SSFC — Annual Report 2018

Nov 13, 2018

Shinkong Synthetic Fibers Corporation

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

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Shinkong Synthetic Fibers Corporation

Opinion

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

In our opinion, based on our audits and the reports of other auditors (please refer to the Other Matter paragraph, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

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 Financial Statements section of our report. We are independent of the Company 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 financial statements for the year ended December 31, 2018. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The descriptions of the key audit matters of the 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.

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We understood the effectiveness of the following internal control operations:

1. Whether the loss on impairment of inventory was recognized according to the Company’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 the Company 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 impairment of inventory 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(e): Summary of significant accounting policies, Note 5: Critical accounting judgments and key sources of estimation uncertainty and Note 15.

Other Matter

We did not audit some of the investments accounted for using the equity method, which are included in the financial statements of the Company, but such statements were audited by other auditors. Our opinion, insofar as it relates to the amounts included for the investments, is based solely on the report of other auditors. The total assets of the investments was $484,459 thousand as of December 31, 2017 and total share of profit or loss of the investments was $146,344 thousand for the year ended December 31, 2017.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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

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

Auditors’ Responsibilities for the Audit of the Financial Statements

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

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

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

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

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

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

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

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements 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 financial statements are intended only to present the 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 financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying 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 financial statements shall prevail.

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SHINKONG SYNTHETIC FIBERS CORPORATION

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

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4, 6, 31 and 32) Financial assets at fair value through profit or loss - current (Notes 3, 4, 7 and 31) Financial assets at fair value through other comprehensive income - current (Notes 3, 4, 8, 31 and 33) Available-for-sale financial assets - current (Notes 3, 4, 11, 31 and 33) Held-to-maturity financial assets - current (Notes 3, 4, 12 and 31) Financial assets at amortized cost - current (Notes 3, 4, 9, 10 and 31) Notes receivable, net (Notes 3, 4, 14, 31 and 32) Trade receivables, net (Notes 3, 4, 14, 31 and 32) Other receivables (Notes 3, 4, 14, 31 and 32) Inventories (Notes 4, 5 and 15) Prepayments (Notes 19 and 32) Other current assets (Note 19) Total current assets NON-CURRENT ASSETS Financial assets at fair value through other comprehensive income - non-current (Notes 3, 4, 8, 31 and 33) Available-for-sale financial assets - non-current (Notes 3, 4, 11, 31 and 33) Held-to-maturity financial assets - non-current (Notes 3, 4, 12 and 31) Financial assets at amortized cost - non-current (Notes 3, 4, 9, 10 and 31) Financial assets measured at cost - non-current (Notes 3, 4, 13 and 31) Investments accounted for using the equity method (Notes 4, 16, 29 and 32) Property, plant and equipment (Notes 4, 17, 32 and 33) Investment properties (Notes 4, 18 and 33) Deferred tax assets (Notes 4 and 27) Other non-current assets (Note 19) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 4, 20, 31 and 33) Short-term bills payable (Notes 4, 20 and 31) Financial liabilities at fair value through profit or loss - current (Notes 3, 4, 7 and 31) Notes payable (Notes 21 and 31) Trade payables (Notes 21, 31 and 32) Other payables (Notes 22, 31 and 32) Current tax liabilities (Notes 4 and 27) Current portion of long-term borrowings and bonds payable (Notes 4, 20, 31, 32 and 33) Other current liabilities (Note 22) Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 4, 20, 31, 32 and 33) Provisions - non-current (Notes 4, 23 and 24) Deferred tax liabilities (Notes 4 and 27) Guarantee deposits received Total non-current liabilities Total liabilities EQUITY (Notes 4 and 25) Share capital Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Treasury shares Total equity TOTAL		2018 Amount % $ 1,392,522 3 5,648 - 589,301 2 - - - - 390,000 1 63,681 - 2,605,858 6 252,064 1 3,101,992 7 149,155 - 1,474 - 8,551,695 20 6,000,062 14 - - - - 400,000 1 - - 17,104,894 40 7,467,077 18 3,029,337 7 155,949 - 165,175 - 34,322,494 80 $ 42,874,189 100 $ 3,276,797 8 499,978 1 1,924 - - - 1,871,444 4 647,299 2 139,211 - 400,000 1 101,129 - 6,937,782 16 5,669,294 13 445,759 1 1,054,889 3 15,312 - 7,185,254 17 14,123,036 33 16,184,093 38 1,575,677 4 1,082,892 3 2,723,600 6 5,263,773 12 9,070,265 21 1,950,952 4 (29,834) - 28,751,153 67 $ 42,874,189 100		2017
				Amount % $ 1,836,608 4 63 - - - 671,528 2 250,000 1 - - 85,472 - 2,619,494 6 216,313 1 2,014,303 5 200,828 - 647 - 7,895,256 19 - - 6,268,364 15 390,000 1 - - 175,506 1 16,375,494 39 7,663,461 18 3,059,703 7 160,976 - 33,582 - 34,127,086 81 $ 42,022,342 100 $ 2,235,000 5 1,599,721 4 2,846 - 28 - 1,540,148 4 501,256 1 128,099 - 1,053,333 3 66,817 - 7,127,248 17 5,906,007 14 676,294 2 920,751 2 15,111 - 7,518,163 18 14,645,411 35 16,184,093 38 1,575,732 4 986,420 2 2,723,600 6 3,585,801 9 7,295,821 17 2,351,119 6 (29,834) - 27,376,931 65 $ 42,022,342 100

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

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

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SHINKONG SYNTHETIC FIBERS CORPORATION

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

OPERATING REVENUE (Notes 4 and 32) Sales OPERATING COSTS (Notes 15, 17, 26 and 32) Cost of goods sold GROSS PROFIT UNREALIZED GAIN ON TRANSACTIONS WITH SUBSIDIARIES REALIZED GAIN ON TRANSACTIONS WITH SUBSIDIARIES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 26 and 32) Selling and marketing expenses General and administrative expenses Research and development expenses Reversal of expected credit loss Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES (Notes 4, 26, 32 and 35) Other income Other gains and losses Finance costs Share of profit or loss of subsidiaries, associates and joint ventures Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 27) NET PROFIT FOR THE YEAR		2018 Amount % $ 24,885,692 100 22,454,284 90 2,431,408 10 (50,442) - 44,323 - 2,425,289 10 498,746 2 320,899 1 157,905 1 (6,583) - 970,967 4 1,454,322 6 414,535 2 98,805 - (124,913) (1) 924,897 4 1,313,324 5 2,767,646 11 (309,709) (1) 2,457,937 10		2017
				Amount % $ 21,034,161 100 19,321,521 92 1,712,640 8 (33,718) - 46,117 - 1,725,039 8 481,800 2 255,108 1 171,589 1 - - 908,497 4 816,542 4 291,086 1 (126,020) (1) (114,507) - 269,098 1 319,657 1 1,136,199 5 (171,473) (1) 964,726 4 (Continued)

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SHINKONG SYNTHETIC FIBERS CORPORATION

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

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 24, 25 and 27) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Unrealized gain (loss) on investments in equity instruments at fair value through other comprehensive income Share of the other comprehensive income (loss) of subsidiaries, 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 (loss) on available-for-sale financial assets Share of the other comprehensive income (loss) of subsidiaries associates and joint ventures accounted for using the equity method Other comprehensive income (loss) for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR EARNINGS PER SHARE (Note 28) Basic Diluted		2018 Amount % $ (27,007) - (347,137) (2) (31,017) - (2,625) - (407,786) (2) (91,087) - - - (2,311) - (93,398) - (501,184) (2) $ 1,956,753 8 $ 1.52 $ 1.52		2017
				Amount % $ (25,628) - - - (5,579) - 4,357 - (26,850) - (68,974) - 964,920 5 326,388 1 1,222,334 6 1,195,484 6 $ 2,160,210 10 $ 0.60 $ 0.60
		$		$

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

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

(Concluded)

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SHINKONG SYNTHETIC FIBERS CORPORATION

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 Other changes in capital surplus Actual partial acquisitions of interests in subsidiaries Appropriation of 2016 earnings Legal reserve Cash dividends Net profit for the year ended December 31, 2017 Other comprehensive income for the year ended December 31, 2017, net of income tax Total comprehensive income for the year ended December 31, 2017 BALANCE AT DECEMBER 31, 2017 Effect of retrospective application BALANCE AT JANUARY 1, 2018 AS RESTATED Other changes in capital surplus Changes in percentage of ownership interests in subsidiaries Appropriation of 2017 earnings Legal reserve Cash dividends Net profit for the year ended December 31, 2018 Other comprehensive loss for the year ended December 31, 2018, net of income tax Total comprehensive income for the year ended December 31, 2018 Disposals of investments in equity instruments designated as at fair value through other comprehensive income/associates’ disposal of the investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT DECEMBER 31, 2018	Share Capital Share (In Thousand) Amount Capital Surplus 1,618,409 $ 16,184,093 $ 1,575,533 - - 199 - - - - - - - - - - - - - - - 1,618,409 16,184,093 1,575,732 - - - 1,618,409 16,184,093 1,575,732 - - (55) - - - - - - - - - - - - - - - - - - 1,618,409 $ 16,184,093 $ 1,575,677	Retained Earnings Unappropriated Legal Reserve Special Reserve 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 - - (192) 96,472 - (96,472) - - (809,205) - - 2,457,937 - - (20,332) - - 2,437,605 - - (86,150) $ 1,082,892 $ 2,723,600 $ 5,263,773	Other Equity Unrealized Gain (Loss) on Exchange Unrealized Gain Financial Assets Differences on (Loss) on at Fair Value Translating Available-for- Through Other Foreign sale Financial Comprehensive Operations Assets 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)	Total Equity $ 25,621,124 199 - (404,602) 964,726 1,195,484 2,160,210 27,376,931 226,921 27,603,852 (247) - (809,205) 2,457,937 (501,184) 1,956,753 - $ 28,751,153
	Share (In Thousand) 1,618,409 - - - - - - 1,618,409 - 1,618,409 - - - - - - - 1,618,409

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

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

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SHINKONG SYNTHETIC FIBERS CORPORATION

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 Expected credit loss reversed on trade receivables Net (gain) loss on fair value changes of financial assets and liabilities designated as at fair value through profit or loss Finance costs Interest income Dividend income Share of profit of subsidiaries, associates and joint ventures Loss (gain) on disposal of property, plant and equipment Impairment losses recognized on property, plant and equipment Net loss on disposal of financial assets Unrealized gain on the transactions with subsidiaries, associates and joint ventures Realized gain on the transactions with subsidiaries, associates and joint ventures Recognition of provisions Net (gain) loss on foreign currency exchange Impairment loss recognized on financial assets Changes in operating assets and liabilities Financial assets mandatorily classified as at fair value through profit or loss Notes and trade receivables Other receivables Inventories Prepayments Other current assets Notes payable Trade payables Other payables Other current liabilities Provisions Cash generated from operations Interest received Dividend received Interest paid Income tax paid Net cash generated from operating activities	2018 $ 2,767,646 523,301 (6,583) (1,508) 124,913 (34,305) (309,179) (924,897) 16,717 3,295 - 50,442 (44,323) 17,955 (43,173) - (4,999) 39,889 (53,965) (1,087,689) 51,673 (827) (28) 332,553 167,704 34,312 (275,497) 1,343,427 32,760 309,179 (123,217) (142,301) 1,419,848	2017 $ 1,136,199 450,401 - 1,835 114,507 (14,417) (204,020) (269,098) (152) 73,925 8,453 33,718 (46,117) 23,128 70,725 25,301 - (243,963) (14,288) 279,239 (18,104) 684 (360) (341,767) 3,092 (24,898) (99,649) 944,374 12,473 204,020 (114,913) (160,665) 885,289 (Continued)

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SHINKONG SYNTHETIC FIBERS CORPORATION

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

CASH FLOWS FROM INVESTING ACTIVITIES 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 held-to-maturity financial assets Purchase of financial assets measured at cost Proceeds from sale of available-for-sale financial assets Proceeds from sale of debt investments with no active markets Dividends received from subsidiaries and associates Net cash outflow on acquisition of subsidiaries Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease in refundable deposits Proceed from disposal of investment properties (Increase) decrease in other assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Proceeds from (repayments of) short-term bills payable Proceeds from (repayments of) long-term borrowings Increase (decrease) in guarantee deposits received Dividends paid to owners of the Company Net cash generated from (used in) financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) 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 $ 211,355 152 (400,000) 250,000 - - - - 461,030 (202,002) (339,920) - 154 - (131,747) (150,978) 1,044,638 (1,099,743) (890,046) 201 (809,205) (1,754,155) 41,199 (444,086) 1,836,608 $ 1,392,522	2017 $ - - - - (390,000) (4,159) 315,807 1,500 418,343 (100,355) (791,123) 502 7,638 100,000 36,080 (405,767) 485,000 74 379,752 (160) (404,602) 460,064 (66,357) 873,229 963,379 $ 1,836,608

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

(Concluded)

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

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

SHINKONG SYNTHETIC FIBERS CORPORATION

1. GENERAL INFORMATION

Shinkong Synthetic Fibers Corporation (“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, the Company’s paid-in capital had increased to $16,184,093 thousand. The Company 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 financial statements are presented in the Company’s functional currency, the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The 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 Company’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 Company 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 Company’s financial assets and financial liabilities as of January 1, 2018.

