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FORMOSA CHEMICALS & FIBRE

CORPORATION

2017ANNUAL SHAREHOLDERS’ MEETING

MEETING HANDBOOK

(Summary)

(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 9, 2017

1

Table of Contents

Meeting Procedure ………………………………………………. page 2

Meeting Agenda……………………………..…………………… page 3

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

Ratification Items………………………………………………… page 15

Discussion Items ……………………………………………... …page 17

Appendices……………………………………………………….. page 25

2

FORMOSA CHEMICALS & FIBRE CORPORATION

2017 ANNUAL SHAREHOLDERS’ MEETING PROCEDURE

1. Call Meeting to Order

2. Chairman’s Address

3. Report Items

4. Ratification Items

5. Discussion Items

6. Extraordinary Motions

7. Meeting Adjourned

3


2017 ANNUAL SHAREHOLDERS’ MEETING

AGENDA

Time: 2:00 p.m., Friday, June 9, 2017

Venue: 2F, International Ballroom at Sunworld Dynasty Hotel

(No. 100 Dun Hua North Road, Taipei, Taiwan)

1. Report Items

(1) 2016 Business Report

(2) Audit Committee’ Review Report on the 2016 Financial Statements

(3) Distribution of 2016 Employees Compensation

2. Ratification Items

(1) Please approve the 2016 Business Report and Financial Statements

as required by the Company Act.

(2) Please approve the Proposal for Distribution of 2016 Profits

as required by the Company Act.

3. Discussion Items

(1) To comply with the regulations of the competent authority in

charge of securities affairs, the Company has established Audit

Committee in lieu of Supervisor. As such, the Company’s

“Procedures for Acquisition and Disposal of Assets of the Company”

shall be revised to reflect such amendments. The corresponding

comparison table for the articles before and after the amendment

is attached. Please discuss and resolve.

4

Report Items

1. About the Company’s results of operation for fiscal year 2016, please

refer to Business Report for further details (on page 5 of the Handbook.)

2. The Company’s Audit Committee members reviewed the 2016 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 14 of the Handbook.)

3. The company has issued the report on compensation distributed to its

employees for 2016.

The pre-tax profit prior to deducting employees compensation

distributable for 2016 is NT$47,608,381,780. Adopted by the Board

Meeting on March 17, 2017, 0.1% of the profit is allocated as

employees’ compensation in accordance with Article 31 of the Articles

of Incorporation. The total allocated amount is NT$47,608,382 ,which

shall be distributed in cash. The above is hereby reported for record.

5


2016 Annual Business Report

FCFC reported annual consolidated revenue of TWD319.2 billion in

2016, which is down by TWD10.14 billion or 3.1% from the annual

consolidated revenue of TWD329.34 billion in 2015. The main factors for the

decline relate to prices having remained below average prices in 2015 despite

the increase in sales prices of 2016 products with the rebound of oil prices.

On the other hand, the sales quantity increased by TWD4.72 billion due to

the completion of the overseas expansion projects, which were put into use

and increased the production capacity. Due to the increase in profits between

products and raw materials, an increase in the proportion of high value

products, the continued promotion of energy conservation and emission

reduction, as well as the profits from investment companies, the annual

consolidated pre-tax income for 2016 reached TWD54.68 billion. This

represents an increase of TWD18.69 billion or a growth rate of 51.9%, as

compared to the annual consolidated pre-tax income of TWD35.99 billion in

2015.

The constant occurrence of black swan events in 2016 caused enormous

impacts and financial fluctuations in the international community. Such

events ranged from the negative interest rates adopted by the Bank of Japan

at the beginning of the year, to the expansion of the QE program to 80 billion

euros adopted by the European Central Bank, to the referendum of the exit

from EU by UK, and the Donald Trump won the presidency of the U.S. at the

end of the year. International oil prices also suffered from fluctuations,

ranging from the bottom prices of less than US$30 per barrel at the beginning

of the year to the steady climbing of prices to exceed US$55 per barrel by the

end of the year.

Looking ahead, due to the continuous improvement of the US labor

market and salary conditions, the steady growth of private consumption

capacity, while China’s economic growth rate in 2016 decreased to 6.7%, the

supply side reform has begun to take effect, allowing enterprises to accelerate

6

the restocking of their inventories. Under the promotion of the two major

economies, the Chinese and U.S. markets, the global economy is expected to

gradually recover. However, due to the ineffectiveness of the administrative

measures of the new Government, the Taiwanese economy is plagued by

labor and environmental protection issues and other factors interfering with

the industrial development of Taiwan. In addition, with increasingly distant

cross-straits relations, Taiwan has failed to grasp opportunities for economic

development. These factors will affect the future development of Taiwanese

enterprises, thus we look forward to the Government will make prompt

improvements to ensure the healthy development of Taiwan’s economy.

In the annual consolidated revenue of 2016, the net revenue of the

parent company Formosa Chemicals & Fibre Corporation (FCFC) was

TWD171.68 billion, accounting for 53.8% of the consolidated revenue. The

total net revenue of subsidiaries in Ningbo, Vietnam, and the Formosa Taffeta

Company Limited reached TWD147.52 billion, accounting for 46.2% of the

consolidated revenue.

Among the various products of the parent company, petrochemical and

plastic products are the main contributors to the revenue, where the net

revenue in 2016 accounted for 88.4% of the parent company revenue, among

which the petrochemical products reached TWD102.6 billion and plastic

products TWD49.1 billion. This accounts for 59.8% and 28.6% of the net

revenue of the parent company, respectively.

The operating statuses of the company’s products are as follows:

In petrochemical products, the focus of the operation is to continue the

refinement of production processes and energy conservation in the hopes of

increasing supply chain flexibility to reduce raw material costs and

processing costs.

In aromatic hydrocarbon products, in 2016, the ARO-1 Plant completed

the refining of xylene to remove the bottleneck and replace the catalyst with

a new alkyl type catalyst to increase the restructuring and alkyl reaction feed.

7

The process allows the adjustment of feed combinations according to market

requirements to reduce the use of high priced raw materials for cost reduction.

In addition, 107 improvement projects for water and energy conservation

were completed, including the installation of cooling systems to recycle pure

LPG, resulting in improved energy efficiency. In 2017, the Company is going

to continue arranging for the ARO-3 Plant to use new generation adsorbents

and alkyl reaction catalysts, and to restructure the heating boiler to remove

bottlenecks and further reduce production costs. In addition, improvements

will be made in the recycling of heavy aromatic hydrocarbon in ARO-1/2/3

Plants to increase material sources.

For styrene monomer, in 2016, styrene production was maintained at a

stable rate throughout the year, and numerous improvements were

implemented for fuel efficiency and energy consumption, achieving a 5.5%

reduction in production costs, and thus increasing profitability. As we look

forward towards 2017, SM-1, SM-2, and SM-3 plants will be respectively

suspending operations to undergo annual inspections, new alkyl catalyst

replacements, and production improvements, to increase production

efficiency. In the future, the Company shall continue to use the Mailiao Plant

for vertical integration, continue efforts in energy conservation, and actively

explore the market to increase profits.

In synthetic phenol products, in 2016, the plants in Taiwan maintained

stable production throughout the year. In addition to favorable pricing of raw

materials benzene and propylene, the profit growth was also attributed to the

improvements in energy conservation, which lowered production costs by

2.3% as compared to 2015. In 2016, the Ningbo Plant actively made

optimization adjustments, improvements to energy conservations, and

expanded the Chinese market to achieve full production output and sales,

successfully turning losses into profits. In 2017, though the demand in Asian

markets is projected to continue increasing, production capacity is

underutilized. Therefore, the Company shall continue to engage in active

energy conservation and optimization to reduce costs and improve operations.

8

It is expected that the synthetic phenol products will continue to maintain

good profits. In addition, to address the increase in demand for Bisphenol A

(BPA) in mainland China, the Ningbo Plant shall implement a production

capacity expansion to further enhance operation performance.

For Purified Terephthalic Acid (PTA) product, both plants in Taiwan and

Ningbo were able to reduce energy consumption and operation costs,

resulting in significantly reduced processing costs per ton of 4.6% and 5.1%,

respectively as compared to 2015. However, due to the mainland China PTA

imports and the poor price, coupled with Taiwan’s exports to the mainland

China still being subject to a 6.5% customs tax, the 2017 sales strategy of the

Taiwan plant will be continuous focusing on the expansion of marginal

interests of the domestic market. In terms of exports, besides supplying the

Formosa Industries Corporation in Vietnam, the surplus will be sold to

potential customers in the Southeast Asia, mainland China, and Middle East

markets that have tax rebates for materials imported for processing to

maintain the full capacity operation of the two production lines. As for the

Ningbo Plant, due to the stability of production and quality, the products

were still welcomed by downstream customers despite a market share of less

than 3%. To avoid long-term losses, the plant shall fully dedicate efforts to

the implementation of improvement projects in production processes, which

shall be operational by the end of the year. The improvements are projected

to reduce processing costs per ton by 23.1%, thus greatly improving

competitiveness and ensuring company sustainability.

For Purified Isopropyl Alcohol (PIA) product, after three years of efforts

and accumulation of experience, the Long-De PTA Plant has achieved

significant improvement in production and quality, establishing a solid

reputation in the market. Despite the fierce competition in 2016, the

Company has continued to implement improvements in energy and water

conservation to increase cost advantages, thus achieving a substantial profit

growth as compared to 2015. With sufficient raw materials, it is projected

that production capacity will increase in 2017. Besides expanding the market

9

to potential customers in the Middle East and other regions with similar

competitiveness, the Company shall focus mainly on the users of plastic

sheeting and low-melting cotton in mainland China to expand market share,

and to prepare in advance for sales after the completion of the Ningbo Plant

in the future.

