SSFC — Annual Report 2018

Nov 13, 2018

Shinkong Synthetic Fibers Corporation and Subsidiaries

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

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2018 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as of and for the year ended December 31, 2018, as provided in International Financial Reporting Standards 10 “Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we did not prepare a separate set of consolidated financial statements of affiliates.

Very truly yours,

SHINKONG SYNTHETIC FIBERS CORPORATION

By

March 25, 2019

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Shinkong Synthetic Fibers Corporation

Opinion

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

In our opinion, based on our audits and the reports of other auditors (please refer to the Other Matter paragraph), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matters

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

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The descriptions of the key audit matters of the consolidated financial statements for the year ended December 31, 2018 are as follows:

Assessment of Impairment Loss of Inventories

Changes in technology may result in slow-moving or obsolete inventories, or cause the net realizable value of inventories to be lower than the cost due to the decline in selling price. Since the balance of inventories is significantly large in the consolidated financial statements for the year ended December 31, 2018 and assessment of impairment involves management’s judgment, the assessment of impairment loss of inventories has been deemed as a key audit matter.

We understood the effectiveness of the following internal control operations:

1. Whether the loss on impairment of inventory was recognized according to the Group’s policy regularly.

2. Whether the assessment on impairment of inventory was reviewed by responsible personnel.

We obtained the data on the assessment of impairment of inventories to check whether the policy of Shinkong Synthetic Fibers Corporation is complied with and whether the calculations were reasonable. We sampled the inventory list on the balance sheet date to verify the selling price data used to evaluate the net realizable value. We evaluated the reasonableness of inventory impairment by performing physical inspection, testing the inventory aging, and comparing the historical levels of write-offs against the amounts stated.

For other relevant disclosures, refer to Note 4(f): Summary of significant accounting policies, Note 5(c): Critical accounting judgments and key sources of estimation uncertainty and Note 16.

Allowance for Expected Credit Loss on Loans

Taipei Star Bank, the financial securities department of the Group, measures the allowance for expected credit loss on loans to reflect the estimation of expected credit loss, and takes into consideration whether credit risk has increased significantly since initial recognition and the impact of the default rate and default loss rate estimated using observable data and historical default experience data. The balance of allowance for expected credit loss on loans as of December 31, 2018 was $561,585 thousand, representing 1.17% of total loans, and the gain on reversal of expected credit loss recognized in the consolidated statements of comprehensive income was $29,085 thousand for the year ended December 31, 2018. Since the assessment of allowance for expected credit loss of loans involves management’s significant judgments such as estimates and assumptions, the allowance for expected credit loss on loans was deemed to be a key audit matter.

We understood the internal controls related to the assessment of allowance for expected credit loss on loans.

We identified companies that might default on loan payments by reviewing publicly available information and confirmed if such companies are the counterparties of Shinkong Synthetic Fibers Corporation and if they have been individually assessed. With respect to individually assessed expected credit losses on loans, we sampled the loans with significant expected credit losses and assessed the reasonableness of estimates of future expected cash flows. With respect to collectively assessed expected credit losses on loans, we assessed the reasonableness of significant assumptions and inputs used in the calculation of expected credit loss, whether they are in line with the actual situation and historical experience. We also sampled and examined the appropriateness of classification of loans and assessed if the calculation of the allowance for expected credit loss on loans was in accordance with related laws and rules from the authorities.

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For other relevant disclosures, refer to Notes 17 and 45.

Other Matter

We did not audit the financial statements of Shinpont Industry Inc., a subsidiary included in the consolidated financial statements of the Group, as of and for the year ended December 31, 2017, but such statements were audited by other auditors. Our opinion, insofar as it relates to the amounts included for Shinpont Industry Inc., is based solely on the report of other auditors. As of December 31, 2017, the total assets of Shinpont Industry Inc. was $1,144,958 thousand, representing 0.79% of consolidated total assets, and total liabilities was $176,556 thousand, representing 0.16% of consolidated total liabilities. For the year ended December 31, 2017, total comprehensive income was $292,722 thousand, representing 12.87% of consolidated total comprehensive income.

We have also audited the parent company only financial statements of Shinkong Synthetic Fibers Corporation as of and for the years ended December 31, 2018 and 2017 on which we have issued an unmodified opinion.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

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

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

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

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

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

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

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

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

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

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The engagement partners on the audit resulting in this independent auditors’ report are Chin-Yen Wang and Chin-Chuan Shih.

Deloitte & Touche Taipei, Taiwan Republic of China

March 25, 2019

Notice to Readers

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

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

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SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 3, 4, 6 and 40) Due from the Central Bank and call loans to other banks (Note 7) Financial assets at fair value through profit or loss - current (Notes 3, 4, 8 and 40) Financial assets at fair value through other comprehensive income - current (Notes 3, 4, 9, 40 and 42) Available-for-sale financial assets - current (Notes 3, 4, 11, 40 and 42) Financial assets at amortized cost - current (Notes 3, 4, 10, 40 and 42) Financial assets measured at cost - current (Notes 3, 4 and 14) Bills and bonds purchased under resale agreements (Notes 4 and 12) Other financial assets - current (Notes 40 and 42) Notes receivable, net (Notes 3, 4, 5, 15, 40 and 41) Trade receivables, net (Notes 3, 4, 5, 15, 40 and 41) Other receivables (Notes 3, 4, 5, 15, 40 and 41) Margin loans receivable Customer margin accounts Inventories (Notes 4, 5, 16 and 24) Prepayments Other current assets (Note 24) Discounts and loans, net (Notes 17 and 41) Total current assets NON-CURRENT ASSETS Financial assets at fair value through other comprehensive income - non-current (Notes 3, 4, 9, 40 and 42) Available-for-sale financial assets - non-current (Notes 3, 4, 11, 40 and 42) Held-to-maturity financial assets - non-current (Notes 3, 4, 13, 40 and 42) Financial assets at amortized cost - non-current (Notes 3, 4, 10, 40 and 42) Financial assets measured at cost - non-current (Notes 3, 4 and 14) Investments accounted for using the equity method (Notes 4, 19 and 41) Other financial assets - non-current (Notes 40 and 42) Property, plant and equipment (Notes 4, 20 and 42) Investment properties (Notes 4, 21 and 42) Goodwill (Notes 4 and 22) Other intangible assets (Note 4) Deferred tax assets (Notes 4 and 35) Other non-current assets (Notes 24 and 42) Operating deposits and settlement funds (Note 23) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 25, 40 and 42) Short-term bills payable (Notes 25 and 40) Bills and bonds sold under repurchase agreements (Notes 4 and 12) Financial liabilities at fair value through profit or loss - current (Notes 4, 8 and 40) Other financial liabilities - current (Notes 27 and 40) Due to the Central Bank and other banks Notes payable (Notes 28 and 40) Trade payables (Notes 28 and 40) Other payables (Notes 30 and 40) Securities financing refundable deposits (Note 4) Deposits payable for securities financing (Note 4) Futures traders' equity Current tax liabilities (Note 35) Current portion of long-term borrowings and bonds payable (Notes 4, 25, 40 and 42) Other current liabilities (Notes 4 and 30) Deposits and remittances (Notes 29 and 41) Total current liabilities NON-CURRENT LIABILITIES Bonds payable (Notes 26 and 40) Long-term borrowings (Notes 25, 40 and 42) Other financial liabilities - non-current (Notes 27 and 40) Provisions - non-current (Notes 4 and 31) Guarantee deposits received (Note 30) Other non-current liabilities (Notes 4 and 30) Deferred tax liabilities (Notes 4 and 35) Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Note 33) Share capital Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Treasury shares Total equity attributable to owners of the Company NON-CONTROLLING INTERESTS Total equity TOTAL		2018 Amount % $ 6,707,050 5 2,954,330 2 1,512,211 1 3,296,399 2 - - 1,128,594 1 - - 5,170,276 4 140,480 - 749,034 - 6,782,797 5 770,094 1 3,362,119 2 650,258 - 5,396,381 4 319,769 - 1,114,002 1 47,402,725 33 87,456,519 61 6,721,618 5 - - - - 22,788,498 16 - - 966,326 1 143,116 - 20,186,685 14 2,127,997 1 280,248 - 13,641 - 382,820 - 2,502,279 2 294,579 - 56,407,807 39 $ 143,864,326 100 $ 5,864,128 4 2,289,412 2 3,714,367 3 12,890 - 20,209 - 6,129,929 4 236,990 - 4,325,239 3 2,006,876 1 935,069 1 1,013,811 1 649,712 - 389,366 - 1,282,051 1 492,025 - 67,829,408 47 97,191,482 67 1,330,000 1 6,392,629 4 5,207 - 665,002 1 53,752 - 27,719 - 1,233,353 1 9,707,662 7 106,899,144 74 16,184,093 11 1,575,677 1 1,082,892 1 2,723,600 2 5,263,773 3 9,070,265 6 1,950,952 2 (29,834) - 28,751,153 20 8,214,029 6 36,965,182 26 $ 143,864,326 100		2017
				Amount % $ 6,671,307 5 3,178,949 2 1,840,699 1 - - 3,776,991 3 - - - - 6,884,863 5 1,100,354 1 675,415 - 7,499,561 5 475,925 - 4,811,546 3 530,141 - 3,972,773 3 560,814 - 806,081 1 45,923,574 32 88,708,993 61 - - 6,676,086 5 21,195,933 15 - - 244,023 - 888,952 1 - - 21,230,695 15 2,142,375 1 279,945 - 12,974 - 421,072 - 2,350,816 2 303,947 - 55,746,818 39 $ 144,455,811 100 $ 4,433,225 3 4,443,967 3 4,929,245 4 6,858 - 19,249 - 6,086,687 4 312,480 - 4,936,502 4 1,815,968 1 904,425 1 974,010 1 529,744 - 276,979 - 1,835,385 1 473,086 - 67,419,010 47 99,396,820 69 1,000,000 1 6,576,192 4 25,416 - 910,009 1 48,341 - 36,119 - 1,094,409 1 9,690,486 7 109,087,306 76 16,184,093 11 1,575,732 1 986,420 1 2,723,600 2 3,585,801 2 7,295,821 5 2,351,119 2 (29,834) - 27,376,931 19 7,991,574 5 35,368,505 24 $ 144,455,811 100

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

(With Deloitte & Touche auditors’ report dated March 25, 2019)

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SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

REVENUE (Notes 4, 19, 34, 41 and 44) Interest income Fee income Share of profit of associates and joint ventures Gain on fair value change of financial assets and liabilities designated as at fair value through profit or loss Realized gain on available-for-sale financial assets Realized gain on financial assets at fair value through other comprehensive income Net sales Rental income Net gain on disposal of financial assets Gain on disposal of property, plant and equipment Gain on disposal of investment properties Gain on foreign currency exchange Other revenue Gain on sale of collaterals assumed Total revenues EXPENSES (Notes 4, 16, 20, 34, 41 and 44) Interest expense Bad debt expense, commitments and guarantee liability provisions Cost of goods sold Rental cost Operating expenses Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses Loss on disposal of financial assets Loss on disposal of property, plant and equipment Other expenses Impairment loss Expected credit loss Loss on foreign currency exchange Total expenses		2018 Amount % $ 1,693,900 4 855,099 2 59,782 - 18,785 - - - 18,952 - 38,916,006 92 139,434 - 6,512 - - - 2,301 - 218,205 1 555,154 1 9,797 - 42,493,927 100 800,934 2 (30,374) - 34,570,808 81 21,277 - 761,031 1 2,081,214 5 355,649 1 3,197,894 7 - - 37,524 - 224,493 1 - - 35,663 - - - 38,858,219 91		2017
				Amount % $ 1,459,427 4 662,765 2 38,342 - 33,984 - 135,027 1 - - 33,623,083 92 109,512 - - - 8,824 - 11,951 - - - 453,639 1 789 - 36,537,343 100 692,488 2 - - 30,737,555 84 16,978 - 747,218 2 1,816,400 5 371,407 1 2,935,025 8 8,467 - - - 205,721 1 28,419 - - - 338,181 1 34,962,834 96 (Continued)

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SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

PROFIT BEFORE INCOME TAX FROM CONTINUING OPERATIONS INCOME TAX EXPENSE (Notes 4 and 35) NET PROFIT FROM CONTINUING OPERATIONS NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) (Notes 3, 4, 33 and 35) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Unrealized loss on investments in equity instruments at fair value through other comprehensive income Share of the other comprehensive income (loss) of associates and joint ventures accounted for using the equity method Income tax relating to items that will not be reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations Unrealized gain on available-for-sale financial assets Loss on investments in debt instruments at fair value through other comprehensive income Share of the other comprehensive income of associates and joint ventures accounted for using the equity method Other comprehensive income (loss) for the year TOTAL COMPREHENSIVE INCOME FOR THE YEAR		2018 Amount % $ 3,635,708 9 773,615 2 2,862,093 7 2,862,093 7 (29,438) - (335,810) (1) (22,935) - (2,456) - (390,639) (1) (99,743) - - - (8,539) - - - (108,282) - (498,921) (1) $ 2,363,172 6		2017
				Amount % $ 1,574,509 4 444,803 1 1,129,706 3 1,129,706 3 (32,476) - - - 260 - 5,557 - (26,659) - (70,662) - 967,783 2 - - 273,835 1 1,170,956 3 1,144,297 3 $ 2,274,003 6

(Continued)

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SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

NET PROFIT ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Company Non-controlling interests EARNINGS PER SHARE (Note 36) Basic Diluted		2018 Amount % $ 2,457,937 6 404,156 1 $ 2,862,093 7 $ 1,956,753 5 406,419 1 $ 2,363,172 6 $ 1.52 $ 1.52		2017
				Amount % $ 964,726 3 164,980 - $ 1,129,706 3 $ 2,160,210 6 113,793 - $ 2,274,003 6 $ 0.60 $ 0.60
		$		$
		$		$
		$		$

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

(With Deloitte & Touche auditors’ report dated March 25, 2019)

(Concluded)

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SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

BALANCE AT JANUARY 1, 2017 Appropriation of 2016 earnings Legal reserve Cash dividends Other changes in capital surplus Actual partial acquisition of interests in subsidiaries Net profit for the year ended December 31, 2017 Other comprehensive income (loss) for the year ended December 31, 2017, net of income tax Total comprehensive income for the year ended December 31, 2017 Changes in non-controlling interests BALANCE AT DECEMBER 31, 2017 Effect of retrospective application BALANCE AT JANUARY 1, 2018 AS RESTATED Appropriation of 2017 earnings Legal reserve Cash dividends Other changes in capital surplus Changes in percentage of ownership interest in subsidiaries Changes in capital surplus from investments in associates and joint ventures accounted for using the equity method Net profit for the year ended December 31, 2018 Other comprehensive income (loss) for the year ended December 31, 2018, net of income tax Total comprehensive income for the year ended December 31, 2018 Changes in non-controlling interests Disposals of investments in equity instruments designated as at fair value through other comprehensive income/associates’ and joint ventures' disposals of investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT DECEMBER 31, 2018				Equity Attributable to Owners of the Company	Equity Attributable to Owners of the Company	Total Non-controlling Interests $ 25,621,124 $ 8,063,296 - - (404,602 ) - 199 (199 ) 964,726 164,980 1,195,484 (51,187) 2,160,210 113,793 - (185,316) 27,376,931 7,991,574 226,921 138,816 27,603,852 8,130,390 - - (809,205 ) - (59 ) 59 (188 ) - 2,457,937 404,156 (501,184) 2,263 1,956,753 406,419 - (322,839 ) - - $ 28,751,153 $ 8,214,029	Total Equity $ 33,684,420 - (404,602 ) - 1,129,706 1,144,297 2,274,003 (185,316) 35,368,505 365,737 35,734,242 - (809,205 ) - (188 ) 2,862,093 (498,921) 2,363,172 (322,839 ) - $ 36,965,182
		Share Capital Capital Surplus $ 16,184,093 $ 1,575,533 - - - - - 199 - - - - - - - - 16,184,093 1,575,732 - - 16,184,093 1,575,732 - - - - - (55 ) - - - - - - - - - - - - $ 16,184,093 $ 1,575,677		Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings $ 911,595 $ 2,723,600 $ 3,127,352 74,825 - (74,825 ) - - (404,602 ) - - - - - 964,726 - - (26,850) - - 937,876 - - - 986,420 2,723,600 3,585,801 - - 232,386 986,420 2,723,600 3,818,187 96,472 - (96,472 ) - - (809,205 ) - - (4 ) - - (188 ) - - 2,457,937 - - (20,332) - - 2,437,605 - - - - - (86,150) $ 1,082,892 $ 2,723,600 $ 5,263,773	Other Equity Exchange Differences on Translating the Financial Statements of Unrealized Gain (Loss) on Available-for- Unrealized Gain (Loss) on Financial Assets at Fair Value Through Other Foreign Operations sale Financial Assets Comprehensive Income Treasury Shares $ 67,829 $ 1,060,956 $ - $ (29,834 ) - - - - - - - - - - - - - - - - (68,974) 1,291,308 - - (68,974 ) 1,291,308 - - - - - - (1,145 ) 2,352,264 - (29,834 ) - (2,352,264) 2,346,799 - (1,145 ) - 2,346,799 (29,834 ) - - - - - - - - - - - - - - - - - - - - (91,087) - (389,765) - (91,087 ) - (389,765 ) - - - - - - - 86,150 - $ (92,232) $ - $ 2,043,184 $ (29,834)

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

(With Deloitte & Touche auditors’ report dated March 25, 2019)

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SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Expected credit loss recognized on trade receivables Net gain on fair value changes of financial assets at fair value through profit or loss Finance costs Interest income Share of profit of associates and joint ventures Loss (gain) on disposal and retirement of property, plant and equipment Gain on disposal of investment properties Net gain on disposal of financial assets Impairment loss recognized on financial assets Impairment loss recognized on property, plant and equipment Net (gain) loss on foreign currency exchange Gain on disposal of collaterals assumed Changes in operating assets and liabilities Due from the Central Bank and call loans to other banks Financial assets at fair value through profit or loss Notes and trade receivables Margin loan receivables Customer margin accounts Inventories Prepayments Other current assets Discounts and loans Due to the Central Bank and other banks Other payables Securities financing refundable deposits Deposits and remittances Deposits payable for securities financing Futures traders' equity Other current liabilities Employee benefits provisions Cash generated from operations Interest received Interest paid Income tax paid Net cash generated from operating activities	2018 $ 3,635,708 1,840,850 4,133 5,289 (18,785) 800,934 (1,693,900) (59,782) 37,524 (2,301) (25,464) - 10,996 (49,217) (9,797) 224,619 526,238 726,184 1,449,427 (120,117) (1,461,925) 262,485 (269,604) (1,450,066) 43,242 (491,196) 30,644 410,398 39,801 119,968 5,506 (265,241) 4,256,551 1,775,669 (790,995) (486,873) 4,754,352	2017 $ 1,574,509 1,748,617 3,671 - (33,984) 692,488 (1,459,427) (38,342) (8,824) (11,951) (126,560) 28,419 73,925 294,092 (789) 320,956 (792,319) (2,312,553) (1,603,907) (90,702) 281,189 (93,928) (636,449) (1,910,879) 483,572 1,438,832 253,884 4,051,255 269,425 90,651 (127,045) (108,930) 2,248,896 1,534,008 (674,927) (342,175) 2,765,802 (Continued)

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SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at fair value through other comprehensive income Proceeds from sale of financial assets at fair value through other comprehensive income Return of capital on financial assets at fair value through other comprehensive income Purchase of financial assets at amortized cost Proceeds from sale of financial assets at amortized cost Purchase of available-for-sale financial assets Proceeds from sale of available-for-sale financial assets Return of capital on available-for-sale financial assets Purchase of held-to-maturity financial assets Proceeds from sale of held-to-maturity financial assets Purchase of financial assets measured at cost Acquisition of associates Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in operating deposits Decrease in operating deposits Decrease in refundable deposits Payments for intangible assets Payments for investment properties Proceeds from disposal of investment properties Increase in bills and bonds purchased under resale agreements Decrease in bills and bonds purchased under resale agreements Increase in other receivables Decrease in other receivables Decrease in other financial assets Increase in other assets Dividends received from associates and joint ventures Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Increase in short-term bills payable Decrease in short-term bills payable Proceeds from issuance of corporate bonds Increase in other borrowings Decrease in other borrowings Increase in bills and bonds sold under repurchase agreements Decrease in bills and bonds sold under repurchase agreements Increase in guarantee deposits received Decrease in guarantee deposits received	2018 $ (1,479,940) 2,602,179 152 (99,785,341) 96,528,558 - - - - - - (45,000) (1,073,428) 4,254 - 9,368 126 (4,800) - 6,199 - 1,714,587 (270,380) - 763,470 (283,489) 4,285 (1,309,200) 1,430,903 - (2,154,555) 330,000 - (736,897) - (1,214,878) 5,411 -	2017 $ - - - - - (1,090,952) 1,618,954 2,609 (95,027,924) 92,004,129 (4,159) - (1,638,343) 35,307 (1,068) - 13,846 - (112) 62,971 (1,499,897) - - 21,290 318,831 (98,262) 3,650 (5,279,130) 383,879 2,050,698 - 500,000 421,989 - 1,895,462 - - (16,380) (Continued)

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SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

Increase in other financial liabilities Decrease in other financial liabilities Decrease in other non-current liabilities Dividends paid to owners of the Company Changes in non-controlling interests Net cash generated from (used in) financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2018 $ - (19,249) (8,400) (809,205) (322,839) (3,499,709) 90,300 35,743 6,671,307 $ 6,707,050	2017 $ 44,665 - (9,820) (404,602) (185,316) 4,680,575 (132,360) 2,034,887 4,636,420 $ 6,671,307

The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche auditors’ report dated March 25, 2019) (Concluded)

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

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

1. GENERAL INFORMATION

Shinkong Synthetic Fibers Corporation (“SSF” or “the Company”) was established in the Republic of China (ROC) in 1967 with an initial capital of $22,500 thousand. As of December 31, 2018, SSF’s paid-in capital had increased to $16,184,093 thousand. SSF manufactures and sells polyester polymers, polyester staple fibers, polyester textured yarns, polyester chips, pre-oriented yarns, polyester flat yarns, polyethylene terephthalate (PET) resins used in PET bottles and polyester base films. The Company’s shares have been listed on the Taiwan Stock Exchange (“TWSE”) since August 1973.

The consolidated financial statements are presented in the Company’s functional currency, the New Taiwan dollar. For greater comparability and consistency of financial reporting, the consolidated financial statements are presented in New Taiwan dollars since the Company’s shares are listed on the Taiwan Stock Exchange.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on March 25, 2019.

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

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

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

1) IFRS 9 “Financial Instruments” and related amendments

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

Classification, measurement and impairment of financial assets

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

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

Financial Assets Cash and cash equivalents Convertible Bond Asset Swap Derivatives Equity securities Mutual funds Debt securities Notes receivable, trade receivables and other receivables Financial Assets IAS 3 A Janu FVTPL $ Add: Reclassification from available-for-sale (IAS 39) Required reclassification FVTOCI Debt instruments Add: Reclassification from held-to-maturity (IAS 39) Add: Reclassification from available-for-sale (IAS 39) Equity instruments Add: Reclassification from available-for-sale (IAS 39) Amortized cost Add: Reclassification from held-to-maturity (IAS 39) Add: Reclassification from loans and receivables (IAS 39) Investments accounted for using the equity method $	Financial Assets Cash and cash equivalents Convertible Bond Asset Swap Derivatives Equity securities Mutual funds Debt securities Notes receivable, trade receivables and other receivables Financial Assets IAS 3 A Janu FVTPL $ Add: Reclassification from available-for-sale (IAS 39) Required reclassification FVTOCI Debt instruments Add: Reclassification from held-to-maturity (IAS 39) Add: Reclassification from available-for-sale (IAS 39) Equity instruments Add: Reclassification from available-for-sale (IAS 39) Amortized cost Add: Reclassification from held-to-maturity (IAS 39) Add: Reclassification from loans and receivables (IAS 39) Investments accounted for using the equity method $	MeasurementCategory IAS 39 IFRS 9 Loans and receivables Amortized cost Held‑for‑trading Mandatorily at fair value through profit or loss (i.e. FVTPL) Held‑for‑trading Mandatorily at FVTPL Held‑for‑trading Mandatorily at FVTPL Available‑for‑sale Fair value through other comprehensive income (i.e. FVTOCI) - equity instruments Available‑for‑sale Mandatorily at FVTPL Held‑for‑trading Mandatorily at FVTPL Available‑for‑sale Mandatorily at FVTPL Available‑for‑sale FVTOCI - debt instruments Held-to-maturity FVTOCI - debt instruments Held-to-maturity Amortized cost Loans and receivables Amortized cost 9 Carrying mount as of ary 1, 2018 Reclassifi- cations Remea- surements IFRS 9 Carrying Amount as of January 1, 2018 Reta Earnin on Jan 20 1,840,699 - $ 166,421 $ - 1,840,699 166,421 - $ 2,007,120 $ - - 584,149 1,946 - 2,721,298 - - 7,809,381 368,880 - 11,114,828 370,826 11,485,654 2 - - 20,611,784 (5,089 ) - 15,322,208 - - 35,933,992 (5,089) 35,928,903 888,952 - - 888,952 2,729,651 $ 47,215,241 $ 365,737 $ 50,310,629 $ 2	MeasurementCategory IAS 39 IFRS 9 Loans and receivables Amortized cost Held‑for‑trading Mandatorily at fair value through profit or loss (i.e. FVTPL) Held‑for‑trading Mandatorily at FVTPL Held‑for‑trading Mandatorily at FVTPL Available‑for‑sale Fair value through other comprehensive income (i.e. FVTOCI) - equity instruments Available‑for‑sale Mandatorily at FVTPL Held‑for‑trading Mandatorily at FVTPL Available‑for‑sale Mandatorily at FVTPL Available‑for‑sale FVTOCI - debt instruments Held-to-maturity FVTOCI - debt instruments Held-to-maturity Amortized cost Loans and receivables Amortized cost 9 Carrying mount as of ary 1, 2018 Reclassifi- cations Remea- surements IFRS 9 Carrying Amount as of January 1, 2018 Reta Earnin on Jan 20 1,840,699 - $ 166,421 $ - 1,840,699 166,421 - $ 2,007,120 $ - - 584,149 1,946 - 2,721,298 - - 7,809,381 368,880 - 11,114,828 370,826 11,485,654 2 - - 20,611,784 (5,089 ) - 15,322,208 - - 35,933,992 (5,089) 35,928,903 888,952 - - 888,952 2,729,651 $ 47,215,241 $ 365,737 $ 50,310,629 $ 2	Carrying Amount IAS 39 IFRS 9 Remark $ 6,671,307 $ 6,671,307 d) 913,592 913,592 - 1,306 1,306 - 56,086 56,086 - 7,809,381 8,178,261 a) 160,421 160,421 b) 869,715 869,715 - 6,000 6,000 c) 2,721,298 2,721,298 c) 584,149 586,095 c) 20,611,784 20,606,695 c) 8,650,901 8,650,901 d) ined gs Effect uary 1, 18 Other Equity Effect on January 1, 2018 Non-controlling Interests Effect on January 1, 2018 Remark 15,571 ( $ 15,571 ) $ - b), c) 18,192 10,106 142,528 a,), c) (1,377) - (3,712) c), d) - - - e) 32,386 ($ 5,465) $ 138,816
		IAS 39 Loans and receivables Held‑for‑trading Held‑for‑trading Held‑for‑trading Available‑for‑sale Available‑for‑sale Held‑for‑trading Available‑for‑sale Available‑for‑sale Held-to-maturity Held-to-maturity Loans and receivables 9 Carrying mount as of ary 1, 2018 Reclassifi- cations 1,840,699 - $ 166,421 1,840,699 166,421 - - 584,149 - 2,721,298 - 7,809,381 - 11,114,828 - - 20,611,784 - 15,322,208 - 35,933,992 888,952 - 2,729,651 $ 47,215,241
	$		$ 2

• a) The Group elected to designate all its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTOCI under IFRS 9, because these investments are not held for trading. As a result, the related other equity - unrealized gain (loss) on available-for-sale financial assets of $2,073,189 thousand was reclassified to other equity - unrealized gain (loss) on financial assets at FVTOCI.

Investments in unlisted shares previously measured at cost under IAS 39 have been designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an increase of $368,880 thousand was recognized in financial assets at FVTPL, and an increase of $227,772 thousand and $141,108 thousand in other equity - unrealized gain (loss) on financial assets at FVTOCI and in non-controlling interests, respectively, on January 1, 2018.

The Group recognized under IAS 39 impairment loss on certain investments in equity securities previously classified as measured at cost and the loss was accumulated in retained earnings. Since those investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, an adjustment was made that resulted in a decrease of $218,484 thousand and $32 thousand in other equity - unrealized gain (loss) on financial assets at FVTOCI and in non-controlling interests, respectively, and an increase of $218,484 thousand

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and $32 thousand in retained earnings and in non-controlling interests, respectively, on January 1, 2018.

• b) Mutual funds previously classified as available-for-sale under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments. The retrospective adjustment resulted in a decrease of $15,709 thousand in other equity - unrealized gain (loss) on available-for-sale financial assets and an increase of $15,709 thousand in retained earnings on January 1, 2018.

• c) Corporate bond investments previously classified as available-for-sale financial assets under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because on January 1, 2018, the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments. The retrospective adjustment resulted in an increase of $138 thousand in other equity - unrealized gain (loss) on available-for-sale financial assets and a decrease of $138 thousand in retained earnings on January 1, 2018.

Debt investments previously classified as available-for-sale financial assets under IAS 39 were classified mandatorily as at FVTOCI under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. As a result of retrospective application, the related adjustments comprised an increase in other equity - unrealized gain (loss) on available-for-sale financial assets of $292 thousand and a decrease in retained earnings of $292 thousand on January 1, 2018.

Debt investments previously classified as held-to-maturity financial assets and measured at amortized cost under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows. As a result of retrospective application, the related adjustments comprised an increase in the loss allowance of $5,089 thousand, and a decrease in retained earnings of $1,377 thousand and a decrease in non-controlling interests of $3,712 thousand on January 1, 2018.

Debt investments previously classified as held-to-maturity financial assets and measured at amortized cost under IAS 39 were classified as at FVTOCI with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. As a result of retrospective application, the related adjustments comprised an increase in other equity - unrealized gain (loss) on financial assets at FVTOCI of $526 thousand and an increase in non-controlling interests of $1,420 thousand on January 1, 2018.

• d) Notes receivable, trade receivables and other receivables that were previously classified as loans and receivables under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9.

• e) As a result of the retrospective application of IFRS 9 by associates, other equity - unrealized gain (loss) on available-for-sale financial assets of $296,134 thousand was reclassified to other equity - unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018.

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

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

In identifying performance obligations, IFRS 15 and the related amendments require that a good or service is distinct if it is capable of being distinct (for example, the Group regularly sells it separately) and the promise to transfer it is distinct within the context of the contract (i.e. the nature of the promise in the contract is to transfer each good or service individually rather than to transfer a combined output).

Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability. Prior to the application of IFRS 15, receivables were recognized or deferred revenue was reduced when revenue was recognized for the relevant contract under IAS 18.

For a sale with a right of return, the Group recognizes a refund liability (i.e. other liabilities) and a right to recover a product (i.e. other assets) when recognizing revenue. Prior to the application of IFRS 15, return provisions and inventories - return receivables were recognized when recognizing revenue.

The Group elected only to retrospectively apply IFRS 15 to contracts that were not complete as of January 1, 2018 and recognize the cumulative effect of the change in retained earnings on January 1, 2018.

The impact on assets, liabilities and equity when retrospectively applying IFRS 15 on January 1, 2018 was not material.

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

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

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

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

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

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IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Group will elect to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value asset and short-term leases will be recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Currently, payments under operating lease contracts are recognized as expenses on a straight-line basis. Prepaid lease payments for land use rights of land are recognized as prepayments for leases. The difference between the actual payments and the expenses, as adjusted for lease incentives, is recognized as accrued expenses. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows. Leased assets and finance lease payables are recognized for contracts classified as finance leases.

The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases with the application of IAS 17. Lease liabilities will be measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets will be measured at an amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments. The Group will apply IAS 36 to all right-of-use assets.

The Group expects to apply the following practical expedients:

• 1) The Group will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.

• 2) The Group will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.

• 3) The Group will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.

• 4) The Group will use hindsight, such as in determining lease terms, to measure lease liabilities.

For leases currently classified as finance leases under IAS 17, the carrying amounts of right-of-use assets and lease liabilities on January 1, 2019 will be determined as at the carrying amounts of the respective leased assets and finance lease payables as of December 31, 2018.

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The Group as lessor

The Group will not make any adjustments for leases in which it is a lessor and will account for those leases with the application of IFRS 16 starting from January 1, 2019.

Anticipated impact on assets, liabilities and equity

Property, plant and equipment Prepayments Other assets - prepayments for leases Right-of-use assets Total effect on assets Lease liabilities - current Lease liabilities - non-current Other financial liabilities - current Other financial liabilities - non-current Other liabilities Total effect on liabilities Retained earnings Total effect on equity	Carrying Amount as of December 31, 2018 $ 20,186,685 319,769 1,202,732 - $ 21,709,186 $ - - 20,209 5,207 492,025 $ 517,441 $ 5,263,773 $ 5,263,773		Adjustments Arising from Initial Application Adjusted Carrying Amount as of January 1, 2019 $ (51,236) $ 20,135,449 (1,947) 317,822 (1,202,732) - 2,778,045 2,778,045 $ 1,522,130 $ 23,231,316 $ 253,824 $ 253,824 1,301,627 1,301,627 (20,209) - (5,207) - (3,647) 488,378 $ 1,526,388 $ 2,043,829 $ (4,258) $ 5,259,515 $ (4,258) $ 5,259,515	Adjustments Arising from Initial Application Adjusted Carrying Amount as of January 1, 2019 $ (51,236) $ 20,135,449 (1,947) 317,822 (1,202,732) - 2,778,045 2,778,045 $ 1,522,130 $ 23,231,316 $ 253,824 $ 253,824 1,301,627 1,301,627 (20,209) - (5,207) - (3,647) 488,378 $ 1,526,388 $ 2,043,829 $ (4,258) $ 5,259,515 $ (4,258) $ 5,259,515
			$
			$

Except for the above impacts, as of the date the consolidated financial statements were authorized for issue, the Group continues assessing other possible impacts that the application of the aforementioned amendments and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers will have on the Group’s financial position and financial performance and will disclose these other impacts when the assessment is completed.

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

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

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

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

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

• 20 -

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants and IFRSs as endorsed and issued into effect by the FSC.

• b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis.

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

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

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

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

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

Current assets include:

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

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

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

Current liabilities include:

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

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

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

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

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• d. Basis of consolidation

• Principles for preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective dates of acquisitions up to the effective dates of disposals, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the interests of the Group and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and any investment retained in the former subsidiary at its fair value at the date when control is lost and (ii) the assets (including any goodwill) and liabilities and any non-controlling interests of the former subsidiary at their carrying amounts at the date when control is lost. The Group accounts for all amounts recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

Before 2018, the fair value of any investment retained in a former subsidiary at the date when control is lost is regarded as the fair value on initial recognition of available-for-sale financial assets or financial assets at fair value through profit or loss or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture. Starting from 2018, the fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition of financial assets at fair value through other comprehensive income or financial assets at fair value through profit or loss or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

See Note 18 for detailed information on subsidiaries (including percentages of ownership and main businesses).

e. Foreign currencies

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

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

• 22 -

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

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

For the purpose of presenting consolidated financial statements, the functional currencies of the Company and the group entities (including subsidiaries, associates, and branches in other countries that use currencies which are different from the currency of the Company) are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income (attributed to the owners of the Company and non-controlling interests as appropriate).

