INX - Annual Report 2015 | FinancialReports.eu

Stock Code: 3481

Innolux Corporation 2015 Annual Report

Notice to readers

This English-version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail.

2015 annual report is available at: Taiwan Stock Exchange Market Observation Post System: http://mops.twse.com.tw Innolux’s website:http://www.innolux.com Printed on April 30, 2016

A. Spokesperson & Deputy Spokesperson information.

Spokesperson Deputy Spokesperson Name: Jyh Chau Wang Name: Chien-Lang Lo Title: President Title: General Director Tel: 886-37-586000 Tel: 886-37-586000 E-mail: [email protected] E-mail: [email protected]

B Headquarters, Branches and Plant.

Headquarters: No.160, Kesyue Road, Jhunan Township, Miaoli County, Hsinchu Science Park Tel: 886-37- 586000 Branch: No.21 Zidong Road, Fenghuali, Xinshi District, Tainan City Tel: 886-6- 5889998 Plant Fab T1: No.160, Kesyue Road, Jhunan Township, Miaoli County, Hsinchu Science Park Tel: 886-37- 586000 Fab T2: No.168, Kesyue Road, Jhunan Township, Miaoli County, Hsinchu Science Park Tel: 886-37- 586000 Fab T3: No. 12, Kejung Road, Jhunan Township, Miaoli County, Hsinchu Science Park Tel: 886-37- 586393 STSP Touch Fab 1: No.12, Nanke 8th Road, Shanhua District, Tainan City, Southern Taiwan Science Park Tel: 886-6-5051880 STSP Touch Fab 2: No.3, Sect. 1, Huansi Road, Sinshih District, Tainan City, Southern Taiwan Science Tel: 886-6-5051888 Park Fab A: No.1, Ciye Road, Sinshih District, Tainan City, Southern Taiwan Science Park Tel: 886-6-5051881 Fab B: No.2, Sect. 2, Huansi Road, Sinshih District, Tainan City, Southern Taiwan Science Park Tel: 886-6-5051889 Fab C: No.12, Nanke 8th Road, Shanhua District, Tainan City, Southern Taiwan Tel: 886-6-5051880 Fab D: No.3, Sect. 1, Huansi Road, Sinshih District, Tainan City, Southern Taiwan Science Park Tel: 886-6-5051888 Fab F: No.11, Luke 10th Road, Kaohsiung City, Southern Taiwan Science Park Tel: 886-7-6278888 Touch Module Fab : No. 12, Nanke 8th Road, Shanhua District, Tainan City, Southern Taiwan Science Park Tel: 886-6-5051880

C. Stock Transfer Agent

Grand Fortune Securities Co., Ltd.

Address: 6th Floor, No.6, Sec. 1 Zhongxiao W Rd., Zhongzheng Dist., Taipei City 10041, Taiwan Tel: 886-2-23711658

Website: http://www.gfortune.com.tw

D. Auditors

PricewaterhouseCoopers Auditors: Han-Chi Wu, Sheng-Chung Hsu Address: 27th Floor, 333 Keelung Rd, Sec. 1, Taipei, Taiwan Tel.: 886-2-27296666 Website: http://www.pwcglobal.com.tw

E. Overseas Securities Exchange

Luxembourg Stock Exchange Disclosed information can be found at http://www.bourse.lu

F. Corporate Website: http://www.innolux.com

	*Contents*	*Contents*
I.	Letter to Shareholders..............................................................................................................1
	1.1	2015 Operating Report......................................................................................................1
	1.2	Summary of 2015 Business Plan.......................................................................................2
II.	Company Profile.......................................................................................................................3
	2.1	Date of Incorporation ........................................................................................................3
	2.2	Company History ..............................................................................................................3
III.	Corporate Governance Report................................................................................................8
	3.1	Organization......................................................................................................................8
	3.2	Directors, Supervisors and Management Team...............................................................10
	3.3	Remuneration of Directors, Supervisors, President, and Vice President ........................20
	3.4	Implementation of Corporate Governance......................................................................27
	3.5	Information Regarding Innolux’s Independent Auditors ................................................51
	3.6	Replacement of independent auditors .............................................................................51
	3.7	The Company’s chairman, general manager, or any managerial officer in charge of
		finance or accounting matters has in the most recent year held a position at the
		accounting firm of its CPA or at an affiliated enterprise.................................................51
	3.8	Changes in Shareholding of Directors, Supervisors, Managers and Major
		Shareholders....................................................................................................................52
	3.9	Information Disclosing the Relationship between any of the Company’s Top Ten
		Shareholders....................................................................................................................53
	3.10	The number of shares held by the Company, the Company’s directors and
		supervisors, managerial officers and enterprises under control, either directly or
		indirectly, with consolidated calculation of the comprehensive shareholding ratio.
		As of 12/31/2015.............................................................................................................54
IV.	Capital Overview....................................................................................................................55
	4.1	Capital and Shares...........................................................................................................55
	4.2	Issuance of Corporate Bonds ..........................................................................................61
	4.3	Preferred Shares ..............................................................................................................61
	4.4	Issuance of Global Depositary Shares.............................................................................62
	4.5	Employee Stock Options.................................................................................................63
	4.6	Status of Employee Restricted Stock ..............................................................................65
	4.7	Status of New Share Issuance in Connection with Mergers and Acquisitions................66
	4.8	Financing Plans and Implementation:.............................................................................66
V.	Operational Highlights...........................................................................................................67
	5.1	Business Activities ..........................................................................................................67
	5.2	Market and Sales Overview ............................................................................................74
	5.3	Human Resources............................................................................................................80
	5.4	Environmental expenditures Information .......................................................................80
	5.5	Labor Relations ...............................................................................................................80
	5.6	Important Contracts.........................................................................................................84
VI.	Financial Information ............................................................................................................86
	6.1	Five-Year Financial Summary.........................................................................................86
	6.2	Five-Year Financial Analysis ..........................................................................................94
	6.3	Supervisors’ Report in the Most Recent Year ...............................................................102
	6.4	Consolidated Financial Statements for the Years Ended December 31, 2015 and
		2014, and Independent Auditors’ Report.......................................................................105
	6.5	Financial Statements for the Years Ended December 31, 2015 and 2014, and

		Independent Auditors’ Report .......................................................................................105
	6.6	Disclosure of the Impact on Company’s Financial Status Due to Financial
		Difficulties.....................................................................................................................105
VII.	Review of Financial Conditions, Operating Results, and Risk Management.................106
	7.1	Analysis of Financial Status..........................................................................................106
	7.2	Analysis of Operating Results.......................................................................................107
	7.3	Analysis of Cash Flow ..................................................................................................108
	7.4	Major Capital Expenditure Items..................................................................................109
	7.5	Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement
		Plans and the Investment Plans for the Coming Year ...................................................109
	7.6	Analysis of Risk Management ......................................................................................109
	7.7	Other Important Matters................................................................................................ 113
VIII.	Special Disclosure ................................................................................................................. 114
	8.1	Summary of Affiliated Companies................................................................................ 114
	8.2	Private Placement Securities in the Most Recent Years................................................122
	8.3	The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent
		Years..............................................................................................................................122
	8.4	Special Notes.................................................................................................................122
IX.	Materially might affect shareholders' equity or the price of the company's securities, has
	occurred during the most recent fiscal year or during the current fiscal year up to the
	date	of printing of the annual report, such situations shall be listed one by one............122

I. Letter to Shareholders

1.1 2015 Operating Report

The overall economic environment experienced a substantial change in 2015. The global demand for IT panels was weak due to the economic recession. The market consumption demand was less than the expectation, especially for tablet computers with the worst case scenario. In terms of mobile phones, the overall business growth was not as expected due to the recession of the Chinese market. Furthermore, the production surplus, exchange rate fluctuations, deflation, and demand uncertainties affected the global economy substantially. As for the panel industry, the additional production capability provided by the new panel plants in China caused a supply surplus with the average market price declining and severe challenges to the operational growth of the panel makers.

Faced with such a difficult macroeconomy and market uncertainty, the company, in addition to a due-dilgent operation and rapid response, enacted a better use of resources to create highly added value. Therefore, the operational performance of the company in 2015 was not as good as the year before; however, through the effort of the management team, the company had a fairly good business result to show. The annual consolidated revenue amounted to NT$364.1 billion, gross profit amounted to NT$46.6 billion, operating profit amounted to NT$22.4 billion, net income amounted to NT$10.8 billion, and earnings per share amounted to NT$1.09 per share.

As for research and development and market segmentation, continuing technology development and refinement has been the key to the company’s operation growth. The application of TV panels mainly focuses on the differentiated strategy of large size and high resolution development; also, the development of monitor panels is towards wide viewing angle and high resolution. As for notebook computers, the focus is on enhancing the resolution of the panel and actively increasing the ratio of FHD and QHD high-resolution products. Moreover, the company, in addition to developing high-tech products, continues to strengthen cost competitiveness and provide customers with “better quality stable price” cost-effective products in order to create a win-win situation for the company and customers.

As we move forward, we will continue to endeavor, to concentrate and to innovate for the best interest of our shareholders.

(I) Result of Business Plan

In 2015 our consolidated revenue was NT$ 364,132,984 thousand, which is decrease NT$64,528,914 thousand by compared with 2014 yearly revenue of NT$ 428,661,898 thousand. In 2015 Net income was NT$10,815,594 thousand and earnings per share were NT$1.09.

(II) Budget Implementation

No financial forecast disclosed for 2015, therefore not applicable to disclose budget implementation.

(III) Financial Analysis from 2014 to 2015

		2014	2015
Capital Structure Analysis	Debt to Asset Ratio(%)	52.50	40.05
	Long-term Capital to Fixed Asset Ratio(%)	121.31	138.84
Liquidity Analysis	Current Ratio(%)	95.10	125.70
	Quick Ratio(%)	77.41	97.37
	Times Interest Earned(Times	7.28	9.68
Profitability Analysis	Return on Total Assets(%)	4.98	2.81
	Return on Equity Attributable to Shareholders of the Parent(%)	10.23	4.69
	Operating Income to Paid-in Capital Ratio(%)	28.30	22.54
	Pre-tax Income to Paid-in Capital Ratio(%)	22.64	14.93
	Net Margin(%)	5.06	2.97
	Earnings Per Share(NT$)	2.31	1.09

(IV) Research and development

We keep helping client to intensify product competiveness, fit market demand and be friendly to the environment as our main objective of display technique development. About the development, mainly include environment protection material, electronics saving and low power consumption, high pixel, high chroma, thin, narrow frame, high dynamic display, touch, wide viewing angle and all-around system services integration, we all obtained remarkable achievement.

For the purpose of further enhancing the company’s competitive advantage, the company has actively involved itself in the research and development of new technologies and new products, such as, the development of highly-flexibile IGZO AMOLED panels, touch integrated technology, color-edge displays, and medium- and large-size touch panels with good results to show that are helpful to the company in continuously outperforming other competitors.

1.2 Summary of 2015 Business Plan

(I) Improvement of technique OLED technology development: Organized the unit responsible for promoting it continuously.

(II) Continue to promote industry 4.0

Industry 4.0 has a specific effort dedicated to realizing factory automation; also, replacing the no-added-value work with automated equipment.

(III) Continuous growth on middle and small size products

Speed up the process from new product development to mass production
TOD technology should be expanded and promoted to the Tablet.

(IV) Diligent Management

In year 2016, the entire staff will also to fully devote themselves to work. Please continue to give us your support and encouragement. Lastly, I wish everyone a good health and the best of luck. Thank you. Lastly, I wish everyone a good health and the best of luck. Thank you.

Chairman: Hsing-Chien Tuan Manager: Hsing-Chien Tuan Chief Accountant: Chin-Yuan Chang

II. Company Profile 2.1 Date of Incorporation: January 14 2003 2.2 Company History	II. Company Profile 2.1 Date of Incorporation: January 14 2003 2.2 Company History

January 2003	Inception and registration of the Company
March 2003	Invested in a subsidiary, Innolux Holding Ltd.
May 2003	Ground breaking ceremony for the TFT and Color Filter Plant In Jhunan
August 2003	The TFT and Color Filter Plant In Jhunan commenced construction
March 2004	Entered into a 7-year NT$20 billion syndicated loan contract with a syndicate including Bank of Communications
June 2004	Machinery installation started in the TFT factory and Color Filter Plant In Jhunan
September 2004	Birth of the first TFT-LCD panel
October 2004	Invested in Innocom Technology (Shenzhen) Ltd. in China
January 2005	Public issuance of the Company’s shares approved by the Financial Supervisory Commission
February 2005	Invested in Innolux Corporation Ltd. in the U.S.
March 2005	Obtained ISO 9001 certification Granted the “2005 Outstanding Award in Makingthe Science Park Green by Planting Trees” by the Science Park Administration
July 2005	Registered as an emerging stock on the GreTai Securities Market Obtained ISO 14001 and OHSAS 18001 certifications
August 2005	Ranked 51st nationwide in actual import/export performance in 2004 Granted the Excellent Award in Import/Export Performance by the Ministry of Economic Affairs and Bureau of Foreign Trade
November 2005	Recognized as an outstanding waste disposal model factory by the Environmental Protection Administration, Executive Yuan
December 2005	Recognized as an Occupational Safety and Health Administration Voluntary Protection Unit by the Council of Labor Affairs, Executive Yuan
October 2006	Shares became listed on the Taiwan Stock Exchange on 24 October
November 2006	The Board passed the resolution of merging with Jemitek Electronics Corp. on 21 November
March 2007	Completed merger with Jemitek Electronics Corp.
June 2007	Invested in InnoJoy Investment Corporation
August 2007	Invested in InnoFun Investment Corporation
November 2007	Global Deposit Receipts became listed on the London Stock Exchange on 7 November
June 2008	Topping out ceremony for the sixth generation factory of the Company
July 2008	Granted the “Outstanding Award in Making Green by Planting Trees” by the Science Park Administration Recognized as one of the TOP 10 Leading Companies among the “Taiwan Technology Top 100” Ranked sixth among Deloitte Technology FAST50 Taiwan in terms of profit growth
September 2008	Entered into a 5-year NT$24 billion and US$200 million syndicated loan contract with a syndicate of 20 banks including Mega International Commercial Bank Selected as one of the 12 units in the national industrial group by the Water Assessment Programme organized by the Ministry of Economic Affairs
October 2008	Received the Bronze Award of the National QCC Competition from the Corporate Synergy Development Center of the Industrial Development Bureau, Ministry of Economic Affairs Granted the 2008 Excellence Award in Recycling and Reducing Waste Production by the Environmental Protection Administration, Executive Yuan

November 2008	Recognized as a nationwide friendly workplace in 2008 by the Council of Labor Affairs, Executive Yuan
December 2008	Granted the 2008 Outstanding Water Conservation Award by the Water Resources Agency, Ministry of Economic Affairs Honored with the "2008 Taiwan CSR Awards-Silver Award" by the Taiwan Institute for Sustainable Energy
February 2009	Innolux Display’s Fab T1 passed and obtained the Taiwan Occupational Safety and Health Management System (TOSHMS) certification
April 2009	Innolux Display’s Fab T1 was granted the excellent award in achieving zero work accident hours by the Council of Labor Affairs
May 2009	Innolux Display’s Fab T2 obtained ISO 9001/ISO 14001/OHSAS 18001/QC 080000 4-in-1 management system certification
June 2009	Granted the 2008 excellent personnel award by the National Labor Safety and Health Partnership of the Council of Labor Affairs
September 2009	Issued the 2008 Sustainability Report of Innolux Display Innolux Display’s Fab T0, T1, and T2 obtained the TS 16949 quality system certification
October 2009	Innolux Display announced a merger with TPO Displays Corp. Honored with the “Energy Conservation Outstanding Innovation Award” by the Bureau of Energy, Ministry of Economic Affairs
November 2009	Innolux Display announced a merger with Chi Mei Optoelectronics Corporation Entered into an NT$48 billion syndicated credit facility with a syndicate of 19 banks including Mega International Commercial Bank Received two Bronze Awards of the National QCC Competition from the Corporate Synergy Development Center of the Industrial Development Bureau, Ministry of Economic Affairs Granted the excellent award in low carbon production and waste reduction by the Industrial Development Bureau, Ministry of Economic Affairs
December 2009	Innolux Display was honored with the "2009 Taiwan CSR Awards-Bronze Award" for its 2008 Sustainability Report by the Taiwan Institute for Sustainable Energy. Received the outstanding award in the “2009 Outstanding Energy Saving Companies Selection” from the Science Park Administration Recognized as the Best Managed Company in Taiwan by Asiamoney Granted the excellence award in environmental protection by the Science Park Administration
January 2010	Obtained “Labeling of Energy Saving Action” from the Environmental Protection Administration
February 2010	Granted the excellent award for outstanding achievement on training and management for occupational health by the Council of Labor Affairs, Executive Yuan
March 2010	Completed the merger with Chi Mei Optoelectronics and TPO Displays Innolux Display renamed as Chimei Innolux Granted the outstanding performance award in occupational safety and health on the occasion of the 2009 Nationwide Occupational Safety and Health Week, held by the Council of Labor Affairs, Executive Yuan
May 2010	Winner of Taiwan's Environmental Protection Administration's 2009 Enterprise Green Procurement Performance Award. Recognized as an outstanding unit in achieving zero work accident hours by the Council of Labor Affairs, Executive Yuan
June 2010	18.5-inch LCD panel is awarded 2009 FPD green quality certification. 42-inch 120Hz+ MEMC is awarded the best integrated LCD panel at the Taiwan Gold Panel Awards 2010 with the 13 th Annual Outstanding Optoelectronics Product Awards.
September 2010	Awarded the Outstanding Energy Conservation Award by the Department of Energy, Ministry of Economic Affairs
October 2010	Passed DNV third-party independent verification for its 18.5-inch LCD flat panel monitor (M185B1-L02), making CMI the first panel maker to receive a supply chain “water footprint” verification statement,Granted “the Excellent Environmental Protection Award” bythe Science

	Park Administration
November 2010	Granted the 2010 excellence award in recycling and reducing waste production by the Environmental Protection Administration Completed the merger with Chi Mei Energy
December 2010	Granted “the 2010 Outstanding Energy Saving Award” by the Science Park Administration Granted “the Excellent Award in Low-Carbon Management” by the Science Park Administration Granted “the 2010 Outstanding Award in Making Green by Planting Trees” by the Science Park Administration
January 2011	Became the first manufacturer to obtain “water footprint” verification for its product supply-chain with regard to its desktop LCD monitors and LCD TVs.
March 2011	2.65-inch and 5.3-inch Memory-In-Display (Midis) technology, which was a new energy-saving panel technology, obtained the Best Paper Award of the 17th IDW (International Display Workshops), Japan.
April 2011	Honored with the 2011 Taiwan Excellence Gold Awards for its ultra-thin 13.3-inch HD notebook display module.
May 2011	Kobe site was awarded the Best Safety & Hygiene Company by the Safety Management Committee of Kobe, Japan.
June 2011	Won the Outstanding Photonics Product Award 2011 for its 21.5-inch PCT (Projected Capacitive Touch) display module by the Photonics Industry & Technology Development Association (PIDA). Honored with the “2011 Contribution to Job Creation” award by the Ministry of Economic Affairs and Council of Labor Affairs, Executive Yuan
August 2011	Ranked third among the “2010 Outstanding Export Growth Companies” by the Bureau of Foreign Trade, Ministry of Economic Affairs
September 2011	Granted the 2010 Enterprise Green Procurement Performance Award by the Environmental Protection Administration, Executive Yuan
October 2011	STSP Branch was honored with the “Jin-Jhan Award” by the Council of Labor Affairs, Executive Yuan. Honored with “National Industrial Safety and Health Award” by the Council of Labor Affairs, Executive Yuan
April 2012	Entered into the Joint Debt Restructuring Agreement with the syndicate
June 2012	Won the Outstanding Photonics Product Award 2012 for its 50-inch 3D Direct-Type LED panel by the PIDA.
August 2012	Honored with the “Taiwan Excellence Silver Award” for its 23.6-inch USB super energy-saving LCD screen
September 2012	Recognized as an outstanding unit for hiring disabled persons by surpassing the target Granted the 2011 Enterprise Green Procurement Performance Award by the Environmental Protection Administration, Executive Yuan and the only panel factory granted the award for four consecutive years and fulfilling its responsibility of a sustainable environmental protection enterprise Chi Mei Optoelectronics UK Limited revoked
December 2012	Changed its name to “群創光電股份有限公司” with the English name of “Innolux Corporation”
January 2013	Global depository receipts listed and traded on the Luxembourg Stock Exchange on 23 January Merger of the subsidiaries InnoJoy Investment Corporation and InnoFun Investment Corporation, in which InnoJoy Investment Corporation was the surviving company Eastern Vision Co., Ltd. Liquidated
March 2013	Trading Limited liquidated Dragon Flame Industrial Ltd. liquidated
April 2013	Nanhai Plant took the lead in obtaining the first MFCA material flow cost accounting certification in the world The Company’s 65-inch 4K2K TV module was awarded the 21st “Taiwan Excellence Gold Award” The Company’s 4.3-inch active organic light emittingdisplay (TRUEOLED)was awarded the 21st

	“Taiwan Excellence Silver Award” The Company's 50-inch ultra-high resolution (4K2K) thin narrow frame LCD TV module was awarded the 21st "Taiwan Excellence Award" The Company’s 30-inch six million pixel medical monitor was awarded the 21st "Taiwan Excellence Award" The Company’s 5-inch Full HD LCD panel module was awarded the 21st "Taiwan Excellence Award" The Company’s 3.4-inch active organic light emitting display was awarded the 21st "Taiwan Excellence Award"
June 2013	The Company's 65-inch ultra-high resolution thin narrow frame LCD TV module was recognized by the 16th “Annual Outstanding Optoelectronics Products Awards” Granted the first “National Environmental Education Award – Excellence Award for Private Enterprises Group” by the Environmental Protection Administration Innocom Technology (Jiashan) Co., Ltd. liquidated
September 2013	Ningbo Chi Mei Electronics Ltd. renamed as Ningbo Innolux Optoelectronics Ltd. Nanhai Chi Mei Optoelectronics Ltd. renamed as Ningbo Innolux Technology Ltd. Ningbo Chi Hsin Electrics Ltd. renamed as Ningbo Innolux Display Ltd. Ningbo Chi Mei Logistics Corp renamed as Ningbo Innolux Logistics Ltd.
October 2013	The Company’s “Intelligent Automation” team was granted the “Annual Innovative Pilot Award” of the Industry Innovation Award for theone-stop touch innovative operating model by the Ministry of Economic Affairs Foshan Chi Mei Logistics Co., Ltd. renamed as Foshan Innolux Logistics Co., Ltd. TPO Displays (Nanjing) Ltd. renamed as Nanjing Innolux Optoelectronics Ltd.
November 2013	Awarded the 2013 Green Building Gold Mark by the Ministry of Economic Affairs Awarded the “Premium” honor of the 2013 Taiwan CSR Awards Full Lucky Investment Limited liquidated
December 2013	Selected as an outstanding water saving unit for 2013 by the Water Resources Agency of the Ministry of Economic Affairs Dongguan Chi Hsin Electrics Ltd. revoked TPO Displays (Shanghai) Ltd. renamed as Shanghai Innolux Optoelectronics Ltd. Global Deposit Receipts listed on the London Stock Exchange delisted
January 2014	Plant T1 and Plant B, D, TOC, F (Tainan) awarded Health Promotion Label of Healthy Workplace Certification Ningbo site awarded Safe Standard Level 2 Corporation Chi Mei Optoelecttonics (Singapore) Pte. Ltd. revoked Innocom Technology (Xiamen) Co., Ltd. revoked Merger of Nanhai Chi Mei Electronics Ltd. and Nanhai Chi Mei Optoelectronics Ltd., in which Nanhai Chi Mei Electronics Ltd. was the surviving company
February 2014	Foshan site awarded as an Advanced Corporation in Promotion of Environmental Protection in Si-shan town Ningbo site awarded as an Advanced Corporation in Safe Production and Workplace in Ningbo City 2013
March 2014	Honored with the Healthy Corporation Award for the 2014 Southern Science Park Ecological and Humanistic Marathon
April 2014	Nanhai Chi Mei Electronics Ltd. renamed as Foshan Innolux Optoelectronics Ltd. Honored with the Taiwan Excellence Sliver Award for its 65-inch ultra-high-analytic 3D TV panel Awarded a certificate of recognition for offering disability employment opportunities to realize corporate social responsibilities by the Southern Taiwan Science Park Administration, Ministry of Science and Technology The Companu’s 28-inch 4K2K and 23.6-inch touch panel won the“Taiwan Excellence Silver Award”
September 2014	Chi Mei Optoelectronics USA, Inc. renamed as Innolux Optoelectronics USA, Inc.

	TPO Displays USA Inc. renamed as Innolux Technology USA Inc.
October 2014	TPO Displays Japan K.K. renamed as Innolux Technology Japan Co.,Ltd.
November 2014	Chi Mei Optoelectronics Europe B.V. renamed as Innolux Optoelectronics Europe B.V. TPO Displays (Shinepal) Ltd. renamed as Nanjing Innolux Technology Ltd. Chi Mei Optoelectronics Japan Co., Ltd. renamed as Innolux Optoelectronics Japan Co.,Ltd. TPO Displays Hong Kong Ltd renamed as Innolux Hong Kong Ltd.
December 2014	Health Management Award and Nutrition Health Award by the Health Promotion Administration Granted 2014 Taiwan Sustainable Development Awards by National Council for Sustainable Development TPO Displays Hong Kong Holding Ltd. renamed as Innolux Optoelectronics Hong Kong Holding Ltd. TPO Hong Kong Holding Ltd. renamed as Innolux Hong Kong Holding Ltd. TPO Displays Europe B.V. renamed as Innolux Technology Europe B.V.
February 2015	Signed an agreement for a syndicated credit line of NT$68.5B with Bank of Taiwan and 15 other banks Innocom Technology (Chengdu) Co., Ltd. revoked
March 2015	The company terminated the debt restructuring negotiation and canceled the debt negotiations
April 2015	The Company’s 100% high color saturation 4K2K TV module was awarded the 21st “Taiwan Excellence Gold Award” Awarded a certificate of recognition for social responsibilities by the Global Views
June 2015	Innolux as the model of innovation awarded National Industrial Innovation Award-Award for Excellence by the MOEA
July 2015	Innolux as an outstanding import/export company honored The Best Contribution Award of the MOEA's Award for International Trade 2015
August 2015	Foshan Innolux Optoelectronics Ltd was awarded International Carbon-Value Award in China
September 2015	Innolux named to Dow Jones Sustainability World Index
October 2015	Awarded the Outstanding Energy Conservation Award 2015 by the Department of Energy, Ministry of Economic Affairs Completed the merger with Chi Mei EL corporation
November 2015	Inception and registration of Ningbo Innolux Electronics Ltd

III. Corporate Governance Report

3.1 Organization

3.1.1 Organization Chart

==> picture [470 x 372] intentionally omitted <==

3.1.2 Major Corporate Functions

Divisions	Main duties
President’s Office	Manage the businesses of the Company according to the resolutions passed by the shareholders’ meetings and the Board and the orders of the Board.
Auditor's Office	Responsible for assessing the soundness of the internal control system and all the standards, checking whether the internal control system is operating effectively on a continual basis, measuring the operating results of the departments and providing improvement recommendations for efficient operation.
Global Sales Business Center	Set up business and support units for different types of customers to provide a one-stopsolution for all customers’ needs.
Product Technology Center	Integrate the research and development of technologies and products, and assess and introduce new technologies and newproducts.
Production Technology Center	Responsible for process technology, automation technology and initial equipment and materialpurchase,etc.
LCD Panel Manufacturing Center	Responsible for the production of large-size LCD panel products.
Module ManufacturingCenter	Responsible for theproduction of LCD moduleproducts.
Touch Panel Business Unit	Responsible for the sales and marketing, technology development and production of touchpanelproducts.
Mobile Device Business Unit	Responsible for the sales, marketing, and product development of LCD wireless communication and audio-visual systems as well asproduction ofpanelproduction.
Sales & Marketing	Responsible for market development, promotion,and customer service.
TechnologyDevelopment	Develop,improve,verify,and test new technologies and newprocesses.
Product Development	Development and improvement of new products; design, development, verification, and testingofproducts.
Manufacturing	Production, packaging,and repair ofproducts.
Environmental & Safety Division	Responsible for handling company-wide issues including environmental protection, occupational safety, damage prevention, and risk control of the factories, staff health management and workplace improvement, and greenhouse gas reduction; implementing and managing the environmental safety and health policies of the Company.
Quality Management Center	Responsible for the quality management of the Company; providing the best and the most efficient quality management services (including quality control, product quality guarantee, quality system, and documentary management); and promoting the concept of totalqualitycontrol.
Finance & Accounting Center	Coordinate the capital operating system of the Company, provide financial and accounting information, manage investment plans and risk aversion, and manage overall financial,investment,stock,accounting,and tax matters.
Legal and Intellectual Property Center	Responsible for drafting and reviewing contracts; providing business-related legal consultation services; and coordinating local and international intellectual property matters of the Company.
Strategic Procurement Center	Responsible for the overall procurement strategy of the Company, strategic planning of important parts and components, material preparation for the introduction of products and standardized cost management.
Business Management Center	Responsible for the operation and management, industrial engineering and information system of the Company; profits and losses of cost accounting, business strategy consultation, work-flow efficiency improvement, capacity expansion planning, production efficiency enhancement, hardware and software infrastructure, and information system construction.
Human Resources Management Center	Responsible for overall human resources policy, promotion of talent selection, education, deployment and retention, employee communications, general administration and corporate social responsibilities,etc.

3.2 Directors, Supervisors and Management Team

3.2.1 Directors and Supervisors

															April 26,2016	April 26,2016	April 26,2016	April 26,2016
Title	Citizenship	Name (Note 1)	Date Elected	Term (Years)	Date First Elected	Shareholding when Elected		Current Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience (Education)	Other Position	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
						Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	Relation
Chairman & Chief Executive Officer	Taiwan	Hsing-Chien Tuan	Jun 19, 2013	3	Nov 21, 2002	17,166,567	0.17	17,471,561	0.18	－	－	－	－	Chairman of the Board and CEO, Innolux Corporation Ph. D, Electronic Engineering, Stanford University (U.S.A.) President, AU Optronics Corp. President, Unipac Optoelectronics Corp.	Chairman of Innolux Holding Ltd., Chairman of Nets Trading Ltd.	－	－	－
Institutional Director	Taiwan	Hyield Venture Capital Co., Ltd	Jun 19, 2013	3	Nov 21, 2002	163,989,223	1.65	176,311,219	1.77	－	－	－	－	－	－	－	－	－
Representative	Taiwan	Jeng-Wu Tai(Note 2)	Jun 19, 2013	3	Sep 11, 2015	N.A.	－	300,060	－	605	－	－	－	Tatung Institute of Technology, Taiwan	Note 2	－	－	－
Institutional Director	Taiwan	Jialian Investment Co., Ltd.	Jun 19, 2013	3	Jun 29, 2012	9,926,773	0.10	10,672,661	0.11	－	－	－	－	－	－	－	－	－
Representative	Taiwan	Jyh-Chau Wang	Jun 19, 2013	3	Jun 29, 2012	N.A.	－	912,067	0.01	607	－	－	－	M.S., Materials Engineering, National Tsing-Hua University Vice President, Chi Lin Technology Co., Ltd. Deputy Plant Director, Unipac Optoelectronics Corp. Associate Research Fellow, Material Research Laboratories, Industrial Technology Research Institute	Note 3	－	－	－
Independent Director	Hong Kong	Stanley Yuk Lun Yim	Jun 19, 2013	3	Jun 19, 2013	－	－	－	－	－	－	－	－	High school graduate	Note 4	－	－	－
Independent Director	Taiwan	Chi-Chia Hsieh	Jun 19, 2013	3	Jun 19, 2013	－	－	－	－	－	－	－	－	Ph. D of Mechanical Engineering, Santa Clara University, USA	Note 5	－	－	－

Title	Citizenship	Name (Note 1)	Date Elected	Term (Years)	Date First Elected	Shareholding when Elected	Shareholding when Elected	Current Shareholding	Current Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience (Education)	Other Position	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
						Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	Relation
Supervisor	Taiwan	Ren-Guang Lin	Jun 19, 2013	3	Jun 29, 2012	－	－	－	－	－	－	－	－	Bachelor of Laws, Soochow University, Master of international banking law, Boston University, USA Master of Law, Duke University,USA Ph. D of Law, Duke University,USA	Professor at National Taiwan University School of Law Director of Securities and Futures Investors Protection Center	－	－	－
Supervisor	Taiwan	Yi-Fang Chen	Jun 19, 2013	3	Jun 29, 2012	－	－	－	－	－	－	－	－	M.S., Accounting, Soochow University Lecturer, Accounting Soochow University Former PwC Partner	Note 6	－	－	－
Supervisor	Taiwan	I-Chen Investment Ltd.	Jun 19, 2013	3	May 19, 2004	25,611,545	0.26	27,535,972	0.28	－	－	－	－	－	－	－	－	－
Representative	Taiwan	Te-Tsai Huang	Jun 19, 2013	3	Jul 1, 2010	N.A.	－	212,619	－	－	－	－	－	Graduated from National Chiao Tung University Manager, Philips Taiwan Ltd. CFO, Vanguard International Semiconductor Corporation CFO, Foxconn Precision Components Co., Ltd.	Note 7	－	－	－

Note 1: Existing Directors and Supervisor as of the date of the annual report.

Note 2: 2015/09/11 Juristic-person director appoints new representative.
Vice Chairman of HH,Director of HungChiau International Investment(Statutory representative),Director of Xin Xi science and technology (Statutory representative), Chairman of Foxconn Precision Component(Shenzhen)Co., Ltd. Chairman of Shenzhen Fu Xun Trade Co., Ltd. Chairman of Rich Kang Precision Electronics (Huizhou) Co., Ltd., Chairman of Ultra-expensive photovoltaic (Guiyang) Co., Ltd.,Director of Fitipower Integrated Technology Inc. (Statutory representative), Director of ESON Precision Engineering Co. Ltd.
Note3: Concurrently as chairman of the board: Landmark International Ltd., Keyway Investment Management Ltd., Toppoly Optoelectronics (B.V.I.) Ltd., Innolux Hong Kong Holding Ltd., Innolux Optoelectronics Hong Kong Holding Ltd., Innolux Hong Kong Limited, Bright Information Holding Ltd., Toppoly Optoelectronics (Cayman) Ltd., Leadtek Global Group Ltd., Innolux Technology Germany GmbH, Innolux Technology Europe B.V., Innolux Technology USA Inc., Yuan Chi Investment Co., Ltd.(Statutory representative)

Concurrently as director: Innolux Optoelectronics Japan Co., Ltd., Innolux Technology Japan Co.,Ltd., InnoJoy Investment Corporation(Statutory representative), FI Medical Device Manufacturing Co. (Statutory representative)

Note4: A founder and Executive Director of S.A.S. Dragon Holding Limited, a member of Justices of Peace in the Government of the Hong Kong Special Administrative Region,

the deputy chairman of Hong Kong Electronic Industry Association, a permanent Honorary President of Hong Kong Trade Services Council, a member of Hong Kong Professionals and Senior Executive Assoication; the chairman of District Fight Crime Committee,Tsuen Wan District Office; a counselor for Coucil of Yan Chai Hospital, a committee member of Political Consultative Conference Shanghai and Yunfu Committee; and a honoary member of Junior Police Call Committee, Tsuen Wan District.

Note5: Concurrently as chairman of the board: Microelectronics Technology Inc. IQE Taiwan Corporation, Jupiter Network Corp., Welltop Technology Co. Ltd, Jupiter Technology (Wuxi) Co., Ltd.
Concurrently as independent director: AcBel Polytech Inc.
Concurrently as director: Asia Pacific Telecom(Statutory representative), China Synthetic Rubber Corp. (Statutory representative), E-ONE Moli Energy Corp. (Statutory representative), Advanced Wireless Semiconductor Company, Bright Led Electronics Corp., Kobrite Taiwan Corporation (Statutory representative), Advanced Crystal Application Technology, Inc. (Statutory representative), Sasson Capital (Statutory representative), Kopin Corporation, Inc. The convener of the 11th supvervision meeting for the Allied Association for Science Park Industries
Note6: A lead accountant of YiFang CPA firm, and a Supervisor of YKK Taiwan Co. and NatureWise Biotech & Medicals Corp.
Note7: Concurrently as chairman of the board: Hyield Venture Capital Co., Ltd. (Statutory representative)
Concurrently as director position in HungChi International Investment (Statutory representative), Pao Shin International Investment Co., Ltd. (Statutory representative), HungChiau International Investment, FuRuei International Investment; and Fuxuntong Trading, ShenZhen.
Concurrently as supervisor: HungJing International Investment (Statutory representative), LiYi International Investment (Statutory representative), HungYuan International Investment (Statutory representative), and Pan-International.

Major shareholders of the institutional shareholders

April 26, 2016

	April 26,2016
Name of institutional shareholders	Major shareholders of the institutional shareholders
Hyield Venture Capital Co., Ltd.	Hon Hai Precision Components Co., Ltd. (97.95%), Pao Shin International Investment Co., Ltd. (1.64%) Chiu-Lien Huang (0.205%), Hsiang-Fu Yu(0.205%)
Jialian Investment Co.,Ltd.	Super Venture Investments Limited, Samoa（100%）
I-Chen Investment Ltd.	Company Objective Developments Limited, Samoa (100%)

Major shareholders of the major shareholders that are juridical persons

Major shareholders of the major shareholders that are juridical persons	Major shareholders of the major shareholders that are juridical persons
April 26,2016
Name of juridical persons	Major shareholders of the juridical persons
Hon Hai Precision Ind. Co., Ltd. (Note)	Terry Tai-Ming Gou (12.62%), Citi Managed Government of Singapore Investment accounts (2.25%), JPMorgan hosting Saudi-Arabia Central Bank investment account (2.11%), Citigroup hosting Hon Hai Precision Ind. Co. Ltd. Depositary Receipts account (1.77%), Standard Chartered hosting Vatican Gardner emerging market equity index fund account (1.37%), Citi Bank hosted Norges Bank Investment account (1.23%), JPMorgan Managed Stichting Depositary APG investment account (1.20%), JP Morgan Chase Bank hosted Abu Dhabi Investment Authority invested more than accounts (1.17%),Standard Chartered Hosting Fidelity light called Trust: Fidelity Low of shares of the Fund (1.06%), JPMorgan Managed Advanced Stars advanced aggregate International Equity Index(0.91%)
Pao Shin International Investment Co., Ltd.	Hon Hai Precision Industry Co., Ltd. (100%)
Super Venture Investments Limited, Samoa （100%）	Diamond Luck Enterprises Ltd（100%）
Company Objective Developments Limited, Samoa(100%)	Perfect Impulse Investments Limited（100%）

Note: The information is derived from the close of registrar information of the company dated 24 April 2016.

Professional qualifications and independence analysis of directors and supervisors

Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors	Professional qualifications and independence analysis of directors and supervisors
														April 26,2016
Criteria Name	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years of Work Experience			Independence Criteria (Note)										Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director
	An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10
Hsing-Chien Tuan	－	－	V	－	－	V	V	V	V	V	V	V	V	－
Hyield Venture Capital Co., Ltd Jeng-Wu Tai	－	－	V	V	V	V	V	V	V	V	V	V	－	－
Jialian Investment Co., Ltd. Jyh-Chau Wang	－	－	V	－	－	V	V	V	V	V	V	V	－	－
Stanley Yuk Lun Yim	－	－	V	V	V	V	V	V	V	V	V	V	V	－
Chi-Chia Hsieh	－	－	V	V	V	V	V	V	V	V	V	V	V	1
Ren-Guang Lin	V	V	V	V	V	V	V	V	V	V	V	V	V	－
Yi-Fang Chen	V	V	V	V	V	V	V	V	V	V	V	V	V	－
I-Chen Investment Ltd. Te-Tsai Huang	－	－	V	V	V	V	V	V	V	V	V	V	－	－

Note：Please tick the corresponding boxes if directors or supervisors have been any of the following during the two years prior to being elected or during the term of office.

Not an employee of the Company or any of its affiliates.
Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.
Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under someone else's name(s), in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.
Not a spouse, relative within the second degree of kinship, or lineal relative within the fifth degree of kinship, of any of the persons in the preceding three subparagraphs.
Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking in the top five in holdings.
Not a director, supervisor, officer, or shareholder holding 5% or more of the shares of a specified company or institution that has a financial or business relationship with

the Company.

Not a professional individual or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services, or consultation to the Company or to any affiliate of the Company, or a spouse thereof.
Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
Not been a person of any conditions defined in Article 30 of the Company Law.
Not a governmental, juridical person, or its representative as defined in Article 27 of the Company Law

3.2.2 Management Team

												April 26,2016	April 26,2016	April 26,2016
Title	Citizenship	Name Note 1	Effective Date	Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience (Education)	Other Position	Managers who are Spouses or Within Two Degrees of Kinship
				Shares	％	Shares	％	Shares	％			Title	Name	Relation
Chairman & Chief Executive Officer	Taiwan	Hsing-Chien Tuan	Jan 14, 2003	17,471,561	0.18	－	－	－	－	Chairman of the Board and CEO, Innolux Corporation Ph. D, Electronic Engineering, Stanford University (U.S.A.) General Manager, AU Optronics Corp. General Manager,Unipac Optoelectronics Corp.	Chairman of Innolux Holding Ltd., Chairman of Nets Trading Ltd.	－	－	－
President	Taiwan	Jyh-Chau Wang	Mar 18, 2010	912,067	0.01	607	－	－	－	M.S., Materials Engineering, National Tsing-Hua University Vice President, Chi Lin Technology Co., Ltd. Deputy Plant Director, Unipac Optoelectronics Corp. Associate Research Fellow, Material Research Laboratories, Industrial TechnologyResearch Institute	Note 2	－	－	－
Vice President	Taiwan	Wen-Jyh Sah	Mar 18, 2010	1,459,963	0.01	9,543	－	－	－	Ph. D, Electrical Engineering, National Taiwan University Senior Consultant,Chi Lin TechnologyCo.,Ltd.	－	－	－	－
Vice President	Taiwan	Chin-Lung Ting	Mar 18, 2010	1,087,063	0.01	－	－	－	－	M.S., Graduate Institute of Electronics Engineering, National Taiwan University Manager,Unipac Optoelectronics Corp.	Note 3	－	－	－
Vice President	Taiwan	Yao-Tong Chen	Mar 18, 2010	1,689,644	0.02	16,422	－	－	－	Master of EMBA, Sun Yat-sen University Manager,Hitachi Electronics Co.,Ltd.	－	－	－	－
Vice President	Taiwan	Chih-Hung Hsiao	Jan 14, 2003	470,480	－	3,600,000	0.04	－	－	B.S., Industrial Engineering, Tunghai University Plant Director, AU Optronics Corp. Deputy Plant Director, Unipac Optoelectronics Corp. Supervisor, Center for Measurement Standards (CMS),Industrial TechnologyResearch Institute	Note 4	－	－	－
Vice President	Taiwan	Hung-Wen Yang(Note 5)	Jun 1, 2007	320,769	－	59,002	－	－	－	M.S., Chemical Engineering, National Cheng Kung University Plant Director, Sintek Photronic Corp Deputy Plant Director, AU Optronics Corp. Manager,Unipac Optoelectronics Corp.	－	－	－	－
Vice President	Taiwan	Chih-Ming Chen(Note 5)	Mar 18, 2010	312,193	－	863	－	－	－	Graduated from Metallurgy and Materials Science Research Institute of National Cheng Kung University Engineer, Shyen Sheng Fuat Steel & Iron Works Co., Ltd Senior Engineer,Unipac Optoelectronics Corp.	－	－	－	－
Vice	Taiwan	Chu-Hsiang	Mar 18,	925,585	0.01	7,953	－	－	－	M.S., Chemical Engineering, National Central	Note 6	－	－	－

Title	Citizenship	Name Note 1	Effective Date	Shareholding	Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience (Education)	Other Position	Managers who are Spouses or Within Two Degrees of Kinship	Managers who are Spouses or Within Two Degrees of Kinship	Managers who are Spouses or Within Two Degrees of Kinship
				Shares	％	Shares	％	Shares	％			Title	Name	Relation
President		Yang(Note 6)	2010							University Deputy Section Manager, Chunghwa Picture Tubes,Ltd.
Assistant Vice President	Taiwan	Kuo-Hsiung Kuo	Mar 18, 2010	714,100	0.01	295,540	－	－	－	B.S., Mechanical Engineering, Waseda University, Japan	Note 7	－	－	－
Assistant Vice President	Taiwan	Ke-Yi Kao	Mar 18, 2010	607,488	0.01	－	－	－	－	M.S., Chemical Engineering, University of Florida (U.S.A.) Assistant Manager, Unipac Optoelectronics Corp.	－	－	－	－
Assistant Vice President	Taiwan	Chung-Kuang Wei	Mar 18, 2010	717,395	0.01	－	－	－	－	Ph. D, Institute of Photonics, National Chiao Tung University Electronics Research Laboratories, Industrial TechnologyResearch Institute	－	－	－	－
Assistant Vice President	Taiwan	Tai-Chi Pan	Mar 18, 2010	886,880	0.01	58,680	－	－	－	Graduated in Electrical Engineering of National Cheng Kung University Assistant Manager, Unipac Optoelectronics Corp.	－	－	－	－
Assistant Vice President	Taiwan	Jia-Pang Pang	Nov 8, 2010	2,445,089	0.02	－	－	－	－	Ph. D, Electronics Engineering, University of Tokyo, Japan Deputy Director of TFT Manufacturing Plant, AU Optronics Corp.	－	－	－	－
Assistant Vice President	Taiwan	Zheng-Xia Kuo	Sept 23, 2013	549,802	0.01	26,000	－	－	－	Bachelor of Industrial Engineering and Management, National Chiao Tung University Person-in-charge of BU, GIO Optoelectronics Corp. Manager of Chi Mei Lighting Technology Corporation Engineer of Chunghwa Picture Tubes, Ltd. Engineer of Behavior Tech Computer Corp.	Director of Ampower Holding Ltd.	－	－	－
Assistant Vice President	Taiwan	Tian-Ren Lin	Sept 23, 2013	1,149,554	0.01	302,081	－	－	－	Master of Electrical Engineering, National Taiwan University Advisor to General Manager's Office, Unity Opto Technology Co., Ltd. Director of Head Office of Product Development, Chi Mei Lighting Technology Corporation	－	－	－	－
Assistant Vice President	Taiwan	Yu Shui Kuo	Dec 1, 2014	160,000	－	－	－	－	－	Master of Mechanical Engineering, Yuan Ze University Associate President of Entire Technology Co. Ltd. Manager of AU Optronics Corp. Associate Manager of Prodisc	－	－	－	－

Title	Citizenship	Name Note 1	Effective Date	Shareholding	Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience (Education)	Other Position	Managers who are Spouses or Within Two Degrees of Kinship	Managers who are Spouses or Within Two Degrees of Kinship	Managers who are Spouses or Within Two Degrees of Kinship
				Shares	％	Shares	％	Shares	％			Title	Name	Relation
										Coordinator Of Ritek Corporation
Assistant Vice President	Taiwan	Mao-Sheng Hung(Note 8)	Dec 25, 2015	144,800	－	－	－	－	－	Master of management, National Taiwan University Department representative of Gigabyte MarketingExecutive of BenQ	－	－	－	－
Assistant Vice President	Taiwan	Jun-Yi Yu (Note 8)	Dec 25, 2015	109,537	－	－	－	－	－	Master of Industrial Engineering,Texas Tech University ProductionManager of AU Optronics Corp.	Note 9	－	－	－
Assistant Vice President	Taiwan	Qing-Hui Lin(Note 8)	Dec 25, 2015	56,039	－	－	－	－	－	Master of institute of science engineering, National Central University R&D Director,Chunghwa Picture Tubes,Ltd.	Note 10	－	－	－
Finance Supervisor	Taiwan	Chien-Lang Lo	May 7, 2014	147,431	－	198	－	－	－	Master of Business Administration, Baruch College, College of the City of New York Assitant manager of Sumitomo Mitsui Banking Corporation. Deputy manager of HSBC Bank director of Tokyo-Mitsubishi UFJ.	Note 11	－	－	－
Account Supervisor	Taiwan	Chin-Yuan Chang	Jan 9, 2009	300,192	－	－	－	－	－	Master of Business Administration, National Chengchi University Vice President of Finance, Xiamen Overseas Chinese Electronic Co., Ltd. CFO, Information Product Business Group, BENQ	Note 12	－	－	－

Note 1: Existing Managers as of the date of the annual report.

Note 2: Concurrently as chairman of the board: Landmark International Ltd., Keyway Investment Management Ltd., Toppoly Optoelectronics (B.V.I.) Ltd., Innolux Hong Kong Holding Ltd., Innolux Optoelectronics Hong Kong Holding Ltd., Innolux Hong Kong Limited, Bright Information Holding Ltd., Toppoly Optoelectronics (Cayman) Ltd., Leadtek Global Group Ltd., Innolux Technology Germany GmbH, Innolux Technology Europe B.V., Innolux Technology USA Inc., Yuan Chi Investment Co., Ltd. (Statutory representative)
Concurrently as director: Innolux Optoelectronics Japan Co., Ltd., Innolux Technology Japan Co., Ltd., InnoJoy Investment Corporation (Statutory representative), FI Medical Device Manufacturing Co. (Statutory representative)
Note 3: Concurrently as chairman of the board: GIO Optoelectronics Corp., Double Star Inc.
Concurrently as director: Innolux Optoelectronics Japan Co., Ltd.
Note 4: Concurrently as chairman of the board: Rockets Holding LTD., Stanford Developments Ltd., Suns Holding Ltd., Lakers Trading Ltd., Warriors Technology Investments Ltd., InnoJoy Investment Corporation (Statutory representative)
Concurrently as director: Yuan Chi Investment Co., Ltd. (Statutory representative)
Note 5: Promoted to Vice President on 25 December 2015
Note 6: Promoted to Vice President on 19 March 2016
Concurrently as director: Chi Lin Optoelectronics. (Statutory representative),FI Medical Device Manufacturing Co. (Statutory representative)
Note 7: Concurrently as chairman of the board: Ningbo Innolux Logistics Co., Ltd., Ningbo Innolux Technology Ltd., Ningbo Innolux Optoelectronics Ltd., Ningbo Innolux Display Ltd.

Concurrently as director: Chi Mei Frozen Food Co., Ltd.

Note 8: Promoted to Assistant Vice President on 25 December 2015
Note 9: Concurrently as chairman of the board: Bright Information Holding Ltd.,Innolux Hong Kong Holding Limited, Innolux Optoelectronics Hong Kong Holding Ltd., Shanghai Innolux Optoelectronics Ltd., Foshan Innolux Optoelectronics Ltd, Kunpal Optoelectronics Ltd., Nanjing Innolux Optoelectronics Ltd., Innocom Technology (Shenzhen) Co., Ltd.
Note 10: Concurrently as chairman of the board: Foshan Innolux Optoelectronics Ltd., Foshan Innolux Logistics Co., Ltd.
Note 11: Concurrently as chairman of the board:Best China Investments Ltd., Mega Chance Investments Ltd., Magic Sun Ltd.,Asiaward Investments Ltd., Main Dynasty Investment Ltd., Sun Dynasty Development Ltd.
Concurrently as director: Ningbo Innolux Logistics Co., Ltd., Ningbo Innolux Technology Ltd., Ningbo Innolux Optoelectronics Ltd., Ningbo Innolux Display Ltd., InnoJoy Investment Corporation (Statutory representative), Yuan Chi Investment Co., Ltd. (Statutory representative)
Note 12: Concurrently as chairman: Innolux Optoelectronics Europe B.V., Innolux Optoelectronics Germany GmbH
Concurrently as director: Innocom Technology (Shenzhen) Co., Ltd., Nanjing Innolux Optoelectronics Ltd., Kunpal Optoelectronics Ltd., Nanjing Innolux Technology Ltd., VAP Optoelectronics (Nanjing) Corp., Shanghai Innolux Optoelectronics Ltd.
Concurrently as supervisor: Ningbo Innolux Logistics Co., Ltd., , Ningbo Innolux Technology Ltd., , Ningbo Innolux Optoelectronics Ltd., Ningbo Innolux Display Ltd., Innolux Optoelectronics Japan Co., Ltd., Innolux Technology Japan Co., Ltd., Foshan Innolux Optoelectronics Ltd., Foshan Innolux Logistics Co., Ltd., InnoJoy Investment Corporation (Statutory representative)

3.3 Remuneration of Directors, Supervisors, President, and Vice President

3.3.1 Remuneration of Directors

Unit: NT$; Shares: thousands

Title	Name (Note 1)	Director Remuneration	Director Remuneration	Director Remuneration	Director Remuneration	Director Remuneration	Director Remuneration	Director Remuneration	Director Remuneration	Ratio of total remuneration (A+B+C+D) to net income (%)(Note10)	Ratio of total remuneration (A+B+C+D) to net income (%)(Note10)	Remuneration received as an employee	Remuneration received as an employee	Remuneration received as an employee	Remuneration received as an employee	Remuneration received as an employee	Remuneration received as an employee	Remuneration received as an employee	Remuneration received as an employee	Remuneration received as an employee	Remuneration received as an employee	Remuneration received as an employee	Remuneration received as an employee	Ratio of total compensation (A+B+C+D+E +F+G) to net income (%)(Note10)	Ratio of total compensation (A+B+C+D+E +F+G) to net income (%)(Note10)	Any remuneration received from Recipients other than subsidiaries
		Compensation (A) (Note 2)		Pensions (B)		Directors remuneration (C) (Note 3)		Service execution fees (D) (Note 4)				Salary, Bonuses, and Allowances (E) (Note 5)		Pensions (F) (Note 6)		Employees’ remuneration (G) (Note 7)				Number of shares subscribed under employee stock options (Note 8)		Number of new shares obtained with restrictive rights of employees (Note9)
		The company	All companies in the financial report	The company	All companies in the financial report	The company	All companies in the financial report	The company	All companies in the financial report	The company	All companies in the financial report	The company	All companies in the financial report	The company	All companies in the financial report	The company		All companies in the financial report		The company	All companies in the financial report	The company	All companies in the financial report	The company	All companies in the financial report
																Cash	Stock	Cash	Stock
Chairman & Chief Executive Officer	Hsing-Chien Tuan	7,200	7,200	－	－	2,993	2,993	190	190	0.10	0.10	31,817	31,817	－	－	20,389	－	20,389	－	900	900	－	－	0.58	0.58	－
Institutional director	Hyield Venture Capital Co., Ltd
Representative	Jeng-Wu Tai(Note11)
Institutional director	Jialian Investment Co.,Ltd.
Representative	Jyh-Chau Wang
Independent Director	Stanley Yuk Lun Yim
Independent Director	Chi-Chia Hsieh

Note 1: Existing Directors as of the date of the annual report. Note 2: Refers to directors’ remuneration paid in 2015. Note 3: The proposal of 2015 profit distribution has resolved by the board of director. Note 4: Refers to the relevant service execution fees of directors in 2015. Note 5: Refers to the salaries, bonuses and special disbursement, etc. received as employees by directors in 2015. Note 6: Refers to the amounts transferred to government authorities in 2015. Note 7: The proposal for 2015 profit distribution of remuneration received as an employee has been resolved by the board of directors. Note 8: Number of shares subscribed under employee stock options excludes the exercised portion. Note 9: Number of shares subscribed under restrictive rights of employees excludes the exercised portion. Note 10: Ratio of total net income (Alone). Note 11:2015/9/11 Representative changed.

Range of remuneration table

	Range of remuneration table	Range of remuneration table	Range of remuneration table	Range of remuneration table
Range of remuneration paid to each director of the Company	Name of Directors
	Total of (A+B+C+D)		Total of (A+B+C+D+E+F+G)
	The company	All companies in the financial report	The company	All companies in the financial report
Under NT$ 2,000,000	Hyield Venture Capital Co., Ltd Jeng-Wu Tai Jialian Investment Co., Ltd. Jyh-Chau Wang Stanley Yuk Lun Yim Chi-Chia Hsieh	Hyield Venture Capital Co., Ltd Jeng-Wu Tai Jialian Investment Co., Ltd. Jyh-Chau Wang Stanley Yuk Lun Yim Chi-Chia Hsieh	Hyield Venture Capital Co., Ltd Jeng-Wu Tai Jialian Investment Co., Ltd. Stanley Yuk Lun Yim Chi-Chia Hsieh	Hyield Venture Capital Co., Ltd Jeng-Wu Tai Jialian Investment Co., Ltd. Stanley Yuk Lun Yim Chi-Chia Hsieh
NT$2,000,000 ~ NT$5,000,000	Hsing-Chien Tuan	Hsing-Chien Tuan
NT$5,000,000 ~ NT$10,000,000
NT$10,000,000 ~ NT$15,000,000
NT$15,000,000 ~ NT$30,000,000			Jyh-Chau Wang	Jyh-Chau Wang
NT$30,000,000 ~ NT$50,000,000			Hsing-Chien Tuan	Hsing-Chien Tuan
NT$50,000,000 ~ NT$100,000,000
Over NT$100,000,000
Total	7	7	7	7

3.3.2 Remuneration of Supervisors

Unit: NT$; Share: thousands

								Unit: NT$;	Unit: NT$;	Share: thousands
Title	Name(Note 1)			Supervisors’ Remuneration				Ratio of total remuneration (A+B+C) to net income (%)(Note 5)		Any remuneration received from Recipients other than subsidiaries
		Base Compensation (A) (Note 2)		Remuneration( B) (Note 3)		Service execution fees (C) (Note 4)
		The company	All companies in the financial report	The company	All companies in the financial report	The company	All companies in the financial report	The company	All companies in the financial report
Supervisor	Ren-GuangLin	2,700	2,700	1,497	1,497	140	140	0.04%	0.04%	－
Supervisor	Yi-FangChen
Supervisor	I-Chen Investment Ltd. Te-Tsai Huang

Note 1: Existing Supervisors as of the date of the annual report. Note 2: Refers to the remuneration paid to supervisors in 2015. Note 3: The proposal of 2015 profit distribution has resolved by the board of director. Note 4: Refers to the relevant service execution fees of supervisors in 2015. Note 5: Ratio of total net income (Alone).

Range of remuneration table

	Range of remuneration table	Range of remuneration table
Range of remuneration paid to each supervisor of the Company	Name of Supervisors
	Total of(A+B+C)
	The company	All companies in the financial report D
Under NT$ 2,000,000	I-Chen Investment Ltd. Te-Tsai Huang, Ren-Guang Lin, Yi-FangChen	I-Chen Investment Ltd. Te-Tsai Huang, Ren-Guang Lin,Yi-FangChen
NT$2,000,000 ~ NT$5,000,000
NT$5,000,000 ~ NT$10,000,000
NT$10,000,000 ~ NT$15,000,000
NT$15,000,000 ~ NT$30,000,000
NT$30,000,000 ~ NT$50,000,000
NT$50,000,000 ~ NT$100,000,000
Over NT$100,000,000
Total	4	4

3.3.3 Compensation of President and Vice President

														Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Title	Name(Note 1)	Salary (A) (Note 2)		Pensions (B) (Note 3)		Bonuses and Allowances (C) (Note 4)		Profit Sharing- Employee Bonus (D) (Note 5)				Ratio of total compensation (A+B+C+D) to net income (%)(Note 6)		Number of employee stock options obtained (Note 7)		Number of new shares obtained with restrictive rights of employees(Note 8)		Any remuneration received from Recipients other than subsidiaries
		The company	All companies in the financial report	The company	All companies in the financial report	The company	All companies in the financial report	The company		All companies in the financial report		The company	All companies in the financial report	The company	All companies in the financial report	The company	All companies in the financial report
								Cash	Stock	Cash	Stock
Chief Executive Officer	Hsing-Chien Tuan	24,913	24,913	220	220	48,854	48,854	34,285	－	34,285	－	1.00%	1.00%	2,345	2,345	24	24	－
President	Jyh-Chau Wang
Vice President	Wen-Jyh Sah
Vice President	Chin-Lung Ting
Vice President	Yao-Tong Chen
Vice President	Chih-Hung Hsiao
Vice President	Hung-Wen Yang(Note 9)
Vice President	Chih-Ming Chen(Note 9)
Vice President	Chu-Hsiang Yang(Note 10)

Note 1: Existing President and Vice President as of the date of the annual report. Note 2: Refers to remuneration paid in 2015. Note 3: Refers to amounts transferred to government authorities in 2015.

Note 4: Refers to the bonuses, special disbursement and 593 tousand for a car and oil costs for CEO & President. Note 5: The proposal of 2015 profit distribution has resolved by the board of director.

Note 6: Ratio of total net income (Alone). Note 7: Number of shares subscribed under employee stock options excludes the exercised portion. Note 8: Number of shares subscribed under restrictive rights of employees excludes the exercised portion. Note 9: Promoted to Vice President on 25 December 2015

Note 10: Promoted to Vice President on 19 March 2016

Range of remuneration table

	Range of remuneration table
Range of remuneration paid to each president and vice president	Name of President	and Vice President
	The company	All companies in the financial report
Under NT$ 2,000,000	Hung-Wen Yang,Chih-Ming Chen, Chu-HsiangYang	Hung-Wen Yang,Chih-Ming Chen, Chu-HsiangYang
NT$2,000,000 ~ NT$5,000,000
NT$5,000,000 ~ NT$10,000,000	Yao-TongChen	Yao-TongChen
NT$10,000,000 ~ NT$15,000,000	Wen-Jyh Sah,Chin-LungTing,Chih-HungHsiao	Wen-Jyh Sah,Chin-LungTing,Chih-HungHsiao
NT$15,000,000 ~ NT$30,000,000	Hsing-Chien Tuan,Jyh-Chau Wang	Hsing-Chien Tuan,Jyh-Chau Wang
NT$30,000,000 ~ NT$50,000,000
NT$50,000,000 ~ NT$100,000,000
Over NT$100,000,000
Total	9	9

3.3.4 Names of managerial officers who received employees’ bonuses in the preceding year and the distribution

and	the distribution
				Unit: NT$thousands as of April 30,2016
	Title	Name (Note 1)	Amount of stock	Amount of cash (Note 2)	Total	Ratio of Total Amount to Net Income (%)(Note 3)
Managerial officers	Chief Executive Officer	Hsing-Chien Tuan	-	53,035	53,035	0.49%
	President	Jyh-Chau Wang
	Vice President	Wen-Jyh Sah
	Vice President	Chin-LungTing
	Vice President	Yao-TongChen
	Vice President	Chih-HungHsiao
	Vice President	Hung-Wen Yang
	Vice President	Chih-MingChen
	Vice President	Chu-HsiangYang
	Associate Vice President	Kuo-Hsiung Kuo
	Associate Vice President	Ke-Yi Kao
	Associate Vice President	Chung-Kuang Wei
	Associate Vice President	Tai-Chi Pan
	Associate Vice President	Jia-Pang Pang
	Associate Vice President	Zheng-Xia Kuo
	Associate Vice President	Tian-Ren Lin
	Associate Vice President	Yu Shui Kuo
	Associate Vice President	Mao-Sheng Hung
	Associate Vice President	Jun-Yi Yu
	Associate Vice President	Qing-Hui Lin
	Manager	Chien-LangLo
	Manager	Chin-Yuan Chang

Note 1: Refers to current managerial officers as of the printing date of the annual report. Note 2: The proposal of 2015 profit distribution has resolved by the Board of director. Note 3: Ratio of Total Amount to Net Income of alone.

3.3.5 Comparison of Remuneration for Directors, Supervisors, Presidents, and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents, and Vice Presidents

A. The ratio of total remuneration paid by the company and by all companies included in the consolidated financial statements for the most recent two fiscal years to directors, supervisors, presidents, and vice presidents of the Company to the net income.

	Ratio of total remuneration paid to directors, supervisors, presidents, and vice presidents to net income	Ratio of total remuneration paid to directors, supervisors, presidents, and vice presidents to net income	Ratio of total remuneration paid to directors, supervisors, presidents, and vice presidents to net income	Ratio of total remuneration paid to directors, supervisors, presidents, and vice presidents to net income
		2014	2015 (Note 1)
	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements
Directors	0.31	0.31	0.58	0.58
Supervisors	0.03	0.03	0.04	0.04
Presidents&Vice Presidents	0.46	0.46	1.00	1.00

Note 1: The proposal of 2015 profit distribution has resolved by the Board of director..

The remuneration payment policy of the Company is determined in accordance with the actual profit of the Company for the year and the ratio as required under the Articles of Association of the Company for distribution as remuneration to directors and supervisors and as bonuses to employees. For payments made to presidents and vice presidents, different levels of remuneration are set after considering their job positions, responsibilities undertaken, job achievements and contributions made to company operations, and with reference to industry standards, the remuneration payment policy is considered to be reasonable.

B. The policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with business performance.

Remunerations of directors and supervisors of the Company are determined in accordance with the Articles of Association of the Company, their participation and value of contributions made to the operation of the Company and with reference to industry standards. For years when the Company has a final net profit, after offsetting losses and making transfers to legal reserves or special reserves, distribution of special stock dividends and employees’ bonuses, the Board will recommend a profit distribution proposal, including remuneration for directors and supervisors, at its own discretion after considering the industry environment and capital requirements of the Company and distribution payments will be made after approval by the shareholders.

Remuneration of presidents and vice presidents includes salaries, bonuses, special disbursements, employee bonus, employee stock options, and new shares with restrictive rights of employees, etc. which are determined after considering the nature of work, responsibilities, job positions, and duties undertaken and with reference to industry standards of similar job positions. The amount of employees’ bonuses, after the relevant resolution has been passed by shareholders, will be reviewed by the remuneration committee according to the bonus distribution mechanism for employees of the Company on individual basis, and a proposal will be made to the Board for a decision and will be implemented upon passing the Board resolution.

3.4 Implementation of Corporate Governance

3.4.1 Board of Directors

A total of 5 meetings of the board of directors were held in the previous period. Director attendance was as follows:

Title	Name	Attendance in Person (B)	By Proxy	Attendance Rate (%) [B/A]	Remarks
Chairman	Hsing-Chien Tuan	5	0	100%	-
Director	Hyield Venture Capital Co., Ltd Hong-Jen Chuang	4	0	100%	2015/09/11 Juristic-person director appoints new representative
Director	Hyield Venture Capital Co., Ltd Jeng-Wu Tai	0	1	-	2015/09/11 Juristic-person director appoints new representative
Director	Jialian Investment Co., Ltd. Jyh-Chau Wang	5	0	100%	-
Independent Director	Stanley Yuk Lun Yim	4	1	80%	-
Independent Director	Chi-Chia Hsieh	5	0	100%	-
Other mentionable items: 1. If the circumstances referred to in Article 14-3 of the Securities and Exchange Act and resolutions of the directors’ meetings objected to by Independent Directors or subject to qualified opinion and recorded or declared in writing exist, the dates of meetings, sessions, contents of motions, all independent opinions, and the Company’s response to the independent directors’ opinions should be specified: None 2. If the Directors avoid motions in a conflict of interest, the Directors’ names, contents of motions, causes for avoidance,and votingshould be specified: Date Name Contents of motions Causes for avoidance Voting 2015/2/10 Hsing-Chien Tuan Jyh-Chau Wang The Compensation Committee is proposing manager bonus for the year of 2014 and amendment the rule of Reward System of executives. The board member Hsing-Chien Tuan and board member and manager Jyh-Chau Wang have a vital interest in the items on the agenda, therefore they avoided participating in the voting process in accordance with the regulations specified in Article 178 of the CompanyAct. Did not for the disucssion 2015/7/30 Hsing-Chien Tuan Jyh-Chau Wang The Compensation Committee is proposing manager bonus for the year of 2014. The board member Hsing-Chien Tuan and board member and manager Jyh-Chau Wang have a vital interest in the items on the agenda, therefore they avoided participating in the voting process in accordance with the regulations specified in Article 178 of the CompanyAct. Did not for the disucssion 2016/2/2 Hsing-Chien Tuan Jyh-Chau Wang The Compensation Committee is proposing manager bonus for the year of 2015 and amendment the rule of Reward System of executives. The board member Hsing-Chien Tuan and board member and manager Jyh-Chau Wang have a vital interest in the items on the agenda, therefore they avoided participating in the voting process in accordance with the regulations specified in Article 178 of the CompanyAct. Did not for the disucssion 3. Measures taken to strengthen the functionality of the Board: (1) The Compnay has set up a Compensation Committee on August 25, 2011 for assisting the Board to conduct regular compensation review and set up compenstation standard for the Directors and managers. The Committee is also in charged of making regular review of performance of the Director and managers, and the related remuneration policy, system, standard, and structure. Please see page 34 for the detail of the Committee’s operation.

