FORMOSA PLASTICS CORPORATION Handbook-EN.pdf · 2018. 6. 1. · emerging markets, making the way out of the shadow of slow global economic growth. According to the forecast made by

FORMOSA PLASTICS CORPORATION

2018 ANNUAL SHAREHOLDERS’ MEETING

MEETING HANDBOOK

(This English translation is prepared in accordance with the Chinese version and is for reference purposes only. If there are any inconsistency between the Chinese original and this translation, the Chinese version shall prevail.)

JUNE 20, 2018

Table of Contents

Meeting Procedure……………..………………………………. page 1

Meeting Agenda……………….……………..………………… page 2

Report Items…………………………………………………… page 4

Ratification Items……………………………………………… page 20

Discussion Items (I)……..…………………………………….. page 22

Election Items………………………………………………….. page 36

Discussion Items (II)…………………………………………… page 39

Appendices………………………………………………..…… page 50

1. Independent Auditor’s Report 2. Articles of Incorporation of the Company 3. Rules of Procedure for Shareholders’ Meeting of the Company 4. Procedures for Engaging in Derivatives Transaction of the

Company 5. Rules for Election of Directors of the Company 6. Current Shareholdings of Directors of the Company 7. Information regarding the Proposed Employees and Directors’

Compensation approved by the Board of Directors of the Company

8. Effect upon Business Performance and Earnings per Share of the Company by the Stock Dividend Distribution Proposed at the 2018 Annual Shareholders’ Meeting


2018 ANNUAL SHAREHOLDERS’ MEETING PROCEDURE

1. Call Meeting to Order

2. Chairman’s Address

3. Report Items

4. Ratification Items

5. Discussion Items (I)

6. Election Items

7. Discussion Items (II)

8. Extraordinary Motions

9. Meeting Adjourned

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2018 ANNUAL SHAREHOLDERS’ MEETING AGENDA

Time : 2:00 p.m., Wednesday, June 20, 2018

Venue : 2F, International Ballroom at Sunworld Dynasty Hotel, Taipei (NO. 100, Dun Hua North Road, Taipei, Taiwan)

1. Report Items

(1) 2017 Business Report (2) Audit Committee’ Review Report on the 2017 Financial

Statements (3) Distribution of 2017 Employees Compensation (4) Issue of 2017 Domestic Unsecured Ordinary Corporate

Bonds

2. Ratification Items (1) Please approve the 2017 Business Report and Financial

Statements as required by the Company Act. (2) Please approve the Proposal for Distribution of 2017 Profits

as required by the Company Act.

3. Discussion Items (I) (1) Amendment to the Articles of Incorporation of the Company.

Please discuss and resovle. (2) Amendment to the Procedures for Engaging in Derivatives

Transactions of the Company. Please discuss and resolve. 4. Election Items

The Company Directors have their tenure nearly expired. Please elect the Board of Directors to conform to the applicable laws.

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5. Discussion Items (II) Appropriateness of releasing the newly elected Directors and the juristic person shareholder which appointed their authorized representatives to be elected as directors, from non-competition restrictions. Please discuss and resolve.

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Report Items

1. About the Company’s results of operation for fiscal year 2017, please refer to Business Report for further details (on page 6 of the Handbook.) which is hereby reported for record.

2. The Company’s Audit Committee members reviewed the 2017 Business Report and Financial Statements and issued their Review Report according to the applicable laws. Please refer to Audit Committee’s Review Report (on page 19 of the Handbook.)

3. The company has issued the report on compensation distributed to its employees for 2017. The pre-tax profit prior to deducting employees’ compensation distributable for 2017 is NT$54,938,767,055. The company has no accumulated losses. Adopted by the Board Meeting on March 22, 2018, 0.13% of the profit is allocated as employees’ compensation in accordance with Article 39 of the Articles of Incorporation. The total allocated amount is NT$69,454,166, which shall be distributed in cash. The above is hereby reported for record.

4. Issue of NT$7 Billion Domestic Unsecured Ordinary Corporate Bonds in 2017 To raise long-term funds to build and expand current plant, to replace current plant and equipment, to pay off loans, to fund the working capital, and to invest in domestic or overseas business, the Board of Directors resolved on Mar. 23, 2017 to issue domestic unsecured ordinary corporate bonds of NT$7 Billion in 2017. The company successfully issued the bonds on May 19, 2017 to satisfy its capital needs. A summary of the major terms of the aforementioned bonds are as follows:

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Tranche Size (NT$ billion)

Coupon Rate(%,fixed annual rate)

Tenor (Year)

Principal Repayment Year

A 3.3 1.09 5

Half of the principal shall be repaid upon the end of the fourth year and the fifth year, respective from the date of issue.

B 3.7 1.32 7

Half of the principal shall be repaid upon the end of the sixth year and the seventh year, respective from the date of issue.

Coupon Frequency

Annual. Interest shall be paid as simple interest rate.

The above is hereby reported for record.

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Formosa Plastics Corporation 2017 Business Report

The Company (Formosa Plastics Corporation) generated consolidated sales of TWD206.71bn in 2017, reaching 106% of its target of TWD194.59bn and was up 15% from TWD180.17bn generated in 2016. Consolidated pretax profit came in at TWD54.90bn in 2017, reaching 122% of its target of TWD45.01bn and was up 25% from TWD43.81bn generated in 2016.

In 2017, the stronger-than-expected global economic recovery has led to growing demand for petrochemical products. Despite the feedstock ethylene and propylene prices were higher due to the rising crude oil prices and delayed production start-up of new ethylene plants in the US, products such as caustic soda, AN, MMA, ECH and AE saw higher prices and spreads given the imbalanced supply and demand situation driven by the deepening implementation of supply side reform and tightening environmental protection in China, which limited the run rate of petrochemical companies in China, frequent production outages and supply reduction of other companies, as well as hurricane in the US at end of August in 2017.

In addition, the Company enhanced its operation safety management to maintain stable operation, which has resulted in a 90% capacity utilization rate in 2017, higher than 87% in 2016. Meanwhile, the Company developed overseas markets aggressively and increased the sales contribution from high-value differentiated products. As a result, the Company’s consolidated operating profit of TWD21.93bn in 2017 significantly increased 68.5% from 2016, which is a record high level for the Company in the past 6 years. Moreover, equity investment income from Formosa Petrochemical and FPC USA were TWD29.90bn in 2017, which supported the Company’s consolidated pretax profit to break the record high level of TWD51.6bn in 2010 and achieve the highest level in the past 63 years since the Company established.

In 2017, the major economies such as the US, Eurozone, Japan, and China showed solid recovery, which resulted in stable growth of global

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trade and the recovery of investments, as well as the stronger growth in emerging markets, making the way out of the shadow of slow global economic growth. According to the forecast made by IMF, global economic growth accelerated by 0.5% points to 3.7% in 2017. Thanks to the global economic recovery, the growth of Taiwan’s economy also showed positive momentum. However, the growth was mainly driven by stronger export. Domestic investments decreased on the contrary, which as a result created a polarization of “warm on the outside, but cool in the inside”.

In addition, the long-term weakness of Taiwan domestic investments environment has made investment rate drop from an average of 27% in the 1990s to an average of 21% in the past 5 years, which was the lowest level in the past 50 years. As a result, Taiwan’s economic growth was slower than the global average for 6 out of the past 7 years. It is obvious that the lagging economic growth in Taiwan has already become a normal situation that leads to stagnant salary growth. The economic issues that Taiwan is facing are getting more and more serious.

The long-term weakness of investment environment in Taiwan was largely due to the environmental assessment system, which allows the ideology of environmental protection override the industry development. As a result, many business opportunities were lost as large scale investment projects were stuck in the long reviewing process. Moreover, the local counties where the factories are located cannot benefit from the contribution of corporate income tax due to the inappropriate financial and tax planning. In addition, the society is brimming with the ideology of populism, which makes all policies that are positive for industry development be considered as “lining moguls’ pockets”. While business would like to stay in Taiwan and to help improve Taiwan’s economic situation, under this circumstance, business dares not to and cannot invest. Take the Company as an example, the amount of depreciation reached to TWD10.3bn in 2009, but due to the investment obstacles, the amount was only TWD5.2bn in 2017, which was a reflection of the Company’s decreasing investment in Taiwan. The Company can only invest in

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overseas markets in order to seek for a sustainable development. On the contrary, markets that the Company exported to are seeking investments aggressively and expanding new petrochemical capacities. In the long run, the situation will continue to limit the space for industry and economic developments in Taiwan.

Furthermore, while export accounts for more than 60 percent of Taiwan GDP, Taiwan’s participation in the international Free Trade Agreement (FTA) coverage is poor at less than 10%, which is much lower than other export-oriented countries such as Japan, South Korea and Singapore. While the trade protectionism atmosphere has gradually increased, and the upcoming formation of "Regional Comprehensive Economic Partnership Agreement (RCEP)" in Asia and the “Comprehensive and Progressive Agreement for Trans-Pacific Partnership Agreement (CPTPP)”, Taiwan has been excluded in the discussion. Taiwan will be marginalized, and our industries will find it very difficult to survive or further develop, if Taiwan government is not actively seeking a solution of the breakthrough for the trade tariff obstacle.

We hope that the government can accelerate the revision of “Environmental Impact Assessment Act”, give back the competency of environmental assessment to the government authority that in charge of the relevant end-enterprise, and to simplify the environmental assessment process. In addition, the government should set up a fiscal tax system with investment incentives and create a favorable investment environment for the industry to dissolve the populist atmosphere and enhance businesses’ confidence in investing in Taiwan. In order to make a breakthrough of the above difficulties and to keep businesses in Taiwan and develop sustainably, the government should understand the market mechanism and the problem of the unequal trade tariff towards the globalization roadmap, as well as make effort to join RCEP, CPTPP and sign FTA with main trading partners.

In view of the difficulty in domestic investment and global trade barrier, the Company continued to develop high-value differentiated products in 2017, which saw sales volume up 11% from 2016, and

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meanwhile to diversify market concentration risks by lowering the export to China from 42.6% of total sales in 2016 to 42.1% in 2017. The Company has also aggressively developed its business and customer service in Southeast Asia, Europe, Middle East, Africa, India and other emerging markets by expanding its onsite technical service offices in Vietnam, Germany, United Arab Emirates, and India. Separately, margins of nitrogen tri-fluoride (NF3) and electronic-grade ammonia (EG NH3) business were impacted by oversupply and small production scale. The Company had worked hard to improve this business but still cannot turn it around. Therefore, the Company shut down the production of HCFC plant after receiving the approval from board of directors in March 2017.

In an effort to develop circular economy, promote the improvement projects, reduce the consumption of water, energy, and the liquid usage volume per unit, the Company accomplished 434 projects in 2017 and resulted in a total benefit of TWD460mn. Aside from this, by promoting Industrial 4.0 and the automatic selling system, production and sales efficiency has come into effect on PVC automatic selling system, and the Company has expanded the application towards PE and PP. Meanwhile, in order to increase the product quality, optimize the operation and formulation and dispatch the power units, the Company has improved the production process and launched 42 improvement projects through instant and historical production data analysis, and expects to complete all the implementation by end of 2018. Apart from this, the Company has introduced AI technique into the production process, and cooperated with Academia Sinica on the AI production procedure improvement to increase product quality and production efficiency. The Company also established an innovation platform to hold seminars semi-annually and boost up the innovation atmosphere. There have been more than 50 ideas proposed on an accumulated basis so far. By the means mentioned above, the Company is able to gradually pursue the rationalization, strengthen the business essence, overcome the operating difficulties and continue to grow the business.

The Company and its China Ningbo subsidiary mainly produce

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plastics and chemical fiber raw materials. In 2017, sales volume of PVC increased 5% to 1,608K tons driven by market diversification with higher sales in New Zealand, Australia, Middle East and Turkey. The Company’s caustic soda sales volume was 1,430K tons in 2017, up 9% from 2016 given, (1) rising demand for metallic aluminum and aluminum oxide due to global recovery in automobile and industrial industry, (2) increasing demand for caustic soda due to severe environmental inspection in China. China has been monitored stringently on the exhaust emissions and waste water treatment, which should comply with the standards. The Company’s HDPE products have expanded to differentiated products like pipe grade, blow molding grade and fiber grade HDPE, and aggressively diversified the market to Southeast Asia and Middle East, however, as the severe competitions in China, sales of general blown film grade HDPE decreased. As a result, HDPE sales volume was 491K tons in 2017, down 1% from 2016. The Company’s EVA sales volume was 247K tons in 2017, up 9% from 2016 due to (1) production increased significantly in 2017 due to Ningbo EVA plant started mass production in May 2016, even though EVA plant in Mailiao complex conducted maintenance shutdown, (2) sales expansion in differentiated products, VA forming grade product. The Company’s LLDPE sales volume was 207K tons in 2017, up 4% from 2016 due to the success in the promotion of the Company’s injection grade LLDPE differentiated products in spite of the decreasing sales in general blown film grade HDPE due to the tight competition in China and the US market as there were new supplies coming on stream. The Company’s AE sales volume was 508K tons in 2017, up 5% from 2016 due to (1) lower run rate of other AE suppliers following the severer environmental inspection in China, (2) stronger demand driven by hurricane in Texas in August 2017, which caused the supply shortage in the market. The Company’s carbon fiber sales volume was 4.7K tons in 2017, up 32% from 2016 due to the rising demand for wind power. The Company’s sales volume of NBA, which is mainly for captive use by AE plants, decreased 1% to 220K tons in 2017 due to oversupply in Asia market and the maintenance shutdown in 4Q17. Sales volume of SAP increased 13% from

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2016 to 132K tons in 2017 mainly due to (1) Ningbo SAP phase 2 capacity started production, (2) aggressive promotion on differentiated products, (3) development of customized products for China, Turkey, and Southeast Asia clients. Sales volume of PP decreased 14% from 2016 to 936K tons in 2017 due to (1) capacity upgrade of PP plant in Linyuan after maintenance shutdown, (2) strong demand from automobile and home appliance, (3) sales expansion in South and Southeast Asia market. Sales volume of AN and MMA both dropped 5% from 2016 in 2017 to 269K tons and 79K tons, respectively, mainly due to the shipment control on the secure of inventory level. Sales volume of ECH increased 12% from 2016 to 94K tons in 2017 due to a better-than-expected downstream product epoxy. Others such as MTBE also saw higher sales volume from last year in 2017.

In terms of capacity expansion, in order to strengthen its competitiveness, the Company has been aggressively expanding its capacities and conducting debottleneck projects, including the debottleneck project of PP plant in Ningbo, which will increase its PP capacity from 450K tons to 522K tons after the project is completed in 1Q19, as well as the project of the new PDH plant, which will have 600K tons propylene capacity and is expected to complete and start production in 2Q21. In addition, the Company continues on its capacity expansion project in Texas, USA, including (1) a new 400K tons HDPE plant invested by subsidiary company in the US called Formosa Industries Corporation, (2) a new 1.2 million tons ethane cracker under Formosa Olefins, LLC (Formosa USA owns 33%). The two plants are scheduled to start production by the end of 2018 and 1Q19, respectively.