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

In relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to non-controlling interests of the subsidiary and is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

f. Inventories

Inventories consist of raw materials, supplies, semi-finished goods, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at the weighted-average cost on the balance sheet date.

g. Investment in associates and joint ventures

An associate is an entity over which the Group has significant influence and which is neither a subsidiary nor an interest in a joint venture. A joint venture is a joint arrangement whereby the Group and other parties that have joint control of the arrangement have rights to the net assets of the arrangement.

The Group uses the equity method to account for its investments in associates and joint ventures.

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

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Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities of an associate or a joint venture at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

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

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

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

The Group discontinues the use of the equity method from the date on which its investment ceases to be an associate and a joint venture. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate and the joint venture attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate and the joint venture. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate and joint venture on the same basis as would be required had that associate directly disposed of the related assets or liabilities. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Group continues to apply the equity method and does not remeasure the retained interest.

When a group entity transacts with its associate and joint venture, profits and losses resulting from the transactions with the associate and joint venture are recognized in the Group’ consolidated financial statements only to the extent of interests in the associate and the joint venture that are not related to the Group.

• h. Property, plant and equipment

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

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

Freehold land is not depreciated.

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

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

i. Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties also include land held for a currently undetermined future use.

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

Investment properties under construction are measured at cost less accumulated impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Depreciation of these assets commences when the assets are ready for their intended use.

For a transfer from the property, plant and equipment classification to investment properties, the deemed cost of the property for subsequent accounting is its carrying amount at the end of owner-occupation.

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

j. Goodwill

Goodwill arising from the acquisition of a business is measured at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units or groups of cash-generating units (referred to as “cash-generating units”) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then pro rata to the other assets of the unit based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. Any impairment loss recognized for goodwill is not reversed in subsequent periods.

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If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation which is disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

• k. Intangible assets

• 1) Intangible assets acquired separately

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

• 2) Internally-generated intangible assets - research and development expenditure

Expenditures on research activities are recognized as expenses in the period in which they are incurred.

• 3) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

• 4) Derecognition of intangible assets

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

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

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

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

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

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

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m. Financial instruments

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

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

• 1) Financial assets

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

• a) Measurement category

2018

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

• i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such financial assets are mandatorily classified or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 40.

• ii. Financial assets at amortized cost

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

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

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

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, time deposits with original maturities of more than 3 months, notes receivable, trade receivables and other receivables at amortized cost, margin loans receivable, securities purchased and sold under resale and repurchase agreements and overdue receivables, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

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

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

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

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

• iii. Investments in debt instruments at FVTOCI

Debt instruments that meet the following conditions are subsequently measured at FVTOCI:

• i) The debt instrument is held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of such financial assets; and

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

Investments in debt instruments at FVTOCI are subsequently measured at fair value. Changes in the carrying amounts of these debt instruments relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and impairment losses or reversals are recognized in profit or loss. Other changes in the carrying amount of these debt instruments are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of.

• iv. Investments in equity instruments at FVTOCI

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

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

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

For securities purchased under resale agreements, the actual amount paid to the counterparty is treated as a financing transaction. For securities sold under repurchase agreements, the actual amount received from the counterparty and the related interest revenue or interest expense is recognized on an accrual basis.

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Margin loans pertain to provision of funds to customers for them to buy securities. Margin loans receivable represents the amount loaned to customers. The securities bought by customers are used to secure these loans and are recorded though memo entries as “collateral securities.” The collateral securities are returned when the loans are repaid.

2017

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

i. Financial assets at FVTPL

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

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on such a financial asset. Fair value is determined in the manner described in Note 40.

Investments in equity instruments under financial assets at FVTPL that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are subsequently measured at cost less any identified impairment loss at the end of each reporting period and presented as a separate line item as financial assets measured at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value is recognized in profit or loss.

ii. Held-to-maturity investments

Domestic and foreign corporate debentures, financial debentures and government debentures, which have credit ratings above a specific credit rating and which the Group has a positive intent and ability to hold to maturity, are classified as held-to-maturity investments.

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

iii. Available-for-sale financial assets

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

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

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

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

iv. Loans and receivables

Loans and receivables (including trade receivables, margin loans receivable, securities purchased and sold under resale and repurchase agreements, cash and cash equivalents, debt investments with no active market, and overdue receivables) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

For securities purchased under resale agreements, the actual amount paid to the counterparty is treated as a financing transaction. For securities sold under repurchase agreements, the actual amount received from the counterparty and the related interest revenue or interest expense is recognized on the accrual basis.

Margin loans pertain to provision of funds to customers for them to buy securities. Margin loans receivable represents the amount loaned to customers. The securities bought by customers are used to secure these loans and are recorded though memo entries as “collateral securities.” The collateral securities are returned when the loans are repaid.

• b) Impairment of financial assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables), investments in debt instruments that are measured at FVTOCI, lease receivables, as well as contract assets.

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

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

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In addition, the MOF regulations also require that credit assets be classified as normal assets, assets that require special mention, substandard assets, assets with doubtful collection, and assets on which there is loss, and the minimum allowance for credit losses and reserve for losses on guarantees for these assets should be 1%, 2%, 10%, 50%, and 100% of outstanding credits, respectively. According to FSC Rule No. 10010006830, the minimum allowance for credit losses and reserve for losses on guarantees for the normal assets should be 1%. According to FSC Rule No. 10300329440, allowance for doubtful accounts should not be lower than 1.5%.

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

2017

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

Financial assets at amortized cost, such as trade receivables, are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience with collecting payments, an increase in the number of delayed payments, as well as observable changes in national or local economic conditions that correlate with default on receivables.

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

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

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

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

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

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In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to impairment is recognized in other comprehensive income. In respect of available-for-sale debt securities, impairment loss is subsequently reversed through profit or loss if an increase in the fair value of such an investment can be objectively related to an event occurring after the recognition of the impairment loss.

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

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

In accordance with the regulations issued by the Ministry of Finance (MOF), Taipei Star Bank provides for an allowance for losses on loans that is based on the risk of loss on particular loans and the risk of loss on the overall loans portfolio (excluding particular loans). The risk of loss on particular loans is evaluated on the basis of the borrowers’/clients’ financial conditions and delinquency record on interest payments. After assessing the value of collaterals provided for certain loans, the recoverability of credit assets is assessed.

The MOF regulations also require that credit assets be classified as normal assets, assets that require special mention, substandard assets, assets with doubtful collection, and assets on which there is loss, and the minimum allowance for credit losses and reserve for losses on guarantees for these assets should be 1%, 2%, 10%, 50%, and 100% of outstanding credits, respectively. According to FSC Rule No. 10010006830, the minimum allowance for credit losses and reserve for losses on guarantees for the normal assets should be 1%. According to FSC Rule No. 10300329440, allowance for doubtful accounts should not be less than 1.5%.

c) Derecognition of financial assets

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

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

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2) Equity instruments

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

Equity instruments issued by a group entity are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of the Company’s own equity instruments.

3) Financial liabilities

• a) Subsequent measurement

Except the following situation, all financial liabilities are measured at amortized cost using the effective interest method:

Financial liabilities at FVTPL

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

Financial liabilities held for trading are stated at fair value, with any gain or loss arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any interest or dividends paid on the financial liability. Fair value is determined in the manner described in Note 40.

• b) Derecognition of financial liabilities

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

• 4) Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts, interest rate swaps, cross-currency swap contracts and convertible bonds assets swap.

Derivatives are initially recognized at fair value at the date on which the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of a derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of a derivative financial instruments is negative, the derivative is recognized as a financial liability.

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

n. Collaterals assumed

Collaterals assumed by Taipei Star Bank are recorded at the book value and evaluated at fair value at the end of the period. An impairment loss is recognized when the book value of collaterals exceeds the fair value. According to the Rules of the FSC, collaterals are not disposed until the end of statutory holding period, but they must be evaluated for impairment loss.

• o. Securities financing guarantee deposits-in and payable for securities financing guarantee

SKIS provides financing to customers for short sale of pledged securities on margin loans or short sale of securities borrowed from securities finance companies. The proceeds from short sale of securities borrowed by customers, net of commissions and securities transaction tax, are retained by SKIS and recorded as “deposit payable for securities financing.” In addition, the SFB requires that customers should make guarantee deposits to the Corporation or provide securities in lieu of cash deposits, which are recorded as “securities financing guarantee deposits.” The securities borrowed by the customers are recorded by memo entry. The guarantee deposit and the proceeds from short sale of securities will be returned to the customers as the customers redeem their credit.

p. Provisions

Provisions, including those arising from contractual obligations specified in service concession arrangements to maintain or restore infrastructure before it is handed over to the grantor and levies imposed by governments, are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

q. Revenue recognition

2018

The Group identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

For contracts where the period between the date on which the Group transfers a promised good or service to a customer and the date on which the customer pays for that good or service is one year or less, the Group does not adjust the promised amount of consideration for the effects of a significant financing component.

• 1) Revenue from the sale of goods

Revenue from the sale of goods comes from sales of goods Sales of goods are recognized as revenue when the goods are delivered to the customer’s specific location because it is the time when the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility for sales to future customers and bears the risks of obsolescence. Trade receivables are recognized concurrently.

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The Group does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

• 2) Revenue from the rendering of services

Service income is recognized when services are provided.

Revenue from a contract to provide services is recognized with reference to the stage of completion of the contract.

• 3) Dividend and interest income

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

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

• 4) Revenue from the finance and securities segment

SKIS, SKIC, SKIA, and SKPIA identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

Revenue of Taipei Star Bank is recognized as follows:

• a) Interest income

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

Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is thereafter recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

• b) Service fees

Service fees are recorded as income upon receipt and substantial completion of activities involved in the earnings process.

• c) Dividend income

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

2017

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

• 35 -

• 1) Revenue from the sale of goods

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

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

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

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

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

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

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials’ ownership.

Revenue from the sale of property in the ordinary course of business is recognized when the construction is completed and the property is transferred to the buyer. Until such revenue is recognized, deposits and installment payments received from sales of properties are carried in the consolidated balance sheets under current liabilities.

• 2) Revenue from the rendering of services

Service income is recognized when services are provided.

Revenue from a contract to provide services is recognized with reference to the stage of completion of the contract.

• 3) Dividend and interest income

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

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

Revenue recognition of SKIS, SKIC, SKIA, and SKPIA:

• a) Brokerage commission is recognized on the trading day.

• b) Interest on margin loans and bonds purchased under resale agreements are accrued according to the term stated in the financing and trading contract.

• c) Purchasing commission is recognized when the commission is received; underwriting commission is recognized at the completion of the underwriting contracts.

• d) Gain on sale of investment is recognized on negotiable securities’ disposal day.

• 36 -

• e) Insurance commission is recognized according to the contract.

• f) Consulting revenue is recognized when the earnings process has been completed and the economic benefits associated with the transaction have been realized or are realizable.

Revenue recognition of Taipei Star Bank:

• a) Interest income

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

Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is thereafter recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

• b) Service fees

Service fees are recorded as income upon receipt and substantial completion of activities involved in the earnings process.

• c) Dividend income

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

r. Leasing

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

1) The Group as lessor

Amounts due from lessees under finance leases are recognized as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Contingent rentals are recognized as income in the period in which they are incurred.

2) The Group as lessee

Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated balance sheets as a finance lease obligation.

Finance expenses implicit in lease payments for each period are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets; in which case, they are capitalized.

Operating lease payments are recognized as expenses on a straight-line basis over the lease term. Contingent rentals are recognized as expenses in the period in which they are incurred.

• 37 -

s. Borrowing costs

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

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

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

• t. Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attached to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable.

• u. Employee benefits

• 1) Short-term employee benefits

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

• 2) Retirement benefits

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

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

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

• 38 -

v. Employee share options

The fair value at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Group’s best estimates of the number of shares or options that are expected to ultimately vest, with a corresponding increase in capital surplus - employee share options. It is recognized as an expense in full at the grant date if vested immediately.

At the end of each reporting period, the Group revises its estimate of the number of employee share options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - employee share options.

w. Taxation

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

1) Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.

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

2) Deferred tax

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

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carry forward and unused tax credits for purchases of machinery, equipment and technology, research and development expenditures, and personnel training expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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

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

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

• 39 -

3) Current tax and deferred tax for the period

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

• x. Treasury shares

When the Company acquires its outstanding shares that have not been disposed of or retired, treasury shares are stated at cost and shown as a deduction in stockholders’ equity. When treasury shares are sold, if the selling price is above the carrying value, the differences should be credited to the capital surplus - treasury stock transactions. If the selling price is below the carrying value, the differences should first be offset against capital surplus from the same class of treasury stock transactions, and the remainder, if any, debited to retained earnings. The carrying value of treasury stock is calculated using the weighted-average approach in accordance with the purpose of the acquisition.

When the Company’s treasury shares are retired, the treasury stock account should be credited, and the capital surplus - premium on stock and capital stock account should be debited proportionately according to the share ratio. The carrying value of treasury shares in excess of the sum of its par value and premium on stock should first be offset against capital surplus from the same class of treasury stock transactions, and the remainder, if any, debited to retained earnings. The sum of the par value and premium on treasury stock in excess of its carrying value should be credited to capital surplus from the same class of treasury stock transactions.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

• a. Estimated impairment of financial assets - 2018

The provision for impairment of trade receivables and investments in debt instruments is based on assumptions about risk of default and expected loss rates. The Group uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Group’s historical experience, existing market conditions as well as forward looking estimates as of the end of each reporting period. For details of the key assumptions and inputs used, see Note 40. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

• b. Estimated impairment of trade receivables - 2017

When there is objective evidence of impairment loss of receivables, the Group takes into consideration the estimation of the future cash flows of such assets. The amount of impairment loss is measured as the difference between such an asset’s carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

• 40 -

c. Write-down of inventories

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

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalents (investments with original maturities not exceeding 3 months) Checks for clearance Due from banks Time deposits Commercial papers Repurchase agreements collateralized by bonds		December 31	December 31
		2018 $ 926.639 3,087,747 377,772 1,018,592 1,183,696 49,863 62,741 $ 6,707,050	2017 $ 561,739 3,465,024 483,518 1,055,270 925,853 59,990 119,913 $ 6,671,307

The market rate intervals of bank deposits, commercial papers, and repurchase agreements collateralized by bonds at the end of the reporting period were as follows:

Bank deposits Commercial papers Repurchase agreements collateralized by bonds	**December 31 **
	2018 2017 0.001%- 3.45% 0.001%- 2.2434% 0.50% 0.30%-0.45% 2.60% 1.55%-1.75%

7. DUE FROM CENTRAL BANK AND CALL LOANS TO BANKS

Deposit reserve account A Deposit reserve account B Financial Information Service Center settlement account		December 31	December 31
		2018 $ 937,015 1,916,826 100,489 $ 2,954,330	2017 $ 1,245,300 1,832,598 101,051 $ 3,178,949

The deposit reserves are determined monthly at prescribed rates based on the average balances of customers’ deposits. The deposit reserve account B is subject to withdrawal restrictions, but other accounts can be withdrawn anytime.

• 41 -

8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Financial assets held for trading Convertible bonds assets swap Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts (a) Foreign exchange contracts (b) Non-derivative financial assets Domestic listed shares Emerging market shares Short-term transactions instruments Financial assets mandatorily classified as at FVTPL Convertible bonds assets swap Convertible bonds Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts (a) Foreign exchange contracts (b) Non-derivative financial assets Domestic listed shares Emerging market shares Mutual funds Overseas bonds Short-term transactions instruments Financial liabilities at FVTPL-current Financial liabilities held for trading Derivative financial liabilities (not under hedge accounting) Forward exchange contracts (a) Foreign exchange contracts (b) Cross-currency swap contracts (c)		December 31	December 31
		2018 $ - - - - - - - 839,966 2,540 2,025 1,613 31,012 44,148 127,034 14,660 449,213 1,512,211 $ 1,512,211 $ 354 10,966 1,570 $ 12,890	2017 $ 913,592 624 682 38,402 17,684 869,715 1,840,699 - - - - - - - - - - $ 1,840,699 $ 2,954 3,904 - $ 6,858

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

					Notional Amount
			Currency	Maturity Date	(In Thousands)
December	31,	2018
Sell			USD/NTD	2019.01.04-2019.01.22	USD4,500/NTD138,474
Sell			EUR/NTD	2019.01.25-2019.04.10	EUR383/NTD13,483
Sell			USD/THB	2019.01.28-2019.03.04	USD3,000/THB98,191
Buy			NTD/JPY	2019.01.08-2019.01.11	JPY53,750/NTD14,521
Buy			NTD/USD	2019.01.11-2019.01.25	USD7,000/NTD215,170
Buy			NTD/EUR	2019.04.25-2019.05.08	EUR2,000/NTD70,147
					(Continued)

• 42 -

					Notional Amount
			Currency	Maturity Date	(In Thousands)
December	31,	2017
Sell			USD/NTD	2018.01.05-2018.01.16	USD3,080/NTD92,296
Sell			EUR/NTD	2018.01.05-2018.04.11	EUR1,836/NTD65,423
Sell			USD/THB	2018.03.21	USD1,500/THB49,022
Buy			NTD/CNY	2018.01.19	CNY5,000/NTD22,573
Buy			NTD/JPY	2018.01.05-2018.06.04	JPY264,160/NTD70,111
Buy			NTD/USD	2018.01.12-2018.04.25	USD19,300/NTD577,548
					(Concluded)

b.

At the end of the reporting period, outstanding foreign exchange contracts not under hedge accounting were as follows: Notional Amount Currency Maturity Date (In Thousands) December 31, 2018 Buy USD 2019.01.07-2019.03.211 $ 30,204 HKD - - Sell JPY 2019.01.07-2019.01.28 1,463,264 EUR 2019.01.07-2019.01.14 6,000 GBP 2019.01.18 100 HKD 2019.01.18 5,160 AUD 2019.01.18 2,200 USD - - December 31, 2017 Buy USD 2018.01.11-2018.01.31 20,552 HKD 2018.01.31 781 Sell JPY 2018.01.16-2018.01.31 1,355,695 EUR 2018.01.11-2018.01.19 3,000 GBP - - HKD - - AUD - - USD 2018.01.31 100

c. At the end of the reporting period, outstanding cross-currency swap contracts not under hedge accounting were as follows: The Group did not enter into any cross-currency swap contracts during 2017.

		Range of	Range of
Notional Amount		Interest Rates	Interest Rates
(In Thousands)	Maturity Date	Paid	Received
December 31, 2018
US$13,500	2019.01.16-2019.03.21	0%-0.68%	2.65%-3.6%

The Group entered into cross-currency swap contracts to manage exposures to exchange rate and interest rate fluctuations of foreign currency denominated assets and liabilities.

• 43 -

9. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

	December 31,	December 31,
		2018
Current
Investments in equity instruments at FVTOCI	$	971,747
Investments in debt instruments at FVTOCI		2,324,652
	$	3,296,399
Non-current
Investments in equity instruments at FVTOCI	$	6,721,618
a. Investments in equity instruments at FVTOCI
	December 31,
		2018
Current
Domestic investments
Listed shares and emerging market shares	$	923,817
Unlisted shares		47,930
	$	971,747
Non-current
Domestic investments
Listed shares and emerging market shares	$	5,255,409
Unlisted shares		1,454,798
Foreign investments
Unlisted shares		11,411
	$	6,721,618

These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes; refer to Table 14 for details of the investments. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale under IAS 39. Refer to Notes 3, 11 and 14 for information relating to their reclassification and comparative information for 2017.

During 2018, the Group sold its shares in domestic investments in order to manage credit concentration risk. The sold shares had a fair value of $213,145 thousand and the Group transferred a loss of $85,745 thousand from other equity to retained earnings.

Refer to Note 42 for information relating to investments in equity instruments at FVTOCI pledged as security.

• 44 -

• b. Investments in debt instruments at FVTOCI

	December 31,	December 31,
		2018
Current
Domestic investments
Government bonds	$	301,956
Corporate bonds		1,462,464
Financial debentures		560,232
	$	2,324,652

• 1) The government bonds, corporate bonds, and financial debentures were classified as available-for-sale financial assets and held-to-maturity financial assets under IAS 39. Refer to Notes 3, 11 and 13 for information relating to their reclassification and comparative information for 2017.

• 2) The investments in debt instruments at FVTOCI under repurchase agreements as of December 31, 2018 amounted to $250,000 thousand.

• 3) During 2018, the expected credit loss reversed on debt instruments of $260 thousand was recognized after the Group evaluated expected credit loss on investments in debt instruments at FVTOCI.

• 4) Refer to Note 45 for information relating to their credit risk management and impairment.

• 5) Refer to Note 42 for information relating to investments in debt instruments at FVTOCI pledged as security.

10. FINANCIAL ASSETS AT AMORTIZED COST - 2018

Current Domestic investments Time deposits with original maturities of more than 3 months (a) Non-current Domestic investments Government bonds (b) Corporate bonds (b) Financial bonds (b) Bills (b) Less: Allowance for impairment loss	December 31, 2018 $ 1,128,594 $ 5,674,877 5,725,067 2,467,220 8,925,000 22,792,164 (3,666) $ 22,788,498

• 45 -

• a. The interest rates for time deposits with original maturities of more than 3 months ranged from 0.12% to 2.4% as at the end of the reporting period. The time deposits were classified as other financial assets under IAS 39. Refer to Note 3 for information relating to their reclassification and comparative information for 2017.

• b. The government bonds, corporate bonds, financial bonds, and bills were classified as held-to-maturity financial assets under IAS 39. Refer to Notes 3 and 13 for information relating to their reclassification and comparative information for 2017.

• c. The investments in debt instruments at amortized cost under repurchase agreements as of December 31, 2018 amounted to $3,552,488 thousand.

• d. The investments in debt instruments at amortized cost used as reserves for trust fund compensation provision as of December 31, 2018 amounted to $50,000 thousand.

• e. During 2018, the expected credit loss reversed on debt instruments of $1,429 thousand was recognized after the Group evaluated expected credit loss on investments in debt instruments at amortized cost.

• f. Refer to Note 45 for information relating to their credit risk management and impairment assessment.

• g. Refer to Note 42 for information relating to investments in financial assets at amortized cost pledged as security.

11. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

	December 31,	December 31,
		2017
Current
Listed shares and emerging market shares	$	921,991
Mutual funds		127,702
Government bonds		431,699
Corporate bonds		1,643,499
Financial bonds		652,100
	$	3,776,991
Non-current
Listed shares and emerging market shares	$	5,572,199
Unlisted shares		1,071,168
Mutual funds		32,719
	$	6,676,086

Refer to Note 42 for information relating to available-for-sale financial assets pledged as security.

• 46 -

12. BILLS AND BONDS PURCHASED UNDER RESALE AGREEMENTS

Bills and Bonds Purchased under Resale Agreements

Notional amounts Interest rate Agreed resale price	**December 31 **
	2018 2017 $ 5,170,276 $ 6,884,863 0.61%-0.65% 0.42%-0.44% $ 5,171,289 $ 6,885,786

Bills and Bonds Issued under Redemption Agreements

Notional amounts Interest rate Agreed redemption price	**December 31 **
	2018 2017 $ 3,714,367 $ 4,929,245 0.44%-3.35% 0.34%-2.32% $ 3,719,582 $ 4,932,498

13. HELD-TO-MATURITY FINANCIAL ASSETS - 2017

Non-current Domestic investments Government bonds Bills Corporate bonds Financial bonds	December 31, 2017 $ 3,858,133 8,075,000 6,559,918 2,702,882 $ 21,195,933

Held to maturity corporate bonds, government bonds and financial bonds under repurchase agreements as of December 31, 2017 amounted to $4,665,982 thousand.

As of December 31, 2017, held-to-maturity government bonds used as reserves for trust fund compensation provision was $50,000 thousand.

Refer to Note 42 for information relating to held-to-maturity financial assets pledged as security.

• 47 -

December 31, 2017

14. FINANCIAL ASSETS MEASURED AT COST - 2017

Current Domestic unlisted ordinary shares Non-current Domestic unlisted ordinary shares Classified according to financial asset measurement categories Available-for-sale financial assets	$ - $ 244,023 $ 244,023

Management believed that the above unlisted equity investments held by the Group had fair values which cannot be reliably measured, because the range of reasonable fair value estimates was so significant. Therefore, they were measured at cost less impairment at the end of the reporting period.

The Group evaluated the above unlisted equity investments and recognized $28,419 thousand in impairment loss on financial assets for the year ended December 31, 2017.

15. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

Notes receivable At amortized cost Gross carrying amount Less: Allowance for impairment loss Trade receivables At amortized cost Gross carrying amount Less: Allowance for impairment loss Other receivables Loan receivables - fixed rate Others		**December 31 **	**December 31 **
		2018 $ 753,619 (4,585) $ 749,034 $ 6,896,905 (114,108) $ 6,782,797 $ 79,800 690,294 $ 770,094	2017 $ 680,000 (4,585) $ 675,415 $ 7,586,115 (86,554) $ 7,499,561 $ - 475,925 $ 475,925

• 48 -

a. Trade receivables

In 2018

Credit periods are typically provided in the Group’s sales agreements. Before accepting any new customer, the Group assesses the potential customer’s credit quality and defines its credit limits. Credit limits and scores attributed to customers are reviewed regularly.

In order to minimize credit risk, the management of the Group has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Group’s credit risk was significantly reduced.

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecasted direction of economic conditions at the reporting date.

The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation, or when the trade receivables are past due. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables based on the Group’s credit classification matrix.

December 31, 2018

Credit Classification - Type A Credit Classification - Type B Credit Classification - Type C Credit Classification - Type D Credit Classification - Type E Expected credit loss rate 0%-2% 4% 15% 50% 100% Gross carrying amount $ 2,914,208 $ 337,031 $ 13,554 $ 2,034 $ - Loss allowance (Lifetime ECLs) (41,877) (13,481) (2,033) (1,017) - Amortized cost $ 2,872,331 $ 323,550 $ 11,521 $ 1,017 $ -	Total - $ 3,266,827 (58,408) $ 3,208,419

The following table details the loss allowance of trade receivables based on the Group’s aging provision matrix.

December 31, 2018

Up to 60 Days 61 to 120 Days Over 120 Days Expected credit loss rate 0%-23.03% 0%-100% 100% Gross carrying amount $ 3,614,475 $ - $ 15,603 Loss allowance (Lifetime ECL) (40,097) - (15,603) Amortized cost $ 3,574,378 $ - $ -	Total - $ 3,630,078 (55,700) $ 3,574,378

• 49 -

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

Balance at January 1, 2018 per IAS 39 Adjustment on retrospective application of IFRS 9 Balance at January 1, 2018 per IFRS 9 Add: Net remeasurement of loss allowance Foreign exchange losses Balance at December 31, 2018 In 2017	2018 $ 91,139 - 91,139 27,617 (63) $ 118,693

The Group applied the same credit policy in 2018 and 2017. In determining the recoverability of a trade receivable, the Group considered any change in the credit quality of the trade receivable since the date credit was initially granted to the end of the reporting period. Estimated irrecoverable amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

Before accepting any new customer, the Group assesses the potential customer’s credit quality and defines its credit limits. Credit limits and scores attributed to customers are reviewed regularly.

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

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2017 $ - $ 87,584 Add: Impairment losses recognized on receivables - 3,647 Foreign exchange translation losses - (92) Balance at December 31, 2017 $ - $ 91,139	Total $ 87,584 3,647 (92) $ 91,139

The aging of receivables was as follows:

Not past due Past due 1- 90 days Past due 91-180 days Past due 181-360 days Past due over than 360 days (Note)		**December 31 **	**December 31 **
		2018 $ 6,237,585 634,399 9,429 3,382 12,110 $ 6,896,905	2017 $ 6,950,833 601,965 21,473 118 11,726 $ 7,586,115

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

• 50 -

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

	December 31,
	2017
Up to 30 days	$ 15,397
31-60 days	11,373
61-90 days	7,552
91-120 days	53,570
	$ 87,892

The above aging schedule was based on the number of past due days from the invoice date.

b. Other receivables - loans receivable

The interest rates and the amounts due on contractual maturity dates of fixed rate loans receivable were as follows:

Fixed rate Less than one year		December	31
		2018 $ 79,800	2017 $ -

The ranges of effective interest rates of loans receivable which are the same as coupon rates were as follows:

Fixed rate	December 31
	2018 2017 4% -

16. INVENTORIES

Finished goods Work in progress Raw materials Semi-finished goods Inventory in transit Construction in progress		**December 31 **	**December 31 **
		2018 $ 3,122,138 535,406 1,342,719 184,686 3,705 207,727 $ 5,396,381	2017 $ 2,076,120 390,593 1,172,931 186,530 51,228 95,371 $ 3,972,773

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 was $34,570,808 thousand and $30,737,555 thousand, respectively. The cost of goods sold included inventory write-downs of $27,023 thousand and reversals of inventory write-downs of $(28,067) thousand. The reversals of previous write-downs for the year ended December 31, 2017 resulted from increased selling prices in certain markets.

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17. DISCOUNTS AND LOANS

Overdrafts Short-term secured overdrafts Short-term loans Short-term secured loans Medium-term loans Medium-term secured loans Long-term loans Long-term secured loans Nonperforming loans Add: Premium adjustment Less: Allowance for impairment loss		December 31	December 31
		2018 $ 17,223 1,572,036 478,045 1,868,815 1,490,210 22,223,620 27,522 20,150,173 130,416 47,958,060 6,250 (561,585) $ 47,402,725	2017 $ - 1,486,176 2,061,860 2,538,395 1,296,896 17,999,624 21,084 21,066,180 19,220 46,489,435 12,451 (578,312) $ 45,923,574

• a. The nonperforming loans of Taipei Star Bank in the amounts of $130,416 thousand and $19,220 thousand as of December 31, 2018 and 2017, respectively, were no longer generating interest revenue.

• b. All unpaid credit extensions of Taipei Star Bank have been prosecuted as of December 31, 2018 and 2017.

• c. The movements of the loss allowance of loans for the years ended December 31, 2018 and 2017 were as follows:

In 2018

Balance at January 1, 2018 Changes in financial instruments recognized at the beginning of the current year Transferred to Lifetime ECLs Credit-impaired financial assets 12-month ECLs Derecognition of financial assets in the current year New financial assets purchased or originated Difference of impairment loss recognized under regulations Write-offs Recovery of written-off receivables Change in exchange rates or others Balance at December 31, 2018	12‑month ECLs Lifetime ECLs (Collectively Assessed) Lifetime ECLs (Individually Assessed) Lifetime ECLs (Non- Purchased or Originated Credit- impaired Financial Assets) Difference of Impairment Loss Recognized $ 34,462 $ - $ 207 $ 8,819 $ 534,824 (3 ) - 3 - - (105 ) - - 105 - 458 - (182 ) (276 ) - (19,909 ) - (25 ) (4,248 ) - 21,135 - 2 738 - - - - (2,236 ) (25,542 ) - - - (4,417 ) - - - - 16,657 - (2,307) - 2 2,423 - $ 33,731 $ - $ 7 $ 17,565 $ 510,282	Total $ 578,312 - - - (24,182 ) 21,875 (26,778 ) (4,417 ) 16,657 118 $ 561,585

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In 2017

Allowance on Particular Loans Allowance on Overall Loan Portfolio (Excluding Particular Loans) Balance at January 1, 2017 $ 54,300 $ 485,383 Provision for (reversal of) doubtful accounts (60,457) 73,805 Collections 25,377 - Impact of exchange rate - (96) Balance at December 31, 2017 $ 19,220 $ 559,092	Total $ 539,683 13,348 25,377 (96) $ 578,312

d. The loans of Taipei Star Bank classified by credit risk as of December 31, 2017 are as follows:

Items	Items	December 31, 2017	December 31, 2017
		Discounts and Loans
		Loans	Allowance for Doubtful Accounts
Objective evidence showing individual impairment	Assessed for impairment on an individual basis	$ 70,571	$ 4,836
	Assessed for impairment on a collective basis	26,680	4,694
No objective evidence showing individual impairment	Assessed for impairment on a collective basis	46,392,184	29,648
Total		$46,489,435	$ 39,178

The allowance for doubtful accounts according to IAS 39 was calculated and disclosed by credit risk. However, the amount was less than the amount calculated under “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non-performing Loans.” Thus, the allowance for doubtful accounts estimated under “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non-performing Loans” was recognized. According to FSC Rule No. 10010006830, allowance for doubtful accounts should be more than 1%; and comply with the FSC Rule No. 10300329440 since December 2014, the property mortgage allowance rate should be more than 1.5%, thus the allowance for doubtful accounts was $578,312 thousand as of December 31, 2017.

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18. SUBSIDIARIES

a. Subsidiaries included in the consolidated financial statements

Investor Investee Nature of Activities Shinkong Synthetic Fibers Corporation (SSF) Pan Asian Plastics Corp. (PAP) Manufacturing and sale of polyester pellets and polyester preforms SSF Hsingshing Investment Co., Ltd. (HSI) Investment in and construction of business and public housing SSF Shinkong Engineering Co., Ltd. (SKE) Contracting for various projects such as air pollution prevention, piping engineering and machine installation SSF and PAP Shinpont Industry Inc. (SPI) Manufacturing of synthetic fibers, wholesale and retail sale of textiles SSF Shin Chiun Industrial Co., Ltd. (SEC) Construction of incinerators SSF Maxima Pacific Ltd. (MPL) Investment SSF SSFC Investment Ltd. (SSFC) Investment SSF, SKE and SEC UBright Optronics Corp. (UBO) Precision chemical materials and mold manufacturing wholesale, etc. SSF, HSI and HAM Shinkong Polyester Film Corp., Ltd. (SPF) Electronic parts and components manufacturing SSF Shinkong International Securities Co., Ltd. (SKIS) Consignment trading of securities and futures SSF ShinBright Optronics Corp. (SOC) Precision chemical materials and electronic parts and components manufacturing SSF and SEC Tac Bright Optronics Corp. (TBO) Precision chemical materials - synthetic resin and plastic manufacturing SSF Taipei Star Bank Commercial bank SSF Hsinshin Asset Management Co., Ltd. (HAM) Housing and building development for sale and rental SSF Shin Kong International Leasing Corp. (SKIL) Leasing MPL Formosa Victory International Ltd. (Formosa) Investment MPL Thai Shinkong Industry Corporation Ltd. (TSI) Manufacturing and sales of plastic, polyester film, and PET SSFC Dayspring Ltd. (Dayspring) Investment SSFC Shinkong Industry (Hangjhou) Co., Ltd. (SKI) Manufacturing and sales of plastic, polyester film, and PET Dayspring Hangjhou Huachun Chemical Fiber Co., Ltd. (HZC) Chemical fiber weaving, printing and dyeing TBO Maxpro Ltd. (MPO) Investment MPO Lofo Holding GmbH (LFHO) Investment SSF Chi Jian Human-Resource & Management Co., Ltd. (CJH) Human resources management consulting

Proportion ofOwnership (%) December 31 2018 2017 Remark 100.00 100.00 100.00 100.00 100.00 100.00 50.00 50.00 2) 100.00 100.00 3) 100.00 100.00 100.00 100.00 53.86 53.86 2) 85.02 85.01 77.98 77.98 100.00 100.00 59.06 59.06 2) 27.06 27.06 2) 100.00 100.00 100.00 100.00 100.00 100.00 90.38 90.38 92.11 92.11 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 1) (Continued)

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Investor Investee Nature of Activities SKIS Shin Kong Investment Consultant Co., Ltd. (SKIC) Securities investment consulting SKIS Shin Kong Insurance Agent Co., Ltd. (SKIA) Life insurance agent SKIS Shin Kong Property Insurance Agency Co., Ltd. (SKPIA) Property insurance agent PAP Hsin Lung Chemical Co., Ltd. (HLC) Manufacturing of magnetic tapes for recording and video disks and polyester film SEC Intelligent Medical Big Data Co., Ltd. (IMBD) Consulting, biotechnology research and development services SEC Shin Kong Technologies Corporation (SKT) Electronic information software business UBO Qbright Materials Inc. (QBM) Precision chemical materials manufacturing and wholesale materials

Proportion ofOwnership (%) December 31 2018 2017 Remark 100.00 100.00 100.00 100.00 100.00 100.00 59.80 59.80 83.33 83.33 100.00 100.00 75.00 75.00 (Concluded)

Remarks:

• 1) Company which is an immaterial subsidiary; its financial statements have not been audited. Management believes there will be no material impact if the financial statements of the Company were to be audited.

