FPC — Annual Report 2019

Aug 19, 2020

Formosa Plastics Corporation 2019 Business Report

1. 2019 Business Report:

The Company (Formosa Plastics Corporation) generated consolidated sales of TWD207.84bn in 2019, reaching 94% of its target of TWD221.88bn and was down 10% from TWD230.37bn generated in 2018. Consolidated pretax profit came in at TWD42.21bn in 2019, reaching 92% of its target of TWD45.93bn and declined by 26% from TWD57.09bn generated in 2018.

Due to the uncertainties brought by US-China trade tension in 2019, global economy has been slowing down and led to the prices decline in ethylene and propylene. The lackluster auto and real estate markets have resulted in a shrinking demand in aluminum, coating, textile and home appliances. The wave of new supply from China and the United States has dragged down the prices of petrochemical products. Except for Ethylene Vinyl Acetate (EVA), product prices have fallen by 6-30% in 2019 from 2018 and spreads have narrowed. Capacity utilization rate of 90% in 2019 was lower than 91% in 2018, impacted by the unplanned shutdown in Linyuan Utility plant on 28 November. Despite the efforts in product differentiation, which sales volume increased by 1% in 2019 and the start of FIC’s new high-density polyethylene (HDPE) plant at the end of August, the lower capacity utilization rate has led to a lower consolidated sales and operating profit of TWD20.19bn dropped by 20% compared to 2018.

In addition, the total cash dividends from investees including Nan Ya Plastics Corp., Formosa Chemicals & Fibre Corp. and Nan Ya Technology Corp. were TWD8.18bn in 2019, although increasing by TWD674.4m on a yearly basis, the equity incomes from investees including Formosa Petrochemical Corp., FPC-USA and Formosa Sumco Technology Corp. were TWD14.73bn in 2019, which was TWD9.34bn significantly lower than 2018. The decrease has led to a 26% decline of the Company’s pre-tax profit in 2019.

Looking back at 2019, the uncertainties from the US-China trade war has weakened investment confidence among corporates. The political

disputes such as Brexit, Japan-South Korea trade tensions, and geopolitical risks have deteriorated the economy growth momentum among developed countries and slowed down the economy expansion in emerging countries, which have dragged down the global economy. Despite the easing of monetary policy from worldwide governments, international agencies have been revising down their global GDP growth forecasts, of which the International Monetary Fund (IMF) tuned down its global GDP growth forecast to 2.9%, the lowest level since the financial crisis in 2009.

As benefiting from order reallocation and investment repatriation that drove domestic demand and consumption, Taiwan GDP has been growing sequentially in 2019, reaching 2.71% of growth in 2019 and returned to the first place within The Four Asian Tigers. Taiwan government’s commitment to attracting overseas Taiwanese enterprises and foreign capitals, and encouraging the investments from local companies has played a positive role in boosting the economic growth momentum in Taiwan. However, the society has been long brimming with the ideology of environmental protection and unreasonable EPA review system, along with the stringent environmental regulations, which has hindered many investment projects. In addition, the government's energy policy of "replacing nuclear power with green energy; replacing coal-based power plant with natural gas-based power plant" is aiming to abandon nuclear power and limit the use of coal, which will lower the diversity of power generation methods, casting out industry concerns over a stable electricity supply going forward and will adversely affect the long-term development of Taiwan’s industry and economy.

Nevertheless, while Taiwan ’s domestic market size is limited, exports is the key driver for Taiwan’s economic growth and accounts for more than 60% of GDP. Facing the rising trend of regional economy and trade integration globally, the preferential tariffs enjoyed by ASEAN 10 plus one, the effective of “Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)”, and the upcoming formation of “Regional Comprehensive Economic Partnership Agreement (RCEP)” in Asia in 2020, of which Taiwan has been excluded in the discussion.

Moreover, owning to an unimproved cross-strait relations, there is concern over an early termination of ECFA (Economic Cooperation Framework Agreement) early-harvest list. As an export-oriented country, if Taiwan is not able to actively seeking for solutions on the breakthrough for the obstacle on trade tariff, Taiwan will be marginalized, and our industries will find it very difficult to survive and develop.

Thus, the Company expects the government to focus and solve the problem of business and development in industries. Aside from grasping the opportunity of industry restructure brought out under US-China trade war, the governments should also roll out a fiscal tax with investment incentives, amend the irrational environmental assessment process and loosen the environmental regulation restrictions. Meanwhile, the government should revisit the energy policy, formulate electricity allocation pragmatically and propose reasonable supporting measures for energy transition to provide stable, abundant and clean electricity and to build a friendly investment environment. The government should not prohibit the coal-fired approach hastily, while the current technology on pollution prevention of coal-fired boilers can remove visual pollution (prevent from emitting white smoke from chimney), and the air emission quality is not inferior to that of natural gas-fired units. Therefore, the choice of electricity allocation should not reply on the type of fuels. The key is the back-end pollution prevention measures. In addition, the government should actively participate in regional economic and trade integration, such as joining CPTPP, RCEP and the discussion of free trade agreements (FTAs) with key trading partners, in order to resolve the unequal tariff environment suffered by Taiwanese companies. This will enhance the confidence and attract domestic and foreign investors in investing in Taiwan, and to build a friendly and sustainable investment development environment.

In view of the uncertainties brought out by US-China trade tension and the difficulty in an oversupplied market under the supply addition wave, the Company has deepened its artificial intelligence (AI) technology to enhance operational efficiency in five aspects "optimization of

production and sales, quality assurance, intelligent maintenance, digital inspection, and cost reduction". In 2019, 46 out of 100 AI projects have been completed with an estimated annual benefit of TWD180m, while the remaining 54 projects are ongoing.

Aside from this, in an effort to popularize AI concept to all employees, the Company continues to provide the five-stage systematic training courses from the basics, practice, project practice, "Taiwan Artificial Intelligence School" and management, and requires all employees to join the training courses related to their job. By the end of 2019, employees with at least college degrees received basic AI training reached nearly 100%. In the meantime, by interacting and cooperating with other companies, professional institutions, international experts, and establishing an AI exchange platform to hold competitions, the Company is looking forward to enhancing the AI capabilities and stimulating more ideas into application.

Furthermore, the Company continues to promote Industrial 4.0 and the automatic selling system into more application towards other products, and promotes 32 improvement projects to increase the product quality, optimize the operation and formulation and dispatch the power units through instant and historical production data analysis. In 2019, the Company has completed 28 improvement projects, and the implementation of the rest 4 projects are expected to be completed by 2020 with an annual benefit of TWD87m.

Moreover, in order to promote the transformation plan of the Renwu complex, the establishment of the composite material center, the industrial 4.0 and artificial intelligence research and development center, and the dye-sensitized battery mass production plant, a 12.3 hectares of part of the land in Renwu Complex has passed by the Ministry of the Interior in July 2019 to change to A kind of industrial zone. At the same time, 13 office buildings, including the 2 founders' offices in the Kaohsiung plant, the birthplace of Formosa Plastics Group, were registered as monument by the Kaohsiung City Government. The “Wang Yung-ching and Wang Yung-tsai Park” will be established in the 2.5 hectares original site. The restoration

and reuse plan was reviewed and approved by the Kaohsiung City Government in December 2019, which is expected to be completed by the end of 2022. After that, the park will be opened to public.