In terms of equity investments, FPC USA (22.61% owned by the Company) generated pretax profit of USD960mn in 2017, down 25% from 2016, mainly due to (1) maintenance shutdown once every 6 years of Olefin No.2 plant (OL-2) in 1Q17, (2) 12-day production halt of plant in Taxes due to hurricane in 3Q17, (3) incident of Olefin No.1 plant (OL-1) in 4Q17. Because of the relatively cheap natural gas and ethane, propane, and butane feedstocks, companies that use natural gas as feedstock are still

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very competitive. Besides, there is no olefin plant scheduled for maintenance shutdown in 2018, along with Trumps policies on tax reduction, energy, and the expansion on infrastructure, these will lead to the increase in the demand for petrochemical products. Therefore, business should be able to grow in 2018 from 2017. In order to expand production scale and continue to leverage on shale gas’ low cost advantage, aside from the ethane cracker expansion project, the Company is conducting the construction of a 400K tpa LDPE plant and a 250K tpa PP plant in Taxes, which are both scheduled to start production by end of 2019.

In addition, profit loss of Fujian Fuxin Special Steel Corporation (29.17% owned by the Company) in 2017 decreased significantly from 2016 given (1) improving stainless steel market condition due to deepening supply side reform in China and the enhancement of the elimination of excess capacity, (2) LME nickel price hiked by 10% from 2016 and pushed product prices higher, (3) record high production and sales volume. Fujian Fuxin is expected to turn profitable in 2018 as (1) according to ISSF forecast, global demand for stainless steel should increase 5.4%, and China to increase 7% in 2018 driven by strong growth of global automobile, home appliance, solar energy industry and strong demand for industrial pipe materials, (2) improvement in steel production process of Fujian Fuxin. Capacity will further increase to 864K tpa from 720K tpa, (3) Fujian Fuxin will develop the super ferritic stainless steel differentiated products, and expects the sales contribution of high added-value on 400 series pure ferritic stainless steel will increase by 20% in 2018 from 2017. In order to enlarge the completeness of the product line and enhance the competitiveness, Fujian Fuxin will conduct the new cold rolling mill plant project with 300K tpa capacity, and expects the plant to start production by 1Q20. Furthermore, Formosa Ha Tinh Steel Corporation, which the Company owns 11.43% equity stake, is constructing an integrated steel plant in Ha Tinh Province, Vietnam, with 7.1mn tpa steel billet capacity. The first blast furnace has started production at the end of May 2017, and its production and selling condition has been smooth so far and has continued to increase the

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capacity utilization rate. The second blast furnace is expected to conduct pilot run in first half of 2018. In addition, the Company and Mitsui Chemicals (Japan) have formed a 50:50 joint venture “Formosa Mitsui Advanced Chemicals Co., Ltd.” in Ningbo. The second phase construction of a 3,500 tpa lithium-ion battery solution plant had finished in Q3 2017 and started production, and total capacity increased to 5,000 tpa from 1,500 tpa. Main customers for Formosa Mitsui Advanced Chemicals Co are electric vehicle and electric bus companies. Formosa Mitsui Advanced Chemicals Co will keep developing new clients and plan to construct the third phase of capacity expansion of 1,500 tpa, and expects to complete the construction by end of 2018.

In terms of research and development, the Company spent TWD1.64bn on R&D in 2017, accounted for 1% of the Company’s revenues. These R&D expenses were mainly spent on developing new formulation, improving production process, increasing product quality, conserving energy consumption, and developing human resources, in order to increase production capacity and lower cost, and to increase technical skills through cooperating with industry peers. Meanwhile, in order to conduct R&D on industrial production technique and to commercialize specialty products, the Company launched 92 R&D projects, including high pseudoplastic and low fogging values PVC homopolymer resin, low-sagging pipe grade HDPE, injection blow molding grade HDPE, high strength wire and cable grade EVA, weather resistant rotational molding grade LLDPE, SAP for pre-making core ultra-thin baby diapers, eco friendly SAP, thermoplastic carbon fiber UD sheet, long carbon fiber reinforced thermoplastic composite, high fluidity melt-blown PP, and high transparent PP. The development in differentiated products and the enhancement in value-added products for downstream have accomplished good results.

Moreover, the Company further enhanced the development of key technology and applied for both domestic and international patent. In 2017, the Company has received approval on 17 patents, and as of the end of 2017, the Company has a total of 138 effective patents. Meanwhile, the

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Company will continue to work with both domestic and international industry experts, government, and academic area to accelerate the interaction and resources integration of research development and production, as well as to speed up the process of commercialization. Also, in order to further strengthen the competitiveness, the Company will incorporate new technologies such as Internet of Things, Automation, and Green Technology to upgrade and expand its R&D capabilities in the area of compounds, circular economy, aerospace and medical materials.

In terms of operational safety and environmental protection, the Company has always been putting equal emphasis on industry developments and environmental protection. As of the end of 2017, the accumulated investments on operational safety, environmental protection, and firefighting has reached TWD19.5bn, which was mainly spent on controlling pollution, saving energy, reducing waste and greenhouse gases, and improving operational safety and firefighting. The Company’s pollution treatment and emissions are better than national regulatory standards.

In 2017, there were 8 business units and 3 employees praised by competent authority. Among them, Mailiao Caustic Soda plant, HDPE plant, and PVC plant received the “Occupational Safety 5-Star Award” from Ministry of Labor and were all praised by Yunlin County for strong performance on occupational safety and health. Mailiao HDPE plant was praised by Water Resources Agency, Ministry of Economic Affairs, for strong performance on water conservation. Also, Mailiao, Renwu and Linyuan plant were praised by Ministry of Health and Welfare for strong performance on creating a healthy working environment. The Company also praised by Department of Environmental Protection of Taipei City Government on strong performance on green purchase.

The Company accomplished 287 improvement projects in 2017 in an effort to save water and energy consumed as well as to reduce greenhouse gas emissions. Total water saved amounted to 3,811 tons/day while greenhouse gas emissions reduction reached 101,985 tons/year. Another 235 improvement projects will be accomplished in 2018, which would

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further conserve water by 3,657 tons/day and reduce greenhouse gas emissions by 117,762 tons/year. Besides, the Company established GPS system for employee safety in order to know well of employees’ movement, enhance operational safety, and continue to promote the “Execution Implementation SOP – Full Participation”, “Advanced Simulation” and “Production Safety Management (PSM)” operations, as a result to reduce abnormal operation and to secure the operation. Moreover, in view of increasing environmental regulations, the Company strengthened the control on equipment component leakage, set up FTIR to monitor air quality instantly, changed Renwu utility plant from coal-based to gas-based, conducted the improvement project on the elimination of while smoke for a total of 6 boiler units in Mailiao, Renwu and Linyuan plant, and promoted water conservation, “processed water not touching ground”, emission and waste reduction, to lower the impact to the environment.

Looking into 2018, global agency is positive on global economic growth momentum and expects GDP to grow by 3.9%. Aside from stable growth in the major economies such as the US, China, Europe Zone and Japan, this will also lead to the continuous growth in emerging markets. IHS forecasts global ethylene capacity will increase around 7.8 million tons in 2018, mainly concentrated in North America, and China. In terms of demand, based on the global ethylene demand growth of 1.2x of GDP growth, incremental demand should be 6.7 million tons in 2018, although supply additions are higher than demand additions, with an 87% forecasted run rate, global ethylene supply demand is rather balanced. Among the new supply additions, there are 7 new ethane crackers with a combined annul ethylene capacity of 10 million tpa in the US. Aside from DowDuPont’s 1.5 million tons ethylene capacity, which has started production in 3Q17, the production start of ExxonMobil and Chevron Phillips Chemical’s ethylene plants were delayed to 1Q18 and 2Q18 due to the lack of technical specialists and the impact from hurricane in August 2017, respectively. The ethylene capacity are 1.5 million tons for each plant, which were originally scheduled to start production at the end of

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2017. The other 4 ethylene capacities will start production after 2019. As a result, US ethylene suppliers cannot fully supply downstream clients in first half of 2018, and the impact of the new supply additions will only come into effect in second half of 2018. In addition, China is the most aggressive country in the development of coal-to-chemical industry. According to the “13th Five-Year Plan for the Demonstration of the Coal Deep Processing Industry” published by China’s National Energy Administration, China will enhance the technique of methanol-to-aromatics (MTA), and to construct million tons of coal-to-chemical capacities. IHS forecasts new coal-to-olefin (CTO) and methanol-to-olefin (MTO) capacities in China will be 4.2 million tons during 2018-2022. However, coal-based chemical production has many environmental issues such as large amount of water and power consumption, high carbon emissions, and environmental pollutions. In addition, under the low oil prices situation, the coal-based chemical production is not economical with high capacity expenditure on water treatment equipment and the high operating costs. Once more downstream derivatives are made from gas-based capacities, product prices might go down and the coal-based chemical production will be no longer competitive.

Furthermore, demand for petrochemical products should increase to support the prices of ethylene, propylene and their downstream derivatives given (1) US President’s, Mr. Trump, tax cut policy and the USD1.5 trillion infrastructure investments, (2) continuous quantitative easing in Eurozone and Japan, (3) China’s investments on infrastructure expansion, promotion on urbanization, and the “One-belt-one-road” project will help maintain a stable economic growth, (4) economic reform released by Indian government, (5) stable global economic growth in 2018, (6) stable oil prices, and, (7) balanced ethylene supply and demand. In terms of China market, which accounts for around 40% of the Company’s total exports, because of the continuous enforcement of supply side reform and de-leveraging, as well as the stricter environmental examination, plants with high-pollution and high-energy-consumption were forced to shut

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down or reduce production volume. These regulations have increased the capacity expenditure for companies in order to meet the environmental requirements, and this may hopefully improve the problem of oversupply and price cutting competition in the past. In addition, China continues to implement the transition of coal-to-gas program, the mid to long-term oil and gas pipeline project, and to ban on plastics waste starting from 2018, which has led to a significant increase in the demand and import of plastics, which will raise the product spreads and is good for Asian petrochemical industry. As a result, the Company expects petrochemical industry to continue to maintain the industry upcycle into 2018 for 4 consecutive years. However, there are still many variables that might affect global economic growth and petrochemical industry, which includes (1) the impact to financial industry on Fed’s reduction on balance sheet and interest rate hike, (2) the uncertainty on the implementation of energy policy easing in US, (3) the rise of global trade protectionism, (4) debt problem in China and the potential bubble in real estate, (5) the impact on oil price from the rising political problem in Middle East and Korea. The Company will still need to respond prudently when it comes to the potential problems mentioned above.

In the new year, as the global climate change and the environmental issue have become widespread public concerns, to pursue the sustainable development, the Company will start from the conduct of corporate governance and the implementation of social responsibility rather than staying out of the global mega trend. In view of the rising of technology innovation and an operating environment that is full of uncertainties, the Company will continue to maintain Formosa Plastics Group’s core value, fully develop circular economy, and to ensure the fulfillment of social responsibility. Aside from this, the Company will raise the run rate as there will be more ethylene and propylene supply provided following the fewer days of maintenance shutdown of ethylene capacity in Taiwan in 2018 from 2017. At the same time, the Company will accelerate the development of new differentiated products and technology, increase the sales contribution of products with high price and high margins, lower

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export volume to China and diversify to South, Southeast Asia, New Zealand, Australia, Africa and other emerging markets, and in addition, to expand the business by setting up technical service offices to provide onsite services.

Moreover, the Company will continue to develop Industrial 4.0 and automatic selling system, as well as to boost up product quality, production efficiency and to lower costs by carrying on the improvement on AI production process and the implementation of AI technique. Furthermore, the Company will create an eco-friendly park and be the role model for the transformation of Taiwan petrochemical industry by promoting the transformation programme of Renwu plant, including the setup of compounds research center, dye-sensitized solar cell plant, chemical & environmental protection experience hall, general showroom in research building, and a research center for AI and Industrial 4.0. Meanwhile, the Company will continue to conduct (1) the debottleneck project of Ningbo PP plant, (2) the investment project of HDPE plant in the US and PDH capacity in Ningbo, and accordingly, to save the growth momentum and expects the Company’s business to challenge another new record in 2018. Chairman: Jason Lin President: Jason Lin In-charge Accountant: Chia-Tse Chang

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Formosa Plastics Corporation

Audit Committee’ Review Report

The Board of Directors has prepared the Company’s 2017 Business Report, Financial Statements, including Consolidated and Individual Financial Statement, and Proposal for Profits Distribution. The CPA firm of KPMG was retained to audit Formosa 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 Formosa Plastics Corporation. According to the Securities and Exchange Act and the Company Act, we hereby submit this report. Please be advised accordingly. Formosa Plastics Corporation Chairman of the Audit Committee: Chi-Lin, Wea

March 22, 2018

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Ratification Items Proposal 1

Proposal: For approval of the 2017 Business Report and Financial Statements as required by the Company Act.

Proposed by the Board of Directors Explanation: 1. The preparation of the Company’s 2017 Consolidated and

Individual Financial Statements were completed. The aforementioned Financial Statement were reviewed by the Audit Committee and approved by the Board Meeting on March 22, 2018, and audited by independent auditors, Ms. Delphi Chen and Mr. Winston Yu, of KPMG. The aforesaid Financial Statements together with the Business Report were reviewed by the Audit Committee, which the Audit Committee’ Review Report is presented.

2. For the aforementioned Business Report, please refer to page 6 through page 18 of the Meeting Handbook. As for the Financial Statements, please refer to page 41 through page 48 of the Handbook. Please approve the Business Report and the Financial Statements.

Resolution:

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Ratification Items Proposal 2

Proposal: For Approval of the Proposal for Distribution of 2017 Profits as required by the Company Act.

Proposed by the Board of Directors Attachment: Please refer to page 49 of the Handbook for the Statement of Profits Distribution, which has been reviewed by the Audit Committee members of Formosa Plastics Corporation and approved by the Board of Directors on March 22, 2018. Resolution:

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Discussion Items (I) Proposal 1 Proposal: To amend the Articles of Incorporation of the Company, the corresponding comparison table for the current and amended articles is attached. Please discuss and resolve.

Proposed by the Board of Directors

Article Current Article Amended Article Reason for

Amendment20 The Board shall consist of

fifteen directors. The

election of directors will be

made by nomination.

Shareholders may elect the

directors from the

candidates list. The total

registered shares held by the

directors shall not be less

than a certain quorum of the

company’s total shares. The

calculation of quorum shall

conform to the method

instructed by the competent

authority.

(Omitted)

The Board shall consist of

eleven to fifteen directors.

The election of directors

will be made by nomination.

Shareholders may elect the

directors from the

candidates list. The total

registered shares held by the

directors shall not be less

than a certain quorum of the

company’s total shares. The

calculation of quorum shall

conform to the method

instructed by the competent

authority.

(Omitted)

To conform to

the needs of

commercial

practice, the

company

proposes to

adjust the

number of

directors to

increase

flexibility.