• 2) Company which is a subsidiary that has material non-controlling interests.

• 3) On January 24, 2017, Shinkong Envirotech Corp. registered the change in its company name to Shin Chiun Industrial Co., Ltd.

• b. Details of subsidiaries that have material non-controlling interests

Name of Subsidiary Shinpont Industry Inc. (SPI) UBright Optronics Corp. (UBO) Tac Bright Optronics Corp. (TBO) Taipei Star Bank	Proportion of Ownership and Voting Rights Held by Non-controlling Interests
	December 31
	2018 2017 50.00% 50.00% 46.14% 46.14% 40.94% 40.94% 72.94% 72.94%

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See Table 6 for information on places of incorporation and principal places of business.

Name of Subsidiary Tac Bright Optronics Corp. (TBO) UBright Optronics Corp. (UBO) Shinpont Industry Inc. (SPI) Taipei Star Bank Others		Profit (Loss) Allocated to Non-controlling Interests For the Year Ended December 31 2018 2017 $ (112,800) $ (209,424) 63,667 12,824 167,170 146,361 138,717 142,267 147,402 72,952 $ 404,156 $ 164,980		Accumulated Non-controlling Interests	Accumulated Non-controlling Interests
				December 31
		2018 $ (112,800) 63,667 167,170 138,717 147,402 $ 404,156		2018 $ 987,967 1,447,094 519,646 3,914,792 1,344,530 $ 8,214,029	2017 $ 1,100,779 1,401,674 484,201 3,842,773 1,162,147 $ 7,991,574

Summarized financial information in respect of each of the Group’s subsidiaries that has material non-controlling interests is set out below. The summarized financial information below represents amounts before intragroup eliminations.

TBO and TBO’s subsidiaries

Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to: Owners Non-controlling interests Revenue Loss for the year Other comprehensive income (loss) for the year Total comprehensive loss for the year		December 31	December 31
	2018 2017 $ 536,012 $ 405,948 4,542,701 4,817,116 (2,127,700) (1,566,506) (620,934) (1,050,924) $ 2,330,079 $ 2,605,634 $ 1,342,112 $ 1,504,855 987,967 1,100,779 $ 2,330,079 $ 2,605,634 For the Year Ended December 31
		2018 $ 1,230,918 $ (275,527) (28) $ (275,555)	2017 $ 721,161 $ (511,541) 311 $ (511,230) (Continued)

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Loss attributable to: Owners Non-controlling interests Total comprehensive loss attributable to: Owners Non-controlling interests Net cash inflow (outflow) from: Operating activities Investing activities Financing activities Net cash inflow (outflow) UBO and UBO’s subsidiaries:	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ (162,727) (112,800) $ (275,527) $ (162,743) (112,812) $ (275,555) $ 114,648 (152,786) 40,592 $ 2,454	2017 $ (302,117) (209,424) $ (511,541) $ (301,933) (209,297) $ (511,230) $ (114,066) (289,572) 391,851 $ (11,787) (Concluded)

Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to: Owners Non-controlling interests Non-controlling interests of subsidiaries		December 31	December 31
		2018 $ 2,712,047 760,590 (459,510) (2,998) $ 3,010,129 $ 1,563,035 1,445,970 1,124 $ 3,010,129	2017 $ 2,391,059 982,806 (450,404) (42) $ 2,923,419 $ 1,521,745 1,400,494 1,180 $ 2,923,419

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Revenue Profit for the year Other comprehensive income (loss) for the year Total comprehensive income for the year Profit (loss) attributable to: Owners Non-controlling interests Non-controlling interests of subsidiaries Total comprehensive income (loss) attributable to: Owners Non-controlling interests Non-controlling interests of subsidiaries Net cash inflow (outflow) from: Operating activities Investing activities Financing activities Net cash inflow SPI Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to: Owners Non-controlling interests	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 2017 $ 2,631,679 $ 2,679,965 $ 138,060 $ 28,217 29 (2,628) $ 138,089 $ 25,589 $ 74,393 $ 15,393 63,723 13,185 (56) (361) $ 138,060 $ 28,217 $ 74,409 $ 13,977 63,736 11,973 (56) (361) $ 138,089 $ 25,589 $ 527,744 $ 539,426 (143,770) (133,548) (61,253) (103,566) $ 322,721 $ 302,312 December 31
		2018 $ 822,072 458,170 (240,524) (426) $ 1,039,292 $ 519,646 519,646 $ 1,039,292	2017 $ 675,486 469,472 (176,556) - $ 968,402 $ 484,201 484,201 $ 968,402

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Revenue Profit for the year Other comprehensive income for the year Total comprehensive income for the year Profit attributable to: Owners Non-controlling interests Total comprehensive income attributable to: Owners Non-controlling interests Net cash inflow (outflow) from: Operating activities Investing activities Financing activities Net cash inflow Taipei Star Bank Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to: Owners Non-controlling interests	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 2017 $ 1,371,000 $ 1,446,337 $ 334,340 $ 292,722 - - $ 334,440 $ 292,722 $ 167,170 $ 146,361 167,170 146,361 $ 334,340 $ 292,722 $ 167,170 $ 146,361 167,170 146,361 $ 334,340 $ 292,722 $ 372,063 $ 305,830 (81,946) (114) (258,450) (281,101) $ 31,667 $ 24,615 December 31
		2018 $ 61,738,217 25,136,859 (79,847,015) (1,654,978) $ 5,373,083 $ 1,458,291 3,914,792 $ 5,373,083	2017 $ 63,581,916 23,586,250 (80,550,839) (1,342,986) $ 5,274,341 $ 1,431,568 3,842,773 $ 5,274,341

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Revenue Profit for the year Other comprehensive income (loss) for the year Total comprehensive income for the year Profit attributable to: Owners Non-controlling interests Total comprehensive income attributable to: Owners Non-controlling interests Net cash (outflow) inflow from: Operating activities Investing activities Financing activities Net cash (outflow) inflow	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ 1,317,750 $ 190,189 14,164 $ 204,353 $ 51,472 138,717 $ 190,189 $ 55,305 149,048 $ 204,353 $ (1,015,063) (1,283,964) 172,679 $ (2,126,348)	2017 $ 1,175,141 $ 195,044 (67,657) $ 127,387 $ 52,777 142,267 $ 195,044 $ 34,467 92,920 $ 127,387 $ 4,311,920 (2,774,043) 447,982 $ 1,985,859

19. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in associates Investments in joint ventures		**December 31 **	**December 31 **
		2018 $ 779,583 186,743 $ 966,326	2017 $ 712,021 176,931 $ 888,952

a. Investments in associates

Name of Associate Unlisted companies Tai Jin Investment Co., Ltd. Tai Shin Leasing & Financial Co., Ltd. Da Chun Universe Investment Co., Ltd. Far Trust International Finance Co., Ltd.		December 31	December 31
		2018 $ 5,845 541,759 7,389 224,590 $ 779,583	2017 $ 5,876 528,970 7,538 169,637 $ 712,021

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At the end of the reporting period, the proportion of ownership and voting rights in associates held by the Group were as follows:

Name of Associate Tai Jin Investment Co., Ltd. Tai Shin Leasing & Financial Co., Ltd. Da Chun Universe Investment Co., Ltd. Far Trust International Finance Co., Ltd.	December 31
	2018 2017 48.57% 48.57% 30.00% 30.00% 45.00% 45.00% 29.05% 25.01%

Refer to Table 6 “Information on Investees” for the nature of activities, principal places of business and countries of incorporation of the associates.

Summarized financial information in respect of the Group’s associates is set out below:

The Group’s share of: Profit for the year Other comprehensive income (loss) Total comprehensive income for the year	For the Year Ended	For the Year Ended	December 31
		2018 $ 49,593 (22,935) $ 26,658	2017 $ 29,812 274,095 $ 303,907

During 2018, the Group’s associates disposed of its shares in equity instruments at FVTOCI and the Group’s share of unrealized loss of $405 thousand was transferred from other equity to retained earnings.

In August 2018, the Group subscribed for an additional 3,600 thousand shares of Far Trust International Finance Co., Ltd. for $45,000 thousand at a percentage different from its existing ownership percentage, increasing its continuing interest from 25.01% to 29.05%.

b. Investments in joint ventures

Name of Joint Venture Shinkong Excelsior Medical Asset Management Co., Ltd. (SEM) Name of Joint Venture Shinkong Excelsior Medical Asset Management Co., Ltd. (SEM)		**December 31 **
		2018 2017 $ 186,743 $ 176,931 December 31
		2018 2017 51% 51%

Refer to Table 6 “Information on Investees” for the nature of activities, principal places of business and countries of incorporation of the joint ventures.

On December 31, 2018 and 2017, the Group held 51% of the issued share capital of SEM and controls 51% of the voting power in the general meeting. However, under SEM’s Articles and the shareholders’ agreement, the Group does not control SEM. SEM is still considered as a joint venture of the Group since the Group does exercise significant influence over it.

The joint venture is accounted for using the equity method.

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The summarized financial information below represents the amounts shown in the joint ventures’ financial statements prepared in accordance with IFRSs adjusted by the Group for equity accounting purposes.

Shinkong Excelsior Medical Asset Management Co., Ltd. (SEM)

Current assets Non-current assets Current liabilities Non-current liabilities Equity Proportion of the Group’s ownership Equity attributable to the Group Carrying amount Operating revenue Depreciation expense and amortization expense Interests income Interests expense Income tax expense Net profit for the year Other comprehensive income Total comprehensive income for the year Dividends received from SEM		December 31	December 31
	2018 $ 22,527 777,717 (45,900) (388,181) $ 366,163 51% $ 186,743 $ 186,743 For the Year Ended		2017 $ 24,076 774,407 (42,089) (409,471) $ 346,923 51% $ 176,931 $ 176,931 December 31
		2018 $ 38,660 $ (2,335) $ 5,466 $ (5,674) $ (4,741) $ 19,978 - $ 19,978 $ 377	2017 $ 33,965 $ (2,254) $ 5,393 $ (5,877) $ (3,069) $ 16,727 - $ 16,727 $ 348

Except for Da Chun Universe Investment Co., Ltd., investments accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments were calculated based on the financial statements which have been audited. Management believes there will be no material impact on the equity method accounting or the calculation of the share of profit or loss and other comprehensive income if the financial statements of the Company were to be audited.

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20. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Effect of foreign currency exchange differences Reclassified Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Disposals Impairment losses Depreciation expenses Effect of foreign currency exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Disposals Effect of foreign currency exchange differences Transfers to investment properties Reclassified Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Impairment losses Depreciation expenses Effect of foreign currency exchange differences Transfers to investment properties Reclassified Balance at December 31, 2018 Carrying amounts at December 31, 2018	Freehold Land $ 6,323,235 121,371 - - (2,441) $ 6,442,165 $ - - - - - $ - $ 6,442,165 $ 6,442,165 - - - (1,452 ) 34 $ 6,440,747 $ - - - - - - - $ - $ 6,440,747	Buildings $ 7,717,825 3,526 - (5,925 ) 475,703 $ 8,191,129 $ 4,308,411 - 3,295 292,274 (4,429) $ 4,599,551 $ 3,591,578 $ 8,191,129 20,942 - (41,274 ) (585 ) 328,808 $ 8,499,020 $ 4,599,551 - 10,301 255,469 (23,617 ) (89 ) - $ 4,841,615 $ 3,657,405	Machinery Equipment $ 28,421,654 126,240 (215,189 ) (16,359 ) 2,352,523 $ 30,668,869 $ 19,920,893 (190,564 ) 70,630 1,376,886 (26,266) $ 21,151,579 $ 9,517,290 $ 30,668,869 51,082 (996,123 ) (488,748 ) - 1,787,472 $ 31,022,552 $ 21,151,579 (955,696 ) 695 1,506,613 (325,400 ) - 2,042 $ 21,379,833 $ 9,642,719	Equipment under Finance Leases $ 44,115 59,244 (3,129 ) - 20,892 $ 121,122 $ 23,140 (3,129 ) - 11,752 - $ 31,763 $ 89,359 $ 121,122 937 (3,728 ) - - (20,892) $ 97,439 $ 31,763 (2,218 ) - 11,989 - - (2,042) $ 39,492 $ 57,947	Property under Construction $ 2,991,069 1,439,347 - 680 (3,023,279) $ 1,407,817 $ - - - - - $ - $ 1,407,817 $ 1,407,817 946,845 - (39.556 ) - (2.122.233) $ 192.873 $ - - - - - - - $ - $ 192.873	Transportation Equipment $ 178,999 15,987 (10,635 ) (515 ) 15,829 $ 199,665 $ 108,034 (9,273 ) - 23,065 (1,157) $ 120,669 $ 78,996 $ 199,665 12,413 (11,115 ) (11,474 ) - 15,131 $ 204,620 $ 120,669 (11,273 ) - 25,875 (2,191 ) - - $ 133,080 $ 71,540	Other Equipment $ 581,401 1,568 (595 ) (3,492 ) 8,220 $ 587,102 $ 529,953 (595 ) - 15,160 (3,500) $ 541,018 $ 46,084 $ 587,102 8,285 (19,647 ) (18,363 ) - 21,392 $ 587,769 $ 541,018 (19,647 ) - 11,480 (18,186 ) - - $ 514,665 $ 64,104	Office Equipment $ 202,132 9,597 (3,835 ) (997 ) 14,016 $ 220,913 $ 151,861 (3,339 ) - 16,445 (1,460) $ 163,507 $ 57,406 $ 220,913 16,987 (9,567 ) (7,608 ) - 6,225 $ 226,950 $ 163,507 (9,568 ) - 16,996 (3,335 ) - - $ 167,600 $ 59,350	Total $ 46,460,430 1,776,880 (233,383 ) (26,608 ) (138,537) $ 47,838,782 $ 25,042,292 (206,900 ) 73,925 1,735,582 (36,812) $ 26,608,087 $ 21,230,695 $ 47,838,782 1,057,491 (1,040,180 ) (607,023 ) (2,037 ) 15,937 $ 47,262,970 $ 26,608,087 (998,402 ) 10,996 1,828,422 (372,729 ) (89 ) - $ 27,076,285 $ 20,186,685

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

Buildings 3-55 years Machinery equipment 2-17 years Transportation equipment 2-7 years Office equipment 3-18 years Other equipment 3-15 years Equipment held under finance leases 5 years

• b. Property, plant and equipment pledged as collateral for bank borrowings is set out in Note 42.

• c. As a result of the declining sale in the market, the estimated future cash flows expected to arise from the related equipment was decreased. The Group carried out a review of the recoverable amount of that related equipment and determined that the carrying amount exceeded the recoverable amount. The review led to the recognition of an impairment loss of $10,966 thousand and $73,925 thousand, which was recognized in cost of goods sold for the years ended December 31, 2018 and 2017, respectively. The Group determined the recoverable amount of the relevant assets on the basis of their value in use. The discount rates used in measuring the value in use were 8.833% and 7.472% per annum.

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21. INVESTMENT PROPERTIES

Cost Balance at January 1, 2017 Additions Disposals Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Disposals Depreciation expenses Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Disposals Transferred from property, plant and equipment Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Transferred from property, plant and equipment Depreciation expenses Balance at December 31, 2018 Carrying amounts at December 31, 2018

Completed Investment Properties $ 2,355,133 112 (53,081) $ 2,302,164 $ (148,815) 2,061 (13,035) $ (159,789) $ 2,142,375 $ 2,302,164 (4,073) 2,037 $ 2,300,128 $ (159,789) 175 (89) (12,428) $ (172,131) $ 2,127,997

Investment properties were depreciated using the straight-line method over their estimated useful lives of 30 to 50 years.

The fair value of the Group’s investment properties as of December 31, 2018 and 2017 was $2,866,898 thousand and $3,257,748 thousand, respectively. Management of the Group used the valuation model that market participants would use in determining the fair value. The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

All of the Group’s investment property was held under freehold interests. The investment properties pledged as collateral for bank borrowings are set out in Note 42.

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22. GOODWILL

Cost Balance at January 1 Effect of foreign currency exchange differences Balance at December 31	For the Year Ended	For the Year Ended	December 31
		2018 $ 279,945 303 $ 280,248	2017 $ 280,736 (791) $ 279,945

The Group did not recognize any impairment loss on goodwill for the years ended December 31, 2018 and 2017.

23. OPERATING DEPOSITS AND SETTLEMENT FUNDS

Operating deposits Settlement funds		**December 31 **	**December 31 **
		2018 $ 226,500 68,079 $ 294,579	2017 $ 226,500 77,447 $ 303,947

• a. Operating deposits

As stipulated in the Rules Governing Securities Firms, underwriters, dealers, and brokers should provide $40 million, $10 million and $50 million, respectively, in the form of cash, government bonds, and/or bank notes as operating deposits to be placed in designated banks. For each additional branch, the Company should place $5 million in designated banks.

As stipulated in the Regulations Governing Margin Purchase and Short Sale of Securities by Securities Firms, securities firms should have operating deposits of $50 million.

As stipulated in the Rules Governing Futures Commission Merchants, futures dealers should have operating deposits of $25 million for registration purposes and $5 million for each of its branches.

• b. SKIA and SKPIA both placed guarantee deposit of $1.5 million calculated by the sales revenue in the prior fiscal year as stipulated in the Regulation Governing Deposit of Bond for Acquirement of Insurance by Insurance Agents, Insurance Brokers and Insurance Surveyors.

• c. SKIC has deposited $5 million as the operating deposit for establishment according to the ROC securities and investing trust association and investment consulting operating deposit regulations.

• d. Settlement funds

As stipulated in the Rules Governing Securities Firms, all brokers should place $15 million as settlement funds with the Taiwan Stock Exchange before starting trading transactions in the first year of trading and contribute a certain percentage of the transaction amounts to the fund within 10 days after the end of each quarter. In the second year, the settlement funds need to reach only $3.5 million including the previous year’s contribution. If the funds accumulated until the previous year are more or less than $3.5 million, the brokers can claim a refund from the Taiwan Stock Exchange or submit the shortage, respectively, at the end of January each year.

• 65 -

Securities firms are required to deposit $3 million as settlement fund to the Taiwan Stock Exchange before each additional branch starts trading operations, and this deposit will be reduced to $0.5 million from the second year.

As stipulated in the Taipei Exchange Rules for Administration of the Joint Responsibility System Clearing and Settlement Fund, securities brokers will need to deposit to the settlement fund $1.5 million for main institution, and an extra $0.25 million for every new branch established, and an extra $2 million for dealers of securities listed in exchange institution. In addition, the Taipei Exchange will calculate an amount using the total buy and sell dollar value for the last year multiplied by a fixed percentage for the securities brokers to deposit or withdraw the settlement fund every year.

As stipulated in the Taiwan Futures Exchange Corporation Criteria for clearing membership, before carrying out clearing and settlement operations, the clearing member shall make a deposit to the clearing and settlement fund equal to 20% of its paid-in capital or designated operating funds.

24. OTHER ASSETS

Current Right to recover a product Loans receivable from the securities department Others Non-current Refundable deposits Overdue receivables Loss Allowance of overdue receivables Prepaid rents (land use rights) Long-term receivables Foreclosed real estate, net Others		**December 31 **	**December 31 **
		2018 $ 38,316 964,220 111,466 $ 1,114,002 $ 47,833 69,488 (69,488) 1,202,732 767,726 - 483,988 $ 2,502,279	2017 $ - 637,863 168,218 $ 806,081 $ 47,959 70,688 (70,688) 1,224,172 554,980 17,002 506,703 $ 2,350,816

In the first quarter of 2014, the Group obtain, the superficies by signed the contract of setting national non-public use land superficies with Northern Region Branch, National Property Administration, MOF, and pay the royalty $1,234,568 thousand. Duration of superficies is 70 years. In the duration, the Group could construct buildings on superficies land under the rule of contract.

The royalty payment above is recognized in prepaid rents, and amortized as expenses in the duration, besides when the building under construction, amortized cost has to record in “Inventory - Construction in progress”.

• 66 -

25. BORROWINGS

a. Short-term borrowings

Secured borrowings Bank loans Unsecured borrowings Line of credit borrowings		**December 31 **	**December 31 **
		2018 $ 580,000 5,284,128 $ 5,864,128	2017 $ 450,000 3,983,225 $ 4,433,225

The range of weighted average effective interest rate on bank loans was 0.82%-4.493% and 0.80%-2.92% per annum as of December 31, 2018 and 2017, respectively.

b. Short-term bills payable

Commercial paper Less: Unamortized discount on bills payable		December 31	December 31
		2017 $ 2,290,000 (588) $ 2,289,412	2017 $ 4,445,000 (1,033) $ 4,443,967

Outstanding short-term bills payable were as follows:

December 31, 2018

Promissory Institution Ta Ching Bills Finance Corporation China Bills Finance Corporation Taiwan Finance Corporation Mega Bills Finance Corporation Taiwan Cooperative Bills Finance Corporation International Bills Finance Corporation Grand Bills Finance Corporation The Shanghai Commercial & Savings Bank KGI Bank Bank SinoPac Mega Bank	Nominal Amount $ 180,000 670,000 35,000 215,000 250,000 100,000 100,000 150,000 120,000 370,000 100,000 $ 2,290,000	Discount Amount $ 128 147 - 145 15 - - - - 153 - $ 588	Carrying Amount Interest Rate Collateral $ 179,872 0.49%-0.95% None 669,853 0.49%-0.95% None 35,000 0.49%-0.95% None 214,855 0.49%-0.95% None 249,985 0.49%-0.95% None 100,000 0.49%-0.95% None 100,000 0.49%-0.95% None 150,000 0.49%-0.95% None 120,000 0.49%-0.95% None 369,847 0.49%-0.95% None 100,000 0.49%-0.95% None $ 2,289,412

• 67 -

December 31, 2017

Promissory Institution International Bills Finance Corporation Ta Ching Bills Finance Corporation China Bills Finance Corporation Taiwan Finance Corporation Mega Bills Finance Corporation Grand Bills Finance Corporation Taiwan Cooperative Bills Finance Corporation Dah Chung Bills Finance Corporation Mega Bank The Shanghai Commercial & Savings Bank KGI Bank	Nominal Amount $ 670,000 460,000 830,000 460,000 855,000 300,000 350,000 190,000 200,000 80,000 50,000 $ 4,445,000	Discount Amount $ 35 171 317 124 147 17 147 6 38 - 31 $ 1,033	Carrying Amount Interest Rate Collateral $ 669,965 0.30%-0.89% None 459,829 0.30%-0.89% None 829,683 0.30%-0.89% None 459,876 0.30%-0.89% None 854,853 0.30%-0.89% None 299,983 0.30%-0.89% None 349,853 0.30%-0.89% None 189,994 0.30%-0.89% None 199,962 0.30%-0.89% None 80,000 0.30%-0.89% None 49,969 0.30%-0.89% None $ 4,443,967

c. Long-term borrowings

Taiwan Bank (1) Taiwan Bank (2) Taiwan Bank (3) Taiwan Bank (4) Bangkok Bank The Export - Import Bank of the ROC Hua Nan Bank KGI Bank Taiwan Business Bank (1) Taiwan Business Bank (2) Bank SinoPac (1) Bank SinoPac (2) Cathay United Bank JihSun Bank (1) JihSun Bank (2) JihSun Bank (3) JihSun Bank (4) Mega Bank (1) Mega Bank (2) Fubon Bank Fubon Bank (Syndicated Loan) Far Eastern International Bank (1) Far Eastern International Bank (2) The Shanghai Commercial & Savings Bank First Bank Bank of Panhsin Taiwan Cooperative Bank Mizuho Bank Mizuho Bank Commercial Paper (Syndicated Loan) Less: Current portions Less: Unamortized discounts on commercial papers Long-term borrowings		December 31	December 31
		2018 $ 1,950,000 100,000 - 100,000 400,000 - 150,000 1,170,000 150,000 100,000 550,000 100,000 150,000 - - - 100,000 430,769 200,000 - - 300,000 200,000 19,417 - 103,200 2,000 600,000 800,000 7,675,386 (1,282,051) (706) $ 6,392,629	2017 $ 1,950,000 100,000 10,000 10,000 400,000 220,000 100,000 1,200,000 150,000 - 350,000 100,000 - 400,000 200,000 200,000 100,000 796,154 - 90,300 700,000 300,000 150,000 36,083 50,000 - - - 800,000 8,412,537 (1,835,385) (960) $ 6,576,192

• 68 -

As of December 31, 2018 and 2017, the weighted average effective interest rate of the bank borrowings was 0.6183%-2.75% and 0.6133%-2.095% per annum, respectively.

Refer to Note 42 for information relating to assets pledged to secure bank borrowings.

26. FINANCIAL DEBENTURES

Secondary financial debentures		December 31	December 31
		2018 $ 1,330,000	2017 $ 1,000,000

Taipei Star Bank issued their first primary financial debenture on June 24, 2016, which was approved under ruling reference No. 10500122720 issued by the Banking Bureau of the FSC on May 24, 2016. Details of the financial debenture issuance are summarized as follows:

• a. Total approved principal: $500,000 thousand.

• b. Principal issued: $500,000 thousand.

• c. Denomination: $10,000 thousand, issued at par.

• d. Period: 7 years with maturity on June 24, 2023.

• e. Nominal interest rate: Fixed interest rate, 1.9%.

• f. Repayment: The financial debenture will be paid on the maturity date.

• g. The interest will be paid annually from the issuance date.

Taipei Star Bank issued their first, second, third and fourth financial debentures on June 19, June 30, August 18, September 29, 2017, respectively, which were approved under ruling reference No. 10600104680 issued by the Banking Bureau of the FSC on May 11, 2017. Details of the financial debenture issuance are summarized as follows:

• a. Total approved principal: $500,000 thousand.

• b. Principal issued:

• 1) 2017 first term: $200,000 thousand.

• 2) 2017 second term: $100,000 thousand.

• 3) 2017 third term: $100,000 thousand.

• 4) 2017 fourth term: $100,000 thousand.

• c. Denomination:

• 1) 2017 first term: $10,000 thousand, issued at par.

• 2) 2017 second term: $10,000 thousand, issued at par.

• 3) 2017 third term: $10,000 thousand, issued at par.

• 4) 2017 fourth term: $10,000 thousand, issued at par.

• 69 -

d. Period:

• 1) 2017 first term: 7 years with maturity on June 19, 2024.

• 2) 2017 second term: 7 years with maturity on June 30, 2024.

• 3) 2017 third term: 7 years with maturity on August 18, 2024.

• 4) 2017 fourth term: 7 years with maturity on September 29, 2024.

e. Nominal interest rate:

• 1) 2017 first term: Fixed interest rate, 1.90%.

• 2) 2017 second term: Fixed interest rate, 1.85%.

• 3) 2017 third term: Fixed interest rate, 1.85%.

• 4) 2017 fourth term: Fixed interest rate, 1.85%.

• f. Repayment: The financial debenture will be paid on the maturity date.

• g. The interest will be paid annually from the issuance date.

Taipei Star Bank made its first and second issues of financial debentures with no maturity dates on September 17 and December 24, 2018, respectively, which were approved under ruling reference No. 10701122210 issued by the Banking Bureau of the FSC on July 30, 2018. Details of the financial debenture issuance are summarized as follows:

• a. Total approved principal: $600,000 thousand.

• b. Principal issued:

• 1) 2018 first term: $200,000 thousand.

• 2) 2018 second term: $130,000 thousand.

• c. Denomination:

• 1) 2018 first term: $10,000 thousand, issued at par.

• 2) 2018 second term: $10,000 thousand, issued at par.

• d. Period:

• 1) 2018 first term: No maturity date.

• 2) 2018 second term: No maturity date.

e. Nominal interest rate:

• 1) 2018 first term: Fixed interest rate, 4.00%.

• 2) 2018 second term: Fixed interest rate, 4.00%.

• f. Repayment: The financial debenture can be redeemed after 5 years from the issuance date

• g. The interest will be paid annually from the issuance date.

• 70 -

27. OTHER FINANCIAL LIABILITIES

Lease payables - current Lease payables - non-current Information on the lease payables: Minimum lease payments Not later than 1 year Later than 1 year and not later than 5 years Less: Future finance charges Present value of minimum lease payments Present value of minimum lease payments Not later than 1 year Later than 1 year and not later than 5 years		December	31
		2018 $ 20,209 5,207 $ 25,416 December	2017 $ 19,249 25,416 $ 44,665 31
		2018 $ 21,000 5,250 26,250 (834) $ 25,416 $ 20,209 5,207 $ 25,416	2017 $ 21,000 26,250 47,250 (2,585) $ 44,665 $ 19,249 25,416 $ 44,665

Taipei Star Bank leased some of its operating equipment under finance leases for three years. The Group will take the ownership of the equipment at the end of the leasing term and the lease payments have been settled. Interest rate underlying all obligations under finance leases which was fixed at the contract date was 4.87% for the years ended December 31, 2018 and 2017.

28. NOTES PAYABLE AND TRADE PAYABLES

Notes payable Operating Non-operating Trade payables Operating		December 31	December 31
		2018 $ 236,990 - $ 236,990 $ 4,325,239	2017 $ 310,372 2,108 $ 312,480 $ 4,936,502

• 71 -

29. DEPOSITS AND REMITTANCES

Checking accounts Demand deposits Demand savings deposits Time deposits Time savings deposits Negotiable certificates of deposit Remittances		December 31	December 31
		2018 $ 944,906 6,222,001 15,097,811 19,085,176 20,202,656 6,276,300 558	2017 $ 1,012,220 5,271,465 14,920,871 17,991,934 20,203,580 8,017,300 1,640

$ 67,829,408 $ 67,419,010

30. OTHER LIABILITIES

Current Other payables Payables for purchase of equipment Notes payable for exchange Payables for salaries or bonuses Others Other liabilities Refund liabilities Customer returns and rebates Others Non-current Other liabilities Guarantee deposits received Others Balance at January 1, 2017 Additional provisions recognized Usage Reversing un-unused balances Balance at December 31, 2017		**December 31 **	**December 31 **
		2018 $ 47,684 377,772 592,354 989,066 $ 2,006,876 $ 214,738 - 277,287 $ 492,025 $ 53,752 27,719 $ 81,471	2017 $ 62,272 483,518 362,905 907,273 $ 1,815,968 $ - 178,111 294,975 $ 473,086 $ 48,341 36,119 $ 84,460 Customer Returns and Rebates $ 240,857 146,157 (168,565) (40,338) $ 178,111

• 72 -

The provision of customer returns and rebates was based on historical experience, management’s judgments and other known reasons estimated product returns and rebates may occur in the year. The provision was recognized as a reduction of operating income in the periods of the related goods sold.

31. PROVISIONS

Non-current Employee retirement benefits (a) Other employee benefits (b)		**December 31 **	**December 31 **
		2018 $ 664,513 489 $ 665,002	2017 $ 909,555 454 $ 910,009

• a. Refer to Note 32 for information related to employee retirement benefits.

• b. Other employee benefits refers to the preferential benefit deposit interest of retired employees.

32. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company and SKE, HAM, SKIS, SKIC, SKIA, SKPIA, Taipei Star Bank, UBO, SPF, SOC, TBO, SPI, CJH, PAP, IMBD, HIS, SKT and SKIL of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The employees of the Group’s subsidiaries in mainland China (SKI and HZC) are members of a state-managed retirement benefit plan operated by the government of mainland China. The subsidiaries are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

b. Defined benefit plans

The defined benefit plan adopted by the Company and SKE, Taipei Star Bank, UBO and PAP of the Group in accordance with the Labor Standards Law is operated by the government of the ROC. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the 6 months before retirement. The Company and SKE, Taipei Star Bank, UBO and PAP contribute amounts equal to 6% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and strategy.

• 73 -

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

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities		December 31	December 31
		2018 $ 1,389,880 (725,367) $ 664,513	2017 $ 1,381,286 (471,731) $ 909,555

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

Present Value of the Defined Benefit Obligation Fair Value of the Plan Assets Balance at January 1, 2017 $ 1,424,462 $ (432,779) Service cost Current service cost 17,991 - Net interest expense (income) 22,747 (6,782) Recognized in profit or loss 40,738 (6,782) Remeasurement Return on plan assets (excluding amounts included in net interest) - (10) Actuarial (gain) loss Changes in demographic assumptions 4 - Changes in financial assumptions 8,894 2,244 Experience adjustments 21,344 - Recognized in other comprehensive income 30,242 2,234 Contributions from the employer - (131,910) Benefits paid (114,333) 97,506 Exchange differences on foreign plans 177 - Balance at December 31, 2017 1,381,286 (471,731) Service cost Current service cost 14,535 - Net interest expense (income) 19,468 (6,644) Recognized in profit or loss 34,003 (6,644) Remeasurement Return on plan assets (excluding amounts included in net interest) - (13,714) Actuarial (gain) loss Changes in demographic assumptions (23) - Changes in financial assumptions 32,612 - Experience adjustments 10,563 - Recognized in other comprehensive income 43,152 (13,714) Contributions from the employer - (298,194) Benefits paid (69,178) 64,916 Exchange differences on foreign plans 617 - Balance at December 31, 2018 $ 1,389,880 $ (725,367)

Net Defined Benefit Liabilities (Assets) $ 991,683 17,991 15,965 33,956 (10) 4 11,138 21,344 32,476 (131,910) (16,827) 177 909,555 14,535 12,824 27,359 (13,714) (23) 32,612 10,563 29,438 (298,194) (4,262) 617 $ 664,513

• 74 -

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

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

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

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

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

Discount rate(s) Expected rate(s) of salary increase	December 31
	2018 2017 0.8928%- 1.189% 0.952%- 1.4575% 0.75%-1.75% 0.75%-1.75%

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

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		December	31
		2018 $ (35,206) $ 36,531 $ 36,109 $ (34,968)	2017 $ (36,108) $ 37,491 $ 37,131 $ (35,923)

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

Expected contributions to the plan for the next year Average duration of the defined benefit obligation		December	31
	2018 2017 $ 49,149 $ 52,142 9-11.2 years 10-11.5 years

• c. MPL, SSFC, Dayspring, Formosa, MPO and LFHO do not have pension plans, as pension plans are not mandatory under the local government legislations.

