FPC - AGM Information 2017 | FinancialReports.eu

FORMOSA PLASTICS CORPORATION

2017 ANNUAL SHAREHOLDERS’ MEETING

MEETING HANDBOOK

(SUMMARY)

(This English translation is prepared in accordance with the Chinese version and is for reference purposes only. If there are any inconsistency between the Chinese original and this translation, the Chinese version shall prevail.)

JUNE 13, 2017

Meeting Procedure……………..………………………………. page 2 Meeting Agenda……………….……………..………………… page 3 Report Items…………………………………………………… page 4 Ratification Items……………………………………………… page 19 Discussion Items……………………………………………….. page 21 Appendices………………………………………………..…… page 38

Independent Auditor’s Report
Articles of Incorporation of the Company
Rules of Procedure for Shareholders’ Meeting of the Company
Procedures for Acquisition and Disposal of Assets of the Company
Current Shareholdings of Directors of the Company
Information regarding the Proposed Employees and Directors’ Compensation approved by the Board of Directors of the Company
Effect upon Business Performance and Earnings per Share of the Company by the Stock Dividend Distribution Proposed at the 2017 Annual Shareholders’ Meeting

FORMOSA PLASTICS CORPORATION

2017 ANNUAL SHAREHOLDERS’ MEETING PROCEDURE

Call Meeting to Order
Chairman’s Address
Report Items
Ratification Items
Discussion Items
Extraordinary Motions
Meeting Adjourned

FORMOSA PLASTICS CORPORATION

2017 ANNUAL SHAREHOLDERS’ MEETING AGENDA

Time : 2:00 p.m., Tuesday, June 13, 2017
Venue : 2F, International Ballroom at Sunworld Dynasty Hotel, Taipei (NO. 100, Dun Hua North Road, Taipei, Taiwan)

1. Report Items

(1) 2016 Business Report
(2) Audit Committee’ Review Report on the 2016 Financial Statements
(3) Distribution of 2016 Employees Compensation

2. Ratification Items

(1) Please approve the 2016 Business Report and Financial Statements as required by the Company Act.
(2) Please approve the Proposal for Distribution of 2016 Profits as required by the Company Act.

3. Discussion Items

(1) Amendment to the Procedures for Acquisition and Disposal of Assets of the Company submitted for discussion and resolution.

Report Items

About the Company’s results of operation for fiscal year 2016, please refer to Business Report for further details (on page 5 of the Handbook.) which is hereby reported for record.
The Company’s Audit Committee members reviewed the 2016 Business Report and Financial Statements and issued their Review Report according to the applicable laws. Please refer to Audit Committee’s Review Report (on page 18 of the Handbook.)
The company has issued the report on compensation distributed to its employees for 2016. The pre-tax profit prior to deducting employees compensation distributable for 2016 is NT$43,318,196,072. The company has no accumulated losses. Adopted by the Board Meeting on March 23, 2017, 0.13% of the profit is allocated as employees’ compensation in accordance with Article 39 of the Articles of Incorporation. The total allocated amount is NT$59,168,796, which shall be distributed in cash. The above is hereby reported for record.

Formosa Plastics Corporation 2016 Business Report

The Company (Formosa Plastics Corporation) generated consolidated sales revenue of TWD180.17bn in 2016, reaching 102% of its target of TWD175.92bn and was down 6% from TWD191.55bn generated in 2015. Consolidated pretax profit came in at TWD43.81bn in 2016, reaching 122% of its target of TWD35.89bn and was up 25% from TWD35.09bn generated in 2015.

In 2016, prices of the Company’s petrochemical products decreased due to falling prices of Dubai crude oil, naphtha, and feedstock ethylene and propylene, as well as increasing petrochemical product supply in the market with new capacities in China started production. While the company’s second phase AE, SAP capacity expansion and newly expanded EVA capacities were all completed and started production in 2016, plus the sales of differentiated products increased 5% from 2015, consolidated revenues were still down from 2015. However, despite narrowing spreads for some products given product price falling more than the correction of ethylene and propylene feedstock cost, the company’s Ningbo subsidiary saw substantial improvement on its operating performance and turned profitable. The Company’s consolidated operating profit of TWD13.02bn in 2016 increased 24% from 2015 due to successful development on high-price specialty products and further penetration into the emerging markets. Earnings from the company’s specialty products increased 5% from 2015. In addition, equity investment income from Formosa Petrochemical and FPC USA reached TWD28.6bn in 2016, up TWD8.6bn from 2015, and supported the company’s consolidated pretax profit to increase from 2015 and reached a record high level since 2011.

Looking at the major economies in 2016, only the US economy showed steady recovery. While China’s economic growth continued to slow down, the supply-side reform effectively implemented in second half of 2016 resulted in capacity reduction that supported its economic growth, which leads to stable growth of other emerging economies. However, the economic situation in Euro zone was still fragile, and Japan’s economic

growth continued to remain slow. Therefore, global economic growth was still slow last year and reached its lowest level since Global Financial Tsunami. This has also impacted Taiwan’s economic growth momentum. Taiwan’s GDP growth was only 1.5% in 2016, which is not only slower than other emerging economies, but also slower than the US and other developed countries in the Euro zone. Evidently, Taiwan was falling into a “stuffy economy” dilemma.

The long-term weakness of Taiwan’s economy is mainly due to the fact that Taiwan has lost its “World Factory” position during the process of globalization. In recent years, Taiwan has been suffering from fights and opposition between political parties, ineffective economic reform, and inappropriate financial and tax planning. In addition, unstable and indecisive long-term industry development plans have created great uncertainty for businesses. While businesses would like to stay in Taiwan to help improve Taiwan’s economic situation, most of them have lost their confidence and do not understand the policy direction. In contrary, the US government is aggressively seeking investments and encouraging manufacturing industries to return to the US.

In addition, the investment environment in Taiwan has deteriorated and business investments are impacted because the rising ideology of environmental protection overriding industry development. Take the Company’s No.6 Naphtha Cracker 4.9 phase investment project as an example, the Company plans to invest TWD11.6bn and submitted the application to government in June 2012. However, after reviewing this application for almost 5 years, the Environmental Protection Agency (EPA) in the end rejected the application and requested the Company to conduct environmental assessment all over again because the serious interference by environmental protection groups, despite all the reductions on energy consumption, pollution, and water usage in this project. On the other hand, the company’s investments on an ethane cracker and a HDPE plant in Texas USA was approved by the US government within 2 years after the submission of application, and the construction of these plants are smoothly in progress. It is obvious that the unreasonable and ineffective

environmental assessment system in Taiwan has become the largest obstacle for Taiwan’s economic development. Furthermore, Taiwan’s central government plans to abolish nuclear power generation system in Taiwan without proper supporting policies, and allowed the local governments to abuse the local authority to implement ban on coal and tighten the standard on environmental control. This will seriously impact the stability of power supply in Taiwan and increase the operational risk for businesses. Accordingly, this will force business to seek investment opportunities outside of Taiwan in order to maintain their long-term operation and developments, which will likely lead to a hollow out crisis for Taiwan.

Moreover, impeded by the cross-strait relations, Taiwan’s participation in the international Free Trade Agreement (FTA) coverage is less than 10%, which is much lower than other export-oriented countries such as Japan and South Korea. While Mainland China actively promotes the "Regional Comprehensive Economic Partnership Agreement (RCEP)" in Asia, Taiwan has been excluded in the discussion. In addition, The US President Trump has decided to withdraw from the Transpacific Strategic Economic Partnership Agreement (TPP). Once anti-globalization and trade protectionism atmosphere gradually increase, Taiwan will be marginalized, and our industries will find it very difficult to survive or further develop, if the Taiwan government is not actively seeking a solution.

We deeply hope that the government will create a favorable investment environment for the industry, set up a fiscal tax system with investment incentives and the national environmental protection laws to enhance the environmental assessment efficiency and eliminate the multi-system chaos. At the same time, try to improve cross-strait relations, and actively strive to join RCEP and sign FTA with the main trading partners, so as to flip the domestic economic dilemma to ensure the sustainable development of Taiwan's economy.

In view of difficult operating environment in 2016 with slowing economic growth in China and falling petrochemical product prices along

with crude oil price corrections, the Company continued to develop high price differentiated products and increased revenue weighting, meanwhile diversifying market concentration risks by lowering the exports sales to China from 45.4% of total sales in 2015 to 42.6% in 2016. The Company has also aggressively developed its business in Africa, India, New Zealand, South America, Russia, and other emerging markets. In order to enhance export business and customer service, the Company has established onsite technical service offices in Vietnam, Germany, United Arab Emirates, and India. Separately, acrylic fiber business was impacted by oversupply and substitution by low priced polyester staple fiber. The Company had worked hard to improve this business but still cannot turn it around. Therefore, the Company has stopped production of acrylic fiber after receiving the approval from board of directors. Furthermore, the Company continued to promote and launch projects that improve energy savings and carbon reductions. In 2016, the Company accomplished 405 projects on this with total savings of TWD390mn. In addition, in order to improve management of operations, the Company’s five subsidiaries in Ningbo, China have merged into one company named Formosa Industries (Ningbo). This merger will reduce the inter-group transaction tax and increase operational efficiency. Through the above measures, the Company is seeking optimal operation and enhancing quality step by step in order to effectively lower the impact from difficult operating environment.

The Company’s PVC sales volume was 1,537K tons in 2016, down 2% from 2015 mainly due to (1) CPC relocating ethylene pipeline (2) less feedstock VCM supply due to maintenance of VCM plant in Mailiao complex (3) weaker demand in India due to shortage of cash on the customer side after the government implemented the banknote demonetization in November 2016. The Company’s caustic soda sales volume was 1,311K tons in 2016, up 4% from 2015 due to (1) Mailiao caustic soda plant increased production with improving demand in 4Q16 (2) stronger shipments to contract-based customers in Australia, USA, and Canada. The Company’s HDPE sales volume was 494K tons in 2016, up

5% from 2015 due to (1) despite fierce competition in China, the Company aggressively developed and expanded into Middle East and South East Asian markets (2) successfully developed bottle cap grade and fiber grade and other differentiated products. The Company’s EVA sales volume was 227K tons in 2016, up significantly by 20% from 2015 due to (1) supply tightness caused by maintenance shutdowns of peers in Korea (2) EVA plant in Ningbo started production in May 2016 (3) successfully developed VA forming grade product and other differentiated products. The Company’s LLDPE sales volume was 200K tons in 2016, down 7% from 2015 mainly due to (1) production of coal-based chemicals increased in China and increased price competition (2) weaker demand from agricultural film market, despite the company was aggressively developing injection grade and rotation grade differentiated products. The Company’s AE sales volume was 483K tons in 2016, up 17% from 2015 due to (1) second phase AE capacity in Ningbo started production and promoted sales into Eastern China and Southern China (2) stronger demand in 4Q16 driven by frequent operational issues in the market. Carbon fiber sales volume was 3,600 tons in 2016, up 9% from 2015 due to significant shipment increase in 2H16 on rising demand of wind power. Sales volume of NBA, which is mainly for captive use by AE plants, increased 3% to 222K tons in 2016 due to Ningbo phase 2 new AR plant started production. Sales volume of SAP increased significantly by 53% to 116K tons in 2016 mainly due to (1) Ningbo SAP phase 2 capacity started production (2) successfully developed quick absorption differentiated products (3) aggressively seek for annual supply contracts with international and regional major customers (4) increased orders from Middle East, Central and Southern America, and Philippine. Sales volume of PP decreased 8% to 824K tons in 2016 mainly due to (1) PP plant in Linyuan shutdown for maintenance (2) PP plant in Ningbo shutdown during the G20 summit period in China. Sales volume of AN increased 1% to 284K tons in 2016 mainly due to stronger demand on higher prices caused by supply tightness with peers having operational issues.

Sales volume of MMA decreased 1% to 83,000 tons in 2016 along

with the inventory adjustment of feedstock ACH. Sales volume of ECH decreased 9% to 84,000 tons in 2016 mainly due to sluggish market condition of its downstream product epoxy. Others such as MTBE also saw higher sales volume in 2016.