In an attempt to develop circular economy, promote project improvements, reduce the consumption of water, energy, and the utility usage volume per unit, the Company accomplished 1,076 projects in 2019 with an annual benefit of TWD770m. The Company also established an innovation platform to hold seminars from time to time to boost up the innovation atmosphere. There have been 202 ideas proposed on an accumulated basis so far with an estimated annual benefit of TWD430m. By the means mentioned above, the Company is able to gradually pursue the rationalization, strengthen the business essence, and overcome the operating difficulties during industry downcycle.

The Company and its China Ningbo and United States subsidiaries mainly produce plastics and chemical fiber raw materials. In 2019, sales volume of PVC increased 2% to 1,690K tons mainly due to the continued market diversification, the strict implement of environmental protection in China, which has increased the cost of coal-based PVC producers and drove up the market price, and the cessation of anti-dumping duties on imported PVCs since 29th September 2019 also improved the domestics demand in China. Sales volume of caustic soda was 1,506K tons in 2019, grew by 5% than 2018 owning to the incremental caustic soda sales in Southeast Asia and spot selling of Australia aluminum customers.

As the Company has been actively expanding into Southeast Asia, South Asia and Africa, and increased the selling of the differentiated products such as bottle blowing grade, pipe grade and blow molding grade HDPE, along with the start of the new HDPE plant by the Company’s US subsidiary since the end of August 2019, the Company’s sales volume in HDPE was 512K tons in 2019, grew by 5% than 2018. The Company’s EVA sales volume was 284K tons in 2019, up 3% from 2018 as there was no new capacity from peers along with an steadily growth in demand for solar packaging driven by China's green energy policy. The Company’s LLDPE sales volume was 211K tons in 2019, up 30% from 2018 given the

aggressive expansion into Bangladesh market, and promotion of the injection grade and rotation molding grade differentiated products, coupling with the conversion of LLDPE from the US subsidiary’s HDPE plant.

As impacted by the US-China trade tension, industry downcycle in auto and housing markets in China, the strict investigation of the environmental inspection, massive capacity expansion by peers, the downstream demand for tapes, coatings and resins has been weakened and market has been oversupplied with higher competition, the Company’s AE sales volume of 499k tons in 2019 has declined by 7% from 2018. The Company’s carbon fiber sales volume was 5.7K tons in 2019, up 4% from 2018 due to the stable incremental demand for wind power and the recovery demand from customers due to an easing competition from Japanese peers. The Company’s sales volume of NBA, which is mainly for captive use by AE plants and bonded customers in China, decreased 4% from 2018 to 223K tons in 2019 due to US-China trade tension and falling demand from downstream for butyl acrylate and butyl acetate due to the price decline in upstream raw materials. Sales volume of SAP lowered by 7% from 2018 to 170K tons in 2019 due to decreasing price in an oversupplied market resulted from the massive capacity expansion from China peers and the shrinking number of newborns by about 2 million in 2019 comparing with 2018.

Sales volume of PP declined 3% from 2018 to 927K tons in 2019 given the unplanned shutdown in Linyuan Utility plant coupled with the annual maintenance shutdown of Linyuan PP plant and the renewal of the granulator. Sales volume in AN of 278K tons in 2019 was similar to 2018. While the downstream demand was not strong, overall market condition was still better than expected given the unexpected plants shutdown of the world’s largest AN producer Ineos in US, Germany and UK which had declared force majeure. Sales volume of MMA of 82K tons in 2019 was down by 1% from 2018 due to a weak demand of downstream end product, an unimproved oversupplied market, and the intensifying market competition. Sales volume of ECH of 95K tons in 2019 increased by 6%

from 2018, which was benefited from the booming development of the wind energy and 5G industry and the stronger demand from downstream epoxy product.

In terms of capacity expansion, in order to strengthen its competitiveness, the Company has been aggressively expanding its capacities and conducting debottleneck projects, including the debottleneck project of PVC plant in Linyuan, which will raise its PVC capacities by 37K tons to 1,302K tons per annum and is expected to be completed and start production by 2Q20. And in Ningbo, the PP plant debottleneck project has increased its PP capacity by 30K tons to 522K tons after the project was completed in 3Q19; the AA plant debottleneck project, which increased AA capacity by 20K tons to 340K tons, was completed in 1Q20. And the SAP plant debottleneck project, will increase its SAP capacity by 10K tons to 100K tons after construction completed in 3Q20. The project of the new PDH plant will have 600K tons propylene capacity and is expected to complete and start production in 3Q21. The new HDPE plant in Texas, US has completed construction and started production since 3Q19.

Furthermore, in Kaohsiung, the Company’s storage tank in Qianzhen District will be moved to the Phase II intercontinental petrochemical zone. The Company has rent the land and dock from Port of Kaohsiung Taiwan International Ports Corporation for petrochemical usage and will build 12 storage tanks and 1 salt warehouse, which are expected to be completed in 2Q21.

In terms of equity investments, FPC-USA (22.66% owned by the Company) generated pretax profit of USD750m in 2019, down 26% from 2018, mainly due to the slowdown of economic growth in major economies such as the United States and the European Union, as well as a number of new capacity in olefins and polyethylene capacities in North America, resulting in an oversupply market and the sequentially falling product prices. In 2020, while the US economy is expected to remain stable, business should decline comparing to 2019 given (1) the continued oversupplied market condition that leads to lower profitability, (2) a

significant decline in China ’s economic growth hampered by COVID-19 could post risk to a further downside to its economic growth. However, following the completion of No.3 olefin plant (OL-3), the new PE packaging plant, and the pipelines for ethane and ethylene since 2H19, under a relatively low raw material cost advantages of ethane, propane and electricity, the FPC-USA’s petrochemical products are still competitive. Moreover, other than the profit contribution from the new LDPE plant after its completion in 1Q20, the PE product line will be more complete and can fully meet downstream customers’ needs with different products.

In addition, profit loss of Fujian Fuxin Special Steel Co., Ltd. (29.16% owned by the Company) in 2019 has further expanded from 2018 given (1) the rising tariff barriers due to US-China trade tension in 2019, (2) the slowdown in economic growth in China with shrinking demand and (3) market oversupplied due to pricing competition from Indonesia peers that led to poor ASPs in finished goods. Fujian Fuxin expects the global steel market demand should continue to decline as a result of the impact from COVID-19. However, Fujian Fuxin is expected to decrease profit loss as Fujian Fuxin will expand the sales in super ferritic stainless steel differentiated products, increase the hot rolling OEM for Formosa Ha Tinh Steel Corporation and sells under full production. In order to enlarge the synergy of vertical integration and enhance the competitiveness, Fujian Fuxin is conducting the new cold rolling mill plant project with 300K tpa capacity, and expects the plant to start production by end of 2020.

In response to global plastic restriction policies and rising environmental protection trends, the demand for biodegradable plastics continues to increase, but only a few manufacturers are producing upstream raw materials globally. In order to achieve social responsibility on a sustainable development, the Company has invested in a Taiwan leading manufacturer Minima Technology Co. Ltd. in 2019 with a 19.15% of shareholding. Minima Technology Co. Ltd. produces 4K tons of decomposable compound rubber particles annually. It mainly produces disposable consumer products such as tableware, paper cups, straws and other decomposable plastic products which are exported to Europe and the

United States. It is expected to turn profitable as benefited from the rising trend of plastics restriction globally and the increase of its capacity to 20K tons after its Huwei plant in Central Taiwan Science Park commences production in 2Q20.

