nan ya plastics corporation 2019 annual report · the english and chinese versions, the chinese...

Security Code：1303

Nan Ya Plastics Corporation

2019

Annual Report

Notice to readers

This English-version annual report is a summary translation of the Chinese version and is

not an official document of the shareholders’ meeting. If there is any discrepancy between

the English and Chinese versions, the Chinese version shall prevail.

Taiwan Stock Exchange Market Observation Post System: mops.twse.com.tw

Annual Report is available at: www.npc.com.tw

Printed on May 12th, 2020

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I. Name, title, contact number and e-mail address of the Company’s Spokesperson and

deputy spokesperson:

Spokesperson

Name: Chia-Chau Wu

Title: Chairman

Contact number: (02)2712-2211

E-mail: [email protected]

Deputy Spokesperson

Name: Ming-Jong Yeh

Title: Financial Officer

Contact number: (02)2712-2211

E-mail: [email protected]

II. Address and telephone of the headquarters, branches, and plant

Headquarters & Renwu Plant

Address: 101, Shuiguan Road, Renwu Dist., Kaohsiung City, Taiwan

Tel: 07-3711411

Taipei Branch

Address: 201, Tung Hwa North Road, Taipei City, Taiwan

Tel:02-27122211

Hsinkang Branch & Plant

Address: 2, Chung-yang Industrial park, Hsinkang Township, Chiayi County,

Taiwan

Tel: 05-3772111

Mailiao Branch

Address: 1-1, Formosa Plastics Group Industrial Zone, Mailiao Township, Yunlin

County, Taiwan

Tel: 05-6812345

LinYuan Plant

Address: 6, Gongye 1st Rd., Linyuan Dist., Kaohsiung City, Taiwan

Tel: 07-6419911

Chiayi Plant

Address: 201, Sec. 2, Beigang Rd., Taibao City, Chiayi County, Taiwan

Tel: 05-2373711

Jinxing Plant

Address: 336, Sec. 1, Nankan Rd., Luzhu Dist., Taoyuan City, Taiwan

Tel: 03-3223751

Kung San Plant

Address: 6, Wenming Rd., Guishan Dist., Taoyuan City, Taiwan

Tel: 03-3284191

Linkou Plant

Address: 102, Nanlin Rd., Taishan Dist., New Taipei City, Taiwan

Tel: 02-29019141

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Shulin Plant

Address: 55, Weiwang St., Shulin Dist., New Taipei City, Taiwan

Tel: 02-26806311

Dyeing & Finishing Plant

Address: 57, Weiwang St., Shulin Dist., New Taipei City, Taiwan

Tel: 02-26806311

III. The name, address, website, and telephone number of the agency handling shares

transfer

Name: Stock Affairs Dept., Nan Ya Plastics Corp.

Address: 201, Tung Hwa North Road, Taipei City, Taiwan

Website: N/A

Tel: (02)2718-9898

IV. Name of the certified public accountant (“CPA”) who duly audited the annual financial

report for the most recent fiscal year, and the name, address and telephone number of

said person's accounting firm:

Name of CPAs: Kuo, Hsin-Yi, Yu, Chi-Lung

Name of accounting firm: KPMG Certified Public Accountants

Address: 68F, Taipei 101 Tower, No. 7, Section 5, Xinyi Road, Taipei City, Taiwan.

Website: http://www.kpmg.com.tw

Tel: (02)8101-6666

V. Name of any exchanges where the company's securities are traded offshore, and the

method by which to access information on said offshore securities: None.

VI. Company website:www.npc.com.tw

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Content

I. Letter to Shareholders ...................................................................................................... 1

1.1 Business Performance for 2019 ........................................................................... 1

1.2 Business Strategy for 2020 .................................................................................. 4

II. Company Introduction ..................................................................................................... 7

2.1 Date of Establishment .......................................................................................... 7

2.2 Business Philosophy and Vision .......................................................................... 7

2.3 Milestone.............................................................................................................. 7

III. Corporate Governance ................................................................................................... 20

3.1 Organization ....................................................................................................... 20

3.1.1 Organization Structure ................................................................................... 203.1.2 Major Corporate Functions ............................................................................ 21

3.2 Directors, Supervisors and Management Team ................................................. 22

3.2.1 Directors ......................................................................................................... 22

3.2.2 Management Team ......................................................................................... 30

3.2.3 Boards of Directors and Major Managers Succession Plan of NPC .............. 32

3.3 Remuneration of Directors, Supervisors, President, and Vice Presidents ......... 33

3.3.1 Remuneration of Directors and Supervisors .................................................. 33

3.3.2 Remuneration of President and Vice Presidents ............................................ 37

3.3.3 Comparison and Description of Remuneration for Directors, Supervisors,

President and Vice Presidents etc. in the Most Recent Two Fiscal Years and

Remuneration Policy for Directors, President and Vice Presidents ............... 40

3.4 Implementation of Corporate Governance......................................................... 41

3.4.1 Board of Directors’ Meeting Status ............................................................... 41

3.4.2 Audit Committee Meeting Status or the Participation of Supervisors in the

Operations of the Board of Directors ............................................................. 45

3.4.3 Corporate Governance Implementation as Required by the Taiwan Financial

Supervisory Commission ............................................................................... 50

3.4.4 Composition, Responsibilities and Operations of NPC’s Remuneration

Committee ...................................................................................................... 66

3.4.5 Social Responsibility Implementation Status as Required by the Taiwan

Financial Supervisory Commission ............................................................... 69

3.4.6 Implementation Status of Operational Integrity as Required by the Taiwan

Financial Supervisory Commission ............................................................... 80

3.4.7 NPC’s Corporate Governance Guidelines and Regulations........................... 86

3.4.8 Other Important Corporate Governance Information .................................... 86

3.4.9 Implementation Status of the Internal Control System .................................. 90

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3.4.10 Reprimands on the Company and its Employees in Violation of Laws, or

Reprimand on its Employees in Violation of Internal Control System and

Other Internal Regulations, Major Shortcomings and Status of Correction .. 91

3.4.11 Major Resolutions of Shareholders’ Meetings and Board Meetings: ............ 91

3.4.12 Major Issues of Record or Written Statements Made by Any Directors or

Supervisors which Specified his/her Dissent to Important Resolutions Passed

by the Board of Directors as of the Publication Date of the Annual Report 105

3.4.13 Resignation or Dismissal of Chairman, President, and Accounting Officer,

Financial Officer, Internal Audit Officer and R&D Officer as of the Date of

this Annual Report ....................................................................................... 105

3.5 Information Regarding NPC’s Audit Fees ....................................................... 106

3.6 Replacement of CPA ........................................................................................ 106

3.7 The Company’s Chairman, Executive Officer, Financial Officer, and Managers

In Charge of its Finance and Accounting Operations did not Hold Any Positions

in the Company’s Independent Auditing Firm or its Affiliates during 2019 ... 106

3.8 Change in Shareholdings and in Shares Pledged by Directors, Management, and

Shareholders Holding more than 10% Share in the Company ........................ 106

3.9 Relationship among the Top Ten Shareholders ................................................ 109

3.10 The Total Number of Shares and Total Equity Stake Held in Any Single

Enterprise by the Company, the Company’s Directors, Supervisors, Managers,

and Any Companies Controlled either Directly or Indirectly by the Company111

IV. Capital and Shares.........................................................................................................112

4.1 Capital and Shares.............................................................................................112

4.1.1 Source of Capital...........................................................................................112

4.1.2 Status of Shareholders...................................................................................112

4.1.3 Shareholding Distribution Status ..................................................................113

4.1.4 List of Major Shareholders ...........................................................................113

4.1.5 Market Price, Net Worth, Earnings, and Dividends Per Share .....................114

4.1.6 Dividend Policy and Implementation Status.................................................114

4.1.7 Effect upon Business Performance and EPS of the Proposed Stock Dividends

Distribution ...................................................................................................115

4.1.8 Compensation of Employees, Directors and Supervisors .............................115

4.1.9 Repurchase of Common Stock......................................................................116

4.2 Corporate Bonds ...............................................................................................117

4.3 Status of Preferred Stock ................................................................................. 127

4.4 Issuance of Global Depositary Receipts .......................................................... 127

4.5 Status of Employee Stock Options .................................................................. 127

4.6 Status of New Shares Issuance in Connection with Mergers and Acquisitions 127

4.7 Financing Plans and Implementation ............................................................... 127

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4.7.1 Finance Plans ............................................................................................... 127

4.7.2 Implementation ............................................................................................ 127

V. Operations Overview ................................................................................................... 128

5.1 Business Content .............................................................................................. 128

5.1.1 Business Scope............................................................................................. 128

5.1.2 Industry Overview ....................................................................................... 1315.1.3 Overview of Technology and R&D ............................................................. 138

5.1.4 Short- and Long-Term Business Development Plans .................................. 139

5.2 Markets and the Overview of Production and Sales ........................................ 142

5.2.1 Market Analysis ........................................................................................... 142

5.2.2 Important Applications and the Production Processes of the Major

Products........................................................................................................ 149

5.2.3 Supply of Primary Raw Materials................................................................ 154

5.2.4 Suppliers/Customers Accounted for at Least 10% of Annual

Procurement/Sales........................................................................................ 156

5.2.5 Production Volume for the Last Two Years ................................................. 157

5.2.6 Sales Volume/Value of the Last Two Years .................................................. 159

5.3 Employees ........................................................................................................ 161

5.4 Environmental Expenditure Information ......................................................... 161

5.5 Labor Relations ................................................................................................ 166

5.6 Important Contracts ......................................................................................... 172

VI. Financial Information................................................................................................... 174

6.1 Five-Year Financial Summary ......................................................................... 174

6.2 Five-Year Financial Summary ......................................................................... 179

6.3 Audit Committee’s Review Report for the Most Recent Year ......................... 182

6.4 Consolidated Financial Statements for the Years Ended December 31, 2019 and

2018, and Independent Auditors’ Report ......................................................... 183

6.5 Stand-Alone Financial Statements for the Year Ended December 31, 2019 and

2018, and Independent Auditors’ Report ......................................................... 183

6.6 The Company should Disclose the Financial Impact to the Company if the

Company and its Affiliated Companies have Incurred any Financial or Cash

Flow Difficulties in 2018 and as of the Date of this Annual Report ................ 183

VII. Review of Financial Conditions, Financial Performance, and Risk Management ...... 184

7.1 Financial Status ................................................................................................ 184

7.2 Analysis of Financial Performance .................................................................. 185

7.3 Cash Flow ........................................................................................................ 186

7.4 Major Capital Expenditure Item ...................................................................... 188

7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses,

Improvement Plans and Investment Plans for the Coming Year ..................... 190

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7.6 Analysis of Risk Management ......................................................................... 190

7.7 Other Significant Issues ................................................................................... 201

VIII. Other Special Notes ..................................................................................................... 202

8.1 Summary of NPC’s Subsidiary ........................................................................ 202

8.2 Private Placement Securities in 2019 and as of the Date of this Annual

Report. .............................................................................................................. 214

8.3 NPC’s Shares Acquired, Disposed Of, and Held by its Subsidiary in 2019 and as

of the Date of this Annual Report .................................................................... 214

8.4 Other Necessary Supplement ........................................................................... 214

8.5 Any Events in 2019 and as of the Date of this Annual Report that Had

Significant Impacts on Shareholders’ Right or Share Prices as Stated in Item 3

Paragraph 2 of Article36 of Securities and Exchange Law of Taiwan ............ 214

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I. Letter to Shareholders

1.1. Business Performance for 2019

In 2019, Nan Ya Plastics Corp. (NPC) recorded a consolidated revenue of NT$

286.30 billion, 14.0% lower than NT$ 333.06 billion in 2018; and a consolidated

pre-tax income of NT$ 26.69 billion, a reduction of 56.6% compared to NT$ 61.53

billion in 2018.

In 2019, NPC faced fierce industry competition, with continued increase in

competitors' capacity and market supply, and the trade war had also created negative

impact in the world's economy. The market adopted a strong wait-and-see attitude,

and the overall performance reflected a difficult operating environment.

The four major product categories of NPC operations are plastics, chemicals,

polyesters, and electronic materials.

With regard to plastic products, NPC has accelerated the research and

development of new applications, new materials, and products that meet

environmental protection trend and have unique specification, and increased the

proportion of production and sales of differentiated and high-value products. NPC

continues to transform and deploys automated monitoring equipment to ensure

quality stability of production process, and together with e-commerce and online

marketing, it has expanded into high-end markets such as the U.S. and Japan as well

as potential emerging markets. With market expansion, sales increase, capacity

utilization increase, cost reduction, the advantages of distributing production

domestically and overseas in Taiwan, China, the U.S. ,and Vietnam, and timely

adjustment of plants' production and sales, NPC strives to provide customers with

satisfied services. The efforts of NPC have enabled plastic processing products to

provide stable profitability.

In terms of petrochemical products, in line with vertical integration and division

of labor in Sixth Naphtha Cracking Plant in Mailiao, NPC's products, including

ethylene glycol (EG), Bisphenol-A (BPA), 1,4-butylene glycol (1,4BG), plasticizers,

phthalic anhydride (PA), 2-ethylhexanol (2EH), and epoxy resin (EPOXY), have

been vertically integrated with upstream and downstream industries, thereby forming

a complete supply chain, which supports the development of downstream industries

such as polyester, electronics, and plastic processing, respectively.

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With a slow global economic growth and negative impact of the trade war, the

market demand decreased in 2019. With the increasing petrochemical capacity by

China, price generally declined, with the prices of main products, BPA and EG,

dropped by 30% compared to 2018, resulting in significant decrease in profit. In the

future, NPC will respond to the change in raw materials and product prices, flexibly

adjust its capacity, continue to drive process optimization, and improve its sales in

areas outside China, so as to increase revenue and profit.

In terms of polyester products, China-U.S. trade war and increase in crude oil

price have made market competition more intense in 2019. The continued fall in price,

and serious price-slashing situation by competitors resulted in sales not meeting

expectation and a drop in profit.

NPC will continue to actively research and develop, monitor and control product

quality stability, promote environmental protection, PET bottles recycling,

biodegradability and green energy, and explore new application areas for products, so

as to differentiate the market and expand scope of sales. NPC will enhance customer

recognition so as to continue to increase sales and maintain stable profitability.

For electronic materials, with the ongoing development of various electronic

product application devices since the fourth quarter of 2016, the active promotion of

new energy vehicle in the world and construction of related infrastructure such as

charging pile, the demand of electronic materials significantly increases, attracting

companies to expand their investments, and resulting in increase in capacity. In

addition, with China and the U.S. imposing higher tariffs on each other, decrease in

home appliance orders, and increase in uncertainties of electronic product market,

customers reduce their inventory and respond to urgent orders, and are more

conservative in their placing of orders. However, due to the advance deployment of

5G communications infrastructure, mid and high-end materials demand increased,

and 2019 overall revenue is only slightly lower than 2018.

The 5G infrastructure and the Internet will continue to develop in the future.

With the related applications, it will drive the demand of electronic materials and

upstream raw materials. NPC will actively promote differentiated products, increase

sales proportion of mid and high-end materials for high-value-added and

high-functionality niche products, to cater to the trend of market development. Also,

it will make use of the advantages of complete upstream and downstream vertical

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integration, to flexibly adjust the capacities in Taiwan and China, driving the increase

in revenue and profit.

Nan Ya Printed Circuit Board Corp., which is invested by NPC, has long been

focusing on the development and production of circuit boards and IC package

substrates. Optimistic with the demand of 5G infrastructure, it has taken advanced

move in the development of related products. The sales of high layer and large

dimension substrate for the related applications were strong in 2019. In addition, the

demand for high-valued products such as System-in-Package for wearable device

applications, and interposer for high-end mobile device was promising during the

second half of the year, driving increase in profit, and hence successfully turned loss

into profit. In response to future development trend of semi-conductor, it actively

strengthens its research and development capabilities, recruits more research and

development talents, speeds up the development of new products, and expands IC

substrate capacity to meet market demand. In the future, the company will work

closely with customers, get more niche products orders, and continue to enhance

production technologies, improve yield and reduce cost, to improve operational

performance.

Nan Ya Technology Corp., another company invested by NPC, is committed to

the development, manufacture, and sale of dynamic random-access memory (DRAM)

products. Though DRAM industry significantly slowed down in 2019, the company

still maintained good profitability, and completed the product development and

shipping of low-power 20 nm 4Gb/8Gb LPDDR3, 2Gb/4Gb/8Gb LPDDR4/4X, etc. It

has also successfully developed 10 nm DRAM cell design, enabling future DRAM

products to continue to shrink in size for at least 3 generations. In 2020, it will

develop first generation 10 nm lead products, DDR4 and DDR5 on its own

technology platform, and is expected to gradually go into trial production after the

second half of the year, in preparation for mass production of 2021. In 2020, it will

continue to focus on 20 nm product portfolio optimization to increase

competitiveness, and increase process technologies, product design, and customer

services capabilities, to meet market demand, and provide customers with best

memory solutions.

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Financial analysis for revenue and expenditure and profitability are as follows:

Year

Item 2019 2018

Capital

Structure(％)

Debt ratio (%) 35.90 32.15

Long-term fund to

property, plant and

equipment ratio (%)

301.84 346.65

Profitability

Return on total assets (%) 4.36 9.71

Return on total equity (%) 6.25 13.97

Pre-tax income to paid-in

capital ratio (%) 33.65 77.58

Net margin (%) 8.11 15.81

Earnings per share(NT$) 2.91 6.65

Note: The calculation of EPS is based on weighted average shares outstanding in

each year.

1.2. Business Strategy for 2020

Looking ahead to 2020, the environment is still disturbing. The world's economy

has been affected by many factors, including trade war, technological war, currency

war, and threat of armed conflict of geopolitics in the long run. Also, the virus

outbreak that affects human health in the beginning of the year deepens the unrest in

the market, suppressing the opportunities for economic recovery through new

technologies development and application in the short run. If the various uncertain

factors can be reduced in the future, the economy should be able to develop normally.

With the complex international situation, maintaining stable growth and profit is

still the most important goal. Therefore, NPC will continue to actively push forward

its four business focus:

(1) Market expansion: Based on the physical sales channels with the assistance

of online marketing, NPC actively expands and separates the market. With the

configuration of domestic and overseas production bases, diversion in sales channels,

production capacity allocation, and market expansion, NPC carries out overall

production and sales allocation, increases revenue, boosts capacity utilization rate,

and reduces cost.

(2) Research and development: Besides developing new products with different

4

characteristics to satisfy customer needs and market trend, NPC makes good use of

the features of existing products to explore new application. It expands customer base

and explore new markets to increase the proportion of differentiated and high-value

products in the hope of increasing profitability continuously.

(3) Circular economy: Implement reduction, reuse, and resource recycling,

reduce raw materials and energy consumption from the source, and carry out resource

integration across plants and companies, recycle energy, and finally recycle the waste

generated, achieving recycling and reuse, and attaining the economic benefits of low

consumption, low emission, and high utilization.

(4) Process optimization: NPC will continue to improve and upgrade its

equipment, increase the efficiency of existing equipment/production lines, create

maximum benefit with minimum investment, and actively implement AI to attain

intellectualization in production process.

In the future, we will continue to make AI our priority, and make use of image

recognition technologies to carry out product quality inspection and control, and

conduct systematic gathering, processing, and application on the massive data, so as

to optimize the control of process conditions, increase quality and reduce raw

materials and energy consumption. We will also expand it horizontally to domestic

and overseas plants to create greater benefits.

In addition, besides participating in the joint venture expansion in US Texas

OL-3 and Louisiana at present, our total ongoing investments amount to

approximately NT$ 68 billion, including 14% in Taiwan, mainly in high-value copper

foil, polyester film, PP synthetic paper, etc., and 86% in other countries, mainly in

expansions of EG plant in the U.S., which is about to be completed, as well as copper

foil substrate, fiberglass cloth, printed circuit board, aluminum plastic film, and BPA

plants in China. When they go into production, it is expected to generate an annual

output of NT$ 52.4 billion, which will drive the continued growth of NPC.

Based on the equipment production capacity and in regards to the supply and

demand situation of the future market, the estimated sales volume of major products

in 2020 is as follows: (including consolidated subsidiaries and inter-company internal

turnover)

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Product

Name Unit

Estimated

Sales

Volume

Product

Name Unit

Estimated

Sales

Volume

Flexible PVC

Film Ton 117,155 1,4BG Ton 50,817

PVC Leather Thousand

Yard 32,700 EG Ton 2,732,674

Rigid Film Ton 151,204 Copper Clad

Laminate

Thousand

Sheet 70,200

PU Synthetic

Leather

Thousand

Yard 15,304 Epoxy Resin Ton 395,550

Plastic Doors

and Windows Ton 28,430

Glass

Fabrics

Thousand

Meter 283,000

Rigid PVC

Pipe Ton 128,400 Copper Foil Ton 55,540

Film Products Ton 73,265 Glass Yarn Ton 167,466

Plasticizer

and THPA Ton 399,109

Printed

Circuit

Board

Thousand

SFT 17,448

PA Ton 137,510

Polyester

Staple fiber,

filament,

fabric

Ton 1,180,537

BPA Ton 589,590 PET Film Ton 68,467

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II. Company Introduction

2.1 Date of Establishment: August 22nd, 1958

2.2 Business Philosophy and Vision:

(1) Business philosophy: Diligence, perseverance, frugality and trustworthiness;

aiming at the sovereign good; perpetual business operation and dedication to the

society.

Today, the Company is able to keep expanding, growing, and developing is

driven by the business philosophy of “diligence, perseverance, frugality and

trustworthiness; aiming at the sovereign good; perpetual business operation and

dedication to the society” raised and practiced by the two founders, Mr. Wang

Yung-Ching and Mr. Wang Yung-Tsai.

In terms of business operations, the Company understands that only by

having a good management foundation can the Company develop steadily

without being shaken by changes in objective conditions. Therefore, regardless of

production, sales, manpower allocation or resource utilization, the Company has

long adhered to the spirit of inquiring into the root of the matter in a practical and

realistic way, pursuing the rationalization management bit by bit, constantly

pursuing cost reduction and efficiency improvement. This spirit has long been

internalized into an important core of our corporate culture, and it is also the drive

for the company to pursue progress and sustainable development.

On the other hand, the company believes that while pursuing

competitiveness and profits, it must also abide by corporate ethics by basing the

management on the positive contribution to the society. Therefore, while

developing the business, the Company also continues to devote itself to charitable

activities in fields such as education, medical services, and caring for the

disadvantaged. The scale is constantly expanded to improve the efficiency and

quality in order to fulfill the responsibilities of corporate citizenship.

(2) Company Vision:

In the various industrial fields in which we are engaged, we will strengthen

the internationalization and diversification to achieve world-class scale, and

occupy the global leadership position. We will also continue to seek depth and

refinement in response to the global changes to ensure long-term stable

development.

2.3 Milestone:

The Company was founded in 1958 with the capital of NT$ 4 million and

had reached to NT$ 79.3 billion at the end of 2019. The consolidated revenue was

NT$ 286.3 billion. At present, our main business involves various processed

7

plastic products, chemical products, electronic materials, the production and sales

of polyester fiber, dyeing and finishing, mechanical and electrical engineering, etc.

The Company has become the world's largest plastics processing plant, and the

production capacity of polyester fiber and copper foil substrate is also among the

best.

The Company has been in business for 62 years, and its business expansion

can be divided into the following stages:

1958 The Company was founded and named “Nan Ya Plastics Processing

Factory Co., Ltd.” with a capital of NT$ 4 million.

Plant of Kaohsiung started production.

1967 Plant of Qian Zhen became fully operational and Plant of Taishan

Mingzhi was planned for construction.

In August, the Company merged "New Easten Plastics Product

Corp." and changed its name to "Nan Ya Plastics Corp.".

The stock was listed on November 5th.

1968 Plant of Mingzhi became officially operational; in October a

polyester fiber plant was planned for construction.

1969 The first set of equipment at the fiber plant began production in May;

in October, the second set of equipment was planned for

construction.

1971 The second set of cotton processing equipment and silk processing

equipment of the fiber plant were installed and went into production

in January.

1972 Plant of Renwu officially went into production. Plant of Linkou was

being built.

1973 Expansion of production equipment for 2,000 metric tons of

polyester cotton and 1,200 metric tons of polyester yarn.

1974 In January, equipment for non-woven fabrics, brushed fabrics and

wet PU leathers was installed in Plant of Shulin.

1976 In October, equipment for rigid PVC film was installed, and

equipment for brushed fabric and non-woven fabrics was expanded.

1977 Equipment for rigid PVC film, brushed fabric and non-woven fabrics

was expanded.

In June, the OEM for professional dyeing and finishing of longfibre

nylon was added to Shulin factory area, known as Plant 1 of Shulin.

1978 The first set of doors and windows was launched in January.

In July, Plant 1 of Shulin went into official production. Two sets of

giant PVC film equipment as well as equipment for PU synthetic

leather and improved coil manufacturing were added.

In October, a joint venture with Huaxia, Cathay Pacific, and Ocean

8

Plastics was established and named as "Taiwan Plasticizer Corp.".

1979 In June, the Company expanded the long-fiber nylon dyeing and

finishing factory in the Shulin factory area, namely Plant 2 of Shulin.

The printing equipment for Plant 1 of Shulin was also expanded.

Construction of Plant of Chiayi and the expansion of 10 sets of PVC

film production equipment and two sets of rubber production

equipment.

In July, the Company diverted the investment in establishing Nan Ya

Plastics Corp. USA.

1980 In September, the Formosa Dyeing and Finishing Corp. was merged

into the Formosa Dyeing Division. The Plant 1 of Taoyuan was

changed to Plant 1 of Dyeing, Plant 1 of Shulin was changed to Plant

2 of Dyeing, and Plant 3 of Shulin was changed to Plant 3 of Dyeing.

Two sets of PVC film production equipment and one set of mold

production equipment were added.

1981 Dual-axis extension PP film equipment and plastic processing

machinery were added to Plant of Linkou and Renwu.

1982 Expansion of the co-generation equipment of the Taishan.

1983 Giant PVC film equipment and high-speed false twisting machine

were added.

1984 Circuit board printing, copper foil substrates, and dyeing plant

equipment were added.

1985 Circuit board printing, copper foil substrates, fiberglass yarn,

microfiber, and false twisting equipment was updated.

1986 Polyester film, electronic epoxy resin, and plastic processing

machinery were added.

1987 Production equipment of petrochemical raw materials and plastic

processing was expanded.

In August, a joint venture with PPG from the United States was

established and named as "FPG Fiber Glass Corp.". In December, the

Company merged "Taiwan Plasticizer Corp." and established the

"Plasticizer Division."

1988 Production equipment for petrochemical raw materials, circuit board

printing, and copper foil substrate were expanded.

1989 Petrochemical raw material equipment was added. In June, the

company diverted investments and established “Nan Ya Plastics

Corp., America”.

1990 Production equipment of polymer packaging materials for electronics

was added. Production equipment for circuit board printing, copper

foil, and glass fabrics was also expanded.

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1991 Spinning equipment was added.

1992 Added production equipment for circuit board printing, epoxy resin,

and the second set of power generation equipment in Shulin.

In April, the Company diversified investments along with Nan Ya

Plastics Corp. and Formosa Chemicals & Fiber Corp. to establish

Formosa Petrochemical Corp.

1993 Production equipment for rigid PVC film, polyester film, and

vacuum evaporation was added.

1994 Production equipment for LCD display and polyester film was added.

In May and June, we invested in the construction of factories for

PVC film, PVC leather and rigid pipes in Guangzhou and Xiamen,

China.

The total amount of overseas convertible corporate bonds issued in

July raised US$ 350 million.

1995 Added production equipment for BOPP stretch film, epoxy resin,

glass fabrics, and copper foil substrate, as well as setting up the

electronic materials division.

In March, the Company diversified investment in setting up “Nan Ya

Technology Corp.” which engaged in the research, development,

design, manufacturing and sales of semiconductors.

In August, in order to expand the electronic materials business, the

special task group of copper foil substrate, epoxy resin, glass fabrics

and copper foil became an independent division from the fourth

plastic division, and the electronic materials division was set up.

1996 Production equipment for circuit board printing and copper foil was

added.

In April, the Company diversified investment in setting up “Mai-

Liao Power Corp”.

In June, the Company invested in the construction of plants for PVC

film, PVC leather and rigid pipes in Nantong, China.

In July, the Company jointly invested with China Man-Made Fiber

Corp. to establish “Nan Chung Petrochemical Corp”.

1997 Spinning equipment was added.

In May, the ethylene glycol plant was appointed to Nan Chung

Petrochemical Corp.

In October, the Company diversified investments in setting up “Nan

Ya Printed Circuit Board Corp”.

In November, Mr. Wang Yung-Ching, the chairman of the board,

was exempted from the duty as president. Mr. Wu Chin-Jen, the vice

president, was promoted to the president. The assistant vice president,

10

Mr. Lin Zhen-Ling, was promoted to the vice president.

1998 Production equipment for ethylene glycol and glass fabrics was

added.

In October, the Company diversified investments in setting up

Formosa Automobile Corp. along with “Formosa Plastics Corp.” and

Asia Pacific Investment Corp.

In December, the Company conducted a cash capital increase and

raised the amount of NT$ 5.05 billion.

1999 Production equipment for chlorinated polyethylene, hydrogen

peroxide, epoxidzed soybean oil, and A-PET transparent sheet was

added.

In June, the Company diversified investments in setting up “Formosa

Environmental Technology Corp”. The Company successively

invested in the construction of PVC rigid pipe and film plants in

Chongqing, China.

2000 Production equipment for phthalic anhydride, optical disc, and

lithium-ion battery were added.

The Company invested in plants for electronic materials, PU

synthetic leather, and film in Kunshan and Huizhou, China.

The Company won the Annual Energy Conservation Excellence

Award from the Ministry of Economic Affairs in 2000.

2001 Added production equipment for color filters, optical discs, solid

polymer PET and 200T/H power generation equipment.

Diversified investments to establish “Formosa Plastics Marine Corp.”

and “Su-Hua Transport Corp”.

2002 Added production equipment for BOPP film and DVD discs.

Established Formosa Industries Corp. in Vietnam with a joint venture

with Formosa Chemicals & Fiber Corp. and King Car Industrial Co.,

Ltd.

In December, in order to diversify shares of Nan Ya Circuit Board

Corp. before the listing of shares, the Company disposed the shares

of Nan Ya Circuit Board Corp. with a total amount of NT$ 219.98

million.

2003 Added ethylene glycol production equipment.

In July, the Company issued a five-year overseas registered

unsecured exchangeable corporate bonds with a total amount of US$

240 million. Bondholders had the right to exchange their corporate

bonds for common stock of Nan Ya Technology Corp.

In November, the Formosa Dyeing Division was merged with the

Fiber Division for business and management needs.

11

In December, the Company diversified investment in establishing

“Nan Ya Photonics Incorporation”.

2004 In January, the switchgear division was merged with the engineering

and construction division for business and management needs.

On June 30th, the Company issued the seven-year overseas

registered unsecured exchangeable corporate bonds with a total

amount of US$ 250 million. The bondholders had the right to

exchange the Company's bonds with the common stock of Formosa

Petrochemical Corp.

2005 In July 2003, the Company issued an overseas unsecured

exchangeable corporate bond with the exchange of shares of Nan Ya

Technology Corp. for US$ 240 million. On July 17th, 2005, the

Company redeemed US$ 217.94 million. On September 7th, the

Company bought back the remaining balance of US$ 21.91 million.

In order to diversify shares of Nan Ya Printed Circuit Board Corp.

before the listing of shares, the Company disposed 46,100 shares of

Nan Ya Printed Circuit Board Corp. at NT$ 48 per share from June

to August.

2006 In June 2004, the Company issued an overseas unsecured

exchangeable corporate bond with the exchange of shares of

Formosa Petrochemical Corp. for US$ 250 million. By January 13th,

2006, bondholders exercised the exchange right with the total

amount of US$ 250 million. All the exchange was completed.

In line with the initial listing of Nan Ya Printed Circuit Board Corp.,

in April, the Company placed 10,200 shares of Nan Ya Printed

Circuit Board Corp. at a price of NT$ 250 per share.

On June 23th, Mr. Wang Yung-Ching, the chairman of the Board of

Directors, and Mr. Wang Yung-Tsai, the vice chairman of the Board

of Directors, resigned. The Board of Directors elected Mr. Wu

Chin-Jen as the chairman of the Board of Directors as well as the

president.

2007 In June, three independent directors were elected.

In August, Nan Ya Technology Corp. raised NT$ 5 billion for capital

increase by cash. The Company subscribed for shares as a specific

person with a total amount of NT$ 198,120,000.

On November 2nd, the Board of Directors resolved to promote the

vice president, Wu Chia-Chau, as the president.

2008 The Mailiao maleic anhydride (MA), γ-butyrolactone (GBL), and

N-methyl-2-pyrrolidone (NMP) plants passed the environmental

impact assessment of the Environmental Protection Agency of the

12

Executive Yuan in February. Production equipment for MA, GBL,

and NMP were also added.

In June, the products were organized into four business divisions

including plastic processing, plastic materials, electronic materials,

polyester products and public utilities for management purposes.

In October, the founder Mr. Wang Yung-Ching passed away.

In order to support the Company's investment in Nan Ya Technology

Corp. and Inotera Memories Inc. to continue developing the DRAM

business, advanced manufacturing technology of Micron Technology

Inc. was introduced. In November, the Company signed a loan

contract of US$ 200 million with Dutch Micron. And pledged

contracts were signed with Dutch Micron and US Micron.

The ethylene glycol plant won the Annual Energy Conservation

Excellence Award from the Ministry of Economic Affairs in 2008.

2009 In April, the Board of Directors decided to invest in a 33.33% stake

of Formosa Synthetic Rubber Corp.

In June, the Company obtained private placements of common

stocks of Nan Ya Technology Corp. with a total amount of NT$

4,619,160,000. In December, it re-subscribed common stocks of Nan

Ya Technology Corp. with a total amount of NT$ 4,270,923,000.

In October, Plant 1 of copper foil substrate won the special award for

the Annual Business Waste Cleaning, Recycling and Reuse Award of

the Ministry of Economic Affairs in 2009. In November, the ethylene

glycol plant was named as a greenhouse gas reduction and excellent

performance unit.

In December, the Board of Directors decided to transfer the equity of

Nan Ya Plastics (Chongqing) Co., Ltd.; merging 5 companies

included the production and sales of fiber products in Kunshan and

steam and power etc.

2010 In March, the Company won the Model Award of the Traditional and

Manufacturing Industry of the listed company in the 6th Corporate

Social Responsibility Award of Global Views Monthly.

In May, Nan Ya Propylene Gentamine (Ningbo) Co., Ltd. increased

the production and sales of plasticizers. It also increased investment

of US$ 36 million and changed its name to Nan Ya Plastics (Ningbo)

Co., Ltd. Moreover, it won the Environmental Protection Agency's

Green Purchasing Excellence Enterprise Award in 2009.

Set the base date for non-physical stocks for the full issuance of

physical stocks on November 30th.

In September, Plant 1 of Shulin won the 2010 Annual Energy

13

Conservation Excellence Award from the Ministry of Economic

Affairs.

In November, Plant of Mailiao Recycling won the Special Award of

the Environmental Protection Agency's 2010 Annual Waste

Resource Management Performance Campaign.

In December, the Board of Directors decided to reduce the

shareholding ratio of Formosa Ha Tien Steel Corp. from 22.5% to

21.25%.

2011 In March, the Board of Directors decided to invest US$ 30 million in

Formosa Synthetic Rubber (Hong Kong) Corp. Ltd. and reinvested

Formosa Synthetic Rubber (Ningbo) Co., Ltd. through Formosa

Synthetic Rubber (Hong Kong) Corp. Ltd.

In May, the Board of Directors decided to adjust the Company's

organizational structure. The environmental safety and health

department was made obsolete. The safety and health department and

the resource recycling department were set up in its place.

In June, the Board of Directors resolved to increase investment in

Nan Ya Plastics Construction Materials (Nantong) Co., Ltd. by US$

5 million.

The remuneration committee was set up on August 26th.

In August, the Company invested in China to establish “Nan Ya

Property (Kunshan) Co., Ltd”.

In October, the cotton plant in the Polyester Fiber Division won the

2011 Annual Energy Conservation Excellence Award from the

Ministry of Economic Affairs.

In November, the Company subscribed common stocks of private

placements of Nan Ya Technology Corp. with the total amount of

NT$ 11,999,999,998.

In December, the “Safety Partnership Declaration” was signed with

the Labor Inspection Office of the Southern District of the Executive

Yuan Labor Committee.

2012 In March, the Board of Directors decided to increase investment in

Vietnam Formosa Ha Tien Steel Corp. by US$ 170 million.

In June, the Board of Directors decided to merge three companies of

PVC film (sheet), PU leather, steam, and electric power products in

Nantong City, mainland China as well as merge another five

companies in Kunshan City, which produced and sold electronic

materials, steam, and electricity products.

In August, the Board of Directors decided to merge two company

which produce and sell BOPP film, rigid PVC film, and PVC film,

14

and other products in Nantong City.

In September, the Company disposed the shares of Nan Ya

Technology Corp. with a total amount of NT$ 835,906,000 and

subscribed for Nan Ya Technology Corp. new shares in a cash

capital increase with a total amount of NT$ 4,236,000,000.

In November, the Ministry of Finance awarded the promotion of

electronic invoices for outstanding business operators. Plant 1 of

copper foil substrate won the 2012 Annual Energy Conservation

Excellence Award from the Ministry of Economic Affairs.

In December, Kung San site and Plant of Ethylene Glycol won the

2012 Annual Voluntary Reduction of Greenhouse Gases by the

Industrial Bureau of the Ministry of Economic Affairs.

2013 In January, in conjunction with the transformation and reengineering

of the Company’s investment business, Nan Ya Technology Corp.

submitted two letters of undertaking to Micron Technology Inc. to

guarantee financial support and participation contracts.

In March, the Board of Directors decided to invest in Formosa Group

(Cayman) Limited with US$ 12,500.

In May, the Board of Directors decided to invest and establish

Formosa Resources Corp. with NT$ 250,000; to participate in the

private equity cash increase of Inotera Memories Inc. with a total

amount of NT$ 4 billion.

In June, Mr. Wu Chia-Chau started serving as chairman.

In August, the Company officially announced the introduction of

AEO certification for high-quality enterprises. It won the award for

contribution from the Ministry of Economic Affairs.

In September, the Board of Directors decided to reduce the

shareholding ratio of Formosa Ha Tien Steel Corp. to 14.75%.

In November, Plant 1 of copper foil substrate was awarded the 22th

2013 ROC Environmental Protection Enterprise Environmental

Protection Award by the Environmental Protection Agency of the

Executive Yuan. Plant 3 of Copper Foil Substrate and Kung San site

were awarded the 2013 Annual Energy Conservation Excellence

Award and Excellence Award from the Ministry of Economic Affairs.

The fiber division won the 2013 environmental impact assessment

and development of the New Taipei City Government Environmental

Protection Agency.

In December, the Company won the 2013 Green Procurement

Excellence Award.

2014 In January, the Company disposed 47,700,000 shares of Formosa

15

Petrochemical Corp. with a total amount of NT$ 3.673 billion. It was

awarded the AEO certification of the Kaohsiung Customs Quality

Enterprise of the Ministry of Finance.

In March, the Board of Directors decided to invest and establish

“Formosa Group (Cayman) Ltd.”; Mr. Tzou Ming-Jen, the senior

vice president, was promoted to the position of executive vice

president.

In April, in cooperation with the Kaohsiung City Government to

promote urban development, the Company’s Plant of Kaohsiung was

moved. The registered location was changed to 101, Shuiguan Road,

Renwu Dist., Kaohsiung City. The re-investment company of Plant 4

of Kunshan glass fabrics started to operate.

In June, the Board of Directors decided to sell and transfer 100%

equity of mainland China Nan Ya Property (Kunshan) Co., Ltd.

In July, with the adjustment of the administrative area of Mailiao

Township in Yunlin County, the location of the Company’s Mailiao

Branch was changed to “1-1, Formosa Plastics Group Industrial Zone,

Mailiao, Yunlin County”.

In September, the Company was awarded the 2013 Green

Procurement Excellence Enterprise Award.

In October, Plant 1 of copper foil substrate won the 23rd China

Enterprise Environmental Protection Award of the Environmental

Protection Agency of the Executive Yuan in 2014.

In November, Plant 3 of spinning won the 2014 Energy

Conservation Excellence Award from the Energy Bureau of the

Ministry of Economic Affairs. The founder, Mr. Wang Yung-tsai,

passed away.

2015 In March, the Board of Directors decided to merge three plastics,

building materials, and rigid film companies in Guangzhou, and was

approved by the Investment Commission (MOEA) in May.

In May, Nan Ya Plastics America Corp. invested and established

“Nan Ya Plastics Corp., Texas” which in turn transferred the

investment to the construction of an ethylene plant.

Started from July 1st, Mr. Wu Chia-Chau, the chairman of the Board

of Directors, was relieved of the position of president and the

executive vice president Mr. Tzou Ming-Jen was promoted as the

president.

In August, the Board of Directors resolved to adopt the Company’s

corporate social responsibility code.

In November, Plant of Xingang Copper Foil Substrate of electronics

16

division won the 24th Republic of China Environmental Protection

Enterprise Environmental Award. Kung San Site of Fiber Division

and Plant 3 of Xingang Copper Foil Substrate of electronics division

won the 2015 award for annual industrial gas voluntary reduction. In

November, the Board of Directors decided to reduce the proportion

of indirect holdings of Formosa Ha Tien Steel Corp. to 12.346%.

In December, the Board of Directors resolved to support Taiwan

Micron Technology Inc. acquisition of Inotera Memories Inc.

Through the transfer of equity enable Inotera Memories Inc. to

become a 100%-owned subsidiary of Taiwan Micron Technology Inc.

The Company also disposed of 22,000,000 shares of Formosa

Petrochemical Corp. with a total amount of NT$ 1,669,800,000.

2016 In order to strengthen the sales of film products and take into account

the scale of the fiber division, the polyester film and release film

products were made independent, and the polyester film division was

also established.

The Company’s indirect shares of Formosa Ha Tien Steel Corp. was

adjusted from 12.346% to 11.432%.

In June, the audit committee was set up to replace the supervisor.

In July, Kung San site won the 2016 Energy Conservation

Excellence Award from the Energy Bureau of the Ministry of

Economic Affairs.

In September, the Board of Directors resolved to acquire 50% shares

and technology license of PFG Fiber Glass Corp. as well as acquire

50% shares and technology license of Fiber Glass (Hong Kong) Co.,

Ltd. from PPG Industries Securities, LLC. The acquisition of both

cases were completed on November 18th.

In November, Plant of Mailiao Ethylene Glycol won the 2016

Annual Greenhouse Gas Voluntary Reduction and Excellent

Performance Contribution Award from the Industrial Bureau of the

Ministry of Economic Affairs. Kung San site won the 2016 Annual

Voluntary Reduction of Greenhouse Gases.

In December, the Company was awarded the AEO certification of

the Kaohsiung Customs Safety Certification Quality Enterprise of the

Ministry of Finance. The Company disposed 442,387,000 shares of

Inotera Memories Inc. to Taiwan Micron Technology Inc. at the

price of NT$ 30 per share.

2017 In March, the Board of Directors decided to donate NT$ 125 million

to establish the “Kaohsiung Cultural Foundation of Brothers Wang

Yung-Ching and Wang Yung-Tsai Park” and increased the

17

investment of “Formosa Resources Corp.” by US$ 55 million.

In May, the Board of Directors decided to increase the investment of

“Formosa Ha Tinh (Cayman) Ltd.” through “Nan Ya Plastics

International (Cayman) Ltd.” by US$ 57,160,834. Plant 2 of Chiayi

in Chiayi County expanded the PP synthetic paper annual production

capacity by 22,000 tons. The Xingang site invested and constructed a

copper foil plant 4 with an annual production capacity of 18,000

tons.

In August, the Board of Directors decided that the mainland “Nan Ya

Plastics (Nantong) Co., Ltd.” will expand the aluminum plastic film

production line and transfer the surplus to increase the capital by

US$ 10 million.

In November, the Board of Directors decided to invest “FG INC” by

US$ 22 million. Plant of Mailiao Ethylene Glycol won the 2017

Annual Greenhouse Gas Voluntary Reduction and Carbon Reduction

Contribution Award from the Industrial Bureau of the Ministry of

Economic Affairs. Kung San site, electronics division, engineering

division of Xingang Plant and the subsidiary of PFG Fiber Glass

Corp. were all awarded the 2017 annual greenhouse gas voluntary

reduction by the Bureau of Labor.

Kung San site was awarded the silver medal of the 2017 Energy

Conservation Standard Award of the Energy Bureau of the Ministry

of Economic Affairs.

In December, the Board of Directors decided to increase the

investment of “Formosa Ha Tinh (Cayman) Ltd.” through “Nan Ya

Plastics International (Cayman) Ltd.” by US$ 57,160,834.

2018 In March, the Board of Directors decided to donate NT$ 63.4675

million to assist Mailiao Township Office in Mailiao County to

construct “Mailiao Township Community Education Park”; “Nan Ya

Electronic Materials (Huizhou) Co., Ltd.” expanded product line of

CCL, substrate and glass fabrics and planned to conduct a cash

capital increase with the amount of US$ 140 million; the merge of

Nan Ya Plastics (Nantong) Co., Ltd. and Nan Ya Plastics Film

(Nantong) Co., Ltd. as well as Nan Ya Plastics (Huizhou) Co., Ltd.

and Nan Ya Plastics Film (Huizhou) Co., Ltd. were both approved by

the Investment Commission (MOEA) in May.

In May, the Company planned to apply an increase investment of

“Formosa Synthetic Rubber (Hong Kong) Corp., Ltd.” with the

amount of US$ 65 million to the Investment Commission (MOEA);

the Company planned to purchase office building from TransGlobe

18

Life Insurance Inc. and Meifu Construction Co., Ltd.

In November, Kung San site and the subsidiary of PFG Fiber Glass

Corp. were all awarded the 2018 annual greenhouse gas voluntary

reduction by the Bureau of Labor.

2019 In March, the Board of Directors decided to increase investment to

“FG INC” by US$ 15 million according to the investment

framework ; expand PET release film production equipment in

Shulin site, New Taipei City.

In May, the Board of Directors decided to set up the first “Corporate

Governance Officer” of the Company.

In August, the Board of Directors decided to increase investment to

“Formosa Resources Corporation” by US$81.25 million ; “Nan Ya

Plastics (Ningbo) Co., Ltd.” expanded product line of BPA and

planned to conduct a cash capital increase with the amount of US$

80 million.

In November, Kung San site won awarded the 2019 annual

greenhouse gas voluntary reduction by the Bureau of Labor.

In December, the Board of Directors decided to increase investment

to “Formosa Synthetic Rubber Corp.” by NT$46 million.

19

III. Corporate Governance

3.1 Organization

3.1.1 Organization Structure

R & D Center

Plant 3 of ChiayiPlant 2 of RenwuRigid PVC Film Plant 1 of HsinkangPlant 1 of ShulinSales Dept. 1,2,3

Plastics 1st Division

Management office

Safety & Health Dept.Resource Recycling Dept.Accounting Dept.Materials Dept.

Taipei Administration Dept.Shipping Dept.

Switchgear PlantMachinery Plant of Chiayi Power Plant of Linkou Power Plant of Shulin Power Plant of Chiayi Power Plant of Jinxing

Electro Design Dept. 1,2,3

Switchgear Sales Dept.Maintenance Dept. 1,2,3Predictive Maintenance Dept.

Machine Design Dept. 1,2,3

Engineering Dept. 1,2,3

Eng. & Const. Division

Management office

Polyester Film Plant 1, 2Polyester Release Film PlantSales Dept.

Polyester Film Division

Management office

Staple Fiber PlantDyeing & Finishing PlantSpin & Texture Plant 1,2,3,4Utilities PlantSales Dept. 1,2

Polyester Fiber Division

Management office

Glass Fabrics Plant 1,2,3,4Copper Foil Plant 1,2,3 CCL Plant 1, 3 of HsinkangEPOXY PlantLCD Plant 1,2Plant 2,3 of ShulinColor Filter PlantMaintenance Dept. 3,4,5Technique Dept. 1,2,3,4,5Quality Assurance Dept. 4,5

Electronic Materials Division

Management office

EG PlantSales Dept.

Petrochemicals 3rd Division

Management office

BPA PlantH2O2 Plant1,4BG PlantMA PlantSales Dept.

Petrochemicals 2nd Division

Management office

Plasticizer PlantINA Plant2EH PlantPA PlantSales Dept.

Petrochemicals 1st Division

Management office

Plant of LinkouPlant 1 of RenwuPlant of LinyuanPlant 1,2&4 of ChiayiEngineering Plastics PlantSales Dept. 1,2,3

Plastics 3rd Division

Management office

Window & Door Frame Plant 1,2Sales Dept. 1,2Plastics 2nd Division

Management office

Shareholders’Meeting

Board of Directors

Chairman

President

Remuneration Committee

Nan Ya Plastics Corp.

Audit Committee

Internal Auditing Office

President’s Office

Chiayi Administration Dept.Kaohsiung Administration Dept.Mailiao Administration Dept.

Sales Dept. 1,2,3,4,5

20

3.1.2 Major Corporate Functions

(1) Plastics 1st Division

Production and sales of flexible PVC film, PVC leather, rigid PVC film, metallized film,

A-PET film, PP synthetic paper, synthetic material, non-woven, PU synthetic leather, etc.

(2) Plastics 2nd Division

Production and sales of plastic door and window, SMC door, sound insulation door, etc.

(3) Plastics 3rd Division

Production and sales of rigid PVC pipe, film products, injected products, extruded products,

tile products, PP synthetic paper, PVC compound, engineering plastics, UP resin, etc.

(4) Petrochemicals 1st Division

Production and sales of plasticizers and their upper stream raw materials such as PA, 2EH, etc.

(5) Petrochemicals 2nd Division

Production and sales of chemical raw materials, i.e. BPA, 1,4BG, MA, etc.

(6) Petrochemicals 3rd Division

Production and sales of EG products.

(7) Electronic Materials Division

Production and sales of copper clad laminate, epoxy resin, glass fabrics, copper foil, LCD,

capacitive touch panel, etc.

(8) Polyester Fiber Division

Production and sales of polyester fiber, PET bottle resin, etc.

(9) Polyester Film Division

Production and sales polyester film, polyester release film, etc.

(10) Eng. & Const. Division

Design, production and sales of mechanical equipment; production and sales of types of

switchgear and public flow systems.

21

3.2 Directors, Supervisors and Management Team

3.2.1 Directors

2020.04.14

Title (Note 1)

Nationality/

Place of

Incorporation

Name Gender Date

Elected

Term

(Years)

Date First

Elected

(Note 2)

Shareholding

when Elected

Current Shareholding

Spouse & Minor Shareholding

Shareholding by Nominee

Arrangement Experience

(Education)

(Note 3)

Director’s Current Position

at NPC and Other Companies

Executives or Directors who are Spouses or within Two

Degrees of Kinship Remarks

(Note 4)

Shares (%) Shares (%) Shares (%) Shares (%) Title Name Relation

Chairman R.O.C. Chia-Chau Wu Male 2019.06.12 3 1986.04.07 79,030 - 79,030 - 55,939 - 0 0

B.S. in Business

Administration,

National Chengchi

University

Chairman of Nanya Technology

Corp. and Nan Ya PCB Corp. None None None

N/A

Managing

Director R.O.C.

Wen-Yuan

Wong Male 2019.06.12 3 2007.06.22 38,206,752 0.48 37,263,311 0.47 310,457 - 0 0

Master Degree in

Industrial Engineering,

University of Houston,

USA

Chairman of Chinese National

Federation of Industries, Director of

Formosa Chemicals & Fibre Corp.,

Formosa Taffeta Co., Ltd., and

Formosa Advanced Technologies

Co., Ltd.

Managing

Director

Wen-Chiao

Wang Brother

Managing

Director R.O.C.

Formosa

Petrochemical

Corp.

-

2019.06.12 3

2007.06.22 179,214,423 2.26 179,214,423 2.26 0 0 0 0 B.S. in Mechanical

Engineering,

University of London

Managing Director of Formosa

Plastics Corp., Formosa Chemicals

& Fibre Corp. and Formosa

Petrochemical Corp.

Chairman of Formosa Plastic Marine

Corp. and Nan Ya Photonics Inc.

Managing

Director

Wen-Yuan

Wong Brother

Representative

Wen-Chiao

Wang

Male 2007.06.22 884,044 0.01 884,044 0.01 50,600,000 0.64 0 0

Managing

Director R.O.C.

Ruey-Yu

Wang Female 2019.06.12 3 2007.06.22 19,052,421 0.24 19,052,421 0.24 0 0 0 0

M.S. in International

Business Management,

National Taiwan

University

Managing Director of Formosa

Chemicals & Fibre Corp.

Chairman of Formosa Biomedical

Technology Corp. and Formosa

Technologies Corp.

Director Kuei-Yung

Wang Sister

Managing

Director

(Independent

Director)

R.O.C. Chih-Kang

Wang Male 2019.06.12 3 2009.06.11 0 0 0 0 0 0 0 0

Ph.D. in Business

Administration, Texas

A&M University, USA

Chairman of CTBC Venture Capital

Co., Ltd. and Taiwan Institution of

Economic Research

Independent Director of Formosa

Sumco Technology Corp.

None None None

22

Title (Note 1)

Nationality/

Place of

Incorporation

Name Gender Date

Elected

Term

(Years)

Date First

Elected

(Note 2)

Shareholding

when Elected





(Education)

(Note 3)





(Note 4)


Independent

Director R.O.C. Yi-Fu Lin Male 2019.06.12 3 2016.06.23 0 0 0 0 3,000 - 0 0

B.A. in Accounting and

Statistics, National

Chengchi University

Independent Director of Taishin

Financial Holding Co., Ltd.,

Swissray Global Healthcare Holding

Ltd. and Pan German Universal

Motors Ltd.

None None None

N/A

Independent

Director R.O.C. Yun-Peng Chu Male 2019.06.12 3 2011.06.21 1,199 - 1,199 - 0 0 0 0

Ph.D. in Economics,

University of

Maryland, USA

Independent Director of Taiwan

Land Development Corp. and China

Petrochemical Development Corp.

None None None

Director R.O.C. Ming-Jen

Tzou Male 2019.06.12 3 1998.05.22 188,742 - 188,742 - 0 0 0 0

Chemical Engineering,

Provincial Taipei

Institute of Technology

President of NPC

Director of Nanya Technology Corp.

and Nan Ya Printed Circuit Board

Corp.

None None None

Director R.O.C.

Formosa

Chemicals &

Fibre

Corporation

-

2019.06.12 3

2007.06.22 413,327,750 5.21 413,327,750 5.21 0 0 0 0

Ph.D. in Law, Chinese

Culture University

Vice President of Contemporary

Taiwan Development Foundation

Independent Director of WIN

Semiconductors Corp. and Capital

Securities Corp.

Director of East-Tender

Optoelectronics Corp.

None None None

Representative

Shen-Yi Lee Male 2007.06.22 0 0 0 0 26,509 - 0 0

Director

(Note 6) R.O.C.

Formosa

Plastics

Corporation

-

2019.06.12 3

2007.06.22 783,356,866 9.88 783,356,866 9.88 0 0 0 0 B.S. in Electrical

Engineering, Tatung


Advisor, NPC

Director of Nan Ya Electronic

Materials (Kunshan) Co., Ltd

None None None

Representative

Zo-Chun Jen Male 1989.04.14 303,377 - 303,377 - 167,852 - 0 0

Director 0.14 11,164,271 0.14 3,068,086 0.04 0 0Director R.O.C. Kuei-Yung

Wang Female 2019.06.12 3 2007.06.22 11,164,271 0.14 11,164,271 0.14 3,068,086 0.04 0 0

B.S. in Chemistry,

University of London

Senior Vice President of NPC

Director of Nan Ya Plastics Corp.

U.S.A

Managing

Director

Ruey-Yu

Wang Sister

23

Title (Note 1)

Nationality/

Place of

Incorporation

Name Gender Date

Elected

Term

(Years)

Date First

Elected

(Note 2)

Shareholding

when Elected





(Education)

(Note 3)





(Note 4)


Director

(Note 4) R.O.C. Fong-Chin Lin Male 2019.06.12 3 1992.04.30 25,458 - 25,458 - 43,590,327 0.55 0 0

M.S. in Accounting,

National Chengchi

University

Senior Vice President, NPC

Director of Nan Ya Plastics (Hong

Kong) Corp.

Managing

Director

Managing

Director

Wen-Yuan

Wong

Wen-Chiao

Wang

Affinity

N/A

Director R.O.C. Sin-Yi Huang Male 2019.06.12 3 2016.06.23 806 - 806 - 572 - 0 0

Chemical Engineering,

Ming Chi Institute of

Technology

Senior Vice President, NPC

Director of Nan Ya Draw-Textured

Yarn (Kunshan) Co., Ltd

None None None

Director R.O.C. Cheng-Chung

Lee Male 2019.06.12 3 2019.06.12 0 0 0 0 0 0 0 0

Vice President, NPC

B.S. in Chemical

Engineering, National

Central University


Materials (Kunshan) Co., Ltd. None None None

Director R.O.C.

Freedom

Internation

Enterprise

Company

-

2019.06.12 3

2007.06.22 3,287,472 0.04 3,287,472 0.04 0 0 0 0 B.A. in Business

Administration,

Tunghai University

Director of Fu Tak Investment

Company None None None

Representative

Ching-Cheng

Chang

Male 2007.06.22 1,563,989 0.02 1,563,989 0.02 0 0 0 0

Note 1: In the case of institutional shareholders, the names and representatives should be indicated respectively (for representatives, the names of institutional shareholders they represent should be indicated) and filled in the table.

Note 2: Any disruption in duty as a Director or Supervisor after the date of their election should be included in a separate note.

Note 3: The experience relevant to current position i.e. held a position at the accounting firm of its auditing CPAs or at an affiliated enterprise its titles and duties should be clearly stated.

Note 4: The Chairman and the President or equivalent position (the top manager) are the same person, or relatives of each other, such as spouse or within one degree of kinship, should explain the reasons, rationality, necessity and

corresponding measures (such as increasing the number of Independent Directors, more than half of the Directors have not served as employees or managers, etc.: N/A

Note 5: Director Fong-Chin Lin was not re-elected at the shareholders' meeting in 2007, but was elected at the shareholders' meeting on June 24th, 2013.

Note 6: Director Zo-Chun Jen was not re-elected at the shareholders' meeting in 1995, but was elected at the shareholders' meeting on June 24th, 2013.

Note 7: “-” indicates the shareholding ratio is less than 0.01%.

24

Major shareholders of the institutional shareholders 2020.04.14

Name of Institutional Shareholders

(Note 1)

Major Shareholders

(Note 2)


1. Formosa Plastics Corp. (28.56%)

2. Formosa Chemicals & Fibre Corp. (24.15%)

3. Nan Ya Plastics Corp. (23.11%)

4. Chang Gung Medical Foundation (5.79%)

5. Formosa Taffeta Co., Ltd. (3.83%)

6. Standard Chartered Bank (Taiwan) Ltd. In Custody for Genesis Equity Group

Inc. (0.60%)

7. Chunghwa Post Co., Ltd. (0.52%)

8. HSBC Bank (Taiwan) Limited In Custody for Power Unlimited Corporation

(0.51%)

9. Standard Chartered Bank (Taiwan) Ltd. In Custody for Central Capital

Management Inc. (0.49%)

10. HSBC Bank (Taiwan) Limited In Custody for Pacific Light and Power Corp.

(0.48%)

Formosa Plastics Corp.


2. Formosa Chemicals & Fibre Corp. (7.65%),

3. Credit Suisse AG- Credit Suisse Singapore Branch (6.26%)


5. Chindwell International Investment Corp. (4.16%)

6. Vanson International Investment Co., Ltd. (3.05%)

7. Formosa Petrochemical Corp. (2.07%)

8. Citibank Taiwan Limited In Custody for Government of Singapore (1.46%)

9. Ming Chi University of Technology (1.43%)

10. Nan Shan Life Insurance Co., Ltd. (1.40%)

Formosa Chemicals & Fibre Corp.


2. Chindwell International Investment Corp. (6.35%)

3. Vanson International Investment Co., Ltd. (3.80%)



6. Wen-Yuan Wong (2.20%)

7. Consolidated Power Development Corp. (1.63%)

8. Standard Chartered Bank (Taiwan) Ltd. In Custody for Genesis Equity Group

Inc. (1.47%),

9. HSBC Bank (Taiwan) Limited In Custody for Consolidated Power Development

Corp. (1.35%)

10. Bank of Taiwan in Custody for Wang Chang-Gung Charitable Trust Fund

(1.21%)

Freedom Internation Enterprise

Company Freedom International Enterprise Inc. (100%)

Note 1: Directors and supervisors acting as the representatives of institutional shareholders shall indicate the names of the institutional shareholders.

Note 2: The name of major shareholders of the institutional shareholders (its 10 largest shareholders) and the holding percentage of each shall be noted. If any of

those shareholders is an institutional shareholder should fill out the following table.

Note 3: If the institutional shareholder is not a company, the names and shareholding ratio of shareholders to be disclosed are the names of people who contributed or donated the capital and the ratio of their contribution or donation.

25

Major shareholders of the Company’s major institutional shareholders 2020.04.14


(Note 1)

Major Shareholders

(Note 2)

Chang Gung Medical Foundation




4. Mr. Wang Yung-Tsai (12.35%)

5. Mr. Wang Yung-Ching (8.08%)

Formosa Taffeta Co., Ltd.



3. Yu Yuang Textile Co., Ltd. (2.55%)

4. Min- Xiong Lai (2.43%)

5. Chang Gung University (2.20%)

6. Chang Gung University of Science and Technology. (2.13%)

7. Ming Chi University of Technology (1.87%)

8. Taiwan Life Insurance Co., Ltd. (1.59%)

9. Cathay Life Insurance Co., Ltd. (1.53%)

10. Asia Pacific Investment Co., Ltd. (1.43%)

Standard Chartered Bank (Taiwan) Ltd. In Custody for

Genesis Equity Group Inc. Investment Account

Chunghwa Post Co., Ltd. Ministry of Transportation and Communications, R.O.C.

HSBC Bank (Taiwan) Limited In Custody for Power

Unlimited Corporation Investment Account

Standard Chartered Bank (Taiwan) Ltd. In Custody for

Central Capital Management Inc. Investment Account

HSBC Bank (Taiwan) Limited In Custody for Pacific

Light and Power Corporation Investment Account

Credit Suisse AG- Credit Suisse Singapore Branch Investment Account

Chindwell International Investment Corp. Everred Corporate, Inc. (100.00%)

Vanson International Investment Co., Ltd. Landmark Capital Holdings Inc. (100.00%)

Citibank Taiwan Limited In Custody for Government of

Singapore Investment Account

Ming Chi University of Technology

1. Mr. Wang Yung-Ching (43.26%)

2. Mr. Wang Yung-Tsai (38.84%)


4. Chindwell International Investment Corp. (3.74%)5. Formosa Chemicals & Fibre Corp. (1.66%)

26


(Note 1)

Major Shareholders

(Note 2)

Nan Shan Life Insurance Co., Ltd.

1. First Commercial Bank Trustee Account For Representative of

Ruen Chen Investment Ho5lding Co., Ltd (60.01%)

2. Ruen Chen Investment Holding Co., Ltd. (29.54%)

3. Y. T. Du (2.90%)

4. Run Tai Sing Co., Ltd. (0.30%)

5. Ruentex Dyeing and Textile Co., Ltd. (0.27%)

6. Ruentex Development Co., Ltd. (0.23%)

7. Ruentex Industries Ltd. (0.21%)

8. Taishin International Bank Trust Account of Nan Shan Life

Insurance Co., Ltd. (0.21%)

9. Yuan Hsin Investment Co. Ltd. (0.16%)

10. Ruentex Leasing Co., Ltd. (0.13%)

Consolidated Power Development Corp. Cabo de Roca Corporation (100%)

HSBC Bank (Taiwan) Limited In Custody for

Consolidated Power Development Corp. Investment Account

Bank of Taiwan in Custody for Wang Chang-Gung

Charitable Trust Fund Trust Account

Freedom International Enterprise Inc. United Rich Investment Holding Ltd. (100%)

Note 1: If any major shareholder is a corporation, its corporate name should be stated.

Note 2: The major shareholders of the corporation (its 10 largest shareholders) and the holding percentage of each shall be noted. Note 3: If the institutional shareholder is not a company, the names and shareholding ratio of shareholders to be disclosed are the names of people who contributed

or donated the capital and the ratio of their contribution or donation.

Note 4: Ratio of the contribution or donation is calculated by the cumulative amount of donations over the years and the amount of donated stocks is calculated based on the face value.

27

Directors’ Professional Qualifications and Independent Analysis

Criteria

Name

(Note 1)

Meet one of the following professional

qualification requirements, together

with at least five years work experience

Independence Criteria (Note 2)

Number of

other

public

companies’ in

which the

individual is

concurrently

serving as an

Independent

Director

An instructor or

higher position

in a department

of commerce,

law, finance,

accounting, or

other academic

department

related to the

business needs

of the Company

in a public or

private junior

college, college

or university

A Judge, public

prosecutor,

attorney, certified

public

accountant, or

other professional

or technical

specialist who

has passed a

national

examination and

been awarded a

certificate in a

profession

necessary for the

business of the

Company

Have work

experience in

the areas of

commerce,

law, finance, or

accounting,

or otherwise

necessary for

the business

of the

Company

1 2 3 4 5 6 7 8 9 10 11 12

Chia-Chau Wu 0

Wen-Yuan Wong 0

Formosa Petrochemical

Corp.

Wen-Chiao Wang

0

Ruey-Yu Wang 0

Chih-Kang Wang 1

Yi-Fu Lin 3

Yun-Peng Chu 2

Ming-Jen Tzou 0

Formosa Chemicals &

Fibre Corporation

Shen-Yi Lee

2

Formosa Plastics

Corporation

Zo-Chun Jen

0

Kuei-Yung Wang 0

Fong-Chin Lin 0

Sin-Yi Huang 0

Cheng-Chung Lee 0

Freedom Internation

Enterprise Company

Ching-Cheng Chang

0

Note 1: The columns are adjusted along with the actual amounts.

Note 2: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during the term of office.

(1) Not an employee of the Company or any of its affiliates.(2) Not a director or supervisor of the Company or any of its affiliates. (Not applicable in cases where the person is an independent director appointed in accordance

with the Act or laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent or subsidiary or a subsidiary of the

same parent.) (3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names,

in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.

(4) Not a managerial officer under (1), spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the personsunder (2) and (3).

(5) Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or

who holds shares ranking in the top five holdings, or who designates its representative to serve as a director or supervisor of the company under Article 27,

paragraph 1 or 2 of the Company Act. (Not applicable in cases where the person is an independent director appointed in accordance with the Act or laws and

regulations of the local country by, and concurrently serving as such at, the Company and its parent or subsidiary or a subsidiary of the same parent.)

(6) If a majority of the company's director seats or voting shares and those of any other company are controlled by the same person: Not a director, supervisor, oremployee of that other company. (Not applicable in cases where the person is an independent director appointed in accordance with the Act or laws and

regulations of the local country by, and concurrently serving as such at, the Company and its parent or subsidiary or a subsidiary of the same parent.)

(7) If the chairman, president, or person holding an equivalent position of the Company and a person in any of those positions at another company or institution are the same person or are spouses: Not a director (or governor), supervisor, or employee of that other company or institution. (Not applicable in cases where the

person is an independent director appointed in accordance with the Act or laws and regulations of the local country by, and concurrently serving as such at, the

Company and its parent or subsidiary or a subsidiary of the same parent.) (8) Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business

relationship with the Company. (Not applicable in cases where the specified company or institution holds 20% or more and not exceed 50% of the total number

of outstanding shares of the Company and the person is an independent director appointed in accordance with the Act or laws and regulations of the local country

28

by, and concurrently serving as such at, the Company and its parent or subsidiary or a subsidiary of the same parent.)

(9) Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides

commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company for which the provider in the past 2 years has

received cumulative compensation exceeding NT$500,000, or a spouse thereof; provided, these restrictions do not apply to any member of the remuneration

committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Securities

and Exchange Act or to the Business Mergers and Acquisitions Act or related laws or regulations. (10) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.

(11) Not being any circumstances in the subparagraphs of Article 30 of the Company Act.

(12) Not being elected in the capacity of the government, a juristic person, or a representative thereof, as provided in Article 27 of the Company Act.

Note 3: The institutional shareholder is defined by its representative.

Note 4: Independent director, Chih-Kang Wang concurrently holds a position of independent director of Formosa Sumco Technology Corp.

Note 5: Independent director, Yi-Fu Lin concurrently holds a position of independent director of Taishin Financial Holding Co., Ltd., Swissray Global Healthcare

Holding Ltd. and Pan German Universal Motors Ltd. Mr. Yi-Fu Lin concurrently hold a position of independent director of Taishin Financial Holding Co.,

Ltd. and Taishin International Bank Co., Ltd; the two entities are deemed to be one according to the administrative rule published on Mar. 19, 2007 by the

Financial Supervisory Commission R.O.C (Taiwan)

Note 6: Independent director, Yun-Peng Chu concurrently holds a position of independent director of Taiwan Land Development Corp. and China Petrochemical Development Corp.

Note 7: Independent director, Shen-Yi Lee concurrently holds a position of independent director of WIN Semiconductors Corp. and Capital Securities Corp.

29

3.2.2 Management Team 2020.04.14

Title (Note 1)

Nationality Name Gender Date

Effective

Shareholding Director’s

Spouse & Minor

shareholding


Arrangement Experience（Education）

(Note 2)

Current Positions

at Other Companies

Managers who are Spouses or Within Two degrees of

Kinship Remarks

Shares % Shares % Shares % Title Name Relation

President R.O.C Ming-Jen

Tzou Male 2015.07.01 188,742 - 0 0 0 0

Executive Vice President, NPC

Chemical Engineering, Provincial

Taipei Institute of Technology

Director of Nan Ya Technology

Co., Ltd. and Nan Ya PCB Corp. None None None

N/A

Senior Vice

President R.O.C

Fong-Chin

Lin Male 2003.11.04 25,458 - 43,590,327 0.55 0 0

Vice President, NPC

M.S. in Accounting, National

Chengchi University

Director of Nan Ya Plastics (Hong

Kong) Co., Ltd. None None None

Senior Vice

President R.O.C Sin-Yi Huang Male 2016.03.24 806 - 572 - 0 0

Vice President, NPC

Chemical Engineering, Ming Chi



Yarn (Kunshan) Co., Ltd. None None None

Senior Vice

President R.O.C

Kuei-Yung

Wang Female 2018.03.23 11,164,271 0.14 3,068,086 0.04 0 0

Vice President, NPC

B.S. in Chemistry, University of

London

Director of Nan Ya Plastics Corp.

USA None None None

Senior Vice

President R.O.C

Cheng-Chung

Lee Male 2017.06.20 0 0 0 0 0 0

Vice President, NPC

B.S. in Chemical Engineering,

National Central University


Materials (Kunshan) Co., Ltd. None None None

Senior Vice

President R.O.C

Chung-Yueh

Shih Male 2019.03.20 8,080 - 0 0 0 0

Vice President, NPC


National Taiwan University

Director of Nan Chung

Petrochemical Corp. None None None

Vice

President R.O.C

Shiou-Yeh

Sheng Male 2014.05.13 0 0 0 0 0 0

Assistant Vice President, NPC



Director of Nan Ya Plastics

(Nantong) Co., Ltd. None None None

Vice

President R.O.C

Pau-Chang

Liu Male 2019.03.20 6,791 - 4,000 - 0 0


B.A. in Accounting, Soochow

University

None None None None

Vice

President R.O.C

Tzong-Yang

Su Male 2014.05.13 3,511 - 3,000 - 0 0



Chinese Culture University


(Guanzhou) Co., Ltd. None None None

Vice

President R.O.C

Yu-Lung

Huang Male 2018.05.09 4,020 - 0 0 0 0


Mechanical, Provincial Kaohsiung



(Ningbo) Co., Ltd. None None None

Vice

President R.O.C

Yu-Sheng

Chen Male 2017.06.20 0 0 0 0 0 0


Chemical Engineering, Provincial

Taipei Institute of Technology

Vice President of Nan Ya Corp.,

Texas None None None

Vice

President R.O.C Kuo-Wei Lin Male 2017.06.20 0 0 0 0 0 0




President of Wen Fung Industrial

Co., Ltd. and Wenling Technology

Co., Ltd

None None None

30

Title (Note 1)

Nationality Name Gender Date

Effective

Shareholding Director’s

Spouse & Minor

shareholding

Shareholding by

Nominee Arrangement

Experience（Education） (Note 2)

Current Positions

at Other Companies

Managers who are Spouses or

Within Two degrees of Kinship Remarks

Shares % Shares % Shares % Title Name Relation

Vice

President R.O.C

Yang-Doun

Chien Male 2016.03.24 0 0 0 0 0 0





Yarn (Kunshan) Co., Ltd. None None None

N/A

Vice

President R.O.C

Wen-Cheng

Yang Male 2018.05.09 0 0 0 0 0 0




None None None None

Vice

President R.O.C

Yung-Fang

Chang Male 2015.11.11 0 0 28,617 - 0 0


Electrical Engineering, Ming Chi


Director of Nan Ya Electric

(Nantong) Co., Ltd. None None None

Financial

Officer R.O.C

Ming-Jong

Yeh Male 2013.03.27 18,426 - 0 0 0 0

President’s Office Vice President,

NPC

B.S. in Accounting, Soochow

University

Supervisor of Wen Fung Industrial

Co., Ltd. None None None

Corporate

Governance

Officer

R.O.C Wen-Pin

Cheng Male 2019.05.10 734 - 0 0 0 0

President’s Office Assistant Vice

President, NPC

B.S. in Business Administration,

Feng Chia University

None None None None

Accounting

Officer R.O.C Li-Ta Pai Male 2013.03.27 15,541 - 0 0 0 0

Accounting Department Manager,

NPC

M.S. in Accounting, Soochow

University

Supervisor of PFG Fiber Glass

Corp. and Wenling Technology

Corp.

None None None

Note 1: President, Vice President, Assistant Vice President, Department Manager, and Branch Agencies and persons who hold positions equivalent to President, Vice President, Assistant Vice President or Manager shall be disclosed. Note 2: The experience relevant to current position i.e. held a position at the accounting firm of its auditing CPAs or at an affiliated enterprise its titles and duties should be clearly stated.

Note 3: The Chairman and the President or equivalent position (the top manager) are the same person, or relatives of each other, such as spouse or within one degree of kinship, should explain the reasons, rationality, necessity and corresponding

measures (such as increasing the number of Independent Directors, more than half of the Directors have not served as employees or managers, etc.: N/A Note 4: The Company does not provide expenses for cars, housing, and other personal expenses.

Note 5: “-” indicates the shareholding ratio is less than 0.01%.

31

3.2.3 Boards of Directors and Major Managers Succession Plan of NPC (1) The Company election of directors shall be conducted in accordance with the candidate nomination system and that shareholders shall elect

directors from among those listed in the slate of director nominees. Now the directors are nominated by major shareholders and elected by

shareholders meeting. Each director has the professional ability such as operating management, industrial knowledge and international outlook, etc.

The newly appointed director will be arranged 12-hour refresher courses in the year he takes office, and will be provided regulations manuals

which stated relevant laws and regulations and precautions for the directors and insiders. To improve professionalism for members in Board of

Directors during their tenure and assist them to equip various professional knowledge required to perform their duties, the Company arranges

refresher courses at least 6 hours per year after excluding the professional competence of each director. The courses covering business, legal affairs

and corporate social responsibility etc. which are all related to the nature of the Company's industry.

(2) The Company cultivates the internal senior managers by arranging them join into the Board of Directors to let them get familiar with the

operation of the Board of Directors. The Senior Vice President, Cheng-Chung Lee joined the Board of Directors to take over the retired director

during the re-elected of Board of Directors in 2019.

(3) In needs of perpetual business operation and ensuring the development of major managing talents can successfully take over, the Company has

set up Talent Development Rule. The rule specifies the criteria of development candidates, election principles, the way of development

conduction and the review of promotion criteria. The amount of manager development candidates of each department shall at least by 2 to for

future optimum selection. In order to promote excellent management and executives in 2019, the Vice President, Chung-Yueh Shih was promoted

to Senior Vice President; Assistant Vice President, Pao-Chang Liu was promoted to Vice President to undertake the more important duties.

(4) If the development candidate is lack of experienced, the Company will increase his or her experiences by job rotation or increasing his or her

responsible business scope. The annual working achievement of development candidates shall be included in periodic assessment in accordance

with “Assessment Rule” and the periodic working assessment shall be the base of year-end performance appraisal assessment. If the year-end

performance appraisal of the development candidates were rated as excellent, it shall be the reference for optimum promotion.

(5) In 2019, in order to progress the managers’ and executives’ understanding of important regulations of other business and abnormal cases,

supervise the department responsibilities and ensure that the cultivation of talents can be successfully taken over and continued, the Company

arranges nine cross-functional training courses, including "production", "business", "project improvement", "engineering", "maintenance",

"materials", "finance", “personnel affairs” and "Work Safety". In 2019, 172 people have attended the courses and accumulated 603 training hours.

32

3.3 Remuneration of Directors, Supervisors, President, and Vice Presidents

3.3.1 Remuneration of Directors and Supervisors

3.3.1.1 Remuneration of Directors and Independent Directors Unit: NT$ thousands; 2019.12.31

Title Name

Director’s Remuneration Total

Remuneration

(A+B+C+D)

as a % of

2018 Net

Income

(Note 2)

Compensation Received by a Director who is an employee of NPC

or of NPC’s consolidated subsidiaries Total

Compensation

(A+B+C+D+E+F+G)

as a % of 2018 Net Income

(Note 10)

Co

mp

ensatio

n P

aid to

Directo

rs from

an In

vested

Co

mp

any

oth

er than

NP

C

′s Su

bsid

iary o

r the P

arent

Co

mp

any

(No

te 11

)

Base

Compensation

(A)(Note 2)

Severance

Pay and

Pensions (B)

Directors

Compensation

(C)

(Note 3)

Allowances

(D)

(Note 4)

Salaries,

Bonuses

and

Allowances

(E) (Note 5)

Severance Pay

and Pensions

(F)

Employee Compensation (G)

(Note 6)

From

NPC

Co

mp

anies in

the co

nso

lidated

finan

cial statemen

ts(No

te 7)

From

NPC

Co

mp

anies in

the co

nso

lidated

finan

cial statemen

ts(No

te 7)

From

NPC

Co

mp

anies in

the co

nso

lidated

finan

cial statemen

ts(No

te 7)

From

NPC

Co

mp

anies in

the co

nso

lidated

finan

cial statemen

ts(No

te 7)

From

NPC

Co

mp

anies in

the co

nso

lidated

finan

cial statemen

ts(No

te 7)

From

NPC

Co

mp

anies in

the co

nso

lidated

finan

cial statemen

ts(No

te 7)

From

NPC

Co

mp

anies in

the co

nso

lidated

finan

cial statemen

ts(No

te 7)

From

NPC

Companies in the

consolidated

financial

statements

(Note 7) From

NPC

Co

mp

anies in

the co

nso

lidated

fin

ancial statem

ents(N

ote 7

)

Cash Stock Cash Stock

Directo

r

Chairman Chia-Chau Wu

17,915 17,915 108 108 0 0 760 970 0.0814 0.0823 49,242 49,242 534 534 53 0 53 0 0.2973 0.2982 56,093

Managing Director Wen-Yuan Wong

Managing Director


Representative

Wen-Chiao Wang

Managing Director Ruey-Yu Wang

Director Ming-Jen Tzou

Director

Formosa Chemicals & Fibre

Corporation Representative

Shen-Yi Lee

Director

(Note)

Formosa Plastics Corporation

Representative

Chin-Jen Wu

Director

(Note)


Representative

Zo-Chun Jen

Director Kuei-Yung Wang

Director Fong-Chin Lin

Director Sin-Yi Huang

Director Cheng-Chung Lee

Director

Freedom Internation

Enterprise Company

Ching-Cheng Chang In

dep

end

ent

Directo

r

Managing Director

(Independent Director) Chih-Kang Wang

5,466 5,466 0 0 0 0 510 510 0.0259 0.0259 0 0 0 0 0 0 0 0 0.0259 0.0259 0 Independent Director Yi-Fu Lin

Independent Director Yun-Peng Chu

33

Note: Formosa Plastics Corporation’s representative, Chin-Jen Wu resigned after the director re-election on June 12, 2019, and the representative was replaced by director Zo-Chun Jen.

1. Please state the policy, system, standards and structure of independent directors ’remuneration payment, and explain the relevance to the amount of remuneration according to the responsibilities, risks and time invested:

The Company does not provide compensation for directors. Independent directors' remuneration is based on a fixed payment system. The main consideration is to maintain its independence and facilitate its supervision function. The

Company pays a fixed remuneration to independent directors based on the principle of NT$1.8 million and the transportation allowance is NT$10,000 each time according to the attendance of the meeting. According to the Company’s

“Regulations and Scope of Independent Directors’ Duties”, the duties and risks includes: Supervise the fair presentation of the Company's financial statements, the hiring (dismissal), independence and performance of CPA of the Company,

the effective implementation of the Company's internal control system, the compliance with relevant laws and regulations of the Company, the existing or potential risk management and control of the Company, etc. The Company has

insured director liability insurance for independent directors. The independent director attends at least 6 times of Board of Directors, 4 times of Audit Committee and 2 times of Remuneration Committee. And in order to implement the

operational integrity, the independent directors review the internal audit reports monthly, and communicate with internal audit officer and CPA regarding internal control and financial statements regularly. More communication details please

refer to “3.4.2 Audit Committee Meeting Status or the Participation of Supervisors in the Operations of the Board of Directors”.

2. Other than disclosure in the above table, Directors remunerations earned by providing services (e.g. providing consulting services as a non-employee) to NPC and all consolidated entities in the 2018 financial statements: None.

34

Range of Remuneration Paid to Directors

Range of Remuneration

Name of Directors

Total of Remuneration (A+B+C+D) Total of Remuneration (A+B+C+D+E+F+G)

From

NPC

(Note 8)

Companies in the consolidated

financial statements

(Note 9) H

From

NPC

(Note 8)

The parent company and all

re-invested businesses

(Note 11) I

Under NT$ 1,000,000

Wen-Yuan Wong, Wen-Chiao Wang,

Ruey-Yu Wang, Ming-Jen Tzou,

Kuei-Yung Wang, Chin-Jen Wu,

Shen-Yi Lee, Fong-Chin Lin,

Zo-Chun Jen, Sin-Yi Huang, Cheng-Chung Lee, Ching-Cheng

Chang, Formosa Petrochemical

Corp., Formosa Plastics

Corporation, Formosa Chemicals &

Fibre Corporation


Ruey-Yu Wang, Ming-Jen Tzou,

Kuei-Yung Wang, Chin-Jen Wu,

Shen-Yi Lee, Fong-Chin Lin,

Zo-Chun Jen, Sin-Yi Huang,

Cheng-Chung Lee, Ching-Cheng

Chang, Formosa Petrochemical

Corp., Formosa Plastics

Corporation, Formosa Chemicals &

Fibre Corporation


Ruey-Yu Wang, Chin-Jen Wu,

Shen-Yi Lee, Ching-Cheng Chang,

Formosa Petrochemical Corp.,

Formosa Plastics Corporation,

Formosa Chemicals & Fibre

Corporation

Chin-Jen Wu, Shen-Yi Lee,

Ching-Cheng Chang, Formosa

Petrochemical Corp., Formosa

Plastics Corporation, Formosa

Chemicals & Fibre Corporation

NT$ 1,000,000～NT$ 1,999,999

Yi-Fu Lin, Yun-Peng Chu, Freedom

Internation Enterprise Company







NT$ 2,000,000～NT$ 3,499,999 Chih-Kang Wang Chih-Kang Wang Chih-Kang Wang Chih-Kang Wang

NT$ 3,500,000～NT$ 4,999,999 None None None None

NT$ 5,000,000～NT$ 9,999,999 None None

Kuei-Yung Wang, Fong-Chin Lin,


Cheng-Chung Lee

Kuei-Yung Wang, Fong-Chin Lin,


Cheng-Chung Lee

NT$ 10,000,000～NT$ 14,999,999 None None Ming-Jen Tzou Ming-Jen Tzou

NT$ 15,000,000～NT$ 29,999,999 Chia-Chau Wu Chia-Chau Wu Chia-Chau Wu Chia-Chau Wu, Wen-Yuan Wong,

Wen-Chiao Wang, Ruey-Yu Wang



Over NT$ 100,000,000 None None None None

Total 20 20 20 20 Note 1: Names of directors shall be listed separately (both the name of the institution and its representative shall be listed for an institutional shareholder). Also, director and independent directors shall be listed separately and

individual payments made shall be summarized and disclosed accordingly. If a .director is also the President or the Vice President, this table and the following one (3-1) or (3-2-1)and (3-2-2) shall also be completed.

Note 2: The remunerations paid to directors in the latest year (including salaries, additional pay, service pay, various prizes, rewards, etc.).

Note 3: The value of remunerations approved to be assigned to directors by the Board of Directors in the most recent year.

35

Note 4: This is the expenses incurred by directors over the past years from carrying out related tasks, including transportation, special expenditure, various types of allowances, dormitory, and company cars, among other supplies in kind).

.When houses, automobiles, and other transportation tools or expenses that are specific to individuals are provided, the nature and cost of the assets provided, the actual or market-value-based rental, the cost of gasoline, and

other .payments shall be disclosed. If a driver is assigned, please indicate the pay available for the driver but it may not be included in the calculation of remunerations. Note 5: Salaries, additional pay, service pay, various prizes, rewards, transportation, special expenditure, various allowances, dormitory, cars, and other actual items that are claimed by directors and employees (including concurrently

hold a .position of President, Vice President, other managers and employees) in the latest year. For housing, automobiles and other transportation tools or expenses that are specific to individuals, the nature and cost of the

assets provided, the .actual or market-value-based rental, the cost of gasoline and other payments shall be disclosed. If a driver is assigned, please indicate the pay available for the driver but it may not be included in the calculation of remunerations. In .addition, salaries recognized in accordance with IFRS 2: stock-based payment transaction, including employee stock option certificates restricted employee shares, and participation in

subscribing shares in cash capital increase, shall .also be included as part of the remunerations.

Note 6: Directors and employees (including concurrently hold a position of President, Vice President, other managers and employees) having claimed employee remunerations (including shares and cash) shall disclose employee remunerations .distributed through the Board of Directors in the most recent year. If it is impossible to estimate the value planned to be distributed this year, follow the actual value distributed last year and calculated

proportionally and Exhibit 1-3 .shall be completed.

Note 7: The total value of various remunerations paid to directors of the Company by all companies in the Consolidated Report (including the Company) shall be disclosed. Note 8: For the total value of various remunerations paid to each director by the Company, disclose the name of the director in the respective bracket.

Note 9: For the total value of various remunerations paid to each director of the Company by all companies (including the Company) in the Consolidated Report, disclose the name of the director in the respective bracket. Note 10: After-tax pure earnings are those indicated in the entity or individual financial report from the most recent year.

Note 11: a. The value of related remunerations claimed by directors of the Company from reinvested businesses other than subsidiaries or the parent company shall be specified in this column. (If there’s no related remuneration,

please fill in “none”) .b. In the event that directors of the Company claim related remunerations from reinvested businesses other than subsidiaries or the parent company, the said remunerations shall be combined in Column I of the remuneration

bracket table and the name of .the column shall be changed to "the parent company and all re-invested businesses."

.c. Remunerations are the compensation, rewards (including rewards for employees, directors, and supervisors) and operational expenditures claimed by supervisors of the Company who serve as the director, supervisor, or manager .at a reinvested business other than the subsidiary or the parent company.

Note 12: 108 thousand and 534 thousand in column B and F is the contribution amount of severance pay and pensions

* The content of the remunerations disclosed in this table differs from the idea of income indicated in the Income Tax Act. As such, the purpose of this table is for disclosure of information only, not for taxation.

3.3.1.2 Remuneration of Supervisors

The Company set up an audit committee to replace the Supervisors on June 23rd, 2016.

36

3.3.2 Remuneration of President and Vice Presidents Unit: NT$ thousands; 2019.12.31

Title Name

Salary (A)

(Note 2)

Severance Pay and Pensions

(B)

Bonuses and Allowances

(C) (Note 3)

Employee Compensation (D) (Note 4)

Total compensation (A+B+C+D)

as a % of 2019 net income

(Note 8)

Co

mp

ensatio

n P

aid to

Directo

rs from

an

Inv

ested C

om

pan

y o

ther th

an N

PC

′s Su

bsid

iary

or th

e Paren

t Co

mp

any

(N

ote 9

)

From NPC

Co

mp

anies in

the co

nso

lidated

fin

ancial statem

ents(N

ote 5

)

From NPC

Co

mp

anies in

the co

nso

lidated

fin

ancial statem

ents(N

ote 5

)

From NPC

Co

mp

anies in

the co

nso

lidated

fin

ancial statem

ents(N

ote 5

)

From NPC

Companies in the

consolidated financial

statements (Note 5) From

NPC

Co

mp

anies in

the co

nso

lidated

fin

ancial statem

ents(N

ote 5

)

Cash Stock Cash Stock

President Ming-Jen Tzou

45,202 45,312 1,296 1,296 49,483 49,483 97 0 97 0 0.4164 0.4169 70

Senior Vice President Fong-Chin Lin

Senior Vice President Sin-Yi Huang

Senior Vice President Kuei-Yung Wang

Senior Vice President Cheng-Chung Lee

Senior Vice President (Note1) Chung-Yueh Shih

Vice President Shiou-Yeh Sheng

Vice President(Note1) Pao-Chang Liu

Vice President Tzong-Yang Su

Vice President Yu-Lung Huang

Vice President Yu-Sheng Chen

Vice President Kuo-Wei Lin

Vice President Yang-Doun Chien

Vice President Wen-Cheng Yang

Vice President Yung-Fang Chang

Note1: Mr. Chung-Yueh Shih, NPC’s former Vice President and Pao-Chang Liu, NPC’s former Assistant Vice President were separately promoted to Senior Vice President and Vice President on March 20, 2019.

Note2: This table is to disclose the remuneration of President and Vice Presidents as of December 31, 2019

37

Range of Remuneration of President and Vice Presidents

Range of compensation

Name of President and Vice Presidents

From NPC (Note 6) The parent company and all re-invested businesses

(Note 7)E

Under NT$ 1,000,000 None None

NT$ 1,000,000～NT$ 1,999,999 None None

NT$ 2,000,000～NT$ 3,499,999 None None

NT$ 3,500,000～NT$ 4,999,999 Pao-Chang Liu, Yu-Lung Huang, Wen-Cheng Yang Pao-Chang Liu, Yu-Lung Huang, Wen-Cheng Yang

NT$ 5,000,000～NT$ 9,999,999

Fong-Chin Lin, Sin-Yi Huang, Kuei-Yung Wang,

Cheng-Chung Lee, Chung-Yueh Shih, Shiou-Yeh Sheng,

Tzong-Yang Su, Yu-Sheng Chen, Kuo-Wei Lin,

Yang-Doun Chien, Yung-Fang Chang

Fong-Chin Lin, Sin-Yi Huang, Kuei-Yung Wang,

Cheng-Chung Lee, Chung-Yueh Shih, Shiou-Yeh Sheng,

Tzong-Yang Su, Yu-Sheng Chen, Kuo-Wei Lin,

Yang-Doun Chien, Yung-Fang Chang

NT$ 10,000,000～NT$ 14,999,999 Ming-Jen Tzou Ming-Jen Tzou

NT$ 15,000,000～NT$ 29,999,999 None None

NT$ 30,000,000～NT$ 49,999,999 None None

NT$ 50,000,000～NT$ 99,999,999 None None

Over NT$ 100,000,000 None None

Total 15 15

* Regardless of their title, the information has to be disclosed as long as their ranking is equivalent to that of a President, Vice President or assistant manager.

Note1: Names of President and Vice President shall be listed separately and individual payments made shall be disclosed through a summary. If the director is also a President or Vice President, this table and the above table (1-1) or

(1-2-1) and (1-2-2) shall be completed.

Note2: Salaries, additional pay, and service pay for President and Vice President in the latest year. Note3: Various prizes, awards, transportation, special expenditure, various allowances, dormitory, cars, and other actual items provided and other compensations for President and Vice President in the latest year. For housing,

automobiles, and other transportation tools or expenses that are specific to individuals, the nature and cost of the assets provided, the actual or market-value-based rental, the cost of gasoline, and other payments shall be

disclosed. If a driver is assigned, please indicate the pay available for the driver but it may not be included in the calculation of remunerations. In addition, salaries recognized in accordance with IFRS 2: stock-based payment transaction, including employee stock option certificates, restricted employee shares, and participation in subscribing shares in cash capital increase, shall also be included as part of the remunerations.

Note4: Employee remunerations (including stock and cash) distributed to President and Vice President as approved by the Board of Directors in the latest year. If it is impossible to estimate the value planned to be distributed this year,

follow the actual value distributed last year and calculated proportionally. In addition, the attached Table 1-3 shall be completed. Note5: The total value of remunerations paid to President and Vice President of the Company by all companies in the Consolidated Report (including the Company) shall be disclosed.

Note6: Disclose each President and Vice Presidents’ name in the respective bracket according to the total value of various remunerations paid by the Company.

Note7: For the total value of various remunerations paid to each President and Vice President of the Company by all companies (including the Company) in the Consolidated Report, disclose the name of the President and Vice President in the respective bracket.

Note8: After-tax pure earnings are those indicated in the entity or individual financial report from the most recent year.

Note9: a. The value of related remunerations claimed by President and Vice President of the Company from reinvestment businesses other than subsidiaries or the parent company shall be specified in this column. (If there’s no related

remuneration, please fill in “none”)

.b. In the event that President and Vice President of the Company claim related remunerations from reinvestment businesses other than subsidiaries or the parent company, the said remunerations shall be combined in Column E

of the remuneration bracket table and the name of the column shall be changed to "the parent company and all reinvested businesses.” .c. Remunerations are the compensation, rewards (including rewards for employees, directors, and supervisors) and operational expenses, among others, claimed by President and Vice President of the Company who serve as the

director, supervisor, or manager at a reinvested business other than the subsidiary or the parent company.

Note10: 1,296 thousand in column B is the contribution amount of severance pay and pensions * The content of the remunerations disclosed in this table differs from the idea of income indicated in the Income Tax Act. As such, the purpose of this table is for disclosure of information only, not for taxation.

38

Employee Compensation of Executive Officers Unit: NT$ thousands; 2019.12.31

Note1: The name and title of the individual shall be disclosed but distribution of profits may be disclosed through a summary. Note2: Employee remunerations (including stock and cash) distributed to managers through the Board of Directors in recent years.

If it is impossible to estimate the value planned to be distributed this year, follow the actual value distributed last year and

calculate proportionally. After-tax pure earnings are those in the latest year. When the International Financial Reporting Standards are adopted, after-tax pure earnings are those indicated in the entity or individual financial report from the most

recent year.

Note3: For the applicability of managers, follow the Tai-Cai-Zheng-San No. 0920001301 letter dated March 27, 2003. (1) Presidents and people of equivalent ranking

(2) Vice Presidents and people of equivalent ranking

(3) Assistant managers and people of equivalent ranking

(4) Head of Department of Finance

(5) Head of Accounting Department (6) Other people handling corporate affairs and signature rights

Note4: If directors, Presidents, and Vice Presidents receive employee remunerations (including stock and cash), this table needs to be completed in

addition to Exhibit 1-2. Note5: Mr. Chung-Yueh Shih, NPC’s former Vice President, and Pao-Chang Liu, NPC’s former Assistant Vice President were separately promoted to

Senior Vice President and Vice President on March 20, 2019.

Note6: The Company appointed Wen-Pin Cheng as the first corporate governance officer on May 10, 2019 Note7: This form is to disclose the employee compensation of executive officers as of 2019.12.31.

Title

(Note 1)

Name

(Note 1)

Employee

Compensation

-in Stock

Employee

Compensation

-in Cash

Total

Total Employee

Compensation as a

% of 2019 Net Income

President Ming-Jen Tzou

0 111 111 0.0005

Senior Vice President Fong-Chin Lin

Senior Vice President Sin-Yi Huang

Senior Vice President Kuei-Yung Wang

Senior Vice President Cheng-Chung Lee

Senior Vice President

(Note5) Chung-Yueh Shih

Vice President Shiou-Yeh Sheng

Vice President Pao-Chang Liu

Vice President Tzong-Yang Su

Vice President Yu-Lung Huang

Vice President Yu-Sheng Chen

Vice President Kuo-Wei Lin

Vice President Yang-Doun Chien

Vice President Wen-Cheng Yang

Vice President Yung-Fang Chang

Financial Officer Ming-Jong Yeh

Corporate Governance

Officer Wen-Pin Cheng

Accounting Officer Li-Ta Pai

39

3.3.3 Comparison and Description of Remuneration for Directors, Supervisors,

President and Vice Presidents etc. in the Most Recent Two Fiscal Years and

Remuneration Policy for Directors, President and Vice Presidents. (1) The ratio of total remuneration paid by the Company and by all companies included in the

consolidated financial statements for the two most recent fiscal years to Directors, Supervisors,

President and Vice Presidents etc. of the Company, to the net income.

Unit: %

Company

Title\Year

The Company All companies in the Consolidated Report

2019 2018 2019 2018

Directors 0.3232 0.1243 0.3241 0.1248

President and

Vice President 0.4164 0.1662 0.4169 0.1664

Note: The increase of the ratio of total remuneration to Directors, President and Vice Presidents of the Company, to the net income resulted from the reduction in 2019 net income as compared to 2018.

(2) The policies, standards, and portfolios for the payment of remuneration, the procedures for

determining remuneration, and the correlation with risks and business performance.

A. NPC’s Independent Directors receives base compensation monthly, and traffic fares based

on attendances of Board meetings. There is no payment of the variable part of

remuneration.

B. The remuneration of NPC’s Directors is determined in accordance with Article 16 of

NPC’s Articles of Incorporation, which stipulates that: "The Board of Directors is

authorized to determine the compensation for the Directors, according to their extent and

value of the contribution provided for the Company and the common compensation

standards of the same industry.", and traffic fares are based on attendances of Board

meetings.

C. On June 22, 2010, the Board of Directors cancelled the policy of paying the Directors and

Supervisors remuneration from earnings, and set up the Audit Committee to replace the

Supervisors on June 23, 2016.

D. The remuneration of NPC’s President and Vice Presidents is determined in accordance

with NPC’s Articles of Incorporation and Article 29 of Company Act. Besides their

monthly base compensation, the remuneration also includes year-end bonus, festival

bonus and special awards according to the Company's operating conditions. The monthly

base compensation will be adjusted based on related standards every year.

E. NPC’s Remuneration Committee held 3 meetings in 2019 to propose advice to the Board

of Directors about the compensation standard and structure, assessment system, salary

adjustment of executive officers; and year-end bonus distribution standards .

40

3.4 Implementation of Corporate Governance

3.4.1 Board of Directors’ Meeting Status

A total of 7 meetings【A】of the Board of Directors’ Meeting were held in 2019. Director

attendance status is shown as follows:

Title Name

(Note1)

Attendance

in person

【B】

By

Proxy

Attendance

rate in

person (%)

【B/A】

(Note2)

Remark

Chairman Chia-Chau Wu 7 0 100.0

Re-elected;

Re-election on

2019.06.12

Managing Director Wen-Yuan Wong 6 0 85.7

Re-elected;

Re-election on

2019.06.12

Managing Director Formosa Petrochemical Corp.

Rep. Wen-Chiao Wang 5 0 71.4

Re-elected;

Re-election on

2019.06.12

Managing Director Ruey-Yu Wang 5 0 71.4

Re-elected;

Re-election on

2019.06.12

Managing Director

(Independent Director) Chih-Kang Wang 7 0 100.0

Re-elected;

Re-election on

2019.06.12

Independent Director Yi-Fu Lin 7 0 100.0

Re-elected;

Re-election on

2019.06.12

Independent Director Yun-Peng Chu 7 0 100.0

Re-elected;

Re-election on

2019.06.12

Director Ming-Jen Tzou 7 0 100.0

Re-elected;

Re-election on

2019.06.12

Director Formosa Chemicals & Fibre Corp.