• 75 -

• d. HLC, SEC and QBM have no full-time employees, and their investment activities are carried out by SSF; therefore, they have no pension plans.

• e. TSI’s pension plan is a defined benefit plan. Pension benefits are calculated on the basis of the length of service and average salaries before retirement. TSI recognized $340 thousand and $241 thousand as pension expense for the years ended December 31, 2018 and 2017, and its pension liabilities amounted to $17,964 thousand and $15,391 thousand on December 31, 2018 and 2017, respectively.

33. EQUITY

• a. Share capital

Ordinary shares

Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31
		2018 2,800,000 $ 28,000,000 1,618,409 $ 16,184,093	2017 2,800,000 $ 28,000,000 1,618,409 $ 16,184,093

Fully paid ordinary shares, which have a par value of NT$10, carry one vote per share and carry a right to dividends.

• b. Capital surplus

May be used to offset a deficit distributed as cash dividends, or transferred to share capital (1) Issuance of ordinary shares Conversion of bonds Treasury share transactions The difference between consideration received or paid and the carrying amount of the subsidiaries’ net assets during actual disposal or acquisition May be used to offset deficit only Changes in percentage of ownership interest in subsidiaries (2)		**December 31 **	**December 31 **
		2018 $ 272,247 163,223 275,547 414,904 1,125,921 449,756 $ 1,575,677	2017 $ 272,247 163,223 275,547 414,904 1,125,921 449,811 $ 1,575,732

• 1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and to once a year).

• 2) Such capital surplus arises from the effect of changes in ownership interests in subsidiaries resulting from equity transactions other than actual disposals or acquisitions, or from changes in capital surplus of subsidiaries accounted for using the equity method.

• 76 -

c. Retained earnings and dividend policy

Under the dividend policy as set forth in the amended Articles, where the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be first for distribution of dividends to preference shares shareholders, and then for distribution of dividends to ordinary shares shareholders, and the amount should be resolved in the shareholders’ meeting. For the policies on the distribution of employees’ compensation and remuneration of directors and supervisors after the amendment, refer to employees’ compensation and remuneration of directors and supervisors in Note 34-g.

The Company’s Articles also stipulate a dividends policy whereby the issuance of stock dividends or the payment of cash dividends. In principle, cash dividends are limited to 20% of the total dividends distributed.

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

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

The appropriations of earnings for 2017 and 2016 which were approved in the shareholders’ meetings on May 29, 2018 and May 26, 2017, respectively, were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For the Year Ended December 31 2017 2016 $ 96,472 $ 74,825 809,205 404,602	Dividends Per Share (NT$)
		For the Year Ended December 31
		2017 2016 $ - $ - 0.50 0.25

The appropriation of earnings for 2018 had been proposed by the Company’s board of directors on March 25, 2019. The appropriation and dividends per share were as follows:

	Appropriation	Appropriation	Dividends Per	Dividends Per
	of	Earnings	Share	(NT$)
Legal reserve	$	245,794	$	-
Cash dividends		1,375,648		0.85

The appropriations of earnings for 2018 are subject to the resolution in the shareholders’ meeting to be held on May 29, 2019.

d. Special reserve

On first-time adoption of IFRSs, the Company appropriated for special reserve, the amounts that were the same as those of unrealized revaluation increment and cumulative translation differences transferred to retained earnings, which were $1,673,314 thousand and $392,143 thousand, respectively.

• 77 -

e. Other equity items

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

For the Year Ended December 31 2018 2017 Balance at January 1 $ (1,145) $ 67,829 Recognized for the year Exchange differences on translating the financial statements of foreign operations 42,428 (200,918) Share from subsidiaries and associates accounted for using the equity method (133,515) 131,944 Balance at December 31 $ (92,232) $ (1,145) 2) Unrealized gain (loss) on available-for-sale financial assets Balance at January 1, 2017 $ 1,060,956 Recognized for the year Unrealized gain arising on revaluation of available-for-sale financial assets 964,920 Share from subsidiaries and associates accounted for using the equity method 326,388 Balance at December 31, 2017 2,352,264 Adjustment due to retrospective application of IFRS 9 (2,352,264) Balance at January 1, 2018 per IFRS 9 $ - 3) Unrealized gain (loss) on financial assets at FVTOCI	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2017 $ 67,829 (200,918) 131,944 $ (1,145) $ 1,060,956 964,920 326,388 2,352,264 (2,352,264) $ -

	For the Year	For the Year
		Ended
	December 31,
		2018
Balance at January 1 per IAS 39	$	-
Adjustment due to retrospective application of IFRS 9		2,346,799
Balance at January 1 per IFRS 9		2,346,799
Recognized for the year
Unrealized loss - equity instruments		(358,797)
Share from subsidiaries and associates accounted for using the equity method		(30,968)
Other comprehensive income recognized for the year		(389,765)
Cumulative unrealized loss of equity instruments transferred to retained earnings
due to disposal		86,150
Balance at December 31	$	2,043,184

• 78 -

f. Non-controlling interests

Balance at January 1 per IAS 39 Adjustment on retrospective application of IFRS 9 Balance at January 1 per IFRS 9 Share in profit for the year Other comprehensive income/(loss) during the year Exchange differences on translating the financial statements of foreign operations Unrealized loss on available-for-sale financial assets Unrealized gain on financial assets at FVTOCI Remeasurement on defined benefit plans Related income tax Partial disposal of subsidiaries - UBO Acquisition of non-controlling interests in subsidiaries - SPF Acquisition of non-controlling interests in subsidiaries - TBO Acquisition of non-controlling interests in subsidiaries - Taipei Star Bank Dividends paid by subsidiaries Others Balance at December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 7,991,574 138,816 8,130,390 404,156 (8,656) - 10,751 245 (77) 62 (5) - - (315,527) (7,310) $ 8,214,029	2017 $ 8,063,296 - 8,063,296 164,980 (1,688) (49,690) - 226 (35) - - (168) (386) (205,399) 20,438 $ 7,991,574

• g. Treasury shares

	Shares				Shares Held
	Transferred to		Shares		by Its
	Employees	(In	Cancelled	(In	Subsidiaries	Total (In
	Thousands of		Thousands of		(In Thousands	Thousands of
Purpose of Buy-back	Shares)		Shares)		of Shares)	Shares)
Number of shares at January 1,
2017		-		-	4,680	4,680
Increase during the period		-		-	-	-
Decrease during the period		-		-	-	-
Number of shares at
December 31, 2017		-		-	4,680	4,680
Increase during the period		-		-	-	-
Decrease during the period		-		-	-	-
Number of shares at
December 31, 2018		-		-	4,680	4,680

• 79 -

The Company’s shares held by its subsidiaries at the end of the reporting periods were as follows:

Name of Subsidiary Number of Shares Held (In Thousands) December 31, 2018 Hsin Lung Chemical Co., Ltd. 4,680 December 31, 2017 Hsin Lung Chemical Co., Ltd. 4,680	Carrying Amount Market Price $ 54,060 $ 54,060 $ 47,039 $ 47,039

Hsin Lung Chemical Co., Ltd. acquired the Company’s shares for investment purposes before the Company obtained control over Hsin Lung Chemical Co., Ltd.

Under the Securities and Exchange Act, the Company shall neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as rights to dividends and to vote. The subsidiaries holding treasury shares, however, retain shareholders’ rights, except the rights to participate in any share issuance for cash and to vote.

34. NET PROFIT (LOSS) FROM CONTINUING OPERATIONS

a. Revenue from Contracts

Refer to Note 51 for detailed revenue information on contracts for the years ended December 31, 2018 and 2017.

b. Finance costs

Interest on bank loans Other interest expense Total interest expense for financial liabilities measured at amortized cost Interest due to the Central Bank and other banks Interest on bills and bonds sold under repurchase agreements Interest on deposits Other finance costs Information about capitalized interest was as follows: Capitalized interest Capitalization rate	For the Year Ended	December 31
	2018 $ 215,685 23,363 239,048 58,641 35,122 468,123 - $ 800,934 For the Year Ended	2017 $ 186,683 16,456 203,139 37,970 21,206 422,311 7,862 $ 692,488 December 31
	2018 2017 $ 1,984 $ 21,678 1.09%-1.2% 1.0%-1.6942%

• 80 -

c. Impairment losses recognized (reversed)

Investments in debt instruments at FVTOCI Financial assets at amortized cost Financial assets measured at cost Bad debt expense, commitments and guarantee liability provisions Trade receivables Property, plant and equipment (included in operating costs)	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 260 $ (8,306) $ - $ 30,374 $ (27,617) $ (10,996)	2017 $ - $ 1,158 $ (28,419) $ (14,419) $ (3,647) $ (73,925)

d. Depreciation and amortization

Property, plant and equipment Investment property Others An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating expenses e. Operating expenses directly related to investment properties Direct operating expenses from investment properties that generated rental income f. Employee benefits expense Post-employment benefits Defined benefit plans Defined contribution plans Share-based payments Equity-settled Total employee benefits expense	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
	2018 2017 $ 1,828,422 $ 1,735,582 12,428 13,035 4,133 3,671 $ 1,844,983 $ 1,752,288 $ 1,741,069 $ 1,660,765 99,781 87,852 $ 1,840,850 $ 1,748,617 $ 4,133 $ 3,671 **For the Year Ended December 31 **
	2018 $ 21,277 For the Year Ended		2017 $ 16,978 December 31
		2018 $ 27,359 99,041 126,400 9,873 $ 136,273	2017 $ 33,956 93,594 127,550 20,438 $ 147,988 (Continued)

• 81 -

An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended	For the Year Ended	December 31
		2018 $ 67,689 68,584 $ 136,273	2017 $ 69,209 78,779 $ 147,988 (Concluded)

• g. Employees’ compensation and remuneration of directors and supervisors

According to the Articles of Incorporation of the Company, the Company accrued employees’ compensation and remuneration of directors and supervisors at rates of no less than 1% and no higher than 5%, respectively, of net profit before income tax, employees’ compensation, and the remuneration of directors and supervisors. The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2018 and 2017 which were approved by the Company’s board of directors on March 25, 2019 and March 26, 2018, respectively, are as follows:

Accrual rate For the Year Ended December 31 2018 2017 Employees’ compensation 1% 1% Remuneration of directors and supervisors - - Amount For the Year Ended December 31 2018 2017 Cash Share Cash Share Employees’ compensation $ 28,419 $ - $ 12,151 $ - Remuneration of directors and supervisors - - - -	Accrual rate For the Year Ended December 31 2018 2017 Employees’ compensation 1% 1% Remuneration of directors and supervisors - - Amount For the Year Ended December 31 2018 2017 Cash Share Cash Share Employees’ compensation $ 28,419 $ - $ 12,151 $ - Remuneration of directors and supervisors - - - -	**For the Year Ended December 31 **	**For the Year Ended December 31 **
	2018 Cash Share $ 28,419 $ - - -		2017
			Cash Share $ 12,151 $ - - -

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

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

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

• h. Gain or loss on foreign currency exchange

Foreign exchange gains Foreign exchange losses	For the Year Ended	For the Year Ended	December 31
		2018 $ 595,612 (377,407) $ 218,205	2017 $ 203,664 (541,845) $ (338,181)

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35. INCOME TAXES RELATING TO CONTINUING OPERATIONS

a. Major components of income tax expense (benefit) recognized in profit or loss are as follows:

Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior years Others Deferred tax In respect of the current year Adjustments to deferred tax attributable to changes in tax rates and laws Income tax expense recognized in profit or loss	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2018 $ 607,923 3,281 (12,409) 465 599,260 193,069 (18,714) 174,355 $ 773,615	2017 $ 385,968 37,257 (16,074) 4,762 411,913 32,890 - 32,890 $ 444,803

A reconciliation of accounting profit and income tax expenses is as follows:

Profit before tax from continuing operations Income tax expense calculated at the statutory rate (20% and 17% for 2018 and 2017 respectively) Nondeductible expenses in determining taxable income Deferred tax effect from earnings of subsidiaries Tax-exempt income Additional income tax under the Alternative Minimum Tax Act Income tax on unappropriated earnings Unrecognized loss carryforwards/deductible temporary differences/investment credits Effect of tax rate changes Adjustments for prior years’ tax Others Income tax expense recognized in profit or loss	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ 3,635,708 $ 727,142 1,137 (236,729) (80,595) - 3,281 171,517 (18,714) (12,409) 218,985 $ 773,615	2017 $ 1,574,509 $ 267,667 1,312 (67,502) (76,384) 6,436 37,257 203,911 - (16,074) 88,180 $ 444,803

In 2017, the applicable corporate income tax rate used by the group entities in the ROC was 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings will be reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

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

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b. Income tax recognized in other comprehensive income

Deferred tax Effect of change in tax rate In respect of the current year: Fair value changes of financial assets at FVTOCI Remeasurement of defined benefit plan	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 3,633 (11,660) 5,571 $ (2,456)	2017 $ - - 5,557 $ 5,557

c. Current tax assets and liabilities

Current tax assets Tax refund receivable Current tax liabilities Income tax payable		**December 31 **	**December 31 **
		2018 $ 44,463 $ 389,366	2017 $ 80,762 $ 276,979

d. Deferred tax assets and liabilities

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

For the year ended December 31, 2018

Deferred Tax Assets Temporary differences Property, plant and equipment Fair value changes of financial assets Inventory write-downs Unrealized gross profit Defined benefit obligation Gain or loss on foreign currency exchange Allowance for impairment loss of receivables Others Loss carryforwards Deferred Tax Liabilities Temporary differences Property, plant and equipment Others	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehen- sive Income $ 9,118 $ 336 $ - 17,719 (5,994) (11,660) 118,547 8,009 - 40,372 8,984 - 110,215 11,242 9,204 7,007 (12,577) - 34,096 9,619 - 12,750 (11,257) - 349,824 8,362 (2,456) 71,248 (43,773) - $ 421,072 $ (35,411) $ (2,456) Opening Balance Recognized in Profit or Loss Recognized in Other Comprehen- sive Income $ 899,857 $ 5,349 $ - 194,552 133,595 - $ 1,094,409 $ 138,944 $ -	Exchange Differences $ - - (354) - - - (31) - (385) - $ (385) Exchange Differences $ - - $ -	Closing Balance $ 9,454 65 126,202 49,356 130,661 (5,570) 43,684 1,493 355,345 27,475 $ 382,820 Closing Balance $ 905,206 328,147 $ 1,233,353

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For the year ended December 31, 2017

Deferred Tax Assets Temporary differences Property, plant and equipment Fair value changes of financial assets Inventory write-downs Unrealized gross profit Defined benefit obligation Gain or loss on foreign currency exchange Allowance for impaired receivables Others Loss carryforwards Deferred Tax Liabilities Temporary differences Property, plant and equipment Others	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehen- sive Income $ 7,130 $ 1,988 $ - 21,561 (3,842) - 124,031 (5,291) - 49,910 (9,538) - 109,477 (4,819) 5,557 (6,738) 13,745 - 31,908 2,217 - 3,877 8,873 - 341,156 3,333 5,557 93,571 (22,323) - $ 434,727 $ (18,990) $ 5,557 Opening Balance Recognized in Profit or Loss Recognized in Other Comprehen- sive Income $ 908,925 $ (9,068) $ - 171,584 22,968 - $ 1,080,509 $ 13,900 $ -	Exchange Differences $ - - (193) - - - (29) - (222) - $ (222) Exchange Differences $ - - $ -	Closing Balance $ 9,118 17,719 118,547 40,372 110,215 7,007 34,096 12,750
			349,824 71,248
			$ 421,072
			Closing Balance $ 899,857 194,552
			$ 1,094,409

e. Deductible temporary differences, and unused loss carryforwards for which no deferred tax assets have been recognized in the consolidated balance sheets

Loss carryforwards Expiry in 2018 Expiry in 2019 Expiry in 2020 Expiry in 2021 Expiry in 2022 Expiry in 2023 Expiry in 2024 Expiry in 2025 Expiry in 2026 Expiry in 2027 Expiry in 2028 Deductible temporary differences Share of loss of associates and joint ventures		December 31	December 31
		2018 $ - 146,253 437,119 401,251 169,015 92,302 152,601 403,614 656,401 805,145 523,601 $ 3,787,302 $ 4,002,637	2017 $ 35,121 146,253 381,979 386,148 220,575 73,842 123,903 346,820 625,052 777,357 - $ 3,117,050 $ 3,941,934

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• f. Information about unused loss carryforwards

Loss carryforwards as of December 31, 2018 comprised:

Unused Amount	Unused Amount	Expiry Year
$	146,253	2019
	437,119	2020
	480,481	2021
	169,015	2022
	92,302	2023
	152,601	2024
	461,758	2025
	656,401	2026
	805,145	2027
	523,601	2028
$	3,924,676

g. Income tax assessments

The income tax returns of SSF through 2014 have been assessed by the tax authorities. The income tax returns of SPF and IMBD through 2015 have been assessed by the tax authorities. The income tax returns of UBO, Taipei Star Bank, SOC, TBO, SPI, SKIS, SKIA, SKIC, SKPIA, HSI, HLC, SKE, SEC, CJH, HAM, SKIL, SEM, SKT and PAP through 2016 have been assessed by the tax authorities. The income tax returns of SPKIA through 2017 have been assessed by the tax authorities.

36. EARNINGS PER SHARE

The earnings and weighted average number of ordinary shares outstanding used in the computation of earnings per share from continuing operations are as follows:

Net Profit for the Year

For the Year Ended December 31 2018 2017 Profit for the year attributable to owners of the Company $ 2,457,937 $ 964,726 Earnings used in the computation of diluted earnings per share from continuing operations $ 2,457,937 $ 964,726 Weighted average number of ordinary shares outstanding (in thousands of shares): For the Year Ended December 31 2018 2017 Weighted average number of ordinary shares used in the computation of basic earnings per share 1,613,729 1,613,729 Effect of potentially dilutive ordinary shares: Employees’ compensation 2,764 1,407 Weighted average number of ordinary shares used in the computation of diluted earnings per share 1,616,493 1,615,136	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 1,613,729 2,764 1,616,493	2017 1,613,729 1,407 1,615,136

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

37. SHARE-BASED PAYMENT ARRANGEMENTS

UBO

Qualified employees of UBO were granted 500 options in December 2017, 3000 options in July 2017 and 4,000 options in May 2014. Each option entitles the holder to subscribe for one thousand ordinary shares of UBO. The options granted are valid for 5 years and exercisable at certain percentages after the second anniversary from the grant date. The options were granted at an exercise price equal to the closing price of UBO’s ordinary shares listed on the grant date. For any subsequent changes in the Company’s capital surplus, the exercise price is adjusted accordingly.

Information on employee share options was as follows:

Balance at January 1 Options granted Options forfeited Options exercised Options expired Balance at December 31 Options exercisable, end of period Weighted-average fair value of options granted ($)	The Plan of December 2016	The Plan of December 2016
	2018 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 500 $ 21.00 - - (50) - - - - - 450 20.70 135 20.70 $ -	2017
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 500 $ 22.25 - - - - - - - - 500 21.00 - - $ -

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Balance at January 1 Options granted Options forfeited Options exercised Options expired Balance at December 31 Options exercisable, end of period Weighted-average fair value of options granted ($) Balance at January 1 Options granted Options forfeited Options exercised Options expired Balance at December 31 Options exercisable, end of period Weighted-average fair value of options granted ($)	The Plan of July 2016	The Plan of July 2016
	2018 2017 Number of Options (In Thousands) Weighted- average Exercise Price (NT$) Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 3,000 $ 20.3 3000 $ 21.50 - - - - (86) - - - (6) 20.0 - - - - - - 2908 20.0 3,000 20.30 869 20.0 - - $ - $ - The Plan of May 2014	2017
		2017
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 3,459 $ 57.50 - (25) - - 3,434 54.20 2,080 $ -

Information on outstanding options as of December 31, 2018 and 2017 is as follows:	Information on outstanding options as of December 31, 2018 and 2017 is as follows:
	December 31
	2018	2017
Range of exercise price (NT$)	$20-$53.4	$20.3-$54.2
Weighted-average remaining contractual life (in years)	0.33-2.92 years	1.33-3.92 years

• 88 -

Options granted in July 2016, December 2016 and May 2014 were priced using the binomial option pricing model and the inputs to the model are as follows:

	December 2016	July 2016	May 2014
Grant-date share price ($)	$22.25	$22.75	$70
Exercise price ($)	$22.25	$22.75	$70
Expected volatility	29.03%	41.81%	37.87%
Expected life (in years)	5 years	5 years	5 years
Risk-free interest rate	0.8561%	0.5020%	1.0558%

Expected volatility was based on the historical share price volatility over the past 1 year. To allow for the effects of early exercise, UBO assumed that employees would exercise their options after the vesting date when the share price was higher than the exercise price.

Compensation cost recognized were $9,873 thousand and $20,438 thousand for the years ended December 31, 2018 and 2017, respectively.

38. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

For the year 2018, the Group subscribed for additional new shares of SPF at a percentage different from its existing ownership percentage, increasing its continuing interest from 85.01% to 85.02%.

For the year 2017, the Group subscribed for additional new shares of TBO at a percentage different from its existing ownership percentage, increasing its continuing interest from 59.05% to 59.06%.

For the year 2017, the Group subscribed for additional new shares of Taipei Star Bank at a percentage different from its existing ownership percentage, increasing its continuing interest from 27.056% to 27.063%.

The above transactions were accounted for as equity transactions, since the Group did not cease to have control over these subsidiaries.

Cash consideration paid The proportionate share of the carrying amount of the net assets of the subsidiary transferred to (from) non-controlling interests Differences recognized from equity transactions Line items adjusted for equity transactions Capital surplus - changes in percentage of ownership interests in subsidiaries Retained earnings		For the Year Ended December 31, 2018	For the Year Ended December 31, 2018
		UBO $ - (62) $ (62) $ (58) (4) $ (62)	SPF $ (2) 5 $ 3 $ 3 - $ 3

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Cash consideration paid The proportionate share of the carrying amount of the net assets of the subsidiary transferred to non-controlling interests Differences recognized from equity transactions Line items adjusted for equity transactions Capital surplus - difference between consideration received or paid and the carrying amount of the subsidiaries’ net assets during actual disposal or acquisition		For the Year Ended December 31, 2017
		TBO Taipei Star Bank $ (130) $ (225) 168 386 $ 38 $ 161 $ 38 $ 161

39. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity attributable to owners of the Company (comprising issued capital, reserves, retained earnings and other equity).

Key management personnel of the Group review the capital structure on an annual basis. As part of this review, the key Management personnel consider the cost of capital and the risk associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the amount of dividends paid to shareholders, the number of new shares issued or repurchased, and/or the amount of new debt issued or existing debt redeemed.

40. FINANCIAL INSTRUMENTS

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

Except for financial instruments measured at fair value, management believes the carrying amounts of the financial instruments approximate their fair values.

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

• 1) Fair value hierarchy

December 31, 2018 Financial assets at FVTPL Derivative financial assets Domestic investments - listed shares and emerging market shares Convertible bonds with assets exchange Convertible bonds Mutual funds Short-term transactions instruments Foreign corporate bonds Financial assets at FVTOCI Investments in equity instruments at FVTOCI Domestic investments - listed shares and emerging market shares Domestic investments - unlisted shares Foreign investments Investments in debt instruments at FVTOCI Bond investments Financial liabilities at FVTPL Derivatives	Level 1 $ - 75,160 - - 127,034 449,213 14,660 $ 666,067 $ 6,179,226 - - 1,809,929 $ 7,989,155 $ -	Level 2 $ 3,638 - 839,966 2,540 - - - $ 846,144 $ - 1,414,709 11,411 514,723 $ 1,940,843 $ 12,890	Level 3 $ - - - - - - - $ - $ - 88,019 - - $ 88,019 $ -	Total $ 3,638 75,160 839,966 2,540 127,034 449,213 14,660 $ 1,512,211 $ 6,179,226 1,502,728 11,411 2,324,652 $ 10,018,017 $ 12,890

• 91 -

December 31, 2017

Financial assets at FVTPL Derivative financial assets Non-derivative financial assets held for trading Available-for-sale financial assets Equity securities Listed shares and emerging market shares Unlisted shares Debt securities Domestic bond investments Foreign bonds investments Mutual funds Financial liabilities at FVTPL Derivatives	Level 1 $ - 908,117 $ 908,117 $ 6,494,190 - 2,255,268 6,000 160,421 $ 8,915,879 $ -	Level 2 $ 1,306 931,276 $ 932,582 $ - 1,071,168 466,030 - - $ 1,537,198 $ 6,858	Level 3 $ - - $ - $ - - - - - $ - $ -	Total $ 1,306 1,839,393 $ 1,840,699 $ 6,494,190 1,071,168 2,721,298 6,000 160,421 $ 10,453,077 $ 6,858

There were no transfers between Levels 1 and 2 in the current and prior years.

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

For the year ended December 31, 2018

Financial Assets Balance at January 1, 2018 (IAS 39) Adjustment on retrospective application of IFRS 9 Balance at January 1, 2018 (IFRS 9) Recognized in other comprehensive income (included in unrealized gain (loss) on financial assets at FVTOCI) Balance at December 31, 2018	Financial Assets at FVTOCI
	Equity Instruments $ 7,172 62,937 70,109 17,910 $ 88,019

• 92 -

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

Financial Instruments Derivatives - foreign exchange forward contracts Unlisted debt securities - ROC Unlisted equity securities - ROC

Valuation Techniques and Inputs

Discounted cash flow. Future cash flows are estimated based on observable forward exchange rates at the end of the reporting period and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties. Discounted cash flow. Future cash flows are discounted at a rate that reflects current borrowing interest rates of the bond issuers at the end of the reporting period. Based on market observations, economic trends and industry characteristics, value multipliers that are highly relevant to the target are used as inputs for fair value calculation.

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

Financial Instruments Unlisted equity securities - ROC

Valuation Techniques and Inputs

Discounted cash flow. Future cash flows are estimated based on observable cash dividends at the end of the reporting period and other parameters, discounted at a rate that reflects the credit risk of various counterparties. Market Multiplier Based on the transaction prices of the shares in an active market of companies in comparable industries, the corresponding net value multiplier and taking into consideration the liquidity discount ratio, the fair value of the target is evaluated. The main significant unobservable input is the liquidity discount.

• 5) Sensitivity analysis of the reasonable possible alternative assumptions for Level 3 fair value measurement

The significant unobservable inputs of the income approach used by the Group are the discount rate, non-controlling equity discount rate and the liquidity discount ratio. The sensitivity analysis is as follows:

December 31, 2018	December 31, 2018
Significant Unobservable Input	Range of Changes	Affected Amount
Discount rate	1% increase 1% decrease	$ (4,230) 5,973
Discount for lack of marketability	10% increase 10% decrease	(6,310) 6,310

• 93 -

c. Categories of financial instruments

Financial assets Financial assets at FVTPL Held for trading Mandatorily classified as at FVTPL Held-to-maturity investments Loans and receivables (1) Available-for-sale financial assets (2) Financial assets at amortized cost (3) Financial assets at FVTOCI Equity instruments Debt instruments Financial liabilities Financial liabilities at FVTPL Held for trading Amortized cost (4)	December 31
	2018 2017 $ - $ 1,840,699 1,512,211 - - 21,195,933 - 16,422,562 - 10,453,077 39,209,663 - 7,693,365 - 2,324,652 - 12,890 6,858 21,895,454 23,738,095

• 1) The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments, other financial assets, notes receivables, trade and other receivables.

• 2) The balances include the carrying amount of available-for-sale financial assets measured at cost.

• 3) The balances include financial assets at amortized cost, which comprise cash and cash equivalents, debt investments, other financial assets, notes receivables, trade and other receivables.

• 4) The balances include financial liabilities at amortized cost, which comprise short-term and long-term loans, short-term bills payable, notes payables, trade and other payables, other financial liabilities, and bonds issued.

• d. Financial risk management objectives and policies

The Group’s major financial instruments include equity and debt investments, trade receivables, trade payables, bonds payable and borrowings. The Group’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including foreign currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

The Group seeks to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures. The use of financial derivatives is governed by the Group’s policies approved by the board of directors, which provided written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis. The Group did not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

• 94 -

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

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

a) Foreign currency risk

Several subsidiaries of the Company had foreign currency sales and purchases, which exposed the Group to foreign currency risk. Exchange rate exposures are managed within approved policy parameters utilizing foreign exchange forward contracts.

The carrying amount of monetary assets and monetary liabilities denominated in the non-functional currency at the balance sheet date (including monetary items denominated in non-functional currency that had reversed in the consolidated financial statements) and the carrying amount of derivatives exposed to exchange rate risk, please refer to Note 45.

The Group uses foreign exchange forward contracts to eliminate currency exposure. It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximize hedge effectiveness.

Sensitivity analysis

The Group is mainly exposed to the USD.

The following table details the Group’s sensitivity to a 5% increase and decrease in the New Taiwan dollar (the functional currency) against the U.S. dollar. The sensitivity rate used when reporting foreign currency risk internally to key management personnel and representing management’s assessment of the reasonably possible change in foreign exchange rates is 5%. A positive number below indicates an increase in pre-tax profit associated with the New Taiwan dollar weakening 5% against the U.S. dollar. For a 5% strengthening of the New Taiwan dollar against the U.S. dollar, there would be an equal and opposite impact on pre-tax profit and the balances below would be negative. This was mainly attributable to the exposure on outstanding receivables and payables in U.S. dollars, which were not hedged at the end of the reporting period.

Profit or loss	USD Impact	USD Impact	USD Impact
	For the Year Ended		December 31
		2018 $ 209,793	2017 $ 254,051

b) Interest rate risk

The Group is exposed to interest rate risk because entities in the Group borrowed funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings and using interest rate swap contracts and forward interest rate contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite ensuring the most cost-effective hedging strategies are applied.

• 95 -

The carrying amounts of the Group’s financial liabilities with exposure to interest rates at the end of the reporting periods were as follows:

Fair value interest rate risk Cash flow interest rate risk	December 31
	2018 2017 $ 3,620,000 $ 5,445,000 13,564,930 12,890,427

The Group is exposed to cash flow interest rate risk in relation to variable-rate bank borrowings.

Sensitivity analysis

The sensitivity analysis below was determined based on the Group’s exposure to interest rates for non-derivative instruments at the each of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 25 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2018 and 2017 would decrease/increase by $33,912 thousand and $32,226 thousand, respectively, which was mainly attributable to the Group’s exposure to interest rates on its variable-rate bank borrowings.

c) Other price risk

The Group was exposed to equity price risk and commodity price risk through its investments in equity securities and mutual funds. The Group manages this exposure by maintaining a portfolio of investments with different risks.

Sensitivity analysis

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

If equity prices had been 5% higher/lower, pre-tax profit for the year ended December 31, 2018 would have increased/decreased by $10,110 thousand, as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income for the year ended December 31, 2018 would have increased/decreased by $384,668 thousand, as a result of the changes in fair value of financial assets at FVTOCI.

If equity prices had been 5% higher/lower, pre-tax profit for the year ended December 31, 2017 would have increased/decreased by $2,804 thousand, as a result of the changes in fair value of held-for-trading investments, and the pre-tax other comprehensive income for the year ended December 31, 2017 would increase/decrease by $386,289 thousand, as a result of the changes in fair value of available-for-sale shares.

The Group’s sensitivity to investments in equity securities has not changed significantly from the prior year.

• 96 -

2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk, which would cause a financial loss to the Group due to the failure of the counterparties to discharge its obligation and due to the financial guarantees provided by the Group, could be arise from the carrying amount of the respective recognized financial assets as stated in the consolidated balance sheets.

The Group adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.

In order to minimize credit risk, management of the Group has delegated a team responsible for determination credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance are made for irrecoverable amounts. In this regard, management believes the Group’s credit risk was significantly reduced.

Trade receivables consisted of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of trade receivables.

The Group transacts with a large number of unrelated customers and, thus, no concentration of credit risk was observed.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Group relies on bank borrowings as a significant source of liquidity. The Group’s had available unutilized bank loan facilities set out in (c) below.

Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, and continuously monitoring forecasted and actual cash flows as well as matching the maturity profiles of financial assets and liabilities.

a) Liquidity and interest rate risk tables for non-derivative financial liabilities

The following table details the Group’s remaining contractual maturities for its non-derivative financial liabilities with agreed repayment periods. The table had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

• 97 -

December 31, 2018

Non-derivative financial liabilities Non-interest bearing liabilities Variable interest rate liabilities Fixed interest rate liabilities Financial debentures December 31, 2017 Non-derivative financial liabilities Non-interest bearing liabilities Variable interest rate liabilities Fixed interest rate liabilities Financial debentures	Less than 1 Year $ 5,202,267 7,268,293 2,289,412 - $ 14,759,972 Less than 1 Year $ 5,675,600 6,379,825 4,443,967 - $ 16,499,392	1-2 Years $ - 5,492,636 - - $ 5,492,636 1-2 Years $ - 5,630,140 - - $ 5,630,140	2-5 Years $ - 905,200 - 500,000 $ 1,405,200 2-5 Years $ - 971,468 - - $ 971,468	5+ Years $ - - - 830,000 $ 830,000 5+ Years $ - - - 1,000,000 $ 1,000,000	Total $ 5,202,267 13,666,129 2,289,412 1,330,000
					$ 22,487,808
					Total $ 5,675,600 12,981,433 4,443,967 1,000,000
					$ 24,101,000

The amounts included above for financial guarantee contracts are the maximum amounts the Group could be required to pay should the counterparty of the contract demand payment of the full amount of the guarantee. Based on expectations at the end of the reporting period, the Group considers that it is more likely than not that no amount will be paid under the contracts.

• b) Liquidity and interest rate risk table for derivative financial liabilities

The following table details the Group’s liquidity analysis of its derivative financial instruments. The table is based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed is determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.

December 31, 2018

Net settled Foreign exchange forward contracts Foreign exchange contracts Cross-currency swap contracts	Less than 1 Year $ 1,671 $ (9,353) $ (1,570)	1-2 Years $ - $ - $ -	2-5 Years $ - $ - $ -	5+ Years $ - $ - $ -	Total $ 1,671 $ (9,353) $ (1,570)

• 98 -

December 31, 2017

c)	Net settled Foreign exchange forward contracts Foreign exchange contracts Financing facilities Amount unused	Less than 1 Year $ (2,330) $ (3,222)	1-2 Years $ - $ -	2-5 Years 5+ Years Total $ - $ - $ (2,330) $ - $ - $ (3,222) December 31 2018 2017 $ 19,792,472 $ 17,344,824	2-5 Years 5+ Years Total $ - $ - $ (2,330) $ - $ - $ (3,222) December 31 2018 2017 $ 19,792,472 $ 17,344,824	2-5 Years 5+ Years Total $ - $ - $ (2,330) $ - $ - $ (3,222) December 31 2018 2017 $ 19,792,472 $ 17,344,824	5+ Years Total $ - $ (2,330) $ - $ (3,222) December 31	5+ Years Total $ - $ (2,330) $ - $ (3,222) December 31
				$
						2018 $ 19,792,472		2017 $ 17,344,824

41. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Besides information disclosed elsewhere in the other notes, details of transactions between the Group and other related parties are disclosed below.