In terms of research and development, the Company spent TWD2.2bn on R&D in 2019, accounted for 1% of the Company’s revenues. These R&D expenses were mainly spent on 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. Meanwhile, the Company conducted R&D on industrial production technique and to commercialize specialty products including PVC emulsion for medical gloves, Urinary system sensor test kit, HDPE cap & closure grade and for floating solar platform application, odorless SAP and applied to ultra-thin diapers with low pulp content, carbon fiber manufactured by dry-jet wet spinning technique, low-dissolution PP material for medical applications and impact copolymer grade for film grade. In 2019, the Company launched 48 R&D projects with an annual benefit of TWD150m.

Moreover, the Company further enhanced the development of key technology and applied for both domestic and international patent. In 2019, the Company has received approval on 16 patents, and as of the end of 2019, the Company has a total of 162 effective patents. Meanwhile, the Company will continue to work with both domestic and international industry experts, government, and academic area, to strengthen academic fundamentals, R&D, virtual laboratory and talent development on production stimulation, as well as to improve the capability of molecular material design and production stimulation, and introduce the R&D digital management system. Moreover, the Company continues to enhance R&D team; focus on talent selection and sending abroad for training; deepen the cultivation of leading lecturers; accelerate the development of differentiated products and environmentally friendly green materials; and develop the techniques of the capture and reuse of carbon dioxide and water. Among them, the "Capture and Reuse of Flue Gas ", which was a

joint project with academic research institutions, was qualified to receive the subsidy from “the A+ Industrial Innovative R&D Program” by Ministry of Economic Affairs in January 2019. The automatic production line of dye-sensitized battery in Shalun, Tainan, has successfully conducted a steady trial run in January 2020, and the Company will continue to promote the product application going forward.

On the operational safety and environmental protection front, the Company has always been putting equal emphasis on industry developments and environmental protection. As of the end of 2019, the accumulated investments on operational safety, environmental protection, and firefighting has reached TWD24.2bn, which was mainly spent on controlling pollution, saving energy, reducing waste and greenhouse gases, and improving operational safety and firefighting. The Company’s pollution treatment and emissions are better than national regulatory standards.

In 2019, there were 6 business units praised by competent authority. Among them, Mailiao VCM plant, LLDPE plant, AN plant were all praised by Yunlin County and Ministry of Labor for strong performance on occupational safety and health. Mailiao Branch even received the “Occupational Safety 5-Star Award” from Yunlin County given the three consecutive years of praise awarded. Linyuan PP plant obtained the role model award by Ministry of Economic Affairs for strong performance on energy conservation. Also, Renwu plant was praised by Ministry of Health and Welfare for strong performance on creating a safe and healthy working environment.

In term of water and energy conservation and greenhouse emissions reduction, in 2019, the Company accomplished 638 improvement projects. Total water saved amounted to 3,926 tons/day, while greenhouse gas emissions reduction reached 1,194K tons/year. Other ongoing 517 improvement projects would further conserve water by 5,214 tons/day and reduce greenhouse gas emissions by 147K tons/year.

Besides, in order to enhance operational safety, other than applying AI into the development of image recognition system to manage the safety

of on-site construction, the Company also establish the GPS system for employee safety, and develop smart wearable devices to assist inspection and maintenance. Moreover, the Company continues to promote “Production Safety Management (PSM)” operations, equipment diagnosis, and continue to promote the “Execution Implementation SOP – Full Participation”, “Advanced Simulation”, “Night Emergency Drills” and “Production Hazard Analysis (PHA)” to reduce abnormal operation and to secure the operation. In addition, in order to strengthen the fire response capability, each plant has added "fire turret" and "advance smoke detection system". Moreover, in view of increasing environmental regulations, the Company has established short, mid, and long-term improvement plans to strengthen the control on volatile organic compounds (VOCs) leakage, and set up FTIR to monitor air quality instantly, conducted the improvement project on the elimination of white smoke for Renwu and Linyuan Utility plant, promoted zero-wastewater emission and kept PVC compound off the ground.

2. Business Performance:

The consolidated revenue in 2019 was TWD207.84bn, a decrease of TWD22.52bn over the previous year of TWD230.371bn. Operating profit was TWD20.19bn with an 10% of operating margin after deducting COGS of TWD175.73bn and operating expenses of TWD11.91bn. Plus non-operating income of TWD22.02bn (included equity investment income of TWD17.73bn), the pretax profit was TWD42.21bn in 2019, decrease 26% from 2018.

3. 2020 Business Performance Target and Outlook:

Looking into 2020, the continued slowdown of economic growth in China and the uncertainty brought by US-China trade tension will weaken global manufacture industry and investment confidence and hamper the global economic recovery. As the first phase trade agreement signed by China and the United States on 15th January 2020, the trade tensions between the two sides has been easing, as well as the worldwide major countries launched the continued monetary easing, the roll-out of fiscal

policies and expansion of infrastructure investments to stimulate economy growth. However, the COVID-19 in China has led to a rapid shrinking domestic demand on the lockdown of cities. Besides, production could not be fully resumed due to the shortage of raw materials, logistics disruption, and the lack of labor force. These could all result in global supply chain disruption and the downside on economic growth. As COVID-19 has been spreading to the world, it is difficult to estimate the impact of the "butterfly effect", and the risk of future economic prospects is still high. Thus, global agencies have revised down their 2020 GDP growth forecasts for World and China which is worse than 2019 GDP growth.

Under the demand and supply situation, IHS forecasts that the global ethylene capacity will increase around 13.2 million tons in 2020, and the new capacity from the US and China will increase by 9.67 million tons (73% of total new capacity) to be among the fastest growing countries in terms of new capacity of ethylene. In terms of demand, based on the global ethylene demand growth of 1.3x of GDP growth, incremental demand should be 7million tons in 2020, and global ethylene market will be oversupplied. The ethylene production rate will be down to 87.5% from the upcycle peak of 90.3%.

Under the supply addition wave of shale gas investment, there are a total of 11 new ethylene plant projects with an annual capacity of 12.43 million tons. The peak of production start was during 2018-2019, and there were a total of 7 projects with annual ethylene capacity of 7.63 million tons (including the Company’s 33%-owned investment company, Formosa Olefins, L.L.C., in the US with an annual ethylene capacity of 1.2 million tons) have completed construction and came on stream. While the remaining 4 projects with an annual capacity of 4.8 million tons will be completed and start operation in the next three years. As the key downstream products for these new ethylene plants are PE, it is estimated that the new capacity additions in these 5 years will reach 8.2 million tons. Due to the oversupply in PE market in North America, companies have cost advantage on low shale gas feedstock price, and most of the new capacities will primarily be exported. It is expected that the impact on

petrochemical market in Asia will become serious increasingly in 2020.

As for China market, while its ethylene capacity will increase by 5.9 million tons in 2020, it is estimated that China needs to imports 20 million tons of ethylene to meet the growing demand, if imported ethylene and its derivatives are used to calculate the consumption of ethylene. However, in the 13th Five-Year Petrochemical Industry Planning, the refining and chemical investment projects led by private enterprises has accelerated its development towards "go large” and “go scalable”. This will lead to an explosive growth in ethylene capacity in the next 3 years with additions up to 16 million tons and could result in a rising self-sufficiency rate for downstream petrochemical products with a narrowing gap between supply and demand in China.