(2) The Company has re-elected its Board Director on 19 June, 2013. The new Board is made of five board member, including two independent directs and three supervisors fors strengthening the Board function and Corporate Governance.
(3) The Board members continuing education extending beyond the scope of the professional expertise of the directors and supervisors, and to select courses encompassing corporate governance related topics such as finance, risk management, business, commerce, legal affairs, accounting, and corporate social responsibility, or courses relating to internal control systems or liability for financial reports. Please see page 43 for the detail of the status of Directors and Supervisors' participation in corporate governance related courses and trainings.

3.4.2 Audit Committee

A. Audit Committee: N.A.

3.4.3 Attendance of Supervisors for Board Meetings

A total of 5 meetings of the board of directors were held in the previous period. Supervisor attendance was as follows:

Title	Name	Attendance in Person(B)	Attendance rate (%) [B/A]	Remarks
Supervisor	Ren-GuangLin	5	100%	-
Supervisor	Yi-FangChen	5	100%	-
Supervisor	I-Chen Investment Ltd. Te-Tsai Huang	4	80%	-
Other mentionable items: 1. Composition and responsibilities of supervisors: (1) Communications between supervisors and the Company's employees and shareholders (e.g. the communication channels and methods, etc.): Our Supervisor could communicate with employees and shareholders in anytime if necessary. (2) Communications between supervisors and the Company's Chief Internal Auditor and CPA (e.g. the items, methods, and results of the audits of corporate finance or operations, etc.): A. Communications with the employees & shareholders: Supervisors could communicate with employee and shareholder in anytime if necessary. B. Communications with the Chief Internal Auditor & CPA: The Company holds a Board Meeting each quarter and keeps the meeting minutes. The Directors, President, and the company's management are then notified of important discussions and resolutions. All Supervisors had attended on each occasion, and the CFO, Chief Internal Auditor, and CPAs were also present at the meetings to discuss the related subjects, Chief Internal Auditor was also present at the meetings to report on the audit operations and major internal auditing matters, including execution, reporting, and monitoring of Supervisors’ instructions. In addition, Supervisors obtained audit reports on a monthly basis, which were submitted by the Chief Internal Auditor. 2. If a supervisor expresses an opinion during a meeting of the Board of Directors, the dates of meetings, sessions, contents of motions, resolutions of the directors’ meetings, and the Company’s response to the supervisor’s opinion should be specified: None

3.4.4 Taiwan Corporate Governance Implementation as Required by the Taiwan Financial Supervisory Commission

Item			Operation	Difference from corporate governance practice principles for TWSE/GTSM-Listed companies and reasons
	Yes	No	Reasons
I. Has the Company enacted and disclosed Corporate Governance Best-Practice Principles in accordance with “Corporate Governance Best-Practice Principles of Companies Listed on the Taiwan Stock Exchange or Over-the-Counter Securities Exchange”?		No	The Company has not yet enacted “Corporate Governance Best-Practice Principles” for the time being. In accordance with the philosophy of “Corporate Governance Best-Practice Principles of Companies Listed on the Taiwan Stock Exchange or Over-the-Counter Securities Exchange”, nevertheless, the Company has, case-by-case one after another, updated (enacted) “Procedure Rules for Shareholders’ Meeting”, “Regulations Governing Transactions with the Enterprises within the Conglomerate and Related Parties”, “Procedure Rules for Board of Directors Meeting ”, “Operating Procedures for Management over Major Internal Information”, “Guidelines for Employee Behaviors”, “Policies of Responsibility Toward the Society”, “Code of Ethical Conduct for Directors and Managerial Officers” ,“Code of Ethical Conduct for Ethics Implementation“ and such rules and regulations to put into implementation thoroughly the spirit of corporate governance. For hands-on performance by the Company in corporate governance, please refer to the present Annual Report “Performance of Corporate Governance”, page 8 topage 54 for details.	No significant difference compared to corporate governance practice principles
II. Equity structure and shareholder rights (I) How the Company handles shareholder suggestions of shareholders and disputes. (II) Company’s control of the list of its major shareholders and final decision-makers (III) How the Company establishes its risk management mechanism and firewalls involving related enterprises. (IV) Has the Company enacted the internal regulations to ban the personnel inside the Company from buying, selling negotiable securities by taking advantage of the information which has not yet been made public in the market?	Yes Yes Yes Yes		(I) The Company has enacted “Operating Procedures for Management over Major Internal Information” and has, besides, set up spokesman and acting spokesman to take charge of proposals or disputes from shareholders. (II) The Company is in a position to dominate the name lists of the key shareholders and the terminal controllers of the key shareholders and has duly input such information to public into the Market Observation Post System (MOPS) promulgated by the Securities and Futures Bureau, Financial Supervisory Commission, Executive Yuan (III) The Company has duly enacted the “Regulations Governing Transaction with Related Parties”, “Regulations Governing Supervision over Subsidiaries” and has, besides, set up relevant departments with sound mechanisms to evaluate and monitor potential risks with affiliated enterprises. (IV) The Company has duly ancted the “Operating Procedures for Management over Major Internal Information” and further in accordance with the Company’s internal control system, enacted “Operating Procedures to Prevent Inside Trading and for Management over Major Information” to ben inside personnel from buying, selling negotiable securities by taking advantage of the information which has not yet been made public in the market.	No significant difference compared to corporate governance practice principles

Item			Operation	Difference from corporate governance practice principles for TWSE/GTSM-Listed companies and reasons
	Yes	No	Reasons
III. Organization and responsibilities of the Board of Directors (I) Has the board of directors worked out diversified, comprehensive and multifaceted policies aiming at its members and put into implementation thoroughly? (II) Other than the Remuneration Committee and Audit Committee, has the Company taken the initiative to set up a variety of other function committee? (III) Has the Company set up regulations and methods to evaluate the performance by the board of directors and conduct evaluation of performance on an annual basis? (IV) Regular assessment on independence of CPAs	Yes Yes	No No	(I) The board of directors is composed of 8 members with a professional background and who are technically experienced, two independent directors, and 3 supervisors (one female). They are well-balance and also have multiple part related expertise to raise stockholders’ interest. The Company’s independent directors and supervisors are well known for their hands-on experiences accumulated in the profssion and individual expertises to firmly safeguard the interests of all the Company’s shareholders. Meanwhile, the board of directors has taken into independent and objective account the key issues which would affect the successful development by the Company. (II) Exactly as resolved in the board of directors on August 25, 2011, the Company already set up the Remuneration Committee where the Company’s independent directors and 2 experts hired from outside the Company serve as the Committee members. For more details regarding the business performance of the Company’s Remuneration Committee, please refer to page 34 of this Annual Report. The Company, nevertheless, has not yet set up committee of other functions to date. (III) The Company has not yet conducted self-evaluation of the Company’s board of directors, functional committees and individual directors. (IV) The Company’s board of directors evaluates the Certified Public Accountant’s independence on a regular basis, say, on an annual basis, and retains creditworthy Certified Public Accountant(s) to certify financial statements. The Certified Public Accountant(s) so retained has (have) been free of any interested party involvement and has(have)independent as the strict requirements.	No significant difference compared to corporate governance practice principles
IV. Has the Company set up sound channels to communicate interested parties, or set up special zone for interested parties through the Company’s website to appropriately respond to interested parties regarding the key responsibility toward the societyissues?	Yes		Innolux offers a variety of features including investor services, supplier area, sales services, product inquiries, media communications, anti-corruption reporting and so forth in order to communicate and respond to shareholders‘ needs and expectations by strengthening communications with stakeholders and thereby meeting their expectations.	No significant difference compared to corporate governance practice principles
V. Did the company engage a professional agency to handle shareholder services for Innolux?	Yes		Innolux has appointed a professional agency to handle shareholder related services for the company.	No significant difference compared to corporate governancepracticeprinciples

Item			Operation	Operation	Difference from corporate governance practice principles for TWSE/GTSM-Listed companies and reasons
	Yes	No		Reasons
VI. Disclosure of information (I) Establishment of a Website where information on financial operations and corporate governance is disclosed. (II) Use of other methods for information disclosure (such as setting an English website, appointing personnel in charge of collecting and disclosing information, implementing a spokesman system and publication of shareholder meeting records on the Company’s website).	Yes Yes		(I) Through the company’s website (http:// www.innolux.com ) with Chinese and English versions, we provide financial, business, and corporate governance information and keep updating. (II) The company’s English website announces information and our Public Relations, Investor relations department, Stock department and the related department responsible for collecting and disclosing the related information also set up positions for its spokesperson in accordance with the regulations and the company provides Investor Conference report on the official website.		No significant difference compared to corporate governance practice principles
VII. Other important information for better understanding the Company’s corporate governance operation (including but not limited to the interests and rights of employees, care for employees, relations with investors, relations with suppliers, relations with materially related parties, further study of directors and supervisors, execution of risk management policy and risk measuring standards, execution of customer policies and liability insurance for the Company’s directors and supervisors)	Yes		(I) Employee's Rights: Please refer to page 80 “5.5 Labor Relations” of the annual report (II) Employee Care The company values employees’ mental and physical balance and provides hardware which can release stresses, such as “Le Qun Guan” and “Huo Li Guan”. Innolux also holds different kinds of activities to provide physical and mental relaxation for our employees. We encourage our employees to join clubs 40 clubs in Taiwan to create an active and positive working environment by supporting those clubs with resources. Innolux cares for our employees from healthcare to daily lives. We not only introduce all-you-can eat organic fruits and vegetables and weekly non-meat-day to the group meals, we also conduct an expanded diet plan. We had been awarded as “Workplace Loss Diet Award” from Bureau of Health Promotion in 2015. We care about the health of mothers in the workplace and provide a friendly working environment such as lactation room，mothers’ classroom, new parent lessons, and support for lactation during work, maternity leave, birth benefits, and parental subsidies. We also established mothers’ healthcare protection measures and rules. (III) Maintaining good relations and interactions with investors, suppliers, and interested parties. According to different interested groups, Innolux has established multiple and unobstructed communication channels, such as investors’ service on company’s webpage,suppliers zone,business service andproduct consulting,media		No significant difference compared to corporate governance practice principles

Item			Operation	Difference from corporate governance practice principles for TWSE/GTSM-Listed companies and reasons
	Yes	No	Reasons
			communications, so that we can keep communicating and getting feedback from those interests groups’ needs and expectations. 1. Investors: the company treats our shareholders with the principle of fairness and openness. We call the shareholders meetings according to the Company Act and other related laws every year, encourage stockholders to actively participate in the stockholders meeting with proposals and questions. 2. Customers: we have salespeople and customer service units to reply to customers’ demands effectively, establish a CRM system, monitor the progress of handling issues, field audits and questionnaire feedback, and customers’ satisfaction survey. 3. Employees: we set up a direct employee line, mobilization meeting, Innolux mailbox, interactive factory meeting (Labor-Management Meeting, the Employee Welfare Committee, management interview, Industrial Safety), employee questionnaires (group meals, activities, training), and opinion collection mail box. 4. Suppliers: setting up an interactive platform for supplier purchasing and procurement management, and a buyer and procurement management department to host ad quality meetings monthly / quoterly with other departments and suppliers 5. Communities: Having departments or individuals to be responsible for the communications with community residents, visit the district officers and residents from time to time, caring, and being kind to the neighbors. 6. Governments: actively participate the regulation public hearing and seminar that host by the governing departments, maintain good interactions with the governments, and follow the government’s environmental protecting actions. 7. Non-governmental organizations: participating the professional seminars host by NGOs, listening to the suggestions from outsiders, keep tracking with the industrial changes, become the reference of CSR policy planning, organizing projects that supporting weakness and promoting environmental protection. (IV) Directors and Supervisors Profession Enhancement Status Innolux’s Directors and Supervisors have both professional background and practical experience. The company arranges further studies for Directors and Supervisors every year. For the latest further study updates please refer to page 43 of this annual report. (V) Risk Management Innolux has established a risk management system to regularlymonitor the

Item			Operation	Difference from corporate governance practice principles for TWSE/GTSM-Listed companies and reasons
	Yes	No	Reasons
			related financial risks, regulation risks, climate change risks, water resource risks, supplier chain risks, information safety risks, and the environment, safety, and health risks. The factories in Taiwan and mainland China have reduced the risks of business suspension and improved the survival capability to face hazard incidents by implementing business continuity plans, including the subjects of earthquake, fire, information interrupts, and infectious disease in 2015. (VI) The implementation of customer policy 1. The customer satisfaction service The company practicing the quality policy and views customer service as the core value of this company. We continuously implement improvement plans for our internal process, such as the quality concepts of product design, manufacturing, information systems, and logistic cooperation, to provide the most competitive service in order to reach the highest customer satisfaction. 2. Customer satisfaction The company collect the KPI of services via VOC sysytem and we monitor, analyze, and improve the feedback from customers. We also keep interacting with customers pro-actively. (VII) The company implements and maintains D&O insurance for its Directors, Supervisors, and key officers by the company Innolux maintains D&O insurance for its Directors,Supervisors,and keyofficers
VIII. Are there corporate governance evaluation reports done by the Company itself or outsourced to professional agencies? If yes, please state the evaluation result, major shortcomings or recommendations, and improvement:	Yes		The company has followed TWSE’s policy to review the corporate governance implementation status item by item, the result disclosured on April 11th.	No significant difference compared to corporate governance practice principles

3.4.5 Composition, Responsibilities and Operations of the Compensation Committee

A. The Compensation Committee Members’ Professional Qualifications and Independent Analysis

Criteria Name (Note 1)	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years of Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years of Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years of Work Experience		Independence Criteria(Note 2)	Independence Criteria(Note 2)	Independence Criteria(Note 2)	Independence Criteria(Note 2)	Independence Criteria(Note 2)	Independence Criteria(Note 2)		Number of Other Public Companies in Which the Individual is Concurrently Serving for Compensation Committee(Note3)
	An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8
Independent Director Chi-Chia Hsieh	－	－	v	v	v	v	v	v	v	v	v	1
External Expert Chi-Lin Wei	－	－	v	v	v	v	v	v	v	v	v	5
External Expert Guan-Jun Wang	v	－	－	v	v	v	v	v	v	v	v	1

Note 1: Director; Independent Director or others.

Note 2: If Compensation Committee Members, during the two years before being elected or during the term of office, meet any of the following situations, please tick the appropriate corresponding boxes:
Not an employee of the company or any of its affiliates;
Not a director or supervisor of the company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary in which the company holds, directly or indirectly, more than 50 percent of the voting shares;
Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under someone else’s name(s), in an aggregate amount of one percent or more of the total number of issued shares of the company or ranking as one of its top ten shareholders;
Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship of any of the above persons in the preceding three subparagraphs;
Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company or ranking as one of its top five shareholders;
Not a director, supervisor, officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the company;
Not a professional individual or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services, or consultation to the company or to any affiliate of the company, or a spouse thereof;
Has not been a person under any conditions defined in Article 30 of the Company Law.
Note 3: If the identity of the member is a board member, please state if that meets Article 6 Section 5 of Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.

B. Compensation Committee Meeting Status

Mr. Chi-Chia Hsieh, Chairman of the Compensation Committee, convened 3 regular meetings in 2015. The Committee members’ attendance status is as follows:

Title	Name	Attendance in Person (B)	By Proxy	Attendance rate (%) [B/A]	Remarks
Chair	Chi-Chia Hsieh	3	－	100	-
Member	Chi-Lin Wei	3	－	100	-
Member	Guan-Jun Wang	3	－	100	-

Annotation:

There was no recommendation of the Compensation Committee which was not adopted or was modified by the Board of Directors in 2015.
There were no written or otherwise recorded resolutions on which a member of the Compensation Committee had a dissenting opinion or qualified opinion.

3.4.6 Social Contributions

3.4.6 Social Contributions
Item	Operation			Difference from company social responsibility practice principles for TWSE/GTSM-Listed companies and reasons
	Yes	No	Reasons
I. Implementation of Corporate Governance (I) Corporate social responsibility policy and performance evaluation (II) Has the company been routinely organizing CSR trainings? (III) Has the company established a designated unit in charge of promoting CSR that consists of members of senior management authorized by the board and report to the board regarding its operation? (IV) Has the company established reasonable salary and renumeration policies that incorporate employee performance evaluation and CSR policies to create an definitive and effective system of merits/demerits?	Yes Yes	No No	(I) Innolux has established relevant CSR policies although CSR policies has not yet to approve by Board of Director meeting directly, but still enacted relevant policies and guidelines have also been made available on the company’s website as a declaration of Innolux’s committment and obligation to fulfilling its corporate social responsibilities. (II) In the orientation training for new employees, Innolux Code of Conduct training has been incorporated as a component. In addition, the company has also incorporated concepts of CSR by emphasizing values such as labor rights in the trainings for assembly line foreman and supervisors. (III) Innolux has established a designated unit responsible for the promotion and planning of CSR in addition to the formulation of approaches and objectives for sustainable development. Innolux also convenes CSR committee meetings on a quarterly basis, although the company has not yet to report and CSR issue to Board of Director meeting directly but the President serving as the management representative. The meeting is attended by senior supervisors from various business divisions, HR, EHS department, green product management department and so forth to discuss the performance of CSR promotion and rate of object accomplishsment in an effort to fulfill the company’s corproate social responsibilities. (IV) Innolux takes the issue of employee benefit and welfare very seriously and has taken steps to ensure that factors such as gender would result in different wage/benefit for employees. By taking various factors (such as employees‘ academic backgrounds, professional experience and surveys of reasonable market salaries) into consideration, Innolux is able to offer competitive salaries. Through the companys’ “Corporate Conduct and Ethics” ,“employee Code of Conduct“,”Employee Reward/Punishment Procedure“with CSRprinciple tally.	Compared to the CSR guidelines and practices adopted by other OTC/listed companies, Innolux’s CSR policies have no distinctive differences.
II. Sustainable Environment Development (I) Commitment to improving resource utilization and the use of renewable materials	Yes		(I) Innolux has not only reduced its discharge of contaminants from the source but also reduced thequantityofpollutants in its	Compared to the CSR guidelines and practices adopted by other OTC/listed companies,Innolux’s

Item	Operation	Operation	Operation	Difference from company social responsibility practice principles for TWSE/GTSM-Listed companies and reasons
	Yes	No	Reasons
(II) Environmental management system designed for industry characteristics. (III) Company strategy for climate change, energy conservation, and greenhouse gas reduction to reflect the affects on operating activities.	Yes Yes		waste water discharge to increase its recycling rate. (II) The company has been actively promoting relevant EHS management systems such as the ISO 14001, OHSAS18001 and so forth in order to facilitate a positive cycle of gradual improvement for green sustainability and safety culture. (III) Innolux has completed its GHG inventory and 3rd party audit as prescribed by ISO 14064-1. Innolux has not only managed its GHG emission information through a GHG Information Platform but also actively participated in the international Carbon Disclosure Project (CDP). Innolux scored 100 points for disclosure in 2015 and was the top-ranking company in the panel industry. On top of that, Innolux was also selected as Asian Region’s for carbon disclosure in the Carbon Disclosure LeadershipIndex(CDLI).	CSR policies have no distinctive differences.
III. Maintaining social services (I) Has the company established relevant management policies and procedures for social services in accordance with pertinent regulations and international conventions on human rights? (II) Has the company established systems/channels for employee complaints and handle the complaints in an appropriate manner? (III) Does the company offer a safe and healthy working environment for its employees and conduct safety and health education for employees on a regular basis? (IV) Has the company established a system for routine communication with its employees and to inform employees regarding significant changes to the company’s operation in a reasonable manner?	Yes Yes Yes Yes		(I) Innolux makes an effort to adhere to pertinent regulations prescribed in the Labor Standards Act. In addition, specific regulations on labor rights have also been established in accordance with the Electronic Industry Code of Conduct,which states that employees shall be free from harrassments or discriminations for reasons including (but not limited to) race. (II) Innolux has established a number of channels for employees filing complaints, including „Communication Hotline“, „Employee Communication Email“ and „Suggestion Box“ that have been setup at various facilities for employees to voice their opinions/thoughts with/without stating their names. (III) The company has also established its EHS Division to take charge of operations including loss and risk aversion,EHS management and employee education and obtained OHSAS18001 from 2005. (IV) By establishing comprehensive channels of communication and convening labor-management meetings and employee welfare commitee meetings on a quarterly basis, representatives of management (consisting of senior-ranking supervisors) and labor representatives (elected by employees) are able to engage in direct, bi-lateral communications. With regards to the notice of labor contract termination, relevant notification procedures are fully compliant with pertinent regulations.	Compared to the CSR guidelines and practices adopted by other OTC/listed companies, Innolux’s CSR policies have no distinctive differences.

Item	Operation	Operation	Operation	Difference from company social responsibility practice principles for TWSE/GTSM-Listed companies and reasons
	Yes	No	Reasons
(V) Has the company established effective career competence development/training plan for its employees? (VI) Has the company established relevant policies and complaint procedures for operations such as R&D, purchasing, production, operation and services to safeguard consumers‘rights? (VII) Has the company adhered to pertinent regulations and international standards for the marketing and labeling of its products and services? (VIII) Does the company evaluate suppliers‘ past records of environmental/social impacts before forming partnerships with them? (IX) Does the company’s contract with its key suppliers include specific clauses that entail immediate termination or rescission of the contract should the supplier be found to violate the company’s CSR policies or cause significant impact on the environment/society?	Yes Yes Yes Yes Yes		(V) Guided by the philosophy that „talents are the foundation of the company’s development“, Innolux has established the „Employee Career Development Roadmap“and the company also offers a list of qualifications that correspond to specific positions, legal certificates and other diplomas in order to boost employees‘ vocational tenacity, competence and competitiveness. (VI) Innolux has established operating principles that are customer-oriented and through means of telephone calls, email exchanges and face-to-face meetings, we are able to have solid grasp of customers‘needs so as to formulate improvement strategies to respond to customers in a timely manner. (VII) Product safety has always been the most important consideration for consumers. And as such, safe product design and a series of safety specification accreditations have been incorporated at the early stage of proeduct design to ensure the safety of consumers. Innolux has taken the initiative to apply for international standard accreditation labels for its LCD panels in order to help consumers identify safe products at a glance. (VIII) With regards to new suppliers, Innolux will refer to relevant guidelines on social/economic/environmental and supply chain assessment along with adequate risk evaluation to screen candidates before choosing official suppliers. Suppliers with actual/potential flaws in operation that have failed to show effective improvement despite notification and guidance from Innolux would be included in the list of forbidden/restricted suppliers. (IX) Innolux reserves the right to halt payment/immediately terminate or rescind any contract of transaction/order and revoke the undersigned vendor or its affiliated businesses‘ qualification as an authorized supplier. Innolux would also be entitled to file for compensation for any losses incurred on the company’s part.
IV. Enhanced information disclosure (I) Has the company disclosed relevant and reliable information relating to corporate social responsibilities on its website and/or MOPS?	Yes		Innolux has established a „Corporate Social Responsibilities“ section on its official website.	Compared to the CSR guidelines and practices adopted by other OTC/listed companies, Innolux’s CSR policies have no distinctive differences.

	Item	Operation	Operation	Operation
		Yes	No	Reasons
V.	If the company has established its CSR guideline in accordance with the „Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies“, please describe the differences in the actual operation and principles established: The Company has not yet enacted “Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies ” for the time being,but has established „Innolux Corporate Code of Conduct“ as a working guideline that prescribes the philosophies and behaviors that are expected of all Innolux employees. The code of conduct serves as a reminder that in the face of different challenges from compeititons, no one shall engage in amoral or illegal business activities for the sake of company profit or growth and that everyone at Innolux must adopt higher standards of self-expectation in order to create greater values to contribute to the society. Using tools such as PC startup screen, posters and relevant promotional platforms, Innolux has disseminated the contents of the code of conduct and incorporated CSR and employee code of conduct courses in the new employee orientations.
VI. Other important information that help to shed light on the company’s status of CSR fulfillment: Innolux publishes its CSR Report annually. The report features relevant chapters and contents on Innolux’s CSR commitment, corproate governance and development, initiatives such as „To Earth, with L.O.V.E“ and „To People, with S.M.I.L.E“ to offer comprehensive disclosure of relevant strategies, directions, measures and performance indicators for issues that were of concern to shareholders. As for Innolux’s CSR performance, in addition to the publication of the report,relevant information is also made available on the company’s website.
VII. A clear statement shall be made if the products or corporate social responsibility report of the Company pass the inspection of the relevant certification agencies: Innolux’s CSR Report for 2015 has been verified by 3rd party institute SGS Taiwan for full compliance with the AA1000AS (AccountAbility 1000 Assurance Standard) in Category II high assurance level and GRI G4’s requirement for comprehensive disclosure.

VI. Other important information that help to shed light on the company’s status of CSR fulfillment: Innolux publishes its CSR Report annually. The report features relevant chapters and contents on Innolux’s CSR commitment, corproate governance and development, initiatives such as „To Earth, with L.O.V.E“ and „To People, with S.M.I.L.E“ to offer comprehensive disclosure of relevant strategies, directions, measures and performance indicators for issues that were of concern to shareholders. As for Innolux’s CSR performance, in addition to the publication of the report, relevant information is also made available on the company’s website.
VII.A clear statement shall be made if the products or corporate social responsibility report of the Company pass the inspection of the relevant certification agencies: Innolux’s CSR Report for 2015 has been verified by 3rd party institute SGS Taiwan for full compliance with the AA1000AS (AccountAbility 1000 Assurance Standard) in Category II high assurance level and GRI G4’s requirement for comprehensive disclosure.

3.4.7 Taiwan Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory Commission

	Operation	Operation	Operation	Difference from corporate integrity practice principles for TWSE/GTSM-Listed companies and reasons
	Yes	No	Reasons
I. Set up operational integrity policy and programs (I) The company clarifies the integrity operation policy in its regulations and external documents and the commitment of the board of directors and managers to active implementation. (II) Has the company established solutions for the prevention of dishonest behaviors and specify relevant operating procedures, guidelines, disciplinary actions for violations and system of complaint and carried out relevant operations accordingly? (III) Has the company taken preventive measures for operations specified in item 2, Article 7 of the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies and other business activities of higher risks of dishonest behaviors?	Yes Yes Yes		(I) Innolux has established Corporate Conduct and Ethics and has clearly laid out the management’s philosophy of honest management also in the „CSR Management Handbook“ and „Code of Moral Conduct“. These documentations strictly require all employees to adhere to the company’s policies on honesty. Additionally, Innolux’s honest management policy and implementations by the board and management are duly disclosed in both the annual report and CSR report. (II) With regards to the prevention of dishonest behavior, Innolux has established clearly defined regulations for appropriate behaviors in the”Corporate Conduct and Ethics” “Corporate Integrity Practice Principles of Innolux” „Code of Moral Conduct“, which states that any act of violation shall be subjected to corresponding punitive actions in accordance with pertinent regulations and work regulations. In addition, Innolux has also established relevant systems for loding complaints as a means for offending employees to seek aid. (III) Should any Innolux employee be found to take part in any act of dishonesty, the offending employee shall receive corresponding disciplinary actions. Should said employee be found to be involved in incidents of corruption, receiving bribery/commission, theft, misappropriate/embezzle company property to result in loss of property/significant damage to the company’s reputation would face dismissal. Should any supplier be found to violate the commitment to honesty and integrity (including the offering/acceptance of bribery, offering illegal political contributions and so forth), Innolux would revoke the supplier’s status as a qualified supplier and cease all collaboration with said supplier.	Conformity with the Integrity Operation Practice Principles for TWSE/GTSM-Listed Companies
II. Putoperation integrity into practice (I) Does the company evaluate past records of businesses that deal with the company and incorporate terms of honest behavior in relevant contracts?	Yes		(I) The company request for global suppliers has a cooperation relationship to follow the Supplier CSR Code of Conduct Operating Standards and sign the Supplier's UndertakingAbout the Code of	Conformity with the Integrity Operation Practice Principles for TWSE/GTSM-Listed Companies

Item	Operation	Operation	Operation	Difference from corporate integrity practice principles for TWSE/GTSM-Listed companies and reasons
	Yes	No	Reasons
(II) Has the company established a designated unit or personnel in charge of promoting corporate ethical management and reporting the status of implementation to the board on a routine basis? (III) Has the company established relevant policies to prevent conflicts of interests and offered suitable channels of communication? Has the company conducted relevant operations according to said policies? (IV) Has the company established effective systems of accounting and internal control in an effort to achieve honest management? Has the company designated internal audit unit or appointed qualified accountants to carry out routine audits? (V) Does the company conduct internal/external training on honest management routinely?	Yes Yes Yes	No	Conduct Integrity, the company request suppliers to guarantee that they will refrain from bribes or offering to bribe Innolux's employees. Suppliers shall also not offer bribes or benefits to political parties or candidates. (II) The company has not yet established a designated unit or personnel in charge of promoting corporate ethical management for the time being. In accordance with the philosophy of “Corporate Integrity Practice Principles of Innolux”, nevertheless, the Company has established an Integrity Committee, which is directly report to Chairman to investigation any contrary of integrity matters. (III) The company clearly makes rules about preventing conflicts of interest in the Code of Conduct. If there is any violation, the company also provides a proper way to report, including a Mailbox for Anti-Corruption Reporting ([email protected]) and staff complaint mailboxes. (IV) Based on the annual audit plan approved by the Board of Directors, perform the internal audit's fieldwork auditing or review depending on the risk. Report of the audit results on a regular basis to ensure that the board and managers are aware of the level of goal achievement in the fields of operational results and efficiency, financial reports are reliable, and the company complies with the relevant decrees. (V) We have made all of our various policies available through easy access on our intranet and require all employees to be trained on corporate social responsibility, also promoted via internal computer boot screens, newsletters, and posters to enhance the staff’s understanding of these policies. We also require our stakeholders, such as our suppliers and vendors, to accept and abide by the integrity policy.
III. Implementation Status of the Company establishes the channels for reporting any ethical irregularities (I) Has the company established a concrete whistleblowing and reward system? Has the company established a convenient reporting channel for whistleblowers and assigned appropriate personnel to handle thepersonnel being	Yes		(I) Innolux has implemented a Mailbox for Anti-Corruption Reporting and staff complaint mailboxes to encourage employees and related people to report evidence. For anti-integrity and anti-corruption incidents, investigators will conduct confidential factual investigations. The investigation reports	Conformity with the Integrity Operation Practice Principles for TWSE/GTSM-Listed Companies

Item	Operation	Operation	Operation	Difference from corporate integrity practice principles for TWSE/GTSM-Listed companies and reasons
	Yes	No	Reasons
reported? (II) Has the company established standard operating procedures for whistleblowing and relevent confidentiality system? (III) Has the company adopted any measures to safeguard employees from being subjected to inappropriate treatment due to accusations of misconduct?	Yes Yes		are submitted to the Integrity Commission for resolution and penalties are imposed internally or the incident is prosecuted. (II) Innolux Corporation ratified the “Operating Standards for the Investigation and Management of Corruption Cases” as the investigation standard for incidents and related confidentiality systems. (III) The company designed a confidentiality system to protect the informants and listed it in the Code of Conduct; the company will protect employees from any revenge due to reporting an incident.
IV. Enhanced information disclosure The company discloses the code of operational integrity and implements the results in its website and the Taiwan Stock Exchange's Market Observation Post System.	Yes		The company discloses the Code of Conduct on the Company’s official website and Taiwan Stock Exchange's Market Observation Post System. It also discloses related information about operational integrity and implements results in the official website and corporate social responsibility report.	Conformity with the Integrity Operation Practice Principles for TWSE/GTSM-Listed Companies
V. If the company makes its own integrity operation according to the Integrity Operation Best Practice Principles for TWSE/GTSM-Listed Companies, please state the differences. The Company has enacted “Corporate Integrity Practice Principles of Innolux” approved by Board of director meetingand disclose on the official website and M.O.P.S.
Other important information for better understanding of the integrity operation (such as the company’s review and revise the regulations on integrity operation): In order to ensure full compliance to the company’s policies for honest management, all newcomers are required to sign a „Honesty, Integrity & IP Protection Agreement“ and suppliers over the world that collaborate with Innolux to sign the „Vendor Commitment“ in the hopes of helping all employees and collaborating partners of Innolux to understand and respect the company’s moral standards. In addition, the company has also been disseminating relevant concepts via workstation startup screens along with routine publication of legal-affairs & IP newsletters containing relevant legal issues so that „Honesty and Integrity“ would become the core of Innolux’s fundamental corporate culture. In addition, Innolux conducts business ethics regulation risk assessment on a yearly basis to monitor the company’s management of business ethics through internal control whilst verifyingand updating pertinent regulations on business ethics.
A clear statement shall be made if the products or corporate social responsibility report of the Company passes the inspection of relevant certification agencies: The Company has submitted its annual report on corporate social responsibilities TTA for inspection.

A clear statement shall be made if the products or corporate social responsibility report of the Company passes the inspection of relevant certification agencies: The Company has submitted its annual report on corporate social responsibilities TTA for inspection.

3.4.8 Corporate Governance Guidelines and Regulations

Please refer to the Company’s website at www. innolux.com

3.4.9 Other Important Information Regarding Corporate Governance

Standard operating procedures for the handling of vital internal information: Innolux has established its „Vital Internal Information Handling Procedure“ that clearly regulates the handling of important internal information and system of disclosure as a working reference for board members, supervisors, managers and employees to follow. Relevant procedures have been submitted to the board for approal and internal announcements have been made in the company along with relevant trainings for all employees.
Status of Directors and Supervisors' participation in corporate governance related courses and trainings as of the deadline of annual report publication April 30, 2016

Title	Name	Date	SponsoringOrganization	Course	Traininghours
Chairman	Hsing-Chien Tuan	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Director	Hyield venture Capital Co., Ltd. Jeng-Wu Tai	May 28, 2015	Taiwan Corporate Governance Association	Corporate Governance and Securities regulations	3
		Jun 15, 2015	Securities & Futures Institute	Determination of the business which is contrary to normal of insiders and apply the Business Judgment Rule	3
		Jun 30, 2015	Securities & Futures Institute	How to use financial information to do business decisions	3
Director	Jialian Investment Co., Ltd. Jyh-Chau Wang	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Independent Director	Chi-Chia Hsieh	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Independent Director	Stanley Yuk Lun Yim	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Supervisor	Ren-Guang Lin	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Supervisor	Yi-Fang Chen	Feb 05, 2015	Securities & Futures Institute	Risk management system as part of the companyoperation	3
		Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Apr 08, 2015	Securities & Futures Institute	Employee remuneration policy and tool	3

Title	Name	Date	Sponsoring Organization	Course	Traininghours
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Supervisor	I-Chen investment Ltd. Te-Tsai Huang	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3

Status of managers‘ participation in corporate governance related courses and trainings as of the deadline of annual report publication;

				April 30,2016	April 30,2016
Title	Name	Date	SponsoringOrganization	Course	Traininghours
Chairman	Hsing-Chien Tuan	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Apr 27, 2015	Innolux Corporation	Compliance with Anti-Trust Law	1
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
President	Jyh-Chau Wang	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Apr 27, 2015	Innolux Corporation	Compliance with Anti-Trust Law	1
		Aug 03, 2015	Innolux Corporation	Trade secret act and policy of Anti- corruption	0.5
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Vice President	Wen-Jyh Sah	Apr 27, 2015	Innolux Corporation	Compliance with Anti-Trust Law	1
		Aug 03, 2015	Innolux Corporation	Compliance with Anti-Trust Law	0.5
		Aug 03, 2015	Innolux Corporation	Trade secret act and policy of Anti- corruption	0.5
Vice President	Chin-Lung Ting	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Apr 27, 2015	Innolux Corporation	Compliance with Anti-Trust Law	1
		Aug 03, 2015	Innolux Corporation	Compliance with Anti-Trust Law	0.5
		Aug 03, 2015	Innolux Corporation	Trade secret act and policy of Anti- corruption	0.5
Vice President	Yao-Tong Chen	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Apr 27, 2015	Innolux Corporation	Compliance with Anti-Trust Law	1
		Aug 03, 2015	Innolux Corporation	Compliance with Anti-Trust Law	0.5
		Aug 03, 2015	Innolux Corporation	Trade secret act and policy of Anti- corruption	0.5
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Vice President	Chih-Hung Hsiao	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Apr 27, 2015	Innolux Corporation	Compliance with Anti-Trust Law	1
		Aug 03, 2015	Innolux Corporation	Compliance with Anti-Trust Law	0.5
		Aug 03, 2015	Innolux Corporation	Trade secret act and policy of Anti- corruption	0.5
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Vice President	Hung-Wen Yang	Apr 27, 2015	Innolux Corporation	Compliance with Anti-Trust Law	1
		Aug 03, 2015	Innolux Corporation	Compliance with Anti-Trust Law	0.5
		Aug 03, 2015	Innolux Corporation	Trade secret act and policy of Anti- corruption	0.5

Title	Name	Date	SponsoringOrganization	Course	Traininghours
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Vice President	Chih-Ming Chen	Apr 27, 2015	Innolux Corporation	Compliance with Anti-Trust Law	1
		Aug 03, 2015	Innolux Corporation	Compliance with Anti-Trust Law	0.5
		Aug 03, 2015	Innolux Corporation	Trade secret act and policy of Anti- corruption	0.5
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Vice President	Chu-Hsiang Yang	Apr 27, 2015	Innolux Corporation	Compliance with Anti-Trust Law	1
		Aug 03, 2015	Innolux Corporation	Compliance with Anti-Trust Law	0.5
		Aug 03, 2015	Innolux Corporation	Trade secret act and policy of Anti- corruption	0.5
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Manager	Chien-Lang Lo	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Aug 03, 2015	Innolux Corporation	Compliance with Anti-Trust Law	0.5
		Aug 03, 2015	Innolux Corporation	Trade secret act and policy of Anti- corruption	0.5
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3
Manager	Chin-Yuan Chang	Mar 20, 2015	Taiwan Corporate Governance Association	Audit Committee Practice Discussion	3
		Aug 03, 2015	Innolux Corporation	Compliance with Anti-Trust Law	0.5
		Aug 03, 2015	Innolux Corporation	Trade secret act and policy of Anti- corruption	0.5
		Sept 01, 2015	Securities & Futures Institute	The regulations of the company insiders’ market manipulation andpractice	3

Certification Details of Employees Whose Jobs are Related to the Release of the Company’s Financial Information

Information
Certification	Number of Employees
	Finance&Accounting	Internal Audit
Certified Internal Auditor(CIA)	-	2
Chartered Financial Analyst(CFA)	1	-
Financial Risk Manager(FRM)	1	-
Senior Securities Specialist	6	-
Securities Specialist	5	-
Internal controller test of Securities & Futures Institute	1	-

3.4.10 Internal Control System

1. Statement of internal control system

Innolux Corporation Statement of Internal Controls

Date: Feb 02, 2016

According to the examination on internal control systems done by the Company itself in 2015, we hereby state as follows:

I. The Company’s board of directors and management team understand their responsibilities of developing, implementing and maintaining the Company’s internal control system, and such a system has been established. The purpose of establishing the internal control system is to reasonably assure the following objectives: (a) The effectiveness and efficiency of business operation (including earnings, operation performance, and the safeguard of company assets); (b) The reliability of the financial and related reports; and (c) The compliance of the relevant laws/regulations and company policies;
II. Due to the innate limitations in designing a faultless internal control system, this system can only assure that the reasonableness of the above three objectives has been fairly achieved. In addition, the effectiveness of the internal control system may change over time due to the change of the business environment or situation. Since the Company’s internal control system has included a self-examination capability, the Company will make immediate corrections when errors are detected.
III. The evaluation of effectiveness of the internal control system design and implementation is made in accordance with the “Guidelines for the Establishment of Internal Control Systems by Public Companies” (the Guidelines). The Guidelines are made to examine the following five factors during the management and control process: (1) control environment, (2) risk assessment and response, (3) control activities, (4) information and communication, and (5) supervision. Each factor also includes several items. Details of each factor can be found in the Guidelines.
IV. The Company has examined the effectiveness of each respected area in the internal control system based on the Guidelines.
V. The examination results indicated that the Company’s internal control system (including subsidiary governance) dated December 31, 2015 had effectively assured that the following objectives had been reasonably achieved during the assessing period: (a) The degree of effectiveness and efficiency of business operation; (b) The reliability of the financial and related reports; (c) The compliance of the relevant laws/regulations and company policies
VI. This Statement is a significant part of the Company’s annual report and prospectus available to the general public. If it contains false information or omits any material content, the Company is in violation of Article 20, Article 32, Article 171, and Article 174 set forth in the Taiwan’s Securities and Exchange Act.
VII. The Company hereby declares that this statement had been approved by the Board of Directors on Feb 02, 2016. Among the 5 attending Directors, no one raised any objection to the contents of this statement.

Innolux Corporation Chairman: Hsing-Chien Tuan General Manager: Hsing-Chien Tuan

Hire an accountant to audit the Company’s internal control system and disclose the audit report made by accountants: None.

3.4.11 Lawful punishment inflicted on the Company, and/or disciplinary action taken by the Company against its employees for violating internal regulations in the latest year and up to the printing date of this Annual Report); important errors committed; and correction and improvement procedures: None.

3.4.12 Major Resolutions of Shareholders’ Meeting and Board Meetings

Important resolutions and implementation made by the Shareholders’ Meeting and Board of Directors by the end of 2015
(1) Adoption of the 2014 Business Report and Financial Statements Status of execution: Resolution carried
- Implementation Status: Fully implemented in accordance with the resolutions
(2) Adoption of the Proposal for Distribution of 2014 Profits Status of execution: Resolution carried
- Implementation Status: Fully implemented in accordance with the resolutions
(3) Carried the resolution to process domestic capital increase by cash to issue common shares, to issue new shares as a result of cash capital increase for sponsoring issuance of GDR. Status of execution:
- Resolution carried and the Board has been authorized to conduct fund raising but it is no any shares issued in the latest year and up to the printing date of this Annual Report.
(4) Resolution to revise Innolux’s charter carried. Status of execution: Resolution carried and implemented in accordance with the revised procedure
- Implementation Status: Fully implemented in accordance with the resolutions
(5) Resolution to revise Innolux’s Rules of Shareholders' Meeting. Status of execution: Resolution carried and.
- Implementation Status: Fully implemented in accordance with the resolutions
(6) Resolution to revise Innolux’s Election Rules of Directors and Supervisors of the company. Status of execution: Resolution carried

Implementation Status: Fully implemented in accordance with the resolutions

2.Important resolutions by the Board for 2015 prior to the deadline of annual report publication

Item	Major resolutions
February 10,2015	The Company’s individual financial statements and consolidated financial statements, 2014. Proposal to execute agreement with Bank of Taiwan and other financial institution(s) for NT$6.85 billion syndicated loans. Revocation of the Company’s capital increase through cash injection to issue common shares and issue global depositary receipts (GDR). Proposal for syndicated loans for the capital expenditures for the Company in 2015. In line with the Company’s investment deployments in Taiwan and the Company’s need for land for Tainan Plant regions, it is proposed that the Company should obtain assets required for business operation through auction by court. Proposal to revoke the Company’s restriction upon employees’ right for new shares issued in Quarter IV, 2014. Passed the assessment of the independence and appropriateness. Proposal for execution of short-term loan agreements with financial institutions. Declaration of the Company’s internal control system 2014. Amendment of the Company’s “Full Incentive System along with Appendix for Managerial Officers” and submittal of the “Full Incentives for Managerial Officers 2014”.
March 20,2015	The Company’s Business Plan 2015. Amendment of the Company’s “Procedure Rules for Shareholders’Meeting”. Amendment of the Company’s “Regulations Governing Election of Directors and Supervisors”. Proposal to convene the Company’s regular shareholders meeting 2015. Proposal for execution of short-term loan agreementswith financial institutions.
April 28,2015	Prepare and compile Innolux’s Account of Business for 2014. Draft of Innolux’s Dividend Remittance for 2014.

Item	Major resolutions
	Proposal to process domestic capital increase by cash to issue common shares,to issue new shares as a result of cash capital increase for sponsoring issuance of GDR. Amendment to Articles of Incorporation of the Company. New proposals at the 2015Annual Meeting of Shareholders. Proposal to supplemental public issuance of Private Equity. Proposal to revoke the Company’s repurchase/redemption of restriction upon employees’ rightfor new sharesinQuarter I,2015.
July 30,2015	The company merger with subsidiary Chi Mei EL Corporation. Proposal to revoke the Company’s repurchase/redemption of restriction upon employees’ right for new shares in Quarter II, 2015. Proposal for execution loan agreements with financial institutions. The rule of remuneration to directors and supervisors and the amount of remuneration to directors and supervisors for 2014. The CompensationCommitteeis proposingmanagerbonusforthe yearof 2014.
October 29, 2015	Approve the financial reporting assessment of the company. Approve the motion of the enactment of the“Procedures for halt and resumption applications”. Passed the motion of the enactment of the“Ethical Corporate Management Best Practice Principles”. Passed the motion of the enactment of “Employee Retired Management approach in Taiwan”. Proposal to revoke the Company’s repurchase/redemption of restriction upon employees’ right for new shares in Quarter III, 2015. Passed the Audit plan of 2016. Proposal for execution of loan agreements with financial institutions.
February 2, 2016	Amendment to part of the provisions of the“Articles of Incorporation”. The Company’s individual financial statements and consolidated financial statements, 2015. Passed the assessment of the independence and appropriateness. The Company’s Business Plan 2016. Proposal for syndicated loans for the capital expenditures for the Company in 2016. Amendment to part of the provisions of the“Rules for Shareholders Meeting”&“Election Rules of Directors and Supervisors”. Amendment to part of the provisions of the“Procedures for Acquisition or Disposal of Assets”&“Polices and Procedures for Financial Derivates Transactions” &“Procedures for Loaning of Funds to Others” &“Procedures for Endorsement & Guarantee”. Election the members of the Seventh Term Board of Directors. Proposal to convene the Company’s regular shareholders meeting 2016. Amendment of the Company’s “Full Incentive System along with Appendix for Managerial Officers” and submittal of the “Full Incentives for Managerial Officers 2015”. Proposal to revoke the Company’s repurchase/redemption of restriction upon employees’ right for new shares in Quarter IV, 2015. Declaration of the Company’s internal control system 2015. Proposal for execution of loan agreements with financial institutions.

3.4.13 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors

None

3.4.14 Resignation or Dismissal of Personnel Involved in Preparation of Financial Reports

None

3.5 Information Regarding Innolux’s Independent Auditors

AccountingFirm	Name ofCPA	Name ofCPA	Audit Period	Note
Pricewaterhousecoopers	Wu,Han-Chi	Sheng-ChungHsu	Jan 1,2015 - Dec 31,2015

Unit: NT$ thousands

Items Amount Range	Items Amount Range	Audit Fee	Non-Audit Fee	Total
1	Below 2 million
2	2 million to 4 million
3	4 million to 6 million
4	6 million to 8 million
5	8 million to 10 million
6	Above 10 million	V	V	V

3.5.1 Non-audit fee paid to auditors, the audit firm and its affiliates accounted for more than one-fourth of total audits Fees should disclosure the audit fee and non-audit fee amount and non-audit service content

						Audit Fee: NT$	Audit Fee: NT$	Thousands	Thousands
Accounting Firm	Name of CPA	Audit Fee	Non-Audit Fee					Audit Period	Note
			System Design	Company Registration	Human resource	Others	Subtotal
Pricewaterho usecoopers	Han-Chi Wu Sheng-Chung Hsu	21,714	-	160	-	13,012	13,172	Jan 1, 2015 to Dec 31,2015	-

3.5.2 Replaced the audit firm and the audit fee paid to the new audit firm was less than the payment of the previous year: No.

3.5.3 Audit fee reduced more than 15% year over year, required to disclose the reduced amount, proportion, and reason: No.

3.6 Replacement of independent auditors:N.A.

3.7 The Company’s chairman, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its CPA or at an affiliated enterprise: None

3.8 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders 3.8.1 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders.

Unit: Per share

Title	Name (Note 1)	2014	2014	2015	2015	As of Apr. 30,2016	As of Apr. 30,2016
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Chairman & CEO	Hsing-Chien Tuan	1,414,994	－	(350,000)	(8,000,000)	290,000	－
Institutional Director	Hyield Venture Capital Co., Ltd	12,321,996	－	－	－	－	－
Representative	Jemg-Wu Tai(Note 2)	－	－	－	－	－	－
Institutional Director	Jialian investment Co.,Ltd	745,888	－	－	－	－	－
Representative	Jyh-Chau Wang	121,179	－	86,000	－	320,000	－
Independent Director	StanleyYuk Lun Yim	－	－	－	－	－	－
Independent Director	Chi-Chia Hsieh	－	－	－	－	－	－
Supervisor	Ren-GuangLin	－	－	－	－	－	－
Supervisor	Yi-FangChen	－	－	－	－	－	－
Supervisor	I-Chen investment Ltd.	1,924,427	－	－	－	－	－
Representative	Te-Tsai Huang	14,859	－	－	－	－	－
Vice President	Wen-Jyh Sah	352,000	－	204,000	－	180,000	－
Vice President	Chin-LungTing	165,068	－	(415,000)	－	160,000	－
Vice President	Yao-TongChen	(255,196)	－	(55,000)	－	80,000	－
Vice President	Chih-HungHsiao	872,544	－	(3,730,000)	－	200,000	－
Vice President	Hung-Wen Yang	23,846	－	(340,000)	－	160,000	－
Vice President	Chih-MingChen	(45,807)	－	(293,000)	－	151,000	－
Vice President	Chu-HsiangYang	406,537	－	(166,000)	－	140,000	－
Associate Vice President	Kuo-HsiungKuo	188,005	－	120,000	－	120,000	－
Associate Vice President	Ke-Yi Kao	198,554	－	102,000	－	120,000	－
Associate Vice President	Chung-KuangWei	(64,508)	－	84,000	－	120,000	－
Associate Vice President	Tai-Chi Pan	412,423	－	(230,000)	－	120,000	－
Associate Vice President	Jia-PangPang	308,980	－	120,000	－	120,000	－
Associate Vice President	Zheng-Xia Kuo	229,802	－	34,000	－	160,000	－
Associate Vice President	Tian-Ren Lin	526,353	－	84,000	－	64,000	－
Associate Vice President	Yu Shui Kuo(Note 3)	－	－	80,000	－	80,000	－
Associate Vice President	Mao-ShengHung(Note4)	－	－	－	－	136,000	－
Associate Vice President	Jun-Yi Yu(Note4)	－	－	－	－	96,000	－
Associate Vice President	Qing-Hui Lin(Note4)	－	－	－	－	56,000	－
Manager	Chien-LangLo(Note5)	－	－	(53,000)	－	24,000	－
Manager	Chin-Yuan Chang	32,339	－	(108,000)	－	42,000	－

Note 1: Refers to current managerial officers as of the printing date of the annual report Note 2: Appointed to office on September 11, 2015 thus the change in equity in 2015 was not calculated. Note 3: Appointed to office on December 01, 2014 thus the change in equity in 2014 was not calculated. Note 4: Appointed to office on December 25, 2015 thus the change in equity in 2015 was not calculated. Note 5: Appointed to office on May 07, 2014 thus the change in equity in 2014 was not calculated. Note 6: The increase(decrease) of the shares held includes the inward or outward transfer of the trusted shareholding.

3.8.2 Shares Trading with Related Parties

None

3.8.3 Shares Pledge with Related Parties

None

3.9 Information Disclosing the Relationship between any of the Company’s Top Ten Shareholders

Shareholders
Name	Shareholding		Spouse & Minor		Shareholding by Nominee Arrangement		The relationship between any of the Company’s Top Ten Share holders		Remarks %
	Shares	%	Shares	%	Shares	%	Name	Relation
Chimei Corporation	570,929,561	5.74%	－	－	－	－	N.A.	N.A.
Representative: Hsu Chun-hua	－	－	－	－	－	－	N.A.	N.A.
Cathay Life Insurance Co.,Ltd.	244,300,330	2.46%	－	－	－	－	N.A.	N.A.
Representative: Tsai Hong-Tu	－	－	－	－	－	－	N.A.	N.A.
Terry Gou	243,964,977	2.45%	－	－	－	－	Hon Hai Precision Ind. Co.,Ltd.	Chairman
Hyield Venture Capital Co., Ltd	176,311,219	1.77%	－	－	－	－	Hon Hai Precision Ind. Co., Ltd.	Subsidiary of Hon Hai Precision Ind. Co.,Ltd.
Representative: Te-Tsai Huang	212,619	－	－	－	－	－	N.A.	N.A.
Standard Chartered Bank hosting Sanskrit Vanguard Emerging Markets Equity Index Fund account	152,264,726	1.53%	－	－	－	－	N.A.	N.A.
Hon Hai Precision Ind. Co., Ltd.	147,965,363	1.49%	－	－	－	－	TerryGou	Chairman
							Hyield Venture Capital Co., Ltd	Subsidiary of Hon Hai Precision Ind. Co.,Ltd.
Representative: Terry Gou	243,964,977	2.45%	－	－	－	－	Hon Hai Precision Ind. Co.,Ltd.	Chairman
Specially designated (earmarked) account of Citibank (Taiwan) for the delegated custody of Newly Emerging Market Evaluation Fund	142,560,544	1.43%	－	－	－	－	N.A.	N.A.
Compal Electronics, Inc.	134,877,335	1.36%	－	－	－	－	N.A.	N.A.
Representative: Hsu,Sheng-Hsiung	2, 317,754	0.02%	－	－	－	－	N.A.	N.A.
Foxconn Technology Co., Ltd.	127,556,349	1.28%	－	－	－	－	N.A.	N.A.
Representative: Lin,DongLiang	－	－	－	－	－	－	N.A.	N.A.
JPMorgan Chase Bank, N.A., Taipei Branch in Custody for Stichting Depositary APG Emerging Markets EquityPool	123,639,169	1.24%	－	－	－	－	N.A.	N.A.

3.10 The number of shares held by the Company, the Company’s directors and supervisors, managerial officers and enterprises under control, either directly or indirectly, with consolidated calculation of the comprehensive shareholding ratio. As of 12/31/2015

Long-term Investment	Ownership by INX	Ownership by INX	Ownership by Directors, Managers, and Directly/Indirectly Owned Subsidiaries	Ownership by Directors, Managers, and Directly/Indirectly Owned Subsidiaries	Total Ownership	Total Ownership
	Shares	%	Shares	%	Shares	%
Asiaward Investment Ltd.	-	-	77,830,001	100%	77,830,001	100%
Best China Investments Ltd.	-	-	10,000,001	100%	10,000,001	100%
Bright Information HoldingLtd.	4,910,000	100%	-	-	4,910,000	100%
Golden Achiever International Limited	40,250	100%	-	-	40,250	100%
InnoLux Corporation	-	-	2,000	100%	2,000	100%
Innolux HoldingLtd.	246,768,185	100%	-	-	246,768,185	100%
Innolux HongKongHoldingLimited	1,158,844,000	100%	-	-	1,158,844,000	100%
Innolux HongKongLimited	-	-	35,000,000	100%	35,000,000	100%
Innolux Optoelectronics Europe B.V.	180	100%	-	-	180	100.%
Innolux Optoelectronics GermanyGmbH	-	-	250	100%	250	100%
Innolux Optoelectronics Hong Kong HoldingLtd.	-	-	162,897,802	100%	162,897,802	100%
Innolux Optoelectronics Japan Co.,Ltd.	80	100%	-	-	80	100%
Innolux Optoelectronics USA,Inc.	-	-	1,000	100%	1,000	100%
Innolux TechnologyEurope B.V.	-	-	375,810	100%	375,810	100%
Innolux TechnologyGermanyGmbH	-	-	100,000	100%	100,000	100%
Innolux TechnologyJapan Co.,Ltd.	-	-	201	100%	201	100%
Innolux TechnologyUSA Inc.	-	-	1,000	100%	1,000	100%
KeywayInvestment Management Limited	5,656,410	100%	-	-	5,656,410	100%
Lakers TradingLtd.	-	-	1	100%	1	100%
Landmark International Ltd.	709,450,000	100%	-	-	709,450,000	100%
Leadtek Global GroupLimited	50,000,000	100%	-	-	50,000,000	100%
Magic Sun Ltd.	-	-	38,000,001	100%	38,000,001	100%
Main DynastyInvestment Ltd.	-	-	139,623,801	100%	139,623,801	100%
Mega Chance Investments Ltd.	-	-	18,000,000	100%	18,000,000	100%
Nets TradingLtd.	-	-	900,001	100%	900,001	100%
Rockets HoldingLtd.	-	-	226,504,550	100%	226,504,550	100%
Stanford Developments Ltd.	-	-	164,000,000	100%	164,000,000	100%
Sun DynastyDevelopment Ltd.	-	-	295,969,001	100%	295,969,001	100%
Suns HoldingLtd.	-	-	18,177,052	100%	18,177,052	100%
ToppolyOptoelectronics(B.V.I.)Ltd.	144,447,000	100%	-	-	144,447,000	100%
ToppolyOptoelectronics(Cayman)Ltd.	-	-	144,417,000	100%	144,417,000	100%
Warriors TechnologyInvestments Ltd.	-	-	18,177,052	100%	18,177,052	100%
Shanghai Innolux Optoelectronics Ltd.	-	-	-	100%	-	100%
Yuan Chi investment co.,Ltd	-	100%	-	-	-	100%
Foshan Innolux Optoelectronics Ltd.	-	-	-	100%	-	100%
Foshan Innolux Logistics Ltd.	-	-	-	100%	-	100%
VAP Optoelectromics(NanJing)Corp.	-	-	-	100%	-	100%
Kunpal Optoelectronics Ltd.	-	-	-	100%	-	100%
NanjingInnolux TechnologyLtd.	-	-	-	100%	-	100%
NanjingInnolux Optoelectronics Ltd.	-	-	-	100%	-	100%
InnoJoyInvestment Corp.	167,405,392	100%	-	-	167,405,392	100%
Innocom Technology (Shenzhen)Co.,LTD	-	-	-	100%	-	100%
Ningbo Innolux TechnologyCo.,LTD	-	-	-	100%	-	100%
Ningbo Innolux Optoelectronics Co.,LTD	-	-	-	100%	-	100%
Ningbo Innolux DisplayLTD	-	-	-	100%	-	100%
Ningbo Innolux Logistics LTD	-	-	-	100%	-	100%

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

A. Type of Stock

Share Type	Authorized Capital	Authorized Capital	Authorized Capital	Authorized Capital	Authorized Capital
	Outstanding			Un-issued Shares	Total
	Issued Shares	Unlisted	Total Shares
Common Shares	9,952,681,577	-	9,952,681,577	547,318,423	10,500,000,000

B. Issued Shares

Unit: Shares Thousand ; NT Thousand

						Unit: Shares Thousand	Unit: Shares Thousand	;NT Thousand
Month/ Year	Par Value	Authorized Capital		Paid-in Capital		Remark
		Shares	Amount	Shares	Amount	Sources of Capital	Capital Increased by Assets Other than Cash	Other
2003.01	-	120,000	1,200,000	35,000	350,000	Created at inception	None	2003.01.14 Yuan-Shang-Zih No. 0920001669
2003.05	10	120,000	1,200,000	100,000	1,000,000	65 million shares from cash capital increase	None	2003.05.30 Yuan-Shang-Zih No. 0920013164
2003.10	10	1,000,000	10,000,000	300,000	3,000,000	200 million shares from cash capital increase	None	2003.11.07 Yuan-Shang-Zih No. 0920030835
2004.04	10	1,000,000	10,000,000	900,000	9,000,000	600 million shares from cash capital increase	None	2004.05.24 Yuan-Shang-Zih No. 0930013914
2004.09	12	2,500,000	25,000,000	1,500,000	15,000,000	600 million shares from cash capital increase	None	2004.10.26 Yuan-Shang-Zih No. 9300030355
2005.06	14	2,500,000	25,000,000	2,100,000	21,000,000	600 million shares from cash capital increase	None	2005.07.22 Yuan-Shang-Zih No. 0940019992
2006.01	-	2,500,000	25,000,000	2,106,624	21,066,240	6.624 million new shares issued upon the exercise of employee stock options	None	2006.02.13 Yuan-Shang-Zih No. 0950002674
2006.04	-	2,500,000	25,000,000	2,111,856	21,118,560	5.232 million new shares issued upon the exercise of employee stock options	None	2006.05.09 Yuan-Shang-Zih No. 0950011150
2006.09	-	2,500,000	25,000,000	2,112,129	21,121,290	273 thousand new shares issued upon the exercise of employee stock options	None	2006.10.16 Yuan-Shang-Zih No. 0950026853
2006.10	41	3,300,000	33,000,000	2,312,129	23,121,290	200 million shares from cash capital increase	None	2006.12.04 Yuan-Shang-Zih No. 0950032417
2007.01	-	3,300,000	33,000,000	2,326,056	23,260,560	13.927 million new shares issued upon the exercise of employee stock options	None	2007.02.09 Yuan-Shang-Zih No. 0960003715
2007.03	-	3,300,000	33,000,000	2,331,706	23,317,062	5.650 million shares from capital increase in connection with merger	None	2007.05.30 Yuan-Shang-Zih No. 0960014540
2007.04	-	3,300,000	33,000,000	2,331,761	23,317,612	55 thousand new shares issued upon the exercise of employee stock options	None	2007.05.31 Yuan-Shang-Zih No. 0960014605
2007.08	-	3,300,000	33,000,000	2,340,765	23,407,652	9.004 million new shares issued upon the exercise of employee stock options	None	2007.08.30 Yuan-Shang-Zih No. 0960023196
2007.09	-	3,300,000	33,000,000	2,442,155	24,421,550	101.390 million shares from capital increase through capitalization of retained earnings	None	2007.09.19 Yuan-Shang-Zih No. 0960025459
2007.10	-	3,300,000	33,000,000	2,442,372	24,423,720	217 thousand new shares issued upon the exercise of employee stock options	None	2007.10.29 Yuan-Shang-Zih No. 0960029080
2007.11	146	3,300,000	33,000,000	2,742,372	27,423,720	300 million shares from cash capital increase to participate in the issuance of overseas depositaryreceipts	None	2007.12.10 Yuan-Shang-Zih No. 0960033616

Month/ Year	Par Value	Authorized Capital	Authorized Capital	Paid-in Capital	Paid-in Capital	Remark	Remark
		Shares	Amount	Shares	Amount	Sources of Capital	Capital Increased by Assets Other than Cash	Other
2008.02	-	3,300,000	33,000,000	2,751,026	27,510,260	8.654 million new shares issued upon the exercise of employee stock options	None	2008.02.12 Yuan-Shang-Zih No. 0970003364
2008.05	-	3,300,000	33,000,000	2,757,583	27,575,830	6.557 million new shares issued upon the exercise of employee stock options	None	2008.05.14 Yuan-Shang-Zih No. 0970012623
2008.08	-	3,300,000	33,000,000	2,770,270	27,702,700	12.687 million new shares issued upon the exercise of employee stock options	None	2008.08.21 Yuan-Shang-Zih No. 0970023231
2008.09	-	4,500,000	45,000,000	3,112,297	31,122,970	342.027 million shares from capital increase through capitalization of retained earnings	None	2008.09.09 Yuan-Shang-Zih No. 0970025445
2008.11	-	4,500,000	45,000,000	3,113,147	31,131,470	850 thousand new shares issued upon the exercise of employee stock options	None	2008.11.18 Yuan-Shang-Zih No. 0970032346
2009.03	-	4,500,000	45,000,000	3,123,695	32,236,950	10.548 million new shares issued upon the exercise of employee stock options	None	2009.03.02 Yuan-Shang-Zih No. 0980005613
2009.05	-	4,500,000	45,000,000	3,128,546	31,285,460	4.851 million new shares issued upon the exercise of employee stock options	None	2009.05.18 Yuan-Shang-Zih No. 0980013470
2009.07	-	4,500,000	45,000,000	3,138,537	31,385,370	9.991 million new shares issued upon the exercise of employee stock options	None	2009.07.23 Yuan-Shang-Zih No. 0980020313
2009.09	-	4,500,000	45,000,000	3,243,122	32,431,222	104.585 million shares from capital increase through capitalization of retained earnings	None	2009.09.07 Yuan-Shang-Zih No. 0980024824
2009.11	-	4,500,000	45,000,000	3,244,596	32,445,960	1.474 million new shares issued upon the exercise of employee stock options	None	2009.11.19 Yuan-Shang-Zih No. 0980032198
2010.02	-	4,500,000	45,000,000	3,254,841	32,548,410	10.245 million new shares issued upon the exercise of employee stock options	None	2010.02.12 Yuan-Shang-Zih No. 0990004357
2010.03	-	10,500,000	105,000,000	8,032,930	80,329,300	4,778,089,000 common stocks from capital increase in connection with merger; private placement of 731.707 million preferred shares	None	2010.03.30 Yuan-Shang-Zih No. 0990008717
2010.04	-	10,500,000	105,000,000	8,040,837	80,408,370	7.907 million new shares issued upon the exercise of employee stock options	None	2010.04.29 Yuan-Shang-Zih No. 0990011506
2010.08	-	10,500,000	105,000,000	8,043,497	80,434,970	2.660 million new shares issued upon the exercise of employee stock options	None	2010.08.26 Yuan-Shang-Zih No. 0990025097
2010.11	-	10,500,000	105,000,000	7,311,789	73,117,890	Reduced capital by 731.707 million shares through private placement ofpreferred shares	None	2010.11.11 Yuan-Shang-Zih No. 0990033742
2011. 01	-	10,500,000	105,000,000	7,311,809	73,118,090	20 thousand new shares issued upon the exercise of employee stock options	None	2011.01.03 Yuan-Shang-Zih No. 1000000178
2011. 03	-	10,500,000	105,000,000	7,312,674	73,126,740	865 thousand new shares issued upon the exercise of employee stock options	None	2011.03.25 Yuan-Shang-Zih No. 1000007874
2011.05	-	10,500,000	105,000,000	7,312,804	73,128,040	130 thousand new shares issued upon the exercise of employee stock options	None	2011.05.04 Yuan-Shang-Zih No. 1000012352
2011.07	-	10,500,000	105,000,000	7,312,904	73,129,040	100 thousand new shares issued upon the exercise of employee stock options	None	2011.07.26 Yuan-Shang-Zih No. 1000021596
2011.11	-	10,500,000	105,000,000	7,312,970	73,129,708	66 thousand new shares issued upon the exercise of employee stock options	None	2011.11.28 Yuan-Shang-Zih No. 1000035175
2012.10	9	10,500,000	105,000,000	7,912,970	79,129,700	600 million shares from cash capital increase	None	2012.10.15 Yuan-Shang-Zih No. 1010031831
2013.02	12.98	10,500,000	105,000,000	9,037,970	90,379,700	1.125 billion shares from cash capital increase to participate in the issuance of overseas depositaryreceipts	None	2013.02.18 Yuan-Shang-Zih No. 1020005087
2013.02	5/-	10,500,000	105,000,000	9,100,272	91,002,720	Issuance of 31,151,000 new shares with restricted employee rights at positive consideration Issuance of 31,151,000 new shares with restricted employee rights at nil consideration	None	2013.02.21 Yuan-Shang-Zih No. 1020005099
2013.04	5/-	10,500,000	105,000,000	9,101,960	91,019,600	Issuance of 844,000 new shares	None	2013.04.16

Month/ Year	Par Value	Authorized Capital	Authorized Capital	Paid-in Capital	Paid-in Capital	Remark	Remark	Remark
		Shares	Amount	Shares	Amount	Sources of Capital	Capital Increased by Assets Other than Cash	Other
						with restricted employee rights at positive consideration Issuance of 844,000 new shares with restricted employee rights at nil consideration		Yuan-Shang-Zih No. 1020010954
2013.08		10,500,000	105,000,000	9,101,670	91,016,700	Capital reduced by 290,000 new shares with restricted employee rights	None	2013.08.23 Yuan-Shang-Zih No. 1020025484
2013.11	-	10,500,000	105,000,000	9,100,892	91,008,920	Capital reduced by 778,000 new shares with restricted employee rights	None	2013.11.27 Yuan-Shang-Zih No. 1020036156
2013.12	5/-	10,500,000	105,000,000	9,109,428	91,094,280	Issuance of 4,268,000 new shares with restricted employee rights at positive consideration Issuance of 4,268,000 new shares with restricted employee rights at nil consideration	None	2013.12.27 Yuan-Shang-Zih No. 1020040096
2014.04	-	10,500,000	105,000,000	9,106,457	91,064,570	Capital reduced by 2,970,000 new shares with restricted employee rights	None	2014.04.10 Zhu-Shang-Zih No.1030009955
2014.09	10	10,500,000	105,000,000	9,956,457	99,564,570	850 million shares from cash capital increase	None	2014.09.05 Zhu-Shang-Zih No.1030026932
2014.09	-	10,500,000	105,000,000	9,955,407	99,554,070	Capital reduced by 1,049,000 new shares with restricted employee rights	None	2014.09.05 Zhu-Shang-Zih No.1030026932
2014.11	-	10,500,000	105,000,000	9,954,536	99,545,360	Capital reduced by 871,000 new shares with restricted employee rights	None	2014.11.19 Zhu-Shang-Zih No.1030033761
2015.03	-	10,500,000	105,000,000	9,954,224	99,542,240	Capital reduced by 312,000 new shares with restricted employee rights	None	2015.03.17 Zhu-Shang-Zih No.1040007082
2015.05	-	10,500,000	105,000,000	9,953,797	99,537,970	Capital reduced by 417,000 new shares with restricted employee rights	None	2015.05.20 Zhu-Shang-Zih No.1040013755
2015.08	-	10,500,000	105,000,000	9,953,583	99,535,830	Capital reduced by 214,000 new shares with restricted employee rights	None	2015.08.19 Zhu-Shang-Zih No.1040023797
2015.11	-	10,500,000	105,000,000	9,953,237	99,532,370	Capital reduced by 345,000 new shares with restricted employee rights	None	2015.11.18 Zhu-Shang-Zih No.1040033254
2016.02	-	10,500,000	105,000,000	9,952,682	99,526,820	Capital reduced by 555,600 new shares with restricted employee rights	None	2016.02.26 Zhu-Shang-Zih No.1050004985

C. Information for Shelf Registration: None

4.1.2 Status of Shareholders

					As of 04/26/2016	As of 04/26/2016
Item	Government Agencies	Financial Institutions	Other Juridical Person	Domestic Natural Persons	Foreign Institutions & Natural Persons	Total
Number of Shareholders	7	76	541	342,104	1,117	343,845
Shareholding (shares)	40,625,931	420,193,941	2,086,443,656	3,431,690,713	3,973,727,336	9,952,681,577
Percentage	0.41%	4.22%	20.96%	34.48%	39.93%	100.00%

4.1.3 Shareholding Distribution Status

A. Common Shares (The par value for each share is NT$10)

	As of 04/26/2016	As of 04/26/2016	As of 04/26/2016
Class of Shareholding (Unit: Share)	Number of Shareholders	Shareholding (Shares)	Percentage
1 ~999	95,792	29,954,318	0.30%
1,000 ~ 5,000	153,102	359,543,209	3.61%
5,001 ~ 10,000	42,316	325,626,402	3.27%
10,001 ~ 15,000	15,579	191,359,672	1.92%
15,001 ~ 20,000	10,052	184,728,543	1.86%
20,001 ~ 30,000	9,190	231,471,800	2.33%
30,001 ~ 50,000	7,499	299,257,017	3.01%
50,001 ~ 100,000	5,631	402,756,336	4.05%
100,001 ~ 200,000	2,392	335,440,568	3.37%
200,001 ~ 400,000	1,054	294,224,607	2.96%
400,001 ~600,000	366	180,230,410	1.81%
600,001 ~ 800,000	170	117,785,964	1.18%
800,001 ~ 1,000,000	125	112,181,206	1.13%
1,000,001 or over	577	6,888,121,525	69.20%
Total	343,845	9,952,681,577	100.00%

4.1.4 List of Major Shareholders

4.1.4 List of Major Shareholders
	As of04/26/2016
Shareholder's Name	Shareholding
	Shares	Percentage
Chimei Corporation	570,929,561	5.74%
CathayLife InsuranceCo.,Ltd.	244,300,330	2.46%
TerryGuo	243,964,977	2.45%
Hyield Venture Capital Co.,Ltd	176,311,219	1.77%
Standard Chartered Bank hosting Sanskrit Vanguard EmergingMarkets EquityIndex Fund account	152,264,726	1.53%
Hon Hai Precision Ind. Co.,Ltd.	147,965,363	1.49%
Specially designated (earmarked) account of Citibank (Taiwan) for the delegated custody of Newly EmergingMarket Evaluation Fund.	142,560,544	1.43%
Compal Electronics,Inc.	134,877,335	1.36%
Foxconn TechnologyCo.,Ltd.	127,556,349	1.28%
JPMorgan Chase Bank, N.A., Taipei Branch in Custody for Stichting Depositary APG Emerging Markets EquityPool	123,639,169	1.24%

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share

Unit: NT$ Thousand share

Item	Year	Year	2014	2015	As of 03/31/2016
Market Price per Share	Highest Market Price		15.95	19.35	11.60
	Lowest Market Price		10.05	9.10	8.80
	Average Market Price		12.77	13.48	10.29
Net Worth per Share	Before Distribution		22.87	23.34	22.39
Earnings per Share	Weighted Average Shares (thousand shares)		9,377,302	9,922,525	9,941,843
	Diluted Earnings Per Share	Adjusted Diluted Earnings Per Share	2.31	1.09	(0.86)
Dividends per Share(Note2)	Cash Dividends		0.7	0.2(Note)	N.A.
	Stock Dividends	Dividends from Retained Earnings	－	－	－
		Dividends from Capital Surplus	－	－	－
	Accumulated Undistributed Dividends		None	None	None
Return on Investment	Price/Earnings Ratio		5.53	12.37	N.A.
	Price/Dividend Ratio		18.24	67.40	N.A.
	Cash Dividend Yield Rate		5.48%	1.48%	N.A.

