I. Spokespersons of the Company

	Spokesperson:	Deputy Spokesperson
Name	Peng, Shen-Long	Huang, Mei-Ling
Title	Chief, Administration Division	Chief, Finance Division
Contact No.	(02)2542-2231, ext 601	(02)2542-2231, ext 628
E-mail	[email protected]	[email protected]

II Addresses and Telephone Numbers of Headquarter and Facotries

Headquarter:

Address: 6F., No.88, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.) Tel: (02) 2542-2231 Fax: (02) 2563-4597 Keelung Factory: Address: (203) No. 171, Zhonghua Rd, Zhongshan District, Keelung City Tel: (02) 2420-1053 Hualien Factory Address: (970) No.15, Huadong, Hualien City, Hualien County Tel: (03) 822-3181 Fax: (03) 822-1854 Miaoli Factory Address: (360) No.210, Fuxing, Miaoli City, Miaoli County Tel: (037) 260-601 Fax: (037) 267-170 Taichung Factory Address: (435) No.100, Sec. 2, Nanti Rd., Wuqi Dist., Taichung City Tel: (04) 2521-8588 Fax: (04) 2630-5618

III. Share Transfer Agency:

Name: Stock Affair Team, TFC Website: http://www.taifer.com.tw/ Address: 6F., No.88, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.) Tel: (02) 2542-2231 Fax: (02) 2531-7679

IV. CPAs audited the annual financial report for the most recent fiscal year

Name of CPAs: Tseng, Kuo-Yang, and Lin, Heng-Sheng Name of Accounting Firm: KPMG Taiwan Address: (110) 68F, No. 7, Xinyi Rd., Sec. 5, Taipei City Tel.: (02) 8101-6666 Fax: (02) 8101-6667 Website: https://home.kpmg.com/tw/zh/home.html

V. Name of any exchanges where the company's securities are traded offshore, and the method by which to access information on said offshore securities: None
VI. Website of the Company: http://www.taifer.com.tw

One. Report to Shareholder ............................................................................................................................... 1	One. Report to Shareholder ............................................................................................................................... 1
Two. Company Profile ....................................................................................................................................... 3
I.	Establishment date .......................................................................................................... 3
II.	Organization and operations ........................................................................................... 3
Three. Corporate Governance Report .............................................................................................................. 7
I.	Organization System ...................................................................................................... 7
II.	Information on Directors, Supervisors, President, Vice Presidents, and
	Management Team ....................................................................................................... 10
III.	Remuneration paid to directors, supervisors, president and vice presidents for the
	recent ............................................................................................................................ 16
IV.	Operation of Corporate Governance ............................................................................ 22
V.	Professional Service Fees of CPAs ............................................................................... 49
VI.	Information on replacement of certified public accountant: not applicable. ................ 51
VII.	Where the company's chairperson, general manager, or any managerial officer in
	charge of finance or accounting matters has in the most recent year held a position
	at the accounting firm of its certified public accountant or at an affiliated
	enterprise of such accounting firm: not applicable. ...................................................... 51
VIII.	Any transfer of equity interests and/or pledge of or change in equity interests
	(during the most recent fiscal year or during the current fiscal year up to the date
	of printing of the annual report) by a director, supervisor, managerial officer, or
	shareholder with a stake of more than 10 percent during the most recent fiscal
	year or during the current fiscal year up to the date of printing of the annual report.
	52
IX.	Information on top ten shareholders and their mutual relationship as spouse or
	blood relative within the second degree ....................................................................... 53
X. Percentage number of shares and consolidate percentage of the company, directors,
	supervisor, managers and the businesses that are controlled by the company
	directly or indirectly on the invested company ............................................................ 54
Four. Capital Raising Activities ...................................................................................................................... 55
I.	Capital and Shares ........................................................................................................ 55
II.	Issuance of corporate bonds ......................................................................................... 60
III.	Preferred shares ............................................................................................................ 60
IV.	Global depository receipts ............................................................................................ 60
V.	Employee share subscription warrants ......................................................................... 60
VI.	New restricted employee shares ................................................................................... 60
VII.	Financial Plans and Implementation ............................................................................ 60
Five. Operation Highlights .............................................................................................................................. 61
I.	Business Content .......................................................................................................... 61
II.	Overview of market and production & sales ................................................................ 79
III.	Employees .................................................................................................................... 98
IV.	Distributed information of environmental protection ................................................... 99
V.	Labor Relations .......................................................................................................... 100
VI.	Important Contracts .................................................................................................... 103
Six. Financial Profile ...................................................................................................................................... 107
I.	Condensed Balance Sheet, Consolidated Income Statement and Audit Opinion of
	CPAs in the Past Five Years........................................................................................ 107
II.	Financial Analysis in the Past Five Years ................................................................... 112
III.	Audit Report of the Audit Committee ........................................................................ 115
IV	Consolidated Financial Statements............................................................................. 116
V	Parent Company Only Financial Statements .............................................................. 202

Seven. Review and Analysis of Financial Status and Business Results and Risk Issue ......................... 279	Seven. Review and Analysis of Financial Status and Business Results and Risk Issue ......................... 279
I.	Financial Status .......................................................................................................... 279
II.	Financial Performance ................................................................................................ 280
III.	Cash flow .................................................................................................................... 281
IV.	Impact to the Financial Business by the Significant Capital Expenditures in the
	Previous Year .............................................................................................................. 281
V.	Re-investment Overview ............................................................................................ 282
VI.	Risk Management Organization ................................................................................. 284
VII.	Assessment of Risks ................................................................................................... 286
VIII.	Other Important Matters ............................................................................................. 301
Eight. Special Records ................................................................................................................................... 302
I.	Affiliate Information .................................................................................................. 302
II.	Private placements of securities in the most recent year and as of the printing date
	of the annual report ..................................................................................................... 307
III.	Shares of the Company that are held or disposed by a subsidiary in the most
	recent year and as of the printing date of the annual report ....................................... 307
IV.	Other necessary descriptions ...................................................................................... 307
Nine. Any	event which has a material impact on shareholders' equity or securities prices, as specified in
Article 36, Paragraph 2, Subparagraph 2 of the Securities and Exchange Act, in the most recent year
and as of the printing date of the annual report .................................................................................. 308

Report to Shareholder

One. Report to Shareholder

Overview of 2020 Business:

In 2020, benefitted from the operation guidelines, the net profit and EPS of TFC have been growing steadily every year. For the major business, fertilizer, the strategy for the niche products is expansion of production and sales. Not only the fertilizer series “King Won” and “Hey Won” were launched, TFC also engaged the development of purification technologies for the electronic-grade chemicals, seeking to optimize the profitability structure of fertilizers and chemicals. For the real estate business, the strategy is to separate the wheat from the chaff, and gradually increase the weight of sustainable property in the profit. The management and employees have fulfilled the duties diligently to work together for keeping outstanding operating performance, while ensuring interests of shareholders.

The project of compounded fertilizer factory and chemical tanks (Peifeng Technology and Fertilizer) at the West 10th Pier of Taichung Harbor commenced the production in July 2020 officially, not only satisfying the demands of the domestic fertilizer market, but also expanding to overseas markets gradually. For the C2 and C4 development in Nangang Software Park, the construction progress has achieved 69.48% and 38.73% (as of January 2021). The development operation is in progress as scheduled. The development, planning, and merchant recruitment for the Hsinchu Science and Commerce Park are in progress. The sustainable properties are established in a gradual manner, to become a foundation of stable profit for TFC.

TFC was selected to the FTSE4Good TIP Taiwan ESG Index in 2020 again. We have received domestic and international recognition for our business performance, corporate governance, and CSR from professional and independent investment agencies. Furthermore, the new product “#43 King Won organic compound fertilizer” and “TFC Biotech King Won P-solubilizing bacteria fertilizer” were developed. Through the innovative products, the reasonable fertilization and friendly farming lands are benefitted, and the CSR is fulfilled.

The Company's actual output of fertilizer products totaled 550,500 tons in 2020, decreased by 5.48% from 2019. The output of chemical engineering products totaled 193,318 tons, decreased by 1.69% from 2019. The actual sales of fertilizer products totaled 634,983 tons, decreasing by 16.64% from 2019, (the domestic sales of fertilizer products increased, but the re-sale of urea by Al-Jubail decreased, and thus the total sales decreased.) And that of chemical engineering products totaled 194,274 tons, decreased by 2.84% from 2019.

In the regards of revenue and profit, based on the consolidated financial statements, the operating revenue was NT$10,169,742 thousand in 2020, decreasing by 21.11% from NT$12,890,565 thousand in 2019. The net operating profit, NT$1,247,689 thousand, decreasing by 23.27% from 2019. The net non-operating profit was NT$1,717,686 thousand, increasing by 104.91% from 2019. The current net profit wasNT$2,452,881 thousand, increasing by 18.84% from 2019.

For the financial structure, based on the consolidated financial statements, the Company had solid financial structure. Until December 31, 2020, the Company has had the assets totaled NTD76,346,127 thousand, and liabilities totaled NTD25,037,416 thousand. The liability ratio was 32.79%. The equity amounted to NTD 51,308,711 thousand, and EPS NT$52.36.

Summary of 2021 Business Plan:

As geopolitical conflicts and the COVID-19 pandemic are easing gradually, the international and domestic macro economic will demonstrate the trend of recovery.

Regarding the fertilizer and chemical business, as Peifeng Technology and Fertilizer has completed the construction of its plant, the new compound fertilizer plant and chemical tank started to operate, which will help the overall operating profit growth. Meanwhile, the budget will be invested in the research and development of new electronic-grade chemical production technologies, to enhance items of future niche products and increase sources of profit.

Report to Shareholder

In terms of real estate business, Nangang Software Park C2 and C4 are in progress as scheduled; part of the land in the Hsinchu Science and Commerce Park has been rezoned in the second phase, which is positive to the future demands of commercial real estate generated when the government develops the high-tech industrial park; the land of the old Kaohsiung plant is under the governmental rezoning, and the development will be gradually completed.

Summary of future business development strategies:

Facing the changes in the economic environment, the Company continues to uphold the overall business strategy of profit growth, competition optimization, and sustainable operation. Improve the fertilizer chemical technologies and quality, increase sales of niche products while expanding overseas markets; develop the real estate business by taking into account of land zoning and market maturity, and adopting diversified utilization modes such as self-development, joint development, long-term and short-term leasing, in order to establish a foundation of sustainable properties. Wish You

All the best and prosper

Chairman, Huang Yao-Hsing

==> picture [36 x 36] intentionally omitted <==

Company Profile

Two. Company Profile

I. Establishment date

May 1st, 1946

II. Organization and operations

Originally a state-owned enterprise (SOE), the Company has been established for 75 years. During the SOE period, to cope with the government’s agriculture policies, the Company was responsible for the production and supply of domestic fertilizer products. Through the business development for more than 70 years, it has became the largest modernized fertilizer production business in Taiwan, and enabled sufficient supply of the fertilizer needed for various stages of agricultural development in Taiwan without interruption; this is a great contribution to advance the development of Taiwanese agriculture. Under the SOE privatization policy actively promoted by the government, the Company was privatized on September 1, 1999, and became a listed private corporation.

The Company is the largest fertilizer manufacturer in Taiwan, supplying more than 600,000 tons to the domestic market annually, accounting for about 70% of the total domestic demand. The main self-produced fertilizer products include single nutrient fertilizers, King Won” Potassium sulfate nitrophosphate organic compound fertilizer series, “Hey Won” nitrophosphate organic compound fertilizer series, Biotec Organic compound fertilizer series, Organic Fertilizer series, Instant Water Soluble Fertilizer series, Biopower Stimulants series, Microbial fertilizer, and acidic soil conditioner. In addition, it also manufactures and imports chemical products and electronic grade chemicals for domestic and foreign markets. After the privatization, in response to changes in the internal and external environment, the Company has actively developed into deep seawater, real estate development, biotechnology, health care products and other businesses.

Looking forward to 2021, to deal with the rapid changes in domestic and foreign industrial and economic environmental conditions, the Company will keep upholding the management philosophy focusing on solidity, reinforcement, innovation and business sustainability, transform and upgrade the Company's constitution, and continue to adopt the profit growth, optimization of competition and sustainable development as its strategic objectives to construct the development blueprint for the two major business units, “fertilizer chemical business” and “real estate and investment business”, and also hopes to achieve the objectives of sustainability and business development pursued by the Company by exploitation of diversified business development and strategy of diversification.

Key milestones since the establishment are summarized as the following:

May 1946	Established by the previous Resources Commission and Taiwan Provincial Government.
December	As the representative of the government, TFC entered a joint venture agreement with Saudi
1979	Arabia to establish Al-Jubail Fertilizer Company in the Al-Jubail Industrial Zone in Saudi
	Arabia.
May 1989	The land of the Company’s Nangang Factory was zoned as the land for the “Nangang Software
	Park” as instructed.
March 1995	The privatization proposal was approved by the Executive Yuan
March 1998	The first share offering after the privatization by public drawing placement for 24.93% held by
	the government; the IPO was successfully completed.
July 1998	To cope with the government’s overall planning and development of the Nangang Software
	Park, the Nangang Factory was officially shutdown.

Company Profile

September1999	Officially and fully privatized.
February 2002	Coping with the planning and development of “Special Zone Program for New Central Business
	District in Hsinchu” by the Hsinchu City Government through the land of Hsinchu Factory.
November	Approved the feasibility research report of transforming the Huanlien Factory to a deep
2004	seawater technology park, and the first-phase investment plan.
January 2005	The Ministry of Economic Affairs released 200 million shares of TFC through the auction after
	market close; the shareholding percentage was reduced to 24.07%.
March 2005	The shares held by the government were managed by the Ministry of Finance.
May 2005	The shares held by the government were managed by the Council of Agriculture.
October 2005	The “Plan to Relocate All the TFC Factories to Taichung Harbor” was approved.
November	The first-phase construction of the first section water-intaking facilities for the deep seawater in
2005	Hualien commenced.
December	Pursuant to the Taipei City Government’s regulations related to the urban renewal business, the
2005	R13 land had joined with the adjacent lands to build the collective housing with joint
	investment.
May 2006	The C6/C7/C8/C9 lands in the Nangang Software Park were offered for development with the
	surface right of 50 years; after the public tendering, CTBC was awarded the tender.
August 2006	TFC entered the joint investment agreement with “Young Energy Source Co., Ltd” to establish
	“Taiwan Yes Deep Ocean Water Co., Ltd.,” for treatment of deep seawater, production and sales
	of packaged drinking water and beverages in partnership.
September2006	Taiwan Yes Deep Ocean Water Co., Ltd. the joint venture with Young Energy Source Co., Ltd,
	50% of stake held by each, convened the meeting of initiator. The imitation capital was NT$650
	million and the registration of company establishment was completed.
May 2007	The piping operation for intaking deep seawater has been completed, with the depth of -662
	meters.
May 2007	The fish collagen peptide factory was officially commissioned.
November	Taiwan Fertilizer Foundation was established officially
2007
November	TFC’s cosmetic products, miss SHARK series were launched officially.
2007
June 2009	To fulfill the corporate social responsibility, the Board of Directors approved USD50 million
	donation to sponsor the Agriculture Ministry of Saudi Arabia for establishing an agriculture
	center.
September2009	The Chairman and the chief in charge of fertilizer department, Saudi Basic Industries
	Corporation, Mr. Al-Sheaibi jointly signed the shareholders’ resolution of Al-Jubail Fertilizer
	to amend the Articles of Incorporation of Al-Jubail Fertilizer; the survival period of Al-Jubail
	Fertilizer was extended from 33 years to 53 years.
May 2010	Invested NT$1.41 billion for the Phase 1 development of Hsinchu Science and Commerce Park
	at the land of TFC’s Hsinchu Factory.
January 2011	“TR Electronic Chemical (Kunshan) Co., Ltd.” was established in Kunshan, China.
November	Invested NT$100 million to established the 100% owned subsidiary, Taifer Biotech Product
2011	Marketing.
December	The Remuneration Committee was established.
2011
December	Acquired all 50% of stake at “Taiwan Yes Deep Ocean Water Co., Ltd.” from Young Energy
2011	Source Co., Ltd.
July 2013	The Taichung Factory was officially commissioned.
December	Through the “Tourism Hotel Tenant Recruitment for C2 of Nangang Software Park Project,” the
2013	“Collaborative Planning Agreement” was entered with the tender winner, “Grand Hi-Lai Hotel
	Co., Ltd,” and “Caesar Park Hotels Ltd.”
February 2015	Approved the tender winner of the tenant recruitment for C2 office building.
February 2015	The Company invested in Cambodia to establish Taifer (Cambodia) Co., Ltd.
April 2015	“Ocean Mine 1400” produced by the re-investee, “Taiwan Yes Deep Ocean Water Co., Ltd.”
	was certified as the health food by the Ministry of Health and Welfare.
June 2015	The addition of two seats of independent directors was approved by 2015 AGM.
August 2015	The Nangang C3 surface right tender was awarded to CTBC Life and China Life Insurance Co.,

Company Profile

Ltd. jointly.

	Ltd. jointly.
September2015	The Nangang C3 surface right agreement was entered with CTBC Life and China Life Insurance
	Co., Ltd.
December	The construction commence ceremony of Nangang C2 office building and tourism hotel was
2015	held.
December	The first Corporate Social Responsibility Report (2014) was released.
2015
January 2016	The beam installation ceremony for D7-A office building in Hsinchu was held.
February 2016	The new product, “#43 "HeyWon" Nitrophosphate Organic Compound Fertilizer” was launched.
May 2006	Completed the GHG inventory for each factory.
August 2016	The re-investee, TR Electronic Chemical (Kunshan) Co., Ltd. proceeded to the dissolution.
August 2016	The subsidiary, Taifer Biotech Product Marketing is renamed to “Mitagri Co. Ltd.”
October 2016	The Board of Directors approved the proposal of factory construction at No. 10 West Pier of
	Taichung Harbor, with total investment of NT$2.367 billion.
November	The Board of Directors approved to invest “Mitagri Co. Ltd.” for total NT$80 million.
2016
November	The new product, “#4 "HeyWon" Nitrophosphate Organic Compound Fertilizer” was launched.
2016
November	The Company won the “Rookie Award” of 2016 TCSA (Taiwan Corporate Sustainability
2016	Awards)
December	“#1 HeyWon” and “#4 HeyWon” compound fertilizers were imported to Malaysia for promotion
2016	and sales.
March 2017	“#43 HeyWon” compound fertilizer was imported to Malaysia for demonstrative farm and trial
	sales.
May 2017	The Company launched the new product “#42 Biotec Organic Compound Fertilizer,” to replace
	the market of #142 and #1 Biotec Organic Compound Fertilizer.
May 2017	To promote the organic nutrients and fertilizers, the Company and West Lake Greenview
	Compound Farm Park in Maoli jointly established the organic model farm
May 2017	The Company established Peifeng Technology Co. , Ltd for the investment in No. 10 West Pier
	of Taichung Harbor.
June 2017	The first supply center was established in Hualien.
June 2017	In coordination with government policies, the fertilizers of TFC achieved the goal of
	comprehensive “Biotec-lization”
August 2017	The commercial office building in Hsinchu, TFC ONE, was completed.
August 2017	To improvement the problem of PM2.5 generated from burning rice straw, the Company
	launched “#10 Biotec Organic Fertilizer” and “#12 Biotec Organic Fertilizer.”
October 2017	The Board of Directors approved the land development of Nangang C4.
November	The Company won the “TOP 50 Enterprise Sustainability Report: Golden Award for
2017	Conventional Manufacturing” and “Social Co-fusion Award in the 2017 TCSA.
December	Premier Lai Ching-te inspected Hualien Deep Sea Water Park and instructed Three “100%”
2017	policy goals.
December	TFC announced the ”Nongyo Biotech 10 Organic Fertilizer” and “Nongyo Biotech 12 Organic
2017	Fertilizer”.
February 2018	TFC’s micro-movie won the “Best Original Script Award” at the 2018 Taipei Golden Eagle
	Micro-movie Festival.
July 2018	The 1st Audit Commission of TFC was founded.
August 2018	TFC signed an agreement with National Chengong University on the industry-academic
	cooperation project of Hualien Deep Sea Water Park.
October 2018	President Tsai Ing-wen visited Hualien Deep Sea Water Park and planned assisting the central
	government in founding the National Marine Resource Museum.
November	TFC won the “Platinum Award for Top 50 Corporate Sustainability Report”.
2018
December	TFC was selected as FTSE4Good.
2018

Company Profile

December	The Board of Directors approved to invest “Taiwan Agricultural Investment and Development
2018	Co., Ltd” for total NT$60 million.
February 2019	The market value of TFC once again became one of the top 100 enterprises of Taiwan.
July 2019	Awarded with the 2019 “National Brand Yushan Award: Best Product Category”.
December	TFC’s fertilizers were recognized by Tottori Flower Gallery in Japan, and signed the Letter of
2019	Intention for Collaboration .
December	The Company won the “Golden Award of Corporate Sustainability Report”.
2019
December	Beam Installation Ceremony for the C2 Project.
2019
January 2020	TFC was selected as FTSE4Good for 2019 to 2020 consecutively.
April 2020	President Tsai, Ing-Wen visited the Taichung Plant.
April 2020	The Company was awarded with the Top Ten Excellent Enterprises Award of the “Golden Peak
	Award: Large Enterprise.”
June 2020	Selected as one of constituents for the Taiwan Sustainability Index for 2020, as the third year in
	a row.
July 2020	The subsidiary, “Peifeng Technology & Fertilizer Co., Ltd.” officially commenced the
	production in its nitrophosphate compound fertilizer plant.
August 2020	To accommodate the real-name system 2.0 for buying fertilizer imposed by the Council of
	Agriculture, the Company established the on-line fertilizer order platform.
September	The Company was awarded with the 17th version of the “National Brand Yushan Award.”
2020
November	Silver Award of Corporate Sustainability Report from the 13th Taiwan Sustainability Award.
2020
December	Selected as one of constituents for the Taiwan Sustainability Index for the first half of 2021, as
2020	the third and half year in a row.

Corporate Governance Report

Three. Corporate Governance Report

I. Organization System

(I) Corporation Organization

==> picture [657 x 326] intentionally omitted <==

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

Shareholder
Assembly
Remuneration
Board of directors
Audit Committee
Committee
Chairman
Audit Office Board of Directors
Office
General Manager
Deputy General
Manager
Keelung Factory Hualien Factory Miaoli Factory Taichung Factory Center Safety and Health Production Dept R&D Dept. Sales Dept Trading Dept Development Dept Business Management Dept Development and Property Planning Dept Information Dept Finance Dept Dept Administration
----- End of picture text -----

Corporate Governance Report

(II) Affairs in charge for each major department

(II) Affairs	in charge for each major department
Unit Name	Duties
R&D Dept.	1. Evaluation and introduction of newproducts and new technology.
	2. R&D of newproducts and technologyand related business.
	3. Improvement of existing products and technology.
	4. Intellectualpropertymanagement.
	5. Other relevant R&D and related business.
Trading Dept	1. Purchase and supplyof the domestic and foreign raw materials.
	2. Dispatchingand inventorycontrol of raw materials.
	3. Storage and transportation management of products and materials and treatment of dull and waste materials.
	4. Planningand execution of unloadingand storage services.
	5. Constructions and services outsourcing.
	6. Import & export and marketing and planning management of the bio-tech chemical products.
	7. Other relevantpurchase and marketingof bio-tech chemicalproducts.
Sales Dept	1. To market, import, export,plan and manage various fertilizers.
	2. To handle customer complaints regarding fertilizer products and bio-tech chemical products.
	3. To compile information regarding business conditions in fertilizer and bio-tech chemical products markets.
	4. To demonstrate and promote ideas of safe agriculture and fertilizer domestically and overseas.
	5. Other business about thepromotions of fertilizers and bio-tech chemicalproducts.
Business Development Dept	1. To seek for, assess, select and studyinvestment opportunities.
	2. To research and execute domestic and overseas investment, cooperation, share participation, merger, venture capital, etc.
	3. To research and execute the technology introduction or cooperation and technical investment.
	4. To research and execute the investment business and its feasibility.
	5. To trace and review investment and reinvestmentperformance.
	6. To deal with other investment related businesses.
Property Development and Management Dept	1. Land development business.
	2. Project design and budgetpreparation.
	3. Handlingof works such asproject outsourcing, construction supervision, and acceptance.
	4. Merchant recruitment, maintenance management and occupation treatment of real estate assets.
	5. Purchase and sale of real estate assets.
	6. Handling of other business related real estate assets.
Planning Dept	1. To research and execute operation policy, operation strategy, mid-term and long-term projectplan and annual operationplan.
	2. To plan and carry forward operation and management systems; manage and evaluate operationperformance.
	3. To trace and evaluate operation meetingminutes, resolutions andproject affairs.
	4. To deal with authorization bylevels and compile rules and regulations.
	5. To deal with other matters in relation to enterpriseplanning.
Information Dept	1. To deal with the business of information system.
	2. To deal with information network.
	3. To deal with the other relevant business.

Corporate Governance Report

Unit Name	Duties
Finance Dept	1. To developserviceplan, and to dispatch and control funds.
	2. To research and developfinancial strategies and conduct financial analysis andprediction.
	3. Toplan and execute financial and wealth management matters.
	4. To research and developaccountingsystem.
	5. To conduct budget and final settlement and control cost and expense.
	6. Business related to investor relationship(IR).
	7. To deal with other matters in relation to finance, accountingand statistics.
Administration Dept	1. Toplan and execute the HR system,plan and execute organization and HR matters.
	2. To deal with employee-employer relationship.
	3. To manage instruments and transactgeneral affairs.
	4. To distribute and keepcash, securities, notes and deeds.
	5. Externalpublic relation.
	6. To deal with other matters out of the duties of the other departments and offices.
Board of Directors Office	1. Matters related to the board and functional committees.
	2. Preparation of annual report and the minutes of shareholders’ meeting.
	3. Compilation of semi-annual and CSR reports.
	4. Promotion of corporate social responsibilityas well as integrity policies.
	5. To deal with stock matters.
Audit Office	To master and manage internal control and internal audit matters.
Production Dept	1. Planning, integrating and managing production plans.
	2. Managing production technology, quality and efficiency, and promoting the maintenance system ofproduction equipment.
	3. Planning, integrating and managing construction plans and capital expenses.
	4. Managing fixed and idle assets other than land.
	5. Evaluating and introducing production technology.
	6. Improving production efficiency for saving energy.
	7. Managing intellectual property rights related to production technology.
	8. Other related business regarding the production management and technology development.
Safety and Health Center	1. Drawing up safety and health policies, goals, and rules and regulations.
	2. Implementing and supervising safety and health related laws and regulations.
	3. Promoting and implementing safety and health plans.
	4. Auditing and assisting the safety and health business of each plant and subsidiary.
	5. Investigating, analyzing, improving and handling occupational safety events.
	6. Managing and promoting health of employees; safety health education and training for employees.
	7. Counseling and providing information of safety health related business.
	8. Other business related to environment, safety and health.
Production Factories	Manufacturing and production management.

Corporate Governance Report

II. Information on Directors, Supervisors, President, Vice Presidents, and Management Team

(I) Director information

Director information (I)

May 1, 2021

Title	Nationality	Name	Gender	Election (Accession) Date	Term	Date First Elected	Shareholding	When Elected	Current shareholding	Current shareholding	Shareholding by Spouse and Children of Minor Age	Shareholding by Spouse and Children of Minor Age	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience (Education)	Other executives or directors who are related as spouses or within the second degree of consanguinity	Executives ir Directors Who are Spouses or within Two Degrees of Kinship	Executives ir Directors Who are Spouses or within Two Degrees of Kinship	Executives ir Directors Who are Spouses or within Two Degrees of Kinship	Remarks
							Shares	Shareholding Ratio (%)	Shares	Shareholding Ratio (%)	Shares	Shareholding Ratio (%)	Shares	Shareholding Ratio (%)			Title	Name	Relation
Chairman	Republic of China	COA		2018.7.1	Three years	2005.5.20	235,886,376	24.07	235,886,376	24.07	0	0	0	0	‐	‐	-	-	-
	Republic of China	Representative: Huang, Yao-Hsing	Male	2020.2.12	Three years	2020.2.12	0	0	0	0	0	0	0	0	PhD, Department of Materials Science, National Sun Yat-sen University Vice President at Taiwan Fertilizer Co.	President of Taiwan Fertilizer Co. Chairman and President of Taiwan Fertilizer (Cambodia) Co., Ltd. Chairman of Taichuang Asset Management Co., Ltd.	-	-	-	Note 4:
Director	Republic of China	COA		2018.7.1	Three years	2005.5.20	235,886,376	24.07	235,886,376	24.07	0	0	0	0	‐	‐	-	-	-
	Republic of China	Representative: Hu, Jong-I	Male	2021.2.22	Three years	2021.2.22	0	0	0	0	0	0	0	0	PhD, Agricultural Economics, The University of Tokyo Chief Secretary, Council of Agriculture, Executive Yuan	Director General, Agriculture and Food Agency, Council of Agriculture, Executive Yuan Director, Agricultural Credit Guarantee Fund	-	-	-
Director	Republic of China	COA		2018.7.1	Three years	2005.5.20	235,886,376	24.07	235,886,376	24.07	0	0	0	0	‐	‐	-	-	-
	Republic of China	Representative: Fan, Mei-Ling	Female	2021.3.8	Three years	2021.3.8	0	0	0	0	0	0	0	0	PhD, Natural Resources Administration, National Dong Hwa University Hualien District Agricultural Research and Extension Station, Council of Agriculture, Executive Yuan	Chief Secretary, Council of Agriculture, Executive Yuan Managing Director, Agricultural Bank of Taiwan Managing Director, Agricultural Bank of Taiwan	-	-	-
Director	Republic of China	COA		2018.7.1	Three years	2005.5.20	235,886,376	24.07	235,886,376	24.07	0	0	0	0	‐	‐	-	-	-
	Republic of China	Representative: Li, Chao-Feng	Male	2018.7.1	Three years	2017.5.12	0	0	0	0	0	0	0	0	Master, Institute of Architectural Engineering, National Cheng Kung University Economic Affairs Department, Yilan County	Person in Charge, Chao Feng Architect Firm Person in Charge, Li Jing Construction Limited	-	-	-
Director	Republic of China	COA		2018.7.1	Three years	2005.5.20	235,886,376	24.07	235,886,376	24.07	0	0	0	0	‐	‐	-	-	-

Corporate Governance Report

Title	Nationality	Name	Gender	Election (Accession) Date	Term	Date First Elected	Shareholding When Elected	Shareholding When Elected	Current shareholding	Current shareholding	Shareholding by Spouse and Children of Minor Age	Shareholding by Spouse and Children of Minor Age	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience (Education)	Other executives or directors who are related as spouses or within the second degree of consanguinity	Executives ir Directors Who are Spouses or within Two Degrees of Kinship	Executives ir Directors Who are Spouses or within Two Degrees of Kinship	Executives ir Directors Who are Spouses or within Two Degrees of Kinship	Remarks
							Shares	Shareholding Ratio (%)	Shares	Shareholding Ratio (%)	Shares	Shareholding Ratio (%)	Shares	Shareholding Ratio (%)			Title	Name	Relation
	Republic of China	Representative: Sun, Uang-Shyang	Male	2020.10.1	Three years	2020.10.1	113	0	113	0	0	0	0	0	Department of Wooden Mold, Kaoshiung Vocational School of Engineering Team leader, Nitrphos Field, Kaohsiung Factory, TFC	Team leader, Nitrphos Field, Taichung Factory, TFC Governor, Trade Union, Taichung Factory, TFC	-	-	-
Director	Republic of China	Chen, Yao-Kuang	Male	2018.7.1	Three years	2018.7.1	100,000	0.01	75,000	0	0	0	0	0	PhD, Stevens Institute of Technology Associate Professor, Architectural Engineering Department, National Cheng Kung University Project Manager at Swanke Hayden Connell Architects, New York	Adjunct Associate Professor at the Architectural Engineering Department of National Cheng Kung University	-	-	-
Independent Director	Republic of China	Lin, Horng-Chang	Male	2018.7.1	Three years	2018.7.1	0	0	0	0	0	0	0	0	Master in Finance, George Washington University, USA EMBA, National Taiwan University CFO, Healthconn Corp. CFO, Yonglin Biotech Independent supervisor, Giga Solar Materials Corp. AVP of the Finance Department and Spokesperson, Senao International Co., Ltd. Consultant, Taiwan Rolling Stock Co., Ltd.	Independent director, Nishoku Technology Inc. Supervisor, Provision Information Co., Ltd. Supervisor, Bright Led Electronics Corp.	‐	‐	‐
Independent Director	Republic of China	Lee, Ming-Shiuan	Female	2018.7.1	Three years	2018.7.1	0	0	0	0	0	0	0	0	Master of Accounting, University of Illinois, Urbana Champaign Master of Accounting, Institute of Accounting, National Taiwan University Bachelor of Accounting, Department of Accounting, National Taiwan University Vice President, PwC Taiwan VP of Finance and Spokesperson, Kingpak Technology Inc. Assistant Manager, Underwriting Department, SinoPac Securities CPA, Republic of Certified Registered CPA, the U.S	VP of Finance, King Max Semiconductor Inc. Independent Director, A-Spine Asia Co., Ltd Independent Director, Hung Sheng Construction Co., Ltd.	‐	‐		‐
Independent Director	Republic of China	Hsiao, Chao-Chin	Male	2018.7.1	Three years	2018.7.1	0	0	0	0	0	0	0	0	MBA, National Cheng Kung University Member, International and Cross-strait Service Committee, Taiwan Provincial CPA Association Member, Laws and Regulations Committee, Taiwan Provincial CPA Association CPA, Republic of Certified	Person in Charge of Taiming Accounting Firm and CPA Independent Director, Trade-Van Information Service Co., Ltd.	‐	‐		‐

Note 1: The Council of Agriculture of the Executive Yuan dismissed its representative, Lin Shih-Chi, on February 21, 2021. Note 2: The Council of Agriculture of the Executive Yuan dismissed its representative, Chen Jun-Jih, on March 8, 2021.

Corporate Governance Report

Note 3: The Council of Agriculture of the Executive Yuan dismissed its representative, Hsu Sheng-Ming, on September 30, 2020.
Note 4: The Company's Chairman takes a concurrent position of the General Manager. Chairman Huang Yao-Hsing started from an entry-level position and has worked for years for the Company. He is experienced in various business areas and his professional competence has been well recognized by those inside or outside the Company. He has the expertise in governance needed as the President, which can help the Company in its sustainability and development. The Company is making efforts toward the ob of outstanding corporate governance; it is possible to plan the related measure in order to be in line with laws and regulations.

Corporate Governance Report

Table 1: Key Shareholders of Institutional Shareholders

May 1, 2021 Name of Institutional Shareholder Major Shareholders of Institutional Shareholder Council of Agriculture, Executive Yuan N/A (ownership: 24.07%)

Form 2: Key Shareholders as Corporations: None

Corporate Governance Report

Director information (II)

May 1, 2021

Qualification Name	Meet One of the Following Pro	fessional Qualification Requirements, Together with at Least Five Years Work Experience	fessional Qualification Requirements, Together with at Least Five Years Work Experience						Independence	Independence
	An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	Have Work Experience in the Areas of Commerce,Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10	11	12	Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director
Huang, Yao-Hsing																‐
Hu, Jong-I																‐
Fan, Mei-Ling																‐
Li, Chao-Feng																‐
Sun, Uang-Shyang																‐
Chen, Yao-Kuang																‐
Lin, Horng-Chang																2
Lee, Ming-Shiuan																2
Hsiao, Chao-Chin																‐

Note : Please tick “  ” the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during the term of office.

(1) Not an employee of the Company or its affiliate.
(2) Not a director or supervisor of the Company or any of its affiliates. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, or subsidiary of the same parent company as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary.)
(3) Is not a top ten shareholder or a shareholder who holds more than one percent of the total issued shares of the Company by him/herself or through his/her spouse, minor children or other persons.
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons stated in (1) Managers or Personnel of (2), (3).
(5) Not a director, supervisor, or employee of an institutional shareholder directly holding at least 5% of the circulating shares of the Company or that ranks Top 5 in shareholding ratio or that assigns a representative to serve as director or supervisor of the Company according to Article 27 Paragraph 1 or 2 of the Company act (The same does not apply, however, to independent directors set up by the Company and its parent company or subsidiary or a subsidiary that shares the same parent company according to the Act or the local laws and regulations.)
(6) Not a director, supervisor, or employee of another company with the number of directors in the Company or shares entitled to votes accounting for a majority that is controlled by the same person (The same does not apply, however, to independent directors set up by the Company or its parent company or subsidiary or a subsidiary that shares the same parent company according to the Act or the local laws and regulations.)
(7) Not if the chairperson, general manager, or person holding an equivalent position of the company and a person in any of those positions at another company or institution are the same person or are spouses: a director (or governor), supervisor, or employee of that other company or institution (but not apply to independent directors appointed in accordance with the act or the laws and regulations of the local country by, and concurrently serving as such at the company and its parent or subsidiary or a subsidiary of the same parent).
(8) Not a director, supervisor, or manager, or shareholder holding at least 5% of shares of a specific company or institution that is financially or commercially related to the Company (The same does not apply, however, if the said specific company or institution holds at least 20% yet less than 50% of the circulating shares of the Company and to independent directors set up by the Company and its parent company or subsidiary or a subsidiary that shares the same parent company according to the Act or the local laws and regulations.)
(9) Not a professional individual who, or an owner, partner, director, supervisor, or managerial officer of a sole proprietorship, partnership, company, or institution that provides auditing services or for the past two years, has provided commercial, legal, financial, accounting services or consultation amounted to less than a cumulative NTD500,000 to the Company or any affiliate of the company, or a spouse thereof. Provided that this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Securities and Exchange Act or to the Business Mergers and Acquisitions Act or related laws or regulations.
(10) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company.
(11) Not having any of the circumstances in Article 30 of the Company Act.
(12) Not a governmental, juridical person or its representative as defined in Article 27 of the Company Act.

Corporate Governance Report

(II) Information on the President, Vice Presidents and Management Team

May 1, 2021

Title	Nationality	Name	Gender	Election (Accession) Date	No. of shared held	No. of shared held	Shareholding by Spouse and Children of Minor Age	Shareholding by Spouse and Children of Minor Age	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience (Education)	Currently holding the position of other companies	Executives or directors who are spouses or relatives within 2nd degree of kinship	Executives or directors who are spouses or relatives within 2nd degree of kinship	Executives or directors who are spouses or relatives within 2nd degree of kinship	Remarks
					Shares	Shareholding Ratio(%)	Shares	Shareholding Ratio(%)	Shares	Shareholding Ratio(%)			Title	Name	Relation
General Manager	Republic of China	Huang, Yao-Hsing	Male	2016.9.1	0	0	0	0	0	0	PhD, Department of Materials Science, National Sun Yat-sen University Assistant Vice President at Taiwan Fertilizer Co. Vice President at Taiwan Fertilizer Co. Vice President at Taiwan Fertilizer Co.	Chairman and President of Taiwan Fertilizer (Cambodia) Co., Ltd. Chairman of Taichuang Asset Management Co., Ltd.	-	-	-	Note 1
Deputy General Manager	Republic of China	Zhang, Cang-Lang	Male	2015.10.1	0	0	0	0	0	0	NTU Graduate Institute of Building and Planning Assistant VP, Taiwan Fertilizer Co., Ltd., Assistant Vice President at Taiwan Fertilizer Co. Vice President at Taiwan Fertilizer Co.	Director and President, Taichuang Asset Management Co., Ltd. Representative of Institutional Director, Taiwan Fertilizer (Samoa) CO., LTD. President, Mongolia Taichuang Limited Director,Taiwan Agricultural Investment Co.,Ltd.	-	-	-
Deputy General Manager	Republic of China	Lin, Chin-Sheng	Male	2020.3.1	0	0	0	0	0	0	Department of Mechanical Engineering, Cheng Shiu Junior College of Engineering Deputy plant director of Taichung plant, Taiwan fertilizer CO.,LTD.	Chairman and President, Peifeng Technology Co., Ltd Factory Chief, Taichung Factory, Taiwan Fertilizer Co., Ltd	-	-	-
Finance Dept Chief	Republic of China	Huang, Mei-Ling	Female	2017.5.1	0	0	0	0	0	0	EMBA, Soochow University Chief Auditor, Taiwan Fertilizer Co., Ltd	Supervisor, Peifeng Technology Co., Ltd	-	-	-
Taichung Factory Factory Chief	Republic of China	Lin, Chin-Sheng	Male	2018.1.1	0	0	0	0	0	0	Department of Mechanical Engineering, Cheng Shiu Junior College of Engineering Deputy plant director of Taichung plant, Taiwan fertilizer CO.,LTD.	Chairman and President, Peifeng Technology Co., Ltd	-	-	-
Keelung Factory Factory Chief	Republic of China	Shao, Hao-Hua	Male	2018.10.1	4,585	0	0	0	0	0	Department of Chemical Engineering, Chung Yuan Christian University Technical Section Manager of Taiwan Fertilizer TaichungFactory	Deputy plant director of Taichung plant, Taiwan fertilizer CO., LTD.	-	-	-
Hualien Factory Factory Chief	Republic of China	Song, Chuang-Hsu	Male	2020.6.1	0	0	0	0	0	0	Department of Chemical Engineering, National Tsing Hua University Chief Engineer, Taichung Factory, Taiwan Fertilizer Co.,Ltd	Director and President, Taiwan Yes Deep Ocean Water Co., Ltd	-	-	-
Miaoli Factory Factory Chief	Republic of China	Hsu, Tsang-Hsien	Male	2019.11.1	0	0	0	0	0	0	Master of Computer Engineering, Northrop University, US Team leader, Electrification Production Group, Miaoli Factory, Taiwan Fertilizer	Director, Al-Jubail Fertilizer Company	-	-	-

Note 1: The Company's Chairman takes a concurrent position of the General Manager. Chairman Huang Yao-Hsing started from an entry-level position and has worked for years for the Company. He is experienced in various business areas and his professional competence has been well recognized by those inside or outside the Company. He has the expertise in governance needed as the President, which can help the Company in its sustainability and development. The Company is making efforts toward the ob of outstanding corporate governance; it is possible to plan the related measure in order to be in line with laws and regulations.

Corporate Governance Report

III. Remuneration paid to directors, supervisors, president and vice presidents for the recent

(I) Remuneration for directors of the board (including independent directors) (Summary of ways for coordinative disclosure of names)

May 1, 2021 Unit: NT$ thousand

Title	Name	Directors’ remuneration	Directors’ remuneration	Directors’ remuneration	Directors’ remuneration	Directors’ remuneration	Directors’ remuneration	Directors’ remuneration	Directors’ remuneration	Ratio of total compensation (A+B+C+D) to net income	Ratio of total compensation (A+B+C+D) to net income	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Relevant Remuneration Received byDirectors Who are Also Employees	Ratio of Total Compensation(A+B+C+D+E+F+G) to Net Income	Ratio of Total Compensation(A+B+C+D+E+F+G) to Net Income	Compensation Paid from an Invested Company Other than the Company’s Subsidiary or the Parent Company
		Salary (A)		Severance Pay and Pens (B)		Remuneration to Directors (C)		Business Execution Expense (D)				Salary, Bonus & Allowance etc. (E)S		everance Pay and Pension		Remuneration to employee (G)
		The Company	All companies in the financial statements	The Company	All companies in the financial statements	The Company	All companies in the financial statements	The Company	All companies in the financial statements	The Company	All companies in the financial statements	The Company	All companies in the financial statements	The Company	All companies in the financial statements	The Company		All companies in the financial statements		The Company	All companies in the financial statements
																Cash Amount	Share Amount	Cash Amount	Share Amount
COA
Chairman	Representative: Huang, Yao-Hsing	6,174	6,174	0	0	7,289	7,289	2,017	2,017	0.63%	0.63%	-	-	-	-	-	-	-	-	0.63%	0.63%	-
Chairman	Representative: Kang, Hsin-Hong (Dismissed on 2/11/2020)	826	826	0	0	42,114	42,114	3,893	3,895	1.91%	1.91%	1,957	1,957	-	-	157	-	157	-	2.00%	2.00%	24
Director	Representative: Hu,Jong-I
Director	Representative: Fan,Mei-Ling
Director	Representative: Li,Chao-Feng
Director	Representative: Sun, Uang-Shyang
Director	Representative: Chen, Jun-Jih (Dismissed on 3/8/2021)
Director	Representative: Lin, Shih-Chi (Dismissed on 2/21/2021)
Director	Representative: Hsu, Sheng-Ming (Dismissed on 9/30/2020)
Natural Person
Director	Chen, Yao-Kuang
Independent Director	Lin, Horng-Chang
Independent Director	Lee, Ming-Shiuan
Independent Director	Hsiao, Chao-Chin
1. The Company's policy, system, standards and structure of remuneration payments to independent directors, and describe the relationship between the responsibility, risk, time committed to the organization and other factors and the amount of remuneration to them: According to the resolution of the 5th meeting of the state-owned enterprises supervision team of the Executive Yuan on August 6, 2010, the remunerations to independent directors of state-owned enterprises supervised by various ministries and departments of the central government are specified as follows: The monthly remuneration to general independent directors shall be capped at two times the independent directors of state-owned enterprises (currently at NT$60,000). It is a type of directors' remuneration which is paid on a monthly basis, and does not pay the surplus distribution. 2. In addition to the disclosure shown in the above table,the remuneration received bythe directors for their serviceprovided to all companies listed in the financial reports in the most recent fiscalyear: None.

Corporate Governance Report

Remuneration Scale Table of 2020

	Remuneration Scale Table of 2020	Remuneration Scale Table of 2020	Remuneration Scale Table of 2020	Remuneration Scale Table of 2020
Remuneration Scale Paid to Each Director	Names of Directors
	Total of(A+B+C+D)		Total of(A+B+C+D+E+F+G)
	The Company	All companies in the consolidated statementsH	The Company	Parent and All Investees I
Below NT$1,000,000	Independent Director: Hsiao, Chao-Chin Independent Director: Lee, Ming-Shiuan Independent Director: Lin,Horng-Chang	Independent Director: Hsiao, Chao-Chin Independent Director: Lee, Ming-Shiuan Independent Director: Lin,Horng-Chang	Independent Director: Hsiao, Chao-Chin Independent Director: Lee, Ming-Shiuan Independent Director: Lin,Horng-Chang	Independent Director: Hsiao, Chao-Chin Independent Director: Lee, Ming-Shiuan Independent Director: Lin,Horng-Chang
NT$1,000,000 (inclusive) ~ NT$2,000,000 (exclusive)	-	-	-	-
NT$2,000,000 (inclusive) ~ NT$3,500,000 (exclusive)	Director: Kang, Hsin-Hong, Representative of COA Director: Sun, Uang-Shyang, Representative of COA	Director: Kang, Hsin-Hong, Representative of COA Director: Sun, Uang-Shyang, Representative of COA	Director: Kang, Hsin-Hong, Representative of COA Director: Sun, Uang-Shyang, Representative of COA	Director: Kang, Hsin-Hong, Representative of COA Director: Sun, Uang-Shyang, Representative of COA
NT$3,500,000(inclusive)~ NT$5,000,000(exclusive)	-	-	-	-
NT$5,000,000 (inclusive) ~ NT$10,000,000 (exclusive)	Director: Chen, Jun-Jih, Representative of COA Director: Li, Chao-Feng, Representative of COA Director: Lin,Shihchi Representative of COA Director: Hsu, Sheng-Ming, Representative of COA Director: Chen,Yao-Kuang	Director: Chen, Jun-Jih, Representative of COA Director: Li, Chao-Feng, Representative of COA Director: Lin,Shihchi Representative of COA Director: Hsu, Sheng-Ming, Representative of COA Director: Chen,Yao-Kuang	Director: Chen, Jun-Jih, Representative of COA Director: Li, Chao-Feng, Representative of COA Director: Lin,Shihchi Representative of COA Director: Hsu, Sheng-Ming, Representative of COA Director: Chen,Yao-Kuang	Director: Chen, Jun-Jih, Representative of COA Director: Li, Chao-Feng, Representative of COA Director: Lin,Shihchi Representative of COA Director: Hsu, Sheng-Ming, Representative of COA Director: Chen,Yao-Kuang
NT$10,000,000(inclusive)~ NT$15,000,000(exclusive)	-	-	-	-
NT$15,000,000 (inclusive) ~ NT$30,000,000 (exclusive)	Chairman: Representative of COA Huang,Yao-Hsing	Chairman: Representative of COA Huang,Yao-Hsing	Chairman: Representative of COA Huang,Yao-Hsing	Chairman: Representative of COA Huang,Yao-Hsing
NT$30,000,000 (inclusive) ~ NT$50,000,000 (exclusive)	-	-	-	-
NT$50,000,000(inclusive)~ NT$100,000,000(exclusive)	-	-	-	-
Above NT$100,000,000	-	-	-	-
Total	11	11	11	11

Note 1: Chairman Huang Yao-Hsing took office on February 12, 2020; Director, Sun Uang-Shyang took office on October 1, 2020.

Note 2: The amount of remuneration for directors by surplus distribution is paid by the amount of allotment adopted by the Board of Directors for Surplus Distribution for 2020.

Corporate Governance Report

Note 3: The remuneration to representatives of institution includes the surplus distribution to be obtained by the institution and the representative directors appointed by the Council of Agriculture, Chairman Huang Yao-Hsing (inaugurated on February 12, 2020); previous Chairman, Kang Hsin-Hong (dismissed on February 11, 2020), previous Director, Chen Jun-Jih (dismissed on February 21, 2021), Director, Li Chao-Feng, Director, Sun Uang-Shyang (inaugurated on October 1, 2020), and previous Director, Hsu Sheng-Ming (dismissed on September 30, 2020), had the remunerations collected by the Council of Agriculture and paid to the national treasury.
Note 4: The portion of non-fixed income for chairman exceeding fixed income (salary for 12 months) is paid to the treasury as specified.
Note 5: The retirement pension actually paid to directors for 2020 is NT$0, with the provision for new system retirement pension for directors accounting for NT$0, and provision for old system retirement pension for directors accounting for NT$0.

Corporate Governance Report

(III) Remuneration for President and Vice Presidents (Summary of ways for coordinative disclosure of names)

May 1, 2021

Unit: New Taiwan Dollar

Title	Name	Wage (A)	Wage (A)	Severanc Pensi	e Pay and on (B)	Bonus and	Special Expense (C)	Remuneration to	Remuneration to	employees (D)	employees (D)	Ratio of Total Remuneration (A+B+C+D) to After- tax Net Income (%)	Ratio of Total Remuneration (A+B+C+D) to After- tax Net Income (%)	Acquired employee share subscription warrants	Acquired employee share subscription warrants	Acquired new restricted employee shares	Acquired new restricted employee shares	Compensation Paid from an Invested Company Other than the Company’s Subsidiary or the Parent Company
		The Company	All companies in the financial statements	The Company	All companies in the financial statements	The Company	All companies in the financial statements	The Company		All companies in the financial statements		The Company	All companies in the financial statements	The Company	All companies in the financial statements	The Company	All companies in the financial statements
								Cash Amount	Share Amount	Cash Amount	Share Amount
General Manager	Huang, Yao-Hsing	5,943	5,943	7,243	7,243	4,846	4,856	973	-	973	-	0.77%	0.77%	-	-	-	-	60
Deputy General Manager	Lo, Shih-Jih (Note 1)
Deputy General Manager	Zhang, Cang-Lang
Deputy General Manager	Lin Ching-Sheng (Note 2)

Note 1: Compulsorily retired due to age on November 1, 2020.

Note 2: Reappointed as Deputy General Manager from March 1, 2020

Corporate Governance Report

Remuneration Scale Table

Remuneration Scale Paid to Each President and Vice President	Name of President and Vice President	Name of President and Vice President
	The Company	Parent and All Investees
Below NT$1,000,000	Huang,Yao-Hsing	Huang,Yao-Hsing
NT$1,000,000(inclusive)~ NT$2,000,000(exclusive)	-	-
NT$2,000,000(inclusive)~ NT$3,500,000(exclusive)	Lin,Ching-Sheng (Note 1)	Lin,Ching-Sheng (Note 1)
NT$3,500,000(inclusive)~ NT$5,000,000(exclusive)	Zhang,Cang-Lang	Zhang,Cang-Lang
NT$5,000,000(inclusive)~ NT$10,000,000(exclusive)	-	-
NT$10,000,000(inclusive)~ NT$15,000,000(exclusive)	Lo,Shih-Jih(Note 2)	Lo,Shih-Jih(Note 2)
NT$15,000,000(inclusive)~ NT$30,000,000(exclusive)	-	-
NT$30,000,000(inclusive)~ NT$50,000,000(exclusive)	-	-
NT$50,000,000(inclusive)~ NT$100,000,000(exclusive)	-	-
Above NT$100,000,000	-	-
Total	4	4

Note 1: Deputy General Manager, Lin Ching-Sheng, took office from March 1, 2020

Note 2: Deputy General Manager, Lo Shih-Jih, compulsorily retired due to age on November 1, 2020.

Note 3: The amount of remuneration for employees is paid by the amount of allotment adopted by the Board of Directors for Surplus Distribution for 2020.

Note 4: The portion of non-fixed income for president exceeding fixed income (salary for 12 months) is paid to the treasury as specified.

Note 5: The retirement pension of General Manager and Deputy General Manager paid in 2020 was NT$7,234 thousand. The new-system pension payable to General Manager and Deputy General Manager was NT$108 thousand; the old-system pension payable to General Manager and Deputy General Manager was NT$312 thousand.

Corporate Governance Report

(IV) Names of Management Team for the Allotment of Employee Remuneration, and Allotment Conditions

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May 1, 2021
Unit: NT$ thousand
Raito of Total
Remuneration Remuneration Amount to
Title Name Total
in Share in Cash After-Tax Net
Income (%)
General
Huang, Yao-Hsing
Manager
Deputy
Lo, Shih-Jih
General
(Note 1)
Manager
Deputy
Managerial General Zhang, Cang-Lang
- 1,234 1,234 0.05%
Officers Manager
Deputy
Lin, Ching-Sheng
General
(Note 2)
Manager
Chief,
Finance Huang, Mei-Ling
Dept
----- End of picture text -----

Note 1: Compulsorily retired due to age on November 11, 2020. Note 2: Reappointed as Deputy General Manager from March 1, 2020

(V) Comparison and explanation of percentage of the total remuneration for directors, supervisors, Presidents and Vice Presidents of this Company paid over the past two years by this Company and all companies in the consolidated financial statements in the net income of individuals or individual financial reports after tax, the policy of remuneration payment, the combination of standard varieties, procedure for remuneration decision, and the relevant between operation performance and future risks:

	future risks:
Year	Profit after tax (NT$ thousand)	Director	Managerial Officers
2019	2,063,955	2.79%	0.79%
2020	2,452,881	2.63%	0.77%

Note 1: According to the articles of association of the Company, the salary of the chairman is 1.25 X the income of the president, and the other directors of the board and supervisors might get NT$20,000 traffic fee per month as compensation. However, the remuneration for the independent director is NT$60,000 per month, and the independent director is not allowed to participate the allocation of remuneration for directors and supervisors.
Note 2: According to the articles of association of the Company, after the provision of reserves, the after-tax net income will be put aside no more than 1.6% as the remuneration for Directors and Supervisors, and 2.4% as remuneration to employees.

Corporate Governance Report

IV. Operation of Corporate Governance

(I) Operation of the Board of Directors

The board of directors convened 10 meetings (A) in 2020. The attendance of the directors and supervisors is described below:

Title	Name	Attendance in Person (B)	Attendance by Proxy	Actual Attendance Rate (%) (B/A)	Remarks
Chairman	Representative of COA: Huang, Yao-Hsing	10	0	100%	Took office on 2/12/2020
Director	Representative of COA: Chen, Jun-Jih	5	0	50%	Dismissed on 3/8/2021
Director	Representative of COA: Lin, Shih-Chi	10	0	100%	Dismissed on 2/21/2021
Director	Representative of COA: Li, Chao-Feng	8	0	80%
Director	Representative of COA: Hsu, Sheng-Ming	8	0	100%	Dismissed on 9/30/2020
Director	Representative of COA: Sun, Uang-Shyang	2	0	100%	Dismissed on 10/1/2020
Director	Chen, Yao-Kuang	10	0	100%
Independent Director	Lin, Horng-Chang	10	0	100%
Independent Director	Lee, Ming-Shiuan	10	0	100%
Independent Director	Hsiao, Chao-Chin	10	0	100%
Other matters required to be recorded. I. If the operation of board of directors matches one of the following conditions, it is required to specify dates, number of meetings and content of proposals of directors, opinions of all independent directors and response to the opinions of independent directors on the Company. (I) For matters set in the Article 14-3 of Security Exchange Act. 1. 18th Meeting, Board of Directors of 34th Term, March 25, 2020 (1) Proposal: Disbursement of 2019 remuneration to the Company's directors and employees Independent directors’ opinion:no opinion. (2) Proposal: Distribution of 2019 remuneration to the directors. Independent directors’ opinion:no opinion. (3) Proposal: Establish the “Management Regulations for TFC Remuneration Committee’s Operation” Independent directors’ opinion:no opinion. (4) Proposal: Deliberate the 2019 year-end bonus of Deputy General Managers and above, please deliberate. Independent directors’ opinion:Please include the materials distributed in the meeting in the meeting minute. Company’s treatment to the independent directors’ opinion:proceed as the opinion. 2. 19th Meeting, Board of Directors of 34th Term, April 24, 2020 (1) Proposal: Amendment to the “Standard Regulations of Internal Control System for Stock Affairs Unit.”

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Independent directors’ opinion: no opinion.
(2) Proposal: For the “Operational Process of Repayment by Installment for the Amount Short from
Loans” drafted for the bank loans provided for the pre-sold houses, the “Regulations Governing
Establishment of Internal Control Systems by Public Companies” shall be observed.
Independent directors’ opinion: no opinion.
3. 24th Meeting, Board of Directors of 34th Term, November 10, 2020
(1) Proposal: Commission KPMG Taiwan to audit and certify the 2021 financial reports and income tax
return and the reporting of the 2020 undistributed surplus.
Independent directors’ opinion: no opinion.
(2) Proposal: Develop the 2021 annual audit program
Independent directors’ opinion: no opinion.
(II) Other resolutions, except for the above-mentioned ones, in the board of directors meeting about
which any independent director expresses dissent or reservation and a record or written statement
is made: None.
II. As for the implementation status of recusal bearing on the interest of a director is involved, the name of
the director, proposal, reasons for the recusal, and participation in the voting shall be described.
(I) 18th Meeting, Board of Directors of 34th Term, March 25, 2020
Proposal: Deliberate the 2019 year-end bonus of Deputy General Managers and above.
Director to recuse: Chairman Huang Yao-Hsing
Reason of recusal: conflict of interest
Participation of voting: not participated.
(II) 19th Meeting, Board of Directors of 34th Term, April 24, 2020
Proposal: Appointment of institutional representative to the subsidiary, “Peifeng Technology Co., Ltd.”
Director to recuse: Chairman Huang Yao-Hsing
Reason of recusal: conflict of interest
Participation of voting: not participated.
III. The status of the board's self-evaluation: Please refer to the official website for the result of 2020
performance evaluation
----- End of picture text -----

Evaluation cycle	Evaluationperiod	Scope of evaluation	Evaluation methods	Evaluation contents
Once a year.	January 1 to December 31.	Performance appraisal of the board, individual board members and functional committees	Internal self-evaluation by the board, self-evaluation by board member, appointment of external specialized institutions and experts.	(1) Board performance appraisal: The participation in the operation of the Company, improvement of the quality of the board of directors' decision making, composition and structure of the board of directors, election and continuing education of the directors and internal control. (2) Individual board member performance appraisal: The alignment of the goals and missions of the Company,

Corporate Governance Report

awareness of the duties of a director, participation in the operation of the Company, management of internal relationship and communication, the director's professionalism and continuing education and internal control. (3) Functional committee performance appraisal: The participation in the operation of the Company, awareness of the duties of the functional committee, improvement of quality of decisions made by the functional committee, makeup of the functional committee and election of its members and internal control.

IV. IV. Goal for enhancement of board functions in the respective year and the most recent year and assessment of implementation conditions:
(I) At the 17th board meeting of the 34th Term of the board on February 25, 2020, the Company approved amendments to the Regulations Governing Procedure for Board of Directors Meetings to reinforce corporate governance and authority of the board.
(II) At the 17th board meeting of the 34th Term of the board on February 25, 2020, the Company approved amendments to the Audit Committee Charter to reinforce corporate governance and authority of the board.
(III) At the 17th board meeting of the 34th Term of the board on February 25, 2020, the Company approved amendments to the Remuneration Committee Charter to reinforce corporate governance and authority of the board.
(IV) At the 22nd board meeting of the 34th Term of the board on August 11, 2020, the Company approved amendments to the Rules Governing the Scope of Powers of Independent Directors to reinforce corporate governance and authority of the board.
(V) At the 23rd board meeting of the 34th Term of the board on September 29, 2020, the Company approved amendments to the Audit Committee Charter to reinforce corporate governance and authority of the board.
(VI) At the 17th board meeting of the 34th Term of the board on February 25, 2020, the Company approved amendments to the Evaluation Procedures for the Board of Directors Performance to reinforce corporate governance and authority of the board.
(VII) At the 27th board meeting of the 34th Term of the board on March 25, 2021, the Company approved the appointment of Chung, Shun-Hua, Chief of Board of Directors Office as the corporate governance officer, to reinforce corporate governance and authority of the board.

Corporate Governance Report

(VIII) The Company has completed the performance evaluations of the Board of directors and functional committees in 2021 Q1, and disclosed the results on the official website.

Corporate Governance Report

(II) Operation of the Audit Committee

The Audit Committee convened 6 meetings (A) in 2020. The attendance of the directors and supervisors is described below

Title	Name	Name	Attendance in Person (B)	Actual Attendance Rate (%) (B/A)	Remarks
Independent Director	Lin, Horng-Chang		6	100%	Convener
Independent Director	Lee, Ming-Shiuan		6	100%
Independent Director	Hsiao, Chao-Chin		6	100%
Other matters required to be recorded. I. Audit Committee composition and responsibilities: (I) Communication with employees and shareholders. 1. A meeting was held in accordance with Article 6 Authority of the Audit Committee Charter, and managerial departments attended the meeting to provide explanation. 2. The independent directors attended the 2020 annual general meeting. (II) Communication with internal auditing officers and CPAs. 1.Communication between the Audit Committee and CPAs Meeting Date Communication Point March 25, 2020 1. CPAs provide a detailed description of financial and profit/loss conditions in 2019 and education on newly amended accounting principles and laws 2. CPAs discuss and convey their opinions on issues raised by meeting participants April 22, 2020 1. CPAs provide a detailed description of financial and profit/loss conditions in the first quarter of 2020 and education on newly amended accounting principles and laws 2. CPAs discuss and convey their opinions on issues raised by meeting participants August 11, 2020 1. CPAs provide a detailed description of financial and profit/loss conditions in the second quarter of 2020 and education on newly amended accounting principles and laws 2. CPAs discuss and convey their opinions on issues raised by meeting participants November 10, 2020 1. CPAs provide a detailed description of financial and profit/loss conditions in the third quarter of 2020 and education on newly amended accounting principles and laws 2. CPAs discuss and convey their opinions on issues raised by meeting participants 2.Communication between the Audit Committee and internal auditing officers Meeting Date Communication Point March 25, 2020 1. Reported the 2019 internal control system, and the self-evaluation results showed that the design and implementation of the system have been effective. 2. Discussed and communicate the status of audit. April 22, 2020 Discussed and communicate the status of audit. June 30, 2020 Discussed and communicate the status of audit. August 11, 2020 Discussed and communicate the status of audit. September 29, 2020 Discussed and communicate the status of audit.
Meeting Date		Communication Point
March 25, 2020		1. Reported the 2019 internal control system, and the self-evaluation results showed that the design and implementation of the system have been effective. 2. Discussed and communicate the status of audit.
April 22, 2020		Discussed and communicate the status of audit.
June 30, 2020		Discussed and communicate the status of audit.
August 11, 2020		Discussed and communicate the status of audit.
September 29, 2020		Discussed and communicate the status of audit.

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November 10, 2020

  1. Communicated the Company 2021 annual audit program. 2. Discussed and communicate the status of audit.

II. Compilation of the 2020 audit committee work highlights:
Establish or amend the internal control protocols.
Assess the effectiveness of the internal control protocols.
Review quarterly and annual financial reports.
Major asset transactions.
Increase the budget for major development projects.
Appointment of CPAs.

III. Resolutions of the 2020 audit committee work highlights and the Company's handling of the audit committee's opinions.

November 10, 2020 1. Communicated the Company 2021 annual audit program. 2. Discussed and communicate the status of audit. II. Compilation of the 2020 audit committee work highlights: 1. Establish or amend the internal control protocols. 2. Assess the effectiveness of the internal control protocols. 3. Review quarterly and annual financial reports. 4. Major asset transactions. 5. Increase the budget for major development projects. 6. Appointment of CPAs. III. Resolutions of the 2020 audit committee work highlights and the Company's handling of the audit committee's opinions.	November 10, 2020 1. Communicated the Company 2021 annual audit program. 2. Discussed and communicate the status of audit. II. Compilation of the 2020 audit committee work highlights: 1. Establish or amend the internal control protocols. 2. Assess the effectiveness of the internal control protocols. 3. Review quarterly and annual financial reports. 4. Major asset transactions. 5. Increase the budget for major development projects. 6. Appointment of CPAs. III. Resolutions of the 2020 audit committee work highlights and the Company's handling of the audit committee's opinions.	1. Communicated the Company 2021 annual audit program. 2. Discussed and communicate the status of audit.	1. Communicated the Company 2021 annual audit program. 2. Discussed and communicate the status of audit.
Meeting date	Content of important proposals	Resolutions	Company's treatment of audit committee's opinions
March 25, 2020	1. 2019 consolidated and parent-only financial statements. 2. 2019 business report 3. 2019 earnings allocation 4. Evaluation of the effectiveness of the Company's 2019 internal control protocols. 5. Establish the “Management Regulations for TFC Remuneration Committee’s Operation” 6. The correction (supplement) of the loaning of funds from 2015 up to now and the financial statements since 2015.	1. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 2. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 3. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 4. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 5. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 6. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration.	Not applicable
April 22, 2020	1. 2020 Q1 consolidated financial statements of the Companyand	1. Unanimous vote by all attending committee members	Proceeded as the independent directors’ opinion.