In term of the market conditions of the Company's key product, PVC, as China has been raising their requirements towards environmental protection, controlling stringently over the expansion for coal-based PVC producer (with coal-based production accounting over 80% of total production), and phasing out the coal-based production that use high mercury as catalysts, the cost for coal-base PVC has been growing and even higher than that of ethylene-based PVC. If the price of ethylene falls in the future, the competitive advantage of ethylene-based PVC will further increase. As for PE market, due to the low self-sufficiency rate in China with a more than 40% of external dependence rate, and as impacted by the substantial incremental in ethylene capacity, it is estimated that the new PE capacity will reach 10.8 million tons in the next 3 years, accounting for 46% of the global new capacity addition of 23.5 million tons. Asia will become the Red Sea market going forward given the declining demand on the slowdown of GDP growth and the significant export volume of low-cost PE from North America. Furthermore, as impacted by the massive expansion of propane dehydrogenation (PDH) and naphtha crackers in China, it is estimated that the new capacity will be up to 9.8 million tons in the next 3 years, accounting for 57% of the global new capacity addition of 17 million tons. Although China’s self-sufficient rate has increased year by year and has exceeded 80%, its downstream

products are mainly the fiber grade and General purpose PP, which will not affect the sales of the Company's high-end differentiated products. Nevertheless, the rapid increase in supply addition will still pressure PP price and narrow the product spreads.

In terms of export, while China market accounts for 40% of the Company’s exporting volume, it is not favorable for the sales of petrochemical products given the weakening exports and the production shift outside of China for downstream processing companies due to US-China trade tension and the spreading of COVID-19, as well as the slowdown in economic growth due to the serious problem of debt default. However, in order to alleviate the impact on the economy, China government continues to roll out policies such as tax cuts, monetary easing, and the promotion of infrastructure investments to achieve the goal of "expanding domestic demand and stabilizing investments." Therefore, the demand for petrochemical products in China should not diminish significantly.

Besides, the upcycle of petrochemical industry normally lasts for only 2-3 years in a 10-year industry cycle, which is evidenced by the booming periods during 1993-1995 and 2003-2005. The upcycle this time was driven by the economic and demand growth in China since 2015, which has lasted for 4 years and marked the longest period within the upcycle period. However, as the wave of supply additions globally in the next 3 years will be greater than demand growth, the outlook for the petrochemical industry in 2020 is not so positive.

In the new year, facing the gloomy global economic growth and the massive wave of new supply additions, the Company has prepared for the long resistance war to overcome the incoming challenges. In addition to deepening AI applications, the Company will continue to develop the R&D of forward-looking and high value-added products, aiming to become the No.1 player in the world. In the meantime, to strengthen long-term competitiveness, the Company has combined the foundations in the past on automation and digitalization and applied new technologies such as AI, 5G, quantum computers and block chain to promote the digital

transformation of optimization in selling and production, the innovation of management, and improve the service quality.

Aside from this, there will be more days of maintenance shutdown for ethylene capacity in Taiwan in 2020 than that in 2019. The Company will seek for imports to cover the shortfall in raw material, aiming to reach the target of “full production and sales”. Also, in response to COVID-19, and to match the demand for customer that has shift its production outside of China, the Company will implement flexible sales strategies, diversify market into emerging markets such as South Asia, Southeast Asia, Africa, New Zealand and Australia, set up overseas warehouses in Bangladesh and the Netherlands to strengthen the function of overseas technical service offices, and at the same time expand differentiated products market to improve business performance.

In addition, as taking the sustainable development of industry and environment into account, the Company will continue to promote circular economy, energy saving and carbon reduction, and develop the key upstream raw materials for green plastic materials, in order to fulfill corporate social responsibilities. In addition, the Company will aggressively promote the transformation program of Renwu Complex, other capacity expansion and debottleneck projects. Through the efforts above, the Company expects to strengthen its business, reverse the business downturn and to make the breakthrough of the challenges in 2020 and maintain a steady performance.

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 2019 Business Report, Financial Statements, including Consolidated and Individual Financial Statement, 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 the Securities and Exchange Act and the Company Act, we hereby submit this report. Please be advised accordingly.

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

March 17, 20120

Ratification Items Proposal 1

Proposal: For approval of the 2019 Business Report and Financial Statements as required by the Company Act.

Proposed by the Board of Directors

Explanation:

• 1.The preparation of the Company’s 2019 Consolidated and Individual Financial Statements were The completed.

• aforementioned Financial Statement were reviewed by the Audit Committee and approved by the Board Meeting on March 17, 2020, and audited by independent auditors, Mr. Astor Kou 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.

• 2.For the aforementioned Business Report, please refer to page 4 through page 18 of the Meeting Handbook. As for the Financial Statements, please refer to page 30 through page 37 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 2019 Profits as required by the Company Act.

Proposed by the Board of Directors

Attachment:

Please refer to page 38 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 on March 17, 2020.

Resolution:

Discussion Items Proposal 1

Proposal: To amend the Articles of Incorporation of the Company, the corresponding comparison table for the current and amended articles is attached. Please discuss and resolve.

	Proposed by theBoard of Directors	Proposed by theBoard of Directors	Proposed by theBoard of Directors
Article	Current Article	Amended Article	Reason for Amendment
20	The Board shall consist of eleven to 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. (Omitted)	The Board shall consist of eleven to 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 includeat leastthree 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. (Omitted)	To conform to the needs of commercial practice, the company proposes to adjust the number of independent directors to increase flexibility.

Article	Current Article	Amended Article	Reason for Amendment
42	(Omitted)	Add “sixty-third amendment on June 10, 2020” to the existing Article.	To amend directors related articles, the Company encloses the date of the 63rd amendment.

Resolution:

Discussion Items Proposal 2

Proposal: Amendment to the Rules of Procedure for Shareholders’ Meetings of the Company. Please discuss and resolve.

Proposed by the Board of Directors Explanation: To refer to the sample template announced in the order Tai-Cheng-Chih-Li-Zi No. 1080024221 dated January 2, 2020 by the Taiwan Stock Exchange Corporation, certain articles of the Rules of Procedure for Shareholders’ Meetings 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	Reason for Amendment
Article 3	(above 4 paragraph omitted) Election or dismissal of directors, 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 Actor 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 notice of thecauses to convenethe shareholders’ meeting. None of the above	(above 4 paragraph omitted) Election or dismissal of directors, amendments to the Articles of Incorporation,capital reduction, application to be delisted from public offering, lifting of non-competition restriction of directors, capital increase by retained earnings, capital increase by capital reserve, dissolution, merger, or demerger of the corporation, or any matter under Paragraph 1 of Article 185 of the Company Act shall be set out in the notice of the reasons for conveningthe shareholders’ meeting. None of the above	Amended in line with Directive Letter No. 1080024221 announced by the Taiwan Stock Exchange Corporation (TWSE) on January 2, 2020.

