FORMOSA PLASTICS CORPORATION AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS

Transcription

1 FORMOSA PLASTICS CORPORATION AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, AND (With Independent Accountants Review Report Thereon)

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4 Consolidated financial statements as of and are reviewed only, not audited in accordance with generally accepted auditing standards CONSOLIDATED STATEMENTS OF FINANCIAL POSITION MARCH 31, DECEMBER 31, AND MARCH 31, (Expressed in thousands of New Taiwan Dollars) Assets (Adjusted) (Adjusted) Liabilities and Equity (Adjusted) (Adjusted) Current assets: Cash and cash equivalents (note 6(1)) $ 8,608,789 5,392,825 11,115,984 Available-for-sale financial assets-current(notes 6(2), 7 and 8) 66,048,634 83,956,324 87,283,948 Notes receivable (note 6(3)) 974,458 1,026, ,988 Accounts receivable, net (note 6(3)) 7,549,829 7,350,138 7,179,266 Accounts receivable-related parties (notes 6(3) and 7) 4,893,812 4,225,994 4,405,466 Other receivables (note 6(3)) 1,301,605 1,052,161 1,037,557 Other receivables-related parties (notes 6(3) and 7) 20,412,446 29,179,344 28,799,968 Inventories (note 6(4)) 25,004,649 22,872,390 19,033,464 Other current assets 5,339,146 5,082,721 4,933,315 Total current assets 140,133, ,138, ,776,956 Non-current assets: Available-for-sale financial assets-non-current (note 6(2)) 14,132,857 10,729,587 10,464,659 Financial assets carried at cost-non-current 2,416,168 2,437,768 2,462,768 Investments accounted for using equity method (notes 6(5), 7 and 8) 155,372, ,240, ,982,691 Property, plant and equipment (notes 6(6), 7 and 8) 82,735,370 83,997,627 82,805,292 Intangible assets 625, , ,113 Deferred tax assets 1,712,787 1,677,266 1,647,335 Other assets (notes 6(3), 7 and 8) 13,677,646 10,979,936 10,788,765 Total non-current assets 270,672, ,664, ,730,623 Current liabilities: Short-term borrowings (notes 6(7) and 8) $ 16,427,489 13,767,560 10,923,003 Accounts payable 2,104,441 5,454,975 1,551,414 Accounts payable-related parties (note 7) 11,855,135 7,358,639 9,119,588 Other payables 1,304,709 1,270,407 2,919,944 Other payables-related parties (note 7) 873, ,159 1,007,355 Current portion of bonds payable (note 6(9)) 5,997,630 7,993,512 7,994,987 Current portion of long-term debts (notes 6(8) and 8) 4,995,601 1,515,645 2,008,253 Other current liabilities (note 7) 10,720,863 9,625,843 12,649,842 Total current liabilities 54,279,417 47,923,740 48,174,386 Non-current liabilities: Bonds payable (note 6(9)) 53,900,336 51,913,453 51,920,286 Long-term debts (notes 6(8) and 8) 20,945,927 26,944,995 24,814,923 Deferred tax liabilities 7,775,356 9,412,161 9,557,168 Accrued pension liabilities 9,291,040 8,985,137 8,872,539 Other liabilities 472, , ,631 Total non-current liabilities 92,385,589 97,729,041 95,664,547 Total liabilities 146,665, ,652, ,838,933 Equity attributable to owners of the parent (notes 6(12)(13)): Common stock 63,657,408 63,657,408 63,657,408 Capital surplus 11,278,180 11,277,988 11,277,971 Retained earnings Legal reserve 41,267,621 43,339,205 43,339,205 Special reserve 33,508,131 39,078,218 39,078,218 Unappropriated retained earnings 55,162,906 46,066,241 49,709,926 Total retained earnings 129,938, ,483, ,127,349 Other components of equity 59,266,552 81,731,150 84,605,918 Total equity 264,140, ,150, ,668,646 Total assets $ 410,805, ,802, ,507,579 Total Liabilities and Equity $ 410,805, ,802, ,507,579 See accompanying notes to consolidated financial statements.

5 Reviewed only, not audited in accordance with generally accepted auditing standards CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE-MONTH PERIODS ENDED MARCH 31, AND (Expressed in thousands of New Taiwan Dollars, except for earnings per share) For the three-month periods ended (Adjusted) Operating revenues (notes 6(14) and 7) $ 51,989,871 47,697,112 Operating costs (notes 6(4)(10)(12) and 7) 48,208,250 42,125,233 Gross profit 3,781,621 5,571,879 Operating expenses (notes 6(10)(12) and 7): Selling expenses 1,249,892 1,370,949 Administrative expenses 1,221,631 1,061,923 Research and development expenses 220, ,024 Total operating expenses 2,692,252 2,632,896 Operating income 1,089,369 2,938,983 Non-operating income and expenses (notes 6(5)(15) and 7): Other income 155, ,009 Other gains and losses 2,925,497 (139,201) Finance costs (379,665) (361,212) Recognized share of profit of associates and joint ventures accounted for using equity method, net 4,182,677 1,902,405 Total non-operating income and expenses 6,884,151 1,513,001 Income before income tax 7,973,520 4,451,984 Less: income tax expense (note 6(11)) 790, ,299 Net income 7,182,974 3,643,685 Other comprehensive income (loss): Items that could be reclassified subsequently to profit or loss Exchange differences arising on translation foreign operations 1,356,292 (1,059,813) Unrealized (losses) gains on available-for-sale financial assets (5,359,605) 3,211,590 Share of other comprehensive income of associates and joint ventures accounted for using equity method (722,480) 601,755 Less: Income tax expense related to components of other comprehensive income (184,284) 121,236 Total items that could be reclassified subsequently to profit or loss (4,910,077) 2,874,768 Total other comprehensive (loss) income, net after tax (4,910,077) 2,874,768 Total comprehensive income $ 2,272,897 6,518,453 Basic earnings per share (note 6(13)) before income tax $ after income tax $ See accompanying notes to consolidated financial statements.