Note:2015 Distribution of Dividends already gets approval from the Board of Directors, subject to shareholders’ approval in Annual General Shareholders’ Meeting.

4.1.6 Dividend Policy and Implementation Status

A. Dividend Policy When allocating the net profits for each fiscal year, the following order shall be followed:
(1) To cover losses
(2) To transfer 10% to the legal reserve account
(3) To transfer the others to the special reserve account or reverse special reserve account pursuant to the regulation
(4) To pay dividends on preferred shares
(5) To distribute the remaining pursuant to the profit distribution proposal of the Board and subject to shareholders’ approval at Annual Shareholders’ Meeting.

The Company is growing stably in a fast-growing and capital-intensive emerging industry. The Board shall prepare a dividend distribution proposal that caters to the future long-term financial planning of the Company, the investment environment and industrial competition, by taking into account the future capital expenditure and capital requirements of the Company, subject to the approval of the shareholders’ meeting. Nevertheless, the amount of dividend distributed to the shareholders shall not exceed two-thirds of the total amount of dividend during the year.

B. Proposed Distribution of Dividend

The Board adopted a proposal in May 12, 2016 for profit distribution as follows: Cash Dividends to Common Shareholders from retained earnings: NT$ 0.2 (Per share). The proposal is subject to shareholders’ approval at the 2016 Annual Shareholders’ Meeting.

C. Significant changes of Dividend policy: None.

4.1.7 Effect of 2016 Share Dividends to Operating Performance and EPS.

No financial forecast disclosed for 2016, therefore not applicable.

4.1.8 Employee, Directors' and Supervisors' Remuneration

A. Information Relating to EmployeeS’, Directors’ and Supervisors’ Remuneration in the Articles of Incorporation

The annual budgeted net income of the Company shall be distributed in the following order: To pay not less than 5% of the net income as employees’ bonuses and which less than 0.1% shall be paid as remuneration to directors and supervisors after recover loss.

A company may, by a resolution adopted by a majority vote at a meeting of board of directors attended by two-thirds of the total number of directors, have the profit distributable as employees’ compensation in the preceding two paragraphs distributed in the form of shares or in cash; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.

The scope of employee shall be entitled to dividend & bonus may include the qualified employees of affillated companies, the board of directors is authorized to determine the related rules.

B. Estimate Foundation of Employee Bonus and Directors’ and Supervisors’ Remuneration

The company has an amount equivalent to a certain percentage of the current net earnings (net income before tax before deducting the remuneration to employees and the remuneration to directors and supervisors) minus the accumulated losses estimated and appropriated as remuneration to employees and remuneration to directors and supervisors, which will be reported as operating cost or operating expense. The remuneration to employees paid with stock is with the

number of shares calculated in accordance with the closing price of common stock in the day prior to the resolution reached by the board of directors. If there is any change in the estimated stock share to be distributed after the publication of the financial report in the following year, it is to be treated as changes in accounting estimates and with the effect of such change recognized in the profit and loss of the following year.

C. Profit Distribution of 2015 Approved in Board of Directors Meeting for Employee Bonus and Directors’ and Supervisors’ Remuneration
(1) For the remuneration to employees and remuneration to directors and supervisors paid in cash or with stock shares: If such distribution amount is different from the estimated amount recognized, the amount of difference, root cause, and accounting treatment should be disclosed as follows:

It was resolved in the company’s board meeting on May 12, 2016 to have the remuneration to employees paid in cash for an amount of NT$734,523,681 and the remuneration to directors and supervisors for an amount of NT$4,489,924.

The estimated remuneration to employees and the estimated remuneration to directors and supervisors referred to above is different from the estimated expense in 2015 for an amount of NT$510,076 that will be treated as changes in accounting estimates and booked as profit and loss adjustments for 2016 after a resolution reached in the shareholders’ meeting.

(2) The amount of remuneration to employees paid with stock shares and its ratio to the net income and total employee remuneration in the current proprietary or individual financial report:

The company has not had stock shares distributed as remuneration to employees in the current year; therefore, it is not applicable.

D. Information of 2014 Earnings Set Aside to Employee Bonus and Directors’ and Supervisors’ Remuneration:

Remuneration:
Distribution of 2014 Earnings(NT$)
Directors' and Supervisors' Remuneration	$6,954,142
Employee Bonus	$1,436,186,891

Employees’ bonus and directors’ and supervisors’ remuneration were accrued at $1,436,187 and $0, respectively, for the year ended December 31, 2014. The amount was accrued by considering the period’s net profit after tax, legal reserve amongst other factors and the Company’s Articles of Incorporation. As resolved by the stockholders in June 2015, employees’ bonus and directors’ and supervisors’ remuneration were $1,436,187 and $6,954, respectively, resulting to a difference of $6,954 from the amounts in 2014 financial statements. The difference was caused by different accrual ratio which has been processed as accounting estimates after being approved at the stockholders’ meeting and recorded as expense in 2015. (NT$ Thousand)

4.1.9 Buyback of Common Stock: None

4.2 Issuance of Corporate Bonds

4.2.1 Corporate Bonds: None.

4.2.2 Convertible Bonds: None.

4.2.3 Exchangeable Bonds: None.

4.2.4 Shelf Registration: None.

4.2.5 Bond with Warrants: None.

4.2.6 Private placement of Corporate Bonds: None.

4.3 Preferred Shares: None.

4.4 Issuance of Global Depositary Shares

4.4 Issuance of Global Depositary Shares	4.4 Issuance of Global Depositary Shares	4.4 Issuance of Global Depositary Shares
Issuing Date Item			01/23/2013
IssuingDate			01/23/2013
Issuance & Listing			LuxembourgStock Exchange
Total Amount(US$)			453,701,250
OfferingPrice Per GDS(US$)			4.481
Units Issued			101,250,000
UnderlyingSecurities			Common Shares
Common Shares Represented			1,012,500,000
Rights & Obligations of GDS Holders			Same as those of Common Share Holders
Trustee			Not Applicable
DepositaryBank			Citibank,N.A. – New York
Custodian Bank			Citibank,N.A. – Taipei Branch
ADSs Outstanding(units)			193,873
Apportionment of Expenses for Issuance & Maintenance			Borne by INX
Terms and Conditions in the Deposit Agreement & CustodyAgreement			See Deposit Agreement and Custody Agreement for Details
Closing Price Per GDS(US$)	2015	High	6.17
		Low	2.81
		Average	4.30
	Jan 1, 2016 - Apr 30,2016	High	3.53
		Low	2.71
		Average	3.10

4.5 Employee Stock Options

4.5.1 Issuance of Employee Stock Options

4.5.1 Issuance of Employee Stock Options
	Unit: NT$: per share
Type of Stock Option	2010
Regulatoryapproval date	Jun9,2010
Issue date	May19,2011
Units issued	50,000,000
Option shares to be issued as a percentage of outstandingshares	0.50%
Duration	5 Years
Conversion measures	New Common Share
Conditional conversion periods and percentages	2nd Year: 30% 3rd Year: 60% 4th Year: 100%
Converted shares	－
Exercised amount	－
Number of sharesyet to be converted	50,000,000
Adjusted exercise price for those who have yet to exercise their rights	21.87
Unexercised shares as a percentage of total issued shares	0.50%
Impact onpossible dilution of shareholdings	Dilution to Shareholders’ Equityis limited

Note:The aggregate total of issued and outstanding shares represents the aggregate total of issued and outstanding shares having been reported to and registered in the Ministry of Economic Affairs as of the Annual Report date.

4.5.2 List of Executives and the Top 10 Employees Receiving Employee Stock Options

				Apr 30,2016;Unit: Thousand	Apr 30,2016;Unit: Thousand	Apr 30,2016;Unit: Thousand	Apr 30,2016;Unit: Thousand	Apr 30,2016;Unit: Thousand	Apr 30,2016;Unit: Thousand	Apr 30,2016;Unit: Thousand	Apr 30,2016;Unit: Thousand
Title	Name	No. of Option Shares	Option Shares as a Percentage of Shares lssued	Exercised				Unexercised
				No. of Shares Converted	Strike Price (NT$)	Amount (NT$ thousand)	Converted Shares as a Percentage of Shares lssued	No. of Shares Converted	Strike Price (NT$)	Amount (NT$ thousand)	Converted Shares as a Percentage of Shares lssued
Chairman	Hsing-Chien Tuan	3,755	0.04%	－	－	－	－	3,755	21.87	82,122	0.04%
President	Jyh-Chau Wang
Vice President	Wen-Jyh Sah
Vice President	Chin-LungTing
Vice President	Yao-TongChen
Vice President	Chih-HungHsiao
Vice President	Hung-Wen Yang
Vice President	Chih-MingChen
Vice President	Chu-HsiangYang
Associate Vice President	Kuo-Hsiung Kuo
Associate Vice President	Ke-Yi Kao
Associate Vice President	Chung-Kuang Wei
Associate Vice President	Tai-Chi Pan
Associate Vice President	Jia-Pang Pang
Associate Vice President	Zheng-Xia Kuo
Associate Vice President	Tian-Ren Lin
Associate Vice President	Yu Shui Kuo
Associate Vice President	Mao-Sheng Hung
Associate Vice President	Jun-Yi Yu
Associate Vice President	Qing-Hui Lin
Managerial Officer	Chien-Lang Lo
Managerial Officer	Chin-Yuan Chang
Employees	Jian-TingLai	1,100	0.01%	－	－	－	－	1,100	21.87	24,057	0.01%
Employees	Qiu-Lian Yang
Employees	Zheng-Xu Zhou
Employees	Kun-FengHuang
Employees	Zong-Ren Kuo
Employees	Hao-Kun Liu
Employees	Shu-Fu Hsu
Employees	Yang-FengLin
Employees	Fu-Shou Wu
Employees	Min-ZhengWang

Note 1:Refers to the current management officers and employees up to the date of the Annual Report

Note 2:The total number of issued shares represents the number of issued shares registered with the Ministry of Economic Affairs as of the date of the printing of the Annual Report.

4.6 Status of Employee Restricted Stock 4.6.1 Status of Employee Restricted Stock

4.6 Status of Employee Restricted Stock 4.6.1 Status of Employee Restricted Stock	4.6 Status of Employee Restricted Stock 4.6.1 Status of Employee Restricted Stock	4.6 Status of Employee Restricted Stock 4.6.1 Status of Employee Restricted Stock	4.6 Status of Employee Restricted Stock 4.6.1 Status of Employee Restricted Stock
30 April 2016,Unit: in thousands of Dollars,in units of thousands.
Class of new restricted shares	First time New restricted shares	Second time New restricted shares	Third time New restricted shares
Effective date of registration	Dec 13,2012
Issue date	Jan 30,2013	Mar 29,2013	Dec 12,2013
Number of new restricted shares issued	62,302,000（Note1）	1,688,000（Note 2）	8,536,000（Note 3）
Issueprice	0.00/5.00
Number of new restricted shares issued as a percentage of the total number of issued shares(Note 4)	0.63%	0.02%	0.09%
Vesting conditions for new restricted shares	Employees shall be in active service during each of the following vesting periods since the capital increase base date with the attainment of the annual individual performance appraisal result of Grade B or G or above over the years. Besides, they shall have fully complied with the service code and have not violated the Company’s service agreement and integrity and intellectual property agreement, work rules, stipulations in contracts with the Company or the regulations of the Company. The percentages of shares in which the vesting conditions are fulfilled are set out below. Upon expiration of one year: 20% of the number of shares subscribed Upon expiration of two years: 40% of the number of shares subscribed Upon expiration of threeyears: 40% of the number of shares subscribed
Restrictions of new restricted shares	(1) shall not be sold, pledged, transferred, given to others as gifts, attached or otherwise dealt with. (2) no voting rights at general meetings. (3) not entitled to participating in the placement (subscription) of shares, dividend distribution for the original shareholders. (4) From the book closure day for the placement of shares at nil onsideration, the book closure day for cash dividends, share subscription in connection with a cash capital increase, the book closure period for general meetings as stipulated in Paragraph 3 under Section 165 of the Company Law, or other statutory book closure periods based on the occurrence of facts to the entitlement distribution date, shares without restrictions of employees who fulfill the vesting conditions in this duration are still not entitled to any voting rights, surplus distribution rights, share placement (subscription) rights,and/or dividend distribution rights.
Custodyof new restricted shares	Custodyof shares in trust
If the vesting conditions are not fulfilled after employees are placed with or subscribe for new shares	Being placed with new shares: Shares will be reacquired by the Company at nil consideration for cancellation. Subscribing for new shares: All shares will be repurchased by the Company at the closing price or the original subscription price, whichever is lower, on the expirydates of the respectiveperiods for cancellation.
Number of new restricted shares reacquired or repurchased	7,136,800	401,200	711,600
Number of shares without restrictions	55,063,600	1,278,800	4,745,200
Number of shares with restrictions	101,600	8,000	3,079,200
Number of shares with restrictions as a percentage of the total number of issued shares(%)	－	－	0.03%
Impact on interests of shareholders	The impact is limited as the dilution ratio is low	The impact is limited as the dilution ratio is low	The impact is limited as the dilution ratio is low

Note1: Allotment of 31,151,000 shares at nil consideration; subscription of 31,151,000 shares at a consideration. Note2: Allotment of 844,000 shares at nil consideration; subscription of 844,000 shares at a consideration. Note3: Allotment of 4,268,000 shares at nil consideration; subscription of 4,268,000 shares at a consideration. Note4: The total number of issued shares represents the number of issued shares registered with the Ministry of Economic Affairs as of the date of the printing of the Annual Report.

4.6.2 Employee Restricted Stock Granted to Management Team and to Top 10 Employees

				30 April 2016,Unit: in thousands of Dollars,in units of thousands.	30 April 2016,Unit: in thousands of Dollars,in units of thousands.	30 April 2016,Unit: in thousands of Dollars,in units of thousands.	30 April 2016,Unit: in thousands of Dollars,in units of thousands.	30 April 2016,Unit: in thousands of Dollars,in units of thousands.	30 April 2016,Unit: in thousands of Dollars,in units of thousands.	30 April 2016,Unit: in thousands of Dollars,in units of thousands.	30 April 2016,Unit: in thousands of Dollars,in units of thousands.
Title	Name	Number of new restricted shares acquired	Number of new restricted shares acquired as a percentage of the total number of issued shares (Note 2)	Without restrictions				With restrictions
				Number of shares without restrictions	Issue price	Issue amount (in thousand dollars)	Number of shares without restrictions as a percentage of the total number of issued shares	Number of shares with restrictions	Issue price	Subscription amount (in thousand dollars)	Number of shares with restrictions as a percentage of the total number of issued shares
Chairman	Hsing-Chien Tuan	8,022	0.081%	7,969	0/5	19,923	0.080%	53	0/5	133	-
President	Jyh-Chau Wang
Vice President	Wen-Jyh Sah
Vice President	Chin-LungTing
Vice President	Yao-TongChen
Vice President	Chih-HungHsiao
Vice President	Hung-Wen Yang
Vice President	Chih-MingChen
Vice President	Chu-HsiangYang
Associate Vice President	Kuo-Hsiung Kuo
Associate Vice President	Ke-Yi Kao
Associate Vice President	Chung-Kuang Wei
Associate Vice President	Tai-Chi Pan
Associate Vice President	Jia-Pang Pang
Associate Vice President	Zheng-Xia Kuo
Associate Vice President	Tian-Ren Lin
Associate Vice President	Yu Shui Kuo
Associate Vice President	Mao-Sheng Hung
Associate Vice President	Jun-Yi Yu
Associate Vice President	Qing-Hui Lin
Managerial Officer	Chien-Lang Lo
Managerial Officer	Chin-Yuan Chang
Employees	Yong-Yu Cai	2,590	0.03%	2,446	0/5	6,115	0.02%	144	0/5	360	-
Employees	Chao-Jun Zhong
Employees	Nai-Jian Zheng
Employees	GengRon Xu
Employees	Zheng-Xu Zhou
Employees	Dong-RongWang
Employees	Min-ZhengWang
Employees	Kun-FengHuang
Employees	Zhi-Xian Wang
Employees	Sheng-Neam Wei

Note 1:Refers to the current management officers and employees up to the date of the Annual Report Note 2:The total number of issued shares represents the number of issued shares registered with the Ministry of Economic Affairs as of the date of the printing of the Annual Report.

4.7 Status of New Share Issuance in Connection with Mergers and Acquisitions: None.

4.8 Financing Plans and Implementation: Not applicable.

V. Operational Highlights

5.1 Business Activities

5.1.1 Business Scope

1. Major business operation Scope of business

The combined operating revenue of the Company is derived from TFT-LCD Flat Panel Displays and its main commodities include large-sized and small-to-medium-sized TFT-LCD related products. Large-sized products are generally applied to Liquid Crystal Displays, Billboards, Desktop Monitors, and notebooks. Small-to-medium-sized products are used to manufacture tablet computers, portable audio players, GPS for automobiles, aviation, and mobile phones, while various types of touch-control panels could be selected. Besides, for the purpose of special usage, the Company also provides products used for medical, industrial, and educational purposes. Given that the business of the Company covers the entire world and the size mix of panels is complete, the Company is a comprehensive LCD provider.

2. Combined Weighing of Different Business Operations in the Year of 2015

mbined Weighing of Different Business Operations in the Year of 2015	mbined Weighing of Different Business Operations in the Year of 2015	mbined Weighing of Different Business Operations in the Year of 2015
Unit: NT$thousand
Major Divisions	Total Sales in 2015	(%)of total sales
TFT-LCD	364,132,984	100%
Total	364,132,984	100%

3. Current commodities (services) items

The Company’s main products are TFT-LCD panels and touch-control modules. The products lines cover small, medium, and large sized panels mainly for a wide range of applications, such as LCD televisions, desktop monitors, notebook computers, mobile phones, portable audio players, automobile accessories, medical, industrial, aeronautic, and educational products.

4. Planned Development of New Commodities (Services)

The Company is planning to develop new commodities with its main focus on flat display-related products, while continuing to delve into key products such as Mobile Phone Panels, medium-sized Display Panels, Electronic Book Panels, Notebook Computer Panels, Desktop Monitor Panels, and large-sized LCD Television Panels. Meanwhile, the Company will continue expanding the product scale and product application and development of capacitor-based touch-control panels. The Company will also keep investing into the field of non-consumption applications, and launch new products fit for industrial specification panels, medical, and public display panels.

5.1.2 Industry Overview

1. Current situation and development of industry

Owing to excellent product properties and improving costs and image quality, TFT-LCD has become the mainstream of various kinds of flat displays in recent years. The application coverage of TFT-LCD is extensive, of which, large-sized products are being applied to the manufacturing of LCD Televisions, Desktop Monitors and Notebook Computers while small-to-medium-sized products are being applied to Flat Panel Computers, portable audio players, and GPS for automobiles and mobile phones. Large-sized TFT-LCD products will move towards the goals of energy-saving, better images, and narrower frames, thereby offering an incentive to consumers to upgrade the existing product lines. As the applications of smart phones become more and more popular and the touch-control technology is gradually mature, small-to-medium sized products will become the fastest growing category with the most diverse products in recent years.

The Company adopts the forward–backward integration manufacturing model in response to the development of TFT-LCD Industry, and comprehensively arranges the early phrase glass of every product generation and the later phrase of all-sized modules and integrates IDM product lines, including 3.5 generation, 4.5 generation, 5 generation, 5.5 generation, 6 generation, 7.5 generation, 8.5 generation and 8.6 generation TFT-LCD plants, 2.5 generation, 4.5 generation, and 5 generation

touch-control sensor plants and production lines and later phrase module plants for IDM products such as later phrase product lines, Light Guide Plate/Backlight modules, PCB manufacture, assembly and pressing type paints. The production capacity and scale of every production line are comprehensive and flexible, matching a-Si, p-Si, LTPS, OLED processing and VA, AAS, TN Fringe field Switching and therefore all-sized products can be produced effectively.

2. Association of upstream, mid-stream, and downstream industries

The Company is an IDM product manufacturer which covers the upstream TFT-LCD Panel production and the downstream System Assembly, the association diagram of upstream, mid-stream and downstream industries which the Company belongs to are shown below:

==> picture [419 x 323] intentionally omitted <==

----- Start of picture text -----

Glass Panel Reticle ITO Conduct
LCD
Polarized Driving IC PCB Backit Modules
Colour Filter
LCD Panel
LCM Modules
LCD Monitor LCD TVs NB Mobile, PDA Others
Consumers
Up stream
stream Middle
INX Electronics
Downstream
----- End of picture text -----

3. Development trend of products

TFT-LCD has a low energy consumption rate, small size, low weight, and low radiation features. Japan, Korea, and Taiwan have actively invested in the production technology for many years, and the technology is getting mature. Now it is widely applied to flat panel displays; especially for notebooks and desktop displays, most of them using TFT-LCD. In the home appliance market, flat screen TVs are the mainstream. The future developing trend of these products are listed below:

(i) Mobile Computers (Notebooks & Tablets)

Due to fair prices and computational efficiency increasing substantially, rapid growth in sales of mobile computers has already become the biggest sales scale under the personal computer category. As the market expands, manufacturers keep releasing differentiation product lines aiming to stimulate different user demands. The design direction focuses on mobility, word processing, and audio performance to meet the needs of every type of customer for market segmentation. LCD panels also have differences in size and resolution. The smallest size is the Tablet; the main market is customers who focus more on personalization and entertainment. Emphasizing small size, light and easily carried features and more focus on entertainment needs. Therefore everything is moving toward a panel with a wide viewing angle.

Nearly years high end tablets not only have improved computational efficiency and completeness of software function, in the same time there has been more focus on the customer’s visual sensibility about high screen resolution. The demand of high end tablets has increased significantly due to large size and more high resolution products continuing to be released.

For many computer users, a keyboard is still the main input device, and notebooks coming with a physical keyboard still have a considerable market. Facing the rise of tablets, personal computer manufacturers have also started to import new design concepts in notebooks, such as transformer books that can switch between two different modes of tablet and notebook at any time, are gradually becoming the mainstream design of 10-inch to 13-inch notebooks. Ultra-thin, wide viewing angle, high colour, and touch function are also becoming important factors. As for those customers with high document requirements and lower mobile requirements, the bigger screen goes with FHD resolution to provide better webpage browsing and visual entertainment experience. 13-inch to 16-inch products are mainstream applications. As for those who emphasize video and audio effects or use the product to replace desktop products, they go with bigger, low energy consumption, and wide color gamut panels to present better color expression.

About the size of the panels, due to the development of next generation production lines and wide screens generally supported by operating systems, 16:9 products are already becoming the mainstream of the market. In addition, to fit the trend of thin and light, panels using thinner glass and thinner organization design are essential factors for products.

(ii) LCD Monitor

LCD monitors mainly go with desktops; two mainstream markets are office use and personal video and audio entertainment use. For office use LCD monitors, generally sales are for computers hosted by brand manufacturers and product structure is relatively simple and of moderate cost to fit the budget of enterprise and government organizations. For personal video and audio entertainment product, due to more focus on video and audio purposes, recently the proportion of the product equipped with wide viewing angle technology has gradually increased. We expecting the proportion is going to increase continually in 2016. Meanwhile due to customers increasing demand for high quality products, we are expecting 4K2K high resolution products to be released on the market, having a wide viewing angle and narrow frames will become the mainstream of the high end market gradually.

In addition, there is increasing customer demands for touch operation. When the software platforms of new versions of Windows gradually spread and become mature, we anticipate the product proportion of our touch function is going to gradually increase.

About size, due to an increase in the manufacturing efficiency and efficiency of product design structure, the price of TFT-LCD products is dropping and accelerating market demand for a transfer to the bigger size. For office use types, a gradual transfer from 18.5-inch and 19-inch to 20-inch and 21.5-inch etc.; the average size is bigger for personal video and audio entertainment products, 23.6-inch and 27-inch units will gradually increase their proportion soon.

Except for standard LCD monitors, the market will release All-In-One (AIO) which is an integrated design of the desktop host and monitor. Because of advantages in functionality saving space , the product is winning customers. As the Windows 10 operating system penetration rate increases, it accompanies the All-in-One product with touch function adding greater entertainment function. It also shows a new appearance for the market of LCD monitors.

(iii) LCD TV

Since 2005, Taiwan, Japan and Korea, started to mass produce generation six (G6). The production of TFT-LCD panels above 32-inches increased significantly and LCD TVs have

taken up living rooms rapidly. In recent years, LCD TVs fast popularization due to each manufacturer developing G7 and G8 capacity, goes with the improvement of each phase of production technology. It not only has become customers’ first choice when buying a new TV, but also has stimulated the traditional TV refresh cycle.

Meanwhile, when the market is warming up and products becomes popular. Innolux is the pioneer of providing differentiated large size models (especially 40-inch, 50-inch and 65-inch), dedicated to effectively improving the technology of each product to significantly increase the panel’s added value, gain customers’ brand recognition, and market segmentation, and increase the market share of large sizes.

Meanwhile, mobile display devices gradually move toward high resolution to satisfy customers' demand for high definition TV. We released 4K2K ultra high resolution products in succession since the second half of 2012 and became the pioneer manufacturer of the first of mass production and the highest market share. The company keeps developing high resolution 4K2K(3840x 2160) with Wide Color Gamut (NTSC 100％), including 85-inch, 75-inch, 65-inch, 58-inch and 50-inch panels and were granted the 2015 “Taiwan Excellence Gold Award”. The 85-inch 100% wide color Gamut and 4K2K LCD TV panel were granted the 2015 Taiwan Flat Panel product technical award. The Innolux 4K2K large size series panel solves dynamic image roughness and increases vividness. The quality of the TV is delicate and the color has higher fidelity, smoother dynamic image, and is mentally in the scene. Moreover, with the standard of 4K high resolution transport protocol agreement completed in the end of 2013, we are expecting the 4K2K product trend will extend into 2015 and future development. Each manufacturer will release 4K2K photographic equipment and go with 4K2K film releases and programs. 4K2K will become the necessary specifications of large TVs.

On the design of panel appearance, the company provides ultra-narrow frames (6mm and 7.5mm) and 50-inch ultra-thin design (thickness <10mm), integrate paint design on appearance to make client rapid input and mass production. End customers not only enjoy the real 4K image, also provide the real high quality of excellent vision and sensual experience. Innolux provide client and customer comprehensive and high competitive TV panel by innovation continually, and continue to lead the market trend and become lead firm of the industry.

(iv) Medium and small size panel

Before 2008, no matter technology or shipment, panel manufacturer of Japan always the leader of medium and small size panel industry; after 2009, Taiwan manufacturer shipment started to exceed Japan and Korea, became the leader of medium and small size panel industry instead. As the competition is more and more intense, panel manufacturer of medium and small size started to produce by higher generation factory. From 2011, even some panel manufacturer started to mass produce mobile phone panel by G6 factory. However, industry competition of medium and small panel not only at price competition, but also at market demands of higher resolution and higher definition panel. It drives medium and small panel manufacturer to be more enhancement in technical part. Since 2013, not only wide viewing angle technology is sharp competitive edge for manufacturers, each manufacturer release high resolution product continually. By a-si realize high cost-effective in over 5-inch screen of FHD resolution and by LTPS provide WQHD resolution in over 5.5-inch screen. In 2015, keep improving resolution in 4-inch to 6-inch screen and compete in lighter, thinner, narrow frames and lower energy consumption products. Manufacturers have R&D input in abnormality cutting wearable device and flexible panel for next generation technology, hoping besides the price competition can developing some more niche products to widen difference with competitors by technology and keeping sustainable operation in the industry.

4. Market competition situation

In competition of the industry, in order of countries input in TFT-LCD, countries are South Korea, Taiwan, China and Japan. Korea has large-scale investment in two big corporate groups Samsung and LG. Due to domestic support on their own brand, they lead in production volume and production value recent years. Taiwan’s manufacturers based on complete supply chain integration

and high production efficiency, the market share is hot pursuit subsequently after Korea manufacturer. The main manufacturers are Innolux and AU Optronics, etc. Japan manufacturers’ market share decrease gradually due to production cost and decreased in new factory investment plan, transfer to high end mobile display and ultra-big TV market. When we look at China, due to huge domestic demand, it attracts government’s support and factory’s input. Recently BOE and ChinaStar step into generation eight production, but due to the production line’s limitation, they cannot provide whole size product.

5.1.3 Research and Development

1. Technical Level and Research Development

We keep helping clients to intensify product competitiveness, fit market demand, and be friendly to the environment as our main objective of display technique development. About the development, it mainly includes environment protection materials, electronic saving and low power consumption, high pixel, high chroma, thin, narrow frame, high dynamic displays, touch, wide viewing angle, and all-around system services integration. We already have obtained remarkable achievements. These results of technical development are applying to TV, desktop monitor, Notebook, Tablet, Cell Phone, Medical, Industrial Display. Moreover, the integrated development on the touch components and panels of more advanced techniques and portable and wearable product applications are the key points of our future product design and development.

2. Facts of research & development:

With incessant efforts, the Company has insistently invested significant human resources, resources and funds in research & development to continually upgrade the quality of products, technology & know-how of new manufacturing process and application for new products. The Company would like to depict performance in research & development through three aspects below:

(1) In the aspect of upgrade of product quality: Including the technology & know-how for broad visual angle, high solution, low energy consumption, thin thickness, high hue, dyamic image, high dynamic range, narrow frames, new touch panel and the like.
(2) New material technical process: Including IGZO, In-Cell Touch Technique, Copper Manufacture Procedure, COA(Color Filter on Array), Photo-Alignment, Horizontal Electronic Field High Transparency and High Contract Positive Magnetic Susceptibility, Reducing Mask and Automotive wide temperature range display material technique.
(3) In the aspect of new product application: The up-to-date technology & know-how developed by the Company have been put into volume production one after another and applied onto a good number of products, including notably general cell phones, cameras, MPD, electronic paper, tablets, notebooks, desk monitors, AIO, television, medical treatment services, vehicular carriage, aerospace and touch panel and the like, in the dimensions ranging from 1.36” to 85” TFT-LCD products. In the days and years ahead, we shall continually invest in the research & development oriented human resources and fund to develop more and more TFT-LCD display and monitor products of added dimensions, application ranges, thinner, more environmental protection friendly and high efficiency to live up to the future trends in application and satisfy customers in varied ranges.

3. The consolidated research & development costs invested in the latest year as of the Annual Report date.

Unit: NT$ thousand

nual Report date.		Unit: NT$thousand
Item	2015	March31,2016
R & D expense	14,404,490	2,258,969
Net Revenue	364,132,984	56,417,120
Percentage of revenue (%)	3.96%	4.00%

4. Successful development technical or product

The company’s develop technical and products for each direction are listed below.

(1) TV:
A. The first company of the world develop 40-inch/50-inch/58-inch the best cutting efficiency size in G5.5/G6/G7.5 generation factory, we creating market differentiation and improve add-value of product.
B. Introduce 4Kx2K ultra high definition and high resolution TV display, the product line is complete, product size from 40-inch to 85-inch, providing higher quality TV image and better product competitiveness, lead 4K TV industry going to fast development and trend.
C. Introduce new size 40-inch/75-inch/85-inch TV display, overall arrangement in big size application, creating more differentiation product than competitors.
D. Develop high chroma technique, increasing to over 130% sRGB colour range and without increase energy consumption, not only increase the performance of display, but also make customers feeling more about the value-added of big size TV product.
E. Develop new MEMC improvement technique, apparent improving dynamic quality and integrate IC, increase dynamic picture quality and integrated technique.
F. Develop and mass produce a series of over 50-inch thin TV model (<10mm), providing artistic and fashion appearance model to clients.
G. Develop 0.5mm thin glass and apply to TV display, reduce glass usage and cost. Whole series big size TV import and mass production successfully.
H. Whole series big size TV import and mass production successfully.
I. Develop Inno Module model, combine narrow frames and front and back appearance, provide clients high competitive module and reduce assembled time and cost.
J. Cooperate with brand to develop big size (65-inch and 75-inch) Curve model, mass production successfully and assist client to introduce the product to the market for customers.
(2) Monitors:
A. Release whole series wide viewing angle VA desktop monitor panel and with high brightness, high contrast, high saturation, not only increase product quality and value, but also provide client the best choice of high end monitor LCD panel.
B. Develop several model of globally new Inno-touch monitor and AIO personal computer, by integrate touch as multi-function use can reduce module thickness to become light, increase touch functional can close to end customers’ need.
C. Release 28-inch and 32-inch 4K2K monitor panel, panel monitor can have higher resolution visual enjoyment, not only increase product value, but also provide client the best choice of high end monitor LCD panel.
D. Develop monitor panel of frameless and wide viewing angle and integrate InnoTouch, not only provide thinner and better appearance design to clients, but also have touch function and provide full service.

(3) Notebook:

A. Release whole series light-weight notebook panel, the thickness of whole series of notebook (11.6-inch/12.5-inch/13.3-inch/14-inch/15.6-inch) is only 2.6mm, show light feature and solve the heavy problem of notebook.
B. Interface technical of Notebook panel is totally from LVDS to eDP. It can connect to high resolution trend, also can save space to help thinner design of the system and lower the energy consumption.
C. Release whole series FHD AAS wide viewing angle notebook panel and goes with Low Power-consumption & Wide Color Gamut to increase color range but not increase energy consumption to increase visual performance.
D. Develop TOD technical on notebook panel, through touch integration, notebook not only can be thinner but also can reduce produce process of the module and simplify the complexity of new product.

(4) Small/Medium:

A. Develop oxide TFT technical, using the technique goes with wide viewing angle technique, reduce power consumption and increase optical performance, further can improve optical specification and realize high quality panel product.
B. Develop high resolution panel and smart phone panel, resolution can reach above 500ppi, at the

same time have high quality, low energy consumption features to delicate the image but not cost too much energy. The product successfully equipped with better viewing quality and lasting for long time to use in portable product.

C. Develop display with Low Power-consumption & Wide Color Gamut, increasing color gamut but not increase energy consumption in smart phone panel and tablet, can reach 130% sRGB color gamut and increase competitiveness of the product.
D. Develop LTPS AAS panel of frames narrow than 0.6mm and high resolution, reduce the size of the panel module to fit the narrow frames demand from smart phone and tablet user, increase the design freedom of portable device display appearance.

(5) Touch Panel:

The company already develops several touch technique solutions (including InnoTouch, TOD, TID, Hybrid, Total Solution):

A. New type Inno-touch technique is integrated touch panel and induction glass technology. The advantage is able to simplified production process and provides economic touch panel option. The technology can goes with multiple size panels; meets the new development trend of affordable electronic product toward to touch function.
B. Touch On Display (TOD): Through TOD technique can make portable device have light performance effectively, also with well optical performance and increase portable electronics competitiveness. Not only medium and small size smart phone and tablet apply and mass production, but also apply to bigger size notebook products.
C. Touch In Display (TID) & Hybrid : Not only have TOD technical advantage, the company develop TID Hybrid technical to make it even more lighter, and high touch sensibility technique apply to portable product can improve the users’ experience about portable electronic product.
D. Provide more completeness Touch Total Solution: Through highly vertical integration of streamlined production, we may provide client complete and all-round touch integration service. Not only shorten the process and time of production and delivery, but also help client to enter the market, make better arrangement and configuration at capacity and resource of panel and touch. Equip with integrated InnoTouch, TOD, TID Hybrid product and process technical to serve customers.
(6) Special Application

Release 21.3-inch to 30-inch (AAS; 5/6/10/14 MegaPixel) medical LCD display, with high resolution, high brightness, high contrast, adopt 10 bits drive new technology and high efficiency LED BL, to make the image more delicate and medical personnel can make more precise judgment. Big size public display 75-inch/ 85-inch present natural high color gamut and give consideration to both indoor and outdoor environment. Also first release horizon LCD display (32:9) presents multiple sizes can fit for multiple environments.

5.1.4 Long- and Short-Term Business Development Plans

1. Short-Term

In the short-run, we shall devote ourselves profoundly toward televisions, notebooks, tablet computers, cell phones, monitors oriented to vehicles, medical treatment services and industries. Continually we shall help customers pep up competitive edge through our pround monitor technology & know-how, live up to the market and environment-friendly demands. About the development, it mainly includes environment protection materials, electronic saving and low power consumption, high pixel, high chroma, thin, narrow frame, high dynamic displays, touch, wide viewing angle, and all-around system services integration. We already have obtained remarkable achievements. Meanwhile, we shall spare no effort to profoundly team up with customers in strategic alliance to solidify our firm foundation in the panel supply chains and create the happy win-win aspects through the teamwork.

2. Long-Term

Long-term development: Other than the efforts to do research & development for up-to-date monitors, strengthen manufacturing process to optimize the productivity. For the emerging of new model monitor know-how, we shall invest appropriate resources, cultivate autonomous development capability, like the embedded touch know-how, super narrow frames, super thin design, super high solution, curved plate design and niche oriented application products and the like. Through such efforts, we hope to set up the optimal strategic deployment in the brand new monitor application regions. Meanwhile, we shall further stress value

chian integration and development of products high added values, to make our products more competitive in both pricing and specifications to provide customers with added solutions and services and to provide terminal end consumers with added excitements in visual enjoyment.

5.2 Market and Sales Overview

5.2.1 Market Analysis

1. Main products selling area

	Unit；NT$thousand；%	Unit；NT$thousand；%	Unit；NT$thousand；%
	Area	Amount ofSales	%
	Domestic sales	103,617,666	28.46%
Foreign sales	Americas	21,274,692	5.84%
	Europe	24,000,586	6.59%
	Asia	213,401,351	58.61%
	Other Area	1,838,689	0.50%
	Total amount of F/S	260,515,318	71.54%
	Total	364,132,984	100.00%

2. Market Share

According to the statistic of IHS/DisplaySearch research report, until Q3 2015, the market of the company’s big size panel shipment is 18%, which is the third-largest supplier of the world LCD panel industry. Based on application product, global market share of LCD display panel is 18.3%, maintains world’s second ranking performance; global market share of LCD TV panel is 19.1%, world’s third ranking performance; global market share of notebook (including tablet) is 17.4% which is the world’s third ranking. Overall, under the tough economic environment and strong market competition, the company still maintains nice performance in the market of big size product application. The market share of medium and small panel is 7.2% until Q3 2015.

3. The supply and demand situation and growth of the future market

Due to the outstanding product feature and the continuous improvement of cost and quality, TFT-LCD already become the mainstream of flat display and the sales will keep growth as the improvement of application level and penetration. According to the estimation of IHS/DisplaySearch, the global shipment of big size (over 9-inch) TFT-LCD panel will be 520 million chips.

If analyzing market size of several main application level, about LCD TV part, as new size development and new technical input and plus new capacity growth stable, global shipment of LCD TV will be 230 million in 2015 and average size increase an inch each year. About LCD monitor, the shipment forecast is 136 million and will slightly decline to 134 million, but as the demand increased of big size and high resolution product, the penetration rate of high value product will increase gradually. About mobile PC (including notebook and tablet), the shipment is 370 million slightly declined in 2015 and the forecast will slightly decline to 360 million in 2016.

==> picture [433 x 115] intentionally omitted <==

----- Start of picture text -----

Million
----- End of picture text -----

Data Source: DisplaySearch

According to the estimation from IHS/DisplaySearch, global shipment of medium and small size panel will be 230 million in 2015, increased 6.4 % compared with 2014. The shipment will be 240 million in 2016 and annual growth rate is 3%. Cell phone shipment reach 159 million in 2015 and the forecast will increase to 171 million in 2016 and annual growth rate is 7.4%.As middle-end smart phone rapid growth in emerging countries market, it will keep driving the demand of cell phone’s panel; the overall cell phone panel shipment

is going to grow continually until 2020 and will be the main growth power of middle and small size panel.

Amidst the unpredictable macroeconomy, competition amidst the industries, expansion and competition by newly joining competitors amidst products and technology & know-how that have been developed and changed in each and every passing day, the TFT-LCD products would be subject to high level circulation uncertainty. In the face of the mounting cutthroat competition, we shall launch overall upgrade of all substances to deal with all sorts of challenges.

We shall boost marketing by means of improved operating efficiency, refined management, product development, customer services, technical research & development and such efforts. In turn, we will be able to intensify gross profit in sales, cost control to further intensify competitive edge.
Continued investment in research & development to suffice technical talents, improve product design and application of materials. We shall proceed with research & development of advanced and improved manufacturing process and new generation monitor technology & know-how so as to create added lead in know-how of products and production costs.
With wholehearted efforts, we shall deploy integrated product lines for new products. The products manufactured by our Company cover televisions, computers, mobile devices, vehicles- and medical treatment oriented products. We provide varied modes to sell panels, whole machines, touch integration and the like. Through such efforts, we virtually bring down the potential risks of fluctuation with single products.
We intensify integration of supply chains to stay in close teamwork with suppliers to deepen deployment of strategic customers, strengthen responsiveness toward supply and demand fluctuation and, meanwhile, boost approval-level from customers.

4. Niches in competition.

(1) Business model:

Since we launched the three-in-one merger, we have continually demonstrated the integrated concerted performance (synergy). Through the business policies with “leadership with know-how and quality, boosting of production efficiency and quality”, we have enhanced the operating efficiency by leaps and bounds and gradually open the new aspects amidst the cutthroat competition.

(2) Vertical and horizontal integration:

In an attempt to strengthen integration of our products, boost cost competitiveness, demonstrate maximum possible benefit in supply chain management, other than production of TFT-LCD panel modules, we dominate a significant ratio of design and manufacture of parts & components, including LED panels, color filter, light guide plate, Backlight Module, PCBA and such structure pieces which could be manufactured inside our home factory or overseas subsidiaries. Thanks to such high leve vertical integration, we have taken advantage in lowering costs, prompt response to assure top level quality.

(3) Portfolios of our products:

The principal products of the Company include notably the TFT-LCD panel modules primarily including: Large size like LED TV, desktop monitor and laptop plate; mid-small size like mobile phone, tablet PC, automotive display. Various products with advanced wide viewing angle and high resolution manufacturing techology. We satisfied every level of your needs.

(4) Our advantages in costs:

Through the hands-on experiences accumulated by TFT-LCD manufacturers at home and abroad, we could conserve quite a few time which is normally indispensable to try & err. In procurement of machinery & equipment, the hands-on experiences accumulated by the suppliers in installation could help us conserve partially the costs. Further coupled with the aforementioned advantages in the unique operation mode and vertical integration, we well outperform horizontal trades in terms of costs required for production.

(5) Concerted performance (synergy) in marketing:

We are dominant of sound marketing channels to get connected with world class customers. Toward those world-class giant customers, we are capable of rendering prompt design, integrated

products with global services through which our customers enjoy the excitements of one-stop shopping.

(6) Customize

Provide customize service for our customers.

In looking back over 2015, our production lines for all sorts of panels were complete and comprehensive and were in an excellent position to enable customers to enjoy the excitements of one-stop shopping. In extensive aspects notably the productivity scale, product design capability, quality rate, supply, managerial plans as well as financial stability, we have accomplished further upgrade.

Besides, the Company has continually without interruption teamed up with customers in the product designs and supply chain management profoundly to continually boost customer approval-level and, in turn, expanded our shares in the panel markets. In 2015, we saw continued shipment growth, apparently that our efforts in performance have yielded fruit step-by-step. We anticipate that in the days and years ahead, we are in a position to further optimize product, upgrade quality and assure further upgraded approval-level from customers.

5. Advantage and disadvantage of long term development and reaction strategy

(1) Advantage:
A. Keep developing new product applications

With rapid development of wireless communication and cloud technologies, TV, PC, pad and cellphone are gradually integrated their contents. The development of “one cloud with multiple screens” is the major strategy of all companies. Because the service of cloud information is surrounding people’s life, the flat-panel monitor, as the intermediary of information, has become more important. The more delicate the information content is, the demand of size, resolution, visual angel, and light specification design of consumers rise. It also raises the unit price of TFT-LCD products, and brings new applications and demand increases. The main stream products of all major TV industry brands is ”smart TV”, which is also the sign of the rapid involvement of cloud applications in TV area. 4K2K ultra HD TV, which were put into market in the second half of 2012 and provided higher level of joy for watching TV, has grown very fast and become the major spec of middle or high end product from 2015.

Regarding to the LCD monitors, because the market is more matured, the major product requirement is energy saving and HD quality to encourage the customers to upgrade the current product lines. Regarding to notebooks, the new market drives come from the new operating system and calculating platform. Ultra Mobile products innovation, this is good for the production of middle size panels. Regarding to the medium and small size panels, the common use of smart phones and gradually matured touch panel technologies allows smart phones to become general consumer products. The delivery of production is growing rapidly while 2015 might deliver more than 1.59 billion and 2016 1.71 billion to be expected. Because the panel size of smart phone increases from the size of functional phones, panel’s unit price rises while the requirements of wide visual angle, high resolution, and color presentation upgrades. Thus, cellphone panels’ revenue rises rapidly, too.

B. Stable customer base

Our major customers are global consumer electronics companies, which have important stands in TV, PC and mobile communication industry globally. Moreover, because the trends on integration of consumer electronics and personal computers are obvious, the market will still be dominated by the international big companies, and develops with the direction of “the big ones get bigger”. Therefore, in the company’s perspective, we not only can grow our revenue rapidly, the market share of us is also expected to keep increasing with our major customer basis.

Under the synthesized effects of the three factors: rise of production line completion, stronger customer base, keep developing new customers in newly developed market on the current customer basis, the company’s revenue is expected to grow stably and rapidly, and the global market share will grows gradually as well.

C. Globalized strategy

Innolux has been recognized as the best LCD panel supplier in all aspects, and had been setting up global strategy aggressively. Now we have production base of post-production LCD panel module and monitor in Shenzhen，Ningbo, Foshan, Nanjing in China, and we also have delivery hubs in major cities in Asia, Europe, and America, so that we can achieve “deliver just in time” object and strengthen the long term cooperative relationship with customers.
D. Vertical integration in depth

Innolux has been working in TFT-LCD industry for a long time, and we have the professional knowledge and managing capability in LCD panel, module, mechanism, and optical components’ R&D, production, and selling. We are more cost-effective and have better capability to service the customers timely than unitary TFT-LCD factory.

(2) Disadvantage and Reaction Strategy
A. The balance of supply and demand is hard to keep due to the intense competition in this industry.

LCD panel industry’s economy cycle is more obvious than other industry and the balance of supply and demand is more difficult to maintain because the high capital intensity and long establishment time. Other competitors in Taiwan, Japan and Korea are planning to build up next generation panel factories and the rising production capability in China since 2012 also brought competition to the industry. Innolux has 3.5th generation, 4th generation, 4.5th generation, 5th generation, 6th generation, 7.5th generation, 8.5th generation and 8.6th generation production lines, which can produce all sizes of LCD panels and touch panels. The production capability is the 3rd largest panel manufacturer. We try to produce the best combination of products and adjust the production allocation according to market supply-demand condition, so that we can optimize the use our production capacity.

B. The complicated technology and patent portfolio

The design and production of TFT-LCD requires highly professional technology. All companies that in this industry are aggressively making their portfolio in technology and patent applications. To avoid the violation of patent rights in the production process, Innolux has been developing our own patents and technology since the beginning of this company. We recruited domestic and international talents to join the research team, and evaluate the feasibility of getting the usage rights of some key technology from foreign companies at the same time. Regarding to intellectual poverty, we not only aggressively conduct R&D and the patent applications, we also keep strong legal support team to protect our intellectual poverty.

C. The global economy influences demand and supply

Global growth for 2015 is projected at 3.1 percent, 0.3 percentage point lower than in 2014, and 0.2 percentage point below the forecasts in the July 2015 World Economic Outlook (WEO) Update.

Prospects across the main countries and regions remain uneven. Relative to last year, the recovery in advanced economies is expected to pick up slightly, while activity in emerging market and developing economies is projected to slow for the fifth year in a row.The regional or global economy fluctuate will influence the demands of LCD monitor products. We provide products that are competitive for its cost and specifications by constantly optimizing our products and technology. We also help our supply chain partners to develop business to diminish the operation disadvantages of fluctuation of external demands.

5.2.2 The Production Procedures of Main Products

1. Important function of main products

(1) TFT-LCD

TFT-LCD products are display application for digital information delivery, its wide application including information display equipment for business and industry, computer, telecom related and consumer electronics display equipment, etc. As the development of integrated digital age 3C market, the main area of TFT-LCD product are:

Information Technology, IT: such as Desktop monitor and Notebooks, etc.
� LCD TV
Communications and Consumer Electronics: Mobile phone, digital camera, digital video, digital photo frame, automotive display, portable DVD player, portable game console, tablet and other high mobility and portable electronic products application.
Special application: medical display, Avionics display, automotive display and other touch panel application.
(2) Touch Panel business
Small size (below 7 inch) products mainly apply to smart phone, multimedia player, GPS and digital camera, etc.
Medium size (7 inch to 19 inch) products mainly apply to tablet, eBook, Ultrabook, notebook, etc.
Large size (above 20 inch) products mainly apply to All-in-one computer (AIO), Public Information Display, etc.

2. Production process of main products

(1) Three Steps in the TFT-LCD Production Process:
In the Array or TFT Process mentioned in the preceding paragraph, injection and washing for glass baseplates→gate metallic layer sputtered coating→gatemetallic layer lithography→Semiconductor layer continued filming→Semiconductor
- lithography→source/drain film-forming→source/ drain medal sputtered coating→source/drain lithography→Protection film manufacturing process→Protection film lithography→Transparent conducting layer sputtered coating transparent conducting layer lithography→thin film transistor electrical analysis→thin film transistor completion.
Cell or LCD Process: The Cell process fits the Array substrate to a color-filter substrate; liquid crystal is then inserted between the two substrate layers.
Module Assembly or LCM Process: taking the panel from the Cell process and bonding the assembling backlights, IC and frame and other components to make the Open cell, module and system and other types based on clients’ demand.
(2) Touch Panel business
Sensor Process: Use Semiconductor Litho process to put sensor on the glass.
Lamination & FPC Bonding Process:
Touch panel modules and LCD/LCM assembling process (TP & LCD/LCM Direct Bonding & Advanced Direct Bonding): A.TP & LCM: taking LCM as the baseplates to be attached to the touch panel modules for overall combination. B.TP & LCD: LCD(Open-Cell) as the baseplates to be attached to the touch panel modules for overall combination before being assembled with Back Light modules(BLM).

5.2.3 Supply Status of Main Materials

Major Raw Materials	Source of Supply	Supply Situation
Driver IC	Supplier U	Good
Glass	Supplier P,SupplierQ,Supplier S	Good
Polarizer	Supplier R,Supplier T,Supplier V	Good

5.2.4 Major Suppliers and Clients

A. Major Clients Information for the Last Two Calendar Years

Unit：NT Thousand$

					Unit：NT Thousand$	Unit：NT Thousand$	Unit：NT Thousand$	Unit：NT Thousand$
Item	2014				2015
	Company Name	Amount	Percent	Relation with Issuer	Company Name	Amount	Percent	Relation with Issuer
1	－	－	－	－	Customer A	39,802,830	10.93	－
2	Others	428,661,898	100.00	None	Others	324,330,154	89.07	None
	Net Total Supplies	428,661,898	100.00	－	Net Total Supplies	364,132,984	100.00	－

B. Major Suppliers Information for the Last Two Calendar Years

Unit：NT Thousand$

Item	2014	2014	2014	2014	2015	2015	2015	2015
	Company Name	Amount	Percent	Relation with Issuer	Company Name	Amount	Percent	Relation with Issuer
1	Others	248,184,050	100.00	－	Others	205,711,096	100.00	－
	Net Sales	248,184,050	100.00	－	Net Sales	205,711,096	100.00	－

5.2.5 Production over the Last Two Years

Unit: NT Thousand$

Year Output Major Products (or bydepartments)	2014	2014	2014	2015	2015	2015
	Capacity	Quantity	Amount	Capacity	Quantity	Amount
TFT-LCD	605,200	574,940	371,700,000	368,000	349,515	317,400,000
Total	605,200	574,940	371,700,000	368,000	349,515	317,400,000

5.2.6 Shipments and Sales over the Last Two Years

Unit：NT Thousand$

Year Shipments & Sales Major Products (orby departments)	2014	2014	2014	2014	2015	2015	2015	2015
	Local		Export		Local		Export
	Quantity	Amount	Quantity	Amount	Quantity	Amount	Quantity	Amount
TFT-LCD	56,087	91,333,989	405,536	337,327,909	76,165	103,617,666	298,805	260,515,318
Total	56,087	91,333,989	405,536	337,327,909	76,165	103,617,666	298,805	260,515,318

5.3 Human Resources

	Year	2014	2015	As of 4/30/2016
Number of Employees	Manager	2,974	2,873	2,828
	IDL	17,306	15,810	14,817
	DL	79,952	61,962	51,918
	Total	91,232	80,645	69,563
	Average Age	27.50	28.75	29.61
Average Years of Service		2.79	3.37	3.90
Education	Ph. D.	0.11%	0.12%	0.13%
	Masters	6.28%	7.28%	8.20%
	Bachelor’s Degree	73.14%	75.74%	73.51%
	Senior High School	15.99%	14.42%	15.63%
	Below Senior High School	4.48%	2.45%	2.53%
	Total	100%	100%	100%

5.4 Environmental expenditures Information

Innolux has disclosed the reactions and the total lost (including compensations) and the possible expenses (including the costs of reactions haven’t been taken, estimated amounts of punishments and compensations. We also explain the reason if there is any cost we couldn’t estimate.) of environmental pollutions.

Mar 6, 2015, Nanjing Innolux Optoelectronics Ltd. had been reported for excess storage of chemicals and imposes a fine for RMB 20,000. This reported incident happened because the inventory amount Non-compliance the rules of Nanjing production security rule.
(1) Getting that excess storage of chemicals to return process immediately.
(2) Controlling for each of the chemicals to ensure the storage of chemicals is not excessive.

5.5 Labor Relations

5.5.1 List any employee benefit plans, continuing education, training, retirement systems, and - the status of their implementation, and the status of labor management agreements and measures for preserving employees' rights and interests.

Employee welfare and the situation of implementation
(1) Besides the basic monthly salary, we also provide Luna Festival, dragon boat festival and New Year bonus, and proper performance bonus according to the company operation revenue.
(2) Our Employees have the labor insurance, citizen health insurance, and group insurance from the very first day of employment.
(3) We have employee restaurants in all factories, and provide meal substitutes according to the company rules.
(4) With the concepts of energy, comfortable life, and happiness, we built the employee’s center, which provides leisure and exercise functions to release our employees’ mental and physical stress.
(5) We set up the employee welfare committee to be responsible for welfare planning and execution, including club activities, exercise periods, earth environmental day, family day, coherence activities, public lecture, special discounts and festival substitutes, wedding or other special events, and emergencies.
(6) We provide health promotion and a mental consulting plan to take care of employees’

mental and physical health.

(7) Strengthening the concepts of sustainable management: we hire mentally or physically ill employees and insist on environmental protection and being responsible for social welfare.
(8) We integrate and continuously improve the system, process and plan of talents development, and we earned the Silver Award of TTQS’ evaluation in 2015.
(9) We provide internal and external trainings, such as professional studies, headquarter training, oversea training to develop employees’ professional knowledge and skills.
(10) Comprehensive certification development framework, based on the professional positions and management functions certification to promote quality, green products, and regulatory courses vertically; also, to promote departmental training horizontally in order to achieve the company’s objectives and to provide the diversified education and training network needed by the organization.
Retirement structure and the situation of implement
(1) Retirement structure and the situation of implement.
(2) We hire actuary to evaluate our employees’ retirement preparation fund and issue the evaluation report according to the ROC’s financial principles.
(3) We transfer 2%~15% monthly salary to retirement preparation every month.
(4) We will conduct the new retirement structure according to the laws from Jul 1, 2005.
Labor and management settlement

The rights and obligations of our labor and management follow the rules of our company operation. The relations between labor and management are good without and dispute settlements.

In order to maintain mutual communications and interactions, we have communicating meetings such as labor-management meeting, the Employee welfare union meeting and mobilization meetings etc., issuing INX digital news, establishing employee communication mailbox to listen and solve employees’ opinions and thoughts.

Working environment and individual safety protection
(1) Safety and Health organization and operation

The company has an environmental safety office to be in charge of all safety and health risks in company operation management, and to integrate the safety and health departments in all factories. The environmental safety office reports to the factory manager, related departments and the soviet in “factory fields’ safety and environmental protection committee” every season.

Analysis and Statistics of Occupational Hazards

Through the incident management system the company analyzes the statistics and causes of incidents including traffic accidents and near miss. With reports and surveys generated, the system would announce improvements in hazard prevention, as well as accident reviews and improvements. It also ensures parallel deployment across plants to prevent re-occurrence of incidents. Over 2015 the Disabling Frequency Rate (FR) increased by 9.50% compared with 2014, while the Disabling Severity Rate (SR) increased by 28.70% compared to 2014.

In addition, the Disabling Severity Raty (SR) decreased from 11.59% in 2010 to 6.24% in 2015, reduced the number of days lost about 1,593 days also reduced the loss NTD$ 2560,000.

Business Continuity Management

Innolux has been providing ESH management and training to vendors. A structure is in place for hazard identification, risk assessment and emergency response for high-risk operations. Monthly meetings are conducted with contractors for two-way

communication and coordination and doing PDCA if the accident happened.

ESH Training

'Employees are the most valuable asset. Training is an investment that never depreciates.' ESH training is the basis for the promotion and practical implementation of our ESH management. We make long-term investments in human and material resources according to the hazard profile of each plant.

We plan, design and deliver training to the staff regarding ESH knowledge and skills, such as handling chemicals, dangerous machinery and equipment, injury prevention, machinery safety, fire safety management, and plant safety management. We also monitor and control the training quality and effectiveness. In 2015, 1,999 ESH training sessions were held, for a total of 493,601 participants. On average, employees joined over 5 training sessions per person per year.

(2) Safety Culture and Risk Management Self-audit on Injury Prevention and Risk Management

Early waring system

The system divided into 5 levels, base on plant equipment, facilities, inside & outside trend, irresistible natural disasters and man-made disasters to pre-defense and notify manager immediately.

Prevention of manmade disasters

Due to musculoskeletal disorders percentage increase this few years, prevention of company as below:

A. Identification and analysis of the risk of job-specific processes of a systematic, resource and continuous improvement mode execution.

B. Occupational Safety and Health Act will trigger repetitive operations, such as pre-musculoskeletal diseases Anti concept implanted "hazard identification and risk assessment norms" to implement career

In order to effectively prevent and control concepts, health management must be through hazard awareness, assessment and control improvement.

(3) Recruitment and Staffing

Innolux’s goal is to employ qualified personnel to create the best possible performance. Our company cares about diversity and equal opportunity. We do not allow employment discrimination based on race, color, age, gender, sexual orientation, ethnicity, disability, pregnancy, religion, political affiliation, union membership, and marital status or otherwise. In our day-to-day operations, this means that we monitor and manage our human resources consciously. We analyze and improve turnover patterns. We build a labor force with a balanced structure, which was also integrated into our recruiting policy.

(4) Zero Distance Communication

Innolux emphasizes harmonious labor relations. To this end, we convene quarterly meetings with the labor-capital committee and the Employee Welfare Committee. High-level managers from the capital side and grassroots level representatives from the labor side engage in two-way face-to-face communications, to exchange views in an open atmosphere. We also have built a full range of communication channels, which employees can use under their names or anonymously. The Employee Care Hotline, the Employee Care Mailbox, and the opinion box help employees to find quick solutions to their problems.

Workplace Free from Sexual Harassment

To protect employees from sexual harassment, Innolux adopted the 'Sexual Harassment Prevention, Complaint and Management Procedures for Taiwan site' to effectively prevent and deal with sexual harassment. Investigation of sexual harassment is conducted in a non-public fashion to protect the privacy of the parties involved. Everyday protection from sexual harassment is promoted through the start-up screens of computers to build a friendly workplace and eliminate sexual harassment. In 2015 16 sexual harassment cases were reported, handled, and solved.

EAPs Employee Assistance Programs

Employees are company's most important asset. Innolux understands how difficulties may affect an individual’s work and life. Therefore, Innolux takes a systematic and embedded approach to offer appropriate professional resources, such as employee communications, psychological counseling, and healthcare, in an effort to reduce the impact that problems may have on our employees' work and lives. We hope to enable our employees to work with a fit body and a healthy mind and improve productivity.

Integrated Employee Care Channels

Innolux takes employee feedback seriously. We offer various feedback channels to employees, to effectively prevent and solve employee issues. From 2013 onward, we put more focus on integrating our employee care channels across Taiwan and China. Thus, we unified the representative code of Employee care hotline and the Employee Care Mailbox at different sites. The same was advertised via internal announcements and the start-up screens on computers. We expect this integrated approach will pay off through more efficient handling of cases.

5.5.2 List any loss sustained as a result of labor disputes in the most recent fiscal year, and during the current fiscal year up to the date of printing of the annual report, disclose an estimate of losses incurred to date or likely to be incurred in the future, and indicate mitigation measures being or to be taken. If the loss cannot be reasonably estimated, make a statement to that effect. NT$2,250 Thousand.

