INX - Annual Report 2019 | FinancialReports.eu

Stock Code: 3481

Innolux Corporation 2019 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.

Taiwan Stock Exchange Market Observation Post System: http://mops.twse.com.tw Innolux Annual Report is available at: http://www.innolux.com Printed on April 30, 2020

A. Spokesperson & Deputy Spokesperson information.

Spokesperson Deputy Spokesperson Name: Chu-Hsiang Yang Name: Chien-Lang Lo Title: President&COO 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 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 Fab T6: No.11, Luke 10th Road, Kaohsiung City, Southern Taiwan Science Park Tel: 886-6-6278888 STSP Touch Fab : No.12, Nanke 8th Road, Shanhua District, Tainan City, Southern Taiwan Science Park Tel: 886-6-5051880 Touch Module Fab : No. 12, Nanke 8th Road, Shanhua District, Tainan City, Southern Taiwan Science Park Tel: 886-6-5051880 N 9Fab：No.10,Nanke 9 th Rd.,Tainan City, Southern Taiwan Science Park Tel: 886-6-5889998

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

Tel: 886-2-23711658

D. Auditors

PricewaterhouseCoopers Auditors: Han-Chi Wu, Liang Hua-Ling Address: 27th Floor, 333 Keelung Rd, Sec. 1, Taipei, Taiwan Website: http://www.pwc.tw Tel.: 886-2-27296666

E. Overseas Securities Exchange:

Singapore Exchange Limited:http://www.sgx.com

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

	*Contents*	*Contents*
I.	Letter to Shareholders .............................................................................................................. 1
II.	Company Profile ....................................................................................................................... 5
	2.1	Date of Incorporation: ..................................................................................................... 5
	2.2	Company History .............................................................................................................. 5
III.	Corporate Governance Report .............................................................................................. 11
	3.1	Organization .................................................................................................................... 11
	3.2	Directors and Management Team ................................................................................... 13
	3.3	Remuneration of Directors, President, and Vice President ............................................. 21
	3.4	Implementation of Corporate Governance ...................................................................... 27
	3.5	Information Regarding the Company’s Audit Fee and Independence ............................ 60
	3.6	Replacement of CPA: ...................................................................................................... 61
	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: ................................................ 61
	3.8	Changes in Shareholding of Directors, Managers and Major Shareholders ................... 62
	3.9	Relationship among the Top Ten Shareholders ............................................................... 63
	3.10	Ownership of Shares in Affiliated Enterprises ................................................................ 64
IV.	Capital Overview .................................................................................................................... 66
	4.1	Capital and Shares ........................................................................................................... 66
	4.2	Bonds ............................................................................................................................... 73
	4.3	Status of Preferred Shares: . ............................................................................................ 74
	4.4	Global Depository Receipts: ........................................................................................... 74
	4.5	Employee Stock Options: ................................................................................................ 74
	4.6	Issuance of New Restricted Employee Shares: ............................................................... 74
	4.7	Status of New Share Issuance in Connection with Mergers and Acquisitions: . ............ 74
	4.8	Financing Plans and Implementation:. ............................................................................ 74
V.	Operational Highlights ........................................................................................................... 75
	5.1	Business Activities .......................................................................................................... 75
	5.2	Market and Sales Overview ............................................................................................ 83
	5.3	Human Resources ............................................................................................................ 91
	5.4	Environmental Protection Expenditures ......................................................................... 91
	5.5	Labor Relations ............................................................................................................... 91
	5.6	Important Contracts ......................................................................................................... 96
VI.	Financial Information ............................................................................................................ 99
	6.1	Five-Year Financial Summary......................................................................................... 99
	6.2	Five-Year Financial Analysis ........................................................................................ 104
	6.3	Audit Committee Report in the Most Recent Year ....................................................... 108
	6.4	Consolidated Financial Statements for the Years Ended December 31, 2019 and
		2018, and Independent Auditors’ Report ....................................................................... 109
	6.5	Financial Statements for the Years Ended December 31, 2019 and 2018, and
		Independent Auditors’ Report ....................................................................................... 109
	6.6	Disclosure of the Impact on Company’s Financial Status Due to Financial
		Difficulties: . ................................................................................................................. 109

VII.	Review of Financial Conditions, Operating Results, and Risk Management ................. 110	Review of Financial Conditions, Operating Results, and Risk Management ................. 110
	7.1	Analysis of Financial Status .......................................................................................... 110
	7.2	Analysis of Financial Performance ............................................................................... 111
	7.3	Analysis of Cash Flow .................................................................................................. 111
	7.4	Major Capital Expenditure Items .................................................................................. 112
	7.5	Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement
		Plans and the Investment Plans for the Coming Year ................................................... 112
	7.6	Analysis of Risk Management ...................................................................................... 112
	7.7	Other Important Matters ................................................................................................ 116
VIII.	Special Disclosure ................................................................................................................. 117
	8.1	Summary of Affiliated Companies ................................................................................ 117
	8.2	Private Placement Securities in the Most Recent Years: ............................................... 126
	8.3	Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent
		Years: ............................................................................................................................. 126
	8.4	Special Notes: ................................................................................................................ 126

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: .......... 126

I.Letter to Shareholders

1.1 2019 Operating Report

In 2019, the global economy fell into a synchronous slowdown. According to the statistics of the International Monetary Fund, the economic growth rate was only 3%, which is the lowest since the global financial crisis, and represents the most serious decline since the synchronous global economic recovery to an annual growth rate of 3.8% in 2017. However, the sluggish economic growth this time is mainly due to the uncertainty caused by global tariff barriers and fierce trade conflicts, resulting in the decline of both capital investment and demand for goods, and the slowdown of global economic growth.

Due to the continuous new panel capacity in mainland China, the oversupply of the panel market, the continuous decline of the panel price, and the impact of the tariff increase due to the Sino-US trade war, the overall operation and growth of the Company has been severely challenged. The consolidated revenue in 2019 was NT$252 billion, a decline of 9.8%, with an after-tax net loss of NT$17.4 billion and a loss per share of NT$1.77. However, owing to the hard work of the Company's business team, the business continues to generate a positive cash flow with an annual EBITDA of 6.0%; the overall financial status is still stable.

After a whole year of refinement, and with the promulgation of automobile emission standards, the finalization of the 5G telecommunication license requirement, and the easing of Sino-US trade conflicts, the supply chain of the panel industry has made competitive and cooperative adjustments; some of the industry peers have stopped production and even closed down, which greatly improved the market supply and demand situation. In the fourth quarter, although various economic data have shown a gradually better trend, there are still tense geopolitics and oil and raw material price fluctuations, as well as the chain effect caused by the COVID-19 pandemic. The Company will continue to adjust its business strategy, improve its technology, develop new applications, tap on products with high-end technology, develop emerging markets, and create maximum benefits for the Company and its shareholders through the improvement of technical quality.

Looking forward to the future, the management team and all the employees are dedicated to and spare no efforts to bring greater benefit to the shareholders.

(I) Result of Business Plan

In 2019 our consolidated revenue was NT$ 251,971,209 thousands, which decrease NT$27,404,906 thousands or 9.8% by compared with the 2018 yearly revenue of NT$ 279,376,115 thousands. In 2019 our annual profit after tax which belonged to mother company was NT$17,442,990 thousands, and the annual loss per share is NT$1.77.

(II) Budget Implementation

No financial forecast disclosed for 2019, therefore not applicable to disclose budget implementation.

(III) Financial Analysis from 2018 to 2019

	Item	2018	2019
Finacial Structure Analysis	Debt to Asset Ratio(%)	38.10	37.23
	Long-term Capital toproperty, plant and equipment(%)	141.15	129.16
Debt-paying ability	Current Ratio(%)	141.12	120.12
	Quick Ratio(%)	113.81	88.51
	Times Interest Earned(Times)	12.59	(15.02)
Profitability	Return on Assets(%)	0.64	(4.25)
	Return on Shareholders’ equity (%)	0.86	(7.16)
	OperatingIncome to Paid-in Capital Ratio(%)	4.86	(20.53)
	Pre-tax Income to Paid-in Capital Ratio(%)	6.60	(17.02)
	Net Margin(%)	0.80	(6.92)
	Basic after-tax EPS(NT$)	0.22	(1.77)

(IV) Research and development

In terms of TV panels, the Company initiated the 8.6 generation panel production line planning and expanded the 50 inch panel production capacity. Subsequently, a number of new panel manufacturers followed the Company's footsteps to invest in more than four 8.6 generation panel factories, successfully pushing the 50 inch specification to the mainstream market position to become the main product for TV-brand oriented customers. These newcomers jointly develop high-quality and high-value-added products with the Company, and jointly grasp business opportunities and share achievements with the Company.

Since 2018, the Company's TV panel products have also been extended from the original OC (open-cell) and panel modules to TV sets, covering all the major sizes of 24"/32"/40"/50"/65", and expanded product exports. Compared with OC products of the same size, TV set products can not only create more than 2 to 2.5 times of revenue, but also extend the related technology to high-level and large-scale products, among which the most representative one is the world's largest 120 inch 8K high-specification TV. Moreover, in addition to entering the market of TV sets, the Company also plans to enter the public display (PID) market, which has not only a high gross profit margin, but also a more than 20% annual growth potential in the future.

In the aspect of notebook panel, the Company cooperates with major brand customers and leads the world in introducing LTPS (low temperature polycrystalline silicon)/IGZO advanced process technology into privacy displays, and also developed products with a new aspect ratio of 3:2/16:10, and leads the world in launching the 16.1 inch FHD to be exclusively provided to world-class customers. In addition, the Company has developed products with a high contrast ratio of 3000:1 (compared with the industry peers’ 800 ~ 1000:1) and narrow-border products to greatly improve the display quality. The Company has also integrated various advanced technological breakthroughs to promote the performance of TFT-LCD panels in cost structure, quality reliability and other key factors to surpass OLED panels.

In terms of small and medium-sized panels, the Company is making a diversified development in sizes ranging from 1.4 inches to 10 inches for wide applications in mobile devices and consumer electronic products, including smart phones, functional phones, tablets, home appliances, smart speakers, smart watches, VR head-mounted displays (HMDs), digital cameras, multi-function printers, entertainment game machines and automotive electronic displays. On technology, we will continue to expand the penetration of low-temperature polycrystalline silicon (LTPS) and IPS technology to meet the market demand of high resolution and wide perspective, while providing lighter, thinner, power-saving, embedded integrated touch, free form and full screens products to enhance the value; we will effectively combine the Company's advanced technology and large-scale production capacity, and closely cooperate with major global customers to achieve a win-win situation.

With the application of touch technology in various mobile devices, the Company is actively developing an integrated touch solution to successfully improve the optical and integrated functions of touch panel. The Company leads the industry in introducing the TOD (Touch on Display) touch solution, which is widely used in mobile phones, tablets and notebook products. With the development of embedded integrated touch technology and the mature supply chain, we have also developed the TID (Touch in Display) touch solution, making the product appearance simpler and lighter. At this stage, we are trying to inject 3D touch DST (Deep Sensing Technology) technology and the active stylus solution under our existing TID (Touch in Display) architecture, and continuously develop new technologies and actively apply them to mobile phones, tablet computers, consumer electronics, automotive and IT products to provide customers and consumers with better product experience, with the goal of becoming a comprehensive touch integrated solution provider covering displays, touch screens and protective glasses.

(V) Digital Transformation of the Company

The Company believes that industry 4.0 will change the manufacturing mode and upgrade it from touch-control one-stop production line automation 3.0 in 2012 to "zero touch" light-off factory in 2019; through AI engineering key technology, the automatic manufacturing technology will gradually improve, and extend upward to the glass supply chain’s supply and demand management and downward to intelligent

logistics on the consumer end, and from manufacturing, quality and supply chain management to intelligent office; through AI human-machine cooperation, the talent value will be improved to replace repetitive routine work to show the effect of AI intelligent interconnection, solid management and doubled yield in quality. AI intelligent factory will drive the trend of high quality and high specification, which is the main axis of value-added strategy of Innolux Corporation.

The Company uses big data to connect the intelligent factory, supply chain, intelligent office and management intelligence of the front-end TFT LCD factory and the back-end LCM module to achieve intelligent manufacturing and flexible decision-making to achieve win-win through interconnection, and solve production problems quickly with intelligent manufacturing.

The Company's digital transformation comes three stages:

1.Industry 4.0 promotion: combining big data and AI to connect the front and back end intelligent factories
Front end: introducing process intelligence (such as intelligent error proofing, intelligent quality, etc.), equipment intelligence (such as intelligent image of automatic equipment plus nonlanding production, intelligent warehousing and logistics, etc.), management intelligence (such as intelligent planning and scheduling, intelligent factory security, etc.) to multiply the benefits of intelligent factory. Through AI big data and actual process monitoring and management, the quality yield is greatly improved, and the number of major abnormal cases (AERB) is decreasing year by year.
Back end: combining automation and AI Artificial Intelligence, and using cross-plant co-structuring and parallel implementation to reduce the manpower demand for cumbersome process by handling, assembling and testing robots to decrease the number of employees from 100,000 in 2015 to 55,000, saving up to NT$7 billion in HR cost.
2.Intelligent management office: introducing the intelligent management office to make improvements from the three aspects of technology, product and brand to promote the technology platform; the products have the advantages of specification priority, cost differentiation and quality differentiation; achieve the promotion of the Company's brand value and customer support through commercial development.
Double-track transformation for innovation: The Company is building its strength in the panel industry, focuses on technology and manufacturing, and devotes itself to transformation to develop and provide one-stop customized production, and combine research and development, system, manufacturing and sales to provide an all-round panel product solution and becomes the best strategic partner of customers.