6 Reviewed only, not audited in accordance with generally accepted auditing standards CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE-MONTH PERIODS ENDED MARCH 31, AND (Expressed in thousands of New Taiwan Dollars) Common stock Capital surplus Legal reserve Special reserve Equity Attributable to Owners of the Parent Retained Earnings Unappropriated retained earnings Exchange difference on translation of foreign operations Others Unrealized gains on available-for-sale financial assets Gains (losses) on effective portion of cash flow hedges Total Equity Balance as of January 1, $ 63,657,408 11,275,671 41,267,621 33,508,131 48,550, ,916 63,615,604 2, ,436,353 Effect of retrospective application and adjustment (570,961) (570,961) Adjusted balance, January 1, 63,657,408 11,275,671 41,267,621 33,508,131 47,979, ,916 63,615,604 2, ,865,392 Net income for the period ,182, ,182,974 Other comprehensive income (loss) for the period, net after tax ,172,008 (6,084,640) 2,555 (4,910,077) Total comprehensive income (loss) for the period ,182,974 1,172,008 (6,084,640) 2,555 2,272,897 Changes in capital surplus Changes in equity of associates and joint ventures accounted for using equity method - 2, ,546 Other - (37) (37) Balance as of $ 63,657,408 11,278,180 41,267,621 33,508,131 55,162,906 1,730,924 57,530,964 4, ,140,798 Balance as of January 1, $ 63,657,408 11,277,988 43,339,205 39,078,218 46,807,749 5,416,784 76,317,462 (3,096) 285,891,718 Effect of retrospective application and adjustment (741,508) (741,508) Adjusted balance, January 1, 63,657,408 11,277,988 43,339,205 39,078,218 46,066,241 5,416,784 76,317,462 (3,096) 285,150,210 Net income for the period ,643, ,643,685 Other comprehensive income (loss) for the period, net after tax (938,577) 3,772,837 40,508 2,874,768 Total comprehensive income (loss) for the period ,643,685 (938,577) 3,772,837 40,508 6,518,453 Changes in capital surplus Other - (17) (17) Balance as of $ 63,657,408 11,277,971 43,339,205 39,078,218 49,709,926 4,478,207 80,090,299 37, ,668,646 See accompanying notes to consolidated financial statements.

7 Reviewed only, not audited in accordance with generally accepted auditing standards CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH PERIODS ENDED MARCH 31, AND (Expressed in thousands of New Taiwan Dollars) For the three-month periods ended (Adjusted) Cash flows from operating activities: Income before income tax $ 7,973,520 4,451,984 Adjustments for: Depreciation expense 1,903,069 1,895,668 Amortization expense 152, ,165 (Reversal) provision for bad debt expense (1,126) 197 Interest expenses 379, ,212 Interest income (128,835) (80,637) Share of profit of associates and joint ventures accounted for using equity method (4,182,677) (1,902,405) Gain on disposal of property, plant and equipment (16,456) (5,705) Property, plant and equipment transferred to expenses Gain on disposal of investments - (159,813) Gain on disposal of investments accounted for using equity method (2,627,625) - Unrealized foreign exchange gain (137,243) (381,420) Incomes and expenses not affecting cash flows (4,658,072) (31,738) Changes in operating assets and liabilities : Changes in operating assets : Notes receivable 85,096 38,830 Accounts receivable 1,231, ,302 Accounts receivable-related parties (261,867) (179,472) Other receivables 431,482 13,185 Other receivables-related parties (153,168) (143,039) Inventories (3,305,058) 3,892,369 Other current assets (412,895) 149,892 Total changes in operating assets (2,385,115) 3,953,067 Changes in operating liabilities : Accounts payable (2,373,657) (3,903,561) Accounts payable-related parties (998,624) 1,760,949 Other payables 106,705 1,149,840 Other payables-related parties (20,731) 76,908 Accrued expense and other current liabilities 1,651,007 2,846,849 Accrued pension liabilities (36,699) (112,597) Total changes in operating liabilities (1,671,999) 1,818,388 Total changes in operating assets and liabilities (4,057,114) 5,771,455 Total adjustments (8,715,186) 5,739,717 Cash generated from operations: (741,666) 10,191,701 Interest received 87,913 82,055 Dividends received - 120,300 Interest paid (164,290) (184,061) Income tax paid (135,120) (8,732) Net cash (used in) provided by operating activities (953,163) 10,201,263 Cash flows from investing activities: Acquisition of available-for-sale financial assets (965) - Proceeds from disposal of available-for-sale financial assets - 308,707 Acquisition of financial assets carried at cost - (25,000) Proceeds from disposal of investments accounted for using equity method 3,776,928 - Acquisition of property, plant and equipment (2,739,134) (865,048) Proceeds from disposal of property, plant and equipment 16,701 7,398 Decrease in due from related parties (listed under other receivables-related parties) 874, ,255 Increase in other assets (601,172) (475,463) Net cash provided by (used in) investing activities 1,326,667 (117,151) Cash flows from financing activities: Increase in short-term borrowings 48,951,384 22,562,214 Decrease in short-term borrowings (50,045,732) (25,403,685) Decrease in short-term notes and bills payable (3,099,844) - Proceeds from long-term debts 5,363,750 3,100,000 Repayments of long-term debts (633,514) (4,737,464) Increase (decrease) in due to related parties (listed under other payables-related parties) 11,816 (6,712) Increase in other liabilities 49,460 26,336 Cash dividends paid (2,576) (3,712) Net cash provided by (used in) financing activities 594,744 (4,463,023) Effect of foreign currency exchange translation (32,336) 102,070 Increase in cash and cash equivalents 935,912 5,723,159 Cash and cash equivalents at beginning of period 7,672,877 5,392,825 Cash and cash equivalents at end of period $ 8,608,789 11,115,984 See accompanying notes to consolidated financial statements.