In terms of capacity expansion, in order to strengthen its competitiveness, the Company has been aggressively expanding capacities and conducting debottlenecking projects. In 2016, the Company finished the 72,000 tons EVA capacity expansion project in Ningbo. In addition, capacity of PP plant in Linyuan increased from 400K tons to 434K tons after the replacement of chip making machines. The capacity of PP plant in Ningbo will increase from 450K tons to 522K tons after the ongoing debottlenecking project is completed in 2019. The Company continues on its capacity expansion project in Texas, USA, including (1) a new 400K tons HDPE plant invested by subsidiary company in the US called Formosa Industries Corporation (2) a new 1.2 million tons ethane cracker under Formosa Olefins, LLC (Formosa USA owns 33%) is scheduled to start production by end of 2018.

In terms of equity investments, FPC USA (22.61% owned by the Company) generated pretax profit of USD1,280mn in 2016, down 1% from 2015. Because the relatively cheap natural gas and ethane, propane, and butane feedstocks, companies that use natural gas as feedstock are still very competitive. Therefore, business should be able to remain stable in 2017 despite its Olefin No.2 plant is scheduled for maintenance shutdown (once in 6 years). In order to expand production scale and continue to leverage on shale gas low cost advantage, aside from the ethane cracker expansion project, the Company is building up a 400K tpa LDPE plant and 250K tpa PP plant, which are all scheduled to start production by end of 2018. In addition, core earnings of Fujian Fuxin Special Steel Corporation (29.17% owned by the Company) have turned positive since December 2016 due to (1) improving stainless steel market. LME nickel price increased substantially by 40% from 2015 and pushed up product prices. (2) production and sales volume increased substantially. While Fujian Fuxin still generated negative pretax profits for the year of 2016, it is

expected to turn profitable in 2017 given (1) production and sales volume should further increase as global demand for stainless steel should increase 3.5-4.0% in 2017, according to ISSF forecast, given strong growth of global auto industry and China accelerating investments on infrastructure (2) product price should increase along with higher nickel prices (3) high-priced inventory has been reduced. Furthermore, Formosa Ha Tinh Steel Corporation, which the Company owns 11.43% equity stake, is constructing an integrated steel plant in Ha Tinh Province, Vietnam with 7.1 million tpa steel billet capacity. The plant has started production of hot rolled coil in December 2015. The two blast furnaces will start production in first half of 2017 and end-2017, respectively.

Separately, in order to expand end-application of carbon fiber and increase sales volume, Sunwell (Jiangsu) Carbon Fiber Materials Co., Ltd. (18% owned by the Company) have established a plant in Yancheng City, Jiangsu Province, China to produce presoaked carbon fiber cloth for wind power and other carbon fiber compounds for bicycle and automobile. The plant construction has completed in April 2016 and the company is aggressively promoting samples with customers.

In addition, in view of the growing demand of lithium-ion battery solution in China and strong growth of electric vehicle and storage stations, the Company and Mitsui Chemicals (Japan) have formed a 50:50 joint venture “Formosa Mitsui Advanced Chemicals Co., Ltd.” in Ningbo to gain business and expand investment area. The first phase construction of a 1,500 tpa battery solution plant has started production in April 2016, and the second phase construction of a 3,500 tpa battery solution plant is expected to finish in Q3 2017.

In terms of research and development, the Company spent TWD1.51 billion on R&D in 2016, which accounts for 1% of the Company’s revenues. These R&D expenses are mainly used in developing new formulation, improving production process, increasing product quality, conserving energy consumption, and developing human resources, in order to increase production capacity and lower cost, and to increase technical skills through cooperation with industry peers. Meanwhile, in order to

conduct R&D on industrial production technical and commercialize specialty products, the Company launched 95 R&D projects, including ultra high polymerization degree PVC, low odor PVC for automobile interior parts, retardant blow molding HDPE and PERT pipe HDPE, high MI HMA EVA and encapsulant film EVA, high MI injection LLDPE, high absorption speed and hydrolysis inhibition SAP, odor control type SAP, unidirectional carbon fiber thermoplastic prepreg, high impact transparent PP for sheet and foamed PP material.

Profit contribution from specialty products continued to increase from 34% in 2015 to 37% in 2016, which is a clear indication that the Company has achieved great results on developing new markets and increasing added-value on downstream products. In addition, the Company further enhanced development of key technology and applied for both domestic and international patent. In 2016, the Company has received approval on 15 patents, and as of the end of 2016, the Company has a total of 117 effective patents. Meanwhile, the Company will continue to work with both domestic and international experts in the industry, government, and academic area in order to accelerate the enhancement of technology skills and the developments of high-value products. In addition, the Company will continue to participate technology innovative R&D projects supported by the government, academia, and research institutions, which will help the Company to have better understanding on industry trend and market demand. In order to further strengthen our competitiveness, the Company will incorporate new technologies such as Internet of Things, Automation, and Green Technology to upgrade and expand our R&D capabilities in the area of green industry, circular economy, and aerospace and medical materials.

In terms of operational safety and environmental protection, the Company has always been putting equal emphasis on industry developments and environmental protection. As of the end of 2016, the accumulated investments on operational safety, environmental protection, and firefighting has reached TWD19.1 billion, which was mainly used for pollution prevention and control, saving energy and reducing waste,

reducing greenhouse gases and improving operational safety and firefighting. The Company’s treatment on pollutants and emissions is better than national regulatory standards.

In 2016, the Company’s Mailiao Caustic Soda plant, HDPE plant, and PVC plant were all praised by Labor Department and Yunlin County for strong performance on occupational safety and health. Linyuan VCM plant was also praised by EPA for strong operation on toxicity. The Company’s Linyuan plant was also praised by EPS for strong performance on carbon emission reduction. In addition, Mailiao Caustic Soda plant and VCM plant were both praised by the Energy Department and Industrial Department of Ministry of Economic Affairs for strong performance on energy savings and carbon emission reduction.

The Company accomplished 269 improvement projects in 2016 in an effort to save water and energy consumed as well as to reduce greenhouse gas emissions. Total water saved amounted to 1,073 MT/day while greenhouse gas emissions reduction reached 57,934 MT/year. Another 176 improvement projects will be accomplished in 2017, which would further conserve water by 3,577 MT/day and reduce greenhouse gas emissions by 83,949 MT/year. In addition, the Company continued to promote reduction of total liquid usage volume and usage volume per unit, and increased the usage of rain water reserve in other to further improve the result of energy saving and carbon emission reduction. Furthermore, the Company promoted each plant to reduce consumption and recycle resource through “circular economy”. In addition, in view of increasing environmental regulations, the Company deepened Production Safety Management (PSM), promoted “Execution SOP – full participation”, “Advanced Simulation” operation and strengthened management and control on equipment component leakage in order to reduce equipment leakage and have a comfortable working environment that has zero operational safety issue. According, plants were running smoothly in 2016.

Looking into 2017, according to the forecast made by IMF, global economic growth should be 3.4% in 2017, up from 3.1% in 2016. Global economy should see mild growth. IHS forecast global ethylene capacity

will increase around 6.9 million tons, mainly concentrated in India, Middle East, North America, and China. In terms of demand, based on the global ethylene demand growth is 1.1x of GDP growth, incremental demand should be 6.1 million tons in 2017, suggesting global ethylene supply demand is rather balanced. However, given the breakthrough of shale gas production technologies in the US, there are 7 new ethane crackers with a combined annul ethylene capacity of 10 million tons in the US. Nonetheless, due to low crude oil prices, shale gas producers have lowered their capital expenditure in order to reduce the financing pressures. In addition, skillful labor is difficult to find and labor cost is also high. Therefore, some of the new cracker investment projects there have postponed and are expected to delay the completion of construction into 2018-2019. Until then, the over produced and cheap price ethane can be exported. However, due to transportation constraints, high investments for the naphtha crackers to modify equipment and construction storage and pipeline and other infrastructures, Reliance is the only company in Asia that imports ethane, which has very limited impact to Asian market in 2017. In addition, many companies in China are producing ethylene based on coal-to-chemical process as China is the largest coal production coal in the world and China has improved coal-to-chemical technology. IHS forecast new coal-based ethylene capacities in China are 4.1 million tons during 2017-2021. However, because of surging coal price in 2016, coal-based chemical companies are struggling under a low crude oil price environment. Therefore, many project delays have been announced. The forecast is new coal-based ethylene capacity is only 860,000 tons in 2017. In addition, coal-based chemical production has many environmental issues such as large water and power consumption, high carbon emission, and environmental pollutions. China’s policy has stopped encouraging coal-to-chemical development and limit the production days of coal mines in order to reduce excess capacities. Therefore, coal-to-chemical production will not have major impact on Asian market in 2017. In the Middle East, only Iran has the cheap natural gas feedstock advantage. The western countries have gradually lifted the economic and financial

sanctions on Iran after the country has executed on the nuclear weapon agreement. Iran has been seeking foreign capital and technology to improve its lagging operation in order to resume its annual ethylene capacity of 6.8 million tons. However, it will still need more time for western countries to fully lift the Iranian sanctions. In addition, international petrochemical companies still have their concerns on increasing investments in Iran given its highly unstable political and economic environment. In the near-term, utilization rates of ethylene and downstream derivatives in Iran will not increase much. The incremental productions should also be sold first to higher-price region such as Europe. Therefore, the impact from Iran to Asian market should be limited in 2017.

Furthermore, US President Mr. Trump will promote corporate tax cut and relax on industry norms and other measure, and also take the expansionary financial policies to increase infrastructure investments and encourage return of overseas manufacturing. It is expected that the US economic growth in 2017 will be better than in 2016, which will support economic growth of emerging countries. In terms of China market, which accounts for around 40% of the Company’s total exports, because the supply side reform has been effective, it is expected to further reduce capacity and control new expansion. In addition, because of strict examination of transportation overload, and more environmental examinations on petrochemical industry, the imbalance between supply and demand in China should gradually improve. Separately, demand in India is also expected to increase given Indian government aggressively invest on infrastructures and promote “Clean India” project, which will improve the bathroom and water supply system. Ethylene, propylene, and their derivatives prices should be supported given growing demand for petrochemical products with global economy expected to continue recovering in 2017. Therefore, overall petrochemical business is expected to improve in 2017 from 2016 with the support of three major economics including US, China, and India.

However, there are still many uncertainties in the market, including (1) China’s economic growth could continue to slow down (2) whether

President Trump will execute on expansionary fiscal policy and trade protectionism (3) the impact on European political and economic environment from Brexit and elections in Germany, France, and Netherland (4) whether oil producing countries will fulfill the production cuts (5) geopolitical risks in Middle East and Africa and potential impact on oil price trend. These are all “Black Swan” that could impact global economic outlook. Taiwan will be difficult not to be involved and should respond prudently.

In the new year, because global economy continues to recover, and IHS forecast Asia naphtha cracker maintenance shutdowns are less than 2016, ethylene and propylene supply can be expected to increase, which is positive for the Company’s operation. Capacity utilization rate is expected to be higher than 2016. However, it is still oversupplied for PVC, caustic soda, SAP, AE, NBA, ECH and other products in China. In addition, although PE and PP supply is still in shortage in China and needs to count on imports, China’s self-sufficiency ratio on these products will increase significantly given coal-to-chemical and PDH capacity expansion. This will result in reduced imports of those products in China, and the imbalance market situation is likely to continue into 2017.

