Stock Code:1310

$\bf{l}$

TAIWAN STYRENE MONOMER CORPORATION AND SUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors' Report for the Years Ended December 31, 2019 and 2018

Address: 8F.-1, No.6, Sec.1, Roosevelt Rd., Taipei City Telephone: $(02)$ 2396-6007

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 an and Chinese language independent auditors' report and consolidated financial statements, the Chinese version shall prevail.

Contents	Page
1. Cover Page	1
2. Table of Contents	$\overline{2}$
3. Representation Letter	3
4. Independent Auditors' Report	4
5. Consolidated Balance Sheets	5
6. Consolidated Statements of Comprehensive Income	6
7. Consolidated Statements of Changes in Equity	7
8. Consolidated Statements of Cash Flows	8
9. Notes to the Consolidated Financial Statements
(1) Company history	9
(2) Approval date and procedures of the consolidated financial statements	9
New standards, amendments and interpretations adopted (3)	$9 - 12$
(4) Summary of significant accounting policies	$12 - 31$
(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty	31
Explanation of significant accounts (6)	$32 - 65$
(7) Related-party transactions	$65 - 67$
Pledged assets (8)	$67 - 68$
(9) Commitments and contingencies	68
(10) Losses due to major disasters	68
(11) Subsequent events	68
$(12)$ Others	68
(13) Other disclosures
(a) Information on significant transactions	$69 - 72$
(b) Information on investees	73
(c) Information on investment in mainland China	73
(14) Segment information	74

Representation Letter

The entities that are required to be included in the combined financial statements of Taiwan Styrene Monomer Corporation as of and for the year ended December 31, 2019 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 endorsed 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 Styrene Monomer Corporation and Subsidiaries do not prepare a separate set of combined financial statements.

Company name: Taiwan Styrene Monomer Corporation Chairman: Lin, Wen-Yuan Date: March 11, 2020

要侯建業群合會計師事務府

KPMG 台北市11049信義路5段7號68樓(台北101大樓) 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Xinyi Road, Taipei City 11049, Taiwan (R.O.C.)

Telephone 電話 +886 2 8101 6666 傳真 + 886 2 8101 6667 Fax Internet 網址 kpmg.com/tw

Independent Auditors' Report

To the Board of Directors of Taiwan Styrene Monomer Corporation:

Opinion

We have audited the consolidated financial statements of Taiwan Styrene Monomer Corporation and its subsidiaries (the "Group"), which comprise the consolidated balance sheet as of December 31, 2019, and the consolidated statements 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 audit and the reports 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 of December 31, 2019, and its consolidated financial performance and its consolidated cash flows for the year then ended 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"), Interpretations developed by the International Financial Reporting Interpretations Committee ("IFRIC") or the former Standing Interpretations Committee ("SIC") endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit 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 Auditor's 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. Based on our audit and the reports of other auditors, 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 of the current period. 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. We have determined the matters described below to be the key audit matters to be communicated in our report.

1. Revenue recognition

Regarding accounting policies on revenue recognition, please refer to note $4(p)$ "Revenue recognition" to the consolidated financial statements.

Description of key audit matter:

The Group's sales revenue is recognized when a performance obligation is satisfied, which depends on the various trade terms agreed with customers. Therefore, the accuracy of revenue recognition is considered to be one of most significance in the audit.

How the matter was addressed in our audit:

Our principal audit procedures included assessing whether the accounting policies regarding to revenue recognition were inconformity with relevant accounting standards; obtaining understanding and testing the design and implement effectiveness of internal controls over revenue recognition; selecting samples and examining the transaction terms and vouchers; in addition, we also performed analytical procedures on primary customers and products to evaluate if there is any material abnormality.

Impairment assessment of investments accounted for using equity method

Refer to note $4(0)$ "Impairment of non-financial assets" and note 6 (i)" Investments accounted for using equity method" to the consolidated financial statements for details of accounting policies and relevant information about impairment assessment of investments accounted for using equity method".

Description of key audit matter:

The Group assesses impairment of investments accounted for using equity method in accordance with relevant accounting standards. Such assessment of impairment requires management to make judgments and assumptions, therefore, the assessment of impairment loss on investments accounted for using equity method is considered to be one of most significance in the audit.

How the matter was addressed in our audit:

Our principal audit procedures included obtaining understanding of the Group's internal controls over impairment loss assessment; evaluating the appropriateness of assumptions adopted by management when determining the recoverable amount based on an appraisal report issued by a third party; and assessing the qualification and independence of the Certified Business Valuator.

Impairment assessment of property, plant and equipment

Refer to note 4(1) "Property, plant and equipment" and note 4(o) "Impairment of non-financial assets" to consolidated financial statements for accounting polices about property, plant and equipment; regarding explanation of property, plant and equipment impairment, please refer to note $6(k)$ .

Description of key audit matter:

Assessing recoverable amount and identifying impairment indication require management to make judgments and assumptions, which are subjective and are with uncertainty, therefore, is considered to be one of most significance in the audit.

How the matter was addressed in our audit:

Our principal audit procedures included obtaining understanding of the Group's internal controls over asset impairment assessment; if there is any indication of impairment, acquiring an assessment prepared by management or an independent valuation report issued by an external expert; evaluating the reasonability of assumptions used, including whether market value indicators are referred to; assessing the qualification and independence of the expert; as well as evaluating related disclosures made by management.

Other Matter

We did not audit the financial statements of some equity-accounted investees of the Group. Those statements, which were prepared using a different financial reporting framework, were audited by other auditors, whose reports have been furnished to us. We have performed audit procedures on the conversion adjustments to the financial statements of those investees, which conform to those financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRSs, IASs, IFRIC, SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our opinion, insofar as it relates to the amounts included for those investees prior to the conversion adjustments, is based solely on the reports of other auditors. Investments accounted for using equity method on those investees constituting 12.95% of consolidated total assets at December 31, 2019, and the related share of profit of associates and joint ventures accounted for using equity method constituting 9.62% of consolidated total profit before tax for the year then ended.

The consolidated financial statements of the Group as of and for the year ended December 31, 2018, were audited by another auditor, who expressed an unmodified opinion with other matters paragraph on March 11, 2019.

Taiwan Styrene Monomer Corporation has prepared its parent-company-only financial statements as of and for the year ended December 31, 2019, on which we have issued an unmodified opinion with other matters paragraph.

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, IFRIC, SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance (including the Audit Committee) are responsible for overseeing the Group's financial reporting process.

Auditor's 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.

1. 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.
1. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
1. 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 auditor's 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.
1. 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.
1. 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.

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 auditor's 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 Lin Wu and Yuan-Sheng Yin.

KPMG

Taipei, Taiwan (Republic of China) March 11, 2020

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' 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.

$-$ times
j
ARAMITICA MOTOR
ì

(English Translation of Consolidated Financial Statements Originally Issued in Chinese)
TAIWAN STYRENE MONOMER CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

		December 31, 2019		December 31, 2018			December 31, 2018 December 31, 2019
	Assets	Amount	Ş	℅ Amount		Liabilities and Equity	Amount Ž, Amount	℅
	Current assets:					Current liabilities:
$\frac{8}{100}$	Cash and cash equivalents (note 6(a))	1,477,082 ↮	$\frac{6}{2}$	20 2,122,960	2100	Short-term borrowings (notes 6(q) and 8)	312,885 3 317,500 sĄ	m
DIII	Current financial assets at fair value through profit or loss (notes 6(b) and 8)	203,070		141,830	2130	Current contract liabilities (note $6(y)$ )	128,851 40,531
1150	Notes receivable, net (note 6(c)	$\mathfrak{z}$		$\vec{a}$	2150	Notes payable	9,678 11,381
1170	Accounts receivable, net (notes 6(c) and 7)	854,834	$\approx$	947,584	2170	Accounts payable (note 7)	,229,326 ≏ 1,097,577	₫
1200	Other receivables (note 7)	3,290		35,647	2200	Other payables (note 6(r))	344,116 227,973
1220	Current tax assets			181	2230	Current tax liabilities	243,073 69,184
130X	$Inventories (note 6(d))$	433,637		709,853	2280	Current lease liabilities (note 6(t))	7,903
1410	Prepayments (note 6(e))	162,264		154,522	2260	Liabilities related to non-current assets (or disposal groups)	6,248
1460	Non-current assets (or disposal groups) held for sale, net (note 6(f))	39,777				held for sale (note 6(f))
1470	Other current assets	524		308	2320	Long-term liabilities, current portion (notes 6(s) and 8)	115,164 26,284
1476	Other current financial assets (notes $6(g)$ and $8$ )	45,958		16,937	2399	Other current liabilities	10,270 4,473
	Total current assets	3,220,542	$\overline{37}$	$\frac{3}{2}$ 4,129,843		Total current liabilities	2,393,363 $\mathbf{e}$ 809,054	$\frac{23}{2}$
	Non-current assets:					Non-Current liabilities:
1510	Non-current financial assets at fair value through profit or loss (notes 6(b))	13,650		17,144	2540	Long-term borrowings (notes 6(s) and 8)	140,902 3,519
1517	Non-current financial assets at fair value through other comprehensive				2570	Deferred tax liabilities (note $6(y)$ )	173,509 175,634
	income (notes 6(h) and 7)	504,147	m	304,917	2581	Non-current lease liabilities (note 6(t))	11,110
1550	Investments accounted for using equity method (notes $6(i)$ , $(i)$ and 7)	,242,335	≌	,587,855	2640 N,	Net defined benefit liabilities, non-current (note 6(u))	74,126 64,445
1600	Property, plant and equipment (notes 6(k), 7 and 8)	3,982,140	$\ddot{ }$	ą0 4,133,895	2600	Other non-current liabilities	10,732 11,320
1755	Right-of-use assets (note 6(l)	22,630				l'otal non-current liabilities	399,269 266,028
1760	nvestment property, net (note 6(m))	139,091		144,361		Total liabilities	2,792,632 $\overline{2}$ 2,075,082	27
1780	intangible assets (note 6(n))	12,098		16,099		Equity attributable to owners of parent (note 6(w)):
1840	Deferred tax assets (note $6(v)$ )	37,068		33,172	3100	Capital stock	5,278,698 57 5,278,698	$\boldsymbol{\mathcal{S}}$
1915	Prepayments for equipment			20,439	3200	Capital surplus	60,415 42,418
1970	Other long-term investments, net (note 6(0))	34,681		38,436		Retained earnings:
1920	Refundable deposits	5,032		7,670	3310	Legal reserve	409,609 ७ 531,249
0661	Other non-current assets (notes 6(p) and (u))	90,928		76,215	3320	Special reserve	8,811 s 430,668
	Total non-current assets	6,083,800	63	$\overline{\circ}$ 6,380,203	3350	Unappropriated retained earnings	2,127,643 $\vec{a}$ 1,320,268	$\mathbb{R}$
							2,546,063 $\overline{z}$ 2,282,185	$\frac{24}{3}$
					3400	Other equity	(421, 857) $\circledcirc$ (581, 249)	$\widehat{a}$
						Total equity attributable to owners of parent	7,463,319 76 7,022,052	$\overline{r}$
					36XX	Non-controlling interests	254,095 207,208
						Total equity	7,717,414 $\overline{28}$ 7,229,260	$\mathbb{E}$
	Total assets	9,304,342	$ \Xi $	$\overline{\mathbf{5}}$ 10,510,046		Total liabilities and equity	10,510,046 $\frac{100}{20}$ 9,304,342	힄

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

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

		2019		2018
		Amount	$\frac{9}{6}$	Amount	$\%$
4000	Operating revenue (notes $6(y)$ and $7)$	\$ 12,219,389	100	15,382,654	100
5000	Operating costs (notes 6(d), (k), (l), (m), (n), (t), (u) and (aa))	10,827,452	89	13,405,660	87
	Gross profit from operations	1.391.937	11	1,976,994	13
	Operating expenses (notes 6(c), (k), (l), (m), (n), (t), (u) and (aa)):
6100	Selling expenses	58,522		60,180
6200	Administrative expenses	241,201	2	345,196	3
6300	Research and development expenses	20,820		36,390
6450	Expected credit impairment loss	714		229
		321,257	$\boldsymbol{2}$	441,995	$\overline{3}$
	Operating income	1,070,680	9	1,534,999	10
	Non-operating income and expenses (notes $6(i)$ , $(i)$ , $(k)$ , $(n)$ , $(t)$ , $(z)$ and $7)$ :
7010	Other income	39,756		48,808
7020	Other gains and losses	(175, 649)	(1)	(63, 285)
7050	Finance costs	(8,338)	E)	(18, 516)	ř.
7060	Share of profit of associates and joint ventures accounted for using equity method	108,311		45,659
		(35.920)	$\bullet$	12,666	$\sim$ $-$
9900	Profit before tax	1,034,760	9	1,547,665	10
7950	Less: Income tax expenses (note $6(v)$ )	153,004	1	360,871	$\overline{2}$
	Net income	881,756	8	1.186,794	8
8300	Other comprehensive income (loss):
8310	Components of other comprehensive income (loss) that will not be reclassified to profit or loss
8311	Gains on remeasurements of defined benefit plans	11,644		20,896
8316	Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income	(22.594)	L	25,711
8320	Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss	(121, 432)	(1)	(224, 600)	(1)
8349	Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss	2,268		3,250
	Components of other comprehensive income (loss) that will not be reclassified to profit or loss	(134, 650)	(1)	(181, 243)	(1)
8360	Components of other comprehensive income (loss) that will be reclassified to profit or loss
8361	Exchange differences on translation	(9.699)		1,183
8370	Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss	207		(426)
8399	Less: Income tax related to components of other comprehensive income that will be reclassified to profit or loss
	Components of other comprehensive income (loss) that will be reclassified to profit or loss	(9, 492)		757
8300	Other comprehensive income	(144.142)	(1)	(180.486)	(1)
8500	Comprehensive income	S 737,614	7	1,006,308	7
	Profit attributable to:
8610	Owners of parent	882,065 \$	8	1,216,401	8
8620	Non-controlling interests	(309)		(29, 607)
		881,756	8	1,186,794	8
	Comprehensive income attributable to:
8710	Owners of parent	\$ 739,732	6	1,036,567	7
8720	Non-controlling interests	(2.118)		(30.259)
		737,614	6	1,006,308	$\overline{z}$
	Earnings per share (note $6(x)$ )				2.30
	Basic earnings per share Diluted earnings per share		1.67 1.67		2.30

al Statements Originally Issued in Chinese, dideted Financi Manuscription	TAIWAN STYRENE MONOMER CORPORATION AND SUBSIDIARIES
(English Translation of Consol) $\vdots$