In plastic products, supported by the demand for rigidity and the long-

term low inventory stock of downstream users, the timely replenishment of

inventory stocks, and the differentiation in product sales and aftersales

services allowed the Company to achieve a profit growth. Looking ahead, in

2017, besides making full use of the free customs tax niches of the Economic

Cooperation Framework Agreement (ECFA), the Company will continue to

strengthen market development and product promotion in regions outside of

China, dedicate efforts to development of new specifications, and expand

product differentiation to increase company competitiveness.

For polystyrene (PS) products, the plants in Taiwan maintained a

considerable profit in materials such as LCD TV diffusion boards and

oriented polystyrene (OPS), while the Ningbo Plant maintained considerable

profits in materials such as high gloss and high impact polystyrene, LED

lighting, and light conductive panels. In 2017, besides ensuring the growth of

sales objectives in the Middle East and other regions, the Taiwan Plant will

actively develop customers from Japanese OA manufacturers who had

transferred to the Vietnamese and Thailand Plants, as well as extend the

company’s reach into regions such as Cambodia and Myanmar. The Ningbo

Plant will continue to increase the sales proportion of special specification

materials, such as high-light conductive panels, refrigerator lining, extra high

impact specifications, and high flow specifications.

In terms of ABS, the sales of special specification ABS of the Taiwan

Plant in 2016 accounted for 24.8% while the Ningbo Plant accounted for

12.2%, which were the main sources of profit in both cases. In 2017, the

Company shall continue to develop high threshold, high value-added special

10

specification products to maximize differentiation proportion, with 30% and

21% objectives for the Taiwan Plant and Ningbo Plant, respectively. The

Company shall also actively expand the market share of PC/ABS and other

plastic compound products. In addition, using the Ningbo Plant as the

foundation for the sales services and product promotion in Chinese markets,

the Company will be able to meet customer demands for upgraded materials

and develop new plastic compound products to ensure the synchronized

increase in sales of special specification products.

For polyproylene (PP) product, despite the routine inspection of the first

and second series in 2016, the Company was able to reach a 73.7% full

production and sales of special specification products while maintaining the

optimal product quality and good profits. As projections for 2017 indicate

that the PP market would continue to pursue stable growth, the Company will

make use of the inspection periods to implement bottleneck removal projects

on the first and second series, which will bolster productivity and ensure

continued development in high flow and lightweight features. Making use of

the high-rigidity characteristics of the impact copolymers of the Company

and the customs tax niche of the ECFA, the Company would be able to make

additional flexible adjustments to production specifications in conjunction

with customization and high-value product development to achieve greater

profits.

For Polycarbonate product, reached recorded high profits in 2016 are

attributed to the strong demands from industries such as the automobile

industry, lighting markets, and plastic modifiers, the vertical integration and

stable production of the company in Mailiao, increase in productivity, lift in

qualities, development of medium and high-end customers, and increase in

sales volume of special specification materials. In 2017, the Company will

continue to implement reforms to produce high value specifications,

especially since the closure of the Japanese company Idemitsu Petrochemical

Co., Ltd. has led to many R&D specialists being transferred to the

11

Company’s Mailiao Plant. Combined with the introduction of mass

production of special specification products, such as high flow specifications,

high transparency light specifications, silica copolymer specifications, high

flow and impact specifications, the Company will strive to develop the high-

end market and ensure the sustainability of high profits.

In terms of fiber textile products, due to the decrease in market demand,

and the suspension of cogeneration equipment in Changhua Plant from

October 2016 onwards due to failure in obtaining renewed operation permits,

the revenue and profits for 2016 were undesirable. Beginning from 2017, the

Company will accept orders for Rayon cotton from more profitable regions

and clients, which will be made into high value-added thick and fine Denier

fiber using post-end yarn spinning processes, while also expanding the

market for differentiated products, such as non-woven cotton and colored

cotton. In terms of nylon filaments, the Company plans to reorganize the

production and sales teams of Taiwanese and Vietnamese Plants to accelerate

the expansion into new markets and differentiated products. With the brand

image as its main sales promotion, the Company shall use reliable high-

quality yarn to establish a marketing channel integrating the upstream,

midstream, and downstream sectors.

In addition, the Formosa Industries Corporation, a joint venture in

Vietnam, with Nan Ya Plastics Corporation has achieved major growth in

both revenue and profits in 2016 as compared to 2015. This has been mainly

attributable to the completion of expansion projects and commencement of

operations involving equipment for the annual production capacity of 38,000

tons of polyester fiber, 80,000 spindles of yarn spinning equipment, and

150,000 kilowatt cogeneration equipment, thus increasing operation

performance. Although the U.S. has withdrawn from the Trans-Pacific

Partnership (TPP) agreement, the joining of Southeast Asian countries in the

RCEP and the niches of the Belt and Road has allowed us to remain

cautiously optimistic for future operations.

12

The Company shall continue to abide by the corporation philosophies of

“Pursuing Root Causes” and “Seeking Perfection” to face difficulties head-on,

seek pragmatic solutions, continue the implementation of improvements such

as industrial safety environmental protection, and fulfill corporate social

responsibilities.

In terms of industrial safety, the various plants have passed the SGS

certifications in the annual company audits and have achieved the OHSAS-

18001 and CNS 15506 international certifications, and will continue to

implement improvements using the PDCA management model. Through the

organizing of case study competitions for PHA, JSA, MOC, and potential

hazard drills, the plants can engage in mutual observation and learn from one

another to discover the blind spots of industrial safety and the potential

hazards. Besides being awarded performance excellence awards from the

Ministry of Labor and the Ministry of Health and Welfare, as the Mailiao

Plant of the Company had won three consecutive “Excellent Department

Awards” between 2013 and 2015, the Mailiao Plant was awarded the highest

honor award, “Industrial Safety Five-Star Award” in 2016.

In terms of environmental protection, the Company has continued to use

the Best Available Control Technology (BACT), energy efficiency

optimization, and pollution prevention and control equipment, and strongly

promoted waste reduction measures. By the end of 2016, the accumulated

investment in pollution prevention and control had reached over TWD16.65

billion while the various plants had achieved the ISO-14001 Environmental

Management certification.

In order to ensure the recycling of resources, the Company has actively

promoted energy conservation and emission/discharge reduction. Over the

years, the Company invested a total of TWD9.12 billion to complete 3,189

improvement projects, which conserved 87,000 tons of water per day, 816.8

tons of steam per hour, 94,000 units of electricity per hour, accounting for

13

TWD8.15 billion in cost reduction, a reduction of 3.19 million tons of CO2

emission, equivalent to 265,000 hectares of afforestation. In the future, the

Company shall continue to abide by the ideology of “circular economy” to

promote improvements such as reduction in raw material consumption,

recycling of waste materials, energy conservation, and waste reduction, and

fulfill the corporate responsibilities of reducing greenhouse gases to achieve

sustainability.

For Company prospects in 2017, the U.S. government is expected to

raise interest rates, which will stimulate the world economy, while China has

also shown signs of recovery. If the government implements policies that can

enable enterprises to overcome some of the irrational social issues, and

provide assistance to enterprises according to their needs by stimulating

economic development, then the basic aspect of Taiwan’s economy will be

able to recover together with the international community. However, if the

cross-straits tensions continue to intensify, it would result in a decrease in

Taiwan’s international competiveness, therefore the ability of the government

in improving the cross-straits relations and engaging in more multi-lateral or

bi-lateral economic agreements to avoid being isolated will be the greatest

challenge for 2017.

Faced with the uncertainties of the global economy, the Company shall

continue to maintain its investments to ensure sustainable management. If

Taiwan were able to make the environment more conducive for investment, it

would definitely be the best choice for investments. In terms of external

developments, there are currently some ongoing projects in both the U.S. and

mainland China. In addition, in terms of business operation, the Company

should continue to engage in the active development of international markets,

such as ASEAN, the Middle East, and the Americas to expand the niche

market of differentiated products, ensure strict control over raw material and

product inventories, and maintain stable production capacity and profits to

ensure returns to stockholders.

14


Audit Committee’ Review Report

The Board of Directors has prepared the Company’s 2016 Business Report,

Financial Statements and Proposal for Profits Distribution. The CPA firm

of PWC was retained to audit Formosa Chemicals & Fibre 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 Chemicals & Fibre

Corporation. According to Article 14-4 of the Securities and Exchange Act

and Article 219 of the Company Act, we hereby submit this report. Please

be advised accordingly.

Formosa Chemicals & Fibre Corporation

Chairman of the Audit Committee:

Ruey-Long Chen

March 17, 2017

15

Ratification Items Proposal 1

Proposal: For approval of the 2016 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 2016 Consolidated and Individual

Financial Statements were completed and the same were approved at

the meeting of the Board on March 17, 2017 and audited by

independent auditors, Mr. Chien-Hung Chou and Ms. Man-Yu

Juanlu , of PWC. 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 5 through

page 13 of the Meeting Handbook. As for the Financial Statements, please refer to page 25 through page 38 of the Handbook. Please approve the Business Report and the Financial Statements.

Resolution:

16

Ratification Items Proposal 2

Proposal: For Approval of the Proposal for Distribution of 2016 Profits as

required by the Company Act.


Explanation:

Please refer to page 39 of the Handbook for the Statement of Profits

Distribution, which has been reviewed by the Audit Committee members of

Formosa Chemicals & Fibre Corporation and approved by the Board of

Directors. Please approve the Statement of Profits Distribution.

