTD). The currencies used in these transactions are denominated in NTD, USD and CNY.

The Group’s currency risk is not hedged as some of the currencies of the Group’s foreign currency receivables and payables are the same, producing a natural hedge effect.

2) Interest rate risk

The Group’ s interest rate risk comes from long-term and short-term bank loans. The long-term bonds issued by the Company is fixed-rate, so there is no risk caused by the fluctuations of interest rates and fair value interest rate. The long-term and short-term bank loans with floating-rate are exposed to interest rate risk, but most of risk is offset by cash and cash equivalents holding in floating-rate deposits.

(Continued)

• 257 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

3) Other market price risk

The Group does not enter into any commodity contracts other than to meet the Group’s expected usage and sales requirements; such contracts are not settled on the net basis.

(ab) Capital management

The Group meets its objectives for managing capital is to safeguard the capacity to continue to operate, to continue to provide a return to 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 Group may adjust the dividend payment to the shareholders, reduce the capital for redistribution to shareholders, issue new shares, or sell assets to settle any liabiltiies.

The Group 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 Group’s debt-to-equity ratios at the end of the reporting period as of December 31, 2019 and 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, 2019 December 31, 2018 $ 29,274,626 22,514,200 (9,116,253) (13,469,938) $ 20,158,373 9,044,262 $ 67,193,864 67,190,754 $ 87,352,237 76,235,016 % 23.08 % 11.86

On December 31, 2019, The increase of debt-to-equity ratio resulted from the operationsupplementing bank loans and cash being invested into subsidiaries.

(Continued)

• 258 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (ac) Investing and financing activities not affecting current cash flow

The Group’s investing and financing activities which did not affect the current cash flow for the years ended December 31, 2019 and 2018, were as follows:

(i) For the acquisition of right-of-use assets based on lease term, please refer to Note 6(i).

Reconciliation of liabilities arising from financing activities was as follows:

Long-term loans Short-term loans Long-term bills payable Lease liabilities Total liabilities from financing activities	January 1, 2019 $ 4,673,930 913,732 349,729 298,815 $ 6,236,206	Cash flows 3,897,363 2,579,857 4,144,448 (61,653) 10,560,015	Non-cash	changes Other December 31, 2019 - 8,483,913 - 3,484,148 - 4,494,177 16,081 253,243 16,081 16,715,481
			Foreign exchange movement (87,380) (9,441) - - (96,821)

Long-term loans Short-term loans Long-term bills payable Total liabilities from financing activities	January 1, 2018 $ 3,269,165 250,000 299,882 $ 3,819,047	Cash flows 1,263,144 669,224 49,847 1,982,215	Non-cash	changes Other December 31, 2018 - 4,673,930 - 913,732 - 349,729 - 5,937,391
			Foreign exchange movement 141,621 (5,492) - 136,129

(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

Kaohsiung Monomer Company Zhong Gong Baoquan Ltd. BES Engineering Corporation Core Pacific City Co., Ltd.

Chung Kung Management and Maintenance of Apartments Co., Ltd.

• Coreasia Human Resources management Co., Ltd.

Capital Machinery Co., Ltd.

Sheen Chuen-Chi Cultural & Educational Foundation

Relationship with the Group

Investee as accounted for using equity method Investee as accounted for using equity method The Company is a director of the entity Shares a director with the Company

Investee as accounted for using equity method of Zhong Gong Baoquan Ltd.

Subsidiary of BES Engineering

The entity is a director of the Company The entity is a director of the Company

(Continued)

• 259 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Name of related party Relationship with the Group Changshu Jing Hui Properties Co., Ltd. The president of the entity is the vice president of the Company All Board of Directors, general manager and The main management of the Company deputy general manager

• (b) The ultimate parent company

The Company is the ultimate parent company.

• (c) Significant Transactions with related parties

• (i) Sale of Goods and Services to Related Parties

The amounts of significant sales by the Company to related parties were as follows:

Associates	For the years ended December 31,
	2019 2018 $ 550,760 644,031

The terms for related party sale transactions were the same as ordinary sales.

(ii) Receivables

The receivables from related parties were as follows:

Accounts	Types of related parties	December 31, 2019 December 31, 2018 $ 57,764 60,233 10,969 9,793 9 4 $ 68,742 70,030
Accounts receivable Other receivables Other receivables	Associates Associates Other related parties

(iii) Payables

The payables to related parties were as follows:

Accounts	Types of related parties	December 31, 2019 December 31, 2018 $ 4,602 4,976 18,134 4,548 $ 22,736 9,524
Other payables Other payables	Associates Other related parties

(Continued)

• 260 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iv) Other

Associates Rental income Other revenues Security service fees Other related parties Rental income Other revenues Other expenses Rental expenses	For the years ended December 31,
	2019 2018 $ 5,373 5,235 16,835 17,809 (23,057) (23,978) 3 4 15 1,043 (21,243) (882) - (4,814)

Please refer to Note 6(q) for lease of land and buildings to related parties.

• (v) The Group had a two-year contract with BES Engineering, for the lease of office building, with the total value of $9,629 thousand. The rental expense for the year ended December 31, 2018 was $4,814 thousand. This rental transaction was applicable to IFRS16 and recognized rightof-use assets and lease liability both amounting to $7,130 thousand. The depreciation expense and interest expense for the years ended December 31, 2019 and 2018 were $4,754 thousand and $82 thousand, respectively. The amount of lease liability as of December 31, 2019 was $2,398 thousand.

• (vi) The Group had contracts with BES Engineering, for mechanical engineering services projects and paid commission on the basis of actual construction. As of December 31, 2019 and 2018, the construction project in-progress amounted to $1,532,800 thousand and $1,532,800 thousand, respectively. As of December 31, 2019 and 2018, the unpaid fees amounted to $860,680 thousand and $1,376,787 thousand, respectively. The refundable deposit at December 31, 2019 and 2018 amounted to $415,794 thousand and $453,492 thousand, respectively.

• (vii) The Group had contracts with Capital Machinery, for mechanical engineering services projects and paid commission on the basis of actual construction. As of December 31, 2019 and 2018, the construction project in-progress amounted to $19,920 thousand and $17,700 thousand, respectively. As of December 31, 2019 and 2018, the unpaid fee amounted to $15,028 thousand and $14,497 thousand, respectively. The security deposit was $1,830 thousand and $1,300 thousand as of December 31, 2019 and 2018.

• (viii) The Group acquired 123,528 thousand shares of preferred stocks of Core Pacific City Co., Ltd. amounting to $1,235,278 thousand on March 11, 2019. Please refer to Note 6(b).

• (ix) The Group acquired 20,000 thousand shares of common stock of BES Twin Towers Co., Ltd. amounting to $215,600 thousand from BES Engineering Co., Ltd. on March 12, 2019.

• (x) The Group acquired 100 thousand shares of common stock of BES Twin Towers Co., Ltd. amounting to $1,078 thousand from its management on March 12, 2019.

(Continued)

• 261 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (xi) To acquire its right of development and use of land, the Company invested the amounts of USD48,000 thousand ($1,400,000 thousand) and USD114,000 thousand ($3,400,000 thousand) in Frontier Fortune Investment Pte. Ltd. (Vietnam) and Core Pacific Twin Star (Vietnam) Investment Co., Ltd., respectively, on October 25, 2018, wherein, 20% of the investment amounts will be offered to Changshu Jing Hui Properties Co., Ltd. for purchasing option.

• (d) Key management personnel compensation

Short-term employee benefit Post-employment benefits	For the years ended December 31,
	2019 2018 $ 201,995 257,498 14,284 7,533 $ 216,279 265,031

• (8) Pledged assets:

The Group's pledged assets are as follows:

Asset	Purpose of pledge Guarantee for priority right-of-use of harbor $ Collateral for long-term and short- term financial credit, syndicated loan Syndicated loan, collateral for long-term financial credit and 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, 2019 December 31, 2018 10,037 10,038 5,511,001 4,453,343 5,122,417 5,995,969 888,805 1,378,279 961,050 915,400 624,180 477,405 91,557 91,557 598,865 625,190 13,807,912 13,947,181
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 Right-of-use of Sea Areas

As of December 31, 2019 and 2018, 4,000 thousand shares of a subsidiary of the Group were pledged as collateral for long-term bills payable.

(Continued)

• 262 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(9) Significant commitments and contingencies:

• (a) As of December 31, 2019 and 2018, the Group had the following unused letters of credit:

USD EUR NTD CNY JPY	December 31, 2019 December 31, 2018 $ 11,696 43,631 235 - 1,015,000 1,095,000 20,799 32,264 37,300 -

• (b) As of December 31, 2019 and 2018, the Group had issued guarantee notes for bank loans, sales and purchases, and development plan aggregating to $13,508,000 thousand, USD30,000 thousand and $13,748,669 thousand, USD20,000 thousand, respectively.

• (c) As of December 31, 2019 and 2018, the Group had contracts for various construction projects inprogress amounting to $10,891,348 thousand and $8,511,323 thousand, respectively. As of December 31, 2019 and 2018, the remaining future obligations under these contracts amounted to $3,404,508 thousand and $4,219,235 thousand, respectively.

• (d) As of December 31, 2019 and 2018, the agreement on the acquisition of material property amounted to $37,200,010 thousand and $0 thousand, and the unpaid portion amounted to $29,760,000 thousand and $0 thousand, respectively. Please refer to Note 6(e) for more information.

• (e) As of December 31, 2019 and 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.

• (f) Important matters

• (i) Case of Kaohsiung gas explosion forced disconnected pipeline

On July 31, 2014, there was an underground pipeline explosion in Kaohsiung city. Due to the post - disaster reconstruction project, Kaohsiung City Government issued a penalty letter No. 10335137100 on August 18, 2014, to order the Company 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 September 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 Feburary 2017.

(Continued)

• 263 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (ii) Abolishment of the permission for Kaohsiung road and underground pipeline excavation and pipeline

Due to the August 1, 2014, 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 December 15, 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 was built by CPC, 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 Feburary 16, 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.

(iii) 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.

(iv) 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 21, 2016: trading the equity of Taiwan Chi chlorine Chemical Co., Ltd, total 6,400,000 shares at the sales price, USD100,000 thousand, which was equivalent to $3,225,000 thousand. After the expectation of the disposal interests, $2,838,761 thousand, the Company instantly instructed 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 September 2016 and asked PPG to participate in the lawsuit. Outside lawyers of PPG, in the October of same year, represented that PPG was 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 received USD100,000 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. The Company prevailed in April 2019, and was entitled to compensation of default interests and the attorney’s fee about USD3,200 thousand, which was obtained in April in the same year.

(Continued)

• 264 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(g) Contingent liabilities

• (i) The Company signed total three land lease contracts with the 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. The Kaohsiung branch of Taiwan International Ports Corporation, Ltd. delivered the land to the Company prior to the end of December 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 $1,650 thousand, $2,565 thousand and $1,493 thousand respectively since the land was delivered. 3 years and 6 months from the land delivery date, the Company paid management fees of $10,654 thousand, $24,605 thousand and $12,329 thousand respectively. The Company also placed Certificate of Deposits of $5,000 thousand and $13,000 thousand as performance bonds in December 2013 and February 2014 respectively. The Company, in August 2015, shortened the operating scale based on th eadjustment of investment plan, which resulted in one of the performance bonds of $8,000 thousand, not being returned. Taiwan International Ports Corporation, Ltd. completed the transaction procedure prior to November 2017. The Company started to implement land drilling and geological improvement project and started paying the land rent of those projects, which was $1,675 thousand and $1,497 thousand respectively each year.

(ii) Dispute from the senior manager

1) Labor Dispute

The previous senior managers, who left the Company without transferring the duties and authorization, did not perform the duties since July 1st 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 against 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 sides, and Expired Employee Retirement Policies of the Company was applicable, the Company shall pay $4,572 thousand to Mr. Liu. The Company was not satisfied with the original verdict and appealed for the 2nd sentence court. The 2nd 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. In June 2019, the appeal was dismissed and the judgment was binding and final.

(Continued)

• 265 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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 $35 thousand, to Mr. Zhang, which was not satisfied by Mr. Zhang and this case was appealed to the 2nd sentence court. In July 2016, the 2nd sentence court rejected the request from Mr. Zhang but he re-appealed to the 3rd sentence in August of the same year. Upon finding the appeal meritorious, the Supreme Court reversed and remanded the judgement. The preparatory proceeding of the first repeated appeal was conducted in Taiwan Court Kaohsiung Branch Court in April 2019.

2) Disclosure Secret Case

Managers who left the office without authorization were 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 Note 8 for details of deposit for lawsuit.

(iii) 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 Janurary 28, 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 victims’ requests. 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 prosecuted the Company and managers in Feburary 2015 and asked for the joint damaged compensation $6,920 thousand, which awaited hearing by Miaoli local court. In September of the same year, both sides agreed to withdraw the litigations. Trial procedure was recovered in Feburary 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 is currently under hearing in High Court Taichung Branch.

(iv) Contract Fraud of Shanghai industry

On August 6, 2014, the reinvestment company, Weihua and Weiqiang, filed the civil appeal to Yangpu District Court to ask Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. to pay all overdrafts of the contract. However, Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. did not perform the first phase of repayment according to Court’s mediation report, Weihua and Weiqiang, on September 2, 2014, applied to Yangpu District Court for the enforcement and sealed all coal tar of Shanghai Tongye Coal and Chemical Industry Group Co., Ltd., the total coal tar sealed was 5,216 tons and 4,777 tons were sold. Subsequently, Weihua and Weijiang Company and Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. would continue negotiations on unrealized creditors and requested Shanghai Tongye Coal

(Continued)

• 266 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

and Chemical Industry Group Co., Ltd. to propose the more specific repayment plan. Weihua and Weiqiang estimated allowance of the accounts receivable to be, CNY19,274 thousand and CNY8,276 thousand respectively. Weihua and Weijiang Company reported to the police the relevant persons of Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. that were suspected to be involve with the contract fraud and other criminal matters. The police rejected the report due to insufficient evidence, therefore Weihua hired a local lawyer in May 2018, to assist with Shanghai police and Shanghai economics investigation group. The case is now under investigation.

• (v) civil compensation for Residents living in An shun

• 1) The 1st case

In 2008 and 2009, Mr. Wu and others filed civil and national compensation lawsuit against the Ministry of Economic Affairs, Tainan City Government, Tainan City Environmental Protection Bureau and the Company (Hereinafter referred to as 1st case of Tainan Anshun plant civil compensation) and they claimed that during 1942 and 1983, the previous Taiwan Alkali Co. Ltd. Anshun plant, produced mercury and dioxins in its production operations and polluted the 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 was the ultimate owner 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 did not supervise and require the Anshun plant to implement pollution prevention and control acts, thus should be jointly responsible for any compensation. 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 Anshun plant, so they claimed the Company shall also take joint responsibility for 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 bear the cost of medical expenses and mental compensation for $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 $2,300 thousand, which was incorporated into this case, the total compensation amount was $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 $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 the Company to compensate the plaintiff for $190,000 thousand, which the Company was not satisfied with and had proposed the appeal for remedy in September 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

(Continued)

• 267 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

$190,000 thousand. The Company made a payment of compensation and related interests to 143 plaintiffs before the end of June 2019. The part related to medical remedy of the case was abandoned for secondary trial.

• 2) The 2nd case

Mr. Chen and others filed civil and national compensation lawsuit against the Company and the Ministry of Economic Affairs on March 14th 2017 (Hereinafter referred to as 1st case of the Tainan Anshun plant civil compensation), they claimed the Company and the Ministry of Economic Affairs had to jointly compensate the plaintiff $80,915 thousand. The verdict of the 3rd national compensation in 2008 of the Tainan Anshun 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. There were disputable factors on both factual and legal matters. During the 1st and 2nd instance of the Anshun 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 Anshun 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 Anshun plant civil compensation, the Company continued to seek for the jurisdiction remedies to protect the Company and shareholder interests.

(10) Losses Due to Major Disasters:None

(11) Subsequent Events:

• (a) In order to invest in the overseas subsidiary for the purpose of plant construction, a resolution was made during the Board of Director’ s meeting held on September 23, 2019 for the issuance of common stock in term of Global Depositary Receipts (GDR), with a maximum limit of $500,000 thousand shares, amounting to USD160,317 thousand, which was approved by Rule No. 1080335763 Financial Supervisory Commission on November 20, 2019. The share price was determined and completed on January 6, 2020 and issued on January 10, 2020. The total units of issued GDR was 18,000 thousand, which represented the right of common stock for 450,000 thousand shares; for every 25 shares of common stock per unit of GDR, the unit price of GDR was USD7.18, which was equivalent to $8.64 per share, resulting to a total issuance price amounting to USD129,240 thousand..

• (b) On February 26, 2020, the Board of Directors resolved during their meeting to purchase the land, lants and equipment of Sunko Ink Co., Ltd amounting to $465,000 thousand for the purpose of expanding the manufacturing and business operations of the Company.

(Continued)

• 268 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(12) Other:

• (a) The nature of operating costs and expenses were as follows:

The nature of operating	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:
	For theyears ended December 31
By funtion By item	2019				2018
	Operating cost	Operating expense	Non-Operating expense	Total	Operating cost	Operating Expense	Non-Operating expense	Total
Employee benefits
Salary	914,004	592,961	-	1,506,965	1,147,548	693,924	246	1,841,718
Labor and health insurance	93,255	59,192	-	152,447	93,076	46,408	-	139,484
Pension	42,922	28,339	-	71,261	45,132	22,761	-	67,893
Remuneration of directors	-	72,303	-	72,303	-	106,013	-	106,013
Others	29,917	17,467	-	47,384	29,380	12,591	-	41,971
Depreciation	1,268,315	160,879	6,058	1,435,252	1,163,078	195,640	5,969	1,364,687
Amortization	640	9,362	-	10,002	5,199	14,337	-	19,536

(b) On March 22, 2019, Kaohsiung Urban Planning Commission (KUPC) announced that Dashe Industrial Park (DIP), where the Company’s plant is located, will be categorized from Special Zone to Zone B. In light of this matter, all the companies involved in this case are making their best effort to negotiate and compromise with KUPC, requesting KUPC to change DIP’ s status to Zone A instead of Zone B.

(Continued)

• 269 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(13) Other disclosures:

• (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:

• (i) Loans to other parties:

(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	Transaction amount for business between two parties	Reasons for short-term financing	Allowance for bad debt	Collateral	Collateral	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.	Other Receivable	Yes	23,128	23,128	6,908	2%	2	-	Operating	-		-	63,429	63,429

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 net value of Core Pacific Twin Star (Myanmar).

Note 3: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statements.

(ii) Guarantees and endorsements for other parties:None

• (iii) Securities held as of December 31, 2019 (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		Note
				Shares/Units	Carrying value	Percentage of ownership (%)	Fair value
CPDC BES Twin Towers Co., Ltd	Yuanta Financial Holdings 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 Aetas Technology Inc. Taiwan Business Bank	None The Company is a director of the investee company None The Company is a supervisor of the investee company None Shares a director with the Company The Company is a director of the investee Company The Company is a director of the investee company � �	Financial assets designated at fair value through profit or loss� current Non-current financial assets at fair value through other comprehensive income � � � Financial assets designated at fair value through profit or loss� non-current 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 other comprehensive income	30,938,819 149,243,449 44,684,712 407,000 2,600,000 422,250,872 2,701,651 8,815 287,961 25,527,558	624,964 1,161,114 434,782 1,461 26,000 7,247,062 114,293 358 - 321,647	0.27 9.75 0.30 4.52 2.89 27.19 14.00 0.05 0.58 0.36	624,964 1,161,114 434,782 1,461 26,000 7,247,062 114,293 358 - 321,647

(Continued)

• 270 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Name of holder	Category and name of security	Relationship with company	Account title		Ending balance	Ending balance		Note
				Shares/Units	Carrying value	Percentage of ownership (%)	Fair value
Tsou Seen Chemical Industries Corporation	Core Pacific City Co., Ltd. Praxair Chemax Semiconductor Materials Taiwan Tea Corporation Good Company TaiRx, Inc.	Shares a director with the Company The Company is a director of the investee 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- current Financial assets at fair value through other comprehensive income� non-current �	160,111,000 6,754,127 9,618,000 750,000 722,500	2,695,932 285,733 158,216 - 14,652 13,086,214	10.31 35.00 1.22 2.08 1.18	2,695,932 285,733 158,216 - 14,652 13,086,214

• (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of $300 million or 20% of the capital stock:

(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	Beginning Balance	Purch	ases	Sales	Sales	Sales	Sales	Ending Balance	Ending Balance
					Shares/units	Amount	Shares/units	Amount	Shares/units	Price	Cost	Gain (loss) on disposal	Shares/units	Amount
The Company BES Twin Towers Co., Ltd	ETF t ETF Money fund Money fund Ordinary and Preferred shares t Praxair Chemax Semiconductor Materials Co., Ltd. t i Praxair Chemax Semiconductor Materials Co., Ltd. t i	Financial assets at fair value hrough profit or loss� current � � � Financial assets at fair value hrough profit or loss�non- current Financial assets at fair value hrough other comprehensive ncome�non- current Financial assets at fair value hrough other comprehensive ncome�non- current	Yuanta/P- shares SSE50 ETF Cathay China First Security and InsuranceCo., Ltd JuShen Funds Co., Ltd Core Pacific City Co., Ltd. BES Twin Towers Co., Ltd. the Company	None � � � Shares a director with the Company Subsidiary Subsidiary	10,313,000 16,378,000 - - 298,723,070 9,455,778 -	289,332 288,988 - - 3,248,545 438,920 -	- - 29,353,684.10 68,030,231.53 123,527,802 - 6,754,127	- - 450,000 1,010,000 1,235,278 - 351,290	10,313,000 16,378,000 29,353,684.10 68,030,231.53 - 6,754,127 -	326,539 334,870 450,353 1,010,582 - 351,290 -	289,332 288,988 450,000 1,010,000 - 351,290 -	37,207 45,882 353 582 - - -	- - - - 422,250,872 2,701,651 6,754,127	- - - - 7,247,062 114,293 285,733

• (v) Acquisition of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Name of property	Transaction date	Transaction amount	Status of payment	Counter-party	Relationship with the Company	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	References for determining price	Purpose of acquisition and current condition	Others
							Owner	Relationship with the Company	Date of transfer	Amount
Ding-Yue Development Co., Ltd	land	September 25, 2019	37,200,010	-	Core Pacific City Co., Ltd.	Shares a director with the Company	Note 1	-	-	-	Appraisal reports from Real Estate Appraisers Firm	Business operating use	Note 2

Note 1: The object of the transaction owned by different related parties within 5 years, wherein a disclosure on the date of acquisition, price, and relationship with the parent company in the current period is required: N/A.

Note 2: The consideration of the transaction and the property (including the land and the building constructed on it) are under mutual trust agreement.

• (vi) Disposal of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock:None

(Continued)

• 271 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

• (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of $100 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	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 CPDC Green Technology Corp.(CPDC GT) (Original name: CPDC Engineering Co., Ltd.) Weihua (Rudong) Trade Co., Ltd Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang)	Tsou Seen Chemical Industries Corporation Weihua (Rudong) Trade Co., Ltd Kaohsiung Monomer Company Ltd c a The Company Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang) s c Jiangsu Weiming Petrochemical Corporation(We iming) s c	Subsidiary Subsidiary Affiliated ompany ccounted for using equity method Subsidiary ame parent ompany ame parent ompany	Sales Sales Sales Sales Sales Sales	(1,053,316) (247,339) (550,760) (249,499) (388,507) (194,560)	% 3.56 % 0.83 % 1.86 % 0.89 % 1.31 % 0.66	3 Month 3 Month 1 Month Base on contract 1 Month 1 Month	- - - - - -	OA 90 days OA 90 days - Base on contract OA 30 days OA 30 days	32,347 79,520 57,764 51,269 99,757 -	1.90% 4.67% 3.39% 3.89% 5.85% -%	Note � Note � �

Note: The amounts of the transaction and the ending balance had been offset in the consolidated financial statements.

(viii) Receivables from related parties with amounts exceeding the lower of $100 million or 20% of the capital stock:None

• (ix) Trading in derivative instruments:None

• (x) Business relationships and significant intercompany transactions:

(In Thousands of New Taiwan Dollars)

No.	Name of company	Name of counter-party	Nature of relationship		Intercompany transactions	Intercompany transactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0 0 0 1 2 3 4	The Company The Company The Company Weihua (Rudong) Trade Co., Ltd (Weihua) Tsou Seen Chemical Industries Corporation(TSCI C) CPDC Green Technology Corp.(CPDC GT)(Original name:CPDC Engineering Co., Ltd.) Weihua (Rudong) Trade Co., Ltd (Weihua)	Weihua (Rudong) Trade Co., Ltd (Weihua) Tsou Seen Chemical Industries Corporation(TSCIC) CPDC Green Technology Corp.(CPDC GT) (Original name:CPDC Engineering Co., Ltd.) The Company The Company The Company Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang)	1 1 1 2 2 2 5	Sales revenue Sales revenue Repair expense Cost of goods sold Cost of goods sold Sales revenue Sales revenue	247,339 1,053,316 249,499 247,339 1,053,316 249,499 388,507	OA 90 days OA 90 days Base on contract OA 90 days OA 90 days Base on contract OA 30 days	0.83% 3.56% 0.89% 0.83% 3.56% 0.89% 1.31%

(Continued)

• 272 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

No.	Name of company	Name of counter-party	Nature of relationship	Intercompany transactions	Intercompany transactions	Intercompany transactions	Intercompany transactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
5 I ( L 6 I ( L 7 J P C i	Weiqiang nternational Trade Shanghai) Co., td.(Weiqiang) Weiqiang nternational Trade Shanghai) Co., td.(Weiqiang) iangsu Weiming etrochemical orporation(Weim ng)	Weihua (Rudong) Trade Co., Ltd (Weihua) Jiangsu Weiming Petrochemical Corporation(Weiming) Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang)	5 4 4	Cost of goods sold Sales revenue Cost of goods sold	388,507 194,560 194,560	OA 30 days OA 30 days OA 30 days	1.31% 0.66% 0.66%

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

(b) Information on investees:

The following is the information on investees for the years ended December 31, 2019 (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 inve	stment amount	Balance as	of December 31,	2019	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2019	December 31, 2018	Shares	Percentage of wnership	Carrying value
The Company � � � � � � � �	Kaohsiung Monomer Company Ltd Zhong gong baoquan Ltd. Ding-Yue Development Co., Ltd. (original name: Tao Zhu Construction & Development Co., Ltd.) CPDC Investment (BVI) Co Ltd. Tsou Seen Chemical Industries Corporation CPDC Green Technology Corp.(Original name: CPDC Engineering Co., Ltd.) Rich Equities Ltd. Unichem Development Limited BES Twin Tower Development Co., 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 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	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 Holding company Dicalcium phosphate Mechanical engineering Holding company Holding company Real estate investment and development	- 14,400 1,100,000 904,946 760,000 100,000 5,996 7,865,233 3,353,383	- 14,400 100,000 904,946 760,000 100,000 5,996 5,894,124 2,000,000	20,000,000 1,440,000 754,000,000 26,580,000 96,000,000 15,000,000 180,000 255,367,516 368,100,910	% 40.00 % 24.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00	888,805 19,835 7,518,184 901,631 1,511,615 102,891 5,183 6,725,721 4,991,033	1,227,244 9,596 1,771 (3,485) 90,669 (37,577) 46 (231,486) 1,247,592	490,897 2,303 1,771 (3,485) 90,669 (37,577) 46 (231,486) 1,247,523	Note 1 Note 1 Note 2 Note 2&4 Note 2&5 Note 2&5 Note 2&4 Note 2&4&5 Note 2&5

(Continued)

• 273 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31,	Balance as of December 31,	2019	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2019	December 31, 2018	Shares	Percentage of wnership	Carrying value
The Company � CPDC Investment (BVI) Co Ltd. Ding-Yue Development Co., Ltd. (original name: Tao Zhu Construction & Development Co., Ltd.) Tsou Seen Chemical Industries Corporation BES Twin Towers Development Co., Ltd. Frontier Fortune Investment Pte. Ltd. Frontier Fortune Investment Pte. Ltd. Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd	Thanh Phong Construction Investment Co., Ltd. Jean Pacific Development Co., Ltd. Core Pacific Overseas Holdings Ltd Da-ying Construction Ltd. Taivex Therapeutics Inc. Frontier Fortune vestment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd Gemini Star (India) Private Limited Core Pacific Twin Star (Vietnam) Investment Co., Ltd. Core Pacific Pioneer (Myanmar) Company Ltd	B2-19, Golden King Tower Building, No. 15 Nguyen Luong Bang, Tan Phu Ward, District 7, Ho Chi Minh City 7F.-2, No.300, Yangguang St., Neihu Dist., Taipei City 11491, Taiwan (R.O.C.) 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 112SINGAPORE (068902) NO.153/Ka,Kyun ShweMmyaing Lane (2) ,23 ward,Thingangyun Townshin Yangon Level7, The Capital, Plot No.C-70, G Block, Bandra Kurla Complex, Bandra MUMBAI Mumbai City MH 400051 IN B2-19, Golden King Tower Building, No. 15 Nguyen Luong Bang, Tan Phu Ward, District 7, Ho Chi Minh City NO.153/Ka,Kyun ShweMmyaing Lane (2) ,23 ward,Thingangyun Townshin Yangon	Engaged in construction, real estate, building constructional consulting, lease equipment and wholesale of building materials Renting and selling real estate Holding company Engineering, construction contracting business Engaged in biotechnology, pharmaceutical research and development and marketing Holding company Holding company and consultancy Real estate and petrochemical products research and consultancy Engineering, real estate and consultancy of construction Building construction, real estate management, development and sale	609,347 480,000 808,564 22,500 462,246 1,326,796 169,921 9,274 1,131,376 24,804	609,347 - 808,564 22,500 462,246 180,817 169,921 - - 12,355	458,637,500,000 48,000,000 26,580,000 - 46,224,551 43,060,000 5,500,001 2,100,000 850,000,000,000 800,000	% 97.87 % 40.00 % 45.19 % 100.00 % 91.10 % 100.00 % 100.00 % 99.99 % 97.70 % 80.00	598,440 479,955 895,933 29,081 325,765 1,307,655 163,195 7,485 1,128,322 24,817	4,044 (113) (7,418) 4,452 (64,876) 25,292 3,378 (1,429) 27,723 840	3,958 (45) (3,352) 4,452 (59,102) 25,292 3,378 (1,429) 27,085 672	Note 2&4&5 Note 1 Note 2&4 Note 2&3 Note 2 Note 2&4 � � � �
								27,625,546	2,296,263	1,561,570

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.

(Continued)

• 274 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(c) Information on investment in mainland China:

• (i) The names of investees in Mainland China, the main businesses and products, and other information:

					(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)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2019	Investment flows		Accumulated outflow of investment from Taiwan as of December 31, 2019	Net income (losses) of the investee	Percentage of ownership	Investment income (losses)	Book value	Accumu-lated remittance of earnings in current period
					Outflow	Inflow
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	( 2 )� ( 3 )	763,460	-	-	763,460	5,243	100.00%	5,243	474,248	-
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	( 1 )� ( 3 )	211,560	-	-	211,560	6,211	100.00%	6,211	122,121	-
Weida (Zhangzhou) Consultant Service Co., Ltd. (Weida)	Consultancy	13,171	( 2 )	13,171	-	-	13,171	(34)	100.00%	(34)	2,421	-
Jiangsu Weiming Petrochemical Corporation(W eiming)	Petrochemical supporting facility construction	5,714,463	( 1 )� ( 2 )	3,743,354	1,971,109	-	5,714,463	(174,059)	100.00%	(174,059)	5,059,219	-
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	( 2 )	30,648	-	-	30,648	(1,661)	100.00%	(1,661)	14,254	-
Kunshan Weiqin Management consultant Co., Ltd (Weiqin)	Management consultant	29,664	( 2 )	29,664	-	-	29,664	(6,693)	100.00%	(6,693)	1,834	-
Zhejiang Wedge new material Co., Ltd(Wedge)	Engaged in trading of Synthetic fiber material	31,278	( 2 )	31,278	-	31,278	-	13	100.00%	13	-	-
Changzhou Weicai New Material Science & Technology Co., Ltd.(Weicai) (Original name:Changzho u Huijie new material Co., Ltd (Huijie))	Engaged in engineering plastic and high valued petroleum chemical products	1,860,113	( 2 )	1,324,893	-	-	1,324,893	(50,911)	100.00%	(50,911)	1,039,038	-

(Continued)

• 275 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as of December 31, 2019	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
8,908,317	14,362,341	Note 4
Note1: There are three ways to invest as follows: (a) The Company directly invests in China. (b) The Company through third regional company (UDL) invests in China. (c) Others. (The Company through subsidiaries invest in China.) Note2: Explaination for the field “net income (losses) of the investee”: (a) If it is in preparation, no investment profit or loss.

• (b) There are three ways to identify the basis of investment profit or loss.

• (b.1) financial statements audit by an international accounting firm with a relationship with a Taiwan accounting firm.

• (b.2) financial statements audit by the Company’s audit CPA. (b.3) others.

Note3: The amount in this table are presented in New Taiwan Dollar.

Note4: The cumulative investment amount or investment proportion to China cannot be over the Company’ s net value of 60%. The Company obtained certified documents of operating headquarters issued by Industrial Development Bureau, Ministry of Economic Affairs on October 18, 2018, and so is not subject to the above regulations. Valid until October 14, 2021.

(iii) Significant transactions:

The significant inter-company transactions with subsidiaries in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions”.

(Continued)

• 276 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(14) Segment information:

• (a) General Information

The Group 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 Group 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.

• (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 4. The Group 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 years ended December 31, 2019 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 Capital expenditure of non-current assets Segment assets Segment liabilities	Acrylonitrile & Acetic Acid $ 10,257,450 - $ 10,257,450 $ 172,782 $ 2,072,848 $ 1,111,943 $ 4,076,676 $ 2,692,554	Caprolactam 15,157,883 - 15,157,883 1,152,520 (4,110,428) 1,934,727 13,934,202 5,051,889	Other 4,208,761 249,499 4,458,260 119,952 3,901,052 2,252,746 78,457,612 21,530,183	Adjustment and eliminations Total - 29,624,094 (249,499) - (249,499) 29,624,094 - 1,445,254 - 1,863,472 - 5,299,416 - 96,468,490 - 29,274,626

(Continued)

• 277 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND SUBSIDIARIES Notes to the Consolidated Financial Statements

For the years 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 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 1,211,110 663,248 13,500,076 5,527,184	Other 3,334,742 238,291 3,573,033 52,420 656,939 3,020,045 71,031,122 14,118,650	Adjustment and eliminations Total - 38,503,121 (238,291) - (238,291) 38,503,121 - 1,384,223 - 4,676,950 - 4,046,481 - 89,704,954 - 22,514,200

(c) Geographical Areas

The Group’ s noncurrent assets located overseas are immaterial. Revenues from domestic and overseas customers for the years ended December 31, 2019 and 2018 were as follows:

Region	For the three months ended December 31,
	2019 2018 $ 20,945,478 28,747,803 8,661,506 9,351,505 17,110 403,813 $ 29,624,094 38,503,121
Operating revenue from domestic sales Asia Other (individual areas under 10%) Total operating revenue

• (d) Major Customers

Customers generating over 10% of total revenue for the December 31, 2019 and 2018 were as follows:

Customers	For the three months ended December 31,
	2019 2018 $ 3,564,112 5,502,844 3,430,779 4,675,062 3,406,066 5,259,325 2,511,171 4,799,812 2,501,627 2,868,527
1018 1011 1020 1019 1001

• 278 -

V. Independent Accountants’ Audit Report

Independent Auditors’ Report

To the Board of Directors of China Petrochemical Development Corporation:

Opinion

We have audited the financial statements of China Petrochemical Development Corporation (“CPDC” or “the Company” ), which comprise the balance sheets as of December 31, 2019 and 2018, 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 other auditors (please refer to Other Matter paragraph), the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits of the financial statements as of and for the year ended December 31, 2019 in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, Rule No. 1090360805 issued by the Financial Supervisory Commission, and the auditing standards generally accepted in the Republic of China. Furthermore, we conducted our audits of the financial statements as of and for the year ended December 31, 2018 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 Company 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. Based on our audits and the reports of other auditors, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Emphasis of Matter

As described in Notes 6(j) and 6(o) 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. 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 still has a dissenting view on the government perception about the condition of pollution and CPDC is seeking a way to define its responsibilities. Our opinion is not modified in respect of this matter.

• 279 -

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, 2019 and 2018 of those 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 1.00% and 1.10% of total assets as of December 31, 2019 and 2018, respectively. The related shares of investment income from these investees including subsidiaries, associates and joint ventures accounted for using equity method represented (0.06)% and (2.23)% of income before income tax for the years ended December 31, 2019 and 2018, respectively.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements as of and for the year then ended December 31, 2019. 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 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”, Note 6(u) “Revenue from contracts with customers” and Note 6(v) “Revenue” in the financial statements.

How the matter was addressed in our audit:

• Testing 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 CPDC. Based on samples selected, vouched significant transactions from both internal and external documents, to verify the authenticity of the transactions.

• Assessment of the fair value of investment property

The book value of investment property of CPDC represented 40% of total assets as of December 31, 2019, which is deemed to be significant. CPDC evaluates 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 Assumptionsand Judgements, and Major Sources of Estimation Uncertainty” , and Note 6(j) “ Investment Property” of the financial statements for details about fair value information on investment property.

How the matter was addressed in our audit:

• Obtain from 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 evaluation 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.

• 280 -

• Impairment assessment of property, plant, and equipment

The book value of property, plant, and equipment of CPDC represented 14% of total assets as of December 31, 2019, which is deemed to be significant. The overall economic trend, market competition and fluctuations in the price of petroleum and petrochemical products may affect the future operation of CPDC, and also affect the estimated economic benefits and recoverable amounts of these assets that the management of CPDC may estimate and determine in the future of the cash generating unit (“CGU”) of the assets, and to evaluate whether there are signs of impairment. The recoverable amounts of these assets have been determined based on the discounted cash flows forecasted by CPDC management which involved significant uncertainties and professional judgments. Therefore, we consider the assessment for impairment of property, plant, and equipment as one of the key audit matters for our audit. Please refer to Note 4 “Impairment of non derivative financial assets”, Note 5 “Significant Accounting Assumptions and Judgments, and Major Sources of Estimation Uncertainty”, and Note 6(h) “Property, plant and Equipment” of the financial statements for details of the information about impairment assessment on property, plant, and equipment.

How the matter was addressed in our audit:

• Obtain from CPDC management the results of their valuation of fixed assets and understand the significant assumptions used in their valuation model.

• Review both the calculations of the value in use and the present value of the discounted cash flows forecasted. Evaluate the CGU, and external and internal impairment indicators identified by management, and ascertain that all fixed assets requiring annual impairment test are covered in the assessment made by management. Likewise, evaluate the reasonableness of the method used in measuring the recoverable amount of the assets (including the realization on the financial forecast, the calculation of recoverable amount and the assumptions considered for the cash flows forecast).

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

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

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

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

Auditor’s 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 auditor’s 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.

• 281 -

3-3

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 Company’s internal control.

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

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

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

6. Obtain sufficient appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on this financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

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

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.

• 282 -

3-4

The engagement partners on the audit resulting in this independent auditors’ report are Chen Mei Fang and Chung Tan Tan.

KPMG

Taipei, Taiwan (Republic of China) March 27, 2020

Notes to Readers

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

The independent auditors’ report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ audit report and financial statements, the Chinese version shall prevail.