Consolidated Statements of Changes in Equity

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Other equity interest

Equity attributable to owners of parent

								511 GM
				Retained earnings			differences on translation of Exchange	Unrealized gains measured at fair financial assets value through (losses) on	gains (losses) Unrealized		Total equity
		Capital	Legal		Unappropriated retained		financial foreign	comprehensive other	on available- for _sl		attributable to owners of	controlling Non-
	$rac{\text{Common stock}}{\text{?}}$	surplus	reserve	Special reserve	earnings	Total	statements	income	financial assets	Total	parent	interests	Total equity
Balance at January 1, 2018	5,278,698	68,142	307,466	,923 157	1,378,191	1,843,580	(3,754)		101,265	97,511	7,287,931	284,331	7,572,262
Effects of retrospective application					281,392	281,392		(190, 286)	(101, 265)	(291, 551)	(10, 159)	$\tilde{\mathcal{E}}$	(10, 136)
Equity at beginning of period after adjustments	5,278,698	68,142	307,466	7.923 $\overline{5}$	1,659,583	2,124,972	(3,754)	(190, 286)		(194,040)	7,277,772	284,354	7,562,126
Net income					.216,401	1,216,401					1,216,401	(29,607)	1,186,794
Other comprehensive income					17,647	17,647	1,456	(198.937)		(197,481)	(179, 834)	(652)	(180, 486)
Total comprehensive income					, 234, 048	234,048	,456	(198, 937)		(197, 481)	1,036,567	(30,259)	1,006,308
Appropriation and distribution of retained carnings:
Legal reserve appropriated			102,143		(102, 143)
Cash dividends of ordinary share					(844, 592)	(844, 592)					(844, 592)		(844, 592)
Reversal of special reserve				(149, 112)	149,112						j.
Changes in equity of associates and joint ventures
accounted for using equity method		(1,073)			1,272	1,272					199		199
Difference between consideration and carrying amount of subsidiaries acquired or disposed of		(6, 654)									(6, 654)		(6, 654)

measured at fair value through other comprehensive Disposal of investments in equity instruments income					30,336	30,336		(30,336)		(30,336)
Other					27	27							27
Balance at December 31, 2018	5,278,698	60,415	409,609	8.811	2,127,643	2,546,063	(2,298)	(419, 559)		(421, 857)	7,463,319	254,095	7,717,414
Net income					882,065	882,065					882,065	(309)	881,756
Other comprehensive income					9.341	9.341	(7.673)	(144.001)		(151.674)	(142, 333)	(1, 809)	(144, 142)
Total comprehensive income					891,406	891,406	(7,673)	(144,001)		(151,674)	739,732	(2.118)	737,614
Appropriation and distribution of retained earnings:
Legal reserve appropriated			121,640		(121, 640)
Special reserve appropriated				,857 $\overline{5}$	$(421, 857)$ $(1, 055, 740)$
Cash dividends of ordinary share						(1,055,740)					(1,055,740)		$(1,055,740)$ $(29,861)$
Changes in equity of associates and joint ventures accounted for using equity method		(1,566)			(28, 295)	(28, 295)					(29, 861)
Disposal of investments accounted for using equity
method					(27,278)	(27,278)		27,278		27,278
measured at fair value through other comprehensive Disposal of investments in equity instruments
income					47,164	47,164		(47,164)		(47, 164)
Changes in ownership interests in subsidiaries		(23,561)					(819)			(819)	(24, 380)	40,442	16,062
Changes in ownership interests in investments accounted for using equity method		7,130			(91, 135)	(91, 135)	(123)	13,110		12,987	(71, 018)		(71, 018)
Other-effect of consolidation changes												(85, 211)	(85,211)
Balance at December 31, 2019	5,278,698	42,418	531,249	430,668	1,320,268	2,282,185	(10, 913)	(570,336)		(581,249)	7,022,052	207,208	7,229,260

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN STYRENE MONOMER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

	2019	2018
Cash flows from operating activities:
Profit before tax	\$ 1,034,760	1,547,665
Adjustments:
Adjustments to reconcile profit (loss)
Depreciation expense	274,461	266,527
Amortization expense	2,927	78,876
Expected credit impairment loss	714	229
Interest expense	8,338	18,516
Interest income	(9,873)	(7,514)
Dividend income	(5,626)	(11, 554)
Share of profit of associates accounted for using equity method	(97, 350)	(39, 280)
Loss (gain) on disposal of property, plant and equipment	23,142	(2,048)
Gain on disposal of investment properties		(7, 440)
Loss (gain) on disposal of investments	(3,624)	21,204
Gain on disposal of non-current assets held for sale	(3,057)
Gain on reversal of impairment loss on investments accounted for using
equity method	(8,766)	(19, 834)
Impairment loss on non-financial assets	174,929	3,858
Gain on lease modification	(168)
Others		(10, 116)
Total adjustments to reconcile profit (loss)	356,047	291,424
Changes in operating assets and liabilities:
Changes in operating assets:
Financial assets mandatorily measured at fair value through profit or loss	(57,746)	153,329
Notes receivable	(12)	2,286
Accounts receivable	63,934	381,928
Construction contract receivables		2,935
Other receivables	32,762	(18, 839)
Inventories	252,238	(57, 492)
Prepayments	(47, 880)	591,392
Other current assets	(3,597)	1,012
Other financial assets	(31,039)	21,786
Total changes in operating assets	208,660	1,078,337
Changes in operating liabilities:
Current contract liabilities	(88,320)	128,851
Notes payable	1,720	(12, 499)
Accounts payable	(128, 440)	87,724
Other payables	(113,606)	52,277
Advance receipts		(45, 867)
Other current liabilities	(85)	(1,440)
Net defined benefit liabilities	1,963	2,137
Total changes in operating liabilities	(326, 768)	211,183
Total changes in operating assets and liabilities	(118, 108)	1,289,520

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN STYRENE MONOMER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

	2019	2018
	\$ 1,272,699	3,128,609
Cash inflow generated from operations
Interest received	9,468	8,099
Dividends received	5,626	2,618
Interest paid	(8,933)	(19,665)
Dividends paid	(172)	(162)
Income taxes paid	(330, 888)	(309, 370)
Net cash flows from operating activities	947,800	2,810,129
Cash flows from investing activities:
Acquisition of financial assets at fair value through other comprehensive income		(215)
Proceeds from disposal of financial assets at fair value through other comprehensive income	2,493	16,262
Proceeds from capital reduction of financial assets at fair value through other comprehensive income	3,475	6,273
Proceeds from disposal of investments accounted for using equity method	41,568
Loss control of subsidiaries	(54, 636)
Acquisition of property, plant and equipment	(288, 685)	(200, 158)
Proceeds from disposal of property, plant and equipment	11,865	2,175
Decrease in refundable deposits	174	38,997
Increase in other receivables from related parties		(4,934)
Acquisition of intangible assets	(5,030)	(1,905)
Proceeds from disposal of intangible assets	3
Proceeds from disposal of investment properties		89,321
Increase in prepayments for equipment	(956)	(14,268)
Increase in other prepayments		(5,553)
Dividends received		1,054
Other investing activities		(1, 553)
Net cash flows used in investing activities	(289, 729)	(74, 504)
Cash flows from financing activities:
Increase in short-term borrowings	620,000
Decrease in short-term borrowings	(615,385)	(44, 614)
Repayments of long-term borrowings	(226, 263)	(754, 299)
Increase in guarantee deposits received		1,120
Payment of lease liabilities	(14,366)
Increase in other non-current liabilities	588	190
Cash dividends paid	(1,055,740)	(844, 592)
Change in non-controlling interests	16,881
Other financing activities		27
Net cash flows used in financing activities	(1,274,285)	(1,642,168)
Effect of exchange rate changes on cash and cash equivalents	81	(841)
Net (decrease) increase in cash and cash equivalents	(616, 133)	1,092,616
Cash and cash equivalents at beginning of period	2,122,960	1,030,344
Cash and cash equivalents at end of period	1,506,827	2,122,960
Components of cash and cash equivalents
Cash and cash equivalents reported in the statement of financial position	\$ 1,477,082	2,122,960
Reclassification to non-current assets (or disposal groups) held for sale	29,745
Cash and cash equivalents at end of period	1,506,827	2,122,960

See accompanying notes to financial statements.

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN STYRENE MONOMER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

(1) Company history

Taiwan Styrene Monomer Corp. (the "Company") was incorporated on November 16, 1979, under the approval of Ministry of Economic Affairs, Republic of China (ROC). Registered address is 8F.-1, No.6, Sec.1, Roosevelt Rd., Taipei City. Please refer to note 4(c) for the major business activities of the Company and its subsidiaries (together referred to as the "Group").

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

The consolidated financial statements were authorized for issue by the Board of Directors on March 11, 2020.

(3) New standards, amendments and interpretations adopted

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019.

New, Revised or Amended Standards and Interpretations	Effective date per IASB
IFRS 16 "Leases"	January 1, 2019
IFRIC 23 "Uncertainty over Income Tax Treatments"	January 1, 2019
Amendments to IFRS 9 "Prepayment features with negative compensation"	January 1, 2019
Amendments to IAS 19 "Plan Amendment, Curtailment or Settlement"	January 1, 2019
Amendments to IAS 28 "Long-term interests in associates and joint ventures"	January 1, 2019
Annual Improvements to IFRS Standards 2015-2017 Cycle	January 1, 2019

Except for IFRS 16 "Lease", the Group believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of signification changes are as follows:

IFRS 16 replaces the existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognized in retained earnings on January 1, 2019. The details of the changes in accounting policies are disclosed below,

Definition of a lease $(i)$

Previously, the Group determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Group assesses whether a contract is or contains a lease based on the definition of a lease, as explained in note $4(m)$ .

On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Group applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

$(ii)$ As a lessee

As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16, the Group recognizes rightof-use assets and lease liabilities for most leases – i.e. these leases are on-balance sheet.

The Group decided to apply recognition exemptions to short-term leases of transportation and office equipment as well as leases for which the underlying asset is of low value. At transition of the leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group's incremental borrowing rate as of January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

In addition, the Group used the following practical expedients when applying IFRS 16 to leases.

Applied a single discount rate to a portfolio of leases with similar characteristics.
Adjusted the right-of-use assets by the amount of IAS 37 onerous contract provision immediately before the date of initial application, as an alternative to an impairment review.
Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term.
Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
(iii) As a lessor

The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor. The Group accounted for its leases in accordance with IFRS 16 from the date of initial application.

Under IFRS 16, the Group is required to assess the classification of a sub-lease by reference to the right-of-use asset, not the underlying asset.

(iv) Impacts on financial statements

On transition to IFRS 16, the Group recognized additional \$70,045 thousand of right-of-use assets and \$66,475 thousand of lease liabilities, the difference amounted to \$3,570 thousand was a decrease in rental prepayments. When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 1.76%.

The explanation of differences between operating lease commitments disclosed at the end of the annual reporting period immediately preceding the date of initial application, and lease liabilities recognized in the statement of financial position at the date of initial application disclosed as follows:

	January 1, 2019
Operating lease commitment at December 31, 2018 as disclosed in the Group's consolidated financial statements	\$ 51,725
Immaterial lease payment not disclosed in financial statements	25,865
Recognition exemption for:
short-term leases	(7,229)
lease of low-value assets	(2, 456)
	67,905
Discounted using the incremental borrowing rate at January 1, 2019 (lease liabilities recognized at January 1, 2019)	66,475

The impact of IFRS endorsed by FSC but not yet effective $(b)$

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2020 in accordance with Rule No. 1080323028 issued by the FSC on July 29, 2019:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 "Definition of a Business"	January 1, 2020
Amendments to IFRS 9, IAS39 and IFRS7 "Interest Rate Benchmark Reform"	January 1, 2020
Amendments to IAS 1 and IAS 8 "Definition of Material"	January 1, 2020

The Group assesses that the adoption of the abovementioned standards would not have any material impact on its consolidated financial statements.

$(c)$ The impact of IFRS issued by IASB but not yet endorsed by the FSC

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

New, Revised or Amended Standards and Interpretations	Effective date per IASB
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture"	Effective date to be determined by IASB
IFRS 17 "Insurance Contracts"	January 1, 2021
Amendments to IAS 1 "Classification of Liabilities as Current or Non-current"	January 1, 2022

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.

(4) Summary of significant accounting policies

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

Statement of compliance $(a)$

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..

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

Except for the following significant accounts, the consolidated financial statements have been prepared on a historical cost basis:

$1)$ Financial instruments at fair value through profit or loss are measured at fair value;
Financial assets at fair value through other comprehensive income are measured at fair 2) value;
The defined benefit liabilities are measured at the present value of the defined benefit 3) obligation less fair value of the plan assets.

(ii) Functional and presentation currency

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

Basis of consolidation $(c)$

Principle of preparation of the consolidated financial statements $(i)$

The consolidated financial statements comprise of 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 the 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 noncontrolling interests having a deficit balance.

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 noncontrolling 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 and liabilities of the subsidiary, and any related non-controlling interests. 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 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 and 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.

			Shareholding $(\% )$
Name of	Name of	Principal	December 31, December 31,
investor	subsidiary	activity	2019	2018	Note
The Company		Zung-Fu Co., Ltd. Building cleaning and maintenance, sewage treatment, air conditioning equipment maintenance	89.16	89.16	Note 1
The Company	Lei-Ting Construction Corporation	Civil and construction engineering	91.40	75.27	Notes 2 and 3
The Company	YSIC Ltd.	Residential building and industrial plant development rental business	99.99	99.99
The Company	Yuan-Shin Materials Technology Co., Ltd.	Basic chemical materials and plastic raw material manufacturing	100.00	100.00
The Company	Yangmingshan Tien Lai Resort & SPA	Hotel	65.07	65.07	Note 4
The Company		Gvision-USA, Inc. Sales and distribution of LCD monitor	44.44	66.67	Note 5
The Company	Taiwan United Medical Inc.	Wholesale and retail of precision instruments and information software		64.79	Note 6
The Company	Jing-Shou Engineering Co., Ltd.	Bridge and building engineering	÷,	100.00	Note 3
The Company	Asia Carbons & Technology Inc.	Electronic component manufacturing	98.58	34.76	Note 7
YSIC Ltd.	Grand Capital Co., Ltd.	Investment	97.22	97.22	Note 8
YSIC Ltd.		Tien Lai Co., Ltd. Piping engineering	50.00	50.00	Notes 9
YSIC Ltd.	Kun Shan International Ltd.	Investment	62.03	62.03
Kun Shan International Ltd.	Kun Shan Yu-Fu Technology Education Consulting Co., Ltd.	Educational consulting, information consulting, software and data storage consultation	100.00	100.00	۰
Kun Shan International Ltd.	Kun Shan Jia-an Technology Education Consulting Co., Ltd.	Educational consulting, information consulting, software and data storage consultation	100.00	100.00
Asia Carbons & Technology Inc.	Asia Graphene Co., Ltd.	Sales of electronic components		100.00	Note 10

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

			Shareholding (%)
Name of	Name of	Principal	December 31, December 31,
investor	subsidiary	activity	2019	2018	Note
Yangmingshan	Yangmingshan	Arts and leisure	$\langle \Psi \rangle$	100.00	Note 11
Tien Lai Resort & Tien Lai Art
SPA	Village
	Development Co.,
	Ltd.

