Oriental Union Chemical : 2023 OUCC annual report

Spokesperson

Name: Daniel Yu

Title: Assistant Vice President

Tel: [phone]

Email: [e-mail]

Acting Spokesperson

Name: David Chiang

Title: Assistant Vice President

Tel: [phone]

Email: [e-mail]

Headquarters & Plants

Headquarters

Address: 13F, 101, Fu-Hsing North Road, Songshan Dist., Taipei City 10595, Taiwan

Tel: [phone]

Plants

Address: 3 Industrial 3rd Road, Linyuan Dist., Kaohsiung City 83245, Taiwan

Tel: [phone]

Common Share Transfer Agent and Registrar

Oriental Securities Corporation

Address: 13F, No. 16, Xinzhan Road, Banqiao Dist., New Taipei City 22041, Taiwan

Tel: [phone] https://www.osc.com.tw

Auditors

Name: Hsin-Wei Tai, CPA Li-Wen Kuo, CPA

Firm: Deloitte & Touche

Address: 20F, No. 100, Songren Rd., Xinyi Dist., Taipei City 11073, Taiwan

Tel: [phone] https://www.deloitte.com.tw

Overseas Securities Exchange and Relevant Info: N/A

Corporate Website

https://www.oucc.com.tw

The English version is the translation of the Chinese text and if there is any discrepancy between the English version and the Chinese text of this document, the Chinese text shall prevail.

	Oriental Union Chemical Corporation
	Contents
I. Letter to Shareholders	1
II. Company Profile
1.	Date of Incorporation	5
2.	Company History	5
III. Corporate Governance Report
1.	Organization	8
2.	Information on the Company's Directors, President, Vice Presidents, Assistant Vice
	President, and heads of all the Company's divisions and branch units	10
3.	Remuneration paid to Directors, Presidents, and Vice Presidents in the most recent year	19
4.	Implementation of Corporate Governance	24
5.	Information of CPA professional fee	56
6.	Information of CPA replacement	56

7. Information regarding Chairman, President, and Financial or Accounting Manager of the Company who has worked with the CPA firm which conducts the audit of the Company or

	an affiliate of said firm in the recent year	57
8.	Any transfer of equity interests and pledge of, or change in equity interests by a Director,
	managerial officer, or shareholder with a stake of more than 10 percent	58
9.	The top 10 shareholders and their relationships	59
10. The number of shares held by the Company and Company Directors, managerial officers
	and the entities directly or indirectly controlled by the Company in a single company, and
	calculating the consolidated shareholding percentage of the above categories	60
IV. Capital Overview
1.	Capital and Shares	61
2.	Issue of Corporate Bonds	65
3.	Preferred Shares	65
4.	Issuance of Overseas Depository Receipts	65
5.	Employee Stock Options	65
6.	Employee Restricted Stock Awards	65
7.	Share Issued for Mergers and Acquisitions	65
8.	Implementation of Capital Utilization Plan	65

	Contents
V. Operation Overview
1.	Business Activities	66
2.	Market, Sale and Production Overview	75
3.	Employees	82
4.	Environmental Protection Expenditure	83
5.	Labor-Management Relations	85
6.	IT Security Management	87
7.	Major Contracts	89
VI. Financial Information
1.	Condensed Balance Sheet, Income Statement, and External Auditor's Opinion for the Last
	Five Years	90
2.	Financial Analysis for the Last Five Years	94
3.	The Audit Committee's Review Report	97
4.	In the case of Insolvency of the Company and its Affiliates	97
5.	Consolidated Financial Statements and External Auditor's Audit Report for the Recent Year	98
6.	Stand-Alone Financial Statements and External Auditor's Audit Report for the Recent Year	108
VII. Review and Analysis of the Financial Position, Performance and Risk Management
1.	Financial Position Review	118
2.	Financial Performance Analysis	119
3.	Cash Flow Review and Analysis	120
4.	The Effect of Major Capital Expenditure on the Financial Position and Operation of the
	Company	120
5.	Direct Investment Policy, the Main Reasons for Profit or Loss as well as the Corrective
	Action Plan Over Past Year, and an Investment Plan for Next Year	121
6.	Analysis of Risk Factors	122
7.	Other Important Notes	126
VIII. Special Disclosure
1.	Information of Affiliates	127
2.	Private Placement of Securities	130
3.	Status of Company Stock Held or Disposed of by Subsidiaries Over Past Year and up to
	the Date of Publication of the Annual Report	130
4.	Other Supplementary Notes	130
5.	Any Matters of Material Significance that could have Affected Shareholder Equity or
	Securities Price Last Year and up to the Date of Publication of the Annual Report	130

Oriental Union Chemical Corporation

I. Letter to Shareholders

I. Foreword

In view of 2023, the impact from high interest rate, intensified inflation, and China's unexpected post-pandemic economic performance set back the global economy, weakened the end-product demands, and stagnated the manufacturing industry activities. Same as to the domestic economy, the hugely cut import & export orders enabled Taiwan's economic growth rate spiral down to 1.4%.