21 The directors shall elect

among themselves five

directors to serve as the

executive directors,

including one independent

director. The five executive

directors shall elect one of

them to become the

Chairman of the Board and

another person to be the

Vice Chairman. The

Chairman represents the

The directors shall elect at

least three from among

themselves but not more

than one third of all the

directors to serve as the

executive directors,

including one independent

director. The five executive

directors shall elect one of

them to become the

Chairman of the Board and

another person to be the

To refer to

Article 208 of

Company Law

regarding

managing

directors, the

company amend

its Articles of

Incorporation

accordingly.

22

Company and is responsible

for general business. When

the Chairman is on leave or

not able to perform his duty

for any reason, the Vice

Chairman shall act as the

deputy. When the Vice

Chairman is also on leave or

not able to perform his duty,

the Chairman shall appoint

one executive director to act

on his behalf.

Vice Chairman.

The Chairman represents the

Company externally and is

responsible for general

business. When the

Chairman is on leave or not

able to perform his duty for

any reason, the Vice

Chairman shall act as the

deputy. When the Vice

Chairman is also on leave or

not able to perform his duty,

the Chairman shall appoint

one executive director to act

on his behalf.

42 (Omitted) Add “sixty-second

amendment on June 20,

2018” to the existing

Article.

To amend

directors related

articles, the

Company

encloses the

date of the 62nd

amendment.

Resolution:

23

Discussion Items (I) Proposal 2 Proposal: Amendment to the Procedures for Engaging in Derivatives Transactions of the Company submitted for discussion.

Proposed by the Board of Directors Explanation: In order to conform to the needs of commercial practice, certain articles of the Procedures for Engaging in Derivatives Transactions of the Company have been amended. The comparison table for articles before and after amendment is hereby attached. Please determine whether the amendments are reasonable.

Article Article before Amendment Article Article after Amendment

Article 4 The nature of the

Company’s derivatives

transactions can be

classified into “hedging

purposes” and “trading

purposes”, which apply to

different exposure limits,

stop-loss limits and

accounting principles, based

on the purposes of the

transactions.

Article 4 The principle of the

Company’s derivatives

transactions is to manage

volatility resulting from

fluctuation in the financial

markets such as movements

in foreign exchange rates,

interest rates, and asset

price.

Article 5 The total contract amount of

derivatives transactions of

the Company shall not

exceed 50% of the

Company’s net worth, and

the maximum loss limit is

10% of the contract amount

for all contracts in aggregate

or for any individual

contract. The content of

individual derivatives

Article 5 The total contract amount

of derivatives transactions

of the Company shall not

exceed 50% of the

Company’s net worth, and

the maximum loss limit is

10% of the contract amount

for all contracts in

aggregate or for any

individual contract. The

content of individual

24

contract shall be approved

by high-level manager(s),

who is authorized by the

Board of Directors.

Major derivatives

transactions of the Company

requires approved by more

than half of all audit

committee members and

submitted to the Board of

Directors for a resolution. If

the approval by more than

half of all audit committee

members is not obtained, the

aforesaid matter may be

implemented if approved by

more than two-thirds of all

Directors, and the resolution

of the Audit Committee

shall be recorded in the

minutes of the Board of

Directors meeting.

derivatives contract shall be

approved by high-level

manager(s), who is

authorized by the Board of

Directors based on the

scope of the approval level

of the Company.

Major derivatives

transactions of the

Company requires approved

by more than half of all

audit committee members

and submitted to the Board

of Directors for a

resolution. If the approval

by more than half of all

audit committee members is

not obtained, the aforesaid

matter may be implemented

if approved by more than

two-thirds of all Directors,

and the resolution of the

Audit Committee shall be

recorded in the minutes of

the Board of Directors

meeting.

Article 6 The transaction personnel of

the Department, which is in

charge of derivatives

transactions, shall follows

the trading strategy in

accordance with the

approved deal terms and

conditions of derivatives

transactions and execute

trades directly to

Article 6 The transaction personnel

of the Department, which is

in charge of derivatives

transactions, shall follows

the trading strategy in

accordance with the

approved deal terms and

conditions of derivatives

transactions. Also, the

transaction personnel shall

25

counterparties. After the

foresaid trades are done, the


deliver the relevant

transaction receipts to the

settlement personnel to

conduct the settlement

procedures. The settlement

personnel shall proceed

contracts signing, bank

accounts opening,

settlement, accounts closing,

etc. with counterparties in

accordance with the trading

conditions.

execute trades directly with

counterparties. After the

foresaid trades are done, the


deliver the relevant

transaction receipts to the

settlement personnel to

conduct the settlement

procedures. The settlement

personnel shall proceed

contracts signing, bank

accounts opening,

settlement, accounts

closing, etc. with

counterparties in

accordance with the trading

conditions.

Article 7 For the derivatives

transactions of the

Company, the Department

that is charge of

establishing management

regulations shall establish a

comprehensive

management information

system towards the balance

position of the Company,

profit/loss analysis, etc. to

control risk properly and to

respond to abnormal

situations immediately.

Article 7 For the derivatives

transactions of the

Company, the Company

shall establish a

comprehensive

management information

system towards the balance

position of the transactions,

profit/loss analysis, etc. to

control risk properly and to

respond to abnormal

situations immediately.

Article 8 The Company shall compile

monthly report on the status


(including purposes of

hedging and purposes of

Article 8 The Company shall compile

monthly report on the status


engaged in up to the end of

the previous month by itself

26

trading) engaged in up to the

end of the previous month

by itself and enter the

information in the regulated

form into the information

reporting website designated

by the competent securities

authority before the tenth

day of each month. If


which maximum loss for all

or individual contract

exceeds 10% of contract

amount respectively, or any

amendment, termination or

cancellation of the original

contract occurs, the

Company shall report and

make public announcements

accordingly on the

information reporting

website designated by the

competent securities

authority within two days

from the date of occurrence

of the event.

and enter the information in

the regulated form into the




authority before the tenth

day of each month. If


which maximum loss for all

or individual contract

exceeds 10% of contract

amount respectively, or any

amendment, termination or

cancellation of the original

contract occurs, the

Company shall report and

make public announcements

accordingly on the




authority within two days

from the date of occurrence

of the event.

Chapter 4 Accounting Principles (Chapter Deleted)

Article 13 The accounting treatment

towards the Company’s

derivatives transactions will

be conducted in accordance

with the requirements of the

General Accepted

Accounting Principles and

the relevant Financial

Accounting Principle

(Article Deleted)

27

Statement announced by the

Accounting Research and

Development Foundation.

Article 14 When the Company

prepares periodical financial

reports (including annual

reports, semi-annual reports,

quarterly reports and

consolidated reports), the

Company shall disclose the

general relevant items of

derivatives transactions by

product purposes in the

footnotes of the financial

statements in accordance

with the regulations of the

Statements of Financial

Accounting Standards No.

34 ‘Accounting for

Financial Instruments’ and

No. 36 ‘Disclosure and

Presentation of Financial

Instruments’ announced by

the Accounting Research

and Development

Foundation.

(Article Deleted)

Article 15 Regarding the derivatives

products of trading

purposes, in addition to the

general disclosure items, the


net income/loss arising from

the current trading activities

and its item presented in the

income statement by

product types.

(Article Deleted)

28

Article 16 Regarding the derivatives

products of hedging

purposes, in addition to the

general disclosure items, the


following items:

1. Hedging for the exiting

assets or liabilities:

(1) The hedged assets or

the liability amount and

the type of derivatives

products for the

foresaid hedged assets

or liability amount.

(2) The definite but

deferred or realized

profit/loss amount due

to hedging.

2. Hedging for the

anticipated positions

(including future

positions from definite

commitments and

contingent

commitments)：

(1) Description of the

content of the

anticipated

transactions.

(2) Description of the

content of the type of

the adopted derivatives

products.

(3) The definite but

(Article Deleted)

29

deferred profit/loss

amount due to hedging.

Chapter 5 Internal Control and Internal

Audit

Chapter 4 Internal Control and

Internal Audit

Article 17 The Company engaging in

derivatives transactions shall

adopt appropriate risk

management practices with

regards to credit risk, market

risk, liquidity risk, cash flow

risk, operation risk and legal

risk. The personnel who is

responsible for the

derivatives transactions may

not serve concurrently in

other operations such as

confirmation and settlement.

Regarding the

appropriateness assessment

towards the risk

measurement, monitoring

and control, and risk

management procedures, the

President Office of the

Company should

periodically report to the

high-level manager(s), who

is authorized by the Board

of Directors.

Article 13 The Company engaging in

derivatives transactions

shall adopt appropriate risk

management practices with

regards to credit risk,

market risk, liquidity risk,

cash flow risk, operation

risk and legal risk. The

personnel who is

responsible for the


may not serve concurrently

in other operations such as

confirmation and

settlement. Regarding the

appropriateness assessment

towards the risk

measurement, monitoring

and control, and risk

management procedures,

the President Office of the

Company should

periodically report to the

high-level manager(s), who

is authorized by the Board

of Directors.

Article 18 The derivatives trading

positions of the Company

shall be evaluated at least

once a week by the

in-charge department, but

the hedging transactions

Article 14 The derivatives trading

positions of the Company


once a week by the

in-charge department, but

the hedging transactions

30

made for business purposes


twice a month. The manager

of the in-charge department

shall pay attention to the

risk control and monitoring


from time to time, and

periodically supervise and

evaluate the derivatives

transactions to check

whether they are conducted

in accordance with the

related procedures

formulated by the Company

hereof and whether the

attendant risk of these

transactions is within the

capability of the Company.

The foresaid evaluation

reports shall be given to a

high-level manager(s)


Directors for review. If there

is any abnormal situation

highlighted in the market

evaluation reports (e.g. the

holding position has reached

the maximum loss limit), the

Company shall immediately

take necessary measures to

deal with the situation and

report to the Board of

Directors. There shall be

independent directors

attending the Board of

made for business purposes


twice a month. The

manager of the in-charge

department shall pay

attention to the risk control

and monitoring of


from time to time, and

periodically supervise and

evaluate the derivatives

transactions to check

whether they are conducted

in accordance with the

related procedures

formulated by the Company

hereof and whether the

attendant risk of these

transactions is within the

capability of the Company.

The foresaid evaluation

reports shall be given to a

high-level manager(s)


Directors for review. If

there is any abnormal

situation highlighted in the

market evaluation reports

(e.g. the holding position

has reached the maximum

loss limit), the Company

shall immediately take

necessary measures to deal

with the situation and report

to the Board of Directors.

There shall be independent

31

Directors meeting and

expressing their opinions.

directors attending the

Board of Directors meeting

and expressing their

opinions.

Article 19 The Company shall

establish a log book to

record all its derivatives

transaction information,

including types and amounts

of derivatives transactions,

and matters to be evaluated

cautiously in accordance

with Article 18 hereof. The

Company's internal audit

personnel shall be in charge

of periodically assessing the

appropriateness of the

internal control regarding

the derivatives transactions,

and take the responsibility

of auditing the trading

department's compliance

with the Procedures,

analyzing the transaction

cycle, preparing the monthly

auditing report and

submitting the auditing

report to the high-level

management personnel


Directors. If any material

violation is discovered, the

Audit Committee shall be

notified in writing and the

Company should, depending

on the status of such

Article 15 The Company shall

establish a log book to

record all its derivatives

transaction information,

including types and

amounts of derivatives

transactions, and matters to

be evaluated cautiously in

accordance with Article 14

hereof. The Company's

internal audit personnel

shall be in charge of

periodically assessing the

appropriateness of the

internal control regarding

the derivatives transactions,

shall conduct monthly audit

to evaluate whether the

trading department conform

to the Procedures, and shall

prepare the monthly

auditing report accordingly.

If any material violation is

discovered, the Audit

Committee shall be notified

in writing and the Company

should, depending on the

status of such material

violation, penalize the

relevant personnel in

accordance with the Human

Resources Management

32

material violation, penalize

the relevant personnel in

accordance with the Human

Resources Management

Policies.

Policies.

Article 20 The Company’s control and

monitoring procedures

towards the derivatives

transactions by the

Company’s subsidiaries are

as follows:

1. If the Company’s

subsidiaries intend to

conduct derivatives

transactions, the

Company shall ensure

that its subsidiaries

establish their own

“Procedures for Engaging

in Derivatives

Transactions”.

2. The Company’s

subsidiaries shall submit

the reference content of

the derivatives

transactions of the

previous month to the

Company for review by

the fifth date of every

month.

3. If any material violation

is found by the internal

auditors of the

subsidiaries, the

subsidiaries shall submit a

Article 16 The Company’s control and

monitoring procedures

towards the derivatives

transactions by the

Company’s subsidiaries are

as follows:

1. If the Company’s

subsidiaries intend to

conduct derivatives

transactions, the

Company shall ensure

that its subsidiaries

establish their own

“Procedures for

Engaging in Derivatives

Transactions”.

2. The Company’s


the reference content of

the derivatives

transactions of the

previous month to the

Company for review by

the fifth date of every

month.

3. If any material violation

is found by the internal

auditors of the

subsidiaries, the


33

written notice to the

Company of such

violations. The Company

shall closely monitor the

violations and the

resulting improvements.

a written notice to the

Company of such

violations. The Company

shall closely monitor the

violations and the

resulting improvements.

Chapter 6 Additional Provision Chapter 5 Additional Provision

Article 21 After the Procedures are

approved by the Board of

Directors, the Procedures

shall be submitted to the

Shareholders Meeting for

approval before its

implementation. Any

amendment is subject to the

same procedure.

The independent directors'

opinions specifically

expressing dissent or

reservations about any

matter shall be included in

the minutes of the Board of

Directors meeting.

The matters for which

paragraph 1 requires


Directors for a resolution

shall first be approved by

more than half of all audit

committee members. If the

approval by more than half

of all audit committee

members is not obtained, the

aforesaid matter may be



Article 17 After the Procedures are

approved by the Board of

Directors, the Procedures

shall be submitted to the

Shareholders Meeting for

approval before its

implementation. Any

amendment is subject to the

same procedure.

The independent directors'

opinions specifically

expressing dissent or

reservations about any

matter shall be included in

the minutes of the Board of

Directors meeting.

The matters for which

paragraph 1 requires


Directors for a resolution

shall first be approved by

more than half of all audit

committee members. If the

approval by more than half

of all audit committee

members is not obtained,

the aforesaid matter may be



34

Directors, and the resolution

of the Audit Committee

shall be recorded in the

minutes of the Board of

Directors meeting.

Directors, and the

resolution of the Audit

Committee shall be

recorded in the minutes of

the Board of Directors

meeting.

Resolution:

35

Election Items Proposal: The Company’s Directors have their tenure nearly expired. Please elect the Board of Directors to conform to the applicable laws.

Proposed by the Board of Directors Explanation: 1. The Company’s current directors were elected in the Annual

Shareholders’ Meeting on June 25, 2015 and have their tenure expired on June 24, 2018. To conform to the applicable Rule, the Company shall elect 15 directors (including 3 independent directors) using the cumulative voting system. The tenure of new session of Directors (including independent directors) shall be three years, starting June 20, 2018 until June 19, 2021.