$\alpha$ $\alpha$ $\alpha$

Note 1: The Company and Lei-Ting Construction Corporation (holding 9.84% of common shares) totally hold 99.00% of common shares of Zung-Fu Co., Ltd.
Note 2: The Company and YSIC Ltd. (holding 8.60% and 24.73% of common shares on December 31, 2019 and 2018, respectively) totally hold 100,00% of common shares of Lei-Ting Construction Corporation.
Note 3: On June 30, 2019, Lei-Ting Construction Corporation issued new shares to merge with Jing-Shou Engineering Co., Ltd. and Lei-Ting Construction Corporation is the surviving company.
Note 4: The Company and YSIC Ltd. (holding 12.10% of common shares) totally hold 77.17% of common shares of Yangmingshan Tien Lai Resort & SPA.
Note 5: Gvision-USA, Inc. conducted a capital increase by cash in May, 2019. The Company did not participate in the capital increase proportionally, and its shares of the company dropped to 44.44%. After the re-election of the directors and supervisors, the Company did not obtain more than half of the vote in the Board of Directors, so the Company lost control of Gvision-USA, Inc. and it became an associate.
Note 6: On October 9, 2019, the Company sold all of its shares of Taiwan United Medical Inc..
Note 7: Originally, the Company, Zung-Fu Co., Ltd, YSIC Ltd, and Jing-Shou Engineering Co., Ltd. hold 64.59% of common shares of Asia Carbons & Technology Inc. On April 23, 2019, Asia Carbons & Technology Inc. conducted a capital reduction of \$450,000 thousand to make up for the deficit, and the company conducted a capital increase by cash of \$100,087 thousand on May 28, 2019. After the capital increase, the Company's shareholding ratio increased to 98.58%. On August 28, 2019, Asia Carbons & Technology Inc. obtained an approval of the special shareholders' meeting for dissolution and liquidation.
Note 8: YSIC Ltd. and Zung-Fu Co., Ltd. (holding 2.78% of common shares) totally hold 100.00% of common shares of Grand Capital Co., Ltd.
Note 9: The Group does not directly or indirectly hold more than half of the total shares of Tien Lai Co., Ltd., but because the chairman of the company is designated by the Group and the Group has control over the company, it is incorporated into consolidation.
Note 10: On May 31, 2019, the Board of Directors determined to dissolve Asia Graphene Co., Ltd. on behalf of the shareholders. On November 7, 2019, Asia Graphene Co. declared the completion of liquidation to the court.

Note 11: On March 29, 2019, the Board of Directors determined to dissolve Yangmingshan Tien Lai Art Village Development Co., Ltd. on behalf of the shareholders. On August 14, 2019, Yangmingshan Tien Lai Art Village Development Co., Ltd. declared the completion of liquidation to the court.

Foreign currencies $(d)$

Foreign currency transactions $(i)$

Transactions in foreign currencies are translated into the respective functional currencies of the Group entities at 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. Non-monetary 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 an investment in equity securities designated as at fair value through other comprehensive income, which are recognized in other comprehensive income.

(ii) Foreign operations

The assets and liabilities of foreign operation, 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 any part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Group disposes of only part of investment in an associate of joint venture that includes a foreign operation, the relevant proportion of the cumulative amount is reclassified to profit or loss.

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

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current:

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

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

An entity shall classify a liability as current when:

It is expected to be settled in the normal operating cycle; $(i)$
(ii) It is held primarily for the purpose of trading;
(iii) It 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 of the liability 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.
Cash and cash equivalents $(f)$

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 short term cash commitments rather than for investment or other purposes should be recognized as cash equivalents.

Financial instruments $(g)$

Trade receivables 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.

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (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)

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.

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.

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. 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, notes and trade receivables, other receivables, refundable deposits and other financial assets).

The Group measures loss allowances at an amount equal to lifetime expected credit loss (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 is 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 assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Group considers a financial asset to be in default when the financial asset is more than 90 days past due or the debtor is unlikely to pay its credit obligations to the Group in full.

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

12-month ECL are the portion of ECL 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 ECL is the maximum contractual period over which the Group is exposed to credit risk.

ECL 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). ECL 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 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 asset is credit-impaired includes the following observable data:

significant financial difficulty of the borrower or issuer;
a breach of contract such as a default;
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.

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. 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.

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.

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

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.

Equity instrument 2)

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.

Financial liabilities 3)

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 or it is designated as such on initial recognition.

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.

Derecognition of financial liabilities 4)

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.

Offsetting of financial assets and liabilities $5)$

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.

(h) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is calculated using 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 costs incurred upon completion and selling expenses.

Non-current assets (or disposal groups) held for sale $(i)$
Non-current assets held for sale $(i)$

Non-current assets or disposal groups comprising assets and liabilities that are highly probable to be recovered primarily through sale rather than through continuing use, are reclassified as held for sale. Immediately before classification as held for sale, the assets, or components of a disposal group, are remeasured in accordance with the Group's accounting policies. Thereafter, generally, the assets or disposal groups are measured at the lower of their carrying amount and fair value less costs to sell.

Any impairment loss on a disposal group is first allocated to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to assets not within the scope of IAS 36 - Impairment of Assets. Such assets will continue to be measured in accordance with the Group's accounting policies.

Impairment losses on assets initially classified as held for sale and any subsequent gains or losses on remeasurement are recognized in profit or loss. Gains are not recognized in excess of the cumulative impairment loss that has been recognized.

Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortized or depreciated, and any equity-accounted investee is no longer equity accounted.

$(ii)$ Discontinued operations

A discontinued operation is a component of the Group's business that either has been disposed of or is classified as held for sale, and

represents a separate major line of business or geographic area of operations:
is part of a single coordinated plan to dispose of a separate major line of business or geographic area of operations; or
is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held for sale.

$(i)$ Investments in associates

Associates are those entities in which the Group has significant influence, but not control or joint control, over their 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 those associates, 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. The Group recognizes any changes of its proportionate share in the investee within capital surplus, when an associate's equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual significant influence.

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

When the Group's share of losses of an associate equals or exceeds its interests 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.

The Group discontinues the use of the equity method and measures the retained interest at fair value from the date when its investment ceases to be an associate. The difference between the fair value of retained interest and proceeds from disposing, and the carrying amount of the investment at the date the equity method was discontinued is recognized in profit or loss. The Group accounts for all the amounts previously recognized in other comprehensive income in relation to that investment on the same basis as would have been required if the associates had directly disposed of the related assets or liabilities. If a gain or loss previously recognized in other comprehensive income would be reclassified to profit or loss (or retained earnings) on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (or retained earnings) when the equity method is discontinued. If the Group's ownership interest in an associate is reduced while it continues to apply the equity method, the Group reclassifies the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that reduction in ownership interest to profit or loss.

When the Group subscribes to additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment will differ from the amount of the Group's proportionate interest in the net assets of the associate. The Group records such a difference as an adjustment to investments, with the corresponding amount charged or credited to capital surplus. The aforesaid adjustment should first be adjusted under capital surplus. If the capital surplus resulting from changes in ownership interest is not sufficient, the remaining difference is debited to retained earnings. If the Group's ownership interest is reduced due to the additional subscription to the shares of the associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate will be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities.

$(k)$ 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, use in the production or supply of goods or services, or for administrative purposes. Investment property is measured at cost on initial recognition, and subsequently at cost, less accumulated depreciation and accumulated impairment losses. Depreciation expense is calculated based on the depreciation method, useful life, and residual value which 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 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.

$(1)$ Property, plant and equipment
$(i)$ Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

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 cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

$1)$ Buildings and structures: 3~60 years
$2)$ Machinery and equipment: 4~21 years
Transportation equipment: $3 \sim 10$ years $3)$
$4)$ Leased assets: $2\neg 10$ years
5) Other equipment: $3 \sim 20$ years

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

(m) Leases

Applicable from January 1, 2019

Identifying a lease $(i)$

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:

the contract involves the use of an identified asset this may be specified explicitly or $1)$ 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
the Group has the right to obtain substantially all of the economic benefits from use of $2)$ the asset throughout the period of use; and
the Group has the right to direct the use of the asset throughout the period of use only if $3)$ either:
the customer has the right to direct how and for what purpose the asset is used throughout the period of use; or
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.
(ii) As a leasee

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
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 its assessment on whether it will exercise a purchase option; or
there is a change in the lease term resulting from a change of its assessment on whether it will exercise an 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 transportation and office equipment that have a lease term of 12 months or less and leases of low-value assets. 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.

Applicable before December 31, 2018

$(i)$ Lessee

Payments made under operating leases (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease.

(ii) Lessor

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term.

Intangible assets $(n)$
Recognition and measurement $(i)$

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 expenditure, 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 from the date that they are available for use.

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

$1)$ Technical royalty: $1 \sim 15$ years
$2)$ Computer software: $1 \sim 3$ years

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

Impairment of non-financial assets $\omega$

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than inventories, contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.

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.

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. For non-financial 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.

Revenue recognition $(p)$

Revenue from contract with customers $(i)$

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 styrene monomer. 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. 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) Hospitality and incinerator operation management

The Group provides services such as hospitality and incinerator operation management. Revenue is recognized in the accounting period in which the goods are provided or services are rendered.

Financing components 3)

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.

Employee benefits $(q)$

$(i)$ 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 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 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) 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.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payables or receivables 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. 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:

temporary differences on the initial recognition of assets and liabilities in a transaction that is $(i)$ 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 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.

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

the Group has a legally enforceable right to set off current tax assets against current tax $(i)$ liabilities; and
the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same $(ii)$ 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.

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.

$(s)$ Earnings per share

The Group discloses the Company's basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares.

$(t)$ 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 Regulations and 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 following period.

There is no information about judgments made in applying accounting policies that might have the most significant effects on the amounts recognized in the consolidated financial statements.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

Impairment assessment of investments accounted for using equity method $(a)$

The Group compares the carrying amounts and the recoverable amount (the greater of its value in use and its fair value less costs to sell) of investments accounted for using equity method to determine whether there is any impairment. In the process of determining the recoverable amount, the Group rely on an appraisal report issued by an expert which had been prepared based on market approach and income approach. Any changes in economic conditions could result in significant impairment charges.

Impairment assessment of property, plant and equipment $(b)$

In the process of evaluating the potential impairment of tangible asset, the Group is required to make subjective judgments in determining the independent cash flows, useful lives, expected future income and expenses related to the specific asset groups considering of the nature of the industry. Any changes in these estimates based on changed economic conditions or business strategies and could result in significant impairment charges or reversal in future years.

(6) Explanation of significant accounts

(a) Cash and cash equivalents

	December 31, 2019	December 31, 2018
Cash on hand	\$ 1,309	1,441
Petty cash	1,214	1,233
Deposits in bank	712,661	944,399
Cash equivalents
Bonds under resell agreements	600,000	850,000
Time deposits due within one year	161,898	325,887
	1,477,082	2,122,960

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

	December 31, 2019	December 31, 2018
Mandatorily measured at fair value through profit or loss:
Current:
Listed stocks	\$ 203,070	141,830
Non-current:
Listed stocks	13,650	17,144
Total	216,720	158,974

The above financial assets had been pledged as collateral for bank loans; please refer to note 8.

Notes and account receivables $(c)$

	December 31, 2019
Notes receivable	33
Accounts receivable	857,581	949,671
Less: Loss allowance	(2.747	(2.087)
	854,867	947,605

The Group 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. The loss allowance provision was determined as follows:

			December 31, 2019
		Gross carrying amount	Weighted- average loss rate	Loss allowance provision
Current	\$	854,039	0.005%	43
1 to 90 days past due		585	$1\%$	74
91 to 180 days past due		322	2%	239
181 to 365 days past due		347	2%	208
More than 1 year past due		2,321	50%~100%	2,183
		857,614		2,747
		December 31, 2018
		Gross carrying amount	Weighted- average loss rate	Loss allowance provision
Current	$\mathbf S$	938,601	0.005%	47
1 to 90 days past due		8,500	$1\%$	41
91 to 180 days past due		251	2%	3
181 to 365 days past due		227	2%	$\overline{2}$
More than 1 year past due		2,113	50%~100%	1,994
		949,692		2,087

The movement in the allowance for notes and accounts receivable was as follows:

	For the years ended December 31
	2019	2018
Beginning balance	2,087	1,858
Impairment losses recognized	714	229
Effect of consolidation changes	(26)	۰
Effect of exchange rate changes	(28)
Ending balance	2,747	2,087

$(d)$ Inventories

	December 31, 2019	December 31, 2018
Merchandise inventory	\$ 1,095	22,752
Finished goods	185,730	174,811
By-product	3,579	6,320
Semi-finished products	52,523	227,927
Work in progress	39,264	51,916
Raw materials	89,012	184,074
Supplies	62,434	42,053
	433,637	709,853

In 2019 and 2018, inventories recognized as cost of sales amounted to \$10,667,982 thousand and \$12,988,304 thousand, respectively.

Except for the transfer of inventory to operating costs from sales, other losses (gains) directly included in operating costs are as follows:

	2019	2018
Loss from decline (gain from recovery) in value of inventories	(16, 823)	29,238
Unallocated fixed manufacturing overhead expenses	24,740	53,435
	7.917	82,673

None of the inventories of the Group was pledged as collateral on December 31, 2019 and 2018.

$(e)$ Prepayments

	December 31, 2019
Prepayment for purchases	5,586	23,360
Office supplies	104,530	93,992
Overpaid sales tax	32,265	19,173
Others	19,883	17,997
	162,264	154,522

$(f)$ Non-current assets (or disposal groups) held for sale, net

On December 24, 2019, the Group obtained an approval of the Board of Directors to sell all the shares of Lei-Ting Construction Corporation. The efforts of sale have commenced, and a sale is expected to be completed by first quarter in 2020. Therefore, the Group reclassified all the company' s assets and liabilities as non-current assets (or disposal groups) held for sale.