Resolution:

17

Discussion Items Proposal 1 Proposal: Amendment to the Procedures for Acquisition and Disposal

of Assets of the company submitted for discussion


Explanation: To comply with the requirements provided in the order

Jin-Guan-Zheng-Fa-Zi No. 1060001296 dated February 9, 2017 by the

Financial Supervisory Commission, certain articles of the Procedures

for Acquisition and Disposal of Assets provided by 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 after Amendment

Article

7 In acquiring or disposing of

real property or equipment

where the transaction

amount reaches 20 percent

of the company's paid-in

capital or NT$300 million

or more, the Company,

unless transacting with a

government agency,

engaging others to build on

its own land, engaging

others to build on rented

land, or acquiring or

disposing of equipment for

business use, shall obtain an

appraisal report prior to the

date of occurrence of the

event from a professional

appraiser and shall further

comply with the following

In acquiring or disposing of

real property or equipment

where the transaction amount

reaches 20 percent of the

company's paid-in capital or

NT$300 million or more, the

Company, unless transacting

with a government

institution, engaging others to

build on its own land,


rented land, or acquiring or

disposing of equipment for

business use, shall obtain an

appraisal report prior to the


event from a professional

appraiser and shall further

comply with the following

provisions:

18

provisions:

(Omitted)

(Omitted)

Article

8-1 (Added)

In acquiring or disposing of

membership cards or

intangible assets where the

transaction amount reaches

20 percent or more of the

company's paid-in capital or

NT$300 million or more, the

Company, unless transacting

with a government

institution, shall obtain a

CPA’s opinion on the

reasonableness of the

transaction price prior to the


event. The CPA shall comply

with the provisions of

Statement of Auditing

Standards No. 20 published

by the Accounting Research

and Development

Foundation.

Article

8-2

The calculation of the transaction amounts referred to in the preceding two articles shall be done in accordance with paragraph 2 of Article 26, herein, and "within the preceding year" as used herein refers to the year preceding the date of occurrence of the current transaction. Items for which

The calculation of the transaction amounts referred to in the preceding three articles shall be done in accordance with paragraph 2 of Article 26, herein, and "within the preceding year" as used herein refers to the year preceding the date of occurrence of the current transaction. Items for which

19

an appraisal report from a professional appraiser or a CPA's opinion has been obtained need not be counted toward the transaction amount.

an appraisal report from a professional appraiser or a CPA's opinion has been obtained need not be counted toward the transaction amount.

Article

12 When the Company intends

to acquire or dispose of real

property from or to a related

party, or when it intends to

acquire or dispose of assets

other than real property

from or to a related party

and the transaction amount

reaches 20 percent or more

of paid-in capital, 10 percent

or more of the Company's

total assets, or NT$300

million or more, except in

trading of government

bonds or bonds under

repurchase and resale

agreements, or subscription

or redemption of domestic

money market funds, the

Company may not proceed

to enter into a transaction

contract or make a payment

until the following matters

have been approved by the

Board of Directors:

(Omitted)

When the Company intends

to acquire or dispose of real

property from or to a related

party, or when it intends to

acquire or dispose of assets

other than real property from

or to a related party and the


20 percent or more of paid-in

capital, 10 percent or more of

the Company's total assets, or

NT$300 million or more,

except in trading of

government bonds or bonds

under repurchase and resale


or repurchase of money

market funds issued by

domestic securities

investment trust enterprises,

the Company may not

proceed to enter into a

transaction contract or make

a payment until the following

matters have been approved

by the Board of Directors:

(Omitted)

20

Article

18

The Company that conducts

a merger, demerger,

acquisition, or assignment

of shares shall, prior to

convening the Board of

Directors to resolve on the

matter, engage a CPA,

attorney, or securities

underwriter to give an

opinion on the

reasonableness of the share

exchange ratio, acquisition

price, or distribution of cash

or other property to

shareholders, and propose

the opinion to the Board of

Directors for deliberation

and approval.

The Company that conducts a

merger, demerger,

acquisition, or assignment of

shares shall, prior to

convening the Board of

Directors to resolve on the

matter, engage a CPA,

attorney, or securities

underwriter to give an

opinion on the

reasonableness of the share

exchange ratio, acquisition

price, or distribution of cash

or other property to

shareholders, and propose the

opinion to the Board of

Directors for deliberation and

approval. However, the

requirement of obtaining an

aforesaid opinion on

reasonableness issued by an

expert may be exempted in

the case of a merger by the

company of a subsidiary in

which it directly or indirectly

holds 100 percent of the

issued shares or authorized

capital, and in the case of a

merger between subsidiaries

in which the Company

directly or indirectly holds

21

100 percent of the respective

subsidiaries’ issued shares or

authorized capital.

Article

26 Under any of the following

circumstances, the

Company acquiring or

disposing of assets shall

publicly announce and

report the relevant

information on the

securities competent

authority's designated

website in the appropriate

format as prescribed by

regulations within 2 days

commencing immediately

from the date of occurrence

of the event:

1.Acquisition or disposal of

real property from or to a

related party, or acquisition

or disposal of assets other

than real property from or

to a related party where the


20 percent or more of paid-

in capital, 10 percent or

more of the Company's

total assets, or NT$300

million or more; provided,

this shall not apply to

trading of government

bonds or bonds under

Under any of the following

circumstances, the Company

acquiring or disposing of

assets shall publicly

announce and report the

relevant information on the

securities competent

authority's designated

website in the appropriate

format as prescribed by

regulations within 2 days

commencing immediately

from the date of occurrence

of the event:

1.Acquisition or disposal

of real property from or to a

related party, or acquisition

or disposal of assets other

than real property from or to

a related party where the


20 percent or more of paid-

in capital, 10 percent or

more of the Company's total

assets, or NT$300 million or

more; provided, this shall

not apply to trading of

government bonds or bonds

under repurchase and resale


22

repurchase and resale

agreements, or

subscription or redemption

of domestic money market

funds.

2.Merger, demerger,


of shares.

3.Losses from derivatives

trading reaching the limits

on aggregate losses or

losses on individual

contracts set out in the

procedures adopted by the

Company.

4.Where an asset

transaction other than any

of those referred to in the

preceding three

subparagraphs, a disposal

of receivables by a

financial institution, or an

investment in the

Mainland China area

reaches 20 percent or

more of paid-in capital or

NT$300 million;

provided, this shall not

apply to the following

circumstances:

(1)Trading of government

bonds.

(2)Trading of bonds under

or repurchase of money


domestic securities

investment trust enterprises.

2.Merger, demerger,


of shares.

3.Losses from derivatives

trading reaching the limits

on aggregate losses or losses

on individual contracts set

out in the procedures

adopted by the Company.

4.Where the type of asset

acquired or disposed is

equipment/machinery for

business use, the trading

counterparty is not a related

party, and the transaction

amount is more than NT$1

billion.

5.Where land is acquired

under an arrangement on


the company's own land,


rented land, joint

construction and allocation

of housing units, joint

construction and allocation

of ownership percentages,

or joint construction and

separate sale, and the

23

repurchase/resale

agreements, or

subscription or

redemption of domestic

money market funds.

(3)Where the type of asset

acquired or disposed is

equipment/machinery for

business use, the trading

counterparty is not a

related party and the

transaction amount is less

than NT$500 million.

(4) Where land is acquired

under an arrangement on

engaging others to build

on the company's own

land, joint construction

and allocation of housing

units, joint construction

and allocation of

ownership percentages, or

joint construction and

separate sale, and the

amount the company

expects to invest in the

transaction is less than

NT$500 million.

(Omitted)

amount the Company

expects to invest in the

transaction is more than

NT$500 million.

6. An asset transaction

other than any of those

referred to in the preceding

five subparagraphs, a

disposal of receivables by

a financial institution, or

an investment in the

mainland China area where

the transaction amount

reaches 20 percent or more

of paid-in capital or

NT$300 million or more,

provided this shall not

apply to the following

circumstances:

(1)Trading of

government bonds.

(2)Trading of bonds

under repurchase/resale

agreements or the

subscription or

repurchase of money


domestic securities

investment trust

enterprises.

(Omitted)

Article

27

When the Company at the

time of public

When the Company at the

time of public announcement

24

announcement makes an

error or omission in an item

required by regulations to be

publicly announced and so

is required to correct it, all

the items shall be again

publicly announced and

reported in their entirety.

makes an error or omission in

an item required by

regulations to be publicly

announced and so is required

to correct it, all the items

shall be again publicly

announced and reported in

their entirety within two days

from the date when is the

Company becomes aware of

the error or omission.

Resolution:

25

FORMOSA CHEMICALS & FIBRE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Expressed in thousands of New Taiwan dollars, except for earnings per share amount)

Year ended December 31

2016 2015

Items Notes AMOUNT % AMOUNT %

4000 Operating revenue 6(19) and 7 $ 319,204,627 100 $ 329,349,307 100

5000 Operating costs 6(6)(14)(23)(24) and

7 ( 271,653,073 ) ( 85 ) ( 295,636,411 ) ( 90 )

5900 Net operating margin 47,551,554 15 33,712,896 10

Operating expenses 6(14)(23)(24) and 7

6100 Selling expenses ( 8,524,812 ) ( 3 ) ( 8,831,840 ) ( 3 )

6200 General and administrative expenses ( 5,591,090 ) ( 2 ) ( 5,506,930 ) ( 1 )

6000 Total operating expenses ( 14,115,902 ) ( 5 ) ( 14,338,770 ) ( 4 )

6900 Operating profit 33,435,652 10 19,374,126 6

Non-operating income and expenses

7010 Other income 6(20) and 7 7,926,142 3 5,306,716 2

7020 Other gains and losses 6(21) ( 3,714,696 ) ( 1 ) 1,418,928 -

7050 Finance costs 6(9)(22) and 7 ( 1,993,143 ) ( 1 ) ( 2,305,371 ) ( 1 )

7060 Share of profit of associates and

joint ventures accounted for under

equity method

6(8)

19,021,711 6 12,194,766 4

7000 Total non-operating income and

expenses

21,240,014 7 16,615,039 5

7900 Profit before income tax 54,675,666 17 35,989,165 11

7950 Income tax expense 6(25) ( 5,908,938 ) ( 2 ) ( 4,371,618 ) ( 1 )

8200 Profit for the year $ 48,766,728 15 $ 31,617,547 10

(Continued)