In the future, based on "playing a one-stop, building big data, sharing smart finance and creating a win-win situation", the Company outlines Taiwan's supply chain layout strategy and vision for the world's factories, and joins hands with the supply chain to upgrade to the world's leading intelligent factory with years of automation manufacturing strength.

1.2 Business Plan for 2020

(I) Finding a New Foothold in Display

Consolidating customers: quickly reflecting market changes, strengthening customer relations, providing a complete panel production line and supply chain from TFT to the whole machine, and expanding the whole machine production line in Taiwan to flexibly respond to the impact of Sino-US trade tariffs.
Expanding the niche and the demand for online conference, online education and home work applications: expanding the new application of PID (public information display), IWB (interactive whiteboard) and outdoor TV.
3 -
Integrating technical resources: improving the market share of automotive tier1, and pushing the automotive mounted display forward to the craft-grade high specification.
Prospective technology research and development: expanding new capacity for technologies such as ultra-narrow frame, and high-contrast and e-competition panel.

(II) New Opportunities in Non-display

Developing all-round medical services: providing one-stop design and manufacturing services.
Developing new businesses: continuing to develop the energy for innovation and expanding high value-added products to mini LED, TFT sensor, FPA (flat panel antenna) LEO low-orbit communication satellite communication, and PLP (panel level package) advanced semiconductor packaging.

(III) Expanding the parallel implementation of "Zero Touch" Light-off Factory

Promoting intelligent manufacturing, automation tooling and equipment development, to develop the Company into a manufacturer with intrinsic AI service.

In 2020, the Company will prudently control cash flow and capital expenditure, and continue to invest in technology upgrading and cost optimization, actively incubate new businesses, make continuous progress in the severe competitive environment, and improve business performance. Finally, I wish you all good health and good luck, thank you.

Chairman: Jin-Yang Hung

Manager: Chu-Hsiang Yang

Chief Accountant: Chin-Yuan Chang

II. Company Profile

2.1 Date of Incorporation: January 14 2003

2.2 Company History

January2003	Inception and registration of the Company
March 2003	Invested in a subsidiary,Innolux HoldingLtd.
May2003	Ground breakingceremonyfor 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	Machineryinstallation started in the TFT factoryand Color Filter Plant In Jhunan
September 2004	Birth of the first TFT-LCDpanel
October 2004	Invested in Innocom Technology (Shenzhen)Ltd. in China
January2005	Public issuance of the Company’s shares approved bythe Financial SupervisoryCommission
February2005	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 bythe Council of Labor Affairs,Executive Yuan
October 2006	Shares became listed on the Taiwan Stock Exchange on 24 October
November 2006	The Boardpassed the resolution of mergingwith Jemitek Electronics Corp. on 21 November
March 2007	Completed merger with Jemitek Electronics Corp.
June 2007	Invested in InnoJoyInvestment 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	Toppingout ceremonyfor the sixthgeneration factoryof 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 amongDeloitte TechnologyFAST50 Taiwan in terms ofprofitgrowth
September 2008	Entered into a 5-year NT$24 billion and US$200 million syndicated loan contract with a syndicate of 20 banks includingMega International Commercial Bank
	Selected as one of the 12 units in the national industrial group by the Water Assessment Programme organized bythe Ministryof Economic Affairs
October 2008	Received the Bronze Award of the National QCC Competition from the Corporate Synergy Development Center of the Industrial Development Bureau,Ministryof 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, Ministryof 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 bythe 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 16949qualitysystem certification
October 2009	Innolux Displayannounced a merger with TPO Displays Corp.
	Honored with the “Energy Conservation Outstanding Innovation Award” by the Bureau of Energy, Ministryof Economic Affairs
November 2009	Innolux Displayannounced 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,Ministryof Economic Affairs
	Granted the excellent award in low carbon production and waste reduction by the Industrial Development Bureau,Ministryof 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 environmentalprotection bythe Science Park Administration
January2010	Obtained “Labelingof EnergySavingAction” from the Environmental Protection Administration
February 2010	Granted the excellent award for outstanding achievement on training and management for occupational health bythe 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 bythe 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 OutstandingOptoelectronics 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” by the 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 desktopLCD monitors and LCD TVs
Feburary2011	Honor Light Services Limited revoked
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 displaymodule
May 2011	Kobe site was awarded the Best Safety & Hygiene Company by the Safety Management Committee of Kobe, Japan. Chi Mei EnergyNetherlands revoked
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,Ministryof 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 RestructuringAgreement 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 outstandingunit for hiringdisabledpersons bysurpassingthe 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	Toptch 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 emitting display (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 Corprenamed 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 NanjingInnolux 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 LuckyInvestment 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. liquidated 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. liquidated Sonic Trading Limited liquidated Innocom Technology (Xiamen) Co., Ltd. liquidated Merger of Nanhai Chi Mei Electronics Ltd. and Nanhai Chi Mei Optoelectronics Ltd., in which Nanhai Chi Mei Electronics Ltd. was the survivingcompany
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 City2013
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 Innolux’s 28-inch 4K2K and 23.6-inch touchpanel 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 TechnologyUSA Inc.
October 2014	TPO Displays Japan K.K. renamed as Innolux TechnologyJapan 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 HongKongLtd renamed as Innolux HongKongLtd.
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 TechnologyEurope B.V.
February 2015	Signed an agreement for a syndicated credit line of NT$68.5B with Bank of Taiwan and 15 other banks Innocon Technology(Chengdu)Co.,Ltd. revoked
March 2015	The company terminated the debt restructuring negotiation and canceled the debt negotiations Honored with the Enterprise Innovation Award of Excellence
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 bythe Global Views
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 SustainabilityWorld 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 Innolux marked 100 in disclosure score and listed as CDLI (Carbon Disclosure Leadership Index) 2nd year in a row in CDP. Innolux honored 2015 Taiwan Corporate Sustainability Report Award-Gold Award. Gold union investments Limited liquidated Awarded the MOL TTQS Silver award
June 2016	Ningbo site was awarded an Outstanding Foreign Company Contribution Award by China ZhejiangInvesetment and Trade Symposium.
July 2016	Awarded Award for International Trade for consecutive 6 years and Target Market Contribution Award, the only multiple winner in 2016 Fab 8 awarded "Best Performance in Water-Saving Unit" by the Water Resources Agency, Ministry of Economic Affairs.
October 2016	Fab3 and T2 plant passed the Green Factory-Clean Production Certification of Industrial Development Bureau,Ministryof Economic Affairs.

November 2016	Awarded Taiwan Corporate Sustainability Awards-- Corporate Sustainability Report Golden Awards of ICT group. Awarded Taiwan Corporate Sustainability Awards--Sustainable Water Management Awards for its outstandingwater managementperformance
December 2016	Innolux was granted the Innovative Product Awards by Hsinchu Science Park for its automotive display technologies: S Shape Display, 1-axis Curve Display, Curve with Touch Display Merger of the subsidiaries Ningbo Innolux Display Ltd. and Ningbo Innolux Technology Ltd., in which Ningbo Innolux DisplayLtd. was the survivingcompany
Feburary 2017	Honored with Taiwan Excellence Achievement Award and Taiwan Excellence Gold Award Asiaward Investment Limited liquidated Ningbo Innolux Logistics Limited liquidated
March 2017	Main Dynasty Investment Limited liquidated Sun DynastyDevelopment Limited liquidated
August 2017	Innolux ranks the 19th of the Large Enterprise Group in "2017 Common Wealth Magazine's Coporate CitizenshipAward"competition
September 2017	Best China Investments Limited liquidated Magic Sun Limited liquidated Mega Chance Investments Limited liquidated
October 2017	Merger of the subsidiaries Nanjing Innolux Optoelectronics Ltd. and Kunpal Optoelectronics Ltd., in which NanjingInnolux Optoelectronics Ltd. was the survivingcompany
December 2017	Merger of the subsidiaries Innolux Optoelectronics Japan Co., Ltd and Innolux Technology Japan Co., Ltd in which Innolux Optoelectronics Japan Co., Ltd was the surviving company and change the company name into Innolux Japan Co. Ltd Merger of the subsidiaries Innolux Technology Europe B.V. and Innolux Optoelectronics Eurpoe B.V. in which Innolux Technology Europe B.V. was the surviving company and change the companyname into Innolux Europe B.V.
February 2018	Merger of the subsidiaries Innolux Optoelectronics USA, Inc. and Innolux Technology USA, Inc. and Innolux Corporation, in which Innolux Optoelectronics USA, Inc. was the surviving company and change the companyname into Innolux USA,Inc.
August 2018	Innolux 3D touchphone won Taiwan OutstandingProduct Award
September 2018	Innolux named DJSI World and DJSI Emerging Markets Index 2018 Innolux Optoelectronics GermanyGmbH liquidated
October 2018	VAP Optoelectromics(NanJing)Corpliquidated
November 2018	Innolux Tainan Fab 3 awarded EEWH-EC Innolux awarded 2018 Taiwan Excellence Gold with DST 3D Touch technology Innolux awarded 2018 Taiwan Corporate SustainabilityTOP 50 Awards
January2019	Golden Achiever International Limited liquidated
July2019	The companywon the 2019 Best Companies to Work for in Asia 2019 Awards
August 2019	Bright Information Holding Ltd. Liquidated The company was selected as the 2019 CSR Corporate Citizenship Award of the World Magazine-Top50 Enterprises in the Large Enterprise Group
September 2019	Innolux named DJSI World and DJSI EmergingMarkets Index 2019
November 2019	The company received the "2019 Sports Enterprise Certification" from the Ministry of Education The company was awarded the "TOP50 Taiwan Enterprise Sustainability Award", the "Taiwan Enterprise Sustainability Report Gold Award" and the best individual performance "Circular Economy Leadership Award" by the Taiwan Sustainable Energy Research Foundation. The company won the 2019 `` Taiwan Excellence Award Quality Award '' The capital reduction is NT$97,110,719,770
December 2019	Innolux Tainan Fab 3 ecological community was selected as the community-type green building that won the Excellent Green BuildingAward in 2019
January2020	Issued the first overseas unsecured conversion of corporate bonds of US $ 300 million

10 -

III. Corporate Governance Report

3.1 Organization

3.1.1 Organization Chart

==> picture [433 x 266] intentionally omitted <==

11 -

3.1.2 Major Corporate Functions

Department	Functions
President’s Office	Manage the businesses of the Company according to the resolutions passed by the shareholders’ meetings and the Board of directors
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.
Mobile Device Center	Responsible for the sales, marketing, and product development of LCD wireless communication and audio-visual systems as well asproduction ofpanelproduction.
AAI Product Center	Responsible for vehicle and aerospace product market development and customer service, development and testing of new technologies and new processes, and product manufacturingrelated matters.
II Product Center	Responsible for information and general product market development and customer service, new technology and new process development and testing, product manufacturingrelated matters
TV Product Center	Responsible for market development,customers service and development,test new technologis and newprocesses of TVproducts.
TechnologyDevelopment Center	Develop, improve, verify, and test new technologies and newprocesses.
LCD Panel ManufacturingCenter	Responsible for theproduction of large-size LCDpanelproducts.
Module ManufacturingCenter	Responsible for theproduction of LCD moduleproducts.
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.
Business Management Center	Responsible for the industrial engineering and information system of the Company, work-flow efficiency improvement, capacity expansion planning, production efficiency enhancement, hardware and software infrastructure, and information system construction.
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.
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.
Finance & Accounting & Business Managament Center	Coordinate the Business Managament, capital operating system, profits and losses of cost accounting,business strategy consultation,of the Company, provide financial and accounting information, manage investment plans and risk aversion, and manage overall financial, investment, stock, accounting, and tax matters.
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.
Legal Affair	Responsible for drafting and reviewing contracts; providing business-related legal consultation services.

12 -

3.2 Directors and Management Team

3.2.1 Directors

							April 21,2020;Shares	April 21,2020;Shares	April 21,2020;Shares	April 21,2020;Shares	April 21,2020;Shares	April 21,2020;Shares	April 21,2020;Shares	April 21,2020;Shares	April 21,2020;Shares	April 21,2020;Shares	April 21,2020;Shares	April 21,2020;Shares	April 21,2020;Shares
Title	Nationality/ Place of Incorporation	Name (Note 1)	Gender	Date Elected (Note2)	Term (Y)	Date First Elected	Shareholding when Elected		Current Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience (Education)	Other Position	Executives, Directors who are spouses or within two degrees of kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	Relation
Chairman	TW	Jin-Yang Hung	M	2019/6/20	3	2018/6/21	－	－	150,000	－	－	－	－	－	MBA, Columbia University, USA Department of Business Administration, Special Assistant to Chairman, Innolux Corporation Associate Vice President, Foxconn Group President, TCC International Holdings Limited Managing Director, BNP Paribas Asset Management Executive Director, Goldman Sachs Group, Inc	Note 3	－	－	－
Institutional Director	TW	Hyield Venture Capital Co.,Ltd	－	2019/6/20	3	2002/11/21	176,311,219	1.82	176,311,219	1.82	－	－	－	－	－	－	－	－	－
	TW	Representative : Chu-Hsiang Yang	M			2019/06201	N.A.	－	925,585	0.01	7,953	－	－	－	M.S., Chemical Engineering, National Central University Vice President ,Innolux Corporation Dircetoc, Chi Mei Optoelectronics Corporation Deputy Section Manager, Chunghwa Picture Tubes, Ltd.	Note 4	－	－	－
Institutional Director	TW	Hyield Venture Capital Co.,Ltd	－	2019/6/20	3	2002/11/21	176,311,219	1.82	176,311,219	1.82	－	－	－	－	－	－	－	－	－
	TW	Representative : Chin-Lung Ting	M			2016/6/24	N.A.	－	1,087,063	0.01	－	－	－	－	M.S., Graduate Institute of Electronics Engineering, National Taiwan University Executive V P ,Innolux Corp Manager, Unipac Optoelectronics Corp.	Note 5	－	－	－

Title	Nationality/ Place of Incorporation	Name (Note 1)	Gender	Date Elected (Note2)	Term (Y)	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 who are spouses or within two degrees of kinship	Executives, Directors who are spouses or within two degrees of kinship	Executives, Directors who are spouses or within two degrees of kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	Relation
Independent Director	TW	Chi-Chia Hsieh	M	2019/6/20	3	2013/6/19	－	－	－	－	－	－	－	－	Ph. D of Mechanical Engineering, Santa Clara University, USA Chairman,Microelectronics TechnologyInc.	Note 6	－	－	－
Independent Director	TW	Zhen-Wei Wang	M	2019/6/20	3	2011/6/9	－	－	－	－	－	－	－	－	Department of Electronic Engineering, National Chiao Tung University NCCU CEO ,Quanta Computer Inc. General Manager,Quanta Computer Inc.	Note 7	－	－	－
Independent Director	HK	Stanley Yuk Lun Yim	M	2019/6/20	3	2013/6/19	－	－	－	－	－	－	－	－	Honorary Doctor of Business Administration A founder and Executive Director of S.A.S. Dragon HoldingLimited	Note 8	－	－	－

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

Note 2：The terms of BOD members reelected on 2019/06/20and effective on 2019/07/01.