As of December 31, 2019, the non-current assets (or disposal groups) comprised the following assets and liabilities, which amounting to \$39,777 thousand and \$6,248 thousand, respectively:

	December 31, 2019
Cash and cash equivalents	29,745 \$
Current tax assets	23
Prepayments	4,034
Other current assets	3,381
Other current financial assets	2,018
Property, plants and equipment	57
Right-of-use assets	517
Refundable deposits
Assets held for sale	39,777
Other payables	1,153
Lease liabilities	522
Other current liabilities	4,573
Liabilities held for sale	6,248

The expected selling price less costs to sell is greater than the carrying amounts; therefore, no impairment loss has been recognized.

(g) Other current financial assets

	December 31, 2019	December 31, 2018
Other financial assets	35,000	STA
Restricted deposits in bank	10,927	13,525
Refundable deposits	31	3,412
	45,958	16,937

The above assets of the Group had been pledged as collateral for long-term and short-term bank loans; please refer to note 8.

(h) Non-current financial assets at fair value through other comprehensive income

	December 31, 2018
Equity investments:
Domestic non-listed stocks	398,836	174,915
Foreign non-listed equity investments	105,311	130,002
	504,147	304,917

The Group designated the investments shown above at fair value through other comprehensive $(i)$ income because these equity securities represent those investments that the Group intends to hold for long-term strategic purposes, not for trading purposes. During the vears ended December 31, 2019 and 2018, the dividends of \$785 thousand and \$3,831 thousand, respectively, related to equity investments at fair value through other comprehensive income held on the years then ended, were recognized.
(ii) In April 2019, the Group sold its shares of Taiwan Insulation Material Industrial Co., Ltd., which were measured at fair value through other comprehensive income. The shares sold had a fair value of \$2,493 thousand and the Group realized a loss of \$90 thousand, which was already included in other comprehensive income. The aforementioned loss has been transferred to retained earnings.
(iii) For market risk; please refer to note $6(ab)$ .
(iv) None of the above-mentioned financial assets had been pledged as collateral as of December 31, 2019 and 2018.
Investments accounted for using equity method $(i)$
Associates $(i)$

Associates of the Group consisted of the following:

	December 31, 2019		December 31, 2018
	Amount	Share- holding (%)	Amount	Share- holding (%)
Grand Cathay Venture Capital Co., Ltd.	331,171 \$	25.00	318,400	25.00
Wonderland Enterprise Co., Ltd.	540,896	37.04	626,867	49.38
Yuan-Jie Investment Co., Ltd.	Ξ	$\frac{1}{2}$	225.127	32.46
Yu-Jie Investment Co., Ltd.	267,794	32.96	301,166	32.96
Yuan-Yao Development Co., Ltd.	٠	۰	36.336	33.22
Globaltop Technology Inc.	65,357	37.92	79.959	37.92
Gvision-USA, Inc.	37,117	44.44		÷.
	\$1,242,335		1,587,855

On March 8, 2019, the Group sold all of its shares of Yuan-Yao Development Co. Ltd., at the price of \$41,568 thousand, and the gain on disposal of investments amounted to \$2,682 thousand, which was accounted for under the other gains and losses of the consolidated comprehensive income statements; meanwhile, the unrealized losses of \$27,278 thousand from investments measured at fair value through other comprehensive income which shall not be reclassified to profit and loss, had been reclassified to retained earnings at the time of disposal.

Wonderland Enterprise Co., Ltd. conducted a capital increase by cash of \$200,000 thousand on January 15, 2019. The Group did not participate in the capital increase proportionally, and its shares of the company dropped to 37.04%. The Group reduced the capital surplus of \$4.217 thousand and retained earnings of \$78,025 thousand, respectively, due to the decrease of its ownership. Meanwhile, the unrealized losses of \$15,826 thousand from investments measured at fair value through other comprehensive income which shall not be reclassified to profit and loss had been reclassified to retain earnings proportionally.

Yuan-Jie Investment Co., Ltd. conducted a capital increase by cash of \$517,000 thousand on December 31, 2019. The Group did not participate in the capital increase proportionally, and its shares of the company decreased to 19.18%. The Group increased the capital surplus of \$11,347 thousand due to the decrease of its ownership. Meanwhile, the unrealized gains of \$2,716 thousand from investments measured at fair value through other comprehensive income which shall not be reclassified to profit and loss and exchange difference of \$133 thousand has been reclassified to retain earnings and to profit and loss, accordingly. The Group lost significant influence of the company and reclassified the investment to FVOCI.

To assess the impairment of Grand Cathay Venture Capital Co., Ltd., an appraisal report issued by an expert had been prepared based on market approach and income approach. In 2019 and 2018, a reversal of impairment loss amounting to \$8,766 thousand and \$19,834 thousand was recognized, respectively.

The Group's financial information for investments accounted for using equity method that are individually insignificant was as follows:

	For the years ended December 31
		2019	2018
Attributable to the Group:
Net income	S	97,350	39,280
Other comprehensive income		(121, 225)	(225, 026)
Total comprehensive income		(23, 875)	(185,746)

None of the investments using equity method of the Group was pledged as collateral as of December 31, 2019 and 2018.

Loss control of subsidiaries $(i)$

Gvision-USA, Inc. conducted a capital injection in the form of cash worth 50,000 shares on May 6, 2019. The Group did not participate in the capital increase proportionally, and its shares of the company dropped to 44.44%. After the re-election of the directors and supervisors on May 21, 2019, the Group did not obtain more than half of the vote in the Board of Directors, so it lost control of the company. The Group reduced capital surplus by \$8,499 thousand for the decrease of its ownership interest in Gvision-USA, Inc. The exchange differences recognized under other comprehensive income were reclassified proportionally to profit and loss by \$819 thousand.

The carrying amounts of assets and liabilities of Gvision-USA, Inc. on May 21, 2019 were as follows:

Cash and cash equivalents	\$ 23,280
Inventories	23,978
Accounts receivable, net	28,102
Prepayments	17,675
Property, plant and equipment	214
Right-of-use assets	6,559
Refundable deposits	588
Accounts payable and other payables	(3,274)
Lease liabilities	(6,679)
Guarantee deposits received	(1,129)
Carrying amount of net assets	89,314

In August 2019, the Company obtained an approval of the Board of Directors to sell all the shares of Taiwan United Medical Inc. The sale was completed on October 9, 2019 with a selling price of \$68,550 thousand. The gain on disposal amounted to \$3,057 thousand, which was accounted for under the other gains and losses of the comprehensive income statements.

(k) Property, plant and equipment

The movements of the property, plant and equipment of the Group were as follows:

	Land	Land improvements	Buildings and structures	Machinery and equipment	Transportation equipment	Leased assets	Other equipment	Construction in progress	Total
Cost:
Balance as of January 1, 2019 \$	1,612,235	8,462	707,736	7,755,943	21,823	121,150	905,004	74,648	11,207,001
Additions				343	1,133	440	5,649	281,120	288,685
Disposals			¥	(66, 859)	(4, 507)	(48, 275)	(35, 677)		(155,318)
Reclassification		$\overline{\phantom{a}}$	8,650	183,240	×		95,787	(266, 282)	21,395
Effect of consolidation changes				(1, 596)	×	(530)	(4,150)	×.	(6, 276)
Effect of exchange rate changes			(2, 132)	34	(46)	11	(383)		(2, 516)
Balance as of December 31. s 2019	1,612,235	8,462	714,254	7,871,105	18,403	72,796	966,230	89,486	11,352,971
Balance as of January 1, 2018 \$	1,612,235	8.462	780,112	7,835,691	21,071	96,523	882,076	9,408	11,245,578
Additions				29,138	895	171	6,576	168,443	205,223
Disposals			(81, 895)	(169, 526)	(123)		(9,712)		(261, 256)
Effect of exchange rate changes and others			(389)	60,640	(20)	24,456	26,064	(103, 203)	7,548
Balance as of December 31, s 2018	1,612,235	8,462	697,828	7,755,943	21,823	121,150	905,004	74,648	11,197,093
Accumulated depreciation and impairment losses:
Balance as of January 1, 2019 \$		8,341	232,845	6,113,795	17,805	80,068	620,252		7,073,106
Depreciation		21	17,701	180,512	1,117	5,028	51,946		256,325
Impairment losses				145,341		16,546	6,810	٠	168,697
Disposals				(62, 889)	(3,478)	(28, 531)	(25, 413)		(120, 311)
Effect of consolidation changes	z		÷	(1, 591)	ă,	(321)	(4,093)	×	(6,005)
Effect of exchange rate changes			(879)	34	(42)	7	(101)		(981)
Balance as of December 31. s 2019		8,362	249,667	6,375,202	15,402	72,797	649,401		7,370,831

(Continued)

	Land	Land improvements	Buildings and structures	Machinery and equipment	Transportation equipment	Leased assets	Other equipment	Construction in progress	Total
Balance as of January 1, 2018 \$	×	8,318	285,098	6,098,890	16,522	73,739	577,160	÷	7,059,727
Depreciation	÷	23	20,124	180.039	1,424	6,319	53,757	P.	261,686
Impairment losses	÷	÷.	21	2,940	Ō.		396		3,336
Disposals	š	۰	(81, 895)	(169, 526)	(123)	٠	(9, 585)		(261, 129)
Effect of exchange rate changes and others			(390)	1,452	(18)	10	(1, 476)		(422)
Balance as of December 31. 2018		8,341	222,937	6,113,795	17,805	80,068	620,252		7,063,198
Carrying value:
Balance as of December 31. s 2019	1,612,235	100	464,587	1,495,903	3,001	(1)	316,829	89,486	3,982,140
Balance as of January 1, 2018 \$	1,612,235	144	495,014	1,736,801	4,549	22,784	304,916	9,408	4,185,851
Balance as of December 31, 2018	1,612,235	121	474,891	1,642,148	4,018	41,082	284,752	74,648	4,133,895

As of December 31, 2019, resulting from overestimate of the business development in carbon material graphitization at high temperature, the Group recognized an impairment loss of \$168,697 thousand with respect to plant and equipment.

As of December 31, 2019 and 2018, the accumulated impairment losses of property, plant and equipment were amounted to \$457,977 thousand and \$332,973 thousand respectively.

As of December 31, 2019 and 2018, the property, plant and equipment of the Group had been pledged as collateral for loans; please refer to note 8.

$(1)$ Right-of-use assets

The cost and accumulated depreciation of leased land, buildings and structures, and transportation equipment of the Group were as follows:

	Land	Buildings and structures	Transportation equipment	Office equipment	Total
Cost:
\$ Balance as of January 1, 2019
Effects of retrospective application
(IFRS 16)	4,194	58,956	6,895		70,045
Balance as of January 1, 2019 after
adjustments	4,194	58,956	6,895		70,045
Additions		918	9,597	4,814	15,329
Lease modification		(49, 584)	1,129		(48, 455)
Effect of consolidation changes		(7, 397)	(744)		(8,141)
Effect of exchange rate changes	(213)	158			(55)
Balance as of December 31, 2019	3,981	3,051	16,877	4,814	28,723
Accumulated depreciation:
\$ Balance as of January 1, 2019
Depreciation	332	9,487	4,489	241	14,549
Lease modification		(7,293)	(106)		(7, 399)
Effect of consolidation changes		(838)	(227)		(1,065)
Effect of exchange rate changes	(4)	12
Balance as of December 31, 2019	328	1,368	4,156	241	6,093
Carrying amount:
Balance as of December 31, 2019 S	3,653	1,683	12,721	4,573	22,630

(Continued)

(m) Investment property

			Buildings and
		Land	structures	Total
Cost:
Balance as of January 1, 2019	\$	90,030	92,634	182,664
Effect of exchange rate changes			(2,979)	(2,979)
Balance as of December 31, 2019		90,030	89,655	179,685
Balance as of January 1, 2018	\$	140,780	161,867	302,647
Disposals		(50, 750)	(67, 904)	(118, 654)
Effect of exchange rate changes			(1, 329)	(1, 329)
Balance as of December 31, 2018	ς	90,030	92,634	182,664
Accumulated depreciation and impairment losses:
Balance as of January 1, 2019	\$		38,303	38,303
Depreciation			3,587	3,587
Effect of exchange rate changes			(1,296)	(1,296)
Balance as of December 31, 2019			40,594	40,594
Balance as of January 1, 2018	\$	4,467	66,341	70,808
Depreciation			4,843	4,843
Disposals		(4, 467)	(32, 306)	(36, 773)
Effect of exchange rate changes			(575)	(575)
Balance as of December 31, 2018	S		38,303	38,303
Carrying value:
Balance as of December 31, 2019		90,030	49,061	139,091
Balance as of January 1, 2018		136,313	95,526	231,839
Balance as of December 31, 2018		90,030	54,331	144,361
Fair value:
Balance as of December 31, 2019				196,688
Balance as of January 1, 2018				306,918
Balance as of December 31, 2018				213,626

The fair value of investment properties is based on an independent professional who has professional qualifications and has relevant experience. The inputs of levels of fair value hierarchy in determining the fair value is classified to Level 3. Fair value was measured using the market approach.

As of December 31, 2019 and 2018, none of the above-mentioned investment property was pledged as collateral.

$(n)$ Intangible assets

The movements of intangible assets of the Group were as follows:

		Technical royalty	Computer software	Total
Cost:
Balance as of January 1, 2019	\$	22,242	1,243	23,485
Additions			5,030	5,030
Disposals			(12)	(12)
Effects of consolidation changes			(115)	(115)
Balance as of December 31, 2019	S	22,242	6,146	28,388
Balance as of January 1, 2018	\$	20,338	4,478	24,816
Additions		1,904	363	2,267
Effects of exchange rate changes			(3, 598)	(3, 598)
Balance as of December 31, 2018		22,242	1,243	23,485
Accumulated amortization:
Balance as of January 1, 2019	\$	6,408	978	7,386
Amortization		1,622	1,305	2,927
Disposals			(9)	(9)
Effects of consolidation changes			(102)	(102)
Impairment loss		6,088		6,088
Balance as of December 31, 2019		14,118	2,172	16,290
Balance as of January 1, 2018	\$	4,787	3,511	8,298
Amortization		1,621	517	2,138
Effects of exchange rate changes			(3,050)	(3,050)
Balance as of December 31, 2018	S	6,408	978	7,386
Carrying value:
Balance as of December 31, 2019	S	8,124	3,974	12,098
Balance as of January 1, 2018		15,551	967	16,518
Balance as of December 31, 2018	\$	15,834	265	16,099

The technical royalty is used in the manufacture of boron nitride. As of December 31, 2019, resulting from the overestimate of the business development, the Group recognized an impairment loss of \$6,088 thousand.