Rep. Shen-Yi Lee 7 0 100.0

Re-elected;

Re-election on

2019.06.12

Director Formosa Plastics Corp.

Rep. Chin-Jen Wu 1 0 33.3

Old; Re-election

on 2019.06.12


Rep. Zo-Chun Jen 7 0 100.0

Re-elected (Note);

Re-election on

2019.06.12

Director Kuei-Yung Wang 7 0 100.0

Re-elected;

Re-election on

2019.06.12

41

Title Name

(Note1)

Attendance

in person

【B】

By

Proxy

Attendance

rate in

person (%)

【B/A】

(Note2)

Remark

Director Fong-Chin Lin 6 0 85.7

Re-elected;

Re-election on

2019.06.12

Director Sin-Yi Huang 7 0 100.0

Re-elected;

Re-election on

2019.06.12

Director Cheng-Chung Lee 4 0 100.0 New; Re-election

on 2019.06.12

Director


Company

Rep. Ching-Cheng Chang

7 0 100.0

Re-elected;

Re-election on

2019.06.12

Note: Formosa Plastics Corporation’s representative, Chin-Jen Wu resigned after the director re-election on June 12, 2019, and

the representative was replaced by director Zo-Chun Jen.

Other mentionable items:

1. If any of the following circumstances occur, the dates of the meetings, sessions, contents of motion, all

Independent Directors’ opinions and the Company’s response should be specified:

(1) Matters referred to in Article 14-3 of the Securities and Exchange Act.: N/A.

(2) Other matters involving objections or expressed reservations by independent directors that were recorded or

stated in writing that require a resolution by the Board of Directors: None.

2. Implementation of Directors Avoiding Conflict of Interests towards Resolution:

(1) The 1st Board of Directors’ Meeting of 2019 (March 20, 2019)

Recusals: Chairman Chia-Chau Wu, attending Managing Director Wen-Yuan Wong, Wen-Chiao Wang and

Ruey-Yu Wang, Director Ming Jen, Tzou, Shen-Yi Lee and Zo Chun, Jen

Resolutions adopted: To compile plan of lending funds for the second quarter of 2019.

Causes of interest conflict Avoidance and Voting status: the above-mentioned Directors were appointed as the

Chairman, Managing Director, Director or representative of the juristic person of the borrowing

Company, so they were recused from the discussion and voting.

(2) The 3rd Board of Directors’ Meeting of 2019 (May 10, 2019)

Recusals: Chairman Chia-Chau Wu, attending Managing Director Wen-Yuan Wong and Director Ming-Jen

Tzou, Shen-Yi Lee and Zo Chun, Jen

Resolutions adopted: To compile plan of lending funds for the third quarter of 2019.





Recusals: Chairman Chia-Chau Wu, attending Managing Director Wen-Yuan Wong and Director Ming-Jen

Tzou

Resolutions adopted: Equipment transactions with related companies: “Formosa Heavy Industries Corp.”,

“Formosa Plastics Corp.”, “Formosa Technologies Corp.” and “Nan Ya Photonics Incorporation”.

Causes of interest conflict Avoidance and Voting status: the above-mentioned Directors as Managing Director

and Director of related companies, so they were recused from the discussion and voting.


Recusals: Chairman Chia-Chau Wu and attending Managing Director Wen-Yuan Wong

Resolutions adopted: The donation NT$ 11,134,000 to Ming Chi University of Technology.


Chairman and Director of Ming Chi University of Technology, so they were recused from the

discussion and voting.

42


Recusals: Chairman Chia-Chau Wu, attending Managing Director Wen-Yuan Wong and Director Ming-Jen,

Tzou, Fong- Chin Lin and Sin-Yi Huang

Resolutions adopted: The Company's investment business “Formosa Industries Corp.” would borrow loans

from banks. The Company was proposed to issue a letter of support

Causes of interest conflict Avoidance and Voting status: the above-mentioned Director was appointed as the

Chairman and Director of Formosa Industries Corp., so they were recused from the discussion and

voting.

(6) The 4th Board of Directors’ Meeting of 2019 (June 12, 2019)

Recusals: Independent Director Chih-Kang Wang, Yi-Fu Lin and Yun-Peng Chu

Resolutions adopted: To appoint 3 Independent directors as the members of Remuneration Committee.

Causes of interest conflict Avoidance and Voting status: the above-mentioned Independent Directors were the

parties, so they were recused from the discussion and voting.

(7) The 5th Board of Directors’ Meeting of 2019 (August 12, 2019)


Ruey-Yu Wang, Director Shen-Yi Lee and Zo Chun, Jen

Resolutions adopted: To compile plan of lending funds for the fourth quarter of 2019






Ruey-Yu Wang, Director Ming-Jen, Tzou and Zo Chun, Jen



Causes of interest conflict Avoidance and Voting status: the above-mentioned Directors were appointed as

Chairman, Managing Director and Director of related companies, so they were recused from the



Recusals: Chairman Chia-Chau Wu and attending Managing Director Wen-Yuan Wong and Wen-Chiao Wang

Resolutions adopted: To increase investment to “Formosa Resources Corporation” for US$81.25 million

Causes of interest conflict Avoidance and Voting status: the above-mentioned Directors as the Managing

Director and Director of Formosa Resources Corporation, so they were recused from the discussion

and voting.


Recusals: Chairman Chia-Chau Wu

Resolutions adopted: To formulate the Chairman’ compensation.

Causes of interest conflict Avoidance and Voting status: Chairman Chia-Chau Wu, acting as principal, so he

was recused from the discussion and voting.


Recusals: Independent Director Chih-Kang Wang, Yi-Fu Lin, Yun-Peng Chu and Director Ching-Cheng Chang

Resolutions adopted: To formulate the existing Directors’ compensation.

Causes of interest conflict Avoidance and Voting status: the above-mentioned Directors were the parties, so

they were recused from the discussion and voting.

(12) The 6th Board of Directors’ Meeting of 2019 (November 8, 2019)

Recusals: Chairman Chia-Chau Wu, attending Managing Director Wen-Chiao Wang and Ruey-Yu Wang,

Director Ming Jen, Tzou, Shen-Yi Lee, Zo Chun, Jen and Kuei-Yung Wang

Resolutions adopted: To compile plan of lending funds for the first quarter of 2020.

Causes of interest conflict Avoidance and Voting status: the above-mentioned Directors as the Chairman,

Managing Director, Director, representative of the juristic person of the borrowing Company or

Director’s relative within the second degree of kinship, so they were recused from the discussion and

voting.


Recusals: Chairman Chia-Chau Wu, attending Managing Director Wen-Chiao Wang and Ruey-Yu Wang,

Director Ming-Jen Tzou, Zo Chun, Jen and Kuei-Yung Wang

43



Causes of interest conflict Avoidance and Voting status: the above-mentioned Directors as Chairman,

Managing Director, Director, representative of the juristic person of the related companies or

Director’s relative within the second degree of kinship, so they were recused from the discussion and

voting.


Recusals: Chairman Chia-Chau Wu, attending Managing Director Wen-Chiao Wang, Ruey-Yu Wang and

Director Kuei-Yung Wang

Resolutions adopted: Donation to Chang Gung University for NT$6.14 million 1,239 dollars.

Causes of interest conflict Avoidance and Voting status: the above-mentioned Directors were as Director of

Chang Gung University, so they were recused from the discussion and voting.


Recusals: Chairman Chia-Chau Wu and attending Director Ming-Jen Tzou and Cheng-Chung Lee

Resolutions adopted: The Company's investment business “Nan Ya Electronic Materials (Huizhou) Co., Ltd.”

would borrow loans from banks. The Company was proposed to issue a letter of support.

Causes of interest conflict Avoidance and Voting status: the above-mentioned Directors were as Chairman and

Director of Nan Ya Electronic Materials (Huizhou) Co., Ltd., so they were recused from the


(16) The 7th Board of Directors’ Meeting of 2019 (December 13, 2019)

Recusals: Attending Managing Director Wen-Yuan Wong, Wen-Chiao Wang and Director Ming-Jen Tzou

Resolutions adopted: To increase investment to “Formosa Synthetic Rubber Corp.” with NT$ 46 million.

Causes of interest conflict Avoidance and Voting status: the above-mentioned Directors were as Chairman,

Director or Director’s relative within the second degree of kinship, so they were recused from the


3. TWSE/TPEx Listed Companies shall disclose information including the evaluation cycles, evaluation periods,

scope, method and content of the Board of Directors’ self (or peer) performance evaluation:

The Company would conduct Board of Directors’ performance evaluation from 2020, and disclose the

implementation in the following year.

4. Measures taken to strengthen the functionality of the Board:

(1) The functions of the Board of Directors of the Company are sound and sufficient, meeting the current

requirements of the Company’s corporate governance and maximize the shareholders’ interests.

(2) The Company has elected Independent Directors. In order to establish a well board governance system, sound

supervision function and strengthen management functions, the Company has established the regulations

governing procedure for Board of Directors’ Meetings according to the provisions of the securities authority.

The main matters for discussion, operating procedures, matters to be recorded in the proceedings, the

announcements and other matters to be followed shall be handled in accordance with the provisions of this

code.

(3) Besides annual review of operation of Board of Directors and strengthen the functions of the Board of

Directors, the internal auditors also submit monthly audit reports on operation of Board of Directors to the

Independent Directors for reviewed before the end of the next month in compliance with the regulations of the

competent securities authorities.

(4) In accordance with the provisions of the securities regulatory authority, the Company passed the resolution of

the Board of Directors on Aug. 26, 2011 and set up the Remuneration Committee and has held 3 meetings in

2019 to report the Manager Year-End Bonus Distribution Standard of 2018, also to assess the policy and system

of managers’ 2019 compensation and had submitted the proposal the Board of Directors’ meeting for

discussion.

(5) In accordance with the provisions of the securities regulatory authority, the Company passed the resolution of

the Board of Directors on Jun. 23, 2016 and set up the Audit Committee to replace Supervisors and has held 5

meetings in 2019 to submit the resolutions of the Board of Directors to the implementation of corporate

governance. Note 1: If directors and supervisors are institutions, names of shareholders and the representative of the institutions shall be disclosed. Note 2: (1) In the event that directors leave before a year is completed, the date when they leave should be indicated in the memo column. The

actual attendance (seated) rate (%), on the other hand, shall be calculated by the number of Board of Directors’ meetings held during

service and the frequency number of attendance (being seated) in the meetings. (2) Before a year is completed, upon any re-election of directors, names of the said directors, new and old, shall be listed and it shall be

specified in the remark column that a specific director is old, new, or re-elected, and the date of re-election. The actual attendance

(seated) rate (%), on the other hand, is to be calculated by the number of Board of Directors’ meetings.

44

3.4.2 Audit Committee Meeting Status or the Participation of Supervisors in the

Operations of the Board of Directors

3.4.2.1 The tenure of the committee members this year is from June 12, 2019 to June 11, 2022. A total of 5 meetings【A】of Audit Committee were held in 2019. The attendance of the members was as follows:

Title Name Attend in

person【B】

Commissioned times

Attendance rate in

person (%)【B/A】

(Note)

Remark

Convener Chih-Kang

Wang 5 0 100.0

Independent Director (Re-elected; Re-election on 2019.06.12)

Member Yi-Fu Lin 5 0 100.0 Independent Director (Re-elected;

Re-election on 2019.06.12)

Member Yun-Peng

Chu 5 0 100.0

Independent Director (Re-elected; Re-election on 2019.06.12)

Other mentionable:

1. The operation of the Audit Committee shall, if any of the following circumstances, specify the date of the Board, date,

contents, results of the Audit Committee resolutions and the handling of the opinions of the Audit Committee as below:

(1) The matters listed in Article 14-5 of the Securities Exchange Act.

(2) Except previous matters, the other approved by the Audit Committee, and by more than two-thirds of all directors agreed

to the matter.

Board of Directors Content

Article 14-5 of

Securities and

Exchange Act

The other approved by the Audit

Committee, and by more than

two-thirds of all directors agreed to the

matter

2019.03.20

1st in 2019

1. Content

(1) To formulate 2018 financial statements of

the Company.

(2) To formulate the Company’s Internal

Control System Statement.

(3) To compile plan of lending funds for the

second quarter of 2019.

(4) To amend the “Procedures for Acquisition

or Disposal of Assets”, the “Procedures

for Engaging in Derivatives

Transactions”, the “Procedures for

Loaning Funds to Other Parties” and the

“Procedures of Endorsements and

Guarantees” of the Company.

(5) To invest “FG INC” for US$ 15 million in accordance of the investment

framework.

-

-

-

-

-

2. Audit Committee Resolution on Mar. 20,2019

(1) In the 1st case, the CPA Kuo, Hsin-Yi reported the communication between the CPA and the audit

committee. The convener asked whether there was better understanding about the content of other matters

audit by CPA and took the responsibility of auditing, the CPA Kuo, Hsin-Yi responded.

(2) In the 3rd case, the convener inquired whether the loan conditions and calculation of interest in the proposal

would be in accordance with past practice and was responded by the financial officer Ming-Jong Yeh.

(3) In the 5th case, the Chairman supplemented the plan and purpose of investing “FG INC”.

(4) All the member of the audit committee agreed to pass all the cases and all the cases were submitted to the

Board of Directors for a resolution.

3. The handling of the opinions of the Audit Committee of the Company and the resolution of the Board of

Directors.

The 5 cases discussed by audit committee were submitted to the Board of Directors for discussions, except

for some Directors who did not participate in the voting due to conflicts of interest, were approved by the

other attending Directors.

45

Board of Directors Content Article 14-5 of Securities and Exchange Act

The other approved by the Audit Committee, and by more than

two-thirds of all directors agreed to the matter

2019.05.10

3rd in 2019

1. Content


third quarter of 2019.

(2) Equipment transactions with related

parties Formosa Heavy Industries Corp.,

Formosa Plastics Corp., Formosa

Technologies Corp. and Nan Ya

Photonics Incorporation.

(3) To donate NT$ 11,134,000 to Ming Chi

University of Technology.

(4) The Company's investment business

“Formosa Industries Corp.” would

borrow loans from banks. The Company

was proposed to issue a letter of support.

(5) To amend the Company’s regulations of

shareholder procedures.

-

-

-

-

-

2. Audit Committee Resolution on May. 8,2019

(1) In the 1st case, the convener inquired whether the loan conditions and calculation of interest in the proposal

would be in accordance with past practice and was responded by the financial officer.

(2) In the 2nd case, the convener explained the relevant information about the transaction of related parties and

was responded by the internal audit officer.

(3) In the 3rd case, the convener inquired whether other companies in FPG also donated to Ming Chi University

of Technology together and was responded by the Chairman.

(4) In the 4th case, the convener asked the attending officers to supplement the reason of issuing the letter of

support and its main content and was responded by the Chairman and the financial officer.

(5) In the 5th case, the convener inquired the attending officers to supplement the key points of the amendment

and was responded by the secretariat.

(6) All the member of the audit committee agreed to pass all the cases and all the cases were submitted to the



Directors.

The 5 cases discussed by audit committee were submitted to the Board of Directors for discussions, except for

some Directors who did not participate in the voting due to conflicts of interest, were approved by the other

attending Directors.

2019.08.12

5th in 2019

1. Content

(1) To compile the financial statements of the

Company for the second quarter of 2019.

(2) To increase investment to “Formosa

Resources Corporation” for US$81.25

million.


fourth quarter of 2019.






(5) The Company’s investment business

“Nan Ya Plastics (Ningbo) Co., Ltd.”

planned to conduct cash capital increase

with the amount of US$ 80 million.

-

-

-

-

-

46

Board of Directors Content Article 14-5 of Securities and Exchange Act

The other approved by the Audit Committee, and by more than

two-thirds of all directors agreed to the matter

2. Audit Committee Resolution on Aug. 7,2019 (1) In the 1st case, the CPA reported the communication content with the Audit Committee, and officers in

attendance supplemented the financial and operating status in the first half of 2019. (2) In the 2nd case, officers in attendance supplemented the plan and purpose of the investment. (3) In the 3rd case, the convener inquired whether the loan conditions and calculation of interest in the proposal

would be in line with the markets conditions and was responded by the financial officer. (4) In the 4th case, the convener inquired whether the transactions with related parties would be in accordance

with past practice and was responded by the internal audit officer. (5) In the 5th case, officers in attendance supplemented the plan and purpose of the investment. (6) All the member of the audit committee agreed to pass all the cases and case 2 to case 5 were submitted to the



Directors.

The 5 cases discussed by audit committee were submitted to the Board of Directors for discussions, except for some Directors who did not participate in the voting due to conflicts of interest, were approved by the other attending Directors.

2019.11.08

6th in 2019

1. Content


first quarter of 2020.






(3) Donation to Chang Gung University for

NT$6,141,239.

(4) The Company's investment business

“Nan Ya Electronic Materials (Huizhou)

Co., Ltd.” would borrow loans from

banks. The Company was proposed to

issue a letter of support.

-

-

-

-

2.Audit Committee Resolution on Nov. 7,2019

(1) In the 1st case, the convener inquired whether the loan conditions and calculation of interest in the proposal

would be in accordance with past practice and was responded by the financial officer.

(2) In the 2nd case, the convener inquired whether the transactions with related parties would be in accordance with past practice and was responded by the internal audit officer.

(3) In the 4th case, the convener whether the content of letter of support in the proposal would be in accordance with past practice and was responded by the financial officer.

(4) All the member of the audit committee agreed to pass all the cases and all the cases were submitted to the Board of Directors for a resolution.


Directors.

The 4 cases discussed by audit committee were submitted to the Board of Directors for discussions, except for some Directors who did not participate in the voting due to conflicts of interest, were approved by the other attending Directors.

2019.12.13

7th in 2019

1. Content

(1) To increase investment to “Formosa

Synthetic Rubber Corp.” with NT$ 46

million.

-

2. Audit Committee Resolution on Dec. 13,2019

(1) In the 1st case, the Chairman supplemented the plan and purpose of investing “Formosa Synthetic Rubber

Corp.”

(2) All the member of the audit committee agreed to pass the case and the case was submitted to the Board of

Directors for a resolution.


Directors.

The case discussed by audit committee was submitted to the Board of Directors for discussions, except for

some Directors who did not participate in the voting due to conflicts of interest, was approved by the other

attending Directors.

47

2. Recusals of Independent Directors due to conflicts of interests in 2019, the name of Independent Director,

resolutions adopted, causes of interest conflict avoidance and voting status should be stated: None.

3. Communication between independent directors, the internal audit officer and the CPA (e.g. on the financial and

business status of the Company, the means, and the results, among others):

(1) Communication between independent directors and the CPA of the Company

The Audit Committee of the Company consists of all Independent Directors. The CPA is arranged to attend to

report to the Independent Directors about the financial status and overall operating results of the Company and its

subsidiaries, and also fully communicate any influence on accounting resulted from the changes in regulations.

(2) Communication between independent directors and the internal auditing officer of the Company

A. The amendment of the “Internal Control Systems” and “Internal Audit Implementation Rules” of the Company

shall be subject to the approval of the Audit Committee and shall be submitted to the Board of Directors for a

resolution. B. The assessment of internal control system effectiveness (with Declaration of Internal Control issued) of the

Company shall be subject to the approval of the Audit Committee and shall be submitted to the Board of

Directors for a resolution.

C. The audit office of the Company submits the internal audit report to the Independent Directors monthly for

review.

D. The Independent Directors and the internal audit officer shall communicate on the internal audit execution

status and internal control operation status of the company at least once a quarterly regular meeting. In addition

to the audit report on the status of correction of defects and irregularities of internal control systems, the report

shall be continued and follow up reminders to determine relevant units to take appropriate improvement

measures in time.

(3) The summary of the communication between the independent director, the internal audit officer of the Company’s

and CPA in 2019

Date Meeting Object Content Result

2019.03.20 Audit

Committee CPA

To explain the opinion and other matters

of 2018 financial report.

Well, all the attended member agreed to

pass.

2019.03.20 Audit

Committee

internal audit

officer

To formulate “Internal Control System

Statement” of the Company of 2018.

All the attended member agreed to pass

and the content was submitted to the


2019.03.20 Board of

Directors

internal audit

officer

To report the execution status of the

Company’s internal audit plan of the Nov.

and Dec. of 2018.

Noted.

No comment.

2019.04.19 Board of

Directors

internal audit

officer


Company’s internal audit plan of the Jan.

and Feb. of 2019.

Noted.

No comment.

2019.05.08 Audit

Committee CPA


of 2019 financial report of the first

quarter.


pass.

2019.05.08 Audit

Committee

internal audit

officer

To amend the “Internal Control Systems”

of the Company’s shareholders procedure.

All the attended member agreed to pass

and the content was submitted to the


2019.05.10 Board of

Directors

internal audit

officer


Company’s internal audit plan of the Mar.

of 2019.

Noted.

No comment.

2019.06.12 Board of

Directors

internal audit

officer

To report the status of correction of

defects and irregularities of internal

control systems for 2018.

Noted.

No comment.

2019.08.07 Audit

Committee CPA


of 2019 financial report of the second

quarter.


pass.

2019.08.12 Board of

Directors

internal audit

officer


Company’s internal audit plan of the

second quarter of 2019.

Noted.

No comment.

2019.11.07 Audit

Committee CPA


of 2019 financial report of the third

quarter.


pass.

48

Date Meeting Object Content Result

2019.11.08 Board of

Directors

internal audit

officer


Company’s internal audit plan of the third

quarter of 2019.

Noted.

No comment.

2019.12.13 Board of

Directors

internal audit

officer


Company’s internal audit plan of the Oct.

of 2019.

Noted.

No comment.

2019.12.13 Board of

Directors

internal audit

officer

To formulate the Company’s internal

audit plan in 2020.

The content was passed in the

resolution.

(4) The key emphasis in work and operation status:

A.The Audit Committee of the Company is composed of 3 independent directors. A total of 5 meetings were held

in 2019, for each discussion of proposals and follow up please refer to “1. Independent Directors’ opinions and

the Company’s response”, the key emphasis in work are as follows:

1. Amend of the “Internal Control Systems” and “Internal Audit Implementation Rules” of the Company.

2. The assessment of internal control system effectiveness.

3. Amend of the “Regulations Governing the Acquisition and Disposal of Assets”, the “Procedures for

Engaging in Derivatives Transactions”, the “Procedures for Loaning Funds to other Parties” and

“Procedures for Providing Endorsements and Guarantees to other Parties” of the Company.

4. The rationality of the proposals that involved the conflicts of interest of directors.

5. Major assets transactions.

6. Major loaning of funds and making of endorsements/guarantees.

7. The audit of annual financial statement and semi-annual financial statement and the accounting policies and

procedures.

B.The Audit Committee will continue to assist the Board of Directors to supervise the fair presentation of the

financial statements of the Company, the hiring (and dismissal), independence, and performance of certificated

public accountants of the Company, the effective implementation of the internal control system of the Company,

compliance with relevant laws and regulations by the Company and management of the existing or potential

risks of the Company in 2020. Note:

* In case of resignation of independent directors before the year is completed, the date of resignation shall be stated in the remark column. The actual seated rate (%), on the other hand, shall be calculated by the number of actual frequency of the independent directors being seated in the meetings

during his/her tenure.

* Before a year is completed, upon any re-election of independent directors, names of the said independent directors, new and old, shall be listed and

it shall be specified in the remark column that a specific supervisor is old, new, or re-elected, and the date of re-election. The actual seated rate (%),

on the other hand, is calculated by the frequency of the independent directors being seated in the meetings during his/her tenure.

3.4.2.2 The Participation of Supervisors in the Operations of the Board of Directors

The Company has set up the Audit Committee to replace Supervisors on Jun. 23, 2016.

49

3.4.3 Corporate Governance Implementation as Required by the Taiwan Financial Supervisory Commission

Evaluation Item Implementation Status (Note)

Deviations from the “Corporate

Governance Best Practice

Principles for TWSE/TPEx Listed

Companies” and Reasons Yes No Summary

1. Did the Company establish and disclose

the Corporate Governance Best Practice

Principles based on “Corporate

Governance Best Practice Principles for

TWSE/TPEx Listed Companies”?

V The Company passed the resolution of the Board of Directors on November 12th, 2014

and set a Corporate Governance Practice Principles, which was disclosed on the

information reporting website designated by the securities authority and the Company’s

website.

Consistent with Article 1 and

Article 2 of the Corporate



Companies. The content is slightly

revised in accordance with the

Company's practice, but it is

consistent with the spirit of the

Code.

2. Shareholding structure and shareholders’

rights

(1) Did the Company establish an internal

operating procedure to deal with

shareholders’ suggestions, doubts,

disputes and litigations, and implement

based on the procedure?

(2) Did the Company maintain a register of

major shareholders with controlling

power as well as a register of persons

exercising ultimate control over those

major shareholders?

(3) Did the Company establish and execute

the risk management and firewall

systems with its affiliated businesses?

V

V

V

(1) The Company has an internal operating procedure for handling shareholder matters

and has set up a spokesperson to address shareholder suggestions or concerns at any

time. In addition, each functional team in the President Office fully supported the

above matters, and have an in-depth understanding and review of the shareholders'

suggestions or concerns. After that, an oral or written reply to the satisfaction of the

shareholders is proposed.

(2) The Company shall pay attention to the situation of any increase, decrease or use as

collateral in the shares of shareholders holding more than 5% of shares and holding

Director or manager positions. The Directors, managers and shareholders holding

more than 10% of the shares are disclosed monthly by the information reporting

website designated by the securities authority.

(3) The Company has established and executed the risk management and firewall

systems with its affiliated businesses.

a. The Company implements profit center management. Each company's personnel,

property management rights and responsibilities are clearly divided, and there are no

irregular transactions.

In compliance with Article 13 of

the Corporate Governance Best

Practice Principles for

TWSE/TPEx Listed Companies.





In compliance with Article 14 to




Companies.

50

http://eng.selaw.com.tw/LawArticle.aspx?LawID=FL020553&ModifyDate=1050930

http://eng.selaw.com.tw/LawArticle.aspx?LawID=FL020553&ModifyDate=1050930






(4) Did the Company establish internal

rules that prohibit Company insiders

from trading securities using

undisclosed information?

V

b. The funds and loans of the Company are calculated based on the accrued market

interest rate. The amount of loan is reassessed every quarter based on business

needs. Guaranteed coverage and limits have also been set for endorsement

guarantees for other companies.

c. To reduce losses, comprehensive risk assessment for banks, customers, and suppliers

are performed. Each company credit authorization to the same customer and stop

payment to the same supplier can be review through the computer system.

d. The relationship between the Company and the related companies, such as

transaction management, endorsement, loans, etc., are monitored. In accordance

with the “Regulations Governing Establishment of Internal Control Systems by

Public Companies”, outlined by the Financial supervisory Commission, the

Company has set up “Supervision and Management of Subsidiaries” to implement

the risk control mechanism for its subsidiaries.

(4)The Company has established rules for personnel management and prevention of

insider trading operations to forbid using undisclosed information to buy and sell

securities for illegal profits. The employees also receive training to comply with

relevant regulations.

In compliance with Article 10-3 of




3. Composition and responsibilities of the

Board of Directors:

(1) Did the Board develop and implement a

diversified policy for the composition

of its members?

V

The nomination and election of the Board of Directors of the Company complies with

Code of Practice for Corporate Governance of the Company and adopted candidate

nomination system. Besides the assessment of each candidate’s education and

experience, the Company takes stakeholders’ opinions into consideration and complies

with “Rules for Election of Directors of the Company” and “Corporate Governance

Principle” to ensure the diversity and independency of the board members. Besides the

knowledge, skills and literacy are necessary for the performance of the Board of

Director. To achieve the idol purpose of the corporate governance, the overall abilities

of the Board of Directors should include: 1. operational judgment, 2. accounting and

financial analysis, 3. operation management, 4. risk management, 5. industrial

knowledge, 6. perspectives of the international market, 7. leadership, 8.

decision-making, etc. The Company's Directors come from diversified backgrounds.





51






All 15 Directors are individuals with specialization and experience in industrial

management, including 3 Independent Directors and 2 female Directors. Female

Directors account for 13.3% of all Directors. In addition to relying on their professional

leadership decision-making ability, the Directors also possess excellent business

management capabilities, as well as expertise in the industry, finance, accounting, or

the legal field. This deepens the independence and diversity of corporate governance.

Our future goal is to recruit professionals who are familiar with AI artificial

intelligence and data analysis, etc.. Each Director's education and experience can be

found in III. Corporate Governance Report and II. Director and Supervisor Information

of this year's annual report. Board of Directors Diversity Policy and Its

Implementation:

Diverse

Item

Name

Gen

der

Concu

rrent E

mplo

ym

ent

Ages

Seniority

Of

Independent

Director

Industrial

Experience Professional Abilities

55-6

4

65-7

4

A

bove 7

5

Less T

han

3 y

ears

3-9

years

More T

han

9 y

ears

Petro

chem

ical

Fin

ance

Tech

nolo

gy

Tex

tile

Operatio

nal Ju

dgm

ent

Acco

untin

g A

naly

sis

Adm

inistratio

n

Risk

Man

agem

ent

Industrial K

now

ledge

Intern

ational O

utlo

ok

Lead

ership

Decisio

n M

akin

g

Law

Chia-Chau

Wu M

Wen-Yuan

Wong M

Wen-Chiao

Wang M

Ruey-Yu

Wang F

Chih-Kang

Wang M

Yi-Fu Lin M

52






Diverse

Item

Name

Gen

der

Concu

rrent E

mplo

ym

ent

Ages

Seniority

Of

Independent

Director

Industrial

Experience Professional Abilities

55-6

4

65-7

4

A

bove 7

5

Less T

han

3 y

ears

3-9

years

More T

han

9 y

ears

Petro

chem

ical

Fin

ance

Tech

nolo

gy

Tex

tile

Operatio

nal Ju

dgm

ent

Acco

untin

g A

naly

sis

Adm

inistratio

n

Risk

Man

agem

ent

Industrial K

now

ledge

Intern

ational O

utlo

ok

Lead

ership

Decisio

n M

akin

g

Law

Yun-Peng

Chu M

Ming-Jen

Tzou M

Shen-Yi

Lee M

Zo-Chun

Jen M

Kuei-Yung

Wang F

Fong-Chin

Lin M

Sin-Yi

Huang M

Cheng-

Chung Lee M

Ching-

Cheng

Chang M

53






(2) In addition to establishing the Salary

and Remuneration Committee and Audit

Committee according to the regulations,

has the Company voluntarily

established other functional

committees?

(3) Did the company establish a standard to

measure the performance of the Board

of Directors and implement it annually?

And report the results of the

performance evaluation to the Board of

Directors, in addition, use them as a

reference for individual

directors ’remuneration and nomination

of re-appointment?

(4) Did the Company regularly evaluate

the independence of CPAs?

V

V

V

(2) The Company has set up a salary remuneration committee after the resolution of the

Board of Directors on August 26th, 2011. The Board of Directors also resolved on

June 23th, 2016 to set up the audit committee in accordance with Article 14-4 of

Securities and Exchange Act. At present, apart from the above two committees, the

Company has not set up any other functional committees.

(3) The Company has not yet established a performance evaluation method for the Board

of Directors. The Company will hold the Evaluation of Board of Directors’

performance start from 2020 in accordance to the regulations. In addition, the

company has set standards for the Board of Directors’ meetings. These meetings are

convened according to the regulations. The Directors have a clear understanding of

the Company's objectives, operations, and finances. The Board of Directors functions

well, and it communicates effectively with the Company's management team.

(4)The Company evaluates the independence and competence of CPAs at least once a

year, focusing on the size and reputation of the accounting firm, the number of

consecutive years of providing audit services, the nature and extent of providing non-audit

services, the audit fees, peer review, whether there are any legal proceedings or

investigations by the competent authorities, quality of audit services, regular training,

interaction with management and internal audit supervisors, etc. Relevant information

and statements are requested from CPAs and the firms. The documents are then

evaluated by the President Office, and the results of recent two years have been

submitted to the Board of Directors on March 23th, 2018 and March 20th, 2019

respectively.

In compliance with Article 28 and

Article 28-1 of the Corporate



Companies.

Not yet in compliance with Article

37-2 of the Corporate Governance

Best Practice Principles for


The evaluation method is going to

be implemented in 2020 according

to the regulations.





4. Does the TWSE/TPEx listed company

have qualified corporate governance

personnel in an appropriate number and

appoint one chief corporate governance

officer in charge of the company'

corporate governance affairs (including

but not limited to providing information

V (1) The Company plans to set up a position for corporate governance officer on May, 10

2019, who will be in charge of corporate governance related issues. And set qualified

corporate governance personnel in charge of corporate governance affairs. The

officer supervises President Office, which is responsible for corporate

governance-related matters includes handling Board of Directors’ and shareholders’

meetings, taking minutes of such meetings, assisting Directors come to the office and

continue training, providing Directors relevant information for operations, assisting

In compliance with Article 3-1

of the Corporate Governance



54






required for Director/Supervisor's

operations, assistance to the directors and

supervisors in complying with laws and

regulations, convening board/shareholder

meetings in compliance with the law,

apply for/change Company registry and

producing meeting minutes of

board/shareholder meetings)?

Directors compliance with law and regulations, and so on.

(2) The corporate governance officer has completed 18 hours lessons in 2019:

Training Date Organizer Program Hours

Beginning Date End Date

2019.07.30 2019.07.31 Securities and

Futures Institute

Directors and

supervisors (including

independent) and

corporate governance

executives practical

workshops

12

2019.11.15 2019.11.15 Securities and

Futures Institute

Avoiding contravening

Securities and

Exchange Act –

Discussing from false

financial statement and

insider trading

3

2019.11.15 2019.11.15 Dharma Drum

Mountain

Humanities and

Social

Improvement

Foundation

Innovation of

enterprise value

3

(3) The operations in 2019 and 2020 are as follows:

1. Assisted Independent Directors and Directors in performing their duties by

providing the necessary information and arranging for continuing education.

2. Assisting Independent Directors in arranging meetings with the internal audit

officer or the CPA in accordance with the “Corporate Governance Best Practice

Principles” when the need to understand the Company's financial operations arises.

3. Assisting the proceedings of Board of Directors' meetings and shareholders'

meetings, and legal compliance of resolutions

4. Drawing up the agendas of the Board of Directors and notifying the Directors 7

55






days in advance, convening meetings and providing meeting information, sending

out reminders regarding agendas that require recusal, and completing the minutes

within 20 days after the meeting.

5. Registering the date of the shareholders' meeting in accordance with the

regulation, preparing meeting notices, manuals, and proceedings, etc. within the

statutory period.

5. Has the Company established a

communication channel with stakeholders

(including but not limited to shareholders,

employees, customers and suppliers)? Has

a stakeholders’ area been set up on the

Company website? Are major Corporate

Social Responsibility (CSR) topics that

the stakeholders are concerned with

addressed appropriately by the Company?

V (1) The Company instructs the President Office to communicate with stakeholders

depending on the situation. A spokesperson and a deputy spokesperson have been

appointed as the external communication channel.

(2) The Company set up the stakeholder area on the Company website to provide

detailed contact information for the dedicated personnel, including phone number

and e-mail, as the channels for the stakeholders to communicate with the Company.

(3) The Company responds to stakeholders' issues of concern at the appropriate time

through the following channels:

a. Shareholders: Shareholders' meetings are held annually and shareholders can

fully exercise their voting rights through electronic means. In addition, the

annual report of the shareholders' meeting, the monthly revenue and the

quarterly self-closing profit and loss are issued to facilitate shareholders'

understanding of the Company's operating conditions.

b. Employees: mainly concerned with workplace safety, employee welfare,

human rights protection, labor and employment issues, etc. Communication

with employees can be conducted through trade unions, factory (office)

meetings, etc.

c. Suppliers and Contractors: mainly concerned with procurement and

contracting policy. The Company adheres to the principle of sustainable

management and fair trade and is committed to working with manufacturers

that comply with environmental protection, safety, and human rights standards.

Open tenders are held through the Formosa Plastics electronic trading

platform, and regular briefings are held to strengthen two-way communication

and advocacy.

d. Customer: mainly concerned with after-sales service and customer

relationship. Issues including product quality and after-sales service that





56






customers care about can be addressed through customer visits, participating in

exhibitions, product briefings, customer satisfaction surveys, etc. The website

also lists the sales service line and e-mail address. Customer complaints are

handled through the "Customer Response Form" and the "Customer Complaint

Handling Form."

6. Does the Company appoint a professional

shareholder services agency to deal with

shareholder affairs?

V The shareholders' meeting of the Company is currently handled by itself, but the

relevant procedures are handled by the designated share unit, the legal office, and the

President Office in accordance with rigorous regulations, so that the shareholders'

meeting will be convened in a legal, effective, and safe context to ensure shareholders'

rights.

Although it does not meet the

requirements of Article 7-1 of the

Corporate Governance Best


TWSE/TPEx Listed Companies, it

does not impair the operational

efficiency of the shareholders'

meeting.

7. Information disclosure

(1) Did the Company establish a website to

disclose information on financial

operations and corporate governance?

(2) Did the Company have other information

disclosure channels (such as establishing

an English language website, delegating a

professional to collect and disclose

Company information, implementing a

spokesperson system, and disclosing the

process of investor conferences on the

Company website)?

V

V

(1) The Company has set up a website in Chinese and English with disclosed relevant

financial business and corporate governance information under “Investor Relations

Section”. The Company's website is: www.npc.com.tw.

(2) The Company has a spokesperson and a deputy spokesperson. A dedicated person

has been appointed in the President Office to collect and disclose Company

information, as well as providing the spokespersons and relevant business

departments with answers to stakeholders, investors, and authorities.





Companies.

In compliance with Article 55-3

and Article 56 of the Corporate



Companies.

57

http://www.npc.com.tw/






(3) Did the Company register and announce

the annual financial reports within 2

months after the end of every fiscal year?

Besides, did the Company announce and

register financial reports of first, second

and third quarter and the operating status

of each month before the prescribed

period?

8. Has the Company disclosed other

information to facilitate a better

understanding of its corporate governance

(including but not limited to employee's

rights, employee wellness, investor

relations, supplier relations, stakeholders'

rights, Directors and Supervisors training

records, implementation of risk

management policies and measurement

standards, implementation of customer

policies and purchase of liability

insurance for the Directors and

Supervisors of the Company)?

V

V (3) The Company announces and registers operating status of the previous month on

the 6th of each month, announces the unaudited financial data of the previous

quarter on the first 10 days of each quarter and announces and registers the financial

reports before the prescribed period. Although the Company does not announce the

financial reports within 2 months after the end of every fiscal year due to the CPA

audit procedures, it has announced the unaudited annual financial reports of the

previous year in advance to help investors understand the operating status of the

Company.

(1) Employees' rights:

The Company strives to pursue a harmonious labor-management relationship and

attaches importance to the right of employees to express their opinions. We have set

up physical suggestion boxes at the places where employees have easy access to, as

well as an online suggestion box in the Company information system. Each

suggestion box is appointed to dedicated personnel for replying, in order to facilitate

communication. An "inspection method" that establishes the internal whistle-blower

channel and protection system has also been set up. In the meantime, Board of

Supervisors and labor-management meetings are held by the unions regularly. The

heads of relevant departments attend the meetings to fully communicate with the

labor representatives. On major labor issues, the Company gives higher priority to

the opinions of the unions, and the top leaders consult with the unions to reach a

consensus and ensure the harmonious labor-management relationship as well as the

sustainable development of the Company.

(2) Employee wellness:

In order to take care of employees' physical and mental health, the Company has

budgeted annual health checks at Chang Gung Memorial Hospital. In addition to the

items required by the law, the Company has added cancer screening programs such

as A-type fetal protein and cancer embryo antigen which are inspection items

without law required. The goal is to ensure the employees understand and improve

their health status, therefore to love and strength their body health. In terms of the

employees' diet, the Company follows health regulations concerning food source,

acceptance and storage, water safety and hygiene, food staff and kitchen cleaning

operations, and food and tableware cleaning inspections to ensure the health and

Although it does not meet the

requirements of Article 55-2 of the

Corporate Governance Best


TWSE/TPEx Listed Companies,

the Company has announced the

unaudited annual financial reports

in advance.

In compliance with Articles 51 to

Articles 54 of the Corporate



Companies.

58






safety of employees' diet. For the relevant welfare measures, please refer to “5.5

Labor Relations” of “V. Operations Overview” of the annual report.

(3) Investor Relations:

The Company uses the President Office and the shareholding department as a bridge

between the Company and its shareholders. In terms of corporate information

transparency, the Company's website has an "Investor Relations Section" to provide

investors with relevant information. In order to maintain a good relationship with

investors, the Company has set up a spokesperson system to provide a means of

contact with shareholders and corporate investment institutions. In addition to

participating in investment forums held by domestic and foreign brokerage firms,

the Company holds meetings with both domestic and international investors on

irregular basis.

(4) Supplier Relations:

The Company's procurement and contracting operations are mainly aimed at

creating a level playing field by looking for good manufacturers that can provide

suitable and appropriate equipment, materials or projects at reasonable prices to

meet the needs of expansion or operation of various departments in a timely manner.

a. Open and fair procurement and contracting mechanism:

The Company uses the "open tender" method to purchase and distribute the

contracting system through the Formosa Plastics electronic trading platform. It

provides functions such as inquiry, quotation, bargaining, order, delivery, payment

progress inquiry, etc. All information is encrypted by electronic voucher and

firewall control to ensure the security of all incoming and outgoing data. Vendors

can access the inquiry case and make quotations anytime and anywhere through the

Internet without time and space restrictions, which greatly improves the efficiency

of operations, saves time and money, and reduces operating costs to increase profits.

After all the inquiry cases have been launched electronically, the manufacturers with

the lowest quotation, fastest delivery time, and best quality are chosen so that both

the buyer and the seller can reasonably achieve the goals in a harmonious atmosphere.

59






b. Sound vendor management:

In order to stabilize the quality and delivery of materials and ensure the quality and

progress of construction, the Company has conducted evaluation and ranking of all

manufacturers through the sound management and evaluation of the manufacturers.

In the case of overdue delivery of the products (engineering), poor quality, or

violation of the safety regulations, the event will be automatically included in the

assessment record in order to replace unqualified manufacturers, and cultivate

excellent manufacturers to achieve good relations as well as long-term cooperation

between the two sides.

c. Electronic trading for a win-win situation:

The Company combines the comprehensive ERP computer management system and

the digital, open, and transparent online procurement and delivery mechanism to

build a high-quality, safe, convenient and fast electronic trading environment. The

Company has further extended the same system vertically and horizontally to the

rest of the industry, sharing the e-generation "Formosa Plastic experience" with all

enterprises. At present, combined with the Company's upstream and downstream

supply chain systems, with more than 10,000 suppliers and third-party suppliers,

this electronic trading platform shares the business opportunities and economic

benefits brought about by open trading.

(5) Stakeholders' Rights

In addition to continuing to improve in the industry, the Company pursues good

business performance and strives to achieve the mission of “caring for the

employees, serving the customers, and rewarding the shareholders.” Therefore, it is

committed to caring for the shareholders, customers, suppliers, employees, and

society. In addition to complying with laws and business ethics, the Company is in

line with international standards in enhancing competitiveness, create shareholders'

benefits, as well as providing supplies of stable, high-quality and low-cost products.

With industrial and environmental protection as a priority, the Company will

develop towards eco-industrial areas and promote green building and green energy

conservation, raw materials procurement, actively planting forests, paying attention

to various social issues, investing in community and social welfare undertakings

suitable for enterprises to contribute to the society.

60






(6) Director Training Records

Title Name Course

Date Organizer Program Hours

Chairman Chia-Chau Wu 2019.11.15

2019.11.15

Dharma Drum

Mountain

Humanities and

Social

Improvement

Foundation

Securities and

Futures

Institute

Innovation of

enterprise value

Avoiding

contravening

Securities and

Exchange Act –

Discussing from

false financial

statement and

insider trading

3

3

Managing

Director

Wen-Yuan Wong,

Wen-Chiao Wang,

Ruey-Yu Wang

Managing

Director

(Independent

Director)

Chih-Kang Wang,

Yi-Fu Lin

Director Ming-Jen Tzou,

Shen-Yi Lee,

Kuei-Yung Wang,

Fong-Chin Lin,

Zo-Chun Jen,

Sin-Yi Huang,

Ching-Cheng Chang

Independent

Director

Yi-Fu Lin 2019.03.29

Taiwan

Corporate

Governance

Association

The Amendment

of Company Law

and

Corresponding

Analysis of

Shareholders'

Meeting

3

2019.04.18

Taiwan

Corporate

Governance

Association

The new

regulations of The

International Tax

Co-Operation

Economic and the

way companies

respond to the

risks and prevent

3





61






Title Name Course

Date Organizer Program Hours

2019.08.12

Taiwan

Corporate

Governance

Association

money laundering

The practice of

share transfer and

tax planning for

directors,

supervisors and

accounting supervisors

3

Independent

Director

Yun-Peng Chu 2019.08.28

2019.10.30

Chung-Hua

Finance and

Economic

Development

Association

Chung-Hua

Finance and

Economic

Development

Association

New challenges of

legal issues in

business

operations

Discussion in

employee

reward strategies

and tools

manipulation

3

3

Director Cheng-Chung Lee 2019.07.30

2019.07.31

Securities and

Futures

Institute

Directors and

supervisors

(including

independent) and

corporate

governance

executives

practical

workshops

12

(7) The situation in which the Company purchased liability insurance for the Directors:

The Company has purchased liability insurance for all Directors, and the insured

amount is US$ 30 million (Around NT$ 900 million). The above insurance period




62






is from August 1st, 2019 to February 1st, 2021. The scope of insurance coverage is

when a Director, major employee or employer duties commit a mistake and a third

party suffers losses as a result and shall be responsible for the compensation

according to the law, during the insurance period the insurance company should is

liable for providing the first compensation claim according to the contract. The

Board of Directors has been informed of the status on November 8th, 2019.

(8) Implementation and policies of risk management: The Company established risk

management policies to identify, evaluate, supervise and control risk from every

aspect, enhance the risk awareness of employees and make sure all potential risks

that might happen are endurable, thus, can the Company execute the optimal

strategy to rationalize the balance between profits and risks, please refer to “6.Risk

Management” of “VII. Financial Status, Operating Results and Risk Management”

of the annual report for further disclosure of risk management policies of the

Company.

(9) Implementation of customer policy: Customers are the cornerstone of the

Company's existence. The goal is to quickly supply the requested products and

achieve stable and adequate supply so that customers can continue operate.

a. Creating a stable supply and demand

The Company and its customers have an important relationship of

interdependence, coexistence, and co-prosperity. Therefore, building a stable

supply and demand relationship is an issue that every sustainable company must

pay attention to. Focusing on the long-term development of the industries in

Taiwan, the Company actively invests in the production of chemicals, plastic, and

fiber raw materials to provide customers with a stable source of materials and lay

a solid foundation for related industries. The solid long-term cooperation has

allowed the customers to show steady growth.

b. Improving raw material self-sufficiency rate

The completion of the sixth naphtha cracker has greatly eased the problem of

long-term raw material shortage in Taiwan and reduced the degree of dependence

on foreign countries. For example, the petrochemical raw materials of the

Company have greatly improved the competiveness of the overall industry due to

the sufficient raw material supply of sixth naphtha cracker.






63






c. Enhancing the competitiveness of midstream and downstream manufacturers

In order to improve the management capabilities of the middle and lower

suppliers of the plastic industry, the founders set up a series of management

courses at the early stage, and actively shared the Company's system and

experience with the industry. The Company has received positive feedback while

strengthening the competitiveness of customers. So far, if other companies come

visit, we are willing to share. From a management point of view, the Company

has always believed that by taking customer interests into account, the Company

will also benefit from it. In addition, in order to cooperate with customers to

expand the market, the Company also actively supports customers and provides

after-sales service.

d. E-commerce saves costs and improves efficiency

In order to improve the efficiency of the transaction process with the customer,

the customer can get instant information and respond quickly when placing

orders, order progress inquiries, receipts and payments, the Company officially

established the Formosa Plastics E-Commerce Center in January 2001. This B2B

online trading portal imports the e-commerce trading system, coordinates the

management of internal resources and strengths, and integrates upstream and

downstream supply chain systems and customer business relationships.

9. Please specify the Company's measures to improve the items listed in the corporate governance review result by Taiwan Stock Exchange's Corporate Governance Center and the

improvement plans for items yet to be completed.

a. The Stock Exchange's Corporate Governance Center released the results of the 5th corporate governance assessment in 2018. NPC listed the top 6%~20% of the listed; among

the capitalization more than NT$ 10 billion, NPC listed the top 11%~20% of Non-financial electronic category. Companies and the priority measures for assessing un-scored

issues in the 5th Corporate Governance are as follows:

b.

Number Evaluation Index Improvement

1.11 Whether the Company uploads update the English version annual

report 7 days before shareholders meeting?

The Company has updated the English version of annual report to the information report

system assigned by competent authority for securities 7 days before 2019 shareholders

meeting.

2.13 Whether the Remuneration Committee arranges at least 2

meetings in 1 year and the all the members attend at least 2 times.

The Company’s Remuneration Committee has arranged 3 meetings in 2019, and the 3

members attended all the meetings.

2.21 Whether the Company sets up corporate governance officer to in

charge of the matters of corporate governance?

The Company has made a resolution in the Board of Directors on May 10, 2019 that we

would set up a corporate governance officer.

64






b. The Stock Exchange's Corporate Governance Center released the results of the 6th corporate governance assessment in 2019. NPC listed the top 6%~20% of the listed; among

the market capitalization more than NT$ 10 billion, NPC listed the top 11%~20% of Non-financial electronic category. Companies and the priority measures for assessing

un-scored issues in the 5th Corporate Governance are as follows:

Number Evaluation Index Improvement

2.22 Has the Company's performance evaluation method for the Board

of Directors been approved by the Board of Directors? Will the

self-evaluation be carried out at least once a year, and will the

evaluation results be disclosed on the Company's website or

annual report?

The Company will hold the evaluation of Board of Directors’ performance start from 2020.

Note: Regardless of the answer, "Yes" or "No", descriptions need to be provided in the summary column

65

3.4.4 Composition, Responsibilities and Operations of NPC’s Remuneration Committee

3.4.4.1 Professional Qualifications and Independence Analysis of Remuneration Committee

Title

(Note1)

Criteria

Name

Meet the following professional qualification requirements, together with at least five

years work experience Independence (Note2)

Number of other public

companies concurrently

serving as a member of

remuneration committee

Remark

An instructor or higher

position in a department of

commerce, law, finance,

accounting, or other academic

department related to the

business needs of the

Company in a public or

private junior college, college

or university

A judge, public prosecutor,

attorney, certified public

accountant, or other professional

or technical specialists who has

passed a national examination and

been awarded a certificate in a

profession necessary for the

business of the Company

Have work experience

in the area of

commerce, law,

finance, accounting, or

otherwise necessary for

the business needs of

the Company

1 2 3 4 5 6 7 8 9 10

Independent

Director Chih-Kang Wang 1 -

Independent

Director Yi-Fu Lin 3 -

Independent

Director Yun-Peng Chu 2 -

Note1: Provide director, independent director, or other for the status.

Note2: When any of the following conditions is met for each member during the two years prior to and during their tenure, please check "V" in the box underneath each conditional code. (1) Not an employee of the Company or any of its affiliates.

(2) Not a director or supervisor of the Company or any of its affiliates. (Not applicable in cases where the person is an independent director appointed in accordance with the Act or laws and regulations of the local

country by, and concurrently serving as such at, the Company and its parent or subsidiary or a subsidiary of the same parent.) (3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total

number of outstanding shares of the Company or ranking in the top 10 in holdings.

(4) Not a managerial officer under (1), spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons under (2) and (3). (5) Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings, or

who designates its representative to serve as a director or supervisor of the company under Article 27, paragraph 1 or 2 of the Company Act. (Not applicable in cases where the person is an independent director

appointed in accordance with the Act or laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent or subsidiary or a subsidiary of the same parent.). (6) If a majority of the company's director seats or voting shares and those of any other company are controlled by the same person: Not a director, supervisor, or employee of that other company. (Not applicable in cases

where the person is an independent director appointed in accordance with the Act or laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent or subsidiary or a

subsidiary of the same parent.) (7) If the chairman, president, or person holding an equivalent position of the Company and a person in any of those positions at another company or institution are the same person or are spouses: Not a director (or

governor), supervisor, or employee of that other company or institution. (Not applicable in cases where the person is an independent director appointed in accordance with the Act or laws and regulations of the local

country by, and concurrently serving as such at, the Company and its parent or subsidiary or a subsidiary of the same parent.) (8) Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company. (Not applicable in cases

where the specified company or institution holds 20% or more and not exceed 50% of the total number of outstanding shares of the Company and the person is an independent director appointed in accordance with

the Act or laws and regulations of the local country by, and concurrently serving as such at, the Company and its parent or subsidiary or a subsidiary of the same parent.). (9) Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or

consultation to the Company or to any affiliate of the Company for which the provider in the past 2 years has received cumulative compensation exceeding NT$500,000, or a spouse thereof; provided, these

restrictions do not apply to any member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Securities and Exchange Act or to the Business Mergers and Acquisitions Act or related laws or regulations.

(10) Not being any circumstances in the subparagraphs of Article 30 of the Company Act.

66

3.4.4.2 Remuneration Committee Meeting Status

(1) There were 3 members of NPC’s Remuneration Committee.

(2) Current members will serve from June 12, 2019 to June 11, 2022. There were 3 meetings【A】of the remuneration committee convened in 2019. The

attendance status is shown as follows:

Title Name Attend in person (B) By proxy(A) Attendance rate in person

(%)(B/A)(Note) Remark

Convener Chih-Kang Wang 3 0 100.0 Independent Director(Re-elected;


Committee Member Yi-Fu Lin 3 0 100.0 Independent Director(Re-elected;


Committee Member Yun-Peng Chu 3 0 100.0 Independent Director(Re-elected;

Re-election on 2019.06.12) Other details to be documented:

1. If the Board of Directors does not accept or modifies suggestions provided by the Remuneration Committee, the date of the Board of Directors’ meeting, the session number,

contents of the proposal, decisions made by the Board of Directors and management opinions from the Remuneration Committee by the Company should be stated (If the

remuneration and rewards approved by the Board of Directors are superior to those advised by the Remuneration Committee, there should be descriptions of the differences and

reasons considered): None.

2. For decisions made by the Remuneration Committee, as long as there are members objecting or having their reservations that are recorded or stated in writing, the date of the

Remuneration Committee meeting, the session number, contents of the proposal, and how opinions from all members and from opposing members are handled should be

described: None.

3. The duty of the Remuneration Committee of the Company is to exercise the care of a good administrator and implement the following functions, including arranging at least 2

meetings in a year, convening meetings at any time as necessary and making recommendations to the Board of Directors for its decision reference based on a professional and

objective status:

(1) To review the regulations and procedures of the organization and propose the amendments.

(2) Prescribe and periodically review the performance review and remuneration policy, system, standards, and structure for directors, supervisors and managerial officers.

(3) Periodically evaluate and prescribe the remuneration of directors, supervisors, and managerial officers.

4. While the Remuneration Committee implements the functions of the preceding paragraph, it shall accord with the following principles:

(1) With respect to the performance assessment and remuneration of directors, supervisors and managerial personnel of the company, it shall refer to the typical pay levels adopted

by peer companies, and take into consideration the reasonableness of the correlation between remuneration and individual performance, the company's business performance,

and future risk exposure.

(2) It shall not produce an incentive for the directors or managerial officers to engage in activity to pursue remuneration exceeding the risks that the company may tolerate.

(3) It shall take into consideration the characteristics of the industry and the nature of the company's business when determining the ratio of bonus payout based on the short-term

performance of its directors and senior management and the time for payment of the variable part of remuneration. Note1: In the event that members of the Remuneration Committee resign before a year is completed, the date of resignation should be indicated in the remark column. The actual attendance rate (%), on the other hand,

shall be calculated by the number of Remuneration Committee meetings held during service and the frequency number of attendance in the meetings. Note2: Before a year is completed, upon any re-election of Remuneration Committee members, new and old, shall be listed and it shall be specified in the remark column that a specific member is old, new, or reelected, and the

date of re-election. The actual attendance rate (%) is calculated by the number of Remuneration Committee meetings held during service and the frequency number of attendance in the meetings.

67

3.4.4.3 The discussion and results of the Remuneration Committee resolutions and the Company’s handling of the opinions of the Remuneration

Committee as below:

Date Content Result Opinions Handling

2019.01.16

(1st in 2019)

To report the 2018 annual year-end bonus distribution

standard report of appointed manager and finance and

accounting department officer that approved by the Board

of Directors.

Noted. The year-end bonus of the appointed manager and

finance and accounting department officer had

been calculated according to the “Principle of

Year-End Bonus and Reward Distribution” and the

Board of Directors approved to distribute

accordingly.

2019.08.07

(2nd in 2019)

Discussion Items No.1

To formulate the Chairman’ compensation.

The content was approved by all the

attending members and submitted to the

Board of Directors for resolution.

The content was submitted to Board of Directors

and approved by all the attending directors.


To formulate the existing Directors’ compensation.







To maintain the existing managers’ compensation

standards and structure.







To maintain the existing managers’ appraisal systems.







To discuss the salary adjustment of the managers would be

in line with all employees in 2019.






2019.12.13

(3rd in 2019)

In response to the expiration of the 5 year implementation

cycle of the current year-end bonus formula, it is planned

to revise the Company's "Regulations of Year-End Bonus

and Remuneration Distribution”






68

3.4.5 Social Responsibility Implementation Status as Required by the Taiwan Financial Supervisory Commission

Evaluation Item

Implementation Status (Note1) Deviations from the Corporate

Social Responsibility Best Practice

Principles for TWSE/GTSM Listed

Companies and Reasons

Yes No Summary (Note2)

1. Does the Company conduct risk

assessments on environmental, social and

corporate governance issues regarding to

the Company’s operation in accordance

with the principle of materiality, and

formulate relevant risk management

policies or strategies? (Note3)

V

The President Office of the Company, together with the general management office

of the whole enterprise, evaluate the risks of the following issues based on the

principle of materiality regarding corporate social responsibility and the impacts on

the stakeholders, and formulate risk policies that can be effectively identified,

measured, evaluated, monitored and controlled to reduce the impact of related risks.

(1) Environmental issues: Including climate change, water resources, greenhouse

gas emissions, waste management, and eco-efficiency operations, etc. With the

concept of equal emphasis on industrial development and environmental

protection, the Company moves towards the goal of eco-industrial plants, in

addition to doing a good job in pollution control, implementing energy-saving

and carbon-reducing green consumption strategies of “recyclable, low pollution,

resources-saving”, the Company sets yearly targets for energy consumption per

unit product and greenhouse gas emission, and keeps tracking and reviewing to

ensure that the targets are achieved.

(2) Social issues: Including human rights, labor rights, social participation and

feedback, human capital development, occupational health and safety, etc., The

Company strictly abides by domestic and foreign regulations regarding labor

and human rights, treats all employees fairly, protects the rights and interests of

employees and arranges health checks for employees every year. It creates a

safe working environment, promotes various caring activities in the

neighborhoods, and actively cooperates with the government and various civil

society organizations to gain a deeper understanding of social needs, care and

assist for the vulnerable groups.

(3) Corporate governance issues: Including strategic operations, business ethics,

legal compliance, risks and hazards, and supply chain management, etc., The

Company has formulated important regulations such as Corporate Governance

Guidelines and Ethical Corporate Management Best Practice Principles.

Through a comprehensive internal control mechanism, it promotes the

Company’s operating efficiency, reduces risks, and ensures the shareholders

’rights.

In compliance with the Article 3-2

of the Corporate Social

Responsibility Best Practice


Companies.

69

Evaluation Item






2. Has the Company established an

exclusively (or concurrently) dedicated

unit for promoting CSR? Is the unit

empowered by the Board of Directors to

implement CSR activities at upper

management levels? Does the unit report

the progress of such activities to the Board

of Directors?

V

To promote Corporate Social Responsibility, the Chairman, Chia-Chau Wu has been

appointed as the general convener and the President, Ming-Jen Tzou as vice

convener to be in charge of the formulation of whole company’s social responsibility

policy, performance supervision and management. President Office, safety and

health department, resource recycling department and other units actively promote

and implement social responsibility and other related operations, prepare the

Corporate Social Responsibility Report and report to the Board of Directors

periodically. The 2018 execution status and Corporate Social Responsibility Report

had reported to the Board of Directors on June 12, 2019. The 2019 execution status

and corporation social responsibility report are estimated to be reported to Board of

Directors in June 2020. In addition, as the member to the Formosa Plastics Group, if

the local sustainable development and social welfare are common business of the

Formosa Plastics Group, the “Foundation”, “Energy Conservation and Carbon

Reduction team”, and “Afforestation team” under the “Social Responsibility

Promotion Center” are responsible for coordinating the work. The Corporate Social

Responsibility Special Unit will report the work items to the Company's Directors

through internal official documents. If the Directors believe that the relevant issues

need to be further discussed with the Independent Directors, the discussion will be

proposed in the Board of Directors’ meeting.

In compliance with the Article 9 of

the Corporate Social Responsibility


TWSE/GTSM Listed Companies.

3. Environmental issues

(1) Does the Company establish an

appropriate environmental management

system based on its industrial

characteristics

V

(1) The Company has formulated regulations of safety and health management, and

established management information systems and office automation systems,

etc., and strengthened the plants’ safety and health management through these

sound systems. In addition, the environmental accounting system was further

introduced into the Company to assist taking control of the information and

benefits of environmental expenditures, and specifically exposing environmental

protection activities to the stakeholders. Under the guidance of the BSMI, every

plant has successively passed ISO 14001 certification since 1986. The timetable

of passing certification for each factory is as follows:

1.Year 1997: The plant of Linkou, Shulin, Kung San, Jinxin, Chiayi and

Hsinkang.

2.Year 1998: The plant of Renwu and Linyuan.

3.Year 2000: The plant of Mailiao and Haifeng.

(For details of the environmental management system based on the industry

characteristics, please refer to Chapter 3 “Green Environment Management

In compliance with Article 13 of the

Corporate Social Responsibility



70

Evaluation Item






(2) Does the Company commit to improving

usage efficiency of various resources

and utilizing renewable resources with

reduced environmental impact?

(3) Does the Company assess the potential

risks and opportunities of climate change

for now and in the future, and adopt

measures to deal with climate-related

issues?

V

V

Promotion” of the Company's 2019 Social Responsibility Report.)

(2) From raw material procurement to product sales, the Company attaches great

importance to the health and safety of its customers. Therefore, the production

process is continuously improved upon (such as reduce the harmful formula,

improve the energy Conservation and carbon reduction and develop green

products). To follow market trends and meet the needs of downstream

customers, the Company has shifted its focus to producing non-toxic and

environmentally friendly products with improved production processes as well

as green energy products. For example, developing halogen-free,

phosphorus-free carrier plates and arsenic-free copper foil to make the new

generation circuit board be applied to fields such as green appliances and

developing waterborne epoxy resin with no volatile organic compounds to be

used for industrial environmental friendly coating. (For details of the specific

practices and products that are environmentally friendly, please refer to Chapter

2 “Product Value Expansion” of the 2019 Corporate Social Responsibility

Report.)

(3) The Company continuously assesses the potential risks and opportunities caused

by climate change. After comprehensively considering the financial impacts,

reputation impacts, global economic situation, volatility of energy cost, costs of

environmental regulations and other factors, the Company sets energy

conservation targets and measures, and promotes the development of

environmentally friendly products to ensure the Company’s stable operation and

maintain its competitiveness. The Company keeps adopting BACT and process

optimization to reduce energy consumption, sets energy consumption per unit

product and greenhouse gas emission control targets, promotes various

water-saving and energy-saving improvements and encourages all departments

to participate in internal and external evaluations or observation tours, in which

the good cases are properly given rewards. It provides a good learning channel

and strengthens the motivation for reduction. Also, the Company builds a

greenhouse gas emissions ERP information management system, and annually

invite impartial third-party institutions to conduct inventory verification to

control greenhouse gas emissions. (More details please refer to Chapter 3

“Green Environment Management Promotion” of the Company's 2019 Social









71

Evaluation Item






(4) Does the Company count greenhouse

gas emissions, water consumption and

total weight of waste in the past two

years, and formulate policies for energy

saving, carbon reduction, greenhouse

gas reduction, water use reduction or

other waste management

V

Responsibility Report.)

(4) The Company has formulated management measures such as safety, health and

environment, greenhouse gas reduction, air pollution prevention, water pollution

prevention, waste and toxicants, soil and groundwater etc. In addition to

continuously promoting various water conservation, energy conservation and

other resource reduction work, performance reviews of foresaid work are carried

out monthly. The Company continues to promote source classification, process

waste reduction and resource utilization, etc., to ensure the normal operation of

production equipment and the surrounding environmental quality, and reduce the

waste of resources and energy, and reduce operating costs to achieve the

multiple benefits of energy saving and carbon reduction. The Company also

commissioned BSI (The British Standards Institution) and SGS (SGS Taiwan

Ltd.) to conduct greenhouse gas inventory and water footprint verification, and

regularly count the total quantity of energy and pollutants such as water and

waste. For energy saving and carbon reduction, specific reduction targets are set

every year, please refer to “Chapter 5.4 Environmental Expenditure

Information”. (For more detailed statistics and specific practices, please refer to

Chapter 3 “Green Environment Management Promotion” of the Company's

2019 Social Responsibility Report.)

In compliance with Article 17-2 to

Article 17-3 of the Corporate Social

Responsibility Best Practice


Companies.

4. Social issues:

(1) Has the Company referred to relevant

laws and international human rights

instruments to establish relevant

management policies and procedures?

V

(1) In order to guarantee the human right of employees, customers and stakeholders

of the Company, the Company complies with relevant labor regulations such as

Labor Standards Act, and UN Universal Declaration of human Rights, UN

Guiding Principles on Business & Human Rights, International Labor Office

Tripartite Declaration of Principles Concerning Multinational Enterprises and

Social Policy, etc. The Company also formulate personnel rules and regulations

to protect employees' rights and interests and provides stable and excellent

treatment, complete education and training, promotion and development system,

and a safe and healthy working environment to enhance the professional

competence of employees. The Chairman Chia-Chau Wu has formally signed

the human rights policy in August, 2018, more details and specific practices and

effectiveness of the human rights concern project please refer to Chapter 4

“Creating a Happy and Safe Workplace” of the Company's 2019 Social

Responsibility Report.)





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Evaluation Item






(2) Has the Company formulated and

implemented reasonable employee

welfare measures (including

compensation, vacation and other

benefits), and appropriately reflected the

operating performance or results in

employee compensation

(3) Has the Company provided employees

with safe and healthy work

environments as well as regular classes

on health and safety?

(4) Has the Company established an

effective competency development

V

V

V

(2) A. The Company has clear regulations on employees’ promotion, appraisal,

training, reward and punishment and other systems. The remuneration

standards for new recruits are determined according to the academic

experience and other conditions which required for the job, upholding the

spirit of "equal pay for equal work", the basic salary ratio of female and

male employees at the same position and same grade is 1: 1, their salary and

promotion would be adjusted year by year according to their work

performance, and the corresponding salary will be given.

B. The Company's holidays include two days of week off, national holidays, and

other dates set by the Central Competent Authority for holidays, and

employees are granted special holidays in accordance with the Labor

Standards Act. For other employees’ benefits, please refer to "Chapter 5.5

Labor Relations”.

C. Article 25 of the Company's Articles of Incorporation stipulates that if the

Company makes a profit in the current year, it shall allocate 0.05% to 0.5%

as the employee's remuneration according to the profit before income tax

before deducting the employees' remuneration in the current year. In

addition, the Company issues employees’ year-end bonuses and adjusts the

annual salary adjustments depends on indicators such as the Company’s

operation performance etc.

(3) The Company regularly provides health and education information for

employees. In order to enhance employees' safety and health awareness, the

Company distributes "work hazard reminder cards" and "safety and hygiene

manuals" to remind employees of work safety through education, training, and

safety observation. For the protection of the work environment and personal

safety of employees, please refer to Chapter 4 “Creating a Happy and Safe

Workplace” of the Company's 2019 Social Responsibility Report.)

(4) Through the e-training management system, the Company ensures that

personnel are gradually completing the training of new personnel, foundation,











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Evaluation Item






career training program for employees?

(5) With regard to customer health and

safety, customer privacy, marketing and

labeling of products and services, has

the Company complied with relevant

regulations and international standards,

and formulated relevant policies and

appeal procedures for consumer

protection?

V

professional, cadre reserve, etc. In addition, in line with the work and safety

needs of individual units, counseling staff with professional licenses hold

occasional seminars on various topics as well as strengthening human rights and

workplace safety awareness courses. (For specific training practices, please

refer to “4.3 Talents Cultivation” of the 2019 Corporate Social Responsibility

Report.)

(5) The specific practices of the Company on customer health and safety, customer

privacy, marketing and labeling of products and services are stated in Chapter 2

"Product Value Expansion" of the Company's 2019 Social Responsibility

Report, the main practices are as follows:

A. Since most of the products produced by the Company are not directly sold to

general consumers, there are fewer marketing activities such as media

advertisements and campaigns. If there are promotion activities involving

regulations, all units will first consult the legal office to avoid violation. In

addition, the Company has formulated the "Personal Data Management

Measures" to strictly restrict the utilization and regulate the searching

functions of personal data to protect customer privacy.

B. Customer relationship management is an important part of the Company's

sustainable operation. In order to understand the valuable opinions of

customers, the Company has clearly defined the customer complaints

channels as well as return and compensation application procedures so that

customers can express relevant appeals through the Response Form. Product

complaints are handled by the salesperson filling out the Customer

Complaint Handling Form for all returns and exchanges. The process is also

monitored by the computer system. The official website provides sales

service hotline and e-mail address of various products to facilitate customers

to directly respond to opinions using multiple channels. The relevant

departments will summarize the issues that customers concerned periodically

and prioritized the issues according to the level of importance and timeliness

to ensure the needs of customers are handled.







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Evaluation Item






(6) Does the Company formulate supplier

management policies which require

suppliers to comply with relevant

regulations on environmental protection,

occupational safety and health or labor

human rights, and how the policies been

implemented?

V

(6)The Company has set a "Supplier / Contractor Social Responsibility

Commitment" and a "Supplier / Contractor Social Responsibility

Questionnaire". All manufacturer are required to sign a confirmation request and

comply with relevant regulations when they logs in the Formosa Technology

E-Market Place or after the ordering is completed. In addition, the procurement

department must check the following delivery conditions according to the

purchase requirements of different materials in every procurement: RoHS

qualification, related national industrial safety standards, ISO certification,

hazard notices and illustrations, properly recycle the used containers or delivery

vehicles, products manufactured by the disadvantaged and products with

nonradioactive labels are prioritized for procurement. For procurements that

have checked any of the above conditions would be indicated in the “Price

Inquiries” and "Orders" to require the supplier to comply with the regulations.

Besides, the Company adheres to the spirit of perpetual business operation and

the principle of fair trading, and commits itself to ensuring that the partners

meet environment protection, industrial safety, and human rights requirements.

Non-compliant manufacturers will be rejected and placed under manufacturer

evaluation. (Other supplier management practices, please refer to Chapter 2

"Product Value Expansion" of the Company's 2019 Social Responsibility

Report.)





5. Does the Company prepare corporate

social responsibility reports and other

reports that disclose the Company's

non-financial information referring to

international report preparation standards

or guidelines? Whether the reports have

obtained the assurance opinion from the

third-party verification institution?

V The content and structure of the Company's "2019 Social Responsibility Report" is

based on the guidelines of GRI standards from Global Reporting Initiative, written in

accordance with the guidelines and framework listed in the core options, and

exposes the Company's main sustainability issues, strategies, goals and adopted

measures. The report was reviewed by the British Standards Institution (BSI), a

third-party impartial institution, exposed in accordance with the core options, and

presented using international indicators.





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Evaluation Item






6. If the Company has established its own Best Practices on CSR according to the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies, please

describe any differences between the prescribed best practices and actual implementations taken by the Company:

Note: The Company passed the resolution of the “Corporate Social Responsibility Code” as set out in the resolution of the Board of Directors on August 12th, 2015. Although the Company's

practice has been slightly revised, the established code and the “the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies” comply with

the same spirit. For the operation of the Company's Corporate Social Responsibility, please refer to the Corporate Social Responsibility Report and website description.

7. Other important and helpful information in understanding CSR operation:

(1) Relevant systems and structures

In order to effectively integrate and promote the Company's social responsibility, the Chairman, Chia-Chau Wu serves as the general convener and the President, Ming Jen,

Tzou serves as the deputy convener. They are responsible for formulating the social responsibility strategy and supervising the performance. The President's office, Safety and

Health Department, the Resource Recycling Department, and the safety, health, and environmental protection unit of each division actively promote and implement corporate

governance, community outreach, and environmental protection. However as the member of the Formosa Plastics Group, in order to effectively integrate and promote the

Company's social responsibility, the Company established a “Social Responsibility Work Promotion Center,” which is responsible for strategy formulation and performance

supervision. The medical and educational units of all companies, offices, staff unit and non-profit organizations collaborate to promote social responsibility. On the other hand,

the seven foundations and charitable trusts funded by the founders, Mr. Wang Yung-Ching and Mr. Wang Yung-Tsai, also play an important role. They have long held the

concept of “what is taken from the society is used interests of the society” to invest in social welfare and do our part to improve social care and reduce social problems. Under

the "Social Responsibility Promotion Center", the "Afforestation Team" and the "Energy Conservation and Carbon Reduction Team" have been set up. The company as a whole

will be responsible for setting up a dedicated safety and health department with the responsibility of each plant as the center and related business divisions to improve the

environmental quality. The charity and neighborly care group has been organized to care for the disadvantaged groups, set up medical centers to offer emergency relief, etc. in

order to achieve important tasks of reducing energy consumption and pollution, creating an ecological environment balance, and successfully achieving various social

responsibility work plans.

(2) Social welfare engagement of the enterprise

A. The system, measures, and performance of environmental protection, safety, and health:

Since its establishment, the Company has always adhered to the philosophy of "industrial development and environmental protection," and pursues social responsibility

and perpetual business operation. Therefore, it attaches great importance to the work of environmental protection.

Following this concept, the Company adopts the latest international technology for production processes and environmental protection equipment. For example, when

building a power plant more than a decade ago, the Company was the first in the country to insist on the use of closed coal bunkers. Coal dust no longer polluted the air, and

BACT is used to make pollution emissions far below domestic and international standards. Although the construction cost increased, the intangible environmental improvement

and the reduction of resource waste and cost reduction can be obtained. In addition to selecting the best production processes and environmental protection equipment at the

beginning of the planning period, the Company also took into consideration of the integration of upstream, middle, and downstream processes, and recycles the by-products and

wastes of the upstream process as raw materials and fuels for the middle and downstream processes by fully integrating and reusing waste gas, waste heat and low-level energy

between the plants, make the best use of resources and energy, reduce energy and waste resources, we pursue the goal of achieving an eco-industrial park. Take the Sixth

Naphtha Cracker for example, the power and steam consumption per unit of product in 2019 years has decreased by 59.2% and 72.9% respectively since the trial operation

began in 1999. Future reduction targets will continue to be promoted. The spirit of the Company is to inquire into the root of the matter, continue to improve and aim at the

sovereign good. Through continuous improvement, the Company will continue to improve the efficiency of equipment operation to reduce energy and resource use, and

strengthen the competitiveness of perpetual business operation.

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Evaluation Item






Taking water conservation as an example, from 1999 to 2019, the sixth naphtha cracker has invested 8.51 billion dollars to complete 2,082 improvement cases, saving

279,300 tons of water per day. The 280 ongoing improvement cases will receive 2.29 billion dollars of investment to achieve the target of saving 17,400 tons of water per day.

The total investment is 10.80 billion dollars. After the completion, the annual benefit will be approximately 1.32 billion dollars. In terms of energy conservation and carbon

reduction, the sixth naphtha cracker has also invested 19.93 billion dollars, 7,079 improvement cases have been completed, reducing about 10.893 million tons of CO2. 1,208

ongoing improvement cases will receive 7.60 billion dollars. It is estimated that an additional 1.373 million tons of CO2 will be reduced, with a total investment of 27.53 billion

dollars. The end benefits will be about 32.74 billion dollars per year.

The above-mentioned results can be affirmed by the Company awards from 159 business units and commendations from the competent authorities of the Ministry of

Economic Affairs, the Water Resources Department, the Industrial Bureau, the Energy Bureau, and the Environmental Protection Agency during the 12 last years from 2008 to

2019.

In addition to adopting the best international production process, doing environmental protection work such as pollution prevention, clean production, energy conservation,

carbon reduction, and water conservation to reach the goal of becoming ecological industrial parks, the Company also follows the trend of the times and pays attention to global

warming and has promoted tree planting and greening in the plant area for years. In recent years, the Company has actively promoted the greening of various plats. At present,

the Company have planted nearly 2 million trees and 390,000 square meters of shrubs, which can absorb about 15,000 tons of CO2 per year. Providing a green aerobic

environment for employees and nearby residents, and taking into account the best of both industrial development and environmental protection. Traditional factories give the

impression that there are few green spaces and trees, and even chimneys emit black smoke from time to time, causing air pollution. The direction of the Company's various

plants is to change the minds of people to create a green landscape just like the park, and to turn air pollution into the surroundings filled with the sounds of singings birds and

the sweet smell of blossoms.

At the same time, the Company also responded to the government's afforestation and carbon reduction plan and cooperated with the Yunlin County Government to promote

flatland afforestation and carbon reduction activities. In 2011, the Company started to receive a 10-year afforestation and carbon reduction subsidy. As of 2019, the Company has

received the flatland afforestation award in Yunlin County, with an application area of 1,094 hectares, and about 1.206 billion in subsidies have been provided to the afforestation

applicants, contributing to the afforestation and carbon reduction.

The Company also fully cooperates with the Environmental Protection Agency to promote green procurement of private enterprises to implement the energy-saving and

carbon-reduction green consumption policy. The statistical green procurement amount of the Company in 2019 was 293 million dollars.

In the future, the Company will continue to take into account the concept of environmental protection and economic development, and implement various measures such as

water conservation, energy conservation and carbon reduction, sustainable use of resources and friendly environment in order to fulfill social responsibilities.

In addition, providing a healthy and safe working environment is the responsibility of the Company to employees and their dependents. Therefore, "Safety First" is an

important principle for us to cherish our employees. In addition to establishing a reward system, employees and contractors are encouraged to raise issues with unsatisfactory

behaviors and false alarms. Departments with zero occupational disasters are also rewarded, encouraging all units to report potential hazards, and report abnormalities, and

unsafe behaviors. The Company quarterly reviews eliminates potential hazards and conducts inter-departmental competitions and performance reviews to increase employee

engagement.

B. Community participation:

The Company is deeply rooted in Taiwan. Plants area are distributed all over Taiwan. We strive to become a “good neighbor” with the surrounding residents by setting up a

dedicated group in each plant to communicate with residents and provide all kinds of assistance. In addition, we continue to mobilize our staff to clean up neighborhood streets

and beaches, continually invest in local public welfare activities, and assist in caring for families and disadvantaged groups, so that our employees and community residents can

77

Evaluation Item






be integrated. Employees have also spontaneously formed a charity group, responding to the feedback to the neighborhood, and by long-term and continuous attention, gradually

expand human care and love to every corner of the society to jointly establish a peaceful society.

C. Social contribution, social services, social welfare, and other social responsibility activities:

Based on the spirit of "what is taken from the society is used interests of the society ", the Company is committed to the perpetual business operation and continues to give

back to the society and fulfill its social responsibilities with the management policy of "quality, reputation, service, and environmental protection." Our results in social

responsibility are also recorded in the "Corporate Social Responsibility Report."

In addition to dedicating to business operations, we also invest in medical care, education, and various social welfare undertakings to fulfill corporate social responsibility:

a. Medical treatment: Chang Gung Memorial Hospital was established in 1976. It is committed to "improving medical standards and creating social well-being" and has the

courage to challenge the status quo. It not only drives the reform and progress of the medical community but also won the trust of the general public. Now,

in Taiwan, there are four major sectors, the North Sector (including Keelung, Lover Lake, Taipei, Linkou, Taoyuan, and other nursing homes), Chiayi

Sector, Yunlin Sector, and Kaohsiung Sector (Kaohsiung and Fengshan Hospital). In services, it is also the largest and most complete medical institution in

Asia, from emergency medical treatment to rehabilitation, health care, and senior care. Chang Gung Memorial Hospital also donated 999 sets of artificial

electronic ears for the benefit of hearing-impaired children, and set up a social service fund to subsidize poor patients for long-term treatment. As of the end

of 2019, it has spent 9.14 billion dollars and continues to provide the medical assistance needed in remote and undeveloped countries.

b. Education: In the 1960s, various industries in Taiwan flourished. In view of the shortage of industrial talents, the Company founded Ming Chi Institute of Technology (now

Ming Chi University of Technology) to provide the students from poor families a chance to study and work at the same time. Later, Chang Gung Medical College

(now Chang Gung University) and Chang Gung Institute of Nursing (now Chang Gung University of Science and Technology) were established to cultivate

students' diligence and simplicity by combining theory and practice, and to cultivate excellent industrial middle cadres and medical staff. Since the beginning of the

1995, the Formosa Plastics Group started funding for aboriginal youth education and employment opportunities. The total donation amount is approximately 1.7

billion dollars, and the number of assisted people reached 5,484.

c. Disaster relief: assisting in the 921 earthquake (1999), Morakot wind disaster (2009), Kaohsiung gas explosion incident (2014), Tainan earthquake (2016), Nibble wind disaster

(2016), Hualien earthquake (2018) and other disaster relief in reconstruction and the rehabilitation of schools in the disaster areas. So far, 76 primary and

secondary schools have been fully sponsored by the Company.

d. Other social welfare: In addition to medical and education, the founders of Formosa Plastics Group have set up seven foundations and charitable social welfare funds. Through

the operation of the foundations and the active participation of companies within the corporation, they continue to promote and donate to various social

welfare undertakings, such as: (1) Nearly 1.12 million doses of Streptococcus pneumonia vaccines to promote the free vaccination program for the elderly over 75 years old to improve their health and quality of

life. (2) Continue to promote the "Professional Service of Early Treatment Effectiveness Improvement Program" to systematically and comprehensively improve the quality of Taiwan's

overall early treatment services. Currently, 92 institutions have been provided with relevant medical assistance and subsidies; and an "early treatment professional communication platform" has been established. Information on national early treatment activities, treatment articles, and teaching files are shared.

(3) Support the inmates: donated to the Yunlin Second Prison, Kaohsiung Prison, and Taipei Prison to handle the Wang Jhan-Yang Foundation Rainbow Project (drug-addicted HIV inmates), with three courses of physiological education, psychological counseling, and vocational training the project assists drug-addicted prisoners with HIV to cultivate life skills, repair family relationships and reintegrate into society. Cooperation with Yunlin Second Prison and Kaohsiung Prison to handle the Wang Jhan-Yang charitable trust fund Xiangyang project (drug inmates) to assist inmates in returning to the society is also conducted. Collaboration with the Correctional Affairs Department of the Ministry of Justice in 2017 to expand the Xiangyang Project in three prisons including Hualien Prison, Tainan Prison, and Kaohsiung Women's Prison.

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Evaluation Item






(4) Promote various scholarships and work-study programs: such as the Children's Education Assistance Program, Disadvantaged Student Scholarship, and the Student Financial Aid Program in Remote Areas, to help the economically disadvantaged or disabled children and young students to be able to receive education unhindered. In 2017, promoted the Excellent Talents Development Program which provides long-term scholarships for outstanding students from disadvantaged backgrounds to assist them in academic and moral development. In addition, we will promote semester and summer work-study programs, match students to work in social welfare institutions, cultivate the service spirit of students contributing to society, and reduce institutional operating costs and expenditures to serve more vulnerable people.

(5) Women and Children's Welfare: a. Promote the nutritional breakfast subsidy for the vulnerable children in the neighboring 7 Township for Mailiao Plant, b. Promote the economic assistance program for victims of domestic abuse, c. Promote the medical treatment and economic assistance of patients with rare diseases, d. Donation to Taitung and Hualien English Assistance Program, an introduction of outstanding American college students to primary schools in remote areas for English teaching, e. Promote the nutritional breakfast subsidy for the vulnerable Junior High School students of Pingtung County, f. Promote the nutritional lunch subsidy for the Elementary School and Junior High School students of Yunlin County, g. Promote subsidy program by donating to Taipei Orphan Welfare Foundation to improve access to school education for them, h. Promote assistant plans for the vulnerable pre-school children in New Taipei City and other counties and cities.

(6) Elderly welfare: a. promote the elderly housing improvement and appliance donation plan, b. Mailiao and Taixi Township meal delivery plan for elderly living alone, c. promote the ‘’Active Aging Center’’ corporately in Taiwan. Members in this center would participate in five major classes (of the elderly) through package-based individual planning courses, including health management, brain training, vitality, physical training and social participation, to maintain their health, preventing disability, and effectiveness of helping healthy elderly people improve, d. Donate to the elderly daycare center shuttle bus and dream plan, e. Promote lighting improvement plan, donate lighting facilities to improve the lighting facilities of Elderly Welfare, to provide well care environment and saving electric bill, f. Promote rural elder care plans that provide elders with day care and various health promotion activities

(7) Vulnerable group support: a. Donation to social welfare institutions daily necessities and rice, b. The low-income households near Mailiao factory receive gifts and bonus for the three most important Chinese holidays, c. Emergency Allowances plan, d. Donation of daily necessities to the Christian Relief Association food bank, e. Promote the support plan for the homeless by establishing short-term shelters and providing cooking equipment. Assist the homeless who are willing to live on their own to leave the homeless life from the beginning. f. Chang Gung University and Chang Gung University of Science and Technology jointly promote the construction of AI long-term care system and the I-Health volunteers promotion plan.

(8) Promote the development of Taiwan's distinctive culture: sponsoring the "Ming Hwa Yuan Art & Cultural Group", "I Wan Jan Puppet Theater ", "Ifkids Theatre", "Apple Theatre" to go on tours in the countryside; sponsor Huang Jun-xiong Puppet Theatre to perform in Chiayi County.

(9) Promote the Wang Jhan-Yang charitable trust fund "Burning Star Project" to cultivate outstanding sports talents, "Future Star Project" sports talents abroad training programs and sports player medical protection programs to help domestic sports talents improve their performance, in addition, assist Wang Chang Gung Charitable Trust in promoting the accompanying athletic trainer plan in 2019.

(10) Institutional support: a. Donation to social welfare institutions includes purchasing facilities and equipment, vehicle funds or housing repair costs. A total number of 34 social welfare institutions in Yilan, Nantou, Taichung, Hualien, Yunlin, Taitung, Taoyuan, Miaoli, Hsinchu, Xinbei, and Pingtung regions etc. were donated, b. Donation to the county and city government’s plans for the vulnerable groups ( Keelung City Government, Taoyuan City Government , Kaohsiung City Government, Chiayi County Government), c. Moon cakes donation to social welfare institutions .

Note 1: If the implementation status is "Yes", please explain the adopted important policies, strategies, measures and implementation; if the implementation status is "No", please explain the reasons and the plans, strategies and measures that going to adopt in the future.

Note 2: If the Company has prepared a corporate social responsibility report, the summary description can be accepted by indicating the way to look up the corporate social responsibility report and the index pages as a replacement.

Note 3: The principle of materiality refers to those who have a significant influence on the company's investors and other stakeholders regarding to environmental, social and corporate governance issues.

79

3.4.6 Implementation Status of Operational Integrity as Required by the Taiwan Financial Supervisory Commission

Evaluation Item

Implementation Status (Note1) Deviations from the Ethical

Corporate Management Best


TWSE/GTSM Listed Companies,

and Reasons

Yes No Summary

1. Stipulating policies and plans for ethical

corporate management

(1) Has the Company formulated the

ethical corporate management policies

approved by the Board of Directors,

clearly indicated policies and activities

related to ethical corporate management

in its bylaws and external documents,

and are the Company’s Directors and

management team actively fulfilling

their commitment to corporate policies?


evaluation mechanism for the risks of

acting unethical, regularly analyzes and

evaluates business activities with a high

risk of acting unethical in the business

scope, and formulates the prevention

plan which the content at least contain

the prevention measures stated in

Article 7-2 of the “Ethical Corporate

Management Best Practice Principles for

TWSE/GTSM Listed Companies.”?

V

V

(1) The Company complies with the Company Act, Securities and Exchange Act,

Business Entity Accounting Act, and other related regulations, and upholding

the “Diligence, Perseverance, Frugality and Trustworthiness” enterprise spirit in

order to comply with the law and ethical standards. With the business

philosophy of honesty, integrity, fairness, and transparency, self-discipline, and

responsibility, the Board of Directors has approved the Company’s ethical

corporate management policy on November 12, 2014. By setting the Company's

President Office as the driving unit to formulate and implement various ethical

policies, the Company establishes a good corporate governance and risk control

mechanism, to seek sustainable development of the Company. The Board of

Directors and the senior managements also promised to actively implement and

supervise the implementation of the ethical management policies.

(2) A. The Company has established strict rules of conduct and ethics in the rules and

regulations such as the “Personnel Management Rules” and “Working Rules”,

and has specified the relevant reward and punishment regulations. Directors,

managers, servants of the Company, or those who have substantial control

capabilities are prohibited from providing, pledge, requesting or accepting any

illegitimate interests directly or indirectly, or making other violations of good

faith, illegality, or breach of fiduciary duty to prevent malpractice,

misappropriation of public funds, acceptance of bribes, disclosure or lies, and

other acts of dishonesty.

B. The Company regularly analyzes and evaluates business activities with a high

risk of acting unethical, and specified the regulations for relevant employees in

“Personnel Management Rules” and “Working Rules”. That is, positions of

interest for business, procurement, contracting, supervision, and budgeting, as

well as contact with other manufacturers shall not accept business dinners or

other entertainment activities invited by the manufacturer, nor accept the

property or other interests of gifts. The offenders shall be excused from office

and their Supervisors shall be jointly and severally punished. In addition,


Article 5 of the “Ethical Corporate

Management Best Practice Principles

for TWSE/GTSM Listed

Companies.”

Although the Company does not

formulate its own “Procedures for

Ethical Management and Guidelines

for Conduct”, the related regulations

are formulated in different rules and

systems, and are implemented.

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Evaluation Item





and Reasons

Yes No Summary

(3) Does the Company clearly specify the

procedures, behavior guidelines, and

punishment for violations and grievance

system in the plan of preventing

unethical behaviors, and implement

them, and regularly reviews and revises

the foresaid plan?

V

related duties have comprehensively promoted regular rotation operations to

prevent the occurrence of any corruption.

C. The specific practice such as to sign the "Oaths" on the first day of the

employee's employment, which requires employee to comply with the

"Business Secrets Act" and has no violation of the intellectual property rights

of the owner of the computer software. The Company also issue a "Working

Rules" manual to the individual for immediate enquiry about “Personnel

Management Rules” and “Ethical Corporate Management Best Practice

Principles”. For those who are dealing with external manufacturers, it is

necessary to sign the "Self-Legal Convention" and adopt regular rotation

system. The relevant laws and regulations of the business are also included in

the training courses for new recruits, professional job training and supervisory

reserve training. In addition, in order to strengthen the employees' behavior

and ethics, they have signed the "Employee Compliance Operation Policy

Statement”.

(3) The Company specifies the ethical policies, regulations and related procedures,

behavior guidelines, punishment for violations, grievance system, etc., in

“Personnel Management Rules”, “Ethical Corporate Management Best Practice

Principles”, “Main Point of Preventing Insider Trading”, “Informant

Regulations” and “"Employee Grievance Procedure" etc. In addition, "Code of

Ethical Conduct” is formulated for the Company’s directors and managers,

please refer to “Chapter 3.4.8 Other Important Corporate Governance

Information”. The foresaid rules and regulations are reviewed regularly in order

to meet the practical needs.

In compliance with Article 7-1 and

Article 10 to Article 13 of the “Ethical

Corporate Management Best Practice


Companies.”

2. Implementing ethical corporate

management

(1) Has the Company evaluated ethical

records of its counterparty? Does the

contract signed by the Company and its

trading counterparty clearly provide

terms on ethical conduct?

V

(1) The contract signed by the Company for commercial activities is subject to the

terms of good faith. In addition, the Company conduct inquiries such as honesty

investigations for customers, suppliers, and other stakeholders to avoid the

occurrence of dishonest behavior and damage of the Company's rights and

interests.


“Ethical Corporate Management Best

Practice Principles for TWSE/GTSM

Listed Companies.”

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Evaluation Item





and Reasons

Yes No Summary


exclusively (or concurrently) dedicated

unit for promoting ethical corporate

management that answers to the Board

of Directors? Does the said unit

regularly (at least once in a year) report

to the Board of Directors on its ethical

management policies and plans of

preventing dishonesty, and its

implementation?

(3) Has the Company established

policies preventing conflict of interests,

provided proper channels of appeal,

and enforced these policies and

channels accordingly?

V

V

(2) The President Office of the Company and the general management office of the

whole enterprise promotes the operation of the integrity management of the

enterprise, includes promoting ethical management policies, organizing

education and training on issues related to ethical management, and deal with

the cases related to informant according to the Company’s informant

regulations. The ethical management promoting units shall report the

implementation to the Board of Directors annually. The latest report is

December 13, 2019, which mainly evaluated the policies and implementation

of integrity management, the Board of Directors and the management actively

implement the commitments of the business policy; the Company's

consideration of the legality and integrity records of agents, suppliers,

customers, or other business transactions; whether it is required for those who

have access to confidential and commercially sensitive information in the

business and if it has a duty of confidentiality and has set up preventive

measures; whether the Company has established a specific reporting and reward

system, and established a convenient reporting channel and other integrity

management projects; and also submitted internal audit reports to the

Independent Directors for review monthly, and regularly report to the Board of

Directors .

(3) The Company has established policies preventing conflict of interests, provided

proper channels of appeal, and enforced these policies and channels

accordingly.

A. The Company’s standards for the Board of Directors meetings has clearly

stated that if Directors or the juridical persons they represented have a

personal interest, they shall state the key aspects of the interest in the

meeting. If their interest may prejudice the interests of the Company, the

persons concerned shall not participate in the discussion and voting of those

items and shall recuse themselves from those sessions. Also, they shall not

stand proxy for other Directors to exercise the voting right on those items.

B. The Company has stated in its "Personnel Management Rules" that

employees should strictly abide by the code of conduct for avoidance of

interests and proactively report ethical concerns such as conflicts of interest,

and have provisions prohibiting competition to prevent conflicts of interest.









82

Evaluation Item





and Reasons

Yes No Summary

(4) Has the Company established effective

accounting systems and internal

control systems for enforcing ethical

corporate management? Does the

internal audit unit formulate the

relevant audit plans based on the

results of the risk assessment of

dishonesty behaviors and audit the

implementation of the plan that

prevents unethical behaviors or

commissioned to a CPA?

(5) Does the Company regularly organize

internal and external training for

ethical corporate management?

V

V

C. The Company has provisions for "Employee Grievance Procedure" and

"Internal and External Reporting Procedure of Unlawful and Unethical

Behaviors", etc., and provides specific reporting channels for reporting any

illegal or improper behavior.

(4) The Company has established an effective and improved accounting system and

internal control mechanism, and fully implemented computerization of

operations. The six management functions of personnel, finance, business,

production, materials, and engineering are connected by computers, layer by

layer, and executed for management of any abnormalities. In addition, the

Company also established a professional and independent internal audit

structure. The structure is divided into three levels. The first level is carried out

by the Auditing Office attached to the Company's Board of Directors, they

formulate the relevant audit plans and audit the implementation of the plan to

reduce the unethical behaviors, and the second level is routine and project-based

independent auditing carried out by the general management office for routines

and projects. Moreover, since internal auditing is the duty of all employees, the

third level of auditing requires all departments to conduct voluntary operation

inspections (on a monthly, quarterly, semi-annual, or annual basis depends on

the projects) to extend the concept internal control to all levels of the Company.

(5) Through regular corporate publications as well as various occasions, the

Company promotes the corporate culture of “Diligence, Perseverance, Frugality

and Trustworthiness,” as well as cultivating work ethics based on integrity,

fairness and transparency, self-discipline, and a sense of responsibility. All new

recruits receive corporate culture training. In addition, training courses about

regulations, anti-fraud, and anti-corruption are held every year to strengthen the

employees' commitment to complying with management rules based on good

faith. In the internal and external 2019 integrity management training, courses

like internal auditing, accounting system, CQM quality management training,

ISO system, JIT production management system and other trainings like quality

improvement and overseas personnel process optimization promotion were

given, the total amount of people received training and the total training time is

1,626 and 34,759 hours respectively.





In compliance with Article 22-2 of the




83

Evaluation Item





and Reasons

Yes No Summary

3. Status for enforcing whistle-blowing

systems in the Company

(1) Has the Company established concrete

whistle-blowing and reward systems as

well as accessible whistle-blowing

channels? Does the Company assign a

suitable and dedicated individual for

the case being exposed by the

whistle-blower?

(2) Has the Company established standard

operating procedures (SOP),

follow-up measures to be taken after

investigation and relevant systems of

confidentiality?

(3) Has the Company adopted protection

measures against inappropriate

disciplinary actions for the

whistle-blower?

V

V

V

The Company has a "Employee Grievance Procedure" and "Internal and External

Reporting Procedure of Unlawful and Unethical Behaviors" to provide a specific

reporting and reward system:

(1) Providing multiple reporting channels such as mailboxes, e-mail, and fax lines.

Visible notices are placed around the main entrances to be used by informants.

(2) After a case is filed, the relevant team members of the general management office

of the whole enterprise shall be responsible for the procedures of case review,

filing, and follow-up investigation.

(3) The principle of confidentiality: During and after an investigation, it is strictly

forbidden to disclose any information to unrelated parties. Supervisors at all

levels must also keep information confidential. All relevant information must be

processed and archived according to the confidential document procedures to

ensure the informant does not experience any unjust punishment.

(4) If it is found that there are violations of the regulations, the one would be

punished in accordance with the Company's Personnel Management Rules, it

may need to notify the judicial and prosecutorial authorities if necessary.

In order to understand the valuable opinions from our customers, the Company has

also established a customer complaints channel, return and compensation application

procedures, so that customers can express their opinions through the "Customer

Feedback Form". The Company's website also provides e-mail address and service

line for each product. Customers can directly respond their opinions through multiple

channels. Moreover, related departments regularly summarize and analyze the issues

which our customers concern, and prioritize them according to their importance and

timeliness to ensure that customer needs are handled.





4. Improvement of information disclosure

Does the Company disclose its ethical

corporate management policies and the

results of its implementation on the

Company’s website and MOPS?

V

Information on integrity management and ethical behavior has been disclosed on the

Company’s website in both Chinese and English versions.





84

Evaluation Item





and Reasons

Yes No Summary

5. Where the Company has established its own best practices on ethical corporate management according to the “Ethical Corporate Management Best Practice Principles for

TWSE/GTSM Listed Companies” , please describe any gaps between the described best practices and actual implementation taken by the Company:

On November 12th, 2014, the Company passed the resolution of the “Corporate Integrity Code of Practice”, which was amended by the resolution of the Board of Directors on

June 23th, 2016. The code was slightly revised according to the Company's practice, but in line with spirit of the “Ethical Corporate Management Best Practice Principles for

TWSE/GTSM Listed Companies.”

6. Other information helpful for understanding the principle of integrity of the Company's operations (e.g., the Company's amendment of its integrity code of practice):

The Company schedules corporate governance courses for directors and managers on a regular basis to strengthen their ability in supervision and governance, with the hopes of

increasing the effectiveness of governance and implementation of integrity operation.

Note 1: Provide a brief description in the summary column, regardless whether "yes" or "no" is selected.

85

3.4.7 NPC’s Corporate Governance Guidelines and Regulations:

The Company has disclosed Corporate Governance Guidelines on its website under the

“Corporate Governance” section of “Investor”.

3.4.8 Other Important Corporate Governance Information

3.4.8.1 In line with the requirements of Financial Supervisory Commission R.O.C. (Taiwan), the

Company set up an Audit Committee and the “Code of Ethical Conduct for Directors and

Managers” is as follow:

NAN YA PLASTICS CORPORATION

Code of Ethical Conduct for Directors and Managers

Amended by Board of Directors on June 23, 2016

Chapter 1 General Provisions

Article 1: The Code of Ethical Conduct (the “Code”) of Nan Ya Plastics Corporation

(the “Company”) is established to stipulate rules for Directors and

managers (including President, Executive Vice Presidents, Senior Vice

Presidents, Vice Presidents, Chief Financial Officer, Chief Accounting

Officer, and other persons authorized to manage affairs and sign documents

on behalf of the Company) to abide by in terms of ethical conduct when

engaging in business activities within the scope of their authority, to

prevent unethical conduct or any conduct that may damage the interest of

the Company and its shareholders.