			MeasurementCategory	MeasurementCategory	MeasurementCategory	MeasurementCategory	MeasurementCategory				Carrying Amount	Carrying Amount	Carrying Amount	Carrying Amount
Financial Assets		IAS 39					IFRS 9				IAS	39		IFRS 9			Remark
Cash and cash equivalents	Loans and	receivables			Amortized cost					$	1,836,608		$ 1,836,608				c
Derivatives	Held‑for‑trading				Mandatorily at fair			value				63				63	-
					through profit or loss
					(i.e. FVTPL)
Equity securities	Available‑for‑sale				Fair value		through other				7,115,398			7,148,007			a
					comprehensive income
					(i.e. FVTOCI) - equity
					instruments
Debt securities	Held-to-maturity				Amortized cost						640,000			640,000			b
Notes receivable, trade	Loans and	receivables			Amortized cost						2,921,279			2,921,279			c
receivables and other
receivables
		IAS 39
		Carrying								IFRS 9		Retained		Other
		Amount								Carrying		Earnings		Equity
		as of						Amount as of				Effect on		Effect on
	January		1,	Reclassifi-			Remea-		January 1,		January 1,			January 1,
Financial Assets		2018			cations	surements				2018		2018		2018			Remark
FVTPL	$		63	$	-	$	-	$		63	$		-	$		-
FVTOCI
Equity instruments			-
Add: Reclassification from available-for-sale			-		7,115,398		32,609
(IAS 39)
			-		7,115,398		32,609			7,148,007		52,804		(20,195 )			a
Amortized cost
Add: Reclassification from held-to-maturity			-		640,000		-
(IAS 39)
Add: Reclassification from loans and			-		4,757,887		-
receivables (IAS 39)
			-		5,397,887		-			5,397,887			-			-	b, c
Investments accounted for using the equity		16,375,494			-		194,312			16,569,806		179,582			14,730		d
method
	$	16,375,557		$	12,513,285	$	226,921	$		29,115,763	$	232,386		$	(5,465)

• a) The Company 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 $2,095,639 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 $32,609 thousand was recognized in both financial assets at FVTOCI and other equity - unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018.

The Company 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 $52,804 thousand in other equity - unrealized gain (loss) on financial assets at FVTOCI and an increase of $52,804 thousand in retained earnings on January 1, 2018.

• b) 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.

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• c) 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.

• d) As a result of the retrospective application of IFRS 9 by subsidiaries and associates, other equity - unrealized gain (loss) on available-for-sale financial assets of $273,684 thousand was reclassified to other equity - unrealized gain (loss) on financial assets at FVTOCI and there was an increase in investments accounted for using the equity method of $194,312 thousand, an increase/in retained earnings of $179,582 thousand, a decrease in other equity - unrealized gain (loss) on financial assets at FVTOCI of $2,329 thousand and an increase in other equity - unrealized gain (loss) on available-for-sale financial assets of $17,059 thousand on January 1, 2018.

• 2) 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 Company 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.

The Company 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.

• b. 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.

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

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

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 Company 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 Company as lessee

Upon initial application of IFRS 16, the Company will recognize right-of-use assets and lease liabilities for all leases on the 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 statements of comprehensive income, the Company 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 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 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 statements of cash flows. Leased assets and finance lease payables are recognized for contracts classified as finance leases.

The Company 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 Company will apply IAS 36 to all right-of-use assets.

The Company expects to apply the following practical expedients:

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

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

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

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

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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.

The Company as lessor

The Company 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

	Carrying	Carrying	Carrying	Adjustments	Adjusted
	Amount as of			Arising from	Carrying
	December		31,	Initial	Amount as of
		2018		Application	January 1, 2019
Right-of-use assets	$		-	$ 36,774	$ 36,774
Total effect on assets	$		-	$ 36,774	$ 36,774
Lease liabilities - current	$		-	$ 17,999	$ 17,999
Lease liabilities - non-current			-	18,775	18,775
Total effect on liabilities	$		-	$ 36,774	$ 36,774

Except for the above impacts, as of the date the financial statements were authorized for issue, the Company 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 Company’s financial position and financial performance and will disclose these other impacts when the assessment is completed.

• c. 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 Company 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 Company shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

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Except for the above impact, as of the date the financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’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 financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

• b. Basis of preparation

The financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value.

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.

When preparing these parent company only financial statements, the Company used the equity method to account for its investment in subsidiaries, associates and joint ventures. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only financial statements to be the same with the amounts attributable to the owner of the Company in its consolidated financial statements, adjustments arising from the differences in accounting treatment between the parent company only basis and consolidated basis were made to investments accounted for using the equity method, the share of profit or loss of subsidiaries, associates and joint ventures, the share of other comprehensive income of subsidiaries, associates and joint ventures and the related equity items, as appropriate, in these parent company only financial statements.

• 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.

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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, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the financial statements are authorized for issue; and

• 3) Liabilities for which the Company does not have an unconditional right to defer settlement for at least 12 months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

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

• d. Foreign currencies

In preparing the Company’s financial statements, transactions in currencies other than the Company’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.

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 purposes of presenting Company’s financial statements, the functional currencies of the Company (including subsidiaries, associates, joint ventures 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 dollars 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.

e. Inventories

Inventories consist of raw materials, supplies, 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 weighted-average cost on the balance sheet date.

f. Investments in subsidiaries

The Company uses the equity method to account for its investments in subsidiaries.

A subsidiary is an entity (including structured entity) that is controlled by the Company.

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Under the equity method, an investment in a subsidiary is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary. The Company also recognizes the changes in the Company’s share of equity of subsidiaries attributable to the Company.

Changes in the Company’s ownership interest in a subsidiary that do not result in the Company losing control of the subsidiary are equity transactions. The Company recognizes directly in equity any difference between the carrying amount of the investment and the fair value of the consideration paid or received.

When the Company’s share of losses of a subsidiary exceeds its interest in that subsidiary (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 Company’s net investment in the subsidiary), the Company continues recognizing its share of further losses.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of a subsidiary 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 Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.

The Company assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the investee’s financial statements as a whole. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Company recognizes a reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount that would have been recognized (net of amortization or depreciation) had no impairment loss been recognized in prior years. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

When the Company loses control of a subsidiary, it recognizes the investment retained in the former subsidiary at its fair value at the date when control is lost. The difference between the fair value of the retained investment plus any consideration received and the carrying amount of the previous investment at the date when control is lost is recognized as a gain or loss in profit or loss. Besides, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Company had directly disposed of the related assets or liabilities.

Profits or losses resulting from downstream transactions are eliminated in full only in the parent company’s financial statements. Profits and losses resulting from upstream transactions and transactions between subsidiaries are recognized only in the parent company’s financial statements only to the extent of interests in the subsidiaries that are not related to the Company.

g. Investments in associates

An associate is an entity over which the Company has significant influence and which is neither a subsidiary nor an interest in a joint venture.

The Company uses the equity method to account for its investments in associates.

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

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Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of an associate 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 Company’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 the associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the associate. The Company 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 accounted for using the equity method. If the Company’s ownership interest is reduced due to its additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate 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 Company’s share of losses of an associate equals or exceeds its interest in that associate (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 Company’s net investment in the associate), the Company discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Company has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

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 Company discontinues the use of the equity method from the date on which its investment ceases to be an associate. 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 attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required had that associate directly disposed of the related assets or liabilities.

When the Company transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Company’s financial statements only to the extent that interests in the associate are not related to the Company.

h. Property, plant and equipment

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

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.

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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 estimate 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. 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.

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. Impairment of tangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible assets 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 Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

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.

k. Financial instruments

Financial assets and financial liabilities are recognized when the Company 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.

• 20 -

• a) Measurement categories

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost and investments in 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 31.

• 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, note, trade and overdue receivables at amortized cost 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.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset.

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 equity instruments at FVTOCI

On initial recognition, the Company 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.

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

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 asset is held for trading.

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 31.

• ii. Held-to-maturity investments

Corporate bonds, which have credit ratings above a specific credit ratings and which the Company 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 amount of available-for-sale monetary financial assets relating to changes 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 Company’s right to receive the dividends is established.

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 in 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 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.

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iv. Loans and receivables

Loans and receivables (including trade receivables, 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.

b) Impairment of financial assets

2018

The Company 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 Company always recognizes lifetime expected credit losses (i.e. ECLs) for trade receivables and lease receivables. For all other financial instruments, the Company 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 Company 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.

The Company 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 the financial asset, 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 Company’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 assets 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.

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For a financial assets 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 asset 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.

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 assets 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 the 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 receivable 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 expect for uncollectible trade receivables and overdue receivables that are written off against the allowance account.

c) Derecognition of financial assets

The Company 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

• 24 -

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.

• 2) Equity instruments

Debt and equity instruments issued by the Company 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 the Company are recognized at the proceeds received, net of direct issue costs.

The 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 situations, all financial liabilities are measured at amortized cost using the effective interest method:

• i. 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 such financial liability.

Fair value is determined in the manner described in Note 31.

• ii. Financial guarantee contracts

2018

Financial guarantee contracts issued by the Company that are not designated as at FVTPL are subsequently measured at the higher of:

• i) The amount of the loss allowance reflecting expected credit losses; and

• ii) The amount initially recognized less, where appropriate, the cumulative amount of amortization recognized in accordance with the revenue recognition policies.

2017

Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of the best estimate of the obligation under the contract and the amount initially recognized less the cumulative amortization recognized.

• 25 -

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 Company enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, including foreign exchange forward contracts and cross currency swaps.

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 hedging relationship. When the fair value of a derivative financial instrument is positive, the derivative is recognized as a financial asset; when the fair value of a derivative financial instrument is negative, the derivative is recognized as a financial liability.

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.

• l. Provisions

Provisions 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.

m. Revenue recognition

2018

The Company 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 Company 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 Company 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.

• 26 -

• 2) Dividend and interest income

Dividend income from 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 the Company 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 Company 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.

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. Allowance 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.

• 1) Revenue from the sale of goods

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

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

• b) The Company 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 Company; and

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

• 2) Dividend and interest income

Dividend income from 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 the Company 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 Company 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.

• n. Leasing

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

• 1) The Company as lessor

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

• 27 -

• 2) The Company as lessee

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

• o. Borrowing costs

Borrowing costs directly attributable to the 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.