26

FORMOSA CHEMICALS & FIBRE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Expressed in thousands of New Taiwan dollars, except for earnings per share amount)

Year ended December 31 2016 2015

Items Notes AMOUNT % AMOUNT % Other comprehensive income (net) 6(18)(25) 8311 Other comprehensive income,

before tax, actuarial gains (losses) on defined benefit plans

( $ 505,220 ) - ( $ 573,733 ) - 8320 Share of other comprehensive loss

of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss

( 23,805 ) - ( 278,660 ) - 8310 Components of other

comprehensive loss that will not be reclassified to profit or loss

( 529,025 ) - ( 852,393 ) - Components of other comprehensive

income that will be reclassified to profit or loss

8361 Financial statements translation

differences of foreign operations

( 4,757,556 ) ( 1 ) ( 756,536 ) - 8362 Unrealized gain (loss) on valuation

of available-for-sale financial assets

24,960,906 8 ( 9,601,819 ) ( 3 ) 8370 Share of other comprehensive

income (loss) of associates and joint ventures accounted for under equity method

1,081,694 - ( 2,088,004 ) ( 1 ) 8399 Income tax relating to the

components of other comprehensive income

591,147 - 15,942 - 8360 Components of other

comprehensive income (loss) that will be reclassified to profit or loss

21,876,191 7 ( 12,430,417 ) ( 4 ) 8300 Total other comprehensive income

(loss) for the year

$ 21,347,166 7 ( $ 13,282,810 ) ( 4 )

8500 Total comprehensive income for the year

$ 70,113,894 22 $ 18,334,737 6

Net income attributable to: 8610 Owners of the parent $ 43,833,045 14 $ 27,578,193 9 8620 Non-controlling interest 4,933,683 1 4,039,354 1 $ 48,766,728 15 $ 31,617,547 10

Total comprehensive income attributable to:

8710 Owners of the parent $ 57,934,824 18 $ 12,247,215 4 8720 Non-controlling interest 12,179,070 4 6,087,522 2 $ 70,113,894 22 $ 18,334,737 6

Before Tax After Tax Before Tax After Tax

Basic earnings per share 6(26)

9710 Profit for the year from continuing operations

$ 9.36 $ 8.35 $ 6.16 $ 5.41

9720 Non-controlling interest ( 1.22 ) ( 0.85 ) ( 1.00 ) ( 0.69 )

9750 Profit attributable to common shareholders of the parent

$ 8.14 $ 7.50 $ 5.16 $ 4.72

Assuming shares held by subsidiary are not deemed as treasury stock:

Profit for the year from continuing operations

$ 9.33 $ 8.32 $ 6.14 $ 5.39

Non-controlling interest ( 1.22 ) ( 0.84 ) ( 0.99 ) ( 0.68 )

Profit attributable to common shareholders of the parent

$ 8.11 $ 7.48 $ 5.15 $ 4.71

The accompanying notes are an integral part of these consolidated financial statements.

27


PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

(Expressed in thousands of New Taiwan dollars, except for earnings per share amount)

For the years ended December 31,

2016 2015

Items Notes AMOUNT % AMOUNT %

4000 Operating revenue 6(17) and 7 $ 217,329,630 100 $ 230,409,926 100

5000 Operating costs 6(5)(21)(22) and 7 ( 187,699,298 ) ( 87 ) ( 211,174,988 ) ( 92 )


5910 Unrealized (profit) loss from sales ( 487,873 ) - 78,217 -

5920 Realized (loss) profit from sales ( 78,217 ) - 36,091 -


Operating expenses 6(12)(21)(22) and 7

6100 Selling expenses ( 4,480,060 ) ( 2 ) ( 4,667,012 ) ( 2 )

6200 General and administrative expenses ( 3,124,754 ) ( 1 ) ( 2,900,202 ) ( 1 )

6000 Total operating expenses ( 7,604,814 ) ( 3 ) ( 7,567,214 ) ( 3 )

6900 Operating profit 21,459,428 10 11,782,032 5

Non-operating income and expenses

7010 Other income 6(18) and 7 5,631,922 3 4,229,054 2

7020 Other gains and losses 6(8)(19) and 7 ( 1,310,705 ) ( 1 ) 4,106,617 2

7050 Finance costs 6(8)(20) and 7 ( 1,098,747 ) ( 1 ) ( 1,434,408 ) ( 1 )

7070 Share of profit of associates and joint

ventures accounted for under equity

method

6(7)

22,878,875 11 11,479,120 5

7000 Total non-operating income and

expenses

26,101,345 12 18,380,383 8

7900 Profit before income tax 47,560,773 22 30,162,415 13

7950 Income tax expense 6(23) ( 3,727,728 ) ( 2 ) ( 2,584,222 ) ( 1 )

8200 Profit for the year $ 43,833,045 20 $ 27,578,193 12

Other comprehensive income (net) 6(16)(23)

Components of other comprehensive loss

that will not be reclassified to profit or loss

8311 Other comprehensive loss, before tax,

actuarial loss on defined benefit plans

( $ 505,220 ) - ( $ 573,733 ) ( 1 )

8330 Share of other comprehensive loss of

associates and joint ventures accounted

for using equity method

( 23,805 ) - ( 278,660 ) -

8310 Components of other comprehensive

loss that will not be reclassified to

profit or loss

( 529,025 ) - ( 852,393 ) ( 1 )

Components of other comprehensive

income (loss) that will be reclassified to

profit or loss

8361 Other comprehensive loss, before tax,

exchange differences on translation

( 3,160,400 ) ( 1 ) ( 995,932 ) -

8362 Other comprehensive income (loss),

before tax, available-for-sale financial

assets

12,044,560 6 ( 12,773,811 ) ( 6 )

8380 Share of other comprehensive income

(loss) of associates and joint ventures

accounted for under equity method

5,155,497 2 ( 724,784 ) -

8399 Income tax relating to the components

of other comprehensive income

591,147 - 15,942 -

8360 Components of other comprehensive

income (loss) that will be reclassified

to profit or loss

14,630,804 7 ( 14,478,585 ) ( 6 )

8300 Other comprehensive income for the year $ 14,101,779 7 ( $ 15,330,978 ) ( 7 )

8500 Total comprehensive income for the year $ 57,934,824 27 $ 12,247,215 5

Basic earnings per share 6(24) Before Tax After Tax Before Tax After Tax

9750 Net income $ 8.14 $ 7.50 $ 5.16 $ 4.72

Assuming shares held by subsidiary are not deemed as treasury stock:

Basic earnings per share (in dollars)

Net income $ 8.11 $ 7.48 $ 5.15 $ 4.71


28

FORMOSA CHEMICALS & FIBRE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

December 31, 2016 December 31, 2015 Assets Notes AMOUNT % AMOUNT %

Current assets

1100 Cash and cash equivalents 6(1) $ 30,391,911 6 $ 34,744,139 7

1110 Financial assets at fair value

through profit or loss - current

6(2)

627,621 - 655,811 -

1125 Available-for-sale financial assets

- current

6(3)

100,777,992 18 83,428,951 16

1150 Notes receivable, net 6(4) 7,037,751 1 6,581,909 1

1160 Notes receivable - related parties 7 11,643 - 5,235 -

1170 Accounts receivable, net 6(5) 18,028,975 3 14,682,304 3

1180 Accounts receivable - related

parties

7

7,356,435 1 6,820,320 1

1200 Other receivables 7 5,107,594 1 7,845,329 2

1210 Other receivables - related

parties

7

19,841,060 4 9,853,312 2

130X Inventory 6(6) and 8 42,215,280 8 40,002,037 8

1470 Other current assets 7 and 8 5,409,066 1 6,330,056 1

11XX Total current assets 236,805,328 43 210,949,403 41

Non-current assets


- non-current

6(3) and 8

42,381,294 8 29,476,127 6

1543 Financial assets carried at cost -

non-current

6(7)

24,431,806 5 3,524,297 1

1550 Investments accounted for under

equity method

6(8), 7 and 8

102,035,137 19 113,700,148 22

1600 Property, plant and equipment 6(9), 7 and 8 130,913,460 24 144,363,759 28

1780 Intangible assets 1,583 - 3,386 -

1840 Deferred income tax assets 6(25) 1,732,954 - 2,087,690 -

1900 Other non-current assets 6,135,028 1 8,880,620 2

15XX Total non-current assets 307,631,262 57 302,036,027 59

1XXX Total assets $ 544,436,590 100 $ 512,985,430 100

(Continued)

29


CONSOLIDATED BALANCE SHEETS (Expressed in thousands of New Taiwan dollars)

December 31, 2016 December 31, 2015 Liabilities and Equity Notes AMOUNT % AMOUNT %

Current liabilities 2100 Short-term borrowings 6(10) $ 26,146,750 5 $ 26,672,648 5 2110 Short-term notes and bills

payable 6(10)

1,499,464 - 2,049,364 - 2120 Financial liabilities at fair value

through profit or loss - current 6(11)

1,381 - 819 - 2150 Notes payable 196,870 - 200,127 - 2170 Accounts payable 8,525,984 2 6,936,889 1 2180 Accounts payable - related parties 7 13,385,510 2 12,287,595 2 2200 Other payables 8,387,052 1 10,310,254 2 2220 Other payables - related parties 7 57,478 - 2,346,509 1 2230 Current income tax liabilities 3,708,596 1 3,174,973 1 2320 Long-term liabilities, current

portion 6(12)(13)