	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 awritten 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	matters may be raised by an extraordinary motion. The content of such matters shall be uploaded
		to a website designated by the competent authority or the Company, and the website shall be specified
		on the meeting notice. Where the meeting agenda has specified general re-elections of the directors and the terms of the directors’ office, the terms of office
		of the directors shall not be altered by raising an extraordinary motion or any other method upon the completion of the general elections at the shareholders’meeting. A shareholder holding 1 percent or more of the total number of issued shares may submit to the Company a 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. However, when a shareholder’s proposal contains suggestions or recommendations for the

	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. (below omitted)	Company to enhance the public interest or facilitate the Company to
		fulfill its corporate social
		responsibility, the Board of Directors may include such proposal into the 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,the method of receiving such proposals (whether written or in electronic form),and the location and time period for their submission; the period for submission of shareholder proposals may not be less than 10 days. (below omitted)
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	If a shareholders’ meeting is convened by the Board of Director, the meeting agenda shall be set by the Board of Directors. The relevant	Amended in line with Directive Letter No. 1080024221 announced

	shall proceed in the order set by the agenda, which may not be changed without a resolution of the shareholders’ meeting. (paragraph 2~3 omitted) 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 callfor a vote.	proposals (including extraordinary motions and amendment to original proposals) shall be decided by voting on a	by the Taiwan Stock Exchange Corporation (TWSE) on January 2, 2020.
		case-by-case basis.The meeting shall proceed in the order set by the agenda, which may not be changed without a resolution of the shareholders’ meeting. (paragraph 2~3 omitted) 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 shall also arrange ample time for a vote.
Article 13	(paragraph 1 omitted) 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	(paragraph 1 omitted) When the Company convenes a shareholders’ meeting,shareholders shall exercise their voting	Amended in line with Directive Letter No. 1080024221 announced by the Taiwan Stock Exchange
		rights by electronic means and may exercise their voting rights in writing.When voting rights are exercised in

	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. (below omitted)	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. (paragraph 3~6 omitted) In addition to the proposals on the meeting agenda, when a shareholder wishes to propose an extraordinary motion, the shareholder’s	Corporation (TWSE) on January 2, 2020. Qualification for proposing an extraordinary motion has been specified pursuant to the Company's actual processing needs.
		voting rights shall represent at least 1% or more of the Company’s total issued shares. (below omitted)
Article 15	(paragraph 1~2 omitted) 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	(paragraph 1~2 omitted) 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	Amended in line with Directive Letter No. 1080024221 announced by the Taiwan Stock

	deliberations and their results, and shall be retained for the duration of the existence of the Company.	deliberations and their results(including the weight of the votes), and the number of weighted votes each candidate received in case of a Directors'elections, and shall be retained for the duration of the existence of the Company.	Exchange Corporation (TWSE) on January 2, 2020.

Resolution:

6

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

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

4000 Operating revenue (Notes 6(r) and 7) 5000 Operating costs (Notes 6(e)(g)(h)(n)(s) and 7) Gross profit Operating expenses (Notes 6(c)(g)(h)(n)(s) and 7): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses 6450 Expected credit loss (gain) Total operating expenses Operating income Non-operating income and expenses (Notes 6(f)(g)(m)(t) and 7): 7010 Other income 7020 Other gains and losses 7050 Finance costs 7060 Recognized share of profit of associates and joint ventures accounted for using equity method, net Total non-operating income and expenses Profit from continuing operations before tax 9300 Less: Income tax expenses(Note 6(o)) Profit 8300 Other comprehensive income (loss): (Note 6(o)(p)(q)) 8310 Components of other comprehensive income (loss) that will not be reclassified to profit or loss 8311 Losses on remeasurements of defined benefit plans 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8320 Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income (loss) that will be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements 8370 Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income (loss) 8500 Total comprehensive income (loss) Basic earnings per share (Note 6(q))	2019	2019	% 100 85 15 3 2 - - 5 10 4 - (1) 7 10 20 2 18 - - (1) - (1) (2) - - (2) (3) 15 fter 5.86	2018 Amount % 230,370,027 100 193,061,959 84 37,308,068 16 6,114,350 3 4,713,287 2 1,138,174 - 945 - 11,966,756 5 25,341,312 11 8,344,017 4 807,515 - (1,480,040) (1) 24,079,572 10 31,751,064 13 57,092,376 24 7,542,836 3 49,549,540 21 (285,593) - (12,003,865) (5) (4,615,730) (2) (169,178) - (16,736,010) (7) 1,770,369 1 392,426 - 522,685 - 1,640,110 1 (15,095,900) (6) 34,453,640 15 Before After 8.97 7.78
	Amount $207,848,572 175,734,622 32,113,950 6,071,615 4,601,134 1,246,402 (1,567) 11,917,584 20,196,366 8,967,238 (319,456) (1,359,114) 14,734,118 22,022,786 42,219,152 4,894,990 37,324,162 (329,854) (1,074,161) (1,728,457) (65,971) (3,066,501) (3,418,914) (473,462) (190,273) (3,702,103) (6,768,604) $ 30,555,558 Before A $ 6.63

See accompanying notes to consolidated financial statements.

5

(English Translation of Financial Statements and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

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

4000 Operating revenue (Notes 6(r) and 7) 5000 Operating costs (Notes 6(e)(g)(h)(n)(s) and 7) Gross profit 5920 Add: Realized profit (loss) on from sales Gross profit from operations Operating expenses (Notes 6(c)(g)(h)(n)(s) and 7): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses 6450 Expected credit loss (gain) Total operating expenses Operating income Non-operating income and expenses (Notes 6(f)(n)(t) and 7): 7010 Other income 7020 Other gains and losses 7050 Finance costs 7070 Share of profit of associates and joint ventures accounted for using equity method, net Total non-operating income and expenses Profit from continuing operations before tax 6400 Less: Income tax expenses (Note 6(o)) Profit 8300 Other comprehensive income (loss) (Note (n)(o)(p)): 8310 Components of other comprehensive income (loss) that will not be reclassified to profit or loss 8311 Losses on remeasurements of defined benefit plans 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8330 Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income (loss) that will be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements 8380 Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income (loss) Total comprehensive income (loss) 9710 Basic earnings per share -before income tax (Note 6(q))

2019

See accompanying notes to financial statements.