8 Notes to consolidated financial statements as of and are reviewed only, not audited in accordance with generally accepted auditing standards MARCH 31, AND (All amounts are expressed in thousands of New Taiwan Dollars, except for per share information or unless otherwise specified) 1. Organization and principal activities Formosa Plastics Corporation (the Company ) was incorporated on November 5, 1954, and established its factories in Kaohsiung City. The Company and its subsidiaries (the Group ) engages in the manufacture and sale of plastic raw materials, chemical fibers, and petrochemical products. The Company has gone through several capital increases and established many divisions, and become a well-diversified enterprise. 2. Approval date and procedures of the consolidated financial statements The consolidated financial statements were reported and issued by the Board of Directors on May 8,. 3. New and revised standards and interpretations (1) The impact of adoption of new and amended standards and interpretations endorsed by the Financial Supervisory Commission of the Republic of China ( FSC ). The Group adopted the 2013 version of IFRSs endorsed by the FSC (excluding IFRS 9 Financial Instruments) as they issue consolidated financial statements commencing from. Related new, revised and amended standards and interpretations are listed below: New, Revised or Amended Standards and Interpretations Effective Date Prescribed by IASB Amendments to IFRS 1 Limited Exemption from Comparative IFRS 7 July 1, 2010 Disclosures for First - time Adopters Amendments to IFRS 7 Disclosures Transfer of Financial Assets July 1, 2011 Amendments to IFRS 7 Disclosures - offsetting Financial Assets and January 1, 2013 Financial Liabilities IFRS 10 Consolidated financial statements January 1, 2013 (Investment entity took effect on January 1, ) IFRS 11 Joint arrangements January 1, 2013 IFRS 12 Disclosure of interests in other entities January 1, 2013 IFRS 13 Fair Value Measurement January 1, 2013

9 2 New, Revised or Amended Standards and Interpretations Effective Date Prescribed by IASB Amendments to IAS 1 Presentation of Items of Other Comprehensive July 1, 2012 Income Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets January 1, 2012 Amendments to IAS 19 Employee Benefits January 1, 2013 Amendments to IAS 27 Separate Financial Statements January 1, 2013 Amendments to IAS 32 Offsetting of Financial Assets and Financial January 1, Liabilities Except for the following, the Group believes that the adoption of aforementioned 2013 version of IFRSs endorsed by the FSC did not have any significant effect on the Group s consolidated financial statements. (a) Amendments to IAS 19, Employee Benefits The amendments to IAS 19 require the Group to calculate a net interest amount by applying the discount rate to the net defined benefit liability or asset to replace the interest cost and expected return on planned assets used in current IAS 19. In addition, the amendments eliminate the accounting treatment of either corridor approach or the immediate recognition of actuarial gains and losses to profit or loss when incurred, and instead, require to recognize all actuarial gains and losses immediately through other comprehensive income. The past service cost, on the other hand, is expensed immediately when incurred and is no longer amortized over the average period before vested on a straight-line basis. In addition, instead of recognizing liability and expense only when the demonstrable benefit commitment is made, the amendments require the Group to recognize liability and expense for termination benefit on (1) the date when the Group can no longer withdraw the offer of the benefit; or (2) the date when the Group recognizes related restructuring expense, whichever date is earlier. Moreover, the amendments also require a broader disclosure for defined benefit plans. The Group has changed the accounting policy related to the measure and expression of net defined benefit assets, pension cost and actuarial gains or losses. With the elimination of the corridor approach, the Group has fully recognized the unrecognized prior service cost and actuarial gains or losses, and retrospectively adjusted the accumulated deficit. The influenced items and amounts are as follows:

10 3 Consolidated statement of financial position: 2010 IFRSs amounts Impact on transition 2013 IFRSs amounts : Investments accounted for using equity method $ 155,646,296 (273,822) 155,372,474 Deferred tax assets 1,645,780 67,007 1,712,787 Accrued pension liabilities 8,896, ,159 9,291,040 Other liabilities 473,308 (378) 472,930 Retained earnings 55,763,502 (600,596) 55,162,906 : Investments accounted for using equity method 160,602,440 (361,630) 160,240,810 Deferred tax assets 1,599,335 77,931 1,677,266 Accrued pension liabilities 8,526, ,420 8,985,137 Other liabilities 473,906 (611) 473,295 Retained earnings 46,807,749 (741,508) 46,066,241 Consolidated statement of comprehensive income: 2010 IFRSs amounts Impact on transition 2013 IFRSs amounts For the three-month periods ended : Operating expenses $ 2,691, ,692,252 Share of other comprehensive income of associates and joint ventures accounted for using equity method 4,211,868 (29,191) 4,182,677 Income tax expense 790,637 (91) 790,546 (2) The IFRSs issued by IASB but not yet endorsed by FSC New, revised and amended standards and interpretations for IFRSs issued by the IASB but not yet endorsed by the FSC are as follows: New, Revised or Amended Standards and Interpretations Effective Date Prescribed by IASB IFRS 9 Financial Instruments January 1, 2018 Amendments to IFRS 10 and IAS 28 Sale or Contribution of January 1, 2016 Assets between an Investor and its Associate or Joint Venture Amendments to IFRS 10, IFRS 12 and IAS 28 Investment January 1, 2016 Entities: Applying the Consolidation Exception Amendments to IFRS 11 Accounting for Acquisitions of January 1, 2016

