TSRC - Annual Report 2018 | FinancialReports.eu

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Home page
Table of Contents
Letter to the Shareholders
Company profile
Corporate governance report
Information on capital raising activities
Overview of business operations
Overview of financial status
Review and analysis of the Company's financial position and financial
performance, and risk management
Special items to be included
Other disclosures
Any circumstances referred to in Paragraph 3(2) of Article 36 of the
Securities and Exchange Act which might materially affect sharehold-
ers' equity or the price of the Company's securities
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Spokesman:Edward Wang Job title: Vice President TEL:02-37016000 E-mail:[email protected]

Deputy Spokesman:Thomas Lin Job title: Sr. Asst.Vice President TEL:02-37016000 E-mail:[email protected]

Head office:

No.2, Singgong Rd., Dashe Dist., Kaohsiung City, Taiwan R.O.C. Tel: 0-351 3811 http://www.tsrc.com.tw Taipei office 18F., 95, Sec. 2, Dunhua S. Rd., Taipei City, Taiwan R.O.C. Tel: 02-3701 6000 Fax: 02-3701 6868 Kaohsiung Factory: No.2, Singgong Rd., Dashe Dist., Kaohsiung City, Taiwan R.O.C. Tel: 07-351 3811 Fax: 07-351 4705 Gangshan Factory: No.39, Bengong 1st Rd., Gangshan Dist., Kaohsiung City, Taiwan R.O.C. Tel: 07-623 3005 Fax: 07-622 5481

Stock Agent:SinoPac Securities Co. Ltd. Stock division Head office:3F., No.17, Bo-ai Rd., Jhongjheng District, Taipei City 100, Taiwan R.O.C. TEL:02-23816288 http://www.sinotrade.com.tw

Financial Statement Auditing CPAs: CPAs:Hung Po Shu, Yu Ann Tine Office:KPMG Head office:68F., No.7, Sec. 5, Sinyi Rd., Sinyi District, Taipei City 110, Taiwan R.O.C. (TAIPEI 101) TEL:02-81016666 http://www.kpmg.com.tw

The name of any exchanges where the Company's securities are traded offshore, and the method by which to access information on said offshore securities: No

		Page
Letter to the Shareholders		4
Company profile		6
I.	Date of incorporation	7
II.	Company history	7
Corporate governance report		8
I.	Company's organization	9
II.	Information on Board of Directors and Presidents	10
III.	Status of corporate governance implementation	21
IV.	Information on CPA professional fee	37
V.	Information on replacement of CPA	37
VI.	Chairman, president, or managers in charge of the Company's finance or accounting matters in the most re-	37
	cent year held a position at the accounting firm of a CPA or any of its affiliated companies
VII.	Information on equity for directors, managers and shareholders holding more than 10% of outstanding	38
	shares equity transfer and equity pledge movements
VIII.	Relationship data among the top 10 shareholders with the highest shareholding ratio	39
IX.	The total number of shares and total equity stake held in any single enterprise by the Company, its directors,	39
	managers and any companies controlled either directly or indirectly by the Company
Information on capital raising activities		40
I.	Capital and shares	41
II.	Corporate Bonds Status	45
III.	Preferred stocks Status	45
IV.	Global depository receipts Status	45
V.	Employee stock warrants Status	45
VI.	New restricted employee shares Status	45
VII.	Status of issuance of new shares in connection with mergers or acquisitions or with acquisitions of shares of	45
	other companies
VIII.	Implementation of capital allocation plans	45

		Page
Overview of business operations		46
I.	Description of business	47
II.	Analysis of market, production and marketing situation	51
III.	Employees information	54
IV.	Disbursements of environmental protection	54
V.	Labor relations	55
VI.	Material contracts	56
Overview of financial status		58
I.	Condensed balance sheet and statement of comprehensive income for the recent five fiscal years	59
II.	Financial analysis for the recent five fiscal years	63
III.	Audit committee's report	66
IV.	Consolidated financial statements and independent auditors' report for the most recent fiscal year	67
V.	Individual financial statements and independent auditors' report for the most recent fiscal year	67
VI.	Financial difficulties which the Company or its affiliates have experienced, and how said difficulties will affect	67
	the Company's financial situation
Review and analysis of the Company's financial position and financial perfor-		68
mance, and risk management
I.	Financial position	69
II.	Financial performance	69
III.	Cash flow analysis	70
IV.	Effect upon financial operations of any major capital expenditure during the most recent fiscal year	71
V.	The Company's reinvestment policy for the most recent fiscal year, the main reasons for profit/loss generated	71
	thereby, the plan for improving re-investment profitability, and investment plans for the coming year
VI.	Analysis and assessment of risk management	71
VII.	Other important matters	73
Special items to be included		74
I.	Information related to the Company's affiliates	75
II.	State of the Company's private placement of marketable securities	81
III.	Holding or disposal of the Company's shares by the Company's subsidiaries	81
IV.	Other matters that require additional description	81
Other disclosures		82

82 Any circumstances referred to in Paragraph 3(2) of Article 36 of the Securities 83 and Exchange Act which might materially affect shareholders' equity or the price of the Company's securities

Letter to the Shareholders

Letter to the Shareholders

Letter to the Shareholders

Letter to the Shareholders

2018 was a year in which TSRC's overall financial performance grew steadily, and its operating performance improved versus the past few years. 2018 saw a number of difficult industry challenges including the weak demand for synthetic rubber caused by slower China automotive and tire market growth and abundant supply of low-price natural rubber, intense pricing pressure driven by aggressive competition, and the trade war which negatively impacted the Company's volume, revenue and profit.

However, the effort over the past years of investing and developing our specialty business portfolio has paid dividends with increased TPE and ASM sales and profit contributions. In particular, our ASM business alliance with global brands in launching high performance sport shoes was very successful, and we were able to run full capacity for all ASM production lines. In addition, we were successful in turning around and significantly improving our joint venture investments in India and China with ISRPL (India) running at above 80% utilization rate in 2018 and turning in good profit, and ARLANXEO-TSRC (China) substantially improving its business performance and profitability. This led to growth in our investment income from the two JVs' strong profit contribution and together with good efforts in financial management boostedTSRC's overall profit resulting in strong Net Income and EPS (earnings per share) improvement over 2017, thereby offsetting the impact from the difficult challenges from the economy and end use market.

In total, the shipment of synthetic rubber and TPE product was 453 thousand metric tons in 2018, a reduction of 6% versus prior year. Consolidated revenue was NTD 29,751 million, a decrease of 6% compared to NTD 31,766 million the previous year. Consolidated gross profit was up 5% to NTD 3,489 million and margin was 12%. Consolidated operating profit was NTD 1,302 million, an increase of 8% compared to the previous year. As a result, net income was NTD 1,192 million while EPS was NTD 1.44, representing a 36% increase from the previous year.

Technology innovation is a key foundation for TSRC in driving profitable growth in the long-term. Over the past few years, we have successfully developed new solutions to support customers as well as engaging customers in new technology and product development. TSRC has also focused on developing new market segments and applications including material for medical devices, lubricant viscosity modifiers, green tires, and specialty films to improve our market position and value share of specialty polymers.

The key research projects in 2018 include the continued development of SSBR microstructure control technology platform with breakthrough in functional modification, development of high-cis BR with new catalyst technology for plastic modification, tire, and shoe applications, technology development in co-polymerization, hydrogenation catalyst, and product finishing for new generation of HSBC, and continued cooperation with leading global brands to jointly develop ASM withhigher performance properties. In 2018,TSRC was granted 6 patents.

Looking ahead, there is strong consensus in the forecast of a slowdown in global economic growth in 2019 due to trade conflicts, currency and crude oil price volatility, market instability, and the weakening of the China economy. It is envisaged that investment and manufacturing activities will contract with these factors, especially if the trade tensions were to continue in 2019. There are significant uncertainties in 2019 to warrant a cautious business projection.

At the micro level of the synthetic rubber and TPE industry, in addition to the macroeconomic uncertainties described above, TSRC is expected to be confronted with raw materials price pressure due to potential trade fallout, tremendous market price pressure for synthetic rubber with low natural rubber prices not expected to abate and oversupply from vertically integrated suppliers, and profit compression and weak demand for TPE due to trade dispute uncertainties and aggressive competition for market share. These factors will limit the ability for TSRC to exercise pricing leverage and drive profit growth. Nevertheless, we are still pushing hard to target a 4% increase in sales volume in 2019 through increased ASM growth, new geographic markets, and selective growth opportunities with on-purpose products.

Our efforts in expanding high value, high performance product technologies remain on-course with the new twenty thousand metric tons per year advanced SEBS line in Nantong, China coming on-stream in end 2019, and the new seven thousand metric tons per year production facility in Binh Duong Province, Vietnam, for ASM expected to start production in first half of 2020. The new SEBS production line will incorporate new processes and technologies, focusing on products for medical applications such as fluid bags and tubes. These two expansion projects are critical to deliver our five-year growth plan and will strengthen our market position in specialty applications and market segments.

We will continue to strengthen our competitive capabilities and enhanceour technology, quality, and customer services in response to the constantly changing market conditions. We expect TSRC to grow and thrivein the future.

Chairman: Nita Ing

Company profile

Company profile

Company profile

I. Date of incorporation

July 27, 1973

II. Company history

I. Date of incorporation II. Company history

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2010's Globalization

Signed an SBS technology licensing contract with a Russian Company, which was the first technology outlicensing by TSRC.
Established an joint venture E-SBR plant with an annual output of 120 thousand metric tons in India and a joint venture NBR plant in Nantong, Jiangsu, China.
Acquired Dexco in the U.S.
Established a SIS plant with an annual output of 25 thousand metric tons in Nantong, Jiangsu, China.
Expanded the production line for Advanced Shoe Materials in Gangshan.
Upgraded the Technology Center and Semi-commercial Plant in Kaohsiung, Taiwan.

2000's Expansion of Production Lines

Successfully developed the second generation SEBS technology.
Established Compound plants in Songjian, Shanghai and Jinan, Shandong, respectively.
Established an SEBS plants with an annual output of 20 thousand metric tons and formed an joint venture-BR plant with an annual output of 50 thousand metric tons respectively in Nantong, Jiangsu, China.

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Kicked off the construction of the second SEBS production line in Nantong, Jiangsu, China.
Raised stake in Indian joint venture (Indian Synthetic Rubber Private Ltd.) to 50%
Incorporated Vietnam subsidiary, located in Binh Duong Province, TSRC (Vietnam)

1990's Rapid Regional Expansion

Established its second SBS production line in Kaohsiung.
Established Shen Hua Chemical Industrial in Nantong, Jiangsu, China and established an E-SBR plant with an annual output of 100 thousand metric tons. This Company is the first joint venture and overseas Company of TSRC.

1980's Early Growing Stage

Established a BR plant with an annual output of 40 thousand metric tons.

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Participated in a joint venture project of BR with an annual output of 50 thousand metric tons in Thailand.
Successfully developed the first generation of SEBS technology.
Relocated the Philips SBS Plant from Texas, USA to Kaohsiung.

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1970's Beginning

Taiwan Synthetic Rubber Corp. (TSRC) was established in 1973.
Established an E-SBR plant with an annual output of 100 thousand metric tons (the first E-SBR plant in Taiwan).

Corporate governance report

Corporate governance report

I. Company's organization

Corporate governance report

I. Company's organization

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Shareholders Meeting
Compensation Committee
Board of Directors
Chairman
Audit Committee
Secretariat Division of Board Directors Internal Auditing Office
CEO
Safety, Health &Environment Section
yS H
Division Division Division Op Division Res Fin u Leg Cor
erations
Department
nthetic Rubber ance Division
al Department
Advanced Materials earch & Development man Resources & porate Development
Management Department
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Tasks of principal divisions/departments/business

Secretariat Division of Board Directors Internal Auditing Office

Safety, Health & Environment Section Synthetic Rubber Division

Advanced Materials Division Operations Division Research & Development Division Finance Division

Human Resources & Management Department Legal Department

Corporate Development Department

Planning and implementing matters of the Board of Directors for the smooth operation of the Board.

Planning and performing internal audit to ensure the effective operation of the internal system as well as establishing corporate risk evaluation and risk management mechanisms.

Stipulating, planning, supervising and promoting the safety and health management matters and directing related departments in implementation.

Responsible for planning and executing the synthetic rubber business development project, selling synthetic rubber products, analyzing overall performance, and responsible for operation result.

Responsible for planning and executing the development project for advanced material business, selling thermoplastic elastomer (TPE) and applied materials, analyzing overall performance, and responsible for operation result.

Responsible for managing the production of plants, supervising the system operation of the supply chains, dedication to maintaining the operational safety of plants, improving quality, maximizing production efficiency, and improving the competitiveness of products.

Developing own or introducing advanced technologies externally in cope with the long-term strategy of TSRC, which allows the product quality of TSRC and technology to reach international level, improves the overall competitiveness, and increases revenues to ensure the sustainability of TSRC.

Responsible for the stipulation of financial policy and accounting system, planning and managing funds, accounts, taxes, equities and financial of re-investing businesses, as well as assisting in the customer credit risk management of all business units. Meanwhile, also responsible for the overall planning of the information service system of TSRC in order to improve the efficiency of operational management and decision-making.

Planning and establishing human resources policy, drafting plans and budget for employee selection, recruitment, cultivation, retainment, and employee relations, as well as shaping organizational culture and promoting organizational management in order to fulfill the goal of the organization and operate effectively.

Responsible for legal management and providing legal support to TSRC to ensure the interests of TSRC are not harmed.

Stipulating the medium to long-term development strategy, integrating and allocating resources, supervising execution process of all projects, handling the promotion of corporate social responsibility and public relations.

Corporate governance report

II. Information on Board of Directors and Presidents

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Shares cur-
Shares held when Shares currently rently held by
their spouses
Nationali- elected held
Term and children
Job title ty or Place Name Gender Date of of con- Date of first of minor age
of regis- elected elected
tract
tration
Share(s) % Share(s) % Share(s) %
Hao Ran Foundation
Chair-man Republic of China Representative: Nita Statutory maleFe- June 21, 2018 3 July 27, 1985 60,171,3190 7.3- 60,171,3190 7.3- 0 -
Ing
Hao Ran Foundation
Direc-tor Republic of China Representative: Chin-Statutory Male June 21, 2018 3 June 06, 2012 60,171,319762 7.3- 60,171,319762 7.3- 0 -
Shan Chiang
Direc- Republic of China Metacity Development Corporation Male June 21, 3 June 21, 31,093,1080 3.8- 31,093,1080 3.8- 0 -
tor Representative: Jing- 2018 2018
Lung Huang
Metacity Development
Direc-tor Republic of China Representative: Tzu Corporation Male June 21, 2018 3 Septem-ber 02, 2002 31,093,1081,046 3.8- 31,093,1081,046 3.8- 0 -
Wei Lee
Metacity Development
Direc-tor Republic of China Representative: John T. Corporation Male June 21, 2018 3 June 10, 2015 31,093,1080 3.8- 31,093,1080 3.8- 0 -
Yu
Wei Dah Development
Direc-tor Republic of China Representative: Tsai-Co.,Ltd. Male June 21, 2018 3 June 21, 2018 53,708,923174 6.5- 53,708,923174 6.5- 0 -
Der Chen
Inde-
pen-dent Republic of China Robert Hung Male June 21, 2018 3 June 06, 2018 0 - 0 - 0 -
Direc-
tor
Inde-
pen-dent Republic Sean Chao Male June 21, 3 June 21, 0 - 0 - 0 -
of China 2018 2018
Direc-
tor
Inde-
pen-dent Republic of China Rex Yang Male June 21, 2018 3 June 21, 2018 0 - 0 - 0 -
Direc-
tor
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Remark: The Company made a complete re-election on June 21, 2018.

Major shareholders of institutional shareholders December 31, 2018

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Institutional shareholders Major institutional shareholders
Hao Ran Foundation No institutional shareholders
Han De Development Corporation QingShan Investment Company (99.8%)
Wei Dah Development Co. Ltd. QingShan Investment Company (99.8%)
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Corporate governance report

December 31, 2018

II. Information on Board of Directors and Presidents

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Other officers, direc-
Shares held tors or supervisors who
through nomi- are their spouses or
nees relatives of 2nd degree
Principal work experience and Position(s) currently held in the Company and/or in any other
of relationship
Academic qualification Company
Rela-
Job
Share(s) % Name tion-
title
ship
Chairman of Hao Ran Foundation
Bachelors' Degree in Depart- Chairman of Continental Holdings Corp.
0 - ment of Economics, University Chairman of Continent Engineering Company No No No
of California, Los Angeles Director of Continent Development Company
Director of American Bridge Holding Company
Masters' Degree in Depart- Director of Wei Dah Development Corporation, Chairman of
0 - ment of Public Administration, Capital Community Management Corporation, Director of Tai- No No No
NCU wan High Speed Rail, Director of Hao Ran Foundation
Managing Director of Pan Asia Corp., Chairman of Han De Con-
struction Co., Ltd, Chairman of Wei Dah Development Corpo-
ration, Chairman of Xi Hui Corporation, Chairman of QingShan
Investment Company, Director of Continent Engineering Com-
0 - [Bachelors' Degree in Depart-] pany (India) (Hong Kong), Supervisor of Continent Development No No No
ment of Accounting, NCKU
Company, Director of Capital Community Management Corpo-
ration, Director of Xin Rong Corporation, Director of Continental
Holdings Corp., Director of CEC Commercial Development Cor-
poration
Masters' Degree in Institute
0 - of Business and Management, Director of Tai He Development and Investment Company, Di- No No No
NCTU rector of Newegg Company, USA
Graduated from Advanced Chairman of CTCI Corporation, Chairman of Xing Li Develop-
Management Class in Man- ment Company, Director of CTCI Overseas Corporation Limited,
0 - agement Faculty, Harvard Director of CTCI Education Foundation, Managing Director of No No No
University, Bachelors' Degree CTCI Foundation, Director of Gintech Energy Corporation, Direc-
in Department of Electrical tor of Utech Solar Company, Director of TCC, Supervisor of China
Engineering, NTU Steel Chemical Company
Bachelors' Degree in Depart-
0 - ment of Accounting and Sta- None No No No
tistics, NCKU
Masters' Degree in Depart-
0 - ment of Economics, Illinois Independent Director of Wistron NeWeb Corporation No No No
State University, USA
Masters' Degree in Depart-
ment of Business Administra-
0 - tion, University of Chicago, Independent Director of Hann Star Corporation No No No
Bachelors' Degree in Depart-
ment of Politics and Interna-
tional Relations, NTU
Bachelors' Degree in Depart-
0 - ment of Business Administra- Director of Kadar Pte. Ltd. No No No
tion, Soochow University
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Remark: The Company made a complete re-election on June 21, 2018.

Major shareholders of major shareholders of institutional shareholders December. 31, 2018

Institutional shareholders	Major institutional shareholders
Ching Shan Zhen Corporation	Jade Fortune Enterprises Inc.(100%)

Corporate governance report

nformation on directors(2)

II. Information on Board of Directors and Presidents

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Condi- Whether they possess work experience
tions of more than five years and the following professional qualifications
At least lecturers of business, law, Judges, prosecutors, attorneys, CPAs, or
Experience in business, law, fi-
finance or accounting departments or other professional and technical personnel
nance and accounting,and other
other relevant departments/divisions possessing licenses after passing national
work required by the Company's
Name required by the Company's business of examinations as required by the Compa- business
public and private colleges/universities ny's business
Nita Ing V
Chin-Shan
V
Chiang
Jing-Lung
V
Huang
Tzu Wei
V
Lee
John T. Yu V
Tsai-Der
V
Chen
Robert
V
Hung
Sean Chao V
Rex Yang V
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Please tick“ v ”in the following blank boxes,if the directors meets the following conditions within two years prior to the appointment and in the duration of the appointment.

Who are not employees of the Company or its affiliates;
Directors and supervisors of non-affiliates of the Company (this limit shall not apply to the independent directors, which were established in accordance with this Act or local laws, of the parent company or a subsidiary of the Company);
Who are not directors/supervisors, or the directors'/supervisors' spouses or minor children, or natural person shareholders who possess more than 1% of the Company's total issued shares in the name of another person, or top ten natural person shareholders;
Who are not spouses, relatives within 2nd degree of relationship or lineal relatives within 3th degree of relationship of the personnel referred to in the preceding three subparagraphs;
Who are not directors, supervisors or employees of institutional shareholders holding more than 5% of the Company total issued shares directly, or directors, supervisors or employees of top five institutional shareholders;
Who are not directors, supervisors, managers or shareholders holding more than 5% of the shares of any specific companies or organizations which have financial or business transactions with the Company;
Who are not the owners, partners, directors, supervisors, managers and spouses of the experts, proprietorship, partnership, companies or organizations that have provided financial, commercial and legal services and consultation to the Company and its affiliates within the recent year; Excluding the remuneration committee referred to in Article 7 of the Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.
Who are not spouses or relatives within 2nd degree of relationship of the other directors;
Who are free from any of the circumstances referred to in Article 30 of the Company Act;
Who are not the corporations or representatives defined in Article 27 of the Company Act;
Remark: The Company made a complete re-election on June 21, 2018.

Corporate governance report

December 31, 2018

II. Information on Board of Directors and Presidents

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compliance with the circumstances for independency
number of other public companies
in which he/she assumes an inde-
pendent director concurrently
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
V V V V V V V V 0
V V V V V V V V 0
V V V V V V V V 0
V V V V V V V V V 0
V V V V V V V V V 0
V V V V V V V V V 0
V V V V V V V V V V 1
V V V V V V V V V V 1
V V V V V V V V V V 0
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Corporate governance report

<2> Information on presidents

II. Information on Board of Directors and Presidents

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Shares currently held by
Shares held through
Shares currently held their spouses and chil- nominees
dren of minor age
Job title Name Nationality Date of elected
Share(s) % Share(s) % Share(s) %
CEO Joseph Chai Singapore November 01, 0 - 0 - 55,000 -
2015
Sr. Vice Presi- Wing-
Advanced Ma-dent Hendrick Keung Canada July 16, 2004 0 - 0 - 0 -
terials Division Lam
Vice President
Operations R. L. Chiu Republic of June 01, 2016 2,046 - 0 - 0 -
Division China
Vice President
Finance Divi- Edward Republic of June 01, 2016 0 - 0 - 0 -
sion Wang China
Vice President
Research & Qiwei Lu USA April 01, 2016 0 - 0 - 0 -
Development
Division
Vice President
Synthetic Rub- Kevin Liu Republic of China June 01, 2016 0 - 0 - 0 -
ber Division
Vice President
Human Re-
sources & Alison Republic of September 01, 0 - 0 - 0 -
Tung China 2017
Management
Department
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Corporate governance report

[December 31, 2018]

II. Information on Board of Directors and Presidents

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Other officers, directors
or supervisors who are
their spouses or rela-
tives of 2nd degree of
Principal work experience and Aca-
Position(s) currently held in the Company and/or in any other Company relationship 人
demic qualification
Rela-
Posi-
Name tion-
tion
ship
Lubrizol Corporation Deputy Vice
Directors of Polybus Corporation. Pte Ltd., TSRC (Hong Kong) Limited,
President of Asia Pacific/
Trimurti Holding Corporation., Hardison International Corporation., Dymas No No No
MBA, Case Western Reserve Uni-
Corporation., Triton International Holdings Corporation.
versity, USA
Financial Officers of Pacific Indus- Chairman of TSRC(Nantong) Industrial Ltd. and TSRC(Shanghai) Industrial
Ltd., TSRC(Vietnam)Co., Ltd.; Directors of TSRC (USA) Investment Corpo-
trial Co., Ltd., Assistant Vice Pres-
ident of First Pacific Co. Ltd. and ration., Dexco Polymers Operating Company LLC, Indian Synthetic Rubber No No No
Private Ltd., Trimurti Holding Corporation., Hardison International Corpora-
Shau Kei Wan Industrial School,
tion., TSRC (Hong Kong) Limited, Dymas Corporation, Polybus Corporation
Hong Kong
PteLtd., TSRC(Lux.) Corporation S.à r.l., APED Company Ltd.
Kaohsiung factory manager and
Assistant of Manufacturing Divi-
sion, Acting Vice President of Rub-
ber Business Division TSRC. Vice
President & Factory manager of Directors of Shen Hua Chemical Industrial Ltd., TSRC-UBE (Nantong) Chem- No No No
Shen Hua Chemical Industrial Co., ical Industrial Co. Ltd.
Ltd. and Chemical Engineer, Chung
Yuan Christian University, Executive
Master of Business Administration,
National Sun Yat-Sen University
Directors of Shen Hua Chemical Industrial Ltd., Polybus Corporation Pte
Ltd., Trimurti Holding Corporation., Triton International Holdings Corpora-
tion, TSRC (Hong Kong) Limited, TSRC (USA) Investment Corporation., Dex-
Chief Financial Officer, HTC /
Master of Business, Administration, co Polymers Operating Company LLC, TSRC(Lux.) Corporation S.à r.l., Indian No No No
Synthetic Rubber Private Ltd., TSRC(Vietnam)Co., Ltd. APED Company Ltd. ;
Tunghai University
Supervisors of TSRC(Nantong) Industrial Ltd., TSRC-UBE (Nantong) Chem-
ical Industrial Company Ltd., TSRC (Shanghai) Industrial Ltd., ARLANXEO-
TSRC(Nantong) Chemical Industrial Co., Ltd.
Global Strategic Technology Offi-
cer, Lubrizol / Doctor in Material
None No No No
Science and Engineering, Universi-
ty of Minnesota
Manager, Sales and Marketing,
Department, Asst. Vice President
Chairman of Shen Hua Chemical Industrial Ltd., TSRC-UBE (Nantong) Chem-
Rubber Business Unit, TSRC.
Spokesperson and Assistant Vice ical Industrial Co. Ltd., Indian Synthetic Rubber Private Limited; Director of No No No
ARLANXEO- TSRC(Nantong) Chemical Industrial Co., Ltd., Thai Synthetic
President, Sales Department, China
Rubbers Co., Ltd
Synthetic Rubber Corp., and MSA,
Cambridge College, USA
Microsoft Corp. Client-aligned Di-
rector of HR Greater China Region,
Vice President, Human Resource
(GIGNA Int'l, Taipei, Taiwan), Na- None No No No
tional Taiwan University-EMBA,
New York University MA, Industrial
& Organizational Psychology
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Corporate governance report

<3> Remuneration paid to directors, supervisors, presidents and vice presidents

1.Directors' remuneration

II. Information on Board of Directors and Presidents

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Directors remuneration
Base compensation Severance pay and Remuneration to Business execution
(A) pensions (B) directors (C) expenses(D)
Job title Name
Compa- Compa- Compa- Compa-
The nies in The nies in The nies in The nies in
Company Financial Company Financial Company Financial Company Financial
Report Report Report Report
Hao Ran Foundation
Chairman Statutory
Representative:Nita Ing
Hao Ran Foundation
Director Statutory Representa-
tive:Chin-Shan Chiang
Metacity Development
Director Corporation Representa-
tive: Jing-Lung Huang
Metacity Development
Director Corporation Representa-
tive:Tzu Wei Lee
Metacity Development
Director Corporation Representa-
tive:John T. Yu
Wei Dah Development
Director Co.,Ltd. Representative:T-
sai-Der Chen
Independent
Director Robert Hung
Independent Sean Chao
Director
18,789 18,789 0 0 14,064 14,064 1,000 1,000
Independent
Director Rex Yang
Wei Dah Development
Chairman Co.,Ltd.
(Note 1,2) Representative: Shao Yu
Wang
Vice Chairman Wei Dah Development
Co.,Ltd. Representa-
(Note 1)
tive:Nita Ing
Wei Dah Development
Co.,Ltd.
Director(Note 1)
Representa-
tive:Chin-Shan Chiang
Metacity Development
Corporation
Director(Note 1)
Representative: D. Otto
Cheng
Director(Note 1) John T. Yu
Independent
Henry Lin
Director(Note 1)
Independent
Henry Feng
Director(Note 1)
----- End of picture text -----

Note1: The Company made a complete re-election on June 21, 2018.

16 Note2: One leased vehicle and one driver assigned to the Company's. The yearly rent for the leased vehicle is NTD 593 thousand and the remuneration paid to the driver is NTD 679 thousand.

Corporate governance report

[Unit: thousand NTD]

II. Information on Board of Directors and Presidents

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

Percentage of the Relevant remuneration received by directors who are also employees Percentage of total
total of A, B, C and of A, B, C, D, E, F and Compen-
D accounting for Salary, bonus and Severance pay and G accounting for sation
income after tax special allowance(E) pensions (F) Employees' earnings (G) income after tax directorspaid to
from
Compa- Compa- Compa- Companies in Finan- Compa- non-con-
The Company
The nies in The nies in The nies in cial Report The Com- nies in solidated
Company Financial Company Financial Company Financial pany Financial affiliates
Report Report Report Cash Stock Cash Stock Report
2.84 2.84 0 0 0 0 0 0 0 0 2.84 2.84 0
----- End of picture text -----

Corporate governance report

II. Information on Board of Directors and Presidents

==> picture [482 x 472] intentionally omitted <==

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

Name of directors
Remuneration
Total (A+B+C+D) Total (A+B+C+D+E+F+G)
paid to the
various directors
Companies in Companies in
The Company Financial The Company Financial
Report Report
Chin-Shan Chiang, Chin-Shan Chiang,
John T. Yu, Tzu Wei John T. Yu, Tzu Wei
Lee, Henry Feng, Tsai- Please refer Lee, Henry Feng, Tsai- Please refer
2,000,000 below Der Chen, Jing-Lung to the Der Chen, Jing-Lung to the
left column. left column.
Huang, D. Otto Cheng, Huang, D. Otto Cheng,
Henry Lin, Wei Dah De- Henry Lin, Wei Dah De-
velopment Co.,Ltd. velopment Co.,Ltd.
Shao Yu Wang, Robert Shao Yu Wang, Robert
Hung, Nita Ing, Rex Hung, Nita Ing, Rex
Please refer Please refer
2,000,000 (inclusive of 2,000,000)- Yang, Sean Chao, Hao Yang, Sean Chao, Hao
to the to the
5,000,000(does not contain 5,000,000) Ran Foundation Statu- left column. Ran Foundation Statu- left column.
tory, Metacity Develop- tory, Metacity Develop-
ment Corporation ment Corporation
5,000,000 (inclusive of 5,000,000)-
- - - -
10,000,000(does not contain
10,000,000)
10,000,000 (inclusive of 10,000,000)-
- - - -
15,000,000(does not contain
15,000,000)
15,000,000 (inclusive of 15,000,000)-
- - - -
30,000,000(does not contain
30,000,000)
30,000,000 (inclusive of 30,000,000)-
- - - -
50,000,000(does not contain
50,000,000)
50,000,000 (inclusive of 50,000,000)-
- - - -
100,000,000(does not contain
100,000,000)
- - - -
100,000,000 above
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Remark: The Company made a complete re-election on June 21, 2018.

Corporate governance report

2. Presidents' and vice presidents' remuneration

Unit: thousand NTD

II. Information on Board of Directors and Presidents

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

Percentage of
Severance Bonus and the total of A, B, Com-
Salary(A) pay and special Employees' compensation C and D account- pen-
pensions (B) allowance(C) amount (D) ing for income sation
after tax (%) paid to
Job title Name directors
The Compa-nies in The Compa-nies in The Compa-nies in The Company Financial ReportCompanies in The Compa-nies in non-con-from
Compa- Finan- Compa- Finan- Compa- Finan- Compa- Finan- solidated
ny cial ny cial ny cial Cash Stock Cash Stock ny cial affiliates
Report Report Report Amount Amount Amount Amount Report
Joseph
CEO Chai
(Note)
Wing-
Sr. Vice Keung
President Hendrick
Lam
Vice
President [R. L. Chiu]
39,083 39,083 0 0 15,803 15,803 6,916 0 6,916 0 5.18 5.18 0
Vice Edward
President Wang
Vice
President [Qiwei Lu]
Vice
President [Kevin Liu]
Vice Alison
President Tung
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Note:One leased vehicle and one driver assigned to CEO. The yearly rent for the leased vehicle is NTD 490 thousand and the remuneration paid to the driver is NTD 576 thousand and rental housing costs NTD 2,640 thousand .

==> picture [494 x 290] intentionally omitted <==

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

Name of president and vice presidents
Remuneration paid to the president and vice presidents
Companies in Financial
The Company
Report
- -
2,000,000 below
2,000,000 (inclusive of 2,000,000)- Please refer to the left
R. L. Chiu, Kevin Liu
5,000,000(does not contain 5,000,000) column.
5,000,000 (inclusive of 5,000,000)- Edward Wang, Wing-Keung Hendrick Please refer to the left
10,000,000(does not contain 10,000,000) Lam, Qiwei Lu, Alison Tung column.
10,000,000 (inclusive of 10,000,000)-15,000,000(does not contain 15,000,000) - -
15,000,000 (inclusive of 15,000,000)- Please refer to the left
30,000,000(does not contain 30,000,000) Joseph Chai column.
30,000,000 (inclusive of 30,000,000)-50,000,000(does not contain 50,000,000) - -
50,000,000 (inclusive of 50,000,000)-100,000,000(does not contain 100,000,000) - -
- -
100,000,000 above
Please refer to the left
Total 7
column.
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Corporate governance report

3.Employees' bonus paid to management team and allocation

II. Information on Board of Directors and Presidents

==> picture [484 x 168] intentionally omitted <==

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

December 31, 2018
Cash Total Percentage
of the total
Job title Name Stock (NTD in (NTD in
income after
thousands) thousands)
tax (%)
Wing-Keung
Sr. Vice President
Hendrick Lam
Vice President. R. L. Chiu
Managers 0 6,916 6,916 0.58
Vice President. Edward Wang
Vice President. Kevin Liu
Vice President. Alison Tung
----- End of picture text -----

<4> The total remuneration as a percentage of net income paid by the Company, and by each other Company included in the consolidated financial statements, during the past two fiscal years to its directors, supervisors, president and vice presidents and describe the remuneration policies, standards, and packages, the procedure for determining remuneration, and its linkage to operating performance and future risk exposure.

Remuneration paid in the most recent two years

Unit: thousand NTD

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

The Company Companies in Financial Report
Job title
2018 2017 2018 2017
Director remuneration 33,853 30,008 33,853 30,008
Director remuneration percentage of net 2.84 3.43 2.84 3.43
income after taxes(%)
CEO and vice president 61,802 59,884 61,802 59,884
CEO and vice president remuneration per- 5.18 6.85 5.18 6.85
centage of net income after taxes(%)
----- End of picture text -----

The Company paid to the directors and personnel above the level of vice presidents remuneration policy standards, and packages, the procedure for determining remuneration, and its linkage to operating performance and future risk exposure are as follows:

The relevant remuneration payable by the Company to CEO and vice presidents shall be subject to the resolution of the shareholders' meeting, while the remuneration payable to CEO and vice president shall be subject to Management Rules Governing Salary to maintain the competitive salary and remuneration standards in the market. Meanwhile, it is necessary to take the salary position applicable to the relevant job tanks in the same trade, Company's overall operational performance and personal performance to define the salary portfolio consisting of monthly salary (including base compensation and allowance) and year-end bonus; the principle of this salary policy has been evaluated to be of no risk in the future.

Corporate governance report

III. Status of corporate governance implementation

<1> Operation of the board of directors

Duration for the 16[th ] board of directors: June 21, 2018 to June 20, 2021 after the reelection of directors in the shareholders' meeting of the Company on June 21, 2018.
The 15[th] Board of Directors held 5 meetings in 2018. The attendance of directors in the meetings is specified as follows:

III. Status of corporate governance implementation

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

Frequency Frequency Actual
Job title Name of actual of proxy attendance Remark
attendance attendance rate (%)
Chairman Wei Dah Development Co.,Ltd. 5 0 100
Representative: Shao Yu Wang
Vice Wei Dah Development Co.,Ltd. 5 0 100
Chairman Representative:Nita Ing
Director Wei Dah Development Co.,Ltd. 5 0 100
Representative:Chin-Shan Chiang
Director Metacity Development Corpora- 4 1 80
tion Representative:Tzu Wei Lee The total
number of
Director Metacity Development Corpora- 3 2 60 meetings in
tion Representative:D. Otto Cheng their dura-
tion is 5.
Director John T. Yu 4 1 80
Independent Director Robert Hung 5 0 100
Independent Director Henry Lin 2 3 40
Independent Director Henry Feng 5 0 100
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Other matters to be noted:

Matters provided in Article 14-3 of the Securities and Exchange Act: Matters provided in Article 14-3 of the Securities and Exchange Act and submitted to the Board of Directors of TSRC for approval by resolution. Independent directors do not have dissenting opinions or qualified opinions on the aforementioned matters.
Matters approved by the Board of Directors by resolution that independent directors have dissenting opinions or
qualified opinions with records or written statement: None.
Status of recusal by Directors in issues with conflict of interest: Directors have avoided the discussion and resolution related to their remunerations themselves.
The goal of enhancing the functions of the Board of Directors of the current year and the most recent year and execute the evaluation on its implementation: To enhance the functions and perfect the supervising function of the Board of Directors of TSRC; TSRC establishes the Audit Committee and Remuneration Committee under the Board of Directors in accordance with Article 24 of the “Articles of Incorporation” of TSRC. Each committee assists the Board to enhance corporate governance and supervising function based on its duties.

Corporate governance report

The Board of Directors held 4 meetings in 2018. The attendance of directors in the meetings is specified as follows:

III. Status of corporate governance implementation

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

Frequency Frequency Actual
Job title Name of actual of proxy attendance Remark
attendance attendance rate (%)
Chairman Hao Ran Foundation Statutory Represen- 4 0 100
tative:Nita Ing
Director Hao Ran Foundation Statutory Represen- 4 0 100
tative:Chin-Shan Chiang
Director Metacity Development Corporation Rep- 4 0 100
resentative: Jing-Lung Huang Start date
for the 16 [th]
Director Metacity Development Corporation Rep- 2 2 50 Board of
resentative:Tzu Wei Lee
Directors is
Director Metacity Development Corporation Rep- 4 0 100 on June 21,
resentative:John T. Yu 2018. The
total number
Director Wei Dah Development Co.,Ltd. Represen-tative:Tsai-Der Chen 4 0 100 of meetings
in their dura-
Independent Director Robert Hung 4 0 100 tion is 5.
Independent Sean Chao 4 0 100
Director
Independent Director Rex Yang 4 0 100
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Other matters to be noted:

Matters provided in Article 14-3 of the Securities and Exchange Act: Matters provided in Article 14-3 of the Securities and Exchange Act are submitted to the Board of Directors of TSRC for approval by resolution. Independent directors do not have dissenting opinions or qualified opinions on the aforementioned matters.
Matters approved by the Board of Directors by resolution that independent directors have dissenting opinions or qualified opinions with records or written statement: In 2018, there were no matters of which the independent directors (16[th] Board of Directors) have dissenting opinions or qualified opinions.
Status of recusal by Directors in issues with conflict of interest: there were no issues of conflict of interest.
The goal of enhancing the functions of the Board of Directors of the current year and the most recent year and execute the evaluation on its implementation: To enhance the functions and perfect the supervising function of the Board of Directors of TSRC; TSRC establishes the Audit Committee and Remuneration Committee under the Board of Directors in accordance with Article 24 of the “Articles of Incorporation” of TSRC. Each committee assists the Board to enhance corporate governance and supervising function based on its duties.

<2> Operation of the Audit Committee

There are 3 members in the Audit Committee of the Company. Duration for the 16[th] board of directors: June 21, 2018 to June 20, 2021 after the reelection of directors in the shareholders' meeting of the Company on June 21, 2018.
The 15[th] Audit Committee held 4 meetings in 2018. The attendance of members in the audit committee meetings is specified as follows:

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

Frequency Frequency Actual
Job title Name of actual of proxy attendance rate Remark
attendance attendance (%)
rectors (Convener)Independent Di- Robert Hung 4 0 100 The total
number of
Independent Director Henry Lin 0 4 0 meetings in
their duration
Independent Director Henry Feng 4 0 100 is 4.
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Other matters to be noted:

Matters provided in Article 14-5 of the Securities and Exchange Act: The operation of the Audit Committee of TSRC is conducted in accordance with Article 14-5 of the Securities and Exchange Act. Matters that shall be reviewed by Audit Committee are reviewed by the Audit Committee and are subject to the consent of one-half or more of all audit committee members and are submitted to the board of directors for a resolution.
Matters that are not passed by the Audit Committee and are approved by 2/3 of all directors by resolution: none.

Corporate governance report

Recusal of independent directors in issues of conflict of interests: none.
Communication among independent directors, internal audit officer and public accountants:
4.1.TSRC currently has 3 independent directors, and all of them are members of the Audit Committee. The audit officer provides audit reports to independent directors on a regular basis and attends the meetings of the Audit Committee to report the audit status. Meanwhile, the audit officer also keeps track of improvements and provides results of improvements based on the opinions of the Audit Committee.

III. Status of corporate governance implementation

4.2.The certified public accountants attend the meetings of the Audit Committee, give detailed explanations regarding the results of quarterly and annual financial reports and provide suggestions on corporate governance and illustration of updated laws and regulations. In addition,members of the Audit Committee also inquire with public accountants for professional opinions on financial and accounting issues through the Financial Officer.
The 16[th] Audit Committee held 3 meetings in 2018. The attendance of members in the audit committee meetings is specified as follows:

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

Frequency Frequency Actual
Job title Name of actual of proxy attendance rate Remark
attendance attendance (%)
Directors (Convener)Independent Robert Hung 3 0 100 The total
number of
Independent Director Rex Yang 3 0 100 meetings in
their duration
is 3
Independent Director Sean Chao 3 0 100
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Other matters to be noted:

Matters provided in Article 14-5 of the Securities and Exchange Act: The operation of the Audit Committee of TSRC is conducted in accordance with Article 14-5 of the Securities and Exchange Act. Matters that shall be reviewed by Audit Committee are reviewed by the Audit Committee and are subject to the consent of one-half or more of all audit committee members and are submitted to the board of directors for a resolution.
Matters that are not passed by the Audit Committee and are approved by 2/3 of all directors by resolution: none.
Recusal of independent directors in issues of conflict of interests: none.
Communication among independent directors, internal audit officer and public accountants:
- 4.1.TSRC currently has 3 independent directors, and all of them are members of the Audit Committee. The audit officer provides audit reports to independent directors on a regular basis and attends the meetings of the Audit Committee to report the audit status. Meanwhile, the audit officer also keeps track of improvements and provides results of improvements based on the opinions of the Audit Committee.
- 4.2.The certified public accountants attend the meetings of the Audit Committee, give detailed explanations regarding the results of quarterly and annual financial reports and provide suggestions on corporate governance and illustration of updated laws and regulations. In addition,members of the Audit Committee also inquire with public accountants for professional opinions on financial and accounting issues through the Financial Officer.
<3> Status of implementation of corporate governance, any departure of such implementation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and the reasons for any departure

==> picture [485 x 166] intentionally omitted <==

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

Status Any departure of such
implementation from the
Assessment Items Corporate Governance
Best-Practice Principles
Yes No Abstract Description for TWSE/TPEx Listed
Companies
1. Has the Company abided by the" Cor- V The Company has referenced the reg- Considering the actual
porate Governance Best Practice Prin- ulations in Corporate Governance Best operation of corporate
ciples for TWSE/GTSM Listed Com- Practice Principles for TWSE/TPEx Listed governance; referencing
panies" to formulate and disclose the Companies and formulated regulations the regulations in those
corporate governance best practice in relevant guidelines of the Company to guidelines; formulate
principles? implement and promote corporate gover- relevant regulations of
nance. the Company. The Com-
pany will update rele-
vant regulations based
on the laws if necessary.
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Corporate governance report

III. Status of corporate governance implementation

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

Status Any departure of such
implementation from the
Assessment Items Corporate Governance
Best-Practice Principles
Yes No Abstract Description for TWSE/TPEx Listed
Companies
2. Equity structure and shareholders
right
(1) Has the Company formulated inter- V (1) The Company has considered the oper- Considering the actual
nal SOP for handling shareholders' ational needs. The Company's website operations. There are
suggestions, doubts, disputes, liti- provides the window for relevant mat- relevant departments
gations and implemented them ac- ters of shareholders currently to handle responsible for hand-
cording to the SOP? suggestions, doubts, disputes and liti- ing relevant matters of
gation matters of the shareholders. In shareholders.
addition, there are relevant functional
departments for handling the sugges-
tions, doubts, disputes and litigation
matters of the shareholders.
(2) Does the Company hold a list of the V (2) Disclose the list of main shareholders No difference
Company's key shareholders and in the Company and their ultimate con-
their ultimate controllers? trollers in accordance with the law
(3) Has the Company established and V (3) There is a clear distinction and proper No difference
implemented risk control and firewall firewall mechanism established for the
mechanism with its affiliated compa- management goal and responsibili-
nies? ties of personnel, assets and finance
between the Company and affiliates.
In addition, the audit unit implements
measures for internal audits and inter-
nal control to ensure the risk control,
management and law compliance.
(4) Has the Company stipulated inter- V (4) Formulate guidelines for ethical behav- No difference
nal regu- lations prohibiting inside ior and regulations for the execution
personnel trading securities using of public affairs and promote relevant
information that has not yet been regulations actively.
disclosed on the market?
3. The organization of the Board of Di-
rectors and their duties
(1) Has the board formulated diverse V (1) The Board of Directors of the Company No difference
guidelines for different groups and adopted plans of diverse directions
implemented them accordingly? in accordance with “Corporate Gov-
ernance Best Practice Principles for
TWSE/TPEx Listed Companies” and
the industrial type and operational
needs. The Board of Directors is com-
posed of 9 directors. Three of which
are independent directors. Corporate
governance can be enhanced, and the
function of Board of Directors can be
implemented effectively with the rich
professional experiences of all directors
and the opinions provided on business
management.
(2) Besides creating the Remuneration V (2) Considering the needs of business op- Considering the man-
Committee and the Audit Commit- erations, the Company has set up func- agement of business
tees according to the law, has the tional committees such as Audit Com- operations, the Compa-
Company voluntarily established mittee and Remuneration Committee. ny will not set up other
other functional committees? functional committee
(3) Has the Company formulated a per- V (3) The Company has drafted "Regulations for now.
formance appraisal method for the for Self-Evaluation or Peer Evaluation of The Company has draft-
board of directors and its evaluation the Board of Directors” in accordance ed some plans and will
thereof and conducted them regu- with “Taiwan Stock Exchange Cor- declare in accordance
larly every year? poration Operation Directions for the with the regulations.
Appointment of Independent Directors
by TWSE Listed Companies” and will
execute and declare in accordance with
the regulations.
(4) Does the Company evaluate accoun- V (4) Before the end of each fiscal year, the No difference
tant independence on a regular ba- responsible unit of the Company will
sis? prepare the evaluation and selection
report for the entrusted certified public
accountant (CPA) of the next fiscal year
and report to the Board of Directors
before appointment to ensure the in-
dependence of the CPA.
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Corporate governance report

III. Status of corporate governance implementation

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

Status Any departure of such
implementation from the
Assessment Items Corporate Governance
Best-Practice Principles
Yes No Abstract Description for TWSE/TPEx Listed
Companies
4. Whether a TWSE/TPEx listed Company V The Company has set up relevant units No difference
sets up a full (or part) time corporate responsible for matters regarding cor-
governance unit or personnel to be in porate governance in accordance with
charge of corporate governance affairs the regulations in Corporate Governance
(including but not limited to furnishing Best Practice Principles for TWSE/TPEx
information required for business ex- Listed Companies.
ecution by directors and supervisors,
handling matters relating to board
meetings and shareholders meetings
according to laws, handling corporate
registration and amendment regis-
tration, producing minutes of board
meetings and shareholders meetings)?
5. Does the Compan y maintain channels V The Company's relevant business depart-
of communication with stakeholders mental personnel will keep in touch with No difference
(including but not limited to share- stakeholders. The supervisory manage-
holders, employees, customers and ment of the board of directors will take
suppliers) and designate a stakehold- care of the stakeholders' opinion.
ers section on its website as well as
properly respond to critical corporate
social responsibility issues that stake-
holders are concerned with?
6. Has the Company commissioned pro- V We commissioned Sino Pac Holdings to No difference
fessional securities institutions to han- handle the shareholders' meeting.
dle shareholders' meetings?
7. Disclosures
(1) Does the Company set up a website V (1) The Company's related information No difference
to disclose financial business and cor- and annual reports will be posted on
porate governance? the Company's website periodically,
and important message will be re-
leased by the Company's spokesman
pursuant to laws
(2) Does the Company also adopts other V (2) In order to enhance the information
means for disclosure. (i.e. English web transparency and services to inves-
site, personnel dedicated to collect tors, including adding financial infor-
and disclose Company information, mation via properly utilizing public
establishment of a spokesperson pol- information systems and the official
icy, disclosure of the process of inves- website of TSRC and implementing
tor conference on Company web site, speaker systems, TSRC holds investor
etc.) conferences annually and live streams
important message to shareholders.
8. Is there any other important informa- V The Company has formulated relevant No difference
tion that will facilitate the understand- important regulations, such as “Regu-
ing of the Company's corporate gov- lations on the authority of the Board of
ernance operations (including but not Directors”, “Distribution table of re-
limited to employee rights, employee sponsibilities on the business of TSRC”,
care, investor relations, sup plier re- “Regulations on the management of
lations, stakeholders' rights, further levels of responsibilities” to clearly de-
education of directors and supervisors, fine the authorized rights of the Board of
implementation of risk management Directors and understand the distribution
policy and risk evaluation standards, of responsibilities between the Board of
client policy implementation, Compa- Directors and managers and the man-
ny's liability insurance for its directors agement and control of all risks.
and supervisors and so on)?
9. Please describe the improvement for the corporate governance evaluation result of the latest year released by the TWSE
Corporate Governance Center and propose precedent enhancement and measures for matters that have not yet been im-
proved-1. Uploading time of information of shareholders' meeting in advance; 2. Complete the yearly education hours of all
directors; 3.Complete relevant operations regarding the performance assessment of the Board of Directors in 2019
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Corporate governance report

<4> Information on Compensation Committee:

The major duties of the Remuneration Committee:

Stipulate and periodically review the performance evaluation of the directors and managers as well as the policy, system, standards, and structure of the remuneration.
Periodically evaluate and stipulate remuneration for directors and managers.
(1) Information on Compensation Committee

III. Status of corporate governance implementation

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

Independent Independent Independent
The identity Director Director Director
Robert Hung Sean Chao Rex Yang
At least lecturers of business, law, finance
or accounting departments or other
relevant departments/divisions required
by the Company's business of public and
Whether they possess work ex- private colleges/universities
perience of more Judges, prosecutors, attorneys, CPAs, or
than five years other professional and technical personnel
and the follow- possessing licenses after passing national
ing professional examinations as required by the
qualifications Company's business
Experience in business, law, finance and
accounting,and other work required by v v v
the Company's business
(1) v v v
(2) v v v
(3) v v v
Compliance with
(4) v v v
the circumstanc-
es for indepen- (5) v v v
dency
(6) v v v
(7) v v v
(8) v v v
Number of other public companies in which he/she assumes 1 1 0
an independent director concurrently
Remarks
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Please tick“ v”in the following blank boxes, if the member meets the following conditions within two years prior to the appointment and in the duration of the appointment.