Note 3：CEO of Innolux Corporation

Concurrently as chairman of the board：InnoJoy Investment Corporation (Statutory representative),Yuan Chi Investment Co., Ltd.(Statutory representative)

Concurrently as director：CarUX Holding Limited,CarUX Technology Pte. Ltd,Innolux Holding Ltd.,Innolux Hong Kong Holding Limited,Innolux Hong Kong Limited,Innolux Optoelectronics

Hong Kong Holding Ltd.,Keyway Investment Management Ltd.,Lakers Trading Ltd.,Landmark International Ltd.,Leadtek Global Group Ltd.,Rockets Holding Ltd.,Stanford Developments Ltd.,Suns Holding Ltd.,Toppoly Optoelectronics (B.V.I.) Ltd.,Toppoly Optoelectronics (Cayman) Ltd.,Warriors Technology Investments Ltd.,FI Medical Device Manufacturing Co. (Statutory representative), CarUX Technology Inc. (Statutory representative)

Note 4：COO of Innolux Corporation

Concurrently as chairman of the board：InnoCare Optoelectronics Corporation (Statutory representative)

Concurrently as director：CarUX Holding Limited , Innolux Japan Co.,Ltd. ,Innolux Singapore Holding Pte. Ltd., Yuan Chi investment co., Ltd (Statutory representative), Chi Lin

Optoelectronics CO., LTD. (Statutory representative), InnoJoy Investment Corporation (Statutory representative), FI Medical Device Manufacturing Co. (Statutory representative), CarUX Technology Inc. (Statutory representative)

Note 5：Executive VP of Innolux Corporation

Concurrently as chairman of the board：GIO Optoelectronics Corp., Shenzhen PixinLED Technology Co.,Ltd., CarUX Technology Inc. (Statutory representative)

Concurrently as director：CarUX Holding Limited,CarUX Technology Pte. Ltd,Double Star Inc.,Innolux Japan Co., Ltd,Innolux Optoelectronics Philippines Corp. ~~,~~

Note 6：Concurrently as chairman of the board：IQE Taiwan Corporation, Jupiter Network Corp., Welltop Technology Co. Ltd, Taicom Capital Limited
Concurrently as independent director：AcBel Polytech Inc.

Concurrently as director：Microelectronics Technology Inc.Advanced Wireless Semiconductor Company, Bright Led Electronics Corp., Sasson Capital (Statutory representative), Kopin

Corporation Inc., T’Cement(Statutory representative), Bright Crystal Company Limited,TCM Limited, Jiang Yang Technology (Wuxi) Co., Ltd. (Statutory representative) Note 7：Concurrently as independent director: Simplo Tchnology Co.,Ltd., ,Casetek Holdings Limited, Phison Electronics Corp.

Concurrently as director representativeITIC Co., Ltd, Give-Circle Co.,Ltd.,

Concurrently as director: B Current Impact Investment ,Janus Technologies, Inc.,Exyte AG

Note 8：The Justice of the Peace Bronze Bauhinia Star, President of the Hong Kong Justices of Peace Association, Member of Shanghai Municipal Committee of CPPCC,Vice President of Shanghai-Hong Kong Economic Development Association, Honorary President of the Hong Kong Committee of Friends of the Yunfu CPPCC, Vice President of Hong Kong Electronics Industry Honor Society, Honorary President of Hong Kong Trade Services Association, Honorary Chairman of Hong Kong Baptist University Foundation, Renji Hospital Advisory Board Forever Consultant Vice Chairman of the Tsuen Wan District Juvenile Police Honorary Chairman's Association, Chairman of the Tsuen Wan District Civic Education Committee, Honorary Advisor of Hong Kong Hung Hom Federation of Industry and Commerce
Note9：Where the chairperson and president or equivalent position (highest level executive officer) is the same person, the spouse, or a first-degree relative, provide information on the reason, reasonableness, necessity, and future improvement measures (such as increasing the number of independent director seats and more than half of all directors not concurrently serving as employees or executive officers)：

The Company’s CEO position is responsible for the sustainable development and long-term business strategy of the Company, while the President and CFO position is responsible for the planning and management of the Company's daily operation. The responsibilities of the Chairman and CEO position and the President and CFO position are clearly defined for an integrated effect. The Chairman of the Company closely communicates with the directors about the Company's operation and planning in order to implement the Company's corporate governance. In the future, the Company plans to increase the number of independent directors to enhance the functions of the board of directors and strengthen the supervision function.

Major shareholders of the institutional shareholders

Major shareholders of the institutional shareholders	Major shareholders of the institutional shareholders
April 21,2020
Name of Institutional shareholders	Major shareholders
Hyield Venture Capital Co., Ltd.	Hon Hai Precision Components Co., Ltd. (97.95%), Pao Shin International Investment Co.,Ltd.(2.05%)

Major shareholders of the Company’s major institutional shareholders

Major shareholders of the Company’s major institutional shareholders	Major shareholders of the Company’s major institutional shareholders
April 21,2020
Name of Institutional Shareholders	Major shareholders
Hon Hai Precision Ind. Co., Ltd. (Note)	Terry Tai-Ming Gou (9.68%), CTBC Terry Tai-Ming Gou Trust account (2.89%), Citi Managed Government of Singapore Investment accounts (1.85%), New Labor Pension Fund(1.62%) JPMorgan Managed Advanced Stars advanced aggregate International Equity Index(1.50%), Standard Chartered hosting Vatican Gardner emerging market equity index fund account (1.23%), Citi Bank hosted Norges Bank Investment account(1.21%), Citigroup hosting Hon Hai Precision Ind. Co. Ltd. Depositary Receipts account (1.05%), Standard Chartered Hosting Fidelity light called Trust: Fidelity Low of shares of the Fund (1.03%) Fubon Life Insurance Co.,Ltd.(1.01%),
Pao Shin International Investment Co.,Ltd.	Hon Hai Precision IndustryCo.,Ltd.(100%)

Note: The information is derived from the close of registrar information of the company dated 25 April 2020.

16 -

Professional qualifications and independence analysis of directors

Criteria Name	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)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	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	11	12
Jin-Yang Hung	－	－	V	－	－	V	V	V	V	V	V	V	V	V	－	－
Hyield Venture Capital Co., Ltd Chu-HsiangYang	－	－	V	－	－	V	V	V	V	V	V	V	V	V	－	－
Hyield Venture Capital Co., Ltd Chin-LungTing	－	－	V	－	－	V	V	V	V	V	V	V	V	V	－	－
Chi-Chia Hsieh	－	－	V	V	V	V	V	V	V	V	V	V	V	V	V	1
Zhen-Wei Wang	－	－	V	V	V	V	V	V	V	V	V	V	V	V	V	3
Stanley Yuk Lun Yim	－	－	V	V	V	V	V	V	V	V	V	V	V	V	V	－

Note: If the director meets any of the following criteria in the two years before being elected or during the term of office, please check "V" the corresponding boxes. 1. Not an employee of the Company or any of its affiliates.
Not a director or supervisor of the Company or any of its affiliates (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
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 others' names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks 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 a manager in (1) or personnel in (2) and (3).
Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the Company's outstanding shares, a top five shareholder, or appointed as the Company's director or supervisor in accordance with Article 27, Paragraph 1 or 2 of the Company Act (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
Not a director, supervisor, or employee of other companies controlled by the same person with over half of the Company's director seats or shares with voting rights (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
Not a director, supervisor, or employee of another company or institution who is the same person or spouse of the Company's chairperson, president or equivalent position (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
Not a director, supervisor, or executive officer of a specific company or institution with financial or business dealings with the Company, or shareholder with 5% or more shares of the Company (not applicable in cases where the specific company or institution holds 20% or more but less than 50% of the Company's outstanding shares, and is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
Not a professional individual who, or an owner, partner, director, supervisor, or manager of a sole proprietorship, partnership, company, or institution that audited or provided commercial, legal, financial, or accounting services for total compensation not exceeding NT$500,000 in the most recent two years to the company or to any affiliate of the company, or a spouse thereof. This does not apply to members of the Remuneration Committee, Public Tender Offer Review Committee, or Merger and Acquisition Special Committee performing duties in accordance with the Securities and Exchange Act or laws and regulations related to mergers and acquisitions.
Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company; 11. Not having any of the situations set forth in Article 30 of the Company Act of the ROC.
Not a government agency, juristic person, or its representative set forth in Article 27 of the Company Act of the ROC.

3.2.2 Management Team

													April 21,2020 Managers who are Spouses or Within Two Degrees of Kinship Title Name Relation －－－－－－－－－－－－－－－－－－	April 21,2020 Managers who are Spouses or Within Two Degrees of Kinship Title Name Relation －－－－－－－－－－－－－－－－－－	April 21,2020 Managers who are Spouses or Within Two Degrees of Kinship Title Name Relation －－－－－－－－－－－－－－－－－－
Title	National ity	Name Note 1	Gender	Date Effective	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 &CEO	TW	Jin-Yang Hung	M	2018/6/21	150,000	－	－	－	－	－	MBA, Columbia University, USA Department of Business Administration, Special Assistant to Chairman, Innolux Corporation Associate Vice President, Foxconn Group President, TCC International Holdings Limited Managing Director, BNP Paribas Asset Management Executive Director, Goldman Sachs Group, Inc	Note 2	－	－	－
President &COO	TW	Chu-Hsiang Yang	M	2010/3/18 (Note3)	925,585	0.01	7,953	－	－	－	M.S., Chemical Engineering, National Central University Vice President ,Innolux Corporation Dircetoc, Chi Mei Optoelectronics Corporation Deputy Section Manager, Chunghwa Picture Tubes, Ltd.	Note 3	－	－	－
Executive Vice President	TW	Chin-Lung Ting	M	2020/2/19	1,087,063	0.01	－	－	－	－	M.S., Graduate Institute of Electronics Engineering, National Taiwan University Executive V P ,Innolux Corp Manager, Unipac Optoelectronics Corp.	Note 4	－	－	－
Vice President	TW	Yao-Tong Chen	M	2010/3/18	1,689,644	0.02	16,422	－	－	－	Master of EMBA, Sun Yat-sen University Manager, Hitachi Electronics Co., Ltd.	－	－	－	－
Vice President	TW	Hung-Wen Yang	M	2007/6/1	320,769	－	29,501	－	－	－	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	TW	Chih-Ming Chen	M	2010/3/18	47,193	－	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.	－	－	－	－

Title	National ity	Name Note 1	Gender	Date Effective	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
Assistant Vice President	TW	Ke-Yi Kao	M	2010/3/18	607,488	0.01	－	－	－	－	M.S., Chemical Engineering, University of Florida (U.S.A.) Assistant Manager, Unipac Optoelectronics Corp.	－	－	－	－
Assistant Vice President	TW	Tai-Chi Pan	M	2010/3/18	886,880	0.01	58,680	－	－	－	Graduated in Electrical Engineering of National Cheng Kung University Assistant Manager, Unipac Optoelectronics Corp.	Director of InnoCare Optoelectronic s Corporation(St atutory representative)	－	－	－
Assistant Vice President	TW	Kuo-Hsiung Kuo	M	2010/3/18	714,100	0.01	295,540	－	－	－	B.S., Mechanical Engineering, Waseda University, Japan	Note 5	－	－	－
Assistant Vice President	TW	Chung-Kuang Wei	M	2010/3/18	64,395	－	－	－	－	－	Ph. D, Institute of Photonics, National CT University Electronics Research Laboratories, Industrial Technology Research Institute	－	－	－	－
Assistant Vice President	TW	Jia-Pang Pang	M	2010/11/8	2,445,089	0.03	－	－	－	－	Ph. D, Electronics Engineering, University of Tokyo, Japan Deputy Director of TFT Manufacturing Plant, AU Optronics Corp.	－	－	－	－
Assistant Vice President	TW	Yu Shui Kuo	M	2014/12/1	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 Coordinator Of Ritek Corporation	－	－	－	－
Assistant Vice President	TW	Zheng-Xia Kuo	M	2013/9/23	499,802	0.01	28,633	－	－	－	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	Director of Ampower Holding Ltd.	－	－	－
Assistant Vice President	TW	Tien-Jen Lin	M	2013/9/23	1,043,554	0.01	115,305	－	－	－	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	Note 6	－	－	－

Title	National ity	Name Note 1	Gender	Date Effective	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
Assistant Vice President	TW	Qing-Hui Lin	M	2015/12/25	273,039	－	－	－	－	－	Master of institute of science engineering, National Central University R&D Director, Chunghwa Picture Tubes, Ltd.	Note 7	－	－	－
Assistant Vice President	TW	Jun-Yi Yu	M	2015/12/25	109,537	－	－	－	－	－	Master of Industrial Engineering,Texas Tech University Production Manager of AU Optronics Corp.	Note 8	－	－	－
Assistant Vice President	TW	Jing-Wun Huang	F	2019/7/3	600	－	－	－	－	－	Bachelor of Taipei Institute of Business Technology Assistant Manager of Unipac Optoelectronics Corp. Assistant Manager of Materials, AUO ptronics Corp.	－	－	－	－
Finance Supervisor	TW	Chien-Lang Lo	M	2014/5/7	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 9	－	－	－
Account Supervisor	TW	Kun- Ma	M	2020/4/21	69,771	－	－	－	－	－	Financial Management of Chung Hua University Bachelor Financial manager of TPO Displays Corp. Financial manager of Fupo Electronics Corporation	Note 10	－	－	－

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

Note 2：Please refer to Note 3 on page 14 of this annual report

Note 3：Please refer to Note 4 on page 14 of this annual report

Note 4：Please refer to Note 5 on page 14 of this annual report

Note 5：Concurrently as chairman of the board：Ningbo Innolux Optoelectronics Ltd., Ningbo Innolux Display Ltd.
Concurrently as director：Chi Mei Frozen Food Co., Ltd.