14,416,502 3 16,179,230 3 2399 Other current liabilities 2,884,328 - 2,201,285 1 21XX Total current liabilities 79,209,915 14 82,359,693 16 Non-current liabilities 2530 Corporate bonds payable 6(12)(13) 39,750,000 8 46,500,000 9 2540 Long-term borrowings 6(13) 38,614,620 7 38,774,737 8 2570 Deferred income tax liabilities 6(25) 312,506 - 927,239 - 2600 Other non-current liabilities 6(14) 6,909,137 1 11,346,228 2 25XX Total non-current liabilities 85,586,263 16 97,548,204 19 2XXX Total liabilities 164,796,178 30 179,907,897 35 Equity attributable to owners of

parent

Share capital 6(15) 3110 Common stock 58,611,863 11 58,611,863 11 Capital surplus 6(16) 3200 Capital surplus 8,622,642 1 8,875,002 2 Retained earnings 6(17) 3310 Legal reserve 46,663,535 9 43,905,716 9 3320 Special reserve 41,927,550 8 41,927,550 8 3350 Unappropriated retained

earnings 6(25)

72,560,103 13 52,528,055 10 Other equity interest 6(18) 3400 Other equity interest 91,965,445 17 77,334,641 15 3500 Treasury stocks 6(15) ( 360,572 ) - ( 352,309 ) - 31XX Equity attributable to owners

of the parent

319,990,566 59 282,830,518 55 36XX Non-controlling interest 59,649,846 11 50,247,015 10 3XXX Total equity 379,640,412 70 333,077,533 65 Significant contingent liabilities

and unrecognized contract

commitments

9

Significant events after the balance

sheet date 11

3X2X Total liabilities and equity $ 544,436,590 100 $ 512,985,430 100


30


PARENT COMPANY ONLY BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars,except as otherwise indicated)

December 31, 2016 December 31, 2015 Assets Notes AMOUNT % AMOUNT %

Current assets

1100 Cash and cash equivalents 6(1) $ 13,108,011 3 $ 18,018,485 4


- current

6(2)

98,777,865 23 81,829,505 21

1150 Notes receivable, net 6(3) 335,838 - 369,427 -

1160 Notes receivable - related parties 7 129,706 - 140,382 -

1170 Accounts receivable, net 6(4) 5,835,641 1 5,330,843 1

1180 Accounts receivable - related

parties

7

14,424,217 3 11,613,706 3

1200 Other receivables 2,606,436 1 3,156,316 1

1210 Other receivables - related

parties

7

19,376,968 5 10,583,312 3

130X Inventory 6(5) 21,820,886 5 19,433,809 5

1470 Other current assets 7 1,818,615 1 3,144,364 1

11XX Total current assets 178,234,183 42 153,620,149 39

Non-current assets

1543 Financial assets carried at cost -

non-current

6(6)

2,463,536 1 2,463,536 1

1550 Investments accounted for under

equity method

6(7) and 8

186,031,851 44 172,507,251 44

1600 Property, plant and equipment 6(8) and 8 50,831,005 12 55,843,737 14

1840 Deferred income tax assets 6(23) 1,421,036 - 1,538,788 -

1900 Other non-current assets 3,693,755 1 5,482,849 2

15XX Total non-current assets 244,441,183 58 237,836,161 61

1XXX Total assets $ 422,675,366 100 $ 391,456,310 100

(Continued)

31


PARENT COMPANY ONLY BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars,except as otherwise indicated)

December 31, 2016 December 31, 2015 Liabilities and equity Notes AMOUNT % AMOUNT %

Current liabilities

2100 Short-term borrowings 6(9) $ 6,990,100 2 $ 2,508,000 1

2170 Accounts payable 3,221,504 1 3,396,755 1

2180 Accounts payable - related parties 7 11,754,679 3 10,618,602 3

2200 Other payables 6,051,111 1 7,173,155 2

2230 Current income tax liabilities 6(23) 2,949,686 1 2,279,372 1

2320 Long-term liabilities, current

portion

6(10)(11)

9,581,962 2 13,642,740 3

2399 Other current liabilities 2,183,611 - 1,140,447 -

21XX Total current liabilities 42,732,653 10 40,759,071 11

Non-current liabilities

2530 Corporate bonds payable 6(10) 39,750,000 10 46,500,000 12

2540 Long-term borrowings 6(11) 14,139,898 3 12,271,194 3

2570 Deferred income tax liabilities 6(23) 143,676 - 804,375 -

2600 Other non-current liabilities 6(12) 5,918,573 1 8,291,152 2

25XX Total non-current liabilities 59,952,147 14 67,866,721 17

2XXX Total liabilities 102,684,800 24 108,625,792 28

Equity

Share capital 6(13)

3110 Common stock 58,611,863 14 58,611,863 15

Capital surplus 6(14)

3200 Capital surplus 8,622,642 2 8,875,002 2

Retained earnings 6(15)

3310 Legal reserve 46,663,535 11 43,905,716 11

3320 Special reserve 41,927,550 10 41,927,550 11

3350 Unappropriated retained

earnings

6(23)

72,560,103 17 52,528,055 13

Other equity interest

3400 Other equity interest 6(16) 91,965,445 22 77,334,641 20

3500 Treasury stocks 6(13) ( 360,572 ) - ( 352,309 ) -

3XXX Total equity 319,990,566 76 282,830,518 72

Significant contingent liabilities

and unrecognized contract

commitments

9

Significant events after the balance

sheet date

11

3X2X Total liabilities and equity $ 422,675,366 100 $ 391,456,310 100 The accompanying notes are an integral part of these consolidated financial statements.

32


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


Equity attributable to owners of the parent

Retained Earnings Other Equity Interest

Notes

Share capital -

common stock

Total capital

surplus,

additional

paid-in capital

Legal reserve

Special reserve

Unappropriated

retained

earnings

Financial

statements

translation

differences of

foreign

operations

Unrealized gain

or loss on

available-for-

sale financial

assets

Hedging

instrument

gain (loss) on

effective

hedge of cash

flow hedges

Treasury

stocks

Total

Non-controlling

interest

Total equity

For the year ended December 31, 2015

Balance at January 1, 2015 $ 58,611,863 $ 8,668,561 $ 42,852,687 $ 41,927,550 $ 33,888,707 $ 4,235,625 $ 87,580,223 ( $ 2,622 ) ( $ 332,413 ) $ 277,430,181 $ 45,869,920 $ 323,300,101 Appropriations of 2014

earnings 6(17)

Legal reserve - - 1,053,029 - ( 1,053,029 ) - - - - - - - Cash dividends - - - - ( 7,033,423 ) - - - - ( 7,033,423 ) - ( 7,033,423 ) Dividends paid to subsidiaries

to adjust capital surplus

- 6,701 - - - - - - - 6,701 - 6,701 Difference between proceeds

on acquisition of or disposal of equity interest in a subsidiary and its carrying amount

- - - - - - - - - - 2,817 2,817 Changes in the net interest of

associates recognised under the equity method

- 199,740 - - - - - - - 199,740 - 199,740 Stocks of the parent company

purchased by the subsidiary and recognised as treasury stock

6(15)

- - - - - - - - ( 19,896 ) ( 19,896 ) - ( 19,896 ) Cash dividends paid by

consolidated subsidiaries

- - - - - - - - - - ( 1,708,087 ) ( 1,708,087 ) Adjustment in non-

controlling interest

- - - - - - - - - - ( 5,157 ) ( 5,157 ) Profit for the year - - - - 27,578,193 - - - - 27,578,193 4,039,354 31,617,547 Other comprehensive loss for

the year

- - - - ( 852,393 ) 413,895 ( 14,964,675 ) 72,195 - ( 15,330,978 ) 2,048,168 ( 13,282,810 ) Balance at December 31,

2015

$ 58,611,863 $ 8,875,002 $ 43,905,716 $ 41,927,550 $ 52,528,055 $ 4,649,520 $ 72,615,548 $ 69,573 ( $ 352,309 ) $ 282,830,518 $ 50,247,015 $ 333,077,533

(Continued)

33


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


Equity attributable to owners of the parent

Retained Earnings Other Equity Interest

Notes

Share capital -

common stock

Total capital

surplus,

additional

paid-in capital

Legal reserve

Special reserve

Unappropriated

retained

earnings

Financial

statements

translation

differences of

foreign

operations

Unrealized gain

or loss on

available-for-

sale financial

assets

Hedging

instrument

gain (loss) on

effective

hedge of cash

flow hedges

Treasury

stocks

Total

Non-controlling

interest

Total equity

For the year ended December 31, 2016

Balance at January 1, 2016 $ 58,611,863 $ 8,875,002 $ 43,905,716 $ 41,927,550 $ 52,528,055 $ 4,649,520 $ 72,615,548 $ 69,573 ( $ 352,309 ) $ 282,830,518 $ 50,247,015 $ 333,077,533 Appropriations of 2015

earnings 6(17)

Legal reserve - - 2,757,819 - ( 2,757,819 ) - - - - - - - Cash dividends - - - - ( 20,514,153 ) - - - - ( 20,514,153 ) - ( 20,514,153 ) Dividends paid to subsidiaries

to adjust capital surplus

- 20,975 - - - - - - - 20,975 - 20,975 Difference between proceeds

on acquisition of or disposal of equity interest in a subsidiary and its carrying amount

- - - - - - - - - - 90,366 90,366 Changes in the net interest of

associates recognised under the equity method

- ( 273,335 ) - - - - - - - ( 273,335 ) - ( 273,335 ) Stocks of the parent company

purchased by the subsidiary and recognised as treasury stock

6(15)

- - - - - - - - ( 8,263 ) ( 8,263 ) - ( 8,263 ) Cash dividends paid by

consolidated subsidiaries

- - - - - - - - - - ( 2,866,605 ) ( 2,866,605 ) Profit for the year - - - - 43,833,045 - - - - 43,833,045 4,933,683 48,766,728 Other comprehensive income

for the year

- - - - ( 529,025 ) ( 3,660,896 ) 18,318,099 ( 26,399 ) - 14,101,779 7,245,387 21,347,166 Balance at December 31,