(1) Who are not employees of the Company or its affiliates;
(2) Not the directors and supervisors of the Company or affiliates. This limit shall not apply to the independent directors of the Company or its parent company or subsidiaries established in accordance with this Law or local laws.
(3) Who are not directors/supervisors, or the directors'/supervisors' spouses or minor children, or natural person shareholders who possess more than 1% of the Company's total issued shares in the name of another person, or top ten natural person shareholders
(4) Who are not spouses, relatives within 2nd degree of relationship or lineal relatives within 3th degree of relationship of the personnel referred to in the preceding three subparagraphs;
(5) Who are not directors, supervisors or employees of institutional shareholders holding more than 5% of the Company total issued shares directly, or directors, supervisors or employees of top five institutional shareholders;
(6) Who are not directors, supervisors, managers or shareholders holding more than 5% of the shares of any specific comp anies or organizations which have financial or business transactions with the Company;
(7) Who are not the owners, partners, directors, supervisors, managers and spouses of the experts, proprietorship, partnership, companies or organizations that have provided financial, commercial and legal services and consultation to the Company and its affiliates within the recent year;
(8) Who are free from any of the circumstances referred to in Article 30 of the Company Act; Remark: The Company made a complete re-election on June 21, 2018.

Corporate governance report

(2) Information on Remuneration Committee
1. There are 3 members in the Remuneration Committee of the Company. 1. Duration for the 16[th] board of directors: June 21, 2018 to June 20, 2021 after the reelection of directors in the shareholders' meeting of the Company on June 21, 2018
2. The 15[th] Remuneration Committee held 3 meetings in 2018. The attendance of members in the remuneration committee meetings is specified as follows:
III. Status of corporate governance implementation

==> picture [423 x 124] intentionally omitted <==

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

Frequency Frequency Actual
Job title Name of actual of proxy attendance rate Remark
attendance attendance (%)
Independent Director Henry Lin 1 2 33
(Convener)
The total number
Robert
Independent Director 3 0 100 of meetings in
Hung their duration is 3.
Independent Director Henry 3 0 100
Feng
----- End of picture text -----

Other matters to be noted:

Where the Board of Directors does not adopt or revise the recommendation from the Remuneration Committee, the minutes of the meeting shall specify the date and term of the directors' meeting, content of the issue, resolution of the directors' meeting, and the disposition on the opinion from the Remuneration Committee by the Company (where the remuneration approved by the Board of Directors is superior to the recommendation from the Remuneration Committee, the difference and reasons shall be specified): none.
If, with respect to any resolution of the remuneration committee, any member has a dissenting or qualified opinion that is on record or stated in a written statement, the minutes of the meeting shall specify the date and term of the meeting of the Remuneration Committee, content of issues, opinions of all members, and disposition on the opinions of members: none.
The 16[th] Remuneration Committee held 2 meetings in 2018. The attendance of members in the

remuneration committee meetings is specified as follows:

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

Frequency Frequency Actual
Job title Name of actual of proxy attendance rate Remark
attendance attendance (%)
Independent Director Sean Chao 2 0 100
(Convener)
The total number
Independent Director Robert 2 0 100 of meetings in
Hung their duration is 2
Independent Director Rex Yang 2 0 100
----- End of picture text -----

Other matters to be noted:

Where the Board of Directors does not adopt or revise the recommendation from the Remuneration Committee, the minutes of the meeting shall specify the date and term of the directors' meeting, content of the issue, resolution of the directors' meeting, and the disposition on the opinion from the Remuneration Committee by the Company (where the remuneration approved by the Board of Directors is superior to the recommendation from the Remuneration Committee, the difference and reasons shall be specified): none.
If, with respect to any resolution of the remuneration committee, any member has a dissenting or qualified opinion that is on record or stated in a written statement, the minutes of the meeting shall specify the date and term of the meeting of the Remuneration Committee, content of issues, opinions of all members, and disposition on the opinions of members: none.

Corporate governance report

<5> Fulfillment of social responsibility

III. Status of corporate governance implementation

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Status Any departure of
such
implementation
from the Corporate
Assessment Items Governance Best-
Yes No Abstract Description Practice Principles
for TWSE/TPEx
Listed
Companies
1. Implementation of Corpo- V 1. Mission and vision of corporation: By adhering to the principles No difference
rate governance of cherishing resources on Earth, fulfilling corporate social re-
(1) Has the Company stip- sponsibility and sustainability, we are dedicated to developing
ulated CSR policies or eco-friendly and energy-saving materials and creating excellent
systems and reviewed the operational performance, which helps the corporation to march
performance? forward at a steady pace on the path of development and bring
more benefits and values to stakeholders and the public.
2. Mission statement: To become a critical cooperation partner of
customers in the long-term, strive to fulfill corporate social re-
sponsibility, and become an excellent corporation dedicated to
innovation, growth and excellence.
3. Vision statement: To become a growth and profit-oriented glob-
al special material corporation and to provide the best solutions,
value and return on investment to our shareholders, customers
and employees.
4. Corporate Social Responsibility system: Stipulate the commu-
nication and solid issue selection procedure of corporate social
responsibility (CSR), and promote CSR business through the
CSR Promotion Committee and periodically convening Steering
Committee meetings to review the CSR promotion and strategy.
(2) Does the Company regu- V The policy and direction of education and training strive to boost No difference
larly organize CSR educa- employee work skills and competiveness. It also encompasses CSR
tion and training? related issues such as environmental protection, energy conser-
vation, labor health and safety and green products in order to re-
spond to changes in the future market and environment.
According to employee training regulation, yearly educational
training plans are determined by yearly operational directions of
the Company, needs of departments, requirement of relevant laws
in order to execute the courses for newly entered and in-job em-
ployee training of general education, professional skills, manage-
ment skills, certified qualification. The objective of lifelong learning
is achieved through internal and external trainings.
(3) Has the Company estab- V The organizational structure of CSR is as follows:five committees, No difference
lished a dedicated (part- “Promotion Secretariat” and “Corporate Governance Commit-
time) unit for CSR, which tee”, “Employee Care Committee”, “Environment Protection
is managed by senior and Energy Saving Committee”, “Outgoing Communication
executives and authorized Committee”, “Social Care Committee” are under Steering
by the board of directors, Committee lead by the CEO to face the management indexes in
and reports to the board economy, environment and society related to the control of social
of directors? responsibilities of enterprises actively. CSR promotion secretariat
collects the performance and opinion every year and report to CSR
guidance committee and then the CEO will report the performanc-
es and future strategies to the Board of Directors.
(4) Has the Company stipu- V TSRC ensures reasonable remuneration through the remuneration No difference
lated a reasonable remu- committee and the remuneration management regulation. Fur-
neration policy, integrated thermore, health and safety performance is linked to an appraisal
the employee perfor- system and reflected in the employees' annual performance eval-
mance evaluation system uation; any violations of the regulation will be dealt with in accor-
with CSR policy, and dance with the reward and punishment regulations.
established clear, effec-
tive reward/punishment
mechanism?
2. Development of sustain- V For the production process, TSRC introduces the principle of No difference
able environment "maximizing the utilization of energy and resources." TSRC tries
(1) D o e s t h e C o m p a n y to minimize the consumption of energy and resources required
contributed to improv- in production by improving the design of the production process
ing the utilization of and efficiency, and recycling raw materials, as well as to continue to
all resources and used develop and produce new green products. For the use of fuels for
recycled material that furnaces, TSRC also uses natural gas to replace fuel oils in order to
brought minimum load reduce pollution.
to the environment.
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Corporate governance report

III. Status of corporate governance implementation

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

Status Any departure of
such
implementation
from the Corporate
Assessment Items Governance Best-
Yes No Abstract Description Practice Principles
for TWSE/TPEx
Listed
Companies
(2) Has the Company estab- V The Company continues to operate effectively, under the certifica- No difference
lished an environment tions of ISO 1400, environmental management system. The Compa-
m a n a g e m e n t s y s te m ny passed ISO 50001 Energy Management System/QC 080000 certi-
according to the industry fication (hazardous material process flow management system).
characteristics?
(3) Does the Company pay V 1. The Company established dedicated environmental management No difference
attention to the impact of organization in accordance with the law, with dedicated environ-
the climate change on the mental management staff in charge of air pollution, waste water,
operation of the Company waste and toxic materials.
and establish energy sav- 2. Regarding planning for reducing greenhouse gas, the Company
ing, carbon reduction and supports the national reduction objectives and complies with
greenhouse gas minimi- relevant policies of competent agencies. ISO 14064-1 (inspection
zation strategies. on greenhouse gas) verification has been approved for 2011,
2013 and 2015-2018, separately and registration operation has
been completed in the “National greenhouse gas platform”.
The Company belongs to the first batch industries announced by
environment protection bureau for the declaration on the emis-
sion volume of greenhouse gas. Inspection and verification have
been completed for organizational greenhouse gas for 2017 on
June 2018.
3. EPA proclaimed the“Regulations for Periodic Regulatory Goals
and Approaches of the Greenhouse Gas Emissions” on March 28,
2017. The first stage of the regulatory goal is between 2016 and
2020. In the first stage of the regulatory goal, the EPA allocates
different emission reduction quotas to different ministries and
agencies under the Executive Yuan (this plant is planned to be
under the Industrial Development Bureau, Ministry of Economic
Affairs), and the actual emission reduction quota has not been
officially proclaimed. This plant will initiate the related emission
reduction measures in advance to comply with the regulatory re-
quirements
4. Regarding the carbon/water trace of the product, three represen-
tative verification of ISO/DIS 14067 (carbon trace of the products)
and water trace of the products are approved in 2012; in addition,
the Company gets hold of the accounting ratio of greenhouse
gas in each stages of product life cycles through the construction
of carbon/water trace verification system and seeks for the op-
portunities for carbon reduction. Moreover, the Company selects
low-carbon raw materials and parts during product production or
development to reduce the burden of the environment.
5. To continue relevant measures of energy saving and carbon re-
duction, ISO 50001 energy management system was built in 2013
and SGS certification is approved. Energy efficiency is increased,
operational costs are reduced, and the emission of greenhouse
gas is reduced continuously from 2014 to 2018. High energy
consumption equipment and processes are improved through
energy management system and external verification of energy
management system is completed continuously every year. In the
future, the system can help the Company to analyze the usage
and consumption status of energy and seek for recognition of
improvement opportunities.
3. Protection of social com- The Company uses the Labor Standards Act and related labor laws as No difference
monwealth V the basis for formulating employee attendance, leave and overtime
(1) Has the Company stipulat- management regulations. Strict rules are enforced to prohibit
ed relevant management forced labor, and all regulations are clearly documented in the CSR
policies and procedures in manifesto.
accordance with related
regulations and the In-
ternational Bill of Human
Rights?
(2) Has the Company es- V The employee complaint management regulation has been imple- No difference
tablished an employee mented and a complaint email has been created in the Company
complaint mechanism intranet.
and channel and has it
handled complaints ade-
quately?
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Corporate governance report

III. Status of corporate governance implementation

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

Status Any departure of
such
implementation
from the Corporate
Assessment Items Governance Best-
Yes No Abstract Description Practice Principles
for TWSE/TPEx
Listed
Companies
(3) Does the Company pro- V The Company executed relevant operations in accordance with oc- No difference
vide the employees with cupational safety and health act. Environment monitoring are per-
safe and healthy working formed every half year to clarify status of personnel exposure while
environment and carried conducting leveled management at the same time. Relevant educa-
out regular training cours- tional training of occupational safety and health are implemented
es regarding safety and every year to promote the knowledge of employee safety and health.
health of the employees.
(4) D o e s t h e C o m p a n y V Group agreement (an agreement every three years), Management No difference
establish the periodic and Labor Council (every season in principle), Communication
communication mech- meeting of officers of the union (based on needs), Meeting for
anism for employees, the Development of Corporate Strategies (every year), Forum with
and notified employees the CEO (based on needs), Welfare committee for labors (every
of any changes in oper- season), responsibilities care committee (every two months), labor
ation that might materi- safety and health committee (every season), communication meet-
ally affect employees in ing for safety of employees (every season), supervisory committee
reasonable manners. for labor pension (every season), agreement organization of joint
operations (based on needs), Health promotion seminars (based on
needs), employee discussion zone in the internal Portal website.
(5) Has the Company creat- V The policy and direction of education and training strive to boost No difference
ed an effective vocation- employee work skills and competiveness in order to respond to
al skill development and changes in the future market and environment. Every year, the an-
training program? nual education and training program is devised according to the
internal employee training regulation, Company's management
guideline, organizational demand and relevant laws, where new
employee and current employee general knowledge, professional
skill, management competency, qualification and certification are
organized. Furthermore, the goal of “lifelong learning” is materi-
alized through internal and external training.
(6) Has the Company stipu- V The customers whom the Company faces are not the end consum- No difference
lated policies and com- ers, but the downstream manufacturers.
plaint filing protocols to Through annual interactive seminars and interviews (email, tele-
protect the consumers' phone interview, questionnaire and so on), we are able to ensure
rights throughout the the health and safety of our clients when using our products.
R&D, procurement, pro- Quality assurance convenes related units to conduct the survey,
duction, operations and analyze the cause and examine the response method in order to
service process? propose appropriate solutions. The cause of the customer com-
plaint and solution are compiled to form an investigation report
according to the handling method of various customer complaints
in order to quickly resolve the problem of quality and hazardous
substance free product deliveries.
In addition, the Company sets up, “mail box for social responsi-
bilities of enterprise” ([email protected]) and special zones for
stakeholders to communicate with all kinds of stakeholders and
give feedbacks.
(7) Has the Company abide V TSRC provides Security Data Sheet (SDS) for all products to cus- No difference
by relevant regulations tomers to ensure users are fully aware of the terms of use and
and international stan- disposal methods for waste. For international laws and regulations
dards concerning the and customers' demand, TSRC establishes a process management
marketing and labeling system for hazardous and nonhazardous materials and provides
of products and ser- compliance statements for all products.
vices?
(8) Before the Company V Apart from conducting procedural evaluations on the quality of raw No difference
decides to collaborate materials provided by suppliers, TSRC also conducts QC 080000
with a supplier, does it (process management system for hazardous materials) on
assess the supplier's past the raw materials and packing materials produced by suppliers. For
record to determine if it the development of raw materials by new suppliers, the developer
has had any influence on shall sign the HSF or provide a self-statement to ensure the
the environment and the safety of products in advance before proceeding to trial production
society? plans. After the trial production process is in compliance with re-
quirements, TSRC shall complete vendor safety capacity
evaluations, investigations on CSR assessment, and vendors shall
complete signing the code of conduct for suppliers of TSRC before
being listed in the qualified suppliers list.
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Corporate governance report

III. Status of corporate governance implementation

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Status Any departure of
such
implementation
from the Corporate
Assessment Items Governance Best-
Yes No Abstract Description Practice Principles
for TWSE/TPEx
Listed
Companies
(9) Does the contract be- V If the following circumstances, such as significant improper quality, No difference
tween the Company and abnormal HSF quality, late delivery, severe violation of industrial
major suppliers include safety regulations or significant CSR deficiencies (media disclosure)
the right to terminate which are not improved within a year, happen to qualified suppliers
or cancel the contract and cause an impact on the production, quality, HSF quality or CSR
should the supplier image of the Company, such supplier shall be suspended for supply
violate the Company's if these deficiencies are not reviewed and improved.
CSR policies, resulting in
considerable impact on
the environment and the
society?
4. Enhancing the disclosure V The "Special Zone for Corporate Social Responsibility” has been No difference
of information established on the Company's official website for public disclosure
Does the Company dis- of information about CSR Report.
close relevant and reliable
CSR related information
on its website and on the
MOPS?
5. Has the Company established the CSR implementation policy according to the Corporate Social Responsibility Best Practice
Principles for TWSE/GTSM-Listed Companies, describe the difference between the actual implementation and the regulations
of the Principle:The Company established CSR guidance committee in 2010 and promoted comprehensive CSR operations and
executed them in accordance with “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies”.
6. Other important in formation that is helpful to understand the operation of CSR :
(1) External consultants establishing the CSR mechanism.
(2) Continued Solution Styrene Butadiene Rubber (SSBR) is used in tire manufacturing. It can reduce oil consumption and waste
gas emission by cars, reducing the impact on the environment.
(3) Participating in the Taiwan Responsible Care Association and Chemical Awareness and Emergency Response Association, Tai-
wan, fulfilling member obligations and ensuring the safety and health of the community/society.
(4) The Manufacturing Process Safety Management Guidelines, Product Management Guidelines, Contractor Safety Manage-
ment Guidelines, Distribution Management Guidelines, Waste Management and Reduction Management Guidelines and
Emergency Reaction Management Guidelines are established based on the safety standards of Taiwan Responsible Caring
Association. The established sub-committees of“Manufacturing Process Safety”,“Product Regulations and Rules”, “Con-
tractor Safety”,“Distribution Safety”,“Energy Saving and Reduction”, “Emergency Reaction” and“Legislation and Dis-
cipline”continued to operate. Plant “Safety, Health, Environmental Protection and Green” policies are implemented with a
reinforced“Technology, Equipment, Staff and Community” policy.
(5) Environmental accounting (including expenses of safety, health and environment protection) was built on 2010. The statistics
of all environmental accounting expanses are calculated every year for the use in management and subsequent improvement
of environment, safety and health;Third-party verification of MFCA(Material Flow Cost Accounting) was also acquired in 2018
to enhance the recycling of waste rubber and improve the functionality of equipment.
(6) Environmental accounting was established in 2010 (including safety, health and environmental protection expense). Statistics
of several environmental accounting expenses every year have also been completed for the purpose of management and
continuous improvement in environmental safety and health. 。
(7) Regarding the management and protection of pipe lines and participation in the control of joint organization,effective opera-
tions are executed continuously in accordance with regulations. Excellent control and joint protection organization award has
been given by Industrial development bureau three years in a row to ensure safe operations of pipe lines and protect public
safety of near-by underground industrial pipe lines and operational safety of labors.
(8) Results of the implementation of corporate social responsibility
1. Economic side: Implement the requirements relating to corporate governance, announce the various ways and channels of
communication for all interested parties on TSRC's official website
2. Environmental side: The Company continues to reduce waste, save energy, improve and refine the production process
through the implementation and execution of all management systems, and wishes to establish and produce environmen-
tally friendly production processes and products.
3. Social side: By using the locations of factories as the basis, the Company gradually establishes the social care map. Through
social participation and helping disadvantaged groups, the Company also continues to promote chemical educational
programs in rural areas and applies products along with suppliers for social care. We expect to fulfill CSR through diverse
charity events.
7. CSR reports certified by relevant certification agencies should be elaborated:
The Company's CSR report was written under the GRI Standards and obtained third party TUV NORD AA1000 verification.
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Corporate governance report

<6> Fulfillment of Ethical Corporate Management

III. Status of corporate governance implementation

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

Status Any departure of
such implemen-
tation from the
Corporate Gover-
Assessment Items nance Best-Prac-
Yes No Abstract Description tice Principles
for TWSE/TPEx
Listed Compa-
nies
1. Define the program for operation in good faith 1. All of the Company's directors and No difference
(1) Has the Company defined its ethical man- V employees complied with the“Ethical
agement policy and approach in its Company Code ”and“Code of Professional Con-
charter and external documents, as well as the duct”promulgated by the Company
commitment of the board of directors and ex- when performing their duty. Meanwhile,
ecutives in actively implementing such manage- the Company also highlighted its deter-
ment policy? mination to fulfill the operation in good
(2) Has the Company stipulated plans against un- V faith in its enterprise cultural declarations
ethical conducts and clearly defined the SOP, about enterprise mission, enterprise
good practice guide, punitive measures, com- view and core competency, and expressly
plaint system and ensure their proper imple- defined the disciplinary procedure for
mentation? violations in said codes in accordance
(3) Has the Company taken precautionary mea- V with the Company's“Reward & Punish-
sures against unethical conducts and business ment Policy”.
activities stipulated by Article 7.2 of the“Ethical 2. Aforementioned regulations are the re-
Corporate Management Best Practice Principles sponsibilities of the Company's board
for TWSE/GTSM Listed Companies” of directors secretariat and Human Re-
sources & Management Department
department.
2. Fulfillment of operation in good faith 1. We make sure that we only conduct No difference
(1) Has the Company assessed the ethical record of V business with qualified suppliers through
its partners and stipulated the ethical behavior the“Supplier Evaluation and Manage-
clause in the contract? ment Regulation”, and we announce
(2) Has the Company established a dedicated (part- V our stance on refusing to collaborate
time) unit subsidiary to the board of directors with unethical companies to our suppli-
to promote ethical management, and has the ers when enquire for quotation.
unit regularly reported its status to the board of 2. All of the Company's directors and
directors? employees complied with the“Ethical
(3) Has the Company stipulated policies to prevent V Code”and“Code of Professional Con-
the conflict of interest, provided adequate com- duct”promulgated by the Company
plaint channel and ensured of its proper imple- when performing their duty. Meanwhile,
mentation? the Company also highlighted its deter-
(4) Has the Company created an effective account- V mination to fulfill the operation in good
ing system, internal control system in imple- faith in its enterprise cultural declara-
menting ethical management, and conducted tions about enterprise mission, enterprise
regular evaluations through the internal audit- view and core competency, and expressly
ing unit or commission an accountant to con- defined the disciplinary procedure for vi-
duct the evaluation? olations in said codes in accordance with
(5) Has the Company regularly organized internal V the Company's“Reward & Punishment
and external education and training concerning Policy”
ethical management? 3. Our Company has developed annual au-
dit plan each year to audit the account-
ing system of the Company and the op-
eration of internal control system.
3. Status of the Company's reporting mechanism. The Company adopted relevant regulations No difference
(1) Has the Company stipulated a specific reporting V and channels based on the“Regulations
and reward system, established a convenient Governing Employee Complaints Man-
reporting channel and assigned appropriate agement”and employee opinions gath-
personnel to the accused? ered from the intranet (EIP), furthermore,
(2) Has the Company stipulated SOP and relevant V the“Reward and Punishment Regulation”
confidentiality system to investigate the matter also stipulates procedures for the reporting
in question? and punishment of violations.
(3) Has the Company taken measures to protect the V
reporter from being wrongfully treated?
4. Enhance the disclosure of information The internal website of our Company, EIP, No difference
(1) Has the Company disclosed the performance of V has disclosed “Regulations for the execu-
its ethical management on the Company web- tion of working affairs” to provide all em-
site and the MOPS? ployees guidelines to follow.
5. If the Company has defined its ethical corporate management practice in accordance with the Ethical Corporate Management
Best Practice Principles for TWSE/GTSM-Listed Companies, please state the operation thereof and difference between the Prin-
ciples and the practice defined by the Company: The Company executed the operation in accordance with the“Ethical Code”
and“Code of Professional Conduct”, and there is no difference between them and said Principles.
6. Any other important information helpful to comprehend the Company's operation in good faith :None.
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Corporate governance report

<7> Stipulation of Corporate Governance Best Practice Principles and related regulations

The Company has currently adopted the“Code of Ethical Conduct,”“Articles of Incorporation,” “Rules for Procedure for hareholders Meetings,”“Rules of Procedure for Board of Directors Meetings,” “Rules for Director Election,”“Procedures for the Handling Acquisition and Disposal of Assets,” “Procedures for Extending Loan to Others,”“Procednres for Granting Endorsements and Guarantees,” and so on. For more information, please visit our website (http://www.tsrc.com.tw).
<8> Other significant information the will provide a better understanding implementation of corporate governmance.

III. Status of corporate governance implementation

1. Advanced study of directors/supervisors

==> picture [483 x 519] intentionally omitted <==

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

Date of ad-
Job title Name Hosted by Programs Hours
vanced study
Securities & Futures Institute [Legal Responsibilities of Directors and Super-] 3
visors in Enterprise Merger
November 22,
Chairman Nita Ing 2018
Securities & Futures Institute [Analysis of Important Issues regarding Recent ] 3
Amendment of The Company Act
Securities & Futures Institute [Legal Responsibilities of Directors and Super-] 3
visors in Enterprise Merger
Chin-Shan November 22,
Director
Chiang 2018
Securities & Futures Institute [Analysis of Important Issues regarding Recent ] 3
Amendment of The Company Act
July 10, 2018 Securities & Futures Institute [Promotion Meeting on Compliance to inter-] 3
nal equity transaction regulations
Securities & Futures Institute [Legal Responsibilities of Directors and Super-] 3
visors in Enterprise Merger
Director Jing-Lung November 22,
Huang 2018
Securities & Futures Institute [Analysis of Important Issues regarding Recent ] 3
Amendment of The Company Act
December 12, Securities & Futures Institute [The Effect on Business Operations by the Re-] 3
2018 cent Reform in Tax Act and Countermeasures
Securities & Futures Institute [Legal Responsibilities of Directors and Super-] 3
visors in Enterprise Merger
Tzu Wei November 22,
Director
Lee 2018
Securities & Futures Institute [Analysis of Important Issues regarding Recent ] 3
Amendment of The Company Act
May 04, 2018 Taiwan Institute for Sustain- Sustainable Development and Strategies in 2
able Energy Industrial Service Industry
Director John T. Yu July 26, 2018 Taiwan Institute for Sustain- 13 [th ] CEO Lectures and Seminars on Special 2
able Energy Topics
Promotion on anti-corruption of enterprise
August 03, 2018 [Taiwan Corporate Governance ] Association and information security from the transfor- 3
mation of Bitcoins
September 19, Taiwan Corporate Governance 14 [th ] International Forum on Corporate gover- 6
2018 Association nance
Major Financial Crimes of Corporate gov-
October 04,
2018 Taipei Foundation of Finance ernance and Corporate governance (0012 3
Tsai-Der period)
Director
Chen
Securities & Futures Institute [Legal Responsibilities of Directors and Super-] 3
visors in Enterprise Merger
November 22,
2018
Securities & Futures Institute [Analysis of Important Issues regarding Recent ] 3
Amendment of The Company Act
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Corporate governance report

III. Status of corporate governance implementation

==> picture [483 x 368] intentionally omitted <==

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

Date of ad-
Job title Name Hosted by Programs Hours
vanced study
The Effect on Taiwanese entrepreneurs by
Trade Friction between China and US and
November 02, Taiwan Corporate Governance Countermeasures; The Effect on the im- 3
2018 Association
plementation of CSR (Taiwan version) and
Indepen- Robert Countermeasures
dent Direc- The Effect on the Company and Directors by
tor Hung November 02, 2018 Taiwan Corporate Governance Association Recent Amendment of The Company Act and 3
Countermeasures
November 02, Taiwan Corporate Governance Role of Directors during the Process of Enter- 3
2018 Association prise Merger
July 10, 2018 Securities & Futures Institute [Promotion Meeting on Compliance to inter-] 3
nal equity transaction regulations
Indepen- Sean July 13, 2018 Taiwan Corporate Governance Association How the directors should accomplish “Loyal Obligation” 3
dent Direc-
Chao
tor September 19, Taiwan Corporate Governance 14 [th] International Forum on Corporate gover- 6
2018 Association nance
November 22, Securities & Futures Institute [Analysis of Important Issues regarding Recent ] 3
2018 Amendment of The Company Act
September 19, Taiwan Corporate Governance 14 [th] International Forum on Corporate gover- 6
2018 Association nance
Indepen-
dent Direc- Rex Yang Securities & Futures Institute [Legal Responsibilities of Directors and Super-] 3
tor November 22, visors in Enterprise Merger
2018
Securities & Futures Institute [Analysis of Important Issues regarding Recent ] 3
Amendment of The Company Act
Ming-
Accounting Supervisor Huang Chen September 19, 2018 Accounting Research and Development Foundation Advanced course for accounting supervisors on the Issuers of Taiwan Stock Exchange 12
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2. Procedures for handling material inside information

The Company specially adopted“Procedures for handling materials inside information”to establish sound mechanisms for the handling and disclosure of material inside information and announced in public. These procedures shall apply to all directors, supervisors, managerial officers, and employees of the Company, any other person who acquires knowledge of the Company's material inside information due to their position, profession, or relationship of control shall comply with the applicable provisions of these procedures. The Company conducted educational campaigns to promote awareness with respect to these procedures and related laws and regulations.

Corporate governance report

<9> Implementation of the Company's internal control system

1. A statement of Internal Control

TSRC Corporation

A statement of Internal Control

Date: March 14, 2019

III. Status of corporate governance implementation

In accordance with the result of self-evaluation of the internal control system in 2018, the Company hereby declares as follows:

The Company acknowledges and understands that the establishment, implementation and maintenance of the internal control system are the responsibility of the Board of Directors and managerial officers, and that the Company has already established such a system. The purpose is to provide reasonable assurance regarding the achievement of objectives such as the effectiveness and efficiency of business operations (including profitability, performance, and security of assets), reliability, timeliness, transparency, and regulatory compliance of reporting, and compliance with applicable laws, regulations, and by laws.
There is limitation inherent to internal control system, no matter how perfect the design is. As such, effective internal control system may only reasonably ensure the achievement of the aforementioned goals Further, the operation environment and situation may vary, and hence the effectiveness of the internal controls system. The internal control system of the Company features the self-monitoring mechanism. Once identified, any shortcomings will be corrected immediately.
The Company judges the effectiveness of the internal control system in design and enforcement in accordance with the “Criteria for the Establishment of Internal Control System of Public Offering Companies” (hereinafter referred to as“the Criteria”) promulgated by the Securities and Futures Commission of the Ministry of Finance. The Criteria is instituted for judging the effectiveness of the design and enforcement of internal control system. There are five components of effective internal control as specified in the Criteria with which the procedure for effective internal control is composed by five elements, namely, 1. Control Environment 2. Risk Evaluation 3. Control Operation 4. Information and Communication and 5.Monitoring. Each of the elements in turn contains certain audit items, and shall be referred to the Criteria for detail.
The Company has adopted the above criteria for the internal control system to assess the effectiveness of the design and operation of its internal control system.
In accordance with the aforesaid evaluation result, the Company believes that the internal control system as of December 31, 2018 (supervision and management over subsidiaries), including understanding the effect of operation, the attainment rate and report of the efficiency goal are reliable, timely, and transparent, and the design and implementation of the internal control system are in compliance with the regulations and effective and reasonably ensure the attainment of the aforesaid goals.
This statement of declaration shall form an integral part of the annual report and prospectus on the Company and will be announced. If there is any fraud, concealment and illegal practice discovered in the content of the aforementioned information, the Company shall be liable to legal consequences under Article 20, Article 32, Article 171 and Article 174 of the Securities and Exchanges Act.
This statement of declaration has been approved by the Board on March 14, 2019 with presence of 9 directors at unanimous consent.

TSRC Corporation

Chairman: Nita Ing

CEO: Joseph Chai

2. Hiring CPA to carry on a special audit of the internal control system: No

Corporate governance report

<10> Any sanctions imposed in accordance with the law upon the Company or its internal personnel, any sanctions imposed by the Company upon its internal personnel for violations of internal control system provisions, principal deficiencies, and the state of any efforts to make improvements in 2018 and until the annual report being published: No
<11> The important resolutions made by shareholders' regular meetings and board of directors' meeting in 2018 and until the annual report being published.

III. Status of corporate governance implementation

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1. The important resolutions made by shareholders' regular
The status of implementation
meetings in 2018
(1) Recognition of the Company's business report and finan-
cial statements for 2017 Resolution passed
With an ex-tight record date of July 24, 2018 as determined
(2) Recognition of the allocation of earnings for 2017 by the Board of Directors, the cash dividend of NTD 0.96 per
share was paid on August 16, 2018
(3) Approved the amendment of “articles of incorporation” Resolved. Registered by competent agencies on July 12, 2018.
(4) Approvedthe amendment of “Procedure for the Acquisi- Resolved. Executed based on the resolution approved in the
tion or Disposal of Assets” shareholders´ meeting.
(5) Approved the amendment of “Procedures for Endorse- Resolved. Executed based on the resolution approved in the
ment and Guarantee” shareholders´ meeting.
(6) Approved the amendment of “Procedures for Lending of Resolved. Executed based on the resolution approved in the
Capital” shareholders´ meeting.
(7) Approved the amendment of “Regulations for Election of Resolved. Executed based on the resolution approved in the
Directors” shareholders´ meeting.
Effected after the resolution approved in the shareholders´
(8) Elected the 16 [th] Board of Directors of the Company
meeting
(9) Call off the restriction on non-compete agreement for 16 [th] Effected after the resolution approved in the shareholders´
Board of Directors meeting
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2. Important resolutions made by board of directors' meetings
Date Important resolutions
Elect director, Nita Ing as the chairman.
June 21, 2018
New member list for Audit Committee and Remuneration Committee of the Company.
Approved the ex-dividend date of distribution of shareholders' equity and distribution date by resolu-
June 26, 2018
tion.
August 10, 2018 Approved the change in spokesman and deputy spokesman of the Company by resolution.
Approved to call off the restriction on non-compete agreement for managers
The Company made an announcement in accordance with Subparagraph 4, Paragraph 1, Article 25 of
November 14, 2018
“Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Com-
panies”.
November 19, 2018 Approved to call off the restriction on non-compete agreement for managers
Approved the shareholders' regular meeting for 2018 should be called.
March 14, 2019
Approved the allocation of earnings for 2018 should be approved.
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<12> Whether any director or supervisor has shown dissent against any important resolution made by the Board of Directors, which is also included in a written statement or recorded resolution in 2018 and until the annual report being published : None
<13> A summary of resignations and dismissals of the chairman, general manager, accounting manager, chief financial officer, chief of internal auditor and director of research and development in 2018 and until the annual report being published:

Job title	Name	Start Date	Date of Dismissal	Reason
Chairman	Shao Yu Wang	June 10, 2015	June 21, 2018	Retirement by self-request

Corporate governance report

IV. Information on CPA professional fee

<1> Information about audit fee and non-audit fee paid to CPA and accounting firms

Unit: thousand NTD

IV. Information on CPA professional fee
V. Information on replacement of CPA
VI. Chairman, president, or managers in charge of the Company's finance or accounting matters in the most recent year held a position at the accounting firm of a CPA or any of its affiliated companies

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Non-audit fee
Name of the
Name of Audit CPA's audit
accounting firm the CPA fee System commercial Industrial & Human Other Subtotal period Remarks
design resource
registration
Po Shu January Other items of non-au-
KPMG Hung 1, 2018 to dit fees are mainly the
5,630 0 0 0 540 540 Decem- result of business tax
Taiwan
Ann Tine ber 31, directly deducting cer-
Yu 2018 tificate fees
Items
Audit fee Non-audit fee Total
Escalation of Professional fee
1 2,000,000 below V
2 2,000,000 (inclusive of 2,000,000)-4,000,000
3 4,000,000 (inclusive of 4,000,000)-6,000,000 V
4 6,000,000 (inclusive of 6,000,000)-8,000,000 V
5 8,000,000 (inclusive of 8,000,000)-10,000,000
6 10,000,000 (inclusive of 10,000,000) above
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<2> Non-audit fees paid to the CPA, to the accounting firm, and/or to any affiliated enterprise of such accounting firm are one quarter or more of the audit fees paid thereto.: None
<3> The audit fees paid for changing the accounting firm and the change of the fiscal year has decreased compared to the previous year : Not applicable
<4> If the audit fees paid for the current fiscal year are lower than those for the previous fiscal year by 15 percent or more. : Not applicable

V. V. Information on replacement of CPA-None

VI. VI. Chairman, president, or managers in charge of the Company's finance or accounting matters has in the most recent year held a position at the accounting firm of a CPA or any of its affiliated Company-None

Corporate governance report

VII. Information on equity of directors, managers and shareholders holding more than 10% of outstanding shares equity transfer and equity pledge movements

VII. Information on equity for directors, managers and shareholders holding more than 10% of outstanding shares equity transfer and equity pledge movements

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2018 As of February 28,
2019
Job title Name Increase Increase Increase Increase
(decrease) (decrease) (decrease) (decrease)
in shares in pledged in shares in pledged
held shares held shares
Chairman Nita Ing - - - -
Director Hao Ran Foundation Statutory - - - -
- - - -
Corporate representative of the director Nita Ing
- - - -
Corporate representative of the director Chin-Shan Chiang
Director Metacity Development Corporation - - - -
- - - -
Corporate representative of the director Jing-Lung Huang
Corporate representative of the director Tzu Wei Lee - - - -
Corporate representative of the director John T. Yu - - - -
Director Wei Dah Development Co.,Ltd. - - - -
Corporate representative of the director Tsai-Der Chen - - - -
- - - -
Independent Director Robert Hung
Independent Director Sean Chao - - - -
- - - -
Independent Director Rex Yang
CEO Joseph Chai - - - -
Sr. Vice President Wing-Keung Hendrick Lam - - - -
Vice President R. L. Chiu - - - -
Vice President Edward Wang - - - -
Vice President Qiwei Lu - - - -
Vice President Kevin Liu - - - -
Vice President Alison Tung - - - -
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Remark: The Company made a complete re-election on June 21, 2018.

Information on the transfer or pledge of equity interests:

The counterparty in the above transfer or pledge of equity interests by a director, managerial officer, or major shareholder is not a related party. Therefore, no information disclosure is required.

Corporate governance report

VIII. Relationship information, if among the Company's ten largest shareholders any one is a related party as defined in the Statement of Financial Accounting Standards No. 6

July 24, 2018

VIII. Relationship data among the top 10 shareholders with the highest shareholding ratio

IX. The total number of shares and total equity stake held in any single enterprise by the Company, its directors, managers and any companies controlled either directly or indirectly by the Company

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Names and relationship of any
Shares currently
held by their Shares held of the top ten shareholders
Share(s) held spouses and in another and their spouses or relatives
Name personally children of person's name who are related defined in the of 2nd degree of relationship Remarks
minor age Statement
Share(s) (%) Share(s) (%) Share(s) (%) Name/name Relationship
Panama Banco industrial 69,524,417 8.4 0 - 0 - N0 N0
Company
Hao Ran Foundation Chair- 60,171,319 7.3 0 - 0 - N0 N0
man: Nita Ing
Wei Dah Development Metacity De- Chairman
Co.,Ltd. 53,708,923 6.5 0 - 0 - velopment of the same
Chairman: Jing-Lung
Huang Corporation person
Formosa Plastics Marine
Corporation 41,201,000 5.0 0 - 0 - N0 N0
Responsible person: Wen-
Chao Wang
Cathay Life Insurance Co.
Ltd.Responsible person: 40,854,000 4.9 0 - 0 - N0 N0
Tiao-Huei Huang
CITI bank Taiwan branch in
custody for Government of 36,676,332 4.4 0 - 0 - N0 N0
Singapore Investment Fund
Tamerton Group Limited 34,578,143 4.2 0 - 0 - N0 N0
Fubon Life Insurance
Co.,Ltd.Chairman: Richard 31,426,050 3.8 0 - 0 - N0 N0
M. Tsai
Metacity Development Wei Dah De- Chairman
Corporation 31,093,108 3.8 0 - 0 - velopment of the same
Jing-Lung Huang Co.,Ltd. person
Fu Da South Korea-Asia Se-
curities investment account 16,121,000 2.0 0 - 0 - N0 N0
hosted by HSBC
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IX. The total number of shares and total equity stake held in any single enterprise by the Company, its directors, managers and any companies controlled either directly or indirectly by the Company

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Investment by directors, managers
Investment by the and enterprises directly or indirectly Total investment
Company
Investees (Note) controlled by the Company
Share(s) (%) Share(s) (%) Share(s) (%)
Trimurti Holding Corporation 86,920,000 100.00 - - 86,920,000 100.00
Hardison International Corporation 3,896,305 100.00 - - 3,896,305 100.00
Dymas Corporation 1,161,004 19.48 4,798,566 80.52 5,959,570 100.00
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Note: the Company's investment accounted for under equity method

Information on capital raising activities

Information on capital raising activities

Information on capital raising activities

I. Capital and shares

<1> Source of capital stock

March 20, 2019

I. Capital and shares

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Authorized stock capi-tal Paid-in capital Remarks
Issue
Year/
month (NTD)price Shares(s) Amount Shares(s) Amount Property other
(1,000 (1,000 Source of stock capital than cash offset Other
(NTD1,000) (NTD1,000)
shares) shares) against capital
July 1973 10 20,000 200,000 5,100 51,000 Incorporation of Company
Technical coop-
eration remuner-
June
10 20,000 200,000 13,200 132,000 Increase of 51,000,000 NTD ation transferred
1974
to capital stock
30,000,000 NTD
Technical coop-
eration remuner-
February 10 20,000 200,000 20,000 200,000 Increase of 61,928,000 NTD ation transferred
1975
to capital stock
6,072,000 NTD
Novem- 10 40,000 400,000 30,000 300,000 [Increase of ]
ber 1975 100,000,000NTD
Decem- 10 40,000 400,000 40,000 400,000 [Increase of ]
ber 1975 100,000,000NTD
July 1976 10 60,000 600,000 50,000 500,000 [Increase of ]
100,000,000NTD
April 10 60,000 600,000 54,000 540,000 Increase of 40,000,000NTD
1977
14,000,000 NTD
July 1980 10 110,000 1,100,000 73,238 732,380 transferred from earnings
52,380,000 NTD
transferred from capital
Increase of 16,980,000 NTD
Septem- 10 110,000 1,100,000 92,300 923,000 173,640,000 NTD Issue date: May
ber 1981 18,1981
transferred from earnings
Increase of 135,470,000
April 10 120,000 1,200,000 116,000 1,160,000 NTD 101,530,000 NTD Listed date:Sep-
1982 tember 25, 1982
transferred from capital
October 10 121,800 1,218,000 121,800 1,218,000 [58,000,000 NTD ]
1983 transferred from capital
Septem- 10 145,000 1,450,000 127,890 1,278,900 [60,900,000 NTD ]
ber 1984 transferred from capital
63,945,000 NTD
August 10 145,000 1,450,000 140,679 1,406,790 transferred from earnings
1985 63,945,000 NTD
transferred from capital
Increase of 80,463,000NTD
119,577,000 NTD
ber 1986Septem- 10 164,200 1,642,000 164,200 1,642,000 transferred from earnings
35,170,000 NTD
transferred from capital
344,820,000 NTD
July 1987 10 201,966 2,019,660 201,966 2,019,660 transferred from earnings
32,840,000 NTD
transferred from capital
August 10 238,319 2,383,199 238,319 2,383,199 [363,539,000 NTD ]
1988 transferred from earnings
August 10 274,068 2,740,679 274,068 2,740,679 [357,480,000 NTD ]
1989 transferred from earnings
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Information on capital raising activities

108 年3 月20 日

I. Capital and shares

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

Authorized stock capi-tal Paid-in capital Remarks
Issue
Year/
month (NTD)price Shares(s) Amount Shares(s) Amount Property other
(1,000 (1,000 Source of stock capital than cash offset Other
(NTD1,000) (NTD1,000)
shares) shares) against capital
October 10 306,956 3,069,560 306,956 3,069,560 [328,881,000 NTD ]
1991 transferred from earnings
August 10 550,000 5,500,000 369,700 3,697,000 [627,440,000 NTD ]
1995 transferred from earnings
July 1997 10 550,000 5,500,000 502,900 5,029,000 [1,332,000,000 NTD ]
transferred from earnings
Authorized
stock capital in-
cludes convert-
July 1998 10 750,000 7,500,000 580,487 5,804,870 [775,870,000 NTD ] ible corporate
transferred from earnings
bonds totaling
10 million
shares
June 29, 1999
Approved by
July 1999 10 750,000 7,500,000 609,511 6,095,114 [290,244,000 NTD ] the official letter
transferred from earnings under (88) Tai-
Tsai-Cheng (1)
No. 59287
Approval by let-
ter under Chin-
June 10 750,000 7,500,000 649,909 6,499,095 [403,981,000 NTD ] Kuan-Cheng-Yi-Tze No.
2006 transferred from earnings 0950124967
dated June 20,
2006
Approval by let-
ter under Chin-
June 10 900,000 9,000,000 714,900 7,149,004 [649,909,000 NTD ] Kuan-Cheng-Yi-Tze No.
2011 transferred from earnings 1000028593
dated June 22,
2011
Approval by let-
ter under Chin-
June 10 900,000 9,000,000 786,390 7,863,904 [714,900,000 NTD ] Kuan-Cheng-Yi-Tze No.
2012 transferred from earnings 1010027239
dated June 19,
2012
Approval by let-
ter under Chin-
June 10 900,000 9,000,000 825,709 8,257,099 [393,195,000 NTD ] Kuan-Cheng-Yi-Tze No.
2014 transferred from earnings 1030023928
dated June 25,
2014
March 20, 2019
Authorized stock capital (shares)
Type of shares Remarks
Listed Shares Non-listed shares Total
Common stocks 825,709,978 74,290,022 900,000,000
Preferred stocks - - -
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Information related to general report system-Not applicable

Information on capital raising activities

<2> Shareholders' structure

I. Capital and shares

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July 24, 2018
Shareholder's Structure Government Financial Other juridical Individual Institutions & Foreign Total
Quantity Agencies Institutions persons Natural Persons
Number of persons 4 21 137 73,255 274 73,691
Share(s) 560,031 80,530,726 210,625,711 243,189,360 290,804,150 825,709,978
Stake(%) 0.07 9.75 25.50 29.46 35.22 100.00
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<3> Diffusion of ownership

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Par value NTD10/ July 24, 2018
Range of shares held Number of shareholders Shares held Stake (%)
1- 999 38,037 7,535,442 0.91
1,000- 5,000 25,090 54,746,945 6.63
5,001- 10,000 5,501 39,053,190 4.73
10,001- 15,000 2,033 24,869,986 3.01
15,001- 20,000 940 16,602,546 2.01
20,001- 30,000 896 21,840,569 2.65
30,001- 50,000 590 22,921,412 2.78
50,001- 100,000 343 23,874,913 2.89
100,001- 200,000 140 18,378,355 2.23
200,001- 400,000 52 13,873,086 1.68
400,001- 600,000 18 8,772,936 1.06
600,001- 800,000 8 5,496,489 0.67
800,001- 1,000,000 6 5,401,894 0.65
1,000,001 above 37 562,342,215 68.10
Total 73,691 825,709,978 100.00
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Preferred stocks shares- The Company does not issue preferred stocks shares.

Information on capital raising activities

<4> Major shareholders

I. Capital and shares

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July 24, 2018
Shares
Shares held Stake (%)
Shareholders
Panama Banco Industrial Company 69,524,417 8.4
Hao Ran Foundation Statutory 60,171,319 7.3
Wei Dah Development Co.,Ltd. 53,708,923 6.5
Formosa Plastics Marine Corporation 41,201,000 5.0
Cathay Life Insurance Co. Ltd. 40,854,000 4.9
CITI bank Taiwan branch in custody for Government of Singapore Invest- 36,676,332 4.4
ment Fund
Tamerton Group Limited 34,578,143 4.2
Fubon Life Insurance Co. Ltd. 31,426,050 3.8
Metacity Development Corporation 31,093,108 3.8
Fu Da South Korea-Asia Securities investment account hosted by HSBC 16,121,000 2.0
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<5> Share price, net worth per share, EPS, dividends per share and related information

Unit: NTD

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Fiscal year 2018 2017 As of Feburary
Item 28,2018
Maximum 37.95 39.50 28.65
Market price Minimum 26.55 30.65 26.70
per share
Average 31.26 34.62 27.68
Before distribution 18.54 18.02 -
Net worth
per share After distribution (Note 1) 17.58 -
Weighted average share(s) 825,709,978 825,709,978 825,709,978
Earnings per share Before adjustment 1.44 1.06 -
EPS
After adjustment (Note 1) 1.06 -
Cash dividend (Note 1) 0.98 0.96 -
Dividend distributed from earnings 0 0 -
Dividends Dividends
per share (Note 1) Dividend distributed from additional paid-in capital - - -
- - -
Cumulative outstanding dividends(Note 2)
Price-earnings (P/E) ratio (Note 3) 21.71 32.66 -
Cash divi- Price-dividend (P/D) ratio(Note 4) 31.90 36.06 -
dend yield
Cash dividend yield(Note 5) 3.13% 2.77% -
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Note 1: The dividends for 2018 have not yet resolved by the shareholders' meeting.

Note 2: Requirements for issue of securities provide that the unappropriated dividends in the current year may be cumulative and distributed in the year of earnings, and only the outstanding cumulative dividends in the current year shall be disclosed.

Note 3: P/E ratio=yearly average closing price per share/EPS

Note 4: P/D ratio=yearly average closing price per share/Cash dividend per share

Note 5: Cash dividend yield=cash dividend per share/yearly average closing price per share

Information on capital raising activities

<6> Dividend policy and implementation status

Dividend policy

The industry operated by our Company has entered a mature and stable stage. Currently, we are striving towards globalization, diversification development actively to meet the long-term plan of the Company and the sustainable growth of the enterprise. The dividend policy of the Company is formulated as follows: if there is surplus left after annual settlement, then 10% will be extracted for statutory surplus reserve after paying all the taxes in accordance with law and compensation of loss in previous years; next, special surplus serve will be proposed or turned around in accordance with Securities and Exchange Act; the remaining amount plus the surplus for distribution in the previous period can supply the surplus for distribution in this year. Hence, surplus distribution plan can be proposed for the distribution of surplus.

II. Corporate Bonds Status III. Preferred stocks Status
IV. Global depository receipts Status
V. Employee stock warrants Status
VI. New restricted employee shares Status
VII. Status of issuance of new shares in connection with mergers or acquisitions or with acquisitions of shares of other companies

VIII. Implementation of capital allocation plans

If the previous dividend for shareholders has been distributed, then the cash dividend should not be lower than 20% of the total distributed amount.

The aforementioned surplus distribution plan is drafted by the board of directors and will be proposed in the shareholders' meeting for final resolution.

Distribution of dividends scheduled at the shareholders' annual meeting Cash dividends to be distributed are NTD 0.98 per share.

<7> Effect upon business performance and EPS of stock dividend distribution plans drafted at the shareholders' annual meeting:Not applicable.

<8> Employees' compensation and directors' remuneration

T he percentage or scope of employee and director remuneration provided in the Corporate Charter. If the Company has profits in the fiscal year, the Company shall appropriate 1% or more of the profits as the employee remuneration and 1% or less as the director remuneration.
- The appropriable remuneration amount for directors and the regulations governing employee remuneration shall be implemented in accordance with the resolution of the Board of Directors.
In 2018, the basis for the Company to estimate the amount of employees' compensation and directors' remuneration, and the actual distributed amount are applied at the ratios as specified by the Company's articles of incorporation. No discrepancy exists between the actual distributed amount and the estimated figure.
Information on any distribution of compensation proposal approved by the Board of Directors:
- (1) NTD 64,290 thousand distributed as employees' compensation and NTD 14,064 thousand as directors' remuneration, which has no difference with the estimated amount of the annual recognized expense.
- (2) Not applicable since no shares are distributed as employees' compensation by the Company this year.
The actual distribution of the remuneration of employees, directors and supervisors in the previous year: The Company distributed NTD49,732 thousand for the remuneration for employees and NTD 9,558 thousand for the remuneration for directors by cash, which has no difference with the estimated amount of the annual recognized expense.
<9> Share repurchases: None

II. Corporate bonds - None

III. Preferred shares - None
IV. Global depository receipts - None
V. Employee stock warrants- None
VI. new restricted employee shares - None
VII. Merger, acquisition and issuance of new shares due to acquisition of shares of the Company - None
VIII. Implementation of capital allocation plans- None

Overview of business operations

Overview of business operations

Overview of business operations

I. Description of businesses

<1> Business Scope

1. Major business and product lines:

The business focuses on-developing, manufacturing and selling various synthetic materials, including: (1)Synthetic rubber and elastomers: E-SBR, S-SBR, BR and TPE

(2)Applied Materials: Material Mixtures

Product Portfolio

Unit: thousand NTD

I. Description of business

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Items Revenue in 2018 Total Turnover(%)
Synthetic rubber and elastomers 28,059,773 94.31
Applied materials 1,691,445 5.69
Total 29,751,218 100.00
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3. Planned Developments of New Products

Continuously develop microstructure control technology platform for next generation of S-SBR products and build partner ship with customer to joint development in customized products.

==> picture [45 x 35] intentionally omitted <==

Develop differentiated application for the SBC products, such as high-end medical materials, customize 2 shoe materials, thin printing and protective film, lubricant viscosity modifier, etc.

==> picture [45 x 38] intentionally omitted <==

Built new BR technology platform for the development of new products to satisfy the needs of the HIPs customers to improve the processing properties of tires and enhance rolling resistance perfor- 3 mance.