• p. Government grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching 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 Company recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company 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 Company with no future related costs are recognized in profit or loss in the period in which they become receivable.

• q. 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 service.

• 2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered service 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 liability (asset) 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.

• 28 -

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Company’s defined benefit plan. 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.

r. 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, except where the Company 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 asset 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 Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred taxes for the year

Current and deferred tax 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. Where current tax or deferred tax arises from the initial accounting for the acquisition of a subsidiary, the tax effect is included in the accounting for the investments in the subsidiaries.

• 29 -

s. Treasury stock

When the Company acquires its outstanding shares that have not been disposed or retired, treasury stock is stated at cost and shown as a deduction in stockholders’ equity. When treasury shares are sold, if the selling price is above the book value, the difference should be credited to the capital surplus - treasury stock transactions. If the selling price is below the book value, the difference 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 account 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.

The Company accounts for its stock held by subsidiaries as treasury stock.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company’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.

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 Foreign currency demand deposits Checking accounts Demand deposits Cash equivalents (investments with original maturities not exceeding 3 months) Time deposits Repurchase agreements collateralized by bonds		December 31	December 31
		2018 $ 929 881,409 287,306 6,562 153,575 62,741 $ 1,392,522	2017 $ 745 1,405,066 138,937 23,147 148,800 119,913 $ 1,836,608

• 30 -

The market rate intervals for bank deposits and repurchase agreements collateralized by bonds at the end of reporting period were 0.001%-3.10% and 0.001%-1.75% as of December 31, 2018 and 2017.

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Financial assets held for trading Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts (a) Financial assets mandatorily classified as at FVTPL Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts (a) Non-derivative financial assets Mutual funds Financial liabilities at FVTPL-current Financial liabilities held for trading Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts (a) Cross-currency swap contracts (b)		December	31
		2018 $ - 653 4,995 $ 5,648 $ 354 1,570 $ 1,924	2017 $ 63 - - $ - $ 2,846 - $ 2,846

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	2019.01.04-2019.01.18	USD3,500/NTD107,711
Sell			EUR/NTD	2019.01.25-2019.04.10	EUR383/NTD13483
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	2019.05.08	EUR1,900/NTD66,637
December	31,	2017
Sell			USD/NTD	2018.01.05-2018.01.12	USD1,500/NTD44,928
Sell			EUR/NTD	2018.01.05-2018.04.11	EUR1,836/NTD65,423
Buy			NTD/JPY	2018.01.05-2018.03.06	JPY194,160/NTD51,539
Buy			NTD/USD	2018.01.12-2018.01.26	USD19,000/NTD568,584
Buy			NTD/CNY	2018.01.19	CNY5,000/NTD22,573

• 31 -

The Company entered into foreign exchange forward contracts to manage exposures to exchange rate fluctuations of foreign currency denominated assets and liabilities.

• b. At the end of the reporting period, outstanding cross-currency swap contracts not under hedge accounting were as follows:

		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 Company did not enter into any cross-currency swap contracts during 2017.

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

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

	December 31,	December 31,
		2018
Current
Investments in equity instruments at FVTOCI	$	589,301
Non-current
Investments in equity instruments at FVTOCI	$	6,000,062
Investments in equity instruments at FVTOCI
	December 31,
		2018
Current
Domestic investments
Listed shares and emerging market shares	$	589,301
Non-current
Domestic investments
Listed shares and emerging market shares	$	4,899,994
Unlisted shares		1,088,657
Foreign investments
Unlisted shares		11,411
	$	6,000,062

• 32 -

These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes. Refer to Table 2 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 Company’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 13 for information relating to their reclassification and comparative information for 2017.

During 2018, the Company sold its shares in domestic investments in order to manage credit concentration risk. The sold shares had a fair value of $211,355 thousand and the Company transferred a loss of $85,832 thousand from other equity to retained earnings.

Refer to Note 33 for information relating to investments in equity instruments at FVTOCI pledged as security.

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

	December 31,
	2018
Current
Domestic investments
Corporate bonds - Tac Bright Optronics Corporation (a)	$ 390,000
Non-current
Domestic investments
Corporate bonds - Tac Bright Optronics Corporation (a)	$ 400,000

• a. The bonds were classified as held-to-maturity financial assets under IAS 39. Refer to Notes 3 and 12 for information relating to their reclassification and comparative information for 2017.

• b. In January 2018, November 2018, and December 2018, the Company bought 2-year corporate bonds issued by Tac Bright Optronics Corp. with face values of $150,000 thousand, $100,000 thousand, and $150,000 thousand, respectively, all of which have a coupon rate of 2.3%.

• c. Refer to Note 10 for information relating to their credit risk management and impairment.

10. CREDIT RISK MANAGEMENT FOR INVESTMENTS IN DEBT INSTRUMENTS - 2018

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

December 31, 2018
	At Amortized
	Cost
Gross carrying amount	$ 790,000
Less: Allowance for impairment loss	-
Amortized cost	$ 790,000

• 33 -

The Company continuously tracks and monitors the changes in credit risk of its debt investments, and at the same time reviews changes in bond yields and other public information and makes an assessment on whether there has been a significant increase in credit risk since initial recognition.

The Company considers the current financial condition of debtors and industry forecasts to estimate 12-month or lifetime expected credit losses. The Company’s current credit risk grading framework comprises the following categories:

Basis for Recognizing Category Description Expected Credit Losses Expected Loss Rate Performing The counterparty has a low risk of default and a strong capacity to meet contractual cash flows 12m ECLs 0.00%	Gross Carrying Amount at December 31, 2018
	At Amortized Cost $ 790,000

11. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

	December 31,	December 31,
		2017
Current
Domestic investments
Listed shares and emerging market shares	$	671,528
Non-current
Domestic investments
Listed shares and emerging market shares	$	5,197,196
Unlisted shares		1,071,168
	$	6,268,364

Refer to Note 33 for information relating to available-for-sale financial assets pledged as security.

12. HELD-TO-MATURITY FINANCIAL ASSETS-2017

	December 31,
	2017
Current
Domestic investments
Corporate bonds - Tac Bright Optronics Corporation	$ 250,000
Non-current
Domestic investments
Corporate bonds - Tac Bright Optronics Corporation	$ 390,000

• 34 -

In November 2016, December 2016, March 2017, June 2017 and September 2017, the Company bought 2-year corporate bonds issued by Tac Bright Optronics Corporation with a coupon rate of 2.3%, at par values of $100,000 thousand, $150,000 thousand, $40,000 thousand, $100,000 thousand and $250,000 thousand, respectively.

13. FINANCIAL ASSETS MEASURED AT COST-2017

	December 31,
	2017
Non-current
Domestic unlisted ordinary shares	$ 175,506
Overseas unlisted ordinary shares	-
	$ 175,506
Classified according to financial asset measurement categories
Available-for-sale financial assets	$ 175,506
Financial assets at FVTPL	-
	$ 175,506

Management believed that the above unlisted equity investments held by the Company 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 Company evaluated the above unlisted equity investments and recognized an impairment loss of $25,301 thousand on financial asset for the year ended December 31, 2017.

14. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

Notes receivable At amortized cost Gross carrying amount Less: Allowance for impairment loss Notes receivable - operating Notes receivable - non-operating		December 31	December 31
		2018 $ 63,681 - $ 63,681 $ 63,681 - $ 63,681	2017 $ 85,472 - $ 85,472 $ 85,472 - $ 85,472 (Continued)

• 35 -

Trade receivables At amortized cost Gross carrying amount Less: Allowance for impairment loss Other receivables Others Trade Receivables In 2018		**December 31 **	**December 31 **
		2018 $ 2,639,342 (33,484) $ 2,605,858 $ 252,064	2017 $ 2,658,361 (38,867) $ 2,619,494 $ 216,313 (Concluded)

Credit periods are typically provided in the Company’s sales agreements. Before accepting any new customer, the Company 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 Company 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 Company 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 Company’s credit risk was significantly reduced.

The Company 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 forecast direction of economic conditions at the reporting date.

The Company 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 Company continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

• 36 -

The following table details the loss allowance of trade receivables based on the Company’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 Less than 1% 4% 15% 50% 100% Gross carrying amount $ 2,463,513 $ 175,340 $ 489 $ - $ - Loss allowance (Lifetime ECLs) (26,397) (7,014) (73) - - Amortized cost $ 2,437,116 $ 168,326 $ 416 $ - $ -	Total - $ 2,639,342 (33,484) $ 2,605,858

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 Less: Net remeasurement of loss allowance Balance at December 31, 2018 The movements of the loss allowance of overdue 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 Less: Net remeasurement of loss allowance Balance at December 31, 2018

2018 $ 38,867 - 38,867 (5,383) $ 33,484 2018 $ 70,688 - 70,688 (1,200) $ 69,488

In 2017

The Company applied the same credit policy in 2018 and 2017. In determining the recoverability of a trade receivable, the Company 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 clients, the Company assesses the potential customer’s credit quality and defines its credit limits. Limits and scores attributed to customers are reviewed periodically.

The Company did not have receivables that were past due but not impaired at the end of the reporting period.

• 37 -

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

Individually Assessed for Impairment Balance at January 2017 $ - Add: Impairment losses recognized on receivables - Balance at December 31, 2017 $ - 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)		Collectively Assessed for Impairment $ 38,437 430 $ 38,867 December	Collectively Assessed for Impairment $ 38,437 430 $ 38,867 December	Total $ 38,437 430 $ 38,867 31
		2018 $ 2,260,440 370,740 8,162 - - $ 2,639,342	2017 $ 2,305,913 344,779 7,669 - - $ 2,658,361

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

15. INVENTORIES

Finished goods Work in progress Raw materials Semi-finished goods		December 31	December 31
		2018 $ 2,070,430 418,997 612,531 34 $ 3,101,992	2017 $ 1,360,680 233,069 420,540 14 $ 2,014,303

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 was $22,454,284 thousand and $19,321,521 thousand, respectively.

As of December 31, 2018 and 2017, the allowance for write-down of inventories was $156,028 thousand and $157,292 thousand, respectively.

• 38 -

16. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in subsidiaries Investments in associates		December 31	December 31
		2018 $ 17,099,049 5,845 $ 17,104,894	2017 $ 16,369,618 5,876 $ 16,375,494

a. Investments in subsidiaries

Listed companies UBright Optronics Corp. Unlisted companies Pan Asian Plastics Corp. Hsingshing Investment Co., Ltd. Shinkong Engineering Co., Ltd. Shinpont Industry Inc. Shin Chiun Industrial Co., Ltd. (Note 3) Maxima Pacific Ltd. SSFC Investment Ltd. Shinkong Polyester Film Co., Ltd. Shinkong International Securities 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. Transferred to treasury stock	December 31	December 31	December 31	December 31
	2018		2017 Proportion of Ownership and Voting Rights % Carrying Amount 50.44 $ 1,414,649 100.00 1,158,628 100.00 1,656,328 100.00 563,229 49.99 484,459 100.00 690,795 100.00 2,366,523 100.00 2,007,391 80.07 804,355 77.98 2,213,164 100.00 (80,591) 56.86 1,394,038 27.06 1,343,841 100.00 6,746 100.00 53,757 100.00 320,435 16,397,747 (28,129) $ 16,369,618
	Proportion of Ownership and Voting Rights % 50.44 100.00 100.00 100.00 49.99 100.00 100.00 100.00 80.07 77.98 100.00 56.86 27.06 100.00 100.00 100.00	Carrying Amount $ 1,454,545 1,366,980 1,664,508 533,800 517,586 696,692 2,782,032 2,015,798 690,737 2,417,822 (109,844) 1,237,367 1,370,564 5,468 54,012 433,310 17,131,377 (32,328) $ 17,099,049		Carrying Amount $ 1,414,649 1,158,628 1,656,328 563,229 484,459 690,795 2,366,523 2,007,391 804,355 2,213,164 (80,591) 1,394,038 1,343,841 6,746 53,757 320,435 16,397,747 (28,129) $ 16,369,618

Note 1: Refer to Note 25 for the Company’s shares held by its subsidiaries are regarded as treasury stock.