2016

$ 58,611,863 $ 8,622,642 $ 46,663,535 $ 41,927,550 $ 72,560,103 $ 988,624 $ 90,933,647 $ 43,174 ( $ 360,572 ) $ 319,990,566 $ 59,649,846 $ 379,640,412


34


PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

Retained earnings Other equity interest

Financial

Share capital -

Unappropriated

retained

statements

translation

differences of

foreign

Unrealized gain

on

available-for- sale financial

Hedging

instrument gain

on effective

hedge of cash

Notes common stock Capital surplus Legal reserve Special reserve earnings operations assets flow hedges Treasury stocks Total

For the year ended December 31, 2015 Balance at January 1, 2015 $ 58,611,863 $ 8,668,561 $ 42,852,687 $ 41,927,550 $ 33,888,707 $ 4,235,625 $ 87,580,223 ( $ 2,622 ) ( $ 332,413 ) $ 277,430,181 Appropriation of 2014 earnings 6(15) Legal reserve - - 1,053,029 - ( 1,053,029 ) - - - - - Cash dividends - - - - ( 7,033,423 ) - - - - ( 7,033,423 ) Stocks of the parent company purchased by the subsidiary

and recognised as treasury stocks 6(13)

- - - - - - - - ( 19,896 ) ( 19,896 ) Dividends paid to subsidiaries to adjust capital surplus 6(14) - 6,701 - - - - - - - 6,701 Changes in the net interest of associates recognised under

the equity method 6(14)

- 199,740 - - - - - - - 199,740 Profit for the year - - - - 27,578,193 - - - - 27,578,193 Other comprehensive income (loss) for the year 6(16) - - - - ( 852,393 ) 413,895 ( 14,964,675 ) 72,195 - ( 15,330,978 ) Balance at December 31, 2015 $ 58,611,863 $ 8,875,002 $ 43,905,716 $ 41,927,550 $ 52,528,055 $ 4,649,520 $ 72,615,548 $ 69,573 ( $ 352,309 ) $ 282,830,518

For the year ended December 31, 2016 Balance at January 1, 2016 $ 58,611,863 $ 8,875,002 $ 43,905,716 $ 41,927,550 $ 52,528,055 $ 4,649,520 $ 72,615,548 $ 69,573 ( $ 352,309 ) $ 282,830,518 Appropriation of 2015 earnings 6(15) Legal reserve - - 2,757,819 - ( 2,757,819 ) - - - - - Cash dividends - - - - ( 20,514,153 ) - - - - ( 20,514,153 ) Stocks of the parent company purchased by the subsidiary

and recognised as treasury stocks 6(13)

- - - - - - - - ( 8,263 ) ( 8,263 ) Dividends paid to subsidiaries to adjust capital surplus 6(14) - 20,975 - - - - - - - 20,975 Changes in the net interest of associates recognised under

the equity method 6(14)

- ( 273,335 ) - - - - - - - ( 273,335 ) Profit for the year - - - - 43,833,045 - - - - 43,833,045 Other comprehensive income (loss) for the year 6(16) - - - - ( 529,025 ) ( 3,660,896 ) 18,318,099 ( 26,399 ) - 14,101,779 Balance at December 31, 2016 $ 58,611,863 $ 8,622,642 $ 46,663,535 $ 41,927,550 $ 72,560,103 $ 988,624 $ 90,933,647 $ 43,174 ( $ 360,572 ) $ 319,990,566

(Note) Employees' compensation for the years ended December 31, 2015 and 2014 was $47,608 and $39,710, respectively, and was deducted f

The accompanying notes are an integral part of these financial statements.

35


CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars) For the years ended December 31

Notes 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax $ 54,675,666 $ 35,989,165 Adjustments Adjustments to reconcile profit (loss) Depreciation 6(9)(23) 16,029,866 16,494,663 Amortization 6(23) 4,311,872 3,455,355 Provision for decline in market value of inventory (gain

from price recovery) 6(6)

498,306 ( 1,329,388 ) Interest income 6(20) ( 411,097 ) ( 482,867 ) Dividend income 6(20) ( 6,243,361 ) ( 3,285,815 ) Net gain on financial assets and liabilities at fair value

through profit or loss 6(2)(11)(21)

( 1,598 ) ( 7,466 ) Impairment loss on financial assets 6(7)(21) 207,066 - (Gain) loss on disposal and scrap of property, plant and

equipment 6(21)

( 18,206 ) 158,124 Impairment loss on property, plant and equipment 6(9)(21) 781,222 - Gain on disposal of investments 6(21) ( 181,168 ) ( 1,158,104 ) Interest expense 6(22) 1,993,143 2,305,371 Share of profit or loss of associates accounted for under

the equity method

( 19,021,711 ) ( 12,194,766 ) Changes in operating assets and liabilities Changes in operating assets Financial assets at fair value through profit or loss 30,350 2,928 Notes receivable ( 455,842 ) ( 2,492 ) Notes receivable-related parties ( 6,408 ) 4,536,336 Accounts receivable ( 3,346,671 ) 4,284,153 Accounts receivable-related parties ( 536,115 ) ( 23,820 ) Other receivables 2,752,270 7,343,434 Inventories ( 2,661,979 ) 10,257,529 Other current assets 920,990 5,906 Other non-current assets 1,013,421 ( 163,050 ) Changes in operating liabilities Financial liabilities at fair value through profit or loss - ( 1,799 ) Notes payable ( 3,257 ) ( 5,440 ) Accounts payable 1,589,095 ( 13,828 ) Accounts payable-related parties 1,097,915 ( 2,756,573 ) Other payables 231,130 340,929 Other current liabilities 683,043 436,161 Accrued pension liabilities ( 4,901,984 ) ( 483,209 )

Cash inflow generated from operations 49,025,958 63,701,437 Interest received 396,562 515,932 Interest paid ( 2,032,885 ) ( 2,579,944 ) Income tax paid ( 5,114,947 ) ( 1,062,784 ) Dividends received 17,438,601 6,798,323

Net cash flows from operating activities 59,713,288 67,372,964

(Continued)

36


CONSOLIDATED STATEMENTS OF CASH FLOWS


For the years ended December 31

Notes 2016 2015

CASH FLOWS FROM INVESTING ACTIVITIES

(Increase) decrease in other receivables-related parties ( $ 9,987,748 ) $ 8,294,128

Acquisition of available-for-sale financial assets ( 5,478,021 ) ( 95,802 )

Proceeds from disposal of available-for-sale financial assets 228,802 107,991

Acquisition of financial assets measured at cost ( 104 ) ( 25,130 )

Cash refund from capital reduction in financial assets

measured at cost

10,704 13,380

Proceeds from disposal of financial assets measured at cost 40,357 1,576

Acquisition of investments accounted for under the equity

method

( 1,361,880 ) ( 600,000 )

Proceeds from disposal of investments accounted for under

equity method

8,760 1,656,262

Acquisition of property, plant and equipment 6(27) ( 8,963,930 ) ( 17,086,875 )

Proceeds from disposal of property, plant and equipment 67,473 178,829

Acquisition of intangible assets ( 234 ) ( 75,868 )

Increase in non-current assets ( 2,713,339 ) ( 2,422,316 )

Net cash flows used in investing activities ( 28,149,160 ) ( 10,053,825 )

CASH FLOWS FROM FINANCING ACTIVITIES

Decrease in short-term borrowings ( 525,898 ) ( 2,514,551 )

Decrease in short-term notes and bills payable ( 549,900 ) ( 300,160 )

Decrease in other payables-related parties ( 2,289,031 ) ( 469,392 )

Increase in long-term borrowings 13,989,866 14,991,674

Payment of long-term borrowings ( 12,474,284 ) ( 31,474,876 )

Payment of bonds payable ( 9,500,000 ) ( 10,000,000 )

Increase in other non-current liabilities ( 45,849 ) ( 78,501 )

Increase (decrease) in guarantee deposits 5,522 ( 11,098 )

Payment of cash dividends 6(27) ( 21,932,687 ) ( 6,277,741 )

Decrease in non-controlling interest ( 2,866,605 ) ( 1,708,087 )

Net cash flows used in financing activities ( 36,188,866 ) ( 37,842,732 )

Effect of foreign exchange translations 272,509 931,812

Net (decrease) increase in cash and cash equivalents ( 4,352,228 ) 20,408,219

Cash and cash equivalents at beginning of year 34,744,139 14,335,920

Cash and cash equivalents at end of year $ 30,391,911 $ 34,744,139


37

FORMOSA CHEMICALS & FIBRE CORPORATION PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31 (Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

For the years ended December 31,

Notes 2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax $ 47,560,773 $ 30,162,415 Adjustments Adjustments to reconcile profit (loss) Depreciation 6(21) 7,289,036 7,843,684 Amortization 6(21) 3,890,281 3,168,326 Net gain on financial assets and liabilities at fair value

through profit or loss 6(19)

- ( 1,129 ) Loss from price reduction (gain from price recovery) of

inventory 6(5)

329,604 ( 1,301,663 ) Interest expense 6(20) 1,098,747 1,434,408 Interest income 6(18) ( 308,290 ) ( 381,417 ) Dividend income 6(18) ( 4,623,739 ) ( 2,905,441 ) Share of profit or loss of associates accounted for under

the equity method

( 22,878,875 ) ( 11,479,120 ) Impairment loss on property, plant and equipment 6(8)(19) 781,222 - Loss (gain) on disposal and scrap of property, plant and

equipment 6(19)