• a. Related party name and category

Related Party Name Related Party Category INVISTA (Taiwan) Limited Taiwan Branch (H.K.) Affiliated company of subsidiary’s main shareholder INVISTA Affiliated company of subsidiary’s main shareholder Tai Shin Leasing & Financial Co., Ltd. Associates Shin Kong Bank Co., Ltd. Related party in substance Chairman Wu and related parties of Chairman Wu Related party in substance The Bank of Taipei Cultural Foundation Related party in substance Shin Kong Textile Co., Ltd. Related party in substance Shin Kong Life Insurance Co., Ltd. Related party in substance Shin Kong Construction and Development Co., Ltd. Related party in substance Shin-Kong Life Real Estate Service Co., Ltd. Related party in substance Shinkong Co., Ltd Related party in substance Hwa Jian Human-Resource & Management Co., Ltd. Related party in substance Others Key management personnel and others

• 99 -

b. Sales of goods

Line Items Related Party Categories/Name Sales Affiliated company of subsidiary’s investors main shareholder/others Related party in substance/others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,371,000 $ 8,987	2017 $ 1,487,661 $ 15,604

• c. Purchases of goods

Related Party Categories/Name Affiliated company of subsidiary’s investors main shareholder/others	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ 2,712	2017 $ 23,602

• d. Receivables from related parties (excluding loans to related parties)

Line Items Related Party Categories/Name Trade receivables Affiliated company of subsidiary’s investors main shareholder/others Related party in substance/others Notes receivable Related party in substance/others		December 31	December 31
		2018 $ 330,179 $ 2,230 $ 762	2017 $ 263,856 $ 169 $ -

• e. Loans

For the Year Ended December 31, 2018

											Differences in
											Transaction
											Terms Between
	Number or								Non-		Related and
	Name of	Highest			Ending	Normal		Performing		Type of	Nonrelated
Category	Related Party	Balance		Balance			Loans		Loans	Collateral	Parties
Employee consumer	8	$	3,499	$	2,441	$	2,441	$	-	None	None
loans
Self-used residential	15		125,647		103,616		103,616		-	Real estate	None
mortgage loans
Secured loans	Key executives		15,169		4,500		4,500		-	Real estate	None
Secured loans	Others		35,559		34,766		34,766		-	Real estate	None

For the Year Ended December 31, 2017

											Differences in
											Transaction
											Terms Between
	Number or								Non-		Related and
	Name of	Highest			Ending	Normal		Performing		Type of	Nonrelated
Category	Related Party	Balance		Balance			Loans		Loans	Collateral	Parties
Employee consumer	9	$	3,685	$	2,499	$	2,499	$	-	None	None
loans
Self-used residential	14		134,537		111,681		111,681		-	Real estate	None
mortgage loans
Secured loans	Key executives		15,589		12,969		12,969		-	Real estate	None
Secured loans	Others		25,031		11,156		11,156		-	Real estate	None

In compliance with the Banking Law, except for consumer loans and government loans, credits extended by Taipei Star Bank to any related party were fully secured, and the other terms of these credits extended to related parties were similar to those for third parties.

• 100 -

f. Deposits from related parties

Related party in substance Key executives Others		**For **	**the Year Ended December 31 **	**the Year Ended December 31 **	**the Year Ended December 31 **
		2018	Interest Expense $ 1,783 159 2,194 $ 4,136		2017
		Ending Balance Interest Rate % $ 603,037 0.00-1.06 35,666 0.00-7.31 121,811 1.00-7.31 $ 760,514			Ending Balance Interest Rate % $ 723,814 0.00-1.70 33,784 0.00-7.31 158,096 0.00-7.31 $ 915,694	Interest Expense $ 4,819 190 1,756 $ 6,765

The terms of the transactions with related parties were similar to those for third parties, except for certain preferential interest rates, which was 7.31% as of both December 31, 2018 and 2017 for employees’ savings and loans.

g. Others

• 1) Operating leases - lessor

Lessor Object Period Related party in substance/others Office and parking space 2017.03.01- 2020.02.29	Rental Income
	For the Year Ended December 31
	2018 2017 $ 662 $ 327

• 2) Operating leases - lessee

Lessee Object Period Related party in substance/others Office and parking space 2017.01.01- 2019.01.19 2016.01.20- 2019.01.19 2017.01.16- 2018.01.15 2018.01.16- 2019.01.15 2018.01.01- 2018.12.31 Substantive related parties/others Land and plant 2006.03- 2018.02.28 Associates Rental cars 2017.08.25- 2019.08.24	Rental Expense
	For the Year Ended December 31
	2018 2017 $ 15,096 $ 15,156 - 3,670 480 -

• 101 -

h. Acquisition of associates

In 2018, the Group subscribed for additional 36,000,000 new shares of Shinkong Excelsior Medical Asset Management Co., Ltd. for $45,000 thousand, at a percentage different from its existing ownership percentage, increasing its continuing interest from 25.01% to 29.05%.

• i. Compensation of key management personnel

Short-term employee benefit Post-employment benefit Others	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ 43,547 3,210 6,907 $ 53,664	2017 $ 37,914 3,083 7,302 $ 48,299

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

42. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings and the tariff of imported raw materials guarantees:

Pledged Asset Type Other financial assets - current Refundable deposits, time deposits, pledged time deposits and restricted demand deposits Other financial assets - non-current Pledged time deposits Available-for-sale financial assets - current and non-current Listed shares Held-to-maturity financial assets Trust fund compensation provision Financial assets at fair value through other comprehensive income - current and non-current Listed shares Financial assets at amortized cost - current Trust fund compensation provision Property, plant and equipment and investment properties Land, buildings and machineries Land use rights M4-1-1 land in Hangjhou		December 31	December 31
		2018 $ 140,480 143,116 - - 3,205,492 52,178 7,643,912 27,379 $ 11,212,557	2017 $ 1,047,066 - 3,574,710 52,555 - - 7,982,117 28,998 $ 12,685,446

As of December 31, 2018 and 2017, the interest rates for the pledged deposits ranged from 0.75% to 2.25% and 0.63% to 1.30%, respectively.

• 102 -

43. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of December 31, 2018 and 2017 were as follows:

• a. Letters of credit

Outstanding letters of credit not reflected in the accompanying consolidated financial statements as of December 31, 2018 and 2017 were as follows:

EUR JPY USD THB	December 31
	2018 2017 $ 3,956 $ 908 410,236 237,235 11,029 11,419 - 150,000

• b. Significant commitments and contingent liabilities of Taipei Star Bank

As of December 31, 2018 and 2017, the significant commitments and contingent liabilities of Taipei Star Bank were as follows:

Unused loan commitments Guarantees Letters of credit Liabilities trusted	**December 31 **
	2018 2017 $ 16,085,920 $ 15,196,224 460,740 576,281 - 13,359 9,911,093 9,642,074

• c. Trust assets

According to Article 17 of the Enforcement Rules of the Trust Enterprise Act, the Bank discloses assets and liabilities of trust accounts and inventory of trust assets as follows:

Trust Assets Bank deposit Short-term investments Mutual fund Securities Real estate Land and buildings	Trust Account Balance Sheet December 31, 2018 Amount Trust Liabilities $ 254,746 Trust capital Funds and investment 3,059,751 Securities and investment 1,359,606 Real estate and investment Net loss 5,236,990 Deferred income $ 9,911,093	Amount $ 3,227,114 1,327,613 5,381,354 (107,377) 82,389 $ 9,911,093

• 103 -

Trust Account Statement of Income For the Year Ended December 31, 2018

Income from trust Dividend income Rental income Interest income Expense from trust Management fee Insurance expense Remittance charge Tax expense Interest expense Exchange expense Other expense Net loss before tax Income tax expense Net loss The summary of trust assets as of December 31, 2018 is as follows: Type Bank deposits Mutual funds Securities Real estate Land and buildings Trust Account Balance Sheet December 31, 2017 Trust Assets Amount Trust Liabilities Bank deposits $ 212,894 Trust capital Short-term investments Funds and investment Mutual funds 2,622,780 Securities and investment Securities 1,326,736 Real estate and investment Real estate Net loss Land and buildings 5,479,664 Deferred income $ 9,642,074

$ 24,307 7,477 124 31,908 (4,049) (15,089) (248) (71,179) (33,875) (47) (14,798) (139,285) (107,377) - $ (107,377) Amount $ 254,746 3,059,751 1,359,606 5,236,990 $ 9,911,093 Amount $ 2,752,521 1,322,148 5,623,058 (73,208) 17,555 $ 9,642,074

• 104 -

Trust Account Statement of Income For the Year Ended December 31, 2017

Income from trust Dividend income Rental income Interest income Expense from trust Management fee Insurance expense Remittance charge Tax expense Interest expense Exchange expense Net loss before tax Income tax expense Net loss The summary of trust assets as of December 31, 2017 is as follows: Type Bank deposits Mutual funds Securities Real estate Land and buildings	$ 18,204 13,182 159 31,545 (1,991) (36,785) (310) (27,295) (38,322) (50) (104,753) (73,208) - $ (73,208) Amount $ 212,894 2,622,780 1,326,736 5,479,664
	$ 9,642,074

44. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

Financial assets Monetary items USD EUR JPY RMB	**December 31 **	**December 31 **
	2018 Foreign Currency (In Thousands) Exchange Rate $ 187,789 30.715 2,237 35.20 770,312 0.2782 1,577 4.472	2017
		Foreign Currency (In Thousands) Exchange Rate $ 187,644 29.76 2,441 35.57 365,878 0.2642 10,869 4.565 (Continued)

• 105 -

Financial liabilities Monetary items USD EUR JPY	**December 31 **	**December 31 **
	2018 Foreign Currency (In Thousands) Exchange Rate $ 50,683 30.715 382 35.2 495,691 0.2782	2017
		Foreign Currency (In Thousands) Exchange Rate $ 31,631 29.76 1,837 35.57 372,485 0.2642 (Concluded)

For the years ended December 31, 2018 and 2017, realized and unrealized net foreign exchange gains (losses) were $218,205 thousand and $(338,181) thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions and functional currencies of the Group entities.

45. DISCLOSURES ACCORDING TO REGULATIONS GOVERNING THE PREPARATION OF FINANCIAL REPORTS BY PUBLIC BANKS

• a. Financial Instruments

• 1) Fair value of financial instruments not measured at fair value

Except as detailed in the following table, the management of Taipei Star Bank considers the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values, therefore, do not disclosure it fair value hierarchy.

Carrying Amount Financial assets Financial assets at amortized cost- debt instruments $ 22,788,498 Financial liabilities Financial liabilities at amortized cost Financial debenture 1,330,000 Carrying Amount Financial assets Held-to-maturity investments $ 21,195,933 Financial liabilities Financial debenture 1,000,000	Estimated Fair Value
	Level 1 Level 2 Level 3 Total $ 10,473,221 $ 12,333,417 $ - $ 22,806,638 - 1,355,320 - 1,355,320 Estimated Fair Value
	Level 1 Level 2 Level 3 Total $ 11,332,943 $ 10,338,385 $ - $ 21,671,328 202,336 815,820 - 1,018,156

The fair values of the financial assets and financial liabilities included in the Level 2 categories above have been determined in accordance with income approaches based on a discounted cash flow analysis.

• 106 -

• 2) Fair value of financial instruments measured at fair value on a recurring basis

• a) Fair value hierarchy

December 31, 2018 Financial assets at FVTPL Derivative financial assets Mutual funds Short-term transactions instruments Financial assets at FVTOCI Investments in equity instruments at FVTOCI Investments in debt instruments at FVTOCI Financial liabilities at FVTPL Derivatives December 31, 2017 Financial assets at FVTPL Equity securities Debt securities Derivative financial assets Available-for-sale financial assets Equity securities Debt securities Mutual funds Financial liabilities at FVTPL Derivatives	Level 1 $ - 25,158 449,213 $ 474,371 $ 285,576 1,809,929 $ 2,095,505 $ - Level 1 $ 6,885 869,715 - $ 876,600 $ 209,089 2,255,268 16,813 $ 2,481,170 $ -	Level 2 $ 841,579 - - $ 841,579 $ - 514,723 $ 514,723 $ (10,966) Level 2 $ - - 914,274 $ 914,274 $ - 466,030 - $ 466,030 $ (3,904)	Level 3 $ - - - $ - $ 47,930 - $ 47,930 $ - Level 3 $ - - - $ - $ - - - $ - $ -	Total $ 841,579 25,158 449,213 $ 1,315,950 $ 333,506 2,324,652 $ 2,658,158 $ (10,966) Total $ 6,885 869,715 914,274 $ 1,790,874 $ 209,089 2,721,298 16,813 $ 2,947,200 $ (3,904)

• 107 -

There were no transfers between Levels 1 and 2 in the current and prior years.

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

For the year ended December 31, 2018

Financial Assets Balance at January 1,2018 (IAS 39) Adjustment on retrospective application of IFRS 9 Balance at January 1,2018 (IFRS 9) Recognized in other comprehensive income (included in unrealized gain (loss) on financial assets at FVTOCI) Balance at December 31, 2018	Financial Assets **at FVTOCI **
	Equity Instruments $ 7,172 33,332 40,504 7,426 $ 47,930

• c) Valuation technique and assumptions used for fair value measurement

The fair values of financial assets and financial liabilities traded on active markets are determined with reference to quoted market prices. When market prices are not available, valuation techniques are applied. The estimates and assumptions used by Taipei Star Bank for financial instrument valuation is consistent with those used by other market participants in pricing of financial instruments. Fair values of derivatives that have no quoted market prices in an active market are calculated using the discounted cash flow method, the fair value of each individual contract is calculated based on the exchange rates quoted by Reuters on each settlement date.

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

Financial Instruments Derivatives - foreign exchange forward contracts Derivatives - convertible bond asset swap

Valuation Techniques and Inputs

Based on the exchange rates quoted by Reuters on each settlement date The value of convertible bond asset swap is the conversion price plus the fixed income value minus the conversion option value. The average price is input into the SYSTEX information system to calculate value of convertible bond asset swap and convertible option. The interbank overnight call loan rate, TAIBIR and IRS from Bloomberg are input into the SYSTEX information system to calculate the discounted fixed income

Investments in debt Based on market quoted prices or prices quoted by Bloomberg instruments

• 108 -

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

Financial Instruments Unlisted equity securities - ROC	Valuation Techniques and Inputs
	Discounted cash flow. Future cash flows are estimated based on observable cash dividends at the end of the reporting period and other parameters, discounted at a rate that reflects the credit risk of various counterparties.

• f) Sensitivity analysis of reasonable possible alternative assumptions for Level 3 fair value measurement

The significant unobservable inputs of the income approach used by Taipei Star Bank are the discount rate, non-controlling equity discount rate and the liquidity discount ratio. The sensitivity analysis is as follows:

December 31,2018	December 31,2018
Significant Unobservable Input	Range of Changes	Affected Amount
Discount rate	1%increase	$ (4,230)
	1%decrease	5,973
Discount for lack of marketability	10% increase	(6,310)
	10%decrease	6,310

• 3) Categories of financial instruments

Financial assets Financial assets at FVTPL Held-to-maturity investments Loans and receivables (a) Available-for-sale financial assets (b) Financial assets at FVTOCI Financial assets at amortized cost (c) Financial liabilities Financial liabilities at FVTPL Amortized cost (d)	December 31
	2018 2017 $ 1,315,950 $ 1,790,874 - 21,195,933 - 58,296,179 - 2,954,372 2,658,158 - 80,539,372 - 10,966 3,904 79,669,829 80,223,075

• a) The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, due from the Central Bank and call loans to other banks, bills and bonds purchased under resale agreements, trade receivables and discounts and loans.

• b) The balances include the carrying amount of available-for-sale financial assets measured at cost.

• c) The balances include financial assets at amortized cost, which comprise cash and cash equivalents, due from the Central Bank and call loans to other banks, debt investments, bills and bonds purchased under resale agreements, trade receivables and discounts and loans.

• 109 -

• d) The balances include financial liabilities at amortized cost, which comprise due to the Central Bank and other banks, bills and bonds sold under repurchase agreements, trade payables, deposits and remittances, bonds issued and other financial liabilities.

• b. Financial risk management objectives and policies

Taipei Star Bank has rules for risk management policies and risk control procedures, which include organizational structure, procedures, mechanism and information system. The rules had been approved by the board of directors (including credit risks, market risks, operation risks, liquidity risks and national risks).

Taipei Star Bank set Risk Management Committee and Risk Management Division, and takes the full responsibility for risk management in order to operate risk management effectively. Chief Executive Officer as the chairman of Risk Management Committee, and Vice Chief Executive Officer as substitute. Risk Management Committee takes charge of risk management as follows:

• 1) Monitoring capital adequacy.

• 2) Measurement and monitoring liquidity risks.

• 3) Risk management of every business segment.

• 4) Assessment of asset quality, classification and loss allowance.

• 5) Information security protection mechanism and emergency response plan.

• 6) Planning, proposal and assessment of risk management policies.

• 7) Reporting implementation status of risk management to the board of directors.

• 8) The Risk Management Committee can assign specialists who are responsible for specific risk tasks, in order to achieve the goals of risk management.

Member of Risk Management Committee sets risk management measurement index depend on their business, and report to Risk Management Committee as a reference for decision making.

1) Market risk

Fair value changes of Taipei Star Bank’s fixed rate debt instruments, bills, loans and other financial instruments, when the market rate changes on the balance sheet date.

Sensitivity analysis

• a) Interest rate risk

If interest rates had been 100 basis yield points higher and all other variables were held constant, the Taipei Star Bank pre-tax profit for the years ended December 31, 2018 and 2017 would decrease by $957 thousand and $633 thousand, respectively, and the pre-tax other comprehensive income for the year ended December 31, 2018 and 2017 would decrease by $68,044 thousand and $52,636 thousand, respectively.

• 110 -

b) Foreign currency risk

If exchange rates of USD/NTD and CNY/NTD strengthened by 3% and all other variables were held constant, the pre-tax profit of Taipei Star Bank for the years ended December 31, 2018 and 2017 would decrease by $13,702 thousand and $13,584 thousand, respectively, and the pre-tax other comprehensive income for the year ended December 31, 2018 and 2017 would decrease by $16,146 thousand and $18,830 thousand, respectively.

c) Equity price risk

If equity prices had been 15% higher and all other variables were held constant, the Taipei Star Bank pre-tax profit for the years ended December 31, 2018 and 2017 would decrease by $0 thousand and $1,033 thousand, respectively, and the pre-tax other comprehensive income for the year ended December 31, 2018 and 2017 would decrease by $50,026 thousand and $31,363 thousand, respectively.

• d) Summarized sensitivity analysis

	December 31, 2018
Main Risk	Range of Changes	Impact Amounts
		Equity	Profit/Loss
Interest rate risk Interest rate risk	Interest rate yield higher 100BPS Interest rateyield lower 100BPS	$ (69,001) 69,001	$ (957) 957
Foreign currency risk Foreign currency risk	USD/NTD and CNY/NTD strengthen 3% USD/NTD and CNY/NTD weakening3%	29,848 (29,848)	13,702 (13,702)
Equity price risk Equity price risk	Equity price higher 15% Equity price lower 15%	50,026 (50,026)	- -

	December 31, 2017
Main Risk	Range of Changes	Impact Amounts
		Equity	Profit/Loss
Interest rate risk Interest rate risk	Interest rate yield higher 100BPS Interest rateyield lower 100BPS	$ (53,269) 53,269	$ (633) 633
Foreign currency risk Foreign currency risk	USD/NTD and CNY/NTD strengthen 3% USD/NTD and CNY/NTD weakening3%	32,414 (32,414)	13,584 (13,584)
Equity price risk Equity price risk	Equity price higher 15% Equity price lower 15%	32,396 (32,396)	1,033 (1,033)

2) Credit risk

Credit risk refers to the Taipei Star Bank’s exposure to financial losses due to inability of customers or counterparties to meet the contractual obligations on financial instruments. When offer loans, loan commitments and guarantees, Taipei Star Bank assess it cautious. Secured loans constituted 96% and 93% of all loans as of December 31, 2018 and 2017, respectively. Pledged assets are properties, cash, securities and other assets, when counterparties inability to meet the contractual obligations, Taipei Star Bank has the right to obtain pledged assets and reduce credit risk. However, the fair value of pledged assets is not consider in the disclosure of exposure amounts.

• 111 -

• a) Credit risk management procedures

The credit risk management procedures and measurement methods of Taipei Star Bank’s main business are as follows:

• i. Credit granting business

2018

The loss allowance on Taipei Star Bank’s discounts and loans whose credit risk have not increased significantly since initial recognition is evaluated using 12-month ECLs; for the discounts and loans whose credit risk have increased significantly or have defaulted and financial assets that are credit-impaired, Lifetime ECLs are used to evaluate the loss allowance.

Determination that credit risk has increased significantly since initial recognition

At the end of each reporting period, Taipei Star Bank assesses the changes in risk of default over the expected lifetime of the discounts and loans to determine if credit risk has increased significantly since initial recognition. For this assessment, reasonable and corroborative information that indicates that credit risk has increased significantly is taken into consideration, the main indicators include:

Quantitative indicators

Past due for at least a certain number of days.

Qualitative indicators

• i) Significant changes in expected or actual operating results.

• ii) Current or expected worsening of debt payment ability due to unfavorable changes in operating, financial or economic conditions.

Definition of credit-impaired and defaulted financial assets

If one or more of the following conditions are met, Taipei Star Bank determines that the financial assets have defaulted and are credit-impaired.

Quantitative indicators

Loans that met the definition of overdue loans in accordance with “Non-performing loans from Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans”.

Qualitative indicators

If there is evidence showing the inability of the borrower to repay the loan or showing that the borrower is in significant financial difficulties, such as the following:

• i) Borrower met the requirements of exemption from reporting in accordance with “Nonperforming loans from Regulations Governing the Procedures for Banking”.

• ii) New payment schedule is negotiated so that the loan is not classified as non-performing.

• 112 -

• iii) Do not belong to the aforementioned non-performing loans, but showing signs of significant financial difficulties or bad credit record such as the following:

• Reported a returned check issued by debtor or on a “No business transaction” list.

• There are cases of overdue loans of the borrower or its enterprise with other financial institutions.

• Businesses operated or invested in by the borrower or its affiliates have ceased operations.

• Returned check not make up or pledged shares account decrease from loans maintenance ratio to minimum notification recovery maintenance ratio, and did not return to the standard ratio within the specified period.

• Situations where the pledged collateral of the debtor is seized by another bank, receivables have been reclassified as overdue receivables by another financial institution, debtor has filed for bankruptcy, reorganization, or other debt clearance proceedings, or when the auditor has issued an opinion expressing material uncertainty over the Company’s ability to continue as a going concern.

The definition of defaulted and credit-impaired credit assets above is applicable to all financial assets of Taipei Star Bank, and are used in the model for impairment assessment.

Measurement of expected credit loss

For the measurement of expected credit loss, Taipei Star Bank classified the credit assets based on credit risk characteristics such as purpose of borrowings, industry characteristics, type of collateral, and borrowing status into the following groups:

	Business	**Type of Collateral **	Credit Risk Group
	State-owned enterprises		Pledged time deposits
	Corporate banking	Corporate banking - secured borrowings	Small and medium enterprises - credit guaranteed
			Small and medium enterprises - non-credit guaranteed
			Non small and medium enterprises
		Corporate Banking - Unsecured borrowings	Small and medium enterprises - non-credit guaranteed
			Non small and medium enterprises
	Consumer banking	Consumer banking - secured borrowings	Property, plant and equipment
			PledgedShares
			Others
		Consumer banking - unsecured borrowings	Check Financing
			Consumer credit
			Self-negotiatingand resolving
			Consumer debt clearance
			Others

Taipei Star Bank adopted the 12-month ECL model to evaluate the loss allowance of financial instruments whose credit risk have not increased significantly since initial recognition, and adopted the lifetime ECL model to evaluate the loss allowance of financial instruments whose credit risk has increased significantly since initial recognition or those that are credit-impaired.

• 113 -

Taipei Star Bank considers both the 12-month and lifetime probability of default (“PD”) of the borrower with the loss given default (“LGD”), multiplied by the exposure at default (“EAD”), as well as the impact of time value, to calculate the respective 12-month ECLs and lifetime ECLs.

“PD” refers to the borrower’s probability of default and “LGD” refers to losses caused by the default. Taipei Star Bank applies the “PD” and “LGD” to the credit business according to each group’s historical information (such as credit loss experience) from internal historical data, and adjusts the historical data based on current observable and forward-looking macroeconomic information, and calculates by the grouping and estimation method.

Taipei Star Bank estimates the account balance based on the grouping and estimation method. In addition, Taipei Star Bank estimates the 12-month ECLs and Lifetime ECLs of loan commitments by considering the portion of the loan commitments expected to be used within 12 months after the reporting date and within the expected lifetime based on the grouping and estimation method to determine the amount of “EAD” for calculating expected credit losses.

Forward-looking information

The Taiwan Corporate Credit Risk Index (TCRI) and unemployment rate announced by the government of the ROC are used as indicators to adjust the probability of default and are included in the evaluation of the loss allowance of financial instruments.

• ii. Investments in debt instruments

Taipei Star Bank considers the historical default rates of each credit rating supplied by external rating agencies, the current financial condition of debtors, and industry forecasts when estimating 12-month or lifetime expected credit losses.

Determination that credit risk has increased significantly since initial recognition

At the end of each reporting period, Taipei Star Bank assesses the changes in risk of default over the expected lifetime of the discounts and loans to determine if credit risk has increased significantly since initial recognition. For this assessment, reasonable and corroborative information that indicates that credit risk has increased significantly is taken into consideration, the main indicators include:

Quantitative indicators

According to the changes in external credit ratings, Taipei Star Bank determines the investments in debt instruments whose credit risk has increased significantly since initial recognition at the end of the reporting period.

The three stages of impairment are as follows:

• i) Stage 1 (low-risk or no significant increase): No changes in external credit ratings or do not conform to the definition of Stage 2 and 3.

• ii) Stage 2 (significant increase in credit risk): Rating is over Baa3 on the initial recognition date, and rating is lower than Ba1, not including ratings of Ca-D on the measurement date; rating is Ba1-Ba3 on the initial recognition date, and rating is downgraded to B1-Caa3 on the measurement date; Rating is B1-Caa3 on the initial recognition date; rating provided by external credit agencies is Baa3/BBB-/BBB-.

• 114 -

• iii) Stage 3 (credit impaired): The rating is Ca-D on the measurement date or have defaulted.

Measurement of ECLs

  - i) The measurement of ECLs of debt instruments will be done on a group basis based on the nature of the products.

  - ii) At the end of the reporting period, Taipei Star Bank evaluates the risk of default occurring over the expected life of debt instruments, to determine if the credit risk has increased significantly since original recognition.

     - Normal credit risk, based on the probability of default (PD) within one year.

     - Significant increase in credit risk, based on the probability of default (PD) over the full lifetime of the debt instruments, if cash flow can be assessed, the discounted cash flow method is used to measure ECLs.

     - Abnormal credit risk, probability of default (PD) is 100%, probability of default (PD) over the full lifetime of the debt instruments is not considered, only the recoverable amount is considered in the measurement of ECLs.

     - Taipei Star Bank assesses the PD of investments in debt instruments using data from external credit rating agencies to calculate the PD of different secured or unsecured repayment orders.

• b) Credit risk hedging or mitigation policies

• i. Collateral

Taipei Star Bank has a series of measures for credit granting to reduce credit risks. One of the procedures is requesting for collateral from the borrowers. To secure the loans, Taipei Star Bank manages and assesses the collateral based on the procedures that suggest the scope of collateralization and valuation of collateral and the process of disposal. In credit contracts, Taipei Star Bank stipulates the security mechanism for loans and the conditions and terms for collateral and offsetting to state clearly that Taipei Star Bank reserves the right to reduce the limit granted or to reduce the repayment period in order to reduce the credit risks.

• 115 -

Taipei Star Bank closely observes the value of collateral of financial assets and considers the financial assets that need to recognized for impairment or those that are already impaired. The following table details the value of collateral of credit-impaired financial assets or those that need to be recognized for impairment.

Credit-impaired financial assets: Receivables Credit card business Others Discounts and loans Total amount of credit-impaired financial assets	Gross Carrying Amount $ - 253 214,111 $ 214,364	Loss Allowance Exposure (At Amortized Cost) $ - $ - (34) 219 (27,959) 186,152 $ (27,993) $ 186,371	Collateral Fair Value $ - - 709,608 $ 709,608

ii. Credit risk concentration limits and control

To avoid over concentration of credit risks, Taipei Star Bank has included credit limits for a single counterparty and for a single group in its credit-related guidelines. Taipei Star Bank has also included credit limits for an individual (entity) and for related enterprises (group) in the guidelines for investment and regulations for risk control on equity investments. To manage the concentration risk on the assets, Taipei Star Bank set credit limits by industry, conglomerate, country, transactions collateralized by shares, and other categories and integrated within one system the supervision of concentration of credit risk in these categories.

iii. Other credit enhancements

To reduce credit risk, Taipei Star Bank stipulates in its credit contracts the terms for offsetting which clearly defines that Taipei Star Bank reserves the right to offset the borrowers’ debt against their deposits in Taipei Star Bank.

c) Credit risk exposure

Credit risk exposure is evaluated based on the positive fair value on the balance sheet date and off-balance loan commitments and other guaranteed commitments.

Except off-balance sheet credit risk exposure, the maximum credit risk exposures of various financial instruments held by the Taipei Star Bank are the same as the per book amounts.

i. Off-balance sheet credit risk exposure

Commitments Guarantees Letters of credit	December 31
	2018 2017 $ 16,085,920 $ 15,196,224 460,740 576,281 - 13,359

• 116 -

ii. Concentration of credit risk

Concentration of credit risk exists when the counterparty of financial transactions are concentrated on one individual or when there is more than one counterparty but they are engaged in similar business activities or have similar economic characteristics, which result in their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Taipei Star Bank did not have transactions involving a single customer or counterparty, but has transactions with counterparties with similar industries or geographical locations. The contract amounts of significant concentration of credit risk and their maximum amounts of credit risk are as follows:

Group or Industry Natural person Real estate Manufacturing Wholesale, retail and restaurants Construction Others Region Domestic Overseas		**December 31 **	**December 31 **
		2018 2017 $ 33,952,929 $ 34,143,080 8,780,745 7,253,302 615,616 1,294,476 874,751 1,316,566 726,826 193,158 3,467,933 2,878,493 $ 48,418,800 $ 47,079,075 **December 31 **
		2018 $ 47,693,648 725,152 $ 48,418,800	2017 $ 46,534,983 544,092 $ 47,079,075

d) Credit quality information

Some financial assets held by Taipei Star Bank, such as cash and cash equivalents, due from the Central Bank and call loans to other banks, financial assets at fair value through profit or loss, bills and bonds purchased under resale agreements and refundable deposits, are exposed to low credit risks because the counterparties have high credit ratings.

• 117 -

In addition to the above-mentioned assets, credit quality analyses on other financial assets were as follows:

December 31, 2018

i. Analysis of credit quality of discounts and loans

Gross carrying amount Loss allowance Difference of impairment loss under regulations Gross carrying amount Loss allowance Difference of impairment loss under regulations Gross carrying amount Loss allowance Difference of impairment loss under regulations						Discounts and Loans	Discounts and Loans
						December 31, 2018
		Stage 1 12‑month ECLs $ 47,743,949 (33,731 ) - $ 47,710,218		Stage 2 Lifetime ECLs (Collectively Assessed) $ - - - $ - Tra		**Stage **	3 Lifetime ECLs (Non- purchased or Originated Credit- impaired Financial Assets) $ 208,905 (17,565 ) - $ 191,340 her Financial Asse	Difference of Impairment Loss Recognized $ - - (510,282) $ (510,282) ts	Total $ 47,958,060 (51,303 ) (510,282) $ 47,396,475
					de	Lifetime ECLs (Individually Assessed) $ 5,206 (7 ) - $ 5,199 s receivable and Ot
						December 31, 2018
		Stage 1 12‑month ECLs $ 8,196,302 (40 ) - $ 8,196,262		Stage 2 Lifetime ECLs (Collectively Assessed) $ - - - $ -		**Stage **	3 Lifetime ECLs (Non- purchased or Originated Credit- impaired Financial Assets) $ 184 (62 ) - $ 122 Commitments	Difference of Impairment Loss Recognized $ - - 28 $ 28	Total $ 8,196,555 (62 ) 28 $ 8,196,481
						Lifetime ECLs (Individually Assessed) $ 69 - $ 69 **Off-balance Sheet **
						December 31, 2018
		Stage 1 12‑month ECLs $ 460,740 (964 ) - $ 459,776		Stage 2 Lifetime ECLs (Collectively Assessed) $ - - - $ -		**Stage **	3 Lifetime ECLs (Non- purchased or Originated Credit- impaired Financial Assets) $ - - - $ -	Difference of Impairment Loss Recognized $ - - (3,644) $ (3,644)	Total $ 460,740 (964 ) (3,644) $ 456,132
						Lifetime ECLs (Individually Assessed) $ - - - $ -

• 118 -

• ii. Analysis of credit quality of marketable securities

Credit quality of debt instruments

Investments in debt instruments were classified as at FVTOCI and as at amortized cost.