Corporate Governance Report

	subsidiaries 2. Amendment to the “Standard Regulations of Internal Control System for Stock Affairs Unit.” 3. For the “Operational Process of Repayment by Installment for the Amount Short from Loans” drafted for the bank loans provided for the pre-sold houses, the “Regulations Governing Establishment of Internal Control Systems by Public Companies” shall be observed.	to approve the proposal and submit it to the board for consideration. 2. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 3. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. For the regulations related to the internal control system, the Company shall provide the correction/supplemen t. “Operational Process of Repayment by Installment for the Amount Short from Loans of Sun and Moon” is only applicable to the Sun and Moon Project.
June 30, 2020	Amendment to some clauses of the “Corporate Governance Best Practice Principles.”	Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration.	Not applicable
August 11, 2020	2020 Q2 consolidated financial statements of the Company and subsidiaries	Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration.	Not applicable
September 29, 2020	Pursuant to the “Q&As for Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies” issued by SFC on July 24, 2020, any money other than the receivables and payables overdue for more than three months and not recovered, if the amount is material, at least to be submitted to the Audit Committee and Board of directors to resolve if such money is	Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration.	Not applicable

Corporate Governance Report

	loaning of funds.
November 10, 2020	1. 2020 Q3 consolidated financial statements of the Company and subsidiaries 2. 2020 assessment of the independence and suitability of CPAs. 3. Commission KPMG Taiwan to audit and certify the 2021 financial reports and income tax return and the reporting of the 2020 undistributed surplus. 4. 2021 annual audit program. 5. Regarding the “Operational Process of Repayment by Installment for the Amount Short from Loans of Pre-Sold House at Sun and Moon” established for the amount short from the bank loans provided for the Sun and Moon Project, amended pursuant to the internal audit and control principles.	1. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 2. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 3. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 4. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 5. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration.	Not applicable

Corporate Governance Report

(III) Corporate Governance Status, Differences with Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and Reasons

Companies and Reasons
Items assessed	Operation			Deviations from “the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
I. Does the company follow the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies, and has the company established and disclosed its own Corporate Governance Best Practice Principles?	V		The Company has established and disclosed the Corporate Governance Best-Practice Principles pursuant to the “Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies.”	No deviation.
II. Shareholdingstructure and shareholders’ rights of the Company
(I) Does the company stipulate internal operating procedures to deal with shareholders' suggestions, doubts, disputes and litigation matters, and implement them according to procedures?	V		The Company has established the “Management Procedures for Stock Affair Operation” and the dedicated stock affair unit, to handle shareholders' suggestions or related issues.	No deviation.
(II) Does the Company grasp the main shareholders that control the Company and the name list of final controllers of the main shareholders?	V		The Company established a stock affair team under the Board of Directors Office to manage the major shareholders that actually control the Company and name list of the persons who ultimately control the major shareholders. The team is also responsible for reporting the change of information in accordance with the regulations.	No deviation.
(III) Does the Company establish and perform the risk control and firewall mechanism with the affiliates?	V		The Company shall also prepare the Operation Procedure of Capital Loan and the Endorsement Guarantee in order to establish the proper risk control mechanism and firewall with the affiliates. The business contact between the Company and all of the affiliates should be handled after the signature of the contract and submission to the board of directors for deliberation.	No deviation.
(IV) Does the Company prepare the internal regulations to prevent its personnel from trading the securities in virtue of the information that is not open to the public?	V		The Operation Procedure on the Treatment of Major Information inside Taiwan Fertilizer Co., Ltd. has been drafted to regulate the directors, supervisors, managers, employees and the personnel who are in other identities, occupations or controlling relationship but acquire the major internal information of the Company. Those who are prohibited to do any inside trades.	No deviation.
III. Composition and duties of the board of directors
(`一`) Does the board of directors formulate a diversified policy and implement it in terms of membership	V		To create good and thorough corporate governance system, the Company has established the Practice Principles for Taiwan Fertilizer Co., Ltd. Article 20 of the Principles clearly states the diverse policies of the board of directors. The formation of the board of directors shall take into account the organizational culture, business model and long-term development, including but not limited to genders, age, nationality and culture. The directors shall have good education, experience and knowledge in the industry and professional background to put the diverse policies of the board of directors into practice and complete its organization. Currently, the board of directors of Taiwan Fertilizer Co., Ltd consists of 9 directors, including 3 independent directors; one director and one director are female. ). All board members are aged between 40 and 70 and possess professional expertise in the fields of chemical engineering, agricultural promotion, agricultural economics, architecture, accounting and finance. Their academic and professional backgrounds complement each other, which in turn ensures optimized all-inclusive business decisions. The professional specialty of each director is detailed in Note 1.	No deviation.
(II) Does the company voluntarily set up other functional committees in addition to the Remuneration committee		V	This Company has established an Audit and Remuneration Committee pursuant to relevant laws. The spirit of corporate culture andgovernance has been incorporated in existingregulatoryframeworks	There is a deviation. The Companyhas not established

Corporate Governance Report

and the Audit Committee?			governing administrative management, education & training, and auditing. Other functional committees have therefore not been established.	functional committees other than Audit and Remuneration Committees.
(III) Does the company stipulate the performance appraisal methods of the board of directors and their assessment methods, and conduct performance evaluations every year and regularly?		V	At the 16th meeting of the 34th term of the board on December 24, 2019, the board approved the "Taiwan Fertilizer Co., Ltd. Evaluation Procedures for the Board of Directors Performance". The internal performance appraisal of the board is conducted once a year, and the evaluation period starts from January 1 and ends on December 31. The performance appraisal of the board is conducted once every three years by external independent specialized institution or teams of external experts and scholars. The results of both the internal and external performance appraisal of the board are to be completed and announced before the end of the first quarter of the next fiscal year. The latest results of performance evaluation have been completed by Q1 2021 and disclosed on the official website.	There is a deviation. The results of performance evaluation have not yet linked to the remunerations and nomination of individual directors.
(IV) Does the company regularly assess the independence of the certifying CPAs?	V		This Company assesses auditor independence on a regular basis. Assessment of CPA independence was approved in the 24th meeting of the 34th board on November 10, 2020. The Company has therefore compiled a CPA Independence Assessment Form (note 2) with reference to Article 47 of the Certified Public Accountant Act and Code of Ethics for Professional Accountants Statement No.10. In addition to a comprehensive assessment of various impacts on CPA independence, CPAs must issue a Declaration of Independence.	No deviation.
IV. Whether the listing company has set up a corporate governance or personnel responsible for corporate governance related matters (including but not limited to providing information required by directors and supervisors to conduct business, and handling matters related to meetings of the board of directors and shareholders meeting in accordance with the law, handling company registration and change registration, making board of directors and shareholders meeting, etc.)?	V		1. The Company takes the board office as its corporate governance full-time organization. This office is responsible for corporate governance related affairs, including promoting the corporate governance rules, providing data as required by directors or supervisors executing business, handling matters related to board of directors and shareholders meeting, handling company registration and change of registration, taking minutes of the board of directors and shareholding meeting, etc. 2. At the 27th board meeting of the 34th Term of the board on March 25, 2021, the Company approved the appointment of Chung, Shun-Hua, Chief of Board of Directors Office as the corporate governance officer, for promoting the corporate governance related operations.	No deviation.
V. Does the company establish communication channels with stakeholders (including but not limited to shareholders, employees, customers and suppliers), set up stakeholder areas on the company's website, and respond appropriately to important corporate societies of concern to stakeholders, and responsibility issues?	V		The Company has a spokesman. If required by the stakeholders, they can communicate with its spokesman or its business unit(s) at any time. The communication channel is smooth. The special zone for the stakeholders is set in the website of the Company to respond the issues concerned by the stakeholders properly.	No deviation.
VI. Does the Company entrust a professional stock agency?		V	Pursuant to the Regulations Governing the Administration of Shareholder Services of Public Companies and the internal control system, the Company handle the stock affair on its own.	There is a deviation. The Company handle the stock affair on its own.
VII. Information disclosure
(I) Has the company set up a website to disclose financial and corporate governance information?	V		The Company has set the special column for serving the investors in its website in both Chinese and English versions, disclosing the information about finance and governance of Company and providing it to the investors for reference on a regular basis.	No deviation.
(II) Does the company adopt other information disclosure methods (such as setting up an English website, appointing a dedicated person responsible for the collection and disclosure of company information, implementing the spokesman system, and posting the company's corporate briefing process on the website, etc.)?	V		1. The Company provides its English version of the critical news such as the annual reports, a handbook for shareholders’ meeting, and a notice of shareholders’ meeting, which the Company’s operation information is fully disclosed in its website. The Company has appointed the spokespersons to issue the Company news externally, and dedicated staff to collect and contact all of media information. The information of investor conferences is uploaded to the official website simultaneously, and dedicated staff are assigned to issue material information on MOPS. 2. The information of investor conferences is uploaded to the official website simultaneously, and dedicated staff are assigned to issue material information on MOPS.	No deviation.
(III) Does the Company publicly announce and file the annual financial reports within two months after the accounting		V	The Company has completed the publishing and reporting of its first, second and third quarter financial reports and the operatingstatus for each month on the Market Observation Post System within 45 days	There is a deviation. The annual financial reports were

Corporate Governance Report

year-end, and publicly announce and file the first, second and third quarterly financial reports and monthly operating status reports before the stipulated deadlines?			before the quarter ends, before March of the following year and before the 10th of the following month in accordance with the relevant regulations of the Securities and Exchange Act.	not published and reported before the end of February of the following year.
VIII. Does the Company have any other important information (including but not limited to employees' rights, employee care, investor relations, supplier relationship, rights and interests of stakeholders, training for directors and supervisors, implementation of risk management policies and risk measurement standards, implementation of customer policies, the Company’s purchase of liability insurance for directors and supervisors, etc.)?	V		(I) Rights and interests of employees as well as employee care: Adhering to the principle that Taiwan Fertilizer is a family, the Company has established the Welfare Committee of Employees to provide employees excellent and considerate welfare activities and caring projects. (II) Investor relation: The Company aims at ensuring the rights and interests of the shareholders and treats all of them equally. According to the relevant provisions of the competent securities authority, the Company issues the major news such as the finance, business and change of the shareholders at Observation Website for News Disclosure. (III) Relations with suppliers: The Company reviews the supplier’s quality capacity, delivery capacity, service team capacity, etc. on a regular basis according to supplier management methods of the Company, to stabilize material quality and to ensure material source safety. In regard to suppliers, the Company not only emphasizes the supplier’s quality, price, delivery time, etc. but also concerns human rights, labor welfare, workplace safety, etc., so as to establish a sustainable supply chain system that develops stably. Now, supplier CSR management is gradually introduced. First, the Company promotes supplier self-assessment to know the supplier operating risks, providing the basis for promotion of supplier CSR management and leading suppliers to develop a production and sales model, while prioritize human rights, labor welfare, occupational safety higher. (IV) Rights of the stakeholders: The Company always abides by the principle of ethical in maintaining and safeguarding the rights of the stakeholders. The Company also provides a smooth communication channel for different kinds of stakeholders to express their opinions any time. (V) Further study of directors and supervisors: The Company follows the provisions of Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies, please refer to MOPS or the official website for the directors’ continuing education. (VI) Implementation of risk management policies and risk balance standard: Subject to the Criteria on the Treatment of Internal Control System of the Company, the risk management policy and the risk evaluation standard of the Company are prepared according to the suitability of the Company objective and the units at different levels of the Company. The goals and the result of risk evaluation are set to help the Company to design, modify and implement the control required on a timely basis. (VII) Implementation of client policies: The Company has prepared Details on the Management of Customer Relationship. Its business departments have set up the customer service center to communicate with customers. (VIII) Purchase of insurance for directors: We have bought the liability insurance for directors and managerial officers from Shinkong Insurance according to relevant regulations. The insurance period is from April 1,2020 to April 1,2021.	No deviation.
IX. Please state the improvements made to the items in the corporate governance evaluation results issued by the Corporate Governance Center of the Taiwan Stock Exchange Co., Ltd. of the latest year (2021), and indicate the enhancement and improvement measures for the items not yet improved. The Company ranked in the 21%~35% range of the listed companies for the 7th Term of Corporate Governance Evaluation; the items to be improved as the first priority are described below: 1. From 2022, when disclosing the material information in Chinese, the English version will be disclosed simultaneously. 2. From 2021, the financial statements in English will be uploaded to MOPS seven days prior to the shareholders’ meeting. 3. The investor conferences may be increased depending on the needs during the year.

Corporate Governance Report

Note 1: Diversification among the members of the board of directors

Title	Name	Gender			Profession specialty and ability	Profession specialty and ability	Profession specialty and ability
			Operational Judgment	Accounting and Financial	Management and Administration	Risk Management	Knowledge of Industry	International Market Perspective	Leadership	Decision making
Chairman	Huang, Yao-Hsing	Male								
Director	Hu, Jong-I	Male								
	Fan, Mei-Ling	Female								
	Chao, Feng-Li	Male								
	Sun, Uang-Shyang	Male								
	Chen, Yao-Kuang	Male								
Independent Director	Lin, Horng-Chang	Male								
	Lee, Ming-Shiuan	Female								
	Hsiao, Chao-Chin	Male								

Note 2: The CPA independence evaluation chart of Taiwan Fertilizer Co., Ltd (2020)

Note 2: The CPA independence evaluation chart of Taiwan Fertilizer Co., Ltd (2020)
Items assessed	Violation of Independence
1. Having a direct or material indirect financial interest in the Company (holding the equity securities, loans or other debt instrument of the Company, including the rights thereof and derived rights)	No
2. Havingfinancingorguaranteed conduct with the Company, the directors or supervisors.	No
3. Members of the audit service team have significant close business relationships with the Companyor anydirector, supervisor or manager of the Company.	No
4. The audit service team has potential employment negotiations with the Company (confirming to be serving as the Company’s director or managerial officer, or position havinga significant influence on the audit case in the future)	No
5. Enteringinto a contingent fee arrangement relatingto the audit engagement.	No
6. Any audit service team members have been serving as directors, managerial officers or positions that have a significant impact on the audit case in the Company within the last twoyears.	No
7. The non-audit service that wasperformed bythe accountingfirm isprovided.	No
8. A member of the audit service team is a relative to a director, supervisor, or managerial officer of the Company or an employee of the Company who is in a position to exert significant influence over the subject matter of the audit engagement.	No
9. A member of the audit service team receives valuable gifts from the Company or its directors or managerial officers	No
10. The Company not request the audit service team to accept improper options made by management in accounting policies or improper disclosures in financial statements?	No
11. The Company has put pressure on CPAs to reduce professional service fees and thus prompt them to improperlyreduce the audit tasks that should beperformed	No
12. Whether the same CPAs have not provided the Company's audit service for seven consecutive years	No

Corporate Governance Report

(IV) The Company should disclose the composition, function, and operation circumstances of compensation committee, if any.

Information of compensation committee members

Status	Qualification Name	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience			Independence Criteria (Note 1)	Independence Criteria (Note 1)	Independence Criteria (Note 1)	Independence Criteria (Note 1)	Independence Criteria (Note 1)	Independence Criteria (Note 1)			No. of other listed companies serving as remuneration committee member concurrently	Remarks
		An instructor or higher up in a department of commerce, law, finance, accounting, or other academic department related to company business in a public or private junior college, college, or university.	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	Business, Legal Affairs, Finance, Accounting or Related Work Experience	1	2	3	4	5	6	7	8	9	10
Independent Director	Lee, Ming-Shiuan														2	Convener
Independent Director	Lin, Horng-Chang														1
Others	Cheng, Yu														3

Note 1: If the member meets any of the following conditions during the two years before the position and during the term of office, please tick ＂  ＂ in the spaces below the conditions.

(1) Not an employee of the Company or its affiliate.
(2) Not a director or supervisor of the Company or any of its affiliates. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, or subsidiary of the same parent company as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary.)
(3) Is not a top ten shareholder or a shareholder who holds more than one percent of the total issued shares of the Company by him/herself or through his/her spouse, minor children or other persons.
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons stated in (1) Managers or Personnel of (2), (3).
(5) Not a director, supervisor, or employee of an institutional shareholder directly holding at least 5% of the circulating shares of the Company or that ranks Top 5 in shareholding ratio or that assigns a representative to serve as director or supervisor of the Company according to Article 27 Paragraph 1 or 2 of the Company act (The same does not apply, however, to independent directors set up by the Company and its parent company or subsidiary or a subsidiary that shares the same parent company according to the Act or the local laws and regulations.)
(6) Not a director, supervisor, or employee of another company with the number of directors in the Company or shares entitled to votes accounting for a majority that is controlled by the same person (The same does not apply, however, to independent directors set up by the Company or its parent company or subsidiary or a subsidiary that shares the same parent company according to the Act or the local laws and regulations.)
(7) Not if the chairperson, general manager, or person holding an equivalent position of the company and a person in any of those positions at another company or institution

Corporate Governance Report

are the same person or are spouses: a director (or governor), supervisor, or employee of that other company or institution (but not apply to independent directors appointed in accordance with the act or the laws and regulations of the local country by, and concurrently serving as such at the company and its parent or subsidiary or a subsidiary of the same parent).

(8) Not a director, supervisor, or manager, or shareholder holding at least 5% of shares of a specific company or institution that is financially or commercially related to the Company (The same does not apply, however, if the said specific company or institution holds at least 20% yet less than 50% of the circulating shares of the Company and to independent directors set up by the Company and its parent company or subsidiary or a subsidiary that shares the same parent company according to the Act or the local laws and regulations.)
(9) Not a professional individual who, or an owner, partner, director, supervisor, or managerial officer of a sole proprietorship, partnership, company, or institution that provides auditing services or for the past two years, has provided commercial, legal, financial, accounting services or consultation amounted to less than a cumulative NTD500,000 to the Company or any affiliate of the company, or a spouse thereof. Provided that this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Securities and Exchange Act or to the Business Mergers and Acquisitions Act or related laws or regulations.
(10) Not having any of the circumstances in Article 30 of the Company Act.

Note 2: Scope of functions and powers of the Remuneration Committee:

(1) Regular review of the organizational charter of the Remuneration Committee and proposal of amendments.
(2) Formulation and regular review of director and manager performance appraisal standards, annual and long-term performance goals as well as remuneration policies, systems, standards, and structures. Performance appraisal standards are disclosed in annual reports.
(3) Regular assessment of director and manager performance target achievement; individual remuneration contents and amounts in accordance with appraisal results based on the aforementioned standards; individual performance appraisal results, remuneration contents and amounts, and relevance and reasonableness of appraisal results for directors and managers are disclosed in annual reports and reported to shareholders’ meetings.

Corporate Governance Report

Remuneration Committee Operation Status
(1) The Company’s Remuneration Committee is composed of three members.
(2) Current tenure: July 1, 2018–June 30, 2021. In the most recent year, the compensation committee held four meetings (A). Members’ qualification and attendance are listed below:

Title	Name	Attendance in Person (B)	Attendance by Proxy	Attendance by Proxy	Actual Attendance Rate (%) `（`B/A`）`	Remarks
Convener	Lee, Ming-Shiuan	4	0		100%
Member	Lin, Horng-Chang	4	0		100%
Member	Cheng, Yu	4	0		100%
Other matters required to be recorded. I. If the board of directors does not accept or modify the suggestions from the Remuneration Committee, the date and the number of times of the meeting, contents of the proposal, the board of directors’ resolution, and the response of the Company to the suggestions shall be stated. (If the remuneration approved by the board of directors is higher than the Remuneration Committee suggests, the difference and the reason shall be stated.) : not applicable. II. If there is a discussed matter in the Remuneration Committee opposed by the members, or a matter the members hold qualified opinions on, which had record or statement in writing, the date and the number of times of the meeting, contents of the proposal, opinions of all members and the response to the opinions shall be stated: not applicable III. The 2020 meeting date and the content and results of resolutions of the remuneration committee, as well as the Company's treatment of the remuneration committee's opinions. Meeting date Content of proposal Resolutions Company's treatment of the remuneration committee's opinions. March 25, 2020 1. Distribution of 2019 remuneration to the directors. 2. Deliberate the 2019 year-end bonus of Deputy General Managers and above. 1. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 2. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. Not applicable June 30, 2020 Deliberate the 2019 employees’ remuneration of Deputy General Managers and above. Unanimous vote by all attending committee members to approve Not applicable September 29, 2020 1. Proposal to amend some clauses of the “Taiwan Fertilizer Co., Ltd. Remuneration Committee Charter” 2. Proposal to amend some clauses of the "Taiwan Fertilizer Co., Ltd. Evaluation Procedures for the Board of Directors Performance.” 3. Deputy General Manager, Shihjih Lo 1. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 2. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 3. Unanimous vote by all Not applicable
Meeting date		Content of proposal		Resolutions		Company's treatment of the remuneration committee's opinions.
March 25, 2020		1. Distribution of 2019 remuneration to the directors. 2. Deliberate the 2019 year-end bonus of Deputy General Managers and above.		1. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 2. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration.		Not applicable
June 30, 2020		Deliberate the 2019 employees’ remuneration of Deputy General Managers and above.		Unanimous vote by all attending committee members to approve		Not applicable
September 29, 2020		1. Proposal to amend some clauses of the “Taiwan Fertilizer Co., Ltd. Remuneration Committee Charter” 2. Proposal to amend some clauses of the "Taiwan Fertilizer Co., Ltd. Evaluation Procedures for the Board of Directors Performance.” 3. Deputy General Manager, Shihjih Lo		1. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 2. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration. 3. Unanimous vote by all		Not applicable

Corporate Governance Report

	Title	Name	Attendance in Person (B)	Attendance by Proxy	Attendance by Proxy	Actual Attendance Rate (%) `（`B/A`）`	Remarks	Remarks
			will retire compulsorily due to age on November 1, 2020. Proposal of disbursinghispension.		attending committee members to approve
	December 29, 2020		1. Proposal to amend that the remuneration policy and system shall be assessed by the Remuneration Committee, and recommend the application scope of the "managerial officers" to the Board of Directors. 2. Deputy General Manager, Wenhsiung Hsieh will retire compulsorily due to age on December 31, 2020. Proposal of disbursing his pension. 3. Proposal to adjust the employees’ salaries for 3%, and the Chief of Finance Dept and other staff as deputy general manager or above are also included.		1. Unanimous vote by all attending committee members to approve 2. Unanimous vote by all attending committee members to approve 3. Unanimous vote by all attending committee members to approve the proposal and submit it to the board for consideration.		Not applicable

Corporate Governance Report

(V) Fulfillment of Corporate Social Responsibility (CSR) and Differences with Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies and reasons

Items assessed			Operation	Deviations with Corporate Governance Best Practice Principles Best Practice Principles for TWSE/GTSM Listed Companies and reasons
	Yes	No	Summary
I. Does the company assess the risk of the environment, society, and issue of management of the company and set up a policy or strategy of risk management, according to principle of importance?	V		The Company has established operating standards related to environmental, social and governance issues and various risk factors, and abided by the standards to conduct risk management to achieve goals such as improving the Company's reputation and risk awareness and providing recommendations for strategic management and decision-making.	No deviation.
II. Does the company set up a unit to promote CSR, and authorized managerial level to handle by the board of the director, and report to the board of the director?	V		1. The CSR Committee serves as the highest ranked unit of the company in the field of CSR promotion. The CSR Secretariat, which is a dedicated unit directly subordinate to the board, assists the CSR Committee in the implementation of various tasks associated with CSR policies approved by the board. The Chairman serves as supervising member of the CSR Committee. The President and Vice President serve as the chairperson and deputy chairperson of the committee which is comprised of AVPs, division heads, and factory managers. Four subunits (Corporate Governance Promotion Task Force, Sustainability Promotion Task Force, Green Commitment Task Force, and Social Engagement Task Force) have been established. These task forces convene meetings or initiate projects for different issues periodically. CSR results and implementation conditions are reported to the board at least annually. 2. Functions and responsibilities of the CSR Committee: `（`1`）` Development and determination of CSR policy directions. `（`2`）` Collection and compilation of stakeholder opinions and identification and management of ESG related impacts, risks, and opportunities. `（`3`）` Formulation of KPIs and management approaches and regular inspection of ESG performance and goal achievement. `（`4`）` Annual reporting of ESG performance and future strategic goals to the board. `（`5`）` Regular organization of CSR training. `（`6`）` Compilation of sustainability reports and submission to the chairman for review and release.	No deviation.
III. Environmental Issue
I. Does the company set up an appropriate environmental management system,	V		Our plants in Taichung and Miaoli have completed the establishment of ISO 14001 environmental management system and regularlyconducted internal	No deviation.

Corporate Governance Report

according to the feature of the industry?		audits to ensure the continuous adoption of the practices.
II. Does the company dedicate in promoting efficiency of the usage of any sources, and use renewable materials that have low impact to the environment.	V	The Company has introduced its integration policy for production value chain and established the most efficient production and energy process design at the Taichung pant (fertilizer chemicals production base) to fully recycle energy and greatly improve energy efficiency. Taiwan Fertilizer uses recycled materials which have less negative impact to the environment to develop a circular economy. For example, waste fish scales are used to extract collagen peptide powder, and wine lees, decomposed wood chips, biogas digestate and rice straw are made into biotech organic fertilizers.	No deviation.
III. Does the company assess the risks and chances that the climate change makes to the present and the future of the company, and adapt measures against the climate issue?	V	We understand the significant economic and environmental impacts of climate change caused by operating activities. We have introduced the SIO 14064-1 greenhouse gases accounting system and regularly conducted the GHG inventory to establish target benchmark for reduction and offer energy-saving, carbon-reduction and GHG reduction solutions and improvement measures	No deviation.
IV. Does the company calculate the emission of green house gas, water consumption, and the amount of waste, and set up a managerial policy of energy saving and carbon reduction, reducing green house gas, reducing using water, or other waste.	V	We have disclosed the GHG emissions, amount of water used and volume of business waste disposal the past two years in our CSR report, and gradually reinforced our in-house management with more stringent measures compared with the environmental protection standards to continue promoting energy conservation and waste reduction actions.	No deviation.
IV. Social Issues
(I) Does the Company establish policies and procedures in compliance with regulations and internationally recognized human rights principles?	V	The Company has notified employees of the international human rights instruments and the domestic Labor Standards Act, the Labor Pension Act and other internal regulations, and published the information in the internal website for employees to examine and follow.	No deviation.
(II) Has the Company established and implemented reasonable employee welfare measures (including remuneration, vacation and other benefits) and appropriately reflected the business performance or results in the employee remuneration policy?	V	We provide our employees with the most comprehensive welfare system, which covers vacations, birthday gifts, social activities and making of work uniforms, and establish an employee welfare committee to offer a variety of subsidies to all employees. We submit proposals to the board to distribute year-end bonuses based on the operating performance. Individual performance bonuses and year-end bonuses are issued based on the appraisal results of individual work responsibilities and contributions.	No deviation.
(III) Has the Company provided employees with a safe and healthy working environment and regularly conducted safety and health training?	V	The plants in Taichung and Miaoli have obtained the ISO 45001`及`CNS 45001 occupational health and safety management system certification. In addition, the Company offers health promotion program and holds a variety of health activities and health education seminars to build a healthy and safe workplace for employees.	No deviation.
(IV) Has the Company established an effective career development training program for	V	The Company continues to establish effective career capacity development training programs for employees in accordance with organizational strategies,	No deviation.

Corporate Governance Report

employees?		personal performance development and functional enhancement needs, to enable employees to fully realize their potential and improve work quality and performance; In 2020, the trainings conducted include professional functions (ethical management and philosophy, research method innovation lectures, labor laws, real estate laws, etc.), management functions (Chung-Hua Financial and Economic Forum and Chung-Hua Leadership Elite Class), core functions (problem analysis and solution, TPM self-improvement by all employees, Personal information Protection Act ) , employee physical and mental health (AED operation training), union training subsidies and other training courses for different functions and aspects.
(V) Has the Company complied with the relevant regulations and international standards and formulated policies for consumer protection and grievance procedures with respect to consumer health and safety, customer privacy, marketing and labeling of products and services?	V	Article 24 of the Company's Corporate Social Responsibility Best Practice Principles discloses that the practices adopted by the Company for the marketing and labeling or products and services in accordance with regulations and international standards include: 1. Labels of packaging bags and promotional materials for fertilizers are in compliance with the domestic regulations on fertilizer management. 2. The Company's real estate development is designed, constructed and managed in accordance with domestic construction regulations. Marketing and product information labeling of properties for sales or for rent honestly disclose information to consumers and have not violated any relevant regulations and international standards. 3. In order to protect the health and safety of customers, we continue to improve our "Fertilizer Traceability System" and have introduced the ISO 22000 food safety system, conducted internal audits twice a year and external audit once a year and recorded the results on the traceability system of the Ministry of Health and Welfare. 4. In order to reinforce customer privacy and business information protection, we have established a Personal Information Protection Management Committee to formulate protection policies and systems for personal information, and rigorously adhered to the Confidentiality Implementation Measures and the Personal Information Protection Act to protect the Company's trade secrets.	No deviation.
(VI) Has the Company established supplier management policies which require suppliers to comply with regulations on environmental protection, occupational safety and health or labor rights, and reported the implementation?	V	The Company has added the CSR self-assessment or evaluation clauses to the Supplier Management Measures and CSR clauses to supplier contracts, and required that suppliers ensure human rights and pay attention to labor rights. The Company also conducts on-site surveys of main suppliers to understand the status of their evaluation in the environmental and social aspects.	No deviation.
V. Has the Company referred to international reporting standards or guidelines in itspreparation of corporate	V	The Company prepares its CSR report in accordance with the GRI Standards Core Option published by the Global Reporting Initiative (GRI). The BSI Group,an independent and credible standards body,is entrusted with the	No deviation.

Corporate Governance Report

social responsibility reports and other report, which adopts the AA1000AS (2008) Type 1 intermediate assurance reports which disclose the Company's level, and guarantees the authenticity of the information disclosed in the report non-financial information? Have the to ensure the accuracy of the information disclosure. abovementioned reports obtained the verification or assurance opinions from third-party certification organizations?

VI. If the company has its own corporate social responsibility code in accordance with the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies, please describe the difference between its operation and the prescribed code: The Company has established the “Corporate Social Responsibility Best Practice Principles,” as the basis for fulfillment of corporate social responsibilities. The Company has constructed three CSR aspects including treatment, environment and society, shaped CSR policies, promoted plans and executed management guidelines. The Company also demonstrates and reports the annual CSR implementation situation to all stakeholders by preparing and publishing CSR reports.
VI. Other important information to help understand the operation of corporate social responsibility: 1. For years, Taiwan Fertilizer Foundation has continued to care for agriculture and those who are underprivileged and in need of social welfare. Since the establishment of a scholarship and grant program in 2017; as of 2020, a total of 154 students have been awarded in five different events, receiving a total of more than NT$2,520,000. It seeks to encourage young students to think comprehensively about the structural challenges of Taiwan's agricultural management during school, and contribute to the future development of Taiwan's agriculture, build dreams and be practical, and advance toward life goals.
In 2020, Taiwan Fertilizer Group and Taiwan Fertilizer Foundation jointly participated in projects such as charitable donations, cultural and art events, sports promotion, purchase of agricultural products and exchanges between industry peers. In terms of charitable donations, we have donated to Formosa Cancer Foundation to organize 2020 Pink Hiking event, 2020 Great Mother by Taiwan Disability-Free Association, and the New Taipei City Disabled Sports Federeation. In terms of sports promotion, we have sponsored Taiwan Table Tennis Association for the 2020 Teenager Table Tennis Elite Championship, LOHAS Table Tennis Championship, and Citizen Sports Competition held by Hualien County Government. For purchasing produce, we coped with the governmental production and sales policy, to buy custard apple, cabbage, yellow watermelon, red dragon fruit, banana, Wendan pomelo, among other fruits. For the cultural and arts promotion, we sponsored the 2020 National Go Competition of 9th Term in Yunlin County, and “Sing For You, the Brilliant Age” held by the Taitung Station of CSBC. For the industrial interaction, we sponsored the 2020 Summit Forum of Taiwan Chemical Industry Association; 67th Anniversary annual convention of Taiwan Institute of Chemical Engineering, “Grateful Press Conference for Traceable Soybean Production and Sales in Chungdu 2020,” “2020 United Annual Convention Forum of Agricultural Science Foundation,Taiwan ROC,” and “Special Exhibition of Youth Returning to Farming Village for a Decade” held by Soil and Water Conservation Bureau, COA.
The fulfillment of our corporate social responsibility is compiled in our annually published Corporate Social Responsibility Report. Stakeholders may download the report from the Market Observation Post System and our official website.

Corporate Governance Report

(VI) Implementation of Ethical Corporate Management and Differences with Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies and reasons

Items assessed			Operation	Deviations with Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies and reasons
	Yes	No	Summary
I. Settingethical managementpolicies andprograms
(I) Does the company establish ethical management policies approved by the board and have bylaws and publicly available documents addressing its corporate conduct and ethics policy and measures and the commitment regarding the implementation of such policy from the board and the executive management team?	V		The Company specifies its policies and actions of integrity operation in the rules and external documents as follows: 1. We disclose our core value, ethics, in the company profile, three-year business management strategies, and our official website. We established the “Ethical Corporate Management Best Practice Principles” to create a corporate culture of ethical management, build a good risk control mechanism, and sturdily ensure sustainable management and development for the enterprise. 2. The Company prepares CSR report each year to explain its integrity operation commitment and executionperformance.	No deviation.
(II) Has the Company established a risk assessment mechanism against unethical conduct, analyzed and assessed on a regular basis business activities within their business scope which are at a higher risk of being involved in unethical conduct, and established prevention programs accordingly which at least cover the prevention measures against the conducts listed in Paragraph 2, Article 7 of the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies?	V		We have established the Ethical Corporate Management Best Practice Principles which serves as the guidelines at the highest standard and code of conduct for operating activities of Taiwan Fertilizer, its subsidiaries and other investees over which Taiwan Fertilizer has the controlling interest. In order to fully implement the ethical management policy, Taiwan Fertilizer has also introduced the Ethical Corporate Management Best Practice Principles and Code of Ethical Conduct for Directors and Top Executives, the Taiwan Fertilizer Staff Working Rules and the Taiwan Fertilizer Staff Evaluation Measures as solutions for preventing unethical behaviors of personnel at various levels. We have also established the Internal and External Personnel Grievances Procedures which details methods for filing grievances, investigation procedures, protection of whistleblowers and others, and adhered to these policies.	No deviation.
(III) Has the Company defined operating procedures, conduct guidelines, disciplinary penalties and grievance process in the program preventing unethical conduct and put them in practice, and regularly reviewed and amended the program?	V			No deviation.
II. Implementation of ethical management
(I) Does the Company evaluate the integrity records of the transaction object and conclude the terms regarding the integrity behavior in the agreement	V		Prior to the purchase, the Company evaluates the integrity records of the transaction object and specifies in the purchase agreement, trading agreement, etc. that the object shall, prior to the execution of the	No deviation.

Corporate Governance Report

signed with them?		agreement or during the terms of this agreement, never give present to Party A’s employee in any form. Should Party B go against the regulations, Party A can terminate this agreement immediately as long as it is discovered and cancels Party B’s rights of trading with Party A or contracting Party A’s projects.`」`
(II) Has the Company established a specialized unit under the board responsible for the promotion of corporate ethics management, which regularly (at least once a year) reports policies on ethical operations, programs on prevention of unethical conduct and the status of supervision to the board?	V	The board office under the board, the audit office, administration divison of the management department are jointly responsible for promoting corporate ethics management policies and related implementation measures.	No deviation.
(III) Does the Company prepare the policies against interest conflict and provide and implement the proper statement channel?	V	The Company clearly stipulates in its Ethical Corporate Management Best Practice Principles and Code of Ethical Conduct for Directors and Top Executives that the company’s directors, independent directors, and top executives shall prevent conflicts of interest involving personal interests or the overall interests of the company. Where it is detected that conduct of employees involves conflicts of interest, such conduct shall be reported to the Audit Committee, managers, internal auditing officers, or other relevant personnel and handled in a confidential manner.	No deviation.
(IV) Has the Company established an effective accounting and internal control system to put ethical operations management into practice and arranged for the internal audit unit to formulate audit plans based on the risk assessment of unethical conduct and audit the compliance to prevent unethical conduct, or commissioned independent auditors to conduct the audit?	V	The Company shall establish its accounting system according to laws and the internal control system pursuant to the “Regulations Governing Establishment of Internal Control Systems by Public Companies.” The audit office prepares the annual audit plan for check, and the internal audit shall be reported in written at each board meeting.	No deviation.
(V) Does the Company hold regular internal and external education trainings on ethical management regularly?	V	The Company regularly conducts education and training sessions on ethical management. In June 2020, we invited Vice President Li-Chen Chiu of KPMG Taiwan's Risk Advisory Services Department to conduct classes on ethical and risk management and share his experience in case studies; 79 employees attended.	No deviation.
III. Operation of the Company’s whistle-blowingsystem
(I) Does the Company prepare the specific whistle-blowing and award & punishment system, establish the convenient whistle-blowingchannel	V	The Company has established its Internal and External Personnel Grievances Procedures and accessible channels for filing grievances. Whistleblowers can submit their cases through written letters or emails	No deviation.

Corporate Governance Report

and designate a person to deal with the accused?		to a specified address or email box. The audit office is the responsible unit handling the cases. Whistleblowers or those with meritorious performance in handling the cases are rewarded appropriately in accordance with Article 10 of the Internal and External Personnel Grievances Procedures
(II) Does the Company establish standard operating procedures for investigating the complaints received, follow-up measures to be adopted and the related confidentiality measures after investigation?	V	Article 6 of the Internal and External Personnel Grievances Procedures have stipulated detailed standard investigation procedures and the confidentiality measures.	No deviation.
(III) Does the Company take measures for protecting the whistle-blower from being punished improperly?	V	The whistleblower protection policy is specified in Article 9 of the “Internal and External Personnel Grievances Procedures”. It protects the whistleblower from any inappropriate treatment due to whistleblowing.	No deviation.
IV. Strengthening of information disclosure
Does the company disclose the contents of its Ethical Corporate Management Best Practice Principles and the effectiveness on its website and MOPS?	V	This Company discloses relevant norms and regulations set forth in its Ethical Corporate Management Best Practice Principles as well as educational information and implementation results on its official website. These principles and the Code of Ethical Conduct for Directors and Top Executives are also disclosed on the Market Observation Post System and relevant training courses are organized. Ethical corporate management implementation records are disclosed in annually released CSR reports.	No deviation.
V. If the company has its own Ethical Corporate Management Best Practice Principles in accordance with the "Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies", please describe the difference between them: The Company prepared Ethical Corporate Management Best Practice Principles as the basis to put integrity operation into practice. Prior to these principles, the Company still abided by the spirit of integrity operation in promoting all of its businesses. The Company will implement the integrity operation in terms of operation and corporate governance byabidingbythe items stated herein in order to realize sustainable development.
VI. Other important information that helps to understand the company's ethical management operation: The operation situation and effectiveness of ethical management of the Company are documented in the annual CSR report issued each year, available for public reference.

Corporate Governance Report

(VII) Disclosure of Inquiry Ways in Case of any Formulation of Corporate Governance Rules and Relevant Regulations by the Company

For more information about the “Corporate Governance Best Practice Principles of Taiwan Fertilizer Co., Ltd.” And” TFC Ethical Corporate Management Best Practice Principles”, please visit our official website: https://www.taifer.com.tw/FileUploadCategoryListC005110.aspx?CategoryID=31da db88-2653-4cc2-834a-0d449891f654

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(VIII) Other Important Information Enough to Enhance the Understanding of the Operation of Corporate Governance

In the 20th meeting, Board of directors of 34th Term on May 26, 2020, it was resolved to approve the amendments to the “Corporate Social Responsibility Best Practice Principles of Taiwan Fertilizer Co., Ltd.” The related clauses are available on the official website
In the 21st meeting, Board of directors of 34th Term on June 30, 2020, it was resolved to approve the amendments to the “Taiwan Fertilizer Co., Ltd. Code of Ethical Conduct for Directors, Supervisors, and Level I Managerial Supervisors.” The related clauses are available on the official website
In the 21st meeting, Board of directors of 34th Term on June 30, 2020, it was resolved to establish the “Corporate Governance Best Practice Principles of Taiwan Fertilizer Co., Ltd.” The related clauses are available on the official website
At the 27th board meeting of the 34th Term of the board on March 25, 2021, tit was resolved to approved the appointment of Chung, Shun-Hua, Chief of Board of Directors Office as the corporate governance officer.
Please visit the Company's official website for the CSR reports in both Chinese and English over the years.

Corporate Governance Report

(IX) Status of the Execution of the Internal Control System

Declaration for Internal Control System of Public Listed Company

Declaration for Internal Control System of Public Listed Company

Showing the effectiveness in design and implementation

(The part following rules and regulations in the Declaration is applicable when all of the rules and regulations are adopted)

TAIWAN FERTILIZER CO., LTD.

Declaration for Internal Control System

Date: March 25, 2021

With respect to the internal control system for 2020, based on the self inspection result, we hereby represent as follows:

I. The Company acknowledges that it is the responsibility of the Board of Directors and the managers of the Company to establish implement and maintain the internal control system, and the Company has established the system for the purpose of providing reasonable assurance of the achievement of such targets as the operating result and efficiency (including profits, performance and safeguarding assets safety, etc.), the financial report reliability and the compliance with relevant statues.
II. The internal control system has its congenital limitation; notwithstanding a perfect design, the effective internal control system can only provide reasonable assurance of the achievement of the above three targets; furthermore, the internal control system effectiveness may vary according to the change of the environment and conditions, provided that internal control system of this Company is equipped with the self supervision mechanism and the Company can take any corrective action in case of any deficiency identified.
III. The Company shall judge the design of the internal control system and the effectiveness of the implementation thereof based on the judgment items of the effectiveness of the internal control system as provided in the Regulations Governing Establishment of Internal Control Systems by Public Companies (hereinafter referred to as “the Regulations”). The internal control system judgment adopted in the Regulations refers to the management based control process and divides the internal control system into five elements: 1. control environment; 2. risk evaluation; 3. Control job; 4. information and communication; and 5.supervision. Each element contains a number of items. For the above items, refer to the Regulations.
IV. The Company has adopted the above-mentioned internal control system judgment items to examine the design of the internal control system and the effectiveness of the implementation thereof.
V. Based on the preceding examination result, the Company deems that, the internal control system of the Company on December 31, 2019 (including the supervision and management of its subsidiary), including knowing about the operating result and the achievement of the efficiency and targets, financial whistle-blowing reliability and the design of and the implementation effectiveness of the internal control system regarding the compliance with relevant statues, is effective, and it can reasonably ensure the achievement of the above targets.
VI. This Declaration shall be the main content of the annual report and prospectus of the Company and be disclosed to the public. In case of any false or hidden illegal matters, the above content disclosed shall involve the legal responsibilities in Article 20, Article 32, Article 171 and Article 174 in the Securities and Exchange Act.
VII. We state herein that the Statement was approved by the board of directors on March 25, 2021. None of the nine directors present at the meeting expressed any objection, and all of them agreed on the contents of the Statement.

TAIWAN FERTILIZER CO., LTD. Chairman and General Manager: Huang, Yao-Hsing

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Corporate Governance Report

If a CPA is appointed to review the internal control system, the CPA’s audit report shall be disclosed: N/A
(X) Punishment to the Company and its Personnel by Law and Punishment to its Personnel in Breach of Internal Control Systems by the Company as well as Major Shortcomings and Improvements over the Recent Years and up to the Date of Publication of Annual Reports: N/A
(XI) Important resolutions at the shareholders’ and board of directors meetings in the most recent year and as of the date on which the annual report was printed.

1. Key resolution and implementation of 2020 shareholders meeting (June 22, 2020)

Item	Content	Implementation
1	The financial statements and recognition of final statements of the Company in 2019 were approved. No shareholders proposed disagreement after the inquiryof the chairman.	All shareholders have been mailed for inquiry.
2	The 2019 Earnings Distribution Plan was approved after no attending shareholder voiced an objection following an inquiry by the chair.	1. Notification has been sent out to shareholders regarding shareholder bonuses and director, and employee remuneration. 2. On August 11, 2020, in the 22th meeting, Board of directors of 34th, the 2019 cash dividends of NT$ 2.2 per share distributable to shareholders; the distribution base date was determined as September 5, 2020.
3	The amendment of certain provisions set forth in the Articles of Incorporation was approved after no attending shareholder voiced an objection followingan inquirybythe chair.	Announce has been made on the Company’s website and the amended regulations are adopted.
4	The amendment of certain provisions of the “Operational Procedures for Loaning of Funds, Endorsements and Guarantees” was approved after no attending shareholder voiced an objection followingan inquirybythe chair.	Announce has been made on the Company’s website and the amended regulations are adopted.
5	Proposal to lift the non-competition restriction for Director, Chen Jun-Jih, was approved after no attending shareholder voiced an objection followingan inquirybythe chair.	Proceeded as the regulations.

2. Important resolutions at the board of directors meeting

Month/Year	Content
February 2020	I. Approve the amendments to the Company's “Rules of Procedure for Shareholders Meetings” in part. II. Approve the amendments to the Company's “Audit Committee Charter” in part. III. Approve the amendments to the Company's “Remuneration Committee Charter” in part.

Corporate Governance Report

Month/Year	Content
March 2020	I. Approved the 2019 Declaration for Internal Control System. II. Approved the 2019 consolidated and parent-only financial statements. III. Approved the 2019 business report. IV. Approved the 2019 earnings allocation. V. Approved the 2019 remuneration disbursed to the Company's directors and employees. VI. Approved the Distribution of 2019 remuneration to the directors. VII. Approved to the operation to accept proposals from the shareholders holding 1% or more stake. VIII. Approved the convening of 2019 annual general meeting at Armed Forces Officers Club (No. 142, Yanping South Road, Zhongzheng District, Taipei City) at 9 am on Thursday, June 22, 2020. IX. Approved the purchase of the directors and officers liability Insurance policies from Shinkong Insurance. X. Approval of the amendments to provisions of the Articles of Incorporation. XI. Approval of the amendments to provisions of the Shareholder Meeting Rules of Procedures.
April 2020	I. Approved the “Taifer Hotel and Office Building New Construction Project” (Nangang C2 Project). It is proposed to add NT$1.472 billion to the original approved budget of NT$10.913 billion, to total NT$12.385 billion as the project budget.
August 2020	I. Approved the 2019 cash dividends of NT$ 2.2 per share distributable to shareholders; the distribution base date was determined as September 5, 2020.
September 2020	I. Approve the amendments to the Company's “Remuneration Committee Charter” in part. II. Approved the amendments to the Company's “Evaluation Procedures for the Board of Directors Performance” in part.
November 2020	I. Revised approval of the 2021 business plan and budget. II. Approved the 2021 annual audit program.
February 2021	I. Approved the convening of 2020 annual general meeting at Armed Forces Officers Club (No. 142, Yanping South Road, Zhongzheng District, Taipei City) at 9 am on Tuesday, June 29, 2021. II. Approved to the operation to accept proposals from the shareholders holding 1% or more stake. III. Approved the nomination period, seats to be elected, and information shall be furnished by nominating shareholder, and the venue of acceptance for the candidates of directors (independent directors included). IV. Approval of the amendments to provisions of the Shareholder Meeting Rules of Procedures.
March 2021	I. Approved the 2020 consolidated and parent-only financial statements. II. Approved the 2020 business report. III. Approved the 2020 earnings allocation. IV. Approved the 2020 Declaration for Internal Control System. V. Approved the 2020 remuneration disbursed to the Company's directors and employees.

Corporate Governance Report

Month/Year	Content
	VI. Approved the Distribution of 2020 remuneration to the directors. VII. Approved the appointment of Chung, Shun-Hua, Chief of Board of Directors Office as the corporate governance officer, taking effect on April 1, 2021.

(XII) Major Contents of Different Opinions of Directors or Supervisors on Important Resolutions with Records or Written Statements as Adopted by the Board of Directors over the Recent Years and up to the Date of the Publication of Annual Reports: not applicable

(XIII) In most recent year and as of the end of this annual report is printed out, the resignation summary of the company's chairman, president, accounting, financial, internal audit, management officers and R&D executives:

Title	Name	Resignation or Dismissal
Chairman	Kang, Hsin-Hong	Dismissed on February 11,2020, and returned to National Cheng Kung University

V. Professional Service Fees of CPAs

(I) Information of Professional Service Fees to CPAs by Fee Range

Name of the accountingfirm	Name	of CPAs	Duration of audit	Remarks
KPMG Taiwan	Tseng, Kuo-Yang	Lin, Heng-Sheng	2020.1.1~2020.12.31	-

Unit: New Taiwan Dollar

Service Fee Item Fee Range	Service Fee Item Fee Range	Audit fee	Non-audit fee	Total
1	Below NT$2,000,000		V
2	NT$2,000 thousand (including) to NT$4,000 thousand
3	NT$4,000 thousand (including) to NT$6,000 thousand	V		V
4	NT$6,000 thousand (including) to NT$8,000 thousand
5	NT$8,000 thousand (including) to NT$10,000 thousand
6	More than NTS$10,000 thousand (including)

Corporate Governance Report

(II) When non-audit fees paid to the CPAs, to the accounting firm of the CPAs, and/or to any affiliated enterprise of such accounting firm are one quarter or more of the audit fees paid thereto, the amounts of both audit and non-audit fees as well as details of non-audit services shall be disclosed:

Professional Service Fees of CPAs

Unit: New Taiwan Dollar

Name of the accounting firm	Name of CPAs	Audit fee	Non-audit fee	Non-audit fee	Non-audit fee	Non-audit fee	Non-audit fee	Duration of Audit
			System Design	Business Registration	Human Resources	Others	Subtotal
KPMG Taiwan	Tseng, Kuo-Yang	4,400	-	-	50	300	350	109.01~109.12
	Lin, Heng-Sheng
Note: Corrections to the financial statements and the announced/reported professional service fee for NT$300 thousand.

(III) When the company changes its accounting firm and the audit fees paid for the fiscal year in which such change took place are lower than those for the previous fiscal year, the amounts of the audit fees before and after the change and the reasons shall be disclosed: not applicable.
(IV) When the audit fees paid for the current fiscal year are lower than those for the previous fiscal year by 10 percent or more, the reduction in the amount of audit fees, reduction percentage, and reason(s) therefor shall be disclosed: not applicable.

Corporate Governance Report

VI. Information on replacement of certified public accountant: not applicable.

VII. Where the company's chairperson, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its certified public accountant or at an affiliated enterprise of such accounting firm: not applicable.

Corporate Governance Report

VIII. Any transfer of equity interests and/or pledge of or change in equity interests (during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report) by a director, supervisor, managerial officer, or shareholder with a stake of more than 10 percent during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report.

(I) Information on transfer of shares:

Title	Name	2020	2020	2021 upto May1	2021 upto May1
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Chairman	COA	0	0	0	0
	Representative: Huang, Yao-Hsing	0	0	0	0
Director	COA	0	0	0	0
	Representative: Hu, Jong-I	0	0	0	0
Director	COA	0	0	0	0
	Representative: Fan, Mei-Ling	0	0	0	0
Director	COA	0	0	0	0
	Representative: Li, Chao-Feng	0	0	0	0
Director	COA	0	0	0	0
	Representative: Sun, Uang-Shyang	0	0	0	0
Director	Chen, Yao-Kuang	(25,000)	75,000	0	0
Independent Director	Lin, Horng-Chang	0	0	0	0
Independent Director	Lee, Ming-Shiuan	0	0	0	0
Independent Director	Hsiao, Chao-Chin	0	0	0	0
General Manager	HuangYao-Hsing	0	0	0	0
Deputy General Manager	Zhang, Cang-Lang	0	0	0	0
Deputy General Manager	Lin Chin-Sheng	0	0	0	0
Chief, Finance Dept	Huang, Mei-Ling	0	0	0	0
Corporate Governance Officer	Chung, Shun-Hua	0	0	0	0

(II) Information on pledge of equity interests:

The counterparty in any such transfer or pledge of equity interests is a related party: None

Corporate Governance Report

IX. Information on top ten shareholders and their mutual relationship as spouse or blood relative within the second degree:

degree:
Name	Shareholding	one self	Shareholding by Spouse and Children of Minor Age		Shareholding by nominee arrangement		Relationship information, if among the company's 10 largest shareholders any one is a related party or a relative within the second degree of kinship of another as stated in No. 6 of SFAS		Remarks
	Shares	Shareholding Ratio (%)	Shares	Shareholding Ratio (%)	Shares	Shareholding Ratio (%)	Name	Relation
Council of Agriculture, Executive Yuan Representative: Huang ,Yao-Hsing Representative: Hu, Jong-I Representative: Fan, Mei-ling Representative: Li, Chao-Feng Representative: Sun, Uang-Shyang	235,886,376	24.07	0	0	0	0	None	None
	0	0	0	0	0	0	None	None
	0	0	0	0	0	0	None	None
	0	0	0	0	0	0	None	None
	0	0	0	0	0	0	None	None
	113	0	0	0	0	0	None	None
Taiwan Cooperative Bank Co., Ltd. Representative: Lei, Chung-Da	29,454,000	3.01	0	0	0	0	None	None
	0	0	0	0	0	0	None	None
China Life Insurance Co., Ltd Representative: Kuo, Yu-Ling	28,363,000	2.89	0	0	0	0	None	None
	0	0	0	0	0	0	None	None
Jun Investment International Co., Ltd Representative: Wu, Cheng-Lung	13,000,000	1.33	0	0	0	0	None	None
	7,725,000	0.79	0	0	0	0	None	None
Financial Department, General Administration Division, Mega International Commercial Bank Co., Ltd. Representative: Koh, Li-Wen	11,610,000	1.18	0	0	0	0	None	None
	0	0	0	0	0	0	None	None
Nanshan Life Insurance Co., Ltd. Representative: Tu, Ying-Tsung	11,101,000	1.13	0	0	0	0	None	None
	0	0	0	0	0	0	None	None
Taiwan Life Insurance Co., Ltd. Representative: Huang, Si-Kuo	10,657,000	1.09	0	0	0	0	None	None
	0	0	0	0	0	0	None	None
JPMorgan Chase Bank N.A. Taipei Branch in custody for Vanguard Total International Stock Index Fund a series of Vanguard Star Funds	10,589,225	1.08	0	0	0	0	None	None
JPMorgan Chase Bank N.A. Taipei Branch in custody for Vanguard Emerging Market Stock Index Vanguard International Equity Index Funds	10,260,186	1.05	0	0	0	0	None	None
Paolyta Co., Ltd Representative: Lu, Bai-Tsang	9,782,000	1.00	0	0	0	0	None	None
	0	0	0	0	0	0	None	None

Capital Raising Activities

X. Percentage number of shares and consolidate percentage of the company, directors, supervisor, managers and the businesses that are controlled by the company directly or indirectly on the invested company

March 31, 2021 Unit: share (NT$); %

					March 31, 2021 Unit: share (NT$); %	March 31, 2021 Unit: share (NT$); %
Reinvested entities (Note)	Investment by the Company		Investments by directors, supervisors, managerial officers and directly or indirectly controlled enterprises		Total investment
	Shares (capital paid)	Shareholding (capital paid) ratio	Shares (capital paid)	Shareholding (capital paid) ratio	Shares (contribution)	Shareholding (capital paid) ratio
Taiwan Yes Deep Ocean Water Co.,Ltd.	25,763,200 shares	100.00	0	0.00	25,763,200 shares	100.00
Peifeng Technology Co., Ltd.	240,000,000 shares	100.00	0	0.00	240,000,000 shares	100.00
Taizhuang Assets Management & Development Co.,Ltd.	5,500,000 shares	100.00	0	0.00	5,500,000 shares	100.00
Taifer International (Samoa) GroupCo.,Ltd.	0	0.00	1,414,989 shares	100.00	1,414,989 shares	100.00
Taifer Chemical International Co.,Ltd.	0	0.00	US$ 1,333,494	100.00	US$ 1,333,494	100.00
Taifer (Cayman) International GroupCo.,Ltd.	10,965 shares	100.00	0	0.00	10,965 shares	100.00
Tr Electronic Chemical Co., Ltd.	0	0.00	10,965,000 shares	51.00	10,965,000 shares	51.00
Taifer(Cambodia)Co.,Ltd.	US$1,254,557	100.00	0	0.00	US$1,254,557	100.00
Al-Jubail Fertilizer Company	6,715 shares	50.00	0	0.00	6,715 shares	50.00
Mitagri Co., Ltd	8,000,000 shares	33.33	0	0.00	8,000,000 shares	33.33
Taiwan Agricultural Investment Co., Ltd.	6,000,000 shares	31.58	0	0.00	6,000,000 shares	31.58

Note: Long-term investments with the equity method.

Capital Raising Activities

Four. Capital Raising Activities

I. Capital and Shares

(I) Source of share capital

Month/Yar	Issuance price	Approved share capital	Approved share capital	Paid-in share capital	Paid-in share capital	Remarks	Remarks	Remarks
		Shares (thousand shares)	Amount (NT$ thousand)	Shares (thousand shares)	Amount (NT$ thousand)	Source of share capital	Property other than cash provided as capital contributions	Others
Aug 2000	NT$10	980,000	9,800,000	980,000	9,800,000	Capital reserve transferred to capital increase NT$2.8 billion (Note)	None	None

Note: Approved with the Letter (89) Tai-Cai-Zheng (1)No.60387 dated July 12, 2000, issued by Securities and Futures Commission.

Share type		Approved share capital		Remarks
	Outstanding shares (thousand shares)	Unissued shares (thousand shares)	Total
Ordinary share	980,000	0	980,000	Public listed

Shelf-registration system: not applicable

(II) Shareholder structure

May 1, 2021

						May 1, 2021
Shareholder structure Quantity	Governmental agencies	Financial institution	Other institution	Individual	Foreign Institutions and foreigners	Total
Number of shareholders	7	28	331	71,236	290	71,892
Number of shares held	254,379,490	137,702,516	96,440,657	391,787,643	99,689,694	980,000,000
Shareholding ratio	25.96%	14.05%	9.84%	39.98%	10.17%	100%

Capital Raising Activities

(III) Share ownership distribution

1. Ordinary share

May 1, 2021

1. Ordinary share			May 1, 2021
Classification of shareholding	Number of shareholders	Number of shares held	Shareholding ratio
1 to 999	27,108	1,125,769	0.11
1,000 to 5,000	33,601	70,562,926	7.20
5,001 to 10,000	5,234	42,597,698	4.35
10,001 to 15,000	1,522	19,882,602	2.03
15,001 to 20,000	1,243	23,418,875	2.39
20,001 to 30,000	1,014	26,520,417	2.71
30,001 to 50,000	806	32,927,331	3.36
50,001 to 100,000	665	48,451,352	4.94
100,001 to 200,000	369	52,555,318	5.36
200,001 to 400,000	157	43,618,941	4.45
400,001 to 600,000	58	27,883,728	2.85
600,001 to 800,000	29	20,345,113	2.08
800,001 to 1,000,000	16	14,340,508	1.46
More than 1,000,001	70	555,769,422	56.71
Total	71,892	980,000,000	100.00

Preference share: none

(IV) List of Major Shareholders

May 1, 2021

(IV) List of Major Shareholders		May 1, 2021
Shares Name of major shareholder	Number of shares held	Shareholding ratio
Council of Agriculture, Executive Yuan	235,886,376	24.07%
Taiwan Cooperative Bank	29,454,000	3.01%
China Life Insurance Co., Ltd	28,363,000	2.89%
Jun Investment International Co., Ltd	13,000,000	1.33%
Financial Division, General Administration Division, Mega International Commercial Bank Co., Ltd.	11,610,000	1.18%
Nanshan Life Insurance Co., Ltd.	11,101,000	1.13%
Taiwan Life Insurance Co., Ltd.	10,657,000	1.09%
JPMorgan Chase Bank N.A. Taipei Branch in custody for Vanguard Total International Stock Index Fund a series of Vanguard Star Funds	10,589,225	1.08%
JPMorgan Chase Bank N.A. Taipei Branch in custody for Vanguard Emerging Market Stock Index Vanguard International EquityIndex Funds	10,260,186	1.05%
Paolyta Co., Ltd	9,782,000	1.00%

Capital Raising Activities

(V) Market share price, net worth, earnings, dividend and relevant information for the most recent two years

Item	Year	Year	2020	2019	Current year up to March 31, 2021 (Note 5)
Market price per share (Note 1)	Highest		NT$59.8	NT$51.7	NT$56.5
	Lowest		NT$39.75	NT$42.7	NT$49.95
	Average		NT$50.91	NT$47.43	NT$53.24
Net value per share	Before distribution		NT$52.36	NT$51.76	NT$53.42
	After distribution		Not yet distributed	NT$49.56	Not yet distributed
Earnings per Share	Weighted-average shares (thousand shares)		980,000	980,000	980,000
	Earnings per Share		NT$2.50	NT$2.11	NT$0.76
Dividends per share	Cash dividends		Not yet distributed	NT$2.2	Not yet distributed
	Bonus share	Shares from earnings	－	－	`－`
		Shares from captial reserves	`－`	`－`	`－`
	Cumulative unpaid dividends		`－`	`－`	`－`
Analysis of return on investment	Price to earnings ratio (Note 2)		20.36	22.48	－
	Price to dividend ratio (Note 3)		`－`	21.56	`－`
	Cash dividend yield (%) (Note 4)		`－`	4.64	`－`

Note 1: Setting forth the highest and lowest market price per share of common stock for each fiscal year. And calculating each fiscal year's average market price based upon each fiscal year's actual transaction prices and volume.

Note 2: Price to earnings ratio= Average closing price per share of the year/ EPS

Note 3: Price to dividend ratio= Average closing price per share of the year/ cash dividend per share

Note 4: Cash dividend yield= Cash dividend per share/average closing price per share of the year

Note 5: The market price per share for 2021 is up to March 31, 2021; the net value and earnings per share are the data from the Q1 consolidated financial statements reviewed by the CPAs.

Note 6: The net value and earnings per share are the data of 2019 and 2020 are the figures audited by the CPAs.

Capital Raising Activities

(VI) Dividend Policy and Implementation

Dividend policy:
(1) The dividend policy specified in the Articles of Incorporation is as the following:

Paragraph 3 and 4 of Article 25

In case where the Company have surplus profit after settling the annual accounts, when allocating its surplus profits after having paid all taxes and dues, shall first set aside ten percent of said profits as legal reserve, and appropriate or reverse the special reserves as required by laws. The sum of such balance with the accumulated undistributed earnings from the previous year is deemed the distributable earnings. However, the special reserves may be reserved or appropriated as the operation requires, and the Board of Directors will propose the earnings distribution to the AGM to distributing bonus to shareholders.

The Company’s shareholder dividends should consider the characteristics of the diversified business, and the changes in the economy, while taking the future capital needs during the life cycle of each product or service, and business development and shareholder rights into account. Unless there are major investment plans, material changes in financial conditions, major operational changes and capacity expansion or other major capital expenditures, the shareholders’ cash dividend distribution ratio shall not be lower than 10% of the total dividends for the year, and shall be reported to shareholders’ meeting for approval and enforcement.

  - (2) The major considerations for distribution of shareholders’ dividends include the future funds of the Company, while taking into account of stable dividends and transformation needs of the Company. After deducting the legal reserve and special reserve, at least 50% of the distributable net profit will be distributed principally.

The dividend distribution to be proposed to the shareholders’ meeting:
- Based on the 2020 earnings distribution proposal by the Board of Directors, the cash dividend is NT$2.3 per share, for total NT$2,254,000,000.
Expected significant changes to dividend policy: None.
(VII) Impact of Proposed Bonus Shares on Operating Performance and EPS : not applicable

(VIII) Remunerations to employees and directors

Employees’ and directors’ remuneration percentage or range as stated in the Articles of Incorporation:

Paragraph 1 and 2 of Article 25 of the Articles of Incorporation.

If the Company records a profit in a year, it shall appropriate two percent of the profit as remuneration to employees and not more than one point sie percent of the profit as remuneration to directors. However, the amount to offset the Company’s accumulated losses shall be set aside in advance.

The employees and directors’ remuneration in the preceding paragraph, shall be resolved by a majority vote at a meeting of board of directors attended by two-thirds of the total number of directors, and report to the shareholders’ meeting.

The basis for the estimation of the amount of remuneration of employees and directors in the current period, and the accounting treatment if there is a difference

Capital Raising Activities

between the estimated amount and the actual bonus paid in shares or cash: The estimated employees’ remuneration, NT$74,105 thousand and directors’ remuneration, NT$49,403 thousand, are both estimated on the basis as 2.4% and 1.6% of 2020 profit, respectively, pursuant to Article 25 of the Articles of Incorporation; no remuneration is distributed in shares. In case the actual amount of distribution is different from the estimation, it it s deemed change in accounting estimate, and recorded as the income/loss of 2021.

Remuneration distribution as decided by the Board of Directors’ meeting:
(1) Amount of distributed employees and directors’ remunerations, in cash or share The proposed amount of distribution approved by the Board of Directors (as the following table), are both estimated on the basis as 2.4% and 1.6% of 2020 profit, respectively, pursuant to Item 1, Article 25 of the Articles of Incorporation; in case the actual amount of distribution is different from the estimation, it it s deemed change in accounting estimate, and adjusted in 2021.

Unit: NTD thousand

	Unit: NTD thousand
Item	Proposed amount of distribution approved by the Board of Directors
Employees’ remuneration in cash	74,105
Employees’ remuneration in shares	None
Directors’ remuneration	49,403

(2) Employee remuneration paid in shares as a percentage of the total amount of the current net profit after tax reported in the consolidated or parent company-only financial statements and the total employee remuneration: not applicable
Actual distribution of employees and directors’ remuneration (including distributed cash, shares, and share prices) in the prior year, and the accounting disclosures, treatments and explanations if a discrepancy exists:
The employees and directors’ remunerations distributed for the previous year (2019) were recorded in the expense of the previous year (2019); the actual distributed employees and directors’ remunerations are identical to the proposed amount of distribution approved by the Board of Directors

Unit: NTD thousand

		Unit: NTD thousan
Item	Proposed amount of distribution approved by the Board of Directors	Actual distributed amount
Employees’ remuneration	61,580	61,580
Directors’ remuneration	41,054	41,054

(IX) Implementation of Share Buyback Program

During 2020 and 2021 as of the publication date of the annual report, the Company has not bought back any share of the Company.

Capital Raising Activities

II. Issuance of corporate bonds: none

III. Preferred shares: none

IV. Global depository receipts: none
V. Employee share subscription warrants: none
VI. New restricted employee shares: none
VII. Financial Plans and Implementation: not applicable

Operation Highlights

Five. Operation Highlights

I. Business Content

(I) Scope of Business

Taiwan Fertilizer Co., Ltd. has been developing mainly under two major business groups, namely “fertilizer chemical” and “real estate development and investment”. Meanwhile, the internal supporting management of the Company has been structured into five sections according to functions. Descriptions are as follows:

Fertilizer and chemical business:
(1) Fertilizers products:

Considering industry development trend and government’s policy of promotion friendly agricultural environment, in addition to the original fertilizer, we constantly expand the green agricultural industry towards the organic development of fertilizers as well as develop biotech agricultural products and promote niche fertilizer products. The Company uses the advantages including fertilizers expert experiences and Know-You’s brand value to progressively explore overseas markets; meanwhile, we assess the appropriate collaborative opportunities or investment plans in seeking for new opportunities for the development of fertilizer industry.

(2) Chemical products:

Based on the original business in chemical and electrochemical products, the sales, market, and business in chemical products have been expanded by way of integration of upstream and downstream products as well as upgrade to electrochemical products. In the oversea market, the focus has been on the investment in electrochemical products and the penetration of international electrochemical market, both in production and in sales, so that the technology, knowhow, and market shares of our electrochemical products can be enhanced.

(3) Trading logistics:

Incorporating the existing procurement business in raw materials, taking advantage of the edge of the special piers at Taichung Harbor along with the planning of free trade zone therein, the Company has constructed a number of chemical storage tanks to further expand the business of import procurement, unloading warehousing, transit trade, while actively transforming into the role of a provider for product integration services and a supplier for relevant raw materials.

Real estate development and investment business:
(1) Development of residential buildings:

Due to regional environmental changes, the industrial lands of the old factories have been changed to non-industrial lands by the local government, and with city development, the lands have become premium areas. Among them, the land of the Nangang Software Park is the most valuable, while the land of the Hsinchu Science and Commercial Park and the special trade area of Kaohsiung are the second best. Land in these parks can be changed to high-value commercial land use for hotels, shopping malls, offices, etc.