In view of an operating environment that is full of uncertainties discussed above, the Company will remain forward thinking and implement innovative measures. We will incorporate Industrial 4.0 to make concrete business plans in three areas including production, marketing, and research & development. The Company will maintain full production and full sales and strengthen our competitiveness on strong products in the international market, with “Global No.1” as our target. In addition, the Company will form “Innovation Team” that will focus on innovative ways for new products, technology, and methodology in order to increase our operational performance. Meanwhile, the Company will form strategic alliance with downstream customers in order to accelerate the development of new specialty products and technologies, which will increase the sales weighting of high price and high margin products. The Company will also adjust marketing strategy in view of the changing

market dynamics. The Company will lower the weighting of exports sales to China and diversify into India, Africa, and Central and Southern America and other emerging markets. The Company will also regularly examine the short-term and long-term product development plans, and continue to improve the operating performance of difficult products. Furthermore, the Company will (1) continue to promote the investment project of No. 6 Naphtha Cracker 4.9 phase, and ethane cracker and HDPE plant in the US (2) utilize the synergies coming from the consolidation of subsidiaries in Ningbo (3) gain from the full production of Ningbo phase 2 capacities. Accordingly, we expect the Company’s business to challenge a new high in 2017.

Chairman: Jason Lin President: Jason Lin In-charge Accountant: Chia-Tse Chang

Formosa Plastics Corporation

Audit Committee’ Review Report

The Board of Directors has prepared the Company’s 2016 Business Report, Financial Statements and Proposal for Profits Distribution. The CPA firm of KPMG was retained to audit Formosa Plastics Corporation’s Financial Statements and has issued an audit report relating to Financial Statements. The Business Report, Financial Statements, and Proposal for Profits Distribution have been reviewed and determined to be correct and accurate by the Audit Committee members of Formosa Plastics Corporation. According to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act, we hereby submit this report. Please be advised accordingly.

Formosa Plastics Corporation Chairman of the Audit Committee: Chi-Lin, Wea

March 23, 2017

Ratification Items Proposal 1

Proposal: For approval of the 2016 Business Report and Financial Statements as required by the Company Act.

Proposed by the Board of Directors

Explanation:

The preparation of the Company’s 2016 Consolidated and Individual Financial Statements were completed and the same were approved by the Board Meeting on March 23, 2017, and audited by independent auditors, Ms. Delphi Chen and Mr. Winston Yu, of KPMG. The aforesaid Financial Statements together with the Business Report were reviewed by the Audit Committee, which the Audit Committee’ Review Report is presented.
For the aforementioned Business Report, please refer to page 5 through page 17 of the Meeting Handbook. As for the Financial Statements, please refer to page 29 through page 36 of the Handbook. Please approve the Business Report and the Financial Statements.

Resolution:

Ratification Items Proposal 2

Proposal: For Approval of the Proposal for Distribution of 2016 Profits as required by the Company Act.

Proposed by the Board of Directors

Attachment:

Please refer to page 37 of the Handbook for the Statement of Profits Distribution, which has been reviewed by the Audit Committee members of Formosa Plastics Corporation and approved by the Board of Directors.

Resolution:

Discussion Items Proposal 1

Proposal: Amendment to the Procedures for Acquisition and Disposal of Assets of the company submitted for discussion.

Proposed by the Board of Directors Explanation: To comply with the requirements provided in the order Jin-Guan-Zheng-Fa-Zi No. 1060001296 dated February 9, 2017 by the Financial Supervisory Commission, certain articles of the Procedures for Acquisition and Disposal of Assets provided by the company have been amended. The comparison table for articles before and after amendment is hereby attached. Please determine whether the amendments are reasonable.

Article	Article before Amendment	Article after Amendment
Article 7	In acquiring or disposing of real property or equipment where the transaction amount reaches 20 percent of the company's paid-in capital or NT$300 million or more, the Company, unless transacting with a governmentagency, engaging others to build on its own land, engaging others to build on rented land, or acquiring or disposing of equipment for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with	In acquiring or disposing of real property or equipment where the transaction amount reaches 20 percent of the company's paid-in capital or NT$300 million or more, the Company, unless transacting with a governmentinstitution, engaging others to build on its own land, engaging others to build on rented land, or acquiring or disposing of equipment for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with the following provisions:

	the following provisions: (Omitted)	(Omitted)
Article 8-1	(Added)	In acquiring or disposing of membership cards or intangible assets where the transaction amount reaches 20 percent or more of the company's paid-in capital or NT$300 million or more, the Company, unless transacting with a government institution, shall obtain a CPA’s opinion on the reasonableness of the transaction price prior to the date of occurrence of the event. The CPA shall comply with the provisions of Statement of Auditing Standards No. 20 published by the Accounting Research and Development Foundation.
Article 8-2	The calculation of the transaction amounts referred to in the precedingtwoarticles shall be done in accordance with paragraph 2 of Article 26, herein, and "within the preceding year" as used herein refers to the year preceding the date of	The calculation of the transaction amounts referred to in the precedingthree articles shall be done in accordance with paragraph 2 of Article 26, herein, and "within the preceding year" as used herein refers to the year preceding the date of occurrence of the current transaction. Items for which

	occurrence of the current transaction. Items for which an appraisal report from a professional appraiser or a CPA's opinion has been obtained need not be counted toward the transaction amount.		an appraisal report from a professional appraiser or a CPA's opinion has been obtained need not be counted toward the transaction amount.
Article 12	When the Company intends to acquire or dispose of real property from or to a related party, or when it intends to acquire or dispose of assets other than real property from or to a related party and the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the Company's total assets, or NT$300 million or more, except in trading of government bonds or bonds under repurchase and resale agreements, or subscription orredemption of domestic money market funds, the Company may not proceed to enter into a transaction contract or make a payment until the following matters have		When the Company intends to acquire or dispose of real property from or to a related party, or when it intends to acquire or dispose of assets other than real property from or to a related party and the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the Company's total assets, or NT$300 million or more, except in trading of government bonds or bonds under repurchase and resale agreements, or subscription orrepurchase of money market fundsissued by domestic securities investment trust enterprises, the Company may not proceed to enter into a transaction contract or make a payment until the following matters have been approved by the Board of

	been approved by the Board of Directors: (Omitted)		Directors: (Omitted)
Article 18	The Company that conducts a merger, demerger, acquisition, or assignment of shares shall, prior to convening the Board of Directors to resolve on the matter, engage a CPA, attorney, or securities underwriter to give an opinion on the reasonableness of the share exchange ratio, acquisition price, or distribution of cash or other property to shareholders, and propose the opinion to the Board of Directors for deliberation and approval.		The Company that conducts a merger, demerger, acquisition, or assignment of shares shall, prior to convening the Board of Directors to resolve on the matter, engage a CPA, attorney, or securities underwriter to give an opinion on the reasonableness of the share exchange ratio, acquisition price, or distribution of cash or other property to shareholders, and propose the opinion to the Board of Directors for deliberation and approval. However, the requirement of obtaining an aforesaid opinion on reasonableness issued by an expert may be exempted in the case of a merger by the company of a subsidiary in which it directly or indirectly holds 100 percent of the issued shares or authorized capital, and in the case of a merger between subsidiaries in which the

			Company directly or indirectly holds 100 percent of the respective subsidiaries’issued shares or authorized capital.
Article 26	Under any of the following circumstances, the Company acquiring or disposing of assets shall publicly announce and report the relevant information on the securities competent authority's designated website in the appropriate format as prescribed by regulations within 2 days commencing immediately from the date of occurrence of the event: 1. Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the Company's total assets, or NT$300		Under any of the following circumstances, the Company acquiring or disposing of assets shall publicly announce and report the relevant information on the securities competent authority's designated website in the appropriate format as prescribed by regulations within 2 days commencing immediately from the date of occurrence of the event: 1.Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the Company's total assets, or NT$300 million or more; provided,

	million or more; provided, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemptionof domestic money market funds. 2.Merger, demerger, acquisition, or assignment of shares. 3.Losses from derivatives trading reaching the limits on aggregate losses or losses on individual contracts set out in the procedures adopted by the Company. 4.Where an asset transaction other than any of those referred to in the precedingthree subparagraphs, a disposal of receivables by a financial institution, or an investment in the Mainland China area reaches 20 percent or more of paid-in capital or NT$300 million; provided, this shall not	this shall not apply to trading of government bonds or bonds under repurchase and resale agreements, or subscription orrepurchase of money market fundsissued by domestic securities investment trust enterprises. 2.Merger, demerger, acquisition, or assignment of shares. 3.Losses from derivatives trading reaching the limits on aggregate losses or losses on individual contracts set out in the procedures adopted by the Company. 4.Where the type of asset acquired or disposed is equipment/machinery for business use, the trading counterparty is not a related party,and the transaction amount ismore than NT$1 billion. 5.Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on

		apply to the following circumstances: (1) Trading of government bonds. (2) Trading of bonds under repurchase/resale agreements, or subscription or redemptionof domestic money market funds. (3)Where the type of asset acquired or disposed is equipment/machinery for business use, the trading counterparty is not a related party and the transaction amount islessthan NT$500 million. (4) Where land is acquired under an arrangement on engaging others to build on the company's own land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the company	rented land,joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the Company expects to invest in the transaction ismorethan NT$500 million. 6. An asset transaction other than any of those referred to in the precedingfive subparagraphs, a disposal of receivables by a financial institution, or an investment in the mainland China area where the transaction amount reaches 20 percent or more of paid-in capital or NT$300 million or more, provided this shall not apply to the following circumstances: (1)Trading of government bonds. (2)Trading of bonds under repurchase/resale agreements or the subscription or

	expects to invest in the transaction isless than NT$500 million. (Omitted)		repurchaseof money market fundsissued by domestic securities investment trust enterprises. (Omitted)
Article 27	When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entirety.		When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entiretywithin two days from the date when is the Company becomes aware of the error or omission.

Resolution:

Explanation	1. The Company plans to distribute dividends of $4.6 per share for current year (among which, $2.27 per share will be distributed as dividends and $2.33 per share will be distributed as bonus); all of which are cash dividends. 2. The Company distributes dividends and bonus for a total of $29,282,407,593; all of which are from net profit after tax of 2016. 3. Effect of changes in long-term equity investments: the effect of changes in long-term equity investments refers to the difference between equity values when not participating in the capital injection of re-investment companies based on the ratio of shareholding. Retained earnings is reduced by NT$1,103,582,107 accordingly. 4. Other comprehensive income transferred to unappropriated earnings of current year is reduced by NT$371,250,992 due to a re-measurement of the actuarial pension adjustment. 5. While the distribution of cash dividends to each individual shareholder is less than 1 dollar, the distribution will be rounded to the nearest dollar.
Amount	3,939,254,298 4,563,882,186 29,282,407,593 29,917,874,02 5	67,703,418,102
Items	Distribution Items: (1) Appropriation of legal reserve (10% of the after-tax profit ) (2) Appropriation of special reserve (3) Distribution of dividends and bonus in cash ( $4.6 per share) (4) Unappropriated retained earnings carried forward to next year	Total
Amount	29,785,708,226 -1,103,582,107 -371,250,992 39,392,542,975	67,703,418,102
Items	Available for Distribution: (1) Unappropriated retained earnings of previous years (2) Effect of changes in long-term equity investments (3) Other comprehensive income transferred to unappropriated retained earnings of current year (4) Net profit after tax of current year	Total

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KPMG

台北市11049信義路5段7號68樓(台北101大樓) Telephone 電話 + 886 (2) 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Fax 傳真 + 886 (2) 8101 6667 Xinyi Road, Taipei City 11049, Taiwan (R.O.C.) Internet 網址 kpmg.com/tw

firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. 38

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KPMG

firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. 42

Articles of Association

of

Formosa Plastics Corporation

Amended and reinstated by General Shareholders Meeting on June, 17 2016

Chapter I General Provisions

Article 1: The Company is incorporated under the name of Fu-mao Plastics Corporation, a private company limited by shares, in accordance with Company Act. On January 14, 1957, the Company’s extraordinary shareholders meeting passed a resolution to change its name to Formosa Plastics Corporation, which has been given the effect by the approval of competent authority as of March 18, 1957.
Article 2: Scope of Business:
(1)B202010: Nonmetallic Mining
(2)C199990: Other Food Manufacturing Not Elsewhere Classified
(3)C801010: Basic Industrial Chemical Manufacturing
(4)C801020: Petrochemical Manufacturing
(5)C801100: Synthetic Resin & Plastic Manufacturing
(6)C801120: Manmade Fiber Manufacturing
(7)C801990: Other Chemical Materials Manufacturing
(8)C802120: Industrial Catalyst Manufacturing
(9)C802170: Poisonous Chemical Material Manufacturing
(10)C805020: Plastic Sheets & Bags Manufacturing
(11)C901070: Stone Products Manufacturing
(12)CB01010: Machinery and Equipment Manufacturing
(13)CC01080: Electronic Parts and Components Manufacturing
(14)D101050: Steam and Electricity Paragenesis
(15)D301010: Water Supply
(16)D401010: Heat Energy Supplying
(17)E603050: Cybernation Equipments Construction
(18)H701010: Residence and Buildings Lease Construction and

Development

(19)H701040: Specialized Field Construction and Development

(20)ID01010: Metrological Instruments Identify
(21)IZ99990: Other Industry and Commerce Services Not Elsewhere Classified
(22)J101050: Sanitary and Pollution Controlling Services
(23)ZZ99999: All business items that are not prohibited or restricted by law, except those that are subject to special approval
Article 3: The Company is headquartered in Kaohsiung City, ROC and may set up factories or branch offices in the country or at overseas locations when necessary. Such establishments, modifications and abolishment will be subject to the resolutions of the Meeting of Directors.
Article 4: The Company may provide endorsement for the related business. The total investment made by the Company may exceed forty percent (40%) of its paid-up capital.
Article 5: Notice of the Company will be published in a manner prescribed in Article 28 of Company Act.