December 31, 2018 Gross carrying amount Loss allowance Amortized cost Adjustments to fair value	At FVTOCI $ 2,324,466 (817) 2,323,649 1,003 $ 2,324,652	At Amortized Cost $ 22,792,164 (3,666) 22,788,498 - $ 22,788,498

Taipei Star Bank’s current credit risk grading framework comprises the following categories:

Credit Rating	Description	Basis for Recognizing Expected Credit Losses	Expected Credit Loss Rate	Gross Carrying Amount
Stage 1 (low credit risk) Stage 2 (significant increase in credit risk) Stage 3 (credit impaired)	No changes in external credit ratings and do not conform to the definition of Stages 2 and 3. The rating is over Baa3 on the initial recognition date, and the rating is lower than Ba1, not including ratings of Ca-D on the measurement date. The rating is Ba1-Ba3 on the initial recognition date, and the rating is downgraded to B1-Caa3 on the measurement date. B1-Caa3 on the initial recognition date. The rating is Ca-D on the measurement date and defaulted.	12-month ECLs Lifetime ECLs (not credit impaired) Lifetime ECLs (credit impaired)	0.00%-0.36% - -	$ 25,116,630 - -

• 119 -

The allowance for impairment loss of investments in debt instruments at FVTOCI and at amortized cost grouped by credit rating is summarized as follows:

Allowance for Impairment Loss Balance at January 1, 2018 under IAS 39 Effect of retrospective application of IFRS 9 Balance at January 1, 2018 under IFRS 9 New financial assets purchased Derecognition Change in exchange rates or others Balance at December 31, 2018		Credit Rating
	Stage 1 12-month ECLs $ - 6,166 6,166 1,188 (1,319) (1,552) $ 4,483	Stage 2 Lifetime ECLs Not Credit- impaired $ - - - - - - $ -	Stage 3
			Lifetime ECLs Credit- impaired $ - - - - - - $ -

• 120 -

December 31, 2017

i. Credit quality analysis on discounts, loans and receivables

December 31, 2017				Neither Past Due Nor Impaired	Neither Past Due Nor Impaired	Neither Past Due Nor Impaired			Past Due But Not Impaired (B)	Past Due But Not Impaired (B)	Impaired (C)	Total (A)+(B)+(C)	Total (A)+(B)+(C)	Provision for Impairment Loss(D)	Provision for Impairment Loss(D)	Net (A)+(B)+ (C)-(D)
	A			B		C	Subtotal (A)
Available-for-sale financial assets Bonds Equities Others Held-to-maturity financial assets Bonds Other financial assets Equities	$ 2,721,298 209,089 16,813 21,195,933 -			$ - - - - -		$ - - - - 7,172	$ 2,721,298 209,089 16,813 21,195,933 7,172		$ - - - - -		$ - - - - 42	$ 2,721,298 209,089 16,813 21,195,933 7,214		$	- - - - (42)	$ 2,721,298 209,089 16,813 21,195,933 7,172
Credit quality analysis on discounts and loans neither past due nor impaired (based on credit ratings of clients) Neither Past Due Nor Impaired December 31, 2017 Level 1 Level 2 Level 3 Level 4 Level 5 Consumer loans Residential mortgage $ 1,322,462 $ 3,315,237 $ 2,764,938 $ 1,324,131 $ 998,777 Petit credit 5,917 9,370 6,806 4,789 1,108 Others (secured) 5,195,457 8,363,479 5,911,069 3,363,713 1,358,295 Others (unsecured) 14,856 43,758 26,766 17,401 4,650 Corporate loans Secured 413,228 201,526 2,081,824 4,652,759 1,751,435 Unsecured 655,718 710,004 892,405 870,306 110,000 $ 7,607,638 $ 12,643,374 $ 11,683,808 $ 10,233,099 $ 4,224,265
			Level 1 $ 1,322,462 5,917 5,195,457 14,856 413,228 655,718 $ 7,607,638		Level 2 $ 3,315,237 9,370 8,363,479 43,758 201,526 710,004 $ 12,643,374			Level 3 $ 2,764,938 6,806 5,911,069 26,766 2,081,824 892,405 $ 11,683,808		Level 4 $ 1,324,131 4,789 3,363,713 17,401 4,652,759 870,306 $ 10,233,099			Level 5 $ 998,777 1,108 1,358,295 4,650 1,751,435 110,000 $ 4,224,265		$	Total 9,725,545 27,990 24,192,013 107,431 9,100,772 3,238,433 46,392,184
															$

• ii. Credit quality analysis on discounts and loans neither past due nor impaired (based on credit ratings of clients)

• 121 -

iii. Credit quality analysis on securities

December 31, 2017		Neither Past Due Nor Impaired	Neither Past Due Nor Impaired		Past Due But Not Impaired (B)	Impaired (C)	Total (A)+(B)+(C)	Provision for Impairment Loss(D)	Net (A)+(B)+ (C)-(D)
	A	B	C	Subtotal (A)
Available-for-sale financial assets Bonds Equities Others Held-to-maturity financial assets Bonds Other financial assets Equities	$ 2,721,298 209,089 16,813 21,195,933 -	$ - - - - -	$ - - - - 7,172	$ 2,721,298 209,089 16,813 21,195,933 7,172	$ - - - - -	$ - - - - 42	$ 2,721,298 209,089 16,813 21,195,933 7,214	$ - - - - (42)	$ 2,721,298 209,089 16,813 21,195,933 7,172

• 122 -

3) Liquidity risk

Taipei Star Bank manages liquidity risk by maintaining adequate reserves, liquidity reserves ratio are 32% and 31% as of December 31, 2018 and 2017, respectively. The fund is sufficient to meet the needs of asset acquisition or debt repayment on maturity, therefore, there is no possibility of financial loss resulting from the shortage of funds. The liquidity risk is quite low due to there is minimum possibility of sell derivatives in a non-reasonable price.

The basic policy of Taipei Star Bank is to matching the maturity profiles of financial assets and liabilities, and managed non- matching gap. Due to the uncertainty of transaction details and types, the maturity profiles of financial assets and liabilities can not matching interest completely. This kinds of gap can generate potential profit or loss, Taipei Star Bank classified financial assets and liabilities into different groups by its nature and assessed its liquidity as follows:

Financial Instruments Assets Cash and cash equivalents Due from the Central Bank and call loans to other banks Financial assets at FVTPL Bills and bonds purchased under resale agreements Trade receivables Discounts and loans Financial assets at FVTOCI Financial assets at amortized cost - debt investments Total assets Liabilities Due to the Central Bank and other banks Financial liabilities at FVTPL Bills and bonds sold under repurchase agreements Trade payables Deposits and remittances Bonds Other financial liabilities Total liabilities Financial Instruments Assets Cash and cash equivalents Due from the Central Bank and call loans to other banks Financial assets at FVTPL Bills and bonds purchased under resale agreements Trade receivables Discounts and loans Available-for-sale financial assets Held-to-maturity financial assets Other financial assets Total assets				December 31, 2018	December 31, 2018
		Less than 1 Month $ 1,994,753 1,229,850 1,315,950 5,170,276 98,845 1,832,465 61,439 7,442,256 19,145,834 6,129,929 10,966 3,314,935 479,279 6,953,704 - 1,646 16,890,459 $ 2,255,375	1-6 Months $ - 573,300 - - 91,142 4,068,064 61,334 650,205 5,444,045 - - 399,432 105,925 20,724,316 - 8,335 21,238,008 $ (15,793,963)	6-12 Months 1-7 Years $ - $ - 560,233 590,947 - - - - 36,705 2,172 7,556,159 19,161,673 281,894 2,055,443 2,132,560 9,996,259 10,567,551 31,806,494 - - - - - - 16,893 38,612 18,789,133 21,362,255 - 1,000,000 10,228 5,207 18,816,254 22,406,074 $ (8,248,703) $ 9,400,420, December 31, 2017		Over 7 Years $ - - - - - 15,339,699 198,048 2,567,218 18,104,965 - - - - - 330,000 - 330,000 $ 17,774,965	Total $ 1,994,753 2,954,330 1,315,950 5,170,276 228,864 47,958,060 2,658,158 22,788,498 85,068,889 6,129,929 10,966 3,714,367 640,709 67,829,408 1,330,000 25,416 79,680,795 $ 5,388,094
		Less than 1 Month $ 2,097,667 1,528,370 1,790,874 6,884,863 47,410 3,804,909 - 7,454,250 - 23,608,343	1-6 Months $ - 584,574 - - 76,724 8,410,286 359,643 544,391 - 9,975,618	6-12 Months $ - 536,137 - - 38,881 9,247,547 617,419 2,199,313 - 12,639,297	1-7 Years $ - 529,868 - - 48,364 8,425,222 1,970,138 9,736,157 7,172 20,716,921	Over 7 Years Total $ - $ 2,097,667 - 3,178,949 - 1,790,874 - 6,884,863 - 211,379 16,601,471 46,489,435 - 2,947,200 1,261,822 21,195,933 - 7,172 17,863,293 84,803,472 (Continued)

• 123 -

Financial Instruments Liabilities Due to the Central Bank and other banks Financial liabilities at FVTPL Bills and bonds sold under repurchase agreements Trade payables Deposits and remittances Bonds Other financial liabilities Total liabilities				December 31, 2017	December 31, 2017
		Less than 1 Month 6,086,687 3,904 4,543,094 577,586 6,826,858 - 1,568 18,039,697 $ 5,568,646	1-6 Months - - 386,151 111,421 21,919,848 - 7,939 22,425,359 $ (12,449,741)	6-12 Months - - - 13,429 18,803,775 - 9,742 18,826,946 $ (6,187,649)	1-7 Years - - - 41,032 19,868,529 1,000,000 25,416 20,934,977 $ (218,056)	Over 7 Years Total - 6,086,687 - 3,904 - 4,929,245 - 743,468 - 67,419,010 - 1,000,000 - 44,665 - 80,226,979 $ 17,863,293 $ 4,576,493 (Concluded)

Analysis of cash outflows from nonderivative financial liabilities

Taipei Star Bank disclosed the analysis of cash outflows from nonderivative financial liabilities by the residual maturities as of the balance sheet date. The amounts of cash outflows are based on contractual cash flows, so some amounts may not correspond to those that shown in the consolidated balance sheets.

December 31, 2018	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Due to the Central Bank and other banks Bills and bonds purchased under resale agreements Trade payables Deposits and remittances Bonds Other items of cash outflow on maturity	$ 6,129,929 3,317,861 479,279 6,953,704 - 3,129	$ - 401,721 79,801 9,603,079 - 3,314	$ - - 26,124 11,121,237 - 5,021	$ - - 16,893 18,789,133 - 10,228	$ - - 38,612 21,362,255 1,330,000 362,088	$ 6,129,929 3,719,582 640,709 67,829,408 1,330,000 383,780
December 31, 2017	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Due to the Central Bank and other banks Bills and bonds purchased under resale agreements Trade payables Deposits and remittances Bonds Other items of cash outflow on maturity	$ 6,086,687 4,543,094 577,586 6,826,858 - 1,623	$ - 389,404 85,609 10,248,603 - 3,156	$ - - 25,812 11,671,245 - 4,783	$ - - 13,429 18,803,775 - 11,388	$ - - 41,032 19,868,529 1,000,000 390,677	$ 6,086,687 4,932,498 743,468 67,419,010 1,000,000 411,627

• 124 -

Analysis of cash outflows from derivative financial liabilities

Derivative financial liabilities to be settled at gross amounts

Derivatives: Foreign exchange contracts

Taipei Star Bank assessed the maturity date of contracts to understand the basic elements of all derivative financial instruments shown in the consolidated balance sheets. The amounts used in the maturity analyses of derivative financial liabilities are based on contractual cash flows, so some may not correspond to the amounts shown in the consolidated balance sheets. The maturity analysis of derivative financial liabilities was as follows:

December 31, 2018	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Derivative financial liabilities at fair value through profit or loss Foreign exchange derivative Cash outflows Cash inflows	$ 1,325,582 1,314,924	$ 153,028 152,720	$ - -	$ - -	$ - -	$ 1,478,610 1,467,644
Subtotal of cash outflows Subtotal of cash inflows	1,325,582 1,314,924	153,028 152,720	- -	- -	- -	1,478,610 1,467,644
Net cash outflow(inflow)	$ (10,658)	$ (308)	$ -	$ -	$ -	$ (10,966)
December 31, 2017	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 **Year **	Over 1 Year	Total
Derivative financial liabilities at fair value through profit or loss Foreign exchange derivative Cash outflows Cash inflows	$ 447,710 445,118	$ 242,693 241,381	$ - -	$ - -	$ - -	$ 690,403 686,499
Subtotal of cash outflows Subtotal of cash inflows	447,710 445,118	242,693 241,381	- -	- -	- -	690,403 686,499
Net cash outflow(inflow)	$ (2,592)	$ (1,312)	$ -	$ -	$ -	$ (3,904)

4) Maturity analysis of off-balance sheet items

Taipei Star Bank conducted the maturity analysis of off-balance sheet items based on the residual maturities as of the balance sheet date. For the financial guarantee contracts issued, the maximum amounts of the guarantees are included in the earliest periods that the guarantee obligation might have been required to be fulfilled. The amounts used in the maturity analysis of off-balance sheet items are based on contractual cash flows, so some amounts may not correspond to those shown in the consolidated balance sheets.

December 31, 2018	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Loan commitments issued Letters of credit issued and yet unused Otherguarantees	$ 665,957 - 200,000	$ 1,331,914 - 60,780	$ 1,997,871 - -	$ 3,995,743 - 51,148	$ 8,094,435 - 148,812	$ 16,085,920 - 460,740
Total	$ 865,957	$1,392,694	$1,997,871	$4,046,891	$8,243,247	$16,546,660

• 125 -

December 31, 2017	0-30 Days	31-90 Days	91-180 Days	181 Days - 1 Year	Over 1 Year	Total
Loan commitments issued Letters of credit issued and yet unused Otherguarantees	$ 588,094 - 217,500	$ 1,176,188 13,359 258,200	$ 1,764,282 - 13,000	$ 3,528,563 - 53,798	$ 8,139,097 - 33,783	$ 15,196,224 13,359 576,281
Total	$ 805,594	$1,447,747	$1,777,282	$3,582,361	$8,172,880	$15,785,864

5) Cash flow risk of variable interest rate

The future cash flow of Taipei Star Bank’s variable interest rate assets and variable interest rate liabilities can be fluctuation and have risk due to the change of market interest rate. After assessed by Taipei Star Bank, Taipei Star Bank decided to managed gap of cash flow to reduce risk from interest rate change.

• 126 -

• c. Disclosure Requirement of Regulations Governing the Preparation of Financial Reports by Public Banks - Article 16

1) Asset quality

Items	Period	Period	Period					December 31, 2018	December 31, 2018										December 31, 2017	December 31, 2017
				Nonperforming Loans (Note 1)		Loans		Ratio of Nonperforming Loans (Note 2)		Allowance for Possible Losses		Coverage Ratio (Note 3)		Nonperforming Loans (Note 1)			Loans		Ratio of Nonperforming Loans (Note 2)		Allowance for Possible Losses		Coverage Ratio (Note 3)
Corporate Banking	Secured			$ -		12,219,032		-		$ 131,217		-		$ 4,559			$ 9,105,333		0.05%		$ 99,774		2,188.51%
	Unsecured			-		1,786,099		-		20,063		-		2,589			3,241,022		0.08%		37,561		1,450.79%
Consumer Banking	Residential mortgage(Note 4)			34,518		8,671,934		0.40%		130,769		378.84%		28,757			9,754,303		0.29%		145,308		505.30%
	Cash card			-		-		-		-		-		-			-		-		-		-
	Small-scale credit	loans(Note 5)		3,629		62,349		5.82%		4,217		116.20%		2,309			35,005		6.60%		7,088		306.97%
	Other (Note 6)	Secured		105,127		25,054,094		0.42%		273,600		260.26%		26,835			24,246,341		0.11%		287,367		1,070.87%
		Unsecured		-		164,552		-		1,719		-		-			107,431		-		1,214		-
Total loans				143,274		47,958,060		0.30%		561,585		391.97%		65,049			46,489,435		0.14%		578,312		889.04%
Items	Period					December 31, 2018											December 31, 2017
			Nonperform ing Receivables		Receivables		Ratio of Nonper- forming Receivables		Allowance for Possible Losses		Coverage Ratio		Nonperform ing Receivables			Receivables		Ratio of Nonper- forming Receivables		Allowance for Possible Losses			Coverage Ratio
Credit cards			$ -		$ -		-		$ -		-		$ -			$ -		-		$ -			-
Accounts receivable factored without recourse(Note 7)			-		-		-		-		-		-			-		-		-			-
											December 31, 2018							December 31, 2017
											Not Reported as Nonperforming Loans				Not Reported as Nonperforming Receivables			Not Reported as Nonperforming Loans				Not Reported as Nonperforming Receivables
Amounts of executed contracts on negotiated debts(Note 8)											$ -				$ -			$ -				$ -
Amounts of executed debt-restructuring projects(Note9)											-				-			1,608				-
Total											-				-			1,608				-

• 127 -

• Note 1: Nonperforming loans are reported to the authorities and disclosed to the public, as required by the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Non-accrued Loans.” Nonperforming receivables are reported to the authorities and disclosed to the public, as required by the Banking Bureau’s letter dated July 6, 2005 (Ref. No. 0944000378).

• Note 2: Ratio of nonperforming loans: Nonperforming loans ÷ Outstanding loans balance. Ratio of nonperforming receivables: Nonperforming receivables ÷ Outstanding receivables balance.

• Note 3: Coverage ratio of loans: Allowance for possible losses for loans ÷ Nonperforming loans. Coverage ratio of receivables: Allowance for possible losses for receivables ÷ Nonperforming receivables.

• Note 4: The mortgage loan is for house purchase or renovation and is fully secured by housing that is purchased (owned) by the borrower, the spouse or the minor children of the borrowers.

• Note 5: Based on the Banking Bureau’s letter dated December 19, 2005 (Ref. No. 09440010950), small-scale credit loans are unsecured, involve small amounts and exclude credit cards and cash cards.

• Note 6: Other consumers’ banking loans refer to secured or unsecured loans that exclude housing mortgage, cash cards, credit cards and small-scale credit loans.

• Note 7: As required by the Banking Bureau in its letter dated July 19, 2005 (Ref. No. 0945000494), accounts receivable factored without recourse are reported as nonperforming receivables within three months after the factors or insurance companies refuse to indemnify banks for any liabilities on these accounts.

• Note 8: Amounts of executed contracts on negotiated debts that are not reported as nonperforming loans or receivables are reported in accordance with the Banking Bureau’s letter dated April 25, 2006 (Ref. No. 09510001270).

• Note 9: Amounts of executed debt-restructuring projects not reported as nonperforming loans or receivables are disclosed to the public in accordance with the Banking Bureau’s letter dated September 15, 2008 (Ref. No. 09700318940) and September 20, 2016 (Ref. No. 10500134790).

• 128 -

• 2) Concentration of credit extensions

(In Thousands of New Taiwan Dollars, %)

Period	December 31, 2018	December 31, 2018		December 31, 2017	December 31, 2017
Rank	Industry of Group Enterprise	Total Amount of Credit Endorsement or Other Transactions	Percentage of Equity	Industry of Group Enterprise	Total Amount of Credit Endorsement or Other Transactions	Percentage of Equity
1	Group A 016700 real estate development	$ 829,000	15.43%	Group A 016700 real estate development	$ 629,000	11.93%
2	Group B 016700 real estate development	538,275	10.02%	Group B 016700 real estate development	561,394	10.64%
3	Group C 016700 real estate development	531,300	9.89%	Group E 016811 real estate leasing	500,000	9.48%
4	Group D 014100 construction	523,210	9.74%	Group G 016700 real estate development	444,869	8.43%
5	Group E 016811 real estate leasing	500,000	9.31%	Group K 016812 real estate agencies activities	432,865	8.21%
6	Group F 015220 shippingagent	436,303	8.12%	Group F 015220 shippingagent	399,642	7.58%
7	Group G 016700 real estate development	414,659	7.72%	Group L 016700 real estate development	392,000	7.43%
8	Group H 015010 ocean transportation	374,477	6.97%	Group J 016499 other financial service	329,000	6.24%
9	Group I 016700 real estate development	312,000	5.81%	Group M 016700 real estate development	323,460	6.13%
10	Group J 016499 other financial service	308,000	5.73%	Group N 011112 man-made fiber spinning	320,000	6.07%

• Note 1: The list shows top 10 rankings by total amount of credit, endorsement or other transactions but excludes government-owned or state-run enterprises. If the borrower is a member of a group enterprise, the total amount of credit, endorsement or other transactions of the entire group enterprise must be listed and disclosed by code and line of industry. The industry of the group enterprise should be presented as the industry of the member firm with the highest risk exposure. The lines of industry should be described in accordance with the Standard Industrial Classification System of the Republic of China published by the Directorate - General of Budget, Accounting and Statistics under the Executive Yuan.

• Note 2: Group enterprise refers to a group of corporate entities as defined by Article 6 of “Supplementary Provisions to the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings”.

• Note 3: Total amount of credit, endorsement or other transactions is the sum of various loans (including import and export negotiations, discounts, overdrafts, unsecured and secured short-term loans, margin loans receivable, unsecured and secured medium-term loans, unsecured and secured long-term loans and overdue loans), exchange bills negotiated, accounts receivable factored without recourse, acceptances and guarantees.

• 129 -

3) Interest rate sensitivity information

Interest Rate Sensitivity (New Taiwan Dollars)

December 31, 2018

Items	1 to 90 Days	91 to 180 Days	181 Days to One Year	Over One Year	Total
Interest rate - sensitive assets	$58,316,681	$ 639,880	$4,326,480	$13,648,238	$76,931,279
Interest rate - sensitive liabilities	53,216,886	7,237,179	12,138,371	1,723,709	74,316,145
Interest rate sensitivity gap	5,099,795	(6,597,299)	(7,811,891)	11,924,529	2,615,134
Net worth					5,373,083
Ratio of interest rate - sensitive assets to liabilities					103.52%
Ratio of interest rate sensitivity gapto net worth					48.67%

Interest Rate Sensitivity (New Taiwan Dollars)

December 31, 2017

Items	1 to 90 Days	91 to 180 Days	181 Days to One Year	Over One Year	Total
Interest rate - sensitive assets	$60,265,620	$1,006,906	$4,785,724	$11,223,546	$77,281,796
Interest rate - sensitive liabilities	49,924,695	8,249,511	14,980,581	1,697,373	74,852,160
Interest rate sensitivity gap	10,340,925	(7,242,605)	(10,194,857)	9,526,173	2,429,636
Net worth					5,274,341
Ratio of interest rate - sensitive assets to liabilities					103.25%
Ratio of interest rate sensitivity gapto net worth					46.06%

• Note 1: The above amounts included only New Taiwan dollar amounts held by the head office and branches of the Bank (i.e., excluding foreign currency).

• Note 2: Interest rate-sensitive assets and liabilities refer to the revenues or costs of interest-earning assets and interest-bearing liabilities that were affected by interest rate changes.

• Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets - Interest rate-sensitive liabilities.

• Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets/Interest rate-sensitive liabilities (in New Taiwan dollars).

Interest Rate Sensitivity (U.S. Dollars)

December 31, 2018

Items	1 to 90 Days	91 to 180 Days	181 Days to One Year	Over One Year	Total
Interest rate-sensitive assets	$ 56,927	$ -	$ 14,254	$ 70,059	$ 141,240
Interest rate-sensitive liabilities	130,113	8,129	19,539	-	157,781
Interest rate sensitivity gap	(73,186)	(8,129)	(5,285)	70,059	(16,541)
Net worth					65
Ratio of interest rate-sensitive assets to liabilities					89.52%
Ratio of interest rate sensitivity gapto net worth					(25,447.69%)

• 130 -

Interest Rate Sensitivity (U.S. Dollars)

December 31, 2017

Items	1 to 90 Days	91 to 180 Days	181 Days to One Year	Over One Year	Total
Interest rate-sensitive assets	$ 32,814	$ 10,003	$ 19,241	$ 77,233	$ 139,291
Interest rate-sensitive liabilities	121,053	10,259	14,715	-	146,027
Interest rate sensitivity gap	(88,239)	(256)	4,526	77,233	(6,736)
Net worth					102
Ratio of interest rate-sensitive assets to liabilities					95.39%
Ratio of interest rate sensitivity gapto net worth					(6,603.92%)

• Note 1: The above amounts included only U.S. dollar amounts held by the head office, domestic branches, OBU and overseas branches of the Bank and excluded contingent assets and contingent liabilities.

• Note 2: Interest rate-sensitive assets and liabilities refer to the revenues or costs of interest-earning assets and interest-bearing liabilities that were affected by interest rate changes.

• Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets - Interest rate-sensitive liabilities.

• Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets/Interest rate-sensitive liabilities (in U.S. dollars).

• 4) Profitability

			Unit: %
Items		December 31, 2018	December 31, 2017
Return on total assets	Before income tax	0.25	0.26
	After income tax	0.22	0.23
Return on equity	Before income tax	4.05	4.13
	After income tax	3.57	3.73
Net income ratio		20.73	20.87

• Note 1: Return on total assets = Income before (after) income tax/Average total assets.

• Note 2: Return on equity = Income before (after) income tax/Average equity.

Note 3: Net income ratio = Income after income tax/Total net revenues.

• Note 4: Income before (after) income tax represents income from January to each period-end date.

• 131 -

5) Maturity analysis of assets and liabilities

Maturity Analysis of Assets and Liabilities (New Taiwan Dollars)

(In Thousands of New Taiwan Dollars)

December 31, 2018

	Total			Remaining Per	iod to Maturity
		0-10 Days	11-30 Days	31-90 Days	91-180 Days	181 Days to 1 **Year **	Over 1 Year
Main capital inflow on maturity	$81,918,770	$11,833,227	$ 6,037,431	$ 2,453,839	$ 2,894,101	$10,129,533	$48,570,639
Main capital outflow on maturity	97,819,771	4,748,524	10,365,713	10,452,429	12,790,523	23,398,700	36,063,882
Gap	(15,901,001)	7,084,703	(4,328,282)	(7,998,590)	(9,896,422)	(13,269,167)	12,506,757

Maturity Analysis of Assets and Liabilities (New Taiwan Dollars)

(In Thousands of New Taiwan Dollars)

December 31, 2017

	Total			Remaining Per	iod to Maturity
		0-10 Days	11-30 Days	31-90 Days	91-180 Days	181 Days to 1 **Year **	Over 1 Year
Main capital inflow on maturity	$82,476,960	$15,973,040	$ 6,368,076	$ 3,648,948	$ 5,940,328	$12,081,752	$38,464,816
Main capital outflow on maturity	97,624,526	6,137,235	10,172,009	11,013,494	13,038,091	22,903,380	34,360,317
Gap	(15,147,566)	9,835,805	(3,803,933)	(7,364,546)	(7,097,763)	(10,821,628)	4,104,499

Note: The above amounts included only New Taiwan dollar amounts held by the Bank.

Maturity Analysis of Assets and Liabilities (U.S. Dollars)

(In Thousands of U.S. Dollars)

December 31, 2018

	Total		Remaining Period to Maturity	Remaining Period to Maturity	Remaining Period to Maturity
		0-10 Days	11-30 Days	31-90 Days	91-180 Days	181 Days to 1 Year
Main capital inflow on maturity	$173,446	$ 36,179	$ 7,637	$ 207	$ 14,163	$115,260
Main capital outflow on maturity	165,116	83,238	34,660	9,050	21,280	16,888
Gap	8,330	(47,059)	(27,023)	(8,843)	(7,117)	98,372

Maturity Analysis of Assets and Liabilities (U.S. Dollars)

(In Thousands of U.S. Dollars)

December 31, 2017

	Total		Remaining Period to Maturity	Remaining Period to Maturity	Remaining Period to Maturity
		0-10 Days	11-30 Days	31-90 Days	91-180 Days	181 Days to 1 Year
Main capital inflow on maturity	$161,738	$ 36,126	$ 6,486	$ 5,219	$ 19,174	$ 94,733
Main capital outflow on maturity	212,122	80,586	33,539	16,216	26,538	55,243
Gap	(50,384)	(44,460)	(27,053)	(10,997)	(7,364)	39,490

Note 1: The above amounts included only U.S. dollar amounts held by the Bank.

Note 2: If foreign currency assets amounts constituted more than 10% of Bank’s total assets, additional information will need to be disclosure.

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46. CAPITAL MANAGEMENT

• a. Eligible capital of Taipei Star Bank meeting the requirements set by the authorities and should comply with the minimum ratio requested by authorities. This is the main objective of capital management of the Bank. The eligible capital and legal capital are calculated under the rule set by the authorities.

To ensure Taipei Star Bank is able to meet the capital needs of operating plan and the capital requirement, Taipei Star Bank sets business operating plan and budget report to assess the impact of business status with its capital adequacy, as well as to reach the optimization of capital allocation within the Bank.

• b. In order to meet capital adequacy requirements set by the authorities, Taipei Star Bank report it to the relevant regulatory agencies quarterly. The capital of the Bank is managed by the Risk Management Division, capital can classify into Tier 1 capital and Tier 2 capital under the “Regulations Governing the Capital Adequacy Ratio of Banks”.

• 1) Tier 1 capital: (including common equity and other tier 1 capital)

  • a) Common equity including ordinary shares and its issuance surplus, capital collected in advance, capital surplus, legal reserve, special reserve, retained earnings, non-controlling interests and other equity items.

  • b) Other tier 1 capital including non-cumulative perpetual preference shares and its issuance surplus, non-cumulative perpetual subordinated debts and the non-cumulative perpetual preference shares and its issuance surplus, and the non-cumulative perpetual subordinated debts which are issued by banks' subsidiaries, and are not directly or indirectly held by banks.

• 2) Tier 2 capital:

Tier 2 capital including cumulative perpetual preference shares and its issuance surplus; cumulative perpetual subordinated debts; convertible subordinated debts, long-term subordinated debts; non-perpetual preference shares and its issuance surplus when first time applying International Financial Reporting Standards in real estate and using the fair value or the re-estimated value method as the deemed cost, the difference in amount between the deemed cost and the book value recognized in retained earnings; the 45% of unrealized gains on changes in the fair value of investment properties using fair value method, as well as the 45% of unrealized gains on available-for-sale financial assets; operational reserves and loan-loss provisions; and the cumulative perpetual preference shares and its issuance surplus, cumulative perpetual subordinated debts, convertible subordinated debts, long-term subordinated debts, and the non-perpetual preference shares and its issuance surplus, which are issued by banks subsidiaries, and are not directly or indirectly held by banks.

• 133 -

c. Information on the Bank’s CAR was as follows:

The eligible capital, risk-weighted assets and capital adequacy ratio are calculated under the “Regulations Governing the Capital Adequacy Ratio of Banks”. Taipei Star Bank meet capital adequacy requirements as of December 31, 2018 and 2017, respectively.

(Unit: In Thousands of New Taiwan Dollars, %)

Analysis Items	Year	Year	December 31, 2018	December 31, 2017
Eligible capital	Common equity		$ 4,764,216	$ 4,643,639
	Other Tier 1 capital		310,007	-
	Tier 2 capital		1,837,893	1,962,568
	Eligible capital		6,912,116	6,606,207
Risk-weighted assets	Credit risk	Standardized approach	48,392,631	48,235,745
		Internal rating - based approach	-	-
		Securitization	-	-
	Operational risk	Basic indicator approach	1,570,663	1,516,625
		Standardized approach/ alternative standardized approach	-	-
		Advanced measurement approach	-	-
	Market risk	Standardized approach	2,483,700	2,978,188
		Internal model approach	-	-
	Risk-weighted assets		52,446,994	52,730,558
Capital adequacyratio(%)			13.18	12.53
Ratio of common equityto risk-weighted assets(%)			9.08	8.81
Ratio of Tier 1 capital to risk-weighted assets(%)			9.67	8.81
Leverage ratio(%)			5.71	5.20

• Note 1: Eligible capital and risk-weighted assets are calculated under the “Regulations Governing the Capital Adequacy Ratio of Banks” and “Explanation of Methods for Calculating the Eligible Capital and Risk - Weighted Assets of Banks.”

• Note 2: Consolidated financial statements for the years ended have to disclosure capital adequacy ratio with two comparative periods, and consolidated financial statements for the six months ended have to disclosure additional capital adequacy ratio for the last years ended except for two comparative periods.

Note 3: Formulas used were as follows:

• 1) Eligible capital = Common equity + Other Tier 1 capital + Tier 2 capital.

• 2) Risk-weighted assets = Risk-weighted asset for credit risk + Capital requirements for operational risk and market risk x 12.5.

• 3) Capital adequacy ratio = Eligible capital ÷ Risk-weighted assets.

• 4) Ratio of the common equity to risk-weighted assets = Common equity ÷ Risk-weighted assets.

• 5) Ratio of Tier 1 capital to risk-weighted assets = (Common equity + Other Tier 1 capital) ÷ Risk-weighted assets.

• 134 -

• 6) Leverage ratio = Tier 1 capital ÷ Exposure measurement.

47. DISCLOSURES ACCORDING TO REGULATIONS GOVERNING THE PREPARATION OF FINANCIAL REPORTS BY SECURITIES FIRMS

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

Except financial instruments measured at fair value, management of Shinkong International Securities Co., Ltd. (SKIS) believes the carrying amounts of consolidated financial statements approximate to their fair value.

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

• 1) Fair value hierarchy

December 31, 2018 Financial assets at FVTPL Trading securities - dealing - Domestic emerging stocks Trading securities - underwriting - Bonds Financial assets at FVTOCI Investments in equity instruments at FVTOCI Domestic investments - unlisted shares December 31, 2017 Financial assets at FVTPL Trading securities - dealing - Domestic emerging stocks	Level 1 $ 44,148 2,540 - $ 46,688 Level 1 $ 17,684	Level 2 $ - - - $ - Level 2 $ -	Level 3 $ - - 40,089 $ 40,089 Level 3 $ -	Total $ 44,148 2,540 40,089 $ 86,777 Total $ 17,684

• 135 -

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

For the year ended December 31, 2018

Financial Assets Balance at January 1, 2018 (IAS 39) Adjustment on retrospective application of IFRS 9 Balance at January 1, 2018 (IFRS 9) Unrealized gain (loss) of financial assets at FVTOCI Balance at December 31, 2018	Financial Assets at FVTOCI
	Equity Instruments $ - 29,605 29,605 10,484 $ 40,089

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

The fair values of investments in domestic unlisted shares are measured using the market multiple valuation technique, which is based on the transaction prices of shares of comparable companies in an active market and the corresponding net value multiplier, taking into consideration the liquidity discount ratio. The main significant unobservable input value is the liquidity discount.

If possible reasonable change in the discount for lack of marketability assumptions will occur and all other inputs will remain constant, the fair value of the investments would increase (decrease) as follows:

December 31, 2018	December 31, 2018
Significant Unobservable Input	Range of Changes	Affected Amount
Discount for lack of marketability	10% increase 10%decrease	$ (3,093) 3,093

• c. Categories of financial instruments

Financial assets Financial assets at FVTPL Held for trading Mandatorily classified as at FVTPL Loans and receivables (1) Available-for-sale financial assets (2) Financial assets at amortized cost (3) Financial assets at FVTOCI Equity instruments Financial liabilities Amortized cost (4)	December 31
	2018 2017 $ - $ 17,684 46,688 - - 10,035,572 - 9,501 8,162,086 - 40,089 - 5,613,455 7,714,747

• 1) The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, margin loans receivable, customer margin accounts, trade receivables, securities business borrowing and lending, securities business borrowing and lending - unrestricted purposes, futures trading margin, other receivables, other financial assets-current, collected payment of shares underwritten, operating deposits, settlement funds and refundable deposits.

• 136 -

• 2) The balances include the carrying amount of available-for-sale financial assets measured at cost.

• 3) The balances include financial assets at amortized cost, which comprise cash and cash equivalents, margin loans receivable, customer margin accounts, trade receivables, securities business borrowing and lending, securities business borrowing and lending - unrestricted purposes, futures trading margin, other receivables, other financial assets-current, collected payment of shares underwritten, operating deposits, settlement funds and refundable deposits.

• 4) The balances include financial liabilities at amortized cost, which comprise short-term loans, short-term bills payable, securities financing refundable deposits, deposits payable for securities financing, future traders’ equity, collection payable - collected payment of shares underwritten, trade and other payables (business tax not included).

• d. Financial risk management objectives and policies

1) Risk management system

• a) Risk management policies

The purpose of SKIS risk management policies is to build culture concern about risk management, and use qualitative and quantitative measurement results as a basis for business plan and risk management monitoring.

b) Risk management organization

The organizational structure of SKIS includes the board of directors, risk management committee, risk management department, and all other business departments.

The board of directors is the highest level in the risk management function and takes the full responsibility for risk management issues and to examine policies and standards and establish risk management system. In addition, every business department monitor, measure, and assesses various risks according to risk management standards. Law compliance department and internal auditing department is responsible for the independent review of risk management.

c) Risk management procedures

SKIS’s risk management procedures, including risk identification, evaluation, monitoring and reporting, and takes appropriate measures to control. According to the risk management policies, SKIS make risk management procedures, which mainly include market risks, credit risks, liquidity risks, and operational risks (law risks). The principle of risks are as follows:

i. Market risk

According to the restrictions of the law and the authorization of the board of directors, the amount of the upper limit (e.g. dealing and underwriting) is set, and the early warning and stop loss mechanism are determined according to the characteristics of the products. Measure and monitor the risk according to the procedures of each business department. Through the after-hours analysis, control the transaction status of the transaction risk. In order to ensure complete and in-depth control of market risk, SKIS regularly conducts stress tests and implements risk management.