2. The election of Directors (including independent directors) shall adopt the candidate nomination system in accordance with Article 192-1 of the Company Act and the Article 20 of the Company's Articles of Incorporation. The Company has examined and approved the qualification of 15 Directors Candidates (including independent directors) in the Board of Directors Meeting on May 8, 2018. The related information of the 12 Director Candidates is shown below:

Name Education Major Experience Shareholding

(Share)

Jason Lin Master of Science in

Environmental

Sciences,

Wageningen

Agricultural

University

Former President of

FPC

Chairman of FPC

and President of

FPC-USA

0

William Wong

Representative of

Formosa Chemicals

& Fibre Corporation

Master of Industrial

Engineering,

University of

Houston

Former President of

FCFC

Chairman of Chinese

National Federation

486,978,692

36

of Industries, FCFC,

Formosa Taffeta and

Formosa Advanced

Technology

Susan Wang

Representative of

Nanya Plastics

Corporation

Barnard College,

U.S.

Former Executive

Vice President of

FPC-USA

Managing Director

of FPC and FPCC

294,793,105

Wilfred Wang

Representative of

Formosa

Petrochemical

Corporation

BA of Mechanical

Engineering,

University of

London

Former Chairman of

FPCC

Chairman of

Formosa Plastics

Marine and Nan Ya

Photonics

131,460,365

C. T. Lee BA of Chemical

Engineering,

National Cheng

Kung University

Former Chairman of

FPC

Chairman of

FPC-USA

632,541

Cher Wang BA of Economics,

University of

California, Berkeley

Former Chairman of

VIA Technologies

Chairman of HTC

7,369,380

Ralph Ho BA of Industrial

Administration,

University of San

Francisco

Former Chairman of

Y F Baxter

International

President of Y F

Chemical

27824,363

K. H. Wu BA of Mechanical

Engineering, Chung

Yuan Christian

University

Former Vice

President of

Formosa Heavy

Industries

President of

Formosa Heavy

Industries

134,537

K. L. Huang BA of Chemical

Engineering, Taipei

Institute of

Technology

Former Senior Vice

President of FPC

Executive Vice

President of FPC

10,400

Cheng-Chung Cheng BA of Chemistry,

National Chung

Former Vice

President of FPC 0

37

Hsing University Senior Vice

President of FPC

Jerry Lin BA of Business

Administration,

National Chengchi

University

Former Vice

President of FPC

Senior Vice

President of FPC

0

Ching-Lian Huang BA of Chemical

Engineering,

Tunghai University

Former Assistant

Vice President of

FPC

Vice President of

FPC

0

The related information of the 3 Independent Director Candidates is shown below:

Name Education Major

Experience Shareholding

(Share)

C. L. Wei

Ph.D. of Economic, Paris of University

Chairman of Waterland Financial Holdings Co., Ltd. Former Chairman of Land Bank of Taiwan

0

C. J. Wu

Ph.D. of Education, National Taiwan Normal University

President of Taiwan University of Education Former Minister of Ministry of Education

0

Yen-Shiang Shih

Ph.D. of Massachusetts Institute of Technology

Chair Professor of Chung Yuan Christian University Chairman of Sustainable and Circular Economy Development Association. Former Minister and Vice Minister of Ministry of Economic Affairs Former Chairman of Chinese Petroleum Corporation

0

Resolution:

38

Discussion Items (II) Proposal 1 Proposal: Appropriateness of releasing the newly elected Directors and the juristic person shareholder which appointed their authorized representatives to be elected as directors, from non-competition restrictions. Please discuss and resolve.

Proposed by the Board of Directors

Explanation: 1. According to Article 209 of the Company Act, any Director

conducting business for himself/herself or on another’s behalf, and the scope of which coincides with the Company’s business scope, shall explain at the Shareholders’ Meeting the essential contents of such conduct and obtain approval from shareholders in the Meeting.

2. Meanwhile, according to Explanation Letter No.89206938, announced by the Ministry of Economic Affairs dated April 24, 2000, when the juristic person shareholder appoints its authorized representatives to be elected as directors according to Article 27-2 of the Company Act, both the juristic person shareholder and the authorized representatives shall be governed by the non-competition restrictions of Article 209 of the Company Act.

3. If the newly-elected Directors and the juristic person shareholder which appoints its authorized representatives to be elected as directors in present year Annual Shareholders’ Meeting violate the non-competition restrictions of Article 209 of the Company Act and the interest of the Company is not impaired, it is proposed to release the Directors and juristic person shareholders which appoints its authorized representatives to be elected as directors after having assumed

39

office from non-competition restrictions for approval. (Proclaim the information of engaging in competitive businesses conducted by the Directors and the juristic person shareholders)

Resolution:

40

6

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

FORMOSA PLASTICS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2017 and 2016

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

2017 2016

Amount % Amount %

4000 Operating revenue (Notes 6(o) and 7) $ 206,709,755 100 180,173,192 100

5000 Operating costs (Notes 6(d)(f)(k)(p) and 7) 173,240,579 84 155,873,996 87

Gross profit 33,469,176 16 24,299,196 13

Operating expenses (Notes 6(c)(f)(k)(p) and 7):

6100 Selling expenses 5,778,400 3 5,318,083 3

6200 Administrative expenses 4,784,185 2 5,175,491 3

6300 Research and development expenses 968,395 - 788,409 -

　　Total operating expenses 11,530,980 5 11,281,983 6

Operating income 21,938,196 11 13,017,213 7

Non-operating income and expenses (Notes 6(c)(e)(q) and 7):

7010 Other income 6,241,452 3 5,288,122 3

7020 Other gains and losses (1,642,268) (1) (1,715,509) (1)

7050 Finance costs (1,527,802) (1) (1,400,343) (1)

7060 Recognized share of profit of associates and joint ventures accounted for using equity method,

net 29,894,765 14 28,624,466 16

　　Total non-operating income and expenses 32,966,147 15 30,796,736 17

Income before income tax 54,904,343 26 43,813,949 24

7950 Less: income tax expense (Note 6(l)) 5,521,490 3 4,421,406 2

Net income 49,382,853 23 39,392,543 22

8300 Other comprehensive income (Notes 6(k)(l)(m)):

8310 Components of other comprehensive income that will not be reclassified to profit or loss

8311 Remeasurements of the net defined benefit liabilities (577,649) - (559,495) -

8320 Share of other comprehensive income of associates and joint ventures accounted for using equity

method (121,817) - 93,130 -

8349 Income tax expense related to items that could not be reclassified subsequently to profit or loss 98,200 - 95,114 -

Total amount of items that could not be reclassified subsequently to profit or loss (601,266) - (371,251) -

8360 Items that could be reclassified subsequently to profit or loss:

8361 Exchange differences on translation of foreign operations (6,363,713) (3) (4,325,453) (3)

8362 Unrealized gains on available-for-sale financial assets 14,838,705 7 13,334,020 8

8370 Share of other comprehensive income of associates and joint ventures accounted for using equity

method 2,508,328 1 1,298,980 1

8399 Income tax benefit related to components of other comprehensive income (loss) 1,236,221 1 341,738 -

Total amount of items that could be reclassified subsequently to profit or loss 12,219,541 6 10,649,285 6

8300 Total other comprehensive income, net of tax 11,618,275 6 10,278,034 6

Total comprehensive income $ 61,001,128 29 49,670,577 28

Basic earnings per share (Note 6(n))

Before After Before After -before/after income tax $ 8.62 7.76 6.88 6.19

See accompanying notes to consolidated financial statements.

41

5

(English Translation of Financial Statements and Report Originally Issued in Chinese)


Statements of Comprehensive Income


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

2017 2016

Amount % Amount %

4000 Operating revenue (Notes 6(o) and 7) $ 170,273,933 100 149,792,471 100

5000 Operating costs (Notes 6(d)(k)(p) and 7) 140,753,716 83 129,509,789 86

Gross profit 29,520,217 17 20,282,682 14

5920 Add: Realized profit (loss) from sales 13,195 - (19,177) -

Gross profit from operations 29,533,412 17 20,263,505 14

Operating expenses (Notes 6(c)(f)(k)(p) and 7):

6100 Selling expenses 4,750,260 3 4,474,276 3

6200 Administrative expenses 4,524,232 3 4,504,861 3

6300 Research and development expenses 968,395 - 788,409 1

　　Total operating expenses 10,242,887 6 9,767,546 7

Operating income 19,290,525 11 10,495,959 7

Non-operating income and expenses (Notes 6(c)(e)(f)(q) and 7):

7010 Other income 6,182,632 4 5,228,049 4

7020 Other gains and losses (2,270,887) (1) (414,311) -

7050 Finance costs (964,044) (1) (1,012,699) (1)

7070 Share of profit of subsidiaries, associates and joint ventures accounted for using equitymethod, net 32,631,087 19 28,962,029 19

　　Total non-operating income and expenses 35,578,788 21 32,763,068 22

Income before income tax 54,869,313 32 43,259,027 29

7950 Less: income tax expense (Note 6(l)) 5,486,460 3 3,866,484 3

Net income 49,382,853 29 39,392,543 26

8300 Other comprehensive income (Notes 6(k)(l)(m)) :

8310 Item that could not be reclassified subsequently to profit or loss

8311 Remeasurements of the net defined benefit liabilities (577,649) - (559,495) -

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 reclassifiedto profit or loss

(121,817) - 93,130 -

8349 Income tax expense related to items that could not be reclassified subsequently to profit or loss 98,200 - 95,114 -

Total amount of items that could not be reclassified subsequently to profit or loss (601,266) - (371,251) -

8360 Items that could be reclassified subsequently to profit or loss:

8361 Exchange differences on translation of foreign operations (6,363,713) (4) (4,325,453) (3)

8362 Unrealized gains on available-for-sale financial assets 14,838,705 9 13,334,020 9

8391 Other components of other comprehensive income that will be reclassified to profit or loss 2,508,328 1 1,298,980 1

8399 Income tax benefit related to components of other comprehensive income 1,236,221 1 341,738 -

Total amount of items that could be reclassified subsequently to profit or loss 12,219,541 7 10,649,285 7

8300 Total other comprehensive income, net of tax 11,618,275 7 10,278,034 7

Total comprehensive income $ 61,001,128 36 49,670,577 33

Basic earnings per share

9710 -before income tax (Note 6(n)) $ 8.62 7.76 6.80 6.19

See accompanying notes to financial statements.

42

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Cas

h an

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te 6

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11

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7,9

71

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62

7,9

50

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11

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　A

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rela

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ties

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s 6

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d 7

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12

10

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arti

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tes

6(c

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d 7

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53

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14

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To

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ass

ets

18

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tes

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4,0

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7)

8,4

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7,6

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42

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te 7

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11

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23

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23

22

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21

5,9

97

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51

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7)

13

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34

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73

　　

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tal

curr

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lia

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74

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lia

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6

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tes

6(i

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21

4,8

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70

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92

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70

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3,6

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7,7

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22

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22

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curr

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11

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46

8

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

FORMOSA PLASTICS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows


(Expressed in Thousands of New Taiwan Dollars)

2017 2016

Cash flows from operating activities:

Income before income tax $ 54,904,343 43,813,949

Adjustments for:

Incomes and expenses not affecting cash flows:

Depreciation expense 7,904,294 8,362,993

Amortization expense 545,805 599,995

(Reversal of provision) provision for bad debt expense (1,678) 1,747

Interest expense 1,527,802 1,400,343

Interest income (483,538) (364,369)

Dividend income (5,606,734) (4,771,936)

Share of profit of associates and joint ventures accounted for using equity method (29,894,765) (28,624,466)

Gain on disposal of property, plant and equipment (9,851) (324)

Gain on disposal of investments (1,762,716) -

Impairment loss on non-financial assets 2,347,867 -

Unrealized foreign exchange loss (gain) 110,414 (268,508)

Total adjustments to reconcile loss (25,323,100) (23,664,525)

Changes in operating assets and liabilities:

Notes receivable (1,203,340) 66,247

Accounts receivable (68,277) (1,875,198)

Accounts receivable due from related parties (983,188) (399,123)

Other receivable (214,914) 49,548

Other receivable due from related parties (63,700) 5,681,948

Inventories (570,634) 705,242

Other current assets 207,550 350,572

Total changes in operating assets (2,896,503) 4,579,236

Accounts payable (767,294) 215,897

Accounts payable to related parties 760,581 1,042,620

Other payable (824,589) (514,763)

Other payable to related parties 145,079 8,695

Other current liabilities 398,591 1,043,098

Net defined benefit liability (382,226) (2,368,608)

Total changes in operating liabilities (669,858) (573,061)

Total changes in operating assets and liabilities (3,566,361) 4,006,175

Total adjustments (28,889,461) (19,658,350)

Cash inflow generated from operations 26,014,882 24,155,599

Interest received 475,019 336,821

Dividends received 22,771,652 17,940,059

Interest paid (1,459,944) (2,005,757)

Income taxes paid (1,720,079) (3,878,393)

Net cash flows provided by operating activities 46,081,530 36,548,329

Cash flows used in investing activities:

Acquisition of available-for-sale financial assets - (4,918,250)

Proceeds from disposal of available-for-sale financial assets 2,560,664 -

Acquisition of financial assets at cost (1,737,518) (29,223)

Acquisition of investments accounted for using equity method (1,989,918) (2,643,960)

Acquisition of property, plant and equipment (6,710,685) (3,412,447)

Proceeds from disposal of property, plant and equipment 18,903 5,794

Decrease (increase) in other receivables due from related parties 4,238,401 (9,677,158)

(Increase) decrease in other financial assets (475,640) 227,237

Net cash flows used in investing activities (4,095,793) (20,448,007)

Cash flows used in financing activities:

Increase in short-term borrowings 338,088,287 233,730,759

Decrease in short-term borrowings (347,987,424) (221,119,522)

(Decrease) increase in short-term notes and bills payable (504,057) 10,000,000

Proceeds from issuing bonds 6,988,624 -

Repayments of bonds (10,750,000) (14,650,000)

Proceeds from long-term debt 3,049,851 4,521,240

Repayments of long-term debt (6,817,635) (3,186,682)

Increase (decrease) in due to related parties (recognized as other payables－related parties) 3,780,972 (1,312,547)

Decrease in other non-current liabilities (39,234) (199,959)

Cash dividends paid (29,224,705) (23,360,116)

Net cash used in financing activities (43,415,321) (15,576,827)

Effect of exchange rate changes on cash and cash equivalents (282,760) (402,728)

Net decrease (increase) in cash and cash equivalents (1,712,344) 120,767

Cash and cash equivalents at beginning of year 19,877,489 19,756,722

Cash and cash equivalents at end of year $ 18,165,145 19,877,489

See accompanying notes to consolidated financial statements.