$(0)$ Other long-term investment, net

	December 31,	December 31,
	2019	2018
Construction and operation of student dormitory	34.681	38,436

The period of rights of investment in construction and operation of student dormitory is 30 years. The subsidy and management income will be recovered annually according to the agreement to July 31, 2035.

Other non-current assets $(p)$

	December 31, 2019	December 31, 2018
Long-term prepaid rents	$\blacksquare$	3,570
Long-term prepaid expenses	84,070	70,988
Net defined benefit assets	6,858	1,657
	90,928	76,215

Long-term prepaid rents are paid for acquisition of the right of land use in China. On January 1, 2019, this amount had been reclassified to right-of-use assets when the Group adopted IFRS 16.

(q) Short-term borrowings

Short-term borrowings of the Group were as follows:

	December 31,	December 31, 2018
Bank overdraft	S		5,505
Secured bank loans		60,000	172,380
Unsecured bank loans		257,500	135,000
Total		317,500	312,885
Range of interest rate		$1.45\%$ ~ 2.22%	$1.45\% \sim 3.73\%$
Unused short-term credit lines		1,423,500	1,804,039

For the collateral for short-term borrowings, please refer to note 8.

$(r)$ Other payables

Other current liabilities of the Group were as follows:

		December 31, 2019	December 31, 2018
Accrued payroll	S	46,145	135,831
Employee bonus payable		24,254	33,351
Compensation payable to directors and supervisor		23,949	41,073
Compensated absences		22,468	20,065
Other accrued expenses payable		54,874	47,531
Payables on equipment		24,966	14,863
Dividends payable		9,870	10,042
Other payables—other		21,447	41,360
Total		227,973	344,116

$(s)$ Long-term borrowings

Long-term borrowings of the Group were as follows:

	December 31, 2019
		Range of
	Currency	interest rate	Due year	Amount
Secured bank loans	NTD	1.72%	2023	S 29,803
Less: current portion				26,284
Total				3,519
Unused long-term credit lines				250,000
	December 31, 2018

		Range of
	Currency	interest rate	Due year	Amount
Secured bank loans	NTD	$1.30 - 1.87\%$	$2021 - 2023$	\$ 256,066
Less: current portion				115,164
Total				140,902

For the collateral for long-term borrowings, please refer to note 8.

Lease liabilities $(t)$

Lease liabilities of the Group were as follows:

	December 31,
	2019
Current	.903
Non-current	11,110

For the maturity analysis, please refer to 6(ab).

The amounts recognized in profit or loss were as follows:

		For the year ended December 31, 2019
	Interest on lease liabilities	1,853
	Expenses relating to short-term leases	591
	Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets	2,908
	The amounts recognized in the statement of cash flows was as follows:
		For the year ended December 31, 2019
	Total cash outflow for leases	19,718
(u)	Employee benefits

- Defined benefit plans $(i)$

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

		December 31, 2018
Present value of defined benefit obligations	279,319	290,741
Fair value of plan assets	(221, 732)	(218, 272)
Net Position	57,587	72,469
Net defined benefit assets (non-current assets)	6,858	1,657
Net defined benefit liabilities	64,445	74,126

The Group makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions 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 Group allocates 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. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

The Group's Bank of Taiwan labor pension reserve account balance amounted to \$221,732 thousand as of December 31, 2019. 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.

Movements in the present value of defined benefit obligations 2)

The movements in the present value of defined benefit obligations of the Group were as follows:

		For the years ended December 31
		2019	2018
Defined benefit obligations at January 1	S	296,812	340,158
Current service costs and interest cost		4,424	5,239
Remeasurements of defined benefit liabilities
-Actuarial gains and losses arising from financial assumptions		444	368
-Actuarial gains and losses arising from experience adjustments		(3,510)	(13, 042)
Benefits paid		(18, 851)	(41, 982)
Defined benefit obligations at December 31		279,319	290,741

$3)$ Movements in fair value of plan assets

The movements in the fair value of the defined benefit plan assets of the Group were as follows:

	For the years ended December 31
		2019	2018
Fair value of plan assets at January 1	\$	228,871	248,930
Interests income		2.304	2,404
Remeasurements of defined benefit assets
-Return on plan assets (excluding interest income)		8,578	8,222
Contributions		830	698
Benefits paid		(18, 851)	(41,982)
Fair value of plan assets at December 31		221,732	218,272

$4)$ Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Group were as follows:

	For the years ended December 31
		2019	2018
Current service costs	S	1,454	1,929
Net interest on defined benefit liabilities (assets)		666	906
		2,120	2,835
			For the years ended December 31
		2019	2018
Operating cost		1,504	2,069
Operating expenses		616	766
		2,120	2,835

Remeasurement values of net defined benefit liabilities (assets) recognized in other $5)$ comprehensive income

The remeasurement values of net defined benefit liabilities (assets) recognized in other comprehensive income of the Group were as follows:

	For the years ended December 31
		2019	2018
Recognized during the period		(11.644)	(20, 896)

6) Actuarial assumptions

Principal actuarial assumptions at the reporting date were as follows:

	December 31, 2019	December 31, 2018
Discount rate	$1.00 \%$	$1.00 \%$
Future salary increase rate	$1.00\% \sim 1.50\% - 1.00\% \sim 1.50\%$

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 \$821 thousand.

The weighted-average lifetime of the defined benefit plans is 4.2 to 12.5 years.

Sensitivity analysis $7)$

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligations shall be as follows:

	Influences of defined benefit obligations
		Increase	Decrease
December 31, 2019
Discount rate (changed by 0.25%)	S	(2,364)	2,428
Future salary increase rate (changed by 1%)		10,185	(9,364)
December 31, 2018
Discount rate (changed by 0.25%)		(2,753)	2,826
Future salary increase rate (changed by 1%)		11,595	(10, 640)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2019 and 2018.

(ii) Defined contribution plans

The Group allocates 6% of each employee's monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Group allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

The pension costs incurred from the contributions to the Bureau of the Labor Insurance amounted to \$15,086 thousand and \$18,730 thousand for the years ended December 31, 2019 and 2018, respectively.

$(v)$ Income taxes

$(i)$ The components of income tax in the years 2019 and 2018 were as follows:

	For the years ended December 31
		2019	2018
Current tax expense
Current period	\$	156,218	364,160
Adjustment for prior periods		825	247
		157,043	364,407
Deferred tax expense
Origination and reversal of temporary differences		(2,924)	(3, 536)
Change in unrecognized deductible temporary differences		(343)
Recognition of previously unrecognized tax losses		(772`
		(4,039)	(3,536)
Income tax expense		153,004	360,871

The amount of income tax recognized in other comprehensive income for 2019 and 2018 was as follows:


	2019	2018
Items that will not be reclassified subsequently to profit or loss:
Remeasurement from defined benefit plans	2.268	3,250

Reconciliation of income tax and profit before tax for 2019 and 2018 is as follows:

		For the years ended December 31
		2019	2018
Profit before income tax		1,034,760	1,547,665
Income tax using the Group's domestic tax rate	S	171,267	285,589
Non-deductible expenses		55,796	(12, 775)
Tax-exempt income		(1,197)	(3, 451)
Recognition of previously unrecognized tax losses		(772)
Current-year losses for which no deferred tax asset was recognized		7,887	72,872
Change in unrecognized temporary differences		(343)
Adjustment for prior periods		825	22,915
Undistributed earnings additional tax			1,724
Investment loss		(80, 459)	(6,003)
Total		153,004	360,871

(Continued)

(ii) Deferred tax assets and liabilities

$1)$ Unrecognized deferred tax assets

The Group's unrecognized deferred tax assets were composed of the following items:

		December 31, 2019	December 31, 2018
The carryforward of unused tax losses	S	90.911	300,327
Other		-	8,258
Total		90,911	308,585

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 reporting 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, 2019 the information of the Group's unused tax losses for which no deferred tax assets were recognized are as follows:

Year of loss	Expiry date	Unused amount
2010	2020	\$ 127,066
2011	2021	162,635
2012	2022	46,030
2013	2023	27,543
2014	2024	1,557
2015	2025	347
2016	2026	49,473
2017	2027	17,812
2018	2028	1,268
2019	2029	20,825
		\$ 454,556

$a)$ Unused tax loss information

Recognized deferred tax assets and liabilities $2)$

Movements of recognized deferred tax assets and liabilities for 2019 and 2018 were as follows:

Deferred Tax Liabilities:

	Land value increment tax	Other	Total
Balance at January 1, 2019	173,509		173,509
Recognized in profit or loss		2.090	2,090
Recognized in other comprehensive income		35	35
Balance at December 31, 2019	173,509	2,125	175,634
Balance at December 31, 2018 (Balance at January 1, 2018)	173,509		173,509

Deferred Tax Assets:

		Allowance for inventory write-down	Investments accounted for using the equity method	Defined benefit pension plans	Accumulating compensated absences	Tax loss carryforward	Total
Balance at January 1, 2019	s	732	3,003	18,081	298	11,058	33,172
Recognized in profit or loss		4,169	(3,003)	(53)	3,983	1,033	6,129
Recognized in other comprehensive income				(2,233)			(2, 233)
Balance at December 31, 2019		4,901		15,795	4,281	12,091	37,068
Balance at January 1, 2018	\$	16	2,810	18,779	278	11,003	32,886
Recognized in profit or loss		716	193	2,552	20	55	3,536
Recognized in other comprehensive income				(3,250)	۰		(3,250)
Balance at December 31, 2018		732	3,003	18,081	298	11,058	33,172

The Company's income tax return for the year 2017 had been examined by the tax authorities.

(w) Capital and other equity

Ordinary shares $(i)$

As of December 31, 2019 and 2018, the number of authorized ordinary shares were 6,750,000 thousand shares with par value of \$10 per share. As of December 31, 2019 and 2018, of 527,870 thousand shares were issued. All issued shares were paid up upon issuance.

(ii) Capital surplus

The balances of capital surplus of the Company were as follows:

	December 31, 2019	December 31, 2018
Difference arising from subsidiary's share price and its carrying value	8,953	24,015
Changes in ownership interests in subsidiaries	22,118	32,183
Changes in equity of investments in associates using equity method	11,347	4,217
Total	42,418	60,415

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding.

(iii) Retained earnings

The Company's Article of Incorporation stipulates that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve, and then any remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders' meeting for approval.

In general, cash dividends shall not be less than 30% of total dividends. However, based on the need to respond to changes in the industry, major investment plans and improve the financial structure, or in the case of sudden major capital needs, the cash dividend payout rate could be adjusted to 10% to 30%. If the cash dividend is less than \$0.1 per share, it will not be issued, and the stock dividend will be paid instead.

Legal reserve $1)$

When a company incurs no loss, it may, pursuant to a resolution by a shareholders' meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

$2)$ Special reserve

In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as special earnings reserve during earnings distribution. The amount to be reclassified should equal the current-period total net reduction of other shareholders' equity. Similarly, a portion of undistributed prior-period earnings shall be reclassified as special earnings reserve (and does not qualify for earnings distribution) to account for cumulative changes to other shareholders' equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders' equity shall qualify for additional distributions.

Earnings distribution $3)$

$(iv)$

On June 28, 2019 and June 26, 2018, the shareholders' meetings resolved to distribute the 2018 and 2017 earnings. These earnings were appropriated as follows and the related information is available on the Market Observation Post System website of the Taiwan Stock Exchange:

	2018		2017
Dividends distributed to ordinary shareholders:	Ratio of allotment of shares (NTD)	Amount	Ratio of allotment of shares (NTD)	Amount
Cash	\$ $2.00$ \$	1,055,740	1.60	844,592
Other equity
		Exchange differences on translation of foreign financial statements	Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income	Total
Balance as of January 1, 2019		\$ (2,298)	(419, 559)	(421, 857)
Exchange differences on foreign operations		(7,880)		(7, 880)
Exchange differences on associates and joint ventures accounted for using equity method		207		207
Unrealized losses from financial assets measured at fair value through other comprehensive income Unrealized gains from financial assets measured at fair value through other comprehensive income, associates			(22, 569)	(22, 569)
and joint ventures accounted for using equity method Disposal of investments accounted for using equity			(121, 432)	(121, 432)
method			27,278	27,278
Changes in ownership interests in subsidiaries		(819)		(819)
Changes in ownership interests in associates Cumulative gains reclassified to retained earnings on disposal of investments in equity instruments designated at fair value through other comprehensive income		(123)	13,110 (47,164)	12,987 (47, 164)
Balance as of December 31, 2019		(10, 913) \$	(570, 336)	(581, 249)
				(Continued)

	Exchange differences on translation of foreign financial statements	Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income	Unrealized gains (losses) on available- for-sale investments	Total
Balance as of January 1, 2018	\$ (3,754)		101,265	97,511
Effects of retrospective application		(190, 286)	(101, 265)	(291, 551)
Balance as of January 1, 2018 after adjustments	(3,754)	(190, 286)		(194, 040)
Exchange differences on foreign operations	1,183			1,183
Exchange differences on associates and joint ventures accounted for using equity method		273		273
Unrealized gains from financial assets measured at fair value through other comprehensive income		25,228		25,228
Unrealized losses from financial assets measured at fair value through other comprehensive income, associates and joint ventures accounted for using equity method		(283, 208)		(283, 208)
Cumulative losses reclassified to retained earnings on disposal of investments in equity instruments designated at fair value through other comprehensive income		28,707		28,707
Balance as of December 31, 2018	(2, 298) S	(419, 559)		(421, 857)
and the control of the con-

$(x)$ Earning per share

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

⁽i) Basic earnings per share

		For the years ended December 31
	2019	2018
Profit attributable to the Company	882,065	1,216,401
Weighted-average number of ordinary shares outstanding	527,870	527,870
Earnings per share (NTD)	1.67	2.30

(ii) Diluted earnings per share

	For the years ended December 31
	2019	2018
Profit attributable to the Company (diluted)	882,065	1,216,401
Weighted-average number of ordinary shares outstanding	527,870	527,870
Effect of dilutive potential ordinary shares
Employee remuneration in stock	1,807	1,785
Weighted-average number of ordinary shares outstanding (diluted)	529,677	529,655
Diluted earnings per share (NTD)	1.67	2.30

Revenue from contracts with customers $(y)$

$(i)$ Disaggregation of revenue

	For the years ended December 31
		2019	2018
Primary geographical markets:
Asia	\$	12,086,625	15,270,505
America		107,148	103,769
Others		25,616	8,380
		12,219,389	15,382,654
Major products/services lines:
Commodity sales revenue	\$	11,757,390	14,933,650
Travel service revenue		188,520	193,784
Construction project revenue		379	18,295
Service revenue		205,376	214,276
Other operating revenue		67,724	22,649
		12,219,389	15,382,654

(ii) Contract balances

	December 31, 2019	December 31, 2018	January 1, 2018
Contract liabilities-travel service contract	32,663	30,969	30,685
Contract liabilities-unearned sales revenue	7,868	97,882	7,920
Total	40,531	128,851	38,605

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

The major change in the balance of contract assets and contract liabilities is the difference between the time frame in the performance obligation to be satisfied and the payment to be received.