2,902 ( 27,244 ) Gain on disposal of investments 6(19) - ( 1,155,418 ) Realized loss (gain) from sales 566,090 ( 114,308 ) Changes in operating assets and liabilities Changes in operating assets Financial assets at fair value through profit or loss - 1,129 Notes receivable 33,589 83,342 Notes receivable - related parties 10,676 147,778 Accounts receivable ( 504,798 ) 452,947 Accounts receivable - related parties ( 2,810,511 ) ( 714,890 ) Other receivables 562,741 7,403,953 Inventory ( 2,716,681 ) 8,842,536 Other current assets 1,202,022 39,805 Other non-current assets 307,020 174,523 Changes in operating liabilities Accounts payable ( 175,251 ) ( 391,684 ) Accounts payable - related parties 1,136,077 ( 1,163,768 ) Other payables 1,054,829 437,317 Other current liabilities 1,043,163 144,295 Accrued pension liabilities ( 2,845,274 ) ( 592,728 )

Cash inflow generated from operations 30,005,353 40,107,648 Interest received 295,429 388,976 Dividends received 17,575,534 7,265,520 Interest paid ( 1,145,955 ) ( 1,465,008 ) Income tax paid ( 3,009,214 ) ( 29,815 )

Net cash flows from operating activities 43,721,147 46,267,321

(Continued)

38

FORMOSA CHEMICALS & FIBRE CORPORATION PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31 (Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

For the years ended December 31, Notes 2016 2015

CASH FLOWS FROM INVESTING ACTIVITIES

(Increase) decrease in other receivables - related parties ( $ 8,793,656 ) $ 9,389,128

Acquisition of available-for-sale financial assets ( 4,903,800 ) -

Proceeds from disposal of available-for-sale financial assets - 88,599

Acquisition of financial assets measured at cost - ( 25,000 )

Acquisition of investments accounted for under the equity

method

( 2,452,940 ) -

Proceeds from disposal of investments accounted for under

equity method

- 1,656,262

Acquisition of property, plant and equipment 6(25) ( 3,790,863 ) ( 3,529,175 )

Proceeds from disposal of property, plant and equipment 14,966 47,438

Increase in deferred expenses ( 2,335,523 ) ( 1,799,122 )

Decrease (increase) in guarantee deposits paid 55,381 ( 12,152 )

Net cash flows (used in) from investing activities ( 22,206,435 ) 5,815,978

CASH FLOWS FROM FINANCING ACTIVITIES

Increase in short-term borrowings 4,482,100 939,600

Increase in long-term borrowings 6,000,000 160,000

Payment of long-term borrowings ( 5,437,755 ) ( 22,941,466 )

Payment of bonds payable ( 9,500,000 ) ( 10,000,000 )

Decrease in other non-current liabilities ( 32,525 ) ( 40,955 )

Payment of cash dividends 6(25) ( 21,932,687 ) ( 6,277,741 )

Net cash flows used in financing activities ( 26,420,867 ) ( 38,160,562 )

Effect of foreign exchange translations ( 4,319 ) ( 9,901 )

Net (decrease) increase in cash and cash equivalents ( 4,910,474 ) 13,912,836

Cash and cash equivalents at beginning of year 18,018,485 4,105,649

Cash and cash equivalents at end of year $ 13,108,011 $ 18,018,485

The accompanying notes are an integral part of these financial statements.

39


Statement of Profits Distribution

For the year of 2016

Unit：NT$

Items Amount Items Amount Explanation

Available for

Distribution:

(1) Unappropriated

retained earnings of

previous years

(2) Net profit after tax

of current year

(3) Other

comprehensive

income transferred

to unappropriated

retained earnings

of current year

29,256,083,229

43,833,045,398

-529,025,507

Distribution Items:

(1) Appropriation of legal

reserve (10% of the

after-tax profit )

(2) Appropriation of special

reserve

(3) Distribution of dividends

and bonus in cash ( $5.6

per share)

(4) Unappropriated retained

earnings carried forward

to next year

4,383,304,540

4,639,539,105

32,822,643,230

30,714,616,245

1. Registered capital of the company is

NT$58,611,862,910; outstanding shares entitled

to cash dividends distribution are 5,861,186,291.

2. The Company plans to distribute dividends of

$5.6 per share for current year (among which,

$2.95 per share will be distributed as dividends

and $2.65 per share will be distributed as bonus);

all of which are cash dividends.

3. The Company distributes dividends and bonus,

all of which are from net profit after tax of 2016.

4. While the distribution of cash dividends to each

individual shareholder is less than 1 dollar, the

distribution will be rounded to the nearest dollar.

5. Other comprehensive income transferred to

unappropriated retained earnings of current year,

all of which are re-measurement of the actuarial

pension adjustment.

Total 72,560,103,120 Total 72,560,103,120

40

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR16000289

To the Board of Directors and Shareholders of Formosa Chemicals & Fibre Corporation

Opinion

We have audited the accompanying consolidated balance sheets of Formosa Chemicals & Fibre

Corporation and its subsidiaries (the “Group”) as at December 31, 2016 and 2015, and the related

consolidated statements of comprehensive income, of changes in equity and of cash flows for the years

then ended, and notes to the consolidated financial statements, including a summary of significant

accounting policies.

In our opinion, based on our audits and the reports of other independent accountants, the

accompanying consolidated financial statements present fairly, in all material respects, the

consolidated financial position of the Group as at December 31, 2016 and 2015, and its consolidated

financial performance and its consolidated cash flows for the years then ended in accordance with the

“Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the

International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations,

and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of

Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the

Republic of China (ROC GAAS). Our responsibilities under those standards are further described in

the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our

report. We are independent of the Group in accordance with the Code of Professional Ethics for

Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other

ethical responsibilities in accordance with the Code. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our

audit of the consolidated financial statements of the current period. These matters were addressed in

the context of our audit of the consolidated financial statements as a whole and, in forming our opinion

thereon, we do not provide a separate opinion on these matters.

Impairment assessment of property, plant and equipment-PTA division

Description

41

Please refer to Note 4(16) for accounting policy on impairment of non-financial assets, Note 5(2) for

uncertainty of accounting estimates and assumptions in relation to impairment assessment of tangible

assets, and Note 6(9) for details of property, plant and equipment impairment.

The Group’s property, plant and equipment amounted to NT$130,913,460 thousand at December 31,

2016. Due to the oversupply of the Group’s products in the market as a result of too many competitors

in the industry, asset items used in the production and manufacturing of PTA may be impaired.

Management has identified its Third Chemical Division, which mainly produces and manufactures

PTA, as a cash-generating unit. Management used the estimated future cash flows and proper discount

rate to calculate value in use and determined the recoverable amount to assess whether assets had been

impaired. Based on the aforementioned valuation model, the Group recognized impairment loss on

property, plant and equipment of NT$314,437 thousand for the year ended December 31, 2016.

As the estimated recoverable amount of a cash-generating unit is dependent upon significant

management judgement, with respect to estimated discount rate applied to estimated future cash flows,

we consider impairment assessment of property, plant and equipment a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

1. Assessing the reasonableness of future cash flows estimated by management for its Third Chemical

Division, checking whether the future 5 years cash flows are in line with the business division’s

operational plan, and reviewing the operational plan proposed by management against actual

performance to confirm relevance of key assumptions.

2. Assessing discount rate and weighted average cost of capital, and checking assumptions of market

rate, capital structure and cost of debt.

3. Verifing the accuracy of valuation model calculation.

Impairment assessment of property, plant and equipment-Changhua plant

Description

Please refer to Note 4(16) for accounting policy on non-financial assets impairment, Note 5(2) for



As described in Note 12(1), the Company recognized impairment loss on its Changhua plant based on

the recoverable amount of idle equipment. As the operation of three cogeneration sets had been

suspended since October 7, 2016, the idle equipment are considered not recoverable. Accordingly, the

Group recognized impairment loss on property, plant and equipment amounting to NT$466,785

thousand for the year ended December 31, 2016.

Given the significance of the closure of the Company’s Changhua plant, we consider management’s

impairment assessment of property, plant and equipment a key audit matter.

42



1. Obtaining Changhua plant’s property listing, and confirming completeness of assets.

2. Obtaining assets impairment report prepared by management for Changhua plant, performing

physical inspection of available plant assets, and verifying whether certain assets are still working.

3. Verifying the accuracy of the amount of impairment loss recognized.

Other matter – audits of the other independent accountants

We did not audit the financial statements of a wholly-owned consolidated subsidiary and certain

investments accounted for under the equity method, which statements reflect total assets (including

investments accounted for under equity method) of NT$139,881,489 thousand and NT$149,833,197

thousand, constituting 26% and 30% of consolidated total assets as of December 31, 2016 and 2015,

respectively, operating income of NT$28,363,847 thousand and NT$24,936,460 thousand, constituting

9% and 8% of consolidated total operating income for the years then ended, respectively, and

comprehensive income of NT$20,803,398 thousand and NT$10,709,919 thousand, constituting 30%

and 58% of consolidated total comprehensive income for the years then ended, respectively. Those

financial statements were audited by other independent accountants whose reports thereon have been

furnished to us, and our opinion expressed herein insofar as it relates to the amounts included in the

financial statements relative to the subsidiary and investee companies, is based solely on the audit

reports of the other independent accountants.

Other matter – parent company only financial statements

We have audited the parent company only financial statements of Formosa Chemicals & Fibre

Corporation as of and for the years ended December 31, 2016 and 2015, and have expressed an

unqualified opinion on such financial statements.

Responsibilities of management and those charged with governance for the

consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial

statements in accordance with the “Regulations Governing the Preparation of Financial Reports by

Securities Issuers” and the International Financial Reporting Standards, International Accounting

Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory

Commission, and for such internal control as management determines is necessary to enable the

preparation of consolidated financial statements that are free from material misstatement, whether due

to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the

Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern and using the going concern basis of accounting unless management either intends to liquidate

43

the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee, are responsible for overseeing the Group’s

financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements

as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s

report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a

guarantee that an audit conducted in accordance with ROC GAAS will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,

individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise 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 due to fraud or error, design and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk

of not detecting a material misstatement resulting from fraud is higher than for one resulting from

error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the

override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Group’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting

and, based on the audit evidence obtained, whether a material uncertainty exists related to events

or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.