At present, the “C2 Hotel and Office Building Development Project” at Nangang Software Park is under construction, and a beam-raising ceremony for the office building will be held in December 2019. The planning and design of the C4 Office Building Development Project is in progress. The construction of the TFC One office building at Hsinchu Science and Commercial Park has been

Operation Highlights

completed, and about 90% of the office spaces have been leased out, mostly to the companies nearby and some leading publicly traded firms. The shopping mall on the 2nd floor is leased by Amazing Hall Banquet, and the 3rd floor is leased by Fitness Factory.

(2) Business Investments:

Taiwan Fertilizer adheres to the investment strategies of "sales-led production and stable development" and "prioritize technical services" to expand the development of domestic and overseas fertilizer and chemical engineering industries. The Company also continues to introduce a series of high-efficiency new fertilizers, eco-friendly agricultural materials and microbial preparations, incorporating the mutually beneficial collaboration of domestic and overseas partners to steadily expand smart agriculture industry and agroecology businesses

We also established Taiwan Fertilizer's Hualien Deep Ocean Water Park Area and an industry development platform, and have committed to the development, manufacturing, and sales of healthy drinking water, deep ocean salt, concentrated solutions, cosmetic and skincare products and healthy food rich in deep ocean minerals. We also have actively invested in the infrastructure of the seaweed industry and the needed industrialized manufacturing to gradually expand our territory in the deep ocean water industry

(II) Industry Overview

1. Macro Economic Environment

(1) International Economy

Benefitted from the commencement of COVID-19 vaccination and low base effect of last year (2020), This year (2021) global economic activities are expected to gradually resume. According to the latest forecast of IHS Markit in January this year, the global economy will grow by 4.42% this year, which is higher than last year's -3.92%, and the forecast for next year (2022) will be 4.13%.

The World Bank (WB) released its global economic outlook report on January 5 this year, predicting that the global economy will grow by 4% this year, which is 0.2 percentage points lower than the previous estimate (June last year). The advanced economies have continuously weakening growing momentum due to the heightened pandemic, with an estimated growth of 3.3%; emerging and developing economies are expected to grow by 5.0% due to the relatively strong recovery of Mainland China. It is still highly uncertain in the short-term economic outlook. Amid a pessimistic scenario, if the infection rate continues to rise, and the vaccination is delayed, the global economic growth rate this year may only be 1.6%. Amid an optimistic scenario, if the pandemic is under control and the speed of vaccination is accelerated, the global economic growth rate may accelerate to nearly 5%.

The current international economy still faces many risks and uncertainties which deserve attention, including the proliferation of the pandemic affecting global manufacturing, consumption, and trade, the US-China trade and technology conflict development, financial fragility heightened by the public debt crisis, and geopolitics, and all these can affect the outlook of the international economy.

(2) Domestic Economy

Although the global end demands are declining due to the pandemic, and detrimental to Taiwan's foreign trade expansion, the outstanding pandemic containment in Taiwan has enabled the significant expansion of the domestic manufacturing capacity of semiconductors, information communication and

Operation Highlights

audio-video products. The returned Taiwanese companies have expanded the capacity, which happened to meet the demand for stocking of 5G, remote business opportunities, and new electronic products, mitigating the impact; the private investment in semiconductors advance the top high-end manufacturing processes and continue the green energy investments such as offshore wind power. Coupled with the continued returns of Taiwanese companies, steady expansion is expected. The private consumption was impacted by the pandemic; nonetheless, the pandemic catalyzed the online shopping at home, with the government's stimulus to promote the gradual recovery of the domestic economy, the growth momentum of private consumption has been bolstered. According to the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, the economic growth rate shall be 2.98% in 2020 and expected to growth by 3.83% in 2010.

In terms of economic indicators, industrial production increased by 9.90% in December 2020; wholesale and retail sales increased by 12.5% and 1.4%, respectively, while food the beverage sales decreased by 0.6%; the export orders amounted to US$60.55 billion, an increase of 38.3%; the export value was USD33 billion, an increase of 12.0%, and the imports value USD27.24 billion, an increase of 0.9%. The trade surplus exceeded USD5.76 billion; the wholesale price index (WPI) fell 5.10%, and the consumer price index (CPI) rose 0.06%; unemployment rate was 3.68 %.

In December 2020, the total score of the Monitoring indicator was 34 points, an increase of 4 points from the previous month, and the light turned yellow-red; the economic leading and coincident indicators continued to rise, reflecting the growing domestic economy.

Recent Status and Development of the Industry
(1) Overview, Development Tendency and Race Condition of Fertilizer Industry:
- A. The fertilizer industry, a mature and essential industry with a long history, is closely related to people’s livelihood. Recently, the government has implemented the organic fertilizer policy towards the promotion of developing friendly agricultural environment. In the second quarter of 2017, we mainly subsidized major fertilizer compound prepared for organic substance. In the future, the compound organic fertilizer will gradually replace the traditional compound fertilizer.
- B. There is a lack of raw material for producing fertilizer in our nation, almost all of which are imported. Because the production costs are influenced by the prices of international fertilizer raw materials, we can only be in line with the government’s policy of caring for famers. As a result, the prices of domestic fertilizer have been constrained by the government for a long time.
(2) Overview, Development Tendency and Race Condition of Chemical Industry:
- In recent years, Taiwan has been witnessing an outflow and brain drain in chemical industry as a result of scarcity of natural resources and lack of competitiveness therein. At present, all products of the company, except for nitric acid, sulphanilic acid and fuming sulfuric acid, which are subject to transportation and storage restricts on them or their by-products, are still produced in Taiwan. Imported goods have outgrown as the dominant sources for items such as liquid ammonia, industrial urea, etc.; products in downstream market are all supplied to Taiwan to meet internal demand, except for sulphanilic acid that is sold to Europe and America. In the relatively mature and saturated market, it is saturated yet relatively stable.

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The fertilizer chemical industry up/mid/downstream relationship diagram

==> picture [459 x 444] intentionally omitted <==

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

Upstream Midstream Downstream
(Agricultural
users)
Agricultural
Liquid Nitric acid Nitrophosphorus
Association
ammonia compound fertilizer
Fertilizer dealer
Farmers
Urea
Potassium
chloride Phosphorus and
Potassium sulfate phosphorus compound
fertilizer
(Industrial users)
Plywood
Phosphorite Superphosphate Ammonium sulfate industry
Fertilizer
industry
Electronic
industry
Molten sulfur Sulfuric acid Food industry
Electric Power
Generation
Sulfanilic acid
Environmental
protection
industry
Chemical
industry
Steel Industry
Melamine
----- End of picture text -----

(3) Overview, Development Tendency and Race Condition of Electric-grade Chemical Industry:

Electric-grade chemicals are generally referred to various chemicals that can be used in the process of electronics industry or facility end, the product items include single organic solvents of simple substance, alkaline acid solution of simple substance to formulas of different proportions. At present, the products are used in the processes such as yellow developer, peeling, itching, polishing and cleaning in semiconductor, panel, solar energy and LED industries.

The value of output of domestic semiconductor industry has broken through NT$3 trillion and more than 200,000 people are employed by this industry. The value-added rate of this industry has exceeded 50% and it contributes more than 15% GDP of Taiwan. Although the pandemic has caused the global economy to shrink, the IC industry has been benefited from the booming development of 5G, AI, electric vehicles and the at-home economy. The overall semiconductor

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industry is expected to gradually grow by about 10%. Meanwhile, the "Nation Safeguard," i.e. TSMC, continues to increase capital expenditures, it is expected to drive the upward growth of related supply chains and chemical demands. The panel industry is in supply shortage due to the impact of the pandemic and the order shifting effect of the US-China trade war. The two leading domestic manufacturers, AUO and Innolux, will focus on the existing capacities to continuously adjust the product mixes for obtaining the maximum operating profit; therefore, it will inevitably lead to an upward increase in the demands for related chemicals, consumables and key components. The LED industry market demand is not as expected, and the average prices of chips and packages have fallen sharply. Looking forward to the future, the compound annual growth rate of the LED industry will not be able to achieve the growth of more than 10% as easily as in the past, but there is still room for growth. Taiwan’s solar power industry will reduce the capacity of domestic capacity of solar cells, and will vertically integrate their OEM partnerss in the third locations, such as China, Thailand, Vietnam, and Malaysia, taking the development of back-end modules, solar power plants and provisions of overall solutions to customers as the future direction of operations. In nutshell, the demanded volume of the electronic grade chemical products will tend to positve growth trend due to the innovative applications and capacity expansions of various industries; therefore, it is seen that the electronic chemical market still has room to develop.

The electronic grade chemicals are the examples of perfect competition. In addition to our commitments to achieving the quality requirements of different industries and different clients, accordingly, our company needs to deepen product production control, quality assurance, technical support and assistance, and comprehensive after-sale customer service. Besides the existing clients in panel industry, we will upgrade relevant technical capabilities to develop products required by the semiconductor industry and make downward proliferation in seeking solar energy as well as the niche products in LED industry. It is hoped to combine the current self-produced ammonia by Miaoli Plant with the products such as nitric and organic solvents with the capabilities of distillation, formulation, separation and waste liquid recycle, to expand our product range for offering the comprehensive one-stop shopping service.

(4) General Situation and Development Trend of the DOW Aquatic Industry:

Deep ocean water (DOW) general refers to the seawater located more than 200 meters deep. Due to the deep ocean environment being high pressure, void of light, and low temperature all year round, there are precious water resources available in low temperature and are clean and rich in mineral nutrients and salt, with a wide range of applications and development potentials for various industries.

The aging population issues and rising health awareness have made domestic and foreign enterprises to start investing in various applications of deep ocean water resources. The food industry in particular values the use of minerals for healthcare. The Company's Hualien D-Park is equipped with a deep ocean water extraction facility which can draw water from 662 meters deep in the Pacific Ocean near Hualien. After precious deep ocean water resources are obtained, the subsidiary, Taiwan Yes Deep Ocean Water Co., Ltd., uses high-tech concentrated liquid production equipment to extract high-quality minerals and concentrate and conduct research, development and marketing of products related to deep ocean water Moreover, the Company's Hualien D-Park has constructed a multi-stage algae growing aquaculture of algae and shrimps in-house and actively invited upstream and downstream industry peers to

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conduct joint development. It has also established a deep ocean water industry platform to expand the applications and value chain to co-create more value to the industry.

(5) Overview, Development Tendency and Race Condition of Land Development Industry:

According to the analysis of the Cathay Pacific Real Estate Index quarterly report in the fourth quarter of 2020, the market for newly projects in the whole year of 109 showed a pattern of rising price with stable volume. The first quarter of each region was affected by the pandemic, the promotion of projects were relatively conservative comparing to 2019. With the development of the pandemic, various countries have imposed the accommodative monetary policy and fiscal expansion policies; with the abundant global liquidity, housing prices in Taiwan and many countries have risen. The market was stimulated by low interest rates and monetary easing, coupled with the increasing return of Taiwanese businessmen, enabling the demand for investment of property in the market gradually increased. In the second and third quarters of 2020, promotion of projects and and prices increased generally in various regions. In the second half of the year, both prices and volume in the housing market rose, and pre-sale houses appeared had the chaotic resale of “red slip.” After the government imposed selective credit control, the Ministry of the Interior amended the laws for actual price registration, and resale of “red slip” was banned, the chaos began to disappear from the market. The prices and promotion of projects in various regions became stable in the fourth quarter and shifted to the wait and see stance.

As a whole, the transaction price of the national housing market rose in 2020, and the transaction volume fluctuated within a stable range. Through the whole year, the price increased and the volume was stable, and the market tended to be active. The volume of promotion of projects and transaction volume increased comparing to 2019, showing a situation where the asking prices continued to rise, the bargaining rate decreased, and the selling rate increased.

In terms of the commercial building market in Taipei , based on the 2020 Q4 quarterly report released by Sinyi Global Assets Commercial Property and index report by Cathay Real Estate, due to the raging COVID-19 pandemic around the world, business positioning have become more cautious. In Taiwan, the funds and technologies from both domestic and foreign enterprises have returned, coupled with the tailwind of low interest rates, these healthy enterprises took advantage of this to cut corner and accelerate. For the A-graded office benchmark in CBDs of Taipei City are still the focus of the market. The plant-offices in Neihu Science Park have stood out, and corporate demands have been strong; therefore, the prices are resilient with rising rents. The average selling price remains at NT$529,000, and the average rent rose slightly to NT$1,199. Although the vacancy rate of commercial offices in Taipei City increased slightly to 2.52%, it still remained below 3%. The rents in various CBDs remained relatively stable, with an average rent of NT$2,344 per 3.3m[2] . The average selling price was driven by the benchmark A-grade offices of each CBD, rising slightly to NT$858,000 per 3.3m[2] . Looking ahead, the 2021 new supplies have been all leased out in advance, as the new supplies in Nangang District will be released in 2023, the offices in the core areas will face sever competition. Affected by the pandemic, foreign business expansion and suspended relocation plans, the plan to expand leasing of the grade A office customers slowed down as well. The demand for shared office has increased, on the other hand. Since most of the new supplies in 2021 have gone, the supply

Operation Highlights

and demand have not changed much, and the rent and vacancy rate are expected to be flat.

In the regard of the commercial real estate market in Hsinchu City , since 2019, under the influence of the dual uncertainties of the US-China trade war and the COVID-19 pandemic, Taiwanese businessmen returned, and the topic of industrial parks heightened. Many industrial chains have returned to Taiwan to position, and thus chose to expand their factories in Taiwan, which has also indirectly driven the regional job opportunities and employed population. Hsinchu is a major economic hub for high-tech industries in Taiwan, with an annual output value of trillion NTD to solidify its position in the global economy. The vigorous development of the Science Park not only promotes the continuous increase in demand to lands for high-tech industry, but also drives the development of related upstream, mid- and downstream industries to form complete industrial chains. The corridors on both sides of Gongdaowu Road in Hsinchu City are adjacent to the Hsinchu Science Park and the extent affected by its spillover influence. In recent years, clusters of science and technology factories and offices here have formed a technological innovation industry corridor. In addition, the Hsinchu City Government proposed the "Zhuke X Project-Innovation Industrial Park" project, which obtained the support from the Executive Yuan in July 2020, its industrial strategy of "One Zone, Two Belts, and Three Arrows," combining with the CPC oil depot and the Company's land to be developed, to form a science and technology corridor with the current Hsinchu Science Park, assisting in the upgrading of technology industries in Hsinchu, and deploying the public facilities to improve the environmental quality and increase the incentives for the industries to stay in Hsinchu.

(III) Technology and R&D overview

R&D expenditure

1. R&D expenditure
Year Item	2019	2020	2021Q1
R&D expenditure(NT$ thousand)	66,624	66,584	15,749
Proportion in business volume (%)	0.52%	0.65%	0.53%

Achievements in recent 2 years

The Company strengthens cooperation with foreign research institutions, introduces new technology and shortens the R&D period by following the innovative strategies and transformation of scientific technology to enter the high-tech market. We will keep improving our microbiologic fermentation technology, establish enzyme hydrolysis extraction technology, DOW highly economic aquaculture technology, inorganic and organic fertilizer formula, and development of core technologies such as process technology and purification technology for electrochemical products, etc.

(1) Development of biotech fertilizer:
A. Application of agricultural microbial strain - development of biotech fertilizer

The Company has also actively cooperated with the government's biogas power generation policy. With the multiple applications of combining biogas slag that is produced after anaerobic fermentation of animal manure with straw decomposition bacteria and agricultural microbial flora, the Company has developed and launched a new product in July 2017, “Known-You

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Branded Bio-organic No. 12 Fertilizer” N-P2O5-K2O=3-3-2-70 (Organic Matter) Feizhi (Zhi) Zi No. 0042045, Item 5-11 miscellaneous compost). In 2020, we had a technical collaboration with Far Eastern University, using rapid fermentation technology to transform biogas residue into odorless organic materials. It is expected that in 2021, we will partner with Far Eastern University for an industry-academic collaborative project, to develop technologies turning livestock manure into odorless organic materials. The technology not only promotes the agricultural circulation economy, reduces the discharge of pig manure into rivers to maintains a water friendly environment, but also provides soil fertility to nourish the soil for sustainable cultivation. Meanwhile, the Company is attached to the importance of corporate social responsibility. With the aim of preventing the problem of kitchen waste and livestock manure in animal husbandry from African swine fever, the Company has actively assisted the local government and private enterprises by coordinating composting fields with technical assistance.

In 2020, the Company evaluated the application of biochar in fertilizers or combined with microorganisms to develop new products, and has cooperated with the "Kaohsiung District Agricultural Research and Extension Station" to research and propose the "application of biochar as a carrier in the development of microbial fertilizer products," to apply for industrial-academic collaboration project of agricultural technology under the Council of Agriculture. It intends to add biochar to compound fertilizers to replace peat partially, while using the porous properties of biochar to develop new microbial fertilizer formulations.

In order to improve the functionality and competitiveness of organic fertilizers, the Company commissioned National Chung Hsing University to develop a multifunctional organic fertilizer for controlling Meloidogyne spp. in March 2019. In 2019 has completed the fertilizer making and testing of induced high GC gram+ flora, and confirmed the optimal combination formula and ratio of rice bran, mushroom bag waste, crab shell powder and others, and screened out the strain number h73 and 20 had the capability to inhibit the incubation of Meloidogyne spp. In 2020, we carried out the preliminary development of multifunctional biotechnology products for the prevention and treatment of Meloidogyne spp., and the appraisal of the quality and field test effect of mass-produced compost trial products for the prevention and treatment of Meloidogyne spp. The implementation results are as follows: 1. Strain appraisal and functional analysis: MLSA showed that Actinobacteria strain h73 is Streptomyces thermovulgaris , and strain 20 may be a new species of Streptomyces . Both strains are P-solubilizing active. Strain h73 is higher P-solubilizing active, but strain 20 is more obvious for potassium solubilizing active; 2. Shake flask culture medium and development of culture conditions: S8 medium is helpful to increase the number of strains 20 and h73. Under the optimal culture conditions, the number of strains in the fermentation broth of strain 20 can reach 3.1 ×10[11 ] CFU/ ml, Strain h73 is 3.7 × 10[10] CFU/ ml; 3. Storage stability test: strain 20 and h73 bacteria liquid were placed at 4ºC and room temperature for four months, and currently the bacterial count maintains no significant change; 4. the greenhouse potted plants tests have shown that the application of 100 times diluted S8-20 bacterial solution has the best control effect on Meloidogyne spp., and its control effect is equivalent to that of the chemical pesticide Oxamyl solution. The addition of 2% mass-produced compost trial

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product promotes the dry weight of the plant. Based on the above results, the strains 20 and h73 cultivated with S8 formula can be further developed as biological pesticides for preventing and controlling Meloidogyne spp. or microbial fertilizers for promoting growth.

B. Application of agricultural biological bacteria-Microbial fertilizer development

As the "Six Subsidy Measures Promoting Eco-Friendly Fertilizer Materials" of the Council of Agriculture, Executive Yuan, included microbial fertilizers for subsidy, the Company conducted a technology transfer of "Microbial fertilizer and biological pesticides Bacillus amyloliquefaciens strain Ba - BPD1, fermentation mass production and applications" from the Agricultural Chemicals and Toxic Substances Research Institute, and successfully developed a phosphate-solubilizing microbial fertilizer, “Known-You Taifer Biopower phosphate-solubilizing bacteria biofertilizer" (Fei-Zhi (Shen)-Zhi No. 0465015).

The Company once again conduct the non-exclusive license of the “Mass Production Application Technology of Microbial P-Solubilizing Fertilizer of the Miaoli Viable Bacteria No.1” to the Miaoli District Agricultural Research and Extension Station of the Council of Agriculture, Executive Yuan in 2018. Miaoli Viable Bacteria No.1 is versatile, both significant phosphorus-solubilizing and potassium-solubilizing active, may boost the growth of roots and bloom of crops, while reducing the use of phosphate fertilizer and potassium fertilizer. The development is registered as microbial fertilizer for potassium solubilizing bacteria - “Known-You Taifer Biopower phosphate-solubilizing bacteria biofertilizer,” N-P2O5-K2O-MgO=5-5-5-1. On January 30, a fertilizer registration (Fei-Zhi (Shen)-Zhi #0465026, Item 8-04 potassium-solubilising microbial fertilizer) was approved by the Agriculture and Food Agency, and the product received its recognition as the "Recommended Domestic Microbial Fertilizer Brand"

To prevent the effects of compound fertilizers on chloride-sensitive crops such as banana, citron, grape, tea and flowers, the Company developed the "Known-You #43 "King Won" Potassium sulfate nitrophosphate organic compound fertilizer". The product contains potassium sulfate, which reduces the impact of chloride ion in soil and the severity of soil acidification. In order to improve the yield and quality of many Taiwan's high economic crops and increase farmers' income,s we added phosphate-solublizing bacteria to develop the "Known-You King Won #43 phosphate-solubilizing bacteria fertilizer”, N-P2O5-K2O-MgO=15-15-15-2-50 (organic), which has obtained a fertilizer registration (Fei-Zhi (Shen)-Zhi #0792051, Item 8-03 phosphate-solublizing microbial fertilizer) approved by the Agriculture and Food Agency on November 25, 2019. The product received the "Recommended Domestic Microbial Fertilizer Brand" on January 21, 2020.

The Company continues to develop and expand microbial fertilizer products to provide farmers with more options for use. Based on the Company’s existing instant fertilizer products, adding liquefied Bacillus amylolus Ba-BPD1 bacteria powder, the product been developed and registered as "Known-You Taifer Biotech Instant #1 phosphate-solubilizing Fertilizer" (Feizhi (Sheng) Zi No. 0465028), N-P2O5-K2O =26-13-13, and "Known-You Taifer Biotech Instant #43 phosphate-solubilizing Fertilizer" (Feizhi (Sheng) Zi No. 0465029), P2O5-K2O =15-15-15, has obtained the fertilizer registration certificate issued by the Agriculture and Food Agency on May 8,

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109 (item 8- 03 Phosphate solubilizing bacteria fertilizer), and obtained the "Domestic Microbial Fertilizer Brand Recommendation" on August 17, 2020.

C. Field validation and demonstration promotion of biotech fertilizer materials

The Company values the deep cultivation and emergence of organic agriculture in Taiwan. In light of improving the development of green capabilities, it actively develops organic materials and fertilizers. In order to provide farmers with high-quality and user-friendly organic agricultural materials, the "Taiwan Fertilizer Organic Demonstration Farm" has been established since 2014. Currently, it has obtained the organic agricultural product verification certificate (1-014-026411) of "NCKU-Agama International Verification Co., Ltd.) After years of using the "Known You Taifer Biopower phosphate-solubilizing bacteria biofertilizer" recommended by the organic agricultural commercial materials and the "Taifei Biotech Organic Fertilizer" series of products, with the organic cultivation experiments of seasonal vegetables and fruit crops (no application chemical fertilizers and chemical pesticides) have been carried out on this farm. The biological control methods are also used jointly to manage pests and diseases, and to confirm the efficacy of the products. At present, 36 kinds of crops have been verified and established for matching fertilization technology with organic cultivation suitable materials.

The Company upholds the active integration of farmers’ field practical experience, and has continued to conduct cooperative trials and demonstrations with organic farmers for many years, for fertilizer promotion and trials. It has signed a cooperation contract with "Green View Garden" and "Yongchang Organic Farm" as "Taiwan Fertilizer Organic Demonstration Cooperative Farm;" of which, Yongchang Strawberry Farm is a demonstration base for organic strawberry fertilizer cultivation and management. It seeks that through the external cooperative organic demonstration farm as an interaction base, it will expand the promotion of organic and friendly agriculture, and enhance the diversified contribution of agricultural production to the ecological environment.

n order to avoid the impact of compound fertilizer products on the market on chloride-sensitive crops, the Company newly developed "Known You #43 "King Won" Potassium sulfate nitrophosphate organic compound fertilizer" in 2019. The potassium component of the product is potassium sulfate. The "Sulfur" element effectively improves the quality of produces, while reducing the impact of chloride ions on the soil, to mitigate the degree of soil acidification. In 2020, the fertilizer has been added beneficial microorganism phosphate-solubilizing bacteria improving the utilization of phosphate fertilizers and promote crop growth. It has been upgraded and developed into "Known-You King Won #43 phosphate-solubilizing bacteria fertilizer" As the high price of “King Won” Potassium sulfate nitrophosphate organic compound fertilizer series products, to make farmers have a deeper understanding of new fertilizers and increase product acceptance, the R&D and business units have to jointly strengthen the expansion and promotion via cooperation of the field experiments and demonstrations, to gradually guide farmers to use and purchase new products. A total of 14 crops were tested in 2020. Fruit trees include wax apples, grapes, Wendan, avocados, persimmons, honeydew melon, honey tangerines, and barrel tangerines. Vegetables and fruits include green onions, onions, small tomatoes, sweet

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potatoes, and asparagus. Special crop is sesame. The test results show that King Won series fertilizers promote the sweetness of wax apples, improve the color of grapes, increase the size and quality of fruits, while increasing the yield of green onions with more upright and stiff tubes, early harvest of onions, and the color, maturity, and volume of the sesame seeds become better. For sweet potatoes, the root tubers become larger, with early harvest and higher volume. In 2021, the field trials of “King Won” Potassium sulfate nitrophosphate organic compound fertilizer series products will be expanded and appled to the application to other crops.

(2) Development of biological pesticides

In response to the rise of safe and organic agriculture, the Company is committed to the development of environmentally friendly, non-toxic, and safe agricultural microbial agents. In 2013, the transfer of “bacillus amyloliquefaciens Ba-BPD1” patented strains and technology from the “Taiwan Agricultural Chemicals and Toxic Substances Research Institute, Council of Agriculture, Executive Yuan” successfully developed the

Bio-PhosphorusSolubilization Fertilizer “Known-You Vitality Phosphorus fertilizer” in conjunction with the research and development of the bio-pesticide water suspending agent for the prevention of strawberry gray mold. After a series of procedures including fermentation mass production conditions, physical and chemical property tests, toxicology tests, product standard specification tests, storage stability tests, field efficacy and drug damage tests were carried out, the test data required for completing the pesticide registration was well prepared; also, it has been certified by the pesticide standard specification inspection of the “Taiwan Agricultural Chemicals and Toxic Substances Research Institute”. The product has the effective ingredient (the number of spores) over 1×10[9] CFU/m, and meets the requirement of a water suspending agent. In August of 2018, it was certified by the review and assessment and acquired the agricultural pesticide permit (NonyaoZhi Zi No. 06345) and successfully developed “Taiwan Fertilizer Nongzhonghe”, a new agricultural pesticide product. It can be used to prevent gray mold on strawberries, vegetables, flowers, and other crops, and features the advantages of high safety, non-toxic, free residue tolerance, and is applicable during harvest. It can be used with chemical pesticides in the application of an integrated pest management (IPM) strategy. It not only reduces the occurrence of resistance, but also reduces the use of chemical pesticides and residual risk and help to ensure the safety of agricultural products In order to expand products' scope of use, we commissioned the Agricultural Technology Research Institute to conduct assessment and experiments of "Taiwan Fertilizer Nongzhonghe"preventing the wilt disease of solanaceous crops in June 2020. The more certain testing result is expected at the end of 2021, and once the effectiveness of "Taiwan Fertilizer Nongzhonghe” against bacterial wilt for tomatoes is verified, we will assess if the commissioned formal field efficacy tests shall be applied for.

(3) R&D of micronutrients fertilizer:

During the cultivation period of economic crops and in the plant nursery, in order to meet the needs for plants to grow better, bear more fruit, and enhance stronger sweetness with the application of fertilizers, practice has been conducted based on the concept of prevention-&-cure-two-in-one to reduce the occurrence of physiological disorders on crops, to supplement the trace minerals lacking, and to develop comprehensive products of trace minerals. The Company and Kaohsiung District Agricultural Research and Extension Station

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collaborated in implementing a 2-year agricultural science and technology enterprises technical commercialization plan (2016 and 2017) -- "Development of new secondary trace element fertilizer". A technology transfer was conducted on March 27, 2019. The deep ocean water concentrate (LC-90K) from the Taiwan Yes Deep Ocean Water Co., Ltd. was used, in combination with formula developed by the Kaohsiung District Agricultural Research and Extension Station, to mix formulas suitable for Item 4-40 liquid compound secondary race element fertilizers. We have obtained fertilizer registration certificate for "Known-You Vitality Minerals" on December 16, 2019, and the registered ingredients include water-soluble magnesium oxide (MgO): 4.0%, water-soluble manganese (Mn): 0.5%, water-soluble boron (B): 0.3% and water-soluble iron (Fe): 0.5%. It can be used for regular care to make plants strong and healthy, as a supplement when elements are lacking in lime soil area and for emergency restoration if plants encounter absorption difficulty of secondary trace elements. "Known-You Vitality Minerals" after field testing has shown that it can improve the nutrient concentration and quality of crops such as java apple, litchi, tomato, kale, leafy vegetables and pineapple. It is also effective on papaya and strawberry, improving the condition of leaf yellowing and whitening from deficiency of iron, manganese and other trace elements during the cultivation process.

(4) Strawberry, vegetable and fruit material development plan.

In order to expand and develop the Company’s agents of fertilizer and pest management, we take the high value crops, strawberry, in Miaoli area, where the main species adopted are “Fengxiang” and “Xiangshui (perfume)”, and search for other appropriate species. We continue developing the supporting application of fertilizer agent and the safe agricultural cultivation techniques without using pesticides during the whole process. Since 2017, we have used the strawberry production techniques from Japan's Miura Farm and conducted an industry-academia collaboration project, "Trial plantation of Japanese style safe strawberry cultivation management method", with Yuanpei University of Medical Technology to verify the possibility of producing healthy and safe strawberries in Taiwan. The trial is implemented on elevated strawberries on the farm using the Company's Biopower Stimulants series, and the performance results have been good. The collaborative experiments with Japan's Miura Farm found the effects of amino acid, and we applied this experience on the probiotic amino acid compound fertilizers for vegetable and fruit crops to be developed with Miaoli District Agricultural Research and Extension Station in 2019. Beside amino acids, the product contains beneficial bacteria with the characteristics of biological fertilizers displays broad-effect resistance to bacteria. In 2020, we have have completed the preparation of prototypes, and tests were conducted during the flowering and fruit-bearing season of strawberries, tomatoes, cucumbers and green peppers, hoping to reinforce the disease resistance of plants and improve fruit aroma, flavor and quality. Based on the data provided by Miaoli District Agricultural Research and Extension Station, the compound formula of "amino acid + bacteria + fertilizer" has improved the weights of cucumbers, tomatoes, and green peppers, and sugar content of small tomatoes, and significantly different from he formula of "bacteria + fertilizer." In addition, the Miaoli District Agricultural Research and Extension Station has completed the scale-up mass production test of the target strain Bacillus velezensis MLBV19-3 in a five-ton fermentation tank. The freeze-drying process produces bacterial powder with a bacterial count of 5×10[9 ] CFU/ml, which can be used as the reference to the conditions of the mass

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production of bacterial powder in the future. Moreover, the MLBV19-3 strain has passed the animal toxicology test of GLP oral and pulmonary respiratory toxicity, proved to be a safe strain, which is positive to the subsequent development and registration as a microbial fertilizer. Strawberry trials are currently in progress, and the results are expected to be obtained after the strawberry season ends in 2021.

(5) Deep seawater for aquaculture application development:

The Company has also applied the three major DOW features, low temperature, cleanliness, and rich in nutrient salts to establish the outdoor large algae production module for the mass breeding technology of different edible algae with nutrient sources in Taiwan, such as sea lettuce, sarcodia montagneana, Ulva Prolifera and others. The Company conducted an industry-academia collaboration project on "Ulva prolifera seedling and lifecycle control research program" with Professor Lin, Hsiu-Mei of National Taiwan Ocean University in 2019, and In 2020, the establishment of outdoor bucket farming and indoor conservation technologies for algae such as red grape algae, eucalyptus serrulata, and Kappa algae have been completed, and the feasibility of seaweed powder as a feed additive for tortoises has been verified. In terms of physical performance (shell length and shell-height ratio), the seaweed powder group is better than the grass powder group, indicating that the seaweed feed helps maintain the body of the Aldabra giant tortoise.

For the shrimp farming, in 2019, Fisheries Research Institute’s "SPF shrimp seedling cultivation technology" had the technology transfer; the Company has been stationed in the Fisheries Research Institute to learn selection of seed shrimp , maturation, shrimp seedling cultivation, microalgae culture and virus detection technology. In 2020 in the Hualien Factory, the existing plant has been altered to the SPF seed shrimp and shrimp breeding center. The shrimp breeding pond, the nursery pond, the microalgae cultivation area and the bait biological cultivation area have been installed. For the Shrimp cultivation (Thailand CP strain and Donggang Donggang Fishery Research Institute KB strain) the eyestalk-cutting ripening test is conducted now, and the survival rate reached 80% with successful oogenesis. However, after moving into the indoor SPF seedling farm, the light was too bright and the seedlings were pressed tightly, which in turn affected the oogenesis. A black net has been added to dim the light, and oogenesis of seed shrimp has been improved. In the mating test part, because it was in the fourth quarter of 2020, affected by the cold current and the low water temperature, even the seed shrimps would have the eggs, the rear-end mating situation was not ideal. Therefore, the mating test will be postponed until the temperature rises in 2021.

In 2020, the Company further cooperated with Sun Yat-Sen University to carry out the intelligent breeding system applied to shrimp farming test. The automatic feeding machine and water quality monitoring equipment are installed. The current water quality monitoring record is generally stable, the pH is maintained between 7.3-9.1, and the ORP is maintained at approximately between 200 -350, and dissolved oxygen is maintained at 3.2-6 ppm. The test results of the automatic feeding system, when comparing the growth of the white shrimps under 24-hour automatic feeding and pure manual feeding, the differences are obvious. The daily weight gain of manual feeding with automatic feeding in summer would reaches an average of 0.25g/day or more, but the pure manual feeding is about 0.2g/day, which shows that the application of the automatic feeding system has advantages in the white shrimp breeding cycle. In

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the future, automated equipment will continue to be applied to the aquaculture ponds to facilitate water quality analysis and management. The use of the automatic feeding system requires manual assistance to achieve the best conditions. In addition, due to the different characteristics of each aquaculture pond, the automatic feeding parameters must be adjusted depending on the actual breeding situation to achieve the optimal result.

(6) Algae Polysaccharide Extraction Technology Research and Development:

The Company commissioned National Taiwan Ocean University to develop "Extraction of algal polysaccharides from large Ulva lactuca nurtured by deep ocean water" in October 2018. The program has established an extraction process for polysaccharides from Ulva lactuca in 2019. More than 12 kilograms of polysaccharides can be extracted from each batch of 27 kilograms of Ulva lactuca powder, and the stability of the extraction rate can reach more than 40%. Professor Chang-Jer Wu from National Taiwan Ocean University analyzed that the Ulva polysaccharides extracted by the Company contained total sugar of 670-680 mg/g and 24-25% sulfate (close to the 16-23.2% in the literature). There were three groups of molecular weight distribution: 180 Da (38-39%), 50-470 kDa (30-33%) and greater than 708 kDa (29-32%). The functional analysis confirmed that Ulva polysaccharides have antioxidant effects. 10 mg/ml Ulva polysaccharides has a DPPH free radicals cleaning rate at 80.81 ± 2.36 %. The superoxide anion (O2 -) free radicals cleaning rate is at 78.30 ± 0.69 % and the Fe2+ chelating ability is 35.06 ± 2.52 %.

The project has completed the technical transfer of "Ulva Polysaccharide Extraction Technology" to Professor Chang-Jer Wu of National Taiwan Ocean University in 2020, and carried out multiple batches of trial mass production to find suitable material feeding quantity and production frequency for a batch. The ulva polysaccharides produced currently meet the standards of various testing values, including the total bacterial count, E. coli group, and mold. The project has signed the exclusive agency contract with a domestic manufacturer in Taiwan to promote and sell ulva polysaccharides. In the future, the production process will continue to be improved and optimized, seeking to satisfy the domestic demand, as the goal.

(7) Study on the Purification Process Technology of Cyclopentane:

Cyclopentanone (CPN) can be used in the manufacturing process of semiconductor flat panel display, including the development of yellow light area and edge-removal agent during packaging. The current unit price is NT$100-NTD200/kg. Due to its high unit price and recyclability, CPN waste solution is worth recycling for purification and reuse. In order to create the Company's new niche electrochemical products as well as integrate the existing distillation purification technology, the Company signed a contract with the Industrial Technology Research Institute in 2018 to carry out the “Study on the purification process technology of cyclopentane”. The project has successfully used the 5kL distillation tower at Miaoli plant to purify recycled CPN waste solution into industrial-grade CPN, with a yield of up to about 70%. Industrial-grade CPN can be purified into electronic-grade and IC-grade CPN, with a product yield o up to 80%. The Company’s Miaoli Factory recovered 237 tons of CPN products from mass production in 2020. The research and development of this project has been completed and the effect is clear.

(8) Research of EBR (PGMEA) phase splitting and esterification technologies EBR (Edge Bead Removal) is a chemical mixture composed of propylene dimethyl ether acetate (PGMEA) and propylene glycol methyl ether (PGME). It

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is an excellent organic solvent in the semiconductor industry and is widely used in wafer edge cleaning and photoresist cleaners. It is called edge washing agent generally. Based on the trend of waste recycling, and in recent years, the Company’s Miaoli Factory has made breakthroughs in chemical purification technology research, while the quality of recycled products being recognized by customers. Therefore it plans to recycle, purify and reuse EBR waste liquid. Due to the hydrophilic properties of EBR chemicals and the similar boiling point to water, the difficulty of purification increased. Therefore, this project has signed an "EBR purification technology development" contract with the Industrial Technology Research Institute in 2020, using the principles of physics and gravity to improve the purification process technology equipment in the Miaoli Factory, so that the goal of separation and purification of PGMEA and PGME is achieved for the quality meeting the level of the market supply chain material and thus to increase profitability. This project has established the PGMEA purification technology in the laboratory. The recovered PGMEA is purified through distillation purification and precision filtration technology to successfully purify the PGMEA waste liquid to the semiconductor solvent grade (purity ≥99.5%, moisture ≤0.03%, chromaticity ≤ 10, and the metal content (20 metals such as Na, Ca, Fe, etc.)≤500 ppt), passed the third-party COA verification, and completed the semiconductor factory introduction verification approval. Follow-up steps will be based on laboratory test results for process and system integration, to improve and establish themass production equipment, to facilitate onboard production testing.

(9) Development of technology to purify industrial-grade hydrochloric acid to electronic-grade.

In order to enhance the diversification and competitiveness of the electrochemical products of the Company’s Miaoli Factory, and achieve profitability goals, the Company has planned to implement the "technical development fo purification of industrial-grade hydrochloric acid into IC-grade hydrochloric acid." The contract was signed with ITRI in 2020, by using 32% industrial grade hydrochloric acid as the raw material, the hydrochloric acid gas over 99% is generated through the azeotropic process, and then absorbed by ultrapure water to produce 36% IC grade hydrochloric acid products. It is expected to complete the construction of the pilot plant of IC grade hydrochloric acid in 2021.

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(IV) Development plan of medium and long-term and short-term business

Category	Short-term business	Medium and Long-term business
Fertilizer industry	(1) To stabilize the existing industry, strength after-sales service, continuously improve fertilizer quality so as to satisfy quality requirements of customers. (2) To separate the market, develop and introduce niche products and keep promoting fertilizers with high additive values so as to increase sales income. (3) To improve packaging quality, strengthen advocacy of new fertilizers, establish test, demonstration and explanation sessions in highly economic crops area of entire province in order to increase the additive value of products. (4) In line with the Southward Policy of the Government along with the global deployment through the construction of ten Plants in the West, work has been undertaken to integrate the industry need of the domestic market, as well as to redirect the excess of fertilizer capacity from domestic market outwards via exporting so as to lay out a foundation for the target oversea markets.	(1) To continuously develop high-technology organic fertilizers in coordination with development of organic agriculture. (2) To refine the agriculture development in order to promote high-component and high-quality fertilizers.
Chemical industry	(1) Anhydrous Ammonia: the downstream demands for supply source shall be stabilized based on the advantages of storage tank. (2) Industry urea: Packing and delivery shall be finished in Taichung Plant to reduce secondary transportation risks on the way to Miaoli Plant and market share shall be expanded flexibly. (3) Nitric acid: the output of nitric acid is increased after operation of Taichung Plant, which can help expand domestic and overseas markets. (4) Melamine: the delivery-to-shop service shall be promoted to solidify the market share with quality and service.	(1) Anhydrous Ammonia: A complete supply chain has been established at Taichung Factory to satisfy customers’ needs. (2) Nitric Acid: Taichung plant has the capacity to stabilize the supply to meet domestic clients’ demands. We expect to expand our 68% thickening program in the second half year of 2018 as soon as the thickening plan is completed for expanding our market scale. (3) Sulfa Acid: We adopted the outsourcing mode to reduce the production cost. And, we will continue maintaining the close contacts with clients and progressively explore the southern European markets (Spain/ France/

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Category	Short-term business	Medium and Long-term business
	(5) Sulfamic Acid: the quality and service shall be improved to stabilize supply and delivery time and increase the market share in Europe and American market. (6) Sulfuric acid and Oleum: the marketing shall be promoted based on competitive price and acid recovery capability in coordination with the remaining capacity of fertilizer. (As the the domestic sulfuric acid is oversupplied with collapsed market price, it is deemed that there is no room for the Company to enter, and thus the sales of sulfuric acid is suspended in 2021.) )	the UK). (4) Fuming sulfuric acid: Currently outsourced to reduce the production costs. The sales and profits can both be stable when the economic conditions are normal. (5) Melamine, industrial urea: It shall be moved to Taichung Plant in coordination with warehousing to improve product quality, quantity and concentration, and continues to serve its customers, so as to expand the market.
Electronic grade chemical products	With the aim to take full advantage of the maximum synergy of Miaoli Plant, semiconductor industry will be entered proactively to expand sales of electric-grade chemicals in addition to activating existing production equipment, developing solvent product recovery and regeneration and purification business and increasing capacity utilization.	With 3 acids and 1 alkali as the development focus, number of self-produced items will be increased and processing quality assurance ability will be improved; R&D technology class will be strengthened and after-sales service and customer relation management will be deepened; technical capacity will be improved upwards to serve IC industry customer base and product scope will be spread downwards to solar and LED industries; and competitive niche products will be produced, in order to enhance the overallprofitability.
Deep ocean water industry	The Company's phased and partition development of the Hualien Deep Ocean Water Park Area with self-built breeding aquatic products and process industry has actively introduced external resources for leasing and industry-university collaboration. Moreover, the re-investee, Taiwan Yes Deep Ocean Water Co., Ltd, continuously researches and develops deep ocean mineral applications and the establishment of a marketing network both nationwide and worldwide.	Once the land estate and activation of deep ocean water resources is completed, we will continue to cooperate with the government and actively promote corridor development of the deep ocean aquatic industry.
Land development	(1) The C2 Development Project at Nangang Software Park: Completed the 3rd design change for constructionpermit and continued	(1) The C2 Development Project at Nangang Software Park: the buildings are expected to be completed from June 2021 to March

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Category	Short-term business	Medium and Long-term business
	to actively carry out construction project plan. (2) The Development Project of TFC ONE in the Hsinchu Science and Commercial Park: the commercial office building has been 100% leased. (3) Hsinchu phase 1 re-planning of lands in the city: the settlement is expected to be completed in 2021. (4) Hsinchu phase 2 re-planning of lands in the city: the reviews of engineering documents and drawings and drainage plan have been completed. The re-planning is expected to be completed in 2021. (5) D7 development Project for Hsinchu Science and Commercial Park: the D7-B development project has been started to accommodate the overall land planning of the Science and Commercial Park. (6) The C4 Office Building Development Project at Nangang Software Park: Obtained the construction permit and completed sub-contracting of the project. To accommodate the elevated bridge installation and the increase in incentive floor area by the City Government, the architecture design will be reviewed to lower the cost in order to maintain the original budget.	2022 successively. The hotel’s decoration, commencement of operation, and full leasing of the office building are expected to be completed as well for the sustainable operation. (2) Kaohsiung Special Trade 7C Land Development Project: The Kaohsiung City Government has started the rezoning of the city, and the development can be carried out after the rezoning is completed. (3) Hualien Land: Continue to develop toward the deep sea water park, and plan to introduce related industries as the main development axis to increase the land utilization rate of the park to increase revenue. (4) The C4 Office Building Development Project at Nangang Software Park: the construction will be started upon the completion of architecture design changes, and the completion is expected no later than 2025 for fully leasing of the office building and sustainable operation.

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II. Overview of market and production & sales

(I) Market analysis

1. Sales area

Category	Product name	Sales area
Fertilizer products	Ammonium sulfate, Urea, Potassium chloride Calcium superphosphate, Compound fertilizer,and Organic fertilizer	Taiwan, Penghu, Kinmen and Matsu
Chemical product	Industrial urea	Taiwan
	Liquid ammonia	Taiwan
	Nitric acid	Taiwan and Southeast Asia area, Mainland China
	Melamine	Taiwan area, India
	Sulfanilic acid	European and the US areas
	Sulfuric Acid and Fuming sulfuric acid	Taiwan
Electronic grade chemicalproducts	Ablution, etchants, organic solution, inorganic acid solution	Taiwan and Southeast Asia area, Mainland China
Land development	Real property development	Taipei, Hsinchu, Kaohsiung, Keelung, Hualien and etc.

Market share, future supply and demand and growth

(1) Fertilizer products

Regarding fertilizers required in the domestic market, apart from urea and potassium chloride which are totally reliant on imports from abroad as none is produced here at home, the rest of the fertilizers can all be produced here at home by domestic fertilizer manufacturers once raw materials from are imported from abroad. The Company has the rich experience, largest output and most complete production equipment of fertilizer in Taiwan with the quality of all products is better than others, making our products more competitive and enjoys a market share of about 68%.

(2) Chemical product

A. Industrial urea: Since the discontinue of the production of urea, the existing key accounts of the Company then started to imported the products for their own use or resale, becoming the main competitors against the Company. In recent years, as the downstream industries are outflowing abroad, the demand in the domestic market has gradually been shrinking where agricultural urea has become a substitute; hence, selling Industrial-grade urea is becoming increasingly difficult and challenging. The market share of urea of the Company is about 40%.
B. Liquid ammonia: the three major importers of liquid ammonia in Taiwan are TFC, Sinopec, and Formosa Plastics. However, Sinopec is not equipped with its own storage tank (New storage tanks will start operation in 2021.); Formosa Plastics is unable to sell domestically due to its location at the Mailiao Industrial Harbor. Hence, the Company has become the exclusive supplier of liquid ammonia in Taiwan, and the sales and market has been relatively stable. The electronics industry constituted the largest business dealing in the current downstream pipelines. If the global economy continues

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to develop stably, there shall be more room for growth. Noticeably, some downstream industries are facing competition against China, it is seen that production is unstable or may tend to be migrated elsewhere.

C. Nitric acid: 61% of the total nitric acid produced by our company is a converted to the compound fertilizer. The fertilizer production requires about 100 thousand tons of nitric acid, and about 65 thousand tons of nitric acid can be sold to the market. In recent years, the competition between the imported and the domestic competitors, we are facing a fierce market competition. Also, the 68% thickening program was completed in the second half year of 2018, and the exporting volume in the past two year has been increasing.
D. Melamine: After the Company stopped producing melamine, our existing large clients have imported it by themselves as well as sold it, so they've become the Company's main competitors in the perfectly competitive market. Additionally, coupled with the decreased demand as a result of gradual migration of downstream industries and toxic substance control, the Company's domestic sales of melamine have been impacted subsequently.
E. Sulfamic Acid: The major export market is Europe and America with annual sales volume of about 12,000mt. The production of sulfuric acid worldwide is about 190,000 tons, and demand on it is about 150,000 tons. The production is obviously exceeding the demand. The competition has been seen among Taiwanese, Chinese, and Indonesian manufacturers which are not slow on trading at competitive prices and squeezing their profit margins.
F. Sulfuric acid and Oleum: The products supplied by the company face the competitions from other domestic manufacturers and the market competition is fierce.
(3) Electronic grade chemical products

So far, the Company has low market share in electric grade chemicals. With regard to future strategy, products relevant to ammonia and the core industries, acid-alkaline series, will be focused on. In addition to mastering raw material advantages and enhancing competitiveness and serving as an upstream supplier, the Company will also integrate its existing resources, improve its equipment utilization ratio, reduce production cost and strengthen its R&D ability and produce products of niche formulas. At the same time, it will compete with peers in order to supply customers directly and thus achieve higher profits.

Expected sales quantity

The estimated sales of fertilizer products in 2021 is 985 thousand tons; 150 thousand tons of chemical products; 150 thousand charge-offs of Al-Jubail Fertilizer Company Urea; 12 thousand tons of electronic grade chemicals.

Niche for competition
(1) Fertilizer products
- A. As the largest fertilizer manufacturer and supplier, it has a long history and owns the leading brand in market.
- B. The quality is reliable, which has passed CNS Mark and ISO 9001 certification, and the products are trusted by farmers.
- C. . Product differentiation: We have Taiwan’s one production equipment producing nitrophosphate organic compound fertilizer, and we have also successfully developed the technology of adding peat, and its patent has been

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applied in many countries. The product quality and the effect are superior to the product produced by domestic competitors.

D. With completed, various products, it can meet clients’ demand for one stop shopping by self-producing or importing.
E. The after-sales service network is available through Taiwan, we have business centers, north, central and south. Our service agents are available for every country nationwide and they provide comprehensive and real-time after-sales service. We also have numerous delivery centers.
F. The business conditions are mastered exactly and purchase conditions for raw materials are superior to those in same industry.
G. The teams for R&D, advertising progressively can provide high-tech products creatively, continuously and deal with tests for fertilizer efficiency and explanation session for new products all over this province so that the capacity of product development, advertising is superior to that in same industry.
(2) Chemical product
A. Nitric acid: our 61% nitric acid has large production capacity but low lower cost; the domestic market channel of which is stable.
B. Liquid ammonia: A dedicated storage tank is available through the Company which is the only supplier of this kind in the domestic market.
C. Sulfamic Acid: With certain popularities and stable market share, the Company has operated chancels of European and American markets for a long time.
D. Melamine: With stable supply and good quality, the Company owns basic domestic clients.
E. Industrial urea: As the sole manufacturer previously, the Company has established good brand reputation and keeps favorable interactive relationship with upstream clients and downstream clients. At present, the imported products can supply domestic markets with sufficient supply of goods, which can meet clients’ demand for goods without stock-out.
F. Sulfuric acid and Oleum: The supply of goods in our company is stable and the quality is reliable.
(3) Electronic grade chemical products
A. Based on core of the Company and relevant products in this industry (such as ammonia, 3-acid 1-alkali, etc.), the Company can reinforce competitive force by using, mastering niche of raw materials and reducing costs of production.
B. Equipped with the distillation, blending, and split charging OEM capacity of solvent products, and various technical capability and permits to recover and reuse waste liquids.

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Favorable, unfavorable factors and countermeasures for development:

Category	Category	Favorable factors	Unfavorable factors	Countermeasures
Fertilizer products		(1) The domestic fertilizer market was freed from January 2003 and all owners compete for competitive conditions. The Company is more excellent that those in same industry at the aspect of quality, costs of production, marketing channels, advertising and after-sales service. (2) With improvement of knowledge, the farmers require creation and change, especially in great demand of new fertilizers with special functions and the advanced R&D teams in our company can promote new products in order to meet farmers’ demand appropriately (3) Since the 2nd quarter of 2017, the government has been subsidizing the compound fertilizer added with organic agents and this is beneficial to the quality upgrading of our company’s traditional compound fertilizer and the development of completely organic compound fertilizer.	(1) Since the domestic fertilizers are scarce and all raw materials depend on importation, the costs of production are quite high and easily affected by international price and fluctuation of ocean freight so that the costs of fertilizers cannot be reflected without allowance of government. (2) In order to keep the supply and demand of domestic chemical fertilizers, the government noticed that export sales of fertilizers should be approved by Council of Agriculture previously from May 2008 to restrict exportation of fertilizers. (3) Our company in line with government’s policy of taking care of farmers, the fertilizer prices have been constrained for a long time.	(1) Adjust combination of products, improve sales profits, continuously improve quality of products, reduce costs of production and increase competitive power of products. (2) Develop basic, multifunctional and excellent products, such as including beneficial microbial fertilizer, organic compound fertilizer, etc., to keep difference of products, improve added value and meet clients’ demand. (3) Promote excellent organic fertilizers to meet strong demand of consumers for organic agricultural products. (4) Improve service for clients, including demonstrational popularization, field trial, result review and emulation, initiation and education for fertilizers, rapid treatment for clients’ complaints, explanation session for new products, sample presentation for trial,plant visit, etc.
Chemical product	Industrial urea	(1) As the unique domestic manufacturer, the Company has established good brand reputation and leading position. (2) The supply of goods is sufficient, which can meet clients’ demand and	(1) Since the Company stopped producing urea and the government approved free importation, some bigger clients of the Company started to import freely for self-use and sales and competed for urea	(1) Master international urea market for cheap, excellent and sufficient goods. (2) Regulate favorable price, compete for clients or provide differentiated service bydelivering goods to

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Category	Category	Favorable factors	Unfavorable factors	Countermeasures
		get rid of anxiety for stock-out.	market. Besides, they owns equipment for self-storage and packages to reduce costs, which is quite unfavorable to the Company. (2) Many Taiwan’s manufacturers have relocated to the Mainland China - resulting in the reduced demand on the industrial urea in the domestic market. (3) Since the urea is approved to import freely, the quality and price compete strongly or “agricultural” urea may be used for replacing “industrial” urea, the market order is affected.	stores. (3) Compete for large, medium or small manufacturers which use raw materials.
	Liquid ammonia	(1) Though Liquid Ammonia is allowed to import freely, yet specialized wharf, large capacity storage tank and unloading, storage equipment is needed specially for importing Anhydrous Ammonia. At present, only the Company and Formosa Plastics Sixth Naphtha Cracking Plant own the equipment. Because the Mai-liao Harbor of Formosa Plastics is an industrial port where liquid ammonia cannot be sold, downstream users usually purchase products from the Company. (2) Since Liquid Ammonia belongs to high dangerous chemicals and experienced professionals are required for unloading, storage	(1) Since the Miaoli Plant of our Company stops production, Liquid Ammonia required domestically largely depends on export and the selling price is affected by international price. The cost structure controlled by the Company is reduced relatively, and its price is unstable. (2) Sinopec will present itself as a competitor once it finishes its construction of storage tanks, and our domestic sales will be affected.	(1) Master business condition exactly and purchase low price, spot Liquid Ammonia appropriately. (2) Consider the competitive power of downstream clients, make price flexibly and appropriately in order to stimulate demand.

Operation Highlights

Category	Favorable factors	Unfavorable factors	Countermeasures
	working, only the Company and Formosa Plastics have relevant technologies atpresent.
Nitric acid	(1) The Company can deal with self-importation of Liquid Ammonia which can be used for producing nitric acid as raw materials. Besides, the unloading, storage equipment for importing Liquid Ammonia are set in Taichung Plant and the Company keeps leading position for mastering costs of raw materials, so the cost of production is lower. But the competitive power is high. (2) The equipment for production in Taichung Plant is new, of which the yield is large and the cost of production is lower.	In the second half of 2018, the Company's Taichung Plant completed 68% thickening program and actively promoted exports. However, as a result of the Korean-made products that have been used by our clients for a long time, it's not easy to enter the market.	Step-by-step promotion is adopted to make the clients accept the 61% nitric acid as well as to be effective incentives in the transition. In the second half of 2018, the concentration plan was completed, and so was the promotion of exports. The initial price will be based on the strategic guide to create marginal contribution, and it will be adjusted according to the changes in the market.
Melamine	(1) As the unique domestic manufacturer previously, the Company owns basic clients and good market reputation. (2) To import products of high quality and stability for high degree of customer satisfaction. (3) Import largely and build safe retail inventory so that clients can pick up goods smoothly, without anxiety for stock-out. Import good-quality, stable products so the acceptability of clients is high.	Additionally, after the control of toxic substances, the Company cannot change the package, which has made the advantage of paper packaging no longer exist and impacted the Company's sales of melamine in the domestic market.	Ensure quality of products, master quotations in international market and import price and adjust selling price flexibly to keep competitive advantages.

Operation Highlights

Category	Category	Favorable factors	Unfavorable factors	Countermeasures
	Sulfanilic acid	(1) The quality is stable and the Company can cooperate with ammonium sulfate plants in order to make the best use of recycled and avoid environmental protection problems. (2) With certain popularities and stable market share, the Company has operated chancels of European and American markets for a long time.	(1) Our Sulfamic Acid products are sold totally, the selling price of which is affected by internationally market deeply (2) Since Indonesia and Mainland China have put into production and cause supply is greater than demand, all manufacturers compete for prices in out-sales market in order to keep market shares (3) The isomorphism type of Sulfamic Acid products is quite high and technologies of production are low. Besides, they can be replaced by developing countries with sufficient raw materials easily.	(1) Ensure stable quality and safety, quickness during transportation. (2) Make quotation differently based on different competitive conditions of out-sales market.
	Sulfuric acid	The self-storage and imported smelt sulfuric acid own equipment advantages for sales, which can adjust retail inventory and gain profits.	(1) Since the opponents are of great quantity, the isomorphism type is high and recycled acid can flow easily. (2) The storage tank is located in Taichung which is far away from the sulfuric acid market, mostly likelylosingits competitiveness.	(1) Keep the costs of purchased materials stable in order to pursuit appropriate profits. (2) Keep current channels smooth and clients’ loyalty and ensure market shares.
	Oleum	On account of producing calcium superphosphate, the Company has capacity to assist clients to recycle byproduct acid and clients’ dependency is quite high.	Since the downstream client is only one, sales conditions are affected by industrial environment and starting time greatly. With addition of lacking self-production capacity, the profits are compressed.	Accelerate to demolish or construct calcium superphosphate factory in Taichung Plant and improve capacity of recycling acid.
Electronic grade chemical products		(1) Electronics related industry is still the keyindustryin Taiwan. Despite	(1) As the Company enters into this industry quite late, the market is	(1) comprehensive supply and it is quite difficult for theproducts

Operation Highlights

Category	Favorable factors	Unfavorable factors	Countermeasures
	the impact of the red supply chain in recent years that led to shrinking the industrial growth, these semiconductor industry will still be expanding. Also, the panel, solar energy and LED industry still keepin a certain scale, so the prosperity of the market is still expectable. (2) The production and quality control technologies of our electronic products are from a Japanese company, HPC, which is the brand accepted in domestic TFT-LCD industry. In the future,the technical layer should be improved and the products and service should be provided for relevant industries, such as,semiconductor, solar energy and LED industry positively. (3) For our electric grade chemicals in future, Miaoli Plant will be the center for production and supply, which is the center of Taoyuan County, Hsinchu County, Miaoli County and Taichung County in concentrated area of domestic electronic industries and can provide Just in Time Service needed by this industry urgently. (4) Integrating our company’s core industry of three acids and one alkali, we have the competitive	occupied by favorable brands, the supply chain in market is quite stable and the certification for quality of materials in photo-electricity industries, it is quite hard to develop market. (2) Since the business cycle of electronic industries is quite short,manufacturers reduce costs or raw materials and chemicals and control price of electric grade chemicals, which can affect space of profits. (3) In order to occupy product share rapidly, some new suppliers consider reducing price as the core of strategies and clients used to choosing supply chain by prices.Thus, the prices are slumped. (4) As the variation of self-made products is not diversified enough,it cannot assist customers’ comprehensive supply and it isquite difficult for the products to enter current market.	toenter current market. (2) Improve quality assurance capacity of processing, reinforce R&D technology grade, build complete logistics system, improve after-sales service of products and management capacity for customer relationship and manufacture products with good profitability formula in order to improve profitability. (3) Reinforce sales team’s technical service capacity and improve brand reputation and customer trust. (4) Reinforce the response capacity of manufacturers for production mode of a few diversified products in order to improve chances to get orders.

Operation Highlights

Category	Favorable factors	Unfavorable factors	Countermeasures
	advantage in obtaining advantage raw materials to reduce the production cost. And, our self-produced products will get into the niche market. (5) As a large domestic acid user, the Company can recycle electronic spent acid solution from clients to transform them into industrial products and to solve clients’ anxieties for treatment of spent solution.

Operation Highlights

Category	Favorable factors	Unfavorable factors	Countermeasures
Land development	Commercial Real Estate of Taipei Leasing market: (1) As key construction projects in Taipei City gradually move east from west, the land plots from old factories will be released for commercial development. The industry clusters are becoming more mature, and the transportation and other infrastructure are in place. The development of the areas surrounding the Nangang Software Park is taking shape. The Nangang Software Park will become the next Xinyi District. Philips, CTBC Financial Holding, 3M and other global firms are establishing their head office in the area. (2) According to Savills’ 2020 Office Leasing Market Report, Nangang’s development has matured. As Nangang Soft Park and CTBC Headquarter have been completed and commenced for many years, becoming a hub for technology, software, and biotechnology companies. There will be dozens of commercial developments project commenced successively in the future. The volume of office supplyis	Commercial Real Estate of Taipei Leasing market: According to statistics from Xinyi Global Assets, Nangang will release 694,218 square meters of office space in the next six years, including the "Pearl of the World" office expected to be completed in 2024 with a scale of approximately 462,812 square meters; Cathay Pacific Construction’s "Liberty Commercial Building" expected to be completed in 2023 with a scale of approximately 495,870 square meters; and Ruentex Development’s "Nangang Heart" complex development project expected to be completed in 2026, with about 165,290 square meters. At present, the development projects with known schedules in Nangang area have more than 363,638 square meters of office space to be completed altogether in 2026. Although the vacancy rate can still be maintained at a low level within three years, the new buildings will be completed from 2022, and during a short period of time, the vacancy rate may rise. With top new office buildings currently in short supply, they are attractive to companies in need, so it is possible to maintain a certain level of rent. However, rents may show a slow growth as the supplyneeds time to	Commercial Real Estate of Taipei Leasing market: (1) The Company adopts an overall planning and design approach for the commercial real estate in Taipei City, and leases the properties out to generate stable income. (2) Work with the professional team to collect market information is undertaken where cooperative MOUs are to be entered into with potential residents moving in, so as to have control over renters and reduce vacancy rate. (3) Complete the development of commercial real estate in Nangang on schedule with the desired quality to take the lead in offering office floor spaces, or conduct pre-leasing to reduce office space inventory. Commercial Real Estate Hsinchu Leasing market: (1) The market of commercial real estate in Hsinchu is affected by Hsinchu Science Park seriously. According to science industry and demand for industrial updating of industries promoted by the government, the complete office functions should beprovided and

Operation Highlights

Category	Favorable factors	Unfavorable factors	Countermeasures
	comparable to that of Xinyi CBD office buildings. The rental price is about NT$1,900 to 2,200 per 3.3m2. Comparing to urban buildings, the rental cost is reduced by one-third from the downtown building, which will attract the companies in need of setting up headquarters, and these who are cost-oriented, and thus become a strong competitor to the existing A-grade office buildings in downtown. The Company has C2 and C4 projects in progress in the Nangang Economic and Trade Park, which will be completed in 2022. (3) In the future, Nangang will continue to introduce large construction projects. In addition to the C3 development project of Taiwan Life Insurance and Mitsui Lalaport Mall, there are North Pop Music Center, Nangang Exhibition Hall No. 2, Lands of Nangang Bottle Cap Factory promoting the East Gateway Project, Nangang Depot Joint Development Base, and Taipower Nangang Maintenance Office are available for development, and it is expected more inflows of	digest. Commercial Real Estate Hsinchu Leasing market: (1) Tai Yuen Hi-Tech Industrial Park near Hsinchu Science & Commerce Park has formed IC design industrial group, and the eight stages of development should be completed continuously. In addition, many office buildings near Gongdaowu Road are completed. All of them are powerful potential opponents of development for Hsinchu commercial office buildings in Hsinchu. (2) Restricted by the urban planning of the science and commercial parks, land lots along Gongdaowu Road can only be used for office buildings. This approach does not reflect the needs of investors, and does not match with the trends in which large-scale land lots have complex commercial development. (3) Gongdaowu Road can be congested during rush hour. The station and route of Hsinchu light rail in the area are expected to be completed after 2028, causing	life convenience or other completed planning, which creates an office park abreast of time. (2) Adjust the planning and design to attract customers that are a match to the provisions of the science and business park, and to actively solicit business to shape up the business atmosphere of this area. (3) Continue striving for the relaxation of the provisions of the land use control for urban planning to facilitate the introduction of the complex commercial development areas that are suitable for regional development. (4) By requesting for lifting restrictions on land use, the area may become a place which meets the needs of talents working locally in the technology field. The reduction in number of trips can reduce the traffic problems. Propose to the government of Hsinchu to assess garage parking and routes for buses to conduct traffic diversion.

Operation Highlights

Category	Favorable factors	Unfavorable factors	Countermeasures
	population and industries will be attracted to here. Commercial Real Estate Hsinchu Leasing market: (1) Hsinchu is a hub for Taiwan's high-tech industries, with Hsinchu Science Park as the development core. The city is rich in academic resources. The main industries are integrated circuits, computers and peripherals, communications, optoelectronics, precision machinery and biotechnology. (2) The Hsinchu City Government introduced the Hsinchu Science Park X Plan along the Gongdaowu Road route. It is expected that the area will become an emerging software park. A total of 36 hectares of land from us, CPC and other public facilities nearby will make the area a technology industry cluster. (3) The Ministry of Science and Technology, Executive Yuan expects to set up the "Hsinchu Science Park X” at D6 Block of the Company in Hsinchu, to introduce industries related to the software design, information software and services, integration	traffic concerns now in the area.

Operation Highlights

Category	Favorable factors	Unfavorable factors	Countermeasures
	of soft- and hardware, and smart applications. The first phase is expected to complete in 2014, which likely drives the industry clusters and development of real properties in D4 to D7 Blocks of the Company. (4) Hsinchu has a rich talent pool and high concentration of industries. The supply of A-level office buildings is still scarce, so there is market demand for office buildings. (5) Many offices of Hsinchu City Center are old and full in addition to the full use of lands in Hsinchu Science Park, there is a situation of a large amount of self-demand requests from the companies in Hsinchu Science Park. This park meets the expansion needs for the technological factories.