Note 6：Concurrently as director：Innolux Europe B.V., Innolux Technology Germany GmbH,

Note 7：Concurrently as chairman of the board：Foshan Innolux Optoelectronics Ltd., Foshan Innolux Logistics Co.

Note 8：Concurrently as chairman of the board：Innolux Hong Kong Holding Limited, Innolux Optoelectronics Hong Kong Holding Ltd., Shanghai Innolux Optoelectronics Ltd., Foshan Innolux Optoelectronics Ltd, Nanjing Innolux Optoelectronics Ltd., Innocom Technology (Shenzhen) Co., Ltd., Ningbo Innolux Optoelectronics Ltd.,
Note 9：Concurrently as director: Ningbo Innolux Optoelectronics Ltd., Ningbo Innolux Display Ltd., InnoJoy Investment Corporation (Statutory representative), Yuan Chi Investment Co., Ltd. (Statutory representative)
Note 10：Concurrently as supervisor: Ningbo Innolux Flnet Electronics Ltd., Nanjing Innolux Optoelectronics Ltd., Nanjing Innolux Technology Ltd.
Note 11：Where the chairperson and president or equivalent position (highest level executive officer) is the same person, the spouse, or a first-degree relative, provide information on the reason, reasonableness, necessity, and future improvement measures (such as increasing the number of independent director seats and more than half of all directors not concurrently serving as employees or executive officers)：Please refer to Note 9 on page 15 of this annual report

3.3 Remuneration of Directors, President, and Vice President

3.3.1 Remuneration to directors and independent directors

		Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands	Unit: NT$; Shares: thousands
Title	Name (Note 1)	Remuneration								Ratio of Total Remuneration (A+B+C+D) to Net Income (%)(Note8)		Relevant Remuneration Received by Directors Who are Also Employees								Ratio of Total Compensation (A+B+C+D+E+ F+G) to Net Income (%)(Note8)		Compensation Paid to Directors from an Invested Company Other than the Company ’ s Subsidiary
		Base Compensation (A) (Note 2)		Severance Pay (B)		Directors Compensation (C) (Note 3)		Allowances (D) (Note 4)				Salary, Bonuses, and Allowances (E) (Note 5)		Severance Pay (F) (Note 6)		Employees Compensation (G) (Note 7)
		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	Jin-Yang Hung(Note 9)	1,800	1,800	－	－	－	－	130	130	(0.01)	(0.01)	14,900	14,900	－	－	－	－	－	－	(0.10)	(0.10)	－
Institutional director	Hyield Venture Capital Co., Ltd	1,350	1,350	－	－	－	－	－	－	(0.01)	(0.01)	－	－	－	－	－	－	－	－	(0.01)	(0.01)	－
Institutional director	Chu-Hsiang Yang(Note 10)	－	－	－	－	－	－	90	90	－	－	13,360	13,360	122	122	－	－	－	－	(0.08)	(0.08)	－
Statutory representative	Chin-Lung Ting	－	－	－	－	－	－	130	130	－	－	10,688	10,688	78	78	－	－	－	－	(0.06)	(0.06)	－
	Jialian Investment Co.,	450	450	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－
Chairman
	Ltd(Note 11).

	I-Chen Investment Ltd. (Note	450	450	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－
Vice Chairman
	11).

Institutional director	Chih-Hung Shiao(Note 11)	－	－	－	－	－	－	20	20	－	－	5,441	5,441	187	187	－	－	－	－	(0.03)	(0.03)	－
Statutory representative	Chuang-Yi Chiu(Note 11)	－	－	－	－	－	－	20	20	－	－	－	－	－	－	－	－	－	－	－	－	－
	Innolux Education	450	450	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－	－
Institutional director
	Foundation(Note11)

Independent Director	Chi-Chia Hsieh	900	900	－	－	－	－	100	100	(0.01)	(0.01)	－	－	－	－	－	－	－	－	(0.01)	(0.01)	－
Independent Director	Bo-Bo Wang(Note 11)	450	450	－	－	－	－	20	20	－	－	－	－	－	－	－	－	－	－	－	－	－
Independent Director	Stanley Yuk Lun Yim	900	900	－	－	－	－	130	130	(0.01)	(0.01)	－	－	－	－	－	－	－	－	(0.01)	(0.01)	－
Independent Director	Zhen-Wei Wang(Note 12)	450	450	－	－	－	－	110	110	－	－	－	－	－	－	－	－	－	－	－	－	－

Please describe the policy, system, standard, and structure of remuneration to independent directors, and the correlation between duties, risk, and time input with the amount of remuneration: For the remuneration of independent directors, besides referring to results of director performance evaluations, the Remuneration Committee considers each director's degree of participation and contribution to the Company's operations, links the reasonableness and fairness of performance and risks to remuneration, considers the Company's business performance and the remuneration standards of competitors, and makes recommendations to the Board of Directors in accordance with the Company's Articles of Incorporation.
Other than as disclosed in the above table, the remuneration earned by Directors providing services (e.g. providing consulting services as a non-employee) to the Company and all consolidated entities in the latest fiscal year: None.

Note 1: Existing Directors as of the date 2019.

Note 2: Refers to directors’ remuneration paid in 2019. Note 3: The proposal of 2019 profit distribution has resolved by the board of director. Note 4: Refers to the relevant service execution fees of directors in 2019.

Note 5: Refers to the salaries, bonuses and special disbursement, etc. received as employees by directors in 2019.

Note 6: Refers to the amounts transferred to government authorities in 2019.

Note 7: The proposal of 2019 profit distribution has resolved by the board of director. Note 8: Ratio of total net income (Alone).

Note 9: Director Jin-Yang Hung was the legal representative of Jialian Investment Co., Ltd. from January to June 108, and was elected as the chairman of the board of directors by the board of directors after the general re-election on June.20 2019

Note10: Director Chu-Hsiang Yang was appointed as the legal representative of Hongyang Venture Capital Co., Ltd. on July 1, 2019 Note11: After re-election, resigned on July 1, 2019

Note12: Independent Director Zhen-Wei Wang was appointed on July 1, 2019

3.3.2 Remuneration of the President and Vice Presidents

Unit: NT$ thousands

														Unit: NT$thousands
Title	Name (Note 1)	Salary (A) (Note 2)		Severance Pay(B) (Note 3)		Bonuses and Allowances (C) (Note 4)		EmployeeCompensation(D)(Note 5)				Ratio of Total Compensation (A+B+C+D) to Net Income (%)(Note 6)		Compensation Paid to the President and Vice Presidents from an Invested Company Other than the Company’ s Subsidiary
		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 &CEO	Jin-Yang Hung	21,855	21,855	548	548	29,090	29,090	－	－	－	－	(0.30)	(0.30)	－
President &COO	Chu-Hsiang Yang
Excutive Vice President	Chin-Lung Ting(Note7)
Vice President	Yao-Tong Chen
	Hung-Wen Yang
	Chih-Ming Chen

Note 1: Existing Management as of the date of 2019. Note 2: Refers to remuneration paid in 2019. Note 3: Refers to amounts transferred to government authorities in 2019. Note 4: Refers to the bonuses, special disbursement. Note 5: The proposal of 2019 profit distribution has resolved by the board of director. Note 6: Ratio of total net income (Alone). Note 7: Dismissal on2019/3/1

	Range of Remuneration table	Range of Remuneration table
Range of Remuneration	Name of President and Vice President
	The company	All companies in the financial report
Less than NT$ 1,000,000
NT$1,000,000(inclusive)~NT$2,000,000(exclusive)
NT$2,000,000(inclusive)~NT$3,500,000(exclusive)	Chin-Lung Ting	Chin-Lung Ting
NT$3,500,000(inclusive)~NT$5,000,000(exclusive)
NT$5,000,000(inclusive) ~ NT$10,000,000(exclusive)	Yao-Tong Chen , Hung-Wen Yang, Chih-Ming Chen	Yao-Tong Chen , Hung-Wen Yang, Chih-Ming Chen
NT$10,000,000(inclusive) ~ NT$15,000,000(exclusive)	Jin-Yang Hung Chu-Hsiang Yang ,	Jin-Yang Hung Chu-Hsiang Yang ,
NT$15,000,000(inclusive) ~ NT$30,000,000(exclusive)
NT$30,000,000(inclusive)~NT$50,000,000(exclusive)
NT$50,000,000(inclusive)~NT$100,000,000(exclusive)
NT$100,000,000and above
Total	6	6

3.3.3 The top five executives with the highest remuneration

Unit: NT$ thousands

														Unit: NT$thousands
Title	Name (Note 1)	Salary (A) (Note 2)		Severance Pay (B) (Note 3)		Bonuses and Allowances (C) (Note 4)		Employee Compensation (D)(Note 5)				Ratio of Total Compensation (A+B+C+D) to Net Income (%)(Note 6)		Compensation Paid to the President and Vice Presidents from an Invested Company Other than the Company’ s Subsidiary
		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 &CEO	Jin-Yang Hung	6,662	6,662	－	－	8,238	8,238	－	－	－	－	(0.09)	(0.09)	－
President &COO	Chu-Hsiang Yang	4,133	4,133	122	122	9,227	9,227	－	－	－	－	(0.08)	(0.08)	－
Vice President	Hung-Wen Yang	3,504	3,504	176	176	4,586	4,586	－	－	－	－	(0.05)	(0.05)	－
Vice President	Chih-Ming Chen	3,776	3,776	177	177	3,824	3,824	－	－	－	－	(0.04)	(0.04)	－
Assistant Vice President	Yu Shui Kuo	3,114	3,114	108	108	4,186	4,186	－	－	－	－	(0.04)	(0.04)	－

Note 1: Fill in the remuneration information of the top five remuneration top managers in 2019 Note 2: Refers to remuneration paid in 2019. Note 3: Refers to amounts transferred to government authorities in 2019. Note 4: Refers to the bonuses, special disbursement. Note 5: The proposal of 2019 profit distribution has resolved by the board of director. Note 6: Ratio of total net income (Alone).

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

The company suffered a loss after tax for 108 years and no employee compensation was allocated

3.3.5 Comparison of Remuneration for Directors, Presidents, and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, 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, presidents, and vice presidents of the Company to the net income.

Year Item	Ratio of total remunerationpaidtonet income	Ratio of total remunerationpaidtonet income	Ratio of total remunerationpaidtonet income	Ratio of total remunerationpaidtonet income
	2018		2019 (Note )
	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements
Directors	3.42	3.42	(0.30)	(0.30)
Presidents&Vice Presidents	5.04	5.04	(0.30)	(0.30)

Note : The proposal of 2018 profit distribution has resolved by the Board of director.

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

Policies, Standards and Combination of Remuneration of the Company

According to the Company's remuneration policy, the remuneration of directors, the President and the Vice President shall be determined by the Remuneration Committee after considering the Company's operation performance, personal performance and responsibilities, and the relationship and rationality between the industry development trend and future operation risks, and by referring to the level of external remuneration market and similar positions in the industry; the board of directors shall comprehensively consider the amount of remuneration, payment method, etc. for a resolution.

The Company's Remuneration Scale and Its Relevance to Business Performance and Future Risks.

In accordance with Article 21 of the Company's Articles of Association, not less than 5% of the pre-tax profit of the current year before deducting the remuneration of employees and directors may be distributed as the employees’ remuneration, and not more than 1% of the amount may be distributed as the directors’ remuneration.

The Company allocates directors' and employees' remuneration based on the actual annual profit and the ratio specified in the Articles of Association. The Remuneration Committee shall make a proposal after considering the industrial environment, the Company's operating conditions, as well as the directors', the President’s and the Vice President 's responsibilities, contribution and goal achievement, and then submit it to the board of directors for resolution, and distribute the remuneration after reporting to the shareholders' meeting.

The reasonableness of the remuneration shall be reviewed by the Remuneration Committee and the board of directors, and the remuneration system shall be reviewed from time to time according to the actual business situation and relevant laws and regulations, so as to achieve a balance between the Company's sustainable operation and risk control.