11 4 New, Revised or Amended Standards and Interpretations Effective Date Prescribed by IASB Interests in Joint Operations IFRS 14 Regulatory Deferral Account January 1, 2016 IFRS 15 Revenue from Contracts with Customers January 1, 2017 Amendment to IAS 1 Disclosure Initiative January 1, 2016 Amendments to IAS16 and IAS 38 Clarification of Acceptable January 1, 2016 Methods of Depreciation and Amortization Amendments to IAS16 and IAS 41 Bearer Plants January 1, 2016 Amendments to IAS 19 Defined Benefit Plans: Employee July 1, Contributions Amendment to IAS 27 Equity Method in Separate Financial January 1, 2016 Statements Amendments to IAS 36: Recoverable Amount Disclosures for January 1, Non-Financial Assets Amendments to IAS 39 Novation of Derivatives and January 1, Continuation of Hedge Accounting Annual Improvements Cycle and July 1, Annual Improvements to IFRSs 2012 Cycle January 1, 2016 Amendments to IFRIC Interpretation 21 Levies January 1, The Group is evaluating the impact on its financial position and financial performance of the initial adoption of above mentioned standards or interpretations. The results thereof will be disclosed when the Group completes its evaluation. 4. Summary of Significant Accounting Policies (1) Statement of compliance The accompanying consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to the Regulations) and guidelines of IAS 34 Interim Financial Reporting which are endorsed by the FSC. These consolidated financial statements are not required to include all disclosures required for full annual financial statements under the Regulations and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations as endorsed by the FSC (hereinafter referred to as IFRS as endorsed by the FSC). Except as described below, the significant accounting policies adopted in the accompanying consolidated financial statements are the same as the consolidated financial statements as of and for the year ended. Please refer to Note 4 of the consolidated financial statements as of and for the year ended for the detail disclosures of significant accounting policies. Please refer to Note 3(1) for the impact of adoption of the 2013 version of IFRSs endorsed and issued to be effective by the FSC commencing from January 1,.

12 5 (2) Basis of consolidation Except for Note 3(1), principle of preparing consolidated financial statements are the same as the consolidated financial statements as of and for the year ended. Please refer to Note 4(c) of the consolidated financial statements as of and for the year ended. 1. Subsidiary included in the consolidated financial statements is as follows: Investor Name of subsidiaries Business activity Percentage of Ownership (%) December 31, March 31, March 31, The Company Formosa Plastics Corp. (Cayman Ltd.) Formosa Industries (Hong Kong) Limited Formosa Industries (Hong Kong) Limited Formosa Industries (Hong Kong) Limited Formosa Industries (Hong Kong) Limited Formosa Industries (Hong Kong) Limited Formosa Industries (Hong Kong) Limited Formosa Plastics Corp. (Cayman Ltd). Formosa Industries (Hong Kong) Limited Formosa Industries (Ningbo) Co., Ltd. Formosa Acrylic Esters (Ningbo) Co., Ltd. Formosa Polyethylene (Ningbo) Co., Ltd. Formosa Polypropylene (Ningbo) Co., Ltd. Formosa Super Absorbent Polymer (Ningbo) Co., Ltd. Formosa electronic (Ningbo) Co., Ltd. Investment 100% 100% 100% Investment 100% 100% 100% Plastics 100% 100% 100% Acrylic Esters 100% 100% 100% Polyethylene 100% 100% 100% Polypropylene 100% 100% 100% Absorbent polymer 100% 100% 100% Electronics 100% 100% 100% 2. Subsidiary not included in the consolidated financial statements: None. (3) Income tax The Group evaluates and discloses interim period income tax expense in accordance with paragraph B12 of IAS 34 Interim Financial Reporting. Income tax expense is the best estimated by multiplying the pretax income for the interim reporting period by the effective annual tax rate as forecasted by the management, and is recognized as current tax expense. Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases shall be measured based on the tax rates that have been enacted or substantively enacted at the time of the asset or liability is recovered or settled and recognized directly in equity or other comprehensive income as tax expense.

13 6 (4) Employee benefits Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of prior financial year, adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-off events. 5. Critical Accounting Judgments and Key Sources of Estimation Uncertainly The consolidated financial statements are prepared in conformity with IAS 34 Interim financial reporting as endorsed by the FSC, under which, management make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. In these consolidated financial statements, judgments and key sources of estimation uncertainty used by management in the application of critical accounting policies are expected to be consistent with those of Note 5 of the consolidated financial statements as of and for the year ended. 6. Significant Accounts Except as described below, the description of significant accounts in the accompanying consolidated financial statements is not materially different from the consolidated financial statements as of and for the year ended. Please refer to Note 6 of the consolidated financial statements as of and for the year ended for the detailed disclosures of these significant accounts. (1) Cash and Cash Equivalents Cash on hand $ Bank deposit 748, ,540 2,667,134 Time deposits 7,859,544 4,526,963 8,448,511 $ 8,608,789 5,392,825 11,115,984 (2) Available-for-sale Financial Assets Listed securities: Listed stocks $ 80,181,491 94,685,911 97,748,607 Please refer to Note 8 for available-for-sale financial assets pledged as collateral as of and, and, respectively.

14 7 (3) Notes Receivable, Accounts Receivable and Other Receivables Notes receivable $ 974,458 1,026, ,988 Accounts receivable (including related parties) 12,448,740 11,581,109 11,589,906 Other receivables-current (including related parties) 21,714,051 30,231,505 29,837,525 Other receivables-non-current (listed under other assets) 4,248,910 1,840,999 1,446,633 Less : allowance for doubtful receivables (5,099) (4,977) (5,174) $ 39,381,060 44,675,454 43,856,878 Aging analysis of notes receivable, accounts receivable and other receivables: Past due but not impaired Neither past due nor impaired Within 30 days days Over 61 days Total $ 39,319,135 61, ,381,060 44,612,221 63, ,675,454 43,844,705 11, ,856,878 Movements of the allowance for doubtful receivables were as follows: For the three-month periods ended Balance, beginning of period $ 6,225 4,977 Provision of impairment Reversal of impairment (1,126) - Balance, end of period $ 5,099 5,174 The terms of sales made by the Group were net 30~90 days. Based on historical default rates, the Group recognizes 0.1% allowance for impairment of uncollectible accounts receivable. (4) Inventories Finished goods $ 16,213,242 13,390,307 10,886,256 Work in process 2,506,666 2,727,638 2,236,896 Raw materials 4,205,968 4,078,981 3,281,432 Supplies 672, , ,876 Machinery and accessories in process 967,238 1,496,028 1,502,049 Others 439, , ,955 Total $ 25,004,649 22,872,390 19,033,464