47

7

(English Translation of Financial Statements and Report Originally Issued in Chinese)


Statements of Cash Flows


(Expressed in Thousands of New Taiwan Dollars)

2017 2016

Cash flows from operating activities:

Income before income tax $ 54,869,313 43,259,027

Adjustments for:

Incomes and expenses not affecting cash flows:

Depreciation expense 5,238,826 5,672,779

Amortization expense 197,548 189,341

(Reversal of provision) provision for bad debt expense (1,678) 1,747

Interest expense 964,044 1,012,699

Interest income (424,718) (304,296)

Dividend income (5,606,734) (4,771,936)

Share of profit of subsidiaries, associates and joint ventures accounted for using equity method (32,631,087) (28,962,029)

Gain on disposal of property, plant and equipment (10,925) (3,295)

Gain on disposal of investments (1,762,716) -

Impairment loss on non-financial assets 2,347,867 -

Realized (gain) loss on from sales (13,195) 19,177

Unrealized foreign exchange loss (gain) 115,764 (294,232)

Total adjustments to reconcile profit (31,587,004) (27,440,045)

Changes in operating assets and liabilities:

Notes receivable 230,880 (142,340)

Accounts receivable 304,747 (1,381,713)

Accounts receivable due from related parties (1,013,030) (720,653)

Other receivable (260,310) (3,960)

Other receivable due from related parties 364,463 6,907,719

Inventories (638,783) 1,002,444

Other current assets (1,054) (464,999)

Total changes in operating assets (1,013,087) 5,196,498

Accounts payable (767,294) 573,054

Accounts payable to related parties 729,231 1,175,560

Other payable (842,978) (512,734)

Other payable to related parties 82,955 337

Other current liabilities 128,379 983,021

Net defined benefit liability (382,226) (2,368,608)

Total changes in operating liabilities (1,051,933) (149,370)

Total changes in operating assets and liabilities (2,065,020) 5,047,128

Total adjustments (33,652,024) (22,392,917)

Cash inflow generated from operations 21,217,289 20,866,110

Interest received 411,427 299,653

Dividends received 22,771,652 17,940,059

Interest paid (989,517) (1,093,506)

Income taxes paid (1,512,821) (3,265,967)

Net cash flows from operating activities 41,898,030 34,746,349

Cash flows from (used in) investing activities:

Acquisition of available-for-sale financial assets - (4,918,250)

Proceeds from disposal of available-for-sale financial assets 2,560,664 -

Acquisition of investments accounted for using equity method (3,421,878) (4,605,470)

Acquisition of property, plant and equipment (2,239,369) (1,968,340)

Proceeds from disposal of property, plant and equipment 18,773 5,661

Decrease (increase) in other receivables due from related parties 4,466,799 (9,722,987)

(Increase) decrease in other financial assets (264,716) 274,225

Net cash flows from (used in) investing activities 1,120,273 (20,935,161)

Cash flows used in financing activities:

Increase in short-term loans 317,537,132 200,722,155

Decrease in short-term loans (325,322,516) (188,536,028)

(Decrease) increase in short-term notes and bills payable (504,057) 10,000,000

Proceeds from issuing bonds 6,988,624 -

Repayments of bonds (10,750,000) (14,650,000)

Proceeds from long-term debt 700,000 3,800,000

Repayments of long-term debt (3,403,175) (1,709,724)

Increase (decrease) in other non-current liabilities 62,667 (275,842)

Cash dividends paid (29,224,705) (23,360,116)

Net cash flows used in financing activities (43,916,030) (14,009,555)

Effect of exchange rate changes on cash and cash equivalents (68,455) 198,935

Net (decrease) increase in cash and cash equivalents (966,182) 568

Cash and cash equivalents at beginning of year 15,465,516 15,464,948

Cash and cash equivalents at end of year $ 14,499,334 15,465,516

See accompanying notes to financial statements.

48

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49

4

Independent Auditors’ Report

To the Board of Directors of Formosa Plastics Corporation:

Opinion

We have audited the consolidated financial statements of Formosa Plastics Corporation (the "Company") and itssubsidiaries (together referred to as the "Group"), which comprise the consolidated statements of financialposition as of December 31, 2017 and 2016, and the consolidated statements of comprehensive income, changesin equity and cash flows for the years ended December 31, 2017 and 2016, and notes to the consolidatedfinancial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other auditors, the accompanying consolidated financialstatements present fairly, in all material respects, the consolidated financial position of the Group as ofDecember 31, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for theyears ended December 31, 2017 and 2016 in accordance with the Regulations Governing the Preparation ofFinancial Reports by Securities Issuers and with the International Financial Reporting Standards (“ IFRSs” ),International Accounting Standards (“ IASs” ), interpretation as well as related guidance endorsed by theFinancial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit in accordance with the “Regulations Governing Auditing and Certification of FinancialStatements by Certified Public Accountants” and the auditing standards generally accepted in the Republic ofChina. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for theAudit of the Consolidated Financial Statements section of our report. We are independent of the Group inaccordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“ theCode”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that theaudit evidence we have obtained during our audits and the reports of the other auditors are sufficient andappropriate 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 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.

1. Revenue Recognition

As the transfer of risks and rewards from the sales occurs at different points in time, it exposes the riskwherein revenue may not be recognized within the proper period. For this reason, revenue recognition isconsidered to be one of the key audit matters. The accounting policies and the related information forrevenue recognition were discussed in Notes 4(o) and 6(o) to the consolidated financial statements.

11049 5 7 68 ( 101 ) Telephone + 886 (2) 8101 6666Fax + 886 (2) 8101 6667Internet kpmg.com/tw

KPMG, a Taiwan partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

KPMG

68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Xinyi Road, Taipei City 11049, Taiwan (R.O.C.)

50

4-1

The principal audit procedures we have performed to address the aforementioned key audit matter includedassessing the rationality of accounting treatment for revenue recognition; vouching the original salesdocuments according to the transactions with the customers during a selected period of time before and afterthe balance sheet date to evaluate whether the revenue is recorded appropriately.

2. Valuation of Inventories

The Group measured the cost and net realizable value of inventory and recognized a loss on the balance sheetdate according to IAS 2 (including loss on obsolescence of inventories); However, to determine whether ornot the loss of inventories should be recognized depends on the subjective judgment of the management. Forthis reason, the valuation of inventories is considered to be one of the key audit matters. The accountingpolicies and the related information for the valuation of inventories were discussed in Notes 4(h), 5 and 6(d)to the consolidated financial statements.

The principal audit procedures we have performed to address the aforementioned key audit matter includedassessing the appropriateness of the policy on inventory valuation and slack loss recognition; ensuringwhether the process of inventory valuation is in conformity with the accounting policies, confirming the salesprice adopted by the management and the changes in the market price of inventory in the period after thebalance sheet date; and sampling procedures to assess the reasonableness of the net realizable value ofinventory.

Other Matter

We did not audit the financial statements of certain investee companies under equity method. The Group'sinvestments in the aforementioned investee companies constituted 32.31% and 31.25% of the consolidated totalassets as of December 31, 2017 and 2016, respectively; and the recognized shares of profit of associatesaccounted for using equity method of these investee companies constituted 53.15% and 63.66% of theconsolidated income before tax for the years ended December 31, 2017 and 2016, respectively. Theconsolidated financial statements of the aforementioned investee companies were audited by other auditorswhose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for theseinvestee companies, is based solely on the reports of other auditors.

We have also audited the parent company only financial statements of the Company as of and for the yearsended December 31, 2017 and 2016 and have expressed an unqualified opinion thereon.

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 Regulations Governing the Preparation of Financial Reports by Securities Issuers and with theInternational Financial Reporting Standards, International Accounting Standards, IFRIC interpretations and SICinterpretations as endorsed by the Financial Supervisory Commission of the Republic of China, and for suchinternal control as management determines is necessary to enable the preparation of consolidated financialstatements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s 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.

51

4-2

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 auditors’ 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 auditor’s 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 auditor’s 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.

52

4-3

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 areHsiu-Lan Chen and Chi-Lung Yu.

KPMG

Taipei, Taiwan (Republic of China)March 22, 2018

Notes to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results ofoperations and cash flows in accordance with IFRSs as endorsed by the FSC of the Republic of China and not those of any otherjurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted andapplied in the Republic of China.

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, theEnglish and Chinese language independent auditors’ report and consolidated financial statements, the Chinese version shall prevail.

53

3

Independent Auditors’ Report

To the Board of Directors of Formosa Plastics Corporation:

Opinion

We have audited the financial statements of Formosa Plastics Corporation (the “Company”) which comprise thestatements of financial position as of December 31, 2017 and 2016, and the statements of comprehensiveincome, changes in equity and cash flows for the years ended December 31, 2017 and 2016, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other auditors, the accompanying financial statementspresent fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016,and its financial performance and its cash flows for the years ended December 31, 2017 and 2016 in accordancewith the Regulations Governing the Preparation of Financial Reports by Securities Issuer.

Basis for Opinion

We conducted our audit in accordance with the “Regulations Governing Auditing and Certification of FinancialStatements by Certified Public Accountants” and the auditing standards generally accepted in the Republic ofChina. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for theAudit of the Financial Statements section of our report. We are independent of the Company in accordance withthe Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we havefulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence wehave obtained during our audits and the report of the other auditors are sufficient and appropriate to provide abasis 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

As the transfer of risks and rewards from the sales occurs at different points in time, it exposes the riskwherein revenue may not be recognized within the proper period. For this reason, revenue recognition isconsidered to be one of the key audit matters. The accounting policies and the related information forrevenue recognition were discussed in Notes 4(o) and 6(o) to the consolidated financial statements.

The principal audit procedures we have performed to address the aforementioned key audit matter includedassessing the rationality of accounting treatment for revenue recognition; vouching the original salesdocuments according to the transactions with the customers during a selected period of time before and afterthe balance sheet date to evaluate whether the revenue is recorded appropriately.

11049 5 7 68 ( 101 ) Telephone + 886 (2) 8101 6666Fax + 886 (2) 8101 6667Internet kpmg.com/tw

KPMG, a Taiwan partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

KPMG

68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Xinyi Road, Taipei City 11049, Taiwan (R.O.C.)

54

3-1

2. Valuation of Inventories

The Group measured the cost and net realizable value of inventory and recognized a loss on the balance sheetdate according to IAS 2 (including loss on obsolescence of inventories); however, to determine whether ornot the loss of inventories should be recognized depends on the subjective judgment of the management. Forthis reason, the valuation of inventories is considered to be one of the key audit matters. The accountingpolicies and the related information for the valuation of inventories were discussed in Notes 4(g), 5 and 6(d)to the consolidated financial statements.

The principal audit procedures we have performed to address the aforementioned key audit matter includedassessing the appropriateness of the policy on inventory valuation and slack loss recognition; ensuringwhether the process of inventory valuation is in conformity with the accounting policies, confirming the salesprice adopted by the management and the changes in the market price of inventory in the period after thebalance sheet date; and sampling procedures to assess the reasonableness of the net realizable value ofinventory.

Other Matter

We did not audit the financial statements of certain investee companies under equity method. The Company's

investments in the aforementioned investee companies constituted 33.77% and 32.70% of the total assets as ofDecember 31, 2017 and 2016, respectively; and the recognized shares of profit of associates accounted for using

equity method of these investee companies constituted 53.19% and 64.47% of the income before tax for theyears ended December 31, 2017 and 2016, respectively. The financial statements of the aforementioned investeecompanies were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as itrelates to the amounts included for these investee companies, is based solely on the reports of other auditors.

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 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.

55

3-2

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.

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 auditor’s report to the related disclosures in the financial 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 auditor’s 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 appropriate audit evidence regarding the financial information of the investment in otherentities accounted for using the equity method to express an opinion on this financial statements. We areresponsible for the direction, supervision and performance of the audit. We remain solely responsible for ouraudit 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.

56

3-3

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 auditor’s 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 areHsiu-Lan Chen and Chi-Lung Yu.

KPMG

Taipei, Taiwan (Republic of China)March 22, 2018

Notes to Readers

The accompanying financial statements are intended only to present the financial position, results of operations and cash flows inaccordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuer and not those of any otherjurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied inthe Republic of China.

The independent auditors’ 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’ report and financial statements, the Chinese version shall prevail.

57

Articles of Association of

Formosa Plastics Corporation Amended and reinstated by General Shareholders Meeting on June, 17 2016

Chapter I General Provisions

Article 1: The Company is incorporated under the name of Fu-mao Plastics

Corporation, a private company limited by shares, in accordance with

Company Act. On January 14, 1957, the Company’s extraordinary

shareholders meeting passed a resolution to change its name to

Formosa Plastics Corporation, which has been given the effect by the

approval of competent authority as of March 18, 1957.

Article 2: Scope of Business:

(1)B202010: Nonmetallic Mining

(2)C199990: Other Food Manufacturing Not Elsewhere Classified

(3)C801010: Basic Industrial Chemical Manufacturing

(4)C801020: Petrochemical Manufacturing

(5)C801100: Synthetic Resin & Plastic Manufacturing

(6)C801120: Manmade Fiber Manufacturing

(7)C801990: Other Chemical Materials Manufacturing

(8)C802120: Industrial Catalyst Manufacturing

(9)C802170: Poisonous Chemical Material Manufacturing

(10)C805020: Plastic Sheets & Bags Manufacturing

(11)C901070: Stone Products Manufacturing

(12)CB01010: Machinery and Equipment Manufacturing

(13)CC01080: Electronic Parts and Components Manufacturing

(14)D101050: Steam and Electricity Paragenesis

(15)D301010: Water Supply

(16)D401010: Heat Energy Supplying

(17)E603050: Cybernation Equipments Construction

(18)H701010: Residence and Buildings Lease Construction and

Development

(19)H701040: Specialized Field Construction and Development

(20)ID01010: Metrological Instruments Identify

(21)IZ99990: Other Industry and Commerce Services Not Elsewhere

58

Classified

(22)J101050: Sanitary and Pollution Controlling Services

(23)ZZ99999: All business items that are not prohibited or restricted by

law, except those that are subject to special approval

Article 3: The Company is headquartered in Kaohsiung City, ROC and may set

up factories or branch offices in the country or at overseas locations

when necessary. Such establishments, modifications and abolishment

will be subject to the resolutions of the Meeting of Directors.

Article 4: The Company may provide endorsement for the related business. The

total investment made by the Company may exceed forty percent

(40%) of its paid-up capital.

Article 5: Notice of the Company will be published in a manner prescribed in

Article 28 of Company Act.

Chapter II Shares

Article 6:The registered capital of the Company is sixty-three billion six hundred

fifty-seven million four hundred seven thousand eight hundred ten New

Taiwan dollars, divided into six billion three hundred sixty-five million

seven hundred forty thousand seven hundred eighty-one full capital

shares having a par value of ten New Taiwan dollars.

Article 7: The Company may exempt from printing share certificates but shall

register with Central Securities Depository for each share issued.

Article 8: A shareholder shall provide his address and personal seal to receive or

transfer any share.

Article 9: (Omitted)



Article 12: The registration of share transfer will be halted within sixty days prior

to a general meeting, thirty days prior to an extraordinary meeting or

five days prior to the closing date regarding a distribution of dividends

and bonus or other interests.