Operation Highlights

(II) Important use and manufacture process of main products

1. Usage of main products

(1) Fertilizer products

Name of fertilizers	Nitrogen- phosphoric anhydride-potassium oxide	Usage
Ammonium sulfate	21-0-0	Base fertilizers and top dressing of allplants
Urea	46-0-0	Base fertilizers and top dressing of allplants
Potassium chloride	0-0-60	Base fertilizers and top dressing of allplants
Superphosphate	0-18-0	Base fertilizers
Compound fertilizers	Multiple formula	Base fertilizers and top dressing of allplants
Organic Fertilizer series	Multiple formula	Base fertilizers

(2) Chemical product

Product Name	Specification	Usage
Industrial urea	Including 46% of nitrogen	Resin, melamine, dyeing and finishing, composites plate, dyeing and finishing, green algae, chemicals, environmentalprotection.
Liquid ammonia	99.50% purity	Monosodium glutamate, refrigeration, electronics, steel, chemicals, etc.
Nitric acid	61~68% concentration	Mental treatment, electroplate, pigment, chemicals, common industrial usage,etc.
Melamine	99.8% purity	Resign, molding powder, composites plate, dyeing, finishing, etc.
Sulfanilic acid	99.8% purity	Flame retardant, softener, metal detergent, pigment, saccharin,food additives,analytical reagent,etc.
Sulfuric acid	98% purity	Mental treatment, electroplate, chemicals, reagent, detergent and common industrial usage.
Oleum	Including25% SO3	Common industrial usage

(3) Electronic grade chemical products

Product Name	Specification	Usage
Ablution	Electronic grade	Wafer, Clean the faceplate after photoresist is stripped.
Etchants	Electronicgrade	Wires of faceplate are etched.
Organic Solution	Electronic grade	Clean and re-clean all sections of processing substrates.
Inorganic acids and alkali	Electronic grade	Etched developing of semiconductor, panel, solar energyand LED etching, development, and cleaning.

Operation Highlights

Manufacturing process of main products
(1) Association graph of Liquid Ammonia and downstream products

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

Materials Based Chemical material Chemical Chemical
fertilizers product
Melamine
Urea
Sulfanilic
acid
Ammonium
sulfate
Liquid
ammonia
All Compound
Fertilizer
Compound
Fertilizer
Nitric acid
----- End of picture text -----

(2) Compound Fertilizer Raw Material Association Diagram

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

Phosphorite Molten sulfur
Superphosphate Sulfuric acid
Potassiumchloride/
Nitric acid Nitrophosphate PotassiumSulfate
Compound
Fertilizer
Liquid
ammonia
Ammoposphate
Compound
Urea
Phosphoric acid
Ammonium
Dihydrogen
Phosphate
Organic fertilizer/
Organic compound Organic matter
fertilizer
----- End of picture text -----

Operation Highlights

(3) Manufacturing process of electronic grade chemicals

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

Materials Electronic-grade
Products
Raw material A Distillation, blending and
filtration
Formulated
products
Raw material B
----- End of picture text -----

(4) Process of manufacturing of Microbial fertilizer

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

Sterilization, inoculation,
Mixture of raw fermentation
materials Packaging
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(III) Supply conditions of main raw materials

Materials	SupplyCondition
Urea	It is mainly purchased outside, most of which is from Mainland China. Besides, the Company gains urea from transferred-investment company-Al-Jubail Fertilizer Companybybuy-back.
Liquid ammonia	It is mainly purchased from Sabic Asia Pacific Pte. Ltd and Mitsubishi Corporation by yearlyagreements.
Sulfuric acid	It is mainly purchased from Japan through long term agreement, the supply of which is stable.
Phosphorite	The main sources of supplyare Jordan and Morocco.
Potassium chloride	Most of it is imported from Canada, Jordan, Israel and Russia.
Molten sulfur	It ispurchased byorderingcontracts with CPC Corporation.

Operation Highlights

(IV) In the following table, the names of clients whose purchase (selling) amount is 10% or more than 10% of total amount in either year of last two years, list of main purchase or selling clients and purchase (selling) amount, proportion are listed. Besides, the reason for increase or decrease is illustrated.
List of main suppliers:

		2019	2019			2020	2020			Upto Q1, 2021	Upto Q1, 2021
Item	Name	Amount (NT$ thousand)	Proportion of net purchases for the whole year (%)	Relationship with the issuer	Name	Amount (NT$ thousand)	Proportion of net purchases for the whole year (%)	Relationship with the issuer	Name	Amount (NT$ thousand)	Proportion of net purchases for 2019 up to Q1 (%)	Relationship with the issuer
1	Sabic Asia Co. Ltd.	810,589	12%	Supplier of Liquid Ammonia	Sabic Asia Co. Ltd.	529,503	10%	Supplier of Liquid Ammonia	Sabic Asia Co. Ltd.	398,975	29%	Supplier of Liquid Ammonia
2.	Al-Jubail Fertilizer Company	1,473,258	22%	The Company’s re-invested enterprises with 50% of stake, and delivers urea according to agreements.	Al-Jubail Fertilizer Company	266,136	5%	The Company’s re-invested enterprises with 50% of stake, and delivers urea according to agreements.	Al-Jubail Fertilizer Company	205,989	15%	The Company’s re-invested enterprises with 50% of stake, and delivers urea according to agreements.
3	Others	4,455,188	66%	-	Others	4,492,344	85%	-	Others	766,606	56%	-
	Net purchases	6,739,035	100%	-	Net purchases	5,287,983	100%	-	Net purchases	1,371,570	100%	-

Operation Highlights

2. List of main customers:

(1) Fertilizer products

2019	Name of customer:	Amount	Proportion for this year (%)
2019/1~2019/12	None	-	-

2020	Name of customer:	Amount	Proportion for this year (%)
2020/01~2020/12	Taifeng Agricultural Resources and Material	NT$332,901 thousand	10.11

(V) Production volume and value in the last two years

Unit: Ton/NT$ thousand

				Unit: Ton/NT$ thousand	Unit: Ton/NT$ thousand	Unit: Ton/NT$ thousand
Year Production volume and value Mainproduct	2020			2019
	Capacity	Production volume	Production value	Capacity	Production volume	Production value
Ammonium sulfate	150,000	96,900	505,602	150,000	93,550	543,978
Superphosphate	120,000	41,350	127,998	120,000	46,550	150,011
Compound fertilizers	485,100	465,614	4,103,190	485,100	439,953	4,000,430
Nitric acid	165,000	159,549	2,485,582	165,000	136,772	1,819,984
Bio-Organic Fertilizer	6,500	3,385	33,754	6,500	4,973	41,419
Recycled Phosphoric Acid	5,500	3,535	89,085	5,500	3,878	95,021
NMP	3,600	1,610	108,182	3,600	1,344	92,492
CNP	600	237	26,188	600	0	0
Ammonium Hydroxide Electronic Grade	7,200	3,535	57,490	7,200	2,302	38,404
Nitric Acid Electronic Grade	7,200	3,153	45,244	7,200	4,700	55,871
Total	950,700	778,868	7,582,314	950,700	734,022	6,837,610

Operation Highlights

(VI) Sales volume and value in the last two years

Unit: Ton/NT$ thousand

					Unit: Ton/NT$ thousand	Unit: Ton/NT$ thousand	Unit: Ton/NT$ thousand	Unit: Ton/NT$ thousand
Year Sales volume and value Mainproduct	2020				2019
	Domestic sales		Export		Domestic sales		Export
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
Ammonium sulfate	57,995	323,606	16,474	56,828	55,604	326,987	4,433	17,389
Superphosphate	9,799	30,304	-	-	21,990	70,534	-	-
Compound fertilizers	453,371	3,983,766	5,122	53,968	447,945	3,980,372	9,230	106,678
Agricultural urea	31,785	312,917	-	-	33,395	331,387	29,354	282,663
Potassium chloride	17,581	158,963	-	-	12,330	118,520	-	-
Resell Urea from Al- Jubail	-	-	39,300	264,938	-	-	168,657	1,474,596
Melamine	1,089	39,503	1	69	1,080	43,367	100	3,380
Sulfanilic acid	472	9,387	12,802	219,293	489	10,015	11,991	225,038
Nitric acid	20,718	322,765	19,544	131,176	20,372	336,011	24,666	167,382
Industrial urea	2,550	30,529	-	-	2,865	34,710	-	-
Liquid ammonia	81,035	1,868,472	-	-	86,155	2,006,040	-	-
Recycled Phosphoric Acid	2,858	72,015	-	-	3,878	95,022	-	-
Sulfuric acid	-	-	-	-	459	761	-	-
Oleum	5,934	14,202	-	-	6,633	18,514	-	-
Otherproducts	7,731	68,529	42	1,032	8,206	73,028	160	4,536
Electronic grade chemicalproducts	8,459	319,404	-	-	8,800	198,297	-	-
Realproperties	-	-	-	-	-	1,036,607	-	-
Leasingrevenue	-	1,580,480	-	-	-	1,589,649	-	-
Other operating income	144,834	307,596	-	-	-	338,859	2,850	224
Total	-	9,442,438	-	727,304	-	10,608,680	-	2,281,885

Operation Highlights

III. Employees

(I) Data of employees for last two years till latest annual press

March 31, 2021

				March 31, 2021
Year		2019	2020	Current year up to March 31, 2021
Number of employees		695	702	646
Average age		42.76	42.45	43.09
Average years of service		12.58	12.27	12.48
Education distribution	PhD	0.86%	0.57%	0.62%
	Master	23.60%	24.64%	25.70%
	College	52.66%	52.29%	52.01%
	Senior high school	22.73%	22.36%	21.52%
	Under senior high school	0.14%	0.14%	0.15%

Note: The number of TFC’s employees here refers to the sum of permanent staff and contractors.

(II) Productivity of employees

Unit: New Taiwan Dollar

			Unit: New Taiwan Dollar
Year	2019	2020	Current year up to March 31,2021
Annual revenue	12,624,716	9,931,129	2,865,337
Revenueperperson	18,165	14,147	4,436
Annual operating profit	1,628,666	1,188,302	338,171
Annual operating profit per person	2,343	1,693	523

Operation Highlights

IV. Distributed information of environmental protection

(I) Any losses suffered by the company in the most recent fiscal year and up to the annual report publication date due to environmental pollution incidents

Disposition dates/disposition reference numbers	Articles of law violated/content of the violated article	Content of the dispositions
2020-06-01/Reference No.: 20-109-060001	The environmental protection agency received a report of fire from the Company’s Taichung Factory at 2:46 on May 5, 2020. Inspectors found a large amount of smoke in the air due to the fire in the Factory. According to the person in charge of the Factory on site, the possible cause might be smolder of stacked semi-finished products and materials on the conveyor belt due to the disconnection of power for inspecting and repairing the main motor of the dryer found faulty at about 0:00 at the same day. However, it was found that the Factory discharged a large amount of air pollutants due to this accident, without reporting to the environmental protection agency within one hour and taking emergency response measures. This was a violation to Article 33, Paragraph 1 of the Air Pollution Control Act.	Penalty: fined NT$300,000.
2020-04-22/Reference No.: 20-109-040028	The ammonium sulfate chemical manufacturing process has possessed a Stationary Pollution Source Installation Permit. When performing an inspection, it was found that the waste gas of the conveyor belt equipment next to the centrifuge was not collected in a sealed manner, with white smoke emitting, and the waste gas was supposed to be collected to the scrubber; and the on-site centrifuge were three units (one in operation but not the other two), inconsistent with the prescribed content on the permit. This has violated Article 24, Item 2 and Item 4 of the Air Pollution Control Act. and Article 23 of the Stationary Pollution Source Installation, Operating and Fuel Use Permit Management Regulations	Penalty: fined NT$100,000.

Operation Highlights

(II) Countermeasures and potential expenditure in the future

Expected environmental capital expenditure in the next two years:

1. Expected	environmental capital expenditure in	the next two years:
Year Item	2021	2022
Description of the equipment intended to purchase for preventing pollution or the expenditure	(1) Air pollution prevention facility (2) Improve equipment of wastewater treatment. (3) Clean, treat and recycle wastes (4) Improve the manufacturing process to prevent pollution in mainproductionplants.	(1) Air pollution prevention facility (2) Improve equipment of wastewater treatment. (3) Clean, treat and recycle wastes (4) Improve the manufacturing process to prevent pollution in mainproductionplants.
Expected improvement	(1) Improve and reduce pollutant discharge to ensure air pollutants, water discharge, the treatment of air pollutants, and waste disposal comply with environmental protection laws so as to avoid pollution incidents. (2) The plants fulfill the commitments set for in the environmental impact assessments.	(1) Improve and reduce pollutant discharge to ensure air pollutants, water discharge, the treatment of air pollutants, and waste disposal comply with environmental protection laws so as to avoid pollution incidents. (2) The plants fulfill the commitments set for in the environmental impact assessments.
Amount	NT$87,000 thousand	NT$87,000 thousand

Influence after improvement:
(1) Improve and reduce discharge of pollutants, make sure that treatment for discharged water, air pollutants and wastes can meet regulations relevant to environmental protection in order to reduce influence on ecological environment.
(2) The operation of plants should meet the requirements in environmental impact assessments and prevent from polluting environment effectively.
(3) Reduce environmental impact on the public living in the communities near the plants and improve enterprise image.

V. Labor Relations

(I) Key employee-employer agreements.
Condition of employee-employer agreements

The Company has formulated “Key Points of Implementing Labor Relation Symposium,” and holds labor relation symposium regularly each year. The symposium is hosted by the General Manager or the Deputy General Manager specified by General Manager, who leads HR and first-level staffs to discuss with labor representatives and representatives of all labor unions of TFC o unblock communication channels, publicize business principles of the Company and enhance the interaction between labor and management. In addition, suggestions and advices of workers can happen by means of the Membership Representative Conference, Meetings of Board of Directors and Supervisors and Joint Meeting of Team Leaders regularly held by the Enterprise Union of TFC. The Company will

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reply employees’ suggestions and advices in writing officially and improve accordingly.

accordingly.
Communication method	Frequency
Labor Relations Symposium	Once/year
Employee-employer meeting	Once/quarter
Trade Union Congress	Once/year
Meeting of governors and supervisors of the union	Once/quarter
Joint meetingof team leaders of union	Once/quarter

Measures for employees welfares
(1) The welfare funds are appropriated as required; the “Employee Welfare Committee” was established to manage all the matters regarding employee’s welfare, such as tours and a variety of contests.
(2) Setting up a breastfeeding room provides female employees a place for breastfeeding.
(3) Setting up a medical office to manage all employee’s medical matters and regularly holding the health examinations.
(4) There are 13 clubs in the company with diverse type and operated vigorously. The clubs are set for cultivate employee’s interest and self-cultivation.
(5) Our retired employee will be gifted a commemorative present and get a retirement certificate.
(6) Marriage and funeral subsidies are available for employees.
(7) If an employee dies, depending on the cause of death and subject to our company’s guidelines of pension fund, the descendants will be given death benefit, compensation for death and funeral expenses.
(8) We insure employees against Labor Insurance, National Health Insurance, group life accident insurance and hospitalization insurance.
(9) We issue annual bonus to our employees. Also, depending our company’s annual operating interests and the rate of surplus, we will give our employees year-end bonuses and employee remuneration.
(10) Maternity allowance is available for employees.
(11) Travel subsidy is available for employees.
Retirementsystem

The Company has a “Taiwan Fertilizer Company’s Employees Retirement, Pension and Severance Regulations”, which is in accordance with the Labor Standard Act and the Labor Pension Act, for new employees and the selection of senior employees who are applicable to the newly-established pension ordinance, the company should pay monthly 6% of their insured salary to the personal account of Labor Insurance Bureau and the 0~6% of his or her insured salary. Selected senior employees who are applicable as the former labor standards, the company should pay monthly 9% to the retirement reserve account, and at the end of March, in accordance of the 56th law of Labor Standard Act providing for the actuarial replenishment of the difference and periodically convenes the Labor Pension Supervision Committee on a quarterly basis. Employees may apply for retirement per Article 5 of the Company's retirement, pension and severance regulations, and those aged 65 should

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be eligible for compulsory retirement. The said retired employees shall be given pension under the Labor Standards Act and the Labor Pension Act.

(II) Employees’ conducts or moral principles

In accordance with the provisions of the Labor Standard Act, the Company has made the “Taiwan Fertilizer Co., Ltd. Code of Practice for Employees”. In addition to sending a notification letter to the employees, it should be announced on the Company's internal website for employees to look up and follow. There is also the “Taiwan Fertilizer Co., Ltd. Code of Ethical Conduct for Directors, Supervisors, and Level I Managerial Supervisors”, which was submitted to the Company's 2009 Annual Shareholders General Meeting, its revision was approved in the 21st Meeting of the 34th Committee of the Board of Directors held on June 30, 2020, and will be reported in the Company's 2021 Annual Shareholders General Meeting. The guidelines were also announced in conjunction on the Company's internal website, to enable the Company's directors as well as the Level I managerial supervisors (including the general manager, deputy general Manager, and Level I managerial supervisors of each unit) to follow as their code of conduct and moral principles whenever engaging in the Company's business activities. In addition, the Company's stakeholders can understand the Company's ethical norms.

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(III) Employees’ further education and training

Year	2019	2020	Current year up to March 31, 2021
Number of classes for training	252	316	66
Person-time for training	3,337	2,096	293
Man-hour for training	15,309	10,497	1,701
Per capita training hours	22.03	14.91	2.62
Costs for training (NT$)	4,238,880	2,448,825	733,726
Per capita costs for training (NT$)	6,099	3,478	1,129

(IV) Losses suffered due to labor disputes (including any violations of the Labor Standards Act found in labor inspection): None

VI. Important Contracts

(I) Supply and sales contracts

Counterpart	Beginning and end of contract	Main contents	Restrictive terms
Sabic Asia Pacific Pte.Ltd.	2021.01.01~2021.12.31	Supply contract for liquid ammonia	None
Mitsubishi Corporation	2021.01.01~2021.12.31	Supply contract for liquid ammonia	None
Taiwan Sugar Corp.	2020.01.01-2020.12.31	Sales contract for fertilizers	None
Sinon Corporation	2020.01.01-2020.12.31	Procurement contract for fertilizers	None
Tai FengHsingIndustrial Limited	2020.01.01-2020.12.31	Service contract	None
Xiyuan Agriculture Resources and Material Company	2020.01.01-2020.12.31	Service contract	None
Advanced Green Biotechnology Inc.	2020.01.01-2020.12.31	Procurement contract for fertilizers	None

(II) Cooperative contract

Counterpart	Beginning and end of contract	Main contents
Saudi Basic Industries Corp.	1980.02.08~2032.07.12	Cooperate to invest in Al-Jubail Fertilizer Company, and eachpartyholds 50% equities.
Jinqun International Corp.	2011.04.18~2031.04.18	Cooperate to invest TR Electronic Chemical (Cayman) Co., Ltd., and TFC holds 51% equities and Jinqun holds 49% equities.
Agricultural Medicine and Toxicological Laboratory of the Council of Agriculture, Executive Yuan	2016.05.01~2021.05.01	License of "Mass production and application of Bacillus amyloliquefaciens strain Ba-BPD1 for microbial fertilizer and biopesticide”.
Taichung District Agricultural Research and Extension Station, Council of Agriculture, Executive Yuan	2017.07.01~2022.06.30	Technical license of “Production and application technology of rice straw decomposing germ complex preparation”
Taichung District Agricultural	2017.07.20~2022.07.19	Technical license of “Production technology and

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Counterpart	Beginning and end of contract	Main contents
Research and Extension Station, Council of Agriculture, Executive Yuan		the application method of Complex farm livestock manure composting fermentation”
Miaoli District Agricultural Research and Extension Station, Council of Agriculture, Executive Yuan	2018.06.08~2026.06.07	Non-exclusive license of to the mass production techniques of Bio-Phosphorus Solubilization Fertilizer of the Miaoli Living Bacteria No. 1
Yufeng Produce and Specialty Company	2018.07.24~2023.07.23	Strategic alliance between TFC and Yufeng Produce and SpecialtyCompany
Industrial Technology Research Institute	2018.04.01~2020.01.31	Improve and reinforce the existing wastewater processing performance of Miaoli plant, so that the wastewater quality can meet the discharge standard, and help plan the basic design of the overall wastewaterprocessingsystem
National Chung Hsing University	2019.03.01~2020.02.29	Development of multifunctional organic fertilizer forpreventingand controllingmeloidogyne spp.
Green View Garden	2019.03.16 ~2021.03.15	Taiwan Fertilizer Organic Demo Cooperative Farm
Kaohsiung District Agricultural Research and Extension Station, Council of Agriculture, Executive Yuan	2019.03.27~2024.03.26	Non-exclusive license of "New minerals secondary trace element fertilizer formula"
Fisheries Research Institute, Council of Agriculture, Executive Yuan	2019.05.01~2022.04.30	Non-exclusive license of "Establishment of SPF white shrimp breeding technology and selection of excellent species"
Tottori Prefecture Tourism Business Group	2020.01.01~2020.12.31	MOU signed by TFC and Tottori Prefecture Tourism Business Group
Agricultural Medicine and Toxicological Laboratory of the Council of Agriculture, Executive Yuan	2020.01.01~2025.01.01	Non-exclusive license of the “new liquefied bacillus thermoamylovorans strain Ba-BPD1 and application for microbial fertilizer” (including a patent of R.O.C, certificate No. I373523)
Agricultural Medicine and Toxicological Laboratory of the Council of Agriculture, Executive Yuan	2020.01.01~2028.01.01	Non-exclusive license of the “new liquefied bacillus thermoamylovorans strain Ba-BPD1 and application for biological pesticides” (including a patent of R.O.C, certificate No. I373523)
Institute for Biotechnology and Medicine Industry	2020.01.01~2020.12.31	License to use national quality label for the materials of “fish scale collagenpeptides”
Miaoli District Agricultural Research and Extension Station, Council of Agriculture, Executive Yuan	2020.01.01~2020.12.31	Development of bacillus amino acid microbial fertilizer for vegetables and fruits.
National Taiwan Ocean University	2020.01.13~2025.01.13	Non-exclusive license of “production technology of Ulvapolysaccharides”
Industrial Technology Research Institute	2020.01.01~2021.06.30	Development of technology to purify industrial-grade hydrochloric acid to electronic-grade.
Agricultural Technology Research Institute	2020.03.01~2021.02.28	Collaborative experiment of artificial propagation of industrialization of flounder
Agricultural Technology Research Institute	2020.03.01~2021.02.28	Collaborative testing program for the industrialized mass production simulation field of bluestriped angelfish
Industrial Technology Research Institute	2020.04.01~2020.11.30	Technical counseling contract for promoting key materials of semiconductor fabrication industrial chain
National Chung Hsing University	2020.05.01~2021.04.30	Preliminary development of multifunctional

104

Operation Highlights

Counterpart	Beginning and end of contract	Main contents
		biotechnology products for the prevention and treatment of Meloidogyne spp., and the appraisal of the quality and field test effect of mass-produced compost trial products for the prevention and treatmen of Meloidogyne spp
Industrial Technology Research Institute	2020.05.01~2021.04.30	Working contract for research of EBR (PGMEA) phase splittingand esterification technologies
Yongchang Organic Farm	2020.05.02~2022.05.01	Taiwan Fertilizer Organic Strawberry Cooperative Farm
Agricultural Technology Research Institute	2020.06.01~2021.05.31	Green house effacacy test of “Nongzhonghe _Bacillus amyloliquefaciens_Ba-BPD1 1×109 cfu/ml” agains bacterial wilt for tomatoes
China Medical University	2020.07.01~2021.07.31	Study on the Effect of Fertilizer Types on Volatile Components of Allium Plants
Yuanpei University of Medical Technology	2020.08.01~2021.03.31	Preliminary Test and Non-Disclosure Agreement for "Strawberry Amino Acid Fertilizer Formula" TechnologyTransfer
Industrial Technology Research Institute	2020.09.17~2021.12.16	Operational evaluation, engineering planning and design contract for deep ocean water ultrafiltration system
Industrial Technology Research Institute	2020.11.01~2022.06.30	Technical service working contract for “development of the technology to distill and purify crude MDI to pure MDI”

(III) Construction and other contracts

Counterpart	Beginning and end of contract	Main contents	Restrictive terms
Atlas Technology Corp.	2020.12.21~ongoing	Nitrophosphate plant, Taichung Factory(1), new continuous monitoring system design and constructionproject	None
Atlas Technology Corp.	2020.11.30~ongoing	Nitrophosphate plant, Taichung Factory(2), new system design and constructionproject	None
Sick Maihak (Taiwan) Co., Ltd.	2020.11.16~ongoing	The design and construction of the new automatic monitoring facility system for the chimney of the Taichung Factory Er-Phosphorus Plant	None
Ching Ye Co., Ltd.	2020.05.12~2020.10.09	Design, manufacturing, and installation of modification of natural gas and explosion-proof area for the combustion furnace of the Nitrophosphate (2) plant of the TaichungFactory	None
Hung Ye Construction Company	2020.12.01~2021.03.30	New Construction of the Ton-Bag Material Warehouse at Taichung Factory	None
Chen Ya Resources Technology Corp.	2019.10.22~Ongoing	Design and construction project of distillate recovery and cracking equipment at Miaoliplant	None
Lin Hsing Machinery Ind. Co., Ltd	2020.3.27~Ongoing	Replacement of Miaoli Plant No. 2 Boiler Burner	None
HCCH & Associates	Effective from the date of contract	Hsinchu Science and Commercial	None

105

Operation Highlights

Counterpart	Beginning and end of contract	Main contents	Restrictive terms
Architects Planners & Engineers	(Feb 1, 2013) until the the completion of final acceptance in conjunction with no matters required to be resolved.	Park D7 Architectural Design and Supervision Technical Service Work
Wei-Da Construction Co., Ltd.	Effective from the date of contract (Nov 2, 2020) until the the completion of final acceptance in conjunction with no matters required to be resolved.	The rezoning project of the Hsinchu City Technology and Commerical Park’s self-sponsored city rezoning area (land of D5/D6 blocks in Hsinchu City)	None
HCCH & Associates Architects Planners & Engineers	Effective from the day of contract (October 31, 2011) until one year after the use permit is acquired.	Technical service work of “Construction design and supervising of the 1st stage C2 and the overall regulation of C2C3C4 NangangSoftware Park”	None
HCCH & Associates Architects Planners & Engineers	Effective from the date of contract (April 20, 2018) until the use permit is acquired in conjunction with the completion of final acceptance.	Increase the grouping of supervisors, and supervision and technical service work for Taiwan Fertilizer's new construction project of Nangang C2 hotel and office building	None
Yuanyang Consturction Engineering Co., Ltd.	Effective from the day of contract ( February 5, 2018) until the the completion of final acceptance in conjunction with no matters required to be resolved.	Taiwan Fertilizer's new Nangang C2 hotel and office building construction project.	None
HCCH & Associates Architects Planners & Engineers	Effective from the day of contract (June 1, 2018) until one year after the use permit is acquired.	Technical service work of “Construction design and supervising of the C4 Nangang Software Park”	None

(IV) Contract for Land Development

Counterpart	Beginning and end of contract	Main contents	Restrictive terms
Shinera Construction Co., Ltd.	On June 10, 2015, a urban revitalization collaboration contract was signed. The first supplementary clause was signed on November 5, 2019. This project should be commenced before September 30, 2023, and the entire project will have the property rights registered and delivered before April 30, 2028.	Urban renewal business of 4 lands of Plot 607, Section 1, Taipei City owned by TFC should be included in the urban renewal business of 25 lands in the same section. The co-construction agreement signed is on the sales of superior residential buildings to be constructed.	The implementer contained in “Urban Renewal Rules” of the agreement is Shinera, who should handle urban renewal procedures. TFC should provide co-construction land as the building land, and Shinera is responsible for integrating the adjacent lands with the co-constructing land, providing all capital needed to execute this project and implementing construction.

106

Financial Profile

Six. Financial Profile

I. Condensed Balance Sheet, Consolidated Income Statement and Audit Opinion of CPAs in the Past Five Years

(I) Condensed Balance Sheet and Comprehensive Income Statement

Condensed Balance Sheet (Consolidated)

Unit: New Taiwan Dollar

Year Item	Year Item		Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information in the Past Five Years		Current year up to March 31, 2021 Financial Information (Note 1)
		2020	2019	2018	2017	2016
Current asset		9,526,919	11,954,934	13,749,184	14,192,823	15,301,306	10,500,759
Property, Plant and Equipment		14,758,989	14,280,801	13,823,376	13,744,278	26,753,401	14,617,108
Intangible asset		122,639	126,933	146,486	234,595	257,986	121,962
Other assets		51,937,580	49,294,128	48,680,671	46,985,195	34,405,109	52,264,613
Total assets		76,346,127	75,656,796	76,399,717	75,156,891	76,717,802	77,504,442
Current liabilities	Before distribution	2,232,969	2,042,946	1,980,296	2,231,866	1,680,062	2,502,668
	After distribution	Not yet distributed	4,198,946	4,136,296	4,289,866	3,738,062	Not yet distributed
non-current liabilities		22,804,447	22,888,797	23,636,475	23,832,573	24,433,314	22,653,393
Total liability	Before distribution	25,037,416	24,931,743	25,616,771	26,064,439	26,027,935	25,156,061
	After distribution	Not yet distributed	27,087,743	27,772,771	28,122,439	28,085,935	Not yet distributed
Equity attributable to owners of the parent company		51,308,711	50,725,053	50,782,946	49,092,452	50,604,426	52,348,381
Share capital		9,800,000	9,800,000	9,800,000	9,800,000	9,800,000	9,800,000
Additionalpaid-in capital		2,244,652	2,244,073	2,243,635	2,232,791	2,232,791	2,244,652
Retained earnings	Before distribution	37,612,891	37,333,830	37,426,654	37,094,340	37,559,433	38,361,458
	After distribution	Not yet distributed		35,270,654	35,036,340	35,501,433	Not yet distributed
Other equities		1,651,168	1,347,150	1,312,657	(34,679)	594,885	1,942,271
Treasury shares		`－`	`－`	`－`	`－`	`－`	`－`
Non-controlling interests		`－`	`－`	`－`	`－`	`－`	`－`
Total Equity	Before distribution	51,308,711	50,725,053	50,782,946	49,092,452	50,604,426	52,348,381
	After distribution	Not yet distributed	48,569,053	48,626,946	47,034,452	48,546,426	Not yet distributed

Note 1: The consolidated financial information of 2021 up to March 31 has been reviewed by the CPAs.

Note 2: The financial statements of 2016 to 2018 corrected or supplemented including:

For the Company’s previous corrected or supplemented the information of the re-investment, Al-Jubail Fertilizer, the IFRS effect was adopted first-time in 2017.
Pursuant to the Letter Jin-Guan-Zheng-Shen-Zhi No.1090330422, issued by Financial Supervisory Commission on March 11, 2020, and by referring to the common practice in the construction industry that the clients may pay considerations in installments for one to five years, the Company corrected (supplemented) the presentation and disclosure of the receivables generated from the sales in the manner of ten-year and twenty-year installments.
Note 3: The aforesaid figures after distribution, are filled in with the figures resolved by the AGM in the next year; but the figures in 2020 and 2021 are not yet resolved.

107

Financial Profile

2. Condense Statement of Comprehensive Income (Consolidated)

Unit: New Taiwan Dollar

Year Item	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Current year up to March 31, 2021 Financial Information (Note 1)
	2020	2019	2018	2017	2016
Operatingrevenue	10,169,742	12,890,565	12,215,092	11,658,986	12,240,920	2,949,084
Gross profit from operations	2,589,109	3,031,311	2,752,349	2,601,225	2,006,254	696,444
Non-operating income and expenses	1,247,689	1,626,011	1,286,502	1,227,938	595,694	367,349
Non-operating income and expense	1,717,686	838,256	1,663,118	606,115	(616,713)	578,660
Net income (loss) before tax	2,965,375	2,464,267	2,949,620	1,834,053	(21,019)	946,009
Net income of continuing operations	2,452,881	2,063,955	2,281,319	1,619,126	(129,503)	748,292
Loss of discontinuing operation	`－`	`－`	`－`	`－`	`－`	`－`
Net income (loss) of the period	2,452,881	2,063,955	2,281,319	1,619,126	(129,503)	748,292
Other comprehensive income of the current year (net amount after-tax)	286,198	33,714	517,626	(655,952)	(171,044)	291,378
Total comprehensive income in the current period	2,739,079	2,097,669	2,798,945	963,174	(300,547)	1,039,670
Net income attributable to owners of the parent company	2,452,881	2,063,955	2,281,319	1,619,126	(129,503)	748,292
Net income attributable to non-controllinginterest	`－`	`－`	`－`	`－`	`－`	`－`
Total comprehensive income attributable to owners of the parent company	2,739,079	2,097,669	2,798,945	963,174	(300,547)	1,039,670
Total comprehensive income attributable to non-controllinginterest	`－`	`－`	`－`	`－`	`－`	`－`
Earnings (losses) per share	2.50	2.11	2.33	1.65	(0.13)	0.76

Note 1: The consolidated financial information of 2021 up to March 31 has been reviewed by the CPAs.

Note 2: The financial statements of 2016 to 2018 corrected or supplemented including:

For the Company’s previous corrected or supplemented the information of the re-investment, Al-Jubail Fertilizer, the IFRS effect was adopted first-time in 2017.
Pursuant to the Letter Jin-Guan-Zheng-Shen-Zhi No.1090330422, issued by Financial Supervisory Commission on March 11, 2020, and by referring to the common practice in the construction industry that the clients may pay considerations in installments for one to five years, the Company corrected (supplemented) the presentation and disclosure of the receivables generated from the sales in the manner of ten-year and twenty -year installments.

Note 3: The loss of discontinuing operation is listed as the amount net of income tax.

108

Financial Profile

3. Condensed Balance Sheet (Parent Company-Only)

Unit: New Taiwan Dollar

Year Item	Year Item	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information of the Current Year up to March 31, 2021(Note 1)
		2020	2019	2018	2017	2016
Current asset		8,676,018	10,948,211	11,977,268	13,612,812	15,035,072	`－`
Property, Plant and Equipment		12,421,858	13,013,485	13,419,677	13,640,123	26,619,098	`－`
Intangible asset		11,724	16,018	22,679	28,922	20,567	`－`
Other assets		54,658,771	51,464,749	50,909,738	47,807,025	34,946,418	`－`
Total assets		75,768,371	75,442,463	76,329,362	75,088,882	76,621,155	`－`
Current liabilities	Before distribution	1,955,626	1,864,243	1,915,349	2,163,017	1,582,350	`－`
	After distribution	Not yet distributed	4,071,349	4,221,017	3,640,350	4,259,043	`－`
non-current	liabilities	22,504,034	22,853,167	23,631,067	23,833,413	24,434,379	`－`
Total liability	Before distribution	24,459,660	24,717,410	25,546,416	25,996,430	25,931,289	`－`
	After distribution	Not yet distributed	26,873,410	27,702,416	28,054,430	27,989,289	`－`
Equity attributable to owners of theparent company		`－`	`－`	`－`	`－`	`－`	`－`
Share capital		9,800,000	9,800,000	9,800,000	9,800,000	9,800,000	`－`
Additional paid-in capital		2,244,652	2,244,073	2,243,635	2,232,791	2,232,791	`－`
Retained earnings	Before distribution	37,612,891	37,333,830	37,426,654	37,094,340	37,559,433	`－`
	After distribution	Not yet distributed	35,177,830	35,270,654	35,036,340	35,501,433	`－`
Other equities		1,651,168	1,347,150	1,312,657	(34,679)	594,885	`－`
Treasury shares		`－`	`－`	`－`	`－`	`－`	`－`
Non-controlling interests		`－`	`－`	`－`	`－`	`－`	`－`
Total Equity	Before distribution	51,308,711	50,725,053	50,782,946	49,092,452	50,187,277	`－`
	After distribution	Not yet distributed	48,569,053	48,626,946	47,034,452	48,129,277	`－`

Note 1: No parent company-only financial information of 2021 up to March 31 has been reviewed by the CPAs.

Note 2: The financial statements of 2016 to 2018 corrected or supplemented including:

For the Company’s previous corrected or supplemented the information of the re-investment, Al-Jubail Fertilizer, the IFRS effect was adopted first-time in 2017.
Pursuant to the Letter Jin-Guan-Zheng-Shen-Zhi No.1090330422, issued by Financial Supervisory Commission on March 11, 2020, and by referring to the common practice in the construction industry that the clients may pay considerations in installments for one to five years, the Company corrected (supplemented) the presentation and disclosure of the receivables generated from the sales in the manner of ten-year and twenty twenty-year installments.
Note 3: The aforesaid figures after distribution, are filled in with the figures resolved by the AGM in the next year; but the figures in 2019 are not yet resolved.

109

Financial Profile

4. Condense Statement of Comprehensive Income (Parent Company-Only)

Unit: New Taiwan Dollar

Year Item	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information in the Past Five Years	Financial Information of the Current Year up to March 31, 2021 (Note 1)
	2020	2019	2018	2017	2016
Operating revenue	9,931,129	12,624,716	11,928,000	11,346,419	11,893,266	`－`
Gross profit from operations	2,472,640	2,984,206	2,701,844	2,544,133	1,975,732	`－`
Non-operating income and expenses	1,188,302	1,628,666	1,292,341	1,275,875	675,215	`－`
Non-operating income and expense	1,775,881	834,541	1,656,253	543,075	(673,333)	`－`
Net income (loss) before tax	2,964,183	2,463,207	2,948,594	1,818,950	1,882	`－`
Net income of continuing operations	2,452,881	2,063,955	2,281,319	1,619,126	(72,798)	`－`
Loss of discontinuing operation	`－`	`－`	`－`	`－`	`－`	`－`
Net income (loss) of the period	2,452,881	2,063,955	2,281,319	1,619,126	(72,798)	`－`
Other comprehensive income of the current year (net amount after-tax)	286,198	33,714	517,626	(655,952)	(145,851)	`－`
Total comprehensive income in the current period	2,739,079	2,097,669	2,798,945	963,174	(218,648)	`－`
Net income attributable to owners of the parent company	`－`	`－`	`－`	`－`	`－`	`－`
Net income attributable to non-controllinginterest	`－`	`－`	`－`	`－`	`－`	`－`
Total comprehensive income attributable to owners of the parent company	`－`	`－`	`－`	`－`	`－`	`－`
Total comprehensive income attributable to non-controllinginterest	`－`	`－`	`－`	`－`	`－`	`－`
Earnings (losses) per share	2.50	2.11	2.33	1.65	(0.07)	`－`

Note 1: No parent company-only financial information of 2021 up to March 31 has been reviewed by the CPAs. Note 2: The financial statements of 2016 to 2018 corrected or supplemented including:

For the Company’s previous corrected or supplemented the information of the re-investment, Al-Jubail Fertilizer, the IFRS effect was adopted first-time in 2017.
Pursuant to the Letter Jin-Guan-Zheng-Shen-Zhi No.1090330422, issued by Financial Supervisory Commission on March 11, 2020, and by referring to the common practice in the construction industry that the clients may pay considerations in installments for one to five years, the Company corrected (supplemented) the presentation and disclosure of the receivables generated from the sales in the manner of ten-year and 20-year installments.

Note 3: The loss of discontinuing operation is listed as the amount net of income tax.

110

Financial Profile

(II) Auditing CPAs and audit opinions

Year	Name of the accounting firm	Names of CPAs	Audit Opninion
2016	Deloitte Taiwan	Wang, Wen-Yi; Kuo, Wen-Chi	Unqualified opinion
2017	KPMG Taiwan	Tseng, Kuo-Yang; Lin, Heng-Sheng	Unqualified opinion
2018	KPMG Taiwan	Tseng, Kuo-Yang; Lin, Heng-Sheng	Unqualified opinion
2019	KPMG Taiwan	Tseng, Kuo-Yang; Lin, Heng-Sheng	Unqualified opinion
2020	KPMG Taiwan	Tseng, Kuo-Yang; Lin, Heng-Sheng	Unqualified opinion

111

Financial Profile

II. Financial Analysis in the Past Five Years

(I) Financial Analysis (Consolidated)

Year Analysis Item(Note 3)	Year Analysis Item(Note 3)	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years	Current year up to March 31, 2021 (Note 1)
		2020	2019	2018	2017	2016
Financial structure (%)	Debt to asset ratio	32.79	32.95	33.52	34.68	34.03	32.45
	Long term capital to property, plant and equipment ratio	502.15	515.47	538.35	530.58	280.47	513.10
Solvency (%)	Current ratio (%)	426.64	585.18	694.29	635.91	910.75	419.58
	Quick ratio(%)	283.94	457.49	524.90	537.18	789.23	292.25
	Interest protection multiples	65,115.89	47,344.38	707,442.92	330,560.00	-199.03	94,230.24
Operating capacity	Receivable turnover rate (times)	11.87	11.94	8.56	7.20	6.48	2.21
	Average cash recoveryday	31	31	43	51	56	164
	Inventory turnover rate (times)	2.87	3.74	4.06	4.97	5.15	0.90
	Payable turnover rate (times)	13.56	13.87	9.47	8.53	9.73	3.67
	Days sales outstanding	127	97	90	73	71	405.44
	Property, plant and equipment turnover rate (times)	0.70	0.91	0.88	0.57	0.45	0.20
	Total asset turnover rate (times)	0.13	0.16	0.16	0.15	0.15	0.03
Profitability	Return on Assets (%)	3.23	2.72	3.01	2.13	-0.15	0.96
	Return on Equity (%)	4.80	4.06	4.56	3.26	-0.25	1.43
	Pre-tax net profit to paid-in capital ratio(%)	30.25	25.14	30.09	18.71	-0.21	9.65
	Netprofit margin (%)	24.11	16.01	18.67	13.88	-1.05	25.37
	EPS(dollar)	2.50	2.11	2.33	1.65	-0.13	0.76
Cash flows	Cash flow ratio (%)	59.29	181.99	94.89	116.46	97.43	24.00
	Cash flow adequacy ratio (%)	46.58	134.68	122.01	142.29	134.18	50.17
	Cash reinvestment ratio (%)	-1.05	1.98	-0.22	0.70	-0.53	0.73
Leverage	Operatingleverage	3.76	3.56	3.52	3.76	7.52	4.24
	Financial leverage	1	1	1	1	1	1
Please explain the reasons of the financial ratio changes in the past two years. 1. Current ratio decreased, mainly because the current assets of 2020 decreased. 2. Quick ratio decreased, mainly because the liquid assets of 2020 decreased. 3. Interest protection multiples increased, mainly because the net profit before tax of 2020 increased. 4. Inventory turnover decreased, mainly because the cost of sales of 2020 decreased. 5. Days sales outstanding increased, mainly because the inventory turnover of 2020 decreased. 6. Property, plant and equipment turnover decreased, mainly because the net sales of 2020 decreased. 7. Pre-tax net profit to paid-in capital increased, mainly because the pre-tax net profit of 2020 increased. 8. Net profit margin increase, mainly because the 2020 net profit after tax increased and net sales decrease. 9. The cash flow ratio decreased, mainly because the cash inflow from operating activities decreased in 2020. 10. Cash flow adequacy ratio decreased, mainly because the cash inflow from operating activities decreased in the recent five years. 11. The cash reinvestment ratio decreased, mainly because the cash inflow from operating activities decreased in 2020.

112

Financial Profile

(II) Financial Analysis (Parent Company-Only)

Year Analysis Item (Note 3)	Year Analysis Item (Note 3)	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years	Current year up to March 31, 2021 (Note 1)
		2020	2019	2018	2017	2016
Financial structure (%)	Debt to asset ratio	32.28	32.76	33.46	34.62	33.95	`－`
	Long term capital to property, plant and equipment ratio	594.21	565.39	554.51	534.64	281.89	`－`
Solvency (%)	Current ratio (%)	443.64	587.27	625.33	629.34	950.17	`－`
	Quick ratio (%)	288.75	452.71	453.39	529.83	826.3	`－`
	Interest protection multiples	82,875.28	60,339.83	No interest expense	45,473,850.00	-890	`－`
Operating capacity	Receivable turnover rate (times)	11.72	11.79	8.43	7.05	6.34	`－`
	Average cash recovery day	31	31	43	52	58	`－`
	Inventory turnover rate (times)	2.88	3.73	4.05	5	5.18	`－`
	Payable turnover rate (times)	13.67	13.84	9.36	8.41	9.57	`－`
	Days sales outstanding	126.45	98	90	73	70	`－`
	Property, plant and equipment turnover rate (times)	0.78	0.95	0.88	0.56	0.44	`－`
	Total asset turnover rate (times)	0.13	0.16	0.15	0.15	0.15	`－`
Profitability	Return on Assets (%)	3.24	2.72	3.01	2.14	-0.15	`－`
	Return on Equity (%)	4.80	4.06	4.56	3.26	-0.25	`－`
	Pre-tax net profit to paid-in capital ratio (%)	30.24	25.13	30.08	18.56	-0.67	`－`
	Net profit margin (%)	24.69	16.34	19.12	14.26	-1.08	`－`
	EPS (dollar)	2.50	2.11	2.33	1.65	-0.13	`－`
Cash flows	Cash flow ratio (%)	66.67	198.78	100.46	119.16	104.01	`－`
	Cash flow adequacy ratio (%)	52.39	141.96	124.9	142.19	134.37	`－`
	Cash reinvestment ratio (%)	-0.01	1.98	-0.17	0.68	-0.53	`－`
Leverage	Operating leverage	3.75	3.39	3.28	3.38	6.12	`－`
	Financial leverage	1	1	1	1	1	`－`
Please explain the reasons of the financial ratio changes in the past two years. 1. Current ratio decreased, mainly because the current assets of 2020 decreased. 2. Quick ratio decreased, mainly because the liquid assets of 2020 decreased. 3. Interest protection multiples increased, mainly because the net profit before tax of 2020 increased. 4. Inventory turnover decreased, mainly because the cost of sales of 2020 decreased. 5. Days sales outstanding increased, mainly because the inventory turnover of 2020 decreased. 6. Pre-tax net profit to paid-in capital increased, mainly because the pre-tax net profit of 2020 increased. 7. Net profit margin increase, mainly because the 2020 net profit after tax increased and net sales decrease. 8. The cash flow ratio decreased, mainly because the cash inflow from operating activities decreased in 2020. 9. Cash flow adequacy ratio decreased, mainly because the cash inflow from operating activities decreased in the recent five years. 10. The cash reinvestment ratio decreased, mainly because the cash inflow from operating activities decreased in 2020.

Note 1: The consolidated financial information of 2021 up to March 31 has been reviewed by the CPAs, but no parent company-only financial information of 2021 up to March 31 has been reviewed by the CPAs.

Note 2: The financial information from 2016 to 2020 has been reviewed by the CPAs.

Note 3: Formula of financial analysis calculation

Financial structure
(1) Debt to asset ratio =total liabilities / total assets

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Financial Profile

(2) Long term capital to property, plant and equipment ratio = (total equity + non-current liabilities) / net property, plant and equipment
Solvency
(1) Current ratio = current assets / current liabilities
(2) Quick ratio = (current assets - inventory - prepaid expenses) / current liabilities (Inventories include the inventories and real properties in progress)
(3) Interest protection multiples = net profit before income tax and interest expense / interest expense in the current period
Operating capacity
(1) Receivable (including accounts receivable and notes receivable due to business) turnover rate = net sales / average receivables for each period (including accounts receivable and notes receivable due to business)
(2) Average cash recovery date = 365 / receivables turnover rate
(3) Inventory turnover rate = sales cost / average inventory
(4) Payable (including accounts payable and notes payable due to business) turnover rate = cost of sales / average balance payable on each period (including accounts payable and notes payable due to business)
(5) Days sales outstanding = 365 / inventory turnover rate
(6) Property, plant and equipment turnover rate = net sales/net average property, plant and equipment value
(7) Total asset turnover rate = net sales / average total assets
Profitability
(1) Return on assets = [after tax profit and loss + interest expense × (1 - tax rate)] / average total assets
(2) Return on equity = after tax profit and loss / average equity
(3) Net profit margin = after tax profit and loss / net sales
(4) Earnings per share = (profit or loss attributable to parent company owner - special dividend) / weighted average number of issued shares
Cash flows
(1) Cash flow ratio = net cash flow from operating activities / current liabilities.
(2) Cash flow adequacy ratio = net cash flow from operating activities in the last five years / (capital expenditure + inventory increase + cash dividend) in the last five years
(3) Cash reinvestment ratio = (net cash flow from operating activities - cash dividends) / (gross property, plant and equipment + long term investment + other non-current assets + working capital)
Leverage
(1) Operating leverage = (net operating income - changing operating costs and expenses) / operating profit
(2) Financial leverage = operating profit / (operating profit - interest expense)

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Financial Profile

III. Audit Report of the Audit Committee

Audit Committee’s Report of Taiwan Fertilizer Co., Ltd.

The Company's 2020 business report, financial statements and statement of earnings distribution were submitted by the Company’s Board of Directors. The financial statements were already audited by Kuo-Yang Tseng, CPA and Heng-Sheng Lin of KPMG, who also issued the auditor report accordingly.

The Audit Committee, after completing the audit of said business report, financial statements and statement of earnings distribution, believes that they are free of material misstatement, and thus produces this report according to Article 219 of the Company Act.

Please review accordingly.

To:

2021 General Shareholders’ Meeting of the Company

TAIWAN FERTILIZER CO., LTD.

Convener of Audit Committee: Lin, Horng-Chang

==> picture [220 x 65] intentionally omitted <==

March 25, 2021

115

Stock Code:1722

IV Consolidated Financial Statements

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors ’ Report For the Years Ended December 31, 2020 and 2019

Address: 6F, No.88, Nanjing E. Rd., Sec 2, Taipei City 10457, Taiwan Telephone: (02)2542-2231

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

Representation Letter

The entities that are required to be included in the combined financial statements of TAIWAN FERTILIZER CO., LTD. as of and for the year ended December 31, 2020 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10 by the Financial Supervisory Commission, "Consolidated Financial Statements." In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, TAIWAN FERTILIZER CO., LTD. and Subsidiaries do not prepare a separate set of combined financial statements.

Company name: TAIWAN FERTILIZER CO., LTD. Chairman: Huang-Yao Hsing Date: March 25, 2021

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Independent Auditors’ Report

To the Board of Directors of TAIWAN FERTILIZER CO., LTD.:

Opinion

We have audited the consolidated financial statements of TAIWAN FERTILIZER CO., LTD. and its subsidiaries (“the Group”), which comprise the consolidated Balance Sheets as of December 31, 2020 and 2019, and the consolidated statement of comprehensive income, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the report of other auditors (please refer to Other Matter paragraph), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the year ended December 31, 2020 and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The key audit matters that, in our professional judgment, should be communicated are as follows:

Impairment assessment of intangible assets

For the accounting policy of impairment assessment of intangible assets, please refer to note 4 (m) “Intangible assets” of the consolidated financial statements. For the accounting estimate and uncertainty assumption of impairment assessment of intangible assets, please refer to note 5 of the consolidated financial statements. For the impairment assessment of intangible assets, please refer to 6(l) of the consolidated financial statements.

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4-1

Key audit matters:

As described in Note 6(l) of the consolidated financial statements, the Group acquired control over Taiwan Yes Deep Ocean Water Co., Ltd. (“ Taiwan Yes” ), which was accounted for as acquisition using the equity method (including the goodwill and trademark with indefinite useful lives). In accordance with IAS 36 “Impairment of Assets”, goodwill and intangible assets with indefinite useful lives should be tested for impairment annually; and based on the estimated future cash flows of Taiwan Yes (the cash-generating unit), the recoverable amount was evaluated in order to determine whether there is any impairment of the aforementioned investment accounted for by using the equity method (including the goodwill and intangible assets with indefinite useful lives). Since the estimated future cash flows requires management’s forecasting of the industry overview and the future operating performance of Taiwan Yes, the recoverable amount will be affected and an impairment loss will be incurred should there be any change in the situation. Therefore, the impairment assessment of equity-method investments has been identified as a key audit matter.

How the matter was addressed in our audit:

Our principal audit procedures included confirming whether the management has properly assessed the recoverability of goodwill based on the forecasted cash flows within the following 5 years, wherein the assessment has been reviewed by the competent authority; and verifying whether the management has disclosed the impairment of goodwill in the financial statements on a timely manner after identifying such circumstance. In addition, we also assessed the adequacy of the forecasting methods and the discount rate used by the management, and compared the discount rate with external information; verified the management’s assumptions with external relevant information, and evaluated the major assumptions (including the forecast revenue growth rate, discount rate and forecast margin).

Other Matter

We did not audit the consolidated financial statements as of and for the years ended December 31, 2020 and 2019 of the certain investees in equity method. Those statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included in the corporation's financial statements for these investees, is based solely on the report of other auditors. As of December 31, 2020 and 2019, the investments in the aforementioned investees are 12.05% (NT$9,202,183 thousand) and 12.30% (NT$9,304,896 thousand) of consolidated total assets. For the years ended December 31, 2020 and 2019, the investment income on the above said investees are 20.02% (NT$593,696 thousand) and 30.49% (NT$751,432 thousand) of the Company's income before income tax.

TAIWAN FERTILIZER CO., LTD. has additionally prepared its parent company only financial statements as of and for the years ended December 31, 2020 and 2019, on which we have issued an unqualified opinion.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs, IASs, interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

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4-2

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

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4-3

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

The engagement partners on the audit resulting in this independent auditors’ report are Kuo-Yang Tseng and Heng-Shen Lin.

KPMG

Taipei, Taiwan (Republic of China) March 25, 2021

Notes to Readers

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

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

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

December 31, 2020 Amount % $ 3,062,027 4 1,300,013 2 112,566 - 118,885 - 659,112 1 12,797 - 6 - 2,822,354 4 364,115 - 1,066,109 1 8,935 -	December 31, 2020	December 31, 2020	December 31, 2020
	Amount	%	Amount
	2,232,969 3 2,042,946 3
	455,120 1 223,648 - 7,104,724 10 7,089,164 10 160,439 - 192,913 - 14,627,720 19 15,018,003 20 131,319 - 107,486 - 325,125 - 257,583 -
9,526,919 12
2,712,178 4 28,507 - 9,282,092 12 14,758,989 20 1,150,181 2 38,102,213 50 122,639 - 325,883 - 115,396 - 193,730 - 27,400 -
	22,804,447 30 22,888,797 30
	25,037,416 33 24,931,743 33
	9,800,000 13 9,800,000 13 2,244,652 3 2,244,073 3 3,397,549 4 3,191,153 4 30,823,647 41 31,147,849 41 3,391,695 4 2,994,828 4 1,651,168 2 1,347,150 2
66,819,208 88
	51,308,711 67 50,725,053 67
$ 76,346,127 100	$ 76,346,127 100 75,656,796 100

See accompanying notes to consolidated financial statements.

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2020 and 2019

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

2020	% 100 (75)	2019	% 100 (76)
Amount $ 10,169,742 (7,580,633)		Amount 12,890,565 (9,859,254)
2,589,109	25	3,031,311	24
299,990 974,846 66,584	3 9 1	298,297 1,040,379 66,624	2 8 1
1,341,420	13	1,405,300	11
1,247,689	12	1,626,011	13
44,080 80,046 1,019,917 (4,561) 578,204	- 1 10 - 6	86,167 79,017 (49,252) (5,216) 727,540	- - - - 6
1,717,686	17	838,256	6
2,965,375 512,494	29 5	2,464,267 400,312	19 3
2,452,881	24	2,063,955	16
(35,816) 715,107 10,833 (7,163)	- 7 - -	(4,398) 195,108 2,740 (879)	- 2 - -
697,287	7	194,329	2
(7,717) (504,660) (101,288)	- (5) (1)	(3,996) (195,916) (39,297)	- (2) -
(411,089)	(4)	(160,615)	(2)
286,198	3	33,714	-
$ 2,739,079	27	2,097,669	16
$ 2,452,881	24	2,063,955	16
$ 2,739,079	27	2,097,669	16
$	2.50		2.11
$	2.50		2.10

See accompanying notes to consolidated financial statements. 123

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Equity attributable to owners of parent

Balance at January 1, 2019 Profit Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve appropriated Cash dividends of ordinary share Reversal of special reserve Changes in equity of associates and joint ventures accounted for using equity method Balance at December 31, 2019 Profit Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve appropriated Cash dividends of ordinary share Reversal of special reserve Other changes in capital surplus Balance at December 31, 2020	Share capital Ordinary shares Capital surplus	Retained earnings	Total other equityinterest Unrealized gains Exchange differences on translation of foreign financial statements (losses) on financial assets measured at fair value through other comprehensive income Total other equityinterest Total equity
		Legal reserve Special reserve Unappropriate d retained earnings Total retained earnings
	$ 9,800,000 2,243,635 2,963,022 31,234,687 3,228,945 37,426,654 109,064 1,203,593 1,312,657 50,782,946
	- - - - 2,063,955 2,063,955 - - - 2,063,955 - - - - (779) (779) (160,615) 195,108 34,493 33,714
	- - - - 2,063,176 2,063,176 (160,615) 195,108 34,493 2,097,669
	- - 228,131 - (228,131) - - - - - - - - - (2,156,000) (2,156,000) - - - (2,156,000) - - - (86,838) 86,838 - - - - - - 438 - - - - - - - 438
	9,800,000 2,244,073 3,191,153 31,147,849 2,994,828 37,333,830 (51,551) 1,398,701 1,347,150 50,725,053 - - - - 2,452,881 2,452,881 - - - 2,452,881 - - - - (17,820) (17,820) (411,089) 715,107 304,018 286,198
	- - - - 2,435,061 2,435,061 (411,089) 715,107 304,018 2,739,079
	- - 206,396 - (206,396) - - - - - - - - - (2,156,000) (2,156,000) - - - (2,156,000) - - - (324,202) 324,202 - - - - - - 579 - - - - - - - 579
	$ 9,800,000 2,244,652 3,397,549 30,823,647 3,391,695 37,612,891 (462,640) 2,113,808 1,651,168 51,308,711

See accompanying notes to consolidated financial statements.

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Expected credit gain for bad debt expense Net gain on financial assets or liabilities at fair value through profit or loss Interest expense Interest income Dividend income Share of profit of associates and joint ventures accounted for using equity method (Gain) loss on disposal of property, plant and equipment, net Gain on disposal of investment properties Impairment loss on non-financial assets Unrealized foreign current exchange (gain) loss Donation expense Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Decrease (increase) in notes receivable Decrease (increase) in accounts receivable Decrease (increase) in other receivable Decrease (increase) in inventories Decrease (increase) in prepayments Decrease (increase) in other current assets Total changes in operating assets Increase (decrease) in contract liabilities Increase (decrease) in notes payable Increase (decrease) in accounts payable Increase (decrease) in other payable Increase (decrease) in receipts in advance Increase (decrease) in other current liabilities Increase (decrease) in net defined benefit liability Increase (decrease) in deferred credits Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow (outflow) generated from operations Interest received Dividends received Interest paid Income taxes refund (paid) Net cash flows from (used in) operating activities	For the years ended December 31 2020 2019 $ 2,965,375 2,464,267 1,074,367 1,004,707 6,524 6,662 - (1,323) (5,065) (9,926) 4,561 5,216 (44,080) (86,167) (41,776) (41,806) (578,204) (727,540) (1,025) 33 (1,047,961) (15,405) - 12,891 (11,245) 22,775 10,075 19,532	For the years ended December 31 2020 2019 $ 2,965,375 2,464,267 1,074,367 1,004,707 6,524 6,662 - (1,323) (5,065) (9,926) 4,561 5,216 (44,080) (86,167) (41,776) (41,806) (578,204) (727,540) (1,025) 33 (1,047,961) (15,405) - 12,891 (11,245) 22,775 10,075 19,532
	2020 $ 2,965,375 1,074,367 6,524 - (5,065) 4,561 (44,080) (41,776) (578,204) (1,025) (1,047,961) - (11,245) 10,075
	(633,829)	189,649
	75,782 80,799 3,591 (377,280) (200,631) (5,472)	(5,515) 296,739 1,602 366,905 375,182 149
	(423,211)	1,035,062
	(18,436) (8,957) (156,269) (16,595) 292,522 6,522 (11,983) (390,367)	(60,751) 8,096 (146,012) (103,907) 8,964 (4,298) (11,159) (392,092)
	(303,563)	(701,159)
	(726,774)	333,903
	(1,360,603)	523,552
	1,604,772 45,422 234,284 (4,561) (555,851)	2,987,819 86,310 1,324,413 (5,216) (675,289)
	1,324,066	3,718,037

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (CONT’D)

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) investing activities: Acquisition of financial assets at fair value through other comprehensive income Proceeds from capital reduction of financial assets at fair value through other comprehensive income Acquisition of financial assets designated at fair value through profit or loss Proceeds from disposal of financial assets designated at fair value through profit or loss Acquisition of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease in other receivables Acquisition of intangible assets Acquisition of investment properties Proceeds from disposal of investment properties Decrease (increase) in other financial assets Decrease (increase) in other non-current assets Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase in short-term loans Decrease in short-term loans Increase (decrease) in guarantee deposits received Payment of lease liabilities Cash dividends paid Net cash flows from (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	For the years ended December 31 2020 2019 (150,000) - 98,000 2,927 (5,710,000) (1,826,799) 5,975,233 2,083,118 - (10,000) (943,905) (1,145,721) 1,039 224 20,718 129,375 (2,230) - (2,516,076) (1,065,863) 1,422,740 22,826 3,118,621 (586,643) 30,535 (7,770)	For the years ended December 31 2020 2019 (150,000) - 98,000 2,927 (5,710,000) (1,826,799) 5,975,233 2,083,118 - (10,000) (943,905) (1,145,721) 1,039 224 20,718 129,375 (2,230) - (2,516,076) (1,065,863) 1,422,740 22,826 3,118,621 (586,643) 30,535 (7,770)
	2020 (150,000) 98,000 (5,710,000) 5,975,233 - (943,905) 1,039 20,718 (2,230) (2,516,076) 1,422,740 3,118,621 30,535
	1,344,675	(2,404,326)
	24,000 (36,000) 67,542 (31,832) (2,156,000)	136,000 (136,000) (22,815) (30,689) (2,156,000)
	(2,132,290)	(2,209,504)
	5,948 542,399 2,519,628	(25,637) (921,430) 3,441,058
	$ 3,062,027	2,519,628

See accompanying notes to consolidated financial statements. 126

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

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

(1) Company history

TAIWAN FERTILIZER CO., LTD. (the “Company”). was incorporated in May 1946. The Company’s registered office address is located at 6F, No. 88, Nanjing E. Rd., Sec.2, Taipei, 10457, Taiwan. The Company and its subsidiaries (together referred to as the “Group”) is mainly engaged in manufactures and sells inorganic and organic fertilizers and other chemical products, constructs and leases real estate services. The Group’s shares were listed on the TSEC since March 24, 1998.

(2) Approval date and procedures of the consolidated financial statements:

The accompanying consolidated financial statements were authorized for issue by the Board of Directors on March 25, 2021.

(3) New standards, amendments and interpretations adopted:

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The Group has initially adopted the following new amendments, which do not have a significant impact on its consolidated financial statements, from January 1, 2020:

Amendments to IFRS 3 “Definition of a Business”
Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”
Amendments to IAS 1 and IAS 8 “Definition of Material”
Amendments to IFRS 16 “COVID-19-Related Rent Concessions”
(b) The impact of IFRS issued by the FSC but not yet effective

The Group assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2021, would not have a significant impact on its consolidated financial statements:

Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9”
Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform － ” Phase 2

(Continued)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following new and amended standards, which may be relevant to the Group, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Standards or Effective date per Interpretations Content of amendment IASB Amendments to IFRS 10 and The amendments address an acknowledged Effective date to be IAS 28 “Sale or Contribution of inconsistency between the requirements in determined by IASB Assets Between an Investor and IFRS 10 and those in IAS 28 (2011) in Its Associate or Joint Venture” dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.

The Group is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its consolidated financial position and consolidated financial performance. The results thereof will be disclosed when the Group completes its evaluation.

The Group does not expect the following other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its consolidated financial statements:

IFRS 17 “ Insurance Contracts” and amendments to IFRS 17 “ Insurance Contracts”
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”
“ － ”
● Amendments to IAS 16 Property, Plant and Equipment Proceeds before Intended Use
“ － ”
● Amendments to IAS 37 Onerous Contracts Cost of Fulfilling a Contract
Annual Improvements to IFRS Standards 2018-2020
Amendments to IFRS 3 “Reference to the Conceptual Framework”
Amendments to IAS 1 “Disclosure of Accounting Policies”
Amendments to IAS 8 “Definition of Accounting Estimates”

(Continued)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(4) Summary of significant accounting policies:

The significant accounting policies presented in the consolidated financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the consolidated financial statements.

(a) Statement of compliance

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

(b) Basis of preparation
(i) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the balance sheets：

1) Financial instruments at fair value through profit or loss are measured at fair value;
2) Financial assets at fair value through other comprehensive income are measured at fair value;
3) The defined benefit liabilities (assets) are measured at fair value of the plan assets less the present value of the defined benefit obligation, limited as explained in note 4(q).

(ii) Functional and presentation currency

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

(c) Basis of consolidation

(i) Principle of preparation of the consolidated financial statements

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

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

135

(Continued)

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Group prepares consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances. Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received will be recognized directly in equity, and the Group will attribute it to the owners of the parent.

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

(ii) List of subsidiaries included in the consolidated financial statements:

)
List of subsidiaries included in the consolidated financial statements:

Investor
Subsidiary
Nature of business

Shareholding ratio
December
31, 2020
December
31, 2019
Notes

The Company
Taifer Chemicals International
Inc.
International trade,
wholesale of fertilizer,
real estate rental or leasing
and gas station
100%
100%
-
The Company
TAIFER (CAYMAN)
INTERNATIONAL GROUP
CO., LTD.
Investment and holding
100%
100%
-
The Company
Taiwan Yes Deep Ocean Water
Co., Ltd.
Wholesale of drinks, food
and grocery
100%
100%
-
The Company
TAIFER (CAMBODIA) CO.,
LTD.
International trade and
wholesale of fertilizer
100%
100%
-
The Company
TAIFER INTERNATIONAL
(SAMOA) CO., LTD.
Investment and holding
-
%
-
% Note 1
The Company
PEIFENG Technology &
Fertilized Co., Ltd.
Manufacture and
wholesale
of fertilizer
100
100%
100%
-
Taiwan Yes Deep Ocean
Water Co., Ltd.
Hasbo Biotech Co., Ltd.
Wholesale of
Nonalcoholic
Beverages and Cosmetics
-
%
-
% Note 2
Taifer Chemicals International
Inc.
TAIFER INTERNATIONAL
(SAMOA) GROUP CO., LTD.
Investment and holding
100%
100%
-
TAIFER INTERNATIONAL
(SAMOA) GROUP CO., LTD
TAIFER CHEMICAL
INTERNATIONAL CO., LTD.
Real estate rental and
leasing
100%
100%
-

Note 1: TAIFER INTERNATIONAL (SAMOA) CO., LTD. was in liquidation process in March 2019. The process has been finished.

136

(Continued)

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

  - Note 2: Hasbo biotech was in liquidation process in October 2017. The process has been finished in April 2020.

(iii) Subsidiaries excluded from the consolidated financial statements: None.
(d) Foreign currency
(i) Foreign currency transaction

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

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

1) an investment in equity securities designated as at fair value through other comprehensive income;
2) a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or
3) qualifying cash flow hedges to the extent that the hedges are effective.
(ii) Foreign operations

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

When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to noncontrolling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

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

(Continued)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

An asset is classified as current when:

(i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is expected to be realized within twelve months after the reporting period; or
(iv) The asset is cash and cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:

(i) It is expected to be settled in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) If is due to be settled within twelve months after the reporting period; or
(iv) The Group does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

All other liabilities are classified as non-current.

(f) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting shortterm cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

(g) Financial instruments

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

(i) Financial assets

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

(Continued)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

‧it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
‧its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

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

2) Fair value through other comprehensive income (FVOCI )

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

‧it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
‧its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

(Continued)

139

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets and accounts receivable (except for those presented as accounts receivable but measured at FVTPL). On initial recognition, the Group may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

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

4) Impairment of financial assets

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

The Group measures loss allowances at an amount equal to lifetime ECL, except for the following which are measured as 12-month ECL:

‧ debt securities that are determined to have low credit risk at the reporting date; and
‧other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

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

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Group’s historical experience and informed credit assessment as well as forward-looking information.