Chapter II Shares

Article 6:The registered capital of the Company is sixty-three billion six hundred fifty-seven million four hundred seven thousand eight hundred ten New Taiwan dollars, divided into six billion three hundred sixty-five million seven hundred forty thousand seven hundred eighty-one full capital shares having a par value of ten New Taiwan dollars.
Article 7: The Company may exempt from printing share certificates but shall register with Central Securities Depository for each share issued.
Article 8: A shareholder shall provide his address and personal seal to receive or transfer any share.
Article 9: (Omitted)

Article 10: (Omitted)

Article 11: (Omitted)
Article 12: The registration of share transfer will be halted within sixty days prior to a general meeting, thirty days prior to an extraordinary meeting or five days prior to the closing date regarding a distribution of dividends and bonus or other interests.

Chapter III Shareholders Meeting

Article 13: A shareholders meeting can be a general meeting or an extraordinary meeting. The Company’s Board of Directors shall convene the annual general meeting once every year within six month after the end of each fiscal year. The Board of Directors may convene an extraordinary meeting whenever necessary unless the Company Act suggests otherwise.
Article 14: The meeting notice shall be published and given to all shareholders at least thirty days prior to a general meeting and fifteen days prior to an extraordinary meeting. The notice shall specify the purpose of such meeting and may be made by electronic communication pursuant to the receiving party’s consent.
Article 15: The Chairman of the Board of Directors will preside the shareholders meeting. Where the Chairman is on leave or not able to perform his duty for any reason, the Vice Chairman shall act on his behalf. Where the Vice Chairman is also on leave or not able to perform his duty for any reason, the Chairman shall appoint one executive director to act on his behalf. If the Chairman has made no appointment, the executive directors shall elect among themselves one person to act as the deputy.
Article 16: Each share is entitled to cast one vote, unless otherwise deprived in accordance with Article 179 paragraph 2 of Company Act.
Article 17: A shareholder may appoint a proxy to attend a shareholders meeting by delivering the proxy form prepared by the Company five days prior to the shareholders meeting. The proxy vote shares held by one proxy representing two or more principals may not exceed three percent (3%) of the total shares issued by the company. Any votes exceeding such limit will not be counted.
Article 18: Unless otherwise stipulated in Company Act, any resolution of a shareholder meeting shall be decided by more than one-half the shareholders presenting at the shareholders meeting consisting of more than one-half the total voting shares.

Article 19: The meeting minutes shall be prepared for each shareholders meeting, recording any resolutions being made, the meeting dates, times, venue, the chairperson’s name, the voting procedures, the summary and the result of the process, and signed by the chairperson or stamped.

Such meeting minutes shall be archived throughout the existence of the Company. The attendance books and proxies shall be retained for at least one year. The copies of the meeting minutes may be distributed in an electronic manner.

The distribution of the foregoing meeting minutes may be made by posting a public announcement onto the Market Observation Post System.

Chapter IV Directors

Article 20: The Board shall consist of fifteen directors. The election of directors will be made by nomination. Shareholders may elect the directors from the candidates list. The total registered shares held by the directors shall not be less than a certain quorum of the company’s total shares. The calculation of quorum shall conform to the method instructed by the competent authority.

The foregoing numbers of directors shall include three independent directors, whose nominations and elections shall be processed in accordance with the Company Act and as required by the competent authority of securities and exchange.

The Company established the Audit Committee pursuant to Article 14-4 of the Securities and Exchange Act, where its members consist of all independent directors. The operation of the Audit Committee as well as the responsibilities and rights of the members shall be determined in accordance with the Securities and Exchange Act and other applicable laws.

Article 21: The directors shall elect among themselves five directors to serve as the executive directors, including one independent director. The five executive directors shall elect one of them to become the Chairman of

the Board and another person to be the Vice Chairman. The Chairman represents the Company and is responsible for general business. When the Chairman is on leave or not able to perform his duty for any reason, the Vice Chairman shall act as the deputy. When the Vice Chairman is also on leave or not able to perform his duty, the Chairman shall appoint one executive director to act on his behalf.

Article 22: The Board will determine the Company’s operation strategies and other significant issues. The Board Meeting shall be convened and presided by the Chairman or by his deputy according to the preceding paragraph if the Chairman is in absence.

The significant issues of the forgoing paragraph shall include the acquisition and disposal of the Company’s major assets and properties.

The Board may empower the Chairman to act on behalf of the Board during the adjournment period. Unless otherwise required by laws or these articles, any issue concerning the major interest of the company or related party transaction shall not be decided without a Board resolution. The powers authorized include:

I. To approve any major contracts;
II. To approve any mortgage of property and loan proposal;
III. To approve the acquisition and disposal of the company’s general asset and property;
IV. To approve the appointment of directors and supervisors of a subsidiary;
V. To approve the closing date of capital increase/decrease and the distribution of cash dividends.
Article 23: Any resolution of the Board shall be determined by one-half of the directors presenting at the meeting consisting of one-half of the total directors.
Article 24: A director shall hold the office for a term of three years and may be reelected. If the election does not complete in time upon the expiration of any term of office, the director may continue to serve until his

successor is elected.

Article 25: Any vacancy on the Board may be filled by immediate election, which may be postponed when the vacant directorship is less than one third of the total directors. The elected director in the place of a vacant directorship will serve for the remaining period of the previous director’s term of office.
Article 26: Any resolution made by the Board meeting shall be documented in the meeting minutes, which shall be signed by the chairperson or stamped and archived in the Company.

Article 27: The Directors shall present at the Board Meeting in person. If the Directors may not be present at the meeting for any reason, unless the Directors resides in oversea location as prescribed by the Company Act, he/she may submit a proxy form, enumerating the purpose of convening such meeting, the scope of authorization, to appoint another director to attend the meeting. A proxy director may not act on behalf of more than one person. If the Board Meeting is conducted by teleconference, directors who attend the meeting through video conference shall be deemed attending in person.

The Board shall specify the purposes of a Board Meeting and notify each director seven days in advance. Notwithstanding, the Board may convene a meeting where there is an urgency. The notice of Board Meeting may be served in writing, by email or facsimile.

Article 28: The Board shall have the power to determine the remuneration of directors based on how a director participates and contributes in the Company’s operation and with reference to the standards implemented by the other companies in the same industry.

The Company shall be held liable for any conduct by a director within his scope of duty during his terms of office and shall maintain valid director liability insurance to the extent required by the laws.

Chapter V (Omitted)

Article 29: (Omitted)

Article 30: (Omitted) Article 31: (Omitted) Article 32: (Omitted) Article 33: (Omitted) Article 34: (Omitted) Article 35: (Omitted)

Chapter VI Manager

Article 36: The Company may have managers. The appointment, removal and compensation of a manager shall be determined in accordance with Article 29 of the Company Act.
Article 37: The manager may not serve the equivalent position of another company at the same time and shall refrain from any activities identical to the Company’s business whether by self-employment or for the benefit of others unless otherwise permitted by the Board to the extent permitted by the laws.

Chapter VII Accounting

Article 38: The Company’s fiscal year starts from January 1 and ends on December 31 of each calendar year. The Board shall prepare the following reports for the ratification by the general shareholders meeting after the final settlement:
(I) Business Operation Report,
(II) Financial Statements, and
(III) Measures on profit distribution or deficit compensation.
Article 39: If the Company gains any profits in any year, the Company shall
retain 0.05% to 0.5% of the pre-tax profit as employee compensation before deducting the employee compensation of such year; provided, however, that the Company shall reserve the amount for compensating the deficit, if any.

The determination of employee compensation shall be made in accordance with Article 235-1 of the Company Act.

Article 40: If there are any earnings after final account settlement, the Company

shall pay off the applicable taxes, compensate the accrued deficit and retain 10% as legal reserve and an additional amount as special reserve before distributing dividends. If there are any remaining earnings of such year, the Board may, combining the undistributed earnings of previous years, propose a shareholder bonus plan and submit for the approval in a general shareholders meeting.

The special reserve as described in the preceding paragraph includes

(1) any amount reserved for any particular purpose,
(2) investment profit and unused deductions for taxable income pursuant to equity methods,
(3) and other special reserve prescribed by applicable laws and regulations.

The Company is in a business of a mature industry and earns its annual profits on a stable basis. The Company adopts a dividend policy that allows the distribution to be made in either way of or a combination of cash dividends, earnings capitalization and capitalization of capital reserve. At least fifty percent (50%) of the annual distributable earning remained after deducting the legal reserve and special reserve will be distributed, preferably in cash. The total percentage of the

capitalization of retained earnings and capital reserve shall not be more than fifty percent (50%) of the total dividends distributed of such year.

Chapter VIII Miscellaneous

Article 41: The Company Act and other applicable laws rules shall govern any matter not prescribed herein.
Article 42: These articles of association are stipulated on July 20, 1954, and reinstated by first amendment on January 8, 1955, second amendment on January 14, 1957, third amendment on August 20, 1957, fourth amendment on July 10, 1958, fifth amendment on March 31, 1960, sixth amendment on September 7, 1960, seventh amendment on July 3, 1961, eighth amendment on December 31, 1963, ninth amendment on February 25, 1965, tenth amendment on March 25, 1965, eleventh amendment on August 20, 1966, twelfth amendment on March 25,

1967, thirteenth amendment on March 25, 1968, fourteenth amendment on April 21, 1969, fifteenth amendment on April 30, 1970, sixteenth amendment on April 20, 1971, seventeenth amendment on March 21, 1972, eighteenth amendment on March 20, 1973, nineteenth amendment on March 26, 1974, twentieth amendment on April 10, 1975, twenty-first amendment on April 15, 1976, twenty-second amendment on August 21, 1976, twenty-third amendment on April 15, 1977, twenty-fourth amendment on April 18, 1978, twenty-fifth amendment on April 16, 1979, twenty-sixth amendment on April 2, 1980, twenty-seventh amendment on April 2, 1981, twenty-eighth amendment on April 9, 1982, twenty-ninth amendment on April 18, 1983, thirtieth amendment on April 27, 1984, thirty-first amendment on April 29, 1985, thirty-second amendment on April 24, 1986, thirty-third amendment on April 15, 1977,

thirty-fourth amendment on April 29, 1988, thirty-fifth amendment on April 28, 1989, thirty-sixth amendment on April 13, 1990,

thirty-seventh amendment on April 16, 1991, thirty-eighth amendment on April 16, 1992, thirty-ninth amendment on April 16, 1993, forties amendment on April 26 1994, forty-first amendment on April 14, 1995, forty-second amendment on April 19, 1996, forty-third

amendment on May 6, 1997, forty-fourth amendment on May 8, 1998, forty-fifth amendment on May 20, 1999, forty-sixth amendment on May 17, 2000, forty-seventh amendment on May 17, 2001,

forty-eighth amendment on May 24, 2002, forty-ninth amendment on May 23, 2003, fiftieth amendment on May 14, 2004, fifty-first amendment on May 23, 2005, fifty-second amendment on June 5, 2006, fifty-third amendment on June 14, 2007, fifty-fourth

amendment on June 19, 2008, fifty-fifth amendment on June 5, 2009, fifty-sixth amendment on June 25, 2010, fifty-seventh amendment on June 20, 2011, fifty-eighth amendment on June 19, 2012, fifty-ninth amendment on June 14, 2013, sixtieth amendment on June 13, 2014 where the articles regarding the establishment of Audit Committee

and the omission of articles regarding supervisors shall become effective at the time the terms of office of the supervisors elected by the general shareholder meeting on June 19, 2012 has expired and the sixty-first amendment on June 17, 2016.