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4
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Contentiously build the optimal process technology and integrate into the new factory design with the highest quality products.

<2> Industry Overview:

1. Global Economic Environment

Global economic growth is expected to slow down in 2019 as the trade tensions may cause more challenges for the global economy. Except the emerging markets are projected to grow at 2018 level, major economies such as the United States, Eurozone, China, and Japan are projected to have lower economic growth than 2018. According to Taiwan Institute of Economic Research (TIER), Taiwan GDP growth rate is forecast at 2.20% for 2019,down from 0.37% in 2018, given its nature of the high dependence on global economy. The United States growth momentum is expected to slow due to the expectation that the benefits of its tax reform will start to erode in 2019. The U.S. Federal Reserve (FED) announced it will be patient and careful before adjusting interest rates as it waits to assess how global risks impact the domestic economy. In response to the unstable global economic environment, economists have suggested other countries such as Europe and Japan should reconsider the pace of raising interest rates or even maintain monetary policies. Furthermore, considering Britain's turbulent exit from the European Union, Italy's struggle with its high spending budget plan and the US economic policies, International Monetary Fund (IMF) and Organization of Economic Co-operation and Development (OECD) project Eurozone economic growth rate to decrease to 1.90% in 2019. As for China and India, IMF predicts China's economic growth to decline to 6.20% and India's to accelerate to 7.40% in 2019 compared to that in 2018. While a more challenging external trade environment is expected for China in 2019, India's economic performance is anticipated to benefit from the structural reforms and lower crude oil prices.The price of crude oil surged since the beginning of 2018 owing to geopolitical instability, fluctuated, and plummeted in the end of year. Although OPEC and its allies have reached an agreement to cut oil production by 1.2 million barrels per day for the first half of 2019, market response revealed concerns whether the supply cut is enough to stabilize the oil market. The increase of US shale oil output in 2019 will further impact the oil price, causing crude oil price to continue its downtrend in 2019. Moreover, the pace of monetary tightening by the major central banks and the extent of interest rate hikes could place uncertainties to the economy in emerging market countries with the potential capital outflow and strained liquidity in 2019. Looking at global economic outlook for 2019, uncertainties over trade dispute, currency, oil price, and the performance of major economies may intensify the turbulence in the global economic growth.

Overview of business operations

2. Relevance of the industry's upstream, midstream and downstream:

I. Description of business

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

Downstream customers
Upstream raw materials of (tires, adhesives, plastic
the petrochemical indus- modification, shoe mate-
try rials)
(crude oil, natural gas)
Midstream raw materials Synthetic rubber
of the petrochemical in- TPE
dustry (ethylene, propyl-
ene, butadiene, styrene)
----- End of picture text -----

Upstream raw materials of the industry are crude oil and natural gas. Midstream raw materials refer to raw materials produced by cracking “petrochemical primary raw materials” e.g. naphtha, followed by reactions such as polymerization, oxidation, and synthesization. The downstream of petrochemical industry processes midstream raw materials to produce plastics, chemical fibers, rubbers, and other chemical products such as tires, plastic modification, adhesives,shoe materials and other industrial goods.

3. Current Industry Status and Outlook:

Global economy went through significant changes in 2018 with trades and industry supply chain negatively impacted by the trade disputes among countries. Demand growth in global market slowed down as a result of trade disputes, which draw close attentions from both public and private sectors.

Automotive sales in China was 27.68 million in 2018 with annual growth rate of -4%, which was the first decrease in more than 20 years, and mainly affected by the slowing growth of China economy. The breakdown of the car sales includes 23.99 million with annual growth rate of -5% for passenger cars was and 4.29 million with annual growth rate of 2.4 % for commercial cars. The growth of commercial cars benefited from the new emission standard in China. In Japan, 5.27 million cars were sold in 2018 with annual growth rate of 1%. The overall slowdown of automotive demand in Asia and the negative impact from the abundant low-priced natural rubber the second half of 2018 contributed to the slight decrease of TSRC synthetic rubber sales in 2018 versus 2017. At the same time, the vertically integrated synthetic rubber competitors drove down the price of synthetic rubber to maintain high upstream capacity utilization rate. The headwind in the market and competition suppressed the profitability of synthetic rubber business, despite the proactive efforts in growing overseas market.

The global demands for thermal plastic elastomers (TPE) maintained 4.2% growth in 2018 , while the competition intensified with the new capacities of hydrogenated thermal plastic elastomer (HSBC) in Asia coming online. In addition, the oversupply of other thermoplastic elastomers (SBS and SIS) continues. Besides the continued efforts in developing differentiated products, the Company sustains its competitiveness by strengthening long term relationships and collaborations with targeted customers in new technology and products. For the business of Applied Materials, the Company develops products with superior functionalities and promotes them for various applications, suchas shoes materials, automotive, hand tools, consumer electronics, medical products, etc. The growing emphasis on environment protection expects to expand the adoption of TPE materials by replacing PVC and conventional rubber materials due to its non-toxic, low environmental impacts during manufacturing, recyclable, and the unique balance between processability and elastic properties.

Looking into 2019, the International Monetary Funds (IMF) predicts global GDP to grow 3.7%. China Association of Automobile Manufactures (CAAM) estimates 2019 China car market to be at the same level as 2018. LMC predicts the car sales in Asia outside China to grow 3.2% in 2019. In light of the slow growth of tires and synthetic rubber market demand due to end-market demand, TSRC is dedicated to new product development to enrich business portfolio for synthetic rubber business. For TPE business, the uncertainty from the trade disputes remains critical to the market demand projection. Particularly in Asia, the newly onstream SEBS capacities in 2018 are expected to further intensify the competition. TSRC has diversified TPE market globally and production capacity in China, Taiwan, and the US to minimize the impact of trade dispute and newly added industry capacity.

Overview of business operations

<3> Overview of technology and R&D

1. R&D expenses

I. Description of business

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Unit: thousand NTD
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2. Successfully developed technology or products

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

Item Result
Patents 6 patents granted this year.
Completed functionalization modification and successful-
Development of S-SBR products
ly applied in the next generation products.
Commercialized green and eco friendly BR and E-SBR
Development of green and ecofriendly rubber materials products and received positive confirmation from leading
companies in plastic modification, tire and shoe materials.
Completed the development of materials for next gener-
Development of new generation HSBC products ation medical applications, graphic printing films, protec-
tive films, foaming and auto component.
Implemented new process technology in upgrading exist-
Development of leading processing technology
ing factories and new factory design.
----- End of picture text -----

Overview of business operations

<4> Long-Term and Short-Term Business Development Plans

In response to the rise of global awareness of Corporate Social Responsibility (CSR), our research and development is focused on developing high value-adding products and technologies with advanced eco-friendly production processes in order to deliver customer satisfactions, solve problems concerning customers' applications of rubbers, and create mutual values. The business development plan includes:

1. Long-Term Plan:

(1) Continue develop technology platforms and applications of TPE materials, strengthen competitive advantages, through product differentiation, incorporate downstream customers' needs and develop high value-adding applied materials.
I. Description of business
(2) Establish communication platform with key customer's development team to jointly develop high quality innovative products.
(3) Upgrade manufacturing equipment and ingredients to improve production efficiency and optimize production costs. Continue quality improvement of existing products through production process optimization.
(4) Assess opportunities to establish strategic alliance with companies in the downstream and upstream, strengthen technical service capability, and create opportunity for technical exchange and cooperation in commercial applications.
(5) Evaluatethe global value chain development and customers needs of synthetic rubber industry while exploring opportunities in new products/new market/new applications.
(6) Continue the technical exchanges and collaboration with the academic sector and customers to enhance product value improve process technology via contracted research by the academic sector.
(7) Optimize resource deployment to increase new product sales and profit , including assessing the integration of Applied Materials in Greater China business operation for incremental economic values.

2. Short-Term Plan:

(1) Complete the construction of the new 20 thousand metric tons per year advanced SEBS line in Nantong, China, successfully coming on-stream in end 2019.
(2) Expand the adoption of advanced shoe materials with the brand companies and complete the construction of Advanced shoe materials seven thousand metric tons per year production line in Binh Duong Province of Vietnam.
(3) Execute the strategy to strengthen technology platforms and customers insights to develop high value-adding products and applications , including advanced shoe materials and medical TPE materials, to enrich product portfolio and market segment.
(4) In response to the green tire labels policy, establish a dedicated S-SBR R&D project team to focus on the development and promotion of S-SBR products with low rolling resistance and wet grip.
(5) Continue exploring opportunities in new products, new markets and new business model and conduct feasibility assessment.
(6) Enhance customers' capability and value chain with products of high quality, high differentiation, highly valueadding, and appropriately targeted market segment.
(7) Continue strengthening TSRC global supply chain to meet customers' need worldwide by optimizing the sales operation and logistics.

Overview of business operations

II. Analysis of the market as well as the production and marketing situation

<1> Market Analysis

1. Major sales destinations

II. Analysis of market, production and marketing situation

arket Analysis Major sales destinations
	Unit: thousand NTD/Metric Ton
Name of product	2018		Exported territories
	Sales volume	Sales amount
Synthetic rubber and elastomers	439,655	28,059,773	China, U.S.A., Thailand, Germany, Turkey, Japan, Italy
Applied materials	12,955	1,691,445	China, South East Asia, and U.S.A.

2. Market share:

Market share:
Synthetic rubber and elastomers	Asia is the major market accounting for 69% of the total sales, awhile Americas and Euro- zone account for 16% and 12% of total sales respectively.
Applied materials	Vietnam is the main market accounting for 46% of total sales, while the second largest market is Greater China, representing 36% of total sales

3. Industry demand supply and market growth projection

International Monetary Fund (IMF) predicts the global economic growth rate as 3.7% for 2018 and 2019, lowered from 3.9% as predicted in April. This is also the first downward adjustment since July 2016. The global economic prospects see higher risks in trade friction and higher-than-expected interest hike. Similarly, world bank adjusted China growth rate in 2019 from 6.5% to 6.2% due to trade dispute. The global economy is highly uncertain and susceptible to negative impacts in areas such as potential financial tightening and rising interest rate, increase in global protectionism, unclear economic policy in China, extreme climate change, and geopolitics tension or conflicts. Therefore, a close attention to downstream demand changes is required.

There is no new production capability of E-SBR in Asia in 2019 according to LMC research institute , while capacity utilization rate is expected to be lowered due to the replacement in tire production by low price nature rubbers. On the other hand, BR capacity utilization rate is expected to be stable in 2019 with higher demand in non-tire applications and new capacity coming onstream in China and Indonesia. New SEBS capacities came onstream in Asia in 2018 and leads to oversupply and pricing pressure in 2019. The Company plans to improve profitability by optimization customer mix, product portfolio and production scheduling.

4. Competitive positioning, future development factors and actions

Global economic growth and new car sales are highly uncertain due to the on-going trade dispute. The Company is aggressively pursue the new business in southeast Asia and the US, while continuing to grow in India through our joint venture company (ISRPL) locally.

The Company is the market leader in TPE materials with a comprehensive offering of SBC polymers and Applied Materials. We continue to expand service network in Asia, Europe and America to provide consistently reliable solutions and timely technical services. Furthermore, we are dedicated to creating product differentiation and accelerating the transitioning to high-value application markets. Multiple new products were recently developed with selected customers, such as medical TPE materials and non-linear structure SIS polymers for specialty and reusable adhesives. T-blend[®] products, our highly value-adding downstream TPE offering, are developed with global brand company for specific end-market applications, such as shoes materials, soft materials, and hot-flow needle injection materials.

Overview of business operations

<2> Important application and manufacturing processes of main products

1.Main product important use:

II. Analysis of market, production and marketing situation

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

E-SBR General material for car tires, soles, conveyor belts, hoses, sport facilities, toys and other industrial prod-
ucts.
S-SBR Energy-saving (low rolling resistance) tires, high-function tires, snow tires and all-season tires.
BR High-speed tires, soles, sport facilities, High Impact polystyrene (HIPS) and other industrial products.
TPE Adhesives, hot-melt adhesive, plastic modification, medical firms, and other industrial products for spe-
cial applications.
Applied Advanced shoe materials, foamed shoe materials, toys, stationery, wire and cable, baby supplies, person-
Materials al care, hand tools covering, materials, car industry and other industries such as refrigeration.
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2.Outline of production process:

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E-SBR is produced in an emulsion polymerization system. Soap is used as the reaction agent for the
E-SBR polymerization of butadiene and styrene to produce high molecular glue. Then, after the addition of an-
ti-oxidant and extender oil (for oil-extended rubber products), the coagulation crumb is then washed,
dewatered, dried, baled and packaged.
S-SBR is produced in a solution polymerization system. Soap is used as the reaction agent for the polym-
S-SBR erization of butadiene and styrene to produce high molecular glue. Then, after the addition of anti-oxi-
dant and extender oil (for oil-extended rubber products), the coagulation crumb is then washed, dewa-
tered, dried, baled and packaged.
BR BR is produced in a solution polymerization system. Crumb is made after polymerization of butadiene
(BD), and is condensed into pallets, ash content is washed off and then dewatered and packed.
TPE TPE is produced in a solution polymerization system. Crumb is made after polymerization of butadiene
and after being steamed to recall solvent, it is dewatered, pelleting and then packed.
Applied
Materials TPE products and other raw materials are mixed, blended and granulated.
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<3> Supply of main raw materials

The synthetic rubber produced by the Company is mainly polymerized from butadiene and styrene within the petrochemical products.

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

Item Main source Supply situation
Butadiene Domestic, Domestic butadiene is primarily supplied by CPC and FPCC and imported in the case of
imports the short supply.
Styrene Domestic Styrene is primarily supplied by TSMC, FCFC and GPPC
----- End of picture text -----

Overview of business operations

<4> Suppliers (Customers) accounting for 10% or more of the Company's total procurement (sales) amount in either of the most recent two fiscal years, the amounts bought from (sold to) each, and the percentage of total procurement (sales) respectively, and reasons for increase/ decrease
Major suppliers accounting for 10% or more in procurement in the past two years

Unit: thousand NTD

II. Analysis of market, production and marketing situation

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2018 2017
Item Suppliers Value Total net pro-curement (%) Relation to the issuer Suppliers Value Total net pro-curement (%) Relation to the issuer
1 Company A 2,891,681 12 None Others 27,283,635 100 -
2 Other 22,082,477 88 - - - -
Net procure- 24,974,158 100 Net pro- 27,283,635 100
ment curement
The reasons for The number of suppliers has been decreased. The ratio of Company A accounted for net pro-
changes in amount curement of the year has increased to over 10%.
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There are no customers accounting for 10% or more of the Company's total sales value in the recent two fiscal years.

<5> Production volume for the most recent two fiscal years

[Unit: thousand NTD/Metric Ton]

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2018 2017
Product
Capacity Output Output value Capacity Output Output value
Synthetic rubber
561,600 446,816 24,202,460 562,892 490,507 27,853,645
and elastomers
Applied materials 23,260 17,651 1,243,699 20,759 14,009 620,888
Total 584,860 464,467 25,446,159 583,651 504,516 28,474,533
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<6> Volume of units sold for the most recent two fiscal years

Unit: thousand NTD/Metric Ton

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2018 2017
Product Domestic Export Domestic Export
Volume Value Volume Value Volume Value Volume Value
Synthetic
rubber and 308,978 19,352,451 130,677 8,707,322 340,517 21,694,549 134,238 9,219,258
elastomers
Applied
5,186 444,112 7,769 1,247,333 5,205 416,298 3,496 415,496
materials
Others - - - - - 20,636 - -
Total 314,164 19,796,563 138,446 9,954,655 345,722 22,131,483 137,734 9,634,754
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Overview of business operations

III. Employees information

III. Employees information

IV. Disbursements of environmental protection

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Year 2018 2017 February 28, 2019
Direct workers 829 779 836
Indirect workers 716 702 711
Total of employees 1,545 1,481 1,547
Average age 39.9(years old) 39.7(years old) 40.0(years old)
Average seniorities 10.4(years) 10.4(years) 10.2(years)
Ph.D. 1 1 2
Master 13 13 12
Education
Bachelor 64 63 65
level (%)
Senior high school 19 19 18
Below senior high school 3 4 3
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IV. Disbursements of environmental protections Losses for environmental pollution

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2018 Till February 28, 2019
1. April 26, 2018 Kaohsiung Environmental Protection Bureau performed a sam-
pled inspection on equipment components without notice in advance. The
leakage value of equipment components exceeds “the control and emission
standard of volatile organic compounds for equipment components in Kaoh-
siung”. Therefore, NTD 100,000 fine has been executed.
2. July 9, 2018 Audit Team in South Region Environmental Protection Bureau
performed a sampled inspection on equipment components without notice
in advance. It was found that the leakage value of equipment components
exceeds “the control and emission standard of volatile organic compounds
for equipment components in Kaohsiung”. Therefore, NTD 200,000 fine has
been executed. Kaohsiung Environ-
3. December 3, 2018 Kaohsiung Environmental Protection Bureau performed a mental Protection
sampled inspection on equipment components without notice in advance. Bureau came to the
Pollution Our “VOCsinspection for the separation valve of pipe lines for recycle water factories and sam-
(Type and proce- remover”, which exceeds “the control and emission standard of volatile pled “the status
dure) organic compounds for equipment components in Kaohsiung”. Therefore, of air pollution”
NTD 100,000 fine has been executed. and “surrounding
4. December 3, 2018 Audit Team in South Region Environmental Protection Bu- smell”. Both satis-
reau has performed a sampled inspection on equipment components without fied the regulations.
notice in advance. Our “VOCsinspection for bottom square Cover of Y-shape
filter net of BD CHARGE HEAD pipe line”, which exceeds “the control and
emission standard of volatile organic compounds for equipment components
in Kaohsiung”. Therefore, NTD 100,000 fine has been executed.
5. December 3, 2018 Kaohsiung Environmental Protection Bureau performed
a sampled inspection on management items of waste without notice in
advance and found the flammable wastes in May exceeded the maximum
monthly production volume in waste cleaning report over 10%. We did not
submit changes in trash clearance plan within 15 days, which violated wastes
cleaning law. Therefore, NTD 60,000 fine has been executed.
Counterpart, or
authority impos- Kaohsiung Environmental Protection Bureau None
ing fines
Was not punished or
Compensation
and fines NTD 560,000 fined by competent
agencies
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Overview of business operations

2018 Till February 28, 2019
1. Designate personnel to inspect 300 points of equipment components in all workshops on a weekly basis.
Revise down the protection value of VOCs inspection from 400 to 200ppm; find out the small amount of VOCs leakage due to ageing of washers earlier and then perform repair immediately to reduce the possibilities of large amount of leakage in components.
Weld as tight as possible for the budding of short tubes during yearly repair to reduce the use of leakage stoppage tape.
The possibilities of ageing of washers can be reduced by replacing the washers after uninstalling equipment components.
Relevant components of wastes are included into inspection region.
Engineering security sector performed 100 points sampled inspection and the associated infrared VOC side leakage in the easily leaking region in all workshops every month.

V. Labor relations

Trained and qualified personnel should perform inspection on equipment Continue to maintain

Adaption of and confirm no leakage before acceptance if there is a replacement or repair proper function of

improvement on the equipment components of all processes. measures 8. Perform steam cooking by vapor fist before opening the tank of the equippollution protection equipment

ment for cleaning to avoid the escape of VOCs.

Assist all workshops to build leakage map for equipment components every season and hold repair and improvement discussion meeting for leakage of equipment components every season.
Engineering security sector collected “Inspection data of equipment components during 2015-2018”of Kaohsiung factory and “statistical data of equipment components fined in Kaohsiung factory for the last 7 years”and assessed the risk level of leakage region and type for the components in all units; and increased the number of inspection points in high-risk regions.
Engineering security sector bought infrared VOCs detector (FLIR) in 2019 to accelerate the inspection speed of equipment components.
Engineering security sector changes the trash clearance plan immediately, which satisfies the regulations.
Review the Trash Clearance Act and enhance the knowledge of case officers to trash regulations.

V. Labor relations

<1> Employee benefit plans, continuing education, training, retirement systems, and the status of their implementation, and measures for preserving employees' rights and interests:

Employee benefit plans, continuing education, training, retirement systems, and the status of their

implementation:

On welfare measures: through our operation of the Employee Welfare Committee, in addition to providing employees national holidays (Dragon Boat Festival, Mid-Autumn Festival, and Chinese New Year), birthdays, Labor Day and other gifts outside, the“optional beneficiary policies”are implemented. According to the policies, the employees may combine the “benefits that comply”with their own requirement by means of their benefit credit tickets, including traveling and recreation activities, children's educational reimbursement, optional purchase of employees' welfare daily necessities, purchase of movie tickets, and leisure requisites to fulfill the benefits substantially.

As for the insurance, TSRC, in addition to the statuary labor and health insurance, also provide free group insurance to employees that covers family members of employees. As for the labor pension system, TSRC conduct the business in accordance with the Labor Standards Act and labor pension system. TSRC allocates a pension to the pension accounts of employees based on the pension actuarial report provided by actuaries every year. The gap between the estimated pension and actual pension amount for personnel who are qualified for retirement by the end of every year is allocated by March 31 of every year in accordance with the regulations, in order to protect the right of retirement of employees.

In respect of employees' training, the rules for employees' training are followed. The training plans are set based on the Company's business policies, units' requirements and relevant laws/regulations, and the general knowledge, professional skills and management ability programs for the newly recruited and employees are handled according to the plans. Meanwhile, the“life-time learning” goal is fulfilled through such training modes as OJT, Off-JT and SD, with the training fees in 2018 being to the value of NTD14,139,000. There were about 14,139 trainees. The average training fees per person were NTD9,200 and the training hours per person were 30 hours.

Overview of business operations

2. Measures for preserving employees' rights and interests:

Since the incorporation of the labor union, the Company has held meetings between employer and labor periodically, and negotiated for the laborers” interests and rights through formal meetings. In 2018, the Company held four meetings in total.

Furthermore, according to the Labor Standard Law and Accounting Handling Rules on Pension, the Company will contribute the pension fund to the employees' personal accounts in the Bank of Taiwan and Bureau of Labor Insurance on a monthly basis.

Meanwhile, the“Reserve Labor Pension Fund Supervisory Commission” will hold meetings to review the utilization of pension funds periodically to protect the retired employees' interests and rights.

<2> No loss sustained as a result of labour disputes by the Company in 2018 and until February 28, 2019.

<3> Estimated loss suffered by the Company due to labor disputes currently and in the future, and explanation measures

VI. Material contracts

Since the Company's incorporation with the union, the relationship between employees and the Company has remained fair through the good interaction and communication between employees and the Company. Therefore, no significant dispute over labor has occurred, let alone the loss thereof. Therefore, the Company and employees will abide by the communication models to create a win-win situation when proceeding with communication, and there is no likelihood of any monetary loss resulting from labor dispute.

VI. Material contracts

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

Nature Concerned party Duration Contents Restrictive terms
The joint venture for production
UBE Industries Ltd., October 20, 1995 until
and sale of BR with the annual
Joint venture Marubeni Corporation termination of the co-
capacity of 50 thousand metric
UBE (Thailand) Co.,Ltd operative relationship tons of BR in Thailand
The joint venture for production
UBE Industries Ltd., October 26, 2006 until
Joint venture Marubeni Petrochemi- termination of the co- and sale of BR plant with the
cals Investment B.V. operative relationship annual capacity of 72 thousand metric tons in China
Technology supply and services Trimurti Holding Corpo-ration December 31, 2006 until termination of duration of licensee Authorize to use SEBS technolo-gy
Authorize for production of ther-
Technology JSC VORONEZHSYN- May 27, 2009 until 10 moplastic elastomers with the
license THEZKAUCHUK years after the official annual capacity of 50 thousand
production metric tons
The joint venture for production
April 3, 2010 until
Joint venture Indian Oil Corporation termination of the co- and sales of ESBR plant with the
annual capacity of 120 thousand
operative relationship metric tons in India
September 1, 2010
Technology Indian Synthetic Rubber until termination of A license for India Synthetic Rubber Private Limited. to use
license Private Ltd. the cooperative rela-
ESBR technology
tionship
The joint venture for production
May 7, 2010 until
Joint venture ARLANXEO Holding B.V termination of the co- and sales of NBR plant with the
annual capacity of 30 thousand
operative relationship metric tons in China
December 1, 2010 un-
ARLANXEO–TSRC (Nan- A license for ARLANXEO-TSRC
Technology til termination of the
license tong) Chemical Indus- cooperative relation- (Nantong) Chemical Industrial
trial Co., Ltd Co Ltd. to use NBR technology
ship
Technology TSRC (Nantong) January 1, 2012 to Extend to a 35 thousand metric
license Industrial Ltd. January 1, 2022 tons-SEBS technology licensing
----- End of picture text -----

Overview of business operations

VI. Material contracts

==> picture [487 x 541] intentionally omitted <==

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

Nature Concerned party Duration Contents Restrictive terms
Technology TSRC (Nantong) January 1, 2014 to
license Industrial Ltd. December 31, 2023 Authorize to use SIS technology
September 1, 2017 to
within ten years start- Adding the permission for SEBS
Technology TSRC (Nantong) ing from the issuance authorized products with the an-
license Industrial Ltd. of the first invoice of nual production of 20 thousand
the new production metric tons
line
Medi-
um-and Bank of Taiwan August 28, 2014 to Loaned NTD 1,000 million Loan amount cannot be
long-term November 25, 2019 drawn again.
loan
Medi-
um-and Taipei Fubon Bank August 28, 2014 to Loaned NTD 500 million Loan amount cannot be
long-term September 25, 2019 drawn again.
loan
Medi-
um-and Mega International October 3, 2014 to Loaned NTD 500 million Loan amount cannot be
long-term Commercial Bank November 25, 2019 drawn again.
loan
Medi-
um-and October 17, 2018 to Loan amount cannot be
Bank of Taiwan Loaned NTD 1,500 million
long-term November 23, 2021 drawn again.
loan
Medi-
um-and Mega Bank May 02, 2018 to Loaned NTD 500 million Loan amount cannot be
long-term October 23, 2023 drawn again.
loan
Medi-
um-and March 21, 2018 to Loan amount cannot be
MUFG Bank Loaned NTD 500 million
long-term March 23, 2021 drawn again.
loan
Repaid amount of NTD
500 million cannot be
Medi- drawn again. The amount
um-and March 23, 2018 to of NTD 500 million is cal-
CTBC Bank Loaned NTD 1,000 million
long-term March 28, 2023 culable mobility. Amount
loan of mobility cannot be
lower than 70% of the
total amount each time.
Medi-
um-and Standard Chartered May 28, 2018 to Loaned NTD 500 million Loan amount cannot be
long-term Bank June 25, 2021 drawn again.
loan
----- End of picture text -----

Overview of financial status

Overview of financial status

Overview of financial status

I. Condensed balance sheet and statement of comprehensive income for recent five fiscal years

<1> Condensed balance sheet

Unit: thousand NTD

I. Condensed balance sheet and statement of comprehensive income for the recent five fiscal years

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Fiscal year Financial information for the recent years
Individual
Item 2018 2017 2016 2015 2014
Current assets 4,200,063 3,709,562 3,885,668 3,532,055 4,303,033
Property, plant and equipment 2,789,755 2,760,238 2,699,834 2,686,179 2,406,647
Intangible assets 65,778 86,312 37,972 49,355 61,045
Other assets 17,248,237 16,104,401 16,125,052 16,128,518 15,321,868
Total assets 24,303,833 22,660,513 22,748,526 22,396,107 22,092,593
Before distribution 4,790,367 6,304,390 5,141,128 3,398,866 3,646,329
Current liability
After distribution (Note) 7,097,072 5,966,838 4,274,119 4,901,408
Non-current liability 4,202,463 1,478,607 2,266,177 2,752,556 2,241,604
Before distribution 8,992,830 7,782,997 7,407,305 6,151,422 5,887,933
Total liability
After distribution (Note) 8,575,679 8,233,015 7,026,675 7,143,012
Equity attributable to shareholders of the parent 15,311,003 14,877,516 15,341,221 16,244,685 16,204,660
Common stock 8,257,099 8,257,099 8,257,099 8,257,099 8,257,099
Capital surplus 45,158 41,043 849 849 849
Before distribution 5,809,486 5,431,836 5,381,012 5,414,016 6,194,132
Retained earnings
After distribution (Note) 4,639,154 4,555,302 4,538,763 4,939,053
Other equity 1,199,260 1,147,538 1,702,261 2,572,721 1,752,580
Treasury stock 0 0 0 0 0
Non-controlling interest 0 0 0 0 0
Before distribution 15,311,003 14,877,516 15,341,221 16,244,685 16,204,660
Total shareholders' equity
After distribution (Note) 14,084,834 14,515,511 15,369,432 14,949,581
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Note: The earnings in 2018 will be distributed subject to the resolution of the shareholders' meeting in 2019.

Overview of financial status

I. Condensed balance sheet and statement of comprehensive income for the recent five fiscal years

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

Fiscal year Financial information for the recent years
Consolidated
Item 2018 2017 2016 2015 2014
Current assets 14,861,158 13,913,627 13,627,402 12,389,236 15,659,546
Property, plant and equipment 8,768,849 8,558,709 8,947,258 9,875,244 10,071,167
Intangible assets 1,851,601 1,942,350 2,179,937 2,397,426 2,467,432
Other assets 4,748,561 4,584,655 5,015,330 5,332,079 4,958,508
Total assets 30,230,169 28,999,341 29,769,927 29,993,985 33,156,653
Before distribution 8,172,613 10,811,273 9,963,898 7,974,847 10,445,749
Current liability
After distribution (Note) 11,603,955 10,789,608 8,850,100 11,700,828
Non-current liability 5,175,715 1,744,622 2,754,204 3,942,024 4,572,506
Before distribution 13,348,328 12,555,895 12,718,102 11,916,871 15,018,255
Total liability
After distribution (Note) 13,348,577 13,543,812 12,792,124 16,273,334
Equity attributable to shareholders of the parent 15,311,003 14,877,516 15,341,221 16,244,685 16,204,660
Common stock 8,257,099 8,257,099 8,257,099 8,257,099 8,257,099
Capital surplus 45,158 41,043 849 849 849
Before distribution 5,809,486 5,431,836 5,381,012 5,414,016 6,194,132
Retained earnings
After distribution (Note) 4,639,154 4,555,302 4,538,763 4,939,053
Other equity 1,199,260 1,147,538 1,702,261 2,572,721 1,752,580
Treasury stock 0 0 0 0 0
Non-controlling interest 1,570,838 1,565,930 1,710,604 1,832,429 1,933,738
Before distribution 16,881,841 16,443,446 17,051,825 18,077,114 18,138,398
Total shareholders' equity
After distribution (Note) 15,650,764 16,226,115 17,201,861 16,883,319
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Note: The earnings in 2018 will be distributed subject to the resolution of the shareholders' meeting in 2019.

Overview of financial status

Condensed statement of comprehensive income

Unit: thousand NTD

I. Condensed balance sheet and statement of comprehensive income for the recent five fiscal years

==> picture [484 x 386] intentionally omitted <==

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

Fiscal year Financial information for the recent years
Individual
Item 2018 2017 2016 2015 2014
Operating revenue 10,834,520 11,254,655 8,831,537 8,636,050 12,265,005
Gross profit 1,107,890 896,998 869,843 1,014,433 1,389,526
Operating profit 250,966 106,207 143,220 295,190 668,983
Non-operating income and expenses 1,077,163 790,340 928,346 -6,465 452,372
Net income before tax 1,328,129 896,547 1,071,566 288,725 1,121,355
Net income 1,192,186 874,107 988,352 529,115 1,141,338
Other comprehensive income (loss) 29,868 (552,296) (934,084) 765,989 565,480
Total comprehensive income 1,222,054 321,811 54,268 1,295,104 1,706,818
Net income attributable to shareholders
1,192,186 874,107 988,352 529,115 1,141,338
of the parent
Net income attributable to non-con-
0 0 0 0 0
trolling interests
Total comprehensive income attributable
1,222,054 321,811 54,268 1,295,104 1,706,818
to shareholders of the parent
Total comprehensive income attributable 0 0 0 0 0
to non-controlling interests
EPS (Note) 1.44 1.06 1.20 0.64 1.38
----- End of picture text -----

Note:[EPS (loss) is computed by income (loss) after tax divided by weighted average outstanding shares. The shares increased after earnings or ] additional paid-in capital transferred to capital should be computed retroactively.

Overview of financial status

[ Unit: thousand NTD]

I. Condensed balance sheet and statement of comprehensive income for the recent five fiscal years

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Fiscal year Financial information for the recent years
Consolidated
Item
2018 2017 2016 2015 2014
Operating revenue 29,751,218 31,766,237 26,955,090 25,981,759 31,868,574
Gross profit 3,488,714 3,328,879 3,880,881 3,375,615 3,963,338
Operating profit 1,301,814 1,202,526 1,764,946 1,396,683 1,939,858
Non-operating income and expenses 328,629 (65,391) (157,636) (750,683) (392,314)
Net income before tax 1,630,443 1,137,135 1,607,310 646,000 1,547,544
Net income 1,233,670 849,717 1,093,607 601,147 1,243,746
Other comprehensive income (loss) (6,708) (568,595) (1,072,228) 737,495 624,067
Total comprehensive income 1,226,962 281,122 21,379 1,338,642 1,867,813
Net income attributable to sharehold-
1,192,186 874,107 988,352 529,115 1,141,338
ers of the parent
Net income attributable to non-con-
41,484 (24,390) 105,255 72,032 102,408
trolling interests
Total comprehensive income attribut-
1,222,054 321,811 54,268 1,295,104 1,706,818
able to shareholders of the parent
Total comprehensive income attribut-
4,908 (40,689) (32,889) 43,538 160,995
able to non-controlling interests
EPS (Note) 1.44 1.06 1.20 0.64 1.38
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CPA's name and auditor's opinion

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Fiscal year CPA's name Auditor's opinion
2018 Po Shu HungAnn Tine Yu Unqualified opinion
2017 Po Shu HungAnn Tine Yu Unqualified opinion
2016 Po Shu HungAnn Tine Yu Unqualified opinion
2015 Po Shu HungAnn Tine Yu Unqualified opinion
2014 Po Shu HungAnn Tine Yu Unqualified opinion
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Overview of financial status

II. Financial analysis for the recent five fiscal years Financial analysis

II. Financial analysis for the recent five fiscal years

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Fiscal year Financial information for the recent years
Individual
Item
2018 2017 2016 2015 2014
Debt-asset ratio(%) 37.00 34.35 32.56 27.47 26.65
Financial
structure
Ratio of long-term capital to property, plant and equipment(%) 699.47 592.56 652.17 707.22 766.47
Current ratio(%) 87.68 58.84 75.58 103.92 118.01
Solvency Quick ratio(%) 34.79 23.76 35.57 53.21 72.05
Interest coverage ratio(%) 17.39 13.53 19.50 6.89 30.72
Receivables turnover rate (times) 9.88 9.21 7.27 6.19 8.00
Average collection days for receivables 36.94 39.63 50.21 58.97 45.64
Inventory turnover rate (times) 4.19 4.94 4.29 4.56 6.42
Operating Payables turnover rate (times) 11.90 11.26 9.49 12.37 15.49
ability
Average days of sales 87.11 73.89 85.08 80.04 56.85
Property, plant and equipment turnover rate (times) 3.90 4.12 3.28 3.39 5.07
Total assets turnover rate(times) 0.46 0.50 0.39 0.39 0.57
Return on assets(%) 5.36 4.11 4.59 2.56 5.45
Return on equity(%) 7.90 5.79 6.26 3.26 7.18
Profitability Ratio of income before tax to paid-in capital (%) 16.08 10.86 12.98 3.50 13.58
Profit margin before tax (%) 11.00 7.77 11.19 6.13 9.31
EPS (NTD) 1.44 1.06 1.20 0.64 1.38
Cash flow ratio (%) 6.81 2.58 2.30 31.33 11.07
Cash flows Cash flow adequacy ratio(％） 28.13 41.77 41.65 (Note) (Note)
Cash flow reinvestment ratio(%) (1.85) (3.02) (3.31) (0.79) (2.89)
Operating leverage 15.65 30.93 21.22 10.53 5.32
Leveraging
Financial leverage 1.48 3.07 1.68 1.20 1.06
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Current ratio, quick ratio and cash flow rate are mainly caused by the decrease in current liabilities.
Times interest earned and ratio of income before tax to paid-in capital are mainly caused by the increase in net profit before taxation.
Return on assets, return on equity and profit margin before tax are mainly caused by the increase in net profit after taxation.
Cash flow adequacy ratio is mainly caused by the decrease in the cash flow of business activities for the past 5 years.
Cash flow reinvestment ratio is mainly caused by the increase in the cash flow of business activities.
Business and financial leverage are mainly caused by the increase in operating profit.

Note: There are no five-year IFRS financial

Overview of financial status

II. Financial analysis for the recent five fiscal years

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Fiscal year Financial information for the recent years
Consolidated
Item
2018 2017 2016 2015 2014
Debt-asset ratio(%) 44.16 43.30 42.72 39.73 45.29
Financial
structure
Ratio of long-term capital to property, plant and equipment(%) 251.54 212.51 221.36 222.97 225.50
Current ratio(%) 181.84 128.70 136.77 155.35 149.91
Solvency Quick ratio(%) 102.14 72.44 82.41 95.02 93.75
Interest coverage ratio(%) 10.62 7.04 11.61 5.14 8.77
Receivables turnover rate (times) 8.21 8.19 7.59 7.21 8.03
Average collection days for receivables 44.45 44.56 48.08 50.62 45.45
Inventory turnover rate (times) 4.21 4.98 4.54 4.25 4.86
Operating Payables turnover rate (times) 15.71 15.75 14.71 16.85 19.55
ability
Average days of sales 86.69 73.29 80.39 85.88 75.10
Property, plant and equipment turnover rate (times) 3.43 3.63 2.86 2.61 3.14
Total assets turnover rate(times) 1.00 1.08 0.90 0.82 0.96
Return on assets(%) 4.62 3.42 4.08 2.31 4.24
Return on equity(%) 7.40 5.07 6.23 3.32 6.97
Profitability Ratio of income before tax to paid-in capital (%) 19.75 13.77 19.47 7.82 18.74
Profit margin before tax (%) 4.15 2.67 4.06 2.31 3.90
EPS (NTD) 1.44 1.06 1.20 0.64 1.38
Cash flow ratio (%) 22.92 14.72 9.11 52.71 19.49
Cash flows Cash flow adequacy ratio(％） 99.39 109.82 103.78 ( 註) ( 註)
Cash flow reinvestment ratio(%) 3.11 2.41 (0.18) 8.62 2.27
Operating leverage 8.52 8.23 5.76 6.88 4.93
Leveraging
Financial leverage 1.15 1.19 1.09 1.13 1.11
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Current ratio, quick ratio and cash flow rate are mainly caused by the decrease in current liabilities.
Interest coverage ratio is mainly caused by the increase in net profit before taxation.
Ratio of income before tax to paid-in capital is mainly caused by the increase in net profit before taxation.
Return on assets, return on equity, profit margin before tax and EPS are mainly caused by the increase in net profit before taxation.
Cash flow reinvestment ratio is mainly caused by the increase in net cash flow of business activities.

Note: There are no five-year IFRS financial

Overview of financial status

1. Financial structure:

(1) Debt-asset ratio ＝total liabilities ／total assets
(2) Ratio of long-term capital to property, plant and equipment ＝(total equity + non-current liabilities) ／ net worth of property, plant and equipment

2. Solvency:

(1) Current ratio ＝current assets ／current liabilities
(2) Quick ratio ＝(current assets －inventory －prepaid expenses) ／current liabilities
(3) Interest coverage ratio ＝income before income tax and interest expenses ／current interest expenses

3. Operating ability:

(1) Receivables (including accounts receivable and notes receivable arising from business operations) turnover rate = net sales ／average receivables (including accounts receivable and notes receivable arising from business operations) for each period
(2) Average collection days for receivables = 365 ／receivables turnover rate
II. Financial analysis for the recent five fiscal years
(3) Inventory turnover rate = cost of sales ／average inventory
(4) Payables (including accounts payable and notes payable arising from business operations) turnover rate = cost of sale ／ average payables (including accounts payable and notes payable arising from business operations) for each period
(5) Average days of sale = 365 ／inventory turnover rate
(6) Property, plant and equipment turnover rate = net sales ／average net worth of property, plant and equipment
(7) Total asset turnover rate = net sales ／average total assets

4. Profitability:

(1) Return on assets = [net income + interest expenses (1 －tax rate)] ／average total assets
(2) Return on equity = net income ／average total equity
(3) Profit margin before tax = net income ／net sales
(4) EPS ＝(profit and loss attributable to owners of the parent －dividends on preferred shares) ／weighted average number of issued shares

5. Cash flow:

(1) Cash flow ratio = net cash flow from operating activities ／current liabilities
(2) Net cash flow adequacy ratio = net cash flow from operating activities for the most recent five years ／(capital expenditures + inventory increase + cash dividend)
(3) Cash flow reinvestment ratio = (net cash flow from operating activities －cash dividend) ／gross property, plant and equipment value + long-term investment + other non-current assets + working capital)

6. Leveraging:

(1) Operating leverage = (net operating revenue －variable operating costs and expenses) ／operating income
(2) Financial leverage = operating income ／(operating income －interest expenses)

Overview of financial status

III. Audit Committee's Report

The Board of Directors has prepared and submitted the Company's 2018 Business Report, Financial Statements and earnings distribution proposal. The above Financial Statements have been audited by KPMG and an audit report is accordingly issued . The above Business Report, Financial Statements, and earnings distribution proposal have been examined and deemed as fairly presented by Audit Committee. This Audit Report is duly submitted in accordance with Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act. Submission for perusal.

To:

The 2019 Annual Shareholders' Meeting

III. Audit committee's report

TSRC Corporation

The convener of Audit Committee Robert Hung

Date: March 14, 2019

Overview of financial status

IV. Consolidated financial statements and independent auditors' report for the most recent fiscal year- Please refer to Page 84.
V. Individual financial statements and independent auditors' report for the most recent fiscal year-Please refer to Page 158.
VI. Financial difficulties which the Company or its affiliates have experienced, and how said difficulties will affect the Company's financial situation - None.
IV. Consolidated financial statements and independent auditors' report for the most recent fiscal year
V. Individual financial statements and independent auditors' report for the most recent fiscal year VI. Financial difficulties which the Company or its affiliates have experienced, and how said difficulties will affect the Company's financial situation

Review and analysis of the Company's financial position and financial performance, and risk management

Review and analysis of the Company's financial position and financial performance, and risk management

I. Financial position:

Unit: thousand NTD

I. Financial position
II. Financial performance

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Item Fiscal year 2018 2017 Amount change Percentage change (％)
Current assets 14,861,158 13,913,627 947,531 6.81
Property, plant and equipment 8,768,849 8,558,709 210,140 2.46
Intangible assets 1,851,601 1,942,350 (90,749) (4.67)
Other assets 4,748,561 4,584,655 163,906 3.58
Total assets 30,230,169 28,999,341 1,230,828 4.24
Current liabilities 8,172,613 10,811,273 (2,638,660) (24.41)
Non-current liabilities 5,175,715 1,744,622 3,431,093 196.67
Total liabilities 13,348,328 12,555,895 792,433 6.31
Capital stock 8,257,099 8,257,099 0 0.00
Capital Surplus 45,158 41,043 4,115 10.03
Retained earnings 5,809,486 5,431,836 377,650 6.95
Total shareholders' equity 16,881,841 16,443,446 438,395 2.67
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Description of addition, deduction, changes, and impacts:

The decrease in current liabilities and the increase in non-current liabilities are caused by repaying short-term loan and increase long-term loan, thereby enhancing liquidity.

II. Financial performance:

Analysis and comparison of financial performance

Unit: thousand NTD

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Item Fiscal year 2018 2017 Amount change Percentage change (％)
Revenue 29,751,218 31,766,237 (2,015,019) (6.34)
Operating cost 26,262,504 28,437,358 (2,174,854) (7.65)
Gross profit 3,488,714 3,328,879 159,835 4.80
Operating expenses 2,439,413 2,345,389 94,024 4.01
Other income and expenses 252,513 219,036 33,477 15.28
Operating profit 1,301,814 1,202,526 99,288 8.26
Non-operating revenues and gains 328,629 (65,391) 394,020 602.56
Net income before tax 1,630,443 1,137,135 493,308 43.38
Less: income tax expenses 396,773 287,418 109,355 38.05
Net income 1,233,670 849,717 383,953 45.19
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Description of addition, deduction, changes, and impacts:

The gross profit of the current year increased compared to the previous year, which was mainly caused by successful transformation of advanced shoe materials this year.
The increase in non-operating revenue and income is mainly caused by the increase of profits from the reinvested companies in the current period and excellent financial management.
The increase in the income tax expenses is mainly caused by the increase in profit during the current period and the increase in the tax rate in Taiwan.

Review and analysis of the Company's financial position and financial performance, and risk management

Sales volume forecast and the basis there of

Unit:thousands metric ton

Name of product	2019	2019
	Sales volume fore cast	Basis
Synthetic rubber and elastomers	453.2	Subject to the requirement of the market and customers
Applied Materials	15.8	Subject to the requirement of the market and customers forecast growth
Total	469.0

III. Cash flow analysis:

III. Cash flow analysis

Ch bl t	Net cash flow f ti	Cash inflow	The impact of h t	Rid	Remedy for insufficient cash	Remedy for insufficient cash
as aance a the beginning	rom operang activities of the year	(outflow) of the year	excange rae fluctuation on cash	emaner (deficit) of cash	Investment plan	Financial plan
3,560,440	1,872,988	(1,212,789)	307,113	4,527,752	-	-

<1> Analysis of change in cash flow in the current year:

Operating activities: This mainly comes from the cash inflow of NTD 2,401,812 thousand generated from income items, cash outflow of NTD 153,294 thousand generated from net changes of operating assets and liabilities, net interest expense of NTD 89,204 thousand and income tax payment of NTD 286,326 thousand.
Investing activities: The NTD 991,852 thousand net cash outflow from investing activities is mainly generated from cash outflow of NTD 1,236,918 thousand from acquiring property, plants and equipment, cash inflow of NTD 131,845 thousand from collecting dividends,cash inflow of NTD 203,207 thousand from investing stock amount and cash inflow of NTD 89,986 thousand from acquiring other non-current assets.
Financing activities: The net cash outflow of NTD 220,937 thousand generated from financing is mainly caused by the net increase of NTD 2,525,355 thousand of short-term loans, net increase of NTD 350,477 thousand of short-term notes and bills payables, net increase of NTD 3,448,602 thousand of long-term loan, decrease of NTD 6,584 thousand for rent payment and cash dividend appropriation of NTD 787,123 thousand.

<2> Corrective measures to be taken in response to illiquidity: None

<3> Liquidity analysis for the coming year:

Unit: thousand NTD

Cash balance at the beginning(1)	Projected cash flow from operation of the year (2)	Estimated annual net cash flow from investing and financing activities(3)	Projected remainder (deficit) of cash (1)+(2)-(3)	Remedy for insufficient cash	Remedy for insufficient cash
				Investment plan	Financial plan
4,527,752	2,092,000	(1,752,000)	4,867,752	-	-

Review and analysis of the Company's financial position and financial performance, and risk management

IV. Impacts on financial operations of any major capital expenditure

<1> Major capital expenditure condition and source of funding

Unit: thousand NTD

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Actual of Year
Item Sources of funds intended Amount
completion date 2018 2019
New lines of SEBS Self-owned capital and 2019 3,069,000 841,150 1,634,000
loads from banks
SIS Pelletizing Self-owned capital 2020 294,500 140,300 63,000
Production lines of ad- Self-owned capital and 2020 682,000 76,290 605,710
vanced shoe materials loads from banks
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<2> Benefits generated: Expected to increase profitability.
V. The Company's reinvestment policy for the most recent fiscal year, the main reasons for profit/loss generated thereby, the plan for improving re-investment profitability, and investment plans for the coming year:
IV. Effect upon financial operations of any major capital expenditure during the most recent fiscal year
V. The Company's reinvestment policy for the most recent fiscal year, the main reasons for profit/ loss generated thereby, the plan for improving re-investment profitability, and investment plans for the coming year
VI. Analysis and assessment of risk management

To maintain the leading roles in synthetic rubber, TSRC actively steps into the special chemical products in the reinvestment policy and aims at the development of high gross profits and high-added value products in order to maintain the overall operating performance.

VI. Analysis and assessment of risk management

<2> The effect of the change in interest rate and exchange rate and inflation on the profit and loss of the Company and future countermeasures

Unit: thousand NTD

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2018 Amount Accounting for the percentage of Accounting for the percentage of
net operating revenues (%) net profit before taxation (%)
Net interest income (expense) (91,259) (0.3) (5.6)
Net exchange gain (loss) 31,065 0.1 1.9
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Interest rate change:

The interest rate risk of the Company comes from the liabilities generated from the operating demand. If there are obvious fluctuations for the expected interest rate, the Company will adopt proper financial instruments, such as longterm liabilities with fixed interest rates, adjustment in the borrowing currency or loan period, to lower the costs of funds with the most suitable borrowing portfolio.

Exchange rate fluctuation:

The Company uses foreign currency to collect and make payments for part of the product sales and procurement, so the obvious exchange rate fluctuation will have an impact on the operating revenues, costs of sale and operating gains of the Company. The Company conducts exchange rate hedging on the net position after offering the foreign currency assets and liabilities possessed and generated from expected transactions to lower the impact of exchange rate fluctuation on operation.

Inflation:

The fluctuation of raw material prices may have an impact on the operation costs of the Company. The responding measures against the risk include the mechanism of bulk procurement and long-term contracts to lower the changes in costs. As for the sale price of products, the Company will make proper adjustments in accordance with costs and market conditions to manage the impact generated from inflation on the Company.

<2> Policy on high risk and high leverage investments, loans to others, guarantee and endorsement and derivative transactions, and the main reason for profit or loss, and response measure to be taken in the future

The Company has not engaged in any high-risk, high-leveraged investments, extending loans to others, or derivatives transactions. Granting endorsements and guarantees is limited to an investee Company accounted for under the equity method. The above transactions will be performed in accordance with relevant requirements prescribed in the Company's “Procedures for the Handling Acquiring or Disposal of Assets,” “Procedures for Extending Loan to Others,” “Procedures for Granting Endorsements and Guarantees.”

Review and analysis of the Company's financial position and financial performance, and risk management

<3> R&D work to be carried out in the future and future expenditures expected for R&D work

Unit: thousand NTD

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Expected R&D
Project name
spending
Develop new generation S-SBR products and enhance the capabilities of core technologies 60,000
Develop New catalyst BRproducts 10,000
Develop high value-added TPE products 210,000
Construct Applied Research Center in Shanghai 80,000
Develop customized shoe materials and high-end applied materials 78,000
Develop a leading production process technology platform 96,000
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<4> Effect on the Company's financial operations of important policies adopted and changes in the legal environment at home and abroad, and measures to be taken in response.
IV. Effect upon financial operations of any major capital expenditure during the most recent fiscal year
V. The Company's reinvestment policy for the most recent fiscal year, the main reasons for profit/ loss generated thereby, the plan for improving re-investment profitability, and investment plans for the coming year
VI. Analysis and assessment of risk management
The Company has always complied with government's laws and regulations and monitored the change in government policies and laws at home and abroad. The change in government policies and laws in the country and overseas in the recent year did not cause any effect to the Company's finance and operations.
<5> Effect of changes in technology and industry dynamics on the Company's financial and business operations, as well as the measures to be taken in response:

As the industry technology develops, TSRC has invested greatly in R&D and process technology, continued to build various technology platforms, and worked with customers to jointly develop new technologies and products. Through these activities, TSRC was able to enhance its technology and provide new solutions for customers, strengthening TSRC's position in specialty materials applications and market segments. Since synthetic rubber business is highly influenced by the external factors such as butadiene price, natural rubber price, and synthetic rubber supply-demand balance, a salesproduction-procurement (SPP) coordination mechanism is in place to periodically review those external factors to control upstream cost and reduce the impact of price fluctuations to the Company. In addition, TSRC has expanded its global presence to reduce the risk of being held limited to a single geographic location or industrial area, further strengthening TSRC's ability in responding to market changes.