Chapter 2 Content of the Code

Article 2: Directors and managers shall conduct corporate affairs on the basis of

integrity, faithfulness, compliance with laws, fairness and righteousness

and with an ethical, self-disciplined attitude.

Article 3: Directors and managers shall avoid any conflicts of interest arising when

their personal interest intervenes, or is likely to intervene in the overall

interest of the Company, including but not limited to unable to perform

their duties in an objective and efficient manner, or taking advantage of

their position in the Company to obtain improper benefits for either

themselves or their spouse, parents, children, or relatives within the

second degree of kinship. To prevent conflicts of interest, any matters

pertaining to lending funds, providing guarantees, and major asset

transactions between the Company and the above-mentioned persons or

their affiliated enterprise thereof shall be submitted to the Board of

Directors for its approval in advance. The corresponding purchase (or

sale) of goods shall be dealt with the best interest of the Company.

Article 4: When the Company has an opportunity for profit, the Directors and

managers have the responsibility to conserve the reasonable and lawful

benefits that can be obtained by the Company.

The Directors and managers shall not obtain personal gain by using the

Company property or information or taking advantage of their positions.

Unless otherwise stipulated in the Company Act or Articles of

Incorporation, they shall not engage in activities that compete with the

business of the Company.

Article 5: The Directors and managers shall be bound by the obligation to maintain

the confidentiality of any information regarding the Company itself or its

suppliers and customers, except when authorized or required by law to

86

disclose such information. Confidential information includes any

undisclosed information that, if exploited by a competitor or disclosed,

could result in damage to the Company or the suppliers and customers.

Article 6: The Directors and managers shall treat all suppliers and customers,

competitors, and employees fairly, and may not obtain improper benefits

through manipulation, nondisclosure, or misuse of the information

learned by virtue of their positions, or through misrepresentation of

important matters, or through other unfair trading practices.

Article 7: The Directors and managers shall have the responsibility to safeguard the

Company’s assets, to use the assets for official business purpose

properly, and to avoid any impact on the Company’s profitability

resulting from theft, negligence in care or waste of the assets.

Article 8: The Directors and managers shall comply with applicable laws and the

Company’s regulations.

Article 9: When a director or manager is found by employee to have committed a

violation of a law, regulation or the Code, the employee shall report to

the Audit committee, their direct managers, president office personnel,

chief internal auditor, or other appropriate personnel with sufficient

evidence. Once the misconduct is confirmed, the Company will reward

the above-mentioned employee in accordance with the Company's rules

for employment management.

The Company shall handle the above-mentioned report properly and

confidentially. The Company also shall use its best efforts to ensure the

safety of the conscientious reporter and protect him/her from all kinds of

reprisals.

Article 10: Where a director or manager is verified to have violated the Code, in

addition to being subject to punishment under the Company's rules for

employment management, the Company shall report the violation to the

Board of Directors. The person involved in the violation shall be liable

for civil, criminal or administrative responsibilities required by law and

the Company shall disclose the violation on the Market Observation Post

System (“MOPS”) immediately, including: the date of the violation,

description of the violation, the provisions of the Code violated, and the

disciplinary actions taken.

Chapter 3 Procedures for Exemption

Article 11: Where a Director or manager is to be exempted from the Code due to

special circumstances, such exemption shall be approved by an majority

vote at a meeting of the Board of Directors attended by over two-third of

the Directors in person or through representation. The Company shall

immediately disclose on the MOPS, including: date of exemption granted

by the Board of Directors, any opposing or qualified opinion expressed

by the independent directors, and the period of, reasons for, and the

provisions of the Code behind the application of the exemption for

shareholders to evaluate the appropriateness and to safeguard the interests

of the Company.

Chapter 4 Method of information disclosure

Article 12: The Company shall disclose the Code on the Company’s website, annual

reports, prospectuses, and the MOPS. Any amendment is subject to the

same procedure.

87

Chapter 5 Additional Provision

Article 13: The Code shall be implemented after approval by the Board of Directors and

shall be reported to the shareholders meeting. Any amendment is subject to the

same procedure.

3.4.8.2 Managers and financial officer of the Company attend continuing education and training

relevant to corporate governance every year, and all equip professional knowledge, their

training status is as follow:

Title Name Course

Date

Organizer Program Hours

President Ming-Jen Tzou 2019.11.15 Dharma Drum

Mountain

Humanities and

Social

Improvement

Foundation

Innovation of

enterprise value

3

Senior Vice

President Fong-Chin Lin

Senior Vice

President Sin-Yi Huang

Senior Vice

President Kuei-Yung Wang

2019.11.15 Securities and

Futures Institute

Avoiding

contravening

Securities and

Exchange Act –

Discussing from

false financial

statement and

insider trading

3

Financial

Officer Ming-Jong Yeh

Internal Audit

Officer Fu-Jung Peng

Accounting

Officer Li-Ta Pai

Senior Vice

President Cheng-Chung Lee 2019.07.30

2019.07.31

Securities and

Futures Institute

Directors and

supervisors

(including

independent) and

corporate

governance


workshops

12

Corporate

Governance

Officer

Wen-Pin Cheng 2019.07.30

2019.07.31

2019.11.15

2019.11.15

Securities and

Futures Institute

Dharma Drum

Mountain

Humanities and

Social

Improvement

Foundation

Securities and

Futures Institute

Securities and

Futures Institute

Directors and

supervisors

(including

independent) and

corporate

governance


workshops

Innovation of

enterprise value

Avoiding

contravening Securities and

Exchange Act – Discussing from false financial statement and

12

3

3

88

insider trading

3.4.8.3 Certification of Employees Whose Jobs are Related to the Release of the Company’s

Financial Information

1. Accounting Department: 4 Certified Public Accountants, 4 Certified Public Bookkeepers,

5 US Certified Public Accountants, 1 Chartered Financial

Analysts, 1 Certified Securities Investment Analysts, 1 Certified

Internal Auditor.

2. Financial Department: None.

3. Internal Auditing Department: 1 Certified Public Accountant.

3.4.8.4 Major internal information processing within the Company

1. The Company has always emphasized the principles of “diligence, perseverance, frugality,

and trustworthiness” and has set strict ethical guidelines. We expect the employees to

follow various codes of conduct and ethical guidelines in a responsible manner in their

work and daily life. Employees are not allowed to engage in leaking trade secrets, false

accounts, malpractices and rumors.

2. The Company also has established “Personnel Management Rules”. Employees are

informed that unless a written permission has been given, no company information or

other unpublished information can be disclosed. Neither should it be used for personal

gains or other purposes.

3. The Company has also set up a "Code for the Spokesperson" to detail principles for

information disclosure and major irregularities at the plants. Except for company

spokespersons, no employee is allowed to disclose policy, operations and

business-related information to media reporters and outsiders in order to avoid violations

and insider trading.

4. The Company has specified the handling of important internal information in the

“Personnel Management Rules” and published it in the internal information management

system. Besides delivering this information to the employees' personal mailboxes, it is

also available in the information system.

89

3.4.9 Implementation Status of the Internal Control System

3.4.9.1 Internal Control System Statement


Internal Control System Statement

Date: 2020.03.18

The Company states the following with regard to its internal control system in 2019,

based on the findings of a self-assessment:

1. The Company is fully aware that establishing, operating, and maintaining an internal control

system are the responsibility of its Board of Directors and management. The Company has

established such a system aimed at providing reasonable assurance of the achievement of

objectives in the effectiveness and efficiency of operations (including profits, performance, and

safeguard of asset security), reliability, timeliness, transparency, and regulatory compliance of

reporting, and compliance with applicable laws, regulations, and bylaws.

2. An internal control system has inherent limitations. No matter how perfectly designed, an effective

internal control system can provide only reasonable assurance of accomplishing the three goals

mentioned above. Furthermore, the effectiveness of an internal control system may change along

with changes in environment or circumstances. The internal control system of the Company

contains self-monitoring mechanisms, however, and the Company takes corrective actions as soon

as a deficiency is identified.

3. The Company judges the design and operating effectiveness of its internal control system based on

the criteria provided in the Regulations Governing the Establishment of Internal Control Systems

by Public Companies (herein below, the “Regulations”). The internal control system judgment

criteria adopted by the Regulations divide internal control into five elements based on the process

of management control: 1. Control environment 2. Risk assessment 3. Control activities 4.

Information and communications 5. Monitoring activities. Each element further contains several

items. Please refer to the Regulations for details.

4. The Company has evaluated the design and operating effectiveness of its internal control system

according to the aforesaid criteria.

5. Based on the findings of the assessment mentioned in the preceding paragraph, the Company

believes that on 2019.12.31 its internal control system (including its supervision and management

of subsidiaries), encompassing internal controls for understanding of the degree of achievement of

operational effectiveness and efficiency objectives, reliability, timeliness, transparency, and

regulatory compliance of reporting, and compliance of reporting, and compliance with applicable

laws, regulations, and bylaws, was effectively designed and operating, and reasonably assured the

achievement of the above-stated objectives.

6. This Statement will become a major part of the content of the Company's Annual Report and

Prospectus, and will be made public. Any falsehood, concealment, or other illegality in the content

made public will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and

Exchange Law.

7. This statement has been passed by the Board of Directors’ Meeting of the Company held on

2020.3.18, where 0 of the 14 attending directors expressed dissenting opinions, and the remainder

all affirmed the content of this Statement.


Chairman: Chia-Chau Wu

President: Ming-Jen Tzou

90

3.4.9.2 If CPA was engaged to conduct a special audit of internal control system, provide its audit

report: None.

3.4.10 If there has been any legal penalty against the company or its internal

personnel, or any disciplinary penalty by the company against its internal

personnel for violation of the internal control system, during the most recent

fiscal year or during the current fiscal year up to the prospectus publication

date, where the result of such penalty could have a material effect on

shareholder equity or securities prices, the prospectus shall disclose the

penalty, the main shortcomings, and the condition of improvement: None.

3.4.11 Major Resolutions of Shareholders’ Meetings and Board Meetings:

3.4.11.1 2019.06.12 Shareholders’ meeting

Directors attending the shareholders’ meeting: Chia-Chau Wu, Ming-Jen Tzou, Shen-Yi

Lee, Kuei-Yung Wang, Fong-Chin Lin, Zo-Chun Jen, Sin-Yi Huang(the above people are

directors), Chih-Kang Wang, Yi-Fu Lin, Yun-Peng Chu (the above people are independent

directors). 10 people in total.

(1) Ratification Items

Proposal 1

Proposal: For approval of the 2018 Business Report and Financial Statements as

required by the Company Act.

(Proposed by the Board of Directors)

Resolution: The total votes was 6,034,805,542; the result of the vote: 5,530,164,084

approval votes (including the electronic votes of 4,847,051,011), which

account for 91.6% of the total votes; 318,160 disapproval votes (including

the electronic votes of 318,160); 0 invalid votes; 504,323,298 abstention

votes and no votes (including the electronic votes of 501,131,588). The

Company ratified the proposal as the approval votes exceed the prescribed

amount.

Proposal 2

Proposal: For Approval of the Proposal for Distribution of 2018 Profits as required by

the Company Act.








amount.

Implementation: 2018 shareholders' meeting approved to distribute cash dividend of

NT$5.0 per share. On June 12, 2019, the Board of Directors set the date July

9, 2019 to be the base day of cash dividends distribution. And it will be

distributed from August 6.

(2) Discussion Items(I)

Proposal 1

Proposal: Amendment to the Procedures for Acquisition or Disposal of Assets of the

Company, please discuss and resolve.


91







amount.

Implementation: According to approval of shareholders' meeting, the Company will

implement the amended procedures and disclosed on the MOPS and on the

Company’s website.

Proposal 2

Proposal: Amendment to the Procedures for Engaging in Derivatives Transactions of

the Company, submitted for discussion.








amount.




Proposal 3

Proposal: Amendment to the Procedures for Loaning Funds to Other Parties of the









amount.




Proposal 4

Proposal: Amendment to the Procedures of Endorsements and Guarantees of the









92

amount.




(3) Election Items

Proposal 1

Proposal: The Company’s Directors have their tenure nearly expired. Please elect the

Board of Directors to conform to the applicable laws.


Resolution: The total shares represented by the shareholders present were

6,034,805,542 at the time of the voting. Shareholder, Huai-Yu Liu was

appointed as ballot inspectors; Li-Ching Tsai, Kuei-Chu Cheng, Shu-Wen

Huang, Min-Hua Chien and Yen-Ting Fen were appointed as calculation

officials by the Chairman. The election results were announced on the spot

by the secretary appointed by the Chairman. The list of elected directors

(including independent directors) and the number of votes received are as

follows:

1. The 12 elected directors:

Name Votes received

Chia-Chau Wu 5,070,379,239

Wen-Yuan Wong 4,866,097,927

Wen-Chiao Wang (Representative of Formosa Petrochemical

Corporation)

4,731,126,929

Ruey-Yu Wang 4,711,241,775

Ming-Jen Tzou 4,001,324,808

Shen-Yi Lee (Representative of Formosa Chemicals & Fibre

Corp.)

3,795,824,484

Zo-Chun Jen (Representative of Formosa Plastics Corp.) 3,694,511,074

Kuei-Yung Wang 3,677,007,321

Fong-Chin Lin 3,649,242,635

Sin-Yi Huang 3,638,798,644

Cheng-Chung Lee 3,559,729,546

Ching-Cheng Chang (Representative of Freedom Internation

Enterprise Company)

3,509,912,330

2. The 3 elected independent directors:

Name Votes received

Chih-Kang Wang 4,552,993,243

Yi-Fu Lin 3,453,396,127

Yun-Peng Chu 3,440,956,819

Implementation: The resolution was submitted to the Ministry of Economic Affairs for

approved and registered by Shangzi No.10801077910 Letter on June 27,

2019 and then announced on the Company’s website.

(4) Discussion Items(II)

Proposal 1

Proposal: Appropriateness of releasing the newly elected Directors and the juristic

person shareholder whose authorized representatives are elected as Directors,

from non-competition restrictions, please discuss and resolve.


93



account for 69.4% of the total votes; 698,782,999 disapproval votes

(including the electronic votes of 698,782,999); 0 invalid votes;

710,220,979 abstention votes and no votes (including the electronic votes of

707,029,269). The Company ratified the proposal as the approval votes

exceed the prescribed amount.

Implementation: Implement according to the resolution of Board of Director.

(5) Extempore motion

(Shui-Hsien,Chang, shareholder No.303076, asked questions about the Company's

operations and stock prices under the impact of the Sino-US trade war. The Chairman

replied and explained.)

(Shueh-Fen,Huang, shareholder No.162367, recognized the achievements of the

management team. The Chairman replied and expressed the appreciation.)

3.4.11.2 2019.03.20 1st Board of Directors’ Meeting of 2019

Proposal 1

Proposal: To formulate 2018 employees’ compensation, please discuss and resolve.

Opinions of independent directors and the implementation: None.

Resolution: All directors in attendance approved the proposal. It would be reported in

2019 shareholders' meeting.

Proposal 2

Proposal: To compile 2018 final accounting books and statements and 2019 operating

plan, please discuss and resolve.

(The secretariat reported that the annex of the proposal has been submitted

to Audit Committee for approval. 2018 annual operating status and 2019

operating plan was respectively reported by the president office of the

Company and head officer of each division.)


Resolution: All directors in attendance approved the proposal.

Proposal 3

Proposal: To compile 2018 profit distribution schedule, please discuss and resolve.


to Audit Committee for approval.)



Proposal 4

Proposal: Preparation for 2019 shareholders' meeting on June 12, 2019, submitted for

discussion.



Proposal 5

Proposal: To re-elect the Board of Directors during 2019 shareholders' meeting, please

discuss and resolve.



94

Proposal 6

Proposal: To ask the shareholders' meeting’s approval for releasing the elected

Directors from non-competition restrictions, please discuss and resolve.



Proposal 7

Proposal: To formulate the Company’s Internal Control System Statement, please


(Proposed by the Audit Committee)



Proposal 8

Proposal: To compile plan of lending funds for the second quarter of 2019, please



(The Chairman, Managing Director in attendance including Wen-Yuan

Wang, Wen-Tsao Wang, Ruey-Yu Wang, Directors in attendance including

Ming Jen, Tzou, Chin-Jen Wu, Shen-Yi Lee and Zo Chun, Jen, respectively,

as the Chairman, Managing Director, Director or representative of the

juristic person of the borrowing Company, should enter recusal. Managing

Director Chih-Kang Wang was appointed by the Chairman as the interim

chairman.)

Opinions of independent directors and the implementation: Managing Director

Chih-Kang Wang inquired the officer in attendance to supplement whether

the loan conditions would be in accordance with past practice. Financial

Officer replied and explained.

Resolution: All directors in attendance except for above-mentioned Directors who had

to enter recusal from voting due to conflict of interest approved the

proposal.

Proposal 9

Proposal: To amend the “Procedures for Acquisition or Disposal of Assets”, the

“Procedures for Engaging in Derivatives Transactions”, the “Procedures for

Loaning Funds to Other Parties” and the “Procedures of Endorsements and

Guarantees” of the Company, please discuss and resolve.



Resolution: All directors in attendance approved the proposal. It would be submitted to

2019 shareholders' meeting for approval.

Proposal 10

Proposal: The Company planned to invest “FG INC” for US$ 15 million in accordance

of the investment framework, please discuss and resolve.




95

Proposal 11

Proposal: The expansion of PET release film production equipment in Shulin Site,

please discuss and resolve.

(The purpose of the expansion was supplemented by the Chairman.)



Proposal 12

Proposal: To raise long-term funds for new expansion, replacement of old plant

equipment, repayment of debts and enrichment of working capital, the

Company planned to issue domestic unsecured corporate bond for NT$12

billion, please discuss and resolve.



Proposal 13

Proposal: The promotion of management position, please discuss and resolve.

(Chung-Yueh Shih was directly involved and should enter recusal.)



3.4.11.3 2019.04.19 2nd Board of Directors’ Meeting of 2019

Proposal 1

Proposal: To present a slate of directors (and independent directors) candidates for

shareholders holding 1% or more of the total number of issued shares of the

Company, please review.



Resolution: All directors in attendance approved the proposal. The nominees were

included in the slate of directors (and independent directors) candidates of

2019 shareholders’ meeting.

3.4.11.4 2019.05.10 3rd Board of Directors’ Meeting of 2019

Proposal 1

Proposal: To compile plan of lending funds for the third quarter of 2019, please discuss

and resolve.



Wang, Directors in attendance including Ming-Jen Tzou, Shen-Yi Lee and

Zo-Chun Jen, respectively, as the Chairman, Managing Director, Director

or representative of the juristic person of the borrowing Company, should

enter recusal. Managing Director Chih-Kang Wang was appointed by the

Chairman as the interim Chairman.)


Chih-Kang Wang asked whether the loan conditions would be in accordance

with past practice in the proposal. Financial Officer replied and explained.



proposal.

96

Proposal 2

Proposal: Transaction with related party, please discuss and resolve.


(The Chairman, Wen-Yuan Wang, Managing Director in attendance and

Ming-Jen Tzou, Directors in attendance, respectively, as the Managing

Director, or Director of the related company, should enter recusal. Managing


Chairman.)



the transaction conditions and price comparison data with the related

company in the proposal had all been audited. Internal Audit Officer replied

and explained.



proposal.

Proposal 3

Proposal: To donate NT$ 11,134,000 to Ming Chi University of Technology, please



(The Chairman and Wen-Yuan Wang, Managing Director in attendance,

respectively, as the Chairmen, or Director of Ming Chi University of

Technology, should enter recusal. Managing Director Chih-Kang Wang was

appointed by the Chairman as the interim Chairman.)


Chih-Kang Wang inquired the officer in attendance to explain whether other

companies in FPG also donated to Ming Chi University of Technology

together. Financial Officer replied and explained.



proposal.

Proposal 4

Proposal: The Company's investment business “Formosa Industries Corp.” would

borrow loans from banks. The Company was proposed to issue a letter of

support, please discuss and resolve.



Wang, Directors in attendance including Ming-Jen Tzou, Fong Chin, Lin

and Sin Yi, Huang, respectively, as the Chairman or Director of Formosa

Industries Corp., should enter recusal. Managing Director Chih-Kang Wang

was appointed by the Chairman as the interim Chairman.)


Chih-Kang Wang inquired the officer in attendance to supplement the

content of the letter of support. Financial Officer replied and explained.



proposal.

97

Proposal 5

Proposal: To amend the Company’s regulations of shareholder procedures, please



(The Chairman inquired the officer in attendance to supplement the key

points of the amendment. Financial Officer replied and explained.)



Proposal 6

Proposal: To amend the Company’s “Corporate Governance Best-Practice Principles”,


(The Chairman supplemented the key points of the amendment.)



Proposal 7

Proposal: To set up the first “Corporate Governance Officer” of the Company, please




Proposal 8

Proposal: To amend “Standard Operation Procedures of Dealing with Directors’

Requests” of the Company, please discuss and resolve.



3.4.11.5 2019.06.12 4th Board of Directors’ Meeting of 2019

Proposal 1

Proposal: To re-elect the Managing Directors and Chairman of the Company, please



Resolution: All directors in attendance elect Chia-Chau Wu, Wen-Yuan Wong,

Wen-Chiao Wang, Ruey-Yu Wang and Chih-Kang Wang as the Managing

Directors. And all Managing Directors in attendance elect Chia-Chau Wu as

the Chairman.

Proposal 2

Proposal: To approve the record day and distribution day for cash dividends of 2018,




Proposal 3

Proposal: To appoint independent director Chih-Kang Wang, Yi-Fu Lin and Yun-Peng

Chu as the members of Remuneration Committee, please discuss and

resolve.

(The independent director Chih-Kang Wang, Yi-Fu Lin and Yun-Peng Chu,

were the parties involved, should enter recusal.)


Resolution: All directors in attendance except for above-mentioned independent

98

directors who had to enter recusal from voting due to conflict of interest

approved the proposal.

Proposal 4

Proposal: To meet operational needs, the Company intends to update the credit line of

various financial institutions, please discuss and resolve.




Proposal 1

Proposal: To compile plan of lending funds for the fourth quarter of 2019, please




Wang, Wen-Chiao Wang and Ruey-Yu Wang, Directors in attendance

including Shen-Yi Lee and Zo-Chun Jen, respectively, as the Chairman,

Managing Director, Director or representative of the juristic person of the

borrowing company, should enter recusal. Managing Director Chih-Kang

Wang was appointed by the Chairman as the interim Chairman.)


Chih-Kang Wang asked whether the loan conditions were in line with the

market practices. Financial Officer replied and explained.



proposal.

Proposal 2




Wang, Wen-Chiao Wang and Ruey-Yu Wang, Directors in attendance

including Ming-Jen Tzou and Zo-Chun Jen, respectively, as the Chairman,


related company, should enter recusal. Managing Director Chih-Kang Wang




the transaction with the related party would be in accordance with past

practice. Internal Audit Officer replied and explained.



proposal.

Proposal 3

Proposal: To increase investment to “Formosa Resources Corporation” for US$81.25

million, please discuss and resolve.



Wang and Wen-Chiao Wang, respectively, as the Chairman or Director of

Formosa Resources Corporation, should enter recusal. Managing Director

Chih-Kang Wang was appointed by the Chairman as the interim Chairman.)

99


Chih-Kang Wang inquired the officer in attendance to supplement the plan

and purpose of the investment. Financial Officer replied and explained.



proposal.

Proposal 4

Proposal: To formulate the Chairman’ compensation, please discuss and resolve.

(Proposed by the Remuneration Committee)

(The Chairman, acting as principal, should enter recusal. Managing Director



Resolution: All directors in attendance except for the Chairman had to enter recusal

from voting due to conflict of interest approved the proposal.

Proposal 5

Proposal: To formulate the existing Directors’ compensation, please discuss and

resolve.


(The independent directors, Chih-Kang Wang, Yi-Fu Lin, Yun-Peng Chu

and director, Ching Cheng, Chang acting as principal, should enter recusal.)




proposal.

Proposal 6

Proposal: The Company’s investment business “Nan Ya Plastics (Ningbo) Co., Ltd.”

planned to conduct cash capital increase with the amount of US$ 80 million

in order to meet the business expansion, please discuss and resolve.


(The capital increase plan and purpose were supplemented by the

Chairman.)



Proposal 7

Proposal: To maintain the existing managers’ compensation standards and structure,





Proposal 8

Proposal: To maintain the existing managers’ appraisal systems, please discuss and

resolve.




100

Proposal 9

Proposal: The salary adjustment of the managers would be in line with all employees

in 2019, please discuss and resolve.





Proposal 1

Proposal: To compile plan of lending funds for the first quarter of 2020, please discuss

and resolve.


(The Chairman, Managing Director in attendance including Wen-Chiao

Wang and Ruey-Yu Wang, Directors in attendance including Ming-Jen Tzou,

Shen-Yi Lee, Zo-Chun Jen and Kuei-Yung Wang, respectively, as the

Chairman, Managing Director, Director, representative of the juristic person

of the borrowing Company or Director, Ruey-Yu Wang’s relative within the

second degree of kinship, should enter recusal. Managing Director




the loan conditions would be in accordance with past practice. Financial




proposal.

Proposal 2




Wang, Ruey-Yu Wang, Directors in attendance including Ming-Jen Tzou,

Zo-Chun Jen and Kuei-Yung Wang, respectively, as the Chairman,


related company, should enter recusal. Managing Director Chih-Kang Wang




the transaction would be in accordance with past practice. Internal Audit




proposal.

Proposal 3

Proposal: Donation to Chang Gung University for NT$6.14 million 1,239 dollars,




Wang and Ruey-Yu Wang, Director in attendance, Kuei-Yung Wang,

respectively, as Director of Chang Gung University, should enter recusal.

Managing Director Chih-Kang Wang was appointed by the Chairman as the

101

interim Chairman.)


Chih-Kang Wang inquired the officer in attendance to supplement the

donation percentage. Financial Officer replied and explained.



proposal.

Proposal 4

Proposal: The Company's investment business “Nan Ya Electronic Materials (Huizhou)

Co., Ltd.” would borrow loans from banks. The Company was proposed to

issue a letter of support, please discuss and resolve.


(The Chairman, Directors in attendance including Ming-Jen Tzou and

Cheng-Chung Lee, respectively, as the Chairman or Director of Nan Ya

Electronic Materials (Huizhou) Co., Ltd., should enter recusal. Managing


Chairman.)


Chih-Kang Wang inquired whether the content of the letter of support would

be in accordance with past practice. Financial Officer replied and explained.



proposal.


Proposal 1

Proposal: To formulate 2020 annual audit plans, please discuss and resolve.



Proposal 2

Proposal: To increase investment to “Formosa Synthetic Rubber Corp.” with NT$ 46

million according to the investment framework, please discuss and resolve.



Wang, Wen-Chiao Wang and Directors, Ming-Jen Tzou respectively, as the

Chairman, Managing Director or Director of Formosa Synthetic Rubber

Corp., or Managing Director, Wen-Chiao Wang’s relative within the second

degree of kinship, should enter recusal.)

(The purpose of the investment to Formosa Synthetic Rubber Corp. was

supplement by the Chairman.)




proposal.

Proposal 3

Proposal: In response to the expiration of the 5 year implementation cycle of the

current year-end bonus formula, it is planned to revise the Company's

"Regulations of Year-End Bonus and Remuneration Distribution”, please



102



Proposal 4

Proposal: To meet operational needs, the Company intends to update the credit line of

various financial institutions, please discuss and resolve.



3.4.11.9 2020.03.18 1st Board of Directors’ Meeting of 2020

Proposal 1

Proposal: To formulate 2019 employees’ compensation, please discuss and resolve.




Proposal 2

Proposal: To compile 2019 final accounting books and statements and 2020 operating

plan, please discuss and resolve.


to Audit Committee for approval. 2019 annual operating status and 2020

operating plan was respectively reported by the president office of the

Company and head officer of each division.)



Proposal 3

Proposal: To compile 2019 profit distribution schedule, please discuss and resolve.


to Audit Committee for approval.)



Proposal 4

Proposal: Preparation for 2020 shareholders' meeting on June 12, 2020, submitted for

discussion.



Proposal 5

Proposal: To formulate the Company’s Internal Control System Statement, please





Proposal 6

Proposal: To amend the Company’s “internal control systems” and “internal audit

implementation rules” of compiling the financial statements, please discuss

and resolve.



103


Proposal 7

Proposal: To compile plan of lending funds for the second quarter of 2020, please




Wang, Ruey-Yu Wang, Directors in attendance including Shen-Yi Lee, Zo

Chun, Jen and Kuei-Yung Wang respectively, as the Chairman, Managing

Director, Director or representative of the juristic person or Director,

Ruey-Yu Wang’s relative within the second degree of kinship, should enter

recusal. Managing Director Chih-Kang Wang was appointed by the

Chairman as the interim Chairman.)


Chih-Kang Wang inquired whether the loan conditions would be in

accordance with past practice. Financial Officer replied and explained.



proposal.

Proposal 8

Proposal: To amend the Company’s “audit committee charter”, please discuss and

resolve.




Proposal 9

Proposal: To increase investment to “FG INC.” with US$ 4.3 million according to the

investment framework, please discuss and resolve.




Proposal 10

Proposal: To amend the Company’s “shareholders’ meeting procedure rules“, please






Proposal 11

Proposal: To amend the Company’s “rules of procedure for meetings of Board of

Directors“ and “Regulations of Scope for Independent Directors’ Duties” ,





104

Proposal 12

Proposal: To raise long-term funds for new expansion, replacement of old plant

equipment, repayment of debts and enrichment of working capital, the

Company planned to issue domestic unsecured corporate bond for NT$10

billion, please discuss and resolve.



3.4.12 Major Issues of Record or Written Statements Made by Any Directors or

Supervisors which Specified his/her Dissent to Important Resolutions Passed

by the Board of Directors as of the Publication Date of the Annual Report:

None.

3.4.13 Resignation or Dismissal of Chairman, President, and Accounting Officer,

Financial Officer, Internal Audit Officer, Corporate Governance Officer and

R&D Officer as of the Date of this Annual Report: None.

105

3.5 Information Regarding NPC’s Audit Fees

Audit Fee

Note: If the Company has changed CPA or Accounting Firm during the current fiscal year, the company shall

report the information regarding the audit period covered by each CPA and the replacement reason.

Unit: NT$ thousands

1. The amount of non-auditing relevant fees charged by the CPA and the related parties reaches 25 % of the

Company's annual auditing expenses:

Note1: If any CPA or the accounting firm is replaced for the Company this year, the inspection periods shall be

listed separately. In addition, the reason for the replacement shall be indicated in the remark column

and information on audit and non-audit public expenditure shall be disclosed.

Note2: The non-audit public expenditure shall be listed separately by the service item. When "Other" of

non-audit public expenditure reaches 25% of the total value of non-audit public expenditure, contents

of the service shall be listed in the remark column.

Note3: Non-audit fee includes expenditure on transfer price report, master document, master file and direct

deduction of business tax.

2. If there is any change in the appointed in dependent auditors and the Company's annual auditing expenses

decreased simultaneously, information regarding the amount, percentage and reasons for the decrease in

auditing expenses shall be disclosed：N/A.

3. Auditing expenses decreased by 10% in comparison to the previous year, information regarding the

amount, percentage and reason for the decrease in auditing expenses shall be disclosed：N/A.

3.6 Replacement of CPA: None. There’s no replacement of CPA in the last 2 years.

3.7 The Company’s Chairman, Executive Officer, Financial Officer, and Managers in

Charge of its Finance and Accounting Operations did not Hold Any Positions in

the Company’s Independent Auditing Firm or its Affiliates during 2019.

3.8 Change in Shareholdings and in Shares Pledged by Directors, Management, and

Shareholders Holding more than 10% Share in the Company.

Accounting Firm Name of CPA Period Covered by CPA’s Audit Remarks

KPMG Kuo, Hsin-Yi Yu, Chi-Lung 2019.01.01~2019.12.13

Fee Items

Fee Range

Audit Fee Non-audit Fee Total

1 Under NT$ 2,000,000 0 1,290 1,290

2 NT$ 2,000,001 ~ NT$ 4,000,000 0 0 0

3 NT$ 4,000,001 ~ NT$ 6,000,000 0 0 0

4 NT$ 6,000,001 ~ NT$ 8,000,000 0 0 0

5 NT$ 8,000,001 ~ NT$ 10,000,000 0 0 0

6 Over NT$ 100,000,000 11,084 0 11,084

Accounting

Firm Name of CPA Audit Fee

Non-audit Fee Period Covered by

CPA’s Audit Remarks System of

Design

Company

Registration

Human

Resource

Others

(Note2) Subtotal

KPMG Kuo, Hsin-Yi Yu, Chi-Lung

11,084 0 0 0 1,290 1,290 2019.01.01~

2019.12.31 Note 3

106

1. Changes in Shareholding of Directors, Managers and Major Shareholders

Title

(Note1) Name

2019 As of April 14, 2020

Holding

Increase

(Decrease)

Pledged

Holding

Increase

(Decrease)

Holding

Increase

(Decrease)

Pledged

Holding

Increase

(Decrease)

Chairman Chia-Chau Wu 0 0 0 0

Managing

Director Wen-Yuan Wong (943,441) 0 0 0

Managing

Director

Formosa Petrochemical Corp. 0 (1,746,000) 0 0

Representative: Wen-Chiao Wang 0 0 0 0

Managing

Director Ruey-Yu Wang 0 0 0 0

Managing

Director

(Independent

Director)

Chih-Kang Wang 0 0 0 0

Independent

Director Yi-Fu Lin 0 0 0 0

Independent

Director Yun-Peng Chu 0 0 0 0

Director and

President Ming-Jen Tzou 0 0 0 0

Director Formosa Chemicals & Fibre Corp.

0 0 0 0 Representative: Shen-Yi Lee


Representative: Zo-Chun Jen

Director and

Senior Vice

President

Kuei-Yung Wang 0 0 0 0

Director and

Senior Vice

President

Fong-Chin Lin 0 0 0 0

Director and

Senior Vice

President

Sin-Yi Huang 0 0 0 0

Director and

Senior Vice

President

Cheng-Chung Lee 0 0 0 0

Director


Company 0 0 0 0

Representative: Ching-Cheng Chang

Senior Vice

President Chung-Yueh Shih 0 0 0 0

Vice

President Shiou-Yeh Sheng 0 0 0 0

Vice

President Pao-Chang Liu 0 0 0 0

Vice

President Tzong -Yang Su 0 0 0 0

Vice

President Yu Lung Huang 2,000 0 0 0

Vice

President Yu-Sheng Chen 0 0 0 0

Vice

President Kuo-Wei Lin 0 0 0 0

107

Title

(Note1) Name

2019 As of April 14, 2020

Holding

Increase

(Decrease)

Pledged

Holding

Increase

(Decrease)

Holding

Increase

(Decrease)

Pledged

Holding

Increase

(Decrease)

Vice

President Yang-Tun Chien 0 0 0 0

Vice

President Wen-cheng Yang 0 0 0 0

Vice

President Yung-Fang Chang 0 0 0 0

Financial

Officer Ming-Jong Yeh 0 0 0 0

Corporate

Governance

Officer

Wen-Pin Cheng 0 0 0 0

Accounting

Officer Li-Ta Pai 0 0 0 0

shareholders

holding more

than 10% share

Chang Gung Medical Foundation 0 0 0 0

Note1: Shareholders holding more than 10% share in the Company shall be indicated as major shareholders and listed respectively.

Note2: Shares trading or pledging with related party shall fill out following information.

2. Information of shares trade or pledge: N/A.

108

3.9 Relationship among the Top Ten Shareholders

2020.04.14

Name

(Note1)

Current Shareholding Spouse’s/minor’s

Shareholding

Shareholding

by Nominee

Arrangement

Name and Relationship Between the Company’s Top Ten Shareholders,

or Spouses or Relatives Within Two Degrees

(Note3) Remarks

Shares % Shares % Shares % Name Relationship

Chang Gung Medical Foundation

Rep. Diana Wang 876,733,453 11.05% 0 0 0 0

Formosa Plastics Corp. Chairman of Formosa Plastics Corp. is one of Chang Gung Medical

Foundation’s board director

Formosa Chemicals & Fibre Corp. Chairman of Formosa Chemicals & Fibre Corp. is one of Chang Gung

Medical Foundation’s board director

Chang Gung University Chairman of Chang Gung University is one of Chang Gung Medical



Rep. Chien-Nan Lin 783,356,866 9.88% 0 0 0 0

Chang Gung Medical Foundation Chairman of Formosa Plastics Corp. is one of Chang Gung Medical


Formosa Chemicals & Fibre Corp. Formosa Chemicals & Fibre Corp. is one of Formosa Plastics Corp.’s

board director

Chang Gung University Chairman of Formosa Plastics Corp. is one of Chang Gung University’s

board director


Formosa Plastics Corp. invested Formosa Petrochemical Corp. under equity

method

Formosa Petrochemical Corp. is one of Formosa Plastics Corp.’s board

director

Formosa Chemicals & Fibre Corporation

Rep. Wen Yuan Wong 413,327,750 5.21% 0 0 0 0

Chang Gung Medical Foundation Chairman of Formosa Chemicals & Fibre Corp. is one of Chang Gung

Medical Foundation’s board director

Formosa Plastics Corp. Formosa Chemicals & Fibre Corp. is one of Formosa Plastics Corp.’s

board director

Chang Gung University Chairman of Formosa Chemicals & Fibre Corp. and Chang Gung University

is the same person


Formosa Chemicals & Fibre Corp. invested Formosa Petrochemical Corp.

under equity method

Formosa Petrochemical Corp. is one of Formosa Chemicals & Fibre Corp.’s

board director

Chang Gung University

Rep. Wen Yuan Wong 317,469,186 4.00% 0 0 0 0

Chang Gung Medical Foundation Chairman of Chang Gung University is one of Chang Gung Medical


Formosa Plastics Corp. Chairman of Formosa Plastics Corp. is one of Chang Gung University ’s

board director

Formosa Chemicals & Fibre Corp. Chairman of Formosa Chemicals & Fibre Corp. and Chang Gung University

is the same person

Formosa Petrochemical Corp. Chairman of Formosa Chemicals & Fibre Corp. is one of Chang Gung

University ’s board director

109

Name (Note1)

Current Shareholding Spouse’s/minor’s

Shareholding

Shareholding

by Nominee Arrangement

Name and Relationship Between the Company’s Top Ten Shareholders,

or Spouses or Relatives Within Two Degrees (Note3)

Remarks

Shares % Shares % Shares % Name Relationship

Vanson International Investment Co., Ltd.

Rep. Landmark Capital Holdings Inc. 189,777,620 2.39% 0 0 0 0

Chingdwell International Investment Corp. With same management team

Citibank Taiwan Limited In Custody for

Macro System Corp. With same management team

Formosa Petrochemical Corporation

Rep. Bao Lang Chen 179,214,423 2.26% 0 0 0 0

Formosa Plastics Corp.

Formosa Plastics Corp. invested Formosa Petrochemical Corp. under equity

method

Formosa Plastics Corp. is one of Formosa Petrochemical Corp.’s board

director

Formosa Chemicals & Fibre Corp.

Formosa Chemicals & Fibre Corp. invested Formosa Petrochemical Corp.

under equity method

Formosa Chemicals & Fibre Corp. is one of Formosa Petrochemical Corp.’s

board director

Chang Gung University Formosa Petrochemical Corp. is one of Chang Gung University ’s board

director

Chingdwell International Investment Corp.

Rep. Everred Corporate, Inc. 147,556,933 1.86% 0 0 0 0

Vanson International Investment Co., Ltd. With same management team


Macro System Corp. With same management team

LGT Bank (Singapore) Ltd. 123,807,765 1.56% 0 0 0 0 None


Macro System Corp. 109,714,138 1.38% 0 0 0 0

Vanson International Investment Co., Ltd. With same management team

Chingdwell International Investment Corp. With same management team

JPMorgan Chase Bank N.A., Taipei

Branch in custody for Vanguard Total

International Stock Index Fund, a series of

Vanguard Star Funds

99,130,133 1.25% 0 0 0 0 None

Note1: Top ten shareholders shall be listed, and both the name of the institution and its representative shall be listed for an institutional shareholder.

Note2: Calculation of the ratio of shareholdings means calculate the shareholding ratio with own shareholdings, spouse’s/minor’s shareholding, shareholding by nominee arrangement

Note3: Shareholders above-mentioned includes institutional shareholder and natural person shareholder and their relationship shall be disclosed in line with Regulations Governing the Preparation of Financial Reports by Securities Issuers.

110

3.10 The Total Number of Shares and Total Equity Stake Held in Any Single

Enterprise by the Company, the Company’s Directors, Supervisors, Managers,

and Any Companies Controlled either Directly or Indirectly by the Company:

2019.12.31 Unit: shares/ %

Affiliated

Enterprises

(Note1)

Ownership by the

Company

Direct or Indirect

Ownership by

Directors/Supervisors/

Managers

Total Ownership

Shares % Shares % Shares %

NAN YA PLASTICS CORP., U.S.A. 2,400 100.00 0 0.00 2,400 100.00

NAN YA PLASTICS CORP., AMERICA 60,000 100.00 0 0.00 60,000 100.00

FG INC 2,000 10.00 17,400 87.00 19,400 97.00

NAN YA PLASTICS INTERNATIONAL(CAYMAN) LTD. 52,000 100.00 0 0.00 52,000 100.00

FORMOSA GROUP(CAYMAN) LTD. 12,500 25.00 37,500 75.00 50,000 100.00

NAN YA PLASTICS (HONG KONG) CO., LTD. 953,253,077 100.00 0 0.00 953,253,077 100.00

SUPERIOR WORLD WIDE TRADING CO., LTD. 14,000 100.00 0 0.00 14,000 100.00

FORMOSA SYNTHETIC RUBBER(HONG KONG) CORP. LTD. 135,000,000 32.53 270,000,000 65.86 405,000,000 98.39

PFG FIBER GLASS(HONG KONG)CO., LTD. 75,500 100.00 0 0.00 75,500 100.00

FORMOSA INDUSTRIES CORP. N/A (Note2) 42.50 N/A (Note2) 42.50 N/A (Note2) 85.00

FORMOSA PLASTICS GROUP INVESTMENT CORP. 5,000,000 100.00 0 0.00 5,000,000 100.00

NAN YA PCB CORP. 432,744,977 66.97 43,772 0.01 432,788,749 66.98

NANYA TECHNOLOGY CORP. 907,303,775 29.71 1,004,571,955 32.68 1,911,875,730 62.39

FORMOSA ENVIRONMENTAL TECHNOLOGY CORP. 46,256,575 26.99 125,143,425 73.01 171,400,000 100.00

FORMOSA PETROCHEMICAL CORP. 2,201,306,014 23.11 5,024,932,631 52.75 7,226,238,645 75.86

PFG FIBER GLASS CORP. 100,000,000 100.00 0 0.00 100,000,000 100.00

FORMOSA HEAVY INDUSTRIES CORP. 651,706,181 32.91 1,328,515,462 67.09 1,980,221,643 100.00

NAN CHUNG PETROCHEMICAL CORP. 100,000,000 50.00 0 0.00 100,000,000 50.00

WEN FUNG INDUSTRIAL CORP. 18,738,135 100.00 0 0.00 18,738,135 100.00

FORMOSA AUTOMOBILE CORP. 27,045,801 45.00 27,044,199 45.00 54,090,000 90.00

YA TAI DEVELOPMET CORP. 1,303,870 44.96 1,306,130 45.04 2,610,000 90.00

FORMOSA FAIRWAY CORP. 4,699,367 33.34 9,395,902 66.66 14,095,269 100.00

FORMOSA PLASTICS TRANSPORT CORP. 6,566,487 33.33 13,132,755 66.67 19,699,242 100.00

HWA YA SCIENCE PARK MANAGEMENT CONSULTING CO., LTD 34,000 34.00 66,000 66.00 100,000 100.00

YI JIH DEVELOPMET CORP. 5,800,000 29.22 14,050,000 70.78 19,850,000 100.00

MAI LIAO POWER CORP. 547,024,654 24.94 1,641,130,008 74.82 2,188,154,662 99.76

FORMOSA SYNTHETIC RUBBER CORP. 44,600,000 33.33 89,200,000 66.67 133,800,000 100.00

FORMOSA PLASTICS CONSTRUCTION CORP. 10,000,000 33.33 20,000,000 66.67 30,000,000 100.00

Note1: Under the equality method.

Note2: Not issue shares.

111

IV. Capital and Shares

4.1 Capital and Shares

4.1.1 Source of Capital

Year / Month Issue price

(NT$ per share)

Authorized capital Paid-in capital Remark

Shares Amount Shares Amount Sources of capital Capital increased by assets

other than cash

notes

2013/08 10 7,930,821,589 79,308,215,890 7,930,821,589 79,308,215,890 Recapitalization of

earnings None Note

Note: In 2012, capital increase by earnings re-capitalization amounted to NT$785,229,860 and was approved by the Financial Supervisory Commission under

Jin-Guan-Zheng-Fa-Zi No.1020028386 dated July 19, 2013.

Unit: share

Type of stock Authorized capital

Remark Outstanding Outstanding Unissued shares Total shares

Common Stock (Registered) 7,930,821,589 (Note) - 7,930,821,589 -

Note: Listed on TSE

4.1.2 Status of Shareholders 2020.04.14

Type of shareholders Government Agencies Financial Institutions Other Juridical Person

Domestic

Natural Person

Foreign Institutions &

Natural Person Total

Number of shareholders 4 67 771 239,476 873 241,191

Shareholding (shares) 95,654,288 484,041,880 3,201,536,350 1,788,014,880 2,361,574,191 7,930,821,589

Holding (percentage) 1.21 6.10 40.37 22.54 29.78 100.00

Note: A primary exchange-listed (or OTC-listed) company or emerging stock company shall disclosure the holding percentage of shares by Mainland Area enterprise.

"Mainland Area enterprise" herein means a juristic person, group, or other institution of the Mainland Area, or a company in which the same have invested in a

third jurisdiction in accordance with Article 3 of the Regulations Governing Permission for People from the Mainland Area to Invest in the Taiwan Area.

112

4.1.3 Shareholding Distribution Status

As of 2020.04.14

Common shares

ownership (Unit: share) Number of shareholders

Ownership

(shares)

Ownership

(percentage)

000,001 ~ 0,000,999 96,518 22,108,375 0.28

001,000 ~ 0,005,000 98,806 213,195,478 2.69

005,001 ~ 0,010,000 21,119 151,382,169 1.91

010,001 ~ 0,015,000 8,431 101,451,853 1.28

015,001 ~ 0,020,000 4,051 71,440,179 0.90

020,001 ~ 0,030,000 4,326 105,493,874 1.33

030,001 ~ 0,050,000 3,227 124,135,880 1.57

050,001 ~ 0,100,000 2,368 163,618,037 2.06

100,001 ~ 0,200,000 1,131 154,137,980 1.94

200,001 ~ 0,400,000 524 144,606,227 1.82

400,001 ~ 0,600,000 185 91,124,315 1.15

600,001 ~ 0,800,000 97 66,888,027 0.84

800,001 ~ 1,000,000 63 56,989,698 0.72

1,000,001and over 345 6,464,249,497 81.51

Total

241,191 7,930,821,589 100.00

4.1.4 List of Major Shareholders

List all shareholders with a stake of 5 percent or greater, or the names of the top ten shareholders.

As of 2020.04.14

Top 10 shareholder Ownership (shares) Ownership Percentage

1. Chang Gung Medical Foundation 876,733,453 11.05

2. Formosa Plastics Corp. 783,356,866 9.88

3. Formosa Chemicals & Fiber Corp. 413,327,750 5.21

4. Chang Gung University 317,469,186 4.00

5. Vanson International Investment Co., Ltd. 189,777,620 2.39

6. Formosa Petrochemical Corp. 179,214,423 2.26

7. Chindwell International Investment Corp. 147,556,933 1.86

8. LGT Bank(Singapore) Ltd. 123,807,765 1.56

9. Citibank Taiwan Limited In Custody for Macro

System Corp. 109,714,138 1.38

10. JPMorgan Chase Bank N.A., Taipei Branch in

custody for Vanguard Total International Stock

Index Fund, a series of Vanguard Star Funds 99,130,133 1.25

113

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share

Unit: NT$

Year

Item 2019 2018 2020.3.31

Market price per share

Highest market price 79.90 88.40 73.20

Lowest market price 66.00 72.00 47.20

Average market price 73.95 81.69 62.03

Book value per share Before distribution 43.45 47.37 41.05

After distribution 41.25 42.37 －

Earnings per share Weighted average shares 7,930,821,589 7,930,821,589 7,930,821,589

Earnings per share (Note 3) 2.91 6.65 0.13

Dividends per share

Cash dividends 2.20 5.00 －

Stock dividends from retained earnings －－－

Stock dividends from capital surplus －－－

Accumulated undistributed dividends (Note 4) －－－

Return on Investment

Price / earnings ratio (Note 5) 25.34 12.23 －

Price / dividend ratio (Note 6） 33.51 16.26 －

Cash dividend yield rate (Note 7) 2.98 6.15 －

If shares are distributed in connection with a capital increase out of earnings or capital reserve, further disclose

information on market prices and cash dividends retroactively adjusted based on the number of shares after

distribution.

Note1: Setting forth the highest and lowest market price per share of common stock for each fiscal year. And calculating

each fiscal year's average market price based upon each fiscal year's actual transaction prices and volume.

Note2: Please fill in distributions decided in the shareholders’ meeting of the following year according to the number of

shares that were already issued for the specific year.

Note3: In case of retroactive adjustments due to bonus shares issued, earnings per share before and after the adjustment

shall be listed.

Note4: For the equity shares issuance criteria, if there are requirements that dividends not distributed for a specific year

can be carried over to the year with earnings, the dividends that have not been paid up to the said year with

earnings shall be disclosed separately.

Note5: Price / earnings ratio = average market price / adjusted earnings per share

Note6: Price / dividend ratio = average market price / cash dividends per share

Note7: Cash dividend yield rate = cash dividends per share / average market price

Note8: For the net value per share and earnings per share, data for the most recent quarter, audited and certified or

reviewed by a CPA shall be provided. For the other columns, data for the current fiscal year up to the date of

publication of the annual report shall be provided.

Note9: The market price per share listed in the above table is based on the data released by the Taiwan Stock Exchange.

Note10: The dividends per share indicate the dividends this year that are distributed in the following year.

Note11: The earning distribution of 2019 is an estimation which has not been approved by the Annual Shareholders’

Meeting.

4.1.6 Dividend Policy and Implementation Status

A. Dividend Policy of the Company’s Articles of Incorporation

The Company is in an industry that’s in a mature phase and can expect a steady stream of

profit. Dividends may be distributed in the form of cash dividend, capital increase through

capitalization of retained earnings, and capital increase through capitalization of capital reserve.

After deducting legal reserve and special reserve from the earnings available for the

appropriation of the year, no less than 50% shall be allocated and cash dividend will be firstly

distributed. The combined dividend distributed from capital increase through capitalization of

retained earnings and capital increase through capitalization of capital reserve cannot exceed

50% of the year's total dividend.

114

B. Proposed Distribution of Dividend

The Company distributed cash dividend NT$2.2 per share, stock dividend NT$0 per share,

totaling NT$2.2 dividend per share.

C. Expect Material Change in Dividend Policy: None

4.1.7 Dividend Policy and Implementation Status: None (Proposed stock dividends

were not set in the last Shareholders' Meeting and the Company itself is not required

to disclose financial forecast)

4.1.8 Compensation of Employees, Directors and Supervisors

A. The Company established an Audit Committee to replace Supervisors on June 23, 2016.

B. The percentages or ranges of employees, director’s compensation as stated in the Company's

Articles of Incorporation:

(1) Article 25 of Articles of Incorporation ：

When allocating the net profits for each fiscal year, the Company shall set aside 0.05%

to 0.5% of the balance of pre-tax profit prior to deducting employees’ compensation as

compensation of employees. However, the Company's accumulated losses shall have been

covered. The resolution of employees’ compensation is pursuant to Article 235-1 of the

Company Act.

(2) Article 26 of Articles of Incorporation ：

Where there is surplus of the annual final account, when allocating the net profits for

each fiscal year, the Company shall first pay its income tax and offset its prior years’

accumulated losses and set aside 10% legal capital reserve and special earning reserve as

necessary followed by the dividend. For remaining surplus incorporated with the

accumulated earning in previous years, the Board of Directors shall prepare the proposal

concerning the appropriation of net profits and submit the same to the shareholders’ meeting

for resolution.

(3)The Company's employee compensation policy follows the spirit of corporate governance

which shall both stimulate the performance of employee while not diluting capital to protect

existing shareholders. All the employee compensation is distributed in the form of cash.

C. The accounting treatment of the discrepancy between the actual distributed amount and the

estimated figure for the current period:

The accrual basis for employees' compensation and remuneration of Directors' shall be

based on relevant regulations, Articles of Incorporation, and past experiences. The difference, if

any, between actual distribution and estimated amount will be included in the profit or loss in the

following fiscal year based on relevant accounting principles.

D. Distribution of 2019 Compensation Approved by the Board of Directors:

The Board Meeting of March 18, 2020 approved:

(1)The amounts of employees’ cash compensation are NT$24,588,045; Stock compensation is

NT$0.The above amounts are in line with the estimated amount.

(2)Share amount of employees’ stock compensation is 0, percentage of the share amount to that

of all stock dividends are 0%.

115

E. Distribution of 2018 Compensation of Employees, Directors and Supervisors(with an indication

of the number of shares, monetary amount, and stock price, of the shares distributed) and, if

there is any discrepancy between the actual distribution and the recognized employee, director,

or supervisor compensation, additionally the discrepancy, cause, and how it is treated.:

The Board Meeting of March 20, 2019 approved:

(1)The actual amounts of employees’ cash compensation are NT$57,878,571, stock

compensation is NT$0, Directors’ compensation is NT$0.

(2)Actual share amount of employees’ stock compensation is NT$0, percentage of the share

amount to that of all stock dividends are 0%.

(3)The actual amount of employees’, Directors’ compensation is consistent with the amount

approved by the Board of Directors.

4.1.9 Repurchase of Common Stock: None

116

4.2 Corporate Bonds

Corporate Bond Type 3rd domestic unsecured corporate bond for 2012

Issue date 2013.02.25

Denomination NT$1,000,000

Issuing and transaction location Taiwan

Issue price At full denomination

Total price Tranche A: NT$2,400,000,000

Tranche B: NT$3,600,000,000

Coupon rate Tranche A: 1.36% p.a.

Tranche B: 1.50% p.a.

Tenor Tranche A: (7 years) Maturity: 2020.02.25

Tranche B: (10 years) Maturity: 2023.02.25

Guarantee agency None

Consignee Trust Department of Bank of Taiwan

Underwriting institution None

Certified lawyer Lin Jhih-Jhong

CPA Wu Chiu-Hwa、Astor Kou

Repayment method

The Company will redeem 50% of the principal at

one year before maturity and redeem the rest 50%

at maturity for each tenor

Outstanding principal NT$3,600,000,000

Terms of redemption or advance repayment None

Restrictive clause None

Name of credit rating agency, rating date,

rating of corporate bonds

Taiwan Ratings

Date rated: February 04, 2013

Rating outcome: tw AA-

Additional

rights

As of the printing date of this

annual report, converted amount

of (exchanged or subscribed)

ordinary shares, GDRs or other

securities

None

Issuance and conversion

(exchange or subscription) method None

Issuance and conversion, exchange or subscription

method, issuing condition dilution, and impact on

existing shareholders’ equity

None

Transfer agent None

117

Corporate Bond Type 1st domestic unsecured corporate bond for 2013





Total price

Tranche A: NT$3,100,000,000

Tranche B: NT$4,600,000,000

Tranche C: NT$1,900,000,000

Coupon rate

Tranche A: 1.40% p.a.


Tranche C: 1.55% p.a.

Tenor

Tranche A: (4 years) Maturity: 2017.08.05


Tranche C: (7 years) Maturity: 2020.08.05


Consignee Trust Department of Bank of Taiwan



CPA Wu Chiu-Hwa、Astor Kou

Repayment method




Outstanding principal NT$95,000,000





Taiwan Ratings

Date rated: April 22, 2013


Additional

rights





securities

None






None

Transfer agent None

118

Corporate Bond Type 2nd domestic unsecured corporate bond for 2013






Tranche B: NT$4,200,000,000






Consignee Trust Department of Mega International

Commercial Bank



CPA Wu Chiu-Hwa、Peggy Chen

Repayment method









Taiwan Ratings

Date rated: November 05, 2013


Additional

rights





securities

None






None

Transfer agent None

119






Total price NT$10,000,000,000

Coupon rate 2.04% p.a.

Tenor 15 years Maturity: 2029.06.24



Commercial Bank




Repayment method

The Company will redeem the bond in 50% of the

face value, respectively, at the end of the 14th and

15 th year






Taiwan Ratings

Date rated: March 27, 2014


Additional

rights





securities

None






None

Transfer agent None

120







Tranche B: NT$1,500,000,000







Commercial Bank




Repayment method









Taiwan Ratings

Date rated: September 11, 2014


Additional

rights





securities

None






None

Transfer agent None

121






Total price NT$5,000,000,000

Coupon rate 0.68% p.a.

Tenor 5 years Maturity: 2021.08.16



Commercial Bank

Underwriting institution Yuanta Securities Co., Ltd


CPA Sinney Kuo、Winston Yu

Repayment method

The Company will redeem the bond in 50% of the

face value, respectively, at the end of the 4th and

5 th year.





rating of corporate bonds None

Additional

rights





securities

None






None

Transfer agent None

122







Tranche B: NT$3,000,000,000







Commercial Bank




Repayment method









Additional

rights





securities

None






None

Transfer agent None

123






Total price

Tranche A: NT$5,250,000,000

Tranche B: NT$3,050,000,000

Tranche C: NT$2,200,000,000

Coupon rate




Tenor






Commercial Bank




Repayment method

the Company will redeem 50% of the principal at








Additional

rights





securities

None






None

Transfer agent None

124






Total price

Tranche A: NT$1,700,000,000

Tranche B: NT$2,800,000,000

Tranche C: NT$1,800,000,000

Coupon rate




Tenor






Commercial Bank


Certified lawyer Jerry Huang


Repayment method









Additional

rights





securities

None






None

Transfer agent None

125






Total price

Tranche A: NT$1,900,000,000

Tranche B: NT$2,500,000,000

Tranche C: NT$700,000,000

Coupon rate




Tenor






Commercial Bank


Certified lawyer Jerry Huang


Repayment method









Additional

rights





securities

None






None

Transfer agent None

126

4.3 Status of Preferred Stock: None.

4.4 Issuance of Global Depositary Receipts: None.

4.5 Status of Employee Stock Options: None.

4.6 Status of New Shares Issuance in Connection with Mergers and Acquisitions:

None.

4.7 Financing Plans and Implementation

4.7.1 Finance Plans:

For each uncompleted public issue or private placement of securities, and for such

issues and placements that were completed in the most recent three years but have not yet

fully yielded the planned benefits: None.

4.7.2 Implementation:

Capital received from previously-issued corporate bonds has been fully executed

according to the required procedures: None.

127

V. Operations Overview

5.1 Business Content

5.1.1 Business Scope

5.1.1.1 Main Business Operations

1. C301010 Yarn Spinning Mills

2. C302010 Knit Fabric Mills

3. C303010 Non-woven Fabrics Mills

4. C305010 Printing, Dyeing, and Finishing Mills

5. C601040 Processed Paper Manufacturing

6. C601990 Other Paper Products Manufacturing

7. C801010 Basic Industrial Chemical Manufacturing

8. C801020 Petrochemical Manufacturing

9. C801060 Synthetic Rubber Manufacturing

10. C801100 Synthetic Resin & Plastic Manufacturing

11. C801110 Fertilizer Manufacturing

12. C801120 Manmade Fiber Manufacturing

13. C801990 Other Chemical Materials Manufacturing

14. C802041 Drugs and Medicines Manufacturing

15. C802120 Industrial Catalyst Manufacturing

16. C802170 Poisonous Chemical Material Manufacturing

17. C802200 Paints, Varnishes, Lacquers, Dyeing Mills and Dyestuff Manufacturing

18. C805010 Plastic Sheets, Pipes and Tubes Manufacturing

19. C805020 Plastic Sheets & Bags Manufacturing

20. C805070 Strengthened Plastic Products Manufacturing

21. C805990 Other Plastic Products Manufacturing

22. C901020 Glass and glass made products manufacturing

23. C901060 Refractory Materials Manufacturing

24. CB01010 Machinery and Equipment Manufacturing

25. CB01030 Pollution Controlling Equipment Manufacturing

26. CB01990 Other Machinery Manufacturing Not Elsewhere Classified

27. CC01010 Electric Power Supply, Electric Transmission and Power Distribution Machinery

Manufacturing

28. CC01080 Electronic Parts and Components Manufacturing

29. CC01090 Batteries Manufacturing

30. CQ01010 Die Manufacturing

31. CZ99990 Other Industrial Products Manufacturing Not Elsewhere Classified

32. D101050 Steam and Electricity Paragenesis

33. D401010 Heat Energy Supplying

34. E599010 Pipe Lines Construction

35. E601010 Electric Appliance Construction

128

36. E603050 Cybernation Equipment Construction

37. E604010 Machinery Installation Construction

38. EZ15010 Warming and Cooling Maintenance Construction

39. H701020 Industrial Factory Buildings Lease Construction and Development

40. H701040 Specialized Field Construction and Development

41. I199990 Other Consultancy

42. ID01010 Metrological Instruments Identify

43. IZ99990 Other Industry and Commerce Services Not Elsewhere Classified

44. J101030 Waste Clearing

45. J101040 Waste Disposing

46. J101050 Sanitary and Pollution Controlling Services

47. J101060 Wastewater (Sewage) Treatment

48. CE01021 Metrological Instruments Manufacturing

49. ZZ99999 All business items that are not prohibited or restricted by law, except those that are

subject to special approval

50. Other business operations of subsidiaries including plastics, electronics, chemical, textile fiber,

investment and etc.

129

5.1.1.2 2019 Business Distribution

Amount: NT$ thousands

Product Name Unit Volume Amount ％

Flexible PVC Film Ton 104,530 6,900,551 2.41

PVC Leather Thousand

Yard 24,540 2,996,160 1.05

Rigid PVC Film Ton 134,610 8,170,411 2.85

PU Synthetic Leather Thousand

Yard 13,079 1,917,804 0.67

Plastic Doors and Windows Ton 22,347 4,561,008 1.59

Rigid PVC Pipe Ton 124,041 5,600,558 1.96

Film Products Ton 30,704 2,262,524 0.79

Plasticizer and THPA Ton 322,998 11,428,993 3.99

PA Ton 110,303 3,131,568 1.09

BPA Ton 360,924 13,964,330 4.88

1,4BG Ton 43,027 2,144,358 0.75

EG Ton 1,760,531 30,699,552 10.72

Copper Clad Laminate Thousand

Sheet 52,899 26,609,055 9.29

Epoxy Resin Ton 348,764 26,508,047 9.26

Glass Fabrics Thousand

Meter 208,336 5,147,019 1.80

Copper Foil Ton 40,621 12,436,485 4.34

Printed Circuit Board Thousand

SFT 18,279 31,093,989 10.86

Glass Yarn Ton 40,541 1,678,544 0.59

Polyester staple fiber, filament, fabric Ton 1,088,082 49,536,298 17.30

PET Film Ton 58,166 4,205,595 1.47

Others 35,310,210 12.34

Total 286,303,059 100.00

130

5.1.1.3 Current Products

(a) Plastic processing products: flexible PVC film, PVC leather, rigid PVC film, PP

synthetic paper, metallized film, A-PET film, Synthetic Material, PU synthetic

leather, Non-woven, Optical film, TPU leather (film), plastic doors and windows,

SMC doors, sound absorbing materials, hard tubes, film products, profile

extrusion products, injection products, plastic floor tiles, hard boards, PVC plastic

pellets, PP synthetic paper, engineering plastic pellets, UP resin, etc.

(b) Plastic raw materials: ethylene glycol, plasticizer, Bisehnol A, butylene glycol,

tetrahydrofuran, phthalic anhydride, 2-Ethylhexanol, etc.

(c) Electronic materials: Copper clad laminate, prepreg, copper foil, epoxy resin,

electronic-grade and industrial-grade glass fiber cloth, LCD display, touch panel,

capacitive circuit board, printed circuit board, and glass fiber filament.

(d) Polyester products: Spinning-grade Virgin & recycled PET Resins,

Spinning-grade Bio-base PET resins, Bottle-grade virgin PET resins, Bottle-grade

Antimony free PET resins, Bottle-grade Bio-base PET resins, Staple fiber of

virgin & recycled, Full drawing yarn of virgin & recycled, Partial orientation yarn

of virgin & recycled, Draw texturing yarn of virgin & recycled ,Yarn dyed,

Industrial yarn, polyester film, and release film.

(e) Electromechanical engineering: plastics, polyesters, chemicals, electronics

engineering design and supervision, switchgear, cast resin transformer, vacuum

contactor switchgear, steam and electric common fluid.

5.1.1.4 New Product Development Plan

Development antifouling and antibacterial products , new automotive interior

products, automotive coating film, quantum dot film, PP environmental

protection decoration material, 5G copper foil substrate heat-resistant cushion,

aluminum plastic film, fireproof material, high value synthetic products, PE pipe

for underground fire protection service, UL-651 PVC pipe for conduct, cling film

for long-term preservation of fruit and vegetable, long-fiber reinforced

thermoplastic engineering plastic pellets, high-frequency low-dielectric copper

clad laminate, microwave wave copper clad laminate, hydrocarbon copper clad

laminate, Interposer high-end mobile phone copper clad laminate, mid/low loss

and very low loss clad laminate, bismaleimide resin, flame retardants containing

P-N, 50~90µm high strength thin fiberglass cloth, low dielectric 20~90µm

fiberglass cloth, copper foil for ultra-high frequency substrate, ultra-thick copper

foil with low roughness, high tensile strength copper foil for lithium ion battery,

new generation high-grade circuit boards, low cost and high efficiency

bottle-grade resins contains titanium catalyst, Bottle-To-bottle PET resins,

develop decolorization technology of recycled textiles, high brightness and fast

reheat PET bottle resins, PET resins for cosmetic container with high transparency

& thickness, bio-based PET resins for textile or bottle uses, PE/PP low melt fiber,

black low melt fiber, diversified recycled filament, ocean recycled filament diverts

waste bottles, textile recycled filament, TPU filament, develop doped dyed

filament with low wear rates against yarn guide, develop high tenacity yarns for

air bag, UL VTM-0 flame retardant white film, and high-clarity energy-saving

gray tone transparent film for vehicle front windshield.

5.1.2 Industry Overview

The current situation and development of the industry, the correlation between the

upper stream, middle and the downstream of the industry, the various product

development trends and the competitive situation:

131

Flexible PVC film

PVC leather

The company's main products are divided into five major industries, namely plastics,

chemicals, electronic materials, polyesters, and electromechanical engineering, which

are described as follows:

5.1.2.1 Plastic Industry

(a) Industry Overview:

The China-US trade war has eased after the G20 summit, and the economy has

stabilized slightly after the implementation of a number of tax abatement and fee

reduction policies in the China. However the overall international market is all of

variables. Started from the second quarter of 2019, US turned the tariff barrage

toward EU, India and Mexico. In addition, the trade friction between Japan and

South Korea caused by forced labor compensation issues during World War II and

the Italy debt crisis made the economic downturn in Europe. Coupled with the

effect of COVID-19, by far the observation of the global economic growth rate

should be conservative and the overall market consumption power will decline.

(b) Industrial Development:

In response to the competition from the China, the Company is currently actively

promoting process optimization, introducing AI artificial intelligence, each plant

actively promotes thorough improvement of basic management, automation

improvement and process optimization, upgrading software and hardware,

improving production efficiency and product quality, and implementing a circular

economy to reduce production costs and raise the competitiveness. In addition, the

Company develops various differentiated and high value products, actively

expands the market and increases market share. From three aspects of production,

development and business, the Company constructs a golden triangle of operation,

analyzes the development trend of industry to implement the forward-looking

business strategy.

(c) Relevance of industry upper stream, middle and lower streams (using film and

rubber as an example)

(d) Development Trends and Competitive Situations:

The Company has plants and offices in Taiwan, China, Vietnam, Indonesia, and

the United States to supply customers with the goods they need. Besides the

upstream raw materials provided by internal supply within the Company, the

Company also satisfies customer needs by excellent designs from creative design

center. By providing the most fashionable style to the customers, the Company

has its competitive market advantage.

To improve overall operating performance, the Company strengthens cross-sector

integration marketing, integrate three major categories of products including

medical, building materials, and automotive, plan joint research and development

PU synthetic leather

Rigid PVC film

Plasticizer

Stabilizer

Plastic powder

PU resin

132

of medical products with the plastic industry technology development center; plan

to visit major China customers and large builders to expand building materials

products and arrange visit to the Essen International Modified Cars and

Accessories Exhibition to expand domestic and overseas vehicle products.

The establishment of "Nan Ya Internet Shopping Mall" provides overall product

solutions and visitor-related service information to increase visitor views and

customer inquiry rates. The Company also integrates marketing websites such as

ice-cooled thermal insulation paper, special film, building materials, medical

products, etc. and links application websites of domestic and overseas, so that

consumers can systematically search for products they need, increase online

visibility, enhance brand image, and establish complete marketing link.

5.1.2.2 Chemical Industry (taking ethylene glycol products as an example)


In 2019, the global polyester production capacity still grew by 5.5%, which made

the demand for ethylene glycol grow steadily. The global capacity requirements

for ethylene glycol are as follows:

Year

Items 2017 2018 2019 2020

(Estimated)

Global Production

Capacity (thousand tons) 31,692 33,506 35,751 40,748

Global Demand

(thousand tons) 27,650 29,200 30,800 31,204

Capacity Utilization (%) 87.2 87.1 86.2 76.6


Started from the second half of 2018, the production of ethylene glycol in China

has increased and the price has begun to decline. In 2019, as the new ethylene

glycol plants in China and US continue to put into production, the market

competition becomes more intense.

(c) Correlation between Upstream, Midstream, and Downstream of the Industry

The main raw material of monoethylene glycol (MEG) is ethylene, and the upstream

raw materials of ethylene are light oil and crude oil. Therefore, the fluctuation of

international oil price will affect the price of raw material ethylene. Monothylene

glycol (MEG) and pure terephthalic acid (PTA) are the main raw materials of

polyester fiber, which is in turn the raw material of downstream textile products.

Therefore, the seasonal demand of the market of textile, yarn and cloth will directly

affect the price of ethylene glycol.

Light oil

Crude oil

Ethylene Monoethylene

Glycol

Pure Terephthalic

Acid

Polyester

Fiber

Product

Textile

133


It is estimated that the global demand for ethylene glycol in 2020 will increase by

1.3% compared with 2019 and the production capacity of ethylene glycol will

increase by 13.9%. Due to the China-US trade war, the expectation of China

economic slowing down affects the slide down export of clothing. Besides, as the

refining and chemical plant in China such as Hengli and Zhejiang Petroleum &

Chemical, etc. started to put into production in early 2020, the sharp increase in

ethylene glycol supply causing the price drops. China is the main market for

ethylene glycol in the world. In 2019, the Company supplied 1.12 million tons of

its imports, accounting for 11.3%. It is estimated that the import of ethylene glycol

in 2020 will be 9.30 million tons. The Company's ethylene glycol products

compete with large-scale ethylene glycol manufacturers such as SABIC and

MEGlobal. Due to the geographical location, the supply can be delivered quickly

and on time to all major ports along the Chinese coast. The excellent quality also

ensures the trust of long-term customers, therefore holding a more competitive

stance.

5.1.2.3 Electronic material Industry


In response to the rapid transmission of large amounts of data, the requirement for

high-frequency and high-speed equipment is an important key to the development of

electronic materials. The company has actively deployed in niche products such as

high-frequency low-dielectric copper clad laminate, IC substrate, high-density

interconnect, vehicle copper clad laminate, microwave copper clad laminate,

hydrocarbon copper clad laminate, ultra-fine glass fibers, low-dielectric ultra-thin

fiberglass cloth and copper foil for ultra-high frequency substrate. In 2019, the demand

for terminal applications such as network communication, high level HDI, automotive

electronics and smart home appliances kept growing. In 2020, the Company will

continue to develop application markets in fast-growing automotive electronics,

high-efficiency computing, internet of things and communication networks. Due to the

lower technology threshold and the encouragement of China policy, general circuit has

many manufacturers and its price competes fiercely. The same industries often expand

their production capacity, through economics of scale reduces their production cost to

maintain their profit, causing the whole market oversupply and the average price of

general circuit keep dropping. But the automotive electronic and network

communication are niche market, their application products have better profit so it is the

target that general circuit suppliers want to cut in. On the other hand, the demand of

personal laptop and consumer electronic are weak, the sales of smart mobile device

slowdown and their average prices keep dropping causing the relevant application of IC

substrate facing price pressure. Now the IC substrate manufacturers act in concert with

the trend of terminal market and actively cut in markets with growth potential such as

artificial intelligence, high-efficiency computing and 5G network communication

products to improve their profit.


As the global board production focus gradually shifted to China, domestic players

have actively integrated cross-strait scale in recent years. The Company has

vertically integrated electronic materials plants in Kunshan for electronic

materials, including glass fiber, fiberglass cloth, copper foil, epoxy resin, copper

foil substrate and circuit board, etc. The Company also plans to continue the

expansion of the copper foil substrate pant II and the fiberglass cloth plant in

Huizhou, which will drive revenue and profit growth.

134



Electronic products use 5G, artificial intelligence, cloud server and automotive

electronics as the force for future growth, and various printed circuit boards and

copper foil substrate manufacturers continue to invest in high-end products.

High-end products require corresponding raw materials, such as ultra-fine glass

fiber, ultra-thin fiberglass cloth, and low-edge copper foil. The Company has also

completed relevant deployments and has better competitiveness in terms of cost,

materials and quality. On the other hand, due to the trend of the terminal

electronics products of general circuit remain light, thin, short and tiny, the

general circuit keeps develop toward multi-layer and fine-line. But the same

industries often expand their production capacity, through economics of scale

reduces their production cost to maintain their profit, causing the whole market

oversupply and the average price of general circuit was under attach. Besides, the

smart phone market grew rapidly in the past, many manufactures expanded their

HDI production capacity to strive the business opportunities, causing the

oversupply of HDI and the price kept dropping. In addition, due to the rapid

change of semiconductor package technology, the usage amount of mobile device

applicant IC substrate gradually decrease. The IC substrate aggregate market is

now under the circumstances of the supply remain the same while the demand

shrinks, the fiercely price competition causing the price of mobile device applicant

IC substrate drops. Along with the recent rises of new fields such as artificial

intelligence, high-efficiency computing and 5G network communication, the

demand of relevant IC substrate has grown which leads to the tight supply of

certain IC substrate.

5.1.2.4 Polyester Industry


Affected by the China-US trade war in 2019, the global economy slowed down

and consumption power weakened. Downstream customers continued to wait and

see, with a low capacity utilization rate and new polyester production capacity in

mainland China continued to expand and grabbed market at low prices. The sales

volume and profitability of our polyester product failed to maintain growth.

Besides, the large-scale chemical fiber plants in mainland China are integrated in

refining and chemical, with vertical integration, large scale, and low cost, the

competition will become more intense in the future.

Printed

Circuit

Board

ECH

BPA

Glass

Fiber

Copper Foil

Epoxy Resin

Epoxy Fiber

Cloth

Copper Clad

Laminate

Prepreg

135

China's polyester filaments are mainly direct spinning, in order to master raw

materials and reduce costs, China keeps expanding production capacity and

developing upstream. In addition, due to the domestic demand market cooling

down and economic growth slowing down, all major manufactures are expanding

towards export, meanwhile domestic sales are promoted at preferential prices to

reduce production capacity. Owing to the stable economic and job market of the

US, the increase in consumer spending power, and the Trump government

advocates protection for US industries from unfair competition, the demand of

polyester products are stable, leading the revenue of US Plant continues to grow.

The general spec of polyester film is under fierce competition due to the low-price

competition in China and oversupply. Only by continuously developing

differentiated products can the Company avoid the competition in mainland

China. On the other hand, the demand of release film will grow slowly due to the

laminated ceramic capacitors are affected by China-US trade war.


The production capacity of polyester continues to grow. The global capacity of

polyester in 2019 was 115.72 million tons, increase by 2.95%, capacity utilization

rate 71.4%, reaching a recent high.

China's total polyester production capacity in 2019 was 72.15 million tons per

year, increasing by 3.5% from 2018. Both production capacity and the product

quality are rapidly improved and the development abilities of differentiated

products are enhanced, leading the competition become fiercer. China’s

percentage of polyester filament is 58%, and the capacity utilization rate is

80%-85%; its quality of polyester filament products has been improved rapidly

and the development ability of differentiated products has increased. In response

to the environmental protection trend, the bottle recycled products have been put

into production since 2019 to expand the market and sell at competitive price. On

the other hand, the total polyester production capacity of the US was 5.19 million

tons in 2019. PET resin accounted for 63% of the US, and its capacity utilization

rate was above 80%. Due to rising wages in Asia, brand owners of garments are

returning to Central America for production, leading to an increase in the growth

of the US domestic textile industry and demand for polyester fiber. Besides, Toray

Group will add a set of polyester release film production line in Japan and South

Korea respectively. In addition, to fulfill the 5G era and to meet growing demand

of laminated ceramic capacitors coating released firm, Toyobo Co. Ltd. in Japan

merged the polyester film division of Teijin Limited in October, 2019.


The main raw materials for polyester products are ethylene glycol (MEG) and

pure terephthalic acid (PTA). And downstream are categorized by different uses

of product, the bottle chips are made into food and beverage packaging materials;

the filaments and stable fiber were the raw material of woven, dyed, garments etc.

Besides, to the different functional needs of garments, trends to a small quantities

of diversification.

136


The production focus of domestic downstream manufacturers have shifted to

Southeast Asian countries, resulting in oversupply of polyester products and price

competition. The company continues to develop and promote high value products,

especially for the promotion of yarn made from PET bottle recycled yarn、staple

fiber、chip , and diversify the market to reduce the impact and increase the

operating rate. The PET bottle market faces keen competition as the new global

production capacity continues to grow. The Company continues to increase

exports to Japan and fought for domestic customers at the same time to increase

sales and achieve full-scale production and sale. With the continuous increase of

production capacity of polyester products in mainland China and the volume wins

and the competition is fierce. To increase the profits, Kunshan Plant actively

expands the differentiated products, seize the advantages of bottle recycled silk

and particle spinning meanwhile expand the sales volume of color silk, knitted

fabric and PET recycled products. On the other hand, the demand of US brand

customers for yarn, staple fiber, and resins made from recycled PET increases day

by day, so the US Plant will continue to adapt equipment to increase the supply of

recycled products and insure profitability.

5.1.2.5 Electrical and Mechanical Engineering (taking switchboards as an example)


Due to the low technology threshold of switchboard in Taiwan, there is a large

number of competitive peers and limited market demand. In light of Japan will

host the Tokyo Olympics and the economic development of Southeast Asian

countries, their basic electricity construction demand are larger, the switchboard

manufactures joint Formosa Heavy Industries Corp. and other companies in the

industry to jointly contract export orders from Southeast Asia, Japan, etc. And the

subsidiaries in China are developing the components and system integrators of

China to continuously reduce the cost of the main and adjunct materials.


Besides continuing introducing “wireless temperature detector”, “partial discharge

monitor” and “smart relay”, etc., the switchboard division improves the real time

monitor function of the functioning switchboard, establishes statistic storage and

analyst work and manages equipment maintenance to make the switchboard achieve

the goal of “differentiation” and “high value”. In respond to the trend of the

application of electric storage to solar energy and wind energy, the Company

Polyester Staple Fiber

Polyester Chips

Polyester POY

Polyester Fully Oriented Yarn

PET Film

PTA、MEG Polyester Textured Yarn

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co-develop the electric storage system with Formosa Plastics Transportation Corp. to

expand the market of green power storage.


Upstream: metal materials such as copper, iron, aluminum, and insulating

materials such as plastics and resins.

Midstream: transformers, ratio converters, circuit breakers, wire and cable, and

various types of controllers.

Downstream: switchboard and overall distribution power system.


Taiwan's parent company specializes in development of new products and new

technology. The subsidiaries in China reduce the cost of the main and adjunct

materials, develop differentiated products, consolidate the domestic market,

cooperate the technology with international manufacturers, jointly fight for orders

and promote the transformers market in Japan and the electric system of Southeast

Asian exporting market to expand the order sources.

5.1.3 Overview of Technology and R&D:

The research and development total expenses for the fiscal year ending on March 31st,

2020 is NT$ 2,024,723,000. Successfully developed technologies or products and

future research and development plans for the following years are as follows:

5.1.3.1 In 2019 and up to March 31, 2020 the R&D expenses are as follows:

Unit: NT$ thousands

2019 As of March 31, 2020

1,717,682 431,199

5.1.3.2 Technologies or products developed successfully:

(a) Plastic products:

Ice cool S insulation film, outdoor workstation temperature-resistant tape,

heat-resistant environmental protection wall covering, MARCO printed wallpaper,

flame-resistant and smoke-proof for cooling tower PVC film, easy-release mold

PVC film, V-Type window film, A-PET conductive film, pipe clad fire barriers,

polyester plasticizer, high-strength ester type thermoplastics urethane, vehicle

leather high solid PU, etc.

For flexible and rigid PVC film, PVC leather, PU synthetic leather, etc., Taiwan

plants have submitted a total of 10 patent applications for Taiwan patents, 7 of

them have passed and rest of 3 are still under review. On the other hand, overseas

plants filed a total of 29 patent applications for China patents, 6 from Huizhou

Plant and 23 from Nantong Plant; 6 of them have passed and rest of 23 are still

under review.

(b) Chemical products: None.

(c) Electronic material products:

High-frequency low dielectric materials, HDI halogen-free materials, halogen-free

flip-chip carrier, MDI modify resin, water-based epoxy resin for explosion-proof

motor anti-corrosion, water-based epoxy resin for automotive plastic bumper

coating, 11µm ultra-thin fiberglass cloth, reverse treatment copper foil for high

frequency substrates, thick copper foil for high electric current, 2-5 mm ultra-thin

copper foil, high-capacity lithium-ion copper foil, and #900 Sizing Industrial Yarn

to Reinforced Plastic.

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(d) Polyester products:

Heat resistant bottle grade Titanium catalyst pellets, deep dyed cation chemical

recycled pellets, 2d bio-degradable low melt fiber, coffee ground recycled yarn,

flame retardant and anti-dropping yarn, elastic polyester filament, differentiated

hallow cross section yarn, heather yarn with relief, PET recycled polyester film,

co-extraction film for laser, polyester release film for thinning polarizers, flame

retardant white film in accordance with UL VTM-0, etc.

(e) Mechanical and electrical engineering:

①The MVMSN 7.2kV VCS medium voltage switchboard has passed the CNS

15156 certification and obtained the type test report.

②The 6.6kV 1500Kva wound core cast resin transformer has passed the type test

certification from the Japan TAKAOKA chemical Co., LTD.

5.1.4 Short- and Long-Term Business Development Plans:

5.1.4.1 Plastic products

Long-term: Promote process optimization, develop high-value products, develop

products that comply with environmental trends and functions, and use

the local production advantages of the plants in Taiwan, China, Vietnam

and the United States can effectively reduce production costs, improve

market competitiveness. In addition, by strengthening online marketing

and promoting integrated marketing, and breaking through the difficult

situation of traditional industry, to obtain the Company's best interests,

create a win-win goal for customers and the Company and actively

explore market opportunities.

Short-term: In response to the factor of China-US trade war and the impact of

COVID-19, we adjusted production and sales plans with solid golden

triangle operation policy, promoted process optimization and AI data

analysis to reduce cost and improve product competitiveness. In

addition, to strive for the order transfer phenomenon caused by war trade

and epidemic and to improve the overall operating performance, we

enhanced the management of each plant and the market expansion of

each business office

5.1.4.2 Chemical products

Long-term: (a) Ethylene glycol: The global polyester fiber grows stably. It’s estimated

the demand of ethylene glycol will grow by around 3.5% per year in the

future, especially in Asian area such as China and India will import

ethylene glycol with the total amount exceed 10 million. The location of

Mailiao ethylene glycol plant of the Company is close to the major

ethylene glycol consumer markets in Asia, and ethylene glycol will still

be profitable.

(b) Bisphenol-A: The quality of the bisphenol-A of the Company is good

and with competitive price and can fully meet the needs of downstream

domestic and foreign customers. At the end of 2019, the new

manufactures of polycarbonate in China such as Hubei Ganning, Honan

Puyang, etc. started to put into production and the production will

become stable in 2020. Since the demand of bisphenol-A increased, the

Company’s production line in Ningbo, China can supply nearby and the

shortage can be supplied by Taiwan to maximize the Company’s profit.

(c) Plasticizers: China's environmental protection policy has become

more stringent, and the public's awareness of environmental protection

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has been greatly enhanced, which has led to a decline in the use of the

phthalate plasticizer DEHP. The Company's DOTP is an

environmentally-friendly plasticizer product, which can replace DEHP

and has been recognized by the Chinese market in terms of transparency,

odor, product stability, and customer service.

Short-term: (a) Ethylene Glycol: Besides actively contacting and increasing the

supply to large domestic customers, the Mailiao ethylene glycol plant

continues to develop China’s new customers which have good

reputation. Through long-term and stable supply to ensures the balance

between production and sales. Now 60% of ethylene glycol products are

supplied to the US fiber plant in Texas, and rest of them are supplied to

local customers with stable profit.

(b) Bisphenol-A: Stabilize the supply of downstream manufactures,

including the Epoxy Resin Plant of the Company, the invested Kunshan

Epoxy Resin Plant in mainland China and the PC Plant of Formosa

Petrochemical Corp. The remaining products are sold to domestic

customers, including the PC Plant of Chi Mei Corp. In addition, the

Company continues to export to customers of PC and epoxy in China,

Japan and South Korea and actively develops the new customers in

Europe, US and the Middle East to ensure the balance between

production and sales.

(c) Plasticizer: The plasticizer plants continues to improve the process

and eliminate the obstacles of production process. By using tools such as

AI prediction modules, ASPEN, etc. to conserve water and energy,

reduce the unit usage of material and energy, reduce production cost and

improve competitiveness

5.1.4.3 Electronic materials products

Long-term: (a) Promote high-frequency low-dielectric copper clad laminate, HDI

materials, servers, switch, vehicle copper clad laminate, IC substrates,

and buried antenna substrates, etc. And with the 5G infrastructure, the

company develops products for base stations, automotive radars and RF

components providing customers with stable and competitive sheet

materials and increasing market share.

(b) Expanding the application fields of anti-corrosion coatings and

composite materials, promoting niche products such as halogen-free

environmentally friendly epoxy resins, heat-resistant phenolic epoxy

resins, and water-based resins. Tapping into emerging markets such as

Northeast Africa, Eastern Europe, and Central and South America, and

expanding market share in industries including electronics, paint, wind

power, civil engineering, and container coating in China.

(c) Continuous promotion for new products of fiberglass yarn and cloth

and increase the proportion of differentiated and high value products.

Through process optimization, equipment automation and the

introduction of AI, improvement of yield and product quality, promotion

of circular economic and various improvements of production progress

to reduce cost, improve competitiveness. In addition, we will continue to

develop new products and segregate the market.

(d) Through promoting the mass production of differentiated products

such as thick copper foil, copper foil for high-frequency substrates,

ultra-thin copper foil, etc. to increase the proportion of differentiated

copper foil. Besides, the Company continues to establish the mass

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production technology of lithium-ion copper foil, develop new

lithium-ion copper foil with high heat resistance and high strength, and

promote the application of solid-state and high-capacity lithium-ion

batteries to increase market share.

(e) The growth trend of the circuit board in the future is still mainly

towards the application products of communication networks,

high-efficiency computing and artificial intelligence. The Company

adheres to the business philosophy of sustainable operation and

continuous innovation and dedicates to the development of products and

expansion of product capacity. In addition, we actively develop new

customers and take the advantage of leading quality and technology as

the axis of log-term business development.

Short-term: (a) Promote environmentally-friendly plates to meet environmental

requirements, master industry development trends and accelerate new

product development certification. Continue to reduce costs, and strive

for copper foil substrate orders at a flexible price to increase sales.

(b) Actively promote high-resistance phenolic epoxy resin and

water-based resins for the applications in high-end copper foil substrates,

composite materials, PCB inks, and automotive plastic bumper coating

etc. to increase market share, strengthen sales in the Chinese domestic

market, and expand the market for wind power and automotive coatings.

(c) Increase the sales of niche-type fiberglass yarn, optimize product

portfolio, develop high quality customers, ensure full production and

sales, increase spinning position in accordance with annual maintain, and

develop multi-cakes bushing to increase the Company’s profit. Besides,

according to the needs of customers, increase the supply of electronic fine

yarn and fight for the industrial yarn orders of Europe, US, South Korea

and India to maintain capacity utilization.

(d) Improve the quality, yield and sales volume of differentiated copper

foil products, and strive to ensure full production and sales.

(e) Due to the upstream production process of semiconductor keeps

shrinking and the end electric products keep develop toward

micromation, the circuit board products will focus on technology

improvement and potential customer development of high-density and

thinning circuit board and IC substrate. In addition, the Company

cooperates with the preference changes of customer toward end products,

keeps adjusting product portfolio, accelerating the equipment

improvement and production capacity expansion of high value products

to improve the production value and profit.

5.1.4.4 Polyester products

Long-term: The production capacity of polyester in China continues to expand, the

quality of polyester products is also improved, and the competition of

the polyester industry will become more and more intense in the future.

In long-term, the Company must keep integrating the production

resources of Taiwan, US, Vietnam and China, accelerating the global

layout and breaking through market segregation to obtain the maximum

profit for the Company. The Kunshan Plant in China continues to

cooperate with brand manufacturers to develop, adjust product portfolio,

expands the sales volume of colored silk and recycled knitted fabrics,

and increase the profits. The US plant continues to strive for orders from

major brand manufacturers and cooperates with the development of PCR

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filament, recycled bottle chips and new products that meet green trends

to increase sales and niche.

Short-term: Continue to promote the differentiated and high value products, through

optimize production process to increase production volume and product

quality, and reduce cost to increase competitiveness. In order to catch the

trend of environmental protection, and to align with the plan of using

recycled product from fashion brands and drink manufacturers, we

actively promote PCR (post-consumer recycled) products. In addition,

we promote functional and innovative product such as lumin max, UV

CUT with anti-transparent, dark cool, heavy metal free, biodegradable,

etc. to increase sales volume and profits. The Kunshan Plant in China

seeks brand cooperation to expand sales of differentiated products,

effectively exploit the advantages of grain spinning and expand the use

of color yarns, and master the sales of recycled knitwear products. On

the other hand, in order to reduce the cost and grabs the demand of

vehicle cloth, we purchase yarn from other manufacturers to ensure the

competitive advantage. Corresponding to the trend of textile orders

returning to Central American, the US Plant actively takes orders to

improve the Company's profits.

5.1.4.5 Mechanical and Electrical Engineering

Long-term: Continuous switchboard product innovation, quality improvement and

cost control operations, strive for the trust of internal and external

customers, develop power cloud monitoring system to segregate the

market.

Short-term: Establish a supply chain system of excellent domestic and overseas

material suppliers, continue to develop material counter-products, open

up domestic and overseas markets, promote “wireless temperature

detector”, partial discharge monitor”, etc., and enhance after sales

service.

5.2 Markets and the Overview of Production and Sales

5.2.1 Market Analysis

5.2.1.1 Sales regions and market share for major products

Items

Primary products Sales region Domestic market share

Plastic products Taiwan, China, America,

Southeast Asia, Europe

Flexible PVC Film 46%, rigid PVC

film 50%, PP synthetic paper 60%,

PU leather 29%, Rigid PVC Pipe

63%

Chemical products Taiwan, China Bisphenol-A 60%,

ethylene glycol 35%

Electronic material

products

Asia, Europe, America,

China

Copper foil substrate 30%, epoxy

resin 63%, circuit board 44%

Polyester products Taiwan, China, Northeast

Asia, Europe, America

Polyester cotton 25%,

polyester yarn 24%,

polyester film 62%

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Items

Primary products Sales region Domestic market share

Mechanical and Electrical

Engineering

America, Southeast Asia,

Taiwan, China Switchboard 22.1%

5.2.1.2 Please see Chapter 1. Letter to the Shareholders for information about the

market's future supply and demand situation and growth, competitive niche and

development prospects, unfavorable factors and countermeasures:

A. Plastic products

① Market's future supply status and growth:

Affected by the China-US trade war, the US’s import cost from China

increase. The Company continues to strive for the orders transfer from

China competitors affected by the trade war and transfer to plants in US,

Taiwan and Vietnam for production. Besides, we continues to develop

various differentiated plastics products. On the other hand, to incentivize

distributors around the world to expand actively, achieve performance goal,

increase the market share and improve the performance growth, we will

review and revise the incentives every year.

In response to changes in market demand and competition for peer-to-peer

price cuts, we actively grasp changes in customer materials, adjust orders

for maneuvering to ensure orders, strengthen the promotion niche and

development of high-value products. In addition we review and improve

the sales portfolio to improve the market competitiveness and profitability.

Due to the increasing level of peers in the China, low-priced competition

and some operators set up processing machines to supply materials, the

market competition will be fiercer. Therefore, we actively develop

products with characteristics of high growth, conform to environmental

regulation, high value to establish the uniqueness of the products and

separate the market from general products, prevent the competitors can

from imitation and ensure the profitability of the Company.

② Competitive Niche:

The Company has a global layout advantage to produce products that

supply customers around the world within a short distance for Southeast

Asia, Northeast Asia, America, and Europe to achieve a global layout.

The main raw materials are supplied by the Formosa Plastics Corp. or the

Company, therefore the source and the quality of the material are stable.

With the advantages of equipment for process optimization, AI data

analysis, etc. and relevant technology, we can produce high value

products.

The Chinese subsidiaries also have a complete management system and

have obtained safety certification for the automotive industry. Their

production and development capabilities are synchronized with the parent

company in Taiwan and they can develop featured products that lead the

industry.

In addition, China’s regulations of cessation of production toward

high-polluted company has become stricter day by day. Aside from

increasing the investment of environmental protection equipment in

China’s subsidiaries, the Company actively invests high standard

143

environmental protection equipment giving us the competition advantage

of sustainable economic and environmental protection production.

③ Favorable factors affecting the Company's development prospects:

In response to the rapid global trend towards diversification and

large-scale customized manufacturing, the company actively promotes

process optimization, upgrades software and hardware, improves

production process, and finds out the optimal process parameters to

improve performance. In addition, the Company continues to introduce

automation, and computerization equipment, improve overall production

capacity, collect and analysis complete data, and optimize relevant

conditions of the production process to improve production efficiency and

reduce cost.

The company has a complete set of equipment, coupled with years of

experience and a strict quality management system. It can provide the

quality and service that meet the customer's satisfaction. The strong R&D

team can better meet the needs of customers by developing products with

special functionality and in accordance with various international

standards.

④ Unfavorable factors in the prospect of future development and

countermeasures:

The China-US trade war and the epidemic of COVID-19 continue to affect

the global economic growth, lower the consumption power and restructure

the supply chain, etc. The Company will closely gasp the dynamics of raw

material market and customers, use the internet marketing, integrate the

resources of domestic and overseas business offices to expand the market,

strive for orders and ensure business performances.

As the plastics industry is quite mature, the competitors imitate similar

products mutually. On the other hand, the environmental protection

regulations have become stricter in recent years, some products are

gradually replaced by non-PVC materials. Therefore, the Company keeps

optimizing the production process, improving product quality and

developing products made from environmental protection material to

reduce the cost and meet the quality standard. In addition, we promote

internet marketing, increase online visibility and enhance brand image to

strive for international customers’ orders.

Along with the economic development growth of China, the labor cost

continues to increase, causing the foreign companies to transfer the

investment to low-cost labor areas in Southeast Asia. In addition, the

Vietnam Plants will take the advantage of ASEAN and other duties

preferences, keeps developing new products to attract domestic and

overseas customers, expands Southeast Asia market and strive for

customers’ order.

B. Chemical products


As the polyester industry in China continues to expand this year, the

demand for ethylene glycol is still growing. The annual production

capacity of Bisphenol-A products from 2019 to 2022 in the world

increased by an average of 490,000 tons/year (an increase of 6.2%) and the

demand increased by 180,000 tons/year (an increase of 2.8%). The

increase in production capacity will be greater than the increase in demand

144

in the future and the market competition is expected to be fierce. On the

other hand, there will be no additional production capacity of plasticizer

after 2020, but the demand will increase along with the economic growth.

It is expected that the global demand will increase from 6.23 million

tons/year to 6.67 million tons/year from 2019 to 2022; the compound

growth rate is 2.3%.


Ethylene glycol products are stable in terms of raw material supply in the

enterprise. Production process and energy improvement continues to be

carried out so that lower production costs can be the competitive niche.

The raw materials of Bisphenol-A include phenol and acetone are

completely supplied by Formosa Plastics Corp., the quality is stable and

most of the finished products are also supplied to the PC plant or epoxy

resin plant in Formosa Plastics Corp., the products are vertically integrated

as a competitive niche. On the other hand, DEHP and DINP are gradually

replaced by environmental protection plasticizer such as DOTP and

hydrogenated plasticizer. Since the demand of environmental protection

plasticizer has grown significantly. It is estimated that after the expansion

of refining and chemical in China begins to put into production, the

production capacity of PTA, the material of DOTP, will increase

significantly, causing the price to bearish. Therefore, the operating status

of DOTP will become better and that is our competitive niche.


The quality of the products is affirmed by the customers and long-term

supply contracts are signed with the customers, thus the production and

sales are stable.


countermeasures:

Due to the ethylene glycol production volume of China will increase, the

market competition will be fiercer in the future. In addition, the BPA

producers of ASEAN countries such as Singapore and Thailand have the

edge of duty-free imports from China, therefore the Company needs to

maintain great quality and increase contract supply volume to improve the

market share and competitiveness.

C. Electronic materials products


In the future, market scale of artificial intelligence, high-efficiency

computing, 5G network communication and 5G smart phones will

continue to evolve, which is favorable to the demand of circuit board. On

the other hand, due to the insufficient consumption power, the sales of

automotive electronic has been weak since 2019 and the market variables

increase. However, in medium and long term, it is expected to growth

continuously. In addition, the trend of semiconductor consolidation remain

unchanged, and along with the expansion of its business scale, the

customers’ bargain power has become stronger which will increase the

cost pressure of circuit board manufactures. Therefore, aside from

developing high value products and expanding the production capacity of

high-end IC substrate to increase the profits and the market shares, the

Company continues to promote project such as employment, materials,

energy conservation, etc. to reduce production cost and improve the

145

business performance of the Company. The market of glass fiber yarn in

China is oversupplied, coupled with the effect of COVID-19 epidemic, the

demand is weakened.


The Company's cross-strait layout has been completed gradually, and the

upstream and downstream electronic materials have been vertically

integrated. Besides masters the upstream substrate industry of the circuit

board, the main raw materials of the circuit board, such as copper foil

substrate, fiberglass cloth, glass fiber, epoxy resin, and copper foil are

self-made to ensure a sufficient quantity and reliable quality. In addition,

the flexible adjustment of production capacity, the balanced development

of the products and other levels are improved significantly, therefore

providing customers comprehensive circuit boards product demand. With

quality rooted over years and technology abilities, the Company has the

advantages of price and technology which are the competitive niche of the

Company.


With automatic production equipment and a completely computerized

system, logistics and information flow are combined to provide rapid

production and delivery efficiency. Together with a strong R&D and

after-sales service promotion team and a complete product portfolio, the

needs of different customers can be met. A number of international

certifications for product safety and system management has also been

obtained. The Company is well-established on both sides of the strait, and

has won recognition from the world's leading manufacturers in terms of

quality, technology, and mass production capabilities. The Company is

currently one of the world's few leading suppliers of all kinds of electronic

materials. Furthermore, due to the Company cutting into the IC substrate

market in an earlier and keeping accumulating development experiences of

all kinds of products. With the excellent technology, quality, mass

production ability and solid customer foundation, our customers are all

world-renowned manufacturers and the products sells all over the world.