Rules of Procedure for Shareholders’ Meetings of Formosa Plastics Corporation

Amended by the Annual Shareholders’ Meeting on June 17, 2016

Article 1 To establish a strong governance system and sound supervisory capabilities for the Company's shareholders’ meetings, and to strengthen management capabilities, these Rules are adopted pursuant to the Corporate Governance Best Practice Principles for Taiwan Stock Exchange Corp (“TWSE”)/ Taipei Exchange (“TPEx”) Listed Companies.
Article 2 The rules of procedures for the Company's shareholders’ meetings, except as otherwise provided by law, regulation, or the Articles of Incorporation, shall be as provided in these Rules.
Article 3 Unless otherwise provided by law or regulation, the Company's Shareholders’ Meetings shall be convened by the Board of Directors. A notice to convene an annual shareholders’ meeting shall be given to each shareholder no later than 30 days prior to the scheduled meeting date; while a notice may be given to registered shareholders who own less than 1,000 shares of nominal stocks no later than 30 days prior to the scheduled meeting date in the form of a public announcement on the Market Observation Post System (MOPS) of the TWSE. A notice to convene a special shareholders’ meeting shall be given to each shareholders no later than 15 days prior to the scheduled meeting date. A public notice may be given to registered shareholders who own less than 1,000 shares of nominal stocks no later than 15 days prior to the scheduled meeting date in the form of a public announcement on the MOPS of the TWSE.
To convene a shareholders’ meeting, the Company shall prepare a meeting handbook. The Company shall prepare electronic versions of a shareholders’ meeting notice and proxy forms, and causes of and explanatory materials relating to all proposals, including proposals for ratification, matters for deliberation, or the election or dismissal of directors, and upload them to the MOPS no later than 30 days prior to

the scheduled Annual Shareholders’ Meeting date or no later than 15 days prior to the scheduled Special Shareholders’ Meeting date. The Company shall prepare electronic versions of a shareholders’ meeting handbook and supplemental meeting materials and upload them to the MOPS no later than 21 days prior to the scheduled Annual Shareholders’ Meeting date or no later than 15 days prior to the scheduled Special Shareholders’ Meeting date. In addition, the Company shall also have prepared a shareholders’ meeting handbook and supplemental meeting materials and made them available for review by shareholders at any time no later than 15 days prior to the scheduled Shareholders’ Meeting date. The Meeting Agenda and supplemental materials shall also be displayed the Company and at the professional shareholder services agent engaged by the Company as well as being distributed on-site at the meeting place.

The reasons for convening a shareholders’ meeting shall be specified in the meeting notice and public announcement. With the consent of the addressee, the meeting notice may be given in electronic form. Election or dismissal of directors or supervisors, amendments to the Articles of Incorporation, the dissolution, merger, or demerger of the corporation, or any matter under paragraph 1 of Article 185 of the Company Act or Articles 26-1 and 43-6 of the Securities and Exchange Act, Articles 56-1 and 60-2 of Regulations Governing the Offering and Issuance of Securities by Securities Issuers shall be set out in the causes in the notice to convene the shareholders’ meeting. None of the above matters may be raised by an extraordinary motion.

A shareholder holding 1 percent or more of the total number of issued shares may submit to the Company a written proposal for discussion at an annual shareholders’ meeting. Such proposals, however, are limited to one item only, and no proposal containing more than one item will be included in the Meeting Agenda. In addition, when the circumstances of any subparagraph of paragraph 4 of Article 172-1 of the Company Act apply to a proposal put forward by a shareholder, the Board of Directors

may exclude it from the Agenda. Prior to the book closure date before an annual shareholders’ meeting is held, the Company shall publicly announce that it will receive shareholder proposals, and the location and time period for their submission; the period for submission of shareholder proposals may not be less than 10 days.

Shareholder-submitted proposals are limited to 300 words, and no proposal containing more than 300 words will be included in the meeting agenda. The shareholder making the proposal shall be present in person or by proxy at the Annual Shareholders’ Meeting and take part in discussion of the proposal.

Prior to the date for issuance of notice of a shareholders’ meeting, the Company shall inform the shareholders who submitted proposals of the proposal screening results, and shall list in the meeting notice the proposals that conform to the provisions of this article. At the Shareholders’ Meeting the Board of Directors shall explain the reasons for exclusion of any shareholder proposals not included in the agenda.

Article 4 For each shareholders’ meeting, a shareholder may appoint a proxy to attend the meeting by providing the proxy form issued by the Company and stating the scope of the power authorized to the proxy.

A shareholder may issue only one proxy form and appoint only one proxy for any given shareholders’ meeting, and shall deliver the proxy form to the Company no later than 5 days prior to the Shareholders’ Meeting date. When duplicate proxy forms are delivered, the one received earliest shall prevail unless a declaration is made to revoke the previous proxy appointment.

After a proxy form has been delivered to the Company, if the shareholder intends to attend the meeting in person or to exercise voting rights in writing or by way of electronic transmission, a written notice of proxy rescission shall be submitted to the Company no later than 2 days prior to the meeting date. If the rescission notice is submitted after that time, votes cast at the meeting by the proxy shall prevail.

Article	5	The venue for a shareholders’ meeting shall be the premises of the
		Company, or a place easily accessible to shareholders and suitable for a
		shareholders’ meeting. The meeting may begin no earlier than 9 a.m.
		and no later than 3 p.m.
Article	6	The Company shall specify in its shareholders’ meeting notices the time
		during which shareholder attendance registrations will be accepted, the
		place to register for attendance, and other matters for attention.
		The time during which shareholder attendance registrations will be
		accepted, as stated in the preceding paragraph, shall be at least 30
		minutes prior to the time the meeting commences. The place at which
		attendance registrations are accepted shall be clearly marked and a
		sufficient number of suitable personnel assigned to handle the
		registrations.
		The Company shall furnish attending shareholders with the meeting
		agenda book, annual report, attendance card, speaker's slips, voting
		slips, and other meeting materials. Where there is an election of
		directors, pre-printed ballots shall also be furnished.
		Shareholders and their proxies (collectively, "shareholders") shall attend
		shareholders’ meetings based on attendance cards, sign-in cards, or
		other certificates of attendance. The Company shall not impose arbitrary
		requirements on shareholders to provide additional evidentiary
		documents beyond those showing eligibility to attend. Solicitors
		soliciting proxy forms shall also bring identification documents for
		verification.
		When the government or a juristic person is a shareholder, it may be
		represented by more than one representative at a shareholders’ meeting.
		When a juristic person is appointed to attend as proxy, it may designate
		only one person to represent it in the meeting.
Article	7	If a shareholders’ meeting is convened by the Board of Directors, the
		meeting shall be chaired by the Chairman. When the Chairman is on
		leave or for any reason unable to exercise the powers of the Chairman,
		the Vice Chairman shall act in place of the Chairman; if there is no Vice

Chairman or the Vice Chairman also is on leave or for any reason unable to exercise the powers of the Vice Chairman, the Chairman shall appoint one of the Managing Directors to act as chair, or, if there are no Managing Directors, one of the Directors shall be appointed to act as chair. Where the Chairman does not make such a designation, the Managing Directors or the Directors shall select from among themselves one person to serve as chair.

When a Managing Director or a Director serves as chair, as referred to in the preceding paragraph, the Managing Director or Director shall be one who has held that position for 6 months or more and who understands the financial and business conditions of the Company. The same shall be true for a representative of a juristic person director that serves as chair.

It is advisable that shareholders’ meetings convened by the Board of Directors be chaired by the Chairman, that a majority of the Directors attend in person, and that at least one member of each functional committee attend as representative. Attendance details should be recorded in the Shareholders Meeting minutes. If a shareholders’ meeting is convened by a party having the convening right but other than the Board of Directors, the convening party shall chair the meeting. When there are two or more such convening parties, they shall mutually select a chair from among themselves.

The Company may appoint its attorneys, certified public accountants, or related persons retained by it to attend a shareholders’ meeting in a non-voting capacity.

Article 8 The Company, beginning from the time it accepts shareholder attendance registrations, shall make an uninterrupted audio and video recording of the registration procedure, the proceedings of the shareholders’ meeting, and the voting and vote counting procedures. The recorded materials of the preceding paragraph shall be retained for at least 1 year. If, however, a shareholder files a lawsuit pursuant to Article 189 of the Company Act, the recording shall be retained until the

conclusion of the litigation.

Article 9 Quorum at shareholders’ meetings shall be calculated based on numbers of shares. The quorum shall be calculated according to the shares indicated by the sign-in cards handed in plus the number of shares whose voting rights are exercised in writing or by way of electronic transmission.

The Chair shall call the meeting to order at the appointed meeting time. However, when the attending shareholders do not represent a majority of the total number of issued shares, the Chair may announce a postponement, provided that no more than two such postponements, for a combined total of no more than 1 hour, may be made. If the quorum is not met after two postponements and the attending shareholders still represent less than one third of the total number of issued shares, the Chair shall declare the meeting adjourned.

If the quorum is not met after two postponements as referred to in the preceding paragraph, but the attending shareholders represent one third or more of the total number of issued shares, a tentative resolution may be adopted pursuant to paragraph 1 of Article 175 of the Company Act; all shareholders shall be notified of the tentative resolution and another shareholders’ meeting shall be convened within 1 month. When, prior to conclusion of the meeting, the attending shareholders represent a majority of the total number of issued shares, the Chair may resubmit the tentative resolution for a vote by the shareholders’ meeting pursuant to Article 174 of the Company Act.

Article 10 If a shareholders’ meeting is convened by the Board of Directors, the meeting agenda shall be set by the Board of Directors. The meeting shall proceed in the order set by the agenda, which may not be changed without a resolution of the shareholders’ meeting.

The provisions of the preceding paragraph apply mutatis mutandis to a shareholders’ meeting convened by a party having the convening right that is not the Board of Directors.

The Chair may not declare the meeting adjourned prior to completion of

deliberation on the meeting agenda of the preceding two paragraphs (including extraordinary motions), except by a resolution of the shareholders’ meeting. If the Chair declares the meeting adjourned in violation of the rules of procedure, the other members of the Board of Directors shall promptly assist the attending shareholders in electing a new chair in accordance with statutory procedures, by a majority of the votes represented by the attending shareholders, and then continue the meeting.

The Chair shall allow ample opportunity during the meeting for explanation and discussion of proposals and of amendments or extraordinary motions put forward by the shareholders; when the Chair is of the opinion that a proposal has been discussed sufficiently to put it to a vote, the Chair may announce the discussion closed and call for a vote.

Article 11 Before speaking, an attending shareholder must specify on a speaker's slip the subject of the speech, his/her shareholder account number (or attendance card number), and account name. The order in which shareholders speak will be set by the Chair.

A shareholder in attendance who has submitted a speaker's slip but does not actually speak shall be deemed to have not spoken. When the content of the speech does not correspond to the subject given on the speaker's slip, the spoken content shall prevail.

Except with the consent of the Chair, a shareholder may not speak more than twice on the same proposal, and a single speech may not exceed 5 minutes. If the shareholder's speech violates the rules or exceeds the scope of the agenda item, the Chair may terminate the speech.