• 39 -

• Note 2: Except for Chi Jian Human-Resource & Management 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.

• Note 3: On January 24, 2017, Shinkong Envirotech Corp. had amended its company name registration to Shin Chiun Industrial Co., Ltd.

• Note 4: Refer to Table 6 for the details of the subsidiaries indirectly held by the Company.

• b. Investments in associates

Unlisted company Tai Jin Investment Co., Ltd.		December 31	December 31
	2018	Carrying Amount $ 5,845	2017
	Proportion of Ownership and Voting Rights % 48.57		Proportion of Ownership and Voting Rights % 48.57	Carrying Amount $ 5,876

The summarized financial information below represents the amounts shown in the associates’ financial statements prepared in accordance with IFRSs adjusted by the Company for equity accounting purposes:

The Company’s share of: Gain (loss) for the year Other comprehensive income Total comprehensive income for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 28 (59) $ (31)	2017 $ (78) 196 $ 118

The investment 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 not 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.

• 40 -

17. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Reclassified Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Disposals Impairment loss Depreciation expense Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Disposals Reclassified Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Impairment loss Depreciation expense Balance at December 31, 2018 Carrying amounts at December 31, 2018	Freehold Land $ 3,573,128 - - - $ 3,573,128 $ - - - - $ - $ 3,573,128 $ 3,573,128 - - - $ 3,573,128 $ - - - - $ - $ 3,573,128	Buildings $ 2,938,811 - - 134 $ 2,938,945 $ 1,970,669 - 3,295 56,460 $ 2,030,424 $ 908,521 $ 2,938,945 - - 311,899 $ 3,250,844 $ 2,030,424 - 3,295 68,267 $ 2,101,986 $ 1,148,858	Machinery Equipment Transportation Equipment $ 11,585,436 $ 58,984 - - (87,496 ) (4,680 ) 131,977 6,428 $ 11,629,917 $ 60,732 $ 9,429,239 $ 30,231 (87,146 ) (4,680 ) 70,630 - 338,895 7,115 $ 9,751,618 $ 32,666 $ 1,878,299 $ 28,066 $ 11,629,917 $ 60,732 - - (846,369 ) (1,126 ) 1,222,422 5,134 $ 12,005,970 $ 64,740 $ 9,751,618 $ 32,666 (829,652 ) (1,126 ) - - 412,483 7,408 $ 9,334,449 $ 38,948 $ 2,671,521 $ 25,792	Other Equipment $ 66,471 - - 603 $ 67,074 $ 63,018 - - 2,947 $ 65,965 $ 1,109 $ 67,074 - (15,373 ) - $ 51,701 $ 65,965 (15,373 ) - 857 $ 51,449 $ 252	Office Equipment $ 39,749 - - - $ 39,749 $ 21,495 - - 4,164 $ 25,659 $ 14,090 $ 39,749 - (7,623 ) - $ 32,126 $ 25,659 (7,623 ) - 3,920 $ 21,956 $ 10,170	Property under Construction $ 622,198 777,688 - (139,638) $ 1,260,248 $ - - - - $ - $ 1,260,248 $ 1,260,248 309,246 - (1,532,138) $ 37,356 $ - - - - $ - $ 37,356	Total $ 18,884,777 777,688 (92,176 ) (496) $ 19,569,793 $ 11,514,652 (91,826 ) 73,925 409,581 $ 11,906,332 $ 7,663,461 $ 19,569,793 309,246 (870,491 ) 7,317 $ 19,015,865 $ 11,906,332 (853,774 ) 3,295 492,935 $ 11,548,788 $ 7,467,077

• 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 4-17 years Transportation equipment 3-6 years Office equipment 3-16 years Other equipment 3-15 years

• b. 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 Company 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 $3,295 thousand and $73,925 thousand, which was recognized in cost of goods sold for the years ended December 31, 2018 and 2017, respectively. The Company 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.

• c. Property, plant and equipment pledged as collateral for bank borrowings is set out in Note 33.

• 41 -

18. INVESTMENT PROPERTIES

Cost Balance at January 1, 2017 Disposals Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Disposals Depreciation expenses Balance at December 31, 2017 Carrying amount at December 31, 2017 Cost Balance at January 1, 2018 Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Depreciation expenses Balance at December 31, 2018 Carrying amount at December 31, 2017

Investment Properties $ 3,750,350 (196,235) $ 3,554,115 $ (557,506) 103,914 (40,820) $ (494,412) $ 3,059,703 $ 3,554,115 $ 3,554,115 $ (494,412) (30,366) $ (524,778) $ 3,029,337

Investment properties are depreciated using the straight-line method over their estimated useful lives of 9 to 46 years.

The fair value of the Company’s investment properties as of December 31, 2018 and 2017 was $3,098,703 thousand and $3,375,905 thousand, respectively. Management of the Company 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 Company’s investment property was held under freehold interests. The investment properties pledged as collateral for bank borrowing are set out in Note 33.

• 42 -

19. OTHER ASSETS

Current Prepayments to suppliers Others Noncurrent Prepayments for equipment Overdue receivables Loss allowance of overdue receivables Refundable deposits Others		December 31	December 31
		2018 $ 147,921 2,708 $ 150,629 $ 135,250 69,488 (69,488) 24,241 5,684 $ 165,175	2017 $ 199,228 2,247 $ 201,475 $ - 70,688 (70,688) 24,395 9,187 $ 33,582

20. BORROWINGS

a. Short-term borrowings

Secured borrowings Bank loans Unsecured borrowings Line of credit borrowings		December 31	December 31
		2018 $ 500,000 2,776,797 $ 3,276,797	2017 $ 300,000 1,935,000 $ 2,235,000

The range of weighted average effective interest rate on bank loans was 0.8538%-3.6% and 0.8542%-1.02% 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
		2018 $ 500,000 (22) $ 499,978	2017 $ 1,600,000 (279) $ 1,599,721

• 43 -

Outstanding short-term bills payable were as follows:

December 31, 2018

Promissory Institution China Bills Finance Corporation Taiwan Cooperative Bills Finance Corporation	Nominal Amount $ 300,000 200,000 $ 500,000	Discount Amount $ 7 15 $ 22	Carrying Amount Interest Rate Collateral $ 299,993 0.49%-0.76% None 199,985 0.49%-0.76% None $ 499,978

December 31, 2017

Promissory Institution Nominal Amount Grand Bill Finance Corporation $ 100,000 Ta Ching Bills Finance Corporation 200,000 China Bills Finance Corporation 300,000 Mega Bills Finance Corporation 300,000 Taiwan Cooperative Bills Finance Corporation 200,000 Taiwan Finance Corporation 200,000 International Bills Finance Corporation 300,000 $ 1,600,000 Long-term borrowings Taiwan Bank JihSun Bank KGI Bank First Bank Bank SinoPac Mega Bank Far Eastern International Bank Fubon Bank Taipei Star Bank Bangkok Bank The Export-Import Bank of the ROC Taiwan Business Bank Mizuho Bank	Discount Amount $ 10 50 30 22 68 70 29 $ 279	Carrying Amount Interest Rate Collateral $ 99,990 0.45%-0.75% None 199,950 0.45%-0.75% None 299,970 0.45%-0.75% None 299,978 0.45%-0.75% None 199,932 0.45%-0.75% None 199,930 0.45%-0.75% None 299,971 0.45%-0.75% None $ 1,599,721 December 31 2018 2017 $ 1,950,000 $ 1,950,000 - 400,000 1,170,000 1,200,000 - 50,000 550,000 350,000 200,000 - 300,000 300,000 - 90,300 - 500,000 400,000 400,000 - 220,000 100,000 - 600,000 - (Continued)	Carrying Amount Interest Rate Collateral $ 99,990 0.45%-0.75% None 199,950 0.45%-0.75% None 299,970 0.45%-0.75% None 299,978 0.45%-0.75% None 199,932 0.45%-0.75% None 199,930 0.45%-0.75% None 299,971 0.45%-0.75% None $ 1,599,721 December 31 2018 2017 $ 1,950,000 $ 1,950,000 - 400,000 1,170,000 1,200,000 - 50,000 550,000 350,000 200,000 - 300,000 300,000 - 90,300 - 500,000 400,000 400,000 - 220,000 100,000 - 600,000 - (Continued)
			2018 2017 $ 1,950,000 $ 1,950,000 - 400,000 1,170,000 1,200,000 - 50,000 550,000 350,000 200,000 - 300,000 300,000 - 90,300 - 500,000 400,000 400,000 - 220,000 100,000 - 600,000 - (Continued)

c. Long-term borrowings

• 44 -

Mizuho Bank commercial paper (Syndicated Loan) Fubon Bank (Syndicated Loan) Less: Current portions Less: Unamortized discounts on commercial papers Long-term borrowings		**December 31 **	**December 31 **
		2018 $ 800,000 - 6,070,000 (400,000) (706) $ 5,669,294	2017 $ 800,000 700,000 6,960,300 (1,053,333) (960) $ 5,906,007 (Concluded)

As of December 31, 2018 and 2017, the weighted average effective interest rate range of the bank borrowings was 0.6183%-1.46% and 0.6133%-1.7895% per annum, respectively.

Refer to Note 33 for information relating to assets pledged as security for bank borrowings.

21. NOTES PAYABLE AND TRADE PAYABLES

Notes payable Operating Trade payables Operating		December 31	December 31
		2018 $ - $ 1,871,444	2017 $ 28 $ 1,540,148

22. OTHER LIABILITIES

Current Other payables Payables for purchase of equipment Payables for salaries or bonuses Payables for annual leave Payables for utilities Others Other liabilities Advance receipts Others		**December 31 **	**December 31 **
		2018 $ 75,331 368,220 17,765 69,595 116,388 $ 647,299 $ 95,275 5,854 $ 101,129	2017 $ 98,688 200,062 12,099 67,501 122,906 $ 501,256 $ 61,838 4,979 $ 66,817

• 45 -

23. PROVISIONS

Non-current Employee retirement benefits		December 31	December 31
		2018 $ 445,759	2017 $ 676,294

Refer to Note 24 for information relating to employee retirement benefits.

24. RETIREMENT BENEFIT PLANS

a. Defined contribution plan

The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, the Company makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

b. Defined benefit plans

The defined benefit plan adopted by the Company 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 contributes 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 Company 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 Company 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 Company has no right to influence the investment policy and strategy.

The amounts included in the balance sheets in respect of the Company’s defined benefit plan were as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities		December 31	December 31
		2018 $ 912,205 (466,446) $ 445,759	2017 $ 905,917 (229,623) $ 676,294

• 46 -

Movements in net defined benefit liabilities were as follows:

	Present Value		Net Defined
	of the Defined		Benefit
	Benefit	Fair Value of	Liabilities
	Obligation	the Plan Assets	(Assets)
Balance at January 1, 2017	$ 929,644	$ (198,100)	$ 731,544
Service cost
Current service cost	10,106	-	10,106
Net interest expense (income)	16,549	(3,527)	13,022
Recognized in profit or loss	26,655	(3,527)	23,128
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	1,363	1,363
Actuarial (gain) loss
Changes in financial assumptions	16,476	-	16,476
Experience adjustments	7,789	-	7,789
Recognized in other comprehensive income	24,265	1,363	25,628
Contributions from the employer	-	(92,138)	(92,138)
Benefits paid	(74,647)	62,779	(11,868)
Balance at December 31, 2017	$ 905,917	$ (229,623)	$ 676,294
Service cost
Current service cost	8,098	-	8,098
Net interest expense (income)	13,204	(3,347)	9,857
Recognized in profit or loss	21,302	(3,347)	17,955
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	(7,534)	(7,534)
Actuarial (gain) loss
Changes in financial assumptions	23,614	-	23,614
Experience adjustments	10,927	-	10,927
Recognized in other comprehensive income	34,541	(7,534)	27,007
Contributions from the employer	-	(269,525)	(269,525)
Benefits paid	(49,555)	43,583	(5,972)
Balance at December 31, 2018	$ 912,205	$ (466,446)	$ 445,759

Through the defined benefit plans under the Labor Standards Law, the Company 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.