<6> Effect of changes in the Company's corporate image on the Company's crisis management, and measures to be taken in response:

TSRC continues to be fully engaged in developing energy-saving materials and creating operational success in accordance with its Company value in corporate social responsibility (CSR) and sustainable business philosophy. TSRC also continues to pursue improvement and innovation in the economic, environmental and social dimensions of CSR, endeavoring to serve as a good corporate citizen and a positive force to the society. Moreover, TSRC attaches great importance to supporting the society throughvarious activities in helping disadvantaged students in local communities and other disadvantaged groups. At the same time, TSRC volunteers in schools to help with interactive chemistry education activities, demonstrating TSRC's attention to corporate contribution and creating value to the society. Furthermore, TSRC implements policies to protect the Company's intellectual properties, confidential information, and personal information of its customers and employees.

TSRC expects to integrate CSR into its core operation process, fulfill sustainable growth, and become customers' longterm partners.In corporate governance, TSRC regularly holds shareholder meetings and investor conferences to increase the transparency of the Company's financial and operations.As for crisis management, TSRC has existing procedures to respond to crisis events including natural disasters and workplace accidents, reducing operational uncertainty to the minimum level.

<7> Expected benefits and risks associated with merger and acquisitions, and mitigation measures being or to be taken:

To achieve corporate transformation and increase shareholders value, TSRC continues to develop and assess equity investment, strategic alliance and merger and acquisitions (M&A)opportunities. The main risks of cross-border M&A include compliance with local M&A regulations and foreign investment requirements as well as post-M&A operation management. To ensure a smooth transition from transaction to post-deal integration, the Company would consult professional advisors with local expertise to set the deal structure conforming to both local and domestic regulations, while the management team would construct a global operating model to align with the Company's cross-border M&A strategy.

Review and analysis of the Company's financial position and financial performance, and risk management

<8> Expected benefits and risks associated withplant expansion and mitigation measures being or to be taken:

To achieve organic growth and strengthen business portfolio via new products and geographic expansion, TSRC is constructing a new 20,000 metric tons advanced SEBS line in Nantong, China. The new SEBS production line incorporates new processes and technologies, focusing on plastic modification, automotive, and medical applications such as IV bag and tubing. It is expected to commercialize in 2019 Q4 and start to contribute to the Company's revenue, profit, and overall competitiveness. Plant expansion is for operational purpose and the decision was made with careful capital expenditure planning, thus the risks associated with plant expansion should be limited.

<9> Risks associated with any consolidation of sales or purchasing operations, and mitigation measures being or to be taken:
Purchase: Capacity of the suppliers of butadiene, the Company's main raw materials, is limited. In order to stabilize the source of raw materials and in consideration of the acquisition cost, the Company entered into the supply contract with the domestic major suppliers to concentrate the supply. If the domestic suppliers suffer force majeure, the Company still can acquire the raw materials from foreign suppliers. Therefore, there is no likelihood of short supply of the raw materials.
- Sales: The Company's major customers are domestic and international tire companies. Although the downstream tire companies face slower growth in demand, its most sales are contract based thanks to good longterm partnership with international major manufacturers. Meanwhile, customers have sound financial structure while business units have conducted credit line control on all customers and worked on the credit investigations on account customers. Through the above measures, no significant risks occurred on the management and operation of synthetic rubber business division.

VII. Other important matters

<10> Effect upon and risk to the Company in the event a major quantity of shares belonging to a director, supervisor, or shareholder holding greater than a 10 percent stake in the Company has been transferred or has otherwise changed hands, and mitigation measures being or to be taken:

In the case of directors, managers, or shareholders holding more than 10% of the Company's common share transferring a major quantity of shares or otherwise changed hands may result in the change of management of the Company or affecting the stock price of the Company. TSRC's directors, managers, and shareholders holding more than 10% of the Company's common share are required to report any changes in their shareholding to the competent authority. As of the date of this annual report, there have been no events of TSRC's directors, manager, or shareholders holding more than 10% of the Company's common share transferring a major quantity of shares or otherwise changed hands.

<11> Effect upon and risk to Company associated with any change in governance personnel or top management, and mitigation measures being or to be taken: No
<12> Litigious and non-litigious matters involved the Company and/or any Company director, any Company supervisor, the general manager, any person with actual responsibility for the firm, any major shareholder holding a stake of greater than 10 percent, and/or any Company or companies controlled by the Company: No
<13> Other important risks, and mitigation measures being or to be taken: No

VII. Other important matters

Risk Assessment and countermeasures for information security

In terms of structure of information system based on its risk level, data copy and offsite host redundant mechanism are built, and the copied media are sent to offsite places for preservation to ensure the data security of information system. In addition, status monitoring of all equipment in major computer faculties are enhanced, double-layer network fire wall mechanism is built, and timely monitoring and treatment of abnormal network messages are performed to protect changing network security from threats and infection of hacker virus and ensure proper operation and data security of information network system. Moreover, the design should be reviewed and planned every year based on the risk level of information system host to enhance proper resources of software and hardware and countermeasures, such as improving operation procedure, etc.

Special items to be included Special items to be included

Special items to be included

Special items to be included

I. Information related to the Company's affiliates

<1> Organizational chart of affiliates

I. Information related to the Company's affiliates

==> picture [509 x 575] intentionally omitted <==

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

TSRC Corp.
100.00% 100.00% 100.00%
19.48%
Hardison International TSRC (Vietnam)
Trimurti Holding Corporation
Corporation Co., Ltd.
100.00% 80.52% 100.00% 100.00%
TSRC
Triton International Dymas Corporation Polybus Corporation (Hong Kong)
Holdings Pte Ltd. Limited
Corporation
100.00% 55.00% 65.44% 100.00% 100.00%
TSRC (Nantong) TSRC-UBE (Nantong) Shen Hua Chemical TSRC (Shanghai)
TSRC (Lux.)
Industries Ltd Chemical Industrial Industrial Co.,Ltd Industries Ltd
Corporation
Company Limited S.à r.l.
100.00%
100.00%
TSRC (USA)
Investment
Corporation
Dexco Polymers 99.00%
Operating Company LLC
1.00%
Dexco Polymers
L.P.
----- End of picture text -----

Special items to be included

<2> Profiles of the Company's affiliates

I. Information related to the Company's affiliates

==> picture [492 x 519] intentionally omitted <==

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

Name of enterprise Date of Address Actual received Major business or
incorporation capitals production items
Trimurti Holding Palm Grove House, P.O. Box 438, Road
March 10,1994 USD 86,920,000 Investment corporation
Corporation Town, Tortola, B.V.I.
Hardison Interna- Palm Grove House, P.O. Box 438, Road
March 11,1994 USD 3,896,000 Investment corporation
tional Corporation Town, Tortola, B.V.I.
Palm Grove House, P.O. Box 438, Road
Dymas Corporation March 19,1991 USD 5,960,000 Investment corporation
Town, Tortola, B.V.I.
Polybus Corporation February 25, 100 Peck Seah Street #09-16 Singapore Trading and investment
SGD 105,830,000
Pte Ltd. 1995 079333 corporation
TSRC (Hong Kong) March 19, 15/F BOC Group Life Assurance Tower 136
Limited 2008 Des Voeux Road Central USD 77,850,000 Investment corporation
Triton International
Palm Grove House, P.O. Box 438, Road USD 50,000
Holdings Corpora- May 24, 1993 Investment corporation
Town, Tortola, B.V.I.
tion
TSRC (Lux.) Corpora- 34-36 avenue de la Liberté, L-1930 Luxem- Trading and investment
tion S.à r.l. July 26, 2011 bourg EUR 50,800,000 corporation
2711 Centerville Road, Suite 400, Coun-
TSRC(USA) Invest- January 27,
ment Corporation 2011 try of New Castle, Wilmington, Delaware, 19808 USD 70,050,000 Investment corporation
Dexco Polymers L.P. February 20, 2002 12012 Wickchester Lane, Suite 280, Hous-ton, TX 77079 Note 1 Production and sale of TPE
Production and sale of
TSRC (Shanghai) February 22, No. 1406, Yu Shu Road,Hi-tech Park Song-
Industries Ltd 2001. jiang Zone, Shanghai,P.R.C USD 5,500,000 compounding materi-als
Shen Hua Chemical March 29, NO.1 Shen Hua Road, Nantong Economic Production and sale of
Industrial Co., Ltd 1996. & Technology Development Area, Nan- USD41,220,000 synthetic rubber prod-
tong Jiangsu, P.R.C. ucts
TSRC (Nantong) September 05, No. 22 Tong Wang Road, Nantong Eco- Production and sale of
Industries Ltd 2006 nomic & Technological Development Area, USD 105,125,000 TPE
Nantong Jiangsu, P.R.C.
TSRC-UBE (Nan-
tong) Chemical December 06, No. 22 Tong Wang Road, Nantong Eco- Production and sale of
Industrial Company 2006 nomic & Technological Development Area, USD 40,000,000 butadiene rubber
Limited Nantong Jiangsu, P.R.C.
Production and pro-
8 VSIP II-A Street 31, Vietnam Singapore cessing of plastic
TSRC (Vietnam) Co., October 16,
Ltd. 2018 Industrial Park II-A, Tan Uyen Town, Binh USD 9,000,000 rubber granular, Ther-
Duong Province, Vietnam moplastic Elastomer
and plastic compound
----- End of picture text -----

Note1: TSRC (USA) Investment Corporation acquired 100% of equities of Dexco Polymers Operating Company LLC and Dexco Polymers LP with USD192,617 thousand in 2011.
Note2: TSRC (USA) Investment Corporation is a limited liability partner of Dexco Polymers L.P.; Dexco Polymers Operating Company LLC is a general partner of Dexco Polymers L.P. that is not involved in the actual operation. Thus, relevant information of Dexco Polymers Operating Company LLC is not additionally disclosed.

Special items to be included

<3> Companies presumed to have a relationship of control and subordination: No
<4> The industries covered by the business operated by the affiliates and mutual dealings and division of work:
I. Information related to the Company's affiliates

==> picture [494 x 614] intentionally omitted <==

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

Connection
Name of enterprise Business covered with Mutual dealings and division of work
business
Investment corporation, reinvest-
Trimurti Holding Cor- ment in Polybus Corporation Pte Ltd. No Recognized as the Company's offshore investee
poration
And TSRC (Hong Kong) Limited.
Investment corporation, reinvest-
Hardison Internation- ment in Dymas Corporation-Triton No Recognized as the Company's offshore investee
al Corporation International Holdings Corporation
and TSRC Biotech Ltd.
Dymas Corporation Investment Corporation No Recognized as the Company's offshore investee
Trading and investment corporation,
reinvestment in Shen Hua Chemical Recognized as the Company's offshore invest-
Polybus Corporation Pte Ltd. Industrial, TSRC (Nantong) Industries Yes ee; responsible for the part of sales activities of the Company, TSRC (Nantong) Industries Ltd.
Ltd. and TSRC-UBE (Nantong) Chem-
and Shen Hua Chemical Industrial Co., Ltd.
ical Industries Company Limited
Investment corporation, reinvest-
TSRC (Hong Kong) ment in TSRC (Shanghai) Industries No Recognized as the Company's offshore investee
Limited Ltd. and TSRC (Jinan) Industries Ltd.
and TSRC(Lux.) Corporation S.à r.l.
Triton International
Investment corporation No Recognized as the Company's offshore investee
Holdings Corporation
Recognized as the Company's offshore invest-
Trading and investment corporation,
TSRC (Lux.) Corpora- reinvestment in TSRC (USA) Invest- Yes ee; responsible for certain sales activities of The
tion S.à r.l. Company and Dexco Polymers L.P. to which and
ment Corporation
TSRC (Nantong) Industries Ltd.
Investment corporation, reinvest-
Such Company is an overseas investee Com-
TSRC (USA) Invest- ment in Dexco Polymers L. P. and Yes pany of the Company, providing support in
ment Corporation Dexco Polymers Operating Company
LLC research and development technology
That Company is the Company's overseas
investee Company, and provides the Compa-
Dexco Polymers L.P. Production and sale of TPE Yes ny with support for R&D technologies and
financial & accounting personnel. The Com-
pany provides that Company with information
services.
Such Company is an overseas investee Com-
pany of the Company. The Company sells part
TSRC (Shanghai) In-dustries Ltd. Production and sale of compounding materials Yes of the products to such Company and provides
management, information and technical ser-
vices.
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Special items to be included

I. Information related to the Company's affiliates

==> picture [494 x 281] intentionally omitted <==

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

Connection
Name of enterprise Business covered with Mutual dealings and division of work
business
That Company is the Company's overseas in-
vestee Company, and provides the Company
Shen Hua Chemical Production and sale of synthetic rub- Yes with support for R&D technologies and finan-
Industrial Co., Ltd ber products cial & accounting personnel. The Company
provides that Company with information ser-
vices.
Such Company is an overseas investee Com-
pany of the Company. The Company sells part
TSRC (Nantong)In-dustries Ltd Production and sale of TPE Yes of the products to such Company and provides
management, information and technical ser-
vices.
That Company is the Company's overseas in-
vestee Company, and provides the Company
TSRC-UBE (Nantong)
Chemical Industrial Production and sale of synthetic rub- Yes with support for R&D technologies and finan-
ber products cial & accounting personnel. The Company
Company Limited
provides that Company with information ser-
vices.
The Company is the overseas investee of our
Production and processing of plastic
TSRC (Vietnam) Co., Ltd. rubber granular, Thermoplastic Elas- Yes Company. Our Company provides the Compa-ny with marketing, management, information
tomer and plastic compound
and technology services.
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Special items to be included

<5> Profiles of Directors, Supervisors and Presidents of the Company's affiliates:

I. Information related to the Company's affiliates

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

Shares held
Name of enterprise Job title Name of representative
Share(s) Shareholding
Director Joseph Chai - -
Trimurti Holding Corporation Director Wing-Keung Hendrick Lam - -
Director Edward Wang - -
Director Joseph Chai - -
Hardison International Corporation
Director Wing-Keung Hendrick Lam - -
Director Joseph Chai - -
Dymas Corporation
Director Wing-Keung Hendrick Lam - -
Director Joseph Chai - -
Polybus Corporation Pte Ltd. Director Wing-Keung Hendrick Lam - -
Director Edward Wang - -
Director Joseph Chai - -
TSRC (Hong Kong) Limited Director Wing-Keung Hendrick Lam - -
Director Edward Wang - -
Director Wing-Keung Hendrick Lam - -
Director Edward Wang - -
TSRC (Lux.) Corporation S.à r.l. Director Max Tsai - -
Director David Maria - -
President Christian Kafka - -
Director Wing-Keung Hendrick Lam - -
Director Edward Wang - -
TSRC(USA) Investment Corporation
Director Max Tsai - -
President Wing-Keung Hendrick Lam - -
Director Joseph Chai - -
Triton International Holdings Corpora-
tion Director Edward Wang - -
Dexco Polymers L.P. President Max Tsai - -
Chairman Wing-Keung Hendrick Lam - -
Director Huang-Cheng Kuo - -
Director Chin-Bao Lu - -
TSRC (Shanghai) Industries Ltd
Director Thomas Lin - -
Supervisor Edward Wang - -
President Peter Lee - -
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Special items to be included

I. Information related to the Company's affiliates

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

Shares held
Name of enterprise Job title Name of representative
Share(s) Shareholding
Chairman Kevin Liu - -
Director Edward Wang - -
Director R. L. Chiu - -
Director Thomas Lin - -
Shen Hua Chemical Industrial Co., Ltd
Director Chao Yang Jiang - -
Director Qiang Xin Lu - -
Director SATOSHI OYAMA - -
President Chao Yang Jiang - -
Chairman Wing-Keung Hendrick Lam - -
Director Calvin Su - -
TSRC (Nantong) Industries Ltd Director Chin-Bao Lu - -
Supervisor Edward Wang - -
President Calvin Su - -
Chairman Kevin Liu - -
Director Thomas Lin - -
Director R. L. Chiu - -
TSRC-UBE (Nantong) Chemical Industri- Director Mori Shigeru - -
al Company Limited
Director SATOSHI OYAMA - -
Supervisor Edward Wang - -
President Chao Yang Jiang - -
Chairman Wing-Keung Hendrick Lam - -
Director Huang-Cheng Kuo - -
TSRC (Vietnam) Co., Ltd.
Director Edward Wang - -
President Huang-Cheng Kuo - -
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Special items to be included

<6> Overview of operation of affiliates

Unit: thousand NTD

II. State of the Company's private placement of marketable securities

III. Holding or disposal of the Company's shares by the Company's subsidiaries IV. Other matters that require additional description

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Gain/loss
EPS
enterpriseName of Capital Total assets liabilitiesTotal Net worth Operating revenue income (loss)Operating current period after tax
(NTD)
(after tax)
Trimutri Holding 2,667,578 13,134,489 1,260 13,133,229 - (40,282) 994,253 11.44
Corporation
Hardison Inter-
national Corpo- 119,745 860,521 - 860,521 - (445) 66,590 17.09
ration
Dymas Corpora- 183,155 916,614 - 916,614 - (94) 73,827 12.39
tion
Polybus Corpo- 2,212,776 8,100,666 74,325 8,026,341 634,887 18,885 684,472 6.47
ration Pte Ltd.
TSRC (Hong 2,392,564 3,251,800 17,815 3,233,985 - (477) 107,041 1.37
Kong) Limited
TSRC (Lux.)
Corporation 1,788,399 3,610,697 921,568 2,689,129 2,863,685 6,492 46,818 0.92
S.à r.l.
TSRC (USA) In-
vestment Corpo- 2,152,847 3,260,445 642,544 2,617,901 - (178,003) 43,108 0.62
ration
Dexco Polymers - 2,505,267 944,311 1,560,956 4,351,411 243,552 230,238 -
L.P.
Triton Interna-
tional Holdings 1,537 115,984 - 115,984 - (38) 7,580 151.60
Corporation
TSRC (Shanghai) -
169,032 499,902 73,299 426,603 530,922 63,532 63,134
Industries Ltd
Shen Hua Chem-
ical Industrial 1,266,814 2,949,565 275,029 2,674,536 6,825,293 84,423 47,054 -
Co., Ltd
TSRC (Nantong) -
3,230,807 5,430,809 1,082,232 4,348,577 4,660,339 776,496 578,533
Industries Ltd
TSRC-UBE (Nan-
tong) Chemical -
1,229,320 2,223,186 786,479 1,436,707 2,944,503 84,563 56,049
Industrial Com-
pany Limited
TSRC (Vietnam) - -
276,597 276,329 1,934 274,395 (2,172) (2,160)
CO., Ltd.
----- End of picture text -----

Note:[Spot exchange rate on the balance sheet date under the title of assets=USD1:NTD 30.733. ] Spot exchange rate on the balance sheet date under the title of income=USD1:NTD 30.1465.

II. State of the Company's private placement of marketable securities: No.

III. Holding or disposal of the Company's shares by the Company's subsidiaries: No.
IV. Other matters that require additional description: No.

Other disclosures

Other disclosures

<1> Employees' ethics

The Company published the“Code of Dutiful Conduct”for the employees in 2002, followed by 5 amendments which clearly specifying that, in performing relevant internal and external Company tasks under their duties in the Company, employees must comply with the regulations about the effective utilization of resources and assets, the protection of trade secrets, the prohibition of insider trading, anti-trust rules, fair trade, avoidance of conflict between the Company and personal interests, avoidance of private benefits, the prohibition of bribery, and regulations or network use and second jobs. Corresponding sanctions are also put in place.

<2> Protection measures for working environment and employees' safety

Based on the“Security Policy”formulated by the Company, people orientation is disclosed as the core value of the Company. Furthermore, through the operation specifications for“technology,”“safety culture,”“Responsibility, ”and “communication ”the goals of zero disasters and zero losses are pursued.

The Company organizes the emergency response, disaster-prevention and safety training, annual health examination, health workshops and psychological consultation, and safety operation environmental testing on a regular basis to ensure that the workplace security and employee personal safety.

The Company has also achieved OHSAS 18001 and CNS15506 requirements for certificates of Occupational Health and Safety Management System, and gained the ISO14001 environmental management system certification to duly fulfill its environmental responsibilities.

Any circumstances referred to in Paragraph 3(2) of Article 36 of the Securities and Exchange Act which might materially affect shareholders' equity or the price of the Company's securities

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Consolidated financial statement

Representation Letter

The entities that are required to be included in the combined financial statements of TSRC Corporation as of and for the year ended December 31, 2018 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 the International Financial Reporting Standards No. 10, "Consolidated Financial Statements." In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, TSRC Corporation does not prepare a separate set of combined financial statements.

Company name: TSRC Corporation Chairman: Nita Ing Date: March 14, 2019

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Independent Auditors' Report

To the Board of Directors of TSRC Corporation:

Opinion

We have audited the consolidated financial statements of TSRC Corporation ("the Group"), which comprise the consolidated statements of financial position as of December 31, 2018 and 2017, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years ended December 31, 2018 and 2017, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years ended December 31, 2018 and 2017 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards ("IFRSs"), International Accounting Standards ("IASs"), interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our 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 Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the the Group in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

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

Revenue recognition
Please refer to note 4(q), 6(v) and note 6(w) for disclosures related to revenue recognition. Description of key audit matter:

Revenue is the key indicator used by investors and management while evaluating the Group's finance or operating performance. The Group initially adopted IFRS 15 and the accuracy of the timing and amount of revenue recognized have significant impact on the financial statements, for which the assumptions and judgments of revenue measurement and recognition rely on subjective judgments of the management.Therefore, we consider it as the key audit matter. How the matter was addressed in our audit:

Testing the effectiveness of design and implementing the internal control (both manual and system control) of sales and collecting cycle; reviewing the revenue recognition of significant sales contracts to determine whether the accounting treatment, key judgment, estimation, and accounting treatment are reasonable; analyzing the changes in top 10 customers from the most recent period and last year, and the changes in the price and quantity of each category of product line to determine whether if there are any significant misstatements; selecting sales transactions from a period of time before and after the balance sheet date, and verifying with the vouchers to determine the accuracy of the timing and amounts of revenue recognized; understanding whether if there is a significant subsequent sales return or discount; and reviewing whether the disclosure of revenue made by the management is appropriate.

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2. Inventory measurement

Please refer to note 4(h), note 5, and note 6(g) for disclosures related to inventory measurement.

Description of key audit matter:

The inventory of the Group includes various types of synthetic rubber and its raw material. Since there is an oversupply and a low market demand in the rubber manufacturing industry, which may result in a decline on the price of raw material, the carrying value of inventories may exceed its net realizable value. The measurement of inventory depends on the evaluation of the management based on evidence from internal and external, both subjective and objective. Therefore, we consider it as the key audit matter.

How the matter was addressed in our audit:

The key audit procedures performed is to understand management's accounting policy of inventory measurement and determine whether if it is reasonable and is being implement. The procedures includes reviewing the inventory aging documents and analyzing its changes; obtaining the documents of inventory measurement and evaluating whether if the bases used for net realizable value is reasonable; selecting samples and verifying them with the vouchers to test the accuracy of the amount; and reviewing whether the disclosure of inventory measurement made by the management is appropriate.

Other Matter

TSRC Corporation has additionally prepared its parent company only financial statements as of and for the years ended December 31, 2018 and 2017, on which we have issued an unqualified opinion.

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

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

In preparing the consolidated financial statements, management is responsible for assessing the 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 are responsible for overseeing the Group's financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

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

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

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

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Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our 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.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and 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 also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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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 auditor's report are Po-Shu Huang and Ann-Tien Yu.

KPMG

Taipei, Taiwan (Republic of China) March 14, 2019

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TSRC CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars)

December 31, 2018	December 31, 2018	December 31, 2018	December 31, 2017	December 31, 2017
	Amount	%	Amount	%
$	4,527,752 679 558,944 2,873,893 91,395 21,636 6,449,363 337,496	15 - 2 10 - - 21 1	3,560,440 - 909,467 2,907,588 76,088 38,795 6,040,680 380,569	12 - 3 10 - - 21 1
	14,861,158	49	13,913,627	47
	1,299,806 - 1,067,378 8,768,849 1,596,324 1,851,601 244,319 540,734	4 - 4 29 5 6 1 2	- 1,120,121 1,123,944 8,558,709 1,611,050 1,942,350 292,498 437,042	- 4 4 29 6 7 1 2
	15,369,011	51	15,085,714	53

$ 30,230,169 100 28,999,341 100

Total assets

(See accompanying notes to consolidated financial statements.)

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December 31, 2018	December 31, 2018	December 31, 2018
Amount	％	Amount
$ 4,147,772 850,000 - 2,066 1,514,522 - 133,032 1,330,672 194,549	14 3 - - 5 - - 4 1	6,365,254 800,000 349,975 226 1,793,092 35,663 118,045 1,170,557 178,461
8,172,613	27	10,811,273
3,718,325 499,693 29,189 695,682 232,826	12 2 - 2 1	800,000 - 26,999 665,560 252,063
5,175,715	17	1,744,622
13,348,328	44	12,555,895
8,257,099	27	8,257,099
45,158	-	41,043
3,857,922 1,951,564	13 6	3,770,512 1,661,324
5,809,486	19	5,431,836
465,589 801,805 - (68,134)	2 3 - -	512,008 - 623,809 11,721
1,199,260	5	1,147,538
15,311,003	51	14,877,516
1,570,838	5	1,565,930
16,881,841	56	16,443,446
$30,230,169	100	28,999,341

(See accompanying notes to consolidated financial statements.)

Chief Accountant:Ming-Huang Chen

Chairman:Nita Ing

Manager:Joseph Chai

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TSRC CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Common Share)

2018	2018	2018	2018	2018		2017
Amount					％	Amount	％
$	29,751,218 26,262,504				100 88	31,766,237 28,437,358	100 90
		3,488,714			12	3,328,879	10
		959,417 1,081,834 387,948 10,214			3 4 1 -	950,976 1,018,863 375,550 -	3 3 1 -
		2,439,413			8	2,345,389	7
		252,513			-	219,036	1
		1,301,814			4	1,202,526	4
		171,366 28,977 (169,434) 297,720			1 - (1) 1	103,465 179,259 (188,149) (159,966)	- 1 (1) -
		328,629			1	(65,391)	-
		1,630,443 396,773			5 1	1,137,135 287,418	4 1
		1,233,670			4	849,717	3
			(21,854) 177,996 -		- - -	2,427 - -	- - -
			156,142		-	2,427	-
		(12,155) - (150,695) -			- - - -	(550,512) (111,655) 91,145 -	(2) - - -
		(162,850)			-	(571,022)	(2)
				(6,708)	-	(568,595)	(2)
$	1,226,962				4	281,122	1
$	1,192,186 41,484				4 -	874,107 (24,390)	3 -
$	1,233,670				4	849,717	3
$	1,222,054 4,908				4 -	321,811 (40,689)	1 -
$	1,226,962				4	281,122	1
$					1.44		1.06

(See accompanying notes to consolidated financial statements.)

Chief Accountant:Ming-Huang Chen

Chairman:Nita Ing

Manager:Joseph Chai

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TSRC CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars)

Equity attributable to owners of parent

Common stock	Capital sur- plus	Retained earnings	Retained earnings	Retained earnings
		Legal reserve	Unappropri- ated retained earnings	Total
$ 8,257,099 - - - -	849 - - 40,194 - -	3,671,676 98,836 - - - -	1,709,336 (98,836) (825,710) - 874,107 2,427	5,381,012 - (825,710) - 874,107 2,427
-	-	-	876,534	876,534
-	-	-	-	-
8,257,099 -	41,043 -	3,770,512 -	1,661,324 29,848	5,431,836 29,848
8,257,099	41,043	3,770,512	1,691,172	5,461,684
- - - - -	- - 4,115 - -	87,410 - - - -	(87,410) (792,682) - 1,192,186 (21,854)	- (792,682) - 1,192,186 (21,854)
-	-	-	1,170,332	1,170,332
-	-	-	(29,848)	(29,848)
$ 8,257,099	45,158	3,857,922	1,951,564	5,809,486

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	Equity attributable to owners of parent	Equity attributable to owners of parent	Equity attributable to owners of parent		Total equity attributable to owners of par- ent	Non con- trolling inter- ests	Non con- trolling inter- ests
	Total	other equity interest
Financial state- ments transla- tion differences for foreign operations	Unrealized gains (losses) on financial as- sets measured at fair value through other comprehensive income	Unrealized gains (losses) on available- for-sale finan- cial assets	Gains (losses) on effective portion of cash flow hedges	Total
990,359 - - - - (478,351)	- - - - - -	735,464 - - - - (111,655)	(23,562) - - - - 35,283	1,702,261 - - - - (554,723)	15,341,221 - (825,710) 40,194 874,107 (552,296)	1,710,604 - (36,664) - (24,390) (16,299)
(478,351)	-	(111,655)	35,283	(554,723)	321,811		(40,689)
-	-	-	-	-	-		(67,321)
512,008 -	- 593,961	623,809 (623,809)	11,721 -	1,147,538 (29,848)	14,877,516 -	1,565,930 -
512,008	593,961	-	11,721	1,117,690	14,877,516	1,565,930
- - - - (46,419)	- - - - 177,996	- - - - -	- - - - (79,855)	- - - - 51,722	- (792,682) 4,115 1,192,186 29,868	- - - 41,484 (36,576)
(46,419)	177,996	-	(79,855)	51,722	1,222,054	4,908
-	29,848	-	-	29,848	-	-
465,589	801,805	-	(68,134)	1,199,260	15,311,003	1,570,838

Chief Accountant:Ming-Huang Chen

Chairman:Nita Ing

Manager:Joseph Chai

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TSRC CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars)

Cash flows from operating activities: Consolidated net income before tax Adjustments: Adjustments to reconcile profit and loss: Depreciation Amortization Expected credit losses for bad debt expense Interest expense Interest income Dividend income Share of profit of associates and joint ventures accounted for under equity method Loss on disposal of property, plan and equipment Gains on disposal of investments Amortization of long-term prepaid rent Gains from bargain purchase Total adjustments to reconcile profit and loss Changes in operating assets and liabilities: Net changes in operating assets: Financial assets at fair value through profit or loss Notes receivable Accounts receivable Other receivable Inventories Other current assets Total changes in operating assets, net Net changes in operating liabilities: Financial liabilities at fair value through profit or loss Accounts payable Accounts payable －related parties Other payable Other current liabilities Net defined benefit liability Other operating liabilities Total changes in operating liabilities, net Total changes in operating assets and liabilities, net Total adjustments	2018	2017
	$ 1,630,443 874,575 152,640 10,214 169,434 (78,175) (81,371) (297,720) 23,824 - 9,768 (11,820)	1,137,135 868,770 149,004 - 188,149 (51,122) (52,343) 159,966 8,997 (154,458) 9,960 -
	771,369	1,126,923
	(679) 350,523 23,481 (6,304) (408,683) 43,073	- (251,508) 378,265 54,605 (660,772) 224,593
	1,411	(254,817)
	1,840 (278,570) (35,663) 176,107 16,088 (56,752) 22,245	226 13,936 33,128 (116,087) (20,553) 2,761 4,013
	(154,705)	(82,576)
	(153,294)	(337,393)
	618,075	789,530

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Cash provided by operating activities Interest income received Interest paid Income taxes paid Net cash provided by operating activities Cash flows from investing activities: Proceeds from disposal of available-for-sale financial assets Acquisition of investments accounted for under equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease in other non-current assets Dividends received Other investing activities (Proceeds from capital repayments of investments accounted for under equity method/Loss control of subsidiaries) Net cash used in investing activities Cash flows from financing activities: Increase in short-term borrowings Decrease in short-term borrowings Increase in short-term commercial paper payable Decrease in short-term commercial paper payable Proceeds from long-term borrowings Repayments of long-term borrowings Increase in other long-term borrowings Decrease in finance lease liabilities Cash dividends paid Overaging unclaimed dividends Net cash provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	2018
	$ 2,248,518 69,172 (158,376) (286,326)
	1,872,988
	- (42,184) (1,237,645) 727 (89,986) 131,845 245,391
	(991,852)
	36,511,929 (39,037,284) 1,119,523 (1,470,000) 3,753,662 (800,000) 494,940 (6,584) (791,238) 4,115
	(220,937)
	307,113
	967,312 3,560,440
	$ 4,527,752

(See accompanying notes to consolidated financial statements.)

Manager:Joseph Chai

Chief Accountant:Ming-Huang Chen

Chairman:Nita Ing

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TSRC CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

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

<1> Organization and Business Scope

TSRC Corporation (the original name was Taiwan Synthetic Rubber Corporation, hereinafter referred to as "the Company") was incorporated in the Republic of China (ROC) on November 22, 1973, as a corporation limited by shares in accordance with the ROC Company Act. In May 1999, Taiwan Synthetic Rubber Corporation was renamed TSRC Corporation as approved by the stockholders' meeting. In June 2016, the Company changed its registered address to be No.2, Singgong Rd., Dashe Dist., Kaohsiung City. The consolidated financial statements comprise the Company and its subsidiaries (the Group) and the interests of the Group in associate companies and in jointly controlled companies. The Group is mainly engaged in the manufacture, import and sale of various types of synthetic rubber, and the import, export, and sale of related raw materials. Please refer to note 14.

<2> Financial Statements Authorization Date and Authorization Process

The consolidated financial statements were approved by the Board of Directors and published on March 14, 2019.

<3> New Standards, Interpretations and Amendments:

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning, or after, January 1, 2018. The differences between the current version and the previous version are as follows:

version are as follows:
New, Revised or Amended Standards and Interpretations	Effective date per IASB
Amendment to IFRS 2 "Clarifications of Classification and Measurement of Share based Payment Transactions" Amendments to IFRS 4 "Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts" IFRS 9 "Financial Instruments" IFRS 15 "Revenue from Contracts with Customers" Amendment to IAS 7 "Statement of Cash Flows-Disclosure Initiative" Amendment to IAS 12 "Income Taxes -Recognition of Deferred Tax Assets for Unrealized Losses" Amendments to IAS 40 "Transfers of Investment Property" Annual Improvements to IFRS Standards 2014–2016 Cycle: Amendments to IFRS 12 Amendments to IFRS 1 and Amendments to IAS 28 IFRIC 22 "Foreign Currency Transactions and Advance Consideration"	January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2017 January 1, 2018 January 1, 2018

version are as follows:

New, Revised or Amended Standards and Interpretations

Effective date
per IASB

Amendment to IFRS 2 "Clarifications of Classification and Measurement of Share based Payment
Transactions"
Amendments to IFRS 4 "Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts"
IFRS 9 "Financial Instruments"
IFRS 15 "Revenue from Contracts with Customers"
Amendment to IAS 7 "Statement of Cash Flows-Disclosure Initiative"
Amendment to IAS 12 "Income Taxes -Recognition of Deferred Tax Assets for Unrealized Losses"
Amendments to IAS 40 "Transfers of Investment Property"
Annual Improvements to IFRS Standards 2014–2016 Cycle:
Amendments to IFRS 12
Amendments to IFRS 1 and Amendments to IAS 28
IFRIC 22 "Foreign Currency Transactions and Advance Consideration"

January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2017
January 1, 2018
January 1, 2018

Except for the following items, 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: (i) IFRS 15 "Revenue from Contracts with Customers"

IFRS 15 establishes a comprehensive framework for determining whether how much and when revenue is recognized. It replaces the existing revenue recognition guidance, including IAS 18 “ Revenue” and IAS 11 “ Construction Contracts” . The Group applies this standard retrospectively with the cumulative effect. It needs not restate those contracts, but instead, continues to apply IAS 11, IAS 18 and the related Interpretations for comparative reporting period. The Group recognizes the cumulative effect upon its initial application of this Standard as an adjustment to the opening balance of its retained earnings on January 1, 2018.

The Group uses the practical expedients for completed contracts, which means it need not restate those contracts that have been completed on January 1, 2018.

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The following are the nature and impacts on changing of accounting policies:

1) Sales of goods

For the sale of products, revenue is currently recognized when the related risks of the goods and rewards of ownership have been transferred to the customer. Revenue is recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable, and there is no continuing management involvement with the goods. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods.

2) Impacts on financial statements
- The Group estimates the adoption of IFRS 15 will not have any significant impact on its consolidated financial statements.
(ii) IFRS 9 "Financial Instruments"

IFRS 9 replaces IAS 39 "Financial Instruments: Recognition and Measurement", which contains classification and measurement of financial instruments, impairment and hedge accounting.

As a result of the adoption of IFRS 9, the Group adopted the consequential amendments to IAS 1 "Presentation of Financial Statements", which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCI. Previously, the Group's approach was to include the impairment of trade receivables in administrative expenses. Additionally, the Group adopted the consequential amendments to IFRS 7 "Financial Instruments: Disclosures" that are applied to disclosures about 2018 but generally have not been applied to comparative information.

The detail of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

1) Classification of financial assets and financial liabilities

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Group classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please see note 4(g).

The adoption of IFRS 9 did not have any significant impact on the Group's accounting policies on financial liabilities.

2) Impairment of financial assets

IFRS 9 replaces the 'incurred loss' model in IAS 39 with the 'expected credit loss' (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than they are under IAS 39; please see note 4(g).

3) Transition

The adoption of IFRS 9 have been applied retrospectively, except as described below:

Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as of January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9, and therefore, is not comparable to the information presented for 2018 under IFRS 9.
The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application:
The determination of the business model within which a financial asset is held.
The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.
The designation of certain investments in equity instruments not held for trading as at FVOCI.

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4) Classification of financial assets on the date of initial application of IFRS 9

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

Financial Assets Equity instruments Trade and other receivables	IAS 39 Measurement categories Available-for-sale (note 1) Loans and receivables (note 2)	Carrying Amount 1,120,121 3,817,055	IFRS 9
			Measurement categories FVOCI Amortized cost	Carrying Amount
				1,149,969 3,817,055

Note1: The Group held equity instrument investment for long-term strategic purposes, as permitted by IFRS 9, at the date of initial application as measured at FVOCI. Therefore, an increase of $29,848 thousand in those assets recognized, and a decrease of $29,848 thousand in other equity interest, as well as the increase of $29,848 thousand in retained earnings were recognized on January 1, 2018.

Note2: Notes receivable, accounts receivable, and other receivables that were classified as loans and receivables under IAS 39 are now classified at amortized cost.

The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 upon transition to IFRS 9 on January 1, 2018.

2017.12.31 IAS 39 Carrying Amount	Reclassifica- tions	Remeasure- ments	2018.1.1 IFRS 9 Carrying Amount	2018.1.1 Retained earn- ingseffect	2018.1.1 Other equity effect
$ 1,120,121 -	(1,120,121) 1,120,121	- 29,848	1,149,969	- 29,848	- (29,848)
$ 1,120,121	-	29,848		29,848	(29,848)
$3,817,055	-	-	3,817,055	-	-

(iii) Amendments to IAS 7 "Disclosure Initiative"

The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. To satisfy the new disclosure requirements, the Group present a reconciliation between the opening and closing balances for liabilities with changes arising from financing activities as note 6(ae).

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning, or after, January 1, 2019 in accordance with Ruling No. 1070324857 issued by the FSC on July 17, 2018:

July 17, 2018:
New, Revised or Amended Standards and Interpretations IFRS 16 “Leases” IFRIC 23 “Uncertainty over Income Tax Treatments” Amendments to IFRS 9 “Prepayment features with negative compensation” Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term interests in associates and joint ventures” Annual Improvements to IFRS Standards 2015–2017 Cycle	Effective date per IASB
	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

July 17, 2018:

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

Effective date per IASB

January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019

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".

IFRS 16 introduces a single and an on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of expenses related to those leases will now be changed since IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of lowvalue items. The lessor accounting remains similar to the current standard – i.e. the lessors will continue to classify the leases as finance or operating leases.

So far, the most significant impact identified is that the Group will have to recognize the new assets and liabilities for the operating leases of its offices, factory facilities and warehouses. No significant impact is expected for the Group's finance leases. Besides, The Group does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant.

1) Determining whether an arrangement contains a lease

The Group has an arrangement that was not in the legal form of a lease, for which it concluded that the arrangement contains a lease of equipment under IFRIC 4. On transition to IFRS 16, the Group can choose to apply either of the following:

IFRS 16 definition of a lease to all its contracts; or
a practical expedient that does not need any reassessment whether a contract is, or contains, a lease. The Group plans to apply the practical expedient to grandfather the definition of a lease upon transition. This means that it will apply IFRS 16 to all contracts entered into before January 1, 2019 and identified them as leases in accordance with IAS 17 and IFRIC 4.
2) Transition

As a lessee, the Group can apply the standard using either of the following:

retrospective approach; or
modified retrospective approach with optional practical expedients.

The lessee applies the election consistently to all of its leases.

On January 1, 2019, the Group plans to initially apply IFRS 16 using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information. When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Group is assessing the potential impact of using these practical expedients.

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When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease by lease basis, whether to apply a number of practical expedients on transition. The Group chooses to elect the following practical expedients:

  - apply a single discount rate to a portfolio of leases with similar characteristics.

  - adjust the right-of-use assets, based on the amount reflected in IAS 37 onerous contract provision, immediately before the date of initial application, as an alternative to an impairment review.

  - apply the exemption not to recognize the right-of-use assets and liabilities to leases with a lease term that ends within 12 months at the date of initial application.

  - exclude the initial direct costs from measuring the right-of-use assets at the date of initial application.

  - use hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

3) So far, the most significant impact identified is that the Group will have to recognize the new assets and liabilities for the operating leases of its offices, warehouses, and factory facilities. The Group estimated that its right-of-use assets and lease liabilities to increase by $1,176,226 thousand and $1,176,226 thousand, respectively, on January 1, 2019. No significant impact is expected for the Group's finance leases. Besides, the Group does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant. Also, the Group is not required to make any adjustments for leases where the Group is the intermediate lessor in a sublease.
(ii) IFRIC 23 Uncertainty over Income Tax Treatments

In assessing whether and how an uncertain tax treatment affects the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates, an entity shall assume that a taxation authority will examine the amounts it has the right to examine and have a full knowledge on all related information when making those examinations.

If an entity concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the entity shall determine the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates consistently with the tax treatment used or planned to be used in its income tax filings. Otherwise, an entity shall reflect the effect of uncertainty for each uncertain tax treatment by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty.

So far, the most significant impact identified is that the Group will have to recognize the new income tax liabilities and income tax expense for its uncertainty over income tax treatments.

The actual impacts of adopting the standards may change depending on the economic conditions and events which may occur in the future.

(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:

have yet to be endorsed by the FSC:
New, Revised or Amended Standards and Interpretations Amendments to IFRS 3 “Definition of a Business” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 and IAS 8 “Definition of Material” The Group assessed that the above IFRSs may not be relevant to the Group.	Effective date per IASB
	January 1, 2020 Effective date to be determined by IASB January 1, 2021 January 1, 2020

have yet to be endorsed by the FSC:

New, Revised or Amended Standards and Interpretations
Amendments to IFRS 3 “Definition of a Business”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an
Investor and Its Associate or Joint Venture”
IFRS 17 “Insurance Contracts”
Amendments to IAS 1 and IAS 8 “Definition of Material”
The Group assessed that the above IFRSs may not be relevant to the Group.

Effective date per IASB

January 1, 2020
Effective date to be
determined by IASB
January 1, 2021
January 1, 2020

100

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<4> Significant Accounting Policies

The significant accounting policies presented in the consolidated financial statements are summarized as follows. Except for those described otherwise, the accounting policies have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently to the balance sheet as of reporting date.

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (the Regulations) and the IFRSs endorsed by the FSC.

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

The consolidated financial statements have been prepared on a historical cost basis except for those otherwise explained in the accounting policies in the notes.

(ii) Functional and presentation currency

The functional currency of each individual consolidated entity is determined based on the primary economic environment. The consolidated financial statements are presented in New Taiwan dollars, which is Company's functional currency. The assets and liabilities of foreign operations are translated to the Group's functional currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated to the Group's functional currency at the average rate. Foreign currency differences are recognized in other comprehensive income. All financial information presented in New Taiwan dollars has been rounded to the nearest thousand.

(c) Basis of consolidation
(i) Principles of preparation of consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. The Company controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its control over the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Transactions and balances, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The comprehensive income from subsidiaries is allocated to the Company and its non-controlling interests, even if doing so causes the non controlling interests to have a deficit balance.

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

Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over its subsidiaries 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 is recognized directly in equity and attributed to the shareholders of the parent.

When the Group loses control of a subsidiary, the Group derecognises the assets (including goodwill) and liabilities of the former subsidiary at their carrying amounts from the consolidated statement and re measures the fair value of retained interest at the date when control is lost. A gain or loss is recognized in profit or loss and is calculated as the difference between:

1) the aggregate of the fair value of consideration received and the fair value of any retained interest at the date when control is lost; and
2) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any noncontrolling interest.

The Group shall apply the accounting treatment to all previously recognizes amount related to its subsidiary in its comprehensive income as if the related assets and liabilities were disposed by the Group directly.

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

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

Percentage of ownership
Descrip-
Name of investor Name of investee Scope of business December December
tion
31, 2018 31, 2017
----- End of picture text -----

Name of investor	Name of investee	Scope of business	Percentage of ownership	Percentage of ownership	Descrip- tion
			December 31, 2018	December 31, 2017

TSRC	Trimurti Holding Cor- poration	Investment	100.00%	100.00%
TSRC	Hardison International Corporation	Investment	100.00%	100.00%
TSRC & Hardison Inter- national Corporation	Dymas Corporation	Investment	100.00%	100.00%	(note 1)
TSRC	TSRC (Vietnam) Co., Ltd.	Production and processing of rubber color masterbatch, thermoplastic elastomer and plastic compoundproducts	100.00%	-	(note 5)
Trimurti Holding Cor- poration	Polybus Corporation Pte Ltd.	International commerce and investment	100.00%	100.00%
Trimurti Holding Cor- poration	TSRC (Hong Kong) Limited	Investment	100.00%	100.00%
TSRC (Hong Kong) Lim- ited	TSRC (Shanghai) In- dustries Ltd.	Production and sale of com- poundingmaterials	100.00%	100.00%
TSRC (Hong Kong) Lim- ited	TSRC (Lux.) Corpora- tion S.à r.l.	International commerce and investment	100.00%	100.00%
TSRC (Lux.) Corporation S.à r.l.	TSRC (USA) Investment Corporation	Investment	100.00%	100.00%
TSRC (USA) Investment Corporation	Dexco Polymers L.P.	Production and sale of TPE	100.00%	100.00%	(note 2)
Polybus Corporation Pte Ltd.	Shen Hua Chemical Industrial Co,. Ltd.	Production and sale of syn- thetic rubberproducts	65.44%	65.44%
Polybus Corporation Pte Ltd.	TSRC-UBE (Nantong) Chemical Industrial Co., Ltd.	Production and sale of syn- thetic rubber products	55.00%	55.00%
Polybus Corporation Pte Ltd.	TSRC (Nantong) Indus- tries Ltd.	Production and sale of TPE	100.00%	100.00%
Hardison International Corporation	Triton International Holdings Corporation	Investment	100.00%	100.00%
Hardison International Corporation	TSRC Biotech Ltd.	Investment	-	100.00%	(note 4)
Triton International Holdings Corporation	Nantong Qix Storage Co., Ltd.	Storehouse for chemicals	50.00%	50.00%	(note 3)

Note1： TSRC directly owns 19.48% of Dymas's equity and indirectly owns 80.52% via Hardison International Corporation.

Note2： TSRC (USA) Investment Corporation is a limited liability shareholder of Dexco Polymers Operating LLC (Dexco LLC). TSRC (USA) directly owns 99% of Dexco Polymers L.P., and indirectly owns Dexco Polymers L.P. via Dexco LLC. Dexco LLC does not engage in operations, so there is no further disclosure of the consolidated information.

Note3： The Group lost the control of Nantong Qix Storage Co., Ltd. (Nantong Qix) in June 2017, due to amendment of Corporate Charter. Nantong Qix is not in the consolidated financial statements.

Note4： TSRC Biotech Ltd. completed its dissolution procedure in June 2018.

Note5： TSRC made the resolution to establish TSRC (Vietnam) Co., Ltd. by the Board of Directors in May 2018, and TSRC has been established in October 2018.

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(d) Foreign currency

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are remeasured to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Nonmonetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation.

Foreign currency differences arising from remeasurement are recognized in profit or loss, except for the difference resulting from available-for-sale equity investment which is recognized in other comprehensive income arising from the remeasurement.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity.

(e) Classification of current and non-current assets and liabilities
(i) An asset is classified as current under one of the following criteria, and all other assets are classified as noncurrent.
- 1) It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
- 2) It holds the asset primarily for the purpose of trading;
- 3) It expects to realize the asset within twelve months after the reporting period; or
- 4) 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.
(ii) A liability is classified as current under one of the following criteria, and all other liabilities are classified as noncurrent.
- 1) It expects to settle the liability in its normal operating cycle;
- 2) It holds the liability primarily for the purpose of trading;
- 3) The liability is due to be settled within twelve months after the reporting period even if refinancing or a revised repayment plan is arranged between the reporting date and the issuance date of the financial statements; or
- 4) It 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 the issue of equity instruments do not affect its classification.

(f) Cash and cash equivalents

Cash and cash equivalents comprise cash balances, time deposits, and short-term investments with high liquidity that are subject to an insignificant risk of changes in their fair value.

The time deposits with maturity of one year or less from the acquisition date are listed in cash and cash equivalents because they are held for the purpose of meeting short-term cash commitments instead of investment or other purposes, are readily convertible to a fixed amount of cash, and are subject to an insignificant risk of changes in value.

(g) Financial instruments
(i) Financial assets (applicable commencing January 1, 2018)

Financial assets are classified into the following categories: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL).

The Group shall reclassify all affected financial assets only when it changes its business model in managing its financial assets.

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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.

A financial asset measured at amortized cost is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, and impairment loss, 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.

A financial asset measured at FVOCI is initially recognized at fair value, plus any directly attributable transaction costs. These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses, and impairment losses, deriving from debt investments are recognized in profit or loss; whereas dividends deriving from equity investments 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 of financial assets measured at FVOCI are recognized in OCI. On derecognition, gains and losses accumulated in OCI of equity investments are reclassified to profit or loss. However, gains and losses accumulated in OCI of debt investments are reclassified to retain earnings instead of profit or loss.

Dividend income derived from equity investments is recognized on the date that the Group's right to receive payment is established, which in the case of quoted securities is normally the exdividend date.

3) Fair value through profit or loss (FVTPL)

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

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss.

4) Impairment of financial assets

The Group recognizes its loss allowances for expected credit losses on financial assets measured at amortized cost (including cash and cash equivalents, notes and accounts receivable, other receivable and guarantee deposit paid).

The Group measures its 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 are always measured at an amount equal to lifetime ECL. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

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.

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and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Group recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss.

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write 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

Financial assets are derecognized when the contractual rights to the cash flows from the assets expire, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets.

(ii) Financial assets (applicable from January 1, 2018)

The Group classifies financial assets into the following categories: receivables and available-for-sale financial assets.

1) Receivables

Receivables are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method. The fair value is the amount of expected future cash flows discounted to present value. Cash flows from shortterm accounts receivable with high collectibility shall not be discounted.

The Group considers evidence of impairment for receivables at both a specific asset and collective level. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

If objective evidence of impairment exists, an impairment loss should be recognized. An impairment loss in respect of a financial asset is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Collateral and proceeds from insurance should also be considered when determining the estimated future cash flows. Losses are recognized in profit or loss and reflected in an allowance account against receivables. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. However, the reversing amount cannot exceed the amortized balance of the assets assuming no impairment was recognized in prior periods.