Since our quality is deeply trusted by the customers, the customer

relationship is good. Besides, we can meet the customers’ needs for

product reliability and production capacity, therefore customers are willing

to cooperate with the Company to develop new products which helps the

Company to seize the business opportunity.


countermeasures:

Electronic products continue to become lighter and smaller, and the

industry continues to expand. The market will become increasingly

competitive in the future. In addition, the environmental protection

regulations of China are becoming stricter day by day. However, the

Company can meet the environmental standards of China. Besides, the

Company has the advantages of vertically integration of the upstream and

downstream, excellent technology and quality. We keep cooperating with

customers to develop all kinds of high niche products such as

high-efficiency computing, network communication, new generation

system in package substrate and high level car boards to response the

growing demand driven by artificial intelligence, 5G communication, and

advanced driver assistance system. Furthermore, we improve product

146

portfolio, strengthen market segregation and expands markets in China,

Southeast Asia and Japan, to enlarge the market share and sales volume. In

response to the declining usage of IC substrates in mobile device, Nan Ya

PCB has closely collaborated with clients and will launch high-end IC

substrates for HPC, 5G telecom equipment, 7nm graphic chips, and new

generation system in package to lift the utilization rate and reach the goal

of 100% production and sales. In addition, we continue to reduce power

consumption and wastes, and procure recycling equipment to increase the

waste water recycling ratio and decrease the volume of bio sludge to fulfill

circular economy and corporate responsibilities.

D. Polyester products


The consumption of polyester products is growing by approximately 3.2%

yearly. With the world's population growth and the change of lifestyle,

polyester applications are becoming more widespread. The consumption

of various types of polyester products will continue to grow steadily and

the global polyester production capacity is estimated to reach 120.97

million tons in 2020. However, the increase in production capacity is

greater than the growth rate of demand. The market competition will

remain fierce. The new polyester capacity of China in 2020 is estimated to

increase by 5.2% compared with 2019. Domestic demand slowed down

and equipment utilization rate was only about 73%. In the future, the

market will still be in a state of unbalanced competition between supply

and demand. In the US market, there was no new capacity in 2019 and

2020. The overall equipment utilization rate remained above 80%.

The market of general package and industrial polyester film are still in the

situation of overcapacity. For high performance polyester products such as

optical, photoresist coating, polarizer and high gas barrier transparent

plating are controlled by manufactures with higher quality. The Company

needs to expand high performance polyester products to avoid the

dilemma of price cutting competition with China manufactures.


The Company has obtained stable raw material supply from the enterprise;

also, the technology is excellent, the equipment is automatic and the

quality control is rigorous. We are a highly vertically-integrated

manufacturer that develop differentiated products, adjust product structure

and enhance products competitiveness. In addition, we can cooperate with

the market and produce diversified, customized and functional products.

The completeness and quality of product portfolio are both better than

competitors. The quality of PET recycled products made by Kunshan Plant

in China is stable. We actively develop differentiated products, adjust

product structure, add the equipment of differentiated products to meet

customer needs, and improve product market competitiveness in order to

increase profits. The US Plant has diversified products with high quality,

fast delivery, and continuous development of new products. The

competitiveness in the US market is much higher than its peers.


Since the Company has been continuously optimizing process coupled

with self-sufficient raw materials, the production cost has been strictly

controlled and reduced. In the future, aside from continuing strengthen

management, the excellent R&D team will keep developing high value

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products with the two major axes of function and environmental protection

according to the characteristics such as small volume, large diversity and

short term delivery of the textile industry. Meanwhile, we will strive to

catch the business opportunities due to the China-US trade friction.

Kunshan plant in China masters the advantages of granular spinning and

cooperates with brand manufactures to develop PET recycled yarn,

continuously develops multi-functional products, enhances product

competitiveness and improves business performance. The US plant

benefits from the government's protection of US industry policies and

sanctions against unfair trade practices, the sales is smooth. Process

optimization and environmental product development will continue to be

carried out to increase profits.


countermeasures:

Major polyester chemical fiber plants accelerate their development toward

petrochemical refining industry. They master the upstream raw materials,

and integrates vertically coupled with large scale and low cost given them

a relatively competitive advantage. Taiwan's textile industry is

export-oriented and when facing the current rapid changes and

competition in global trade, aside from strengthening our ability of

technology development and producing high value production, we need to

respond quickly in accordance with changes in market demand and

improve product structure to maintain the overall competitiveness of the

industry. In addition to develop new products actively, the company can

also use the layout across China, US, Taiwan, and Vietnam to optimize the

distribution of resources according to market demand and maintain the

best competitiveness in a highly competitive global market. China industry

peers has begun to devote itself to the production and development of

recycled silk. Besides increasing production and reducing costs, Kunshan

Plant has actively expanded high-value products, segregated markets and

enhanced product competitiveness. With the abundant low-price imported

product, the PET chip of US plant will face a fierce competition in the

future. To improve production capacity and profit, we will keep

optimizing process and developing the bottle chips with 10%-25%

recycled material.

E. Mechanical and electrical engineering


Taiwan's parent company plans to strive for electrical distribution

equipment of wind power and with the quality advantage of cast resin

transformer to expand the market in Japan. The subsidiaries in China keep

support the expansion and construction in China and Vietnam of the

enterprise and strengthen the development of cooperation with

Chinese-funded turnkey engineering companies to expand orders for

Chinese customers.


Corporate brand is conducive to the willingness of international

manufacturers to cooperate with the Company and fight for the orders

together. Through large scale procurement reducing the material cost,

shorten the delivery time, make sure the product design and the quality of

production process, and integrate enterprise resources to develop

148

differentiated products which is conducive to the promotion of high end

projects.


Through technology cooperation with Fuji Electric Co., Ltd. to produce

vacuum contactor switches (VCS) improves product quality; cooperation

with Japan Takaoka to produce molded-type transformers enhancing

equipment self-made ability. On the other hand, the South Asia countries

such as Philippines are actively carry out basic electricity construction, the

electric equipment market is expected to grow. With the overseas

investment of the enterprise, it is beneficial to local Taiwanese business

market.


countermeasures:

To face the low investment willingness in Taiwan and low-price

competition in the industry, the Company accelerates research and

development of electricity monitoring new products and lower the

production costs to obtain low-cost but high-quality components and

semi-finished products. Due to the slowdown of the China economy, the

subsidiaries of China will not only enhance expansion the orders of the

expansion of Chinese-funded corporations but also develop the after-sales

service orders to maintain the grow of the revenue.

5.2.2 Important Applications and the Production Processes of the Major

Products

5.2.2.1 Major uses of the primary products

Product Name Important use

Flexible

PVC Film

Tape, floor tiles, wallpaper, labels, pools, transparent, raincoats,

insufflation, water beds, table mats, car, building materials etc.

PVC Leather Furniture, purses, clothing, footwear, raincoats, toys, vehicles,

gloves, boat products, etc.

Rigid PVC Film

Vacuum forming, food packaging, credit card, floor tile fitting, wood

veneering, printing, stationery, electroplating, photo album, fold

molding, water tower plate, medicine packaging

PP Synthetic

Paper

Stationery, labels, advertising tags, cards, solar back panels, TPU

liners

A-PET Film and

Sheet

Food packaging, printing, stationery, folding, high frequency heat

sealing

PU Synthetic

leather

Shoes, vehicle interiors, furniture, 3C product covers, sports

equipment, yoga mats, abrasives, fireproof material, heat insulation

paint, resin etc.

POM doors and

windows Energy-saving doors, windows and curtain wall for buildings

149


SMC fiberglass

door SMC room door, fire door, entrance door

PEPA Synthetic

Paper Advertisement printing, printing paper, label paper, stationery

Rigid PVC Pipe Engineering, water plant, electrical, drainage and general

construction pipes

Plastic pallet Automatic warehousing, cargo carrying, stacking machines, and

export shipments

BOPP Stretch

Film Tape, garment bags, food packaging, photo albums, etc.

UP Resin Crafts, transparent shower, artificial stone, shipbuilding, furniture,

and building materials, etc.

Engineering

plastic

Electronic and electrical parts, sports equipment, household

appliance, automotive materials, etc.

PVC Compound Extrusion, injection, blow molding, pipes, films, sheets, valve,

fitting, tool handles, shoes, containers of water or oil, etc.

BPA Epoxy resin, PC resin

Ethylene glycol Polyester fiber products, ester pellets for bottles, polyester film,

antifreeze

Copper Clad

Laminate Printed circuit boards (PCB)

Epoxy resin Electronic, civil, paint, composite materials

General circuit

board

Key component of various electronic devices which purpose is to

serve as a carrier for various electronic devices and as a medium for

interconnection between components. Application products include:

Notebook computers, workstations, servers, high-end memory

modules, game consoles, TV sets, cars, LED displays, mobile

phones, and wireless charging.

150


IC Substrate

Carrier applied to IC chip products so that the output / input signals

of the chip can communicate through inner/outer lead and system on

the substrate. In addition, it can help cooling the chips. The products

applied to various electronic products including optical sensor, cloud

server chips, AI chips for data centers, 8K TV chips, traffic

supervisory monitors, AI chips 5G wireless communication module

chip, RF module for mobile phone, network communication chip,

computer graphics IC substrate, APU IC substrate, wearable device,

digital TV and set-top box chipset, vehicle carrier board, car sensors,

smart speaker AP , AI identification systems, cryptocurrency(mining)

and high-performance computing wafer substrates

Electronic grade

glass fiber

Upstream raw materials of printed circuit boards, industrial

materials, building materials, etc.

Reinforced glass

fiber

Electrical and electronic parts, auto parts, sports equipment,

industrial materials, etc.

Polyester staple

fiber

Spinning woven fabrics are used in a variety of clothing, home

furnishings, or for non-woven fabrics and fillers

PET resin Made into a variety of bottles, yarn, cotton, film

Polyester yarn Made into yarn woven cloth or knitted cloth for various garments,

tire cords, canvas, water pipes, etc.

Polyester film Food packaging, bronzing transfer, LCD panel, 3C electronics

Release film Laminated ceramic capacitors coating, polarizing plate production

process examination, transparent optical coating

151

5.2.2.2 Production processes of major products

Flexible PVC film production flow chart

Ethylene glycol production flow chart

Air

Separation Plant

Oxygen

Ethylene

CO2 Removal

Unit Wastewater

Treating Unit

Product

Storage

EO

Reaction

and Scrubbing

Unit

EO

Stripping and

Reabsorption

Unit

EG

Reaction

and Evaporation

Unit

EG

Drying

and Purification

Unit

Ethylene Glycol

Mono Ethylene Glycol Di-Ethylene Glycol

Tri-Ethylene Glycol

Flexible

PVC film

Mixing

Embossing

Coiling

Inspect

Cooling

Calendering Discharg

e

Examine

混煉

Mixing

Plastic

powder

Plasticizer

Colorant

Additive

Stabilizer

152

Copper clad laminate production flow chart

General circuit board production flow chart

IC substrate production flow chart

Ingredients Impregnation Lamiante Combination

Solvent

Hardener

Accelerator

Epoxy resin

Glass fiber Glass fiber

Cloth Copper

Copper clad

laminate Timming Hot Press

Core preparation

PP lamination

Inner layer pattern formation

Through hole drilling

Laser via drilling

Desmear

Copper plating

Outer layer pattern formation

Solder resistance formation

Printing of Legend

Surface treatment

Router

Open/short test

FVI

Package

Surface treatment

Core preparation

Through hole drilling

Copper roughness

Inner layer pattern formation

ABF lamination

Laser via drilling

Outer layer pattern formation

Copper plating

Solder resistance formation

Solder printing

Dicing

Open/short test

FVI

Package

153

Polyester products production flow chart

5.2.3 Supply of Primary Raw Materials

The Company now conducts procurement operations through an internet electronic

platform to ensure the fairness and justice of the procurement process and prevent

procurement defects. The procurement cases are advertised on the Internet, and the

supplier submits quotes after confirming the identity with an electronic signature. This

ensures the safety and fairness of the overall operation and shortens the time of

procurement operations, as well as achieving a win-win situation between the

Company and its suppliers. At present, this electronic platform has more than 10,000

online quotation manufacturers. The Company's 2019 major raw materials usage

status and suppliers are as follows:

Material Type Unit Volume Major Supplier

Plastic Powder Ton 318,309 Formosa Plastics Corp.

Stabilizer Ton 9,767 Intra-company transfer

Plasticizer Ton 42,344 Intra-company transfer

Modifier Ton 25,248 Formosa Plastics Corp.

Epichlorohydrin Ton 175,220 Formosa Plastics Corp.

PET Film Biaxial

Stretching

Melt

Extruding

Polyester Chips

Spinning

Polyester Spin Drawn Yarn

Polyester POY

Polyester Staple Fiber

PTA

EG

Esterification

Reactor

Spinning

Polycondensation

Reactor

Polyester Textured Yarn

Polyester Fully Oriented Yarn

154

Material Type Unit Volume Major Supplier

Fiberglass Yarn Ton 111,869 Intra-company transfer

EG Ton 369,819 Intra-company transfer

PTA Ton 971,261

Formosa Chemical & Fibre Corp.,

Formosa Chemicals Industries

(Ningbo) Co., Ltd.

Ethylene Ton 1,207,983 Formosa Petrochemical Corp.,

Substrate Sheet 5,692,725 Intra-company transfer

OX Ton 155,420 Formosa Chemical & Fibre Corp.

Butadiene Ton 37,228 Formosa Petrochemical Corp.

Normal Butane Ton 51,205 Formosa Petrochemical Corp.

BPA Ton 220,427 Intra-company transfer

Acetone Ton 46,118



(Ningbo) Co., Ltd.

Propylene Ton 113,125 Formosa Petrochemical Corp.

Phenol Ton 464,663



(Ningbo) Co., Ltd.

Naphtha Ton 67,989 Formosa Petrochemical Corp.

Copper Wire Ton 86,999 Xiamen Songtai Industrial Co., Ltd

155

5.2.4 Suppliers/Customers Accounted for at Least 10% of Annual Procurement/Sales

5.2.4.1 Major Suppliers for the Last Two Years Unit: NT$ thousands

2019 2018 As of March 31st, 2020

Item Company Name Amount Percent

〔%〕 Relation to NPC Company Name Amount

Percent

〔%〕 Relation to NPC Company Name Amount

Percent

〔%〕 Relation to NPC

1 Formosa

Petrochemical Corp. 35,608,519 18.40

Investee under

equity method

Formosa


Investee under

equity method

Formosa


Investee under

equity method

2 Formosa Chemical &

Fibre Corp. 24,944,681 12.89

Juristic person

director of NPC

Formosa Chemical &

Fibre Corp. 36,196,315 15.48

Juristic person

director of NPC

Formosa Chemical &

Fibre Corp. 5,626,776 12.88

Juristic person

director of NPC

Others 132,982,666 68.71 Others 150,356,044 64.32 Others 29,668,702 67.94

Net Purchase 193,535,866 100.00 Net Purchase 233,769,375 100.00 Net Purchase 43,669,553 100.00

Note:

Compared with 2018, the amount of procurement from Formosa Petrochemical Corp. and Formosa Chemical & Fibre Corp. decreased in 2019. It is mainly because the procurement price of raw material such as ethylene

and PTA decreased.

5.2.4.2 Major Customers for the Last Two Years: None.

156

5.2.5 Production Volume for the Last Two Years

Production Value: NT$ thousands

Year

Production Volume & Value

Product Name

2019 2018

Production

Capacity

Production

Volume

Production

Value

Production

Capacity

Production

Volume

Production

Value

Flexible PVC Film Ton 255,600 107,736 7,112,195 255,600 116,692 7,621,063

PVC leather Thousand

Yard 54,000 21,897 2,673,468 54,000 24,687 3,105,972

Rigid PVC Film Ton 298,200 137,285 8,332,514 298,200 149,078 8,940,788

PU Synthetic Leather Thousand

Yard 32,880 13,788 2,021,766 32,400 14,964 2,271,579

Plastic Doors and Windows Ton 41,649 25,306 5,164,889 40,260 23,959 4,756,904

Rigid PVC Pipe Ton 239,000 123,608 5,581,008 239,000 125,276 5,678,733

Film Products Ton 124,400 64,463 4,750,166 121,300 68,400 5,021,802

Plasticizer and THPA Ton 602,000 340,150 12,035,901 602,000 388,717 14,727,840

PA Ton 228,000 174,609 4,957,254 228,000 192,458 6,217,191

BPA Ton 550,000 532,048 20,585,203 550,000 604,668 30,712,499

1,4BG Ton 120,000 48,408 2,412,534 120,000 84,072 4,562,677

EG Ton 1,980,000 2,119,557 36,960,128 1,980,000 2,087,845 55,034,017

157

Year

Production Volume & Value

Product Name

2019 2018

Production

Capacity

Production

Volume

Production

Value

Production

Capacity

Production

Volume

Production

Value

Copper Clad Laminate Thousand

Sheet 72,400 55,517 27,925,951 72,400 60,425 33,089,336

Epoxy Resin Ton 457,000 403,239 30,648,457 457,000 393,097 33,333,264

Glass Fabrics Thousand

Meter 618,000 538,003 13,291,566 672,000 608,274 15,873,928

Copper Foil Ton 88,800 82,006 25,106,875 96,000 88,293 29,830,951

Glass Yarn Ton 233,000 164,631 6,816,319 212,000 206,802 10,096,156

Printed Circuit Board Thousand

SFT 32,340 17,437 29,661,682 29,940 19,129 28,917,372

Polyester staple fiber, filament, fabric Ton 1,601,120 1,109,572 50,514,659 1,703,300 1,271,799 62,186,909

Polyester Film Ton 94,800 69,008 4,989,508 94,800 74,463 5,140,332

Note1: Production Capacity refers to the quantity that can be produced using existing production equipment and under normal operation after the company has measured the

necessary stoppages, holidays, etc.

Note2: If the production of each product is substitutable shall combine the calculated production capacity and note it.

Note3: The production capacity of EG only included mono-EG, excluded other by-products.

158

5.2.6 Sales Volume/Value of the Last Two Years

Sales Value: NT$ thousands

Year

Sales Volume & Value

Product Name

Unit

2019 2018

Domestic Export Domestic Export

Volume Value Volume Value Volume Value Volume Value

Flexible PVC Film Ton 31,592 2,549,770 72,938 4,350,781 36,152 2,782,529 78,880 4,730,121

PVC leather Thousand Yard 0 0 24,540 2,996,160 0 0 28,798 3,623,194

Rigid PVC Film Ton 25,103 1,511,298 109,507 6,659,113 27,671 1,666,988 117,669 7,049,618

PU Synthetic Leather Thousand Yard 1,433 224,199 11,646 1,693,605 2,229 387,649 11,286 1,663,968

Plastic Doors and Windows Ton 9,611 1,698,806 12,736 2,862,202 8,636 1,512,857 13,667 2,915,163

Rigid PVC Pipe Ton 89,298 4,323,834 34,743 1,276,724 90,076 4,365,293 34,796 1,295,127

Film Products Ton 25,232 1,754,787 5,472 507,737 29,060 2,047,914 3,064 310,571

Plasticizer and THPA Ton 44,230 1,777,748 278,768 9,651,245 49,412 2,003,542 286,846 10,736,714

PA Ton 24,535 809,315 85,768 2,322,253 27,775 975,081 86,734 2,724,034

BPA Ton 187,999 7,124,130 172,925 6,840,200 189,638 9,377,437 207,621 10,800,275

1,4BG Ton 27,838 1,209,821 15,189 934,537 41,903 2,033,510 34,814 2,130,003

EG Ton 416,663 7,405,312 1,343,868 23,294,240 359,728 8,809,245 1,267,161 34,074,320

Copper Clad Laminate Thousand Sheet 7,193 4,001,906 45,706 22,607,149 7,727 4,384,794 45,981 25,026,245

Epoxy Resin Ton 29,640 2,375,431 319,124 24,132,616 28,717 2,618,236 286,696 24,127,694

Glass Fabrics Thousand Meter 42,725 1,243,159 165,611 3,903,860 39,136 1,113,673 197,391 5,058,895

159

Year

Sales Volume & Value

Product Name

Unit

2019 2018

Domestic Export Domestic Export

Volume Value Volume Value Volume Value Volume Value

Copper Foil Ton 2,764 945,647 37,857 11,490,838 3,090 1,119,557 37,655 12,646,677

Glass Yarn Ton 7,260 271,721 33,281 1,406,823 7,984 453,348 57,673 2,752,053

Printed Circuit Board Thousand SFT 3,997 13,610,001 14,282 17,483,988 3,883 10,595,938 17,406 18,236,613

Polyester staple fiber, filament, fabric Ton 256,869 11,554,374 831,213 37,981,924 268,561 13,282,966 995,291 48,515,352

Polyester Film Ton 13,814 1,037,684 44,352 3,167,911 16,613 1,219,862 45,434 3,063,368

Others 16,902,178 18,408,032 20,765,771 20,065,365

Total 82,326,864 203,976,195 91,516,190 241,545,370

160

5.3 Employees

Employees are the most important asset of a company. Every company should strive

to ensure every employee can work safely and is willing to contribute his or her talent.

To recruit talented employees, the Company offers stable and competitive

compensation, comprehensive training, and promotion system to achieve the basic

policy of full utilization of human resources.

Note: The number of employees includes the consolidated financial reporting

company.

5.4 Environmental Expenditure Information

5.4.1 Total losses and penalties for environmental pollution

The Company was sanctioned by the Department of Environmental Protection

in a total of 3 cases, and the total sanction amount was NT$300,000 from 2019

up to March 31, 2020.

Disposition

Date

Item

2019.04.02 2019.05.22 2020.03.23

Compensation

object or

disposition unit

Environmental

Protection Bureau,

Chiayi County

Department of

Environmental

Protection, New Taipei

City Government

Environmental

Protection Bureau,

Yunlin County

Disposition No.

Fu Shou Huan

Kong Zih No.

1080045849

Huan Ji Zih

No. 1080909975

Fu Huan Kong 2

Zih No.

1090014921

Regulation

Violated

Paragraph 2,

Article 23 of Air

Pollution Control Act

Paragraph 2, Article 24

of Air Pollution Control

Act

Paragraph 1,

Article 31 of Air

Pollution Control Act

Violation

Examination of

Expansion site of

Hsinkang Plant

revealed the

following

deficiencies:

When examining the

production process of

PU leather in Shulin

Plant, the buck value of

washing tower was

30mmH2O which was

different from the

When examining

2EH Plant in

Mailiao, the test

value of one

equipment

component was

greater than

Year 2019 2018 As of 2020.03.31

Number of

Employees

Male 24,244 24,508 23,774

Female 8,027 8,254 7,835

Total 32,271 32,762 31,609

Average Age 39 39 40

Average Seniority (Year) 14 13 14

Educational

Background

Rate (%)

PhD 0.11 0.12 0.11

Master 2.61 2.32 2.73

Bachelor 9.37 9.16 9.53

High School 67.58 67.47 68.22

Under high school 20.32 20.93 19.41

161

Disposition

Date

Item

2019.04.02 2019.05.22 2020.03.23

1. The pavement

of vehicle route

was not cleaned.

2. The

implementation

of control

facilities on

exposed areas

within the

construction

site was less

than 80%.

3. The sludge on

the surface of

the vehicle

body and the

tire was not

effectively

cleaned when

the vehicle left

the construction

site.

permitted operation

range(100~300mmH2O).

Therefore, the operation

was recognized not in

accordance with the

approved content.

10,000ppm,

exceeded the

control standard.

Disposition

content (including

disposition

amount)

Administrative fine

of NT$100,000

Administrative fine of

NT$100,000

Administrative fine

of NT$100,000

5.4.2 The possible expenses that could be incurred and measures to be

taken currently and in the future

5.4.2.1 Improvement plans and measures to be taken currently and in the future

(a) Using the best available control technology in the new expansion production

process to reduce the impact on the environment.

(b) Continue to promote process optimization and combine Real-Time Production

Management system. Through early warning control of computer system, to

ensure the operation of various equipment can meet the approved content.

(c) Strengthen the operation management of prevention equipment and regular

maintenance, maintain the normal operation of the system, exert the best

handling efficiency and ensure the pollutant emissions comply with regulatory

requirements.

(d) Improve the operator's ability of system trouble shooting to complete the repair

in the shortest time and complete the relevant notification according to

regulations.

(e) In the spirit of inquiring into the root of the matter, the reason of error should be

reviewed and analyzed from the management, environmental and operational

aspects and recorded as case studies. The cases are created to enhance the

environmental awareness and the alertness of all employees through education

and training.

162

5.4.2.2 Expected environmental protection capital expenditures for next two years

Year

Items 2020 2021

Pollution control

equipment to be

purchased or

expenditure

Improve pollution source

equipment and switch to

low-pollution fuel

Adding waste gas prevention

equipment (improving

removal efficiency and

eliminating white

smoke-derived visual

pollution)

Testing fee, air pollution fees,

water pollution fees and other

fees

Inspection fees, air pollution

fees, water pollution fees, etc.

Reduce the consumption of

bituminous coal and replace

with natural gas in accordance

with the government to

improve air quality.

Registration fee of the

existing chemical substance

standard.

Expected

Improvements

Enhance the treatment

capacity of wastewater, waste

gas and waste in the plant.

Compliance with laws and

regulations, reducing

environmental impact, and

enhancing public perception.

Ensure the disposal ability of

waste water, exhaust gas and

wastes in the plant.

Compliance with government

regulations and fulfill

corporate social responsibility.

Amount NT$ 1,660,194 thousand NT$ 1,670,685 thousand

5.4.2.3 The impact on the Company's finance and operations to the implementation of

Restriction of Hazardous Substances Directive (RoHS) in the European Union:

In response to the EU RoHS Directive, the Company has already imposed strict

control according to the requirements of European customers, from the material

formulation and process specifications, to ensure the usage volume of restricted

heavy metals such as lead and cadmium is under the limitation. Therefore, the

Company has not experienced a significant impact on finances and operations.

5.4.2.4 Environmental protection policy

(a) Safety and Health Environmental Protection Policy

The Company's safety and health environmental protection policy is based

on the “Safety and Health Environmental Protection Policy” of Formosa Plastics

Group signed on February 1st, 2012. Besides pledging to protect the environment

and maintain community safety, all employees should enrich their profession; take

safety and environmental protection as the basic consideration of any decision.

Everyone should lead by example and regard safety, health, and environmental

protection as their responsibility.

We truly believe that the environment protection and industry development

are equally important. Ensuring the safety of the products, employee, contractor,

plant area and community is not only are corporation social responsibility but also

part of the competitiveness of the corporation.

We believe every disaster or accident can be prevented, no matter how big

or small it is. Through the values of the Company and the power of organization

163

and system, the working level of each plant can reach to and acceptable standards.

To achieve this goal, all the supervisors must have appropriate participation and

understanding of the system, provide adequate training and require thorough

implementation and continuous improvement to ensure the policy and the goal are

achieved.

All the employees should enrich their profession at any time, take safety and

environmental protection as the basic consideration of any decision, fully

understand the spirit of the system and thoroughly implement the execution of the

system, face the problem with the attitude of inquiring into the root of the matter

and keep improve and progress with the best operating mode of the industry.

Leading by example, starting from ourselves; maintaining the safety of

colleagues, neighbors, and self; maintaining the cleanliness of the natural

environment; maintaining the assets of the Company and aiming at perpetual

business operation development, these are the responsibilities of each of us.

(b) Improvement of greenhouse gas reduction

The reduction of greenhouse gases has always been a topic of concern for

the Company. In 2006, the Company set up the “Greenhouse Gas Inventory

Reduction Group” to comprehensively promote the reduction of greenhouse gas

inventory. Moreover, the “Energy Conservation, Carbon Reduction, and Pollution

Prevention Promotion Organization” was set up to coordinate water and energy

conservation as well as pollution prevention throughout the company. The

implementation of the "Greenhouse Gas Inventory Reduction Management

Method" and the completion of the "Greenhouse Gas Inventory and Reduction

Computer Operation" were carried out in the meantime.

Each unit of the company sets annual energy consumption and greenhouse

gas emission targets per unit of product. The reduction target of the whole

company for per unit of product is the reduction of water consumption by 2%,

energy consumption by 3%, waste reduction by 1% and according to the concept

of “circular economy", lower down the source wastewater emission by 5% year by

year. In 2019, the Company also invested NT$ 477,217 thousand to complete 540

water-saving and energy-saving improvement cases. Greenhouse gas CO2e

emission was reduced to 154,407 tons/year with 284 ongoing improvement

projects. It is expected to invest another NT$ 1,101,241 thousand, which will

further reduce greenhouse gas CO2e emissions by 170,621 tons per year.

For the annual greenhouse gas emissions, the Company entrusted a

third-party unit verified by the Bureau of Environmental Protection to verify the

annual greenhouse gas emissions. It has been verified that the greenhouse gas

inventory in 2016 the annual greenhouse gas emission was 6,075,317 tons of

CO2e, in 2017 the annual greenhouse gas emission was 6,361,965 tons of CO2e

and in 2018 the annual greenhouse gas emission was 6,210,275 tons of CO2e. The

inventory operation for 2019 is expected to be completed by August 2020.

(c) Air pollution prevention and control measures

The Company continues to promote improvement to reduce pollutants in

exhaust gas. Based on the principle of best feasible control technology, the

Company plans to set up various prevention equipment systems to treat pollutants

in exhaust gas, conduct regular inspection to ensure the discharge concentration of

various pollutants can meet the national standards.

The main control measures include: self-inspection, equipment component

inspection, perimeter air quality inspection, and joint odor inspection. For

large-scale emission sources, there are automatic monitoring facilities (CEMS)

164

and chimney surveillance video to perform 24-hour real-time monitoring. In the

case of abnormalities, alerts will be issued immediately to alert personnel to

improve processing.

Besides cooperate with the environmental impact assessment to implement

the control of permitted volume, the Sixth Naptha Cracker plant also established a

VOC gas fingerprint database to compare the sampling analysis results from

plants and large storage tanks and to master the source of odor and carry out

improvement. Moreover, the Fourier Transform Infrared Spectrometer (FTIR) is

equipped to form a plant air pollution safety net for continuous monitor.

Furthermore, it is available for mobile use with delivery vehicle.

(d) Water pollution prevention and management measures

In order to comply with the wastewater treatment and discharge

management operations, relevant management measures have been formulated in

accordance with government regulations, and wastewater reduction operations

have been actively promoted. The main measures are as follows:

(i) Implement the wastewater source management:

For the collection, transportation and pre-treatment facilities of household

sewage, process or construction wastewater, the Company established

regulations for the operation and monitoring of wastewater sources.

(ii) Establish relevant regulations for wastewater treatment processes:

Including planning processing facility, rainwater collection and discharge

management, emission permit application, operation and reporting record,

effluent inspection management and water volume (quality) automatic

continuous monitoring operation.

(iii) Each plant regularly reviews and reports waste water reduction or reuse:

Supervision and inspection operation such as periodical inspection of

treatment facilities, inspection of the effluent quality, etc. When an

abnormality is discovered, should filing immediately and control, track and

improve the abnormal.

(iv) Supervision and review operation includes periodic inspection, water quality

inspection, etc. If any abnormalities were found, the Company will

immediately put them on record for control and tracking improvement

(e) Waste management measures

In order to achieve resource sustainability and effectively manage waste

disposal, the Company starts from the waste reduction of source as a starting point

(including source reduction and production process reuse) and finally consider

outsourcing treatment. Besides, we take “recycling→incineration→burying” as

the order of adoption and formulate various management measures for wastes

classification, storage, clearance and disposal:

(i) Classification and storage after waste production:

Comply with Waste Disposal Act, the Company classifies the general

garbage and process waste first and then storing them in containers or

collection bins (bags). Storage areas are set up with waterproof (rainproof)

facilities, wastewater and odor collection facilities, and signs for

management. Storage containers must remain intact and free from rust and

leakage.

(ii) Waste clearance and disposal operations:

A waste management computer system has been set up, including the

supplier for cleaning up, cleaning project documentation, and online

reporting management to ensure that all business wastes are legally reused

165

or cleaned up.

(iii) Flow tracking operation:

Through regular follow-up and visits to the cleaning supplier, the Company

can control the waste flow, eliminate secondary pollution caused by illegal

disposal. Besides, the Company requires the contractor to cooperate

with the online declaration and other regulations by attaching relevant

statutory documents (such as proper handling certificate or legal clearing

list) to file for cleaning fees.

(f) Operational management measures for toxic chemical

Besides the compliance with government regulations, efforts are made to

strengthen the prevention and management of leakage of toxic chemical

substances. The main management measures include:

(i) Reduction Management:

Through process optimization, improve the operational conversion

efficiency to reduce operations or find substitutes to reduce usage and

in-plant storage.

(ii) The operation or storage process is enclosed, which effectively reduces the

possibility of leakage and reduces the risk of the contact and explosion of

personnel.

(iii) Regular implementation of hazard prevention and response drills:

Strengthening disaster response capabilities to reduce disaster risks.

(g) Energy saving and carbon reduction measures and the acquisition of carbon right

is included in the Company’s carbon reduction strategies

The Company actively promotes improvement of energy saving and carbon

reduction and each plant improves process energy consumption reduction, energy

reuse, waste heat reuse, equipment efficiency improvement, energy management

measures, etc. Subsequently through inventory and continues review to promote

and strengthen the cross-plant and cross company resource integration and achieve

the purpose of waste heat fully recycle and reuse and carbon reduction.

Cooperates with the project and result of greenhouse gases voluntary emission

reduction implemented by Green Productivity Foundation, hosted by Industrial

Development Bureau, Ministry of Economic Affairs every year, the Company is

intended to use it as an offset for allocated emission allowance in the future.

5.5 Labor Relations

5.5.1 The Company continues to promote many employee caring

programs in order to motivate employees, enhance employee

benefits, and driven the employee to have a balance development

in aspect such as work, health, life, etc.

5.5.1.1 Employee care and employee welfare measures

(a) Multiple employee benefits:

Besides the items required by law, the Company provides medical fee discounts of

Chang Gung Memorial Hospital for employees and their family members,

scholarships for employees’ children, encouragement bonus for stock purchasing,

birthday coupons, wedding and funeral subsidies, holiday gifts and coupons, and

comprehensive living facilities in the plant, sick leave pay better than the law

166

required, death compensation, etc. The Company also organizes various leisure

activities such as sports day, domestic travel, and a variety of club activities.

(b) Remuneration:

According to the labor market, a reasonable and competitive salary remuneration

is set, a stable salary adjustment policy is provided, and holiday bonuses for

occasions such as the Dragon Boat Festival, Moon Festival, and Year-End are

issued according to the operation status.

(c) Communication structure:

The Company holds supervisor communication meetings at all levels periodically

and issue bimonthly enterprise magazines. Employee can also express opinions

through employee suggestion boxes or dedicated phone lines.

(d) Innovative incentives:

The Company sets up IE proposal bonuses to encourage employee to discover the

abnormalities in work and design a well improvement plan. The Company will

award bonuses based on the improvement effectiveness and period, after adopting

the plan. Moreover, innovation platform website was set for employees to discuss

professional issues and appropriate reward will be given to those who provide

excellent innovative idea.

5.5.1.2 Professional Development and Training:

Employees are the company's most important asset and the foundation for perpetual

business operation. Apart from providing proper welfare and care, we also hope

through a good training environment, we can cultivate outstanding talents with

optimism, enthusiasm, professionalism and innovation.

The Company already developed a completed personnel training system, including

new recruits orientation, basic job training, professional job position training,

management trainee training, expatriate training, e-learning and knowledge

management system, and other courses (e.g. life and health lectures). Through

e-training management system, the employees can complete the training of each

stage step by step. The training courses and completion deadlines that each

employee required to take are also included in the computer control and will notify

each department to conduct the training within the time limit by computer. We

expect all the employees to become excellent talents with enthusiasm, innovative

ideas and professional and management practices.

5.5.1.3 Retirement system

(a) Retirement Application

Employee may apply for retirement under any of the following conditions:

① Where the employee attains the age of 55 and has worked for 15 years.

② Where the employee has worked for more than 25 years.

③ Where the employee attains the age of 60 and has worked for 10 years.

(b) Retirement Order

Employee are ordered to retire under any of the following situations has occurred:

① Where the employee attains the age of 65; however, executives or above are

allowed to extend until the age of 70; senior executive president is allow to

extend until the age of 75.

② Where the employee is unable to perform his/ her duties due to disability.

(c) Option of pension payment system:

① Employee on board before June 30th, 2005 who chooses the pension system of

the "Labor Standards Law" or temporarily choose not should be conducted

167

according to the "Labor Standards Law". But before June 30th, 2010, employee

can still chooses the pension system of the “Labor Pension Act” and the service

period started from the adopting date should be conducted accordingly; the

service period before should be conducted according to the "Labor Standards

Law". After adopting the “Labor Pension Act”, employee cannot choose to

adopt the "Labor Standards Law".

② Employee on board after July 1st, 2005 should adopt the pension payment

system of the “Labor Pension Act”.

(d) Calculation criteria for pension:

① The base of service period before July 31th, 1984 should be accounted

according to the “Regulations Governing the Retirement of the Factory Workers

of Taiwan Province” and calculated by the three months’ average wage before

retirement. The base of service period before August 1st, 1984 should be

accounted according to Article 55 of the "Labor Standards Law" and calculated

by the six months’ average wage before retirement. But the total number of

bases of the two shall be no more than 45.

② Employee forced to retire due to the disability incurred from the execution of

their duties his or her retirement pension calculation should add 20% based on

the preceding subparagraph.

③ Employee who adapts the pension payment system of the “Labor Pension Act”,

his or her reserved period in the Company before adapting the “Labor Pension

Act” be calculated according to the average wage at the time of retirement and

based on the preceding subparagraph and be paid at the time of retirement. The

service period after adapting the “Labor Pension Act” should be claimed from

the Bureau of Labor Insurance at the age of 60 in accordance with the Article 24

of the “Labor Pension Act”.

5.5.1.4 Employee Code of Conduct or Ethics

(a) In order to clearly define the rights and obligations of employers and employees,

and to maintain order in the workplace, the Company has established “Working

Rules” in accordance with the law and publicly disclosed at the approval of the

competent authority as the base for employee management. The “Working Rules”

clearly defined items such as the appointment, promotion, working hours, wages,

conduct that should be complied, award, punishment, dismissal, retirement,

training, assessment, occupational injury and disease benefit, pension and welfare

of the employee.

(b) In order to strengthen the behavior and ethical norms of the employees, employees

are required to sign the “Nan Ya Plastics Corp. Employees' Commitment to

Observe the Operational Policy Statement," which is summarized as follows:

① Prohibition of Unfair Competition (Antitrust) Policy:

Employees must fully comply with the Fair Trade Act. The Company

encourages employees to gain profit by legal means, any action shall comply

with relevant regulations.

② Conflict of interest prevention policy:

When employees are required to engage in business related to the Company,

they shall not damage the company's rights and interests. Employees shall not

directly or indirectly accept gifts, entertainment or other benefits from any

procurement (sales) customer or competitor.

③ Internal Data Policy:

Employees may not disclose any confidential company information or other

unpublished information without the written permission of the company and nor

168

can employees use the information mentioned above for personal interests or

other business unrelated to the Company. All technical information in personal

custody should be returned when resign.

④ Political Activity Policy:

Employees shall not directly or indirectly donate money, services or other

valuable items of the Company to any candidate or political party, or engage in

acts prohibited by relevant laws and regulations, nor can the employees affect

the job duties of legislator, political and government official by improper

interests.

5.5.1.5 Workplace and employee safety:

(a) In order to ensure the safety, health and environmental management of each

department to prevent accidents and achieve the management objectives of “zero

disasters”, ensure the safety and health of employees and neighborhood residents,

maintain the integrity of the company's equipment and property, ensure all

operations can continue with no issue, and improve the overall business

performance, the industrial safety health management rules and related

management measures are formulated in accordance with the government safety

and health and environmental protection laws and regulations.

(b) The scope of application includes the occupational safety and health management

system and the job duties of various departments, the establishment of various

safety and health protection facilities, the establishment of safety operation

standards for various operations, the periodic automatic inspection and assessment

of safety and health, personnel safety and health, fire education and training,

safety and health performance assessment, emergency response planning, disaster

simulation exercises, and accident handling.

(c) There are 12 plants area in the Company and among them 51 plants have passed

the ISO 14001 environmental management system, and 50 plants have passed the

OHSAS 18001 Occupational Safety and Health Management System and the

Taiwan Occupational Safety and Health Management System (TOSHMS).

(d) To strengthen the management of workplace safety and reduce the risk of harm,

the Company actively promotes the “Process Safety Management (PSM)” and sets

up PSM personnel at all levels to fully promote and control the PSM management

operations of various departments to ensure the quality of PSM operations. The

details of the management operations are as follows:

① 14 PSM management items such as “process hazard analysis” and “modification

management” are audited one by one at each process plant monthly to ensure

that each plant can implement various tasks in accordance with the standard

procedures.

② The results of safety management KPIs are reported monthly by each plants to

effectively control process safety management risks.

③ “PSM operation communication and PSM personnel Symposium” is hosted

every half year to implement the communication of PSM operation and improve

the PSM operation quality of each department.

④ The process risk management wrap-up presentation activity was held every year,

to improve the level of the whole process risk management analysis and

assessment through the wrap-up presentation and observation and learning

activities.

(e) The company regularly or irregularly holds safety and health education training

and propaganda meeting. Periodic training such as semi-annual training of stacker

and crane operator, etc.; propaganda meeting such as SWAT symposium, recent

169

external major accidents discussion, etc. to ensure all the employees have the

appropriate and necessary training. In 2019, 171 classes of safety and health

education training were conducted by the President's office. The number of

participants was 7,085, and the total training hours was 49,395 hours.

(f) In order to control the working environment of employees and assess the exposure

status of hazardous factors, besides setting up detection and alarm equipment at

proper location, periodic workplace environmental assessment and process hazard

assessment is also carried out to as the basis for improving the workplace

environment. Each department should decorate the Safety, health and environment

policy and certified site at the obvious access.

(g) The Company provides health and education information to the employees

periodically. In order to enhance the employees' safety and health awareness, the

Company distributes "work hazard reminder cards" and "safety and health

manuals" and reminds the employees of operation safety through education,

training, and safety observation.

(h) Conduct annual employee health checkups, including general health checkups,

special health checks, health checkups for foreign employees, health checkups for

food handlers, etc. and the establishment management of medical health unit such

as deployment of medical health unit, management of medical appliance,

deployment of first-aid personnel, deployment of medicine etc.

5.5.1.6 Implementation of Employee Welfare and Retirement System: Sound.

5.5.1.7 Implementation of Employee Advanced Study and Training:

In 2019, except the various training courses conducted by each department based

on practical needs, the President's office also coordinated common professional

training, such as AI preparatory school training, artificial intelligence introduction,

pattern recognition, data preprocessing, R (programming language) instruction,

basic and advanced statistics and quality management training, quality control

junior engineer (administrator) training, work safety (re)training, and assistant

supervisor and supervisor training. A total of 234 classes were conducted with

9,051 participants. The total number of training hours was 100,764 hours, and the

total cost of education and training was NT$ 21,419 thousand.

5.5.1.8 Labor and Management Negotiation:

(a) Participate in the trade union congress, the Board of Supervisors, and hold regular

labor-management meetings to establish a labor-management consultation

mechanism.

(b) Establish an employee complaints system to improve labor relations.

(c) Formulate working rules and personnel management rules, and clearly define the

rights and obligations of labor and management and management matters so that

employees can fully understand and protect their rights and interests.

(d) In accordance with the provisions of the Labor Safety and Health Act, employee

health checkups are regularly conducted. Labor safety and health personnel are

appointed to formulate various labor safety and health management rules to avoid

accidents and maintain employee safety.

5.5.1.9 Implementation of Measures to Protect Employee Rights: Sound.

The company has always attached great importance to employee rights and

provided reasonable treatment. In the past five years, the voluntary quitting rate

has remained below 0.08%, which fully demonstrates that the company is

committed to employee care and workplace safety.

170

5.5.2 Losses arising as a result of labor disputes in the most recent year

up to the date of publishing of this annual report, and disclosure of

potential losses in the current and future terms and

countermeasures: None.

171

5.6 Important Contracts

Nature of

Contract Party

Contract start/end

date Main Content Restrictive Clauses

Distributor

Contract

Taiwan Power

Company

Since December

1992

Selling excessive power of Chiayi

plant to Taiwan Power Company If no objections, effective every year.

Taiwan Power

Company Since March 1995

Selling excessive power of Shulin

plant to Taiwan Power Company If no objections, effective every year.

Taiwan Power

Company

Since August 30th,

1997

Selling excessive power of

Jinxing plant to Taiwan Power

Company

If no objections, effective every year.

Technology

Cooperation

Contract

Eastman Chemical

Company 2004.02~2024.06

Co-polyester PETG resin,

development of non-PVC

semi-rigid film

Limited for PVC film machine

Sharp Corporation

of Japan 2019.12~2020.12

Optical film technology

cooperation for high-end displays

When the contract expires, the validity

period can be automatically extended

for one year.

Armstrong

Flooring

Corporation

Since July 1983

Non-asbestos floor tile

manufacturing equipment and

technology transfer

Export must be handled by technicians

and the contract is valid

Davy Process

Technology Ltd.

Dow Global

Technology Inc.

2008.10~2033.10

Selector30 production technology

and basic engineering design for

shifting the Oxo reaction of

2-Ethylhexanol plant.

Technology transfer is not allowed

Idemitsu Kosan

Co., Ltd. 2004.07~2019.07

BPA production technology

transfer. (Second Set) Technology transfer is not allowed

Idemitsu Kosan

Co., Ltd. 2019.08~2034.08

BPA technology licensing contract

(Ningbo BPA Phase 2 Expansion) Technology transfer is not allowed

Mitsui Kinzoku 2013.05~2022.04 Ultra-thin copper foil downstream

processing patent authorization

1. Technology transfer is not allowed

2. Product sales are limited to outside

of Japan

Fuji Electric Co.,

Ltd. Since March 2011

Vacuum contactor (VCS)

manufacturing technology

transfer

Sales are limited to Taiwanese

companies and related overseas

companies. Other regions need to be

negotiated on a case-by-case basis.

Akaoka Chemical

Co., Ltd. 2010.09~2020.09

Molded Transformer (MTR)

technology transfer Only for sales outside Japan

PPG Industries

Industrial

Company

Since September

2016

Glass fiber exclusive

authorization contract (PFC Fiber

Glass and PFC Kunshan)

If no objections, effective every year.

NGK Spark Plug

Co., Ltd. 2020.01~2028.12

Flip chip package carrier product

technical cooperation -

172

Nature of

Contract Party

Contract start/end

date Main Content Restrictive Clauses

IBM (International

Business

Machines

Corporation)

2016.11~2020.05

Joint development of advanced

technology of flip chip package

carrier products

-

Long-term

Loan

contracts

Bank of

Ta0069wan 2013.11~2021.04

Improve financial structure and

enrich working capital.

In the credit duration, the

debt-guarantor’s year-end debt asset

ratio shall not exceed 150% and the

working capital ratio shall not be less

than 100%.

This shall be subject to the annual

CPA certification.

MUFG Bank 2017.03~2019.03 Improve financial structure and

enrich working capital.

Bank of Taiwan 2018.07~2021.07 Improve financial structure and

enrich working capital. -

KGI Bank 2019.04~2022.04 Improve financial structure and


CTBC Bank

(Note 1) 2017.09~2020.02

Improve financial structure and


Mizuho Bank, Ltd. 2018.07~2020.07 Improve financial structure and


CHB

(Note 2) 2017.08~2020.07

Nan Ya Printed Circuit Board

Corp. (Kunshan) applied for

long-term loans.

-

Hua Nan Bank

(Note 2) 2017.08~2020.07



long-term loans.

-

Bank of China

(Note 3) 2017.07~2020.07



long-term loans.

-

Note 1: This long-term loan has paid off the remaining principle in advance in June 2019.

Note 2: This long-term loan has paid off the remaining principle in advance in October 2019. Note 3: This long-term loan has paid off the remaining principle in advance in July 2019.

173

VI. Financial Information6.1 Five-Year Financial Summary

1. Condensed Statements of Financial Position and Comprehensive Income– by IFRSs

(1) Condensed Statements of Financial Position – Consolidated by IFRSs

Unit: NT$ thousands

Year

Item

Five-Year Financial Summary（Note1） Financial

Information

ending March

31, 2020

(Note 3) 2019 2018 2017 2016 2015

Current assets 187,476,346 210,274,541 212,066,791 217,478,209 199,737,404 181,106,832

Property, plant and equipment

(Note 2) 156,095,364 140,907,261 132,901,898 139,724,458 137,066,328 159,999,014

Intangible assets 2,323,852 2,524,125 2,737,790 2,958,086 112,325 2,274,387

Other assets (Note 2) 208,783,117 216,543,417 196,364,910 177,024,051 176,809,919 197,456,397

Total assets 554,678,679 570,249,344 544,071,389 537,184,804 513,725,976 540,836,630

Current liabilities Before Dist. 83,516,150 81,791,547 79,681,194 84,918,274 66,602,248 84,712,244

After Dist. 100,963,957 121,445,655 120,128,384 120,606,971 92,773,959 -

Non-current liabilities 115,591,829 101,552,805 97,170,436 101,233,064 109,172,502 119,457,784

Total liabilities Before Dist. 199,107,979 183,344,352 176,851,630 186,151,338 175,774,750 204,170,028

After Dist. 216,555,786 222,998,460 217,298,820 221,840,035 201,946,461 -

Equity attributable to owners of

the parent 344,571,884 375,672,197 355,619,860 338,453,114 324,283,742 325,534,933

Common stock 79,308,216 79,308,216 79,308,216 79,308,216 79,308,216 79,308,216

Capital surplus 26,617,834 26,672,119 26,158,472 23,155,633 23,642,467 26,622,115

Retained earnings Before Dist. 204,105,146 220,788,020 208,480,444 191,296,477 169,705,210 205,110,660

After Dist. 186,657,339 181,133,912 168,033,254 155,607,780 143,533,499 -

Other equity 34,540,688 48,903,842 41,672,728 44,692,788 51,627,849 14,493,942

Treasury stock - - - - - -

Non-controlling interest 10,998,816 11,232,795 11,599,899 12,580,352 13,667,484 11,131,669

Total equity Before Dist. 355,570,700 386,904,992 367,219,759 351,033,466 337,951,226 336,666,602

After Dist. 338,122,893 347,250,884 326,772,569 315,344,769 311,779,515 -

Note1：Financial Statements from 2015 to 2019 have been audited by KPMG.

Note2：Where asset revaluation took place in a specific fiscal year, the revaluation date and revaluation surplus shall be

reported in a footnote.

Note3：During the current fiscal year up to the date of publication of the annual report, a company that is listed on

an exchange or has its shares traded on an OTC market shall disclose the most recent financial information

audited or reviewed by CPA, if any.

Note4：Earnings distributions for 2019 has not yet been approved by the shareholders’ meeting.

Note5：Financial information as of March 31st, 2020 has been reviewed by CPA.

174

(2) Condensed Statements of Financial Position – Stand-alone by IFRSs

Unit: NT$ thousands

Year

Item


Information

ending March

31, 2020 2019 2018 2017 2016 2015

Current assets 96,587,652 116,585,515 110,598,910 119,292,304 99,573,162

We did not

prepare

stand-alone

financial

statements for

the first quarter

of 2020.

Property, plant and equipment

(Note 2) 62,826,030 59,292,743 54,710,944 57,198,803 57,055,752

Intangible assets 30,257 34,972 53,054 77,818 102,583

Other assets (Note 2) 358,721,827 362,594,363 333,343,155 307,706,918 300,309,340

Total assets 518,165,766 538,507,593 498,706,063 484,275,843 457,040,837

Current liabilities Before Dist. 72,889,520 67,022,935 51,537,875 62,586,548 43,986,723

After Dist. 90,337,327 106,677,043 91,985,065 98,275,245 70,158,434

Non-current liabilities 100,704,362 95,812,461 91,548,328 83,236,181 88,770,372

Total liabilities Before Dist. 173,593,882 162,835,396 143,086,203 145,822,729 132,757,095

After Dist. 191,041,689 202,489,504 183,533,393 181,511,426 158,928,806

Equity attributable to owners of

the parent 344,571,884 375,672,197 355,619,860 338,453,114 324,283,742

Common stock 79,308,216 79,308,216 79,308,216 79,308,216 79,308,216

Capital surplus 26,617,834 26,672,119 26,158,472 23,155,633 23,642,467

Retained earnings Before Dist. 204,105,146 220,788,020 208,480,444 191,296,477 169,705,210

After Dist. 186,657,339 181,133,912 168,033,254 155,607,780 143,533,499

Other equity 34,540,688 48,903,842 41,672,728 44,692,788 51,627,849

Treasury stock - - - - -

Non-controlling interest - - - - -

Total equity Before Dist. 344,571,884 375,672,197 355,619,860 338,453,114 324,283,742

After Dist. 327,124,077 336,018,089 315,172,670 302,764,417 298,112,031


Note2：Where asset revaluation took place in a specific fiscal year, the revaluation date and revaluation surplus

shall be reported in a footnote.

Note3：During the current fiscal year up to the date of publication of the annual report, a company that is listed on an

exchange or has its shares traded on an OTC market shall disclose the most recent financial information audited

or reviewed by CPA, if any.

Note4：Earnings distributions for 2019 has not yet been approved by the shareholders’ meeting.

175

(3) Condensed Statements of Comprehensive Income – Consolidated by IFRSs Unit: NT$ thousands

Year

Item


Information

ending March

31, 2020

(Note 2) 2019 2018 2017 2016 2015

Operating revenue 286,303,059 333,061,560 306,139,952 275,294,431 299,781,414 65,557,509

Gross profit 28,137,227 49,063,585 49,967,131 31,399,041 36,355,804 7,520,661

Operating income 9,885,385 29,420,773 29,849,625 13,282,862 18,596,532 2,853,831

Non-operating income and expenses 16,803,645 32,104,413 32,926,549 40,564,129 25,048,005 -794,231

Income before income tax 26,689,030 61,525,186 62,776,174 53,846,991 43,644,537 2,059,600

Profit from Continuing Operation 23,209,523 52,658,851 53,974,776 48,713,023 36,081,704 1,177,528

Income (Loss) from Discontinued

Operation - - - - - -

Net income(Loss) 23,209,523 52,658,851 53,974,776 48,713,023 36,081,704 1,177,528

Other comprehensive income

(net after tax) -14,584,450 -6,855,471 -4,711,464 -8,673,869 -12,905,297 -20,084,001

Total comprehensive income 8,625,073 45,803,380 49,263,312 40,039,154 23,176,407 -18,906,473

Net Income attributable to owners

of the parent 23,076,123 52,746,021 54,521,016 48,840,267 35,721,346 1,005,514

Net income attributable to

non-controlling interests 133,400 -87,170 -546,240 -127,244 360,358 172,014

Total comprehensive income

attributable to owners of the parent 8,608,080 45,930,928 49,852,604 40,827,917 23,428,479 -19,041,232


attributable to non-controlling interests 16,993 -127,548 -589,292 -788,763 -252,072 134,759

Earnings per share (NT$) 2.91 6.65 6.87 6.16 4.50 0.13



exchange or has its shares traded on an OTC market shall disclose the most recent financial information

audited or reviewed by CPA, if any.

Note3：Loss of discontinued operations shall be reported as the after-tax amount.

Note4：Where the financial information is notified by Regulator that shall be corrected or restated, it shall be reported

with the corrected or restated figures as well as indicating the circumstances and reasons.

Note5：Financial information as of March 31st, 2020 has been reviewed by CPA.

176

(4) Condensed Statements of Comprehensive Income– Stand-alone by IFRSsUnit: NT$ thousands

Year

Item


Information

ending March

31, 2020

(Note 2) 2019 2018 2017 2016 2015

Operating revenue 154,799,788 188,909,965 173,402,399 154,864,376 179,864,666

We did not

prepare

stand-alone

financial

statements for

the first quarter

of 2020.

Gross profit 13,933,923 27,744,060 28,511,689 19,470,915 22,845,716

Operating income 2,882,092 15,451,551 15,433,981 7,855,101 11,587,069

Non-operating income and expenses 21,681,365 42,369,141 43,415,501 43,660,130 28,668,935

Income before income tax 24,563,457 57,820,692 58,849,482 51,515,231 40,256,004

Profit from Continuing Operation 23,076,123 52,746,021 54,521,016 48,840,267 35,721,346

Income (Loss) from Discontinued

Operation - - - - -

Net income(Loss) 23,076,123 52,746,021 54,521,016 48,840,267 35,721,346

Other comprehensive income

(net after tax) -14,468,043 -6,815,093 -4,668,412 -8,012,350 -12,292,867

Total comprehensive income 8,608,080 45,930,928 49,852,604 40,827,917 23,428,479

Net Income attributable to owners

of the parent 23,076,123 52,746,021 54,521,016 48,840,267 35,721,346

Net income attributable to

non-controlling interests - - - - -


attributable to owners of the parent 8,608,080 45,930,928 49,852,604 40,827,917 23,428,479


attributable to non-controlling interests - - - - -

Earnings per share (NT$) 2.91 6.65 6.87 6.16 4.50



exchange or has its shares traded on an OTC market shall disclose the most recent financial information audited

or reviewed by CPA, if any.

Note3：Loss of discontinued operations shall be reported as the after-tax amount.

Note4：Where the financial information is notified by Regulator that shall be corrected or restated, it shall be reported

with the corrected or restated figures as well as indicating the circumstances and reasons.

177

2. Matters of material significance which affected the comparability of the above-mentioned condensed

financial statements: None.

If any untrue statement is found in the condensed financial statements, the issuer and the CPA shall be

held liable in accordance with laws.

3. Names of CPA and audit opinions

(1) Names of CPA and audit opinions for the recent 5 years

Year CPA Firm CPA's Name Auditing Opinion

2015 KPMG Taiwan Kuo, Hsin-Yi, CPA

Peggy Chen, CPA

Modified unqualified

opinion


Yu, Chi-Lung, CPA Unmodified opinion







(2) To meet the internal adjustment of KPMG, we replaced Wu Chiu-Wua and Peggy Chen with Kuo,

Hsin-Yi and Peggy Chen as our CPA since the first quarter of 2015.

(3) To meet the internal adjustment of KPMG, we replaced Kuo, Hsin-Yi and Peggy Chen with Kuo,

Hsin-Yi and Yu, Chi-Lung as our CPA since the first quarter of 2016.

178

6.2 Five-Year Financial Analysis

1. Financial Analysis – Consolidated by IFRSs

Note1：The Financial Statements from 2015 to 2019 have been audited by KPMG.

Note2：Financial information as of March 31, 2020 has been reviewed by CPA.

Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%)

1. Due to the decrease of net income before tax in 2019 compared with 2018, the times interest earned decreased.

2. Due to the decrease of net sales in 2019 compared with 2018, the property, plant and equipment turnover decreased.

3. Due to the decrease of net income after tax in 2019 compared with 2018, the return on total assets decreased.

4. Due to the decrease of net income after tax in 2019 compared with 2018, the return on total equity decreased.

5. Due to the decrease of net income before tax in 2019 compared with 2018, the pre-tax income to paid-in capital ratio

decreased.

6. Due to the decrease of net income after tax in 2019 compared with 2018, the net margin decreased.

7. Due to the decrease of net income after tax in 2019 compared with 2018, the earnings per share decreased.

8. Due to the decrease of operating income in 2019 compared with 2018, the operating leverage increased.

Year（Note1）

Item

Five-Year Financial Summary Information

ending

March 31,

2020

(Note 2) 2019 2018 2017 2016 2015

Capital

structure

Debt ratio (%) 35.90 32.15 32.51 34.65 34.22 37.75

Long-term fund to property, plant and

equipment ratio (%) 301.84 346.65 349.42 314.68 316.24 285.08

Liquidity

Current ratio (%) 224.48 257.09 266.14 256.10 299.90 213.79

Quick ratio (%) 169.93 192.60 208.60 210.45 237.23 158.34

Times interest earned (times) 14.74 35.39 37.60 32.59 23.50 5.36

Operating

performance

Accounts receivable turnover (times) 5.72 5.93 5.84 5.87 5.96 6.07

Days sales outstanding 63.81 61.55 62.50 62.18 61.24 60.14

Inventory turnover (times) 5.70 6.33 6.73 6.58 6.12 5.51

Accounts payable turnover (times) 15.05 14.87 12.79 13.02 15.42 15.03

Inventory turnover days 64.04 57.66 54.23 55.47 59.64 66.21

Property, plant and equipment turnover

(times) 1.93 2.43 2.25 1.99 2.13 1.66

Total assets turnover (times) 0.51 0.60 0.57 0.52 0.57 0.48

Profitability

Return on total assets (%) 4.36 9.71 10.37 9.54 7.34 0.26

Return on total equity (%) 6.25 13.97 15.03 14.70 11.23 0.34

Pre-tax income to paid-in capital ratio (%) 33.65 77.58 79.15 67.90 55.03 2.60

Net margin (%) 8.11 15.81 17.63 17.69 12.04 1.80

Earnings per share(NT$) 2.91 6.65 6.87 6.16 4.50 0.13

Cash flow

Cash flow ratio (%) 62.62 66.71 51.63 54.63 94.91 5.93

Cash flow adequacy ratio (%) 101.66 108.20 129.28 142.98 128.75 85.67

Cash flow reinvestment ratio (%) 1.60 1.76 0.71 2.83 6.37 0.64

Leverage Operating leverage 4.29 1.73 3.12 3.53 2.35 3.17

Financial leverage 1.20 1.06 1.06 1.13 1.11 1.14

179

2. Financial Analysis – Stand-alone by IFRSs

Year(Note 1)

Item

Five-Year Financial Summary Information

ending

March 31,

2020

(Note 2) 2019 2018 2017 2016 2015

Capital

structure

Debt ratio (%) 33.50 30.24 28.69 30.11 29.05

We did not

prepare

parent

company

only

financial

statements

for the

first quarter

of 2020.

Long-term fund to property, plant and

equipment ratio (%) 708.74 795.18 817.33 737.23 723.95

Liquidity

Current ratio (%) 132.51 173.95 214.60 190.60 226.37

Quick ratio (%) 99.86 133.15 172.53 159.30 175.51

Times interest earned (times) 18.10 44.28 47.85 42.29 28.59

Operating

performance

Account receivable turnover (times) 7.86 8.95 9.00 8.40 7.86

Days sales outstanding 46 41 41 43 46

Inventory turnover (times) 5.95 7.06 7.70 7.07 6.56

Account payable turnover (times) 12.18 12.65 10.61 10.40 12.86

Inventory turnover days 61 52 47 52 56

Property, plant and equipment turnover(times) 2.54 3.31 3.10 2.71 3.06

Total assets turnover (times) 0.29 0.36 0.35 0.33 0.39

Profitability

Return on total assets (%) 4.58 10.37 11.29 10.58 7.98

Return on total equity (%) 6.41 14.43 15.71 14.74 11.12

Pre-tax income to paid-in capital ratio (%) 30.97 72.91 74.20 64.96 50.76

Net margin (%) 14.91 27.92 31.44 31.54 19.86

Earnings per share(NT$) 2.91 6.65 6.87 6.16 4.50

Cash flow

Cash flow ratio (%) 47.05 52.72 54.96 53.91 101.15

Cash flow adequacy ratio (%) 91.85 93.20 118.19 133.20 142.92

Cash flow reinvestment ratio (%) -0.88 -0.81 -1.22 1.32 4.69

Leverage Operating leverage 6.24 1.52 1.48 3.33 2.98

Financial leverage 1.91 1.09 1.08 1.17 1.14

Note1: The Financial Statements from 2015 to 2019 have been audited by KPMG.

Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%)

1. Due to the decrease of current assets in 2019 compared with 2018, the current ratio decreased.

2. Due to the decrease of current assets in 2019 compared with 2018, the quick ratio decreased.

3. Due to the decrease of net income before tax in 2019 compared with 2018, the times interest earned decreased.

4. Due to the decrease of net sales in 2019 compared with 2018, the property, plant and equipment turnover decreased.

5. Due to the decrease of net income after tax in 2019 compared with 2018, the return on total assets decreased.

6. Due to the decrease of net income after tax in 2019 compared with 2018, the return on total equity decreased.

7. Due to the decrease of net income before tax in 2019 compared with 2018, the pre-tax income to paid-in capital ratio

decreased.

8. Due to the decrease of net income after tax in 2019 compared with 2018, the net margin decreased.

9. Due to the decrease of net income after tax in 2019 compared with 2018, the earnings per share decreased.

10. Due to the decrease of operating income in 2019 compared with 2018, the operating leverage increased.

11. Due to the decrease of operating income in 2019 compared with 2018, the financial leverage increased.

180

The above ratios of financial analysis are calculated based on the following equations:

1. Capital structure

(1) Debt ratio ＝ Total liabilities / Total assets

(2) Long-term fund to property, plant and equipment ratio ＝（Total equity + non-current liabilities) / Net

property, plant and equipment

2. Liquidity

(1) Current ratio ＝Current assets / Current liabilities

(2) Quick ratio ＝ (Current assets – inventory – prepaid expenses) / Current liabilities

(3) Times interest earned ＝ Net Income before tax and interest expenses / Interest expenses

3. Operating performance

(1) Account receivable turnover (including accounts receivable and notes receivable) ＝ Net sales /

Average account receivable (including account receivable and notes receivable) balance

(2) Days sales outstanding ＝ 365 / Receivable turnover

(3) Inventory turnover ＝ Cost of goods sold / Average inventory

(4) Account payable turnover (including accounts payable and notes payable) ＝ Cost of goods sold

/Average account payable (including account payable and notes payable) balance

(5) Inventory turnover days ＝ 365 / Inventory turnover

(6) Property, plant and equipment turnover ＝ Net sales / Average net property, plant and equipment

(7) Total assets turnover ＝Net sales / Average total assets

4. Profitability

(1) Return on total assets ＝ [Net income after tax + interest expense x (1-interest rate)] / Average total

assets]

(2) Return on total equity ＝ Net income after tax / Average shareholders’ equity

(3) Net margin = Net income / Net sales

(4) Earnings per share = (Net income - preferred stock dividend) / Weighted average number of shares

outstanding

5. Cash flow

(1) Cash flow ratio ＝ Net cash flow provided by operating activities / Current liabilities

(2) Cash flow adequacy ratio ＝ Five-year sum of cash from operations / Five-year sum of capital

expenditures, inventory additions, and cash dividend

(3) Cash flow reinvestment ratio = (Cash provided by operating activities - cash dividends) / (Gross

property, plant and equipment + long-term investments + other noncurrent assets + working capital)

6. Leverage

(1) Operating leverage ＝ (Operating revenues – variable cost and expense) / Operating Income

(2) Financial leverage ＝ Operating income / (Operating income – interest expenses)

181

6.3 Audit Committee’s Review Report for the Most Recent Year:

Audit Committee’s Review Report

The Board of Directors has prepared the Company’s 2019 Business Report, Financial

Statements, including Consolidated and Individual Financial Statements, and Proposal for

Profits Distribution. The CPA firm of KPMG was retained to audit Nan Ya Plastics

Corporation’s Financial Statements and has issued an audit report relating to Financial

Statements. The Business Report, Financial Statements, and Proposal for Profits Distribution

have been reviewed and determined to be correct and accurate by the Audit Committee

members of Nan Ya Plastics Corporation. According to the Securities and Exchange Act and

the Company Act, we hereby submit this report. Please be advised accordingly.

Nan Ya Plastics Corporation

Chairman of the Audit Committee: Chih-Kang, Wang

March 18, 2020

182

6.4 Consolidated Financial Statements for the Years Ended December 31,

2019 and 2018, and Independent Auditors’ Report:

Please refer to page 215 to page 321 of the Annual Report.

6.5 Stand-Alone Financial Statements for the Year Ended December 31,

2019 and 2018, and Independent Auditors’ Report:

Please refer to page 322 to page 414 of the Annual Report.

6.6 The Company should Disclose the Financial Impact to the Company

if the Company and its Affiliated Companies have Incurred any

Financial or Cash Flow Difficulties in 2019 and as of the Date of

this Annual Report: None.

183

VII. Review of Financial Conditions, Financial Performance,

and Risk Management7.1 Financial Status

Major reasons for changes in assets, liabilities, and shareholders' equity, as well

as related effects in the most recent two fiscal years. If such effects are significant,

response measures should be elaborated:

Unit: NT$ thousands

Year

Item 2019 2018

Difference

Amount ％

Current Assets 187,476,346 210,274,541 -22,798,195 -10.84

Non-Current Assets 367,202,333 359,974,803 7,227,530 2.01

Total Assets 554,678,679 570,249,344 -15,570,665 -2.73

Current Liabilities 83,516,150 81,791,547 1,724,603 2.11

Non-Current Liabilities 115,591,829 101,552,805 14,039,024 13.82

Total Liabilities 199,107,979 183,344,352 15,763,627 8.60

Capital stock 79,308,216 79,308,216 0 0.00

Capital surplus 26,617,834 26,672,119 -54,285 -0.20

Retained Earnings 204,105,146 220,788,020 -16,682,874 -7.56

Others 34,540,688 48,903,842 -14,363,154 -29.37

Total equity attributable to owners of parent

344,571,884 375,672,197 -31,100,313 -8.28

Non-controlling interests

10,998,816 11,232,795 -233,979 -2.08

Total Stockholders' Equity

355,570,700 386,904,992 -31,334,292 -8.10

Note: The decreased in others was due to the decrease in unrealized gains on financial assets and

exchange differences on translation of foreign financial statement.

184

7.2 Analysis of Financial Performance

Main reasons that caused the significant changes in operating revenue, operating

income and income before tax and its impacts on the most recent two fiscal years:

1. Financial Performance Comparison/Analysis

Unit: NT$ thousands

Year

Item 2019 2018 Difference ％

Gross Sales 294,088,363 341,845,212 -47,756,849 -13.97

Less: Sales

Returns 1,734,078 1,514,953 219,125 14.46

Sales Allowances 6,051,226 7,268,699 -1,217,473 -16.75

Net Sales 286,303,059 333,061,560 -46,758,501 -14.04

Cost of Sales 258,172,796 284,054,265 -25,881,469 -9.11

Less: Realized

profit from

affiliated

companies

-6,964 -56,290 49,326 -87.63

Gross profit 28,137,227 49,063,585 -20,926,358 -42.65

Operating

expenses 18,251,842 19,642,812 -1,390,970 -7.08

Operating income 9,885,385 29,420,773 -19,535,388 -66.40

Non-operating

income and gains 21,964,897 36,798,546 -14,833,649 -40.31

Non-operating

expenses and

losses

5,161,252 4,694,133 467,119 9.95

Profit before

income tax 26,689,030 61,525,186 -34,836,156 -56.62

Less: Income tax

expenses 3,479,507 8,866,335 -5,386,828 -60.76

Profit 23,209,523 52,658,851 -29,449,328 -55.92

Note:

1. The decrease in realized profit from affiliated companies was due to the products sold to

affiliates during this period were all fully-processed and sold out.

2. The decrease in gross profit was mainly due to the decrease in sales was greater than cost of

sales.

3. The decrease in operating income was mainly due to the decrease in sales was greater than

cost of sales.

4. The decrease in non-operating income and gains was mainly due to the decrease in share of

profit of associates and joint ventures accounted for using equity method.

5. The decrease in profit before income tax and profit were mainly due to the decrease in sales

was greater than cost of sales and share of profit of associates and joint ventures accounted for

using equity method.

6. The decrease in income tax expense was mainly due to the decrease in profit before income

tax.

185

2. Expected sales volume and the basis, possible effects on the company's

future financial operations, and response plan:

Please refer to “Business Strategy for 2020” of “I. Letters to shareholders”.

7.3 Cash Flow

Analysis of changes in cash flow, improvement plans for liquidity shortage in the

most recent fiscal year, and cash liquidity analysis in the upcoming fiscal year:

1. Analysis of cash flow changes for the most recent fiscal year:

Unit: NT$ thousands

Cash and Cash

Equivalents,

Beginning of Year

Net Cash Flow

from Operating

Activities

Cash

Outflow

Cash Surplus

(Deficit)

Leverage of Cash Deficit

Investment

Plans

Financing

Plans

52,365,882 52,299,353 61,057,116 43,608,119 －－

(1) Operating activities:

The net cash inflow from operating activities for this year was NT$

52,299,353 thousand, which was mainly due to the profit of NT$

23,209,523 thousand, the receiving of cash dividends of NT$20,260,972

thousand and the decrease in inventory of NT $ 7,166,765 thousand.

(2) Investment Activities:

The net cash outflow from investment activities for the year was NT$

37,413,115 thousand, mainly due to the increase in property, plant and

equipment of NT$ 29,483,979 thousand.

(3) Financing Activities:

The net cash outflow from financing activities for the year was NT$

21,226,234 thousand, mainly due to the issuance of cash dividends of

NT$ 39,629,893 thousand and corporate bonds NT$11,381,560

thousand and the increase in long-term borrowings of NT$ 6,133,209

thousand.

2. Remedy for Cash Deficit and Liquidity Analysis:

(1) There was no cash deficit this year.

(2) The liquidity analysis for the most recent two fiscal years is as follows:

Year

Item 2019 2018 Variance (%)

Cash Flow Ratio (%) 62.62 66.71 -6.13

Cash Flow Adequacy Ratio (%) 101.66 108.20 -6.04

Cash Reinvestment Ratio (%) 1.60 1.76 -9.09

186

Analysis on increase/decrease in ratio:

(a) Cash flow ratio:

The 2019 annual cash flow ratio was lower than that of the 2018

year, mainly due to the decrease in net cash flow from operating

activities of NT$ 2,265,587 thousand and the increase in current

liabilities of NT$ 1,724,603 thousand.

(b) Cash flow adequacy ratio:

The 2019 cash flow adequacy ratio was lower than that of 2018,

mainly due to the net cash flow from operating activities from 2015

to 2019 increased by NT$ 31,966,771 thousand from 2014 to 2018;

the increase in capital expenditure of NT$ 23,243,854 thousand and

the increase of NT$ 24,559,903 thousand in cash dividends.

(c) Cash reinvestment ratio:

The 2019 cash reinvestment ratio was lower than that of 2018,

mainly due to the decrease in net cash flow from operating

activities of NT$ 2,265,587 thousand and the increase in gross

property, plant and equipment of NT$ 21,278,914 thousand.

3. Cash liquidity analysis for the coming year:

Unit: NT$ thousands

Cash and Cash

Equivalents,

Beginning of Year

Net Cash Flow

from Operating

Activities

Cash

Outflow

Cash Surplus

(Deficit)

Leverage of Cash Deficit

Investment

Plans

Financing

Plans

43,608,119 32,545,530 32,766,425 43,387,224 －－

(1) Operating activities:

It is estimated that the net cash inflow from operating activities in 2020

will be NT$ 32,545,530 thousand as the company's stable profit will

generate net cash inflow from operating activities.

(2) Investment Activities:

It is estimated that the net cash outflow of investment activities in 2020

will be NT$15,825,826 thousand, which was mainly due to the increase

in expenditures for plant construction, machinery equipment purchase

and long-term investments, etc., so that the investment activities are net

cash outflows.

(3) Financing Activities:

It is estimated that the net cash outflow of financing activities in 2020

will be NT$ 16,940,599 thousand, mainly due to the issuance of cash

dividends and the repayment of long-term borrowings, resulting in net

cash outflow from financing activities.

(4) It is expected that there will be no cash deficit in the coming year.

187

7.4 Major Capital Expenditure Item

1. Major Capital Expenditure Items and Source of Capital

Unit: NT$ thousands

Project

Actual or Planned

Source of Capital

Actual or Planned Date of

Completion

Total Capital

Actual or Expected Capital Expenditure

2018 2019 2020 2021 and afterward

8th PET Film production line in

Linkou

Bank loans or self-capital

2020.12 1,934,358 19,000 1,215,358 700,000 0

4th polyester release film

production line in Shulin

2020.06 399,991 32,300 202,145 165,546 0

5th polyester release film

production line in Shulin

2021.01 790,000 0 100,000 531,786 158,214

Chia Yi 2nd Plant Synthetic Paper

2020.06 1,187,788 662,630 132,526 37,632 0

Expansion of LFT machines of Hsin-Kang Engineering Plastics Plant

2021.01 237,056 0 0 164,800 72,256

Copper Foil 4th Plant(Hsin-Kang)

2021.01 7,998,238 354,499 998,311 3,243,831 3,401,597

Copper Clad Laminate Second Plant(Huizhou)

2021.12 4,914,982 0 177,363 400,012 4,337,607

Glass Fiber Cloth Plant(Huizhou)

2021.09 4,056,756 0 4,648 450,993 3,601,115

Expansion of Circuit Board in

Jinxing plant(3rd)

Capital increased by cash of subsidiary

2019.07 12,789,535 1,497,099 1,272,067 0 0

Expansion of IC Substrate in

Kunshan

Capital increased by cash of subsidiary

2021.05 3,720,522 0 0 3,602,477 118,045

PVC Leather in Nan-Tong Plant

Bank loans or self-capital

2020.12 1,598,275 186,800 1,296,585 99,675 0

Aluminum Metalized Film in Nan-Tong Plan

2020.06 802,437 3,206 546,794 252,437 0

The 2nd phase of BPA in Ningbo

2021.10 5,589,884 4,623 177,218 1,866,340 3,541,703

Flexible PVC Sheeting in US

Texas 2021.11 648,486 0 0 0 648,486

Ethylene Glycol in US Texas

2020.07 38,274,048 8,299,416 16,453,114 10,399,149 0

Note：We will timely adjust the purchase schedules of machinery equipment in accordance with

whole economic trend and the needs of new products and new technologies.

188

2. Expected Benefits

(1) Expected sales, production volumes, value and gross profit

Year Item

Production

Volumes

(Ton/Year)

Sales Volumes

(Ton/Year)

Sales Value

(NT$ 100

millions)

Gross Profit

(NT$ 100

millions)

2021

8th PET Film

production line in

Linkou

14,400 14,400 12.0 4.3

2021

4th polyester

release film

production line in

Shulin

120,000

thousands

square meter

120,000

thousands

square meter

9.0 1.7

2021

5th polyester

release film

production line in

Shulin

123,600

thousands

square meter

123,600

thousands

square meter

9.4 2.5

2020 Chia Yi 2nd Plant

Synthetic Paper 21,600 21,600 16.2 2.9

2021

Expansion of LFT

machines of

Hsin-Kang

Engineering

Plastics Plant

4,800 4,800 3.3 0.7

2021 Copper Foil 4th

Plant(Hsin-Kang) 18,000 18,000 60.4 13.6

2021

Copper Clad

Laminate Second

Plant(Huizhou)

13,200

thousands

sheet

13,200

thousands sheet 86.5 13.6

2021 Glass Fiber Cloth

Plant(Huizhou)

117,000

kilometer

117,000

kilometer 24.4 3.9

2020

Expansion of

Circuit Board in

Jinxing plant

379

thousands sft

379

thousands sft 29.7 3.7

2021

Expansion of IC

Substrate in

Kunshan

271

thousands sft

271

thousands sft 16.7 2.6

2020 PVC Leather in

Nan-Tong Plant

9,000

thousands

yard

9,000

thousands yard 13.5 2.1

2020

Aluminum

Metalized Film in

Nan-Tong Plan

13,536

thousands

square meter

13,536

thousands

square meter

13.4 2.0

2022 The 2nd phase of

BPA in Ningbo 130,000 130,000 93.7 19.25

2022

Flexible PVC

Sheeting in US

Texas

14,400 12,000 8.4 1.0

2020 Ethylene Glycol

in US Texas 828,000 828,000 142.9 45.7

(2) Other Benefits(Such as product quality、pollution prevention、cost

reduction etc.): None.

189

7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses,

Improvement Plans and Investment Plans for the Coming Year

Remarks

Item

Amount

(NT$

thousands)

Policies Reasons for Gain

or Loss Action Plan

Future

Investment

Plan

Formosa Synthetic

Rubber Corp.

46,000 Long-term

investment

Increase working capital

and improve the financial

construction

None None

Formosa Resources

Corp. (reinvest

Formosa Steel IB

Pty., Ltd.)

1,570,000 Long-term

investment

Reinvestment company

Formosa Steel IB Pty Ltd

and the Australian iron

miner FMG Group jointly

invest in the Iron Bridge

iron miner project is under

construction currently

None Invest in

stages

according to

the company's

capital needs

FG INC 231,570 Long-term

investment

The project continues

according to the plan

None Invest in

stages

according to

the company's

capital needs

Nan Ya Plastics

(Hong Kong) Co.,

Ltd. (reinvest Nan

Ya Electronic

Materials

(Huizhou) Co.,

Ltd.)

4,308,591 Long-term

investment

Expand capacity and

increase profitability

None None

7.6 Analysis of Risk Management

1. Interest rate, foreign exchange rates, and inflation rate changes in the most

recent year, up to the publication date of this annual report, that can affect

the company's revenue and future response measures:

(1) Interest rate:

In terms of long-term liabilities with a floating interest rate (including

long-term corporate bond bearing interest at floating rates), the Company

will carefully assess the financial market situation and sign an interest rate

swap contract with the bank when the interest rate is relatively low to

avoid the risk of interest rate fluctuation.

(2) Foreign exchange rates:

Insufficient funds for foreign exchange in daily operations are addressed

by making spot foreign exchange or forward foreign exchange

purchases when the exchange rate is favorable. Long-term foreign

currency liabilities are addressed by signing long-term forward foreign

exchange contracts or cross-currency swaps with the banks when the

exchange rate is relatively low to minimize the impact of exchange rates

on revenue and profits.

(3) Inflation Status:

According to Directorate –General of Budget, Accounting, and Statistics,

Executive Yuan, R.O.C. (Taiwan), the CPI change rate in 2019 was

0.56%, and the CPI change rate (less food and energy) was 0.50%. The

inflation risk was low and had no significant influence on the

190

Company's profit and loss.

2. Policies to high-risk, high-leveraged investments, lending or endorsement

guarantees, and derivative transactions, main causes of gain or loss in the

most recent year up to the publication of this annual report, and future

response measures:

(1) High-risk, high-leveraged investments:

The Company mainly invests in the petrochemical industry, which is a

mature and stable industry with low risks. The company has always

maintained stable operations and a sound financial structure. It does not

engage in any high-leveraged investment.

(2) Lending:

In principle, the Company only issues loans to affiliated companies. The

amount is in accordance with Article 15 of Company Act and

“Procedures for Loaning Funds to Other Parties” of the Company and

granted with the approval of the Board of Directors. Since purposes of

loans are mostly short-term fund scheduling, and the borrowers are the

parent company, subsidiaries, and affiliated companies, no bad debt loss

has occurred.

(3) Endorsement guarantees:

The company only endorses and guarantees the parent company,

subsidiaries, affiliated companies, or invested companies whose

endorsement guarantees are made by each shareholder in accordance

with its shareholding ration due to joint investment. The endorsement

guarantee is mostly for funding guarantee; relevant procedures are

handled in accordance with “Procedures for Providing Endorsements

and Guarantees to Other Parties” of the Company and granted with the

approval of the Board of Directors. There has never been losses due to

endorsement guarantees.

(4) Derivative transactions:

The Company's various derivative transactions are for the purpose of

avoiding market risks caused by fluctuations in foreign exchange rates

and interest rates. In addition, they are not used for arbitrage and

speculation. Execution is based on the relevant regulations and

International Financial Reporting Standards (IFRS) promulgated by the

regulator. It is equally based on the “Procedures for Engaging in

Derivatives Transactions of the Company” and the “Foreign Exchange

Trading and Risk Management Measures” defined by the Company.

The Company's various derivative transactions are all conducted by

financial department of Group Administration. To comply with the risk

control principles which the functions of dealing, confirmation and

settlement of derivatives transactions shall be performed by different

personnel, the Company set up foreign exchange transaction group and

risk management group in the financial department. After foreign

exchange transaction group complete the transactions, relevant

transaction details would be reviewed by risk management group and

other financial institutions and only then settlement would be conducted.

Once any abnormal transactions was found, solutions should be planned

and submitted to the highest supervisor of financial department. The

improvement should be followed up.

In accordance with risks and periods of derivative and adopt long-term

credit rating as an indicator, counterparties should be applicable to

different credit rating to avoid default risk caused by abnormal credit. In

191

addition, it should be reviewed every 6 months to avoid losses due to

any default risk.

The Company also set up an internal auditing department individually

apart from financial department of Group Administration. In addition to

review every outcome and appropriateness of hedging transactions, the

internal auditing department prepare audit reports and submit to the

supervisors. The follow-up improvements would be kept supervising.

3. Future Research and Development (R&D) Plans and Corresponding Budge

R&D product

project

Unfinished current

progress

Must be

reinvested

Research and

development

expenses from

2020

(NT$ 1,000)

Time expected

to complete

mass-production

Main factors

affecting the

success of R&D

in the future

Development of

easy clean,

antibacterial and

flame resistant

ARES wall

covering

Cooperate with DuPont

proofing, physical property

evaluation

5,000 2020.6 Cost and market

Development of

railway car

interior decoration

film

Developed PVC materials

for customer surface

processing, blister

molding, environmental

testing and verification

5,000 2020.12 Quality and

machining

Development of

SHARP Quantum

Dot film

QD technology transfer

and cooperative

development of Sharp,

NSM company

10,000 2020.6 Quality , cost and

market

Development of

automotive cover

film

Development of modified

polymer plasticizer

formula film

6,000 2020.12 Quality , cost and

market

Aluminum plastic

film

Addition of processing

laminating machine,

self-developed polyester

adhesive and PO adhesive

12,000 2020.6 Quality and cost

Development of

5G high frequency

copper clad

laminated cushion

pad

Machine equipment

addition and testing 8,000 2020.12

Quality and

market

192

R&D product

project

Unfinished current

progress

Must be

reinvested

Research and

development

expenses from

2020

(NT$ 1,000)

Time expected

to complete

mass-production

Main factors

affecting the

success of R&D

in the future

PE pipe for

underground fire

protection service

Apply to the National Fire

Agency, Ministry of the

Interior for fire review

11,105 2020,12 Quality and cost

Halogen-free Low

loss NPG-182

material

development

Formula and process

condition testing and

evaluation

1,200 2020.03

Acquisition of

key raw materials

and improvement

of processing

technology

Halogen-free

Ultra low loss

NPG-188 material

development

Formula and process


evaluation

1,500 2020.06

Acquisition of

key raw materials

and improvement

of processing

technology

Halogen-free high

Tg low loss

NPG-190BH

material

development

Formula and process


evaluation

1,900 2020.09

Acquisition of

key raw materials

and improvement

of processing

technology

Halogen-free high

Tg low loss

NPG-178 material

development

Formula and process


evaluation

1,600 2020.09

Acquisition of

key raw materials

and improvement

of processing

technology

Hydrocarbon

material

development

(High thermal

conductivity)

Formula and process


evaluation

2,000 2020.03

Acquisition of

key raw materials

and improvement

of processing

technology

Bismaleimide

resin development

Synthetic formula research,

customer evaluation and

certification

1,000 2020.12

Bismaleimide

synthesis

technology

Flame Retardants

Containing P-N

development

Synthetic formula research,

customer evaluation and

certification

2,000 2020.12

Key raw material

acquisition and

processing

technology

enhancement

High strength

50~90µm

fiberglass cloth

Evaluation of product

performance,

Customer certification

1,000 2020.09

Technology of

surface treatment

and spreading

193

R&D product

project

Unfinished current

progress

Must be

reinvested

Research and

development

expenses from

2020

(NT$ 1,000)

Time expected

to complete

mass-production

Main factors

affecting the

success of R&D

in the future

Low dielectric

20~90µm

fiberglass cloth

Evaluation of product

performance,

Customer certification

1,500 2020.12

Technology of

surface treatment

and spreading

Development of

copper foil for ultra

high-frequency

substrates

Product performance

assessment,

Improved heat resistance

950 2020.12

Surface

roughening

treatment

technology

Development of

ultra thick copper

foil with low

roughness

Equipment installation 1,000 2020.12

Formula control

technology and

mass production

High-capacity

lithium battery

copper foil

Formula development is

complete and pending

On-site trial production

3,000 2020.12

Mass production,

processability and

inspection

technology

Ultra-fine yarn

sizing ingredient

development

Customer test ongoing 4,200 2020.08

Formula ratio,

Optimum

production

conditions

Development of

solid state

polycondensation

pellets for Bottle

to Bottle

Customers’ approval 3,000 2020.12

Pass beverage

brand’s

certification

Development of

textiles recycled

technology by

chemical

recycling process

Evaluation and

development of chemical

recycling process.

3,000 2020.12

Pass textile

brand’s

certification

Improvement of

solid state

polycondensation

reaction rate for

Titanium catalyst

pellets

Commercial test in

polymer lines 2,000 2020.09

Pass Japanese

customer’s

certification

Development of

bottle- grade

pellets for high

brightness & fast

reheat bottle

Commercial test in


Pass beverage

brand’s

certification

194

R&D product

project

Unfinished current

progress

Must be

reinvested

Research and

development

expenses from

2020

(NT$ 1,000)

Time expected

to complete

mass-production

Main factors

affecting the

success of R&D

in the future

Development of

bottle- grade

pellets for high

transparency

cosmetic

container

Commercial test in


Pass Japanese

customer’s

certification

Recycled

conjugate staple

fiber

Continue to improve the

quality 200 2020.06 Polymer viscosity

PTT/recycled PET

conjugate staple

fiber


quality 400 2020.05

Viscosity and

ratio of polymer

Recycled low melt

staple fiber


quality 300 2020.06

Adjustment of

polymer

constitution

Recycled DTY

with hydrophilic

performance

Formula research and

customer evaluation 400 2020.10

Formula and

processability

Deep dye cationic

dyeable DTY



Formula and

processability

Recycle version

biodegradable

DTY



Formula and

processability

Double draw

woolly Elasticity improvement 300 2020.08 Processability

Conductive

filament

Production yield

improvement 100 2020.12 Conductive chip

Textile-recycled

DTY Uneven color shade 150 2021.05

Recycled textile

purification

Recycle version

micro-fiber

filament

Production yield

improvement 100 2020.12

Chip and spin

yarn filtration

12 kV VCB panel

type test In preparation 19,574 2020.06

Quality

certification

2000kVA wound

core die-cast

transformer

(MTR)

development

In preparation 3,500 2020.07 Quality

certification

195

4. Important domestic and international policy and regulatory environment:

changes that has an impact on the company's finances in the most recent

year up to the publication of this annual report, and future response

measures:

The Company closely monitors all domestic and foreign governmental

policies and regulations that might impact the Company’s business and

financial operations and arranges personnel to receive professional training

as needed. During the period of 2019 to February 29, 2020, the following

changes or developments in governmental policies and regulations may

influence the Company’s business and financial operations:

(1) Amendments to the Statute for Industrial Innovation, made on July 24,

2019, were mostly concerned with extending the tax benefits for

research and development (R&D) investments to the end of 2029, and

introducing regulations such as allowing investment expenditure to be

listed as deductions to undistributed earnings. The Company will use

such amendments as references for filing R&D and investment expenses

to benefit from related tax exemptions.

(2) The Management, Utilization, and Taxation of Repatriated Offshore

Funds Act, announced on July 24, 2019, is mostly concerned with the

investment income derived from an offshore invested enterprise that

profit-seeking enterprises have applied for repatriation for use toward

substantial investments and meet other conditions including 25% cap on

financial investment and cannot be used for acquisition of real property.

Tax benefits including 8% tax rate in the first year, 10% tax rate in the

second year, and a 50% refund of the tax paid upon completing the

substantial investment can be applied toward such funds. The Company

will apply for repatriation of investment income derived from an

offshore invested enterprise pursuant to relevant regulations when

necessary based on the business and financing status of the Company

and its offshore invested enterprises.

5. Risks associated with changes in technology and industry in the most recent

year up to the publication of this annual report, and future response measures:

None.

6. Changes in corporate image and impact on company’s crisis management in

the most recent year up to the publication of this annual report, and future

response measures: The Company followed the philosophy of

“trustworthiness, to aim at the sovereign good, perpetual business operation

and dedication to the society”. In the future, we will keep carrying out the

philosophy and devoting more resources to the society.

7. Risks associated with mergers and acquisitions in the most recent year up to

the publication of this annual report: None.

8. Risks associated with capacity expansion in the most recent year up to the

publication of this annual report: Please refer to “7.4 Major Capital

Expenditure Item” of “Chapter 7 Review of Financial Conditions, Financial

Performance, and Risk Management”: None.

196

9. Risks associated with sales concentration and purchase in the most recent year

up to the publication of this annual report, and future response measures:

(1) Purchase:

Most of the Company's main raw materials are sourced from the

Formosa Plastics Group or the internal vertical integration supply.

Therefore, the source, quality, and delivery date are under good control.

However, if a company in the group or a division in the Company

arranges annual repair or has an equipment failure, it will have to

cooperate with the repair schedule or reduce production. In order to

respond to customer orders, it is necessary to import raw materials to

make up for any shortcoming. If the petrochemical raw materials market

is at a high level, there will be the risk of being forced to import

high-priced raw materials in order to meet production needs. Fortunately,

the Company maintains good relations with major suppliers and

diversifies the procurement areas, so the risks are still acceptable by the

Company.

(2) Sales:

In the future, global economic will still be affected by multiple factors

like China-US trade war, cross-strait relations, the fluctuation of oil price,

etc. Paying close attention to the trend of industrial relocation in order to

diversify the sales area. In addition, increase the proportion of direct sales

and distributors in other parts of the world. Using Taiwan as an operation

center to integrate the resources of domestic and overseas transfer

companies. Besides dividing the risk of concentrated distribution and

arranging the best mix of production and sales, supplemented by

e-commerce and on-line marketing to enhance overall competitiveness.

10. Effects of, risks relating to and response to large share transfers or changes in

shareholdings by directors, supervisors, or shareholders with shareholdings of

over 10%: None.

11. Risks associated with changes in management, and future response measures:

None.

12. If there has been any substantial impact upon shareholders' equity or prices

for the company's securities as a result of any litigation, non-litigious

proceeding, or administrative dispute involving a company director,

supervisor, general manager, de facto responsible person, or major

shareholder with a stake of more than 10%, and the matter was finalized or

remained pending, the prospectus shall disclose the information:

(1) The Company versus DBTEL Incorporated (formerly known as

DBTEL)

(a) Disputes:

The Company's liquid crystal display products customer, DBTEL

Incorporated, started placing orders of LCD from May, 2003. In

June, 2004, it unilaterally canceled part of orders, causing the

Company's raw materials and finished goods to be stored in the

company's warehouse. Due to DBTEL Incorporated continuous

delay delivery time and even refusal to receive the goods, resulting

in the loss of account receivable and value of inventories.

197

(b) The target amount: US$ 5,409,815 and NT$ 100,846,141.

(c) The commencement date of the lawsuit: April 6th, 2006.

(d) Major litigants: Nan Ya Plastics Corp., DBTEL Incorporated.

(e) Current situation:

○1 On April 22th, 2020, Taiwan High Court ruled that the second

judgment ordering the payment of more than US$ 5,395,363 of

principal and interest, namely NT$ 100,846,141 of principal

and interest, and the provisional execution to be abolished. Nan

Ya Corp.’s suit in the first instance and the statement of

provisional execution were dismissed; the rest of appeals were

dismissed.

For remedies, the Company will assess whether to appeal

against the statement with regards to loss part of the

Company’s second judgment (namely DBTEL Incorporated

does not need to pay US$ 14,452 to the Company) after

receiving the verdict.

(2) Taixi villagers filed a civil litigation

(a) Reason:

74 people, including Zhang Shufen, a native of Taixi, claimed that

gas emissions from Mailiao Industrial Complex caused a total of 29

persons in their families to die or suffer from cancer. In a result, they

claimed for damages with the Company and other 4 companies.

(b) Target amount: NT$ 70,176,986.

(c) The commencement date of the lawsuit: August 13th, 2015.

(d) Current situation:

Since there was no legal provision in the regard of plaintiff’s claim,

the Company has actively put forward a favorable defense. The

case is currently been adjudicated by Taiwan Yunlin District Court.

(3) The Company versus Lin Fengyi

(a) Reason:

The plaintiff Lin Fengyi claimed for damages with the Company.

He claimed that the employees of the Company and the

co-defendants Pan Qinling, Li Xueqin and Tai Ya Enterprise Co.,

Ltd. jointly defrauded the plaintiff, causing the plaintiff to suffer

the damage of NT$ 315 million. The original claim was that during

October, 2016, the co-defendant Pan Qinling borrowed money

from the plaintiff on the grounds that he purchased the "PVC

compounds" from the Company. In November, 2016, he claimed

that the price of "PVC compounds" would rise due to Trump was

elected as the US President. Thus, Pan Qinling defrauded the

plaintiff of his money amounted to NT$ 315 million and used the

“PVC compounds” as guarantee. The plaintiff claimed that the

employees of the Company cooperated with Pan Qinling to jointly

defraud the plaintiff and constituted an infringement.

(b) Target amount: NT$ 315 million.

(c) The commencement date of the lawsuit: June 1st, 2017.

(d) Current situation:

Taipei District Court has judged the Company and its employees win

the court case at August, 31st 2018. Lin Fengyi appealed from the

judgment accordance to law. On April 30th, 2020, Taiwan High

Court ruled that the appeal be dismissed and the litigation expenses

shall be borne by Lin Fengyi.

198

13. Other significant risks and future response measures:

(1) The Company's IT system is self-developed, tailor-made for the

Company's organization and various systems. Therefore, it emphasizes

the division of labor, mutual checks, and balances, such as procurement

and outsourcing, fund scheduling, and financial risk control through

individual operations and mutual inspections to avoid operational risks.

The Company's management computer operating system is divided into

six management functions including personnel management, business

management, production management, engineering management, material

management, and financial and accounting management, which are

interconnected and interlocked. After the data is input once, the

application can be transmitted at multiple levels to avoid errors, and

exceptions are managed. To convert a management report into a "talking

report" which can actively display any abnormalities allowed the

Company's operation management function has both risk control and

management features.

(2) In order to ensure the security and stability of the computer network,

prevent the abnormality of the information system and the damage of

computer files, strengthen the protection of personal data, effectively

control the risk of enterprise information systems, and maintain the

continuous operation of the enterprise, we have established relevant

administration regulations and processing guidelines for employees to

follow, and constructs layer-by-layer control and protection mechanisms

to protect application programs, operating systems and computer

network. In order to ensure the safe use of information and the

establishment of a reliable information environment, our company's

information security policy is as follows:

(a) Comply with government laws and regulations, and popularize

awareness of information security.

(b) Pay attention to risk management and protect data security.

(c) All the employees must participate, and we pursue continuous

improvement.

(3) The globally interconnected Internet makes business activities more

flexible and fast, but cyberattacks are rising accordingly. These attacks

include causing network services unavailable through creating a large

number of network connections, snooping secrets over the network or

affecting system service using computer viruses or malicious programs,

stealing confidential information through the use of social engineering,

or the leakage of confidential information due to insufficient security

awareness of employees. In view of these risks, we have planned and

arranged adequate security measures, as specified below:

(a) Adopt a defense-in-depth architecture to prevent network attacks.

We build systems such as Intrusion Prevention System (IPS),

malicious URL filtering, and Advanced Persistent Threat (APT)

Prevention, and establish management and control mechanisms for

internet access, e-mail, and personal information leakage.

(b) Establish mechanisms for physical access control, system login

authentication, password control, access authorization and regular

vulnerability scan, installing anti-virus software and security

patches, controlling document and USB access, and establishing

backup mechanisms to enhance endpoint protection.

(c) Conduct information security education and testing for employees

every year to strengthen employees' awareness of cyber security

risks.

199

(d) Review the security measures and regulations annually, pay

attention to the security issues and make the response plan to

ensure its appropriateness and effectiveness.

(4) Due to the rapid changes in the attack techniques of hackers, the tactics

continue to evolve, thus, we cannot guarantee our information system

will not be affected by cyber threats. To mitigate the effects of cyber

threats, we have considerable security protection measures and

trainings.