The Group considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings’.

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

(Continued)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data:

‧significant financial difficulty of the borrower or issuer;
‧a breach of contract such as a default or being more than 180 days past due;
‧the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;
‧it is probable that the borrower will enter bankruptcy or other financial reorganization; or
‧the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charge to profit or loss and is recognized in other comprehensive income instead of reducing the carrying amount of the asset.

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

5) Derecognition of financial assets

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

(Continued)

141

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

(ii) Financial liabilities and equity instruments
1) Classification of debt or equity

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

2) Equity instrument

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

3) Treasury shares

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

4) Financial liabilities

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

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

5) Derecognition of financial liabilities

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

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

(Continued)

142

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

6) Offsetting of financial assets and liabilities

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

7) Financial guarantee contract

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Financial guarantee contract liabilities are measured initially at their fair values and, if not designated as at FVTPL and do not arise from a transfer of an asset, are measured subsequently at the higher of: (a) the amount of the loss allowance determined in accordance with IFRS 9; and (b) the amount recognized initially less, where appropriate, cumulative amortization recognized in accordance with the revenue recognition policies set out below.

(h) Inventories

－ Inventories included Raw materials, finished goods, merchandise, and construction-in-progress land and projects. Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted average method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost, of completion and selling expenses.

(i) Investment in associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition, less any accumulated impairment losses.

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

When changes in an associate’s equity are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the associate, the Group recognizes the Group’s share of change in equity of the associate in capital reserves in proportion to its ownership.

(Continued)

143

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

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

(j) Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business or for administrative purposes. Investment property is measured at cost on initial recognition. Subsequent to initial recognition, investment property is measured at initial acquisition cost less accumulated depreciation and accumulated impairment losses. The methods for depreciating and determining the useful life and residual value of investment property are the same as those adopted for property, plant and equipment.

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount) is recognized in profit or loss.

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

(k) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of certain items of property, plant and equipment on January 1, 2012, the Group’s date of transition to the Standards, was determined with reference to its fair value at that date.

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

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

(ii) Subsequent expenditure

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

(iii) Depreciation

Depreciation is calculated on the depreciable amount of an asset using the straight-line basis over its useful life. The depreciable amount of an asset is determined based on the cost less its residual value.

Land has an unlimited useful life and therefore is not depreciated.

(Continued)

144

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

(1)Buildings (2)Machine (3)Instrument equipment (4)Miscellaneous equipment Item Buildings: Leasehold improvements and others Buildings, warehouses, storage sheds	3～60 years 3～40 years 3～15 years 3～15 years Useful lives Item Machine: 3～15 years Production equipment 16～60 years Storage tanks, power transmission systems, etc.	Useful lives
		3～15 years 16～40 years

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

(iv) Reclassification as investment property

A property is reclassified to investment property at its carrying amount when the use of the property changes from owner-occupied to investment property.

(l) Leases
(i) Identifying a lease

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

1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and
2) the customer has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
3) the customer has the right to direct the use of the asset throughout the period of use only if either:
the customer has the right to direct how and for what purpose the asset is used throughout the period of use; or

145

(Continued)

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

the relevant decisions about how and for what purpose the asset is used are predetermined and:
－ the customer has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or
－ the customer designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

On the day after the lease is completed or when the contract is re-evaluated to include a lease, the Group allocates the consideration in the contract to individual lease components on the basis of a relatively separate price. However, when leasing land and buildings, the Group chooses not to distinguish between non-lease components but treat lease components and non-lease components as a single lease component.

(ii) As a lessee

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

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

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

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

－ fixed payments including in-substance fixed payments;
－ variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
－
amounts expected to be payable under a residual value guarantee; and
－ payments for purchase or termination options that are reasonably certain to be exercised.

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

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

146

(Continued)

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

－ ’ there is a change in the Group s estimate of the amount expected to be payable under a residual value guarantee; or
－ there is a change of the valuation of the underlying asset purchase option; or
－ there is a change of its assessment on whether it will exercise a purchase, extension or termination option; or
－ there is any lease modifications

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

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

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

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

(iii) As a lessor

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

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

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

For operating leases, the Group recognizes the lease payments received as lease revenue during the lease period on a straight-line basis.

(Continued)

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Notes to Consolidated Financial Statements

(m) Intangible assets
(i) Recognition and measurement

Goodwill arising on the acquisition of subsidiaries is measured at cost, less accumulated impairment losses.

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

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

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

(ii) Subsequent Expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(iii) Amortization

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

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

Computer software cost 5 years Patent 7~8 years

The residual value, the amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least annually at each financial year-end. Any change thereof is accounted for as a change in accounting estimate.

(n) Impairment of non financial assets

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

(Continued)

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Notes to Consolidated Financial Statements

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

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

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

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

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

(o) Provisions

A provision is recognized if, as a result of a past event, the Group has a present obligation that can be estimated reliably, and an outflow of economic benefits is possibly required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

(p) Revenue Recognition

(i) Derivative financial instruments and hedge accounting

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

1) Sale of goods

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

(Continued)

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Notes to Consolidated Financial Statements

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

2) Land development and sale of real estate

The Group develops and sells residential properties and usually sales properties in advance during construction or before construction begins. Revenue is recognized when control over the properties has been transferred to the customer. The properties have generally no alternative use for the Group due to contractual restrictions. However, an enforceable right to payment does not arise until legal title of a property has passed to the customer. Therefore, revenue is recognized at a point in time when the legal title has passed to the customer.

The revenue is measured at the transaction price agreed under the contract. For sale of readily available house, in most cases, the consideration is due when legal title of a property has been transferred. While deferred payment terms may be agreed in rare circumstances, the deferral never exceeds twelve months. The transaction price is therefore not adjusted for the effects of a significant financing component. For pre-selling properties, the consideration is usually received by installment during the period from contract inception until the transfer of properties to the customer. If the contract includes a significant financing component, the transaction price will be adjusted for the effects of the time value of money during the period, using the specific borrowing rate of the construction project. Receipt of a prepayment from a customer is recognized as contract liability. Interest expense and contract liability are recognized when adjusting the effects of the time value of money. Accumulated amount of contract liability is recognized as revenue when control over the property has been transferred to the customer.

3) The Group’s operating leasing business is classified into operating leases based on lease conditions and the possibility of cash receivables, and recognizes relevant operating lease income.
4) Financing components

The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.

(q) Employee benefits
(i) Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

(ii) Defined benefit plans

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

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

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

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

(iii) Other long-term employee benefits

The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.

(iv) Termination benefits

Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognizes costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting date, then they are discounted.

(v) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(r) Income Taxes

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

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:

(i) temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;
(ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
(iii) taxable temporary differences arising on the initial recognition of goodwill.

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

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

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

(i) the Group has a legally enforceable right to set off currenttax assets against current tax liabilities; and
(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:
1) the same taxable entity; or
2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

152

(Continued)

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(s) Earnings per share

Disclosures are made of basic and diluted earnings per share attributable to ordinary equity holders of the Group. The basic earnings per share is calculated based on the profit attributable to the ordinary shareholders of the Group divided by weighted average number of ordinary shares outstanding. The diluted earnings per share is calculated based on the profit attributable to ordinary shareholders of the Group, divided by weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as remuneration of employees and employee stock options.

(t) Operating segments

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

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the consolidated financial statements in conformity with the IFRSs endorsed by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the next period.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is as follows. Those assumptions and estimation have been updated to reflect the impact of COVID-19 pandemic:

Impairment of goodwill

The assessment of impairment of goodwill is based on the valuation method, material assumptions, share value, etc. The assumptions of forecast annual revenue growth rate, forecast margin, revenue on cash basis, etc. require the subjective judgments of the management, which contains estimation of uncertainty. Please refer to 6(l) for further description of the impairment of goodwill.

The process of measurement

The Group’s accounting policies include measuring financial and non-financial assets and liabilities at fair value through profit or loss. The Group’s financial instrument valuation group conducts independent verification on fair value by using data sources that are independent, reliable, and representative of exercise prices. This financial instrument valuation group also periodically adjusts valuation models, conducts back testing, renews input data for valuation models, and makes all other necessary fair value adjustments to assure the rationality of fair value.

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Group strives to use the market observable inputs when measuring its assets and liabilities.

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

(a) Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.
(b) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
(c) Level 3: inputs for the assets or liability that are not based on observable market data.

Please refer to notes listed below for assumptions used in measuring fair value.

For any transfer within the fair value hierarchy, the impact of the transfer is recognized on the reporting date. Please refer to Note 6(u), Financial instruments for assumptions used in measuring fair value.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Cash on hand Demand deposits and checking accounts Time deposits with original maturities less than 3 months Cash and cash equivalents	December 31, 2020 $ 4,352 922,519 2,135,156	December 31, 2019 4,156 853,892 1,661,580
	$ 3,062,027	2,519,628

(i) Time deposits with original maturity of more than 3 months are recorded as other financial assets, and are classified as non-current if their maturities exceed one year, and as follow.

Other current financial assets Other non-current financial assets	December 31, 2020 $ 1,066,109 193,730	December 31, 2019 4,210,241 168,219 4,378,460
	$ 1,259,839

(ii) Refer to Note 6(u) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Group.

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

Financial assets and liabilities at fair value through profit or loss. Non-derivative financial assets Beneficiary Certificate	December 31, 2020 $ 1,300,013	December 31, 2019 1,560,181

Please refer to note 6(t) for the amount of remeasurement fair value through profit or loss.

Equity investments at fair value through other comprehensive income Stock listed on domestic markets Stock unlisted on domestic markets Total	December 31, 2020 $ 112,566 2,712,178	December 31, 2019 94,691 1,962,947
	$ 2,824,744	2,057,638

(i) Equity investments at fair value through other comprehensive income.

The Group designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investments that the Group intends to hold for long-term for strategic purposes.

As a result of the investment at fair value through other comprehensive income, the amounts of the dividend revenues recognized for the years ended December 31, 2020 and 2019 were $$41,776 thousand and $$41,638 thousand, respectively.

A resolution was approved during the general shareholders’ meeting of Top Taiwan V Venture Capital Co., Ltd., one of the financial assets measured at fair value through other comprehensive income by the Group, held on May 10, 2019, for capital reduction, wherein the Group will receive the refund of $2,927 thousand.

A resolution was approved during the provisional meeting of the shareholders of Eminent Venture Capital Corporation, one of the financial assets measured at fair value through other comprehensive income by the Group, held on December 31, 2019, for capital reduction, wherein the Group will receive the refund of $18,000 thousand.

The Group invested in domestic non listed (OTC) company stocks of Eminent III Venture Capital Corporation (Eminent III) through a joint venture agreement in November 2017. Thereafter, a second cash capital increase was approved during the board of directors by Eminent III in December 2019, resulting in the Group to remit the shares amounting to $150,000 thousand in January 2020.

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

A resolution was approved during the provisional meeting of the shareholders of Eminent II Venture Capital Corp. (Eminent II), a domestic non-listed (OTC) company and one of the financial assets measured at fair value through other comprehensive income by the Group, held on June 18, 2020, for capital reduction, wherein the Group will receive the refund of $80,000 thousand.

There were no disposals of strategic investments and transfers of any cumulative gain or loss within equity relating to these investments as of December 31, 2020 and 2019.

(ii) For credit risk, please refer to note 6(u).
(iii) Financial assets at fair value through other comprehensive income of the Company had not been pledged as collateral for long-term borrowings.
(d) Financial assets measured at amortized cost

Foreign government bonds Less : Loss allowance Total	December 31, 2020 $ 28,507 -	December 31, 2019 30,104 - 30,104
	$ 28,507

The Group has assessed that these financial assets are held to maturity to collect contractual cash flows, which consist solely of payments of principal and interest on principal amount outstanding. Therefore, these investments were classified as financial assets measured at amortized cost.

(i) For credit risk, please refer to note 6(u).
(ii) Financial assets measured at amortized costs of the Group had not been pledged as collateral for long-term borrowings.
(e) Notes receivable, accounts receivable, long-term notes and accounts receivable

Notes receivables – Merchandise Account receivables– Merchandise Less : Loss allowance	December 31, 2020 $ 118,885 660,018 (906) $ 777,997	December 31, 2019 194,667 740,817 (906)
		934,578

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Group applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivable. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provision in Taiwan was determined as follows:

December 31, 2020	December 31, 2020	Loss allowance provision - - - 906
Gross carrying amount $ 714,368 9,253 18,129 37,153	Expected loss rate
$ 778,903		906
		Loss allowance provision - - - 906
Gross carrying amount $ 915,226 8,262 8,665 3,331	Expected loss rate
	0%~0.01% 0%~0.53% 0%~0.86% 0%~100%
$ 935,484		906

The movement in the allowance for account receivables was as follows:

Balance on January 1 Impairment losses reversed Balance on December 31	For the years ended December 31 2020 2019 $ 906 2,229 - (1,323)
	$ 906 906

(f) Other receivables (including the long-term receivables)

Other receivables Building and Land receivables Unrealized interest income Less : Loss allowance	December 31, 2020 $ 319,294 140,511 (14,335) (317,277)	December 31, 2019 329,265 162,239 (20,383) (317,277)
	$ 128,193	153,844

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Other receivables Long-term receivable	December 31, 2020 $ 12,797 115,396	December 31, 2019 23,588 130,256
	$ 128,193	153,844

As of December 31, 2020, the total amount of receivables due to the sale of premises of the Group was $126,176 thousand. After the year 2021 and the year 2022, $10,780 and $115,396 thousand will be recovered respectively.

The above receivables of $126,176 thousand are all secured by the premises and promissory notes sold, and a mortgage is established to the Group.

The movement in the allowance for other receivables was as follows.

Balance on December 31 (Same as Balance on January 1)	For the years ended December 31 2020 2019 $ 317,277 317,277

Note: Ending balances in 2020 and 2019 were the same as the beginning balances in 2020 and 2019.

For the explanation of individually assessed impairment, please refers to note 7; for other credit risk information, please refers to note 6(u).

(g) Inventories, construction in progress, land held for sale and receipts in advance

Inventories Raw materials Finished goods Merchandise Construction in progress Hsinchu land development project	December 31, 2020 $ 1,744,775 427,898 4,898 $ 2,177,571 $ 644,783	December 31, 2019 1,335,476 458,018 6,797
		1,800,291
		644,783

The cost of inventories recognized as cost of goods sold and expense for the years ended December 31, 2020 and 2019, amounted to $6,753,471 and $9,068,079 thousand, respectively.

As of December 31, 2020 and 2019, the aforesaid inventories were not pledged as collateral.

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(h) Investments accounted for using equity method

The Group’s financial information for equity accounted investees at the reporting date was as follows:

Material associates Al-Jubail Fertilizer Company (“Al-Jubail”) Associates that are not individually material MITAGRI Co., Ltd. Taiwan Agricultural Investment and Development Co., Ltd. Joint ventures that are not individually material TR Electronic Chemical Co., Ltd.	December 31, 2020 $ 9,202,183 32,881 47,028	December 31, 2019 9,304,896 40,211 55,190 9,400,297 December 31, 2019 -
	$ 9,282,092
	December 31, 2020 $ -

(i) Associates that had materiality were as follows:

Associate	Nature of relationship	Country of registration	Equity ownership	Equity ownership
			December 31, 2020	December 31, 2019
AI-Jabail Fertilizer Company	Equity-method investee	Kingdom of Saudi Arabia	50.00%	50.00%

The following is a summary of financial information on the Group’s significant associates. In order to reflect the adjustments for fair value in acquisition of shares and differences in accounting policies, adjustment for the amounts presented on the financial statements of associates in accordance with IFRSs has been made to such financial information.

Summary financial information on AI-Jabail Fertilizer Company

Current assets Noncurrent assets Current liabilities Noncurrent liabilities Net assets Net assets attributable to non controlling interests Net assets attributable to investee owners	December 31, 2020 $ 6,628,334 15,110,337 (1,739,092) (840,436) $ 19,159,143 $ 9,405,861 9,753,282 $ 19,159,143	December 31, 2019 5,317,917 17,012,975 (2,313,795) (974,846)
		19,042,251
		9,250,058 9,792,193
		19,042,251

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Revenue Profit for the year Other comprehensive income Comprehensive income Comprehensive income attributable to non controlling interests Comprehensive income attributable to investee owners Dividends declared by Associates	For the years ended December 31 2020 2019 $ 8,857,397 9,455,505	For the years ended December 31 2020 2019 $ 8,857,397 9,455,505
	2020 $ 8,857,397
	$ 1,565,731 21,666	1,641,322 5,479
	$ 1,587,397	1,646,801
	$ 879,745	754,168
	$ 707,652	892,633
	$ 211,435	1,415,010

(ii) Joint ventures

On March 31, 2011, under the authorization of the Investment Commission of the Ministry of Economic Affairs of the Republic of China, the Group established TR Electronic Chemical Co., Ltd. (“TREC”) in the Cayman Islands through its subsidiary, Taifer (Cayman) International Group Co., Ltd. TREC then invested in TR Electronic Chemical (Kunshan) Co., Ltd. (“TREC-K”), which enabled the Group to have a 100% indirect interest in TREC-K. TREC-K manufactures and sells electronic chemicals. Later, under a joint venture agreement between the Group and Shiung-Shing Chemical International Trade Group. (“Shiung-Shing”), another TREC shareholder, Shiung- Shing assigned a manager to handle TREC’s daily business and management. Thus, the Group had no control over TREC and TREC-K. In June 2015, the carrying amount of the Group’s investment in TREC was zero. TREC-K declared bankruptcy, for the relevant explanation of bankruptcy and litigation, please refer to note 7.

(iii) Pledged

As of December 31, 2020 and 2019, the investments in the aforesaid equity-accounted investees were not pledged as collateral.

(i) Property, plant and equipment

The movements in the cost, depreciation, and impairment of the property, plant and equipment of the Group for the years ended December 31, 2020 and 2019 were as follows:

Cost or deemed cost: Balance on January 1, 2020 Additions Disposals Effect of foreign currency exchanges difference Transfer from completion Balance on December 31, 2020	Land $ 3,638,943 - - - -	Building and constructio n 3,781,499 14,695 - - 1,101,967	Machinery and equipment 10,115,796 80,813 (5,795) - 1,364,209	Transportation Equipment 86,727 1,626 (9,610) (5) 4,545	Other Equipment 431,561 7,191 (172) (3) 4,765	Construction inprogress 1,464,663 999,366 - - (2,244,014)	Total 19,519,189 1,103,691 (15,577) (8) 231,472 20,838,767
	$ 3,638,943	4,898,161	11,555,023	83,283	443,342	220,015

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Balance on January 1, 2019 Additions Disposals Transfer to investment properties Effect of foreign currency exchanges difference Transfer from completion Balance on December 31, 2019 Depreciation and impairment loss Balance on January 1, 2020 Depreciation for the year Disposals Effect of foreign currency exchanges difference Balance on December 31, 2020 Balance on January 1, 2019 Depreciation for the year Disposals Effect of foreign currency exchanges difference Transfer from completion Balance on December 31, 2019 Carrying amounts: Balance on December 31, 2020 Balance on January 1, 2019 Balance on December 31, 2019	Land Building and construction Machinery and equipment Transportation Equipment Other Equipment Construction in progress Total
	$ 3,638,943 3,635,995 9,645,374 85,693 421,734 907,925 18,335,664 - 19,401 148,044 484 8,129 1,074,735 1,250,793 - (1,891) (45,620) (2,240) (7,882) - (57,633) - - - - - (2,305) (2,305) - - - (2) - - (2) - 127,994 367,998 2,792 9,580 (515,692) (7,328)
	$ 3,638,943 3,781,499 10,115,796 86,727 431,561 1,464,663 19,519,189
	: $ - 794,401 4,129,605 61,333 170,229 82,820 5,238,388 - 128,917 684,337 7,882 35,823 - 856,959 - - (5,781) (9,610) (172) - (15,563) - - - (4) (2) - (6)
	$ - 923,318 4,808,161 59,601 205,878 82,820 6,079,778
	$ - 681,571 3,542,353 55,687 143,872 88,805 4,512,288 - 115,364 630,759 7,879 34,161 - 788,163 - (1,891) (45,545) (2,232) (7,708) - (57,376) - - - (1) (1) - (2) - (643) 2,038 - (95) (5,985) (4,685)
	$ - 794,401 4,129,605 61,333 170,229 82,820 5,238,388
	$ 3,638,943 3,974,843 6,746,862 23,682 237,464 137,195 14,758,989
	$ 3,638,943 2,954,424 6,103,021 30,006 277,862 819,120 13,823,376
	$ 3,638,943 2,987,098 5,986,191 25,394 261,332 1,381,843 14,280,801

As of December 31, 2020 and 2019, the property, plant and equipment were not pledged as collateral.

(j) Right-of-use assets

The Group leases land. Information about leases for which the Group as a lessee is presented below:

Cost: Balance on December 31, 2020 (Same as Balance on December 31, 2020) Balance on December 31, 2019 (Same as Balance on December 31, 2019) Accumulated depreciation and impairment losses: Balance on January 1, 2020 Depreciation for the year Balance on December 31, 2020 Balance on January 1, 2019 Depreciation for the year Balance on December 31, 2019	Land $ 1,359,667
	$ 1,359,667
	$ 104,772 104,714
	$ 209,486
	$ - 104,772
	$ 104,772

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Notes to Consolidated Financial Statements

Carrying amount: Balance on December 31, 2020 Balance on January 1, 2019 Balance on December 31, 2019	Land $ 1,150,181
	$ 1,359,667
	$ 1,254,895

On October 31, 2006, the Company leased from the Taichung Harbor Bureau, Ministry of Transportation and Communications (“THB”) a 247.298 square meter lot in a special petrochemical industry zone in Taichung to develop wharf areas called wests 8 and 9, and construct warehouse facilities and public roads. The main provisions of the lease agreement were as follows:

(i) The lease term for the land in a special industrial zone is 20 years, and the agreement is renewable until the total lease reaches 50 years.
(ii) The Group can sublease the land, and it can also develop wests 8 and 9 of the wharf area, as well as construct warehouse facilities and public roads on behalf of THB. The Group can use its capital expenses for the construction as rentals in advance. However, once the lease term ends or the agreement is early terminated, all the titles to the facilities and improvements on the leased land should be transferred to THB.

The Group used its expenditures of $1,500,481 thousand for the construction of wests 8 and 9 of Taichung Harbor as rentals until March 20, 2034. The long-term prepayments for lease should be amortized over its rent free periods.

(k) Investment property

The Group for the movement in Investment property were as follows:

	Own asset	Undeveloped Investment Property 17,339,970 - (374,779) - (43)	Right-of-use assets Other 3,778 - - - -	Total 37,056,759 2,516,076 (374,792) (1,571) (43)
Completed Investment Property $ 10,989,238 13,759 (13) (1,571) -	Investment Property under Construction 8,723,773 2,502,317 - - -
$ 11,001,413	11,226,090	16,965,148	3,778	39,196,429
$ 11,016,483 379 2,305 (49) (951) (28,929)	7,662,067 1,061,706 - - - -	17,347,837 - - (7,421) - (446)	- 3,778 - - - -	36,026,387 1,065,863 2,305 (7,470) (951) (29,375)
$ 10,989,238	8,723,773	17,339,970	3,778	37,056,759

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

	Own asset	Undeveloped Investment Property 607,646 - - - -	Right-of-use assets Other - 1,259 - - 839	Right-of-use assets Other - 1,259 - - 839	Total 982,285 112,694 (13) (750) -
Completed Investment Property $ 296,648 93,082 (13) (750) (839)	Investment Property under Construction 77,991 18,353 - - -
$ 388,128	96,344	607,646	2,098		1,094,216
$ 203,836 93,303 (49) (442)	59,522 18,469 - -	607,646 - - -	- - - -		871,004 111,772 (49) (442)
$ 296,648	77,991	607,646	-		982,285
$ 10,613,285	11,129,746	16,357,502	1,680		38,102,213
$ 10,812,647	7,602,545	16,740,191	-		35,155,383
$ 10,692,590	8,645,782	16,732,324	3,778		36,074,474
				$ 104,432,231
				$ 96,182,489

Completed investment property are located in C3/C6/C7/C8/C9 in the Nangang Economic and Trade Park, and the Corporation leased land use right to others.

(i) The main provisions of the C6/C7/C8/C9 contract on the pledging of land use rights were as follows:
1) Land use rights are for 50 years from the date of registration of these rights.
2) The land use rights (accounted for as deferred income-current and noncurrent) amounted to $3,200,889 thousand, which has been treated as royalty revenue (accounted for as operating revenue) amortizable over 50 years from June 13, 2006. As of December 31, 2020 and 2019, the unamortized balances of the land used rights under above mentioned contract were $2,269,964 and $2,333,981 thousand, respectively.
3) In addition to the land use right, the annual rental payable by the lessee is 8% of the reference land price announced by the local government, with the calculation starting from the contract date. When the reference land price is adjusted, the annual rental will be revised at the percentage the same as that set on the date of the reference price adjustment. The annual rentals in 2020 and 2019 were $339,220 and $328,151 thousand , respectively.
(ii) On September 15, 2015, the Corporation signed with CTBC Life Insurance Co., Ltd. and Taiwan Life Insurance Co., Ltd. (together, the “lessees”) separate contracts for these two insurance companies to have the rights to use land located in C3 in the Nangang Economic and Trade Park. The main provisions of these contracts are as follows:

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Notes to Consolidated Financial Statements

1) Land use rights (LURs) are valid for 45 years from the date of the registration of these rights.
2) The LURs (accounted for as deferred income -current and noncurrent) amounted to $14,288,705 thousand, which has been treated as royalty revenue (under operating revenue) amortizable over 45 years from December 10, 2015. As of December 31, 2020 and 2019, the unamortized balance of the LURs were $12,683,431 and $13,000,957 thousand, respectively.
3) In addition to the LURs, the rental payable by the lessees is 0.8% of the reference land price announced by the local government, with the calculation starting from the registration date. When the reference land price is adjusted, the annual rental will be revised at the same percentage as the rate of the reference price adjustment. The lessees’ annual rental in 2020 and 2019 were $46,754 and $45,009 thousand, respectively.
4) After nine years and six months from the registration date, the lessees have within six months to extend the validity period for the land use rights to another 40 years by giving a written notice to the Corporation. With this extension, the entire validity period of the LURs will be 85 years, and the lessees should pay an additional one-time royalty of $15,000,000 thousand.
5) Under the contract, the lessees provided the Taiwan Government Bond A02105 and A03114 as collaterals; the fair values of these bonds were as follow:

Balance on December 31, 2020 Balance on December 31, 2019 Balance on January 1, 2019	The Taiwan Government Bond A02105 $ 1,211,269	The Taiwan Government Bond A03114 1,760,699
	$ 1,173,011	1,691,012
	$ 1,086,786	1,596,767

(iii) Investment properties under construction are located in Hsinchu City and Hualien City and included land for the “C2 Tourist Hotel Project” and “Commercial Building Project” in the Nangang Economic and Trade Park. The C2 Tourist Hotel Project was won by the Grand Hi Lai Hotel Co., Ltd. and the Caesar Park Hotel Co., Ltd., who both signed a front-end agreement (FEA) on December 31, 2013, with the contract for C2 Tourist Hotel Project signed under lease agreement with the Grand Hi Lai Hotel Co., Ltd. for the development of the C2 Tourist Hotel, and the termination agreement signed with Caesar Park Hotel Co., Ltd. based on the resolution approved during the board meeting of the Company held on March 28, 2019. The related termination procedures were still in progress.

In addition, the bid for the C2 Commercial Building Project was won by Dung Jeng Investment Co., Ltd. (“Dung Jeng”), in which the Group will construct a building and parking space for Dung Jeng. The lease contract was signed on January 30, 2015, with a lease period of 20 years from the completion of the building and parking space. The termination agreement with the Dung Jeng Investment Co., Ltd. had been approved during the board meeting of the Company held on March 28, 2019. The related termination procedures were still in progress.

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Notes to Consolidated Financial Statements

The construction licenses for C2 Hotel and Commercial Building Projects have been obtained, wherein they are allowed to engage in engineering works such as steel structure and curtain wall, at a total investment amount of $5,130,021 thousand, of which, the amount of $2,497,316 thousand had been currently invested.

The fair value of investment properties (as measured or disclosed in the consolidated financial statements) was based on a valuation by a qualified independent appraiser who has recent valuation experience in the location and category of the investment property being valued. The inputs of levels of fair value hierarchy in determining the fair value was classified to Level 3.

The fair values of investment properties were assessed as follows:

C6／C7／C8／C9 C2 C3 Hsinchu Kaohsiung	December 31, 2020 $ 24,232,441	December 31, 2019 22,746,927 18,544,519 32,165,990 5,434,878 17,290,175
	$ 20,377,824
	$ 35,935,442
	$ 5,512,070
	$ 18,374,454

The fair value were based on the valuation carried out at April 20, 2020 and April 10, 2019 by independent qualified professional valuer.

The fair value is measured at market value, mainly use the comparison approach and land development analysis approach to determine the value of the investment property. The weight is 50/50. The significant key assumption of the development profit margin intervals was as follows:

Area C6/C7/C8/C9 C2 C3 HsinChu KaoHsiung	For the years ended December 31	For the years ended December 31
	2020 18% 18% 18% 16% 17%	2019
		18% 16% 18% 16% 16%

The other investment properties held by the Corporation are mainly located in different industrial zones. They have no quoted prices in an active market and there was no alternative basis for estimating their fair values. Thus, the fair values of the investment properties were not reliably determinable.

As of December 31, 2020 and 2019, investment properties were not pledged as collateral.

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Notes to Consolidated Financial Statements

(l) Intangible Assets

The components of the costs of intangible assets, amortization, and impairment loss thereon for the years ended December 31, 2020 and 2019, were as follows:

Patents $ 29,910 -	Computer Software 145,729 2,230	Trademark 84,900 -	Goodwill 358,487 -	Total 619,026 2,230
$ 29,910	147,959	84,900	358,487	621,256
$ 29,910	145,729	84,900	358,487	619,026
$ 29,910	145,729	84,900	358,487	619,026
$ 29,187 113	130,434 6,411	49,000 -	283,472 -	492,093 6,524
$ 29,300	136,845	49,000	283,472	498,617
$ 29,010 177 -	123,949 6,485 -	49,000 - -	270,581 - 12,891	472,540 6,662 12,891
$ 29,187	130,434	49,000	283,472	492,093
$ 610	11,114	35,900	75,015	122,639
$ 900	21,780	35,900	87,906	146,486
$ 723	15,295	35,900	75,015	126,933

The Group acquired trademark and goodwill through the acquisition of an additional 50% equity in Taiwan Yes Deep Ocean Water Co., Ltd. (“Taiwan Yes”) on January 7, 2013. For the years ended December 31, 2020 and 2019, the Group evaluated the recoverable amount of trademark and goodwill and recognized an impairment loss of zero and $12,891 thousand, respectively. The recoverable amount of Taiwan Yes were determined based on the value in use calculation with a discount rate of 12.19% and 14.21%, respectively. This impairment was mainly due to the fact that the future operating performance of Taiwan Yes was not as expected.

(m) Operating leases

The Group leases out its investment property and some machinery. The Group has classified these leases as operating leases, because it does not transfer substantially all of the risks and rewards incidental to the ownership of the assets. Please refer to note 6(k) sets out information about the operating leases of investment property.

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

A maturity analysis of lease payments, showing the undiscounted lease payments to be received after the reporting date are as follows:

Less than one year One to two years Two to three years Three to four years Four to five years More than five years Total undiscounted lease payments	December 31, 2020 $ 752,876 723,617 655,718 604,509 595,069 12,736,560 $ 16,068,349	December 31, 2019 730,357 714,799 671,851 620,287 593,892 12,874,908
		16,206,094

For the years ended December 31, 2020 and 2019, the property rental income was $746,508 and $698,588 thousand, respectively. There were no significant property equipment and maintenance expenses.

(n) Employee benefits

(i) Defined benefit plans

Reconciliation of defined benefit obligation at present value and plan asset at and fair value are as follows:

Present value of defined benefit obligation Fair value of plan assets The effect of asset ceiling Net defined benefit liabilities	December 31, 2020 $ 507,524 (376,205)	December 31, 2019 521,197 (413,711) 107,486 - 107,486
	131,319 -
	$ 131,319

The Group makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pension benefits for employees upon retirement. Plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average monthly salary for the one months prior to retirement.

1) Composition of plan assets

The Group set aside pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. Under these regulations, the minimum earnings from these pension funds shall not be less than the earnings from two-year time deposits with the interest rates offered by local banks.

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Group’s Bank of Taiwan labor pension reserve account balance amounted to $376,205 thousand as of December 31, 2020. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in present value of the defined benefit obligations

The movements in the present value of the defined benefit obligations for the years ended December 31, 2020 and 2019 were as follows:

Defined benefit obligation, January 1 Current service costs and interest Re-measurement of the net defined benefit liability －Actuarial (losses) gains arose from changes in demographic assumptions －Actuarial gains arose from changes in financial assumption －Experience adjustment Benefits paid Defined benefit obligation, December 31	For the years ended December 31 2020 2019 $ 521,197 520,510 18,210 19,289 - 1 12,665 3,204 37,470 17,657 (82,018) (39,464) $ 507,524 521,197
	2020 $ 521,197 18,210 - 12,665 37,470 (82,018)
	$ 507,524

3) Movements in the fair value of plan assets

The movements in the fair value of the defined benefit plan assets for the years ended December 31, 2020 and 2019 were as follows:

December 31, 2020 and 2019 were as follows:
	For	the years ended	December 31
		2020	2019
Fair value of plan assets, January 1	$	413,711	406,263
Interests revenue		2,452	2,883
Re-measurement of the net defined benefit liability
－Experience adjustment		14,319	16,464
Contributions made		13,975	27,565
Benefits paid		(68,252)	(39,464)
Fair value of plan assets, December 31	$	376,205	413,711

4) Movements in the fair value of plan assets : None

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

5) Expenses recognized in profit or loss

The Group’s pension expenses recognized in profit or loss for the years ended December 31, 2020 and 2019 were as follows:

Current service cost Net interest of net liabilities for defined benefit obligations Operating costs Operating expenses	For the years ended December 31 2020 2019 $ 15,115 15,616 643 790	For the years ended December 31 2020 2019 $ 15,115 15,616 643 790
	2020 $ 15,115 643
	$ 15,758	16,406
	$ 10,196 5,562	10,458 5,948
	$ 15,758	16,406

6) Re-measurement of net defined benefit liability recognized in other comprehensive income

The Group’s net defined benefit liability recognized in other comprehensive income for the years ended December 31, 2020 and 2019 were as follows:

Cumulative amount, January 1 Recognized during the year Cumulative amount, December 31	For the years ended December 31 2020 2019 $ 100,436 96,918 28,653 3,518	For the years ended December 31 2020 2019 $ 100,436 96,918 28,653 3,518
	2020 $ 100,436 28,653
	$ 129,089	100,436

7) Actuarial assumptions

The following were the key actuarial assumptions at the reporting date:

The principal actuarial assumptions at the reporting date were as follows:

Discount rate Future salary increases	2020.12.31 0.25% 1.50%	2019.12.31 0.65% 1.50%

The expected allocation payment to be made by the Group to the defined benefit plans for the one-year period after the reporting date is $16,256 thousand.

The weighted-average duration of the defined benefit plan is 6 year.

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

8) Sensitivity Analysis

As of December 31, 2020 and 2019, the changes in the principal actuarial assumptions will impact on the present value of defined benefit obligation as follows:

December 31, 2020 Discount rate Future salary increase rate December 31, 2019 Discount rate Future salary increase rate	Impact on the present value of defined benefit obligation Increase by 0.25% Decrease by 0.25% (7,988) 8,237 8,114 (7,910) (7,936) 8,186 8,096 (7,890)
	Increase by 0.25% (7,988) 8,114 (7,936) 8,096

The sensitivity analysis assumed all other variables remain constant during the measurement. This may not be representative of the actual change in defined benefit obligation as some of the variables may be correlated in the actual situation. The model used in the sensitivity analysis is the same as the defined benefit obligation liability.

The analysis is performed on the same basis for prior year.

(ii) Defined contribution plans

The Group contributes an amount at the rate of 6% of the employee’s monthly wages to the Labor Pension personal account with the Bureau of the Labor Insurance and Council of Labor Affairs in R.O.C. in accordance with the provisions of the Labor Pension Act. The Group’s contributions to the Bureau of the Labor Insurance and Social Security Bureau for the employees’ pension benefits require no further payment of additional legal or constructive obligations.

As of December 31, 2020 and 2019, the expense of defined contribution plans under Labor Pension Act was as follows:

Operating costs Operating expenses	For the years ended December 31 2020 2019 $ 12,930 11,504 10,978 10,926 $ 23,908 22,430
	2020 $ 12,930 10,978
	$ 23,908

The cost of the pension contributions to the Labor Insurance Bureau for the years ended December 31, 2020 and 2019 amounted to $18,997 and $20,232 thousand, respectively.

(Continued)

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Notes to Consolidated Financial Statements

(iii) Short-term employee benefits

Short-term employee benefits
short term employee benefit liabilities	December 31, 2020 $ 12,033	December 31, 2019
		9,476

(o) Income tax
(i) The components of income tax in the years 2020 and 2019 were as follows:

Current income tax expense Current period incurred 10% surtax on undistributed earnings Land value increment tax Prior years income tax adjustment Deferred tax expense Income tax expense	For the years ended December 31 2020 2019 $ 291,013 404,110 322 755 202,496 108,634 5,491 (2,635) 499,322 510,864 13,172 (110,552) $ 512,494 400,312	For the years ended December 31 2020 2019 $ 291,013 404,110 322 755 202,496 108,634 5,491 (2,635) 499,322 510,864 13,172 (110,552) $ 512,494 400,312
	2020
	$ 291,013 322 202,496 5,491 499,322 13,172 $ 512,494
		510,864
		(110,552)
		400,312

The amount of income tax recognized in other comprehensive income for 2020 and 2019 was as follows:

Items that will not be reclassified to profit or loss: Remeasurements effects of defined benefit plans Items that may be reclassified subsequently to profit and loss: Foreign currency translation differences for foreign operations	For the years ended December 31 2020 2019 $ (7,163) (879) $ (101,288) (39,297)
	2020 $ (7,163)
	$ (101,288)

Reconciliation of income tax and profit tax for 2020 and 2019 is as follows:

Profit excluding income tax Income tax using the Compnay's domestic tax rate Effect of tax rates in foreign jurisdiction Non-deductible income tax Tax-exempt income Land value increment tax Undistributed earnings additional tax Prior years income tax adjustment Others Income tax expense	For the years ended December 31 2020 2019 $ 2,965,375 2,464,267 593,075 492,853 (1,967) (1,932) 2,134 4,428 (219,111) (179,386) 133,678 87,338 322 755 5,491 (2,635) (1,128) (1,109) $ 512,494 400,312
	2020 $ 2,965,375
	593,075 (1,967) 2,134 (219,111) 133,678 322 5,491 (1,128)
	$ 512,494

(Continued)

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Notes to Consolidated Financial Statements

(ii) Deferred tax assets and liabilities
1) Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following items:

Tax effect of deductible Temporary Differences The carryforward of unused tax losses	December 31, 2020 $ 7,192 77,279	December 31, 2019 7,192 51,265
	$ 84,471	58,457

The R.O.C Income Tax Act allows net losses, as assessed by the tax authorities, to offset taxable income over a period of ten years for local tax reporeing purposes. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilize the benefits therefrom.

As of December 31, 2020, the information of the Group’s unused tax losses for which no deferred tax assets were recognized are as follows:

Year of assessment 2013 2014 2015 2016 2017 2018 2019 2020	Unused balance $ 35,265 5,171 22,641 26,549 47,964 4,344 4,281 240,178 $ 386,393	Expiry year
		2023 2024 2025 2026 2027 2028 2029 2030

2) Recognized deferred tax assets and liabilities

The movements in deferred tax assets and liabilities for the years ended December 31, 2020 and 2019 were as follows:

Deferred tax liabilities:

Land value increment tax	Investment income recognized under the equity method	Exchange difference on the translation of foreign operations	Others	Total 7,089,164 15,560
$ 6,363,202 (68,818)	625,386 85,915	72,592 -	27,984 (1,537)
$ 6,294,384	711,301	72,592	26,447	7,104,724
$ 6,384,498 (21,296) -	696,125 (70,739) -	111,718 - (39,126)	26,137 1,847 -	7,218,478 (90,188) (39,126)
$ 6,363,202	625,386	72,592	27,984	7,089,164

(Continued)

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Notes to Consolidated Financial Statements

Deferred tax assets:

Unamortized manufacturing costs	Tax losses	Defined benefit obligation	Impairment loss on assets	Exchange difference on the translation of foreign operations	Others	Total 215,044 2,388 108,451
$ 55,900 10,259 -	40,312 - -	24,237 - 7,163	63,456 - -	379 - 101,288	30,760 (7,871) -
$ 66,159	40,312	31,400	63,456	101,667	22,889	325,883
$ 44,513 11,387 -	40,312 - -	22,594 764 879	63,456 - -	208 - 171	22,547 8,213 -	193,630 20,364 1,050
$ 55,900	40,312	24,237	63,456	379	30,760	215,044

(iii) The Company’s income tax returns through 2017 have been assessed and approved by the Tax Authority.

(p) Share capital and other interests

(i) Share capital

As of December 31, 2020 and 2019, the authorized capital of the Company amounting to $9,800,000 with par value of $10 per share. The paid in capital was $9,800,000 thousands, and the capital that rose from the shares had all been retrieved.

(ii) Capital surplus

The components of capital surplus were as follows:

Donations Treasury share transactions Others	December 31, 2020 $ 44,803 2,187,988 11,861	December 31, 2019 44,803 2,187,988 11,282 2,244,073
	$ 2,244,652

In accordance with Amended Companies Act 2012, realized capital reserves can only be capitalized or distributed as cash dividends after offsetting against losses. The aforementioned capital reserves include share premiums and donation gains. In accordance with Securities Offering and Issuance Guidelines, the amount of capital reserves that can be capitalized shall not exceed 10 percent of the actual share capital amount.

(Continued)

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Notes to Consolidated Financial Statements

(iii) Retained earnings

Under the dividend policy as set forth in the Articles, where the Corporation made 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 Corporation’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for distribution of dividends and bonus to shareholders.

To determine dividend amounts, the Corporation should take into account the diversity of its business, cycles of the industry, and capital demand in relation to specific products and services. To balance business development and shareholders’ welfare, the cash dividend should not be less than 10% of total annual dividends, unless there is any capital demand due to essential investment plan, change in financial position, business operation, extension of capacity or any other capital expenditure and should be approved in the shareholders’ meetings.

1) Legal reserve

If the Company earned a profit for the year, the meeting of shareholders decides on the distribution of the statutory earnings reserve either by issuing new shares or by paying cash, and the distribution is limited to the portion of legal reserve which exceeds 25 percent of the actual share capital.

2) Special reserve

The Group implemented the optional exemptions under IFRS 1 "First-time Adoption of International Financial Reporting Standards” when adopting the International Financial Reporting Standards at first time. The increase in retained earnings resulting from the unrealized revaluation increments, cumulative translation adjustment and the revaluation increments in the transfer from fix assets to investment property was $32,114,341 thousand. In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, the same amount of the increasing earnings shall be reclassified to special earnings reserve. If a certain proportion of the asset has been disposed or reclassified, the same proportion of special earnings reserve equivalent to that of the asset, which has been disposed or reclassified, has to be transferred back to its earnings. Such special earnings reserve has to have the same amount with the one that was initially being reclassified to its special earnings reserve. The balance of such special earnings reserve amounted to $30,409,839 and $30,734,041 thousand as of December 31, 2020 and 2019, respectively.

In accordance with the aforesaid Ruling, a special reserve is set aside from the current year’s net income after tax and prior year’s undistributed earnings at an amount equal to the debit balance of contra accounts in shareholders’ equity. When the debit balance of any of these contra accounts in shareholders’ equity is reversed, the related special reserve can be reversed. The subsequent reversals of the contra accounts in shareholders' equity shall quality for additional distributions.

(Continued)

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Notes to Consolidated Financial Statements

3) Earnings distribution

Earnings distribution for 2019 and 2018 was decided via the general meeting of shareholders held on 22 June 2020 and 20 June 2019, respectively. The relevant dividends distributions to shareholders were as follows:

Dividends distributed to ordinary shareholders: Cash	For the year ended December 31 2019 2018 Amount per share (dollars) Amount Amount per share (dollars) Amount $ 2.20 2,156,000 2.20 2,156,000	For the year ended December 31 2019 2018 Amount per share (dollars) Amount Amount per share (dollars) Amount $ 2.20 2,156,000 2.20 2,156,000	For the year ended December 31 2019 2018 Amount per share (dollars) Amount Amount per share (dollars) Amount $ 2.20 2,156,000 2.20 2,156,000
	2019
	Amount per share (dollars)	Amount
	$ 2.20	2,156,000 2.20

On March 25, 2021, the Company’s Board of Directors resolved to appropriate the 2020 earnings. These earnings were appropriated as follows:

Dividends distributed to ordinary shareholders: Cash	For the year ended December 31	For the year ended December 31	For the year ended December 31
	2020
	Amount per share (dollars)		Amount
	$ 2.30		2,254,000

(iv) Other equity accounts (net of tax)

Balance on January 1, 2020 Exchange differences on translation of foreign financial statements Exchange differences on subsidiaries accounted for using equity method Unrealized gains from financial assets measured at fair value through other comprehensive income Balance on December 31, 2020 Balance on January 1, 2019 Exchange differences on translation of foreign financial statements Exchange differences on subsidiaries accounted for using equity method Unrealized gains from financial assets measured at fair value through other comprehensive income Balance on December 31, 2019	Exchange differences on translation of foreign financial statements $ (51,551) (7,361) (403,728) - $ (462,640)	Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income 1,398,701 - - 715,107 2,113,808	Total 1,347,150 (7,361) (403,728) 715,107 1,651,168 1,312,657 (3,882) (156,733) 195,108 1,347,150
	$ 109,064 (3,882) (156,733) - $ (51,551)	1,203,593 - - 195,108 1,398,701

175

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(q) Earnings per share

The basic earnings per share and diluted earnings per share were calculated as follows:

Basic earnings per share Profit attributable to ordinary shareholders Weighted average number of ordinary shares Diluted earnings per share Profit attributable to ordinary shareholders (diluted) Weighted average number of ordinary shares Effect of potentially dilutive ordinary shares Employees’ compensation Weighted average number of ordinary shares (diluted)	For the years ended December 31 2020 2019 $ 2,452,881 2,063,955	For the years ended December 31 2020 2019 $ 2,452,881 2,063,955
	2020 $ 2,452,881
	980,000	980,000
	$ 2.50	2.11
	$ 2,452,881	2,063,955
	980,000 1,711	980,000 1,963
	981,711	981,963
	$ 2.50	2.10

(r) Revenue from contracts with customers
(i) Details of revenue

The details of revenue for the year ended December 31, 2020 were as follows:

Revenue from contracts with customers Revenue from investment properties Property revenue Other operating revenue	For the year ended December 31 2020 2019 $ 8,461,052 10,207,265 1,580,480 1,589,649 - 1,036,607 128,210 57,044 $ 10,169,742 12,890,565
	2020
	$ 8,461,052 1,580,480 - 128,210
	$ 10,169,742

(ii) Disaggregation of revenue

For the year ended December 31, 2020	For the year ended December 31, 2020	For the year ended December 31, 2020	For the year ended December 31, 2020
Fertilizers and other chemical products $ 7,549,294 264,938 405,907	Real estate property and investment 1,574,136 - 6,344	Others 369,123 - -	Total
			9,492,553 264,938 412,251
$ 8,220,139	1,580,480	369,123	10,169,742

176

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the year ended December 31, 2020 Fertilizers and other chemical products Real estate property and investment Others Total $ 8,220,139 - - 8,220,139 - 1,580,480 - 1,580,480 - - 369,123 369,123 $ 8,220,139 1,580,480 369,123 10,169,742 For theyear ended December 31, 2019 Fertilizers and other chemical products Real estate property and investment Others Total $ 7,954,738 2,619,293 331,027 10,905,058 1,469,202 - - 1,469,202 509,342 6,963 - 516,305 $ 9,933,282 2,626,256 331,027 12,890,565 $ 9,933,282 - - 9,933,282 - 1,589,649 - 1,589,649 - 1,036,607 - 1,036,607 - - 331,027 331,027 $ 9,933,282 2,626,256 331,027 12,890,565 December 31, 2020 December 31, 2019 January 1, 2019 $ 778,903 935,484 1,226,708 (906) (906) (2,229) $ 777,997 934,578 1,224,479 $ 88,420 106,856 91,395 - - 76,212 $ 88,420 106,856 167,607	For the year ended December 31, 2020 Fertilizers and other chemical products Real estate property and investment Others Total $ 8,220,139 - - 8,220,139 - 1,580,480 - 1,580,480 - - 369,123 369,123 $ 8,220,139 1,580,480 369,123 10,169,742 For theyear ended December 31, 2019 Fertilizers and other chemical products Real estate property and investment Others Total $ 7,954,738 2,619,293 331,027 10,905,058 1,469,202 - - 1,469,202 509,342 6,963 - 516,305 $ 9,933,282 2,626,256 331,027 12,890,565 $ 9,933,282 - - 9,933,282 - 1,589,649 - 1,589,649 - 1,036,607 - 1,036,607 - - 331,027 331,027 $ 9,933,282 2,626,256 331,027 12,890,565 December 31, 2020 December 31, 2019 January 1, 2019 $ 778,903 935,484 1,226,708 (906) (906) (2,229) $ 777,997 934,578 1,224,479 $ 88,420 106,856 91,395 - - 76,212 $ 88,420 106,856 167,607	For the year ended December 31, 2020 Fertilizers and other chemical products Real estate property and investment Others Total $ 8,220,139 - - 8,220,139 - 1,580,480 - 1,580,480 - - 369,123 369,123 $ 8,220,139 1,580,480 369,123 10,169,742 For theyear ended December 31, 2019 Fertilizers and other chemical products Real estate property and investment Others Total $ 7,954,738 2,619,293 331,027 10,905,058 1,469,202 - - 1,469,202 509,342 6,963 - 516,305 $ 9,933,282 2,626,256 331,027 12,890,565 $ 9,933,282 - - 9,933,282 - 1,589,649 - 1,589,649 - 1,036,607 - 1,036,607 - - 331,027 331,027 $ 9,933,282 2,626,256 331,027 12,890,565 December 31, 2020 December 31, 2019 January 1, 2019 $ 778,903 935,484 1,226,708 (906) (906) (2,229) $ 777,997 934,578 1,224,479 $ 88,420 106,856 91,395 - - 76,212 $ 88,420 106,856 167,607	For the year ended December 31, 2020 Fertilizers and other chemical products Real estate property and investment Others Total $ 8,220,139 - - 8,220,139 - 1,580,480 - 1,580,480 - - 369,123 369,123 $ 8,220,139 1,580,480 369,123 10,169,742 For theyear ended December 31, 2019 Fertilizers and other chemical products Real estate property and investment Others Total $ 7,954,738 2,619,293 331,027 10,905,058 1,469,202 - - 1,469,202 509,342 6,963 - 516,305 $ 9,933,282 2,626,256 331,027 12,890,565 $ 9,933,282 - - 9,933,282 - 1,589,649 - 1,589,649 - 1,036,607 - 1,036,607 - - 331,027 331,027 $ 9,933,282 2,626,256 331,027 12,890,565 December 31, 2020 December 31, 2019 January 1, 2019 $ 778,903 935,484 1,226,708 (906) (906) (2,229) $ 777,997 934,578 1,224,479 $ 88,420 106,856 91,395 - - 76,212 $ 88,420 106,856 167,607	For the year ended December 31, 2020 Fertilizers and other chemical products Real estate property and investment Others Total $ 8,220,139 - - 8,220,139 - 1,580,480 - 1,580,480 - - 369,123 369,123 $ 8,220,139 1,580,480 369,123 10,169,742 For theyear ended December 31, 2019 Fertilizers and other chemical products Real estate property and investment Others Total $ 7,954,738 2,619,293 331,027 10,905,058 1,469,202 - - 1,469,202 509,342 6,963 - 516,305 $ 9,933,282 2,626,256 331,027 12,890,565 $ 9,933,282 - - 9,933,282 - 1,589,649 - 1,589,649 - 1,036,607 - 1,036,607 - - 331,027 331,027 $ 9,933,282 2,626,256 331,027 12,890,565 December 31, 2020 December 31, 2019 January 1, 2019 $ 778,903 935,484 1,226,708 (906) (906) (2,229) $ 777,997 934,578 1,224,479 $ 88,420 106,856 91,395 - - 76,212 $ 88,420 106,856 167,607
Fertilizers and other chemical products $ 7,954,738 1,469,202 509,342	Real estate property and investment 2,619,293 - 6,963		Others 331,027 - -
$ 9,933,282	2,626,256		331,027
$ 9,933,282 - - -	- 1,589,649 1,036,607 -		- - - 331,027
$ 9,933,282	2,626,256		331,027
December 31, 2020 $ 778,903 (906) $ 777,997 $ 88,420 - $ 88,420		December 31, 2019 935,484 (906)
		934,578		1,224,479
		106,856 -		91,395 76,212
		106,856		167,607

(Continued)

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Notes to Consolidated Financial Statements

For details on accounts receivable and allowance for impairment, please refer to note 6(e).

The amount of revenue recognized for the years ended December 31, 2020 and 2019 that was included in the contract liability balance at the beginning of the period were $100,439 thousand and $154,988 thousand.

(s) Remuneration to employees, directors and supervisors

In accordance with the articles of incorporation the Company should contribute no less than 2.4% of the current year profit as employee compensation and less than 1.6% as directors’ and supervisors’ remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit.

For the years ended December 31, 2020 and 2019, the Company estimated its employee remuneration amounting to $74,105 and $61,580 thousand, and directors’ and supervisors’ remuneration amounting to $49,403 and $41,054 thousand, respectively. The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees and directors of each period, multiplied by the percentage of remuneration to employees and directors as specified in the Company’s articles. These remunerations were expensed under operating costs or operating expenses during 2020 and 2019. The numbers of shares to be distributed for 2020 and 2019 were calculated based on the closing price of the Company’s ordinary shares, one day before the date of the meeting of Board of Directors. If the financial report release date of subsequent year changed,

There was no difference of Employee compensation and directors’ remuneration between the amounts recognized on consolidated financial statements and actual distributed amount.

Information on remuneration to employees and directors resolved by the Corporation’s board of directors in 2020 and 2019 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

(t) Non operating income and expenses
(i) Interest income

The details of interest income for the years ended December 31, 2020 and 2019 were as follows:

Interest income Others	For the years ended December 31 2020 2019 $ 41,341 82,221 2,739 3,946 $ 44,080 86,167
	2020 $ 41,341 2,739
	$ 44,080

(Continued)

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Notes to Consolidated Financial Statements

(ii) Other income

The details of other income for the years ended December 31, 2020 and 2019 were as follows:

Dividends Others	For the years ended December 31 2020 2019 $ 41,776 41,806 38,270 37,211 $ 80,046 79,017
	2020 $ 41,776 38,270
	$ 80,046

(iii) Other gains and losses

The details of other gains and losses for the years ended December 31, 2020 and 2019 were as follows:

Gain (loss) on disposal of property, plant and equipment Gain (loss) on disposal of investments Net foreign exchange gain Net loss (gain) on financial assets or liabilities at fair value through profit or loss Donation expense Loss on impairment of intangible assets Others	For the years ended December 31 2020 2019 $ 1,025 (33) 1,047,961 15,405 1,888 (13,179) 5,065 9,926 (10,075) (19,532) - (12,891) (25,947) (28,948) $ 1,019,917 (49,252)
	2020 $ 1,025 1,047,961 1,888 5,065 (10,075) - (25,947)
	$ 1,019,917

(iv) Finance costs

The details of finance costs for the years ended December 31, 2020 and 2019 were as follows:

Bank interest expense Lease liabilities expense	For the years ended December 31 2020 2019 $ 358 414 4,203 4,802 $ 4,561 5,216
	2020 $ 358 4,203
	$ 4,561

(Continued)

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Notes to Consolidated Financial Statements

(u) Financial instruments
(i) Credit risk
- 1) Exposure to credit risk

The carrying amount of financial assets represents the Group’s maximum credit exposure.

2) Credit risk concentrations

The clients of the Group are widely spread and unrelated; thus, credit risk is limited.

3) Receivables and debt securities

For credit risk exposure of notes and trade receivables, please refer to note 6(e).

Other financial assets at amortized cost includes other receivables, investments in government bonds, corporate bonds and time deposits

Debt investments at fair value through other comprehensive income include government bonds, listed and unlisted debt securities.

All of these financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected credit losses.

The movement in the allowance for impairment during the years ended December 31, 2020 and 2019, please refer to note note 6(e) and 6(f).

(ii) Liquidity risk

The following are the contractual maturities of financial liabilities, excluding estimated interest payment and the impact of netting agreements.

Carrying amount	Within 1year	1-5years More than 5 years - - 325,125 - 139,482 28,946
$ 20,109 1,594,570 204,462	20,109 1,269,445 36,034
$ 1,819,141	1,325,588	464,607 28,946
$ 32,214 1,549,642 240,495	32,214 1,292,059 36,034	- - 257,583 - 140,780 63,681
$ 1,822,351	1,360,307	398,363 63,681

The Group does not expect the cash flows included in the maturity analysis to occur significantly earlier or at significantly different amounts.

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Notes to Consolidated Financial Statements

(iii) Currency risk
1) Exposure to foreign currency risk

The following are the contractual maturities of financial liabilities, excluding estimated interest payment and the impact of netting agreements.

December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2019	December 31, 2019	December 31, 2019
Foreign Currency	Exchange Rate	NTD	Foreign Currency	Exchange Rate	NTD
$ 7,011 1,906 1,210,587 -	28.51 28.51 7.60 -	199,866 54,323 9,202,183 -	45,698 1,753 1,159,125 7,818	30.11 30.11 8.03 30.11	1,375,782 52,775 9,304,896 235,381

2) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, other receivables, amortised cost of financial assets, accounts payable and other payables that are denominated in foreign currency. A 10% of appreciation of each major foreign currency against the Group’s functional currency as of December 31, 2020 and 2019 would have increased or decreased the before tax net income by $20,335 and $95,835 thousand, respectively. The analysis is performed on the same basis for both periods.

As the Group deals in diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. For the years ended December 31, 2020 and 2019, the foreign exchange losses, including both realized and unrealized, amounted to 1,888 and (13,179) thousand dollars, respectively.

(iv) Interest rate analysis

The interest risk exposure from financial assets and liabilities has been disclosed in the note of liquidity risk management.

The sensitivity analysis below is based on the exposure to equity price risks at the end of the reporting period. For floating-rate liabilities, the analysis is based on the assumption that the amount of liabilities outstanding on the reporting date is circulated throughout the year.

If interest rates had been 1 basis point higher/lower and all other variables were held constant, the Corporation’s pre-tax (loss) profit for the years ended December 31, 2020 and 2019 would decrease/increase by $0 due to the Group’ s cash and cash equivalents balances which exceeds its loan amount.

(Continued)

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Notes to Consolidated Financial Statements

(v) Other price risk

If the stock price changes at the reporting date, the changes in other comprehensive income of the Company are estimated as follows: (The analysis was made on the same basis for both periods, assuming that all other variables remain constant and any impact to forecasted sales and purchases was ignored):

For the years ended December 31 2020 2019 Comprehensive Income (Loss)(net of tax) Net Income (Loss) (net of tax) Comprehensive Income (Loss)(net of tax Net Income (Loss) (net of tax) $ 141,237 52,001 102,882 62,407	For the years ended December 31 2020 2019 Comprehensive Income (Loss)(net of tax) Net Income (Loss) (net of tax) Comprehensive Income (Loss)(net of tax Net Income (Loss) (net of tax) $ 141,237 52,001 102,882 62,407	For the years ended December 31 2020 2019 Comprehensive Income (Loss)(net of tax) Net Income (Loss) (net of tax) Comprehensive Income (Loss)(net of tax Net Income (Loss) (net of tax) $ 141,237 52,001 102,882 62,407
2020
Comprehensive Income (Loss)(net of tax) $ 141,237	Net Income (Loss) (net of tax)
$ (141,237)	(52,001) (102,882)	(62,407)

(vi) Fair value of financial instruments
1) Categories and fair value of financial instruments

The fair value of financial assets and liabilities at fair value through profit or loss, and financial assets at fair value through other comprehensive income (available for sale financial assets) is measured on a recurring basis. The carrying amount and fair value of the Group’s financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and for equity investments that has no quoted prices in the active markets and whose fair value cannot be reliably measured, disclosure of fair value information is not required:

	December 31, 2020	December 31, 2020	December 31, 2020	Total 1,300,013
Book Value $ 1,300,013		FairValue
	Level 1 1,300,013	Level 2 -	Level 3 -
$ 112,566 2,712,178	112,566 -	- -	- 2,712,178	112,566 2,712,178
2,824,744	112,566	-	2,712,178	2,824,744

(Continued)

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Notes to Consolidated Financial Statements

	December 31, 2020	December 31, 2020	December 31, 2020	Total 28,214 - - - - -
BookValue $ 28,507 3,062,027 1,259,839 777,997 128,193 27,400		FairValue
	Level 1 - - - - - -	Level 2 28,214 - - - - -	Level 3 - - - - - -
5,283,963	-	28,214	-	28,214
$ 20,000 476,158 793,287 192,912 325,125	- - - - -	- - - - -	- - - - -	- - - - -
1,807,482	-	-	-	-
$ 11,216,202	1,412,579	28,214	2,712,178	4,152,971
	December 31, 2019			Total 1,560,181
BookValue $ 1,560,181		FairValue
	Level 1 1,560,181	Level 2 -	Level 3 -
$ 94,691 1,962,947	94,691 -	- -	- 1,962,947	94,691 1,962,947
2,057,638	94,691	-	1,962,947	2,057,638
$ 30,104 2,519,628 4,378,460 934,578 153,844 57,892	- - - - - -	30,034 - - - - -	- - - - - -	30,034 - - - - -
8,074,506	-	30,034	-	30,034
$ 11,692,325	1,654,872	30,034	1,962,947	3,647,853

(Continued)

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Notes to Consolidated Financial Statements

	December 31, 2019	December 31, 2019	December 31, 2019
BookValue $ 32,000 641,384 650,675 224,744 257,583		FairValue		Total - - - - -
	Level 1 - - - - -	Level 2 - - - - -	Level 3 - - - - -
1,806,386	-	-	-	-
$ 1,806,386	-	-	-	-

2) Valuation techniques for financial instruments not measured at fair value

The Group’s valuation techniques and assumptions used for financial instruments not measured at fair value are as follows:

a) Financial assets measured at amortized cost

If the quoted prices in active markets are available, the market price is established as the fair value. However, if quoted prices in active markets are not available, the estimated valuation or prices used by competitors are adopted.

b) Financial assets and financial liabilities measured at amortized cost

If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values.

3) Valuation techniques for financial instruments measured at fair value:
a) Non-derivative financial instruments

When a financial instrument is regarded as quoted in an active market, the quoted prices in an active market will be the fair value. The market prices from the main exchanges and government bond exchanges are the basis of the fair value of OTC equity instruments and debt instruments which have a quoted market price in an active market.

A financial instrument is regarded as being quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s-length basis. Quoted market prices may not be indicative of the fair value of an instrument if the activity in the market is infrequent, the market is not well-established, only small volumes are traded, or bid-ask spreads are very wide.

(Continued)

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Notes to Consolidated Financial Statements

Measurements of fair value of financial instruments without an active market are based on a valuation technique or quoted price from a competitor. Fair value measured by a valuation technique can be extrapolated from similar financial instruments, the discounted cash flow method, or other valuation technique including a model using observable market data at the reporting date.

If the financial instruments held by the Group do not belong to active markets, the category and nature of the fair value are as follows:

Equity investments without an active market: The fair value is assessed by market comparison approach. The

main assumption is measured from the retained earnings multiplier as the basis.

4) Transfers between Level 1 and Level 2

There were no transfers in either direction in 2020 and 2019.

5) Reconciliation of Level 3 fair values

Opening balance, January 1, 2020 Total gains and losses recognized: In other comprehensive income Cash capital increase Capital reduction by capital stock return Ending Balance, December 31, 2020 Opening balance, January 1, 2019 Total gains and losses recognized: In other comprehensive income Capital reduction by capital stock return Ending Balance, December 31, 2019	Fair value through other comprehensive income (Available-for-sale financial assets) Unquoted equity instruments $ 1,962,947 697,231 150,000 (98,000)
	$ 2,712,178
	$ 1,764,692 201,182 (2,927)
	$ 1,962,947

For the years ended December 31, 2020 and 2019, total gains and losses that were included in “other gains and losses” , “unrealized gains and losses from available-for-sale financial assets” and “unrealized gains and losses from financial assets at fair value through other comprehensive income” were as follows:

Total gains and losses recognized: In other comprehensive income, and presented in “unrealized gains and losses from financial assets at fair value through other comprehensive income”	For the years ended December 31 2020 2019 $ 697,231 201,182
	2020 $ 697,231

185

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

6) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Group’s main financial instruments that use Level 3 inputs to measure fair value are“fair value through other comprehensive income (available-for-sale financial assets) – equity investments”.

The Group most fair value is categorized to Level 3 with single significant unobservable input. The equity investments without an active market has duplicate unobservable inputs. The unobservable inputs of the equity investments without an active market are independent, so there is no correlation to others.

Quantified information of significant unobservable inputs was as follows:

Item Valuation technique Financial assets at fair value through profit or loss- equity investments without an active market Comparable transaction method Financial assets at fair value through other comprehensive income-equity investments without an active market Net Asset Value Method	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and fair value measurement
	‧The multiplier of price-to-book ratio (As of December 31, 2020 and December 31, 2019 were 17.96~23.27 and 19.19~21.58) ‧Market illiquidity discount (As of December 31, 2020 and December 31, 2019 were 10%~33% and 10%~33%%) The estimated fair value would increase (decrease) if: ‧the multiplier were higher (lower) ‧the market illiquidity discount were lower (higher). ‧Net Asset Value Not applicable

7) Fair value measurements in Level 3 – sensitivity analysis of reasonably possible alternative assumptions

The Group’s measurement on the fair value of financial instruments is deemed reasonable despite different valuation models or assumptions may lead to different results.

For fair value measurements in Level 3, changing one or more of the assumptions would have the following effects on profit or loss and other comprehensive income:

December 31, 2020 Financial assets at fair value through other comprehensive income Equity investments without an active market	Inputs	Fluctuation in inputs	Profit	or loss	Other comprehensive income Favour-a ble Unfavour- able 26,306 (49,694)
			Favour-a ble	Unfavour- able	Favour-a ble
	Market illiquidity discount	1%	-	-	26,306

186

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2019 Financial assets carried at cost Equity investments without an active market	Inputs	Fluctuation in inputs	Profit	or loss	Other comprehensive income Favour-ab le Unfavour- able 48,432 (170,576)
			Favour-a ble	Unfavour- able	Favour-ab le
	Market illiquidity discount	1%	-	-	48,432

The favorable and unfavorable effects represent the changes in fair value, and fair value is based on a variety of unobservable inputs calculated using a valuation technique. The analysis above only reflects the effects of changes in a single input, and it does not include the interrelationships with another input.