15 8 As the net realizable value of inventories has increased because the circumstance that caused the inventory devaluation in prior period has improved, the Group recognized gain from recovery in the value of inventories of $84,574 and $65,802 for the three-month periods ended and, respectively, which were credited to cost of goods sold. (5) Investments Accounted for Using Equity Method (a) The components of the investments accounted for using equity method were as follows: Associates Formosa Petrochemical Corporation $ 71,148,450 68,855,649 69,399,141 Formosa Plastics Corp., U.S.A. 35,285,243 40,524,762 41,856,606 Formosa Heavy Industries Corp. 7,147,592 7,783,997 7,869,851 Sky Dragon Investment Limited 3,295,606 2,265,937 1,922,384 Mai Liao Power Corp. 11,215,811 11,422,034 11,794,070 Formosa Sumco Technology Corporation 5,505,970 5,706,246 5,820,685 Formosa Transportation Corp. 602, , ,493 Formosa Fairway Corp. 87,225 75,408 76,179 Yi-Jih Development Corp. 61,964 62,209 62,281 Ya Tai Development Corp. 92,564 49,055 47,929 Formosa Automobile Corporation Wha Ya Park Management Consulting Corporation Ltd. 1,824 2,113 2,156 Su-Hua Transportation Corporation 169, , ,394 Formosa Environmental Technology 271, , ,989 Corporation Formosa Resources Corporation 3,014,683 4,359,188 4,332,161 Formosa Group (Cayman) Limited ,942 49,190 Formosa Group Investment (Cayman) Limited Formosa Plastics Development Corporation Ltd. - 14,559 13,606 Formosa Ha Tinh Steel Corporation 15,490, Formosa Ha Tinh (Cayman) Limited - 15,761,499 15,448,295 Jointly controlled entities Formosa Asahi Spandex Co., Ltd. 1,216,160 1,312,517 1,231,249 Formosa Daikin Advanced Chemical Co., Ltd. 641, , ,765 Formosa Mitsui Advanced Chemical Co., Ltd. 122, , ,885 $ 155,372, ,240, ,982,691

16 9 For the three-month periods ended and, the Group s share of net income (loss) of associates and jointly controlled entities were as follows: For the three-month periods ended Associates Formosa Petrochemical Corporation $ 2,522, ,892 Formosa Plastics Corp., U.S.A. 1,475,697 1,391,438 Formosa Heavy Industries Corp. 140,863 85,853 Sky Dragon Investment Limited (404,308) (314,182) Mai Liao Power Corp. 338, ,035 Formosa Sumco Technology Corporation 49, ,439 Formosa Transportation Corp. (1,999) 11,941 Formosa Fairway Corp Yi-Jih Development Corp Ya Tai Development Corp. 18,765 (1,126) Formosa Automobile Corporation 8,971 14,182 Wha Ya Park Management Consulting Corporation Ltd Su-Hua Transportation Corporation 9,935 11,826 Formosa Environmental Technology Corporation (1,675) (1,365) Formosa Resources Corporation (10,679) (27,027) Formosa Group (Cayman) Limited - 27,636 Formosa Group Investment (Cayman) Limited - 2 Formosa Plastics Development Corporation Ltd. - (953) Formosa Ha Tinh Steel Corporation (43,138) - Formosa Ha Tinh (Cayman) Limited - (156,630) Jointly controlled entities Formosa Asahi Spandex Co., Ltd. 30,683 39,031 Formosa Daikin Advanced Chemical Co., Ltd. 48,795 13,463 Formosa Mitsui Advanced Chemical Co., Ltd. (47) (935) $ 4,182,677 1,902,405 (b) Associates (i) The information of the major associate of the investments accounted for using the equity method was as follows: Associates Relationship Registration Country Percentage of ownership 2104 Formosa Petrochemical Corporation Formosa Petrochemical Corporation, the main supplier of raw materials for the Group, has principal activities that consists of petroleum refining and integrated manufacture of hydrocarbon Taiwan 28.79% 28.79% 28.79%

17 10 The fair value of investments in publicly traded stocks of the major associate was as follows: 2104 Formosa Petrochemical Corporation $ 212,547, ,413, ,864,607 The following is the aggregated financial information of the major associate, and necessary changes have already been made to the information therein concerning the associates' consolidated financial statements based on the IFRS as endorsed by FSC to reflect the fair value adjustments made at the time of acquisition and adjustment for accounting policy variations. The financial information of Formosa Petrochemical Corporation was as follows: 2104 Current assets $ 305,390, ,281, ,452,469 Non-current assets 225,332, ,734, ,550,666 Current liabilities (144,842,587) (104,523,565) (75,147,732) Non-current liabilities (138,125,624) (128,851,442) (125,321,535) Net asset $ 247,754, ,641, ,533,868 Net asset contributed to non-controlling interest of Formosa Petrochemical Corporation $ 31,240 34,359 35,349 Net asset contributed to Formosa Petrochemical Corporation $ 247,723, ,606, ,498,519 For the three-month periods ended Revenue $ 263,363, ,034,556 Net income $ 8,782,671 1,122,927 Other comprehensive income (1,414,672) 769,718 Total comprehensive income $ 7,367,999 1,892,645 Income allocated to non-controlling interest of Formosa Petrochemical Corporation $ Income allocated to Formosa Petrochemical Corporation $ 7,367,437 1,891,655