Chapter III Shareholders Meeting

Article 13: A shareholders meeting can be a general meeting or an extraordinary

meeting. The Company’s Board of Directors shall convene the annual

general meeting once every year within six month after the end of each

59

fiscal year. The Board of Directors may convene an extraordinary

meeting whenever necessary unless the Company Act suggests

otherwise.

Article 14: The meeting notice shall be published and given to all shareholders at

least thirty days prior to a general meeting and fifteen days prior to an

extraordinary meeting. The notice shall specify the purpose of such

meeting and may be made by electronic communication pursuant to

the receiving party’s consent.

Article 15: The Chairman of the Board of Directors will preside the shareholders

meeting. Where the Chairman is on leave or not able to perform his

duty for any reason, the Vice Chairman shall act on his behalf. Where

the Vice Chairman is also on leave or not able to perform his duty for

any reason, the Chairman shall appoint one executive director to act

on his behalf. If the Chairman has made no appointment, the

executive directors shall elect among themselves one person to act as

the deputy.

Article 16: Each share is entitled to cast one vote, unless otherwise deprived in

accordance with Article 179 paragraph 2 of Company Act.

Article 17: A shareholder may appoint a proxy to attend a shareholders meeting

by delivering the proxy form prepared by the Company five days prior

to the shareholders meeting. The proxy vote shares held by one proxy

representing two or more principals may not exceed three percent

(3%) of the total shares issued by the company. Any votes exceeding

such limit will not be counted.

Article 18: Unless otherwise stipulated in Company Act, any resolution of a

shareholder meeting shall be decided by more than one-half the

shareholders presenting at the shareholders meeting consisting of more

than one-half the total voting shares.

Article 19: The meeting minutes shall be prepared for each shareholders meeting,

recording any resolutions being made, the meeting dates, times,

venue, the chairperson’s name, the voting procedures, the summary

and the result of the process, and signed by the chairperson or

stamped.

Such meeting minutes shall be archived throughout the existence of

the Company. The attendance books and proxies shall be retained for

at least one year. The copies of the meeting minutes may be

60

distributed in an electronic manner.

The distribution of the foregoing meeting minutes may be made by

posting a public announcement onto the Market Observation Post

System.

Chapter IV Directors

Article 20: The Board shall consist of fifteen directors. The election of directors

will be made by nomination. Shareholders may elect the directors

from the candidates list. The total registered shares held by the

directors shall not be less than a certain quorum of the company’s total

shares. The calculation of quorum shall conform to the method

instructed by the competent authority.

The foregoing numbers of directors shall include three independent

directors, whose nominations and elections shall be processed in

accordance with the Company Act and as required by the competent

authority of securities and exchange.

The Company established the Audit Committee pursuant to Article

14-4 of the Securities and Exchange Act, where its members consist of

all independent directors. The operation of the Audit Committee as

well as the responsibilities and rights of the members shall be

determined in accordance with the Securities and Exchange Act and

other applicable laws.

Article 21: The directors shall elect among themselves five directors to serve as

the executive directors, including one independent director. The five

executive directors shall elect one of them to become the Chairman of

the Board and another person to be the Vice Chairman. The Chairman

represents the Company and is responsible for general business. When

the Chairman is on leave or not able to perform his duty for any

reason, the Vice Chairman shall act as the deputy. When the Vice

Chairman is also on leave or not able to perform his duty, the

Chairman shall appoint one executive director to act on his behalf.

Article 22: The Board will determine the Company’s operation strategies and

other significant issues. The Board Meeting shall be convened and

presided by the Chairman or by his deputy according to the preceding

paragraph if the Chairman is in absence.

The significant issues of the forgoing paragraph shall include the

61

acquisition and disposal of the Company’s major assets and

properties.

The Board may empower the Chairman to act on behalf of the Board

during the adjournment period. Unless otherwise required by laws or

these articles, any issue concerning the major interest of the company

or related party transaction shall not be decided without a Board

resolution. The powers authorized include:

I. To approve any major contracts;

II. To approve any mortgage of property and loan proposal;

III. To approve the acquisition and disposal of the company’s

general asset and property;

IV. To approve the appointment of directors and supervisors of a

subsidiary;

V. To approve the closing date of capital increase/decrease and the

distribution of cash dividends.

Article 23: Any resolution of the Board shall be determined by one-half of the

directors presenting at the meeting consisting of one-half of the total

directors.

Article 24: A director shall hold the office for a term of three years and may be

reelected. If the election does not complete in time upon the expiration

of any term of office, the director may continue to serve until his

successor is elected.

Article 25: Any vacancy on the Board may be filled by immediate election, which

may be postponed when the vacant directorship is less than one third

of the total directors. The elected director in the place of a vacant

directorship will serve for the remaining period of the previous

director’s term of office.

Article 26: Any resolution made by the Board meeting shall be documented in the

meeting minutes, which shall be signed by the chairperson or stamped

and archived in the Company.

Article 27: The Directors shall present at the Board Meeting in person. If the

Directors may not be present at the meeting for any reason, unless the

Directors resides in oversea location as prescribed by the Company

Act, he/she may submit a proxy form, enumerating the purpose of

convening such meeting, the scope of authorization, to appoint another

director to attend the meeting. A proxy director may not act on behalf

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of more than one person.

If the Board Meeting is conducted by teleconference, directors who

attend the meeting through video conference shall be deemed

attending in person.

The Board shall specify the purposes of a Board Meeting and notify

each director seven days in advance. Notwithstanding, the Board may

convene a meeting where there is an urgency. The notice of Board

Meeting may be served in writing, by email or facsimile.

Article 28: The Board shall have the power to determine the remuneration of

directors based on how a director participates and contributes in the

Company’s operation and with reference to the standards implemented

by the other companies in the same industry.

The Company shall be held liable for any conduct by a director within

his scope of duty during his terms of office and shall maintain valid

director liability insurance to the extent required by the laws.

Chapter V (Omitted)








Chapter VI Manager

Article 36: The Company may have managers. The appointment, removal and

compensation of a manager shall be determined in accordance with

Article 29 of the Company Act.

Article 37: The manager may not serve the equivalent position of another

company at the same time and shall refrain from any activities

identical to the Company’s business whether by self-employment or

for the benefit of others unless otherwise permitted by the Board to

the extent permitted by the laws.

Chapter VII Accounting

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Article 38: The Company’s fiscal year starts from January 1 and ends on

December 31 of each calendar year. The Board shall prepare the

following reports for the ratification by the general shareholders

meeting after the final settlement:

(I) Business Operation Report,

(II) Financial Statements, and

(III) Measures on profit distribution or deficit compensation.

Article 39: If the Company gains any profits in any year, the Company shall

retain 0.05% to 0.5% of the pre-tax profit as employee compensation

before deducting the employee compensation of such year; provided,

however, that the Company shall reserve the amount for compensating

the deficit, if any.

The determination of employee compensation shall be made in

accordance with Article 235-1 of the Company Act.

Article 40: If there are any earnings after final account settlement, the Company

shall pay off the applicable taxes, compensate the accrued deficit and

retain 10% as legal reserve and an additional amount as special

reserve before distributing dividends. If there are any remaining

earnings of such year, the Board may, combining the undistributed

earnings of previous years, propose a shareholder bonus plan and

submit for the approval in a general shareholders meeting.

The special reserve as described in the preceding paragraph includes

(1) any amount reserved for any particular purpose,

(2) investment profit and unused deductions for taxable income

pursuant to equity methods,

(3) and other special reserve prescribed by applicable laws and

regulations.

The Company is in a business of a mature industry and earns its annual

profits on a stable basis. The Company adopts a dividend policy that

allows the distribution to be made in either way of or a combination of

cash dividends, earnings capitalization and capitalization of capital

reserve. At least fifty percent (50%) of the annual distributable earning

remained after deducting the legal reserve and special reserve will be

distributed, preferably in cash. The total percentage of the

capitalization of retained earnings and capital reserve shall not be more

than fifty percent (50%) of the total dividends distributed of such year.

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Chapter VIII Miscellaneous

Article 41: The Company Act and other applicable laws rules shall govern any

matter not prescribed herein.

Article 42: These articles of association are stipulated on July 20, 1954, and

reinstated by first amendment on January 8, 1955, second amendment

on January 14, 1957, third amendment on August 20, 1957, fourth

amendment on July 10, 1958, fifth amendment on March 31, 1960,

sixth amendment on September 7, 1960, seventh amendment on July

3, 1961, eighth amendment on December 31, 1963, ninth amendment

on February 25, 1965, tenth amendment on March 25, 1965, eleventh

amendment on August 20, 1966, twelfth amendment on March 25,

1967, thirteenth amendment on March 25, 1968, fourteenth

amendment on April 21, 1969, fifteenth amendment on April 30,

1970, sixteenth amendment on April 20, 1971, seventeenth

amendment on March 21, 1972, eighteenth amendment on March 20,

1973, nineteenth amendment on March 26, 1974, twentieth

amendment on April 10, 1975, twenty-first amendment on April 15,

1976, twenty-second amendment on August 21, 1976, twenty-third

amendment on April 15, 1977, twenty-fourth amendment on April 18,

1978, twenty-fifth amendment on April 16, 1979, twenty-sixth

amendment on April 2, 1980, twenty-seventh amendment on April 2,

1981, twenty-eighth amendment on April 9, 1982, twenty-ninth

amendment on April 18, 1983, thirtieth amendment on April 27, 1984,

thirty-first amendment on April 29, 1985, thirty-second amendment on

April 24, 1986, thirty-third amendment on April 15, 1977,

thirty-fourth amendment on April 29, 1988, thirty-fifth amendment on

April 28, 1989, thirty-sixth amendment on April 13, 1990,

thirty-seventh amendment on April 16, 1991, thirty-eighth amendment

on April 16, 1992, thirty-ninth amendment on April 16, 1993, forties

amendment on April 26 1994, forty-first amendment on April 14,

1995, forty-second amendment on April 19, 1996, forty-third

amendment on May 6, 1997, forty-fourth amendment on May 8, 1998,

forty-fifth amendment on May 20, 1999, forty-sixth amendment on

May 17, 2000, forty-seventh amendment on May 17, 2001,

forty-eighth amendment on May 24, 2002, forty-ninth amendment on

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May 23, 2003, fiftieth amendment on May 14, 2004, fifty-first

amendment on May 23, 2005, fifty-second amendment on June 5,

2006, fifty-third amendment on June 14, 2007, fifty-fourth

amendment on June 19, 2008, fifty-fifth amendment on June 5, 2009,

fifty-sixth amendment on June 25, 2010, fifty-seventh amendment on

June 20, 2011, fifty-eighth amendment on June 19, 2012, fifty-ninth

amendment on June 14, 2013, sixtieth amendment on June 13, 2014

where the articles regarding the establishment of Audit Committee

and the omission of articles regarding supervisors shall become

effective at the time the terms of office of the supervisors elected by

the general shareholder meeting on June 19, 2012 has expired and the

sixty-first amendment on June 17, 2016.

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Rules of Procedure for Shareholders’ Meetings of Formosa Plastics Corporation

Amended by the Annual Shareholders’ Meeting on June 17, 2016

Article 1: To establish a strong governance system and sound supervisory

capabilities for the Company's shareholders’ meetings, and to strengthen

management capabilities, these Rules are adopted pursuant to the

Corporate Governance Best Practice Principles for Taiwan Stock

Exchange Corp (“TWSE”)/ Taipei Exchange (“TPEx”) Listed

Companies.

Article 2: The rules of procedures for the Company's shareholders’ meetings,

except as otherwise provided by law, regulation, or the Articles of

Incorporation, shall be as provided in these Rules.

Article 3: Unless otherwise provided by law or regulation, the Company's

Shareholders’ Meetings shall be convened by the Board of Directors.

A notice to convene an annual shareholders’ meeting shall be given to

each shareholder no later than 30 days prior to the scheduled meeting

date; while a notice may be given to registered shareholders who own

less than 1,000 shares of nominal stocks no later than 30 days prior to

the scheduled meeting date in the form of a public announcement on the

Market Observation Post System (MOPS) of the TWSE. A notice to

convene a special shareholders’ meeting shall be given to each

shareholders no later than 15 days prior to the scheduled meeting date.

A public notice may be given to registered shareholders who own less

than 1,000 shares of nominal stocks no later than 15 days prior to the

scheduled meeting date in the form of a public announcement on the

MOPS of the TWSE.

To convene a shareholders’ meeting, the Company shall prepare a

meeting handbook. The Company shall prepare electronic versions of a

shareholders’ meeting notice and proxy forms, and causes of and

explanatory materials relating to all proposals, including proposals for

ratification, matters for deliberation, or the election or dismissal of

directors, and upload them to the MOPS no later than 30 days prior to

the scheduled Annual Shareholders’ Meeting date or no later than 15

days prior to the scheduled Special Shareholders’ Meeting date. The

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Company shall prepare electronic versions of a shareholders’ meeting

handbook and supplemental meeting materials and upload them to the

MOPS no later than 21 days prior to the scheduled Annual

Shareholders’ Meeting date or no later than 15 days prior to the

scheduled Special Shareholders’ Meeting date. In addition, the

Company shall also have prepared a shareholders’ meeting handbook

and supplemental meeting materials and made them available for review

by shareholders at any time no later than 15 days prior to the scheduled

Shareholders’ Meeting date. The Meeting Agenda and supplemental

materials shall also be displayed the Company and at the professional

shareholder services agent engaged by the Company as well as being

distributed on-site at the meeting place.

The reasons for convening a shareholders’ meeting shall be specified in

the meeting notice and public announcement. With the consent of the

addressee, the meeting notice may be given in electronic form.

Election or dismissal of directors or supervisors, amendments to the

Articles of Incorporation, the dissolution, merger, or demerger of the

corporation, or any matter under paragraph 1 of Article 185 of the

Company Act or Articles 26-1 and 43-6 of the Securities and Exchange

Act, Articles 56-1 and 60-2 of Regulations Governing the Offering and

Issuance of Securities by Securities Issuers shall be set out in the causes

in the notice to convene the shareholders’ meeting. None of the above

matters may be raised by an extraordinary motion.

A shareholder holding 1 percent or more of the total number of issued

shares may submit to the Company a written proposal for discussion at

an annual shareholders’ meeting. Such proposals, however, are limited

to one item only, and no proposal containing more than one item will be

included in the Meeting Agenda. In addition, when the circumstances of

any subparagraph of paragraph 4 of Article 172-1 of the Company Act

apply to a proposal put forward by a shareholder, the Board of Directors

may exclude it from the Agenda.

Prior to the book closure date before an annual shareholders’ meeting is

held, the Company shall publicly announce that it will receive

shareholder proposals, and the location and time period for their

submission; the period for submission of shareholder proposals may not

be less than 10 days.

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Shareholder-submitted proposals are limited to 300 words, and no

proposal containing more than 300 words will be included in the

meeting agenda. The shareholder making the proposal shall be present

in person or by proxy at the Annual Shareholders’ Meeting and take part

in discussion of the proposal.