• 283 -

					December 31, 2018	Amount %			650,000 1	2,674 -	1,728,481 2	2,159,721 3	331,606 -	479,514 1	- -	685,000 1	685,000 1	12,690 -	12,690 -	6,049,686 8		1,795,000 2	1,923,233 2	8,758,989 10	- -	349,729 -	104,335 -	104,335 -	12,931,286 14	12,931,286 14	18,980,972 22	18,980,972 22			26,998,573 32	1,260,386 1		1,708,303 2	33,521,575 39	5,144,764 6		40,374,642 47		(488,212) (1)	(1,248,499) (1)	(1,248,499) (1)		(1,736,711) (2)	(1,736,711) (2)	66,896,890 78	66,896,890 78	85,877,862 100	85,877,862 100
					December 31, 2019	Amount %			$ 3,100,558 3	88,263 -	1,137,731 1	1,529,259 2	72,521 -	156,905 -	40,375 -	1,370,000 2		7,961 -		7,503,573 8		3,460,000 4	1,899,668 2	7,020,975 8	61,388 -	4,494,177 5	106,290 -		17,042,498 19		24,546,071 27				28,348,502 31	1,286,700 1		2,137,330 2	35,490,262 39	1,779,147 2		39,406,739 43		(804,515) (1)	(1,120,657) (1)			(1,925,172) (2)		67,116,769 73		$ 91,662,840 100
(English Translation of Financial Statements Originally Issued in Chinese)	CHINA PETROCHEMICAL DEVELOPMENT CORPORATION	Balance Sheets	December 31, 2019 and 2018	(Expressed in Thousands of New Taiwan Dollars)	December 31, 2019 December 31, 2018	Amount % Amount % Liabilities and Equity		Current liabilities:	$ 3,347,128 4 8,465,372 10 2100 Short-term loans (note 6(k))	624,964 1 1,016,992 1 2130 Current contract liabilities (note 6(u))	1,534,864 2 2,466,935 3 2170 Accounts payable	173,060 - 244,187 - 2200 Other payables (note 6(s) and 7)	52,546 - 106,181 - 2230 Current tax liabilities (notes 4 and 6(r))	1,881,035 2 1,973,971 2 2250 Provisions-current (notes 4, 6(o) and 6(q))	822,458 1 561,673 1 2280 Lease liabilities-current (notes 4 and 6(n))	369,145 - 313,520 1 2320 Long-term liabilities-current portion (notes 4 and 6(l))		8,805,200 10 15,148,831 18 2399 Other current liabilities, others		Total current liabilities	7,247,062 8 3,248,545 4 Non-Current liabilities:	2540 Long-term bank loans (note 6(l))	1,738,008 2 1,963,687 2 2550 Provisions-non-current (notes 4, 6(o) and (q))	2570 Deferred tax liabilities (notes 4, 6(r))	23,822,451 26 12,436,188 14 2580 Lease liabilities-non-current (note 6(n))	13,094,097 14 14,585,386 17 2611 Long-term bills payable (note 6(m))	101,087 - - - 2670 Other non-current liabilities, others		36,716,577 40 38,350,359 45 Total non-currnet liabilities		11,009 - 11,009 - Total liabilities		127,349 - 133,857 - Share capital		82,857,640 90 70,729,031 82 3110 Common stock (note 6(s))	3200 Capital surplus (note 6(s))	Retained earnings: (note 6(s))	3310 Legal reserve	3320 Special reserve	3350 Unappropriated earnings			Others (notes 4 and 6(s))	3410 Exchange differences arising on translation of foreign operations	3420 Unrealised gains or loss on financial assets at fair value through other		comprehensive income			$ 91,662,840 100 85,877,862 100 Total equity Total liabilities and equity
						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(d))	Accounts receivable related parties, net (notes 4, 6(d) and 7)	Other receivables (notes 4, 6(d) and 7)	Inventories (notes 4 and 6(e))	Prepayments	Other current assets		Total current assets		Non-current assets:	Non-current financial assets at fair value through profit or loss (note 4 and	6(b))	Non-current financial assets at fair value through other comprehensive	income (note 4 and 6(c))	Investments accounted for using equity method (notes 4 and 6(f))	Property, plant and equipment (notes 4 and 6(h))	Right-of-use assets (notes 4 and 6(i))		Investment property, net (notes 4 and 6(j))		Deferred income tax assets (notes 4 and 6(r))		Other non-current assets (note 8)		Total non-current assets																	Total assets
									1100	1110	1170	1180	1200	130X	1410	1470					1510		1517		1551	1600	1755		1760		1840		1900

• 284 -

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

Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Common Share)

4000 Operating revenue (notes 4 and 6(v)) 5000 Operating costs (notes 4 and 6(e)) 5910 Less: Unrealized (profit) loss from sales 5920 Add:Realized profit (loss) on intercompany transactions Gross profit Operating expenses: 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses 6450 Impairment loss determined in accordance with IFRS 9 Profit from operations Non-operating income and expenses: 7010 Other income (note 6(x) and 7) 7590 Other gains and losses (note 6(x)) 7050 Finance costs (note 6(n) and (x)) 7060 Shares of profit (loss) of associates and joint ventures accounted for using equity method, net (note 4 and 6(f)) 7235 Gains on financial assets (liabilities) at fair value through profit or loss (note 4 and 6(b)) 7673 Impairment loss on property, plant, and equipment (note 4 and 6(h)) Total non-operating income and expenses Income before income tax 7950 Less: Income tax expenses (notes 4 and 6(r)) Net income 8300 Other comprehensive income (loss): 8310 Items that may not be reclassified subsequently to profit or loss: 8311 Gains (losses) on remeasurements of defined benefit plans 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8330 Shares of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Allocation of income tax to the above items 8360 Items that may be reclassified subsequently to profit or loss: 8361 Exchange differences arising on translation of foreign operations 8367 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8380 Shares of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that may be reclassified to profit or loss 8399 Allocation of income tax to the above items 8300 Other comprehensive (loss) income, net 8500 Total comprehensive income Earnings per share (notes 4 and 6(t)) 9750 Basic earnings per share 9750 Basic earnings per share-retrospestive 9850 Diluted earnings per share 9850 Diluted earnings per share-retrospestive	2019 Amount % $ 26,797,793 100 25,764,405 96 1,033,388 4 1,742 - 31,639 - 1,066,769 4 350,248 1 528,108 2 321,522 1 - - 1,199,878 4 (133,109) - 381,775 1 (12,173) - (106,515) - 1,566,487 6 3,033,671 11 (2,901,096) (11) 1,962,149 7 1,829,040 7 90,591 - 1,738,449 7 (12,128) - 125,611 - 7,865 - - - 121,348 - (316,303) (1) - - - - - - (316,303) (1) (194,955) (1) $ 1,543,494 6 $ 0.61 $ 0.61	2018 Amount % 36,969,800 100 32,624,724 88 4,345,076 12 (31,639) - (749) - 4,312,688 12 324,917 1 703,708 2 266,188 1 - - 1,294,813 4 3,017,875 8 950,933 3 (491,698) (1) (52,100) - 949,617 2 261,643 1 - - 1,618,395 5 4,636,270 13 346,001 1 4,290,269 12 14,866 - (408,318) (1) (37,175) - - - (430,627) (1) (95,834) - - - - - - - (95,834) - (526,461) (1) 3,763,808 11 1.59 1.51 1.58 1.51

See accompanying notes to financial statements.

• 285 -

								Total equity	62,307,725	825,358		63,133,083		4,290,269	(526,461)	(526,461)	3,763,808			-	-	(1)	(1)		66,896,890	1,738,449	(194,955)	(194,955)	1,543,494			-	-	(1,349,929)	-	26,314		-			67,116,769
Total other equity interest	Unrealized gains		(losses) on financial	Exchange assets measured at	differences on fair value through Unrealized gains	translation of other (losses) on	foreign financial comprehensive available-for-sale	statements income financial assets	(392,378) - (788,734)	- (807,702) 788,734		(392,378) (807,702) -		- - -	(95,834) (440,797) -		(95,834) (440,797) -			- - -	- - -	- - -			(488,212) (1,248,499) -	- - -	(316,303) 127,432 -		(316,303) 127,432 -			- - -	- - -	- - -	- - -	- - -		- 410 -			(804,515) (1,120,657) -
							Unappropriated	retained earnings	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	1,738,449	(6,084)		1,732,365			(429,027)	(1,968,687)	(1,349,929)	(1,349,929)	-		(410)			1,779,147
	Retained earnings							Special reserve	28,023,386	-		28,023,386		-	-		-			-	5,498,189	-			33,521,575	-	-		-			-	1,968,687	-	-	-		-			35,490,262
								Legal reserve	1,099,137	-		1,099,137		-	-		-			609,166	-	-			1,708,303	-	-		-			429,027	-	-	-	-		-			2,137,330
								Capital surplus	1,260,386	-		1,260,386		-	-		-			-	-	-			1,260,386	-	-		-			-	-	-	-	26,314		-			1,286,700
	Share capital						Ordinary	shares	26,998,573	-		26,998,573		-	-		-			-	-	-			26,998,573	-	-		-			-	-	-	1,349,929	-		-			28,348,502
									$																																$
									Balance at January 1, 2018	Effects of retrospective application		Balance at January1, 2018 after adjustments		Net income for the year ended December 31, 2018	Other comprehensive income for the year ended December 31, 2018		Total comprehensive income for the year ended December 31, 2018		Appropriation and distribution of retained earnings:	Legal reserve appropriated	Special reserve appropriated	Disposal of investments in equity instruments designated at fair value through other		comprehensive income	Balance at December 31, 2018	Net income for the year ended December 31, 2019	Other comprehensive income for the year ended December 31, 2019		Total comprehensive income for the year ended December 31, 2019		Appropriation and distribution of retained earnings:	Legal reserve appropriated	Special reserve appropriated	Cash dividends of ordinary share	Stock dividends of ordinary share	Difference between consideration and carrying amount of subsidiaries acquired or	disposed	Disposal of investments in equity instruments designated at fair value through other		comprehensive income	Balance at December 31, 2019

• 286 -

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

Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities: Income before income tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Net gain on financial assets or liabilities at fair value through profit or loss Interest expense Interest income Dividend income Share of profit of subsidiaries, associates and joint ventures accounted for using equity method (Gain) loss on disposal of property, plan and equipment (Gain on reversal of) impairment loss on non-financial assets Unrealized profit (loss) from sales Realized loss (profit) on from sales Impairment loss on property, plan and equipment Loss (gain) on fair value adjustment of investment property Gain on lease modification Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Increase in accounts receivable Decrease (increase) in accounts receivable due from related parties Decrease (increase) in other receivable Decrease in inventories (Increase) decrease in prepayments Decrease in other current assets Total changes in operating assets Increase in contract liabilities Decrease in accounts payable (Decrease) increase in other payable Decrease in provisions Decrease in other current liabilities Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash (outflow) inflow generated from operations Interest received Interest paid Income taxes paid Net cash flows from (used in) operating activities Cash flows from (used in) investing activities: Proceeds from disposal of financial assets at fair value through other comprehensive income Acquisition of financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through profit or loss Acquisition of investments accounted for using equity method Acquisition of property, plant and equipment Increase in other non-current assets Dividends received Decrease in deferred tax liabilities Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase in short-term loans Decrease in short-term loans Proceeds from long-term debt Repayments of long-term debt Increase in long-term bills payable Decrease in long-term bills payable Payment of lease liabilities Increase in other non-current liabilities Cash dividends paid Interest paid for lease liabilities Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

For the years ended December 31 2019 2018 $ 1,829,040 4,636,270 1,243,821 1,202,591 2,522 2,522 (3,033,671) (261,643) 106,515 52,100 (63,473) (164,358) (137,950) - (1,566,487) (949,617) 2,765 6,941 (85,089) 140,104 (1,742) 31,639 (31,639) 749 2,901,096 - (111,367) (119,574) (4) - (774,703) (58,546) 932,071 945,151 71,127 (43,381) 47,081 (73,370) 187,448 98,967 (260,785) 48,931 (55,625) (11,056) 921,317 965,242 85,589 2,674 (590,750) (106,655) (650,086) 918,652 (346,174) (127,805) (4,729) (334,837) (1,506,150) 352,029 (584,833) 1,317,271 (1,359,536) 1,258,725 469,504 5,894,995 70,027 174,349 (102,361) (56,391) (349,676) (180,404) 87,494 5,832,549 351,290 - (2,835,278) (2,138,319) 2,262,460 624,255 (11,244,492) (2,634,121) (2,607,379) (1,554,817) 3,986 (1,096) 1,313,922 826,058 (2,288) - (12,757,779) (4,878,040) 8,614,975 2,500,000 (6,164,417) (2,100,000) 6,170,000 2,650,000 (3,820,000) (2,540,000) 5,850,000 50,000 (1,700,000) - (48,334) - 1,955 38,045 (1,349,929) - (2,209) - 7,552,041 598,045 (5,118,244) 1,552,554 8,465,372 6,912,818 $ 3,347,128 8,465,372

See accompanying notes to financial statements.

• 287 -

(English Translation of Financial Statements and Report Originally Issued in Chinese) CHINA PETROCHEMICAL DEVELOPMENT CORPORATION

Notes to the Financial Statements

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

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 moved 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 were authorized for issue by the Board of Directors on March 27, 2020.

(3) New standards, amendments and interpretations 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, 2019.

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

(i) 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.

(Continued)

• 288 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• 1) Definition of a lease

Previously, the Company determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Company assesses whether a contract is or contains a lease based on the definition of a lease, as explained in Note 4(l).

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Company applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

2) As a lessee

As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Company. Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases are on-balance sheet.

The Company decided to apply recognition exemptions to short-term leases of machinery and leases of IT equipment.

• Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Company’ s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments – the Company applied this approach to all other lease.

In addition, the Company used the following practical expedients when applying IFRS 16 to leases.

• Applied a single discount rate to a portfolio of leases with similar characteristics.

• Adjusted the right-of-use assets by the amount of IAS 37 onerous contract provision immediately before the date of initial application, as an alternative to an impairment review.

• Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term.

• Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.

• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

(Continued)

• 289 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• 3) As a lessor

The Company is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor, except for a sub-lease. The Company accounted for its leases in accordance with IFRS 16 from the date of initial application.

• 4) Impacts on financial statements

On transition to IFRS 16, the Company recognized additional $147,307 thousand of right-of-use assets and $147,307 thousand of lease liabilities. When measuring lease liabilities, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 1.80%.

The explanation of differences between operating lease commitments disclosed at the end of the annual reporting period immediately preceding the date of initial application, and lease liabilities recognized in the balance sheets at the date of initial application disclosed as follows:

Operating lease commitment at December 31, 2018 as disclosed in the Company’s financial statements Discounted using the incremental borrowing rate at January 1, 2019 Finance lease liabilities recognized as at December 31, 2018 Lease liabilities recognized at January 1, 2019	January 1, 2019
	$ 162,554 147,307 - $ 147,307

• (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, 2020 in accordance with Rule No. 1080323028 issued by the FSC on July 29, 2019:

1080323028 issued by the FSC on July 29, 2019:
	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 “Definition of a Business”	January 1, 2020
Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”	January 1, 2020
Amendments to IAS 1 and IAS 8 “Definition of Material”	January 1, 2020

The Company assesses that the adoption of the abovementioned standards would not have any material impact on its financial statements.

(Continued)

• 290 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• (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 have yet to be endorsed by the FSC:

Effective date New, Revised or Amended Standards and Interpretations per IASB Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between Effective date to an Investor and Its Associate or Joint Venture” be determined by IASB IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” January 1, 2022

Those which may be relevant to the Company are set out below:

Issuance / Release Dates September 11, 2014

Standards or Interpretations Content of amendment Amendments to IFRS 10 and IAS 28 “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 Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

(4) Summary of significant accounting policies:

The significant accounting policies, which have been applied consistently to all periods presented in these financial statements, except when otherwise indicated in note 3, are as follows:

(a) Statement of compliance

These financial statements have been prepared in accordance with the Regulation Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations”).

• (b) Functional and presentation currency

• (i) Basis of measurement

Except for the following significant accounts, the financial statements have been prepared on a historical cost basis:

• 1) Financial instruments at fair value through profit or loss are measured at fair value;

(Continued)

• 291 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• 2) Financial assets at fair value through other comprehensive income are measured at fair value;

• 3) The defined benefit liabilities (assets) are measured at fair value of the plan assets less the present value of the defined benefit obligation, limited as explained in note 6(q); and

• 4) Investment property is measured at fair value

• (ii) Functional and presentation currency

The functional currency of each Group entity is determined based on the primary economic environment in which the entity operates. The financial statements are presented in New Taiwan Dollar (NTD), which is the Company’s functional currency. All financial information presented in NTD has been rounded to the nearest thousand.

• (c) Foreign currency

• (i) Foreign currency transaction

Transactions in foreign currencies are translated into the functional currencies of the Company at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currency using the exchange rate at the date that the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income:

• an investment in equity securities designated as at fair value through other comprehensive income;

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

• qualifying cash flow hedges to the extent the hedge are effective.

• (ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rate. Exchange differences are recognized in other comprehensive income.

(Continued)

• 292 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

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. When the Company disposes of only 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 noncontrolling interests. When the Company disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, exchange differences arising from such a monetary item that are considered to form part of the net investment in the foreign operation are recognized in other comprehensive income.

• (d) Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

• (i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

• (ii) It is held primarily for the purpose of trading;

• (iii) It is expected to be realized within twelve months after the reporting period; or

• (iv) The asset is cash and cash equivalent 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:

• (i) It is expected to be settled during the in its normal operating cycle;

• (ii) It is held primarily for the purpose of trading;

• (iii) It is due to be settled within twelve months after the reporting period; or

• (iv) The Company does not have an unconditional right to defer settlement of the liability 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.

• (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 known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

(Continued)

• 293 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Bank overdrafts that are repayable on demand and form an integral part of the Company’ s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

(f) Financial instruments

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(i) Financial assets

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

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

1) 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.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

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

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 instrument-by-instrument basis.

(Continued)

• 294 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Equity investments at FVOCI are subsequently measured at fair value. Dividends 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 are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Company’s right to receive payment is established.

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

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL. 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.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

• 4)

• 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;

• 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.

(Continued)

• 295 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• 5) 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. nonrecourse features)

• 6) Impairment of financial assets

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

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

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 forwardlooking information.

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

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

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

(Continued)

• 296 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

12-month ECL are the portion of ECL that result from default events that are possible within the 12 months 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 ECL is the maximum contractual period over which the Company is exposed to credit risk.

ECL 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). ECL 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 asset 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.

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written 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.

• 7) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

(Continued)

• 297 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

The Company enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

• (ii) Financial liabilities and equity instruments

• 1) Classification of debt or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

2) Equity instrument

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

3) Treasury shares

When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is recognized in capital surplus or retained earnings (if the capital suplus is not sufficient to be written down).

4) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

5) Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

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

(Continued)

• 298 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• 6) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(g) Inventories

• (i) Manufaturing

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is calculated using 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 present 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.

(ii) Construction

Inventories of the construction business are measured at the lower of cost and net realizable value. The cost of inventories includes expenditure incurred in bringing them to their existing location and condition and capitalized borrowing costs.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The net realizable value is estimated as follows:

• 1) Land held for development: net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses, or estimated by recent market value (development analytical method or comparison method).

• 2) Construction-in-progress: net realizable value is the estimated selling price (current market condition) in the ordinary course of business, less the estimated costs of completion and selling expenses, or estimated by recent market value.

(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 arising from the acquisition less any accumulated impairment losses.

The financial statements include the Company’s share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Company, from the date on which significant influence commences until the date on which significant influence ceases.

(Continued)

• 299 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Gains and losses resulting from transactions between the Group and an associate are recognized only to the extent of unrelated Company’s interests in the associate.

When the Company’s share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

When the Company subscribes to additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment will differ from the amount of the Company’s proportionate interest in the net assets of the associate. The Company records such a difference as an adjustment to investments, with the corresponding amount charged or credited to capital surplus. The aforesaid adjustment should first be adjusted under capital surplus. If the capital surplus resulting from changes in ownership interest is not sufficient, the remaining difference is debited to retained earnings. If the Company’s ownership interest is reduced due to the additional subscription to the shares of the associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate will be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities.

(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 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 initially measured at cost and subsequently at fair value with any change therein recognized in profit or loss.

Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss. When investment property that was previously classified as property, plant and equipment is sold, any related amount included in ‘other equity - revaluation surplus’ is transferred to retained earnings.

Rental income from investment property is recognized as other revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental income, over the term of the lease.

(Continued)

• 300 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION

Notes to the Financial Statements

• (k) Property, plant and equipment

• (i) Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

• (ii) Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.

• (iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

The estimated useful lives of periods are as follows:	property, plant
Land improvement	3~30 years
Buildings and constructions	2~60 years
Machine equipment	1~30 years
Transportation equipment	2~ 40 years
Other equipment	2~13 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

• (iv) Reclassification to investment property

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified accordingly. Any gain arising on this remeasurement is recognized in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognized in other comprehensive income and presented in ‘other equity - revaluation surplus’.

(Continued)

• 301 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Any loss is recognized in profit or loss. However, to the extent that an amount is included in the revaluation surplus for that property, the loss is recognized in other comprehensive income and reduces the revaluation surplus within equity.

(l) Leases

Leases (applicable from January 1, 2019)

• (i) Identifying a lease

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

• 1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

• 2) the customer has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

• 3) the customer has the right to direct the use of the asset throughout the period of use only if either:

• the customer has the right to direct how and for what purpose the asset is used throughout the period of use; or

• the relevant decisions about how and for what purpose the asset is used are predetermined and:

  • the customer has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or

  • the customer designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

(ii) As a leasee

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

(Continued)

• 302 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, including in-substance fixed payments;

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• amounts expected to be payable under a residual value guarantee; and

• payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• there is a change in future lease payments arising from the change in an index or rate; or

• there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee; or

• there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or

• there is a change of its assessment on whether it will exercise a extension or termination option;or

• there is any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Company accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Company presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

If an arrangement contains lease and non-lease components, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Company has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

(Continued)

• 303 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

The Company has elected not to recognize right-of-use assets and lease liabilities for shortterm leases of machinery that have a lease term of 12 months or less and leases of low-value assets, including IT equipment. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

For sale-and-leaseback transactions, the Company applies the requirements for determining when a performance obligation is satisfied in IFRS15 to determine whether the transfer of an asset is accounted for as a sale of the asset. If the transfer of an asset satisfies the requirement of IFRS15 to be accounted for as a sale of the asset, the Company derecognizes the transferred asset, then measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained. Accordingly, the Company recognizes only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. For leaseback transaction, the Company applies the lessee accounting policy. If the transfer of an asset does not satisfy the requirement of IFRS15 to be accounted for as a sale of the asset, the Company continues to recognize the transferred asset and recognizes the financial liability equal to the transfer proceeds.

(iii) As a leasor

When the Company acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease. If a head lease is a short-term lease to which the Company applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, the Company applies IFRS15 to allocate the consideration in the contract.

The Company recognizes a finance lease receivable at an amount equal to its net investment in the lease. Initial direct costs, such as lessors to negotiate and arrange a lease, are included in the measurement of the net investment. The interest income is recognized over the lease term based on a pattern reflecting a constant periodic rate of return on the net investment in the lease. The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other income’.

(Continued)

• 304 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Leases (policy applicable before January 1, 2019)

(i) Lessor

A finance lease asset is recognized on a net basis as lease receivable. Initial direct costs incurred in negotiating and arranging an operating lease are added to the net investment in the leased asset. The finance income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the receivable.

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into the operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly.

Contingent rents are recognized as income in the period when the lease adjustments are confirmed.

(ii) Lessee

Leases in which the Company assumes substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair value or the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset.

Other leases are operating leases and are not recognized in the Company’s balance sheets.

Payments made under operating leases (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Contingent rent is recognized as expense in the period in which it is incurred.

At inception of an arrangement, the Company determines whether such an arrangement is or contains a lease. The specific asset is the lease subject when depended on by the arrangement. The arrangement is the transfer of a right to use the asset when transfers control of the specific assets to the Company.

(Continued)

• 305 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

At inception or on reassessment of the arrangement, if an arrangement contains a lease, that lease shall be classified as a finance lease or an operating lease. The Company separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Company concludes for a finance lease that it is impracticable to separate the payment reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset. Subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the Company’ s incremental borrowing rate. If the Company concludes for an operating lease that it is impracticable to separate the payment reliably, then it treats all payments under the arrangement as lease payments, and discloses the situation accordingly.

(m) Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories, contract assets, deferred tax assets and investment properties and biological assets, measured at fair value, less costs) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units (CGUs). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(n) Provisions

A provision is recognized if, as a result of a past event, the Company has a present 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.

(Continued)

• 306 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(i) 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.

(ii) Site restoration

In accordance with the Company’ s published environmental policy and applicable legal requirements, a provision for site restoration in respect to contaminated land, and the related expense, is recognized when the land is contaminated.

(o) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company’s main types of revenue are explained below.

(i) Sale of goods

The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied. A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

(ii) 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.

• (iii) Financing components

The Company 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 Company does not adjust any of the transaction prices for the time value of money.

(Continued)

• 307 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(p) Employee benefits

• (iv) Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.

(v) Defined benefit plans

The Company’s net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to 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. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(vi) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid 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.

(Continued)

• 308 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• (q) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

The Company has determined that interest and penalties related to income taxes, including uncertain tax treatment, do not meet the definition of income taxes, and therefore accounted for them under IAS37.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

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 recognized except for the following:

• (i) temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;

• (ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

• (iii) taxable temporary differences arising on the initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date, and reflect uncertainty related to income taxes, if any.

Deferred tax assets and liabilities are offset if the following criteria are met:

• (i) the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and

• (ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

• 1) the same taxable entity; or

• 2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(Continued)

• 309 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Deferred tax assets are 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 profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized; such reductions are reversed when the probability of future taxable profits improves.

(r) Business combination

The Company accounts for business combinations using the acquisition method. The goodwill arising from an acquisition is measured as the excess of (i) the consideration transferred (which is generally measured at fair value) and (ii) the amount of non-controlling interest in the acquiree, both over the identifiable net assets acquired at the acquisition date. If the amount calculated above is a deficit balance, the Company recognized that amount as a gain on a bargain purchase in profit or loss immediately after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed.

All acquisition-related transaction costs are expensed as incurred, except for the issuance of debt or equity instruments.

For each business combination, the Company measures any noncontrolling interests in the acquiree either at fair value or at the noncontrolling interest’ s proportionate share of the acquiree’ s identifiable net assets, if the noncontrolling interests are present ownership interests and entitle their holders to a proportionate share of the Company’ s net assets in the event of liquidation. Other components of noncontrolling interests are measured at their acquisition-date fair values, unless another measurement basis is required by the IFRSs endorsed by the FSC.

(s) Earnings per share

The Company discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee bonus.

(t) Operating segments

The Company discloses information of operating segments in the consolidated financial statements, which is therefore not included in the financial statements.

(5) Significant accounting assumptions and judgments, and major sources of 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.

Management continues to monitor the accounting estimates and assumptions. Management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

(Continued)

• 310 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

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 investment property is measured at fair value deriving from external appraisal reports. When the presumed factors implemented in the evaluation process, e.g. discount rates and return on investment, change due to the evolving market and economy, the change may have an impact on the balance of the recognized assets and profit or loss. For more information regarding the valuation, please refer to note 6(j).

• (b) Impairment of property, plant and equipment, and intangible assets

In the process of evaluating the potential impairment of tangible and intangible assets other than goodwill, the Company is required to make subjective judgments in determining the independent cash flows, useful lives, expected future income and expenses related to the specific asset groups considering of the nature of the industry. Any changes in these estimates based on changed economic conditions or business strategies and could result in significant impairment charges or reversal in future years. Please refer to note 6(h) for further description of the key assumptions used to determine the recoverable amount.

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 (i.e. as prices) or indirectly (i.e. 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(j) - Investment property;

• (ii) Note 6(y) - Financial instruments.

(Continued)

• 311 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Cash on hand Checking and demand deposits Time deposits Cash equivalents Cash and cash equivalents	December 31, 2019 December 31, 2018 $ 662 704 385,749 117,007 2,331,288 5,978,582 629,429 2,369,079 $ 3,347,128 8,465,372

Time deposits with original maturity within three month which are held for the purpose of meeting short-term cash commitments, rather than for investment or other purposes, and 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(y) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Company.

• (b) Financial assets at fair value through profit or loss

Current financial assets designated at fair value through profit or loss: Beneficiary certificates Stocks listed on domestic markets Subtotal Non-current financial assets designated at fair value through profit or loss: Stocks unlisted on domestic markets Total	December 31, 2019 December 31, 2018 $ - 538,987 624,964 478,005 624,964 1,016,992 7,247,062 3,248,545 $ 7,872,026 4,265,537

Please refer to Note 6(x) for the gain or loss on financial assets recognized at fair value through profit or loss.

The dividends income from the financial assets recognized at fair value through profit or loss for the years ended December 31, 2019 and 2018 amounted to $27,844 thousand and $17,212 thousand, respectively.

(Continued)

• 312 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

The Company purchased the common and preferred stock of Core Pacific City Co., Ltd. accounted for as financial assets at fair value through profit or loss - non current. 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.

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 $1,560,000 � thousand and accounted in financial assets at fair value through profit or loss non-current.

On March 31, 2019, the Company’ s board of directors approved a resolution to invest in Core Pacific City Co., Ltd. by issuing 123,528 thousand preferred shares amounting to $1,235,278 thousand, which were accounted for as financial assets at fair value through profit or loss� noncurrent.ts.

The Company holds 422,251 and 298,723 shares of the common and preferred stock of Core Pacific City Co., Ltd as of December 31, 2019 and 2018, respectively. The Company recognized the changes in fair value as net gain and loss based on the fair value evaluation report of the investments. Accrording to the valuation report, fair value was measured using the net asset method and the fair value of the valuation date was determined under the assumption of relevant rate of return by the external expert. The amount accounted for gain from investments in equity instruments at fair value through profit or loss was $2,763,239 thousand and $189,380 thousand for the years ended December 31, 2019 and 2018, respectively. The increase of fair value was due to the bidding of Core Pacific City Co., Ltd, which was completed on September 25, 2019, and the contract of property transaction was signed on October 30, 2019.

Please refer to Note 8 for details of the financial assets at fair value through profit or loss of the Company pledged as collateral as of December 31, 2019 and 2018.

(c) Financial assets at fair value through other comprehensive income

Equity investments at fair value through other comprehensive income - non current Stocks listed on domestic markets Stocks unlisted on domestic markets Total	December 31, 2019 December 31, 2018 $ 1,595,896 1,496,949 142,112 466,738 $ 1,738,008 1,963,687

Please refer to Note 6(s) for the gain or loss on financial assets recognized at fair value through other comprehensive income.

The dividend income from the financial assets recognized at fair value through other comprehensive income for the years ended December 31, 2019 and 2018 amounted to $110,105 thousand and $619,522 thousand.

(Continued)

• 313 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• (i) 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 R.O.C. Company Act, 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 withdrawal of the resolution from the illegal temporary shareholders’ meetings and the resolutions from the temporary shareholders’ meeting was not established. 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. The judgment was binding and final on December 2017. 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 November 19, 2016, the letter from Ministry of Economic Affairs states that Lin Ke-Ming, 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 Janurary 9, 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 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 6, 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 withdrawal of a part of such arbitration award against the Company to Taipei District Court. On December 13, 2019, Taipei District Court dismissed the Company’s claim of withdrawing the ICC’s decision. The Company filed an appeal on January 8, 2020, that is now adjudicated by Taiwan High Court.

(Continued)

• 314 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

On July 12, 2019, the Board of Directors of the Company made resolution to transfer 35% of shares of PCSM to BES Twin Towers Development Co., Ltd., a subsidiary of the Company, at a price of $351,290 thousand, resulting in an unrealized gain on disposal amounted of $107,068 thousand, not reclassified as retained earnings. Please refer to note 7 for more information.

As of December 31, 2019 and 2018, the Company provided as collateral a portion of its financial assets. Please refer to Note 8 for details of the related assets pledged as collateral.

� (ii) 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	For the years ended December 31,	For the years ended December 31,
	2019 After-tax other comprehensive income After-taxProfit (loss) $ 17,380 78,720 $ (17,380) (78,720)	2018
	After-tax other comprehensive income $ 17,380 $ (17,380)	After-tax other comprehensive income After-taxProfit (loss) 19,637 42,655 (19,637) 42,655
Increase of 1% Decrease of 1%

• (d) Notes, trades, and other receivables

Accounts receivable (including related parties) Other receivables Less: allowance for doubtful receivables Net book value	December 31, 2019 December 31, 2018 $ 2,040,420 3,043,618 52,546 106,181 (332,496) (332,496) $ 1,760,470 2,817,303

Movements of the allowance for doubtful receivables for the years ended December 31, 2019 and 2018 were as follows:

Movements of the allowance for doubtful receivables for the 2018 were as follows:	years ended December 31, 2019 and
Balance on January 1, 2019 and 2018 Balance on December 31, 2019 and 2018	For the years ended December 31,
	2019 2018 $ 332,496 332,496 $ 332,496 332,496

There were no notes, trade, and other receivables of the Company had been pledged as collateral as of December 31, 2019 and 2018.

(Continued)

• 315 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(e) Inventories

Finished goods Work-in-process Raw materials Fuel Subtotal Land held for construction site - compensation for levied land Payment for floor area ratio Construction-in-progress Subtotal Total	December 31, 2019 December 31, 2018 $ 363,659 494,735 276,037 291,312 1,189,501 1,164,884 19,331 23,040 1,848,528 1,973,971 9,423 - 13,535 - 9,549 - 32,507 - $ 1,881,035 1,973,971

For the years ended December 31, 2019 and 2018, the components of cost of goods sold were as follows:

Cost of goods sold (Gain on reversal of) write-down or scrapping Net inventory loss (profit) Unallocated fixed production overheads from idle facilities Revenue from sale of scraps Net amount	For the years ended December 31,
	2019 2018 25,285,794 32,201,453 (85,089) 140,104 35,889 15,840 555,181 295,345 (27,370) (28,018 25,764,405 32,624,724

As of December 31, 2019 and 2018, the aforesaid inventories were not pledged as collateral.

• (f) Investments accounted for using equity method

• (i) The Company’s investments accounted for using the equity method at the reporting date were classified as follows:

Subsidiaries Associates Total	December 31, 2019 December 31, 2018 $ 22,433,855 11,038,311 1,388,596 1,397,877 $ 23,822,451 12,436,188

(Continued)

• 316 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• (ii) Share of profit (loss) of subsidiaries and associates for the years ended December 31, 2019 and 2018 were as follows:

2018 were as follows:
Share of profit (loss) of subsidiaries and associates	For the years ended December 31,
	2019 2018 $ 1,566,487 949,617

• (iii) The key financial information of subsidiaries and associates in which the Company has equity investments were as follows (before adjustment for the Company’s proportionate share):

Total assets Total liabilities Revenue Net income	December 31, 2019 December 31, 2018 $ 39,492,803 22,199,195 (8,440,913) (3,865,359) $ 31,051,890 18,333,836 For the years ended December 31,
	2019 2018 $ 9,624,392 10,684,086 $ 2,132,044 2,421,564

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.

• (iv) 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, Ministry of Economic Affairs (MOEA) approved the investment of the Company in Jiangsu Weiming Petrochemical Corporation in China in the amount of CNY2,388,000 thousand (equivalent to $11,100,000 thousand) mainly to establish a manufacturing operations for petrochemical products (including hydrorefining crude benzol, cyclohexanone, nylon 6, etc.).

• (v) On December 27, 2018, and January 30, 2019, respectively, resolutions were made during the board meeting of the Company to invest in Thanh Phong Construction Investment Co., Ltd. and Core Pacific Twin Star (Vietnam) Investment Co., Ltd., both through BES Twin Towers Development Co., Ltd. and Frontier Fortune Invest Pte. Ltd.

• (vi) On August 12, 2019, a resolution was made during the board meeting of the Company to invest in Jean Pacific Development Co., Ltd., with the amount of $480,000 thousand.

• (vii) On September 25, 2019, and October 24, 2019, respectively, resolutions were made during the board meeting of the Company to raise capital for Ding-Yue Development Co., Ltd. amounting to $7,440,000 thousand, for the purpose of its engagement in join open bidding of Core Pacific City permanent land ownership and meet funding requirement.

(Continued)

• 317 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(viii) Collateral

As of December 31, 2019 and 2018, the Company provided as collateral a portion of its investments in aforesaid equity-accounted investees. Please refer to Note 8 for details of the related assets pledged as collateral.

(g) Business Combination

• (i) The Company acquired Thanh Phong Construction Investment Ltd. on December 20, 2018, purchased 90% of its shares and obtained controlling power of the entity. The entity engages in real estate and construction.

The transfer price was $119,573 thousand in cash, the fair value of assets acquired and liabilities assumed on the acquisition date was as below:

liabilities assumed on the acquisition date was as below:
Cash and cash equivalents	$	132,857
Fair value of identifiable assets	$	132,857
Goodwill derived from acquisition:
Transfer price	$	119,573
Non-controlling equity (fair value of identifiable assets		13,284
measured at the percentage of non-controlling equity)
Fair value of identifiable assets		(132,857)
Goodwill	$	-

(h) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Company for the years ended December 31, 2019 and 2018 were as follows:

Cost or deemed cost: Balance as of January 1, 2019 Additions Disposal Reclassification Balance as of December 31, 2019 Balance as of January 1, 2018 Additions Disposals Reclassification Balance as of December 31, 2018	Land $ 5,647,642 - - - $ 5,647,642 $ 5,647,642 - - - $ 5,647,642	Land improvements 259,258 - - 5,033 264,291 262,023 - (3,464) 699 259,258	Buildings 2,354,623 - (734) 13,574 2,367,463 2,252,349 - (25,640) 127,914 2,354,623	Machinery and equipment 41,722,566 45 (949,884) 1,281,149 42,053,876 41,265,787 - (464,841) 921,620 41,722,566	Vehicles 54,856 - (1,688) 5,889 59,057 52,798 - (2,400) 4,458 54,856	Other facilities 167,352 - (5,006) 35,140 197,486 160,911 - (1,473) 7,914 167,352	Construction in progress 1,604,941 2,607,334 - (1,340,785) 2,871,490 1,112,729 1,554,817 - (1,062,605) 1,604,941	Accumulated impairment Total - 51,811,238 - 2,607,379 - (957,312) - - - 53,461,305 - 50,754,239 - 1,554,817 - (497,818) - - - 51,811,238

(Continued)

• 318 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Depreciation and impairment loss: Balance as of January 1, 2019 Depreciation for the period Impairment Disposals Reclassification Balance as of December 31, 2019 Balance as of January 1, 2018 Depreciation for the period Disposals Balance as of December 31, 2018 Carrying amounts: Balance as of December 31, 2019 Balance as of January 1, 2018 Balance as of December 31, 2018	Land $ - - - - - $ - $ - - - $ - $ 5,647,642 $ 5,647,642 $ 5,647,642	Land improvements 209,976 5,781 - - - 215,757 208,460 4,981 (3,465) 209,976 48,534 53,563 49,282	Buildings 1,046,971 73,672 - (734) 372 1,120,281 1,001,176 68,540 (22,745) 1,046,971 1,247,182 1,251,173 1,307,652	Machinery and equipment 33,812,114 1,102,240 - (946,639) (474) 33,967,241 33,139,241 1,117,302 (444,429) 33,812,114 8,086,635 8,126,546 7,910,452	Vehicles 46,189 2,249 - (1,685) - 46,753 45,849 2,740 (2,400) 46,189 12,304 6,949 8,667	Other facilities 132,183 10,865 - (5,005) 102 138,145 124,628 9,028 (1,473) 132,183 59,341 36,283 35,169	Construction in progress - - - - - - - - - - 2,871,490 1,112,729 1,604,941	Accumulated impairment Total 1,978,419 37,225,852 - 1,194,807 2,901,096 2,901,096 (484) (954,547) - - 4,879,031 40,367,208 1,994,784 36,514,138 - 1,202,591 (16,365) (490,877) 1,978,419 37,225,852 (4,879,031) 13,094,097 (1,994,784) 14,240,101 (1,978,419) 14,585,386

The market price of Caprolactam (“CPL”), the main product of the Company, has declined over the past few years. Recovery of the market price is unlikely as the production capacity of CPL continues to expand. The amount of book value of the Toufen production line CGU was evaluated as higher than its recoverable amount, resulting in a impairment loss amounting to $2,901,096 thousand, which was recognized under the non-operating profit or loss section of the statement of comprehensive income. The value-in-use was discounted by using the pre-tax discount rate of 6.86% for the year ended on December 31, 2019. The recoverable amount is determined by the total of value-in-use and net fair value (fair value, less, cost of disposal), whose evaluation involved an input value belonging to level 3 and conducted by using the market method.

As of December 31, 2019 and 2018, 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.