18 11 For the three-month periods ended Beginning balance of investment in associate at $ 70,386,512 68,855,649 January 1 Total comprehensive income allocated to the Group 1,908, ,492 Ending balance of investment in associate at March 31 72,295,207 69,399,141 Difference in capital surplus from changes in holding 2,546 - proportion due to non-acquisition of newly-issued shares Decrease in carrying amount from disposal of associate s shares (1,149,303) - Total carrying amount of equity of the major associate $ 71,148,450 69,399,141 (ii) The financial information of the minor associates of the investments accounted for using equity method was as follows: 2104 Total carrying amount of equity of the minor associates $ 82,243,014 89,149,808 90,418,651 For the three-month periods ended March 31 Attributable to the parent Net income $ 1,581,185 1,528,954 Other comprehensive income (3,747) 344,525 Total comprehensive income $ 1,577,438 1,873,479 (c) Jointly controlled entities The description of joint controlled entities in the accompanying consolidated financial statements is not materially different from the consolidated financial statements as of and for the year ended. Please refer to Note 6(5) of the consolidated financial statements as of and for the year ended. The Group s investments in jointly controlled entities are not significant. The financial information of the minor joint ventures of the investments accounted for using equity method was as follows: 2104 Total carrying amount of equity of the minor joint ventures $ 1,981,010 2,235,353 2,164,899

19 12 For the three-month periods ended Attributable to the parent Net income $ 79,431 51,559 Other comprehensive income - - Total comprehensive income $ 79,431 51,559 (d) On January 17,, the Group sold 49,348 thousand common shares of Formosa Petrochemical Corporation for $3,776,928. This resulted in a gain on disposal of this investment of $2,627,625, net of related expenses, which was charged to comprehensive income under other gains and losses. (e) Collaterals Please refer to Note 8 for investments accounted for using equity method which were pledged to banks as collateral to secure the Company s bank loans as of and and. (6) Property, Plant and Equipment The cost and depreciation of the property, plant and equipment of the Consolidated Company of and for the three-month periods ended and : as Land Building Machinery and equipment Other facilities Construction in progress Total Cost: Balance as of January 1, $ 6,478,259 25,629, ,035,372 5,580,269 15,842, ,565,785 Additions ,736 28,424 2,673,974 2,739,134 Disposals (11) - (121,916) (8,498) - (130,425) Reclassification 25, ,407 19,133 (600,145) 118,419 Effect of exchange rate change - 45, ,575 12, , ,614 Balance as of $ 6,478,248 25,700, ,901,174 5,632,163 18,027, ,739,527 Balance as of January 1, $ 6,679,420 25,987, ,812,660 5,986,397 22,272, ,737,743 Additions - 1,092 24,801 25, , ,048 Disposals (1,507) - (119,031) (17,486) - (138,024) Reclassification - 5,034 1,809,339 57,984 (1,484,203) 388,154 Effect of exchange rate change - (68,103) (413,518) (20,163) (255,945) (757,729) Balance as of $ 6,677,913 25,925, ,114,251 6,032,730 21,345, ,095,192 Accumulated depreciation: Balance as of January 1, $ - 11,250, ,627,468 4,231, ,109,387 Depreciation for the period - 223,668 1,612,994 66,407-1,903,069 Disposals - - (121,825) (8,355) - (130,180) Reclassification Effect of exchange rate change - 9, ,849 8, ,813 Balance as of $ - 11,483, ,222,486 4,298, ,004,157 Balance as of January 1, $ - 12,178, ,117,081 4,444, ,740,116 Depreciation for the period - 223,876 1,591,670 80,122-1,895,668 Disposals - - (119,031) (17,300) - (136,331) Reclassification - - (1,192) 1, Effect of exchange rate change - (17,221) (180,949) (11,869) - (210,039) Balance as of $ - 12,384, ,407,579 4,497, ,289,900 Carrying amounts: Balance as of $ 6,478,248 14,216,759 42,678,688 1,334,023 18,027,652 82,735,370 Balance as of $ 6,679,420 13,808,852 39,695,579 1,541,647 22,272,129 83,997,627 Balance as of $ 6,677,913 13,540,220 39,706,672 1,535,349 21,345,138 82,805,292

20 13 (a) As of and and, the Group s parcels of land with title temporarily registered under the names of third parties for trust purpose had carrying value of $35,914, $35,914, and $34,407, respectively, which were recorded under property, plant and equipment. The Group has implemented a deed of trust with the authorities to secure the Group s rights related to the abovementioned properties. (b) Please refer to Note 6(15) for further information about the capitalized interest on borrowings for the purchase of the property, plant and equipment and gain (loss) on disposal of property, plant and equipment. (c) Collaterals The property, plant and equipment pledged to secure bank loans as of and December 31, and,, are described in Note 8. (7) Short-term Borrowings (a) Short-term borrowings consisted of the following: Unsecured short-term borrowings $ 15,839,390 13,460,290 10,610,931 Employees savings 588, , ,072 Total $ 16,427,489 13,767,560 10,923,003 Interest rate 0.664%~3.435% 0.695%-2.635% 0.696%~2.200% (b) Issuance and redemption of loans For the three-month periods ended Balance as of January 1 $ 17,521,603 13,767,560 New issuance during the period 48,951,362 22,562,214 Repayments during the period (50,045,710) (25,403,685) Effect of exchange rate change 234 (3,086) Balance as of March 31 $ 16,427,489 10,923,003 Interest Rate 0.664%~3.435% 0.696%~2.200% (c) The assets pledged to secure loans are described in Note 8.