9710 Basic earnings per share -before income tax (Note 6(q))

					December 31, 2018	Amount %			20,398,302 4	11,995,636 3	4,278,011 1	7,866,286 2	4,739,699 1	11,390,216 2	- -	4,598,557 1	4,541,715 1	13,242,719 3		83,051,141 18	83,051,141 18			32,556,004 6	6,281,339 1	16,670,784 4	- -	7,123,118 1	262,880 -	62,894,125 12		145,945,266 30			63,657,408 13	11,713,842 2			57,103,815 11	58,778,533 12	82,499,843 16		198,382,191 39		81,814,560 16		355,568,001 70		501,513,267 100
					December 31, 2019	Amount %			20,255,096 4	14,991,544 3	4,215,436 1	6,847,390 1	1,956,466 -	23,634,300 5	32,878 -	- -	4,666,096 1	12,684,172 3		89,283,378 18				32,564,312 7	1,944,444 -	17,028,048 4	19,319 -	6,910,706 1	184,432 -	58,651,261 12		147,934,639 30			63,657,408 13	11,724,498 2			62,058,769 12	63,968,902 13	72,320,189 15		198,347,860 40		75,423,554 15		349,153,320 70		497,087,959 100
									$																																								$
(English Translation of Consolidated Financial Statements Originally Issued in Chinese)	FORMOSA PLASTICS CORPORATION AND SUBSIDIARIES	Consolidated Balance Sheets	December 31, 2019 and 2018	(Expressed in Thousands of New Taiwan Dollars)	December 31, 2019 December 31, 2018	Amount % Amount % Liabilities and Equity		Current liabilities:	18,165,952 4 23,310,772 5 2100 Short-term borrowings (Notes 6(i))	4,044,356 1 4,017,249 1 2110 Short-term notes and bills payable (Note 6(j))	2170 Accounts payable	102,342,079 20 98,426,404 20 2180 Accounts payable－related parties (Note 7)	2,584,690 - 2,432,446 - 2200 Other payables	7,392,229 1 9,422,032 2 2220 Other payables－related parties (Note 7)	3,562,016 1 4,295,591 1 2280 Current lease liabilities (Note 6(m))	997,608 - 1,381,590 - 2321 Current portion of bonds payable (Note 6(l))	14,791,036 3 16,692,844 3 2322 Current portion of long-term debts (Notes 6(k) and 8)	18,269,476 4 20,756,740 4 2399 Other current liabilities (Note 7)		3,467,418 1 3,526,561 1 Total current liabilities		175,616,860 35 184,262,229 37 Non-Current liabilities:		21,408,559 4 26,542,369 5 2530 Bonds payable (Note 6(l))	202,446,613 41 203,967,598 42 2540 Long-term debts (Note 6(k) and 8)	85,635,983 17 76,618,563 15 2570 Deferred tax liabilities (Note 6(o))	1,055,171 - - - 2580 Non-current lease liabilities (Note 6(m))	423,488 - 430,613 - 2640 Net defined benefit liabilities (Note 6(n))	2,871,940 1 2,455,815 - 2670 Other non-current liabilities	7,629,345 2 7,236,080 1 Total non-current liabilities		321,471,099 65 317,251,038 63 Total liabilities		Equity (Note 6(p)):	3110 Common stock	3200 Capital surplus		Retained earnings:	3310 Legal reserve	3320 Special reserve	3350 Unappropriated retained earnings		Total retained earnings		3400 Other components of equity		Total equity		497,087,959 100 501,513,267 100 Total liabilities and equity
									$																																								$
						Assets		Current assets:	Cash and cash equivalents (Note 6(a))	Current financial assets at fair value through profit or loss (Note 6(b))	Current financial assets at fair value through other comprehensive income (Note	6(b))	Notes receivable (Notes 6(c)(r))	Accounts receivable, net (Notes 6(c)(r))	Accounts receivable－related parties (Notes 6(c)(r) and 7)	Other receivables (Note 6(d))	Other receivables－related parties (Notes 6(d) and 7)	Inventories (Note 6(e))		Other current assets		Total current assets		Financial assets at fair value through other comprehensive income-non-current (Note 6(b))	Investments accounted for using equity method (Note 6(f) and 8)	Property, plant and equipment (Note 6(g), 7 and 8)	Right-of-use assets (Note 6(h))	Intangible assets	Deferred tax assets (Note 6(o))	Other non-current assets (Note 8) Total non-current assets																			Total assets
									1100	1110	1120		1150	1170	1180	1200	1210	130X		1470				1517	1550	1600	1755	1780	1840	1900

					December 31, 2018	Amount %			14,343,680 3	11,995,636 3	2,871,571 1	7,947,619 2	4,570,797 1	1,167,103 -	- -	4,598,557 1	2,284,327 -	10,899,670 2		60,678,960 13	60,678,960 13			32,556,004 7	4,628,711 1	16,670,784 3	- -	7,123,118 2	158,998 -	61,137,615 13		121,816,575 26			63,657,408 13	11,713,842 3	11,713,842 3		57,103,815 12	58,778,533 12	82,499,843 17		198,382,191 41		81,814,560 17	81,814,560 17	355,568,001 74		477,384,576 100	477,384,576 100
					December 31, 2019	Amount %			$ 16,170,175 4	14,991,544 3	2,775,256 1	6,743,427 1	1,772,799 -	1,099,004 -	32,878 -	- -	3,488,889 1	9,681,968 2		56,755,940 12				32,564,312 7	1,944,444 -	17,028,048 4	19,319 -	6,910,706 2	69,481 -	58,536,310 13		115,292,250 25			63,657,408 14	11,724,498 2			62,058,769 13	63,968,902 14	72,320,189 16		198,347,860 43		75,423,554 16		349,153,320 75		$ 464,445,570 100
(English Translation of Financial Statements and Report Originally Issued in Chinese)	FORMOSA PLASTICS CORPORATION	Balance Sheets	December 31, 2019 and 2018	(Expressed in Thousands of New Taiwan Dollars)	December 31, 2019 December 31, 2018	Amount % Amount % Liabilities and Equity		Current liabilities:	$ 12,301,257 3 18,941,635 4 2100 Short-term borrowings (Notes 6(i))	4,044,356 1 4,017,249 1 2110 Short-term notes and bills payable (Note 6(j))	102,342,079 22 98,426,404 21 2170 Accounts payable	2180 Accounts payable－related parties (Note 7)	4,931,809 1 6,977,979 2 2200 Other payables	5,294,496 1 5,809,131 1 2220 Other payables－related parties (Note 7)	970,934 - 1,376,297 - 2280 Current lease liabilities (Note 6(m))	15,903,748 3 18,227,744 4 2321 Current portion of bonds payable (Note 6(l))	10,682,599 2 14,196,795 3 2322 Current portion of long-term debts (Notes 6(k) and 8)	2,344,034 1 1,943,604 - 2399 Other current liabilities		158,815,312 34 169,916,838 36 Total current liabilities			Non-Current liabilities:	9,924,415 2 10,038,913 2 2530 Bonds payable (Note 6(l))	249,152,130 54 252,285,317 53 2540 Long-term debts (Note 6(k))	39,280,562 9 38,227,497 8 2570 Deferred tax liabilities (Note 6(o))	51,805 - - - 2580 Non-current lease liabilities (Notes 6(m))	124,762 - 124,762 - 2640 Net defined benefit liabilities (Note 6(n))	1,861,535 - 1,928,942 - 2670 Other non-current liabilities	5,235,049 1 4,862,307 1 Total non-current liabilities		305,630,258 66 307,467,738 64 Total liabilities		Equity (Notes 6(p)):	3110 Common stock	3200 Capital surplus		Retained earnings:	3310 Legal reserve	3320 Special reserve	3350 Unappropriated retained earnings		Total retained earnings		3400 Other components of equity		Total equity		$ 464,445,570 100 477,384,576 100 Total liabilities and equity
						Assets		Current assets:	Cash and cash equivalents (Note 6(a))	Current financial assets at fair value through profit or loss (note 6(b))	Current financial assets at fair value through other comprehensive income	(Note 6(b))	Notes and accounts receivable, net (Notes 6(c))	Accounts receivable－related parties (Note 6(c) and 7)	Other receivables (Notes 6(d))	Other receivables－related parties (Note 6(d) and 7)	Inventories (note 6(e))	Other current assets		Total current assets			Non-current assets:	Financial assets at fair value through other comprehensive income-non- current (Note 6(b))	Investments accounted for using equity method (Note 6(f) and 7)	Property, plant and equipment (Notes 6(g), 7 and 8)	Right-of-use assets (Notes 6(h))	Intangible assets	Deferred tax assets (Note 6(o))	Other non-current assets (Notes 8) Total non-current assets																			Total assets
									1100	1110	1120		1170	1180	1200	1210	130X	1470						1510	1550	1600	1755	1780	1840	1900