Prior to the date for issuance of notice of a shareholders’ meeting, the

Company shall inform the shareholders who submitted proposals of the

proposal screening results, and shall list in the meeting notice the

proposals that conform to the provisions of this article. At the

Shareholders’ Meeting the Board of Directors shall explain the reasons

for exclusion of any shareholder proposals not included in the agenda.

Article 4: For each shareholders’ meeting, a shareholder may appoint a proxy to

attend the meeting by providing the proxy form issued by the Company

and stating the scope of the power authorized to the proxy.

A shareholder may issue only one proxy form and appoint only one

proxy for any given shareholders’ meeting, and shall deliver the proxy

form to the Company no later than 5 days prior to the Shareholders’

Meeting date. When duplicate proxy forms are delivered, the one

received earliest shall prevail unless a declaration is made to revoke the

previous proxy appointment.

After a proxy form has been delivered to the Company, if the

shareholder intends to attend the meeting in person or to exercise voting

rights in writing or by way of electronic transmission, a written notice of

proxy rescission shall be submitted to the Company no later than 2 days

prior to the meeting date. If the rescission notice is submitted after that

time, votes cast at the meeting by the proxy shall prevail.

Article 5: The venue for a shareholders’ meeting shall be the premises of the

Company, or a place easily accessible to shareholders and suitable for a

shareholders’ meeting. The meeting may begin no earlier than 9 a.m.

and no later than 3 p.m.

Article 6: The Company shall specify in its shareholders’ meeting notices the time

during which shareholder attendance registrations will be accepted, the

place to register for attendance, and other matters for attention.

The time during which shareholder attendance registrations will be

accepted, as stated in the preceding paragraph, shall be at least 30

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minutes prior to the time the meeting commences. The place at which

attendance registrations are accepted shall be clearly marked and a

sufficient number of suitable personnel assigned to handle the

registrations.

The Company shall furnish attending shareholders with the meeting

agenda book, annual report, attendance card, speaker's slips, voting

slips, and other meeting materials. Where there is an election of

directors, pre-printed ballots shall also be furnished.

Shareholders and their proxies (collectively, "shareholders") shall attend

shareholders’ meetings based on attendance cards, sign-in cards, or

other certificates of attendance. The Company shall not impose arbitrary

requirements on shareholders to provide additional evidentiary

documents beyond those showing eligibility to attend. Solicitors

soliciting proxy forms shall also bring identification documents for

verification.

When the government or a juristic person is a shareholder, it may be

represented by more than one representative at a shareholders’ meeting.

When a juristic person is appointed to attend as proxy, it may designate

only one person to represent it in the meeting.

Article 7: If a shareholders’ meeting is convened by the Board of Directors, the

meeting shall be chaired by the Chairman. When the Chairman is on

leave or for any reason unable to exercise the powers of the Chairman,

the Vice Chairman shall act in place of the Chairman; if there is no Vice

Chairman or the Vice Chairman also is on leave or for any reason

unable to exercise the powers of the Vice Chairman, the Chairman shall

appoint one of the Managing Directors to act as chair, or, if there are no

Managing Directors, one of the Directors shall be appointed to act as

chair. Where the Chairman does not make such a designation, the

Managing Directors or the Directors shall select from among themselves

one person to serve as chair.

When a Managing Director or a Director serves as chair, as referred to

in the preceding paragraph, the Managing Director or Director shall be

one who has held that position for 6 months or more and who

understands the financial and business conditions of the Company. The

same shall be true for a representative of a juristic person director that

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serves as chair.

It is advisable that shareholders’ meetings convened by the Board of

Directors be chaired by the Chairman, that a majority of the Directors

attend in person, and that at least one member of each functional

committee attend as representative. Attendance details should be

recorded in the Shareholders Meeting minutes. If a shareholders’

meeting is convened by a party having the convening right but other

than the Board of Directors, the convening party shall chair the meeting.

When there are two or more such convening parties, they shall mutually

select a chair from among themselves.

The Company may appoint its attorneys, certified public accountants, or

related persons retained by it to attend a shareholders’ meeting in a

non-voting capacity.

Article 8: The Company, beginning from the time it accepts shareholder

attendance registrations, shall make an uninterrupted audio and video

recording of the registration procedure, the proceedings of the

shareholders’ meeting, and the voting and vote counting procedures.

The recorded materials of the preceding paragraph shall be retained for

at least 1 year. If, however, a shareholder files a lawsuit pursuant to

Article 189 of the Company Act, the recording shall be retained until the

conclusion of the litigation.

Article 9: Quorum at shareholders’ meetings shall be calculated based on numbers

of shares. The quorum shall be calculated according to the shares

indicated by the sign-in cards handed in plus the number of shares

whose voting rights are exercised in writing or by way of electronic

transmission.

The Chair shall call the meeting to order at the appointed meeting time.

However, when the attending shareholders do not represent a majority

of the total number of issued shares, the Chair may announce a

postponement, provided that no more than two such postponements, for

a combined total of no more than 1 hour, may be made. If the quorum is

not met after two postponements and the attending shareholders still

represent less than one third of the total number of issued shares, the

Chair shall declare the meeting adjourned.

If the quorum is not met after two postponements as referred to in the

71

preceding paragraph, but the attending shareholders represent one third

or more of the total number of issued shares, a tentative resolution may

be adopted pursuant to paragraph 1 of Article 175 of the Company Act;

all shareholders shall be notified of the tentative resolution and another

shareholders’ meeting shall be convened within 1 month.

When, prior to conclusion of the meeting, the attending shareholders

represent a majority of the total number of issued shares, the Chair may

resubmit the tentative resolution for a vote by the shareholders’ meeting

pursuant to Article 174 of the Company Act.

Article 10: If a shareholders’ meeting is convened by the Board of Directors, the

meeting agenda shall be set by the Board of Directors. The meeting shall

proceed in the order set by the agenda, which may not be changed

without a resolution of the shareholders’ meeting.

The provisions of the preceding paragraph apply mutatis mutandis to a

shareholders’ meeting convened by a party having the convening right

that is not the Board of Directors.

The Chair may not declare the meeting adjourned prior to completion of

deliberation on the meeting agenda of the preceding two paragraphs

(including extraordinary motions), except by a resolution of the

shareholders’ meeting. If the Chair declares the meeting adjourned in

violation of the rules of procedure, the other members of the Board of

Directors shall promptly assist the attending shareholders in electing a

new chair in accordance with statutory procedures, by a majority of the

votes represented by the attending shareholders, and then continue the

meeting.

The Chair shall allow ample opportunity during the meeting for

explanation and discussion of proposals and of amendments or

extraordinary motions put forward by the shareholders; when the Chair

is of the opinion that a proposal has been discussed sufficiently to put it

to a vote, the Chair may announce the discussion closed and call for a

vote.

Article 11: Before speaking, an attending shareholder must specify on a speaker's

slip the subject of the speech, his/her shareholder account number (or

attendance card number), and account name. The order in which

shareholders speak will be set by the Chair.

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A shareholder in attendance who has submitted a speaker's slip but does

not actually speak shall be deemed to have not spoken. When the

content of the speech does not correspond to the subject given on the

speaker's slip, the spoken content shall prevail.

Except with the consent of the Chair, a shareholder may not speak more

than twice on the same proposal, and a single speech may not exceed 5

minutes. If the shareholder's speech violates the rules or exceeds the

scope of the agenda item, the Chair may terminate the speech.

When an attending shareholder is speaking, other shareholders may not

speak or interrupt unless they have sought and obtained the consent of

the Chair and the shareholder that has the floor; the Chair shall stop any

violation.

When a juristic person shareholder appoints two or more representatives

to attend a shareholders’ meeting, only one of the representatives so

appointed may speak on the same proposal.

After an attending shareholder has spoken, the Chair may respond in

person or direct relevant personnel to respond.

Article 12: Voting at a shareholders’ meeting shall be calculated based on the

number of shares.

With respect to resolutions of shareholders’ meetings, the number of

shares held by a shareholder with no voting rights shall not be calculated

as part of the total number of issued shares.

When a shareholder is an interested party in relation to an agenda item,

and there is the likelihood that such a relationship would prejudice the

interests of the Company, that shareholder may not vote on that item,

and may not exercise voting rights as proxy for any other shareholder.

In case a director of the Company has created a pledge on the

Company’s shares more than half of the Company’s shares being held

by him/her/it at the time he/she/it is elected, the voting power of the

excessive portion of shares shall not be exercised.

The number of shares for which voting rights may not be exercised

under the preceding two paragraphs shall not be calculated as part of the

voting rights represented by attending shareholders.

With the exception of a trust enterprise or a stock agency approved by

the competent securities authority, when one person is concurrently

73

appointed as proxy by two or more shareholders, the voting rights

represented by that proxy may not exceed 3 percent of the voting rights

represented by the total number of voting shares, otherwise, the portion

of excessive voting rights shall not be counted.

Article 13: A shareholder shall be entitled to one vote for each share held, except

when the shares are restricted shares or are deemed non-voting shares

under paragraph 2 of Article 179 of the Company Act.

When the Company holds a shareholders’ meeting, it may allow the

shareholders to exercise voting rights in writing or by way of electronic

transmission. When voting rights are exercised in writing or by way of

electronic transmission, the method for exercising the voting rights shall

be specified in the shareholders’ meeting notice. A shareholder

exercising voting rights in writing or by way of electronic transmission

will be deemed to have attended the meeting in person, but to have

waived his/her rights with respect to the extraordinary motions and

amendments to original proposals of that meeting.

A shareholder intending to exercise voting rights in writing or by way of

electronic transmission under the preceding paragraph shall deliver a

written declaration of intent to the Company no later than 2 days prior to

the scheduled shareholders’ meeting date. When duplicate declarations

of intent are delivered, the one received earliest by the Company shall

prevail, except when a declaration is made to revoke the earlier

declaration of intention.

After a shareholder has exercised voting rights in writing or by way of

electronic transmission, in the event the shareholder intends to attend the

shareholders’ meeting in person, a written declaration of intent to

rescind the voting rights already exercised under the preceding

paragraph shall be made known to the Company, by the same means by

which the voting rights were exercised, no later than 2 days prior to the

scheduled shareholders’ meeting date. If the notice of rescission is

submitted after that time, the voting rights already exercised in writing

or by way of electronic transmission shall prevail. When a shareholder

has exercised voting rights both in writing or by way of electronic

transmission and by appointing a proxy to attend a shareholders’

meeting, the voting rights exercised by the proxy in the meeting shall

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prevail.

Except as otherwise provided in the Company Act and in the Company's

Articles of Incorporation, the adoption of a proposal shall require an

affirmative vote of a majority of the voting rights represented by the

attending shareholders. At the time of a vote, for each proposal, the

Chair or a person designated by the Chair shall announce the total

number of voting rights represented by the attending shareholders,

followed by a poll of the shareholders. After the conclusion of the

meeting, on the same day it is held, the results for each proposal, based

on the numbers of votes for and against and the number of abstentions,

shall be entered into the MOPS.

When there is an amendment or an alternative to a proposal, the Chair

shall present the amended or alternative proposal together with the

original proposal and decide the order in which they will be put to a

vote. When any one among them is passed, the other proposals will then

be deemed rejected, and no further voting shall be required.

Vote monitoring and counting personnel for the voting on a proposal

shall be appointed by the Chair, provided that all monitoring personnel

shall be shareholders of the Company. Vote counting for shareholders’

meeting proposals or elections shall be conducted in public at the place

of the shareholders’ meeting. Immediately after vote counting has been

completed, the results of the voting, including the statistical tallies of the

numbers of votes, shall be announced on-site at the meeting, and a

record made of the vote.

Article 14: The election of directors at a shareholders’ meeting shall be held in

accordance with the applicable election and appointment rules adopted

by the Company, and the voting results shall be announced on-site

immediately, including the names of those elected as directors and the

numbers of votes with which they were elected.

The ballots for the election referred to in the preceding paragraph shall

be sealed with the signatures of the monitoring personnel and kept in

proper custody for at least 1 year. If, however, a shareholder files a

lawsuit pursuant to Article 189 of the Company Act, the ballots shall be

retained until the conclusion of the litigation.

Article 15: Matters relating to the resolutions of a shareholders’ meeting shall be

75

recorded in the meeting minutes. The meeting minutes shall be signed or

sealed by the Chair of the meeting and a copy distributed to each

shareholder within 20 days after the conclusion of the meeting. The

meeting minutes may be produced and distributed in electronic form.

The Company may distribute the meeting minutes of the preceding

paragraph by means of a public announcement made through the MOPS.

The meeting minutes shall accurately record the year, month, day, and

place of the meeting, the Chair's full name, the methods by which

resolutions were adopted, and a summary of the deliberations and their

results, and shall be retained for the duration of the existence of the

Company.

Article 16: On the day of a shareholders’ meeting, the Company shall compile in

the prescribed format a statistical statement of the number of shares

obtained by solicitors through solicitation and the number of shares

represented by proxies, and shall make an express disclosure of the

same at the place of the shareholders’ meeting.

If matters put to a resolution at a shareholders’ meeting constitute

material information under applicable laws or regulations or under

TWSE regulations, the Company shall upload the content of such

resolution to the MOPS within the prescribed time period.

Article 17: Staff handling administrative affairs of a shareholders’ meeting shall

wear identification cards or arm bands.

The Chair may direct the proctors or security personnel to help maintain

order at the meeting place. When proctors or security personnel help

maintain order at the meeting place, they shall wear an identification

card or armband bearing the word "Proctor."

At the place of a shareholders’ meeting, if a shareholder attempts to

speak through any device other than the public address equipment set up

by the Company, the Chair may prevent the shareholder from so doing.

When a shareholder violates the rules of procedure and defies the

Chair's correction, obstructing the proceedings and refusing to heed calls

to stop, the Chair may direct the proctors or security personnel to escort

the shareholder from the meeting.

Article 18: When a meeting is in progress, the Chair may announce a break based

on time considerations. If a force majeure event occurs, the Chair may

76

rule the meeting temporarily suspended and announce a time when, in

view of the circumstances, the meeting will be resumed.

If the meeting venue is no longer available for continued use and not all

of the items (including extraordinary motions) on the meeting agenda

have been addressed, the shareholders’ meeting may adopt a resolution

to resume the meeting at another venue.

A resolution may be adopted at a shareholders’ meeting to postpone or

resume the meeting within 5 days in accordance with Article 182 of the

Company Act.

Article 19: These Rules, and any amendments hereto, shall be implemented after

adoption by shareholders’ meetings.

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Procedures for Engaging in Derivatives Transactions of Formosa Plastics Corporation


Chapter 1 General Principles

Article 1: The “Procedures for Engaging in Derivatives Transactions”

(hereinafter referred to as the “Procedures”) of Formosa Plastics

Corporation (hereinafter referred to as the “Company”) was

established in accordance with Article 17 of the “Procedures for

Acquisition or Disposal of Assets” of the Company.