Non-operating income and expenses $(z)$
$(i)$ Other income

Details of other income of the Group were as follows:


	2019	2018
Interest income	9,873	7,514
Rent income	2,459	3,142
Dividend income	3,465	8,936
Write-off of overdue payables	3,445	10,116
Others	20,514	19,100
Total	39,756	48,808

(ii) Other gains and losses

	For the years ended December 31
		2019	2018
Foreign exchange gains (losses)	\$	4,828	(18, 373)
Gains from dispositioning investment property		۰	7,440
Gains (losses) on disposal of investment		3,624	(21,204)
Gains (losses) on financial assets at fair value through profit or loss		7,373	(49,084)
Gain on lease modification		168
Gain on disposal of non-current assets (or disposal groups) held for sale		3,057
Gains (losses) on disposal of property, plant and equipment		(23, 142)	2,048
(Reversal of) impairment loss		(166, 163)	15,976
Miscellaneous disbursements		(5, 394)	(88)
Total		(175, 649)	(63,285)

(iii) Finance costs

	For the years ended December 31
	2019	2018
Interest expense	8.338	18.516

(aa) Employee compensation and directors and supervisors' remuneration

According to the Article of Incorporation, once the Company has annual profit, it should appropriate $1\%~5\%$ of the profit to its employees and 2.5% or less to its directors and supervisors as remuneration (since January 31, 2019, the Audit Committee has been set up to replace the supervisors' authority). However, if the Company still has accumulated deficit, the profit should be reserved to offset the deficit.

For the years ended December 31, 2019 and 2018, the renumerations to employees amounted to \$23,949 thousand and \$33,086 thousand, respectively, and the remuneration to directors and supervisors amounted to \$23,949 thousand and \$41,073 thousand, respectively. The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees, directors and supervisors of each period, multiplied by the percentage of remuneration to employees, directors and supervisors as specified in the Company's articles. These remunerations were expensed under operating costs or operating expenses during 2019 and 2018. Related information would be available at the Market Observation Post System website. If there are any subsequent adjustments to the actual remuneration amounts, the adjustment will be regarded as changes in accounting estimates and will be reflected in profit or loss in the following year. The amounts, as stated in the consolidated financial statements are identical to those of the actual distributions for 2018.

(ab) Financial instruments
$(i)$ Credit risk
- $1)$ Credit risk exposure

The carrying amount of financial assets and contract assets represents the maximum amount exposed to credit risk.

Concentration of credit risk $\mathbf{2}$

As of December 31, 2019 and 2018, the Group reviewed the concentrations of credit risk arising from the major top ten customers, and it was 81% and 78% of the total accounts receivable, respectively. The concentrations of credit risk of the remaining accounts receivable are relatively small.

Credit risk of receivables $3)$

For credit risk exposure of notes and trade receivables, please refer to note $6(c)$ . Other financial assets at amortized cost include time deposits and other receivables, etc. The allowance for the receivables is measured by lifetime expected credit losses. The remaining financial assets are measured by 12-month expected credit losses.

(ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities, including estimated interest payments.

December 31, 2019 Non-derivative financial liabilities 318,596 Short-term borrowings \$ 317,500 318,596 $\blacksquare$ 1,222,624 1,222,624 1,212,247 10,377 Accounts payable ٠ 26,785 29.803 31,543 4,020 738 Long-term borrowings 2,367 1,424 943 Deposit received 2,367 Lease liabilities 19,013 20,439 8,651 6,601 5,187 1,591,307 1,567,703 10,621 17,245 1,595,569 December 31, 2018 Non-derivative financial liabilities \$ 317,678 312,885 317,678 Short-term borrowings ۰ 1,340,743 10,054 1,350,797 1,350,797 Accounts payable ۰ 265,075 256.066 118,451 146,624 Long-term borrowings 7,497 7,497 6,819 678 Deposit received 1,927,245 1,783,691 157,356 1,941,047		Carrying amount	Contractual cash flows	Within 1 year	1-2 years	2-5 years	Over 5 years

The Group 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 Group's significant exposure to foreign currency risk was as follows:

		December 31, 2019			December 31, 2018
	Foreign currency	Exchange rate	NTD	Foreign currency	Exchange rate	NTD
Financial assets
Monetary items
USD	\$ 3.069	29.980	91,999	4.671	30.715	143,483
CNY	26,172	4.297	112,474	541	4.475	2,422
Financial liabilities
Monetary items
USD	14.685	29.980	440.251	20,127	30.715	618,203
CNY	1.525	4.297	6.555	¥	÷	$\mathcal{L}^{\mathcal{L}}$

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, accounts payable and other payables that are denominated in foreign currency. For the years ended 2019 and 2018 a strengthening (weakening) of 1% of the NTD against the USD and CNY, would have increased (decreased) net profit before tax by \$2,423 thousand and \$4,723 thousand. The analysis is performed on the same basis.

Since the Group has many kinds of functional currency, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. For years 2019 and 2018, foreign exchange gain (loss) (including realized and unrealized portions) amounted to \$4,828 thousand and \$(18,373) thousand, respectively.

$2)$ Interest rate risk

Please refer to the notes on liquidity risk management and interest rate exposure of the Group's financial assets and liabilities.

The following sensitivity analysis is based on the exposure to the interest rate risk of derivative and non-derivative financial instruments on the reporting date. Regarding assets with variable interest rates, the analysis is based on the assumption that the amount of assets outstanding at the reporting date was outstanding through the year. The rate of change is expressed as the interest rate increases or decreases by 1% when reporting to management internally, which also represents the management's assessment of the reasonably possible interest rate change.

If the interest rate had increased/decreased by 1%, the Group's profit before tax would have decreased by \$3,473 thousand and increased by \$3,912 thousand for the years ended 2019 and 2018, respectively with all other variable factors remaining constant. This is mainly due to the Group's loan at variable rates.

3) Other market price risk

If the securities price at the reporting date changes (the analysis is performed on the same basis and all other variable factors remaining constant), the effect for comprehensive income is illustrated below:

			For the years ended December 31
	2019		2018
at the reporting date	Prices of securities Other comprehensive income after tax	Net income	Other comprehensive income after tax	Net income
Increasing 1%	5,041	2,167	3.049	1,590
Decreasing 1%	(5,041)	(2,167)	(3,049)	(1,590)

(iv) Fair value information
$1)$ Types and fair value of financial instruments

Financial assets measured at fair value through profit or loss and financial assets at fair value through other comprehensive income are measured at fair value on the basis of repeatability. The carrying amount and fair value of the 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 lease liabilities, disclosure of fair value information is not required:

			December 31, 2019
			Fair value
	Book value	Level 1	Level 2	Level 3	Total
Financial assets at fair value through profit or loss:
Financial assets mandatorily at fair value through profit or loss	216,720 \$	203,070	13,650		216,720
Financial assets at fair value through other comprehensive income:
Domestic and foreign non- listed stocks	504,147			504,147	504,147
Financial assets measured at amortized cost:
Cash and cash equivalents	1,477,082
Notes and accounts receivable	854,867
Other receivables	3,290
Other financial assets-current	45,958
Refundable deposits	5,032
Subtotal	2,386,229		$\frac{1}{2}$
Total	\$3,107,096	203,070	13,650	504,147	720,867
Financial liabilities measured at amortized cost:
Short-term borrowings	£. 317,500
Notes and accounts payable	1,108,958
Other payables	113,666
Other current liabilities	1,424
Long-term borrowings	29,803
Other non-current liabilities	943
Lease liabilities	19,013
Total	1,591,307

			December 31, 2018
			Fair value
	Book value	Level 1	Level 2	Level 3	Total
Financial assets at fair value through profit or loss:
Financial assets mandatorily at fair value through profit or loss	158,974 \$	141,830	17,144		158,974
Financial assets at fair value through other comprehensive income:
Domestic and foreign non- listed stocks	304,917			304,917	304,917
Financial assets measured at amortized cost:
Cash and cash equivalents	2,122,960
Notes and accounts receivable	947,605
Other receivables	35,647
Other financial assets-current	16,937
Refundable deposits	7,670
Subtotal	3,130,819
Total	3,594,710	141,830	17,144	304,917	463,891
Financial liabilities measured at amortized cost:
Short-term borrowings	\$ 312,885
Notes and accounts payable	1,239,004
Other payables	111,793
Other current liabilities	6,819
Long-term borrowings	256,066
Other non-current liabilities	678
Total	1,927,245 S.

$2)$ Valuation techniques for financial instruments measured at fair value

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. Whether transactions are taking place 'regularly' is a matter of judgment and depends on the facts and circumstances of the market for the instrument.

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. Determining whether a market is active involves judgment.

Measurements of fair value of financial instruments without an active market are based on valuation technique or quoted price from a competitor. Fair value, measured by using valuation technique that can be extrapolated from either similar financial instruments or discounted cash flow method or other valuation techniques, including models, is calculated based on available market data at the reporting date. For example, yield curve of Taipei Exchange and average interest rate of commercial paper quoted by Reuters.

$3)$ Transfers between Level 1 and Level 2

There is no transfer for the years ended 2019 and 2018.

4) Reconciliation of Level 3 fair values

	Fair value through other comprehensive income
		Unquoted equity instruments
Opening balance, January 1, 2019	\$	304,917
Total gains and losses recognized
Other comprehensive income		(22, 594)
Reclassification		229,512
Capital reduction by cash		(3, 475)
Disposal/Redemption		(2, 493)
Effect of exchange rate changes		(1,720)
Ending Balance, December 31, 2019	\$	504,147
Opening balance, January 1, 2018	\$	304,956
Total gains and losses recognized
Other comprehensive income		25,838
Disposal		(16, 262)
Settlement		(2,107)
Purchase		215
Adjustments due to IFRS9		(5, 553)
Capital reduction by cash		(4, 147)
Effect of exchange rate changes		1,977
Ending Balance, December 31, 2018	\$	304,917

Above-mentioned total gains and losses were included in unrealized gains and losses from financial assets at fair value through other comprehensive income. Among those related to the assets still held on December 31, 2019 and 2018 were as follows:

	For the years ended December 31
	2019	2018
Total gains and losses recognized:
In other comprehensive income, and presented in "unrealized gains and losses from financial assets	(22.594)	20,896
at fair value through other comprehensive income"

Quantified information on significant unobservable inputs (Level 3) used in fair value $5)$ measurement

The Group's financial instruments that use Level 3 inputs to measure fair value include financial assets measured at fair value through profit or loss-equity investments.

The Group's equity investments without an active market which are classified as Level 3 have numerous unobservable inputs. The significant unobservable inputs of equity instrument investments are not correlated to each other.

Ouantified information of significant unobservable inputs was as follows:

Item	Valuation technique	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and fair value measurement
Financial assets at fair value through other comprehensive income - equity investments without an active market	Market approach (Comparable listed company method)	Price to book ratio $(0.84 - 1.19$ and $0.72 - 1.35$ as of December 31, 2019 and $2018$ $\sim$ Lack of market liquidity discount $(0\%~30\%$ and $0\%~30\%$ as of December 31, 2019 and 2018)	• The fair value would increase if price to book ratio increase $\blacksquare$ The fair value would if lack of decrease liquidity market discount increase

Fair value measurements in Level $3$ – sensitivity analysis of reasonably possible 6) alternative assumptions

The fair value measurement of financial instruments by the consolidated company is reasonable, but the use of different evaluation models or evaluation parameters may result in different evaluation results. For financial instruments classified as Level 3, if the price to book ratio or liquidity discount changes by $10\%$ , the other comprehensive gains and losses for the period will decrease or increase by \$32,112 thousand and \$50,397 thousand, respectively.

The favorable and unfavorable changes of the Group refer to the fluctuation of fair value, and the fair value is calculated by valuation techniques based on the unobservable input parameters of different degrees.

(ac) Financial risk management

$(i)$ Overview

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

$1)$ credit risk
$\overline{2}$ liquidity risk
3) market risk

The following likewise discusses the Group's objectives, policies and processes for measuring and managing the above mentioned risks. For more disclosures about the quantitative effects of these risks exposures, please refer to the respective notes in the accompanying consolidated financial statements.

$(ii)$ Structure of risk management

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The financial department of the Group provides services and coordinates the operation of the financial market. And the important activities are subject to the Board of Director's approval. The Group must be abided by the financial risk management and operation. Internal Audit undertakes reviews of risk management controls and procedures, the results of which are reported to the Board of Directors regularly.

(iii) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers and investments in securities.

Accounts receivable and other receivables $1)$

The financial department has established a credit policy. Under the policy, each new customer is analyzed individually for credit worthiness before payment and delivery terms are offered. The Group's review includes external ratings, when available, and bank references. Purchase limits are established for each customer and represent the maximum open amounts without requiring approval from the financial department; these limits are reviewed quarterly. Customers that fail to meet the Group's benchmark creditworthiness may transact with the Group only on a prepayment basis.

The Group's customers include many types and regions. In order to reduce credit risk, the Group reviews financial statuses and collectible of accounts receivable of each customer regularly and accounts loss allowance.

The Group has allowance for impairment losses account to reflect the estimated loss of account receivable and other receivables. The main components of the allowance account include specific loss components related to individual significant risks, and combined loss components established for similar asset groups that have occurred but have not yet been identified. Portfolio loss allowance accounts are determined based on historical payment statistics for similar financial assets.

$2)$ Investment

The credit risk resulted from deposits, fixed income investments, and other financial instruments is measured and monitored by the Group's finance department. The Group only transacts with financial institutions with good credit rating. The Group does not centralize its investments on specific counterparties hence there is no significant credit risk arising therefrom.

(iv) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting 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 far as possible, that it always has 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.

The Group manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Group's management supervises the banking facilities and ensures compliance with the terms of loan agreements.

Market risk $(v)$

Market risk is the 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 and purchases are denominated in a currency other than the respective functional currencies of the Group's entities. The currency used in these transactions is USD. The Group adopts a natural hedging strategy. When the net assets and liabilities imbalances occur in the short-term, the Group buys or sells foreign currencies to maintain exposures at an acceptable level.