															Total equity	345,010,166	12,337,702		357,347,868		49,549,540		(15,095,900)	(15,095,900)	34,453,640			-	-	(36,284,722)		(12,698)			(27,612)	91,525		355,568,001	37,324,162		(6,768,604)	(6,768,604)	30,555,558			-	-	(36,921,297)		(59,598)			4,003	6,653		349,153,320	349,153,320
													Gains (losses)	on hedging	instruments	-	9,551		9,551		-		(28,314)		(28,314)			-	-	-		-			-	-		(18,763)	-		19,542		19,542			-	-	-		-			-	-		779
(English Translation of Consolidated Financial Statements Originally Issued in Chinese)	FORMOSA PLASTICS CORPORATION AND SUBSIDIARIES	Consolidated Statements of Changes in Equity	For the years ended December 31, 2019 and 2018	(Expressed in Thousands of New Taiwan Dollars)	Equity attributable to owners of parent	Total other equity interest	Retained earnings Unrealized	gains	on financial	Exchange assets Unrealized	differences on measured at gains (losses) Gains (losses)	translation of fair value on available- on effective	Unappropriate foreign through other for-sale portion of	Capital Legal Special d retained financial comprehensive financial cash flow	surplus reserve reserve earnings statements income assets hedges	11,649,929 52,165,530 51,285,206 78,699,082 (3,225,029) - 90,768,489 9,551	- - - 3,181,817 - 99,924,374 (90,768,489) (9,551)		11,649,929 52,165,530 51,285,206 81,880,899 (3,225,029) 99,924,374 - -		- - - 49,549,540 - - - -		- - - (201,564) 1,668,424 (16,534,446) - -		- - - 49,347,976 1,668,424 (16,534,446) - -			- 4,938,285 - (4,938,285) - - - -	- - 7,493,327 (7,493,327) - - - -	- - - (36,284,722) - - - -		- - - (12,698) - - - -			(27,612) - - - - - - -	91,525 - - - - - - -		11,713,842 57,103,815 58,778,533 82,499,843 (1,556,605) 83,389,928 - -	- - - 37,324,162 - - - -		- - - (377,598) (3,721,645) (2,688,903) - -		- - - 36,946,564 (3,721,645) (2,688,903) - -			- 4,954,954 - (4,954,954) - - - -	- - 5,190,369 (5,190,369) - - - -	- - - (36,921,297) - - - -		- - - (59,598) - - - -			4,003 - - - - - - -	6,653 - - - - - - -		11,724,498 62,058,769 63,968,902 72,320,189 (5,278,250) 80,701,025 - -
							Share capital							Ordinary	shares	63,657,408	-		63,657,408		-		-		-			-	-	-		-			-	-		63,657,408	-		-		-			-	-	-		-			-	-		63,657,408
																$																																								$
																Balance at January 1, 2018	Effects of retrospective application		Equity at beginning of period after adjustments		Net Income for the period	Other comprehensive income (loss) for the period, net of income	tax		Total comprehensive income (loss) for the period		Appropriation and distribution of retained earnings:	Legal reserve appropriated	Special reserve appropriated	Cash dividends of ordinary share	Changes in equity of associates and joint ventures accounted for	using equity method	Other changes in capital surplus:	Changes in equity of associates and joint ventures accounted for	using equity method	Other changes in capital surplus		Balance at December 31, 2018	Net Income for the period	Other comprehensive income (loss) for the period, net of income	tax		Total comprehensive income (loss) for the period		Appropriation and distribution of retained earnings:	Legal reserve appropriated	Special reserve appropriated	Cash dividends of ordinary share	Changes in equity of associates and joint ventures accounted for	using equity method	Other changes in capital surplus:	Changes in equity of associates and joint ventures accounted for	using equity method	Other changes in capital surplus		Balance at December 31, 2019

													Total equity	345,010,166	12,337,702		357,347,868		49,549,540	(15,095,900)	(15,095,900)	34,453,640			-	-	(36,284,722)	(12,698)		(27,612)		91,525		355,568,001	37,324,162	(6,768,604)	(6,768,604)	30,555,558			-	-	(36,921,297)	(59,598)		4,003	6,653		349,153,320	349,153,320
											Gains (losses)	on hedging	instruments	-	9,551		9,551		-	(28,314)		(28,314)			-	-	-	-		-		-		(18,763)	-	19,542		19,542			-	-	-	-		-	-		779
FORMOSA PLASTICS CORPORATION	Statements of Changes in Equity	For the years ended December 31, 2019 and 2018	(Expressed in Thousands of New Taiwan Dollars)	Total other equity interest	Share capital Retained earnings Unrealized	gains	on financial	Exchange assets	differences on measured at Unrealized	translation of fair value gains (losses) Gains (losses)	Unappropriated foreign through other on available- on effective	Ordinary retained financial comprehensive for-sale portion of cash	shares Capital surplus Legal reserve Special reserve earnings statements income financial assets flow hedges	63,657,408 11,649,929 52,165,530 51,285,206 78,699,082 (3,225,029) - 90,768,489 9,551	- - - - 3,181,817 - 99,924,374 (90,768,489) (9,551)		63,657,408 11,649,929 52,165,530 51,285,206 81,880,899 (3,225,029) 99,924,374 - -		- - - - 49,549,540 - - - -	- - - - (201,564) 1,668,424 (16,534,446) - -		- - - - 49,347,976 1,668,424 (16,534,446) - -			- - 4,938,285 - (4,938,285) - - - -	- - - 7,493,327 (7,493,327) - - - -	- - - - (36,284,722) - - - -	- - - - (12,698) - - - -		- (27,612) - - - - - - -		- 91,525 - - - - - - -		63,657,408 11,713,842 57,103,815 58,778,533 82,499,843 (1,556,605) 83,389,928 - -	- - - - 37,324,162 - - - -	- - - - (377,598) (3,721,645) (2,688,903) - -		- - - - 36,946,564 (3,721,645) (2,688,903) - -			- - 4,954,954 - (4,954,954) - - - -	- - - 5,190,369 (5,190,369) - - - -	- - - - (36,921,297) - - - -	- - - - (59,598) - - - -		- 4,003 - - - - - - -	- 6,653 - - - - - - -		63,657,408 11,724,498 62,058,769 63,968,902 72,320,189 (5,278,250) 80,701,025 - -
														$																																			$
														Balance at January 1, 2018	Effects of retrospective application		Equity at beginning of period after adjustments		Net Income for the period	Other comprehensive income (loss) for the period		Total comprehensive income (loss) for the period		Appropriation and distribution of retained earnings:	Legal reserve appropriated	Special reserve appropriated	Cash dividends of ordinary share	Changes in equity of associates and joint ventures accounted	Other changes in capital surplus:	Changes in equity of associates and joint ventures accounted for	using equity method	Other changes in capital surplus		Balance at December 31, 2018	Net Income for the period	Other comprehensive income (loss) for the period		Total comprehensive income (loss) for the period		Appropriation and distribution of retained earnings:	Legal reserve appropriated	Special reserve appropriated	Cash dividends of ordinary share	Changes in equity of associates and joint ventures accounted	Other changes in capital surplus:	Capital surplus used to offset accumulated deficits	Other changes in capital surplus		Balance at December 31, 2019