In despite of the impact aforementioned, the 2023 petrochemical industry in general dimmed as enormous additional capacity hit the market. Taking the upstream ethylene glycol (EG) as an example, the 2023 EG global capacity reached 58 million MT, yet the demand totaled only 34 million MT. The overall EG operating rate of the year was 60%, and the market remained oversupplied. Same as to the domestic petrochemical industry, the total 2023 production valued NT$1.6 trillion, a 14% decline from the previous year.

Though the Company's EG product line encountered the succession of global new capacity and low market demand, the management team sustained persistent and perceptive to cope with the world development trend, obtained control of its overall cost and customer relationships; and, developed niche products of green, electronic, and new materials, based on the core vantage of ethylene oxide (EO), to maintain stable and advanced operation.

In 2023, the consolidated revenue of the Company reached NT$20.8 billion, a decrease of 6% from the previous year, and the operating net profit totaled NT$0.27 billion, of earnings per share (EPS) NT$0.30.

II. Operating Performance Review

1. Safety, Health, and Environment

Aiming at the green and sustainable development, the Company practices circular economy and attaches great importance to issues such as industrial safety, health and environmental protection, as well as improves persistently the process design and equipment investment, and recycles homogeneous waste to reduce the impact on environment.

Not only has the Company developed, at its early stage, the carbon capture and utilization (CCU) technology by way of recycling CO2 from production to produce the high purity CO2 for industrial, food and electronic businesses, then further process to produce ethylene carbonate (EC) for manufactures of polycarbonate (PC), composite materials, and electrolyte of lithium battery. The Company also supplies and benefits its downstream customers with its outstanding carbon-captured solvents ethanolamine (EA) and ethylenediamine (EDA) series, and strives to develop the CO2 chemicals, technologies and products of plastic recycling and biodegradability to counteract the global issue of CO2 emission.

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Letter to Shareholders

In addition, to conform with the large power user terms, the Company has procured the 10% contractual capacity of green power, readjusted the ratio of heat to electricity to meet the energy demand of its new specialty chemical plants, and planned the installment of the cogeneration device to achieve its goal in optimal emission, power saving and carbon reduction.

1. EG Business
   The Company's EG product line was affected by the unbalanced supply and demand and unsustainable prices on account of China's newly launched capacity in 2023. The EG total output across the strait was 460,000 MT in 2023, a decrease of 2% over 2022, while sales of 480,000 MT, of 3% decrease; the ethylene oxide (EO) total output 330,000 MT, an increase of 18% over 2022, sales of 210,000 tons, of 27% increase.
2. Gas Business
   To counteract the change in applications of downstream industries, the company secured its gas vantage in autonomous pipeline supply to the Linyuan Industrial Park, and jointly implemented its liquefied gas business expansion to multiple industries, which resulted in an equal or partly less sales volume in 2023 than that of 2022. The sales volume of LCO2, on the other hand, though diminished remarkably by virtue of the CPC scheduled overhaul and the ensued insufficient supply of ethylene, the LCO2 prices were provided a steady boost as the supply of LCO2 the by-product was short from the low operating rates of domestic chemicals.
   In 2023, the oxygen sold on both sides, apart from its own use, totaled 84,000 MT, an increase of 6% over 2022; the total nitrogen sold was 336,000 MT, a decrease of 7%; while sales of CO2 33,000 MT, of 19% decrease.
3. Specialty Chemicals Business
   The slowdown effect of global economy resulted in the decrease demands on volume and price of the specialty chemicals in 2023. Given that EO derivatives, with high correlation to the overall economy growth, were supplied to the downstream industries such as daily chemicals, electronics, resin synthesis, textile auxiliary and concrete.
   As to solvent and amine chemicals, the product series of EA, the additional capacity launched in China reduced its domestic reliance on import; so were the capacity of ethylene glycol butyl ether (EB) and ethylene carbonate (EC) product series enlarged, which of the latter encountered a competitive supply & demand, as the market demand on the lithium battery electrolyte increased. To enhance the hedge against risks, the Company optimized its product channels, sustained its technical edge, and increased high purity product applications, securing its domestic sales and product differentiation strategy, resulting in a better performance in both sales volume and prices in comparison with the associates worldwide.
   In sum, the Specialty Chemicals business in 2023 across the strait totaled 200,000 MT, an increase of 5% over 2022; sales of 190,000 MT, of 3% increase. The overall prices, revenue and profit, however, lessened due to the unpromising global market.
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Oriental Union Chemical Corporation