21 14 (8) Long-term Loans (a) Long-term loans consisted of the following: Mach 31, Unsecured bank loans $ 21,571,525 17,898,069 16,259,464 Secured bank loans 4,370,003 10,562,571 10,563,712 Less: Current portion of long-term loans (4,995,601) (1,515,645) (2,008,253) Total $ 20,945,927 26,944,995 24,814,923 Repayment period ~2019 ~2021 ~2021 Interest rate 1.135%~2.204% 1.198%~2.280% 1.186%~1.649% (b) Issuance and redemption of loans For the three-month periods ended Balance as of January 1 $ 21,211,292 28,460,640 New issuance during the period 5,363,750 3,100,000 Repayments during the period (633,514) (4,737,464) Balance as of March 31 $ 25,941,528 26,823,176 Interest Rate 1.368%~2.204% 1.186%~1.649% (c) Secured bank loans (i) In order to raise funds to finance the Sixth Naphtha Cracker project and the construction of related factories, the Group signed a syndicated loan agreement with Mega International Commercial Bank (formerly Chiao Tung Bank), the lead bank of the syndicated loan, and other banks on April 28, The details of the loan agreement are as follows: I. Credit line: $30,769,000 and US$242,000 thousand. II. Interest rate: as settled with each participating bank. III. Period: 10 to 15 years. IV. Collateral: the acquired land, buildings and machinery financed by the loan. V. The financial covenants under the loan agreement include the requirement to maintain certain financial ratios based on the audited financial reports. If the Company breaches these financial covenants, the syndicated banks may determine to declare the unpaid principal, interest, fees and other sums payable by the Company under the loan agreement to be immediately due and payable. These financial ratios are as follows: Current Ratio (total current assets divided by total current liabilities): not lower than 100%, except for the syndicated loan of Sixth Naphtha Cracker project, which is not lower than 120%. Leverage Ratio (total liabilities plus contingent liabilities to tangible net worth): not higher than 150%

22 15 The Company did not breach the above mentioned financial covenants in respect of its financial statements as of. VI. As of, NT$30,479,000 and US$242,000 thousand of the credit line had been drawn. (ii) In order to raise funds to build the plant and accessory equipment, the Group signed a syndicated loan agreement with Bank of Taiwan, the lead bank of the syndicated loan, and 18 other banks on November 14, As of, the details of the loan agreement are as follows: I. Credit line: $10,300,000. II. Interest rate: as settled with each participating bank. III. Period: 7 years (including a 3 years extension). IV. Collateral: the land at Sixth Naphtha Cracker pledged for 120 percent of the credit line financed by the loan. V. The financial covenants under the loan agreement include the requirement to maintain certain financial ratios based on the audited consolidated financial reports. If the Company breaches these financial covenants, the syndicated banks may determine to declare the unpaid principal, interest, fees and other sums payable by the Company under the loan agreement to be immediately due and payable. These financial ratios are as follows: Current Ratio (total current assets divided by total current liabilities): not lower than 100%. Leverage Ratio (total liabilities plus contingent liabilities to tangible net worth): not higher than 150% The Company did not breach the above mentioned financial covenants in respect of its financial statements as of. VI. As of, NT$10,300,000 of the credit line had been used. (d) The assets pledged to secure loans are described in Note 8.

23 16 (9) Bonds Payable Domestic unsecured nonconvertible $ 59,897,966 59,906,965 59,915,273 corporate bonds Less: current portion (5,997,630) (7,993,512) (7,994,987) Total $ 53,900,336 51,913,453 51,920,286 Expiry ~2023 ~2026 ~2026 The first domestic unsecured nonconvertible corporate bond in 2009 The first domestic unsecured nonconvertible corporate bond in 2010 The first domestic unsecured nonconvertible corporate bond in 2011 The second domestic unsecured nonconvertible corporate bond in 2011 The first domestic unsecured nonconvertible corporate bond in 2012 Issue amounts $6,000,000 $6,000,000 $6,000,000 $4,000,000 $7,000,000 Ending balance at 2,999,496 5,996,269 5,991,424 3,994,212 6,988,926 Current portion at 2,999,496 2,998, Ending balance at - 2,998,668 5,993,874 3,995,815 6,991,572 Current portion at - 2,998,668 2,996,937 1,997,907 - Ending balance at - 2,999,467 5,994,691 3,996,349 6,992,454 Current portion at - 2,999,467 2,997,346 1,998,174 - Issuance date May 22, 2009 June 21, 2010 November 16, 2011 December 15, 2011 May 22, 2012 Coupon rate 1.85% 1.55% 1.34% 1.35% 1.26% 1.42% Interest payment date May 22 June 21 November 16 December 15 May 22 Repayment method Payable in 2 equal installments for each different coupon rate in 2013 and, respectively. Payable in 2 equal installments for each different coupon rate in and, respectively. Payable in 2 equal installments for each different coupon rate in and 2016, respectively. Payable in 2 equal installments for each different coupon rate in and 2016, respectively. Payable in 2 equal installments for each different coupon rate in 2016~2017 and 2018~2019, respectively. The second domestic unsecured nonconvertible corporate bond in 2012 The third domestic unsecured nonconvertible corporate bond in 2012 The first domestic unsecured nonconvertible corporate bond in 2013 The second domestic unsecured nonconvertible corporate bond in 2013 The first domestic unsecured nonconvertible corporate bond in Issue amounts $5,000,000 $9,000,000 $11,500,000 $8,500,000 $6,000,000 Ending balance at 4,991,222 8,982,413 11,475,387 8,478,617 - Current portion at Ending balance at 4,993,118 8,986,080 11,479,788 8,482,080 5,985,970 Current portion at Ending balance at 4,993,750 8,987,302 11,481,255 8,483,235 5,986,770 Current portion at Issuance date September 12, 2012 November 5, 2012 June 10, 2013 November 8, 2013 May 21, Coupon rate 1.28% 1.40% 1.25% 1.39% 1.53% 1.23% 1.52% 1.42% 1.94% 1.83% 1.92% Interest payment date September 12 November 5 June 10 November 8 May 21 Repayment method Payable in 2 equal installments for each different coupon rate in 2016~2017 and 2018~2019., respectively. Payable in 3 equal installments for each different coupon rate in 2016~2017, 2018~2019 and 2021~2022, respectively. Payable in 2 equal installments for each different coupon rate in 2016~2017 and 2022~2023, respectively. Payable in 2 equal installments for each different coupon rate in 2017~2018 and 2022~2023, respectively. Payable in 2 equal installments for each different coupon rate in 2023~2024 and 2025~2026, respectively.