2) Available-for-sale financial assets

Available-for-sale financial assets are recognized initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value, and changes therein, other than impairment losses, dividend income, and foreign currency gains or losses which are recognized as current earnings, are recognized in other comprehensive income and presented in the unrealized gain/loss from available-for-sale financial assets in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, and is included in other gains and losses under non-operating income and expenses. The purchase and disposal of financial assets are recognized using trade date accounting. Dividend income is recognized in profit or loss on the date that the Group's right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. Dividend income is recorded under non-operating income and expenses.

If there is any objective evidence of impairment, the accumulated gain or loss recognized as other comprehensive income is reclassified to current earnings. If, in a subsequent period, the amount of the impairment loss of a financial asset decreases, impairment losses recognized on an available-for-sale equity security cannot be reversed through profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income, and accumulated in other equity.

3) Derecognition of financial assets

The Group derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Group transfers substantially all the risks and rewards of ownership of the financial assets.

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

Debt or equity instruments issued by the Group are classified as financial liabilities or equity in accordance with the substance of the contractual agreement.

Equity instruments refer to surplus equities of the assets after the deduction of all the debts for any contracts. Equity instruments issued are recognized as the amount of consideration received less the direct cost of issuing.

Interest, gains or losses related to financial liabilities are recognized in profit or loss, and recorded under non -operating income and expenses.
2) Other financial liabilities

Financial liabilities not classified as held-for-trading or designated as at fair value through profit or loss, which comprise loans and borrowings, and trade and other payables, are measured at fair value plus any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, and is recorded under non-operating income and expenses.

3) Derecognition of financial liabilities
The Group derecognizes a financial liability when its contractual obligation has been discharged or cancelled or has expired.
4) Offsetting of financial assets and liabilities

The Group presents financial assets and liabilities on a net basis when the Group has the legally enforceable right to offset, and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.

5) Financial guarantee contract

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

A financial guarantee contract not designated as at fair value through profit or loss issued by the Group is recognized initially at fair value plus any directly attributable transaction cost. After initial recognition, it is measured at the higher of (a) the contractual obligation amount determined in accordance with IAS 37; or (b) the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with accounting policies.

(iv) Derivative financial instruments and hedge accounting

The Group holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are initially measured at fair value. Any attributable transaction costs thereof are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss and are included in the line item of non-operating income and expenses in the statement of comprehensive income. When a derivative is designated as, and effective for, a hedging instrument, its timing of recognition in profit or loss is determined based on the nature of the hedging relationship. When the fair value of a derivative instrument is positive, it is classified as a financial asset, whereas when the fair value is negative, it is classified as a financial liability.

(h) Inventories

The cost of inventories consists of all costs of purchase, costs of conversion, and other costs incurred in bringing the inventories to their present location and condition. The cost of inventories includes an appropriate share of fixed production overhead based on normal capacity and allocated variable production overhead based on actual output. However, unallocated fixed production overhead arising from lower or idle capacity is recognized in cost of goods sold during the period. If actual capacity is higher than normal capacity, fixed production overhead should be allocated based on actual capacity. The method of valuing inventories is the weighted-average method.

Inventories are measured at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses at the end of the period. When the cost of inventories is higher than the net realizable value, inventories are written down to net realizable value, and the write-down amount is charged to current year's cost of goods sold. If net realizable value increases in the future, the cost of inventories is reversed within the original write-down amount, and such reversal is treated as a reduction of cost of goods sold.

(i) Investment in associates

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

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

The consolidated financial statements include the Group's share of the profit or loss and other comprehensive income of equity accounted investees after adjustments to align the accounting policies with those of the Group from the date that significant influence commences until the date that significant influence ceases. When changes in an associate's equity are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Group's ownership percentage of the associate, the Group recognizes the changes in ownership interests of the associate in capital surplus in proportion to its ownership interests.

When the Group's share of losses exceeds its interest in associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee. The Group adopts the acquisition method for changes in ownership interests of investment in associates. Goodwill is measured at the amount of fair value transferred out subtracted by the net amounts of the identifiable assets acquired and the liabilities assumed (normally measured at fair value) on the acquisition-date. If the balance after subtraction is negative, the Group shall first reassess if all the assets acquired and the liabilities are identified correctly, then the Group can recognizes gain from bargain purchase in profit or loss.

If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Group shall continue to apply the equity method without remeasuring the retained interest.

(j) Joint arrangements

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint venture recognizes its interest in a joint venture as an investment and shall account for that investment using the equity method in accordance with IAS 28.

The Group determines the type of joint arrangement in which it is involved by considering the structure and form of the arrangement, the separate legal vehicle, the terms agreed by the parties in the contractual arrangement and other facts and circumstances. Previously the Group determines the type of joint arrangement by considering only the structure and form of the arrangement. The Group has re-determined the joint arrangement which it is involved and has reclassified the "jointly controlled entity" to "joint venture." After the reclassification, the Group continues to adopt the accounting treatment by the equity method. Therefore, there is no impact on the recognized assets, liabilities, and comprehensive income of the subsidiary.

(k) Property, plant and equipment
(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset. The cost of a self-constructed asset comprises material, labor, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost that is eligible for capitalization. Cost also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. The cost of the software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately, unless the useful life and the depreciation method of a significant part of an item of property, plant and equipment are the same as the useful life and depreciation method of another significant part of that same item.

The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized as other gains and losses.

(ii) Reclassification to investment properties
Property is reclassified to investment property at its carrying amount when the use of the property changes from owner-occupied to investment property.

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(iii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

(iv) Depreciation

The depreciable amount of an asset is determined after deducting its residual amount from its original cost and is depreciated using the straight-line method over its useful life. Assets are evaluated based on their individually significant components, and if the useful life of a component varies from that of others, then this component should be separately depreciated. The depreciation charge for each period shall be recognized in profit or loss. The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the lessee adopts for depreciable assets that are owned. If there is reasonably certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.

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

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

The estimated useful lives, for the current equipment are as follows:	and comparative
(1) Land improvements	8~30 years
(2) Buildings	3~60 years
(3) Machinery	3~40 years
(4) Furniture and fixtures equipment	3~8 years
(5) Leased assets	3~8 years

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the changes are accounted for as a change in an accounting estimate.

(l) Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, or to 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 measured under the cost model, and the depreciation expense is calculated using the depreciable amount. The depreciation method, the useful life, and the residual amount are the same as those adopted for property, plant and equipment. Cost includes expenditure that is directly attributable to the acquisition of the investment property and any other cost and capitalized borrowing costs that can be directly attributed.

When the use of an investment property changes such that it is reclassified as property, plant and equipment, its carrying amount at the date of reclassification becomes its cost for subsequent accounting.

(m) Leases
(i) Lessor

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

(ii) Lessee

Leases in which the Group assumes substantially all of the risks and rewards of ownership of leased assets are classified as finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair value or the present of the minimum lease payments. Subsequent minimum lease payments are attributable to finance cost and the reduction of the outstanding liabilities, and the finance cost is allocated to each period during the lease term using a constant periodic rate of interest on the remaining balance of the liability. The acquisition of property, plant and equipment under a finance lease is accounted for in accordance with the accounting policy applicable to the asset.

Other leases are operating leases and are not recognized in the Group's statement of financial position. Payments made under an operating lease are recognized in profit or loss on a straight-line basis over the term of the lease.

(n) Intangible assets
(i) Goodwill

Goodwill arises from business combinations in which the acquisition method is adopted, and is recorded at cost less accumulated impairment losses.

(ii) Other intangible assets

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

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(iii) 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.

(iv) Amortization
The depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and intangible assets with an indefinite useful life, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows: (1) Computer software 3 years (2) Industrial technology and know-how 10~20 years (3) Patent 20 years (4) Non-compete agreement 3 years (5) Customer relationship 18 years (6) Trademark and goodwill Uncertain useful lives

The residual value, amortization period, and amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at each reporting date. Any change shall be accounted for as changes in accounting estimates.

(o) Impairment －non-financial assets

With regard to non financial assets (other than inventories and deferred tax assets), the Group assesses at the end of each reporting period whether there is any indication that an impairment loss has occurred, and estimates the recoverable amount for assets with an indication of impairment. If it is not possible to determine the recoverable amount for the individual asset, then the Group will have to determine the recoverable amount for the asset's cash -generating unit.

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value less costs to sell or its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the entity shall estimate the recoverable amount of that asset. Impairment loss is reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount, increasing the individual asset's or cash-generating unit's carrying amount to its estimated recoverable amount. The reversal of an impairment loss of an individual asset or cash-generating unit cannot exceed the carrying amount of the individual asset or cash-generating unit, less any depreciation or amortization, had it not recognized an impairment loss. Notwithstanding whether indicators exist, recoverability of goodwill and intangible assets with indefinite useful lives or those not yet in use is required to be tested at least annually. Impairment loss is recognized if the recoverable amount is less than the carrying amount.

For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer's cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination. If the carrying amount of the cash-generating units exceeds the recoverable amount of the units, the entity shall recognize the impairment loss, and the impairment loss shall be allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited.

(p) Provisions

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

A provision for onerous contracts is recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognizes any impairment loss on the assets associated with that contract.

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(q) Revenue

(i) Revenue from contracts with customers (applicable commencing January 1, 2018)
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 is mainly engaged in the manufacture and sale of various types of synthetic rubber. The Group recognizes revenue when control of the products has been transferred, being when the products are delivered to the customer, the ownership of the significant risks and rewards of the products have been transferred to the customer, and the Group is no longer engaged with the management 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 and 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) Management services

The Group is engaged in providing management services. Revenue from providing services is recognized in the accounting period in which the services are rendered. For fixed price contracts, revenue is recognized based on the actual service provided at the end of the reporting period as a proportion of the total services to be provided. The proportion of services provided is determined based on surveys of work performed.

3) Financing components

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

(ii) Revenue (applicable before January 1, 2018)
1) Sale of goods

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement. For export transactions, transfer occurs upon loading the goods onto the relevant carrier at the port; however, for sales in the domestic market, transfer usually occurs when the product is received at the customer's warehouse.

2) Rendering of services

The Group is engaged in providing management services. Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed based on surveys of work performed.

3) Rental income

The rental income arising from investment property is recognized in profit or loss on a straight-line basis during the lease term.

(r) Employee benefits
(i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

(ii) Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value.

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The fair value of any plan assets is deducted. The discount rate is the yield at the reporting date (market yields of high-quality corporate bonds or government bonds) on bonds that have maturity dates approximating the terms of the Group's obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to 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. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realizable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized immediately in profit or loss.

Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest) and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Group can reclassify the amounts recognized in other comprehensive income to retained earnings.

(iii) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans 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.

(s) Income tax

Income tax expenses include both 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 shall be recognized in profit or loss.

Current taxes comprise the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years. 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 shall not be recognized for the exceptions below:

(i) Assets and liabilities that are initially recognized but are not related to the business combination and have no effect on net income or taxable gains (losses) during the transaction.
(ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse.

(iii) Initial recognition of goodwill.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities may be offset against each other if the following criteria are met:

(i) The entity has the legal right to settle tax assets and liabilities on a net basis; and

(ii) The taxing of deferred tax assets and liabilities fulfills one of the scenarios below:
1) levied by the same taxing authority; or
2) levied by different taxing authorities, but where each such authority intends to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset should be recognized for unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which they can be utilized. Such deferred tax assets shall also be reviewed at each reporting date, and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

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(t) Earnings per share

Earnings per share (EPS) of common stock are calculated by dividing net income (or loss) for the reporting period attributable to common stockholders by the weighted-average number of common shares outstanding during that period. The weighted-average number of common shares outstanding is adjusted retroactively for the increase in common shares outstanding from stock issuance arising from the capitalization of retained earnings, or additional paid-in capital.

Employee bonuses in the form of stock of the Company are potential stock. If the potential stock does not have a dilutive effect, only the basic earnings per share are disclosed; otherwise, diluted earnings per share are disclosed in addition to the basic earnings per share. When computing diluted earnings per share with regard to employee bonuses in the form of stock, the closing price at the reporting date is used as the basis of computation of the number of shares to be issued. When computing diluted earnings per share prior to the following Board of Directors, the effect of dilution from these potential shares is taken into consideration.

(u) 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> Critical Accounting Judgments and Key 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 will continually review the estimates and basic assumptions. Changes in accounting estimates will be recognized in the period of change and the future period of their impact.

There are no critical judgments in applying the accounting policies that have significant effect 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: Inventory measurement

Since inventory is measured by the lower of cost and net realizable value, the Group evaluated the inventory based on the selling price of the product line and price fluctuation of raw material, and written down the book value to net realizable value. Please refer to note 6(g) for inventory measurement.

<6> Description of Significant Accounts

(a) Cash and cash equivalents

Cash on hand Checking and savings deposits Time deposits Cash and cash equivalents per statements of cash flow	December 31, 2018 $ 433 1,593,472 2,933,847 $ 4,527,752	December 31, 2017
		435 1,037,168 2,522,837
		3,560,440

The disclosure of interest rate risk and sensitivity analysis for the Group's financial assets and liabilities is referred to note 6(aa).

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

December 31, 2018

Mandatorily measured at fair value through profit or loss: Derivative instruments not used for hedging Forward contracts

$ 679

December 31, 2018 $ 2,066	December 31, 2017
	226

Financial liabilities held for trading: Derivative instruments not used for hedging Forward contracts/Swap contracts

The Group uses derivative financial instruments to manage the exposures due to fluctuations of foreign exchange risk from its operating activities. As of December 31, 2018 and 2017, the Group reported the following derivatives financial instruments as financial assets and liabilities at fair value through profit or loss without the application of hedge accounting.

December 31, 2018

Forward contracts / Swap contracts:

Forward contracts / Swap contracts:		December 31, 2018
Swap contracts Forward Exchange Agreement Forward Exchange Agreement	Contract amount (thousand) $ 14,960	Currency Maturity dates USD/EUR 2019.1.4~2019.1.29 December 31, 2017	Maturity dates
	Contract amount (thousand) $ 650 200	Currency EUR/TWD EUR/USD	Expired date
			2018.1.18~2018.3.21 2018.2.13

Equity investments at fair value through other comprehensive income: Listed stocks (domestic) Unlisted stocks (domestic and overseas) Total	December 31, 2018
	$ 305,631 994,175
	$ 1,299,806

(i) Equity investments at fair value through other comprehensive income
The Group held equity instrument investment for long-term strategic purposes, not held for trading purposes, which have been designated as measured at fair value through other comprehensive income. These investments were classified as available-for-sale financial assets －non-current on December 31, 2017.

In January 2018, the Group surrendered all of is shares in Pulse Metric, Inc. due to the investee had no substantial operation. The shares disposed had a no fair value; therefore the Group realized a loss of $29,848 thousand, recognized in other comprehensive income. The loss had been transferred to retained earnings.

(ii) For dividend income, please refer to note 6(y).
(iii) For credit risk and market risk, please refer to note 6(aa).
(iv) The Group did not hold any collateral for the collectible amounts.
(v) The significant financial assets at fair value through other comprehensive income denominated in foreign currency were as follows:

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

Foreign currency
amount Exchange rate TWD
December 31, 2018
THB $ 367,531 0.9532 350,331
----- End of picture text -----

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(d) Available-for-sale financial assets －non-current

Listed stocks (domestic) Unlisted stocks (domestic and overseas) Total	December 31, 2017
	$ 235,024 885,097
	$ 1,120,121

Please refer to note 6(y) for gains on disposal of investments and dividend income.

If the market price of the available-for-sale financial assets fluctuates (assuming that all other variables remain the same), the impact on other comprehensive income will be as follows:

2017	2017	2017
		Net
$
$
	0.9176

The significant available-for-sale financial assets denominated in foreign currency were as follows:

As of December 31, 2017, the Group did not pledge any collateral on available-for-sale financial instruments. For credit risk and market risk, please refer to note 6(aa).

(e) Notes and accounts receivable (including related parties)

Notes receivable Accounts receivable Less: loss allowance	December 31, 2018 $ 558,944 2,884,202 10,309 $3,432,837	December 31, 2017
		909,467 2,907,867 279
		3,817,055

The Group applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected credit loss provision for all receivables on December 31, 2018. 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 forwardlooking information. The expected credit losses as of December 31, 2018 was determined as follows:

Current 1 to 30 days past due 31 to 90 days past due More than 90 days past	Gross carrying amount $ 3,364,574 60,182 17,659 731 $ 3,443,146	Weighted-average expected credit loss rate 0.04%~0.33% 0.45%~16.31% 5.98%~65.24% 100%	Loss allowance provision
			3,417 1,996 4,165 731
			10,309

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As of December 31, 2017, the Group applies the incurred loss model to consider the loss allowance provision and the aging analysis of notes and trade receivable, which were past due but not impaired, was as follows:

December 31, 2017

$ 99,033

1 to 30 days past due

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

Balance at January 1, 2018 and 2017 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 per IFRS 9 Impairment loss recognized Impairment loss reversed Foreign exchange gains (losses) Balance at December 31, 2018 and 2017	2018 $ 279 - 279 10,214 (279) 95 $ 10,309	2017	2017
		Individually assessed impairment 282 - - (3) 279	Collectively assessed impairment
			- - - -
			-

The Group did not hold any collateral for the collectible amounts. For other credit risk information, please refers to note 6(aa).

The carrying amounts of notes and accounts receivable with short maturity are not discounted under the assumption that the carrying amount approximates the fair value.

(g) Other receivables (including related parties)

Other receivables －related parties Other	December 31, 2018 $ 42,427 48,968 $ 91,395	December 31, 2017
		55,120 20,968
		76,088

As of December 31, 2018 and 2017, the Group had no other receivables that were past due. Therefore, no provisions for doubtful debt were required after the management's assessment. For other credit risk information, please refers to note 6(aa).

(h) Inventories

The components of the Group's inventories were as follows:

Raw materials Supplies Work in progress Finished goods Merchandise Total	December 31, 2018 $ 1,713,308 102,599 370,562 3,576,007 686,887 $ 6,449,363	December 31, 2017
		1,905,394 98,738 335,606 3,114,627 586,315
		6,040,680

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As of December 31, 2018 and 2017, the Group did not pledge any collateral on inventories. Except for operating costs arising from the ordinary sale of inventories, other gains and losses directly recorded under operating cost were as follows:

Loss on decline in market value of inventory Income from sale of scrap Loss on physical count Unallocated production overhead Total	2018	2017 32,478 (66,012) 2,982 99,954 69,402
	$ 35,089 (58,932) 446 62,666
	$ 39,269

(h) Investments accounted for under equity method

The details of the investments accounted for under the equity method at the reporting date were as follows:

Associates Joint ventures	December 31, 2018 $ 628,467 438,911 $ 1,067,378	December 31, 2017
		805,561 318,383
		1,123,944

(i) Associates

For the years ended December 31, 2018 and 2017, the Group recognized its share of gain from the associates of $104,521 thousand and $120,983 thousand, respectively.

The details of the significant associates are as follows:

Name of associates Indian Synthetic Rubber Pri- vate Limited ARLANXEO-TSRC (Nantong) Chemicals Industries Co., Ltd.	Existing relationship with the Group Strategic alliance of production and sales of synthetic rubber products Strategic alliance of production and sales of NBR	The main operating place / register country India China	Proportion of equity and voting right	Proportion of equity and voting right
			December 31, 2018 50.00% (Note 1) 50.00%	December 31, 2017
				34.04% 50.00%

Note1: Indian Synthetic Rubber Private Limited has been reclassified from associate to joint venture from April 2018.

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A summary of the financial information of the significant associate were as follows:

1) Summary of financial information of Indian Synthetic Rubber Private Limited

On April 10, 2018, the Group acquired 15.96% ownership of Indian Synthetic Rubber Private Limited from other shareholders, and the Group recognized the gain from bargain purchase amounting to $11,820 thousand. After the acquisition transaction, the Group owns 50% of Indian Synthetic Rubber Private Limited, which has been reclassified from associate to joint venture, but still listed as investments accounted for under equity method.

Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to the Group	December 31, 2017
	$ 2,523,989 3,779,641 (3,788,115) (1,958,847)
	$556,668
	$ 189,490

Revenue Net income of continued operations Other comprehensive income (loss) Total comprehensive income (loss) Total comprehensive income attributable to the Group Note2: For information on revenue and profit or loss for the December 31, Beginning equity of the associate attributable to the Group Current total comprehensive income of the associate attributable to the Group Other Associate reclassified to joint venture Ending balance of the equity of the associate attributable to the Group	For the three months ended March 31, 2018 2017 $ 1,324,113 5,624,915 $36,141 263,190 - 102,557 $36,141 365,747 $ 12,303 124,500 2018, please refer to the description of joint ventures For the three months ended March 31, 2018 2017 $ 205,093 76,678 12,303 124,500 (4,109) 3,915 (213,287) - $ - 205,093	2017
		5,624,915
		263,190 102,557
		365,747
		124,500
		76,678 124,500 3,915 -
		205,093

Note2: For information on revenue and profit or loss for the December 31, 2018, please refer to the description of joint ventures.

2) Summary of financial information of ARLANXEO-TSRC (Nantong)

Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to the Group	December 31, 2018 $ 716,347 822,219 (1,094,043) (13,709) $ 430,814 $ 215,407	December 31, 2017
		524,169 942,114 (1,082,863) (22,024)
		361,396
		180,698

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			2018	2017
	Revenue	$	2,062,759	1,446,906
	Net income of continued operations	$	79,204	4,943
	Other comprehensive income (loss)		-	-
	Total comprehensive income (loss)	$	79,204	4,943
	Total comprehensive income attributable to the	$	39,602	2,471
	Group
			2018	2017
	Beginning equity of the associate attributable to	$	181,347	180,559
	the Group
	Current total comprehensive income of the	$	39,602	2,471
	associate attributable to the Group
	Other		(1,114)	(1,683)
	Ending balance of the equity of the associate	$	219,835	181,347
	attributable to the Group
	3) Summary of respectively not significant associates recognized under equity method were as follows:
		December 31, 2018		December 31, 2017
	Balance of not significant associate's equity	$	408,632	419,121
			2018	2017
	Attributable to the Group:
	Income from continued operation	$	52,616	28,922
	Other comprehensive income		-	-
	Total comprehensive income	$	52,616	28,922
(ii)	Joint ventures
	1) Summary of financial information of Indian Synthetic Rubber		Private Limited
			December 31, 2018
	Current assets		$	2,663,769
	Non-current assets			3,484,344
	Current liabilities			(2,424,997)
	Non-current liabilities			(2,910,295)
	Equity		$	812,821
	Equity attributable to the Group		$	406,411
			For	the nine months
			ended December 31,
				2018
	Revenue		$	4,126,045
	Net income of continued operations		$	413,944
	Other comprehensive income (loss)			(157,496)
	Total comprehensive income (loss)		$	256,448
	Total comprehensive income attributable to the Group		$	109,926

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	For the nine months	For the nine months
	ended December 31,
	2018
Beginning equity of the joint venture attributable to the Group	$ -
Joint venture reclassified from associate		213,287
Current total comprehensive income of the joint venture attributable to the Group		109,926
Other		39,928
Ending balance of the equity of the joint venture attributable to the Group	$	363,141

Summary of respectively not significant joint ventures recognized under the	Summary of respectively not significant joint ventures recognized under the	equity method were as follows:	equity method were as follows:
	December 31, 2018	December	31, 2017
Balance of not significant joint venture's equity	$ 75,770		318,383
	2018	2017
Attributable to the Group:
Income (loss) from continued operation	$ 4,525		(280,949)
Other comprehensive income (loss)	-	-
Total comprehensive income (loss)	$ 4,525		(280,949)

The liquidation of Taiwan Advance Material Corp. in December 2018 was approved by its Board of Directors and the Ministry of Economic Affairs in October 2017, wherein the remaining amount of $245,391 thousands had been received by the Group.

(iii) Collateral

As of December 31, 2018 and 2017, the Group did not pledge any collateral on investments accounted for under the equity method.

(i) Lose control of subsidiaries

The Group lost the control of Nantong Qix Storage Co., Ltd (Nantong Qix) in June, 2017, due to amendment of the Corporate Charter. Nantong Qix is not included in the consolidated financial statements, but listed as investments accounted for under equity method.

The carrying amount of assets and liabilities of Nantong Qix on June 30, 2017 were as follows:

Cash and cash equivalents Accounts receivables Other receivables Other current assets Property, plant and equipment Other non-current assets Accounts payables Other payables Carrying amount of net assets	$ 81,959 1,060 849 357 35,944 23,848 (421) (8,954)
	$ 134,642

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(j) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group were as follows:

Cost: Balance at January 1, 2018 Additions Disposals Reclassification Effect of changes in exchange rates Balance at December 31, 2018 Balance at January 1, 2017 Additions Disposals Reclassification Effect of changes in exchange rates Balance at December 31, 2017 Depreciation and impairment loss: Balance at January 1, 2018 Depreciation Disposal Effect of changes in exchange rates Balance at December 31, 2018 Balance at January 1, 2017 Depreciation Disposal Reclassification Effect of changes in exchange rates Balance at December 31, 2017 Carrying value: December 31, 2018 January 1, 2017 December 31, 2017	Land $ 614,101 - - - - $614,101 $ 614,101 - - - - $614,101 $ - - - - $ - $ - - - - - $ - $614,101 $614,101 $614,101	Land improvements 106,131 - - 199 669 106,999 106,510 - - 1,460 (1,839) 106,131 85,133 2,446 - 658 88,237 84,347 2,587 - - (1,801) 85,133 18,762 22,163 20,998	Buildings
			4,048,091 - (1,035) 11,310 (60,202)
			3,998,164
			4,062,799 - (1,775) 18,546 (31,479)
			4,048,091
			2,134,269 131,216 (1,035) (27,768)
			2,236,682
			2,036,837 129,271 (1,619) (16,813) (13,407)
			2,134,269
			1,761,482
			2,025,962
			1,913,822

The Group performed the asset impairment test by estimating the future cash flows. Impairment loss was recognized thereon as the estimated amount of future cash flows was less than the carrying value. Please refer to note 8 for the information of the property, plant and equipment.

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Machinery 19,944,375 4,791 (114,721) 512,270 (64,588) 20,282,127 20,289,079 2,778 (151,425) 167,924 (363,981) 19,944,375 14,652,082 714,097 (90,361) (5,108) 15,270,710 14,493,478 710,898 (140,606) (127,834) (283,854) 14,652,082 5,011,417 5,795,601 5,292,293	Furniture and fixtures and other equipment 217,074 254 (1,889) 13,227 (393) 228,273 192,592 343 (843) 29,606 (4,624) 217,074 160,257 12,090 (1,698) (8) 170,641 154,803 11,289 (739) (989) (4,107) 160,257 57,632 37,789 56,817	Leased assets 94,596 - - - - 94,596 94,596 - - - - 94,596 - - - - - - - - - - - 94,596 94,596 94,596	Construction inprog- ress 566,082 1,209,361 - (560,479) (4,105) 1,210,859 357,046 692,022 - (475,082) (7,904) 566,082 - - - - - - - - - - - 1,210,859 357,046 566,082

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) Investment property Cost: Balance as at January 1, 2018 Additions Balance as at December 31, 2018 Balance as at January 1, 2017 Additions Balance as at December 31, 2017 Depreciation: Balance as at January 1, 2018 Depreciation Balance as at December 31, 2018 Balance as at January 1, 2017 Depreciation Balance as at December 31, 2017 Carrying value: Balance as at December 31, 2018 Balance as at December 31, 2017 Balance as at January 1, 2017 Fair value: Balance as at December 31, 2018 Balance as at December 31, 2017 Balance as at January 1, 2017	Land $ 1,073,579 - $ 1,073,579 $1,073,579 - $ 1,073,579 $ - - $ - $ - - $ - $ 1,073,579 $ 1,073,579 $ 1,073,579	Buildings 741,889 - 741,889 741,889 - 741,889 204,418 14,726 219,144 189,693 14,725 204,418 522,745 537,471 552,196

(k) Investment property

Investment property comprises a number of commercial properties that are leased to third parties. Each of the leases contains an initial Non-cancellable period of 1~5 years. Subsequent renewals are negotiable with the lessee, and no contingent rents are charged. Please refer to note 6(x) for further information.

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The fair value of investment property (as disclosed in the financial statements) is based on a valuation by an independent appraiser. The range of yields applied to the net annual rentals to determine the fair value of the property were as follows:

ndependent appraiser. The were as follows:	range of yields applied	to the net annual renta
Region Da'an Dist., Taipei City	2018 2.10%	2017
		2.10%

The Group has rented out a parcel of land, but has decided not to treat this property as investment property because it is out not the Group's intention to hold it for capital appreciation or rental income. Accordingly, the property is still recorded under property, plant and equipment.

As of December 31, 2018 and 2017, the Group did not pledge any collateral on investment properties.

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(l) Intangible assets

The cost and amortization of the intangible assets of the Group were as follows:

	Industrial technology and know-how	Industrial technology and know-how	software	Goodwill	Goodwill
Costs:
Balance at January 1, 2018	$	1,003,145	236,986		205,021
Reclassification	-		9,260	-
Effect of changes in exchange rates		17,893	(1,703)			6,079
Balance at December 31, 2018	$	1,021,038	244,543		211,100
Balance at January 1, 2017	$	1,039,513	201,489		221,719
Reclassification		32,157	37,971	-
Disposals	-		(1,798)	-
Effect of changes in exchange rates		(68,525)	(676)		(16,698)
Balance at December 31, 2017	$	1,003,145	236,986		205,021
Amortization:
Balance at January 1, 2018	$	406,994	201,328	-
Amortization		48,724	20,126	-
Effect of changes in exchange rates		2,519	(1,712)	-
Balance at December 31, 2018	$	458,237	219,742	-
Balance at January 1, 2017	$	381,187	186,874	-
Amortization		47,275	17,096	-
Reclassification	-		(184)	-
Disposals	-		(1,798)	-
Effect of changes in exchange rates		(21,468)	(660)	-
Balance at December 31, 2017	$	406,994	201,328	-
Carrying value:
December 31, 2018	$	562,801	24,801		211,100
December 31, 2017	$	596,151	35,658		205,021
January 1, 2017	$	658,326	14,615		221,719
i) In 2018 and 2017, the amortization	of intangible assets were as follows:
		2018	2017
Operating costs	$	6,422	6,793
Operating expenses	$	146,218	142,211

(i) In 2018 and 2017, the amortization of intangible assets were as follows:

(ii) Impairment Loss

In accordance with IAS 36 “impairment of assets,” the Group assesses the impairment loss of intangible assets, goodwill and trademark, at the end of each reporting period. The recoverable amount of the cashgenerating unit is the expected discount present value of future cash inflows. As of December 31, 2018 and 2017, based on the result of the assessment of the Group, the recoverable amount of the cash-generating unit was higher than the book value. Therefore, there was no impairment loss.

1) operating results, and the financial budget.
2) Forecast of operating revenue, operating cost, and operating expenses are based on the future operational plan, with consideration on the changes and competition in the market industry.
3) For the years 2018 and 2017, the discount rates for the present value of recoverable amounts were 8% and 9%, respectively.

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Patent and trademark 587,467 - 17,418 604,885 635,313 - - (47,846) 587,467 151,661 23,664 4,957 180,282 138,675 23,902 - - (10,916) 151,661 424,603 435,806 496,638	Customer relationship 1,071,543 - 31,772 1,103,315 1,158,816 - - (87,273) 1,071,543 401,829 60,126 13,064 475,019 370,177 60,731 - - (29,079) 401,829 628,296 669,714 788,639	Non-compete agreement 8,954 - 266 9,220 9,683 - - (729) 8,954 8,954 - 266 9,220 9,683 - - - (729) 8,954 - - -

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(iii) The Group did not pledge any collateral on intangible assets.

(m) Prepaid rent

Cost: January 1, 2018 Additions Effects of changes in exchange rates December 31, 2018 January 1, 2017 Reclassification Effects of changes in exchange rates December 31, 2017 Amortization: January 1, 2018 Amortization Effects of changes in exchange rates December 31, 2018 January 1, 2017 Amortization Reclassification Effects of changes in exchange rates December 31, 2017 Carrying value: December 31, 2018 December 31, 2017 January 1, 2017 December 31, 2018 Current Non-current December 31, 2017 Current Non-current	Land lease prepayment
	$ 490,235 75,153 (11,199)
	$ 554,189
	$ 526,479 (31,046) (5,198)
	$ 490,235
	$ 113,288 9,768 (2,754)
	$ 120,302
	$ 112,377 9,960 (8,072) (977)
	$ 113,288
	$ 433,887
	$ 376,947
	$ 414,102
	$ 11,454 422,433
	$ 433,887
	$ 9,805 367,142
	$ 376,947

As of December 31, 2018 and 2017, the Group's prepaid rent was not provided as pledged assets for long-term borrowings and credit lines.

(n) Short-term and long-term borrowings

The details of the Group's short-term and long-term borrowings were as follows:

(i) Short-term borrowings

	December 31, 2018
Range of interest rates (%)	Year of maturity 2019 December 31, 2017	Amount
0.55~5.66		$ 4,147,772

Range of interest rates (%)	Year of maturity 2018	Amount
0.40~4.79		$ 6,365,254

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The abovementioned short-term borrowings were to mature within one year.

As of December 31, 2018 and 2017, the unused credit facilities (including credit lines for short-term commercial paper payable) amounted to $15,664,492 thousand and $13,586,947 thousand, respectively.

(ii) Short-term commercial paper payable

December 31, 2017 Guarantee or acceptance institution Range of interest rates(%) Amount Commercial paper payable International Bills Finance Corporation 0.87 $ 350,000 Less: discount 25 Total $ 349,975 (iii) Long-term borrowings 1) Long-term bank borrowings December 31, 2018 Range of interest Currency rates(%) Year of maturity Amount Secured loans USD 4.25~4.38 2020~2023 $ 768,325 Unsecured loans NTD 1.05~1.44 2019~2023 3,800,000 Total $ 4,568,325 Current $ 850,000 Non-current 3,718,325 Total $ 4,568,325 December 31, 2017 Range of interest Currency rates(%) Year of maturity Amount Unsecured loans NTD 1.44 2018~2019 $ 1,600,000 Current $ 800,000 Non-current 800,000 Total $ 1,600,000 2) Long-term commercial paper payable (recorded as other long-term borrowings) December 31, 2018 Guarantee or accep- Range of interest tance institution rates(%) Amount Commercial paper payable CTBC Bank 1.2457 $ 500,000 Less: discount 307 Total $ 499,693				December 31, 2017	December 31, 2017	December 31, 2017	Amount $ 350,000 25 $ 349,975	Amount $ 350,000 25 $ 349,975	Amount $ 350,000 25 $ 349,975
	Guarantee or acceptance institution International Bills Finance Corporation			Range of interest rates(%) 0.87 December 31, 2018
							$
							$

Currency USD NTD			Range of interest rates(%) Year of maturity 4.25~4.38 2020~2023 1.05~1.44 2019~2023 December 31, 2017			Year of maturity			Amount
									$ 768,325 3,800,000
									$ 4,568,325
									$ 850,000 3,718,325
									$ 4,568,325

						Year of maturity			Amount
									$ 1,600,000
									$ 800,000 800,000
									$ 1,600,000

		Guarantee or accep- tance institution CTBC Bank			Range of interest rates(%) 1.2457				Amount
								$	500,000 307
								$	499,693

The Group disclosed the related risk exposure to the financial instruments in note 6(aa).

(iv) Collateral of loans

The Group pledged certain assets for the loans. Please refer to note 8 for additional information.

(v) Special agreements of loan contracts

The Group entered into syndicated loan contracts with Taipei Fubon Bank and seven other banks:

1) Borrower: TSRC (USA) Investment Corporation.
2) Amount: USD80,000,000.
3) Duration: Originally 5 years (starting from March 31, 2011). According to the contracts, TSRC (USA) Investment Corporation could extend the duration for two more years when the loan mature in March 2016.

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4) Interest rate: 3-month or 6-month LIBOR plus 1.30%.
5) Repayment term: Principal that borrower is repaid semi-annually in 8 installments starting 18 months after the date of initial utilization of the loan. Principal amount of the loan that borrower is repaid semi-annually in 7 installments starting 24 months from the date of initial utilization of the loan. Each of the first 6 installments is 10% of the principal, and the final installment is 40% of the principal. Starting from March 2016, borrower will repay the outstanding amount USD32,000 thousand semi-annually in 5 installments.
6) Guarantee: The Company provided a guarantee for TSRC (USA) Investment Corporation.
7) Others: During the period of borrowing, the Group should comply with the covenants. As of December 31, 2017, the Group was in compliance with the covenants described above. The loans was repaid in 2017.

(iv) Finance lease liabilities

The Group has entered into a lease contract for leasing a parcel of land from the Industrial Development Bureau of the Ministry of Economic Affairs for the period from June 29, 2004, to June 28, 2024. During the term of the lease, the Group has an option to purchase the rented land from the Industrial Development Bureau of the Ministry of Economic Affairs through a formal application. Once the application is approved, the rental and deposit paid during the lease period can be offset against the purchase price. The Group intends to purchase the rented land after the contract expires. The finance lease liabilities payable were as follows:

Future minimum lease payments December 31, 2018 Less than one year $ 7,064 Between one and five years 28,256 More than five years 3,532 $ 38,852 Future minimum lease payments December 31, 2017 Less than one year $ 7,064 Between one and five years 28,256 More than five years 10,595 $ 45,915 urrent provisions (recorded as other payable) Onerous Contracts Balance at January 1, 2018 $ - Increase in provisions - Provisions recognized - Reversal of unused provisions - Effect of changes in exchange rates - Balance at December 31, 2018 $ - Balance at January 1, 2017 $ 33,599 Increase in provisions - Provisions recognized (32,789) Reversal of unused provisions - Effect of changes in exchange rates (810) Balance at December 31, 2017 $ -	Interest 77 1,054 1,883 3,014 Interest 77 1,054 2,362 3,493 Provision for defective products 28,324 33,103 (1,466) (32,563) (270) 27,128 - 58,828 - (30,674) 170 28,324	Present value of minimum lease payments
		6,987 27,202 1,649
		35,838
		Present value of minimum lease payments
		6,987 27,202 8,233
		42,422
		Total
		28,324 33,103 (1,466) (32,563) (270)
		27,128
		33,599 58,828 (32,789) (30,674) (640)
		28,324

(o) Current provisions (recorded as other payable)

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In order to meet its obligation in the sales contracts, the Group expected the benefit to be lower than the expected cost. The Group accrued its provision according to the contracts, and recorded it under other income and expenses. The Group may have losses caused by the defeats of new products that are not yet mass produced and by the return and compensation occurred after products were delivered to customers. The Group had estimated the provisions based on historical experience and recognized the amount under operating cost.

(p) Operating leases

(i) Lessee

Non-cancellable rental payables of operating leases were as follows:

Less than five years More than five years	December 31, 2018 $ 247,585 126,856 $ 374,441	December 31, 2017
		173,442 132,564
		306,006

The Group leases offices and factory facilities under operating leases. The leases typically run for a period of 1 to 20 years, with an option to renew the lease. The lease payment will be adjusted to reflect market price when renewing the contract.

For the years ended December 31, 2018 and 2017, lease expenses were $103,860 thousand and $99,299 thousand, respectively.

(ii) Lessor

The Group leases out its investment property under operating leases; please refer to note 6(k). The future minimum lease payment receivables under Non-cancellable leases were as follows:

Less than five years	December 31, 2018 $ 68,626	December 31, 2017
		123,408

(q) Employee benefits

(i) Defined benefit plans

The following table shows a reconciliation between the present value of the defined benefit obligation and the fair value of plan assets:

The present value of the defined benefit obligations Fair value of plan assets The net defined benefit liability	December 31, 2018 $ 607,256 (467,801) $ 139,455	December 31, 2017
		598,028 (423,675)
		174,353

The Group established the pension fund account for the defined benefit plan in Bank of Taiwan. The plan, under the Labor Standards Law, provides benefits based on an employee's length of service and average monthly salary for the six-month period 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 Labors. Minimum annual distributions of the funds by the Bureau shall be no less than the earnings attainable from the two-year time deposits with the interest rates offered by local banks. The Group's Bank of Taiwan labor pension reserve account balance amounted to $467,801 thousand at the end of the reporting period. For information on the utilization of the labor pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

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2) Movements in present value of defined benefit plan obligation

The movements in present value of the Group's defined benefit plan obligation for the years ended December 31, 2018 and 2017, were as follows:

Defined benefit obligation as of 1 January Current service costs and interest Remeasurements of net defined benefit liability (asset) －Return on plan assets (excluding current interest expense) －Due to changes in financial assumption of actuarial (losses) gains Benefits paid by the plan Defined benefit obligation as of 31 December	2018 $ 598,028 14,742 21,429 12,848 (39,791) $ 607,256	2017
		636,379 14,510 10,500 (13,674) (49,687)
		598,028

3) Movements in fair value of defined benefit plan assets

The movements in the fair value of the defined benefit plan assets for the years ended December 31, 2018 and 2017, were as follows:

Fair value of plan assets as of January 1 Remeasurements of net defined benefit liability (asset) －Return on plan assets (excluding current interest expense) Contributions made Benefits paid by the plan Fair value of plan assets as of December 31	2018 $ 423,675 18,090 65,827 (39,791) $ 467,801	2017
		462,360 4,306 6,696 (49,687)
		423,675

4) Expenses recognized in profit or loss

The expenses recognized on profit or loss for the years ended December 31, 2018 and 2017, were as follows:

	2018		2017
Current service cost	$	6,710		7,526
Net interest on the defined benefit liability (asset)		2,365		1,931
	$	9,075		9,457
The Group recognized pension costs of the defined benefit plans in profit or loss as follows:
	2018		2017
Operating costs	$	5,555		4,155
Operating expenses		3,520		2,651
	$	9,075		9,457

5) Remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income The Group's remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income for the years ended December 31, 2018 and 2017 were as follows:

Balance of January 1 Recognized during the period Balance of December 31	2018 $ (178,457) (21,854) $(200,311)	2017
		(180,884) 2,427
		(178,457)

6) Actuarial assumptions

The following are the Group's principal actuarial assumptions:

Discount rate Future salary increases rate	December 31, 2018 1.125% 1.500%	December 31, 2017
		1.375% 1.500%

The Group expects to make contributions of $4,535 thousand to the defined benefit plans in the next year starting from the reporting date of 2018.

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The weighted-average duration of the defined benefit plan is 11.22 years.

7) Sensitivity analysis

When calculating the present value of the defined benefit obligation, the Group uses judgments and estimations to determine the related actuarial assumptions, including discount rate, employee turnover rates and future salary changes, as of the balance sheet date. Any changes in the actuarial assumptions may significantly impact the amount of the defined benefit obligation.

As of December 31, 2018 and 2017, the effects of the present value of the defined benefit obligation arising from changes in principal actuarial assumptions were as follows:

December 31, 2018 Discount rate Future salary increase rate December 31, 2017 Discount rate Future salary increase rate	The impact of defined benefit obligation	The impact of defined benefit obligation
	Increase 0.25% $ (12,848) 12,819 (13,240) 13,232	Decrease 0.25%
		13,291 (12,450) 13,674 (12,877)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions remain 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 the pension liabilities in the balance sheets.

The method and assumptions used on current sensitivity analysis is the same as those of the prior year.

(ii) Defined contribution plans

The Group has made monthly contributions equal to 6% of each employee's monthly wages to the labor pension personal account at the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Group contributes a fixed amount to the Bureau of the Labor Insurance without additional legal or constructive obligations.

The Group's pension costs under the defined contribution plan were $101,634 thousand and $100,426 thousand for the years 2018 and 2017, respectively. Payments were made to the Bureau of Labor Insurance and to local government for the overseas subsidiaries.

(iii) Short-term employee benefit liabilities

Compensated absence liabilities	December 31, 2018 $ 39,821	December 31, 2017
		36,057

(r) Income tax

According to the amendments to the "Income Tax Act” enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, an increase in the corporate income tax rate from 17% to 20% is applicable upon filing the corporate income tax return commencing 2018.

(i) Income tax expenses

The amount of the Group's income tax for the years ended December 31, 2018 and 2017, were as follows:

Current income tax expense Current period Adjustment for prior periods Deferred tax expense Origination and reversal of temporary differences Income tax expenses on continuing operations	2018 $ 310,548 7,924 318,472 78,301 $ 396,773	2017
		251,217 11,857
		263,074
		24,344
		287,418

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Reconciliations of the Group's income tax expense (benefit) and the profit before tax for 2018 and 2017 were as follows:

Income before tax Income tax calculated on pretax accounting income at statutory rate Effect of tax rates in foreign jurisdiction Dividend income Adjustment for prior periods Domestic investment loss Foreign investment income R&D tax credits utilized Withholding tax of revenue from overseas Adjustment of tax rates Current-year losses for which no deferred income tax asset was recognized Change in unrecognized temporary differences Others Total	2018	2017 1,137,135 193,313 80,799 (8,727) 11,857 21,022 (5,813) (6,163) 34,551 (61,765) - - 28,344 287,418
	$ 1,630,443
	$ 326,087 42,714 (10,885) 7,924 (94,488) (20,264) (7,900) 35,076 51,772 80,800 7,117 (21,180)
	$ 396,773

(ii) Recognized deferred tax assets and liabilities

1) Unrecognized deferred tax assets

The Group deferred tax assets have not been recognized in respect of the following items:

Tax effect of deductible Temporary Differences The carryforward of unused tax losses	December 31, 2018 $ 7,117 80,800 $ 87,917

Under the income tax rate, tax losses can be carried forward for ten years to offset taxable income after permitted by domestic tax authority. Deferred income tax assets have not been recognized in respect of these items because it is not probable that the future taxable profit will be available, against which, the Group can utilize the benefits therefrom.

As of December 31, 2018, the amount of tax losses not yet recognized as deferred tax assets and their credit for the previous year is as follows:

Year 2016 2018	Amount $ 19,985 60,815 $ 80,800	Year of expiration
		2026 2028

2) Recognized deferred income tax assets and liabilities

Changes in the amount of deferred income tax assets and liabilities for 2018 and 2017 were as follows: Deferred tax assets:

Balance at January 1, 2018 Recognized in profit or loss Balance at December 31, 2018 Balance at January 1, 2017 Recognized in profit or loss Balance at December 31, 2017	Defined benefit plans $ 30,053 (6,533) $ 23,520 $ 19,704 10,349 $ 30,053	Allowance for inventory valuation 46,542 6,672 53,214 45,655 887 46,542	Loss carryforward 66,262 (8,868) 57,394 135,889 (69,627) 66,262	Others 149,641 (39,450) 110,191 120,469 29,172 149,641	Total
					292,498 (48,179)
					244,319
					321,717 (29,219)
					292,498

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Deferred tax liabilities: Balance at January 1, 2018 Recognized in profit or loss Balance at December 31, 2018 Balance at January 1, 2017 Recognized in profit or loss Balance at December 31, 2017	Foreign investment income accounted for under equity method $ 324,654 102,821 $ 427,475 $ 311,287 13,367 $ 324,654	Depreciation difference between financial and tax reporting 93,866 1,390 95,256 170,383 (76,517) 93,866	Land value increment tax 56,683 - 56,683 56,683 - 56,683	Others 190,357 (74,089) 116,268 132,082 58,275 190,357

Deferred tax liabilities:

(iii) Examination and approval

The tax returns of the Company have been examined by the tax authorities through 2016.

(s) Capital and other equity

(i) Capital

In accordance with the Company' s articles of incorporation amended on June 21, 2018, the capital share of the Company amounted to $12,000,000 thousand, divided into 1,200,000,000 shares, at NTD10 per share.

In accordance with the original Company's articles of incorporation, the capital share of the Company amounted to $9,000,000 thousand, divided into 900,000,000 shares, at NTD10 per share.

As of December 31, 2018 and 2017, 825,709,978 shares of ordinary were issued.

(ii) Additional paid-in capital

The components of additional paid-in capital as of December 31, 2018 and 2017, were as

Share premium Overaging unclaimed dividends	December 31, 2018 $ 849 44,309 $ 45,158	December 31, 2017
		849 40,194
		41,043

In accordance with the ROC Company Act, realized capital surplus can be used to increase share capital or to distribute as cash dividends after offsetting losses. The aforementioned capital surplus includes share premiums and donation gains. In accordance with the Securities Offering and Issuance Guidelines, the amount of capital surplus to increase share capital shall not exceed 10 percent of the actual share capital amount.

(iii) Retained earnings
1) Legal reserve

The ROC Company Act stipulates that companies must retain 10% of their annual net earnings, as defined in the Act, until such retention equals the amount of issued share capital. When a Company incurs no loss, it may, pursuant to a resolution to be adopted by the shareholders' meeting as required, distribute its legal reserve by issuing new shares or cash. Only the portion of legal reserve which exceeds 25% of the issued share capital may be distributed.

2) Special earnings reserve

By choosing to apply exemptions granted under IFRS 1 First-time Adoption of International Financial Reporting Standards during the Company's first-time adoption of the IFRSs endorsed by the FSC, unrealized revaluation gains recognized under shareholders' equity and cumulative translation adjustments (gains) were reclassified to retained earnings at the adoption date. In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, an increase in retained earnings due to the first-time adoption of the IFRSs endorsed by the FSC shall be reclassified as a special earnings reserve during earnings distribution. However, when adjusted retained earnings due to the first-time adoption of the IFRSs endorsed by the FSC are insufficient for the appropriation of a special earnings reserve at the transition date, the Company may appropriate a special earnings reserve up to the amount of increase in retained earnings. Upon the use, disposal, or reclassification of related assets, the Company may reverse the special earnings reserve proportionately. As a result of elections made according to IFRS 1, the Company has reclassified $(103,035) thousand to retained earnings and is not required to appropriate a special earnings reserve.

A portion of current-period earnings and undistributed prior-period earnings shall be reclassified as a special earnings reserve during earnings distribution. The amount to be reclassified should be equal to the difference between the total net current-period reduction of special earnings reserve resulting from the first-time adoption of IFRSs and the carrying amount of other shareholders' equity as stated above. Similarly, a portion of undistributed prior-period earnings shall be reclassified as a special earnings reserve (which does not

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qualify for earnings distribution) to account for cumulative changes to other shareholders' equity pertaining to prior periods due to the first-time adoption of IFRSs. Amounts of subsequent reversals pertaining to the net reduction of other shareholders' equity shall qualify for additional distributions.

3) Distribution of retained earnings

In accordance with the Company's articles of incorporation amended on June 21, 2018, the profit of annual account, if any, shall deduct the tax and make up the loss carried from previous years, then appropriate 10% as legal reserve fund. The rest shall be distributed or reserved as special reserve pursuant to the Securities and Exchange Act. The distributable earnings shall be the balance after considering the above facts and accounting requirement by the relevant law, if any, plus the unappropriated earnings from the previous period; With regard to distribution of surplus, it is proposed to distribute the available surplus.

With regard to the distribution of the dividends of the above-mentioned shareholders, their cash dividend must not be less than 20% of the total amount distributed.

In accordance with the original Company's articles of incorporation, the Company must retain 10% of its after-tax earnings as legal reserve (less deficits of prior years, if any) and then provide a special reserve. No less than 50% of distributable earnings shall be appropriated to shareholders.

If the dividends and bonuses mentioned above were to be distributed, distribution of cash dividends should not be less than 20% of total dividends, and the distribution of stock dividends should not be more than 80% of total dividends. If the dividends per share are less than $0.5 (dollars), part or all of the remaining earnings can be retained.

In accordance with the revised ROC Company Act, remuneration for employees, directors and supervisors is no longer subject to earnings distribution. With respect to the items of earnings distribution, the stockholders' meeting on June 24, 2016, approved a resolution to amend the articles of the Company. Please refer to note 6(t).