III. 2024 Business Goals and Future Outlook

(1) Overview of 2024 Business Plan

1. EG Business

Looking into 2024, with the expected oversupply of EG, the Company aims to fulfill the needs of its domestic clients, optimize the product portfolios of EG and EO derivatives as prioritized. As the EG plants from the both sides employ high-efficiency catalysts for operation, implement thermal integration system to reduce process energy consumption; and, further joined by its coastal ethylene storage tank for operative flexibility, the operation of EG plant in Linyuan shall maintain optimal, with manufacturing costs reduced, and product competitiveness enhanced.

2. Gas Business

Based on the existing pipeline and the liquefied gas customers, the gas business formulates its sales strategy according to the prosperity change of the industries, to promote the niche products to develop new customers; and, provides its end customers directly with extra high purity CO2 credited to its vantages in CCU and purification technologies, and adjusts strategic product portfolios to increase the supply volume of electronic- and semiconductor-grade customers for profit improvement, showcasing its strength in low carbon process.

3. Specialty Chemicals Business

To maintain its domestic leading position, the Company continues developing electronic chemicals of the EA and EB product lines, to expand semiconductor-grade customers. The EC product line, based on the polycarbonate market, shall undertake the development in high value- added applications of high purity ethylene carbonate (HPEC) and polycarbonatediol (PCDL), with the market vantage of the lithium battery electrolyte.

In respect to the daily chemicals, the Company continues promoting its biomass products, and collaborating with customers on the low carbon chemicals from recycled plastics (rPET), CCU, as well as the formulated functional products, in the hope of strengthening the concept of green products and striving for eco-friendly and sustainable operation in line with customers.

As construction related businesses start to emphasize on the development of carbon reduction products, in view of the increasing awareness of eco-friendliness and the arousing issues of carbon emission reduction. The company's development in the series of carbon reduction and extra high functional concrete admixtures well aligns with its global pre-positioning.

With the technical vantage and broad product applications, the fine chemicals of ethylenediamines (EDAs) and polyetheramine (PEA), coupled with the excellent carbon capture solvents of EA series, provide the markets with solutions to the carbon reducing technology and formulated chemicals, which are widely applied to the downstream of chelating agent, agricultural additive, papermaking additive, textile additive, and electronics cleansing

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Letter to Shareholders

agent. The Company stipulates its sales strategies according to the business cycle of industries, to develop electronics customers with its high-spec amine series or formulations. In accordance with the worldwide market stimulation strategies and downstream destocking in H2/2024, the demand of amine series may slowly head upward.

In general, the company shall take advantage of its edge in the high value development of ethylene and propylene oxides for the new specialty chemicals, to ensure a promising start for the high-valued and new functional products in 2024.

(2) Prospects for Future Operations

With regard to the overall challenges, the Company shall adhere to its continuous development in technology and new products; and, render its operation further flexibility and adaptation by means of advanced digital management; and, as business-oriented, to provide customers with one stop services in conformity with its targets in green, electronic, and new materials.

At last, the Company shall implement circular economy, energy transformation, and low- carbon production, to become a world-class diversified business enterprise, to achieve the sustainable goal of 35% carbon emission deduction by 2035 and carbon neutral by 2050; and, to keep pace with the global technology trend, strive for robust operation, pursuing profit, growth and green technology for advanced chemical materials, constantly creating sustainable advantages for shareholders, customers and employees.

Chairman of the Board

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Oriental Union Chemical Corporation

1. 1. Company Profile
2. Date of incorporation: December 22, 1975
3. Company history

In 1975 ● Registration and incorporation of the Company was approved, with the shareholders including Central Investment Holding Co, Executive Yuan Development Fund, the Far Eastern Textile Corporation (now known as Far Eastern New Century), Union Carbide Corporation, USA, and the China Development Corporation; the capital was NTD$569,250,000.

In 1978 ● Construction of the EG plant was completed.

In 1982 ● The Union Carbide Corporation, USA withdrew from the Company, and the Union Industrial GAS Company co-invested together with Central Investment Holding Co and CPC was consolidated into the Company; capital increased to NTD$1,493,658,000.

In 1986 ● Office premises at Fu-Hsing N Road, Taipei City were purchased and Head Office was relocated to the premises.

In 1987 ● The Company was publicly listed on the Taiwan Stock Exchange on October 21.