(v) Financial risk management
(i) Overview

The Group has exposures to the following risks from its financial instruments:

1) Credit risk
2) Liquidity risk
3) Market risk

The following discusses the Group’s objectives, policies and processes for measuring and managing the above mentioned risks.

(ii) Risk management framework

The Group’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

(iii) Credit risk

Credit risk means the potential loss of the Group if the counterparty involved in that transaction defaults. The primary potential credit risk is from financial instruments like accounts receivable and equity securities.

1) Accounts receivables and other receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk, particularly in the current deteriorating economic circumstances.

(Continued)

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Notes to Consolidated Financial Statements

The Group has established a credit granting policy. According to the policy, the Group must analyze its credit rating individually for each new customer before granting standard payment and shipping conditions and terms.

The Group establishes an impairment allowance that represents its estimate of incurred losses in respect of trade receivables. The two components of this impairment allowance are specific loss component that relates to individually significant exposure and collective loss component which the loss was incurred but not identified. The collective component is based on historical payment experience of similar financial assets.

2) Investment

The credit risk exposure in the bank deposits, fixed income investments and other financial instruments are measured and monitored by the Group’s finance department. As the Group deals with the banks and other external parties with good credit standing and financial institutions, corporate organization and government agencies which are graded above investment level, management believes that the Group does not have compliance issues and no significant credit risk.

3) Guarantees

As of December 31, 2020 and 2019, the endorsement guarantee provided by the Company to individual entities of joint ventures, please refer to Note 7.

(iv) Liquidity risk

Liquidity risk is a risk that the Group is unable to meet the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as much as possible, that it always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

(v) Market risk

Market risk is a risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

1) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency. The currencies used in these transactions are denominated in USD, EUR, JPY, and RMB.

The exchange gains or losses of trade receivables in foreign currencies resulting from the changes in exchange rates are offset against the exchange losses or gains of short-term borrowings in foreign currencies; thus, the exposure to foreign currency risk is insignificant.

(Continued)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The interest is denominated in the same currency as borrowings. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short term imbalances.

The investments of other subsidiaries of the Company are not for hedging.

2) Interest rate risk

The Group’s interest rate risk arises from short-term and long-term loans bearing floating interest rates. Future cash flow will be affected by a change in market interest rate.

3) Other market risk

The Group does not enter into any commodity contracts other than to meet its expected usage and sales requirements; such contracts are not settled on a net basis.

(w) Capital management

The Group’s objectives in managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the dividend payment to the shareholders, return capital to shareholders, and issue new shares or sell assets to reduce debts.

The Group manages capital by the debt to equity ratio. Such ratio is calculated as net liabilities divided by total capital. Net liabilities represent the total amount of liabilities on the balance sheet minus cash and cash equivalents. The total amount of capital represents all the equity components (share capital, capital surplus, retained earnings, and other equity) plus net liabilities.

The Group’s debt to equity ratios at the balance sheet date were as follows:

December 31, 2020 $ 25,037,416 (3,062,027)	December 31, 2020 $ 25,037,416 (3,062,027)	December 31, 2019 24,931,743 (2,519,628)
21,975,389 51,308,711		22,412,115 50,725,053
$ 73,284,100		73,137,168
	29.99%	30.64%

(Continued)

189

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(x) Investing and financing activities not affecting current cash flow

The Group’s investing and financing activities which did not affect the current cash flow in the years ended December 31, 2020 and 2019 , were as follows:

Purchases of property, plant and equipment Add: opening balances of equipment and construction payables Deduction: closing balances of equipment and construction payables	For the years ended December 31 2020 2019 $ 1,103,691 1,250,793 155,654 50,582 (315,440) (155,654) $ 943,905 1,145,721
	2020
	$ 1,103,691 155,654 (315,440) $ 943,905

(7) Related-party transactions:

(a) Names and relationship with related parties

The following are entities that have had transactions with related parties and the Company’s subsidiaries during the periods covered in the non consolidated financial statements.

Name of related party AI-Jabail Fertilizer Company TR Electronic Chemical Co.,Ltd. TR Electronic Chemical (Kunshan) Ltd. Council of Agriculture, Executive Court, R.O.C. TAIWAN FERTILIZER Legal Foundation	Relationship with the Group
	Equity-method investee The Company's jointly controlled entity The Company's jointly controlled entity’s subsidary (Note) Individuals are those entities in which the Group has significant influence Other related parties

Note: The bankruptcy of TR Electronic Chemical (Kunshan) Ltd. was declared by the court in China in September, 2017, and the relevant statutory procedures had been completed.

(b) Significant transactions with related parties
(i) Purchase of Goods from Related Parties

The amounts of significant purchase transactions and outstanding balances between the Group and related parties were as follows:

AI-Jabail Fertilizer Company	For the years ended December 31 2020 2019 $ 266,136 1,473,258
	2020
	$ 266,136

There were no significant differences between the terms and pricing of purchase transactions with related enterprises and those carried out with other normal vendors.

(Continued)

190

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(ii) Receivables from Related Parties

The receivables from related parties were as follows:

Account	Relationship	December 31, 2020 $ 455	December 31, 2019 455
Account receivable	`J`ointly controlled entity

(iii) Payables from Related Parties

The payables from related parties were as follows:

Account	Relationship	December 31, 2020 $ -	December 31, 2019 235,381
Account payable	AI-Jabail Fertilizer Company

(iv) Prepayment for Related Parties

The prepayment for related parties were as follows:

Account	Relationship	December 31, 2020 $ 90,026	December 31, 2019 -
Account receivable	AI Jabail Fertilizer Company

The pricing and terms conditions of prepayment for related parties were based on their purchases.

(v) Others

1) TR Electronic Chemical Co., Ltd. (TR), a jointly controlled entity of the Corporation, had obtained a financing of US$10,000 thousand from a bank, and the Corporation and Jing Chin International Limited Corporation, a shareholder of TR, guaranteed the repayment of this financing. When TR failed to make a repayment, the bank then requested the guarantors to repay the loan partially. Because the Corporation could only provide TR-in compliance with the “Regulations Governing the Granting of Loans and Endorsements and Guarantees by Public Companies” - with a limited amount of endorsement, the Corporation’s board approved the repayment of TR’s loan, as following.

Due Date Date of Repayment Amount inUSD March 27, 2014 June 27, 2014 $ 4,570 April 26, 2015 April 24, 2015 3,300 March 27, 2016 March 31, 2016 2,147	Amount inNTD 144,641 102,610 70,026

Considering the weakening operating and repayment capability of TR, the Corporation recognized an impairment loss in 2015.

(Continued)

191

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

2) The bankruptcy of TR Electronic Chemical (Kunshan) Ltd., declared by the court in China in September 2017, was investigated, and the proposal of liquidated property distribution was announced publicly in mid August, 2018. In November 2018, the Kunshan Court of China reversed its decision and terminated the bankruptcy liquidation process of TR, with the approval of the Market Supervision Administrations of Kunshan in August 2020. Also, the investors of TR Electronic Chemical Co. Ltd., JIN QUN INTERNATIONAL CO., Ltd. and other six stockholders, institute the civil lawsuit with joint liquidation liability in Taipei District Court. The first instance was pronounced in December, 2018. However, the stockholders were not satisfied with the result and appealed for the second instance. The second instance was pronounced in January, 2019. However, the stockholders were not satisfied with the result and appealed for the third instance. In March 2020, the Taiwan High Court delivered the appeal to the Supreme Court, and the case is still in progress.
3) Hasbo Biotech Co., Ltd. commenced its liquidation process in October 2017, and the related procedures had been completed in April 2020.
(c) Compensation of key management personnel

The compensation to directors and other key management personnel were as follows:

Salaries and other short-term employee benefits Post-employment benefits	For the years ended December 31 2020 2019 $ 83,670 76,600 8,447 1,178	For the years ended December 31 2020 2019 $ 83,670 76,600 8,447 1,178
	2020
	$ 83,670 8,447	76,600 1,178
	$ 92,117	77,778

(8) Pledged assets:

ledged assets:
Asset	Purpose of pledge	December 31, 2020 $ 177,638	December 31, 2019 145,096
Other financial asset current and non-current	Guarantee for provisional attachment

(9) Commitments and contingencies:

(a) Significant commitments and contingencies
(i) Significant commitments and contingencies were as follows:

Purchase real estate property Purchase investment property	December 31, 2020 $ 114,881	December 31, 2019 999,133
	$ 5,039,234	7,175,358

(Continued)

192

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(ii) Unused standby letters of credit

USD thousands	December 31, 2020 $ 5,638	December 31, 2019 12,502

(iii) The Corporation had guarantee notes payable for its debt as follow:

Guarantee notes payable	December 31, 2020 $ 7,521,500	December 31, 2019 8,363,770

(10) Losses Due to Major Disasters:None

(11) Subsequent Events:None

(12) Other:

(a) A summary of current-period employee benefits, depreciation, and amortization, by function, is as follows:

follows:
By item	For the years ended December 31 2020 2019
	Operating Cost	Operating expense	Total	Operating Cost	Operating expense	Total
Employee benefit Salary Health and labor insurance Pension Others Depreciation Amortization	$ 459,815 37,498 23,126 19,936 1,001,028 -	558,824 26,111 16,540 10,478 54,696 6,524	1,018,639 63,609 39,666 30,414 1,055,724 6,524	435,158 36,113 21,962 18,876 935,735 -	560,023 26,751 16,874 14,640 50,213 6,662	995,181 62,864 38,836 33,516 985,948 6,662

The depreciation of non-operating income and expenses of the Group in 2020 and 2019 were $18,643 and $18,759 thousand, respectively.

(b) In order to highlight corporate social responsibility, improve farmers' well-being, and cooperate with the government's policy of “promoting the halving of chemical pesticides in ten years and the withdrawal of highly toxic pesticides”, in December 2019, the Group will decide to donate $123,318 thousand to Agricultural Technology Research Institute.

(Continued)

193

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements

(13) Other disclosures:

(a) Information on significant transactions:

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Group:

(i) Loans to other parties:

(In Thousands of New Taiwan Dollars)

Number	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Transaction amount for business between two parties	Reasons for short-term financing	Allowance for bad debt	Collateral	Collateral	Individual funding loan limits	Maximum limit of fund financing
												Item	Value
0	Taiwan Fertilizer Co., Ltd. (the "Company")	Dayun Co., Ltd./City state Co., Ltd./Kuan Chu Construction Co.,Ltd.	Long-term receivable	No	12,249	15,890	11,454	1.845%~2. 375%	79,500	－	-	Commercial paper	15,890	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the "Company")	○○Lin	Long-term receivable	No	13,127	17,030	12,276	1.845%~2. 375%	85,300	－	-	Commercial paper	17,030	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the "Company")	○○Liao	Long-term receivable	No	12,765	16,560	11,937	1.845%~2. 375%	83,120	－	-	Commercial paper	16,560	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the "Company")	○○Yeh	Long-term receivable	No	13,019	16,890	12,175	1.845%~2. 375%	84,500	－	-	Commercial paper	16,890	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the "Company")	○○Lee	Long-term receivable	No	12,380	16,060	11,577	1.845%~2. 375%	80,600	－	-	Commercial paper	16,060	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the "Company")	Xiangzhan Investment Developmen t Co.,Ltd.	Long-term receivable	No	12,616	15,770	11,828	1.845%~2. 375%	157,880	－	-	Commercial paper	15,770	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the "Company")	○○Tan	Long-term receivable	No	43,831	54,810	41,110	1.845%~2. 375%	78,360	－	-	Commercial paper	54,810	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the "Company")	○○Huang	Long-term receivable	No	8,342	15,400	6,802	1.645%~2. 175%	77,000	－	-	Commercial paper	15,400	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the "Company")	○○Chang	Long-term receivable	No	4,920	8,200	-	1.645%~2. 175%	82,000	－	-	Commercial paper	8,200	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the "Company")	○○ Chuang	Long-term receivable	No	8,607	15,890	7,017	1.645%~2. 175%	79,500	－	-	Commercial paper	15,890	2,565,436	10,261,742

Note 1: (1) The total amount available for lending purpose shall not exceed twenty percent (20%) of the net worth of the Company.
(2) The accumulated capital loan and amount of the company to a single enterprise with business transactions shall be limited to 5% of net worth of the Company.
Note 2: If there is a business transaction, the contract price between the two parties shall be used as the business transaction amount.

Note3: The second order of mortgage right mentioned above is used as collateral.

Note4: In accordance with the letter of the Financial Supervision and Administration Commission of the Republic of China on March 11, 2020, No. 1090330422 and in practice, the construction industry generally gives customers a payment of one to five years in installments, and writes off 10 years and 20 years The goods are disclosed in the table above.

(Continued)

194

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(ii) Guarantees and endorsements for other parties:

(In Thousands of New Taiwan Dollars)

==> picture [571 x 123] intentionally omitted <==

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

Ratio of
Counter-party of accumulated
guarantee and amounts of Parent Subsidiary Endorsements/
endorsement Limitation on Highest Balance of Property guarantees and company endorsements/ guarantees to
amount of balance for guarantees pledged for endorsements to endorsements/ guarantees third parties
guarantees and guarantees and Actual usage guarantees net worth of the Maximum guarantees to to third parties on behalf of
Relationshi endorsements and endorsements amount and latest amount for third parties on behalf of companies in
Name of p with the for a specific endorsements as of during the endorsements financial guarantees and on behalf of parent Mainland
No. guarantor Name Company enterprise during reporting date period (Amount) statements endorsements subsidiary company China
the period
0 Taiwan Taifer Subsidiary 48,805 13,500 13,500 13,500 - 0.03% 25,654,356 Y N N
Fertilizer Chemicals
Co., Ltd. International
(the Inc.
“Company”)
----- End of picture text -----

Note 1: (1) The company under business dealings.

(2) A subsidiary in which the Group directly or indirectly holds more than 50% of its common shares.
(3) The parent company which directly or indirectly holds more than 50% of the common shares of the Group.
(4) A subsidiary in which the Group directly or indirectly holds more than 90% of its common shares.
(5) The financial guarantee provided by the Group based on its contractor's agreement to the same trade and co-proprietor.
(6) The financial guarantee provided by the Group based on its shareholding due to joint venture relationship.
(7) The financial guarantee provided by the Group based on sales contract regulated by Consumer Protection Act for sales in advance .
Note 2: The total amount of the guarantee provided by the Corporation to any individual entity should not exceed 20% of the Corporation’s net worth, or 50% of the individual net worth of Taifer.

Note 3: The total amount of guarantee should not exceed 50% of the Corporation’s net worth.

(iii) Securities held as of December 31, 2020 (excluding investment in subsidiaries, associates and joint ventures):

(In Thousands of New Taiwan Dollars)

Category and name of security	Marketable Securities Type/Name and Issuer	Relationship with company	Account title	Endingbalance	Endingbalance	Endingbalance	Endingbalance	Highest Percentage of ownership (%)	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
Taiwan Fertilizer Co., Ltd.	Mutual funds Mega Diamond Money Market Fund Deutsche Far Eastern DWS Taiwan Money Market Fund Jih Sun Money Market Fund Yuanta De-Li Money Market Fund Prudential Financial Money Market Fund FSITC Money Market Taishin 1699 Money Market Fund Union Money Market Fund Ordinary shares Eminent Venture Capital Corporation Eminent II VC Corp Eminent III VC Corp Taiwan Stock Exchange Corporation Top Taiwan V Venture Capital Co., Ltd Visgeneer Inc. TaiAn Technologies Corporation TSCBio Ventures Capital Co. Ding-Tang Phalanx Biotech Co., Ltd. Bion tech Inc.	－－－－－－－－ Our Company is legal representative director of the company 〞〞－－ Our Company is legal representative director of the company 〞〞－－ Our Company is legal representative director of the company	Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent	11,858 12,719 12,709 9,125 9,402 10,367 13,924 12,021 2,700 12,000 30,000 15,003 1,366 3,147 1,667 3,360 1,500 404 4,167	150,001 150,001 190,003 150,002 150,002 160,002 190,001 160,001 15,714 85,440 228,000 2,279,977 1,871 32,856 23,834 44,486 - - -	- % - % - % - % - % - % - % - % 10.00% 18.50% 16.56% 2.00% 9.76% 10.31% 16.67% 19.75% 6.71% 0.49% 15.16%	150,001 150,001 190,003 150,002 150,002 160,002 190,001 160,001 15,714 85,440 228,000 2,279,977 1,871 32,856 23,834 44,486 - - -	- % - % - % - % - % - % - % - % 10.00% 18.50% 16.56% 2.00% 9.76% 10.31% 16.67% 19.75% 6.71% 0.49% 15.16%	Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 3 Note 3 Note 3 Note 5 Note 5 Note 3 Note 3

195

(Continued)

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements

Category and name of security	Marketable Securities Type/Name and Issuer	Relationship with company	Account title		Ending balance	Ending balance		Highest Percentage of ownership (%)	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
Taiwan Fertilizer Co., Ltd.	China Petrochemical Development Corporation Bonds International Bonds: Mizuho Financial Group	－－	FVOCI - noncurrent Amortized at cost financial assets - non current	9,662 -	112,566 28,507	0.29% - %	112,566 28,214	0.29% - %	Note 2 Note 4

Note 1: The market value was calculated on the basis of the net asset value as of the balance sheet date.

Note 2: The market value was calculated on the basis of the closing price on the Taiwan Stock Exchange as of the balance sheet date.

Note 3: The market value was calculated on the basis of the audited financial statement for the same period.

Note 4: The amortized coste was calculated on the basis of the closing price on the Taiwan Stock Exchange as of the balance sheet date.

Note 5: The market value was calculated on the basis of the estimated fair value per share of the expert evaluation report.

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Category and name of security	Account name	Name of counter-part y	Relationship with the company	BeginningBalance	BeginningBalance	Purchases	Purchases	Sales	Sales	Sales	Sales	EndingBalance	EndingBalance
					Shares	Amount	Shares	Amount	Shares	Price	Cost	Gain (loss) on disposal	Shares	Amount
Taiwan Fertilizer Co.,Ltd.	Mega DiamondMone yMarket Fund	FVTPL - current	-	-	11,914	150,012	47,505	600,000	47,562	600,012	600,710	698	11,858	150,001
〞	Eastspring Investments Well Pool Money Market Fund	FVTPL - current	-	-	10,985	150,009	10,970	150,000	21,955	300,009	300,251	243	-	-
〞	Allianz Global Investors Taiwan Money Market Fund	FVTPL - current	-	-	11,925	150,011	35,687	450,000	47,611	600,011	600,561	550	-	-
〞	Deutsche Far Eastern DWS Taiwan Money Market Fund	FVTPL - current	-	-	-	-	25,444	300,000	12,725	150,000	150,078	78	12,719	150,001
〞	Jih Sun Money Market Fund	FVTPL - current	-	-	12,772	190,015	50,921	760,000	50,984	760,015	760,936	920	12,709	190,003
〞	Yuanta De-Li Money Market Fund	FVTPL - current	-	-	9,164	150,011	36,549	600,000	36,588	600,011	600,640	629	9,125	150,002
〞	Prudential Financial Money Market Fund	FVTPL - current	-	-	9,446	150,011	37,665	600,000	37,709	600,011	600,700	688	9,402	150,002
〞	FSITC Money Market	FVTPL - current	-	-	838	150,009	1,672	300,000	2,510	450,009	450,432	423	-	-
〞	Taiwan Money Market Fond	FVTPL - current	-	-	10,415	160,011	41,532	640,000	41,580	640,011	640,742	731	10,367	160,002
〞	UPAMC James Bond Money Market Fund	FVTPL - current	-	-	8,941	150,009	8,929	150,000	17,870	300,009	300,240	231	-	-
〞	Taishin 1699 Money Market Fund	FVTPL - current	-	-	11,411	155,013	53,204	725,000	50,692	690,013	690,766	754	13,924	190,001
〞	Union Money Market Fund	FVTPL - current	-	-	-	-	32,704	435,000	20,683	275,000	275,186	186	12,021	160,001

Note: Unrealized gain and loss on financial assets were recognized.

196

(Continued)

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock:None
(vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Type of property	Transaction date	Acquisition date	Book value	Transaction amount	Amount actually receivable	Gain from disposal	Counter-party	Nature of relationship	Purpose of disposal	Price reference	Other terms
Taiwan Fertilizer Co., Ltd.	Investment property	March 3, 2020	June 1,1953 ~September 1, 1984	320,470	1,280,000	1,	959,530	Wan Cixing Construction Co., Ltd.、Fuhui Development Co.,Ltd.	None	To activate unused assets	Appraisal report	None

(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Relatedparty	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase/Sale	Amount	Percentage of total purchases/sales	Payment terms	Unitprice	Payment terms	Endingbalance	Percentage of total notes/accounts receivable (payable)
Taiwan Fertilizer Co., Ltd.	AI-Jabail Fertilizer Company	Equity-method investee	Purchase	266,136	5.03%	Same as those for third parties	Determined under the considerations of international market price and production cost	30 days	-	-%	-

(viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue	Overdue	Amounts received in subsequentperiod	Allowance for bad debts
					Amount	Action taken
Taiwan Fertilizer Co., Ltd.	TR ELECTRONIC CHEMICAL CO.,LTD.	Jointly controlled entity	Other receivable 317,277	-	317,277	-	-	317,277

(ix) Trading in derivative instruments:None
(x) Business relationships and significant intercompany transactions:

(In Thousands of New Taiwan Dollars)

				(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
No.	Name of company	Name of counter-party	Nature of relationship	Intercompanytransactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0	TaiwanFertilizerCo., Ltd.	Taiwan Yes Deep Ocean Water Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taifer Chemicals International Inc. Taifer Chemicals International Inc. Taifer Chemicals International Inc. TAIFER (CAMBODIA) CO., LTD TAIFER (CAMBODIA) CO., LTD	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	Sales Rental revenue Other income Cost of goods sold Selling expenses Administrative expenses Research and development expenses Accounts receivable Other receivables Other payables Rental revenue Cost of goods sold Account payables Sales Selling expenses	3,128 7,153 595 332 1,186 9,568 19 236 4 111 5,962 919 101 606 2,849	were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others were not significantly different from others	0.03% 0.07% 0.01% 0.00% 0.01% 0.09% 0.00% 0.00% 0.00% 0.00% 0.06% 0.01% 0.00% 0.01% 0.03%

(Continued)

197

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES Notes to Consolidated Financial Statements

No.	Name of company	Name of counter-party	Nature of relationship		Intercompanytransactions	Intercompanytransactions
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0	TaiwanFertilizerCo ., Ltd.	TAIFER (CAMBODIA) CO., LTD PEIFENG TECHNOLOGY & FERTILIZER CO., LTD. PEIFENG TECHNOLOGY & FERTILIZER CO.,LTD.	1 1 1	Account receivables Cost of goods sold Other payables	606 109,081 26,890	were not significantly different from others were not significantly different from others were not significantly different from others	0.00% 1.07% 0.04%

Note 1): The numbering is as follows:

1.“0” represents the parent company.
2.Subsidiaries are sequentially numbered from 1 by company.

Note 2): The types of transaction between the parent company and subsidiaries are as follows:

1.Transactions from parent company to subsidiary.
2.Transactions from subsidiary to parent company.
3.Transactions between subsidiaries.
Note 3): The report only disclosed the data of sales and accounts receivable of the significant trade between parent and subsidiary. The relative purchase and accounts payable will not be disclosed redundantly.

Note 4): It is the amount of consolidated operating revenue or consolidated total assets divided by trading amount.

Note 5): The transaction listed on the consolidated financial statements has been eliminated through consolidation.

(b) Information on investees:

The following is the information on investees for the years ended December 31, 2020 (excluding information on investees in Mainland China):

(In Thousands of New Taiwan Dollars)

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

Main Original investment amount Balance as of December 31, 2020 Highest Net income Share of
Name of investor Name of investee businesses and products Shares Percentage of Carrying Percentage of (losses) profits/losses
Location December 31, 2020 December 31, 2019 (thousands) wnership value Ownership of investee of investee Note
Taiwan Fertilizer Al-Jubail Fertilizer Kingdom of Manufacture of urea, 2-EH 3,050,000 3,050,000 7 50.00% 9,202,183 50.00% 1,565,731 593,696 Associate
Co., Ltd. Company Saudi Arabia (2-ethyl hexanol), and DOP
(dioctyl phthalate)
〃 Taifer ChemicalsTaiwan International trade; wholesale of 126,300 126,300 5,500 100.00% 92,301 100.00% 8,769 8,769 Subsidiary
International Inc fertilizer, tobacco, liquor,
beverage, forage, machinery,
electrical equipment, etc.;
development, operation and
management of residential
buildings and factory buildings;
special zone development;
investment in and construction
of public works; development of
new towns and districts; agent
services on regional district
requisition; land adjustment; and
real estate rental or leasing
〃 Taiwan Yes DeepTaiwan Wholesale of drinks, food and 1,224,235 1,224,235 25,763 100.00% 287,691 100.00% (3,606) (2,798) Subsidiary
Ocean Water Co., grocery and other articles for
Ltd. daily use; tobacco and liquor;
glass and pottery; hygiene
products; fertilizers and other
chemical products; and
cosmetics; and
international trade
〃 PEIFENGTaiwan Manufacture and wholesale of 2,400,000 1,900,000 240,000 100.00% 2,427,460 100.00% 38,589 38,589 Subsidiary
TECHNOLOGY & fertilizer
FERTILIZER CO.,
LTD.
〃 MITAGRI CO.,Taiwan Wholesale and retail of products 80,000 80,000 8,000 33.33% 32,881 33.33% (21,042) (7,330) Associate
LTD. for organic agriculture
〃 Taiwan AgriculturalTaiwan Wholesale and retail of products 60,000 60,000 6,000 31.58% 47,028 31.58% (23,365) (8,162) Associate
Investment and for organic agriculture
Development co.,
Ltd.
〃 TAIFER Cayman Investment and holding 321,900 321,900 11 100.00% - 100.00% - - Subsidiary
(CAYMAN)Islands
INTERNATIONAL
GROUP CO., LTD.
----- End of picture text -----

(Continued)

198

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

==> picture [592 x 180] intentionally omitted <==

Note: The liquidation procedure was conducted in March 2019, and the relevant statutory procedures have been completed.

(c) Information on investment in mainland China:
(i) The names of investees in Mainland China, the main businesses and products, and other information:

(In Thousands of New Taiwan Dollars)

==> picture [571 x 224] intentionally omitted <==

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

Accumulated Accumulated Net
Main Total outflow of Investment flows outflow of income Highest Accumulated
businesses amount Method investment from investment from (losses) Percentage percentage Investment remittance of
Name of and of paid-in of Taiwan as of Taiwan as of of the investee of of income Book earnings in
investee products capital investment January 1, 2019 Outflow Inflow December 31, 2020 ownership ownership (losses) value current period
TR Manufacture of USD$ 21,500 ( note 3 ) USD$ 10,965 - - USD$ - USD$ - -% -% USD$ - USD$ - -
Electronic nitric acid,
Chemical hydrofluoric (NT$612,922) (NT$312,590) (NT$-) (NT$ - ) (NT$ - ) (NT$
(Kunshan) acid, ammonia, - )
Ltd. phosphoric acid, ( note 4) ( note 4) ( note 1 ) ( note 1 ) ( note 5 )
oxalic acid, ( note 5 )
ammonia
fluoride and LCD
and IC Stripper
Limitation on investment in Mainland China:
Accumulated Investment in Mainland China as Investment Amounts Authorized by
of December 31, 2020 Investment Commission, MOEA Upper Limit on Investment
NT$ - NT$ 312,590 NT$30,785,227
(US$ - ) (US$ 10,965 ) (note 2)
(note 1) (note 4)
----- End of picture text -----

(ii) Limitation on investment in Mainland China:

Note 1: The Group applied for the cessation of it operations to the local court on March 17, 2017, and the cessation was completed in August 2020. The accumulated investment amount of disposed in the current period is NT$312,590 thousand (US$10,965 thousand ), and the accumulated investment amount from Taiwan of remitted at the end of the period is zero.

Note 2: The limit is based on the “Regulations Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission under the Ministry of Economic Affairs; the amount is 60% of shareholders’ equity or of consolidated shareholders’ equity.

Note 3: Indirect investment in mainland China through a subsidiary in a third place. (Investor: TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD.)
Note 4: The foreign currency amounts of original investment amount and carrying value were translated into New Taiwan dollars at the exchange rate NT$28.508 as of December 31, 2020.

Note 5: As of June 30, 2015, the investment accounted for using the equity method balance of the Corporation was zero, so the Company did not recognize income (loss) of the investment.

(iii) Significant transactions:None

(Continued)

199

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(d) Major shareholders:

Major shareholders:
Shareholding Shareholder’s Name	Shares	Percentage
Council of Agriculture, Executive Court, R.O.C.	235,886,376	24.07%

(14) Segment information:

(a) General information

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Specifically, the Group’s reportable segments under IFRS 8 “Operating Segments” were fertilizer and chemical and construction (rental is included).

(b) Reportable segment profit or loss, segment assets, segment liabilities, and their measurement and reconciliations

The Group uses the internal management report that the chief operating decision maker reviews as the basis to determine resource allocation and make a performance evaluation. The internal management report includes profit before taxation, excluding any extraordinary activity and foreign exchange gain or losses, because taxation, extraordinary activity and foreign exchange gains or losses are managed on a group basis, and hence they are not able to be allocated to each reportable segment. In addition, not all reportable segments include depreciation and amortization of significant non-cash items. The reportable amount is similar to that in the report used by the chief operating decision maker.

The operating segment accounting policies are similar to the ones described in Note 4 “Significant accounting policies” except for the recognition and measurement of pension cost, which is on a cash basis. The Group treated intersegment sales and transfers as third-party transactions. They are measured at market price.

The Group’s operating segment information and reconciliation were as follows:

For the year ended December 31, 2020	Fertilizer and chemical $ 8,220,139 89,609	Construction 1,580,480 13,115	Others 369,123 18,551	Adjustment and eliminations - (121,275)	Adjustment and eliminations - (121,275)	Total 10,169,742 -
External customer revenues Intersegment revenues Total revenue Net gains and losses of intersegment Other gains and losses Finance costs Share of profit of associates and joint ventures accounted for using equity method Interest income Other income Reportable segment profit or loss
	$ 8,309,748	1,593,595	387,674	(121,275)		10,169,742
	$ 992,467	332,864	(77,642)	-		1,247,689 1,019,917 (4,561) 578,204 44,080 80,046

					$ 2,965,375

(Continued)

200

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the year ended December 31, 2019	Fertilizer and chemical $ 9,933,282 4,879	Construction 2,626,256 13,388	Others 331,027 20,787	Adjustment and eliminations - (39,054)	Adjustment and eliminations - (39,054)	Total 12,890,565 -
External customer revenues Intersegment revenues Total revenue Net gains and losses of intersegment Other gains and losses Finance costs Share of profit of associates and joint ventures accounted for using equity method Interest income Other income Reportable segment profit or loss Reportable segment assets December 31, 2020 December 31, 2019 Reportable segment liabilities December 31, 2020 December 31, 2019
	$ 9,938,161	2,639,644	351,814	(39,054)		12,890,565
	$ 690,899	1,034,371	(99,259)	-		1,626,011 (49,252) (5,216) 727,540 86,167 79,017
	$ 21,039,106	54,932,381	433,069
					$ 2,464,267
	$ 21,008,845	54,239,039	445,071	(36,159) 75,656,796
	$ 5,729,362	19,283,161	54,617	(29,724) 25,037,416
	$ 5,544,778	19,329,167	64,819	(7,021) 24,931,743

(c) Geographic information

The revenue-generating units of the Group were mainly in Republic of China. Thus, the disclosure of geographical information was not required.

(d) Major customer

Customer A from fercilizer and chenical department	For the years ended December 31 2020 2019 $ 1,104,580 1,469,202
	2020 $ 1,104,580

201

Stock Code:1722

V Parent Company Only Financial Statements

TAIWAN FERTILIZER CO., LTD.

Parent Company Only Financial Statements

With Independent Auditors ’ Report For the Years Ended December 31, 2020 and 2019

Address: 6F, No.88, Nanjing E. Rd., Sec 2, Taipei City 10457, Taiwan Telephone: (02)2542-2231

Independent Auditors’ Report

To the Board of Directors of TAIWAN FERTILIZER CO., LTD.:

Opinion

We have audited the financial statements of TAIWAN FERTILIZER CO., LTD.(“the Company”), which comprise the Balance Sheets as of December 31, 2020 and 2019, and the statement of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the report of other auditors (please refer to Other Matter paragraph), the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the year ended December 31, 2020 and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

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, 2020. 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 key audit matters that, in our professional judgment, should be communicated are as follows:

Impairment assessment of investments in equity method (including goodwill and intangible assets with an indefinite useful life)

Please refer to notes 4(n), 5 and 6(h) for the “recognition of impairment assessment of investments accounted for by the equity method”, “assumptions used and uncertainties considered in determining investments accounted for by the equity method, investments for impairment loss and obsolescence” and “balances of impairment loss and obsolescence”, respectively.

203

3-1

Key audit matters:

As described in Note 6(h) of the accompanying financial statements, the Company acquired control over Taiwan Yes Deep Ocean Water Co., Ltd. (“ Taiwan Yes” ), which was accounted for as acquisition using the equity method (including the goodwill and trademark with indefinite useful lives). In accordance with IAS 36 “Impairment of Assets”, goodwill and intangible assets with indefinite useful lives should be tested for impairment annually; and based on the estimated future cash flows of Taiwan Yes (the cash-generating unit), the recoverable amount was evaluated in order to determine whether there is any impairment of the aforementioned investment accounted for by using the equity method (including the goodwill and intangible assets with indefinite useful lives). Since the estimated future cash flows requires management’s forecasting of the industry overview and the future operating performance of Taiwan Yes, the recoverable amount will be affected and an impairment loss will be incurred should there be any change in the situation. Therefore, the impairment assessment of equity method investments has been identified as a key audit matter.

How the matter was addressed in our audit:

Our principal audit procedures included confirming whether the management have properly assessed the recoverability of goodwill based on the forecasted cash flows within the following 5 years, wherein the assessment have been reviewed by the competent authority; and verifying whether the management has disclosed the impairment of goodwill in the financial statements on a timely manner after identifying such circumstance. In addition, we also assessed the adequacy of the forecasting methods and the discount rate used by the management, and compared the discount rate with external information; verified the management’s assumptions with external relevant information, and evaluated the major assumptions (including the forecast revenue growth rate, discount rate and forecast margin).

Other Matter

We did not audit the financial statements as of and for the years ended December 31, 2020 and 2019, of certain investees in equity method. Those statements were audited by other auditors, whose reports have been furnished to us. Our opinion, insofar as it relates to the amounts included in the Corporation’s financial statements for these investees, is based solely on the reports of the other auditors. As of December 31, 2020 and 2019, the investments in the aforementioned investees are 12.15% and 12.33% ($9,202,183 thousand and $9,304,896 thousand), of the Corporation’s total assets. For the years ended December 31, 2020 and 2019, the investment income on the above said investees are 20.03% and 30.51% ($593,696 thousand and $751,432 thousand) of the Corporation’s income before income tax.

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 Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs, IASs, interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of 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 are responsible for overseeing the Company’s financial reporting process.

204

3-2

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

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

205

3-3

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

The engagement partners on the audit resulting in this independent auditors’ report are Kuo-Yang Tseng and Heng-Shen Lin.

KPMG

Taipei, Taiwan (Republic of China) March 25, 2021

Notes to Readers

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

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

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD.

Balance Sheets

December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

December 31, 2020 Amount % $ 2,521,222 3 1,300,013 2 112,566 - 117,543 - 646,808 1 11,523 - 2,774,010 4 285,034 - 900,000 1 7,299 -	December 31, 2020	December 31, 2020
	Amount	%
	1,955,626 3 1,864,243 3
	223,648 - 223,648 - 7,104,724 10 7,089,164 10 136,462 - 164,257 - 14,627,720 19 15,018,003 20 131,319 - 107,486 - 280,161 - 250,609 -
8,676,018 11
2,712,178 4 28,507 - 12,121,677 16 12,421,858 17 1,122,080 2 38,094,155 50 11,724 - 285,570 - 115,396 - 159,188 - 20,020 -
	24,459,660 32 24,717,410 33
	9,800,000 13 9,800,000 13 2,244,652 3 2,244,073 3 3,397,549 5 3,191,153 4 30,823,647 41 31,147,849 41 3,391,695 4 2,994,828 4 1,651,168 2 1,347,150 2
	51,308,711 68 50,725,053 67
67,092,353 89
$ 75,768,371 100	$ 75,768,371 100 75,442,463 100

See accompanying notes to parent company only financial statements.

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD.

Statements of Comprehensive Income

For the years ended December 31, 2020 and 2019

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

2020	% 100 (75)	2019	% 100 (76)
Amount $ 9,931,129 (7,458,489)		Amount 12,624,716 (9,640,510)
2,472,640	25	2,984,206	24
(258,061) (959,675) (66,602)	(2) (10) (1)	(255,859) (1,033,241) (66,440)	(2) (8) (1)
(1,284,338)	(13)	(1,355,540)	(11)
1,188,302	12	1,628,666	13
37,684 97,462 1,020,337 (3,581) 623,979	- 1 10 - 7	75,204 76,370 (34,615) (4,089) 721,671	1 1 - - 6
1,775,881	18	834,541	8
2,964,183 511,302	30 5	2,463,207 399,252	21 3
2,452,881	25	2,063,955	18
(35,816) 715,107 10,833 (7,163)	- 7 - -	(4,398) 195,108 2,740 (879)	- 2 - -
697,287	7	194,329	2
(512,377) (101,288)	(5) (1)	(199,912) (39,297)	(2) -
(411,089)	(4)	(160,615)	(2)
286,198	3	33,714	-
$ 2,739,079	28	2,097,669	18
$	2.50		2.11
$	2.50		2.10

See accompanying notes to parent company only financial statements. 208

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD.

Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2019 Profit Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve appropriated Cash dividends of ordinary share Reversal of special reserve Other changes in capital surplus Balance at December 31, 2019 Profit Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve appropriated Cash dividends of ordinary share Reversal of special reserve Other changes in capital surplus Balance at December 31, 2020	Share capital Ordinary shares Capital surplus	Retained earnings
		Legal reserve Special reserve Unappropriate d retained earnings Total retained earnings
	- - - - 2,063,955 2,063,955 - - - 2,063,955 - - - - (779) (779) (160,615) 195,108 34,493 33,714
	- - - - 2,063,176 2,063,176 (160,615) 195,108 34,493 2,097,669
	- - 228,131 - (228,131) - - - - - - - - - (2,156,000) (2,156,000) - - - (2,156,000) - - - (86,838) 86,838 - - - - - - 438 - - - - - - - 438
	9,800,000 2,244,073 3,191,153 31,147,849 2,994,828 37,333,830 (51,551) 1,398,701 1,347,150 50,725,053 - - - - 2,452,881 2,452,881 - - - 2,452,881 - - - - (17,820) (17,820) (411,089) 715,107 304,018 286,198
	- - - - 2,435,061 2,435,061 (411,089) 715,107 304,018 2,739,079
	- - 206,396 - (206,396) - - - - - - - - - (2,156,000) (2,156,000) - - - (2,156,000) - - - (324,202) 324,202 - - - - - - 579 - - - - - - - 579
	$ 9,800,000 2,244,652 3,397,549 30,823,647 3,391,695 37,612,891 (462,640) 2,113,808 1,651,168 51,308,711

See accompanying notes to parent company only financial statements.

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD.

Statements of Cash Flows

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Net gain on financial assets or liabilities at fair value through profit or loss Interest expense Interest income Dividend income Share of profit of subsidiaries,associates and joint ventures accounted for using equity method (Gain) loss on disposal of property, plant and equipment, net Gain on disposal of investment properties Unrealized foreign currency exchange loss Loss on disposal of investments Donation expense Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Decrease (increase) in notes receivable Decrease (increase) in accounts receivable Decrease (increase) in other receivable Decrease (increase) in inventories Decrease (increase) in prepayments Decrease (increase) in other current assets Total changes in operating assets Changes in operating liabilities: Increase (decrease) in contract liabilities Increase (decrease) in notes payable Increase (decrease) in accounts payable Increase (decrease) in other payable Increase (decrease) in receipts in advance Increase (decrease) in other current liabilities Increase (decrease) in net defined benefit liability Increase (decrease) in deferred credits Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes refund (paid) Net cash flows from (used in) operating activities	For the years ended December 31 2020 2019 $ 2,964,183 2,463,207 1,024,419 993,158 6,524 6,661 (5,065) (9,926) 3,581 4,089 (37,684) (75,204) (41,776) (41,806) (623,979) (721,671) (1,025) 21 (1,047,961) (15,405) 1,597 624 - 108 10,075 19,532	For the years ended December 31 2020 2019 $ 2,964,183 2,463,207 1,024,419 993,158 6,524 6,661 (5,065) (9,926) 3,581 4,089 (37,684) (75,204) (41,776) (41,806) (623,979) (721,671) (1,025) 21 (1,047,961) (15,405) 1,597 624 - 108 10,075 19,532
	2020 $ 2,964,183 1,024,419 6,524 (5,065) 3,581 (37,684) (41,776) (623,979) (1,025) (1,047,961) 1,597 - 10,075
	(711,294)	160,181
	76,354 88,973 4,031 (380,104) (170,435) (5,463)	(12,130) 292,938 1,562 365,271 415,524 753
	(386,644)	1,063,918
	(22,745) (8,959) (153,149) 13,260 292,494 4,016 (11,983) (390,367)	(60,936) 10,019 (149,391) (105,563) 9,306 (3,070) (11,159) (392,092)
	(277,433)	(702,886)
	(664,077)	361,032
	(1,375,371)	521,213
	1,588,812 39,026 234,284 (3,581) (554,572)	2,984,420 75,347 1,324,413 (4,089) (674,168)
	1,303,969	3,705,923

210

7-1

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD.

Statements of Cash Flows (CONT’D)

For the years ended December 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from (used in) investing activities: Acquisition of financial assets at fair value through other comprehensive income Proceeds from capital reduction of financial assets at fair value through other comprehensive income Acquisition of financial assets designated at fair value through profit or loss Proceeds from disposal of financial assets designated at fair value through profit or loss Acquisition of investments accounted for using equity method Proceeds from disposal of subsidiaries Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease (increase) in refundable deposits Decrease in other receivables Acquisition of intangible assets Acquisition of investment properties Proceeds from disposal of investment properties Decrease (increase) in other financial assets Increase in other non-current assets Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase (decrease) in guarantee deposits received Payment of lease liabilities Cash dividends paid Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	2020 (150,000) 98,000 (5,710,000) 5,975,233 (500,000) - (197,718) 1,039 30,514 15,680 (2,230) (2,515,774) 1,422,740 3,225,104 -	2019 - 2,927 (1,826,799) 2,083,118 (10,000) 9,301 (383,438) 225 (785) 129,375 - (1,065,641) 22,826 (994,928) (420)
	1,692,588	(2,034,239)
	29,552 (27,245) (2,156,000)	(24,380) (26,195) (2,156,000)
	(2,153,693)	(2,206,575)
	842,864 1,678,358	(534,891) 2,213,249
	$ 2,521,222	1,678,358

See accompanying notes to parent company only financial statements. 211

(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

For the years ended December 31, 2020 and 2019

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

(1) Company history

TAIWAN FERTILIZER CO., LTD. (the “Company”). was incorporated in May 1946. The Company’s registered office address is located at 6F, No. 88, Nanjing E. Rd., Sec.2, Taipei, 10457, Taiwan. The Company is mainly engaged in manufactures and sells inorganic and organic fertilizers and other chemical products, constructs and leases real estate services. The Company’s shares were listed on the TSEC since March 24, 1998.

(2) Approval date and procedures of the financial statements:

The accompanying financial statements were authorized for issue by the Board of Directors on March 25, 2021.

(3) New standards, amendments and interpretations adopted:

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The Company has initially adopted the following new amendments, which do not have a significant impact on its financial statements, from January 1, 2020:

Amendments to IFRS 3 “Definition of a Business”
Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”
Amendments to IAS 1 and IAS 8 “Definition of Material”
Amendments to IFRS 16 “COVID-19-Related Rent Concessions”
(b) The impact of IFRS issued by the FSC but not yet effective

The Company assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2021, would not have a significant impact on its financial statements:

Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9”
Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform － ” Phase 2

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

The following new and amended standards, which may be relevant to the Company, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

The Company does not expect the following other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its consolidated financial statements:

IFRS 17 “ Insurance Contracts” and amendments to IFRS 17 “ Insurance Contracts”
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”
“ － ”
● Amendments to IAS 16 Property, Plant and Equipment Proceeds before Intended Use
“ － ”
● Amendments to IAS 37 Onerous Contracts Cost of Fulfilling a Contract
Annual Improvements to IFRS Standards 2018-2020
Amendments to IFRS 3 “Reference to the Conceptual Framework”
Amendments to IAS 1 “Disclosure of Accounting Policies”
Amendments to IAS 8 “Definition of Accounting Estimates”

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(4) Summary of significant accounting policies:

The significant accounting policies presented in the financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the financial statements.

(a) Statement of compliance

These financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations”).

(b) Basis of preparation
(i) Basis of measurement
- 1) Financial instruments at fair value through profit or loss are measured at fair value；
- 2) Financial assets at fair value through other comprehensive income are measured at fair value;
- 3) The defined benefit liabilities (assets) are measured at fair value of the plan assets less the present value of the defined benefit obligation, limited as explained in note 4(q).
(ii) Functional and presentation currency

The functional currency is determined based on the primary economic environment in which the entities operate. The financial statements are presented in New Taiwan Dollar, which is the Company’s functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

(c) Foreign currency

(i) Foreign currency transaction

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

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

1) an investment in equity securities designated as at fair value through other comprehensive income;
2) a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or

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TAIWAN FERTILIZER CO., LTD. Notes to Financial Statements

3) qualifying cash flow hedges to the extent that the hedges are effective.
(ii) Foreign operations

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

When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to noncontrolling interests. When the Company disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

(d) Classification of current and non-current assets and liabilities

An asset is classified as current when:

(i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is expected to be realized within twelve months after the reporting period; or
(iv) The asset is cash and cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:

(i) It is expected to be settled in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) If is due to be settled within twelve months after the reporting period; or
(iv) It does not have an unconditional right to defer settlement for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

All other liabilities are classified as non-current.

(e) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are shortterm, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting shortterm cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

(f) Financial instruments

(i) Financial assets

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

1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

‧it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
‧its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

2) Fair value through other comprehensive income (FVOCI )

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

‧it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
‧its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

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

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets and accounts receivable (except for those presented as accounts receivable but measured at FVTPL). On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

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

4) Impairment of financial assets

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

The Company measures loss allowances at an amount equal to lifetime ECL, except for the following which are measured as 12-month ECL:

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

‧ debt securities that are determined to have low credit risk at the reporting date; and
‧other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

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

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company’s historical experience and informed credit assessment as well as forward-looking information.

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings’.

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

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data:

‧significant financial difficulty of the borrower or issuer;
‧a breach of contract such as a default or being more than 180 days past due;
‧the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

‧it is probable that the borrower will enter bankruptcy or other financial reorganization; or
‧the disappearance of an active market for a security because of financial difficulties.

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Company has a policy of writing off the gross carrying amount when the financial asset is 180 days past due based on historical experience of recoveries of similar assets. For corporate customers, the Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

Derecognition of financial assets

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

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

(ii) Financial liabilities and equity instruments
1) Classification of debt or equity

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

2) Equity instrument

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

3) Treasury shares

4) Financial liabilities

5) Derecognition of financial liabilities

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

6) Offsetting of financial assets and liabilities

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

7) Financial guarantee contract

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(g) Inventories

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost, of completion and selling expenses.

(h) Investment in associates

Associates are those entities in which the Company has significant influence, but not control or joint control, over the financial and operating policies.

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

When changes in an associate’s equity are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Company’s ownership percentage of the associate, the Company recognizes the Company’s share of change in equity of the associate in capital reserves in proportion to its ownership.

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

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

(i) Subsidiaries

The subsidiaries in which the Company holds controlling interest are accounted for under equity method in the nonconsolidated financial statements. Under equity method, the net income, other comprehensive income and equity in the nonconsolidated financial statement are the same as those attributable to the owners of parent in the consolidated financial statements.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

The changes in ownership of the subsidiaries that did not resule in the Company’s loss of control.are recognized as equity transaction.

(j) Investment property

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount) is recognized in profit or loss.

(k) Property, plant and equipment
(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of certain items of property, plant and equipment on January 1, 2012, the Company’s date of transition to the Standards, was determined with reference to its fair value at that date.

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

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

(ii) Subsequent expenditure

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

(iii) Depreciation

Land has an unlimited useful life and therefore is not depreciated.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

Buildings Machine Instrument equipment Miscellaneous equipment Item Buildings: Leasehold improvements and others Buildings, warehouses, storage sheds	3～60years 3～40years 3～15years 3～15years Useful lives Item Machine: 3～15 years Production equipment 16～60 years Storage tanks, power transmission systems, etc.	Useful lives
		3～15 years 16～40 years

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

(iv) Reclassification as investment property

A property is reclassified to investment property at its carrying amount when the use of the property changes from owner-occupied to investment property.

(l) Leases
(i) Identifying a lease

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

1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and
2) the customer has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
3) the customer has the right to direct the use of the asset throughout the period of use only if either:
the customer has the right to direct how and for what purpose the asset is used throughout the period of use; or

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

the relevant decisions about how and for what purpose the asset is used are predetermined and:
－ the customer has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or
－ the customer designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

On the day after the lease is completed or when the contract is re evaluated to include a lease, the Company allocates the consideration in the contract to individual lease components on the basis of a relatively separate price. However, when leasing land and buildings, the Company chooses not to distinguish between non lease components but treat lease components and non lease components as a single lease component.

(ii) As a lessee

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

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

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

－ fixed payments including in-substance fixed payments;
－ variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
－ amounts expected to be payable under a residual value guarantee; and
－ payments for purchase or termination options that are reasonably certain to be exercised.

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

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

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

－ ’ there is a change in the Company s estimate of the amount expected to be payable under a residual value guarantee; or
－ there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or
－ there is a change of its assessment on whether it will exercise a purchase, extension or termination option; or
－
there is any lease modifications

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

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

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

(iii) As a lessor

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

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

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

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

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

(m) Intangible assets
(i) Recognition and measurement

Goodwill arising on the acquisition of subsidiaries is measured at cost, less accumulated impairment losses.

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

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

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

(ii) Subsequent Expenditure

(iii) Amortization

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

Computer software cost 5 years

Patent 7~8 years

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

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(n) Impairment of non financial assets

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

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

(o) Provisions

A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and an outflow of economic benefits is possibly required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

(p) Revenue Recognition
(i) Revenue from contracts with customers

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

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

1) Sale of goods

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

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

2) Land development and sale of real estate

The Company develops and sells residential properties and usually sales properties in advance during construction or before construction begins. Revenue is recognized when control over the properties has been transferred to the customer. The properties have generally no alternative use for the Company due to contractual restrictions. However, an enforceable right to payment does not arise until legal title of a property has passed to the customer. Therefore, revenue is recognized at a point in time when the legal title has passed to the customer.

3) The Company's operating leasing business is classified into operating leases based on lease conditions and the possibility of cash receivables, and recognizes relevant operating lease income.
4) Financing componentsx

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(q) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

(ii) Defined benefit plans

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

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

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

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

(iii) Other long-term employee benefits

The Company’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.

(iv) Termination benefits

Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Group recognizes costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting date, then they are discounted.

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Notes to Financial Statements

(v) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(r) Income Taxes

(i) temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;
(ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
(iii) taxable temporary differences arising on the initial recognition of goodwill.

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

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

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:
1) the same taxable entity; or
2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(s) Earnings per share

Disclosures are made of basic and diluted earnings per share attributable to ordinary equity holders of the Company. The basic earnings per share is calculated based on the profit attributable to the ordinary shareholders of the Company divided by weighted average number of ordinary shares outstanding. The diluted earnings per share is calculated based on the profit attributable to ordinary shareholders of the Company, divided by weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as remuneration of employees and employee stock options.

(t) Operating segments

Please refer to the consolidated financial statements of TAIWAN FERTILIZER CO., LTD. for the years ended December 31, 2020 and 2019 for operating segments information.

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the financial statements in conformity with the IFRSs endorsed by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

(a) Impairment assumptions of carrying amounts of subsidiaries.

The assessment of impairment of subsidiaries requires the Company to allocate the subsidiaries' CGUs to the recoverable amount. To calculate the recoverable amount of relevant CGUs, the management should use the appropriate discount rate for calculating the present value to estimate the future cash flow of CGUs . If the actual cash flow less than expectation, the Company would have significant impairment loss.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

Regarding assumptions and estimation uncertainties, valuation has a significant risk of resulting in a material adjustment within the next financial year as following:

The Company’s accounting policies include measuring financial and non-financial assets and liabilities at fair value through profit or loss. The Company’s financial instrument valuation group conducts independent verification on fair value by using data sources that are independent, reliable, and representative of exercise prices. This financial instrument valuation group also periodically adjusts valuation models, conducts back testing, renews input data for valuation models, and makes all other necessary fair value adjustments to assure the rationality of fair value.

The Company strives uses the market observable inputs when measuring its assets and liabilities.

(a) Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.
(b) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).
(c) Level 3: inputs for the assets or liability that are not based on observable market data.

For any transfer within the fair value hierarchy, the impact of the transfer is recognized on the reporting date. Please refer to Note 6(t), Financial instruments for assumptions used in measuring fair value.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Cash on hand Demand deposits and checking accounts Time deposits with original maturities less than 3 months Cash and cash equivalents	December 31, 2020 $ 2,446 684,776 1,834,000	December 31, 2019 2,056 453,758 1,222,544
	$ 2,521,222	1,678,358

(i) Time deposits with original maturity of more than 3 months are recorded as other financial assets, and are classified as non-current if their maturities exceed one year, and as follow.

Other current financial assets Other non current financial assets	December 31, 2020 $ 900,000 159,188	December 31, 2019 4,157,246 127,046 4,284,292
	$ 1,059,188

(ii) Refer to Note 6(t) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Company.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

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

Mandatorily measured at fair value through profit or loss Non-derivative financial assets Beneficiary certificate	December 31, 2020 $ 1,300,013	December 31, 2019 1,560,181

Please refer to note 6(s) for the amount of remeasurement fair value through profit or loss.

Equity investments at fair value through other comprehensive income Stock listed on domestic markets Stock unlisted on domestic markets Total	December 31, 2020 $ 112,566 2,712,178	December 31, 2019 94,691 1,962,947
	$ 2,824,744	2,057,638

(i) Equity investments at fair value through other comprehensive income

The Company designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investments that the Company intends to hold for long-term for strategic purposes.

As a result of the investment at fair value through other comprehensive income, the amounts of the dividend revenues recognized for the years ended December 31, 2020 and 2019 were $41,776 thousand and $41,638 thousand, respectively.

A resolution was approved during the general shareholders’ meeting of Top Taiwan V Venture Capital Co., Ltd., one of the financial assets measured at fair value through other comprehensive income by the Company, held on May 10, 2019, for capital reduction, wherein the Company will receive the refund of $2,927 thousand.

A resolution was approved during the provisional meeting of the shareholders of Eminent Venture Capital Corporation, one of the financial assets measured at fair value through other comprehensive income by the Company, held on December 31, 2019, for capital reduction, wherein the Company will receive the refund of $18,000 thousand.

The Company invested in domestic non listed (OTC) company stocks of Eminent III Venture Capital Corporation (Eminent III) through a joint venture agreement in November 2017. Thereafter, a second cash capital increase was approved during the board of directors by Eminent III in December 2019, resulting in the Company to remit the shares amounting to $150,000 thousand in January 2020.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

A resolution was approved during the provisional meeting of the shareholders of Eminent II Venture Capital Corp. (Eminent II), a domestic non-listed (OTC) company and one of the financial assets measured at fair value through other comprehensive income by the Company, held on June 18, 2020, for capital reduction, wherein the Company will receive the refund of $80,000 thousand.

There were no disposals of strategic investments and transfers of any cumulative gain or loss within equity relating to these investments as of December 31, 2020 and 2019.

(ii) For credit risk, please refer to note 6(t).
(iii) Financial assets at fair value through other comprehensive income of the Company had not been pledged as collateral for long-term borrowings.
(d) Financial assets measured at amortized cost

Foreign government bonds Less : Loss allowance Total	December 31, 2020 $ 28,507 -	December 31, 2019 30,104 - 30,104
	$ 28,507

The Company has assessed that these financial assets are held to maturity to collect contractual cash flows, which consist solely of payments of principal and interest on principal amount outstanding. Therefore, these investments were classified as financial assets measured at amortized cost.

(i) For credit risk, please refer to note 6(t).
(ii) Financial assets measured at amortized costs of the Company had not been pledged as collateral for long-term borrowings.
(e) Notes receivable, accounts receivable, long-term notes and accounts receivable

Notes receivables – Merchandise Account receivables – Merchandise Less : Loss allowance	December 31, 2020 $ 117,543 646,808 - $ 764,351	December 31, 2019 193,897 735,781 -
		929,678

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provision in Taiwan were determined as follows:

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

December 31, 2020	December 31, 2020	Loss allowance provision - - - -
Gross carrying amount $ 701,452 9,156 18,005 35,738	Expected loss rate
$ 764,351		-
		Loss allowance provision - - - -
Gross carrying amount $ 909,746 8,192 8,579 3,161	Expected loss rate
	0%~0.01% 0%~0.55% 0%~0.86% 0%~1%
$ 929,678		-

(f) Other receivables (including the long-term receivable)

Other receivables Property receivable Unrealized interest income Less : Loss allowance Other receivables Long-term receivables	December 31, 2020 $ 318,020 140,511 (14,335) (317,277)	December 31, 2019 323,393 162,239 (20,383) (317,277)
	$ 126,919	147,972
	$ 11,523 115,396	17,716 130,256
	$ 126,919	147,972

As of December 31, 2020, the total amount of receivables due to the sale of premises of the Company was $126,176 thousand, After the year 2021 and the year 2022, $10,780 and $115,396 thousand will be recovered respectively.

The above receivables of $126,176 thousand are all secured by the premises and promissory notes sold, and a mortgage is established to the Company.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

The movement in the allowance for other receivables was as follows.

Balance on December 31 (Same as Balance on January 1)	For the years ended December 31 2020 2019 $ 317,277 317,277

Note: Ending balances in 2020 and 2019 were the same as the beginning balances in 2020 and 2019.

For the explanation of individually assessed impairment, please refers to note 7; for other credit risk information, please refers to note 6(t).

(g) Inventories, construction in progress, land held for sale and receipts in advance

Inventories Raw materials Finished goods Merchandise Construction in progress Hsinchu land development project	December 31, 2020 $ 1,739,833 389,212 182 $ 2,129,227 $ 644,783	December 31, 2019 1,329,721 419,077 325
		1,749,123
		644,783

The cost of inventories recognized as cost of goods sold and expense for the years ended December 31, 2020 and 2019, amounted to $6,631,474 and $8,849,526 thousand, respectively. For the years ended December 31, 2020 and 2019, the write-down of inventories to net realizable value both are not recognized.

As of December 31, 2020 and 2019, the aforesaid inventories were not pledged as collateral.

(h) Investments accounted for using equity method

Subsidiaries Associates	December 31, 2020 $ 2,839,585 9,282,092	December 31, 2019 2,301,527 9,400,297 11,701,824
	$ 12,121,677

(i) Subsidiaries

Please refer to the consolidated financial report for the years ended December 31, 2020.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(ii) Associates

The Company’s financial information for equity accounted investees at the reporting date was as follows:

December 31, 2020 December 31, 2019 Material associates Al-Jubail Fertilizer Company (“Al-Jubail”) $ 9,202,183 9,304,896 Associates that are not individually material MITAGRI Co., Ltd. 32,881 40,211 Taiwan Agricultural Investment and Development Co., Ltd. 47,028 55,190 $ 9,282,092 9,400,297 Associates that had materiality were as follows: Country Equity ownership Associate Nature of relationship of registration December 31, 2020 December 31, 2019 AI-Jabail Fertilizer Company Equity-method investee Kingdom of Saudi Arabia 50.00% 50.00%	December 31, 2020 December 31, 2019 Material associates Al-Jubail Fertilizer Company (“Al-Jubail”) $ 9,202,183 9,304,896 Associates that are not individually material MITAGRI Co., Ltd. 32,881 40,211 Taiwan Agricultural Investment and Development Co., Ltd. 47,028 55,190 $ 9,282,092 9,400,297 Associates that had materiality were as follows: Country Equity ownership Associate Nature of relationship of registration December 31, 2020 December 31, 2019 AI-Jabail Fertilizer Company Equity-method investee Kingdom of Saudi Arabia 50.00% 50.00%	December 31, 2020 December 31, 2019 Material associates Al-Jubail Fertilizer Company (“Al-Jubail”) $ 9,202,183 9,304,896 Associates that are not individually material MITAGRI Co., Ltd. 32,881 40,211 Taiwan Agricultural Investment and Development Co., Ltd. 47,028 55,190 $ 9,282,092 9,400,297 Associates that had materiality were as follows: Country Equity ownership Associate Nature of relationship of registration December 31, 2020 December 31, 2019 AI-Jabail Fertilizer Company Equity-method investee Kingdom of Saudi Arabia 50.00% 50.00%	December 31, 2020 December 31, 2019 Material associates Al-Jubail Fertilizer Company (“Al-Jubail”) $ 9,202,183 9,304,896 Associates that are not individually material MITAGRI Co., Ltd. 32,881 40,211 Taiwan Agricultural Investment and Development Co., Ltd. 47,028 55,190 $ 9,282,092 9,400,297 Associates that had materiality were as follows: Country Equity ownership Associate Nature of relationship of registration December 31, 2020 December 31, 2019 AI-Jabail Fertilizer Company Equity-method investee Kingdom of Saudi Arabia 50.00% 50.00%
			December 31, 2020
AI-Jabail Fertilizer Company	Equity-method investee	Kingdom of Saudi Arabia	50.00%

The following is a summary of financial information on the Company’s significant associates. In order to reflect the adjustments for fair value in acquisition of shares and differences in accounting policies, adjustment for the amounts presented on the financial statements of associates in accordance with IFRSs has been made to such financial information.

Summary financial information on AI-Jabail Fertilizer Company

Current assets Noncurrent assets Current liabilities Noncurrent liabilities Net assets Net assets attributable to non controlling interests Net assets attributable to investee owners	December 31, 2020 $ 6,628,334 15,110,337 (1,739,092) (840,436) $ 19,159,143 $ 9,405,861 9,753,282 $ 19,159,143	December 31, 2019 5,317,917 17,012,975 (2,313,795) (974,846)
		19,042,251
		9,250,058 9,792,193
		19,042,251

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

Revenue Profit for the year Other comprehensive income Comprehensive income Comprehensive income attributable to non controlling interests Comprehensive income attributable to investee owners Dividends declared by Associates	For the years ended December 31 2020 2019 $ 8,857,397 9,455,505	For the years ended December 31 2020 2019 $ 8,857,397 9,455,505
	1,565,731 21,666	1,641,322 5,479
	$ 1,587,397	1,646,801
	$ 879,745	754,168
	$ 707,652	892,633
	$ 211,435	1,415,010

(iii) Taiwan Yes Deep Ocean Water Co., Ltd., which was accounted for as acquisition using the equity method, did not meet the expected operation performance taoget. The Company assessed the decrease of future cash inflow would cause the recoverable amount less than the bookl value. The Company recognized impairment loss $0 and $12,891 thousand included in share of other compreensive income of subsidiaires, associates and joint ventures accounted for using equity method in statements of comprehensive income.
(iv) Collateral

As of December 31, 2020 and 2019, the investments in the aforesaid equity-accounted investees were not pledged as collateral.

(i) Property, plant and equipment

The movements in the cost, depreciation, and impairment of the property, plant and equipment of the Group for the years ended December 31, 2020 and 2019 were as follows:

Land $ 3,652,778 - - -	Building and constructio n 3,749,688 14,606 - 88,011	Machinery and equipment 9,379,379 79,407 (5,795) 96,542	Transportation Equipment 85,716 1,519 (9,610) 4,545	Other Equipment 419,170 6,914 (172) 4,765	Construction inprogress 294,491 118,293 - (193,863)	Total 17,581,222 220,739 (15,577) -
$ 3,652,778	3,852,305	9,549,533	82,170	430,677	218,921	17,786,384
$ 3,652,778 - - - -	3,604,872 19,401 (1,891) - 127,306	9,019,442 129,545 (45,620) - 276,012	84,681 484 (2,240) - 2,791	409,108 8,129 (7,518) - 9,451	496,239 224,254 - (2,305) (423,697)	17,267,120 381,813 (57,269) (2,305) (8,137)
$ 3,652,778	3,749,688	9,379,379	85,716	419,170	294,491	17,581,222
$ - - -	747,690 122,430 -	3,518,395 646,571 (5,781)	60,347 7,870 (9,610)	158,485 35,481 (172)	82,820 - -	4,567,737 812,352 (15,563)
$ -	870,120	4,159,185	58,607	193,794	82,820	5,364,526

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

Land $ - - - -	Building and constructio n 635,327 114,897 (1,891) (643)	Machinery and equipment 2,942,333 625,554 (45,545) (3,947)	Transportation Equipment 54,709 7,870 (2,232) -	Other Equipment 132,254 33,682 (7,356) (95)	Construction inprogress 82,820 - - -	Total 3,847,443 782,003 (57,024) (4,685)
$ -	747,690	3,518,395	60,347	158,485	82,820	4,567,737
$ 3,652,778	2,982,185	5,390,348	23,563	236,883	136,101	12,421,858
$ 3,652,778	2,969,545	6,077,109	29,972	276,854	413,419	13,419,677
$ 3,652,778	3,001,998	5,860,984	25,369	260,685	211,671	13,013,485

As of December 31, 2020 and 2019, the property, plant and equipment were not pledged as collateral.

(j) Right-of-use assets

The Company leases land. Information about leases for which the Company as a lessee is presented below:

Cost: Balance on December 31, 2020 Balance on December 31, 2019 Accumulated depreciation and impairment losses: Balance on January 1, 2020 Depreciation for the year Balance on December 31, 2020 Balance on January 1, 2019 Depreciation for the year Balance on December 31, 2019 Carrying amount: Balance on December 31, 2020 Balance on January 1, 2019 Balance on December 31, 2019	Land $ 1,321,931
	$ 1,321,931
	$ 99,955 99,896
	$ 199,851
	$ - 99,955
	$ 99,955
	$ 1,122,080
	$ 1,321,931
	$ 1,221,976

(i) The lease term for the land in a special industrial zone is 20 years, and the agreement is renewable until the total lease reaches 50 years.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(ii) The Company can sublease the land, and it can also develop wests 8 and 9 of the wharf area, as well as construct warehouse facilities and public roads on behalf of THB. The Company can use its capital expenses for the construction as rentals in advance. However, once the lease term ends or the agreement is early terminated, all the titles to the facilities and improvements on the leased land should be transferred to THB.

The Company used its expenditures of $1,500,481 thousand for the construction of wests 8 and 9 of Taichung Harbor as rentals until March 20, 2034. The long-term prepayments for lease should be amortized over its rent free periods.