The appropriations of 2017 and 2016 earnings as dividends to stockholders that were approved by the Company's shareholders during their meetings on June 21, 2018, and June 22, 2017, respectively, were as follows:

	2017 2016 Amount per share Amount per share (NTD) Total amount (NTD) Total amount 0.96 792,682 1.00 825,710 Foreign exchange differences arising from Unrealized gains (losses) from finan- cial assets measured at fair val- ue through other com- prehensive Available- for-sale financial Effective portion of cash flow foreign income assets hedges Total $ 512,008 - 623,809 11,721 1,147,538 - 593,961 (623,809) - (29,848) 512,008 593,961 - 11,721 1,117,690 24,421 - - - 24,421 (70,840) - - - (70,840) - 207,844 - - 207,844	2017 2016 Amount per share Amount per share (NTD) Total amount (NTD) Total amount 0.96 792,682 1.00 825,710 Foreign exchange differences arising from Unrealized gains (losses) from finan- cial assets measured at fair val- ue through other com- prehensive Available- for-sale financial Effective portion of cash flow foreign income assets hedges Total $ 512,008 - 623,809 11,721 1,147,538 - 593,961 (623,809) - (29,848) 512,008 593,961 - 11,721 1,117,690 24,421 - - - 24,421 (70,840) - - - (70,840) - 207,844 - - 207,844

$
	Foreign exchange differences arising from foreign $ 512,008 - 512,008 24,421 (70,840) -
		1,147,538 (29,848)
		1,117,690 24,421 (70,840) 207,844

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			Unrealized
			gains (losses)
			from finan-
			cial assets
			measured
		Foreign	at fair val-
		exchange	ue through	Available-		Effective
		differences	other com-	for-sale		portion of
		arising from	prehensive	financial		cash flow
		foreign	income	assets		hedges		Total
Share of other comprehensive income		-					(79,855)	(79,855)
of associates and joint ventures
accounted for under equity method,
losses on effective portion of cash
flow hedges
Balance as of December 31, 2018		$ 465,589	801,805		-		(68,134)	1,199,260
	Foreign exchange
	differences aris-				Effective portion
		ing from	Available-for-sale		of cash flow
		foreign	financial assets		hedges			Total
Balance as of January 1, 2017	$	990,359	735,464			(23,562)		1,702,261
Foreign exchange differences aris-		(534,213)	-			-		(534,213)
ing from foreign operation
Share of other comprehensive in-		55,862	-			-		55,862
come of associates accounted for
under equity method, exchange
differences on translation
Unrealized gains (losses) from
available-for-sale financial assets		-	(111,655)			-		(111,655)
Share of other comprehensive		-				35,283		35,283
income of associates and joint
ventures accounted for under
equity method, losses on effective
portion of cash flow hedges
Balance as of December 31, 2017	$	512,008	623,809			11,721		1,147,538

(t) Earnings per share

The calculation of the Company's basic earnings per share and diluted earnings per share were as follows: (i) Basic earnings per share

Net income attributable to common shareholders of the Company Weighted-average number of common shares Basic earnings per share (in NTD) (ii) Diluted earnings per share Net income attributable to common shareholders of the Company (diluted) Weighted-average number of common shares (basic) Impact of potential common shares Effect of employees' bonuses Weighted-average number of shares outstanding (diluted) Diluted earnings per share (in NTD)	2018 $ 1,192,186 825,710 $ 1.44 2018 $ 1,192,186 825,710 2,683 828,393 $ 1.44	2017
		874,107
		825,710
		1.06
		2017
		874,107
		825,710 1,603
		827,313
		1.06

(u) Employees' compensation and directors' remuneration

In accordance with the Company's articles of incorporation, if there is profit for the year, the Company should contribute more than 1% of its profit as employees' compensation, and less than 1% as directors' remuneration. The related regulations on distribution of employees' compensation and directors' remuneration were approved by the board of directors.

For the years ended December 31, 2018 and 2017, the estimated amounts of employees' bonuses were $64,290 thousand and $49,732 thousand, respectively, and the estimated amounts of directors' remuneration were $14,064 thousand and $9,558 thousand, respectively. The estimated amounts mentioned above were according to the Company's articles of incorporation, and were recorded as operating cost or operating expenses in the respective

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periods. Related information would be available at the Market Observation Post System website. The amounts, as stated in the consolidated financial statements, are identical to those of the actual distributions for 2018 and 2017. (v) Revenue from contracts with customers

	2018
Synthetic rubber	Non-synthetic rubber 1,675,761 15,632 - 52 1,691,445 - 1,689,317 2,128 1,691,445	Total
$ 19,476,346 4,444,409 3,314,608 824,410		21,152,107 4,460,041 3,314,608 824,462
$ 28,059,773		29,751,218
$ 27,112,256 - 947,517		27,112,256 1,689,317 949,645
$ 28,059,773		29,751,218

For details on revenue for the year ended December 31, 2017, please refer to note 6(w). (w) Revenue

				2017
	Sale of goods	$		31,745,601
	Service income			20,636
		$		31,766,237
	For details on revenue for the year ended December 31, 2018, please refer to note 6(v).
(x)	Other income and expenses
				2018	2017
	Rental income	$		80,276	76,870
	Royalty income			131,530	101,540
	Net service income			13,854	8,898
	Depreciation of investment properties			(14,726)	(14,725)
	Net other income			41,579	46,453
	Other income and expenses	$		252,513	219,036
(y)	Non-operating income and expenses
	(i) Other gains
				2018	2017
	Interest income		$	78,175	51,122
	Dividend income			81,371	52,343
	Gains from bargain purchase			11,820	-
	Other gains		$	171,366	103,465
	(ii) Other gains and losses
				2018	2017
	Loss on disposal of property, plant and		$	(23,824)	(8,997)
	equipment, net
	Gains on disposals of investment			-	154,458
	Foreign exchange gain, net			7,380	25,793
	Gains (losses) on financial assets (liabilities)			23,685	(120)
	at fair value through profit or loss
	Other income			21,736	8,125
	Other gains and losses, net		$	28,977	179,259

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(iii) Finance costs

iii) Finance costs
2018		2017
Interest expense $ 169,434		188,149
eclassification of components of other comprehensive income
he changes in components of other comprehensive income were as follows:
		2018	2017
Effective portion of cash flow hedges:
Net gains (losses) for current year	$	(86,325)	44,784
Less: Adjustment of reclassification included in profit or loss		(6,470)	9,501
Net gains (losses) recognized in other comprehensive income	$	(79,855)	35,283
Available-for-sale financial assets
Net change in fair value for current period	$	-	(111,655)
Net change in fair value reclassified to profit or loss		-	-
Net changes in fair value recognized in other comprehensive income	$	-	(111,655)

(z) Reclassification of components of other comprehensive income

The changes in components of other comprehensive income were as follows:

(aa) Financial instruments
(i) Credit risk
- 1) Credit risk exposure

The maximum credit risk exposure of the Group's financial assets is equal to their carrying amount. As of December 31, 2018 and 2017, the maximum credit risk exposure amounted to $9,416,810 thousand, and $8,591,408 thousand, respectively.

2) Concentration of credit risk

The Group's cash and cash equivalents and accounts receivable are the main source of potential credit risk. The Group deposits its cash and cash equivalents in different financial institutions and has no concentration of credit risk on an individual customer. Therefore, the Group concluded that it is not exposed to credit risk. The Group guarantees bank loans for investees. The Group concluded that it is not exposed to credit risk for these transactions.

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(ii) Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments but excluding the impact of netting agreements.

December 31, 2018 Non-derivative financial liabilities Short-term debts Accounts payable (including related parties) Other payables Long-term debts (including other long-term borrowings and current portion) Deposits received Provision for guarantee liabilities －non-current Derivative financial liabilities Other forward contracts: Outflow December 31, 2017 Non-derivative financial liabilities Short-term debts Short-term commercial paper payable Accounts payable (including related parties) Other payables Long-term debts (including current portion) Deposits received Provision for guarantee liabilities －non-current Derivative financial liabilities Other forward contracts: Outflow	Contractual cash flows
	$ 4,173,699 1,514,522 997,500 5,286,619 49,266 4,159,941 2,066
	$ 16,183,613
	$ 6,403,311 349,975 1,828,755 882,853 1,623,419 42,276 2,709,687 226
	$ 13,840,502

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

(iii) Currency risk

1) Risk exposure

The Group's financial assets and financial liabilities exposed to significant currency risk were as follows:

December 31, 2018 Financial assets: Monetary assets: USD EUR JPY CNY Financial liabilities: Monetary liabilities: USD EUR JPY	Foreign currency $ 39,364 $ 12,984 $ 77,582 $ 17,665 $ 56,225 $ 11,634 $ 24,691	Exchange rate 30.7330 35.2047 0.2784 4.4742 30.7330 35.2047 0.2784	NTD
			1,209,774 457,098 21,599 79,037 1,727,963 409,571 6,874

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Within 6 months 3,936,374 1,514,522 997,500 468,567 49,266 732,738 2,066 7,701,033 5,941,195 349,975 1,828,755 882,853 409,057 42,276 526,562 226 9,980,899	6-12 months 237,325 - - 466,625 - 797,995 - 1,501,945 462,116 - - - 408,617 - 662,625 - 1,533,358	1-2years - - - 628,261 - 898,940 - 1,527,201 - - - - 805,745 - 526,562 - 1,332,307	2-5years - - - 3,723,166 - 1,730,268 - 5,453,434 - - - - - - - - -

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	Foreign currency	Exchange rate	NTD
December 31, 2017
Financial assets:
Monetary assets:
USD	$ 38,486	29.8480	1,148,730
EUR	$ 14,867	35.6743	530,370
JPY	$ 130,957	0.2649	34,691
CNY	$ 19,566	4.5788	89,589
Financial liabilities:
Monetary liabilities:
USD	$ 75,539	29.8480	2,254,688
EUR	$ 13,560	35.6743	483,744
JPY	$ 109,006	0.2649	28,876

2) Sensitivity analysis

The Group's exposure to foreign currency risk arose from cash and cash equivalents, accounts and other receivables, loans and borrowings, and accounts and other payables that were denominated in foreign currencies. If the NTD against the USD, EUR, CNY and JPY had appreciated depreciated by 1% the Group's net income before tax would have increase/decreased by $3,769 thousand and $9,639 thousand for the years ended December 31, 2018 and 2017, respectively, with all other variable factors remaining constant. The analysis was performed on the same basis for both periods.

3) Foreign exchange gain and loss on monetary item

Since the Group has many kinds of functional currency, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. In 2018 and 2017, foreign exchange gain (loss) (including realized and unrealized) amounting to $7,380 thousand and $25,793 thousand.

(iv) Interest rate risk analysis

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

The following sensitivity analysis is based on the risk exposure to interest rates of the non-derivative financial instruments on the reporting date. For floating-rate instruments, the sensitivity analysis assumes the floating-rate liabilities as of the reporting date are outstanding for the whole year.

If the interest rate had increased / decreased by 1%, the Group's net income before tax would have increased / decreased by $92,158 thousand and $79,653 thousand for the years ended December 31, 2018 and 2017, respectively, with all other variable factors remaining constant. This is mainly due to the Group's borrowing at floating-rates.

(v) Fair value

1) Categories and fair value of financial instruments

Except for the followings, carrying amount of the Group's financial assets and liabilities are valuated approximately to their fair value, and are not based on observable market date and the value measurements which are not reliable. No additional fair value disclosure is required in accordance to the regulations.

	December 31, 2018	December 31, 2018	December 31, 2018
Carrying amount $ 679 305,631 994,175 1,299,806 4,527,752		Fair value
	Level 1 - 305,631 - 305,631 -	Level 2 679 - - - -	Level 3 - - 994,175 994,175 -	Total
				679
				305,631 994,175
				1,299,806
				-

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	December 31, 2018	December 31, 2018	December 31, 2018
Carrying amount 3,432,837 91,395 64,341 8,116,325 $ 9,416,810 $ 2,066 4,147,772 5,068,018 1,514,522 997,500 49,266 11,777,078 $ 11,779,144		Fair value
	Level 1 Level 2 Level 3 - - - - - - - - - - - - 305,631 679 994,175 - 2,066 - - - - - - - - - - - - - - - - - - - - 2,066 - December 31, 2017
Carrying amount $ 235,024 885,097 1,120,121 3,560,440 3,817,055 76,088 17,704 7,471,287 $ 8,591,408 $ 26 6,365,254 349,975 1,600,000 1,828,755 882,853 42,276 $11,069,339		Fair value
	Level 1 235,024 - 235,024 - - - - - 235,024 - - - - - - - -	Level 2 - 885,097 885,097 - - - - - 885,097 226 - - - - - - 226	Level 3 - - - - - - - - - - - - - - - - -

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2) Valuation techniques and assumptions used in fair value determination

If the financial instruments held by the Group have the quoted market price in active market, the fair value of the assets is based on the quoted market price. However, if the instruments have no quoted market price in active market, the Group uses market comparison approach to evaluate the fair value. The main assumption is based on the investee's earnings after tax and the listed (over the counter) Company's earnings used in computing the market price. The estimated price has been discounted due to the price of the securities lacks the liquidity. The liquidity discount is a significant unobservable input in valuing equity investment. Forward exchange contracts are normally priced based on the exchange rates provided by the world agencies.
3) Reconciliation of Level 3 fair values

Balance at January 1, 2018 Total gains recognized: In other comprehensive income Balance at December 31, 2018 Balance at January 1, 2017 Total losses recognized: In other comprehensive income Balance at December 31, 2017	Unquoted equity instruments
	$ 885,097 109,078
	$ 994,175
	$ 968,406 (83,309)
	$ 885,097

4) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement Quantified information of significant unobservable inputs was as follows:

Item Financial assets at fair value through other comprehensive income equity investments with- out an active market	Valuation technique Comparative listed Com- pany	Significant unobservable inputs •Multipliers of price-to- earnings ratios as of De- cember 31, 2018 and 2017 were 13.20~17.32 and 14.81~15.13, respectively •Market illiquidity discount rate as of December 31, 2018 and 2017 was both 20%	Inter-relationship between significant unobservable inputs and fair value measurement
			The estimated fair value would increase (decrease) if •the multiplier were higher (lower) •the market illiquidity discount were lower (higher)

5) Fair value measurements in Level 3 －sensitivity analysis of reasonably possible alternative assumptions For fair value measurements in Level 3, changing one or more of the assumptions would have the following effects on profit or loss and other comprehensive income:

December 31, 2018 Financial assets fair value through other comprehensive income Equity investments without an active market December 31, 2017 Available-for-sale financial assets Equity investments without an active market	Input Liquidity discount at 20% Liquidity discount at 20%	Assumptions 1% 1%	Other comprehensive income	Other comprehensive income
			Favourable $ 12,431 $ 11,068	Unfavourable
				(12,431) (11,068)

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

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(ab) Financial risk management
(i) Overview

The Group is exposed to the following risks arising from financial instruments:

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

This note discloses information about the Group's exposure to the aforementioned risks, and its goals, policies, and procedures regarding the measurement and management of these risks. For additional quantitative disclosures of these risks, please refer to the notes regarding each risk disclosed throughout the financial report.

(ii) Risk management framework

The Group's finance department is responsible for the establishment and management of the Group's risk management framework and policies. It is overseen by and reports to management, the Audit Committee, and the Board of Directors regarding the framework's operations.

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

The Group's Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group's Audit Committee is assisted in its oversight role by Internal Audit, with undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

(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 investment securities.

1) Accounts receivable and Notes Receivable

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Group's customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk, particularly during deteriorating economic circumstances. The Group's Accounts Receivable and Notes Receivable are mainly due from customers in China, accounting 43% and 50% of the total amount of the receivables as of December 31, 2018, and 2017, respectively.

The sales department and the finance department of the Group has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Group's standard payment and delivery terms and conditions are offered. The Group's review includes the history of transactions with the counter-party, its financial position, and geographic considerations. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval; these limits are reviewed on a periodic basis. Customers that fail to meet the Group's benchmark creditworthiness may transact with the Group only on a prepayment basis.

Goods are sold subject to a retention of title clause so that in the event of non payment, the Group may have a secured claim. The Group otherwise does not require collateral in respect of trade and other receivables. The Group has established an allowance for doubtful accounts to reflect its actual and estimated potential losses resulting from uncollectible accounts and trade receivables. The allowance for doubtful accounts consists primarily of specific losses regarding individual customers and estimates of potential losses based on the use of lifetime expected credit loss provision.

2) Investments

The credit risk exposure in the bank deposits and other financial instruments is measured and monitored by the Group's finance department. Since those who transact with the Group are banks and other external parties with good credit standing, financial institutions with a credit rating above investment grade, and government agencies, there are no non compliance issues. With regard to investment in a financial institution with a credit rating above investment grade, an investment limit is set according to the long-term credit rating. Hence, there is no significant credit risk.

3) Guarantees

The Group's policy allows it to provide financial guarantees to business partners or to related parties and jointly controlled entities according to its percentage ownership in these entities. Financial guarantees provided by the Group as of December 31, 2018 and 2017, are disclosed in note 7 "Related-party Transactions."

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(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.

(v) Market risk

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.

1) Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currency of the Company. The currencies used in these transactions are NTD, EUR, USD, JPY and CNY.

Foreign exchange gains and losses resulting from account and trade receivables held by the Group in a currency other than the respective functional currencies are used to offset foreign exchange gains and losses resulting from short-term loans denominated in a foreign currency. Hence, the Group's risk exposure to foreign exchange risk is reduced.

Interest expenses are denominated in the same currency as that of the principal. Generally, the currency of loans matches that of the Group's operating cash flow, primarily consisting of NTD, EUR, USD, JPY, and CNY. With regard to monetary assets and liabilities denominated in a foreign currency, when a short-term risk exposure exists, the Group relies on immediate foreign exchange transactions to ensure the net exposure to foreign exchange risk is maintained at an acceptable level.

The Group does not hedge against investments of related parties.

2) Interest rate risk

The interest rates of the Group's long-term and short-term borrowings are floating. Hence, changes in market conditions will cause fluctuations in the effective interest rate of the aforementioned loans. The Group's finance department monitors and measures potential changes in market conditions, entering into interest rate swaps to achieve a fixed interest rate on the Group's loans.

3) Other market price risk

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

(ac) Capital management

The Group's goal of capital management is to ensure the Group's continuing operating capacity, and to continuously provide remuneration to the shareholders and benefits to other equity holders. To ensure that the above mentioned goal is achieved, the Group's management reviews its capital structure periodically. In consideration of the overall economic situation, financing cost and sufficiency of cash in flows generated by operating activities, the Group will adjust its capital structure by paying dividends, issuing new stock, purchasing treasury stock, increasing or decreasing loans, and issuing or purchasing bonds.

The Group's capital structure at the end of the reporting period were as follows:

Total liabilities Total equity Total assets Debts ratio	December 31, 2018 $ 13,348,328 16,881,841 $ 30,230,169 44%	December 31, 2017
		12,555,895 16,443,446
		28,999,341
		43%

As of December 31, 2018, there were no material changes in the Group's debts ratio.

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

The Group did not have any non-cash flow transactions on investing and financing activities for the years ended December 31, 2018 and 2017.

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

Reconciliation of liabilities arising from financing activities were as follows:

Non-cash changes

Long-term borrowings (including current portion) Other long-term borrowings Short-term borrowings Short-term commercial paper payable Total liabilities from financing activities	January 1, 2018 $ 1,600,000 - 6,365,254 349,975 $ 8,315,229	Cash flows 2,953,662 494,940 (2,525,355) (350,477) 572,770	Foreign exchange movement 14,663 - 307,873 - 322,536	Amortization of commercial paper discount - 4,753 - 502 5,255	December 31, 2018
					4,568,325 499,693 4,147,772 -
					9,215,790

<7> Related-party Transactions

(a) Names and relationship with related parties

In this consolidated financial report, the related parties having transactions with the consolidated group are listed as below:

Name of related party

Relationship with the Group

・[The Group recognized joint venture under equity method ] (reclassified from associate to joint venture since April 2018)

Indian Synthetic Rubber Private Limited

・[The Group recognized associates under equity method]

ARLANXEO-TSRC (Nantong) Chemical Industries Co., Ltd.

Asia Pacific Energy Development Co., Ltd

〃 Taiwan Advanced Materials Corp ・[The Group recognized joint venture under equity method] Nantong Qix Storage Co., Ltd. 〃 Marubeni Corporation ・[Corporate investor of the consolidated entity] UBE Industrial Ltd. 〃 Nantong Chemical & Light Industry Co., Ltd. ・[[The ultimate controlling party of the investor, which recog-]]

・[[The ultimate controlling party of the investor, which recog-]] nized joint venture under equity method ・[[The controlling party of the investor, which recognized joint ]] venture under equity method

Nantong Benny Petrochemicals Harbour Storage ・[[The controlling party of the investor, which recognized joint ]] Co., Ltd. venture under equity method

UBE (Shanghai) Ltd. ・[Subsidiary of corporate investor of the consolidated entity]

(b) Significant transactions with related parties
(i) Operating revenue

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

2018 $ 17,149	2017
	6,724

Associates

The sales price with related parties is not significantly different from normal transactions, and the payment terms were about one month.

(ii) Purchases

The amounts of purchase transactions with related parties were as follows:

Associates Others	2018 $ - 212,465 $ 212,465	2017
		820 569,766
		570,586

There were no significant differences between the pricing of purchase transactions with related parties and that with other suppliers. The payment terms ranged from one to two months, which were similar to other suppliers.

(iii) Service income and expenses

The Group provided and received management, technologies and IT services to associates, joint ventures, and other related parties. The amounts recognized as other income and expenses were as follows:

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				2018	2017	2017
	Associates
	Indian Synthetic Rubber Private Limited	$		15,197		45,830
	ARLANXEO-TSRC (Nantong) Chemical Industries Co., Ltd.			174,309		115,073
	Joint ventures
	Indian Synthetic Rubber Private Limited			47,455	-
	Others			3,786		1,512
	Other related parties
	Others			(3,206)		(2,298)
		$		237,541		160,117
(iv)	Receivable from related parties
	The details of the Group's receivable from related parties were as follows:
	Account Type of related parties		December 31, 2018		December	31, 2017
	Other Associates
	receivable Indian Synthetic Rubber Private Limited	$		-		32,707
	ARLANXEO-TSRC (Nantong) Chemical Indus-			21,365		22,167
	tries Co., Ltd.
	Other Joint ventures
	receivable Indian Synthetic Rubber Private Limited			20,820	-
	Others			242		246
		$		42,427		55,120
(v)	Payable to related parties
	The details of the Group's payable to related parties were as follows:
	Account Type of related parties		December 31, 2018		December	31, 2017
	Accounts payable Other related parties	$		-		35,663
	Other payable Other related parties			908		703
		$		908		36,366
(vi)	Guarantees
	The credit limits of the guarantees the Group had provided on the	bank loans of related parties were as				follows:
			December 31, 2018		December	31, 2017
	Associates
	Indian Synthetic Rubber Private Limited	$		-		1,656,563
	ARLANXEO-TSRC (Nantong) Chemical Industries Co., Ltd.			1,530,733		1,053,124
	Joint ventures
	Indian Synthetic Rubber Private Limited			1,461,354	-
			$	2,992,087		2,709,687
	Accordingly, the amounts of the Group increased provision liabilities		and	investments accounted for under equity
	method were as follows:
			December 31, 2018		December	31, 2017
	Associates
	Indian Synthetic Rubber Private Limited	$		-		26,350
	ARLANXEO-TSRC (Nantong) Chemical Industries Co., Ltd.			4,428		649
	Joint ventures
	Indian Synthetic Rubber Private Limited			24,761	-
		$		29,189		26,999

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The compensation of the key management personnel comprised the following:

Short-term employee benefits Post-employment benefits Pledged Assets The carrying values of pledged assets were as follows: Pledged assets Object Restricted savings deposits (recorded as other non-current assets) Deposit for safety produc- tion Machinery etc. (recorded property, plant and equipment) Guarantee for long-term borrowings	2018 $ 108,307 1,288 $ 109,595 December 31, 2018 $ - 361,731 $ 361,731	2017
		108,228 1,078
		109,306
		December 31, 2017
Restricted savings deposits (recorded as other non-current assets) Machinery etc. (recorded property, plant and equipment)		4,175 -
		4,175

<8> Pledged Assets

<9> Commitments and Contingencies

(a) As of December 31, 2018 and 2017, the Group's unused letters of credit outstanding for purchases of materials were $2,050,872 thousand and $1,653,768 thousand, respectively.

(b) As of December 31, 2018 and 2017, the Group's signed construction and design contracts with several factories totaled $1,717,411 thousand and $129,184 thousand, respectively, of which $466,392 thousand and $101,616 thousand, respectively, were paid.

<10> Losses Due to Major Disasters: None.

<11> Subsequent Events: None.

<12> Others

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

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

By function Year ended December 31, 2018 Year ended December 31, 2017
Operating Operating Operating Operating
Total Total
By nature costs expenses costs expenses
Employee benefits
Salary 935,385 633,012 1,568,397 879,970 609,067 1,489,037
Labor and health insurance 84,622 55,575 140,197 79,502 55,692 135,194
Pension 73,865 36,844 110,709 72,702 37,181 109,883
Directors' remuneration - 40,402 40,402 - 23,250 23,250
Others (note 1) 162,922 88,733 251,655 139,389 80,769 220,158
Depreciation (note 2) 743,685 116,164 859,849 728,048 125,997 854,045
Amortization 6,422 146,218 152,640 6,793 142,211 149,004
----- End of picture text -----

Note1： Others personnel expenses included meals, employee welfare, training expenses and employees' bonus.

Note2： Depreciation expenses for investment property recognized under other income and expenses amounting to $14,726 thousand $14,725 for the years ended December 31, 2018 and 2017 were excluded.

<13> Other Disclosures

(a) Information on significant transactions:

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The following is the information on significant transactions required by the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" for the Group:

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

Highest
balance of
Financial
No. Name of lender Name of borrower statement Related financing to Ending
account party other parties balance
during the
year
1 TSRC (Shanghai) Indus- TSRC (Nantong) Indus- Loan Yes 154,592 147,649
tries Ltd. tries Ltd.
ARLANXEO-TSRC (Nan-
2 TSRC (Nantong) Indus-tries Ltd. tong) Chemical Indus- Loan Yes 328,028 313,194
tries Co., Ltd.
----- End of picture text -----

Note1： The loan limit extended per party of TSRC (Shanghai) Industries Ltd. should not be over 10% of total equity. However, if the counterparty is a subsidiary 100% owned, directly or indirectly by TSRC, the loan limit extended per party should not be over 50% of the total equity of the most recent financial statements audited or reviewed by a CPA.

Note2： The maximum loan extended to all parties of TSRC (Shanghai) Industries Ltd. should not be over 40% of total equity. However, if the counterparty is a subsidiary 100.00% owned, directly or indirectly by TSRC, the total loan limit should not be over 100% of total equity of the most recent financial statements audited or reviewed by a CPA .

Note3： The loan limit extended per party of TSRC (Nantong) Industries Ltd. should not be over 10% of total equity. Note4： The maximum loan extended to all parties of TSRC (Nantong) Industries Ltd. should not be over 40% of total equity. Note5： TSRC (Shanghai) Industries Ltd., and TSRC (Nantong) Industries Ltd. are 100.00% owned by TSRC. ARLANXEO-TSRC (Nantong) Chemical Industries Co., Ltd. is a foreign Company with TSRC holding 50% of its equity.

Note6： Credit period: The financing period should not be over one year.

Note7： Loans to other parties numbering is as follows:(1)if it's ordinary business relationship, the number is "1".(2)if it needs short-term financial funds, the number is "2".

Note8： The transactions within the Group were eliminated in the consolidated financial statements.

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Counter-party of guarantee and endorsement Limitation on Highest balance Ending
Name amount of guar- for guarantees balance of
No. of Com- Relationship antees and and endorse- guarantees
pany Name with the endorsements ments during and endorse-
Company for one party the year ments
TSRC (USA) Investment
0 TSRC 4 (Note 2) 464,520 460,995
Corporation
ARLANXEO-TSRC (Nan-
0 TSRC tong) Chemical Industries 6 (Note 2) 1,530,733 1,530,733
Co., Ltd.
0 TSRC Indian Synthetic Rubber 6 (Note 2) 1,622,265 1,461,354
Private Limited
0 TSRC TSRC (Vietnam) Co., Ltd. 4 (Note 2) 402,584 399,529
0 TSRC Dexco Polymers L.P. 4 (Note 2) 308,550 307,330
----- End of picture text -----

Note1： The guarantee's relationship with the guarantor is as follows:

(1)A Company with which it does business.

(2)A Company in which the public Company directly and indirectly holds more than 50 percent of the voting shares.

(3)A Company that directly and indirectly holds more than 50 percent of the voting shares in the public Company.
(4)A Company in which the public Company holds, directly or indirectly, 90% or more of the voting shares.
(5)A Company that fulfills its contractual obligations by providing mutual endorsements/guarantees for another Company in the same industry or for joint builders for purposes of undertaking a construction project.
(6)A Company that all capital contributing shareholders make endorsements/ guarantees for their jointly invested Company in proportion to their shareholding percentages.
(7)Companies in the same industry provide among themselves joint and several security for a performance guarantee of a sales contract for pre-construction homes pursuant to the Consumer Protection Act for each other.
Note2： The guaranteed amount is limited to 50% of total equity amounting to $7,655,502 thousand.
Note3： The aggregate amount of guarantee by the Company is limited to 1.5 times its stockholders' equity, amounting to $22,966,505 thousand.
Note4： The transactions within the Group were eliminated in the consolidated financial statements.

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[Unit: thousand NTD]

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

Purposes Transaction Collateral
Amount actually drawn Range of interest rates borrowers financing of fund for the amount for betweenbusiness Reasons for short-term financing Allowance for bad debt Item Value limit for each borrowing Financing Company financing limit Maximum for thelender
(Note 5) two parties
- 3.915% 2 - Operating - - 213,302 426,603
capital (Note 1) (Note2)
- 5.11% 2 - Operating - - 434,858 1,739,431
capital (Note 2) (Note3)
----- End of picture text -----

[Unit: thousand NTD]

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

Ratio of accumulated Subsidiary en- Endorsements/
Amount Property pledged amounts of guaran- Maximum allow- Parent company endorsement / dorsement / guarantees to
on guarantees tees and endorse- able amount for guarantees to third parties on
actually drawn ments (Amount) and endorse- net worth of the latest ments to guarantees and endorsements third parties on guarantees to behalf of parent third parties on behalf of Com-pany in Main-
financial statements behalf of subsidiary company land China
460,995 - 3.01% (Note 3) Y
425,950 - 10.00% (Note 3) Y
1,461,354 - 9.54% (Note 3)
- - 2.61% (Note 3) Y
307,330 - 2.01% (Note 3) Y
----- End of picture text -----

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(iii)	(iii)	(iii)	(iii)
Name of holder	Nature and name of security	Relationship with the security issuer	Account name
TSRC	Taiwan High Speed Rail Cor- poration	-	Financial assets at fair value through other comprehensive income －non-current
TSRC	Evergreen Steel Corporation	-	Financial assets at fair value through other comprehensive income －non-current
TSRC	Thai Synthetic Rubbers Co., Ltd.	-	Financial assets at fair value through other comprehensive income －non-current
TSRC	Hsin Yung Enterprise Corpo- ration	-	Financial assets at fair value through other comprehensive income －non-current
Dymas Cor- poration	Thai Synthetic Rubbers Co., Ltd.	-	Financial assets at fair value through other comprehensive income －non-current

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NTD300 million or 20% of the capital stock: None.

(v) Acquisition of individual real estate with amount exceeding the lower of NTD300 million or 20% of the capital stock: None.

(vi) Disposal of individual real estate with amount exceeding the lower of NTD300 million or 20% of the capital stock: None.

(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NTD300 million or 20% of the capital stock:

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Name of
Counter-party Relationship
Company
TSRC (Lux.) Corporation S.à r.l. TSRC Related parties
TSRC TSRC (Lux.) Corporation S.à r.l. Related parties
Shen Hua Chemical Industries Co., A director of Shen Hua Chemical
Ltd. Marubeni Corporation Industries Co., Ltd.
Polybus Corporation Pte Ltd. TSRC (Nantong) Industries Ltd. Related parties
TSRC (Nantong) Industries Ltd. Polybus Corporation Pte Ltd. Related parties
TSRC (Lux.) Corporation S.à r.l. Dexco Polymers L.P. Related parties
Dexco Polymers L.P. TSRC (Lux.) Corporation S.à r.l. Related parties
TSRC (Lux.) Corporation S.à r.l. TSRC (Nantong) Industries Ltd. Related parties
TSRC (Nantong) Industries Ltd. TSRC (Lux.) Corporation S.à r.l. Related parties
Dexco Polymers L.P. TSRC (Nantong) Industries Ltd. Related parties
TSRC (Nantong) Industries Ltd. Dexco Polymers L.P. Related parties
----- End of picture text -----

Note1: The transactions within the Group were eliminated in the consolidated financial statements.

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[Unit: thousand NTD]

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

Ending balance Maximum
Number of shares Book value percentaHolding ge Market value investment in 2018 Remarks
10,001,000 305,631 0.18% 305,631 100,010
12,148,000 366,991 3.00% 366,991 209,878
599,999 146,220 5.42% 146,220 65,143
5,657,000 276,853 3.90% 276,853 64,296
837,552 204,111 7.57% 204,111 58,674
1,299,806 1,299,806 498,001
----- End of picture text -----

Unit: thousand NTD

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

Status and reason
for deviation from
Transaction details Account / note receivable (payable)
arm's length trans-
action Re-
marks
Percentage Percentage of total ac-
Purchase / Unit Credit
Amount of total pur- Credit period Balance counts / notes receiv-
Sale price period
chases / sales able (payable)
Purchase 178,675 6.37% 70 days - (17,076) (5.19%)
Sale (178,675) (1.65%) 70 days - 17,076 1.52%
Purchase 116,398 2.04% 14 days - - -
Purchase 427,649 70.56% 40 days - (10,392) (34.66%)
Sale (427,649) (9.18%) 40 days - 10,392 1.97%
Purchase 998,093 35.59% 90 days - (46,980) (14.29%)
Sale (998,093) (22.94%) 90 days - 46,980 10.21%
Purchase 1,625,167 57.96% 70 days - (263,933) (80.27%)
Sale (1,625,167) (34.87%) 70 days - 263,933 50.01%
Purchase 237,940 8.39% 70 days - (14,115) (6.26%)
Sale (237,940) (5.11%) 70 days - 14,115 2.67%
----- End of picture text -----

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Name of related party	Counter-party	Relationship	Balance of receivables from related party
TSRC (Nantong) Industries Ltd.	TSRC (Lux.) Corporation S.à r.l.	Related par- ties	263,933

Note1: Transactions within the Group were eliminated in the consolidated financial statements. Note2: Until March 14, 2019.

(ix) Trading in derivative instruments: Please refer to notes 6(b).

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Existing
Name of counter relationship
No. Name of Company party with the counter-
party
0 TSRC TSRC (Nantong) Industries Ltd. 1
0 TSRC TSRC (Nantong) Industries Ltd. 1
0 TSRC TSRC (Lux.) Corporation S.à r.l 1
0 TSRC Polybus Corporation Pte Ltd. 1
0 TSRC Dexco Polymers L.P. 1
0 TSRC TSRC (Nantong) Industries Ltd 1
1 TSRC (Nantong) Industries Ltd. TSRC (Shanghai) Industries Ltd. 3
1 TSRC (Nantong) Industries Ltd. Polybus Corporation Pte Ltd. 3
1 TSRC (Nantong) Industries Ltd. TSRC (Lux.) Corporation S.à r.l. 3
1 TSRC (Nantong) Industries Ltd. TSRC (Lux.) Corporation S.à r.l 3
1 TSRC (Nantong) Industries Ltd. TSRC-UBE (Nantong) Industries Ltd. 3
1 TSRC (Nantong) Industries Ltd. Dexco Polymers L.P. 3
2 Dexco Polymers L.P. TSRC (Lux.) Corporation S.à r.l. 3
2 Dexco Polymers L.P. TSRC (Lux.) Corporation S.à r.l. 3
Shen Hua Chemical Industries
3 Polybus Corporation Pte Ltd. 3
Co., Ltd.
4 TSRC (Lux.) Corporation S.à r.l. TSRC 2
5 TSRC (Shanghai) Industries Ltd. TSRC (Nantong) Industries Ltd. 3
0 TSRC TSRC (USA) Investment Corporation 1
0 TSRC TSRC (Vietnam) Co., Ltd. 1
0 TSRC Dexco Polymers L.P. 1
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Note1： Company numbering is as follows:(1)Parent company-0.(2)Subsidiary starts from 1.

Note2： The number of the relationship with the transaction counterparty represents the following:(1)1 represents downstream transactions.(2)2 represents upstream transactions.(3)3 represents midstream transactions.

Note3： For balance sheet items, over 0.1% of total consolidated assets, and for profit or loss items, over 0.1% of total consolidated revenue were selected for disclosure.

Note4： TSRC's guarantees for bank loans of investees.

Note5： The transactions within the Group were eliminated in the consolidated financial statements.

152

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[ Unit: thousand NTD]

Turnover rate (Note 1)	Overdue amount	Overdue amount	Amounts received in subsequent period (Note 2)	Allowances for bad debts
	Amount	Action taken
6.22	-		108,614	-

[Unit: thousand NTD]

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Transaction details
Percentage of the total
Account name Amount Trading terms consolidated revenue
or total assets
Sales revenue 49,236 The transaction is not significantly different from normal trans- 0.17%
actions, and the collection terms were about two months
Other income and 49,882 〃 0.17%
expenses
Sales revenue 178,675 〃 0.60%
Sales revenue 83,982 〃 0.28%
Accounts receivable 30,231 〃 0.10%
Other income and 36,031 The transaction is not significantly different from normal trans- 0.12%
expenses actions, and the collection terms were about six months
Sales revenue 76,593 The transaction is not significantly different from normal trans- 0.26%
actions, and the collection terms were about two months
Sales revenue 427,649 〃 1.44%
Sales revenue 1,625,167 〃 5.46%
Accounts receivable 263,933 〃 0.87%
Other income and 200,566 〃 0.67%
expenses
Sales revenue 237,940 〃 0.80%
Sales revenue 998,093 The transaction is not significantly different from normal trans- 3.35%
actions, and the collection terms were about three months
Accounts receivable 46,980 〃 0.16%
Sales revenue 57,427 The transaction is not significantly different from normal trans- 0.19%
actions, and the collection terms were about two months
Other income and 47,643 The transaction is not significantly different from normal trans- 0.16%
expenses actions, and the collection terms were about six months
Sales revenue 38,155 The transaction is not significantly different from normal trans- 0.13%
actions, and the collection terms were about two months
Note 4 460,995 - -
Note 4 399,529 - -
Note 4 307,330 - -
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(b) Information on investees:

The following is the information on investees for the year ended December 31, 2018 (excluding information on

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Name of investor Name of investee Address Scope of business
TSRC Trimurti Holding Cor-poration Palm Grove House, P.O.BOX 438, Road Town, Tortola B.V.I Investment corporation
Hardison International Palm Grove House, P.O.BOX 438, Road
TSRC Corporation Town, Tortola B.V.I Investment corporation
Palm Grove House, P.O.BOX 438, Road
TSRC Dymas Corporation Investment corporation
Town, Tortola B.V.I
TSRC Taiwan Advanced Ma- No 39, Bengong 1st Rd., Gangshan Dist., Production and sale of TPE
terials Corp. Kaohsiung City, Taiwan (R.O.C.)
8 VSIP II-A Street 31, Vietnam Singapore Production and processing of rubber color
TSRC TSRC (Vietnam) Co., Ltd. Industrial Park II-A, Tan Uyen Town, Binh masterbatch, thermoplastic elastomer and
Duong Province, Vietnam plastic compound products
Trimurti Holding Polybus Corporation 100 Peck Seah Street #09 16 Singapore International commerce and investment
Corporation Pte Ltd. 079333 corporation
Trimurti Holding TSRC (Hong Kong) 15/F BOC Group Life Assurance Tower
Corporation Limited 136 Des Voeux Road Central Investment corporation
Room No.702, Indian Oil Bhawan, 1 Sri
Trimurti Holding Indian Synthetic Rub- Produchion and sale of synthetic rubber
Corporation ber Private Limited Aurobindo Marg, Yusuf Sarai, New Delhi 110016, India products
TSRC (Hong Kong) TSRC (Lux.) Corpora- 34 36 avenue de la Liberte L-1930 Lux- International commerce and investment
Limited tion S.à r.l. embourg corporation
2711 Centerville Road, Suite 400, Coun-
TSRC (Lux.) Corpo- TSRC (USA) Investment
ration S.à r.l. Corporation try of New Castle, Wilmington, Delaware. ,19808. Investment corporation
TSRC (USA) Invest-ment Corporation Dexco Polymers L.P. 12012 Wickchester Lane, Suite 280, Houston, TX77079 Production and sale of TPE
Hardison Interna- Triton International Palm Grove House, P.O.BOX 438, Road
tional Corporation Holdings Corporation Town, Tortola B.V.I Investment corporation
Hardison Interna- Palm Grove House, P.O.BOX 438, Road
tional Corporation Dymas Corporation Town, Tortola B.V.I Investment corporation
Dymas Corpora- Asia Pacific Energy Consulting for electric power facilities
tion Development Co., Ltd. Cayman Islands management and electrical system design
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Note1： Amounts in foreign currencies were translated based on the exchange rate at the reporting date (USD1 to NTD30.733; EUR1 to NTD35.2047). Note2： TSRC directly owns 19.48% of Dymas's equity and indirectly owns 80.52% via Hardison International Corporation. Note3： Taiwan Advance Materials Corp. has been liquidated in December, 2018.

Note4： Transactions within the Group were eliminated in the consolidated financial statements.

(c) Information on investment in Mainland China:

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Method Cumulative invest-
Name of investee of invest- ment (amount)
in Mainland China Scope of business Issued capital ment from Taiwan as of
(Note 1) January 1, 2018
Shen Hua Chemical Production and sale of synthetic rubber products 1,266,814 (2)a. -
Industries Co., Ltd. (USD41,220)
Changzhou Asia Pacific Power generation and sale of electricity and steam 709,932 (2)c. 117,769
Co-generation Co., Ltd. (USD23,100) (USD3,832)
TSRC (Shanghai) Indus- Production and sale of compounding materials 169,032 (2)b. 120,473
tries Ltd. (USD5,500) (USD3,920)
Nantong Qix Storage Storehouse for chemicals 92,199 (2)d. 46,100
Co., Ltd. (USD3,000) (USD1,500)
TSRC-UBE (Nantong) Production and sale of synthetic rubber products 1,229,320 (2)a. 30,733
Industries Ltd. (USD40,000) (USD1,000)
TSRC (Nantong) Indus- Production and sale of TPE 3,230,807 (2)a. 204,313
tries Ltd. (USD105,125) (USD6,648)
ARLANXEO-TSRC (Nan- Production and sale of NBR 1,376,838 (2)a. -
tong) Chemical Indus- (USD44,800)
tries Co., Ltd.
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Note1： The method of investment is divided into the following four categories:

(1)Remittance from third-region companies to invest in Mainland China.
(2)Through the establishment of third-region companies then investing in Mainland China.
a. Through the establishment of Polybus Corporation Pte. Ltd. then investing in Mainland China.
b. Through the establishment of TSRC (Hong Kong) Limited then investing in Mainland China.
c. Through the establishment of Asia Pacific Energy Development Co., Ltd. then investing in Mainland China.
d. Through the establishment of Triton International Holdings Corporation then investing in Mainland China.

(3)Through transferring the investment to third-region existing companies then investing in Mainland China.

(4)Other methods: EX: delegated investments.

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Unit: thousand NTD/thousand USD/thousand EUR

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Original cost Ending balance Maximum Net income Invest-
investment ment
December 31, 2018 December 31, 2017 Shares of ownershiPercentage p Book value amount in 2018 investee(loss) of income(loss) Remarks
1,005,495 1,005,495 86,920,000 100.00% 13,133,229 1,005,945 994,253 996,552 Subsidiary
109,442 109,442 3,896,305 100.00% 860,521 109,442 66,590 66,590 Subsidiary
38,376 38,376 1,161,004 19.48% 174,404 38,376 73,827 14,381 [Subsidiary (note ]
2)
- 720,000 - - - 720,000 (4,523) (2,171) (note 3)
278,280 - - 100.00% 274,395 278,280 (2,160) (2,160) -
2,007,749 2,007,749 105,830,000 100.00% 8,026,341 2,007,749 684,472 684,472 [Indirectly owned ]
(USD65,101) (USD65,101) subsidiary
2,392,564 2,392,564 77,850,000 100.00% 3,233,985 2,392,564 107,041 107,041 [Indirectly owned ]
(USD77,850) (USD77,850) subsidiary
905,794 861,907
222,861,375 50.00% 363,141 905,794 450,085 200,977 -
(USD29,473) (USD28,045)
1,788,399 1,788,399 50,800,000 100.00% 2,689,129 1,788,399 46,818 46,818 [Indirectly owned ]
(EUR50,800) (EUR50,800) subsidiary
2,152,847 2,152,847 100 100.00% 2,617,901 2,152,847 43,108 43,108 [Indirectly owned ]
(USD70,050) (USD70,050) subsidiary
5,919,698 5,919,698 - 100.00% 1,560,956 5,919,698 230,238 230,238 [Indirectly owned ]
(USD192,617) (USD192,617) subsidiary
1,537 1,537 50,000 100.00% 115,984 1,537 7,580 7,580 [Indirectly owned ]
(USD50) (USD50) subsidiary
147,488 147,488 4,798,566 80.52% 742,210 147,488 73,827 59,446 [Indirectly owned ]
(USD4,799) (USD4,799) subsidiary
346,822 346,822
7,522,337 37.78% 408,632 346,822 139,268 52,616 -
(USD11,285) (USD11,285)
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Unit: thousand NTD ／thousand USD

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Investment flow during Cumulative invest- Net Direct / indi- Maximum Accumulated
current period ment (amount) income rect invest- invest- Investment Book remittance of
income
Remittance Repatriation from Taiwan as of (loss) of ment holding ment in (loss) value earnings in current
amount amount December 31, 2018 investee percentage 2018 period
- - - 47,054 65.44% 829,003 30,792 1,767,378 4,379,389
(note 2)
- - 117,769 243,514 28.34% 201,195 69,012 488,307 -
(USD3,832) (note 3)
- - 120,473 63,134 100.00% 169,032 63,134 426,603 -
(USD3,920) (note 2)
- - 46,100 13,392 50.00% 46,100 6,696 75,770 -
(USD1,500) (note 2)
- - 30,733 56,049 55.00% 676,126 30,827 790,189 -
(USD1,000) (note 2)
- - 204,313 578,533 100.00% 3,230,807 578,533 4,348,577 -
(USD6,648) (note 2)
- - - 79,204 50.00% 688,419 39,602 219,835 -
(note 3)
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Note2： The investment income (loss) were recognized under the equity method and based on the financial statements audited by the auditor of the Company.

Note3： The investment income (loss) were recognized under the equity method and based on the financial statements audited by international accounting firms.

Note4： Amounts in foreign currencies were translated based on the exchange rate at the reporting date (USD1 to NTD30.733). Note5： The transactions within the Group were eliminated in the consolidated financial statements.

155

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(ii) Limitation on investment in Mainland China: Unit: thousand NTD ／thousand USD

Company name	Accumulated investment amount in Mainland China as of December 31, 2018	Investment (amount) approved by Investment Commission, Ministry of Economic Affairs	Maximum investment amount set by Investment Commission, Ministry of Economic Affairs
TSRC	519,388 (USD16,900)	5,757,367 (USD187,335) (Note 2)	- (Note 1)

Note1： In accordance with the "Regulations on Permission for Investment or Technical Cooperation in Mainland China" and the "Principles for Examination of Applications for Investment or Technical Cooperation in Mainland China" amended and ratified by the Executive Yuan on August 22, 2008, the Company met the criteria for operational headquarters under the Statute for Industrial Innovation and obtained approval from the Industrial Development Bureau, Ministry of Economic Affairs, on August 23, 2018. As it has an operational headquarters status, the Company is not subject to the limitation as to the amount of investment in Mainland China during the period from August 20, 2018 to August 19, 2021.

Note2： This amount includes capital increase out of earnings, approved by the Investment Commission, MOEA. Note3： Amounts in foreign currencies were translated based on the exchange rate at the reporting date (USD1 to NTD30.733). (iii) Significant transactions:

Related information is provided in note 13(a)x.

<14> Segment Information

(a) General information

There are three service departments which should be reported: synthetic rubber services department, non-synthetic rubber services department, and others. The synthetic rubber services department produces and sells synthetic rubber products. The non-synthetic rubber services department produces and sells reengineering plastic and plastic elasticity engineering products. The others department provides storage service.

A reportable department is a strategic business unit providing different products and services. Because each strategic business unit requires different kinds of techniques and marketing tactics, it should be separately managed.

(b) Information on income and loss, assets, liabilities, basis of measurement, and the reconciliation for reportable segments

The Group uses the internal management report that the chief operating decision maker reviews as the basis to determine resource allocation and make a performance evaluation. The internal management report includes profit before taxation, but not including any extraordinary activity. Because taxation and extraordinary activity are managed on a group basis, they are not able to be allocated to each reportable segment. In addition, not all profit or loss from reportable segments includes significant non-cash items such as depreciation and amortization. The reportable amount is consistent with that in the report used by the chief operating decision maker. The operating segment accounting policies are consistent with those described in note 4 "Significant Accounting Policies".

The Group treated intersegment sales and transfers as third-party transactions. They are measured at market price. Information on reportable segments and reconciliation for the Group is as follows:

		2018
Synthetic rubber services department $ 28,059,773 63,495 $ 28,123,268 $ 161,061 $ 948,506 $ 1,305,978 $ 1,226,488 $-	Non- synthetic rubber services department 1,691,445 4,093 1,695,538 9,216 52,729 - 332,391 -	Others - 10,587 10,587 - 30,444 59,312 25,183 -	Adjustments or elimination - - - (843) (4,464) (1,067,570) 46,381 -	Total
				29,751,218 78,175
				29,829,393
				169,434
				1,027,215
				297,720
				1,630,443
				-

156

2017

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Revenue: Revenue from external custom- ers Interest revenue Total revenue Interest expenses Depreciation and amortization Share of profit of equity-account- ed investees (associates and joint- ly controlled entities) Reportable segment profit or loss Reportable segment assets and liabilities (note)	Synthetic rubber $ 30,913,807 42,302 $ 30,956,109 $ 186,803 $ 951,413 $ 727,642 $ 938,391 $ -	Non- synthetic rubber 831,794 2,729 834,523 2,454 40,478 - 7,590 -	Others 20,636 6,091 26,727 (1,108) 34,066 31,085 166,096 -	Adjustments or elimination - - - - (8,183) (918,693) 25,058 -	Total
					31,766,237 51,122
					31,817,359
					188,149
					1,017,774
					(159,966)
					1,137,135
					-

Note:[As the information on segment assets and liabilities was not provided to the chief operating decision maker, the information ] on segment assets and liabilities is not disclosed.

(c) Geographical information

In presenting information on the basis of geography, segment revenue is based on the geographical location of customers, and segment assets are based on the geographical location of the assets.

Geographical information Revenue from external customers: China United States Taiwan Thailand Japan Other countries Total Geographical information Non-current assets: China Taiwan United States Other countries Total	2018	2017 14,660,428 3,737,572 3,624,916 2,071,247 694,139 6,977,935 31,766,237 December 31, 2017 5,874,971 4,719,125 2,408,113 670,886 13,673,095
	$ 12,567,753 3,887,293 2,975,814 1,868,240 596,790 7,855,328
	$ 29,751,218
	December 31, 2018
	$ 6,216,425 4,494,372 2,295,249 818,840
	$ 13,824,886

Non-current assets include investment accounted for under the equity method, property, plant and equipment, investment property, intangible assets, and other assets, not including financial instruments, deferred tax assets, pension fund assets, and rights arising from insurance contract (non-current).