14. The Organizational Structure of Risk Management

Risk Evaluation Items Risk Management Unit Risk Review

1. Interest Rate, Changes

in Foreign Exchange

Rates, and Inflation

President’s Office,

Accounting Department,

Finance Department,

President Office of Formosa

Plastics Group

Computer auditing, regular

self-inspection, monthly funds

meeting, joint meeting of

financial executives, Internal

Auditing office, the Board of

Directors

2. High-risk, high-

leveraged investments,

lending or endorsement

guarantees, and

derivative transactions


Finance Department,


Plastics Group

Computer auditing, regular

self-inspection, monthly funds

meeting, joint meeting of

financial executives, Internal

Auditing office, the Board of

Directors

3. R&D Plans President’s Office,

Technical Department of

various Divisions,

Formosa Plastics Group

Production and sales meeting,

business performance

meeting, research and

development project meeting,

the Board of Directors,

Internal Auditing office

4. Changes in important

domestic and

international policy and

regulatory


Management Office and

Technical Department of

various Divisions,

Legal Affairs Office,


Plastics Group



meeting, the Board of

Directors, Internal Auditing

office

5. Changes in technology President’s Office,

Management Office of various

Divisions,

R&D Center,




meeting, Internal Auditing

office, the Board of Directors

6. Changes in corporate

image



Divisions,





Directors

7. Merger, acquisition

and reinvestment



Divisions,






200

Risk Evaluation Items Risk Management Unit Risk Review

8. Capacity expansion President’s Office, Plant

Office and Management

Office of various Divisions,






9. Purchase and sales

concentration



Divisions,

Purchasing Department,


Plastics Group

Weekly market meeting,

production and sales meeting,




10. Large share transfers

or changes in

shareholdings by

directors, supervisors, or

substantial shareholders


Stock Office of the Finance

Department

Business management


Directors

11. Change in

management



Business management


Directors

12. Litigation and

non-litigation cases



Divisions,

Legal Affairs Office





13. Information security President’s Office,


Divisions,


Business management



7.7 Other Significant Issues: None.

201

VIII. Other Special Notes8.1 Summary of NPC’s Subsidiary

8.1.1. Subsidiary Chart: 2019.12.31

Nan Ya Plastics Corp.

Nan Ya Printed Circuit Board (Kunshan) Co., Ltd.

NT$ 5,017,721,000100.00%

PFG Fiber Glass (Hong Kong) Co., Ltd.NT$ 4,495,987,000

75,500 Shares, 100.00%

Nan Ya Plastics Corp. USA

NT$ 313,920,000 2,400 shares, 100.00%

Wen Fung Industrial Co., Ltd.

NT$ 214,236,000 18,738,000shares,

100.00%

Nan Ya Plastics Corp., America

NT$ 7,853,605,000 60,000 shares, 100.00%

Nan Ya Printed Circuit Board Corp.

NT$ 4,480,417,000432,745,000 shares,

66.97%

PFG Fiber Glass Corp. NT$ 2,648,131,000100,000,000 Shares,

100.00%

Nan Ya Plastics International (Cayman) Ltd. NT$ 18,784,619,000

52,000 shares, 100.00%

Nan Ya Plastics(Hong Kong) Co., Ltd.NT$ 39,166,673,000

953,253,000 shares, 100.00%

Superior World Wide Trading Co., Ltd.NT$ 33,677,000

14,000 shares, 100.00%

Formosa Plastics Group Investment Corp. NT$ 76,859,000

5,000,000 shares, 100.00%

Nan Chung Petrochemical Corp.NT$ 1,000,002,000

100,000,000 shares, 50.00%

Wenling Technology Corp.NT$ 212,017,000 12,739,000 shares,

100.00%

Nan Ya Printed Circuit Board (Hong Kong) Co., Ltd.

NT$ 5,020,900,0001,223,820,000 shares,

100.00%

Nan Ya Plastics Corp., Texas

NT$ 9,934,980,000 3,000 shares, 100.00%

Nan Ya PCB (U.S.A.) Co., Ltd.

NT$ 3,479,0001,000,000 shares, 100.00%

Nan Ya Plastics (Xiamen) Co., Ltd. 85%

Nan Ya Plastics (Guangzhou)Co., Ltd. 100%

Nan Ya Plastics (Nantong)Co., Ltd. 100%

China Nantong HuafengCo., Ltd. 100%

Nantong Huafu PlasticsCo., Ltd. 100%

Nan Ya Electric (Nantong) Co., Ltd. 100%

Nan Ya Plastics (Huizhou)Co., Ltd. 100%

Nan Ya Electronic Materials (Huizhou) Co., Ltd. 100%

Nan Ya Trading (Huizhou)Co., Ltd. 100%

Nan Ya Electronic Materials (Kunshan) Co., Ltd. 100%

Nan Ya Draw-Textured Yarn (Kunshan) Co., Ltd. 100%

Nan Ya Plastics (Ningbo) Co., Ltd. 100%

PFG Fiber Glass (Kunshan) Co., Ltd.NT$ 4,487,409,000

100.00%

Note1: NPC is the control company of above mentioned subsidiaries. (The shareholdings and % were as of 2019.12.31)

Note2: The investment amount was the original investment cost; unit NT$ thousands.

Note3: The reinvested companies in mainland area were limited companies, non-share companies.

202

Information on investment in Mainland-area of Nan Ya Plastics (Hong Kong) Co., Ltd.

Unit: NT$ thousands

Subsidiaries Amount Invested Subsidiaries Amount Invested

Nan Ya Plastics (Xiamen) Co., Ltd. 738,752 Nan Ya Plastics (Huizhou) Co., Ltd. 2,418,397

Nan Ya Plastics (Guangzhou) Co., Ltd. 1,998,681 Nan Ya Electronic Materials (Huizhou) Co., Ltd. 5,489,509

Nan Ya Plastics (Nantong) Co., Ltd. 3,008,918 Nan Ya Trading (Huizhou) Co., Ltd. 32,267

China Nantong Huafeng Co., Ltd. 99,636 Nan Ya Electronic Materials (Kunshan) Co., Ltd. 15,159,216

Nantong Huafu Plastics Co., Ltd. 71,503 Nan Ya Draw-Textured Yarn (Kunshan) Co., Ltd. 7,035,085

Nan Ya Electric (Nantong) Co., Ltd. 339,275 Nan Ya Plastics (Ningbo) Co., Ltd. 1,989,308

203

8.1.2. Subsidiary Information: 2019.12.31 Unit: Thousands

Subsidiaries Date of

Incorporation Address

Capital Stock

(Note) Business Activities

Nan Ya PCB Corp. 1997.10.28 3F., No. 201-36, Dunhua N. Rd., Songshan Dist.,

Taipei City 105, Taiwan (R.O.C.) NT$ 6,461,655

Production and Selling of Printed

Circuit Board and IC Substrate

Nan Chung Petrochemical Corp. 1996.07.09 No.21, Taisu Industrial Park, Mailiao Township,

Yunlin County 638, Taiwan (R.O.C.) NT$ 2,000,000

Production and Selling of Mono-EG,

Di-EG, Tri-EG, Nitrogen, Oxygen,

Argon, Liquid Oxygen, and

Liquid Nitrogen

Wen Fung Industrial Corp. 1973.07.02 No. 118, Nanlin Rd., Taishan Dist., New Taipei City

243, Taiwan (R.O.C.) NT$ 187,381

1.Production of Electronic Components

2.Wholesale of Electronic Materials

Formosa Plastics Group Investment Corp. 1985.08.31 3F., No. 201-5, Dunhua N. Rd., Songshan Dist.,

Taipei City 105, Taiwan (R.O.C.) NT$ 50,000

1.Investment

2.Other Investment Related Business

PFG Fiber Glass Corp. 1987.08.31 No.2-1, Zhongyang Industrial Park, Hsinkang

Township, Chiayi County 616, Taiwan (R.O.C.) NT$ 1,000,000

Production and Selling of Glass and

Glass Products

Wenling Technology Corp. 2003.11.25 No. 118, Nanlin Rd., Taishan Dist., New Taipei City

243, Taiwan (R.O.C.) NT$ 127,385

Production and Selling of Electronic

Components

Nan Ya Plastics Corp. USA. 1979.07.12 9 Peach Tree Hill Road, Livingston, NJ 07039, USA US$ 12,000 Production and Selling of Rigid PVC

Film, A-PET Film and Patio Door

Nan Ya Plastics Corp., America 1989.06.20 9 Peach Tree Hill Road, Livingston, NJ 07039, USA US$ 300,000

Production and Selling of EG,

Polyester Fiber and

Flexible PVC Sheeting

Nan Ya Plastics Corp., Texas 2015.05.20 9 Peach Tree Hill Road, Livingston, NJ 07039, USA US$ 330,000 Production and Selling of EG

Nan Ya Plastics International (Cayman) Ltd. 2016.01.12 Caribbean Plaza, 878 West Bay Road, P O Box

10335, Grand Cayman KY1-1003, Cayman Islands US$ 52 Investment

Nan Ya PCB (U.S.A.) Corp. 2002.06.13 1761 E. McNair Drive, Suite 101 TEMPE, AZ 85283,

USA US$ 100 Customer Promotion

Nan Ya Plastics (Hong Kong) Co., Ltd. 1990.04.20 Room 707, Citicorp Centre 7/F,18 Whitfield Road,

Causeway Bay, Hong Kong HKD 9,532,531

Selling of

Plastics and Electronic Products

Nan Ya PCB (Hong Kong) Co., Ltd 1999.08.04 Room 707, Citicorp Centre 7/F,18 Whitfield Road,

Causeway Bay, Hong Kong HKD 1,223,820 Selling of Electronic Products

Superior World Wide Trading Co, Ltd. 1973.03.30 Room 707, Citicorp Centre 7/F,18 Whitfield Road,

Causeway Bay, Hong Kong HKD 1,400 Plastics Trading

204



Capital Stock


PFG Fiber Glass (Hong Kong) Co., Ltd. 2001.01.08 Room 707, Citicorp Centre 7/F,18 Whitfield Road,

Causeway Bay, Hong Kong HKD 588,900 Investment

Nan Ya Plastics (Xiamen) Co., Ltd. 1994.06.30

No.2 Xin Mei Road, Xinyang Industrial Zone

Haicang District of Xiamen City, Fujian Province,

China

US$ 28,724 Development and Production of

PVC Rigid Pipe and Pipe Fittings

Nan Ya Plastics (Nantong) Co., Ltd. 1996.03.22 No.88 Tongjing Road, Nantong City,

Jiangsu Province, China US$ 150,500

Production and Selling of Flexible

PVC sheeting, Rigid PVC film, PVC

leather, Paper Tube, Processing and

Grinding of PVC Scrap, PU synthetic

leather, PP Non-Woven Fabric,

Aluminum Film, Plastic Honeycomb

Board, Wood Frame Material, PVC

film and Electric Power and Steam

China Nantong Huafeng Co., Ltd. 1984.05.11 No.88 Tongjing Road, Nantong City,


Wholesale Sales of PVC Leather and

PVC sheet

Nantong Huafu Plastics Co., Ltd. 1993.04.13 No.88 Tongjing Road, Nantong City,


Wholesale Sales of PVC Leather and

PVC sheet

Nan Ya Electric (Nantong) Co., Ltd. 2000.10.16 No.88 Tongjing Road, Nantong City,


Production and Selling of

Switchgear and components

Nan Ya Plastics (Guangzhou) Co., Ltd. 1994.05.23 No.1Nan Ya Rd., Jiaoxin Village, Shi Men St.,

Guang Zhou, Guangdong, China US$ 65,000

Production and Selling of Flexible

PVC Sheeting, PVC Leather, Rigid

PVC Film, Metallized PVC Film, Pipe

Fittings, PVC Compound, Metallized

Roll and Rubber Roll

Nan Ya Plastics (Huizhou) Co., Ltd 2000.12.18 Yongshi Boulevard, Shiwan Town,

Boluo County, Huizhou City, Guangdong, China US$ 75,300

Production and Selling of PU Synthetic

Leather, Casting PVC, Engineering

Plastics and PVC Film

Nan Ya Electronic Materials (Huizhou) Co., Ltd. 2002.11.07 Yongshi Boulevard, Shiwan Town,


Production and Selling of CCL and

Glass Fabrics

Nan Ya Trading (Huizhou) Co., Ltd. 2006.01.10 Yongshi Boulevard, Shiwan Town,


Import, Export and Wholesale Sales of

Materials and Products of Electronic,

Plastics and Chemical Fiber

Nan Ya Electronic Materials (Kunshan) Co., Ltd. 2000.08.07 No.201.Chang Jiang South Road, Kunshan Economic

and Technical Development Zone, Jiangsu, China US$ 463,800

Production and Selling of CCL,

Copper Foil, Fiber Glass Fabric,

Epoxy、Electric Power And Steam

205



Capital Stock


Nan Ya PCB (Kunshan) Co., Ltd. 2000.08.07 No.201.Chang Jiang South Road, Kunshan Economic



Printed Circuit Board

PFG Fiber Glass (Kunshan) Co., Ltd. 2001.05.11 No.201.Chang Jiang South Road, Kunshan Economic



Fiber Glass

Nan Ya Draw-Textured Yarn (Kunshan) Co., Ltd. 2002.12.12 No.889 Xin Nan Dong Road, Kunshan Economic and

Technical Development Zone, Jiangsu, China US$ 214,000

Production and Selling of Polyester

Fiber Goods, Dyeing Machining,

Electric Power and Steam

Nan Ya Plastics (Ningbo) Co., Ltd. 2011.01.04 Fpg Ningbo Industrial Park, Ningbo, China US$ 73,000 Production and Selling of plasticizer

and BPA

Note: The origin investment amount as of December 31, 2019; the capital of related parties set up at mainland China is the registered capital.

8.1.3 Shareholders in Common of NPC and Its Subsidiary with Deemed Control and Subordination: None.

8.1.4. Business Scope of NPC’s Subsidiary: Plastics industry, electronic industry, chemical industry, fiber textile and investment

business.

8.1.5. Directors, Supervisors and Presidents of NPC’s Subsidiaries 2019.12.31 Unit: shares；%

Name of Subsidiary Title (Note1) Name or Representative Shareholding (Note2) (Note3)

Shares %

Nan Ya PCB Corp.

Chairman Nan Ya Plastics Corp. (Representative: Chia-Chau Wu)

432,744,977 66.97 Director Nan Ya Plastics Corp. (Representative: Wen-Yuan Wong)

Director Nan Ya Plastics Corp. (Representative: Ming-Jen Tzou)

Director Nan Ya Plastics Corp. (Representative: Fong-Chin Lin)

Director Chia-Fung Chang 692,841 0.11

Director and President Ann-De Tang 194 -

Director (Independent Director) Cheng-I Wang 0 0

Director (Independent Director) De-Ho Jan 0 0

Director (Independent Director) Ta-Sheng Lin 0 0

206


Shares %

Nan Chung Petrochemical

Corp.



Director and President Nan Ya Plastics Corp. (Representative: Ming-Jen Tzou) Director Nan Ya Plastics Corp. (Representative: Chung-Yueh Shih)

Director China Man-made Fiber Corp. (Representative: Kuei-Shiang Wang)

100,000,000 50.00 Director China Man-made Fiber Corp. (Representative: Hung-Yang Wu)

Director China Man-made Fiber Corp. (Representative: Ping-Cing Syu)

Supervisor Vacancy 0 0

Supervisor Jie-Yi Wang 0 0

Wen Fung Industrial Co.,

Ltd.


18,738,135 100.00

Director Nan Ya Plastics Corp. (Representative: Wen-Yuan Wong)

Director Nan Ya Plastics Corp. (Representative: Ming-Jen Tzou) Director Nan Ya Plastics Corp. (Representative: Kuo-Wei Lin)

Director Nan Ya Plastics Corp. (Representative: Cheng-Chung Lee)

Supervisor Nan Ya Plastics Corp. (Representative: Ming-Jong Yeh)


Investment Corp.



Director Nan Ya Plastics Corp. (Representative: Susan Wang)

Supervisor Nan Ya Plastics Corp. (Representative: Ming-Jong Yeh)

PFG Fiber Glass Corp.



Director and President Nan Ya Plastics Corp. (Representative: Ming-Jen Tzou)

Supervisor Nan Ya Plastics Corp. (Representative: Li-Ta Pai)

Wenling Technology Corp.

Chairman Wen Fung Industrial Co., Ltd. (Representative: Chia-Chau Wu)

12,738,515 100.00 Director Wen Fung Industrial Co., Ltd. (Representative: Ming-Jen Tzou)

Director Wen Fung Industrial Co., Ltd. (Representative: Chia-Fung Chang)

Supervisor Wen Fung Industrial Co., Ltd. (Representative: Ming-Jong Yeh)

207


Shares %

Nan Ya Plastics Corp. USA

Chairman Nan Ya Plastics Corp. (Representative: Wen-Yuan Wong)

2,400 100.00


Director and President Nan Ya Plastics Corp. (Representative: Chia-Chau Wu)



Director Nan Ya Plastics Corp. (Representative: Kuei-Yung Wang)

Nan Ya Plastics Corp.,

America

Chairman Nan Ya Plastics Corp. (Representative: Wen-Yuan Wong)

60,000 100.00


Director and President Nan Ya Plastics Corp. (Representative: Chia-Chau Wu)



Nan Ya Plastics Corp.,

Texas

Chairman Nan Ya Plastics Corp., America (Representative: Wen-Yuan Wong)

3,000 100.00

Director Nan Ya Plastics Corp., America (Representative: Susan Wang)

Director and President Nan Ya Plastics Corp., America (Representative: Chia-Chau Wu)

Director Nan Ya Plastics Corp., America (Representative: Ming-Jen Tzou)

Director Nan Ya Plastics Corp., America (Representative: Zo-Chun Jen)

Nan Ya Plastics

International (Cayman)

Ltd.

Chairman Nan Ya Plastics Corp. (Representative: Chia-Chau Wu) 52,000 100.00

Nan Ya PCB (U.S.A.) Co.,

Ltd.

Chairman Nan Ya PCB Corp. (Representative: Ann-De Tang) 1,000,000 100.00

Director Nan Ya PCB Corp. (Representative: Chia-Fung Chang)

Nan Ya Plastics

(Hong Kong)

Co., Ltd.

Chairman of the Board of Directors Nan Ya Plastics Corp. (Representative: Chia-Chau Wu)

953,253,077 100.00 Director Nan Ya Plastics Corp. (Representative: Fong-Chin Lin)

Nan Ya PCB

(Hong Kong) Co., Ltd.

Chairman of the Board of Directors Nan Ya PCB Corp. (Representative: Ann-De Tang) 1,223,820,000 100.00

Director Nan Ya PCB Corp. (Representative: Chia-Fung Chang)

Superior World Wide

Trading Co, Ltd.

Chairman of the Board of Directors Nan Ya Plastics Corp. (Representative: Susan Wang)

14,000 100.00 Director Nan Ya Plastics Corp. (Representative: Chia-Chau Wu)

Director Nan Ya Plastics Corp. (Representative: Ming-Jen Tzou )

208

Name of Subsidiary Title (Note1) Name or Representative Shareholding (Note2)(Note3)

Shares %

PFG Fiber Glass

(Hong Kong)

Co., Ltd.

Chairman of the Board of Directors Nan Ya Plastics Corp. (Representative: Chia-Chau Wu)

75,500 100.00 Director Nan Ya Plastics Corp. (Representative: Ming-Jen Tzou)

Director Nan Ya Plastics Corp. (Representative: Yao-Ming Shih)

Nan Ya Plastics

(Xiamen) Co., Ltd.

Chairman Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Chia-Chau Wu) - 85.00

Vice Chairman Xiamen Haicang Investment Group Co., Ltd. (Representative: Siao-Jyuan Shen) - 15.00

Director and President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Fong-Chin Lin)

- 85.00 Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Tzong-Yang Su)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Guo-Ming Shang)

Supervisor Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Ming-Jong Yeh)

Supervisor Xiamen Haicang Investment Group Co., Ltd. (Representative: Yan-Fang Lyu) - 15.00

Nan Ya Plastics

(Nantong) Co., Ltd.

Chairman Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Chia-Chau Wu)

- 100.00

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Ming-Jen Tzou)


Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Zo-Chun Jen)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Tzong-Yang Su)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Shiou-Yeh Sheng)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Yung-Fang Chang)

Director and Vice President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Zhen-Sheng Yeh)


China Nantong

Huafeng Co., Ltd.


- 100.00

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Fong-Chin Lin)


Director and President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Zhen-Sheng Yeh)


209


Shares %

Nantong Huafu Plastics

Co., Ltd.


- 100.00

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Fong-Chin Lin)


Director and President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Zhen-Sheng Yeh)


Nan Ya Electric

(Nantong) Co., Ltd.

Chairman Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Yong-Cai Cai)

- 100.00

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Chia-Chau Wu)


Director and President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Zo-Chun Jen)


Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Zhen-Sheng Yeh)


Nan Ya Plastics

(Guangzhou) Co., Ltd.


- 100.00





Director and Vice President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Jhong-Jhih Deng)


Nan Ya Plastics

(Huizhou) Co., Ltd


- 100.00





Director and Vice President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Si-Cun Yang)


210


Shares %

Nan Ya Electronic

Materials (Huizhou)

Co., Ltd.


- 100.00

Director and President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Ming-Jen Tzou)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Cheng-Chung Lee)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Kuo-Wei Lin)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Si-Cun Yang)


Nan Ya Trading

(Huizhou) Co., Ltd.

Chairman and President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Ming-Jen Tzou)

- 100.00 Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Cheng-Chung Lee)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Kuo-Wei Lin)

Nan Ya Electronic

Materials (Kunshan) Co.,

Ltd.


- 100.00

Director and President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Ming-Jen Tzou)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Zo-Chun Jen)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Cheng-Chung Lee)


Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: You-Ming Ke)


Nan Ya PCB (Kunshan)

Co., Ltd.

Chairman Nan Ya PCB (Hong Kong) Co., Ltd. (Representative: Chia-Chau Wu)

- 100.00

Director Nan Ya PCB (Hong Kong) Co., Ltd. (Representative: Chia-Fung Chang)

Director and President Nan Ya PCB (Hong Kong) Co., Ltd. (Representative: Ann-De Tang)

Director and Vice President Nan Ya PCB (Hong Kong) Co., Ltd. (Representative: Yong-Ji Lin)

Director Nan Ya PCB (Hong Kong) Co., Ltd. (Representative: Hong-Zhong Chen)

Supervisor Nan Ya PCB (Hong Kong) Co., Ltd. (Representative: Ruei-Lian Lyu)

PFG Fiber Glass

(Kunshan) Co., Ltd.

Chairman PFG Fiber Glass (Hong Kong) Co., Ltd. (Representative: Chia-Chau Wu)

- 100.00

Director PFG Fiber Glass (Hong Kong) Co., Ltd. (Representative: Ming-Jen Tzou)

Director and President PFG Fiber Glass (Hong Kong) Co., Ltd. (Representative: Cheng-Chung Lee)

Director PFG Fiber Glass (Hong Kong) Co., Ltd. (Representative: Yao-Ming Shih)

Director and Vice President PFG Fiber Glass (Hong Kong) Co., Ltd. (Representative: Sian-Jhih Cai)


211


Shares %

Nan Ya Draw-Textured

Yarn (Kunshan) Co., Ltd.


- 100.00


Director and President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Sin-Yi Huang)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Yang-Doun Chien)


Nan Ya Plastics

(Ningbo) Co., Ltd.


- 100.00


Director and President Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Chung-Yueh Shih)

Director Nan Ya Plastics (Hong Kong) Co., Ltd. (Representative: Yu-Lung Huang)


Note1: If the subsidiary is a foreign company, the equivalent position shall be listed.

Note2: If the invested company is a corporation, number of shares and percentage of shareholding shall be listed; others shall disclosed the amount and portion of the

contribution to the capital.

Note3: If the director or supervisor is a juristic person, the relevant information of representative shall be disclosed.

8.1.6. Operational Highlights of NPC's Subsidiaries: 2019.12.31 Unit: NT$ thousands

Company Capital Total assets Total liabilities Net worth Operating revenue Operating income Net income

Earnings per

share (NT$)

(After-Tax)

Nan Ya PCB Corp. 6,461,655 38,313,309 9,088,628 29,224,681 31,093,989 71,315 308,203 0.48

Nan Chung Petrochemical Corp. 2,000,000 3,045,138 705,102 2,340,036 6,757,302 11,918 34,675 0.17

Wen Fung Industrial Co., Ltd 187,381 250,337 50 250,287 0 -129 5,182 0.28

Formosa Plastics Group Investment Corp. 50,000 86,943 70 86,873 0 -72 202 0.04

PFG Fiber Glass Corp. 1,000,000 5,352,938 3,212,834 2,140,104 3,667,819 199,269 182,704 1.83

Wenling Technology Corp. 127,385 158,721 22,968 135,753 158,350 454 1,767 0.14

212


Earnings per

share (NT$)

(After-Tax)

Nan Ya Plastics Corp. USA 313,920 2,782,087 920,084 1,862,003 3,772,193 38,770 13,498 5,624.17

Nan Ya Plastics Corp., America 7,853,605 44,238,910 2,655,072 41,583,838 31,666,263 2,090,045 1,454,262 24,237.70

Nan Ya Plastics Corp., Texas 9,934,980 30,747,940 22,182,375 8,565,565 0 -191,370 -745,044 -248,348.00

Nan Ya Plastics International (Cayman) Ltd. 1,741 11,407,974 0 11,407,974 0 0 0 0.00

Nan Ya PCB (U.S.A.) Co., Ltd. 3,479 13,739 0 13,739 23,394 1,047 676 0.68

Nan Ya Plastics (Hong Kong) Co., Ltd. 39,166,673 95,323,639 9,811,840 85,511,799 76,342,258 4,866,703 4,524,884 4.75

Nan Ya PCB (Hong Kong) Co., Ltd. 5,020,900 9,603,190 68 9,603,122 0 -84 -86,474 -0.07

Superior World Wide Trading Co., Ltd. 33,685 781,224 2,979 778,245 12,711 -15,798 60,095 4,292.50

PFG Fiber Glass (Hong Kong) Co., Ltd. 2,407,676 8,498,135 998,821 7,499,314 3,514,922 -71,124 83,276 1,102.98

Nan Ya Plastics (Xiamen) Co., Ltd. 775,457 1,323,652 132,404 1,191,248 1,401,151 115,690 93,803 -

Nan Ya Plastics (Nantong) Co., Ltd. 4,540,736 10,764,202 972,647 9,791,555 6,495,393 312,527 362,886 -

China Nantong Huafeng Co., Ltd. 93,004 332,572 1,812 330,760 0 -1,308 6,880 -

Nantong Huafu Plastics Co., Ltd. 79,111 99,977 6,986 92,991 0 -219 2,596 -

Nan Ya Electric (Nantong) Co., Ltd. 339,275 1,259,266 154,797 1,104,469 585,143 36,839 42,247 -

Nan Ya Plastics (Guangzhou) Co., Ltd. 1,998,681 2,686,342 365,955 2,320,387 2,456,878 -50,065 -17,017 -

Nan Ya Plastics (Huizhou) Co., Ltd 2,527,462 3,509,998 282,912 3,227,086 2,264,616 52,060 104,835 -

213

(2) Affiliated company’s Consolidated Financial Statements: same as NPC’s Financial Statements.

(3) Consolidated Business Reports of Affiliated Enterprises: None.

8.2 Private Placement Securities in 2019 and as of the Date of this Annual Report: None.

8.3 NPC’s Shares Acquired, Disposed Of, and Held by its Subsidiary in 2019 and as of the Date of this Annual Report: None.

8.4 Other Necessary Supplement: None.

8.5 Any Events in 2019 and as of the Date of this Annual Report that Had Significant Impacts on Shareholders’ Right or Share

Prices as Stated in Item 3 Paragraph 2 of Article36 of Securities and Exchange Law of Taiwan: None.


Earnings per

share (NT$)

(After-Tax)

Nan Ya Electronic Materials (Huizhou) Co., Ltd. 5,489,509 11,165,040 4,813,688 6,351,352 10,173,866 327,920 322,453 -

Nan Ya Trading (Huizhou) Co., Ltd. 32,267 58,915 1,159 57,756 7,354 -134 867 -

Nan Ya Electronic Materials (Kunshan) Co., Ltd. 15,159,216 60,820,416 4,414,369 56,406,047 46,874,056 3,872,470 3,272,429 -

Nan Ya PCB (Kunshan) Co., Ltd. 5,017,721 12,785,578 3,196,182 9,589,396 13,831,978 -118,849 -86,812 -

PFG Fiber Glass (Kunshan) Co., Ltd. 4,668,263 8,463,077 754,659 7,708,418 3,514,922 -70,812 90,954 -

Nan Ya Draw-Textured Yarn (Kunshan) Co., Ltd. 7,035,085 6,735,383 6,532,369 203,014 3,170,543 -378,227 -209,593 -

Nan Ya Plastics (Ningbo) Co., Ltd. 2,188,834 6,457,583 4,571,004 1,886,579 11,240,524 591,509 440,322 -

Note1: All subsidiaries shall be disclosed regardless the scale.

Note2: If the subsidiary is a foreign company, the relevant number shall be disclosed base on its 2019 financial report and exchange to NT$. The currency is as follow:

Total assets, Total liabilities Operating revenue, Operating income, Net income

(1) 1USD = NT$ 30.106 1USD = NT$ 30.924

(2) 1HKD = NT$ 3.8597 1HKD = NT$ 3.9646

(3) 1CNY = NT$ 4.3155 1CNY = NT$ 4.4844

214

Stock Code:1303

NAN YA PLASTICS CORPORATION ANDSUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors’ ReportFor the Years Ended December 31, 2019 and 2018

Address: 101, Shuiguan Road, Renwu Dist., Kaohsiung City 814, TaiwanTelephone: (07)371-1411

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

215

Table of contents

Contents Page

1. Cover Page 2152. Table of Contents 2163. Representation Letter 2174. Independent Auditors’ Report 2185. Consolidated Balance Sheets 2236. Consolidated Statements of Comprehensive Income 2247. Consolidated Statements of Changes in Equity 2258. Consolidated Statements of Cash Flows 2269. Notes to the Consolidated Financial Statements

(1) Company history 227(2) Approval date and procedures of the consolidated financial

statements227

(3) New standards, amendments and interpretations adopted 227～230(4) Summary of significant accounting policies 230～252(5) Significant accounting assumptions and judgments, and

major sources of estimation uncertainty252～253

(6) Explanation of significant accounts 253～290(7) Related-party transactions 290～297(8) Pledged assets 297(9) Significant commitment and contingencies 298(10) Losses Due to Major Disasters 299(11) Subsequent Events 299(12) Other 299(13) Other disclosures

(a) Information on significant transactions

(b) Information on investees

(c) Information on investment in mainland China

(14) Segment information

299、303～316 300、317～319300、320～321

300～302

216

Representation Letter

The entities that are required to be included in the combined financial statements of NAN YA PLASTICSCORPORATION as of and for the year ended December 31, 2019 under the Criteria Governing thePreparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements ofAffiliated Enterprises are the same as those included in the consolidated financial statements prepared inconformity with International Financial Reporting Standards No. 10 endorsed by the Financial SupervisoryCommission, "Consolidated Financial Statements." In addition, the information required to be disclosed in thecombined financial statements is included in the consolidated financial statements. Consequently, NAN YAPLASTICS CORPORATION and Subsidiaries do not prepare a separate set of combined financial statements.

Company name: NAN YA PLASTICS CORPORATIONChairman: Wu, Chia-ChauDate: March 18, 2020

217

Independent Auditors’ Report

To the Board of Directors of NAN YA PLASTICS CORPORATION:

Opinion

We have audited the consolidated financial statements of NAN YA PLASTICS CORPORATION ("theCompany") and its subsidiaries (“the Group”), which comprise the consolidated statement of financial positionas of December 31, 2019 and 2018, and the consolidated statements of comprehensive income, changes inequity and cash flows for the years ended December 31, 2019 and 2018, and notes to the consolidated financialstatements, including a summary of significant accounting policies.

In our opinion, based on our audits and the report of other auditors (please refer to Other Matter paragraph), theaccompanying consolidated financial statements present fairly, in all material respects, the consolidatedfinancial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performanceand its consolidated cash flows for the years then ended in accordance with the Regulations Governing thePreparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards(“ IFRSs” ), International Accounting Standards (“ IASs” ), Interpretations developed by the InternationalFinancial Reporting Interpretations Committee (“ IFRIC” ) or the former Standing Interpretations Committee(“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit of the consolidated financial statements as of and for the year ended December 31,2019 in accordance with the Regulations Governing Auditing and Certification of Financial Statements byCertified Public Accountants, Rule No. 1090360805 issued by the Financial Supervisory Commission, and theauditing standards generally accepted in the Republic of China. Furthermore, we conducted our audit of theconsolidated financial statements as of and for the year ended December 31, 2018 in accordance with theRegulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, andthe auditing standards generally accepted in the Republic of China. Our responsibilities under those standardsare further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statementssection of our report. We are independent of the Group in accordance with the Certified Public AccountantsCode of Professional Ethics in Republic of China (“ the Code” ), and we have fulfilled our other ethicalresponsibilities in accordance with the Code. Based on our audits and the report of other auditors, we believethat the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

218

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit ofthe consolidated financial statements of the current period. These matters were addressed in the context of ouraudit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do notprovide a separate opinion on these matters. Key audit matters for the Group's financial statements are stated asfollows:

1. Revenue recognition

How the matter was addressed in our audit

Please refer to note 4(p) "Revenue recognition" for accounting policy related to revenue recognition, andnote 6(u) "Revenue" for information related to revenue recognition of the consolidated financial statements.

The operating performance of the Group has an effect on the distribution to its shareholders and stock price.Thus, their financial performance will have an impact on the users of financial statements. Therefore, theveracity and appropriateness of revenue recognition is a key matter when conducting our audit.

Our principal audit procedures included the following:

(1) Assessing the accounting policies and appropriateness of revenue recognition (including sales returnsand discounts).

(2) Obtaining the list of the top ten newly-added clients and the list of newly added related parties for thecurrent year, inspecting whether the transaction terms are different for normal clients, and reviewing theConsolidated Company’ s financial position after the reporting period to verify the frequency of theunusual sales returns for the purpose of assessing the appropriateness of revenue recognition.

(3) Selecting a moderate number of samples from sales invoices to verify that the accounts receivable havebeen recovered and to ensure that the remitter matches the customer for the purpose of assessing theaccuracy of revenue recognition.

(4) Performing sales cut-off test on the period before and after the financial position date by vouchingrelevant documents of sales transactions to determine whether sales income, return, and discounts havebeen appropriately recognized.

2. Valuation of inventories


Please refer to note 4(h) "Inventories" for accounting policy related to valuation of inventories, and note 6(f)"Inventories, net" for information related to valuation of inventories of the consolidated financial statements.

The amount of inventories shall be disclosed by using the lower of cost or net realizable values. Since the netrealizable value is influenced by the international raw material pricing, there is a risk that the cost willexceed the net realizable value. Therefore, the valuation of inventories is a key matter when conducting ouraudit.

219


(1) Assessing the appropriateness of inventory valuation policies.

(2) Ensuring the process of inventory valuation is in conformity with the accounting policies.

(3) Understanding the net realizable value used by the management, and the variation of the prices in aperiod after the reporting date, to ensure the appropriateness of the valuation price.

(4) Assessing whether the disclosure of provision for inventory valuation is appropriate.

Other Matter

We did not audit the financial statements of certain subsidiaries and investee companies, which representedinvestment in other entities accounted for using the equity method of the Group. Those statements were auditedby other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amountsincluded for certain subsidiaries and investee companies, is based solely on the report of other auditors. Thefinancial statements of the aforementioned subsidiaries reflect the total assets constituting 9.8 percent and 9.53percent of the consolidated total assets as at December 31, 2019 and 2018, respectively; and the total revenuesconstituting 11 percent and 12.55 percent of the consolidated total revenues for the years ended December 31,2019 and 2018, respectively.The investment in aforementioned investee companies accounted for using theequity method constituted 14.44 percent and 14.4 percent of the consolidated total assets as at December 31,2019 and 2018, respectively, and the related share of profit of associated and joint ventures accounted for usingthe equity method constituted 95.85 percent and 30.19 percent of consolidated total comprehensive income forthe years ended December 31, 2019 and 2018, respectively.

The Company has prepared its parent-company-only financial statements as of and for the years endedDecember 31, 2019 and 2018, on which we have issued an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated FinancialStatements

Management is responsible for the preparation and fair presentation of the consolidated financial statements inaccordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and withthe IFRSs, IASs, IFRC, SIC endorsed and issued into effect by the Financial Supervisory Commission of theRepublic of China, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due to fraudor error.

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

Those charged with governance (including the Audit Committee) are responsible for overseeing the Group’ sfinancial reporting process.

220

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an auditconducted in accordance with the auditing standards generally accepted in the Republic of China will alwaysdetect a material misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economicdecisions 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, weexercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

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

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

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

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

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

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

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

221

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

The engagement partners on the audit resulting in this independent auditors’ report are

Kuo, Hsin-Yi and Yu, Chi-Lung.

KPMG

Taipei, Taiwan (Republic of China) March 18, 2020

Notes to Readers

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

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

222

(English Translation of Consolidated Financial Statements Originally Issued in Chinese)NAN YA PLASTICS CORPORATION AND SUBSIDIARIES

Consolidated Balance SheetsDecember 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

December 31, 2019 December 31, 2018Assets Amount % Amount %

Current assets:1100 Cash and cash equivalents (notes 6(a) and (x)) $ 43,608,119 8 52,365,882 91110 Current financial assets at fair value through profit or loss (notes 6(b), (x)) 4,044,356 1 4,017,249 11120 Current financial assets at fair value through other comprehensive income (notes

6(c), (x), and 8)41,715,821 8 44,528,667 8

1150 Notes receivable, net (notes 6(d) and (x)) 5,557,174 1 6,524,088 11170 Accounts receivable, net (notes 6(d) and (x)) 36,640,358 7 39,237,627 71180 Accounts receivable due from related parties (notes 6(d), (x) and 7) 1,866,001 - 2,484,349 -1200 Other receivables (note 6(e)) 2,237,168 - 1,869,037 -1210 Other receivables due from related parties (notes 6(e), (x), and 7) 5,925,227 1 6,117,870 1130X Inventories (note 6(f)) 41,567,752 7 49,040,842 91470 Other current assets 4,314,370 1 4,088,930 1

Total current assets 187,476,346 34 210,274,541 37Non-current assets:

1510 Non-current financial assets at fair value through profit or loss (notes 6(b) and (x)) 824,726 - 1,047,877 -1517 Non-current financial assets at fair value through other comprehensive income

(notes 6(c) and (x))22,662,110 4 28,011,349 5

1550 Investments accounted for using equity method (notes 6(g) and 8) 165,109,381 30 169,871,136 301600 Property, plant and equipment (notes 6(h) and 8) 156,095,364 28 140,907,261 251755 Right-of-use assets (notes 6(i) and 7) 1,198,549 - - -1782 Intangible assets (note 6(j)) 2,293,595 - 2,486,740 -1812 Technology development expense 30,257 - 37,385 -1840 Deferred tax assets (note 6(q)) 5,439,156 1 5,519,863 11915 Prepayments for purchase of equipment 3,468,440 1 2,710,252 -1937 Overdue receivables (note 6(d)) - - - -1975 Net defined benefit asset-non-current (note 6(p)) 1,865 - 1,040 -1990 Other non-current assets 10,078,890 2 9,381,900 2

Total non-current assets 367,202,333 66 359,974,803 63

Total assets $ 554,678,679 100 570,249,344 100

December 31, 2019 December 31, 2018Liabilities and Equity Amount % Amount %

Current liabilities:2100 Short-term borrowings (notes 6(l), (x), and (aa)) $ 24,012,100 4 21,253,381 42110 Short-term notes and bills payable (notes 6(k), (x) and (aa)) 15,392,795 3 8,897,747 12170 Notes and accounts payable (note 6(x)) 9,102,231 2 9,496,716 22180 Accounts payable to related parties (notes 6(x) and 7) 6,986,969 1 8,720,846 12200 Other payables (note 7) 18,539,776 3 20,233,152 42280 Current lease liabilities (notes 6(o),(x) , (aa), and 7) 197,527 - - -2321 Current portion of bonds payable (notes 6(n), (x) and (aa)) 4,647,875 1 5,946,931 12322 Current portion of long-term borrowings (note 6(m), (x) and (aa)) 3,333,333 1 6,133,333 12399 Other current liabilities 1,303,544 - 1,109,441 -

Total current liabilities 83,516,150 15 81,791,547 14Non-Current liabilities:

2530 Bonds payable (notes 6(n), (x) and (aa)) 59,330,786 11 52,584,524 92540 Long-term borrowings (notes 6(m), (x) and (aa)) 14,751,117 3 6,137,472 12570 Deferred tax liabilities (note 6(q)) 13,122,029 2 12,639,024 32580 Non-current lease liabilities (notes 6(o), (x) , (aa) and 7) 291,222 - - -2611 Long-term notes payable (notes 6(m), (x) and (aa)) 5,096,417 1 7,096,550 12640 Net defined benefit liability-non-current (note 6(p)) 22,183,650 4 22,287,385 42645 Guarantee deposits 712,939 - 679,464 -2670 Other non-current liabilities 103,669 - 128,386 -

Total non-current liabilities 115,591,829 21 101,552,805 18Total liabilities 199,107,979 36 183,344,352 32

Equity attributable to owners of parent (notes 6(r)):3110 Common Stock 79,308,216 14 79,308,216 143200 Capital surplus 26,617,834 5 26,672,119 53300 Retained earnings 204,105,146 37 220,788,020 393400 Others 34,540,688 6 48,903,842 836XX Non-controlling interests 10,998,816 2 11,232,795 2

Total equity 355,570,700 64 386,904,992 68Total liabilities and equity $ 554,678,679 100 570,249,344 100

See accompanying notes to Consolidated financial statements.223


Consolidated Statements of Comprehensive IncomeFor the years ended December 31, 2019 and 2018

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

2019 2018

Amount % Amount %

4000 Operating revenue (notes 6(u) and 7) $ 286,303,059 100 333,061,560 1005000 Operating costs (notes 6(f), (p), (v), 7 and 12) 258,172,796 90 284,054,265 855910 Less: Unrealized (realized) profit from affiliated companies (note 7) (6,964) - (56,290) -

Gross profit from operation 28,137,227 10 49,063,585 15Operating expenses (notes 6(j), (p), (v), 7 and 12):

6100 Selling expenses 9,661,546 3 10,261,727 36200 Administrative expenses 8,590,296 3 9,381,085 3

Total operating expenses 18,251,842 6 19,642,812 6Net Operating income 9,885,385 4 29,420,773 9Non-operating income and expenses (notes 6(g), (o), (w) and 7):

7010 Other income 6,371,567 2 6,635,682 27020 Other gains and losses 213,753 - 1,012,460 -7050 Finance costs (1,620,428) (1) (1,723,469) -7060 Share of profit of associates and joint ventures accounted for using equity method 11,838,753 4 26,179,740 8

Total non-operating income and expenses 16,803,645 5 32,104,413 10Profit before tax 26,689,030 9 61,525,186 19

7950 Less: Income tax expenses (note 6(q)) 3,479,507 1 8,866,335 3Profit 23,209,523 8 52,658,851 16

8300 Other comprehensive income (loss) (note 6(g) and (r)): 8310 Components of other comprehensive income that will not be reclassified to profit or loss8311 Gains (losses) on remeasurements of defined benefit plans (52,911) - (768,275) -8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive

income (7,787,479) (3) (3,311,346) (1)8320 Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of

other comprehensive income that will not be reclassified to profit or loss (808,135) - (3,383,834) (1)8349 Less: income tax related to components of other comprehensive income that will not be reclassified to profit or loss (10,556) - (324,897) -

Total items that may not be reclassified subsequently to profit and loss (8,637,969) (3) (7,138,558) (2)8360 Components of other comprehensive income (loss) that will be reclassified to profit or loss8361 Exchange differences on translation (5,962,293) (2) 441,013 -8370 Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of

other comprehensive income that will be reclassified to profit or loss 15,812 - (22,910) -8399 Less: income tax related to components of other comprehensive income that will be reclassified to profit or loss - - 135,016 -

Total items that may be reclassified subsequently to profit and loss (5,946,481) (2) 283,087 -8300 Other comprehensive income (14,584,450) (5) (6,855,471) (2)8500 Total comprehensive income $ 8,625,073 3 45,803,380 14

Profit, attributable to:8610 Owners of parent $ 23,076,123 8 52,746,021 168620 Non-controlling interests 133,400 - (87,170) -

$ 23,209,523 8 52,658,851 16Comprehensive income attributable to:

8710 Owners of parent $ 8,608,080 3 45,930,928 148720 Non-controlling interests 16,993 - (127,548) -

$ 8,625,073 3 45,803,380 14

Basic earnings per share (note 6(t)):Before

TaxAfterTax

BeforeTax

AfterTax

9710 Income from continuing operations $ 3.37 2.93 7.76 6.64Income from non-controlling equity (0.27) (0.02) (0.47) 0.01

9750 Income attributable to shareholders of the parent $ 3.10 2.91 7.29 6.65

See accompanying notes to Consolidated financial statements. 224


Consolidated Statements of Changes in EquityFor the years ended December 31, 2019 and 2018(Expressed in Thousands of New Taiwan Dollars)

Equity attributable to owners of parentItems of other equity interest

Retained earnings Unrealizedgains

Ordinaryshares

Capitalsurplus

Legalreserve

Specialreserve

Unappropriatedretainedearnings

Exchangedifferences ontranslation of

foreignfinancial

statements

(losses) fromfinancial assets

measured atfair value

through othercomprehensive

income

Unrealizedgains (losses)on available-

for-salefinancial

assets

Gains (losses)on effectiveportion ofcash flow

hedges

Gains (losses)on hedging instruments

Total equityattributable to

owners ofparent

Non-controlling

interests Total equityBalance at January 1, 2018 $ 79,308,216 26,158,472 57,873,852 86,932,416 63,674,176 (6,026,197) - 47,691,196 7,729 - 355,619,860 11,599,899 367,219,759Effects of retrospective application - - - - 507,292 - 61,239,238 (47,691,196) (7,729) 7,729 14,055,334 (1,172) 14,054,162Balance at January 1, 2018 after adjustment 79,308,216 26,158,472 57,873,852 86,932,416 64,181,468 (6,026,197) 61,239,238 - - 7,729 369,675,194 11,598,727 381,273,921Appropriation and distribution of retained earnings:

Legal reserve appropriated - - 5,452,101 - (5,452,101) - - - - - - - -Special reserve appropriated - - - 6,819,825 (6,819,825) - - - - - - - -Cash dividends of ordinary share - - - - (40,447,190) - - - - - (40,447,190) - (40,447,190)Reversal of special reserve - - - (15,150) 15,150 - - - - - - - -

Other changes in capital surplus:Other changes in capital surplus - 513,647 - - - - - - - - 513,647 - 513,647

Profit - - - - 52,746,021 - - - - - 52,746,021 (87,170) 52,658,851Other comprehensive income - - - - (498,165) 320,901 (6,614,919) - - (22,910) (6,815,093) (40,378) (6,855,471)Total comprehensive income - - - - 52,247,856 320,901 (6,614,919) - - (22,910) 45,930,928 (127,548) 45,803,380Changes in non-controlling interests - - - - - - - - - - - (238,384) (238,384)Disposal of investments in equity instruments designated at

fair value through other comprehensive income - - - - (382) - - - - - (382) - (382)Balance at December 31, 2018 79,308,216 26,672,119 63,325,953 93,737,091 63,724,976 (5,705,296) 54,624,319 - - (15,181) 375,672,197 11,232,795 386,904,992Appropriation and distribution of retained earnings:

Legal reserve appropriated - - 5,274,602 - (5,274,602) - - - - - - - -Special reserve appropriated - - - 6,106,008 (6,106,008) - - - - - - - -Cash dividends of ordinary share - - - - (39,654,108) - - - - - (39,654,108) - (39,654,108)Reversal of special reserve - - - (1,433) 1,433 - - - - - - - -

Other changes in capital surplus:Other changes in capital surplus - (54,285) - - - - - - - - (54,285) - (54,285)

Profit - - - - 23,076,123 - - - - - 23,076,123 133,400 23,209,523Other comprehensive income - - - - (104,889) (5,866,135) (8,512,831) - - 15,812 (14,468,043) (116,407) (14,584,450)Total comprehensive income - - - - 22,971,234 (5,866,135) (8,512,831) - - 15,812 8,608,080 16,993 8,625,073Changes in non-controlling interests - - - - - - - - - - - (250,972) (250,972)Balance at December 31, 2019 $ 79,308,216 26,617,834 68,600,555 99,841,666 35,662,925 (11,571,431) 46,111,488 - - 631 344,571,884 10,998,816 355,570,700



Consolidated Statements of Cash FlowsFor the years ended December 31, 2019 and 2018(Expressed in Thousands of New Taiwan Dollars)

2019 2018Cash flows from (used in) operating activities:

Profit before tax $ 26,689,030 61,525,186Adjustments:

Adjustments to reconcile profit (loss):Depreciation expense 15,258,463 15,992,569Amortization expense 1,286,179 1,860,619Net gain on diposal of financial assets (53,863) -Net loss (profit) on financial assets at fair value through profit or loss 26,211 (198,301)Interest expense 1,620,428 1,723,469Interest income (1,090,433) (1,047,522)Dividend income (3,237,464) (3,613,797)Share of profit of associates and joint ventures accounted for using equity method (11,838,753) (26,179,740)(Profit) loss on disposal of property, plant and equipment (307,736) 105,817Property, plant and equipment transferred to expenses 87,995 116,398Realized profit from affiliated companies (6,964) (56,290)Unrealized foreign exchange profit or loss 287,198 34,600Other revenue, overdue dividends and compensation of board and directors 3,518 2,906Gain on reversal of impairment loss of property, plant and equipment (59) (9,761)

Total adjustments to reconcile profit (loss) 2,034,720 (11,269,033)Changes in operating assets and liabilities:

Decrease (increase) in notes receivable 966,914 (476,425)Decrease in accounts receivable (including related parties) 3,033,777 2,269,070(Increase) decrease in other receivable (405,483) 171,441Decrease (increase) in inventories 7,166,765 (9,467,658)(Increase) decrease in other current assets (252,266) 1,257,583

Total changes in operating assets 10,509,707 (6,245,989)Decrease in notes and accounts payable (2,113,364) (1,759,085)(Decrease) increase in other payable (46,578) 352,922Increase (decrease) in other current liabilities 194,103 (101,110)Decrease in net defined benefit liability (157,473) (267,847)

Total changes in operating liabilities (2,123,312) (1,775,120)Total changes in operating assets and liabilities 8,386,395 (8,021,109)Total adjustments 10,421,115 (19,290,142)

Cash inflow generated from operations 37,110,145 42,235,044Interest received 1,127,785 1,176,031Dividends received 20,260,972 21,127,146Interest paid (1,505,460) (1,834,432)Income taxes paid (4,694,089) (7,144,975)

Net cash flows from operating activities 52,299,353 55,558,814Cash flows from (used in) investing activities:

Acquisition of financial assets at fair value through other comprehensive income - (1,676,070)Proceeds from capital reduction of financial assets at fair value through other comprehensive income - 1,972Proceeds from disposal of financial assets at amortised cost - 1,680,011Proceeds from disposal of financial assets at fair value through profit or loss 207,799 -Acquisition of investments accounted for using equity method (2,320,536) (2,010,450)Acquisition of property, plant and equipment (29,483,979) (21,147,017)Proceeds from disposal of property, plant and equipment 1,250,215 88,170Decrease (increase) in refundable deposits 19,220 (63,686)Decrease in other receivables due from related parties 192,643 8,229,871Increase in other non-current assets (7,278,477) (4,299,944)

Net cash flows used in investing activities (37,413,115) (19,197,143)Cash flows from (used in) financing activities:

Increase in short-term loans 2,772,313 11,969,794Increase in short-term notes and bills payable 6,500,000 900,000Proceeds from issuing bonds 11,381,560 10,483,594Repayments of bonds (5,950,000) (7,885,122)Proceeds from long-term debt 14,388,650 3,200,000Repayments of long-term debt (8,255,441) (15,802,786)(Decrease) increase in other borrowings (long-term notes payables) (2,000,000) 2,100,000Increase (decrease) in guarantee deposits received 33,475 (25,212)Payment of lease liabilities (209,941) -Decrease in other non-current liabilities (5,985) (203,234)Cash dividends paid (39,629,893) (40,399,354)Change in non-controlling interests (250,972) (201,851)

Net cash flows from financing activities (21,226,234) (35,864,171)Effect of exchange rate changes on cash and cash equivalents (2,417,767) 1,483,615Net increase in cash and cash equivalents (8,757,763) 1,981,115Cash and cash equivalents at beginning of period 52,365,882 50,384,767Cash and cash equivalents at end of period $ 43,608,119 52,365,882



Notes to the Consolidated Financial StatementsFor the years ended December 31, 2019 and 2018

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

(1) Company history

Nan Ya Plastics Corporation was incorporated on August 22, 1958, and established its factories inKaohsiung City. The Company engages in the manufacture and sale of plastic products, polyester fibers,petrochemical products, and electronic materials. It has gone through several capital increases andestablished many divisions. Currently, the Company has the following divisions: plastics, fiber,petrochemical, electronics, and engineering. It also has 10 manufacturing plants across Taiwan, 1 branchoffice in Mai-Liao and 1 branch office in Sen-Kong.

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

The accompanying consolidated financial statements were approved and authorized for issue by the Boardof Directors on March 18, 2019.

(3) New standards, amendments and interpretations adopted:

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

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

New, Revised or Amended Standards and InterpretationsEffective date

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

Except for the following items, the Consolidated Company believes that the adoption of the aboveIFRSs would not have any material impact on its consolidated financial statements. The extent andimpact of signification changes are as follows:

(i) IFRS 16“Leases”

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

(Continued)227

NAN YA PLASTICS CORPORATION AND SUBSIDIARIESNotes to the Consolidated Financial Statements

The Consolidated Company applied IFRS 16 using the modified retrospective approach, underwhich the cumulative effect of initial application is recognized in retained earnings on January1, 2019. The details of the changes in accounting policies are disclosed below,

1) Definition of a lease

Previously, the Consolidated Company determined at contract inception whether anarrangement is or contains a lease under IFRIC 4. Under IFRS 16, the ConsolidatedCompany assesses whether a contract is or contains a lease based on the definition of alease, as explained in Note 4(m).

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

2) As a lessee

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

The Consolidated Company decided to apply recognition exemptions to short-term leasesof buildings that have a lease term of 12 months or less.

● Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaininglease payments, discounted at the Consolidated Company’s incremental borrowingrate as at January 1, 2019. Right-of-use assets are measured at either:

－ their carrying amount as if IFRS 16 had been applied since thecommencement date, discounted using the lessee’ s incremental borrowingrate at the date of initial application – the Consolidated Company applied thisapproach to its largest property leases; or

－ an amount equal to the lease liability, adjusted by the amount of any prepaidor accrued lease payments – the Consolidated Company applied this approachto all other lease.

(Continued)228


In addition, the Consolidated Company used the following practical expedientswhen applying IFRS 16 to leases.

－ Applied a single discount rate to a portfolio of leases with similarcharacteristics.

－ Adjusted the right-of-use assets by the amount of IAS 37 onerous contractprovision immediately before the date of initial application, as an alternativeto an impairment review.

－ Applied the exemption not to recognize right-of-use assets and liabilities forleases with less than 12 months of lease term.

－ Excluded initial direct costs from measuring the right-of-use asset at the dateof initial application.

－ Used hindsight when determining the lease term if the contract containsoptions to extend or terminate the lease.

3) Impacts on financial statements

On transition to IFRS 16, the Consolidated Company recognized additional $1,394,800of right-of-use assets and $624,278 of lease liabilities, the difference was recognized inretained earnings. When measuring lease liabilities, the Consolidated Companydiscounted lease payments using its incremental borrowing rate at January 1, 2019. Theweighted-average rate applied was 3.10%.

January 1, 2019Operating lease commitment on December 31, 2018 as disclosed in

the Consolidated Company’s consolidated financial statements$ 666,080

Discounted using the incremental borrowing rate on January 1, 2019 624,278Lease liabilities recognized on January 1, 2019 $ 624,278

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

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


per IASBAmendments to IFRS 3 “Definition of a Business” January 1, 2020Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform” January 1, 2020Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020

The Consolidated Company assesses that the adoption of the abovementioned standards would nothave any material impact on its consolidated financial statements.

(Continued)229


(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 StandardsBoard (IASB), but have yet to be endorsed by the FSC:


per IASBAmendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Betweenan Investor and Its Associate or Joint Venture”

Effective date tobe determinedby IASB

IFRS 17 “Insurance Contracts” January 1, 2021Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” January 1, 2022

Those which may be relevant to the Consolidated Company are set out below:

Issuance / ReleaseDates

Standards orInterpretations Content of amendment

September 11, 2014 Amendments to IFRS 10 andIAS 28 “Sale or Contributionof Assets Between an Investorand Its Associate or JointVenture”

The amendments address an acknowledgedinconsistency between the requirements inIFRS 10 and those in IAS 28 (2011) indealing with the sale or contribution of assetsbetween an investor and its associate or jointventure.The main consequence of the amendments isthat a full gain or loss is recognized when atransaction involves a business (whether it ishoused in a subsidiary or not). A partial gainor loss is recognized when a transactioninvolves assets that do not constitute abusiness, even if these assets are housed in asubsidiary.

The Consolidated Company is evaluating the impact of its initial adoption of the abovementionedstandards or interpretations on its consolidated financial position and consolidated financialperformance. The results thereof will be disclosed when the Consolidated Company completes itsevaluation.

(4) Summary of significant accounting policies:

The significant accounting policies presented in the consolidated financial statements are summarizedbelow. Except for those specifically indicated, the following accounting policies were applied consistentlythroughout the periods presented in the consolidated financial statements.

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the RegulationsGoverning the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “theRegulations” ) and the International Financial Reporting Standards, International AccountingStandards, IFRIC Interpretations, and SIC Interpretations endorsed by the Financial SupervisoryCommission, ROC.

(Continued)230


(b) Basis of preparation

Basis of measurement

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

(i) Financial instruments at fair value through profit or loss are measured at fair value;

(ii) Fair value through other comprehensive income (Available-for-sale) financial assets aremeasured at fair value;

(iii) The defined benefit liabilities (assets) are measured at fair value of the plan assets less thepresent value of the defined benefit obligation, limited as explained in note 6(p).

Functional and presentation currency

The functional currency of each Consolidated Company entity is determined based on the primaryeconomic environment in which the entity operates. The consolidated financial statements arepresented in New Taiwan Dollars, which is the Company’ s functional currency. All financialinformation presented in New Taiwan Dollars has been rounded to the nearest thousand.

(c) Basis of consolidation

(i) Principle of preparing consolidated financial statements

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

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

The Group prepares consolidated financial statements using uniform accounting policies forlike transactions and other events in similar circumstances.

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

Shareholding

InvestorThe name of subsidiaries Business activity

December 31,2019

December 31,2018 Note

The Company Nan Ya Plastics CorporationU.S.A.

production of plasticproducts

%100.00 %100.00

The Company Nan Ya Plastics CorporationAmerica

production of plastic,polyester and chemicalproducts

%100.00 %100.00

(Continued)231


Shareholding


December 31,2019


The Company Formosa Plastics GroupInvestment Corp.

investment %100.00 %100.00

The Company Nan Ya Plastics (HongKong) Co., Ltd.

plastics and electronicproducts trading,investment

%100.00 %100.00

The Company Superior World WideTrading Co., Ltd.

plastics trading,investment

%100.00 %100.00

The Company Nan Ya PCB Corporation production of printedcircuit board

%66.97 %66.97

The Company Wen Fung Industrial Co.,Ltd.

production ofelectronic components

%100.00 %100.00

The Company Nan Chung PetrochemicalCorporation

production of chemicalproducts

%50.00 %50.00

The Company Nan Ya PlasticsInternational (Cayman)Limited

investment %100.00 %100.00

The Company PFG Fiber GlassCorporation

production of glassfiber

%100.00 %100.00

The Company PFG Fiber Glass (HongKong) Corporation Limited

investment %100.00 %100.00

Nan Ya PCB Corporation Nan Ya PCB (U.S.A.)Corporation

retargeting %100.00 %100.00

Nan Ya PCB Corporation Nan Ya PCB (HK)Corporation

electronic materialstrading, investment

%100.00 %100.00

Nan Ya PCB (HK)Corporation

Nan Ya PCB (Kunshan)Corporation

production of printedcircuit board

%100.00 %100.00

Nan Ya Plastics (HongKong) Co., Ltd.

Nan Ya Plastics (Nantong)Co., Ltd.

production of plasticproducts, steam andelectricity

%100.00 %100.00 Note 1


Nan Ya Electric (Nantong)Co., Ltd.

production of switchgear and control panel

%100.00 %100.00


Nan Ya Plastics Film(Nantong) Co., Ltd.


%- %- Note 1


China Nantong HuafengCo., Ltd.

trading %100.00 %100.00


Nantong Huafu Plastics Co.,Ltd.

trading %100.00 %100.00


Nan Ya Electronic Materials(Kunshan) Co., Ltd.

production ofelectronic materials,polyester products,steam and electricity

%100.00 %100.00


Nan Ya Draw TexturedYarn (Kunshan) Co., Ltd.

production of fiber %100.00 %100.00


Nan Ya Plastics(Guangzhou) Co., Ltd.

production of polyesterproducts

%100.00 %100.00


Nan Ya Plastics (Huizhou)Co., Ltd.

production of polyesterproducts

%100.00 %100.00 Note 2


Nan Ya Plastics Film(Huizhou) Co., Ltd.

production of plasticfilm products

%- %- Note 2


Nan Ya Electronic Materials(Huizhou) Co., Ltd.

production ofelectronic materials

%100.00 %100.00

(Continued)232


Shareholding


December 31,2019



Nan Ya Trading (Huizhou)Co., Ltd.

trading %100.00 %100.00


Nan Ya Plastics (Xiamen)Co., Ltd.


%85.00 %85.00


Nan Ya Plastics (Ningbo)Co., Ltd.

production of plasticproducts andplasticizer

%100.00 %100.00

Wen Fung Industrial Co.,Ltd.

Wellink TechnologyCorporation

production ofelectronic components

%100.00 %100.00

Nan Ya Plastics CorporationAmerica

Nan Ya Plastics CorporationTexas

production of chemicalproducts

%100.00 %100.00

PFG Fiber Glass (HongKong) Corporation Limited

PFG Fiber Glass (Kunshan)Co., Ltd.

production of glassfiber

%100.00 %100.00

Note 1： On October 1, 2018, Nan Ya Plastics (Nantong) Co., Ltd and Nan Ya Plastics Film (Nantong) Co., Ltd merged into NanYa Plastics (Nantong) Co., Ltd.

Note 2： On October 1, 2018, Nan Ya Plastics (Huizhou) Co., Ltd and Nan Ya Plastics Film (Huizhou) Co., Ltd merged into NanYa Plastics (Huizhou) Co., Ltd.

The Company holds fifty-percent voting shares of Nan Chung Petrochemical Corporation (NanChung), therefore, the general manager of Nan Chung has been designated by the Company.As the Company has control over the operations of Nan Chung, hence, the Company includedNan Chung as one of its subsidiaries in its consolidated financial statements.

(d) Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of theConsolidated Company entities at the exchange rates at the dates of the transactions. At the end ofeach subsequent reporting period, monetary items denominated in foreign currencies are translatedinto the functional currencies using the exchange rate at that date. Non-monetary items denominatedin foreign currencies that are measured at fair value are translated into the functional currenciesusing the exchange rate at the date that the fair value was determined. Non-monetary itemsdenominated in foreign currencies that are measured based on historical cost are translated using theexchange rate at the date of the transaction.

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

● an investment in equity securities designated as at fair value through other comprehensiveincome;

● a financial liability designated as a hedge of the net investment in a foreign operation to theextent that the hedge is effective; or

● qualifying cash flow hedges to the extent that the hedges are effective.

(Continued)233


Foreign operations

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

When a foreign operation is disposed of such that control, significant influence, or joint control islost, the cumulative amount in the translation reserve related to that foreign operation is reclassifiedto profit or loss as part of the gain or loss on disposal. When the Consolidated Company disposes ofonly part of its interest in a subsidiary that includes a foreign operation while retaining control, therelevant proportion of the cumulative amount is reattributed to non controlling interests. When theConsolidated Company disposes of only part of its investment in an associate or joint venture thatincludes a foreign operation while retaining significant influence or joint control, the relevantproportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary receivable from or payable to a foreign operation is neitherplanned nor likely to occur in the foreseeable future. Exchange differences arising from such amonetary item that are considered to form part of the net investment in the foreign operation arerecognized in other comprehensive income.

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

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

(i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

(ii) It is held primarily for the purpose of trading;

(iii) It is expected to be realized within twelve months after the reporting period ; or

(iv) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged orused to settle a liability for at least twelve months after the reporting period date.

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

An entity shall classify a liability as current when:

(i) It is expected to be settled in the normal operating cycle;


(iii) It is due to be settled within twelve months after the reporting period date; or

(Continued)234


(iv) The Consolidated Company does not have an unconditional right to defer settlement of theliability for at least twelve months after the reporting period date. Terms of a liability thatcould, at the option of the counterparty, result in its settlement by issuing equity instruments donot affect its classification.

(f) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquidinvestments that are readily convertible to known amounts of cash and are subject to an insignificantrisk of changes in value. Time deposits which meet the above definition and are held for the purposeof meeting short term cash commitments rather than for investment or other purposes should berecognized as cash equivalents.

(g) Financial instruments

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

(i) Financial assets

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

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair valuethrough other comprehensive income (FVOCI); or FVTPL. Financial assets are not reclassifiedsubsequent to their initial recognition unless the Consolidated Company changes its businessmodel for managing financial assets, in which case all affected financial assets are reclassifiedon the first day of the first reporting period following the change in the business model.

1) Financial assets measured at amortized cost

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

● it is held within a business model whose objective is to hold assets to collectcontractual cash flows; and

● its contractual terms give rise on specified dates to cash flows that are solelypayments of principal and interest on the principal amount outstanding.

(Continued)235


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

2) Fair value through other comprehensive income (FVOCI)

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

● it is held within a business model whose objective is achieved by both collectingcontractual cash flows and selling financial assets; and


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

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

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

Dividend income derived from equity investments is recognized on the date that theConsolidated Company’ s right to receive payment is established, which in the case ofquoted securities is normally the ex-dividend date.

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above aremeasured at FVTPL, including derivative financial assets. On initial recognition, theConsolidated Company may irrevocably designate a financial asset, which meets therequirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing soeliminates or significantly reduces an accounting mismatch that would otherwise arise.

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

(Continued)236


4) Business model assessment

The Consolidated Company makes an assessment of the objective of the business modelin which a financial asset is held at portfolio level because this best reflects the way thebusiness is managed and information is provided to management. The informationconsidered includes:

● the stated policies and objectives for the portfolio and the operation of those policiesin practice. These include whether management’ s strategy focuses on earningcontractual interest income, maintaining a particular interest rate profile, matchingthe duration of the financial assets to the duration of any related liabilities orexpected cash outflows or realizing cash flows through the sale of the assets;

● how the performance of the portfolio is evaluated and reported to the ConsolidatedCompany management;

● the risks that affect the performance of the business model (and the financial assetsheld within that business model) and how those risks are managed;

● how managers of the business are compensated ─ e.g. whether compensation isbased on the fair value of the assets managed or the contractual cash flows collected;and

● the frequency, volume and timing of sales of financial assets in prior periods, thereasons for such sales and expectations about future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify forderecognition are not considered as sales for this purpose, and are consistent with theConsolidated Company’s continuing recognition of the assets.

Financial assets that are held for trading or are managed and whose performance isevaluated on a fair value basis are measured at FVTPL.

5) Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘ principal’ is defined as the fair value of thefinancial assets on initial recognition. ‘Interest’ is defined as consideration for the timevalue of money and for the credit risk associated with the principal amount outstandingduring a particular period of time and for other basic lending risks and costs, as well as aprofit margin.

In assessing whether the contractual cash flows are solely payments of principal andinterest, the Consolidated Company considers the contractual terms of the instrument.This includes assessing whether the financial asset contains a contractual term that couldchange the timing or amount of contractual cash flows such that it would not meet thiscondition. In making this assessment, the Consolidated Company considers thefollowing:

● contingent events that would change the amount or timing of cash flows;

● terms that may adjust the contractual coupon rate, including variable rate features;

(Continued)237


● prepayment and extension features; and

● terms that limit the Consolidated Company's claim to cash flows from specifiedassets (e.g. non-recourse features)

6) Impairment of financial assets

The Consolidated Company recognizes loss allowances for expected credit losses (ECL)on financial assets measured at amortized cost (including cash and cash equivalents,amortized costs, notes and accounts receivable, other receivable, guarantee deposit paidand other financial assets) and contract assets.

The Consolidated Company measures loss allowances at an amount equal to lifetimeECL, 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 defaultoccurring over the expected life of the financial instrument) has not increasedsignificantly since initial recognition.

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

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

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

The maximum period considered when estimating ECLs is the maximum contractualperiod over which the Consolidated Company is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantlysince initial recognition and when estimating ECL, the Consolidated Company considersreasonable and supportable information that is relevant and available without undue costor effort. This includes both quantitative and qualitative information and analysis basedon the Consolidated Company’s historical experience and informed credit assessment, aswell as forward-looking information.

The Consolidated Company assumes that the credit risk on a financial asset has increasedsignificantly if there is a breach of contract.

The Consolidated Company considers a financial asset to be in default when theborrower is unlikely to pay its credit obligations in full. The Consolidated Companymeasures its loss allowances at an amount equal to lifetime expected credit loss.

(Continued)238


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

At each reporting date, the Consolidated Company assesses whether financial assetscarried at amortized cost is credit-impaired. A financial asset is ‘credit-impaired’ whenone or more events that have a detrimental impact on the estimated future cash flows ofthe financial asset have occurred. Evidence that a financial assets is credit-impairedincludes the following observable data:

● significant financial difficulty of the borrower or issuer;

● a breach of contract such as a default or being more than one year past due;

● the lender of the borrower, for economic or contractual reasons relating to theborrower's financial difficulty, having granted to the borrower a concession that thelender would not otherwise consider;

● it is probable that the borrower will enter bankruptcy or other financialreorganization; or

● the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from thegross carrying amount of the assets.

The gross carrying amount of a financial asset is written off when the ConsolidatedCompany has no reasonable expectations of recovering a financial asset in its entirety ora portion thereof. The Consolidated Company individually makes an assessment withrespect to the timing and amount of write-off based on whether there is a reasonableexpectation of recovery. The Consolidated Company expects no significant recoveryfrom the amount written off. However, financial assets that are written off could still besubject to enforcement activities in order to comply with the Consolidated Company’sprocedures for recovery of amounts due.

7) Derecognition of financial assets

The Consolidated Company derecognizes a financial asset when the contractual rights tothe cash flows from the financial asset expire, or it transfers the rights to receive thecontractual cash flows in a transaction in which substantially all of the risks and rewardsof ownership of the financial asset are transferred or in which the Consolidated Companyneither transfers nor retains substantially all of the risks and rewards of ownership and itdoes not retain control of the financial asset.

The Consolidated Company enters into transactions whereby it transfers assetsrecognized in its statement of balance sheet, but retains either all or substantially all ofthe risks and rewards of the transferred assets. In these cases, the transferred assets arenot derecognized.

(Continued)239


(ii) Financial liabilities and equity instruments

1) Classification of debt or equity

Debt and equity instruments issued by the Consolidated Company are classified asfinancial liabilities or equity in accordance with the substance of the contractualarrangements and the definitions ofa financial liability and an equity instrument.

2) Financial liabilities

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

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

3) Derecognition of financial liabilities

The Consolidated Company derecognizes a financial liability when its contractualobligations are discharged or cancelled, or expire. The Consolidated Company alsoderecognizes a financial liability when its terms are modified and the cash flows of themodified liability are substantially different, in which case a new financial liability basedon the modified terms is recognized at fair value.

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

4) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in thestatement of balance sheet when, and only when, the Consolidated Company currentlyhas a legally enforceable right to set off the amounts and it intends either to settle themon a net basis or to realize the asset and settle the liability simultaneously.

(h) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories iscalculated using the weighted average method, and includes expenditure incurred in acquiring theinventories, production or conversion costs, and other costs incurred in bringing them to theirpresent location and condition. In the case of manufactured inventories and work in progress, costincludes an appropriate share of production overheads based on normal operating capacity.

(Continued)240


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

(i) Investment in associates

Associates are those entities in which the Consolidated Company has significant influence, but notcontrol or joint control, over the financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially atcost. The cost of the investment includes transaction costs. The carrying amount of the investment inassociates includes goodwill which is arising from the acquisition less any accumulated impairmentlosses.

The consolidated financial statements include the Consolidated Company’s share of the profit or lossand other comprehensive income of those associates, after adjustments to align the accountingpolicies with those of the Consolidated Company, from the date on which significant influencecommences until the date on which significant influence ceases. The Consolidated Companyrecognizes any changes of its proportionate share in the investee within capital surplus, when anassociate’s equity changes due to reasons other than profit and loss or comprehensive income, whichdid not result in changes in actual significant influence.

Gains and losses resulting from transactions between the Consolidated Company and an associateare recognized only to the extent of unrelated Group’s interests in the associate.

When the Consolidated Company’s share of losses of an associate equals or exceeds its interests inan associate, it discontinues recognizing its share of further losses. After the recognized interest isreduced to zero, additional losses are provided for, and a liability is recognized, only to the extentthat the consolidated Company has incurred legal or constructive obligations or made payments onbehalf of the associate.

When the Consolidated Company subscribes to additional shares in an associate at a percentagedifferent from its existing ownership percentage, the resulting carrying amount of the investmentwill differ from the amount of the Consolidated Company’s proportionate interest in the net assets ofthe associate. The Consolidated Company records such a difference as an adjustment to itsinvestments, with the corresponding amount charged or credited to capital surplus. The aforesaidadjustment should first be adjusted under additional paid in capital. If the additional paid in capitalresulting from changes in ownership interest is not sufficient, the remaining difference is debited toretained earnings. If the Consolidated Company’s ownership interest is reduced due to the additionalsubscription of the shares of the associate by other investors, the proportionate amount of the gainsor losses previously recognized in other comprehensive income in relation to that associate will bereclassified to profit or loss on the same basis as would be required if the associate had directlydisposed of its related assets or liabilities.

(Continued)241


(j) Joint arrangements

A joint arrangement is an arrangement of which two or more parties have joint control. The IFRSclassifies joint arrangements into two types — joint operations and joint ventures, which have thefollowing characteristics:

(i) All parties are bound by the arrangement; and

(ii) the contractual arrangement gives two or more of those parties joint control of thearrangement. IFRS 11 “Joint Arrangements” defines joint control as the contractually agreedsharing of control of an arrangement, which exists only when decisions about the relevantactivities (ie activities that significantly affect the returns of the arrangement) require theunanimous consent of the parties sharing control.

A joint arrangement whereby the parties that have joint control of the arrangement have rights to theassets, and obligations for the liabilities, relating to the arrangement. The Consolidated Companyaccounts for the assets, liabilities, revenues and expenses in relation to its interest in a jointoperation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues andexpenses. When assessing whether a joint arrangement is a joint operation or a joint venture, theConsolidated Company considers the structure and legal form of the arrangement, the terms agreedby the parties in the contractual arrangement and, when relevant, other facts and circumstances.

A joint venture is a joint arrangement whereby the Consolidated Company has joint control of thearrangement (i.e. joint venturers) in which the Consolidated Company has rights to the net assets ofthe arrangement , rather than rights to its assets and obligations for its liabilities.The ConsolidatedCompany recognizes its interest in a joint venture as an investment and accounts for that investmentusing the equity method in accordance with IAS 28 “Investments in Associates and Joint Ventures”,unless the Consolidated Company qualifies for exemption from that Standard. Please refer to note6(g) for the application of the equity method.

When assessing the classification of a joint arrangement, the Consolidated Company considers thestructure and legal form of the arrangement, the terms in the contractual arrangement, and other factsand circumstances. When the facts and circumstances change, the Consolidated Companyreevaluates whether the classification of the joint arrangement has changed.

(k) Investment property

Investment property is property held either to earn rental income or for capital appreciation or forboth, but not for sale in the ordinary course of business, use in the production or supply of goods orservices, or for administrative purposes. Investment property is measured at cost on initialrecognition, and subsequently at cost, less accumulated depreciation and accumulated impairmentlosses. Depreciation expense is calculated based on the depreciation method, useful life, and residualvalue which are the same as those adopted for property, plant and equipment. Any gain or loss ondisposal of an investment property (calculated as the difference between the net proceeds fromdisposal and the carrying amount) is recognized in profit or loss. Rental income from investmentproperty is recognized as other revenue on a straight-line basis over the term of the lease. Leaseincentives granted are recognized as an integral part of the total rental income, over the term of thelease.

(Continued)242


(l) Property, plant and equipment

(i) Recognition and measurement

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

If significant parts of an item of property, plant and equipment have different useful lives, they

are accounted for as separate items (major components) of property, plant and equipment.

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

(ii) Subsequent cost

Subsequent expenditure is capitalized only if it is probable that the future economic benefitsassociated with the expenditure will flow to the Consolidated Company.

(iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized inprofit or loss on a straight line basis over the estimated useful lives of each component of anitem of property, plant and equipment.

Land is not depreciated.

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

1) Buildings: 25 to 50 years.

2) Machinery and transportation equipment: 7 to 15 years.

3) Miscellaneous equipment: 7 to 15 years.

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

(iv) Reclassification to investment property

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

(Continued)243


(m) Lease

Lease (applicable from January 1, 2019)

(i) Identifying a lease

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

1) the contract involves the use of an identified asset – this may be specified explicitly orimplicitly, and should be physically distinct or represent substantially all of the capacityof a physically distinct asset. If the supplier has a substantive substitution right, then theasset is not identified; and

2) the Consolidated Company has the right to obtain substantially all of the economicbenefits from use of the asset throughout the period of use; and

3) the Consolidated Company has the right to direct the use of the asset, if either:

● the customer has the right to direct how and for what purpose the asset is usedthroughout the period of use; or

● the relevant decisions about how and for what purpose the asset is used arepredetermined and:

－ the Consolidated Company has the right to operate the asset is usedthroughout the period of use, without the supplier having the right to changethose operating instructions; or

－ the Consolidated Company designed the asset in a way that predetermineshow and for what purpose it will be used throughout the period of use.

At inception or on reassessment of a contract that contains a lease component, theConsolidated Company allocates the consideration in the contract to each lease component onthe basis of their relative stand-alone prices. However, for the leases of land and buildings inwhich it is a lessee, the Consolidated Company has elected not to separate non-leasecomponents and account for the lease and non-lease components as a single lease component.

(ii) As a lessee

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

(Continued)244


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

The lease liability is initially measured at the present value of the lease payments that are notpaid at the commencement date, discounted using the interest rate implicit in the lease or, ifthat rate cannot be reliably determined, the Consolidated Company’ s incremental borrowingrate. Generally, the Consolidated Company uses its incremental borrowing rate as the discountrate.

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

－ fixed payments, including in-substance fixed payments;

– variable lease payments that depend on an index or a rate, initially measured using theindex or rate as at the commencement date;

– amounts expected to be payable under a residual value guarantee; and

– payments for purchase or termination options that are reasonably certain to be exercised.

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

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

– there is a change in the Consolidated Company’s estimate of the amount expected to bepayable under a residual value guarantee; or

– there is a change in the lease term resulting from a change of its assessment on whether itwill exercise an option to purchase the underlying asset, or

– there is a change of its assessment on whether it will exercise a purchase, extension ortermination option; or

– there is a change in scope, object or other conditions of a lease.

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

When the lease liability is remeasured to reflect the partial or full termination of the lease forlease modifications that decrease the scope of the lease, the Consolidated Company accountsfor the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or lossany gain or loss relating to the partial or full termination of the lease.

(Continued)245


The Consolidated Company presents right-of-use assets that do not meet the definition ofinvestment and lease liabilities as a separate line item respectively in the statement of financialposition.

The Consolidated Company has elected not to recognize right-of-use assets and lease liabilitiesfor short-term leases of buildings that have a lease term of 12 months or less and leases of low-value assets. The Consolidated Company recognizes the lease payments associated with theseleases as an expense on a straight-line basis over the lease term.

(iii) As a leasor

When the Consolidated Company acts as a lessor, it determines at lease commencementwhether each lease is a finance lease or an operating lease. To classify each lease, theConsolidated Company makes an overall assessment of whether the lease transfers to thelessee substantially all of the risks and rewards of ownership incidental to ownership of theunderlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is anoperating lease. As part of this assessment, the Consolidated Company considers certainindicators such as whether the lease is for the major part of the economic life of the asset.

When the Consolidated Company is an intermediate lessor, it accounts for its interests in thehead lease and the sub-lease separately. It assesses the lease classification of a sub-lease withreference to the right-of-use asset arising from the head lease. If a head lease is a short-termlease to which the Consolidated Company applies the exemption described above, then itclassifies the sub-lease as an operating lease.

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

The lessor recognizes a finance lease receivable at an amount equal to its net investment in thelease. Initial direct costs, such as lessors to negotiate and arrange a lease, are included in themeasurement of the net investment. The interest income is recognized over the lease termbased on a pattern reflecting a constant periodic rate of return on the net investment in thelease. The Consolidated Company recognizes lease payments received under operating leasesas income on a straight-line basis over the lease term as part of ‘rental income’.

Lease (applicable before January 1, 2019)

(i) Lessor

Lease income from an operating lease is recognized in income on a straight-line basis over thelease term. Initial direct costs incurred in negotiating and arranging an operating lease areadded to the carrying amount of the leased asset, and recognized as an expense over the leaseterm on the same basis as the lease income. Incentives granted to the lessee to enter into anoperating lease are spread over the lease term on a straight-line basis in order that the leaseincome received is reduced accordingly.

Contingent rents are recognized as income in the period when the lease adjustments areconfirmed.

(Continued)246


(ii) Lessee

Leases are operating leases and are not recognized in the Consolidated Company’ s balancesheets. Payments made under operating leases (excluding insurance and maintenanceexpenses) are recognized in profit or loss on a straight-line basis over the term of the lease.

Contingency rent is recognized as expense in the period in which it is incurred.

(n) Intangible assets, technical cooperation fee and long-term prepaid rental expense (recognized asother assets)

(i) Intangible assets, technical cooperation fee and long-term prepaid rental expense

Other intangible assets, including intangible assets, technical cooperation fee and long-termprepaid rental expense, that are acquired by the Consolidated Company and have finite usefullives are measured at cost less accumulated amortization and any accumulated impairmentlosses.

(ii) Subsequent expenditure

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

(iii) Amortization

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

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

1) Goodwill 15 years

2) Technical cooperation fee 5~15 years

3) Long-term prepaid rental expense 50 years

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

(o) Impairment – Non-financial assets

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

(Continued)247


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

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

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

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

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

(p) Revenue recognition

(i) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitledin exchange for transferring goods or services to a customer. The Company recognizes revenuewhen it satisfies a performance obligation by transferring control of a good or a service to acustomer. The accounting policies for the Company’ s main types of revenue are explainedbelow.

1) Sale of goods

The Consolidated Company recognizes revenue when control of the products hastransferred, being when the products are delivered to the customer, the customer has fulldiscretion over the channel and price to sell the products, and there is no unfulfilledobligation that could affect the customer’s acceptance of the products. Delivery occurswhen the products have been shipped to the specific location, the risks of obsolescenceand loss have been transferred to the customer, and either the customer has accepted theproducts in accordance with the sales contract, the acceptance provisions have lapsed, orthe Consolidated Company any has objective evidence that all criteria for acceptancehave been satisfied.

(Continued)248


2) Financing components

The Consolidated Company does not expect to have any contracts where the periodbetween the transfer of the promised goods or services to the customer and payment bythe customer exceeds one year. As a consequence, the Consolidated Company does notadjust any of the transaction prices for the time value of money.

(q) Contract costs (applicable from January 1, 2018)

(i) Incremental costs of obtaining a contract

The Consolidated Company recognizes as an asset the incremental costs of obtaining a contractwith a customer if the Consolidated Company expects to recover those costs. The incrementalcosts of obtaining a contract are those costs that the Consolidated Company incurs to obtain acontract with a customer that it would not have incurred if the contract had not been obtained.Costs to obtain a contract that would have been incurred regardless of whether the contract wasobtained shall be recognized as an expense when incurred, unless those costs are explicitlychargeable to the customer regardless of whether the contract is obtained.

The Consolidated Company applies the practical expedient to recognize the incremental costsof obtaining a contract as an expense when incurred if the amortization period of the asset thatthe entity otherwise would have recognized is one year or less.

(ii) Costs to fulfill a contract

If the costs incurred in fulfilling a contract with a customer are not within the scope of anotherStandard (for example, IAS 2 Inventories, IAS 16 Property, Plant and Equipment or IAS 38Intangible Assets), the Consolidated Company recognizes an asset from the costs incurred tofulfill a contract only if those costs meet all of the following criteria:

● the costs relate directly to a contract or to an anticipated contract that the ConsolidatedCompany can specifically identify;

● the costs generate or enhance resources of the Consolidated Company that will be used insatisfying (or in continuing to satisfy) performance obligations in the future; and

● the costs are expected to be recovered.

General and administrative costs, costs of wasted materials, labor or other resources to fulfilthe contract that were not reflected in the price of the contract, costs that relate to satisfiedperformance obligations (or partially satisfied performance obligations), and costs for whichthe Consolidated Company cannot distinguish whether the costs relate to unsatisfiedperformance obligations or to satisfied performance obligations (or partially satisfiedperformance obligations), the Consolidated Company recognizes these costs as expenses whenincurred.

(Continued)249


(r) Employee benefits

(i) Defined contribution plans

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

(ii) Defined benefit plans

The Consolidated Company’s net obligation in respect of defined benefit plans is calculatedseparately for each the plan by estimating the amount of future benefit that employees haveearned in the current and prior periods, discounting that amount and deducting the fair value ofany plan assets.

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

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

When the benefits of a plan are changed or when a plan is curtailed, the resulting change inbenefit that relates to past service or the gain or loss on curtailment is recognized immediatelyin profit or loss. The Consolidated Company recognizes gains and losses on the settlement of adefined benefit plan when the settlement occurs.

(iii) Short-term employee benefits

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

(s) Share–based payment

The grant-date fair value of equity-settled share-based payment arrangements granted to employeesis generally recognized as an expense, with a corresponding increase in equity, over the vestingperiod of the awards. The amount recognized as an expense is adjusted to reflect the number ofawards for which the related service and non-market performance conditions are expected to be met,such that the amount ultimately recognized is based on the number of awards that meet the relatedservice and non-market performance conditions at the vesting date.

(Continued)250


For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences betweenexpected and actual outcomes.

(t) Income taxes

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

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

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

(i) Temporary differences on the initial recognition of assets and liabilities in a transaction that isnot a business combination and that affects neither accounting nor taxable profits (losses) atthe time of the transaction;

(ii) Temporary differences related to investments in subsidiaries, associates and joint arrangementsto the extent that the Consolidated Company is able to control the timing of the reversal of thetemporary differences and it is probable that they will not reverse in the foreseeable future; and

(iii) Taxable temporary differences arising on the initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differenceswhen they reserve, using tax rates enacted or substantively enacted at the reporting date.

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

(i) the Consolidated Company has a legally enforceable right to set off current tax assets againstcurrent tax liabilities ; and

(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the sametaxation authority on either:

1) the same taxable entity; or

2) different taxable entities which intend to settle current tax assets and liabilities on a netbasis, or to realize the assets and liabilities simultaneously, in each future period inwhich significant amounts of deferred tax liabilities or assets are expected to be settled orrecovered.

(Continued)251


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

(u) Earnings per share

The Consolidated Company discloses the Company’ s basic and diluted earnings per shareattributable to ordinary shareholders of the Company. Basic earnings per share is calculated as theprofit attributable to ordinary shareholders of the Company divided by the weighted average numberof ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable toordinary shareholders of the Company divided by the weighted average number of ordinary sharesoutstanding after adjustment for the effects of all potentially dilutive ordinary shares, such asemployee compensation.

(v) Operating segments

An operating segment is a component of the Consolidated Company that engages in businessactivities from which it may earn revenues and incur expenses (including revenues and expensesrelating to transactions with other components of the Consolidated Company). Operating results ofthe operating segment are regularly reviewed by the Consolidated Company’ s chief operatingdecision maker to make decisions about resources to be allocated to the segment and to assess itsperformance. Each operating segment consists of standalone financial information.

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

The preparation of the financial statements in conformity with the Regulations and the IFRSs endorsed bythe FSC requires management tomake judgments, estimates, and assumptions that affect the application of the accounting policies and thereported amount of assets, liabilities, income, and expenses. Actual results may differ from theseestimates.

The management continues to monitor the accounting estimates and assumptions. The managementrecognizes any changes in accounting estimates during the period and the impact of those changes inaccounting estimates in the following period.

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

(a) Evaluation of inventories

Because inventories are measured at the lower of cost and net realizable value, the ConsolidatedCompany evaluates the amount of normal waste, obsolete, and inventories without market price as ofthe reporting date, and reduces the book value to net realizable value. Such evaluation methoddepends on the demand of merchandise for a particular period of time in the future; therefore, theremight be significant change due to the rapid industry transformation. Please refer to note 6(f) forfurther description of the evaluation of inventories.

(Continued)252


(b) Measurement of defined benefit obligations

Accrued pension liabilities and resulting pension expenses under defined benefit pension plans arecalculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discountrate, rate of employee turnover, future salary increase rate, etc. Changes in economic circumstancesand market conditions will affect these assumptions and may have a material impact on the amountof the expense and the liability. Refer to note 6(p) for further description of the actuarialassumptions and sensitivity analysis.

The Consolidated Company’ s accounting policies include measuring financial and non-financial assetsand liabilities at fair value through profit or loss. The Consolidated Company establishes a measurementand review mechanism for measuring fair value.

The Consolidated Company strives to use market observable inputs when measuring assets and liabilities.Different levels of the fair value hierarchy to be used in determining the fair value of financial instrumentsare as follows:

(a) Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.

(b) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset orliability, either directly (ie as prices) or indirectly (ie derived from prices).

(c) Level 3: inputs for the assets or liability that are not based on observable market data. For anytransfer within the fair value hierarchy, the impact of the transfer is recognized on the reporting date.Please refer to note 6(x), financial instruments, for assumptions used in measuring fair value.

(6) Explanation of significant accounts:

(a) Cash and Cash Equivalents

December 31,2019

December 31,2018

Cash on hand $ 1,483 1,454Cash in banks 5,922,259 10,533,271Time deposits 28,061,383 33,242,563Cash equivalents 9,622,994 8,588,594Cash and cash equivalents $ 43,608,119 52,365,882

Please refer to note 6(x) for the interest rate risk and fair value sensitivity analysis of the financialassets and liabilities of the Consolidated Company.

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

December 31,2019

December 31,2018

Current financial assets designated as at fair value throughprofit or loss:Funds $ 4,044,356 4,017,249

(Continued)253


December 31,2019

December 31,2018

Non-current financial assets designated as at fair value throughprofit or loss:Foreign Bonds $ 510,611 715,289Foreign Stocks 314,115 332,588

Total $ 824,726 1,047,877

Remeasurement at fair value recognized in profit or loss is disclosed in note 6(w).

(c) Financial assets at fair value through other comprehensive income

Current financial assets at fair value through other comprehensive income

December 31,2019

December 31,2018

Equity instruments at fair value through other comprehensiveincome:Stocks $ 41,715,821 44,528,667

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

December 31,2019

December 31,2018

Stocks $ 22,662,110 28,011,349

(i) Debt investments at fair value through other comprehensive income

The Consolidated Company has assessed that the following securities were held within abusiness model whose objective was achieved by both collecting the contractual cash flowsand by selling securities. Therefore, they have been classified as debt investments at fair valuethrough other comprehensive income.

(ii) Equity investments at fair value through other comprehensive income

The Consolidated Company designated the investments shown above as equity instruments atfair value through other comprehensive income because these equity instruments representthose investments that the Consolidated Company intends to hold for long-term for strategicpurposes.

On April 16, 2018, the Consolidated Company participated in the proportional capital increaseby cash of Formosa Ha Tinh (Cayman) Limited, at 11.43% ownership interest, with the totalinvestment amounting to USD57,161 thousand (equivalent to $1,676,070).

There were no disposals of strategic investments and transfers of any cumulative gain or losswithin equity relating to these investments as of December 31, 2019 and 2018.

(Continued)254


(iii) For credit risk and market risk; please refer to note 6(x).

(iv) The financial assets at fair value through other comprehensive income of the ConsolidatedCompany had been pledged as collateral; please refer to note 8.

(d) Notes and accounts receivable

December 31,2019

December 31,2018

Notes receivable from operating activities $ 5,573,110 6,581,868Accounts receivable 38,849,472 42,029,583Overdue receivables 4,555 34,567Less: Loss allowance (363,604) (399,954)

$ 44,063,533 48,246,064

The Consolidated Company applies the simplified approach to provide for its expected credit losses,i.e. the use of lifetime expected loss provision for all receivables on December 31, 2019 and 2018.To measure the expected credit losses, accounts receivables have been grouped based on sharedcredit risk characteristics and the days past due, as well as incorporated forward looking information,including macroeconomic and relevant industry information. The loss allowance provision as ofDecember 31, 2019 and 2018 amounted to $363,604 and $399,954, respectively, expected loss rateless than 1%.

The Consolidated Company applies the expected credit losses to analysis of notes and accountsreceivable as of December 31, 2019 and 2018 were determined as follows:

December 31,2019

December 31,2018

Past due 1 to 90 days $ 99,867 356,122Past due 90 to 180 days 63,102 85,466Past due 180 to 360 days 45,317 83,682Past due over 360 days 56,025 76,580

$ 264,311 601,850

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

For the years endedDecember 31

2019 2018Balance at January 1, 2019 and 2018 $ 399,954 418,824Impairment losses reversed (29,028) (16,472)Foreign exchange gains/(losses) (7,322) (2,398)Balance at December 31, 2019 and 2018 $ 363,604 399,954

As of December 31, 2019 and 2018, notes and accounts receivable which were overdue or underlegal proceedings amounted to $4,555 and $34,567. Such receivables were reclassified to overduereceivables under other assets and provided with a full impairment loss provision.

(Continued)255


The Consolidated Company signed without-recourse factoring and financing contracts with financialinstitutions. According to these contracts, the net accounts receivable that have matured but are stilluncollected will be paid by the financial institutions, except for those affected by trade disputes. Asof December 31, 2019 and 2018, the outstanding accounts receivable factoring transactions betweenthe Consolidated Company and the financial institutions were as follows:

December 31, 2019Purchaser Factoring

BalanceAdvancedAmount

FactoringLine

Gold Circuit Electronics, Ltd E. Sun Bank $ 69,693 - 100,000

December 31, 2018Purchaser Factoring


FactoringLine

Gold Circuit Electronics, Ltd E. Sun Bank $ 33,704 - 100,000

(e) Other receivables

December 31,2019

December 31,2018

Other accounts receivable—other $ 2,237,168 1,869,037Other accounts receivable—loans to associates

5,925,227 6,117,870

Less: Loss allowance - -Total $ 8,162,395 7,986,907

Other receivables are financial assets with low credit risk, thus the Consolidated Company measuredthe loss allowance based on 12-month expected credit losses.

(f) Inventories

The components of inventories were as follows:

December 31,2019

December 31,2018

Finished goods $ 12,537,778 15,454,895Work in process 10,154,245 12,788,826Machinery and accessories in process 4,835,894 4,011,249Raw materials 11,326,558 13,234,237Supplies 950,930 832,700Consigned-out raw materials 189,211 219,347Consigned-out finished goods 16,881 9,612Goods in transit 1,556,255 2,489,976Inventories, net $ 41,567,752 49,040,842

(Continued)256


The details of the cost of sales were as follows:


2019 2018Inventory that has been sold $ 254,673,143 281,091,295Write-down of inventories (Reversal of write-downs) (306,449) 404,341Unallocated production overheads 3,806,102 2,558,629

$ 258,172,796 284,054,265

(g) Investments accounted for using equity method

The components of the investments accounted for using equity method at the reporting date were asfollows:

December 31,2019

December 31,2018

Associates $ 164,591,844 169,446,506Joint ventures 517,537 424,630

$ 165,109,381 169,871,136

(i) Associates

The Consolidated Company’s share of net income (loss) of associates were as follows:


2019 2018The Consolidated Company’s share of net income of

associates $ 11,731,913 26,149,691

1) The unrealized translation gain or loss arising from the investment in foreign entities,which was determined on exchange rates as of December 31, 2019 and 2018, wererecognized in comprehensive income.

2) The unrealized sales profits from downstream transactions with investees under theequity method are treated as deductions from gross income. The realized sales profitsfrom downstream sales are added to gross income. Details of these transactions aredisclosed in note 7.

3) In March, August and Decenber, 2019, the Consolidated Company participated in thecapital increase by cash of FG Inc., Formosa Resources Corporation, and FormosaSynthetic Rubber Corporation, with total investment amounting to USD7,500 thousand(equivalent to $231,570), $1,570,000 and $46,000, respectively.

(Continued)257


4) In October, 2018, the Consolidated Company participated in the capital increase by cashof Formosa Synthetic Rubber (Hong Kong) Corporation Limited, with the totalinvestment amounting to USD65,000 thousand (equivalent to $2,010,450).

5) The Consolidated Company’s financial information for investments accounted for usingthe equity method that are individually insignificant were as follows:

December 31,2019

December 31,2018

Carrying amount of individually insignificantassociates’ equity $ 164,591,844 169,446,506

For the years ended December 312019 2018

Attributable to the Consolidated Company:Net Income $ 11,731,913 26,149,691Other comprehensive income (1,739,976) (2,994,412)Total comprehensive income $ 9,991,937 23,155,279

(ii) Joint ventures

The Consolidated Company’s share of net income of joint venture were as follows:


2019 2018The Consolidated Company’s share of net income of joint

ventures $ 106,840 30,049

The Consolidated Company’ s financial information for investments in individuallyinsignificant joint venture accounted for using equity method at the reporting date was asfollows. These financial information are included in the consolidated financial statements.

December 31,2019

December 31,2018

The carrying value of joint ventures that were notindividually material $ 517,537 424,630


2019 2018Attributable to the Consolidated Company:

Net income $ 106,840 30,049Other comprehensive income - -Total comprehensive income $ 106,840 30,049

(Continued)258


(iii) Collateral

Please refer to note 8 for investments accounted for using equity method which were pledgedto banks or courts as collateral to secure the Consolidated Company’s bank loans and lawsuitsas of December 31, 2019 and 2018

(h) Property, Plant and Equipment

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

LandBuilding andconstruction

Machineryand

equipmentTransportation

equipmentOther

facilitiesConstructionin progress Total

Cost or deemed cost:

Balance on January 1, 2019 $ 13,494,231 62,744,023 344,851,726 1,547,158 12,480,222 22,470,349 457,587,709

Additions 9,869 1,927 1,448,022 15,152 270,447 27,738,562 29,483,979

Disposals (2,016) (38,438) (5,598,968) (50,393) (318,298) (45,986) (6,054,099)

Reclassification - (107,656) 11,025,265 36,040 701,345 (7,493,082) 4,161,912

Effect of movements in exchange rates

(1,587) (911,035) (4,397,209) (14,574) (155,094) (833,379) (6,312,878)

Balance on December 31, 2019 $ 13,500,497 61,688,821 347,328,836 1,533,383 12,978,622 41,836,464 478,866,623


Additions 3,613,725 1,175,812 1,423,544 21,787 159,637 14,752,512 21,147,017

Disposals (700) (149,525) (3,542,559) (64,783) (194,523) (68,198) (4,020,288)

Reclassification 8,966 82,631 8,700,603 34,490 493,829 (5,991,643) 3,328,876


1,778 (240,275) (1,026,328) (251) (70,227) 301,445 (1,033,858)


Depreciation and impairment loss:

Balance on January 1, 2019 $ - 34,982,056 270,655,062 1,357,620 9,685,710 - 316,680,448

Depreciation for the period - 1,996,284 12,319,601 51,865 640,467 - 15,008,217

Reversal of impairment - - (59) - - - (59)

Disposals - (20,320) (4,641,689) (49,482) (312,134) - (5,023,625)

Reclassification - (158,796) 6,982 (8,525) (6,991) - (167,330)


- (478,605) (3,117,272) (11,779) (118,736) - (3,726,392)

Balance on December 31, 2019 $ - 36,320,619 275,222,625 1,339,699 9,888,316 - 322,771,259

Balance on January 1, 2018 $ - 33,094,723 261,429,163 1,372,432 9,367,746 - 305,264,064

Depreciation for the period - 2,089,876 13,298,915 47,954 555,824 - 15,992,569

Reversal of impairment - - (9,761) - - - (9,761)

Disposals - (119,768) (3,339,156) (62,873) (188,106) - (3,709,903)

Reclassification - 1 (427,516) - 226 - (427,289)


- (82,776) (296,583) 107 (49,980) - (429,232)

Balance on December 31, 2018 $ - 34,982,056 270,655,062 1,357,620 9,685,710 - 316,680,448

Carrying amounts:

Balance on December 31, 2019 $ 13,500,497 25,368,202 72,106,211 193,684 3,090,306 41,836,464 156,095,364


(Continued)259


(i) Please refer to note 8 for the property, plant and equipment pledged to secure bank loans as ofDecember 31, 2019 and 2018.