(k) Investment property

The Company for the Investment property were as follows:

	Own assets	Undeveloped Investment Property 17,339,970 - (374,779) (43)	Right-of-use assets Other 3,778 - - -	Right-of-use assets Other 3,778 - - -	Total 37,039,730 2,515,774 (374,779) (43)
Completed Investment Property $ 10,972,209 13,457 - -	Investment Property under Construction 8,723,773 2,502,317 - -
$ 10,985,666	11,226,090	16,965,148	3,778		39,180,682
$ 10,998,676 157 2,305 - (28,929)	7,662,067 1,061,706 - - -	17,347,837 - - (7,421) (446)	- 3,778 - - -		36,008,580 1,065,641 2,305 (7,421) (29,375)
$ 10,972,209	8,723,773	17,339,970	3,778		37,039,730
$ 288,719 92,559 (839)	77,991 18,353 -	607,646 - -	- 1,259 839		974,356 112,171 -
$ 380,439	96,344	607,646	2,098		1,086,527
$ 195,988 92,731	59,522 18,469	607,646 -	- -		863,156 111,200
$ 288,719	77,991	607,646	-		974,356
$ 10,605,227	11,129,746	16,357,502	1,680		38,094,155
$ 10,802,688	7,602,545	16,740,191	-		35,145,424
$ 10,683,490	8,645,782	16,732,324	3,778		36,065,374
				$ 104,432,231
				$ 96,182,489

Completed investment property are located in C3/C6/C7/C8/C9 in the Nangang Economic and Trade Park, and the Corporation leased land use right to others.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(i) The main provisions of the C6/C7/C8/C9 contract on the pledging of land use rights were as follows:
1) Land use rights are for 50 years from the date of registration of these rights.
2) The land use rights (accounted for as deferred income-current and noncurrent) amounted to $3,200,889 thousand, which has been treated as royalty revenue (accounted for as operating revenue) amortizable over 50 years from June 13, 2006. As of December 31, 2020 and 2019, the unamortized balances of the land used rights under above mentioned contract were $2,269,964 and $2,333,981 thousand, respectively.
3) In addition to the land use right, the annual rental payable by the lessee is 8% of the reference land price announced by the local government, with the calculation starting from the contract date. When the reference land price is adjusted, the annual rental will be revised at the percentage the same as that set on the date of the reference price adjustment. The annual rentals in 2020 and 2019 were $339,220 and $328,151 thousand, respectively.
(ii) On September 15, 2015, the Corporation signed with CTBC Life Insurance Co., Ltd. and Taiwan Life Insurance Co., Ltd. (together, the “lessees”) separate contracts for these two insurance companies to have the rights to use land located in C3 in the Nangang Economic and Trade Park. The main provisions of these contracts are as follows:
1) Land use rights (LURs) are valid for 45 years from the date of the registration of these rights.
2) The LURs (accounted for as deferred income - current and noncurrent) amounted to $14,288,705 thousand, which has been treated as royalty revenue (under operating revenue) amortizable over 45 years from December 10, 2015. As of December 31, 2020 and 2019, the unamortized balance of the LURs were $12,683,431 and $13,000,957 thousand, respectively.
3) In addition to the LURs, the annual rental payable by the lessees is 0.8% of the reference land price announced by the local government, with the calculation starting from the registration date. When the reference land price is adjusted, the annual rental will be revised at the same percentage as the rate of the reference price adjustment. The lessees’ annual rental in 2020 and 2019 were both $46,754 and $45,009 thousand.
4) After nine years and six months from the registration date, the lessees have within six months to extend the validity period for the land use rights to another 40 years by giving a written notice to the Corporation. With this extension, the entire validity period of the LURs will be 85 years, and the lessees should pay an additional one-time royalty of $15,000,000 thousand.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

5) Under the contract, the lessees provided the Taiwan Government Bond A02105 and A03114 as collaterals; the fair values of these bonds were as follow:

Balance on December 31, 2020 Balance on December 31, 2019 Balance on January 1, 2019	The Taiwan Government Bond A02105 $ 1,211,269	The Taiwan Government Bond A03114 1,760,699
	$ 1,173,011	1,691,012
	$ 1,086,786	1,596,767

(iii) Investment properties under construction are located in Hsinchu City and Hualien City and included land for the “C2 Tourist Hotel Project” and “Commercial Building Project” in the Nangang Economic and Trade Park. The C2 Tourist Hotel Project was won by the Grand Hi Lai Hotel Co., Ltd. and the Caesar Park Hotel Co., Ltd., who both signed a front-end agreement (FEA) on December 31, 2013, with the contract for C2 Tourist Hotel Project signed under lease agreement with the Grand Hi Lai Hotel Co., Ltd. for the development of the C2 Tourist Hotel, and the termination agreement signed with Caesar Park Hotel Co., Ltd. based on the resolution approved during the board meeting of the Company held on March 28, 2019. The related termination procedures were still in progress.

In addition, the bid for the C2 Commercial Building Project was won by Dung Jeng Investment Co., Ltd. (“Dung Jeng”), in which the Company will construct a building and parking space for Dung Jeng. The lease contract was signed on January 30, 2015, with a lease period of 20 years from the completion of the building and parking space. The termination agreement with the Dung Jeng Investment Co., Ltd. had been approved during the board meeting of the Company held on March 28, 2019. The related termination procedures were still in progress.

The construction licenses for C2 Hotel and Commercial Building Projects have been obtained, wherein they are allowed to engage in engineering works such as steel structure and curtain wall, at a total investment amount of $2,497,316 thousand, of which, the amount of $5,130,021 thousand had been currently invested.

The fair values of investment properties were assessed as follows:

C6／C7／C8／C9 C2 C3 Hsinchu Kaohsiung	December 31, 2020 $ 24,232,441	December 31, 2019 22,746,927 18,544,519 32,165,990 5,434,878 17,290,175
	$ 20,377,824
	$ 35,935,442
	$ 5,512,070
	$ 18,374,454

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

The fair values were based on the valuations carried out at April 20, 2020 and April 10, 2019 by independent qualified professional valuer.

Area C6/C7/C8/C9 C2 C3 HsinChu KaoHsiung	For the years ended December 31	For the years ended December 31
	2020 18% 18% 18% 16% 17%	2019
		18% 16% 18% 16% 16%

As of December 31, 2020 and 2019 investment properties were not pledged as collateral.

(l) Operating leases

The Company leases out its investment property and some machinery. The Company has classified these leases as operating leases, because it does not transfer substantially all of the risks and rewards incidental to the ownership of the assets. Please refer to note 6(k) sets out information about the operating leases of investment property.

A maturity analysis of lease payments, showing the undiscounted lease payments to be received after the reporting date are as follows:

Less than one year One to two years Two to three years Three to four years Four to five years More than five years Total undiscounted lease payments	December 31, 2020 $ 765,379 730,185 661,772 610,563 601,123 12,784,992	December 31, 2019 742,946 727,303 678,420 626,341 599,946 12,929,393 16,304,349
	$ 16,154,014

For the years ended December 31, 2020 and 2019, the property rental income was $759,623 and $711,967 thousand, respectively. There were no significant property equipment and maintenance expenses.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(m) Employee benefits

(i) Defined benefit plans

Reconciliation of defined benefit obligation at present value and plan asset at and fair value are as follows:

Present value of defined benefit obligation Fair value of plan assets The effect of the asset ceiling Net defined benefit liabilities	December 31, 2020 $ 507,524 (376,205)	December 31, 2019 521,197 (413,711)
	131,319 -	107,486 -
	$ 131,319	107,486

The Company makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pension benefits for employees upon retirement. Plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average monthly salary for the six months prior to retirement.

1) Composition of plan assets

The Company set aside pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. Under these regulations, the minimum earnings from these pension funds shall not be less than the earnings from two-year time deposits with the interest rates offered by local banks.

The Company’s Bank of Taiwan labor pension reserve account balance amounted to $376,205 thousand as of December 31, 2020. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

2) Movements in present value of the defined benefit obligations

The movements in the present value of the defined benefit obligations for the years ended December 31, 2020 and 2019 were as follows:

Defined benefit obligation, January 1 Current service costs and interest Re-measurement of the net defined benefit liability －Actuarial (losses) gains arose from changes in demographic assumptions －Actuarial gains arose from changes in financial assumption －Experience adjustment Benefits paid Defined benefit obligation, December 31	For the years ended December 31 2020 2019 $ 521,197 520,510 18,210 19,289 - 1 12,665 3,204 37,470 17,657 (82,018) (39,464) $ 507,524 521,197
	2020 $ 521,197 18,210 - 12,665 37,470 (82,018)
	$ 507,524

3) Movements in the fair value of plan assets

The movements in the fair value of the defined benefit plan assets for the years ended December 31, 2020 and 2019 were as follows:

December 31, 2020 and 2019 were as follows:
	For	the years ended	December 31
		2020	2019
Fair value of plan assets, January 1	$	413,711	406,263
Interests revenue		2,452	2,883
Re-measurement of the net defined benefit liability
－Experience adjustment		14,319	16,464
Contributions made		13,975	27,565
Benefits paid		(68,252)	(39,464)
Fair value of plan assets, December 31	$	376,205	413,711

4) Movements in the fair value of plan assets : None

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

5) Expenses recognized in profit or loss

The Company’s pension expenses recognized in profit or loss for the years ended December 31, 2020 and 2019 were as follows:

Current service cost Net interest of net liabilities for defined benefit obligations Operating costs Operating expenses	For the years ended December 31 2020 2019 $ 15,115 15,616 643 790	For the years ended December 31 2020 2019 $ 15,115 15,616 643 790
	2020 $ 15,115 643
	$ 15,758	16,406
	$ 10,196 5,562	10,458 5,948
	$ 15,758	16,406

6) Re-measurement of net defined benefit liability recognized in other comprehensive income

The Company’s net defined benefit liability recognized in other comprehensive income for the years ended December 31, 2020 and 2019 were as follows:

Cumulative amount, January 1 Recognized during the year Cumulative amount, December 31	For the years ended December 31 2020 2019 $ 100,436 96,918 28,653 3,518	For the years ended December 31 2020 2019 $ 100,436 96,918 28,653 3,518
	2020 $ 100,436 28,653
	$ 129,089	100,436

7) Actuarial assumptions

The following were the key actuarial assumptions at the reporting date:

The principal actuarial assumptions at the reporting date were as follows:

Discount rate Future salary increases	2020.12.31 0.25% 1.50%	2019.12.31 0.65% 1.50%

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date is $16,256 thousand.

The weighted-average duration of the defined benefit plan is 6 year.

247

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

8) Sensitivity Analysis

As of December 31, 2020 and 2019, the changes in the principal actuarial assumptions will impact on the present value of defined benefit obligation as follows:

December 31, 2020 Discount rate Future salary increase rate December 31, 2019 Discount rate Future salary increase rate	Impact on the present value of defined benefit obligation Increase by 0.25% Decrease by 0.25% (7,988) 8,237 8,114 (7,910) (7,936) 8,186 8,096 (7,890)
	Increase by 0.25% (7,988) 8,114 (7,936) 8,096

The analysis is performed on the same basis for prior year.

(ii) Defined contribution plans

The Company contributes an amount at the rate of 6% of the employee’s monthly wages to the Labor Pension personal account with the Bureau of the Labor Insurance and Council of Labor Affairs in R.O.C. in accordance with the provisions of the Labor Pension Act. The Company’s contributions to the Bureau of the Labor Insurance and Social Security Bureau for the employees’ pension benefits require no further payment of additional legal or constructive obligations.

As of December 31, 2020 and 2019, the expense of defined contribution plans under Labor Pension Act was as follows:

Operating costs Operating expenses	For the years ended December 31 2020 2019 $ 12,587 11,193 9,438 9,469	For the years ended December 31 2020 2019 $ 12,587 11,193 9,438 9,469
	2020 $ 12,587 9,438
	$ 22,025	20,662

The cost of the pension contributions to the Labor Insurance Bureau for the years ended December 31, 2020 and 2019 amounted to $17,114 and $18,464 thousand, respectively

248

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(iii) Short-term employee benefits

short term employee benefit liabilities

	December 31,	December	31,
	2020	2019
$	11,899		9,347

(n) Income tax
(i) The components of income tax in the years 2020 and 2019 were as follows:

Current income tax expense Current period incurred 10% surtax on undistributed earnings Land value increment tax Prior years income tax adjustment Deferred tax expense Origination and reversal of temporary differences Land value increment tax Income tax expense	For the years ended December 31 2020 2019 $ 290,143 403,496 - 309 202,496 108,634 5,491 (2,635)	For the years ended December 31 2020 2019 $ 290,143 403,496 - 309 202,496 108,634 5,491 (2,635)
	2020 $ 290,143 - 202,496 5,491
	498,130	509,804
	81,990 (68,818)	(89,256) (21,296)
	13,172	(110,552)
	$ 511,302	399,252

The amount of income tax recognized in other comprehensive income for 2020 and 2019 was as follows:

Items that will not be reclassified to profit or loss: Remeasurements effects of defined benefit plans Items that may be reclassified subsequently to profit and loss: Foreign currency translation differences for foreign operations	For the years ended December 31 2020 2019 $ (7,163) (879) $ (101,288) (39,297)
	2020 $ (7,163)
	$ (101,288)

249

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

Reconciliation of income tax and for 2020 and 2019 as follows:

Profit excluding income tax Income tax using the Company’s domestic tax rate Non-deductible income tax Tax-exempt income Land value increment tax Overestimate and underestimate of previously income tax Undistributed earnings additional tax Others Income tax expense	For the years ended December 31 2020 2019 $ 2,964,183 2,463,207 592,837 492,641 2,133 4,414 (219,078) (179,386) 133,678 87,338 5,491 (2,635) - 309 (3,759) (3,429) $ 511,302 399,252
	2020 $ 2,964,183
	592,837 2,133 (219,078) 133,678 5,491 - (3,759)
	$ 511,302

(ii) Deferred tax assets and liabilities
1) Recognized deferred tax assets and liabilities

The movements in deferred tax assets and liabilities for the years ended December 31, 2020 and 2019 were as follows:

Deferred tax liabilities:

Land value increment tax	Investment income recognized under the equity method	Exchange difference on the translation of foreign operations	Others	Total 7,089,164 15,560
$ 6,363,202 (68,818)	625,386 85,915	72,592 -	27,984 (1,537)
$ 6,294,384	711,301	72,592	26,447	7,104,724
$ 6,384,498 (21,296) -	697,551 (72,165) -	111,718 - (39,126)	24,711 3,273 -	7,218,478 (90,188) (39,126)
$ 6,363,202	625,386	72,592	27,984	7,089,164

Deferred tax assets:

Unamortized manufacturing costs	Defined benefit obligation	Impairment loss on assets	Exchange difference on the translation of foreign operations	Others	Total
$ 55,900 10,259 -	24,237 - 7,163	63,456 - -	379 - 101,288	30,759 (7,871) -	174,731 2,388 108,451
$ 66,159	31,400	63,456	101,667	22,888	285,570
$ 44,513 11,387 -	22,594 764 879	63,456 - -	208 - 171	22,546 8,213 -	153,317 20,364 1,050
$ 55,900	24,237	63,456	379	30,759	174,731

250

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(iii) The Company’s income tax returns through 2017 have been assessed and approved by the Tax Authority.
(o) Share capital and other interests

(i) Share capital

(ii) Capital surplus

The components of capital surplus were as follows:

Donations Treasury share transactions Others	December 31, 2020 $ 44,803 2,187,988 11,861	December 31, 2019 44,803 2,187,988 11,282
	$ 2,244,652	2,244,073

(iii) Retained earnings

251

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

1) Legal reserve

2) Special reserve

The Company implemented the optional exemptions under IFRS 1 "First-time Adoption of International Financial Reporting Standards” when adopting the International Financial Reporting Standards at first time. The increase in retained earnings resulting from the unrealized revaluation increments, cumulative translation adjustment and the revaluation increments in the transfer from fix assets to investment property was $32,114,341 thousand. In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, the same amount of the increasing earnings shall be reclassified to special earnings reserve. If a certain proportion of the asset has been disposed or reclassified, the same proportion of special earnings reserve equivalent to that of the asset, which has been disposed or reclassified, has to be transferred back to its earnings. Such special earnings reserve has to have the same amount with the one that was initially being reclassified to its special earnings reserve. The balance of such special earnings reserve amounted to $30,409,839 and $30,734,041 thousand as of December 31, 2020 and 2019, respectively.

3) Earnings distribution

Dividends distributed to ordinary shareholders: Cash	2019	2019		2018 Amount per share (dollars) Amount 2.20 2,156,000	2018 Amount per share (dollars) Amount 2.20 2,156,000
	Amount per share (dollars)	Amount		Amount per share (dollars)
	$ 2.20	2,156,000		2.20

252

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

On March 25, 2021, the Company’s Board of Directors resolved to appropriate the 2020 earnings. These earnings were appropriated as follows:

For the year ended December 31 2020 Amount per share (dollars) Amount Dividends distributed to ordinary shareholders: Cash $ 2.3 2,254,000 v) Other equity accounts (net of tax) Exchange differences on translation of foreign financial statements Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Total Balance on January 1, 2020 $ (51,551) 1,398,701 1,347,150 Exchange differences on subsidiaries accounted for using equity method (411,089) - (411,089) Unrealized gains from financial assets measured at fair value through other comprehensive income - 715,107 715,107 Balance on December 31, 2020 $ (462,640) 2,113,808 1,651,168 Balance on January 1, 2019 $ 109,064 1,203,593 1,312,657 Exchange differences on subsidiaries accounted for using equity method (160,615) - (160,615) Unrealized gains from financial assets measured at fair value through other comprehensive income - 195,108 195,108 Balance on December 31, 2019 $ (51,551) 1,398,701 1,347,150	For the year ended December 31 2020 Amount per share (dollars) Amount Dividends distributed to ordinary shareholders: Cash $ 2.3 2,254,000 v) Other equity accounts (net of tax) Exchange differences on translation of foreign financial statements Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Total Balance on January 1, 2020 $ (51,551) 1,398,701 1,347,150 Exchange differences on subsidiaries accounted for using equity method (411,089) - (411,089) Unrealized gains from financial assets measured at fair value through other comprehensive income - 715,107 715,107 Balance on December 31, 2020 $ (462,640) 2,113,808 1,651,168 Balance on January 1, 2019 $ 109,064 1,203,593 1,312,657 Exchange differences on subsidiaries accounted for using equity method (160,615) - (160,615) Unrealized gains from financial assets measured at fair value through other comprehensive income - 195,108 195,108 Balance on December 31, 2019 $ (51,551) 1,398,701 1,347,150	For the year ended December 31 2020 Amount per share (dollars) Amount Dividends distributed to ordinary shareholders: Cash $ 2.3 2,254,000 v) Other equity accounts (net of tax) Exchange differences on translation of foreign financial statements Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Total Balance on January 1, 2020 $ (51,551) 1,398,701 1,347,150 Exchange differences on subsidiaries accounted for using equity method (411,089) - (411,089) Unrealized gains from financial assets measured at fair value through other comprehensive income - 715,107 715,107 Balance on December 31, 2020 $ (462,640) 2,113,808 1,651,168 Balance on January 1, 2019 $ 109,064 1,203,593 1,312,657 Exchange differences on subsidiaries accounted for using equity method (160,615) - (160,615) Unrealized gains from financial assets measured at fair value through other comprehensive income - 195,108 195,108 Balance on December 31, 2019 $ (51,551) 1,398,701 1,347,150	For the year ended December 31 2020 Amount per share (dollars) Amount Dividends distributed to ordinary shareholders: Cash $ 2.3 2,254,000 v) Other equity accounts (net of tax) Exchange differences on translation of foreign financial statements Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Total Balance on January 1, 2020 $ (51,551) 1,398,701 1,347,150 Exchange differences on subsidiaries accounted for using equity method (411,089) - (411,089) Unrealized gains from financial assets measured at fair value through other comprehensive income - 715,107 715,107 Balance on December 31, 2020 $ (462,640) 2,113,808 1,651,168 Balance on January 1, 2019 $ 109,064 1,203,593 1,312,657 Exchange differences on subsidiaries accounted for using equity method (160,615) - (160,615) Unrealized gains from financial assets measured at fair value through other comprehensive income - 195,108 195,108 Balance on December 31, 2019 $ (51,551) 1,398,701 1,347,150
	2020
	Amount per share (dollars)

			Total 1,347,150 (411,089) 715,107 1,651,168 1,312,657 (160,615) 195,108 1,347,150
$ 109,064 (160,615) - $ (51,551)		1,203,593 - 195,108 1,398,701

(iv) Other equity accounts (net of tax)

(p) Earnings per share

The basic earnings per share and diluted earnings per share were calculated as follows:

Basic earnings per share Profit attributable to ordinary shareholders Weightedaverage number of ordinary shares	For the years ended December 31 2020 2019 $ 2,452,881 2,063,955	For the years ended December 31 2020 2019 $ 2,452,881 2,063,955
	2020 $ 2,452,881
	980,000	980,000
	$ 2.50	2.11

253

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

Diluted earnings per share Profit attributable to ordinary shareholders (diluted) Weightedaverage number of ordinary shares Effect of potentially dilutive ordinary shares Employees’ compensation Weightedaverage number of ordinary shares (diluted)	For the years ended December 31 2020 2019 $ 2,452,881 2,063,955	For the years ended December 31 2020 2019 $ 2,452,881 2,063,955
	2020 $ 2,452,881
	980,000 1,711	980,000 1,963
	981,711	981,963
	$ 2.50	2.10

(q) Revenue from contracts with customers

(i) Details of revenue

The details of revenue were as follows:

Revenue from contracts with customers Revenue from investment properties Property revenue Other operating revenue	For the years ended December 31 2020 2019 $ 8,218,525 9,938,161 1,586,529 1,596,074 - 1,036,607 126,075 53,874 $ 9,931,129 12,624,716	For the years ended December 31 2020 2019 $ 8,218,525 9,938,161 1,586,529 1,596,074 - 1,036,607 126,075 53,874 $ 9,931,129 12,624,716
	2020 $ 8,218,525 1,586,529 - 126,075 $ 9,931,129
		12,624,716

(ii) Disaggregation of revenue

For theyear ended December 31, 2020 Fertilizers and other chemical products Real estate property and investment Others Total $ 7,547,680 1,586,529 126,075 9,260,284 264,938 - - 264,938 405,907 - - 405,907	For theyear ended December 31, 2020 Fertilizers and other chemical products Real estate property and investment Others Total $ 7,547,680 1,586,529 126,075 9,260,284 264,938 - - 264,938 405,907 - - 405,907	For theyear ended December 31, 2020 Fertilizers and other chemical products Real estate property and investment Others Total $ 7,547,680 1,586,529 126,075 9,260,284 264,938 - - 264,938 405,907 - - 405,907	For theyear ended December 31, 2020 Fertilizers and other chemical products Real estate property and investment Others Total $ 7,547,680 1,586,529 126,075 9,260,284 264,938 - - 264,938 405,907 - - 405,907
Fertilizers and other chemical products $ 7,547,680 264,938 405,907	Real estate property and investment 1,586,529 - -	Others 126,075 - -
$ 8,218,525	1,586,529	126,075	9,931,129
$ 8,218,525 - -	- 1,586,529 -	- - 126,075	8,218,525 1,586,529 126,075
$ 8,218,525	1,586,529	126,075	9,931,129

254

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

For the year ended December 31, 2019

Fertilizers and other chemical products $ 7,959,617 1,469,202 509,342	Real estate property and investment 2,632,681 - -	Others 53,874 - -	Total 10,646,172 1,469,202 509,342
$ 9,938,161	2,632,681	53,874	12,624,716
$ 9,938,161 - - -	- 1,596,074 1,036,607 -	- - - 53,874	9,938,161 1,596,074 1,036,607 53,874
$ 9,938,161	2,632,681	53,874	12,624,716

(iii) Contract balances

December 31, 2020 $ 764,351 -	December 31, 2019 929,678 -	January 1, 2019 1,210,486 -
$ 764,351	929,678	1,210,486
$ 83,449 -	106,194 -	90,918 76,212
$ 83,449	106,194	167,130

For details on accounts receivable and allowance for impairment, please refer to note 6(e).

The amount of revenue recognized for the years ended December 31, 2020 and 2019 that was included in the contract liability balance at the beginning of the period were $100,123 and $154,511 thousand.

(r) Remuneration to employees, directors and supervisors

In accordance with the articles of incorporation the Company should contribute no less than 2.4% of the profit as employee compensation and less than 1.6% as directors’ and supervisors’ remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit.

255

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

For the years ended December 31, 2020 and 2019, the Company estimated its employee remuneration amounting to $74,105 and $61,580 thousand, and directors’ remuneration amounting to $49,403 and $41,054 thousand, respectively. The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees and directors of each period, multiplied by the percentage of remuneration to employees and directors as specified in the Company’s articles. These remunerations were expensed under operating costs or operating expenses during 2020 and 2019. The numbers of shares to be distributed for 2020 and 2019 were calculated based on the closing price of the Company’s ordinary shares, one day before the date of the meeting of Board of Directors.

There was no difference of Employee compensation and directors’ remuneration between the amounts recognized on financial statements and actual distributed amount.

(s) Non operating income and expenses

(i) Interest income

The details of interest income for the years ended December 31, 2020 and 2019 were as follows:

Interest income - bank deposits Other interest income	For the years ended December 31 2020 2019 $ 35,304 71,249 2,380 3,955 $ 37,684 75,204
	2020 $ 35,304 2,380
	$ 37,684

(ii) Other income

The details of other income for the years ended December 31, 2020 and 2019 were as follows:

Dividends Others	For the years ended December 31 2020 2019 41,776 41,806 55,686 34,564 $ 97,462 76,370
	2020 41,776 55,686
	$ 97,462

256

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(iii) Other gains and losses

The details of other gains and losses for the years ended December 31, 2020 and 2019 were as follows:

Gain (loss) on disposal of property, plant and equipment Gain on disposal of investment properties Net foreign exchange gain and (loss) Gain on financial assets at fair value through profit or loss Donation expenses & relevane withholding tax Others	For the years ended December 31 2020 2019 $ 1,025 (21) 1,047,961 15,405 1,635 (11,953) 5,065 9,926 (10,075) (19,532) (25,274) (28,440) $ 1,020,337 (34,615)
	2020 $ 1,025 1,047,961 1,635 5,065 (10,075) (25,274)
	$ 1,020,337

(iv) Finance costs

The details of finance costs for the years ended December 31, 2020 and 2019 were as follows:

Bank interest expense Lease interest	For the years ended December 31 2020 2019 $ 1 - 3,580 4,089 $ 3,581 4,089
	2020 $ 1 3,580
	$ 3,581

(t) Financial instruments
(i) Credit risk
- 1) Exposure to credit risk

The carrying amount of financial assets represents the Company’s maximum credit exposure.

2) Credit risk concentrations

The clients of the Company are widely spread and unrelated; thus, credit risk is limited.

3) Receivables and debt securities

For credit risk exposure of notes and trade receivables, please refer to note 6(e).

Other financial assets at amortized cost includes other receivables, investments in government bonds, corporate bonds and time deposits

257

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

Debt investments at fair value through other comprehensive income include government bonds, listed and unlisted debt securities.

All of these financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected credit losses.

The movement in the allowance for impairment during the years ended December 31, 2020 and 2019, please refer to note 6(e) and 6(f).

(ii) Liquidity risk

The following are the contractual maturities of financial liabilities, excluding estimated interest payment and the impact of netting agreements.

December 31, 2020 Non-derivative financial liabilities Noninterestbearing liabilities Lease liabilities December 31, 2019 Non-derivative financial liabilities Noninterestbearing liabilities Lease liabilities	Carrying amount	1-3 months	1-5 years More than 5 years 280,161 - 118,647 24,606 398,808 24,606 250,609 - 119,946 54,132 370,555 54,132
	$ 1,305,743 174,078	1,025,582 30,825
	$ 1,479,821	1,056,407
	$ 1,402,597 204,903	1,151,988 30,825
	$ 1,607,500	1,182,813

The Company does not expect the cash flows included in the maturity analysis to occur significantly earlier or at significantly different amounts.

(iii) Market risk

1) Currency risk

The following are the contractual maturities of financial liabilities, excluding estimated interest payment and the impact of netting agreements.

December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2019 Foreign Currency Exchange Rate NTD 42,294 30.11 1,273,303 1,159,125 8.03 9,304,896 1,086 30.11 32,695	December 31, 2019 Foreign Currency Exchange Rate NTD 42,294 30.11 1,273,303 1,159,125 8.03 9,304,896 1,086 30.11 32,695
Foreign Currency	Exchange Rate	NTD	Foreign Currency	Exchange Rate
$ 6,812 1,210,587 1,127	28.51 7.60 28.51	194,196 9,202,183 32,133	42,294 1,159,125 1,086	30.11 8.03 30.11

258

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

December 31, 2020	December 31, 2020	December 31, 2020	December 31, 2019 Foreign Currency Exchange Rate NTD 7,818 30.11 235,381	December 31, 2019 Foreign Currency Exchange Rate NTD 7,818 30.11 235,381
Foreign Currency	Exchange Rate	NTD	Foreign Currency	Exchange Rate
-	-	-	7,818	30.11

2) Sensitivity analysis

The Company’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, other receivables, loans, accounts payable and other payables that are denominated in foreign currency. A 10% of appreciation of each major foreign currency against the Company’s functional currency as of December 31, 2020 and 2019 would have increased or decreased the before tax net income by $15,536 and $83,034 thousand, respectively. The analysis is performed on the same basis for both periods.

As the Company deals in diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. For the years ended December 31, 2020 and 2019, the foreign exchange losses, including both realized and unrealized, amounted to 1,635 and (11,953) thousand, respectively.

(iv) Interest rate analysis

The interest risk exposure from financial assets and liabilities has been disclosed in the note of liquidity risk management.

If interest rates had been 1 basis point higher/lower and all other variables were held constant, the Corporation’s pre-tax (loss) profit for the years ended December 31, 2020 and 2019 would decrease/increase by $0 due to the Company’s cash and cash equivalents balances which exceeds its loan amount.

(v) Other price risk

For the years ended December 31 2020 2019 Comprehensive Income (Loss)(net of tax) Net Income (Loss) (net of tax) Comprehensive Income (Loss)(net of tax Net Income (Loss) (net of tax) $ 141,237 52,001 102,882 62,407	For the years ended December 31 2020 2019 Comprehensive Income (Loss)(net of tax) Net Income (Loss) (net of tax) Comprehensive Income (Loss)(net of tax Net Income (Loss) (net of tax) $ 141,237 52,001 102,882 62,407	For the years ended December 31 2020 2019 Comprehensive Income (Loss)(net of tax) Net Income (Loss) (net of tax) Comprehensive Income (Loss)(net of tax Net Income (Loss) (net of tax) $ 141,237 52,001 102,882 62,407
2020
Comprehensive Income (Loss)(net of tax) $ 141,237	Net Income (Loss) (net of tax)
$ (141,237)	(52,001) (102,882)	(62,407)

259

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(vi) Fair value of financial instruments
1) Categories and fair value of financial instruments

The fair value of financial assets and liabilities at fair value through profit or loss, and financial assets at fair value through other comprehensive income (available for sale financial assets) is measured on a recurring basis. The carrying amount and fair value of the Company’s financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and for equity investments that has no quoted prices in the active markets and whose fair value cannot be reliably measured, disclosure of fair value information is not required:

	December 31, 2020	December 31, 2020	December 31, 2020	Total 1,300,013
BookValue $ 1,300,013		FairValue
	Level 1 1,300,013	Level 2 -	Level 3 -
$ 112,566 2,712,178	112,566 -	- -	- 2,712,178	112,566 2,712,178
2,824,744	112,566	-	2,712,178	2,824,744
$ 28,507 2,521,222 1,059,188 764,351 126,919 20,020	- - - - - -	28,214 - - - - -	- - - - - -	28,214 - - - - -
4,520,207	-	28,214	-	28,214
$ 8,644,964	1,412,579	28,214	2,712,178	4,152,971
$ 464,348 561,234 164,257 280,161	- - - -	- - - -	- - - -	- - - -
1,470,000	-	-	-	-
$ 1,470,000	-	-	-	-

260

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

	December 31, 2019	December 31, 2019	December 31, 2019
BookValue $ 1,560,181		FairValue		Total 1,560,181
	Level 1 1,560,181	Level 2 -	Level 3 -
$ 94,691 1,962,947	94,691 -	- -	- 1,962,947	94,691 1,962,947
2,057,638	94,691	-	1,962,947	2,057,638
$ 30,104 1,678,358 4,284,292 929,678 147,972 50,491	- - - - - -	30,034 - - - - -	- - - - - -	30,034 - - - - -
7,120,895	-	30,034	-	30,034
$ 10,738,714	1,654,872	30,034	1,962,947	3,647,853
$ 626,456 525,532 191,502 250,609	- - - -	- - - -	- - - -	- - - -
1,594,099	-	-	-	-
$ 1,594,099	-	-	-	-

2) Valuation techniques for financial instruments not measured at fair value

The Company’s valuation techniques and assumptions used for financial instruments not measured at fair value are as follows:

a) Financial assets measured at amortized cost (held to maturity financial assets)

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

b) Financial assets measured at amortized cost (debt investment that has no active markets) and financial liabilities measured at amortized cost

3) Valuation techniques for financial instruments measured at fair value:
a) Non-derivative financial instruments

If the financial instruments held by the Company do not belong to active markets, the category and nature of the fair value are as follows:

Equity investments without an active market: The fair value is assessed by market comparison approach. The
main assumption is measured from the retained earnings multiplier as the basis.
4) Transfers between Level 1 and Level 2

There were no transfers in either direction in 2020 and 2019.

262

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

5) Reconciliation of Level 3 fair values

Opening balance, January 1, 2020 Total gains and losses recognized: In other comprehensive income Cash capital increase Capital reduction by capitak stock return Ending Balance, December 31, 2020 Opening balance, January 1, 2019 Total gains and losses recognized: In other comprehensive income Capital reduction by capitak stock return Ending Balance, December 31, 2019	Fair value through other comprehensive income (Available-for-sale financial assets) Unquoted equity instruments $ 1,962,947 697,231 150,000 (98,000) $ 2,712,178 $ 1,764,692 201,182 (2,927) $ 1,962,947

For the years ended December 31, 2020 and 2019, total gains and losses that were included in “unrealized gains and losses from financial assets at fair value through other comprehensive income” were as follows:

		For the years ended	December 31
		2020	2019
Total gains and losses recognized:
In other comprehensive income, and presented in	$	697,231	201,182
“unrealized gains and losses from financial assets at
fair value through other comprehensive income”

6) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Company’s financial instruments that use Level 3 inputs to measure fair value include “financial assets measured at fair value through profit or loss – debt investments” and “fair value through other comprehensive income (available-for-sale financial assets) – equity investments”.

The Company most fair value is categorized to Level 3 with single significant unobservable input. The equity investments without an active market has duplicate unobservable inputs. The unobservable inputs of the equity investments without an active market are independent, so there is no correlation to others.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

Quantified information of significant unobservable inputs was as follows:

Item Valuation technique Financial assets at fair value through profit or loss- equity investments without an active market Comparable transaction method Financial assets at fair value through other comprehensive income-equity investments without an active market Net Asset Value Method	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and fairvalue measurement
	‧The multiplier of price-to-book ratio (As of December 31, 2020 and December 31, 2019, were 17.96~23.27 and 19.19~21.58) ‧Market illiquidity discount (As of December 31, 2020 and December 31, 2019, were 10%~33% and 10%~33% ) The estimated fair value would increase (decrease) if: ‧the multiplier were higher (lower) ‧the market illiquidity discount were lower (higher). ‧Net Asset Value Not applicable

7) Fair value measurements in Level 3 – sensitivity analysis of reasonably possible alternative assumptions

The Company’s measurement on the fair value of financial instruments is deemed reasonable despite different valuation models or assumptions may lead to different results.

For fair value measurements in Level 3, changing one or more of the assumptions would have the following effects on profit or loss and other comprehensive income:

December 31, 2020 Financial assets at fair value through other comprehensive income Equity investments without an active market December 31, 2019 Financial assets carried at cost Equity investments without an active market	Inputs	Fluctuation in inputs	Profit	or loss	Other comprehensive income	Other comprehensive income
			Favour-a ble	Unfavour- able	Favour-a ble	Unfavour- able
	Market illiquidity discount Multiplier of price-to-earnings ratio	±1% 1%	- -	- -	26,306 48,432	(49,694) (170,576)

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(u) Financial risk management
(i) Overview

The Company has exposures to the following risks from its financial instruments:

1) Credit risk
2) Liquidity risk
3) Market risk

The following discusses the Company’s objectives, policies and processes for measuring and managing the above mentioned risks.

(ii) Risk management framework

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.

Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

(iii) Credit risk

Credit risk means the potential loss of the Company if the counterparty involved in that transaction defaults. The primary potential credit risk is from financial instruments like accounts receivable and equity securities.

1) Accounts receivables and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of theCompany’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk, particularly in the current deteriorating economic circumstances.

The Company establishes an impairment allowance that represents its estimate of incurred losses in respect of trade receivables. The two components of this impairment allowance are specific loss component that relates to individually significant exposure and collective loss component which the loss was incurred but not identified. The collective component is based on historical payment experience of similar financial assets.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

2) Investment

The credit risk exposure in the bank deposits, fixed income investments and other financial instruments are measured and monitored by the Company’s finance department. As the Company deals with the banks and other external parties with good credit standing and financial institutions, corporate organization and government agencies which are graded above investment level, management believes that the Company does not have compliance issues and no significant credit risk.

3) Guarantees

As of December 31, 2020 and 2019, the endorsement guarantee provided by the Company to individual entities of joint ventures, please refer to Note 7.

(iv) Liquidity risk

Liquidity risk is a risk that the Company is unable to meet the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as much as possible, that it always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

(v) Market risk

Market risk is a risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

1) Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency. The currencies used in these transactions are denominated in USD, EUR, JPY, and RMB.

The interest is denominated in the same currency as borrowings. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short term imbalances.

The investments of other subsidiaries of the Company are not for hedging.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

2) Interest rate risk

The Company’s interest rate risk arises from short-term and long-term loans bearing floating interest rates. Future cash flow will be affected by a change in market interest rate.

3) Other market risk

The Company does not enter into any commodity contracts other than to meet its expected usage and sales requirements; such contracts are not settled on a net basis.

(v) Capital management

The Company’s objectives in managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the dividend payment to the shareholders, return capital to shareholders, and issue new shares or sell assets to reduce debts.

The Company manages capital by the debt to equity ratio. Such ratio is calculated as net liabilities divided by total capital. Net liabilities represent the total amount of liabilities on the balance sheet minus cash and cash equivalents. The total amount of capital represents all the equity components (share capital, capital surplus, retained earnings, and other equity) plus net liabilities.

The Company’s debt to equity ratios at the balance sheet date were as follows:

December 31, 2020 $ 24,459,660 (2,521,222)	December 31, 2020 $ 24,459,660 (2,521,222)	December 31, 2019 24,717,410 (1,678,358)
21,938,438 51,308,711		23,039,052 50,725,053
$ 73,247,149		73,764,105
	29.95%	31.23%

(w) Investing and financing activities not affecting current cash flow

The Company’s investing and financing activities which did not affect the current cash flow in the years ended December 31, 2020 and 2019 , were as follows:

years ended December 31, 2020 and 2019 , were as follows:
Purchases of property, plant and equipment Add: opening balances of equipment and construction payables Deduction: closing balances of equipment and construction payables	For the years ended December 31 2020 2019 $ 220,739 381,813 48,960 50,585 (71,981) (48,960) $ 197,718 383,438
	2020 $ 220,739 48,960 (71,981) $ 197,718

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(7) Related-party transactions:

(a) Names and relationship with related parties

The following are entities that have had transactions with related parties and the Company's subsidiaries during the periods covered in the non consolidated financial statements.

Name of related party Relationship with the Company AI-Jabail Fertilizer Company Equity-method investee TR Electronic Chemical Co.,Ltd. The Company's jointly controlled entity TR Electronic Chemical (Kunshan) Ltd. The Company's jointly controlled entity’s subsidary (Note 1) TAIFER (CAMBODIA) Co., Ltd. The Company's subsidary Taifer Chemicals International Inc. 〃 Taiwan Yes Deep Ocean Water Co., Ltd. 〃 Hasbo Biotech Co., Ltd. 〃 (Note 2) PEIFENG Technology & Fertilizer Co., Ltd. The Company's subsidary TAIFER (CAYMAN) INTERNATIONAL GROUP Co., Ltd. 〃 TAIFER INTERNATIONAL (SAMOA) Co., Ltd. 〃 (Note 3) TAIFER INTERNATIONAL (SAMOA) GROUP Co., Ltd. 〃 TAIFER CHEMICAL INTERNATIONAL Co., Ltd. 〃 Council of Agriculture, Executive Court, R.O.C. Individuals are those entities in which the Company has significant influence TAIWAN FERTILIZER Legal Foundation Other related parties

TAIWAN FERTILIZER Legal Foundation

Note 1: The bankruptcy of TR Electronic Chemical (Kunshan) Ltd. was declared by the court in China in September, 2017, and the relevant statutory procedures had been completed in August, 2020.
Note 2: The liquidation procedure was conducted in October 2017, and the relevant statutory procedures have been completed in Apiral 2020.
Note 3: The liquidation procedure was conducted in March 2019, and the relevant statutory procedures have been completed.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(b) Significant transactions with related parties
(i) Sale of Goods to Related Parties

The amounts of significant sales transactions and outstanding balances between the Company and related parties were as follows:

Subsidiaries	For the years ended December 31 2020 2019 $ 4,329 8,645
	2020
	$ 4,329

Prices charged for sales transactions with associates were not significantly different from those of non related parties.

(ii) Purchase of Goods from Related Parties

The amounts of significant purchase transactions and outstanding balances between the Company and related parties were as follows:

AI-Jabail Fertilizer Company	For the years ended December 31 2020 2019 $ 266,136 1,473,258
	2020
	$ 266,136

There were no significant differences between the terms and pricing of purchase transactions with related enterprises and those carried out with other normal vendors.

(iii) Receivables from Related Parties

The receivables from related parties were as follows:

Account	Relationship	December 31, 2020 $ 842 455	December 31, 2019 4,030 455 4,485
Account receivable Account receivable	Subsidiaries Joint ventrue
		$ 1,297

(iv) Payables from Related Parties

The payables from related parties were as follows:

Account	Relationship	December 31, 2020 $ - 101 27,001 1,776	December 31, 2019 235,381 - 371 1,776 237,528
Account payable Account payable Other payable Guarantee deposit	AI-Jabail Fertilizer Company Subsidiaries Subsidiaries Subsidiaries
		$ 28,878

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(v) Prepayment for Related Parties

The prepayment for related parties were as follows:

Account	Relationship	December 31, 2020 $ 90,026	December 31, 2019
Account prepayment	AI Jabail Fertilizer Company		-

The pricing and terms conditions of prepayment for related parties were based on their purchases.

(vi) Rent revenue

The Company leased its office building to its parent company in 2019 and 2018. The lease contract was based on the regional rent rate. For the years ended December 31, 2020 and 2019, the Company incurred the amounts of $13,115 and $13,388 thousand, respectively, resulting from its transaction with other related parties.

(vii) Outsourcing

The Company outsourced its subsidiary, PEIFENG Technology & Fertilizer Co., Ltd., to process fertilizer at an amount of $89,003 thousand, which was recognized as operating cost.

(viii) Others

1) TR Electronic Chemical Co., Ltd. (TR), a jointly controlled entity of the Corporation, had obtained a financing of US$10,000 thousand from a bank, and the Corporation and Jing Chin International Limited Corporation, a shareholder of TR, guaranteed the repayment of this financing. When TR failed to make a repayment, the bank then requested the guarantors to repay the loan partially. Because the Corporation could only provide TR-in compliance with the “Regulations Governing the Granting of Loans and Endorsements and Guarantees by Public Companies” - with a limited amount of endorsement, the Corporation’s board approved the repayment of TR’s loan, as following.

Due Date Date of Repayment Amount inUSD March 27, 2014 June 27, 2014 $ 4,570 April 26, 2015 April 24, 2015 3,300 March 27, 2016 March 31, 2016 2,147	Amount inNTD 144,641 102,610 70,026

Considering the weakening operating and repayment capability of TR, the Corporation recognized an impairment loss in 2015.

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

2) The bankruptcy of TR Electronic Chemical (Kunshan) Ltd., declared by the court in China in September 2017, was investigated, and the proposal of liquidated property distribution was announced publicly in mid August, 2018. In November 2018, the Kunshan Court of China reversed its decision and terminated the bankruptcy liquidation process of TR, with the approval of the Market Supervision Administrations of Kunshan in August 2020. Also, the investors of TR Electronic Chemical Co. Ltd., JIN QUN INTERNATIONAL CO., Ltd. and other six stockholders, institute the civil lawsuit with joint liquidation liability in Taipei District Court. The first instance was pronounced in December, 2018. However, the stockholders were not satisfied with the result and appealed for the second instance. The second instance was pronounced in January, 2019. However, the stockholders were not satisfied with the result and appealed for the third instance. In March 2020, the Taiwan High Court delivered the appeal to the Supreme Court, and the case is still in progress.
(c) Compensation of key management personnel

The compensation to directors and other key management personnel were as follows:

Salaries and other short-term employee benefits Post-employment benefits	For the years ended December 31 2020 2019 $ 76,426 69,388 8,447 1,178	For the years ended December 31 2020 2019 $ 76,426 69,388 8,447 1,178
	2020
	$ 76,426 8,447
	$ 84,873	70,566

(8) Pledged assets:

Asset	Purpose of pledge	December 31, 2020 $ 159,188	December 31, 2019 127,046
Other financial asset non-current	Guarantee for provisional attachment

(9) Commitments and contingencies:

(a) Significant commitments and contingencies
(i) Significant commitments and contingencies were as follows:

Purchase real estate property Purchase investment property	December 31, 2020 $ 114,881	December 31, 2019 140,957 7,175,358
	$ 5,039,234

(ii) Unused standby letters of credit

USD thousands

December 31, 2020 $ 5,638	December 31, 2019 12,502

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(iii) The Corporation had guarantee notes payable for its debt as follow:

Guarantee notes payable	December 31, 2020 $ 7,521,500	December 31, 2019 8,363,770

(10) Losses Due to Major Disasters:None

(11) Subsequent Events:None

(12) Other:

(a) A summary of current-period employee benefits, depreciation, and amortization, by function, is as follows:

By item	For theyears ended December 31	For theyears ended December 31	For theyears ended December 31	For theyears ended December 31	For theyears ended December 31	For theyears ended December 31
	2020			2019
	Operating Cost	Operating expense	Total	Operating Cost	Operating expense	Total
Employee benefit Salary Health and labor insurance Pension Remuneration of directors Others Depreciation Amortization	$ 451,043 36,605 22,783 - 19,748 956,288 -	463,563 22,966 15,000 62,315 9,977 49,488 6,524	914,606 59,571 37,783 62,315 29,725 1,005,776 6,524	427,502 35,216 21,651 - 18,632 929,801 -	475,150 23,770 15,417 54,967 14,273 44,598 6,661	902,652 58,986 37,068 54,967 32,905 974,399 6,661

(i) The depreciation of non-operating income and expenses of the Company in 2020 and 2019 were $18,643 and $18,759 thousand, respectively.

(ii) The Company for the years ended December 31, 2020 and 2019 the information of the number of employees and employee benefit expense is as follows:

Number of employees Number of directors who were not employees The average employee benefit The average salaries and wages Percentage of average employee salary expense The remuneration of supervisors	2020 704	2019 692 8 1,508 1,320 -
	8
	$ 1,497
	$ 1,314
	(0.45)% $ -

The remuneration policy for directors

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

The remuneration policy for directors is clearly set in the Company’s articles of association, which stipulates that the remuneration to the chairman shall be 1.25 times the income received by the general manager. The remuneration to the remaining directors and independent directors shall not exceed the highest salary of the Company’s employees. The surplus distribution to directors shall not exceed 1.6% of the Company’s profit for the year. However, the independent directors do not participate in the Company’s surplus distribution.

The remuneration policy for managers

The remunerations to managers are in accordance with the managerial salary standards of the Company and the Council of Agriculture, R.O.C., which are reviewed by the Remuneration Committee and approved by the board of directors.

Furthermore, the remuneration of the Company’s managers is determined by reference to the Company’s overall operating performance, future risks and development trends of the industry, as well as the individual’s performance achievement rate and contribution to the Company.

The remuneration policy for employees

The employee remuneration includes salary and employee remuneration, as well as allowance. The recipients may include employees of affiliated companies who meet certain conditions such as rank and performance. The above conditions will have to be approved by the board of directors.

In addition, the wages of the employees of the Company are paid based on the grade table set according to the complexity of their work, the degree of responsibilities, and the professional skills required.

In order to attract outstanding employees, the Company provides an attractive remuneration policy to take care of employees and encourage them to make good performance.

(b) In order to highlight corporate social responsibility, improve farmers' well-being, and cooperate with the government's policy of “promoting the halving of chemical pesticides in ten years and the withdrawal of highly toxic pesticides”, in December 2019, the Company will decide to donate $123,318 thousand to Agricultural Technology Research Institute.

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TAIWAN FERTILIZER CO., LTD. Notes to Financial Statements

(13) Other disclosures:

(a) Information on significant transactions:

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company:

(i) Loans to other parties:

(In Thousands of New Taiwan Dollars)

Number	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower	Transaction amount for business between two parties	Reasons for short-term financing	Allowance for bad debt	Collateral	Collateral	Individual funding loan limits	Maximum limit of fund financing
													Item	Value
0	Taiwan Fertilizer Co., Ltd. (the “Company”)	Dayun Co., Ltd/City State Co., Ltd/Kuam Chu Constructio n Co.,Ltd	Lone-term receivable	No	12,249	15,890	11,454	1.845%~2 .375%	1	79,500	－	-	Commercial paper	15,890	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the “Company”)	OO Lin	Lone-term receivable	No	13,127	17,030	12,276	1.845%~2 .375%	1	85,300	－	-	Commercial paper	17,030	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the “Company”)	OO Liao	Lone-term receivable	No	12,765	16,560	11,937	1.845%~2 .375%	1	83,120	－	-	Commercial paper	16,560	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the “Company”)	OO Yeh	Lone-term receivable	No	13,019	16,890	12,175	1.845%~2 .375%	1	84,500	－	-	Commercial paper	16,890	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the “Company”)	OO Lee	Lone-term receivable	No	12,380	16,060	11,577	1.845%~2 .375%	1	80,600	－	-	Commercial paper	16,060	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the “Company”)	Xiangzhan Investment Developmen t Co.,Ltd.	Lone-term receivable	No	12,616	15,770	11,828	1.845%~2 .375%	1	157,880	－	-	Commercial paper	15,770	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the “Company”)	O Tan	Lone-term receivable	No	43,831	54,810	41,110	1.845%~2 .375%	1	78,360	－	-	Commercial paper	54,810	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the “Company”)	OO Huang	Lone-term receivable	No	8,342	15,400	6,802	1.645%~2 .175%	1	77,000	－	-	Commercial paper	15,400	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the “Company”)	OO Chang	Lone-term receivable	No	4,920	8,200	-	1.645%~2 .175%	1	82,000	－	-	Commercial paper	8,200	2,565,436	10,261,742
0	Taiwan Fertilizer Co., Ltd. (the “Company”)	OO Chuang	Lone-term receivable	No	8,607	15,890	7,017	1.645%~2 .175%	1	79,500	－	-	Commercial paper	15,890	2,565,436	10,261,742

Note 1: (1) The total amount available for lending purpose shall not exceed twenty percent (20%) of the net worth of the Company. (2) The accumulated capital loan and amount of the company to a single enterprise with business transactions shall be limited to 5% of net worth of the Company. Note 2: If there is a business transaction, the contract price between the two parties shall be used as the business transaction amount. Note 3: The second order of mortgage right mentioned above is used as collateral. Note 4: In accordance with the letter of the Financial Supervision and Administration Commission of the Republic of China on March 11, 2020, No. 1090330422, and in practice, the constuction industry generally gives customers a payment of one to five years in installments, and writes off 10 years and 20 years The goods are disclosed in the table above.

(ii) Guarantees and endorsements for other parties:

(In Thousands of New Taiwan Dollars)

No.	Name of guarantor	Counter-party of guarantee and endorsement	Counter-party of guarantee and endorsement	Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during theperiod	Balance of guarantees and endorsements as of reportingdate	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and endorsements	Parent company endorsements/ guarantees to third parties on behalf of subsidiary	Subsidiary endorsements/ guarantees to third parties on behalf of parent company	Endorsements/ guarantees to third parties on behalf of companies in Mainland China
		Name	Relationship with the Company
0	Taiwan Fertilizer Co., Ltd. (the “Company”)	Taifer Chemicals Internationa l Inc.	Subsidiary	48,805	13,500	13,500	13,500	-	0.03%	25,654,356	Y	N	N

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TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

Note 1: (1) The company under business dealings.

(2) A subsidiary in which the Group directly or indirectly holds more than 50% of its common shares.
(3) The parent company which directly or indirectly holds more than 50% of the common shares of the Group.
(4) A subsidiary in which the Group directly or indirectly holds more than 90% of its common shares.
(5) The financial guarantee provided by the Group based on its contractor's agreement to the same trade and co proprietor.
(6) The financial guarantee provided by the Group based on its shareholding due tojoint venture relationship.
(7) The financial guarantee provided by the Group based on sales contract regulated by Consumer Protection Act for sales in advance .
Note 2: The total amount of the guarantee provided by the Corporation to any individual entity should not exceed 20% of the Corporation’s net worth, or 50% of the individual net worth of Taifer.

Note 3: The total amount of guarantee should not exceed 50% of the Corporation’s net worth.

(iii) Securities held as of December 31, 2020 (excluding investment in subsidiaries, associates and joint ventures):

(In Thousands of New Taiwan Dollars)

Category and name of security	Marketable Securities Type/Name and Issuer	Relationship with company	Account title	Endingbalance	Endingbalance	Endingbalance	Endingbalance	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
Taiwan Fertilizer Co., Ltd. Taiwan Fertilizer Co., Ltd. Taiwan Fertilizer Co., Ltd.	Mutual funds Mega Diamond Money Market Fund Deutsche Far Eastern DWS Taiwan Money Market Fund Jih Sun Money Market Fund Yuanta De Li Money Market Fund Prudential Financial Money Market Fund FSITC Money Market Taishin 1699 Money Market Fund Union Money Market Fund Ordinary shares Eminent Venture Capital Corporation Eminent II VC Corp Eminent III VC Corp Taiwan Stock Exchange Corporation Top Taiwan V Venture Capital Co., Ltd Visgeneer Inc. TaiAn Technologies Corporation TSCBio Ventures Capital Co. Ding-Tang Phalanx Biotech Co., Ltd. Bion tech Inc. China Petrochemical Development Corporation Bonds International Bonds: Mizuho Financial Group	－－－－－－－－ Our Company is legal representative director of the company 〞〞－－ Our Company is legal representative director of the company 〞〞－－ Our Company is legal representative director of the company －－	Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current Fair value through profit or loss- current FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - noncurrent FVOCI - current Amortized at cost financial assets - non current	11,858 12,719 12,709 9,125 9,402 10,367 13,924 12,021 2,700 12,000 30,000 15,003 1,366 3,147 1,667 3,360 1,500 404 4,167 9,662 -	150,001 150,001 190,003 150,002 150,002 160,002 190,001 160,001 15,714 85,440 228,000 2,279,977 1,871 32,856 23,834 44,486 - - - 112,566 28,507	- % - % - % - % - % - % - % - % 10.00% 18.50% 16.56% 2.00% 9.76% 10.31% 16.67% 19.75% 6.71% 0.49% 15.16% 0.29% - %	150,001 150,001 190,003 150,002 150,002 160,002 190,001 160,001 15,714 85,440 228,000 2,279,977 1,871 32,856 23,834 44,486 - - - 112,566 28,214	Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 1 Note 3 Note 3 Note 3 Note 5 Note 5 Note 3 Note 3 Note 2 Note 4

Note 1: The market value was calculated on the basis of the net asset value as of the balance sheet date.

Note 2: The market value was calculated on the basis of the closing price on the Taiwan Stock Exchange as of the balance sheet date. Note 3: The market value was calculated on the basis of the audited financial statement for the same period.

Note 4: The amortized coste was calculated on the basis of the closing price on the Taiwan Stock Exchange as of the balance sheet date. Note 5: The market value was calculated on the basis of the estimated fair value per share of the expert evaluation report.

275 (Continued)

TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Category and name of security	Account name	Name of counter-par ty	Relationship with the company	BeginningBalance	BeginningBalance	Purchases	Purchases	Sales	Sales	Sales	Sales	EndingBalance	EndingBalance
					Shares	Amount	Shares	Amount	Shares	Price	Cost	Gain (loss) on disposal	Shares	Amount
Taiwan Fertilizer Co., Ltd.	Mega DiamondMo ney Market Fund Eastspring Investments Well Pool Money Market Fund Allianz Global Investors Taiwan Money Market Fund Deutsche Far Eastern DWS Taiwan Money Market Fund Jih Sun Money Market Fund Yuanta De-Li Money Market Fund Prudential Financial Money Market Fund FSITC Money Market Taiwan Money Market Fund UPAMC James Bond Money Market Fund Taishin 1699 Money Market Fund Union Money Market Fund	FVTPL - current FVTPL - current FVTPL - current FVTPL - current FVTPL - current FVTPL - current FVTPL - current FVTPL - current FVTPL - current FVTPL - current FVTPL - current FVTPL - current	- -	- -	11,914 10,985 11,925 - 12,772 9,164 9,446 838 10,415 8,941 11,411 -	150,012 150,009 150,011 - 190,015 150,011 150,011 150,009 160,011 150,009 155,013 -	47,505 10,970 35,687 25,444 50,921 36,549 37,665 1,672 41,532 8,929 53,204 32,704	600,000 150,000 450,000 300,000 760,000 600,000 600,000 300,000 640,000 150,000 725,000 435,000	47,562 21,955 47,611 12,725 50,984 36,588 37,709 2,510 41,580 17,870 50,692 20,683	600,012 300,009 600,011 150,000 760,015 600,011 600,011 450,009 640,011 300,009 690,013 275,000	600,710 300,251 600,561 150,078 760,936 600,640 600,700 450,432 640,742 300,240 690,766 275,186	698 243 550 78 920 629 688 423 731 231 754 186	11,858 - - 12,719 12,709 9,125 9,402 - 10,367 - 13,924 12,021	150,001 - - 150,001 190,003 150,002 150,002 - 160,002 - 190,001 160,001

Note: Unrealized gain and loss on financial assets were recognized.

(v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock:None

(vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Type of property	Transaction date	Acquisition date	Book value	Transaction amount	Amount actually receivable	Gain from disposal	Counter-party	Nature of relationship	Purpose of disposal	Price reference	Other terms
Taiwan Fertilizer Co., Ltd.	Investment property	March 3, 2020	June 1,1953 ~September 1, 1984	320,470	1,280,000	1,	959,530	Wan Cixing Construction Co., Ltd.、Fuhui Development Co., Ltd.	None	To activate unused assets	Appraisal report	None

276

(Continued)

TAIWAN FERTILIZER CO., LTD.

Notes to Financial Statements

(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Relatedparty	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase/Sale	Amount	Percentage of total purchases/sales	Payment terms	Unitprice	Payment terms	Endingbalance	Percentage of total notes/accounts receivable (payable)
Taiwan Fertilizer Co., Ltd.	AI-Jabail Fertilizer Company	Equity-method investee	Purchase	266,136	5.03%	Same as those for third parties	Determined under the considerations of international market price and production cost	30 days	-	-%	-

(viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

Name of company	Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue	Overdue	Amounts received in subsequentperiod	Allowance for bad debts
					Amount	Action taken
Taiwan Fertilizer Co., Ltd.	TR ELECTRONIC CHEMICAL CO.,LTD.	Jointly controlled entity	Other receivable 317,277	-	317,277	-	-	317,277

(ix) Trading in derivative instruments:None

(b) Information on investees:

The following is the information on investees for the years ended December 31, 2020 (excluding information on investees in Mainland China):

(In Thousands of New Taiwan Dollars)

==> picture [581 x 354] intentionally omitted <==

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

Main Original investment amount Balance as of December 31, 2020 Net income Share of
Name of investor Name of investee businesses and products Shares Percentage of Carrying (losses) profits/losses
Location December 31, 2020 December 31, 2019 (thousands) wnership value of investee of investee Note
Taiwan Fertilizer Co., Al-Jubail Fertilizer Kingdom of Manufacture of urea, 2-EH (2-ethyl 3,050,000 3,050,000 7 50.00% 9,202,183 1,565,731 593,696 Associate
Ltd. Company Saudi Arabia hexanol), and DOP (dioctyl
phthalate)
〃 Taifer Chemicals Taiwan International trade; wholesale of 126,300 126,300 5,500 100.00% 92,301 8,769 8,769 Subsidiary
International Inc fertilizer, tobacco, liquor, beverage,
forage, machinery, electrical
equipment, etc.; development,
operation and management of
residential buildings and factory
buildings; special zone
development; investment in and
construction of public works;
development of new towns and
districts; agent services on regional
district requisition; land adjustment;
and real estate rental or leasing
〃 Taiwan Yes Deep Ocean Taiwan Wholesale of drinks, food and 1,224,235 1,224,235 25,763 100.00% 287,691 (3,606) (2,798) Subsidiary
Water Co., Ltd. grocery and other articles for daily
use; tobacco and liquor; glass and
pottery; hygiene products;
fertilizers and other chemical
products; and cosmetics; and
international trade
〃 PEIFENG Taiwan Manufacture and wholesale of 2,400,000 1,900,000 240,000 100.00% 2,427,460 38,589 38,589 Subsidiary
TECHNOLOGY & fertilizer
FERTILIZER CO., LTD.
〃 MITAGRI CO., LTD. Taiwan Wholesale and retail of products for 80,000 80,000 8,000 33.33% 32,881 (21,042) (7,330) Associate
organic agriculture
〃 Taiwan Agricultural Taiwan Wholesale and retail of products for 60,000 60,000 6,000 31.58% 47,028 (23,365) (8,162) Associate
Investment and organic agriculture
Development co., Ltd.
〃 TAIFER (CAYMAN) Cayman Investment and holding agriculture 321,900 321,900 11 100.00% - - - Subsidiary
INTERNATIONAL Islands
GROUP CO., LTD.
〃 TAIFER (CAMBODIA) Cambodia International trade; wholesale of 40,052 40,052 - 100.00% 32,133 1,224 1,214 Subsidiary
CO., LTD fertilizer
----- End of picture text -----

277

(Continued)

TAIWAN FERTILIZER CO., LTD. Notes to Financial Statements

==> picture [582 x 136] intentionally omitted <==

(c) Information on investment in mainland China:
(i) The names of investees in Mainland China, the main businesses and products, and other information:

(In Thousands of New Taiwan Dollars)

==> picture [551 x 207] intentionally omitted <==

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

Accumulated Accumulated Net
Main Total outflow of Investment flows outflow of income Accumulated
businesses amount Method investment from investment from (losses) Percentage Investment remittance of
Name of and of paid-in of Taiwan as of Taiwan as of of the investee of income Book earnings in
investee products capital investment January 1, 2019 Outflow Inflow December 31, 2020 ownership (losses) value current period
TR Manufacture of nitric USD$ 21,500 ( note 3 ) USD$ 10,965 - - USD$ - USD$ - -% USD$ - USD$ - -
Electronic acid, hydrofluoric
Chemical acid, ammonia, (NT$612,922) (NT$312,590) (NT$-) (NT$ - ) (NT$ - ) (NT$
(Kunshan) phosphoric acid, - )
Ltd. oxalic acid, ammonia ( note 4) ( note 4) ( note 1 ) ( note 1 ) ( note 5 )
fluoride and LCD and ( note 5 )
IC Stripper
Limitation on investment in Mainland China:
Accumulated Investment in Mainland China as Investment Amounts Authorized by
of December 31, 2020 Investment Commission, MOEA Upper Limit on Investment
NT$ - NT$ 312,590 NT$30,785,227
(US$ - ) (US$ 10,965 ) (note 2)
(note 1 ) (note 4)
----- End of picture text -----

(ii) Limitation on investment in Mainland China:
- Note 1: The Company applied for the cessation of it operations to the local court on March 17, 2017, and the cessation was completed in August 2020. The accumulated investment amount of disposed in the current period is NT$312,590 thousand (US$10,965 thousand), and the accumulated investment amount from Taiwan of remitted at the end of the period is zero.
- Note 2: The limit is based on the “Regulations Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission under the Ministry of Economic Affairs; the amount is 60% of shareholders’ equity or of consolidated shareholders’ equity.
- Note 3: Indirect investment in mainland China through a subsidiary in a third place. (Investor: TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD.)
- Note 4: The foreign currency amounts of original investment amount and carrying value were translated into New Taiwan dollars at the exchange rate NT$28.508 as of December 31, 2020.
- Note 5: As of June 30, 2015, the investment accounted for using the equity method balance of the Corporation was zero, so the Corporation didn’t recognize income (loss) of the investment.
(iii) Significant transactions:None
(d) Major shareholders:

Major shareholders:
Shareholding Shareholder’s Name	Shares	Percentage
Council of Agriculture, Executive Court, R.O.C.	235,886,376	24.07%

(14) Segment information:

Please refer to the consolidated financial report for the year ended December 31, 2020.

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Seven. Review and Analysis of Financial Status and Business Results and Risk Issue

I. Financial Status

Unit: NTD thousand

Year Item	2020	2019	Difference	Difference
			Amount	%
Current asset	9,526,919	11,954,934	(2,428,015)	(20.31)
Property, Plant and Equipment	14,758,989	14,280,801	478,188	3.35
Intangible asset	122,639	126,933	(4,294)	(3.38)
Other assets	51,937,580	49,294,128	2,643,452	5.36
Total assets	76,346,127	75,656,796	689,331	0.91
Current liabilities	2,232,969	2,042,946	190,023	9.30
non-current liabilities	22,804,447	22,888,797	(84,350)	(0.37)
Total liability	25,037,416	24,931,743	105,673	0.42
Share capital	9,800,000	9,800,000	0	0.00
Additional paid-in capital	2,244,652	2,244,073	579	0.03
Retained earnings	37,612,891	37,333,830	279,061	0.75
Equity attributable to owners of the parent company	51,308,711	50,725,053	583,658	1.15
Note 2: The financial information of 2019 and 2020 has been reviewed by the CPAs. Analysis of the reason causing changes of 20% or more: 1. Current assets: current assets decreased,mainlybecause other financial assets decrease.

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Review and Analysis of Financial Status and Business Results and Risk Issue

II. Financial Performance

(I) Comparative analysis table of financial performance

Unit: NTD thousand

Year Item	2020	2019	Increased (decreased) amount	Percentage of change (%)
Operatingrevenue	10,169,742	12,890,565	(2,720,823)	(21.11)
Operatingcost	7,580,633	9,859,254	(2,278,621)	(23.11)
Grossprofit from operations	2,589,109	3,031,311	(442,202)	(14.59)
Operatingexpenses	1,341,420	1,405,300	(63,880)	(4.55)
Operating profit	1,247,689	1,626,011	(378,322)	(23.27)
Non-operating income and expense	1,717,686	838,256	879,430	104.91
Net income (loss) before tax	2,965,375	2,464,267	501,108	20.33
Tax expense (income)	512,494	400,312	112,182	28.02
Net income (loss) of theperiod	2,452,881	2,063,955	388,926	18.84
Note 2: The financial information of 2019 and 2020 has been reviewed by the CPAs. Analysis of the reason causing changes of 20% or more: 1. Operating revenue: operating revenue decreased, mainly because the recognized sales of property resulted the increased operating revenue in the previous period. 2. Operating costs: operating costs decreased, mainly because the material costs decreased during the period. 3. Operating incomes: operating incomes decreased, mainly because the recognized sales of property resulted the increased operating incomes in the previous period. 4. Non-operating income and expense: the non-operating net income increased, mainly because the gains from investment property disposal was recognized. 5. Net profit before tax: the net profit before tax increased, mainly because the gains from investment property disposal was recognized. 6. Income tax expense: the income tax expense increased, mainly because the net profit before tax increased.