(i)

Right-of-use assets

The Company leases assets including land, land use right, buildings, machinery and equipment and vehicles. Information about leases for which the Company as a lessee is presented below:

Cost: Balance as of January 1, 2019 Effects of retrospective application Balance as of January 1, 2019 - retrospective Additions Disposal Balance as of December 31, 2019	Land $ - 61,679 61,679 108 - $ 61,787	Buildings - 7,130 7,130 - - 7,130	Machinery and equipment - 63,906 63,906 - - 63,906	Vehicles - 14,592 14,592 3,927 (1,772) 16,747	Other facilities Total - - - 147,307 - 147,307 - 4,035 - (1,772) - 149,570

(Continued)

• 319 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

					Machinery	Machinery	Machinery
						and			Other
			Land	Buildings	equipment			Vehicles	facilities	Total
	Accumulated depreciation and impairment losses:
	Balance as of January 1, 2019	$	-	-		-		-	-	-
	Effects of retrospective application		-	-		-		-	-	-
	Balance as of January 1, 2019 - retrospective		-	-		-		-	-	-
	Depreciation for the period		2,821	4,753		33,708		7,732	-	49,014
	Disposal		-	-		-		(531)	-	(531)
	Balance as of December 31, 2019	$	2,821	4,753		33,708		7,201	-	48,483
	Carrying amounts:
	Balance as of December 31, 2019	$	58,966	2,377		30,198		9,546	-	101,087
(j)	Investment property
	The movement of invesment property	was as followed:
				Land			Buildings			Total
	Cost or deemed cost:
	Balance as of January 1, 2019		$	38,331,633				18,726	38,350,359
	Decrease			(9,423)				-		(9,423)
	Net gains and losses due to fair value			(1,623,671)				(688)		(1,624,359)
	adjustments
	Balance as of December 31, 2019		$	36,698,539				18,038	36,716,577
	Balance as of January 1, 2018		$	38,211,181				15,351	38,226,532
	Net gains and losses due to fair value			120,452				3,375		123,827
	adjustments
	Balance as of December 31, 2018		$	38,331,633				18,726	38,350,359
	Carrying amounts:
	Balance as of December 31, 2019		$	36,698,539				18,038	36,716,577
	Balance as of January 1, 2018		$	38,211,181				15,351	38,226,532
	Balance as of December 31, 2018		$	38,331,633				18,726	38,350,359

(Continued)

• 320 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• (i) 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, 2019

Qianjin Dist., Qianzhen Dist., Subject Kaohsiung City Kaohsiung City Important contract terms None None The range of rental in the area where the $550~$700( NT dollars) $450( NT dollars) investment property is located

The rental range of similar investment $563~$589( NT dollars) None property

The current status of the investment Unused Leased property Past earnings $0~ $0 $0~ $0 Income capitalization rate 5.525% None Discount rate 4.380% 4.780% Outsourcing or self-valuation Outsourcing Outsourcing Evaluation office Colliers International Colliers International Taiwan Taiwan Appraiser name Feng-ru, Ke Shiou-ying, Jan Evaluation date December 31, 2019 December 31, 2019 Outsourcing fair value $ 10,530 $ 2,514,000

December 31, 2018

Subject

Qianjin Dist., Kaohsiung City

Important contract terms None

The range of rental in the area where the investment $550~$700( NT dollars) 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-Yu, Ke Evaluation date December 31, 2018 Outsourcing fair value $ 10,640

(Continued)

• 321 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

In accordance with Article 34 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, 2019 and 2018, the discount rate was 4.380%~4.780% and 4.380%, respectively. As of December 31, 2019 and 2018, the weighted average capitalization rate was 5.525% and 5.415%, respectively, derived as the ratio of annual net operating income of comparable properties divided by reasonable price.

(ii) Evaluation through land development analysis

The Company classified its undeveloped land as investment property. The Company adopted the development land analysis approach to measure the fair value of the undeveloped land in accordance with Article 9 of the Regulations Governing the Preparation of Financial Reports by Securities Issuers. The input value involved in evaluation belongs to level 3. The relevant information is summarized as follows:

December 31, 2019

December 31, 2019
Subject	Annan Dist., Tainan City	Qianzhen Dist., Kaohsiung City Others 101,156,568 2,718,175 18%~30% 12%~25% 3.900%~8.930% 1.06%~3.47% 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 and Shiou-ying, Jan December 31, 2019 December 31, 2019 27,885,380 1,349,677
Estimate total sales price Rate of return Capital interest rate Evaluation office Appraiser name Evaluation date Outsourcing fair value	7,968,120 23% 1.790% CCIS Real Estate Joint Appraisers Firm Huo-ming, Huang December 31, 2019 $ 4,956,990

(Continued)

• 322 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

December 31, 2018

December 31, 2018
Subject	Annan Dist., Tainan City	Qianzhen Dist., Kaohsiung City Others 9,612,972 (Note) 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 and Jian-hui, Gu Yu-xian, Houng, Jian-hui, Gu, and Shiou-ying, Jan December 31, 2018 December 31, 2018 31,970,281 1,348,683
Estimate total sales price Rate of return Capital interest rate Evaluation office Appraiser name Evaluation date Outsourcing fair value	7,968,120 23% 1.790% CCIS Real Estate Joint Appraisers Firm Huo-ming, Huang December 31, 2018 $ 5,020,755

Note: some of the estimated market value, as a whole, is determined based on the basic unit.

The fair value of the Company’s investment property is outsourced. In accordance with the appraisal reports, the approach and process include selecting a section as a basic unit, whose market value is estimated through comparison approach and cost approach, wherein the time and leveling cost are then factored in to approximate the fair value of the subject.

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; 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 6(p) for the relevant information including rent revenue and the direct operating expenses incurred.

As of December 31, 2019 and 2018, 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 event of the resumption of 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.

(Continued)

• 323 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

AnShun Land Located in Tainan City Annan District:

(i) History

• 1) The land where the AnShun Alkali plants located was originally established by Japanese company Kanegafuchi Soda in 1938 under Japanese Colonial Rule.

• 2) The Government undertook construction after the Retrocession of Taiwan, and established a state-owned company, Taiwan Alkali Industrial Corporation (TAIC) and operated at the AnShun 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 in 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 Anshun land of TAIC.

• 5) Since the said merger, the Company takeover the Anshun land, the Company has never had any act of production, operations, development, use or pollution at the site. According to subsequent investigation and research, parts of the area had 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, respectively, 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, along with the treatment projects and remediation plan. As the Company never used the land after being ordered to take charge by the Executive Yuan Department of Ministry of Economic Affairs (MOEA), the Company thus objected and carried out the following administrative and 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 was 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 for reimbursement compensation.

(Continued)

• 324 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• 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 did not mention whether the successor of the Polluter entity should be responsible for the treatment projects and remediation plan under SGPR Act was not within 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 Anshun plant in accordance with the Soil and Groundwater Pollution Remediation Act.

• a) The Company proposed the “Tainan City, CPDC former Taiwan Alkali Anshun 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 4, 2015. According to the remediation technology and the actual implementation of the subsequence adjustment, the 3rd remediation change plan was proposed on March 2, 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 Janurary 3, 2018.

• b) The relating remediation expense for the first phase was estimated to be $1,647,200 thousand. The remediation expense about $1,600,000 thousand was engaged as the 1st phase until September 2014. Simultaneously, the following 10-year remediation work needed to be started after the 2nd change plan was adopted at an estimated cost of $1,356,000 thousand in December 2014

(Continued)

• 325 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(ii) Extension legislation:

• 1) Remediation prepay

• a) Tainan city government on Feburary 27, 2008 with the letter No. 09722004430 asked the Company to pay each expense: $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 laws and regulations in July 2008. The Company objected to the prepaid expense and land polluter, hence, the administrative remedy was proposed in July 2008, with Kaohsiung High Administrative court sentencing the Company to pay the expense $88,430 thousand in Janurary 2008. The Company appealed in March 2008 and Supreme Administrative Court sent the case back to Kaohsiung High Administrative Court for further trial. Kaohsiung High Administrative court sentenced the original punishment and the petition decision beyond $76,066 thousand was withdrawn. In December 2013, both parties proposed the appeal for the unfavorable parts and Supreme Administrative Court sentenced the amount beyond $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 $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 December 2016. The Company proposed the appeal remedy for the unsatisfied sentenced contents on Janurary 2017. Supreme Administrative Court sentenced on Janurary 2018 that the expenses $1,134,718 thousand did not 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 $17,962 thousand, which resulted from the relevant working plan of AnShun Land Site soil pollution remediation and was prepaid by Tainan city government on behalf of the Company, and Tainan city government in December 2009 with the letter No. 09822035440 asked the Company to pay the above fees prior to Janurary 31, 2010. The Company estimated such expense at the end of 2009 and proposed the administrative remedy in Janurary 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 $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 $7,068 thousand was withdrawn on October 7, 2015 and this case had been appealed for the remedy. The determined withdrawn amount $95 thousand had been returned back to the account by Tainan city government. The verdict from Supreme Administrative Court had been received on Feburary 18, 2017, the fact was again returned back to Kaohsiung High Administrative court for the trial.

(Continued)

• 326 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• c) The Tainan City Government, in February 2014, passed 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 Anshun factory, in the amount of $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 $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. On December 19, 2019, a fine of $5,301 thousand was imposed by the court; in pursuit of the best interest of the Company, an appeal was filed with Supreme Administrative Court on January 16, 2020.

• d) Tainan City Government, in May 2016, issued the letter No. 10504498726, requesting the Company pay a fee for the “supervision management and audit work plan of 2013 CPDC (Taiwan Alkali) Anshun plant site remediation” and requesting the Company pay the fee of $63,271 thousand prior to July 20, 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 judgment 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.

• e) The Tainan City Government issued the letter No. 1080412260 in April 2019, requesting the Company to pay before June 30, 2019. The government claimed to have performed "2016 China Petroleum & Chemical Corporation Anshun Plant Remediation Site Supervision, Management and Checking Work Plan" on behalf of the Company, and request the Company to pay $59,624 thousand in accordance with Article 14 (4) and Article 15 of the Soil and Groundwater Pollution Remediation Act (hereinafter referred to as the “Soil Pollution Law”). Based on the laws and regulations, the Company paid the aforementioned fees first within the time limit set by the Tainan City Government, and filed an administrative appeals in May of the same year, and this case is still in the petition process.

(Continued)

• 327 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• 2) Tainan city government claimed that the Company didn’t implement per the remediation process.

• a) Tainan City Government issued a letter No. 105050004 for administrative sanctions on May 23, 2016 and deemed that the Company did not 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 $200 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 October 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 Janurary 2018. This case was determined to be closed.

• b) Tainan city government, on May 23, 2016, required the Company to complete the correction (which means reducing the rate of dioxin pollution to 41%) prior to October 31, 2016 with letter No. 1050527601 and attached with No. 105050004 issued on May 19, 2016, otherwise; the Company would be subject to daily penalties. 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 $600 thousand and was ordered to participate in environment seminars for 4 hours (premier $200 thousand plus added $400 thousand). After verification, the previous penalty was not audited at the time 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 Feburary 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 November of the same year, the Company had declared the appeal in December of the same year. The Supreme Administrative Court rejected the Company’s request on July 10, 2018. This case was determined to be closed.

(Continued)

• 328 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• c) 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 imposed a penalty of $1,000 thousand. After the verification, there is no ‘take it as’ 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 October of the same year. The Company proposed to Kaohsiung High Administrative court for the administrative remedy in December of the same year.

• d) The Tainan City Government issued the punishment notification No. 108040003 in April 2019 as a result of the concentration of the dioxin in the exhaust pipe test results not being lower than the standard set by the third change plan (less than 0.1ng-TEQ/Nm3) and would result in a fine of $200 thousand. An administrative appeals was filed in May 2019 in accordance with the laws, and the Environmental Protection Agency of the Executive Yuan dismissed in July of the same year. The Company filed an administrative lawsuit in September of the same year. The case is currently in administrative court of the Tainan District Court.

3) Others

• a) The Company still has the objection on the adscription of pollution responsibility for AnShun 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 bear the 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 Anshun 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 perpetrators, and who should pay the relevant costs and penalties. 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 the decision not to proceed with the case. The original disposal authorities revoked the previous punishment but simultaneously imposed 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 November 2017. This case was under hearing in Supreme Administrative Court.

(Continued)

• 329 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

The cumulative fee of invested and estimated control & management cost and remediation fee were $3,433,510 thousand until December 31, 2019. The preceding remediation fee was estimated according to the current possible situations by the Company. However, unpredictable future events may cause large fluctuations in the total expected remediation fees. This will be closely monitored and evaluated by management

b) Anshun 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 Supreme Court.

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 the demolition of the illegal construction and return the land. Kaohsiung District Court rejected the Company’ s petition. Due to the previous judgment, 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 and was under hearing in April 2019.

(Continued)

• 330 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Shulin Land of Taiwan Alkali Co., Ltd.:

• 1) History:

• a) No. 540, 541 and 543, Dongshan Section, Shulin District, Xinbei City and No. 489, Weiwang Section, Shulin Dist., New Taipei City 238, Taiwan including land originally belonging to Shulin plant of Taiwan Alkali Co. Ltd. Taiwan Alkali Co. Ltd., which 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.

• b) Then the plant was subsequently sold to CPC. The New Taipei City Government Environmental Protection Bureau, on August 16, 2010, announced the land as “soil pollution control site”.

• c) 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 surviving company and shall take the responsibility 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 polluter and required to propose subsequent disposal and remediation.

Since the change of predetermined place of CPC’s warehouse, the relocation schedule had to be extended to November 15, 2017. The remediation work schedule was postponed so that the soil pollution control plan (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 on May 18, 2017. Because of the different dynamic factors for the predetermined place of CPC’s warehouse, the relocation process was extend to December 31, 2021, and the remediation work schedule had to be postponed. Therefore, the “soil pollution control plan (the 2nd change plan) of Shulin Land of former Taiwan Alkali Co., Ltd (part of the sites)” was proposed in August 2019, and New Taipei City Government agreed for future reference on August 16, 2019. We are now performing this project subject to the soil pollution control plan. The relevant remediation expense of $273,750 thousand was estimated and listed in 2011 according to Financial accounting standards related regulations. However, it will be assessed to adjust for changes due to internal and external factors in future, which may result in significant differences on the entire remediation expense.

(Continued)

• 331 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(k) Short-term loans

The details, terms and conditions of short-term loans were as follow:

Unsecured bank loans Letters of credit loans Total Unsecured bank loans Secured bank loans Total		December 31, 2019	December 31, 2019	December 31, 2019
	Currency	Interest Rate Range
	NTD NTD
	Currency	Interest Rate Range	Year of Expiration Amount 2019 $ 600,000 2019 50,000 $ 650,000	Amount
	NTD NTD	1.3800%~1.814% 1.4945%

As of December 31, 2019 and 2018, the Company were granted by banks short-term credit lines of $6,100,000 thousand and $6,650,000 thousand, of which $1,614,920 thousand and $3,565,104 thousand, respectively, were unused.

(l) Long-term loans

The details, terms and conditions of long-term loans were as follow:

Secured bank loans Less: current portion Total Secured bank loans Less: current portion Total		December 31, 2019	December 31, 2019	December 31, 2019
	Currency	Interest Rate Range
	NTD
	Currency	Interest Rate Range	Year of Expiration Amount 2019~2021 $ 2,480,000 (685,000) $ 1,795,000	Amount
	NTD	1.4300%~1.9556%

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.

• (i) 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.

• (ii) 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.

(Continued)

• 332 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• (iii) 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 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:

• 1) Current ratio (total current assets divided by total current liabilities): not lower than 100%.

• 2) Leverage ratio (total liabilities plus contingent liabilities to tangible net worth): not higher than 100%.

• 3) Times interest earned (income before tax plus depreciation expense plus amortization expense divided by interest expenses): not lower than 2 times.

• (iv) In the event that there is a financial ratio violation in any of the fiscal years, the period from the announcement of the consolidated financial report that does not comply with the financial commitments to the announcement date of the next consolidated financial report shall be the improvement period. If the borrower resolves the violation during the improvement period, it is not considered a breach of financial commitment. However, the borrower shall, from the date of the announcement of the consolidated financial report that does not comply with the financial commitment, to the date of interest payable after the expiration of the improvement period, the credit balance of credit cases, in accordance with Article 7 (3) of this contract, the applicable interest rate plus the annual interest rate of 0.05% is charged to interest. If the improvement is not completed within the time limit, from the expiration date of the improvement period, the next interest payable date after the date on which the borrower has filed a consolidated financial report meeting the financial commitments, for the credit balance of this credit, the interest rate shall be calculated based on the contract interest rate plus the annual interest rate of 0.05%, and may be handled in accordance with the breach of contract.

• (v) The term of the repayment of the category A credit is stipulated as: The first period will be paid off from the date of the first use of the credit application to the expiration of three years. After that, it will be a period of six months for once. Settlement of the liability divided into five phases. The first period to the fourth period, each period shall be settled separately for 15% of the outstanding principal balance of the expiration date of the credit period, and the fifth period shall be settled for 40% of the outstanding principal balance of the expiration date of the credit period.

• (vi) The term of payment of the category B credit is stipulated as: The borrower shall fully repay on the due date as set out in each application for use.

As of December 31, 2019 and 2018, the unused credit line amounted to $0 thousand and $2,250,000 thousand, respectively. Please refer to Note 8 for details of the related assets pledged as collateral.

(Continued)

• 333 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

The Company signed contracts for secured bank credit facilities in order to finance its operating requirement. As of December 31, 2019 and 2018, the total credit lines were $1,630,000 thousand and $1,200,000 thousand, respectively. Credit facilities of $1,350,000 thousand and $380,000 thousand, respectively were used. The unused amounted to $280,000 thousand and $820,000 thousand, respectively. The current portion of the long-term bank loans obtained from such credit facilities amounted to $500,000 thousand and $380,000 thousand, respectively. Please refer to Note 8 for details of the related assets pledged as collateral.

Please refer to Note 8 for details of the related assets pledged as collateral.

(m) Long-term bills payable

The components of long-term bills payable were as follows:

Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Less: Discount on long- term bills payable Total	December 31, 2019 Acceptance institution Period Amount International Bills Finance Corporation 2019.12.24~2020.03.23 $ 200,000 Taching Bills Finance Corporation 2019.12.26~2020.02.24 350,000 Taching Bills Finance Corporation 2019.11.20~2020.02.18 50,000 China Bills Finance Corporation 2019.12.23~2020.03.23 500,000 China Bills Finance Corporation 2019.11.15~2020.02.13 650,000 Mega Bills Finance Corporation 2019.11.05~2020.01.03 500,000 Mega Bills Finance Corporation 2019.11.13~2020.01.13 450,000 Mega Bills Finance Corporation 2019.11.14~2020.02.12 250,000 Mega Bills Finance Corporation 2019.11.14~2020.02.12 400,000 Mega Bills Finance Corporation 2019.11.19~2020.01.13 150,000 Mega Bills Finance Corporation 2019.11.22~2020.02.12 200,000 Mega Bills Finance Corporation 2019.12.20~2020.02.18 200,000 Mega Bills Finance Corporation 2019.12.20~2020.03.19 600,000 4,500,000 (5,823) $ 4,494,177
	Acceptance institution
	International Bills Finance Corporation Taching Bills Finance Corporation Taching Bills Finance Corporation China Bills Finance Corporation China Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation

(Continued)

• 334 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Bills payable Bills payable Bills payable Bills payable Bills payable Less: Discount on long- term bills payable Total	December 31, 2018 Acceptance institution Period Amount China Bills Finance Corporation 2018.11.09~2019.01.08 $ 100,000 China Bills Finance Corporation 2018.11.16~2019.01.15 50,000 International Bills Finance Corporation 2018.11.30~2019.01.18 50,000 Taching Bills Finance Corporation 2018.11.26~2019.02.25 50,000 Mega Bills Finance Corporation 2018.12.20~2019.03.20 100,000 350,000 (271) $ 349,729
	Acceptance institution
	China Bills Finance Corporation China Bills Finance Corporation International Bills Finance Corporation Taching Bills Finance Corporation Mega Bills Finance Corporation

The Company had revolving commercial promissory note agreements with bills finance companies in order to finance its operating requirement. As of December 31, 2019 and 2018, the bills payable bear interest rates ranging from 0.55%~1.3400% and 0.50%~1.1513%, respectively.

Please refer to Note 8 for details of the related assets pledged as collateral.

(n) Lease liabilities

The lease liabilities of the Company were as follows:

Current Non-Current	December 31, 2019
	$ 40,375 $ 61,388

There were no significant issues, repurchases and repayments of lease liabilities for the year ended December 31, 2019.

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities Expense relating to short-term leases	For the years ended December 31, 2019
	$ 2,209 $ 28,625

The amounts recognized in the statement of cash flows for the Company were as follows:

Total cash outflow for leases	For the years ended December 31, 2019
	$ 50,543

(Continued)

• 335 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(o) Provisions

Balance as of January 1, 2019 Provisions made during the year Provisions used during the year Balance as of December 31, 2019 Current Non-current 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	Decommissioning $ 1,198,350 - (1,910) $ 1,196,440 $ - 1,196,440 $ 1,196,440 $ 1,200,529 - (2,179) $ 1,198,350 $ - 1,198,350 $ 1,198,350	Remediation project 967,414 - (363,442) 603,972 151,417 452,555 603,972 1,087,851 - (120,437) 967,414 473,629 493,785 967,414	Employee benefits Total 236,983 2,402,747 32,519 32,519 (13,341) (378,693) 256,161 2,056,573 5,488 156,905 250,673 1,899,668 256,161 2,056,573 242,172 2,530,552 11,620 11,620 (16,809) (139,425) 236,983 2,402,747 5,885 479,514 231,098 1,923,233 236,983 2,402,747

• (i) 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 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 decade. 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 of 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 second remediation stage, the Company estimated the cost based on the situation on December 2014 at $1,356,000 thousand. 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 4, 2015. According to the remediation technology and the actual implementation of the subsequence adjustment, the 3rd remediation change plan was proposed on March 2, 2017, which was reviewed and adopted on Jan. 3, 2018. (Note 6(j) for more details)

(Continued)

• 336 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• (ii) 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 issued letter No. 1000010000. In that letter, the Company was 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 plan.

• 2) Since the change of predetermined place of CPC’s warehouse, the relocation schedule had to be extended to November 15, 2017. The remediation work schedule was postponed so that the soil pollution control plan (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 on May18, 2017. Because of the different dynamic factors for the predetermined place of CPC’s warehouse, the relocation process was extended to December 31, 2021 and the remediation work schedule had to be postponed. Therefore, the “soil pollution control plan (the 2nd change plan) of Shulin Land of former Taiwan Alkali Co., Ltd (part of the sites)” was proposed in August, 2019, and New Taipei City Government agreed for future reference on August 16, 2019. We are now performing this project subject to the soil pollution control plan. However, it will be assessed to adjust for changes due to internal and external factors in future, which may result in significant differences on the entire remediation expenses.

(p) Operating lease

The Company leases 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, 2019 December 31, 2018 $ 20,125 16,094 132,221 19,904 291,949 38,019 $ 444,295 74,017

For the years ended December 31, 2019 and 2018, the income from the rental of property, plant and equipment amounted to $18,173 thousand and $19,491 thousand, respectively.

(Continued)

• 337 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(q) Employee benefits

(i) Defined benefit plans

Reconciliation of defined benefit obligation at present value and plan asset at fair value were as follows:

Present value of funded defined benefit obligation Fair value of plan assets Net defined benefit liabilities	December 31, 2019 December 31, 2018 $ 531,181 581,583 (290,272) (356,244) $ 240,909 225,339

The provision consists of net defined benefit liabilities and accrued pension liabilities for professional managements. The accrued pension liabilities for professional managements was $9,764 thousand and $5,759 thousand as of December 31, 2019 and 2018, respectively.

The Company makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions 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 the six months prior to retirement.

1) Composition of plan assets

The Company allocates 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 Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

The Company’ s Bank of Taiwan labor pension reserve account balance amounted to $290,272 thousand as of December 31, 2019. 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 Bureau of Labor Funds, Ministry of Labor.

• 2) Movement in present value of the defined benefit obligations

The movement in present value of the defined benefit obligations for the Company were as follows:

Defined benefit obligation, January 1 Benefits paid from plan assets Current service costs and interest Past service credit Defined benefit obligation, December 31	For the years ended December 31, 2019 2018 $ 581,583 699,020 (94,989) (140,457) 17,942 24,038 26,645 (1,018) $ 531,181 581,583

(Continued)

• 338 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• 3) Movement of defined benefit plan assets

The movement in the present value of the defined benefit plan assets for the Company 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	For the years ended December 31, 2019 2018 $ 356,244 465,705 10,714 11,036 (94,989) (140,457) 3,786 6,112 14,517 13,848 $ 290,272 356,244

• 4) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Company 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, 2019 2018 $ 11,683 14,845 2,473 3,081 $ 14,156 17,926 $ 12,943 16,473 54 56 999 1,254 160 143 $ 14,156 17,926 $ 18,302 19,960

• 5) Remeasurement of net defined benefit liability (asset) recognized in other comprehensive income

The Company’s remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income for the years ended December 31, 2019 and 2018, was as follows:

Accumulated balance, January 1 Recognized during this year Accumulated balance, December 31	For the years ended December 31, 2019 2018 (138,978) (153,844) (12,128) 14,866 $ (151,106) (138,978)

(Continued)

• 339 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• 6) Actuarial assumptions

The principal actuarial assumptions at the reporting date were as follows:

Discount rate Future salary increases	For the years ended December 31, 2019 2018 1.00% 1.125% 1.50% 1.5%

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date is $9,134 thousand.

The weighted average lifetime of the defined benefits plans is 13.18 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.

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2019 Discount rate Increase in future wage 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% $ (13,652) 14,212 13,864 (13,389) (13,948) 14,531 14,186 (13,689)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2019 and 2018.

(Continued)

• 340 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(ii) Defined contribution plans

The Company allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

The cost of the pension contributions to the Labor Insurance Bureau for the years ended December 31, 2019 and 2018 amounted to $37,949 thousand and $40,539 thousand, respectively.

• (iii) The pension costs incurred from the contributions to the Bureau of the Labor Insurance amounted to $6,234 thousand and $5,759 thousand for the year ended December 31, 2019 and 2018, respectively.

(iv) Short-term compensated absences liabilities

As of December 31, 2019 and 2018, the Company’ s short-term compensated absences liabilities amounted to $5,488 thousand and $5,885 thousand, respectively.

(r) Income Tax

(i) Income tax expense

The components of income tax expense for the years ended December 31, 2019 and 2018 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,
	2019 2018 $ (78,970) (346,615) (11,621) 614 (90,591) (346,001) 470,679 (570,690) (470,679) 570,690 - - $ (90,591) (346,001)

For the years ended December 31, 2019 and 2018, income tax expenses recognized under other comprehensive income were both $0 thousand.

(Continued)

• 341 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Reconciliation of income tax and profit before tax for the years ended December 31, 2019 and 2018, were as follows:

Profit (loss) before income tax Income tax on pre-tax financial income calculated at the domestic rate Income basic tax Unrecognized deferred tax assets Changes of permanent differences Prior years income tax adjustment Undistributed earnings additional tax Income tax expense	For the years ended December 31, 2019 2018 $ 1,829,040 4,636,270 $ (365,808) (927,254) (26,879) - (470,679) 570,690 836,487 358,215 (11,621) 614 (52,091) (348,266) $ (90,591) (346,001)

(ii) Deferred tax assets and liabilities

• 1) Unrecognized deferred tax assets

Decommissioning liabilities $ Remediation project Pollution remediation Allowance for doubtful receivables Investment property, property, plant and equipment Tax loss Others $	December 31, 2019 December 31, 2018 78,980 67,683 239,143 239,744 364,829 727,670 319,484 319,484 3,533,331 750,998 4,301,403 4,278,868 316,110 415,439 9,153,280 6,799,886

Tax loss ratified by Tax Administration could be carried forward for ten consecutive years in accordance with the 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.

(Continued)

• 342 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

As of December 31, 2019, the expiration years of tax loss unrecognized as deferred tax assets were as follows:

The Company

Year incurred	Amount Expiry Date $ 353,570 2024 2,132,246 2025 1,815,587 2026
2014 2015 2016

• 2) Deferred tax liabilities:

As of December 31, 2019 and 2018, the balance of deferred income tax liabilities for the provision of land value-added tax was $7,020,975 thousand an $8,758,989 thousand, respectively.

• 3) Deferred tax assets:

December 31, 2019 (equal to January 1) December 31, 2018 (equal to January 1)	Taxable Loss Total $ 11,009 11,009 $ 11,009 11,009

• (iii) Assessment of tax

The Company's income tax return for the years through 2017 were assessed by the Tax Administration.

• (s) Capital and other equity

• (i) The issuance of common stock

As of December 31, 2019 and 2018, the authorized, issued and outstanding capital of the Company amounted to $28,348,502 thousand and $26,998,573 thousand, respectively, divided into 2,834,850 thousand shares and 2,699,857 thousand shares, respectively, with par value of $10 (NT dollars) per share.

(In thousands of shares)

Balance, January 1 Capital increased by retained earnings Balance, December 31	Common Stock	Common Stock
	For the years ended December 31,
		2019 2018 2,699,857 2,699,857 134,993 - 2,834,850 2,699,857

(Continued)

• 343 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

On May 24, 2019, a resolution was made during the shareholders’ meeting for the issuance of 134,993 thousand new ordinary shares, by using the unappropriated retained earnings, amounting to $1,349,929 thousand, which had been approved by the Financial Supervisory Commission on May 30, 2019, with the record date set at July 4, 2019, based on the decision made during the board meeting held on June 11, 2019. The relevant registration procedures have been completed as of December 31, 2019.

(ii) Capital Surplus

The balances of capital surplus as of December 31, 2019 and 2018, were as follows:

Common stock Difference arising from subsidiary's share price and its carrying value Other Total	December 31, 2019 December 31, 2018 $ 1,242,245 1,242,245 26,314 - 18,141 18,141 $ 1,286,700 1,260,386

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding.

(iii) 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

When a company incurs no loss, it may, pursuant to a resolution by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

(Continued)

• 344 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

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 Rule No. 1010012865 issued by the Financial Supervisory Commission on April 6, 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, 2019 and 2018.

In 2014, the Company changed the subsequent measurement of investment properties from cost model to fair value model. In accordance with Rule No. 1030006415 issued by the Financial Supervisory Commission on March 18, 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 as of December 31, 2019 and 2018, 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 31, 2019 and 2018, the Company appropriated to the special reserve an amount of $5,835,980 thousand and $3,867,293 thousand, respectively.

• b) In accordance with Rule No. 1010047490 issued by the Financial Supervisory Commission on November 21, 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.

(Continued)

• 345 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• c) In accordance with Rule No. 1010012865 issued by the Financial Supervisory Commission on April 6, 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 May 4, 2019, the shareholders' meeting decided to appropriate the Company's 2018 earnings in cash and in shares, both in the amount of $1,349,929 thousand. On April 11, 2018, the shareholders' meeting decided not to appropriate the Company's 2018 earnings.

On March 27, 2020, Board of Directors proposed to appropriate the Company's 2019 earnings with a cash dividend of $0.3 per share, totaling $985,455 thousand.

• (iv) Other equity accounts

Balance, January 1, 2019 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 Disposal of investments in equity instruments designated 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, 2019

Exchange differences on foreign operation Unrealized gain or loss on financial assets at fair value through other comprehensive income $ (488,212) (1,248,499) (316,303) - - 125,611 - 410 - 1,684 - 137 $ (804,515) (1,120,657)

(Continued)

• 346 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Balance, January 1, 2018 Retrospective adjustments Exchange difference on subsidiary accounted for using equity method Unrealized gains from financial assets measured at fair value through other comprehensive income for subsidiaries accounted for using equity method Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Unrealized (losses) 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 Unrealized gain or loss on financial assets at fair value through other comprehensive income $ (392,378) (788,734) - (18,968) (95,834) - - (408,318) - (32,387) - (92) $ (488,212) (1,248,499)

(t) Earnings per share

The basic earnings per share and diluted earnings per shares for the years ended December 31, 2019 and 2018 were calculated as follows:

Basic earnings per share (NT dollars) Profit attributable to ordinary shareholders $ Weighted-average number of ordinary shares (thousand shares) Weighted-average number of ordinary shares-retrospective (thousand shares) Basic earnings per share $ Basic earnings per share-retrospective	For the years ended December 31,	For the years ended December 31,
	2019 1,738,449 2,834,850 0.61	2018
		4,290,269 2,699,857 2,834,850 1.59 1.51

(Continued)

• 347 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Diluted earnings per share (NT dollars) Profit attributable to ordinary shareholders (diluted) $ Weighted-average number of ordinary shares (thousand shares) Effect of potentially dilutive ordinary shares of Employee stock bonus Weighted-average number of ordinary shares (diluted) (thousand shares) Weighted-average number of ordinary shares (diluted)- retrospective (thousand shares) Diluted earnings per share Diluted earnings per share-retrospective	For the years ended December 31,	For the years ended December 31,
	2019 1,738,449 2,834,850 5,894 2,840,744 0.61	2018 4,290,269 2,699,857 13,371 2,713,228 2,848,221 1.58 1.51

• (u) Revenue from contracts with customers

• (i) The Company primarily engages in the production of CPL, AN, Nylon and by-products and the storage, transportation, purchase and sale of these products, related chemicals and their raw materials. For the details of products and sales area, please refer to Note 14(b) and (c) of the consolidated financial statements.

(ii) Contract balances

Notes receivable $ Accounts receivable (including related parties) Less: allowance for doubtful account $ Contract liabilities $	December 31, 2019 December 31, 2018 500,788 682,435 1,539,632 2,361,183 (332,496) (332,496) 1,707,924 2,711,122 88,263 2,674

Please refer to Note 6(y) for disclosure of accounts receivable and allowance for doubtful accounts.

The amounts of revenue recognized for the years ended December 31, 2019 and 2018 that were included in the contract liability balance at the beginning of the peroids were $2,674 thousand and $5,253 thousand, respectively.

(Continued)

• 348 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(v) Revenue

The detail of revenue were as followed:

Sales of goods	For the years ended December 31, 2019 2018 $ 26,797,793 36,969,800

(w) 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 remuneration of employees shall be in the form of cash or shares, whose recipients may include the employees of the Company's affiliated companies who meet certain conditions. The remuneration of directors may solely be cash. The aforesaid profit represents the income before income tax and remuneration for the period.

For the years ended December 31, 2019 and 2018, the remuneration to employees amounted to $57,759 thousand and $146,409 thousand, respectively, and the remuneration to directors amounted to $38,506 thousand and $97,606 thousand, respectively. These amounts were calculated using the Company’s income before income tax before remuneration of employees and directors for the years ended December 31, 2019 and 2018. These benefits were charged to profit or loss under operating costs or operating expenses for the years ended December 31, 2019 and 2018. When the board of directors decided to distribute stock dividends, the number of which shall be calculated based on the closing price of the Company’s ordinary shares one day before the date of the meeting of board of directors. The actual distribution of the employee remuneration was $72,812 thousand; while the amount for directors is identical to those stated on financial statements. Related information would be available at the Market Observation Post System website.

(x) Non-operating income and expense

(i) Other income

The components of other income for the years ended December 31, 2019 and 2018 were as follows:

Interest income Rent income Dividend income Other income, others	For the years ended December 31,
	2019 2018 $ 63,473 164,358 18,173 19,491 137,950 636,733 162,179 130,351 $ 381,775 950,933

(Continued)

• 349 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(ii) Other gains and losses

The components of other gains and losses for theyears ended December 31, 2019 and 2018 were as follows:

Losses on disposals of property, plants, and equipment Gain on amendement of lease Foreign exchange losses Gains on fair value adjustment, investment property Fee expense Losses on work stoppages Others	For the years ended December 31, 2019 2018 $ (2,765) (6,941) 4 - (4,699) (15,866) 111,367 119,574 (49,667) (50,859) (35,932) (425,116) (30,481) (112,490) $ (12,173) (491,698)

(iii) Finance costs

The components of finance costs for theyears ended December 31, 2019 and 2018 were as follows:

Interest expense (y) Financial Instruments (i) 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 Loans and receivables Cash and cash equivalents Notes receivable, accounts receivable and other receivables Other assets Total	For the years ended December 31, 2019 2018 $ (106,515) (52,100) $ (106,515) (52,100) December 31, 2019 December 31, 2018 $ 7,872,026 4,265,537 1,738,008 1,963,687 3,347,128 8,465,372 1,760,470 2,817,303 126,464 127,646 $ 14,844,096 17,639,545

(Continued)

• 350 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

2) Financial liabilities

Short-term loans Long-term bank loans-current portion Payables Long-term bank loans Long-term bills payable Other liabilities Lease liabilities Total	December 31, 2019 December 31, 2018 $ 3,100,558 650,000 1,370,000 685,000 1,978,181 2,967,746 3,460,000 1,795,000 4,494,177 349,729 102,013 101,861 101,763 - $ 14,606,692 6,549,336

(ii) Credit risk

• 1) Exposure to credit risk

The carrying amount of financial assets represents the Company’ s maximum credit exposure. As of December 31, 2019 and 2018, the maximum exposures to credit risk amounted to $14,844,096 thousand and $17,639,545 thousand, respectively.

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, 2019 and 2018, 83% and 82%, respectively, of the total amount of accounts receivable was composed of 10 customers and 11 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. Credit is granted to these customers according to the result of the Company’s credit evaluation. Those customers who do not satisfy the requirement shall not be offered credit.

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. Expected losses of the receivables on December 31, 2019 and 2018 were as follows:

(Continued)

• 351 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Not past due Past due more than 1 year Not past due Past due more than 1 year	December 31, 2019	December 31, 2019
	Carrying amount of account receivables Weighted average expected credit loss Allowance for expected credit loss $ 1,802,830 0~6% 94,906 237,590 100% 237,590 $ 2,040,420 332,496 December 31, 2018
		Weighted average expected credit loss Allowance for expected credit loss 0~4% 94,906 100% 237,590 332,496

(iii) Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

December 31, 2019 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, 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 $ 1,137,731 834,883 5,567 102,013 2,130,000 5,800,558 4,494,177 $ 14,504,929 $ 1,728,481 935,006 10,848 100,057 1,550,000 1,580,000 349,729 $ 6,254,121	Contractual cash flows 1,137,731 834,883 5,567 102,013 2,164,396 5,818,196 4,500,000 14,562,786 1,728,481 935,006 10,848 100,057 1,607,245 1,584,731 350,000 6,316,368	Within 6 months 1,137,731 721,168 5,567 86,033 537,000 3,511,535 - 5,999,034 1,728,481 745,448 10,848 88,523 411,652 551,332 350,000 3,886,284	6-12 months - 113,715 - 9,480 440,850 - - 564,045 - 189,558 - 9,023 210,987 180,128 - 589,696	1-2 years - - - 4,685 1,186,546 1,454,375 4,500,000 7,145,606 - - - 226 421,974 100,394 - 6,434,608	2-5 years More than 5 years - - - - - - 315 1,500 - - 852,286 - - - 852,601 1,500 - - - - - - 765 1,520 562,632 - 752,877 - - - 6,798,642 1,520

(Continued)

• 352 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(iv) 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 EUR VND CNY Long-term share investment using equity method USD Financial liabilities Monetary items USD	December 31, 2019 Foreign Currency Exchange rate NTD $ 26,996 30.036 810,862 2,000 33.640 67,280 4,795,580 0.0013 6,234 18,221 4.310 78,531 173 30.036 5,183 $ 5,881 30.036 176,630	December 31, 2019 Foreign Currency Exchange rate NTD $ 26,996 30.036 810,862 2,000 33.640 67,280 4,795,580 0.0013 6,234 18,221 4.310 78,531 173 30.036 5,183 $ 5,881 30.036 176,630	December 31, 2018	December 31, 2018
	Foreign Currency $ 26,996 2,000 4,795,580 18,221 173 $ 5,881	Exchange rate 30.036 33.640 0.0013 4.310 30.036 30.036	Foreign Currency 44,564 - 4,786,000 475,179 170 12,497	Exchange rate NTD 30.710 1,368,570 - - 0.0013 1,954,813 4.470 2,124,050 30.710 5,254 30.710 383,797

• 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, payables, and loans, which are denominated in foreign currency. A 1% of appreciation of NTD against USD, EUR, VND, and CNY would have increased net income by $6,292 thousand and increased $24,921 thousand for the years ended December 31, 2019 and 2018, respectively; other comprehensive income would have increased $52 thousand and increased $53 thousand for the years ended December 31, 2019 and 2018, respectively. The analysis is performed on the same basis for 2018.