(d) Information about major customers

For the years 2018 and 2017, the Group had no major customer who constituted 10% or more of net sales.

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Individual financial statements and independent auditors' report for the most recent fiscal year

Independent Auditors' Report

To the Board of Directors of TSRC Corporation:

Opinion

We have audited the financial statements of TSRC Corporation, which comprise the statements of financial position as of December 31, 2018 and 2017, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the years ended December 31, 2018 and 2017, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the TSRC Corporation as of December 31, 2018 and 2017, and its financial performance and its cash flows for the years ended December 31, 2018 and 2017 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards ("IFRSs"), International Accounting Standards ("IASs"), interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our 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 Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the TSRC Corporation in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

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

1. Revenue recognition

Please refer to note 4(q), note 6(t) and 6(u) for disclosures related to revenue recognition. Description of key audit matter:

Revenue is the key indicator used by investors and management while evaluating the TSRC Corporation's finance or operating performance. TSRC Corporation initially adopted IFRS 15 and the accuracy of the timing and amount of revenue recognized have significant impact on the financial statements, for which the assumptions and judgments of revenue measurement and recognition rely on subjective judgments of the management. Therefore, we consider it as the key audit matter.

How the matter was addressed in our audit:

Testing the effectiveness of design and implementing the internal control (both manual and system control) of sales and collecting cycle; reviewing the revenue recognition of significant sales contracts to determine whether the accounting treatment key judgment, estimation, and accounting treatment are reasonable; analyzing the changes in top 10 customers from the most recent period and last year, and the changes in the price and quantity of each category of product line to determine whether if there are any significant misstatements; selecting sales transactions from a period of time before and after the balance sheet date, and verifying with the vouchers to determine the accuracy of the timing and amounts of revenue recognized; understanding whether if there is a significant subsequent sales return or discount; and reviewing whether the disclosure of revenue made by the management is appropriate.

2. Inventory measurement

Please refer to note 4(g), note 5, and note 6(g) for disclosures related to inventory measurement. Description of key audit matter:

The inventory of TSRC Corporation includes various types of synthetic rubber and its raw material. Since there is an oversupply and a low market demand in the rubber manufacturing industry, which may result in a decline on the price of raw material, the carrying value of inventories may exceed its net realizable value. The measurement of inventory depends on the evaluation of the management based on evidence from internal and external, both subjective and objective. Therefore, we consider it as the key audit matter.

How the matter was addressed in our audit:

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

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

In preparing the financial statements, management is responsible for assessing the TSRC Corporation'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 TSRC Corporation or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the TSRC Corporation's financial reporting process.

Auditors' Responsibilities for the Audit of the Financial Statements

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

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

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our 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 auditor's report are Po-Shu Huang and Ann-Tien Yu.

KPMG

Taipei, Taiwan (Republic of China)

March 14, 2019

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TSRC CORPORATION

Balance Sheets

December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars)

December 31, 2018	December 31, 2018	December 31, 2017	December 31, 2017
Amount	%	Amount	%
$ 338,449 2,041 1,062,295 58,782 134,365 74 2,469,128 134,929	1 - 4 - 1 - 10 1 17 5 - 59 12 7 - - - 83	231,989 348 1,030,480 39,864 140,819 114 2,171,015 94,933	1 - 5 - 1 - 10 - 17 - 4 60 12 7 - - - 83
4,200,063		3,709,562
1,095,695 - 14,442,549 2,789,755 1,596,324 65,778 71,154 42,515		- 936,362 13,457,697 2,760,238 1,611,050 86,312 85,326 13,966
20,103,770		18,950,951

Total assets

$ 24,303,833 100 22,660,513 100

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December 31, 2018	December 31, 2018	December 31, 2018	December 31, 2018	December 31, 2018	December 31, 2018
Amount				％	Amount
$		2,354,568 850,000 - - 914,222 614,005 - 57,572		10 3 - - 4 3 - -	3,809,306 800,000 349,975 226 719,356 584,292 5,797 35,438
		4,790,367		20	6,304,390
		2,950,000 499,693 29,189 538,403 185,178		12 2 - 2 1	800,000 - 26,999 425,853 225,755
		4,202,463		17	1,478,607
		8,992,830		37	7,782,997
		8,257,099		34	8,257,099
			45,158	-	41,043
		3,857,922 1,951,564		16 8	3,770,512 1,661,324
		5,809,486		24	5,431,836
		465,589 801,805 - (68,134)		2 3 - -	512,008 - 623,809 11,721
		1,199,260		5	1,147,538
	15,311,003			63	14,877,516
$	24,303,833			100	22,660,513

See accompanying notes to parent company only financial statements

Chief Accountant:Ming-Huang Chen

Chairman:Nita Ing

Manager:Joseph Chai

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TSRC CORPORATION

Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Common Share)

2018	2018		2017
Amount		％	Amount	％
$ 10,834,520 9,718,836		100 90	11,254,655 10,359,649	100 92
	1,115,684 7,794	10 -	895,006 (1,992)	8 -
	1,107,890	10	896,998	8
	353,113 490,195 250,918 1,624	3 5 2 -	355,972 454,706 239,232 -	3 4 2 -
	1,095,850	10	1,049,910	9
	238,926	2	259,119	2
	250,966	2	106,207	1
	73,955 11,051 (81,035) 1,073,192	1 - (1) 10	57,380 170,939 (71,568) 633,589	- 2 (1) 6
	1,077,163	10	790,340	7
	1,328,129 135,943	12 1	896,547 22,440	8 -
	1,192,186	11	874,107	8
	(21,854) 159,333 18,663 -	- 1 - -	2,427 - - -	- - - -
	156,142	1	2,427	-
	(46,419) - (79,855) -	- - (1) -	(478,351) (80,331) 3,959 -	(4) (1) - -
	(126,274)	(1)	(554,723)	(5)
	29,868	-	(552,296)	(5)
$	1,222,054	11	321,811	3
		1.44		1.06

See accompanying notes to parent company only financial statements

Chief Accountant:Ming-Huang Chen

Chairman:Nita Ing

Manager:Joseph Chai

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TSRC CORPORATION

Statements of Changes in Equity

For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars)

Retained earnings

Common stock	Capital sur- plus	Legal reserve	Unappropri- ated retained earnings	Total
$ 8,257,099 - - - - -	849 - - 40,194 - -	3,671,676 98,836 - - - -	1,709,336 (98,836) (825,710) - 874,107 2,427	5,381,012 - (825,710) - 874,107 2,427
-	-	-	876,534	876,534
8,257,099 -	41,043 -	3,770,512 -	1,661,324 29,848	5,431,836 29,848
8,257,099	41,043	3,770,512	1,691,172	5,461,684
- - - - -	- - 4,115 - -	87,410 - - - -	(87,410) (792,682) - 1,192,186 (21,854)	- (792,682) - 1,192,186 (21,854)
-	-	-	1,170,332	1,170,332
-	-	-	(29,848)	(29,848)
$ 8,257,099	45,158	3,857,922	1,951,564	5,809,486

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	Total other equity interest	Total other equity interest	Total other equity interest
Financial state- ments translation differences for foreign operations	Unrealized gains (losses) on financial assets measured at fair value through other comprehen- sive income	Unrealized gains (losses) on avail- able-for-sale finan- cial assets	Gains (losses) on effective portion of cash flow hedges	Total
990,359 - - - - (478,351)	- - - - - -	735,464 - - - - (111,655)	(23,562) - - - - 35,283	1,702,261 - - - - (554,723)
(478,351)	-	(111,655)	35,283	(554,723)
512,008 -	- 593,961	623,809 (623,809)	11,721 -	1,147,538 (29,848)
512,008	593,961	-	11,721	1,117,690
- - - - (46,419)	- - - - 177,996	- - - - -	- - - - (79,855)	- - - - 51,722
(46,419)	177,996	-	(79,855)	51,722
-	29,848	-	-	29,848
465,589	801,805	-	(68,134)	1,199,260

See accompanying notes to parent company only financial statements

Chairman:Nita Ing

Manager:Joseph Chai

Chief Accountant:Ming-Huang Chen

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TSRC CORPORATION

Statements of Cash Flows

For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars)

2018	2018	2018	2017
$ 1,328,129 274,913 27,123 1,624 81,035 (7,485) (66,470) (1,073,192) 1,088 - 7,794 8,014			896,547 272,809 21,973 - 71,568 (5,601) (51,779) (633,589) 373 (154,458) (1,992) (6,140)
	(745,556)		(486,836)
	(1,693) (33,439) (18,918) 3,008 (298,113) (39,996)		957 284,481 16,341 185 (150,050) (10,381)
	(389,151)		141,533
		(226) 194,866 50,923 22,134 (56,752) 905	226 (401,929) 29,085 (7,741) 2,761 (84)
		211,850	(377,682)
	(177,301)		(236,149)
	(922,857)		(722,985)

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2018	2018	2018	2018
$		405,272 10,931 (75,195) (14,978)
		326,030
-	(278,280) (320,621) (28,548) 66,470 245,391
	(315,588)
27,822,749 (29,277,487) 1,119,523 (1,470,000) 3,000,000 (800,000) 494,940 (6,584) (791,238) 4,115
			96,018
		106,460 231,989
$		338,449

See accompanying notes to parent company only financial statements

Chairman:Nita Ing

Manager:Joseph Chai

Chief Accountant:Ming-Huang Chen

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TSRC CORPORATION

Notes to the Financial Statements

For the years ended December 31, 2018 and 2017

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

<1> Organization and Business Scope

TSRC Corporation (the original name was Taiwan Synthetic Rubber Corporation, hereinafter referred to as "the Company") was incorporated in the Republic of China (ROC) on November 22, 1973, as a corporation limited by shares in accordance with the ROC Company Act. In May 1999, Taiwan Synthetic Rubber Corporation was renamed TSRC Corporation as approved by the stockholders' meeting. In June 2016, the Company changed its registered address to be No.2, Singgong Rd., Dashe Dist., Kaohsiung City. The Company is mainly engaged in the manufacture, import, and sale of various types of synthetic rubber, and the import, export, and sale of related raw materials. Please refer to note 14.

<2> Financial Statements Authorization Date and Authorization Process

The parent company onlyfinancial statements were approved by the Board of Directors and published on March 14, 2019.

<3> New Standards, Interpretations and Amendments:

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018. The differences between the current version and the previous version are as follows:

version are as follows:

New, Revised or Amended Standards and Interpretations

Effective date
per IASB

January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2017
January 1, 2018
January 1, 2018

Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its parent company onlyfinancial statements. The extent and impact of signification changes are as follows:

(i) IFRS 15 "Revenue from Contracts with Customers"

IFRS 15 establishes a comprehensive framework for determining whether how much and when revenue is recognized. It replaces the existing revenue recognition guidance, including IAS 18 “ Revenue” and IAS 11 “ Construction Contracts” . The Company applies this standard retrospectively with the cumulative effect. It needs not restate those contracts, but instead, continues to apply IAS 11, IAS 18 and the related Interpretations for comparative reporting period. The Company recognizes the cumulative effect upon its initial application of this Standard as an adjustment to the opening balance of its retained earnings on January 1, 2018.

The Company uses the practical expedients for completed contracts, which means it need not restate those contracts that have been completed on January 1, 2018.

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The following are the nature and impacts on changing of accounting policies:

1) Sales of goods
- For the sale of products, revenue is currently recognized when the related risks of the goods and rewards of ownership have been transferred to the customer. Revenue is recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable, and there is no continuing management involvement with the goods. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods.
2) Impacts on financial statements
- The Company estimates the adoption of IFRS 15 will not have any significant impact on its parent Company onlyfinancial statements.
(ii) IFRS 9 "Financial Instruments"

IFRS 9 replaces IAS 39 "Financial Instruments: Recognition and Measurement", which contains classification and measurement of financial instruments, impairment and hedge accounting.

As a result of the adoption of IFRS 9, the Company adopted the consequential amendments to IAS 1 "Presentation of Financial Statements", which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and OCI. Previously, the Company's approach was to include the impairment of trade receivables in administrative expenses. Additionally, the Company adopted the consequential amendments to IFRS 7 "Financial Instruments: Disclosures" that are applied to disclosures about 2018 but generally have not been applied to comparative information.

The detail of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below:

1) Classification of financial assets and financial liabilities

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available-for-sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Company classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please see note 4(f).

The adoption of IFRS 9 did not have any significant impact on the Company accounting policies on financial liabilities.

2) Impairment of financial assets

3) Transition

The adoption of IFRS 9 have been applied retrospectively, except as described below:

Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognized in retained earnings and reserves as of January 1, 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements of IFRS 9, and therefore, is not comparable to the information presented for 2018 under IFRS 9.
The following assessments have been made on the basis of the facts and circumstances that existed at the date of initial application:
The determination of the business model within which a financial asset is held.
The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.
The designation of certain investments in equity instruments not held for trading as at FVOCI.

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4) Classification of financial assets on the date of initial application of IFRS 9

The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Company's financial assets as of January 1, 2018:

Financial Assets Equity instruments Trade and other receivables	IAS39	Carrying Amount 936,362 1,030,828	IFRS9
	Measurement categories Available-for-sale (note 1) Loans and receivables (note 2)		Measurement categories FVOCI Amortized cost	Carrying Amount
				936,362 1,030,828

Note2: Notes receivable, accounts receivable, and other receivables that were classified as loans and receivables under IAS 39 are now classified at amortized cost.

The following table reconciles the carrying amounts of financial assets under IAS 39 to the carrying amounts under IFRS 9 upon transition to IFRS 9 on January 1, 2018.

2017.12.31 IAS 39 Carry- ing Amount	Reclassifica- tions	Remeasure- ments	2018.1.1 IFRS 9 Carrying Amount	2018.1.1 Re- tained earn- ings effect	2018.1.1 Other equity effect
$ 936,362 -	(936,362) 936,362	- -	936,362	- 29,848	- (29,848)
$936,362	-	-		29,848	(29,848)
$ 1,030,828	-	-	1,030,828	-	-

(iii) Amendments to IAS 7 "Disclosure Initiative"

The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes. To satisfy the new disclosure requirements, the Company present a reconciliation between the opening and closing balances for liabilities with changes arising from financing activities as note 6(ac).

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

Effective date per
IASB

January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019

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Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of signification changes are as follows: (i) IFRS 16 “Leases”

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".
IFRS 16 introduces a single and an on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of expenses related to those leases will now be changed since IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of lowvalue items. The lessor accounting remains similar to the current standard – i.e. the lessors will continue to classify the leases as finance or operating leases.

So far, the most significant impact identified is that the Company will have to recognize the new assets and liabilities for the operating leases of its offices, factory facilities and warehouses. No significant impact is expected for the Company's finance leases. Besides, The Company does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant.

1) Determining whether an arrangement contains a lease
The Company has an arrangement that was not in the legal form of a lease, for which it concluded that the arrangement contains a lease of equipment under IFRIC 4. On transition to IFRS 16, the Company can choose to apply either of the following:
IFRS 16 definition of a lease to all its contracts; or
a practical expedient that does not need any reassessment whether a contract is, or contains, a lease.
The Company plans to apply the practical expedient to grandfather the definition of a lease upon transition. This means that it will apply IFRS 16 to all contracts entered into before January 1, 2019 and identified them as leases in accordance with IAS 17 and IFRIC 4.
2) Transition

As a lessee, the Company can apply the standard using either of the following:

retrospective approach; or
modified retrospective approach with optional practical expedients.

The lessee applies the election consistently to all of its leases.

On January 1, 2019, the Company plans to initially apply IFRS 16 using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information.

When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Company chooses to elect the following practical expedients:

apply a single discount rate to a portfolio of leases with similar characteristics.
adjust the right-of-use assets, based on the amount reflected in IAS 37 onerous contract provision, immediately before the date of initial application, as an alternative to an impairment review.
apply the exemption not to recognize the right-of-use assets and liabilities to leases with lease term that ends within 12 months of the date of initial application.
exclude the initial direct costs from measuring the right-of-use assets at the date of initial application.
use hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

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3) So far, the most significant impact identified is that the Company will have to recognize the new assets and liabilities for the operating leases of its offices, warehouses, and factory facilities. The Company estimated that its right-of-use assets and lease liabilities to increase by $134,208 thousand and $134,208 thousand, respectively, on January 1, 2019. No significant impact is expected for the Company's finance leases. Besides, the Company does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant. Also, the Company is not required to make any adjustments for leases where the Company is the intermediate lessor in a sub-lease.

(ii) IFRIC 23 Uncertainty over Income Tax Treatments

In assessing whether and how an uncertain tax treatment affects the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates, an entity shall assume that a taxation authority will examine the amounts it has the right to examine and have a full knowledge on all related information when making those examinations.

So far, the most significant impact identified is that the Company will have to recognize the new income tax liabilities and income tax expense for its uncertainty over income tax treatments.

The actual impacts of adopting the standards may change depending on the economic conditions and events which may occur in the future.

(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 Amendments to IFRS 3 “Definition of a Business” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Inves- tor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 and IAS 8 “Definition of Material”	Effective dateper IASB
	January 1, 2020 Effective date to be determined by IASB January 1, 2021 January 1, 2020

The Company assessed that the above IFRSs may not be relevant to the Company.

<4> Significant Accounting Policies

The significant accounting policies presented in the parent company onlyfinancial statements are summarized as follows. Except for those described otherwise, the accounting policies have been applied consistently to all periods presented in these parent company onlyfinancial statements, and have been applied consistently to the balance sheet as of reporting date.

(a) Statement of compliance

The financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (the Regulations).

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

The financial statements have been prepared on a historical cost basis except for those otherwise explained in the accounting policies in the notes.

(ii) Functional and presentation currency

The functional currency of each entity is determined based on the primary economic environment. The Company's financial statements are presented in New Taiwan dollars, which is the Company's functional currency. All financial information presented in New Taiwan dollars has been rounded to the nearest thousand.

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Transactions in foreign currencies are translated to the functional currencies of the Company at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are remeasured to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year.

(d) Classification of current and non-current assets and liabilities
(i) An asset is classified as current under one of the following criteria, and all other assets are classified as noncurrent.
- 1) It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
- 2) It holds the asset primarily for the purpose of trading;
- 3) It expects to realize the asset within twelve months after the reporting period; or
- 4) 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.
(ii) A liability is classified as current under one of the following criteria, and all other liabilities are classified as noncurrent.
- 1) It expects to settle the liability in its normal operating cycle;
- 2) It holds the liability primarily for the purpose of trading;
- 3) The liability is due to be settled within twelve months after the reporting period even if refinancing or a revised repayment plan is arranged between the reporting date and the issuance date of the financial statements; or
- 4) It 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 the issue of equity instruments do not affect its classification.
(e) Cash and cash equivalents

Cash and cash equivalents comprise cash balances, time deposits, and short-term investments with high liquidity that are subject to an insignificant risk of changes in their fair value.

(f) Financial instruments
(i) Financial assets (applicable commencing January 1, 2018)

Financial assets are classified into the following categories: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL).

The Company shall reclassify all affected financial assets only when it changes its business model in managing its financial assets.

1) Financial assets measured at amortized cost
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

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2) Fair value through other comprehensive income (FVOCI )

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

Dividend income derived from equity investments is recognized on the date that the Company's right to receive payment is established, which in the case of quoted securities is normally the exdividend date.

3) Fair value through profit or loss (FVTPL)

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

4) Impairment of financial assets

The Company recognizes its loss allowances for expected credit losses on financial assets measured at amortized cost (including cash and cash equivalents, notes and accounts receivable, other receivable and guarantee deposit paid).

The Company measures its 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 are always measured at an amount equal to lifetime ECL.

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

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

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

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

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Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Company recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss.

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company's procedures for recovery of amounts due.

5) Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the assets expire, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

(ii) Financial assets (applicable from January 1, 2018)
The Company classifies financial assets into the following categories: receivables and available-for-sale financial assets.
1) Receivables

The Company considers evidence of impairment for receivables at both a specific asset and collective level. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

2) Available-for-sale financial assets

Available-for-sale financial assets are recognized initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value, and changes therein, other than impairment losses, dividend income, and foreign currency gains or losses which are recognized as current earnings, are recognized in other comprehensive income and presented in the unrealized gain/loss from available-for-sale financial assets in equity. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss, and is included in other gains and losses under non-operating income and expenses. The purchase and disposal of financial assets are recognized using trade date accounting. Dividend income is recognized in profit or loss on the date that the Company's right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date. Dividend income is recorded under non-operating income and expenses.

3) Derecognition of financial assets

The Company derecognizes financial assets when the contractual rights of the cash inflow from the asset are terminated, or when the Company transfers substantially all the risks and rewards of ownership of the financial assets.

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

Debt or equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual agreement.

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Interest, gains or losses related to financial liabilities are recognized in profit or loss, and recorded under nonoperating income and expenses.

2) Other financial liabilities
- Financial liabilities not classified as held-for-trading or designated as at fair value through profit or loss, which comprise loans and borrowings, and trade and other payables, are measured at fair value plus any directly attributable transaction cost at the time of initial recognition. Subsequent to initial recognition, they are measured at amortized cost calculated using the effective interest method. Interest expense not capitalized as capital cost is recognized in profit or loss, and is recorded under non-operating income and expenses.
3) Derecognition of financial liabilities
- The Company derecognizes a financial liability when its contractual obligation has been discharged or cancelled or has expired.
4) Offsetting of financial assets and liabilities
- The Company presents financial assets and liabilities on a net basis when the Company has the legally enforceable right to offset, and intends to settle such financial assets and liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.
5) Financial guarantee contract
- A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder of a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.
- A financial guarantee contract not designated as at fair value through profit or loss issued by the Company is recognized initially at fair value plus any directly attributable transaction cost. After initial recognition, it is measured at the higher of (a) the contractual obligation amount determined in accordance with IAS 37; or (b) the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with accounting policies.
(iv) Derivative financial instruments and hedge accountin

The Company holds derivative financial instruments to hedge its foreign currency exposures. Derivatives are recognized initially at fair value, and attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss and are included in statement of comprehensive income. When the fair value of a derivative instrument is positive, it is classified as a financial asset, and when the fair value is negative, it is classified as a financial liability.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. Fair value generally refers to the quoted market price in active markets. In case there's no quoted market price, the fair value is supposed to be estimated by evaluation method. Most derivative financial instruments of the Company use the quoted market price provided by financial institutions as a reference.

(g) Inventories

(h) Investment in associates

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

The equity of associates are incorporated in the financial statements using the equity method. 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 financial statements include the Company's share of the profit or loss and other comprehensive income of equity accounted investees after adjustments to align the accounting policies with those of the Company, from the date that significant influence commences until the date that significant influence ceases. When changes in an associate's

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equity are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Company's ownership percentage of the associate, the Company recognizes the changes in ownership interests of the associate in capital surplus in proportion to its ownership interests.

Unrealized profits resulting from the transactions between the Company and an associate are eliminated to the extent of the Company's interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.

When the Company's share of losses exceeds its interest in associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the investee.

(i) Investment in subsidiaries

When preparing the Company's financial statements, investments in subsidiaries which are controlled by the Company using the equity method. Under the equity method, the net income, other comprehensive income, and equity in the financial statements are equivalent to those attributable to the shareholders of the parent company in the consolidated financial statements.

Changes in ownership of a subsidiary that do not result in loss of control are accounted for as equity transactions. If the investment in shares is not made by cash but in exchange with providing service or other assets, the cost of the investment is determined by either the fair value of shares purchased, the fair value of the service provided, or the fair value of the assets exchanged, which ever can be determined more objectively. If the investment in subsidiary is in exchange with service to be provided in the future, the account "investment in equity method" should be credited and reversed to recognized investment income based on the timing of the service provided under a reasonable accounting system.

(j) Joint arrangement

The Company determines the type of joint arrangement in which it is involved by considering the structure and form of the arrangement, the separate legal vehicle, the terms agreed by the parties in the contractual arrangement and other facts and circumstances. Previously the Company determines the type of joint arrangement by considering only the structure and form of the arrangement. The Company has re-determined the joint arrangement which it is involved and has reclassified the "jointly controlled entity" to "joint venture." After the reclassification, the Company continues to adopt the accounting treatment by the equity method. Therefore, there is no impact on the recognized assets, liabilities, and comprehensive income of the subsidiary.

(k) Property, plant and equipment
(i) Recognition and measurement

(ii) Reclassification to investment properties
Property is reclassified to investment property at its carrying amount when the use of the property changes from owner occupied to investment property.
(iii) Subsequent cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.

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(iv) Depreciation

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

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

equipment are as follows:
(1) Land improvements	8~30 years
(2) Buildings	3~60 years
(3) Machinery	3~40 years
(4) Furniture and fixtures equipment	3~8 years
(5) Leased assets	3~8 years

(l) Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, or to 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 measured under the cost model, and depreciation expense is calculated using the depreciable amount. The depreciation method, useful life, and residual amount are the same as those adopted for property, plant and equipment. Cost includes expenditure that is directly attributable to the acquisition of the investment property and any other cost and capitalized borrowing costs that can be directly attributed.

(m) Leases
(i) Lessor
Lease income from an operating lease is recognized in income on a straight-line basis over the lease term.
(ii) Lessee

Leases in which the Company assumes substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair value or the present of the minimum lease payments. Subsequent minimum lease payments are attributable to finance cost and the reduction of the outstanding liabilities, and the finance cost is allocated to each period during the lease term using a constant periodic rate of interest on the remaining balance of the liability. The acquisition of property, plant and equipment under a finance lease is accounted for in accordance with the accounting policy applicable to the asset.

Other leases are operating leases and are not recognized in the Company's statement of financial position. Payments made under an operating lease are recognized in profit or loss on a straight-line basis over the term of the lease.

(n) Intangible assets

Intangible assets comprise computer software and industrial technology and are measured at cost less accumulated amortization and accumulated impairment losses.

The depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets. The estimated useful lives for the current and comparative periods are as follows:

(i)Computer software

3 years

(ii)Industrial technology

10 years

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(o) Impairment －non-financial assets

With regard to non-financial assets (other than inventories and deferred tax assets), the Company assesses at the end of each reporting period whether there is any indication that an impairment loss has occurred, and estimates the recoverable amount for assets with an indication of impairment. If it is not possible to determine the recoverable amount for the individual asset, then the Company will have to determine the recoverable amount for the asset's cash-generating unit.

The Company assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. If any such indication exists, the entity shall estimate the recoverable amount of that asset. Impairment loss is reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount, increasing the individual asset's or cash-generating unit's carrying amount to its estimated recoverable amount. The reversal of an impairment loss of an individual asset or cash-generating unit cannot exceed the carrying amount of the individual asset or cash-generating unit, less any depreciation or amortization, had it not recognized the impairment loss.

(p) Provisions

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

(q) Revenue
(i) Revenue from contracts with customers (applicable commencing January 1, 2018)

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

1) Sale of goods

The Company is mainly engaged in the manufacture and sale of various types of synthetic rubber. The Company recognizes revenue when control of the products has been transferred. When the products are delivered to the customer, the ownership of the significant risks and rewards of the products have been transferred to the customer, and the Company is no longer engaged with the management of the products. Delivery occurs being 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 and the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

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

2) Management services

The Company is engaged in providing management services. Revenue from providing services is recognized in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognized based on the actual service provided at the end of the reporting period as a proportion of the total services to be provided. The proportion of services provided is determined based on surveys of work performed.

3) Financing components

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

(ii) Revenue (applicable before January 1, 2018)
1) Sale of goods

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consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

2) Rendering of services

The Company is engaged in providing management services. Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed based on surveys of work performed.

3) Rental income

The rental income arising from investment property is recognized in profit or loss on a straight-line basis during the lease term.

(r) Employee benefits
(i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

(ii) Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted. The discount rate is the yield at the reporting date (market yield of high-quality corporate bonds or government bonds) on bonds that have maturity dates approximating the terms of the Company's obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An economic benefit is available to the Company if it is realizable during the life of the plan, or on settlement of the plan liabilities.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized immediately in profit or loss.

Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest) and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Company can reclassify the amounts recognized in other comprehensive income to retained earnings.

(iii) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

(s) Income tax

(i) Assets and liabilities that are initially recognized but are not related to the business combination and have no effect on net income or taxable gains (losses) during the transaction.

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(ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse.
(iii) Initial recognition of goodwill.

Deferred tax assets and liabilities may be offset against each other if the following criteria are met:

(i) The entity has the legal right to settle tax assets and liabilities on a net basis; and
(ii) The taxing of deferred tax assets and liabilities fulfills one of the scenarios below:
evied by the same taxing authority; or
levied by different taxing authorities, but where each such authority intends to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched.

(t) Earnings per share

(u) Operating segments

The Company has disclosed information about operating segments in its consolidated financial statements. Hence no further information is disclosed in the financial statements.

<5> Critical Accounting Judgments and Key Sources of Estimation Uncertainty

The preparation of the parent company onlyfinancial statements in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers 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 will continually review the estimates and basic assumptions. Changes in accounting estimates will be recognized in the period of change and the future period of their impact.

There are no critical judgments in applying the accounting policies that have significant effect on the amounts recognized in the parent company onlyfinancial 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:

Inventory measurement

Since inventory is measured by the lower of cost and net realizable value, the Company evaluated the inventory based on the selling price of the product line and price fluctuation of raw material, and written down the book value to net realizable value. Please refer to note 6(g) for inventory measurement.

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<6> Description of Significant Accounts

(a) Cash and cash equivalents

cription of Significant Accounts Cash and cash equivalents
Checking and savings deposits	December 31, 2018 $ 338,449	December 31, 2017
		231,989

The disclosure of interest rate risk and sensitivity analysis for the Company's financial assets and liabilities is referred to note 6(y).

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

Financial liabilities held for trading: Derivative instruments not used for hedging Forward contracts	December 31, 2018 $ -	December 31, 2017 226

The Company uses derivative financial instruments to manage the exposures due to fluctuations of foreign exchange risk from its operating activities. As of December 31, 2018 and , 2017, the Company reported the following derivatives financial instruments as financial assets and liabilities at fair value through profit or loss without the application of hedge accounting.

Forward Exchange Agreement Forward Exchange Agreement		December 31, 2017
	Contract amount (thousand) $ 650 200	Currency EUR/TWD EUR/USD	Expired date
			2018.1.18~2018.3.21 2018.2.13

(c) Financial assets at fair value through other comprehensive income －non-current

Equity investments at fair value through other comprehensive income: Listed stocks (domestic) Unlisted stocks (domestic and overseas) Total	December 31, 2018
	$ 305,631 790,064
	$ 1,095,695

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

The Company held equity instrument investment for long-term strategic purposes, not held for trading purposes, which have been designated as measured at fair value through other comprehensive income. These investments were classified as available-for-sale financial assets －non-current on December 31, 2017.

(ii) For dividend income, please refer to note 6(w).
(iii) For credit risk and market risk, please refer to note 6(y).
(iv) The Company did not hold any collateral for the collectible amounts.
(v) The significant financial assets at fair value through other comprehensive income denominated in foreign currency were as follows:

December 31, 2018 THB	Foreign currency amount $ 153,399	Exchange rate 0.9532	TWD
			146,220

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(d) Available-for-sale financial assets －non-current

Listed stocks (domestic) Unlisted stocks (domestic or overseas) Total	December 31, 2017
	$ 235,024 701,338
	$ 936,362

Please refer to note 6(w) for gains on disposal of investments and dividend income.

If the market price of the available-for-sale financial assets fluctuates (assuming that all other variables remain the same), the impact on other comprehensive income will be as follows:

December 31, 2017 Fluctuation in market price at reporting date Other comprehensive income(after tax) Net income Increase 10% $ 93,636 - Decrease 10% $(93,636) - The significant available-for-sale financial assets denominated in foreign currency were Foreign currency amount Exchange rate December 31, 2017 THB $ 143,421 0.9176	December 31, 2017	December 31, 2017	as follows: TWD 131,640
		Net income
		-
		-
		0.9176

As of December 31, 2017, the Company did not pledge any collateral on available-for-sale financial instruments. For credit risk and market risk, please refer to 6(y).

(e) Notes and accounts receivable (including related parties) and other receivable (including related parties)

Notes receivable Accounts receivable Accounts receivable －related parties Less: allowance for impairment	December 31, 2018 $ 2,041 1,063,919 58,782 1,624 $ 1,123,118	December 31, 2017
		348 1,030,480 39,864 -
		1,070,692

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected credit loss provision for all receivables on December 31, 2018. 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 expected credit losses as of December 31, 2018 was determined as follows:

Current 1 to 30 days past due 31 to 90 days past due	Gross carrying amount $ 1,093,738 28,323 2,681 $ 1,124,742	Weighted-average expected credit loss rate 0.04%~0.33% 0.45%~16.31% 5.98%~27.3%	Loss allowance provision
			1,045 238 341
			1,624

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As of December 31, 2017, the Company applies the incurred loss model to consider the loss allowance provision of notes and trade receivable, and the aging analysis of notes and trade receivable, which were past due but not impaired, was as follows:

December 31, 2017

December 31, 2017
1 to 30 days past due $ 6,234 he movement in the allowance for notes and accounts receivable was a 2018 Balance at January 1, 2018 and 2017 per IAS 39 $ - Adjustment on initial application of IFRS 9 - Balance at January 1, 2018 per IFRS 9 - Impairment loss recognized 1,624 Balance at December 31, 2018 and 2017 $ 1,624	s follows: 2017
	Individually as- sessed impairment - - -	Collectively as- sessed impairment
		- -
		-

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

The Company did not hold any collateral for the collectible amounts. For other credit risk please refers to note 6(y).

The carrying amounts of notes and accounts receivable with short maturity are not discounted under the assumption that the carrying amounts approximate their fair value.

(f) Other receivables (including related parties)

Other receivables －related parties Other	December 31, 2018	December 31, 2017 124,268 16,551 140,819
	$ 102,185 32,180
	$ 134,365

As of December 31, 2018 and 2017, the Company had no other receivables that were past due. Therefore, no provisions for doubtful debt were required after the management's assessment. For other credit risk information, please refers to note 6(y).

(g) Inventories

The components of the Company's inventories were as follows:

Raw materials Supplies Work in progress Finished goods Merchandise Total	December 31, 2018	December 31, 2017
	$ 650,479 10,317 136,600 1,667,308 4,424	623,207 14,797 140,968 1,385,523 6,520
	$ 2,469,128	2,171,015

As of December 31, 2018 and 2017, the Company did not pledge any collateral on inventories.

Except for operating costs arising from the ordinary sale of inventories, other gains and losses directly recorded under operating costs were as follows:

Loss on decline in market value of inventory Income from sale of scrap Unallocated production overhead Total	2018	2017
	$ 6,191 (23,357) 7,946	50,509 (29,629) 31,830
	$(9,220)	52,710

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The Company reversed the allowance for loss on inventory for the year period ended December 31, 2017, when the Company sold or used the inventories for which an allowance had been provided previously.

(h) Investments accounted for under the equity method

The details of the investments accounted for under the equity method at the reporting date were as follows:

Subsidiaries Joint ventures	December 31, 2018 $14,442,549 - $ 14,442,549	December 31, 2017
		13,210,135 247,562
		13,457,697

(i) Subsidiaries

TSRC (Vietnam) Co., Ltd. has been established in October 2018, with the approval of the Company's Board of Directors in May 2018, at an investment amount of $278,280 thousand (USD9,000 thousand).

The disposal of subsidiary's shares (without fair value) in Pulse Metric, Inc. in 2018 was due to the unsubstantial operation of the investee, resulting in a loss of $29,848, recognized in other comprehensive income, which had been reclassified to retained earnings by the Company. Other information is provided in the Group's consolidated financial statement for the year ended December 31, 2018.

(ii) Joint ventures

financial statement for the year ended December 31, 2018. Joint ventures	financial statement for the year ended December 31, 2018. Joint ventures
Summary of respectively not significant joint ventures recognized under		the equity method were as follows:
	December 31, 2018	December	31, 2017
Balance of not significant joint venture's equity	$ -		247,562
	2018	2017
Attributable to the Company:
Income from continued operation	$ (2,171)		(283,112)
Other comprehensive income	-	-
Total comprehensive income	$(2,171)		(283,112)

(iii) Collateral

As of December 31, 2018 and 2017, the Company did not pledge any collateral on investments accounted for under the equity method.

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(i) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Company were as follows:

Cost or deemed cost: Balance at January 1, 2018 Additions Disposals Reclassification Balance at December 31, 2018 Balance at January 1, 2017 Additions Disposals Reclassification Balance at December 31, 2017 Depreciation and impairment loss: Balance at January 1, 2018 Depreciation Disposal Balance at December 31, 2018 Balance at January 1, 2017 Depreciation Disposal Balance at December 31, 2017 Carrying value: December 31, 2018 December 31, 2017 January 1, 2017	Land $ 614,101 - - - $ 614,101 $ 614,101 - - - $ 614,101 $ - - - $- $ - - - $- $ 614,101 $ 614,101 $ 614,101	Land improvements 83,556 - - 199 83,755 82,096 - - 1,460 83,556 62,942 2,370 - 65,312 60,458 2,484 - 62,942 18,443 20,614 21,638	Buildings
			1,199,976 - (1,035) 5,363
			1,204,304
			1,160,008 - (1,775) 41,743
			1,199,976
			839,760 30,245 (1,035)
			868,970
			812,358 29,021 (1,619)
			839,760
			335,334
			360,216
			347,650

The Company did not pledge any collateral on property, plant and equipment. (j) Investment property Land Buildings Cost: Balance as at January 1, 2018 $ 1,073,579 741,889 Additions - - Balance as at December 31, 2018 $ 1,073,579 741,889 Balance as at January 1, 2017 $ 1,073,579 741,889 Additions - - Balance as at December 31, 2017 $ 1,073,579 741,889 Depreciation: Balance as at January 1, 2018 $ - 204,418 Depreciation - 14,726 Balance as at December 31, 2018 $ - 219,144 Balance as at January 1, 2017 $ - 189,693 Depreciation - 14,725 Balance as at December 31, 2017 $ - 204,418	Total
	1,815,468 -
	1,815,468
	1,815,468 -
	1,815,468
	204,418 14,726
	219,144
	189,693 14,725
	204,418

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Machinery 8,612,836 - (64,192) 362,048 8,910,692 8,568,082 - (97,444) 142,198 8,612,836 7,297,678 220,824 (63,104) 7,455,398 7,173,493 221,412 (97,227) 7,297,678 1,455,294 1,315,158 1,394,589	Furniture and fixtures 87,051 - (242) 5,159 91,968 59,888 - (45) 27,208 87,051 55,712 6,748 (242) 62,218 50,590 5,167 (45) 55,712 29,750 31,339 9,298	Leased assets 94,596 - - - 94,596 94,596 - - - 94,596 - - - - - - - - 94,596 94,596 94,596	Prepayments for equip- ment and construction in progress 324,214 297,381 - (379,358) 242,237 217,962 389,174 - (282,922) 324,214 - - - - - - - - 242,237 324,214 217,962

Carrying value: Balance as at December 31, 2018 Balance as at December 31, 2017 Balance as at January 1, 2017 Fair value: Balance as at December 31, 2018 Balance as at December 31, 2017 Balance as at January 1, 2017	Land $ 1,073,579 $ 1,073,579 $ 1,073,579	Buildings 522,745 537,471 552,196	Total
			1,596,324
			1,611,050
			1,625,775
			$ 3,334,675
			$ 3,334,675
			$ 3,334,675

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as follows:
Region Da'an Dist., Taipei City	2018 2.10%	2017
		2.10%

The Company has rented out a parcel of land, but has decided not to treat this property as investment property because it is not the Company's intention to hold it for capital appreciation or rental income. Accordingly, the property is still recorded under property, plant and equipment.

As of December 31, 2018 and 2017, the Company did not pledge any collateral on investment properties. (k) Intangible assets

The cost and amortization of the intangible assets of the Company were as follows:

Costs: Balance at January 1, 2018 Reclassification Balance at December 31, 2018 Balance at January 1, 2017 Reclassification Balance at December 31, 2017 Amortization: Balance at January 1, 2018 Amortization Balance at December 31, 2018 Balance at January 1, 2017 Amortization Balance at December 31, 2017 Carrying value: December 31, 2018 December 31, 2017 January 1, 2017	Industrial technology $ 73,913 - $ 73,913 $ 41,756 32,157 $ 73,913 $ 23,263 7,390 $ 30,653 $ 17,748 5,515 $ 23,263 $ 43,260 $ 50,650 $ 24,008	Computer software 162,377 6,589 168,966 124,221 38,156 162,377 126,715 19,733 146,448 110,257 16,458 126,715 22,518 35,662 13,964	Total
			236,290 6,589
			242,879
			165,977 70,313
			236,290
			149,978 27,123
			177,101
			128,005 21,973
			149,978
			65,778
			86,312
			37,972

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(i) In 2018 and 2017, the amortization of intangible assets were as follows:

Operating costs Operating expenses	2018 $ 6,053 $ 21,070	2017
		3,122
		18,851

(ii) The Company did not pledge any collateral on intangible assets.
(l) Short-term and long-term borrowings

The details of the Company's short-term and long-term borrowings were as follows:

(i) Short-term borrowings

	December 31, 2018
Range of interest rates(%) 0.55~3.44	Year of maturity 2019 December 31, 2017	Amount
		$ 2,354,568

Range of interest rates(%) 0.53~2.06	Year of maturity 2018	Amount
		$ 3,809,306

The abovementioned short-term borrowings were to mature within one year.

As of December 31, 2018 and 2017, the unused credit facilities (including credit lines for short-term commercial paper payable) amounted to $5,614,028 thousand and $4,415,850 thousand, respectively.

(ii) Short-term commercial paper payable

The details of the Company's short-term commercial paper payable were as follows:

December 31, 2017

Guarantee or acceptance institution Range of interest rates(%) Commercial paper payable International Bills Finance Corporation 0.87 Less: discount Total ong-term borrowings December 31, 2018 Currency Range of interest rates(%) Year of maturity Unsecured loans NTD 1.05~1.44 2019~2023 Current Non-current Total December 31, 2017 Currency Range of interest rates(%) Year of maturity Unsecured loans NTD 1.44 2018~2019 Current Non-current Total	Guarantee or acceptance institution Range of interest rates(%) International Bills Finance Corporation 0.87 December 31, 2018	Guarantee or acceptance institution Range of interest rates(%) International Bills Finance Corporation 0.87 December 31, 2018		Amount
			$	350,000 25
			$	349,975

Currency NTD	Range of interest rates(%) Year of maturity 1.05~1.44 2019~2023 December 31, 2017	Year of maturity		Amount
				$ 3,800,000
				$ 850,000 2,950,000
				$ 3,800,000

Currency NTD	Range of interest rates(%) 1.44	Year of maturity		Amount
		2018~2019		$ 1,600,000
				$ 800,000 800,000
				$ 1,600,000

(iii) Long-term borrowings

The Company disclosed related risk exposure to the financial instruments in note 6(y).

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(iv) Long-term commercial paper payable

The details of the Company's Long-term commercial paper payable were as follows:

	December 31, 2018
Guarantee or acceptance institution CTBC Bank	Range of interest rates(%) 1.2457	Amount
		$ 500,000 307
		$ 499,693

(v) Collateral of loans

The Company did not provide assets as pledge assets for the loans and short-term commercial paper payable. (vi) Finance lease liabilities

The Company has entered into a lease contract for leasing a parcel of land from the Industrial Development Bureau of the Ministry of Economic Affairs for the period from June 29, 2004, to June 28, 2024. During the term of the lease, the Company has an option to purchase the rented land from the Industrial Development Bureau of the Ministry of Economic Affairs through a formal application. Once the application is approved, the rental and deposit paid during the lease period can be offset against the purchase price. The Company intends to purchase the rented land after the contract expires. The finance lease liabilities payable were as follows:

Future minimum leasepayments December 31, 2018 Less than one year $ 7,064 Between one and five years 28,256 More than five years 3,532 $ 38,852 December 31, 2017 Less than one year $ 7,064 Between one and five years 28,256 More than five years 10,595 $ 45,915 Current provisions (recorded as other payable) Provision for defectiveproducts Balance at January 1, 2018 $ 13,231 Increase in provisions 6,259 Reversal of unused provisions (14,740) Balance at December 31, 2018 $ 4,750 Balance at January 1, 2017 $ - Increase in provisions 27,713 Reversal of unused provisions (14,482) Balance at December 31, 2017 $ 13,231	Interest 77 1,054 1,883 3,014 77 1,054 2,362 3,493	Present value of minimum lease payments
		6,987 27,202 1,649
		35,838
		6,987 27,202 8,233
		42,422

(m) Current provisions (recorded as other payable)

The Company may have losses caused by the defeats of new products that are not yet mass produced and by the return and compensation occurred after products were delivered to customers. The Company had estimated the provisions based on historical experience and recognized the amount under operating cost.

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(n) Operating leases

(i) Lessee

Non-cancellable rental payables of operating leases were as follows

December 31, 2018 $ 59,503	December 31, 2017
	71,123

More than five years

The Company leases offices and factory facilities under operating leases. The leases typically run for a period of 4 to 5 years, with an option to renew the lease. The lease payment will be adjusted to reflect market price when renewing the contract.

For the years ended December 31, 2018 and 2017, lease expenses were $19,321 thousand and $19,281 thousand, respectively.

(ii) Lessor

The Company leases out its investment property under operating leases; please refer to note 6(j). The future minimum lease payment receivables under non-cancellable leases were as follows:

December 31, 2018 December 31, 2017 $ 49,897 102,598

Less than five years

(o) Employee benefits

(i) Defined benefit plans

The following table shows a reconciliation between the present value of the defined benefit obligation and the fair value of plan assets:

air value of plan assets:
The present value of the defined benefit obligations Fair value of plan assets The net defined benefit liability	December 31, 2018 $ 607,256 (467,801) $ 139,455	December 31, 2017
		598,028 (423,675)
		174,353

The Company established the pension fund account for the defined benefit plan in Bank of Taiwan. The plan, under the Labor Standards Law, provides benefits based on an employee's length of service and average monthly salary for the six-month period prior to retirement.

1) Composition of plan assets

The Company 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 Labors. Minimum annual distributions of the funds by the Bureau shall be no less than the earnings attainable from two year time deposits with interest rates offered by local banks.

The Company's Bank of Taiwan labor pension reserve account balance amounted to $467,801 thousand at the end of the reporting period. 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 Labors.

2) Movements in present value of defined benefit obligation

The movements in present value of the Company's defined benefit obligation for the years ended December 31, 2018 and 2017 were as follows:

Defined benefit obligation as of 1 January Current service costs and interest Remeasurements of net defined benefit liability (asset) －Return on plan assets (excluding current interest expense) －Due to changes in financial assumption of actuarial (losses) gains Benefits paid by the plan Defined benefit obligation as of 31 December	2018 $ 598,028 14,742 21,429 12,848 (39,791) $ 607,256	2017
		636,379 14,510 10,500 (13,674) (49,687)
		598,028

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3) Movements in fair value of plan assets

The movements in the fair value of the plan assets for the years ended December 31, 2018 and 2017 were as follows:

follows:
Fair value of plan assets as of January 1 Remeasurements of net defined benefit liability (asset) －Return on plan assets (excluding current interest expense) Contributions made Benefits paid by the plan Fair value of plan assets as of December 31	2018 $ 423,675 18,090 65,827 (39,791) $ 467,801	2017
		462,360 4,306 6,696 (49,687)
		423,675

4) Expenses recognized in profit or loss

Fair value of plan assets as of December 31 $ 467,801 423,675 Expenses recognized in profit or loss	Fair value of plan assets as of December 31 $ 467,801 423,675 Expenses recognized in profit or loss	Fair value of plan assets as of December 31 $ 467,801 423,675 Expenses recognized in profit or loss	Fair value of plan assets as of December 31 $ 467,801 423,675 Expenses recognized in profit or loss
The expenses recognized on profit or loss for the years ended December 31, 2018 and 2017 were as follows:
	2018		2017
Current service cost	$	6,710	7,526
Net interest on the defined benefit liability (asset)		2,365	1,931
	$	9,075	9,457
	2018		2017
Operating costs	$	5,555	5,787
Operating expenses		3,089	3,379
Other income and expenses		222	261
Other receivable		209	30
	$	9,075	9,457

5) Remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income The Company's remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income for the years ended December 31, 2018 and 2017, were as follows:

		2018	2017
	Balance of January 1	$ (178,457)	(180,884)
	Recognized during the period	(21,854)	2,427
	Balance of December 31	$(200,311)	(178,457)
(6)	Actuarial assumptions
	The following are the Company's principal actuarial assumptions at the reporting dates:
		December 31, 2018	December 31, 2017
	Discount rate	1.125%	1.375%
	Future salary increases rate	1.500%	1.500%

The Company expects to make contributions of $4,535 thousand to the defined benefit plans in the next year starting from the reporting date of 2018.

The weighted-average duration of the defined benefit plan is 11.22 years.

7) Sensitivity analysis

When calculating the present value of the defined benefit obligation, the Company uses judgments and estimations to determine the related actuarial assumptions, including discount rates, employee turnover rates and future salary changes, as of balance sheet date. Any changes in the actuarial assumptions may significantly impact the amount of the defined benefit obligation.

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As of December 31, 2018 and 2017, the effects of the present value of the defined benefit obligation arising from changes in principle actuarial assumptions were as follows:

December 31, 2018 Discount rate Future salary increase rate December 31, 2017 Discount rate Future salary increase rate	Effects of defined benefit obligation	Effects of defined benefit obligation
	Increase 0.25% $ (12,848) 12,819 (13,240) 13,232	Decrease 0.25%
		13,291 (12,450) 13,674 (12,877)

The method and assumptions used on current sensitivity analysis are the same as those of the prior year. (ii) Defined contribution plans

The Company has made monthly contributions equal to 6% of each employee's monthly wages to the labor pension personal account at the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Company contributes a fixed amount to the Bureau of the Labor Insurance without additional legal or constructive obligations.

The Company's pension costs under the defined contribution plan were $24,022 thousand and $21,937 thousand for the years 2018 and 2017, respectively. Payments were made to the Bureau of Labor Insurance.

(iii) Short-term employee benefit liabilities

December 31, 2018 $ 25,658	December 31, 2017
	24,346

Compensated absence liabilities

(p) Income tax

(i) Income tax expenses (benefit)

The amount of the Company's income tax expenses (benefit) for the years ended December 31, 2018 and 2017, were as follows:

were as follows:
Current income tax expense Adjustment for prior periods Deferred tax expense Origination and reversal of temporary differences Adjustment of tax rates Change in unrecognized temporary differences Income tax expenses on continuing operations	2018 $ 9,221 67,833 51,772 7,117 126,722 $ 135,943	2017
		5,797
		16,643 - -
		16,643
		22,440

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Reconciliations of the Company's income tax expense (benefit) and the profit before tax for 2018 and 2017 were as follows:

Income before tax Income tax calculated on pretax accounting income at statutory rate Adjustment of tax rates Dividend income Adjustment for prior periods Domestic investment loss Foreign investment income R&D tax credits utilized Current year losses for which no deferred income tax asset was recognized Change in unrecognized temporary differences Others Total	2018	2017
	$ 1,328,129	896,547
	$ 265,627 51,772 (10,885) 9,221 (94,488) (169,543) (7,900) 80,800 7,117 4,222	152,413 - (8,727) 6,973 21,022 (141,623) (6,163) - - (1,455)
	$ 135,943	22,440

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

The Company deferred tax assets have not been recognized in respect of the following items:

Tax effect of deductible Temporary Differences The carryforward of unused tax losses	December 31, 2018
	$ 7,117 80,800
	$ 87,917

As of December 31, 2018, the amount of tax losses not yet recognized as deferred tax assets and their credit for the previous year is as follows:

Year 2016 2018	Amount $ 19,985 60,815 $ 80,800	Year of expiration
		2026 2028

1) Recognized deferred income tax assets and liabilities Changes in the amount of deferred tax assets and liabilities for 2018 and 2017 were as follows:

Balance at January 1, 2018 Recognized in profit or loss Balance at December 31, 2018 Balance at January 1, 2017 Recognized in profit or loss Balance at December 31, 2017	Defined benefitplans $ 30,053 (6,533) $ 23,520 $ 19,704 10,349 $ 30,053	Allowance for inventory valuation 14,818 3,853 18,671 6,231 8,587 14,818	Loss carryforward 23,676 (15,050) 8,626 37,042 (13,366) 23,676	Others 16,779 3,558 20,337 24,344 (7,565) 16,779	Total
					85,326 (14,172)
					71,154
					87,321 (1,995)
					85,326

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Deferred tax liabilities: Balance at January 1, 2018 Recognized in profit or loss Balance at December 31, 2018 Balance at January 1, 2017 Recognized in profit or loss Balance at December 31, 2017	Foreign investment income ac- counted for under equity method $ 324,654 102,821 $ 427,475 $ 311,287 13,367 $ 324,654	Capitaliza- tion of inter- est expense 31,963 5,017 36,980 31,751 212 31,963	Land value increment tax 56,683 - 56,683 56,683 - 56,683	Others 12,553 4,712 17,265 11,484 1,069 12,553

Deferred tax liabilities:

(iii) Examination and approval

The tax returns of the Company have been examined by the tax authorities through 2016.