When an attending shareholder is speaking, other shareholders may not speak or interrupt unless they have sought and obtained the consent of the Chair and the shareholder that has the floor; the Chair shall stop any violation.

When a juristic person shareholder appoints two or more representatives to attend a shareholders’ meeting, only one of the representatives so

appointed may speak on the same proposal. After an attending shareholder has spoken, the Chair may respond in person or direct relevant personnel to respond. Article 12 Voting at a shareholders’ meeting shall be calculated based on the number of shares. With respect to resolutions of shareholders’ meetings, the number of shares held by a shareholder with no voting rights shall not be calculated as part of the total number of issued shares. When a shareholder is an interested party in relation to an agenda item, and there is the likelihood that such a relationship would prejudice the interests of the Company, that shareholder may not vote on that item, and may not exercise voting rights as proxy for any other shareholder. In case a director of the Company has created a pledge on the Company’s shares more than half of the Company’s shares being held by him/her/it at the time he/she/it is elected, the voting power of the excessive portion of shares shall not be exercised. The number of shares for which voting rights may not be exercised under the preceding two paragraphs shall not be calculated as part of the voting rights represented by attending shareholders. With the exception of a trust enterprise or a stock agency approved by the competent securities authority, when one person is concurrently appointed as proxy by two or more shareholders, the voting rights represented by that proxy may not exceed 3 percent of the voting rights represented by the total number of voting shares, otherwise, the portion of excessive voting rights shall not be counted.

Article 13 A shareholder shall be entitled to one vote for each share held, except when the shares are restricted shares or are deemed non-voting shares under paragraph 2 of Article 179 of the Company Act.

When the Company holds a shareholders’ meeting, it may allow the shareholders to exercise voting rights in writing or by way of electronic transmission. When voting rights are exercised in writing or by way of electronic transmission, the method for exercising the voting rights shall

be specified in the shareholders’ meeting notice. A shareholder exercising voting rights in writing or by way of electronic transmission will be deemed to have attended the meeting in person, but to have waived his/her rights with respect to the extraordinary motions and amendments to original proposals of that meeting.

A shareholder intending to exercise voting rights in writing or by way of electronic transmission under the preceding paragraph shall deliver a written declaration of intent to the Company no later than 2 days prior to the scheduled shareholders’ meeting date. When duplicate declarations of intent are delivered, the one received earliest by the Company shall prevail, except when a declaration is made to revoke the earlier declaration of intention.

After a shareholder has exercised voting rights in writing or by way of electronic transmission, in the event the shareholder intends to attend the shareholders’ meeting in person, a written declaration of intent to rescind the voting rights already exercised under the preceding paragraph shall be made known to the Company, by the same means by which the voting rights were exercised, no later than 2 days prior to the scheduled shareholders’ meeting date. If the notice of rescission is submitted after that time, the voting rights already exercised in writing or by way of electronic transmission shall prevail. When a shareholder has exercised voting rights both in writing or by way of electronic transmission and by appointing a proxy to attend a shareholders’ meeting, the voting rights exercised by the proxy in the meeting shall prevail.

Except as otherwise provided in the Company Act and in the Company's Articles of Incorporation, the adoption of a proposal shall require an affirmative vote of a majority of the voting rights represented by the attending shareholders. At the time of a vote, for each proposal, the Chair or a person designated by the Chair shall announce the total number of voting rights represented by the attending shareholders, followed by a poll of the shareholders. After the conclusion of the

meeting, on the same day it is held, the results for each proposal, based on the numbers of votes for and against and the number of abstentions, shall be entered into the MOPS.

When there is an amendment or an alternative to a proposal, the Chair shall present the amended or alternative proposal together with the original proposal and decide the order in which they will be put to a vote. When any one among them is passed, the other proposals will then be deemed rejected, and no further voting shall be required.

Vote monitoring and counting personnel for the voting on a proposal shall be appointed by the Chair, provided that all monitoring personnel shall be shareholders of the Company. Vote counting for shareholders’ meeting proposals or elections shall be conducted in public at the place of the shareholders’ meeting. Immediately after vote counting has been completed, the results of the voting, including the statistical tallies of the numbers of votes, shall be announced on-site at the meeting, and a record made of the vote.
Article 14 The election of directors at a shareholders’ meeting shall be held in accordance with the applicable election and appointment rules adopted by the Company, and the voting results shall be announced on-site immediately, including the names of those elected as directors and the numbers of votes with which they were elected.
The ballots for the election referred to in the preceding paragraph shall be sealed with the signatures of the monitoring personnel and kept in proper custody for at least 1 year. If, however, a shareholder files a lawsuit pursuant to Article 189 of the Company Act, the ballots shall be retained until the conclusion of the litigation.
Article 15 Matters relating to the resolutions of a shareholders’ meeting shall be recorded in the meeting minutes. The meeting minutes shall be signed or sealed by the Chair of the meeting and a copy distributed to each shareholder within 20 days after the conclusion of the meeting. The meeting minutes may be produced and distributed in electronic form. The Company may distribute the meeting minutes of the preceding

paragraph by means of a public announcement made through the MOPS. The meeting minutes shall accurately record the year, month, day, and place of the meeting, the Chair's full name, the methods by which resolutions were adopted, and a summary of the deliberations and their results, and shall be retained for the duration of the existence of the Company.

Article 16 On the day of a shareholders’ meeting, the Company shall compile in the prescribed format a statistical statement of the number of shares obtained by solicitors through solicitation and the number of shares represented by proxies, and shall make an express disclosure of the same at the place of the shareholders’ meeting.
If matters put to a resolution at a shareholders’ meeting constitute material information under applicable laws or regulations or under TWSE regulations, the Company shall upload the content of such resolution to the MOPS within the prescribed time period.
Article 17 Staff handling administrative affairs of a shareholders’ meeting shall wear identification cards or arm bands.

The Chair may direct the proctors or security personnel to help maintain order at the meeting place. When proctors or security personnel help maintain order at the meeting place, they shall wear an identification card or armband bearing the word "Proctor."

At the place of a shareholders’ meeting, if a shareholder attempts to speak through any device other than the public address equipment set up by the Company, the Chair may prevent the shareholder from so doing. When a shareholder violates the rules of procedure and defies the Chair's correction, obstructing the proceedings and refusing to heed calls to stop, the Chair may direct the proctors or security personnel to escort the shareholder from the meeting.
Article 18 When a meeting is in progress, the Chair may announce a break based on time considerations. If a force majeure event occurs, the Chair may rule the meeting temporarily suspended and announce a time when, in view of the circumstances, the meeting will be resumed.

If the meeting venue is no longer available for continued use and not all of the items (including extraordinary motions) on the meeting agenda have been addressed, the shareholders’ meeting may adopt a resolution to resume the meeting at another venue.

A resolution may be adopted at a shareholders’ meeting to postpone or resume the meeting within 5 days in accordance with Article 182 of the Company Act.

Article 19 These Rules, and any amendments hereto, shall be implemented after adoption by shareholders’ meetings.

Procedures for Acquisition or Disposal of Assets of Formosa Plastics Corporation

Amended by the Annual Shareholders’ Meeting on June 17, 2016

Chapter 1 General Principles

Article 1: When acquiring or disposing of the following assets, Formosa Plastics Corporation (hereinafter referred to as the “Company”) and its subsidiaries shall follow the Procedures for Acquisition or Disposal of Assets (hereinafter referred to as the “Procedures”):
Investments in stocks, government bonds, corporate bonds, bank debentures, securities representing interest in a fund, depositary receipts, call (put) warrants, beneficial interest securities, asset-backed securities, etc.
Real property (including land, houses and buildings, investment property, and land use rights) and equipment.
Memberships.
Patents, copyrights, trademarks, franchise rights, and other intangible assets.
Claims of financial institutions (including receivables, bills purchased and discounted, loans, and overdue receivables).
Derivatives.
Assets acquired or disposed through mergers, demergers, acquisitions, or assignment of shares in accordance with law.
Other major assets.
Article 2: The limit amount of investments for non-operating real property or securities (the original investment), by the Company and each subsidiary, shall not exceed 60% of the book value of total assets; for an individual securities investment, the limit amount shall not exceed 50% of the foresaid limit amount, i.e. 30% of the book value of total assets.

Article 3: Terms used in these Procedures are defined as follows:

Derivatives: Forward contracts, options contracts, futures contracts, leverage contracts, swap contracts, and compound contracts

combining the above products, whose value is derived from assets, interest rates, foreign exchange rates, indexes or other interests. The term "forward contracts" does not include insurance contracts, performance contracts, post-sale service contracts, long-term lease contract, and long-term procurement (sales) agreements.

Assets acquired or disposed through mergers, demergers, acquisitions, or assignment of shares in accordance with law: Refers to assets acquired or disposed through mergers, demergers, or acquisitions conducted under the Business Mergers and Acquisitions Act, Financial Holding Company Act, Financial Institutions Merger Act and other acts, or to shares acquired from another company through issuance of new shares of its own as the consideration therefor (hereinafter "acquisition of shares") under paragraph 8 of Article 156 of the Company Act.
Related party or subsidiary: As defined in the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
Professional appraiser: Refers to a real property appraiser or other person duly authorized by law to engage in the value appraisal of real property or equipment.
Date of occurrence: Refers to the date of contract signing, date of payment, date of consignment trade, date of transfer, dates of Board of Directors resolutions, or other date that can confirm the counterpart and monetary amount of the transaction, whichever date is earlier; provided, for investment for which approval of the competent authority is required, the earlier of the above date or the date of receipt of approval by the competent authority shall apply.

Mainland China area investment: Refers to investments in the Mainland China area approved by the Ministry of Economic Affairs Investment Commission or conducted in accordance with the provisions of the Regulations Governing Permission for Investment or Technical Cooperation in the Mainland Area.

Article 4: Professional appraisers and their officers, certified public accounts, attorneys, and securities underwriters that provide the Company with appraisal reports, certified public accountant's opinions, attorney's opinions, or underwriter's opinions in relation to the assets acquired or disposed, shall not be a related party of any party to the transaction.
Article 5: The procedures for the assessment, determination of transaction terms and conditions, and price of acquiring or disposing of assets by the Company shall be in accordance with the following requirements:
Transactions relating to short-term securities investments and derivatives, which are mentioned in Article 1, should be evaluated and executed by the financial department; long-term securities investment should be assessed by the Company’s President Office (“President Office”) and executed by the financial department after the approval; except for the foresaid assets, the other asset transactions should be assessed by the Company’s President Office and executed by the related departments after the approval.

2. The price of transactions described in the preceding paragraph, except which are traded in the stock exchange or securities brokerage firms, shall be determined via public bidding, price bidding, or price negotiation based on reference to the market conditions.

Article 6: Where an acquisition or disposition of assets of the Company shall be approved by the Board of Directors according to the Procedures or other relevant laws, the independent directors' opinions specifically expressing dissent or reservations about any matter shall be included in the minutes of the Board of Directors meeting.
A major asset transaction or a derivatives transaction shall be approved by more than half of all audit committee members and submitted to the Board of Directors for a resolution. If approval of more than half of all audit committee members is not obtained, the procedures may be implemented if approved by more than two-thirds of all Directors, and the resolution of the Audit Committee shall be

recorded in the minutes of the Board of Directors meeting.

Chapter 2 Acquisition or Disposal of Assets

Article 7: In acquiring or disposing of real property or equipment where the transaction amount reaches 20 percent of the company's paid-in capital or NT$300 million or more, the Company, unless transacting with a government agency, engaging others to build on its own land, engaging others to build on rented land, or acquiring or disposing of equipment for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with the following provisions:
Where due to special circumstances it is necessary to give a limited price, specified price, or special price as a reference basis for the transaction price, the transaction shall be proposed for approval in advance by the Board of Directors, and the same procedure shall be followed for any future changes to the terms and conditions of the transaction.
Where the transaction amount is NT$1 billion or more, appraisals from two or more professional appraisers shall be obtained.
Where any one of the following circumstances applies with respect to the professional appraiser's appraisal results, unless all the appraisal results for the assets to be acquired are higher than the transaction amount, or all the appraisal results for the assets to be disposed of are lower than the transaction amount, a certified public accountant shall be engaged to perform the appraisal in accordance with the provisions of Statement of Auditing Standards No. 20 published by the Accounting Research and Development Foundation of Republic of China (ARDF) and render a specific opinion regarding the reason for the discrepancy and the appropriateness of the transaction price:
- (1) The discrepancy between the appraisal result and the transaction amount is 20 percent or more of the transaction amount.
- (2) The discrepancy between the appraisal results of two or more

professional appraisers is 10 percent or more of the transaction amount.