(ii) For the years ended December 31, 2019 and 2018, the capitalized interest on borrowings forthe purchase of the property, plant and equipment of the Consolidated Company amounted to$299,843 and $63,733, respectively. The capitalized interest rate ranged from 1.3030% to3.5230% and 1.405% to 2.2793% for the years ended December 31, 2019 and 2018,respectively.

(i) Right-of-use assets

The Consolidated Company leases many assets including land and buildings, machinery andtransportation equipment. Information about leases for which the Consolidated Company as a lesseeis presented below:


Machineryand

equipmentTransportation

equipment TotalCost：

Balance at January 1, 2019 $ - - - - -Effects of retrospective application 777,198 121,009 29,296 467,297 1,394,800Acquisitions 2,270 79,378 - 356 82,004Disposal (272) (1,486) (1,047) - (2,805)Effect of changes in foreign exchange

rates (35,475) (40) (304) (9,543) (45,362)Balance at December 31, 2019 $ 743,721 198,861 27,945 458,110 1,428,637

Accumulated depreciation andimpairment losses:

Balance at January 1, 2019 $ - - - - -Depreciation for the period 29,094 62,694 9,203 142,903 243,894Disposal (272) - (1,047) - (1,319)Effect of changes in foreign exchange

rates (8,549) (23) (136) (3,779) (12,487)Balance at December 31, 2019 $ 20,273 62,671 8,020 139,124 230,088

Carrying amount:Balance at December 31, 2019 $ 723,448 136,190 19,925 318,986 1,198,549

(j) Intangible assets

The cost, amortization and impairment of the intangible assets of the Consolidated Company were asfollows:

TrademarkCosts :

Balance at December 31, 2019 (as same as balance at January 1, 2019) $ 2,897,172Balance at December 31, 2018 (as same as balance at January 1, 2018) $ 2,897,172

Accumulated amortization and impairment losses :Balance at January 1, 2019 $ 410,432Amortization for the period 193,145Balance at December 31, 2019 $ 603,577

(Continued)260


TrademarkBalance at January 1, 2018 $ 217,287Amortization for the period 193,145Balance at December 31, 2018 $ 410,432

Carrying value：Balance at December 31, 2019 $ 2,293,595

Balance at December 31, 2018 $ 2,486,740

The amortization expense relating to the intangible assets of the Consolidated Company for the yearsended December 31, 2019 and 2018 was recognized in the administrative expenses in the statementsof comprehensive income.

(k) Short-term notes and bills payable

December 31,2019

December 31,2018

Short-term notes and bills payable $ 15,400,000 8,900,000Discount on short-term notes and bills payable (7,205) (2,253)Total $ 15,392,795 8,897,747Range of interest rates 0.532%~0.695% 0.36%~0.75%

(l) Short-term borrowings

December 31,2019

December 31,2018

Unsecured short-term borrowings $ 24,012,100 21,253,381Range of interest rates 0.67%~0.99% 0.74%~4.35%

The amount of $2,772,313 and $11,969,794 were issued respectively, and there were no materialbuyback or redemption on short-term borrowings for the years ended December 31, 2019 and 2018.For information concerning interest expense, please refer to note 6(w).

(m) Long-term debts

Long-term debts consisted of the following:

December 31, 2019Currency Interest rate Expiration Amount

Secured long-term debts TWD 0.9900%~1.6316% 2020~2021 $ 4,000,000Unsecured long-term debts TWD 0.9456%~1.0920% 2020~2022 4,300,000Unsecured long-term debts USD 3.2140%~3.5230% 2021 9,784,450Long-term notes payable TWD 0.57%~0.842% 2020 5,096,417Less: current portion (3,333,333)Total $ 19,847,534

(Continued)261



Secured long-term debts TWD 1.6316% 2018~2021 $ 3,333,333Unsecured long-term debts TWD 0.98%~1.09% 2019~2020 8,000,000Unsecured long-term debts CNY 4.75% 2020 937,472Long-term notes payable TWD 0.44%~0.84% 2019~2020 7,096,550Less: current portion (6,133,333)Total $ 13,234,022

Please refer to note 6(x) for information on the Consolidated Company’s exposure to liquidity risk,and risk of changes in interest rates and liquidation risk.

(i) The Consolidated Company issued the amounts of $14,388,650 and $3,200,000 on long termloans for the years ended December 31, 2019 and 2018, respectively. The amounts of$8,255,441 and $15,802,786 were redeemed for the years ended December 31, 2019 and 2018,respectively. For information on interest expenses, please refer to note 6(w).

(ii) Pledged assets for bank loans

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

(iii) Secured debts

In order to raise funds to repay debts and for reinvestments, new factory construction plans,and foreign and domestic equipment acquisitions, the Consolidated Company signed asyndicated long-term mortgage loan agreement with Bank of Taiwan, the lead bank of thesyndicated loan, and other banks on November 14, 2013. The key terms and conditions of theloan agreement are as follows:

1) Credit line: TWD6,000,000

2) Interest rate: as settled with each participating bank.

3) Period: 7 years (including a 3-year grace period)

4) Collateral: the acquired land financed by the loan.

5) The financial covenants under this loan agreement include the requirement to maintaincertain financial ratios based on the audited annual financial reports. Failure to complywith these financial covenants may cause the syndicated banks to terminate the creditline or declare the unpaid principal and interest under the loan agreement to beimmediately due and payable. These financial ratios are as follows:

a) Current Ratio (total current assets divided by total current liabilities): not less than100%

b) Leverage Ratio (total liabilities plus contingent liabilities to tangible net worth):not higher than 150%

As of December 31, 2019, TWD6,000,000 of the credit line had been drawn.

(Continued)262


(n) Bonds payable

December 31,2019

December 31,2018

Domestic unsecured nonconvertible corporate bonds $ 64,050,000 58,600,000Costs of issuing bonds (71,339) (68,545)Current portion (4,647,875) (5,946,931)Total $ 59,330,786 52,584,524

The terms of domestic corporate bonds as of December 31, 2019 were as follows:

The third domesticunsecured

nonconvertiblecorporate bond

The first domesticunsecured


The second domesticunsecured






in 2012 in 2013 in 2013 in 2014 in 2014Issued amount TWD6,000,000 TWD9,600,000 TWD10,400,000 TWD10,000,000 TWD5,000,000Balance, end of year 4,798,532 949,599 10,388,631 9,983,992 1,498,875Current portion 1,199,633 949,599 - - -Issuance date February 25, 2013 August 5, 2013 December 18, 2013 June 24, 2014 November 11, 2014Issuance period 7 years and 10 years 4 years, 5 years and 7

years10 years and 12 years 14 years and 15 years 5 years and 10 years

Coupon rate 1.36% and 1.50% 1.40%, 1.45% and1.55%

1.98% and 2.08% 2.04% 1.45% and 1.93%

Interest payment date February 25 August 5 December 18 June 24 November 11Repayment method Payable in 2 equal

installments for eachcoupon rate in2018~2019 and2021~2022,respectively

Payable in 2 equalinstallments for eachcoupon rate in2016~2017,2017~2018 and2019~2020,respectively

Payable in 2 equalinstallments for eachcoupon rate in2022~2023 and2024~2025,respectively

Payable in 2 equalinstallments for eachcoupon rate in 2028and 2029,respectively.

Payable in 2 equalinstallments for eachcoupon rate in2018~2019 and2023~2024,respectively.











in 2016 in 2017 in 2018 in 2019 in 2019

Issued amount TWD5,000,000 TWD9,500,000 TWD10,500,000 TWD6,300,000 TWD5,100,000Balance, end of year 4,997,286 401,847 10,487,148 6,290,742 5,092,009Current portion 2,498,643 - - - -

Issuance date August 16, 2016 July 10, 2017 September 6, 2018 June 17, 2019 October 15, 2019Issuance period 5 years 5 years and 7 years 5 years, 7 years and

10 years5 years, 7 years and10 years

5 years.7 years and10 years

Coupon rate 0.68% 1.03% and 1.25% 0.83%, 0.91%, and1.07%

0.74%, 0.82%, and0.91%

0.71%. 0.75% and0.84%

Interest payment date August 16 July 10 September 6 June 17 October 15Repayment method Payable in 2 equal

installments for eachcoupon rate in 2020and 2021, respectively


Payable in 2 equalinstallments for eachcoupon rate in2022~2023,2024~2025, and2027~2028,respectively



(Continued)263


The details of Nan Ya Plastics (Hong Kong) Co., Ltd’s overseas corporate bond were as follows:

Issued in 2013Issued amount USD 180,000 thousandIssuance date August 5, 2013Issuance period 5 yearsCoupon rate 3 month LIBOR+1.1%Interest payment date February 5, May 5, August 5, and November 5Bondholders with a put option The bondholders bear no right to request the Consolidated

Company to redeem the bond.Issuer with a redemption option The bond issuer bears the right to request the holders to

redeem all outstanding bonds if the issuer needs to payextra tax due to change in laws and regulations.

(o) Lease liabilities

The carrying values of lease liabilities were as follows:

December 31,2019

Current $ 197,527Non-current $ 291,222

For information on the maturity analysis, please refer to note 6(x).

The amounts recognized in profit or loss were as follows:

For the yearsended

December 31,2019

Interest on lease liabilities $ 17,681Expenses relating to short-term leases $ 128,661

The amounts recognized in the statement of cash flows for the Consolidated Company was asfollows:

For the yearended

December 31,2019

Total cash outflow for leases $ 356,283

(Continued)264


(i) Real estate leases

As of December 31, 2019, the Consolidated Company leases land and buildings for its officespace and plants. The leases of land typically run for a period of 4 to 20 years, of office spacefor 2 to 20 years, and of plants for 3 years. Besides, the rights-of-use for land in mainlandChina typically run for 50 years. Some leases include an option to renew the lease for anadditional period of the same duration after the end of the contract term.

Some also require the Consolidated Company to make payments that relate to the propertytaxes levied on the lessor and insurance payments made by the lessor; these amounts aregenerally determined annually.

(ii) Other leases

The Consolidated Company leases transportation equipment, with lease terms of 2 to 7 years.In some cases, the Consolidated Company has options to purchase the assets at the end of thecontract term.

The Consolidated Company also leases buildings with contract terms of one year or less. Theseleases are short-term. The Consolidated Company has elected not to recognize right-of-useassets and lease liabilities for these leases.

(p) Employee Benefits

(i) Defined benefit plans

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

December 31,2019

December 31,2018

Present value of defined benefit obligation $ 31,416,494 31,872,431Fair value of plan assets (9,234,709) (9,586,086)Net defined benefit liabilities $ 22,181,785 22,286,345

The Consolidated Company makes defined benefit plan contributions to the pension fundaccount with Bank of Taiwan that provides pensions for its employees upon retirement. Plans(covered by the Labor Standards Law) entitle a retired employee to receive retirement benefitsbased on years of service and average monthly salary for the six months prior to retirement.

1) Composition of plan assets

The Consolidated Company allocates pension funds in accordance with the Regulationsfor Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund,and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. Withregard to the utilization of the funds, minimum earnings shall be no less than the earningsattainable from two-year time deposits with interest rates offered by local banks.

(Continued)265


The Consolidated Company’ s Bank of Taiwan labor pension reserve account balanceamounted to $9,100,116 as of December 31, 2019. For information on the utilization ofthe labor pension fund assets, including the asset allocation and yield of the fund, pleaserefer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in the present value of the defined benefit obligation

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


Balance, beginning of year $ 31,872,431 31,686,207Current service cost and interest expense 775,748 783,247Remeasurements of the net defined benefit liabilities:

Actuarial losses (gains) arising from changes infinancial assumptions (8,649) 730,174

Experience adjustments 448,365 208,321Benefits paid from plan assets (1,672,846) (1,561,576)Increase from transfer of related party employees 4,886 21,084Effect of movements in exchange rates (3,441) 4,974Balance, end of year 31,416,494 31,872,431

3) Movements in the fair value of the plan assets

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


Balance, beginning of year $ 9,586,086 9,900,290Interest income 120,577 122,962Remeasurements of the net defined benefit liabilities:

Return on plan assets 386,803 170,220Contributions from employer 406,606 439,565Benefits paid (1,261,962) (1,051,927)Effect of movements in exchange rates (3,401) 4,976Balance, end of year $ 9,234,709 9,586,086

(Continued)266


4) Expenses recognized in profit or loss

The expenses recognized in profit or loss were as follows:


Current service cost $ 379,380 390,880Net interest expense of net defined benefit liabilities 275,791 269,405

$ 655,171 660,285


Operating Costs $ 518,447 520,903Selling expenses 22,202 23,027Administrative expenses 114,522 116,355

$ 655,171 660,285

5) Remeasurement of net defined benefit liability recognized in other comprehensiveincome

The Consolidated Company's remeasurement of the net defined benefit liabilityrecognized in other comprehensive income were as follows:


Accumulated amount at January 1 $ (6,065,249) (5,296,974)Recognized during the period (52,913) (768,275)Accumulated amount at December 31 $ (6,118,162) (6,065,249)

6) Actuarial assumptions

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

December 31,2019

December 31,2018

Discount rate 1.00%~3.24% 1.25%~4.15%Future salary increase rate 2.50%~4.62% 2.50%~3.50%

The expected allocation payment to be made by the Consolidated Company to thedefined benefit plans for the one-year period after the reporting date is $407,329.

The weighted average lifetime of the defined benefits plans is 8.8~21 years.

(Continued)267


7) Sensitivity analysis

As the principle actuarial assumptions change, the present value of the defined benefitobligation of the Company, Nan Ya PCB Corp., Nan Chung Petrochemical Corp.,Wellink Technology Corp., and PFG Fiber Glass Corporation would increase (decrease)as follows:

Influences of defined benefitobligations

Increase DecreaseDecember 31, 2019Discount rate( 0.25% variation) $ (559,036) 581,465Future salary increasing rate( 1.00% variation) 2,480,687 (2,169,550)

December 31, 2018Discount rate( 0.25% variation) (624,311) 650,735Future salary increasing rate( 1.00% variation) 2,785,372 (2,414,004)

As the principle actuarial assumptions change, the present value of the defined benefitobligation of Nan Ya Plastics Corporation U.S.A. would increase (decrease) as follows:


Increase DecreaseDecember 31, 2019Discount rate( 1.00% variation) $ (15,200) 18,520Future salary increasing rate( 1.50% variation) 6,225 (5,220)

December 31, 2018Discount rate( 1.00% variation) (13,789) 16,579Future salary increasing rate( 1.50% variation) 4,771 (4,095)

Reasonably possible changes at the reporting date to one of the relevant actuarialassumptions, holding other assumptions remain constant, would have affected thedefined benefit obligation by the amounts shown above. The method used in thesensitivity analysis is consistent with the calculation of pension liabilities in the balancesheets.

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

(Continued)268


(ii) Defined contribution plan

The Labor Pension Act (“ The Act” ) prescribes a defined contribution plan. Pursuant to theAct, the Company, and its subsidiaries namely, Nan Ya PCB Corp., Wen Fung IndustrialCorp., Nan Chung Petrochemical Corp., Wellink Technology Corp. and PFG Fiber GlassCorporation have made monthly contributions equal to 6% of each employee’s monthly salaryto employees’ pension accounts.

Nan Ya Plastics Corporation America and Nan Ya PCB (U.S.A.) Corporation adopt a DefinedContribution Plan and periodically provide contributions thereon according to local law. Thosecontributions are recognized as an expense on an accrual basis.

Subsidiaries in China are governed by China laws and regulation. Based on China laws andregulation, those companies contribute for employees’ pension benefits at rates ranging from6% to 20% of salary every month and remit those contributions to the related authority.

The Consolidated Company’ s pension costs under the defined contribution pension planamounted to $1,334,582 and $1,304,581 for the years ended December 31, 2019 and 2018,respectively.

(q) Income Tax

(i) Income tax expense

The components of income tax expense for 2019 and 2018were as follows:


2019 2018Current income tax expense

Current period $ 2,887,588 6,323,793Adjustment for prior periods (57,400) (66,970)

Deferred tax expenseOrigination and reversal of temporary differences 649,319 2,574,453Adjustment for prior periods - 35,059

Total income tax expense $ 3,479,507 8,866,335

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


Items that will not be reclassified subsequently to profit or loss:Re-measurement from defined benefit plans $ 10,556 324,897

Items that may be reclassified subsequently to profit or loss:Exchange differences on translation of foreign financial

statements $ - (135,016)

(Continued)269


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


Income tax using the Company's domestic tax rate $ 6,671,347 14,651,481Effect of tax rate in foreign jurisdiction 158,174 454,169Tax effect on tax-exempt dividend income (642,419) (713,998)Adjustment in tax rate - (566,136)Tax-exempt income (36,841) (88,504)Tax effect on unrecognized deferred assets of tax losses 92,790 184,935Tax effect on unrecognized temporary differences (85,969) 6,528Income tax expense arising from investment income in joint

ventures 25,374 112,310Tax effect on investment income recognized under equity method (3,341,606) (6,490,250)Differences between estimated and actual income tax and income

tax adjustments on prior years (57,400) (31,911)Undistributed earnings additional tax 391,303 697,337Recognition of previously unrecognized tax losses (3,204) (13,523)Other income tax adjustments 307,958 663,897Income tax expense $ 3,479,507 8,866,335

(ii) Deferred tax assets and liabilities

1) Unrecognized deferred tax assets

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

December 31,2019

December 31,2018

Tax effect of deductible temporary differences $ 1,029,699 123,128The carryforward of unused tax losses 500 987,371

$ 1,030,199 1,110,499

The R.O.C Income Tax Act allows net losses, as assessed by the tax authorities, to offsettaxable income over a period of ten years for local tax reporting purposes. Deferred taxassets have not been recognized in respect of these items because it is not probable thatfuture taxable profit will be available against which the Consolidated Company canutilize the benefits therefrom.

(Continued)270


As of December 31, 2019, the information of the Consolidated Company’ s unutilizedbusiness losses for which no deferred tax assets were recognized are as follows:

Occurrence yearUnutilized

creditable amount Expiry date2010 $ 33,282 20202011 23,925 20212012 36,973 20222013 1,135,895 20232014 36,692 20242015 93 20252016 1,565,767 20262017 1,886,099 20272018 429,770 2028

$ 5,148,496

2) Recognized deferred tax assets and liabilities

Movement in the deferred tax assets and liabilities for 2019 and 2018 were as follows:

Deferred tax liabilities:

Foreigninvestment incomerecognized under

equity methodDefined benefit

plans Others TotalBalance on January 1, 2019 $ 11,822,444 (4,179) 820,759 12,639,024Recognized in profit or loss 478,348 (81) 10,483 488,750Recognized in other comprehensive income - 554 - 554Foreign currency translation differences for foreign

operations - 112 (6,411) (6,299)Balance on December 31, 2019 $ 12,300,792 (3,594) 824,831 13,122,029

Balance on January 1, 2018 $ 10,108,698 (5,691) 682,214 10,785,221Recognized in profit or loss 1,713,746 1,282 130,844 1,845,872Recognized in other comprehensive income - 400 - 400Foreign currency translation differences for foreign

operations - (170) 7,701 7,531Balance on December 31, 2018 $ 11,822,444 (4,179) 820,759 12,639,024

Deferred tax assets:

Investment taxcredits

Definedbenefit plans Idle capacity

Losscarryforward Others Total

Balance on January 1, 2019 $ - 4,446,111 78,039 - 995,713 5,519,863Recognized in profit or loss - (32,962) 223 - (127,830) (160,569)Recognized in other comprehensive

income - 11,110 - - - 11,110Foreign currency translation

differences for foreign operations - - - - 68,752 68,752Balance on December 31, 2019 $ - 4,424,259 78,262 - 936,635 5,439,156

(Continued)271





Balance on January 1, 2018 $ 17,818 3,686,959 33,319 1,354,361 819,385 5,911,842

Recognized in profit or loss (17,818) 433,855 44,720 (1,354,361) 129,964 (763,640)

Recognized in other comprehensiveincome - 325,297 - - (135,016) 190,281

Foreign currency translationdifferences for foreign operations - - - - 181,380 181,380

Balance on December 31, 2018 $ - 4,446,111 78,039 - 995,713 5,519,863

(iii) Assessment of tax

The Corporation’ s income tax return for the year 2017 had been examined by the taxauthorities.

(r) Capital and other equity

As of December 31, 2019 and 2018, the Consolidated Company’ s government registered totalauthorized capital and issued capital stock both amounted to $79,308,216, divided into 7,930,822thousand shares of stock with $10 par value per share.

(i) Capital surplus

The components of capital surplus were as follows:

December 31,2019

December 31,2018

Paid-in capital from conversion of corporate bond tocommon stock in excess of par value

$ 8,997,136 8,997,136

Gains on acquisition of Taiwan Plasticizer Corporation 74,474 74,474Other 17,546,224 17,600,509Total $ 26,617,834 26,672,119

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, andonly the realized capital surplus can be used to increase the common stock or be distributed ascash dividends. The aforementioned realized capital surplus includes capital surplus resultingfrom premium on issuance of capital stock and earnings from donated assets received.According to the Regulations Governing the Offering and Issuance of Securities by SecuritiesIssuers, capital increases by transferring capital surplus in excess of par value should notexceed 10% of the total common stock outstanding.

(ii) Retained earnings

1) Legal reserve

If the Company incurs no loss, it may, pursuant to a resolution by a shareholders’meeting, distribute its legal reserve by issuing new shares or by distributing cash, andonly the portion of legal reserve which exceeds 25% of capital may be distributed.

(Continued)272


2) Special reserve

As the Company opted to avail of the exemptions allowed under IFRS 1“ First-timeAdoption of International Financial Reporting Standards” during the Company’ s first-time adoption of the IFRSs as endorsed by the FSC, unrealized revaluation incrementsand cumulative translation adjustments (gains) of $6,277,052, which were previouslyrecognized in shareholders’ equity were reclassified to retained earnings. In accordancewith Regulatory Permit No. 1010012865 as issued by the FSC on April 6, 2012, a specialreserve is appropriated from retained earnings for aforementioned reclassification. Inaddition, during the use, disposal or reclassifications of relevant assets, these specialreserves can be reverted to distributable earnings proportionately. As the amountappropriated exceeds the increase in retained earnings arising from the adoption ofIFRSs, only $6,243,060 is appropriated in compliance to the IFRSs as endorsed by theFSC. The balance of special reserve amounted to $6,128,451 and $6,129,884 as ofDecember 31, 2019 and 2018.

Pursuant to the Regulatory Permit mentioned above, the Company is also required to setaside an additional special reserve, as part of the distribution of its annual earnings, equalto the difference between the amount of above-mentioned special reserve and net debitbalance of the other components of stockholders’ equity.

3) Earnings distribution

According to the rules of the Company’s articles, the Company’s annual net earnings,after providing for income tax and covering the losses of previous years, is first set asidefor legal reserve at the rate of 10% thereof. In addition, a special reserve in accordancewith applicable laws and regulations shall also be set aside. The remainder plus theundistributed earnings of the previous years are distributed or left undistributed forbusiness purposes according to the resolution of the stockholders’ dividend distributionplan, which are initially proposed by the Board of Directors and adopted by theshareholders in the Annual Stockholders’ Meeting.

The Company belongs to a mature industry, in which the annual profit is stable. It adoptsthree kinds of dividend distribution policies, which are cash dividends, capitalization ofearnings, and capital surplus. The net earnings after deducting the legal reserve andspecial reserve may first be distributed by way of cash dividends which shall be equal toat least fifty percent of the Company’ s total dividend distribution every year. Thecapitalization of earnings and capital surplus shall not exceed fifty percent of the totaldividends.

(Continued)273


Based on the resolutions approved by stockholders during meetings held on June 12,2019 and June 19, 2018, the distribution of the Company's earnings in 2018 and 2017,respectively, were as follows:

2018 2017Dividends per share:

Cash dividends $ 5.00 5.10Stock dividends - -

$ 5.00 5.10

The aforementioned earnings distributions did not differ from those proposed by theboard of directors and those estimated and accrued amount in the financial statements in2018 and 2017. The related information can be obtained from the Market ObservationPost System website.

(iii) Other equity accounts (net of tax)


foreignfinancial

statements

Unrealizedgains (losses)on financialassets at fairvalue through

othercomprehensive

income

Gains(losses) onhedging

instruments TotalBalance at January 1, 2019 $ (5,705,296) 54,624,319 (15,181) 48,903,842

Exchange differences arising on translation of foreign operations (4,917,128) - - (4,917,128)Exchange differences on associates / joint ventures accounts for using equity

method (949,007) - - (949,007)Unrealized gains (losses) from financial assets at fair value through other

comprehensive income - (7,787,927) - (7,787,927)Unrealized gains (losses) from financial assets measured at fair value through

other comprehensive income, associates and joint ventures accounted forusing equity method - (724,904) - (724,904)

Share of cash flow hedge of associates / joint ventures - - 15,812 15,812Balance at December 31, 2019 $ (11,571,431) 46,111,488 631 34,540,688


foreignfinancial

statements


othercomprehensive

income

Available-for-sale

investmentCash flow

hedge


instruments TotalBalance at January 1, 2018 $ (6,026,197) - 47,691,196 7,729 - 41,672,728

Effects of retrospective application - 61,239,238 (47,691,196) (7,729) 7,729 13,548,042Balance at January 1, 2018 after adjustments (6,026,197) 61,239,238 - - 7,729 55,220,770Exchange differences arising on translation of

foreign operations (91,431) - - - - (91,431)Exchange differences on associates / joint ventures

accounted for using equity method 412,332 - - - - 412,332Unrealized gains (losses) from financial assets at

fair value through other comprehensive income - (3,311,346) - - - (3,311,346)Unrealized gains (losses) from financial assets

measured at fair value through othercomprehensive income, associates and jointventures accounted for using equity method - (3,303,573) - - - (3,303,573)

Share of cash flow hedge of associates / jointventures - - - - (22,910) (22,910)

Balance at December 31, 2018 $ (5,705,296) 54,624,319 - - (15,181) 48,903,842

(Continued)274


(s) Share-based payment

The Consolidated Company was authorized to issue 9,912 units and 1,588 units of employee stockoptions on June 23, 2009 and March 25, 2010, respectively, and each option entitles the holder tosubscribe for one thousand common shares of the Consolidated Company at the exercise price of$89 and $124.5, respectively. The Consolidated Company transferred capital surplus to share capitalon August 5, 2011, and adjusted the exercise price to $75.4 and $116. The Consolidated Companydistributed cash dividend on July 23, 2012, July 22, 2015, and July 12, 2016, and adjusted theexercise price to $72.2 (9,912 units) and $111.1 (1,588 units), $70.0 (9,912 units) and $107.5 (1,588units), and $67.6 (9,912 units) and $103.8 (1,588 units), respectively. The Consolidated Companydistributed cash dividend from capital surplus on July 26, 2017, and adjusted the exercise price toNT$100.5 (1,588 units). The grant was limited to regular employees of NanYa PCB Corporation.The options are exercisable at certain percentages after the second anniversary from the grant date,with 50%, 75%, and 100% of these stock options vested after the second, third, and fourthanniversary dates, respectively, and the options granted are valid for 8 years. Among all other stockoptions, those issued in 2009 and 2010 were already expired on June 23, 2017 and March 24, 2018,respectively.

(i) Parameter of the measurement of the fair value on grant dates

The Consolidated Company utilized the Black-Scholes option pricing model to value the stockoptions granted, and the main inputs to the valuation model were as follows:

The 1st batch2009 of

employee stockoptions

The 2nd batch2010 of

employee stockoptions

Dividend rate - -Expected price volatility %42.89 %39.77Risk-free interest rate %1.0102 %0.9584Expected valid period (years) 5.375 5.375Projected turnover rate %13.01 %23.43

(ii) Related information of employee stock option plans

The details of these employee stock option plans for the years ended December 31, 2019 wereas follows:


2018

Employee stock option plans

Weighted-average

exercise price

Number ofoptions(Units)

Outstanding at January 1, 2018 $ 100.50 978Options exercised 100.50 (978)Outstanding at December 31, 2018 - -Options exercisable at December 31, 2018 - -

(Continued)275


(t) Earnings Per Share

The basic earnings per share for the years ended December 31, 2019 and 2018 were calculated onprofit attributable to ordinary shareholders of the Company of $23,076,123 and $52,746,021,respectively, and weighted average number of outstanding shares of stock were 7,930,822 ordinaryshares, were calculated as follows:

(i) Profit attributable to ordinary shareholders

For the years endedDecember 31,

2019 2018Profit attributable to ordinary shareholders $ 23,076,123 52,746,021

(ii) Weighted average number of outstanding ordinary shares

For the years ended December31,

2019 2018Shares outstanding as of January 1 is the same as weighted

average number of common stock outstanding as ofDecember 31 $ 7,930,822 7,930,822

(u) Revenue from contracts with customers

For the years ended December 31, 2019Plasticsindustry

Chemicalindustry

Electronicindustry

Polyesterindustry

Otherindustries Total

Main Products

PVC sheet $ 6,900,551 - - - - 6,900,551

Rigid sheet 8,170,411 - - - - 8,170,411

Pipes 5,600,558 - - - - 5,600,558

Phthalate Plasticizers - 11,428,993 - - - 11,428,993

BPA - 13,964,330 - - - 13,964,330

EG - 30,699,552 - - - 30,699,552

CCL - - 26,609,055 - - 26,609,055

Epoxy - - 26,508,047 - - 26,508,047

PCB - - 31,089,732 - - 31,089,732

Polyester Staple Fiber - - - 10,914,349 - 10,914,349

PET Resin - - - 20,728,025 - 20,728,025

DTY - - - 17,271,587 - 17,271,587

Machinery and Switchgear - - - - 3,954,305 3,954,305

Others 21,857,861 16,092,620 28,050,812 6,236,615 225,656 72,463,564

$ 42,529,381 72,185,495 112,257,646 55,150,576 4,179,961 286,303,059

(Continued)276


For the years ended December 31, 2018Plasticsindustry

Chemicalindustry

Electronicindustry

Polyesterindustry


Main ProductsPVC sheet $ 7,512,651 - - - - 7,512,651Rigid sheet 8,716,606 - - - - 8,716,606Pipes 5,660,420 - - - - 5,660,420Phthalate Plasticizers - 12,740,256 - - - 12,740,256BPA - 20,177,712 - - - 20,177,712EG - 42,883,565 - - - 42,883,565CCL - - 29,411,039 - - 29,411,039Epoxy - - 26,745,930 - - 26,745,930PCB - - 28,829,433 - - 28,829,433Polyester Staple Fiber - - - 13,361,926 - 13,361,926PET Resin - - - 28,926,507 - 28,926,507DTY - - - 18,922,604 - 18,922,604Machinery and Switchgear - - - - 5,766,342 5,766,342Others 23,648,401 20,691,572 32,035,262 6,646,451 384,883 83,406,569

$ 45,538,078 96,493,105 117,021,664 67,857,488 6,151,225 333,061,560

(v) Employee compensation

According to the specifications of the Company’s article, 0.05% to 0.5% of the earnings before taxand bonuses should be appropriated to employees as bonuses. However, certain amounts of theearnings should be reserved if there is an accumulated loss from the operations in the previous yearsin advance of the appropriation of the employee bonuses.

The remunerations to employees amounted to $24,588 and $57,879, respectively, for the years endedDecember 31, 2019 and 2018, respectively. These amounts were calculated using the Company's netincome before tax without the remunerations to employees for each period, multiplied by theproposed percentage which is stated under the Company's proposed Article of Incorporation. Theseremunerations were expensed under operating costs or expenses for each period. If there are anysubsequent adjustments to the actual remuneration amounts after the annual shareholder’ meeting,the adjustment will be regarded as changes in accounting estimates and will be reflected in profit orloss in the following year.

For the year ended December 31, 2018 and 2017, the remunerations to employees amounted to$57,879 and $58,908, respectively, which were paid in cash. There was no difference from the actualdistribution. The information is available on the Market Observation Post System website.

(w) Non-operating income and expenses

(i) Other income

The details of other income were as follows:

2019 2018Interest income $ 1,090,433 1,047,522Dividend income 3,237,464 3,613,797Other income 2,043,670 1,974,363

$ 6,371,567 6,635,682

(Continued)277


(ii) Other gains and losses

The details of other gains and losses were as follows:

2019 2018Loss on disposal of property, plant and equipment $ 307,736 (105,817)Foreign currency exchange gain (loss) 100,199 1,137,154Gain on financial assets and liabilities at fair value through

profit or loss(26,211) 198,301

Gain on disposal of financial assets 53,863 -Reversal of impairment loss on plant, property, and

equipment and non-financial assets 59 -

Others (221,893) (217,178)$ 213,753 1,012,460

(iii) Finance costs

The details of finance costs were as follows:

2019 2018Interest expense $ 1,920,271 1,787,202Less: interest capitalized (299,843) (63,733)

$ 1,620,428 1,723,469

(x) Financial Instruments

(i) Credit Risk

1) Credit risk exposure

The Consolidated Company is exposed to credit risk primarily from cash and cashequivalents, deposits, and trade receivables.

2) Concentration of credit risk

As sales are made to customers worldwide, the Consolidated Company’ s exposure tocredit risk concentration is expected to be low. Also, the Consolidated Companymitigates its exposure by evaluating the customers’ financial situation regularly.

(Continued)278


(ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities, includingestimated interest payments and excluding the impact of netting agreements.

Carryingamount

Contractualcash flows

Within 6months 6-12 months 1-2 years 2-5 years Over 5 years

December 31, 2019Non-derivative financial

liabilitiesShort-term notes and bills

payable $ 15,392,795 15,402,402 15,402,402 - - - -Notes and accounts payable 9,102,231 9,102,231 9,102,231 - - - -Accounts payables to related

parties 6,986,969 6,986,969 6,986,969 - - - -Short-term borrowings 1,568,800 1,583,873 43,690 1,540,183 - - -Long-term borrowings 9,784,450 9,820,116 - - 9,820,116 - -Bonds payable (TWD) 63,978,661 68,740,741 1,526,240 3,975,235 6,553,430 31,840,153 24,845,683Long-term notes payable 5,096,417 5,185,968 7,164 7,164 2,128,656 3,042,984 -

$ 111,910,323 116,822,300 33,068,696 5,522,582 18,502,202 34,883,137 24,845,683December 31, 2018Non-derivative financial

liabilitiesShort-term notes and bills

payable $ 8,897,747 8,902,253 8,902,253 - - - -Notes and accounts payable 9,496,716 9,496,716 9,496,716 - - - -Accounts payables to

related parties 8,720,846 8,720,846 8,720,846 - - - -Short-term borrowings 21,253,381 21,275,726 21,062,328 213,398 - - -Long-term borrowings 12,270,805 12,468,908 5,520,038 702,628 5,576,178 670,064 -Bonds payable (TWD) 58,531,455 63,537,300 1,490,640 5,305,820 5,411,435 28,195,578 23,133,827Long-term notes payable 7,096,550 7,169,000 6,900 6,900 4,113,800 3,041,400 -

$ 126,267,500 131,570,749 55,199,721 6,228,746 15,101,413 31,907,042 23,133,827

It is expected that the cash flows included in the maturity analysis to occur significantly earlieror at significantly different amounts.

(iii) Currency risk

1) Exposure to foreign currency risk

The Consolidated Company’ s significant exposure to foreign currency risk were asfollows:

December 31, 2019Foreign Currency Exchange Rate TWD

Financial assetsMonetary itemsUSD $ 814,690 30.1060 24,527,057JPY 391,109 0.2763 108,063

EUR 598 33.6895 20,146 HKD 5,840 3.8597 22,541

CNY 23,304 4.3155 100,568

(Continued)279



Non-monetary itemsUSD $ 482,507 30.1060 14,526,356CNY 59,888 4.3155 258,447

IDR 119,869,376 0.0022 263,713 VND 6,283,412,736 0.0013 8,168,437Financial liabilities

Monetary itemsUSD 159,283 30.1060 4,795,374JPY 1,487,754 0.2763 411,066EUR 2,498 33.6895 84,156



EUR 1,865 35.1670 65,586 HKD 1,926 3.9401 7,589

CNY 2,003 4.4779 8,969Non-monetary itemsUSD 637,933 30.7330 19,605,595

CNY 49,723 4.4779 222,655 IDR 115,654,799 0.0020 231,310 VND 6,171,469,405 0.0013 8,022,910Financial liabilities

Monetary itemsUSD 74,665 30.7330 2,294,679JPY 1,266,777 0.2772 351,151EUR 1,079 35.1670 37,945

CNY 1 4.4779 4

(Continued)280



The Consolidated Company’ s exposure to exchange rate risk arises from the foreigncurrency exchange fluctuations on cash and cash equivalents, accounts receivable, otherreceivables, loans and borrowings, accounts payable and other payables that aredominated in foreign currency. The overall effects to net income before tax for the yearsended December 31, 2019 and 2018 assuming the TWD depreciated or appreciated by1% against the USD, JPY, EUR, HKD and CNY as of December 31, 2019 and 2018 wereas follows:


2019 2018Appreciation in value of 1% $ (194,865) (277,022)Depreciation in value of 1% 194,865 277,022

This analysis is performed on the same basis for the two periods.

3) Foreign exchange gain and loss on monetary items

Since the Consolidated Company has many kinds of functional currency, the informationon foreign exchange gain (loss) on monetary items is disclosed by total amount. for theyears ended December 31, 2019 and 2018, foreign exchange gain (loss) (includingrealized and unrealized portions) amounted to $100,199 and $1,137,154, respectively.

(iv) Other market price risks

For the years ended December 31, 2019 and 2018, the sensitivity analyses for the changes inthe securities price at the reporting date were performed using the same basis for thecomprehensive income as illustrated below:

For the yearsended

December 31,2019

For the yearsended

December 31,2018

Prices of securities at the reporting date

Othercomprehensiveincome after

tax


taxIncreasing 1% $ 417,158 445,287

Decreasing 1% $ (417,158) (445,287)

(Continued)281


(v) Interest rate analysis

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

The following sensitivity analysis is based on the risk exposure to the interest rates risk ofderivative and non derivative financial instruments on the reporting date. For variable rateinstruments, the sensitivity analysis assumes the liabilities bearing variable interest rates areoutstanding for the whole year. A 1% increase or decrease in interest rate is assessed bymanagement to be a reasonable possible change in interest rate.

An increase or decrease of 1% in interest rates mainly from loans with floating interest rates atthe reporting date would have increased or decreased net income by $978 and $1,362 for theyears ended December 31, 2019 and 2018, respectively.

(vi) Fair value of financial instruments

1) Fair value hierarchy

The fair value of financial assets and liabilities at fair value through profit or loss andfinancial assets at fair value though other comprehensive income is measured on arecurring basis. The carrying amount and fair value of the Consolidated Company’ sfinancial assets and liabilities, including the information on fair value hierarchy were asfollows; however, except as described in the following paragraphs, for financialinstruments not measured at fair value whose carrying amount is reasonably close to thefair value, and lease liabilities, disclosure of fair value information is not required :

December 31, 2019Fair Value

Book Value Level 1 Level 2 Level 3 TotalFinancial assets at fair value

through profit or lossDesignated at fair value

through profit or loss $ 4,869,082 - 4,044,356 824,726 4,869,082Financial assets at fair value

through other comprehensiveincomeStocks in listed companies $ 41,715,821 41,715,821 - - 41,715,821Unquoted equity instruments 22,662,110 - - 22,662,110 22,662,110 Subtotal $ 64,377,931 41,715,821 - 22,662,110 64,377,931

Financial assets measured atamortized costCash and cash equivalent $ 43,608,119 - - - -Notes and accounts receivable

(including related parties) 44,063,533 - - - -Other receivables due from

related parties 5,925,227 - - - -Subtotal $ 93,596,879 - - - -

(Continued)282



Book Value Level 1 Level 2 Level 3 TotalFinancial liabilities at amortized

costShort-term borrowings $ 24,012,100 24,012,100 - - 24,012,100Short-term notes and bills

payable 15,392,795 15,392,795 - - 15,392,795Notes and accounts payable

(including related parties) 16,089,200 - - - -Bonds payable 63,978,661 63,978,661 - - 63,978,661Long-term borrowings 18,084,450 18,084,450 - - 18,084,450Long-term notes payable 5,096,417 5,096,417 - - 5,096,417

Subtotal $ 142,653,623 126,564,423 - - 126,564,423


Book Value Level 1 Level 2 Level 3 TotalFinancial assets at fair value

through profit or lossDesignated at fair value

through profit or loss $ 5,065,126 - 4,017,249 1,047,877 5,065,126Financial assets at fair value

through other comprehensiveincomeStocks in listed companies $ 44,528,667 44,528,667 - - 44,528,667Unquoted equity instruments 28,011,349 - - 28,011,349 28,011,349

Subtotal $ 72,540,016 44,528,667 - 28,011,349 72,540,016Financial assets measured at

amortized costCash and cash equivalent $ 52,365,882 - - - -Notes and accounts receivable

(including related parties) 48,246,064 - - - -Other receivables due from

related parties 6,117,870 - - - -Subtotal $ 106,729,816 - - - -

Financial liabilities at amortizedcostShort-term borrowings $ 21,253,381 21,253,381 - - 21,253,381Short-term notes and bills

payable 8,897,747 8,897,747 - - 8,897,747Notes and accounts payable

(including related parties) 18,217,562 - - - -Bonds payable 58,531,455 58,531,455 - - 58,531,455Long-term borrowings 12,270,805 12,270,805 - - 12,270,805Long-term notes payable 7,096,550 7,096,550 - - 7,096,550

Subtotal $ 126,267,500 108,049,938 - - 108,049,938

(Continued)283


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

The Consolidated Company’ s valuation techniques and assumptions used for financialinstruments not measured at fair value are as follows:

a) Financial assets measured at amortized cost

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

b) Financial liabilities measured at amortized cost

If there is quoted price generated by transactions, the recent transaction price andquoted price data is used as the basis for fair value measurement. However, if noquoted prices are available, the discounted cash flows are used to estimate fairvalues.

3) Valuation techniques for financial instruments measured at fair value

a) Non-derivative financial instruments

Financial instruments traded in active markets are measured at fair value based onthe quoted market prices. Quoted prices are the prices announced by the main stockexchanges and over-the-counter markets. They are the basis for recognizing the fairvalue of the listed and over-the-counter equity instruments.

Financial instrument possesses a quoted price in the active markets if the tradingprices fairly represent the frequent and orderly transactions for financialinstrument, and are readily available from trade centers, security brokers,underwriters, trade unions, pricing service institutes or other related authorities.The market for the said financial instrument shall be seen as inactive should theaforementioned requirements have not been met. Large or significantly increasinggap between the purchase and the exit prices of a financial instrument, or low tradevolume, are general indicators of an inactive market.

If the financial instrument of the Consolidated Company possesses an activemarket, its fair value should be recognized according to different categories andcharacteristics as follows:

For listed and over-the-counter stocks with standard terms and are publicly tradedin active markets, their fair value are calculated by the market’s quoted prices.

Other financial instruments that are not traded in active markets are measured withfair values provided by using the valuation techniques via market approach or thediscounted cash flow method or other available methods.

(Continued)284


If the financial instruments held by the Consolidated Company are not traded inactive markets, the valuation of their fair value is categorized as follows:

Bond investments that has no quoted prices: Fair value is measured with theincome approach by applying the discounted cash flow method that convert futurecash flow amounts to a single current amount on the basis of the value indicated bycurrent market expectations about those future amounts.

4) Transfers between levels of the fair value hierarchy

There were no transfers between levels of the fair value hierarchy for the years endedDecember 31, 2019 and 2018.

5) Reconciliation of Level 3 fair value

Fair valuethrough profit

and lossFair value through othercomprehensive income

Bondinvestmentand others

Unquoted equityinstruments

Bond investmentand others

Balance at January 1, 2019 $ 1,047,877 28,011,349 -

Total gains and losses recognized: In profit or loss 545 - - In other comprehensive income - (4,975,987) -Disposals (207,799) - -Effect of exchange rate changes (15,897) (373,252) -Balance at December 31, 2019 $ 824,726 22,662,110 -Balance at January 1, 2018 $ 1,038,606 30,050,756 -Total gains and losses recognized:

In profit or loss (21,142) - - In other comprehensive income - (4,270,410) -Purchased - 1,676,070 -Proceeds from capital reduction - (1,972) -Effect of exchange rate changes 30,413 556,905 -Balance at December 31, 2018 $ 1,047,877 28,011,349 -

6) The valuation procedures for fair value measurements being categorized within Level 3is to ensure the valuation results are reasonable by applying independent information tomake results close to the current market conditions, confirming the resource ofinformation is independent, reliable and in line with other resources and represented asthe exercisable price. According to the Consolidated Company’s accounting policy, theanalysis of value changes on remeasured or reevaluated assets and liabilities at thereporting date is performed to ensure the reasonability of the evaluation results.

(Continued)285


7) Quantified information on significant unobservable inputs (Level 3) used in fair valuemeasurement

Most of the Consolidated Company’ s financial instruments that use Level 3 inputsinvolve only one significant unobservable input. Only equity investment with no-activemarkets involves multiple significant unobservable inputs.

Quantified information of significant unobservable inputs were as follows:

Item Valuation techniqueSignificant

unobservable inputs

Inter-relationshipbetween significantunobservable inputs

and fair valuemeasurement

Financial assets atfair value throughothercomprehensiveincome -equity instrumentswithout an active market

Market comparablecompanies

Price to earnings ratiomultiple, price to bookratio multiple,enterprise value tooperating income ratiomultiple, enterprisevalue to EBITAmultiple, discount forlack of marketability

The higher themultiple, the higher thefair value

Net Asset ValueMethod

Not applicable Not applicable

8) Fair value measurement in Level 3 - sensitivity analysis of the possible alternativeassumptions

The valuation models and assumptions used to measure the fair value of the financialinstruments is reasonable. However, the use of different valuation models or assumptionsmay result in different measurements. For fair value measurements in Level 3, changingone or more of the assumptions to reflect reasonably possible alternative assumptionswould have the following effects:

Recognized in othercomprehensive income

Input ChangeFavorable

changeUnfavorable

changeDecember 31, 2019

Financial assets at fairvalue through othercomprehensive income –unquoted equityinstruments

Price to earnings ratiomultiple, price to book ratiomultiple, enterprise value tooperating income ratiomultiple, enterprise value toEBITA multiple, discount forlack of marketability ± 1% $ 189,147 (189,147)

December 31, 2018

(Continued)286




changeUnfavorable

changeFinancial assets at fairvalue through othercomprehensive income –unquoted equityinstruments

Price to earnings ratiomultiple, price to book ratiomultiple, enterprise value tooperating income ratiomultiple, enterprise value toEBITA multiple, discount forlack of marketability ± 1% $ 239,952 (239,952)

(y) Financial risk management

(i) The Consolidated Company have exposures to the following risks from its financialinstruments:

1) Credit risk

2) Liquidity risk

3) Market risk

The following likewise discusses the Consolidated Company's objectives, policies andprocesses for measuring and managing the above mentioned risks. For more disclosures aboutthe quantitative effects of these risks exposures, please refer to the respective notes in theaccompanying consolidated financial statements.

(ii) Structure of risk management

The Consolidated Company’s risk management policies are established to identify and analyzethe risks faced by the Consolidated Company, to set appropriate risk limits and controls, and tomonitor risks and adherence to limits.

The Consolidated Company Audit Committee oversees how management monitors compliancewith the Consolidated Company’ s risk management policies and procedures and reviews theadequacy of the risk management framework in relation to the risks faced by the ConsolidatedCompany.

(iii) Credit risk

Credit risk is the risk of financial loss to the Consolidated Company if a customer orcounterparty to a financial instrument fails to meet its contractual obligations.

To maintain the credit quality of receivables, a credit risk management policy has beenestablished. Under this policy, each customer is analyzed individually regarding customer’ sfinancial situation, external and internal credit rating, historical trading record, and currenteconomic condition which may affect customer’s payment ability. In addition, some methodsare adopted to reduce the credit risk for specific customers, such as prepayment and insuranceof accounts receivable.

(Continued)287


The credit risk exposure on bank deposits and other financial instruments are measured andmonitored by the Consolidated Company’s finance department. As the Consolidated Company’s transactions are done with the banks and other external parties with good credit standing,management is not aware of any noncompliance issues and is not expecting significant creditrisk.

(iv) Liquidity risk

Liquidity risk is the risk that the Consolidated Company will encounter difficulty in meetingthe obligations associated with its financial liabilities that are settled by delivering cash oranother financial asset. The Consolidated Company’ s approach to managing liquidity is toensure, as much as possible, that it will always have sufficient current funds, such as cash andcash equivalents, securities with high liquidity and sufficient credit line from banks, to meet itsliabilities when due, without incurring unacceptable losses or risking damage to theConsolidated Company’s reputation.

(v) Market risk

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

1) Currency risk

The Consolidated Company is exposed to currency risk is due to global transactions thatare denominated in a currency other than the respective functional currency of theCompany, primarily the New Taiwan Dollars (TWD). The currencies used in thesetransactions are denominated in USD. The currency risk mainly arises from futurebusiness transactions and recognized assets and liabilities. Part of the currency risksarising from purchases and sales can be offset each other to achieve automatic hedge.

When the Consolidated Company has foreign currency needs, the Consolidated Companyuses spot exchange contracts and forward exchange contracts if the exchange rate isadvantageous to the Consolidated Company to manage the risk. If necessary, theConsolidated Company uses derivatives operated by prestigious international banks tomanage its exposure to foreign currency exchange rate fluctuation risk, which monitorthe exchange rate risks and adhere to acceptable levels by the Consolidated Company.

2) Interest rate risk

The Consolidated Company’s interest rate risk mainly arises from long-term loans withvariable interest rates, which bear cash flow risks to the Consolidated Company. Part ofthe interest rate risks can be offset by cash and cash equivalents with variable interestrates held by the Consolidated Company.

The Consolidated Company manages interest rate risks by using derivatives whennecessary, to lower the risk to acceptable levels.

(Continued)288


3) Other market price risk

The Consolidated Company is exposed to fair value change risk due to financial assets atfair value through other comprehensive income (available-for-sale financial assets),which were measured at fair value.

(z) Capital Management

Although business operated by the Consolidated Company has reached the stage of maturity, asufficient amount of capital is still required to support the operation of investee companies,construction and expand its production facilities and equipment.

The Consolidated Company’s policy is to maintain sufficient financial resources and operating planto meet future demands such as operating capital, capital expenditure, research and developmentexpenditures, loan reimbursements, and dividend distributions.

The Consolidated Company and other entities in the same industry use the debt-to-equity ratio tomanage its capital. This ratio is the total net debt divided by the total capital. The net debt from thebalance sheet is derived from the total liabilities less cash and cash equivalents. The total capital andequity include share capital, capital surplus, retained earnings, and other equity plus net debt. TheConsolidated Company’s debt-to-equity ratio at the end of the reporting period were as follows:

December 31,2019

December 31,2018

Total liabilities $ 199,107,979 183,344,352Less: cash and cash equivalents (43,608,119) (52,365,882)Net debt $ 155,499,860 130,978,470Total equity $ 355,570,700 386,904,992Debt-to-equity ratio at December 31 %30.43 %25.29

(aa) Reconciliation of liabilities arising from financing activities

Short-termborrowings

Short-termnotes payable

Long-term notes payable

Long-termborrowings(including

currentportion)

Bonds payable(including

currentportion)

Lease liabilities(including

currentportion)

Total liabilitiesarising from

financingactivities

Balance as of January 1,2019 $ 21,253,381 8,897,747 7,096,550 12,270,805 58,531,455 624,278 108,674,216

Change in cash fromfinancing activities 2,772,313 6,500,000 (2,000,000) 6,133,209 5,431,560 (209,941) 18,627,141

Non-cash changes - (4,952) (133) - 15,646 80,518 91,079

Influence due to fluctuationof exchange rate (13,594) - - (319,564) - (6,106) (339,264)

Balance as of December31, 2019 $ 24,012,100 15,392,795 5,096,417 18,084,450 63,978,661 488,749 127,053,172

(Continued)289



Short-term notespayable

Long-term notespayable


current portion)


current portion)


financingactivities

Balance as of January 1, 2018 $ 9,295,583 7,998,778 4,998,418 23,151,433 55,923,701 101,367,913

Change in cash from financing activities 11,969,794 900,000 2,100,000 (12,602,786) 2,598,472 4,965,480

Non-cash changes - (1,031) (1,868) - 15,414 12,515

Influence due to fluctuation of exchangerate (11,996) - - 1,722,158 (6,132) 1,704,030

Balance as of December 31, 2018 $ 21,253,381 8,897,747 7,096,550 12,270,805 58,531,455 108,049,938

(7) Related-party transactions:

(a) Parent company and ultimate controlling party

The Company is the ultimate controlling party of the Consolidated Company and its subsidiaries.

(b) Names and relationship with related parties

The followings are entities that have had transactions with related party during the periods coveredin the consolidated financial statements.

Name of related partyRelationship with the

Consolidated CompanyFormosa Petrochemical Corporation AssociatesNanya Technology Corporation AssociatesFormosa Resources Corporation AssociatesFormosa Plastics Construction Corporation AssociatesFormosa Heavy Industries Corporation AssociatesFormosa Heavy Industries (Ningbo) Co., Ltd. AssociatesFormosa Heavy Industries Corp. (GZ) Ltd. AssociatesFormosa Synthetic Rubber (Hong Kong) Corporation Limited AssociatesFormosa Synthetic Rubber (Ningbo) Co., Ltd. AssociatesFormosa Industries Corporation AssociatesFormosa Group (Cayman) Limited AssociatesFormosa Utility Venture, Ltd. AssociatesFormosa Environmental Technology Corporation AssociatesFormosa Plastics Transport Corporation AssociatesFG Inc. AssociatesNan Ya Plastics (Zhengzhou) Co., Ltd. Joint venturesNanya Kyowa Plastics (Nantong) Co., Ltd. Joint venturesP.T. Indonesia Nanya Indah Plastics Co. Joint venturesFormosa Plastics Corporation Other related partiesFormosa Chemicals and Fiber Corporation Other related parties

(Continued)290


Name of related partyRelationship with the

Consolidated CompanyHwa Ya Power Corporation Other related partiesFormosa Taffeta Co., Ltd. Other related partiesFormosa Advanced Technologies Co., Ltd. Other related partiesFormosa Ha Tinh (Cayman) Ltd. Other related partiesFormosa Ha Tinh Steel Corporation Other related partiesFormosa Ha Tinh (Cayman) Limited Taiwan Branch Other related partiesChina Man-made Fiber Corporation Other related partiesMai Liao Harbor Administration Corp. Other related partiesFormosa Industries (Ningbo) Co., Ltd. Other related partiesFormosa Power (Ningbo) Limited Company Other related partiesFormosa Chemicals and Fiber (Ningbo) Corporation Other related partiesXiamen Haicang Investment Group Co., Ltd. Other related partiesFormosa Plastics Marine Corporation Other related partiesFormosa Plastics Corporation U.S.A. Other related partiesFG LA LLC Other related partiesMing Chi University Of Technology Other related partiesFormosa Industries Corporation, U.S.A. Other related partiesFormosa Plastics Marine Corporation Other related partiesFormosa Electronic (Ningbo) Co., Ltd. Other related parties

(c) Significant related-party transactions

(i) Sales to related parties

The amounts of significant sales by the Consolidated Company to related parties were asfollows:


2019 2018Associates and joint ventures $ 4,823,266 7,582,255Other related parties 13,749,358 16,804,638

$ 18,572,624 24,386,893

The receivables from related parties were as follows:

December 31,2019

December 31,2018

Associates and joint ventures $ 683,497 975,340Other related parties 1,182,504 1,509,009

$ 1,866,001 2,484,349

(Continued)291


The selling prices and collection terms of sales to related parties are not significantly differentfrom those of third-party customers. The accounts receivable arising from sales of machineryand equipment, and machine parts are collected after the delivery inspection, and the accountsreceivable arising from sales of other products are collected on the 30th day of the followingmonth.

The Consolidated Company sells mainly machinery and provides engineering services torelated parties in China and Vietnam. Payment is made after the test run of machinery sold.Also, it sells other products to these related parties. Selling prices and collection terms of otherproducts sold to these associates are not materially different from those to non-related generalbuyers. Payments are collected 30 to 180 days after shipping of these other products.

(ii) Purchase from related parties

The amounts of significant purchases by the Consolidated Company from related parties wereas follows:

2019 2018Associates and joint ventures

Formosa Petrochemical Corporation $ 35,608,519 47,217,016Other associates and joint ventures 39,150 90,169

Other related partiesFormosa Chemicals and Fiber Corporation 24,944,681 36,196,315Other related parties 21,870,354 24,913,017

$ 82,462,704 108,416,517

The payables to related parties were as follows:

December 31,2019

December 31,2018

Associates and joint venturesFormosa Petrochemical Corporation $ 2,862,473 3,376,770Other associates and joint ventures 4,727 72

Other related partiesFormosa Chemicals and Fiber Corporation 1,959,178 2,763,341

Other related parties 2,160,591 2,165,767$ 6,986,969 8,305,950

Purchase prices and payment terms of purchases from related parties are not materiallydifferent from those of non-related general suppliers. Payment shall be paid within 30 to 180days of the month following the month of purchase with checks which are due and payableimmediately.

(Continued)292


(iii) Unrealized sales profit

Significant unrealized (realized) profits from sales to related parties were as follows:

For the years ended December 31, 2019 For the years ended December 31, 2018

Investee

Unrealized salesprofit at

beginning ofperiod

(Realized)Unrealized sales

profits

Unrealized salesprofit at end of

period

Unrealized salesprofit at

beginning ofperiod

(Realized)Unrealized sales

profits

Unrealizedsales profit atend of period

Associates and joint ventures $ 45,959 (6,964) 38,995 102,249 (56,290) 45,959

(iv) Construction

The Consolidated Company contracted with associates to construct and expand the factory.The construction costs were as follows:


Associates and joint ventures Formosa Heavy Industries Corporation $ 3,082,860 728,593Other related parties Formosa Plastics Corporation 17,988 -

$ 3,100,848 728,593The payables to related parties were as follows:

December 31,2019

December 31,2018

Associates and joint ventures

Formosa Heavy Industries Corporation $ - 414,896

(v) Utility expenses

Part of the utilities of the Consolidated Company's Lin-Yuan plant and all of the utilities of theConsolidated Company’s Ren-Wu plant, including power, water and steam, are supplied by orpaid on behalf of the Consolidated Company by the utility plants of Formosa PlasticsCorporation. The utilities of the Consolidated Company’ s Mai Liao plant, including power,water and steam, are supplied by Formosa Petrochemical Corporation. The expenses forutilities were as follows:



Formosa Petrochemical Corporation $ 7,217,914 7,903,439

Other related parties

Other related parties 106,786 109,049

$ 7,324,700 8,012,488

(Continued)293



December 31,2019

December 31,2018


Formosa Petrochemical Corporation $ 84,083 89,949

(vi) Property transactions

1) Purchase of Property, Plant and Equipment

The purchases price of property, plant and equipment purchased from related partieswere as follows:

December 31,2019

December 31,2018

Associates－Formosa Petrochemical Corporation $ 9,618 30,768

In November, December, 2019 and June, 2018, the Consolidated Company purchased property,plant, and equipment, amounting to $9,618 and $30,768, respectively. As of December 31,2019 and 2018, the ownership transfer process has been finished. The purchase price for theproperty, plant, and equipment was determined based on market condition and asset evaluationreport. For further description of the property, plant, and equipment, please refer to note 6(i).

.

2) Acquisition of financial assets

AccountNumber of Shares

(in thousands) Purpose

For the year ended

December 31, 2019Associates－Formosa ResourcesCorporation

Investments accountedfor using equity method

157,000

Shares of stock of FormosaResources Corporation

$ 1,570,000

Associates－FG Inc.Investments accountedfor using equity meth -

Shares of stock of FG Inc.231,570

Associates－Formosa SyntheticRubber CorporationLimited


4,600

Shares of stock of FormosaSynthetic Rubber CorporationLimited

46,000

Subsidiaries－NanYa PCB Corporation

Investments accountedfor using equity method"

13,267

Shares of stock of FormosaAdvanced TechnologiesCo.,Ltd 472,968

$ 2,320,538

(Continued)294

NAN YA PLASTICS CORPORATION AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

AccountNumber of Shares

(in thousands) PurposeFor the year endedDecember 31, 2018

Other related parties－Formosa Ha Tinh(Cayman) Ltd.

Non-current financialassets at fair valuethrough othercomprehensive income 56,471

Shares of stock of FormosaHa Tinh (Cayman) Ltd.

$ 1,676,070

Associates－Formosa SyntheticRubber (Hong Kong)Corporation Limited


65,000

Shares of stock of FormosaSynthetic Rubber (HongKong) Corporation Limited

2,010,450

$ 3,686,520

3) Disposals of property, plant and equipment

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

For the years ended December31, 2019

For the years ended December31, 2018

Disposalprice

Gain (loss)from disposal

Disposalprice

Gain (loss)from disposal

Associates

Formosa IndustriesCorporation

$ 1,247,436 (62,144) - -


Formosa PlasticCorporation

- - 187 57

$ 1,247,436 (62,144) 187 57

As of December 31, 2019 and 2018, the outstanding balance were $748,193 and $0,respectively. Please refer to note 6(h) for the details of property, plant and equipment.

(vii) Loans to related parties

The loans to related parties were as follows:

Other receivables from related parties

December 31,2019

December 31,2018


Other associates and joint ventures $ 198,097 221,205


Formosa Plastics Marine Corporation 5,640,819 5,807,107

Other related parties 86,311 89,558

$ 5,925,227 6,117,870

(Continued)295


(viii) Endorsements and guarantees

The amounts of the Consolidated Company’s endorsements and guarantees for securing relatedparties’ loans were as follows:

December 31,2019

December 31,2018

Associates and joint ventures Formosa Group (Cayman) Limited $ 7,526,500 19,208,125 Formosa Industries Corporation 602,120 5,043,547 Formosa Resources Corporation 3,236,395 3,303,798Other related parties Formosa Ha Tinh (Cayman) Ltd. 20,753,559 15,915,686

$ 32,118,574 43,471,156

(ix) Leases

1) The rental income of the Consolidated Company from leasing its plants to its relatedparties, recognized as other income, were as follows:



Nan Ya Technology Corporation $ 258,976 234,064

The rentals charged to related parties are determined based on the local market prices,and rents are collected monthly depending on the contract.

2) The rental expenses of the Consolidated Company's offices and buildings leased itsrelated parties, recognized as operating costs and expenses, were as follows:

The Consolidated Company rented an office building and a piece of land from FormosaPlastics Corporation. The rentals charged to related parties are determined based on thelocal market prices. Rental expenses for the years ended December 31, 2018 amounted to$41,171. The Consolidated Company applied IFRS 16, with a date of initial applicationon January 1, 2019. This lease transaction recognized the additional amounts of $51,295and $51,295 of right-of-use assets and lease liabilities, respectively. For the years endedDecember 31, 2019, the Consolidated Company recognized the amount of $564 asinterest expense. As of December 31, 2019, the balance of lease liabilities amounted to$26,385, consisting of current and noncurrent portion amounting to $25,264 and $1,121,respectively.

(Continued)296


The Consolidated Company rented an office building from Formosa Chemicals and FiberCorporation. The rentals charged to related parties are determined based on the localmarket prices. Rental expenses for the years ended December 31, 2018 amounted to$27,125. The Consolidated Company applied IFRS 16, with a date of initial applicationon January 1, 2019. This lease transaction recognized the additional amounts of $53,458and $53,458 of right-of-use assets and lease liabilities, respectively. For the year endedDecember 31, 2019, the Consolidated Company recognized the amount of $584 asinterest expense. As of December 31, 2019, the balance of lease liabilities amounted to$26,918.

The Consolidated Company rented an office building from Ming Chi University oftechnology in May 2019, where in the rental is determined based on the local marketprices. The interest expenses for the years ended December 31, 2019 amounted to $984.As of December 31, 2019, the balance of lease liabilities amounting to $67,947,consisted of current and non-current portion of $3,140 and $64,807, respectively.

(x) Others

For the yearsended

December 31,2019

Associates－Formosa Plastics Corporation $ 10

For the year ended December 31, 2019, the Consolidated Company purchased official vehiclesfrom Formosa Plastics Corporation, which were managed assets, and recognized asmiscellaneous purchases. The Consolidated Company did not have similar transactions for theyear ended December 31, 2018.

(d) Key management personnel compensation

Key management personnel compensation comprised:


2019 2018Short-term employee benefits $ 143,949 130,435

(8) Pledged assets:

The carrying values of pledged assets were as follows:

Pledged assets Object UsageDecember 31,

2019December 31,

2018Current Financial asset at fair value through other

comprehensive income－stock of FormosaPlastics Corporation

Others The collateral toprovisional executionin litigation

$ 1,271,053 1,286,336

Land (include idle land) Bank loans Bank loans 7,529,494 7,529,494Machinery and equipment Bank loans Bank loans - 11,681Total $ 8,800,547 8,827,511

(Continued)297


(9) Significant commitment and contingencies:

December 31,2019

December 31,2018

(1) Outstanding standby letter of credit $ 2,358,537 1,359,423(2) Endorsements and guarantees 32,118,574 43,471,156(3) Bonding guarantees by banks 29,000 22,000(4) Letters of credit guarantees by banks 24,000 20,000

(5) Formosa Industries Corporation, a Company’s investee, signed a syndicated line of credit with a groupof financial institutions amounting to USD 250,000 thousand for its operational needs. According tothe requirement of the consortium, the Company has to offer a letter of support based on its ownershipof 42.5% and commit to monitor the operations of Formosa Industries Corporation to ensure that itcompletes its financial obligation.

(6) Formosa Ha Tinh (Cayman) Ltd. and Formosa Ha Tinh Steel Corporation, Company’ s investees,signed a syndicated line of credit with a group of financial institutions amounting to USD 1,990,000thousand and USD 500,000 thousand, respectively, for its operational needs. According to therequirement of the consortium, the Company has to offer a letter of undertaking or a letter of supportbased on its ownership of 11.432% and commit to monitor the operations of Formosa Ha Tinh(Cayman) Ltd. and Formosa Ha Tinh Steel Corporation to ensure that they complete their financialobligation.

(7) Nan Ya Electronic Materials (Huizhou) Co., Ltd, a Company's investee, planned to apply for a five-year syndicated loan with a total amount of no more than CNY 1,000,000 thousand, with a group offinancial institutions, among which Mega International Commercial Bank Suzhou Branch and FubonBank (China) Co., Ltd. act as leading banks. According to the requirement of the consortium, theCompany has to offer a letter of support, and commit to monitor the operations of Nan Ya ElectronicMaterials (Huizhou) Co., Ltd to ensure that it completes its financial obligation.

(8) Litigation between the Company and DBTEL Incorporated

The Company’s client, DBTEL Inc. (DBTEL), placed several orders from the Company concerningLCD monitors since May 2003. However, in June 2004, it decided to cancel some of them, evendemanding the Company to postpone its delivery; and in some cases, it went to a certain extent as torefuse accepting the goods delivered by the Company, resulting in a stock up of both raw materials andfinished products in the Company’s warehouse amounting to USD 5,409,815 and TWD 100,846,141.In light of this matter, the Company filed a lawsuit against DBTEL to the Taiwan High Court on April6, 2006, demanding for compensation for the damage caused by DBTEL. In reply, the Courtauthorized the Company to hold certain properties of DBTEL as its collateral. However, DBTEL wasnot satisfied with the decision made by the Court; therefore, it filed an appeal against the Company.On April 18, 2017, the Court decided that the compensation demanded by the Company should notexceed the amounts of USD 1,246,118 and TWD 27,229,161 (both including principal and interest).Plus, the said properties that were held by the Company for collateral should also be returned toDBTEL. On August 8, 2018, the Supreme Court rejected the verdict handed down by the High Courtabout the dismissal of the Company’ s appeal in the first instance, the appeal of DBTEL, otherdeclaration of provisional execution, and the related legal expenses. Therefore, the High Court willhave to decide on this matter. Currently, this case is still in progress.

(Continued)298



(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

(12) Other:

A summary of current-period employee benefits, depreciation, and amortization, by function, were asfollows:

For the years ended December 31,

by function 2019 2018

by itemOperating

CostsOperatingexpenses

Non-Operatingexpenses Total

OperatingCosts

Operatingexpenses


Employee benefit

Salaries 29,371,912 5,432,775 - 34,804,687 22,652,598 5,711,946 - 28,364,544

Labor and health insurance 2,103,858 363,328 - 2,467,186 2,018,259 345,431 - 2,363,690

Pension expenses 1,638,905 350,848 - 1,989,753 1,616,508 348,358 - 1,964,866

Remuneration of directors - 35,172 - 35,172 - 30,235 - 30,235

Others personnel expenses 1,249,637 211,038 - 1,460,675 1,230,798 196,730 - 1,427,528

Depreciation expenses 14,546,276 681,407 30,780 15,258,463 15,424,744 542,501 25,324 15,992,569

Amortization expenses 1,039,106 247,073 - 1,286,179 1,614,247 246,372 - 1,860,619

(13) Other disclosures:

(a) Information on significant transactions:

(i) Lending to other parties: Please see attached Table 1.

(ii) Guarantees and endorsements for other parties: Please see attached Table 2.

(iii) Information regarding securities held at the reporting date (subsidiaries, associates and jointventures not included): Please see attached Table 3.

(iv) Information regarding purchase or sale of securities for the period exceeding 300 million or20% of the Company’s paid-in capital: Please see attached Table 4.

(v) Information on acquisition of real estate with purchase amount exceeding 300 million or 20%of the Company's paid-in capital: Please see attached Table 5.

(vi) Information regarding receivables from disposal of real estate exceeding 300 million or 20% ofthe Company's paid-in capital: Please see attached Table 6.

(vii) Information regarding related-parties purchases and/or sales exceeding 100 million or 20% ofthe Company's paid-in capital: Please see attached Table 7.

(viii) Information regarding receivables from related-parties exceeding 100 million or 20% of theCompany's paid-in capital: Please see attached Table 8.

(ix) Information regarding trading in derivative financial instruments: None.

(x) Significant transactions and business relationship: Please see attached Table 9.

(Continued)299



(b) Information on investees: Please see attached Table 10.

(c) Information on investment in mainland China: Please see attached Table 11.

(14) Segment information:

(a) General Information

The Consolidated Company’ s four reportable segments are: plastics products, plastic materials,electronic materials and fiber products. Plastic products department mainly engaged in themanufacture and sale of flexible PVC sheets and other plastics processing products; plastic materialsdepartment is mainly engaged in the manufacture and sale of ethylene glycol and other plasticpetrochemical raw materials; electronic materials department is mainly engaged in the manufactureand sale of copper clad laminate; fiber products department is mainly engaged in the manufactureand sale of polyester products.

The Consolidated Company’s reportable segments are responsible for the Consolidated Company’sstrategic business units, including the manufacturing and supplying of different products. As eachstrategic business unit requires different technology and marketing strategies, each unit isadministered individually.

(b) Segment revenue and operating results

The Consolidated Company uses the internal management report that the chief operating decisionmaker reviews as the basis to determine resource allocation and make a performance evaluation. Theinternal management report includes profit before taxation, excluding any shares of profit (loss) ofassociates and joint ventures accounted for using equity method, income tax, extraordinary gains andlosses, and foreign exchange gains and losses, because they are managed on a group basis, and hencethey are not allocated to each reportable segment. In addition, not all reportable segments includedepreciation and amortization of significant non-cash items. The reportable amount is similar to thatin the report used by the chief operating decision maker.

There were no material differences between the accounting policies adopted for the ConsolidatedCompany’ s operating segments and those described in Note 4. The terms and conditions for theConsolidated Company’ s intersegment sales and transfers are the same as those of third-partytransactions, which are measured at market price.

Operating segments are combined and reconciled as follows:

For the year ended December 31, 2019

PlasticsProduct

PlasticsMaterial

ElectronicMaterials

PolyesterProduct

OtherDepartment Reconciliations Total

Revenue：

Net revenue from external customers $ 42,529,381 72,185,495 112,257,646 55,150,576 4,179,961 - 286,303,059

Net revenue from sales among intersegments 1,294,908 8,277,826 19,627,835 991,997 3,704,696 (33,897,262) -

Interest revenue 217,255 148,752 565,513 1,385 631,436 (473,908) 1,090,433

Total revenue $ 44,041,544 80,612,073 132,450,994 56,143,958 8,516,093 (34,371,170) 287,393,492

Interest expense $ 95,805 892,028 295,524 204,706 606,273 (473,908) 1,620,428

Depreciation and amortization 1,520,694 4,733,890 7,849,577 1,823,620 616,861 - 16,544,642

Share of profit (loss) of associates and joint venturesaccounted for using equity method 11,838,753

Reportable segment profit or loss $ 3,222,819 (2,549,569) 7,979,595 2,112,671 22,471,164 (6,547,650) 26,689,030

Reportable segment assets $ 36,222,891 76,553,181 139,519,674 34,504,449 451,894,399 (184,015,915) 554,678,679

Reportable segment liabilities $ 10,417,840 19,255,892 29,203,048 10,063,287 142,497,488 (12,329,576) 199,107,979

(Continued)300


For the year ended December 31, 2018PlasticsProduct

PlasticsMaterial

ElectronicMaterials

PolyesterProduct

OtherDepartment Reconciliations Total

Revenue：

Net revenue from external customers $ 45,538,078 96,493,105 117,021,664 67,857,488 6,151,225 - 333,061,560

Net revenue from sales among intersegments 1,225,586 10,196,690 23,255,143 1,129,823 3,116,521 (38,923,763) -

Interest revenue 271,715 23,327 422,509 1,175 958,342 (629,546) 1,047,522

Total revenue $ 47,035,379 106,713,122 140,699,316 68,988,486 10,226,088 (39,553,309) 334,109,082

Interest expense $ 98,397 565,344 446,900 177,355 1,065,019 (629,546) 1,723,469

Depreciation and amortization 1,498,561 5,392,569 8,551,325 1,788,845 621,888 - 17,853,188

Share of profit (loss) of associates and joint venturesaccounted for using equity method 26,179,740

Reportable segment profit or loss $ 3,345,913 12,916,430 11,011,174 2,958,826 42,812,286 (11,519,443) 61,525,186

Reportable segment assets $ 33,571,790 81,947,557 133,224,420 35,866,701 471,499,730 (185,860,854) 570,249,344

Reportable segment liabilities $ 10,551,184 13,929,371 27,416,068 10,561,594 135,233,689 (14,347,554) 183,344,352

Further explanations of the significant reconciling items of reportable segment information exhibitedabove are described as follows:

The eliminations of the Consolidated Company’ s intersegment revenue amounted to $34,371,170and $39,553,309 in 2019 and 2018, respectively.

(c) Geographic information

The Consolidated Company’ s revenues from continuing operations from external customers bylocation of operations and information about its non-current assets by location of assets are asfollows:

For the years ended December 31Geographic 2019 2018

Net Revenue from External Customers:Taiwan $ 82,326,864 91,516,190China and HK 116,321,519 136,624,703U.S.A. 37,218,261 45,444,934Others 50,436,415 59,475,733

$ 286,303,059 333,061,560

GeographicDecember 31,

2019December 31,

2018Non-current Assets: Taiwan $ 87,701,251 79,773,532 China and HK 49,900,319 55,581,958 U.S.A. 35,563,525 20,168,048

$ 173,165,095 155,523,538

Non-current assets include property, plant and equipment, intangible assets, technology developmentexpense, prepayments for purchase of equipment and other assets, but do not include financialinstruments, deferred tax assets, post-employment benefit assets, and non-current assets arising frominsurance contracts.

(Continued)301


(d) Information about major customers

There is no single customer’s sale which exceeds 10% of the Consolidated Company’s revenues.

302

TABLE 1

Item Value0 The Company Formosa Plastics Group

Investment Corp. (Note 6)Other receivablesfrom related

ti

YES 70,000 70,000 - - 2 - Operatingcapital

- ‑ - 86,142,971 172,285,942

0 The Company Wellink TechnologyCorporation (Note 6)

Other receivablesfrom related

ti


- ‑ - 86,142,971 172,285,942

0 The Company Nan Ya Plastics (Hong Kong)Co., Ltd. (Note 6)


ti


- ‑ - 86,142,971 172,285,942

0 The Company Nan Ya Plastics CorporationTexas (Note 6)


ti

YES 21,205,840 - - 3.211%~3.613% 2 - Operatingcapital

- ‑ - 86,142,971 172,285,942

0 The Company Nan Chung PetrochemicalCorporation (Note 6)


ti

YES 500,000 500,000 - 1.4142%~1.4181% 2 - Operatingcapital

- ‑ - 86,142,971 172,285,942

0 The Company Formosa Heavy IndustriesCorporation


ti

YES 12,000,000 6,500,000 - 1.4138%~1.4181% 2 - Operatingcapital

- ‑ - 86,142,971 172,285,942

0 The Company Nanya Technology Corporation Other receivablesfrom related

ti

YES 1,500,000 - - - 2 - Operatingcapital

- - - 86,142,971 172,285,942

0 The Company Formosa PetrochemicalCorporation


ti


- ‑ - 86,142,971 172,285,942

0 The Company Formosa Plastics Corporation Other receivablesfrom related

ti

YES 8,000,000 6,000,000 - - 2 - Operatingcapital

- ‑ - 86,142,971 172,285,942

0 The Company Formosa Chemicals and FiberCorporation


ti


- ‑ - 86,142,971 172,285,942

0 The Company Formosa Plastics MarineCorporation


ti

YES 9,385,318 8,460,819 5,640,819 1.4138%~1.4181% 2 - Operatingcapital

- ‑ - 86,142,971 172,285,942

1 Nan Ya Plastics CorporationAmerica

Nan Ya Plastics CorporationTexas (Note 6)


ti


- ‑ - 20,791,919 41,583,838


Nan Ya Plastics CorporationU.S.A. (Note 6)


ti

YES 903,180 903,180 286,237 2.8130%~3.610% 2 - Operatingcapital

- - - 20,791,919 41,583,838

2 Nan Ya PCB Corporation The Company (Note 6) Other receivablesfrom related

ti

YES 4,500,000 4,000,000 4,000,000 1.418% 2 - Operatingcapital

- - - 7,306,170 14,612,340

2 Nan Ya PCB Corporation Nan Ya PCB (HK)Corporation (Note 6)


ti


- ‑ - 7,306,170 14,612,340

2 Nan Ya PCB Corporation Nan Ya PCB (Kunshan)Corporation (Note 6)


ti


- - - 7,306,170 14,612,340

2 Nan Ya PCB Corporation Formosa Plastics MarineCorporation


ti

YES 500,000 - - 1.414%~1.418% 2 - Operatingcapital

- ‑ - 7,306,170 14,612,340

2 Nan Ya PCB Corporation Formosa Heavy IndustriesCorporation


ti


- ‑ - 7,306,170 14,612,340

EndingBalance

CollateralActual Usageduring the

Period

Range of Interest Ratesduring the Period.

Purposes of FundFinancing for the

Borrowers (Note 1)

Allowancefor Bad Debt

NAN YA PLASTICS CORPORATION AND SUBSIDIARIES LOANS TO OTHER PARTIES

FOR THE YEAR ENDED DECEMBER 31, 2019(Expressed in thousands of New Taiwan Dollars)

No. Name of Lenders Account NameName of Borrowers

Highest Balance ofFinancing to OtherParties during the

Period

MaximumLimitation on

Fund Financing(Note 4)

Individual FundingLoan Limits (Note 3)

Transaction Amountfor Business BetweenTwo Parties (Note 2)

Reasons forShort-termFinancing

RelatedParty

303

Item Value

EndingBalance


Period



Borrowers (Note 1)

Allowancefor Bad DebtNo. Name of Lenders Account NameName of Borrowers


Period






RelatedParty

3 Nan Ya Plastics (Hong Kong) Co.,Ltd.

Nan Ya Electronic Materials(Kunshan) Co., Ltd. (Note 6)


ti

YES 362,773 - - 4.12% 2 - Operatingcapital

- ‑ - 42,667,670 85,335,340

4 Wen Fung Industrial Co., Ltd. Wellink TechnologyCorporation (Note 6)


ti


- ‑ - 24,174 241,735

4 Wen Fung Industrial Co., Ltd. Formosa EnvironmentalTechnology Corporation


ti

YES 60,000 60,000 60,000 1.418% 2 - Operatingcapital

- ‑ - 120,868 241,735

5 Nan Ya Plastics (Guangzhou) Co.,Ltd.

Nan Ya Draw Textured Yarn(Kunshan) Co., Ltd. (Note 6)


ti


- - - 1,316,852 2,633,704


Nan Ya Plastics (Ningbo) Co.,Ltd. (Note 6)


ti


- ‑ - 1,316,852 2,633,704

6 Nan Ya Plastics (Huizhou) Co.,Ltd.



ti


- ‑ - 1,691,034 3,382,068




ti


- ‑ - 1,691,034 3,382,068

7 Nan Ya Trading (Huizhou) Co.,Ltd.

PFG Fiber Glass (Kunshan)Co., Ltd. (Note 6)


ti


- ‑ - 28,644 57,289

8 Nan Ya Plastics (Xiamen) Co., Ltd. Xiamen Haicang InvestmentGroup Co., Ltd.


ti


- - - 684,281 684,281

8 Nan Ya Plastics (Xiamen) Co., Ltd. Nan Ya Draw Textured Yarn(Kunshan) Co., Ltd. (Note 6)


ti


- - - 684,281 684,281

8 Nan Ya Plastics (Xiamen) Co., Ltd. Nan Ya Plastics (Ningbo) Co.,Ltd. (Note 6)


ti


- - - 684,281 684,281

8 Nan Ya Plastics (Xiamen) Co., Ltd. PFG Fiber Glass (Kunshan)Co., Ltd. (Note 6)


ti


- ‑ - 684,281 684,281

8 Nan Ya Plastics (Xiamen) Co., Ltd. Nan Ya Plastics (Zhengzhou)Co., Ltd.


ti


- - - 684,281 684,281

9 Nan Ya Plastics (Nantong) Co.,Ltd.



ti


- ‑ - 4,980,774 9,961,548




ti


- ‑ - 4,980,774 9,961,548

10 China Nantong Huafeng Co., Ltd. Nan Ya Draw Textured Yarn(Kunshan) Co., Ltd. (Note 6)


ti


- ‑ - 163,893 327,786

10 China Nantong Huafeng Co., Ltd. Nan Ya Plastics (Ningbo) Co.,Ltd. (Note 6)


ti


- ‑ - 163,893 327,786

304

Item Value

EndingBalance


Period



Borrowers (Note 1)



Period






RelatedParty

11 Nantong Huafu Plastics Co., Ltd. PFG Fiber Glass (Kunshan)Co., Ltd. (Note 6)


ti


- ‑ - 45,816 91,632

11 Nantong Huafu Plastics Co., Ltd. Nan Ya Draw Textured Yarn(Kunshan) Co., Ltd. (Note 6)


ti


- ‑ - 45,816 91,632

12 Nan Ya Electric (Nantong) Co.,Ltd.



ti


- ‑ - 575,088 1,150,175




ti


- ‑ - 575,088 1,150,175

13 Nan Ya Electronic Materials(Kunshan) Co., Ltd.

Nan Ya Plastics (Zhengzhou)Co., Ltd.


ti


- ‑ - 27,718,743 55,437,487


Nan Ya Electronic Materials(Huizhou) Co., Ltd. (Note 6)


ti


- ‑ - 27,718,743 55,437,487




ti


- ‑ - 27,718,743 55,437,487




ti


- ‑ - 27,718,743 55,437,487


Nan Ya PCB (Kunshan)Corporation (Note 6)


ti


- - - 27,718,743 55,437,487




ti


- ‑ - 27,718,743 55,437,487

Note 1：(a) Those with business contact please fill in 1; (b) Those necessary for short-term financing please fill in 2.Note 2：Amount from business contact stands for the sum of purchases and sales.

Note 3：Capital loaned to other parties should not exceed 50% of the lender’s net worth, of which the sum loaned to non interested parties for capital requirements should not exceed 40% of the net worth of borrower. The cap amount of loans to associates and interested parties should not exceed 25% of the equity of the lenders. Other parties should not exceed 20% of the lender’s net worth.

Note 4：Subsidiaries' capital loaned to associates and interested parties should not exceed 50% of the equity of the lenders. Other parties should not exceed 40% of the lender’s net worth. The subsidiaries' cap amount of loans to other parties should not exceed 100% of its equity. Non-interested parties should not exceed 40% of its net worth. However, subsidiaries' capital loaned to the parties located in non-Taiwan and directly or indirectly held by the company 100% of the shares are not be limited.

Note 5：Nan Ya Plastics corporation, America and Nan Ya Plastics corporation USA s’reporting currency are denominated in USD, and the exchange rate of TWD to USD as of December 31, 2019 (in average) is 30.106(30.924)：1.

Nan Ya Plastics (Hong Kong) Co., Ltd and Superior World Wide Trading Co., Ltd. s’reporting currency are denominated in HKD, and the exchange rate of TWD to HKD as of December 31, 2019 (in average) is 3.8597(3.9646)：1.

Note 6：This transaction has already been written off during the consolidation process.

305

TABLE 2B=A/2 C D=C/SE A=S/E*1.3

0 The Company Formosa IndustriesCorporation

1 9,531,078 4,940,651 602,120 602,120 - 0.17% 447,943,449 N N N

0 The Company Formosa Group (Cayman)Ltd.

6 223,971,725 18,816,250 7,526,500 7,526,500 - 2.18% 447,943,449 N N N

0 The Company Formosa Ha Tinh (Cayman)Ltd.

6 223,971,725 20,753,559 20,753,559 20,753,559 - 6.02% 447,943,449 N N N

0 The Company Formosa ResourcesCorporation

6 223,971,725 3,236,395 3,236,395 3,236,395 - 0.94% 447,943,449 N N N

1 Nan Ya PlasticsCorporation America

Nan Ya PlasticsCorporation Texas

4 27,029,495 139,201 102,946 102,946 - 0.26% 54,058,989 Y N N

Note1: The total amount of guarantees and endorsements by the company shall not exceed 1.3 times of the company's net value, and the amount of guarantees and endorsements for a specific enterprise shall not exceed one half of the foregoing total.

Note2: There are seven conditions in which the Company may have guarantees or endorsements for other parties as follows:(1)The Company has business relationship.(2)The Company holds directly and indirectly more than 50% of the voting shares of the subsidiaries. (3)In aggregate, the Company holds directly or its subsidiaries hold indirectly more than 50% of the investee. (4)Subsidiaries in which the Company holds directly or indirectly more than 90% of the voting shares make endoresement and guarantees for each other.(5)The Company is required to provide guarantees or endorsements for the construction project based on the construction contract.(6)The stockholders of the Company provide guarantees or endorsements for the investee in proportion to their stockholding percentage.

FOR THE YEAR ENDED DECEMBER 31, 2019

(7)According to Consumer Protection Act, companies are required to provide guarantees and endorsements for joint and several libility if take part in business of preconstruction real estate.

Name Relationship with TheCompany (Note)

Highest Balance forGuarantee and

Endorsements duringthe Period

NAN YA PLASTICS CORPORATION AND SUBSIDIARIESGUARANTEES AND ENDORSEMENTS FOR OTHER PARTIES

(Expressed in thousands of New Taiwan Dollars)

Balance ofGuarantees and

Endorsements as ofDecember 31, 2019

Amount of Endorsement/Guarantee Collateralized

by Properties

Ratio of Accumulated Amountsof Guarantees and

Endorsements to Net Worth ofthe Latest Financial Statements

Maximum Amountsfor Guarantees and

Endorsements

Amount Secured byGuaranteed and

Endorsed PropertyNo Endorsement

Guarantee Provider

Counterparty of Guarantee and Endorsement Limitation Amount ofGuarantees and

Endorsements for aSpecific Enterprise

Parent Company Endorses/Guarantees to Third Parties

on Behalf of Subsidiary

Subsidiary Endorses/Guarantees to ThirdParties on Behalf of

Parent Company

Endorsements/Guarantees to the Third Parties

on Behalf of the Companies inMainland China

306

TABLE 3

Number of Shares(in thousands)

CarryingValue

ShareholdingPercentage

Market Value orNet Asset Value

The Company Mega Internaitonal Private USD MoneyMarket

- Financial assets valued at FVTPL－current

12,479 4,044,356 - 4,044,356

The Company Formosa Plastics Corporation Other related parties Financial assets valued atFVTOCI－current

294,793 29,420,352 4.63% 29,420,352 Note 1

The Company Formosa Chemicals and FiberCorporation

Other related parties Financial assets valued atFVTOCI－current

140,520 12,295,469 2.40% 12,295,469

The Company Formosa Group Ocean Marine InvestmentCorporation

Other related parties Financial assets valued atFVTOCI－non current

3 4,842,526 19.00% 4,842,526

The Company Formosa Plastics Corporation U.S.A. Other related parties Financial assets valued atFVTOCI－non current

2 1,283,210 0.51% 1,283,210

The Company Ostendo Technologies Inc. - Financial assets valued atFVTOCI－non current

150 - 0.12% -

The Company Formosa Plastics Maritime Corp. Other related parties Financial assets valued atFVTOCI－non current

352 299,258 18.00% 299,258

The Company Formosa International Development Co.,Ltd.

Other related parties Financial assets valued atFVTOCI－non current

16,509 259,076 18.00% 259,076

The Company Mai Liao Harbor Administration Corp. Other related parties Financial assets valued atFVTOCI－non current

39,562 896,136 17.98% 896,136

The Company Formosa Plastics Marine Corporation Other related parties Financial assets valued atFVTOCI－non current

2,429 752,699 15.00% 752,699

The Company ASIA Pacific Investment Co. Other related parties Financial assets valued atFVTOCI－non current

63,717 2,209,623 14.99% 2,209,623

The Company Formosa Technologies Corporation Other related parties Financial assets valued atFVTOCI－non current

2,925 72,959 12.50% 72,959

The Company WK Technology Fund Ltd. - Financial assets valued atFVTOCI－non current

326 8,304 1.63% 8,304

The Company WK Technology Fund IV Ltd. - Financial assets valued atFVTOCI－non current

460 5,573 1.08% 5,573

The Company Central Leasing Corp. - Financial assets valued atFVTOCI－non current

1,779 - 1.07% -

The Company Chinese Television System Inc. - Financial assets valued atFVTOCI－non current

1,769 34,075 1.04% 34,075

The Company China Investment & DevelopmentCompany, Limited

- Financial assets valued atFVTOCI－non current

1,287 4,431 0.80% 4,431

NAN YA PLASTICS CORPORATION AND SUBSIDIARIESSECURITIES HELD AS OF DECEMBER 31, 2019

(EXCLUDING INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES)

(Expressed in thousands of New Taiwan Dollars)DECEMBER 31, 2019

Security Holder Category and Name of SecurityDecember 31, 2019

Notes

Relationship BetweenIssuer of Security and the

Company which HoldsSecurities

Account Name

307


CarryingValue




Notes



Account Name

The Company Taiwan Aerospace Corp. - Financial assets valued atFVTOCI－non current

1,070 18,849 0.79% 18,849

The Company Guang Yuan Securities InvestmentConsulting Corporation

- Financial assets valued atFVTOCI－non current

5,000 26,600 3.91% 26,600

The Company Nan Ya Photonics Inc. Other related parties Financial assets valued atFVTOCI－non current

6,646 110,131 14.42% 110,131

The Company Mega Growth Capital Venture - Financial assets valued atFVTOCI－non current

2,500 19,746 1.97% 19,746


Double Oak (Bonds) - Financial assets valued at FVTPL－non current

- 180,019 - 180,019


Sutton (Bonds) - Financial assets valued at FVTPL－non current

- 330,592 - 330,592


American Overseas Reinsurance Co., Ltd.(Preferred Stock)

- Financial assets valued at FVTPL－non current

- 106,768 - 106,768


MBIA Insurance Corp. (Preferred Stock) - Financial assets valued at FVTPL－non current

- 207,347 - 207,347

Nan Ya Plastics (Hong Kong)Co., Ltd.

Hua Ya (Dong Ying) Plastics Corp. - Financial assets valued atFVTOCI－non current

- 199,951 15.00% 199,951


Hua Ya (Wu Hu) Plastics Corp. - Financial assets valued atFVTOCI－non current

- 180,342 15.00% 180,342

Formosa Plastics GroupInvestment Corp.

WK Technology Fund Ltd. - Financial assets valued atFVTOCI－non current

1,935 12,318 2.42% 12,318


WK Technology Fund IV Ltd. - Financial assets valued atFVTOCI－non current

658 18,576 3.60% 18,576

Nan Ya International (Cayman)Limited

Formosa Ha Tinh (Cayman) Ltd. Other related parties Financial assets valued atFVTOCI－non current

621,178 11,407,727 11.43% 11,407,727

Note 1：The Company pledged its shares of Formosa Plastics Corporation of 12,736 thousand common shares amounting to $1,271,053.

308

Shares(in thousands) Amount Shares

(in thousands) Amount Shares(in thousands) Price Carrying

ValueGain/Loss on

DisposalShares

(in thousands) Amount

The Company Nan Ya Plastics (HongKong) Co., Ltd.

Investmentsaccountedfor using equitymethod

Nan Ya Plastics(Hong Kong)Co., Ltd.

Investmentsaccounted forusing equitymethod

844,053 79,668,326 109,200 4,308,591 953,253 85,283,330(Note 1.2)

Nan YaPlastics (HongKong) Co.,Ltd.

Nan Ya ElectronicMaterials (Huizhou)Co., Ltd.


Nan YaElectronicMaterials(Huizhou) Co.,Ltd.


- 1,965,292 - 4,308,591 - 6,351,352(Note 1.2)

The Company Formosa ResourcesCorporation


FormosaResourcesCorporation


584,594 5,370,047 157,000 1,570,000 741,594 6,615,934(Note 1)

Nan Ya PCBCorporation

Formosa AdvancedTechnologies Co.,Ltd


Formosa TaffetaCo., Ltd.


- - 13,267 472,968 13,267 475,710(Note 1)

Note 1：End of period amount includes investment income and transaction adjustment under equity method and the effect of exchange changes.Note 2：This transaction has already been written off during the consolidation process.

CompanyName

Category and Name ofSecurity

FinancialStatement Account

Sales Ending BalanceCounter-party Relationship

Beginning Balance Purchases

NAN YA PLASTICS CORPORATION AND SUBSIDIARIESINDIVIDUAL SECURITIES ACQUIRED OR DISPOSED OF WITH ACCUMULATED AMOUNT EXCEEDING THE LOWER OF TWD300 MILLION OR 20% OF THE CAPITAL STOCK


TABLE 4

309

TABLE 5

OwnerRelationship

with theCompany

Date ofTransfer Amount

Nan Ya PlasticsCorporationTexas

Construction inprogress and eqipment

2019.04 396,685 Paid Formosa HeavyIndustries Corporation

Associates - - - - Negotiation Plantexpansion

None





None





None





None





None

TABLE 6

Nan Ya DrawTextured Yarn(Kunshan) Co.,Ltd.