5.6 Important Contracts

5.6 Important	Contracts
Agreement	Counterparty	Period	Major Contents	Restrictions
Lease Agreement of the Land	Science-based Industrial Park Administration	Feb 2001- Dec 2020	Lease of land for Chunan Base of Hsinchu Science Park in Miaoli County	Pursuant to the terms and conditions set forth under the Agreement
Lease Agreement of the Land	Science-based Industrial Park Administration	May 28, 2003 - Dec 31,2022	Leasehold of land	Pursuant to the terms and conditions set forth under the Agreement
Lease Agreement of the Land	Science-based Industrial Park Administration	Feb 2004 - Dec 2023	Lease of land for Chunan Base of Hsinchu Science Park in Miaoli County (Plant No. II)	Pursuant to the terms and conditions set forth under the Agreement
Lease Agreement of the Land	Science-based Industrial Park Administration	Apr 6, 2004 – Dec 31,2023	Leasehold of land	Pursuant to the terms and conditions set forth under the Agreement
Lease Agreement of the Land	Science-based Industrial Park Administration	Dec 1, 2007 – Dec 31,2026	T2 Leasehold of land oriented for factory	Pursuant to the terms and conditions set forth under the Agreement
Lease Agreement of the Land	South Taiwan Science-based Industrial Park Administration	Mar 9, 2015 - Mar 8, 2035	Leasehold of land	Pursuant to the terms and conditions set forth under the Agreement
Engineering Project Agreement	Chung Lin Construction Co., Ltd.	Feb 2001Till expiry of warranty period	FAB I Project of Civil Engineering Construction	Pursuant to the terms and conditions set forth under the Agreement
Engineering Project Agreement	Hu Tzu Construction Co., Ltd.	Jul 2005Till expiry of warranty period	FAB II Newly constructed project	Pursuant to the terms and conditions set forth under the Agreement
Engineering Project Agreement	Cheng Teh Fireproof Industrial Co., Ltd.	Sep 2005Till expiry of warranty period	New construction of Plant No. II, award of the fire prevention project contract	Pursuant to the terms and conditions set forth under the Agreement
Lease Agreement	Chan Mao Optical Co., Ltd.	Jul 4, 2013 – Jul 3, 2016	Leasehold of land for construction purposes	Pursuant to the terms and conditions set forth under the Agreement
Syndicated Loans	CTBC Bank and the bank syndicate	Jul 8, 2004 – Jul 8, 2015	Financing for fund for setup (establishment) of next generation (Generation V up) fund financing for TFT-LCD.	Pursuant to the terms and conditions set forth under the Agreement
Syndicated Loans	Mega Bank and the bank syndicate	Feb 2005 – Mar 2015	FAB I Loan for machine and equipment procurement	Pursuant to the terms and conditions set forth under the Agreement
Syndicated Loans	Bank of Taiwan and bank groups	Mar 9, 2006 - Nov 15, 2016	Financing Loan for next generation (Above 7.5 generation) of TFT-LCD procurement	Pursuant to the terms and conditions set forth under the Agreement
Syndicated Loans	Bank of Taiwan and bank groups	Feb 8, 2007 – Aug 8, 2016	Financing Loan for next generation (6 generation) of TFT-LCDprocurement	Pursuant to the terms and conditions set forth under the Agreement
Syndicated Loans	CTBC Bank and the bank syndicate	Aug 2008 – Aug 2016	Loan for factory and machine and equipment procurement	Pursuant to the terms and conditions set forth under the Agreement
Syndicated Loans	Mega Bank and Taiwan Cooperative Bank and other 20 bank	Sept 25, 2008 – Nov 20, 2016	Invest to build generation 6 TFT LCD factory and the fund for machine and equipment and the related	Pursuant to the terms and conditions set forth under the Agreement

Agreement	Counterparty	Period	Major Contents	Restrictions
			attached equipment procurement, NT$ 24 billion and US$ 200 million.
Syndicated Loans	Bank of Taiwan and bank groups	Sept 9, 2009 – Sept 9, 2016	In an attempt to reimburse the syndicated loan credit loans due in 2009 and June 2010.	Pursuant to the terms and conditions set forth under the Agreement
Syndicated Loans	Mega Bank and Taiwan Cooperative Bank and other 19 bank	Nov 17, 2009 – Nov 14, 2016	To be used to suffice the Company’s general mid-term working capital and to expand the existent productivity and equipment & facilities, in the amount ofNT$48billion.	Pursuant to the terms and conditions set forth under the Agreement
Syndicated Loans	Bank of Taiwan and bank groups	Mar 12, 2015 - Mar 12, 2018	1. To be used by the Loanee to reimburse, under the syndicated accord, the mid-term and long-term syndicated loans, for all fund required for the outstanding balance of principal as mentioned above. 2. In the amount of NT$68.5billion	Pursuant to the terms and conditions set forth under the Agreement
Joint agreement of settlement contract	Bank Syndicate	Apr 5, 2012 – Dec 31, 2016	Negotiate with syndicate to extend the participating loan and medium-short term loan amount	Pursuant to the terms and conditions set forth under the Agreement
Patent authorization	Foreign Company A	Jun 17, 2013 – Jun 17,2016	3D Relevant technology & know-how	Pursuant to the terms and conditions set forth under the Agreement
Cross-licensing	Foreign Company B	Sept 30, 2010 – Sept 30,2017	LCDRelevant patents	Pursuant to the terms and conditions set forth under the Agreement
Cross-licensing	Multinational Enterprise C.	June 28, 2010 - Dec 31,2019	IPS Relevant technology & know-how	Pursuant to the terms and conditions set forth under the Agreement
Cross-licensing	Foreign Company D	Jul 2, 2012 – Jul 7, 2022	Display of the relevant cross-patent licensing within the regions.	Pursuant to the terms and conditions set forth under the Agreement
Cross-licensing	Foreign Company E	Jul 1, 2013 – Jul 1, 2023	LCD Relevant technology & know-how	Pursuant to the terms and conditions set forth under the Agreement
Patent authorization	Foreign Company F	Jan 1, 2013 – Dec 31, 2019	LCD Relevant technology & know-how	Pursuant to the terms and conditions set forth under the Agreement
Patent authorization	Foreign Company G	Sept 5, 2013 – Sept 5,2018	LCD Relevant technology & know-how	Pursuant to the terms and conditions set forth under the Agreement
Patent authorization	Multinational Enterprise H	Oct 31, 2013 - Oct 31, 2017	LCD related technical	Pursuant to the terms and conditions set forth under the Agreement

VI. Financial Information

6.1 Five-Year Financial Summary

6.1.1 Five-Year Financial Summary

1. Condensed Balance Sheet-IFRS-Consolidate

Unit: NT Thousand

Year Item	Year Item		Five-Year Financial Summary(Note1)	Five-Year Financial Summary(Note1)	Five-Year Financial Summary(Note1)	Five-Year Financial Summary(Note1)	Financial data of ending date in March 31, 2016
		2011	2012	2013	2014	2015
Current assets		－	173,139,399	171,701,969	189,380,812	138,866,987	108,812,385
Fixed assets		－	332,525,859	273,505,759	233,609,843	199,482,740	193,473,161
Intangible assets		－	22,909,059	21,214,994	20,219,137	19,342,856	19,090,785
Other assets		－	42,888,840	41,778,163	39,306,763	29,749,753	29,882,030
Total assets		－	571,463,157	508,200,885	482,516,555	387,442,336	351,258,361
Current liabilities	Before distribution	－	237,566,939	300,586,751	199,135,498	110,471,463	91,887,681
	After distribution	－	237,566,939	301,944,190	206,082,686	Note 3	－
Non current liabilities		－	162,539,193	13,036,280	54,209,621	44,706,150	36,560,388
Total liabilities	Before distribution	－	400,106,132	313,623,031	253,345,119	155,177,613	128,448,069
	After distribution	－	400,106,132	314,980,470	260,292,307	Note 3	－
Equity attributable to owners of theparent		－	169,823,860	193,043,229	227,690,063	232,264,723	222,810,292
Capital stock		－	79,129,708	91,094,288	99,545,364	99,532,372	99,526,816
Capital surplus		－	119,677,980	96,058,741	99,584,369	99,643,564	99,645,204
Retained earnings	Before distribution	－	(24,979,239)	7,421,697	26,632,674	30,338,450	21,756,942
	After distribution	－	(24,979,239)	7,331,202	19,685,486	Note 3	－
Other equityinterest		－	(4,004,589)	(1,531,497)	1,927,656	2,750,337	1,881,330
Treasurystock		－	－	－	－	－	－
Non controllinginterest		－	1,533,165	1,534,625	1,481,373	－	－
Total shareholders’ equity	Before distribution	－	171,357,025	194,577,854	229,171,436	232,264,723	222,810,292
	After distribution	－	171,357,025	193,220,415	222,224,248	Note 3	－

Note 1: Financial data by IFRS less than 5 years, preparing the following report by ROC GAAP Note 2: Numbers are audited.

Note 3: Pending on approval of shareholders at Annual General Shareholders’ Meeting

2. Condensed Statement of Income-IFRS-Consolidate

Unit: NT Thousand

Year Item		Five-Year Financial Summary (Note1)	Five-Year Financial Summary (Note1)	Five-Year Financial Summary (Note1)	Five-Year Financial Summary (Note1)	Financial data of ending date in March 31, 2016
	2011	2012	2013	2014	2015(Note3)
Operatingrevenue	－	483,609,931	422,730,500	428,661,898	364,132,984	56,417,120
Grossprofit(loss)from operations	－	4,499,935	37,759,115	50,385,001	46,640,105	(4,037,460)
Net operatingincome(loss)	－	(19,749,654)	15,349,268	28,173,396	22,430,709	(8,402,287)
Non-operatingincome and expenses	－	(11,064,521)	(9,705,915)	(5,639,056)	(7,571,522)	(131,293)
Profit(loss)before tax	－	(30,814,175)	5,643,353	22,534,340	14,859,187	(8,533,580)
Profit (loss) from continuing operations	－	(30,167,283)	5,095,019	21,676,908	10,814,141	(8,581,508)
Profit (loss) from discontinued operations	－	－	－	－	－	－
Profit(loss)	－	(30,167,283)	5,095,019	21,676,908	10,814,141	(8,581,508)
Other comprehensive income,net	－	(1,975,663)	2,859,517	3,159,493	507,196	(882,994)
Comprehensive income	－	(32,142,946)	7,954,536	24,836,401	11,321,337	(9,464,502)
Profit (loss), attributable to owners ofparent	－	(29,899,236)	5,102,568	21,676,759	10,815,594	(8,581,508)
Profit (loss), attributable to non-controllinginterests	－	(268,047)	(7,549)	149	(1,453)	－
Comprehensive income, attributable to owners ofparent	－	(31,688,130)	7,953,076	24,844,853	11,352,532	(9,464,502)
Comprehensive income, attributable to non-controllinginterests	－	(454,816)	1,460	(8,452)	(31,195)	－
Earningsper share	－	(4.00)	0.57	2.31	1.09	(0.86)

Note 1: Financial data by IFRS less than 5 years, preparing the following report by ROC GAAP Note 2: Numbers are audited.

Note 3: Pending on approval of shareholders at Annual General Shareholders’ Meeting

3. Condensed Balance Sheet-IFRS-Alone

Unit: NT Thousand

			Unit: NT Thousand	Unit: NT Thousand	Unit: NT Thousand	Unit: NT Thousand
Year Item			Five-Year Financial Summary(Note1)
		2011	2012	2013	2014	2015
Current assets		－	147,154,273	138,274,531	162,875,147	111,926,408
Fixed assets		－	287,051,335	233,557,614	192,599,182	163,921,697
Intangible assets		－	22,796,701	21,114,443	20,127,184	19,264,025
Other assets		－	100,240,714	100,611,858	106,252,898	102,927,491
Total assets		－	557,243,023	493,558,446	481,854,411	398,039,621
Current liabilities	Before distribution	－	238,165,426	287,413,773	205,189,126	121,257,442
	After distribution	－	238,165,426	288,771,212	212,136,314	Note 3
Non current liabilities		－	149,253,737	13,101,444	48,975,222	44,517,456
Total liabilities	Before distribution	－	387,419,163	300,515,217	254,164,348	165,774,898
	After distribution	－	387,419,163	301,872,656	261,111,536	Note 3
Equity attributable to owners of the parent		－	169,823,860	193,043,229	227,690,063	232,264,723
Capital stock		－	79,129,708	91,094,288	99,545,364	99,532,372
Capital surplus		－	119,677,980	96,058,741	99,584,369	99,643,564
Retained earnings	Before distribution	－	(24,979,239)	7,421,697	26,632,674	30,338,450
	After distribution	－	(24,979,239)	7,331,202	19,685,486	Note 3
Other equityinterest		－	(4,004,589)	(1,531,497)	1,927,656	2,750,337
Treasurystock		－	－	－	－	－
Non controlling	interest	－	－	－	－	－
Total shareholders’ equity	Before distribution	－	169,823,860	193,043,229	227,690,063	232,264,723
	After distribution	－	169,823,860	191,685,790	220,742,875	Note 3

Note 1: Financial data by IFRS less than 5 years, preparing the following report by ROC GAAP Note 2: Numbers are audited.

Note 3: Pending on approval of shareholders at Annual General Shareholders’ Meeting

4. Condensed Statement of Income-IFRS-Alone

Unit: NT Thousand

		Unit: NT Thousand	Unit: NT Thousand	Unit: NT Thousand	Unit: NT Thousand
Year Item		Five-Year Financial Summary (Note1)
	2011	2012	2013	2014	2015(Note 3)
Operatingrevenue	－	471,524,374	419,738,269	426,005,033	360,638,133
Grossprofit(loss)from operations	－	(7,116,158)	27,531,818	36,395,248	33,712,246
Net operatingincome(loss)	－	(24,249,282)	11,300,119	20,439,440	15,826,909
Non-operatingincome and expenses	－	(7,431,680)	(6,864,968)	1,238,394	(2,017,968)
Profit(loss)before tax	－	(31,680,962)	4,435,151	21,677,834	13,808,941
Profit(loss)from continuingoperations	－	(29,899,236)	5,102,568	21,676,759	10,815,594
Profit(loss)from discontinued operations	－	－	－	－	－
Profit(loss)	－	(29,899,236)	5,102,568	21,676,759	10,815,594
Other comprehensive income,net	－	(1,788,894)	2,850,508	3,168,094	536,938
Comprehensive income	－	(31,688,130)	7,953,076	24,844,853	11,352,532
Profit(loss),attributable to owners ofparent	－	(29,899,236)	5,102,568	21,676,759	10,815,594
Profit (loss), attributable to non-controlling interests	－	－	－	－	－
Comprehensive income, attributable to owners ofparent	－	(31,688,130)	7,953,076	24,844,853	11,352,532
Comprehensive income, attributable to non-controllinginterests	－	－	－	－	－
Earningsper share	－	(4.00)	0.57	2.31	1.09

Note 1: Financial data by IFRS less than 5 years, preparing the following report by ROC GAAP Note 2: Numbers are audited.

Note 3: Pending on approval of shareholders at Annual General Shareholders’ Meeting

Unit: NT Thousand

6.1.2 Five-Year Financial Summary

1. Condensed Balance Sheet-GAAP-Consolidate

Year Item	Year Item	Five-Year Financial Summary(Note)	Five-Year Financial Summary(Note)	Five-Year Financial Summary(Note)	Five-Year Financial Summary(Note)
		2011	2012	2013	2014	2015
Current assets		212,582,766	174,628,466	－	－	－
Funds & Long-term investments		22,059,603	23,623,033	－	－	－
Fixed assets		403,808,043	328,297,554	－	－	－
Intangible assets		18,517,906	18,065,083	－	－	－
Other assets		26,696,758	26,244,104	－	－	－
Total assets		683,665,076	570,858,240	－	－	－
Current liabilities	Before distribution	419,171,745	237,029,639	－	－	－
	After distribution	419,171,745	237,029,639	－	－	－
Long-term liabilities		55,703,297	152,491,697	－	－	－
Other liabilities		10,122,091	8,894,958	－	－	－
Total liabilities	Before distribution	484,997,133	398,416,294	－	－	－
	After distribution	484,997,133	398,416,294	－	－	－
Capital stock		73,129,708	79,129,708	－	－	－
Capital surplus		191,835,695	119,594,471	－	－	－
Retained earnings	Before distribution	(69,654,839)	(26,984,855)	－	－	－
	After distribution	(69,654,839)	(26,984,855)	－	－	－
Unrealized gain instruments	or loss on financial	(2,107,490)	(985,693)	－	－	－
Cumulative translation adjustments		2,977,862	155,150	－	－	－
Net loss unrecognized as pension cost		－	－	－	－	－
Minorityinterest		2,487,007	1,533,165	－	－	－
Total shareholders’ equity	Before distribution	198,667,943	172,441,946	－	－	－
	After distribution	198,667,943	172,441,946	－	－	－

Note: Numbers are audited.

2. Condensed Statement of Income-GAAP-Consolidate

Unit: NT Thousand, EPS NTD

Year Item	Five-Year Financial Summary (Note1)	Five-Year Financial Summary (Note1)	Five-Year Financial Summary (Note1)	Five-Year Financial Summary (Note1)
	2011	2012	2013	2014	2015
OperatingRevenue	510,081,200	483,609,931	－	－	－
Grossprofit(loss)from operations	(35,208,648)	4,737,345	－	－	－
Net operatingincome(loss)	(62,700,308)	(19,344,622)	－	－	－
Non-operatingrevenue andgain	8,311,203	6,999,454	－	－	－
Non-operatingexpense and loss	(15,341,165)	(17,725,537)	－	－	－
Profit (loss) from continuing operations Before tax	(69,730,270)	(30,070,705)	－	－	－
Profit (loss) from continuing operations	(64,760,598)	(29,473,396)	－	－	－
Profit (loss) from discontinued operations	－	－	－	－	－
Extraordinary gain or loss	－	－	－	－	－
Cumulative effect of accounting principle changes	－	－	－	－	－
Net income	(64,760,598)	(29,473,396)	－	－	－
Earningsper share	(8.81)	(3.91)	－	－	－

Note 1: Numbers are audited.

3. Condensed Balance Sheet-GAAP-Alone

Unit: NT Thousand

Year Item	Year Item	Five-Year Financial Summary(Note1)	Five-Year Financial Summary(Note1)	Five-Year Financial Summary(Note1)	Five-Year Financial Summary(Note1)
		2011	2012	2013	2014	2015
Current assets		155,428,602	148,614,892	－	－	－
Funds & Long-term investments		82,495,850	82,455,767	－	－	－
Fixed assets		342,612,740	284,338,966	－	－	－
Intangible assets		18,515,631	18,064,885	－	－	－
Other assets		22,596,907	23,121,395	－	－	－
Total assets		621,649,730	556,595,905	－	－	－
Current liabilities	Before distribution	380,305,366	237,628,126	－	－	－
	After distribution	380,305,366	237,628,126	－	－	－
Long-term liabilities		33,946,997	139,310,440	－	－	－
Other liabilities		11,216,431	8,748,558	－	－	－
Total liabilities	Before distribution	425,468,794	385,687,124	－	－	－
	After distribution	425,468,794	385,687,124	－	－	－
Capital stock		73,129,708	79,129,708	－	－	－
Capital surplus		191,835,695	119,594,471	－	－	－
Retained earnings	Before distribution	(69,654,839)	(26,984,855)	－	－	－
	After distribution	(69,654,839)	(26,984,855)	－	－	－
Unrealized gain instruments	or loss on financial	(2,107,490)	(985,693)	－	－	－
Cumulative translation adjustments		2,977,862	155,150	－	－	－
Net loss unrecognized as pension cost		－	－	－	－	－
Total shareholders’ equity	Before distribution	196,180,936	170,908,781	－	－	－
	After distribution	196,180,936	170,908,781	－	－	－

Note 1: Numbers are audited.

4. Condensed Statement of Income-GAAP-Alone

Unit: NT Thousand EPS NTD

	Unit: NT Thous	Unit: NT Thous	Unit: NT Thous	Unit: NT Thous	andEPS NTD
Year Item	Five-Year Financial Summary (Note1)
	2011	2012	2013	2014	2015
OperatingRevenue	485,403,114	471,524,374	－	－	－
Grossprofit(loss)from operations	(43,979,512)	(6,872,735)	－	－	－
Net operatingincome(loss)	(63,395,419)	(23,838,237)	－	－	－
Non-operatingrevenue andgain	7,966,978	7,345,941	－	－	－
Non-operatingexpense and loss	(14,733,347)	(14,445,196)	－	－	－
Profit (loss) from continuing operations Before tax	(70,161,788)	(30,937,492)	－	－	－
Profit (loss) from continuing operations	－	－	－	－	－
Profit (loss) from discontinued operations	－	－	－	－	－
Extraordinary gain or loss	－	－	－	－	－
Cumulative effect of accounting principle changes	－	－	－	－	－
Net income	(64,439,778)	(29,205,349)	－	－	－
Earningsper share	(8.81)	(3.91)	－	－	－

Note 1: Numbers are audited.

6.1.3 Auditors’ Opinions from 2011 to 2015

Year	CPA Firm	CPA's Name	AuditingOpinion
2011	PricewaterhouseCoopers	Hsiao Chun-Yuan & Hsu Yung-Chien	Unqualified-modified wording
2012	PricewaterhouseCoopers	Hsiao Chun-Yuan & Hsu Yung-Chien	Unqualified-modified wording
2013	PricewaterhouseCoopers	Hsiao Chun-Yuan & Wu Han-Chi	Unqualified-modified wording
2014	PricewaterhouseCoopers	Wu Han-Chi & ShengChung-Hsu	Unqualified-modified wording
2015	PricewaterhouseCoopers	Wu Han-Chi & ShengChung-Hsu	Unqualified wording

6.1.4 If there was change/replacement of the CPA within the most recent 5 fiscal years, explanation made by the company’s previous and current CPA over the causes for such change/replacement shall be set forth.

Year	Former CPA's Name	Current CPA's Name	Reason
2011	None
2012	None
2013	Hsiao Chun-Yuan & Hsu Yung-Chien	Hsiao Chun-Yuan & Wu Han-Chi	Unqualified-modified wording
2014	Hsiao Chun-Yuan & Wu Han-Chi	Wu Han-Chi & ShengChung-Hsu	Unqualified-modified wording
2015	None

6.2 Five-Year Financial Analysis

1. Financial Analysis-IFRS-Consolidate

Item	Year (Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)	Ending date in March 31,2016
		2011	2012	2013	2014	2015
Financial structure (%)	Ratio of liabilities to assets	－	70.01	61.71	52.50	40.05	36.57
	Ratio of long-term capital to fixed assets	－	100.41	75.91	121.31	138.84	134.06
Solvency (%)	Current ratio	－	72.88	57.12	95.10	125.7	118.42
	Quick ratio	－	54.77	39.92	77.41	97.37	85.41
	Times interest earned ratio	－	－	2.12	7.28	9.68	－
Operating ability	Accounts receivable turnover (turns)	－	6.11	5.56	5.88	5.68	5.19
	Average collectionperiod	－	60	66	62	64	70
	Inventoryturnover(turns)	－	8.51	7.67	8.41	9.29	7.68
	Accounts payable turnover (turns)	－	4.47	4.54	4.90	4.52	4.5
	Average days in sales	－	43	48	43	39	48
	Fixed assets turnover(turns)	－	1.31	1.40	1.69	1.68	1.15
	Total assets turnover(turns)	－	0.77	0.78	0.87	0.84	0.61
Profitability	Return on total assets(%)	－	(3.77)	1.72	4.98	2.81	(2.25)
	Return on stockholders' equity (%)	－	(16.18)	2.79	10.23	4.69	(3.77)
	Ratio to issued capital(%)	－	(38.94)	6.20	22.64	14.93	(8.57)
	Profit ratio(%)	－	(6.18)	1.21	5.06	2.97	(15.21)
	Earningsper share($)	－	(4.00)	0.57	2.31	1.09	(0.86)
Cash flow (%)	Cash flow ratio	－	21.16	25.25	52.33	73.38	(2.89)
	Cash flow adequacyratio	－	64.93	84.75	129.39	226.97	287.06
	Cash reinvestment ratio	－	7.83	12.91	14.58	9.86	(0.36)
Leverage	Operatingleverage	－	－	4.77	3.02	3.35	－
	Financial leverage	－	－	1.49	1.15	1.08	－
Analysis of financial ratio change in the last two years. (If the difference does not exceed 20%, the analysis is not
required.)
1. Ratio of liabilities to assets decrease Mainly due to bank loan repayment. 2Ct ti d ik ti i il d t bk l t
. urren rao an Quc rao ncrease many ue o an oan repaymen. 3. Times interest earned ratio increase mainly due to interest expense decrease in 2015. 4. Various ratios of profitability decrease due primarily to economy is in a slump, the profits earned by the Company decreased than 2014’s. 5. Cash flow ratio increase mainly due to decrease in cash provided by operating activities. 6. Various ratios of Cash flow adequacy ratio rose due primarily to the facts that in 2015, the Capital expenditures by the Company decreased than 2014’s. 7. Cash reinvestment ratio fall due primarily to economy is in a slump, Cash provided by operating activities decrease in 2015.

Note 1: We adopted International Financial Reporting Standards ( IFRS). For period less than five(5) years, we worked Table 4 below, adopted the Financial Reporting Standards of the Republic of China.
Note 2: Numbers are audited.

Note 3: Financial Ratio Formula

Financial Structure analysis
(1) Debt ratio= Total Liabilities / Total Assets
(2) Long-term funds to property, plant and equipment = (Total equity + Non-current liabilities ) / Property, plant and equipment, net
Liquidity analysis
(1) Current ratio = Current assets / Current liability
(2) Quick ratio = (Current Assets - Inventories - Prepaid expenses) / Current liability
(3) Times interest earned = Profit Before Credit for Income Tax / Current interest expense
Operating performance analysis
(1) Average collection turnover(Including Accounts Receivable and Notes Receivable from operation) =

Sales / Average trade receivables

(2) Days to collect accounts receivable = 365 / Average collection turnover
(3) Average inventory turnover = Cost of goods sold / Average inventories
(4) Average payment turnover (Including Accounts Payable and Notes Payable from operation) = operating costs / Average trade payables
(5) Average days to sell inventory = 365 / Average inventory turnover
(6) Property, plant and equipment turnover = Sales / Average property, plant and equipment, net
(7) Total assets turnover = Sales / Average total assets
Return on investment analysis
(1) Rate of return on assets = [Profit + Interest expense X (1 - Tax rate)] / Average assets
(2) Rate of return on equity = Profit / Average total Equity
(3) Profit to sales = Profit / Sales
(4) Earnings per share = (Equity attributable to owners of parent - Dividend-preferred stock ) / Weighted average outstanding shares
Cash flow
(1) Cash flow ratio = Net cash provided by operating activities / Current liability
(2) Cash flow adequacy ratio = 5-year net cash provided by operating activities / 5-year (Capital expense + Increase in inventories + Cash dividend)
(3) Cash flow reinvestment ratio = (Net cash provided by operating activities - Cash dividend) - (Property, plant and equipment, net + Long-term investments + Other non-current assets + Operating Capital)
Leverage
(1) Operating Leverage= (Net sales – Variable cost) / Operating income
(2) Financial leverage = Operating income / (Operating income – Interest expenses)

2. Financial Analysis-IFRS-Alone

Item	Year (Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)
		2011	2012	2013	2014	2015
Financial structure (%)	Ratio of liabilities to assets	－	69.52	60.89	52.75	41.65
	Ratio of long-term capital to fixed assets	－	111.16	88.26	143.65	168.85
Solvency (%)	Current ratio	－	61.79	48.11	79.38	92.30
	Quick ratio	－	46.82	34.07	65.50	71.48
	Times interest earned ratio	－	(5.27)	2.03	8.23	9.59
Operating ability	Accounts receivable turnover (turns)	－	6.16	5.66	6.03	5.82
	Average collectionperiod	－	59	64	61	63
	Inventoryturnover(turns)	－	9.99	9.62	10.78	11.61
	Accounts payable turnover (turns)	－	3.13	3.11	3.39	3.40
	Average days in sales	－	37	38	34	31
	Fixed assets turnover(turns)	－	1.49	1.61	2.00	2.02
	Total assets turnover(turns)	－	0.80	0.80	0.87	0.82
Profitability	Return on total assets(%)	－	(4.36)	1.65	4.95	2.76
	Return on stockholders' equity (%)	－	(16.35)	2.81	10.30	4.70
	Ratio to issued capital(%)	－	(40.04)	4.87	21.78	13.87
	Profit ratio(%)	－	(6.34)	1.22	5.09	3.00
	Earningsper share($)	－	(4.00)	0.57	2.31	1.09
Cash flow (%)	Cash flow ratio	－	17.11	17.30	44.53	39.11
	Cash flow adequacyratio	－	81.66	96.55	153.66	214.96
	Cash reinvestment ratio	－	7.06	9.34	14.02	5.79
Leverage	Operatingleverage	－	－	5.81	3.63	4.12
	Financial leverage	－	－	1.62	1.17	1.11
Analysis of financial ratio change in the last two years. (If the difference does not exceed 20%, the analysis is not required.) 1. Ratio of liabilities to assets: Mainly due to bank loan repayment. 2. Various ratios of profitability decrease due primarily to economy is in a slump, the profits earned by the Company decreased than 2014’s. 3. Various ratios of Cash flow adequacy ratio rose due primarily to the facts that in 2015, the Capital expenditures by the Company decreased than 2014’s. 4. Cash reinvestment ratio fall due primarily to economy is in a slump, Cash provided by operating activities decrease in 2015.

Note 1: We adopted International Financial Reporting Standards ( IFRS). For period less than five(5) years, we worked Table 3 below, adopted the Financial Reporting Standards of the Republic of China.
Note 2: Numbers are audited.

Note 3: Financial Ratio Formula

Financial Structure analysis
(1) Debt ratio= Total Liabilities / Total Assets
(2) Long-term funds to property, plant and equipment = (Total equity + Non-current liabilities ) / Property, plant and equipment, net
Liquidity analysis
(1) Current ratio = Current assets / Current liability
(2) Quick ratio = (Current Assets - Inventories - Prepaid expenses) / Current liability
(3) Times interest earned = Profit Before Credit for Income Tax / Current interest expense
Operating performance analysis
(1) Average collection turnover(Including Accounts Receivable and Notes Receivable from operation) = Sales / Average trade receivables
(2) Days to collect accounts receivable = 365 / Average collection turnover
(3) Average inventory turnover = Cost of goods sold / Average inventories
(4) Average payment turnover (Including Accounts Payable and Notes Payable from operation) = operating costs / Average trade payables

(5) Average days to sell inventory = 365 / Average inventory turnover
(6) Property, plant and equipment turnover = Sales / Average property, plant and equipment, net
(7) Total assets turnover = Sales / Average total assets
Return on investment analysis
(1) Rate of return on assets = [Profit + Interest expense X (1 - Tax rate)] / Average assets
(2) Rate of return on equity = Profit / Average total Equity
(3) Profit to sales = Profit / Sales
(4) Earnings per share = (Equity attributable to owners of parent - Dividend-preferred stock ) / Weighted average outstanding shares
Cash flow
(1) Cash flow ratio = Net cash provided by operating activities / Current liability
(2) Cash flow adequacy ratio = 5-year net cash provided by operating activities / 5-year (Capital expense + Increase in inventories + Cash dividend)
(3) Cash flow reinvestment ratio = (Net cash provided by operating activities - Cash dividend) - (Property, plant and equipment, net + Long-term investments + Other non-current assets + Operating Capital)
Leverage
(1) Operating Leverage= (Net sales – Variable cost) / Operating income
(2) Financial leverage = Operating income / (Operating income – Interest expenses)

3. Financial Analysis-GAAP-Consolidate

Item	Year (Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)	Financial analysis in the past five years(Note 1)
		2011	2012	2013	2014	2015
Financial structure (%)	Ratio of liabilities to assets	70.94	69.79	－	－	－
	Ratio of long-term capital to fixed assets	65.50	101.68	－	－	－
Solvency (%)	Current ratio	50.71	73.67	－	－	－
	Quick ratio	36.10	54.89	－	－	－
	Times interest earned ratio	(10.85)	(2.91)	－	－	－
Operating ability	Accounts receivable turnover (turns)	7.28	6.11	－	－	－
	Average collectionperiod	50	60	－	－	－
	Inventoryturnover(turns)	7.87	8.50	－	－	－
	Accounts payable turnover (turns)	4.76	4.46	－	－	－
	Average days in sales	46	43	－	－	－
	Fixed assets turnover(turns)	1.18	1.32	－	－	－
	Total assets turnover(turns)	0.73	0.77	－	－	－
Profitability	Return on total assets(%)	(8.54)	(3.64)	－	－	－
	Return on stockholders' equity (%)	(27.92)	(15.74)	－	－	－
	Ratio to issued capital(%)	(85.74)	(24.45)	－	－	－
	Ratio to Profit before tax	(95.35)	(38.00)	－	－	－
	Profit ratio(%)	(12.63)	(6.04)	－	－	－
	Earningsper share($)	(8.81)	(3.91)	－	－	－
Cash flow(%)	Cash flow ratio	6.71	18.36	－	－	－
	Cash flow adequacyratio	56.37	62.57	－	－	－
	Cash reinvestment ratio	5.75	6.89	－	－	－
Leverage	Operatingleverage	－	－	－	－	－
	Financial leverage	－	－	－	－	－
Analysis of financial ratio change in the last two years. (If the difference does not exceed 20%, the analysis is not required.):N.A.

Note 1: Numbers are audited.

Note 2: Calculation formula of financial ratio

Financial Structure analysis
(1) Debt ratio= Total Liabilities / Total Assets
(2) Long-term funds to property, plant and equipment = (Total equity + Non-current liabilities ) / Property, plant and equipment, net
Liquidity analysis
(1) Current ratio = Current assets / Current liability
(2) Quick ratio = (Current Assets - Inventories - Prepaid expenses) / Current liability
(3) Times interest earned = Profit Before Credit for Income Tax / Current interest expense
Operating performance analysis
(1) Average collection turnover(Including Accounts Receivable and Notes Receivable from operation) = Sales / Average trade receivables
(2) Days to collect accounts receivable = 365 / Average collection turnover
(3) Average inventory turnover = Cost of goods sold / Average inventories
(4) Average payment turnover (Including Accounts Payable and Notes Payable from operation) = operating costs / Average trade payables
(5) Average days to sell inventory = 365 / Average inventory turnover
(6) Property, plant and equipment turnover = Sales / Average property, plant and equipment, net
(7) Total assets turnover = Sales / Average total assets
Return on investment analysis
(1) Rate of return on assets = [Profit + Interest expense X (1 - Tax rate)] / Average assets
(2) Rate of return on equity = Profit / Average total Equity
(3) Profit to sales = Profit / Sales
(4) Earnings per share = (Equity attributable to owners of parent - Dividend-preferred stock ) / Weighted average outstanding shares

Cash flow
(1) Cash flow ratio = Net cash provided by operating activities / Current liability
(2) Cash flow adequacy ratio = 5-year net cash provided by operating activities / 5-year (Capital expense + Increase in inventories + Cash dividend)
(3) Cash flow reinvestment ratio = (Net cash provided by operating activities - Cash dividend) - (Property, plant and equipment, net + Long-term investments + Other non-current assets + Operating Capital)
Leverage
(1) Operating Leverage= (Net sales – Variable cost) / Operating income
(2) Financial leverage = Operating income / (Operating income – Interest expenses)

4. Financial Analysis-GAAP-Alone

Item	Year (Note 1)	Financial analysis in the past five years (Note 1)	Financial analysis in the past five years (Note 1)	Financial analysis in the past five years (Note 1)	Financial analysis in the past five years (Note 1)	Financial analysis in the past five years (Note 1)
		2011	2012	2013	2014	2015
Financial structure (%)	Ratio of liabilities to assets	68.44	69.29	－	－	－
	Ratio of long-term capital to fixed assets	67.17	109.10	－	－	－
Solvency (%)	Current ratio	40.87	62.54	－	－	－
	Quick ratio	27.31	46.93	－	－	－
	Times interest earned ratio	(14.02)	(4.93)	－	－	－
Operating ability	Accounts receivable turnover (turns)	7.13	6.16	－	－	－
	Average collectionperiod	51	59	－	－	－
	Inventoryturnover(turns)	8.81	9.99	－	－	－
	Accounts payable turnover (turns)	3.75	3.13	－	－	－
	Average days in sales	41	37	－	－	－
	Fixed assets turnover(turns)	1.31	1.50	－	－	－
	Total assets turnover(turns)	0.75	0.80	－	－	－
Profitability	Return on total assets(%)	(9.36)	(4.22)	－	－	－
	Return on stockholders' equity (%)	(28.33)	(15.91)	－	－	－
	Ratio to issued capital(%)	(86.69)	(30.13)	－	－	－
	Ratio to Profit before tax	(95.94)	(39.10)	－	－	－
	Profit ratio(%)	(13.28)	(6.19)	－	－	－
	Earningsper share($)	(8.81)	(3.91)	－	－	－
Cash flow (%)	Cash flow ratio	16.16	14.96	－	－	－
	Cash flow adequacyratio	73.1	79.33	－	－	－
	Cash reinvestment ratio	15.98	6.65	－	－	－
Leverage	Operatingleverage	－	－	－	－	－
	Financial leverage	－	－	－	－	－
Analysis of financial ratio change in the last two years. (If the difference does not exceed 20%, the analysis is not required.):N.A.

Note 1: Financial data by IFRS less than 5 years, preparing the following table 3 by ROC GAAP Note 2: Numbers are audited.

Note 3: Financial Ratio Formula

Financial Structure analysis
(1) Debt ratio= Total Liabilities / Total Assets
(2) Long-term funds to property, plant and equipment = (Total equity + Non-current liabilities ) / Property, plant and equipment, net
Liquidity analysis
(1) Current ratio = Current assets / Current liability
(2) Quick ratio = (Current Assets - Inventories - Prepaid expenses) / Current liability
(3) Times interest earned = Profit Before Credit for Income Tax / Current interest expense
Operating performance analysis
(1) Average collection turnover(Including Accounts Receivable and Notes Receivable from operation) = Sales / Average trade receivables
(2) Days to collect accounts receivable = 365 / Average collection turnover
(3) Average inventory turnover = Cost of goods sold / Average inventories
(4) Average payment turnover (Including Accounts Payable and Notes Payable from operation) = operating costs / Average trade payables
(5) Average days to sell inventory = 365 / Average inventory turnover
(6) Property, plant and equipment turnover = Sales / Average property, plant and equipment, net
(7) Total assets turnover = Sales / Average total assets
Return on investment analysis
(1) Rate of return on assets = [Profit + Interest expense X (1 - Tax rate)] / Average assets
(2) Rate of return on equity = Profit / Average total Equity
(3) Profit to sales = Profit / Sales
(4) Earnings per share = (Equity attributable to owners of parent - Dividend-preferred stock ) / Weighted

100

average outstanding shares

Cash flow
(1) Cash flow ratio = Net cash provided by operating activities / Current liability
(2) Cash flow adequacy ratio = 5-year net cash provided by operating activities / 5-year (Capital expense + Increase in inventories + Cash dividend)
(3) Cash flow reinvestment ratio = (Net cash provided by operating activities - Cash dividend) - (Property, plant and equipment, net + Long-term investments + Other non-current assets + Operating Capital)
Leverage
(1) Operating Leverage= (Net sales – Variable cost) / Operating income
(2) Financial leverage = Operating income / (Operating income – Interest expenses)

101

6.3 Supervisors’ Report in the Most Recent Year

Innolux Corporation

Supervisors’ Audit Report

The Board of Directors has duly submitted the 2015 operating report, financial statements, and table of profit distribution. The financial statements has been duly reviewed and approved by CPA Mr. Wu Han-Chi and CPA Mr. Sheng-Chung Hsu of PwC Taiwan with the issuance of Independent Auditor’s Report.

I, as the supervisor of the Company, have completed the audit and review, and had found nothing inconsistent with any of the above. Therefore, I issue this audit report for acknowledgment in accordance with Article 219 of the Company Act. For your approval.

General Shareholders Meeting of the Company in 2016

Supervisor: Lin, Ren-Guang

Date: May 12, 2016

102

Innolux Corporation

Supervisors’ Audit Report

General Shareholders Meeting of the Company in 2016

Supervisor: Chen, Yi-Fang

Date: May 12, 2016

103

Innolux Corporation

Supervisors’ Audit Report

To

General Shareholders Meeting of the Company in 2016

Supervisor:

I-Chen Investment Ltd. Representative: Te-Tsai Huang

Date: May 12, 2016

104

6.4 Consolidated Financial Statements for the Years Ended December 31, 2015 and 2014, and Independent Auditors’ Report

Please refer to page 123 of the annual report.

6.5 Financial Statements for the Years Ended December 31, 2015 and 2014, and Independent Auditors’ Report

Please refer to page 209 of the annual report.

6.6 Disclosure of the Impact on Company’s Financial Status Due to Financial Difficulties: Not applicable.

105

VII. Review of Financial Conditions, Operating Results, and Risk Management

7.1 Analysis of Financial Status

Unit: NT Thousand

			Unit: NT Thousand	Unit: NT Thousand
Year Item	2014	2015	Difference
			Amount	%
Current Assets(1)	189,380,812	138,866,987	(50,513,825)	(26.67)
Fixed Assets	233,609,843	199,482,740	(34,127,103)	(14.61)
Intangible assets	20,219,137	19,342,856	(876,281)	(4.33)
Other Assets(2)	39,306,763	29,749,753	(9,557,010)	(24.31)
Total Assets	482,516,555	387,442,336	(95,074,219)	(19.70)
Current Liabilities(3)	199,135,498	110,471,463	(88,664,035)	(44.52)
Other Liabilities- non-current	54,209,621	44,706,150	(9,503,471)	(17.53)
Total Liabilities (4)	253,345,119	155,177,613	(98,167,506)	(38.75)
Capital stock	99,545,364	99,532,372	(12,992)	(0.01)
Capital surplus	99,584,369	99,643,564	59,195	0.06
Retained Earnings	26,632,674	30,338,450	3,705,776	13.91
Other equity (5)	1,927,656	2,750,337	822,681	42.68
Non controllingequity (6)	1,481,373	－	(1,481,373)	(100.00)
Total Stockholders' Equity	229,171,436	232,264,723	3,093,287	1.35
Analysis of changes in financial ratios: 1. Mainly due to decrease in cash and cash equivalents, accounts receivable, accounts receivable – related parties and inventory. 2. Mainly due to decrease in Other Financial Assets - Noncurrent. 3. Mainly due to decrease in short- term debt, accounts payable and Long-Term Liabilities-Current Portion. 4. Mainly due to decrease in Current Liabilities. 5. Mainly due to decrease in Exchange Differences on Translation of Foreign Financial Statements and increase in Unrealized Gains (Losses) on Available-for-sale financial assets. 6. Mainlydue to merger subsidiaryChi Mei EL Corporation.

106

7.2 Analysis of Operating Results

Unit: NT Thousand

			Unit: NT Thousand	Unit: NT Thousand
Year Item	2014	2015	Difference
			Amount	%
OperatingRevenue	428,661,898	364,132,984	(64,528,914)	(15.05)
OperatingCosts	378,276,897	317,492,879	(60,784,018)	(16.07)
Gross Profit	50,385,001	46,640,105	(3,744,896)	(7.43)
OperatingExpenses	22,211,605	24,209,396	1,997,791	8.99
OperatingIncome(1)	28,173,396	22,430,709	(5,742,687)	(20.38)
Non-operatingIncome and Expenses(2)	(5,639,056)	(7,571,522)	(1,932,466)	34.27
Income Before Tax(3)	22,534,340	14,859,187	(7,675,153)	(34.06)
Tax Benefit(Expense)(4)	857,432	4,045,046	3,187,614	371.76
Net income(5)	21,676,908	10,814,141	(10,862,767)	(50.11)
Other comprehensive income(6)	3,159,493	507,196	(2,652,297)	(83.95)
Total comprehensive income(7)	24,836,401	11,321,337	(13,515,064)	(54.42)
Analysis of changes in financial ratios: 1. Mainly due to decrease in Gross Profit and increase in Operating Expenses. 2. Mainly due to increase in Annual court fees. 3. Mainly due to decrease in Operating Income. 4. Mainly due to increase in Undistributed Surplus Earnings. 5. Mainly due to decrease in Income Before Tax and increase in Tax Benefit Expense. 6. Mainly due to decrease in Exchange Differences on Translation of Foreign Financial Statements and increase in Unrealized Gains (Losses) on Available-for-sale financial assets. 7. Mainlydue to decrease in Net income.

107

7.3 Analysis of Cash Flow

7.3.1 Cash Flow Analysis for the Current Year

Unit: NT Thousand

7.3.1 Cash Flow Analysis for	the Current Year	Unit: NT Thousand
Year Items	2015	Analysis
Net cash provided by operatingactivities	81,064,293	Net cash provided mainly due to depreciation and reasonable control for operatingcycle.
Net cash used in investing activities	(20,802,751)	Mainly due to additions to property, plant and equipment.
Net cash used in financing activities	(79,457,353)	Mainly due to bank loan repayment and cash
		dividends

7.3.2 Cash Flow Analysis for the Coming Year

Unit: NT Thousand

				Unit: NT Thousand	Unit: NT Thousand
Cash and cash equivalents at beginning of year (1)	Estimated Net cash provided by operating activities for whole year (2)	Estimated Net decrease in cash and cash equivalent for wholeyear (3)	Estimated Surplus (Shortage) of Cash (1)+(2)+(3)	Remedy Actions for Estimated Cash Shortfall
				Investment Plan	Financing Plan
52,522,790	23,469,000	24,441,000	51,550,790	－	－
2016 Analysis of changes in cash flow Operating Activities: Net Cash inflow due to expected the average selling price for panels will return to the stable and lower production cost continually Investing Activities: Net cash outflow due to overcome difficulties continually and capital expenditure for new techniques Financing Activities: Net cash inflow mainly due to bank loan borrowing RemedyActions for Cash Shortfall: None

108

7.4 Major Capital Expenditure Items

Capital Expenditures in 2015 focus on high-precision, high aperture ratio, yield quality improvement,Generation 8.6, LTPS and Green environmental protection, Total amount approximately 24 billion.

7.5 Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans

and the Investment Plans for the Coming Year

In terms of outward investment, the Company focused on the up- and down-streams of TFT-LCD industries to assure effective vertical itnegration as the final objectives. Given the worsening fluctuation of panel industry and the mature development of the industrial chains, the Company held a policy of being increasingly conservative. Other than the effortswe try to refrain from investing toward the businesses irrelevant to the Company’s principal business, the Company disposed non-core investment and investment insignificant in strategies.

In the consolidated financial report of the Company in 2015, the investment gain recognized in equity method came to NT$213,587,000, thanks primarily to the upturn of the overall economy where the business performance of the invested businesses turned better. Some outward investments appeared at a loss. Overall, the performance with the Company’s outward reinvestments have been well up to our expectation and have been continually integrated with our business development.

7.6 Analysis of Risk Management

7.6.1 Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on Corporate Finance, and Future Response Measures

Interest rate
Domestic economic affected by the global trade slowdown and export decreased, the economic growth rate decrease this year. The Directorate General of Budget, Accounting and Statistics (DGBAS) of Executive Yuan anticipated the economic growth rate (yoy) by 2016 would hit 2.32%, 1.26% outgrew the annual rate of 2015 at 1.06%. Given the factors of economic growth and commodity prices, the Central Bank would maintain an easy interest rate policy in 2016. The M2 currency growth targets were set at 2.5%~6.5%. To prevent an increase in the Company’s loan costs as a result of an adjustment of currency policy and rise in interest rate in the market, the Company would undertake interest swap transactions in due time over the current loans in floating interest rates so as to evade the risks of the change in cash flow possibly incurred by fluctuation of interest rate.
Foreign exchange rates
a. To prevent a potential disadvantage to the foreign currencies in input, ouput, investment and financing activities to the Company’s assets, liabilities values, operating results due to fluctuation in exchange rates, the Company, in due time, would undertake forward foreign exchange to evade potential risks in fluctuation in exchange rates.
b. The Company adopted Natural Hedge in principle to evade exchange rate risks by taking the revenues from sales in foreign currencies to pay off required foreign currencies. We, therefore, only undertook the hedge transaction aiming at the positions of net assets or liabilities in foreign currencies.
c. In the Company, over 90% of the operating revenues came from U. S. Dollars and other foreign currencies. For capital expenditures and manufacturing costs, the primary demand for foreign currencies came from U. S. Dollars and Japanese yen. Any unfavorable significant change in exchange rate would lead to a passive impact upon the financial profit and/or loss. In calculation with the Company’s output and marketing as well as cost structure in 2015, where the New Taiwan Dollars is

109

appreciated by 1% over U. S. Dollars, the Company’s gross profit would drop 0.4%~0.55%.

3. Inflation

The DGBAS forecasts a -0.31% CPI growth rate for the entire year as domestic inflation is projected to be subdued.While low international commodity prices including oil have dragged down inflation expectations, energy price slumps will likely weigh less on the inflation downtrend next year. The CPI annual growth rate is expected to rise mildly toward 0.84% in 2016.

The high-speed inflation and deflation would interfere with the efficiency in the markets; discourage investment, consumption, savings and such behaviors. To prevent potential impact on the negative aspect from high speed inflation which would, in turn, dampen investment, consumption and savings, the communications has tried by all means of lower various costs to enhance competitive edge and would be closely watchful the change in the supply and demand in the market, to flexbly adjust product portfolio to closely live up to actual demand in the market.

7.6.2 Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to - - High risk, High leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions

The Company had not engaged in highly risky and high financial leverage investment. Exactly as required by the Securities and Futures Bureau, Financial Supervisory Commission, Executive Yuan and the laws and ordinances concerned, we have set up wholesome financial and operating grounds in the managerial regulations and operating procedures, including “Procedures to Engage in Transaction and Disposal of Derivatives”, “Procedures for Loaning of Funds to Others” and “Operating Procedures of Endorsements/Guarantees”.
In an attempt to control potential risks in finance, we hold a very wholesome and conservative principle in derivative financial instruments to primarily evade the potential risks of the exchange rates in the substantial positions incurred by input, output and financing activities. In the days and years ahead, we shall stick to such same principle to coordinate with the trends of exchange rates and interest rates as well as the Company’s business operation, we shall adjust the financial risk management in real time in accordance with laws and ordinances concerned, internal managerial rule and operating procedures.

7.6.3 Future Research & Development Projects and Corresponding Budget

In terms of the technical development in the future, the Company will continually aim at the development in the monitor application regions. Primarily, we would aim at broad vision TFT LCD monitor technology & know-how to upgrade the contrast and dues in TFT LCD; upgrade of the high penetrating TFT LCD know-how in the optical utilization rate; ultra dimension TFT LCD monitoring technology & know-how; high solution, high brightness, narrow frame TFT LCD moules; in high solution, high brightness, high temperature, low energy consumption. TFT LCD bare-eye monitor know-how upgrade into stereo display effect, rightness monitor technology & know-how, built-in touch panel technology & know-how (TOD, TID, Hybrid) , attachment process technology & know-how. In 2015, the Company invest research & development funds in amount 14.4 billion, the amount will over 10 billion in 2016, we shall continually invest in technical research & development and boost competitive edge.

7.6.4 Effects of and Response to Changes in Policies and Regulations Relating to Corporate

Finance and Sales

As of the Annual Report’s publication date, there has been no adversely impact on financial or business due to any policy and law changed. All the Company’s teammates would be

110

closely watchful of potential changes in major policies and laws and ordinances concerned at home and abroad and set up legal personnel to help such issues. Through such efforts, we shall be able to take right countermeasures in real-time to minimize the potential impact upon the Company’s financial standing which might be incurred by major policies at home and abroad and change in laws.

7.6.5 Effects of and Response to Changes in Technology and in Industry Relating to

Corporate Finance and Sales

Technology Change

The TFT-LCD industry is challenged by the constantly upgraded know-how and new products while the mainstream products are being replaced by new generation at a quickening pace. Should we fail to deal with the impact incurred by the change in science and technology, that would be an impact upon the business and financial standing on the seamy sides. Since the Company first came into being, we have spared no effort to accumulate the technical capability of TFT-LCD displays to deal with the impact incurred by the change in science and technology. Other than investment in high level research & development toward high display quality, high solution, broad vision angles, high open rates, quick response, thin and light designs, narrow frames, ultra energy conservaton and such technology & know-how, we have, as wll, tried to develop low temperature LTPS and organic lighting display OLED and such technology & know-how to assure firm competitive edge and effective growth in the Company’s business and financial standing.

Industry Change

TFT-LCD features high economic cycle and drastic fluctuation. Any sort of economic trend drop might lead to a shock to the Company’s business operation on the seamy side. Here at the Company, all our teammates would be closely watchful of fluctuation that might hit the Company ito passive aspect and work out sound countermeasures beforehand. In terms of financial operation, we adopt sound and stable financial operation to deal with potential fluctuation in the businesses.

7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the

Company’s Response Measures

Faithful law compliance, focus on shareholders’ equity represent the very bounden duties to the Company’s management. In case of a contingence, the Company’s ranking department head would serve as the emergency convener to immediately set up the Crisis Task Force ti defuse the crisis forthwith. As of the Annual Report’s publication date, there has been no event that adversely impact in Innolux’s corporate image and impact on corporate risk management.

7.6.7 Expected Benefits from, Risks Relating to and Response to Merger and Acquisition

Plans

At the moment, the Company has no plan to launch a merger with another enterprise. Toward potential strategic investment or vertical integration, and the cost benefit and the potential risk so arising, the Company’s management would conduct appropriate evaluation and evasion as appropriate.

7.6.8 Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans

We all have those related technical groups to perform the professional feasibility assessment for expansion and build out of new generation factory

7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration

There is no risk associated with excessive customer concentration, due to the plenty production line and the main customers are international brand manufacturers. Innolux’s

111

usually have two or more suppliers for main material. Therefore there is no risk associated with excessive concentration of purchasing. We will keep developing new products and new customers in the future and seeking for the better quality and the lower cost of purchase sources to reduce the risk of excessive customer concentration or excessive purchasing concentration.

7.6.10 Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over 10%

As of the date of this Annual Report, there were no such risks for Innolux.

7.6.11 Effects of, Risks Relating to and Response to Changes in Control over the Company

As of the date of this Annual Report, there were no such risks for Innolux.

- 7.6.12 Litigation or Non litigation Matters

The lawsuits, non-contentious cases, administrative litigation that are decided by the court or still in proceeding in recent years until this report was issued.
(1) Former Chi Mei Optoelectronics Corporation, CMO Japan Co. Ltd. CMO UK Ltd., Chi Mei Optoelectronics Europe B.V., and Chi Mei Optoelectronics U.S.A. Inc. were inquired by the Department of Justice of U.S.A. in December 2006 regarding to their being suspected of involving violating Anti-trust Laws. Some state governments in the U.S.A, European Union, China, Brazil, and Korean governments also conducted investigations. Some of the retailers and consumers in the U.S. and Canada had brought individual or collective Civil Procedure lawsuits toward panel manufacturers. Former Chi Mei Optoelectronics Corporation and Chi Mei Optoelectronics U.S.A. Inc. were listed as defendant in some of the cases. The debriefing of major investigations related to anti-trust laws are as following:
- A. The company had reached agreement with the U.S.A. Department of Justice to pay 220 million USD sentence with five years installment plan. Until the end of February 2015, the company finished the payment 220 million USD. From 2012 to presents, the company has reached settlement agreements with individual plaintiffs in the U.S.A, and recognizes the related losses. From 2011 November to presents, the company has reached settlement agreements with 14 state governments, and the company had agreed to settle the civil procedure lawsuits by paying the sentences according to civil codes. And all state governments are solved and finished.
- B. The company received European Commission’s notice in December 2010 to inquire the company paying 300 million via Euro sentences. The company had appealed to EU Court of Justice in February 2011. EU Court of Justice decided to accepted parts of the appeal and decreased the sentence to 288 million Euro in February 2014. The company made appeal to parts of the judgment within legal time limit. The EU Court of Justice dismisses the appeal and sustains the original judgement in July 2015.
- C. Except the final judgment remaining unpredictable, the company has recognized the losses according to the facts and evaluation regarding to anti-trust investigation related items revealed in previous paragraphs. The losses are listed in“Provisions Liabilities-Current” and “other financial non-current liabilities”.
(2) Eidos Display, LLC and Eidos III, LLC (below as Eidos) had brought a suit to Eastern District Court of Texas in April 25, 2011, to accuse certain products of ，
Innolux and its US branch’s infringes its patent rights. The summary judgment which decided the invalidation of Eidos’ patent rights, of this case had been issued by the administrative judge in December 2013 and the judge of this case had confirmed

112

the summary judgment in January 2014. Eidos had appealed to the United States courts of appeals in February 2014. The United States courts of appeals made decision to rejected and remanded to the district court in March 2015. The company has a form to United States courts of appeals and raise defences actively. The United States courts of appeals rejected INX’s request in June 2015. The company has a form to US Supreme Court and made petition for writ of certiorari on September 2015, but rejected by US Supreme Court on November 2015. The final judgment depends on the suit proceedings and can’t be certain; therefore, this case doesn’t influence Innolux’s business and finance in short order.

Board members, monitors, CEO, responsible person in fact, shareholders and their companies holding more than 10% shares that involved in lawsuits, non-contentious cases, administrative litigation that were decided by the court or still in proceeding in recent years until this report was issued and might cause major influence on Innolux stockholder's equity and securities price: None.

7.6.13 Other Major Risks:None.

7.7 Other Important Matters: None.

113

VIII. Special Disclosure

8.1 Summary of Affiliated Companies

==> picture [662 x 404] intentionally omitted <==

114

8.1.2 Innolux Subsidiaries

December 31, 2015

				December 31,2015
Company	Date of Incorporation	Address	Capital Stock	Business Activities
Asiaward Investment Ltd.	Jan 9, 2008	Room 1701, 111 Leighton Road, CausewayBay,HongKong	USD 10,000,000	Controlling Company
Best China Investments Ltd.	Jan 3, 2007	Offshore Chambers, P.O. Box,217,Apia,Samoa	USD 10,000,000	Controlling Company
Bright Information Holding Ltd.	Nov 26, 2008	Unit 2602-03, 26/F., BEA Tower, Millennium City 5, 418 Kwun Tong Road, Kowloon, Hong Kong.	USD 4,910,000	Controlling Company
Golden Achiever International Limited	Sept 30, 2005	Palm Grove House, PO Box 438, Road Town, Tortola, British Virgin Islands	USD 40,250	Controlling Company
InnoLux Corporation	Nov 22, 2004	2525 Brockton Drive, Suite 300, Austin,TX 78758	USD 200,000	Sales company
Innolux Holding Ltd.	Feb 28, 2002	Offshore Chambers, P.O. Box,217,Apia,Samoa.	USD 246,768,185	Controlling Company
Innolux Hong Kong Holding Limited	Dec 14, 2005	Unit 2602-03, 26/F., BEA Tower, Millennium City 5, 418 Kwun Tong Road, Kowloon, Hong Kong	HKD 1,158,844,000	Controlling Company
Innolux Hong Kong Limited	Feb 15, 2006	Unit 2602-03, 26/F., BEA Tower, Millennium City 5, 418 Kwun Tong Road, Kowloon, Hong Kong.	HKD 35,000,000	Entrepot trade company
Innolux Optoelectronics Europe B.V.	Nov 29, 2004	Jupiterstraat 106, 2132 HE Hoofddorp,The Netherlands	EUR 18,000	Operating electronics parts and LCD display import and export sale
Innolux Optoelectronics Germany GmbH	Mar 02, 2006	Hanns-Martin Schleyer Strasse 9b-9c,47877 Willich-Munchheide	EUR 25,000	Operating electronics parts and LCD display import and export sale and after service
Innolux Optoelectronics Hong Kong Holding Ltd.	Nov 16, 2001	Unit 2602-03, 26/F., BEA Tower, Millennium City 5, 418 Kwun Tong Road, Kowloon, Hong Kong.	HKD 162,897,802	Controlling Company
Innolux Optoelectronics Japan Co., Ltd.	Aug 20, 1991	8F, kowa kawasaki-nishiguchi Bldg., 66-2 horikawa-cho, Saiwai-ku, Kawasaki-City, Kanagawa 212-0013,Japan	JPY 314,258,270	Operating TFT-LCD development, manufacture and sales
Innolux Optoelectronics USA, INC.	May 9, 2002	101 Metro Drive Suite 510,San Jose,CA95110, U.S.A	US$6,000,000	Operating electronics parts and computer displaysale
Innolux Technology Europe B.V.	Mar 8, 2006	Stationstraat 39G, 6411NK, Heerlen, The Netherlands	EUR 37,581,000	Controlling Company of Researching, developing and Testing
Innolux Technology Germany GmbH	Feb 17, 2006	Kaiserswerther Strasse 115,D-40880 Ratingen, Germany	EUR 100,000	Testing & Maintenance Company
Innolux Technology Japan Co., Ltd.	Mar 1, 2005	1-1-1, Ibukidaihigashimachi, Nishi-ku, Kobe-city, 651-2242, Japan	JPY 146,570,164	Distributor
Innolux Technology USA Inc.	Apr 12, 2006	2300 North Barrington Road, Suite 400, Hoffman Estates, IL 60169,USA	USD 1,000	Distributor
Keyway Investment Management Limited	Mar 30, 2005	Portcullis TrustNet Chambers, P.O Box 1225,Apia,Samoa	USD 5,656,410	Controlling Company
Lakers Trading Ltd.	Jun 4, 2004	Offshore Chambers, P.O. Box,217,Apia,Samoa	USD 1	Entrepot trade company
Landmark International Ltd.	Apr 24, 2003	Offshore Chambers, P.O.Box 217,Apia,Samoa	USD 709,450,000	Controlling Company

115

Company	Date of Incorporation	Address	Capital Stock	Business Activities
Leadtek Global Group Limited	Mar 30, 2005	P.O. Box 3444,Road Town,Tortola,BVI	USD 50,000,000	Entrepot trade company
Magic Sun Ltd.	Nov 10, 2009	Offshore Chambers, P.O. Box,217,Apia,Samoa	US$38,000,000	Controlling Company
Main Dynasty Investment Ltd.	Dec 06, 2007	Room 1701, 111 Leighton Road, CausewayBay,HongKong	USD 18,000,000	Controlling Company
Mega Chance Investments Ltd.	Jan 3, 2007	Offshore Chambers, P.O. Box 217,Apia,Samoa	USD 18,000,000	Controlling Company
Nets Trading Ltd.	May 2, 2008	Offshore Chambers, P.O. Box 217,Apia,Samoa	USD900,001	General Investment Industry
Rockets Holding Ltd.	Dec 18, 2002	Offshore Chambers, P.O. Box,217,Apia,Samoa	USD 226,504,550	Controlling Company
Stanford Developments Ltd.	Aug 12, 1999	Offshore Chambers, P.O. Box,217,Apia,Samoa	USD 164,000,000	Controlling Company
Sun Dynasty Development Ltd.	Nov 6, 2009	Room 1701, 111 Leighton Road, CausewayBay,HongKong	USD 38,000,000	Controlling Company
Suns Holding Ltd.	Dec 18, 2006	Offshore Chambers, P.O. Box,217,Apia,Samoa	USD 18,177,052	Controlling Company
Toppoly Optoelectronics (B.V.I.) Ltd.	Jul 17, 2001	CITCO Building, P.O. Box 662, Road Town, Tortola , British Virgin Islands.	USD 144,447,000	Controlling Company
Toppoly Optoelectronics (Cayman) Ltd.	Jul 17, 2001	89 Nexus Way, Camana Bay, P. O. Box 31106, Georgetown Grand Cayman KY1-1205, Cayman Islands	USD 144,417,000	Controlling Company
Warriors Technology Investments Ltd.	Jan 3, 2007	Offshore Chambers, P.O. Box,217,Apia,Samoa	US$18,177,052	Investment activities
Shanghai Innolux Optoelectronics Ltd.	Jan 9, 2006	No. 272-2, Ba Sheng Road, New Customs, Wai Gao Qiao Free Trade Zone, 200131 Pudong, Shanghai, China	USD 21,000,000	Manufacturing & selling LCD back end module related technologies and products.
Yuan Chi investment co., Ltd	Jul 6, 2005	No.8, Zhongxin Rd., Xinshi Dist., Tainan City 74148, Taiwan (R.O.C.)	NTD 2,100,000,000	Investment activities
Foshan Innolux Optoelectronics Ltd.	Apr 21, 2006	Xingye North Rd., Foshan Science & Technology Industry Garden, Foshan, Guangdong, 528325, China	USD 383,000,000	Manufacturing & selling LCD back end module related technologies and products.
Foshan Innolux Logistics Ltd.	Jul 17, 2008	North Factory, Xingye Rd., Nanhai Economic Zone, Foshan, Guangdong,528325,China	USD 1,500,000	Storage services
VAP Optoelectromics (NanJing) Corp.	Mar 29, 2007	No. 8, Jiu Zu Road, Jiangning Economic and Technical Development Zone, Nanjing, China	USD 10,100,000	Manufacturing & selling LCD back end module related technologies and products.
Kunpal Optoelectronics Ltd.	Jan 9, 2009	No. 93, Fu Cheng West Road, Jiangning Economic and Technical Development Zone, Nanjing,China	USD 4,000,000	Thinner glass process service
Nanjing Innolux Technology Ltd.	Oct 24, 2007	No. 93, Fu Cheng West Road, Jiangning Economic and Technical Development Zone, Nanjing,China	USD 2,100,000	Business of display and related product.
Nanjing Innolux Optoelectronics Ltd.	May 23, 2001	No. 93, Fu Cheng West Road, Jiangning Economic and Technical Development Zone, Nanjing, China	USD 142,000,000	Manufacturing & selling LCD back end module related technologies and products.
InnoJoyInvestment	Jun 26,2007	No.8,Zhongxin Rd.,Xinshi	NTD1,674,053,920	Investment activities

116

Company	Date of Incorporation	Address	Capital Stock	Business Activities
Corp.		Dist., Tainan City 74148, Taiwan (R.O.C.)
Innocom Technology (Shenzhen) Co., LTD	Jun 24, 2004	1F, Zone 4, G2 Zone 2F A region, 3F, 4F and 5F Foxconn Technology Industrial Park E, Bao'an District, Shenzhen City, GuangdongProvince,China	USD 164,000,000	Manufacturing & selling LCD back end module related technologies and products.
Ningbo Innolux Technology Co., LTD	Jun 7, 2005	No.8, Cao E River Rd., Ningbo Bonded Zone	USD 130,000,000	Manufacturing & selling LCD back end module related technologies and products.
Ningbo Innolux Electronics Ltd.	Nov 04,2015	No.8, Cao E River Rd., Ningbo Bonded Zone Building 2 2F	CNY 30,000,000	Selling LCD back end module related technologies and products.
Ningbo Innolux Optoelectronics Co., LTD	Dec 14, 2004	No.16, YangZi River North Rd., Ningbo Export Processing Zone, 315800, China	USD 310,000,000	Manufacturing & selling LCD back end module related technologies and products.
Ningbo Innolux Display LTD	Dec 05, 2006	No.8, Cao E River Rd., Ningbo Bonded Zone	USD 30,000,000	Manufacturing & selling LCD back end module related technologies and products.
Ningbo Innolux Logistics LTD	Dec 05, 2006	No.8, Alishan Road, Ningbo Export ProcessingZone,China	USD 4,000,000	Storage services

8.1.3 Shareholders in Common of INX and Its Subsidiaries with Deemed Control and

Subordination: None.

8.1.4 Business Scope of INX and Its Subsidiaries:

The company and its subsidiary operating business include the development, manufacture, after service and sale of TFT-LCD.

By the layout of globalization, combine the distribution of Taiwan and China production base; provide downstream manufacturer or panel module manufacturer to have high flexibility supply capacity.

There are a small number of affiliated companies are setting investment business as operating scope, to strength vertical integration and strategy investment and coordinate the company’s future operation.