Article 2: Derivatives referred to herein are defined as forward contracts,

options contracts, futures contracts, leverage contracts, swap

contracts, and compound contracts combining the above products,

whose value is derived from assets, interest rates, foreign exchange

rates, indexes or other interests.

Article 3: Forward contracts referred to herein do not include insurance

contracts, performance contracts, after-sales service contracts,

long-term lease contracts, and long-term purchase (sales) contracts.

Article 4: The nature of the Company’s derivatives transactions can be

classified into “hedging purposes” and “trading purposes”, which

apply to different exposure limits, stop-loss limits and accounting

principles, based on the purposes of the transactions.

Chapter 2 Operation Procedures

Article 5: The total contract amount of derivatives transactions of the

Company shall not exceed 50% of the Company’s net worth, and

the maximum loss limit is 10% of the contract amount for all

contracts in aggregate or for any individual contract. The content of

individual derivatives contract shall be approved by high-level

manager(s), who is authorized by the Board of Directors.

Major derivatives transactions of the Company requires approved

by more than half of all audit committee members and submitted to

the Board of Directors for a resolution. If the approval by more than

half of all audit committee members is not obtained, the aforesaid

matter may be implemented if approved by more than two-thirds of

all Directors, and the resolution of the Audit Committee shall be

78

recorded in the minutes of the Board of Directors meeting.

Article 6: The transaction personnel of the Department, which is in charge of

derivatives transactions, shall follows the trading strategy in

accordance with the approved deal terms and conditions of

derivatives transactions and execute trades directly to

counterparties. After the foresaid trades are done, the transaction

personnel shall deliver the relevant transaction receipts to the

settlement personnel to conduct the settlement procedures. The

settlement personnel shall proceed contracts signing, bank accounts

opening, settlement, accounts closing, etc. with counterparties in

accordance with the trading conditions.

Article 7: For the derivatives transactions of the Company, the Department

that is charge of establishing management regulations shall

establish a comprehensive management information system towards

the balance position of the Company, profit/loss analysis, etc. to

control risk properly and to respond to abnormal situations

immediately.

Chapter 3 Information Disclosure Procedures

Article 8: The Company shall compile monthly report on the status of

derivatives transactions (including purposes of hedging and

purposes of trading) engaged in up to the end of the previous month

by itself and enter the information in the regulated form into the

information reporting website designated by the competent

securities authority before the tenth day of each month. If

derivatives transactions of which maximum loss for all or

individual contract exceeds 10% of contract amount respectively, or

any amendment, termination or cancellation of the original contract

occurs, the Company shall report and make public announcements

accordingly on the information reporting website designated by the

competent securities authority within two days from the date of

occurrence of the event.

Article 9: When the Company’s subsidiaries are not domestic public

companies and are participating in derivatives transactions, the

Company shall follow the requirements of Article 8 hereof to report

and make public announcements on behalf of its subsidiaries.

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Article 10:: When the Company makes an error or omission in an item required

by the Procedures to be publicly announced and so is required to

correct it, all the items shall be again publicly announced and

reported in their entirety.

Article 11: The Company shall upload the auditing report regarding the

derivatives transactions and the implementation status of annual

auditing plans of internal audits in the regulated form to the

information reporting website designated by the competent

securities authority before the end of February of every year.

Article 12: The Company shall upload the improvement situation for any

abnormal affairs regarding the Procedures to the information

reporting website designated by the competent securities authority

before the end of May of every year.

Chapter 4 Accounting Principles

Article 13: The accounting treatment towards the Company’s derivatives

transactions will be conducted in accordance with the requirements

of the General Accepted Accounting Principles and the relevant

Financial Accounting Principle Statement announced by the

Accounting Research and Development Foundation.

Article 14: When the Company prepares periodical financial reports (including

annual reports, semi-annual reports, quarterly reports and

consolidated reports), the Company shall disclose the general

relevant items of derivatives transactions by product purposes in the

footnotes of the financial statements in accordance with the

regulations of the Statements of Financial Accounting Standards

No. 34 ‘Accounting for Financial Instruments’ and No. 36

‘Disclosure and Presentation of Financial Instruments’ announced

by the Accounting Research and Development Foundation.

Article 15: Regarding the derivatives products of trading purposes, in addition

to the general disclosure items, the Company shall disclose the net

income/loss arising from the current trading activities and its item

presented in the income statement by product types.

Article 16: Regarding the derivatives products of hedging purposes, in addition

to the general disclosure items, the Company shall disclose the

following items:

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1.Hedging for the exiting assets or liabilities:

(1)The hedged assets or the liability amount and the type of

derivatives products for the foresaid hedged assets or liability

amount.

(2)The definite but deferred or realized profit/loss amount due to

hedging.

2.Hedging for the anticipated positions (including future positions

from definite commitments and contingent commitments)：

(1)Description of the content of the anticipated transactions.

(2)Description of the content of the type of the adopted derivatives

products.

(3)The definite but deferred profit/loss amount due to hedging.

Chapter 5 Internal Control and Internal Audit

Article 17: The Company engaging in derivatives transactions shall adopt

appropriate risk management practices with regards to credit risk,

market risk, liquidity risk, cash flow risk, operation risk and legal

risk. The personnel who is responsible for the derivatives

transactions may not serve concurrently in other operations such as

confirmation and settlement. Regarding the appropriateness

assessment towards the risk measurement, monitoring and control,

and risk management procedures, the President Office of the

Company should periodically report to the high-level manager(s),

who is authorized by the Board of Directors.

Article 18: The derivatives trading positions of the Company shall be evaluated

at least once a week by the in-charge department, but the hedging

transactions made for business purposes shall be evaluated at least

twice a month. The manager of the in-charge department shall pay

attention to the risk control and monitoring of derivatives

transactions from time to time, and periodically supervise and

evaluate the derivatives transactions to check whether they are

conducted in accordance with the related procedures formulated by

the Company hereof and whether the attendant risk of these

transactions is within the capability of the Company. The foresaid

evaluation reports shall be given to a high-level manager(s)

authorized by the Board of Directors for review. If there is any

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abnormal situation highlighted in the market evaluation reports (e.g.

the holding position has reached the maximum loss limit), the

Company shall immediately take necessary measures to deal with

the situation and report to the Board of Directors. There shall be

independent directors attending the Board of Directors meeting and

expressing their opinions.

Article 19: The Company shall establish a log book to record all its derivatives

transaction information, including types and amounts of derivatives

transactions, and matters to be evaluated cautiously in accordance

with Article 18 hereof. The Company's internal audit personnel

shall be in charge of periodically assessing the appropriateness of

the internal control regarding the derivatives transactions, and take

the responsibility of auditing the trading department's compliance

with the Procedures, analyzing the transaction cycle, preparing the

monthly auditing report and submitting the auditing report to the

high-level management personnel authorized by the Board of

Directors. If any material violation is discovered, the Audit

Committee shall be notified in writing and the Company should,

depending on the status of such material violation, penalize the

relevant personnel in accordance with the Human Resources

Management Policies.

Article 20: The Company’s control and monitoring procedures towards the

derivatives transactions by the Company’s subsidiaries are as

follows:

1.If the Company’s subsidiaries intend to conduct derivatives

transactions, the Company shall ensure that its subsidiaries

establish their own “Procedures for Engaging in Derivatives

Transactions”.

2. The Company’s subsidiaries shall submit the reference content of

the derivatives transactions of the previous month to the

Company for review by the fifth date of every month.

3.If any material violation is found by the internal auditors of the

subsidiaries, the subsidiaries shall submit a written notice to the

Company of such violations. The Company shall closely monitor

the violations and the resulting improvements.

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Chapter 6 Additional Provision

Article 21: After the Procedures are approved by the Board of Directors, the

Procedures shall be submitted to the Shareholders Meeting for

approval before its implementation. Any amendment is subject to

the same procedure.

The independent directors' opinions specifically expressing dissent

or reservations about any matter shall be included in the minutes of

the Board of Directors meeting.

The matters for which paragraph 1 requires submitted to the Board

of Directors for a resolution shall first be approved by more than

half of all audit committee members. If the approval by more than

half of all audit committee members is not obtained, the aforesaid

matter may be implemented if approved by more than two-thirds of

all Directors, and the resolution of the Audit Committee shall be

recorded in the minutes of the Board of Directors meeting.

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Rules for Election of Directors of Formosa Plastics Corporation


Article 1: Except as otherwise provided by law and regulation or by the

Company's Articles of Incorporation, elections of directors shall be

conducted in accordance with the Rules.

Article 2: The cumulative voting system shall be used for election of the

directors at the Company. Each share will have voting rights in

number equal to the directors to be elected, and may be cast for a

single candidate or split among multiple candidates. Attendance card

numbers printed on the ballots may be used instead of recording the

names of voting shareholders.

Article 3: Before the election begins, the Chair shall appoint a number of

persons to perform the respective duties of vote monitoring and

counting personnel.

Article 4: The number of directors will be as specified in the Company's

Articles of Incorporation. Those receiving ballots representing the

highest numbers of voting rights will be elected sequentially

according to their respective numbers of votes. If a person is elected

to be director at the same time, he/she shall only decide to be a

director. After the above-mentioned person decided, the vacant

position shall be filled by the candidate receiving the second highest

numbers of voting rights. When two or more persons receive the same

number of votes, thus exceeding the specified number of positions,

they shall draw lots to determine the winner, with the Chair drawing

lots on behalf of any person not in attendance.

Article 5: The election of directors shall be elected in accordance with the

Company's Articles of Incorporation in that a candidate nomination

system shall be adopted and that shareholders shall elect directors

from among those listed in the slate of director nominees.

Independent and non-independent directors shall elect at the same

time, but in separately calculated numbers as stated as Article 4. If the

company has established an audit committee, at least one of its

independent directors is required to have accounting or financial

expertise.

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The Company shall, prior to the book closure date before the

convening of the shareholders' meeting, publish a notice specifying a

period for receiving nominations of director candidates, the number of

directors to be elected, the place for receiving such nominations, and

other necessary matters; the period for receiving nominations shall

not be less than 10 days.

The Board of Directors and a shareholder holding one percent or

more of the total number of issued shares may present a slate of

director nominees to the Company; the number of nominees may not

exceed the number of directors to be elected.

When providing a recommended slate of director candidates, a

shareholder or the Board of Directors shall include in the

documentation attached thereto each nominee's name, educational

background, work experience, a written undertaking indicating the

nominee's consent to serve as a director if elected as such, a written

statement that none of the circumstances in Article 30 of the

Company Act exists, and other relevant documentary proof. If the

candidate is a juristic person shareholder or a juristic person’s

representative, a basic registration information of the

above-mentioned juristic person shareholder and a document

certifying the shareholding of the Company shall be attached.

The Board of Directors, or other person having the authority to call a

shareholders' meeting, shall review the qualifications of each director

nominee; except under any of the following circumstances, all

qualified nominees shall be included in the slate of director

candidates:

1.Where the nominating shareholder submits the nomination at a time

not within the published period for receiving nominations.

2.Where the shareholding of the nominating shareholder is less than

one percent at the time of book closure by the Company under

Article 165, paragraph 2 or 3 of the Company Act.

3.Where the number of nominees exceeds the number of directors to

be elected.

4.Where the relevant documentary proof required under the preceding

paragraph is not attached.

Article 6: The Board of Directors shall prepare ballots and distribute one ballot

85

per voter corresponding to his/her attendance card number. The

numbers of ballot sdistributed to the voters shall be equal to the

directors to be elected. As for the number of voting rights associated

with each ballot shall be specified on the ballots.

Article 7: If a candidate is a shareholder, a voter must fill the candidate's

account name and shareholder account number in the "candidate"

column of the ballot; If a candidate is a non-shareholder, the voter

shall fill the candidate's full name and identity card number.

Article 8: A Ballot shall be deemed void under the following conditions:

1.The ballot was not prepared as Article 6 stated; or

2.The ballot has more than one candidate’s name filled; or

3.Other words or marks are filled in addition to the information

Article 7 stated; or

4.A ballot was not filled, or not completely filled, in compliance with

the requirement set forth in Article 7; or

5.The writing is unclear and indecipherable; or

6.The candidate whose name is filled in the ballot is a shareholder, but

the candidate's account name and shareholder account number do

not conform with those given in the shareholder register, or the

candidate whose name is filled in the ballot is a non-shareholder,

and a cross-check shows that the candidate's name and identity card

number do not match.

Article 9: The voting rights shall be calculated at the end of the poll and the

Chair shall announce the voting results on-site immediately, including

the names of those elected as directors and the numbers of votes with

which they were elected.

The ballots for the election referred to in the preceding paragraph

shall be sealed with the signatures of the monitoring personnel and

kept in proper custody for at least 1 year. If, however, a shareholder

files a lawsuit pursuant to Article 189 of the Company Act, the ballots

shall be retained until the conclusion of the litigation.

Article 10: The Rules, and any amendments hereto, shall be implemented after

approval by a shareholders meeting.

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Formosa Plastics Corporation

Current Shareholdings of Directors

Title Name Shareholding (share)

Chairman Jason Lin 0

Managing Director William Wong Representative of Formosa Chemicals & Fibre Corporation

486,978,692

Managing Director Susan Wang Representative of Nan Ya Plastics Corporation

294,793,105

Managing Director Wilfred Wang Representative of Formosa Petrochemical Corporation

131,460,365

Managing Director (Independent Director)

C. L. Wea 0

Independent Director C. J. Wu 0

Independent Director T. S. Wang 0

Director C. T. Lee 632,541

Director Cher Wang 7,369,380

Director K. H. Wu 134,537

Director Ralph Ho 27,824,363

Director Cheng-Chung Cheng 0

Director Wen-Chin Hsiao 6,685

Note: According to Article 26 of Securities and Exchange Act, the minimum shareholdings of the Company’s Directors are 101,851,853 shares. As of April 22, 2018, the actual shareholdings of the Company’s Directors are 949,199,668 shares.

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Information regarding the Proposed Employees and Directors’ Compensation to Adopted by the Board of Directors of the Company: 1. Amounts of employees’ cash compensation, stock compensation, and

Directors’ compensation:

Employees Cash Compensation NT$ 69,454,166

Employees Stock Compensation NT$ 0

Directors Cash Compensation NT$ 0

2. Share amount of the employees’ stock compensation and the percentage of the share amount to that of all stock dividends capitalization:

Share amount of employees’ stock compensation 0 share

Percentage of the share amount to that of all stock dividends capitalization

0%

The above-listed amount of employees’ cash compensation is consistent with the proposed amount adopted by the Board of Directors of the Company. Effect upon Business Performance and Earnings Per Share of the Company by the Stock Dividend Distribution Proposed at the 2018 Annual Shareholders’ Meeting: Not applicable since the Company does not propose the stock dividend distribution at the 2018 Annual Shareholders’ Meeting and does not required to prepare financial forecast information.

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Documents

FORMOSA PLASTICS CORPORATION Handbook-EN.pdf · 2018. 6. 1. · emerging markets, making the way out of the shadow of slow global economic growth. According to the forecast made by