• 3) Foreign exchange gains (losses) on monetary items

Since the Company has many kinds of functional currency, the information on foreign exchange gains (losses) on monetary items is disclosed by total amount. For the years ended December 31, 2019 and 2018, foreign exchange gains (losses) (including realized and unrealized portions) amounted to ($4,699) thousand and ($15,866) thousand, respectively.

(v) 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.

(Continued)

• 353 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

If the interest rate increases by 1%, the Company’ s net income will decrease by $21,300 thousand and $16,500 thousand for the years ended December 31, 2019 and 2018, respectively, assuming all other variable factors remain constant. This is due mainly to the fact that the Company’s borrowings bear floating interest rate.

• (vi) Fair value information

The Company uses market observations as much as possible when measuring 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 was 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, 2019 Financial Assets Cash and cash equivalent Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-non-current Financial assets at fair value through other comprehensive income-non- current Note receivables, accounts receivable and other receivables Other assets Non-financial Assets Investment property	Book value $ 3,347,128 624,964 7,247,062 1,738,008 1,760,470 126,464 36,716,577 $ 51,560,673		Fair value	Fair value
		Level 1 - 624,964 - 1,595,896 - - - 2,220,860	Level 2 - - - - - - - -	Level 3 Total - - - 624,964 7,247,062 7,247,062 142,112 1,738,008 - - - - 36,716,577 36,716,577 44,105,751 46,326,611

(Continued)

• 354 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

December 31, 2019 Financial Liabilities Short-term loans Long-term loans-current portion Long-term loans Long-term accounts payable Long-term bills payable Other liabilities Lease liabilities December 31, 2018 Financial Assets Cash and cash equivalent Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-non-current 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 $ 3,100,558 1,370,000 3,460,000 1,978,181 4,494,177 102,013 101,763 $ 14,606,692 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		Fair value	Fair value
		Level 1 - - - - - - - -	Level 2 Level 3 Total - - - - - - - - - - - - - - - - - - - - - - - - Fair value
		Level 1 - 1,016,992 - 1,524,767 - - - 2,541,759 - - - - - - -	Level 2 - - - - - - - - - - - - - - -	Level 3 Total - - - 1,016,992 3,248,545 3,248,545 438,920 1,963,687 - - - - 38,350,359 38,350,359 42,037,824 44,579,583 - - - - - - - - - - - - - -

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.

(Continued)

• 355 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• 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 investee.

• ii) Derivative financial instruments

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, 2019 and 2018.

(Continued)

• 356 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• e) Statements of changes in fair value measurements of financial assets in Level 3

January 1, 2019 Purchase Decrease Effects on deferred income tax liabilities Total gain and losses recognized in profit or loss or other comprehensive income December 31, 2019 January 1, 2018 Adjustments for initial application of IFRS 9 January 1, 2018, adjusted Purchase Effects on deferred income tax liabilities Total gain and losses recognized in profit or loss or other comprehensive income December 31, 2018	Investment Property $ 38,350,359 - (9,423) (1,735,726) 111,367 $ 36,716,577 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 other comprehensive income Designated at initial recognition Derivative financial assets Non-public quoted equity instruments 3,248,545 - 466,738 1,235,278 - - - - (351,290) - - - 2,763,239 - 26,664 7,247,062 - 142,112 Financial assets reported at fair value through profit or loss Financial assets reported at fair value through other comprehensive income Designated at initial recognition Derivative financial assets Non-public quoted equity instruments 1,102,515 - - 396,650 - 694,659 1,499,165 - 694,659 1,560,000 - - - - - 189,380 - (227,921) 3,248,545 - 466,738
		Designated at initial recognition 1,102,515 396,650 1,499,165 1,560,000 - 189,380 3,248,545

(Continued)

• 357 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• 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 (for instance, when a firm uses an unadjusted previous transaction price or a third-party pricing information), e.g. part of the the Company's investment in non-active market equity and debt instruments. The fair value of the Company's investment property is level 3, which is determined in accordance with IFRSs, i.e., outsourcing to external appraisors for assessment based on market evidence (please refer to Note 6(j)). Due to the impracticability to evaluate the relationship between the unobservable input value and fair value, the quantitative information is not disclosed. The fair value of the aforesaid assets at December 31, 2019 and 2018 was $36,716,577 thousand and $38,350,359 thousand, respectively.

The Company holds investments in equity shares, which is classified as financial assets at fair value through profit or losse, whose fair value belongs to level 3.

Most of fair value assets belonging to level 3 possesses no more than one significant unobservable input value. Only 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	Valuation technique	Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement • Net Asset Value • Lack of market liquidity, discount rate 10%~30% • Not applicable • Lack of market liquidity, the more the discount, the lower the fair value
Financial assets at fair value through profits or losses and financial assets at fair value through other comprehensive income	Net Asset Value Method

(Continued)

• 358 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• g) The evaluation process for fair value belonging to level 3

The Company's fair value evaluation involves observable input value requiring unobservable parameters for significant adjustments or unobservable input value, both of which belong to level 3. The main source of such input value is external appraisors' reports. The results of the evaluation are then reviewed to assure the consistency with the source of the evaluation and the reasonability.

The evaluation of investment property complies with FSC's regulations of the evaluation methods and parameters, and is conducted by external appraisors.

• h) Fair value measurements of 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.

• (z) Financial risk management

• (i) Overview

The Company is 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 financial statements.

• (ii) 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.

(Continued)

• 359 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

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.

(iii) Credit Risk

Credit risk means the potential loss of the Company if the clients or counterparties involved in transactions 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.

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 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 Company’s finance department. As the Company deals with the banks and other external parties with good credit standing and financial institutions, corporations and government agencies which are graded above investment level, management believes that the Company does not have compliance issues and significant credit risk.

(Continued)

• 360 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(iv) 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 much as possible, that it always has 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 does not have significant liquidity risk.

(v) 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 CNY.

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.

2) Interest rate risk

The Company’s interest rate risk comes from long-term and short-term bank loans. The long-term bonds issued by theCompany is fixed-rate, so there is no risk caused by the fluctuations of interest rates and fair value interest rate. The long-term and short-term bank loans with floating-rate are exposed to interest rate risk, but most of risk is offset 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 a net basis.

(Continued)

• 361 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(aa) Capital management

The Company’s objectives for managing capital is to safeguard the capacity to continue to operate, to continue to provide a return to shareholders, to maintain the 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 shareholders, reduce the capital for redistribution to shareholders, issue new shares, or sell assets to settle any liabiltiies.

The Company and other entities in the same industry use the debt-to-equity ratio to manage capital. This ratio is the total net debt 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, and other equity plus net debt.

The Company’s debt-to-equity ratios at the end of the reporting period as of December 31, 2019 and 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, 2019 December 31, 2018 $ 24,546,071 18,980,972 (3,347,128) (8,465,372) $ 21,198,943 10,515,600 $ 67,116,769 66,896,890 $ 88,315,712 77,412,490 % 24.00 % 13.58

On December 31, 2019, The increase of debt-to-equity ratio resulted from the operationsupplementing bank loans and cash being invested into subsidiaries.

(ab) Investing and financing activities not affecting current cash flow

The Company’s investing and financing activities which did not affect the current cash flow for the years ended December 31, 2019 and 2018, were as follows:

• (i) For the acquisition of right-of-use assets based on lease term, please refer to Note 6(i).

Reconciliation of liabilities arising from financing activities was as follows:

Long-term loans Short-term loans Long-term bills payable Lease liabilities Total liabilities from financing activities	January 1, 2019 $ 2,480,000 650,000 349,729 147,307 $ 3,627,036	Cash flows 2,350,000 2,450,558 4,144,448 (50,543) 8,894,463	Non-cash	changes Other December 31, 2019 - 4,830,000 - 3,100,558 - 4,494,177 4,999 101,763 4,999 12,526,498
			Foreign exchange movement - - - - -

(Continued)

• 362 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Long-term loans Short-term loans Long-term bills payable Total liabilities from financing activities	January 1, 2018 $ 2,370,000 250,000 299,882 $ 2,919,882	Cash flows 110,000 400,000 49,847 559,847	Non-cash	changes Other December 31, 2018 - 2,480,000 - 650,000 - 349,729 - 3,479,729
			Foreign exchange movement - - - -

(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 Kaohsiung Monomer Company Investee accounted for using equity method Zhong Gong Baoquan Ltd. Investee accounted for using equity method BES Engineering Corporation The Company is a director of the entity Core Pacific City Co., Ltd. Share a director with the Company Chung Kung Management and Maintenance of Investee as accounted for using equity method of Apartments Co., Ltd. Zhong Gong Baoquan Ltd. Coreasia Human Resources management Co., Subsidiary of BES Engineering

Coreasia Human Resources management Co., Ltd. Capital Machinery Co., Ltd.

The entity is a director of the Company

Sheen Chuen-Chi Cultural & Educational Foundation

The entity is a director of the Company

Ding-Yue Development Co., Ltd. Chemax International Corporation

Subsidiary of the company

Subsidiary of the Company (merging with Tsou Seen since August 1, 2018)

CPDC Investment (BVI) Co Ltd.

Subsidiary of the Company

Tsou Seen Chemical Industries Corporation

Subsidiary of the Company (merging with Chemax Company since August 1, 2018) Subsidiary of the Company

CPDC Green Technology Corp. (Original name: CPDC Engineering Co., Ltd.)

Rich Equities Ltd.

Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Sub-subsidiary of the Company

Unichem Development Limited BES Twin Towers Co., Ltd.

Weiming (Jiangsu) Petrochemical Company Weiqiang International Trading (Shanghai) Co., Ltd.

(Continued)

• 363 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Name of related party	Relationship with the Group
Weihua (Rudong) Trading (Shanghai) Co.,	Sub-subsidiary of the Company
Ltd.
Thanh Phong Constuction Invetment Co., Ltd.	Subsidiary of the company
Taivex Therapeutics Corporation	Sub-subsidiary of the company
Changshu Jing Hui Properties Co., Ltd.	The president of the entity is the vice president of
	the Company

(b) The ultimate parent company

The Company is the ultimate parent company.

• (c) Significant Transactions with related parties

• (i) Sale of Goods and Services to Related Parties

The amounts of significant sales by the Company to related parties were as follows:

Subsidiary Sub-subsidiary Associates	For the years ended December 31,
	2019 2018 $ 1,053,316 1,291,836 329,145 509,585 550,760 644,031 $ 1,933,221 2,445,452

The terms for related party sale transactions were the same as those of other unrelated customers excluding Tsou Seen Chemical Industries Corporation, Weihua (Rudong) Trade Co., Ltd and Weiqiang International Trade (Shanghai) Co., Ltd. who have the terms for 3 month.

• (ii) Receivables

The receivables from related parties were as follows:

Accounts	Types of related parties	December 31, 2019 December 31, 2018 $ 32,348 65,945 82,948 118,009 57,764 60,233 5 13,653 10,969 9,793 9 4 $ 184,043 267,637
Accounts receivable Accounts receivable Accounts receivable Other receivables Other receivables Other receivables	Subsidiary Sub-Subsidiary Associates Subsidiary Associates Other related parties

(Continued)

• 364 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(iii) Payables

The payables to related parties were as follows:

Accounts	Types of related parties	December 31, 2019 December 31, 2018 $ 51,269 27,085 4,602 4,976 18,134 4,548 $ 74,005 36,609
Other payables Other payables Other payables	Subsidiary Associates Other related parties

(iv) Other

Subsidiary and sub-Subsidiary Rental income Sale of scraps Other revenues Associates Rental income Other revenues Security service fees Other related parties Rental income Other revenues Other expense Rental expense	For the years ended December 31,
	2019 2018 $ 200 1,563 - 12,044 13,965 14,693 5,373 5,235 16,835 17,809 (22,467) (23,978) 3 4 15 1,043 (21,243) (882) - (4,814)

Please refer to Note 6(j) for lease of land and buildings to related parties.

• (v) The Company had a two-year contract with BES Engineering, for the lease of office building, with the total value of $9,629 thousand. The rental expense for the year ended December 31, 2018 was $4,814 thousand. This rental transaction was applicable to IFRS16 and recognized right-of-use assets and lease liability both amounting to $7,130 thousand. The depreciation expense and interest expense for the year ended December 31, 2019 were $4,754 thousand and $82 thousand, respectively. The amount of lease liability as of December 31, 2019 was $2,398 thousand.

• (vi) The Company's equipment maintenance services and commissioned fees for the subsidiaries in 2019 and 2018 were $249,499 thousand and $238,291 thousand, respectively. As of December 31, 2019 and 2018, the Company recorded the unpaid under other payables.

(Continued)

• 365 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

The total contract price (excluding tax) of the Company's uncompleted contracts for the projects issued to the subsidiaries as of December 31, 2019 and 2018 were $545,497 thousand and $444,608 thousand, respectively, and the payment were $281,399 thousand and $121,087 thousand, respecitively .

• (vii) 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, 2019 and 2018, the construction project in-progress amounted to $1,552,720 thousand and $1,532,800 thousand, respectively. As of December 31, 2019 and 2018, the unpaid fee amounted to $875,708 thousand and $1,376,787 thousand, respectively.

• (viii) The Company had contracts with other subsidiaries, 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 months. As of December 31, 2019, no constructional management fee is paid by the Company. Other fees, taxes, and other related expenses, such as design fee, amenities design fee, bulk fees, sales expenses, Kaohsiung House (green building) Bonus, trust fees, property management funds, land value tax, financing interest, etc., are all attributed to the Company, while the subsidiary serves merely as an ageny. For the year ended December 31, 2019, the subsidiary has requested for the amount of $10,026 thousand.

• (ix) The Company acquired 123,528 thousand shares of preferred stocks of Core Pacific City Co., Ltd. amounting to $1,235,278 thousand on March 11, 2019. Please refer to Note 6(b).

• (x) The Company acquired 20,000 thousand shares of common stock of BES Twin Towers Co., Ltd. amounting to $215,600 thousand from BES Engineering Co., Ltd. on March 12, 2019.

• (xi) The Company acquired 100 thousand shares of common stock of BES Twin Towers Co., Ltd. amounting to $1,078 thousand from its managements on March 12, 2019.

• (xii) To acquire its right of development and use of land, the Company invested the amounts of USD48,000 thousand ($1,400,000 thousand) and USD114,000 thousand ($3,400,000 thousand) in Frontier Fortune Investment Pte. Ltd. (Vietnam) and Core Pacific Twin Star (Vietnam) Investment Co., Ltd., respectively, on October 25, 2018, wherein, 20% of the investment amounts will be offered to Changshu Jing Hui Properties Co., Ltd. for purchasing option.

• (xiii) The board of directors of the Company made resolutions on July 12, 2019, to transfer 35% of the shares of Praxair Chemax Semiconductor Materials Co., Ltd. to BES Twin Towers Development Co., Ltd., totaling 6,754 thousand shares, at the amount of $351,290 thousand. Please refer to Note 6(c) for more information.

• (d) Key management personnel compensation

Short-term employee benefit Post-employment benefits	For the years ended December 31,
	2019 2018 $ 179,628 226,502 4,284 653 $ 183,912 227,155

(Continued)

• 366 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(8) Pledged assets:

The Company's pledged assets are as follows:

Asset	Purpose of pledge Guarantee for priority right-of-use of harbor Collateral for long-term and short- term financial credit, syndicated loan Syndicated loan, collateral for long-term financial credit and long-term bills payable Long-term bills payable Long-term bills payable Long-term bills payable Deposit for lawsuit	December 31, 2019 December 31, 2018 $ 10,037 10,038 4,693,853 3,734,754 5,122,417 5,995,969 951,789 1,445,374 961,050 915,400 624,180 477,405 91,557 91,557 $ 12,454,883 12,670,497
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

(9) Significant commitments and contingencies:

• (a) As of December 31, 2019 and 2018, the Company had the following unused letters of credit:

USD EUR NTD JPY	December 31, 2019 December 31, 2018 $ 11,696 43,631 235 - 1,015,000 1,095,000 37,300 -

• (b) As of December 31, 2019 and 2018, the Company had issued guarantee notes for bank loans, sales and purchases, and development plan aggregating to $13,508,000 thousand, USD30,000 thousand and $13,784,000 thousand, USD20,000 thousand, respectively.

• (c) As of December 31, 2019 and 2018, the Company had contracts for various construction projects inprogress amounting to $3,614,625 thousand and $3,296,924 thousand, respectively. As of December 31, 2019 and 2018, the remaining future obligations under these contracts amounted to $2,276,969 thousand and $2,772,572 thousand, respectively.

(Continued)

• 367 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• (d) As of December 31, 2019 and 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

• (i) Case of Kaohsiung gas explosion forced disconnected pipeline

On July 31, 2014, there was an underground pipeline explosion in Kaohsiung city. Due to the post - disaster reconstruction project, Kaohsiung City Government issued a penalty letter No. 10335137100 on August 18, 2014, to order the Company 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 September 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 Feburary 2017.

• (ii) Abolishment of the permission for Kaohsiung road and underground pipeline excavation and pipeline

Due to the August 1, 2019, 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 December 15, 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 was built by CPC, 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 Feburary 16, 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.

(iii) 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 21, 2016: trading the equity of Taiwan Chi chlorine Chemical Co., Ltd, total 6,400,000 shares at the sales price, USD100,000 thousand, which was equivalent to $3,225,000 thousand. After the expectation of the disposal interests, $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

(Continued)

• 368 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

USD100,000 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. The case prevailed in April, 2019, and the Company was entitled to acquire the compensation of default interests and the attorney’s fee about USD3,200 thousand, which was obtained in April in the same year.

(iv) 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.

(f) Contingent liabilities

(i) The Company signed total three land lease contracts with the 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. The Kaohsiung branch of Taiwan International Ports Corporation, Ltd. delivered the land to the Company prior to the end of December 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 $1,650 thousand, $2,565 thousand and $1,493 thousand respectively since the land was delivered. 3 years and 6 months from the land delivery date, the Company paid management fees of $10,654 thousand, $24,605 thousand and $12,329 thousand respectively. The Company also placed Certificate of Deposits of $5,000 thousand and $13,000 thousand as performance bonds in December 2013 and February 2014 respectively. The Company, in August 2015, narrowed the operating scale based on the adjustment of investment plan, which resulted in one of the performance bonds of $8,000 thousand, not being returned. Taiwan International Ports Corporation, Ltd. completed the transaction procedure prior to November 2017. The Company started to implement land drilling and geological improvement project and started paying the land rent of those projects, which was $1,675 thousand and $1,497 thousand respectively each year.

(ii) Dispute from the senior manager

1) Labor Dispute

The previous senior managers, who left the Company without transferring the duties and authorization, did not perform the duties since July 1st 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.

(Continued)

• 369 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

The Civil litigation against 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 sides, and Expired Employee Retirement Policies of the Company was applicable, the Company shall pay $4,572 thousand to Mr. Liu. The Company was not satisfied with the original verdict and appealed for the 2nd sentence court. The 2nd 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. In June 2019, the appeal was dismissed and the judgment was binding and final.

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 $35 thousand, to Mr. Zhang, which was not satisfied by Mr. Zhang and this case was appealed to the 2nd sentence court. In July 2016, the 2nd sentence court rejected the request from Mr. Zhang but he re-appealed to the 3rd sentence in August of the same year. Upon finding the appeal meritorious, the Supreme Court reversed and remanded the judgement. The preparatory proceeding of the first repeated appeal was conducted in Taiwan Court Kaohsiung Branch Court in April 2019.

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 Note 8 for details of deposit for lawsuit.

(iii) 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 Janurary 28, 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 prosecuted the Company and managers in Feburary 2015 and asked for the joint damaged compensation $6,920 thousand, which awaited hearing by Miaoli local court. In September of the same year, both sides agreed to withdraw the litigations. Trial procedure was recovered in Feburary 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 is currently under hearing in High Court Taichung Branch.

(Continued)

• 370 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(iv) Contract Fraud of Shanghai industry

On August 6, 2014, the reinvestment company, Weihua and Weiqiang, filed the civil appeal to Yangpu District Court to ask Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. to pay all overdrafts of the contract. However, Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. did not perform the first phase of repayment according to Court’s mediation report, Weihua and Weiqiang, on September 2, 2014, applied to Yangpu District Court for the enforcement and sealed all coal tar of Shanghai Tongye Coal and Chemical Industry Group Co., Ltd., the total coal tar sealed was 5,216 tons and 4,777 tons were sold. Subsequently, Weihua and Weijiang Company and Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. would continue negotiations on unrealized creditors and requested Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. to propose the more specific repayment plan. Weihua and Weiqiang estimated allowance of the accounts receivable to be, CNY19,274 thousand and CNY8,276 thousand respectively. Weihua and Weijiang Company reported to the police the relevant persons of Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. that were suspected to be involve with the contract fraud and other criminal matters. The police rejected the report due to insufficient evidence, therefore Weihua hired a local lawyer in May 2018, to assist with Shanghai police and Shanghai economics investigation group. The case is now under investigation.

• (v) Civil compensation for Residents living in An shun

1) The 1st case

In 2008 and 2009, Mr. Wu and others filed civil and national compensation lawsuit against the Ministry of Economic Affairs, Tainan City Government, Tainan City Environmental Protection Bureau and the Company (Hereinafter referred to as 1st case of Tainan Anshun plant civil compensation) and they claimed that during 1942 and 1983, the previous Taiwan Alkali Co. Ltd. Anshun plant, produced mercury and dioxins in its production operations and polluted the 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 was the ultimate owner 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 did not supervise and require the Anshun plant to implement pollution prevention and control acts, thus should be jointly responsible for any compensation. 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 Anshun plant, so they claimed the Company shall also take joint responsibility for 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 bear the cost of medical expenses and mental compensation for $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

(Continued)

• 371 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

appealed to the Tainan District Court asking the Company for medication, health examination fee and reparations, to the amount of $2,300 thousand, which was incorporated into this case, the total compensation amount was $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 $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 the Company to compensate the plaintiff for $190,000 thousand, which the Company was not satisfied with and had proposed the appeal for remedy in September 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 $190,000 thousand. The Company made a payment of compensation and related interests to 143 plaintiffs before the end of June 2019. The part related to medical remedy of the case was abandoned for secondary trial.

1) The 2nd case

Mr. Chen and others filed civil and national compensation lawsuit against the Company and the Ministry of Economic Affairs on March 14th 2017 (Hereinafter referred to as 1st case of the Tainan Anshun plant civil compensation), they claimed the Company and the Ministry of Economic Affairs had to jointly compensate the plaintiff $80,915 thousand. The verdict of the 3rd national compensation in 2008 of the Tainan Anshun 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. There were disputable factors on both factual and legal matters. During the 1st and 2nd instance of the Anshun 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 Anshun 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 Anshun plant civil compensation, the Company continued to seek for the jurisdiction remedies to protect the Company and shareholder interests.

(10) Losses Due to Major Disasters:None

(11) Subsequent Events:

• (a) In order to invest in the overseas subsidiary for the purpose of plant construction, a resolution was made during the board of director’s meeting held on September 23, 2019 for the issuance of common stock in Global Depositary Receipts (GDR), with a maximum limit of 500,000 thousand shares, amounting to USD160,317 thousand, which was approved by Rule No. 1080335763 Financial Supervisory Commission on November 20, 2019. The share price was determined and completed on January 6, 2020 and issued on January 10, 2020. The total units of issued GDR was 18,000 thousand, which represented the right of common stock for 450,000 thousand shares; for every 25 shares of common stock per unit of GDR, the unit price of GDR was USD7.18, which was equivalent to $8.64 per share, resulting to a total issuance price amounting to USD129,240 thousand.

(Continued)

• 372 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• (b) On February 26, 2020, the Board of Directors resolved during their meeting to purchase the land, plants and equipment of Sunko Ink Co., Ltd amounting to $465,000 thousand for the purpose of expanding the manufacturing and business operation of the Company.

(12) Other:

• (a) The nature of operating costs and expenses were as follows:

The nature of operating	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:	costs and expenses were as follows:
	For theyears ended December 31
By funtion By item	2019				2018
	Operating cost	Operating expense	Non-Operating expense	Total	Operating cost	Operating Expense	Non-Operating expense	Total
Employee benefits
Salary	851,240	376,084	-	1,227,324	1,103,552	541,464	-	1,645,016
Labor and health insurance	84,828	33,162	-	117,990	86,961	26,726	-	113,687
Pension	41,612	16,727	-	58,339	43,857	20,367	-	64,224
Remuneration of directors	-	46,842	-	46,842	-	106,013	-	106,013
Others	28,139	9,421	-	37,560	28,220	7,920	-	36,140
Depreciation	1,160,456	77,307	6,058	1,243,821	1,132,123	64,499	5,969	1,202,591
Amortization	-	2,522	-	2,522	-	2,522	-	2,522

Additional information on the number of emplyees and employee benefits expense of the Company are summarized as follows:

Number of employees Number of non-employee directors Average employee benefits expense Average employee salary expenses Average employee salary adjustment	For the years ended December 31, 2019 2018 1,310 1,251 7 8 $ 1,106 1,496 $ 942 1,323 % (28.80)

• (b) On March 22, 2019, Kaohsiung Urban Planning Commission (KUPC) announced that Dashe Industrial Park (DIP), where the Company’s plant is located, will be categorized from Special Zone to Zone B. In light of this matter, all the companies involved in this case are making their best effort to negotiate and compromise with KUPC, requesting KUPC to change DIP’ s status to Zone A instead of Zone B.

(Continued)

• 373 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(13) Other disclosures:

• (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:

• (i) Loans to other parties:

(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	Transaction amount for business between two parties	Reasons for short-term financing	Allowance for bad debt	Collateral	Collateral	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.	Other Receivable	Yes	23,128	23,128	6,908	2%	2	-	Operating	-		-	63,429	63,429

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 net value of Core Pacific Twin Star (Myanmar).

Note 3: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statements.

• (ii) Guarantees and endorsements for other parties:None

• (iii) Securities held as of December 31, 2019 (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		Note
				Shares/Units	Carrying value	Percentage of ownership (%)	Fair value
CPDC CPDC BES Twin Towers Co., Ltd	Yuanta Financial Holdings 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 Aetas Technology Inc. Taiwan Business Bank	None The Company is a director of the investee company None The Company is a supervisor of the investee company None Share a director with the Company The Company is a director of the investee Company The Company is a director of the investee company � �	Financial assets designated at fair value through profit or loss� current Non-current financial assets at fair value through other comprehensive income � � � Financial assets designated at fair value through profit or loss� non-current 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 other comprehensive income	30,938,819 149,243,449 44,684,712 407,000 2,600,000 422,250,872 2,701,651 8,815 287,961 25,527,558	624,964 1,161,114 434,782 1,461 26,000 7,247,062 114,293 358 - 321,647	0.27 9.75 0.30 4.52 2.89 27.19 14.00 0.05 0.58 0.36	624,964 1,161,114 434,782 1,461 26,000 7,247,062 114,293 358 - 321,647

(Continued)

• 374 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Name of holder	Category and name of security	Relationship with company	Account title		Ending balance	Ending balance		Note
				Shares/Units	Carrying value	Percentage of ownership (%)	Fair value
BES Twin Towers Co., Ltd Tsou Seen Chemical Industries Corporation	Core Pacific City Co., Ltd. Praxair Chemax Semiconductor Materials Taiwan Tea Corporation Good Company TaiRx, Inc.	Share a director with the Company The Company is a director of the investee 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- current Financial assets at fair value through other comprehensive income� non-current �	160,111,000 6,754,127 9,618,000 750,000 722,500	2,695,932 285,733 158,216 - 14,652 13,086,214	10.31 35.00 1.22 2.08 1.18	2,695,932 285,733 158,216 - 14,652 13,086,214

• (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of $300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Category and name of security	Account name	Name of counter-party	Relationship with the company	Beginnin	g Balance	Purch	ases	Sales	Sales	Sales	Sales	Ending Balance	Ending Balance
					Shares/units	Amount	Shares/units	Amount	Shares/units	Price	Cost	Gain (loss) on disposal	Shares/units	Amount
The Company	ETF t ETF Money fund Money fund Ordinary and Preferred shares t Praxair Chemax Semiconductor Materials Co., Ltd. t i	Financial assets at fair value hrough profit or loss� current � � � Financial assets at fair value hrough profit or loss�non- current Financial assets at fair value hrough other comprehensive ncome�non- current	Yuanta/P- shares SSE50 ETF Cathay China First Security and InsuranceCo., Ltd JuShen Funds Co., Ltd Core Pacific City Co., Ltd. BES Twin Towers Co., Ltd.	None � � � Share a director with the Company Subsidiary	10,313,000 16,378,000 - - 298,723,070 9,455,778	289,332 288,988 - - 3,248,545 438,920	- - 29,353,684.10 68,030,231.53 123,527,802 -	- - 450,000 1,010,000 1,235,278 -	10,313,000 16,378,000 29,353,684.10 68,030,231.53 - 6,754,127	326,539 334,870 450,353 1,010,582 - 351,290	289,332 288,988 450,000 1,010,000 - 351,290	37,207 45,882 353 582 - -	- - - - 422,250,872 2,701,651	- - - - 7,247,062 114,293

• (v) Acquisition of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Name of property	Transaction date	Transaction amount	Status of payment	Counter-party	Relationship with the Company	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	References for determining price	Purpose of acquisition and current condition	Others
							Owner	Relationship with the Company	Date of transfer	Amount
Ding-Yue Development Co., Ltd	land	September 25, 2019	37,200,010	-	Core Pacific City Co., Ltd.	Share a director with the Company	Note 1	-	-	-	Appraisal reports from Real Estate Appraisers Firm	Business operating use	Note 2

Note 1: The object of the transaction owned by different related parties within 5 years, wherein a disclosure on the date of acquisition, price, and relationship with the parent company in the current period is required: N/A.

Note 2: The consideration of the transaction and the property (including the land and the building constructed on it) are under mutual trust agreement.

• (vi) Disposal of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock:None

(Continued)

• 375 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

• (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of $100 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Related party	Nature of relationship		Transaction details	Transaction details	Transaction details	Transactions wit from	h terms different others	Notes/Accounts receivable (payable)	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 CPDC Green Technology Corp.(CPDC GT) (Original name: CPDC Engineering Co., Ltd.)	Tsou Seen Chemical Industries Corporation Weihua (Rudong) Trade Co., Ltd Kaohsiung Monomer Company Ltd The Company	Subsidiary S Subsidiary S Affiliated company accounted for using equity method S Subsidiary S	ales ales ales ales	(1,053,316) (247,339) (550,760) (249,499)	% 3.93 % 0.92 % 2.06 % 0.97	3 Month 3 Month 1 Month Base on contract	- - - -	OA 90 days OA 90 days - Base on contract	32,347 79,520 57,764 51,269	1.89% 4.66% 3.38% 4.51%	Note � Note

Note: The amounts of the transaction and the ending balance had been offset in the consolidated financial statements.

(viii) Receivables from related parties with amounts exceeding the lower of $100 million or 20% of the capital stock:None

(ix) Trading in derivative instruments:None

(b) Information on investees:

The following is the information on investees for the years ended December 31, 2019 (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 inve	stment amount	Balance as	of December 31,	2019	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2019	December 31, 2018	Shares	Percentage of wnership	Carrying value
The Company � � � � � � �	Kaohsiung Monomer Company Ltd 1 S ( Zhong gong baoquan Ltd. 6 Ding-Yue Development Co., Ltd. (original name: Tao Zhu Construction & Development Co., Ltd.) 8 CPDC Investment (BVI) Co Ltd. Tsou Seen Chemical Industries Corporation F P CPDC Green Technology Corp.(Original name: CPDC Engineering Co., Ltd.) 1 3 Rich Equities Ltd. Unichem Development Limited 1	,Hsing Kung Road,Ta he P O Box 6-25 Nantze,Kaohsiung 815), Taiwan F., No.12, Dongxing Rd., Taipei City 105, Taiwan F., No.12, Dongxing Rd., Taipei City 105, Taiwan Citco Building, Wickhams Cay, P.O. Box662 No.1, Jingjin Rd., angliao Township, ingtung County 940, Taiwan 4F.-16, No.61, Wufu rd Rd., Qianjin Dist., Kaohsiung City 801, Taiwan Level3,Alexander House,35 Cybercity,Ebene, Mauritius Room 511, 5/F, Tower Silvercord 30 Canton Road TSIM SHA TSUI KOWLOON	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 Holding company Dicalcium phosphate Mechanical engineering Holding company Holding company	- 14,400 1,100,000 904,946 760,000 100,000 5,996 7,865,233	- 14,400 100,000 904,946 760,000 100,000 5,996 5,894,124	20,000,000 1,440,000 754,000,000 26,580,000 96,000,000 15,000,000 180,000 255,367,516	% 40.00 % 24.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00	888,805 19,835 7,518,184 901,631 1,511,615 102,891 5,183 6,725,721	1,227,244 9,596 1,771 (3,485) 90,669 (37,577) 46 (231,486)	490,897 2,303 1,771 (3,485) 90,669 (37,577) 46 (231,486)	Note 1 Note 1 Note 2 Note 2&4 Note 2&5 Note 2&5 Note 2&4 Note 2&4&5

(Continued)

• 376 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31,	Balance as of December 31,	2019	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2019	December 31, 2018	Shares	Percentage of wnership	Carrying value
The Company � � CPDC Investment (BVI) Co Ltd. Ding-Yue Development Co., Ltd. (original name: Tao Zhu Construction & Development Co., Ltd.) Tsou Seen Chemical Industries Corporation BES Twin Towers Development Co., Ltd. Frontier Fortune Investment Pte. Ltd. Frontier Fortune Investment Pte. Ltd. Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd	BES Twin Tower Development Co., Ltd. Thanh Phong Construction Investment Co., Ltd. Jean Pacific Development Co., Ltd. Core Pacific Overseas Holdings Ltd Da-ying Construction Ltd. Taivex Therapeutics Inc. Frontier Fortune vestment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd Gemini Star (India) Private Limited Core Pacific Twin Star (Vietnam) Investment Co., Ltd. Core Pacific Pioneer (Myanmar) Company Ltd	16F., No.12, Dongxing Rd., Taipei City 105, Taiwan B2-19, Golden King Tower Building, No. 15 Nguyen Luong Bang, Tan Phu Ward, District 7, Ho Chi Minh City 7F.-2, No.300, Yangguang St., Neihu Dist., Taipei City 11491, Taiwan (R.O.C.) 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 112SINGAPORE (068902) NO.153/Ka,Kyun ShweMmyaing Lane (2) ,23 ward,Thingangyun Townshin Yangon Level7, The Capital, Plot No.C-70, G Block, Bandra Kurla Complex, Bandra MUMBAI Mumbai City MH 400051 IN B2-19, Golden King Tower Building, No. 15 Nguyen Luong Bang, Tan Phu Ward, District 7, Ho Chi Minh City NO.153/Ka,Kyun ShweMmyaing Lane (2) ,23 ward,Thingangyun Townshin Yangon	Real estate investment and development Engaged in construction, real estate, building constructional consulting, lease equipment and wholesale of building materials Renting and selling real estate Holding company Engineering, construction contracting business Engaged in biotechnology, pharmaceutical research and development and marketing Holding company Holding company and consultancy Real estate and petrochemical products research and consultancy Engineering, real estate and consultancy of construction Building construction, real estate management, development and sale	3,353,383 609,347 480,000 808,564 22,500 462,246 1,326,796 169,921 9,274 1,131,376 24,804	2,000,000 609,347 - 808,564 22,500 462,246 180,817 169,921 - - 12,355	368,100,910 458,637,500,000 48,000,000 26,580,000 - 46,224,551 43,060,000 5,500,001 2,100,000 850,000,000,000 800,000	% 100.00 % 97.87 % 40.00 % 45.19 % 100.00 % 91.10 % 100.00 % 100.00 % 99.99 % 97.70 % 80.00	4,991,033 598,440 479,955 895,933 29,081 325,765 1,307,655 163,195 7,485 1,128,322 24,817	1,247,592 4,044 (113) (7,418) 4,452 (64,876) 25,292 3,378 (1,429) 27,723 840	1,247,523 3,958 (45) (3,352) 4,452 (59,102) 25,292 3,378 (1,429) 27,085 672	Note 2&5 Note 2&4&5 Note 1 Note 2&4 Note 2&3 Note 2 Note 2&4 � � Note 2&4 �
								27,625,546	2,296,263	1,561,570

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.

(Continued)

• 377 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(c) Information on investment in mainland China:

(i) The names of investees in Mainland China, the main businesses and products, and other information:

					(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)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2019	Investment flows		Accumulated outflow of investment from Taiwan as of December 31, 2019	Net income (losses) of the investee	Percentage of ownership	Investment income (losses)	Book value	Accumu-lated remittance of earnings in current period
					Outflow	Inflow
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	( 2 )� ( 3 )	763,460	-	-	763,460	5,243	100.00%	5,243	474,248	-
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	( 1 )� ( 3 )	211,560	-	-	211,560	6,211	100.00%	6,211	122,121	-
Weida (Zhangzhou) Consultant Service Co., Ltd. (Weida)	Consultancy	13,171	( 2 )	13,171	-	-	13,171	(34)	100.00%	(34)	2,421	-
Jiangsu Weiming Petrochemical Corporation(W eiming)	Petrochemical supporting facility construction	5,714,463	( 1 )� ( 2 )	3,743,354	1,971,109	-	5,714,463	(174,059)	100.00%	(174,059)	5,059,219	-
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	( 2 )	30,648	-	-	30,648	(1,661)	100.00%	(1,661)	14,254	-
Kunshan Weiqin Management consultant Co., Ltd (Weiqin)	Management consultant	29,664	( 2 )	29,664	-	-	29,664	(6,693)	100.00%	(6,693)	1,834	-
Zhejiang Wedge new material Co., Ltd(Wedge)	Engaged in trading of Synthetic fiber material	31,278	( 2 )	31,278	-	31,278	-	13	100.00%	13	-	-
Changzhou Weicai New Material Science & Technology Co., Ltd.(Weicai) (Original name:Changzho u Huijie new material Co., Ltd (Huijie))	Engaged in engineering plastic and high valued petroleum chemical products	1,860,113	( 2 )	1,324,893	-	-	1,324,893	(50,911)	100.00%	(50,911)	1,039,038	-

(Continued)

• 378 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION Notes to the Financial Statements

(ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as of December 31, 2019	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
8,908,317	14,362,341	Note 4

Note1: There are three ways to invest as follows:

• (a) The Company directly invests in China.

• (b) The Company through third regional company (UDL) invests in China.

• (c) Others. (The Company through subsidiaries invest in China.)

Note2: Explanation for the field “net income (losses) of the investee”:

• (a) If it is in preparation, no investment profit or loss.

• (b) There are three ways to identify the basis of investment profit or loss.

• (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 be over the Company’ s net value of 60%. The Company obtained certified documents of operating headquarters issued by Industrial Development Bureau, Ministry of Economic Affairs on October 18, 2018, and so is not subject to the above regulations. Valid until October 14, 2021.

(iii) 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:None

VI. In the case of any insolvency of the Company and its affiliates, specify its effect on the Company’s financial position:None

• 379 -

Seven. Review and Analysis of Financial Position and Financial Performance, and Risk Management

I. Financial status comparison and analysis (Adoption of IFRS-Consolidated)

Currency Unit: NTD Thousand

			Currency Unit: NTD Thousand	Currency Unit: NTD Thousand
Year Item	2019	2018	Variance
			Amount	%
Current Assets	23,986,973	21,622,587	2,364,386	10.93
Property, plant and equipment	20,275,279	19,501,534	773,745	3.97
Intangible assets	177,464	188,061	(10,597)	(5.63)
Other assets	52,028,774	48,392,772	3,636,002	7.51
Total assets	96,468,490	89,704,954	6,763,536	7.54
Current liabilities	8,741,513	7,488,055	1,253,458	16.74
Non-current liabilities	20,533,113	15,026,145	5,506,968	36.65
Total liabilities	29,274,626	22,514,200	6,760,426	30.03
Capital stock	28,348,502	26,998,573	1,349,929	5.00
Capital surplus	1,286,700	1,260,386	26,314	2.09
Retained earnings	39,406,739	40,374,642	(967,903)	(2.40)
Other equities	(1,925,172)	(1,736,711)	(188,461)	(10.85)
Non-controlling equity	77,095	293,864	(216,769)	(73.77)
Total shareholders’ equity	67,193,864	67,190,754	3,110	-
Notes to significant changes: 1. The current assets increased because the Company purchased the land, subsection 3, Songxi section, Songshan Dist., Taipei City, and paid the first installment in accordance with contract. The amount was NT$7,440,010 thousand dollars, and was recognized as “Inventory-Prepayment for Land”. 2. Plant, Property, and Machinery increased in 2019 due to China subsidiary receiving work in progress construction assets. 3. Intangible assets decreased in 2019 due to the decrease of China subsidiary’s patents. 4. Other assets increased because the Company recognized the net profit and loss of financial asset at fair value of Core Pacific City Co., Ltd. 5. Current liabilities increased in 2019 due to short-term financing loans from financial institutions. 6. Non-current liabilities increased in 2019 due to long-term financing loans from financial institutions and ticket companies. 7. Retained earnings decreased due to lower profits in this reporting period and distribution of cash and stock dividends. 8. Other reserves decreased due to Exchange Differences on Translation of Foreign Financial Statements. 9. Non-controlling equity decreased due to the Company the repurchase of the equity of the subsidiary.