117

8.1.5 Rosters of Directors, Supervisors, and Presidents of INX’s Subsidiaries:

As of 12/31/2015

			As of 12/31/2015	As of 12/31/2015
Company	Title	Name	Shareholding
			Shares	% (Investment Holding)
Asiaward Investment Ltd.	Chairman	Chien-LangLo	-	-
Best China Investments Ltd.	Chairman	Chien-LangLo	-	-
Bright Information Holding Ltd.	Chairman	Jyh Chau,Wang	-	-
	Director	Chao-Hsien Liu	-	-
	Director	Jun-Yi Yu	-	-
Golden Achiever International Limited	Chairman	Chao-Hsien Liu	-	-
InnoLux Corporation	Chairman	Nai-Hsun Kuo	-	-
Innolux HoldingLtd.	Chairman	Hsing-Chien Tuan	-	-
Innolux Hong Kong Holding Limited	Chairman	Jyh Chau,Wang	-	-
	Director	Chao-Hsien Liu	-	-
	Director	Jun-Yi Yu	-	-
Innolux Hong Kong Limited	Chairman	Jyh Chau,Wang	-	-
	Director	Tzu-En Hung	-	-
	Director	Nai-Hsun Kuo	-	-
Innolux Optoelectronics Europe B.V.	Chairman	Chin-Yuan Chang	-	-
Innolux Optoelectronics Germany GmbH	Chairman	Chin-Yuan Chang	-	-
Innolux Optoelectronics Hong Kong Holding Ltd.	Chairman	Jyh Chau,Wang	-	-
	Director	Shu-Mei He	-	-
	Director	Jun-Yi Yu	-	-
Innolux Optoelectronics Japan Co., Ltd.	Chairman	Suzuki Mikio	-	-
	Director	Jyh Chau,Wang	-	-
	Director	Ching-LungTing	-	-
	Supervisor	Kida Masukichi	-	-
	Supervisor	Hui-Chuan Chien	-	-
	Supervisor	Chin-Yuan Chang	-	-
Innolux Optoelectronics USA, INC.	Chairman	Junichi Ishi	-	-
	Director	Suzuki Mikio	-	-
	Director	Sato Takahiro	-	-
Innolux Technology Europe B.V.	Chairman	Jyh Chau,Wang	-	-
	Director	van Riel, Lucien Franciscus Henricus	-	-
Innolux Technology Germany GmbH	Chairman	Jyh Chau,Wang	-	-
	Director	van Riel, Lucien Franciscus Henricus	-	-
	Director	Akkie Petrus Lambert Kersten	-	-
Innolux Technology Japan Co., Ltd.	Chairman	Taruda Kiyoshi	-	-
	Director	Jyh Chau,Wang	-	-
	Director	Hui-Chuan Chien	-	-
	Supervisor	Chin-Yuan Chang	-	-
Innolux Technology USA Inc.	Chairman	Jyh Chau,Wang	-	-
	Director	Brant White	-	-
Keyway Investment Management Limited	Chairman	Jyh Chau, Wang	-	-
Lakers TradingLtd.	Chairman	Chih-HungHsiao	-	-
Landmark International Ltd.	Chairman	Jyh Chau,Wang	-	-
Leadtek Global GroupLimited	Chairman	Jyh Chau,Wang	-	-
Magic Sun Ltd.	Chairman	Chien-LangLo	-	-
Main DynastyInvestment Ltd.	Chairman	Chien-LangLo	-	-
Mega Chance Investments Ltd.	Chairman	Chien-LangLo	-	-
Nets TradingLtd.	Chairman	Hsing-Chien Tuan	-	-
Rockets HoldingLtd.	Chairman	Chih-HungHsiao	-	-
Stanford Developments Ltd.	Chairman	Chih-HungHsiao	-	-

118

Company	Title	Name	Shareholding	Shareholding
			Shares	% (Investment Holding)
Sun DynastyDevelopment Ltd.	Chairman	Chien-LangLo	-	-
Suns HoldingLtd.	Chairman	Chih-HungHsiao	-	-
Toppoly Optoelectronics (B.V.I.) Ltd.	Chairman	Jyh Chau, Wang	-	-
Toppoly Optoelectronics (Cayman)Ltd.	Chairman	Jyh Chau, Wang	-	-
Warriors Technology Investments Ltd.	Chairman	Chih-Hung Hsiao	-	-
Shanghai Innolux Optoelectronics Ltd	Chairman	Nai-Jian Zheng	-	100%
	Director	Chin-Yuan Chang	-	100%
	Director	Jun-Yi Yu	-	100%
Yuan Chi investment co., Ltd	Chairman	Innolux Corporation Representative - Jyh-Chau Wang	-	100%
	Director	Innolux Corporation Representative – Chien-LangLo	-	100%
	Director	Innolux Corporation Representative - Chih-Hung Hsiao	-	100%
Foshan Innolux Optoelectronics Ltd.	Chairman	Qing-Hui Lin	-	100%
	Director	Chien-MingChen	-	100%
	Director	Jun-Yi Yu	-	100%
	Supervisor	Chin-Yuan Chang	-	100%
Foshan Innolux Logistics Ltd.	Chairman	Qing-Hui Lin	-	100%
	Director	Jung-Hsien Chien	-	100%
	Director	Kuei Wang	-	100%
	Supervisor	Chin-Yuan Chang	-	100%
VAP Optoelectromics (NanJing) Corp.	Chairman	Nai-Jian Zheng	-	100%
	Director	Chin-Yuan Chang	-	100%
	Director	Nai-Hsun Kuo	-	100%
	Supervisor	Kun Ma	-	100%
Kunpal Optoelectronics Ltd.	Chairman	Nai-Jian Zheng	-	100%
	Director	Jun-Yi Yu	-	100%
	Director	Chin-Yuan Chang	-	100%
	Supervisor	Kun Ma	-	100%
Nanjing Innolux Technology Ltd.	Chairman	Nai-Jian Zheng	-	100%
	Director	Chin-Yuan Chang	-	100%
	Director	Chih-ChiangLu	-	100%
	Supervisor	Kun Ma	-	100%
Nanjing Innolux Optoelectronics Ltd.	Chairman	Nai-Jian Zheng	-	100%
	Director	Chin-Yuan Chang	-	100%
	Director	Jun-Yi Yu	-	100%
	Supervisor	Kun Ma	-	100%
InnoJoy Investment Corp	Chairman	Innolux Corporation Representative - Chih-Hung Hsiao	167,405,392	100%
	Director	Innolux Corporation Representative - Jyh Chau,Wang	167,405,392	100%
	Director	Innolux Corporation Representative – Chien-LangLo	167,405,392	100%
	Supervisor	Innolux Corporation Representative - Chin-Yuan Chang	167,405,392	100%
Innocom Technology (Shenzhen) Co., LTD	Chairman	Zhen-Da chiu	-	100%
	Director	Jun-Yi Yu	-	100%
	Director	Chin-Yuan Chang	-	100%
Ningbo Innolux Technology Co., LTD	Chairman	Kuo-HsiungKuo	-	100%
	Director	Chien-LangLo	-	100%
	Director	Cheng-ChungChiang	-	100%

119

Company	Title	Name	Shareholding	Shareholding
			Shares	% (Investment Holding)
	Supervisor	Chin-Yuan Chang	-	100%
Ningbo Innolux Electronics Ltd.	Chairman	Cheng-ChungChiang	-	100%
	Director	Chao-Hsien Liu	-	100%
Ningbo Innolux Optoelectronics Co., LTD	Chairman	Kuo-HsiungKuo	-	100%
	Director	Chien-LangLo	-	100%
	Director	Cheng-ChungChiang	-	100%
	Supervisor	Chin-Yuan Chang	-	100%
Ningbo Innolux Display LTD	Chairman	Kuo-HsiungKuo	-	100%
	Director	Chien-LangLo	-	100%
	Director	Cheng-ChungChiang	-	100%
	Supervisor	Chin-Yuan Chang	-	100%
Ningbo Innolux Logistics LTD	Chairman	Kuo-HsiungKuo	-	100%
	Director	Chien-LangLo	-	100%
	Director	Cheng-ChungChiang	-	100%
	Supervisor	Chin-Yuan Chang	-	100%

120

8.1.6 Operational Highlights of INX Subsidiaries

Unit: NT$ thousands, 12/31/2015

Company	Capital Stock	Assets	Liabilities	Net Worth	Net Revenue	Income (Loss) from Operation	Net Income (Loss)	Basic Earnings (Loss) Per Share
Asiaward Investment Ltd.	329,610	266,110	-	266,110	-	-	781	0.01
Best China Investments Ltd.	328,250	266,110	-	266,110	-	-	781	0.08
Bright Information HoldingLtd.	161,171	105,122	424	104,698	-	(422)	(205)	(0.04)
Golden Achiever International Limited	1,321	66,583	-	66,583	-	-	(2,048)	(50.89)
InnoLux Corporation	6,565	64,649	157,514	(92,865)	-	(1,574)	(1,327)	(663.52)
Innolux HoldingLtd.	8,100,166	20,263,127	-	20,263,127	-	-	293,551	1.19
Innolux Hong Kong HoldingLimited	4,907,704	2,908,171	-	2,908,171	-	-	687,929	0.59
Innolux Hong Kong Limited	148,225	15,018,116	16,863,138	(1,845,022)	45,445,873	214,048	317,860	9.08
Innolux Optoelectronics Europe B.V.	646	163,822	31,180	132,642	90,939	1,601	(4,827)	(26,816.67)
Innolux Optoelectronics GermanyGmbH	897	18,679	1,656	17,023	29,766	1,406	(7,957)	(31,827.20)
Innolux Optoelectronics HongKongHoldingLtd.	689,872	1,055,807	-	1,055,807	-	-	295,546	1.81
Innolux Optoelectronics Japan Co.,Ltd.	85,698	1,779,369	271,988	1,507,381	1,753,930	29,887	36,154	451,923.92
Innolux Optoelectronics USA,Inc.	196,950	367,656	89,952	277,704	871,707	15,153	9,020	9,019.72
Innolux Technology Europe B.V.	1,348,406	2,390,123	108,859	2,281,264	703,812	41,844	32,697	87.00
Innolux Technology GermanyGmbH	3,588	87,211	28,133	59,078	26,091	1,242	173	1.73
Innolux Technology Japan Co.,Ltd.	39,970	1,777,235	70,276	1,706,959	300,026	18,981	17,594	87,533.16
Innolux Technology USA Inc.	33	717,879	354,387	363,492	1,628,549	35,615	24,231	24,231.43
Keyway Investment Management Limited	185,672	230,932	-	230,932	-	-	(3,746)	(0.66)
Lakers TradingLtd.	-	56,879,198	56,629,118	250,080	147,471,396	(147,484)	-	-
Landmark International Ltd.	23,287,696	45,947,765	-	45,947,765	-	-	4,159,463	5.86
Leadtek Global Group Limited	1,641,250	37,689,599	37,922,462	(232,863)	65,759	65,759	(103,103)	(2.06)
Magic Sun Ltd.	1,247,350	1,092,270	-	1,092,270	-	-	92,832	2.44
Main Dynasty Investment Ltd.	591,307	438,236	-	438,236	-	-	1,286	0.01
Mega Chance Investments Ltd.	590,850	438,237	-	438,237	-	-	1,286	0.07
Nets TradingLtd.	29,543	30,916	-	30,916	-	-	-	-
Rockets HoldingLtd.	7,435,012	15,064,678	-	15,064,678	-	-	102,191	0.45
Stanford Developments Ltd.	5,383,300	13,237,065	42	13,237,023	-	-	7,291	0.04
Sun Dynasty Development Ltd.	1,253,429	1,092,270	-	1,092,270	-	-	92,832	0.31
Suns HoldingLtd.	596,662	5,041,225	-	5,041,225	-	-	192,687	10.60
Toppoly Optoelectronics (B.V.I.)Ltd.	4,741,473	6,787,268	-	6,787,268	-	-	751,258	5.20
Toppoly Optoelectronics (Cayman)Ltd.	4,740,488	6,786,885	-	6,786,885	-	-	751,258	5.20
Warriors Technology Investments Ltd.	596,662	5,041,223	-	5,041,223	-	(2)	192,687	10.60

121

Company	Capital Stock	Assets	Liabilities	Net Worth	Net Revenue	Income (Loss) from Operation	Net Income (Loss)	Basic Earnings (Loss) Per Share
Shanghai Innolux Optoelectronics Ltd.	689,325	6,780,952	5,725,145	1,055,807	19,156,619	403,584	295,546	-
Yuan Chi investment co., Ltd	2,100,000	1,138,486	504	1,137,982	-	(305)	(215,059)	-
Foshan Innolux Optoelectronics Ltd.	12,571,975	53,655,567	33,706,792	19,948,775	83,039,005	2,310,115	1,669,650	-
Foshan Innolux Logistics Ltd.	49,238	77,846	9,580	68,266	93,204	1,321	3,161	-
VAP Optoelectromics (NanJing)Corp.	331,533	75,820	9,648	66,172	-	(170)	(2,048)	-
Kunpal Optoelectronics Ltd.	131,300	91,745	13,884	77,861	96,629	(218)	234	-
Nanjing Innolux TechnologyLtd.	68,933	607,407	1,286	606,121	-	(1,645)	12,948	-
Nanjing Innolux Optoelectronics Ltd.	4,661,150	19,119,688	12,938,947	6,180,741	39,575,507	780,761	738,310	-
InnoJoyInvestment Corp.	1,674,054	1,242,974	214	1,242,760	-	(226)	(338,289)	(2.02)
Innocom Technology (Shenzhen)Co.,LTD	5,383,300	13,854,983	617,973	13,237,010	1,414,499	352,344	7,291	-
Ningbo Innolux TechnologyCo.,LTD	4,267,250	10,153,413	6,711,131	3,442,282	23,512,300	476,693	299,191	-
Ningbo Innolux Electronics Ltd.	151,650	151,688	-	151,688	-	-	38	-
Ningbo Innolux Optoelectronics Co.,LTD	10,175,750	38,583,538	16,278,476	22,305,062	63,518,261	1,620,283	2,185,851	-
Ningbo Innolux Display LTD	984,750	4,046,400	3,687,205	359,195	5,683,539	185,227	105,198	-
Ningbo Innolux Logistics LTD	131,300	158,584	915	157,669	13,105	(8,868)	(6,907)	-

8.2 Private Placement Securities in the Most Recent Years: None.

8.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years: None.

8.4 Special Notes: None.

IX. Materially might affect shareholders' equity or the price of the company's securities, has occurred during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, such situations shall be listed one by one: None.

122

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Innolux Corporation:

We have audited the accompanying consolidated balance sheets of Innolux Corporation and its subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Innolux Corporation and subsidiaries as of December 31, 2015 and 2014, and their financial performance and cash flows for the years then ended in conformity with the “Regulations Governing the Preparation of Financial Statements by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

We have also audited the separate financial statements of Innolux Corporation as of and for the years ended December 31, 2015 and 2014, and have expressed an unqualified opinion on such financial statements.

PricewaterhouseCoopers, Taiwan

February 2, 2016

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.

123

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(3) 6(5) 7 7 6(6) 6(1) and 8 6(2) 6(3) 6(7) 6(8), 7 and 8 6(9) 6(10) 6(25) 8 6(8)	2015 $ 52,522,790 120,036 - 48,189,791 2,632,853 2,024,204 30,198,432 1,107,869 1,979,467 91,545 138,866,987 281,922 7,123,034 1,610,586 199,482,740 680,503 19,342,856 15,888,467 119,703 4,045,538 248,575,349 $ 387,442,336	2014
Current Assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1125 Available-for-sale financial assets - current 1170 Accounts receivable, net 1180 Accounts receivable, net - related parties 1200 Other receivables 130X Inventory 1410 Prepayments 1476 Other financial assets - current 1479 Other current assets 11XX Total current assets Non-current assets 1510 Financial assets at fair value through profit or loss - non-current 1523 Available-for-sale financial assets - non-current 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1760 Investment property, net 1780 Intangible assets 1840 Deferred income tax assets 1980 Other financial assets - non-current 1990 Other non-current assets 15XX Total non-current assets 1XXX Total assets			$ 70,989,741 52,453 220,000 70,976,005 6,112,400 2,849,589 33,787,842 1,441,603 2,802,110 149,069
			189,380,812
			605,155 5,137,117 2,364,225 233,609,843 693,677 20,219,137 17,778,516 11,160,082 1,567,991
			293,135,743
			$ 482,516,555

(Continued)

124

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars)

Liabilities andEquity	Notes 6(11) 6(2) 6(4) 7 7 and 9 6(15) 6(12) 6(12) 6(25) 6(13) 6(16) 6(14)(17) 6(18) 6(19) 9	2015 $ - 265,525 - 57,069,951 3,359,933 24,912,360 1,819,368 5,551,759 16,361,238 1,131,329 110,471,463 43,629,968 514,094 562,088 44,706,150 155,177,613 99,532,372 99,643,564 2,676,947 - 27,661,503 2,750,337 232,264,723 - 232,264,723 $ 387,442,336	2014
Current Liabilities 2100 Short-term borrowings 2120 Financial liabilities at fair value through profit or loss - current 2125 Derivative financial liabilities for hedging - current 2170 Accounts payable 2180 Accounts payable - related parties 2200 Other payables 2230 Current income tax liabilities 2250 Provisions - current 2320 Long-term liabilities, current portion 2399 Other current liabilities 21XX Total current liabilities Non-current liabilities 2540 Long-term borrowings 2570 Deferred income tax liabilities 2600 Other non-current liabilities 25XX Total non-current liabilities 2XXX Total liabilities Equity attributable to owners of the parent 3110 Share capital - common stock 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings 3400 Other equity interest 31XX Equity attributable to owners of the parent 36XX Non-controlling interest 3XXX Total equity Significant contingent liabilities and unrecognized contract commitments 3X2X Total liabilities and equity			$ 22,526,999 605,016 1,351 74,954,439 5,252,946 23,912,180 582,258 3,133,489 66,162,663 2,004,157
			199,135,498
			42,293,423 477,580 11,438,618
			54,209,621
			253,345,119
			99,545,364 99,584,369 509,272 1,144,229 24,979,173 1,927,656
			227,690,063
			1,481,373
			229,171,436
			$ 482,516,555

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

125

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

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

Items

Notes
2015
2014
7
$ 364,132,984
$ 428,661,898
6(6)(23) and 7
(
317,492,879) (
378,276,897)
46,640,105
50,385,001
6(23)
(
3,204,824) (
3,224,079)
(
6,600,082) (
6,810,443)
(
14,404,490) (
12,177,083)
(
24,209,396) (
22,211,605)
22,430,709
28,173,396
6(20)
2,313,182
2,734,952
6(21)
(
8,683,203) (
5,130,475)
6(22)
(
1,415,088) (
3,309,347)
213,587
65,814
(
7,571,522) (
5,639,056)
14,859,187
22,534,340
6(25)
(
4,045,046) (
857,432)
$ 10,814,141
$ 21,676,908

(Continued)

126

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

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

Items

Notes
2015
2014
6(13)
($ 195,939) ($ 55,790)
6(25)
33,309
9,484

(
162,630) (
46,306)
(
1,421,828)
3,078,767
2,266,346
284,946
6(4)
(
297,675) (
278,458)
4,432
81,659
6(25)
118,551
38,885
669,826
3,205,799
$ 507,196
$ 3,159,493
$ 11,321,337
$ 24,836,401
$ 10,815,594
$ 21,676,759
(
1,453)
149
$ 10,814,141
$ 21,676,908
$ 11,352,532
$ 24,844,853
(
31,195) (
8,452)
$ 11,321,337
$ 24,836,401
6(26)
$ 1.09
$ 2.31
$ 1.07
$ 2.28

Other comprehensive income
(net)
Components of other
comprehensive loss that will not
be reclassified to profit or loss
8311
Remeasurement of defined
benefit obligations
8349
Income tax relating to the
components of other
comprehensive income that will
not be reclassified
8310
Components of other
comprehensive loss that will
not be reclassified to profit or
loss
Components of other
comprehensive income that will
be reclassified to profit or loss
8361
Financial statements translation
differences of foreign operations
8362
Unrealized gain on valuation of
available-for-sale financial assets
8363
Cash flow hedges
8370
Share of other comprehensive
income of associates and joint
ventures accounted for under
equity method
8399
Income tax relating to the
components of other
comprehensive income that will
be reclassified
8360
Components of other
comprehensive income that
will be reclassified to profit
or loss
8300
Other comprehensive income for
the year, net of tax
8500
Total comprehensive income for
the year
Profit attributable to:
8610
Owners of the parent
8620
Non-controlling interest
Total
Other comprehensive income
attributable to:
8710
Owners of the parent
8720
Non-controlling interest
Total
Earnings per share (in dollars)
9750
Basic earnings per share
9850
Diluted earnings per share

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

127

INNOLUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars)

Notes					Equity attributable	owners ofthe parent						Non- controlling interest	Total
	Common stock	Capital surplus		Retained Earnings			Other Equity	Int	erest		Total
			Legal reserve	Special reserve	Unappropriated earnings	Financial statements translation differences of foreign operations	Unrealized gain (loss) on available- for-sale financial assets		Changes in gain (loss) on cash flow hedge	Employee unearned compensation
6(18) 6(18) 6(18) 6(18) 6(14) 6(19) 6(18) 6(14) 6(19)	$ 91,094,288 8,500,000 - - - - - ( 48,924 ) - - - - - - $99,545,364 $ 99,545,364 - - - ( 12,992 ) - - - - - - $99,532,372	$ 96,058,741 2,125,000 - - - ( 1,266,944 ) 2,328,981 48,924 47,174 289,523 ( 47,030 ) - - - $99,584,369 $ 99,584,369 - - - 12,992 ( 3,760 ) 22,740 27,185 38 - - $99,643,564	$ 2,328,981 - 509,272 - - - ( 2,328,981 ) - - - - - - - $ 509,272 $ 509,272 2,167,675 - - - - - - - - - $2,676,947	$ - - - 1,144,229 - - - - - - - - - - $1,144,229 $ 1,144,229 - ( 1,144,229 ) - - - - - - - - $ -		( $ 78,074 ) - - - - - - - - - - - - 3,161,022 $3,082,948 $ 3,082,948 - - - - - - - - - ( 1,387,654 ) $1,695,294						$ 1,534,625 - - - - - - - - - - ( 44,800 ) 149 ( 8,601 ) $1,481,373 $ 1,481,373 - - - - - - - ( 1,450,178 ) ( 1,453 ) ( 29,742 ) $	$ 194,577,854 10,625,000 - - ( 90,495 ) ( 1,266,944 ) - - 3,223 578,227 ( 47,030 ) ( 44,800 ) 21,676,908 3,159,493 $ 229,171,436 $ 229,171,436 - - ( 6,947,188 ) - ( 1,349 ) 143,442 27,185 ( 1,450,140 ) 10,814,141 507,196 $ 232,264,723

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

128

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated profit before tax for the year
Adjustments to reconcile net income to net cash provided by
operating activities
Income and expenses having no effect on cash flows
Depreciation and amortization
Compensation related to share-based payment
Provision for doubtful accounts
Share of profit of associates and joint ventures
accounted for under equity method
Loss (gain) on disposal of investments
Loss on disposal of property, plant and equipment
Impairment loss
Interest expense
Interest income
Dividend income
Unrealized foreign exchange (gain) loss
Changes in assets/liabilities relating to operating activities
Net changes in assets relating to operating activities
Financial assets /liabilities at fair value through profit
or loss
Accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Prepayments
Other current assets
Net changes in liabilities relating to operating activities
Derivative financial liabilities for hedging
Accounts payable
Accounts payable - related parties
Other payables
Provisions - current
Other current liabilities
Other non-current liabilities
Cash generated from operations
Cash paid for income tax
Net cash provided by operating activities

Notes
2015
2014
$ 14,859,187
$ 22,534,340
6(23)
53,571,172
60,899,556
6(14)
143,442
578,227
6(5)
-
820
(
213,587 ) (
65,814 )
6(21)
47,583
(
794,041 )
6(21)
180,829
179,758
6(21)
589,911
351,066
6(22)
1,712,758
3,586,581
6(20)
(
484,873 ) (
328,633 )
6(20)
(
224,441 ) (
39,958 )
(
225,917 )
1,417,004

(
83,841 )
198,617
22,786,214
(
4,618,534 )
3,479,547
(
4,062,415 )
849,827
(
1,047,816 )
3,589,410
16,736,314
333,734
(
246,732 )
57,524
259,826
(
299,026 ) (
299,025 )
(
17,884,488 )
9,518,853
(
1,893,013 ) (
3,503,297 )
(
713,699 )
4,070,494
2,418,270
1,184,460
(
821,001 ) (
290,486 )
6,891
(
721,826 )
81,782,413
105,497,339
(
718,120 ) (
768,062 )
81,064,293
104,729,277

(Continued)

129

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of available-for-sale financial assets
Proceeds from disposal of available-for-sale financial assets
Acquisition of investment accounted for under equity
method
Proceeds from disposal of investment accounted for under
equity method
Proceeds from capital reduction of investments accounted
for under equity method
Decrease (increase) in other financial assets
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets
Proceeds from disposal of intangible assets
Increase in other non-current assets
Interest received
Dividends received
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings
Increase in long-term borrowings
Payment of long-term borrowings
Capital issued for cash
Repurchase from issuance of restricted stock to employees
Changes in non-controlling interests
Interest paid
Cash paid from capital surplus
Cash dividends paid
Net cash used in financing activities
Effect of changes in foreign currency exchange
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Notes
2015
2014
$ -
( $ 240,167 )

450,057
802,524
-
(
73,500 )
-
1,685,201
-
59,451
783,662
(
52,903 )
6(27)
(
24,511,490 ) (
20,526,552 )
6(27)
1,798,359
4,253,209
(
16,392 ) (
18,140 )
856
-
(
4,453 ) (
22,070 )
449,038
368,335
247,612
64,221
(
20,802,751 ) (
13,700,391 )
(
22,449,868 ) (
8,881,219 )
68,100,131
-
(
116,527,861 ) (
61,671,395 )
6(16)
-
10,625,000
(
3,676 ) (
7,754 )
(
50 ) (
44,800 )
(
1,628,841 ) (
3,608,923 )
6(18)
-
(
1,266,944 )
6(18)
(
6,947,188 ) (
90,495 )
(
79,457,353 ) (
64,946,530 )
728,860
769,567
(
18,466,951 )
26,851,923
70,989,741
44,137,818
$ 52,522,790
$ 70,989,741

130

INNOLUX CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

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

HISTORY AND ORGANIZATION

(1)Innolux Corporation (the “Company”) was organized on January 14, 2003 under the Act for Establishment and Administration of Science Parks in Republic of China (R.O.C.). The Company was listed on the Taiwan Stock Exchange Corporation (the “TSEC”) in October 2006. The Company merged with TPO Displays Corporation and Chi Mei Optoelectronics Corporation on March 18, 2010, with the Company as the surviving entity.
(2)The Company and its subsidiaries (the “Group”) engage in the research, development, design, manufacture and sales of TFT-LCD panels, modules and monitors of LCD, color filter, and low temperature poly-silicon TFT-LCD.

THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND

PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors on February 2, 2016.

APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)
According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued by FSC on April 3, 2014, commencing 2015, companies with shares listed on the TWSE or traded on the Taipei Exchange or Emerging Stock Market shall adopt the 2013 version of IFRS (not including IFRS 9, ‘Financial instruments’) as endorsed by the FSC and the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” effective January 1, 2015 (collectively referred herein as ‘‘the 2013 version of IFRS”) in preparing the consolidated financial statements. The impact of adopting the 2013 version of IFRS is listed below:
A. IAS 19 (revised), ‘Employee benefits’
- The revised standard makes amendments that net interest amount, calculated by applying the discount rate to the net defined benefit asset or liability, replaces the finance charge and expected return on plan assets. Additional disclosures are required for defined benefit plans.
B. IAS 1, ‘Presentation of financial statements’
- The amendment requires entities to separate items presented in OCI classified by nature into two groups on the basis of whether they are potentially reclassifiable to profit or loss subsequently when specific conditions are met. If the items are presented before tax then the tax related to each of the two groups of OCI items (those that might be reclassified and those that will not be reclassified) must be shown separately. Accordingly, the Group will adjust its presentation of the statement of comprehensive income.
C. IFRS 12, ‘Disclosure of interests in other entities’
- The standard integrates the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. Also, the Group will disclose additional information about its interests in consolidated entities and unconsolidated entities accordingly.
D. IFRS 13, ‘Fair value measurement’

131

The standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard sets out a framework for measuring fair value from market participants’ perspective, and requires disclosures about fair value measurements. For non-financial assets only, fair value is determined based on the highest and best use of the asset. Based on the Group’s assessment, the adoption of the standard has no significant impact on its consolidated financial statements, and the Group will disclose additional information about fair value measurements accordingly.

Based on the Group’s assessment, the adoption of the 2013 version of IFRS has no significant impact on the consolidated financial statements for the years ended December 31, 2015 and 2014.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group None.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the 2013 version of IFRS as endorsed by the FSC:

as endorsed by the FSC:

New Standards,Interpretations and Amendments

Effective Date by
International Accounting
Standards Board

IFRS 9, ‘Financial instruments’
Sale or contribution of assets between an investor and its associate or
joint venture (amendments to IFRS 10 and IAS 28)
Investment entities: applying the consolidation exception (amendments
to IFRS 10, IFRS 12 and IAS 28)
Accounting for acquisition of interests in joint operations
(amendments to IFRS 11)
IFRS 14, ‘Regulatory deferral accounts’
IFRS 15, ‘Revenue from contracts with customers’
IFRS 16, ‘Leases’
Disclosure initiative (amendments to IAS 1)
Disclosure initiative (amendments to IAS 7)
Recognition of deferred tax assets for unrealised losses (amendments to
IAS 12)

January 1, 2018
To be determined by
International Accounting
Standards Board
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2018
January 1, 2019
January 1, 2016
January 1, 2017
January 1, 2017

132

New Standards,Interpretations and Amendments

Effective Date by
International Accounting
Standards Board

Clarification of acceptable methods of depreciation and amortisation
(amendments to IAS 16 and IAS 38)
Agriculture: bearer plants (amendments to IAS 16 and IAS 41)
Defined benefit plans: employee contributions (amendments to IAS
19R)
Equity method in separate financial statements (amendments to IAS 27)
Recoverable amount disclosures for non-financial assets (amendments
to IAS 36)
Novation of derivatives and continuation of hedge accounting
(amendments to IAS 39)
IFRIC 21, ‘Levies’
Improvements to IFRSs 2010-2012
Improvements to IFRSs 2011-2013
Improvements to IFRSs 2012-2014

January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
January 1, 2014
January 1, 2014
July 1, 2014
July 1, 2014
January 1, 2016

The Group is assessing the potential impact of the new standards, interpretations and amendments above. The impact will be disclosed when the assessment is complete.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out

below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

These consolidated financial statements are the consolidated financial statements prepared by the Group in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

(2) Basis of preparation

A. Except for the following items, these consolidated financial statements have been prepared under the historical cost convention:
(a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
(b) Available-for-sale financial assets measured at fair value.
(c) Defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligations.
B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The

133

areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

A. Basis for preparation of consolidated financial statements
(a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.
(b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
(c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
(d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.
(e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

134

B. Subsidiaries included in the consolidated financial statements:

Name of Investor	Name ofSubsidiary	Main Business Activities	Ownership (%)	Ownership (%)	Description
			December31,
			2015	2014
Innolux Corporation	Bright Information Holding Ltd. Gold Union Investments Ltd. Golden Achiever International Ltd. Innolux Holding Ltd. Keyway Investment Management Limited Landmark International Ltd. Toppoly Optoelectronics (B.V.I.) Ltd. Innolux Hong Kong Holding Ltd. (Former TPO Hong Kong Holding Ltd.) Leadtek Global Group Limited Yuan Chi Investment Co., Ltd. InnoJoy Investment Corporation Innolux Optoelectronics Europe B.V. (Former Chi Mei Optoelectronics Europe B.V.) Innolux Optoelectronics Japan Co., Ltd. (Former Chi Mei Optoelectronics Japan Co., Ltd.) Chi Mei El Corporation	Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Order swapping Investment company Investment company Investment and distribution company Investment and distribution company Production and distribution company	100 - 100 100 100 100 100 100 100 100 100 100 100 -	100 100 100 100 100 100 100 100 100 100 100 100 100 97	- (d) - - - - - - - - - - - (a)

135

Name of Investor	Name ofSubsidiary	Main Business Activities	Ownership (%)	Ownership (%)	Description
			December31,
			2015	2014
Bright Information Holding Ltd. Gold Union Investments Ltd. Golden Achiever International Ltd. Innolux Holding Ltd. Keyway Investment Management Limited Landmark International Ltd. Toppoly Optoelectronics (B.V.I.) Ltd. Innolux Hong Kong Holding Ltd.	Kunpal Optoelectronics Ltd. Ningbo Innolux Display Ltd. VAP Optoelectronics (Nanjing) Corp. Rockets Holding Ltd. Suns Holding Ltd. Lakers Trading Ltd. Innolux Corporation Ningbo Innolux Logistics Ltd. Foshan Innolux Logistics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Toppoly Optoelectronics (Cayman) Ltd. Innolux Optoelectronics Hong Kong Holding Ltd. (Former TPO Displays Hong Kong Holding Ltd.) Innolux Hong Kong Ltd. (Former TPO Displays Hong Kong Ltd.)	Processing company Processing company Processing company Investment holdings Investment holdings Order swapping Distribution company Warehousing company Warehousing company Processing company Processing company Processing company Processing company Investment holdings Investment holdings Order swapping company	100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100	100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100	- (c) - - - - - - - - - - (c) - - -

136

Name of Investor	Name of Subsidiary	Main Business Activities	Ownership (%)	Ownership (%)	Description
			December31,
			2015	2014
Innolux Hong Kong Holding Ltd. Innolux Optoelectronics Europe B.V. Innolux Optoelectronics Japan Co., Ltd. Rockets Holding Ltd. Suns Holding Ltd. Toppoly Optoelectronics (Cayman) Ltd.	Innolux Technology Europe B.V. (Former TPO Displays Europe B.V.) Innolux Technology Japan Co., Ltd. (Former TPO Displays Japan K.K.) Innolux Technology USA Inc. (Former TPO Displays USA Inc.) Innolux Optoelectronics Germany GmbH (Former Chi Mei Optoelectronics Germany GmbH) Innolux Optoelectronics USA, Inc. (Former Chi Mei Optoelectronics, USA, Inc.) Best China Investments Ltd. Mega Chance Investments Ltd. Magic Sun Ltd. Stanford Developments Ltd. Nets Trading Ltd. Warriors Technology Investments Ltd. Nanjing Innolux Technology Ltd. (Former TPO Displays (Shinepal) Ltd.) Nanjing Innolux Optoelectronics Ltd.	Investment and R&D company R&D company Distribution company After sales service company Distribution company Investment holdings Investment holdings Investment holdings Investment holdings Investment company Investment company Distribution company Processing company	100 100 100 100 100 100 100 100 100 100 100 100 100	100 100 100 100 100 100 100 100 100 100 100 100 100	- - - - - - - - - - - - -

137

Name of Investor	Name ofSubsidiary	Main Business Activities	Ownership (%)	Ownership (%)	Description
			December31,
			2015	2014
Innolux Optoelectronics Hong Kong Holding Ltd. Innolux Technology Europe B.V. Best China Investments Ltd. Mega Chance Investments Ltd. Magic Sun Ltd. Stanford Developments Ltd. Sun Dynasty Development Ltd. Ningbo Innolux Display Ltd.	Shanghai Innolux Optoelectronics Ltd. Innolux Technology Germany GmbH (Former TPO Displays Germany GmbH) Asiaward Investment Ltd. Main Dynasty Investment Ltd. Sun Dynasty Development Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Chengdu) Co., Ltd. Ningbi Innolux Electronics Ltd.	Processing company Testing and maintenance company Investment holdings Investment holdings Investment holdings Processing company Processing company Distribution company	100 100 100 100 100 100 - 100	100 100 100 100 100 100 100 -	- - - - - - (b) (e)

(a) The Board of Directors of the Company in July, 2015 resolved to conduct a simple merger with Chi Mei El Corporation (Chi Mei El), a 97%-owned subsidiary of the Company effective September 1, 2015. The Company was the surviving company while Chi Mei El was dissolved after the merger. Said merger was accounted for an as equity transaction.
(b) Innocom Technology (Chengdu) Ltd. ceased operations and was liquidated in the first quarter of 2015.
(c) Ningbo Innolux Display Ltd., a wholly-owned subsidiary of Gold Union Investments Ltd., became Landmark International Ltd.’s subsidiary after the reorganization in August 2015.
(e) Gold Union Investments Ltd. ceased operations and was liquidated in the fourth quarter of 2015.
(f) Ningbo Innolux Electronics Ltd. was established in November 2015 and was included in the consolidated financial statements since the date of establishment.
C. Subsidiaries not included in the consolidated financial statements: None.
D. Adjustments for subsidiaries with different balance sheet dates: None.
E. The restrictions on fund remittance from subsidiaries to the parent company: None.
F. Subsidiaries that have non-controlling interests that are material to the Group: None.

(4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated

138

financial statements are presented in NTD, which is the Company’s functional and the Group’s presentation currency.

A. Foreign currency transactions and balances
(a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise, except when deferred in other comprehensive income as qualifying cash flow hedges.
(b) Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognized in profit or loss.
(c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.
(d) All foreign exchange gains and losses are presented in the statement of comprehensive income under “other gains and losses”.
B. Translation of foreign operations
(a) The operating results and financial position of all the group entities and associates that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- i. Assets and liabilities for each balance sheet presented are translated at the exchange rate prevailing at the dates of that balance sheet;
- ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period;

iii. All resulting exchange differences are recognized in other comprehensive income.

(b) When a foreign operation partially disposed of or sold is an associate, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, even the Group still retains partial interest in the former foreign associate after losing significant influence over the former foreign associate, such transactions should be accounted for as disposal of all interest in these foreign operations.
(c) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, if the Group retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

139

(5) Classification of current and non-current items

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
(a) Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;
(b) Assets held mainly for trading purposes;
(c) Assets that are expected to be realized within twelve months from the balance sheet date;
(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
(a) Liabilities that are expected to be paid off within the normal operating cycle;
(b) Liabilities arising mainly from trading activities;
(c) Liabilities that are to be paid off within twelve months from the balance sheet date;
(d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(6) Cash equivalents

Cash equivalents refer to short-term highly liquid investments that are readily convertible to known amount of cash and subject to an insignificant risk of changes in value. Time deposits and bonds sold under repurchase agreements that meet the above criteria and held for the purpose of meeting short-term cash commitment in operations are classified as cash equivalents.

(7) Financial assets at fair value through profit or loss

A. Financial assets at fair value through profit or loss are financial assets held for trading or designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of sale in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:
(a) Hybrid (combined) contracts; or
(b) They eliminate or significantly reduce a measurement or recognition inconsistency; or
(c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.
B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using trade date accounting.
C. Financial assets at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in profit or loss.

140

(8) Available-for-sale financial assets

A. Available-for-sale financial assets are non-derivatives that are designated in this category. On a regular way purchase or sale basis, available-for-sale financial assets are recognized and derecognized using trade date accounting.
B. Available-for-sale financial assets are initially recognized at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in other comprehensive income.

(9) Loans and receivables

Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. Accounts receivable are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. However, short-term accounts receivable which are non-interest bearing are subsequently measured at initial invoice amount as the effect of discounting is insignificant.

(10) Impairment of financial assets

A. The Group assesses at each balance sheet date whether there is objective evidence that an individual financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of an individual financial asset or group of financial assets that can be reliably estimated.
B. The objective evidence that the Group uses to determine whether there is an impairment loss is as follows:
(a) Significant financial difficulty of the issuer or debtor;
(b) A breach of contract, such as a default or delinquency in interest or principal payments;
(c) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered; or
(d) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
C. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:
(a) Financial assets measured at amortized cost
- The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortized cost that would have been at the date of reversal had the impairment loss not been recognized previously. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.
(b) Available-for-sale financial assets

141

The amount of the impairment loss is measured as the difference between the asset’s acquisition cost (less any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognized in profit or loss, and is reclassified from “other comprehensive income” to “profit or loss”. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognized, then such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognized in profit or loss shall not be reversed through profit or loss. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

(11) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average cost method. The cost of finished goods and work in process comprises raw materials, direct labor, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

(12) Investments accounted for under the equity method / associates

A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 per cent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognized at cost.
B. The Group’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
C. When changes in an associate’s equity are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the associate, the Group recognizes all the change in equity in “capital surplus” in proportion to its ownership.
D. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
E. In the case that an associate issues new shares and the Group does not subscribe or acquire new shares proportionately, which results in a change in the Group’s ownership percentage of the associate but maintains significant influence on the associate, then “capital surplus” and “investments accounted for under the equity

142

method” shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Group’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.

F. Upon loss of significant influence over an associate, the Group remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognized in profit or loss.
G. When the Group disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of.
H. When the Group disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognized as capital surplus in relation to the associate are reclassified to profit or loss. If it retains significant influence over this associate, then the amounts previously recognized as capital surplus in relation to the associate are reclassified to profit or loss proportionately.
(13) Property, plant and equipment
A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalized.
B. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss when incurred.
C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. If each component of property, plant and equipment is significant, it is depreciated separately.
D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:
- Buildings 3~50 years
- Machinery and equipment 2~9 years

Others 2~6 years

(14) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 25~50 years.

143

(15) Intangible assets

A. Goodwill arises in a business combination accounted for by applying the acquisition method.
B. Intangible assets, mainly patents, royalties and other intangible assets, are amortized on a straight-line basis over their estimated useful lives of 2～10 years.

(16) Impairment of non-financial assets

A. The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. Such recovery of impairment loss shall not result to the asset’s carrying amount greater than its amortized cost where no impairment loss was recognized.
B. The recoverable amounts of goodwill, intangible assets with an indefinite useful life and intangible assets that have not yet been available for use shall be evaluated periodically. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognized in profit or loss shall not be reversed in the following years.
C. For impairment testing purpose, goodwill is allocated to cash generating units. This allocation is based on operating segments. Goodwill is allocated to a cash generating unit or a group of cash generating units that expects to benefit from business combination that will produce goodwill.

(17) Financial liabilities at fair value through profit or loss

A. Financial liabilities at fair value through profit or loss are financial liabilities held for trading. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. Derivatives are also categorized as financial liabilities held for trading unless they are designated as hedges.
B. Financial liabilities at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial liabilities are recognized in profit or loss.
(18) Derivative financial instruments and hedging activities
A. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Any changes in the fair value are recognized in profit or loss.
B. The Group designates certain derivatives as either:
- (a) Hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value hedge).
- (b) Hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge).
C. The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair

144

values or cash flows of hedged items.

D. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as current assets or liabilities.
E. Fair value hedge
(a) Changes in the fair value of derivatives that are designated and qualified as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The Group only applies fair value hedge accounting for hedging foreign currency on long-term borrowings. The gain or loss relating to the effective portion of currency swaps hedging long-term borrowings denominated in foreign currency is recognized in the statement of comprehensive income within “finance costs”. The gain or loss relating to the ineffective portion is recognized in the statement of comprehensive income within “other gains and losses”. Changes in the fair value of the hedge long-term borrowings denominated in foreign currency attributable to interest rate risk are recognized in the statement of comprehensive income within “finance costs”.
(b) If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized to profit or loss over the period to maturity.

F. Cash flow hedge

(a) The effective portion of changes in the fair value of derivatives that are designated and qualified as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the statement of comprehensive income within “other gains and losses”.
(b) Amounts accumulated in other comprehensive income are reclassified into profit or loss in the periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognized in the statement of comprehensive income within “finance costs”.
(c) When a hedging instrument expires, or is sold, cancelled or executed, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other comprehensive income at that time remains in other comprehensive income. When a forecast transaction occurs or is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is transferred to profit or loss in the periods when the hedged forecast cash flow affects profit or loss.

(19) Employee benefit

A. Short-term employee benefits
Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid and should be recognized as expenses in that period when the employees render service.
B. Pensions

145

(a) Defined contribution plans

For defined contribution plans, the contributions are recognized as pension expenses on an accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund or a reduction in the future payments.

(b) Defined benefit plans
i. The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bond (at the balance sheet date) of a currency and term consistment with the currency and term of the employment benefit abligations.
ii. Remeasurement arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.

iii. Past service costs are recognized immediately in profit or loss.

C. Employees’, directors’ and supervisors’ remuneration

Employees’ remuneration and directors’ and supervisors’ remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated.

- (20) Employee share based payment

A. For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognized as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognized is based on the number of equity instruments that eventually vest.
B. Restricted stocks to employees:
(a) Restricted stocks issued to employees are measured at the fair value of the equity instruments granted at the grant date, and are recognized as compensation cost over the vesting period.
(b) For restricted stocks where employees have to pay to acquire those stocks, if employees resign during the vesting period, they must return the stocks to the Group and the Group must refund their payments on the stocks. The Group recognizes the payments from the employees who are expected to resign during the vesting period as liabilities at the grant date, and recognizes the payments from the employees who are expected to be eventually vested with the stocks in “capital surplus – others”.
C. The grant date for the shares reserved for employee preemption in cash capital increase is the date on which the Company informs employees of the grant and both the Company and employees agree to the number of shares granted and the price for subscription.

146

(21) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity.
B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
C. Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
D. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. At each balance sheet date, unrecognized and recognized deferred income tax assets are reassessed.
E. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilized.

(22) Revenue recognition

The Group manufactures and sells TFT-LCD panels. Revenue is measured at the fair value of the consideration received or receivable taking into account value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group’s activities.

(23) Business combinations

A. The Group uses the acquisition method to account for business combinations. The Group chooses to measure the non-controlling interest in the acquiree at the non-controlling interest’s proportionate share of the acquirer’s identifiable net assets on an acquisition-by-acquisition basis.
B. If the total of the fair values of the consideration of acquisition and any non-controlling interest in the acquiree as well as the acquisition-date fair value of any previous equity interest in the acquiree is higher than the fair value of the Group’s share of the identifiable net assets acquired, the difference is recorded as goodwill; if less than the fair value of the Group’s share of the identifiable net assets acquired, the difference is recognized directly in profit or loss.

(24) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments.

147

CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgments in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. The information is addressed below:

(25) Critical judgements in applying the Group’s accounting policies

Financial assets - impairment of equity investments

The Group follows the guidance of IAS 39 to determine whether a financial asset-equity investment is impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an equity investment is less than its cost and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

If the decline of the fair value of an individual equity investment below cost was considered significant or prolonged, the accumulated fair value adjustments recognized in other comprehensive income on the impaired “available-for-sale financial assets” is transferred to profit or loss.

(26) Critical accounting estimates and assumptions

The Group makes estimates and assumptions based on the expectation of future events that are believed to be reasonable under the circumstances at the end of the reporting period. The resulting accounting estimates might be different from the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:

A. Impairment assessment of goodwill

The impairment assessment of goodwill relies on the Group’s subjective judgment, including identifying cash-generating units, allocating assets and liabilities as well as goodwill to related cash-generating units, and determining the recoverable amounts of related cash-generating units. Please refer to Note 6(10) for the information on goodwill impairment.

B. Impairment assessment of tangible and intangible assets (excluding goodwill)
The Group assesses impairment based on its subjective judgement and determines the separate cash flows of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilised and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Group strategy might cause material impairment on assets in the future.
C. Realizability of deferred income tax assets
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. Assessment of the realizability of deferred income tax assets involves critical accounting judgments and estimates of the management, including the assumptions of expected future sales, revenue growth rate, profit rate, tax holiday, available tax credits, and tax planning, etc. Any change in global economic environment, industrial environment, and laws and

148

regulations might cause material adjustments to deferred income tax assets.

D. Evaluation of inventories

As inventories are stated at the lower of cost and net realizable value, the Group must determine the net realizable value of inventories on balance sheet date using judgments and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realizable value.

E. Financial assets - fair value measurement of unlisted stocks without active market

The fair value of unlisted stocks held by the Group that are not traded in an active market is determined considering those companies’ recent fund raising activities and technical development status, fair value assessment of other companies of the same type, market conditions and other economic indicators existing on balance sheet date. Any changes in these judgments and estimates will impact the fair value measurement of these unlisted stocks. Please refer to Note 12(3) for the financial instruments fair value information.

DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

ILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand and revolving funds Checking accounts and demand deposits Time deposits Cash equivalents - Repurchase bonds	December 31,2015 2,255 $ 28,526,258 23,331,155 51,859,668 663,122 52,522,790 $	December 31,2014
		2,572 $ 45,954,667 20,806,255
		66,763,494 4,226,247
		70,989,741 $

A. The Group associates with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.
B. The above time deposits and bonds with repurchase agreement expire in 3 months and risks of changes in their values are remote. The remaining time deposits which did not meet the definition of cash equivalents were $1,973,263 and $517,240 at December 31, 2015 and December 31, 2014 respectively, and were classfied as
‘other financial assets - current’.

149

(2) Financial assets and liabilities at fair value through profit or loss

Assets: Current items: Financial assets held for trading Forward foreign exchange contracts Non-current items: Financial assets held for trading Stock-Advanced Optoelectronic Technology Inc. Valuation adjustment Liabilities: Current items: Financial liabilities held for trading Forward foreign exchange contracts	December31,2015 120,036 $ 77,019 $ 204,903 281,922 $ 265,525 $	December31,2014
		52,453 $ 77,019 $ 528,136 605,155 $ 605,016 $

A. The Group recognized net loss of $663,075 and $976,857 on financial assets held for trading for the years ended December 31, 2015 and 2014, respectively.
B. The non-hedging derivative financial assets and liabilities transaction information are as follows:

		December 31,	December 31,	2015		December 31,	December 31,	2014
	Contract Amount				Contract Amount
Derivative financial	(Notional Principal)				(Notional Principal)
assets and liabilities	(in	thousands)		Contract Period	(in	thousands)		Contract Period
Current items
Forward foreign	USD (sell)	$	150,000	2015/10-2016/2 USD (sell)		$	425,000	2014/10-2015/3
exchange contracts	TWD (buy)		4,896,705	2015/10-2016/2 JPY (buy)		48,580,180		2014/10-2015/3
Forward foreign	USD (sell)		295,000	2015/10-2016/3 EUR (sell)			38,000	2014/10-2015/2
exchange contracts	JPY (buy)		35,649,520	2015/10-2016/3 USD (buy)			47,574	2014/10-2015/2
Forward foreign	EUR (sell)		5,000	2015/11-2016/1
exchange contracts	USD (buy)		175,075	2015/11-2016/1
Forward foreign	EUR (sell)		80,500	2015/10-2016/3
exchange contracts	JPY (buy)		10,668,495	2015/10-2016/3
Forward foreign	HKD (sell)		321,477	2015/11-2016/1
exchange contracts	EUR (buy)		39,000	2015/11-2016/1
Forward foreign	USD (sell)		240,000	2015/10-2016/2
exchange contracts	RMB (buy)		1,541,675	2015/10-2016/2

The Group entered into forward foreign exchange contracts to hedge exchange rate risk of import and export proceeds and foreign currency. However, these forward foreign exchange contracts are not accounted for under hedge accounting.

150

(3) Available-for-sale financial assets

Available-for-sale financial assets
Items Current items Bond investments Non-current items Listed stocks and bond investments Emerging and unlisted stocks	December 31,2015 - $ 6,403,449 $ 719,585 7,123,034 $	December 31,2014
		220,000 $
		3,582,677 $ 1,554,440
		5,137,117 $

A. The Group recognised net gain (loss) in other comprehensive income for fair value change and reclassified from equity to profit or loss for the years ended December 31, 2015 and 2014. Please refer to Note 6(19).
B. For the years ended December 31, 2015, the Group assessed that investment value of certain investee companies was impaired and recognized impairment loss of $108,000 which is listed as ‘other gains and losses’.
C. The counterparties of the Group’s debt instrument investments have good credit quality.

(4) Hedging derivative financial liabilities

losses’. C. The counterparties of the Group’s debt instrument investments have good credit quality. Hedging derivative financial liabilities	y.	y.
Items December31,2015 December31,2014 Current items Interest rate swap - cash flow hedges - $ 1,351 $ Cash flow hedges Derivative Period of Gain Instruments Period of (Loss) Expected Designated Fair Value Anticipated to be Recognized Hedged Items as Hedges December 31,2014 Cash Flow in Profit or Loss Long-term borrowings Interest rate swap 1,351) ($ 2008~2015 2008~2015 Designated as HedgingInstruments	December31,2014
	$	1,351
		Period of Gain (Loss) Expected to be Recognized in Profit or Loss
Long-term borrowings		2008~2015

A. The Company was exposed to significant risk of future cash flow changes on principal payments associated with the Company’s floating interest rate bearing borrowings, both current and long-term portion. Therefore, the Company entered into interest rate swap contracts for exchanging floating interest rate for fixed interest rate (TWD90/180CP (Page51328) to hedge such exposures. The contract had matured and was settled in February, 2015.

151

B. Information about gain or loss arising from cash flow hedges recognized in profit or loss and other comprehensive income:

comprehensive income:
Items Amount of gain or loss adjusted in other comprehensive income Amount of gain or loss transferred from other comprehensive income to profit or loss	Years ended December31,
	2015 5 $ 297,670	2014
		1,224 $ 277,234

(5) Accounts and notes receivable

Amount of gain or loss adjusted in other comprehensive income Amount of gain or loss transferred from other comprehensive income to profit or loss Accounts and notes receivable	$	5 297,670	5 297,670	$	1,224 277,234	1,224 277,234
		December 31,2015			December 31,2014
Notes receivable		$	-		$	21,447
Accounts receivable			48,944,637			71,922,008
			48,944,637			71,943,455
Less: Allowance for sales returns and discounts	(		636,330)	(		827,583)
Allowance for bad debts	(		118,516)	(		139,867)
		$	48,189,791		$	70,976,005

A. The Group’s accounts receivable that were neither past due nor impaired meet the credit ranking rule based on

the counterparties’ industrial characteristics scale of business and profitability.

B. The aging analysis of accounts receivable and notes receivable that were past due but not impaired is as follows:

follows:
Up to 60 days 61 to 180 days Over 180 days	December 31,2015 644,656 $ 42,281 15,766 702,703 $	December 31,2014
		611,670 $ 64,488 73,023 749,181 $

C. Movement analysis of accounts receivable and notes receivable that were impaired is as follows:
(a) As of December 31, 2015 and 2014, the Group’s accounts receivable that were impaired were $118,516 and $139,867, respectively.

(b) Movement on allowance for bad debts for impairment loss on individual provision is as follows:

			2015			2014
At January 1		$	139,867		$	139,221
Allowance for bad debts - provision			-			820
Allowance for bad debts - write-offs	(		21,447)	(		211)
Net exchange difference			36			37
Allowance for bad debts - reclassifications			60			-
At December 31		$	118,516		$	139,867

152

(6) Inventories

Inventories
		December31,2015		December31,2014
Raw materials and supplies		$	3,952,699	$	3,851,583
Work in process			13,906,846		17,996,857
Finished goods			12,338,887		11,939,402
		$	30,198,432	$	33,787,842
Expenses and losses incurred on inventories are as follows:
			Years ended	December 31,
			2015		2014
Cost of inventories sold		$	317,186,303	$	378,358,466
Gain on reversal of decline in market value	(		602,609)	(	473,142)
Disposal loss and others			909,185		391,573
		$	317,492,879	$	378,276,897

The Group had disposed its expired and slow-moving inventories for the years ended December 31, 2015 and 2014. Thus, the risk of reduction in the inventory’s market price had decreased and the net realizable value of inventories had been recovered.

(7) Investments accounted for under the equity method

inventories had been recovered. Investments accounted for under the equity method
Ampower Holding Ltd. TOA Optronics Corporation GIO Optoelectronics Corporation Others	December31,2015 881,351 $ 310,074 99,533 319,628 1,610,586 $	December31,2014
		1,477,199 $ 364,907 450,726 71,393 2,364,225 $

The operating results of the Group’s share in all individually immaterial associates are summarized below:

Profit or loss for the year from continuing operations Other comprehensive income - net of tax Total comprehensive income	Years ended December31,	Years ended December31,
	2015 213,587 $ 4,432 218,019 $	2014
		65,814 $ 81,659 147,473 $

153

(8) Property, plant and equipment

2015

									2015
											Transfer, net
												exchange
												differences
		At January1				Additions			Disposals			and others	At December 31
Cost:
Land		$	3,852,792		$	-		$	-		$	-	$	3,852,792
Buildings			185,352,098			77,904	(		285,434)			551,758		185,696,326
Machinery and equipment			432,578,807			745,188	(		11,488,751)			10,624,985		432,460,229
Others			30,029,064			311,893	(		3,317,504)			6,609,029		33,632,482
			651,812,761			1,134,985	(		15,091,689)			17,785,772		655,641,829
Accumulated depreciation
and impairment:
Buildings	(		83,503,695)	(		13,130,422)			216,190			525,499	(	95,892,428)
Machinery and equipment	(		325,264,992)	(		35,070,724)			10,473,424	(		2,464,586)	(	352,326,878)
Others	(		22,124,028)	(		4,123,746)			3,167,673	(		3,800,392)	(	26,880,493)
	(		430,892,715)	(		52,324,892)			13,857,287	(		5,739,479)	(	475,099,799)
Unfinished construction
and equipment under
acceptance			12,689,797			24,661,681	(		796,613)	(		17,614,155)		18,940,710
		$	233,609,843										$	199,482,740
									2014
											Transfer, net
												exchange
												differences
		At January1				Additions			Disposals			and others	At December 31
Cost:
Land		$	3,852,792		$	-		$	-		$	-	$	3,852,792
Buildings			184,139,364			8,652	(		341,088)			1,545,170		185,352,098
Machinery and equipment			433,442,047			393,335	(		19,161,213)			17,904,638		432,578,807
Others			29,178,672			210,165	(		4,149,307)			4,789,534		30,029,064
			650,612,875			612,152	(		23,651,608)			24,239,342		651,812,761
Accumulated depreciation
and impairment:
Buildings	(		68,425,305)	(		15,250,980)			327,125	(		154,535)	(	83,503,695)
Machinery and equipment	(		291,198,835)	(		40,505,195)			18,063,267	(		11,624,229)	(	325,264,992)
Others	(		20,748,143)	(		3,617,759)			4,042,819	(		1,800,945)	(	22,124,028)
	(		380,372,283)	(		59,373,934)			22,433,211	(		13,579,709)	(	430,892,715)
Unfinished construction
and equipment under
acceptance			3,265,167			19,220,115	(		814,963)	(		8,980,522)		12,689,797
		$	273,505,759										$	233,609,843

A. The Group evaluated the recoverable amount for assets with impairment indicators; the impairment loss for the years ended December 31, 2015 and 2014 was $481,911 and $351,066, respectively, shown under “other gains and losses”.

154

B. Information about the property, plant and equipment that were pledged to others as collateral is provided in Note 8.
C. As of December 31, 2015 and 2014, the prepayments for business facilities which have not yet entered the factory (shown as ‘other non-current assets’) amounted to $3,110,696 and $591,998, respectively.

(9) Investment property

Investment property
Cost: Land Buildings Accumulated depreciation and impairment: Buildings ( Cost: Land Buildings Accumulated depreciation and impairment: Buildings (		2015		At December 31 188,247 $ 564,109 752,356 71,853) 680,503 $ At December 31 188,247 $ 568,440 756,687 63,010) 693,677 $
	At January1 188,247 $ 568,440 756,687 63,010) ( 693,677 $ (	Additions Disposals - $ - $ - 4,331) ( - 4,331) ( 13,174) 4,331 ( 13,174) $ - $ 2014
	At January1 188,247 $ 568,440 756,687 49,837) ( 706,850 $ (	Additions - $ - - 13,173) 13,173) $	Disposals - $ - - - ( - $

The fair value of the investment property held by the Group as at December 31, 2015 and 2014 was $1,077,466 and $1,110,523, respectively. The amounts mentioned above represent valuation results of comparative method based on market trading information.

155

(10) Intangible assets

A. Intangible assets are goodwill, payments for TFT-LCD related technology and royalty.

									2015
										Transfer, net
										exchange
										differences
		AtJanuary1				Additions		Disposals		and others		At	December31
Cost:
Patents and royalty		$	8,137,035		$	-		$	-	$	15,650	$	8,152,685
Goodwill			17,096,628			-			-		-		17,096,628
Others			3,993,161			16,392	(	116,305)			322,252		4,215,500
			29,226,824			16,392	(	116,305)			337,902		29,464,813
Accumulated
amortization and
impairment:
Patents and royalty	(		5,735,685)	(		933,024)			-		-	(	6,668,709)
Others	(		3,272,002)	(		300,082)		115,449			3,387	(	3,453,248)
	(		9,007,687)	(		1,233,106)		115,449			3,387	(	10,121,957)
		$	20,219,137	($		1,216,714)	($		856)	$	341,289	$	19,342,856
									2014
										Transfer, net
										exchange
										differences
		AtJanuary1				Additions		Disposals		and others		At	December31
Cost:
Patents and royalty		$	8,807,308		$	-	673,622) ($			$	3,349	$	8,137,035
Goodwill			17,096,628			-			-		-		17,096,628
Others			3,497,213			18,140	(		8,911)		486,719		3,993,161
			29,401,149			18,140	(	682,533)			490,068		29,226,824
Accumulated
amortization and
impairment:
Patents and royalty	(		5,215,970)	(		1,193,337)		673,622			-	(	5,735,685)
Others	(		2,970,185)	(		319,112)			7,012		10,283	(	3,272,002)
	(		8,186,155)	(		1,512,449)		680,634			10,283	(	9,007,687)
		$	21,214,994	($		1,494,309)	($		1,899)	$	500,351	$	20,219,137

156

B. Details of amortization on intangible assets are as follows:

Operating costs Operating expenses	Years ended December 31,	Years ended December 31,
	2015 1,005,129 $ 227,977 1,233,106 $	2014
		960,230 $ 552,219
		1,512,449 $

C. The Company performed impairment analysis for recoverable amount of the goodwill at each reporting date and used the value in use as the basis for calculation of the recoverable amount. The value in use was calculated based on the estimated present value of future cash flows for five years, which was discounted at the discount rate of 5.72% and 4.89% for the years ended December 31, 2015 and 2014, respectively, to reflect the specific risks of the related cash generating units. The future cash flows were estimated based on the future revenue, gross profit, and other operating costs each year. Based on the evaluation above, the Company did not recognize impairment loss on goodwill for the years ended December 31, 2015 and 2014.

(11) Short-term borrowings

Short-term borrowings
Type of borrowings Bank loans Credit loans Range of interest rates	December31,2014 22,526,999 $ 1.20%~3.92%	Collateral
		None

As of December 31, 2015, the Group has no short-term borrowings.

- (12) Long term borrowings

Long-term borrowings
Type of loans	Period		December 31,2015			December 31,2014
Syndicated bank loans	2015/3/12~2018/3/12		$	60,280,000		$	108,368,190
Guaranteed commercial
papers				-			129,148
				60,280,000			108,497,338
Less:
Administrative expenses
charged by syndicated
banks		(		288,794)	(		41,252)
Current portion		(		16,361,238)	(		66,162,663)
			$	43,629,968		$	42,293,423
Range of interest rates				1.90%~2.19%			1.25%~2.47%

A. Please refer to Note 8 for the information on assets pledged as collateral for long-term borrowings.

B. The syndicated loan agreements specified that the Company shall meet covenants on current ratio, liability ratio, interest coverage, and tangible net equity, which were based on the Company’s annual consolidated financial statements audited by independent auditors. The Company’s financial ratios on the consolidated financial statements for the years ended December 31, 2015 and 2014 are in compliance with the covenants

157

on the syndicated loan agreement.

C. In order to repay the unpaid balance of the medium and long-term syndicated loans as specified in the “Agreed-upon Repayment Agreement” which was signed on April 5, 2012, the Board of Directors during its meeting on February 10, 2015 approved the proposal for the Company to apply for a new syndicated credit line of $68.5 billion with certain financial institutions. Subsequently, on March 12, 2015, the Company acquired consent of all financial institution creditors to terminate the ‘‘Agreed-upon Repayment Agreement’’, and waive negotiation on the debt issue.

(13) Pensions

A. Defined benefit pension plan
(a) The Company and its domestic subsidiaries have a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005, and service years thereafter of employees who choose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last six months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company will make contribution for the deficit by next March.
(b) The amounts recognised in the balance sheet are as follows:

Present value of defined benefit obligations Fair value of plan assets ( Net defined benefit liability	December31,2015 1,852,905 $ 1,529,124) ( 323,781 $	December31,2014 1,605,920 $ 1,488,938) 116,982 $

158

Present value of
defined benefit
obligations
Year ended December 31, 2015
Balance at January 1
1,605,920
$ Current service cost
8,228
Interest expense/income
36,133
44,361
Remeasurements:
Change in financial assumptions
172,133
Experience adjustments
30,491
202,624
Balance at December 31
1,852,905
$ Present value of
defined benefit
obligations
Year ended December 31, 2014
Balance at January 1
1,504,354
$ Current service cost
10,470
Interest expense/income
30,087
40,557
Remeasurements:
Change in demographic
assumptions
77,419
Change in financial assumptions
76,611)
(
Experience adjustments
60,201
61,009
Balance at December 31
1,605,920
$

Fair value of
Net defined
plan assets
benefit liability
1,488,938
$ 116,982
$ -
8,228
33,501
2,632
33,501
10,860
-
172,133
6,685
23,806
6,685
195,939
1,529,124
$ 323,781
$ Fair value of
Net defined
plan assets
benefit liability
1,454,627
$ 49,727
$ -
10,470
29,092
995
29,092
11,465
-
77,419
-
76,611)
(
5,219
54,982
5,219
55,790
1,488,938
$ 116,982
$

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit

159

after being authorized by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan assets fair value in accordance with IAS 19 paragraph 142. The compositon of fair value of plan assets as of December 31, 2015 and 2014 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

(e) The principal actuarial assumptions used were as follows:

Discount rate Future salary increases	Years ended December 31,	Years ended December 31,
	2015 1.70% 3.00%	2014
		2.25%
		3.00%

Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Mortality Table.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

he analysis was as follows:
December 31, 2015 Effect on present value of defined benefit obligation	Increase 1% Decrease 1% 299,276) ($ 367,992 $ Discount rate	Increase 1% Decrease 1% 337,723 $ 283,242) ($ Future salaryincreases
	Increase 1% 299,276) ($	Increase 1% 337,723 $ (

The sensitivity analysis above was arrived at based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

(f) The Company suspended its contributions to the pension reserve as agreed by the Science Park Administration in June 2013.
(g) As of December 31, 2015, the weighted average duration of that retirement plan is 19 years.
B. Defined contribution pension plan
(a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.
(b) The subsidiaries in Mainland China have defined contribution plans. Monthly contributions to an independent fund administered by the government in accordance with the pension regulations in the People’s Republic of China (PRC) are based on certain percentages of employees’ monthly salaries and wages. Other than the monthly contributions, the Group has no further obligations.
(c) The pension costs under the defined contribution pension plans of the Group for the years ended

160

December 31, 2015 and 2014 were $2,283,605 and $1,999,252, respectively.

(14) Share-based payment

A. As of December 31, 2015, the Company’s share-based payment transactions were set forth below:

Type of arrangement	Quantity Contract granted (in period Grant date thousand units) (inyears) 2010.05.13 20,000 5 2011.05.19 50,000 5 2013.01.30 31,151 3 2013.01.30 31,151 3 2013.03.29 844 3 2013.03.29 844 3 2013.12.12 4,268 3 2013.12.12 4,268 3 2014.07.09 85,000 -	Quantity Contract granted (in period Grant date thousand units) (inyears) 2010.05.13 20,000 5 2011.05.19 50,000 5 2013.01.30 31,151 3 2013.01.30 31,151 3 2013.03.29 844 3 2013.03.29 844 3 2013.12.12 4,268 3 2013.12.12 4,268 3 2014.07.09 85,000 -	Vesting conditions
Employee stock options Employee stock options Restricted stocks to employees - shares without consideration - shares subscribed with consideration - shares without consideration - shares subscribed with consideration - shares without consideration - shares subscribed with consideration Reservation for new share subscription by employees		5 5 3 3 3 3 3 3 -	Note (a), (b) Note (a) Note (c), (d) Note (c), (d) Note (c), (d) Note (c), (d) Note (c), (d) Note (c), (d) Vested immediately

(a) The employees may exercise the stock options by stage based on 30%, 30% and 40% of total options granted on completion of the specified year(s) of service (one to four years) from the grant date.
(b) The employee stock options had already expired.
(c) The employees may exercise the stock options by stage based on 20%, 40% and 40% of total options granted on completion of the specified year(s) of service (one to three years) from the grant date.
(d) The restricted stocks issued by the Company cannot be transferred. Voting right and dividend right are restricted on these stocks before vested.

161

(e) The fair value of stock options granted from 2010 to first quarter of 2014 is measured using the Black-Scholes option-pricing model. Relevant information is as follows:

Type of arrangement	Grant date	Price (in dollars)	Exercise price (in dollars)	Expected volatility (%)	Expected duration (month)	Expected dividend yield(%)	Free Fair value interest per unit rate(%) (in dollars) 0.42 $ 2.42 - 10.65 - 5.65 - 18.40 - 13.40 - 15.35 - 10.35 1.00 7.31 ~8.32 0.80 15.12 ~16.98
Reservation for new share subscription by employees Restricted stocks to employees: - shares issued with no consideration - shares subscribed with consideration - shares issued with no consideration - shares subscribed with consideration - shares issued with no consideration - shares subscribed with consideration Employee stock options Employee stock options	2014.7.9 2013.12.12 2013.12.12 2013.3.29 2013.3.29 2013.1.30 2013.1.30 2011.05.19 2010.05.13	$ 14.9 10.65 10.65 18.4 18.4 15.35 15.35 26.7 39.85	$ 12.5 - 5.00 - 5.00 - 5.00 26.7 39.85	36.01 - - - - - - 35.67 51.57	0.84 - - - - - - 48.60 48.60	- - - - - - - 0.00 0.00

162

B. The details of the employee stock option plan for the years ended December 31, 2015 and 2014 are as follows:

follows:
Quantity (in thousand StockOptions units) Outstanding options at the beginning of the year 70,000 Options exercised - Options expired 20,000) ( Outstanding options at the end of the year 50,000 Exercisable options at the end of the year 50,000 Quantity (in thousand Stock Options units) Outstanding options at the beginning of the year 94,819 Options exercised - Options expired 24,819) ( Outstanding options at the end of the year 70,000 Exercisable options at the end of the year 50,000	Year ended December31,2015
	Weighted Weighted average Range of average exercise exercise remaining price price vesting (in dollars) (in dollars) period 25.63 $ - 32.59 22.85 22.85 $ 0.39years 22.85 Year ended December 31,2014		Weighted average stock price of stock options at exercise date(in dollars)
			13.61 $
	Weighted average exercise price (in dollars) 28.71 $ - 32.10 25.63 26.75	Weighted Range of average exercise remaining price vesting (in dollars) period 32.59 $ 0.38years 22.85 1.39years	Weighted average stock price of stock options at exercise date(in dollars)
			12.68 $

C. For the years ended December 31, 2015 and 2014, the expenses incurred from share-based payment arrangements were $143,442 and $578,227, respectively.

163

(15) Provisions-current

At January 1, 2015 Addition Used during the year ( At December 31, 2015	Warranty 747,021 $ 1,970,000 1,908,885) ( 808,136 $	Litigation and others 2,386,468 $ 4,626,005 2,268,850) ( 4,743,623 $	Total 3,133,489 $ 6,596,005 4,177,735) 5,551,759 $

A. Warranty

The Group provides warranty on TFT-LCD panel products sold. Provision for warranty is estimated based on historical warranty data of TFT-LCD panel products.

B. Litigation and others

Litigation and other provisions for the Group are related to patents of TFT-LCD panel products and anti-trust litigations. For information on estimation of provisions, please refer to Note 9(1).