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3.4 Implementation of Corporate Governance

3.4.1 Board of Directors

A total of 8 meetings of the Board of Directors were held in the previous(2019)period. Director attendance was as follows:

Title	Name	Attendance in Person	By Proxy	Attendance Rate (%)	Remarks
Chairman	Jin-YangHung	8	－	100.00%	Reappointed
Director	Hyield Venture Capital Co., Ltd Chu-HsiangYang	5	－	83.00%	Newappointed
Director	Hyield Venture Capital Co., Ltd Chin-LungTing	8	－	100.00%	Reappointed
Independent Director	Chi-Chia Hsieh	6	1	75.00%	Reappointed
Independent Director	Zhen-Wei Wang	6	－	100.00%	Newappointed
Independent Director	Stanley Yuk Lun Yim	5	1	83.33%	Reappointed
Vice Chairman	I-Chen Investment Ltd. Chih-Hung Shiao	2	－	100.00%	Dismissed
Director	Hyield Venture Capital Co., Ltd Te-Tsai Huang	2	－	100.00%	Dismissed
Independent Director	Bo-Bo Wang	2	－	100.00%	Dismissed

Note ： On June 20, 2019, the general shareholders' general election of directors was comprehensively reelected. The actual attendance (%) was calculated based on the number of board meetings and the actual number of attendances during his tenure.

Other mentionable items:

If any of the following circumstances occur,, the dates of the meetings, sessions, contents of motion, all independent directors’ opinions and the company’s response should be specified:
(1) Matters referred to in Article 14-3 of the Securities and Exchange Act.

Total 10 meetings of the BOD were held in the period from 2019 to the date of the annual report printed, all the resolutions pleaese refer the Page 58to Page 59 and there is no independent opinions remained of the meeting.

(2)Other matters involving objections or expressed reservations by independent directors that were recorded or stated in writing that require a resolution by the board of directors.：None.
If there are directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified:

Directors’Name	Contents of motions	Causes for avoidance	Voting
Stanley Yuk Lun Yim Bo-Bo Wang	Report to the company's 2018 functional committee member compensation	As the interested person in this case, according to the law to avoidance	Did not for the disucssion
Jin-Yang Hung Chih-Hung Shiao Chin-Lung Ting	The Compensation Committee is proposing manager bonus for the year of 2018	The board member and manager have a vital interest in the items on the agenda, therefore they avoided participating in the voting process in accordance with the Rules and Procedures for Meeting of the Board of Directors	Did not for the disucssion

27 -

Date	Directors’Name	Contents of motions	Causes for avoidance	Voting
7-17 2019/05.09	Jin-Yang Hung Chih-Hung Shiao Chin-Lung Ting	The Compensation Committee is proposing the manager bonus for the 2018	The board member and manager have a vital interest in the items on the agenda, therefore they avoided participating in the voting process in accordance with the Rules and Procedures for Meeting of the Board of Directors	Did not for the disucssion
8-3 2019/07/30	Chu-Hsiang Yang	The Compensation Committee is proposing manager salary structureadjustment	As the interested person in this case, according to the law to avoidance	Did not for the disucssion
	Jin-Yang Hung Chu-Hsiang Yang	Proposal for manager to participate in the employee shareholding trust plan	The board member and manager have a vital interest in the items on the agenda, therefore they avoided participating in the voting process in accordance with the Rules and Procedures for Meeting of the Board of Directors	Did not for the disucssion
8-7 2020/02/13	Chi-Chia Hsieh Zhen-Wei Wang Stanley Yuk Lun Yim	Report to the company's 2019 functional committee member compensation	As the interested person in this case, according to the law to avoidance	Did not for the disucssion
	Jin-Yang Hung Chu-Hsiang Yang	The Compensation Committee is proposing the manager bonus for the 2019	The board member and manager have a vital interest in the items on the agenda, therefore they avoided participating in the voting process in accordance with the Rules and Procedures for Meeting of the Board of Directors	Did not for the disucssion

3.Implementation of self-evaluations by the Company's Board of Directors:
(1) Evaluation cycle: Once a year
(2) Evaluation period: Performance evaluation for January 1, 2019 to December 31, 2019
(3) Scope of evaluation:scope covers the evaluation of the board as a whole, individual directors and functional committees.
(4) Evaluation method: the internal evaluation of the board and self-evaluation by individual board members (5) Evaluation items:
- A. The evaluation of the board as a whole: which should cover, Participation in the operation of the company;Improvement of the quality of the board of directors' decision making;Composition and structure of the board of directors;Election and continuing education of the directors; andInternal control.
- B. Individual directors: which should cover Alignment of the goals and missions of the company;Awareness of the duties of a director;Participation in the operation of the company;Management of internal relationship and communication;The director's professionalism and continuing education; andInternal control.
- C. Functional committees: which should cover Participation in the operation of the company;Awareness of the duties of the functional committee;Improvement of quality of decisions made by the functional committee;Makeup of the functional committee and election of its members and Internal control.
Measures taken to strengthen the functionality of the Board:
(1) The Board of Directors shall director the company’s strategy, adivise the management team, responsible to shareholders, and compliance with relevant laws and regulations and the management of the existing or potential risks of the Company.
(2) The Compnay has set up a Audit Committee on July ,2016 for assisting the Board in the effectiveness of the implementation of the internal control system, the fair presentation of the financial reports, independence, and performance of the certificated public accountants, the compliance with relevant laws and regulations and the management of the existing or potential risks of the Company. Please see page 30-32 for the detail of the Audit Committee’s operation.
(3) The Compnay has set up compenstation Committee on Augest , 2011 and set up standard for the Directors and managers. The Compensation 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 42-43 for the detail of the Compensation Committee’s operation
28 -
(4) The Company has re-elected its Board Director on 20 June, 2019. The new Board is made of 7 board members, including 3 independent directors’ fors strengthening the Board function and Corporate Governance.
(5) The Board members continuing education extending beyond the scope of the professional expertise of the directors, 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 53for the detail of the status of Directors ' participation in corporate governance related courses and trainings.

5. Attendance of Independent directors at Board Meetings

Board Meeting	Independent Director Chi-Chia Hsieh	Independent Director Bo-Bo Wang(Note)	Independent Director Stanley Yuk Lun Yim	Independent Director Zhen-Wei Wang(Note)
7-16 2019/02/14	Proxy	Attend in person	Attend in person	－
7-17 2019/05/09	Attend in person	Attend in person	Attend in person	－
8-1 2019/06/20	Attend in person	－	Attend in person	Attend in person
8-2 2019/07/15	Attend in person	－	Attend in person	Attend in person
8-3 2019/07/30	Leave	－	Attend in person	Attend in person
8-4 2019/08/20	Attend in person	－	Attend in person	Attend in person
8-5 2019/11/08	Attend in person	－	Attend in person	Attend in person
8-6 2019/12/17	Attend in person	－	Attend in person	Attend in person

Note: On June 20, 2019, the shareholders' general meeting was fully re-elected,

independent director Bo-Bo Wang dismissed ; new independent director Zhen-Wei Wang was appointed.
29 -

3.4.2 Audit Committee

A total of 6 Audit Committee meeting were held in the previous (2019) period. The attendance of the independent directors was as follows:

Title	Name	Attendance in Person	By Proxy	Attendance Rate	Remarks
Independent Director	Chi-Chia Hsieh	5	1	83.33%	Reappointed
Independent Director	Zhen-Wei Wang	4	－	100.00%	Newappointed
Independent Director	StanleyYuk Lun Yim	6	－	100.00%	Reappointed
Independent Director	Bo-Bo Wang	2	－	100.00%	Dismissed

Note ： On June 20, 2019, the general shareholders' general election of directors was comprehensively reelected. The actual attendance (%) was calculated based on the number of meetings and the actual number of attendances during his tenure.

Other mentionable items:

1.The annual work focus and authority of the audit committee
(1) The main function of the Audit Committee is to supervise the following matters:
- A. Fair presentation of the financial reports of this Corporation.
- B. The hiring (and dismissal), independence, and performance of certificated public accountants of this Corporation.
- C. The effective implementation of the internal control system of this Corporation.
- D. Compliance with relevant laws and regulations by this Corporation.
- E. Management of the existing or potential risks of this Corporation.
(2) The powers of the audit Committee are as follows:
- A. The adoption of or amendments to the internal control system pursuant to Article 14-1 of the Securities and Exchange Act.
- B. Assessment of the effectiveness of the internal control system.
- C. The adoption or amendment, pursuant to Article 36-1 of the Securities and Exchange Act, of the procedures for handling financial or business activities of a material nature, such as acquisition or disposal of assets, derivatives trading, loaning of funds to others, and endorsements or guarantees for others.
- D. Matters in which a director is an interested party.
- E. Asset transactions or derivatives trading of a material nature.
- F. Loans of funds, endorsements, or provision of guarantees of a material nature.
- G. The offering, issuance, or private placement of equity-type securities.
- H. The hiring or dismissal of a certified public accountant, or their compensation.
- I. The appointment or discharge of a financial, accounting, or internal audit officer.
- J. Annual and semi-annual financial reports.
- K. Other material matters as may be required by this Corporation or by the competent authority.
2.If any of the following circumstances occur, the dates of meetings, sessions, contents of motion, resolutions of the

Audit Committee and the Company’s response to the Audit Committee’s opinion should be specified:

(1) Matters referred to in Article 14-5 of the Securities and Exchange Act.

Board Meeting	Agenda items	Resolution	Company's handling of the members'opinions
7-16 2019/02/14	1.The company’s independent financial statements and consolidated financial statements 2.Passed the Accountant assessment of the independence and appropriateness 3.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. 4.Declaration of the Company’s internal control system 2018.	Approved by Committee	Approved by all Independent directors

30 -

Board Meeting	Agenda items	Resolution	Company's handling of the members'opinions
7-17 2019/05/09	1.Prepare and compile Innolux’s Business Report for 2018 2.Draft of Innolux’s Dividend Remittance for 2018 3.Amendment to the Operating Procedure Governing the Acquisition and Disposal of Assets of the Company. 4.Amendment to the Operating Procedure Governing Loaning of Funds and Making of Endorsements/Guarantees of the Company. 5.Amendment to the Audit Committee Charter 6.Subsidiaries investing in obtaining wealth management products	Approved by Committee	Approved by all Independent directors
8-3 2019/07/30	1.Amendment to the Audit Committee Charter	Approved by Committee	Approved by all Independent directors
8-5 2019/11/08	1.Passed the Audit Plan of 2020 2.The restructing of overseas investment	Approved by Committee	Approved by all Independent directors
8-6 2019/12/17	1.To issue overseas unsecured convertible bonds	Approved by Committee	Approved by all Independent directors

(2)Other matters which were not approved by the Audit Committee but were approved by two-thirds or more of all directors：None.
If there are independent directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified: None
Communications between the independent directors, the Company's chief internal auditor and CPAs (e.g. the material items, methods and results of audits of corporate finance or operations, etc.)
(1)Communication between independent directors and internal auditors: The head of Internal Audit send the audit and follow-up reports monthly and presents the findings of all audit reports in the quarterly meetings of the Audit Committee. If material unusual matters occur during the auditing process, the head of Internal Audit will report to the members of the Audit Committee immediately.

(2)The major matters of the communications between independent directors and internal auditors

Date	Descriptions of themajor matters	Resolution
2019/01/25	Audit Report Findings December 2018 review by Independent
		No objection
	Directors.

2019/02/14 Audit Committee		1. No objection
	1. The findings of the internal audit reports for the fourth quarter
		2. After the review and
	of 2018
		approval, report to the
	2. Statement of Internal Control System for 2018
		board ofdirectors

2019/02/22	Audit Report Findings January 2019 review by Independent
		No objection
	Directors.

2019/03/25	Audit Report Findings February 2019 review by Independent Directors.	No objection
2019/04/26	Audit Report Findings March 2019 review by Independent Directors.	No objection
2019/05/09 AuditCommittee	The findings of the internal audit reports for the first quarter of 2019	No objection
2019/05/24	Audit Report Findings April 2019 review by Independent Directors.	No objection
2019/06/27	Audit Report Findings May 2019 review by Independent Directors.	No objection
2019/07/25	Audit Report Findings June 2019 review by Independent Directors.	No objection
2019/07/30 AuditCommittee	The findings of the internal audit reports for the second quarter of 2019	No objection
2019/08/23	Audit Report Findings July 2019 review by Independent Directors.	No objection

31 -

Date	Descriptions of themajor matters	Resolution
2019/09/26	Audit Report Findings August 2019 review by Independent Directors.	No objection
2019/10/25	Audit Report Findings September 2019 review by Independent Directors.	No objection
2019/11/08 AuditCommittee	The findings of the internal audit reports for the third quarter of 2019	No objection
2019/11/21	Audit Report Findings October 2019 review by Independent Directors.	No objection
2019/12/26	Audit Report Findings November 2019 review by Independent Directors.	No objection

(3) Communication between independent directors and independent auditors: The Company CPAs have presented the findings or the comments for the quarterly corporate financial reports, as well as those matters communication of which is required by law, in the regular quarterly meetings of the Audit Committee.
(4) The major matters of the communications between independent directors and independent auditors

Date	Descriptions of the major matters	Resolution
	The findings of the audits on the Company’s financial results for
2019/02/14		No objection
	2018

	The findings of the review on the Company’s financial results
2019/05/09		No objection
	for theQ1 ended March 31,2019

	The findings of the review on the Company’s financial results
2019/07/30		No objection
	for theQ2 ended June 30,2019

	1.The findings of the review on the Company’s financial results
	for the Q3 ended September 30, 2019
2019/11/08		No objection
	2. The findings of the audits on the Company’s Key Audit.