• 380 -

II. Analysis on financial performance (Adoption of IFRS-Consolidated)

Currency Unit: NTD Thousand

Year Item	2019	2019	2018	2018	Increase/ Decrease	Ratio %
	Subtotal	Total	Subtotal	Total
Total operating revenue Less: Sales return and discount Operating revenue, net Operating cost Less: Unrealized sales profit and loss Add: Realized sales profit and loss Gross profit (loss) Operating expenses Operating profit or loss Non-operating revenue and expense Net profit (loss) before tax Less: Income tax gain (expense) Net profit (loss) Other comprehensive income (after tax) Total comprehensive income Net profit (loss) attributable to parent company in current period Net profit (loss) attributable to non-controlling equity in the current period Total comprehensive income attributable to parent company Comprehensive income attributable to non-controllingequity	29,624,094 0	29,624,094 27,996,514	38,503,121 0	38,503,121 33,326,959	(8,879,027) (8,879,027) (5,330,445) 0 3 (3,548,579) (64,477) (3,484,102) 670,624 (2,813,478) 266,118 (2,547,360) 327,947 (2,219413) (2,551,820) 4,460 (2,220,314) 901	(23.06) (23.06) (15.99) 100.00 (68.56) (3.07) (113.30) 41.87 (60.16) 67.21 (59.50) 62.87 (59.04) (59.48) 48.09 (58.99) 20.36
		0 0		0 (3)
		1,627,580 2,036,600		5,176,159 2,101,077
		(409,020) 2,272,492 1,863,472 (129,837)		3,075,082 1,601,868 4,676,950 (395,955)
		1,733,635		4,280,995
		(193,665)		(521,612)
		1,539,970		3,759,383
		1,738,449 (4,814) 1,543,494 (3,524)		4,290,269 (9,274) 3,763,808 (4,425)

Notes to increase/decrease:

1. Operating revenues:

2. The decrease was mainly due to major product, AN 2019 average selling price decreased 18% YoY, volumes of major product CPL decreased by 27%, and average selling prices decreased by 16%.

3. Operating profit: (1) For Acrylonitrile (AN) products, the trade conflict caused the slowdown of terminal demand. As the spread between Acrylonitrile (AN) and raw material narrowed down, sales prices decreased 18% versus last year, and the profit was decreased by NT$760 million. (2) For Caprolactam (CPL) products, the new production capacity in Mainland China has continued to be put into production and resuled in the increase of supply, and the trade conflict between China and the United States has aggravated weakness for the macroeconomic; thus, impacted the downstream market demand, sales prices and sales volumes. The sales volumes decreased 16%, sales prices decreased 27%, and the profit was decreased by NT$2.44 billion versus 2018.

4. Operating expense and operating income:

5. Operating expenses decreased in 2019, due to the decrease in sales volume and the austerity of administrative expenses. Operating profits decreased in 2019, because the trade conflict and the new production capacity caused the slowdown of terminal demand and resulted in the decrease of revenue.

6. Non-operating revenue and gain: Non-operating items increased due to the recognition of “gain on valuation of financial asset” of 3.88 billion and “impairment loss of assets” of 2.91 billion.

7. Income tax expense: The decrease was due to the additional tax on undistributed surplus earnings.

8. Other comprehensive income (after tax): The increase was due to the unrealised gains (losses) from investments in equity instruments measured at fair value through other comprehensive income.

9. 381 -

III. Review and Analysis of Cash Flow (Adoption of IFRS-Consolidated)

Currency Unit: NTD Thousand

				Currency Unit: NTD Thousand	Currency Unit: NTD Thousand
Balance of cash – beginning (1)	Net cash flow from operating activities in the year (2)	Cash inflow in the year (3)	Surplus (deficit) (1)+(2)-(3)	Remedy for deficit in cash
				Investment project	Wealth management project
13,469,938	(8,403,512)	4,049,827	9,116,253	-	-
(I) Analysis of variance in cash flows: 1. Operating activities: Net cash inflow NT$8,403,512 thousand, mainly due to the decrease in the cost of acquiring land and other accounts payable. 2. Investing activities: Net cash outflow NT$4,882,052 thousand, mainly due to the capital expenditure related to acquiring plants and equipments. 3. Financing activities: Net cash inflow NT$9,039,309 thousand, mainly due to borrowing long-term and short-term loans. (II) Remedy for deficit in cash and liquidity analysis: 1. Remedy for deficit in cash: None (surplus) 2. Liquidity analysis: The quick ratio and the times interest earned in 2019 decreased versus 2018, mainly because the decrease in profit led to the decline of accounts receivable and the borrowing led to the increase of interest expense. (III) Analysis of variance in cash flows for the future year: 1. Operating activities: Projected net cash inflow, NT$7,010,305 thousand 2. Investing activities: Projected net cash outflow, NT$8,040,877 thousand, primarily as a result of purchasing fixed assets. 3. Financing activities: Net cash inflow NT$16,502,697 thousand, primarily as a result of increase in long-term loans. 4. Remedy for deficit in cash: None (surplus)

IV. Major capital expenditure for the most recent year and its effect on financial position and operation of the Company ： N/A

• 382 -

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

CPDC’s reinvestment policy still focuses on the core competitiveness in the petrochemical-related industries. The invested objective shall be selected in terms of downstream and upstream or vertical integration, business development and revitalization of assets.

The Company currently operates on the mainland China Jiangsu Sunshine Island a liquid chemical storage and chemical products trading business, which is currently stable in operations. In the future, we aim to increase volume throughput to further improve profitability and proactively increase the variety of products to increase our China market share. As for the chemicals trading business in Shanghai, in addition to dedicating to the supply of high-quality chemical raw materials in China and Asia, we also integrate Taiwan’s overseas purchases and sales with China’s trade, so as to demonstrate the advantages of bilateral trade, and provide customers in Asia and the world with high-quality products and services.

The cyclohexanone plant and nylon 6 plant of the petrochemical plant in Rudong, Jiangsu have been completed and are expected to be put into operation in 2020. In the future, the Company will be able to integrate the upstream and downstream of the two main products, CPL and AN, to obtain the cost competitive advantage; the benefits of the integrated production base are just around the corner.

The integrated production base will enhance the Company’s downstream cost competitive advantage; furthermore, since being close to the mainland market and matching with local development advantages, it will be beneficial to the development of high-value and high-margin products. The Company plans to take the Taiwan R&D center as the core and cooperate with the plastic modification and engineering plastic alloy production base in Changzhou, Jiangsu which the Company acquired in 2018; with excellent nylon modified engineering plastics as the core product, we horizontally expand to other major engineering plastic materials, and actively establish the market competitive advantage of integrated production.

The axis of the global economy is shifting from west to east, pulling the center of chemical demand to the east. The Asia-Pacific region has become the driving force for the growth of global petrochemical demand. The increase in purchasing power, the

• 383 -

large population, and the increasing degree of urbanization all mean that the rapid growth of petrochemical demand will continue in the future. In consideration of the Company’s long-term development and sustainable operation, the Company will, subject to the needs and strategy for business expansion, keep paying attention to relevant industrial development domestically and overseas and carefully evaluate adequate investment objectives. Notwithstanding, the Company will still focus on obtaining production technology, new energy, specialty chemical products, precision chemical products and bio-tech-related industries developments as the priority.

Furthermore, to support the Go South Policy of the government, the Company has evaluated investment opportunities in land development by copying our earlier investment strategy in the mainland China.

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:

• Impact on the Company’s income:

Impact on the Company’s income:
Item	2019 (NTD Thousand; %)
Net interest revenue	(17,431)
Net exchange gain	(16,293)
Net interest revenue to net operating revenue	-0.06%
Net interest revenue to net profit before tax	-0.94%
Net exchange gain to net operating revenue	-0.05%
Net exchange gain to net profit before tax	-0.87%

(1) Interest rate

The Company’s interest rate risk primarily derives from interest accrued based on a floating interest rate arising from long-term and short-term debt and fixed income. To hedge interest fluctuation risk, the Company undertakes transactions when the interest rate stays low/high 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

• 384 -

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. There are no outstanding balances of any unsettled financial derivatives transactions subject to exchange rate fluctuation risk at the end of 2019.

• (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.

1. Future countermeasures:

2. (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 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.

• 385 -

The derivatives transaction policy: No unsettled balance of the derivatives transaction existed at the end of 2019.

(III) Future R&D plans and expected R&D expenditure:

R&D has been a core target of our sustainable operations. With the R&D of CPDC, three main orientations are: Improvement of the existing production process, Development of correlative products and New product development.

• (1) Improvement of the existing production process:

The Company continues to improve existing production processes to raise efficiency, lower manufacturing cost and develop production process with energy saving.

• (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.

The Company has planned expenditures of about NT$735,502 thousand in R&D activities in 2020. The expenditures to be spent in R&D each year in the future will be subject to the progress of the R&D plan.

Statistics of R&D expenses invested by CPDC and its subsidiaries in the past years.

Year	2015	2016	2017	2018	2019	2020 (Projected) (Note 1)
Amount (NTD thousand)	216,793	198,273	236,348	335,436	401,655	735,502

Note 1: Included the estimate amount of subsidiary Taivex Therapeutics Corporation in 2020.

• (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

• 386 -

• (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:

To improve the operational flexible on major raw material Ammonia and phenol, the Board agreed to invest and build the storage device of Ammonia and phenol on Kaohsiung storage areas, the building plan started from October 2015 and will last through June 2020, and the plan is proceeding as planned. To increase the production and market share of the 3 factories for CPL production, the Board approved expenditures on Toufen Hydrogen production and Phenol revitalization projects, to achieve 200,000 tons production capacity scale. This plan has been completed, and Phenol production entered regular production in 2019. On Hydrogen production expansion, depending on the market conditions in 2H 2020, production capacity will be adjusted. For AN production, the Board approved expenditures the Da-she factory AN factory revitalization works, and key equipment air compressor debottlenecking improvement projects. These 2 projects will be implemented in two different production lines, in separate years. The completed portions has already been implemented and tested on target and according to plan. Also, to fulfill our social responsibility, we implemented coal fired electricity, smokeless pollution prevention construction, to achieve natural gas emission targets, to lower the impact to the environment.

According to the analysis on supply & demand in the CPL market, Taiwan’s dependence on imported CPL has fallen each year. The supply and demand of CPL in Mainland China has changed substantially, with its own production capability being upgraded drastically, and its dependence on imported CPL declined drastically, even facing an overproduction situation. In order to mitigate the impact caused by the change in CPL market to the Company, the Company’s relevant units will be dedicated to adjust the production amount, actively search possible solutions in lowering material and production costs, and develop high end Nylon Chips products thus maximizing profits for the Company. Also, the company will continue to position for new product development and deploy overseas for continued growth.

(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.

• 387 -

Meanwhile, the Kaohsiung Plant of CPC is scheduled to be relocated and shut down in 2015. With respect to the Dashe Industrial Park where the Company’s Dashe Plant is located, Kaohsiung County Government issued the official letter under (87) Fu-Chien-Tu-Tze No. 211694 dated November 7, 1998 on “Motions for Changing Da-Sheh Urban Plan (3rd overall review)”, in which the conditions identified in the motion No. 7 required that “the manufacturers in the special industrial park shall be relocated before 2018, and the park shall be changed to a Type-B industrial park by the County Government pursuant to the statutory procedure.” Meanwhile, Kaohsiung City Government asked the Ministry of Interior to authorize the “Motion for Changing Dashe Urban Plan (4th overall review)" via its official letter under Kao-Shih-Fu-Tu-Fa-Kuei-Tze No. 10130250600 dated January 13, 2012. The Kaohsiung City Government Planning Bureau on March 22, 2019 approved the change to a Type-B industrial part, allowing continued production but no further expansion or reconstruction. The Company in conjunction with other factories in the industrial park, continues to lobby and communicate with the government to reinstate to a Type A industrial park. Also, to apply a sunset clause, and support factories and planning for any potential factory moves.

The Company’s primary product lines, CPL and AN, refer to the main raw materials supplied to downstream nylon, acrylic fiber and ABS plastic industries. CPL and AN refers to the basic raw materials for petrochemical downstream products. The Company’s customers are primarily are chemical fiber textile plants that are limited in number, due to its industrial characteristics. The Company’s capacity increase and lower cost advantage has increased its market share to 64%.

(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

1. “Administrative disposition under Nan-Shih-Fu Huan-Shui-Tze No. 09722014930”

2. (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.

3. (2) Claimed value: NT$88,786,006

4. 388 -

5. (3) Date of initiation: June 2008

6. (4) Parties:

Plaintiff: CPDC

Defendant: Tainan City Government

• (5) Status:

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.

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.

3. (2) Claimed value: NT$351,750,000

4. (3) Date of initiation: July 2008

5. (4) Parties:

Plaintiff: Wu, et al.

Defendant: CPDC, MOEA, Tainan City Government, and Environmental Protection Bureau of Tainan City Government

• (5) Status: The 1[st] 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

• 389 -

us to compensate the plaintiff for a total of NT$190,000 thousand yuan in the original case about medical expense, such as part of the abandonment sent back to the more trial, CPDC won. The appeal was filed in August 2019, and the entire case is currently in the Supreme Court.

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) Parties:

Plaintiff: Yu, et al.

Defendant: CPDC and MOEA

• (5) Status: Pursuant to laws, the Company responded 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.

• “Administrative disposition under Nan-Shih-Fu Huan-Shui-Tze No. 09822035440”

• (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) Parties:

Plaintiff: CPDC

Defendant: Tainan City Government

• (5) Status:

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 overruled. The Company filed an appeal against the judgement overruling 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 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. The Kaohsiung High Administrative Court ruled in July 2018 that the part of the judgement about the amount exceeding NT$8,120,984 should be revoked, while the other claims filed by the Company were overruled. The Company filed an appeal against the judgement overruling the

• 390 -

Company’s claims pursuant to laws. The case is currently under the Supreme Administrative Court.

1. An Shun fish farm rental

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) Parties:

Plaintiff: CPDC

Defendant: 11 people, including Wu Jen-Tz, et al.

• (5) Status:

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) Date of initiation: September 2017

• (4) Parties:

Plaintiff: CPDC

Defendant: 4 tenants

• (5) Status:

The Company filed a suit in September 2017, and settlement has been tried. The case now is under hearing by District Court.

• C. Case 3

• (1) Fact at issue:

The case is for the Shun fish farm owned by the Company. Since some tenants have terminated their rental contract, the contract is not renewed. However, some tenants denied having terminated the lease, and thus, they urged the Company to perform the lease.

• (2) Claimed value: None

• (3) Date of initiation: September 2017

• (4) Parties:

Plaintiff: CPDC

Defendant: 4 tenants

• (5) Status:

The case has started the litigation process in 2019, and the case now is under hearing by 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

• 391 -

have occupied the dormitory for many years or 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.

• (2) Claimed value: NT$19,566,120 and added interest

• (3) Date of initiation: January 2016

• (4) Parties:

Plaintiff: CPDC

Defendant: Residents of the Taiwan Alkali An Shun Dormitory

• (5) Status:

The Company filed a suit in January 2016. On September 24, 2019, the High Court ruled that the Company won the case and the case ended.

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) Parties:

Plaintiff: CPDC

Defendant: New Taipei City Government

• (5) Status:

• (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 also 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 the Supreme Administrative Court, and it was overruled by the Supreme

• 392 -

Administrative Court in August 2017. The case was closed.

  - (B) Shulin Plant’s application for suspension of the execution: In order to declare the effect of the original decision, the Company petitioned for suspension of the execution pursuant to 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. 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. 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 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.

3. (2) Claimed value: NT$7 billion, etc.

4. (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

5. (4) Parties:

Plaintiff and complainant: CPDC

Defendant: Managers Tsai, Liu and Chen et al.

• (5) Status:

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

• 393 -

decision, the Company filed an appeal for remedy with the High Court in January 2018. The criminal case was rejected by the Supreme Court, and the civil case is currently in the Taipei District Court.

1. “Administrative disposition under Nan-Shih-Fu Huan-Shui-Tze No. 1000700466”

2. (1) Fact at issue:

Tainan City Government ordered the 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) Parties:

Plaintiff: CPDC

Defendant: Tainan City Government

• (5) Status:

The Company paid foresaid 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. On April 12, 2018, the Supreme Court ruled that the Company does not need to pay NT$6,498,455.

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 into 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 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.

• 394 -

• (2) Claimed value: NT$5,506,370

• (3) Date of initiation: February 2013

• (4) Parties:

Plaintiff: CPDC

Defendant: Taiwan Alkali Co., Ltd. Village Management Committee, et al.

• (5) Status: 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. In 2019, the Supreme Court remanded the case, and the case is currently in the High Court Kaohsiung Branch Court.

• Civil action against high-rank management

• (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: January 2014

• (4) Parties:

Plaintiff: Liu and Chang

Defendant: CPDC

• (5) Status:

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. For the former case, the Company filed an appeal in September 2015 and both parties’ appeals were overruled by the judgement rendered by the High Court in March 2017. In disagreement with the decision, the Company filed an appeal for remedy with the Supreme Court 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.

1. “Administrative disposition under Fu-Huan-Shui-Tze No. 1030098879”

2. (1) Fact at issue:

3. 395 -

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) Parties:

Plaintiff: CPDC

Defendant: Tainan City Government

• (5) Status:

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 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.

3. (2) Claimed value: No

4. (3) Date of initiation: September 2014

5. (4) Parties:

Plaintiff: CPDC

Defendant: Kaohsiung City Government

• (5) Status: 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 Febuary within the same year. Currently, the case is pending trial by the Supreme Administrative Court.

• 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)

• (1) Fact at issue:

  • Due to the Kaohsiung gas explosion on August 1[st] , Public Works Bureau of Kaohsiung City Government, via its official letter to CPC Corp., the person subject

• 396 -

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: No

• (3) Date of initiation: September 2014

• (4) Parties:

Plaintiff: CPDC

Defendant: Public Works Bureau of Kaohsiung City Government

• (5) Status:

The Company initiated a petition pursuant to laws in September and November 2014, and the Petition Committee of Kaohsiung City Government overruled the petition. In April 2015 the Company filed an administrative suit against two administrative disposition. The petition was overruled 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.

1. An Shun application

2. (1) 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: No

• (3) Date of initiation: December 2014

• (4) Parties:

Plaintiff: CPDC

Defendant: Tainan City Government

• (5) Status:

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 made a decision not to proceed with the case, because the original disposition had been revoked. New disposition was

• 397 -

overruled in July 2015. The Company filed a 1st instance for remedy in September 2015, but it was overruled 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. In October 2018, the Supreme Court overruled the appeal, and the case was confirmed.

1. Lawsuit of Business negligent injury from Heng-I Inc.

2. (1) Fact at issue: Gas explosion has been occurred from Heng-I Chemical factory next to the Tou-Fen factory. This developed into a business negligent injury lawsuit because of combustion from several workers and as the accident happened in the public drainage location of industrial areas, excessive material has been analyzed by samples which belongs to CPDC. Plaintiff request to make CPDC managers as a defendant and its pending trial by Taiwan Miaoli District Court. In February 2015, injured workers from Heng-I Chemical Inc. applied for joint liability to pay compensation of NT$6,920,000.

3. (2) Claimed value: NT$6,920,000

4. (3) Date of initiation: February 2015

5. (4) Parties:

Plaintiff: Injured workers from Heng-I Chemical Inc.

  - Defendant: CPDC and its manager

• (5) Status:

  • The civil action case was pending trial by the Miaoli District Court, and in March 2017 the judgement was rendered that the Company and the manager won the case. In disagreement with the decision, the plaintiffs filed an appeal for remedy. The issue is under examination by the Taichung Branch of High Court. As for criminal actions, a ruling was rendered to not prosecute in March 2016.

• Application of joint Occupational Accident from an employee of Chung-Yen Engineering Co., Ltd.

• (1) Fact at issue: An employee of Chung-Yen Engineering Co., Ltd., Wang, fell during construction of the rust-proof operation of ceiling’s pipes, resulting in contusion and fracture in his 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) Parties:

Plaintiff: Wang

Defendant: Chung-Yen Engineering Co., Ltd. & CPDC

• (5) Status:

• 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. In August 2019, we were judged to pay no-fault liability compensation for occupational disasters, and be

• 398 -

liable jointly and severally with the CHUNG YEN ENGINEERING CO.,LTD., with a total of NT$607,150. The case was concluded.

1. “Administrative disposition under Nan-Shih-Fu-Huan-Tu-Tze No. 1050327521”

2. (1) Fact at issue: 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.

3. (2) Claimed value: NT$63,270,582

4. (3) Date of initiation: December 2016

5. (4) Parties:

Plaintiff: CPDC

Defendant: Tainan City Government

• (5) Status:

  • 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. After the examination by Kaohsiung High Administrative Court, the Company was only liable for approximately NT$400 million among the total. Both parties disagreed with the decision and filed the appeals for remedy in July 2017. The issue now is under hearing by the Supreme Administrative Court.

• “Administrative disposition under Fu-Huan-Tu-Tu-Tsai-Tze No. 105050004”

• (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) Parties:

Plaintiff: CPDC

Defendant: Tainan City Government

• (5) 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.

• 399 -

The case was closed.

1. “Administrative disposition under Fu-Huan-Tu-Tu-Tsai-Tze No. 106010003”

2. (1) 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.

3. (2) Claimed value: NT$600,000

4. (3) Date of initiation: In the period of petition

5. (4) Parties:

Plaintiff: CPDC

Defendant: Tainan City Government

• (5) 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.

• One million fine on the non-proposal for a 3[rd] revision of the pollution remediation plan

• (1) Fact at issue: According to Article 22, Paragraph 4 of the Soil and Groundwater Pollution Remediation Act, the Tainan City Government fined the Company NT$1,000,000 and 8 hours of environmental seminars on 4 May, 2017 based on the administrative disposition under Fu-Huan-Tu-Tze No. 1060456103, which the Environmental Protection Bureau of Tainan City Government alleges that the Company’s pollution remediation plan did not complied with a request for improving the processing capacity. Thus, the EPB deemed the Company as failing to submit a 3[rd] revision proposal to the remeidiation plan.

• (2) Claimed value: NT$1,000,000

• (3) Date of initiation: June 2017

• (4) Parties:

Plaintiff: CPDC

Defendant: Tainan City Government

• 400 -

• (5) 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

1. Reinvestment entity – Legal action against declaration of the capacity of Chairman of Praxair Chemax Semiconductor Materials Co., Ltd.

2. (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.

3. (2) Claimed value: None

4. (3) Date of initiation: May 2013

5. (4) 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) Status: 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 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

• 401 -

changing the seal registration on December 27, 2016, the Company dismiss the action. International arbitration on January 23, 2018 declared judgement, indicating that the Company won one caes and lost one case. As per the judgements outstanding as of December 2018, dividends received from 2014 to 2017, was approximately NT$560 million. The Company filed a dismissal arbitration lawsuit in Taiwan court against the dissatisfied part and the case is currently in the jurisdiction of the Taiwan Taipei District Court.

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.

3. (2) Claimed value: None

4. (3) Date of initiation: February 2015

5. (4) Parties:

Plaintiff: CPDC

Defendant: Chairman of Praxair, Lin Ke-Ming, and Supervisor Taimur Sharih

• (5) Status:

  • 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.

• 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.

• (2) Claimed value: None

• (3) Date of initiation: September 2016

• (4) 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

3. 402 -

should have been revoked.

• (2) Claimed value: None

• (3) Date of initiation: February 2017

• (4) Parties:

Plaintiff: CPDC

Defendant: Praxair

• (5) Status:

Pending trial by the Taiwan Miaoli District Court.

1. Reinvestment – Praxair absence of directors and supervisors

2. (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.

3. (2) Claimed value: None

4. (3) Date of initiation: January 2017

5. (4) Parties:

Plaintiff: CPDC

• (5) 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.

• Reinvestment –Rental payment of Praxair

• (1) Fact at issue:

Praxair did not comply with the contract and pay for the rent since March 2013.

• (2) Claimed value: NT$40,823,556

• (3) Date of initiation: August 2017

• (4) Parties:

Plaintiff: CPDC

• (5) 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.

• Reinvestment – Payment of Praxair Chang Ming-Zhong’s Pension

• (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.

• (2) Claimed value: NT$1,670130

• (3) Date of initiation: June 2017

• (4) Parties:

  • Plaintiff: Chang Ming-Zhong

• 403 -

Defendant: CPDC

(5) Status:

On December 2018, judgement determined that the company should pay NT$1,777,575 and interest. The whole case is concluded.

1. Reinvestment – Praxair determination action for Chairman Lin Ke-Ming’s existence of commission of authority

2. (1) Fact at issue:

Because of the absence of Praxair directors and supervisors at that time, Praxair filed a determination action for Chairman Lin Ke-Ming’s existence of commission of authority on 8 March, 2017.

• (2) Claimed value: None.

• (3) Date of initiation: March 2017

• (4) Parties:

• Plaintiff: Praxair Inc.

Defendant: CPDC

• (5) Status:

On June 2018, the Company lost the lawsuit, and a decision was made to not appeal.

The whole case was confirmed.

1. Reinvestment – Contract disputation with Shanghai Tongye Coal Chemical Group Co. Ltd

2. (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 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.

3. (2) Claimed value: RMB$ 3.5 million

4. (3) Date of initiation: August 2014

5. (4) Parties:

   • Plaintiff: Weihua (Rudong) Trading Co., Ltd. & Weiqiang International Trading (Shanghai) Co., Ltd.

Defendant: Shanghai Tongye Coal Chemical Group Co. Ltd

• (5) Status:

• 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, the Shanghai Tongye Coal Chemical Group Co. Ltd failed to comply with the first-phase payment by the mediation agreement. On September 2, 2014, Weihua and Weiqiang applied for compulsory execution and seized the Coal Tar from Shanghai Tongye Coal Chemical Group Co. Ltd with Yangpu District Court until the Court lifts the seizure for auction to repay the debt. After that,

• 404 -

Weihua and Weiqiang continually negotiate and request for specific repayment plan with Shanghai Tongye Coal Chemical Group Co. Ltd. Authorities concerned is proceeding 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: None.

• 405 -

、 Eight Special Note

I. Information about Affiliates

1. Consolidated operating report of affiliate

==> picture [597 x 346] intentionally omitted <==

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

CPDC
Organizational chart of affiliates
40% 100% 100% 100% 100% 100% 100% 100%
Tsou Seen
Kaohsiung CPDC Green Unichem CPDC Rich Equities Ding-Yue BES Twin Towers
Monomer Co., Chemical Technology Development Investment Ltd. Development Co., Development Co.,
Ltd. Industries Corporation Limited (BVI) Co., Ltd Ltd.
Corporation
Ltd.
100%
100% Frontier Fortune
91.10% Da Yin Construction Investment Pte.
Taivex Engineering Co., Ltd. Ltd.
Therapeutics
Corporation
99.99% 100% 97.70% 97.87%
Gemini Core Pacific Core Pacific Thanh Phong
Star (India) Twin Star Twin Star Construction
4.02% 99.51% Private (Myanmar) (Vietnam) Investment Co.,
Limited. Investment Investment Ltd.
44.52% 55.48% 95.98% 100% 100% 100% 100% 0.49% Co., Ltd. Co., Ltd.
Weiqiang Weihua Weida(Zha Zhangzhou Kunshan Changzhou Weiming
International (Rudong) ngzhou) Weida Weiqin Weicai New (Jiangsu)
80%
Trade Trade Co., Ltd Consultant Petrochemi Management Material Petrochemical
(Shanghai) Co. Service cal Co., Consulting Science & Company Core Pacific Pioneer
Ltd. Co., Ltd. Ltd. Co., Ltd. Technology (Myanmar) Co., Ltd.
Co., Ltd.
----- End of picture text -----

(1) Organizational chart of affiliates

Note: 1. Data updated as of December 31, 2019

1. Substantially identified companies constitutes controlling and affiliates relationships as defined in Article 369-2 of the Company Law.

(2) Profiles of affiliates

Unit： Thousand

(2) Profiles of	affiliates			Unit：Thousand
Name	Date of Incorporation	Address	Paid-in Capital	Principle Business
Kaohsiung Monomer Co., Ltd.	1976.06.10	No. 1 Xinkung Road, Da-Sheh District, Kaohsiung City	NTD 500,000	Production and sale of methyl methacrylate (MMA)
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
CPDC Green Energy Technolocy Company (formerly CDPC Engineering Corp.)	1999.05.31	No. 16, 14F, 61, Wufu 3rd Road, Chienching District, Kaohsiung City	NTD 150,000	Machinery engineering
Dingyue Development Co., Ltd.(Note4)	1995.10.11	8F, No. 12 Tunghsing Road, Songshan District, Taipei City	NTD 7,540,000	Research and analysis on land utilization, and planning and consultation services, and lease and sale of factory premises and commercial buildings, et al.
Da Yin Construction Engineering Co., Ltd.	1972.11.24	No. 5, 10F, 51, Fuxing Road, Taoyuan City	NTD 22,500	Civil engineering contractor
Chunghwa Gemini Development Co.,Ltd.	2011.03.01	16F, No. 12 Tunghsing Road, Songshan District, Taipei City	NTD3,681,009	Investment in construction of infrastructure, real property trading, international trading, real property lease, and hotel services
CPDC Investment (BVI) Co., Ltd.	1998.01.09	Citco Building, Wickhams Cay, P.O Box 662	NTD 904,944 (Note 3)	Reinvestment
Rich Equities Ltd.	2007.03.21	Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius	NTD 5,996 (Note 3)	Reinvestment
Unichem Development Limited	2008.05.20	Room 1405-1406, No. 43-59, Dominion Centre, Queen's Road East, Wan-chai District, Hong Kong	NTD 7,865,233 (Note 3)	Reinvestment
Tuo-Fong Investment Company	2016.11.23	112 Robinson Road#05-01Robinson 112 Singapore(068902)	NTD1,326 ,796 (Note 3)	Reinvestment

• 407-

Name	Date of Incorporation	Address	Paid-in Capital	Principle Business
Weihua (Rudong) Trade Co., Ltd.	2012.12.10	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 & import, and import & export of technology, and commissioned distribution
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
Weiqiang International Trade (Shanghai) Co., Ltd.	2013.03.21	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 & export and related alternatives
Jiangsu Weiming Petrochemical Corporation	2013.05.16	No. 9, Kang Cheng Village, Changsha Township, Rudong Township, Chiangsu Province	NTD 5,714,463 (Note 3)	Petrochemical project related facilities construction
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)	Wholesale of petrochemical raw material (exclusive of crude oil, crude oil product, hazardous goods, controlled chemical product and toxic chemical products) and consulting service of petrochemicals.
Kunshan Wei-Chin Management Consulting Co., Ltd.	2016.01.21	Room 2006, No. 5, Yadong Square, Huaqiao Township, Chiangsu Province	NTD 29,664 (Note 3)	Business management consultation services, investment consultation, and marketing planning.
Zhejiang Wei-Chi Material Co., Ltd.	2015.01.06	Sian Township Industrial Zone, Changxing County	NTD1,860,113 (Note 3)	Wholesale of synthetic fiber materials (Nylon products.)
Core Pacific Twin Tower (Myanmar) Co. Ltd.	2017.02.16	No.153/Ka,Kyun Shwe Myaing Lane(2), 23 Ward,Thingangyun Township,Yangon	NTD 169,921 (Note 3)	Reinvestment and advisory services
Weifong (Myanmar) Co. Ltd.	2018.5.24	No.153/Ka,Kyun Shwe Myaing Lane(2), 23 Ward,Thingangyun Township,Yangon	NTD 30,992 (Note 3)
Sheng Fong Construction Investment Co. Ltd.	2017.5.22	B2-19, Golden king tower building, No. 15 Nguyen Luong Bang, Tan Phu Ward, District 7,Ho Chi Minh City	NTD 622,633 (Note 3)

• 408-

Name	Date of Incorporation	Address	Paid-in Capital	Principle Business
Core Pacific Gemini (Vietnam) Co. Ltd.	2018.11.19	B2-19, Golden king tower building, No. 15 Nguyen Luong Bang, Tan Phu Ward, District 7,Ho Chi Minh City	NTD1,157,997 (Note 3)
CPDC Gemini (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	NTD 9,274 (Note 3)

• 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: Tao Chu Construction Co. Ltd. was renamed to Dingyue Development Co., Ltd. in September 2019.

(3) Overview of affiliate operation

Currency Unit: NTD Thousand

Name	Capital	Total assets	Total liabilities	Net Value	Operating revenue	Operating income (Loss)	Profit (loss) (after tax)	EPS (NT$) (after tax)
Kaohsiung Monomer Co., Ltd.	500,000	3,346,583	1,124,569	2,222,014	4,886,832	1,519,187	1,227,244	24.54
Tsou Seen Chemical Industries Corporation	960,000	1,743,920	234,047	1,509,873	1,621,982	172,181	90,669	0.94
Taivex therapeutics Inc.	507,399	363,925	12,311	351,614	0	(67,869)	(64,876)	(1.28)
CPDC Green Energy Technolocy Company (formerly CDPC Engineering Corp.)	150,000	164,632	61,741	102,891	251,188	(36,698)	(37,577)	(2.51)
Dingyue Development Co., Ltd.	7,540,000	7,518,755	571	7,518,184	0	(3,887)	1,771	0.00
Da Yin Construction Engineering Co., Ltd.	22,500	29,733	652	29,081	0	(214)	4,452	--
Chunghwa Gemini Development Co., Ltd.	3,681,009	5,016,662	25,629	4,991,033	0	(26,697)	1,247,592	3.39
CPDC Investment (BVI) Co., Ltd.	904,946	901,631	0	901,631	0	(159)	(3,485)	--
Rich Equities Ltd.	5,996	5,183	0	5,183	0	(77)	46	--
Unichem Development Limited	7,865,233	6,725,778	57	6,725,721	0	(1,777)	(231,486)	--
Tuo-Fong Investment Company	1,326,796	1,307,656	1	1,307,655	0	(3,772)	25,292	--

• 409-

Weihua (Rudong) Trade Co., Ltd.	763,460	896,991	422,743	474,248	544,151	17,206	5,243	--
WEIDA (ZHANGZHOU) CONSULTANT SERVICE CO., LTD.	13,171	2,421	0	2,421	0	(57)	(34)	--
Weiqiang International Trade (Shanghai) Co., Ltd.	211,560	231,222	109,101	122,121	2,414,123	2,938	6,211	--
Jiangsu Weiming Petrochemical Corporation	5,714,463	8,622,621	3,563,402	5,059,219	143,614	(178,458)	(174,059)	--
WEIDA (ZHANGZHOU) Petrochemical CO., LTD.	30,648	14,267	13	14,254	0	(1,570)	(1,661)	--
Kunshan Wei-Chin Management Consulting Co., Ltd.	29,664	1,836	2	1,834	0	(6,827)	(6,693)	--
Zhejiang Wei-Chi Material Co., Ltd.	1,860,113	1,488,633	449,595	1,039,038	92,115	(156,466)	(50,911)	--
Core Pacific Gemini (Myanmar) Co. Ltd.	169,921	163,492	297	163,195	0	2,360	3,378	--
Weifong (Myanmar) Co. Ltd.	30,992	72,721	41,700	31,021	0	906	840	--
Sheng Fong Construction Investment Co. Ltd.	622,633	728,374	116,886	611,488	0	(4,158)	4,044	--
Core Pacific Gemini (Vietnam) Co. Ltd.	1,157,997	1,154,955	71	1,154,884	0	(512)	27,723	--
CPDC Gemini (India) Co. Ltd.	9,274	7,499	14	7,485	0	(1,429)	(1,429)	--

Note 1: All of the affiliates should be disclosed, irrelevant of scale and size.

Note 2: Where the affiliate refers to a foreign company, the relevant figures shall be stated in NTD at the foreign exchange rate.

Note 3: N/A

• 410-

2. Consolidated financial statement of affiliates

Declaration Form

1. The preparation of our company’s affiliates consolidated financial statement in 2019 (From January 1st to December 31st) in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” and “Regulations Governing the Preparation of Financial Reports and Related Terminology by Securities Issuers”.

2. Our company declare that no information relevant to our affiliates consolidated financial statement has been falsified or concealed.

Hereby certify

Company name：China Petrochemical Development Corporation

==> picture [45 x 44] intentionally omitted <==

Chairman：Ruey-Long Chen

==> picture [87 x 127] intentionally omitted <==

Date：March 27, 2020

• 411-

Representation Letter

• A. The entities that are required to be included in the combined financial statements of China Petrochemical Development Corporation and its affiliates as of and for the year ended December 31, 2019 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises and Regulations Governing the Preparation of Financial Reports by Securities Issuers.

• B. The consolidated financial statements prepared by the Company contained no misrepresentations and nondisclosures.

Company name: China Petrochemical Development Corporation Chairman: Chen Ruey-Long Date: March 27, 2020

• 412 -

Independent Auditors’ Review Report

To the Board of Directors of China Petrochemical Development Corporation:

Introduction

We have reviewed the accompanying consolidated financial statements of China Petrochemical Development Corporation (“CPDC”) and its affiliates (“the Group”) as of and for the year ended December 31, 2019 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 described in Notes 5(i) and 5(o) 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. 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 still has a dissenting view on the government perception about the condition of pollution and CPDC is seeking a way to define its responsibilities.