(16) Share capital

A. As of December 31, 2015, the Company’s authorized and outstanding capital were $120,000,000 (including $500,000 reserved for employee stock options) and $99,532,372, respectively, with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

Movements in the number of the Company’s ordinary shares outstanding are as follows:

At January 1 Capital issued for cash Cancellation of restricted stock to employees ( At December 31	2015 Number of ordinary shares(in thousands) 9,954,536 - 1,299) ( 9,953,237	2014 Number of ordinary shares(in thousands) 9,109,429 850,000 4,893) 9,954,536

B. On June 20, 2014, the Board of Directors approved the domestic capital increase with 850,000,000 shares. The issue price was determined to be $12.5 in July 2014. The Company’s capital has increased by $10,625,000 on August 12, 2014 and has been effective on September 5, 2014.
C. The Board of Directors of the Company resolved to increase capital for cash by issuing global depositary receipts (the “GDR”). The amount of $9,360,000 (approximately equivalent to US$312,625 thousand) is tentatively scheduled for release. Based on shareholder’s interest, the issuance of the GDR was cancelled in accordance with the Financial Supervisory Commission (FSC)’s approval on January 30, 2015.
D. As authorized by the shareholders during their meeting in June 2012, the Board of Directors of the Company resolved to increase capital for cash by issuing the GDR on July 18, 2012, and had been completed in January 2013. The Company issued 1,125,000 thousand shares of common stock for cash, including 112,500 thousand shares regarded as employee stock options, and 101,250,000 units of GDRs which represent 1,012,500 thousand shares of common stock, with a unit of GDR representing 10 shares of common stock at the Luxembourg Stock Exchange. Per unit was issued at a premium of US$4.481, which was equivalent to $12.98 per share and raised a total of $14,519,051, net of issuance cost. As of December 31, 2015, there were 193

164

thousand units outstanding, representing 1,939 thousand shares of common stocks.

E. As authorized by the shareholders at the shareholders’ meeting in June, 2012, the Board of Directors of the Company adopted a resolution on January 30, 2013, March 29, 2013 and November 12, 2013 to issue restricted shares to employees, consisting of 36,263 thousand shares without consideration and 36,263 thousand shares with consideration (the price for subscription is $5 per share). The effective dates of the issuance were on January 30, 2013, March 29, 2013 and December 12, 2013. Until the vesting conditions are met by employees, those shares are restricted with regard to transfer of voting rights, dividend and other rights. As of December 31, 2015 and 2014, the Company bought back 1,299 and 4,893 thousand shares of unvested restricted stocks to employees, respectively, and decreased capital in accordance with related regulation.
F. The stockholders during their meeting on January 6, 2010 approved the merger of the Company with another company by issuing new shares, with the Company as the surviving company. The Company issued 4,046,382 thousand new shares according to the merger contract. The new shares included the common stock issued by the acquired companies in May and December 2006 through private placement. The issuance of 570,929 thousand shares was determined based on the exchange ratio in the merger contract. The rights and obligations of the private common shares were the same as other issued common shares, except for the transfer restriction under R.O.C. Securities and Exchange Act and the listing restriction that no public listing will be allowed within three years since the day of issuance and only if the Company completes the application to publicly issue the shares. The Board of Directors of the Company approved the public issuance of the above private common shares on April 28, 2015. As approved by Financial Supervisory Committee on July 30, 2015, the stocks were officially listed in the Taiwan Stock Exchange starting from August 7, 2015.

(17) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Accumulated deficit shall first be covered by retained earnings before the capital reserve can be used to cover the accumulated deficit.

165

2015

At January 1
Cancellation of restricted stock to
employees
Vested restricted stock to employees
Changes in restricted stock to
employees
Compensation related to share-based
payment
Expiration of employee stock options
Changes in net equity of long-term
equity investments
Changes in non-controlling interests
At December 31

Share of profit
(loss) of
associates
accounted for
Restricted
under equity
Employee
stock to
Sharepremium
method
stock options
employees
Total
97,972,912
$ 9,273
$ 1,373,859
$ 228,325
$ 99,584,369
$ -
-
-
12,992
12,992
125,600
-
-
125,600)
(
-
-
-
-
3,760)
(
3,760)
(
-
-
22,740
-
22,740
1,003,099
-
1,003,099)
(
-
-
-
27,185
-
-
27,185
38
-
-
-
38
99,101,649
$ 36,458
$ 393,500
$ 111,957
$ 99,643,564
$

							2014
			Share of profit
			(loss) of
			associates
			accounted for						Restricted
			under equity				Employee		stock to
	Sharepremium			method		stock options			employees			Total
At January 1	$	94,106,611	$	56,303		$	1,697,935	$		197,892	96,058,741 $
Capital issued for cash		2,125,000										2,125,000
Cash paid from capital surplus	(	1,266,944)		-			-			-	(	1,266,944)
Capital surplus offset against
accumulated deficit		2,328,981		-			-			-		2,328,981
Cancellation of restricted stock to
employees		-		-			-			48,924		48,924
Vested restricted stock to employees		65,665		-			-	(		65,665)		-
Changes in restricted stock to
employees		-		-			-			47,174		47,174
Compensation related to share-based
payment		205,700		-			83,823			-		289,523
Expiration of employee stock options		407,899		-	(		407,899)			-		-
Changes in net equity of long-term
equity investments		-	(	47,030)			-			-	(	47,030)
At December 31	$	97,972,912	$	9,273		$	1,373,859	$		228,325	99,584,369 $

166

(18) Retained earnings

A. In accordance with the Company’s Articles of Incorporation, net income must be distributed in the following order:
(a) To pay all tax accruals and payables arising from the current year and to cover prior years’ losses, if any;
(b) As legal reserve equal to 10% of net income after tax and distribution pursuant to clause (a);
(c) As any special reserve;
(d) To pay dividends on preferred shares;
(e) To pay bonuses to employees not less than 5% of net income after tax and distribution pursuant to clauses (a) to (d); and
(f) The remaining amount, if any, shall be distributed pursuant to the proposal of the Board of Directors in accordance with the Company’s dividend policy and the resolution approved at the stockholders’ meeting, of which 0.1% should be paid as remuneration to directors and supervisors and the remaining amount as dividends to stockholders.
Dividends distributed in respect of any fiscal year in the form of shares shall not exceed two-thirds of total dividends to stockholders.
B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.
C. The details of the appropriation of 2014 net income which was approved at the stockholders’ meeting in June 2015 and the appropriation of 2013 net income which was approved at the stockholders’ meeting in June 2014 are as follows:

re as follows:
Legal reserve Special reserve Cash dividends	Dividends per Amount share(in dollars) 2,167,675 $ - 6,947,188 0.70 $ 9,114,863 $ 2014	2013
	Amount 2,167,675 $ - 6,947,188 9,114,863 $	Amount 509,272 $ 1,144,229 90,495 1,743,996 $	Dividends per share(in dollars)
			0.01 $

Furthermore, the Company’s stockholders have resolved to distribute $0.14 per share as cash dividend from capital surplus amounting to $1,266,944 in June 2014. Accordingly, the Company distributed a total of $0.15 cash dividend per share.

The Company’s appropriations of earnings for 2015 are to be authorized by the Board of Directors and presented for approval in the Company’s stockholders’ meeting for 2016.

D. For the information relating to employees’ remuneration (bonuses) and directors’ and supervisors’ remuneration, please refer to Note 6(24).

167

(19) Other equity items

Other equity items
Available- Employee Currency for-sale Hedging unearned translation investments reserve compensation Total At January 1 3,082,948 $ 1,259,847) ($ 247,070 $ 142,515) ($ 1,927,656 $ Fair value losses of cash flow hedges - - 5) ( - 5) ( Reclassified as current income of cash flow hedges - - 297,670) ( - 297,670) ( Revaluation of available-for-sale investments - gross - 2,304,633 - - 2,304,633 Revaluation transfer of available-for-sale investment - gross - 38,287) ( - - 38,287) ( Currency translation differences 1,392,086) ( - - - 1,392,086) ( Issuance of restricted stocks to employees - - - 2,411 2,411 Compensation related to share-based payment - - - 120,702 120,702 Share of subsidiaries and other comprehensive income of associates 4,432 - - - 4,432 Effect of income tax - 67,946 50,605 - 118,551 At December 31 1,695,294 $ 1,074,445 $ - $ 19,402) ($ 2,750,337 $ 2015 Available- Employee Currency for-sale Hedging unearned translation investments reserve compensation Total At January 1 78,074) ($ 1,544,345) ($ 478,190 $ 387,268) ($ 1,531,497) ($ Fair value losses of cash flow hedges - - 1,224) ( - 1,224) ( Reclassified as current income of cash flow hedges - - 277,234) ( - 277,234) ( Revaluation of available-for-sale investments - gross - 536,429 - - 536,429 Revaluation transfer of available-for-sale investment - gross - 251,483) ( - - 251,483) ( Currency translation differences 3,087,368 - - - 3,087,368 Issuance of restricted stocks to employees - - - 43,951) ( 43,951) ( Compensation related to share-based payment - - - 288,704 288,704 Share of other comprehensive income of associates 73,654 8,005 - - 81,659 Effect of income tax - 8,453) ( 47,338 - 38,885 At December 31 3,082,948 $ 1,259,847) ($ 247,070 $ 142,515) ($ 1,927,656 $ 2014	2015
		Total
	Employee Hedging unearned reserve compensation Total 478,190 $ 387,268) ($ 1,531,497) ($ 1,224) ( - 1,224) ( 277,234) ( - 277,234) ( - - 536,429 - - 251,483) ( - - 3,087,368 - 43,951) ( 43,951) ( - 288,704 288,704 - - 81,659 47,338 - 38,885 247,070 $ 142,515) ($ 1,927,656 $	Total

168

(20) Other income

Other income
Rental revenue Interest income Dividend income Other interest income	2015 2014 182,349 $ 634,368 $ 484,873 328,633 224,441 39,958 1,421,519 1,731,993 2,313,182 $ 2,734,952 $ Years ended December31,
	2015 182,349 $ 484,873 224,441 1,421,519 2,313,182 $

(21) Other gains and losses

Other gains and losses
		Years ended	December 31,
		2015		2014
Net loss on financial assets and liabilities
at fair value through profit or loss	($	663,075)	($	976,857)
Net currency exchange gain		814,978		1,242,754
(Loss) gain on disposal of investments	(	47,583)		794,041
Loss on disposal of property, plant and
equipment	(	180,829)	(	179,758)
Impairment loss	(	589,911)	(	351,066)
Litigation loss and others	(	8,016,783)	(	5,659,589)
	($	8,683,203)	($	5,130,475)

(22) Finance costs

Finance costs
Interest expense: Bank borrowings Others Gain on cash flow hedges, reclassified from equity ( Expenses by nature Employee benefit expense: Salaries and other short-term employee benefits Share-based payments Post-employment benefits Depreciation Amortization	Years ended December31,
	2015 2014 1,707,993 $ 3,579,026 $ 4,765 7,555 297,670) 277,234) ( 1,415,088 $ 3,309,347 $ 2015 2014 43,675,968 $ 43,517,392 $ 143,442 578,227 2,294,465 2,010,717 52,338,066 59,387,107 1,233,106 1,512,449 99,685,047 $ 107,005,892 $ Years ended December 31,	2014
	2015 43,675,968 $ 143,442 2,294,465 52,338,066 1,233,106 99,685,047 $

(23) Expenses by nature

169

(24) Employees’, directors’ and supervisors’ remuneration

A. According to the Articles of Incorporation of the Company, when distributing earnings, the Company shall distribute bonus to the employees and pay remuneration to the directors and supervisors that account for 5% and 0.1%, respectively, of the total distributed amount.
However, in accordance with the Company Act amended on May 20, 2015, a company shall distribute employee remuneration, based on the current year's profit condition, in a fixed amount or a proportion of profits. If a company has accumulated deficit, earnings should be channeled to cover losses. Aforementioned employee remuneration could be paid by cash or stocks. Specifics of the compensation are to be determined in a board meeting that registers two-thirds of directors in attendance, and the resolution must receive support from half of participating members. The resolution should be reported during the shareholders' meeting. Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements, entitled to receive aforementioned stock or cash may be specified in the Articles of Incorporation. The board of directors of the Company has approved the amended Articles of Incorporation of the Company on February 2, 2016. According to the amended articles, a ratio of profit of the current year distributable, after covering accumulated losses, shall be distributed as employees' compensation and directors’ and supervisors’ remuneration. The ratio shall not be lower than 5% for employees’ compensation and shall not be higher than 0.1% for directors’ and supervisors’ remuneration. The amended articles will be resolved during the shareholders’ meeting in 2016.
B. For the years ended December 31, 2015 and 2014, employees’ compensation (bonus) was accrued at $734,524 and $1,436,187, respectively; while directors’ and supervisors’ remuneration was accrued at $5,000 and $0, respectively. The aforementioned amounts were recognized in expenses.
The expenses recognized for 2015 were accrued based on the earnings of current year and are to be presented for approval by the Board of Directors and reported during the Company’s stockholders’ meeting.
The expenses recognized for 2014 were accrued based on the net income for 2014 and the percentage specified in the Articles of Incorporation of the Company, taking into account other factors such as legal reserve. Employees’ bonus and directors’ and supervisors’ remuneration were accrued at $1,436,187 and $0, respectively, for the year ended December 31, 2014. Employees’ bonus and directors’ and supervisors’ remuneration for 2014 as resolved by the stockholders were $1,436,187 and $6,954, respectively. The difference of $6,954 between employees’ bonus (directors’ and supervisors’ remuneration) as resolved by the stockholders and the amount recognized in the 2014 financial statements was caused by a different accrual ratio which was accounted for as a change in accounting estimate after being approved at the stockholders’ meeting and recorded as expense in 2015.

Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved by the board of directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(25) Income tax

A. Income tax expense
(a) Components of income tax expense:

170

Current tax: Current tax on profit for the year Tax on undistributed surplus earnings Adjustments in respect of prior years Total current tax Deferred tax: Origination and reversal of temporary differences Income tax expense	Years ended December 31,	Years ended December 31,
	2015 1,010,940 $ 915,947 39,736 1,966,623 2,078,423 4,045,046 $	2014
		791,019 $ - 104,819 895,838 38,406) ( 857,432 $

(b) The income tax (charge)/credit relating to components of other comprehensive income is as follows:

		Years ended	December31,	December31,
		2015		2014
Fair value gains/losses on available-for-sale
financial assets	($	67,946)		$	8,453
Cash flow hedges	(	50,605)	(		47,338)
Actuarial gains/losses on defined benefit
obligations	(	33,309)	(		9,484)
	($	151,860)	($		48,369)

B. Reconciliation between income tax expense and accounting profit:

			Years ended	December31,	December31,	December31,
			2015			2014
Tax calculated based on profit before		$	3,623,079		$	4,535,027
tax and statutory tax rate
Effects from items disallowed by tax regulation	(		929,272)	(		533,680)
Under provision of prior year's income tax			39,736			104,819
Additional 10 percent tax on undistributed			915,947			-
earnings
Effect from Alternative Minimum Tax			42			74,672
Change in assessment of realization
of deferred tax assets			395,514	(		3,323,406)
Tax expenses	$		4,045,046	$		857,432

C. Amounts of deferred tax assets or liabilities as a result of temporary differences and taxable loss are as follows:

171

Year ended December 31, 2015

							Recognised	Recognised
								in other
					Recognised in		comprehensive
			January1		profit or loss			income		December31
Temporary differences:
-Deferred tax assets:
Sales returns and discount		$	166,373		$	77,153	$	-		$	243,526
provisions
Accrued royalties and
warranty provisions			327,918			326,639		-			654,557
Unrealized loss on
financial instruments			699,962			158,326		67,946			926,234
Unrealized expenses			40,794	(		29,924)		-			10,870
Unrealized exchange loss (gain)			200,697	(		81,480)		-			119,217
Net operating loss
carryforward			15,993,574	(		2,375,483)		-		13,618,091
Others			349,198	(		66,535)		33,309			315,972
		$	17,778,516	($		1,991,304)	$	101,255		15,888,467 $
-Deferred tax liabilities:
Unrealized (gain) loss on
cash flow hedges	($		50,605)		$	-	$	50,605		$	-
Amortization charges on
goodwill	(		394,687)	(		82,369)		-	(		477,056)
Others	(		32,288)	(		4,750)		-	(		37,038)
	($		477,580)	($		87,119)	$	50,605	($		514,094)
		$	17,300,936	($		2,078,423)	$	151,860		15,374,373 $

172

Recognised in other Recognised in comprehensive January1 profit or loss income December31 Temporary differences: -Deferred tax assets: Sales returns and discount provisions 288,013 $ 121,640) ($ - $ 166,373 $ Accrued royalties and warranty provisions 364,411 36,493) ( - 327,918 Unrealized loss (gain) on financial instruments 448,380 260,035 8,453) ( 699,962 Unrealized expenses 97,965 57,171) ( - 40,794 Unrealized exchange loss (gain) - 200,697 - 200,697 Net operating loss carryforward 16,702,351 708,777) ( - 15,993,574 Others 222,749 116,965 9,484 349,198 18,123,869 $ 346,384) ($ 1,031 $ 17,778,516 $ -Deferred tax liabilities: Unrealized exchange (gain) loss 51,357) ($ 51,357 $ - $ - $ Unrealized (gain) loss on cash flow hedges 97,943) ( - 47,338 50,605) ( Amortization charges on goodwill 726,842) ( 332,155 - 394,687) ( Others 33,566) ( 1,278 - 32,288) ( 909,708) ($ 384,790 $ 47,338 $ 477,580) ($ 17,214,161 $ 38,406 $ 48,369 $ 17,300,936 $ Year ended December31,2014	Year ended December31,2014
		December31

D. Expiration dates of unused taxable loss and amounts of unrecognised deferred tax assets are as follows:

December 31, 2015

		December 31,2015
Year incurred	Amount filed / assessed Assessed Filed	Unused amount 66,433,000 $ 43,278,299 109,711,299 $	Unrecognised deferred tax assets 18,410,536 $ 11,950,753 30,361,289 $	Usable until
2011 2012				2021 2022

173

December 31, 2014

		December 31,2014
Year incurred	Amount filed / assessed Assessed Filed Filed	Unused amount 14,641,521 $ 63,808,943 43,505,968 121,956,432 $	Unrecognised deferred tax assets 3,414,183 $ 14,879,288 10,055,723 28,349,194 $	Usable until
2010 2011 2012				2015~2020 2021 2022

E. The amounts of deductible temporary differences that are not recognised as deferred tax assets are as follows:

Deductible temporary differences

December31,2015 33,185,717 $	December31,2014
	31,105,662 $

F. The Company has not recognised taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2015 and 2014, the amounts of temporary differences unrecognised as deferred tax liabilities were $29,289,598 and $20,486,590, respectively.
G. Certain revenue from the design, research, development, manufacture and sale of the thin film transistor - liquid crystal displays (TFT-LCD) and LCDs is exempt from income tax from 2008 to 2015.
H. The Company’s income tax returns through 2013 have been assessed and approved by the Tax Authority.
I. Unappropriated retained earnings recorded by the Company pertain to retained earnings after 1998.
K. The details of imputation system are as follows:
(a) Balance of tax credit account
(b) Estimated (Actual) creditable tax rate

December31,2015 761,660 $ 2015 (Estimated) 6.06%	December31,2014
	738,931 $
	2014(Actual)
	3.90%

174

(26) Earnings per share

Earnings per share
Basic earnings per share Profit attributable to ordinary shareholders of the parent Weighted average number of ordinary shares outstanding (shares in thousands) Basic earnings per share (in dollar) Diluted earnings per share Profit attributable to ordinary shareholders of the parent Weighted average number of ordinary shares outstanding (shares in thousands) Assumed conversion of all dilutive potential ordinary shares: -Employees’ bonus -Restricted stocks Diluted earnings per share (in dollar)	Years ended December31,
	2015 10,815,594 $ 9,922,525 1.09 $ 10,815,594 $ 9,922,525 116,513 27,519 10,066,557 1.07 $	2014
		21,676,759 $ 9,377,302 2.31 $ 21,676,759 $ 9,377,302 106,514 41,875 9,525,691 2.28 $

As employee stock options had anti-dilutive effect for the years ended December 31, 2015 and 2014, they were not included in the calculation of diluted earnings per share.

(27) Non-cash transaction

A. Investing activities with partial cash payments:

not included in the calculation of diluted earnings per Non-cash transaction A. Investing activities with partial cash payments:	share.
		Years ended	December 31,
		2015			2014
Purchase of property, plant and	$	25,796,666		$	19,832,267
equipment
Add: Opening balance of payable on
equipment		2,688,976			3,383,261
Less: Ending balance of payable on
equipment	(	3,974,152)	(		2,688,976)
Cash paid during the year	$	24,511,490		$	20,526,552
B. Investing activities with partial cash receipts:
					Year ended
			December 31,2014
Disposal of property, plant and equipment			$		1,839,001
Add: Opening balance of receivable on equipment					2,414,208
Less: Ending balance of receivable on equipment					-
Cash received during the year			$		4,253,209

175

RELATED PARTY TRANSACTIONS

(1) Significant related party transactions

A. Operating revenue

Sales of goods: Others Associates	Years ended December31,	Years ended December31,
	2015 13,068,072 $ 233,299 13,301,371 $	2014
		14,450,540 $ 33,263
		14,483,803 $

The collection period was 30~120 days upon delivery or on a monthly-closing basis to related parties, and 30~90 days to non-related parties. The sales prices and the trading terms to related parties above were not significantly different from those of sales to third parties.

B. Purchases of goods

significantly different from those of sales to third parties. Purchases of goods
Purchases of goods: Others Associates	Years ended December31,
	2015 8,949,014 $ 360,626 9,309,640 $	2014
		13,019,919 $ 11,275,187
		24,295,106 $

The payment term was 30~120 days to related parties after delivery, and 30~180 days to non-related parties after delivery or on a monthly-closing basis. The purchase prices and the payment terms from related parties above were not materially different from those of purchases from third parties.

C. Consigned processing

(a) Consigned processing

Consigned processing (a) Consigned processing
		Years ended December31,
		2015		2014
Processing costs:
Others	$	99,587	$	124,425
(b) Balance of consigned processing at the end of period (shown as “Other payables”)
	December31,2015		December31,2014
Payables to related parties:
Others	$	70,229	$	2,505,250

The Group subcontracted the processing of products of associates in Mainland China. The processing fees were mainly charged based on cost plus method.

176

D. Accounts receivable

Receivables from related parties: Others Associates	December31,2015 2,551,425 $ 81,428 2,632,853 $	December31,2014
		6,084,501 $ 27,899 6,112,400 $

The receivables from related parties arise mainly from sales transactions. The receivables are due 30~120 days after the date of sale. The receivables are unsecured in nature and bear no interest. There are no provisions held against receivables from related parties.

E. Accounts payable

against receivables from related parties. Accounts payable
Payables to related parties: Others Associates	December31,2015 3,284,529 $ 75,404 3,359,933 $	December31,2014
		5,225,129 $ 27,817 5,252,946 $

The payables to related parties arise mainly from purchase transactions and are due 30~120 days after the date of purchase. The payables bear no interest.

F. Property transactions

Purchase of property

(a) Acquisition of property, plant and equipment:

rchase. The payables bear no interest. erty transactions hase of property cquisition of property, plant and equipment:
Others Associates eriod-end balances arising from purchases of property Others Associates	Years ended December31,
	2015 2014 41,366 $ 21,407 $ 220 639,044 41,586 $ 660,451 $ (shown as “Other payables”): December31,2015 December31,2014 7,365 $ 748 $ - 229 7,365 $ 977 $	2014
		748 $ 229 977 $

(b) Period-end balances arising from purchases of property (shown as “Other payables”):

Sale of property

(a) Proceeds from sale of property and gain on disposal:

177

Years ended December31	Years ended December31	Years ended December31
Disposal Gain on proceeds disposal 1,812 $ 45 $ 2015	2014
Disposal proceeds 1,812 $	Disposal proceeds 46,157 $	Gain on disposal
		2,807 $

(b) Period-end balances arising from sale of property (shown as “Other receivables”):

Others	December31,2015 794 $	December31,2014
		46,382 $

(2) Key management compensation

Others Key management compensation	December31,2015 December31,2014 794 $ 46,382 $	December31,2015 December31,2014 794 $ 46,382 $
Salaries and other short-term employee benefits Share-based payments Post-employment benefit	2015 2014 136,698 $ 73,982 $ 6,286 18,638 220 216 143,204 $ 92,836 $ Years ended December31,
		2014
		73,982 $ 18,638 216 92,836 $

PLEDGED ASSETS

The Group’s assets pledged as collateral are as follows:

Pledged asset Other financial assets-current Time deposits Demand deposits Property, plant and equipment Other financial assets-non-current Refundable deposits Time deposits	December31,2015 December31,2014 Purpose 6,204 $ 253 $ Tariff guarantee and land lease - 2,284,617 Syndicated bank loans 59,669,639 163,632,314 Long-term loans and performance guarantee for lease payable - 11,079,360 Guarantee to European Commission for litigation 119,703 80,722 Tariff guarantee, land lease and guarantee for contract 59,795,546 $ 177,077,266 $ Bookvalue	Purpose
	December31,2015 6,204 $ - 59,669,639 - 119,703 59,795,546 $

178

SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

(1) Contingencies Significant Litigations
A. Chi Mei Optoelectronics Corporation (the “CMO”), Chi Mei Optoelectronics Japan Co., Ltd., Chi Mei Optoelectronics UK Ltd., Chi Mei Optoelectronics Europe B.V., and Chi Mei Optoelectronics USA Inc. were investigated by the United States (the “U.S.”) Department of Justice in December 2006 for alleged violation of the anti-trust laws. Moreover, authorities of some U.S state governments, as well as the governments of the European Union, China, Brazil and Korea also started to investigate this case. In addition, certain downstream customers and consumers brought class-actions and/or individual civil lawsuits in the U.S. and Canada against the TFT-LCD companies; and in certain lawsuits, CMO and Chi Mei Optoelectronics USA Inc. were listed as defendants. Details of the investigations on significant cases related to the alleged violation of the anti-trust laws are as follows:
(a) The Company had reached a plea agreement with the U.S. Department of Justice in December 2009, agreeing to pay a fine of US$220 million through installment over five years. The fine had been fully paid as of February 2015.
- The Company had also reached out-of-court settlement agreements with the plaintiffs on separate civil lawsuits in the U.S. since 2012 and recognized related losses.

Further, the Company had reached out-of-court settlement agreements with fourteen State Governments since November 2011, agreeing to pay civil statutory damages in order to settle these civil lawsuits. All civil lawsuits between the Company and the U.S state governments have been settled.

(b) In December 2010, the Company had been ordered by the European Commission to pay a fine of EUR 300 million. The Company appealed the case in February 2011, and the General Court of the European Union rendered a judgment in February 2014 lowering the fine from EUR 300 million to EUR 288 million. The Company further filed an appeal against a part of the judgment and the Court of Justice of the European Union has adjudicated to maintain the aforementioned amount of fine.
(c) Except for those anti-trust litigations for which the ultimate results cannot be reliably estimated, the Company has recognized actual or estimated losses or liabilities in “other payables” and “other non-current liabilities”.
B. Eidos Displays, LLC and Eidos III, LLC (“Eidos”) filed a lawsuit with the United States District Court for the District of East Texas on April 25, 2011, alleging infringement of its patent. The administrative law judge has ruled a summary judgment for the lawsuit in December 2013 rendering Eidos’ patent as invalid, and the presiding judge has confirmed the summary judgment in January 2014. Eidos has filed a complaint in February 2014. The United States Court of Appeals for the Federal Circuit has rejected the judgement and sent back to the United States District Court in March 2015. The Company submitted an application to ask the United States Court of Appeals for the Federal Circuit to rehear en banc in April 2015. Though the United States Court of Appeals rejected the request in June 2015, the Company appealed to the Supreme Court in September 2015 and petitioned for writ of certiorari. The Supreme Court of the United States has denied the appeal of the Company

179

in November 2015. The case remains at the ruling by the United States Court of Appeals for the Federal Circuit in March 2015. However, the results of the litigation are uncertain and are dependent on the future litigation progress. The Company does not expect that the lawsuit would have a material adverse effect on the Company’s financial position or results of operations in the short-term.

(2) Commitments

A. Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:

Property, plant and equipment	December31,2015 37,625,398 $	December31,2014 15,338,375 $

B. Operating lease commitments

The Group leases plant, land and warehouses under non-cancellable operating lease agreements. The majority of lease agreements are renewable at the end of the lease period at market rate. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

No later than one year Later than one year but no later than five years Later than five years	December31,2015 581,145 $ 2,150,162.00 1,219,709 3,951,016 $	December31,2014
		571,800 $ 2,152,538.00 1,541,309
		4,265,647 $

C. Outstanding letters of credit

The outstanding letters of credit for the purchase of property, plant and equipment are as follows:

Outstanding letters of credit SIGNIFICANT DISASTER LOSS	December31,2015 474,222 $	December31,2014 693,635 $

None.

SUBSEQUENT EVENTS AFTER THE BALANCE SHEET DATE

None.

OTHERS

(1) Capital management

The Group’s objectives are to maintain an optimal capital structure, and constructively reduce the debt ratio and the cost of capital in order to maximize shareholders' equity.

(2) Financial instruments

A.Fair value information of financial instruments

The carrying amounts of the Group’s financial instruments not measured at fair value (including cash and cash equivalents, accounts receivable, other receivables, other financial assets-current, short-term loans, accounts payable, other payables and long-term loans) are approximate to their fair values. The fair value information of financial instruments measured at fair value is provided in Note 12(3).

B.Financial risk management policies
(a)The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management

180

programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial position and financial performance. The Group uses derivative financial instruments to hedge certain risk exposures (see Notes 6(2), (4)).

(b)Risk management is carried out by each treasury department (of all group companies) under policies approved by the board of directors. Group treasury identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units. The Board provides principles for overall risk management, as well as policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment by excess liquidity.
C.Significant financial risks and degrees of financial risks
(a)Market risk

Foreign exchange risk

a) The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD and RMB. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.
b) Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The group companies are required to hedge their entire foreign exchange risk exposure via their treasury departments. To manage their foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, entities in the Group use forward foreign exchange contracts. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency.
c) The Group’s businesses involve some non-functional currency operations (the Company’s and certain subsidiaries’ functional currency: NTD; other certain subsidiaries’ functional currency: RMB). Based on the simulations performed, the impact on post-tax profit of a 1% exchange rate fluctuation would be an increase of $161,700 and $304,219 for the years ended December 31, 2015 and 2014, respectively. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

181

Foreign Currency Exchange Amount Rate Book Value (In Thousands) (Note) (NTD) Financial assets Monetary items USD 4,589,186 $ 32.83 150,662,976 $ JPY 9,363,752 0.27 2,528,213 EUR 75,963 35.88 2,725,552 Non-monetary items USD 2,342,530 $ 32.83 76,905,260 $ HKD 178,232 4.24 755,704 JPY 5,527,619 0.27 1,492,457 EUR 3,697 35.88 132,648 USD 4,009,239 $ 32.83 131,623,316 $ JPY 29,629,471 0.27 7,999,957 EUR 3,440 35.88 123,427 December 31,2015 Financial liabilities Monetary items		December 31,2014	December 31,2014
		Foreign Currency Exchange Amount Rate (In Thousands) (Note) 7,672,372 $ 31.65 6,197,615 0.26 363,657 38.47 2,217,538 $ 31.65 322,534 4.08 5,383,824 0.26 3,834 38.47 6,531,987 $ 31.65 38,466,012 0.26 292,992 38.47	Book Value (NTD) 242,830,574 $ 1,611,380 13,989,885 70,185,078 $ 1,315,939 1,399,794 147,494 206,737,389 $ 10,001,163 11,271,402

Note: Exchange rate represents the amount of NT dollars for which one foreign currency could be exchanged.
d) Total exchange gain (loss), including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2015 and 2014 amounted $814,978 and $1,242,754, respectively.

Price risk

a) The Group is exposed to equity securities price risk because of investments held by the Group that are classified on the consolidated balance sheet either as available-for-sale or at fair value through profit or loss. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio in accordance with the policy set by the Group.
b) The Group’s investments in equity securities comprise domestic listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 20% with all other variables held constant, post-tax profit for the years ended December 31, 2015 and 2014 would have increased/decreased by $56,384 and $121,031, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss; other components of equity would have increased/decreased by $1,424,607 and $1,027,423, respectively, as a result of gains/losses on equity securities classified as available-for-sale.

Interest rate risk

a) The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates

182

expose the Group to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. During the years ended December 31, 2015 and 2014, the Group’s borrowings at variable rate were denominated in the NTD, USD and RMB.

b) The Group analyzes its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for liabilities that represent the major interest-bearing positions.
c) Based on the simulations performed, the impact on post-tax profit of a 0.1% shift would be a maximum increase of $150,700 or decrease of $271,243 for the years ended December 31, 2015 and 2014, respectively. The simulation is done on a quarterly basis to verify that the maximum loss potential is within the limit given by the management.
d) Based on the various scenarios, the Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly. The Group agrees with other parties to exchange interest rate, at specified intervals. The difference between fixed contract rates and floating-rate interest amounts are calculated by reference to the agreed notional amounts.
(b)Credit risk
a) Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Customer credit quality is assessed via internal risk control, considering customer financial position, past experience and other factors. Individual risk limits are set by the board of directors based on internal or external ratings. The utilization of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables. Because the Company's counterparties and executor are banks with good credit standing and financial institutions and Government with investment grade or above, there is no significant default. Therefore, there is no significant credit risk.
b) No credit limits were exceeded during the reporting periods. Management does not expect any significant losses from non-performance by these counterparties.
c) The individual analysis of financial assets that had been impaired is provided in Note 6.
(c)Liquidity risk
a) Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has

183

sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities (Note 6(12)) at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and, external regulatory or legal requirements.

b) Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing savings accounts, time deposits, money market deposits and marketable securities. The Group chooses instruments that are with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the abovementioned forecasts. These are expected to readily generate cash inflows for managing liquidity risk.
c) The table below analyses the Group’s non-derivative financial liabilities and net-settled or gross-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative financial liabilities:

Non-derivative financial liabilities:	Non-derivative financial liabilities:
Less than Between 1 December 31,2015 1year and 3years Accounts payable 60,429,884 $ - $ Other payables 24,912,360 - Long-term borrowings (including current portion) 16,440,000 43,840,000 Less than Between 1 December 31,2014 1year and 3years Short-term borrowings 22,526,999 $ - $ Accounts payable 80,207,385 - Other payables 23,912,180 - Long-term borrowings (including current portion) 66,192,903 42,304,435 Other financial liabilities 36,821 10,938,112 December31,2015 Less than 1year Forward exchange contracts 265,525 $ $ Derivative financial liabilities: December 31,2014 Less than 1year Forward exchange contracts 605,016 $ $ Interest rate swap contracts 1,351		Between 3 and 5years - $ - - Between 3 and 5years - $ - - - 663 Between 1 and3 years	Over 5 years Total - $ 60,429,884 $ - 24,912,360 - 60,280,000 Over 5 years Total - $ 22,526,999 $ - 80,207,385 - 23,912,180 - 108,497,338 6,344 10,981,940 Total 265,525 $ Total 605,016 $ 1,351	Total
				60,429,884 $ 24,912,360 60,280,000 Total
	$	- Between 1 and 3years
	$	- -

184

     - d) The related information on the repayment of the medium and long-term syndicated loans from the ‘‘Agreed-upon Agreement’’ is described in Note 6(12).

(3) Fair value estimation
A.Details of the fair value of the Group’s financial assets and financial liabilities not measured at fair value are provided in Note 12(2)A. Details of the fair value of the Group’s investment property measured at cost are provided in Note 6(9).
B.The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:
- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed stocks and on-the-run bonds is included in Level 1.
- Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Group’s investment in derivative instruments is included in Level 2.
- Level 3: Unobservable inputs for the asset or liability. The fair value of the Group’s investment in equity investment without active market is included in Level 3.
C.The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2015 and 2014 is as follows:

ollows:
December31,2015 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Equity securities Forward exchange contracts Available-for-sale financial assets Equity securities Liabilities Recurring fair value measurements Financial liabilities at fair value through profit or loss Forward exchange contracts	Level 1 281,922 $ - 6,403,449 6,685,371 $ - $	Level 2 - $ 120,036 - 120,036 $ 265,525 $	Level3 - $ - 719,585 719,585 $ - $	Total
				281,922 $ 120,036 7,123,034
				7,524,992 $
				265,525 $

185

December 31,2014 Assets Financial assets at fair value through profit or loss Equity securities Forward exchange contracts Available-for-sale financial assets Equity securities Debt securities Liabilities Financial liabilities at fair value through profit or loss Forward exchange contracts Derivative financial liabilities for hedging Interest rate swap contracts Recurring fair value measurements Recurring fair value measurements	Level 1 605,155 $ - 3,296,020 220,000 4,121,175 $ - $ - - $	Level 2 - $ 52,453 - - 52,453 $ 605,016 $ 1,351 606,367 $	Level 3 - $ - 1,841,097 - 1,841,097 $ - $ - - $	Total
				605,155 $ 52,453 5,137,117 220,000
				6,014,725 $
				605,016 $ 1,351
				606,367 $

D.The methods and assumptions the Group used to measure fair value are as follows:
(a)The instruments the Group used market quoted prices as their fair values (that is, Level 1) are listed below
- by characteristics:

Listed shares Emerging stocks Corporate bond Last Weighted average Market quoted price Closing price transaction price quoted price

(b)Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the consolidated balance sheet date.
(c)When assessing non-standard and low-complexity financial instruments, for example, debt instruments without active market, interest rate swap contracts, foreign exchange swap contracts and options, the Group adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.
(d)The valuation of derivative financial instruments is based on valuation model widely accepted by market participants, such as present value techniques and option pricing models. Forward exchange contracts are usually valued based on the current forward exchange rate.
(e)The output of valuation model is an estimated value and the valuation technique may not be able to capture

186

all relevant factors of the Group’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs, for example, model risk or liquidity risk and etc. In accordance with the Group’s management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the consolidated balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.

(f)The Group takes into account adjustments for credit risks to measure the fair value of financial and non-financial instruments to reflect credit risk of the counterparty and the Group’s credit quality.
E.For the years ended December 31, 2015 and 2014, there was no transfer between Level 1 and Level 2.

187

F.The following table presents the changes in level 3 instruments as at December 31, 2015 and 2014:

			Equitysecurities	Equitysecurities	Equitysecurities
			2015		2014
At January 1		$	1,841,097	$	1,703,929
Acquired in the period			-		162,730
Transfers out from level 3	(		903,073)		-
Gains and losses recognized in profit or loss			-		10,701
Gains and losses recognized in other comprehensive income	(		218,439)		196,382
Disposed in the period			-	(	232,645)
At December 31		$	719,585	$	1,841,097

G.For the year ended December 31, 2014, there was no transfer into or out from Level 3. As the shares of General Interface Solution (GIS) Holding Limited had been listed in June 2015, the Group transferred the fair value from Level 3 into Level 1 at the end of month when the event occurred.

H.Investment management segment is in charge of valuation procedures for fair value measurements being categorized within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently calibrating valuation model, performing back-testing, updating inputs used to the valuation model and making any other necessary adjustments to the fair value.

Investment management segment set up valuation policies, valuation processes and rules for measuring fair value of financial instruments and ensure compliance with the related requirements in IFRS.

188

I.The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

Non-derivative equity instrument: Unlisted shares Venture capital shares Private equity fund investment Private placement shares (emerging companies)	Fair value at December 31,2015	Valuation technique	Significant unobservable input	Range (weighted average)	Relationship of inputs to fair value
	388,799 $ 28,596 $ 302,190	Market comparable companies Net asset value Market price method	Price to earnings ratio multiple, price to book ratio multiple, control premium Discount for lack of marketability Not applicable Discount for lack of marketability	0.56~1.41 (0.70) 20%~70% (22%) 318 (318) 30% (30%)	The higher the multiple and control premium, the higher the fair value The higher the discount for lack of marketability, the lower the fair value The higher the net asset value, the higher the fair value The higher the discount for lack of marketability, the lower the fair value

J.The Group has carefully assessed the valuation models and assumptions used to measure fair value; therefore, the fair value measurement is reasonable. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorised within Level 3 if the inputs used to valuation models have changed:

changed:
Financialassets	Period	Input	Change	Recognised in other comprehensive income
				Favourable change	Unfavourable change
Equity instrument Equity instrument	2015/12/31 2014/12/31	$ 719,585 1,841,097	± 1% ± 1%	$ 7,196 18,411	($ 7,196) ( 18,411)

189

SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: Please refer to table 1.
B. Provision of endorsements and guarantees to others: Please refer to table 2.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3.
D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: None.
E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.
G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 4.
H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 5.
I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Notes 6(2) and 6(4).
J. Significant inter-company transactions during the reporting periods: Please refer to table 6.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 7.

(3) Information on investments in Mainland China
A. Basic information: Please refer to table 8.
B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to Notes 13(1)A, G, H, J.

SEGMENT INFORMATION

(1) General information

The Group is primarily engaged in research, development, manufacture and sale of TFT LCD.

The chief operating decision-maker considered the business from a perspective of product size of TFT LCD. TFT LCD products are currently classified into big size and small-medium size. Because the Company met the criteria for combining the segment information of big-size and small-medium-size TFT LCD departments, the Company disclosed only one reportable operating segment for all TFT LCD products.

The Company’s operating segment information was prepared in accordance with the Company’s accounting policies. The chief operating decision-maker allocated resources and assesses performance of the operating segments primarily based on the operating revenue and profit (loss) before tax and discontinued operations of individual operating segment.

(2) Segment information

The segment information provided to the chief operating decision-maker for the reportable segments is as follows:

190

Segment revenue Segment income Depreciation and amortization Capital expenditure-property, plant and equipment Segment assets	Years ended December 31	Years ended December 31
	2015 TFT LCD 364,132,984 $ 14,862,088 $ 53,557,244 $ 24,511,490 $ 387,442,336 $	2014
		TFT LCD
		428,661,898 $
		22,523,244 $
		60,883,074 $
		20,526,552 $
		480,984,747 $

(3) Reconciliation for segment income (loss)

A reconciliation of reported segment income (loss) and income from continuing operations before tax is provided as follows:

A. Reconciliation of segment revenue with operating revenue:

			Years ended	December31	December31
			2015		2014
Segment revenue	$		364,132,984	$	428,661,898
Other revenue			-		-
Operating revenue	$		364,132,984	$	428,661,898
Reconciliation of segment income with income (loss)	from		continuing operations before		income tax:
			Years ended	December31
			2015		2014
Reportable segments income/(loss)		$	14,862,088	$	22,523,244
Others	(		2,901)		11,096
Income/(loss) before tax from continuing
operations		$	14,859,187	$	22,534,340
Reconciliation of segment assets with total assets:
		December31,2015		December31,2014
Segment assets		$	387,442,336	$	480,984,747
Others			-		1,531,808
		$	387,442,336	$	482,516,555

B. Reconciliation of segment income with income (loss) from continuing operations before income tax:

C. Reconciliation of segment assets with total assets:

191

D. Other significant reconciliation:

Other significant reconciliation:
Depreciation and amortization Others Capital expenditure - property, plant and equipment Others	Years ended December31
	2015 53,557,244 $ 13,928 53,571,172 24,511,490 - 24,511,490 $	2014
		60,883,074 $ 16,482 60,899,556 20,526,552 - 20,526,552 $

(4) Information on product

Revenue from external customers is mainly from TFT-LCD product. Details of revenue are as follows:

Sales of TFT LCD products Other revenues	Years ended December31	Years ended December31
	2015 364,132,984 $ - 364,132,984 $	2014
		428,661,898 $ - 428,661,898 $

(5) Geographical information

Geographical information for the years ended December 31, 2015 and 2014 is as follows:

Years ended December31	Years ended December31	Years ended December31
Revenue Non-current assets 103,617,666 $ 187,010,460 $ 92,893,492 36,492,781 73,942,347 181 24,000,586 25,094 16,352,055 450 53,326,838 22,671 364,132,984 $ 223,551,637 $ 2015	2014
	Revenue Non-current asset 91,333,989 $ 214,158,469 $ 103,061,439 41,762,276 124,681,779 - 31,048,822 28,601 11,727,851 513 66,808,018 140,789 428,661,898 $ 256,090,648 $
		214,158,469 $ 41,762,276 - 28,601 513 140,789
		256,090,648 $

(6) Major customer information

None of the individual sales to the Group’s customers exceeds 10% of the sales in the consolidated statement of comprehensive income for the year ended December 31, 2014. The individual sales to the Group’s customers that exceed 10% of the sales in the statements of comprehensive income for the year ended December 31, 2015 are set forth below:

are set forth below:
Customer A	Year ended December 31,2015
	Sales 39,802,830 $	Percentage of sales
		11%

192

Table 1

Expressed in thousands of NTD (Except as otherwise indicated)

Innolux Corporation and subsidiaries

Loans to others

For the year ended December 31, 2015

No.	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2015	Balance at December 31, 2015	Actual amount drawn down	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short-term financing	Allowance for doubtful accounts	Collateral	Limit on loans granted to a singleparty	Ceiling on total loansgranted	Footnote
													Item Value
1 1 2 2 2 2 3 4 5 6 6	Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innolux Technology USA Inc. Innolux Technology Europe B.V. Innolux Technology Japan Co., Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Optoelectronics Japan Co., Ltd.	Ningbo Innolux Technology Ltd. Ningbo Innolux Display Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Display Ltd. Nanjing Innolux Optoelectronics Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Leadtek Global Group Limited Innolux Corporation Leadtek Global Group Limited	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties	3,282,500 $ 1,969,500 4,549,500 707,700 909,900 808,800 196,950 1,391,278 1,418,040 409,050 681,750	$ - - 4,549,500 707,700 909,900 808,800 196,950 1,391,278 1,418,040 - 681,750	$ - - 4,493,390 707,700 909,900 808,800 196,950 1,362,788 1,418,040 - 681,750	- - 1.925%~ 2.00% 2% 2% 2% 0.16%~ 0.56% 0.000%~ 0.269% 1% - 1%	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Business association Short-term financing	- - - - - - - - - - -	Operating support Operating support Operating support Operating support Operating support Operating support Operating support Operating support Operating support - Operating support	- - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - - -	$ 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 602,953 232,264,723	$ 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 602,953 232,264,723	A A A A A A A A A B A

193

Note A: The Company - Innolux Corporation

2.The financial limit on loans granted shall not exceed 40% of the company’s net equity. If it is for short-term capital needs, the limit shall not exceed 30% of the company’s net equity.

3.The policy for loans granted to direct or indirect wholly-owned overseas subsidiaries is as follows: for short-term capital needs, financial limit shall not be below the 40% requirement, but should not exceed 100% of the company’s net equity.

Note B: The subsidiary - Innolux Optoelectronics Japan Co., Ltd.

For the company’s short-term capital needs, financial limit on loans granted to a single party shall not exceed 10% of the company’s net equity, based on the most recent audited financial statements of the parent company; for the companies having

business relationship with the Company, financial limit on loans granted to a single party shall not exceed the amount of business transactions occurred between the creditor and borrower.

2.The financial limit on loans granted shall not exceed 30% of the company’s net equity, based on the most recent audited financial statements of the parent company; with intercompany transaction, the company’s financial limit on loans granted shall not exceed 40% of the company's equity.

3.The amount of loans provided by the company and intercompany shall not exceed 40% of the company’s equity.

194

Innolux Corporation and subsidiaries Provision of endorsements and guarantees to others For the year ended December 31, 2015

Table 2

Expressed in thousands of NTD (Except as otherwise indicated)

Number	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a singleparty	Maximum outstanding endorsement/ guarantee amount as of December 31, 2015	Outstanding endorsement/ guarantee amount at December 31, 2015	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided	Provision of endorsements/ guarantees by parent company to subsidiary	Provision of endorsements/ guarantees by subsidiary to parent company	Provision of endorsements/ guarantees to the party in Mainland China	Footnote
		Companyname	Relationship with the endorser/ guarantor
0	Innolux Corporation	Leadtek Global Group Limited	An indirect wholly- owned subsidiary	$ 116,132,362	$ 17,528,550	$ -	$ -	$ -	-	$ 116,132,362	Y	N	N	A,B

Note A: Limits on endorsement/guarantee amount provided to each counterparty did not exceed 0.5% of the Company’s net equity based on the most recent audited financial statements of the Company. Maximum endorsement/guarantee amounts allowable should not exceed 1% of the Company’s net equity based on the most recent audited financial statements of the Company. For subsidiaries with over 90% of shares directly or indirectly owned by the Company, the endorsement / guarantee amount provided by the Company shall not exceed 10% of the Company’s net equity. The limitation is not required for direct or indirect wholly-owned subsidiaries of the Company.

Note B: Accumulated endorsement/guarantee amount provided by the Company shall not exceed 50% of the Company’s net equity.

195

Innolux Corporation and subsidiaries

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) December 31, 2015

Table 3

Expressed in thousands of NTD (Except as otherwise indicated)

Securitiesheld by	Marketable securities	Relationship with the securitiesissuer	General ledgeraccount		As of Dece	mber 31, 2015
				Numberofshares	Bookvalue	Ownership (%)	Fairvalue
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Yuan Chi Investment Co., Ltd. Yuan Chi Investment Co., Ltd. InnoJoy Investment Corporation InnoJoy Investment Corporation InnoJoy Investment Corporation InnoJoy Investment Corporation Warriors Technology Investments Ltd. Warriors Technology Investments Ltd. Nets Trading Ltd.	Common stock	None None None None None None None None None None None None None None None	Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Financial asset at fair value through profit or loss Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current	900,000 150,500,000 48,283,725 89,072 44,741,305 1,209 1,439,180 12,283,000 11,165,222 10,000,000 6,311,734 7,271,326 16,000,000 40,500,000 90	$ 62,091 650,115 319,955 2,271 910,485 - 694 97,281 281,922 302,190 78,266 189,782 6,058 4,475,250 28,596	1 6 19 - 9 - 2 3 8 7 2 6 6 13 -	$ 62,091 650,115 319,955 2,271 910,485 - 694 97,281 281,922 302,190 78,266 189,782 6,058 4,475,250 28,596
	AvanStrate Inc. TPV Technology Ltd. Chi Lin Optoelectronics Co., Ltd. Epistar Corporation Chimei Materials Technology Corp. Allied Material Technology Corp. Trillion Science Inc. China Electric Mfg. Corp. Advanced Optoelectronic Technology, Inc. Fitipower Integrated Technology Inc. G-TECH Optoelectronics Corporation Entire Technology Co., Ltd. OED Holding Ltd. General Interface Solution (GIS) Holding Limited PilotTech Global Fund

196

Innolux Corporation and subsidiaries Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more For the year ended December 31, 2015

Table 4 Purchaser/seller	Counterparty	Relationship with the counterparty		Tran	saction		Differences in compared trans	transaction terms to third party actions	(Except as otherwis Expressed in thousa Notes/accounts receivable(payable)	(Except as otherwis Expressed in thousa Notes/accounts receivable(payable)	e indicated) nds of NTD Footnote
			Purchases (sales)	Amount	Percentage of total purchases(sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable (payable)
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation	Lakers Trading Ltd. Hon Hai Precision Industry Co., Ltd. Honfujin Precision Electronics (Chongqing) Co., Ltd. Shenzhen FuTaiHong Precision Industry Co., Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Technology USA Inc. Competition Team Ireland Ltd. Innolux Optoelectronics USA, Inc. Futaijing Precision Electronics (Yantai) Co., Ltd. Innolux Hong Kong Ltd. Futaijing Precision Electronics (Beijing) Co., Ltd. Hongfujin Precision Electronics (Zhengzhou) Co., Ltd.	An indirect wholly-owned subsidiary Same major stockholder An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. A subsidiary of the Company An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd.	Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales	$ 8,538,206 2 3,414,590 1 3,187,388 1 2,488,188 1 1,561,151 - 1,512,160 - 1,393,483 - 734,048 - 645,222 - 628,495 - 441,462 - 437,312 -		60 days 45~60 days 45~60 days 60 days 45 days 60 days 45 days 45 days 60 days 60 days 60 days 60 days	Similar with general sales Similar with general sales Similar with general sales Similar with general sales Single sales target, no basis for comparison Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales	No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference	- $ - 1,031,767 2 404,513 1 133,501 - 138,810 - 173,166 - - - 71,538 - 35,124 - - - - - 74,849 -

197

Innolux Corporation	Honfujin Precision Electronics	An indirect wholly-owned	Sales	$ 331,460	-	60 days	Similar with	No material		$ 139,373	-
	(Shenzhen) Co., Ltd.	subsidiary of Hon Hai Precision					general sales	difference
		Industry Co., Ltd.
Innolux Corporation	FI Medical Device	The company's investments	Sales	233,299	-	90 days	Similar with	No material		81,427	-
	Manufacturing Co., Ltd.	accounted for under the equity					general sales	difference
		method
Innolux Corporation	Honfujin Precision Electronics	An indirect wholly-owned	Sales	231,303	-	45 days	Similar with	No material		76,783	-
	(Wuhan) Co., Ltd.	subsidiary of Hon Hai Precision					general sales	difference
		Industry Co., Ltd.
Innolux Corporation	Competition Team Technology	An indirect wholly-owned	Sales	186,962	-	90 days	Similar with	No material		144,167	-
	(India) Private Ltd.	subsidiary of Hon Hai Precision					general sales	difference
		Industry Co., Ltd.
Innolux Corporation	Chi Lin Optoelectronics Co., Ltd.	The company is a corporate director	Sales	133,737	-	45~90 days	Similar with	No material		40,420	-
		of Chi Lin Optoelectronics					general sales	difference
Innolux Corporation	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	2,087,965	1	60~90 days after	Single	No material	(	821,291)	1
	Ltd.					acceptance	purchases	difference
							target, no basis
							for comparison
Innolux Corporation	Chi Lin Optoelectronics Co., Ltd.	The company is a corporate director	Purchases	822,868	-	120 days after	Single	No material	(	289,219)	-
		of Chi Lin Optoelectronics				acceptance	purchases	difference
							target, no basis
							for comparison
Innolux Corporation	FI Medical Device	The company's investments	Purchases	302,010	-	30 days after	Single	No material	(	58,375)	-
	Manufacturing Co., Ltd.	accounted for under the equity				acceptance	purchases	difference
		method					target, no basis
							for comparison
Innolux Corporation	Leadtek Global Group Limited	A subsidiary of the Company	Processing	44,091,210	13	60~90 days	Cost plus	No material	(	20,900,275)	29
			expense					difference
Innolux Corporation	Lakers Trading Ltd.	An indirect wholly-owned	Processing	44,600,117	14	60~90 days	Cost plus	No material	(	14,958,119)	20
		subsidiary	expense					difference
Innolux Corporation	Innolux Hong Kong Ltd.	An indirect wholly-owned	Processing	34,025,843	10	60~90 days	Cost plus	No material	(	8,331,372)	11
		subsidiary	expense					difference
Nanjing Innolux	Innolux Hong Kong Ltd.	An indirect wholly-owned	Processing	33,337,143	98	60 days	Similar with	No material		7,831,158	98
Optoelectronics Ltd.		subsidiary	revenue				general	difference
							transactions

198

Ningbo Innolux	Leadtek Global Group Limited	A subsidiary of the Company	Processing	$ 28,498,599	84	60 days	Similar with	No material		$ 14,623,208	91
Optoelectronics Ltd.			revenue				general	difference
							transactions
Foshan Innolux	Lakers Trading Ltd.	An indirect wholly-owned	Processing	26,744,283	69	60 days	Similar with	No material		8,018,465	82
Optoelectronics Ltd.		subsidiary	revenue				general	difference
							transactions
Ningbo Innolux Technology	Leadtek Global Group Limited	A subsidiary of the Company	Processing	16,347,277	91	60 days	Similar with	No material		2,204,994	78
Ltd.			revenue				general	difference
							transactions
Shanghai Innolux	Lakers Trading Ltd.	An indirect wholly-owned	Processing	12,905,853	95	60 days	Similar with	No material		2,149,428	95
Optoelectronics Ltd.		subsidiary	revenue				general	difference
							transactions
Ningbo Innolux Display Ltd.	Lakers Trading Ltd.	An indirect wholly-owned	Processing	4,597,437	100	60 days	Similar with	No material		1,027,542	100
		subsidiary	revenue				general	difference
							transactions
Innocom Technology	Lakers Trading Ltd.	An indirect wholly-owned	Processing	644,975	46	60 days	Similar with	No material		3,360,510	92
(Shenzhen) Co., Ltd.		subsidiary	revenue				general	difference
							transactions
Innolux Technology Japan	Innolux Hong Kong Ltd.	An indirect wholly-owned	Service	275,557	92	60 days	Similar with	No material		48,127	85
Co., Ltd.		subsidiary	revenue				general	difference
							transactions
Ningbo Innolux	Ningbo Innolux Technology Ltd.	An indirect wholly-owned	Sales	3,479,126	6	90 days	Similar with	No material		742,775	3
Optoelectronics Ltd.		subsidiary					general	difference
							transactions
Shanghai Innolux	Nanjing Innolux Optoelectronics	An indirect wholly-owned	Sales	658,797	3	60 days	Similar with	No material		119,316	3
Optoelectronics Ltd.	Ltd.	subsidiary					general	difference
							transactions
Ningbo Innolux	Ningbo Innolux Display Ltd.	An indirect wholly-owned	Sales	263,304	-	60 days	Similar with	No material		161,406	1
Optoelectronics Ltd.		subsidiary					general	difference
							transactions
Ningbo Innolux	Ningbo Lin Moug Optronics Co.,	An indirect wholly-owned	Purchases	1,720,767	3	120 days after	Similar with	No material	(	617,975)	4
Optoelectronics Ltd.	Ltd.	subsidiary of Chi Lin				goods are	general	difference
		Optoelectronics Co., Ltd.				shipped	transactions
Ningbo Innolux	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	744,581	1	60 days after	Similar with	No material	(	249,403)	2
Optoelectronics Ltd.	Ltd.					goods are	general	difference
						shipped	transactions
Foshan Innolux	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	742,147	1	90 days after	Similar with	No material	(	294,409)	1
Optoelectronics Ltd.	Ltd.					goods are	general	difference
						shipped	transactions

199

Ningbo Innolux Technology	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	$ 729,655	3	90 days after	Similar with	No material	($	185,937)	3
Ltd.	Ltd.					goods are	general	difference
						shipped	transactions
Nanjing Innolux	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	491,739	1	90 days after	Similar with	No material	(	112,654)	1
Optoelectronics Ltd.	Ltd.					goods are	general	difference
						shipped	transactions
Ningbo Innolux	Honfujin Precision Electronics	An indirect wholly-owned	Purchases	465,072	1	90 days after	Similar with	No material	(	117,821)	1
Optoelectronics Ltd.	(Shenzhen) Co., Ltd.	subsidiary of Hon Hai Precision				goods are	general	difference
		Industry Co., Ltd.				shipped	transactions
Ningbo Innolux Technology	Ningbo Lin Moug Optronics Co.,	An indirect wholly-owned	Purchases	453,764	2	120 days after	Similar with	No material	(	190,049)	3
Ltd.	Ltd.	subsidiary of Chi Lin				goods are	general	difference
		Optoelectronics Co., Ltd.				shipped	transactions
Ningbo Innolux Display Ltd.	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	311,236	6	90 days after	Similar with	No material	(	187,611)	7
	Ltd.					goods are	general	difference
						shipped	transactions

200

Innolux Corporation and subsidiaries

Receivables from related parties reaching $100 million or 20% of paid-in capital or more December 31, 2015

Table 5

Expressed in thousands of NTD (Except as otherwise indicated)

Creditor	Counterparty	Relationship with the counterparty	Balance as at December 31,2015	Turnover rate	Overd	ue receivables	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts
					Amount	Action taken
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Innocom Technology (Shenzhen) Co., Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Leadtek Global Group Limited	Shenzhen FuTaiHong Precision Industry Co., Ltd. Hon Hai Precision Industry Co., Ltd. Honfujin Precision Electronics (Chongqing) Co., Ltd. Kangzhun Electronics Technology (Kunshan) Co., Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Technology USA Inc. Hongfujin Precision Electronics (Shenzhen) Co., Ltd. Competition Team Technology (India) Private Ltd. Lakers Trading Ltd. Leadtek Global Group Limited Innolux Hong Kong Ltd. Leadtek Global Group Limited Lakers Trading Ltd. Lakers Trading Ltd. Nanjing Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Display Ltd. Lakers Trading Ltd. Ningbo Innolux Display Ltd.	An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. Same major stockholder An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. A subsidiary of the Company An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary A subsidiary of the Company An indirect wholly-owned subsidiary A subsidiary of the Company An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary	$ 133,501 1,031,767 404,513 286,218 138,810 173,166 139,373 144,167 8,018,465 14,623,208 7,831,158 2,204,994 3,360,510 2,149,428 119,316 742,775 161,406 1,027,542 518,992	2.97 2.35 3.78 - 9.59 8.71 4.17 2.59 1.77 1.66 4.24 3.56 0.23 4.95 5.36 4.07 1.63 4.57 -	$ - 84,118 10,639 31,754 - - - 5,729 8,018,465 13,732,390 3,085,461 150,784 2,910,074 - - 92,453 - - 150,784	- Subsequent collection Subsequent collection Subsequent collection - - - Subsequent collection Subsequent collection Subsequent collection Subsequent collection Subsequent collection Subsequent collection - - Subsequent collection - - Subsequent collection	$ 88,285 212,224 78,969 59,298 - - 97,623 39,233 5,284,848 3,349,891 2,975,253 1,587,768 - 545,267 - 442,391 37,153 598,463 241,922	- - - - - - - - - - - - - - - - - - -

201

Table 6

Expressed in thousands of NTD (Except as otherwise indicated)

Innolux Corporation and subsidiaries Significant inter-company transactions during the reporting periods For the year ended December 31, 2015

Transaction (Note C)

Number	Companyname	Counterparty	Relationship (NoteA)	General ledgeraccount	Amount	Transaction terms (NoteB)	Percentage of consolidated total operating revenues or total assets
0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 2 2 3 3 4 4 5 5	Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Technology Ltd.	Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Optoelectronics USA, Inc. Innolux Technology USA Inc. Innolux Technology USA Inc. Lakers Trading Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Leadtek Global Group Limited Leadtek Global Group Limited Nanjing Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Leadtek Global Group Limited Leadtek Global Group Limited	1 1 1 1 1 1 1 1 1 1 1 1 1 3 3 3 3 3 3 3 3 3 3 3 3	Sales Processing expense Accrued expenses Sales Accounts receivable Sales Sales Accounts receivable Sales Processing expense Accrued expenses Processing expense Accrued expenses Sales Accounts receivable Processing revenue Accounts receivable Processing revenue Accounts receivable Processing revenue Accounts receivable Processing revenue Accounts receivable Processing revenue Accounts receivable	628,495 $ 34,025,843 8,331,372) ( 1,561,151 138,810 734,048 1,512,160 173,166 8,538,206 44,600,117 14,958,119) ( 44,091,210 20,900,275) ( 658,797 119,316 12,905,853 2,149,428 26,744,283 8,018,465 33,337,143 7,831,158 644,975 3,360,510 16,347,277 2,204,994	- - - - - - - - - - - - - - - - - - - - - - - - -	- 9 2 - - - - - 2 12 4 12 5 - - 4 1 7 2 9 2 - 1 4 1

202

6	Ningbo Innolux Optoelectronics Ltd.	Leadtek Global Group Limited	3	Processing revenue	28,498,599	-	8
6	Ningbo Innolux Optoelectronics Ltd.	Leadtek Global Group Limited	3	Accounts receivable	14,623,208	-	4
6	Ningbo Innolux Optoelectronics Ltd.	Ningbo Innolux Technology Ltd.	3	Sales	3,479,126	-	1
6	Ningbo Innolux Optoelectronics Ltd.	Ningbo Innolux Technology Ltd.	3	Accounts receivable	742,775	-	-
6	Ningbo Innolux Optoelectronics Ltd.	Ningbo Innolux Display Ltd.	3	Sales	263,304	-	-
6	Ningbo Innolux Optoelectronics Ltd.	Ningbo Innolux Display Ltd.	3	Accounts receivable	161,406	-	-
7	Ningbo Innolux Display Ltd.	Lakers Trading Ltd.	3	Processing revenue	4,597,437	-	1
7	Ningbo Innolux Display Ltd.	Lakers Trading Ltd.	3	Accounts receivable	1,027,542	-	-
8	Innolux Technology Japan Co., Ltd.	Innolux Hong Kong Ltd.	3	Service revenue	275,557	-	-
9	Leadtek Global Group Limited	Ningbo Innolux Display Ltd.	3	Accounts receivable	518,992	-	-

Note A: 1. The parent company to the subsidiary.

The subsidiary to the subsidiary.

Note B: Except for no comparable transactions from related parties, sales prices were similar to non-related parties transactions and the collection period was 30~120 days; the purchases from related parties were at market prices and payment term was 30~120 days upon receipt of goods.

Note C: Amount disclosure standard: purchases, sales and receivables from related parties in excess of $100 million or 20% of capital.