Interest rate risk $2)$

Interest rate risk is the risk of changes in the fair value of financial instruments caused by changes in market interest rates or the risk of changes in cash flows of financial instruments caused by changes in market interest rates. The interest rate risk of the financial assets and liabilities is described in the note of liquidity risk management.

3) Other market price risk

The Group is exposed to equity price risk due to the investments in equity securities. The Group actively monitors the performance of this investment portfolios using fair value basis. This is a strategic investment and is not held for trading. The Group does not actively trade in these investments.

(ad) Capital management

The Group plan the capital which need in the future (including research and development costs and repayment) based on the characteristics of operating and development, and considering factors such as changes in the external environment to protect sustainable development of the Group, give back to shareowners and maintain the best structure to enhance value. Overall, the Group adopts a prudent risk management strategy.

(ae) Investing and financing activities not affecting current cash flows

There is no non-cash investing activities for the nine months ended December 31, 2019 and 2018.

Reconciliation of liabilities arising from financing activities in 2019 was as follows:

				Non-cash changes
					Exchange
				Effect of	rate
	January 1,		Lease	consolidation	changes and	December
	2019	Cash flows	modification	changes	others	31, 2019
Lease liabilities	66,475	(14,366)	(41, 224)	(7, 201)	15,329	19,013

(af) Operating lease

Leases as lessee $(i)$

Non-cancellable operating lease rentals payable was as follows:

	December 31, 2018
Less than one year	12,000
Between one and five years	39,725
	51,725

(7) Related-party transactions

Names and relationship with related parties $(a)$

Name of related party	Relationship with the Group
Wonderland Enterprise Co., Ltd.	An associate
Globaltop Technology Inc.	An associate
Kun Shan GlobalTop Taiben Trading Co. Ltd.	Subsidiary of an associate
Thrutek Applied Materials Co., Ltd.	Subsidiary of an associate
Sun Trend Co., Ltd	Subsidiary of an associate
Yuan-Yao Development Co., Ltd	Subsidiary of an associate

(b) Significant transactions with related parties

$(i)$ Sales

The amounts of significant sales (returns) by the Group to related parties were as follows:

	For the years ended December 31
	2019		2018
Other related parties		(3,156)	18,596

$\sim 10$

$\sim$ $\sim$ $\sim$

$\mathbf{L}$

$\overline{a}$

There were no comparable transactions with non-related parties.

(ii) Purchase

The amounts of significant purchases by the Group from related parties were as follows:

	For the years ended December 31
	2019	2018
Other related parties	-	10.865

The terms and pricing of purchase transactions with related parties were not significantly different from those offered by other vendors.

(iii) Receivables from related parties

Receivables from the related parties were as follows:

Accounts	Types of related parties	December 31, 2019	December 31, 2018
Accounts receivable	Other related parties	49	3,351
Other receivables	Other related parties		5,370
		49	8,721

The credit terms of sales ranged from 30 to 90 days which were not significantly different from those of non-related parties.

(iv) Payables to related parties

	Types of	December 31,	December 31,
Accounts	related parties	2019	2018
Accounts payable	Other related parties		2,789

The purchase credit terms are 60 days, which is the same as non-related parties transactions.

(v) Property transactions
$1)$ Disposals of securities

The Group sold all its shares of Yuan-Yao Development Co., Ltd. to Wonderland Enterprise Co., Ltd. on March 8, 2019, with a selling price of \$41,568 thousand and a disposal gain of \$2,682 thousand. On April 30, 2019, the Group sold its shares of Taiwan Insulation Material Industrial Co., Ltd. which were measured at fair value through other comprehensive income to Yuan-Yao Development Co., Ltd. with a selling price of \$2,493 thousand.

$2)$ Purchases of property, plant and equipment

The purchases price of property, plant and equipment purchased from related parties are summarized as follows:

	For the years ended December 31
	2019	2018
Other related parties		2.487

Disposals of property, plant and equipment $3)$

The disposals of property, plant and equipment to related parties are summarized as follows:

			For the years ended December 31
		2019		2018
			Gain (loss)		Gain (loss)
Related parties		Disposal price	from disposal	Disposal price	from disposal
Thrutek Applied	S	3,000	104
Materials Co., Ltd. Globaltop Technology Inc.		4,478	887
		7,478	991

	For the years ended December 31
	2019	2018
Short-term employee benefits	37,336	55,801
Post-employment benefits	733	826
	38,069	56,627

Short-term employee benefits include the estimated employee compensation. Please refer to note $6(aa)$ for the estimated method.

(8) Pledged assets

The carrying amounts of pledged assets were as follows:

Pledged assets	Object		December 31, 2019	December 31, 2018
Cash in banks (other financial assets) Performance guarantee			7,608	13,525
Land, buildings and structures	Borrowings		571,016	2,471,173
Listed stocks (current financial assets Borrowings) measured at fair value through profit or loss)				27,005
		S	578,624	2,511,703

(9) Commitments and contingencies:

(a) Letter of credit issued but not expired

	December 31, 2019	December 31, 2018
Letter of credit outstanding for the import of raw materials	\$ 969,835	1,067,148
	(including)	(including)
	USD807	USD117
	thousand and	thousand and
	EUR317 thousand)	EUR1,550
		thousand)

(10) Losses due to major disasters: None.

(11) Subsequent events: None.

$(12)$ Others:

(a) A summary of employee benefits, depreciation, and amortization, by function, is as follows:

			For the years ended December 31
By Function		2019			2018
	Operating	Operating		Operating	Operating
$\mathbf{By}$ item	cost	expense	Total	cost	expense	Total
Employee benefits
Salary	303,987 IS	138,855	442,842	393,271	220,392	613,663
Labor and health insurance	24,623	5,232	29,855	25,236	10,566	35,802
Pension	9,711	2,967	12,678	17,002	5,797	22,799
Others	7,753	14,484	22,237	10,445	19,934	30,379
Depreciation	246,222	28,239	274,461	249,808	16,719	266,527
Amortization	2,031	896	2,927	77,737	1,139	78,876

(13) Other disclosures:

Information on significant transactions $(a)$

The following is the information on significant transactions required by the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" for the Group for the year ended December 31, 2019:

$(i)$ Lending to other parties:

												(In Thousands of New Taiwan Dollars)
Number (Note I)	Name of lender	Name of borrower	Account name.	Related party	Highest balance during the period	Ending balance	Actual usage amount during the period	Range of during the period	interest rates Purposes of financing (Note 2)	Transaction amount for business between two parties	Reasons for short-term financing	Allowance for bad debt	Item	Collateral Value	Individual funding loan limit of fund limits (Note 3)	Maximum financing (Note 3)
0	The Company Asia Carbons Other	& Technologyreceivables Inc.		Yes	24,140	1999	٠	3%	2	$\bullet$	Working capital			$\overline{\phantom{a}}$	702,205	1,404,410
0	The Company Asia Carbons Other	& Technologyreceivables Inc.		Yes.	35,000	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	2%	$\overline{2}$	$\bullet$	Working capital	۰		$\overline{\phantom{a}}$	702,205	1,404,410
	Kun Shan Yu-Kun Shan Fu Technology Education Consulting Co., Lid.	Globaltop Trading Co., Ltd.	Other receivables	Yes	13,731			3.3%	$\overline{2}$	$\overline{\phantom{a}}$	Working capital			۰	28,951	57,902
2	YSIC Ltd.	Asia Carbons Other & Technologyreceivables Пnс.		Yes	30,000			3%	$\overline{c}$	$\cdot$	Working capital			$\overline{\phantom{a}}$	147,194	294,387

Note 1: The description of the number column is as follows:
(1) Issuer fills in 0.
(2) The investees are numbered sequentially by the Arabic number 1.

2(2) The musstees are numbered sequentially by the Arabic number in Franchise. Note 2: Nature of lending amount specified in the "Management of Loans to Others" set by the Company shall not exceed 20% of the Company's most

The individual lending amount shall not exceed 20% of the audited or reviewed net worth of YSIC Ltd., and the aggregate lending amount shall not exceed 40% of the aforementioned net worth

(ii) Guarantees and endorsements for other parties: None.
(iii) Information regarding securities held at the reporting day (excluding investment in subsidiaries, associates and joint ventures):

						Ending balance		Highest
Name of holder	Category and name of security	Relationship with the security issuer	Account	Shares	Carrying value ownership (%)	Percentage of	Fair value	Percentage of ownership (%)	Note
The Company	E Ink Holdings Inc.		Current financial assets at fair value through profit or loss	400.000	12,500	0.04%	12,500	0.09%
The Company	Test Research, Inc.		Current financial assets at fair value through profit or loss	500,000	26,600	0.21%	26,600	0.25 %
The Company	Iniversal Venture Capital Investment Corporation		Non-current investment in equity instrument at FVOCI	8,400,000	56,445	6.98%	56,445	6.98%
The Company	Euroc Venture Capital Corp.		Non-current investment in equity instrument at FVOCI	290.928	4.192	2.38 %	4,192	2.38 %
The Company	Euroc III Venture Capical Corp.		Non-current investment in equity instrument at FVOCI	259.875	3,272	5.00 %	3.272	5.00 %
The Company	Global Investment Holding Co., Ltd		Non-current investment in equity instrument at FVOCI	10.901.520	80,605	5.75 %	80,605	5.75 %
The Company	Faith Alliance Corporation	$\sim$	Non-current investment in equity instrument at FVOCI	25,720	108	0.06%	108	0.06 %

								Highest
Name of holder	Category and name of security	Relationship with the security issuer	Account	Shares	Carrying value	Ending balance Percentage of ownership (%)	Fair value	Percentage of ownership (%)	Note
The Company	Multilayer P. C. B. & Assembly Manufacturer		Non-current investment in equity instrument at FVOCI	912	20	0.01%	20	0.01%
The Company	Leadwell Cnc Machines Mfg.,Corp.		Non-current investment in equity instrument at FVOCI	37,352	867	$0.06 \%$	867	0.06%
The Company	Crownpo Technology Inc.	$\blacksquare$	Non-current investment in cquity instrument at FVOCI	709	19	0.01%	19	0.01%
The Company	Infomedia Inc.		Non-current investment in equity instrument at FVOCI	200,000	179	0.11%	179	0.01%
The Company	Vxis Technology Corp.	$\ddot{\phantom{0}}$	Non-current investment in equity instrument at FVOCI	72,480	613	0.61%	613	0.61%
The Company	Asia Global Venture Capital II Co., Ltd	$\ddot{\phantom{0}}$	Non-current investment in equity instrument at FVOCI	1,000,000	21,417	10.00 %	21,417	10.00 %
The Company	Shieh-Tai Biochemical Technology Co., Ltd		Non-current investment in equity instrument at FVOCI	120,339	$\sim$	0.32%	$\tilde{\phantom{a}}$	0.32 %
The Company	Lof Solar Corp.		Non-current investment in equity instrument at FVOCl	2,000,000	ä,	4.48 %	$\blacksquare$	4.48 %
The Company	Yuan-Jie Investment Co., Ltd.	$\overline{a}$	Non-current investment in equity instrument at FVOCI	21,000,000	228,424	19.09%	228,424	32.31 %
Zung-Fu Co., Ltd.	Lidien Inc.		Non-current investment in equity instrument at FVOCI	760,000	11,373	19.00 %	11,373	19.00 %
Zung-Fu Co., Ltd.	Deng Yun Co., Ltd	÷,	Non-current investment in equity instrument at FVOCI	591,945	14,025	3.09%	14,025	3.09%
Zung-Fu Co., Ltd.	YuChie Inc.		Non-current investment in equity instrument at FVOCI	589,000	6,880	19.00 %	6,880	19.00 %
YSIC Ltd.	Ardentee Corporation		Current financial assets at fair value through profit or oss	600.000	18,510	0.12%	18,510	0.12%
YSIC Ltd.	Leo Systems, Inc.		Current financial lassets at fair value through profit or loss	100,000	2,015	0.12%	2,015	0.12%
YSIC Ltd.	Co-Tech Development Corp.	٠	Current financial assets at fair value through profit or loss	200,000	8,510	$0.08 \%$	8,510	0.32 %
YSIC Ltd.	Phison Electronics Corporation	÷,	Current financial assets at fair value through profit or loss	20,000	6,810	0.01%	6,810	0.01%
YSIC Ltd.	Topco Scientific Co., Ltd.	$\overline{a}$	Current financial assets at fair value through profit or loss	110,000	11,605	$0.06 \%$	11,605	0.06%
YSIC Ltd.	Unicon Optical Co., Ltd.	$\overline{a}$	Current financial assets at fair value through profit or loss	1,500,000	53,235	0.88%	53,235	0.88 %
YSIC Ltd.	Avalue Technology Inc.	÷,	Current financial assets at fair value through profit or loss	250,000	19,100	0.36 %	19,100	0.36 %

					Ending balance			Highest
Name of holder	Category and name of security	Relationship with the security issuer	Account	Shares	Carrying value	Percentage of ownership (%)	Fair value	Percentage of ownership $(\% )$	Note
YSIC Ltd.	Symtek Automation Asia Co., Ltd.		Current financial assets at fair value through profit or loss	20,000	1.550	0.03%	1.550	0.03%
YSIC Ltd.	Nan Ya Printed Circuit Board Corporation		Current financial assets at fair value through profit or loss	50,000	2,298	0.01%	2.298	0.01%
YSIC Ltd.	Materials Analysis Technology Inc.		Current financial assets at fair value through profit or loss	5,000	407	0.01%	407	0.01%
YSIC Ltd.	International Games System Co., Ltd.		Current financial assets at fair value through profit or loss	10,000	3,900	0.01%	3,900	0.01%
YSIC Ltd.	Metatech (AP) Inc.	÷,	Current financial assets at fair value through profit or loss	20,000	1,110	$0.03\%$	1,110	0.03%
YSIC Ltd.	Globalwafers Co ILtd.		Current financial assets at fair value through profit or loss	30,000	11,475	0.01%	11,475	0.01%
YSIC Ltd.	Shin Kong Chi- Shin Money- Market Fund		Current financial assets at fair value through profit or loss	1,138,166	17,691	% L.	17,691	$\frac{9}{6}$
YSIC Ltd.	Prudential Fincl US Inv Grd Corp		Current financial assets at fair value through profit or loss	600,000	5,754	$\frac{1}{2}$ ÷.	5,754	$\frac{9}{6}$ ÷,
YSIC Ltd.	Ciw International Co., Ltd.	$\blacksquare$	Current financial assets at fair value through profit or oss	1,000,000	13,650	0.72 %	13,650	0.72%
YSIC Ltd.	Mcm Stamping Co., Ltd.		Non-current investment in equity instrument at FVOCI	200,000	391	0.63%	391	0.63%
YSIC Ltd.	Vxis Technology Corp.		Non-current investment in equity instrument at FVOCI	72,480	617	0.61%	617	0.61%
YSIC Ltd.	Infomedia Inc.	$\overline{a}$	Non-current investment in equity instrument at FVOCI	650,000	579	$0.35\%$	579	0.35%
YSIC Ltd.	Yuan-Jie Investment Co., Ľtd.		Non-current investment in equity instrument at FVOCI	100,000	1,088	0.09%	1,088	0.15 %
GRAND CAPITALCO., Ltd	Deng Yun Co., Ltd		Non-current financial assets at FVTPL	3,082,453	73,033	16.10 %	73,033	16.10 %