	Matters,KAM

3.4.3 Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
1.Does the company establish and disclose the Corporate Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?	V		The Company has enacted Corporate Governance Best-Practice Principles and disclosed on the official website and M.O.P.S. in addition to protect the rights and interests of shareholders, strengthen the powers of the board of directors, respect the rights and interests of stakeholders and enhance information transparency.The INX’s Corporatie Govermance Best-Practice Principles”please refer to INX official website.	No significant difference compared to corporate governance practice principles
2.Shareholding structure & shareholders’ rights (1)Does the company establish an internal operating procedure to deal with shareholders’ suggestions, doubts, disputes and litigations, and implement based on the procedure?	V		(1)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.	No significant difference compared to corporate governance practice principles

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status
	Yes	No	Abstract Illustration
(2)Does the company possess the list of its major shareholders as well as the ultimate owners of those shares?	V		(2)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
(3)Does the company establish and execute the risk management and firewall system within its conglomerate structure?	V		(3)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.
(4)Does the company establish internal rules against insiders trading with undisclosed information?	V		(4)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 and Code of Ethics for Directors and Officers 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.
3.Composition and Responsibilities of the Board of Directors (1)Does the Board develop and implement a diversified policy for the composition of its members?	V		(1) The Company's Code of Corporate Governance strengthens the functions of the Board of Directors and formulates a diversified approach. The nomination and selection of the board of directors of the company is in accordance with the provisions of the company's articles of association. In addition to assessing the qualifications of each candidate's academic experience, and taking into account the opinions of interested parties, the company's election rules and corporate governance code are adhered to. To ensure the diversity and independence of the board of directors. Specific management objectives include, but are not limited to, standards in two major directions: 1. Basic conditions and values: gender and age, etc. 2. Professional knowledge and skills: professional background, professional skills, and industrial experience.The board of directors of the company generally has the knowledge, skills and literacy necessary to perform their duties. Diversified policy for the composition of its Board of director members please refer page 39 note 1of annual report.

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status
	Yes	No	Abstract Illustration
(2)Does the company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee?		V	(2)The Company has set up the Audit Committee and Remuneration Committee, the Company’s independent director’s serve as the Committee members. For more details regarding the business performance of the Company’s Audit and Remuneration Committee, please refer to page 30-32&41-43 of this Annual Report. The Company, nevertheless, has not yet set up committee of other functions to date.
(3) Does the company establish standards and method for evaluating Board performance, conduct annual performance evaluations, submit performance evaluation results to the Board, and use the results as a basis for determining the remuneration and nomination of individual directors?			(3)The board of directors of the Company passed the “Board Performance Evaluation Method” on November 08, 2019, which stipulates that the board of directors shall perform performance evaluations for the board of directors, board members, remuneration committee and audit committee at least once a year. The internal evaluation shall be conducted at the end of each year, and the current year ’s performance evaluation shall be conducted in accordance with this method. The Company shall take into consideration its condition and needs when establishing the criteria for evaluating the performance of the board of directors, which should cover, at a minimum, the following five aspects: A.Participation in the operation of the company; B.Improvement of the quality of the board of directors' decision making; C.Composition and structure of the board of directors; D.Election and continuing education of the directors; E.Internal control. The criteria for evaluating the performance of the board members , should cover, at a minimum, the following six aspects: A.Alignment of the goals and missions of the company; B.Awareness of the duties of a director; C.Participation in the operation of the company; D.Management of internal relationship and communication; E.The director's professionalism and continuing education; F.Internal control. The criteria for evaluating the performance of functional committees should cover, at a minimum, the following five aspects:

34 -

Evaluation Item			Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
			A.Participation in the operation of the company; B.Awareness of the duties of the functional committee; C.Improvement of quality of decisions made by the functional committee; D.Makeup of the functional committee and election of its members E.Internal control. The internal self-assessment results of the company's board of directors in 2019 were submitted to the board of directors on February 13, 2020. A. The overall assessment result of the board's self-evaluation is excellent. B. The overall self-assessment results of directors are excellent. C. The overall evaluation result of the functional committee's self-evaluation is excellent. It shows that the overall operation of the company's board of directors is still perfect, and there are no major improvement projects. The board of directors also decided to invite directors to attend the shareholders' meeting to improve corporate governance.	No significant difference compared to corporate governance practice principles
(4)Does the company regularly evaluate the independence of CPAs?	V		(4) On February 14, 2019, the board of directors of the company regularly evaluates the independence of visa accountants on the basis of the independence of Article 47 of the Accountant Law and the content of the Code of Practice Ethics Bulletin No. 10. For the criteria for evaluating the independence of accountants, please refer to Note 2 on page 39 of this annual report.
4. Does the public company have a suitable number of competent corporate governance personnel, and has it appointed a corporate governance supervisor responsible for corporate governance matters (including but not limited to providing information for directors and supervisors to perform their duties, assisting directors with regulatory compliance, handling matters related to Board meetings and shareholders' meetings, and preparing proceedings for Board meetings and shareholders' meetings)?	V		In order to protect shareholders' rights and interests and strengthen the functions of the board of directors, the board of directors of the Company appointed the CFO Chien-Lang Lo as the Director of Corporate Governance on May 9, 2019. His qualification meets the requirements of paragraph 1, Article 3-1 of the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies. The responsibilities of the Director of Corporate Governance include handling relevant matters of the board of directors’ meeting and the general shareholders’ meeting in accordance with the law, taking the minutes of the board of directors’ meeting and the general shareholders’ meeting, assisting the directors in taking office and continuing education, providing the information needed for the directors to carry out their business, assisting the directors in legal compliance and	No significant difference compared to corporate governance practice principles

35 -

Evaluation Item			Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
			reporting the operation of corporate governance to the board of directors on a regular basis every year. The secretary unit of the board of directors is responsible for the implementation of corporate governance related matters. The detail of completed item in 2019 list as below, and is reported to the Board of Directors for the first quarter of 2020: 1. The company held 8 Board meeting, 6 Audit committee meeting and 4 Remuneration Committee Meetings in 2019. 2.Rregular AGM in 2019 3. All the members of Board of directors have participated in corporate governance related courses. 4. The company maintains D&O insurance for its Directors and key officers and report to the Board meeting. 5. The company held a meeting irregular for Accountants, Independent Direcotrs and Internal auditor to discuss and enhanced internal audit control system. Please refer to page 31-32 of annual report and our website (http://www.innolux.com) for communication. 6. The Agenda and meeting materials of Borad meeting mail/send to all directors 7 days before of the board meeting and finished the meeting minutes in 20 days after the meeting. 7. Booking the date of AGM, prepare meeting notice, hand book and minutes of AGM all comply with the listed company rules in Taiwan. 8. Training situation of corporate governance supervisor responsible Please refer to page 54 of annual report.
5.Does the company establish a communication channel and build a designated section on its website for stakeholders (including but not limited to shareholders, employees, customers, and suppliers), as well as handle all the issues they care for in terms of corporate social responsibilities?	V		The company offers a variety of features including employees, investor services, customers and supplier area, sales services, product inquiries, media communications and NGOs, reporting and so forth in order to communicate and respond to stakeholders‘needs and expectations by strengthening communications with stakeholders and thereby meeting their expectations. The issues of stakeholders please refer the annual report page 40 note 3.	No significant difference compared to corporate governance practice principles
6.Does the company appoint a professional shareholder service agency to deal with shareholder affairs?	V		The company has appointed a professional agency to handle shareholder related services for the company.	No significant difference compared to corporate governance practice principles

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
7.Information Disclosure (1)Does the company have a corporate website to disclose both financial standings and the status of corporate governance?	V		(1)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.	No significant difference compared to corporate governance practice principles
(2)Does the company have other information disclosure channels (e.g. building an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences)?	V		(2)The company’s English website announces information and our Public 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.
(3) Does the company announce and report annual financial statements within two months after the end of each fiscal year, and announce and report Q1, Q2, and Q3 financial statements, as well as monthly operation results, before the prescribed time limit?		V	(3)The company announce and report annual financial statements within two months after the end of each fiscal year,and early announce monthly operation results, before the prescribed time limit and announce and report Q1, Q2, and Q3 financial statements, before the prescribed time limit.
8.Is there any other important information to facilitate a better understanding of the company’s corporate governance practices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors)? (1)Employee's Rights: Please refer to page 91 “5.5 Labor Relations” of the annual report (2)Employee Care The company attaches great importance to the balance of physical and mental health of employees, in addition to holding a balance of physical and mental activities, it also sets up various physical and mental balance facilities. Through the establishment of the Staff Welfare Committee, the Taiwan factory organizes various leisure and cultural activities, promotes community activities and constructs a website of the Staff Welfare Association, so that employees can balance their health and life while working. In order to improve employees' health awareness, we conduct regular health checkups and provide employee health consultations every year. In addition, in order to ensure the well-being of female employees, and in accordance with the labor regulations of the locality of the factory, the implementation of the maternity leave pay allowance, the strengthening of the fetus rest and the family care leave, etc., for the female employees of pregnancy, implement the health risk assessment, adjust the work as needed, Under the principle of maternity protection and employment equal rights, create a friendly working environment for female employees. (3)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 and product consulting, media communications, so that we can keep communicating and getting feedback from those interests groups’ needs and expectations. 1. 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. 2. 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. 3. 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

37 -

Evaluation Item	Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Implementation Status
		Yes	No		Abstract Illustration
customers’ satisfaction survey. 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. 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. (4)Directors Profession Enhancement Status The company ’s Directors have both professional background and practical experience. The company arranges further studies for Directors and every year. For the latest further study updates please refer to page 53of this annual report. (5)Risk Management The company has established a risk management system to regularly monitor the related financial risks, regulation risks, climate change risks, hydropower risks, supplier chain risks, information safety risks, and the environment, safety, and health risks. to enhance the competitiveness of the industry The risk management process mainly includes risk identification, risk assessment and risk response. Risk identification: Identify relevant risk items according to regulations, industry standards and international development trends. Risk assessment: The degree of risk is comprehensively considered according to the severity and frequency of occurrence Risk response: According to the degree of risk, formulate control measures and response plans. The criteria for evaluating control plans generally include effectiveness, feasibility and cost. (6)The implementation of customer policy In addition to attaching importance to the confidentiality and privacy of customer information, the company also launched a series of "Continuously Improvement Projects" through the company's internal "INNOLUX Intelligent Portal-intelligent platform" application, in "design, purchase, production, sales" The densely structured information network effectively integrates the company's cross-departmental resources to achieve the improvement of quality, technology and service performance, and demonstrates its commitment to improving customer satisfaction. In addition, through customer satisfaction analysis to understand and meet customer needs, the evaluation includes quality, technology, service and comprehensive indicators. Based on customer feedback and opinions, regularly review and propose appropriate improvement plans. (7)The company implements and maintains D&O insurance for its Directors and key officers by the company The company maintains D&O insurance for its Directors and key officers
9.Please explain the improvements which have been made in accordance with the results of the Corporate Governance Evaluation System released by the Corporate Governance Center, Taiwan Stock Exchange, and provide the priority enhancement measures. The Company governance of the company was ranked among the top 6%~20%,. It has set up its "Company governance guidelines" according to the revised Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies by the Taiwan Stock Exchange Corporation (TWSE). The company has been working hard on sustainable economy, environment, and society and fulfilling long-term and sustainable responsibility to individual stakeholders and the whole society based on business core value of honesty and integrity. The areas that require immediate improvement are described below: Evaluation Indicators Priority items to be improved and measures Do the company's internal rules stipulate and disclose on the company's website that it prohibits insiders such as company directors or employees from using information that is not available on the market for profit? The company has established the "Directors and Managers' Code of Ethical Conduct" and "Internal Material Information Processing Procedures", and disclosed on the company's official website that the specific conditions of internal rules will be implemented in the future (such as: when to conduct education training, target , Course content, etc.) are exposed on the company website. Does the company formulate succession planning for board members and important management, and disclose its operation on the company's website or annual report? The 2019 annual report "Corporate Governance Operational Situation and the Differences and Causes with the Code of Corporate Governance Practices for Listed Companies" will explain the succession planning of board members and important management and other related contents to make it more complete.
	Evaluation System released by the Corporate Governance Center, Taiwan Stock Exchange, and provide the priority
	enhancement measures.
	The Company governance of the company was ranked among the top 6%~20%,. It has set up its "Company
	governance guidelines" according to the revised Corporate Governance Best Practice Principles for TWSE/TPEx
	Listed Companies by the Taiwan Stock Exchange Corporation (TWSE). The company has been working hard on
	sustainable economy, environment, and society and fulfilling long-term and sustainable responsibility to individual
	stakeholders and the whole society based on business core value of honesty and integrity.
	The areas that require immediate improvement are described below:
	Evaluation Indicators			Priority items to be improved and measures
	Do the company's internal rules stipulate			The company has established the "Directors and Managers' Code of
	and disclose on the company's website			Ethical Conduct" and "Internal Material Information Processing
	that it prohibits insiders such as company			Procedures", and disclosed on the company's official website that the
	directors or employees from using			specific conditions of internal rules will be implemented in the future
	information that is not available on the			(such as: when to conduct education training, target , Course content,
	market for profit?			etc.) are exposed on the company website.
	Does the company formulate succession			The 2019 annual report "Corporate Governance Operational Situation
	planning for board members and			and the Differences and Causes with the Code of Corporate Governance
	important management, and disclose its			Practices for Listed Companies" will explain the succession planning of
	operation on the company's website or			board members and important management and other related contents to
	annual report?			make it more complete.