• 47 -

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 1.189% 1.4575% 0.75% 0.75%

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 $ (22,611) $ 23,453 $ 23,266 $ (22,539)	2017 $ (23,261) $ 24,148 $ 24,016 $ (23,242)

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 $ 37,243 $ 34,706 10.31 years 10.71 years

25. 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$10.00, carry one vote per share and carry a right to dividends.

• 48 -

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 a deficit only Changes in percentage of ownership interests 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 once a year).

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

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 26-f.

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 deficit. 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.

• 49 -

The appropriations of earnings for 2017 and 2016 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 reserves

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.

• 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 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 on retrospective application of IFRS 9 (2,352,264) Balance at January 1, 2018 per IFRS 9 $ -	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) $ -

• 50 -

3) Unrealized gain (loss) on financial assets at FVTOCI

	For the Year	For the Year
		Ended
	December 31,
		2018
Balance at January 1 per IAS 39	$	-
Adjustment on 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

• f. Treasury shares

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

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 rice $ 54,060 $ 54,060 $ 47,039 $ 47,039

• 51 -

Hsin Lung Chemical Co., Ltd. acquired the Company’s share for investment 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 the 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.

26. NET PROFIT FROM CONTINUING OPERATIONS

Net profit from continuing operations were as follows:

• a. Other income and expenses

Other income Rental income Interest income Service revenue Dividends Others Other expenses Rental expense Service costs Others	For the Year Ended	For the Year Ended	December 31
		2018 $ 122,008 34,305 38,557 309,179 16,315 520,364 (45,576) (17,797) (42,456) (105,829) $ 414,535	2017 $ 130,212 14,417 40,919 204,020 12,941 402,509 (61,549) (18,931) (30,943) (111,423) $ 291,086

• b. Other gains and losses

Gain (loss) on disposal of property, plant and equipment Net foreign exchange gain (loss) Fair value changes of financial assets and financial liabilities Financial assets held for trading Financial assets mandatorily classified as at FVTPL Loss on disposal of financial assets Impairment loss on financial assets Gain on reversal of estimated casualty expense	For the Year Ended	For the Year Ended	December 31
		2018 $ (16,717) 114,014 - 1,508 - - - $ 98,805	2017 $ 152 (120,953) (1,835) - (8,453) (25,301) 30,370 $ (126,020)

• 52 -

c. Finance costs

Interest on bank loans Other interest expenses Total interest expense for financial liabilities measured at amortized cost Less: Amounts included in the cost of qualifying assets Information about capitalized interest was as follows: Capitalized interest Capitalization rate d. Depreciation and amortization An analysis of depreciation by function Operating costs Operating expenses e. Employee benefits expense Short-term benefits Post-employment benefits (Note 24) Defined contribution plans Defined benefit plans Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended	For the Year Ended	For the Year Ended	December 31
	2018 $ 124,813 1,801 126,614 (1,701) $ 124,913 **For the Year Ended **			2017 $ 125,436 159 125,595 (11,088) $ 114,507 **December 31 **
	2018 $ 1,701 1.20% For the Year Ended			2017 $ 11,088 1.20% December 31
	2018 $ 509,591 13,710 $ 523,301 **For the Year Ended **			2017 $ 432,093 18,308 $ 450,401 **December 31 **
		2018 $ 1,524,673 33,517 17,955 51,472 $ 1,576,145 $ 1,210,710 365,435 $ 1,576,145	2017 $ 1,336,923 32,389 23,128 55,517 $ 1,392,440 $ 1,112,720 279,720 $ 1,392,440

• 53 -

• f. 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 - - - -	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 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 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.

• g. Gain or loss on foreign currency exchange

Foreign exchange gains Foreign exchange losses	For the Year Ended	For the Year Ended	December 31
		2018 $ 324,647 (210,633) $ 114,014	2017 $ 121,468 (242,421) $ (120,953)

• 54 -

27. INCOME TAXES RELATING TO CONTINUING OPERATIONS

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

For the Year Ended December 31 2018 2017 Current tax In respect of the current year $ 168,022 $ 136,318 Income tax on unappropriated earnings 3,220 24,054 Adjustments for prior years 1,927 (3,883) 173,169 156,489 Deferred tax In respect of the current year 113,689 14,984 Adjustments to deferred tax attributable to changes in tax rates and laws 22,851 - 136,540 14,984 Income tax expense recognized in profit or loss $ 309,709 $ 171,473 A reconciliation of accounting profit and income tax expenses is as follows: For the Year Ended December 31 2018 2017 Profit before tax from continuing operations $ 2,767,646 $ 1,136,199 Income tax expense calculated at the statutory rate $ 553,529 $ 193,154 Nondeductible expenses in determining taxable income 2 850 Deferred tax effect from earnings of subsidiaries (227,256) (67,810) Tax-exempt income (61,836) (33,246) Income tax on unappropriated earnings 3,220 24,054 Unrecognized deductible temporary differences 18,182 56,258 Effect of tax rate changes 22,851 - Adjustments for prior years’ tax 1,927 (3,883) Others (910) 2,096 Income tax expense recognized in profit or loss $ 309,709 $ 171,473	**For the Year Ended **	**For the Year Ended **	**For the Year Ended **	**December 31 **
				2017 $ 136,318 24,054 (3,883) 156,489 14,984 - 14,984 $ 171,473 December 31
		2018 $ 2,767,646 $ 553,529 2 (227,256) (61,836) 3,220 18,182 22,851 1,927 (910) $ 309,709	2017 $ 1,136,199 $ 193,154 850 (67,810) (33,246) 24,054 56,258 - (3,883) 2,096 $ 171,473

In 2017, the applicable corporate income tax rate used by the Company 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%.

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

• 55 -

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) 5,402 $ (2,625)	2017 $ - - 4,357 $ 4,357

c. Current tax assets and liabilities

Current tax liabilities Income tax payable		**December 31 **	**December 31 **
		2018 $ 139,211	2017 $ 128,099

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

Opening Deferred Tax Assets Balance Temporary differences Fair value changes of financial assets $ 17,702 Unrealized gross profit 10,419 Defined benefit obligation 75,502 Allowance for impairment loss of receivables 13,840 Inventory write-downs 26,740 Others 16,773 $ 160,976 Deferred Tax Liabilities Temporary differences Property, plant and equipment Unappropriated earnings of subsidiaries Others	Recognized in Other Recognized in Compre- hensive Closing Profit or Loss Income Balance $ (6,042) $ (11,660) $ - 4,598 - 15,017 9,886 9,035 94,423 1,209 - 15,049 4,466 - 31,206 (16,519) - 254 $ (2,402) $ (2,625) $ 155,949 Opening Balance Recognized in Profit or Loss Closing Balance $ 726,259 $ 5,348 $ 731,607 194,492 127,775 322,267 - 1,015 1,015 $ 920,751 $ 134,138 $ 1,054,889

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For the year ended December 31, 2017

Opening Deferred Tax Assets Balance Temporary differences Fair value changes of financial assets $ 21,323 Unrealized gross profit 12,527 Defined benefit obligation 71,145 Allowance for impaired receivables 14,358 Inventory write-downs 26,740 Others 7,691 $ 153,784 Deferred Tax Liabilities Temporary differences Property, plant and equipment Unappropriated earnings of subsidiaries	Recognized in Other Recognized in Compre- hensive Closing Profit or Loss Income Balance $ (3,621) $ - $ 17,702 (2,108) - 10,419 - 4,357 75,502 (518) - 13,840 - - 26,740 9,082 - 16,773 $ 2,835 $ 4,357 $ 160,976 Opening Balance Recognized in Profit or Loss Closing Balance $ 735,277 $ (9,018) $ 726,259 167,655 26,837 194,492 $ 902,932 $ 17,819 $ 920,751

e. Deductible temporary differences for which no deferred tax assets have been recognized in the balance sheets

Deductible temporary differences Loss recognized by investment using the equity method Loss recognized by fair value changes of financial assets Others		**December 31 **	**December 31 **
		2018 $ 2,386,253 1,066 27,665 $ 2,414,984	2017 $ 2,324,073 - - $ 2,324,073

f. Income tax assessments

The income tax returns through 2014 have been assessed by the tax authorities.

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28. 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

Profit for the year attributable to owners of the Company Earnings used in the computation of diluted earnings per share from continuing operations	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,457,937 $ 2,457,937	2017 $ 964,726 $ 964,726

Weighted average number of ordinary shares outstanding (in thousands of shares) is as follows:

Weighted average number of ordinary shares used in the computation of basic earnings per share Effect of potential dilutive ordinary shares: Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended	For the Year Ended	December 31
		2018 1,613,729 2,764 1,616,493	2017 1,613,729 1,407 1,615,136

If the Company offered to settle compensation or bonuses paid to employees in cash or shares, the Company 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.

29. PARTIAL ACQUISITION OR DISPOSAL OF SUBSIDIARIES - WITHOUT LOSS OF CONTROL

For the year 2018, the Company subscribed for additional new shares of Shinkong Polyester Film Corp., Ltd. at a percentage different from its existing ownership percentage, increasing its continuing interest from 80.0729% to 80.0735%.

For the year 2017, the Company subscribed for additional new shares of Tac Bright Optronics Corp. at a percentage different from its existing ownership percentage, increasing its continuing interest from 56.85% to 56.86%.

For the year 2017, the Company 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 Company did not cease to have control over these subsidiaries.

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30. CAPITAL MANAGEMENT

The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Company’s overall strategy remains unchanged

The capital structure of the Company 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 Company 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 Company 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.

31. 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.

• 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 Mutual funds Financial assets at FVTOCI Investments in equity instruments at FVTOCI Domestic investments - listed shares and emerging market shares Domestic investments - unlisted shares Foreign investments Financial liabilities at FVTPL Derivative instruments	Level 1 $ - 4,995 $ 4,995 $ 5,489,295 - - $ 5,489,295 $ -	Level 2 $ 653 - $ 653 $ - 1,088,657 11,411 $ 1,100,068 $ 1,924	Level 3 $ - - $ - $ - - - $ - $ -	Total $ 653 4,995 $ 5,648 $ 5,489,295 1,088,657 11,411 $ 6,589,363 $ 1,924

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December 31, 2017

Financial assets at FVTPL Derivative financial assets Available-for-sale financial assets Equity securities Domestic investments - listed shares and emerging market shares Domestic investments - unlisted shares Financial liabilities at FVTPL Derivative instruments	Level 1 $ - $ 5,868,724 - $ 5,868,724 $ -	Level 2 $ 63 $ - 1,071,168 $ 1,071,168 $ 2,846	Level 3 $ - $ - - $ - $ -	Total $ 63 $ 5,868,724 1,071,168 $ 6,939,892 $ 2,846

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

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

Financial Instruments Valuation Techniques and Inputs

Derivatives - foreign currency Discounted cash flow. forward contracts

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.

Unlisted debt securities - ROC 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.