8

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from operating activities: Income before income tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Expected credit loss / Provision for credit loss Net gain on financial assets or liabilities at fair value through profit Interest expense Interest income Dividend income Share of profit of associates and joint ventures accounted for using equity method Gain on disposal of property, plant and equipment Gain on disposal of right-of-use assets Impairment loss on non-financial assets Unrealized foreign exchange loss Total adjustments to reconcile profit Changes in operating assets and liabilities: Changes in operating assets: Notes receivable Accounts receivable Accounts receivable due from related parties Other receivable Other receivable due from related parties Inventories Other current assets Total changes in operating assets Changes in operating liabilities: Accounts payable Accounts payable to related parties Other payable Other payable to related parties Other current liabilities Net defined benefit liability Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from operating activities Cash flows (used in) from investing activities: Acquisition of financial assets at fair value through other comprehensive income Proceeds from disposal of financial assets at fair value through profit or loss Acquisition of investments accounted for using equity method Proceeds from capital reduction of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Decrease(increase) in other receivables due from related parties Acquisition of right-of-use assets Proceeds from disposal of right-of-use assets Increase in other non-current assets Net cash flows used in investing activities Cash flows from (used in) financing activities: Increase in short-term borrowings Decrease in short-term borrowings Increase in short-term notes and bills payable Proceeds from issuing bonds Repayments of bonds Proceeds from long-term debt Repayments of long-term debt Increase in due to related parties (recognized as other payables－related parties) Payment of lease liabilities Decrease in other non-current liabilities Cash dividends paid Net cash flows used in financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period		2019 2018 $ 42,219,152 57,092,376 6,909,994 6,936,928 481,013 514,967 (1,567) 945 (27,107) (215,889) 1,359,114 1,480,040 (623,668) (660,660) (8,186,145) (7,511,680) (14,734,118) (24,079,572) (31,109) (119,338) (12,834) - - 911,512 1,755,009 14,651 (13,111,418) (22,728,096) (152,244) 619,432 1,938,516 (1,461,514) 733,575 615,879 371,720 (62,057) (391,997) (378,511) 2,444,492 (3,204,370) 127,399 416,317 5,071,461 (3,454,824) (91,835) 225,031 (1,165,761) (586,149) (560,817) 155,487 806,845 164,647 (608,817) 230,485 (542,266) (139,425) (2,162,651) 50,076 2,908,810 (3,404,748) (10,202,608) (26,132,844) 32,016,544 30,959,532 635,930 644,092 22,475,201 25,574,093 (1,363,206) (1,488,457) (7,184,041) (5,181,983) 46,580,428 50,507,277 (229,555) (1,676,070) - 772,908 (1,951,323) (4,461,444) - 1,127,075 (17,293,279) (15,672,540) 44,773 222,276 (52,559) (55,830) 2,293,804 (647,826) (684,825) - 13,630 - (2,657,326) (100,860) (20,516,660) (20,492,311) 341,549,459 396,653,692 (341,928,883) (391,181,044) 3,000,000 2,500,000 - 9,300,000 (4,600,000) (5,700,000) 2,300,000 - (6,491,026) (5,813,964) 11,663,632 5,801,540 (32,421) - (78,446) (20,421) (36,927,613) (36,293,430) (31,545,298) (24,753,627) 336,710 (115,712) (5,144,820) 5,145,627 23,310,772 18,165,145 $ 18,165,952 23,310,772

See accompanying notes to consolidated financial statements.

7

(English Translation of and Report Originally Issued in Chinese) FORMOSA PLASTICS CORPORATION

Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from operating activities: Income before income tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Expected credit loss / Provision for credit loss Interest expense Net gain arising from financial assets at fair value through profit Interest income Dividend income Share of profit of associates and joint ventures accounted for using equity method Gain on disposal of property, plant and equipment Realized (profit) loss on from sales Unrealized foreign exchange gain Total adjustments to reconcile profit Changes in operating assets and liabilities: Changes in operating assets: Notes and accounts receivable Accounts receivable due from related parties Other receivable Other receivable due from related parties Inventories Other current assets Total changes in operating assets Changes in operating liabilities: Accounts payable Accounts payable to related parties Other payable Other payable to related parties Other current liabilities Net defined benefit liability Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from operating activities Cash flows (used in) from investing activities: Acquisition of financial assets at fair value through other comprehensive income Proceeds from disposal of financial assets designated at fair value through profit or loss Acquisition of investments accounted for using equity method Proceeds from capital reduction of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease (increase) in other receivables due from related parties (Increase) decrease in other non-current assets Net cash flows used in investing activities Cash flows from (used in) financing activities: Increase in short-term borrowings Decrease in short-term borrowings Increase in short-term notes and bills payable Proceeds from issuing bonds Repayments of bonds Proceeds from long-term debt Repayments of long-term debt Decrease in lease payable Decrease in other non-current liabilities Cash dividends paid Net cash flows used in financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period		2019 2018 $ 41,792,121 57,046,158 3,909,081 4,195,963 133,555 157,087 (1,567) 945 931,962 968,554 (27,107) (215,889) (519,376) (599,064) (8,186,145) (7,511,680) (16,390,959) (24,320,374) (31,614) (66,465) (42,800) 16,848 (281,878) (80,495) (20,506,848) (27,454,570) 2,140,592 (1,104,424) 514,635 486,098 393,102 (59,193) 180,510 (877,575) 3,471,424 (2,291,351) (320,824) (326,457) 6,379,439 (4,172,902) (96,315) (1,825) (1,204,191) (551,543) (398,575) (1,228,996) (68,099) 59,252 (1,201,193) (390,875) (542,266) (139,425) (3,510,639) (2,253,412) 2,868,800 (6,426,314) (17,638,048) (33,880,884) 24,154,073 23,165,274 536,374 583,027 22,475,202 25,574,092 (952,564) (968,427) (6,253,106) (5,007,157) 39,959,979 43,346,809 (229,555) - - 772,908 (5,044,323) (6,137,514) - 1,127,075 (4,899,716) (8,682,664) 44,769 70,439 2,150,603 (616,504) (487,361) 93,963 (8,465,583) (13,372,297) 333,165,116 375,117,873 (331,348,845) (367,434,810) 3,000,000 2,500,000 - 9,300,000 (4,600,000) (5,700,000) 2,300,000 - (3,788,889) (2,988,889) (32,421) - (89,518) (97,609) (36,927,613) (36,293,430) (38,322,170) (25,596,865) 187,396 64,654 (6,640,378) 4,442,301 18,941,635 14,499,334 $ 12,301,257 18,941,635

See accompanying notes to financial statements.

Formosa Plastics Corporation Statement of Profits Distribution For the year of 2019

Unit ： NT$

		Unit：NT$
Items		Amount
Available for Distribution: 1.Unappropriated retained earnings of previous years 2.Effect on long-term equity investment not recognized by shareholding percentage 3.Other comprehensive income transferred to unappropriated retained earnings of current year 4.Net profit after tax of current year Total 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 ( $4.4 per share) 4.Unappropriated retained earnings carried forward to next year Total		35,433,602,677 -59,599,260 -377,597,612 37,324,162,012
		72,320,567,817
		3,732,416,201 4,910,773,792 28,009,259,436 35,668,118,388
		72,320,567,817
Explanation	1.The Company plans to distribute dividends of $4.4 per share for current year (among which, $2.21 per share will be distributed as dividends and $2.19 per share will be distributed as bonus); all of which are cash dividends. 2. The Company distributes dividends and bonus for a total of $28,009,259,436; all of which are from net profit after tax of 2019. 3. Effect of Changes on long-term equity investment is changes in equities of long-term investments due to the reinvested company launching a stock repurchase. 4. Other comprehensive income transferred to unappropriated earnings of current year is 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.