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 27, 2020

• 413 -

								December 31, 2019	Amount %			$ 3,484,148 4	88,263 -	1,759,769 2	2,457 -	1,836,000 2	95,702 -	165,646 -	49,911 -	49,911 -	1,762,130 2	1,762,130 2	57,009 -	9,301,035 10		6,721,783 7	2,463,544 2	7,020,975 7	203,332 -	4,494,177 5	125,616 -	21,029,427 21	21,029,427 21	30,330,462 31			28,348,502 29	1,286,700 1		2,137,330 2	35,490,262 36	1,779,147 2		39,406,739 40		(804,515) (1)	(1,120,657) (1)	(1,120,657) (1)	(1,925,172) (2)	(1,925,172) (2)	1,410,303 1	68,527,072 69	68,527,072 69	$ 98,857,534 100	$ 98,857,534 100
(English Translation of Consolidated Financial Statements Originally Issued in Chinese)	Reviewed only, not audited in accordance with generally accepted auditing standards		CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES	Consolidated Balance Sheet	December 31, 2019		(Expressed in Thousands of New Taiwan Dollar)	December 31, 2019	Assets Amount % Liabilities and Equity		Current assets: Current liabilities:	Cash and cash equivalents (notes 3 and 5(a)) $ 10,645,522 11 2100 Short-term loans (note 5(k))	Financial assets at fair value through profit or loss-current (notes 3 and 5(b)) 783,180 1 2130 Current contract liabilities (note 5(u))	Current financial assets at fair value through other comprehensive income (notes 3 and 5(c)) 321,647 - 2170 Accounts payable	Notes and accounts receivable, net (notes 3 and 5(d)) 2,030,063 2 2180 Total accounts payable to related parties (note 6)	Other receivables (notes 3, 5(d) and 6) 242,810 - 2200 Other payables	Inventories (notes 3 and 5(e)) 9,861,423 10 2230 Current tax liabilities (note 3 and 5(r)	Prepayments 1,516,516 2 2250 Provisions-current (notes 3, 5(o) and 5(q))	Other current assets 770,195 1 2280 Lease liabilities-current (notes 3 and 5(n))		Total current assets 26,171,356 27 2320 Long-term liabilities-current portion (notes 3 and 5(l))		Non-current assets: 2399 Other current liabilities, others	Non-current financial assets at fair value through profit or loss (notes 3 and 5(b)) 9,942,994 10 Total current liabilities	Non-current financial assets at fair value through other comprehensive income (notes 3 and 5(c)) 2,038,393 2 Non-Current liabilities:	Investments accounted for using equity method (notes 3 and 5(f)) 1,429,990 1 2540 Long-term bank loans (note 5(l))	Property, plant and equipment (notes 3 and 5(g)) 21,304,002 22 2550 Provisions-non-current (notes 3,5(o) and (q))	Right-of-use assets (notes 3 and 5(h)) 848,503 1 2570 Deferred tax liabilities (notes 3 and 5(r))	Investment property, net (notes 3 and 5(i)) 36,719,706 37 2580 Lease liabilities-non-current (notes 3 and 5(n))	Intangible assets (notes 3 and 5(j)) 177,464 - 2611 Long-term bills payable (notes 3 and 5(m))	Deferred tax assets (notes 3 and 5(r)) 74,717 - 2670 Other non-current liabilities, others	Other non-current assets 150,409 - Total non-currnet liabilities		Total non-current assets 72,686,178 73 Total liabilities	Equity attributable to owners of parent:	Share capital	3110 Common stock (note 5(s))	3200 Capital surplus (note 5(s))	Retained earnings: (note 5(s))	3310 Legal reserve	3320 Special reserve	3350 Unappropriated earnings			Others (notes 3 and 5(s))	3410 Exchange differences arising on translation of foreign operations	3420 Unrealised gains or loss on financial assets at fair value through other comprehensive income				36XX Non-controlling interests	Total assets $ 98,857,534 100 Total equity Total liabilities and equity
												1100	1110	1120	1170	1200	130X	1410	1470					1510	1517	1551	1600	1755	1760	1780	1840	1900

• 414 -

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES

Consolidated Statement of Comprehensive Income

For the year ended December 31, 2019

(Expressed in Thousands of New Taiwan Dollar , Except for Earnings Per Common Share)

4000 Operating revenue (notes 3 and 5(u)) 5000 Operating costs (notes 3 and 5(e)) Gross profit (loss) from operations 5920 Add:Realized loss on intercompany transactions Gross profit Operating expenses: 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Profit from operations Non-operating income and expenses: 7010 Other income (note 5(x)) 7590 Miscellaneous disbursements (notes 5(k) and (x)) 7050 Finance costs (note 5(x)) 7060 Shares of profit (loss) of associates and joint ventures accounted for using equity method, net (notes 3 and 5(f)) 7235 Gains on financial assets (liabilities) at fair value through profit or loss 7673 Impairment loss recognised in profit or loss, property, plant and equipment Total non-operating income and expenses Income before income tax 7950 Less: Income tax expenses Net income 8300 Other comprehensive income (loss): 8310 Items that will not be reclassified subsequently to profit or loss: 8311 Gains (losses) on remeasurements of defined benefit plans 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8320 Shares of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Allocation of income tax to the above items 8360 Items that may be reclassified subsequently to profit or loss: 8361 Exchange differences arising on translation of foreign operations 8399 Allocation of income tax to the above items 8300 Other comprehensive (loss) income, net 8500 Total comprehensive income Net income attributable to: 8610 Shareholders of the parent 8620 Non-controlling interests Comprehensive (loss) income attributable to: 8710 Shareholders of the parent 8720 Non-controlling interests Earnings per share(notes 3 and 5(t)) Basic earnings per share Diluted earnings per share

2019 Amount % $ 33,960,166 100 30,551,536 90 3,408,630 10 - - 3,408,630 10 748,690 2 1,125,909 4 401,655 1 2,276,254 7 1,132,376 3 713,257 2 (35,187) - (145,715) - 3,404 - 4,130,817 13 (2,901,096) (9) 1,765,480 6 2,897,856 9 427,875 1 2,469,981 8 6,959 - 130,071 - (9,627) - 3,837 - 123,566 - (317,231) (1) - - (317,231) (1) (193,665) (1) $ 2,276,316 7 $ 1,738,449 6 731,532 2 $ 2,469,981 8 $ 1,543,494 5 732,822 2 $ 2,276,316 7 $ 0.61 $ 0.61

See accompanying notes to consolidated financial statements. - 415 -

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

For the year ended December 31, 2019

(Expressed in Thousands of New Taiwan Dollar, Unless Otherwise Specified)

(1) Company history

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 moved to No.1, Jingjian Rd., Dashe Dist., Kaohsiung City 815, Taiwan (R.O.C.) on July 18, 2016. The Company and its subsidiaries 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) New standards, amendments and interpretations 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, 2019.

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

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:

(i) 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.

1) Definition of a lease

Previously, the Group determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Group assesses whether a contract is or contains a lease based on the definition of a lease, as explained in Note 3(m).

(Continued)

• 416 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Group applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

• 2) As a lessee

As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16, the Group recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases are on-balance sheet.

The Group decided to apply recognition exemptions to short-term leases of machinery and leases of IT equipment.

• Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments – the Group applied this approach to all other lease.

In addition, the Group used the following practical expedients when applying IFRS 16 to leases.

• Applied a single discount rate to a portfolio of leases with similar characteristics.

• Adjusted the right-of-use assets by the amount of IAS 37 onerous contract provision immediately before the date of initial application, as an alternative to an impairment review.

• Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term.

• Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.

• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

(Continued)

• 417 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

3) As a lessor

The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor, except for a sub-lease. The Group accounted for its leases in accordance with IFRS 16 from the date of initial application.

4) Impacts on financial statements

On transition to IFRS 16, the Group recognized additional $298,815 thousand of right-ofuse assets and $298,815 thousand of lease liabilities. When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 1.80%. For the purpose of applying to IFRS 16, the Group reclassified right of use of land from Other Non-Current Assets to Rightof-Use Assets, which amounted for $682,373 thousand.

The explanation of differences between operating lease commitments disclosed at the end of the annual reporting period immediately preceding the date of initial application, and lease liabilities recognized in the balance sheets at the date of initial application disclosed as follows:

Operating lease commitment at December 31, 2018 as disclosed in the Group’s consolidated financial statements Recognition exemption for: short-term leases leases of low-value assets Extension and termination options reasonably certain to be exercised Discounted using the incremental borrowing rate at January 1, 2019 Finance lease liabilities recognized as at December 31, 2018 Lease liabilities recognized at January 1, 2019

January 1, 2019 $ 307,302 (9,132) (80) 55,200 353,290 298,815 - $ 298,815

(Continued)

• 418 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• (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, 2020 in accordance with Rule No. 1080323028 issued by the FSC on July 29, 2019:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 “Definition of a Business”	January 1, 2020
Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”	January 1, 2020
Amendments to IAS 1 and IAS 8 “Definition of Material”	January 1, 2020

The Group assesses that the adoption of the abovementioned standards would not have any material impact on its consolidated financial statements.

• (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 have yet to be endorsed by the FSC:

Board (IASB), but have yet to be endorsed by the FSC:
	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between	Effective date to
an Investor and Its Associate or Joint Venture”	be determined
	by IASB
IFRS 17 “Insurance Contracts”	January 1, 2021
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”	January 1, 2022

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

Issuance / Release Dates September 11, 2014

Standards or Interpretations Content of amendment Amendments to IFRS 10 and IAS 28 “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 abovementioned standards or interpretations on its consolidated financial position and consolidated financial performance. The results thereof will be disclosed when the Group completes its evaluation.

(Continued)

• 419 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(3) Summary of significant accounting policies:

The significant accounting policies, which have been applied consistently to all periods presented in these financial statements, except when otherwise indicated in note 2, are as follows:

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations” ) and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations endorsed and issued into effect by the Financial Supervisory Commission, R.O.C..

• (b) Basis of Preparation

• (i) 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);

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

• 3) The defined benefit liabilities (assets) are measured at fair value of the plan assets less the present value of the defined benefit obligation (please see note 5(q));

• 4) Investment properties are measured at fair value.

• (ii) Functional and presentation currency

The functional currency of each Group entity is determined based on the primary economic environment in which the entity operates. The consolidated financial statements are presented in New Taiwan Dollar (NTD), which is the Company’ s functional currency. All financial information presented in NTD has been rounded to the nearest thousand.

• (c) Basis of Consolidation

• (i) Principles of preparation of the consolidated financial statements

The consolidated financial statements comprise the Company and subsidiaries.

Subsidiaries are entities controlled by the Group. The Group ‘controls’ an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

(Continued)

• 420 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. Intragroup balances and transactions, and any unrealized income and expenses arising from Intragroup transactions are eliminated in preparing the consolidated financial statements. The Group attributes the profit or loss and each component of other comprehensive income to the owners of the parent and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

The Group prepares consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances.

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received will be recognized directly in equity, and the Group will attribute it to the owners of the parent.

• (ii) List of subsidiaries in the consolidated financial statements

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

Name of investors	Name of subsidiaries	Nature of business 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	Shareholding ratio December 31, 2019 Notes % 100.00 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, 2019, TSCIC's actual paid-in capital amounted to $960,000 thousand. % 100.00 CPDC GT (Original name : CPDC EC) was established on May 31, 1999. As of December 31, 2019, CPDC GT's actual paid-in capital amounted to $150,000 thousand. % 100.00 CPDC (BVI) was established on January 9, 1998, registered in the British Virgin Islands, and is an international investment company. As of December 31, 2019, CPDC (BVI)'s actual paid-in capital amounted to USD26,580 thousand. % 100.00 BES Twin Towers was established on March 1, 2011. The Company purchased its shares of non- controlling interest on March 12, 2019, resulting in its shareholding ratio to be 100%. It increased its capital through the Company amounting to $1,136,705 thousand on January 30, 2019, and increased its capital by retained earnings amounting to $343,304 thousand on June 24,2019. As of December 31, 2019, BES Twin Towers's actual paid- in capital amounted to $3,681,009 thousand. % 100.00 UDL was established on May 20, 2008. As of December 31, 2019, UDL's actual paid-in capital amounted to USD255,368 thousand.
The Company The Company The Company The Company The Company	Tsou Seen Chemical Industries Corporation(TSCIC) CPDC GreenTechnology Corp.(CPDC GT)(Original name:CPDC Engineering Co., Ltd.) CPDC Investment (BVI) Co Ltd. (CPDC (BVI)) BES Twin Towers Development Co., Ltd. (BES Twin Towers) Unichem Development Limited (UDL)

(Continued)

• 421 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

Name of investors	Name of subsidiaries	Nature of business Petrochemical supporting facility construction Engaged in trading of petroleum chemical products, electronic chemicals, a 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 Commissioned to create a vendor to build housing, commercial buildings and plant rental business, management of land development and playgrounds and other related business investments Engaged in trading of petroleum chemical products, electronic chemicals, a variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Engaged in trading of petroleum chemical products, electronic chemicals, a variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Engaged in biotechnology, pharmaceutical research and development and marketing	Shareholding ratio December 31, 2019 Notes % 0.49 Weiming was established on May 16, 2013. It increased its capital through UDL amounting to CNY96,000 thousand, CNY100,000 thousand, CNY 100,000 thousand, CNY147,000 thousand and CNY130,000 on March 12, June 27, September 24, December 25, 2019, and June 25, 2018, respectively. The said amounts were verified on March 13, July 2, September 26, December 26, 2019, and June 28, 2018, respectively. As of December 31, 2019, Weiming's actual paid-in capital amounted to CNY1,218,000 thousand. % 44.52 Weiqiang was established on May 9, 2013. It increased its capital through the Company amounting to CNY20,000 thousand on February 24, 2018 and verified on February 27, 2018. As of December 31, 2019, Weiqiang's actual paid-in capital amounted to CNY44,920 thousand. % 97.87 Thanh Phong was established on May 22, 2017. Its capital originally invested was VND90,000,000 thousand and increased VND368,637,500 thousand on December 20, 2018 and verified on December 20, 2018. As of December 31, 2019, Thanh Phong's actual paid-in capital amounted to VND468,637,500 thousand. % 100.00 Ding-Yue (original name: Tao Zhu) was established on October 11, 1995 and increased its capital amounted to $1,000,000 thousand and 6,440,000 thousand by the Company on September 25 and November 6, 2019, respectively. As of December 31, 2019, Ding-Yue's actual paid-in capital amounted to $7,540,000 thousand. In order to comply with the business strategies of the Company's petrochemical and land development, Ding-Yue started to expand the scale of its land development business since September 2019 and expects its upcoming operating activities on construction and land development to substantially expand as compared to those of the previous years; therefore, the subsidiary is included in the consolidated financial statement in September 2019. % 4.02 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, 2019, Weihua's actual paid-in capital amounted to CNY156,289 thousand. % 55.48 Weiqiang was established on May 9, 2013. It increased its capital through the Company amounting to CNY20,000 thousand 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, 2019, Weiqiang's actual paid-in capital amounted to CNY44,920 thousand. % 91.10 Taivex was established on February 11, 2010. TSCIC invested in Taivex on August 18, 2010. As of December 31, 2019, Taivex's actual paid-in capital amounted to $507,399 thousand.
The Company The Company The Company The Company Tsou Seen Chemical Industries Corporation Tsou Seen Chemical Industries Corporation Tsou Seen Chemical Industries Corporation	Jiangsu Weiming Petrochemical Corporation (Weiming) Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang) Thanh Phong Construction Investment Co., Ltd. (Thanh Phong) Ding-Yue Development Co., Ltd (Ding-Yue) (original name: Tao Zhu Construction & Development Co., Ltd.) (Tao Zhu) Weihua (Rudong) Trade Co., Ltd. (Weihua) Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang) Taivex Therapeutics Corporation (Taivex)

(Continued)

• 422 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

Name of investors	Name of subsidiaries	Nature of business Petrochemical supporting facility construction Engaged in trading of petroleum chemical products, electronic chemicals, a variety of industrial gases, gas mixtures and other manufacturing sub-fitted trading Consultancy Engaged in trading of petroleum chemical products, electronic chemicals, a 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-value petroleum chemical products Holding company Investment and technical advisory services Real estate, research of petroleum market and consultancy	Shareholding ratio December 31, 2019 Notes % 99.51 Weiming was established on May 16, 2013. It increased its capital through UDL amounting to CNY96,000 thousand, CNY100,000 thousand, CNY 100,000 thousand, CNY147,000 thousand and CNY130,000 on March 12, June 27, September 24, December 25, 2019, and June 25, 2018, respectively. The said amounts were verified on March 13, July 2, September 26, December 26, 2019, and June 28, 2018, respectively. As of December 31, 2019, Weiming's actual paid-in capital amounted to CNY1,218,000 thousand. % 95.98 Weihua was established on December 10, 2012. As of December 31, 2019, Weihua's actual paid-in capital amounted to CNY156,289 thousand. % 100.00 Weida was established on November 26, 2012. As of December 31, 2019, Weida's actual paid-in capital amounted to USD450 thousand. % 100.00 Weida PC was established on December 23, 2014. As of December 31, 2019 Weida PC's actual paid-in capital amounted to CNY6,000 thousand. % 100.00 Weiqin was established on April 29, 2016. As of December 31, 2019, Weiqin's actual paid in capital amounted to CNY6,000 thousand. % - Wedge was established on July 25, 2016 and was dissolved on April 20, 2018. The liquidation process had been completed on January 29, 2019. As of December 31, 2019, Wedge's actual paid-in capital amounted to CNY0 thousand. % 100.00 Weicai (Original name : Huijie) was established on January 6, 2015, and acquired by UDL on November 5, 2018. The investment was made through UDL amounted CNY214,955 thousand and was verified on December 27, 2018. As of December 31, 2019, Weicai's actual paid-in capital amounted to CNY414,955 thousand. % 100.00 Frontier Fortune was established on November 23, 2016. It increased its capital through BES Twin Towers amounting to USD36,890 thousand, USD300 thousand and USD5,670 thousand on January 30, March 7, 2019 and November 30, 2018. As of December 31, 2019, Frontier fortune's actual paid-in capital amounted to USD43,060 thousand. % 100.00 Core Pacific Twin Star (Myanmar) was established on February 16, 2017. It increased its capital through Frontier Fortune amounting to USD5,320 thousand on November 30, 2018. As of December 31, 2019, Core Pacific Twin Star (Myanmar)'s actual paid-in capital amounted to USD5,500 thousand. % 99.99 Gemini Star (India) was established on January 8, 2019. As of December 31 2019, its actual paid-in capital amounted to INR21,000 thousand.
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) BES Twin Towers Development Co., Ltd. Frontier Fortune Investment Pte. Ltd. Frontier Fortune Investment Pte. Ltd.	Weiming (Jiangsu) Petrochemical Company (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 Weicai New Material Science & Technology Co., Ltd.(Weicai)(Original name:Changzhou Huijie new material Co., Ltd (Huijie)) Frontier Fortune Investment Pte. Ltd. (Frontier Fortune) Core Pacific Twin Star (Myanmar) Investment Co., Ltd.(Core Pacific Twin Star (Myanmar)) Gemini Star (India) Private Limited.(Gemini Star (India))

(Continued)

• 423 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

Name of investors	Name of subsidiaries	Nature of business Engineering, real estate and construction consultancy Building construction, real estate management, development and sale	Shareholding ratio December 31, 2019 Notes % 97.70 Core Pacific Twin Star (Vietnam) was established on November 19, 2018. It increased its capital through Core Pacific Twin Star (Myanmar) amounted to VND850,000,000 thousand on January 30, 2019. As of December 31, 2019, its actual paid-in capital amounted to VND870,000,000 thousand. % 80.00 Core Pacific Pioneer was established on May 24, 2018. It increased its capital through Core Pacific Twin Star (Myanmar) amounted to MMK755,230 thousand on July 3, 2019. As of December 31, 2019, its actual paid-in capital amounted to MMK1,512,540 thousand.
Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Co., Ltd.	Core Pacific Twin Star (Vietnam) Investment Co., Ltd. (Core Pacific Twin Star (Vietnam)) Core Pacific Pioneer (Myanmar) Co., Ltd.(Core Pacific Pioneer (Myanmar))

(iii) Subsidiaries not included in the consolidated financial statements

Name of investors	Name of subsidiaries	Nature of business Holding company Engineering, construction contracting business	Shareholding ratio December 31, 2019 Notes % 100.00 Rich was established on March 21, 2007. As of December 31, 2019, its actual paid-in capital amounted to USD180 thousand and its total assets represented 0.01% of consolidated total assets. % 100.00 Da Yin Construction Engineering was established on November 24, 1972. As of December 31, 2019, its actual paid-in capital amounted to $22,500 thousand and its total assets represented 0.02% of consolidated total assets.
The Company Ding-Yue Development Co., Ltd ( Ding-Yue ) (original name: Tao Zhu Construction & Development Co., Ltd.) (Tao Zhu)	Rich Equities Ltd. (Rich) Da Yin Construction Engineering Co., Ltd.(Da Yin Construction Engineering)

• (iv) According to the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises, Kaohsiung Monomer Company (KMC) qualifies as a substantial related party.

Name of investee	Nature of business	Shareholding ratio Notes % 40.00 Note 1
Kaohsiung Monomer Company	Sales and production of methyl methacrylate

NOTE 1: The chairman is assigned by The Company.

• (v) All of the important internal transaction between the Group had been eliminated.

• (d) Foreign currency

• (i) Foreign currency transaction

Transactions in foreign currencies are translated into the respective functional currencies of Group entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Nonmonetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

(Continued)

• 424 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income:

• ． an investment in equity securities designated as at fair value through other comprehensive income;

• ． 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 hedges are effective.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rate. Exchange differences are recognized in other comprehensive income.

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. When the Group disposes of only 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 noncontrolling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future. Exchange differences arising from such a monetary item that are considered to form part of the net investment in the foreign operation are recognized in other comprehensive income.

(e) Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as noncurrent.

• (i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

• (ii) It is held primarily for the purpose of trading;

• (iii) It is expected to be realized within twelve months after the reporting period; or

• (iv) The asset is cash and cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

(Continued)

• 425 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

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

• (i) It is expected to be settled during the in its normal operating cycle;

• (ii) It is held primarily for the purpose of trading;

• (iii) It is due to be settled within twelve months after the reporting period; or

• (iv) The Group 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.

• (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 known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

Bank overdrafts that are repayable on demand and form an integral part of the Group’ s cash management are included as a component of cash and cash equivalents for the purpose of the consolidated statement 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.

(h) Financial instruments

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(Continued)

• 426 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• (i) Financial assets

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

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI) – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

• 1) 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.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

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

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.

Equity investments at FVOCI are subsequently measured at fair value. Dividends 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 are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Group’s right to receive payment is established.

• 3) 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. 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.

(Continued)

• 427 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

4)

• 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.

• 5) 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;

(Continued)

• 428 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• ． 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)

• 6) Impairment of financial assets

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

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

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 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 debtor is unlikely to pay its credit obligations to the Group in full.

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

12-month ECL are the portion of ECL that result from default events that are possible within the 12 months 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 ECL is the maximum contractual period over which the Group is exposed to credit risk.

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.

(Continued)

• 429 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

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 asset 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.

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written 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.

• 7) Derecognition of financial assets

The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

• (ii) Financial liabilities and equity instruments

• 1) Classification of debt or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

(Continued)

• 430 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

2) Equity instrument

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

3) Treasury shares

When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is recognized in capital surplus or retained earnings (if the capital surplus is not sufficient to be written down).

4) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

5) Derecognition of financial liabilities

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

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

6) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(Continued)

• 431 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(i) Inventories

• (i) Manufacturing industry

The 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.

(ii) Construction industry

Inventories of the construction business are measured at the lower of cost and net realizable value. The cost of inventories includes expenditure incurred in bringing them to their existing location and condition and capitalized borrowing costs.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The net realizable value is estimated as follows:

• 1) Land held for development: net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses, or estimated by recent market value (development analytical method or comparison method).

• 2) Construction-in-progress: net realizable value is the estimated selling price (current market condition) in the ordinary course of business, less the estimated costs of completion and selling expenses, or estimated by recent market value.

(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 arise from the acquisition less any accumulated impairment losses.

The consolidated financial statements include the Group’ s share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Group, from the date on which significant influence commences until the date on which significant influence ceases.

Gains and losses resulting from transactions between the Group and an associate are recognized only to the extent of unrelated Group’s interests in the associate.

(Continued)

• 432 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

When the Group’s share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

When the Group subscribes to additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment will differ from the amount of the Group’s proportionate interest in the net assets of the associate. The Group records such a difference as an adjustment to investments, with the corresponding amount charged or credited to capital surplus. The aforesaid adjustment should first be adjusted under capital surplus. If the capital surplus resulting from changes in ownership interest is not sufficient, the remaining difference is debited to retained earnings. If the Group’s ownership interest is reduced due to the additional subscription to the shares of the associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate will be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities.

(k) Investment property

Investment property is 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 initially measured at cost and subsequently at fair value with any change therein recognized in profit or loss.

Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss. When investment property that was previously classified as property, plant and equipment is sold, any related amount included in ‘other equity - revaluation surplus’ is transferred to retained earnings.

Rental income from investment property is recognized as other revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental income, over the term of the lease.

(l) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

(Continued)

• 433 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Group.

(iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

The estimated useful lives of periods are as follows:	property, plant
Land improvement	3~30 years
Buildings and constructions	2~60 years
Machine equipment	1~30 years
Transportation equipment	2~40 years
Other equipment	2~13 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(iv) Reclassification to investment property

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified accordingly. Any gain arising on this remeasurement is recognized in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognized in other comprehensive income and presented in “ other equity - revaluation surplus” . Any loss is recognized in profit or loss. However, to the extent that an amount is included in the revaluation surplus for that property, the loss is recognized in other comprehensive income and reduces the revaluation surplus within equity.

(Continued)

• 434 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(m) Leases

Leases (applicable from January 1, 2019)

• (i) Identifying a lease

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

• 1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

• 2) the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

• 3) the Group has the right to direct the use of the asset when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of an asset if either:

• －

• the Group has the right to operate the asset; or

• － the Group designed the asset in a way that predetermines how and for what purpose it will be used.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Group has elected not to separate non-lease components and account for the lease and nonlease components as a single lease component.

(ii) As a leasee

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

(Continued)

• 435 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

• －

• fixed payments;

• － variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• － amounts expected to be payable under a residual value guarantee; and

• －

• payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• －

• there is a change in future lease payments arising from the change in an index or rate; or

• － there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee; or

• － there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or

• － there is a change of its assessment on whether it will exercise a purchase, extension or termination option; or

• －

• there is any lease modification

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Group accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Group presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

If an arrangement contains lease and non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

(Continued)

• 436 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less and leases of low-value assets, including IT equipment. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

For sale-and-leaseback transactions, the Group applies the requirements for determining when a performance obligation is satisfied in IFRS15 to determine whether the transfer of an asset is accounted for as a sale of the asset. If the transfer of an asset satisfies the requirement of IFRS15 to be accounted for as a sale of the asset, the Group derecognizes the transferred asset, then measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained. Accordingly, the Group recognizes only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. For leaseback transaction, the Group applies the lessee accounting policy. If the transfer of an asset does not satisfy the requirement of IFRS15 to be accounted for as a sale of the asset, the Group continues to recognize the transferred asset and recognizes the financial liability equal to the transfer proceeds.

(iii) As a leasor

When the Group acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, the Group applies IFRS15 to allocate the consideration in the contract.

The Group recognizes a finance lease receivable at an amount equal to its net investment in the lease. Initial direct costs, such as lessors to negotiate and arrange a lease, are included in the measurement of the net investment. The interest income is recognized over the lease term based on a pattern reflecting a constant periodic rate of return on the net investment in the lease. The Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other income’.

(Continued)

• 437 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

Leases (Applicable before January 1, 2019)

(i) Lessor

A finance lease asset is recognized on a net basis as lease receivable. Initial direct costs incurred in negotiating and arranging an operating lease are added to the net investment in the leased asset. The finance income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the receivable.

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset, and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into the operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly.

Contingent rents are recognized as income in the period when the lease adjustments are confirmed.

(ii) Lessee

Leases in which the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair value or the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset.

Other leases are operating leases and are not recognized in the Group’s balance sheets.

Payments made under operating leases (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Contingent rent is recognized as expense in the period in which it is incurred.

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. The specific asset is the lease subject when depended on by the arrangement. The arrangement is the transfer of a right to use the asset when transfers control of the specific assets to the Group.

(Continued)

• 438 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

At inception or on reassessment of the arrangement, if an arrangement contains a lease, that lease shall be classified as a finance lease or an operating lease. The Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payment reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset. Subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the Group’ s incremental borrowing rate. If the Group concludes for an operating lease that it is impracticable to separate the payment reliably, then it treats all payments under the arrangement as lease payments, and discloses the situation accordingly.

(n) Intangible assets

(i) Recognition and measurement

1) Goodwill

Goodwill arising on the acquisition of subsidiaries is measured at cost, less accumulated impairment losses. Please refer to Note 5(j) for details of the accounting policy on the initial recognition of goodwill.

• 2) Other intangible assets

Expenditure on research activities is recognized in profit or loss as incurred.

Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to, and has sufficient resources to, complete development and to use or sell the asset. Otherwise, it is recognized in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost, less accumulated amortization and any accumulated impairment losses.

Other intangible assets, including customer relationships, patents and trademarks, that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) 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.

• (iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

(Continued)

• 439 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

The estimated useful lives for current and comparative periods are as follows:

Technology 5~13 years

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(o) Impairment ─ non-derivative financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories, contract assets, deferred tax assets and investment properties and biological assets, measured at fair value, less costs) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or Cash Generating Units (CGUs). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(p) Provisions

A provision is recognized if, as a result of a past event, the Group has a present obligation that can be estimated reliably, and it is probable 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.

(Continued)

• 440 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(i) 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.

(ii) Site restoration

In accordance with the Group’ s published environmental policy and applicable legal requirements, a provision for site restoration in respect to contaminated land, and the related expense, is recognized when the land is contaminated.

(q) Revenue

Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer. The Group recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Group’s main types of revenue are explained below.

(i) Sale of goods

The Group recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognized when the goods are delivered as this is the point in time that the Group has a right to an amount of consideration that is unconditional.

(ii) 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.

(iii) 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.

(Continued)

• 441 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

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.

(iv) Commissions

When the Group 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 Group, and is recognized in proportion to the stage of completion of the transaction.

(v) 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.

(r) Employee benefits

(i) 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. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.

(ii) Defined benefit plans

The Group’s net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognized asset is limited to 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. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

(Continued)

• 442 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

• (iii) 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.

(s) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

The Group has determined that interest and penalties related to income taxes, including uncertain tax treatment, do not meet the definition of income taxes, and therefore accounted for them under IAS37

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

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 recognized except for the following:

• (i) differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;

• (ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

(iii) taxable temporary differences arising on the initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date, and reflect uncertainty related to income taxes, if any.

(Continued)

• 443 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

Deferred tax assets and liabilities are offset if the following criteria are met:

• (i) the Group has a legally enforceable right to set off current tax assets against current tax liabilities ; and

• (ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

• ． the same taxable entity; or

• ． different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Deferred tax assets are 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 profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date, and are reduced to the extent that it is no longer probable that the related tax benefits will be realized; such reductions are reversed when the probability of future taxable profits improves.

(t) Business combination

The Company accounts for business combinations using the acquisition method. The goodwill arising from an acquisition is measured as the excess of (i) the consideration transferred (which is generally measured at fair value) and (ii) the amount of non-controlling interest in the acquiree, both over the identifiable net assets acquired at the acquisition date. If the amount calculated above is a deficit balance, the Company recognized that amount as a gain on a bargain purchase in profit or loss immediately after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed.

All acquisition-related transaction costs are expensed as incurred, except for the issuance of debt or equity instruments.

For each business combination, the Group measures any noncontrolling interests in the acquiree either at fair value or at the noncontrolling interest’ s proportionate share of the acquiree’ s identifiable net assets, if the noncontrolling interests are present ownership interests and entitle their holders to a proportionate share of the Group’ s net assets in the event of liquidation. Other components of noncontrolling interests are measured at their acquisition-date fair values, unless another measurement basis is required by the IFRSs endorsed by the FSC.

(u) Earnings per share

The Group discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee bonus.

(Continued)

• 444 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(v) Government Grants

A government grant receivable to the Group 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.

(w) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Each operating segment consists of standalone financial information.

(4) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the consolidated financial statements in conformity with the Regulations and the IFRSs 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.

Management continues to monitor the accounting estimates and assumptions. Management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

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 investment property is measured at fair value derived from external appraisal reports. When the presumed factors implemented in the evaluation process, e.g. discount rates and return on investment, change due to the evolving market and economy, the change may have an impact on the balance of the recognized assets and profit or loss. For more information regarding the valuation, please refer to note 5(i).

(b) Impairment of property, plant and equipment

In the process of evaluating the potential impairment of tangible and intangible assets other than goodwill, the Group is required to make subjective judgments in determining the independent cash flows, useful lives, expected future income and expenses related to the specific asset groups considering of the nature of the industry. Any changes in these estimates based on changed economic conditions or business strategies and could result in significant impairment charges or reversal in future years. Please refer to note 5(g) for further description of the key assumptions used to determine the recoverable amount.

(Continued)

• 445 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

The Group’s accounting policies include measuring financial and nonfinancial 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 backtesting, 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:

． Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.

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

• ． 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:

• (a) Note 5(i) - Investment property;

• (b) Note 5(y) - Financial instruments.

(5) Explanation of significant accounts:

• (a) Cash and cash equivalents

Cash and cash equivalents
Cash on hand Checking and demand deposits Time deposits Cash equivalents Cash and cash equivalents	December 31, 2019
	$ 1,657 5,384,714 4,629,722 629,429 $ 10,645,522

Time deposits with original maturity within three months which are held for the purpose of meeting short-term cash commitments, rather than for investment or other purposes, and 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 5(y) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Group.

(Continued)

• 446 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(b) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss－current: Stocks unlisted on domestic markets Financial assets at fair value through profit or loss－non-current Stocks listed on domestic markets Total	December 31, 2019
	$ 783,180 9,942,994 $ 10,726,174

Please refer to Note 5(y) for the gain or loss on financial assets recognized at fair value through profit or loss.

The Group purchased the common and preferred stock of Core Pacific City Co., Ltd accounted as financial assets at fair value through profit or loss-non current. 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.

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 $1,560,000 － thousand and accounted in financial assets at fair value through profit or loss non-current.

On March 31, 2019, the Company’ s board of directors approved a resolution to invest in Core Pacific City Co., Ltd. by issuing 123,528 thousand preferred shares amounting to $1,235,278 thousand, which were accounted for as financial assets at fair value through profit or loss－ noncurrent.

The Group holds 582,362 shares of the common and preferred stock of Core Pacific City Co., Ltd as of the date of December 31, 2019. The Group recognized the changes in fair value as net gain and loss based on the fair value evaluation report of the investments. According to the valuation report, the fair value was measured using the net asset method and the fair value of the valuation date was determined under the assumption of relevant rate of return by the external expert. The amount accounted for gain from investments in equity instruments at fair value through profit or loss was $3,846,442 thousand for the year ended December 31, 2019. The increase of fair value was due to the bidding of Core Pacific City Co., Ltd, which was completed on September 25, 2019, and the contract of property transaction was signed on October 30, 2019.

Please refer to Note 7 for details of the financial assets at fair value through profit or loss of the Group pledged as collateral as of December 31, 2019.

(Continued)

• 447 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• (c) Financial assets at fair value through other comprehensive income

Financial assets at fair value through profit or loss－current: Stocks listed on domestic markets Financial assets at fair value through profit or loss－non-current Stocks listed on domestic markets Stocks unlisted on domestic markets Subtotal Total	December 31, 2019
	$ 321,647 1,595,896 442,497 2,038,393 $ 2,360,040

Please refer to Note 5(s) for the gain or loss on financial assets recognized at fair value through other comprehensive income.

The dividend income from the financial assets recognized at fair value through other comprehensive income for the year ended December 31, 2019 amounted to $272,736 thousand and $625,787 thousand.

• (i) 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 R.O.C. Company Act, 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. 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. The judgment was binding and final on December 2017. 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 November 19th 2016, the letter from Ministry of Economic Affairs states that Lin Ke-Ming, appointed by the Company,

(Continued)

• 448 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

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 Janurary 9, 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 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 6, 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 withdrawal of a part of such arbitration award against the Company to Taipei District Court. On December 13, 2019, Taipei District Court dismissed the Company’ s claim of withdrawing the ICC’ s decision. The Company filed an appeal on January 8, 2020, that is now adjudicated by Taiwan High Court.

As of December 31, 2019, the Group provided as collateral a portion of its financial assets. Please refer to Note 7 for details of the related assets pledged as collateral.

－ (ii) 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	For the year ended December 31, 2019
	After-tax other comprehensive income After-taxProfit (loss) $ 23,600 107,262 $ (23,600) (107,262)
Increase of 1% Decrease of 1%

• (d) Notes, trades, and other receivables

Notes receivable Accounts receivable Other receivables Less: allowance for doubtful receivables Net book value	December 31, 2019 $ 508,121 1,979,747 248,128 (463,123) $ 2,272,873

(Continued)

• 449 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

Movements of the allowance for doubtful receivables for the year ended December 31, 2019 were as follows:

Balance on January 1, 2019 Reverse of impairment loss Foreign exchange losses Balance on December 31, 2019	For the years ended December 31, 2019 $ 461,031 6,500 (4,408) $ 463,123

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, 2019. Please refer to Note 8(f) for further details relating to litigation and evaluation of collectability.

There were no notes, trades and other receivables of the Group had been pledged as collateral as of December 31, 2019.

(e) Inventories

Finished goods Work-in-process Raw materials Fuel Merchandise inventory Subtotal Prepayment for land Land Held for Construction Site - Compensation for Levied Land Payment for floor area ratio Construction-in-progress Subtotal Total	December 31, 2019 $ 468,888 422,544 1,363,906 19,350 48,524 2,323,212 7,440,010 9,423 13,535 75,243 7,538,211 $ 9,861,423

(Continued)

• 450 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

A resolution was made during the Board of Directors’ meeting held on September 25, 2019 for the Group to acquire Core Pacific City’s permanent land ownership. The Group won the bidding on the same date. On October 30, 2019, the Group subsequently entered into a purchase agreement with Core Pacific City Co., Ltd. to buy the land located at Songshan District, Taipei City, as a construction site, for the amount of $37,200,010 thousand. As of December 31, 2019, both parties have agreed to put the property, which includes the land and the existing construction along with an initial amount of $7,440,010 thousand, with a future payable amount of $29,760,000 thousand, into a trust.

For the year ended December 31, 2019, the components of cost of goods sold were as follows:

Cost of goods sold (Gain on reversal of) write-down or scrapping Net inventory loss (profit) Unallocated fixed production overheads from idle facilities Revenue from sale of scraps Net amount	For the year ended December 31, 2019
	$ 30,067,724 (85,013) 41,846 555,181 (28,202) $ 30,551,536

As of December 31, 2019, the aforesaid inventories were not pledged as collateral.

• (f) Investments accounted for using equity method

• (i) The Group’ s investments accounted for using the equity method at the reporting date were classified as follows:

classified as follows:
Subsidiaries Associates Total	December 31, 2019
	$ 34,264 1,395,723 $ 1,429,987

• (ii) Share of profit (loss) of subsidiaries and associates for the years ended December 31, 2019 was as follows:

Share of profit (loss) of subsidiaries and associates	For the year ended December 31, 2019
	$ 3,404

(Continued)

• 451 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• (iii) The key financial information of subsidiaries and associates in which the Group has equity investments was as follows (before adjustment for the Group’s proportionate share):

Total assets Total liabilities Revenue Net income	December 31, 2019 $ 6,507,295 (3,207,714) $ 3,299,581 For the year ended December 31, 2019
	$ 306,653 $ 808

The Group does not guarantee any contingent liabilities of an associate jointly with other investors. Likewise, the Group does not guarantee alone any other contingent liabilities of an associate.

• (iv) On August 12, 2019, a resolution was made during the board meeting of the Company to invest in Jean Pacific Development Co., Ltd., with the amount of $480,000 thousand dollars.

• (v) Collateral

As of December 31, 2019, the Group provided as collateral a portion of its investments in aforesaid equity-accounted investees. Please refer to Note 7 for details of the related assets pledged as collateral.

(Continued)

• 452 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(g) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group for the year ended December 31, 2019 were as follows:

Cost or deemed cost: Balance as of January 1, 2019 Acquisition through business combination Additions Disposal Reclassification Effect of movements in exchange rate Balance as of December 31, 2019 Depreciation and impairment loss: Balance as of January 1, 2019 Acquisition through business combination Depreciation for the period Impairment loss Disposals Reclassification Effect of movements in exchange rate Balance as of December 31, 2019 Carrying amounts: Balance as of December 31, 2019	Land $ 5,730,777 - - - - - $ 5,730,777 $ - - - - - - - $ - $ 5,730,777	Land improvements 287,788 - - - 5,034 - 292,822 216,486 - 6,537 - - - - 223,023 69,799	Buildings 3,802,532 - 1,493 (1,136) 13,986 (35,252) 3,781,623 1,306,801 - 129,681 - (1,136) 372 (6,942) 1,428,776 2,352,847	Machinery and equipment 47,466,254 - 4,238 (1,022,963) 1,540,245 (36,908) 47,950,866 38,110,991 - 1,326,431 - (1,019,424) 2,451 (15,452) 38,404,997 9,545,869	Vehicles 72,379 - 6,538 (7,395) 10,946 (469) 81,999 59,049 - 4,266 - (6,237) 70 (249) 56,899 25,100	Other facilities 754,899 88 50,677 (29,832) 39,931 (2,363) 813,400 528,702 27 102,812 - (28,408) (2,893) (1,238) 599,002 214,398	Construction in progress 4,733,335 - 5,487,214 (9,814) (1,610,142) (196,803) 8,403,790 - - - - - - - - 8,403,790	Accumulated impairment Total - 62,847,964 - 88 - 5,550,160 - (1,071,140) - - - (271,795) - 67,055,277 2,137,966 42,359,995 - 27 - 1,569,727 2,901,096 2,901,096 (484) (1,055,689) - - - (23,881) 5,038,578 45,751,275 (5,038,578) 21,304,002

The market price of Caprolactam (“CPL”), the main product of the Company, has declined over the past few years. Recovery of the market price is unlikely as the production capacity of CPL continues to expand. The amount of book value of the Toufen production line CGU was evaluated as higher than its recoverable amount, resulting in a impairment loss amounting to $2,901,096 thousand, which was recognized under the non-operating profit or loss section of the statement of comprehensive income. The value-in-use was discounted by using the pre-tax discount rate of 6.86% for the year ended on December 31, 2019. The recoverable amount was determined by the total of value-in-use and net fair value (fair value, less, cost of disposal), whose evaluation involved an input value belonging to level 3 and was conducted by using the market method.