203

Innolux Corporation and subsidiaries Information on investees For the year ended December 31, 2015

Table 7

Expressed in thousands of NTD (Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial invest	ment amount	Shares held	as at Decemb	er 31,2015	Net profit (loss) of the investee for the year ended December 31,2015	Investment income (loss) recognised by the Company for the year ended December 31, 2015	Footnote
				Balance as at December 31, 2015	Balance as at December 31, 2014	Numberofshares	Ownership (%)	Bookvalue
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation	Bright Information Holding Ltd. Gold Union Investments Ltd. Golden Achiever International Ltd. Innolux Holding Ltd. Keyway Investment Management Limited Landmark International Ltd. Toppoly Optoelectronics (B.V.I.) Ltd. Innolux Hong Kong Holding Ltd. Leadtek Global Group Limited Yuan Chi Investment Co., Ltd. InnoJoy Investment Corporation Innolux Optoelectronics Europe B.V. Innolux Optoelectronics Japan Co., Ltd. Ampower Holding Ltd. Jetronics International Corp. FI Medical Device Manufacturing Co., Ltd. iZ3D, Inc.	Hong Kong Samoa BVI Samoa Samoa Samoa BVI Hong Kong BVI Taiwan Taiwan Netherlands Japan Cayman Samoa Taiwan USA	Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Order swap company Investment company Investment company Importing, exporting, buying, selling and logistics services of electronic equipment and TFT-LCD Researching, manufacturing and selling of the film transistor liquid crystal display Investment holdings Investment holdings Production and selling of the absorption for medical element Research and development and sale of 3D flat monitor	119,724 $ - 119,106 7,858,300 197,554 33,438,542 3,596,307 2,107,291 - 1,217,235 1,674,054 121,941 1,335,486 1,717,714 86,149 73,500 -	119,724 $ 348,999 9,083 7,858,300 197,554 32,925,315 3,596,307 2,107,291 - 1,217,235 1,674,054 121,941 1,335,486 1,717,714 86,149 73,500 -	4,910,000 - 40,250 246,768,185 5,656,410 709,450,000 144,447,000 1,158,844,000 50,000,000 - 167,405,392 180 80 14,062,500 726,941 7,350,000 4,333	100 - 100 100 100 100 100 100 100 100 100 100 100 50 32 49 35	104,699 $ - 65,966 20,242,553 230,932 45,888,559 6,787,268 2,907,677 232,863) ( 1,137,982 1,242,760 132,641 1,507,382 881,351 2,055) ( 321,683 -	205) ($ 104,634 2,048) ( 293,551 3,746) ( 4,159,463 751,258 687,929 103,103) ( 215,059) ( 338,289) ( 4,827) ( 36,154 271) ( 1,268 554,470 -	2,044) ($ 104,634 5,354 295,014 3,746) ( 4,281,112 751,258 660,141 103,103) ( 215,059) ( 338,289) ( 4,827) ( 36,154 8,925) ( 406 271,690 -

204

Innolux Corporation	Chi Mei Lighting Technology	Taiwan	Manufacturing of	819,312	819,312	78,195,856	33		-		-		-
	Corporation		electronic equipment
			and lighting equipment
Innolux Corporation	Chi Mei El Corporation	Taiwan	Developing, designing,	-	361,382	-	-		-	(	51,718)	(	50,265)
			manufacturing and
			selling of organic light
			emitting diodes
Innolux Corporation	GIO Optoelectronics Corp.	Taiwan	Developing, designing,	800,892	800,892	63,521,501	24		98,785		21,911		5,210
			manufacturing and
			selling of components
			of back light module
			on TFT-LCD
Innolux Holding Ltd.	Rockets Holding Ltd.	Samoa	Investment holdings	7,296,530	7,296,530	226,504,550	100		15,064,678		102,191		102,191
Innolux Holding Ltd.	Suns Holding Ltd.	Samoa	Investment holdings	555,422	555,422	18,177,052	100		5,041,225		192,687		192,687
Innolux Holding Ltd.	Lakers Trading Ltd.	Samoa	Order swap company	-	-	1	100		250,080		-		-
Innolux Holding Ltd.	Innolux Corporation	USA	Distributor company	6,348	6,348	2,000	100	(	92,865)	(	1,327)	(	1,327)
Toppoly Optoelectronics (B.V.I.)	Toppoly Optoelectronics (Cayman)	Cayman	Investment holdings	3,572,384	3,572,384	144,417,000	100		6,786,885		751,258		751,258
Ltd.	Ltd.
Innolux Hong Kong Holding Ltd.	Innolux Optoelectronics Hong Kong	Hong Kong	Investment holdings	-	-	162,897,802	100		1,055,807		295,546		295,546
	Holding Ltd.
Innolux Hong Kong Holding Ltd.	Innolux Hong Kong Ltd.	Hong Kong	Order swap company	-	-	35,000,000	100	(	1,845,021)		317,860		317,860
Innolux Hong Kong Holding Ltd.	Innolux Technology Europe B.V.	Netherlands	Holding company and	3,073,072	3,073,072	375,810	100		2,281,088		32,523		32,523
			R&D testing company
Innolux Hong Kong Holding Ltd.	Innolux Technology Japan Co., Ltd.	Japan	R&D testing company	1,815,603	1,815,603	201	100		1,706,959		17,594		17,594
Innolux Hong Kong Holding Ltd.	Innolux Technology USA Inc.	USA	Distributor company	263,685	263,685	1,000	100		363,492		24,231		24,231
Innolux Optoelectronics Europe	Innolux Optoelectronics Germany	Germany	Importing, exporting,	10,324	10,324	250	100		17,023	(	7,957)	(	7,957)
B.V.	GmbH		buying, selling and
			logistics services of
			electronic equipment
			and TFT-LCD
Innolux Optoelectronics Japan	Innolux Optoelectronics USA, Inc.	USA	i Selling of electronic	2,400	2,400	1,000	100		277,704		9,020		9,020
Co., Ltd.			equipment and
			computer monitors
Rockets Holding Ltd.	Best China Investments Ltd.	Samoa	Investment holdings	314,740	314,740	10,000,001	100		266,110		781		781
Rockets Holding Ltd.	Mega Chance Investments Ltd.	Samoa	Investment holdings	573,940	573,940	18,000,000	100		438,237		1,286		1,286
Rockets Holding Ltd.	Magic Sun Ltd.	Samoa	Investment holdings	1,146,370	1,146,370	38,000,001	100		1,092,270		92,832		92,832

205

Rockets Holding Ltd.	Stanford Developments Ltd.	Samoa	Investment holdings	5,391,125	5,391,125	164,000,000	100	13,237,023		7,291		7,291
Rockets Holding Ltd.	Nets Trading Ltd.	Samoa	Investment company	27,477	27,477	900,001	100	30,916		-		-
Suns Holding Ltd.	Warriors Technology Investments	Samoa	Investment company	555,422	555,422	18,177,052	100	5,041,223		192,687		192,687
	Ltd.
Innolux Technology Europe B.V.	Innolux Technology Germany GmbH	Germany	Testing and	33,735	33,735	100,000	100	59,078		173		173
			maintenance company
Best China Investments Ltd.	Asiaward Investment Ltd.	Hong Kong	Investment holdings	314,740	314,740	77,830,001	100	266,110		781		781
Mega Chance Investments Ltd.	Main Dynasty Investment Ltd.	Hong Kong	Investment holdings	573,940	573,940	139,623,801	100	438,236		1,286		1,286
Magic Sun Ltd.	Sun Dynasty Development Ltd.	Hong Kong	Investment holdings	1,146,370	1,146,370	295,969,001	100	1,092,270		92,832		92,832
Yuan Chi Investment Co., Ltd.	Chi Mei Lighting Technology	Taiwan	Trading business,	263,812	263,812	19,673,402	8	-		-		-
	Corporation		manufacturing of
			electronic equipment
			and lighting equipment
Yuan Chi Investment Co., Ltd.	GIO Optoelectronics Corp.	Taiwan	Developing, designing,	6,881	6,881	467,519	-	748		21,911		39
			manufacturing and
			selling of components
			of back light module
			on TFT-LCD
Yuan Chi Investment Co., Ltd.	TOA Optronics Corporation	Taiwan	Selling electronic	423,606	423,606	58,007,000	40	310,074	(	237,256)	(	54,833)
			materials, trading
			business,
			manufacturing of
			electronic equipments
			and lighting
			equipments

206

Information on investments in Mainland China For the year ended December 31, 2015

Table 8

Innolux Corporation and subsidiaries

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-in capital (Note A)	Investment method (Note C)	Accumulated amount of remittance from Taiwan to Mainland China as of January 1, 2015	Amount remitted Mainlan Amount re to Taiwan for December	from Taiwan to d China/ mitted back the year ended 31, 2015	Accumulated amount of remittance from Taiwan to Mainland China as of December 31, 2015	Net income (loss) of investee for the year ended December 31 , 2015	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2015 (Note B)	Book value of investments in Mainland China as of December 31, 2015	Accumulated amount of investment income remitted back to Taiwan as of December 31, 2015	Footnote
					Remitted to Mainland China	Remitted back to Taiwan
Innocom Technology (Shenzhen) Co., Ltd. OED Company Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Nanjing Innolux Technology Ltd. Kunpal Optoelectronics Ltd. VAP Optoelectronics (Nanjing) Corp. Nanjing Innolux Optoelectronics Ltd. Ningbo Innolux Logistics Ltd. Shanghai Innolux Optoelectronics Ltd. Foshan Innolux Logistics Ltd. Amlink (Shanghai) Ltd. Kunshan Guann-Jye Electronics Co., Ltd. Interface Optoelectronics (Shenzhen) Co., Ltd. Ningbo Innolux Electronics Ltd.	Manufacturing and selling of LCD backend module and related components Manufacturing and selling of electronic paper Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Purchases and sales of monitor-related components company Glass thinning processing service Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Warehousing services Manufacturing and selling of LCD backend module and related components Warehousing services Manufacturing and selling of power supply, modem, ADSL, and other IT equipments Manufacturing of transformers Development of new type of flat panel display, monitor and peripherals, production and management, and offer of after-sales service Manufacturing and selling of LCD backend module and related components	$ 5,383,300 318,465 10,175,750 4,267,250 12,571,975 984,750 68,933 131,300 331,533 4,661,150 131,300 689,325 49,238 656,500 275,730 3,157,765 151,650	2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3	$ 4,165,878 65,650 241,758 4,267,250 12,571,975 984,750 68,933 124,139 9,848 4,661,150 131,300 - 49,238 328,250 88,299 443,138 -	$ - - - - - - - - 114,888 - - - - - - - -	$ - - - - - - - - - - - - - - - - -	$ 4,165,878 65,650 241,758 4,267,250 12,571,975 984,750 68,933 124,139 124,735 4,661,150 131,300 - 49,238 328,250 88,299 443,138 -	$ 7,291 ( 248,223) 2,185,851 299,191 1,669,650 105,005 12,948 234 ( 2,048) 738,310 ( 6,907) 295,546 3,161 ( 19,288) - - 38	100 4 100 100 100 100 100 100 100 100 100 100 100 50 32 13 100	$ 7,291 - 2,185,851 299,191 1,672,129 105,005 12,948 234 ( 2,048) 738,310 ( 6,907) 295,546 3,161 ( 9,065) - - 38	$ 13,237,010 14,840 22,305,061 3,442,283 19,839,990 359,195 606,121 77,861 66,172 6,180,741 157,669 1,055,807 68,266 372,990 - 4,475,256 151,688	$ 1,217,422 - 5,666,742 - - - - - - - - - - - - - -	2.1 2.1 2.2 2.2 2.2 2.2 2.3 2.4 2.5 2.3 2.7 2.6 2.7 2.8 2.9 2.1 3.1

207

Ceiling on investments in Mainland China:

Company name	Accumulated amount of remittance from Taiwan to Mainland China as of December 31, 2015	Investment amount approved by the Investment Commission of the Ministry of Economic Affairs (MOEA)	Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA 139,358,834 $ NT$ using exchange rate.
Innolux Corporation Note A: The relevant figures are listed in NT$. Note B: Profit or loss recognised for the year e Note C: The investment methods are as follows	29,821,744 $ Where foreign currencies were involved, the figures nded December 31, 2015 was audited by independe :	40,547,247 $ were converted to nt accountants.

Directly investing in Mainland China.
Through investing in companies in the third area, which then invested in the investee in Mainland China.
2.1.Through investing in Innolux Holding Ltd. in the third area, which then invested in the investee in Mainland China.
2.2.Through investing in Landmark International Ltd. in the third area, which then invested in the investee in Mainland China.
2.3.Through investing in Toppoly Optoelectronics (B.V.I.) Ltd. in the third area, which then invested in the investee in Mainland China.
2.4.Through investing in Bright Information Holding Ltd. in the third area, which then invested in the investee in Mainland China.
2.5.Through investing in Golden Achiever International Ltd. in the third area, which then invested in the investee in Mainland China.
2.6.Through investing in Innolux Hong Kong Holding Ltd. in the third area, which then invested in the investee in Mainland China.
2.7.Through investing in Keyway Investment Management Limited in the third area, which then invested in the investee in Mainland China.
2.8.Through investing in Ampower Holding Ltd. in the third area, which then invested in the investee in Mainland China.
2.9.Through investing in Jetronics International Corporation in the third area, which then invested in the investee in Mainland China.
Others.
3.1.The company invests in the company via investee companies in Mainland China is Ningbo Innolux Electronics Ltd. Except for the investment via the holding companies in Mainland China, other investments shall be approved by Investment Commission of the Ministry of Economic Affairs.

208

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Innolux Corporation:

We have audited the accompanying parent company only balance sheets of Innolux Corporation as of December 31, 2015 and 2014, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended. These parent company only financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these parent company only financial statements based on our audits.

In our opinion, the parent company only financial statements referred to above present fairly, in all material respects, the financial position of Innolux Corporation as of December 31, 2015 and 2014, and their financial performance and cash flows for the years then ended in conformity with the “Regulations Governing the Preparation of Financial Statements by Securities Issuers”.

PricewaterhouseCoopers, Taiwan February 2, 2016

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.

209

INNOLUX CORPORATION

PARENT COMPANY ONLY BALANCE SHEETS

DECEMBER 31, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 2015 6(1) $ 35,279,610 6(2) 81,858 6(3) - 6(5) 45,755,129 7 2,904,753 872,255 7 377,364 6(6) 24,546,126 705,456 6(1) and 8 1,400,856 3,001 111,926,408 6(3) 1,944,917 6(7) 81,315,320 6(8), 7 and 8 163,921,697 6(9) 680,503 6(10) 19,264,025 6(25) 15,722,814 8 119,703 6(8) 3,144,234 286,113,213 $ 398,039,621 (Continued)	2014
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1125 Available-for-sale financial assets - current 1170 Accounts receivable, net 1180 Accounts receivable - related parties 1200 Other receivables 1210 Other receivables - related parties 130X Inventory 1410 Prepayments 1476 Other financial assets - current 1479 Other current assets 11XX Total current assets Non-current assets 1523 Available-for-sale financial assets - non-current 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1760 Investment property, net 1780 Intangible assets 1840 Deferred income tax assets 1980 Other financial assets - non-current 1990 Other non-current assets 15XX Total non-current assets 1XXX Total assets		$ 55,543,195 52,453 220,000 68,858,149 6,067,658 699,592 691,024 27,938,165 542,334 2,250,035 12,542
		162,875,147
		3,101,461 73,096,389 192,599,182 693,677 20,127,184 17,575,426 11,160,082 625,863
		318,979,264
		$ 481,854,411

210

INNOLUX CORPORATION

PARENT COMPANY ONLY BALANCE SHEETS

DECEMBER 31, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	Notes 6(11) 6(2) 6(4) 7 7 and 9 6(25) 6(15) 6(12) 6(12) 6(25) 6(13) 6(16) 6(14)(17) 6(18) 6(19) 9	2015 $ - 53,921 - 27,731,035 45,433,862 24,387,687 902,134 5,551,759 16,361,238 835,806 121,257,442 43,629,968 514,094 373,394 44,517,456 165,774,898 99,532,372 99,643,564 2,676,947 - 27,661,503 2,750,337 232,264,723 $ 398,039,621	2014
Current liabilities 2100 Short-term borrowings 2120 Financial liabilities at fair value through profit or loss - current 2125 Derivative financial liabilities for hedging - current 2170 Accounts payable 2180 Accounts payable - related parties 2200 Other payables 2230 Current income tax liabilities 2250 Provisions - current 2320 Long-term liabilities, current portion 2399 Other current liabilities 21XX Total current liabilities Non-current liabilities 2540 Long-term borrowings 2570 Deferred income tax liabilities 2670 Other non-current liabilities 25XX Total non-current liabilities 2XXX Total liabilities Equity 3110 Share capital - common stock 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings 3400 Other equity interest 3XXX Total equity Significant contingent liabilities and unrecognized contract commitments 3X2X Total liabilities and equity			$ 1,300,000 605,016 1,351 33,731,780 85,171,012 18,688,940 - 3,133,489 61,092,333 1,465,205
			205,189,126
			37,223,093 477,579 11,274,550
			48,975,222
			254,164,348
			99,545,364 99,584,369 509,272 1,144,229 24,979,173 1,927,656
			227,690,063
			$ 481,854,411

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

211

INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

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

Items

Notes
2015
2014
7
$ 360,638,133
$ 426,005,033
6(6)(23) and 7
(
326,925,887) (
389,609,785)
33,712,246
36,395,248
6(23)
(
1,167,637) (
1,092,207)
(
3,183,374) (
3,451,341)
(
13,534,326) (
11,412,260)
(
17,885,337) (
15,955,808)
15,826,909
20,439,440
6(20)
1,301,865
1,379,919
6(21)
(
7,842,919) (
3,418,822)
6(22)
(
1,310,112) (
2,721,239)
5,833,198
5,998,536
(
2,017,968)
1,238,394
13,808,941
21,677,834
6(25)
(
2,993,347) (
1,075)
$ 10,815,594
$ 21,676,759
6(13)
( $ 195,939) ( $ 55,790)
33,309
9,484
(
162,630) (
46,306)
(
1,392,086)
3,087,368
(
1,149,260)
103,510
6(4)
(
297,675) (
278,458)
3,420,038
263,095
6(25)
118,551
38,885
699,568
3,214,400
$ 536,938
$ 3,168,094
$ 11,352,532
$ 24,844,853
6(26)
$ 1.09
$ 2.31
$ 1.07
$ 2.28

4000
Sales revenue
5000
Operating costs
5900
Net operating margin
Operating expenses
6100
Selling expenses
6200
General and administrative expenses
6300
Research and development expenses
6000
Total operating expenses
6900
Operating profit
Non-operating income and expenses
7010
Other income
7020
Other gains and losses
7050
Finance costs
7070
Share of profit of subsidiaries, associates
and joint ventures accounted for under
equity method
7000
Total non-operating income and
expenses
7900
Profit before income tax
7950
Income tax expense
8200
Profit for the year
Other comprehensive income (net)
Components of other comprehensive loss
that will not be reclassified to profit or loss
8311
Remeasurement of defined benefit
obligations
8349
Income tax relating to the components of
other comprehensive income that will not
be reclassified
8310
Components of other comprehensive
loss that will not be reclassified to
profit or loss
Components of other comprehensive
income that will be reclassified to profit or
loss
8361
Financial statements translation
differences of foreign operations
8362
Unrealized (loss) gain on valuation of
available-for-sale financial assets
8363
Cash flow hedges
8380
Share of other comprehensive income of
subsidiaries, associates and joint ventures
accounted for under equity method
8399
Income tax relating to the components of
other comprehensive income that will be
reclassified
8360
Components of other comprehensive
income that will be reclassified to
profit or loss
8300
Other comprehensive income for the year,
net of tax
8500
Total comprehensive income for the year
Earnings per share (in dollars)
9750
Basic earnings per share
9850
Diluted earnings per share

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

212

INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars)

Notes 2014 Balance at January 1, 2014 Capital issued for cash 6(16) Appropriation of 2013 earnings(Note1): 6(18) Legal reserve Special reserve Cash dividends Cash paid from capital surplus 6(18) Capital surplus offset against accumulated deficit Cancellation of restricted stock to employees Changes in restricted stock to employees Compensation related to share-based payment 6(14) Changes in net equity of long-term equity investments Profit for the year Other comprehensive income for the year 6(19) Balance at December 31, 2014 2015 Balance at January 1, 2015 Appropriation of 2014 earnings(Note2): 6(18) Legal reserve Special reserve Cash dividends Cancellation of restricted stock to employees Changes in restricted stock to employees Compensation related to share-based payment 6(14) Changes in net equity of long-term equity investments Changes in non-controlling interests Profit for the year Other comprehensive income for the year 6(19) Balance at December 31, 2015	Commonstock $ 91,094,288 8,500,000 - - - - - ( 48,924 ) - - - - - $ 99,545,364 $ 99,545,364 - - - ( 12,992) - - - - - - $ 99,532,372	Capitalsurplus $ 96,058,741 2,125,000 - - - ( 1,266,944) 2,328,981 48,924 47,174 289,523 ( 47,030) - - $ 99,584,369 $ 99,584,369 - - - 12,992 ( 3,760) 22,740 27,185 38 - - $ 99,643,564			RetainedEarnings	Unappropriated earnings $ 5,092,716 - ( 509,272 ) ( 1,144,229 ) ( 90,495 ) - - - - - - 21,676,759 ( 46,306 ) $24,979,173 $ 24,979,173 ( 2,167,675 ) 1,144,229 ( 6,947,188 ) - - - - - 10,815,594 ( 162,630 ) $27,661,503		Other EquityInterest	Other EquityInterest	Employee unearned compensation	Total
			Legal reserve $ 2,328,981 - 509,272 - - - ( 2,328,981) - - - - - - $ 509,272 $ 509,272 2,167,675 - - - - - - - - - $2,676,947				Financial statements translation differences of foreign operations	Unrealized gain (loss) on available- for-sale financial assets	Changes in gain (loss) on cash flow hedges $ 478,190 - - - - - - - - - - - ( 231,120) $ 247,070 $ 247,070 - - - - - - - - - ( 247,070) $ -
							( $ 78,074 ) - - - - - - - - - - - 3,161,022 $ 3,082,948 $ 3,082,948 - - - - - - - - - ( 1,387,654 ) $1,695,294	( $ 1,544,345 ) - - - - - - - - - - - 284,498 ( $1,259,847 ) ( $ 1,259,847 ) - - - - - - - - - 2,334,292 $1,074,445		($ 387,268 ) - - - - - - - ( 43,951 ) 288,704 - - - ($ 142,515 ) ($ 142,515 ) - - - - 2,411 120,702 - - - - ($ 19,402 )	$193,043,229 10,625,000 - - ( 90,495 ) ( 1,266,944 ) - - 3,223 578,227 ( 47,030 ) 21,676,759 3,168,094 $227,690,063 $227,690,063 - - ( 6,947,188 ) - ( 1,349 ) 143,442 27,185 38 10,815,594 536,938 $232,264,723

Note1: Employees’ bonus and directors’ and supervisors’ remuneration accrued at $172,217 and $4,004 had been deducted from the statement of comprehensive income for the year ended December 31, 2013.

Note2: Employee’s bonus and directors’ and supervisors’ remuneration accrued at $1,436,187 and $6,954 had been deducted from the statement of comprehensive income for the year ended December 31, 2014.

The accompanying notes are an integral part of these financial statements. 213

INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax for the year
Adjustments to reconcile net income to net cash provided by
operating activities
Income and expenses having no effect on cash flows
Depreciation and amortization
Compensation related to share-based payment
Share of profit of subsidiaries and associates accounted
for under equity method
Loss (gain) on disposal of investments
Loss (gain) on disposal of property, plant and
equipment
Interest income
Dividend income
Interest expense
Unrealized foreign exchange (gain) loss
Changes in assets/liabilities relating to operating activities
Net changes in assets relating to operating activities
Financial assets/liabilities at fair value through profit
or loss
Accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Prepayments
Other current assets
Net changes in liabilities relating to operating activities
Derivative financial liabilities for hedging
Accounts payable
Accounts payable - related parties
Other payables
Provisions - current
Other current liabilities
Other non-current liabilities
Cash generated from operations
Cash paid for income tax
Net cash provided by operating activities

Notes
2015
2014
$ 13,808,941
$ 21,677,834
6(23)
49,383,090
56,134,539
6(14)
143,442
578,227
(
5,833,198 ) (
5,998,536 )
6(21)
112,058
(
452,613 )
6(21)
100,841
(
22,568 )
6(20)
(
144,282 ) (
126,493 )
6(20)
(
117,882 ) (
7,567 )
6(22)
1,607,782
2,998,473
(
148,786 )
1,188,553

(
580,500 )
91,169
23,103,020
(
5,094,884 )
3,162,905
(
3,657,816 )
(
178,584 ) (
89,561 )
3,392,039
11,572,044
(
143,809 )
306,774
9,541
14,142
(
299,026 ) (
299,025 )
(
6,000,745 )
4,707,855
(
39,736,875 )
3,193,266
4,001,150
4,125,260
2,418,270
1,184,460
(
577,572 )
309,564
(
17,734 ) (
951,067)
47,464,086
91,382,030
(
38,833) (
1,075)
47,425,253
91,380,955

(Continued)

214

INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in other receivables – related parties
Acquisition of available-for-sale financial assets
Proceeds from disposal of available-for-sale financial
assets
Acquisition of investment accounted for under equity
method
Proceeds from disposal of investment accounted for under
equity method
Proceeds from capital reduction of investments accounted
for under equity method
Acquisition of property, plant and equipment
Decrease in other financial assets
Proceeds from disposal of property, plant and equipment
Decrease (increase) in other non-current assets
Interest received
Dividends received
Cash inflow from incorporation of subsidiary
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings
Increase in long-term borrowings
Payment of long-term borrowings
Capital issued for cash
Cash dividends paid
Cash paid from capital surplus
Repurchase from issuance of restricted stock to employees
Acquisition of subsidiary stock
Interest paid
Net cash used in financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Notes
2015
2014
$ 225,689
$ 96,927
-
(
135,456 )
231,275
167,288
(
623,249 ) (
753,906 )
-
1,550,113
531,696
736,214
6(27)
(
21,096,240 ) (
14,629,033 )
810,198
440,446
42,240
12,761
329
(
568,172 )
138,837
125,498
141,053
1,444,112
11,874
-
(
19,586,298) (
11,513,208)
(
1,300,000 ) (
643,565 )
68,100,131
-
(
106,427,892 ) (
57,625,650 )
6(16)
-
10,625,000
6(18)
(
6,947,188 ) (
90,495 )
6(18)
-
(
1,266,944 )

(
3,676 ) (
7,754 )
(
50 )
-
(
1,523,865) (
2,920,036)
(
48,102,540) (
51,929,444)
(
20,263,585 )
27,938,303
55,543,195
27,604,892
$ 35,279,610
$ 55,543,195

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

215

INNOLUX CORPORATION

NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

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

1. HISTORY AND ORGANIZATION

(1)Innolux Corporation (the “Company”) was organized on January 14, 2003 under the Act for Establishment and Administration of Science Parks in Republic of China (R.O.C.). The Company was listed on the Taiwan Stock Exchange Corporation (the “TSEC”) in October 2006. The Company merged with TPO Displays Corporation and Chi Mei Optoelectronics Corporation on March 18, 2010, with the Company as the surviving entity.
(2)The Company engages in the research, development, design, manufacture and sales of TFT-LCD panels, modules and monitors of LCD, color filter, and low temperature poly-silicon TFT-LCD.

THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE PARENT COMPANY ONLY FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These parent company only financial statements were authorized for issuance by the Board of Directors on February 2, 2016.

APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting

Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued by FSC on April 3, 2014, commencing 2015, companies with shares listed on the TWSE or traded on the Taipei Exchange or Emerging Stock Market shall adopt the 2013 version of IFRS (not including IFRS 9, ‘Financial instruments’) as endorsed by the FSC and the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” effective January 1, 2015 (collectively referred herein as ‘‘the 2013 version of IFRS”) in preparing the financial statements. The impact of adopting the 2013 version of IFRS is listed below:
A. IAS 19 (revised), ‘Employee benefits’

The revised standard makes amendments that net interest amount, calculated by applying the discount rate to the net defined benefit asset or liability, replaces the finance charge and expected return on plan assets. Additional disclosures are required for defined benefit plans.

B. IAS 1, ‘Presentation of financial statements’
The amendment requires entities to separate items presented in OCI classified by nature into two groups on the basis of whether they are potentially reclassifiable to profit or loss subsequently when specific conditions are met. If the items are presented before tax then the tax related to each of the two groups of OCI items (those that might be reclassified and those that will not be reclassified) must be shown separately. Accordingly, the Company will adjust its presentation of the statement of comprehensive income.
C. IFRS 12, ‘Disclosure of interests in other entities’
The standard integrates the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. Also, the Company will disclose additional information about its interests

216

in consolidated entities and unconsolidated entities accordingly.

D. IFRS 13, ‘Fair value measurement’

The standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard sets out a framework for measuring fair value from market participants’ perspective, and requires disclosures about fair value measurements. For non-financial assets only, fair value is determined based on the highest and best use of the asset. Based on the Company’s assessment, the adoption of the standard has no significant impact on its parent company only financial statements, and the Company will disclose additional information about fair value measurements accordingly.

Based on the Company’s assessment, the adoption of the 2013 version of IFRS has no significant impact on the parent company only financial statements for the years ended December 31, 2015 and 2014.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Company None.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the 2013 version of IFRS as endorsed by the FSC:

as endorsed by the FSC:

New Standards,Interpretations and Amendments
IFRS 9, ‘ Financial instruments’
Sale or contribution of assets between an investor and its associate or
joint venture (amendments to IFRS 10 and IAS 28)
Investment entities: applying the consolidation exception (amendments
to IFRS 10, IFRS 12 and IAS 28)
Accounting for acquisition of interests in joint operations
(amendments to IFRS 11)
IFRS 14, ‘Regulatory deferral accounts’
IFRS 15, ‘Revenue from contracts with customers’
IFRS 16, ‘Leases’
Disclosure initiative (amendments to IAS 1)
Disclosure initiative (amendments to IAS 7)
Recognition of deferred tax assets for unrealised losses (amendments to
IAS 12)

Effective Date by
International Accounting
Standards Board

217

New Standards,Interpretations and Amendments
Clarification of acceptable methods of depreciation and amortisation
(amendments to IAS 16 and IAS 38)
Agriculture: bearer plants (amendments to IAS 16 and IAS 41)
Defined benefit plans: employee contributions (amendments to IAS
19R)
Equity method in separate financial statements (amendments to IAS 27)
Recoverable amount disclosures for non-financial assets (amendments
to IAS 36)
Novation of derivatives and continuation of hedge accounting
(amendments to IAS 39)
IFRIC 21, ‘Levies’
Improvements to IFRSs 2010-2012
Improvements to IFRSs 2011-2013
Improvements to IFRSs 2012-2014

Effective Date by
International Accounting
Standards Board

January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
January 1, 2014
January 1, 2014
July 1, 2014
July 1, 2014
January 1, 2016

The Company is assessing the potential impact of the new standards, interpretations and amendments above. The impact will be disclosed when the assessment is complete.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these parent company only financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

These parent company only financial statements are prepared by the Company in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers.

(2) Basis of preparation

A. Except for the following items, these parent company only financial statements have been prepared under the historical cost convention:
(a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
(b) Available-for-sale financial assets measured at fair value.
(c) Defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligations.
B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.

218

(3) Foreign currency translation

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The parent company only financial statements are presented in NTD, which is the Company’s functional and presentation currency.

A. Foreign currency transactions and balances
(a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise, except when deferred in other comprehensive income as qualifying cash flow hedges.
(b) Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognized in profit or loss.
(c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.
(d) All foreign exchange gains and losses are presented in the statement of comprehensive income under “other gains and losses”.
B. Translation of foreign operations
(a) The operating results and financial position of all the group entities and associates that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- i. Assets and liabilities for each balance sheet presented are translated at the exchange rate prevailing at the dates of that balance sheet;
- ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period;

iii. All resulting exchange differences are recognized in other comprehensive income.

(b) When a foreign operation partially disposed of or sold is an associate, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, if the Company retains partial interest in the former foreign associate after losing significant influence over the former foreign associate, such transactions should be accounted for as disposal of all interest in these foreign operations.
(c) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, if the Company retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as

219

disposal of all interest in the foreign operation.

(4) Classification of current and non-current items

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
(a) Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;
(b) Assets held mainly for trading purposes;
(c) Assets that are expected to be realized within twelve months from the balance sheet date;
(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
(a) Liabilities that are expected to be paid off within the normal operating cycle;
(b) Liabilities arising mainly from trading activities;
(c) Liabilities that are to be paid off within twelve months from the balance sheet date;
(d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(5) Cash equivalents

(6) Financial assets at fair value through profit or loss

A. Financial assets at fair value through profit or loss are financial assets held for trading or designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of sale in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:
(a) Hybrid (combined) contracts; or
(b) They eliminate or significantly reduce a measurement or recognition inconsistency; or
(c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.
B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using trade date accounting.
C. Financial assets at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in profit or loss.

220

(7) Available-for-sale financial assets

A. Available-for-sale financial assets are non-derivatives that are designated in this category. On a regular way purchase or sale basis, available-for-sale financial assets are recognized and derecognized using trade date accounting.
B. Available-for-sale financial assets are initially recognized at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in other comprehensive income.

(8) Loans and receivables

(9) Impairment of financial assets

A. The Company assesses at each balance sheet date whether there is objective evidence that an individual financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of an individual financial asset or group of financial assets that can be reliably estimated.
B. The objective evidence that the Company uses to determine whether there is an impairment loss is as follows: (a) Significant financial difficulty of the issuer or debtor;
(b) A breach of contract, such as a default or delinquency in interest or principal payments;
(c) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered; or
(d) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
C. When the Company assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:
(a) Financial assets measured at amortized cost
- The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortized cost that would have been at the date of reversal had the impairment loss not been recognized previously. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.
(b) Available-for-sale financial assets

The amount of the impairment loss is measured as the difference between the asset’s acquisition cost (less

221

any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognized in profit or loss, and is reclassified from “other comprehensive income” to “profit or loss”. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognized, then such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognized in profit or loss shall not be reversed through profit or loss. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

(10) Inventories

(11) Investments accounted for under the equity method / subsidiaries / associates

A. Subsidiaries are all entities (including structured entities) controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
B. Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Company are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.
C. The Company's share of its subsidiaries' post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Company’s share of losses in a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognise losses proportionate to its ownership.
D. If changes in the Company’s shares in subsidiaries do not result in loss in control (transactions with non-controlling interest), transactions shall be considered as equity transactions, which are transactions between owners. Difference of adjustment of non-controlling interest and fair value of consideration paid or received is recognised in equity.
E. When the Company loses control of a subsidiary, the Company remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. The Company should reclassify all amounts previously recognized as other comprehensive income and amounts relating to the prior subsidiary to profit or loss.
F. Associates are all entities over which the Company has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or

222

more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognized at cost.

G. The Company’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Company’s share of losses in an associate equals or exceeds its interest in the associate, the Company does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
H. When changes in an associate’s equity are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Company’s ownership percentage of the associate, the Company recognizes all the change in equity in “capital surplus” in proportion to its ownership.

223

I. Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Company.
J. In the case that an associate issues new shares and the Company does not subscribe or acquire new shares proportionately, which results in a change in the Company’s ownership percentage of the associate but maintains significant influence on the associate, then “capital surplus” and “investments accounted for under the equity method” shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Company’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.
K. When the Company loses its control in an associate, the Company revalues the remaining investment in the prior associate at fair value, and recognises the difference between fair value and book value in the profit or loss for the period.
L. When the Company disposes its investment in an associate and loses significant influence over the associate, the amounts previously recognised in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of.
M. When the Company disposes its investment in an associate and loses significant influence over the associate, capital surplus in relation to the associate is transferred to profit or loss; if it retains significant influence over the associate, the amounts are transferred in accordance with the disposal ratio to profit or loss.
N. Pursuant to the “Regulations Governing the Preparation of Financial Reports by Securities Issuers,” profit (loss) of the current period and other comprehensive income in the parent company only financial statements shall equal to the amount attributable to owners of the parent in the financial statements prepared with basis for consolidation. Owners’ equity in the parent company only financial statements shall equal to equity attributable to owners of the parent in the financial statements prepared with basis for consolidation.
(12) Property, plant and equipment
A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalized.
B. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss when incurred.
C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. If each component of property, plant and equipment is significant, it is depreciated separately.

224

D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

Buildings 3~50 years

Machinery and equipment 2~9 years

Others 2~6 years

(13) Investment property

(14) Intangible assets

A. Goodwill arises in a business combination accounted for by applying the acquisition method.
B. Intangible assets, mainly patents, royalties and other intangible assets, are amortized on a straight-line basis over their estimated useful lives of 2～10 years.

(15) Impairment of non-financial assets

A. The Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. Such recovery of impairment loss shall not result to the asset’s carrying amount greater than its amortized cost where no impairment loss was recognized.
B. The recoverable amounts of goodwill, intangible assets with an indefinite useful life and intangible assets that have not yet been available for use shall be evaluated periodically. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognized in profit or loss shall not be reversed in the following years.
C. For impairment testing purpose, goodwill is allocated to cash generating units. This allocation is based on operating segments. Goodwill is allocated to a cash generating unit or a group of cash generating units that expects to benefit from business combination that will produce goodwill.

(16) Financial liabilities at fair value through profit or loss

A. Financial liabilities at fair value through profit or loss are financial liabilities held for trading. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. Derivatives are also categorized as financial liabilities held for trading unless they are designated as hedges.
B. Financial liabilities at fair value through profit or loss are initially recognized at fair value. Related

225

transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial liabilities are recognized in profit or loss.

(17) Derivative financial instruments and hedging activities

A. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Any changes in the fair value are recognized in profit or loss.
B. The Company designates certain derivatives as either:
(a) Hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value hedge).
(b) Hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge).
C. The Company documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
D. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as current assets or liabilities.
E. Fair value hedge
(a) Changes in the fair value of derivatives that are designated and qualified as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The Company only applies fair value hedge accounting for hedging foreign currency on long-term borrowings. The gain or loss relating to the effective portion of currency swaps hedging long-term borrowings denominated in foreign currency is recognized in the statement of comprehensive income within “finance costs”. The gain or loss relating to the ineffective portion is recognized in the statement of comprehensive income within “other gains and losses”. Changes in the fair value of the hedge long-term borrowings denominated in foreign currency attributable to interest rate risk are recognized in the statement of comprehensive income within “finance costs”.
(b) If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized to profit or loss over the period to maturity.
F. Cash flow hedge
(a) The effective portion of changes in the fair value of derivatives that are designated and qualified as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the statement of comprehensive income within “other gains and losses”.
(b) Amounts accumulated in other comprehensive income are reclassified into profit or loss in the periods

226

when the hedged item affects profit or loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognized in the statement of comprehensive income within “finance costs”.

(c) When a hedging instrument expires, or is sold, cancelled or executed, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other comprehensive income at that time remains in other comprehensive income. When a forecast transaction occurs or is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is transferred to profit or loss in the periods when the hedged forecast cash flow affects profit or loss.

(18) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid and should be recognized as expenses in that period when the employees render service.

B. Pensions
(a) Defined contribution plans

(b) Defined benefit plans
i. The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bond (at the balance sheet date).
ii. Remeasurement arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.

iii. Past service costs are recognized immediately in profit or loss.

C. Employees’, directors’ and supervisors’ remuneration

- (19) Employee share based payment

A. For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognized as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognized is based on

227

the number of equity instruments that eventually vest.

B. Restricted stocks to employees:
(a) Restricted stocks issued to employees are measured at the fair value of the equity instruments granted at the grant date, and are recognized as compensation cost over the vesting period.
(b) For restricted stocks where employees have to pay to acquire those stocks, if employees resign during the vesting period, they must return the stocks to the Company and the Company must refund their payments on the stocks. The Company recognizes the payments from the employees who are expected to resign during the vesting period as liabilities at the grant date, and recognizes the payments from the employees who are expected to be eventually vested with the stocks in “capital surplus – others”.
C. The grant date for the shares reserved for employee preemption in cash capital increase is the date on which the Company informs employees of the grant and both the Company and employees agree to the number of shares granted and the price for subscription.

(20) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity.
B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
C. Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the parent company only balance sheet. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
D. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. At each balance sheet date, unrecognized and recognized deferred income tax assets are reassessed.
E. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilized.

(21) Revenue recognition

The Company manufactures and sells TFT-LCD panels. Revenue is measured at the fair value of the consideration received or receivable taking into account value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Company’s activities.

228

(22) Business combinations

A. The Company uses the acquisition method to account for business combinations. The Company chooses to measure the non-controlling interest in the acquiree at the non-controlling interest’s proportionate share of the acquirer’s identifiable net assets on an acquisition-by-acquisition basis.
B. If the total of the fair values of the consideration of acquisition and any non-controlling interest in the acquiree as well as the acquisition-date fair value of any previous equity interest in the acquiree is higher than the fair value of the Company’s share of the identifiable net assets acquired, the difference is recorded as goodwill; if less than the fair value of the Company’s share of the identifiable net assets acquired, the difference is recognized directly in profit or loss.

229

CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these parent company only financial statements requires management to make critical judgments in applying the Company’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. The information is addressed below:

(1) Critical judgments in applying the Company’s accounting policies

Financial assets - impairment of equity investments

The Company follows the guidance of IAS 39 to determine whether a financial asset-equity investment is impaired. This determination requires significant judgment. In making this judgment, the Company evaluates, among other factors, the duration and extent to which the fair value of an equity investment is less than its cost and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

(2) Critical accounting estimates and assumptions

The Company makes estimates and assumptions based on the expectation of future events that are believed to be reasonable under the circumstances at the end of the reporting period. The resulting accounting estimates might be different from the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:

A. Impairment assessment of goodwill

The impairment assessment of goodwill relies on the Company’s subjective judgment, including identifying cash-generating units, allocating assets and liabilities as well as goodwill to related cash-generating units, and determining the recoverable amounts of related cash-generating units. Please refer to Note 6(10) for the information on goodwill impairment.

B. Impairment assessment of tangible and intangible assets (excluding goodwill)
The Group assesses impairment based on its subjective judgement and determines the separate cash flows of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilised and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Group strategy might cause material impairment on assets in the future.
C. Realizability of deferred income tax assets
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. Assessment of the realizability of deferred income tax assets involves critical accounting judgments and estimates of the management, including the assumptions of expected future sales, revenue growth rate, profit rate, tax holiday, available tax credits, and tax planning, etc. Any change in global economic environment, industrial

230

environment, and laws and regulations might cause material adjustments to deferred income tax assets.

D. Evaluation of inventories

As inventories are stated at the lower of cost and net realizable value, the Company must determine the net realizable value of inventories on balance sheet date using judgments and estimates. Due to the rapid technology innovation, the Company evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realizable value.

E. Financial assets - fair value measurement of unlisted stocks without active market

The fair value of unlisted stocks held by the Company that are not traded in an active market is determined considering those companies’ recent fund raising activities and technical development status, fair value assessment of other companies of the same type, market conditions and other economic indicators existing on balance sheet date. Any changes in these judgments and estimates will impact the fair value measurement of these unlisted stocks. Please refer to Note 12(3) for the financial instruments fair value information.

DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

ILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand and revolving funds Checking accounts and demand deposits Time deposits Cash equivalents - Repurchase Bonds	December31,2015 255 $ 22,427,408 12,851,947 35,279,610 - 35,279,610 $	December31,2014
		255 $ 40,578,940 11,394,000
		51,973,195 3,570,000
		55,543,195 $

A. The Company associates with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.
B. The above time deposits expire in 3 months and risks of changes in their values are remote. The remaining time deposits which did not meet the definition of cash equivalents were $1,400,000 at December 31, 2015, and were classfied as ‘other financial assets-current’.

(2) Financial assets and liabilities at fair value through profit or loss

Assets Current items Financial assets held for trading Forward foreign exchange contracts Liabilities Current items Financial liabilities held for trading Forward foreign exchange contracts	December31,2015 81,858 $ December31,2015 53,921 $	December31,2014
		52,453 $
		December31,2014
		605,016 $

A. The Company recognized net loss of $133,873 and $883,120 on financial assets held for trading for the years ended December 31, 2015 and 2014, respectively.

231

B. The non-hedging derivative financial assets and liabilities transaction information are as follows:

		December 31,	2015		December 31,	2014
	Contract Amount			Contract Amount
Derivative financial	(Notional Principal)			(Notional	Principal)
assets and liabilities	(in thousands)		Contract Period	(in thousands)		Contract Period
Current items
Forward foreign	USD (sell)	295,000 $	2015/10~2016/3	USD (sell)	425,000 $	2014/10~2015/3
exchange contracts	JPY (buy)	35,649,520	2015/10~2016/3	JPY (buy)	48,580,180	2014/10~2015/3
Forward foreign	USD (sell)	150,000	2015/10~2016/2	EUR (sell)	38,000	2014/10~2015/2
exchange contracts	TWD (buy)	4,896,705	2015/10~2016/2	USD (buy)	47,574	2014/10~2015/2
Forward foreign	EUR (sell)	5,000	2015/11~2016/1
exchange contracts	TWD (buy)	175,075	2015/11~2016/1
Forward foreign	EUR (sell)	80,500	2015/10~2016/3
exchange contracts	JPY (buy)	10,668,495	2015/10~2016/3

The Company entered into forward foreign exchange contracts to hedge exchange rate risk of import and export proceeds and foreign currency. However, these forward foreign exchange contracts are not accounted for under hedge accounting.

(3) Available-for-sale financial assets

under hedge accounting. Available-for-sale financial assets
Items Current items Bond investments Non-current items Listed stocks and bond investments Emerging and unlisted stocks	December31,2015 - $ 1,562,871 $ 382,046 1,944,917 $	December31,2014
		220,000 $
		2,537,965 $ 563,496
		3,101,461 $

A. The Company recognised net gain (loss) in other comprehensive income for fair value change and reclassified from equity to profit or loss for the years ended December 31, 2015 and 2014. Please refer to Note 6(19).

B. The counterparties of the Company’s debt instrument investments have good credit quality.

(4) Hedging derivative financial liabilities

Hedging derivative financial liabilities
Items Current item Interest rate swap - cash flow hedges	December31,2015 - $	December31,2014
		1,351 $

Cash flow hedges

Hedged Items Long-term borrowings	Derivative Instruments Designated Fair Value as Hedges December 31,2014 Interest rate swap 1,351) ($ Designated as HedgingInstruments	Derivative Instruments Designated Fair Value as Hedges December 31,2014 Interest rate swap 1,351) ($ Designated as HedgingInstruments	Derivative Instruments Designated Fair Value as Hedges December 31,2014 Interest rate swap 1,351) ($ Designated as HedgingInstruments	Period of Anticipated Cash Flow	Period of Gain (Loss) Expected to be Recognised in Profit or Loss
	Derivative Instruments Designated as Hedges Interest rate swap
			1,351) ($	2008~2015	2008~2015

232

A. The Company was exposed to significant risk of future cash flow changes on principal payments associated with the Company’s floating interest rate bearing borrowings, both current and long-term portion. Therefore, the Company entered into interest rate swap contracts for exchanging floating interest rate for fixed interest rate (TWD90/180CP (Page51328) to hedge such exposures. The contract had matured and was settled in February, 2015.
B. Information about gain or loss arising from cash flow hedges recognized in profit or loss and other comprehensive income:

comprehensive income:
			Years ended December 31,
Items			2015			2014
Amount of gain or loss adjusted in other	$		5	$		1,224
comprehensive income
Amount of gain or loss transferred from other
comprehensive income to profit or loss			297,670			277,234
Accounts and notes receivable
		December 31,2015			December 31,2014
Notes receivable	$		-	$		21,447
Accounts receivable			46,508,958			69,802,557
			46,508,958			69,824,004
Less: Allowance for sales returns and discounts	(		636,330)	(		827,583)
Allowance for bad debts	(		117,499)	(		138,272)
	$		45,755,129	$		68,858,149

(5) Accounts and notes receivable

A. The Company’s accounts receivable that were neither past due nor impaired meet the credit ranking rule based on the counterparties’ industrial characteristics scale of business and profitability.

233

B. The aging analysis of accounts receivable and notes receivable that were past due but not impaired is as follows:

ollows:
Up to 60 days 61 to 180 days Over 180 days	December31,2015 482,335 $ 14,480 14,481 511,296 $	December31,2014
		534,490 $ 64,153 4,309 602,952 $

The above ageing analysis was based on past due date.

C. Movement analysis of accounts receivable and notes receivable that were impaired is as follows:
(a) As of December 31, 2015 and 2014, the Company’s accounts receivable that were impaired were $117,499 and $138,272, respectively.
(b) Movement on allowance for bad debts for impairment loss based on individual provision is as follows:

At January 1 Allowance for bad debts - reclassified Allowance for bad debts - write-offs At December 31 Inventories Raw materials and supplies Work in process Finished goods	2015 138,272 $ 674 21,447) ( 117,499 $ December 31,2015 1,954,960 $ 11,769,129 10,822,037 24,546,126 $	2014
		138,483 $ - 211) ( 138,272 $ December 31,2014 1,780,875 $ 16,122,356 10,034,934 27,938,165 $

(6) Inventories

Expenses and losses incurred on inventories are as follows:

		Years ended	December31,	December31,
		2015		2014
Cost of inventories sold	$	326,638,579	$	389,619,753
Gain on reversal of decline in market value	(	602,500)	(	383,000)
Disposal loss and others		889,808		373,032
	$	326,925,887	$	389,609,785

The Company had disposed its expired and slow-moving inventories. Thus, the risk of reduction in the inventory’s market price had decreased and the net realizable value of inventories had been recovered.

234

(7) Investments accounted for under the equity method

Investments accounted for under the equity method
Subsidiaries: Landmark International Ltd. Innolux Holding Ltd. Toppoly Optoelectronics (B.V.I.) Ltd. Innolux Hong Kong Holding Ltd. Innolux Optoelectronics Japan Co., Ltd. InnoJoy Investment Corporation Yuan Chi Investment Co., Ltd. Others Associates: Ampower Holding Ltd. GIO Optoelectronics Corporation Others	December31,2015 45,888,559 $ 20,242,553 6,787,268 2,907,677 1,507,382 1,242,760 1,137,982 301,375 881,351 98,785 319,628 81,315,320 $	December31,2014
		41,425,623 $ 16,796,396 5,945,861 2,393,227 1,572,495 1,670,083 918,468 375,650 1,477,199 449,994 71,393
		73,096,389 $

A. The Company’s subsidiaries

(a)Details of the Company’s subsidiaries are provided in Note 4(3) of the Company’s consolidated financial statements as of and for the year ended December 31, 2015.

(b)The Board of Directors of the Company in July, 2015 resolved to conduct a simple merger with Chi Mei El Corporation (Chi Mei El), a 97%-owned subsidiary of the Company effective September 1, 2015. The Company was the surviving company while Chi Mei El was dissolved after the merger. Said merger was accounted for an as equity transaction.

B. The Company’s associates

The operating results of the Company’s share in all individually immaterial associates are summarized below:

Profit or loss for the year from continuing operations Other comprehensive income - net of tax Total comprehensive income	Years ended December 31,	Years ended December 31,
	2015 268,381 $ 4,437 272,818 $	2014
		101,899 $ 74,419
		176,318 $

235

(8) Property, plant and equipment

									2015
			At January1			Additions			Disposals			Transfer	At December 31
Cost:
Land		$	3,852,792		$	-		$	-		$	-		$	3,852,792
Buildings			156,858,729			40,626	(		19,452)			782,147			157,662,050
Machinery and equipment			375,070,309			62,167	(		6,453,017)			11,658,328			380,337,787
Others			22,584,306			-	(		2,164,598)			6,204,932			26,624,640
			558,366,136			102,793	(		8,637,067)			18,645,407			568,477,269
Accumulated depreciation
and impairment:
Buildings	(		72,766,956)	(	11,798,206)				19,172	(		24,146)	(		84,570,136)
Machinery and equipment	(		284,203,012)	(	32,843,077)				6,259,044	(		5,127,045)	(		315,914,090)
Others	(		17,590,360)	(		3,522,586)			2,163,943	(		3,182,164)	(		22,131,167)
	(		374,560,328)	(	48,163,869)				8,442,159	(		8,333,355)	(		422,615,393)
Unfinished construction
and equipment under
acceptance			8,793,374		22,380,334				-	(		13,113,887)			18,059,821
		$	192,599,182											$	163,921,697
									2014
			At January1			Additions			Disposals			Transfer	At December 31
Cost:
Land		$	3,852,792		$	-		$	-		$	-		$	3,852,792
Buildings			156,365,038			-	(		303,647)			797,338			156,858,729
Machinery and equipment			376,152,145			51,347	(	14,314,548)				13,181,365			375,070,309
Others			20,655,250			2,223	(		2,591,901)			4,518,734			22,584,306
			557,025,225			53,570	(	17,210,096)				18,497,437			558,366,136
Accumulated depreciation
and impairment:
Buildings	(		59,116,947)	(	13,954,331)				302,794			1,528	(		72,766,956)
Machinery and equipment	(		252,063,722)	(	37,915,245)			14,309,885		(		8,533,930)	(		284,203,012)
Others	(		15,428,084)	(		2,767,296)			2,588,567	(		1,983,547)	(		17,590,360)
	(		326,608,753)	(	54,636,872)			17,201,246		(		10,515,949)	(		374,560,328)
Unfinished construction
and equipment under
acceptance			3,141,142		14,127,037		(		130)	(		8,474,675)			8,793,374
		$	233,557,614											$	192,599,182

A. Information about the property, plant and equipment that were pledged to others as collateral is provided in Note 8.

B. As of December 31, 2015 and 2014, the prepayments for business facilities which have not yet entered the factory (shown as ‘other non-current assets’) amounted to $3,110,696 and $591,998, respectively.

236

(9) Investment property

vestment property
Cost: Land Buildings Accumulated depreciation and impairment: Buildings (		At Additions Disposals December 31 - $ - $ 188,247 $ - 4,331) ( 564,109 - 4,331) ( 752,356 13,174) 4,331 71,853) ( ( 680,503 $ 2015	At At January1 Additions December 31 188,247 $ - $ 188,247 $ 568,440 - 568,440 756,687 - 756,687 49,837) 13,173) ( 63,010) ( 706,850 $ 693,677 $ 2014
	At January1 188,247 $ 568,440 756,687 63,010) ( 693,677 $	Additions - $ - ( - ( 13,174)

The fair value of the investment property held by the Company as at December 31, 2015 and 2014 was $1,077,466 and $1,110,523, respectively. The amounts mentioned above represent valuation results of comparative method based on market trading information.

(10) Intangible assets

A. Intangible assets are goodwill, payments for TFT-LCD related technology and royalty.

Cost: Patents and royalty Goodwill Others Accumulated amortisation and impairment: Patents and royalty Others				2015
	At January1 Additions 8,137,035 $ - $ 17,096,628 - 3,686,545 - ( 28,920,208 - ( 5,735,683) ( 933,024) ( 3,057,341) ( 273,023) ( 8,793,024) ( 1,206,047) ( 20,127,184 $			Disposals - $ - 113,730) 113,730) - 113,730 113,730	Transfer At December 31 15,650 $ 8,152,685 $ - 17,096,628 327,238 3,900,053 342,888 29,149,366 - 6,668,707) ( - 3,216,634) ( - 9,885,341) ( 19,264,025 $

Cost: Patents and royalty Goodwill Others Accumulated amortisation and impairment: Patents and royalty Others				2014
	At January1 Additions Disposals 8,807,308 $ - $ 673,622) ($ 17,096,628 - - 3,267,074 - 79,340) ( 29,171,010 - 752,962) ( 5,215,968) ( 1,193,337) ( 673,622 2,840,599) ( 291,157) ( 79,340 ( 8,056,567) ( 1,484,494) ( 752,962 ( 21,114,443 $				Transfer At December 31 3,349 $ 8,137,035 $ - 17,096,628 498,811 3,686,545 502,160 28,920,208 - 5,735,683) ( 4,925) 3,057,341) ( 4,925) 8,793,024) ( 20,127,184 $

237

B. Details of amortization on intangible assets are as follows:

Operating costs Operating expenses	Years ended December31,	Years ended December31,
	2015 998,974 $ 207,073 1,206,047 $	2014
		954,350 $ 530,144
		1,484,494 $

C. The Company performed impairment analysis for recoverable amount of the goodwill at each reporting date and used the value in use as the basis for calculation of the recoverable amount. The value in use was calculated based on the estimated present value of future cash flows for five years, which was discounted at the discount rate of 5.72% and 4.89% for the years ended December 31, 2015 and 2014, respectively, to reflect the specific risks of the related cash generating units. The future cash flows were estimated based on the future revenue, gross profit, and other operating costs each year. Based on the evaluation above, the Company did not recognize impairment loss on goodwill for the years ended December 31, 2015 and 2014.

(11) Short-term borrowings

Short-term borrowings
Type of borrowings Bank loans Credit loans Interest rate	December 31,2014 1,300,000 $ 2.5%	Collateral
		None

As of December 31, 2015, the Company has no short-term borrowing.

(12) Long term borrowings

Type of loans Syndicated bank loans Guaranteed commercial papers Less: Administrative expenses charged by syndicated banks Current portion Range of interest rates	Period December 31,2015 December 31,2014 2015/3/12 ~2018/3/12 60,280,000 $ 98,227,530 $ - 129,148 60,280,000 98,356,678 288,794) ( 41,252) ( 16,361,238) ( 61,092,333) ( 43,629,968 $ 37,223,093 $ 1.90%~2.19% 1.25%~2.47%

A. Please refer to Note 8 for the information on assets pledged as collateral for long-term borrowings.
B. The syndicated loan agreements specified that the Company shall meet covenants on current ratio, liability ratio, interest coverage, and tangible net equity, which were based on the Company’s annual parent company only financial statements audited by independent auditors. The Company’s financial ratios on the parent company only financial statements for the years ended December 31, 2015 and 2014 are in compliance with the covenants on the syndicated loan agreement.
C. In order to repay the unpaid balance of the medium and long-term syndicated loans as specified in the

238

“Agreed-upon Repayment Agreement” which was signed on April 5, 2012, the Board of Directors during its meeting on February 10, 2015 approved the proposal for the Company to apply for a new syndicated credit line of $68.5 billion with certain financial institutions. Subsequently, on March 12, 2015, the Company acquired consent of all financial institution creditors to terminate the ‘‘Agreed-upon Repayment Agreement’’, and waive negotiation on the debt issue.

(13) Pensions

A. Defined benefit pension plan

(a) The Company has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005, and service years thereafter of employees who choose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last six months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company will make contribution for the deficit by next March.
(b) The amounts recognised in the balance sheet are as follows:

Present value of defined benefit obligations Fair value of plan assets ( Net defined benefit liability	December31,2015 1,852,905 $ 1,529,124) ( 323,781 $	December31,2014 1,605,920 $ 1,488,938) 116,982 $

239

Year ended December 31, 2015 Balance at January 1 Current service cost Interest expense/income Remeasurements: Change in financial assumptions Experience adjustments Balance at December 31 Year ended December 31, 2014 Balance at January 1 Current service cost Interest expense/income Remeasurements: Change in demographic assumptions Change in financial assumptions Experience adjustments Balance at December 31		Present value of defined benefit obligations		Fair value of plan assets		Net defined benefit liability
		1,605,920 $ 8,228 36,133 44,361 172,133 30,491 202,624 1,852,905 $ Present value of defined benefit obligations		1,488,938 $ - 33,501 33,501 - 6,685 6,685 1,529,124 $ Fair value of plan assets		116,982 $ 8,228 2,632 10,860 172,133 23,806 195,939 323,781 $ Net defined benefit liability
	1,504,354 $ 10,470 30,087 40,557 77,419 76,611) ( 60,201 61,009 1,605,920 $			1,454,627 $ - 29,092 29,092 - - 5,219 5,219 1,488,938 $	49,727 $ 10,470 995 11,465 77,419 76,611) ( 54,982 55,790 116,982 $

240

December 31, 2015 and 2014 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

(e) The principal actuarial assumptions used were as follows:

announced by the government. he principal actuarial assumptions used were as follows:
Discount rate Future salary increases	2015 2014 1.70% 2.25% 3.00% 3.00% Years ended December31,
	2015 1.70%
	3.00%	3.00%

Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Mortality Table.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

he analysis was as follows:
December 31, 2015 Effect on present value of defined benefit obligation		Discount rate		Future salaryincreases
		Increase 1%	Decrease 1%	Increase 1%		Decrease 1%
	(	299,276) $	367,992 $	337,723 $	(	283,242) $

(f) The Company suspended its contributions to the pension reserve as agreed by the Science Park Administration in June 2013.
(g) As of December 31, 2015, the weighted average duration of that retirement plan is 19 years.
B. Defined contribution pension plan
(a) Effective July 1, 2005, the Company has established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.
(b) The pension costs under the defined contribution pension plans of the Company for the years ended December 31, 2015 and 2014 were $1,003,836 and $939,629, respectively.

241

(14) Share-based payment

A. As of December 31, 2015, the Company’s share-based payment transactions are set forth below:

Type of arrangement Employee stock options Employee stock options Restricted stocks to employees -shares without consideration -shares subscribed with consideration -shares without consideration -shares subscribed with consideration -shares without consideration -shares subscribed with consideration Reservation for new share subscription by employees	Quantity granted Contract period Grant date (in thousand units) (inyears) Vestingconditions 2010.05.13 20,000 5 Note (a), (b) 2011.05.19 50,000 5 Note (a) 2013.01.30 31,151 3 Note (c), (d) 2013.01.30 31,151 3 Note (c), (d) 2013.03.29 844 3 Note (c), (d) 2013.03.29 844 3 Note (c), (d) 2013.12.12 4,268 3 Note (c), (d) 2013.12.12 4,268 3 Note (c), (d) 2014.07.09 85,000 - Vested immediately	Vestingconditions

(a) The employees may exercise the stock options by stage based on 30%, 30% and 40% of total options granted on completion of the specified year(s) of service (one to four years) from the grant date.
(b) The employee stock options had already expired.
(c) The employees may exercise the stock options by stage based on 20%, 40% and 40% of total options granted on completion of the specified year(s) of service (one to three years) from the grant date.
(d) The restricted stocks issued by the Company cannot be transferred. Voting right and dividend right are restricted on these stocks before vested.

242

(e) The fair value of stock options granted from 2010 to first quarter of 2014 is measured using the Black-Scholes option-pricing model. Relevant information is as follows:

Exercise Type of Price price arrangement Grant date (in dollars) (in dollars) Reservation for new share subscription by employees 2014.07.09 14.90 $ 12.50 $ Restricted stocks to employees - shares issued with no consideration 2013.12.12 10.65 - - shares subscribed with consideration 2013.12.12 10.65 5.00 - shares issued with no consideration 2013.03.29 18.40 - - shares subscribed with consideration 2013.03.29 18.40 5.00 - shares issued with no consideration 2013.01.30 15.35 - - shares subscribed with consideration 2013.01.30 15.35 5.00 Employee stock options 2011.05.19 26.70 26.70 Employee stock options 2010.05.13 39.85 39.85	Expected volatility (%) 36.01 - - - - - - 35.67 51.57	Expected duration (month) 0.84 - - - - - - 48.60 48.60	Risk Expected free Fair value dividend interest per unit yield(%) rate(%) (in dollars) - 0.42 2.42 $ - - 10.65 - - 5.65 - - 18.40 - - 13.40 - - 15.35 - - 10.35 0.00 1.00 7.31 ~8.32 0.00 0.80 15.12 ~16.98

B. The details of the employee stock option plan for the years ended December 31, 2015 and 2014 are as follows:

follows:
Weighted average Range of Quantity exercise exercise (in thousand price price Stock Options units) (in dollars) (in dollars) Outstanding options at the beginning of the year 70,000 $ 25.63 Options exercised - - Options expired (20,000) 32.59 Outstanding options at the end of the year 50,000 22.85 $ 22.85 0.39 years Exercisable options at the end of the year 50,000 22.85 period Year ended December 31,2015 Weighted average remaining vesting	Year ended December 31,2015
		Weighted average stock price of stock options at exercise date(in dollars)
		$ 13.61

243

Year ended December 31, 2014

						Weighted
		Weighted			Weighted	average
		average	Range of		average	stock price of
	Quantity	exercise	exercise		remaining	stock options
	(in thousand	price		price	vesting	at exercise
Stock Options	units)	(in dollars)	(in dollars)		period	date(in dollars)
Outstanding options at the	94,819	$ 28.71
beginning of the year
Options exercised	-	-				$ 12.68
Options expired	(24,819)	32.10
Outstanding options at the
end of the year	70,000	25.63	$	32.59	0.38 years
				22.85	1.39 years
Exercisable options at the
end of the year	50,000	26.75

C. For the years ended December 31, 2015 and 2014, the expenses incurred from share-based payment arrangements were $143,442 and $578,227, respectively.

(15) Provisions-current

At January 1, 2015 Addition Used during the year ( At December 31, 2015	Warranty 747,021 $ 1,970,000 1,908,885) ( 808,136 $	Litigation and others 2,386,468 $ 4,626,005 2,268,850) ( 4,743,623 $	Total 3,133,489 $ 6,596,005 4,177,735) 5,551,759 $

A. Warranty

The Company provides warranty on TFT-LCD panel products sold. Provision for warranty is estimated based on historical warranty data of TFT-LCD panel products.

B. Litigation and others

Litigation and other provision for the Company are related to patents of TFT-LCD panel products and

anti-trust litigations. For information on estimation of provisions, please refer to Note 9(1).

244

(16) Share capital

A. As of December 31, 2015, the Company’s authorized and outstanding capital were $120,000,000 (including $500,000 reserved for employee stock options) and $99,532,372, respectively, with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

Movements in the number of the Company’s ordinary shares outstanding are as follows:

At January 1 Capital issued for cash Cancellation of restricted stock to employees ( At December 31	2015 Number of ordinary shares(in thousands) 9,954,536 - 1,299) ( 9,953,237	2014 Number of ordinary shares(in thousands) 9,109,429 850,000 4,893) 9,954,536

B. On June 20, 2014, the Board of Directors approved the domestic capital increase with 850,000,000 shares. The issue price was determined to be $12.5 in July 2014. The Company’s capital has increased by $10,625,000 on August 12, 2014 and has been effective on September 5, 2014.
C. The Board of Directors of the Company resolved to increase capital for cash by issuing global depositary receipts (the “GDR”). The amount of $9,360,000 (approximately equivalent to US$312,625 thousand) is tentatively scheduled for release. As the Company has received the bank’s approval for extending capital increase, based on shareholder’s interest, the issuance of the GDR was cancelled in accordance with the Financial Supervisory Commission (FSC)’s approval on January 30, 2015.
D. As authorized by the shareholders during their meeting in June 2012, the Board of Directors of the Company resolved to increase capital for cash by issuing the GDR on July 18, 2012, and had been completed in January 2013. The Company issued 1,125,000 thousand shares of common stock for cash, including 112,500 thousand shares regarded as employee stock options, and 101,250,000 units of GDRs which represent 1,012,500 thousand shares of common stock, with a unit of GDR representing 10 shares of common stock at the Luxembourg Stock Exchange. Per unit was issued at a premium of US$4.481, which was equivalent to $12.98 per share and raised a total of $14,519,051, net of issuance cost. As of December 31, 2015, there were 193 thousand units outstanding, representing 1,939 thousand shares of common stocks.
E. As authorized by the shareholders at the shareholders’ meeting in June, 2012, the Board of Directors of the Company adopted a resolution on January 30, 2013, March 29, 2013 and November 12, 2013 to issue restricted shares to employees, consisting of 36,263 thousand shares without consideration and 36,263 thousand shares with consideration (the price for subscription is $5 per share). The effective dates of the issuance were on January 30, 2013, March 29, 2013 and December 12, 2013. Until the vesting conditions are met by employees, those shares are restricted with regard to transfer of voting rights, dividend and other rights. As of December 31, 2015 and 2014, the Company bought back 1,299 and 4,893 thousand shares of unvested restricted stocks to employees, respectively, and decreased capital in accordance with related regulation.
F. The stockholders during their meeting on January 6, 2010 approved the merger of the Company with another company by issuing new shares, with the Company as the surviving company. The Company issued 4,046,382 thousand new shares according to the merger contract. The new shares included the common stock issued by the acquired companies in May and December 2006 through private placement. The

245

issuance of 570,929 thousand shares was determined based on the exchange ratio in the merger contract. The rights and obligations of the private common shares were the same as other issued common shares, except for the transfer restriction under R.O.C. Securities and Exchange Act and the listing restriction that no public listing will be allowed within three years since the day of issuance and only if the Company completes the application to publicly issue the shares. The Board of Directors of the Company approved the public issuance of the above private common shares on April 28, 2015. As approved by Financial Supervisory Committee on July 30, 2015, the stocks were officially listed in the Taiwan Stock Exchange starting from August 7, 2015.

(17) Capital surplus

At January 1 Cancellation of restricted stock to employees Vested restricted stock to employees Changes in restricted stock to employees Compensation related to share-based payment Expiration of employee stock options Changes in net equity of long-term equity investments Changes in non-controlling interests At December 31		2015

246

2014

							2014
			Share of profit
					(loss) of
				associates
			accounted for						Restricted
			under equity				Employee			stock to
	Sharepremium				method		stock option		employees				Total
At January 1	$	94,106,611		$	56,303		1,697,935 $		$	197,892		$	96,058,741
Capital issued for cash		2,125,000			-		-			-			2,125,000
Cash paid from capital surplus	(	1,266,944)			-		-			-	(		1,266,944)
Capital surplus offset against
accumulated deficit		2,328,981			-		-			-			2,328,981
Cancellation of restricted stock to
employees		-			-		-			48,924			48,924
Vested restricted stock to employees		65,665			-		-	(		65,665)			-
Changes in restricted stock to
employees		-			-		-			47,174			47,174
Compensation related to share-based
payment		205,700			-		83,823			-			289,523
Expiration of employee stock options		407,899			-	(	407,899)			-			-
Changes in net equity of long-term
equity investments		-	(		47,030)		-			-	(		47,030)
At December 31	$	97,972,912		$	9,273		1,373,859 $		$	228,325		$	99,584,369

(18) Retained earnings

A. In accordance with the Company’s Articles of Incorporation, net income must be distributed in the following order:
(a) To pay all tax accruals and payables arising from the current year and to cover prior years’ losses, if any;
(b) As legal reserve equal to 10% of net income after tax and distribution pursuant to clause (a);
(c) As any special reserve;
(d) To pay dividends on preferred shares;
(e) To pay bonuses to employees not less than 5% of net income after tax and distribution pursuant to clauses (a) to (d); and
(f) The remaining amount, if any, shall be distributed pursuant to the proposal of the Board of Directors in accordance with the Company’s dividend policy and the resolution approved at the stockholders’ meeting, of which 0.1% should be paid as remuneration to directors and supervisors and the remaining amount as dividends to stockholders.

Dividends distributed in respect of any fiscal year in the form of shares shall not exceed two-thirds of total dividends to stockholders.

B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.

247

C. The details of the appropriation of 2014 net income which was approved at the stockholders’ meeting in June 2015 and the appropriation of 2013 net income which was approved at the stockholders’ meeting in June 2014 are as follows:

Legal reserve Special reserve Cash dividends	Dividends per Amount share(in dollars) 2,167,675 $ - 6,947,188 0.70 $ 9,114,863 $ 2014	2013	2013
	Amount 2,167,675 $ - 6,947,188 9,114,863 $	Amount 509,272 $ 1,144,229 90,495 1,743,996 $	Dividends per share(in dollars)
			0.01 $

The Company’s appropriations of earnings for 2015 are to be authorized by the Board of Directors and presented for approval in the Company’s stockholders’ meeting for 2016.

D. For the information relating to employees’ remuneration (bonuses) and directors’ and supervisors’ remuneration, please refer to Note 6(24).