If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s

report to the related disclosures in the consolidated financial statements or, if such disclosures are

inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up

to the date of our auditor’s report. However, future events or conditions may cause the Group to

cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Group to express an opinion on the consolidated financial

44

statements. We are responsible for the direction, supervision and performance of the group audit.

We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies in

internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant

ethical requirements regarding independence, and to communicate with them all relationships and

other matters that may reasonably be thought to bear on our independence, and where applicable,

related safeguards.

From the matters communicated with those charged with governance, we determine those matters that

were of most significance in the audit of the consolidated financial statements of the current period and

are therefore the key audit matters. We describe these matters in our auditor’s report unless law or

regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we

determine that a matter should not be communicated in our report because the adverse consequences of

doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Chou, Chien-Hung Juanlu, Man-Yu

for and on behalf of PricewaterhouseCoopers, Taiwan

March 17, 2017 ------------------------------------------------------------------------------------------------------------------------------------------------- The accompanying non-consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying non-consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

----------------------------------------------------------------------------------------------------------------------------- ------------------- The accompanying non-consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying non-consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

----------------------------------------------------------------------------------------------------------------------------- -------------------- The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation. ----------------------------------------------------------------- -------------------------------------------------------------------------------- The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

----------------------------------------------------------------------------------------------------------------------------- -------------------- The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

------------------------------------------------------------------------------------------------------------------------------------------------- The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

45

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of Formosa Chemicals & Fibre Corporation

Opinion

We have audited the accompanying parent company only balance sheets of Formosa Chemicals &

Fibre Corporation (the “Company”) as at December 31, 2016 and 2015, and the related parent

company only statements of comprehensive income, of changes in equity and of cash flows for the

years then ended, and notes to the parent company only financial statements, including a summary of

significant accounting policies.

In our opinion, based on our audits and the reports of other auditors, the accompanying parent

company only financial statements present fairly, in all material respects, the parent company only

financial position of the Company as at December 31, 2016 and 2015, and its parent company only

financial performance and its parent company only cash flows for the years then ended in accordance

with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of

Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the

Republic of China (ROC GAAS). Our responsibilities under those standards are further described in

the Auditor’s Responsibilities for the Audit of the Parent Company Only Financial Statements section

of our report. We are independent of the Company in accordance with the Code of Professional Ethics

for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other

ethical responsibilities in accordance with the Code. Based on our audits and the reports of other

auditors, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our

audit of the parent company only financial statements of the current period. These matters were

addressed in the context of our audit of the parent company only financial statements as a whole and,

in forming our opinion thereon, we do not provide a separate opinion on these matters.

Impairment assessment of property, plant and equipment-PTA division

Description


uncertainty of accounting estimates and assumptions in relation to impairment valuation of tangible

assets, Note 6(8) for explanation of property, plant and equipment impairment.

46

The Company’s property, plant and equipment amounted to NT$50,831,005 thousand at December 31,

2016. Due to the oversupply of the Company’s products in the market as a result of too many

competitors in the industry, asset items used in the production and manufacturing of PTA may be

impaired. Management has identified its Third Chemical Division, which mainly produces and

manufactures PTA, as a cash-generating unit. Management used the estimated future cash flows and

proper discount rate to calculate value in use and determined the recoverable amount to assess whether

assets had been impaired. Based on the aforementioned valuation model, the Company recognized

impairment loss on property, plant and equipment of NT$314,437 thousand for the year ended

December 31, 2016.

As the estimated recoverable amount of a cash-generating unit is dependent upon significant

management judgement, with respect to estimated discount rate applied to estimated future cash flows,

we consider impairment assessment of property, plant and equipment a key audit matter.



1. Assessing the reasonableness of future cash flows estimated by management for its Third Chemical

Division, checking whether the future 5 years cash flows are in line with the business division’s

operational plan, and reviewing the operational plan proposed by management against actual

performance to confirm relevance of key assumptions.

2. Assessing discount rate and weighted average cost of capital, and checking assumptions of market

rate, capital structure and cost of debt.

3. Verifing the accuracy of valuation model calculation.

Impairment assessment of property, plant and equipment - Changhua plant

Description




As described in Note 12(1), the Company recognized impairment loss on its Changhua plant based on

the recoverable amount of idle equipment. As the operation of three cogeneration sets had been

suspended since October 7, 2016, the idle equipment are considered not recoverable. Accordingly, the

Company recognized impairment loss on property, plant and equipment amounting to NT$466,785

thousand for the year ended December 31, 2016.

Given the significance of the shutdown of the Company’s Changhua plant, we consider management’s

impairment assessment of property, plant and equipment a key audit matter.

47



1. Obtaining Changhua plant’s property listing, and confirming completeness of assets.

2. Obtaining assets impairment report prepared by management for Changhua plant, performing

physical inspection of available plant assets, and verifying whether certain assets are still working.

3. Verifying the accuracy of the amount of impairment loss recognized.

Other matter – audits of the other independent accountants

We did not audit the financial statements of certain investments accounted for under the equity method.

The balance of these investments accounted for under equity method amounted to NT$107,556,340

thousand and NT$114,043,846 thousand, constituting 25% and 29% of total assets as of December 31,

2016 and 2015, respectively, and comprehensive income was NT$21,133,455 thousand an d

NT$10,645,424 thousand, constituting 36% and 87% of total comprehensive income for the years then

ended, respectively. Those financial statements were audited by other independent accountants whose

reports thereon have been furnished to us, and our opinion expressed herein insofar as it relates to the

amounts included in the financial statements, relative to three investees, is based solely on the audit

reports of the other independent accountants.

Responsibilities of management and those charged with governance for the parent

company only financial statements

Management is responsible for the preparation and fair presentation of the parent company only

financial statements in accordance with the “Regulations Governing the Preparation of Financial

Reports by Securities Issuers”, and for such internal control as management determines is necessary to

enable the preparation of parent company only financial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing

the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to

going concern and using the going concern basis of accounting unless management either intends to

liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee, are responsible for overseeing the

Company’s financial reporting process.

Auditor’s responsibilities for the audit of the parent company only financial

statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial

statements as a whole are free from material misstatement, whether due to fraud or error, and to issue

48

an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is

not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,

individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of these parent company only financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain

professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the parent company only financial

statements, whether due to fraud or error, design and perform audit procedures responsive to those

risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one

resulting from error, as fraud may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Company’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting

and, based on the audit evidence obtained, whether a material uncertainty exists related to events or

conditions that may cast significant doubt on the Company’s ability to continue as a going concern.

If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s

report to the related disclosures in the parent company only financial statements or, if such

disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence

obtained up to the date of our auditor’s report. However, future events or conditions may cause the

Company to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the parent company only financial

statements, including the disclosures, and whether the parent company only financial statements

represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Company to express an opinion on the parent company only financial

statements. We are responsible for the direction, supervision and performance of the audit. We

remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies in

internal control that we identify during our audit.

49

We also provide those charged with governance with a statement that we have complied with relevant

ethical requirements regarding independence, and to communicate with them all relationships and

other matters that may reasonably be thought to bear on our independence, and where applicable,

related safeguards.

From the matters communicated with those charged with governance, we determine those matters that

were of most significance in the audit of the parent company only financial statements of the current

period and are therefore the key audit matters. We describe these matters in our auditor’s report unless

law or regulation precludes public disclosure about the matter or when, in extremely rare

circumstances, we determine that a matter should not be communicated in our report because the

adverse consequences of doing so would reasonably be expected to outweigh the public interest

benefits of such communication.

Chou, Chien-Hung Juanlu, Man-Yu

for and on behalf of PricewaterhouseCoopers, Taiwan

March 17, 2017

----------------------------------------------------------------------------------------------------------------------------- -------------------- The accompanying non-consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying non-consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

50

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$ 47,608,382

Employees Stock Compensation NT$ 0

Directors Compensation NT$ 0

2. Share amount of the employees’ stock compensation and the

percentage of the share amount to that of all stock dividend:

Share amount of employees’ stock compensation 0 share

Percentage of the share amount to that of all stock

dividend

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

2017 Annual Shareholders’ Meeting:

Not applicable since the Company does not propose the stock dividend

distribution at the 2017 Annual Shareholders’ Meeting and does not required

preparing financial forecast information.

51


Current Shareholdings of Directors

Title Name Shareholding (share)

Chairman Wen Yuan, Wang 129,198,084

Vice Chairman Fu Yuan, Hong 272,804

Managing Director Wilfred, Wang 16,867,218

Managing Director Nan Ya Plastics Corporation

Representative: Ruey Yu, Wang 140,519,648

Managing Director

(Independent Director) Ruey Long, Chen 0

Independent Director Tzong Yeong, Lin 0

Independent Director Kung, Wang 0

Director Chang Gung Medical

Foundation Representative:

Wen Neng, Ueng

1,089,142,009

Director Formosa Petrochemical

Corporation Representative:

Walter Wang 48,567,575

Director Dong Terng, Huang 34,410

Director Chiu Ming, Chen 79,627

Director Hung Chi, Yang 152,289

Director Ing Dar, Fang 73

Director Wen Chin, Lu 3,236

Director Sun Ju, Lee 15,450

Note: According to Article 26 of Securities and Exchange Act, the

minimum shareholdings of the Company’s Directors are 93,778,981

shares. As of April 11, 2017, the actual shareholdings of the

Company’s Directors are 1,424,852,423 shares.

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