As of December 31, 2019, the Group provided as collateral, a portion of its property, plant and equipment, please refer to Note 7 for details of the related assets pledged as collateral.

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, Ministry of Economic Affairs (MOEA) approved the investment of the Company in Jiangsu Weiming Petrochemical Corporation in China in the amount of CNY2,388,000 thousand (equivalent to $11,100,000 thousand) mainly to establish manufacturing operations for petrochemical products (including hydrorefining crude benzol, cyclohexanone, nylon 6, etc.). As of December 31, 2019, accumulated investment remittance from Taiwan to Mainland China was CNY1,218,000 thousand. The amount invested in manufacturing plant and machinery was CNY1,251,456 thousand.

(Continued)

• 453 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(h) Right-of-use assets

The Group leases assets including land, land use right, buildings, machinery and equipment and vehicles. Information about leases for which the Group as a lessee is presented below:

Cost: Balance as of January 1, 2019 Effects of retrospective application Balance as of January 1, 2019- retrospective Aquisition through business combination Additions Disposal Effect of movements in exchange rate Balance as of December 31, 2019 Accumulated depreciation and impairment losses: Balance as of January 1, 2019 Effects of retrospective application Balance as of January 1, 2019 - retrospective Depreciation for the period Disposal Effect of movements in exchange rate Balance as of December 31, 2019 Carrying amounts: Balance as of December 31, 2019	Land $ - 204,443 204,443 - 108 - - $ 204,551 $ - - - 8,012 - - $ 8,012 $ 196,539	Land-use right - 682,373 682,373 - - - (24,635) 657,738 - 47,630 47,630 13,686 - (2,353) 58,963 598,775	Buildings - 12,155 12,155 - 7,399 - - 19,554 - - - 8,901 - - 8,901 10,653	Machinery and equipment - 63,906 63,906 - - - - 63,906 - - - 33,708 - - 33,708 30,198	Vehicles - 16,537 16,537 615 4,411 (2,107) - 19,456 - - - 9,096 (621) - 8,475 10,981	Other facilities Total - - 1,774 981,188 1,774 981,188 - 615 164 12,082 - (2,107) - (24,635) 1,938 967,143 - - - 47,630 - 47,630 580 73,983 - (621) - (2,353) 580 118,639 1,358 848,504

(Continued)

• 454 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• (i) Investment property

The movement of invesment property was as followed:

Cost or deemed cost: Balance as of January 1, 2019 Aquisition through business combination Decrease Net gains and losses due to fair value adjustments Balance as of December 31, 2019 Carrying amounts: Balance as of December 31, 2019	Land $ 38,331,633 2,075 (9,423) (1,622,617) $ 36,701,668 $ 36,701,668	Buildings Total 18,726 38,350,359 - 2,075 - (9,423) (688) (1,623,305) 18,038 36,719,706 18,038 36,719,706

• (i) Evaluation by income approach

The fair value of some investment properties of the Group 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, 2019

Subject	Qianjin Dist., Kaohsiung City Qianzhen Dist., Kaohsiung City None None $550~$700( NT dollars) $450( NT dollars) $563~$589( NT dollars) None Unused Leased $0~ $0 $0~ $0 5.525% None 4.380% 4.780% Outsourcing Outsourcing Colliers International Taiwan Colliers International Taiwan Feng-ru, Ke Shiou-ying, Jan December 31, 2019 December 31, 2019 $ 10,530 $ 2,514,000
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

(Continued)

• 455 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

In accordance with Article 34 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 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, 2019, the discount rate was 4.380%~4.780%, and the weighted average capitalization rate was 5.525%, derived as the ratio of annual net operating income of comparable properties divided by reasonable price.

(ii) Evaluation through land development analysis

The Group classified its undeveloped land as investment property. The Group adopted the development land analysis approach to measure the fair value of the undeveloped land in accordance with Article 9 of the Regulations Governing the Preparation of Financial Reports by Securities Issuers. The input value involved in evaluation belongs to level 3. The relevant information is summarized as follows:

December 31, 2019

Subject	Annan Dist., Tainan City	Qianzhen Dist., Kaohsiung City Others 101,156,568 2,718,175 18%~30% 12%~25% 3.900%~8.930% 1.06%~3.47% Colliers International Taiwan Real Estate Joint Appraisers Firm Hon Bun Real Estate Appraisers Firm, Colliers International Taiwan and China Real Estate Appraisers Firm Shiou-ying, Jan , Jian-hui,Gu Yu-xian, Houng, Jian-hui, Gu, Shiou-ying, Jan and Dian- ching, Hsieh December 31, 2019 December 31, 2019 27,885,380 1,352,806
Estimate total sales price Rate of return Capital interest rate Evaluation office Appraiser name Evaluation date Outsourcing fair value	7,968,120 23% 1.790% CCIS Real Estate Joint Appraisers Firm Huo-ming, Huang December 31, 2019 $ 4,956,990

(Continued)

• 456 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

The fair value of the Group’ s investment property is outsourced. In accordance with the appraisal reports, the approach and process include selecting a section as a basic unit, whose market value is estimated through comparison approach and cost approach, wherein the time and leveling cost are then factored in to approximate the fair value of the subject.

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; 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 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(p) for the relevant information including rent revenue and the direct operating expenses incurred.

As of December 31, 2019, the Group provided as collateral portion of its investment property. Please refer to Note 7 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 event of the resumption of 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.

AnShun Land Located in Tainan City Annan District:

(i) History

• 1) The land where the AnShun Alkali plants located was originally established by Japanese company Kanegafuchi Soda in 1938 under Japanese Colonial Rule.

• 2) The Government undertook construction after the Retrocession of Taiwan, and established a state-owned company, Taiwan Alkali Industrial Corporation (TAIC) and operated at the AnShun 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 in 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.

(Continued)

• 457 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• 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 Anshun land of TAIC.

• 5) Since the said merger, the Company takeover the Anshun land, the Company has never had any act of production, operations, development, use or pollution at the site. According to subsequent investigation and research, parts of the area had 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, respectively, 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, along with the treatment projects and remediation plan. As the Company never used the land after being ordered to take charge by the Executive Yuan Department of Ministry of Economic Affairs (MOEA), the Company thus objected and carried out the following administrative and 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 was rejected.

• b) In January 2006, the Company filed a complaint against MOEA in the Taiwan Taipei District Court in the amount of $10,077 thousand for reimbursement 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 did not mention whether the successor of the Polluter entity should be responsible for the treatment projects and remediation plan under SGPR Act was not within 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 Anshun plant in accordance with the Soil and Groundwater Pollution Remediation Act.

(Continued)

• 458 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• a) The Company proposed the “Tainan City, CPDC former Taiwan Alkali Anshun 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 4, 2015. According to the remediation technology and the actual implementation of the subsequence adjustment, the 3rd remediation change plan was proposed on March 2, 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 Janurary 3, 2018.

• b) The relating remediation expense for the first phase was estimated to be $1,647,200 thousand. The remediation expense about $1,600,000 thousand was engaged as the 1st phase until September 2014. Simultaneously, the following 10-year remediation work needed to be started after the 2nd change plan was adopted at an estimated cost of $1,356,000 thousand in December 2014.

(ii) Extension legislation:

• 1) Remediation prepay

• a) Tainan city government on Feburary 27, 2008 with the letter No. 09722004430 asked the Company to pay each expense: $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 laws and regulations in July 2008. The Company objected to the prepaid expense and land polluter, hence, the administrative remedy was proposed in July 2008, with Kaohsiung High Administrative court sentencing the Company to pay the expense $88,430 thousand in Janurary 2008. The Company appealed in March 2008 and Supreme Administrative Court sent the case back to Kaohsiung High Administrative Court for further trial. Kaohsiung High Administrative court sentenced the original punishment and the petition decision beyond $76,066 thousand was withdrawn. In December 2013, both parties proposed the appeal for the unfavorable parts and Supreme Administrative Court sentenced the amount beyond $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 $356 thousand had all been returned back to the

(Continued)

• 459 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

account by Tainan city government. Kaohsiung High Administrative court rejected the appeal of the Company on December 2016. The Company proposed the appeal remedy for the unsatisfied sentenced contents on Janurary 2017. Supreme Administrative Court sentenced on Janurary 2018 that the expenses $1,134,718 thousand did not 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 $17,962 thousand, which resulted from the relevant working plan of AnShun Land Site soil pollution remediation and was prepaid by Tainan city government on behalf of the Company, and Tainan city government in December 2009 with the letter No. 09822035440 asked the Company to pay the above fees prior to Janurary 31, 2010. The Company estimated such expense at the end of 2009 and proposed the administrative remedy in Janurary 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 $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 $7,068 thousand was withdrawn on October 7, 2015 and this case had been appealed for the remedy. The determined withdrawn amount $95 thousand had been returned back to the account by Tainan city government. The verdict from Supreme Administrative Court had been received on Feburary 18, 2017, the fact was again returned back to Kaohsiung High Administrative court for the trial.

• c) The Tainan City Government, in February 2014, passed 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 Anshun factory, in the amount of $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 $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. On December 19, 2019, a fine of $5,301 thousand was imposed by the court; in pursuit of the best interest of the Company, an appeal was filed with Supreme Administrative Court on January 16, 2020.

(Continued)

• 460 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• d) Tainan City Government, in May 2016, issued the letter No. 10504498726, requesting the Company pay a fee for the “supervision management and audit work plan of 2013 CPDC (Taiwan Alkali) Anshun plant site remediation” and requesting the Company pay the fee of $63,271 thousand prior to July 20, 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 judgment 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.

• e) The Tainan City Government issued the letter No. 1080412260 in April 2019, requesting the Company to pay before June 30, 2019. The government claimed to have performed "2016 China Petroleum & Chemical Corporation Anshun Plant Remediation Site Supervision, Management and Checking Work Plan" on behalf of the Company, and request the Company to pay $59,624 thousand in accordance with Article 14 (4) and Article 15 of the Soil and Groundwater Pollution Remediation Act (hereinafter referred to as the “Soil Pollution Law”). Based on the laws and regulations, the Company paid the aforementioned fees first within the time limit set by the Tainan City Government, and filed an administrative appeals in May of the same year, and this case is still in the petition process.

• 2) Tainan city government claimed that the Company did not implement per the remediation process.

• a) Tainan City Government issued a letter No. 105050004 for administrative sanctions on May 23, 2016 and deemed that the Company did not 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 $200 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 October 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 Janurary 2018. This case was determined to be closed.

(Continued)

• 461 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• b) Tainan city government, on May 23, 2016, required the Company to complete the correction (which means reducing the rate of dioxin pollution to 41%) prior to October 31, 2016 with letter No. 1050527601 and attached with No. 105050004 issued on May 19, 2016, otherwise; the Company would be subject to daily penalties. 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 $600 thousand and was ordered to participate in environment seminars for 4 hours (premier $200 thousand plus added $400 thousand). After verification, the previous penalty was not audited at the time 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 Feburary 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 November of the same year, the Company had declared the appeal in December of the same year. The Supreme Administrative Court rejected the Company’s request on July 10, 2018. This case was determined to be closed.

• c) 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 imposed a penalty of $1,000 thousand. After the verification, there is no ‘take it as’ 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 October of the same year. The Company proposed to Kaohsiung High Administrative court for the administrative remedy in December of the same year.

• d) The Tainan City Government issued the punishment notification No. 108040003 in April 2019 as a result of the concentration of the dioxin in the exhaust pipe test results not being lower than the standard set by the third change plan (less than 0.1ng-TEQ/Nm3) and would result in a fine of $200 thousand. An administrative appeals was filed in May 2019 in accordance with the laws, and the Environmental Protection Agency of the Executive Yuan dismissed in July of the same year. The Company filed an administrative lawsuit in September of the same year. The case is currently in administrative court of the Tainan District Court.

(Continued)

• 462 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

3) Others

• a) The Company still has the objection on the adscription of pollution responsibility for AnShun 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 bear the 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 Anshun 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 perpetrators, and who should pay the relevant costs and penalties. 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 the decision not to proceed with the case. The original disposal authorities revoked the previous punishment but simultaneously imposed 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 November 2017. This case was under hearing in Supreme Administrative Court.

The cumulative fee of invested and estimated control & management cost and remediation fee were $3,433,510 thousand as of December 31, 2019. The preceding remediation fee was estimated according to the current possible situations by the Company. However, unpredictable future events may cause large fluctuations in the total expected remediation fees. This will be closely monitored and evaluated by management

• b) Anshun 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 Supreme Court.

(Continued)

• 463 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

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 the demolition of the illegal construction and return the land. Kaohsiung District Court rejected the Company’ s petition. Due to the previous judgment, 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 and was under hearing in April 2019.

Shulin Land of Taiwan Alkali Co., Ltd.:

• 1) History:

• a) No. 540, 541 and 543, Dongshan Section, Shulin District, Xinbei City and No. 489, Weiwang Section, Shulin Dist., New Taipei City 238, Taiwan including land originally belonging to Shulin plant of Taiwan Alkali Co. Ltd. Taiwan Alkali Co. Ltd., which 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.

• b) Then the plant was subsequently sold to CPC. The New Taipei City Government Environmental Protection Bureau, on August 16, 2010, announced the land as “soil pollution control site”.

• c) 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 surviving company and shall take the responsibility 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 polluter and required to propose subsequent disposal and remediation.

(Continued)

• 464 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

Since the change of predetermined place of CPC’s warehouse, the relocation schedule had to be extended to November 15, 2017. The remediation work schedule was postponed so that the soil pollution control plan (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 on May 18, 2017. Because of the different dynamic factors for the predetermined place of CPC’s warehouse, the relocation process was extend to December 31, 2021, and the remediation work schedule had to be postponed. Therefore, the “soil pollution control plan (the 2nd change plan) of Shulin Land of former Taiwan Alkali Co., Ltd (part of the sites)” was proposed in August 2019, and New Taipei City Government agreed for future reference on August 16, 2019. We are now performing this project subject to the soil pollution control plan.

The relevant remediation expense of $273,750 thousand was estimated and listed in 2011 according to Financial accounting standards related regulations. However, it will be assessed to adjust for changes due to internal and external factors in future, which may result in significant differences on the entire remediation expense.

(j) Intangible assets

The cost, amortization, and impairment of the intangible assets of the Group for the year ended December 31, 2019 were as follows:

Costs： Balance as of January 1, 2019 Acquisition in 2019 Disposals Others Effect of movement in exchange rates Balance as of December 31, 2019 Amortization and Impairment Loss: Balance as of January 1, 2019 Amortization for the period Disposals Effect of movement in exchange rates Balance as of December 31, 2019 Carrying value: Balance as of December 31, 2019	Goodwill $ 147,990 - - - (3,128) $ 144,862 $ - - - - $ - $ 144,862	Computer software 7,573 1,979 (780) - (350) 8,422 2,073 1,193 (457) (129) 2,680 5,742	Patents and trademark Total 102,598 258,161 5,025 7,004 - (780) (6,535) (6,535) (841) (4,319) 100,247 253,531 68,027 70,100 5,690 6,883 - (457) (330) (459) 73,387 76,067 26,860 177,464

As of December 31, 2019, the aforesaid intangible assets were not pledged as collateral.

(Continued)

• 465 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(k) Short-term loans

The details, terms and conditions of short-term loans were as follow:

Unsecured bank loans-the Company Letters of credit loans-the Company Secured bank loans-Weicai (Original name: Huijie) Total		December 31, 2019	December 31, 2019
	Currency	Interest Rate Range	Year of Expiration Amount 2020 $ 2,050,000 2020 1,050,558 2020 383,590 $ 3,484,148
	NTD NTD CNY	1.400%~1.620% 1.330%~1.943% 4.785%~5.8725%

As of December 31, 2019, the Company was granted by banks short-term credit lines of $6,100,000 thousand of which $1,614,920 thousand were unused.

As of December 31, 2019, the subsidiaries were granted by banks short-term credit lines of $130,000 thousand, CNY89,000 thousand and USD6,000 thousand of which $130,000 thousand and USD6,000 thousand were unused.

As of December 31, 2019, the associate was granted by banks short-term credit lines of $500,000 thousand of which $500,000 thousand were unused.

(l) Long-term loans

The details, terms and conditions of long-term loans were as follow:

Secured bank loans-the Company Unsecured bank loans-Weihua Unsecured bank loans-Weiming Subtotal Total		December 31, 2019	December 31, 2019
	Currency	Interest Rate Range	Year of Expiration Amount 2020~2022 $ 4,830,000 2024 254,415 2023~2026 3,399,498 $ 8,483,913 (1,762,130) $ 6,721,783
	NTD CNY CNY	1.4700%~1.9556% 4.900%~5.057% 4.900%~5.488%

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.

• (i) 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 plants and purchase of accessory equipment.

• (ii) 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 requirements.

(Continued)

• 466 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• (iii) 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 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:

• 1) Current ratio (total current assets divided by total current liabilities): not lower than 100%.

• 2) Leverage ratio (total liabilities plus contingent liabilities to tangible net worth): not higher than 100%.

• 3) Times interest earned (income before tax plus depreciation expense plus amortization expense divided by interest expenses): not lower than 2 times.

• (iv) In the event that there is a financial ratio violation in any of the fiscal years, the period from the announcement of the consolidated financial report that does not comply with the financial commitments to the announcement date of the next consolidated financial report shall be the improvement period. If the borrower resolves the violation during the improvement period, it is not considered a breach of financial commitment. However, the borrower shall, from the date of the announcement of the consolidated financial report that does not comply with the financial commitment, to the date of interest payable after the expiration of the improvement period, the credit balance of credit cases, in accordance with Article 7 (3) of this contract, the applicable interest rate plus the annual interest rate of 0.05% is charged to interest. If the improvement is not completed within the time limit, from the expiration date of the improvement period, the next interest payable date after the date on which the borrower has filed a consolidated financial report meeting the financial commitments, for the credit balance of this credit, the interest rate shall be calculated based on the contract interest rate plus the annual interest rate of 0.05%, and may be handled in accordance with the breach of contract.

• (v) The term of the repayment of the category A credit is stipulated as: The first period will be paid off from the date of the first use of the credit application to the expiration of three years. After that, it will be a period of six months for once. Settlement of the liability divided into five phases. The first period to the fourth period, each period shall be settled separately for 15% of the outstanding principal balance of the expiration date of the credit period, and the fifth period shall be settled for 40% of the outstanding principal balance of the expiration date of the credit period.

• (vi) The term of payment of the category B credit is stipulated as: The borrower shall fully repay on the due date as set out in each application for use.

As of December 31, 2019, the unused credit line amounted to $0 thousand. Please refer to Note 8 for details of the related assets pledged as collateral.

(Continued)

• 467 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

The Company signed a contract for secured bank credit facilities in order to finance its operation. As of December 31, 2019, the total credit lines were $1,630,000 thousand. Credit facilities of $1,350,000 thousand were used. The unused amounted was $280,000 thousand. The current portion of the long-term bank loans obtained from such credit facilities amounted to $500,000 thousand. Please refer to Note 7 for details of the related assets pledged as collateral.

As of December 31, 2019, the subsidiaries were granted by banks long-term credit lines of CNY1,190,000 thousand of which CNY159,617 thousand were unused. Please refer to Note 7 for details of the related assets pledged as collateral.

Please refer to Note 7 for details of the related assets pledged as collateral.

(m) Long-term bills payable

The components of long-term bills payable were as follows:

Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Bills payable Less: Discount on long- term bills payable Total	December 31, 2019 Acceptance institution Period Amount China Bills Finance Corporation 2019.11.15~2020.02.13 $ 650,000 China Bills Finance Corporation 2019.12.23~2020.03.23 500,000 International Bills Finance Corporation 2019.12.24~2020.03.23 200,000 Taching Bills Finance Corporation 2019.12.26~2020.02.24 350,000 Taching Bills Finance Corporation 2019.11.20~2020.02.18 50,000 Mega Bills Finance Corporation 2019.11.05~2020.01.03 500,000 Mega Bills Finance Corporation 2019.11.13~2020.01.13 450,000 Mega Bills Finance Corporation 2019.11.14~2020.02.12 250,000 Mega Bills Finance Corporation 2019.11.14~2020.02.12 400,000 Mega Bills Finance Corporation 2019.11.19~2020.01.13 150,000 Mega Bills Finance Corporation 2019.11.22~2020.02.12 200,000 Mega Bills Finance Corporation 2019.12.20~2020.02.18 200,000 Mega Bills Finance Corporation 2019.12.20~2020.03.19 600,000 4,500,000 (5,823) $ 4,494,177
	Acceptance institution
	China Bills Finance Corporation China Bills Finance Corporation International Bills Finance Corporation Taching Bills Finance Corporation Taching Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation Mega Bills Finance Corporation

The Company had revolving commercial promissory note agreements with bills finance companies in order to finance its operations. The bills payable bear interest rates ranged from 0.55%~1.3400%, for the year ended December 31, 2019.

Please refer to Note 7 for details of the related assets pledged as collateral.

(Continued)

• 468 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(n) Lease liabilities

The lease liabilities of the Group were as follows:

The lease liabilities of the Group were as follows:
Current Non-current	December 31, 2019
	$ 49,911 $ 203,332

There were no significant issues, repurchases and repayments of lease liabilities for the year ended December 31, 2019.

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities Expenses relating to short-term leases	For the year ended December 31, 2019
	$ 4,875 $ 48,112

The amounts recognized in the statement of cash flows for the Group were as follows:

Total cash outflow for leases	For the year ended December 31, 2019
	$ 61,653

(o) Provisions

Balance as of January 1, 2019 Provisions made during the year Provisions used during the year Provisions reversed during the year Provisions amortized during the year Effect of movements in exchange rate Balance as of December 31, 2019 Current Non-current	Decommissioning $ 1,686,580 34,291 (1,910) - 5,256 (1,806) $ 1,722,411 $ - 1,722,411 $ 1,722,411	Remediation project 967,414 - (363,442) - - - 603,972 151,417 452,555 603,972	Employee benefits Total 323,306 2,977,300 37,845 72,136 (38,328) (403,680) (20,016) (20,016) - 5,256 - (1,806) 302,807 2,629,190 14,229 165,646 288,578 2,463,544 302,807 2,629,190

(Continued)

• 469 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• (i) 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 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 decade. 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 of 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 second remediation stage, the Company estimated the cost based on the situation on December 2014 at $1,356,000 thousand. 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 4, 2015. According to the remediation technology and the actual implementation of the subsequence adjustment, the 3rd remediation change plan was proposed on March 2, 2017, which was reviewed and adopted on Janurary 3, 2018. Please refer to note 5(i) for more information.

• (ii) 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 issued letter No. 1000010000. In that letter, the Company was 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 plan.

• 2) Since the change of predetermined place of CPC’s warehouse, the relocation schedule had to be extended to November 15, 2017. The remediation work schedule was postponed so that the soil pollution control plan (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 on May18, 2017. Because of the different dynamic factors for the predetermined place of CPC’s warehouse, the relocation process was extended to December 31, 2021 and the remediation work schedule had to be postponed. Therefore, the “soil pollution control plan (the 2nd change plan) of Shulin Land of former Taiwan Alkali Co., Ltd (part of the sites)” was proposed in August, 2019, and New Taipei City Government agreed for future reference on August 16, 2019. We are now performing this project subject to the soil pollution control plan. However, it will be assessed to adjust for changes due to internal and external factors in future, which may result in significant differences on the entire remediation expenses.

(Continued)

• 470 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(p) Operating lease

The Group leases 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, 2019 $ 14,747 117,800 257,696 $ 390,243

For the year ended December 31, 2019, the income from the rental of property, plant and equipment amounted to $18,232 thousand.

(q) Employee benefits

(i) Defined benefit plans

Reconciliation of defined benefit obligation at present value and plan asset at fair value were as follows:

Present value of funded defined benefit obligation Fair value of plan assets Net defined benefit liabilities	December 31, 2019 $ 905,333 (627,711) $ 277,622

The provision consists of net defined benefit liabilities and accrued pension liabilities for professional management. The accrued pension liabilities for professional management was $9,764 thousand as of December 31, 2019.

The Group makes defined benefit plan contributions to the pension fund account with Bank of Taiwan and provides pensions 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 the six months prior to retirement.

1) Composition of plan assets

The Group allocates 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 Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

(Continued)

• 471 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

The Group’ s Bank of Taiwan labor pension reserve account balance amounted to $627,711 thousand as of December 31, 2019. 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 Bureau of Labor Funds, Ministry of Labor.

• 2) Movement in present value of the defined benefit obligations

The movement in present value of the defined benefit obligations for the Group 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 3) Movement of defined benefit plan assets	For the year ended December 31, 2019 $ 976,135 (113,505) 24,259 18,444 $ 905,333

The movement in the present value of the defined benefit plan assets for the Group 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	For the year ended December 31, 2019 $ 675,820 32,363 (113,505) 7,628 25,405 $ 627,711

(Continued)

• 472 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• 4) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Group were as follows:

Current service cost Others Net interest of net liabilities for defined benefit Operating costs Selling expenses Administrative expenses Research and development expenses Actual return on plan assets	For the year ended December 31, 2019 $ 13,421 (114) 3,209 $ 16,516 $ 14,706 125 1,519 166 $ 16,516 $ 18,997

• 5) Remeasurement of net defined benefit liability (asset) recognized in other comprehensive income

The Group’ s remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income for the year ended December 31, 2019, was as follows:

Accumulated balance, January 1 Recognized during this year Accumulated balance, December 31	For the year ended December 31, 2019 $ (192,077) 6,959 $ (185,118)

• 6) Actuarial assumptions

The principal actuarial assumptions at the reporting date were as follows:

Discount rate Future salary increases	For the year ended December 31, 2019
	0.8%~1% 1%~3%

The expected allocation payment to be made by the Group to the defined benefit plans for the one-year period after the reporting date is $11,699 thousand.

(Continued)

• 473 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

～ The weighted average lifetime of the defined benefits plans is 1.00 13.18 years.

7) Sensitivity analysis

In determining the present value of the defined benefit obligation, the Group’ 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.

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2019 Discount rate Increase in future wage	Impact on the present value of defined benefit obligation Increase by 0.25% Decrease by 0.25% $ (16,024) 16,610 16,206 (15,712)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2019 and 2018.

(ii) Defined contribution plans

The Company allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

The pension costs incurred from the contributions to the Bureau of the Labor Insurance amounted to $55,030 thousand for the year ended December 31, 2019.

• (iii) The pension recognized consists of pension expenses and pensions for professional management. The pension expenses for professional management was $6,234 thousand as of December 31, 2019.

(iv) Short-term compensated absences liabilities

As of December 31, 2019, the Group’s short-term compensated absences liabilities amounted to $14,229 thousand.

(Continued)

• 474 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(r) Income Tax

(i) The components of income tax expense for the year ended December 31, 2019 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 year ended December 31, 2019 $ (440,173) (3,035) (443,208) 486,012 (470,679) 15,333 $ (427,875)

For the year ended December 31, 2019, income tax expenses recognized under other comprehensive income were $0 thousand.

Reconciliation of income tax and profit before tax for the year ended December 31, 2019 was as follows:

Profit (loss) before income tax Income tax on pre-tax financial income calculated at the domestic rate Tax-free income Recognition of previously unrecognized taxgain Unrecognized deferred tax assets Changes of permanent differences Prior years income tax adjustment Undistributed earnings additional tax Income basic tax Others Income tax expense	For the year ended December 31, 2019 $ 2,897,857 $ (689,166) 577 31 (490,711) 835,627 (3,035) (52,091) (26,879) (2,228) $ (427,875)

(Continued)

• 475 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• (ii) Deferred tax assets and liabilities

• 1) Unrecognized deferred tax assets

Decommissioning liabilities Remediation project Pollution remediation Allowance for doubtful receivables Investment property, property, plant and equipment Pension Tax loss Others	December 31, 2019
	$ 82,663 239,143 364,829 319,484 3,565,240 1,322 5,336,109 378,486 $ 10,287,276

As of December 31, 2019, the expiration years of tax loss unrecognized as deferred tax assets were as follows:

• a) The Company

Year incurred	Amount Expiry date $ 353,570 2024 2,132,246 2025 1,815,587 2026
2014 2015 2016

b) Taivex Therapeutics Inc.

Year incurred	Amount Expiry date $ 14,388 2020 16,878 2021 29,657 2022 50,227 2023 27,419 2024 43,032 2025 44,291 2026 54,764 2027 79,334 2028 64,909 2029
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (estimated)

(Continued)

• 476 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• c) BES Twin Towers Co., Ltd.

	Year incurred	Amount	Expiry date
	2013 $	10,195	2023
	2014	44,139	2024
	2018	445,328	2028
d)	CPDC Green Technology Corp.
	Year incurred	Amount	Expiry date
	2016 $	5,646	2026
	2017	30,267	2027
	2018	38,057	2028
	2019 (estimated)	38,444	2029
e)	Weihua (Rudong) Trade Co., Ltd
	Year incurred	Amount	Expiry date
	2015 $	25,772	2020
	2016	45,087	2021
	2017	22,092	2022
f)	Weiqiang International Trade (Shanghai) Co., Ltd.
	Year incurred	Amount	Expiry date
	2014 $	2,812	2019
	2015	17,547	2020
	2016	20,761	2021
g)	Weida (zhangzhou) Consultant Service Co., Ltd.
	Year incurred	Amount	Expiry date
	2015 $	1,042	2020
	2016	1,145	2021
	2017	1,414	2022
	2018	282	2023
	2019 (estimated)	31	2024

h) Jiangsu Weiming Petrochemical Corporation

Year incurred	Amount Expiry date $ 46,843 2022 20,510 2023 175,560 2024
2017 2018 2019 (estimated)

(Continued)

• 477 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• i) Zhangzhou Weida Petrochemical Co.,Ltd

Year incurred	Amount Expiry date $ 559 2020 2,025 2021 1,953 2022 5,717 2023 1,654 2024
2015 2016 2017 2018 2019 (estimated)

j) Kunshan Weiqin Management consultant Co., Ltd

Year incurred	Amount Expiry date $ 1,325 2021 6,189 2022 9,291 2023 5,071 2024
2016 2017 2018 2019 (estimated)

k) Changzhou Weicai New Material Science & Technology Co., Ltd. (Original name: Huijie)

Year incurred	Amount Expiry date $ 405 2020 282,336 2021 214,252 2022 185,026 2023 51,248 2024
2015 2016 2017 2018 2019 (estimated)

2) Deferred tax liabilities:

As of December 31, 2019, the balance of deferred income tax liabilities for the provision of land value-added tax was $7,020,975 thousand.

3) Deferred tax assets:

January 1, 2019 Recognized in profit or loss Recognized in other comprehensive income December 31, 2019	Taxable Loss $ 11,009 - - $ 11,009	Defined benefit plans 10,333 (967) (3,837) 5,529	Other Total 41,879 63,221 16,300 15,333 - (3,837) 58,179 74,717

(Continued)

• 478 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(iii) Assessment of tax

The Company’ s tax returns for the years through 2017 were assessed by the Tax Administration.

(s) Capital and other equity

(i) The issuance of common stock

As of December 31, 2019, the authorized, issued and outstanding capital of the Company amounted to $28,348,502 thousand, divided into 2,834,850 thousand shares with par value of $10 (NT dollars) per share.

(In thousands of shares)

Balance, January 1 Capital increased by retained earnings Balance, December 31	Common Stock	Common Stock
	For the year ended December 31, 2019
		2,699,857 134,993
		2,834,850

On May 24, 2019, a resolution was made during the shareholders’ meeting for the issuance of 134,993 thousand new ordinary shares, by using the unappropriated retained earnings, amounting to $1,349,929 thousand, which had been approved by the Financial Supervisory Commission on May 30, 2019, with the record date set at July 4, 2019, based on the decision made during the board meeting held on June 11, 2019. The relevant registration procedures have been completed as of December 31, 2019.

(ii) Capital Surplus

Premium of common stock Difference arising from subsidiary’s share price and its carrying value Other Total	December 31, 2019 $ 1,242,245 26,314 18,141 $ 1,286,700

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding.

(Continued)

• 479 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(iii) 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 stock dividends, 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

According to the amendment of the R.O.C. Company Act, the Company must retain 10% of its after-tax annual earnings as legal reserve until such retention equals the amount of total capital. When a company incurs no loss, it may, pursuant to a resolution by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

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, 2019.

In 2014, the Group 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 March 18, 2014, on the first-time adoption of fair value model for the subsequent measurement of investment properties, the Group set aside an equal amount of special reserve when the fair value increment of investment properties is transferred to retained earnings. The Group 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 as of December 31, 2019.

(Continued)

• 480 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

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 31, 2019, the Company appropriated to the special reserve an amount of $5,835,980 thousand.

• b) In accordance with Ruling No. 1010047490 issued by the Financial Supervisory Commission on November 21, 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 April 6, 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 May 4, 2019, the shareholders’ meeting decided to appropriate the Company’s 2018 earnings in cash and in shares, both in the amount of $1,349,929 thousand.

On March 27, 2020, the Board of Directors proposed to appropriate the Company’s 2019 earnings with a cash dividend of $0.3 per share, totaling $985,455 thousand.

(Continued)

• 481 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(iv) Other equity accounts

Balance, January 1, 2019 Exchange differences on foreign operation Exchange difference on subsidiary accounted for using equity method Exchange difference on affiliated accounted for using equity method Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Disposal of investments in equity instruments designated at fair value through other comprehensive income Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income for affiliated companies accounted for using equity method Balance, December 31, 2019

Exchange differences on foreign operation Unrealized gain or loss on financial assets at fair value through other comprehensive income $ (488,212) (1,248,499) (315,666) - (117) - (520) - - 127,853 - 410 - (421) $ (804,515) (1,120,657)

(t) Earnings per share

The basic earnings per share and diluted earnings per shares for the year ended December 31, 2019 were calculated as follows:

Basic earnings per share (NT dollars) Profit attributable to ordinary shareholders Weighted-average number of ordinary shares (thousand shares) Basic earnings per share Diluted earnings per share (NT dollars) Profit attributable to ordinary shareholders (diluted) Weighted-average number of ordinary shares (thousand shares) Effect of potentially dilutive ordinary shares of Employee stock bonus Weighted-average number of ordinary shares (diluted)-retrospective (thousand shares) Diluted earnings per share

For the year ended December 31, 2019

$ 1,738,449 2,834,850 $ 0.61 $ 1,738,449 2,834,850 5,894 2,840,744 $ 0.61

(Continued)

• 482 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(u) Revenue from contracts with customers

• (i) 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. For the details of products and sales area, please refer to Notes 13(b) and (c).

(ii) Contract balances

Notes receivable Accounts receivable (including related parties) Less: allowance for doubtful account Contract liabilities	December 31, 2019
	$ 508,121 1,979,747 (457,805) $ 2,030,063 $ 88,263

Please refer to Note 5(y) for disclosure of accounts receivable and allowance for doubtful accounts.

The amount of revenue recognized for the year ended December 31, 2019, that was included in the contract liability balance at the beginning of the period was $5,578 thousand.

(v) Revenue

The detail of revenue were as followed:

Sales of goods	For the year ended December 31, 2019
	$ 33,960,166

(w) 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 remuneration of employees shall be in the form of cash or shares, whose recipients may include the employees of the Company’s affiliated companies who meet certain conditions. The remuneration of directors may solely be cash. The aforesaid profit represents the income before income tax and remuneration for the period.

(Continued)

• 483 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

For the year ended December 31, 2019, the remuneration to employees amounted to $57,759 thousand and the remuneration to directors amounted to $38,506 thousand, respectively. These amounts were calculated using the Company’s profit before tax before remuneration of employees and directors for the year ended December 31, 2019. These benefits were charged to profit or loss under operating costs or operating expenses for the year ended December 31, 2019. When the board of directors decided to distribute stock dividends, the number of which shall be calculated based on the closing price of the Company’ s ordinary shares one day before the date of the meeting of board of directors. The actual distribution of the employee remuneration was $72,812 thousand; while the amount for directors identical to those stated on the financial statement. Related information would be available at the Market Observation Post System website.

(x) Non-operating income and expense

(i) Other income

The components of other income for the year ended December 31, 2019 were as follows:

Interest income Rent income Dividend income Other income, others	For the year ended December 31, 2019
	$ 134,810 12,858 303,466 262,123 $ 713,257

(ii) Other gains and losses

The components of other gains and losses for the year ended December 31, 2019 were as follows:

Losses on disposal of property, plant and equipment Losses on disposals of investments Gain on amendement of lease Foreign exchange losses Gains on fair value adjustment, investment property Fee expense Losses on work stoppages Other losses	For the year ended December 31, 2019 $ (2,560) (838) 5 (20,208) 112,421 (50,114) (35,932) (37,961) $ (35,187)

(Continued)

• 484 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(iii) Finance costs

The components of finance costs for the year ended December 31, 2019 were as follows:

Interest expense (y) Financial Instruments (i) 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 Loans and receivables Cash and cash equivalents Notes receivable, accounts receivable and other receivables Other assets Total 2) Financial liabilities Short-term loans Long-term bank loans-current portion Payables Long-term bank loans Long-term bills payable Lease liabilities Other liabilities Total

For the year ended December 31, 2019 $ (145,715) $ (145,715) December 31, 2019 $ 10,726,174 2,360,040 10,645,522 2,272,873 247,252 $ 26,251,861 December 31, 2019 $ 3,484,148 1,762,130 2,550,645 6,721,783 4,494,177 253,243 121,339 $ 19,387,465

(Continued)

• 485 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(ii) Credit risk

1) Exposure to credit risk

The carrying amount of financial assets represents the Group’ s maximum credit exposure. As of December 31, 2019, the maximum exposures to credit risk amounted to $26,251,861 thousand.

2) The concentration of credit risk

The sales of the Group are significantly concentrated in a small number of customers. For the year ended December 31, 2019, 70% of the total amount of accounts receivable was owed by 10 customers. Under the Group’s credit policy, customers are requested to provide the Group certain financial information such as audited financial report, or other related documents for purposes of evaluating their credit worthiness. Credit is granted to these customers according to the result of the Group’s credit evaluation. Those customers who do not satisfy the requirements shall not be offered credit.

3) Impairment losses

The Group 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, 2019 were as follows:

Not past due Over 0~30 days Over 31~120 days Past due more than 1 year	Carrying amount of account receivables $ 2,108,317 19,702 7,993 351,856 $ 2,487,868	Weighted average expected credit loss Allowance for expected credit loss 0% 105,289 1.41% 278 4.78% 382 100% 351,856 457,805

(Continued)

• 486 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(iii) Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

December 31, 2019 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 $ 1,762,225 985,213 6,122 121,339 2,216,200 9,751,861 4,494,177 $ 19,337,137	Contractual cash flows 1,762,225 985,213 6,122 121,339 2,252,804 10,324,036 4,500,000 19,951,739	Within 6 months 1,762,225 871,498 6,122 105,359 537,000 3,709,309 - 6,991,513	6-12 months - 113,715 - 9,480 529,258 518,090 - 1,170,543	1-2 years - - - 4,685 1,186,546 2,163,728 4,500,000 7,854,959	2-5 years More than 5 years - - - - - - 315 1,500 - - 3,795,714 137,195 - - 3,796,029 138,695

• (iv) Currency risk

• 1) Currency risk exposure

The Group’s exposures to significant currency risk were those from its foreign currency denominated financial assets and liabilities as follows:

Financial assets Monetary items USD EUR VND MMK CNY INR Long-term share investment using equity method USD Financial liabilities Monetary items USD CNY GBP	December 31, 2019	December 31, 2019
	Foreign Currency $ 58,609 2,002 4,010,877 1,324,699,288 203,235 17,195 30,002 $ 5,987 847,776 3	Exchange rate NTD 30.036 1,760,399 33.640 67,344 0.0013 5,214 0.0203 1,722,108 4.310 2,702,755 0.4281 7,253 30.036 901,116 30.036 179,621 4.310 3,653,912 39.450 125

(Continued)

• 487 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

2) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the foreign currency exchange rate fluctuations on cash and cash equivalents, receivables, payables and loans, which are denominated in foreign currency. A 1% of appreciation of NTD against USD, EUR, VND, MMK, CNY, INR and GBP would have increased net income by $19,352 thousand for the year ended December 31, 2019; other comprehensive income would have increased $9,011 thousand for the year ended December 31, 2019. The analysis is performed on the same basis for 2018.