Polyester plantesterfication processequipment

2019.01.24 2007.07~2016.05 1,309,580 1,247,436 (62,144) FormosaIndustriesCorporation

Associates Asset activationand operatingperformanceimprovement

Asset ValuationReport

None


Name of Property TransactionDate Acquisition Date Book Value Transaction amount Amount actually receivable Others

40% received, final paymentdue after acceptance

RECEIVABLES FROM DISPOSAL OF REAL ESTATE EXCEEDING 300 MILLION OR 20% OF THE COMPANY'S PAID-IN CAPITAL

Company Name


NAN YA PLASTICS CORPORATION AND SUBSIDIARIESACQUISITION OF INDIVIDUAL REAL ESTATE WITH AMOUNT EXCEEDING THE LOWER OF TWD300 MILLION OR 20% OF THE CAPITAL STOCK


Counter-partyCompany Name Name of Property TransactionDate

TransactionAmount

Status ofPayment

Relationshipwith the

Company

Disclosure of Information on Previous Transfer of Equipment is Required for Related

Parties who are also the Counter Parties References forDetermining

Price


Purpose ofAcquisitionand Current

Condition

Others

Gain (Loss)fom Disposal

Counter-party


Company

Purpose ofDisposal

References forDetermining

Price

310

TABLE 7

Purchases /(Sales) Amount % to total

purchase/(sales) Credit Period Unit Price PaymentTerm

EndingBalance % to Total

The Company Formosa Plastics Corporation Other related parties (Sales) (1,184,681) (0.77)% 30 days - ‑ 57,849 0.32%

The Company Formosa Chemicals and Fiber Corporation Other related parties (Sales) (7,531,843) (4.87)% 30 days - ‑ 632,141 3.50%

The Company Nan Ya PCB Corporation Subsidiaries (Sales) (976,163) (0.63)% 30 days - ‑ 83,490 0.46% Note

The Company Formosa Petrochemical Corporation Associates (Sales) (1,422,244) (0.92)% 30 days - ‑ 87,584 0.48%

The Company Nanya Technology Corporation Associates (Sales) (144,369) (0.09)% 30 days - ‑ 9,888 0.05%

The Company Formosa Taffeta Co., Ltd. Other related parties (Sales) (872,256) (0.56)% 30 days - ‑ 85,949 0.48%

The Company Nan Ya Plastics Corporation U.S.A. Subsidiaries (Sales) (553,828) (0.36)% O/A105 days - ‑ 281,253 1.56% Note

The Company Nan Ya Plastics Corporation America Subsidiaries (Sales) (325,829) (0.21)% O/A105 days - ‑ 71,817 0.40% Note

The Company Nan Ya Plastics Corporation Texas Subsidiaries (Sales) (396,946) (0.26)% O/A105 days - - 0 0.00% Note

The Company Nan Ya Electronic Materials (Huizhou) Co., Ltd. Subsidiaries (Sales) (4,427,438) (2.86)% O/A180 days - ‑ 2,254,032 12.48% Note

The Company Nan Ya Plastics (Nantong) Co., Ltd. Subsidiaries (Sales) (934,785) (0.60)% O/A150 days - ‑ 291,773 1.62% Note

The Company Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries (Sales) (4,418,060) (2.85)% O/A150 days - ‑ 1,138,058 6.30% Note

The Company Formosa Industries Corporation Associates (Sales) (2,521,147) (1.63)% O/A150 days - ‑ 258,445 1.43%

The Company Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Subsidiaries (Sales) (618,908) (0.40)% O/A150 days - ‑ 269,959 1.49% Note

The Company Nan Ya Plastics (Ningbo) Co., Ltd. Subsidiaries (Sales) (266,521) (0.17)% O/A150 days - ‑ 1,065 0.01% Note

The Company Nan Chung Petrochemical Corporation Subsidiaries (Sales) (228,823) (0.15)% 30 days - ‑ 14,678 0.08% Note

The Company PFG Fiber Glass Corporation Subsidiaries (Sales) (123,484) (0.08)% 30 days - - 7,470 0.04% NoteThe Company Nan Ya Plastics (Guangzhou) Co., Ltd. Subsidiaries (Sales) (187,763) (0.12)% O/A150 days - ‑ 54,176 0.30% Note

The Company Formosa Plastics Corporation Other related parties Purchases 11,978,383 11.46% 30 days - ‑ (1,080,354) (9.82)%

The Company Formosa Chemicals and Fiber Corporation Other related parties Purchases 24,442,785 23.39% 30 days - ‑ (1,923,275) (17.48)%

The Company Formosa Petrochemical Corporation Associates Purchases 30,339,000 29.04% 30 days - ‑ (2,358,012) (21.43)%

The Company PFG Fiber Glass Corporation Subsidiaries Purchases 2,548,914 2.44% 30 days - ‑ (241,454) (2.19)% NoteThe Company Nan Chung Petrochemical Corporation Subsidiaries Purchases 3,382,831 3.24% 30 days - ‑ (329,258) (2.99)% Note

Nan Ya PCB Corporation The Company Parent Purchases 976,163 6.07% 30 days - ‑ (83,490) (4.18)% Note

Nan Ya PCB Corporation Nan Ya PCB (Kunshan) Corporation Subsidiaries Purchases 8,438,867 52.47% 30 days - ‑ (978,457) (49.04)% Note

Nan Ya PCB Corporation Formosa Advanced Technologies Co.,Ltd Associates (Sales) (106,503) (0.41)% 70 days - ‑ 16,398 0.25%

Nan Ya PCB (Kunshan) Corporation Nan Ya PCB Corporation Subsidiaries (Sales) (8,438,867) (61.01)% 30 days - ‑ 978,457 50.28% Note

Nan Ya PCB (Kunshan) Corporation Nan Ya Electronic Materials (Kunshan) Co., Ltd. Same chairman Purchases 1,655,334 19.67% 60 days - ‑ (130,455) (14.75)% Note

Nan Ya PCB (Kunshan) Corporation Formosa Advanced Technologies Co.,Ltd Associates (Sales) (215,081) (1.55)% 70 days - ‑ 46,710 2.40%

Nan Chung Petrochemical Corporation The Company Parent (Sales) (3,382,831) (50.06)% 30 days - ‑ 329,258 51.19% Note

Nan Chung Petrochemical Corporation China Man-made Fiber Corporation Other related parties (Sales) (3,361,822) (49.75)% 15th day of next month - ‑ 313,981 48.81%

Nan Chung Petrochemical Corporation Formosa Petrochemical Corporation Associates Purchases 5,040,286 89.15% 15th day of next month - ‑ (487,616) (96.55)%

Nan Chung Petrochemical Corporation The Company Parent Purchases 228,823 4.05% 30 days - ‑ (14,678) (2.91)% NotePFG Fiber Glass Corporation The Company Parent (Sales) (2,548,914) (69.49)% 30 days - ‑ 241,454 74.66% Note

PFG Fiber Glass Corporation Formosa Chemicals and Fiber Corporation Other related parties Purchases 462,079 20.30% 30 days - ‑ (35,903) (23.90)%

PFG Fiber Glass Corporation Formosa Petrochemical Corporation Other related parties Purchases 229,233 10.07% 30 days - ‑ (16,845) (11.22)%

PFG Fiber Glass Corporation The Company Parent Purchases 123,484 5.42% 30 days - - (7,470) (4.97)% Note

RELATED-PARTY TRANSACTIONS FOR PURCHASES AND SALES WITH AMOUNTSEXCEEDING THE LOWER OF TWD100 MILLION OR 20% OF THE CAPITAL STOCKNAN YA PLASTICS CORPORATION AND SUBSIDIARIES


Related PartyCompany Name NotesNotes/Accounts (Payable) ReceivableAbnormal TransactionTransaction Details


Relationship

311


purchase/(sales) Credit Period Unit Price PaymentTerm



Relationship

Nan Ya Plastics Corporation U.S.A. Formosa Plastics Corporation U.S.A. Other related parties Purchases 762,014 29.16% payment within oneh

- ‑ (49,326) (11.85)%

Nan Ya Plastics Corporation U.S.A. The Company Parent Purchases 553,828 21.19% O/A 105 days - ‑ (281,253) (67.56)% Note

Nan Ya Plastics Corporation U.S.A. Nan Ya Plastics Corporation America Subsidiaries Purchases 118,192 4.52% payment within oneh

- ‑ 0 0.00% Note

Nan Ya Plastics Corporation America Formosa Industries Corporation Other related parties (Sales) (175,567) (0.55)% O/A 105 days - - 170,923 5.67%

Nan Ya Plastics Corporation America Formosa Plastics Corporation U.S.A. Other related parties (Sales) (328,436) (1.04)% payment within oneh

- ‑ 0 0.00%

Nan Ya Plastics Corporation America Nan Ya Plastics Corporation U.S.A. Subsidiaries (Sales) (118,192) (0.37)% payment within oneh

- ‑ 0 0.00% Note

Nan Ya Plastics Corporation America Formosa Plastics Corporation U.S.A. Other related parties Purchases 229,374 0.83% payment within oneh

- ‑ (11,219) (4.81)%

Nan Ya Plastics Corporation America The Company Parent Purchases 325,829 1.17% O/A 105 days - ‑ (71,817) (30.80)% Note

PFG Fiber Glass (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries (Sales) (2,790,904) (79.40)% 60 days - ‑ 269,349 64.67% Note

PFG Fiber Glass (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries Purchases 275,369 18.38% 60 days - ‑ (20,862) (8.34)% Note

Nan Ya Plastics (Xiamen) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. Other related parties Purchases 226,523 21.37% 60 days - ‑ (33,010) (36.23)%Nan Ya Plastics (Guangzhou) Co., Ltd. Formosa Plastics Corporation Other related parties Purchases 432,111 22.88% O/A 150 days - ‑ (149,140) (51.40)%

Nan Ya Plastics (Guangzhou) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. Other related parties Purchases 434,314 23.00% 60 days - ‑ (41,500) (14.30)%

Nan Ya Plastics (Guangzhou) Co., Ltd. The Company Parent Purchases 187,763 9.94% O/A 150 days - ‑ (54,176) (18.67)% Note

Nan Ya Electronic Materials (Huizhou) Co., Ltd. The Company Parent Purchases 4,427,438 49.93% O/A 180 days - ‑ (2,254,032) (47.96)% Note

Nan Ya Electronic Materials (Huizhou) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries Purchases 3,720,449 41.96% 180 days - ‑ (2,408,494) (51.24)% Note

Nan Ya Plastics (Huizhou) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. Other related parties Purchases 109,958 6.98% 60 days - ‑ (12,641) (7.01)%

Nan Ya Plastics (Nantong) Co., Ltd. Formosa Plastics Corporation Other related parties Purchases 159,162 2.60% O/A 150 days - ‑ (97,889) (14.31)%

Nan Ya Plastics (Nantong) Co., Ltd. The Company Parent Purchases 934,785 15.25% O/A 150 days - ‑ (291,773) (42.64)% Note

Nan Ya Plastics (Nantong) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. Other related parties Purchases 1,046,261 17.07% 60 days - ‑ (59,540) (8.70)%

Nan Ya Plastics (Nantong) Co., Ltd. Nanya Kyowa Plastics (Nantong) Co., Ltd. Joint venture (Sales) (330,017) (5.08)% 60 days - - 79,907 4.47%

Nan Ya Electric (Nantong) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries (Sales) (129,795) (22.18)% 60 days - ‑ 7,526 2.49% Note

Nan Ya Plastics (Ningbo) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries (Sales) (3,786,561) (33.69)% 60 days - ‑ 335,747 51.42% Note

Nan Ya Plastics (Ningbo) Co., Ltd. Formosa Chemicals and Fiber (Ningbo) Corporation Other related parties Purchases 6,221,820 72.74% 60 days - ‑ (579,512) (96.47)%

Nan Ya Plastics (Ningbo) Co., Ltd. The Company Parent Purchases 266,521 3.12% O/A 150 days - ‑ (1,065) (0.18)% NoteNan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Huizhou) Co., Ltd. Subsidiaries (Sales) (3,720,449) (7.94)% 180 days - ‑ 2,408,494 15.79% Note

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya PCB (Kunshan) Corporation Same chairman (Sales) (1,655,334) (3.53)% 60 days - ‑ 130,455 0.86% Note

Nan Ya Electronic Materials (Kunshan) Co., Ltd. PFG Fiber Glass (Kunshan) Co., Ltd. Subsidiaries (Sales) (275,369) (0.59)% 60 days - ‑ 20,862 0.14% Note

Nan Ya Electronic Materials (Kunshan) Co., Ltd. The Company Parent Purchases 4,418,060 12.46% O/A 150 days - ‑ (1,138,058) (36.49)% Note

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Subsidiaries Purchases 251,162 0.71% 60 days - ‑ (16,029) (0.51)% Note

Nan Ya Electronic Materials (Kunshan) Co., Ltd. PFG Fiber Glass (Kunshan) Co., Ltd. Subsidiaries Purchases 2,790,904 7.87% 60 days - ‑ (269,349) (8.64)% Note

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd. Subsidiaries Purchases 3,786,561 10.68% 60 days - ‑ (335,747) (10.77)% Note

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Electric (Nantong) Co., Ltd. Subsidiaries Purchases 129,795 0.37% 60 days - ‑ (7,526) (0.24)% NoteNan Ya Draw Textured Yarn (Kunshan) Co., Ltd. The Company Parent Purchases 618,908 24.49% O/A 150 days - ‑ (269,959) (85.71)% Note

Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries (Sales) (251,162) (7.92)% 60 days - ‑ 16,029 7.70% Note

Note：The transaction has been written off during the consoliation process.

312

TABLE 8

Amount Action TakenThe Company Formosa Chemicals and Fiber Corporation Other related parties Receivables from related parties： 632,141 10.77 ‑ ‑ 626,437 ‑

The Company Nan Ya Plastics Corporation U.S.A.(Note1) Subsidiaries Receivables from related parties： 281,253 1.88 ‑ ‑ 4 ‑

The Company Nan Ya Electronic Materials (Huizhou) Co., Ltd.(Note1) Subsidiaries Receivables from related parties： 2,254,032 2.01 ‑ ‑ 72,922 ‑

The Company Nan Ya Plastics (Nantong) Co., Ltd.(Note1) Subsidiaries Receivables from related parties： 291,773 3.86 ‑ ‑ 206,664 ‑

The Company Nan Ya Electronic Materials (Kunshan) Co., Ltd.(Note1) Subsidiaries Receivables from related parties： 1,138,058 3.75 ‑ ‑ 432,426 ‑

The Company Formosa Industries Corporation Assosiates Receivables from related parties： 258,445 4.94 ‑ ‑ 93,197 ‑

The Company Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd.(Note1) Subsidiaries Receivables from related parties： 269,959 2.50 ‑ ‑ 105,855 ‑

Nan Ya PCB (Kunshan) Corporation Nan Ya PCB Corporation(Note1) Subsidiaries Receivables from related parties： 978,457 9.47 ‑ ‑ 978,457 ‑

Nan Chung Petrochemical Corporation The Company(Note1) Parent Receivables from related parties： 329,258 10.33 ‑ ‑ 326,840 ‑

Nan Chung Petrochemical Corporation China Man-made Fiber Corporation Other related parties Receivables from related parties： 313,981 10.22 ‑ ‑ 307,149 ‑

PFG Fiber Glass Corporation The Company(Note1) Parent Receivables from related parties： 241,454 10.16 ‑ ‑ 241,454 ‑

Nan Ya Plastics Corporation America Formosa Industries Corporation Other related parties Receivables from related parties： 170,923 2.05 ‑ ‑ 170,923 ‑

PFG Fiber Glass (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd.(Note1) Subsidiaries Receivables from related parties： 269,349 9.54 ‑ ‑ 269,349 ‑

Nan Ya Plastics (Ningbo) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd.(Note1) Subsidiaries Receivables from related parties： 335,747 20.07 - - 335,747 -

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Huizhou) Co., Ltd.(Note1) Subsidiaries Receivables from related parties： 2,408,494 1.46 ‑ ‑ 520,388 ‑

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya PCB (Kunshan) Corporation(Note1) Same chairman Receivables from related parties： 130,455 10.59 ‑ ‑ 130,455 ‑

The Company Formosa Plastics Marine Corporation Other related parties Other receivables from relatedi

5,640,819 note ‑ ‑ ‑ ‑

Nan Ya Plastics Corporation America Nan Ya Plastics Corporation Texas(Note1) Subsidiaries Other receivables from relatedi

12,042,400 note ‑ ‑ ‑ ‑

Nan Ya Plastics Corporation America Nan Ya Plastics Corporation U.S.A.(Note1) Subsidiaries Other receivables from relatedi

286,237 note ‑ ‑ ‑ ‑

Nan Ya PCB Corporation The Company(Note1) Parent Other receivables from relatedi

4,000,000 note ‑ ‑ ‑ ‑

Nan Ya Plastics (Nantong) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd.(Note1) Subsidiaries Other receivables from relatedi

1,631,271 note ‑ ‑ ‑ ‑

NAN YA PLASTICS CORPORATION AND SUBSIDIARIESRECEIVABLES FROM RELATED PARTIES WITH AMOUNTS EXCEEDING THE LOWER OF TWD100 MILLION OR 20% OF THE CAPITAL STOCK


Related Party Relationship TurnoverRate

OverdueCompany Name Ending Balance

Amounts Receivedin Subsequent

Periods

Allowancefor BadDebts

DECEMBER 31, 2019

313

Amount Action TakenRelated Party Relationship Turnover

RateOverdue

Company Name Ending BalanceAmounts Received

in SubsequentPeriods


Nan Ya Plastics (Huizhou) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd.(Note1) Subsidiaries Other receivables from relatedi

526,495 note ‑ ‑ ‑ ‑

Nan Ya Plastics (Huizhou) Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd.(Note1) Subsidiaries Other receivables from relatedi

504,917 note ‑ ‑ ‑ ‑

Nan Ya Plastics (Xiamen) Co., Ltd. Nan Ya Plastics (Zhengzhou) Co., Ltd.(Note1) Subsidiaries Other receivables from relatedti ：

138,097 note ‑ ‑ ‑ ‑

Nan Ya Plastics (Xiamen) Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd.(Note1) Subsidiaries Other receivables from related 133,781 note ‑ ‑ ‑ ‑Nan Ya Plastics (Guangzhou) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd.(Note1) Subsidiaries Other receivables from related

i720,694 note ‑ ‑ ‑ ‑

Nan Ya Plastics (Guangzhou) Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd.(Note1) Subsidiaries Other receivables from related 215,777 note ‑ ‑ ‑ ‑Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd.(Note1) Subsidiaries Other receivables from related

i4,837,710 note ‑ ‑ ‑ ‑

Nan Ya Electronic Materials (Kunshan) Co., Ltd. PFG Fiber Glass (Kunshan) Co., Ltd.(Note1) Subsidiaries Other receivables from relatedi

280,509 note ‑ ‑ ‑ ‑

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya PCB (Kunshan) Corporation(Note1) Subsidiaries Other receivables from relatedi

1,639,902 note ‑ ‑ ‑ ‑

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd.(Note1) Subsidiaries Other receivables from relatedi

258,932 note ‑ ‑ ‑ ‑

Nan Ya Electric (Nantong) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd.(Note1) Subsidiaries Other receivables from relatedi

310,718 note ‑ ‑ ‑ ‑

China Nantong Huafeng Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd.(Note1) Subsidiaries Other receivables from relatedi

155,359 note ‑ ‑ ‑ ‑

China Nantong Huafeng Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd.(Note1) Subsidiaries Other receivables from relatedi

135,076 note ‑ ‑ ‑ ‑

Note： The turnover rate of other receivables from related parties can not be calculated.Note 1：The transaction has been written off during the consoliation process.

314

TABLE 9

Financial StatementItem Amount Terms

Percentage ofConsolidated Total Gross

Sales or Total Assets

0 The Company Nan Ya PCB Corporation and its subsidiaries 1 Sales 1,014,444 30-150 days 0.35%

0 The Company Nan Chung Petrochemical Corporation 1 Sales 228,823 30 days 0.08%

0 The Company PFG Fiber Glass Corporation 1 Sales 123,484 30 days 0.04%

0 The Company Nan Ya Plastics Corporation U.S.A 1 Sales 553,828 O/A 105 days 0.19%

0 The Company Nan Ya Plastics Corporation America 1 Sales 325,829 O/A 105 days 0.11%

0 The Company Nan Ya Plastics Corporation Texas 1 Sales 396,946 O/A 105 days 0.14%

0 The Company Nan Ya Plastics (Hong Kong) Co., Ltd. and its subsidiaries 1 Sales 11,055,007 O/A 150-180 days 3.86%

0 The Company PFG Fiber Glass (Hong Kong) Corporation Limited and its subsidiaries 1 Sales 20,062 O/A 150 days 0.01%

1 Nan Chung Petrochemical Corporation The Company 2 Sales 3,382,831 30 days 1.18%

2 Wen Fung Industrials Co., Ltd. and its subsidiaries Nan Ya PCB Corporation and its subsidiaries 3 Sales 125,007 30 days 0.04%

3 PFG Fiber Glass Corporation The Company 2 Sales 2,548,914 30 days 0.89%

4 Nan Ya Plastics Corporation U.S.A. The Company 2 Sales 61,994 O/A 105 days 0.02%

5 Nan Ya Plastics Corporation America Nan Ya Plastics Corporation U.S.A 3 Sales 118,192 payment within one month 0.04%

5 Nan Ya Plastics Corporation America The Company 2 Sales 48,651 O/A 105 days 0.02%

6 Nan Ya Plastics (Hong Kong) Co., Ltd. and its subsidiaries The Company 2 Sales 104,694 60 days 0.04%

6 Nan Ya Plastics (Hong Kong) Co., Ltd. and its subsidiaries Nan Ya PCB Corporation and its subsidiaries 3 Sales 2,153,824 60 days 0.75%

6 Nan Ya Plastics (Hong Kong) Co., Ltd. and its subsidiaries PFG Fiber Glass (Hong Kong) Corporation Limited and its subsidiaries 3 Sales 334,930 60 days 0.12%

7 PFG Fiber Glass (Hong Kong) Corporation Limited and its subsidiaries The Company 2 Sales 52,737 O/A 150 days 0.02%

7 PFG Fiber Glass (Hong Kong) Corporation Limited and its subsidiaries Nan Ya Plastics (Hong Kong) Co., Ltd. and its subsidiaries 3 Sales 2,802,369 60 days 0.98%

0 The Company Nan Ya PCB Corporation and its subsidiaries 1 Accounts receivable 98,754 30-150 days 0.02%

0 The Company Nan Ya Plastics Corporation U.S.A 1 Accounts receivable 281,253 O/A 105 days 0.05%

0 The Company Nan Ya Plastics Corporation America 1 Accounts receivable 71,817 O/A 105 days 0.01%

0 The Company Nan Ya Plastics (Hong Kong) Co., Ltd. and its subsidiaries 1 Accounts receivable 4,055,790 O/A 150-180 days 0.73%

SIGNIFICANT TRANSACTIONS AND BUSINESS RELATIONSHIP BETWEEN THE PARENT AND ITS SUBSIDIARIESNAN YA PLASTICS CORPORATION AND SUBSIDIARIES


No.(Note 1) Company Name Counter-party Relationship

(Note 2)

Intercompany Transactions

FOR THE NINE MONTHS ENDED DECEMBER 31, 2019

315

Financial StatementItem Amount Terms

Percentage ofConsolidated Total Gross

Sales or Total Assets

No.(Note 1) Company Name Counter-party Relationship

(Note 2)

Intercompany Transactions

1 Nan Chung Petrochemical Corporation The Company 2 Accounts receivable 329,258 30 days 0.06%

3 PFG Fiber Glass Corporation The Company 2 Accounts receivable 241,454 30 days 0.04%

6 Nan Ya Plastics (Hong Kong) Co., Ltd. and its subsidiaries Nan Ya PCB Corporation and its subsidiaries 3 Accounts receivable 202,961 60 days 0.04%

7 PFG Fiber Glass (Hong Kong) Corporation Limited and its subsidiaries Nan Ya Plastics (Hong Kong) Co., Ltd. and its subsidiaries 3 Accounts receivable 271,581 60 days 0.05%

0 The Company Nan Ya PCB Corporation and its subsidiaries 1 Rent revenue 202,242 30-150 days 0.07%

Note 1: The appointed numbers represent:1. 0 refers to the Parent Company.2. Subsidiaries are numbered and organized in a ascending chronological order in an ascending chronological order.

Note 2: Transactions are categorized as follows:1. Parent company to subsidiary.2. Subsidiary to parent company.3. Subsidiary to subsidiary.

Note 3: Disclosure of information on significant transactions and business relationship between the parent company and its subsidiaries regarding sales and accounts receivable, excluding their related purchases and accounts payable.

316

TABLE 10

December 31,2019

December 31,2018

Shares(in thousands) % Carrying

ValueThe Company Nan Ya Plastics Corporation U.S.A.

(Note)U.S.A. production of plastic

products313,920 313,920 2 100.00% 1,862,003 13,498 13,498 Note 3.4

The Company Nan Ya Plastics Corporation America(Note)

U.S.A. production of plastic,polyester and chemical

7,853,605 7,853,605 60 100.00% 41,583,838 1,454,262 1,454,262 Note 3.4

The Company Nan Ya Plastics (Hong Kong) Co.,Ltd. (Note 1)

Hong Kong plastics, electronicproducts trading, and

39,166,673 34,858,082 953,253 100.00% 85,283,330 4,524,884 4,524,884 Note 3.4

The Company Superior World Wide Trading Co.,Ltd. (Note 1)

Hong Kong plastics trading andinvestment

33,677 33,677 14 100.00% 778,245 60,095 60,095 Note 3.4

The Company Formosa Synthetic Rubber (HongKong) Corporation Limited (Note)

Hong Kong production of syntheticrubber products

4,162,010 4,162,010 135,000 32.53% 2,249,187 (564,873) (183,754) Note 3

The Company PFG Fiber Glass (Hong Kong)Corporation Limited (Note 1)

Hong Kong investment 4,495,987 4,495,987 76 100.00% 7,737,129 83,276 63,291 Note 3.4

The Company Formosa Industries Corporation (Note2)

Vietnam chemical fiber, dyingand finishing and

8,435,875 8,435,875 - 42.50% 8,163,096 350,666 149,033 Note 3

The Company Nan Ya PCB Corporation Taiwan production of printedcircuit board

4,480,417 4,480,417 432,745 66.97% 19,551,043 308,203 207,963 Note 3.4

The Company Formosa Plastics Group InvestmentCorp.

Taiwan investment 76,859 76,859 5,000 100.00% 86,873 202 202 Note 3.4

The Company Nanya Technology Corporation Taiwan semiconductorproduction and

52,438,472 52,438,472 907,304 29.71% 45,168,287 9,824,600 2,926,374 Note 3

The Company Formosa Environmental TechnologyCorporation

Taiwan environmentalprotection

672,370 672,370 46,257 26.99% 250,241 366 99 Note 3

The Company Formosa Petrochemical Corporation Taiwan production of chemicalproducts

24,647,480 24,647,480 2,201,306 23.11% 76,273,869 36,798,213 8,501,950 Note 3

The Company PFG Fiber Glass Corporation Taiwan production of glassfiber

2,648,131 2,648,131 100,000 100.00% 4,196,150 182,704 9,811 Note 3.4

The Company Nan Chung Petrochemical Corporation Taiwan production of chemicalproducts

1,000,002 1,000,002 100,000 50.00% 1,169,804 34,675 17,535 Note 3.4

The Company Wen Fung Industrial Co., Ltd. Taiwan production ofelectronic components

214,236 214,236 18,738 100.00% 250,287 5,182 5,182 Note 3.4

NAN YA PLASTICS CORPORATION AND SUBSIDIARIESINFORMATION ON INVESTEES (EXCLUDING THOSE IN MAINLAND CHINA)


Investor Company Investee Company Location Major OperationsOriginal Investment Amount Balance as of December 31, 2019

Net Income ofInvestee

Investment Income(Loss) Recognized

by the InvestorCompany

Notes


317

December 31,2019

December 31,2018


Value





Notes

The Company Formosa Automobile SalesCorporation

Taiwan production ofautomobile

945,028 945,028 27,046 45.00% 181,332 170,099 76,547 Note 3

The Company Ya Tai Development Corporation Taiwan development industry 53,941 53,941 1,304 44.96% 18,020 (1,856) (834) Note 3

The Company Formosa Heavy Industries Corporation Taiwan machinery industry 2,497,721 2,497,721 651,706 32.91% 7,247,995 124,778 41,066 Note 3

The Company Formosa Fairway Corporation Taiwan transportation business 33,340 33,340 4,699 33.34% 82,185 (16,684) (5,563) Note 3

The Company Formosa Plastics TransportCorporation

Taiwan transportation business 67,254 67,254 6,566 33.33% 1,062,879 137,544 45,849 Note 3

The Company Hwa Ya Science Park ManagementConsulting Co., Ltd.

Taiwan service business 359 359 34 34.00% 2,606 2,908 988 Note 3

The Company Yi Jih Development Corporation Taiwan construction business 58,000 58,000 5,800 29.22% 64,672 876 256 Note 3

The Company Mai Liao Power Corporation Taiwan electricity generationbusiness

5,985,465 5,985,465 547,025 24.94% 11,050,586 2,199,499 548,596 Note 3

The Company Formosa Synthetic RubberCorporation

Taiwan production of syntheticrubber products

446,000 400,000 44,600 33.33% 292,635 (2,050) (684) Note 3

The Company Formosa Resources Corporation Taiwan mining industry 7,415,940 5,845,940 741,594 25.00% 6,615,934 (605,807) (151,452) Note 3

The Company Formosa Group (Cayman) Limited(Note)

CaymanIslands

investment 377 377 13 25.00% 653,576 145,410 36,352 Note 3

The Company Formosa Plastics ConstructionCorporation

Taiwan construction business 100,000 100,000 10,000 33.33% 75,521 (20,335) (6,778) Note 3

The Company Nan Ya International (Cayman)Limited (Note)

CaymanIslands

investment 18,784,619 18,784,619 52 100.00% 11,407,973 - - Note 3.4

The Company FG Inc. (Note) U.S.A. investment 891,746 660,176 2 10.00% 869,209 (132,609) (13,261) Note 3

Nan Ya PlasticsCorporation America

Formosa Utility Venture, Ltd.(Note) U.S.A. electricity generationand trading

240,848 240,848 - 12.10% 2,419,574 1,150,743 139,665 Note 3

Nan Ya PlasticsCorporation America

Nan Ya Plastics Corporation Texas(Note)

U.S.A. production of chemicalproducts

9,934,980 9,934,980 3 100.00% 8,565,565 (745,044) (745,044) Note 3.4


Formosa Olefins, L.L.C. (Note) U.S.A. chemical business 2,070,540 2,070,540 - 21.00% 1,374,730 (1,781,360) (374,086) Note 3

318

December 31,2019

December 31,2018


Value





Notes


Nan Ya PCB (HK) Corporation Hong Kong production ofelectronic products and

5,020,900 5,020,900 1,223,820 100.00% 9,603,122 (86,474) (86,474) Note 3.4


Nan Ya PCB (U.S.A.) Corporation U.S.A. retargeting 3,479 3,479 1,000 100.00% 13,739 676 676 Note 3.4


Formosa Advanced TechnologiesCo.,LTD.

Taiwan IC packaging, testingand modules

472,968 - 13,267 3.00% 475,710 1,262,495 1,550 Note 3


Nan Ya PCB (Kunshan) Corporation China production of printedcircuit board

5,017,721 5,017,721 - 100.00% 9,589,396 (86,812) (86,812) Note 3.4

Wen Fung IndustrialCo., Ltd.

Wellink Technology Corporation Taiwan production ofelectronic components

212,017 212,017 12,739 100.00% 135,753 1,767 1,767 Note 3.4

Superior World WideTrading Co., Ltd.

P.T.Indonesia Nanya Indah PlasticsCo.

Indonesia production of plasticproducts

121,835 121,835 5 50.00% 259,090 122,511 61,256 Note 3

Note：The reporting currency of Nan Ya Plastics Corporation USA, Nan Ya Plastics Corporation America, Formosa Synthetic Rubber (Hong Kong) Corporation Limited, Formosa Group (Cayman)

Limited, Nan Ya Internaitonal (Cayman) Limited, , FG Inc., Formosa Utility Venture, Ltd, Nan Ya Plastics Corporation Texas, and Formosa Olefins, L.L.C is denominated in USD,

and the exchange rate of TWD to USD as of December 31, 2019 (in average) is 30.106(30.924)：1.

Note 1：The reporting currency of Nan Ya Plastics (Hong Kong) Co., Ltd., Superior World Wide Trading Co., Ltd. and PFG Fiber Glass (Hong Kong) Corporation Limited is denominated in HKD,

Note 2：The reporting currency of Formosa Industries Corporation, Vietnam is denominated in VND, and the exchange rate of TWD to VND as of December 31, 2019 (in average) is 1：0.001299(0.001331).

Note 3：Investment income of the current period does not include cumulative translation adjustment and capital surplus adjustment.

Note 4：The transaction has been written off during the consoliation process.

and the exchange rate of TWD to HKD as of December 31, 2019 (in average) is 3.8597(3.9646)：1.

319

TABLE 11(a) Information regarding investments in Mainland China :

Outflow InflowNan Ya Plastics (Guangzhou) Co.,Ltd.(Note1)

production of polyester products 1,998,681 Indirect investment 1,998,681 - - 1,998,681 (17,017) 100.00% (17,017) 2,320,387 611,825

Nan Ya Plastics (Xiamen) Co.,Ltd.(Note1)

production of plastic products 775,457 Indirect investment 738,752 - - 738,752 93,803 85.00% 79,733 1,012,561 72,820

Nan Ya Plastics (Huizhou) Co.,Ltd.(Note1)

production of polyester products 2,527,462 Indirect investment 2,418,397 - - 2,418,397 104,835 100.00% 104,835 3,227,086 -

Nan Ya Electronic Materials (Huizhou)Co., Ltd.(Note1)

production of electronic materials 5,489,509 Indirect investment 1,180,918 4,308,591 - 5,489,509 322,453 100.00% 322,453 6,351,352 -

Nan Ya Trading (Huizhou) Co.,Ltd.(Note1)

trading 32,267 Indirect investment 32,267 - - 32,267 867 100.00% 867 57,756 -

Nan Ya Plastics (Nantong) Co.,Ltd.(Note1)

production of plastic products, steam andelectricity

4,540,736 Indirect investment 3,008,918 - - 3,008,918 362,886 100.00% 362,886 9,791,555 103,612

China Nantong Huafeng Co., Ltd.(Note1) trading 93,004 Indirect investment 99,636 - - 99,636 6,880 100.00% 6,880 330,760 -

Nantong Huafu Plastics Co., Ltd.(Note1) trading 79,111 Indirect investment 71,503 - - 71,503 2,596 100.00% 2,596 92,991 -

Nan Ya Electric (Nantong) Co.,(Note1) production of switch gear and control panel 339,275 Indirect investment 339,275 - - 339,275 42,247 100.00% 42,247 1,104,469 -

Nanya Kyowa Plastics (Nantong) Co.,Ltd.

interior decorating business 200,988 Indirect investment 100,494 - - 100,494 95,175 50.00% 47,588 199,844 -

Nan Ya Electronic Materials (Kunshan)Co., Ltd.(Note1)

production of electronic materials, polyesterproducts, steam and electricity

15,159,216 Indirect investment 15,159,216 - - 15,159,216 3,272,429 100.00% 3,272,429 56,406,047 -

Nan Ya Draw Textured Yarn (Kunshan)Co., Ltd.(Note1)

production of polyester products 7,035,085 Indirect investment 7,035,085 - - 7,035,085 (209,593) 100.00% (209,593) 203,014 -

Nan Ya Plastics (Zhengzhou) Co., Ltd. production of plastic products 261,737 Indirect investment 130,869 - - 130,869 (4,008) 50.00% (2,004) 58,603 -

Nan Ya Plastics (Ningbo) Co.,Ltd.(Note1)

production of plastic products and plasticizer 2,188,834 Indirect investment 1,989,308 - - 1,989,308 440,322 100.00% 440,322 1,886,579 -

PFG Fiber Glass (Kunshan) Co.,Ltd.(Note1)

production of glass fiber 4,668,263 Indirect investment 4,487,409 - - 4,487,409 90,954 100.00% 90,954 7,708,418 149,416

Accumulated InwardRemittance ofEarnings as of

December 31, 2019

Carrying Value ofInvestment as of

December 31, 2019Method of Investment Investment

Gain (Loss)Name of the PRC Investee Company Primary Business ScopeAmount of

Paid-inCapital

NAN YA PLASTICS CORPORATION AND SUBSIDIARIESINFORMATON ON INVESTMENT IN MAINLAND CHINA


InvestmentTransferred from

Taiwan as ofJanuary 1, 2019


Taiwan as ofDecember 31, 2019

CurrentIncome ofInvestees

For The Year EndedDecember 31, 2019

Direct and IndirectShareholding

Percentage by theCompany


320

Outflow Inflow

Accumulated InwardRemittance ofEarnings as of

December 31, 2019




Paid-inCapital









Hua Ya (Dong Ying) Plastics Corp. production of plastic products 254,190 Indirect investment 34,591 - - 34,591 - 15.00% - 199,951 23,020

Hua Ya (Wu Hu) Plastics Corp. production of plastic products 624,948 Indirect investment 34,591 - - 34,591 - 15.00% - 180,342 12,687

Formosa Synthetic Rubber (Ningbo)Limited Corporation

synthetic rubber 12,777,590 Indirect investment 4,162,010 - - 4,162,010 (564,873) 32.53% (183,754) 2,249,187 -

which are recognized according to the financial statements audited by an international accounting firm.Note 1: The transaction has been written-off during the consolidation process.

Accumulative Remittance from Taiwanto Mainland China as of September 30,

2019 (Note 1)

Amount of Investment Approved byInvestment Commission, Ministry of

Economic Affairs (Note 2)

47,590,969 53,616,900

Note 1：Reporting currency of Chinese subsidiaries is CNY, and the monetary amount is first translated to HKD using the exchange rate as of December 31, 2019 (in average) is 1：1.1181(1.1311), and translated to TWD using the exchange rate as of December 31, 2019 (in average) is 1：3.8597(3.9646).Note 2：It includes the amount of $3,010,315 from capital increase out of earnings and capital increase out of capital surplus.Note 3：The Industrial Development Bureau of the MOEA issued a letter to the Company stating that it qualifies under Section 12 of the Statute for Upgrading Industries.Note 4 : The accumulative remittance from Taiwan to Mainland China, end of the period includes the amount of Nan Ya Plastics (Anshan) Co., Ltd.

(c) Information on significant transactions：

For more information concerning the direct or indirect significant transactions between the Company and its Chinese investees for the year ended December 31, 2019, please refer to the attatchemant of note 13 for "Information on material transaction items".

Limit on the Amount of Investment inMainland China (Note 3)

-

Note: All companies disclosed within the investment income of the current year column are recognized according to the audited financial statements of the Company, except for Formosa Synthetic Rubber (Ningbo) Co., Ltd.,

(b) Quota for investments in Mainland China :

321

Stock Code:1303

(English Translation of Financial Statements and Report Originally Issued in Chinese)


Financial Statements

With Independent Auditors’ ReportFor the Years Ended December 31, 2019 and 2018

Address: 101, Shuiguan Road, Renwu Dist., Kaohsiung City 814, TaiwanTelephone: (07)371-1411

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

322

Table of contents

Contents Page

1. Cover Page 3222. Table of Contents 3233. Independent Auditors’ Report 3244. Balance Sheets 3285. Statements of Comprehensive Income 3296. Statements of Changes in Equity 3307. Statements of Cash Flows 3318. Notes to the Financial Statements

(1) Company history 332(2) Approval date and procedures of the financial statements 332(3) New standards, amendments and interpretations adopted 332～335(4) Summary of significant accounting policies 335～353(5) Significant accounting assumptions and judgments, and major

sources of estimation uncertainty353～354

(6) Explanation of significant accounts 354～387(7) Related-party transactions 387～395(8) Pledged assets 395(9) Significant commitments and contingencies 395～396(10) Losses Due to Major Disasters 396(11) Subsequent Events 396(12) Other 396～397(13) Other disclosures

(a) Information on material transaction items 397、398～409(b) Information on investees 397、410～412(c) Information on investment in mainland China 397、413～414

397(14) Segment information

323

Independent Auditors’ Report

To the Board of Directors ofNAN YA PLASTICS CORPORATION:

Opinion

We have audited the financial statements of NAN YA PLASTICS CORPORATION (“the Company”), whichcomprises the statement of financial position as of December 31, 2019 and 2018, the statements ofcomprehensive income, changes in equity and cash flows for the years ended December 31, 2019 and 2018, andnotes to the financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the report of other auditors (please refer to Other Matter paragraph), theaccompanying financial statements present fairly, in all material respects, the financial position of the Companyas at December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended inaccordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audit of the financial statements as of and for the year ended December 31, 2019 inaccordance with the Regulations Governing Auditing and Certification of Financial Statements by CertifiedPublic Accountants, Rule No. 1090360805 issued by the Financial Supervisory Commission, and the auditingstandards generally accepted in the Republic of China. Furthermore, we conducted our audit of the financialstatements as of and for the year ended December 31, 2018 in accordance with the Regulations GoverningAuditing and Certification of Financial Statements by Certified Public Accountants, and the auditing standardsgenerally accepted in the Republic of China. Our responsibilities under those standards are further described inthe Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We areindependent of the Company in accordance with the Certified Public Accountants Code of Professional Ethicsin Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance withthe Code. Based on our audits and the report of other auditors, we believe that the audit evidence we haveobtained 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 ofthe financial statements of the current period. 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 opinionon these matters. Key audit matters for the Company's financial statements are stated as follows:

1. Revenue recognition

Please refer to note 4(o) "Revenue recognition" for the accounting policy related to revenue recognition,and note 6(s) "Revenue" for information related to revenue recognition for the individual financial statement.

324


Nan Ya Plastics Corporation is a listed company and its operating performance has an effect on distributionto its shareholders and stock price. Thus, its financial performance will have an impact on the users offinancial statement. Therefore, the veracity and appropriateness of revenue recognition is a key matter whenconducting our audit.


(1) Assessing the accounting policies and appropriateness of revenue recognition (including sales returnsand discounts).

(2) Obtaining the list of the top ten newly-added clients and the list of newly added related parties for thecurrent year, inspecting whether the transaction terms are different for normal clients, and reviewing theCompany’s financial position after the reporting period to verify the frequency of unusual sales returnsfor the purpose of assessing the appropriateness of revenue recognition.

(3) Selecting a moderate number of samples from sales invoices to verify that the accounts receivable havebeen recovered and to ensure that the remitter matches the customer for the purpose of assessing theaccuracy of revenue recognition.

(4) Performing sales cut-off test on the period before and after the financial position date by vouchingrelevant documents of sales transactions to determine whether sales income, return, and discounts havebeen appropriately recognized.

2. Valuation of inventories

Please refer to note 4(g) "Inventories" for the accounting policy related to valuation of inventories, and note6(f) "Inventories, net" for information related to valuation of inventories for the parent-company-onlyfinancial statement.


The amount of inventories shall be disclosed by lower of cost or net realizable value. Since the net realizablevalue is influenced by the international raw material pricing, there is a risk that the cost will exceed its netrealizable value. Therefore, the valuation of inventories is a key audit matter when conducting the audit ofthe individual financial statement.


(1) Assessing the appropriateness of inventories valuation policies.

(2) Ensuring the process of inventory valuation is in conformity with the accounting policies.

(3) Understanding the net realizable values used by management and the variation of the prices in a periodafter the reporting date to ensure the appropriateness of the valuation price.

(4) Assessed whether the disclosure of provision for inventory valuation is appropriate.

325

Other Matter

We did not audit the financial statements of certain investee companies, which represented investment in otherentities accounted for using the equity method of the Company. Those statements were audited by otherauditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included foraforementioned investee companies, is based solely on the report of other auditors. The investment inaforementioned investee companies accounted for using the equity method constituting 22.75 percent and 22.45percent of total assets at December 31, 2019 and 2018, respectively, and the related share of profit ofsubsidiaries, associates and joint ventures accounted for using the equity method constituting 40.53 percent and31.93 percent of total profit before tax for the years ended December 31, 2019 and 2018, respectively.

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

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

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

Those charged with governance (including the Audit Committee) are responsible for overseeing the Company’sfinancial 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 freefrom material misstatement, whether due to fraud or error, and to issue an auditor’ s report that includes ouropinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted inaccordance with the auditing standards generally accepted in the Republic of China will always detect a materialmisstatement 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 userstaken on the basis of these financial statements.

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

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

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

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

326

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

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

6. Obtain sufficient and appropriate audit evidence regarding the financial information of the investment inother entities accounted for using the equity method to express an opinion on this financial statements. Weare responsible for the direction, supervision and performance of the audit. We remain solely responsible forour audit opinion.

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

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

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

The engagement partners on the audit resulting in this independent auditors’ report are

Kou, Hsin-Yi and Yu, Chi-Lung.

KPMG

Taipei, Taiwan (Republic of China)March 18, 2020

Notes to Readers

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

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

327

(English Translation of Financial Statements and Report Originally Issued in Chinese)NAN YA PLASTICS CORPORATION

Balance SheetsDecember 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

December 31, 2019 December 31, 2018Assets Amount % Amount %

Current assets:1100 Cash and cash equivalents (notes 6(a) and (v)) $ 2,398,959 1 5,508,330 11110 Current financial assets at fair value through profit or loss (notes 6(b)

and (v))4,044,356 1 4,017,249 1

1120 Current financial assets at fair value through other comprehensive income(notes 6(c) and (v))

41,715,821 8 44,528,667 8

1150 Notes receivable, net (notes 6(d) and (v)) 2,035,966 1 2,417,539 11170 Accounts receivable, net (notes 6(d) and (v)) 10,297,642 2 12,333,877 21180 Accounts receivable due from related parties (notes 6(d), (v) and 7) 5,726,710 1 6,409,203 11200 Other receivables (note 6(e)) 928,677 - 1,346,114 -1210 Other receivables due from related parties (notes 6(e), (v) and 7) 5,640,819 1 12,683,027 3130X Inventories (note 6(f)) 21,787,220 4 25,605,150 51470 Other current assets 2,011,482 - 1,736,359 -

Total current assets 96,587,652 19 116,585,515 22Non-current assets:

1517 Non-current financial assets at fair value through other comprehensiveincome (notes 6(c) and (v))

10,843,196 2 11,132,158 2

1550 Investments accounted for using equity method (notes 6(g)) 334,228,505 64 339,241,706 631600 Property, plant and equipment (note 6(h)) 62,826,030 12 59,292,743 111755 Right-of-use assets (note 6(i)) 127,874 - - -1812 Technology development expense 30,257 - 34,972 -1840 Deferred tax assets (note 6(p)) 3,979,584 1 4,060,736 11915 Prepayments for purchase of equipment 1,669,032 - 1,401,284 -1937 Overdue receivables (note 6(d)) - - - -1990 Other non-current assets 7,873,636 2 6,758,479 1

Total non-current assets 421,578,114 81 421,922,078 78

Total assets $ 518,165,766 100 538,507,593 100

December 31, 2019 December 31, 2018Liabilities and Equity Amount % Amount %

Current liabilities:2100 Short-term borrowings (notes 6(k), (v) and (y)) $ 22,443,300 4 20,880,900 42111 Short-term notes and bills payable (notes 6(j), (v) and (y)) 15,392,795 3 8,897,747 22170 Notes and accounts payable (note 6(v)) 5,045,472 1 4,993,365 12180 Accounts payable to related parties (notes 6(v) and 7) 5,957,209 1 7,130,082 12200 Other payables 11,350,723 2 12,493,985 22220 Other payables to related parties (notes 6(v), (y) and 7) 4,000,000 1 - -2280 Current lease liabilities (notes 6(n), (v), (y), and 7) 59,288 - - -2321 Current portion of bonds payable (notes 6(m), (v) and (y)) 4,647,875 1 5,946,931 12322 Current portion of long-term borrowings (notes 6(l), (v) and (y)) 3,333,333 1 6,133,333 12399 Other current liabilities 659,525 - 546,592 -

Total current liabilities 72,889,520 14 67,022,935 12Non-Current liabilities:

2530 Bonds payable (notes 6(m), (v) and (y)) 59,330,786 12 52,584,524 102540 Long-term borrowings (notes 6(m), (v) and (y)) 4,966,667 1 5,200,000 12570 Deferred tax liabilities (notes 6(p)) 11,480,294 2 10,984,786 22580 Non-current lease liabilities (note 6(n), (v), (y), and 7) 69,457 - - -2611 Long-term notes payable (note 6(l), (v) and (y)) 5,096,417 1 7,096,550 12640 Net defined benefit liability-non-current (note 6(n)) 19,424,132 4 19,596,620 42645 Guarantee deposits 288,238 - 305,584 -2670 Other non-current liabilities 48,371 - 44,397 -

Total non-current liabilities 100,704,362 20 95,812,461 18Total liabilities 173,593,882 34 162,835,396 30

Equity(notes 6(q)):3110 Common Stock 79,308,216 15 79,308,216 153200 Capital surplus 26,617,834 5 26,672,119 53300 Retained earnings 204,105,146 39 220,788,020 413400 Others 34,540,688 7 48,903,842 9

Total equity 344,571,884 66 375,672,197 70Total liabilities and equity $ 518,165,766 100 538,507,593 100

See accompanying notes to financial statements.328

(English Translation of Financial Statements and Report Originally Issued in Chinese)NAN YA PLASTICS CORPORATIONStatements of Comprehensive Income

For the years ended December 31, 2019 and 2018(Expressed in Thousands of New Taiwan Dollars, Except for Earnings Per Common Share)

2019 2018

Amount % Amount %

4000 Operating revenue, net (notes 6(s) and 7) $154,799,788 100 188,909,965 100

5000 Operating costs (notes 6(f), (o), (t), 7 and 12) 140,895,897 91 161,183,893 85

5910 Less: Unrealized (realized) profit from affiliated companies (note 7) (30,032) - (17,988) -

Gross profit from operations 13,933,923 9 27,744,060 15

Operating expenses (notes 6(e), (o), (t), 7 and 12):

6100 Selling expenses 5,658,176 4 5,959,140 3

6200 Administrative expenses 5,393,655 3 6,333,369 4

Total operating expenses 11,051,831 7 12,292,509 7

Operating income 2,882,092 2 15,451,551 8

Non-operating income and expenses (notes 6(g), (n), (u) and 7):

7010 Other income 4,814,269 3 5,120,668 3

7020 Gains (losses) on reclassification of financial assets (84,658) - 988,720 1

7050 Finance costs (1,369,753) (1) (1,274,829) (1)

7070 Share of profit of subsidiaries, associates and joint ventures accounted for using equity method, net 18,321,507 12 37,534,582 20

Total non-operating income and expenses 21,681,365 14 42,369,141 23

Profit before income tax 24,563,457 16 57,820,692 317950 Less: Income tax expenses(benefits)(notes 6(p)) 1,487,334 1 5,074,671 3

Profit (loss) 23,076,123 15 52,746,021 28

8300 Other comprehensive income (notes 6(g) and (q)):

8310 Components of other comprehensive income that will not be reclassified to profit or loss

8311 Gains (losses) on remeasurements of defined benefit plans 34,401 - (582,901) -

8316 Unrealized losses from investments in equity instruments measured at fair value through othercomprehensive income

(3,101,808) (2) (1,513,062) (1)

8330 Share of other comprehensive income of subsidiaries, associates and joint ventures accounted forusing equity method, components of other comprehensive income that will not be reclassified toprofit or loss

(5,543,433) (3) (5,280,046) (3)

8349 Less : income tax related to components of other comprehensive income that will not bereclassified to profit or loss

6,880 - (262,925) -

Total items that may not be reclassified subsequently to profit and loss (8,617,720) (5) (7,113,084) (4)

8360 Components of other comprehensive income (loss) that will be reclassified to profit or loss

8361 Exchange differences on translation of foreign financial statements (5,866,135) (4) 455,917 -

8380 Share of other comprehensive income of subsidiaries, associates and joint ventures accounted forusing equity method, components of other comprehensive income that will be reclassified toprofit or loss

15,812 - (22,910) -

8399 Less : income tax related to components of other comprehensive income that will be reclassified toprofit or loss

- - 135,016 -

Total items that may be reclassified subsequently to profit or loss (5,850,323) (4) 297,991 -

8300 Other comprehensive income (14,468,043) (9) (6,815,093) (4)

8500 Total comprehensive income $ 8,608,080 6 45,930,928 24

BeforeTax

AfterTax

BeforeTax

AfterTax

Basic earnings per share (note 6(r) ) : $ 3.10 2.91 7.29 6.65

See accompanying notes to financial statements.329


Statements of Changes in EquityFor the years ended December 31, 2019 and 2018(Expressed in Thousands of New Taiwan Dollars)

Retained earnings Items of other equity interestUnrealized

gains

Ordinaryshares

Capitalsurplus

Legalreserve

Specialreserve

Unappropriatedretainedearnings


foreignfinancial

statements

(losses) fromfinancial assets

measured atfair value

through othercomprehensive

income

Unrealizedgains (losses)on available-

for-salefinancial

assets

Gains (losses)on effectiveportion ofcash flow

hedges

Gains (losses)on hedging instruments Total equity

Balance at January 1, 2018 $ 79,308,216 26,158,472 57,873,852 86,932,416 63,674,176 (6,026,197) - 47,691,196 7,729 - 355,619,860Effects of retrospective application - - - - 507,292 - 61,239,238 (47,691,196) (7,729) 7,729 14,055,334Balance at January 1, 2018 after adjustment 79,308,216 26,158,472 57,873,852 86,932,416 64,181,468 (6,026,197) 61,239,238 - - 7,729 369,675,194Appropriation and distribution of retained earnings:

Legal reserve appropriated - - 5,452,101 - (5,452,101) - - - - - -Special reserve appropriated - - - 6,819,825 (6,819,825) - - - - - -Cash dividends of ordinary shares - - - - (40,447,190) - - - - - (40,447,190)Reversal of special reserve - - - (15,150) 15,150 - - - - - -

Other changes in capital surplus:Other changes in capital surplus - 513,647 - - - - - - - - 513,647

Profit - - - - 52,746,021 - - - - - 52,746,021Other comprehensive income - - - - (498,165) 320,901 (6,614,919) - - (22,910) (6,815,093)Total comprehensive income - - - - 52,247,856 320,901 (6,614,919) - - (22,910) 45,930,928Disposal of investments in equity instruments designated at fair value through

other comprehensive income - - - - (382) - - - - - (382)Balance at December 31, 2018 79,308,216 26,672,119 63,325,953 93,737,091 63,724,976 (5,705,296) 54,624,319 - - (15,181) 375,672,197Appropriation and distribution of retained earnings:

Legal reserve appropriated - - 5,274,602 - (5,274,602) - - - - - -Special reserve appropriated - - - 6,106,008 (6,106,008) - - - - - -Cash dividends of ordinary share - - - - (39,654,108) - - - - - (39,654,108)Reversal of special reserve - - - (1,433) 1,433 - - - - - -

Other changes in capital surplus:Other changes in capital surplus - (54,285) - - - - - - - - (54,285)

Profit - - - - 23,076,123 - - - - - 23,076,123Other comprehensive income - - - - (104,889) (5,866,135) (8,512,831) - - 15,812 (14,468,043)Total comprehensive income - - - - 22,971,234 (5,866,135) (8,512,831) - - 15,812 8,608,080Balance at December 31, 2019 $ 79,308,216 26,617,834 68,600,555 99,841,666 35,662,925 (11,571,431) 46,111,488 - - 631 344,571,884

See accompanying notes to financial statements. 330


Statements of Cash FlowsFor the years ended December 31, 2019 and 2018(Expressed in Thousands of New Taiwan Dollars)

2019 2018Cash flows from (used in) operating activities:

Profit before tax $ 24,563,457 57,820,692Adjustments:

Adjustments to reconcile profit (loss):Depreciation expense 5,989,435 6,354,470Amortization expense 906,871 1,500,194Net profit on financial assets or liabilities at fair value through profit or loss (27,107) (215,889)Interest expense 1,369,753 1,274,829Interest income (305,117) (312,106)Dividend income (3,212,093) (3,569,990)Share of profit of subsidiaries, associates and joint ventures accounted for using equity method (18,321,507) (37,534,582)(Gain) loss on disposal of property, plant and equipment (8,856) 11,107Realized profit from affiliated companies (30,032) (17,988)Unrealized foreign exchange loss 198,499 18,259

Total adjustments to reconcile profit (loss) (13,440,154) (32,491,696)Changes in operating assets and liabilities:

Decrease (increase) in notes receivable 381,573 (40,530)Decrease (increase) in accounts receivable (including related parties) 2,536,888 (250,540)Decrease in other receivable 353,341 368,474Decrease (increase) in inventories 3,126,876 (6,706,962)Increase in other current assets (275,124) (93,573)

Total changes in operating assets 6,123,554 (6,723,131)Decrease in notes and accounts payable (including related parties) (1,106,189) (1,246,262)Increase (decrease) in other payable 149,440 (131,528)Increase (decrease) in other current liabilities 112,933 (103,895)Decrease in net defined benefit liability (138,087) (214,401)

Total changes in operating liabilities (981,903) (1,696,086)Total changes in operating assets and liabilities 5,141,651 (8,419,217)Total adjustments (8,298,503) (40,910,913)

Cash inflow generated from operations 16,264,954 16,909,779Interest received 369,214 257,410Dividends received 21,266,219 21,777,114Interest paid (1,364,445) (1,264,672)Income taxes paid (2,244,863) (2,342,364)

Net cash flows from operating activities 34,291,079 35,337,267Cash flows from (used in) investing activities:

Proceeds from capital reduction of financial assets at fair value through other comprehensive income - 1,973Proceeds from disposal of financial assets designated at fair value through profit or loss - 772,908Acquisition of investments accounted for using equity method (6,156,161) (3,686,520)Acquisition of property, plant and equipment (4,842,444) (7,305,999)Proceeds from disposal of property, plant and equipment 12,261 21,103Increase in refundable deposits (25,815) (3,916)Decrease (increase) in other receivables due from related parties 7,042,208 (1,206,104)Increase in other non-current assets (6,176,525) (3,705,003)

Net cash flows (used in) from investing activities (10,146,476) (15,111,558)Cash flows from (used in) financing activities:

Increase in short-term loans 1,562,821 12,452,539Increase in short-term notes and bills payable 6,500,000 900,000Proceeds from issuance of bonds 11,381,560 10,483,594Repayments of bonds (5,950,000) (6,100,000)Proceeds from long-term debt 4,300,000 3,200,000Repayments of long-term debt (7,333,333) (3,933,333)(Decrease) increase in long-term notes payable (2,000,000) 2,100,000Decrease in guarantee deposits (17,346) (81,064)Increase in other payables to related parties 4,000,000 -Payment of lease liabilities (58,833) -Increase in other non-current liabilities 22,707 3,978Cash dividends paid (39,629,893) (40,495,027)

Net cash flows used in financing activities (27,222,317) (21,469,313)Effect of exchange rate changes on cash and cash equivalents (31,657) (16,476)Net decrease in cash and cash equivalents (3,109,371) (1,260,080)Cash and cash equivalents at beginning of period 5,508,330 6,768,410Cash and cash equivalents at end of period $ 2,398,959 5,508,330

See accompanying notes to financial statements. 331


Notes to the Financial StatementsFor the years ended December 31, 2019 and 2018

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

(1) Company history

Nan Ya Plastics Corporation was incorporated on August 22, 1958, and established its factories inKaohsiung City. The Company engages in the manufacture and sale of plastic products, polyester fibers,petrochemical products, and electronic materials. The Company has gone through several capital increasesand established many divisions. Currently, the Company has the following divisions: plastics, fiber,petrochemical, electronics, and engineering. The Company has 10 manufacturing plants across Taiwan, 1branch office in Mai-Liao and 1 branch office in Sen-Kong.

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

The accompanying financial statements were approved and authorized for issue by the Board of Directorson March 18, 2020.

(3) New standards, amendments and interpretations adopted:

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

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


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

Except for the following items, the Company believes that the adoption of the above IFRSs wouldnot have any material impact on its financial statements. The extent and impact of significationchanges are as follows:

(i) IFRS 16“Leases”

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

(Continued)332

NAN YA PLASTICS CORPORATIONNotes to the Financial Statements

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

1) Definition of a lease

Previously, the Company determined at contract inception whether an arrangement is orcontains a lease under IFRIC 4. Under IFRS 16, the Company assesses whether acontract is or contains a lease based on the definition of a lease, as explained in Note 4(l).

On transition to IFRS 16, the Company elected to apply the practical expedient tograndfather the assessment of which transactions are leases. The Company applied IFRS16 only to contracts that were previously identified as leases. Contracts that were notidentified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is alease. Therefore, the definition of a lease under IFRS 16 was applied only to contractsentered into or changed on or after January 1, 2019.

2) As a lessee

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

The Company decided to apply recognition exemptions to short-term leases of buildingsthat have a lease term of 12 months or less.

● Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaininglease payments, discounted at the Company’ s incremental borrowing rate as atJanuary 1, 2019. Right-of-use assets are measured at either:

－ their carrying amount as if IFRS 16 had been applied since thecommencement date, discounted using the lessee’ s incremental borrowingrate at the date of initial application – the Company applied this approach toits largest property leases; or

－ an amount equal to the lease liability, adjusted by the amount of any prepaidor accrued lease payments – the Company applied this approach to all otherlease.

In addition, the Company used the following practical expedients when applyingIFRS 16 to leases.

－ Applied a single discount rate to a portfolio of leases with similarcharacteristics.

(Continued)333


－ Adjusted the right-of-use assets by the amount of IAS 37 onerous contractprovision immediately before the date of initial application, as an alternativeto an impairment review.

－ Applied the exemption not to recognize right-of-use assets and liabilities forleases with less than 12 months of lease term.

－ Excluded initial direct costs from measuring the right-of-use asset at the dateof initial application.

－ Used hindsight when determining the lease term if the contract containsoptions to extend or terminate the lease.

3) Impacts on financial statements

On transition to IFRS 16, the Company additional the amount of the right-of-use assetsand lease liabilities recognized were both $114,265, the difference was recognized inretained earnings. When measuring lease liabilities, the Company discounted leasepayments using its incremental borrowing rate at January 1, 2019. The weighted-averagerate applied was 1.41%.

January 1, 2019Operating lease commitment on December 31, 2018 as disclosed in

the Company’s financial statements$ 116,104

Discounted using the incremental borrowing rate on January 1, 2019 114,265Lease liabilities recognized on January 1, 2019 $ 114,265

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

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


per IASBAmendments to IFRS 3 “Definition of a Business” January 1, 2020Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform” January 1, 2020Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020

The Company assesses that the adoption of the abovementioned standards would not have anymaterial impact on its financial statements.

(Continued)334


(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 StandardsBoard (IASB), but have yet to be endorsed by the FSC:


per IASBAmendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Betweenan Investor and Its Associate or Joint Venture”

Effective date tobe determinedby IASB

IFRS 17 “Insurance Contracts” January 1, 2021Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” January 1, 2022

Those which may be relevant to the Company are set out below:

Issuance / ReleaseDates

Standards orInterpretations Content of amendment

September 11, 2014 Amendments to IFRS 10 andIAS 28 “Sale or Contributionof Assets Between an Investorand Its Associate or JointVenture”

The amendments address an acknowledgedinconsistency between the requirements inIFRS 10 and those in IAS 28 (2011) indealing with the sale or contribution of assetsbetween an investor and its associate or jointventure.The main consequence of the amendments isthat a full gain or loss is recognized when atransaction involves a business (whether it ishoused in a subsidiary or not). A partial gainor loss is recognized when a transactioninvolves assets that do not constitute abusiness, even if these assets are housed in asubsidiary.

The Company is evaluating the impact of its initial adoption of the abovementioned standards orinterpretations on its financial position and financial performance. The results thereof will bedisclosed when the Company completes its evaluation.

(4) Summary of significant accounting policies:

The significant accounting policies presented in the financial statements are summarized below. Exceptfor those specifically indicated, the following accounting policies were applied consistently throughout theperiods presented in the financial statements.

(a) Statement of compliance

These annual financial statements have been prepared in accordance with the Guidelines Governingthe Preparation of Financial Reports by Securities Issuers (hereinafter referred to as the Guidelines).

(Continued)335


(b) Basis of preparation

Basis of measurement

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

(i) Financial instruments at fair value through profit or loss are measured at fair value;

(ii) Financial assets at fair value through other comprehensive income are measured at fair value;

(iii) The defined benefit liabilities are measured at fair value of the plan assets less the presentvalue of the defined benefit obligation, limited as explained in note 4(q).

Functional and presentation currency

The functional currency of the Company is determined based on the primary economic environmentin which the entity operates. The financial statements are presented in New Taiwan Dollar, which isthe Company’s functional currency. All financial information presented in New Taiwan Dollar hasbeen rounded to the nearest thousand.

(c) Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of theCompany at the exchange rates at the dates of the transactions. At the end of each subsequentreporting period, monetary items denominated in foreign currencies are translated into the functionalcurrencies using the exchange rate at that date. Non-monetary items denominated in foreigncurrencies that are measured at fair value are translated into the functional currenciesy using theexchange rate at the date that the fair value was determined. Non-monetary items denominated inforeign currencies that are measured based on historical cost are translated using the exchange rate atthe date of the transaction.

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

● an investment in equity securities designated as at fair value through other comprehensiveincome;

● a financial liability designated as a hedge of the net investment in a foreign operation to theextent that the hedge is effective; or

● qualifying cash flow hedges to the extent that the hedges are effective.

Foreign operations

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

(Continued)336


When a foreign operation is disposed of such that control, significant influence, or joint control islost, the cumulative amount in the translation reserve related to that foreign operation is reclassifiedto profit or loss as part of the gain or loss on disposal. When the Company disposes of only part ofits interest in a subsidiary that includes a foreign operation while retaining control, the relevantproportion of the cumulative amount is reattributed to non-controlling interest. When the Companydisposes of only part of its investment in an associate or joint venture that includes a foreignoperation while retaining significant influence or joint control, the relevant proportion of thecumulative amount is reclassified to profit or loss.

When the settlement of a monetary receivable from or payable to a foreign operation is neitherplaned nor likely to occur in the foreseeable future. Exchange differences arising from such amonetary item that are considered to form part of a net investment in the foreign operation arerecognized in other comprehensive income.

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

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

(i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;


(iii) It is expected to be realized within twelve months after the reporting period; or

(iv) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged orused to settle a liability for at least twelve months after the reporting period.

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

An entity shall classify a liability as current when:

(i) It is expected to be settled in the normal operating cycle;


(iii) It is due to be settled within twelve months after the reporting period; or

(iv) The Company does not have an unconditional right to defer settlement of the liability for atleast twelve months after the reporting period. Terms of a liability that could, at the option ofthe counterparty, result in its settlement by issuing equity instruments do not affect itsclassification.

(e) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquidinvestments that are readily convertible to known amounts of cash and which are subject to aninsignificant risk of changes in value. Time deposits which meet the above definition and are heldfor the purpose of meeting short term cash commitments rather than for investment or other purposesshould be recognized as cash equivalents.

(Continued)337


(f) Financial instruments

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

(i) Financial assets

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

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

1) Financial assets measured at amortized cost

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

● it is held within a business model whose objective is to hold assets to collectcontractual cash flows; and


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

2) Fair value through other comprehensive income (FVOCI)

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

● it is held within a business model whose objective is achieved by both collectingcontractual cash flows and selling financial assets; and


(Continued)338


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

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

Dividend income derived from equity investments is recognized on the date that theCompany’s right to receive payment is established, which in the case of quoted securitiesis normally the ex-dividend date.

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above aremeasured at FVTPL, including derivative financial assets. On initial recognition, theCompany may irrevocably designate a financial asset, which meets the requirements tobe measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates orsignificantly reduces an accounting mismatch that would otherwise arise.

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

4) Business model assessment

The Company makes an assessment of the objective of the business model in which afinancial asset is held at portfolio level because this best reflects the way the business ismanaged and information is provided to management. The information consideredincludes:

● the stated policies and objectives for the portfolio and the operation of those policiesin practice. These include whether management’ s strategy focuses on earningcontractual interest income, maintaining a particular interest rate profile, matchingthe duration of the financial assets to the duration of any related liabilities orexpected cash outflows or realizing cash flows through the sale of the assets;

● how the performance of the portfolio is evaluated and reported to the Company’ smanagement;

● the risks that affect the performance of the business model (and the financial assetsheld within that business model) and how those risks are managed;

● how managers of the business are compensated ─ e.g. whether compensation isbased on the fair value of the assets managed or the contractual cash flows collected;and

● the frequency, volume and timing of sales of financial assets in prior periods, thereasons for such sales and expectations about future sales activity.

(Continued)339


Transfers of financial assets to third parties in transactions that do not qualify forderecognition are not considered sales for this purpose, and are consistent with theCompany’s continuing recognition of the assets.

Financial assets that are held for trading or are managed and whose performance isevaluated on a fair value basis are measured at FVTPL.

5) Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘ principal’ is defined as the fair value of thefinancial assets on initial recognition. ‘Interest’ is defined as consideration for the timevalue of money and for the credit risk associated with the principal amount outstandingduring a particular period of time and for other basic lending risks and costs, as well as aprofit margin.

In assessing whether the contractual cash flows are solely payments of principal andinterest, the Company considers the contractual terms of the instrument. This includesassessing whether the financial asset contains a contractual term that could change thetiming or amount of contractual cash flows such that it would not meet this condition. Inmaking this assessment, the Company considers:

● contingent events that would change the amount or timing of cash flows;

● terms that may adjust the contractual coupon rate, including variable rate features;

● prepayment and extension features; and

● terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse features)

6) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financialassets measured at amortized cost (including cash and cash equivalents, amortized costs,notes and accounts receivable, other receivable, guarantee deposit paid and otherfinancial assets), and contract assets.

The Company measures loss allowances at an amount equal to lifetime ECL, except forthe 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 defaultoccurring over the expected life of the financial instrument) has not increasedsignificantly since initial recognition.

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

(Continued)340


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

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

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

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

The Company assumes that the credit risk on a financial asset has increased significantlyif there is a breach of contract.

The Company considers a financial asset to be in default when the borrower is unlikelyto pay its credit obligations to the Company in full. The Company measures its lossallowances at an amount equal to lifetime expected credit loss.

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

At each reporting date, the Company assesses whether financial assets carried atamortized cost is credit-impaired. A financial asset is ‘credit-impaired’ when one or moreevents that have a detrimental impact on the estimated future cash flows of the financialasset have occurred. Evidence that a financial assets is credit-impaired includes thefollowing observable data:

● significant financial difficulty of the borrower or issuer;

● a breach of contract such as a default or being more than one year past due;

● the lender of the borrower, for economic or contractual reasons relating to theborrower's financial difficulty, having granted to the borrower a concession that thelender would not otherwise consider;

● it is probable that the borrower will enter bankruptcy or other financialreorganization; or

● the disappearance of an active market for a security because of financial difficulties.

(Continued)341


Loss allowances for financial assets measured at amortized cost are deducted from thegross carrying amount of the assets.

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

7) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cashflows from the financial asset expire, or it transfers the rights to receive the contractualcash flows in a transaction in which substantially all of the risks and rewards ofownership of the financial asset are transferred or in which the Company neithertransfers nor retains substantially all of the risks and rewards of ownership and it doesnot retain control of the financial asset.

The Company enters into transactions whereby it transfers assets recognized in itsstatement of balance sheet, but retains either all or substantially all of the risks andrewards of the transferred assets. In these cases, the transferred assets are notderecognized.

(ii) Financial liabilities and equity instruments

1) Classification of debt or equity

Debt and equity instruments issued by the Company are classified as financial liabilitiesor equity in accordance with the substance of the contractual arrangements and thedefinitions of a financial liability and an equity instrument.

2) Financial liabilities

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

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

(Continued)342


3) Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligations aredischarged or cancelled, or expire. The Company also derecognizes a financial liabilitywhen its terms are modified and the cash flows of the modified liability are substantiallydifferent, in which case a new financial liability based on the modified terms isrecognized at fair value.

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

4) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in thestatement of balance sheet when, and only when, the Company currently has a legallyenforceable right to set off the amounts and it intends either to settle them on a net basisor to realize the asset and settle the liability simultaneously.

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories iscalculated using the weighted average method, and includes expenditure incurred in acquiring theinventories, production or conversion costs, and other costs incurred in bringing them to theirpresent location and condition. In the case of manufactured inventories and work in progress, costincludes an appropriate share of production overheads based on normal operating capacity.

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

(h) Investment in associates

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

Investments in associates are accounted for using the equity method and are recognized initially atcost. The cost of the investment includes transaction costs. The carrying amount of the investment inassociates includes goodwill which is arising from the acquisition less any accumulated impairmentlosses.

The financial statements include the Company’s share of the profit or loss and other comprehensiveincome of those associates, after adjustments to align the accounting policies with those of theCompany, from the date on which significant influence commences until the date on whichsignificant influence ceases. The Company recognizes any changes of its proportionate share in theinvestee within capital surplus, when an associate’s equity changes due to reasons other than profitand loss or comprehensive income, which did not result in changes in actual significant influence.

Gains and losses resulting from transactions between the Company and an associate are recognizedonly to the extent of unrelated Company’s interests in the associate.

(Continued)343


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

When the Company subscribes to additional shares in an associate at a percentage different from itsexisting ownership percentage, the resulting carrying amount of the investment will differ from theamount of the Company’ s proportionate interest in the net assets of the associate. The Companyrecords such a difference as an adjustment to its investments, with the corresponding amountcharged or credited to capital surplus. The aforesaid adjustment should first be adjusted underadditional paid in capital. If the additional paid in capital resulting from changes in ownershipinterest is not sufficient, the remaining difference is debited to retained earnings. If the Company’sownership interest is reduced due to the additional subscription of the shares of the associate byother investors, the proportionate amount of the gains or losses previously recognized in othercomprehensive income in relation to that associate will be reclassified to profit or loss on the samebasis as would be required if the associate had directly disposed of its related assets or liabilities.

(i) Subsidiaries

The Company accounts the investee companies that it possesses control using the equity. Netincome, other comprehensive income, and shareholder’ s equity in the financial reports of theCompany and the net income, other comprehensive income, and shareholder’s equity that belongs tothe Consolidated Company in the consolidated financial reports should be the same.

The Company accounts the changes in equity, under the condition that control is still present, asequity transactions between the proprietors.

(j) Joint arrangements

A joint arrangement is an arrangement of which two or more parties have joint control. The IFRSclassifies joint arrangements into two types — joint operations and joint ventures, which have thefollowing characteristics:

(i) the parties are bound by a contractual arrangement; and

(ii) the contractual arrangement gives two or more of those parties joint control of thearrangement. IFRS 11 “Joint Arrangements” defines joint control as the contractually agreedsharing of control of an arrangement, which exists only when decisions about the relevantactivities (ie activities that significantly affect the returns of the arrangement) require theunanimous consent of the parties sharing control.

A joint arrangement whereby the parties that have joint control of the arrangement have rights to theassets, and obligations for the liabilities, relating to the arrangement. The Company accounts for theassets, liabilities, revenues and expenses in relation to its interest in a joint operation in accordancewith the IFRSs applicable to the particular assets, liabilities, revenues and expenses. When assessingwhether a joint arrangement is a joint operation or a joint venture, the Company considers thestructure and legal form of the arrangement, the terms agreed by the parties in the contractualarrangement and, when relevant, other facts and circumstances.

(Continued)344


A joint venture is a joint arrangement whereby the Company has joint control of the arrangement(i.e. joint venturers) in which the Company has rights to the net assets of the arrangement , ratherthan rights to its assets and obligations for its liabilities. The Company recognizes its interest in ajoint venture as an investment and accounts for that investment using the equity method inaccordance with IAS 28 “ Investments in Associates and Joint Ventures” , unless the Companyqualifies for exemption from that Standard. Please refer to note 4(i) for the application of the equitymethod.

When assessing the classification of a joint arrangement, the Company considers the structure andlegal form of the arrangement, the terms in the contractual arrangement, and other facts andcircumstances. When the facts and circumstances change, the Company reevaluates whether theclassification of the joint arrangement has changed.

(k) Property, plant and equipment

(i) Recognition and measurement

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

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

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

(ii) Subsequent cost

Subsequent expenditure is capitalized only if it is probable that the future economic benefitsassociated with the expenditure will flow to the Company.

(iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized inprofit or loss on a straight line basis over the estimated useful lives of each component of anitem of property, plant and equipment.

Land is not depreciated.

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

1) Buildings: 25 to 50 years.

2) Machinery and transportation equipment: 7 to 15 years.

3) Miscellaneous equipment: 7 to 15 years.

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

(Continued)345


(l) Lease

Lease (applicable from January 1, 2019)

(i) Identifying a lease

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

1) the contract involves the use of an identified asset – this may be specified explicitly orimplicitly, and should be physically distinct or represent substantially all of the capacityof a physically distinct asset. If the supplier has a substantive substitution right, then theasset is not identified; and

2) the Company has the right to obtain substantially all of the economic benefits from use ofthe asset throughout the period of use; and

3) the Company has the right to direct the use of the asset if either:

● the Company has the right to direct how and for what purpose the asset is usedthroughout the period of use, without the supplier having the right to change thoseoperating instructions; or

● the relevant decisions about how and for what purpose the asset is used arepredetermined and:

－ the Company has the right to operate the asset is used throughout the periodof use, without the supplier having the right to change those operatinginstructions; or

－ the Company designed the asset in a way that predetermines how and forwhat purpose it will be used throughout the period of use.

At inception or on reassessment of a contract that contains a lease component, theCompany allocates the consideration in the contract to each lease component on the basisof their relative stand-alone prices. However, for the leases of land and buildings inwhich it is a lessee, the Company has elected not to separate non-lease components andaccount for the lease and non-lease components as a single lease component.

(ii) As a lessee

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

(Continued)346


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

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

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

－ fixed payments, including in-substance fixed payments;

－ variable lease payments that depend on an index or a rate, initially measured using theindex or rate as at the commencement date;

－ amounts expected to be payable under a residual value guarantee; and

－ payments for purchase or termination options that are reasonably certain to be exercised.

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

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

－ there is a change in the Company’s estimate of the amount expected to be payable undera residual value guarantee; or

－ there is a change in the lease term resulting from a change of its assessment on whether itwill exercise an option to purchase the underlying asset, or

－ there is a change of its assessment on whether it will exercise a extension or terminationoption; or

－ there is a change in scope, object or other conditions of a lease.

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

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

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

(Continued)347


The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases of buildings that have a lease term of 12 months or less and leases of low-valueassets. The Company recognizes the lease payments associated with these leases as an expenseon a straight-line basis over the lease term.

(iii) As a leasor

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

When the Company is an intermediate lessor, it accounts for its interests in the head lease andthe sub-lease separately. It assesses the lease classification of a sub-lease with reference to theright-of-use asset arising from the head lease. If a head lease is a short-term lease to which theCompany applies the exemption described above, then it classifies the sub-lease as anoperating lease.

If an arrangement contains lease and non-lease components, the Company applies IFRS15 toallocate the consideration in the contract.

The lessor recognizes a finance lease receivable at an amount equal to its net investment in thelease. Initial direct costs, such as lessors to negotiate and arrange a lease, are included in themeasurement of the net investment. The interest income is recognized over the lease termbased on a pattern reflecting a constant periodic rate of return on the net investment in thelease. The Company recognizes lease payments received under operating leases as income on astraight-line basis over the lease term as part of ‘rental income’.

Lease (applicable before January 1, 2019)

(i) Lessor

Lease income from an operating lease is recognized in income on a straight-line basis over thelease term. Initial direct costs incurred in negotiating and arranging an operating lease areadded to the carrying amount of the leased asset, and recognized as an expense over the leaseterm on the same basis as the lease income. Incentives granted to the lessee to enter into anoperating lease are spread over the lease term on a straight-line basis in order that the leaseincome received is reduced accordingly.

Contingent rents are recognized as income in the period when the lease adjustments areconfirmed.

(Continued)348


(ii) Lessee

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

Contingency rent is recognized as expense in the period in which it is incurred.

(m) Technical cooperation fee

(i) Technical cooperation fee

Technical cooperation fee is measured at cost less accumulated amortization and anyaccumulated impairment losses.

(ii) Subsequent expenditure

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

(iii) Amortization

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

1) Technical cooperation fee 5~15 years

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

(n) Impairment – Non-financial assets

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

For impairment testing, assets are grouped together into the smallest group of assets that generatescash inflows from continuing use that are largely independent of the cash inflows of other assets orCGUs.

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

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

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

(o) Revenue recognition

(i) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitledin exchange for transferring goods or services to a customer. The Company recognizes revenuewhen it satisfies a performance obligation by transferring control of a good or a service to acustomer. The accounting policies for the Company’ s main types of revenue are explainedbelow.

1) Sale of goods

The Company recognizes revenue when control of the products has transferred, beingwhen the products are delivered to the customer, the customer has full discretion over thechannel and price to sell the products, and there is no unfulfilled obligation that couldaffect the customer’s acceptance of the products. Delivery occurs when the products havebeen shipped to the specific location, the risks of obsolescence and loss have beentransferred to the customer, and either the customer has accepted the products inaccordance with the sales contract, the acceptance provisions have lapsed, or theCompany any has objective evidence that all criteria for acceptance have been satisfied.

2) Financing components

The Company does not expect to have any contracts where the period between thetransfer of the promised goods or services to the customer and payment by the customerexceeds one year. As a consequence, the Company does not adjust any of the transactionprices for the time value of money.

(p) Contract costs

(i) Incremental costs of obtaining a contract

The Company recognizes as an asset the incremental costs of obtaining a contract with acustomer if the Company expects to recover those costs. The incremental costs of obtaining acontract are those costs that the Company incurs to obtain a contract with a customer that itwould not have incurred if the contract had not been obtained. Costs to obtain a contract thatwould have been incurred regardless of whether the contract was obtained shall be recognizedas an expense when incurred, unless those costs are explicitly chargeable to the customerregardless of whether the contract is obtained.

The Company applies the practical expedient to recognize the incremental costs of obtaining acontract as an expense when incurred if the amortization period of the asset that the entityotherwise would have recognized is one year or less.

(Continued)350


(ii) Costs to fulfill a contract

If the costs incurred in fulfilling a contract with a customer are not within the scope of anotherStandard (for example, IAS 2 Inventories, IAS 16 Property, Plant and Equipment or IAS 38Intangible Assets), the Company recognizes an asset from the costs incurred to fulfill acontract only if those costs meet all of the following criteria:

● the costs relate directly to a contract or to an anticipated contract that the Company canspecifically identify;

● the costs generate or enhance resources of the Company that will be used in satisfying (or incontinuing to satisfy) performance obligations in the future; and

● the costs are expected to be recovered.

General and administrative costs, costs of wasted materials, labor or other resources to fulfilthe contract that were not reflected in the price of the contract, costs that relate to satisfiedperformance obligations (or partially satisfied performance obligations), and costs for whichthe Company cannot distinguish whether the costs relate to unsatisfied performanceobligations or to satisfied performance obligations(or partially satisfied performanceobligations), the Company recognizes these costs as expenses when incurred.

(q) Employee benefits

(i) Defined contribution plans

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

(ii) Defined benefit plans

The Company’s net obligation in respect of defined benefit plans is calculated separately foreach the plan by estimating the amount of future benefit that employees have earned in thecurrent and prior periods, discounting that amount and deducting the fair value of any planassets.

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

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

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When the benefits of a plan are changed or when a plan is curtailed, the resulting change inbenefit that relates to past service or the gain or loss on curtailment is recognized immediatelyin profit or loss. The Company recognizes gains and losses on the settlement of a definedbenefit plan when the settlement occurs.

(iii) Short-term employee benefits

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

(r) Income taxes

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

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

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

(i) temporary differences on the initial recognition of assets and liabilities in a transaction that isnot a business combination and that affects neither accounting nor taxable profits (losses) atthe time of the transaction;

(ii) temporary differences related to investments in subsidiaries, associates and joint arrangementsto the extent that the Company is able to control the timing of the reversal of the temporarydifferences and it is probable that they will not reverse in the foreseeable future; and

(iii) taxable temporary differences arising on the initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differenceswhen they reserve, using tax rates enacted or substantively enacted at the reporting date.

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

(i) the Company has a legally enforceable right to set off current tax assets against current taxliabilities ; and

(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the sametaxation authority on either:

1) the same taxable entity; or

(Continued)352


2) different taxable entities which intend to settle current tax assets and liabilities on a netbasis, or to realize the assets and liabilities simultaneously, in each future period inwhich significant amounts of deferred tax liabilities or assets are expected to be settled orrecovered.

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

(s) Earnings per share

The Company discloses the Company’s basic and diluted earnings per share attributable to ordinaryshareholders of the Company. Basic earnings per share is calculated as the profit attributable toordinary shareholders of the Company divided by the weighted average number of ordinary sharesoutstanding.

(t) Operating segments

The Company has already disclosed related information of its operating segments in the consolidatedfinancial report of the Consolidated Company as of December 31, 2019, thus no additionalinformation will be disclosed herein.

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

The preparation of the financial statements in conformity with the Guidelines Governing the Preparationof Financial Reports by Securities Issuers requires management to make judgments, estimates, andassumptions that affect the application of the accounting policies and the reported amount of assets,liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The managementrecognizes any changes in accounting estimates during the period and the impact of those changes inaccounting estimates in the following period.

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

(a) Evauation of inventory

Because inventories are measured at the lower of cost and net realizable value, the Companyevaluates the amount of normal waste, obsolete, and inventories without market price as of thereporting date, and reduces the book value to net realizable value. Such evaluation method dependson the demand of merchandise for a particular period of time in the future; therefore, there might besignificant change due to the rapid industry transformation. Please refer to note 6(f) for furtherdescription of the evaluation of inventories.

(Continued)353


(b) The Company's accounting policies include measuring financial and non-financial assets andliabilities at fair value through profit or loss. The Company establishes a measurement and reviewmechanism for measuring fair value.

The Company strives to use market observable inputs when measuring assets and liabilities. Differentlevels of the fair value hierarchy to be used in determining the fair value of financial instruments are asfollows:

(a) Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.

(b) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset orliability, either directly (ie as prices) or indirectly (ie derived from prices).

(c) Level 3: inputs for the assets or liability that are not based on observable market data.

For any transfer within the fair value hierarchy, the impact of the transfer is recognized on the reportingdate. Please refer to note 6(v), financial instruments, for assumptions used in measuring fair value.

(6) Explanation of significant accounts:

(a) Cash and Cash Equivalents

December 31,2019

December 31,2018

Cash on hand $ 245 96Cash in banks 2,398,714 3,664,254Time deposits - 1,843,980Cash and cash equivalents $ 2,398,959 5,508,330

Please refer to note 6(v) for the interest rate risk and sensitivity analysis of the financial assets andliabilities of the Company.

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

December 31,2019

December 31,2018

Financial assets designated as at fair value through profit orloss：Funds $ 4,044,356 4,017,249

Remeasurement at fair value recognized in profit or loss is disclosed in note 6(u).

(Continued)354


(c) Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income - current

December 31,2019

December 31,2018

Equity instruments at fair value through other comprehensiveincome :Stocks $ 41,715,821 44,528,667

Financial assets at fair value through other comprehensive income- non-current

December 31,2019

December 31,2018

Equity instruments at fair value through other comprehensiveincome：Stocks $ 10,843,196 11,132,158

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

The Company designated the investments shown above as equity instruments at fair valuethrough other comprehensive income because these equity instruments represent thoseinvestments that the Company intends to hold for long-term for strategic purposes.

There were no disposals of strategic investments and transfers of any cumulative gain or losswithin equity relating to these investments as of December 31, 2019 and 2018.

(ii) For credit risk and market risk; please refer to note 6(v).

(iii) As of December 31, 2019, the financial assets at fair value through other comprehensiveincome of the Company had been pledged as collateral for its long-term borrowings. Pleaserefer to note 8.

(d) Notes receivable, accounts receivable and other receivables

December 31,2019

December 31,2018

Notes receivable $ 2,051,902 2,432,508Accounts receivable 16,096,019 18,813,719Overdue receivables 4,555 6,550Allowance for doubtful receivables (92,158) (92,158)

$ 18,060,318 21,160,619

(Continued)355


The Company applies the simplified approach to provide for its expected credit losses, i.e. the use oflifetime expected loss provision for all receivables on December 31, 2019 and 2018. To measure theexpected credit losses, trade receivables have been grouped based on shared credit riskcharacteristics and the days past due, as well as incorporated forward looking information, includingmacroeconomic and relevant industry information. The loss allowance provision as of December 31,2019 amounted to $92,158, expected loss rate less than 1%.

The Company applies the expected credit losses to analysis of notes and accounts receivable as ofDecember 31, 2019, as follows:

December 31,2019

December 31,2018

Past due 1 to 90 days $ 35,370 69,756Past due 90 to 180 days 12,070 16,198Past due 180 to 360 days 2,965 4,890Past due over 360 days 7,621 8,572

$ 58,026 99,416

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


2019 2018Balance at January 1, 2019 and 2018 $ 92,158 86,533Impairment loss recognized - 5,625Balance at December 31, 2019 and 2018 $ 92,158 92,158

As of December 31, 2019 and 2018, notes and trade receivable which were overdue or under legalproceedings amounted to $4,555 and $6,550, respectively. Such receivables were reclassified tooverdue receivables under other assets and provided with a full impairment loss provision.

The Company signed without-recourse factoring and financing contracts with financial institutions.According to these contracts, the net accounts receivable that have matured but are still uncollectedwill be paid by the financial institutions, except for those affected by trade disputes. As ofDecember 31, 2019 and 2018, the outstanding accounts receivable factoring transactions between theCompany and the financial institutions were as follows:

December 31, 2019

PurchaserFactoring


FactoringLine

Gold Circuit Electronics, Ltd. E. Sun Bank $ 69,693 - 100,000

December 31, 2018

PurchaserFactoring


FactoringLine

Gold Circuit Electronics, Ltd. E. Sun Bank $ 33,704 - 100,000

(Continued)356


(e) Other receivables

December 31,2019

December 31,2018

Other accounts receivable—other $ 928,677 1,346,114Other accounts receivable—loans to associates 5,640,819 12,683,027Less: Loss allowance - -Total $ 6,569,496 14,029,141

Other receivables are financial assets with low credit risk, thus the Company measured the lossallowance based on 12-month expected credit losses.

(f) Inventories

As of December 31, 2019 and 2018, the components of inventories were as follows:

December 31,2019

December 31,2018

Finished goods $ 6,183,288 8,276,355Work in process 5,005,165 6,582,025Machinery and accessories in process 4,788,355 3,955,613Raw materials 5,141,749 6,270,672Supplies 807 669Consigned-out raw materials 174,917 206,046Consigned-out finished goods 13,943 1,013Goods in transit 478,996 312,757Inventories, net $ 21,787,220 25,605,150

The details of the cost of sales were as follows:

2019 2018Inventory that has been sold $ 137,443,958 158,335,071Write-down of inventories (Reversal of write-downs) (227,666) 300,047Unallocated production overheads 3,679,605 2,548,775

$ 140,895,897 161,183,893

As of December 31, 2019 and 2018, the Company did not provide any inventories as collateral for itsloans.

(Continued)357


(g) Investments accounted for using equity method

The components of the investments accounted for using equity method were as follows:

December 31,2019

December 31,2018

Subsidiaries $ 173,906,675 173,901,499Associates 160,321,830 165,340,207

$ 334,228,505 339,241,706

(i) Subsidiaries

For the years ended December 31, 2019 and 2018, the Company’s share of net income in itssubsidiaries was as follows:

For the year ended December 312019 2018

The Company’s share of net income in its subsidiaries $ 6,356,723 11,326,244

In April and August, 2019, the Company participated in the capital increase by cash of itssubsidiary, Nan Ya Plastics (Hong Kong) Co., Ltd., with the total investments amounting toUSD77,000 thousand (equivalent to $2,378,838) and USD63,000 thousand (equivalent to$1,929,753), respectively.

In April, 2018, the Company participated in the capital increase by cash of its subsidiary, NanYa International (Cayman) Limited, with the total investments amounting to USD57,161thousand (equivalent to $1,676,070).

Please refer to the consolidated financial statements for the year ended December 31, 2019 forfurther related information.

(ii) Associates

For the years ended December 31, 2019 and 2018, the Company’s share of net income (loss) ofassociates were as follows:


The Company’s share of net income of associates $ 11,964,784 26,208,338

(Continued)358


1) Aforementioned information of associates was derived from financial statements auditedby auditors.

2) The unrealized translation gain or loss arising from the investment in foreign entities,which was determined on exchange rates as of December 31, 2019 and 2018, wererecognized in comprehensive income.

3) The unrealized sales profits from downstream transactions with investees under theequity method are treated as deductions from gross income. The realized sales profitsfrom downstream sales are added to gross income. Details of these transactions aredisclosed in note 7.

4) In March, August and December, 2019, the Company participated in the capital increaseby cash of FG Inc., Formosa Resources Corporation and Formosa Synthetic RubberCorporation, with the total investment amounting to USD7,500 thousand (equivalent to$231,570), $1,570,000 and $46,000, respectively.

5) In October, 2018, the Company participated in the capital increase by cash of FormosaSynthetic Rubber (Hong Kong) Corporation Limited, with the total investmentamounting to USD65,000 thousand (equivalent to $2,010,450).

6) The Company’ s financial information for investments accounted for using the equitymethod that are individually insignificant were as follows:

December 31,2019

December 31,2018

The carrying value of associates that were notindividually material $ 160,321,830 165,340,207


Attributable to the Company:Net Income $ 11,964,784 26,208,338Other comprehensive income (1,741,168) (2,994,412)Total comprehensive income $ 10,223,616 23,213,926

(iii) Collateral

Please refer to note 8 for investments accounted for using equity method which were pledgedto banks or courts as collateral to secure the Company’ s bank loans and lawsuits as ofDecember 31, 2019 and 2018.

(Continued)359


(h) Property, Plant and Equipment

The cost, depreciation, and impairment of property, plant and equipment of the Company for theyears ended December 31, 2019 and 2018 were as follows:


Machineryequipment

Transportationequipment

Otherfacilities

Constructionin progress Total

Cost or deemed cost:


Additions - - - - - 4,842,444 4,842,444

Disposals - - (728,957) (32,137) (178,250) - (939,344)

Reclassification - 110,011 6,551,321 32,891 558,053 (2,628,306) 4,623,970



Additions 3,613,725 1,151,296 - - - 2,540,978 7,305,999

Disposals - (148,815) (1,756,375) (28,588) (97,865) - (2,031,643)

Reclassification - - 6,474,982 23,423 326,888 (3,162,837) 3,662,456


Depreciation and impairment loss:

Balance on January 1, 2019 $ - 18,730,805 139,613,668 941,893 2,716,908 - 162,003,274

Depreciation for the period - 788,819 4,856,548 20,782 263,582 - 5,929,731

Disposals - - (725,759) (32,137) (178,043) - (935,939)

Reclassification - - 125 - (134) - (9)

Balance on December 31, 2019 $ - 19,519,624 143,744,582 930,538 2,802,313 - 166,997,057

Balance on January 1, 2018 $ - 18,027,652 136,078,625 951,476 2,590,509 - 157,648,262

Depreciation for the period - 822,246 5,288,965 19,005 224,254 - 6,354,470

Disposals - (119,093) (1,753,887) (28,588) (97,865) - (1,999,433)

Reclassification - - (35) - 10 - (25)

Balance on December 31, 2018 $ - 18,730,805 139,613,668 941,893 2,716,908 - 162,003,274

Carrying amounts:



(i) Please refer to note 8 for the property, plant and equipment pledged to secure bank loans as ofDecember 31, 2019 and 2018.

(ii) For the years ended December 31, 2019 and 2018, the capitalized interest on borrowings forthe purchase of the property, plant and equipment of the Company amounted to $63,061 and$59,705, respectively. The capitalized interest rate ranged from 1.303% to 1.410% and 1.405%to 1.507% for the years ended December 31, 2019 and 2018, respectively.

(Continued)360


(i) Right-of-use assets

The Company leases many assets including land and buildings. Information about leases for whichthe Company as a lessee is presented below:

LandBuilding andconstruction Total

Cost：Balance at January 1, 2019 $ - - -Effects of retrospective application 5,356 108,909 114,265Acquisitions 2,270 71,043 73,313Reclassification (272) - (272)Balance at December 31, 2019 $ 7,354 179,952 187,306

Accumulated depreciation and impairment losses:Balance at January 1, 2019 $ - - -Depreciation for the period 1,655 58,049 59,704Reversal od impairment (272) - (272)Balance at December 31, 2019 $ 1,383 58,049 59,432

Carrying amount:Balance at December 31, 2019 $ 5,971 121,903 127,874

(j) Short-term notes and bills payable

December 31,2019

December 31,2018

Short-term notes and bills payable $ 15,400,000 8,900,000Discount on short-term notes and bills payable (7,205) (2,253)Total $ 15,392,795 8,897,747Interest rate 0.532%~0.695% 0.36%~0.75%

(k) Short-term borrowings

December 31,2019

December 31,2018

Unsecured short-term borrowings $ 22,443,300 20,880,900Interest rate 0.67%~0.98% 0.74%~1.10%

The amount of $1,562,821 and $12,452,539 was issued, and there were no material buyback orredemption on short term borrowings for the year ended December 31, 2019 and 2018. Forinformation concerning interest expense, please refer to note 6(u).

(Continued)361


(l) Long-term debts

Long-term debts consisted of the following:


Secured long-term debts TWD 0.9900%~1.6316% 2020~2021 $ 4,000,000Unsecured long-term debts TWD 0.9456%~1.0920% 2020~2022 4,300,000Long-term notes payable TWD 0.57%~0.842% 2020 5,096,417

Current portion TWD (3,333,333)Total $ 10,063,084


Secured long-term debts TWD 1.6316% 2018~2021 $ 3,333,333Unsecured long-term debts TWD 0.98%~1.09% 2019~2020 8,000,000Long-term notes payable TWD 0.44%~0.84% 2019~2020 7,096,550Current portion TWD (6,133,333)Total $ 12,296,550

Please refer to note 6(v) for information on the Company’s exposure to liquidity risk, and risk ofchanges in interest rates and liquidation risk.

(i) The Company issued the amounts of $4,300,000 and $3,200,000 on long term loans for theyear ended December 31, 2019 and 2018, respectively. The amounts of $7,333,333and$3,933,333 were redeemed for the year ended December 31, 2019 and 2018, respectively. Forinformation on interest expense, please refer to note 6(u).

(ii) Pledged assets for bank loans

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

(iii) Secured debts

In order to raise funds to repay debts and for reinvestments, new factory construction plans,and foreign and domestic equipment acquisitions, the Company signed a syndicated long-termmortgage loan agreement with Bank of Taiwan, the lead bank of the syndicated loan, and otherbanks on November 14, 2013. The key terms and conditions of the loan agreement were asfollows:

1) Credit line: TWD6,000,000

2) Interest rate: as settled with each participating bank.

(Continued)362


3) Period: 7 years (including a 3-year grace period)

4) Collateral: the acquired land financed by the loan.

5) The financial covenants under this loan agreement include the requirement to maintaincertain financial ratios based on the audited annual financial reports. Failure to complywith these financial covenants may cause the syndicated banks to terminate the creditline or declare the unpaid principal and interest under the loan agreement to beimmediately due and payable. These financial ratios were as follows:

a) Current Ratio (total current assets divided by total current liabilities): not less than100%

b) Leverage Ratio (total liabilities plus contingent liabilities to tangible net worth):not higher than 150%

As of December 31, 2019, TWD6,000,000 of the credit line had been drawn.

(m) Unsecured bonds payable

December 31,2019

December 31,2018

Domestic unsecured nonconvertible corporate bonds $ 64,050,000 58,600,000Costs of issuing bonds (71,339) (68,545)Current portion (4,647,875) (5,946,931)Total $ 59,330,786 52,584,524

The terms of domestic corporate bonds as of December 31, 2019 were as follows:

The third domesticunsecured










in 2012 in 2013 in 2013 in 2014 in 2014Issued amount TWD6,000,000 TWD9,600,000 TWD10,400,000 TWD10,000,000 TWD5,000,000Balance, end of year 4,798,532 949,599 10,388,631 9,983,992 1,498,875Current portion 1,199,633 949,599 - - -Issuance date February 25, 2013 August 5, 2013 December 18, 2013 June 24, 2014 November 11, 2014Issuance period 7 years and 10 years 4 years, 5 years and 7

years10 years and 12 years 14 years and 15 years 5 years and 10 years

Coupon rate 1.36% and 1.50% 1.40%, 1.45% and1.55%

1.98% and 2.08% 2.04% 1.45% and 1.93%

Interest payment date February 25 August 5 December 18 June 24 November 11Repayment method Payable in 2 equal

installments for eachcoupon rate in2018~2019 and2021~2022,respectively

Payable in 2 equalinstallments for eachcoupon rate in2016~2017,2017~2018 and2019~2020,respectively


Payable in 2 equalinstallments for eachcoupon rate in 2028and 2029,respectively.


(Continued)363












in 2016 in 2017 in 2018 in 2019 in 2019

Issued amount TWD5,000,000 TWD9,500,000 TWD10,500,000 TWD6,300,000 TWD5,100,000

Balance, end of year 4,997,286 9,491,847 10,487,148 6,290,742 5,092,009

Current portion 2,498,643 - - - -

Issuance date August 16, 2016 July 10, 2017 September 6, 2018 June 17, 2019 October 15, 2019

Issuance period 5 years 5 years and 7 years 5 years, 7 years and10 years

5 years, 7 years and10 years

5 years, 7 years and 10years

Coupon rate 0.68% 1.03% and 1.25% 0.83%%, 0.91% and1.07%

0.74% , 0.82% and0.91%

0.71%%, 0.75% and0.84%

Interest payment date August 16 July 10 September 6 June 17 October 15

Repayment method Payable in 2 equalinstallments for eachcoupon rate in 2020and 2021, respectively


Payable in 2 equalinstallments for eachcoupon rate in2022~2023,2024~2025, and2027~2028respectively



(n) Lease liabilities

The carrying values of lease liabilities were as follows:

December 31,2019

Current $ 59,288Non-current $ 69,457

For information on the maturity analysis, please refer to note 6(v).

The amounts recognized in profit or loss were as follows:

For the yearsended

December 31,2019

Interest on lease liabilities $ 2,248Expenses relating to short-term lease $ 12,790

The amounts recognized in the statement of cash flows for the Company was as follows:

For the yearsended

December 31,2019

Total cash outflow for leases $ 73,871

(Continued)364


(i) Real estate leases

As of December 31, 2019, the Company leases land and buildings for its office space andplant. The leases of land typically run for a period of 1 to 17 years, of office space for 2 to 20years, and of plant for 2 year. Some leases include an option to renew the lease for anadditional period of the same duration after the end of the contract term.

Some leases require the Company to make payments that relate to the property taxes levied onthe lessor and insurance payments made by the lessor; these amounts are generally determinedannually.

The Company expects the relative proportions of fixed and variable lease payments to remainbroadly consistent in future years.

(ii) Other leases

The Company leases buildings with contract terms of one year. These leases are short-termitems. The Company has elected not to recognize right-of-use assets and lease liabilities forthese leases.

(o) Employee Benefits

(i) Defined benefit plans

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

December 31,2019

December 31,2018

Present value of defined benefit obligation $ 27,140,150 27,760,041Fair value of plan assets (7,716,018) (8,163,421)Net defined benefit liabilities $ 19,424,132 19,596,620

The Company makes defined benefit plan contributions to the pension fund account with Bankof Taiwan that provides pensions for its employees upon retirement. Plans (covered by theLabor Standards Law) entitle a retired employee to receive retirement benefits based on yearsof service and average monthly salary for the six months 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 fundsare managed by the Bureau of Labor Funds, Ministry of Labor. With regard to theutilization of the funds, minimum earnings shall be no less than the earnings attainablefrom two-year time deposits with interest rates offered by local banks.

The Company’ s Bank of Taiwan labor pension reserve account balance amounted to$7,764,729 as of December 31, 2019. For information on the utilization of the laborpension fund assets, including the asset allocation and yield of the fund, please refer tothe website of the Bureau of Labor Funds, Ministry of Labor.

(Continued)365


2) Movements in the present value of the defined benefit obligation

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


Balance, beginning of year $ 27,760,041 27,829,507

Current service cost and interest expense 658,029 669,298

Remeasurements of the net defined benefit liabilities:

Experience adjustments 297,227 733,228

Benefits paid from plan assets (1,583,581) (1,484,214)

Increase from transfer of related party employees 8,434 12,222

Balance, end of year $ 27,140,150 27,760,041

3) Movements in the fair value of the plan assets

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


Balance, beginning of year $ 8,163,421 8,601,387

Interest income 97,717 102,419

Remeasurements of the net defined benefit liabilities:

Return on plan assets (except for interest income) 331,628 150,327

Contributions from employer 293,315 301,126

Benefits paid (1,170,063) (991,838)

Balance, end of year $ 7,716,018 8,163,421

4) Expenses recognized in profit or loss

The expenses recognized in profit or loss were as follows:


Current service cost $ 317,276 328,413

Net interest expense of net defined benefit liabilities 243,036 238,466

$ 560,312 566,879

(Continued)366



Operating costs $ 432,688 436,303Selling expenses 20,830 21,788Administrative expenses 106,794 108,788

$ 560,312 566,879

5) Remeasurement of net defined benefit liability recognized in other comprehensiveincome

The Company's remeasurement of the net defined benefit liability recognized in othercomprehensive income were as follows:


Accumulated amount at January 1 $ (5,461,051) (4,878,150)Recognized during the period 34,401 (582,901)Accumulated amount at December 31 $ (5,426,650) (5,461,051)

6) Actuarial assumptions

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

For the years ended December 31December 31,

2019December 31,

2018Discount rate %1.00 %1.25Future salary increase rate %2.85 %2.85

The expected allocation payment to be made by the Company to the defined benefit plansfor the one-year period after the reporting date is $293,231.