38 -

Note1: Board Diversity Policy

Title	Title	Name	Industry experience / professional	Industry experience / professional	Industry experience / professional	Industry experience / professional	Industry experience / professional	Industry experience / professional	Industry experience / professional	Industry experience / professional	Years of independent director	Years of independent director	Years of independent director	Age	Age	Age	Age	Gender	Employee status
			Operational Judgments	Management Administration	Accounting & Financial analysis	Business & Economics	Crisis Management	Knowledge of the industry	International market perspective	Ability to lead and to make policy decisions	Under 3 years	3-9year	9 years or more	Under 55 years old	56-65 years old	66-75 years old
Chairman		Jin-Yang Hung	V	V	V	V	V	V	V	V	－	－	－	V	－	－		M	V
Director		Chu-Hsiang Yang	V	V	V	V	V	V	V	V	－	－	－	V	－	－		M	V
Director		Chin-Lung Ting	V	V	V	V	V	V	V	V	－	－	－	V	－	－		M	V
Independent Director		Chi-Chia Hsieh	V	V	V	V	V	V	V	V	－	V	－	－	－	V		M	－
Independent Director		Zhen-Wei Wang	V	V	V	V	V	V	V	V	V	－	－	－	V	－		M	－
Independent Director		Stanley Yuk Lun Yim	V	V	V	V	V	V	V	V	－	V	－	－	V	－		M	－
Note2: The independence of CPAs
Item																		Results
1	No major financial interested relationshipwith the client																V Yes No
2	Avoidinganyimproper relationshipwith the client																V Yes No
3	The accountant should supervise their assistants to strictlycomplywith honesty, justice and independence																V Yes No
4	The accountant isprohibited from auditingcertification for the company’s financial report where he/she served in within theprevious twoyears																V Yes No
5	The accountant’s identification is forbidden to be infringed byanother individual																V Yes No
6	The accountant does not hold anyshares in the companyor in its subsidiaries																V Yes No
7	The accountant does not owe anydebt to the companyor its subsidiaries																V Yes No
8	The accountant is not in any joint investment or benefit-sharingrelationshipwith the companyor its subsidiaries																V Yes No
9	The accountant is not employed andpaid regularilybythe companyor its subsidiaries																V Yes No
10	The accountant does not receive anycommission which is occupational-related																V Yes No
11	The accountant is subject to disciplinaryactions does not over 7years or returningdoes not less than 2years																V Yes No
12	The accountant audit experience obtain the Electronic industry																V Yes No

Note3: The issues of stakeholders

Stakeholder	Concerned issues	Major Communication Channel
Employees	Recruitment and staffing Human rights Talent development and training Occupational health and safety	1. Communication hotline 67885, mailbox and disability care group([email protected]). 2. Labor-management meeting, Meeting with the Executives. 3. DL interview, seminars for disability group and new employees. 4. Innolux Monthly. 5. Satisfaction survey. Contact person: Ms. Liu/[email protected]/037-586000#64650 Contactperson: Ms. Wang/[email protected]/06-5051888#47276
Customers	Occupational health and safety Human rights Integrity management R & D and innovation of products and technologies Customer relationship management Water resources management	1. VOC (Voice of Customer) system. 2. INNOLUX Intelligent Portal for immediate interaction with the customers. 3. Top management meeting. 4. Customer satisfaction survey and ananlysis. 5. Customer audit or questionnaire. 6. Designated account service for immediate response. Contactperson: Ms. Huang/[email protected]/06-5051888#44856
Shareholders/ Investors	Financial performances Recruitment and staffing Emission of greenhouse gases Energy management Green product management Supply Chain Management Occupational health and safety	1. Annual report. 2. Shareholders’ meeting. 3. Investors’ hotline and mailbox. 4. Participation in seminars held by local and overseas investment agencies. 5. Interview with the analysts Contact person: IR:Ms. Chen/ [email protected] / 06-5051888#47154 Shareholders:Ms. Chen/[email protected]//037-586000#63588
Suppliers	Occupational health and safety Human rights Diversity and equality Recruitment and staffing Talent development and training	1. Procurement strategy meeting. 2. Supplier communication meeting. 3. Material quality meeting. 4. Annual suppliers’ meeting. 5. Suppliers’ notice. SRM (Supplier Relationship Management)An interactive platform for information exchange between purchasing/material control units and suppliers -- Covers purchasing operations, such as purchase orders, delivery dates, invoicing, payment inquiries, etc. and includes an electronic signature system to ensure that the signingof online documents is legallybindingfor bothparties.
Media	Recruitment and staffing Corporate governance Water management	1. Designated media mailbox and hotline. 2. Press release. 3. Press conference Contactperson:Ms.Chien/[email protected]/037-586000#47153
NGOs	Community participation and social charity Water management Air pollution prevention Recruitment and staffing Occupational health and safety	1. Collaboration with NGOs to hold CSR projects. 2. NGOs funding. 3. Invite NGOs to take part in seminars. Contact person:Ms.Tai/[email protected]/06-5051888#47050

3.4.4 Composition, Responsibilities and Operations of the Remuneration Committee

A.Professional Qualifications and Independence Analysis of Remuneration Committee Members

Criteria Name	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 )	Independence Criteria(Note )	Independence Criteria(Note )	Independence Criteria(Note )	Independence Criteria(Note )	Independence Criteria(Note )	Independence Criteria(Note )	Independence Criteria(Note )	Independence Criteria(Note )	Independence Criteria(Note )	Number of Other Public Companies in Which the Individual is Concurrently Serving as an Remuneration Committee Member
	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	Has 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
Independent Director Chi-Chia Hsieh	－	－	V	V	V	V	V	V	V	V	V	V	V	1
Independent Director Zhen-Wei Wang	－	－	V	V	V	V	V	V	V	V	V	V	V	3
Independent Director Stanley Yuk Lun Yim	－	－	V	V	V	V	V	V	V	V	V	V	V	－

Note : Please tick the corresponding boxes that apply to a member during the two years prior to being elected or during the term(s) 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 (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
3.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 others' names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders.
4.Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship of a manager in (1) or personnel in (2) and (3).
5.Not a director, supervisor, or employee of a corporate shareholder that directly holders 5% or more of the Company's outstanding shares, is a top five shareholder, or appointed a representative as the Company's director or supervisor in accordance with Article 27, Paragraph 1 or 2 of the Company Act (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
6.Not a director, supervisor, or employee of other companies controlled by the same person with over half of the Company's director seats or shares with voting rights (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
7.Not a director, supervisor, or employee of another company or institution who is the same person or spouse of the Company's chairperson, president or equivalent position (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
8.Shareholders (not applicable in cases where the specific company or institution holds 20% or more but less than 50% of the Company's outstanding shares, and is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
9.Not a professional individual who, or an owner, partner, director, supervisor, or manager of a sole proprietorship, partnership, company, or institution that audited or provided commercial, legal, financial, or accounting services for total compensation not exceeding NT$500,000 in the most recent two years to the company or to any affiliate of the company, or a spouse thereof, This does not apply to members of the Remuneration Committee, Public Tender Offer Review Committee, or Merger and Acquisition Special Committee performing duties in accordance with the Securities and Exchange Act or laws and regulations related to mergers and acquisitions.
10.Not a person of any conditions defined in Article 30 of the Company Law.

B.Attendance of Members at Remuneration Committee Meetings

There are 3 members in the Remuneration Committee. A total of 4 (A) Remuneration Committee meetings were held in the previous period. The attendance record of the Remuneration Committee members was as follows:

Title	Name	Attendance in Person(B)	ByProxy	Attendance rate(%)	Remarks
Convener	Chi-Chia Hsieh	3	1	75.00%	Reappointed
Committee Member	Bo-Bo Wang	2	－	100.00%	Dismissed
Committee Member	Stanley Yuk Lun Yim	4	－	100.00%	Reappointed
Committee Member	Zhen-Wei Wang	2	－	100.00%	Newappointed

Note : On June 20, 2019, the general shareholders' general election of directors was comprehensively reelected. The actual attendance (%) was calculated based on the number of meetings and the actual number of attendances during his tenure.

Other mentionable items:

1.Scope of duties of the Remuneration Committee
(1).Periodically reviewing this Charter and making recommendations for amendments.
(2).Establishing and periodically reviewing the performance assessment standards, annual and long-term performance goals, and the policies, systems, standards, and structure for the compensation of the directors, supervisors, and managerial officers of this Corporation.
(3).Periodically assessing the degree to which performance goals for the directors and managerial officers of this Corporation have been achieved, setting the types and amounts of their individual compensation.

The Committee shall perform the duties under the preceding paragraph in accordance with the following principles:

(1).Salary management should conform to the company's salary concept.
(2).Performance assessments and compensation levels of directors and managerial officers shall take into account the general pay levels in the industry, individual performance assessment results, the time spent by the individual and their responsibilities, the extent of goal achievement, their performance in other positions, and the compensation paid to employees holding equivalent positions in recent years. Also to be evaluated are the reasonableness of the correlation between the

individual's performance and this Corporation's operational performance and future risk exposure, with respect to the achievement of short-term and long-term business goals and the financial position of this Corporation.

(3).No member of the Committee may participate in discussion and voting when the Committee is deciding on that member's individual compensation.
If the board of directors declines to adopt or modifies a recommendation of the remuneration committee, it should specify the date of the meeting, session, content of the motion, resolution by the board of directors, and the Company’s response to the remuneration committee’s opinion (eg., the remuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified): None.
Resolutions of the remuneration committee objected to by members or expressed reservations and recorded or declared in writing, the date of the meeting, session, content of the motion, all members’ opinions and the response to members’ opinion should be specified: None.
The review and evaluation of the company's salary and compensation information in 2019 are as follows:

Board Meeting	Remuneration Committee	Agenda items	Resolution	Company's handling of the members' opinions
7-16 2019/02/14	3-9 2019/02/14	1.Full rewards for managers 2018 2.Employee compensation and director compensation distribution 2018 3.Functional Committee Remuneration Recommendation 2018	Approved by Committee	Approved by all Independent directors
7-17 2019/05/09	3-10 2019/05/09	1.Remuneration recommendations for managers and employees 2018	Approved by Committee	Approved by all Independent directors
8-3 2019/07/30	4-2 2019/07/30	1.Board of Directors and Functional Committee Remuneration 2.Adjustment Proposal 3.Proposals for managers to Manager salaryadjustment suggestions	Approved by Committee	Approved by all Independent directors

3.4.5 Corporate Social Responsibility

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” andReasons
	Yes	No	Abstract Explanation
1. Does the company assess ESG risks associated with its operations based on the principle of materiality, and establish related risk management policies or strategies?	V		The Company has established a risk management mechanism to regularly review the risks related to finance, laws and regulations, climate change, water and electricity resources, industrial supply chain, information security and occupational safety and health, so as to improve its competitiveness in the industry. The risk management process mainly includes risk identification, risk assessment and risk response. Risk identification: identifying relevant risk items according to laws and regulations, industrial standards and international development trends. Risk assessment: comprehensive consideration of the severity and frequency of the risk. Risk response: formulating control measures and response plans according to the degree of risk. The criteria for evaluating control plans generally include the effectiveness, feasibility and cost. The Company's relevant risk management policies and effectiveness are disclosed in the annual CSR report and the official website.	No significant difference compared to Corporate Social Responsibility
2.Does the company establish exclusively (or concurrently) dedicated first-line managers authorized by the board to be in charge of proposing the corporate social responsibility policies and reporting to the board?	V		The company has set up a corporate social responsibility department as a special promotion organization for corporate social responsibility. The board of directors on October 27, 2017 formulated the company's corporate social responsibility code of practice, and authorized the chairman or his designated person to be responsible for corporate social responsibility policies, systems or Relevant management policies and specific promotion plans are proposed and implemented, and according to the principle of materiality, the risk assessment of environmental, social or corporate governance issues related to the company's operations is carried out, and the annual implementation results and the work plan of the next year are reported to the board . Through the supervision of the board of directors to assist the management team to practice corporate social responsibility, promote sustainableperformance.	No significant difference compared to Corporate Social Responsibility

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” andReasons
	Yes	No	Abstract Explanation
3. Environmental issues (1) Does the company establish proper environmental management systems based on the characteristics of their industries?	V		(1)The company has been actively promoting relevant EHS management systems and occupational Safety and Health Management System and so forth in order to facilitate a positive cycle of gradual improvement for green sustainability and safety culture. The company began to introduce environmental management system and obtained verification as early as 2001, and obtained the ISO14001: 2015 new version of the standard verification certificate issued by the impartial third-party verification agency in 2019. . The company's Taiwan factory EMS certificate is verified by a third-party verification agency (BSI). The latest verification date: December 12, 2019, and the certificate validity period: December 11,2022.	No significant difference compared to Corporate Social Responsibility
(2) Does the company endeavor to utilize all resources more efficiently and use renewable materials which have low impacton the environment?	V		(2)The company has not only reduced its discharge of contaminants from the source but also reduced the quantity of pollutants in its waste water discharge to increase its recycling rate by machine deisign and Technology promotion.
(3) Does the company evaluate potential risks and opportunities brought by climate change, and take response measures to climate-related issues?	V		(3) The company follows the "National Climate Change Adaptation Policy Program", cooperates with the government department's greenhouse gas reduction plan, and also incorporates climate change related information and potential risks and opportunities into the "Corporate Social Responsibility Committee" issue. Promote improvement and review of implementation effectiveness,reduce externalenvironment and businessrisks.
(4) Does the company compile statistics of greenhouse gas emissions, water use, and total weight of waste in the past two years, and does it establish policies for energy conservation & carbon reduction, greenhouse gas emission reduction, water use reduction, and other waste management?	V		(4) The company has counted greenhouse gas emissions, water consumption and total waste weight for many years. Continuously improve electricity efficiency and clean process improvement for specific production to reduce greenhouse gas emissions, complete greenhouse gas inventory in accordance with ISO14064-1 and pass third-party external verification to understand the space for improvement; Carbon Disclosure Project 108 (Carbon Disclosure Project) , CDP) Both "Climate Change" and "Water Management" received B ratings. Facing the challenges of water resources, the Company focused on water saving and recycling, and improved the efficiency of water resources management to effectively respond to the water shortage crisis. In terms of waste reduction, it is implemented to promote waste reduction and recycling at the source. The CSR report is issued every year to disclose the company's policies and effectiveness ingreenhousegas emissions,water consumption and waste management.