(iv) Information regarding purchase or sale of securities for the period exceeding NTD300 million or 20% of the Company's paid-in capital: None
Information on acquisition of real estate with purchase amount exceeding NTD300 million or 20% of the Company's paid-in $(v)$ capital: None
(vi) Information regarding receivables from disposal of real estate exceeding NTD300 million or 20% of the Company's paid-in capital: None
(vii) Information regarding related-parties purchases and/or sales exceeding NTD100 million or 20% of the Company's paid-in capital: None
(viii) Information regarding receivables from related-parties exceeding NTD100 million or 20% of the Company's paid-in capital: None
(ix) Information regarding trading in derivative financial instruments: None
Significant transactions and business relationship between the parent company and its subsidiaries for the year ended $(x)$ December 31, 2019: None
$(b)$ Information on investees:

The following is the information on investees for the years ended December 31, 2019 (excluding information on investees in Mainland China):

											(In Thousands of New Taiwan Dollars)
			Main		Original investment amount		Balance as of December 31, 2019		Highest	Net income	Share of
Name of investor	Name of investee	Location	businesses and products	December 31, 2019	December 31, 2018	Shares	Percentage of ownership	Carrying value	Percentage of ownership	(losses) of investee	profits/lasses of investee	Note
The Company	Grand Carhay Venture Capital Co., Ltd.	Taiwan	Investment business	400,000	400,000	40,000,000	25.00 %	331,171	25,00 %	(698)	(175)
The Company	Wonderland Enterprise Co., .td.	Taiwan	General investment business	325,230	325,230	29,629,597	37 04 %	540,896	49.38%	94,305	34,527
The Company	Yuan-Jie Investment Co., .td.	Taiwan	General investment business	209,896	209,896	÷	% ÷,		32.31 %	133,494	43,129
The Company	Yu-Jie Investment Co., Ltd.	Taiwan	General investment business	223,539	223,539	21,320,000	32.80%	266,507	32.80%	104,903	34.408
The Company	Yuan-Yao Development Co. .td.	Taiwan	General investment business		55,305				33.22 %	(1,653)	(549)
The Company	Faiwan United Medical Inc.	Taiwan	Wholesale and Retail of Precision Instruments and Information Software		229,364	÷	%		64.79%	73	47	Subsidiary
The Company	Zung-Fu Co., Ltd.	l'aiwan	Building cleaning and maintenance, Sewage treatment, Air conditioning quipment maintenance	522,032	522,032	22,289,256	89.16%	103,787	89.16%	(14, 469)	(11, 470)	Subsidiary
The Company	YSIC Ltd	Taiwan	Residential building and industrial plant development ental business	1,638,164	1,638,164	103,975,894	99.99%	731,635	99.99%	(185, 507)	(134, 285)	Subsidiary
The Company	Yuan-Shin Materials Technology Corp. Ltd	Taiwan	Basic precision chemical materials and plastic raw material manufacturing	145,900	145,900	5,000,000	100.00 %	41,607	100.00 %	(1,045)	(1,045)	Subsidiary
The Company	Yangmingshan Tien Lai Resort & SPA	Taiwan	General hotel industry	630,555	630,555	25,865,618	65.07%	694,989	65.07%	24,174	13,417	Subsidiary
The Company	Gvision-USA, Inc.	USA	Sale and distribution of liquid crystal displays	56,266	56,266	666,667	44.44 %	٠	66.67%	2,936	3,474	Subsidiary
The Company	Gvision-USA, Inc.	USA	Sale and distribution of liquid crystal displays	56,266	56,266	666,667	44.44 %	37,117	44.44 %	608	(1,627)
The Company	Jing-Shou Engineering Co., -td	Taiwan	Bridge and building engineering		187,000	$\ddot{\phantom{0}}$	% ä,	٠	100.00%	(1, 301)	(1, 296)	Subsidiary
The Company	Lei-Ting Construction Corporation	Taiwan	Operating civil and construction engineering pusiness	71,383	41,060	6,306,400	91.40 %	41,119	91.40 %	(3, 335)	(1,759)	Subsidiary
The Company	Asia Carbon & Technology nc.	Taiwan	Electronic component manufacturine	291.064	192,400	9,866,389	98,58 %	10,209	98.58%	(81,682)	(57, 647)	Subsidiary
Zung-Fu Co., Ltd.	Grand Captial Co., Ltd.	Sevchelles	General investment business	2,500	2,500	75,098	2.78 %	2,092	2.78%	(74)	(2)	Subsidiary
Zung Fu Co., Ltd.	Globaltop Technology Inc.	Taiwan	GPS Module, GPS Handheld System and GPS Antenna.	20,000	20,000	876,554	4.17%	7,195	4.17%	(33, 583)	(1, 402)
Zung-Fu Co., Ltd.	Asia Carbon & Technology 'nc.	Taiwan	Electronic component manufacturine	115,850	115,850	$\overline{a}$	₩ ÷,		16.19%	(81,682)	÷.	Subsidiary
YSIC Ltd.	Kun Shan International Ltd.	Seychelles	General investment business	122,572	122,572	3,702,718	62.03 %	131,665	62.03%	2.132	1,322	Subsidiary
YSIC Ltd.	Grand Captial Co., Ltd.	Seychelles	General investment business	88,090	88,090	2,622,904	97.22 %	73,082	97.22 %	(74)	(72)	Subsidiary
YSIC Ltd.	Yangmingshan Tien Lai Resort & SPA	Taiwan	General hotel industry	110,836	110,836	4,807,774	12.10%	118,706	12.10%	24,174	2,564	Subsidiary
YSIC Ltd.	Globaltop Technology Inc.	Taiwan	GPS Module, GPS Handheid System and GPS Antenna.	155,449	155,449	7,086,249	33.74 %	58,162	33.74%	(33, 583)	(11, 332)
YSIC Ltd.	Lei-Ting Construction Corporation	Taiwan	Operating civil and construction engineering business	99,380	99,380	593,600	8.60%	3,870	24.73%	(3, 335)	(1,308)	Subsidiary
YSIC Ltd.	Tien Lai Co., Ltd.	Taiwan	Piping engineering	5,000	5,000	500,000	50.00 %	2,044	50,00 %	(988	(494)	Subsidiary
YSIC Ltd.	Yuan-Jie Investment Co., лd.	Taiwan	General investment business	1,000	1,000	$\overline{a}$	%		0.15%	133,494	205

(Continued)

			Main		Original investment amount		Balance as of December 31, 2019		Highest	Net income	Share of
Name of investor	Name of investee	Location	businesses and products	2019	December 31, December 31, 2018	Shares	Percentage of ownership	Carrying value	Percentage of ownership	(losses) of investee	profits/losses of investee	Note
YSIC Ltd.	Yu-Jie Investment Co., Ltd.	Taiwan	General investment business	1,000	1.000	103,000	0.16%	1.287	0.16%	104,903	166
YSIC Ltd.	Asia Carbon & Technology Дnс.	Taiwan	Electronic component manufacturine	77.917	77,917		۰		10.57%	(81, 682)	(3,227)	Subsidiary
Lei-Ting Construction Zung-Fu Co., Ltd. Corporation		Taiwan	Building cleaning and maintenance, Sewage treatment, Air conditioning equipment maintenance	59,670	59,670	2,461,351	9.85%	11,461	9.85%	(14, 469)	(1.425)	Subsidiary
Co., Ltd.	Jing-Shuo Engineering Asia Carbon & Technology Inc.	Taiwan	Electronic component manufacturina	13,855	13,855				3.08%	(81, 682)		(940) Subsidiary
lAsia Carbon & Technology Inc.	Asia Graphene Co., Ltd.	Taiwan	Electronic component manufacturing		1.000				100.00%	(40)	(40)	Subsidiary
Yangmingshan Tien Lai Resort & SPA	Yangmingshan Tien Lai Art Taiwan Willage Development Co., Ltd.		lArts and cultural services and other leisure services		1.680				100.00%	(55)	(55)	Subsidiary

$(i)$ The names of investees in Mainland China, the main businesses and products, and other information:

										(In Thousands of New Taiwan Dollars)
Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment (Note 1)	Accumulated outflow of linvestment froml Taiwan as of January 1, 2019 Outflow	Investment flows Inflow	Accumulated outflow of investment from Taiwan as of December 31. 2019	Net income (losses) of the (Note 2)	Percentage оf investee ownership	Highest Percentage оf ownership	Investment income (losses)	Book value	Accumulated remittance of earnings in current period
Kun Shan Yu-Fu Technology Education Consuting Co., Ltd.	Educational consulting, information operation consulting, software and data storage consultation	103.984 (USD 3,468)	(2)	109,427 (USD 3, 650)	۰	109,427 (USD 3,650)	4,374 (USD 142	62.03%	100 %		2,713 89.367
Kun Shan Jia-An Technology Education Consuting Co., Ltd.	Educational consulting, information operation consulting, software and data storage consultation	72,899 (USD 2.432)	(2)	(Note 4)			(2,117) (USD-69)	62.03%	% ۰.		$(1,313)$ 40.857

Note1: The investment methods are divided into the following three types: (1) Direct investment in Mainland China. (2) Indirect investment in Mainland China through a holding company established in other countries. (3) Others.

Note2: The investment income (losses) recognized in the current period were calculated based on the financial statements that have not been reviewed.

Note3: The foreign currency transactions have been translated into New Taiwan Dollar at the exchange rate at the end of the financial reporting date and the average exchange rate (USD1=NTD29.98, USD1=NTD30.8906).

Note4: Kun Shan Yu-Fu Technology Education Consulting Co., Ltd. had been spinned-off as Kun Shan Yu-Fu Technology Education Consulting Co., Ltd. and Kun Shan Jia-An Technology Education Consulting Co., Ltd.

(ii) Upper limit on investment in Mainland China:

Accumulated Investment in Mainland China as of December 31, 2019	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment (Note)
109.427	109.427	441,581
(USD 3.650)	(USD 3,650)

Note: The investment limit was calculated based on the official document 09704604680 announced by the MOEAIC on August 29, 2008.

(iii) Significant inter-company transactions with the subsidiary in Mainland China: None.

(14) Segment information:

Plasticization segment: manufacturing and domestic/international sales of styrene monomer, $(a)$ manufacturing and sales of chemical materials and plastic materials.
$(b)$ Investment segment: investment business.
Other segment: the revenues of the segments that have not reached the quantitative threshold are $(c)$ hotel, general service business, medical equipment wholesale and electronic sales.

The Group's operating segment information and reconciliation are as follows:

			For the year ended December 31, 2019
	Plasticization segment	Investment segment	Other segments	Reconciliation and elimination	Total
Revenue
Revenue from external customers	11,717,894	41,688	459,807		12,219,389
Intersegments revenues		10,105	4,567	(14,672)
Total revenue	11,717,894	51,793	464,374	(14, 672)	12,219,389
Reportable segment profit or loss	1,028,011	(183, 567)	(70, 271)	260,587	1,034,760

			For the year ended December 31, 2018
	Plasticization segment		Investment segment	Other segments	Reconciliation and elimination	Total
Revenue
Revenue from external customers		14,806,544	16,689	559,421		15,382,654
Intersegments revenues			22,838	19,388	(42, 226)
Total revenue		14,806,544	39,527	578,809	(42, 226)	15,382,654
Reportable segment profit or loss		1,562,218	(61, 846)	(81,319)	128,612	1,547,665

Information about products and services $(i)$

The Group operating business by production perspective and information about products and services revenue from external customers is the same as in note 14 (b).

(ii) Information about major customers

		For the years ended December 31
	2019	2018
Plasticization segment client A	6,157,091	7,277,419
Plasticization segment client B	1,862,773	2,527,091
	8,019,864	9,804,510

AI assistant

T.S.M.C. — Annual Report 2019

51769_rns_2019-11-01_d576a59e-ad20-4bab-8f0b-65193ed788b3.pdf

TAIWAN STYRENE MONOMER CORPORATION AND SUBSIDIARIES

Table of contents

Representation Letter

Independent Auditors' Report

Opinion

Basis for Opinion

Key Audit Matters

1. Revenue recognition

Other Matter

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

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

KPMG

Notes to Readers

Consolidated Balance Sheets

December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

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

Consolidated Statements of Changes in Equity

For the years ended December 31, 2019 and 2018

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN STYRENE MONOMER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN STYRENE MONOMER CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued)

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN STYRENE MONOMER CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

(1) Company history

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

(3) New standards, amendments and interpretations adopted

Definition of a lease $(i)$

(4) Summary of significant accounting policies

(ii) Functional and presentation currency

Basis of consolidation $(c)$

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

Foreign currencies $(d)$

Derecognition of financial liabilities 4)

(m) Leases

Applicable before December 31, 2018

Revenue recognition $(p)$

Employee benefits $(q)$

$(t)$ Operating segments

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

(6) Explanation of significant accounts

$(d)$ Inventories

$(e)$ Prepayments

$(f)$ Non-current assets (or disposal groups) held for sale, net

(g) Other current financial assets

Loss control of subsidiaries $(i)$

(k) Property, plant and equipment

(Continued)

$(1)$ Right-of-use assets

(m) Investment property

$(n)$ Intangible assets

$(0)$ Other long-term investment, net

Other non-current assets $(p)$

(q) Short-term borrowings

$(r)$ Other payables

$(s)$ Long-term borrowings

Lease liabilities $(t)$

$4)$ Expenses recognized in profit or loss

6) Actuarial assumptions

$(v)$ Income taxes

(ii) Deferred tax assets and liabilities

$1)$ Unrecognized deferred tax assets

Recognized deferred tax assets and liabilities $2)$

Deferred Tax Assets:

(w) Capital and other equity

Ordinary shares $(i)$

(ii) Capital surplus

$(x)$ Earning per share

T.S.M.C. Annual Report 2019