(II) Analysis table of gross profit from operations

) Analysis table ofgrossprofit	) Analysis table ofgrossprofit	from operations	from operations	from operations	from operations
		Unit: NTD thousand
	Changes between two consecutive period	Reason of difference
		Selling price difference	Cost difference	Quantity difference	Others
Gross profit from operations	(442,202)	(471,875)	749,231	(71,174)	(648,384)
Remark	Operating gross margin decreased from the previous period, mainly because the sold investment property increased the gross margin during the same period lastyear.

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III. Cash flow

Review and analysis table of cash flow

Unit: NTD thousand

Beginning cash balance	Net cash flow from operating activities throughout the year	Net cash flow from operating activities throughout the year	Estimated yearly net cash inflow (outflow)	Cash surplus (deficit) amount	Remedies for cash deficits	Remedies for cash deficits
					Financing plans
2,519,628	1,324,066		(781,667)	3,062,027	`－`
1. Analysis of cash flow changes for the year (1) Net inflow from operating activities: mainly because the net cash inflow generated from operating activities, and the the investees distributed the cash dividends. (2) Net inflow from investing activities: mainly because of the acquisition of property, plant, and equipment, and investment properties. (3) Net outflow from the financing activities: mainly due to distribution of cash dividends. 2. Remedies for cash deficits and analysis of liquidity: none. 3. Analysis of cash flow in the coming year Unit: NTD thousand
Beginning cash balance	Net cash flow from operating activities throughout theyear	Estimated yearly net cash inflow (outflow)		Cash surplus (deficit) amount		Remedies for cash deficits
						Investment plan (Note 1)
3,062,027	1,207,100	(5,723,452)		(1,454,325)		(1,454,325)
Note: by terminating the fixed deposits in banks or redemption of funds.

IV. Impact to the Financial Business by the Significant Capital Expenditures in the Previous Year

(I) Utilization Status and Source of Funds for Significant Capital Expenditures in the Previous Year

Unit: NTD thousand

Project	Actual or Expected Source of Funds	Actual or Expected Finish Date	Total Funds Needed	Actual Accumulated Disbursements as of December 31,2020	Expected Utilization Amount in 2021
Investment in Pei Feng Technology Co.,Ltd. Project	Self-owned funds	June 2020	NT$2.4 billion	NT$2.155 billion	NT$245 million
Nangang Software Park C2 Development Project	Self-owned funds	Completion is expected in 2022	NT$12.385 billion	Approximately NT$5.419 billion	Approximately NT$3.799 billion
Nangang Software Park C4 Development Project	Self-owned funds	Completion is expected by December,2025	NT$3.156 billion	Approximately NT$45 million	Approximately NT$172 million

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Review and Analysis of Financial Status and Business Results and Risk Issue

(II) Expected Potential Benefit: Expected Sales Quantity, Value and Gross Margin Increase

Unit: NTD thousand

Year	Item	ProductionQuantity	SalesQuantity	Sales Value	Gross Margin
After 2021	Pei Feng Technology Co., Ltd. Project (Originally from West No.10 Pier, Taichung Harbor new plantproject)	Planned Nitro-phosphorus based compound fertilizer plant, annual capacity 162,500 tons.	60,000 tons of Nitrophosphorus-based compound fertilizer is for domestic sales, all others (102,500 tons) will be exported.	Annual revenue NT$ 3,528,000.	Gross margin 8.76%

Note: Based on the estimation of the plan

Year	Item	Total floor area	Leasingrevenue	Gross Margin
2023~	Nangang Software Park C2 Development Project	around 198.3 thousand m2	Annual rent NT$900 million~1 billion	Gross margin NT$400~500 million
2026~	Nangang Software Park C4 Development Project	around 56.2 thousand m2	Annual rent NT$200~300 million	Gross margin NT$150~200 million

V. Re-investment Overview

(I) Main Reasons, Improvement Plan for Re-investment Policy, Profit or Loss for Previous Years:

1. Re-investment Policy

TFC upholds the values of development, consolidation, innovation and sustainability as management philosophy to carry out gradual transformation, and to demonstrate a dynamic corporate with vision that is characterized by a firm foothold in the local market with an eye toward global future. With proactive innovation strategies in research and development for new products, production process and related technology, and aligns with national policy and the trends of development in smart agriculture and organic ecological industries, the Company aims for further development in collaboration with domestic and international enterprises from the upstream and downstream of the fertilizer industry. The Company embraces the investment strategies that is characterized by sales oriented production and priority on technical services, strives to expand fertilizer business overseas in emerging markets such as ASEAN, India, and so on. Through partnering with business there and integrating local resources of competitive advantage, TFC seeks for collaboration in advanced products marketing to establish overseas market share, and in expectation to make it the cornerstone for building the corporate overseas production base, in order for a steady expansion of the fertilizer core business onto a new international stage.

Main reasons, improvement plan for re-investment policy, profit or loss for previous years

Re-invested Company	Main Reason for Profit or Loss in 2020	Improvement Plan
TAIWAN YES DEEP OCEAN WATER CO., LTD.	TFC has significantly reduced losses in recent years, by integration of related resources, which effectively reduced the production cost of niche products, and optimized sales channels andproduct assortment.	(1) Expenses control (2) Reduce manufacturing costs (3) Focusing on niche products (4) Optimizing the product channels

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Review and Analysis of Financial Status and Business Results and Risk Issue

(II) Investment Plan for Next Year:

Fertilizer Chemical Industry: In consideration of trends of development in global farming and products appeals, TFC has developed and produced fertilizer products which includes new series of the “Hey Won” nitrophosphate organic compound fertilizer that added peat, the “King Won” potassium sulfate nitrophosphate organic compound fertilizer series, and Biotec organic compound fertilizer series, which provide quality fertilizer featuring high efficiency, multifunction and ecological sustainability for use in farming to enhance both quantity and quality of agricultural products. The ongoing establishment of the plant with production capacity of 162.5 thousand tons of notrophosphate organic compound fertilizers, will be completed in the year 2020 and ready to provide not merely sufficient fertilizer demanded by the domestic market, but also for marketing overseas to expand the Company’s fertilizer and chemical products related business on a global level. TFC has also build 3 tanks each with a volume of 3,000 kiloliter for storing chemicals of MDI, TDI, and PPG that are by products of imported nitrophosphate from downstream, which would make the most of nitrophosphate production capacity, and create profit for the Company.

Agricultural innovation industry: In conformity with the trends of developing smart agriculture, and concept of less-labor that are greatly promoted by the government, TFC has not just developed state of the art products that meet the production requirement of intelligence and less labor, but also has planned for business collaboration with domestic agriculture enterprises that have the growth potential. Through implementation of cutting-edge technology for smart agriculture or unique operating model by these potential enterprises, TFC plans to establish an industrial platform that would enhance efficiencies in research and development, production and marketing for agriculture, and its product value. The Company seeks for opportunity to develop implementation of its niche products and strives to create new sources for profiting and fields for developing.

283

Review and Analysis of Financial Status and Business Results and Risk Issue

VI. Risk Management Organization

Risk Management Organization Chart:

According to the latest internal audit development and requirements of standards, the Company has strengthened the management of corporate risks, including risk detection, assessment, reporting and following up, both cautious and strict Three levels (mechanisms) are responsible for the risk control of the Company: The organizer or the person in charge is the “first mechanism” and must take responsibility for the mechanical design and prevention of the detection of initial risk, assessment, and control. The second mechanism is the general manager (or deputy general manager), especially the approval document or its review or appraisal committee. The third mechanism constitutes reviews by Legal Affairs and Auditing Office, plus Board of Directors’ (including functional committees) deliberations. The Company has not set up the Chief Risk Officer at this time. The purpose of this is to ask all employees to perform risk control. It is the most practical approach for risk management that involves multi-level prevention rather than one-man control. See the following table:

Significant Risk Assessment Items	Direct Unit for Risk Control (Business In-charge Unit) (First Mechanism)	Risk Deliberation and Control (General Manager/ Deputy GM) (Second Mechanism)	Legal, Audit Office and the Board of Directors (Third Mechanism)
1. Interest Rate, Exchange Rate and Financial Risks	Financial Department	General Manager, Deputy GM, Financial Department	Board of Directors, Audit Office, Remuneration Committee: Decision making and ultimate control of risk assessment and control Audit Office: Examination, assessment, monitoring, improvement, following up and reporting of risks.
2. Risks Such as High Risk and High Leverage Investment, Capital Lending to Others, Derivative Products Trading, Financial Wealth Management Investment, etc.	Financial Department
3. R&D Plan	R&D Department	General Manager, Deputy GM, Planning Department, Financial Department, In-Charge and Relevant Unit
4. Policy and Legal Change	Planning Department,Legal
5. Technology and Industry Change	R&D Department, Planning Department, Business Development Department
6. Corporate Image Change	Administration Department, Board of Directors Office

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Significant Risk Assessment Items	Direct Unit for Risk Control (Business In-charge Unit) (First Mechanism)	Risk Deliberation and Control (General Manager/ Deputy GM) (Second Mechanism)
7. Investment, Re-investment and Merger Benefits	Sales Department, Planning Department, Business Development Department, Property Development and Management Department
8. Expansion of Plant or Production Capacity	Production Department, TradingDepartment	Business Meeting Report, Performance Review Meeting, Manufacturing and Sales Meeting.
9. Centralized Procurement or Sales	Sales Department, TradingDepartment
10. Shareholdings Transfer for Directors, Supervisors and Main Shareholders	Board of Directors Office	General Manager, Deputy GM, Board of Director Office, Legal, Planning Department
11. Management Power Change	Board of Directors Office
12. Litigation or Non-litigation Items	Legal
13. Other Operating Issues	Planning Department, Administration Department
14. Personnel Behavior, Ethics and Integrity	Various Supervisor and Administration Departments	Personnel Appraisal Committee
15. Compliance of SOP, Legal and Regulations	Various Supervisors and Legal	Planning Department
16. Management of the Board of Directors	Board of Directors Office	Legal
17. Material Information Management and Insider Trading Prevention	Director, managerial officers, and people who are aware of the information	Spokesman System, Confidentiality System
18. Information Security	Information Department	General Manager, DeputyGM
19. Environment Health and Safety	Safety and Health Cente	General Manager

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Review and Analysis of Financial Status and Business Results and Risk Issue

VII. Assessment of Risks

(I) Impact of Interest Rate Change, Exchange Rate Change, and Inflation on the

Company’s Profit and Loss and the Countermeasures in the Future

Interest rate change
The net interest income of the Company for the year ending December 31, 2020 and the quarter ending March 31, 2021, was NT$39,519 thousand and NT$5,873 thousand respectively, which accounted for 0.39% and 0.2% of the net operating revenue. Therefore, there was no significant impact on the Company's operations and profit. In the future, in response to the change of interest rate trends, we will actively look for higher returns and lower cost targets to reduce interest rate risk.
Foreign exchange rate change
For the year ending December 31, 2020 and the quarter ending March 31, 2021, the Company's net exchange gain (loss) amounted to NT$1,888 thousand and NT$ （ 6,304 ） thousand, respectively, which accounted for 0.02% and -0.21% of net operating revenue. Therefore, there was no significant impact on the Company's operations and profit. In the future, to reduce exchange risks, we will actively develop foreign exchange hedge strategies in response to the changes in exchange rate trends.

(II) Policy on High Risk, High Leverage Investment, Capital Lending and Others,

Endorsement of Guarantee and Derivative Products Trading, and Main Reasons for

Profit or Loss and Countermeasures in the Future

High-risk and highly leveraged investments, loans to others, and derivative trading: not applicable. The Company does not conduct such business.
Endorsement/guarantee: As of March 31, 2021, the balance of endorsement/guarantee is NT$13,500 thousand.

(III) Future R&D Plan and Estimate of R&D Expenses

R&D for the next two years will concentrate on:

Microbiological material R&D and establishment of application technology.
Strawberry, vegetable and fruit material development plan.
Algae polysaccharide extraction technology research and development.
Deep seawater for aquaculture application development.
Development of electronic-grade hydrochloric acid purification technology.
Research of EBR (PGMEA) phase splitting and esterification technologies.
Development of the technology to distill and purify crude MDI to pure MDI.
Planning and design of ultrafiltration system for deep seawater in Hualien Factory.

To enable sustainable growth, Taiwan Fertilizer Co., Ltd. will continue to strengthen research and development. The estimated total R&D budget will be about NT$60 million each year (personnel expenses excluded). The R&D plan for the next two years is summarized as follows:

1. Microbiological Material R&D and Establishment of Application Technology

With industry-academia cooperation and the transfer of technology, combined with the Company's internal microbial fermentation core technology, establish a fermentation mass production technology for beneficial crop antagonistic bacteria, using organic materials and fertilizer materials to develop Organic Fertilizer series and Microbial fertilizer that combine both fertilizer effectiveness and the prevention of insect pests. In addition, in coordination

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Review and Analysis of Financial Status and Business Results and Risk Issue

with the government's agricultural recycling economy policy, renewable energy, venous industries, local production and marketing, and innovation of various types of waste recycling and recycling industries and transformation into reusable organic material products, combined with various activities of the Sales Department, aggressively promote the organic fertilizer market and expand the promotion of organic materials materials. Moreover, in 2021, the farm testing for the new products of King Won” Potassium sulfate nitrophosphate organic compound fertilizer series will be expanded. It is intended to expand the demonstration of the six crops with better results in 2020 (wax apple, grapes, green onions, onions, asparagus and sesame), and the new crops including papaya, guava, pineapple, cauliflower, dragon fruit, lemon and edamame will be applied. Total R&D disbursement for the next two years will be NT$13 million.

2. Strawberry, vegetable and fruit material development plan:

In 2020, the industry-academia collaboration with “Miaoli District Agricultural Research developed the “ Probiotic Amino Acid compound fertilizer for vegetable and fruits.” The goal is by using the product for the high cash crops of strawberry, vegetable and fruits to demonstrate that the growth of plant and its capacity to prevent diseases could be enhanced by adding good bacteria, and the quality of agricultural products and its flavor may be improved by adding amino acids. This product may also be promoted and implemented with the available organic fertilizer or bio promoter by the Company, to bring more than double of efficacy. The currently developed prototypes for seedling growth and blossom/fruit bearing have been tested; meanwhile, the added target strain, Bacillus velezensis MLBV19-3 has completed the mass production process of five-ton large-scale industrial fermentation tanks, and has also passed toxicological tests. The feasibility of technical transfer will be evaluated later. Total R&D disbursement for the next two years will be NT$5 million

3. Algae Polysaccharide Extraction Technology Research and Development: In 2020, the “Ulva polysaccharides Extraction Technology” was transferred from Professor Chang-Jer Wu, NTOU; and the exclusive agency contract in Taiwan has been signed with a domestic vendor to promote and sell ulva polysaccharides. The vendor orders 200kg, 400kg, and 500kg of ulva polysaccharides from 2020 to 2022 from the Company. Therefore, the Company plans the mass production of ulva polysaccharides in 2021, and continues to improve and optimize the production process, for suitable material feeding quantity and production frequency for a batch, seeking to satisfy the domestic demand, as the goal. Total R&D disbursement for the next two years will be NT$15 million.

4. Deep Seawater for Aquaculture Application Development:

The Company has also applied the three major DOW features, low temperature, cleanliness, and rich in nutrient salts to establish the outdoor large algae and shrimp farming. For the algae farming, it successfully established red grape algae, eucalyptus serrulata, and long-hearted cappa algae and other algae outdoor bucket cultivation and indoor seeding technology, and verified the feasibility of seaweed powder as a tortoise feed additive in 2020. In 2021, for enteromorpha with potential in the Japanese market, the enteromorpha germplasm and seedling process improvement program is conductedd, including the establishment of enteromorpha gene bank and standard procedures for screening and breeding, as well as expansion of the nursery room to improve enteromorpha seedling

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Review and Analysis of Financial Status and Business Results and Risk Issue

method for better livability and shortens the seedling time. At the same time, the laboratory management and production are institutionalized, so that operators may systematically operate according to SOP. In addition, more algae species with market potential will be collected to meet the needs of algae in the future health industry. In the regard of shrimp farming, the Company was stationed in the Donggang Fishery Research Institute in 2020, to learn about species selection and shrimp breeding techniques. In the Hualien Factory, the existing plant has been altered to the seed shrimp fattening and shrimp breeding center. It is expected that a small quantity of SPF shrimp larvae will be produced provisionally in 2021 for growing test. If the survival rate of several consecutive batches of shrimp larvae or breeding cycle perform well, it will be planned to start the shrimp larvae sales in 2022. Total R&D disbursement for the next two years will be NT$14.5 million.

5. Development of electronic-grade hydrochloric acid purification technology:

In order to achieve the aim to enhance the diversification of electrochemical products and its profit, the Company has projected to conduct “Purification Technology Development of Electronic Grade Hydrochloric Acid from Industrial Grade Hydrochloric Acid, which employ industrial grade hydrochloric acid as material for research and develop purification for the production process of electronic grade hydrochloric acid, to achieve the aim of mass produce IC grade hydrochloric acid. This R&D project designate to design a pilot plant, which improve and adjust test, process of production, and parameter adjustment, to achieve the objective of commercial production of IC grade hydrochloric acid, possibility for expansion of production capacity will be accessed afterward. R&D investment in the next two years are projected amount to NT$ 4.7 million.

6. Research of EBR (PGMEA) phase splitting and esterification technologies:

To enhance the diversification and profitability of the electrochemical products of the Company’s Miaoli Factory, we signed an agreement with the ITRI for "EBR Purification Technology Development." It recovers the wasted EBR liquid for purification; by the principle of splitting phases and esterification, it may sucessfully esterify PGME to PGMEA, forming a single chemical raw material; and then unnecessary impurities are removed through the distillation purification process, and with water content reduced to 300ppm; the goal is that the quality of PGMEA reaches industrial grade and electronic grade products. This project plans to make breakthroughs and improvements in the capacity and process of the T-701 Distillation Plant in Miaoli Factory, increasing the original monthly capacity of 100 to 200 tons to 300 to 400 tons, and changing the production operating system from manual to semi-automatic to fully automatic, to strengthen the controllability and stability of the process technology. R&D investment and the new equipment in the next two years are projected amount to NT$5 million.

7. Development of the technology to distill and purify crude MDI to pure MDI:

Methylene diphenyl diisocyanate (MDI) is an important isocyanate and is the main raw material for producing polyurethane (PU). MDI has 4,4', 2,4' and 2,2'-MDI three isomers. Since 4,4'-MDI has a wide range of industrial uses, it is necessary to separate and purify the product to obtain pure 4,4'- MDI (pure MDI). The price of pure MDI is 1.6 times of the price of polymeric MDI, so it has higher economic benefits to separate pure MDI from crude MDI. Based on the wide range of uses and economic benefits of MDI, we will retain "ITRI-Material and Chemical Research Laboratoriesfor" for cooperation to establish the

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production technology of for producing pure MDI produced from crude MDI. R&D investment in the next two years are projected amount to NT$ 4.9 million.

8. Planning and design of ultrafiltration system for deep seawater in Hualien

Factory:

In order to improve the situation where the deep ocean water of the Hualien Factory was affected by typhoons and earthquakes, resulting in a sharp rise in turbidity and unable to stably supply water for algae and white shrimp farming, we commissioned the "ITRI Material and Chemical Research Laboratories-Water Technology Team" to evaluate and test the most suitable treatment means for deep ocean water with high turbidity. The research and development includes the confirmation of high turbidity deep ocean water quality and water volume, filtration membrane test and selection, basic engineering design of filtration system and trial commissioning assistance. It is estimated that approximately NT$3 million will be invested in the next two years as the research and development expenses.

9. The main factors affecting the success of R&D are

(1)The leading edge of technology.
(2)Integration of internal and external resources.
(3)Product marketing ability and market feedback mechanism.

(IV) Impact of Important Policies and Legal Changes at Home and Abroad on the

Company's Financial Business and Response Countermeasures

To take care of the farmer, lessening the burden of the cost of fertilizer for the farmer, the government has implemented a subsidy policy for fertilizers since 2008. Meanwhile, the “Fertilizer Prices Review Group” was established by the Council of Agriculture (COA) to review the domestic factory price of chemical fertilizers on a monthly basis based on the costs of international fertilizer raw materials. The fertilizer producer's factory price was regulated. However, due to the price decrease in the global raw materials in 2017, the government terminated the phase task of subsidizing chemical fertilizer spreads in July of 2017. In the future, the Company will continue to seize sources of raw materials and set the goal to reduce the impact of price fluctuations. The Company has coped with the COA’s fertilizer purchase with real name 2.0 policy imposed on July 15, 2020.
The Executive Yuan promoted the "Actual Price Registration 2.0" policy. On December 30, 2020, the Legislative Yuan passed the amendments to the "The Equalization of Land Rights Act," the "Land Administration Agent Act," and the "Real Estate Broking Management Act." These amendments have a total of five key points, including 1."Complete disclosure of transaction information including door number and land number," that is to remove the current requirement that transaction information is disclosed in a sectional and de-identified manner, but fully disclose the door number and land number information, and retroactively applied the cases that have been disclosed; 2. "Pre-sale houses are fully managed and declared immediately." Those who add pre-sale houses should report the construction information in writing to the local government for reference before selling, and self-sellers are included in the scope of the actual-price registration system. The report time is advanced to report within 30 days after the signing of the pre-sale house transaction contract; 3. "Addition of the competent authority's inspection authority and increased penalties for repetitive failure of

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correction." The local competent authorities may check the documents of counterparts of transactions; for any one dubious of reporting fake registered price, the central competent authority may consult relevant agencies or financial institutions for price information related documents; 4. “Managing the Red Slip," which clearly stipulates that when the pre-sale house seller receives the deposit, a written agreement shall be used to specify the underlying object and considerations; the seller shall not agree anything unfavored to the buyers, including the seller reserving the right to sell and sign a contract, and the buyer must not resell the pre-sale house red slip to a third party; 5. "Pre-sale house sale standard form contract for reference", specifying that before the presale house is sold, the seller shall report the standard form contract of pre-sale house transaction to the local government for reference. The penalty rules are specified for the aforesaid five measures. The Company shall complete various required reporting before the deadline when conducting real property transactions to avoid penalty.

(V) Impact of Technological Changes and Industrial Changes to the Company’s Financial Business and the Countermeasures

With the change of Taiwan’s agricultural structure and the increasing emphasis on environmental protection and health preservation awareness of the citizens, the Company has started to build an organic fertilizer plant for the production of organic fertilizers; with the superior material supply system and fermentation technology and taking advantage of the Company’s excellent brand image it will reshape the image of the “Known-You” brand of organic fertilizer and to enter the domestic and foreign organic fertilizer market. Continue to improve the formula and introduce a variety of beneficial microorganisms; also, introduce a post-fermentation process to improve the quality of organic fertilizer products.
Due to the severe impact of international raw material and energy price fluctuations on the production of fertilizers and chemical products of the Company, for the purpose of grasping the sources of raw materials and reducing the impact of price fluctuations, the Company has strengthened supply contracts with manufacturers and continued the investment contract with SABIC in Saudi Arabia; also, it has actively implemented a downstream related product integration investment plan and energy transfer investment plan in order to improve the overall operating synergy of the Company.

(VI) Impact of Corporate Image Change on Corporate Crisis Management and the Countermeasures

The Company was originally a state-owned enterprise and has been transformed into a private Company since September 1, 1999. The Company has continued to reform its business with a diversified operation implemented to improve operating performance; also, it has changed people’s stereotyped images of a company with a state-owned business operation. The Company’s corporate image has been positively promoted; however, while pursuing reasonable profits, the Company still fully cooperates with the government to take care of the farmers and uphold the downstream chemical industry policies, to stably supply domestically-needed fertilizers and chemical products at a reasonable price, and to execute various industrial pollution prevention tasks and care for the benefit of employees. The Company established the Taiwan Fertilizer Foundation in

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2007 to take care of farmers and underprivileged individuals; also, it aims to exercise corporate social responsibility in order to fulfill the three operating objectives, including “promoting stable development of the Company’s operations,” “protecting the interest of the Shareholders of the Company,” and “performing the social responsibility of the Company.”

(VII) Expected Benefits, Possible Risks, and Countermeasures of Mergers and

Acquisitions

The Company has no project or plan for M&A.

(VIII) Expected Benefits, Possible Risks, and Countermeasures of Expansion of Plants

The plans for the relocation of the Company’s factories to Taichung Harbor were completed in 2015 and the development will be carried out in three phases. The first phase will be for land filling and geology improvement, harbor loading and storage facilities, raw material storage systems, public systems, other infrastructure constructions, and new construction projects for nitric acid and nitrate-phosphorus plants. The second phase will be for the construction of phosphonium and ammonium sulfate plants and the relocation of an old nitrate-phosphorus plant. The third phase will be for the construction of a new phosphate fertilizer plant. The production in each old plant will be ceased gradually and the relevant production machinery and equipment will be relocated to the new plants in accordance with the principle of “build new plants, relocate old plants” to continue the overall operation of the Company and ensure that the fertilizer supply business will not be interrupted due to the development of this plan.

The Company has been producing fertilizers for more than 75 years and is quite skilled in various fertilizer production processes. The business product items in this plan are all current business items on the production line:

Chemical Products: liquid ammonia, urea, phosphoric acid, nitric acid, sulfamic acid, and other chemicals.
Fertilizer products: single nutrient fertilizers, potassium sulfate “King Won” fertilizer series, “Hey Won” nitrophosphate organic compound fertilizer series, Biotec organic compound fertilizer series, organic fertilizer series, instant water soluble fertilizer series, biopower stimulants series, microbial fertilizer, and acidic soil conditioner, among other things.
Warehoused Products: In line with the increase in the utilization rate of the harbor unloading business, the Company will actively strive to apply to the Port of Taichung to become a qualified statutory unloading and storage company to undertake the customs declaration and tally business of the import and export goods of the fertilizer industry or other businesses.

In line with the implementation of this plan, in addition to screening the world’s excellent manufacturing processes, the Company will strictly request these international manufacturers to provide patent technology guarantee in compliance with production specifications; also, combine each plant’s many years of operating experience in the design improvement to refine the production process in order to lay a foundation for future successful business operation. Moving the production of each plant to Taichung Harbor, will help increase productivity, efficiency, product portfolio, unloading

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management efficiency, and complementary use of raw materials in order to reduce costs. In particular, the production site is close to major fertilizer markets, such as, Taichung, Nantou, Yunlin, Chiayi, and Tainan, which are highly beneficial to the management of sales channels, reduction of transportation costs, and market integration and competition.

(IX) The impact of concentration of purchase or sales and countermeasures

The main suppliers of the Company are SABIC Fertilizer Company, Sabic Asia Pacific, and Arab Potash Co. Ltd., among which SABIC Fertilizer Company is a company jointly invested in by the Company and Sabic in Saudi Arabia. The Company has urea supplied and shipped according to the cooperation contract. Sabic Asia Pacific sells liquid ammonia to the Company on behalf of various companies in Saudi Arabia. Arab Potash Co. Ltd. is an important global manufacturer of potassium chloride. The three companies have had good business relations with the Company for years. Apart from paying attention to the supply quality and goodwill of each raw material supplier, the Company also judges business conditions, prepares safety stocks, and follows-up on shipping lead time; therefore, the risk of facing purchase concentration is insignificant
The Company’s major customers for fertilizer products are farmers’ associations in all counties and cities of the country, with dispersion of sales, and there is no risk of concentration of sales.
(X) The impact of mass share transfer or change of Directors, Supervisors or shareholders holding more than 10% of the Company's shares, the risks and countermeasures: not applicable
(XI) The impact of the change of management on the Company, the risks and countermeasures: not applicable

(XII) Litigation and non-litigation

The Company established Cayman Xuchang Chemistry Technology Co., Ltd. (hereinafter referred to as “Cayman Xuchang”) as a joint venture with Samoa Jinqun International Co., Ltd. (hereinafter referred to as “Jinqun”). Cayman Xuchang took out a loan of US$ 10 million from the Hsinchu Branch of Shanghai Commercial and Savings Bank in February 29, 2012 with this Company and Jinqun serving as joint guarantors. Due to the fact that Cayman Xuchang was unable to repay the loan, this Company paid back a total of US$ 10,017, 062 (4.57 million, 3.3 million, and 2,147,065 on June 26, 2014, April 23, 2015, and March 31, 2016, respectively) to avoid the generation of overdue records at the Joint Credit Information Center. Pursuant to the regulations set forth in Article 281 of the Civil Code, this Company is entitled, as one of the joint debtors, to “demand from the other debtors the reimbursement of their respective shares in the prestation (US$ 5,008,532 each), plus interest from the date of release, due to release from the obligation by virtue of its performance.” Since Jinqun was a Samoa-based foreign company not recognized in Taiwan, and Chien-Liang Chao being its credit and joint guarantee agreement signatory with legal capacity, was listed as defendants together with Jinqun, in this case, pursuant to Article 15 of the Enforcement Act of the Part of General Principles of the Civil Code which stipulated that “the actor shall be jointly liable for this legal action with the foreign legal person,” thus shall pay

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for the Company NT$ 5,008,532. The Company thus commissioned an attorney to file repayment litigation with the Taipei District Court on July 18, 2017. The Court’s verdict (Chong-Su-Zi No.1012/2017) on December 17, 2018, stated that the defendants Jinqun and Chao, Chien-Liang shall pay the plaintiff, US$ 2,666,032, with interest rate at 5 % per annum counted from June 27, 2014, to July 5, 2015 Chien-Liang Chao as the responsible person of Jinqun then filed a second instance appeal on January 7, 2019, of which the Supreme Court has accepted (Chong-Shang-Zi No.395/2019) and initiated preliminary court hearings on July 25, 2019. In response, the commissioned an attorney of the Company has submitted an answer and file an incidental appeal on July 17, 2019, claimed that Jinqun and Chien-Liang Chao should pay additional US$2,342,500 to the Company with interest rate at 5% per annum, to the date of repayment. The Company's commissioned attorney had presented in the preliminary court of the 2nd instance on July 25, 2019; the case was ruled on December 31 in the same year, according to a written order of the second instance on January 3, 2020. The appeal against Chien-Liang Chao has received a favorable ruling, but the incidental appeal against Jinqun filed by the Company was overruled by the court. In other words, for this litigation of debt redemption, TFC as the prevailing party of first and second court instances could demand the full amount of repayment from Chien-Liang Chao. Chien-Liang Chao, the responsible person of Jinqun thus filed a third court instance appeal on January 30, 2020, the Company, therefore, commissioned the attorney of second court instance as its advocate. The Taiwan Supreme Court had sent a letter on March 12, 2020, to notify that the dossier and evidence of the case have been transferred to the Supreme Court, and Chien-Liang Chao then submitted on March 24, 2020, additional complaints concerning reasons to appeal. The case is still in the process of the third instance.

TR Electronic Chemical (Kunshan) Co., Ltd, (“Kunshan TR” hereinafter) is a subsidiary of the Company. On January 31, 2012, L&K Engineering (Suzhou) Co. Ltd. (“L&K Company” hereinafter) claimed it has signed up a contract of installing mechanical and electrical equipment for the first phase establishment of a new plant with the Kunshan TR. In which the Kunshan TR agreed to contract the electromechanical engineering project to the L&K Company. After the project completed in 2013, the L&K Company has yet received the payment from Kunshan TR after several overdue notices. Since the Company has promised to pay the cost of the project, the L&K Company did not take action to sue the Kunshan TR right away. Not until July 15, 2016, the L&K Company has sued Kunshan TR and demand for the priority of compensation. The court ordered Kunshan TR to pay the L&K Company project cost and interest of overdue payment in the verdict of the first trial but dismissed the demand for the priority of compensation in the judgments of first and second instances. As a result, the L&K Company could not take part in preference in asset allocation while Kunshan TR was filing bankruptcy. Since the Company also did not pay the overdue engineering on behalf of Xuchang, and installment payment, the L&K Company thus declared the Company was responsible for their loss and the filed lawsuit against the Company that demanded RMB 20,000,000, the first instance was filed on October 16, 2018. The verdict based on first instance judgment on October 14, 2019, stated that “the account in arrear of a project by Kunshan TR has no direct legal relation with TFC”, “no proof has shown TFC has promised to

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pay the L&K Company the overdue engineering and installment payment for Kunshan TR”, and that “the L&K Company has not in exercise proactively its contractual and legal rights, and attributed the unsettlement of project cost to TFC, the Company that has no direct legal relationship with Kunshan TR, was with no legal ground", thus the court entered a judgment against the L&K Company. The L&K Company objected on October 25, 2019, the second instance then transferred to Higher People’s Court of Jiangsu (Second instance case number: Su 05 Minchu 1330/2018). The first court session began on June 17, 2020. The judge asked if both parties prefer mediation. Since the accusations of the L&K Company regarding the Company was groundless, the Company refused the mediation. On September 25, 2020, the court judged in favor of the Company at the second instance. The legal fee for the second instance was paid by the L&K Company. The judgement of the second instance was final and conclusive.

On February 24, 2011, the plaintiffs, Chi-Nien Tsao and Tung-Chou Chao signed the transaction contracts of houses during the presale of “Sun & Moon” with the Company for NT$80,600,000 and NT$81,400,000, respectively. The two paid the considerations of NT$21,261,071 and NT$21,669,962, respectively. The Company sent the reminder letter on January 14, 2016, to urge the two plaintiffs to complete closing procedures and ownership transfer. Still, the two plaintiffs did not execute the closing obligation within a prescribed time limit. The Company, therefore, notified through a letter on March 9, 2016, to rescind the two purchase contracts for their failure to complete closing payments, and charged them a breach penalty equivalent to 15% of the total amount paid. The two plaintiffs thus filed civil appeal around June 20, 2017, to claim for refund of purchase payment. According to the opinion of the Taipei District Court: ”checked through dossier, found no evidence of reminder material that showed ‘defendant has notified plaintiffs to close payment with written notice after the defendant has considered two plaintiffs failed to complete the closing procedure within a prescribe time limit’, but defendant executed the right of rescission with the aforementioned legal attest letter on March 9, 2016, which violated the provision of the contract, and not legitimate. But as investigated, the defendant has sold the contentious unit on the 14th floor to the third party on October 28, 2016, and completed the closing procedures… and resulted in the impossibility of performance; therefore, Chi-Nien Tsao, the plaintiff, claimed for rescission of the purchase agreement and demanded to return payment for the unit on the 14th floor amounting NT$ 21,669,962 pursuant to the regulation set forth in Article 256 of the Civil Code, was grounded with legally evident.” (referred to Taipei District Court case number Cong Su Zi No. 1017/2017, Item 4, Chapter 2 of Civil Verdict). On November 23, 2018, the first instance judgment was given in favor of the plaintiff (whereas the Company shall return Chi-Nien Tsao the payment of NT$ 21,669,962), but Tung-Chou Chao lost the suit to the Company. Mr. Chao objected to the verdict and has filed appeal again. The Company also filed an appeal with Taipei District Court on December 21, 2018; the case is now in second instance trial (referred to case number: Chong Sun Zi No.124/2019). Mr. Chao objected to the verdict and has filed appeal again. The Company also filed an appeal with Taipei District Court on December 21, 2018. The second instance trial of the case number is Chong Sun Zi No.124/2019. In the second trial, the court judged that “the claim of Tung-Chou Chao for TFC to refund the consideration of NT$21,261,071, pay liquidated damages, or

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compensate NT$12,090,000 is groundless,” in other words, the appeal filed by Mr. Chao was without a reason. For the judgement regarding Chi-Nien Tsao, the court found “Chi-Nien Tsao may request TFC to refund the consideration of NT$12,210,000 with interest.” Both the Company and Chi-Nien Tsao filed the appeal for the third instance and the case is now pending in the Supreme Court for trial.

On July 31, 2011, Fulien International Property Co., Ltd. purchased 3 units (including 6 parking spaces) of the Building “Sun & Moon” from the Company, including A2/A3 on the 17th floor, A2 on the 14th floor, and A5 on the 11th floor, with more than NT$ 80 million of partial payment made (total cost NT$ 240 million). Still, the mortgages and building ownership transfer registration was not completed before April 4, 2015. The Company had Fulien International Property Co., Ltd. reminded repeatedly, but Fulien International Property Co., Ltd refused to perform the contract on a pretext. The Company thus send a legal attest letter on December 1, 2015, to cancel the contract for the purchase of the three properties, and to charge a penalty for a breach of contract for an amount equivalent to 15% of the total purchase amount of NT$ 47,157,000. Fulien International Property Co., Ltd. thought that the penalty for an amount equivalent to 15% of the total purchase amount was too high. It filed a “decrease of penalty” litigation with the Taipei District Court on December 29, 2015, claiming that the Company should have the penalty for a breach of contract reduced to an amount not more than 7% of the total purchase and demanding the Company to refund the unjustly enriched benefit of an amount of NT$ 37,939,406. The Company commissioned an attorney filed an answer (Chong Su-Zi No. 148/2016) for the case before February 2016 to detail the total amount of derivative expenses and damages incurred due to the cancellation of the contract for more than NT$ 100 Million. The Taipei District Court dismissed the plaintiff’s lawsuit and the plea for provisional injunction with the civil judgment issued on July 1, 2016. Fulien International Property Co., Ltd. objected to the court judgment of the first instance and filed an appeal on July 22, 2016. The Company commissioned an attorney to serve as the appellee’s action agent for the second court instance. The High Court had the second instance appeal assigned with the case number of Chong Sun Zi No. 778 dated 2016 and dismissed the appeal in the final verdict on August 7, 2018, for the same reason as stated in the first ruling. Fulien International Property Co., Ltd. has therefore filed a third appeal around September 3, 2018. (Case No. Tai-Shan-Zhi No.611/2020). The Supreme Court abolished the original verdict on April 30, 2020 and remanded the case to the High Court for rehearing. The reason was that the arguments regarding the “cancellation of transaction contract” and “reduced penalty” were arguable. The case no. of the first re-trial is Chong Sun Zi No.80/2020. The case now is pending for the first re-trial.
In 2011, Mr. Kuo-Chi Liao has purchased two presold units (B1-11 and B5-11) of the Building “Sun & Moon” and has completed ownership transfer in March 2016. Four of the joint purchasers of the unit A3-09F, the City Bon Company, Kwong Tsuen Construction Co., Ltd., and Da Shon Company, together filed joint litigation with the Taipei District Court in August 2016 stating the detection of countless black cracks on the structural pillars and suspecting the presence of slag components. They requested a purchase price reduction to NT$ 24.2 million (Mr. Liao requested a reduction to NT$ 7,950,000 and the three other plaintiffs requested a total reduction to NT$ 16,250,000)

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due to illegal construction, unsafe building structure (public facility flaws), and false advertising pursuant to Article 359 of the Civil Code. The Taipei District Court is scheduled to be the first oral argument (Chong Su-Zi No. 1090/2016) for the case on November 22, 2015. Taipei District Court commissioned the Taipei Professional Civil Engineers Association with an official letter issued on July 26, 2017, to conduct an appraisal to clarify whether slag components are present in the concrete used for structural pillars or diaphragm walls of the B1, B2, and B3 parking lot area. The Association notified the court on October 18, 2017, that the total appraisal fees cost NT$ 1.08 million, of which the Company bore part of the appraisal expenses up to NT$ 600,000. In October 2020, the first instance trial found the Company lose the case, and determined the plaintiffs claiming price reduction pursuant to the provisions of the Civil Code, and the refund the consideration pursuant to the improper gains defined in the Civil Code was justified. The Company has appointed a lawyer to file a second instance appeal on November 16, 2020 (Case No. Chong Sun Zi No.943/2020), the second instance of this case is currently under trial.

As aforementioned, Mr. Kuo-Chi Liao, the plaintiff, further declared that the Company has to pay for delay interest due to delay in notifying property handover and the loan interest, the total amounted to NT$ 22,418,497. The Taipei District Court dismissed the plaintiff’s suit (the Company won the lawsuit) and denied the motion for provisional execution in the civil verdict on November 24, 2017 (Chong Su-Zi No. 834/2016). It proved that the Company did not delay the delivery of the house. Mr. Liao filed an appeal, and the case no. of the second re-trial is Chong Sun Zi No.139/2018. The Taiwan High Court dismissed the plaintiff’s suit (the Company won the lawsuit) on July 30, 2019. Mr. Liao again filed a third instance appeal around August 30, 2019. The third court instance is now still in progress.
Plaintiff Fang-Chou Lai owned the land of Land lot 934 of Beishan section in Xizhi District, New Taipei City, as there have no roads for passages around, Lai then requested for the right of pass through surrounding lands of Land lot 1332 and 1318 of Beishan Section, owned by the Company and National Property Administration totaling 125 m2. But as what requested were way high then regulations stated in current law, the claim of Lai was denied by the Company and National Property Administration. In order to declare the right of pass and necessity to install cables, and pipelines of water and gas on land Land lot 1332 in Beishan Section that was owned by the Company, Lai, therefore, filed a lawsuit for ensuring the right of pass with Shilin District Court Neihu Summary Court on November 26, 2018. The National Property Administration was also the defendant of the case, which is now trialed by Taipei District Court (referred to case number Chong Su Zi No. 18/2019). The plaintiff declared an amount of NT$ 10,100,000 from the Company and the National Property Administration. On August 31, 2020, the court ruled that the Company won the case, on the grounds that the current land use status of the Beishan Section of Xizhi District, New Taipei City, owned by the plaintiff, did not meet the key conditions of bag land specified in Article 787 of the Civil Code, and his claimed method to go through the Company's land should was neither the least harmful method. The plaintiff, Mr. Lai, has filed an appeal for the case. On November 13, 2020, the court of first instance (Taipei District Court) transferred the file

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to the court of second instance (Taiwan High Court) (Case No. Chong Sun Zi

No.851/2020). Currently, the case is pending at the court of the second instance.

Ms. Li-Ren Wang, the plaintiff, has purchased one presold unit (B2-4F, including two parking spaces) of the Building “Sun & Moon” from this Company on March 3, 2011. The total value of this unit priced NT$ 81.32 million, and the plaintiff has paid in advance for a total of NT$ 37.5 million. When the Company has acquired the usage permit for the aforementioned residential building project on December 4, 2014, and notified the owner to conduct handover procedure, Ms. Wang refused to complete her follow-up payments, mortgage application, and closing payments. She also failed to provide the Registration of Ownership transfer and did not execute her closing obligations. The Company thus invited Ms. Wang for settling the dispute on October 12, 2015, Ms. Wang showed up and express her will to terminate the contract and send a lawyer’s letter on the 30th of the same month in the same year to rescind the purchase contract. Ms. Wang further complaint to the Consumer Protection Officer about the Company for false advertising and installed grille on the exterior wall. Pursuant to the provisions set forth in Article 26, Paragraph 1 of the purchase agreement (failure to execute obligations within a prescribed time limit upon written notice), the Company thus sent official correspondence on December 1, 2015, to conduct the right of rescission and charge a breach penalty equivalent to 15% of the total purchase amount (NT$ 12,198,000). Ms. Wang commissioned an attorney to file litigation with the Taipei District Court in September 13, 2016 and complained about the detection of significant flaws during public facility handover in July 2016. These included ready-mixed concrete adulterated with slag, and false advertising constituting fraudulent behavior such as incomplete wooded area covering 5,000 m2. The attorney of the plaintiff requested to cancel the purchase and claimed rescission of the purchase agreement and return of all payments by this Company pursuant to the regulation set forth in Article 92 and 359 of the Civil Code. (case number Xiao Sun Zi No. 36/2016) The Company appointed an attorney as its litigation representative. On November 28, 2017, Taipei District Court dismissed the plaintiff’s lawsuit, and determined that the Company has notified the plaintiff to rescind the contract according to the regulation on Article 26 of the contract on December 1, 2015, thus with the provision of legal rescission. The plaintiff has filed a second instance appeal (case number Xiao Sun Zi No. 1/2018). The Company again Commissioned the attorney of the first instance to be its litigation agent of the appeal trial. The second court instance is now still in progress.
The Company has lent Hualian City Office part of its land of Land lot 121, Meigang Section, Hualian City for use as access road of a landfill, with leasehold till April 30, 2019. Whereas resolved in the Board meeting in April 2019, there will have no renewal and would take back the land on May 1, 2019. The Hualian City Office, therefore, notified the Company through an official letter issued on May 2, 2019 that stated ”the laneway borrowed by Hualian City Government had already been assigned as existing laneway in the official letter issued on March 5, 2014, numbering Chian Ji Zi 1030017212”, “through examining judicial practices, if there is an objection to the determination of designated “existing laneway” as a public easement, the Company may file an appeal with Taipei High Court for declaratory relief to determine not applicable of public easement.” Since the Company was denied the right to take back the land

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with access road by the Hualian City Office, and its sanitation worker has interfered with the Company to install the access control system on May 9, 2019. The Company, therefore, commissioned the attorney to submit a complaint to administrative judgment on June 24, 2019, to determine the loaned land was not the “existing laneway.” The case is still pending before the Taipei High Court (referring to case number Su Zi No. 1085/2019), the market price of the involved land valued NT$ 27,230,000.

The Company has leased the land of Land lot 121 Meigang Section, Hualian City to National Cheng Kong University (hereinafter referred to as NCKU) for use in experiment and research of aquaculture in July 2018. In March 2019, when the construction was in progress, massive buried garbage on-site was discovered. In order to find out which party has committed the offense, the Company commissioned an attorney to inform against occupying offense of land and violation of the Waste Disposal Act with Hualien District Prosecutors Office. Hualian District Prosecutors Office informed Hualien Precinct, Hualien County Police Department to investigate the reported case through official letter issued on June 4, 2019, the Company also appointed staff to help and cope with police for interrogation report. After the first inquiry session called on September 19, 2019, Hualien District Prosecutors Office has announced the interrogation concluded (case number Ta Zi No.526/2019) on November 14, 2019, without waiting for the Company to provide excavated evidences. To protect the Company’s asset, the Company has requested and was authorized to commission the attorney to file a retrial of criminal action. The Hualien District Prosecutors Office has not yet appointed a responsible department and prosecutor (case number Ta Zi No. 179/2020). The market price of occupied land valued NT$ 181.5 million, garbage clearance and disposal cost NT$ 350~400 million.
O2Micro International Ltd. (“O2Micro” hereinafter) rented the office of the Company’s TFC Building in Hsinchu during November 2018, but did not follow the terms and conditions in the agreement, unilaterally terminated tenancy, and leave outstanding estate management fee, water, and electric bill and other fees, the Company thus commissioned an attorney to claim for payment of outstanding rent, estate management fees and other fees (total costs NT$ 5,592,276) on July 4, 2019. The total costs have added to NT$ 5,625,049 in the latter claim. The Taipei District Court heard the case (Bei Su Zi No.31/2019), and on August 13, 2020, found the Company lose the case. In the verdict, it is found that the Company legally terminated the leasing agreement, and pursuant to the the leasing agreement, and that the lessee must have used the leased object pursuant to the leasing agreement for the Company to claim the rents during the rent-free period. However, O2Micro did not use the leased object, so the Company must not claim the rents during rent-free period. . The court found that the Company could only claim part of the rents, management fee, utility fee and liquidated damages from O2Micro, but because O2Micro defended that the rent deposit was offset, the court held that the Company should not claim rents, management fee, utility fee and liquidated damages from O2Micro, and ruled that the Company lost the case. The Company’s appointed litigation attorney believed that the probability of obtaining a favorable judgment on the appeal for the rent-free period is low, and the first-instance judgment has determined that the Company has legally terminated the leasing agreement and thus has been able to cover the rent, management fees, utilities and liquidated damages with

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the deposit. Therefore, the rights of the Company have been secured, and the recommendation is that the Company may consider not appealing. By considering the professional opinions of the litigation attorney, the time cost of appeal, and the cost of litigation, the Company decided not to appeal, so the case has been concluded.
The five plaintiffs, LingYing Hung, WeiTing Chang, YuTing Hsu, PeiWen Tsai, and Tsai-Luan Chen (four households), complained of significant flaws and false advertising detected in the Company’s project of the Building “Sun & Moon.” Thus, file a lawsuit on December 21, 2016, to claim compensation from the Company to pay each household NT$ 2 million, totaling NT$ 8 million, the Taipei District Court is hearing the case (referring to case number Xiao Zi No. 12/2017).
The Company has leased the land No. 720, subsection 2, Nangang Section, Taipei City to Chi-Hung Chang for use as a residential building site. The two parties have signed the land lease agreement on September 2, 2009, lease term last 10 years, from August 16, 2009, to August 15, 2019, if the lease were not renewed before the end by both parties, the contract would terminate automatically without notice from the Company. According to the provision of clause 3 on rent set forth in the agreement, Chi-Hung Chang shall prepay rent of six months and rent margin each year on January 10 and July 10, but Chang has not paid according to the agreement since December 31, 2016. Although the Company urged Chi-Hung Chang to pay the accumulated overdue rents with letters and legal attest letter, but he always failed to pay the accumulated overdue rents by the deadlines. The Company sent again the legal attest letter to Chang on June 28, 2019, to express the intention of rescission, but still received no response from Chang, who was not just unwilling to clear outstanding rents, also unwell to dismantle the erected building and return the land. Therefore, the Company filed a lawsuit against Chi-Hung Chang as a defendant with Shilin District Court on January 13, 2020, to demand Chang to dismantle the building for returning the land and clear all outstanding rents, the value of claim cost NT$ 12,493,498. Since on October 29, 2020, when the first type transcript was requested for the registration of the disputed building, it was discovered that the owner of the disputed building was still registered as Chi-Hung Chang’s father; however, his father had passed away and the inheritance had not been allocated. To confirm the right owner of the disputed building disposal for implementing follow-up enforcement, on January 19, 2021, a lawyer was appointed to file to the court of first instance to add 10 heirs of Chi-Hung Chang’s father as defendants.
The Company and Guangxi Mingli Chemicals Co., Ltd (“Mingli” hereinafter) entered a procurement contract No. PA-0445CH for the electronic-grade phosphoric acid procurement on September 2, 2015 (hereinafter “procurement contract”) with term of September 2015 to August 2016. The payment term is full pre-payment for yellow phosphorous, the material of electronic-grade acid. However, Mingli had the problem of quality and delayed delivery since May 2016, and thus the delivered volume was less than 60% of the agreed contractual volume till the expiry of the contract. The Company and "Mingli" reached an agreement in November 2016 to extend the procurement contract to April 2017. In January of 2017, "Mingli" announced that it had reached a strategic cooperation agreement with Jiangsu Kaiyuan Pharmaceutical and Chemical Co., Ltd., but "Mingli" was unable to resume the production line of electronic-grade acid still, so the Company appointed a lawyer to send a letter to "Mingli" in November 2017,

299

Review and Analysis of Financial Status and Business Results and Risk Issue

requesting "Mingli" to buy back the unused yellow phosphorus pursuant to the procurement contract. Later, the Company signed a supplementary agreement with "Mingli" in December 2017 to extend the procurement contract to December 31, 2019. However, when the procurement contract expired on December 31, 2019, "Mingli" was still unable to resume supply. On May 19, 2020, the Company commissioned a lawyer to file a complaint, claim damage from "Mingli" for US$1,027,817.62. The case number established by the court was "(2020) Gui-07-Min-Chu-No. 38," and the cause of the litigation was "disputes over transaction contracts." The first trial session of the first instance was conducted on July 17, 2020 at “Qinzhou Intermediate People's Court, Guangxi Zhuang Autonomous Region.” "Mingli" agreed to apply the Chinese law for the trial, and demonstrated the willingness of settlement. On July 20, 2020, the Company filed a written explanation for the objection of the counterpart. On December 11, 2020, the court found the fact that "Mingli" had breached the contract, and ordered "Mingli" to compensate the Company's consideration plus interest losses (based on US$1,012,533.41 with the interest rate as the six months London Interbank Offered Rate (LIBOR) on January 2, 2020, which was 1.9095%, from January 1, 2020 until the date of full repayment). The case acceptance fee of RMB61,923 was borne by Mingli.

(XIII)Other Important Risks and Countermeasures:

Evaluation and Analysis of Information Security

Risk evaluation and analysis of cyber-attacks: In spite of the constantly changing cyber-attacks and invasion types, the Company has established a multi-level information security protection system through various gateway security equipment and end point security system in order to protect or maintain the Company’s manufacturing operation, accounting, and other critical operating functions. Data backup and standby system are in place according to the operating procedure. But there is no guarantee that the Company’s intranet will be completely free from any illegal invasion and cyber-attack, or any activity that will destruct the Company’s operation and damage the goodwill. Malicious attack may also try to implant a computer virus, ransomware, or other malicious program into the Company’s network and information system, interrupting with the Company’s operating, acquiring the control over the Company system, extort the Company or intruding the confidential information. These attacks may cause a temporary paralyze of the Company’s network and information system for a period of time, or require additional expense to implement remedial and improvement measures, or may leave the Company to some legal disputes or supervisory investigations associated with significant liability due to the divulge of the information belonged to a customer or a third party to which the Company owes the obligation of confidentiality.
Risk evaluation and analysis of social engineering attack: The Company constructs the defense mechanism of social engineering attacks with various algorithms and information and intelligence sources but cannot guarantee that the social engineering attacks or BEC from a third party will be completely prevented.
Risk evaluation and analysis of denial-of-service attack: The Company has established the multi-line load redundancy system for important internet services but cannot guarantee that the all third-party internet attacks paralyzing the system will be completely prevented.
Risk evaluation and analysis of information divulge: External attacks or internal

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Review and Analysis of Financial Status and Business Results and Risk Issue

employees may attempt to steal the Company’s trade secrets, other intellectual property and confidential information, such as the proprietary information of customers, or other stakeholders, and employees’ personal data.

The Company retains the third party to perform the audit of the information environment and internal control, and to inspect and evaluate the information operating procedure every year to ensure the adequacy and effectiveness. However, this does not guarantee that the Company will be free from any unknown risk and attack from the constantly changing security threat. During 2020, and up to the publication date of the annual report, the Company has not found any material cyber attack or incidents have had or may have materially negative impact on the Company’s business or operation.

VIII. Other Important Matters: None

301

Special Records

Eight. Special Records

I. Affiliate Information

(I) Consolidated revenue report of affiliates

Organizational chart of affiliates

TAIWAN FERTILIZER CO., LTD.

TAIWAN YES PEIFENG TAIZHUANG ASSETS TAIFER (CAYMAN) TAIFER MANAGEMENT & INTERNATIONAL (CAMBODIA) CO., DEEP OCEAN TECHNOLOGY DEVELOPMENT CO., GROUP CO., LTD. LTD. 100% WATER CO., LTD. CO., LTD. LTD. 100% 100% 100% 100% TAIFER TR ELECTRONIC INTERNATIONAL CHEMICAL CO., (SAMOA) GROUP LTD. 51% CO., LTD. 100% TAIFER CHEMICAL INTERNATIONAL CO., LTD. 100%

302

Special Records

2. Basic information of affiliates

Company	1. Establishment date	Address	Paid-in capital	Business/production item
TAIWAN YES DEEP OCEAN WATER CO., LTD.	September 25, 2006	No.15, Huadong, Hualien City, Hualien County, Taiwan (R.O.C.)	NT$ 257,632,000	Production, manufacture, and sale of bottled water, concentrated solution, cosmetics, and heath care products related to deep ocean water
PEIFENG TECHNOLOGY CO., LTD.	June 06, 2017	8F., No.88, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City 104, Taiwan(R.O.C.)	NT$2,400,000 thousand	Manufacture and sales of fertilizer
TAIZHUANG ASSETS MANAGEMENT & DEVELOPMENT CO., LTD.	September 9, 1999	8F., No.88, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)	NT$ 55,000,000	Development, rent, and sale of land, houses and buildings; gas station
TAIFER INTERNATIONAL (SAMOA) GROUP CO., LTD.	February 25, 2013	TMF Chambers, P.O. Box3269, Apia, Samoa	US$1,415,000	Investment and share holding
TAIFER CHEMICAL INTERNATIONAL CO., LTD.	October 19, 2011	No. 38, Tourist Street, 3rd Sub-District, Qingertai District, Ulaanbaatar, Mongolia	US$1,333,000	Leasing of buildings and real estate
TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD.	February 01, 2011	P.O. Box 32052, Grand Cayman Ky1-1208, Cayman Island, British West Indies	US$10,965,000	Investment and share holding
TR ELECTRONIC CHEMICAL CO., LTD.	November 03, 2010	P.O. Box 2804, George Town, Grand Cayman, Cayman Island, British West Indies	US$21,500,000	Investment and share holding
TAIFER (CAMBODIA) CO., LTD.	December 22, 2014	No.11 Street 3, Sangkat Teuk Loak 3,Khan Tuol Kork, Phnom Penh. Cambodia	US$ 1,255,000	Sale and production of fertilizer

Information of the same shareholders presumed having a control or affiliating relationship: None
Industries generally covered by the business of the affiliates:

Major industries covered: Manufacture, sale, import, and export of fertilizer of all kinds, chemical products, care products, health care products, deep ocean water and derivatives as well as development and leasing of land, houses, and buildings

303

Special Records

5. Information of the directors, supervisors and presidents of the affiliates

March 31, 2021

Unit: New Taiwan Dollar; share; %

Company	Title	Name or representative	No. of shared held	No. of shared held
			Shares (contribution)	Shareholding ratio
TAIWAN YES DEEP OCEAN WATER CO., LTD.	Chairman	TAIWAN FERTILIZER CO., LTD. Representative: Cheng, Kuo-Chung	25,763,200 shares	100.00
	Director	TAIWAN FERTILIZER CO., LTD. Representative: Liu, Guo-Yian
	Director	TAIWAN FERTILIZER CO., LTD. Representative: Song, Chuan-Hsu
	Supervisor	TAIWAN FERTILIZER CO., LTD. Representative: Liu, Wei
	President	Song, Chuan-Hsu
PEIFENG TECHNOLOGY CO., LTD.	Chairman	TAIWAN FERTILIZER CO., LTD. Representative: Lin, Chin-Sheng	240,000,000 shares	100.00
	Director	TAIWAN FERTILIZER CO., LTD. Representative: Wang, Chun-Wen
	Director	TAIWAN FERTILIZER CO., LTD. Representative: Zhuang, Zhi-Ying
	Supervisor	TAIWAN FERTILIZER CO., LTD. Representative: Huang, Mei-ling
	President	Lin, Chin-Sheng
TAIZHUANG ASSETS MANAGEMENT & DEVELOPMENT CO., LTD.	Chairman	TAIWAN FERTILIZER CO., LTD. Representative: Huang, Yao-Hsing	5,500,000 shares	100.00
	Director	TAIWAN FERTILIZER CO., LTD. Representative: Zhang, Cang-Lang
	Director	TAIWAN FERTILIZER CO., LTD. Representative: Huang, Rui-Zhen
	Supervisor	TAIWAN FERTILIZER CO., LTD. Representative: Liu, Wei
	President	Zhang, Cang-Lang
TAIFER INTERNATIONAL (SAMOA) GROUP CO., LTD.	Corporate representative of director	TAIZHUANG ASSETS MANAGEMENT & DEVELOPMENT CO., LTD. Representative: Zhang, Cang-Lang	1,414,989 shares	100.00
TAIFER CHEMICAL INTERNATIONAL CO. , LTD.	President	Zhang, Cang-Lang	US$1,333,000	100.00
TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD.	Corporate representative of director	TAIWAN FERTILIZER CO., LTD. Representative: Liu, Guo-Yian	10,965 shares	100.00
TR ELECTRONIC CHEMICAL CO., LTD.	Chairman	TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD Representative: Liu, Guo-Yian	10,965,000 shares	51.00
	Director	TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD Representative: Liu, Wei
	Director	Jinqun International Corp. Representative: Zhao, Jian-Liang
	Director	TAIFER (CAYMAN) INTERNATIONAL

304

Special Records

Company	Title	Name or representative	No. of shared held	No. of shared held
			Shares (contribution)	Shareholding ratio
		GROUP CO., LTD Representative: Xu, Shi-Chang
	Supervisor	TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD Representative: Jian, Zhao-Ren
	President	Zhao, Jian-Liang
TAIFER (CAMBODIA) CO., LTD.	Chairman	TAIWAN FERTILIZER CO., LTD. Representative: Huang, Yao-Hsing	US$1,333,000	100.00
	Director	TAIWAN FERTILIZER CO., LTD. Representative: Wang, Chun-Wen
	Director	TAIWAN FERTILIZER CO., LTD. Representative: Zhuang, Zhi-Ying
	President	Huang, Yao-Hsing

305

Special Records

6. Operating status of affiliates

December 31, 2020

Unit: New Taiwan Dollar

Company	Capital	Total property	Total liability	Net value	Operating revenue	Operating profit	Current pofit/loss	EPS (dollar)
TAIWAN YES DEEP OCEAN WATER CO., LTD.	257,632	243,705	46,572	197,133	94,745	(3,258)	(6,269)	(0.24)
PEIFENG TECHNOLOGY CO., LTD.	2,400,000	2,948,874	528,585	2,420,290	91,945	36,761	31,096	0.13
TAIZHUANG ASSETS MANAGEMENT & DEVELOPMENT CO., LTD.	55,000	104,796	7,187	97,609	162,026	2,678	8,769	1.59
TAIFER INTERNATIONAL (SAMOA) GROUP CO., LTD.	42,797	62,257	0	62,257	0	0	6,398	-
TAIFER CHEMICAL INTERNATIONAL CO. , LTD.	45,630	62,745	744	62,001	6,344	2,178	6,398	-
TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD.	321, 900	0	0	0	0	0	0	-
TR ELECTRONIC CHEMICAL CO., LTD.	321, 962	0	0	0	0	0	0	-
TAIFER (CAMBODIA) CO., LTD.	40,052	32,991	858	32,133	4,829	646	1,214	-

Note: TR Electronic Chemical (Kunshan) Co., Ltd. currently is bankrupt and under the liquidation; therefore, it is removed from the list above.
1. The endorsement/guarantee, loaning of funds to others, and derivative transactions of each affiliates: in the 9th meeting of the Board of Directors of 34th Term, on April 30, 2019, it was approved to continue the provision of total NT$13.5 million guarantee to the subsidiary, Taizhuang Assets Management and Development Co., Ltd. (“Taizhuang”), for its procurement of petroleum products. As of March 31, 2021, the Company actually continues to provide the guarantee of NT$13.5 million by pledging a certificate of deposit for Taizhuang’s procurement of petroleum products.
(II) Consolidated financial statements of affiliates : For the year of 2020 (from January 1, 2020 to December 31, 2020), the companies to be included in the preparation of the affiliate consolidated financial statements pursuant to the “Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Reports and Consolidated Financial Statements of Affiliated Enterprises,” are the same as those included in the consolidated financial statements of the parent company and subsidiaries prepared in conformity under the International Accounting Standards (IAS) No. 10, which standards certified by the Financial Supervisory Commission. In addition, the information required to be disclosed in the consolidated financial statements is included in the aforesaid consolidated financial statements. Consequently, the Company and its subsidiaries do not prepare a separate set of consolidated financial statements.

(III) Relationship Report: none

306

Special Records

II. Private placements of securities in the most recent year and as of the printing date of the annual report: None
III. Shares of the Company that are held or disposed by a subsidiary in the most recent year and as of the printing date of the annual report: None
IV. Other necessary descriptions: None

307

Nine. Any event which has a material impact on shareholders' equity or securities prices, as specified in Article 36, Paragraph 2, Subparagraph 2 of the Securities and Exchange Act, in the most recent year and as of the printing date of the annual report: None

308

AI assistant

TFC — Annual Report 2020

51902_rns_2021-08-13_322fc8fe-0b9c-4863-ac88-26279ecbc3f1.pdf

I. Spokespersons of the Company

III. Share Transfer Agency:

One. Report to Shareholder

Overview of 2020 Business:

Summary of 2021 Business Plan:

Summary of future business development strategies:

Two. Company Profile

I. Establishment date

II. Organization and operations

Three. Corporate Governance Report

I. Organization System

(I) Corporation Organization

(II) Affairs in charge for each major department

II. Information on Directors, Supervisors, President, Vice Presidents, and Management Team

(I) Director information

Director information (I)

Table 1: Key Shareholders of Institutional Shareholders

Director information (II)

(II) Information on the President, Vice Presidents and Management Team

III. Remuneration paid to directors, supervisors, president and vice presidents for the recent

(I) Remuneration for directors of the board (including independent directors) (Summary of ways for coordinative disclosure of names)

Remuneration Scale Table of 2020

(III) Remuneration for President and Vice Presidents (Summary of ways for coordinative disclosure of names)

Remuneration Scale Table

(IV) Names of Management Team for the Allotment of Employee Remuneration, and Allotment Conditions

IV. Operation of Corporate Governance

(I) Operation of the Board of Directors

(II) Operation of the Audit Committee

(III) Corporate Governance Status, Differences with Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and Reasons

(IV) The Company should disclose the composition, function, and operation circumstances of compensation committee, if any.

(V) Fulfillment of Corporate Social Responsibility (CSR) and Differences with Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies and reasons

(VI) Implementation of Ethical Corporate Management and Differences with Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies and reasons

(VII) Disclosure of Inquiry Ways in Case of any Formulation of Corporate Governance Rules and Relevant Regulations by the Company

(VIII) Other Important Information Enough to Enhance the Understanding of the Operation of Corporate Governance

(IX) Status of the Execution of the Internal Control System

Showing the effectiveness in design and implementation

TAIWAN FERTILIZER CO., LTD.

1. Key resolution and implementation of 2020 shareholders meeting (June 22, 2020)

2. Important resolutions at the board of directors meeting

V. Professional Service Fees of CPAs

(I) Information on transfer of shares:

(II) Information on pledge of equity interests:

IX. Information on top ten shareholders and their mutual relationship as spouse or blood relative within the second degree:

X. Percentage number of shares and consolidate percentage of the company, directors, supervisor, managers and the businesses that are controlled by the company directly or indirectly on the invested company

Four. Capital Raising Activities

I. Capital and Shares

(I) Source of share capital

(II) Shareholder structure

(III) Share ownership distribution

1. Ordinary share

(IV) List of Major Shareholders

(V) Market share price, net worth, earnings, dividend and relevant information for the most recent two years

(VI) Dividend Policy and Implementation

(VIII) Remunerations to employees and directors

(IX) Implementation of Share Buyback Program

II. Issuance of corporate bonds: none

Five. Operation Highlights

I. Business Content

(I) Scope of Business

(II) Industry Overview

1. Macro Economic Environment

(1) International Economy

(2) Domestic Economy

(III) Technology and R&D overview

C. Field validation and demonstration promotion of biotech fertilizer materials

(IV) Development plan of medium and long-term and short-term business

II. Overview of market and production & sales

(I) Market analysis

1. Sales area

(1) Fertilizer products

(2) Chemical product

(II) Important use and manufacture process of main products

1. Usage of main products

(1) Fertilizer products

(2) Chemical product

(3) Electronic grade chemical products

(III) Supply conditions of main raw materials

TFC Annual Report 2020