Unlisted equity securities - ROC

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

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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) Held-to-maturity investments Financial assets at amortized cost (3) Financial assets at FVTOCI Equity instruments Financial liabilities Financial liabilities at FVTPL Held for trading Financial liabilities at amortized cost (4)	December 31
	2018 2017 $ - $ 63 5,648 - - 4,757,887 - 6,939,892 - 640,000 5,104,125 - 6,589,363 - 1,924 2,846 11,800,458 12,437,425

• 1) The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market, note receivables, trade receivables 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, note receivables, trade receivables 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 payable, trade payables and other payables.

• d. Financial risk management objectives and policies

The Company’s major financial instruments include equity and debt investments, trade receivables, trade payables and borrowings. The Company’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 Company 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 Company 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 Company’s policies approved by the board of directors, which provided written principles on foreign currency 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 Company did not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

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1) Market risk

The Company’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 Company’s exposure to market risk or the manner in which these risks were managed and measured.

a) Foreign currency risk

The Company have foreign currency sales and purchases, which expose the Company to foreign currency risk. Exchange rate exposures are managed within approved policy parameters utilizing foreign exchange forward contracts.

The Company use foreign exchange forward contracts to eliminate currency exposure. It is the Company’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 following table details the Company’s sensitivity to a 5% increase and decrease in the New Taiwan dollars (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. dollar, which were not hedged at the end of the reporting period.

Profit or loss		Currency USD Impact	Currency USD Impact
		For the Year Ended	December 31
		2018 $ 67,154	2017 $ 160,176

b) Interest rate risk

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

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

Cash flow interest rate risk Fair value interest rate risk	December 31
	2018 2017 $ 9,346,091 $ 9,194,340 500,000 1,600,000

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

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Sensitivity analysis

The sensitivity analysis below was determined based on the Company’s exposure to interest rates for non-derivative instruments at the end of each 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 Company’s pre-tax profit for the years ended December 31, 2018 and 2017 would decrease by $23,365 thousand and $22,986 thousand, which was mainly attributable to the Company’s exposure to interest rates on its variable-rate bank borrowings.

• c) Other price risk

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

Sensitivity analysis

The sensitivity analyses 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, the pre-tax other comprehensive income for the year ended December 31, 2018 would have increased/decreased by $329,468 thousand, as a result of the changes in fair value of financial assets at FVTOCI.

If equity prices had been 5% higher/lower, the pre-tax other comprehensive income for the year ended December 31, 2017 would increase/decrease by $346,995 thousand, as a result of the changes in fair value of available-for-sale shares.

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 Company. As at the end of the reporting period, the Company’s maximum exposure to credit risk, which would cause a financial loss to the Company due to the failure of the counterparties to discharge its obligation and due to the financial guarantees provided by the Company, could be arise from the carrying amount of the respective recognized financial assets as stated in the balance sheets.

The Company 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 Company 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 Company 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 Company 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.

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3) Liquidity risk

The Company manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Company’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 Company relies on bank borrowings as a significant source of liquidity. The Company 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 Company’s short, medium and long-term funding and liquidity management requirements. The Company 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 Company’s remaining contractual maturities for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Company 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.

December 31, 2018

Non-derivative financial liabilities Non-interest bearing liabilities Variable interest rate liabilities Fixed interest rate liabilities Financial guarantee contracts December 31, 2017 Non-derivative financial liabilities Non-interest bearing liabilities Variable interest rate liabilities Fixed interest rate liabilities Financial guarantee contracts	Less than 1 Year $ 1,954,389 3,676,797 499,978 3,405,368 $ 9,536,532 Less than 1 Year $ 1,643,364 3,288,333 1,599,721 1,828,800 $ 8,360,218	1-2 Years $ - 4,869,294 - 450,000 $ 5,319,294 1-2 Years $ - 5,272,674 - 400,000 $ 5,672,674	2-5 Years $ - 800,000 - 100,000 $ 900,000 2-5 Years $ - 633,333 - 100,000 $ 733,333	5+ Years $ - - - 785 $ 785 5+ Years $ - - - 785 $ 785	Total $ 1,954,389 9,346,091 499,978 3,956,153
					$ 15,756,611
					Total $ 1,643,364 9,194,340 1,599,721 2,329,585
					$ 14,767,010

The amounts included above for financial guarantee contracts are the maximum amounts the Company 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 Company considers that it is more likely than not that no amount will be paid under the contracts.

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

The following table details the Company’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

c)	Net settled Foreign exchange forward contracts Cross-currency swap contracts December 31, 2017 Net settled Foreign exchange forward contracts Financing facilities	Less than 1 Year 1-2 Years 2-5 Years $ 299 $ - $ - $ (1,570) $ - $ - Less than 1 Year 1-2 Years 2-5 Years $ (2,783) $ - $ -	5+ Years $ - $ - 5+ Years $ -	Total $ 299 $ (1,570) Total $ (2,783)

Amount unused		**December 31 **	**December 31 **
		2018 $ 10,901,813	2017 $ 10,672,860

32. TRANSACTIONS WITH RELATED PARTIES

Besides information disclosed elsewhere in the other notes, details of transactions between the Company and other related parties are disclosed below.

• a. Related party name and category

Related Party Name UBright Optronics Corp. Tac Bright Optronics Corp. Taipei Star Bank Shinkong Polyester Film Corp., Ltd. Shinkong International Securities Co., Ltd. Pan Asian Plastics Corp.	Related Party Category
	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

(Continued)

• 65 -

Related Party Name ShinBright Optronics Corp. HisingShing Investment Co., Ltd. Shinkong Engineering Co., Ltd. Shinpont Industry Inc. SSFC Investment Ltd. Chi Jian Human-Resource & Management Co., Ltd. Hsinshin Asset Management Co., Ltd. Shin Kong International Leasing Corp. Thai Shinkong Industry Corp. Ltd. Shinkong Industry (Hangjhou) Co., Ltd. Hangjhou Huachun Chemical Fiber Co., Ltd. Shin Kong Technologies Corp. INVISTA (Taiwan) Limited Taiwan Branch (H.K.) INVISTA Shin Kong Bank Co., Ltd. Taishin International Bank Shin Kong Textile Co., Ltd. Shin Kong Life Insurance Co., Ltd. Shin Kong Construction and Development Co., Ltd. Shin Kong Recreation Co., Ltd. Shin Kong Life Real Estate Service Company Hwa Jian Human-Resource & Management Co., Ltd. Shinkong Co., Ltd. Shin Kong Mitsukoshi Department Store Co., Ltd. Others

Related Party Category

Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Other related parties Key management personnel of the Company (Concluded)

• b. Sales of goods

Line Items Related Party Categories/Name Sales Subsidiaries/others Other related parties/others Purchases of goods Related Party Categories/Name Subsidiaries/others Other related parties/others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2018 2017 $ 3,352,148 $ 2,678,772 8,987 56,936 $ 3,361,135 $ 2,735,708 **For the Year Ended December 31 **
		2018 $ 1,997,380 2,712 $ 2,000,092	2017 $ 1,459,039 - $ 1,459,039

• c. Purchases of goods

• 66 -

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

Line Items Related Party Categories/Name Trade receivables Subsidiary/Shinkong Polyester Film Corp., Ltd. Subsidiaries/others Other related parties/others Notes receivables Other related parties/others		December 31	December 31
		2018 $ 658,561 267,694 2,230 $ 928,485 $ 762	2017 $ 495,282 212,056 14,417 $ 721,755 $ 232

The outstanding receivables from related parties are unsecured. For the years ended December 31, 2018 and 2017, no impairment loss was recognized for receivables from related parties.

• e. Payables to related parties (excluding loans from related parties)

Line Items Related Party Categories/Name Trade payables Subsidiary/Thai Shinkong Industry Corp. Ltd. Subsidiaries/others		December 31	December 31
		2018 $ 490,907 23,923 $ 514,830	2017 $ 433,065 817 $ 433,882

The outstanding trade payables from related parties are unsecured.

• f. Cost of goods sold

Line Items Related Party Categories/Name Contractor labor cost Subsidiaries/others Other related parties/others Disposals of investment properties Related Party Category/Name Subsidiary/UBright Optronics Corp.	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2017 $ 61,049 - $ 61,049 Gain (Loss) on Disposal
		For the Year Ended December 31, 2017 $ -

• g. Disposals of investment properties

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• h. Loans from related parties

Related Party Category/Name Subsidiaries/others		December 31	December 31
		2018 $ -	2017 $ 500,000

The Company obtained loans at rates comparable to market interest rates for the loans from related parties.

• i. Endorsements and guarantees

Endorsements and guarantees provided by the Company

Related Party Category/Name Subsidiaries/others Amount utilized		December 31	December 31
		2018 $ 3,756,152	2017 $ 2,179,585

• j. Other receivables and liabilities

Line Items Related Party Categories/Name Deposits Subsidiary/Taipei Star Bank Subsidiary/Taishin International Bank Subsidiary/Shin Kong Bank Co., Ltd. Other receivables Subsidiary/Pan Asian Plastics Corp. Subsidiary/Shinpont Industry Inc. Subsidiary/others Other related parties/others Prepayment Other related parties/others Other payables Subsidiaries/others Other related parties/others		**December 31 **	**December 31 **
		2018 $ 173,749 145,886 364,652 $ 684,287 $ 41,481 38,996 9,164 38 $ 89,679 $ 431 $ 55,556 2,495 $ 58,051	2017 $ 172,059 102,929 98,611 $ 373,599 $ 25,165 41,615 7,870 35 $ 74,685 $ 603 $ 57,461 1,588 $ 60,049

• 68 -

k. Others

1) Operating leases - lessor

Lessor Object Period Subsidiaries/ others Land, plant and equipment 2010.07.01- 2020.12.31 Other related parties/ others Office and parking space 2017.03.01- 2020.02.29	Rental Income
	For the Year Ended **December 31 **
	2018 2017 $ 70,848 $ 79,345 662 327

2) Operating leases - lessee

Lessee Object Period Subsidiaries/ Others Rental cars 2015.04.15- 2020.07.27 Other related parties/ others Office and parking space 2017.01.01- 2019.01.19 2016.01.20- 2019.01.19 2017.01.16- 2019.01.15 Other related parties/ others Land, plants and, etc. 2006.03.01- 2018.02.28 Other revenues Related Party Categories/Name Subsidiaries/others Other related parties/others Reduction of manufacturing expenses Related Party Category/Name Subsidiaries/others	Rental Expense For the Year Ended December 31 2018 2017 $ 3,053 $ 2,685 14,560 14,620 - 3,670 For the Year Ended December 31	Rental Expense	Rental Expense
		For the Year Ended December 31
	2018 2017 $ 40,604 $ 41,088 4 - $ 40,608 $ 41,088 **For the Year Ended December 31 **
		2018 $ 360,946	2017 $ 351,650

• 3) Other revenues

• 4) Reduction of manufacturing expenses

• 5) Additional acquisition of interests in subsidiaries

In 2018, the Company subscribed for an additional 100% of the new shares of ShinBright Optronics Corp. for $120,000 thousand, and the ownership percentage remained at 100%.

• 69 -

In 2018, the Company subscribed for an additional 100% of the new shares of Shin Kong International Leasing Corp. for $82,000 thousand, and the ownership percentage remained at 100%.

In 2017, the Company subscribed for an additional 100% of the new shares of Shin Kong International Leasing Corp. for $100,000 thousand, and the ownership percentage remained at 100%.

• l. Compensation of key management personnel

As of December 31, 2018 and 2017, the remuneration of directors and other members of key management personnel were as follows:

Short-term employee benefits Retirement benefits 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.