• 137 -

ii. Credit risk

Credit risk exposure by SKIS including issuer's credit risk and counterparty credit risk. The former is the risk that the financial institution which is deposit by SKIS may default, because SKIS dealing business with many domestic financial institutions which has good credit, and there is no significant concentration situation. The credit risk management is follow to rule. The latter mainly comes from the brokerage business, including credit risk arising from customers' failure to fulfill delivery obligations and securities lending or borrowing. If the market encounters sudden and serious incidents, resulting in insufficient market depth or disorder, and resulting in significant losses in the customer's holding portion, further implicating SKIS's direct or indirect risks. In order to prevent the above situation, SKIS has set up rules for the risk management of brokerage, supplemented by dynamic monitoring of the market, and regularly monitors.

In order to reduce the credit risk of the counterparty (customer), the business unit measures the financial and credit status of the counterparty before the transaction, and confirms the legality of the transaction. Then set the credit limit according to the customer's financial strength, and implement credit rating management. Regular or irregular inspection of customer credit portions after the transaction. Low liquidity shares, high risk shares and securities lending or borrowing warning indicators as the focus of credit risk control.

In addition, for counterparties, other than regularly reviewing their credit status, they also manage credit risk through the following measures: New credit exposure limit, credit limit shorten, add collateral to enhance credit.

iii. Liquidity risk

SKIS liquidity risk management covers the source of funds, capital utilization and gap management.

• i) For the source of funds, SKIS ensuring the stability and dispersion of the source of funds, maintaining a sufficient amount at any time, and effectively respond to the risk of fluctuations in unanticipated capital supply.

• ii) For the use of funds, SKIS assessing investment income, ensure its liquidity and safety to effectively respond to the unexpected needs of funds.

• iii) To manage the funding gaps of every period, SKIS arrangement of the source and use of funds, simulated the possible future funding gaps and capital planning, ensure that the sources of funds needed to maintain normal operations are safe.

• iv) The Finance Department prepares relevant management statements and inform the risk management unit in accordance with the operating rules for liquidity risk management. Which is to ensure the safety and stability of the operating funds.

• iv. Legal and operational risk

Legal and operational risk management is divided into preventive control and post-clearance review based on nature and accountability. Preventive control can prevent irreparable damage, such as keep focus on the regulations modify and the impact for company. Post-clearance review whether the business unit performs business according to the operation regulations, and suggest improvements for each business, review loss of operational risk, and review the standard operating procedures of each unit.

• 138 -

SKIS managed by the internal regulations, which review and adjustment for the existing business regularly. If a new type of business is planned or the operating environment changes, the law will be followed and the risk management will modify and assessment.

2) Market risk analysis

Market risk is the uncertainty of changes in fair value of in- and off-balance-sheet financial instruments due to changes in market risk factors. Market risk factors include interest rates, exchange rates, equity security prices, and commodity prices. Except listed shares, convertible bonds and emerging market shares hold by underwriting, and emerging market shares hold by dealing. In general, SKIS does not hold high portion of listed shares and convertible bonds, therefore, market risk is mainly derived from fluctuations in emerging market shares.

In order to control market risks, SKIS compliance with regulations and sets risk limits from board of directors. According to the analysis of the overall economy, industry and the financial status of individual companies, are provided for the investment decisions. Take into account the fundamentals and technical aspects of the stock market, and the supply and demand relationship of the market, also monitor the risk exposure through the mechanism of stop-loss of SKIS.

• 3) Credit risk analysis

SKIS’s credit risk arises from derivatives transactions and securities investment, it can be divided into categories such as issuer risk and counterparty risk as follows:

• a) Issuer risk is the credit risk that stock issuers go into liquidation or are unable to pay back money when debt, bills and other securities mature.

• b) Counterparty risk is the credit risk that the counterparty undertaking derivatives or transactions are unable to fulfill settlement obligations.

SKIS’s demand deposits, short-term bills payable, other refundable deposits and trade receivable have credit risk.

• a) Credit risk concentration

SKIS is mainly engaged in brokerage business and the customers are scattered. To avoid the concentration of credit risks, SKIS controls the transaction risk of the brokerage business and controls the transaction amount according to the customer's financial status. For holding debt instruments or deposits, SKIS has already traded with a number of financial institutions to diversify risks and design monitor system for every financial institutions. Therefore, SKIS has not concentration of credit risk.

• b) Credit risk quality

SKIS financial assets can be divided into categories including not past due and not impaired, past due but not impaired, impaired and impaired reserve.

• 139 -

As table below, all of SKIS financial assets are not past due and not impaired, which comprise cash and cash equivalents, customer margin accounts and other refundable deposits, Its credit risk is low risk, indicating that it can maintain its financial commitment performance ability even in the face of significant uncertainties or exposure to adverse conditions. For receivable, the proportion of trade receivables and margin loans receivable is relatively high, the credit risk of each financial asset is as follows:

• i. Cash and cash equivalents

Which mainly comprise time deposits, checking accounts and demand deposits, and commercial papers.

• ii. Customer margin accounts

According to the regulations of the authority, the customer margin accounts shall be deposited in banks with credit rating above a certain level, and separate accounts shall be set up and stored separately from their own assets.

iii. Other refundable deposits

Which mainly comprise operating deposits, settlement funds and refundable deposits. Operating deposits deposited in a bank with good credit. Settlement funds as stipulated in the Rules Governing Securities Firms, all brokers should place settlement funds with the Taiwan Stock Exchange.

iv. Other financial assets

Time deposits with original maturities of more than 3 months, deposited in a bank with good credit ratings.

• v. Trade receivables

It is the creditor's rights arising from the securities business, including the transaction price of the sale of the operating securities, the financing interest receivable from the credit transaction, the receivables arising from the business of the securities being purchased and the purchase or holding by the customer. Securities are secured loans, etc.

• vi. Margin loans receivable

• 140 -

vii. Securities business borrowing and lending - unrestricted purposes

Credit Risk Quality of Financial Assets

(In Thousands of New Taiwan Dollars)

December 31, 2018

Financial Assets Cash and cash equivalents Customer margin accounts Collected payment of shares underwritten Refundable deposits Receivable Margin loans receivable Trade receivables Securities business borrowing and lending - unrestricted purposes Other receivable Securities business borrowing and lending Futures trading margin Other financial assets Time deposits Refinancing margin Refinancing deposit receivable Other receivable - related Trade receivable - related Stock borrowing margin	Not Past Due and Not Impaired $ 365,461 650,258 7,106 304,043 1,326,868 3,362,119 2,253,042 964,220 7,430 4,019 417 6,591,247 206,000 22,647 18,501 990 813 20 248,971 $ 8,167,086	Past Due But Not Impaired $ - - - - - - - - - - - - - - - - - - - $ -	Impaired $ - - - - - - - - - - - - - - - - - - - $ -	Impaired Reserve $ - - - - - - - - - - - - - - - - - - - $ -	Total $ 365,461 650,258 7,106 304,043
					1,326,868
					3,362,119 2,253,042 964,220 7,430 4,019 417
					6,591,247
					206,000 22,647 18,501 990 813 20
					248,971
					$ 8,167,086

Credit Risk Quality of Financial Assets

(In Thousands of New Taiwan Dollars)

December 31, 2017

Financial Assets Cash and cash equivalents Customer margin accounts Collected payment of shares underwritten Refundable deposits Receivable Margin loans receivable Trade receivables Securities business borrowing and lending - unrestricted purposes Other receivable Securities business borrowing and lending Other financial assets Time deposits Refinancing margin Refinancing deposit receivable Other receivable - related Trade receivable - related Stock borrowing margin	Not Past Due and Not Impaired $ 375,341 530,141 98,264 313,168 1,316,914 4,811,546 3,118,280 637,863 6,810 8,029 8,582,528 110,000 14,787 14,317 1,204 802 20 141,130 $ 10,040,572	Past Due But Not Impaired $ - - - - - - - - - - - - - - - - - - $ -	Impaired $ - - - - - - - - - - - - - - - - - - $ -	Impaired Reserve $ - - - - - - - - - - - - - - - - - - $ -	Total $ 375,341 530,141 98,264 313,168
					1,316,914
					4,811,546 3,118,280 637,863 6,810 8,029
					8,582,528
					110,000 14,787 14,317 1,204 802 20
					141,130
					$ 10,040,572

• 141 -

4) Liquidity risk analysis

a) The definition of liquidity risk

Liquidity risk is the potential loss that SKIS may suffer due to inability to liquidate assets or raise enough funds in reasonable time to perform obligations when due and to meet the demands of assets growth. Inability to liquidate current assets at reasonable price or raising funds to fulfill funding gap with price higher than the reasonable one.

• b) Liquidity risk management policy

In order to maintain the running of the SKIS's daily capital, and ensure the safety and liquidity of capital use. The financial department as a independent unit for funding and monitoring.

According to the transactions with financial institutions, the finance department uses the remaining funds appropriately. SKIS implements funding gap management of various term structures in order to efficiently control unexpected fund dispatching, and also prepare funding liquidity risk report for management purpose.

• c) Liquidity risk for non-derivative financial liabilities

SKIS relies on bank borrowings and short-term bills payable as a significant source of liquidity, SKIS had available unutilized bank loan unused facilities $137.45 billion and $49.55 billion as of December 31, 2018 and 2017, respectively.

The following table details SKIS’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The table had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which SKIS can be required to pay. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

Contractual Maturities for Its Non-derivative Financial Liabilities

(In Thousands of New Taiwan Dollars)

December 31, 2018

Financial Liabilities Short-term loans Short-term bills payable Securities financing refundable deposits Deposits payable for securities financing Future traders' equity Payables Trade payables Other payables Collection payable - collected payment of shares underwritten Cash outflow			Repayment Periods	Repayment Periods		5+ Years $ - - - - - - - - $ -	Total $ 100,000 540,000 935,069 1,013,811 649,712 2,119,298 253,165 7,058
		On Demand $ - - 935,069 1,013,811 649,712 2,119,298 37,110 7,058 $ 4,762,058	Less than 3 Months $ 100,000 540,000 - - - - 208,532 - $ 848,532	3-12 Months $ - - - - - - 7,523 - $ 7,523	1-5 Years $ - - - - - - - - $ -
							$ 5,618,113

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Contractual Maturities for Its Non-derivative Financial Liabilities

(In Thousands of New Taiwan Dollars)

December 31, 2017

Financial Liabilities Short-term loans Short-term bills payable Securities financing refundable deposits Deposits payable for securities financing Future traders' equity Payables Trade payables Other payables Collection payable - collected payment of shares underwritten Cash outflow			Repayment Periods	Repayment Periods		5+ Years $ - - - - - - - - $ -	Total $ 500,000 1,530,000 904,425 974,010 529,744 2,988,624 194,921 98,249
		On Demand $ - - 904,425 974,010 529,744 2,988,624 26,334 98,249 $ 5,521,386	Less than 3 Months $ 500,000 1,530,000 - - - - 163,077 - $ 2,193,077	3-12 Months $ - - - - - - 5,510 - $ 5,510	1-5 Years $ - - - - - - - - $ -
							$ 7,719,973

d) Stress test of liquidity risk

A stress test is applied to measure loss under extremely unfavorable market circumstances in order to assess financial institutions’ tolerance to extreme market volatility. The stress scenario includes market volatility, various credit events and unforeseen financial market liquidity tightening, etc., which may generate capital liquidity stress. With the change of the positive and negative fund gaps in each period.

With funding gap in a stress test, the financial unit will report the results to the risk management team, if necessary, prevent the occurrence of stressful events by the following procedures:

• i. Disposal of current assets, lower the market unfavorable price risk.

• ii. Decrease financial instruments to increase liquidity reserve.

• iii. Pledged SKIS assets to obtain capital.

• iv. Disposal of investments, lower the market unfavorable price risk.

• v. Capital increase or other financing methods.

• iv. Obtain capital from parent company or subsidiaries.

e. Capital risk management

Under the rules governing securities firms and related regulations, the capital adequacy ratio of a securities firm should be at least 250% to ensure its stability, business scale, business plan, capital increase plan, as well as maintain the health of the securities markets.

The management procedures of SKIS’s capital adequacy are as follows:

• 1) Relevant departments are required to calculate, monitor, and analyze SKIS’s capital adequacy monthly.

• 2) Simulate the capital adequacy result and provide to relevant departments based on the assumptions of the business plan, policy directions, investment strategy and other material impacts.

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• 3) When the capital adequacy is lower than the standard as required, the relevant departments should report to the board of directors or the Chief Executive Officer, and may start to plan on the resolutions. Any major decisions should first be approved by the board of directors before implementation.

• a) Capital increase.

• b) Adjustment of business strategies.

Capital adequacy ratio of SKIS:

December 31, 2018

	December 31,	December 31,
Item		2018
Eligible capital
Tier 1 capital	$	3,048,551
Tier 2 capital		13,765
Tier 3 capital		-
Minus assets		(380,393)
Total net eligible capital	$	2,681,923
Equivalent amount of operating risk
Equivalent amount of market risk	$	21,256
Equivalent amount of credit risk		458,209
Equivalent amount of operating risk		117,753
Total equivalent amount	$	597,218
Capital adequacy ratio		449%
December 31, 2017
	December 31,
Item		2017
Eligible capital
Tier 1 capital	$	2,816,695
Tier 2 capital		-
Tier 3 capital		-
Minus assets		(388,310)
Total net eligible capital	$	2,428,385
Equivalent amount of operating risk
Equivalent amount of market risk	$	10,417
Equivalent amount of credit risk		538,084
Equivalent amount of operating risk		107,058
Total equivalent amount	$	655,559
Capital adequacy ratio		370%

Note 1: Capital adequacy ratio = Net eligible capital ÷ Equivalent amount of operating risk.

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• Note 2: Net eligible capital = Tier 1 capital + Tier 2 capital + Tier 3 capital - assets.

• Note 3: Equivalent amount of operating risk = Equivalent amount of market risk + Equivalent amount of credit risk + Equivalent amount of operating risk.

48. ACCORDING TO REGULATIONS GOVERNING FUTURES COMMISSION MERCHANTS, FINANCIAL RATIOS OF FUTURES BUSINESS

Shinkong International Securities Co., Ltd. - Futures Division

Law: Regulations Governing Futures Commission Merchants

Rule No.		Formula	December 31, 2	018		December 31, 20	17	Standard	Status of Compliance with Standard
			Formula	Ratio		Formula	Ratio
17		Total equity (Total liabilities - customers’ equity accounts - futures)	$328,690	24.04		212,536	19.40	≧1	Met
			$663,385-$649,712			540,699-529,744
17		Total current assets Total current liabilities	$918,487	1.38		667,775	1.24	≧1	Met
			$663,385			540,699
22		Total equity Capital stock (Note)	$328,690	131.48%		212,536	121.45%	≧60% ≧40%	Met
			$250,000			175,000
22		Adjusted net capital Client and proprietary account	$327,728	259.38%		211,931	152.71 %	≧20% ≧15%	Met
			$126,351			138,777

• Note: Capital stock should compliance the Standards Governing the Establishment of Futures Commission Merchants. Shinkong International Securities Co., Ltd., follow the principle to compute the paid-in capital or allocate exclusively earmarked operating capital.

49. FUTURES BROKERAGE AND DEALING BUSINESS RISK

Customers have to deposit an initial margin at a percentage of the amount of transaction when entering into futures contracts with the futures department of Shinkong International Securities. Customers’ gains or losses result from the leverage on the margin deposits. For the protection of Shinkong International Securities from harm arising from customers’ huge losses, the margin accounts of customers are reevaluated daily on the basis of the market prices of the outstanding futures contracts. When the customers’ margin accounts fall below an agreed level (the maintenance margin), Shinkong International Securities will ask its customers to deposit additional margins immediately. If the customers fail to do so, Shinkong International Securities settles their position by making offsets against their contracts.

50. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees:

• 1) Financing provided to others (Table 7 and 13)

• 2) Endorsements/guarantees provided (Table 1 and 8)

• 3) Marketable securities held (Table 2, 9, and 13)

• 4) Marketable securities acquired or disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital (Table 3 and 10)

• 145 -

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

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

• 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital (Table 4, 11, and 15)

• 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital (Table 5, 12, and 16)

• 9) Trading in derivative instruments (Note 8)

• 10) Intercompany relationships and significant intercompany transactions (Table 17)

• 11) Information on investees (Table 6 and 18)

• b. Information on investments in mainland China

• 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area (Table 19)

• 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses (Table 20):

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

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

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

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

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

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

51. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Specifically, the Group’s reportable segments under IFRS 8 “Operating Segments” were polyester, finance and securities, optronics and others.

• 146 -

Segment Revenues and Results

Revenues Profit before income tax Revenues Profit before income tax			For the Year Ended December 31, 2018	For the Year Ended December 31, 2018	For the Year Ended December 31, 2018
		Polyester $ 32,715,782 $ 3,092,272	Finance and Securities Optronics Others $ 2,728,019 $ 6,873,394 $ 176,732 $ 850,078 $ (268,964) $ (37,678) For the Year Ended December 31, 2017			Total $ 42,493,927 $ 3,635,708
		Polyester $ 28,244,732 $ 1,603,623	Finance and Securities $ 2,434,348 $ 693,110	Optronics $ 5,743,900 $ (668,820)	Others $ 114,363 $ (53,404)	Total $ 36,537,343 $ 1,574,509

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales for the years ended December 31, 2018 and 2017.

Segment profit represented the profit before tax earned by each segment. This was the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

Segment Total Assets

Segment assets Polyester Finance and securities Optronics Others Total segment assets		**December 31 **	**December 31 **
		2018 $ 32,181,651 95,229,627 11,414,277 5,038,771 $ 143,864,326	2017 $ 32,198,425 96,757,789 11,575,697 3,923,900 $ 144,455,811

Geographical Information

The Group operates in two geographical areas - Asia and Europe. The main operating activities related to research, manufacture and sale of polyester chip and polyester film. The revenue and non-current assets in Asia were more than 90% of the total balance of revenue and non-current assets from continuing operations for both 2018 and 2017. Based on materiality consideration, the Group did not distinguish them in detail.

Information about Major Customers

Included in revenue of $42,493,927 thousand and $36,537,343 thousand in 2018 and 2017, respectively, is revenue of approximately $6,667,784 thousand and $4,469,961 thousand which arose from sales to the Group’s largest customer A. No other single customers contributed 10% or more to the Group’s revenue for both 2018 and 2017.

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TABLE 1

SHINKONG SYNTHETIC FIBERS CORPORATION

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

No.	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collateral	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China	Note
		Name	Relationship
0	Shinkong Synthetic Fibers Corporation	Tac Bright Optronics Corp. ShinBright Optronics Corp. Hsingshing Investment Co., Ltd. Shin Kong International Leasing Corp. Hangjhou Huachun Chemical Fiber Co., Ltd. Shinkong Industry (Hangjhou) Co., Ltd.	2 2 2 2 3 3	Note C Note C Note C Note C Note D Note D	$ 1,164,541 730,317 700,000 1,250,000 123,820 30,955	$ 1,142,261 710,317 700,000 1,250,000 122,860 30,715	$ 1,142,260 710,317 700,000 1,050,000 122,860 30,715	$ - - - - - -	3.97 2.47 2.43 4.35 0.43 0.11	Note E Note E Note E Note E Note E Note E	Y Y Y Y Y Y	N N N N N N	N N N N Y Y

Note A: The intercompany transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows:

1. Parent company: 0.

2. Subsidiaries are numbered from 1.

Note B: Relationships between the endorsement/guarantee provider and the guaranteed party can be classified as the following 7 category:

1. A company with which it does business.

2. A company in which the Company directly and indirectly holds more than 50 percent of the voting shares.

3. A company that directly and indirectly holds more than 50 percent of the voting shares in the Company.

4. Companies in which the Company holds, directly or indirectly, 90% or more of the voting shares.

5. The Company fulfills its contractual obligations by providing mutual endorsements/guarantees for another company in the same industry or for joint builders for purposes of undertaking a construction project.

6. All capital contributing shareholders make endorsements/guarantees for their jointly invested company in proportion to their shareholding percentages.

7. Companies in the same industry provide among themselves joint and several security for a performance guarantee of a sales contract for pre-construction homes pursuant to the Consumer Protection Act for each other.

Note C: The limits on domestic endorsement or guarantee amount provided to each guaranteed party = Net equity $28,751,153 thousand x 20% = $5,750,231 thousand.

Note D: The limits on foreign endorsement or guarantee amount provided to each guaranteed party = Net equity $28,751,153 thousand x 30% = $8,625,346 thousand.

Note E: The total amount of endorsement or guarantee that the Company is allowed to provide = Net equity $28,751,153 thousand x 50% = $14,375,577 thousand.

• 148 -

TABLE 2

SHINKONG SYNTHETIC FIBERS CORPORATION

MARKETABLE SECURITIES HELD DECEMBER 31, 2018

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

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			December 31, 2018	December 31, 2018			Note
				Number of Shares		Carrying Amount	Percentage of Ownership (%)		Fair Value
Shinkong Synthetic Fibers Corporation	Mutual funds Shin Kong Global AI New Industry Fund Shares Hsin Ba Ba Corporation Yuanta Financial Holding Co., Ltd. China Steel Corporation The Great Taipei Gas Corporation Corporate bonds of Tac Bright Optronics Corp. Shares Overseas Investment & Development Corp. Li Yu Venture Capital Investment Corp. Global Securities Finance Corporation Shin Kong Chao Feng Ranch & Resort Corporation PC Home Venture Fund Corp Budworth Investment Limited Great Taipei Broadband Co., Ltd. Zacros Taiwan Co., Ltd. Wave-In Communication Inc. Shin Kong iEcofun Corporation Shares Taiwan Cement Corp. Shin Kong Textile Co., Ltd Shin Kong Financial Holding Co., Ltd. Taishin Financial Holding Co., Ltd. Century Development Corporation Universal Venture Capital Investment Corporation O-Bank Co., Ltd. Shin Kong Mitsukoshi Department Store Co., Ltd. Corporate bonds of Tac Bright Optronics Corp.	Related party in substance None None None Related party in substance Subsidiary None None None Related party in substance None None Related party in substance None None None None Related party in substance Related personnel with the Company’s chairman Related personnel with the Company’s chairman None None None Related party in substance Subsidiary	Financial assets at FVTPL - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at amortized cost - current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at amortized cost - non-current	500,000 12 49,957 179,380 20,213,826 39 4,000,000 174,455 2,102,512 200,000 78,540 288,000 2,500,000 10,000,000 1,080,906 800,000 10,510,119 28,378,958 146,221,686 132,649,317 11,814,995 5,600,000 25,762,308 24,401,636 40		$ 4,995 - 772 4,350 584,179 $ 589,301 $ 390,000 $ 43,761 1,717 12,026 30,475 1,247 11,411 13,666 12,855 2,950 7,142 374,160 1,277,053 1,311,609 1,731,074 109,355 80,035 206,098 773,428 $ 6,000,062 $ 400,000	- - - - 3.91 - 4.44 1.49 0.53 2.22 3.03 5.00 1.67 9.44 13.99 17.54 0.21 9.46 1.19 1.27 3.52 4.65 1.07 1.96 -		$ 4,995 - 772 4,350 584,179 $ 589,301 $ 390,000 $ 43,761 1,717 12,026 30,475 1,247 11,411 13,666 12,855 2,950 7,142 374,160 1,277,053 1,311,609 1,731,074 109,355 80,035 206,098 773,428 $ 6,000,062 $ 400,000

• 149 -

TABLE 3

SHINKONG SYNTHETIC FIBERS CORPORATION

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

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

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty (Note)	Relationship (Note)	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Ending	Balance
					Number of Shares	Amount	Number of Shares	Amount	Number of Shares	Amount	Carrying Amount	Gain (Loss) on Disposal	Number of Shares	Amount
Shinkong Synthetic Fibers Corporation	Corporate bonds of Tac Bright Optronics Corp.	Financial assets measured at amortized cost	-	-	64	$ 640,000	40	$ 400,000	25	$ 250,000	$ 250,000	$ -	79	$ 790,000

Note: These two columns need to be filled for marketable securities recognized as investments accounted for using the equity method.

• 150 -

TABLE 4

SHINKONG SYNTHETIC FIBERS CORPORATION

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

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

Buyer	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/ Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
Shinkong Synthetic Fibers Corporation	Thai Shinkong Industry Corporation Ltd. Shinkong Polyester Film Corp., Ltd. Pan Asian Plastics Corp. Shinpont Industry Inc. Hangjhou Huachun Chemical Fiber Co., Ltd.	Investments through subsidiary MAXIMA PACIFIC LTD. Investments accounted for using the equity method Investments accounted for using the equity method Investments accounted for using the equity method Investments through subsidiary SSFC INVESTMENT LTD.	Purchase Sale Sale Sale Sale Sale	$ 1,967,547 (349,494) (1,780,624) (731,108) (248,188) (158,494)	9.30 (1.40) (7.16) (2.94) (1.00) (0.64)	Note Note Note Note Note Note	Note Note Note Note Note Note	Note Note Note Note Note Note	Accounts payable $ (490,907) Accounts receivable 33,786 Accounts receivable 658,561 Other receivable 4,094 Accounts receivable 154,838 Other receivable 41,481 Accounts receivable 61,624 Other receivable 38,996 Accounts receivable 9,995	(26.23) 1.30 25.27 1.62 5.94 16.46 2.36 15.47 0.38

Note: Please refer to Table 17.

• 151 -

TABLE 5

SHINKONG SYNTHETIC FIBERS CORPORATION

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

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

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate		Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Shinkong Synthetic Fibers Corporation	ShinKong Polyester Film Corp., Ltd. Pan Asian Plastics Corp.	Investments accounted for using the equity method Investments accounted for using the equity method	Accounts receivable $ 658,561 Accounts receivable 154,838	3.09 4.87	$ - -	- -	$ 386,397 214,990	$ - -

• 152 -

TABLE 6

SHINKONG SYNTHETIC FIBERS CORPORATION

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

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	As of December 31, 2018	As of December 31, 2018	As of December 31, 2018	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares	%	Carrying Amount
Shinkong Synthetic Fibers Corporation MAXIMA PACIFIC LTD. SSFC INVESTMENT LTD. Dayspring Ltd. Hsingshing Investment Co., Ltd. Hsinshin Asset management Co., Ltd. Tac Bright Optronics Corporation MAXPRO LTD.	Pan Asian Plastics Corp. Hsingshing Investment Co., Ltd. Shinkong Engineering Co., Ltd. Shinpont Industry Inc. Shin Chiun Industrial Co., Ltd. Maxima Pacific Ltd. SSFC Investment Ltd. UBright Optronics Corp. Shinkong Polyester Film Corp., Ltd. Shinkong International Securities Co., Ltd. Tai Jin Investment Co., Ltd. ShinBright Optronics Corp. Tac Bright Optronics Corp. Taipei Star Bank Chi Jian Human-Resource & Management Co., Ltd. Hsinshin Asset Management Co., Ltd. Shin Kong International Leasing Corp. Thai Shinkong Industry Corporation Ltd. FORMOSA VICTORY INTERNATIONAL LTD. Dayspring Ltd. Shinkong Industry (Hangjhou) Co., Ltd. Hangjhong Huachun Chemical Fiber Co., Ltd. Da Chun Universe Investment Co., Ltd. Shinkong Polyester Film Corp., Ltd. Shinkong Polyester Film Corp., Ltd. MAXPRO LTD. LOFO HOLDING GmbH	8F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) 9F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) 9F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) 8F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) 9F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) British Virgin Islands British Virgin Islands No. 21-9, Songshu, Daxi Dist., Taoyuan City 33545, Taiwan (R.O.C.) 8F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) 5F., No. 66-1, Sec. 1, Chongqing S. Rd., Taipei City 100, Taiwan (R.O.C.) 8F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) No. 58, Keyan Rd., Zhunan Township, Miaoli County 350, Taiwan (R.O.C.) No. 58, Keyan Rd., Zhunan Township, Miaoli County 350, Taiwan (R.O.C.) No. 133, Sec. 2, Yanping N. Rd., Taipei City 103, Taiwan (R.O.C.) 2F., No. 248, Sec. 3, Yanping Rd., Pingzhen Dist., Taoyuan City 324, Taiwan (R.O.C.) 8F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) 7F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) Thailand British Virgin Islands Hong Kong China China 5F., No. 65, Jingu Ln., Sec. 2, Changping Rd., Beitun Dist., Taichung City, Taiwan (R.O.C.) 8F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) 8F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) British Virgin Islands Germany	Manufacturing and sales of polyester pellets and polyester preforms Investment, construction of business building, and public housing. Contracting for various projects such as air pollution prevention, piping engineering and machine installation Synthetic fibers manufacturing, textiles wholesale and retail Construction of incinerators Investment Investment Precision chemical materials and mold manufacturing wholesale, etc. Electronic parts and components manufacturing Consignment trading of securities and futures Investment Precision chemical materials and electronic parts and components manufacturing Precision chemical materials - synthetic resin and plastic manufacturing Commercial bank Human resources management consulting Housing and building development for sale and rental Leasing Manufacturing and sales of plastic, polyester film, and PET Investment Investment Manufacturing and sales of plastic, polyester film, and PET Chemical fiber weaving, printing and dyeing Investment Electronic parts and components manufacturing Electronic parts and components manufacturing Investment Investment	$ 363,024 1,318,000 665,095 252,540 715,000 1,128,832 2,161,057 418,575 784,539 1,107,200 3,505 120,000 2,740,086 1,131,438 5,000 50,000 382,000 US$ 37,409 US$ 1,240 US$ 51,082 US$ 17,300 US$ 51,082 9,000 39,272 12,593 1,743,557 1,743,507	$ 363,024 1,318,000 665,095 252,540 715,000 1,128,832 2,161,057 418,575 1,201,000 1,107,200 3,505 200,000 2,740,086 1,131,438 5,000 50,000 300,000 US$ 37,409 US$ 1,240 US$ 51,082 US$ 17,300 US$ 51,082 9,000 60,000 17,568 1,743,557 1,743,507	50,569,938 152,100,000 38,543,818 25,245,000 71,500,000 1 1 38,695,828 68,857,106 114,633,265 1,111,315 12,000,000 263,586,455 83,213,000 Note 5,370,000 38,200,000 117,499,997 1 341,348,521 1 1 Note 3,427,000 823,000 54,204,000 Note	100.00 100.00 100.00 49.99 100.00 100.00 100.00 50.44 80.07 77.98 48.57 100.00 56.86 27.06 100.00 100.00 100.00 90.38 100.00 92.11 100.00 100.00 45.00 3.99 0.96 100.00 100.00	$ 1,334,652 1,664,508 533,800 517,586 696,692 2,782,032 2,015,798 1,454,545 690,737 2,417,822 5,845 (109,844 ) 1,237,367 1,370,564 5,468 54,012 433,310 US$ 69,796 US$ 1,616 RMB 274,158 RMB 129,944 RMB 289,027 7,389 32,240 8,840 2,979 1,658	$ 102,062 9,380 (5,942 ) 334,340 1,087 467,263 43,727 138,060 (128,197 ) 510,000 58 (149,235 ) (275,527 ) 190,189 59 491 31,442 US$ 17,344 US$ (7 ) RMB 10,212 RMB 954 RMB 10,169 (235 ) (128,197 ) (128,197 ) (2,614 ) -	$ 102,062 9,380 (5,942 ) 167,144 1,087 467,263 43,727 69,666 (104,781 ) 397,707 28 (149,235 ) (156,654 ) 51,471 59 491 31,442 - - - - - - - - - -
											(Continued)

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Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	As of December 31, 2018	As of December 31, 2018	As of December 31, 2018	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares	%	Carrying Amount
Shinkong International Securities Co., Ltd. Shin Chiun Industrial Co., Ltd. Pan Asian Plastics Corp. Shinkong Engineering Co., Ltd. Shin Kong International Leasing Corp. UBright Optronics Corp.	Shin Kong Investment Consultant Co., Ltd. Shin Kong Insurance Agent Co., Ltd. Shin Kong Property Insurance Agency Co., Ltd. UBright Optronics Corp. Tac Bright Optronics Corp. Intelligent Medical Big Data Co., Ltd. Shin Kong Technologies Corporation Tai Shin Leasing & Financial Co., Ltd. Hsin Lung Chemical Co., Ltd. UBright Optronics Corp. Shinkong Excelsior Medical Asset Management Co., Ltd. Far Trust International Finance Co., Ltd. Qbright Materials Inc.	Taiwan (R.O.C.) Taiwan (R.O.C) Taiwan (R.O.C.) No. 21-9, Songshu, Daxi Dist., Taoyuan City, Taiwan (R.O.C.) No. 58, Keyan Rd., Zhunan Township, Miaoli County 350, Taiwan (R.O.C.) 10F.-10, No. 48, Sec. 1, Kaifeng St., Zhongzheng Dist., Taipei City, Taiwan (R.O.C.) Taiwan (R.O.C.) 2F.-2, No. 9, Dehui St., Zhongshan Dist., Taipei City, Taiwan (R.O.C.) 8F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) No. 21-9, Songshu, Daxi Dist., Taoyuan City, Taiwan (R.O.C.) 17F.-6, No. 880, Zhongzheng Rd., Zhonghe Dist., New Taipei City, Taiwan (R.O.C.) 19F.-1, No. 33, Sec. 1, Minsheng Rd., Banqiao Dist., New Taipei City, Taiwan (R.O.C.) Taiwan (R.O.C.)	Securities investment consulting Life insurance agent Property insurance agent Precision chemical materials and mold manufacturing wholesale, etc. Precision chemical materials - synthetic resin and plastic manufacturing Consulting, biotechnology research and development service Electronic information software business Leasing Manufacturing of magnetic tapes for recording and video disks and polyester film Precision chemical materials and mold manufacturing wholesale, etc. Medical equipment wholesale Overdue receivables management service Precision chemical materials manufacturing and wholesale	$ 20,000 3,000 2,997 96,317 153,270 25,000 10,000 520,000 202,090 36,906 174,861 211,578 5,250	$ 20,000 3,000 2,997 96,317 153,270 25,000 10,000 520,000 202,090 36,906 167,559 166,578 5,250	2,000,000 2,000,000 1,000,000 1,587,081 10,218,000 2,500,000 1,000,000 22,200,000 2,990,000 1,038,000 17,486,064 16,885,605 5,250,000	100.00 100.00 100.00 2.07 2.20 83.33 100.00 30.00 59.80 1.35 51.00 29.05 75.00	$ 23,293 36,618 20,411 109,530 104,744 1,741 10,528 541,759 328,734 36,669 186,743 224,590 3,373	$ 341 8,707 6,150 138,060 (257,527 ) (1,046 ) 120 128,384 1,345 138,060 19,978 52,317 (224 )	$ - - - - - - - - - - - - -

Note: This is a limited company, the proportion of ownership is calculated based on the amount of capital contribution.