4. No more than 3 months may elapse between the date of the appraisal report issued by a professional appraiser and the contract execution date; provided, where the publicly announced current value for the same period is used and not more than 6 months have elapsed, an opinion may still be issued by the original professional appraiser.

Article 8: The Company acquiring or disposing of securities shall, prior to the date of occurrence of the event, obtain financial statements of the issuing company for the most recent period, certified or reviewed by a certified public accountant, for reference in appraising the transaction price, and if the dollar amount of the transaction is 20 percent of the Company's paid-in capital or NT$300 million or more, the Company shall additionally engage a certified public accountant prior to the date of occurrence of the event to provide an opinion regarding the reasonableness of the transaction price. If the CPA needs to use the report of an expert as evidence, the CPA shall do so in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ARDF. This requirement does not apply, however, to publicly quoted prices of securities that have an active market, or where otherwise provided by regulations of the securities competent authority.
Article The calculation of the transaction amounts referred to in the preceding 8-1: two articles shall be done in accordance with paragraph 2 of Article 26, herein, and "within the preceding year" as used herein refers to the year preceding the date of occurrence of the current transaction. Items for which an appraisal report from a professional appraiser or a CPA's opinion has been obtained need not be counted toward the transaction amount.
Article 9: Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court

may be substituted for the appraisal report or CPA opinion.

Article 10: Where the Company acquires or disposes of assets shall be conducted by the authorization to the Chairman by the Board of Directors in accordance with the authorization limits of the Company.

Chapter 3 Related Party Transactions

Article 11: When the Company engages in any acquisition or disposal of assets from or to a related party, in addition to ensuring that the necessary resolutions are adopted and the reasonableness of the transaction terms is appraised in compliance with the provisions of the Chapter 2 and this Chapter, if the transaction amount reaches 10 percent or more of the Company's total assets, the Company shall also obtain an appraisal report from a professional appraiser or a CPA's opinion in compliance with the provisions of Chapter 2.
The calculation of the transaction amount referred to in the preceding paragraph shall be made in accordance with Article 8-1.
Article 12: When the Company intends to acquire or dispose of real property from or to a related party, or when it intends to acquire or dispose of assets other than real property from or to a related party and the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the Company's total assets, or NT$300 million or more, except in trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of domestic money market funds, the Company may not proceed to enter into a transaction contract or make a payment until the following matters have been approved by the Board of Directors:
The purpose, necessity and anticipated benefit of the acquisition or disposal of assets.
The reason for choosing the related party as a trading counterparty.
With respect to the acquisition of real property from a related party, information regarding appraisal of the reasonableness of the preliminary transaction terms in accordance with Article 13 through 15.

The date and price at which the related party originally acquired the real property, the original trading counterparty, and that trading counterparty's relationship to the Company and the related party.
Monthly cash flow forecasts for the year commencing from the anticipated month of signing of the contract, and evaluation of the necessity of the transaction, and reasonableness of the funds utilization.
An appraisal report from a professional appraiser or a CPA's opinion obtained in compliance with the preceding article.
Restrictive covenants and other important stipulations associated with the transaction.

The calculation of the transaction amounts referred to in the preceding paragraph shall be made in accordance with paragraph 2 of Article 26 herein, and "within the preceding year" as used herein refers to the year preceding the date of occurrence of the current transaction. Items that have been approved by the Board of Directors need not be counted toward the transaction amount.

With respect to the acquisition or disposal of business-use equipment between the Company and its parent or subsidiaries, the Company's Board of Directors may pursuant to Article 10 delegate the Chairman to decide such matters when the transaction is within a certain amount and have the decisions subsequently proposed to and ratified by the next Board of Directors meeting.

When a matter is proposed for discussion by the Board of Directors pursuant to paragraph 1 of this Article, the independent Directors' opinions specifically expressing dissent or reservations about any matter shall be included in the minutes of the Board of Directors meeting.

implemented if approved by more than two-thirds of all Directors, and the resolution of the Audit Committee shall be recorded in the minutes of the Board of Directors meeting.

Article 13: The Company shall evaluate the reasonableness of the transaction costs by the following means if it intends to acquire real property from a related party:

Based upon the related party's transaction price plus necessary interest on funding and the costs to be duly borne by the buyer. "Necessary interest on funding" is imputed as the weighted average interest rate on borrowing in the year the company purchases the property; provided, it may not be higher than the maximum non-financial industry lending rate announced by the Ministry of Finance.
Total loan value appraisal from a financial institution where the related party has previously created a mortgage on the property as security for a loan; provided, the actual cumulative amount loaned by the financial institution shall have been 70 percent or more of the financial institution's appraised loan value of the property and the period of the loan shall have been 1 year or more. However, this shall not apply where the financial institution is a related party of one of the trading counterparties.

Where land and structures thereupon are combined as a single property purchased in one transaction, the transaction costs for the land and the structures may be separately appraised in accordance with either of the means listed in the preceding paragraph.

When acquiring real property from a related party, the Company shall evaluate the cost of the real property in accordance with paragraph 1 and paragraph 2 and shall also engage a CPA to review the evaluation and render a specific opinion.

Article 14: Where the Company acquires real property from a related party and one of the following circumstances exists, the acquisition shall be conducted in accordance with Article 12, and Article 13 does not

apply:

The related party acquired the real property through inheritance or as a gift.
More than 5 years have elapsed from the time the related party signed the contract to obtain the real property to the signing date for the current transaction.

The real property is acquired through signing of a joint development contract with the related party, or through engaging a related party to build real property, either on the company's own land or on rented land.

Article 15: When the results of the Company's appraisal conducted in accordance with paragraph 1 and paragraph 2 of Article 13 are uniformly lower than the transaction price, the matter shall be handled in compliance with Article 16. However, where the following circumstances exist, and objective evidence has been submitted and specific opinions on reasonableness have been obtained from a professional real property appraiser and a CPA, Article 16 shall not apply:
Where the related party acquired undeveloped land or leased land for development, it may submit proof of compliance with one of the following conditions:
- (1) Where undeveloped land is appraised in accordance with the means in the preceding two articles, and structures according to the related party's construction cost plus reasonable construction profit are valued in excess of the actual transaction price. The "Reasonable construction profit" shall be deemed the average gross operating profit margin of the related party's construction division over the most recent 3 years or the gross profit margin for the construction industry for the most recent period as announced by the Ministry of Finance, whichever is lower.
- (2) Completed transactions by unrelated parties within the preceding year involving other floors of the same property or neighboring or closely valued parcels of land, where the land area and

transaction terms are similar after calculation of reasonable price discrepancies in floor or area land prices in accordance with standard property market practices.

(3) Completed leasing transactions by unrelated parties for other floors of the same property from within the preceding year, where the transaction terms are similar after calculation of reasonable price discrepancies among floors in accordance with standard property leasing market practices.
Where the Company acquiring real property from a related party provides evidence that the terms of the transaction are similar to the terms of transactions completed for the acquisition of neighboring or closely valued parcels of land of a similar size by unrelated parties within the preceding year.

Completed transactions for neighboring or closely valued parcels of land in the preceding paragraph in principle refers to parcels on the same or an adjacent block and within a distance of no more than 500 meters or parcels close in publicly announced current value; transaction for similarly sized parcels in principle refers to transactions completed by unrelated parties for parcels with a land area of no less than 50 percent of the property in the planned transaction; within the preceding year refers to the year preceding the date of occurrence of the acquisition of the real property.

Article 16: Where the Company acquires real property from a related party and the results of appraisals conducted in accordance with Article 13 through 15 are uniformly lower than the transaction price, the following steps shall be taken:
A special earnings reserve shall be set aside in accordance with paragraph 1 of Article 41 of the Securities and Exchange Act against the difference between the real property transaction price and the appraised cost, and such difference may not be distributed or used for capital increase by issuance of new shares. Where the Company uses the equity method to account for its investment in

another company, then the special earnings reserve called for under paragraph 1 of Article 41 of the Securities and Exchange Act shall be set aside pro rata in a proportion consistent with the share of public company's equity stake in the other company.

Audit Committee shall supervise the Company’s execution of the aforesaid matter.
Actions taken pursuant to subparagraph 1 and subparagraph 2 shall be reported to a shareholders meeting, and the details of the transaction shall be disclosed in the annual report and any investment prospectus.

The Company having set aside a special earnings reserve under the preceding paragraph may not utilize the special earnings reserve until it has recognized a loss on decline in market value of the assets it purchased at a premium, or they have been disposed of, or adequate compensation has been made, or the status quo ante has been restored, or there is other evidence confirming that there was nothing unreasonable about the transaction, and the securities competent authority has given its consent.

When the Company obtains real property from a related party, it shall also comply with the preceding two paragraphs if there is other evidence indicating that the acquisition was not an arm’s length transaction.

Chapter 4 Engaging in Derivatives Trading

Article 17: Any derivatives trading of the Company shall be conducted in accordance with the “Procedures for Engaging in Derivatives Transactions” of the Company, and when doing so, the Company shall pay attention to issues of risk management and auditing to fulfill the Internal Control System of the Company.

Chapter 5 Mergers and Consolidations, Splits, Acquisitions,

and Assignment of Shares

Article 18: The Company that conducts a merger, demerger, acquisition, or

assignment of shares shall, prior to convening the Board of Directors to resolve on the matter, engage a CPA, attorney, or securities underwriter to give an opinion on the reasonableness of the share exchange ratio, acquisition price, or distribution of cash or other property to shareholders, and propose the opinion to the Board of Directors for deliberation and approval.

Article 19: The Company participating in a merger, demerger, or acquisition shall prepare a public report to shareholders detailing important contractual content and matters relevant to the merger, demerger, or acquisition prior to the shareholders meeting, together with the expert opinion referred to in Article 18 when sending notice of the shareholders meeting, for reference in deciding whether to approve the merger, demerger, or acquisition. Provided, where a provision of another act exempts a company from convening a shareholders meeting to approve the merger, demerger, or acquisition, this restriction shall not apply. Where the shareholders meeting of any one of the companies participating in a merger, demerger, or acquisition fails to convene or pass a resolution due to lack of a quorum, insufficient votes, or other legal restriction, or the proposal is rejected by the shareholders meeting, the Company shall immediately publicly explain the reason, the follow-up measures, and the preliminary date of the next shareholders meeting.
Article 20: When the Company participates in a merger, demerger, or acquisition, it shall convene a board of directors meeting and shareholders meeting on the same date on which the other companies participating in the merger, demerger, or acquisition convene their board of directors and shareholders meeting to resolve matters relevant to the merger, demerger, or acquisition, unless another act provides otherwise or the securities competent authority is notified in advance of extraordinary circumstances and grants consent. The Company and other companies participating in an assignment of shares shall call their respective board of directors meeting on the same day, unless another act

provides otherwise or the securities competent authority is notified in advance of extraordinary circumstances and grants consent.

When the Company participates in a merger, demerger, acquisition, or assignment of shares, it shall prepare a full written record of the following information and retain the record for 5 years for reference. In addition, the information set out in the subparagraphs 1 and 2 of the following paragraph shall be reported in the prescribed format and via the Internet-based information system to the securities competent authority for recordation within two days commencing immediately from the date of passage of a resolution by the Board of Directors.