33. 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 Object Available-for-sale financial assets - Listed shares current and non-current Unlisted shares Financial assets at fair value through Listed shares other comprehensive income - current and non-current Unlisted shares Property, plant and equipment Land, buildings and machineries Investment properties Investment properties		**December 31 **	**December 31 **
		2018 $ - - 2,653,770 442,790 4,629,836 498,470 $ 8,224,866	2017 $ 2,892,660 527,056 - - 4,717,874 500,339 $ 8,637,929

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34. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

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

Letters of Credit

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

EUR JPY USD	December 31
	2018 2017 $ 3,865 $ 252 389,378 12,520 758 590

35. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

Financial assets Monetary items USD EUR RMB JPY Non-monetary items Investments accounted for using the equity method USD RMB Financial liabilities Monetary items USD	December 31	December 31
	2018 Foreign Currency (In Thousands) Exchange Rate $ 77,259 30.715 2,097 35.2 1,456 4.472 21,891 0.2782 90,686 30.715 455,828 4.472 37,032 30.715	2017
		Foreign Currency (In Thousands) Exchange Rate $ 107,881 29.76 2,214 35.57 8,887 4.565 15,310 0.2642 79,581 29.76 446,239 4.565 17,736 29.76

For the years ended December 31, 2018 and 2017, realized and unrealized net foreign exchange gains (losses) were $114,014 thousand and $(120,953) 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.

• 71 -

36. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees:

• 1) Financing provided to others (None)

• 2) Endorsements/guarantees provided (Table 1)

• 3) Marketable securities held (excluding investments in subsidiaries, associates and joint ventures) (Table 2)

• 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)

• 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)

• 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital (Table 5)

• 9) Trading in derivative instruments (Note 7)

• 10) Information on investees (Table 6 to 12)

• 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 13)

• 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 14):

  • 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

• 72 -

• 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

• 73 -

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 categories:

1. A company that has a business relationship with the Company.

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.

• 74 -

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 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	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	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	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		$ 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	- - - - 3.91 - 4.44 1.49 0.53 2.22 3.03 5.00 1.67 9.44 13.99 17.54		$ 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

(Continued)

• 75 -

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
	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	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 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	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		$ 374,160 1,277,053 1,311,609 1,731,074 109,355 80,035 206,098 773,428 $ 6,000,062 $ 400,000	0.21 9.46 1.19 1.27 3.52 4.65 1.07 1.96 -		$ 374,160 1,277,053 1,311,609 1,731,074 109,355 80,035 206,098 773,428 $ 6,000,062 $ 400,000

(Concluded)

• 76 -

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.

• 77 -

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 of the consolidated financial statements.

• 78 -

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	$ - -

• 79 -

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 wholesales 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)

• 80 -

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)

• 81 -

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 Borrowing Amount	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	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	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	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..

• 82 -

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.

• 83 -

TABLE 9

SHINKONG SYNTHETIC FIBERS CORPORATION

INVESTEE’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 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	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	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	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	$ 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	- - - - - - - - - - - - 0.02 - - 0.02	$ 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

(Continued)

• 84 -

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.	Shares Taishin Financial Holding Co., Ltd. Shin Kong Textile 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.	Related personnel with the Company’s chairman Related party in substance 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	Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-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 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	4,775,222 1,951,507 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	$ 62,317 87,817 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	0.04 0.65 - - - 0.21 - - - - - - - - - 0.23	$ 62,317 87,817 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

(Continued)

• 85 -

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. Pan Asian Plastics Corp. Shin Kong International Leasing Corp.	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 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 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 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 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 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	976 358,587 112 4,680,487 360,000 2,970,000 990,000 3,000,000 14,973,909 21 977,994 236,990 4,850,000 5,000 360,000 100,000 150,000	$ 9 4,680 5 54,060 100,071 203,770 18,869 28,830 134,316 210,000 12,763 3,342 - 103 5,410 856 1,508	- - - 0.29 15.52 19.80 19.80 - 0.12 - - 1.82 7.09 0.01 - - -	$ 9 4,680 5 54,060 100,071 203,770 18,869 28,830 134,316 210,000 12,763 3,342 - 103 5,410 856 1,508

(Concluded)

• 86 -

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: These two columns need to be filled in for marketable securities recognized as investments accounted for using the equity method.

• 87 -

TABLE 11

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

INVESTEES’ 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		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 consolidated financial statements Table 17.

• 88 -

TABLE 12

SHINKONG SYNTHETIC FIBERS CORPORATION AND SUBSIDIARIES

INVESTEES’ 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	$ - -

• 89 -

TABLE 13

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 premium of US$4,280 thousand from machinery equipment from SSFC Investment Ltd., which is not included in the calculation of the authorized amount and cash remittance of US$240 thousand to Dayspring Ltd.

Note B: The amounts were calculated based on the financial statements that have been audited.

• 90 -

TABLE 14

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. 91 -

SHINKONG SYNTHETIC FIBERS CORPORATION

THE CONTENTS OF STATEMENTS OF MAJOR ACCOUNTING ITEMS

Item Major Accounting Items in Assets, Liabilities and Equity Statement of cash and cash equivalents Statement of financial assets at fair value through profit or loss Statement of financial assets at fair value through other comprehensive income - current Statement of notes receivable Statement of accounts receivable Statement of other receivables Statement of inventories Statement of prepayment Statement of other current assets Statement of financial assets at fair value through other comprehensive income - non-current Statement of changes in financial assets at amortized cost Statement of changes in investments accounted for using the equity method Statement of changes in property, plant, and equipment Statement of changes in accumulated depreciation of property, plant and equipment Statement of changes in accumulated impairment of property, plant and equipment Statement of changes in investment properties Statement of changes in accumulated depreciation of investment properties Statement of changes in accumulated impairment of investment properties Statement of deferred income tax assets Statement of other non-current assets Statement of short-term borrowings Statement of short-term payables Statement of liabilities at fair value through profit and loss - current Statement of accounts payables Statement of other payables - current Statement of other current liabilities Statement of long-term borrowings Statement of provision Statement of deferred income tax liabilities Major Accounting Items in Profit or Loss Statement of sales revenue Statement of cost of goods sold Statement of operating expense Statement of other income and expenses Statement of financial costs Statement of labor, depreciation and amortization by function

**Statement Index **

1 Note 7 2 3 4 5 6 7 8 9 10 11 Note 17 Note 17 Note 17 Note 18 Note 18 Note 18 Note 27 Note 19 12 Note 20 Note 7 13 Note 22 Note 22 Note 20 Note 23 Note 27 14 15 16 Note 26 Note 26 17

• 92 -

STATEMENT 1

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF CASH AND CASH EQUIVALENTS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Description Cash on hand Petty cash Checking account Shin Kong Bank Co., Ltd., etc. Cash deposits Shin Kong Bank Co., Ltd., etc. Foreign currency deposits US$27,973 thousand exchange rate 30.715 JPY21,891 thousand exchange rate 0.2782 EUR457 thousand exchange rate 35.2 RMB4 thousand exchange rate 4.472 Time deposits Expired by January 2019, interest rate at 3.1% (Note A) Repurchase agreements collateralized by corporate bonds Expired by January 2019, interest 2.6% (Note B)

Amount $ 929 287,306 6,562 881,409 153,575 62,741 $ 1,392,522

Note A: US$5,000 thousand (exchange rate US$1=30.715) Note B: US$2,043 thousand (exchange rate US$1=30.715)

• 93 -

STATEMENT 2

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - CURRENT FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Name Description Number of Shares Denomination Total Amount Stock Hsin Ba Ba Corporation 12 10 $ - Yuanta Financial Holding Co., Ltd. 49,957 10 500 China Steel Corporation 179,380 10 1,794 The Great Taipei Gas Corporation 20,213,826 10 202,138 $ 204,432	Accumulated Cost Impairment $ - $ - 600 - 4,422 - 491,196 - $ 496,218 $ -	FairValue
		Unit Price (Dollar) Total Value 11.60 $ - 15.45 772 24.25 4,350 28.90 584,179 $ 589,301

• 94 -

STATEMENT 3

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF NOTES RECEIVABLE FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Client Name Description General clients Company A Payment of goods Company B 〃 Company C 〃 Others (Note) 〃 Related parties	Amount $ 35,603 17,177 3,203 6,936 62,919 762 $ 63,681

Note: The amount of individual client included in others does not exceed 5% of the account balance.

• 95 -

STATEMENT 4

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF ACCOUNTS RECEIVABLE FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Client Name Description General clients Company A Payment of goods Other (Note) 〃 Less: Allowance for impairment loss Related parties SPF 〃 PAP 〃 SPI 〃 TSI 〃 SKI 〃 HZC 〃 Others 〃	Amount $ 430,790 1,280,067 (33,484) 1,677,373 658,561 154,838 61,624 33,786 9,995 7,451 2,230 928,485 $ 2,605,858

Note: The amount of individual client included in others does not exceed 5% of the account balance.

• 96 -

STATEMENT 5

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF OTHER RECEIVABLES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Description Other receivables Receivables of tax refund Receivables from related parties Rental revenue Others	Amount $ 123,865 89,679 36,085 2,435 $ 252,064

• 97 -

STATEMENT 6

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF INVENTORIES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Items Description Finished good POY, etc. Work in progress Raw materials EG, PTA, etc. Materials Supplies and spare parts Less: Allowance for loss for market price decline and obsolete and slow-moving inventories	Amount $ 2,176,070 431,778 511,314 138,824 34 3,258,020 (156,028)	LCNRV
		Cost Fair Value $ 2,158,065 $ 2,052,425 431,647 418,866 511,314 494,613 138,824 117,918 - -

$ 3,101,992

• 98 -

STATEMENT 7

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF PREPAYMENTS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Description Prepayments for goods Prepaid purchase deposit and various fees Prepaid expense Prepaid insurance fee, etc.	Amount $ 147,921 1,234 $ 149,155

• 99 -

STATEMENT 8

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF OTHER CURRENT ASSETS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Description Temporary payments Temporary payments for dining fees, traveling expenses, etc.	Amount $ 1,474

• 100 -

STATEMENT 9

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - NON-CURRENT FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Name Listed company share Taiwan Cement Corp. Shinkong Textile Co., Ltd. Shin Kong Financial Holding Co., Ltd. Taishin Financial Holding Co., Ltd. O-Bank TranSystem, Inc. Shares of unlisted companies Century Development Corporation Universal Venture Capital Investment Corporation 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. Great Taipei Broadband Co., Ltd Zacros Taiwan Co., Ltd. Wave-In Communication Inc. Shinkong iEcofun Corporation Foreign investments Budworth Investment Limited	Beginning Balance Number of Shares Fair Value 9,554,654 $ 348,267 28,378,958 1,279,891 144,145,821 1,513,531 127,017,619 1,759,194 30,926,308 275,553 3,000,000 20,760 5,197,196 11,188,443 104,237 5,600,000 46,312 24,401,636 920,619 4,000,000 38,171 189,627 1,901 2,102,512 14,411 200,000 17,666 78,540 (676) 2,500,000 12,900 10,000,000 82,138 1,080,906 3,337 800,000 5,658 1,246,674 288,000 - $ 6,443,870	Acquisition Number of Shares Amount 955,465 $ 25,893 - - 2,075,865 - 5,631,698 - - - - - 25,893 626,552 5,118 - 33,723 - - - 5,590 - - - - - 12,809 - 1,923 - 766 - - - - - 1,484 61,413 - 11,411 $ 98,717	Disposal Number of Shares Amount - $ - - 2,838 - 201,922 - 28,120 5,164,000 69,455 3,000,000 20,760 323,095 - - - - - 147,191 - - 15,172 184 - 2,385 - - - - - - - 69,283 - 387 - - 219,430 - - $ 542,525	Ending Balance Provide for Guarantee or Pledge Number of Shares Fair Value (Number of Share) 10,510,119 $ 374,160 - 28,378,958 1,277,053 14,100,000 146,221,686 1,311,609 116,000,000 132,649,317 1,731,074 75,000,000 25,762,308 206,098 - - - 4,899,994 11,814,995 109,355 - 5,600,000 80,035 - 24,401,636 773,428 13,970,000 4,000,000 43,761 - 174,455 1,717 - 2,102,512 12,026 - 200,000 30,475 - 78,540 1,247 - 2,500,000 13,666 - 10,000,000 12,855 - 1,080,906 2,950 - 800,000 7,142 - 1,088,657 288,000 11,411 - $ 6,000,062
	Number of Shares 9,554,654 28,378,958 144,145,821 127,017,619 30,926,308 3,000,000 11,188,443 5,600,000 24,401,636 4,000,000 189,627 2,102,512 200,000 78,540 2,500,000 10,000,000 1,080,906 800,000 288,000	Number of Shares 955,465 - 2,075,865 5,631,698 - - 626,552 - - - - - - - - - - - -	Number of Shares - - - - 5,164,000 3,000,000 - - - - 15,172 - - - - - - - -	Number of Shares 10,510,119 28,378,958 146,221,686 132,649,317 25,762,308 - 11,814,995 5,600,000 24,401,636 4,000,000 174,455 2,102,512 200,000 78,540 2,500,000 10,000,000 1,080,906 800,000 288,000