(Concluded)

• 154 -

TABLE 7

SHINKONG SYNTHETIC FIBERS CORPORATION

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

No.	Lender	Borrower	Financial Statement Account	Related Party	Highest Balance for the Period	Ending Balance	Actual Amount Borrowed	Interest Rate (%)	Nature of Financing	Business Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each **Borrower **	Aggregate Financing Limit	Note
													Item	Value
1	Hsingshing Investment Co., Ltd.	Shin Kong International Leasing Corp.	Other receivables	Yes	$ 200,000	$ 200,000	$ -	2.5	2	$ -	Operating capital	$ -	None	$ -	$ 665,803 (Note B)	$ 665,803 (Note B)
2	Shin Kong International Leasing Corp.	Shan Cho Fu Construction and Development Co., Ltd.	Other receivables	No	53,800	53,800	53,800	4.0	2	-	Operating capital	-	Buildings located on Shiyuan Rd., Wenshan Dist.	64,560	173,324 (Note C)	173,324 (Note C)
3	Shin Kong International Leasing Corp.	San Yu Construction Co., Ltd.	Other receivables	No	34,000	34,000	14,000	4.0	2	-	Operating capital	-	Buildings located on Xinsheng N. Rd., Zhongshan Dist., and time deposit pledged as security	42,300	173,324 (Note C)	173,324 (Note C)
4	Shin Kong International Leasing Corp.	Chi Fu Assets Management Co., Ltd.	Other receivables	No	12,000	12,000	12,000	4.0	2	-	Operating capital	-	Buildings located on Xinsheng N. Rd., Zhongshan Dist., and time deposit pledged as security	20,200	173,324 (Note C)	173,324 (Note C)
5	Shin Chiun Industrial Co., Ltd.	Tac Bright Optronics Corp.	Other receivables	Yes	160,000	160,000	55,000	1.5	2	-	Repayments of borrowings	-	None	-	278,677 (Note D)	278,677 (Note D)

Note A: The intercompany transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows:

1. Parent company: 0.

2. Subsidiaries are numbered from 1.

Note B: The Financing limit for each borrower and total financing limit are 40% net equity of Hsingshing Investment Co., Ltd.

Note C: The Financing limit for each borrower and total financing limit are 40% net equity of Shin Kong International Leasing Corp.

Note D: The Financing limit for each borrower and total financing limit are 40% net equity of Shin Chiun Industrial Co., Ltd.

• 155 -

TABLE 8

SHINKONG SYNTHETIC FIBERS CORPORATION

INVESTEE’S ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collateral	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China	Note
		Name	Relationship
1	Hangjhoi Huachun Chemical Fiber Co., Ltd.	Shinkong Industry (Hangjhou) Co., Ltd.	Subsidiaries of the Company	$ 387,758 (At a limit of the endorser’s 30% net equity) (¥ 86,708)	$ 196,812	$ 187,824 (Note B)	$ -	$ -	14.53	$ 646,264 (At a limit of the endorser’s 50% net equity) (¥ 144,513)	-	-	Y

Note A: The intercompany transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows:

1. Parent company: 0.

2. Subsidiaries are numbered from 1.

Note B: Foreign currency as RMB42,000 thousand.

• 156 -

TABLE 9

SHINKONG SYNTHETIC FIBERS CORPORATION

MARKETABLE SECURITIES HELD IN INVESTEES DECEMBER 31, 2018

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

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
Shinkong International Securities Co., Ltd. Taipei Star Bank Maxima Pacific Ltd. Hsingshing Investment Co., Ltd.	Shares Shares Taiwan Futures Exchange Co., Ltd. Mutual funds Notes investments Shares Corporate bonds Financial bonds Government bonds Corporate bonds Financial bonds Government bonds Notes investments Shares Taishin Financial Holding Co., Ltd. Shares Taishin Financial Holding Co., Ltd. Preferred Stock E Shares Asia Cement Corporation The Great Taipei Gas Corporation Shares Taishin Financial Holding Co., Ltd. Shin Kong Textile Co., Ltd.	None None None None None None None None None None None None Related personnel with the Company’s chairman Related personnel with the Company’s chairman None Related party in substance Related personnel with the Company’s chairman Related party in substance	Financial assets at FVTPL - current Financial assets at FVTOCI - non-current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at amortized cost - non-current Financial assets at amortized cost - non-current Financial assets at amortized cost - non-current Financial assets at amortized cost - non-current Financial assets at FVTPL - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current	1,372,251 601,358 1,760,000 450,000 13,546,118 1,450 11 3,000 4,766 53,875 432 8,925 2,376,427 132,420 396 117,962 4,775,222 1,951,507	$ 44,148 40,089 25,158 449,213 333,506 1,462,464 560,232 301,956 5,722,111 5,674,877 2,466,510 8,925,000 31,012 (US$ 1,010) 7,045 (US$ 229) 14 3,409 62,317 87,817	- - - - - - - - - - - - 0.02 - - 0.02 0.04 0.65	$ 44,148 40,089 25,158 449,213 333,506 1,462,464 560,232 301,956 5,722,111 5,674,877 2,466,510 8,925,000 31,012 (US$ 1,010) 7,045 (US$ 229) 14 3,409 62,317 87,817

(Continued)

• 157 -

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
Shin Chiun Industrial Co., Ltd. UBright Optronics Corp. Hsinshin Asset management Co., Ltd. Hsin Lung Chemical Co., Ltd. Shinkong Engineering Co., Ltd.	Shares Cheng Mei Materials Technology Corporation Prince Housing & Development Corp. Full Wang International Development Co., Ltd. Shares Shin Kong Textile Co., Ltd. Mutual funds Shin Kong US Harvest Balanced Schroder 2022 Emerging Market Sovereign Bond Fund Shin Kong Global AI New Industry Fund Foreign corporate bonds Standard Chartered Goldman Sachs Shares Huaku Development Co., Ltd. Shares Wei Chuan Foods Corp. The Great Taipei Gas Corporation Shares Taiwan Shin Kong Security Co., Ltd. Shin Kong Insurance Co., Ltd. Shin Kong Financial Holding Co., Ltd. Taishin Financial Holding Co., Ltd. Shin Kong Textile Co., Ltd. Shinkong Synthetic Fibers Corporation Shin Ching Investment Co., Ltd. Mien Hao Co., Ltd. Shin Yun Co., Ltd. Mutual funds Shin Kong US Harvest Balanced Shares Shin Kong Financial Holding Co., Ltd. Corporate bonds of Tac Bright Optronics Corp	None None None Related party in substance Related party in substance None Related party in substance None None None None Related party in substance Related party in substance Related party in substance Related personnel with the Company’s chairman Related personnel with the Company’s chairman Related party in substance The Company None None None Related party in substance Related personnel with the Company’s chairman Related party	Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - non-current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTPL - current Financial assets at FVTOCI - non-current Financial assets at amortized cost - non-current	10,150 7,359 2,009,017 619,000 5,010,020 10,000 30,000 200,000 300,000 181,560 1,152 48 1,149 733,808 976 358,587 112 4,680,487 360,000 2,970,000 990,000 3,000,000 14,973,909 21	$ 90 75 25,916 27,855 48,046 3,026 (US$ 99) 9,205 (US$ 300) 5,927 (US$ 192) 8,733 (US$ 285) 12,364 26 1 43 25,610 9 4,680 5 54,060 100,071 203,770 18,869 28,830 134,316 210,000	- - - 0.21 - - - - - - - - - 0.23 - - - 0.29 15.52 19.80 19.80 - 0.12 -	$ 90 75 25,916 27,855 48,046 3,026 (US$ 99) 9,205 (US$ 300) 5,927 (US$ 192) 8,733 (US$ 285) 12,364 26 1 43 25,610 9 4,680 5 54,060 100,071 203,770 18,869 28,830 134,316 210,000

(Continued)

• 158 -

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
Pan Asian Plastics Corp. Shin Kong International Leasing Corp.	Shares Taishin Financial Holding Co., Ltd. Fuhbic International Corp. United Capital Fund Shinpont Industry Inc. Mutual funds Cathay No. 2 Real Estate Investment Trust. O-Bank No. 1 Real Estate Investment Trust Millerful No. 1 Real Estate Investment Trust	Related personnel with the Company’s chairman None None Related party None None None	Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current	977,994 236,990 4,850,000 5,000 360,000 100,000 150,000	$ 12,763 3,342 - 103 5,410 856 1,508	- 1.82 7.09 0.01 - - -	$ 12,763 3,342 - 103 5,410 856 1,508

(Concluded)

• 159 -

TABLE 10

SHINKONG SYNTHETIC FIBERS CORPORATION

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

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

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty (Note)	Relationship (Note)	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Ending	Balance
					Number of Shares	Amount	Number of Shares	Amount	Number of Shares	Amount	Carrying Amount	Gain (Loss) on Disposal	Number of Shares	Amount
Shinkong Engineering Co., Ltd.	Corporate bonds of Tac Bright Optronics Corp.	Financial assets measured at amortized cost	-	-	21	$ 210,000	-	$ -	-	$ -	$ -	$ -	21	$ 210,000

Note: Marketable Securities recognized as investments accounted for using the equity method have to disclosure these two column.

• 160 -

TABLE 11

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

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

Buyer	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/ Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
Thai Shinkong Industry Corporation Ltd. Shinkong Polyester Film Corp., Ltd. Pan Asian Plastics Corp. Shinpont Industry Inc. Shinkong Industry (Hangjhou) Co., Ltd. Shinpont Industry Inc. Shinkong Polyester Film Corp., Ltd. UBright Optronics Corp.	Shinkong Synthetic Fibers Corporation Shinkong Synthetic Fibers Corporation Shinkong Synthetic Fibers Corporation Shinkong Synthetic Fibers Corporation Shinkong Synthetic Fibers Corporation Shinkong Synthetic Fibers Corporation INVISTA (Singapore) Pte. Ltd. (INVISTA) INVISTA (Taiwan) Limited Taiwan Branch (H.K.) UBright Optronics Corp. Shinkong Polyester Film Corp., Ltd.	Investments accounted for using the equity method Investments accounted for using the equity method Investments accounted for using the equity method Investments accounted for using the equity method Investments accounted for using the equity method Investments accounted for using the equity method Affiliated company of Shinpont Industry Affiliated company of Shinpont Industry Subsidiaries Subsidiaries	Sale Purchase Purchase Purchase Purchase Purchase Sale Sale Sale Purchase	$ (1,967,547) 349,494 1,780,624 731,108 248,188 158,494 (1,250,873) (120,127) (123,513) 123,513	(29.79) 5.59 82.52 84.23 35.09 16.24 (91.24) 8.76 (4.21) 7.93	Note Note Note Note Note Note According to the contract sign by both parties According to the contract sign by both parties Note Note	Note Note Note Note Note Note According to the contract sign by both parties According to the contract sign by both parties Note Note	Note Note Note Note Note Note According to the contract sign by both parties According to the contract sign by both parties Note Note	Accounts receivable $ 490,907 Accounts payable (33,786) Accounts payable (658,824) Other payable (3,831) Accounts payable (154,982) Other payable (41,337) Accounts payable (61,761) Other payable (38,859) Accounts payable (9,995) Accounts receivable 303,748 Accounts receivable 26,431 Accounts receivable 8,912 Accounts payable (8,912)	43.94 (6.95) (94.14) (4.35) (91.97) (55.16) (83.22) (78.93) (68.17) 91.99 8.01 3.29 (4.98)

Note: Refer to Table 17.

• 161 -

TABLE 12

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

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

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate		Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Thai Shinkong Industry Corporation Ltd. Shinpont Industry Inc.	Shinkong Synthetic Fibers Corporation INVISTA (Singapore) Pte. Ltd. (INVISTA)	Parent Company and its subsidiary Affiliated company of Shinpont Industry Inc.	Accounts receivable from related parties $490,907 Accounts receivable from related parties $303,748	4.26 4.81	$ - -	- -	$ 214,669 297,486	$ - -

• 162 -

TABLE 13

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

No.	Lender	Borrower	Financial Statement Account	Related Party	Highest Balance for the Period	Ending Balance	Actual Borrowing Amount	Interest Rate (%)	Nature of Financing	Business Transaction Amount	Reasons for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each **Borrower **	Aggregate Financing Limit	Note
													Item	Value
1	Shin Kong International Leasing Corp.	Shan Cho Fu Construction and Development Co., Ltd. San Yu Construction Co., Ltd. Chi Fu Assets Management Co., Ltd.	Other receivables Other receivables Other receivables	No No No	$ 53,800 34,000 12,000	$ 53,800 34,000 12,000	$ 53,800 14,000 12,000	4 4 4	2 2 2	$ - - -	Operating capital Operating capital Operating capital	$ - - -	Buildings located on Shiyuan Rd., Wenshan Dist. Buildings located on Xinsheng N. Rd., Zhongshan Dist., and time deposit pledged as security Buildings located on Xinsheng N. Rd., Zhongshan Dist., and time deposit pledged as security	$ 64,560 42,300 20,200	$ 173,324 (Note B) 173,324 (Note B) 173,324 (Note B)	$ 173,324 (Note B) 173,324 (Note B) 173,324 (Note B)

Note A: The intercompany transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows:

1. Issuer: 0.

2. Subsidiaries are numbered from 1.

Note B: The Financing limit for each borrower and total financing limit are 40% of Shin Kong International’s net equity.

• 163 -

TABLE 14

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

CONSOLIDATED COMPANY’S MARKETABLE SECURITIES HELD DECEMBER 31, 2018

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

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
Shinkong Synthetic Fibers Corporation Shinkong International Securities Co., Ltd. Taipei Star Bank Maxima Pacific Ltd. UBright Optronics Corp. Shinkong Engineering Co., Ltd.	Mutual funds Shin Kong Global AI New Industry Fund Shares Mutual funds Notes investments Shares Taishin Financial Holding Co., Ltd. Mutual funds Shin Kong US Harvest Balanced Schroder 2022 Emerging Market Sovereign Bond Fund Shin Kong Global AI New Industry Fund Foreign corporate bonds Standard Chartered Goldman Sachs Mutual funds Shin Kong US Harvest Balanced	Related party in substance None None None Related personnel with the Company’s Chairman Related party in substance None Related party in substance None None Related party in substance	Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current	500,000 1,372,251 1,760,000 450,000 2,376,427 5,010,020 10,000 30,000 200,000 300,000 3,000,000	$ 4,995 44,148 25,158 449,213 31,012 (US$ 1,010) 48,046 3,026 (US$ 99) 9,205 (US$ 300) 5,927 (US$ 192) 8,733 (US$ 285) 28,830	- - - - 0.02 - - - - - -	$ 4,995 44,148 25,158 449,213 31,012 (US$ 1,010) 48,046 3,026 (US$ 99) 9,205 (US$ 300) 5,927 (US$ 192) 8,733 (US$ 285) 28,830

(Continued)

• 164 -

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			December 31, 2018	December 31, 2018	December 31, 2018	Note
				Number of Shares		Carrying Amount	Percentage of Ownership (%)	Fair Value
Shin Kong International Leasing Corp. Shinkong Synthetic Fibers Corporation Taipei Star Bank Maxima Pacific Ltd. Hsingshing Investment Co., Ltd. Shin Chiun Industrial Co., Ltd.	Mutual funds Cathay No. 2 Real Estate Investment Trust. O-Bank No. 1 Real Estate Investment Trust Millerful No. 1 Real Estate Investment Trust Shares Hsin Ba Ba Corporation Yuanta Financial Holding Co., Ltd. China Steel Corporation The Great Taipei Gas Corporation Shares Corporate bonds Financial bonds Government bonds Shares Taishin Financial Holding Co., Ltd. Preferred Stock E Shares Asia Cement Corporation The Great Taipei Gas Corporation Shares Cheng Mei Materials Technology Corporation Prince Housing & Development Corp. Full Wang International Development Co., Ltd.	None None None None None None Related party in substance None None None None Related personnel with the Company’s Chairman None Related party in substance None None None	Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTPL - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current	360,000 100,000 150,000 12 49,957 179,380 20,213,826 13,546,118 1,450 11 3,000 132,420 396 117,962 10,150 7,359 2,009,017	$ 5,410 856 1,508 $ 666,067 $ - 772 4,350 584,179 333,506 1,462,464 560,232 301,956 7,045 (US$ 229) 14 3,409 90 75 25,916		- - - - - - 3.91 - - - - - - - 0.02 - - -	$ 5,410 856 1,508 - 772 4,350 584,179 333,506 1,462,464 560,232 301,956 7,045 (US$ 229) 14 3,409 90 75 25,916

(Continued)

• 165 -

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			December 31, 2018	December 31, 2018		Note
				Number of Shares		Carrying Amount	Percentage of Ownership (%)	Fair Value
Hsinshin Asset management Co., Ltd. Hsin Lung Chemical Co., Ltd. Shinkong Synthetic Fibers Corporation Shinkong Synthetic Fibers Corporation	Shares Huaku Development Co., Ltd. Shares Wei Chuan Foods Corp. The Great Taipei Gas Corporation Shares Taiwan Cement Corp. Shin Kong Textile Co., Ltd. Shares Shin Kong Financial Holding Co., Ltd. Taishin Financial Holding Co., Ltd. Century Development Corporation Universal Venture Capital Investment Corporation O-Bank Co., Ltd. Shin Kong Mitsukoshi Department Store Co., Ltd. Overseas Investment & Development Corp Li Yu Venture Capital Investment Corp. Global Securities Finance Corporation Shin Kong Chao Feng Ranch & Resort Corporation PC Home Venture Fund Corp Budworth Investment Limited Great Taipei Broadband Co., Ltd. Zacros Taiwan Co., Ltd.	None None Related party in substance None Related party in substance Related personnel with the Company’s Chairman Related personnel with the Company’s Chairman None None None Related party in substance None None None Related party in substance None None Related party in substance None	Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current	181,560 1,152 48 10,510,119 28,378,958 146,221,686 132,649,317 11,814,995 5,600,000 25,762,308 24,401,636 4,000,000 174,455 2,102,512 200,000 78,540 288,000 2,500,000 10,000,000		$ 12,364 26 1 $ 3,296,399 $ 374,160 1,277,053 1,311,609 1,731,074 109,355 80,035 206,098 773,428 43,761 1,717 12,026 30,475 1,247 11,411 13,666 12,855	- - - 0.21 9.46 1.19 1.27 3.52 4.65 1.07 1.96 4.44 1.49 0.53 2.22 3.03 5.00 1.67 9.44	$ 12,364 26 1 374,160 1,277,053 1,311,609 1,731,074 109,355 80,035 206,098 773,428 43,761 1,717 12,026 30,475 1,247 11,411 13,666 12,855

(Continued)

• 166 -

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Number of Shares	Carrying Amount	Percentage of Ownership (%)	Fair Value
Shinkong Engineering Co., Ltd. Shin Chiun Industrial Co., Ltd. Hsingshing Investment Co., Ltd. Pan Asian Plastics Corp. Pan Asian Plastics Corp. Hsin Lung Chemical Co., Ltd.	Wave-In Communication Inc. Shin Kong iEcofun Corporation Shares Shin Kong Financial Holding Co., Ltd. Shares Shin Kong Textile Co., Ltd. Shares Taishin Financial Holding Co., Ltd. Shin Kong Textile Co., Ltd. Shares Taishin Financial Holding Co., Ltd. Shares Fuhbic International Corp. United Capital Fund Shares Taiwan Shin Kong Security Co., Ltd. Shin Kong Insurance Co., Ltd. Shin Kong Financial Holding Co., Ltd. Taishin Financial Holding Co., Ltd. Shin Kong Textile Co., Ltd. Shin Ching Investment Co., Ltd.	None None Related personnel with the Company’s Chairman Related party in substance Related personnel with the Company’s Chairman Related party in substance Related personnel with the Company’s Chairman None None Related party in substance Related party in substance Related personnel with the Company’s Chairman Related personnel with the Company’s Chairman Related party in substance None	Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current	1,080,906 800,000 14,973,909 619,000 4,775,222 1,951,507 977,994 236,990 4,850,000 1,149 733,808 976 358,587 112 360,000	$ 2,950 7,142 134,316 27,855 62,317 87,817 12,763 3,342 - 43 25,610 9 4,680 5 100,071	13.99 17.54 0.12 0.21 0.04 0.65 - 1.82 7.09 - 0.23 - - - 15.52	$ 2,950 7,142 134,316 27,855 62,317 87,817 12,763 3,342 - 43 25,610 9 4,680 5 100,071

(Continued)

• 167 -

Holding Company Name	Type and Name of Marketable Securities	Relationship with the Holding Company	Financial Statement Account			December 31, 2018	December 31, 2018		Note
				Number of Shares		Carrying Amount	Percentage of Ownership (%)	Fair Value
Shinkong International Securities Co., Ltd. Taipei Star Bank	Mien Hao Co., Ltd. Shin Yun Co., Ltd. Shares Taiwan Futures Exchange Co., Ltd. Corporate bonds Financial bonds Government bonds Notes investments	None None None None None None None	Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at amortized cost - non-current Financial assets at amortized cost - non-current Financial assets at amortized cost - non-current Financial assets at amortized cost - non-current	2,970,000 990,000 601,358 4,766 53,875 432 8,925		$ 203,770 18,869 40,089 $ 6,721,618 $ 5,722,111 5,674,877 2,466,510 8,925,000 $ 22,788,498	19.80 19.80 - - - - -	$ 203,770 18,869 40,089 5,722,111 5,674,877 2,466,510 8,925,000

(Concluded)

• 168 -

TABLE 15

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

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

Buyer	Related Party	Relationship		Transaction	Details		Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
Shinpont Industry Inc.	INVISTA (Singapore) Pte. Ltd. INVISTA (Taiwan) Limited Taiwan Branch (H.K.)	Affiliated company of Shinpont Industry Inc. Affiliated company of Shinpont Industry Inc.	Sale Sale	$ (1,250,873) (120,127)	(91.24) (8.76)	According to contract signed by both parties According to contract signed by both parties	According to contract signed by both parties According to contract signed by both parties	According to contract signed by both parties According to contract signed by both parties	$ 303,748 26,431	91.99 8.01

• 169 -

TABLE 16

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

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

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate		Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Shinpont Industry Inc.	INVISTA (Singapore) Pte. Ltd.	Affiliated company of Shinpont Industry Inc.	$ 303,748	4.81	$ -	-	$ 297,486	$ -

• 170 -

TABLE 17

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2018 (Amounts in Thousands of New Taiwan Dollars)

No. (Note A)	Investee Company	Counterparty	Relationship (Note B)		Transactions Details	Transactions Details
				Financial Statement Account	Amount	Payment Terms	% of Total Sales or Assets (Note C)
0	SSF	TSI TSI TSI TSI HZC HZC HZC HZC SKI SKI SSFC SPF SPF SPF SPF SPF SPF UBO UBO SPI SPI SPI SPI SPI SPI PAP PAP PAP PAP PAP PAP PAP SKE TBO TBO TBO	1 2 1 2 1 1 2 2 1 1 2 1 1 1 2 1 1 1 1 2 1 1 1 1 1 1 1 2 2 1 1 2 2 1 1 1	Sales revenue Cost of goods sold Accounts receivable Accounts payable Sales revenue Accounts receivable Accounts payable Cost of goods sold Sales revenue Accounts receivable Accrued expense Rental revenue Sales revenue Other revenue Reduction of manufacturing expense Accounts receivable Other receivables Other receivables Other revenue Reduction of manufacturing expense Sales revenue Rental revenue Other revenue Accounts receivable Other receivables Sales revenue Rental revenue Reduction of manufacturing expense Manufacturing expense Accounts receivable Other receivables Accrued expense Manufacturing expense Financial asset at amortized cost Interest receivable Interest revenue	$ 349,494 1,967,547 33,786 490,907 84,053 7,451 23,561 29,024 158,494 9,995 48,628 28,970 1,780,624 9,308 1,003 658,561 4,094 1,153 9,826 203,569 248,188 27,075 21,442 61,624 38,996 731,108 14,803 156,374 10,914 154,838 41,481 1,669 54,000 790,000 3,853 17,975	Refer to Note 4 〃 〃 〃 〃 〃 〃 〃 〃 〃 General 〃 Refer to Note 4 General Refer to Note 5 Refer to Note 4 General 〃 〃 Refer to Note 5 Refer to Note 4 General 〃 Refer to Note 4 General Refer to Note 4 General Refer to Note 5 〃 Refer to Note 4 General 〃 Refer to Note 5 General 〃 〃	- 5 - - - - - - - - - - 4 - - - - - - - 1 - - - - 2 - - - - - - - 1 - -
							(Continued)

• 171 -

No. (Note A)	Investee Company	Counterparty	Relationship (Note B)		Transactions Details	Transactions Details
				Financial Statement Account	Amount	Payment Terms	% of Total Sales or Assets (Note C)
		SKT Taipei Star Bank Taipei Star Bank Taipei Star Bank SKIS SKIL SKIL HAM	2 1 1 2 2 2 2 2	Manufacturing expense Bank deposit Interest revenue Interest expense Professional service fee Rental expense Accrued expense Other expense	$ 7,120 173,749 3,268 5,520 7,175 3,053 4,113 1,560	Refer to Note 5 General 〃 〃 〃 〃 〃 〃	- - - - - - - -
1	SKE	TBO TBO TBO Taipei Star Bank	3 3 3 3	Financial asset at amortized cost Interest revenue Interest receivable Bank deposit	210,000 4,830 1,535 27,801	〃 〃 〃 〃	- - -
2	HZC	SKI SKI SKI	3 3 3	Rental revenue Reduction of manufacturing expense Other receivables	10,944 35,388 3,796	〃 Refer to Note 5 General	- - -
3	SPF	UBO UBO SOC SKI Taipei Star Bank	3 3 3 3 3	Accounts receivable Sales revenue Sales revenue Sales revenue Bank deposit	8,912 123,513 9,778 1,102 1,704	〃 Refer to Note 4 〃 〃 General	- - - - -
4	UBO	Taipei Star Bank	3	Bank deposit	161,506	〃	-
5	TBO	SOC SOC	3 3	Sales revenue Accounts receivable	6,653 1,083	Refer to Note 4 〃	-
6	SOC	UBO UBO TBO	3 3 3	Sales revenue Accounts receivable Processing revenue	38,096 6,676 2,415	〃 〃 〃	- - -
7	SSFC	Dayspring Taipei Star Bank	3 3	Other payables Bank deposit	45,666 73,786	General 〃	- -
8	HSI	SKE SKE SKIL Taipei Star Bank	3 3 3 3	Accounts receivable Service revenue Interest revenue Bank deposit	1,450 16,214 2,048 92,812	〃 〃 〃 〃	- - - -
9	SKIS	Taipei Star Bank Taipei Star Bank Taipei Star Bank	3 3 3	Bank deposit Restricted asset Guarantee deposit for operating	80,805 300,000 5,000	〃 〃 〃	- - -

(Continued)

• 172 -

No. (Note A)	Investee Company	Counterparty	Relationship (Note B)		Transactions Details	Transactions Details
				Financial Statement Account	Amount	Payment Terms	% of Total Sales or Assets (Note C)
10	HAM	Taipei Star Bank	3	Bank deposit	$ 28,079	〃	-
11	SEC	TBO TBO Taipei Star Bank	3 3 3	Other receivables Interest revenue Bank deposit	55,000 1,297 104,603	〃 〃 〃	- - -
12	PAP	Taipei Star Bank	3	Bank deposit	3,437	〃	-
13	SKIL	Taipei Star Bank Taipei Star Bank SKIS	3 3 3	Bank deposit Rental revenue Rental revenue	4,735 1,309 2,920	〃 〃 〃	- - -
14	Maxima	Taipei Star Bank	3	Bank deposit	398,959	〃	-
15	IMBD	Taipei Star Bank	3	Bank deposit	2,999	〃	-
16	CJH	Taipei Star Bank	3	Bank deposit	2,813	〃	-
17	SKT	TBO SPF	3 3	Sales revenue Sales revenue	1,067 2,301	〃 〃	- -

Note A: Significant transactions between the Company and its subsidiaries or among subsidiaries are numbered as follows:

1. Parent company: 0.

2. Subsidiaries are numbered from 1.

Note B: Related party transactions are divided into 3 categories as follows:

1. The Company to subsidiaries.

2. Subsidiaries to the Company.

3. Subsidiaries to subsidiaries.

4. Note C: For assets and liabilities, amount is shown as a percentage to consolidated total assets as of December 31, 2018, while revenues, costs and expenses are shown as a percentage to consolidated revenues for the year ended December 31, 2018.

(Continued)

• 173 -

Note D: Transaction terms of sale and purchase between Shinkong Synthetic Fibers Corporation and its subsidiary are as follow:

Company Name	Item	Terms of Selling	Terms of Purchase	Terms of Collection	Terms of Payments
HZC	Finishedgoods	Market value	Market value	Open account90 days	Open account90 days
	Materials	At cost		Open account90days
TSI	Finishedgoods	Marketvalue	Marketvalue	Open account60days	Open account90days
	Materials	Market value		Open account 7 days
SKI	Finishedgoods	Marketvalue		Open account30days
	Materials	Market value		Open account 30 days
SPF	Finishedgoods	Marketvalue		Open account90-120days
SPI	Finishedgoods	Accordingtoprofessional magazineprice list		Open account 45 days
	Materials	At cost		Open account30days
PAP	Finishedgoods	Accordingto main customers		Open account 120days
	Materials	At cost		Open account90 days

Transaction terms between UBO and related parties are as follow:

Company Name	**Item **	Terms of Selling	Terms of Purchase	**Terms of Collection **	Terms of Payments
SPF	Materials		Marketvalue		Next month 20th after delivery
SOC	Materials		Market value		Open account90 days
Transaction terms between TBO and related parties are as follow:
Company Name	**Item **	Terms of Selling	Terms of Purchase	**Terms of Collection **	Terms of Payments
SOC	Finishedgoods	Marketvalue	Marketvalue	Open account90days	Open account60days

Transaction terms between SOC and related parties are as follow:

Company Name	Item	Terms of Selling	Terms of Purchase	Terms of Collection	Terms of Payments
TBO	Materials	Market value	Market value	Open account 60 days	Open account90 days
SPF	Materials		Marketvalue		open account 120days
UBO	Materials	Market value		Open account90 days

Transaction terms between SPF and related parties are as follow:

Company Name	**Item **	Terms of Selling	Terms of Purchase	**Terms of Collection **	Terms of Payments
SSF	Finishedgoods		Marketvalue		90days -120days
UBO	Finishedgoods	Marketvalue		Next month 20thafter delivery
SOC	Finishedgoods	Market value		Open account 120 days
SKI	Recycled PET	Marketvalue		Open account60days

Note E: Allocation expense for providing Shinkong Synthetic Fibers corporation management service.

(Concluded)

• 174 -

TABLE 18

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	As of	December 31, 2018	December 31, 2018	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares	%	Carrying Amount
Shinkong Synthetic Fibers Corporation Pan Asian Plastics Corp. Hsingshing Investment Co., Ltd. Shin Kong International Leasing Corp. Shin Kong International Leasing Corp.	Tai Jin Investment Co., Ltd. Tai Shin Leasing & Financial Co., Ltd. Da Chun Universe Investment Co., Ltd. Shinkong Excelsior Medical Asset Management Co., Ltd. Far Trust International Finance Co., Ltd.	8F., No. 123, Sec. 2, Nanjing E. Rd., Taipei City 104, Taiwan (R.O.C.) 2F.-2, No. 9, Dehui St., Zhongshan Dist., Taipei City, Taiwan (R.O.C.) 5F., No. 65, Jingu Ln., Sec. 2, Changping Rd., Beitun Dist., Taichung City, Taiwan (R.O.C.) 17F.-6, No. 880, Zhongzheng Rd., Zhonghe Dist., New Taipei City, Taiwan (R.O.C.) 19F.-1, No. 33, Sec. 1, Minsheng Rd., Banqiao Dist., New Taipei City, Taiwan (R.O.C.)	Investment Leasing Investment Medical equipment wholesale Overdue receivables management service	$ 3,505 520,000 9,000 167,559 211,578	$ 3,505 520,000 9,000 167,559 166,578	1,111,315 22,200,000 Note 17,486,064 16,885,605	48.57 30.00 45.00 51.00 29.05	$ 5,845 541,759 7,389 186,743 224,590	$ 58 128,384 235 19,978 52,317	$ 28 35,416 105 10,189 14,044

Note: This is a limited company, the proportion of ownership is calculated based on the amount of capital contribution.

• 175 -

TABLE 19

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

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

Investee Company	Main Businesses and Products	Main Businesses and Products	Paid-in Capital	Paid-in Capital	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2018	Investment Flows	Investment Flows	Accumulated Outward Remittance for Investments from Taiwan as of December 31, 2018	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note B)	Carrying Amount as of December 31, 2018	Accumulated Repatriation of Investment Income as of December 31, 2018	Note
							Outflow	Inflow
Hangjhou Huachun Chemical Fiber Co., Ltd. Shinkong Industry (Hangjhou) Co., Ltd.	Chemical fiber weaving, printing and dyeing Manufacturing and sales of plastic, polyester film, and PET		US$54 million US$17.8 million		Investments through subsidiary SSFC Investment Ltd. Investments through subsidiary SSFC Investment Ltd.	$ 1,642,757 (US$ 51,080) 594,328 (US$ 17,300)	$ - -	$ - -	$ 1,642,757 (US$ 51,080) 594,328 (US$ 17,300)	$ 46,369 4,349	92.11 100.00	$ 42,710 4,349	$ 1,224,842 578,353	$ - 326,702
Accumulated Outward Remittance for Investments in Mainland China as of December 31, 2018		Investment Amounts Authorized by the Investment Commission, MOEA		Upper Limit on the Amount of Investment Stipulated by the Investment Commission, MOEA
$2,237,085 (US$68,380) (Note A)		$1,948,996 (US$66,530)		$17,250,692

Note A: Including US$4,280 thousand premium of machinery equipments from SSFC Investment Ltd., which did not calculated in authorized amounts, and cash remittance of US$240 thousand only to Dayspring Ltd.

Note B: The amounts were calculated based on the financial statements that have been audited.

• 176 -

TABLE 20

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

SIGNIFICANT TRANSACTIONS WITH INVESTEE COMPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD PARTY, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES

FOR THE YEAR ENDED DECEMBER 31, 2018

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

Investee Company	Transaction Type	Purchase/Sale	Purchase/Sale	Price	Transaction Details	Transaction Details	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Unrealized (Gain) Loss	Note
		Amount	%		Payment Terms	Comparison with Normal Transactions	Ending Balance	%
Shinkong Synthetic Fibers Corporation Hangjhou Huachun Chemical Fiber Co., Ltd. Shinkong Industry (Hangjhou) Co., Ltd. Shinkong Polyester Film Corp., Ltd. Shinkong Industry (Hangjhou) Co., Ltd.	Sale Purchase Sale Sale	($84,053) 29,024 (158,493) (1,102)	(0.34) 0.14 (0.64) (0.04)	Note Note Note Note	Note Note Note Note	Note Note Note Note	Accounts receivable $ 7,451 Accounts payable (23,561) Accounts receivable 9,995 Accounts receivable -	0.29 (1.26) 0.38 -	$ 1,192 - 2,755 -

Note: Refer to Table 17.

1. Endorser/guarantor provided with investee companies in Mainland China directly or indirectly through a third party: Please refer to Tables 1 and 8.

2. Financing providing to others with investee companies in Mainland China directly or indirectly through a third party: None.

3. Other transaction that have a material impact on profit or loss or financial condition: None.

4. 177 -