Basic identification data for personnel: Including the occupational titles, names, and national ID numbers (or passport numbers in the case of foreign nationals) of all persons involved in the planning or implementation of any merger, demerger, acquisition, or assignment of shares prior to disclosure of the information.
Dates of material events: Including the signing of any letter of intent or memorandum of understanding, the engagement of a financial or legal advisor, the execution of a contract, and the convening of a board of directors meeting.
Important documents and minutes: Including merger, demerger, acquisition, and share transfer plans, any letter of intent or memorandum of understanding, material contracts, and minutes of board of directors meetings.

Where the Company participating in a merger, demerger, acquisition, or assignment of shares is neither listed on an exchange nor has its shares traded on an OTC market, the Company shall enter into an agreement with such party and shall comply with the preceding paragraph of this Article.

Article 21: Every person participating in or privy to the plan for merger, demerger, acquisition, or assignment of shares shall issue a written undertaking of confidentiality and may not disclose the content of the plan prior to public disclosure of the information and may not trade, in

their own name or under the name of another person, in any stock or other equity security of any company related to the plan for merger, demerger, acquisition, or assignment of shares.

Article 22: When participating in a merger, demerger, acquisition, or assignment of shares, the Company shall not arbitrarily alter the share exchange ratio or acquisition price unless under the below-listed circumstances, and shall stipulate the circumstances permitting alteration in the contract for the merger, demerger, acquisition, or assignment of shares:

Capital increase by cash injection, issuance of convertible corporate bonds, or the issuance of stock dividend, issuance of corporate bonds with warrants, preferred shares with warrants, stock warrants, or other equity based securities.
An action, such as a disposal of major assets that affects the company's financial operations.
An event, such as a major disaster or major change in technology that affects shareholder equity or share price.
An adjustment where any of the companies participating in the merger, demerger, acquisition, or assignment of shares buys back treasury stock.
An increase or decrease in the number of entities or companies participating in the merger, demerger, acquisition, or assignment of shares.
Other terms/conditions that the contract stipulates may be altered and that have been publicly disclosed.
Article 23: The contract for participation by the Company in a merger, demerger, acquisition, or assignment of shares shall record the rights and obligations of the companies participating in the merger, demerger, acquisition, or assignment of shares, and shall also record the following:
Handling of breach of contract.
Principles for the handling of equity-type securities previously

issued or treasury stock previously bought back by any company that is extinguished in a merger or that is demerged.

The amount of treasury stock participating companies are permitted under law to buy back after the record date of calculation of the share exchange ratio, and the principles for handling thereof.
The manner of handling changes in the number of participating entities or companies.
Preliminary progress schedule for plan execution, and anticipated completion date.
Scheduled date for convening the legally mandated shareholders meeting if the plan exceeds the deadline without completion, and relevant procedures.
Article 24: After public disclosure of the information, if the Company participating in the merger, demerger, acquisition, or assignment of shares intends further to carry out a merger, demerger, acquisition, or assignment of shares with another company, all of the participating companies shall carry out anew the procedures or legal actions that had originally been completed toward the merger, demerger, acquisition, or assignment of share ; except that where the number of participating companies is decreased and a participating company's shareholders meeting has adopted a resolution authorizing the Board of Directors to alter the limits of authority, such participating company may be exempted from calling another shareholders meeting to resolve on the matter anew.
Article 25: Where any of the companies participating in a merger, demerger, acquisition, or assignment of shares is not a public company, the Company shall sign an agreement with the non-public company in accordance with the provisions of Article 20, Article 21, and Article 24.

Chapter 6 Public Disclosure of Information

Article 26: Under any of the following circumstances, the Company acquiring or disposing of assets shall publicly announce and report the relevant

information on the securities competent authority's designated website in the appropriate format as prescribed by regulations within 2 days commencing immediately from the date of occurrence of the event:

Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the Company's total assets, or NT$300 million or more; provided, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of domestic money market funds.
Merger, demerger, acquisition, or assignment of shares.
Losses from derivatives trading reaching the limits on aggregate losses or losses on individual contracts set out in the procedures adopted by the Company.
Where an asset transaction other than any of those referred to in the preceding three subparagraphs, a disposal of receivables by a financial institution, or an investment in the Mainland China area reaches 20 percent or more of paid-in capital or NT$300 million; provided, this shall not apply to the following circumstances:
(1) Trading of government bonds.
(2) Trading of bonds under repurchase/resale agreements, or subscription or redemption of domestic money market funds.
(3) Where the type of asset acquired or disposed is equipment/machinery for business use, the trading counterparty is not a related party, and the transaction amount is less than NT$500 million.
(4) Where land is acquired under an arrangement on engaging others to build on the company's own land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the company expects to invest in the

transaction is less than NT$500 million.

The amount of transactions above shall be calculated as follows:

The amount of any individual transaction.
The cumulative transaction amount of acquisitions and disposals of the same type of underlying asset with the same trading counterparty within the preceding year.
The cumulative transaction amount of real property acquisitions and disposals (cumulative acquisitions and disposals, respectively) within the same development project within the preceding year.
The cumulative transaction amount of acquisitions and disposals (cumulative acquisitions and disposals, respectively) of the same security within the preceding year.
"Within the preceding year" as used in the paragraph 2 refers to the year preceding the date of occurrence of the current transaction. Items duly announced in accordance with these Procedures need not be counted toward the transaction amount.
Article 27: When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entirety.
Article 28: The Company acquiring or disposing of assets shall keep all relevant contracts, meeting minutes, log books, appraisal reports and CPA, attorney, and securities underwriter opinions at the company headquarters, where they shall be retained for 5 years except where another act provides otherwise.
Article 29: Where any of the following circumstances occurs with respect to a transaction that the Company has already publicly announced and reported in accordance with the Article 26 through 28, a public report of relevant information shall be made on the information reporting website designated by the securities competent authority within 2 days commencing immediately from the date of occurrence of the event:
Change, termination, or rescission of a contract signed in regard to

the original transaction.

The merger, demerger, acquisition, or assignment of shares is not completed by the scheduled date set forth in the contract.
Change to the originally publicly announced and reported information.

Chapter 7 Additional Provisions

Article 30: Information required to be publicly announced and reported in accordance with the provisions of Chapter 6 on acquisitions and disposals of assets by a subsidiary of the Company that is not a public company in Taiwan shall be reported by the Company.
The paid-in capital or total assets of the Company shall be the standard for determining whether or not a subsidiary referred to in the preceding paragraph is subject to subparagraph 5 of paragraph 1 of Article 26requiring a public announcement and regulatory filing in the event the type of transaction specified therein reaches 20 percent of paid-in capital or 10 percent of the total assets.
Article 31: The Company’s controlling and monitoring procedures towards the acquisition or disposal of assets by its subsidiaries are as follows:
The Company shall urge its subsidiaries to establish and execute their own “Procedures for Acquisition of Disposal of Assets”.
If any material violation is found by the internal auditors of the subsidiaries, the subsidiaries shall deliver a written notice to the Company of this kind of violation. The Company shall know the condition of dealing with the violation(s) and of the resulting improvements.
Article 32: Should there be any violation of the procedures when the persons-in-charge of the Company deal with acquisition or disposal of assets, subsequent penalization is subject to the relevant HR policies of the Company.
Article 33: (Deleted)
Article 34: For the calculation of 10 percent of total assets under this Procedures, the total assets stated in the most recent parent company only financial

report or individual financial report prepared under the Regulations Governing the Preparation of Financial Reports by Securities Issuers shall be used.

Article 35: After the Procedures are approved by the Board of Directors, the Procedures shall be submitted to the Shareholders Meeting for approval before its implementation. Any amendment is subject to the same procedure. The independent directors' opinions specifically expressing dissent or reservations about any matter shall be included in the minutes of the Board of Directors meeting.

The matters for which paragraph 1 requires submitted to the Board of Directors for a resolution shall first be approved by more than half of all audit committee members. If the approval by more than half of all audit committee members is not obtained, the procedures may be implemented if approved by more than two-thirds of all Directors, and the resolution of the Audit Committee shall be recorded in the minutes of the Board of Directors meeting.

Formosa Plastics Corporation Current Shareholdings of Directors

Title	Name	Shareholding (share)
Chairman	Jason Lin	0
Managing Director	William Wong Representative of Formosa Chemicals & Fibre Corporation	486,978,692
Managing Director	Susan Wang Representative of Nan Ya Plastics Corporation	294,793,105
Managing Director	Wilfred Wang Representative of Formosa Petrochemical Corporation	131,460,365
Managing Director (Independent Director)	C. L. Wea	0
Independent Director	C. J. Wu	0
Independent Director	T. S. Wang	0
Director	C. T. Lee	632,541
Director	Cher Wang	7,369,380
Director	Fu-Chan Wei Representative of Chang Gung Medical Foundation	601,011,035
Director	K. H. Wu	134,537
Director	Ralph Ho	27,824,363
Director	Cheng-ChungCheng	0
Director	Wen-Chin Hsiao	6,685

Note: According to Article 26 of Securities and Exchange Act, the minimum of the Directors are shareholdings Company’s
101,851,853 shares. As of April 15, 2017, the actual shareholdings of the Company’s Directors are 1,550,210,703 shares.

Information regarding the Proposed Employees and Directors’ Compensation to Adopted by the Board of Directors of the Com n pa y:

Company:	Company:

1. Amounts of employees’ cash compensation, stock compensation, and Directors’ compensation:
Employees Cash Compensation	NT$59,168,796
Employees Stock Compensation	NT$0
Directors Cash Compensation	NT$0
2. Share amount of the employees’ stock compensation and the percentage of the share amount to that of all stock dividends capitalization:
Share amount of employees’ stock compensation	0 share
Percentage of the share amount to that of all stock dividends capitalization	0%

The above-listed amount of employees’ cash compensation is consistent with the proposed amount adopted by the Board of Directors of the Company.

Effect upon Business Performance and Earnings Per Share of the Company by the Stock Dividend Distribution Proposed at the 2017 Annual Shareholders’ Meeting:

Not applicable since the Company does not propose the stock dividend distribution at the 2017 Annual Shareholders’ Meeting and does not required to prepare financial forecast information.

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FPC — AGM Information 2017

51762_rns_2017-06-21_c850f9c5-845b-4eab-8274-837b6b7c619e.pdf

FORMOSA PLASTICS CORPORATION

2017 ANNUAL SHAREHOLDERS’ MEETING

MEETING HANDBOOK

(SUMMARY)

Table of Contents

FORMOSA PLASTICS CORPORATION

2017 ANNUAL SHAREHOLDERS’ MEETING PROCEDURE

FORMOSA PLASTICS CORPORATION

2017 ANNUAL SHAREHOLDERS’ MEETING AGENDA

1. Report Items

2. Ratification Items

3. Discussion Items

Report Items

Formosa Plastics Corporation 2016 Business Report

Formosa Plastics Corporation

Audit Committee’ Review Report

Ratification Items Proposal 1

Explanation:

Resolution:

Ratification Items Proposal 2

Attachment:

Resolution:

Discussion Items Proposal 1

Resolution:

KPMG

KPMG

Articles of Association

of

Formosa Plastics Corporation

Chapter I General Provisions

Chapter II Shares

Chapter III Shareholders Meeting

Chapter IV Directors

Chapter V (Omitted)

Chapter VI Manager

Chapter VII Accounting

Chapter VIII Miscellaneous

Rules of Procedure for Shareholders’ Meetings of Formosa Plastics Corporation

Procedures for Acquisition or Disposal of Assets of Formosa Plastics Corporation

Chapter 1 General Principles

Chapter 2 Acquisition or Disposal of Assets

Chapter 3 Related Party Transactions

Chapter 4 Engaging in Derivatives Trading

Chapter 5 Mergers and Consolidations, Splits, Acquisitions,

and Assignment of Shares

Chapter 6 Public Disclosure of Information

Chapter 7 Additional Provisions

Formosa Plastics Corporation Current Shareholdings of Directors

Information regarding the Proposed Employees and Directors’ Compensation to Adopted by the Board of Directors of the Com n pa y:

Effect upon Business Performance and Earnings Per Share of the Company by the Stock Dividend Distribution Proposed at the 2017 Annual Shareholders’ Meeting:

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FPC AGM Information 2017