• 101 -

STATEMENT 10

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF FINANCIAL ASSETS MEASURED AT AMORTIZED COST FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Name Description Tac Bright 2016 first term private unsecured ordinary corporate bonds - Tac Bright 2016 second term private unsecured ordinary corporate bonds - Tac Bright 2016 third term private unsecured ordinary corporate bonds - Tac Bright 2017 first term private unsecured ordinary corporate bonds - Tac Bright 2017 second term private unsecured ordinary corporate bonds - Tac Bright 2017 third term private unsecured ordinary corporate bonds - Tac Bright 2018 first term private unsecured ordinary corporate bonds - Tac Bright 2018 second term private unsecured ordinary corporate bonds -	Beginning Balance Number of Shares Book Value 10 $ 100,000 15 150,000 4 40,000 10 100,000 25 250,000 - - - - - - $ 640,000	Acquisition Number of Shares Book Value - $ - - - - - - - - - 15 150,000 10 100,000 15 150,000 $ 400,000	Disposal Number of Shares Book Value 10 $ 100,000 15 150,000 - - - - - - - - - - - - $ 250,000	Ending Balance Providing Guarantee or Pledge Note Number of Shares Book Value - $ - - - - - - - 4 40,000 - Current 10 100,000 - Current 25 250,000 - Current 15 150,000 - Non-current 10 100,000 - Non-current 15 150,000 - Non-current $ 790,000

• 102 -

STATEMENT 11

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Name of Investee company 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 Optroics Corp. Shinkong Polyester Film Corp., Ltd. Shinkong International Securities Co., Ltd. Tai Jin Investment Co., Ltd. ShinBright Optronics Corp. Tac Bright Optronics Corporation Taipei Star Bank Chi Jian Human-Resource & Management Co., Ltd. (Note) Hsinshin Asset Management Co., Ltd. Shin Kong International Leasing Corp. Less: Transfer to Treasury Stock	Balance, January 1, 2018 Shares Amount 50,569,938 $ 1,158,628 152,100,000 1,656,328 38,543,818 563,229 25,245,000 484,459 71,500,000 690,795 1 2,366,523 1 2,007,391 38,695,828 1,414,649 110,503,140 804,355 114,633,265 2,213,164 1,111,315 5,876 20,000,000 (80,591) 263,586,455 1,394,038 83,213,000 1,343,841 - 6,746 5,370,000 53,757 30,000,000 320,435 16,403,623 (28,129) $ 16,375,494	Acquisition Shares Amount - $ 106,290 - - - - - - - 4,810 - - - - - - 232 2 - - - - 11,999,999 120,000 - - - - - - - - 8,200,000 82,000 313,102 (4,199) $ 308,903	Disposal Gain (Loss) on Equity Shares Amount Investment - $ - $ 102,062 - (1,200) 9,380 - (23,487) (5,942) - (134,017) 167,144 - - 1,087 - (51,754) 467,263 - (35,320) 43,727 - (29,770) 69,666 (41,646,266) (8,839) (104,781) - (193,049) 397,707 - (59) 28 (19,999,999) - (149,253) - (17) (156,654) - (24,748) 51,471 - (1,337) 59 - (236) 491 - (567) 31,442 $ (504,400) $ 924,897	Balance, December 31, 2018 Shares % Amount 50,569,938 100.00 $ 1,366,980 152,100,000 100.00 1,664,508 38,543,818 100.00 533,800 25,245,000 49.99 517,586 71,500,000 100.00 696,692 1 100.00 2,782,032 1 100.00 2,015,798 38,695,828 50.44 1,454,545 68,857,106 80.07 690,737 114,633,265 77.98 2,417,822 1,111,315 48.57 5,845 12,000,000 100.00 (109,844) 263,586,455 56.86 1,237,367 83,213,000 27.06 1,370,564 - - 5,468 5,370,000 100.00 54,012 38,200,000 100.00 433,310 17,137,222 (32,328) $ 17,104,894	Market value or Net Assets Value Collateral $ 1,251,022 None 1,664,508 〃 462,483 〃 519,543 〃 696,692 〃 2,785,427 〃 2,038,462 〃 1,517,640 〃 721,002 〃 2,401,169 〃 6,611 〃 (112,545) 〃 1,324,794 〃 1,454,142 〃 5,468 〃 54,012 〃 433,310 〃 $ 17,223,740
	Shares 50,569,938 152,100,000 38,543,818 25,245,000 71,500,000 1 1 38,695,828 110,503,140 114,633,265 1,111,315 20,000,000 263,586,455 83,213,000 - 5,370,000 30,000,000	Shares - - - - - - - - 232 - - 11,999,999 - - - - 8,200,000	Shares - - - - - - - - (41,646,266) - - (19,999,999) - - - - -	Shares % 50,569,938 100.00 152,100,000 100.00 38,543,818 100.00 25,245,000 49.99 71,500,000 100.00 1 100.00 1 100.00 38,695,828 50.44 68,857,106 80.07 114,633,265 77.98 1,111,315 48.57 12,000,000 100.00 263,586,455 56.86 83,213,000 27.06 - - 5,370,000 100.00 38,200,000 100.00

Note: This is a limited company, the shareholding ratio is calculated based on the amount of capital contribution.

• 103 -

STATEMENT 12

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF SHORT-TERM BORROWINGS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Creditor Mizuho Bank Bangkok Bank The Export - Import Bank of the ROC Land Bank of Taiwan First Bank HSBC Bank Bank SinoPac Hwatai Bank Hua Nan Bank E.SUN Commercial Bank Sunny Bank Cathay United Bank DBS Bank

Amount Contract Period Range of Interest Rate (%) Collateral $ 300,000 2018.12.25-2019.12.25 0.8538-3.6 None 200,000 2018.09.27-2019.09.30 0.8538-3.6 None 500,000 2018.04.16-2019.04.16 0.8538-3.6 None 200,000 2018.06.01-2019.05.31 0.8538-3.6 None 160,000 2018.03.09-2019.03.09 0.8538-3.6 None 100,000 2018.06.01-2019.05.31 0.8538-3.6 None 250,000 2018.10.03-2019.10.03 0.8538-3.6 None 150,000 2018.01.31-2019.01.31 0.8538-3.6 None 500,000 2018.03.02-2019.03.02 0.8538-3.6 Property 192,145 2018.12.25-2019.12.25 0.8538-3.6 None 210,000 2018.12.27-2019.12.26 0.8538-3.6 None 199,647 2018.08.25-2019.08.24 0.8538-3.6 None 315,005 2018.06.01-2019.06.01 0.8538-3.6 None $ 3,276,797

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STATEMENT 13

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF ACCOUNTS PAYABLE FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Client Name Description Company A Payable for goods Company B 〃 Company C 〃 Company D 〃 Company E 〃 Company F 〃 Others (Note) 〃 Accounts payables to related parties TSI 〃 Others 〃	Amount $ 629,996 160,312 116,436 99,037 84,809 72,353 193,671
	1,356,614
	490,907 23,923
	514,830
	$ 1,871,444

Note: The amount of individual vendor in others does not exceed 5% of the account balance.

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STATEMENT 14

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF SALES REVENUE FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Description Sales revenue Less: Sales returns Sales allowances	Amount $ 24,908,191 (19,519) (2,980) $ 24,885,692

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STATEMENT 15

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF COST OF GOODS SOLD FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item 1. Raw materials Balance, beginning of the year Add: Raw materials purchased Less: Balance, end of the year Total used raw material of the year 2. Materials Balance, beginning of the year Add: Material purchased Less: Transferred to other accounts Balance, end of the year Total used materials of the year 3. Direct labor 4. Manufacturing expense 5. Manufacturing cost 6. Add: Work in progress, beginning of the year Work in progress bought in Less: Work in progress, end of the year Transferred to other accounts 7. Finished goods cost 8. Add: Finished goods, beginning of the year Finished goods bought in Less: Transferred to other accounts Finished goods, end of the year 9. Difference of temporary valuation of material price 10. Loss from cessation of work 11. Gain from price recovery of inventory 12. Revenue from sale of scraps

Amount $ 328,656 17,279,700 (511,314) 17,097,042 119,086 1,728,710 (24,037) (138,824) 1,684,935 599,739 2,268,423 21,650,139 233,115 13,885 (431,778) (550,962) 20,914,399 1,490,738 2,142,452 (28,330) (2,176,104) (16,109) 150,885 (1,264) (22,383) $ 22,454,284

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STATEMENT 16

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Name Payroll and related expense Rental expense Stationery expense Traveling expense Transportation fee postage expenses Repair and maintenance expense Advertisement expense Utilities expense Insurance expense Entertainment expense Donation expense Taxes Depreciation expense Meal expenses Employee benefits Consumables expense Professional service fees Commission expense Export expense Training expense Research expense Information fee Other expense Expected credit loss reversed	Selling Expense General And Administrative Expense Research and Development Expenses Expected Credit Loss (Reversed) $ 69,584 $ 198,251 $ 66,068 $ - 633 18,673 - - 204 1,152 49 - 3,999 6,518 543 - 314,718 160 349 - 2,222 6,888 11 - - 1,535 4,640 - 6,265 85 - - - 736 - - 5,631 12,851 4,471 - 2,562 13,359 9 - - 177 - - - 106 494 - - 2,914 3,040 - 870 2,219 1,270 - 459 1,362 775 - 25 662 344 - 9,450 18,945 504 - 37,283 - - - 38,735 40 - - 10 5,126 26 - - - 71,885 - 11 10,849 195 - 6,085 18,291 3,232 - - - - (6,583) $ 498,746 $ 320,899 $ 157,905 $ (6,583)	Total $ 333,903 19,306 1,405 11,060 315,227 9,121 6,175 6,350 736 22,953 15,930 177 600 5,954 4,359 2,596 1,031 28,899 37,283 38,775 5,162 71,885 11,055 27,608 (6,583) $ 970,967

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STATEMENT 17

SHINKONG SYNTHETIC FIBERS CORPORATION

STATEMENT OF LABOR, DEPRECIATION AND AMORTIZATION BY FUNCTION FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

Classified By Function Classified By Nature Labor cost (Note) Salary and bonus Labor and health insurance Pension Board compensation Others Depreciation expense	2018 Classified as Cost of Revenue Classified as Operating Expenses Total $ 952,918 $ 304,698 $ 1,257,616 87,213 19,415 106,628 37,686 13,701 51,387 - 7,887 7,887 40,240 12,117 52,357 509,591 13,710 523,301	2017
		Classified as Cost of Revenue Classified as Operating Expenses Total $ 853,640 $ 223,781 $ 1,077,421 86,428 18,417 104,845 40,516 14,891 55,407 - 7,548 7,548 38,696 9,399 48,095 432,093 18,308 450,401

Note: As of December 31, 2018 and 2017, the Company had 1,500 and 1,472 employees, respectively. There were 10 non-employee directors for both years.

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