24 17 (10) Employee Benefits (a) Defined benefit plan Subsequent to, there is apparently no evidence of any material market volatility, material curtailment, reimbursement and settlement or other material one-time events. Therefore, pension cost in the consolidated financial statements is measured and disclosed according to the respective actuarial report for the years ended 2013 and. The Group s pension costs recognized in profit or loss were as follows: For the three-month periods ended Operating cost $ 43,461 42,861 Selling expenses $ 1,679 1,616 Administrative expenses $ 24,766 25,231 (b) Defined contribution plan (11) Income Tax The Group s pension costs recognized in profit or loss were as follows: For the three-month periods ended Operating cost $ 37,286 39,139 Selling expenses $ 1,684 1,814 Administrative expenses $ 24,182 22,731 (a) The details of income tax expense for the three-month periods ended and were as follows: For the three-month periods ended Current income tax expense $ 339, ,124 Deferred tax expense 450, ,175 Income tax expense $ 790, ,299

25 18 (b) The income tax expense related to components of other comprehensive income for the three-month periods ended and was as follows: For the three-month periods ended Items that could be reclassified subsequently to profit or loss: Exchange differences on translation of foreign financial statements $ 184,284 (121,236) (c) Examination and approval The Company s income tax returns have been examined by the ROC tax authority through (d) Information related to the accumulated deficit and imputation credit account (ICA) and creditable ratio were as follows: December 31, (12) Equity Undistributed earnings in 1997 and prior years $ 432, , ,111 Undistributed earnings in 1998 and thereafter 54,730,795 45,634,130 49,277,815 $ 55,162,906 46,066,241 49,709,926 Imputation credit account $ 2,901,834 3,141,029 3,152, (actual) (estimated) Tax deduction ratio for earnings distribution to ROC residents 9.80% 8.16% Under the information for integrated income tax, the above imputation credit account and creditable ratio were calculated according to the formal interpretation No issued by Taxation Administration, Ministry of Finance, R.O.C. on October 17, Except as described below, there was no material change in equity for the three-month periods ended and. Please refer to Note 6(13) of the consolidated financial statements as of and for the year ended for the related detail disclosures on equity.

26 19 (a) Capital surplus The components of capital surplus were as follows: Paid-in capital in excess of par value $ 8,130,081 8,130,081 8,130,081 Overdue unpaid directors remuneration and dividends 83,490 83,298 83,281 Paid in capital in excess of the par value derived from overseas corporate bond conversion 2,997,503 2,997,503 2,997,503 Treasury stock transactions 16,263 16,263 16,263 Equity in capital surplus of investee companies 50,843 50,843 50,843 $ 11,278,180 11,277,988 11,277,971 (b) Retained earnings In accordance with the Company s articles of incorporation, the Company s annual earnings after providing for income tax are appropriated and distributed as follows: Cover prior year s accumulated deficit, if any; Of the remaining balance, if any, 10% is set aside as legal reserve; Of the remaining balance, if any, certain amount is set aside as special reserve and as common stockholders dividends; The remainder, together with accumulated earnings from prior year, is reported to the board of directors for purposes of making a plan for the distribution of cash dividend and/or stock dividend and bonuses for stockholders, directors, and supervisors. (i) Special reserve As the Company opted to avail of the exemptions allowed under IFRS 1 First-time Adoption of International Financial Reporting Standards during the Company s first-time adoption of the IFRS as endorsed by the FSC, unrealized revaluation increments and cumulative translation adjustments (gains) of $2,790,507, which were previously recognized in shareholders equity were reclassified to retained earnings. In accordance with Regulatory Permit No as issued by the FSC on April 6, 2012, a special reserve is appropriated from retained earnings for aforementioned reclassification. In addition, during the use, disposal or reclassifications of relevant assets, this special reserve is reverted to distributable earnings proportionately. The carrying amount of special reserve amounted to $2,790,507 as of and and.

27 20 Pursuant to the Regulatory Permit mentioned above, the Company is also required to set aside an additional special reserve, as part of the distribution of its annual earnings, equal to the difference between the amount of above-mentioned special reserve and net debit balance of the other components of stockholders equity. (ii) Earnings distribution The Company appropriates 0.1% to 1% of the distributable earnings after dividends as employee bonuses, which are recognized as the Company s expenses in the year earnings. These bonuses are charged to operating costs and expenses in each period when those earnings arise. For the three-month periods ended and, the estimated employee bonuses amounted to $9,506 and $8,511, respectively. The employee bonuses amounted to $30,000 and $26,686 in 2013 and, respectively. The amounts as stated in the consolidated financial statements are identical to the actual distributions for The information about the appropriations of bonuses to employees is available at the Market Observation Post System website. The differences between the amounts approved in the shareholders meeting and those recognized in the consolidated financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in. The appropriations of earnings in were approved in the board of directors meeting on March 24,, and the appropriations in 2013 earnings were approved in the stockholders meeting on June 13,, respectively. The amounts of appropriation of dividends per share were as follows: 2013 Dividends Dividends per share Amount per share Amount Dividends attributable to ordinary shareholders: Cash dividends $ ,094, ,821,759

28 21 (c) Other equity Exchange differences on translation of foreign operations Unrealized gains (losses) on available-for-sale financial assets Cash flow hedge Balance at January 1, $ 558,916 63,615,604 2,109 Exchange differences on translation of foreign operations, net of tax -the Group 1,066, associates 105, Unrealized gains (losses) on available-for-sale financial assets -the Group - (5,359,605) - -associates - (725,035) 2,555 Balance at $ 1,730,924 57,530,964 4,664 Balance at January 1, $ 5,416,784 76,317,462 (3,096) Exchange differences on translation of foreign operations, net of tax -the Group (902,948) - - -associates (35,629) - - Unrealized gains (losses) on available-for-sale financial assets -the Group - 3,211, associates - 561,247 40,508 Balance at $ 4,478,207 80,090,299 37,412 (13) Earnings Per Share The basic earnings per share were calculated as follows: For the three-month periods ended Net income attributable to the Group $ 7,182,974 3,643,685 Weighted-average number of ordinary shares outstanding (basic) 6,365,741 6,365,741 Basic earnings per share (dollars) $