• 3) Foreign exchange gain and loss on monetary items

Since the Group has many kinds of functional currency, the information on foreign exchange gains (losses) on monetary items is disclosed by total amount. For the year ended December 31, 2019, foreign exchange gains (losses) (including realized and unrealized portions) amounted to $20,209 thousand.

(v) 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 Group’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 Group’s net income will decrease by $22,162 thousand for the year ended December 31, 2019 assuming all other variable factors remain constant. This is due mainly to the fact that the Group’s borrowings bear floating interest rate.

• (vi) Fair value information

The Group uses market observations as much as possible when measuring 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).

(Continued)

• 488 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• a) Fair value of financial instruments

The fair value of financial assets and liabilities was 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, 2019 Financial Assets Cash and cash equivalent Financial assets at fair value through profit or loss-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 other comprehensive income-non- current Note receivables, accounts receivable and other receivables 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 Lease liabilities Other liabilities	Book value $ 10,645,522 783,180 321,647 9,942,994 2,038,393 2,272,873 247,252 36,719,706 $ 62,971,567 $ 3,484,148 1,762,130 6,721,783 2,550,645 4,494,177 253,243 121,339 $ 19,387,465		Fair value	Fair value
		Level 1 - 783,180 321,647 - 1,595,896 - - - 2,700,723 - - - - - - - -	Level 2 - - - - - - - - - - - - - - - - -	Level 3 Total - - - 783,180 - 321,647 9,942,994 9,942,994 442,497 2,038,393 - - - - 36,719,706 36,719,706 47,105,197 49,805,920 - - - - - - - - - - - - - - - -

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 Group is close to its fair value.

(Continued)

• 489 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• c) Valuation techniques for financial instruments measured at fair value:

The Group 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 Group 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 investee.

• ii) Derivative financial instruments

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 year ended December 31, 2019.

(Continued)

• 490 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• e) Statements of changes in fair value measurements of financial assets in Level 3

January 1, 2019 Acquisition from business combination Purchase Decrease Effects on deferred income tax liabilities Total gain and losses recognized in profit or loss or other comprehensive income December 31, 2019	Investment Property $ 38,350,359 2,075 - (9,423) (1,735,726) 112,421 $ 36,719,706	Financial assets reported at fair value through profit or loss Financial assets reported at fair value through other comprehensive income Designated at initial recognition Derivative financial assets Non-public quoted equity instruments 4,996,581 - 481,391 - - - 1,235,278 - - (135,307) - - - - - 3,846,442 - (38,894) 9,942,994 - 442,497
		Designated at initial recognition 4,996,581 - 1,235,278 (135,307) - 3,846,442 9,942,994

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), e.g. part of the the Group’s investment in non-active market equity and debt instruments. The fair value of the Group’s investment property is level 3, which is determined in accordance with IFRSs, i.e., outsourcing to external appraisors for assessment based on market evidence (please refer to Note 5(i)). Due to the impracticability to evaluate the relationship between the unobservable input value and fair value, the quantitative information is not disclosed. The fair value of the aforesaid assets at December 31, 2019 is $36,719,706 thousand.

The Group holds investments in equity shares, which is classified as financial assets at fair value through profit or losses, whose fair value belongs to level 3.

Most of fair value assets belonging to level 3 possesses single significant unobservable input values. Only equity instruments with inactive market may result

(Continued)

• 491 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

in multiple unobservable input values which are all independent from each other.

Quantified information of significant unobservable inputs was as follows:

Item	Valuation technique	Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement ‧Net Asset Value ‧Lack of market liquidity discount rate 10%~30% ‧Not applicable ‧Lack of market liquidity Higher discount, lower fair market value
Financial assets at fair value through profits or losses and financial assets at fair value through other comprehensive income	Net Asset Value Method

• g) The evaluation process for fair value belonging to level 3

The Group’ s fair value evaluation involves observable input value requiring unobservable parameters for significant adjustments or unobservable input value, both of which belong to level 3. The main source of such input value is external appraisors’ reports. The results of the evaluation are then reviewed to assure the consistency with the source of the evaluation and the reasonability.

The evaluation of investment property complies with FSC’ s regulations of the evaluation methods and parameters, and is conducted by external appraisors.

• 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.

• (z) Financial risk management

• (i) Overview

The Group are exposed to the following risks due to the use of financial instruments:

• 1) Credit Risk

• 2) Liquidity risk

• 3) Market risk

(Continued)

• 492 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

The following discusses the Group’ 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 financial statements.

(ii) 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 Group’s risk management policies and to report regularly on its activities.

The Group’s risk management policies are established to identify and analyze the risks faced by the Group, 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 Group’ s activities. The Group, 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 Group oversees how management monitors compliance with the Group’ s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee of the Group 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.

(iii) Credit Risk

Credit risk means the potential loss of the Group if the clients or counterparties involved in transactions default. The primary potential credit risk is from cash and accounts receivable.

1) Accounts receivable and other receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Group’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 Group has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Group’ s standard payment and delivery terms and conditions are offered. The Group’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 Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis.

(Continued)

• 493 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

The Group 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 Group’s finance department. As the Group deals with the banks and other external parties with good credit standing and financial institutions, corporations and government agencies which are graded above investment level, management believes that the Group does not have compliance issues and significant credit risk.

(iv) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as much as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The management believes that the Group does not have significant liquidity risk.

(v) 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 Group’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 returns.

The Group 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 Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group’s entities, primarily the New Taiwan Dollar (NTD). The currencies used in these transactions are denominated in NTD, USD and CNY.

The Group’s currency risk is not hedged as some of the currencies of the Group’s foreign currency receivables and payables are the same, producing a natural hedge effect.

(Continued)

• 494 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

2) Interest rate risk

The Group’ s interest rate risk comes from long-term and short-term bank loans. The long-term bonds issued by theCompany is fixed-rate, so there is no risk caused by the fluctuations of interest rates and fair value interest rate. The long-term and short-term bank loans with floating-rate are exposed to interest rate risk, but most of risk is offset by cash and cash equivalents holding in floating-rate deposits.

3) Other market price risk

The Group does not enter into any commodity contracts other than to meet the Group’s expected usage and sales requirements; such contracts are not settled on a net basis.

• (aa) Capital management

The Group meets its objectives for managing capital is to safeguard the capacity to continue to operate, to continue to provide a return to 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 Group may adjust the dividend payment to shareholders, reduce the capital for redistribution to shareholders, issue new shares or sell assets to settle any liabilities.

The Group 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 Group’s debt-to-equity ratio at the end of the reporting period as of December 31, 2019 was follows:

Total liabilities Less: cash and cash equivalents Net debt Total equity Total liabilities and equity Debt-to-equity ratio	December 31, 2019 $ 30,330,462 (10,645,522) $ 19,684,940 $ 68,527,072 $ 88,212,012 % 22.32

(Continued)

• 495 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• (ab) Investing and financing activities not affecting current cash flow

The Group investing and financing activities which did not affect the current cash flow for the year ended December 31, 2019 were as follows:

• (i) For the acquisition of right-of-use assets based on lease term, please refer to Note 5(h).

Reconciliation of liabilities arising from financing activities was as follows:

Long-term loans Short-term loans Long-term bills payable Lease liabilities Total liabilities from financing activities	January 1, 2019 $ 4,673,930 913,732 349,729 298,815 $ 6,236,206	Cash flows 3,897,363 2,579,857 4,144,448 (61,653) 10,560,015	Non-cash	changes Other December 31, 2019 - 8,483,913 - 3,484,148 - 4,494,177 16,081 253,243 16,081 16,715,481
			Foreign exchange movement (87,380) (9,441) - - (96,821)

(6) 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. BES Engineering Corporation Core Pacific City Co., Ltd.

Chung Kung Management and Maintenance of Apartments Co., Ltd.

Coreasia Human Resources management Co., Ltd.

Capital Machinery Co., Ltd.

Sheen Chuen-Chi Cultural and Educational Foundation

Changshu Jing Hui Properties Co., Ltd.

All board of directors, general manager and deputy general manager

Lucite International Asia Pacific PTE. Ltd. Korea

Lucite International U.K. Ltd.

Investee accounted for using equity method The Company is a director of the entity Share a director with the Company

Investee as accounted for using equity method of Zhong Gong Baoquan Ltd.

Subsidiary of BES Engineering

The entity is a director of the Company The entity is a director of the Company

The president of the entity is the vice president of the Company

The main management of the Company

Associated company

Associated company

(Continued)

• 496 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(b) The ultimate parent company

The Company is the ultimate parent company.

• (c) Significant Transactions with related parties

• (i) Receivables

The receivables from related parties were as follows:

Accounts	Types of related parties December 31, 2019 Other related parties $ 9
Other receivables

• (ii) Payables

The payables to related parties were as follows:

Accounts	Types of related parties	December 31, 2019
Other payables Other payables Other Associates Security service fees Other related parties Rental income Other revenues Other expense	Associates Other related parties	$ 4,602 18,134 $ 22,736 For the year ended December 31, 2019
		$ (23,057) 3 15 (21,243)

• (iii) Other

Please refer to Note 5(p) for lease of land and buildings to related parties.

• (iv) The Group had a two-year contract with BES Engineering, for the lease of office building, with the total value of $9,629 thousand. This rental transaction was applicable to IFRS16 and recognized right-of-use assets and lease liability both amounting to $7,130 thousand. The depreciation expense and interest expense for the year ended December 31, 2019 was $4,754 thousand and $82 thousand, respectively. As of December 31, 2019, the amount of lease liability was $2,398 thousand.

(Continued)

• 497 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• (v) The Group had contracts with BES Engineering, for mechanical engineering services projects and paid commission on the basis of actual construction. As of December 31, 2019, the construction project in-progress amounted to $1,532,800 thousand. As of December 31, 2019, the unpaid fees amounted to $860,680 thousand and the refundable deposit amounted to $415,794 thousand.

• (vi) The Group had contracts with Capital Machinery, for mechanical engineering services projects and paid commission on the basis of actual construction. As of December 31, 2019, the construction project in-progress amounted to $19,920 thousand and the unpaid fee amounted to $15,028 thousand. As of December 31, 2019, the security deposit was $1,830 thousand。

• (vii) The Group acquired 20,000 thousand shares of common stock of BES Twin Towers Co., Ltd. amounting to $215,600 thousand from BES Engineering Co., Ltd. on March 12, 2019.

• (viii) The Group acquired 100 thousand shares of common stock of BES Twin Towers Co., Ltd. amounting to $1,078 thousand from its management on March 12, 2019.

• (ix) To acquire its right of development and use of land, the Company invested the amounts of USD48,000 thousand ($1,400,000 thousand) and USD114,000 thousand ($3,400,000 thousand) in Frontier Fortune Investment Pte. Ltd. (Vietnam) and Core Pacific Twin Star (Vietnam) Investment Co., Ltd., respectively, on October 25, 2018, wherein, 20% of the investment amounts will be offered to Changshu Jing Hui Properties Co., Ltd. for purchasing option.

• (x) KMC had incurred $4,464 thousand of technical services expense to other related parties for the year ended December 31, 2019. The expense above had been included in sales and administration expenses.

• (d) Key management personnel compensation

Short-term employee benefit Post-employment benefits	For the year ended December 31, 2019
	$ 213,069 14,284 $ 227,353

(Continued)

• 498 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(7) Pledged assets:

The Group’s pledged assets are as follows:

Asset

Purpose of pledge December 31, 2019 Guarantee for priority right of use of harbor and purchases of materials and machinery $ 108,472 Collateral for long-term and short-term financial credit, syndicated loan 5,511,001 Syndicated loan, collateral for long-term financial credit and long-term bills payable 5,122,417 Long-term bills payable 938,120 Long-term bills payable 624,180 Deposit for lawsuit 91,557 Collateral for long-term financial credit 598,865 $ 12,994,612

Time deposits Property, plant and equipment Investment property Financial assets reported at fair value through other comprehensive income Financial assets reported at fair value through profit or loss Refundable deposit Right-of-use of Sea Areas

As of December 31, 2019, 4,000 thousand shares of a subsidiary of the Group were pledged as collateral for long-term bills payable.

(8) Significant commitments and contingencies:

• (a) As of December 31, 2019, the Group had the following unused letters of credit:

USD EUR NTD CNY JPY	December 31, 2019
	$ 11,696 235 1,015,000 20,799 37,300

• (b) As of December 31, 2019, the Group had issued guarantee notes for bank loans, sales and purchases, and development plan aggregating to $13,508,000 thousand, USD30,000 thousand, respectively.

• (c) As of December 31, 2019, the Group had contracts for various construction projects in-progress amounting to $10,891,348 thousand. As of December 31, 2019, the remaining future obligations under these contracts amounted to $3,404,508 thousand.

(Continued)

• 499 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• (d) As of December 31, 2019, the agreement on the acquisition of material property and the unpaid portion amounted to $37,200,010 thousand and $29,760,000 thousand respectively. Please refer to Note 5(e) for more information.

• (e) As of December 31, 2019, 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.

• (f) Important matters

• (i) Case of Kaohsiung gas explosion forced disconnected pipeline

On July 31, 2014, there was an underground pipeline explosion in Kaohsiung city. Due to the post - disaster reconstruction project, Kaohsiung City Government issued a penalty letter No. 10335137100 on August 18, 2014, to order the Company 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 September 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 Feburary 2017.

• (ii) Abolishment of the permission for Kaohsiung road and underground pipeline excavation and pipeline

Due to the August 1, 2014, 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 December 15, 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 was built by CPC, 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 Feburary 16, 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.

(iii) 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.

(Continued)

• 500 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(iv) 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 21, 2016: trading the equity of Taiwan Chi chlorine Chemical Co., Ltd, total 6,400,000 shares at the sales price, USD100,000 thousand, which was equivalent to $3,225,000 thousand. After the expectation of the disposal interests, $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 September 2016 and asked PPG to participate in the lawsuit. Outside lawyers of PPG, in the October of same year, represented that PPG was 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 USD100,000 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. The Company prevailed in April 2019, and was entitled to compensation of default interests and the attorney’s fee about USD3,200 thousand, which was obtained in April in the same year.

(g) Contingent liabilities

• (i) The Company signed total three land lease contracts with the 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. The Kaohsiung branch of Taiwan International Ports Corporation, Ltd. delivered the land to the Company prior to the end of December 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 $1,650 thousand, $2,565 thousand and $1,493 thousand respectively since the land was delivered. 3 years and 6 months from the land delivery date, the Company paid management fees of $10,654 thousand, $24,605 thousand and $12,329 thousand respectively. The Company also placed Certificate of Deposits of $5,000 thousand and $13,000 thousand as performance bonds in December 2013 and February 2014 respectively. The Company, in August 2015, narrowed the operating scale based on the adjustment of investment plan, which resulted in one of the performance bonds of $8,000 thousand, not being returned. Taiwan International Ports Corporation, Ltd. completed the transaction procedure prior to November 2017. The Company started to implement land drilling and geological improvement project and started paying the land rent of those projects, which was $1,675 thousand and $1,497 thousand respectively each year.

(Continued)

• 501 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(ii) Dispute from the senior manager

1) Labor Dispute

The previous senior managers, who left the Company without transferring the duties and authorization, did not 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 against 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 sides, and Expired Employee Retirement Policies of the Company was applicable, the Company shall pay $4,572 thousand to Mr. Liu. The Company was not satisfied with the original verdict and appealed for the 2nd sentence court. The 2nd 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. In June 2019, the appeal was dismissed and the judgment was binding and final.

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 $35 thousand, to Mr. Zhang, which was not satisfied by Mr. Zhang and this case was appealed to the 2nd sentence court. In July 2016, the 2nd sentence court rejected the request from Mr. Zhang but he re-appealed to the 3rd sentence in August of the same year. Upon finding the appeal meritorious, the Supreme Court reversed and remanded the judgement. The preparatory proceeding of the first repeated appeal was conducted in Taiwan Court Kaohsiung Branch Court in April 2019.

2) Disclosure Secret Case

Managers who left the office without authorization were 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 Note 7 for details of deposit for lawsuit.

(Continued)

• 502 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(iii) 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 Janurary 28, 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 prosecuted the Company and managers in Feburary 2015 and asked for the joint damaged compensation $6,920 thousand, which awaited hearing by Miaoli local court. In September of the same year, both sides agreed to withdraw the litigations. Trial procedure was recovered in Feburary 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 is currently under hearing in High Court Taichung Branch.

(iv) Contract Fraud of Shanghai industry

On August 6, 2014, the reinvestment company, Weihua and Weiqiang, filed the civil appeal to Yangpu District Court to ask Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. to pay all overdrafts of the contract. However, Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. did not perform the first phase of repayment according to Court’s mediation report, Weihua and Weiqiang, on September 2, 2014, applied to Yangpu District Court for the enforcement and sealed all coal tar of Shanghai Tongye Coal and Chemical Industry Group Co., Ltd., the total coal tar sealed was 5,216 tons and 4,777 tons were sold. Subsequently, Weihua and Weijiang Company and Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. would continue negotiations on unrealized creditors and requested Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. to propose the more specific repayment plan. Weihua and Weiqiang estimated allowance of the accounts receivable to be, CNY19,274 thousand and CNY8,276 thousand respectively. Weihua and Weijiang Company reported to the police the relevant persons of Shanghai Tongye Coal and Chemical Industry Group Co., Ltd. that were suspected to be involve with the contract fraud and other criminal matters. The police rejected the report due to insufficient evidence, therefore Weihua hired a local lawyer in May 2018, to assist with Shanghai police and Shanghai economics investigation group. The case is now under investigation.

(Continued)

• 503 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(v) Civil compensation for Residents living in Anshun

• 1) The 1st case

In 2008 and 2009, Mr. Wu and others filed civil and national compensation lawsuit against the Ministry of Economic Affairs, Tainan City Government, Tainan City Environmental Protection Bureau and the Company (Hereinafter referred to as 1st case of Tainan Anshun plant civil compensation) and they claimed that during 1942 and 1983, the previous Taiwan Alkali Co. Ltd. Anshun plant, produced mercury and dioxins in its production operations and polluted the 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 was the ultimate owner 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 did not supervise and require the Anshun plant to implement pollution prevention and control acts, thus should be jointly responsible for any compensation. 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 Anshun plant, so they claimed the Company shall also take joint responsibility for 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 bear the cost of medical expenses and mental compensation for $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 $2,300 thousand, which was incorporated into this case, the total compensation amount was $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 $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 the Company to compensate the plaintiff for $190,000 thousand, which the Company was not satisfied with and had proposed the appeal for remedy in September 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 $190,000 thousand. The Company made a payment of compensation and related interests to 143 plaintiffs before the end of June 2019. The part related to medical remedy of the case was abandoned for secondary trial.

(Continued)

• 504 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

• 2) The 2nd case

Mr. Chen and others filed civil and national compensation lawsuit against the Company and the Ministry of Economic Affairs on March 14th 2017 (Hereinafter referred to as 1st case of the Tainan Anshun plant civil compensation), they claimed the Company and the Ministry of Economic Affairs had to jointly compensate the plaintiff $80,915 thousand. The verdict of the 3rd national compensation in 2008 of the Tainan Anshun 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. There were disputable factors on both factual and legal matters. During the 1st and 2nd instance of the Anshun 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 Anshun 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 Anshun plant civil compensation, the Company continued to seek for the jurisdiction remedies to protect the Company and shareholder interests.

(9) Losses Due to Major Disasters:None

(10) Subsequent Events:

• (a) In order to invest in the overseas subsidiary for the purpose of plant construction, a resolution was made during the board of director’s meeting held on September 23, 2019 for the issuance of common stock in Global Depositary Receipts (GDR), with a maximum limit of 500,000 thousand shares, amounting to USD160,317 thousand, which was approved Rule No. 1080335763 Financial Supervisory Commission on November 20, 2019. The share price was determined and completed on January 6, 2020 and issued on January 10, 2020. The total units of issued GDR was 18,000 thousand, which represented the right of common stock for 450,000 thousand shares; for every 25 shares of common stock per unit of GDR, the unit price of GDR was USD7.18, which was equivalent to $8.64 per share, resulting to a total issuance price amounting to USD129,240 thousand.

• (b) On February 26, 2020, the Board of Directors resolved during their meeting to purchase the land, plants and equipment of Sunko Ink Co., Ltd amounting to $465,000 thousand for the purpose of expanding the manufacturing and business operations of the Company.

(Continued)

• 505 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(11) Other:

• (a) The nature of operating costs and expenses were as follows:

By funtion By item	For the year ended December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019	For the year ended December 31, 2019
	Operating cost	Operating expense	Non-Operating expense	Total
Employee benefits
Salary	1,075,048	668,843	-	1,743,891
Labor and health insurance	102,078	63,170	-	165,248
Pension	47,105	30,674	-	77,779
Remuneration of directors	-	72,303	-	72,303
Others	29,917	17,467	-	47,384
Depreciation	1,476,773	160,879	6,058	1,643,710
Amortization	640	9,362	-	10,002

(b) On March 22, 2019, Kaohsiung Urban Planning Commission (KUPC) announced that Dashe Industrial Park (DIP), where the Company’s plant is located, will be categorized from Special Zone to Zone B. In light of this matter, all the companies involved in this case are making their best effort to negotiate and compromise with KUPC, requesting KUPC to change DIP’ s status to Zone A instead of Zone B.

(Continued)

• 506 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(12) Other disclosures:

• (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:

(i) Loans to other parties:

Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:	Loans to other parties:
(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	Transaction amount for business between two parties	Reasons for short-term financing	Allowance for bad debt	Collateral Item Value I l		ndividual funding oan limits	Maximum limit of fund financing
													Item
1	Core Pacific Twin Star (Myanmar) Investment Company Ltd.	Core Pacific Pioneer (Myanmar) Company Ltd.	Other Receivable	Yes	23,128	23,128	6,908	2%	2	-	Operating	-		-	63,429	63,429

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 net value of Core Pacific Twin Star (Myanmar).

Note 3: The amounts of the transaction and the ending balance had been offset in the consolidated interim financial statements.

• (ii) Guarantees and endorsements for other parties:None

• (iii) Securities held as of December 31, 2019 (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		Highest Percentage of ownership (%)	Note
				Shares/Units	Carrying value	Percentage of ownership (%)	Fair value
CPDC	Yuanta Financial Holdings 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	None The Company is a director of the investee company None The Company is a supervisor of the investee company None Share a director with the company The Company is a director of the investee company The Company is a director of the investee company	Financial assets designated at fair value through profit or loss－ current Non-current financial assets at fair value through other comprehensive income 〞 〞 〞 Financial assets designated at fair value through profit or loss－ non-current Non-current financial assets at fair value through other comprehensive income Non-current financial assets at fair value through other comprehensive income	30,938,819 149,243,449 44,684,712 407,000 2,600,000 422,250,872 2,701,651 8,815	624,964 1,161,114 434,782 1,461 26,000 7,247,062 114,293 358	0.27 9.75 0.30 4.52 2.89 27.19 14.00 0.05	624,964 1,161,114 434,782 1,461 26,000 7,247,062 114,293 358	% 0.27 % 9.75 % 0.30 % 4.52 % 2.89 % 27.19 % 49.00 % 0.05

(Continued)

• 507 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

Name of holder	Category and name of security	Relationship with company	Account title		Ending balance	Ending balance	Ending balance	Highest Percentage of ownership (%)	Note
				Shares/Units	Carrying value	Percentage of ownership (%)	Fair value
CPDC BES Twin Towers Co., Ltd Tsou Seen Chemical Industries Corporation	Aetas Technology Inc. Taiwan Business Bank Core Pacific City Co., Ltd. Praxair Chemax Semiconductor Materials Taiwan Tea Corporation Good Company TaiRx, Inc.	The Company is a director of the investee company 〞 Share a director with the Company The Company is a director of the investee company The Company is a director of an investee company The Company is a director of the investee company 〞	Non-current financial assets at fair value through other comprehensive income Current financial assets at fair value through other comprehensive income 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- current Financial assets at fair value through other comprehensive income－ non-current 〞	287,961 25,527,558 160,111,000 6,754,127 9,618,000 750,000 722,500	- 321,647 2,695,932 285,733 158,216 - 14,652 13,086,214	0.58 0.36 10.31 35.00 1.22 2.08 1.18	- 321,647 2,695,932 285,733 158,216 - 14,652 13,086,214	% 0.58 % 0.36 % 10.31 % 35.00 % 1.22 % 2.08 % 1.18 % -

• (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of $300 million or 20% of the capital stock:

(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	Beginning Balance	Purchases	Purchases	Sales	Sales	Sales	Sales	Ending Balance	Ending Balance
					Shares/units	Amount	Shares/units	Amount	Shares/units	Price	Cost	Gain (loss) on disposal	Shares/units	Amount
The Company BES Twin Towers Co., Ltd.	ETF ETF Money Fund Money Fund Ordinary and Preferred shares Praxair Chemax Semiconductor Materials Co., Ltd. Praxair Chemax Semiconductor Materials Co., Ltd.	Financial assets at fair value through profits or losses－ current 〞 〞 〞 Financial assets at fair value through profit or loss－non- current Financial assets at fair value through other comprehensive income－non- current 〞	Yuanta/P- shares SSE50 ETF Cathay China First Security and InsuranceCo., Ltd JuShen Funds Co., Ltd Core Pacific City Co., Ltd. BES Twin Towers Co., Ltd. The Company	None 〞 〞 〞 Share a director with the Company Subsidiary Subsidiary	10,313,000 16,378,000 - - 298,723,070 9,455,778 -	289,332 288,988 - - 3,248,545 438,920 -	- - 29,353,684.10 68,030,231.53 123,527,802 - 6,754,127	- - 450,000 1,010,000 1,235,278 - 351,290	10,313,000 16,378,000 29,353,684.10 68,030,231.53 - 6,754,127 -	326,539 334,870 450,353 1,010,582 - 351,290 -	289,332 288,988 450,000 1,010,000 - 351,290 -	37,207 45,882 353 582 - - -	- - - - 422,250,872 2,701,651 6,754,127	- - - - 7,247,062 114,293 285,733

• (v) Acquisition of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Name of property	Transaction date	Transaction amount	Status of payment	Counter-party	Relationship with the Company	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	References for determining price	Purpose of acquisition and current condition	Others
							Owner	Relationship with the Company	Date of transfer	Amount
Ding-Yue Development Co., Ltd	land	September 25, 2019	37,200,010	-	Core Pacific City Co., Ltd.	Share a director with the Company	Note 1	-	-	-	Appraisal reports from Real Estate Appraisers Firm	Business operating use	Note 2

(Continued)

• 508 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

Note 1: The object of the transaction owned by different related parties within 5 years, wherein a disclosure on the date of acquisition, price, and relationship with the parent company in the current period is required: N/A.

Note 2: The consideration of the transaction and the property (including the land and the building constructed on it) are under mutual trust agreement.

• (vi) Disposal of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock:None

• (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of $100 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	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 CPDC Green Technology Corp.(CPDC GT) (Original name:CPDC Engineering Co., Ltd.) Weihua (Rudong) Trade Co., Ltd Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang)	Tsou Seen Chemical Industries Corporation Weihua (Rudong) Trade Co., Ltd Kaohsiung Monomer Company Ltd The Company Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang) Jiangsu Weiming Petrochemical Corporation(We iming)	Subsidiary Subsidiary Affiliated company accounted for using equity method Subsidiary same parent company same parent company	Sales Sales Sales Sales Sales Sales	(1,053,316) (247,339) (550,760) (249,499) (388,507) (194,560)	% 3.56 % 0.83 % 1.86 % 0.89 % 1.31 % 0.66	3 Month 3 Month 1 Month Base on contract 1 Month 1 Month	- - - - - -	OA 90 days OA 90 days none Base on contract OA 30 days OA 30 days	32,347 79,520 57,764 51,269 99,757 -	1.90% 4.67% 3.39% 3.89% 5.85% -%	Note 〞 〞 Note 〞 〞

Note: The amounts of the transaction and the ending balance had been offset in the consolidated financial statements.

• (viii) Receivables from related parties with amounts exceeding the lower of $100 million or 20% of the capital stock:None

• (ix) Trading in derivative instruments:None

• (x) Business relationships and significant intercompany transactions:

(In Thousands of New Taiwan Dollars)

No.	Name of company	Name of counter-party	Nature of relationship		Intercompany transactions	Intercompany transactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0 0 0 1	The Company The Company The Company Weihua (Rudong) Trade Co., Ltd (Weihua)	Weihua (Rudong) Trade Co., Ltd (Weihua) Tsou Seen Chemical Industries Corporation(TSCIC) CPDC Green Technology Corp.(CPDC GT) (Original name:CPDC Engineering Co., Ltd.) The Company	1 1 1 2	Sales revenue Sales revenue Repair expense Cost of goods sold	247,339 1,053,316 249,499 247,339	OA 90 days OA 90 days Base on contract OA 90 days	0.83% 3.56% 0.89% 0.83%

(Continued)

• 509 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

No.	Name of company	Name of counter-party	Nature of relationship		Intercompany transactions	Intercompany transactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
2 3 4 5 6 7	Tsou Seen Chemical Industries Corporation(TSCI C) CPDC Green Technology Corp.(CPDC GT) (Original name:CPDC Engineering Co., Ltd.) Weihua (Rudong) Trade Co., Ltd (Weihua) Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang) Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang) Jiangsu Weiming Petrochemical Corporation(Weim ing)	The Company The Company Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang) Weihua (Rudong) Trade Co., Ltd (Weihua) Jiangsu Weiming Petrochemical Corporation(Weiming) Weiqiang International Trade (Shanghai) Co., Ltd.(Weiqiang)	2 2 5 5 4 4	Cost of goods sold Sales revenue Sales revenue Cost of goods sold Sales revenue Cost of goods sold	1,053,316 249,499 388,507 388,507 194,560 194,560	OA 90 days Base on contract OA 30 days OA 30 days OA 30 days OA 30 days	3.56% 0.89% 1.31% 1.31% 0.66% 0.66%

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

(b) Information on investees:

The following is the information on investees for the years ended December 31, 2019 (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 investment amount	Original investment amount	Balance as of December 31, 2019	Balance as of December 31, 2019	Balance as of December 31, 2019	Highest Percentage of wnership	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2019	December 31, 2018	Shares	Percentage of wnership	Carrying value
The Company 〞 〞 〞	Kaohsiung Monomer Company Ltd Zhong gong baoquan Ltd. Ding-Yue Development Co., Ltd. (original name: Tao Zhu Construction & Development Co., Ltd.) CPDC Investment (BVI) Co 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 Citco Building, Wickhams Cay, P.O. Box662	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 Holding company	- 14,400 1,100,000 904,946	- 14,400 100,000 904,946	20,000,000 1,440,000 754,000,000 26,580,000	% 40.00 % 24.00 % 100.00 % 100.00	888,805 19,835 7,518,184 901,631	% 40.00 % 24.00 % 100.00 % 100.00	1,227,244 9,596 1,771 (3,485)	490,897 2,303 1,771 (3,485) 2	Note 1 Note 1 Note 2 Note &4

(Continued)

• 510 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31,	Balance as of December 31,	2019	Highest Percentage of wnership	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2019	December 31, 2018	Shares	Percentage of wnership	Carrying value
The Company 〞 〞 〞 〞 〞 〞 CPDC Investment (BVI) Co Ltd. Ding-Yue Development Co., Ltd. (original name: Tao Zhu Construction & Development Co., Ltd.) Tsou Seen Chemical Industries Corporation BES Twin Towers Development Co., Ltd. In Frontier Fortune Investment Pte. Ltd. Frontier Fortune Investment Pte. Ltd. Frontier Fortune Investment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd	Tsou Seen Chemical Industries Corporation CPDC Green Technology Corp.(Original name: CPDC Engineering Co., Ltd.) Rich Equities Ltd. Unichem Development Limited BES Twin Tower Development Co., Ltd. Thanh Phong Construction Investment Co., Ltd. Jean Pacific Development Co., Ltd. Core Pacific Overseas Holdings Ltd Da-ying Construction Ltd. Taivex Therapeutics Inc. Frontier Fortune vestment Pte. Ltd. Core Pacific Twin Star (Myanmar) Investment Company Ltd Gemini Star (India) Private Limited Core Pacific Twin Star (Vietnam) Investment Co., Ltd. Core Pacific Pioneer (Myanmar) Company Ltd	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 B2-19, Golden King Tower Building, No. 15 Nguyen Luong Bang, Tan Phu Ward, District 7, Ho Chi Minh City 7F.-2, No.300, Yangguang St., Neihu Dist., Taipei City 11491, Taiwan (R.O.C.) 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 112SINGAPORE (068902) NO.153/Ka,Kyun ShweMmyaing Lane (2) ,23 ward,Thingangyun Townshin Yangon Level7, The Capital, Plot No.C-70, G Block, Bandra Kurla Complex, Bandra MUMBAI Mumbai City MH 400051 IN B2-19, Golden King Tower Building, No. 15 Nguyen Luong Bang, Tan Phu Ward, District 7, Ho Chi Minh City NO.153/Ka,Kyun ShweMmyaing Lane (2) ,23 ward,Thingangyun Townshin Yangon	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 Renting and selling real estate Holding company Engineering, construction contracting business Engaged in biotechnology, pharmaceutical research and development and marketing Holding company Engineering, construction contracting business Real estate and petrochemical products research and consultancy Engineering, real estate and consultancy of construction Building construction, real estate management, development and sale	760,000 100,000 5,996 7,865,233 3,353,383 609,347 480,000 808,564 22,500 462,246 1,326,796 169,921 9,274 1,131,376 24,804	760,000 100,000 5,996 5,894,124 2,000,000 609,347 - 808,564 22,500 462,246 180,817 169,921 - - 12,355	96,000,000 15,000,000 180,000 255,367,516 368,100,910 458,637,500,000 48,000,000 26,580,000 - 46,224,551 43,060,000 5,500,001 2,100,000 850,000,000,000 800,000	% 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 97.87 % 40.00 % 45.19 % 100.00 % 91.10 % 100.00 % 100.00 % 99.99 % 97.70 % 80.00	1,511,615 102,891 5,183 6,725,721 4,991,033 598,440 479,955 895,933 29,081 325,765 1,307,655 163,195 7,485 1,128,322 24,817	% 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 97.87 % 40.00 % 45.19 % 100.00 % 91.10 % 100.00 % 100.00 % 99.99 % 97.70 % 80.00 -	90,669 (37,577) 46 (231,486) 1,247,592 4,044 (113) (7,418) 4,452 (64,876) 25,292 3,378 (1,429) 27,723 840	90,669 (37,577) 46 (231,486) 1,247,523 3,958 (45) (3,352) 4,452 (59,102) 25,292 3,378 (1,429) 27,085 672	Note 2&5 Note 2&5 Note 2&4 Note 2&4&5 Note 2&5 Note 2&4&5 Note 1 Note 2&4 Note 2&3 Note 2 Note 2&4 〞 〞 〞 〞
								27,625,546		2,296,263	1,561,570

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.

(Continued)

• 511 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(c) Information on investment in mainland China:

(i) The names of investees in Mainland China, the main businesses and products, and other information:

(In Thousands of New Taiwan Dollars)

Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2019	Investment flows	Investment flows	Accumulated outflow of investment from Taiwan as of December 31, 2019	Net income (losses) of the investee	Percentage of ownership	Highest percentage of ownership	Investment income (losses)	Book value	Accumu-lated remittance of earnings in current period
					Outflow	Inflow
Weihua (Rudong) Trade Co., Ltd (Weihua)	Engaged in Chemical storage, wholesale, import and export, commission agent, etc.	763,460	( 2 )、 ( 3 )	763,460	-	-	763,460	5,243	100.00%	100.00%	5,243	474,248	-
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	( 1 )、 ( 3 )	211,560	-	-	211,560	6,211	100.00%	100.00%	6,211	122,121	-
Weida (Zhangzhou) Consultant Service Co., Ltd. (Weida)	Consultancy	13,171	( 2 )	13,171	-	-	13,171	(34)	100.00%	100.00%	(34)	2,421	-
Jiangsu Weiming Petrochemical Corporation(W eiming)	Petrochemical supporting facility construction	5,714,463	( 1 )、 ( 2 )	3,743,354	1,971,109	-	5,714,463	(174,059)	100.00%	100.00%	(174,059)	5,059,219	-
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	( 2 )	30,648	-	-	30,648	(1,661)	100.00%	100.00%	(1,661)	14,254	-
Kunshan Weiqin Management consultant Co., Ltd (Weiqin)	Management consultant	29,664	( 2 )	29,664	-	-	29,664	(6,693)	100.00%	100.00%	(6,693)	1,834	-
Zhejiang Wedge new material Co., Ltd(Wedge)	Engaged in trading of Synthetic fiber material	31,278	( 2 )	31,278	-	31,278	-	13	100.00%	100.00%	13	-	-
Changzhou Weicai New Material Science & Technology Co., Ltd.(Weicai) (Original name:Changzho u Huijie new material Co., Ltd (Huijie))	Engaged in engineering plastic and high valued petroleum chemical products	1,860,113	( 2 )	1,324,893	-	-	1,324,893	(50,911)	100.00%	100.00%	(50,911)	1,039,038	-

(Continued)

• 512 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(ii) Limitation on investment in Mainland China:

Accumulated Investment in Mainland China as of December 31, 2019	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
8,908,317	14,362,341	Note 4

Note1: There are three ways to invest as follows:

• (a) The Company directly invests in China.

• (b) The Company through third regional company (UDL) invests in China.

• (c) Others. (The Company through subsidiaries invest in China.)

Note2: Explanation for the field “net income (losses) of the investee”:

• (a) If it is in preparation, no investment profit or loss.

• (b) There are three ways to identify the basis of investment profit or loss.

• (b.1) financial statements audit by an international accounting firm with a relationship with a Taiwan accounting firm.

• (b.2) financial statements audit by the Company’s audit CPA.

• (b.3) others.

Note3: The amount in this table are presented in New Taiwan Dollar.

• Note4: The cumulative investment amount or investment proportion to China cannot be over the Company’s net value of 60%. The Company obtained certified documents of operating headquarters issued by Industrial Development Bureau, Ministry of Economic Affairs on October 18, 2018, and so is not subject to the above regulations. Valid until October 14, 2021.

(iii) Significant transactions:

The significant inter-company transactions with subsidiaries in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions”.

(Continued)

• 513 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(13) Segment information:

• (a) General Information

The Group 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.

• (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 3. 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, 2019 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 Capital expenditure of non- current assets Segment assets Segment liabilities	Acrylonitrile & Acetic Acid $ 10,257,450 - $ 10,257,450 $ 172,782 $ 2,072,848 $ 1,111,943 $ 4,076,676 $ 2,692,554	Caprolactam 15,157,883 - 15,157,883 1,152,520 (4,110,428) 1,934,727 13,934,202 5,051,889	Other 8,544,833 249,499 8,794,332 328,409 4,935,436 2,469,698 80,846,656 22,586,019	Adjustment and eliminations Total - 33,960,166 (249,499) - (249,499) 33,960,166 - 1,653,711 - 2,897,856 - 5,516,368 - 98,857,534 - 30,330,462

(Continued)

• 514 -

CHINA PETROCHEMICAL DEVELOPMENT CORPORATION AND AFFILIATES Notes to the Consolidated Financial Statements

(c) Geographical Areas

The Group’ s noncurrent assets located overseas are immaterial. Revenues from domestic and overseas customers for the year ended December 31, 2019 were as follows:

		For the year
		ended
		December 31,
Region		2019
Operating revenue from domestic sales	$	23,705,935
Asia		10,237,121
Other (individual areas under 10%)		17,110
Total operating revenue	$	33,960,166

(d) Major Customers

Customers generating over 10% of total revenue for the year ended December 31, 2019 were as follows:

follows:
			For the year
			ended
			December 31,
	Customers		2019
1018		$	3,564,112
1011			3,430,779
1020			3,406,066
1019			2,511,171

• 515 -

• Affiliate Reports ： None

II. Private placement of securities for the most recent year and until the date of publication of the annual report

N/A

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

IV. Supplementary Disclosure

N/A

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 see Pages 388~405 of the annual report about legal actions.

Please refer to annual report Pages 216~223 and Pages 263~268 about the land pollution case and the significant contingent liabilities and unrecognized contractual commitments referred to in the notes to the financial statement.

• 516-