In 1988 ● Land was purchased in the Chienchen District, Kaohsiung City occupying an area of about 5.704 acres at the price of about NT$1 billion.

In 1992 ● An EG waste water treatment plant that meets the national standards for discharge of waste water was completed.

In 1993 ● Addition of the 2nd gas plant increased the output of gas products.

In 1995 ● About 9% of the equity of ICI Far Eastern Co Ltd (now OPTC) was acquired.

In 1997 ● The second LPG plant was added to increase the output of liquid nitrogen and liquid oxygen by a total of 73,000 tons each year.

In 1998 ● May: Reinvestment was made to establish the Tong Fu Investment Corporation, a subsidiary wholly owned by OUCC.

• The Company's Linyuan Plant was certified under ISO-14001 (environmental protection management), and hit the unprecedented record for zero labor safety incidents for 2 million man-hours consecutively.
• December: Issue of the first secured common corporate bonds in the amount of NT$800

million, valid for 5 years.

In 1999 ● January: A branch office was established in the Kaohsiung Nantz Export Zone, and an on-site gas factory was built to expand the gas operation.

• February: Completed the debottlenecking of EO/EG to increase the output of EO and EG

by about 70,000 tons and 40,000 tons per year.

In 2000 ● September: Implemented the SAP Enterprise Resource Planning (ERP) System.

• December: Treasury stock, totaling 5,213 thousand shares was repurchased for the first time to maintain goodwill and shareholder equity.

In 2001 ● April: Completed cancellation of the treasury stock repurchased for the first time.

• April: Repurchased treasury stock, totaling 9,995 thousand shares, for the second time, and completed the cancellation in September.
• September: Repurchased treasury stock, totaling 7,349 thousand shares, for the third time to transfer shares to the employees.

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Company Profile

In 2002 ● July: Completed the EA factory dedicated to producing MEA, DEA and TEA, with an annual output of 40,000 tons, to become the factory with the largest output in Asia.

• July: The Company's Linyuan factory was certified under ISO-9001 (quality management).
• September: The Company's Linyuan factory was certified under OHSAS-18001 (occupational safety & health management).
• November: Completed the EC factory dedicated to the production of EC with an annual output of 40,000 tons. It became the EC factory with the largest output in the world and

supplies raw materials to the Chi Mei ASAHI CORPORATION, a joint venture of Chi Mei Corporation and the Asahi Kasei Corporation (consolidated to form the Chi Mei Corporation on April 1, 2009) dedicated to producing PC.

In 2003 ● February and December: With approval of the Investment Commission, MOEA, Bermuda-based PET Far Eastern (Holding) Ltd. (PETH) and Virgin Islands-based Pacific Petrochemical (Holding) Ltd. (PPL) reinvested in the Oriental Petrochemical (Shanghai) Corporation. The company was engaged in the production and marketing of PTA. The Company acquired about 39% of the equity.

In 2004 ● August: Completed the transfer of Company shares, repurchased for the third time, to employees.

• November: The Company won the most honorable award for the industry in Taiwan, the "Sustainable Industry Excellence Award", as a symbol of sustainable development by the

enterprise.

In 2005 ● February: Issue of common stock totaling 60,000,000 shares at NT$28 per share by a capital increase in cash, which raised the fund to a total of NT$1,680,000,000.

• August: Completed the multi-functional pilot plant designed and configured independently by the Company as a base for the development of new technology for OUCC products. As well as for the basic design of production processes and test runs of

new products.

In 2006 ● January: Acquired 20% of the equity of the Kuokuang Petrochemical Technology Company. The company schedules production of various gasoline and chemical products made from crude oil or natural gas.

In 2008 ● January: Completed the second EA factory with an annual output of 40,000 tons, dedicated to the production of MEA, DEA and TEA.

• January: Completed debottlenecking EC to increase output by about 20,000 tons per year.
• October: With the approval of the Investment Commission, MOEA, OUCC (Bermuda) Holding Ltd reinvested in the incorporation of Oriental Petrochemical (Yangzhou)

Corporation. The company was primarily engaged in the production and marketing of ethanolamine, EC, AEO, PEG and MPEG.

In 2009 ● December: Received the "National Industrial Park Safe Partner Excellence Award - Excellent Business Unit 2009" by the Council of Labor Affairs, Executive Yuan.

In 2010 ● February: Subscribed for PPL shares from Yuan Ding Investment Co and Core Pacific Capital Ltd, and sold PETH shares to Far Eastern New Century Corp, and held 100% of the shares of PPL, and 39% of Oriental Petrochemical (Shanghai) Corporation indirectly.

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