2016 Annual Report

Stock Code : 2103 Annual Report 2016 Annual Report website of FSC: http://mops.twse.com.tw The company's website: http://www.tsrc.com.tw Published on Mar 20, 2017 Spokesman：Alice Yuan Title：Asst Vice President TEL：02-37016000 E-mail：[email protected] Deputy Spokesman：Su-Fen Huang Title：Sr. Manager TEL：02-37016000 E-mail：[email protected] Head office: No.2, Singgong Rd., Dashe Dist., Kaohsiung City, Taiwan R.O.C. Tel: 886-7-351 3811-9 Fax: 886-7-351 4705 Taiwan 18F., 95, Sec. 2, Dunhua S. Rd., Taipei City, Taiwan R.O.C. Tel: 886-2-3701 6000 Fax: 886-2-3701 6868 http://www.tsrc.com.tw Kaohsiung Factory: No.2, Singgong Rd., Dashe Dist., Kaohsiung City, Taiwan R.O.C. Tel: 886-7-351 3811-9 Fax: 886-7-351 4705 Gangshan Factory: No.39, Bengong 1st Rd., Gangshan Dist., Kaohsiung City, Taiwan R.O.C. Tel: 886-7-623 3005 Fax: 886-7-622 5481 Stock Agent：SinoPac Securities Co. Ltd. Stock division Head office：3F., No.17, Bo-ai Rd., Jhongjheng District, Taipei City 100, Taiwan R.O.C. TEL：02-23816288 http://www.sinotrade.com.tw Financial Statement Auditing CPAs: CPAs：Hung Po Shu, Yu Ann Tine office：KPMG Head office：68F., No.7, Sec. 5, Sinyi Rd., Sinyi District, Taipei City 110, Taiwan R.O.C. (TAIPEI 101) TEL：02-81016666 http://www.kpmg.com.tw The name of any exchanges where the company's securities are traded offshore, and the method by which to access information on said offshore securities: No C ontents Letter to the Shareholders.....................................................................1 Company profile................................................................................... 4 I.Date of incorporation.........................................................................4 II.Company history.................................................................................4 Corporate governance report I.Company's organization.................................................................... 7 II.Information on directors, supervisors, presidents, vice presidents and assist vice presidents............................................ 9 III.Status of corporate governance implementation...................... 33 IV.Information on CPA professional fee........................................... 47 V.Information on replacement of CPA............................................ 47 VI.Chairman, president, or managers in charge of the company's finance or accounting matters has in the most recent year held a position at the accounting firm of a CPA or any of its affiliated company.................................................. 47 VII.Information on equity of directors, managers and shareholders holding more than 10% of outstanding shares equity transfer and equity pledge movements........................ 48 VIII.Relationship data among the top 10 shareholders with the highest shareholding ratio............................................................49 IX.The total number of shares and total equity stake held in any single enterprise by the company, its directors, managers and any companies controlled either directly or indirectly by the company..................................................................................50 Information on capital raising activities I.Capital and shares.............................................................................52 II.Corporate bonds, preferred stocks, global depository receipts, employee stock warrants, new restricted employee shares, any merger and acquisition activities........................................... 56 III.Implementation of capital allocation plans................................. 56 Overview of business operations I.Description of business...................................................................... 58 II.Analysis of market as well as production and marketing situation............................................................................................ 61 III.Employees information.................................................................... 64 IV.Disbursements of environmental protection................................ 64 V.Labor relations.................................................................................. 66 VI.Material contracts........................................................................... 67 Overview of financial status I.Condensed balance sheet and statement of comprehensive income for the recent five fiscal years......................................... 70 II.Financial analysis for the recent five fiscal years...........................76 III.Audit committee's report for the most recent fiscal year's financial statements............................................................ 81 IV.Consolidated financial statements and independent auditors' report for the most recent fiscal year........................................... 81 V.Individual financial statements and independent auditors' report for the most recent fiscal year............................................ 81 VI.Financial difficulties which the company or its affiliates have experienced, and how said difficulties will affect the company's financial situation........................................................81 Review and analysis of the company's financial position and financial performance, and risk management I.Financial posftion...............................................................................................83 II.Financial performance.................................................................................... 84 III.Cash flow analysis............................................................................................85 IV.Effect upon financial operations of any major capital expenditure during the most recent fiscal year................................................................ 85 V.The company's reinvestment policy for the most recent fiscal year, the main reasons for profit/loss generated thereby, the plan for improving re-investment profitability, and investment plans for the coming year.................................................................................................... 86 VI.Analysis and assessment of risk management............................................ 86 VII.Other important matters............................................................................... 87 Special items to be included I.Information related to the company's affiliates............................................ 89 II.State of the company's private placement of marketable securities.......94 III.Holding or disposal of the company's shares by the company's subsidiaries....................................................................................................... 94 IV.Other matters that require additional description..................................... 94 Other disclosures................................................................................................ 96 Any circumstances referred to in Paragraph 3(2) of Article 36 of the Securities and Exchange Act which might materially affect shareholders' equity or the price of the company's securities......................................................................................................... 98 Letter to the Shareholders Letter to the Shareholders Dear Shareholders: In 2016, there were some surprising changes that will have a profound influence on the world over the next few years. People in the U.K. voted to leave the European Union in June and newly elected President of the United States of America in November. Although the impact of these two events on international politics and economics remains to be seen, the global financial markets were shocked at the time the events occurred and the global foreign exchange markets experienced drastic changes. The exchange rate of NTD to USD that is closely relevant to the exports of Taiwan fluctuated drastically, and the exchange rate of RMB to USD depreciated to the lowest point by the end of the year under the influence of decelerating economic growth and capital outflows in China. The acute changes in the foreign exchange markets had an impact on export-oriented corporations in the aspects of order intake, quotations and profits. In addition, many newly promulgated regulations governing industrial safety and environmental protection in Taiwan and the world increased operating costs of the petrochemical industry. Starting from Q4, the price of butadiene dramatically and unexpectedly increased within a short period. These exceptional and changing internal and external factors increased the complexity and challenge of corporate operations. Although the overall environment in the past year was full of challenges, the Company still strove to invest in replacing aged equipment, to improve the quality of production procedures, to adjust our product portfolio, to increase investment in environmental protection and industrial safety, and to develop products with better competitiveness that meet market demands in order to increase market share and profits. In addition to improving the operating structure, the Company, on the other hand, also actively assisted joint ventures to improve operating performance. These steps enabled the Company to improve the operating and financial performance from the previous year and laid a solid foundation for future growth. Achievement in 2016 Business Achievement Despite concerns about oversupply remaining in the synthetic rubber market in Asia, the overall operation of the Company was not influenced like other small players due

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