(19) Other equity items

Available- Currency for-sale translation investments At January 1 3,082,948 $ 1,259,847) ($ Fair value losses of cash flow hedges - - Reclassified as current income of cash flow hedges - - Revaluation of available-for-sale investments - gross - 1,145,267) ( Revaluation transfer of available-for-sale investment - gross - 3,993) ( Currency translation differences 1,392,086) ( - Issuance of restricted stocks to employees - - Compensation related to share-based payment - - Share of subsidiaries and other comprehensive income of associates 4,432 3,415,606 Effect of income tax - 67,946 At December 31 1,695,294 $ 1,074,445 $			2015

248

2014

Available- Currency for-sale translation investments At January 1 78,074) ($ 1,544,345) ($ Fair value losses of cash flow hedges - - Reclassified as current income of cash flow hedges - - Revaluation of available-for-sale investments - gross - 138,700 Revaluation transfer of available-for-sale investment - gross - 35,190) ( Currency translation differences 3,087,368 - Issuance of restricted stocks to employees - - Compensation related to share-based payment - - Share of subsidiaries and other comprehensive income of associates 73,654 189,441 Effect of income tax - 8,453) ( At December 31 3,082,948 $ 1,259,847) ($	Employee Hedging unearned reserve compensation Total 478,190 $ 387,268) ($ 1,531,497) ($ 1,224) ( - 1,224) ( 277,234) ( - 277,234) ( - - 138,700 - - 35,190) ( - - 3,087,368 - 43,951) ( 43,951) ( - 288,704 288,704 - - 263,095 47,338 - 38,885 247,070 $ 142,515) ($ 1,927,656 $	Total

(20) Other income

Other income
			Years ended	December 31,
			2015			2014
Rental revenue		$	165,372		$	139,286
Interest income			144,282			126,493
Dividend income			117,882			7,567
Other income			874,329			1,106,573
		$	1,301,865		$	1,379,919
Other gains and losses
			Years ended	December31,
			2015			2014
Net loss on financial assets and liabilities at fair
value through profit or loss	($		133,873)	($		883,120)
Net currency exchange (loss) gain	(		66,797)			1,143,155
(Loss) gain on disposal of investments	(		112,058)			452,613
(Loss) gain on disposal of property, plant and
equipment	(		100,841)			22,568
Litigation loss and others	(		7,429,350)	(		4,154,038)
	($		7,842,919)	($		3,418,822)

(21) Other gains and losses

249

(22) Finance costs

Finance costs
Interest expense: Bank borrowings Others Gain on cash flow hedges, reclassified from equity	2015 2014 1,601,674 $ 2,984,966 $ 6,108 13,507 297,670) ( 277,234) ( 1,310,112 $ 2,721,239 $ Years ended December 31,
	2015 1,601,674 $ 6,108 297,670) ( 1,310,112 $

(23) Expenses by nature

Expenses by nature
Employee benefit expense: Salaries and other short-term employee benefits Share-based payments Post-employment benefits Depreciation Amortization	Years ended December 31,
	2015 26,436,720 $ 143,442 1,014,696 48,177,043 1,206,047 76,977,948 $	2014
		24,882,037 $ 578,227 951,094 54,650,045 1,484,494 82,545,897 $

(24) Employees’, directors’ and supervisors’ remuneration

A. According to the Articles of Incorporation of the Company, when distributing earnings, the Company shall distribute bonus to the employees and pay remuneration to the directors and supervisors that account for 5% and 0.1%, respectively, of the total distributed amount.

However, in accordance with the Company Act amended on May 20, 2015, a company shall distribute employee remuneration, based on the current year's profit condition, in a fixed amount or a proportion of profits. If a company has accumulated deficit, earnings should be channeled to cover losses. Aforementioned employee remuneration could be paid by cash or stocks. Specifics of the compensation are to be determined in a board meeting that registers two-thirds of directors in attendance, and the resolution must receive support from half of participating members. The resolution should be reported during the shareholders' meeting. Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements, entitled to receive aforementioned stock or cash may be specified in the Articles of Incorporation. The board of directors of the Company has approved the amended Articles of Incorporation of the Company on February 2, 2016. According to the amended articles, a ratio of profit of the current year distributable, after covering accumulated losses, shall be distributed as employees' compensation and directors’ and supervisors’ remuneration. The ratio shall not be lower than 5% for employees’ compensation and shall not be higher than 0.1% for directors’ and supervisors’ remuneration. The amended articles will be resolved during the shareholders’ meeting in 2016.

B. For the years ended December 31, 2015 and 2014, employees’ compensation (bonus) was accrued at $734,524 and $1,436,187, respectively; while directors’ and supervisors’ remuneration was accrued at $5,000

250

and $0, respectively. The aforementioned amounts were recognized in expenses.

The expenses recognized for 2015 were accrued based on the earnings of current year and are to be presented for approval by the Board of Directors and reported during the Company’s stockholders’ meeting.

The expenses recognized for 2014 were accrued based on the net income for 2014 and the percentage specified in the Articles of Incorporation of the Company, taking into account other factors such as legal reserve. Employees’ bonus and directors’ and supervisors’ remuneration were accrued at $1,436,187 and $0, respectively, for the year ended December 31, 2014. Employees’ bonus and directors’ and supervisors’ remuneration for 2014 as resolved by the stockholders were $1,436,187 and $6,954, respectively. The difference of $6,954 between employees’ bonus (directors’ and supervisors’ remuneration) as resolved by the stockholders and the amount recognized in the 2014 financial statements was caused by a different accrual ratio which was accounted for as a change in accounting estimate after being approved at the stockholders’ meeting and recorded as expense in 2015.

251

(25) Income tax

A. Income tax expense

(a) Components of income tax expense:

ome tax ncome tax expense a) Components of income tax expense:
			Years ended	December31,
			2015			2014
Current tax:
Current tax on profit for the year		$	42		$	123,787
Tax on undistributed surplus earnings			915,947			-
Adjustments in respect of prior years			36,371			1,075
Total current tax			952,360			124,862
Deferred tax:
Origination and reversal of temporary differences			2,040,987	(		123,787)
Income tax expense		$	2,993,347		$	1,075
b) The income tax (charge)/credit relating to components of other			comprehensive income is as follows:
			Years ended	December 31,
			2015			2014
Fair value gains/losses on available-for-sale
financial assets	($		67,946)		$	8,453
Cash flow hedges	(		50,605)	(		47,338)
Actuarial gains/losses on defined benefit
obligations	(		33,309)	(		9,484)
	($		151,860)	($		48,369)
Reconciliation between income tax expense and accounting profit:
			Years ended December31,
			2015			2014
Tax calculated based on profit before tax and
statutory tax rate	$		2,347,520	$		3,685,232
Effects from items disallowed by tax regulation	(		975,322)	(		575,514)
Under provision of prior year's income tax			36,371			1,075
Additional 10% tax on undistributed earnings			915,947			-
Effect from estimated investment tax credit			-			74,672
Effect from Alternative Minimum Tax			42			-
Change in assessment of realization of deferred tax
assets			668,789	(		3,184,390)
Tax expenses	$		2,993,347	$		1,075

(b) The income tax (charge)/credit relating to components of other comprehensive income is as follows:

B. Reconciliation between income tax expense and accounting profit:

252

C. Amounts of deferred tax assets or liabilities as a result of temporary differences and taxable loss are as follows:

follows:
					Year ended December 31,2015
								Recognised
								in other
					Recognised in		comprehensive
			January1		profit or loss			income			December 31
Temporary differences:
-Deferred tax assets:
Sales returns and		$	166,373		$	77,153	$		-		$	243,526
discount provisions
Accrued royalties and
warranty provisions			327,918			326,639			-			654,557
Unrealized exchange
loss (gain)			200,697	(		81,480)			-			119,217
Unrealized loss on
financial instruments			699,962			158,326		67,946				926,234
Net operating loss
carryforward			15,848,188	(		2,385,024)			-			13,463,164
Others			332,288	(		49,481)		33,309				316,116
		$	17,575,426	($		1,953,867)	$	101,255			$	15,722,814
-Deferred tax liabilities:
Unrealized (gain) loss on
cash flow hedges	($		50,605)		$	-	$	50,605			$	-
Amortisation charges
on goodwill	(		394,687)	(		82,369)			-	(		477,056)
Others	(		32,287)	(		4,751)			-	(		37,038)
	($		477,579)	($		87,120)	$	50,605		($		514,094)
		$	17,097,847	($		2,040,987)	$	151,860			$	15,208,720

253

Recognised in other Recognised in comprehensive January1 profit or loss income December31 Temporary differences: -Deferred tax assets: Sales returns and discount provisions 288,013 $ 121,640) ($ - $ 166,373 $ Accrued royalties and warranty provisions 364,411 36,493) ( - 327,918 Unrealized exchange loss (gain) - 200,697 - 200,697 Unrealized loss (gain) on financial instruments 449,511 258,904 8,453) ( 699,962 Net operating loss carryforward 16,520,833 672,645) ( - 15,848,188 Others 212,631 110,173 9,484 332,288 17,835,399 $ 261,004) ($ 1,031 $ 17,575,426 $ -Deferred tax liabilities: Unrealized exchange (gain) loss 51,357) ($ 51,357 $ - $ - $ Unrealized (gain) loss on cash flow hedges 97,943) ( - 47,338 50,605) ( Amortisation charges on goodwill 726,842) ( 332,155 - 394,687) ( Others 33,566) ( 1,279 - 32,287) ( 909,708) ($ 384,791 $ 47,338 $ 477,579) ($ 16,925,691 $ 123,787 $ 48,369 $ 17,097,847 $ Year ended December31,2014		Year ended December31,2014
			December31

D. Expiration dates of unused taxable loss and amounts of unrecognised deferred tax assets are as follows:

		December 31,2015
Year incurred 2011 2012	Amount filed / assessed Assessed Filed	Unused amount 66,433,000 $ 43,123,372 109,556,372 $	Unrecognised deferred tax assets 18,410,536 $ 11,950,753 30,361,289 $	Usable untilyear
				2021 2022

254

December 31, 2014

					Unrecognised
	Amount filed /				deferred	Usable
Year incurred	assessed		Unused amount		tax assets	untilyear
2010	Assessed	$	14,641,521	$	3,414,183	2015~2020
2011	Assessed		63,808,943		14,879,288	2021
2012	Filed		43,123,373		10,055,723	2022
		$	121,573,837	$	28,349,194
he amounts of deductible temporary differences that are not recognised					as deferred tax assets are as follows:
			December	31,	2015 December31,2014
Deductible temporary differences			33,185,717 $ $			31,105,662

E. The amounts of deductible temporary differences that are not recognised as deferred tax assets are as follows:

Deductible temporary differences

F. The Company has not recognised taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2015 and 2014, the amounts of temporary differences unrecognised as deferred tax liabilities were $29,289,598 and $20,486,590, respectively.
G. Certain revenue from the design, research, development, manufacture and sale of the thin film transistor - liquid crystal displays (TFT-LCD) and LCDs is exempt from income tax from 2008 to 2015.
H. The Company’s income tax returns through 2013 have been assessed and approved by the Tax Authority.
I. Unappropriated retained earnings recorded by the Company pertain to retained earnings after 1998.
J. The details of imputation system are as follows:

(a)Balance of tax credit account

(b)Estimated (Actual) creditable tax rate

December 31,2015 761,660 $ 2015(Estimate) 6.06%	December 31,2014
	738,931 $ 2014(Actual)
	3.9%

255

(26) Earnings per share

Earnings per share
Basic earnings per share Profit attributable to ordinary shareholders of the parent Weighted average number of ordinary shares outstanding (shares in thousands) Basic earnings per share (in dollar) Diluted earnings per share Profit attributable to ordinary shareholders of the parent Weighted average number of ordinary shares outstanding (shares in thousands) Assumed conversion of all dilutive potential ordinary shares: -Employees’ bonus -Restricted stocks Diluted earnings per share (in dollar)	Years ended December 31,
	2015 10,815,594 $ 9,922,525 1.09 $ 10,815,594 $ 9,922,525 116,513 27,519 10,066,557 1.07 $	2014
		21,676,759 $ 9,377,302 2.31 $ 21,676,759 $ 9,377,302 106,514 41,875 9,525,691 2.28 $

As employee stock options had anti-dilutive effect for the years ended December 31, 2015 and 2014, they were not included in the calculation of diluted earnings per share.

(27) Non-cash transaction

Investing activities with partial cash payments:

not included in the calculation of diluted earnings per share. Non-cash transaction Investing activities with partial cash payments:
Purchase of property, plant and equipment Add: Opening balance of payable on equipment Less: Ending balance of payable on equipment ( Cash paid during the year	Years ended December 31,
	2015 22,483,127 $ 2,732,538 4,119,425) ( 21,096,240 $	2014
		14,180,607 $ 3,180,964 2,732,538) 14,629,033 $

256

RELATED PARTY TRANSACTIONS

(1) Significant related party transactions

A. Operating revenue

D PARTY TRANSACTIONS nificant related party transactions Operating revenue
Sales of goods: Subsidiaries Others Associates	Years ended December31,
	2015 13,048,043 $ 13,019,281 233,299 26,300,623 $	2014
		7,967,864 $ 14,374,629 27,050
		22,369,543 $

B. Purchases of goods

significantly different from those of sales to third parties. Purchases of goods
Others Associates Subsidiaries Purchases of goods:	Years ended December 31,
	2015 2,960,453 $ 311,987 123,169 3,395,609 $	2014
		2,767,390 $ 4,431,198 420,519
		7,619,107 $

The payment term was 30~120 days to related parties after delivery, and 30~180 days to non-related parties after delivery or on a monthly-closing basis. The purchase prices and the payment terms to related parties above were not materially different from those of purchases from third parties.

C. Consigned processing

(a) Consigned processing

onsigned processing ) Consigned processing
Processing costs: Subsidiaries Others	Years ended December 31,
	2015 122,717,171 $ 31,116 122,748,287 $	2014
		167,873,521 $ 15,192
		167,888,713 $

257

(b)Balance of consigned processing at the end of year (shown as “Other payables”)	(b)Balance of consigned processing at the end of year (shown as “Other payables”)
	December31,2015	December31,2014
Payables to related parties:
Subsidiaries	3,765,006 $	2,677,593 $
The Company subcontracted the processing of products of associates in Mainland China. The processing
fees were mainly charged based on cost plus method.

D. Accounts receivable

Accounts receivable
		December 31,2015			December 31,2014
Receivables from related parties:
Others		$	2,659,151		$	5,821,222
Subsidiaries			519,539			774,814
Associates			81,427			27,899
			3,260,117			6,623,935
Less: Transfer to other receivables	(		355,364)	(		556,217)
Allowance for bad debts			-	(		60)
		$	2,904,753		$	6,067,658

(a) The receivables from related parties arise mainly from sales transactions. The receivables are due 30~120 days after the date of sale. The receivables are unsecured in nature and bear no interest. There are no provisions held against receivables from related parties.

(b) The above receivables from related parties that exceed normal granting periods were transferred to ‘other receivables – related parties’.
E. Other receivables

receivables – related parties’. E.Other receivables
		December31,2015			December31,2014
Transfer from accounts receivable	$		355,364	$		556,217
Other receivables			22,000			134,807
	$		377,364	$		691,024
F.Accounts payable
	December31,2015			December31,2014
Payables to related parties:
Subsidiaries	$		44,235,860	$		83,822,951
Others			1,130,282			1,347,900
Associates			67,720			161
	$		45,433,862	$		85,171,012

The payables to related parties arise mainly from purchase transactions and are due 30~120 days after the date of purchase. The payables bear no interest.

258

G. Other payables-short-term financing

2015

			2015
Subsidiaries Subsidiaries	Maximum outstanding balance 410,850 $	Actual amount drawn down - $	Interest rate 0.00% 2014	Interest expense 2,168 $	Accrued expense
					- $

	Maximum outstanding balance 396,900 $	Actual amount drawn down 396,900 $	Interest rate 1.38%	Interest expense 5,952 $	Accrued expense
					- $

H. Property transactions

Purchase of property

(a) Acquisition of property, plant and equipment:

balance drawn down sidiaries 396,900 $ 396,900 $ erty transactions chase of property quisition of property, plant and equipment:	Interest rate expense expense 1.38% 5,952 $ - $	Interest rate expense expense 1.38% 5,952 $ - $
Subsidiaries Others Associates riod-end balances arising from purchases of property Subsidiaries Others	Years ended December 31,
	2015 2014 148,450 $ 597,848 $ 7,820 2,398 220 510,051 156,490 $ 1,110,297 $ (shown as “Other payables”): December31,2015 December31,2014 542,694 $ 586,682 $ 6,273 748 548,967 $ 587,430 $	2014
		597,848 $ 2,398 510,051
		1,110,297 $
		586,682 $ 748
		587,430 $

(b) Period-end balances arising from purchases of property (shown as “Other payables”):

I. Endorsements and guarantees

As of December 31, 2014, the balances of endorsement/guarantee provided by the Company for bank borrowings are as follows. Details are provided in Table 2.

Subsidiaries

December31,2014
16,901,100 $

As of December 31, 2015, the Company has no endorsements/guarantees provided to other subsidiaries.

259

(2) Key management compensation

ey management compensation
Salaries and other short-term employee benefits Share-based payments Post-employment benefits	Years ended December 31,
	2015 136,698 $ 6,286 220 143,204 $	2014
		73,982 $ 18,638 216
		92,836 $

PLEDGED ASSETS

The Company’s assets pledged as collateral are as follows:

Pledged asset Other financial assets-current Demand deposits Time deposits Property, plant and equipment Other financial assets-non-current Refundable deposits Time deposits	Book	December31,2014 Purpose 2,250,035 $ Syndicated bank loans - Land lease 163,632,314 Long-term loans and performance guarantee for lease payable 11,079,360 Guarantee to European Commission for litigation 80,722 Tariff guarantee, land lease and guarantee for contract 177,042,431 $ value	Purpose
	December31,2015 - $ 856 59,669,639 - 119,703 59,790,198 $

SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

－ (1) Contingencies Significant Litigations

A. Chi Mei Optoelectronics Corporation (the “CMO”), Chi Mei Optoelectronics Japan Co., Ltd., Chi Mei Optoelectronics UK Ltd., Chi Mei Optoelectronics Europe B.V., and Chi Mei Optoelectronics USA Inc. were investigated by the United States (the “U.S.”) Department of Justice in December 2006 for alleged violation of the anti-trust laws. Moreover, authorities of some U.S state governments, as well as the governments of the European Union, China, Brazil and Korea also started to investigate this case. In addition, certain downstream customers and consumers brought class-actions and/or individual civil lawsuits in the U.S. and Canada against the TFT-LCD companies; and in certain lawsuits, CMO and Chi Mei Optoelectronics USA Inc. were listed as defendants. Details of the investigations on significant cases related to the alleged violation of the anti-trust laws are as follows:
(a) The Company had reached a plea agreement with the U.S. Department of Justice in December 2009, agreeing to pay a fine of US$220 million through installment over five years. The fine had been fully paid as of February 2015.

The Company had also reached out-of-court settlement agreements with the plaintiffs on separate civil lawsuits in the U.S. since 2012 and recognized related losses.

260

civil lawsuits between the Company and the U.S state governments have been settled.

(b) In December 2010, the Company had been ordered by the European Commission to pay a fine of EUR 300 million. The Company appealed the case in February 2011, and the General Court of the European Union rendered a judgment in February 2014 lowering the fine from EUR 300 million to EUR 288 million. The Company further filed an appeal against a part of the judgment and the Court of Justice of the European Union has adjudicated to maintain the aforementioned amount of fine.
(c) Except for those anti-trust litigations for which the ultimate results cannot be reliably estimated, the Company has recognized actual or estimated losses or liabilities in “other payables” and “other non-current liabilities”.
B. Eidos Displays, LLC and Eidos III, LLC (“Eidos”) filed a lawsuit with the United States District Court for the District of East Texas on April 25, 2011, alleging infringement of its patent. The administrative law judge has ruled a summary judgment for the lawsuit in December 2013 rendering Eidos’ patent as invalid, and the presiding judge has confirmed the summary judgment in January 2014. Eidos has filed a complaint in February 2014. The United States Court of Appeals for the Federal Circuit has rejected the judgement and sent back to the United States District Court in March 2015. The Company submitted an application to ask the United States Court of Appeals for the Federal Circuit to rehear en banc in April 2015. Though the United States Court of Appeals rejected the request in June 2015, the Company appealed to the Supreme Court in September 2015 and petitioned for writ of certiorari. The Supreme Court of the United States has denied the appeal of the Company in November 2015. The case remains at the ruling by the United States Court of Appeals for the Federal Circuit in March 2015. However, the results of the litigation are uncertain and are dependent on the future litigation progress. The Company does not expect that the lawsuit would have a material adverse effect on the Company’s financial position or results of operations in the short-term.

(2) Commitments

A. Capital expenditures contracted for at the balance sheet date but not yet incurred are as follows:

Property, plant and equipment	December31,2015 38,262,634 $	December31,2014
		19,350,952 $

B. Operating lease commitments

The Company leases plant, land and warehouses under non-cancellable operating lease agreements. The majority of lease agreements are renewable at the end of the lease period at market rate. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Not later than one year Later than one year but not later than five years Later than five years	December31,2015 508,974 $ 1,873,940 1,207,891 3,590,805 $	December31,2014
		500,648 $ 1,943,776 1,490,584
		3,935,008 $

C. Outstanding letters of credit

The outstanding letters of credit for the purchase of property, plant and equipment are as follows:

261

Outstanding letters of credit

December 31, 2015 December 31, 2014 $ 474,222 $ 693,635

SIGNIFICANT DISASTER LOSS

None.

SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

OTHERS

(1) Capital management

The Company’s objectives are to maintain an optimal capital structure, and constructively reduce the debt ratio and the cost of capital in order to maximize shareholders' equity.

(2) Financial instruments
A. Fair value information of financial instruments

The carrying amounts of the Company’s financial instruments not measured at fair value (including cash and cash equivalents, accounts receivable, other receivables, other financial assets-current, short-term loans, accounts payable, other payables and long-term loans) are approximate to their fair values. The fair value information of financial instruments measured at fair value is provided in Note 12(3).

B. Financial risk management policies
(a) The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial position and financial performance. The Company uses derivative financial instruments to hedge certain risk exposures (see Notes 6(2), (4)).
(b) Risk management is carried out by the treasury department under policies approved by the board of directors. Company treasury identifies, evaluates and hedges financial risks in close cooperation with the Company’s operating units. The Board provides principles for overall risk management, as well as policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment by excess liquidity.

262

C. Significant financial risks and degrees of financial risks
(a) Market risk

Foreign exchange risk

e) The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD and RMB. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.
f) Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The group companies are required to hedge their entire foreign exchange risk exposure via the Company’s treasury departments. To manage their foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, entities in the Company use forward foreign exchange contracts. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency.
g)The Company’s businesses involve some non-functional currency operations (the Company’s functional currency: NTD). Based on the simulations performed, the impact on post-tax profit of a 1% exchange rate fluctuation would be an increase of $29,120 or a decrease of $13,765 for the years ended December 31, 2015 and 2014, respectively. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

follows:
Foreign Currency Exchange Amount Rate Book Value (In Thousands) (Note) (NTD) Financial asstes Monetary items USD 2,229,374 $ 32.83 73,190,348 $ JPY 1,607,428 0.27 434,006 EUR 75,928 35.88 2,724,297 Non-monetary items USD 2,342,530 $ 32.83 76,905,260 $ HKD 178,232 4.24 755,704 JPY 5,527,619 0.27 1,492,457 EUR 3,697 35.88 132,648 Monetary items USD 1,990,752 $ 32.83 65,356,388 $ JPY 29,475,552 0.27 7,958,399 EUR 3,397 35.88 121,884 December 31,2015 Financial liabilities	December 31,2014
	Foreign Currency Exchange Amount Rate (In Thousands) (Note) 3,689,844 $ 31.65 2,740,487 0.26 363,356 38.47 2,217,538 $ 31.65 278,754 4.08 5,383,824 0.26 3,834 38.47 3,568,162 $ 31.65 32,732,829 0.26 292,958 38.47	Book Value (NTD)
		116,783,563 $ 725,133 13,978,305 70,185,078 $ 1,137,316 1,424,560 147,494 112,932,327 $ 8,661,107 11,270,094

263

Note: Exchange rate represents the amount of NT dollars for which one foreign currency could be exchanged.

h)Total exchange loss (gain), including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2015 and 2014 amounted $66,797 and ($1,143,155), respectively.

Price risk

c) The Company is exposed to equity securities price risk because of investments held by the Company that are classified on the parent company only balance sheet either as available-for-sale or at fair value through profit or loss. To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio in accordance with the policy set by the Company.
d) The Company’s investments in equity securities comprise domestic listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 20% with all other variables held constant, other components of equity for the years ended December 31, 2015 and 2014 would have increased/decreased by $388,983 and $620,292, respectively, as a result of gains/losses on equity securities classified as available-for-sale.

Interest rate risk

e) The Company’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Company to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. During the years ended December 31, 2015 and 2014, the Company’s borrowings at variable rate were denominated in the NTD and USD.
f) The Company analyzes its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Company calculates the impact on profit and loss of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for liabilities that represent the major interest-bearing positions.
g) Based on the simulations performed, the impact on post-tax profit of a 25% shift would be a maximum increase of $150,700 or decrease of $245,892 for the years ended December 31, 2015 and 2014, respectively. The simulation is done on a quarterly basis to verify that the maximum loss potential is within the limit given by the management.
h) Based on the various scenarios, the Company manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Company raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if the Company borrowed at fixed rates directly. The Company agrees with other parties to exchange interest rate, at specified intervals. The difference between fixed contract rates and floating-rate interest amounts are calculated by reference to the agreed notional amounts.

264

(b) Credit risk

d) Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Company’s credit policy, each local entity in the Company is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Customer credit quality is assessed via internal risk control, considering customer financial position, past experience and other factors. Individual risk limits are set by the board of directors based on internal or external ratings. The utilization of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables. Because the Company's counterparties and executor are banks with good credit standing and financial institutions and government with investment grade or above, there is no significant default. Therefore, there is no significant credit risk.
e) No credit limits were exceeded during the reporting periods. Management does not expect any significant losses from non-performance by these counterparties.
f) The individual analysis of financial assets that had been impaired is provided in Note 6.
(c) Liquidity risk
e) Company treasury monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities (Note 6(12)) at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Company’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and external regulatory or legal requirements.
f) Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Company treasury. Company treasury invests surplus cash in interest bearing savings accounts, time deposits, money market deposits and marketable securities. The Company chooses instruments that are with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the abovementioned forecasts. These are expected to readily generate cash inflows for managing liquidity risk.
g) The table below analyses the Company’s non-derivative financial liabilities and net-settled or gross-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

265

Non-derivative financial liabilities:

Less than Between 1 Between 3 December 31,2015 1year and 3years and 5years Accounts payable 73,164,897 $ - $ - $ Other payables 24,387,687 - - Long-term borrowings (including current portion) 16,440,000 43,840,000 - Less than Between 1 Between 3 December31,2014 1year and3 years and5 years Short-term borrowings 1,300,000 $ - $ - $ Accounts payable 118,902,792 - - Other payables 18,688,940 - - Long-term borrowings (including current portion) 61,122,573 37,234,105 - Other financial liabilities - 11,230,850 - Financial guarantee contracts 10,140,660 - - Derivative financial liabilities: Between 1 December 31,2015 Less than 1year and 3years Forward exchange contracts $ 53,921 $ - Between 1 December 31,2014 Less than 1year and 3years Forward exchange contracts $ 605,016 $ - Interest rate swap contracts 1,351 -	Over 5 years Total - $ 73,164,897 $ - 24,387,687 - 60,280,000 Over 5 years Total - $ 1,300,000 $ - 118,902,792 - 18,688,940 - 98,356,678 6,344 11,237,194 - 10,140,660 Total $ 53,921 Total $ 605,016 1,351	Total
		73,164,897 $ 24,387,687 60,280,000 Total
	$
$ - Between 1 and 3years
$ - -

h) The related information on the repayment of the medium and long-term syndicated loans from the ‘‘Agreed-upon Agreement’’ is described in Note 6(12).

266

(3) Fair value estimation

A. Details of the fair value of the Company’s financial assets and financial liabilities not measured at fair value are provided in Note 12(2)A. Details of the fair value of the Company’s investment property measured at cost are provided in Note 6(9).
B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company’s investment in listed stocks and on-the-run bonds is included in Level 1.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Company’s investment in derivative instruments is included in Level 2.
Level 3: Unobservable inputs for the asset or liability. The fair value of the Company’s investment in equity investment without active market is included in Level 3.
C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2015 and 2014 is as follows:

follows:
December31,2015 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Forward exchange contracts Available-for-sale financial assets Equity securities Liabilities Recurring fair value measurements Financial liabilities at fair value through profit or loss Forward exchange contracts	Level 1 - $ 1,562,871 1,562,871 $ - $	Level 2 81,858 $ - 81,858 $ 53,921 $	Level3 - $ 382,046 382,046 $ - $	Total
				81,858 $ 1,944,917
				2,026,775 $
				53,921 $

267

December31,2014 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Forward exchange contracts Available-for-sale financial assets Equity securities Debt securities Liabilities Recurring fair value measurements Financial liabilities at fair value through profit or loss Forward exchange contracts Derivative financial liabilities for hedging Interest rate swap contracts	Level 1 - $ 2,537,965 220,000 2,757,965 $ - $ - - $	Level 2 52,453 $ - - 52,453 $ 605,016 $ 1,351 606,367 $	Level3 - $ 563,496 - 563,496 $ - $ - - $	Total
				52,453 $ 3,101,461 220,000
				3,373,914 $
				605,016 $ 1,351
				606,367 $

D. The methods and assumptions the Company used to measure fair value are as follows:
(a) The instruments the Company used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

Listed shares Emerging stocks Corporate bond Weighted average Market quoted price Closing price Last transaction price quoted price

(b) Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the parent company only balance sheet date.
(c) When assessing non-standard and low-complexity financial instruments, for example, debt instruments without active market, interest rate swap contracts, foreign exchange swap contracts and options, the Company adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.
(d) The valuation of derivative financial instruments is based on valuation model widely accepted by market participants, such as present value techniques and option pricing models. Forward exchange contracts are usually valued based on the current forward exchange rate.
(e) The output of valuation model is an estimated value and the valuation technique may not be able to

268

capture all relevant factors of the Company’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs, for example, model risk or liquidity risk and etc. In accordance with the Company’s management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the parent company only balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.

(f) The Company takes into account adjustments for credit risks to measure the fair value of financial and non-financial instruments to reflect credit risk of the counterparty and the Company’s credit quality.
E. For the years ended December 31, 2015 and 2014, there was no transfer between Level 1 and Level 2.

F. The following table presents the changes in level 3 instruments as at December 31, 2015 and 2014:

he following table presents the changes in level 3 instruments as at	December 31, 2015 and 2014:
At January 1 Acquired in the period Gains and losses recognized in other comprehensive income ( At December 31	2015 2014 563,496 $ 644,661 $ - 135,456 181,450) 216,621) ( 382,046 $ 563,496 $ Equitysecurities
	2015 563,496 $ - 181,450) ( 382,046 $

G. For the years ended December 31, 2015 and 2014, there was no transfer into or out from Level 3.
H. Investment management segment is in charge of valuation procedures for fair value measurements being categorized within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently calibrating valuation model, performing back-testing, updating inputs used to the valuation model and making any other necessary adjustments to the fair value.

Investment management segment set up valuation policies, valuation processes and rules for measuring fair value of financial instruments and ensure compliance with the related requirements in IFRS.

I. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

269

Non-derivative equity instrument: Unlisted shares	Fair value at December Valuation Significant 31,2015 technique unobservable input Discount for lack of marketability 382,046 $ Market comparable companies Price to earnings ratio multiple, price to book ratio multiple controll premium	Range (Weighted Relationship of average) inputs to fair value The higher the multiple and control premium, the higher the fair value The higher the discount for lack of marketability, the lower the fair value 20%~30% (22%) 0.56~1.41 (0.70)

J. The Company has carefully assessed the valuation models and assumptions used to measure fair value; therefore, the fair value measurement is reasonable. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorised within Level 3 if the inputs used to valuation models have changed:

Financial assets Equity instrument Equity instrument	Period 2015/12/31 2014/12/31	Input 382,046 $ 563,496	Change ± 1% ± 1%	Favourable Unfavourable change change 3,820 $ 3,820) ($ 5,635 5,635) ( Recognised in other comprehensive income

SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: Please refer to table 1.
B. Provision of endorsements and guarantees to others: Please refer to table 2.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3.
D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: None.
E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.
G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 4.
H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 5.
I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Notes 6(2) and 6(4).
J. Significant inter-company transactions during the reporting periods: Please refer to table 6.

270

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 7.

(3) Information on investments in Mainland China

A. Basic information: Please refer to table 8.
B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to Notes 13(1)A, G, H, J.

SEGMENT INFORMATION

None.

271

Table 1

Innolux Corporation Loans to others For the year ended December 31, 2015

Expressed in thousands of NTD (Except as otherwise indicated)

No.	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2015	Balance at December 31, 2015	Actual amount drawn down	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short-term financing	Allowance for doubtful accounts	Collateral	Limit on loans granted to a singleparty	Ceiling on total loansgranted	Footnote
													Item Value
1 1 2 2 2 2 3 4 5 6 6	Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innolux Technology USA Inc. Innolux Technology Europe B.V. Innolux Technology Japan Co., Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Optoelectronics Japan Co., Ltd.	Ningbo Innolux Technology Ltd. Ningbo Innolux Display Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Display Ltd. Nanjing Innolux Optoelectronics Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Leadtek Global Group Limited Innolux Corporation Leadtek Global Group Limited	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties	3,282,500 $ 1,969,500 4,549,500 707,700 909,900 808,800 196,950 1,391,278 1,418,040 409,050 681,750	$ - - 4,549,500 707,700 909,900 808,800 196,950 1,391,278 1,418,040 - 681,750	$ - - 4,493,390 707,700 909,900 808,800 196,950 1,362,788 1,418,040 - 681,750	- - 1.925%~ 2.00% 2% 2% 2% 0.16%~ 0.56% 0.000%~ 0.269% 1% - 1%	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Business association Short-term financing	- - - - - - - - - - -	Operating support Operating support Operating support Operating support Operating support Operating support Operating support Operating support Operating support - Operating support	- - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - - - -	$ 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 602,953 232,264,723	$ 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 232,264,723 602,953 232,264,723	A A A A A A A A A B A

272

Note A: The Company - Innolux Corporation

1.For loans obtained for short-term financing, financial limit on loans granted to a single party shall not exceed 10% of the company’s net equity, based on the most recent audited financial statements of the company. 2.The financial limit on loans granted shall not exceed 40% of the company’s net equity. If it is for short-term capital needs, the limit shall not exceed 30% of the company’s net equity. 3.The policy for loans granted to direct or indirect wholly-owned overseas subsidiaries is as follows: for short-term capital needs, financial limit shall not be below the 40% requirement, but should not exceed 100% of the company’s net equity.

Note B: The subsidiary - Innolux Optoelectronics Japan Co., Ltd. 1. For the company’s short-term capital needs, financial limit on loans granted to a single party shall not exceed 10% of the company’s net equity, based on the most recent audited financial statements of the parent company; for the companies having business relationship with the Company, financial limit on loans granted to a single party shall not exceed the amount of business transactions occured between the creditor and borrower. 2.The financial limit on loans granted shall not exceed 30% of the company’s net equity, based on the most recent audited financial statements of the parent company; with intercompany transaction, the company’s financial limit on loans granted shall not exceed 40% of the company's equity. 3.The amount of loans provided by the company and intercompany shall not exceed 40% of the company’s equity.

273

Table 2

Innolux Corporation Provision of endorsements and guarantees to others For the year ended December 31, 2015

Expressed in thousands of NTD (Except as otherwise indicated)

Number	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a singleparty	Maximum outstanding endorsement/ guarantee amount as of December 31, 2015	Outstanding endorsement/ guarantee amount at December 31, 2015	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided	Provision of endorsements/ guarantees by parent company to subsidiary	Provision of endorsements/ guarantees by subsidiary to parent company	Provision of endorsements/ guarantees to the party in Mainland China	Footnote
		Companyname	Relationship with the endorser/ guarantor
0	Innolux Corporation	Leadtek Global Group Limited	An indirect wholly- owned subsidiary	$ 116,132,362	$ 17,528,550	$ -	$ -	$ -	-	$ 116,132,362	Y	N	N	A,B

274

Innolux Corporation

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) December 31, 2015

Table 3

Expressed in thousands of NTD (Except as otherwise indicated)

Securitiesheld by	Marketable securities	Relationship with the securitiesissuer	General ledgeraccount		As of Dece	mber 31, 2015
				Numberofshares	Bookvalue	Ownership (%)	Fairvalue
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Yuan Chi Investment Co., Ltd. Yuan Chi Investment Co., Ltd. InnoJoy Investment Corporation InnoJoy Investment Corporation InnoJoy Investment Corporation InnoJoy Investment Corporation Warriors Technology Investments Ltd. Warriors Technology Investments Ltd. Nets Trading Ltd.	Common stock	None None None None None None None None None None None None None None None	Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Financial asset at fair value through profit or loss Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current	900,000 150,500,000 48,283,725 89,072 44,741,305 1,209 1,439,180 12,283,000 11,165,222 10,000,000 6,311,734 7,271,326 16,000,000 40,500,000 90	$ 62,091 650,115 319,955 2,271 910,485 - 694 97,281 281,922 302,190 78,266 189,782 6,058 4,475,250 28,596	1 6 19 - 9 - 2 3 8 7 2 6 6 13 -	$ 62,091 650,115 319,955 2,271 910,485 - 694 97,281 281,922 302,190 78,266 189,782 6,058 4,475,250 28,596
	AvanStrate Inc. TPV Technology Ltd. Chi Lin Optoelectronics Co., Ltd. Epistar Corporation Chimei Materials Technology Corp. Allied Material Technology Corp. Trillion Science Inc. China Electric Mfg. Corp. Advanced Optoelectronic Technology, Inc. Fitipower Integrated Technology Inc. G-TECH Optoelectronics Corporation Entire Technology Co., Ltd. OED Holding Ltd. General Interface Solution (GIS) Holding Limited PilotTech Global Fund

275

Innolux Corporation

Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more For the year ended December 31, 2015

Table 4 Purchaser/seller	Counterparty	Relationship with the counterparty		Tran	saction		Differences in compared trans	transaction terms to third party actions	(Except as otherwis Expressed in thousa Notes/accounts receivable(payable)	(Except as otherwis Expressed in thousa Notes/accounts receivable(payable)	e indicated) nds of NTD Footnote
			Purchases (sales)	Amount	Percentage of total purchases(sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable (payable)
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation	Lakers Trading Ltd. Hon Hai Precision Industry Co., Ltd. Honfujin Precision Electronics (Chongqing) Co., Ltd. Shenzhen FuTaiHong Precision Industry Co., Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Technology USA Inc. Competition Team Ireland Ltd. Innolux Optoelectronics USA, Inc. Futaijing Precision Electronics (Yantai) Co., Ltd. Innolux Hong Kong Ltd. Futaijing Precision Electronics (Beijing) Co., Ltd. Hongfujin Precision Electronics (Zhengzhou) Co., Ltd.	An indirect wholly-owned subsidiary Same major stockholder An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. A subsidiary of the Company An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd.	Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales	$ 8,538,206 2 3,414,590 1 3,187,388 1 2,488,188 1 1,561,151 - 1,512,160 - 1,393,483 - 734,048 - 645,222 - 628,495 - 441,462 - 437,312 -		60 days 45~60 days 45~60 days 60 days 45 days 60 days 45 days 45 days 60 days 60 days 60 days 60 days	Similar with general sales Similar with general sales Similar with general sales Similar with general sales Single sales target, no basis for comparison Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales	No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference	- $ - 1,031,767 2 404,513 1 133,501 - 138,810 - 173,166 - - - 71,538 - 35,124 - - - - - 74,849 -

276

Innolux Corporation	Honfujin Precision Electronics	An indirect wholly-owned	Sales	$ 331,460	-	60 days	Similar with	No material		$ 139,373	-
	(Shenzhen) Co., Ltd.	subsidiary of Hon Hai Precision					general sales	difference
		Industry Co., Ltd.
Innolux Corporation	FI Medical Device	The company's investments	Sales	233,299	-	90 days	Similar with	No material		81,427	-
	Manufacturing Co., Ltd.	accounted for under the equity					general sales	difference
		method
Innolux Corporation	Honfujin Precision Electronics	An indirect wholly-owned	Sales	231,303	-	45 days	Similar with	No material		76,783	-
	(Wuhan) Co., Ltd.	subsidiary of Hon Hai Precision					general sales	difference
		Industry Co., Ltd.
Innolux Corporation	Competition Team Technology	An indirect wholly-owned	Sales	186,962	-	90 days	Similar with	No material		144,167	-
	(India) Private Ltd.	subsidiary of Hon Hai Precision					general sales	difference
		Industry Co., Ltd.
Innolux Corporation	Chi Lin Optoelectronics Co., Ltd.	The company is a corporate director	Sales	133,737	-	45~90 days	Similar with	No material		40,420	-
		of Chi Lin Optoelectronics					general sales	difference
Innolux Corporation	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	2,087,965	1	60~90 days after	Single	No material	(	821,291)	1
	Ltd.					acceptance	purchases	difference
							target, no basis
							for comparison
Innolux Corporation	Chi Lin Optoelectronics Co., Ltd.	The company is a corporate director	Purchases	822,868	-	120 days after	Single	No material	(	289,219)	-
		of Chi Lin Optoelectronics				acceptance	purchases	difference
							target, no basis
							for comparison
Innolux Corporation	FI Medical Device	The company's investments	Purchases	302,010	-	30 days after	Single	No material	(	58,375)	-
	Manufacturing Co., Ltd.	accounted for under the equity				acceptance	purchases	difference
		method					target, no basis
							for comparison
Innolux Corporation	Leadtek Global Group Limited	A subsidiary of the Company	Processing	44,091,210	13	60~90 days	Cost plus	No material	(	20,900,275)	29
			expense					difference
Innolux Corporation	Lakers Trading Ltd.	An indirect wholly-owned	Processing	44,600,117	14	60~90 days	Cost plus	No material	(	14,958,119)	20
		subsidiary	expense					difference
Innolux Corporation	Innolux Hong Kong Ltd.	An indirect wholly-owned	Processing	34,025,843	10	60~90 days	Cost plus	No material	(	8,331,372)	11
		subsidiary	expense					difference
Nanjing Innolux	Innolux Hong Kong Ltd.	An indirect wholly-owned	Processing	33,337,143	98	60 days	Similar with	No material		7,831,158	98
Optoelectronics Ltd.		subsidiary	revenue				general	difference
							transactions
Ningbo Innolux	Leadtek Global Group Limited	A subsidiary of the Company	Processing	$ 28,498,599	84	60 days	Similar with	No material		$ 14,623,208	91
Optoelectronics Ltd.			revenue				general	difference
							transactions
Foshan Innolux	Lakers Trading Ltd.	An indirect wholly-owned	Processing	26,744,283	69	60 days	Similar with	No material		8,018,465	82
Optoelectronics Ltd.		subsidiary	revenue				general	difference
							transactions
Ningbo Innolux Technology	Leadtek Global Group Limited	A subsidiary of the Company	Processing	16,347,277	91	60 days	Similar with	No material		2,204,994	78
Ltd.			revenue				general	difference
							transactions
Shanghai Innolux	Lakers Trading Ltd.	An indirect wholly-owned	Processing	12,905,853	95	60 days	Similar with	No material		2,149,428	95
Optoelectronics Ltd.		subsidiary	revenue				general	difference
							transactions

277

Ningbo Innolux Display Ltd.	Lakers Trading Ltd.	An indirect wholly-owned	Processing	4,597,437	100	60 days	Similar with	No material		1,027,542	100
		subsidiary	revenue				general	difference
							transactions
Innocom Technology	Lakers Trading Ltd.	An indirect wholly-owned	Processing	644,975	46	60 days	Similar with	No material		3,360,510	92
(Shenzhen) Co., Ltd.		subsidiary	revenue				general	difference
							transactions
Innolux Technology Japan	Innolux Hong Kong Ltd.	An indirect wholly-owned	Service	275,557	92	60 days	Similar with	No material		48,127	85
Co., Ltd.		subsidiary	revenue				general	difference
							transactions
Ningbo Innolux	Ningbo Innolux Technology Ltd.	An indirect wholly-owned	Sales	3,479,126	6	90 days	Similar with	No material		742,775	3
Optoelectronics Ltd.		subsidiary					general	difference
							transactions
Shanghai Innolux	Nanjing Innolux Optoelectronics	An indirect wholly-owned	Sales	658,797	3	60 days	Similar with	No material		119,316	3
Optoelectronics Ltd.	Ltd.	subsidiary					general	difference
							transactions
Ningbo Innolux	Ningbo Innolux Display Ltd.	An indirect wholly-owned	Sales	263,304	-	60 days	Similar with	No material		161,406	1
Optoelectronics Ltd.		subsidiary					general	difference
							transactions
Ningbo Innolux	Ningbo Lin Moug Optronics Co.,	An indirect wholly-owned	Purchases	1,720,767	3	120 days after	Similar with	No material	(	617,975)	4
Optoelectronics Ltd.	Ltd.	subsidiary of Chi Lin				goods are	general	difference
		Optoelectronics Co., Ltd.				shipped	transactions
Ningbo Innolux	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	744,581	1	60 days after	Similar with	No material	(	249,403)	2
Optoelectronics Ltd.	Ltd.					goods are	general	difference
						shipped	transactions
Foshan Innolux	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	742,147	1	90 days after	Similar with	No material	(	294,409)	1
Optoelectronics Ltd.	Ltd.					goods are	general	difference
						shipped	transactions
Ningbo Innolux Technology	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	$ 729,655	3	90 days after	Similar with	No material	($	185,937)	3
Ltd.	Ltd.					goods are	general	difference
						shipped	transactions
Nanjing Innolux	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	491,739	1	90 days after	Similar with	No material	(	112,654)	1
Optoelectronics Ltd.	Ltd.					goods are	general	difference
						shipped	transactions
Ningbo Innolux	Honfujin Precision Electronics	An indirect wholly-owned	Purchases	465,072	1	90 days after	Similar with	No material	(	117,821)	1
Optoelectronics Ltd.	(Shenzhen) Co., Ltd.	subsidiary of Hon Hai Precision				goods are	general	difference
		Industry Co., Ltd.				shipped	transactions
Ningbo Innolux Technology	Ningbo Lin Moug Optronics Co.,	An indirect wholly-owned	Purchases	453,764	2	120 days after	Similar with	No material	(	190,049)	3
Ltd.	Ltd.	subsidiary of Chi Lin				goods are	general	difference
		Optoelectronics Co., Ltd.				shipped	transactions
Ningbo Innolux Display Ltd.	Hon Hai Precision Industry Co.,	Same major stockholder	Purchases	311,236	6	90 days after	Similar with	No material	(	187,611)	7
	Ltd.					goods are	general	difference
						shipped	transactions

278

Innolux Corporation

Receivables from related parties reaching $100 million or 20% of paid-in capital or more

December 31, 2015

Table 5

Expressed in thousands of NTD (Except as otherwise indicated)

Creditor	Counterparty	Relationship with the counterparty	Balance as at December 31,2015	Turnover rate	Overd	ue receivables	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts
					Amount	Action taken
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Innocom Technology (Shenzhen) Co., Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Leadtek Global Group Limited	Shenzhen FuTaiHong Precision Industry Co., Ltd. Hon Hai Precision Industry Co., Ltd. Honfujin Precision Electronics (Chongqing) Co., Ltd. Kangzhun Electronics Technology (Kunshan) Co., Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Technology USA Inc. Hongfujin Precision Electronics (Shenzhen) Co., Ltd. Competition Team Technology (India) Private Ltd. Lakers Trading Ltd. Leadtek Global Group Limited Innolux Hong Kong Ltd. Leadtek Global Group Limited Lakers Trading Ltd. Lakers Trading Ltd. Nanjing Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Display Ltd. Lakers Trading Ltd. Ningbo Innolux Display Ltd.	An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. Same major stockholder An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. A subsidiary of the Company An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary A subsidiary of the Company An indirect wholly-owned subsidiary A subsidiary of the Company An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary	$ 133,501 1,031,767 404,513 286,218 138,810 173,166 139,373 144,167 8,018,465 14,623,208 7,831,158 2,204,994 3,360,510 2,149,428 119,316 742,775 161,406 1,027,542 518,992	2.97 2.35 3.78 - 9.59 8.71 4.17 2.59 1.77 1.66 4.24 3.56 0.23 4.95 5.36 4.07 1.63 4.57 -	$ - 84,118 10,639 31,754 - - - 5,729 8,018,465 13,732,390 3,085,461 150,784 2,910,074 - - 92,453 - - 150,784	- Subsequent collection Subsequent collection Subsequent collection - - - Subsequent collection Subsequent collection Subsequent collection Subsequent collection Subsequent collection Subsequent collection - - Subsequent collection - - Subsequent collection	$ 88,285 212,224 78,969 59,298 - - 97,623 39,233 5,284,848 3,349,891 2,975,253 1,587,768 - 545,267 - 442,391 37,153 598,463 241,922	- - - - - - - - - - - - - - - - - - -

279

Table 6

Innolux Corporation

Significant inter-company transactions during the reporting periods For the year ended December 31, 2015

Expressed in thousands of NTD (Except as otherwise indicated)

Number	Companyname	Counterparty	Relationship (NoteA)		Transac	tion(NoteC)
				General ledgeraccount	Amount	Transaction terms (NoteB)	Percentage of consolidated total operating revenues or total assets
0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 2 2 3 3 4 4 5 5 6	Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Optoelectronics Ltd.	Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Optoelectronics USA, Inc. Innolux Technology USA Inc. Innolux Technology USA Inc. Lakers Trading Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Leadtek Global Group Limited Leadtek Global Group Limited Nanjing Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Leadtek Global Group Limited Leadtek Global Group Limited Leadtek Global Group Limited	1 1 1 1 1 1 1 1 1 1 1 1 1 3 3 3 3 3 3 3 3 3 3 3 3 3	Sales Processing expense Accrued expenses Sales Accounts receivable Sales Sales Accounts receivable Sales Processing expense Accrued expenses Processing expense Accrued expenses Sales Accounts receivable Processing revenue Accounts receivable Processing revenue Accounts receivable Processing revenue Accounts receivable Processing revenue Accounts receivable Processing revenue Accounts receivable Processing revenue	628,495 $ 34,025,843 8,331,372) ( 1,561,151 138,810 734,048 1,512,160 173,166 8,538,206 44,600,117 14,958,119) ( 44,091,210 20,900,275) ( 658,797 119,316 12,905,853 2,149,428 26,744,283 8,018,465 33,337,143 7,831,158 644,975 3,360,510 16,347,277 2,204,994 28,498,599 $	- - - - - - - - - - - - - - - - - - - - - - - - - -	- 9 2 - - - - - 2 12 4 12 5 - - 4 1 7 2 9 2 - 1 4 1 8

280

6	Ningbo Innolux Optoelectronics Ltd.	Leadtek Global Group Limited	3	Accounts receivable	14,623,208	-	4
6	Ningbo Innolux Optoelectronics Ltd.	Ningbo Innolux Technology Ltd.	3	Sales	3,479,126	-	1
6	Ningbo Innolux Optoelectronics Ltd.	Ningbo Innolux Technology Ltd.	3	Accounts receivable	742,775	-	-
6	Ningbo Innolux Optoelectronics Ltd.	Ningbo Innolux Display Ltd.	3	Sales	263,304	-	-
6	Ningbo Innolux Optoelectronics Ltd.	Ningbo Innolux Display Ltd.	3	Accounts receivable	161,406	-	-
7	Ningbo Innolux Display Ltd.	Lakers Trading Ltd.	3	Processing revenue	4,597,437	-	1
7	Ningbo Innolux Display Ltd.	Lakers Trading Ltd.	3	Accounts receivable	1,027,542	-	-
8	Innolux Technology Japan Co., Ltd.	Innolux Hong Kong Ltd.	3	Service revenue	275,557	-	-
9	Leadtek Global Group Limited	Ningbo Innolux Display Ltd.	3	Accounts receivable	518,992	-	-

Note A: 1. The parent company to the subsidiary.

3. The subsidiary to the subsidiary.

Note C: Amount disclosure standard: purchases, sales and receivables from related parties in excess of $100 million or 20% of capital.

281

Innolux Corporation

Information on investees For the year ended December 31, 2015

Table 7

Expressed in thousands of NTD (Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial invest	ment amount	Sharesheld	as atDecemb	er31,2015	Net profit (loss) of the investee for the year ended December 31,2015	Investment income (loss) recognised by the Company for the year ended December 31, 2015	Footnote
				Balance as at December 31, 2015	Balance as at December 31, 2014	Number of shares	Ownership (%)	Book value
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation	Bright Information Holding Ltd. Gold Union Investments Ltd. Golden Achiever International Ltd. Innolux Holding Ltd. Keyway Investment Management Limited Landmark International Ltd. Toppoly Optoelectronics (B.V.I.) Ltd. Innolux Hong Kong Holding Ltd. Leadtek Global Group Limited Yuan Chi Investment Co., Ltd. InnoJoy Investment Corporation Innolux Optoelectronics Europe B.V. Innolux Optoelectronics Japan Co., Ltd. Ampower Holding Ltd. Jetronics International Corp. FI Medical Device Manufacturing Co., Ltd. iZ3D, Inc.	Hong Kong Samoa BVI Samoa Samoa Samoa BVI Hong Kong BVI Taiwan Taiwan Netherlands Japan Cayman Samoa Taiwan USA	Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Order swap company Investment company Investment company Importing, exporting, buying, selling and logistics services of electronic equipment and TFT-LCD Researching, manufacturing and selling of the film transistor liquid crystal display Investment holdings Investment holdings Production and selling of the absorption for medical element Research and development and sale of 3D flat monitor	119,724 $ - 119,106 7,858,300 197,554 33,438,542 3,596,307 2,107,291 - 1,217,235 1,674,054 121,941 1,335,486 1,717,714 86,149 73,500 -	119,724 $ 348,999 9,083 7,858,300 197,554 32,925,315 3,596,307 2,107,291 - 1,217,235 1,674,054 121,941 1,335,486 1,717,714 86,149 73,500 -	4,910,000 - 40,250 246,768,185 5,656,410 709,450,000 144,447,000 1,158,844,000 50,000,000 - 167,405,392 180 80 14,062,500 726,941 7,350,000 4,333	100 - 100 100 100 100 100 100 100 100 100 100 100 50 32 49 35	104,699 $ - 65,966 20,242,553 230,932 45,888,559 6,787,268 2,907,677 232,863) ( 1,137,982 1,242,760 132,641 1,507,382 881,351 2,055) ( 321,683 -	205) ($ 104,634 2,048) ( 293,551 3,746) ( 4,159,463 751,258 687,929 103,103) ( 215,059) ( 338,289) ( 4,827) ( 36,154 271) ( 1,268 554,470 -	2,044) ($ 104,634 5,354 295,014 3,746) ( 4,281,112 751,258 660,141 103,103) ( 215,059) ( 338,289) ( 4,827) ( 36,154 8,925) ( 406 271,690 -

282

Innolux Corporation	Chi Mei Lighting Technology	Taiwan	Manufacturing of	$	819,312	$	819,312	78,195,856	33		$	-		$	-		$	-
	Corporation		electronic equipment
			and lighting equipment
Innolux Corporation	Chi Mei El Corporation	Taiwan	Developing, designing,		-		361,382	-	-			-	(		51,718)	(		50,265)
			manufacturing and
			selling of organic light
			emitting diodes
Innolux Corporation	GIO Optoelectronics Corp.	Taiwan	Developing, designing,		800,892		800,892	63,521,501	24			98,785			21,911			5,210
			manufacturing and
			selling of components
			of back light module
			on TFT-LCD
Innolux Holding Ltd.	Rockets Holding Ltd.	Samoa	Investment holdings		7,296,530		7,296,530	226,504,550	100			15,064,678			102,191			102,191
Innolux Holding Ltd.	Suns Holding Ltd.	Samoa	Investment holdings		555,422		555,422	18,177,052	100			5,041,225			192,687			192,687
Innolux Holding Ltd.	Lakers Trading Ltd.	Samoa	Order swap company		-		-	1	100			250,080			-			-
Innolux Holding Ltd.	Innolux Corporation	USA	Distributor company		6,348		6,348	2,000	100	(		92,865)	(		1,327)	(		1,327)
Toppoly Optoelectronics (B.V.I.)	Toppoly Optoelectronics (Cayman)	Cayman	Investment holdings		3,572,384		3,572,384	144,417,000	100			6,786,885			751,258			751,258
Ltd.	Ltd.
Innolux Hong Kong Holding Ltd.	Innolux Optoelectronics Hong Kong	Hong Kong	Investment holdings		-		-	162,897,802	100			1,055,807			295,546			295,546
	Holding Ltd.
Innolux Hong Kong Holding Ltd.	Innolux Hong Kong Ltd.	Hong Kong	Order swap company		-		-	35,000,000	100	(		1,845,021)			317,860			317,860
Innolux Hong Kong Holding Ltd.	Innolux Technology Europe B.V.	Netherlands	Holding company and		3,073,072		3,073,072	375,810	100			2,281,088			32,523			32,523
			R&D testing company
Innolux Hong Kong Holding Ltd.	Innolux Technology Japan Co., Ltd.	Japan	R&D testing company		1,815,603		1,815,603	201	100			1,706,959			17,594			17,594
Innolux Hong Kong Holding Ltd.	Innolux Technology USA Inc.	USA	Distributor company		263,685		263,685	1,000	100			363,492			24,231			24,231
Innolux Optoelectronics Europe	Innolux Optoelectronics Germany	Germany	Importing, exporting,		10,324		10,324	250	100			17,023	(		7,957)	(		7,957)
B.V.	GmbH		buying, selling and
			logistics services of
			electronic equipment
			and TFT-LCD
Innolux Optoelectronics Japan	Innolux Optoelectronics USA, Inc.	USA	i Selling of electronic		2,400		2,400	1,000	100			277,704			9,020			9,020
Co., Ltd.			equipment and
			computer monitors
Rockets Holding Ltd.	Best China Investments Ltd.	Samoa	Investment holdings		314,740		314,740	10,000,001	100			266,110			781			781
Rockets Holding Ltd.	Mega Chance Investments Ltd.	Samoa	Investment holdings		573,940		573,940	18,000,000	100			438,237			1,286			1,286
Rockets Holding Ltd.	Magic Sun Ltd.	Samoa	Investment holdings		1,146,370		1,146,370	38,000,001	100			1,092,270			92,832			92,832
Rockets Holding Ltd.	Stanford Developments Ltd.	Samoa	Investment holdings	$	5,391,125	$	5,391,125	164,000,000	100		$	13,237,023		$	7,291		$	7,291
Rockets Holding Ltd.	Nets Trading Ltd.	Samoa	Investment company		27,477		27,477	900,001	100			30,916			-			-
Suns Holding Ltd.	Warriors Technology Investments	Samoa	Investment company		555,422		555,422	18,177,052	100			5,041,223			192,687			192,687
	Ltd.

283

Innolux Technology Europe B.V.	Innolux Technology Germany GmbH	Germany	Testing and	33,735	33,735	100,000	100	59,078		173		173
			maintenance company
Best China Investments Ltd.	Asiaward Investment Ltd.	Hong Kong	Investment holdings	314,740	314,740	77,830,001	100	266,110		781		781
Mega Chance Investments Ltd.	Main Dynasty Investment Ltd.	Hong Kong	Investment holdings	573,940	573,940	139,623,801	100	438,236		1,286		1,286
Magic Sun Ltd.	Sun Dynasty Development Ltd.	Hong Kong	Investment holdings	1,146,370	1,146,370	295,969,001	100	1,092,270		92,832		92,832
Yuan Chi Investment Co., Ltd.	Chi Mei Lighting Technology	Taiwan	Trading business,	263,812	263,812	19,673,402	8	-		-		-
	Corporation		manufacturing of
			electronic equipment
			and lighting equipment
Yuan Chi Investment Co., Ltd.	GIO Optoelectronics Corp.	Taiwan	Developing, designing,	6,881	6,881	467,519	-	748		21,911		39
			manufacturing and
			selling of components
			of back light module
			on TFT-LCD
Yuan Chi Investment Co., Ltd.	TOA Optronics Corporation	Taiwan	Selling electronic	423,606	423,606	58,007,000	40	310,074	(	237,256)	(	54,833)
			materials, trading
			business,
			manufacturing of
			electronic equipments
			and lighting
			equipments

284

Table 8

Innolux Corporation Information on investments in Mainland China For the year ended December 31, 2015

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-in capital (Note A)	Investment method (Note C)	Accumulated amount of remittance from Taiwan to Mainland China as of January 1, 2015	Amount remitted Mainlan Amount re to Taiwan for December	from Taiwan to d China/ mitted back the year ended 31, 2015	Accumulated amount of remittance from Taiwan to Mainland China as of December 31, 2015	Net income (loss) of investee for the year ended December 31 , 2015	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2015 (Note B)	Book value of investments in Mainland China as of December 31, 2015	Accumulated amount of investment income remitted back to Taiwan as of December 31, 2015	Footnote
					Remitted to Mainland China	Remitted back to Taiwan
Innocom Technology (Shenzhen) Co., Ltd. OED Company Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Nanjing Innolux Technology Ltd. Kunpal Optoelectronics Ltd. VAP Optoelectronics (Nanjing) Corp. Nanjing Innolux Optoelectronics Ltd. Ningbo Innolux Logistics Ltd. Shanghai Innolux Optoelectronics Ltd. Foshan Innolux Logistics Ltd. Amlink (Shanghai) Ltd. Kunshan Guann-Jye Electronics Co., Ltd. Interface Optoelectronics (Shenzhen) Co., Ltd. Ningbo Innolux Electronics Ltd.	Manufacturing and selling of LCD backend module and related components Manufacturing and selling of electronic paper Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Purchases and sales of monitor-related components company Glass thinning processing service Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Warehousing services Manufacturing and selling of LCD backend module and related components Warehousing services Manufacturing and selling of power supply, modem, ADSL, and other IT equipments Manufacturing of transformers Development of new type of flat panel display, monitor and peripherals, production and management, and offer of after-sales service Manufacturing and selling of LCD backend module and related components	$ 5,383,300 318,465 10,175,750 4,267,250 12,571,975 984,750 68,933 131,300 331,533 4,661,150 131,300 689,325 49,238 656,500 275,730 3,157,765 151,650	2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3	$ 4,165,878 65,650 241,758 4,267,250 12,571,975 984,750 68,933 124,139 9,848 4,661,150 131,300 - 49,238 328,250 88,299 443,138 -	$ - - - - - - - - 114,888 - - - - - - - -	$ - - - - - - - - - - - - - - - - -	$ 4,165,878 65,650 241,758 4,267,250 12,571,975 984,750 68,933 124,139 124,735 4,661,150 131,300 - 49,238 328,250 88,299 443,138 -	$ 7,291 ( 248,223) 2,185,851 299,191 1,669,650 105,005 12,948 234 ( 2,048) 738,310 ( 6,907) 295,546 3,161 ( 19,288) - - 38	100 4 100 100 100 100 100 100 100 100 100 100 100 50 32 13 100	$ 7,291 - 2,185,851 299,191 1,672,129 105,005 12,948 234 ( 2,048) 738,310 ( 6,907) 295,546 3,161 ( 9,065) - - 38	$ 13,237,010 14,840 22,305,061 3,442,283 19,839,990 359,195 606,121 77,861 66,172 6,180,741 157,669 1,055,807 68,266 372,990 - 4,475,256 151,688	$ 1,217,422 - 5,666,742 - - - - - - - - - - - - - -	2.1 2.1 2.2 2.2 2.2 2.2 2.3 2.4 2.5 2.3 2.7 2.6 2.7 2.8 2.9 2.1 3.1

285

Ceiling on investments in Mainland China:

Company name	Accumulated amount of remittance from Taiwan to Mainland China as of December 31, 2015	Investment amount approved by the Investment Commission of the Ministry of Economic Affairs (MOEA)	Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA
Innolux Corporation	29,821,744 $	40,547,247 $	139,358,834 $

Note A: The relevant figures are listed in NT$. Where foreign currencies were involved, the figures were converted to NT$ using exchange rate. Note B: Profit or loss recognised for the year ended December 31, 2015 was audited by independent accountants. Note C: The investment methods are as follows:

Directly investing in Mainland China.
Through investing in companies in the third area, which then invested in the investee in Mainland China.
2.1.Through investing in Innolux Holding Ltd. in the third area, which then invested in the investee in Mainland China.
2.2.Through investing in Landmark International Ltd. in the third area, which then invested in the investee in Mainland China.
2.3.Through investing in Toppoly Optoelectronics (B.V.I.) Ltd. in the third area, which then invested in the investee in Mainland China.
2.4.Through investing in Bright Information Holding Ltd. in the third area, which then invested in the investee in Mainland China.
2.5.Through investing in Golden Achiever International Ltd. in the third area, which then invested in the investee in Mainland China.
2.6.Through investing in Innolux Hong Kong Holding Ltd. in the third area, which then invested in the investee in Mainland China.
2.7.Through investing in Keyway Investment Management Limited in the third area, which then invested in the investee in Mainland China.
2.8.Through investing in Ampower Holding Ltd. in the third area, which then invested in the investee in Mainland China.
2.9.Through investing in Jetronics International Corporation in the third area, which then invested in the investee in Mainland China.
Others.
3.1.The company invests in the company via investee companies in Mainland China is Ningbo Innolux Electronics Ltd. Except for the investment via the holding companies in Mainland China, Ceiling on investments in Mainland China:

286

Innolux Corporation Chairman: Hsing-Chien Tuan

AI assistant

INX — Annual Report 2015

52330_rns_2016-07-07_73617bbf-cae8-4ee9-b4b7-60b9b3aa8daa.pdf

Innolux Corporation 2015 Annual Report

Notice to readers

A. Spokesperson & Deputy Spokesperson information.

B Headquarters, Branches and Plant.

C. Stock Transfer Agent

D. Auditors

E. Overseas Securities Exchange

F. Corporate Website: http://www.innolux.com

Contents

I. Letter to Shareholders

1.1 2015 Operating Report

(I) Result of Business Plan

(II) Budget Implementation

(III) Financial Analysis from 2014 to 2015

(IV) Research and development

1.2 Summary of 2015 Business Plan

(II) Continue to promote industry 4.0

(III) Continuous growth on middle and small size products

(IV) Diligent Management

III. Corporate Governance Report

3.1 Organization

3.1.1 Organization Chart

3.1.2 Major Corporate Functions

3.2 Directors, Supervisors and Management Team

3.2.1 Directors and Supervisors

Major shareholders of the major shareholders that are juridical persons

Professional qualifications and independence analysis of directors and supervisors

the Company.

3.2.2 Management Team

Note 1: Existing Managers as of the date of the annual report.

3.3 Remuneration of Directors, Supervisors, President, and Vice President

3.3.1 Remuneration of Directors

Range of remuneration table

3.3.2 Remuneration of Supervisors

Range of remuneration table

3.3.3 Compensation of President and Vice President

Range of remuneration table

3.3.4 Names of managerial officers who received employees’ bonuses in the preceding year and the distribution

3.3.5 Comparison of Remuneration for Directors, Supervisors, Presidents, and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents, and Vice Presidents

3.4 Implementation of Corporate Governance

3.4.1 Board of Directors

3.4.2 Audit Committee

A. Audit Committee: N.A.

3.4.3 Attendance of Supervisors for Board Meetings

3.4.4 Taiwan Corporate Governance Implementation as Required by the Taiwan Financial Supervisory Commission

3.4.5 Composition, Responsibilities and Operations of the Compensation Committee

A. The Compensation Committee Members’ Professional Qualifications and Independent Analysis

B. Compensation Committee Meeting Status

3.4.6 Social Contributions

3.4.7 Taiwan Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory Commission

3.4.8 Corporate Governance Guidelines and Regulations

Please refer to the Company’s website at www. innolux.com

3.4.9 Other Important Information Regarding Corporate Governance

3.4.10 Internal Control System

1. Statement of internal control system

Innolux Corporation Statement of Internal Controls

3.4.12 Major Resolutions of Shareholders’ Meeting and Board Meetings

2.Important resolutions by the Board for 2015 prior to the deadline of annual report publication

3.4.13 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors

3.4.14 Resignation or Dismissal of Personnel Involved in Preparation of Financial Reports

3.5 Information Regarding Innolux’s Independent Auditors

3.6 Replacement of independent auditors:N.A.

3.8 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders 3.8.1 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders.

3.8.2 Shares Trading with Related Parties

3.8.3 Shares Pledge with Related Parties

3.9 Information Disclosing the Relationship between any of the Company’s Top Ten Shareholders

3.10 The number of shares held by the Company, the Company’s directors and supervisors, managerial officers and enterprises under control, either directly or indirectly, with consolidated calculation of the comprehensive shareholding ratio. As of 12/31/2015

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

A. Type of Stock

B. Issued Shares

4.1.2 Status of Shareholders

4.1.3 Shareholding Distribution Status

4.1.4 List of Major Shareholders

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share

4.1.6 Dividend Policy and Implementation Status

INX Annual Report 2015