(q) Capital and other equity

(i) Capital

In accordance with the original Company's articles of incorporation, the capital share of the Company amounted to $9,000,000 thousand, divided into 900,000,000 shares, at NTD10 per share.

As of December 31, 2018 and 2017, 825,709,978 shares of ordinary were issued.

(ii) Additional paid-in capital

The components of additional paid-in capital as of December 31, 2018 and 2017, were as follows:

Share premium Overaging unclaimed dividends	December 31, 2018 $ 849 44,309 $ 45,158	December 31, 2017
		849 40,194
		41,043

(iii) Retained earnings

1) Legal reserve

2) Special earnings reserve

A portion of current period earnings and undistributed prior period earnings shall be reclassified as a special earnings reserve during earnings distribution. The amount to be reclassified should be equal to the difference between the total net current period reduction of special earnings reserve resulting from the first-time

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adoption of IFRSs and the carrying amount of other shareholders' equity as stated above. Similarly, a portion of undistributed prior period earnings shall be reclassified as a special earnings reserve (which does not qualify for earnings distribution) to account for cumulative changes to other shareholders' equity pertaining to prior periods due to the first-time adoption of IFRSs. Amounts of subsequent reversals pertaining to the net reduction of other shareholders' equity shall qualify for additional distributions.

3) Distribution of retained earnings

In accordance with the Company's articles of incorporation amended on June 21, 2018, the profit of annual account, if any, shall deduct the tax and make up the loss carried from previous years, then appropriate 10% as legal reserve fund. The rest shall be distributed or reserved as special reserve pursuant to the Securities and Exchange Act. The distributable earnings shall be the balance after considering the above facts and accounting requirement by the relevant law, if any, plus the unappropriated earnings from the previous period; With regard to distribution of surplus, it is proposed to distribute the available surplus. With regard to the distribution of the dividends of the above-mentioned shareholders, their cash dividend must not be less than 20% of the total amount distributed.

In accordance with the original Company's articles of incorporation, the Company must retain 10% of its after -tax earnings as legal reserve (less deficits of prior years, if any) and then provide a special reserve. No less than 50% of distributable earnings shall be appropriated to shareholders.

If the dividends and bonuses mentioned above were to be distributed, distribution of cash dividends should not be less than 20% of total dividends, and the distribution of stock dividends should not be more than 80% of total dividends. If the dividends per share are less than NTD 0.5, part or all of the remaining earnings can be retained.

Dividends distributed to com- mon shareholders: Cash (iv) Other equities Balance as of January 1, 2018 (after adjustments of retrospective applica- tion) Effects of retrospective application Balance at January 1, 2018 after adjust- ments Foreign exchange differences arising from foreign operation Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Disposal of investments in equity in- struments at fair value through other comprehensive income Share of other comprehensive income of associates and joint ventures ac- counted for under equity method, losses on effective portion of cash flow hedges Balance as of December 31, 2018	2017 2016 Amount per share(NTD) Total amount Amount per share(NTD) Total amount $ 0.96 792,682 1.00 825,710 Foreign exchange differences arising from foreign op- erations Unrealized gains (losses) from finan- cial assets measured at fair val- ue through other com- prehensive income Available- for-sale financial assets Effective portion of cash flow hedges Total $ 512,008 - 623,809 11,721 1,147,538 - 593,961 (623,809) - (29,848) 512,008 593,961 - 11,721 1,117,690 (46,419) - - - (46,419) - 177,996 - - 177,996 - 29,848 - - 29,848 - - - (79,855) (79,855) $ 465,589 801,805 - (68,134) 1,199,260	2016	2016	2016
			Total amount
				825,710
				Total
				1,147,538 (29,848)
				1,117,690 (46,419) 177,996 29,848 (79,855)
				1,199,260

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Balance as of January 1, 2017 Foreign exchange differences aris- ing from foreign operation Unrealized gains (losses) from avail- able-for-sale financial assets －the Company Unrealized gains (losses) from avail- able-for-sale financial assets －the subsidiary Share of other comprehensive in- come of associates and joint ven- tures accounted for under equity method, losses on effective por- tion of cash flow hedges Balance as of December 31, 2017	Foreign exchange differences arising from foreign operations $ 990,359 (478,351) - - - $ 512,008	Available-for-sale financial assets 735,464 - (80,331) (31,324) 623,809	Effective portion of cash flow hedges (23,562) - - - 35,283 11,721

(r) Earnings per share

The calculation of the Company's basic earnings per share and diluted earnings per share for the years ended December 31, 2018 and 2017, were as follows:

(i) Basic earnings per share

Net income attributable to common share- holders of the Company Weighted-average number of common shares Basic earnings per share (in NTD) (ii) Diluted earnings per share Net income attributable to common share- holders of the Company (diluted) Weighted-average number of common shares (basic) Impact of potential common shares Effect of employees' bonuses Weighted-average number of shares out- standing (diluted) Diluted earnings per share (in NTD)	2018 $ 1,192,186 825,710 $ 1.44 2018 $ 1,192,186 825,710 2,683 828,393 $ 1.44	2017
		874,107
		825,710
		1.06
		2017
		874,107
		825,710 1,603
		827,313
		1.06

(s) Employees' compensation and directors' remuneration

For the years ended December 31, 2018 and 2017, the Company estimated its employees' compensation were $64,290 thousand and $49,732 thousand, respectively, and the estimated amounts of directors' remuneration were $14,064 thousand and $9,558 thousand, respectively. The estimated amounts mentioned above were according to the Company's articles of incorporation, and were recorded as operating cost or operating expenses in the respective periods. Related information would be available at the Market Observation Post System website. The amounts, as stated in the parent company onlyfinancial statements, are identical to those of the actual distributions for 2018 and 2017.

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evenue from contracts with customers	evenue from contracts with customers
		For the	years ended December 31, 2018
			Non-synthetic
	Synthetic rubber		rubber	Total
Primary geographical markets:
Asia	$	7,466,957	1,199,108	8,666,065
America		1,061,915	1,293	1,063,208
Europe		502,481	-	502,481
Others		602,714	52	602,766
	$	9,634,067	1,200,453	10,834,520
Major product lines:
Synthetic rubber / elastomers	$	9,197,559	-	9,197,559
Applied materials		-	1,197,286	1,197,286
Others		436,508	3,167	439,675
	$	9,634,067	1,200,453	10,834,520

(t) Revenue from contracts with customers

For details on revenue for the years ended December 31, 2017, please refer to note 6(u).

(u) Revenue

The details of the Company's revenue for the years ended December 31, 2018 and 2017 were as follows:

2017 Sale of goods $ 11,254,655

(v) Other income and expenses

The components of the Company's other income and expenses for the years ended December 31, 2018 and 2017, were as follows:

Rental income Royalty income Net service income Depreciation of investment properties Net other income Other income and expenses (w) Non-operating income and expenses (i) Other gains Interest income Dividend income Other gains (ii) Other gains and losses Gains on disposals of investment Foreign exchange gain, net Other loss Other gains and losses, net (iii) Finance costs Interest expense	2018 $ 77,711 173,727 3,570 (14,726) (1,356) $ 238,926 2018 $ 7,485 66,470 $ 73,955 2018 - 12,218 (1,167) $ 11,051 2018 $ 81,035	2017 74,335 144,806 30,466 (14,725) 24,237 259,119 2017
		5,601 51,779
		57,380
		2017
		154,458 18,221 (1,740)
		170,939
		2017 71,568

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(x) Reclassification of components of other comprehensive income

The changes in components of other comprehensive income were as follows:

Effective portion of cash flow hedges: Net gains (losses) for current year Less: Adjustment of reclassification included in profit or loss Net gains (losses) recognized in other comprehensive income Available-for-sale financial assets Net change in fair value for current period Net change in fair value reclassified to profit or loss Net changes in fair value recognized in other comprehensive income	2018 $ (86,325) (6,470) $(79,855) $ - - $ -	2017
		44,784 9,501
		35,283
		(111,655) -
		(111,655)

(y) Financial instruments
(i) Credit risk
- 1) Credit risk exposure

The maximum credit risk exposure of the Company's financial assets is equal to their carrying amount. As of December 31, 2018 and 2017, the maximum credit risk exposure amounted to $2,726,345 thousand, $2,385,767 thousand, respectively.

2) Concentration of credit risk

The Company's cash and cash equivalents and accounts receivable are the main source of potential credit risk. The Company deposits its cash and cash equivalents in different financial institutions and has no concentration of credit risk on an individual customer. Therefore, the Company concluded that it is not exposed to credit risk.

The Company guarantees bank loans for investees. The Company concluded that it is not exposed to credit risk for these transactions.

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(ii) Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments but excluding the impact of netting agreements.

December 31, 2018 Non-derivative financial liabilities Short-term borrowings Accounts payable Other payable Long-term borrowings Deposits received Financial guarantee contracts December 31, 2017 Non-derivative financial liabilities Short-term borrowings Short-term commercial paper payable Accounts payable Other payable Long-term borrowings Deposits received Financial guarantee contracts Derivative financial liabilities Other forward contracts: Outflow	Contractual cash flows $ 2,358,154 914,222 393,266 4,448,523 16,873 4,159,941 $12,290,979 $ 3,813,808 349,975 719,356 409,342 1,623,419 15,967 2,709,687 226 $9,641,780	Within 6 months
		2,358,154 914,222 393,266 452,040 16,873 732,738
		4,867,293
		3,813,808 349,975 719,356 409,342 409,057 15,967 526,562 226
		6,244,293

The Company does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts.

(iii) Currency risk

1) Risk exposure

The Company's financial assets and financial liabilities exposed to significant currency risk were as follows:

December 31, 2018 Financial assets: Monetary assets: USD EUR JPY CNY Financial liabilities: Monetary liabilities: USD EUR JPY December 31, 2017 Financial assets: Monetary assets: USD EUR JPY CNY	Foreign currency $ 29,687 $ 1,524 $ 11,446 $ 12,114 $ 30,887 $ 2,235 $ 3,694 $ 26,287 $ 2,004 $ 20,486 $ 12,245	Exchange rate 30.7330 35.2047 0.2784 4.4742 30.7330 35.2047 0.2784 29.8480 35.6743 0.2649 4.5788	NTD
			912,371 53,652 3,187 54,200 949,250 78,683 1,028 784,614 71,491 5,427 56,067

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6-12 months - - - 450,099 - 797,995 1,248,094 - - - - 408,617 - 662,625 - 1,071,242	1-2 years - - - 144,009 - 898,940 1,042,949 - - - - 805,745 - 526,562 - 1,332,307	2-5 years - - - 3,402,375 - 1,730,268 5,132,643 - - - - - - - - -

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Financial liabilities: Monetary liabilities: USD EUR JPY	Foreign currency $ 44,023 $ 1,149 $ 10,192	Exchange rate 29.8480 35.6743 0.2649	NTD
			1,313,999 40,990 2,700

2) Sensitivity analysis

The Company's exposure to foreign currency risk arose from cash and cash equivalents, accounts and other receivables, loans and borrowings, and accounts and other payables that were denominated in foreign currencies. If the NTD against the USD, EUR, CNY and JPY had appreciated / depreciated by 1% the Company's net income before tax would have increase/decreased by $56 thousand and $4,401 thousand for the years ended December 31, 2018 and 2017, respectively, with all other variable factors remaining constant. The analysis was performed on the same basis for both periods.

3) Foreign exchange gain and loss on monetary item

The amount, expressed in functional currency, of foreign exchange gain and loss (including realized and unrealized portion) of the Company's monetary items, and the exchange rate used to translate the original amount to the Company's functional currency, NTD (also the expressed currency), were as follows:

USD Other	2018 Foreign exchange gain(loss) Average exchange rate $ 9,325 30.1465 2,893 -	2017	2017
	Foreign exchange gain(loss) $ 9,325 2,893	Foreign exchange gain(loss) 17,898 323	Average exchange rate
			30.4499 -

(iv) Interest rate risk analysis

Please refer to the note on liquidity risk management for the interest rate exposure of the Company's financial assets and liabilities.

If the interest rate had increased / decreased by 1%, the Company's net income before tax would have increased / decreased by $66,543 thousand and $54,093 thousand for the years ended December 31, 2018 and 2017, respectively, with all other variable factors remaining constant. This is mainly due to the Company's borrowing at floating-rates.

(v) Fair value

1) Categories and fair value of financial instruments

Except for the followings, carrying amount of the Company's financial assets and liabilities are valuated approximately to their fair value, and are not based on observable market date and the value measurements which are not reliable. No additional fair value disclosure is required in accordance to the regulations.

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	December 31, 2018	December 31, 2018	December 31, 2018
Carrying amount $ 305,631 790,064 1,095,695 338,449 1,123,118 134,365 34,718 1,630,650 $2,726,345 $ 2,354,568 4,299,693 914,222 393,266 16,873 7,978,622 $7,978,622		Fair	value
	Level 1 Level 2 Level 3 305,631 - - - - 790,064 305,631 - 790,064 - - - - - - - - - - - - - - - 305,631 - 790,064 - - - - - - - - - - - - - - - - - - - - - December 31, 2017
Carrying amount $ 235,024 701,338 936,362 231,989 1,070,692 140,819 5,905 1,449,405 $2,385,767 $ 226 3,809,306 349,975 1,600,000 719,356 409,342 15,967 6,903,946 $6,904,172		Fair	value
	Level 1 235,024 - 235,024 - - - - - 235,024 - - - - - - - - -	Level 2 - - - - - - - - - 226 - - - - - - - 226	Level 3 - 701,338 701,338 - - - - - 701,338 - - - - - - - - -

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2) Valuation techniques and assumptions used in fair value determination

If the financial instruments held by the Company have the quoted market price in active market, the fair value of the assets is based on the quoted market price. However, if the instruments have no quoted market price in active market, the Company uses market comparison approach to evaluate the fair value. The main assumption is based on the investee's earnings after tax and the listed (over the counter) Company's earnings used in computing the market price. The estimated price has been discounted due to the price of the securities lacks the liquidity. Forward Exchange Contracts are normally priced based on the exchange rates provided by the World Agencies.

3) Reconciliation of Level 3 fair values

Balance at January 1, 2018 Total gains recognized: In other comprehensive income (loss) Balance at December 31, 2018 Balance at January 1, 2017 Total losses recognized: In other comprehensive income (loss) Balance at December 31, 2017	Unquoted equity instruments
	$ 701,338 88,726
	$ 790,064
	$ 748,683 (47,345)
	$ 701,338

4) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement Quantified information of significant unobservable inputs was as follows:

Item •Financial assets at fair value through other comprehensive income equity in- vestments without an active market	Valuation tech- nique •Comparative list- ed Company	Significant unobservable inputs •Multipliers of price-to- earnings ratios as of December 31, 2018 and 2017 were 13.20~17.32 and 14.81~15.13, respec- tively •Market illiquidity dis- count rate as of Decem- ber 31, 2018 and 2017 was both 20%	Inter-relationship between significant unobservable inputs and fair value mea- surement
			The estimated fair value would increase (decrease) if •the multiplier were higher (lower) •the market illiquidity dis- count were lower (higher)

5) Fair value measurements in Level 3 －sensitivity analysis of reasonably possible alternative assumptions For fair value measurements in Level 3, changing one or more of the assumptions would have the following effects on profit or loss and other comprehensive income:

December 31, 2018 Financial assets fair value through other compre- hensive income Equity investments without an active market December 31, 2017 Available-for-sale financial assets Equity investments without an active market	Input Liquidity dis- count at 20% Liquidity dis- count at 20%	Assump- tions 1% 1%	Other comprehensive income	Other comprehensive income
			Favourable $ 9,878 8,768	~~Unfavour-~~ able
				(9,878) (8,768)

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(z) Financial risk management
(i) Overview

The Company is exposed to the following risks arising from financial instruments:

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

This note discloses information about the Company's exposure to the aforementioned risks, and its goals, policies, and procedures regarding the measurement and management of these risks. For additional quantitative disclosures of these risks, please refer to the notes regarding each risk disclosed throughout the financial report.

(ii) Risk management framework

The Company's finance department is responsible for the establishment and management of the Company's risk management framework and policies. It is overseen by and reports to management, the Audit Committee, and the Board of Directors regarding the framework's operations.

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

The Company's Audit Committee oversees how management monitors compliance with the Company's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Company's Audit Committee is assisted in its oversight role by Internal Audit, which undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

(iii) Credit risk

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

1) Trade and other receivables

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company's customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk, particularly during deteriorating economic circumstances. In 2018 and 2017, there was no geographical concentration of credit risk regarding the Company's revenue.

The sales department and the finance department of the Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes the history of transactions with the counter-party, its financial position, and geographic considerations. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval; these limits are reviewed on a periodic basis. Customers that fail to meet the Company's benchmark creditworthiness may transact with the Company only on a prepayment basis.

Goods are sold subject to a retention of title clause so that in the event of non payment, the Company may have a secured claim. The Company otherwise does not require collateral in respect of trade and other receivables.

The Company has established an allowance for doubtful accounts to reflect its actual and estimated potential losses resulting from uncollectible accounts and trade receivables. The allowance for doubtful accounts consists primarily of specific losses regarding individual customers and estimates of potential losses based on the use of lifetime expected credit loss provision.

2) Investments

The credit risk exposure in the bank deposits and other financial instruments is measured and monitored by the Company's finance department. Since those who transact with the Company are banks and other external parties with good credit standing, financial institutions with a credit rating above investment grade, and government agencies, there are no non compliance issues. With regard to investment in a financial institution with a credit rating above investment grade, an investment limit is set according to the long-term credit rating. Hence, there is no significant credit risk.

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3) Guarantees

The Company's policy allows it to provide financial guarantees to business partners or to related parties and jointly controlled entities according to its percentage ownership in these entities. Financial guarantees provided to subsidiaries, associates, and jointly controlled entities by the Company as of December 31, 2018 and 2017, are disclosed in note 7 "Related-party Transactions."

(iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity is to ensure, as 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 Company's reputation.

(v) Market risk

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

1) Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currency of the Company. The currencies used in these transactions are EUR, USD, JPY and CNY.

Foreign exchange gains and losses resulting from account and trade receivables held by the Company in a currency other than the respective functional currencies are used to offset foreign exchange gains and losses resulting from short-term loans denominated in a foreign currency. Hence, the Company's risk exposure to foreign exchange risk is reduced.

Interest expenses are denominated in the same currency as that of the principal. Generally, the currency of loans matches that of the Company's operating cash flow, primarily NTD, USD, EUR and JPY.

With regard to monetary assets and liabilities denominated in a foreign currency, when a short-term risk exposure exists, the Company relies on immediate foreign exchange transactions to ensure the net exposure to foreign exchange risk is maintained at an acceptable level.

The Company does not hedge against investments in subsidiaries.

2) Interest rate risk

The interest rates of the Company's long-term and short-term borrowings are floating. Hence, changes in market conditions will cause fluctuations in the effective interest rate of the aforementioned loans. The Company's finance department monitors and measures potential changes in market conditions, entering into interest rate swaps to achieve a fixed interest rate on the Company's loans.

3) Other market price risk

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

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(aa) Capital management

The Company goal of capital management is to ensure the Company's continuing operating capacity, and to continuously provide remuneration to the shareholders and benefits to other equity holders. To ensure that the above mentioned goal is achieved, the Company's management reviews its capital structure periodically. In consideration of the overall economic situation, financing cost and sufficiency of cash in-flows generated by operating activities, the Company will adjust its capital structure by paying dividends, issuing new stock, purchasing treasury stock, increasing or decreasing loans, and issuing or purchasing bonds.

The Company's capital structure at the end of the reporting period were as follows:

Total liabilities Total equity Total assets Debts ratio	December 31, 2018 $ 8,992,830 15,311,003 $ 24,303,833 37%	December 31, 2017
		7,782,997 14,877,516
		22,660,513
		34%

As of December 31, 2018, there were no material changes in The Company's debts ratio.

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

The Company did not have any non-cash flow transactions on investing and financing activities for the years ended December 31, 2018 and 2017.

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

Reconciliation of liabilities arising from financing activities were as follows:

Long-term borrowings (includ- ing current portion) Other long-term borrowings Short-term borrowings Short-term commercial paper payable Total liabilities from financing activities	January 1, 2018 $ 1,600,000 - 3,809,306 349,975 $ 5,759,281	Cash flows 2,200,000 494,940 (1,681,444) (350,477) 663,019	Non-cash changes Foreign exchange movement Amortization of commercial paper dis- count - - - 4,753 226,706 - - 502 226,706 5,255	December 31, 2018
			Foreign exchange movement - - 226,706 - 226,706
				3,800,000 499,693 2,354,568 -
				6,654,261

<7> Related-party Transactions

(a) Parent company and ultimate controlling party The Company is the ultimate controlling party of the subsidiaries.

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(b) Names and relationship with related parties

In this financial report, the related parties having transactions with the Company and subsidiaries were listed as below:

Name of related party
Trimurti Holding Corporation
Hardison International Corporation
Dymas Corporation
TSRC (Hong Kong) Limited
TSRC (Shanghai) Industries Ltd.
TSRC (Lux.) Corporation S.'a r.l.
TSRC (USA) Investment Corporation
Dexco Polymers L.P.
Polybus Corporation Pte Ltd.
Shen Hua Chemical Industries Co., Ltd.
TSRC-UBE (Nantong) Industries Co., Ltd.
TSRC (Nantong) Industries Ltd.
Triton International Holdings Corporation
Indian Synthetic Rubber Private Limited
ARLANXEO-TSRC (Nantong) Chemical Industries
Co., Ltd.
Asia Pacific Energy Development Co., Ltd.
Taiwan Advanced Material Corp
Nantong Qix Storage Co., Ltd.

Relationship with the Group

The subsidiary of the Company
〃
〃
〃
〃
The subsidiary of the Company
〃
〃
〃
〃
〃
〃
〃
The subsidiary recognized joint venture under equity method
The subsidiary recognized associates under equity method
〃
The Company recognized joint venture under equity method
(Its has been liquidated in December, 2018)
The subsidiary recognized joint venture under equity method

The Company recognized joint venture under equity method (Its has been liquidated in December, 2018)

(c) Significant transactions with related parties
(i) Revenue

The amounts of sales transactions with related parties were as follows:

2018 $ 349,143	2017
	273,171

Subsidiaries

There were no significant differences between the pricing of sales transactions with related parties and that with other customers. The payment terms ranged from two to three months, which were similar to those given to other customers.

(ii) Purchases

The amounts of purchase transactions with related parties were as follows:

2018 $ 18,596	2017
	97,564

Subsidiaries

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(iii) Service income and expenses

1) The Company provided management, technologies and IT services to its subsidiaries, associates, and joint ventures. The amounts recognized as other income and expenses were as follows:

Subsidiaries Shen Hua Chemical Industries Co., Ltd. TSRC (Nantong) Industries Ltd. Other subsidiaries Associates ARLANXEO-TSRC (Nantong) Chemical Industries Co., Ltd. Indian Synthetic Rubber Private Limited Joint ventures Indian Synthetic Rubber Private Limited	2018 $ 5,754 59,859 31,107 15,560 15,197 47,455 $ 174,932	2017
		28,709 60,789 37,492 11,448 45,830 -
		184,268

2) The Company received consulting services such as marketing, financing and research services from its subsidiaries. In 2018 and 2017, the services amounted to $60,351 thousand and $65,237 thousand, respectively, and were recorded under operating expenses.
(iv) Receivable from related parties

The details of the Company's receivable from related parties were as follows:

Account Accounts receivable －related parties Accounts receivable －related parties Accounts receivable －related parties Accounts receivable －related parties Accounts receivable －related parties Other receivable Other receivable Other receivable Other receivable Other receivable	Type of relatedparties Subsidiaries TSRC (Nantong) Industries Ltd. Polybus Corporation Pte Ltd. TSRC (Lux.) Corporation S.'a.r.l. Dexco Polymers L.P. Other subsidiaries Subsidiaries TSRC (Nantong) Industries Ltd. Other subsidiaries Associates Indian Synthetic Rubber Private Limited Other associates Joint ventures Indian Synthetic Rubber Private Limited	December 31, 2018 $ 7,434 3,124 17,076 30,231 917 59,644 9,540 - 12,187 20,814 $ 160,967	December 31, 2017
			16,891 11,078 11,895 - - 57,979 25,076 32,707 8,506 -
			164,132

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(v) Payable to related parties

As the result of the aforementioned transactions, the details of the Company's payable to related parties were as follows:

ollows:
Account	Type of related parties	December		31, 2018	December	31, 2017
Accounts payable	Subsidiaries	$		4,340		4,537
Other payable	Subsidiaries			40,736		36,453
		$		45,076		40,990
Guarantees
he credit limits of the guarantees	the Company had provided on the bank loans of related parties were a
ollows:
		December		31, 2018	December	31, 2017
Subsidiaries
TSRC (Vietnam) Co., Ltd.		$		399,529	-
TSRC (USA) Investment Corporation				460,995	-
Dexco Polymers L.P.				307,330	-
Associates
Indian Synthetic Rubber Private Limited			-			1,656,563
ARLANXEO-TSRC (Nantong) Chemical Industries Co., Ltd.				1,530,733		1,053,124
Joint ventures
Indian Synthetic Rubber Private Limited				1,461,354	-
		$		4,159,941		2,709,687
Accordingly, the amounts of the Company increased provision liabilities and				investments accounted for unde
quity method were as follows:
		December		31, 2018	December	31, 2017
Associates
Indian Synthetic Rubber Private Limited		$	-			26,350
ARLANXEO-TSRC (Nantong) Chemical Industries Co., Ltd.				4,428		649
Joint ventures
Indian Synthetic Rubber Private Limited				24,761	-
		$		29,189		26,999
management personnel transactions
compensation of the key management personnel comprised the following:
			2018		2017
Short-term employee benefits		$		88,668		87,364
Post-employment benefits				563		393
		$		89,231		87,757

(v) Guarantees

The credit limits of the guarantees the Company had provided on the bank loans of related parties were as follows:

Accordingly, the amounts of the Company increased provision liabilities and investments accounted for under equity method were as follows:

(d) Key management personnel transactions

The compensation of the key management personnel comprised the following:

<8> Pledged Assets: None.

<9> Commitments and Contingencies

(a) As of December 31, 2018 and 2017, the Company's unused letters of credit outstanding for purchases of materials were $1,505,674 thousand, $1,008,244 thousand, respectively.

(b) As of December 31, 2018 and 2017, the Company's signed construction and design contracts with several factories totaled $17,300 thousand, $55,462 thousand, respectively, of which $13,840 thousand, $29,610 thousand, respectively, were paid.

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<10> Losses Due to Major Disasters: None.

<11> Subsequent Events: None.

<12> Others

A summary of current-period employee benefits, depreciation, and amortization, by function, is as follows:

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By function 2018 2017
Operating Operating Operating Operating
Total Total
By nature costs expenses costs expenses
Employee benefits
Salary 389,679 337,180 726,859 362,900 328,591 691,491
Labor and health insurance 31,451 24,362 55,813 29,043 24,678 53,721
Pension (note 1) 17,600 14,039 31,639 16,517 14,013 30,530
Directors' remuneration - 40,402 40,402 - 23,250 23,250
Others (note 2) 63,509 50,614 114,123 46,994 49,887 96,881
Depreciation (note 3) 219,629 40,558 260,187 209,412 48,672 258,084
Amortization 6,053 21,070 27,123 3,122 18,851 21,973
----- End of picture text -----

Note1： Pension expenses excluded expenses for employees on international assignments amounting to $1,458 thousand and $864 thousand for the years 2018 and 2017, respectively.

Note2： Others personnel expenses included meals, employee welfare, training expenses, employees' bonus, and directors' remuneration.

Note3： Depreciation expenses for investment property recognized under other income and expenses, amounting to $14,726 thousand and $14,725 thousand for the years 2018 and 2017 were excluded. The average employee numbers were 682 and 658 for the years 2018 and 2017, respectively. There were 8 non -employee directors for both years.

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<13> Other Disclosures

(a) Information on significant transactions:

The following is the information on significant transactions required by the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" for the Company:

(i) Loans to other parties:

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Highest
balance of
Financial
No. Name of lender Name of borrower statement Related financing to Ending
account party other parties balance
during the
year
1 TSRC (Shanghai) Indus- TSRC (Nantong) Industries Loan Yes 154,592 147,649
tries Ltd. Ltd.
2 TSRC (Nantong) Indus- ARLANXEO-TSRC (Nantong) Loan Yes 328,028 313,194
tries Ltd. Chemical Industries Co., Ltd.
----- End of picture text -----

Note 1: The loan limit extended per party of TSRC (Shanghai) Industries Ltd. should not be over 10% of total equity. However, if the counterparty is a subsidiary 100% owned, directly or indirectly by TSRC, the loan limit extended per party should not be over 50% of the total equity of the most recent financial statements audited or reviewed by a CPA.

Note 2: The maximum loan extended to all parties of TSRC (Shanghai) Industries Ltd. should not be over 40% of total equity. However, if the counterparty is a subsidiary 100% owned, directly or indirectly by TSRC, the total loan limit should not be over 100% of total equity of the most recent financial statements audited or reviewed by a CPA .

Note 3: TSRC (Shanghai) Industries Ltd., and TSRC (Nantong) Industries Ltd. are 100% owned by TSRC.

Note 4: Credit period: The financing period should not be over one year.

Note 5: Nature of financing activities is as follows:

(1)if there are transactions between these two parties, the number is "1".

(2)if it is necessary to loan to other parties, the number is "2".

(ii) Guarantees and endorsements for other parties:

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Counter-party of guarantee and endorsement Limitation on amount of Highest balance Ending balance
No. Name Relationship guarantees for guarantees and endorse- of guarantees
of Company Name with the Com- ments for one and endorse- ments during and endorse-ments
pany party the year
TSRC (USA) Investment Cor-
0 TSRC 4 (Note 2) 464,520 460,995
poration
0 TSRC ARLANXEO-TSRC (Nantong) 6 (Note 2) 1,530,733 1,530,733
Chemical Industries Co., Ltd.
0 TSRC Indian Synthetic Rubber 6 (Note 2) 1,622,265 1,461,354
Private Limited
0 TSRC TSRC (Vietnam) Co., Ltd. 4 (Note 2) 402,584 399,529
0 TSRC Dexco Polymers L.P. 4 (Note 2) 308,550 307,330
----- End of picture text -----

Note 1: The guarantee's relationship with the guarantor is as follows:

(1) A Company with which it does business.

(2) A Company in which the public Company directly and indirectly holds more than 50 percent of the voting shares.

(3) A Company that directly and indirectly holds more than 50 percent of the voting shares in the public Company.

(4) A Company in which the public Company holds, directly or indirectly, 90% or more of the voting shares.

(5) A Company that fulfills its contractual obligations by providing mutual endorsements/guarantees for another Company in the same industry or for joint builders for purposes of undertaking a construction project.

(6) A Company that all capital contributing shareholders make endorsements/ guarantees for their jointly invested Company in proportion to their shareholding percentages.

(7) Companies in the same industry provide among themselves joint and several security for a performance guarantee of a sales contract for pre-construction homes pursuant to the Consumer Protection Act for each other.

Note 2: The guaranteed amount is limited to fifty percent of issued capital, amounting to $7,655,502 thousand.

Note 3: The aggregate amount of guarantee by the Company is limited to 1.5 times its stockholders' equity, amounting to $22,966,505 thousand.

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Unit: thousand NTD

==> picture [492 x 114] intentionally omitted <==

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

fund financ-Purposes of Transaction amount for Reasons for Allowance Collateral Financing limit Maximum fi-
tually drawnAmount ac- Range of in-terest rates ing for the borrowers (Note 5) two betweenbusiness parties short-term financing for bad debt Item Value for each borrow-Companying nancing limit for thelender
- 3.915% 2 - Operating - - 213,302 426,603
capital (Note 1) (Note 2)
- 5.11% 2 - Operating - - 434,858 1,739,431
capital (Note 3) (Note 4)
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Unit: thousand NTD

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

Endorsements/
actually Amountdrawn and endorsements Property pledged on guarantees(Amount) amounts of guarantees net worth of the latest and endorsements toRatio of accumulated financial statements Maximum allow-able amount for guarantees and endorsements third parties on be-half of subsidiaryParent company endorsement / guarantees to Subsidiary endorse-to third parties on ment /guarantees behalf of parent company Mainland Chinaguarantees to third parties Company in on behalf of
460,995 - 3.01% (Note 3) Y
425,950 - 10.00% (Note 3) Y
1,461,354 - 9.54% (Note 3)
- - 2.61% (Note 3) Y
307,330 - 2.01% (Note 3) Y
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(iii) Securities held as of December 31, 2018 (excluding investment in subsidiaries, associates and joint ventures):

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

Name of holder Nature and name Relationship with the Account name
of security security issuer
TSRC Taiwan High Speed Rail - Available-for-sale financial as-
Corporation sets －non-current
TSRC Evergreen Steel Corpora- - Available-for-sale financial as-
tion sets －non-current
TSRC Thai Synthetic Rubbers Co., - Available-for-sale financial as-
Ltd. sets －non-current
TSRC Hsin-Yung Enterprise Cor- - Available-for-sale financial as-
poration sets －non-current
Dymas Corpora-tion Thai Synthetic Rubbers Co., Ltd. - Available-for-sale financial as-sets －non-current
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(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NTD300 million or 20% of the capital stock: None.

(v) Acquisition of individual real estate with amount exceeding the lower of NTD300 million or 20% of the capital stock: None.

(vi) Disposal of individual real estate with amount exceeding the lower of NTD300 million or 20% of the capital stock: None.

(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NTD300 million or 20% of the capital stock:

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

Name of Company Counter-party Relationship
TSRC (Lux.) Corporation S.'a.r.l. TSRC Related parties
TSRC TSRC (Lux.) Corporation S.'a r.l. Related parties
Shen Hua Chemical Industries Co., A director of Shen Hua Chemi-
Ltd. Marubeni Corporation cal Industries Co., Ltd.
Polybus Corporation Pte Ltd. TSRC (Nantong) Industries Ltd. Related parties
TSRC (Nantong) Industries Ltd. Polybus Corporation Pte Ltd. Related parties
TSRC (Lux.) Corporation S.'a.r.l. Dexco Polymers L.P. Related parties
Dexco Polymers L.P. TSRC (Lux.) Corporation S.'a r.l. Related parties
TSRC (Lux.) Corporation S.'a.r.l. TSRC (Nantong) Industries Ltd. Related parties
TSRC (Nantong) Industries Ltd. TSRC (Lux.) Corporation S.'a r.l. Related parties
Dexco Polymers L.P. TSRC (Nantong) Industries Ltd. Related parties
TSRC (Nantong) Industries Ltd. Dexco Polymers L.P. Related parties
----- End of picture text -----

(viii) Receivables from relatedparties with amounts exceedingthe lower of NTD100 million or	(viii) Receivables from relatedparties with amounts exceedingthe lower of NTD100 million or	(viii) Receivables from relatedparties with amounts exceedingthe lower of NTD100 million or	(viii) Receivables from relatedparties with amounts exceedingthe lower of NTD100 million or	20% of the capital stock:
	Name of related party	Counter-party	Relationship	Balance of receivables from related party
	TSRC (Nantong) Industries Ltd.	TSRC (Lux.) Corporation S.à r.l.	Related parties	263,933

Note 1: Until March 14, 2019.

214

Unit: thousand NTD

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Ending balance
Remarks
Number of shares Book value Holding percentage Market value
10,001,000 305,631 0.18% 305,631
12,148,000 366,991 3.00% 366,991
599,999 146,220 5.42% 146,220
5,657,000 276,853 3.90% 276,853
837,552 204,111 7.57% 204,111
1,299,806 1,299,806
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Unit: thousand NTD

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Status and reason for
Transaction details deviation from arm's Account / note receivable (payable)
-length transaction
Remarks
Percentage of Percentage of total
Purchase / Credit Unit Credit peri-
Amount total purchases Balance accounts / notes receiv-
Sale period price od
/ sales able (payable)
Purchase 178,675 6.37% 70 days - (17,076) (5.19%)
Sale (178,675) (1.65%) 70 days - 17,076 1.52%
Purchase 116,398 2.04% 14 days - - -
Purchase 427,649 70.56% 40 days - (10,392) (34.66%)
Sale (427,649) (9.18%) 40 days - 10,392 1.97%
Purchase 998,093 35.59% 90 days - (46,980) (14.29%)
Sale (998,093) (22.94%) 90 days - 46,980 10.21%
Purchase 1,625,167 57.96% 70 days - (263,933) (80.27%)
Sale (1,625,167) (34.87%) 70 days - 263,933 50.01%
Purchase 237,940 8.39% 70 days - (14,115) (6.26%)
Sale (237,940) (5.11%) 70 days - 14,115 2.67%
----- End of picture text -----

Unit: thousand NTD

Turnover rate	Overdue amount	Overdue amount	Amounts received in subsequent period (Note 1)	Allowances for bad debts
	Amount	Action taken
6.22	-		108,614	-

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(ix) Trading in derivative instruments: None.
Information on investees:
The following is the information on investees for the year 2018 (excluding information on investees in Mainland China):
Name of investor Name of investee Address Scope of business
TSRC Trimurti Holding Cor-poration Palm Grove House, P.O.BOX 438, Road Town, Tortola B.V.I Investment corporation
TSRC Hardison Internation-al Corporation Palm Grove House, P.O.BOX 438, Road Town, Tortola B.V.I Investment corporation
TSRC Dymas Corporation Palm Grove House, P.O.BOX 438, Road Investment corporation
Town, Tortola B.V.I
TSRC Taiwan Advanced No 39, Bengong 1st Rd., Gangshan Dist., Production and sale of TPE
Materials Corp. Kaohsiung City, Taiwan (R.O.C.)
8 VSIP II-A Street 31, Vietnam Singapore Production and processing of rubber
TSRC TSRC (Vietnam) Co., Ltd. Industrial Park II-A, Tan Uyen Town, Binh color masterbatch, thermoplastic elas-
Duong Province, Vietnam tomer and plastic compound products.
Trimurti Holding Polybus Corporation 100 Peck Seah Street #09 16 Singapore International commerce and invest-
Corporation Pte Ltd. 079333 ment corporation
Trimurti Holding TSRC (Hong Kong) 15/F BOC Group Life Assurance Tower 136
Corporation Limited Des Voeux Road Central Investment corporation
Room No.702, Indian Oil Bhawan, 1 Sri
Trimurti Holding Indian Synthetic Rub- Produchion and sale of synthetic rub-
Corporation ber Private Limited Aurobindo Marg, Yusuf Sarai, New Delhi 110016, India ber products
TSRC (Hong Kong) TSRC (Lux.) Corpora- 34 36 avenue de la Liberte L-1930 Luxem- International commerce and invest-
Limited tion S.à r.l. bourg ment corporation
2711 Centerville Road, Suite 400, Coun-
TSRC (Lux.) Corpora- TSRC (USA) Invest-
tion S.à r.l. ment Corporation try of New Castle, Wilmington, Delaware. ,19808. Investment corporation
TSRC (USA) Invest-ment Corporation Dexco Polymers L.P. 12012 Wickchester Lane, Suite 280, Hous-ton, TX77079 Production and sale of TPE
Hardison Interna- Triton International Palm Grove House, P.O.BOX 438, Road
tional Corporation Holdings Corporation Town, Tortola B.V.I Investment corporation
Hardison Interna- Palm Grove House, P.O.BOX 438, Road
tional Corporation Dymas Corporation Town, Tortola B.V.I Investment corporation
Asia Pacific Energy Consulting for electric power facilities
Dymas Corporation Development Co., Cayman Islands management and electrical system de-
Ltd. sign
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(ix) Trading in derivative instruments: None.

(a) Information on investees:

(c) Information on investment in Mainland China:

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Cumulative invest-
Method of
Name of investee ment (amount)
in Mainland China Scope of business Issued capital investment from Taiwan as of
(Note 1)
January 1, 2018
Shen Hua Chemical Indus- Production and sale of synthetic rubber prod- 1,266,814 (2)a. -
tries Co., Ltd. ucts (USD41,220)
Changzhou Asia Pacific Power generation and sale of electricity and 709,932 (2)c. 117,769
Co-generation Co., Ltd. steam (USD23,100) (USD3,832)
TSRC (Shanghai) Industries Production and sale of compounding materials 169,032 (2)b. 120,473
Ltd. (USD5,500) (USD3,920)
Nantong Qix Storage Co., Storehouse for chemicals 92,199 (2)d. 46,100
Ltd. (USD3,000) (USD1,500)
TSRC-UBE (Nantong) Indus- Production and sale of synthetic rubber prod- 1,229,320 (2)a. 30,733
tries Ltd. ucts (USD40,000) (USD1,000)
TSRC (Nantong) Industries Production and sale of TPE 3,230,807 (2)a. 204,313
Ltd. (USD105,125) (USD6,648)
ARLANXEO-TSRC (Nantong) Production and sale of NBR 1,376,838 (2)a. -
Chemical Industries Co., Ltd. (USD44,800)
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Note1: The method of investment is divided into the following four categories:
(1)Remittance from third-region companies to invest in Mainland China.
(2)Through the establishment of third-region companies then investing in Mainland China. a.Through the establishment of Polybus Corporation Pte. Ltd. then investing in Mainland China.
b.Through the establishment of TSRC (Hong Kong) Limited then investing in Mainland China.

c.Through the establishment of Asia Pacific Energy Development Co., Ltd. then investing in Mainland China.

d.Through the establishment of Triton International Holdings Corporation then investing in Mainland China.

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Unit: thousand NTD/thousand USD/thousand EUR

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Original cost Ending balance Net income
Investment
(loss) of in- Remarks
December 31, December 31, Shares Percentage of Book value vestee income (loss)
2018 2017 ownership
1,005,495 1,005,495 86,920,000 100.00% 13,133,229 994,253 996,552 Subsidiary
109,442 109,442 3,896,305 100.00% 860,521 66,590 66,590 Subsidiary
38,376 38,376 1,161,004 19.48% 174,404 73,827 14,381 [Subsidiary ]
(note 2)
- 720,000 - - - (4,523) (2,171) (note 3)
278,280 - - 100.00% 274,395 (2,160) (2,160) subsidiary
(USD65,101)2,007,749 (USD65,101)2,007,749 105,830,000 100.00% 8,026,341 684,472 684,472 [Indirectly owned ] subsidiary
(USD77,850)2,392,564 (USD77,850)2,392,564 77,850,000 100.00% 3,233,985 107,041 107,041 [Indirectly owned ] subsidiary
905,794 861,907 222,861,375 50.00% 363,141 450,085 200,977
(USD29,473) (USD28,045)
(EUR50,800)1,788,399 (EUR50,800)1,788,399 50,800,000 100.00% 2,689,129 46,818 46,818 [Indirectly owned ] subsidiary
(USD70,050)2,152,847 (USD70,050)2,152,847 100 100.00% 2,617,901 43,108 43,108 [Indirectly owned ] subsidiary
(USD192,617)5,919,698 (USD192,617)5,919,698 - 100.00% 1,560,956 230,238 230,238 [Indirectly owned ] subsidiary
(USD50)1,537 (USD50)1,537 50,000 100.00% 115,984 7,580 7,580 [Indirectly owned ] subsidiary
(USD4,799)147,488 (USD4,799)147,488 4,798,566 80.52% 742,210 73,827 59,446 [Indirectly owned ] subsidiary
346,822 346,822 7,522,337 37.78% 408,632 139,268 52,616
(USD11,285) (USD11,285)
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Unit: thousand NTD/thousand USD

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Investment flow during Cumulative investment Direct / indi- Accumulated
current period (amount)from Taiwan Net income rect invest- Investment remittance of
(loss) of Book value
Remittance Repatriation as of December 31, investee ment holding income (loss) earnings in
amount amount 2018 percentage current period
- - - 47,054 65.44% 30,792 1,767,378 4,379,389
(note 2)
- - 117,769 243,514 28.34% 69,012 488,307 -
(USD3,832) (note 2)
- - 120,473 63,134 100.00% 63,134 426,603 -
(USD3,920) (note 2)
- - 46,100 13,392 50.00% 6,696 75,770 -
(USD1,500) (note 2)
- - 30,733 56,049 55.00% 30,827 790,189 -
(USD1,000) (note 2)
- - 204,313 578,533 100.00% 578,533 4,348,577 -
(USD6,648) (note 2)
- - - 79,204 50.00% 39,602 219,835 -
(note 3)
----- End of picture text -----

(3)Through transferring the investment to third-region existing companies then investing in Mainland China.
(4)Other methods: EX: delegated investments.
Note2: The investment income (loss) were recognized under the equity method and based on the financial statements audited by the auditor of the Company.
Note3: The investment income (loss) were recognized under the equity method and based on the financial statements audited by international accounting firms.

Note4: Amounts in foreign currencies were translated based on the exchange rate at the reporting date (USD1 to NTD30.733).

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(ii) Limitation on investment in Mainland China:

Unit: thousand NTD/thousand USD

Accumulated investment amount in Mainland China as of December 31, 2018	Investment (amount) approved by Investment Commission, Ministry of Economic Affairs	Maximum investment amount set by Investment Commission, Ministry of Economic Affairs
519,388 (USD16,900)	5,757,367 (USD187,335) (Note 2)	- (Note 1)

Note1： In accordance with the "Regulations on Permission for Investment or Technical Cooperation in Mainland China" and the "Principles for Examination of Applications for Investment or Technical Cooperation in Mainland China" amended and ratified by the Executive Yuan on August 22, 2008, the Company met the criteria for operational headquarters under the Statute for Industrial Innovation and obtained approval from the Industrial Development Bureau, Ministry of Economic Affairs, on August 23, 2018. As it has an operational headquarters status, the Company is not subject to the limitation as to the amount of investment in Mainland China during the period from August 20, 2018 to August 19, 2021.

(iii) Significant transactions:

1) Sales and accounts receivable

Sales to related parties in Mainland China are summarized as follows:

	2018
TSRC (Shanghai) Industries Ltd.	$	8,844
TSRC (Nantong) Industries Ltd.		49,236
Shen Hua Chemical Industries Co., Ltd.		152
	$	58,232
The related accounts receivable resulting from the above transactions as of December 31, 2018 as follows:
	December 31, 2018
TSRC (Shanghai) Industries Ltd.	$	917
TSRC (Nantong) Industries Ltd.		7,434
	$	8,351

2) Purchases and accounts payable

Purchase from related parties in Mainland China are summarized as follows:

	2018
TSRC (Nantong) Industries Ltd.	$ 18,533
Shen Hua Chemical Industries Co., Ltd.	63
	$ 18,596
The related accounts payable resulting from the above transactions as of December 31, 2018 as follows:
	December 31, 2018
TSRC (Nantong) Industries Ltd.	$ 4,340

There were no significant differences between the pricing of purchases transactions with related parties and that with other customers. The payment terms ranged from one to two months, which were similar to other suppliers.

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Service income Nature Management and technology ser- vices Management and technology ser- vices Management and technology ser- vices Management and technology ser- vices & trademark rights Management and technology ser- vices & trademark rights	Name Shen Hua Chemical Industries Co., Ltd. TSRC (Nantong) Industries Ltd. TSRC-UBE (Nantong) Industries Ltd. TSRC (Shanghai) Industries Ltd. ARL ANXEO-TSRC (Nantong) Chemical Industries Co., Ltd.	Service income in 2018 $ 5,754 59,859 4,284 8,045 15,560 $ 93,502

3) Service income

4) Guarantees

As of December 31, 2018, guarantees provided by the Company for the bank loans of investees in Mainland China was as follows:

2018 $ 1,530,733

ARLANXEO-TSRC (Nantong) Chemical Industrial Co., Ltd.

<14> Segment Information

Please refer to the year 2018 consolidated financial statements.

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TSRC Corporation

Chairman:Nita Ing

220

AI assistant

TSRC — Annual Report 2018

51969_rns_2019-06-17_d079f4c6-5618-4d90-8ad2-a0adaab3169b.pdf

Table of Contents

Table of Contents

Letter to the Shareholders

Letter to the Shareholders

Letter to the Shareholders

Company profile

I. Date of incorporation

II. Company history

2010's Globalization

2000's Expansion of Production Lines

1990's Rapid Regional Expansion

1980's Early Growing Stage

1970's Beginning

Corporate governance report

Corporate governance report

Corporate governance report

I. Company's organization

Tasks of principal divisions/departments/business

Corporate governance report

II. Information on Board of Directors and Presidents

nformation on directors(2)

<2> Information on presidents

<3> Remuneration paid to directors, supervisors, presidents and vice presidents

1.Directors' remuneration

2. Presidents' and vice presidents' remuneration

3.Employees' bonus paid to management team and allocation

III. Status of corporate governance implementation

<1> Operation of the board of directors

<2> Operation of the Audit Committee

<4> Information on Compensation Committee:

<5> Fulfillment of social responsibility

<6> Fulfillment of Ethical Corporate Management

<7> Stipulation of Corporate Governance Best Practice Principles and related regulations

1. Advanced study of directors/supervisors

2. Procedures for handling material inside information

<9> Implementation of the Company's internal control system

1. A statement of Internal Control

TSRC Corporation

A statement of Internal Control

IV. Information on CPA professional fee

<1> Information about audit fee and non-audit fee paid to CPA and accounting firms

V. V. Information on replacement of CPA-None

VII. Information on equity of directors, managers and shareholders holding more than 10% of outstanding shares equity transfer and equity pledge movements

VIII. Relationship information, if among the Company's ten largest shareholders any one is a related party as defined in the Statement of Financial Accounting Standards No. 6

Information on capital raising activities

Information on capital raising activities

<2> Shareholders' structure

<4> Major shareholders

<5> Share price, net worth per share, EPS, dividends per share and related information

<6> Dividend policy and implementation status

<7> Effect upon business performance and EPS of stock dividend distribution plans drafted at the shareholders' annual meeting:Not applicable.

<8> Employees' compensation and directors' remuneration

II. Corporate bonds - None

Overview of business operations

Overview of business operations

I. Description of businesses

<1> Business Scope

1. Major business and product lines:

3. Planned Developments of New Products

<2> Industry Overview:

1. Global Economic Environment

2. Relevance of the industry's upstream, midstream and downstream:

3. Current Industry Status and Outlook:

<3> Overview of technology and R&D

1. R&D expenses

2. Successfully developed technology or products

<4> Long-Term and Short-Term Business Development Plans

1. Long-Term Plan:

2. Short-Term Plan:

II. Analysis of the market as well as the production and marketing situation

<1> Market Analysis

1. Major sales destinations

2. Market share:

3. Industry demand supply and market growth projection

4. Competitive positioning, future development factors and actions

<2> Important application and manufacturing processes of main products

1.Main product important use:

TSRC Annual Report 2018