The weighted-average lifetime of the defined benefits plans is 8.8 years.


If the actuarial assumptions had changed, the impact on the present value of the definedbenefit obligation as of December 31, 2019 and 2018 shall be as follows:



(Continued)367




Reasonably possible changes at the reporting date to one of the relevant actuarialassumptions, holding other assumptions remain constant, would have affected thedefined benefit obligation by the amounts shown above. The method used in thesensitivity analysis is consistent with the calculation of pension liabilities in the balancesheets.

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

(ii) Defined contribution plan

The Company allocates 6% of each employee’s monthly wages to the labor pension personalaccount at the Bureau of Labor Insurance in accordance with the provisions of the LaborPension Act. Under these defined contribution plans, the Company allocates a fixed amount tothe Bureau of Labor Insurance without additional legal or constructive obligation.

The pension costs incurred from the contributions to the Bureau of the Labour Insuranceamounted to $301,776 and $288,938 for the years ended December 31, 2019 and 2018,respectively.

(p) Income taxes

(i) Income tax expense

The components of income tax expense for 2019 and 2018 were as follows:


Current income tax expenseCurrent period $ 976,213 2,563,282Adjustment for prior periods (58,659) (42,455)

Deferred tax expense Origination and reversal of temporary differences 569,780 2,518,785Adjustment for prior periods - 35,059

Total income tax expense $ 1,487,334 5,074,671

(Continued)368


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


Items that will not be reclassified subsequently to profit or loss:Remeasurement from defined benefit plans $ (6,880) 262,925

Items that may be reclassified subsequently to profit or loss:Exchange differences on translation of foreign financial

statements $ - (135,016)

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


Profit excluding income tax $ 24,563,457 57,820,692Income tax using the Company's domestic tax rate $ 4,912,691 11,564,138Effect of tax rates in foreign jurisdiction 162,493 466,284Tax effect on tax-exempt dividend income (642,419) (713,998)Adjustment in tax rate - (572,798)Unrecognized deferred tax asset due to current deductable loss - 36,659Tax-exempt income (5,421) (43,177)Income tax expense arising from investment income in associates

and joint ventures 25,374 112,310Tax effect on investment income recognized under equity method (3,340,943) (6,489,688)Differences between estimated and actual income tax and income

tax adjustments on prior years (58,659) (7,396)Undistributed earnings additional tax 391,303 697,337Other income tax adjustments 42,915 25,000Income tax expense $ 1,487,334 5,074,671

(ii) Deferred tax assets and liabilities

1) Unrecognized deferred tax assets

The amount of unrecognized deferred tax assets as of December 31, 2019 and 2018 wereas follows:

December 31,2019

December 31,2018

Deductible temporary difference $ - 36,659

(Continued)369


2) Recognized deferred tax assets and liabilities

Movement in the amount of deferred tax assets and liabilities for 2019 and 2018 were asfollows:

Deferred tax liabilities:

Foreigninvestment

incomerecognized

under equitymethod

Balance on January 1, 2019 $ 10,984,786Recognized in profit or loss 495,508Balance on December 31, 2019 $ 11,480,294

Balance on January 1, 2018 $ 9,292,780Recognized in profit or loss 1,692,006Balance on December 31, 2018 $ 10,984,786

Deferred tax assets:




Balance on January 1, 2019 $ - 3,919,324 78,039 - 63,373 4,060,736

Recognized in profit or loss - (27,617) 223 - (46,878) (74,272)

Recognized in other comprehensiveincome - (6,880) - - - (6,880)


Balance on January 1, 2018 $ 17,818 3,268,780 33,319 1,354,361 120,387 4,794,665

Recognized in profit or loss (17,818) 387,619 44,720 (1,354,361) 78,002 (861,838)

Recognized in other comprehensiveincome - 262,925 - - (135,016) 127,909


3) Assessment of tax

The Company’ s tax returns for the year through 2017 were assessed by the ROCauthorities.

(Continued)370


(q) Capital and other equity

As of December 31, 2019 and 2018, the Company’s government registered total authorized capitaland issued capital stock both amounted to $79,308,216, divided into 7,930,822 thousand shares ofstock with $10 par value per share.

(i) Capital surplus

The components of capital surplus as of December 31, 2019 and 2018 were as follows:

December 31,2019

December 31,2018

Paid-in capital from conversion of corporate bond tocommon stock in excess of par value

$ 8,997,136 8,997,136

Gains on acquisition of Taiwan Plasticizer Corporation 74,474 74,474Other 17,546,224 17,600,509Total $ 26,617,834 26,672,119

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, andonly the realized capital surplus can be used to increase the common stock or be distributed ascash dividends. The aforementioned realized capital surplus includes capital surplus resultingfrom premium on issuance of capital stock and earnings from donated assets received.According to the Regulations Governing the Offering and Issuance of Securities by SecuritiesIssuers, capital increases by transferring capital surplus in excess of par value should notexceed 10% of the total common stock outstanding.

(ii) Retained earnings

1) Legal reserve

If the Company incurs no loss, it may, pursuant to a resolution by a shareholders’meeting, distribute its legal reserve by issuing new shares or by distributing cash, andonly the portion of legal reserve which exceeds 25% of capital may be distributed.

2) Special reserve

As the Company opted to avail of the exemptions allowed under IFRS 1“ First-timeAdoption of International Financial Reporting Standards” during the Company’ s first-time adoption of the IFRSs as endorsed by the FSC, unrealized revaluation incrementsand cumulative translation adjustments (gains) of $6,277,052, which were previouslyrecognized in shareholders’ equity were reclassified to retained earnings. In accordancewith Regulatory Permit No.1010012865 as issued by the FSC on April 6, 2012, a specialreserve is appropriated from retained earnings for aforementioned reclassification. Inaddition, during the use, disposal or reclassifications of relevant assets, these specialreserves can be reverted to distributable earnings proportionately. As the amountappropriated exceeds the increase in retained earnings arising from the adoption ofIFRSs, only $6,243,060 is appropriated in compliance to the IFRSs as endorsed by theFSC. The balance of special reserve amounted to $6,128,451 and $6,129,884 as ofDecember 31, 2019 and 2018, respectively.

(Continued)371


Pursuant to the Regulatory Permit mentioned above, the Company is also required to setaside an additional special reserve, as part of the distribution of its annual earnings, equalto the difference between the amount of above-mentioned special reserve and net debitbalance of the other components of stockholders’ equity.

3) Earnings distribution

According to the rules of the Company’s articles, the Company’s annual net earnings,after providing for income tax and covering the losses of previous years, is first set asidefor legal reserve at the rate of 10% thereof. In addition, a special reserve in accordancewith applicable laws and regulations shall also be set aside. The remainder plus theundistributed earnings of the previous years are distributed or left undistributed forbusiness purposes according to the resolution of the stockholders’ dividend distributionplan, which are initially proposed by the Board of Directors and adopted by theshareholders in the Annual Stockholders’ Meeting.

The Company belongs to a mature industry, in which the annual profit is stable. It adoptsthree kinds of dividend distribution policies, which are cash dividends, capitalization ofearnings, and capital surplus. The net earnings after deducting the legal reserve andspecial reserve may first be distributed by way of cash dividends which shall be equal toat least fifty percent of the Company’ s total dividend distribution every year. Thecapitalization of earnings and capital surplus shall not exceed fifty percent of the totaldividends.

Based on the resolution approved by stockholders during meetings held on June 12, 2019and June 19, 2018, the distribution of the Company's earnings in 2018 and 2017,respectively, were as follows:

2018 2017Dividends per share:

Cash dividends $ 5.00 5.10Stock dividends - -

$ 5.00 5.10

The aforementioned earnings distributions did not differ from those proposed by theboard of directors and those estimated and accrued amount in the financial statements in2018 and 2017. The related information can be obtained from the Market ObservationPost System website.

(Continued)372


(iii) Other equity accounts (net of tax)


foreignfinancial

statements


othercomprehensive

income


instruments TotalBalance, January 1, 2019 $ (5,705,296) 54,624,319 (15,181) 48,903,842

Exchange differences on associates and subsidiariesaccounted for using equity method

(5,866,135) - - (5,866,135)

Unrealized gains (losses) from financial assets atfair value through other comprehensive income

- (3,101,808) - (3,101,808)

Unrealized gains (losses) from financial assetsmeasured at fair value through othercomprehensive income, associates and jointventure accounted for using equity method

- (5,411,023) - (5,411,023)

Share of cash flow hedge of associates and subsidiariesunder equity method

- - 15,812 15,812

Balance, December 31, 2019 $ (11,571,431) 46,111,488 631 34,540,688


foreignfinancial

statements


othercomprehensive

income

Available-for-sale

investmentCash flow

hedge


instruments TotalBalance, January 1, 2018 $ (6,026,197) - 47,691,196 7,729 - 41,672,728

Effects of retrospective application - 61,239,238 (47,691,196) (7,729) 7,729 13,548,042Balance at January 1, 2018 after adjustments (6,026,197) 61,239,238 - - 7,729 55,220,770Exchange differences on associates and subsidiaries

accounted for using equity method320,901 - - - - 320,901

Unrealized gains (losses) from financial assets atfair value through other comprehensive income

- (1,513,062) - - - (1,513,062)

Unrealized gains (losses) from financial assetsmeasured at fair value through othercomprehensive income, associates and jointventure accounted for using equity method

- (5,101,857) - - - (5,101,857)

Share of cash flow hedge of associates and subsidiariesunder equity method

- - - - (22,910) (22,910)

Balance, December 31, 2018 $ (5,705,296) 54,624,319 - - (15,181) 48,903,842

(r) Earnings Per Share

The basic earnings per share for the years ended December 31, 2019 and 2018 were calculated onprofit attributable to ordinary shareholders of the Company of $23,076,123 and $52,746,021,respectively, and weighted average number of outstanding shares of stock were 7,930,822 thousandordinary shares, calculated as follows:

(i) Profit attributable to ordinary shareholders


Profit attributable to ordinary shareholders $ 23,076,123 52,746,021

(Continued)373


(ii) Weighted average number of outstanding ordinary shares


Shares outstanding as of January 1 is the same as weighted averagenumber of common stock outstanding as of December 31 $ 7,930,822 7,930,822

(s) Revenue from contracts with customers

For the year ended December 31, 2019Plasticsindustry

Chemicalindustry

Electronicindustry

Polyesterindustry


Main Products

PVC sheet $ 3,540,253 - - - - 3,540,253

Rigid sheet 3,571,701 - - - - 3,571,701

Pipes 4,328,463 - - - - 4,328,463


BPA - 10,538,314 - - - 10,538,314

EG - 25,064,611 - - - 25,064,611

CCL - - 12,369,984 - - 12,369,984

Epoxy - - 13,205,639 - - 13,205,639


PET Resin - - - 5,415,426 - 5,415,426

DTY - - - 10,653,668 - 10,653,668


Others 14,900,186 15,427,668 11,860,046 5,734,443 572,199 48,494,542

$ 26,340,603 59,063,773 37,435,669 26,030,245 5,929,498 154,799,788

For the year ended December 31, 2018Plasticsindustry

Chemicalindustry

Electronicindustry

Polyesterindustry


Main Products

PVC sheet $ 3,816,661 - - - - 3,816,661

Rigid sheet 3,796,990 - - - - 3,796,990

Pipes 4,367,640 - - - - 4,367,640


BPA - 15,486,085 - - - 15,486,085

EG - 37,729,350 - - - 37,729,350

CCL - - 14,131,008 - - 14,131,008

Epoxy - - 13,883,654 - - 13,883,654


PET Resin - - - 7,797,077 - 7,797,077

DTY - - - 12,377,992 - 12,377,992


Others 15,929,858 19,807,266 12,468,338 6,119,522 666,468 54,991,452

$ 27,911,149 82,337,245 40,483,000 31,204,596 6,973,975 188,909,965

(Continued)374


(t) Employee compensation

According to the specifications of the Company’s article, 0.05% to 0.5% of the earnings before taxand bonuses should be appropriated to employees as bonuses. However, certain amounts of theearnings should be reserved if there is an accumulated loss from the operations in the previous yearsin advance of the appropriation of the employee bonuses.

For the years ended December 31, 2019 and 2018, the Company estimated its employeeremuneration amounted to $24,588 and $57,879, respectively, which were based on the Company'sprofit before tax without the employee's compensation of each period, multiplied by the percentageof remuneration to employees as specified in the Company's articles. These remunerations wereexpensed under operating costs or operating expenses during 2019 and 2018.

For the year ended December 31, 2018 and 2017, the remunerations to employees amounted to$57,879 and $58,908, respectively, which were paid in cash. There was no difference from the actualdistribution. The information is available on the Market Observation Post System website.

(u) Non-operating income and expenses

(i) Other income

The details of other income were as follows:


Interest income $ 305,117 312,106Dividend income 3,212,093 3,569,990Other income 1,297,059 1,238,572

$ 4,814,269 5,120,668

(ii) Other gains and losses

The details of other gains and losses were as follows:


Foreign exchange gains (losses) $ 22,628 927,028Gain of financial assets at fair value through profit or loss 27,107 215,889Gains on disposal of property, plant and equipment 8,856 (11,107)Others (143,249) (143,090)

$ (84,658) 988,720

(Continued)375


(iii) Finance costs

The details of finance costs were as follows:


Interest expense $ 1,432,814 1,334,534Less: Capitalization of interest (63,061) (59,705)

$ 1,369,753 1,274,829

(v) Financial Instruments

(i) Credit Risk

1) Credit risk exposure

The Company is exposed to credit risk primarily from cash and cash equivalents,deposits, and trade receivables.

2) Concentration of credit risk

As sales are made to customers worldwide, the Company’ s exposure to credit riskconcentration is expected to be low. Also, the Company mitigates its exposure byevaluating the customers’ financial situation regularly.

(ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities, includingestimated interest payments and excluding the impact of netting agreements.

Carryingamount



December 31, 2019

Non-derivative financialliabilities

Short-term notes and billspayable $ 15,392,795 15,407,205 15,407,205 - - - -

Notes and accounts payable 5,045,472 5,045,472 5,045,472 - - - -

Payables to related parties 5,957,209 5,957,209 5,957,209 - - - -

Short-term borrowings 22,443,300 22,456,331 22,456,331 - - - -

Long-term debts 8,300,000 8,415,051 711,826 2,698,470 3,200,372 1,804,383 -

Bonds payable 63,978,661 68,740,741 1,526,240 3,975,235 6,553,430 31,840,153 24,845,683

Long-term notes payable 5,096,417 5,185,968 7,164 7,164 2,128,656 3,042,984 -

Other payables-relatedparties 4,000,000 4,000,000 - 4,000,000 - - -

Lease lisbility 128,745 139,028 30,485 30,239 5,202 14,521 58,581

$ 130,342,599 135,347,005 51,141,932 10,711,108 11,887,660 36,702,041 24,904,264

(Continued)376


Carryingamount



December 31, 2018

Non-derivative financialliabilities

Short-term notes and billspayable $ 8,897,747 8,902,253 8,902,253 - - - -

Notes and accounts payable 4,993,365 4,993,365 4,993,365 - - - -

Payables to related parties 7,130,082 7,130,082 7,130,082 - - - -

Short-term borrowings 20,880,900 20,894,315 20,894,315 - - - -

Long-term debts 11,333,333 11,462,092 5,520,038 702,628 4,569,362 670,064 -

Bonds payable 58,531,455 63,537,300 1,490,640 5,305,820 5,411,435 28,195,578 23,133,827

Long-term notes payable 7,096,550 7,169,000 6,900 6,900 4,113,800 3,041,400 -

$ 118,863,432 124,088,407 48,937,593 6,015,348 14,094,597 31,907,042 23,133,827

It is not expected that the cash flows included in the maturity analysis to occur significantlyearlier or at significantly different amounts.

(iii) Currency risk

1) Exposure to foreign currency risk

The Company’s significant exposure to foreign currency were as follows:



EUR 118 33.6900 3,975CNY 22,179 4.3160 95,713Non-monetary itemsUSD 2,285,122 30.1060 68,795,879HKD 24,253,931 3.8597 93,612,898

VND 6,283,412,736 0.0013 8,164,369Financial liabilities

Monetary itemsUSD 28,723 30.1060 864,735JPY 416,880 0.2763 115,184EUR 1,151 33.6900 38,777

(Continued)377




EUR 1,155 35.1670 40,625CNY 1,643 4.4779 7,358Non-monetary itemsUSD 2,054,030 30.7330 63,126,490HKD 22,368,943 3.9401 88,135,872

VND 6,171,469,405 0.0013 8,170,053Financial liabilities

Monetary itemsUSD 27,024 30.7330 830,536JPY 553,746 0.2772 153,498EUR 863 35.1670 30,365


The Company’ s exposure to exchange rate risk arises from the foreign currencyexchange fluctuations on cash and cash equivalents, accounts receivable, otherreceivables, financial assets at fair value through other comprehensive income (available-for-sale financial assets), loans and borrowings, accounts payable and other payableswhich are denominated in different foreign currencies. The overall effects to net incomebefore tax for the year ended December 31, 2019 and 2018 assuming the TWDdepreciated or appreciated by 1% against the USD, JPY, EUR and CNY as of December31, 2019 and 2018 were as follows:


Appreciation in value of 1% $ (134,452) (262,468)Depreciation in value of 1% 134,452 262,468

This analysis is performed on the same basis for the two periods.

(Continued)378


3) Foreign exchange gain and loss on monetary items

The Company foreign exchange gains and losses on monetary items (including realizedand unrealized portions) converted to functional currency were as follow :


foreign exchangegains and (losses)

foreign exchangegains and (losses)

TWD $ 22,628 927,028

(iv) Interest rate analysis

The Company's financial assets and liabilities exposed to interest rates risk are described inliquidity risk

The following sensitivity analysis is based on the risk exposure to the interest rates ofderivative and non-derivative financial instruments on the reporting date. For variable rateinstruments, the sensitivity analysis assumes the liabilities bearing variable interest rates areoutstanding for the whole year. A 1% increase or decrease in interest rate is assessed bymanagement to be a reasonably possible change in interest rate.

An increase or decrease of 1% in interest rates mainly from loans with floating interest rates atthe reporting date would have increased or decreased net income by $945 and $1,362 for theyears ended December 31, 2019 and 2018, respectively.

(v) Other market price risks

For the years ended December 31, 2019 and 2018, the sensitivity analyses for the changes inthe securities price at the reporting date were performed using the same basis for thecomprehensive income as illustrated below:

For the yearsended

December 31,2019

For the yearsended

December 31,2018

Prices of securities at the reporting date


tax


taxIncreasing 1% $ 417,158 445,287

Decreasing 1% $ (417,158) (445,287)

(Continued)379


(vi) Fair value of financial instruments

1) Fair value hierarchy

The fair value of financial assets and liabilities at fair value through profit or loss andfinancial assets at fair value though other comprehensive income (available for salefinancial assets) is measured on a recurring basis. The carrying amount and fair value ofthe Company’ s financial assets and liabilities, including the information on fair valuehierarchy as stated below. However, except as described in the following paragraphs, forfinancial instruments not measured at fair value whose carrying amount is reasonablyclose to the fair value, and for equity investments that has no quoted prices in the activemarkets and whose fair value cannot be reliably measured, disclosure of fair valueinformation is not required :


Carryingamount Level 1 Level 2 Level 3 Total

Financial assets at fair valuethrough profit or loss

Financial assets designated asat fair value through profitor loss $ 4,044,356 - 4,044,356 - 4,044,356

Financial assets at fair valuethrough other comprehensiveincome

Stocks in listed companies $ 41,715,821 41,715,821 - - 41,715,821

Unquoted equity instruments 10,843,196 - - 10,843,196 10,843,196

Subtotal $ 52,559,017 41,715,821 - 10,843,196 52,559,017

Financial assets measured atamortized cost

Cash and cash equivalent $ 2,398,959 - - - -

Notes and accounts receivable(including related parties) 18,060,318 - - - -

Subtotal $ 20,459,277 - - - -

Financial liabilities at amortizedcost

Short-term borrowings $ 22,443,300 22,443,300 - - 22,443,300

Short-term notes and billspayable 15,392,795 15,392,795 - - 15,392,795

Other payables-related parties 4,000,000 - - - -

Notes and accounts payable(including related parties) 11,002,681 - - - -

Bonds payable 63,978,661 63,978,661 - - 63,978,661

Long-term borrowings 8,300,000 8,300,000 - - 8,300,000

Long-term notes payable 5,096,417 5,096,417 - - 5,096,417

Lease liabilities 128,745 128,745 - - 128,745

Subtotal $ 130,342,599 115,339,918 - - 115,339,918

(Continued)380



Carryingamount Level 1 Level 2 Level 3 Total

Financial assets at fair valuethrough profit or loss

Financial assets designated asat fair value through profitor loss $ 4,017,249 - 4,017,249 - 4,017,249

Available-for-sale financialassets

Stocks in listed companies $ 44,528,667 44,528,667 - - 44,528,667

Unquoted equity instruments 11,132,158 - - 11,132,158 11,132,158

Subtotal $ 55,660,825 44,528,667 - 11,132,158 55,660,825

Loans and receivables

Cash and cash equivalent $ 5,508,330 - - - -

Notes and accounts receivable(including related parties) 21,160,619 - - - -

Subtotal $ 26,668,949 - - - -

Financial liabilities at amortizedcost

Short-term borrowings $ 20,880,900 20,880,900 - - 20,880,900

Short-term notes and billspayable 8,897,747 8,897,747 - - 8,897,747

Notes and accounts payable(including related parties) 12,123,447 - - - -

Bonds payable 58,531,455 58,531,455 - - 58,531,455

Long-term borrowings 11,333,333 11,333,333 - - 11,333,333

Long-term notes payable 7,096,550 7,096,550 - - 7,096,550

Subtotal $ 118,863,432 106,739,985 - - 106,739,985

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

The Company’ s valuation techniques and assumptions used for financialinstruments not measured at fair value are as follows:

a) Financial assets measured at amortized cost (held-to-maturity financial assets)

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

b) Financial liabilities measured at amortized cost

If there is quoted price generated by transactions, the recent transaction price andquoted price data is used as the basis for fair value measurement. However, if noquoted prices are available, the discounted cash flows are used to estimate fairvalues.

(Continued)381


3) Valuation techniques for financial instruments measured at fair value

a) Non-derivative financial instruments

Financial instruments traded in active markets are measured at fair value based onthe quoted market prices. Quoted prices are the prices announced by the main stockexchanges and over-the-counter markets. They are the basis for recognizing the fairvalue of the listed and over-the-counter equity instruments. Financial instrumentpossesses a quoted price in the active markets if the trading prices fairly representthe frequent and orderly transactions for financial instrument, and are readilyavailable from trade centers, security brokers, underwriters, trade unions, pricingservice institutes or other related authorities. The market for the said financialinstrument shall be seen as inactive should the aforementioned requirements havenot been met. Large or significantly increasing gap between the purchase and theexit prices of a financial instrument, or low trade volume, are general indicators ofan inactive market.

If the financial instrument of the Company possesses an active market, its fair valueshould be recognized according to different categories and characteristics asfollows:

For listed and over-the-counter stocks with standard terms and are publicly tradedin active markets, their fair value are calculated by the market’ s quoted prices.Other financial instruments that are not traded in active markets are measured withfair values provided by using the valuation techniques via market approach or thediscounted cash flow method or other available methods.

4) Transfers between levels of the fair value hierarchy

There were no transfers between levels of the fair value hierarchy for the years endedDecember 31, 2019 and 2018.

5) Reconciliation of Level 3 fair values

Fair value throughother

comprehensiveincome (available-for-sale financial

assets)Unquoted equity

instrumentsJanuary 1, 2019 $ 11,132,158Total gains and losses recognized: In other comprehensive income (288,962)December 31, 2019 $ 10,843,196

(Continued)382


Fair value throughother

comprehensiveincome (available-for-sale financial

assets)Unquoted equity

instrumentsJanuary 1, 2018 $ 13,606,256Total gains and losses recognized: In other comprehensive income (2,472,125)Disposals (1,973)December 31, 2018 $ 11,132,158

6) The valuation procedures for fair value measurements being categorized within Level 3is to ensure the valuation results are reasonable by applying independent information tomake results close to the current market conditions, confirming the resource ofinformation is independent, reliable and in line with other resources and represented asthe exercisable price. According to the Company’ s accounting policy, the analysis ofvalue changes on remeasured or reevaluated assets and liabilities at the reporting date isperformed to ensure the reasonability of the evaluation results.

7) Quantified information on significant unobservable inputs (Level 3) used in fair valuemeasurement

Most of the Company’s financial instruments that use Level 3 inputs involve only onesignificant unobservable input. Only equity investment with no-active markets involvesmultiple significant unobservable inputs.

Quantified information of significant unobservable inputs were as follows:

Item Valuation techniqueSignificant

unobservable inputs

Inter-relationshipbetween significantunobservable inputs

and fair valuemeasurement

Financial assets atfair value throughothercomprehensiveincome – unquotedequity instruments

Market comparablecompanies

Price to earnings ratiomultiple, price to bookratio multiple,enterprise value tooperating income ratiomultiple, enterprisevalue to EBITAmultiple, discount forlack of marketability

The higher themultiple, the higher thefair value

Net Asset ValueMethod

Not applicable Not applicable

(Continued)383


8) Fair value measurement in Level 3 - sensitivity analysis of reasonably possiblealternative assumption

The valuation models and assumptions used to measure the fair value of the financialinstruments is reasonable. However, the use of different valuation models or assumptionsmay result in different measurements. The following is the effect of other comprehensiveincome resulting from financial assets and liabilities categorized within Level 3 if theinputs used in valuation models have changed:



changeUnfavorable

changeDecember 31, 2019Financial assets at fairvalue through othercomprehensive income –unquoted equityinstruments

Price to earnings ratiomultiple, price to book ratiomultiple, enterprise value tooperating income ratiomultiple, enterprise value toEBITA multiple, discount forlack of marketability

± 1%

$ 71,266 (71,266)December 31, 2018Financial assets at fairvalue through othercomprehensive income –unquoted equityinstruments

Price to earnings ratiomultiple, price to book ratiomultiple, enterprise value tooperating income ratiomultiple, enterprise value toEBITA multiple, discount forlack of marketability

± 1%

$ 71,321 (71,321)

(w) Financial risk management

(i) The Company have exposures to the following risks from its financial instruments:

1) Credit risk

2) Liquidity risk

3) Market risk

The following likewise discusses the Company’ s objectives, policies and processes formeasuring and managing the above mentioned risks. For more disclosures about thequantitative effects of these risks exposures, please refer to the respective notes in theaccompanying financial statements.

(Continued)384


(ii) Structure of risk management

The Company’ s risk management policies are established to identify and analyze the risksfaced by the Company, to set appropriate risk limits and controls, and to monitor risks andadherence to limits.

The Company Audit Committee oversees how management monitors compliance with theCompany’ s risk management policies and procedures and reviews the adequacy of the riskmanagement framework in relation to the risks faced by the Company.

(iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to afinancial instrument fails to meet its contractual obligations.

To maintain the credit quality of receivables, a credit risk management policy has beenestablished. Under this policy, each customer is analyzed individually regarding customer’ sfinancial situation, external and internal credit rating, historical trading record, and currenteconomic condition which may affect customer’s payment ability. In addition, some methodsare adopted to reduce the credit risk for specific customers, such as prepayment and insuranceof accounts receivable.

The credit risk exposure on bank deposits and other financial instruments are measured andmonitored by the Company’ s finance department. As the Company’ s transactions are donewith the banks and other external parties with good credit standing, management is not awareof any noncompliance issues and is not expecting significant credit risk.

(iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligationsassociated with its financial liabilities that are settled by delivering cash or another financialasset. The Company’s approach to managing liquidity is to ensure, as much as possible, that itwill always have sufficient current funds, such as cash and cash equivalents, securities withhigh liquidity and sufficient credit line from banks, to meet its liabilities when due, withoutincurring unacceptable losses or risking damage to the Company’s reputation.

(v) Market risk

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

1) Currency risk

The Company is exposed to currency risk is due to global transactions that aredenominated in a currency other than the respective functional currency of the Company,the New Taiwan Dollars (TWD). These transactions are primarily denominated in USD.The currency risk mainly arises from future business transactions and recognized assetsand liabilities. Part of the currency risks arising from purchases and sales can be offseteach other to achieve automatic hedge.

(Continued)385


When the Company has foreign currency needs, the Company uses spot exchangecontracts and forward exchange contracts if the exchange rate is advantageous to the Company to manage the risk. If necessary, the Company uses derivatives operated byprestigious international banks to manage its exposure to foreign currency exchange ratefluctuation risk, which monitor the exchange rate risks and adhere to acceptable levels bythe Company.

2) Interest rate risk

The Company’ s interest rate risk mainly arises from long-term loans with variableinterest rates, which bear cash flow risks to the Company. Part of the interest rate riskcan be offset by cash and cash equivalents with variable interest rates held by theCompany.

The Company monitors and manages interest rate risks, using derivatives whennecessary, to lower the risks to acceptable levels.

3) Other market price risk

The Company is exposed to fair value change risk due to financial assets at fair valuethrough other comprehensive income (available-for-sale financial assets), which weremeasured at fair value.

(x) Capital management

Although business operated by the Company has reached the stage of maturity, a sufficient amountof capital is still required to support the operation of investee companies, construction and expand itsproduction facilities and equipment.

The Company’s policy is to maintain sufficient financial resources and operating plan to meet futuredemands such as operating capital, capital expenditure, research and development expenditures, loanreimbursements, and dividend distributions.

The Company and other entities in the same industry use the debt-to-equity ratio to manage itscapital. This ratio is the total net debt divided by the total capital. The net debt from the balancesheet is derived from the total liabilities less cash and cash equivalents. The total capital and equityinclude share capital, capital surplus, retained earnings, and other equity plus net debt. TheCompany’s debt-to-equity ratio at the end of the reporting period were as follows :

December 31,2019

December 31,2018

Total liabilities $ 173,593,882 162,835,396Less: cash and cash equivalents (2,398,959) (5,508,330)Net debt $ 171,194,923 157,327,066Total equity $ 344,571,884 375,672,197Debt-to-equity ratio at December 31 %33.19 %29.52

(Continued)386


(y) Movements in liabilities arising from financing activities


Short-term notes and

bills payableLong-term

notes payable


current portion)


currentportion)

Lease liabilities(including

currentportion)


financingactivities

Balance, January 1, 2019 $ 20,880,900 8,897,747 7,096,550 11,333,333 58,531,455 114,265 106,854,250

Changes in cash flows fromfinancing activities 1,562,821 6,500,000 (2,000,000) (3,033,333) 5,431,560 (58,833) 8,402,215

Changes in non-cash - (4,952) (133) - 15,646 73,313 83,874

Changes in foreignexchange movement (421) - - - - - (421)

Balance, December 31,2019 $ 22,443,300 15,392,795 5,096,417 8,300,000 63,978,661 128,745 115,339,918


Short-term notesand bills payable

Long-term notespayable

Long-termborrowings

(including currentportion)

Bonds payable(including current

portion)


financing activitiesBalance, January 1, 2018 $ 8,428,500 7,998,778 4,998,418 12,066,666 54,132,447 87,624,809

Changes in cash flows fromfinancing activities 12,452,539 900,000 2,100,000 (733,333) 4,383,594 19,102,800

Changes in non-cash - (1,031) (1,868) - 15,414 12,515

Changes in foreignexchange movement (139) - - - - (139)

Balance, December 31,2018 $ 20,880,900 8,897,747 7,096,550 11,333,333 58,531,455 106,739,985

(7) Related-party transactions:

(a) Parent company and ultimate controlling party

The Company is the ultimate controlling party of the Company and its subsidiaries.

(b) Names and relationship with related parties

The followings are entities that have had transactions with related party during the periods coveredin the consolidated financial statements.

Name of related party Relationship with the GroupNan Ya Plastics Corporation U.S.A Subsidiaries

Nan Ya Plastics Corporation America Subsidiaries

Formosa Plastics Group Investment Corp. Subsidiaries

Nan Ya Plastics (Hong Kong) Co., Ltd Subsidiaries

Superior World Wide Trading Co., Ltd Subsidiaries

Nan Ya PCB Corporation Subsidiaries

Wen Fung Industrial Co., Ltd Subsidiaries

Nan Chung Petrochemical Corporation Subsidiaries

Nan Ya International (Cayman) Limited Subsidiaries

(Continued)387


Name of related party Relationship with the GroupPFG Fiber Glass Corporation Subsidiaries

PFG Fiber Glass (Hong Kong) Corporation Limited Subsidiaries

Nan Ya PCB (U.S.A) Corporation Subsidiaries

Nan Ya PCB (Hong Kong) Corporation Subsidiaries

Nan Ya PCB (Kunshan) Corporation Subsidiaries

Nan Ya Plastics (Nantong) Co., Ltd Subsidiaries (note 1)

Nan Ya Electric (Nantong) Co., Ltd Subsidiaries

Nan Ya Plastics Film (Nantong) Co., Ltd Subsidiaries (note 1)

China Nantong Huafeng Co., Ltd Subsidiaries

Nantong Huafu Plastics Co., Ltd. Subsidiaries

Nan Ya Electronic Materials (Kunshan) Co., Ltd Subsidiaries

Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd Subsidiaries

Nan Ya Plastics (Guangzhou) Co., Ltd Subsidiaries

Nan Ya Plastics (Huizhou) Co., Ltd Subsidiaries (note 2)

Nan Ya Plastics Film (Huizhou) Co., Ltd Subsidiaries (note 2)

Nan Ya Electronic Materials (Huizhou) Co., Ltd Subsidiaries

Nan Ya Trading (Huizhou) Co., Ltd Subsidiaries

Nan Ya Plastics (Xiamen) Co., Ltd Subsidiaries

Nan Ya Plastics (Ningbo) Co., Ltd Subsidiaries

Wellink Technology Corporation Subsidiaries

Nan Ya Plastics Corporation Texas Subsidiaries

PFG Fiber Glass (Kunshan) Co., Ltd Subsidiaries

Formosa Petrochemical Corporation Associates

Nanya Technology Corporation Associates

Formosa Resources Corporation Associates

Formosa Plastics Construction Corporation Associates

Formosa Heavy Industries Corporation Associates

Formosa Heavy Industries (Ningbo) Co., Ltd. Associates

Formosa Heavy Industries Corp. (GZ) Ltd. Associates

Formosa Synthetic Rubber (Hong Kong) Corporation Limited Associates

Formosa Synthetic Rubber (Ningbo) Co., Ltd. Associates

Formosa Industries Corporation Associates

(Continued)388


Name of related party Relationship with the GroupFormosa Group (Cayman) Limited Associates

Formosa Utility Venture, Ltd. Associates

Formosa Environmental Technology Corporation Associates

FG Inc. Associates

P.T. Indonesia Nanya Indah Plastics Co. Joint ventures

Nan Ya Plastics (Zhengzhou) Co., Ltd. Joint ventures

Nanya Kyowa Plastics (Nantong) Co., Ltd. Joint ventures

Formosa Plastics Corporation Other related parties

Formosa Chemicals and Fiber Corporation Other related parties

Hwa Ya Power Corporation Other related parties

Formosa Taffeta Co., Ltd. Other related parties

Formosa Advanced Technology Corporation Other related parties

Formosa Ha Tinh (Cayman) Ltd. Other related parties

Formosa Ha Tinh Steel Corporation Other related parties

Formosa Ha Tinh (Cayman) Limited Taiwan Branch Other related parties

China Man-made Fiber Corporation Other related parties

Mai Liao Harbor Administration Corp. Other related parties

Formosa Industries (Ningbo) Co., Ltd. Other related parties

Formosa Power (Ningbo) Limited Company Other related parties

Formosa Electronic (Ningbo) Co., Ltd. Other related parties

Formosa ABS Plastics (Ningbo) Limited Company Other related parties

Formosa Chemicals and Fiber (Ningbo) Corporation Other related parties

Formosa Phenol (Ningbo) Limited Company Other related parties

Xiamen Haicang Investment Group Co., Ltd. Other related parties

Formosa Plastics Marine Corporation Other related parties

Formosa Plastics Corporation U.S.A. Other related parties

FG LA LLC Other related parties

Ming Chi University Of Technology Other related parties

Note 1： On October 1, 2018, Nan Ya Plastics (Nantong) Co., Ltd and Nan Ya Plastics Film(Nantong) Co., Ltd merged into Nan Ya Plastics (Nantong) Co., Ltd.

Note 2： On October 1, 2018, Nan Ya Plastics (Huizhou) Co., Ltd and Nan Ya Plastics Film(Huizhou) Co., Ltd merged into Nan Ya Plastics (Huizhou) Co., Ltd.

(Continued)389


(c) Significant related-party transactions

(i) Sales to related parties

The amount of significant sales by the Company to related parties were as follows:


Subsidiaries $ 13,730,940 13,504,808Associates and joint ventures 4,207,868 7,213,615Other related parties 9,619,460 11,891,020

$ 27,558,268 32,609,443

The receivables from related parties were as follows:

December 31,2019

December 31,2018

Subsidiaries Nan Ya Electronic Materials (Huizhou) Co., Ltd $ 2,254,032 2,148,099 Other subsidiaries 2,282,104 2,206,191Associates and joint ventures 410,877 941,679Other related parties 779,697 1,113,234

$ 5,726,710 6,409,203

The selling prices and collection terms of sales to related parties are not significantly differentfrom those of third-party customers. The accounts receivable arising from sales of machineryand equipment, and machine parts are collected after the delivery inspection, and the accountsreceivable arising from sales of other products are collected on the 30th day of the followingmonth.

The Company sells mainly machinery and provides engineering services to related parties inChina and Vietnam. Payment is made after the test run of machinery sold. Also, it sells otherproducts to these related parties. Selling prices and collection terms of other products sold tothese associates are not materially different from those to non-related general buyers. Paymentsare collected 30 to 180 days after shipping of these other products.

(ii) Purchase from related parties

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


Subsidiaries $ 6,074,110 7,946,081Associates and joint ventures Formosa Petrochemical Corporation 30,339,000 40,296,020Other related parties Formosa Plastics Corporation 11,978,383 13,244,230 Formosa Chemicals and Fiber Corporation 24,442,785 35,324,798 Other related parties 13,686 22,212

$ 72,847,964 96,833,341

(Continued)390



December 31,2019

December 31,2018

Subsidiaries $ 594,849 603,968Associates and joint ventures Formosa Petrochemical Corporation 2,358,012 2,835,106Other related parties Formosa Chemicals and Fiber Corporation 1,923,275 2,688,279 Other related parties 1,081,073 1,002,729

$ 5,957,209 7,130,082

Purchase prices and payment terms of purchases from related parties are not materiallydifferent from those of non-related general suppliers. Payment shall be paid within 30 to 180days of the month following the month of purchase with checks which are due and payableimmediately.

(iii) Unrealized sales profit

Significant unrealized (realized) profits from sales to related parties for the years endedDecember 31, 2019 and 2018 were as follows:


Investee company

Unrealized salesprofit at beginning

of period

(Realized)Unrealized

Sales Profits

Unrealized salesprofit at end

of periodSubsidiaries $ 97,719 (23,068) 74,651

Associates and joint ventures $ 45,960 (6,964) 38,996


Investee company

Unrealized salesprofit at beginning

of period

(Realized)Unrealized

Sales Profits

Unrealized salesprofit at end

of periodSubsidiaries $ 59,417 38,302 97,719

Associates and joint ventures $ 102,250 (56,290) 45,960

(iv) Construction

The Company contracted with associates to construct and expand the Company’s factory. Theconstruction costs were as follows:


Associates and joint ventures Formosa Heavy Industries Corporation $ 110,994 218,464

No outstanding balance in December 31, 2019 and 2018.

(Continued)391


(v) Utility expenses

Part of the utilities of the Company's Lin-Yuan plant and all of the utilities of the Company’sRen-Wu plant, including power, water and steam, are supplied by or paid on behalf of theCompany by the utility plants of Formosa Plastics Corporation. The utilities of the Company’sMai Liao plant, including power, water and steam, are supplied by Formosa PetrochemicalCorporation. The expenses for utilities for the years ended December 31, 2019 and 2018 wereas follows:


Subsidiaries Nan Chung Petrochemical Corporation $ 21,017 3,754Associates and joint ventures Formosa Petrochemical Corporation 6,329,046 6,996,065Other related parties Formosa Plastics Corporation 106,786 109,049

$ 6,456,849 7,108,868

(vi) Property transactions ─ Acquisition of financial assets

Account

Number of Shares


For the year ended

December 31,2019

Subsidiaries ─ Nan YaPlastics (Hong Kong)Co., Ltd.

Investments accounted forusing equity method

109,200

Shares of stock of Nan YaPlastics (Hong Kong) Co.,Ltd. $ 4,308,591

Associates ─ FormosaResources Corporation

Investments accounted forusing equity method 157,000

Shares of stock of FormosaResources Corporation 1,570,000

Associates ─ FG Inc. Investments accounted forusing equity method -

Shares of stock of FG Inc.231,570

Associates ─ FormosaSynthetic RubberCorporation Limited


4,600

Shares of stock of FormosaSynthetic RubberCorporation Limited 46,000

$ 6,156,161

Account

Numberof Shares


For the year ended

December 31,2018

Subsidiaries ─ Nan YaInternational (Cayman)Limited


1 Shares of stock of Nan YaInternational (Cayman)Limited

$ 1,676,070

Associates ─ FormosaSynthetic Rubber (HongKong) CorporationLimited


65,000

Shares of stock of FormosaSynthetic Rubber (HongKong) Corporation Limited

2,010,450

$ 3,686,520

(Continued)392


(vii) Loans to related parties

The loans to related parties were as follows:

Other Receivables from Related Parties

December 31,2019

December 31,2018

Subsidiaries Nan Ya Plastics Corporation Texas $ - 7,375,920Other related parties Formosa Plastics Marine Corporation 5,640,819 5,307,107

$ 5,640,819 12,683,027

(viii) Borrowings from Related Parties:

Other Payables to Related Parties

December 31,2019

December 31,2018

Subsidiaries Nan Ya PCB Corporation $ 4,000,000 -

(ix) Endorsements and guarantees

As of December 31, 2019 and 2018, the amounts of the Company’ s endorsements andguarantees for securing related parties’ loans were as follows:

December 31,2019

December 31,2018

Associates and joint ventures Formosa Group (Cayman) Limited $ 7,526,500 19,208,125 Formosa Industries Corporation 602,120 5,043,547 Formosa Resources Corporation 3,236,395 3,303,798Other related parties Formosa Ha Tinh (Cayman) Ltd. 20,753,559 15,915,686

$ 32,118,574 43,471,156

(Continued)393


(x) Leases

1) The rental income of the Company from leasing its plants to its related parties,recognized as other income, were as follows:


Subsidiaries Nan Ya PCB Corporation $ 202,242 195,815Associates and joint ventures Nan Ya Technology Corporation 258,976 234,065

$ 461,218 429,880

The rentals charged to related parties are determined based on the local market prices,and rents are collected monthly depending on the contract.

2) The rental expenses of the Company's offices and buildings leased from its relatedparties, recognized as operating costs and expenses, were as follows:

The Company rented an office building and a piece of land from Formosa PlasticsCorporation. The rentals charged to related parties are determined based on the localmarket prices. Rental expenses for the years ended December 31, 2018 amounted to$40,437. The Company applied IFRS 16, with a date of initial application on January 1,2019. This lease transaction recognized the additional amounts of $49,848 and $49,848of right-of-use assets and lease liabilities, respectively. For the years ended December 31,2019, the Company recognized the amount of $548 as interest expense. As of December31, 2019, the balance of lease liabilities amounted to $25,657, consisting of current andnoncurrent portion amounting to $24,536 and $1,121, respectively.

The Company rented an office building from Formosa Chemicals and Fiber Corporation.The rentals charged to related parties are determined based on the local market prices.Rental expenses for the years ended December 31, 2018 amounted to $26,391. TheCompany applied IFRS 16, with a date of initial application on January 1, 2019. Thislease transaction recognized the additional amounts of $52,012 and $52,012 of right-of-use assets and lease liabilities, respectively. For the year ended December 31, 2019, theCompany recognized the amount of $568 as interest expense. As of December 31, 2019,the balance of lease liabilities amounted to $26,190.

The Company rented an office building from Ming Chi University of technology in May2019, where in the rental is determined based on the local market prices. The interestexpenses for the years ended December 31, 2019 amounted to $984. As of December 31,2019, the balance of lease liabilities amounting to $67,947, consisted of current and non-current portion of $3,140 and $64,807, respectively.

(Continued)394


(xi) Other

For the yearsended December

31, 2019Associates－Formosa Plastics Corporation $ 10

For the year ended December 31, 2019, the Company purchased official vehicles fromFormosa Plastics Corporation, which were managed assets, and recognized as miscellaneouspurchases. The Company did not have similar transactions for the year ended December 31,2018.

(d) Key management personnel compensation

Key management personnel compensation comprised:


Short-term employee benefits $ 126,953 118,080

(8) Pledged assets:

The carrying values of pledged assets were as follows:

Pledged assets Object Usage December 31,

2019December 31,

2018Current financial assets at fair value through other

comprehensive income－stock of Formosa PlasticsCorporation

Others The collateral toprovisional executionin litigation $ 1,271,053 1,286,336

Land (include idle land) Bank loans Bank loans 7,529,494 7,529,494Machinery and equipment Bank loans Bank loans - 11,681Total $ 8,800,547 8,827,511

(9) Significant commitments and contingencies:

December 31,2019

December 31,2018

(a) Outstanding standby letter of credit $ 2,247,989 1,192,060(b) Endorsements and guarantees 32,118,574 43,471,156

(c) Formosa Industries Corporation, a Company’ s investee, signed a syndicated line of credit with agroup of financial institutions amounting to USD 250,000 thousand for its operational needs.According to the requirement of the consortium, the Company has to offer a letter of support basedon its ownership of 42.5% and commit to monitor the operations of Formosa Industries Corporationto ensure that it completes its financial obligation.

(d) Formosa Ha Tinh (Cayman) Ltd. and Formosa Ha Tinh Steel Corporation, Company’ s investees,signed a syndicated line of credit with a group of financial institutions amounting to USD 1,990,000thousand and USD 500,000 thousand, respectively, for its operational needs. According to therequirement of the consortium, the Company has to offer a letter of undertaking or a letter of supportbased on its ownership of 11.432% and commit to monitor the operations of Formosa Ha Tinh(Cayman) Ltd. and Formosa Ha Tinh Steel Corporation to ensure that they complete their financialobligation.

(Continued)395


(e) Nan Ya Electronic Materials (Huizhou) Co., Ltd, a Company's investee, planned to apply for a five-year syndicated loan with a total amount of no more than CNY 1,000,000 thousand, with a group offinancial institutions, among which Mega International Commercial Bank Suzhou Branch and FubonBank (China) Co., Ltd. act as leading banks. According to the requirement of the consortium, theCompany has to offer a letter of support, and commit to monitor the operations of Nan Ya ElectronicMaterials (Huizhou) Co., Ltd to ensure that it completes its financial obligation.

(f) Litigation between the Company and DBTEL Incorporated

The Company’ s client, DBTEL Inc. (DBTEL), placed several orders from the Company concerningLCD monitors since May 2003. However, in June 2004, it decided to cancel some of them, evendemanding the Company to postpone its delivery; and in some cases, it went to a certain extent as torefuse accepting the goods delivered by the Company, resulting in a stock up of both raw materialsand finished products in the Company’ s warehouse amounting to USD 5,409,815 and NTD100,846,141. In light of this matter, the Company filed a lawsuit against DBTEL to the Taiwan HighCourt on April 6, 2006, demanding for compensation for the damage caused by DBTEL. In reply,the Court authorized the Company to hold certain properties of DBTEL as its collateral. However,DBTEL was not satisfied with the decision made by the Court; therefore, it filed an appeal againstthe Company.

On April 18, 2017, the Court decided that the compensation demanded by the Company should notexceed the amounts of USD 1,246,118 and TWD 27,229,161 (both including principal and interest).Plus, the said properties that were held by the Company for collateral should also be returned toDBTEL. On August 8, 2018, the Supreme Court rejected the verdict handed down by the HighCourt’ s judgment about the dismissal of the Company’ s appeal in the first instance, the appeal ofDBTEL, other declaration of provisional execution, and the related legal expenses. Therefore, theHigh Court will have to decide on this matter. Currently, this case is still in progress.

(10) Losses Due to Major Disasters:None

(11) Subsequent Events:None

(12) Other:

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

By function For the year ended December 31, 2019 For the year ended December 31, 2018By item Operating

costsOperatingexpenses


Operatingcosts

Operatingexpenses


Employee benefit

Salaries 10,265,158 4,171,573 - 14,436,731 11,030,984 4,451,774 - 15,482,758

Labor and health insurance 735,699 230,520 - 966,219 709,804 219,615 - 929,419

Pension expenses 637,644 224,444 - 862,088 632,245 223,572 - 855,817

Remuneration of directors - 29,092 - 29,092 - 24,125 - 24,125

Others personnel expenses 263,439 74,368 - 337,807 261,664 72,574 - 334,238

Depreciation 5,779,963 178,692 30,780 5,989,435 6,129,460 199,686 25,324 6,354,470

Amortization 891,226 15,646 - 906,872 1,484,780 15,414 - 1,500,194

(Continued)396


The company's number of employees and additional information on employee benefits are as follows:


2019 2018Number of employees 12,545 12,599Number of non-concurrently employees by directors 9 10Average employee benefit expenses $ 1,324 1,398Average employee salary expenses $ 1,152 1,230Adjustment of average employee salary expenses %(6.34)

(13) Other disclosures:

(a) Information on material transaction items:

(i) Loans to other parties: Please see attached Table 1.

(ii) Guarantees and endorsements for other parties: Please see attached Table 2.

(iii) Information regarding securities held as of December 31, 2019 (excluding investment insubsidiaries, associates and joint ventures): Please see attached Table 3.

(iv) Information regarding individual securities acquired or disposed of with accumulated amountexceeding the lower of TWD300 million or 20% of the capital stock: Please see attached Table4.

(v) Information regarding acquisition of individual real estate with amount exceeding the lower ofTWD300 million or 20% of the capital stock: Please see attached Table 5.

(vi) Information regarding disposal of individual real estate with amount exceeding the lower ofTWD300 million or 20% of the capital stock: Please see attached Table 6.

(vii) Information regarding related-party transactions for purchases and sales with amountsexceeding the lower of TWD100 million or 20% of the capital stock: Please see attached Table7.

(viii) Information regarding receivables from related parties with amounts exceeding the lower ofTWD100 million or 20% of the capital stock: Please see attached Table 8.

(ix) Information regarding trading in derivative instruments: None

(b) Information on investees (excluding those in mainland China): Please see attached Table 9.

(c) Information on investment in mainland China: Please see attached Table 10.

(14) Segment information:

Please refer to the consolidated financial report as of and for the year ended December 31, 2019.

(Continued)397

TABLE 1

Item Value

0 The Company Formosa Plastics GroupInvestment Corp.

Other receivablesfrom related parties


- ‑ - 86,142,971 172,285,942

0 The Company Wellink TechnologyCorporation



- ‑ - 86,142,971 172,285,942

0 The Company Nan Ya Plastics (Hong Kong)Co., Ltd.



- ‑ - 86,142,971 172,285,942

0 The Company Nan Ya Plastics CorporationTexas



- ‑ - 86,142,971 172,285,942

0 The Company Nan Chung PetrochemicalCorporation


YES 500,000 500,000 - 1.4142%~1.4181% 2 - Operatingcapital

- ‑ - 86,142,971 172,285,942

0 The Company Formosa Heavy IndustriesCorporation



- ‑ - 86,142,971 172,285,942

0 The Company Nanya TechnologyCorporation



- - - 86,142,971 172,285,942

0 The Company Formosa PetrochemicalCorporation



- ‑ - 86,142,971 172,285,942

0 The Company Formosa Plastics Corporation Other receivablesfrom related parties


- ‑ - 86,142,971 172,285,942

0 The Company Formosa Chemicals and FiberCorporation



- ‑ - 86,142,971 172,285,942

0 The Company Formosa Plastics MarineCorporation



- ‑ - 86,142,971 172,285,942


Nan Ya Plastics CorporationTexas



- ‑ - 20,791,919 41,583,838


Nan Ya Plastics CorporationU.S.A.



- - - 20,791,919 41,583,838

2 Nan Ya PCB Corporation The Company Other receivablesfrom related parties

YES 4,500,000 4,000,000 4,000,000 1.418% 2 - Operatingcapital

- - - 7,306,170 14,612,340

2 Nan Ya PCB Corporation Nan Ya PCB (HK)Corporation



- ‑ - 7,306,170 14,612,340

2 Nan Ya PCB Corporation Nan Ya PCB (Kunshan)Corporation



- - - 7,306,170 14,612,340

2 Nan Ya PCB Corporation Formosa Plastics MarineCorporation



- ‑ - 7,306,170 14,612,340

2 Nan Ya PCB Corporation Formosa Heavy IndustriesCorporation



- ‑ - 7,306,170 14,612,340

RelatedParty

EndingBalance


Period



Borrowers (Note 1)

Allowancefor Bad Debt

NAN YA PLASTICS CORPORATION LOANS TO OTHER PARTIES

FOR THE YEAR ENDED DECEMBER 31, 2019 (Expressed in thousands of New Taiwan Dollars)

No. Name of Lenders Account NameName of BorrowersHighest Balance of

Financing to Other Partiesduring the Period



IndividualFunding LoanLimits (Note 3)

Transaction Amount forBusiness Between Two

Parties (Note 2)


398

Item Value

RelatedParty

EndingBalance


Period



Borrowers (Note 1)


Highest Balance ofFinancing to Other Parties

during the Period





Parties (Note 2)


3 Nan Ya Plastics (Hong Kong)Co., Ltd.

Nan Ya Electronic Materials(Kunshan) Co., Ltd.


YES 362,773 - - 4.12% 2 - Operatingcapital

- ‑ - 42,667,670 85,335,340

4 Wen Fung Industrial Co., Ltd. Wellink TechnologyCorporation



- ‑ - 24,174 241,735

4 Wen Fung Industrial Co., Ltd. Formosa EnvironmentalTechnology Corporation


YES 60,000 60,000 60,000 1.418% 2 - Operatingcapital

- ‑ - 120,868 241,735


Nan Ya Draw Textured Yarn(Kunshan) Co., Ltd.



- - - 1,316,852 2,633,704


Nan Ya Plastics (Ningbo) Co.,Ltd.



- ‑ - 1,316,852 2,633,704





- ‑ - 1,691,034 3,382,068





- ‑ - 1,691,034 3,382,068

7 Nan Ya Trading (Huizhou) Co.,Ltd.




- ‑ - 28,644 57,289

8 Nan Ya Plastics (Xiamen) Co.,Ltd.

Xiamen Haicang InvestmentGroup Co., Ltd.



- - - 684,281 684,281





- - - 684,281 684,281





- - - 684,281 684,281





- ‑ - 684,281 684,281





- - - 684,281 684,281





- ‑ - 4,980,774 9,961,548





- ‑ - 4,980,774 9,961,548

10 China Nantong Huafeng Co., Ltd. Nan Ya Draw Textured Yarn(Kunshan) Co., Ltd.



- ‑ - 163,893 327,786

10 China Nantong Huafeng Co., Ltd. Nan Ya Plastics (Ningbo) Co.,Ltd.



- ‑ - 163,893 327,786

399

Item Value

RelatedParty

EndingBalance


Period



Borrowers (Note 1)


Highest Balance ofFinancing to Other Parties

during the Period





Parties (Note 2)


11 Nantong Huafu Plastics Co., Ltd. PFG Fiber Glass (Kunshan)Co., Ltd.



- ‑ - 45,816 91,632

11 Nantong Huafu Plastics Co., Ltd. Nan Ya Draw Textured Yarn(Kunshan) Co., Ltd.



- ‑ - 45,816 91,632





- ‑ - 575,088 1,150,175





- ‑ - 575,088 1,150,175





- ‑ - 27,718,743 55,437,487


Nan Ya Electronic Materials(Huizhou) Co., Ltd.



- ‑ - 27,718,743 55,437,487





- ‑ - 27,718,743 55,437,487





- ‑ - 27,718,743 55,437,487


Nan Ya PCB (Kunshan)Corporation



- - - 27,718,743 55,437,487





- ‑ - 27,718,743 55,437,487

Note 1：(a) Those with business contact please fill in 1; (b) Those necessary for short-term financing please fill in 2.Note 2：Amount from business contact stands for the sum of purchases and sales.

Note 3：Capital loaned to other parties should not exceed 50% of the lender’s net worth, of which the sum loaned to non interested parties for capital requirements should not exceed 40% of the net worth of borrower. The cap amount of loans to associates and interested parties should not exceed 25% of the equity of the lenders. Other parties should not exceed 20% of the lender’s net worth.

Note 4：Subsidiaries' capital loaned to associates and interested parties should not exceed 50% of the equity of the lenders. Other parties should not exceed 40% of the lender’s net worth. The subsidiaries' cap amount of loans to other parties should not exceed 100% of its equity. Non-interested parties should not exceed 40% of its net worth. However, subsidiaries' capital loaned to the parties located in non-Taiwan and directly or indirectly held by the company 100% of the shares are not be limited.

Note 5：Nan Ya Plastics corporation, America and Nan Ya Plastics corporation USA s’reporting currency are denominated in USD, and the exchange rate of TWD to USD as of December 31, 2019 (in average) is 30.106(30.924)：1.

Nan Ya Plastics (Hong Kong) Co., Ltd and Superior World Wide Trading Co., Ltd. s’reporting currency are denominated in HKD, and the exchange rate of TWD to HKD as of December 31, 2019 (in average) is 3.8597(3.9646)：1.

400

TABLE 2B=A/2 C D=C/SE A=S/E*1.3

0 The Company Formosa IndustriesCorporation

1 9,531,078 4,940,651 602,120 602,120 - 0.17% 447,943,449 N N N

0 The Company Formosa Group (Cayman)Ltd.

6 223,971,725 18,816,250 7,526,500 7,526,500 - 2.18% 447,943,449 N N N

0 The Company Formosa Ha Tinh (Cayman)Ltd.

6 223,971,725 20,753,559 20,753,559 20,753,559 - 6.02% 447,943,449 N N N

0 The Company Formosa ResourcesCorporation

6 223,971,725 3,236,395 3,236,395 3,236,395 - 0.94% 447,943,449 N N N

1 Nan Ya PlasticsCorporation America


4 27,029,495 139,201 102,946 102,946 - 0.26% 54,058,989 Y N N

Note1: The total amount of guarantees and endorsements by the company shall not exceed 1.3 times of the company's net value, and the amount of guarantees and endorsements for a specific enterprise shall not exceed one half of the foregoing total.

Note2: There are seven conditions in which the Company may have guarantees or endorsements for other parties as follows:(1)The Company has business relationship.(2)The Company holds directly and indirectly more than 50% of the voting shares of the subsidiaries. (3)In aggregate, the Company holds directly or its subsidiaries hold indirectly more than 50% of the investee. (4)Subsidiaries in which the Company holds directly or indirectly more than 90% of the voting shares make endoresement and guarantees for each other.(5)The Company is required to provide guarantees or endorsements for the construction project based on the construction contract.(6)The stockholders of the Company provide guarantees or endorsements for the investee in proportion to their stockholding percentage.

NAN YA PLASTICS CORPORATIONGUARANTEES AND ENDORSEMENTS FOR OTHER PARTIES


Balance of Guaranteesand Endorsements asof December 31, 2019

Amount of Endorsement/Guarantee Collateralized

by Properties

Ratio of Accumulated Amountsof Guarantees and

Endorsements to Net Worth ofthe Latest Financial Statements

MaximumAmounts for

Guarantees andEndorsements

Amount Secured byGuaranteed and

Endorsed PropertyNo Endorsement

Guarantee Provider

Counterparty of Guarantee and Endorsement Limitation Amountof Guarantees and

Endorsements for aSpecific Enterprise

Parent Company Endorses/Guarantees to Third Parties

on Behalf of Subsidiary

Subsidiary Endorses/Guarantees to ThirdParties on Behalf of

Parent Company

Endorsements/Guarantees to the ThirdParties on Behalf of the

Companies in Mainland China


(7)According to Consumer Protection Act, companies are required to provide guarantees and endorsements for joint and several libility if take part in business of preconstruction real estate.

Name Relationship with TheCompany (Note)

Highest Balance forGuarantee and

Endorsements duringthe Period

401

TABLE 3


CarryingValue



The Company Mega Internaitonal Private USD MoneyMarket

- Financial assets valued at FVTPL－current

12,479 4,044,356 - 4,044,356

The Company Formosa Plastics Corporation Other related parties Financial assets valued at FVTOCI－current

294,793 29,420,352 4.63% 29,420,352 Note 1

The Company Formosa Chemicals and Fiber Corporation Other related parties Financial assets valued at FVTOCI－current

140,520 12,295,469 2.40% 12,295,469

The Company Formosa Group Ocean Marine InvestmentCorporation

Other related parties Financial assets valued at FVTOCI－non current

3 4,842,526 19.00% 4,842,526

The Company Formosa Plastics Corporation U.S.A. Other related parties Financial assets valued at FVTOCI－non current

2 1,283,210 0.51% 1,283,210

The Company Ostendo Technologies Inc. - Financial assets valued at FVTOCI－non current

150 - 0.12% -

The Company Formosa Plastics Maritime Corp. Other related parties Financial assets valued at FVTOCI－non current

352 299,258 18.00% 299,258

The Company Formosa International Development Co.,Ltd.

Other related parties Financial assets valued at FVTOCI－non current

16,509 259,076 18.00% 259,076

The Company Mai Liao Harbor Administration Corp. Other related parties Financial assets valued at FVTOCI－non current

39,562 896,136 17.98% 896,136

The Company Formosa Plastics Marine Corporation Other related parties Financial assets valued at FVTOCI－non current

2,429 752,699 15.00% 752,699

The Company ASIA Pacific Investment Co. Other related parties Financial assets valued at FVTOCI－non current

63,717 2,209,623 14.99% 2,209,623

The Company Formosa Technologies Corporation Other related parties Financial assets valued at FVTOCI－non current

2,925 72,959 12.50% 72,959

The Company WK Technology Fund Ltd. - Financial assets valued at FVTOCI－non current

326 8,304 1.63% 8,304

The Company WK Technology Fund IV Ltd. - Financial assets valued at FVTOCI－non current

460 5,573 1.08% 5,573

The Company Central Leasing Corp. - Financial assets valued at FVTOCI－non current

1,779 - 1.07% -

The Company Chinese Television System Inc. - Financial assets valued at FVTOCI－non current

1,769 34,075 1.04% 34,075

The Company China Investment & DevelopmentCompany, Limited

- Financial assets valued at FVTOCI－non current

1,287 4,431 0.80% 4,431

NAN YA PLASTICS CORPORATIONSECURITIES HELD AS OF DECEMBER 31, 2019

(EXCLUDING INVESTMENT IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES)

(Expressed in thousands of New Taiwan Dollars)DECEMBER 31, 2019


Notes



Account Name

402


CarryingValue




Notes



Account Name

The Company Taiwan Aerospace Corp. - Financial assets valued at FVTOCI－non current

1,070 18,849 0.79% 18,849

The Company Guang Yuan Securities InvestmentConsulting Corporation

- Financial assets valued at FVTOCI－non current

5,000 26,600 3.91% 26,600

The Company Nan Ya Photonics Inc. Other related parties Financial assets valued at FVTOCI－non current

6,646 110,131 14.42% 110,131

The Company Mega Growth Capital Venture - Financial assets valued at FVTOCI－non current

2,500 19,746 1.97% 19,746


Double Oak (Bonds) - Financial assets valued at FVTPL－non current

- 180,019 - 180,019


Sutton (Bonds) - Financial assets valued at FVTPL－non current

- 330,592 - 330,592


American Overseas Reinsurance Co., Ltd.(Preferred Stock)

- Financial assets valued at FVTPL－non current

- 106,768 - 106,768


MBIA Insurance Corp. (Preferred Stock) - Financial assets valued at FVTPL－non current

- 207,347 - 207,347


Hua Ya (Dong Ying) Plastics Corp. - Financial assets valued at FVTOCI－non current

- 199,951 15.00% 199,951


Hua Ya (Wu Hu) Plastics Corp. - Financial assets valued at FVTOCI－non current

- 180,342 15.00% 180,342


WK Technology Fund Ltd. - Financial assets valued at FVTOCI－non current

1,935 12,318 2.42% 12,318


WK Technology Fund IV Ltd. - Financial assets valued at FVTOCI－non current

658 18,576 3.60% 18,576

Nan Ya International (Cayman)Limited

Formosa Ha Tinh (Cayman) Ltd. Other related parties Financial assets valued at FVTOCI－non current

621,178 11,407,727 11.43% 11,407,727

Note 1：The Company pledged its shares of Formosa Plastics Corporation of 12,736 thousand common shares amounting to $1,271,053.

403

TABLE 4

Shares (inthousands) Amount Shares (in

thousands) Amount Shares (inthousands) Price Cost Gain (loss)

on disposalShares (inthousands) Price

TheCompany

Nan Ya Plastics(Hong Kong) Co.,Ltd.

Investmentsaccountedfor usingequitymethod

Nan YaPlastics(HongKong) Co.,Ltd.


844,053 79,668,326 109,200 4,308,591 953,253 85,283,330(Note 1)

Nan YaPlastics(HongKong) Co.,Ltd.

Nan Ya ElectronicMaterials(Huizhou) Co.,Ltd.


Nan YaElectronicMaterials(Huizhou)Co., Ltd.


- 1,965,292 - 4,308,591 - 6,351,352(Note 1)

TheCompany





584,594 5,370,047 157,000 1,570,000 741,594 6,615,934(Note 1)

Nan YaPCBCorporation

FormosaAdvancedTechnologiesCo.,Ltd


FormosaTaffetaCo., Ltd.


- - 13,267 472,968 13,267 475,710(Note 1)

Note 1：End of period amount includes investment income and transaction adjustment under equity method and the effect of exchange changes.

Companyholding

securities

Security typeand name Account

Sale EndingCounter-party Relationship

Beginning Purchase

NAN YA PLASTICS CORPORATIONINDIVIDUAL SECURITIES ACQUIRED OR DISPOSED OF WITH ACCUMULATED AMOUNT EXCEEDING THE LOWER OF TWD300 MILLION OR 20% OF THE CAPITAL STOCK


404

TABLE 5

OwnerRelationship

with theCompany

Date ofTransfer Amount





None





None





None





None





None

TABLE 6

Nan Ya DrawTextured Yarn(Kunshan) Co., Ltd.

Polyester plantesterfication processequipment

2019.01.24 2007.07~2016.05

1,309,580 1,247,436 (62,144) FormosaIndustriesCorporation

Associates AssetActivation andoperatingperformance

Asset ValuationReport

None

NAN YA PLASTICS CORPORATIONACQUISITION OF INDIVIDUAL REAL ESTATE WITH AMOUNT EXCEEDING THE LOWER OF TWD300 MILLION OR 20% OF THE CAPITAL STOCK


Counter-partyCompany Name Name of Property TransactionDate

TransactionAmount

Status ofPayment


Company

Disclosure of Information on Previous Transfer of Equipment is Required for Related

Parties who are also the Counter PartiesReferences

forDetermining

Price

Purpose ofAcquisitionand Current

Condition

Others

NAN YA PLASTICS CORPORATIONDISPOSAL OF INDIVIDUAL REAL ESTATE WITH AMOUNT EXCEEDING THE LOWER OF TWD 300 MILLION OR 20% OF THE CAPITAL STOCK


Company Name Name of Property TransactionDate

AcquisitionDate Book Value Purpose of

Disposal

References forDetermining

PriceOthersRelationship with

the Company


40% received, finalpayment due after

acceptance

Transaction amount Amount actuallyreceivable

Gain (Loss)fom Disposal

Counter-party

405

TABLE 7


purchase/(sales) Credit Period UnitPrice

PaymentTerm


The Company Formosa Plastics Corporation Other related parties (Sales) (1,184,681) (0.77)% 30 days - ‑ 57,849 0.32%

The Company Formosa Chemicals and Fiber Corporation Other related parties (Sales) (7,531,843) (4.87)% 30 days - ‑ 632,141 3.50%

The Company Nan Ya PCB Corporation Subsidiaries (Sales) (976,163) (0.63)% 30 days - ‑ 83,490 0.46%

The Company Formosa Petrochemical Corporation Associates (Sales) (1,422,244) (0.92)% 30 days - ‑ 87,584 0.48%

The Company Nanya Technology Corporation Associates (Sales) (144,369) (0.09)% 30 days - ‑ 9,888 0.05%

The Company Formosa Taffeta Co., Ltd. Other related parties (Sales) (872,256) (0.56)% 30 days - ‑ 85,949 0.48%

The Company Nan Ya Plastics Corporation U.S.A. Subsidiaries (Sales) (553,828) (0.36)% O/A105 days - ‑ 281,253 1.56%

The Company Nan Ya Plastics Corporation America Subsidiaries (Sales) (325,829) (0.21)% O/A105 days - ‑ 71,817 0.40%

The Company Nan Ya Plastics Corporation Texas Subsidiaries (Sales) (396,946) (0.26)% O/A105 days - - 0 0.00%

The Company Nan Ya Electronic Materials (Huizhou) Co., Ltd. Subsidiaries (Sales) (4,427,438) (2.86)% O/A180 days - ‑ 2,254,032 12.48%

The Company Nan Ya Plastics (Nantong) Co., Ltd. Subsidiaries (Sales) (934,785) (0.60)% O/A150 days - ‑ 291,773 1.62%

The Company Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries (Sales) (4,418,060) (2.85)% O/A150 days - ‑ 1,138,058 6.30%

The Company Formosa Industries Corporation Associates (Sales) (2,521,147) (1.63)% O/A150 days - ‑ 258,445 1.43%

The Company Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Subsidiaries (Sales) (618,908) (0.40)% O/A150 days - ‑ 269,959 1.49%

The Company Nan Ya Plastics (Ningbo) Co., Ltd. Subsidiaries (Sales) (266,521) (0.17)% O/A150 days - ‑ 1,065 0.01%

The Company Nan Chung Petrochemical Corporation Subsidiaries (Sales) (228,823) (0.15)% 30 days - ‑ 14,678 0.08%

The Company PFG Fiber Glass Corporation Subsidiaries (Sales) (123,484) (0.08)% 30 days - - 7,470 0.04%The Company Nan Ya Plastics (Guangzhou) Co., Ltd. Subsidiaries (Sales) (187,763) (0.12)% O/A150 days - ‑ 54,176 0.30%

The Company Formosa Plastics Corporation Other related parties Purchases 11,978,383 11.46% 30 days - ‑ (1,080,354) (9.82)%

The Company Formosa Chemicals and Fiber Corporation Other related parties Purchases 24,442,785 23.39% 30 days - ‑ (1,923,275) (17.48)%

The Company Formosa Petrochemical Corporation Associates Purchases 30,339,000 29.04% 30 days - ‑ (2,358,012) (21.43)%

The Company PFG Fiber Glass Corporation Subsidiaries Purchases 2,548,914 2.44% 30 days - ‑ (241,454) (2.19)%The Company Nan Chung Petrochemical Corporation Subsidiaries Purchases 3,382,831 3.24% 30 days - ‑ (329,258) (2.99)%

Nan Ya PCB Corporation The Company Parent Purchases 976,163 6.07% 30 days - ‑ (83,490) (4.18)%

Nan Ya PCB Corporation Nan Ya PCB (Kunshan) Corporation Subsidiaries Purchases 8,438,867 52.47% 30 days - ‑ (978,457) (49.04)%

Nan Ya PCB Corporation Formosa Advanced Technologies Co.,Ltd Associates (Sales) (106,503) (0.41)% 70 days - ‑ 16,398 0.25%

Nan Ya PCB (Kunshan) Corporation Nan Ya PCB Corporation Subsidiaries (Sales) (8,438,867) (61.01)% 30 days - ‑ 978,457 50.28%

Nan Ya PCB (Kunshan) Corporation Nan Ya Electronic Materials (Kunshan) Co., Ltd. Same chairman Purchases 1,655,334 19.67% 60 days - ‑ (130,455) (14.75)%

Nan Ya PCB (Kunshan) Corporation Formosa Advanced Technologies Co.,Ltd Associates (Sales) (215,081) (1.55)% 70 days - ‑ 46,710 2.40%

Nan Chung Petrochemical Corporation The Company Parent (Sales) (3,382,831) (50.06)% 30 days - ‑ 329,258 51.19%

Nan Chung Petrochemical Corporation China Man-made Fiber Corporation Other related parties (Sales) (3,361,822) (49.75)% 15th day of next month - ‑ 313,981 48.81%

Nan Chung Petrochemical Corporation Formosa Petrochemical Corporation Associates Purchases 5,040,286 89.15% 15th day of next month - ‑ (487,616) (96.55)%

Nan Chung Petrochemical Corporation The Company Parent Purchases 228,823 4.05% 30 days - ‑ (14,678) (2.91)%

Relationship

INFORMATION REGARDING RELATED-PARTIES PURCHASES AND/OR SALES EXCEEDING 100 MILLION OR 20% OF THE COMPANY'S PAID-IN-CAPITALNAN YA PLASTICS CORPORATION




406


purchase/(sales) Credit Period UnitPrice

PaymentTerm


RelationshipRelated PartyCompany Name NotesNotes/Accounts (Payable) ReceivableAbnormal TransactionTransaction Details

PFG Fiber Glass Corporation The Company Parent (Sales) (2,548,914) (69.49)% 30 days - ‑ 241,454 74.66%

PFG Fiber Glass Corporation Formosa Chemicals and Fiber Corporation Other related parties Purchases 462,079 20.30% 30 days - ‑ (35,903) (23.90)%

PFG Fiber Glass Corporation Formosa Petrochemical Corporation Other related parties Purchases 229,233 10.07% 30 days - ‑ (16,845) (11.22)%

PFG Fiber Glass Corporation The Company Parent Purchases 123,484 5.42% 30 days - - (7,470) (4.97)%

Nan Ya Plastics Corporation U.S.A. Formosa Plastics Corporation U.S.A. Other related parties Purchases 762,014 29.16% payment within oneh

- ‑ (49,326) (11.85)%

Nan Ya Plastics Corporation U.S.A. The Company Parent Purchases 553,828 21.19% O/A 105 days - ‑ (281,253) (67.56)%

Nan Ya Plastics Corporation U.S.A. Nan Ya Plastics Corporation America Subsidiaries Purchases 118,192 4.52% payment within oneh

- ‑ 0 0.00%

Nan Ya Plastics Corporation America Formosa Industries Corporation Other related parties (Sales) (175,567) (0.55)% O/A 105 days - - 170,923 5.67%

Nan Ya Plastics Corporation America Formosa Plastics Corporation U.S.A. Other related parties (Sales) (328,436) (1.04)% payment within oneh

- ‑ 0 0.00%

Nan Ya Plastics Corporation America Nan Ya Plastics Corporation U.S.A. Subsidiaries (Sales) (118,192) (0.37)% payment within oneh

- ‑ 0 0.00%

Nan Ya Plastics Corporation America Formosa Plastics Corporation U.S.A. Other related parties Purchases 229,374 0.83% payment within oneh

- ‑ (11,219) (4.81)%

Nan Ya Plastics Corporation America The Company Parent Purchases 325,829 1.17% O/A 105 days - ‑ (71,817) (30.80)%

PFG Fiber Glass (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries (Sales) (2,790,904) (79.40)% 60 days - ‑ 269,349 64.67%

PFG Fiber Glass (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries Purchases 275,369 18.38% 60 days - ‑ (20,862) (8.34)%

Nan Ya Plastics (Xiamen) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. Other related parties Purchases 226,523 21.37% 60 days - ‑ (33,010) (36.23)%Nan Ya Plastics (Guangzhou) Co., Ltd. Formosa Plastics Corporation Other related parties Purchases 432,111 22.88% O/A 150 days - ‑ (149,140) (51.40)%

Nan Ya Plastics (Guangzhou) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. Other related parties Purchases 434,314 23.00% 60 days - ‑ (41,500) (14.30)%

Nan Ya Plastics (Guangzhou) Co., Ltd. The Company Parent Purchases 187,763 9.94% O/A 150 days - ‑ (54,176) (18.67)%

Nan Ya Electronic Materials (Huizhou) Co., Ltd. The Company Parent Purchases 4,427,438 49.93% O/A 180 days - ‑ (2,254,032) (47.96)%

Nan Ya Electronic Materials (Huizhou) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries Purchases 3,720,449 41.96% 180 days - ‑ (2,408,494) (51.24)%

Nan Ya Plastics (Huizhou) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. Other related parties Purchases 109,958 6.98% 60 days - ‑ (12,641) (7.01)%

Nan Ya Plastics (Nantong) Co., Ltd. Formosa Plastics Corporation Other related parties Purchases 159,162 2.60% O/A 150 days - ‑ (97,889) (14.31)%

Nan Ya Plastics (Nantong) Co., Ltd. The Company Parent Purchases 934,785 15.25% O/A 150 days - ‑ (291,773) (42.64)%

Nan Ya Plastics (Nantong) Co., Ltd. Formosa Industries (Ningbo) Co., Ltd. Other related parties Purchases 1,046,261 17.07% 60 days - ‑ (59,540) (8.70)%

Nan Ya Plastics (Nantong) Co., Ltd. Nanya Kyowa Plastics (Nantong) Co., Ltd. Joint venture (Sales) (330,017) (5.08)% 60 days - - 79,907 4.47%

Nan Ya Electric (Nantong) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries (Sales) (129,795) (22.18)% 60 days - ‑ 7,526 2.49%

Nan Ya Plastics (Ningbo) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries (Sales) (3,786,561) (33.69)% 60 days - ‑ 335,747 51.42%

Nan Ya Plastics (Ningbo) Co., Ltd. Formosa Chemicals and Fiber (Ningbo) Corporation Other related parties Purchases 6,221,820 72.74% 60 days - ‑ (579,512) (96.47)%

Nan Ya Plastics (Ningbo) Co., Ltd. The Company Parent Purchases 266,521 3.12% O/A 150 days - ‑ (1,065) (0.18)%Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Huizhou) Co., Ltd. Subsidiaries (Sales) (3,720,449) (7.94)% 180 days - ‑ 2,408,494 15.79%

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya PCB (Kunshan) Corporation Same chairman (Sales) (1,655,334) (3.53)% 60 days - ‑ 130,455 0.86%

Nan Ya Electronic Materials (Kunshan) Co., Ltd. PFG Fiber Glass (Kunshan) Co., Ltd. Subsidiaries (Sales) (275,369) (0.59)% 60 days - ‑ 20,862 0.14%

Nan Ya Electronic Materials (Kunshan) Co., Ltd. The Company Parent Purchases 4,418,060 12.46% O/A 150 days - ‑ (1,138,058) (36.49)%

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Subsidiaries Purchases 251,162 0.71% 60 days - ‑ (16,029) (0.51)%

Nan Ya Electronic Materials (Kunshan) Co., Ltd. PFG Fiber Glass (Kunshan) Co., Ltd. Subsidiaries Purchases 2,790,904 7.87% 60 days - ‑ (269,349) (8.64)%

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd. Subsidiaries Purchases 3,786,561 10.68% 60 days - ‑ (335,747) (10.77)%

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Electric (Nantong) Co., Ltd. Subsidiaries Purchases 129,795 0.37% 60 days - ‑ (7,526) (0.24)%Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. The Company Parent Purchases 618,908 24.49% O/A 150 days - ‑ (269,959) (85.71)%

Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries (Sales) (251,162) (7.92)% 60 days - ‑ 16,029 7.70%

407

TABLE 8

Amount ActionTaken

The Company Formosa Chemicals and Fiber Corporation Other related parties Receivables from related parties： 632,141 10.77 ‑ ‑ 626,437 ‑

The Company Nan Ya Plastics Corporation U.S.A. Subsidiaries Receivables from related parties： 281,253 1.88 ‑ ‑ 4 ‑

The Company Nan Ya Electronic Materials (Huizhou) Co., Ltd. Subsidiaries Receivables from related parties： 2,254,032 2.01 ‑ ‑ 72,922 ‑

The Company Nan Ya Plastics (Nantong) Co., Ltd. Subsidiaries Receivables from related parties： 291,773 3.86 ‑ ‑ 206,664 ‑

The Company Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries Receivables from related parties： 1,138,058 3.75 ‑ ‑ 432,426 ‑

The Company Formosa Industries Corporation Assosiates Receivables from related parties： 258,445 4.94 ‑ ‑ 93,197 ‑

The Company Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Subsidiaries Receivables from related parties： 269,959 2.50 ‑ ‑ 105,855 ‑

Nan Ya PCB (Kunshan) Corporation Nan Ya PCB Corporation Subsidiaries Receivables from related parties： 978,457 9.47 ‑ ‑ 978,457 ‑

Nan Chung Petrochemical Corporation The Company Parent Receivables from related parties： 329,258 10.33 ‑ ‑ 326,840 ‑

Nan Chung Petrochemical Corporation China Man-made Fiber Corporation Other related parties Receivables from related parties： 313,981 10.22 ‑ ‑ 307,149 ‑

PFG Fiber Glass Corporation The Company Parent Receivables from related parties： 241,454 10.16 ‑ ‑ 241,454 ‑

Nan Ya Plastics Corporation America Formosa Industries Corporation Other related parties Receivables from related parties： 170,923 2.05 ‑ ‑ 170,923 ‑

PFG Fiber Glass (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries Receivables from related parties： 269,349 9.54 ‑ ‑ 269,349 ‑

Nan Ya Plastics (Ningbo) Co., Ltd. Nan Ya Electronic Materials (Kunshan) Co., Ltd. Subsidiaries Receivables from related parties： 335,747 20.07 - - 335,747 ‑

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Electronic Materials (Huizhou) Co., Ltd. Subsidiaries Receivables from related parties： 2,408,494 1.46 ‑ ‑ 520,388 ‑

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya PCB (Kunshan) Corporation Same chairman Receivables from related parties： 130,455 10.59 ‑ ‑ 130,455 ‑

The Company Formosa Plastics Marine Corporation Other related parties Other receivables from related parties： 5,640,819 Note ‑ ‑ ‑ ‑

Nan Ya Plastics Corporation America Nan Ya Plastics Corporation Texas Subsidiaries Other receivables from related parties： 12,042,400 Note ‑ ‑ ‑ ‑

Nan Ya Plastics Corporation America Nan Ya Plastics Corporation U.S.A. Subsidiaries Other receivables from related parties： 286,237 Note ‑ ‑ ‑ ‑

Nan Ya PCB Corporation The Company Parent Other receivables from related parties： 4,000,000 Note ‑ ‑ ‑ ‑

Nan Ya Plastics (Nantong) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd. Subsidiaries Other receivables from related parties： 1,631,271 Note ‑ ‑ ‑ ‑

NAN YA PLASTICS CORPORATIONRECEIVABLES FROM RELATED PARTIES WITH AMOUNTS EXCEEDING THE LOWER OF TWD100 MILLION OR 20% OF THE CAPITAL STOCK

December 31, 2019



AmountsReceived inSubsequent

Periods



408

Amount ActionTaken



AmountsReceived inSubsequent

Periods


Nan Ya Plastics (Huizhou) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd. Subsidiaries Other receivables from related parties： 526,495 Note ‑ ‑ ‑ ‑

Nan Ya Plastics (Huizhou) Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Subsidiaries Other receivables from related parties： 504,917 Note ‑ ‑ ‑ ‑

Nan Ya Plastics (Xiamen) Co., Ltd. Nan Ya Plastics (Zhengzhou) Co., Ltd. Subsidiaries Other receivables from related parties： 138,097 Note ‑ ‑ ‑ ‑

Nan Ya Plastics (Xiamen) Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Subsidiaries Other receivables from related parties： 133,781 Note ‑ ‑ ‑ ‑Nan Ya Plastics (Guangzhou) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd. Subsidiaries Other receivables from related parties： 720,694 Note ‑ ‑ ‑ ‑

Nan Ya Plastics (Guangzhou) Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Subsidiaries Other receivables from related parties： 215,777 Note ‑ ‑ ‑ ‑Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Subsidiaries Other receivables from related parties： 4,837,710 Note ‑ ‑ ‑ ‑

Nan Ya Electronic Materials (Kunshan) Co., Ltd. PFG Fiber Glass (Kunshan) Co., Ltd. Subsidiaries Other receivables from related parties： 280,509 Note ‑ ‑ ‑ ‑

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya PCB (Kunshan) Corporation Subsidiaries Other receivables from related parties： 1,639,902 Note ‑ ‑ ‑ ‑

Nan Ya Electronic Materials (Kunshan) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd. Subsidiaries Other receivables from related parties： 258,932 Note ‑ ‑ ‑ ‑

Nan Ya Electric (Nantong) Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd. Subsidiaries Other receivables from related parties： 310,718 Note ‑ ‑ ‑ ‑

China Nantong Huafeng Co., Ltd. Nan Ya Plastics (Ningbo) Co., Ltd. Subsidiaries Other receivables from related parties： 155,359 Note ‑ ‑ ‑ ‑

China Nantong Huafeng Co., Ltd. Nan Ya Draw Textured Yarn (Kunshan) Co., Ltd. Subsidiaries Other receivables from related parties： 135,076 Note ‑ ‑ ‑ ‑

Note： The turnover rate of other receivables from related parties can not be calculated.

409

TABLE 9

December 31,2019

December 31,2018


ValueThe Company Nan Ya Plastics Corporation U.S.A.

(Note)U.S.A. production of plastic

products313,920 313,920 2 100.00% 1,862,003 100.00% 13,498 13,498 Note 3

The Company Nan Ya Plastics Corporation America(Note)

U.S.A. production of plastic,polyester and chemical

7,853,605 7,853,605 60 100.00% 41,583,838 100.00% 1,454,262 1,454,262 Note 3

The Company Nan Ya Plastics (Hong Kong) Co.,Ltd. (Note 1)

Hong Kong plastics, electronicproducts trading, and

39,166,673 34,858,082 953,253 100.00% 85,283,330 100.00% 4,524,884 4,524,884 Note 3

The Company Superior World Wide Trading Co.,Ltd. (Note 1)

Hong Kong plastics trading andinvestment

33,677 33,677 14 100.00% 778,245 100.00% 60,095 60,095 Note 3

The Company Formosa Synthetic Rubber (HongKong) Corporation Limited (Note)

Hong Kong production of syntheticrubber products

4,162,010 4,162,010 135,000 32.53% 2,249,187 32.53% (564,873) (183,754) Note 3

The Company PFG Fiber Glass (Hong Kong)Corporation Limited (Note 1)

Hong Kong investment 4,495,987 4,495,987 76 100.00% 7,737,129 100.00% 83,276 63,291 Note 3

The Company Formosa Industries Corporation (Note2)

Vietnam chemical fiber, dyingand finishing and

8,435,875 8,435,875 - 42.50% 8,163,096 42.50% 350,666 149,033 Note 3

The Company Nan Ya PCB Corporation Taiwan production of printedcircuit board

4,480,417 4,480,417 432,745 66.97% 19,551,043 66.97% 308,203 207,963 Note 3

The Company Formosa Plastics Group InvestmentCorp.

Taiwan investment 76,859 76,859 5,000 100.00% 86,873 100.00% 202 202 Note 3

The Company Nanya Technology Corporation Taiwan semiconductorproduction and

52,438,472 52,438,472 907,304 29.71% 45,168,287 29.91% 9,824,600 2,926,374 Note 3

The Company Formosa Environmental TechnologyCorporation

Taiwan environmentalprotection

672,370 672,370 46,257 26.99% 250,241 26.99% 366 99 Note 3

The Company Formosa Petrochemical Corporation Taiwan production of chemicalproducts

24,647,480 24,647,480 2,201,306 23.11% 76,273,869 23.11% 36,798,213 8,501,950 Note 3

The Company PFG Fiber Glass Corporation Taiwan production of glassfiber

2,648,131 2,648,131 100,000 100.00% 4,196,150 100.00% 182,704 9,811 Note 3

The Company Nan Chung PetrochemicalCorporation

Taiwan production of chemicalproducts

1,000,002 1,000,002 100,000 50.00% 1,169,804 50.00% 34,675 17,535 Note 3

The Company Wen Fung Industrial Co., Ltd. Taiwan production ofelectronic components

214,236 214,236 18,738 100.00% 250,287 100.00% 5,182 5,182 Note 3

NAN YA PLASTICS CORPORATIONINFORMATION ON INVESTEES (EXCLUDING THOSE IN MAINLAND CHINA)


Investor Company Investee Company Location Major OperationsOriginal Investment Amount Balance as of December 31, 2019 Mid-term

maximumshareholding or

capital




Notes


410

December 31,2019

December 31,2018


ValueInvestor Company Investee Company Location Major Operations

Original Investment Amount Balance as of December 31, 2019 Mid-termmaximum

shareholding orcapital




Notes

The Company Formosa Automobile SalesCorporation

Taiwan production ofautomobile

945,028 945,028 27,046 45.00% 181,332 45.00% 170,099 76,547 Note 3

The Company Ya Tai Development Corporation Taiwan development industry 53,941 53,941 1,304 44.96% 18,020 44.96% (1,856) (834) Note 3

The Company Formosa Heavy IndustriesCorporation

Taiwan machinery industry 2,497,721 2,497,721 651,706 32.91% 7,247,995 32.91% 124,778 41,066 Note 3

The Company Formosa Fairway Corporation Taiwan transportation business 33,340 33,340 4,699 33.34% 82,185 33.34% (16,684) (5,563) Note 3

The Company Formosa Plastics TransportCorporation

Taiwan transportation business 67,254 67,254 6,566 33.33% 1,062,879 33.33% 137,544 45,849 Note 3

The Company Hwa Ya Science Park ManagementConsulting Co., Ltd.

Taiwan service business 359 359 34 34.00% 2,606 34.00% 2,908 988 Note 3

The Company Yi Jih Development Corporation Taiwan construction business 58,000 58,000 5,800 29.22% 64,672 29.22% 876 256 Note 3

The Company Mai Liao Power Corporation Taiwan electricity generationbusiness

5,985,465 5,985,465 547,025 24.94% 11,050,586 24.94% 2,199,499 548,596 Note 3

The Company Formosa Synthetic RubberCorporation

Taiwan production of syntheticrubber products

446,000 400,000 44,600 33.33% 292,635 33.33% (2,050) (684) Note 3

The Company Formosa Resources Corporation Taiwan mining industry 7,415,940 5,845,940 741,594 25.00% 6,615,934 25.00% (605,807) (151,452) Note 3

The Company Formosa Group (Cayman) Limited(Note)

CaymanIslands

investment 377 377 13 25.00% 653,576 25.00% 145,410 36,352 Note 3

The Company Formosa Plastics ConstructionCorporation

Taiwan construction business 100,000 100,000 10,000 33.33% 75,521 33.33% (20,335) (6,778) Note 3

The Company Nan Ya International (Cayman)Limited (Note)

CaymanIslands

investment 18,784,619 18,784,619 52 100.00% 11,407,973 100.00% - - Note 3

The Company FG Inc. (Note) U.S.A. investment 891,746 660,176 2 10.00% 869,209 10.00% (132,609) (13,261) Note 3

Nan Ya Plastics CorporationAmerica (Note)

Formosa Utility Venture, Ltd.(Note) U.S.A. electricity generationand trading

240,848 240,848 - 12.10% 2,419,574 12.10% 1,150,743 139,665 Note 3

Nan Ya Plastics CorporationAmerica (Note)

Nan Ya Plastics Corporation Texas(Note)

U.S.A. production of chemicalproducts

9,934,980 9,934,980 3 100.00% 8,565,565 100.00% (745,044) (745,044) Note 3

Nan Ya Plastics CorporationTexas (Note)

Formosa Olefins, L.L.C. (Note) U.S.A. chemical business 2,070,540 2,070,540 - 21.00% 1,374,730 21.00% (1,781,360) (374,086) Note 3

411

December 31,2019

December 31,2018


ValueInvestor Company Investee Company Location Major Operations

Original Investment Amount Balance as of December 31, 2019 Mid-termmaximum

shareholding orcapital




Notes

Nan Ya PCB Corporation Nan Ya PCB (HK) Corporation Hong Kong production ofelectronic products and

5,020,900 5,020,900 1,223,820 100.00% 9,603,122 100.00% (86,474) (86,474) Note 3

Nan Ya PCB Corporation Nan Ya PCB (U.S.A.) Corporation U.S.A. retargeting 3,479 3,479 1,000 100.00% 13,739 100.00% 676 676 Note 3

Nan Ya PCB Corporation Formosa Advanced TechnologiesCo.,LTD.

Taiwan IC packaging, testingand modules

472,968 - 13,267 3.00% 475,710 3.00% 1,262,495 1,550 Note 3


Nan Ya PCB (Kunshan) Corporation China production of printedcircuit board

5,017,721 5,017,721 - 100.00% 9,589,396 100.00% (86,812) (86,812) Note 3

Wen Fung Industrial Co., Ltd. Wellink Technology Corporation Taiwan production ofelectronic components

212,017 212,017 12,739 100.00% 135,753 100.00% 1,767 1,767 Note 3

Superior World Wide TradingCo., Ltd. (Note 1)

P.T.Indonesia Nanya Indah PlasticsCo.

Indonesia production of plasticproducts

121,835 121,835 5 50.00% 259,090 50.00% 122,511 61,256 Note 3

Note：The reporting currency of Nan Ya Plastics Corporation USA, Nan Ya Plastics Corporation America, Formosa Synthetic Rubber (Hong Kong) Corporation Limited, Formosa Group (Cayman)

Limited, Nan Ya Internaitonal (Cayman) Limited, , FG Inc., Formosa Utility Venture, Ltd, Nan Ya Plastics Corporation Texas, and Formosa Olefins, L.L.C is denominated in USD,

and the exchange rate of TWD to USD as of December 31, 2019 (in average) is 30.106(30.924)：1.

Note 1：The reporting currency of Nan Ya Plastics (Hong Kong) Co., Ltd., Superior World Wide Trading Co., Ltd. and PFG Fiber Glass (Hong Kong) Corporation Limited is denominated in HKD,

Note 2：The reporting currency of Formosa Industries Corporation, Vietnam is denominated in VND, and the exchange rate of TWD to VND as of December 31, 2019 (in average) is 1：0.001299(0.001331).

Note 3：Investment income of the current period does not include cumulative translation adjustment and capital surplus adjustment.

and the exchange rate of TWD to HKD as of December 31, 2019 (in average) is 3.8597(3.9646)：1.

412

TABLE 10(a) Information regarding investments in Mainland China :

Outflow InflowNan Ya Plastics (Guangzhou) Co., Ltd. production of polyester products 1,998,681 Indirect investment 1,998,681 - - 1,998,681 (17,017) 100.00% (17,017) 2,320,387 611,825

Nan Ya Plastics (Xiamen) Co., Ltd. production of plastic products 775,457 Indirect investment 738,752 - - 738,752 93,803 85.00% 79,733 1,012,561 72,820

Nan Ya Plastics (Huizhou) Co., Ltd. production of polyester products 2,527,462 Indirect investment 2,418,397 - - 2,418,397 104,835 100.00% 104,835 3,227,086 -

Nan Ya Electronic Materials (Huizhou)Co., Ltd.

production of electronic materials 5,489,509 Indirect investment 1,180,918 4,308,591 - 5,489,509 322,453 100.00% 322,453 6,351,352 -

Nan Ya Trading (Huizhou) Co., Ltd. trading 32,267 Indirect investment 32,267 - - 32,267 867 100.00% 867 57,756 -

Nan Ya Plastics (Nantong) Co., Ltd. production of plastic products, steam andelectricity

4,540,736 Indirect investment 3,008,918 - - 3,008,918 362,886 100.00% 362,886 9,791,555 103,612

China Nantong Huafeng Co., Ltd. trading 93,004 Indirect investment 99,636 - - 99,636 6,880 100.00% 6,880 330,760 -

Nantong Huafu Plastics Co., Ltd. trading 79,111 Indirect investment 71,503 - - 71,503 2,596 100.00% 2,596 92,991 -

Nan Ya Electric (Nantong) Co., production of switch gear and control panel 339,275 Indirect investment 339,275 - - 339,275 42,247 100.00% 42,247 1,104,469 -

Nanya Kyowa Plastics (Nantong) Co.,Ltd.

interior decorating business 200,988 Indirect investment 100,494 - - 100,494 95,175 50.00% 47,588 199,844 -

Nan Ya Electronic Materials (Kunshan)Co., Ltd.

production of electronic materials, polyesterproducts, steam and electricity

15,159,216 Indirect investment 15,159,216 - - 15,159,216 3,272,429 100.00% 3,272,429 56,406,047 -


production of polyester products 7,035,085 Indirect investment 7,035,085 - - 7,035,085 (209,593) 100.00% (209,593) 203,014 -

Nan Ya Plastics (Zhengzhou) Co., Ltd. production of plastic products 261,737 Indirect investment 130,869 - - 130,869 (4,008) 50.00% (2,004) 58,603 -

Nan Ya Plastics (Ningbo) Co., Ltd. production of plastic products and plasticizer 2,188,834 Indirect investment 1,989,308 - - 1,989,308 440,322 100.00% 440,322 1,886,579 -

PFG Fiber Glass (Kunshan) Co., Ltd. production of glass fiber 4,668,263 Indirect investment 4,487,409 - - 4,487,409 90,954 100.00% 90,954 7,708,418 149,416

Accumulated InwardRemittance of Earnings as

of December 31, 2019




Paid-inCapital

NAN YA PLASTICS CORPORATIONINFORMATON ON INVESTMENT IN MAINLAND CHINA











413

Outflow Inflow

Accumulated InwardRemittance of Earnings as

of December 31, 2019




Paid-inCapital









Hua Ya (Dong Ying) Plastics Corp. production of plastic products 254,190 Indirect investment 34,591 - - 34,591 - 15.00% - 199,951 23,020

Hua Ya (Wu Hu) Plastics Corp. production of plastic products 624,948 Indirect investment 34,591 - - 34,591 - 15.00% - 180,342 12,687

Formosa Synthetic Rubber (Ningbo)Limited Corporation

synthetic rubber 12,777,590 Indirect investment 4,162,010 - - 4,162,010 (564,873) 32.53% (183,754) 2,249,187 -

which are recognized according to the financial statements audited by an international accounting firm.

Accumulative Remittance fromTaiwan to Mainland China as of

September 30, 2019 (Note 1)

Amount of Investment Approved byInvestment Commission, Ministry of

Economic Affairs (Note 2)

47,590,969 53,616,900

Note 1：Reporting currency of Chinese subsidiaries is CNY, and the monetary amount is first translated to HKD using the exchange rate as of December 31, 2019 (in average) is 1：1.1181(1.1311), and translated to TWD using the exchange rate as of December 31, 2019 (in average) is 1：3.8597(3.9646).Note 2：It includes the amount of $3,010,315 from capital increase out of earnings and capital increase out of capital surplus.Note 3：The Industrial Development Bureau of the MOEA issued a letter to the Company stating that it qualifies under Section 12 of the Statute for Upgrading Industries.Note 4 : The accumulative remittance from Taiwan to Mainland China, end of the period includes the amount of Nan Ya Plastics (Anshan) Co., Ltd.

(c) Information on significant transactions：

For more information concerning the direct or indirect significant transactions between the Company and its Chinese investees for the year ended December 31, 2019, please refer to the attatchemant of note 13 for "Information on material transaction items".

Limit on the Amount of Investment inMainland China (Note 3)

-

Note: All companies disclosed within the investment income of the current year column are recognized according to the audited financial statements of the Company, except for Formosa Synthetic Rubber (Ningbo) Co., Ltd.,

(b) Quota for investments in Mainland China :

414

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