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” andReasons
	Yes	No	Abstract Explanation
4.Social issues (1) Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights? (2) Does the company have reasonable employee benefit measures (including salaries, leave, and other benefits), and do business performance or results reflect on employee salaries?	V V		(1) The company formulates relevant employee codes in accordance with labor standards law, employment service law and gender work equality law, etc. to protect the rights and interests of colleagues. Also abide by international labor standards such as the "United Nations Universal Declaration of Human Rights", "United Nations Guidelines on Enterprise and Human Rights", the ILO Declaration on Fundamental Principles and Rights at Work, and the "Responsible Business Alliance (RBA)" Based on local labor laws, establish an equal opportunity corporate culture. (2) The company provides employees with work and life leave plans, festive bonuses, and group insurance. It also plans a competitive salary level. In addition to considering the external competitiveness and internal fairness of salary and benefits, it also has an overview of the company's financial and operating conditions. The industry's annual salary adjustment strategy and personal work performance, improve the planning and execution of annual salary adjustment operations, design and issue incentive bonuses to motivate and retainoutstandingtalents	No significant difference compared to Corporate Social Responsibility
(3) Does the company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis?	V		(3) The company sets up the environmental safety unit, which is responsible for planning, implementation, auditing and improvement of the company's environmental safety and health management system operation and has environmental safety and quality policies. The company has obtained the occupational health and safety management system verification and requires all departments to implement relevant safety Execution of health services and regular education and training, including the planning and execution of fire-fighting equipment (administration) and water and electricity, the monitoring and control of business waste cleaning, and emergency handling procedures, etc. In order to prevent occupational disasters and maintain workplace safety, the company regularly implements safety and health education andtrainingfor allemployees.
(4) Does the company provide its employees with career development and training sessions?	V		(4) The company upholds the belief that talents are the cornerstone of the company's development, integrates talent development systems and processes, and hopes to enhance the passion and professionalism of employees through the promotion of certification courses.

- 47 -	Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
		Yes	No	Abstract Explanation
	(5) Does the company comply with relevant regulations and international standards in customer health and safety, customer privacy, and marketing and labeling its goods and services, and has it established consumer rights protection policies and complaint procedures? (6) Does the company have a supplier management policy, require suppliers to comply with regulations on environmental protection, occupational safety and health, and labor rights, and what is its implementation status?	V V		A. Develop the "Employee Space-Time Development Concept Map", and provide relative education and training based on the required working ability of the position (post) to enhance the professional ability of employees. B. Promote the training of INX4.0 big data talents, strengthen and drive the transformation of AI talents within the company, cultivate cross-disciplinary system development and operation and maintenance talents, and strengthen the goal of intelligent and intelligent integration of INX4.0. C. Conduct English and Japanese courses to improve employees' language skills, integrate INX work situation into course materials, and achieve practical learning through practical exercises. (5) The company 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.The company 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. (6)The company formulates the "Supplier's Corporate Social Responsibility Management Practices" based on the Responsible Business Alliance Code of Conduct (RBA), and expects suppliers to work together to fulfill corporate social responsibilities in all aspects of ethics, labor human rights, environment, health, safety and management systems Good risk management and continuous operation plan. New suppliers must sign a manufacturer ’s commitment before cooperating to ensure that the commitments comply with RBA requirements. Existing suppliers conduct corporate social responsibility risk questionnaire surveys (SAQ) annually for key raw material suppliers. High-risk suppliers initiate on-site audits and continue to track and supervise to ensure that they are properlyimproved.

		Implementation Status	Deviations from “the Corporate
Evaluation Item Yes	No	Abstract Explanation	Social Responsibility Best-Practice Principles for TWSE/TPEx Listed
			Companies” and Reasons
5. Does the company reference internationally V		The company's 2019 CSR Report is based on the GRI Sustainability Reporting	No significant difference compared
accepted reporting standards or guidelines,		Standards (GRI Standards) officially published by the Global Sustainability	to Corporate Social Responsibility
and prepare reports that disclose		Reporting Association on October 19, 2016 and passed the third-party verification
non-financial information of the company,		unit Taiwan Verification Technology Co., Ltd. SGS) guarantees, in line with the
such as corporate social responsibility		spirit of the AA1000AS (Account Ability 1000 Assurance Standard) second
reports? Do the reports above obtain		application type high assurance level, and the requirements of the GRI Standards
assurance from a third party verification		comprehensive compliance option (Comprehensive).
unit?
6. If the Company has established the corporate social	responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed
Companies”, please describe any discrepancy between the Principles and their implementation:
The company formulated corporate social responsibility policies and corporate social responsibility code of conduct in accordance with the corporate social responsibility code
of practice of listed companies and the Responsible Business Alliance (RBA) code of conduct, emphasizing the inclusion of social environmental opportunities and risks Operation
management, pursuing the company's sustainable development. The corporate social responsibility policy is based on the corporate code of conduct and takes the responsible
business alliance code as the core, covering five policy directions including corporate governance, environmental protection, employee care, supply chain social and environmental
responsibilitymanagement,and community participation.		Communicateandintegrate with interested parties,and strivetoachieveasustainable environment anda humansociety.

If the Company has established the corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”, please describe any discrepancy between the Principles and their implementation: The company formulated corporate social responsibility policies and corporate social responsibility code of conduct in accordance with the corporate social responsibility code of practice of listed companies and the Responsible Business Alliance (RBA) code of conduct, emphasizing the inclusion of social environmental opportunities and risks Operation management, pursuing the company's sustainable development. The corporate social responsibility policy is based on the corporate code of conduct and takes the responsible business alliance code as the core, covering five policy directions including corporate governance, environmental protection, employee care, supply chain social and environmental responsibility management, and community participation. Communicate and integrate with interested parties, and strive to achieve a sustainable environment and a human society. 7.Other important information to facilitate better understanding of the company’s corporate social responsibility practices: The company adheres to the concept of corporate management and social co-prosperity, combines corporate social responsibility policies with business strategies, and jointly promotes with the Innolux Education Foundation, and takes charity care and environmental education as the main axis in community participation and social care to implement sustainable management Effectively, the performance of corporate social responsibility is divided by the issuance report, and related information is also published on the company ’s website and public information observatory. (1) Charity: A. Christmas gift raising activities In 2019, 1,300 gifts were collected again. 25 volunteers from Chun-Ai Society held Christmas parties in Nanzhuang and Tianmei Elementary School of Miaoli, and Danei and Ershi Elementary School of Tainan respectively, and a total of 100 students from rural areas participated in the Christmas parties. The World Peace Council gave the gifts to 74 elementary schools in Miaoli and Tainan to about 1,300 students. For three consecutive years, totally 4,414 gifts were collected for 225 elementary schools in Miaoli and Tainan to realize the Christmas dream. B. charity breakfast donation activities: For the third year in a row, in 2019 the charity breakfast fund-raising activity for poor and disadvantaged children was launched to provide basic needs for medical support and stable meals for vulnerable families around the Tainan Science-based Industrial Park. This year, a total of NT$343,365 was raised as breakfast funds for 86 impoverished students in Miaoli and Tainan for one semester. For three consecutive years, a total of NT$5,366,842 was raised to help 1342 impoverished students in Miaoli and Tainan for one semester. (2) Environmental Education: Water Resources Summer Camp: The Company sponsored 20 schoolchildren of the World Peace Society to participate in the summer camp. Totally 100 schoolchildren participated in the camp to develop the good habit of reducing and caring for the environment and the sea since their childhood, and to "care for the earth since childhood".

3.4.6 Ethical Corporate Management

3.4.6 Ethical Corporate Management
Evaluation Item	Implementation Status			Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” andReasons
	Yes	No	Abstract Illustration
1.Establishment of ethical corporate management policies and programs (1) Does the company establish an ethical corporate management policy that was approved by the Board of Directors, and declare its ethical corporate management policy and methods in its regulations and external documents, as well as the commitment of its Board and management to implementing the management policies?	V		(1) Integrity and integrity are the company's most important operating stone, which consolidates the company's leadership role in the panel industry and gains the trust and respect of customers, shareholders, employees, suppliers and society. The company's integrity management policy has been set out in the Innolux Code of Integrity Management Code, Corporate Governance Practice Code, Corporate Social Responsibility Practice Code, Directors and Managers' Code of Ethical Conduct adopted by the Board of Directors. Various internal regulations and external documents, such as employee code of conduct, supplier corporate social responsibility code of conduct, and operating standards, express the policies and practices of operating in good faith, and strictly require employees of the company to fulfill the company's integrity policy. At the same time, the company's annual report and corporate social responsibility report and other documents also detail the company's integrity management policy and the board of directors and management's commitment toactivelyimplement the situation.	No significant difference compared to Integrity Operation Practice Principles
(2) Does the company establish mechanisms for assessing the risk of unethical conduct, periodically analyze and assess operating activities within the scope of business with relatively high risk of unethical conduct, and formulate an unethical conduct prevention plan on this basis, which at least includes preventive measures for conduct specified in Article 7, Paragraph 2 of the Ethical Corporate Management Best- Practice Principles for TWSE/TPEx Listed Companies?	V		(2) In order to prevent dishonesty, the company has strengthened relevant prevention measures in regulations and external documents for business activities with a high risk of dishonesty, and regularly checks, analyzes and evaluates whether the prevention measures are operating effectively to review and correct the prevention measures. In addition, the company requires all employees to understand the aforementioned specifications in detail, and publish the specifications on the company's official website and internal website for internal and external personnel to consult at any time. Employees clearly know the rules they should follow to reduce the occurrence of dishonesty.

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(3) Does the company specify operating procedures, guidelines for conduct, punishments for violation, rules of appeal in the unethical conduct prevention plan, and does it implement and periodically review and revise the plan?	V		(3) The company has established clearly defined regulations and announced on the official website and internal website for employees to studies and follow, if there the company specification 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 ceaseallcollaborationwithsaid supplier.
2.Fulfill operations integrity policy (1)Does the company evaluate business partners’ ethical records and include ethics-related clauses in business contracts?	V		(1)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 Undertaking about the Code of 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 politicalparties orcandidates.	No significant difference compared to Integrity Operation Practice Principles
(2) Does the company establish a dedicated unit under the board of directors to promote ethical corporate management, and periodically (at least once a year) report to the Board of Directors and supervise the implementation of the ethical corporate management policy and unethical conduct prevention plan?		V	(2) The company is led by the Corruption Incident Investigation Team as a special unit. It continues to promote various integrity management plans in accordance with company policies, and promotes integrity and cleanliness matters. It regularly reports to the chairman and general manager on integrity management policies and prevention of dishonesty behavior plans and supervision and implementation. Situation, and is planning a mechanism for regular reporting to the board of directors. If there is a case of violation of integrity and integrity, the company will handle it in accordance with the regulations of the investigation andmanagementof the corruption incidentof Innolux.
(3)Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it?	V		(3)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 Reporting ([email protected]) and staff complaint mailboxes for employees immideted report the case and also finished questionnaire for annual basis.

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(4) Does the company have effective accounting system and internal control systems set up to facilitate ethical corporate management, does the internal auditing unit formulate audit plans based on unethical conduct risk assessment results, and does it audit compliance with the unethical conduct prevention plan or commission aCPA to perform theaudit?	V		(4) The company establishes a complete and effective accounting system and internal control system to ensure the continuous design and implementation of the system. In addition to regular audits by the internal auditing unit of the company and its compliance with the anti-corruption measures formulated in accordance with the risk assessment results within the company, there is also PricewaterhouseCoopers to regularly check the financial statements for the company.
(5)Does the company regularly hold internal and external educational trainings on operational integrity?	V		(5)We have made all of our various policies available through easy access on our intranet and require all employees to be trained for one hour on corporate social responsibility, there are 13,548 employees been trained in 2019, 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 oursuppliersand vendors,toaccept andabide bytheintegrity policy.
3.Operation of the integrity channel (1)Does the company establish both a reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up?	V		(1) The company has implemented a Mailbox for 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 are submitted to the Integrity Commission for resolution and penalties are imposed internally or the incident isprosecuted.	No significant difference compared to Integrity Operation Practice Principles
(2) Does the company establish standard operating procedures for investigating reported cases, and does it take subsequent measures and implement a confidentiality mechanism after completing investigation?	V		(2) The company has formulated detailed investigation procedures and related confidentiality mechanisms for the investigation and management of the corruption incidents of Innolux Optoelectronics. For investigations of reported cases, the company conducts investigations in a confidential and rigorous manner. After the investigation of the reported cases is completed, the company takes follow-up measures according to the severity of the internal rules. If criminal responsibility is involved, it will be transferred to the judicial office for investigation.

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(3)Does the company provide proper whistleblower protection?	V		(3)The company strictly prohibits any form of retaliation. In order to protect the whistleblower, the company clearly stated in the Innolux Optoelectronics Code of Conduct that the company will protect the whistleblower from any retaliation caused by the report, and prohibits colleagues from taking measures in the company's internal regulations. Any retaliation measures. In the course of the investigation, the investigation team did abide by the relevant provisions of the confidentiality of the informant ’s identity and anonymous reporting, strictly abided by the standard operating procedures for the investigation of the report, and related confidentiality mechanisms, to protect the confidentiality of the informant ’s identity, so that the informant would not suffer from the report Improperdisposal.
4.Strengthening information disclosure Does the company disclose its ethical corporate management policies and the results of its implementation on the company’s websiteandMOPS?	V		The company discloses the Code of Conduct on the Company’s official website and MOPS . It also discloses related information about operational integrity and implements results in the official website and corporate social responsibility report.	No significant difference compared to Integrity Operation Practice Principles
5.If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation. The Company has enacted Corporate Integrity Practice Principles of Innolux approved by Board of director meeting and disclose on the official website and M.O.P.S.There is not conformity with theintegrity operationpractice priceiples .
6.Other important information to facilitate a better understanding of the company’s ethical corporate management policies (e.g., review and amend its policies).: (1)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. (2) The Company 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.

3.4.7 Corporate Governance Guidelines and Regulations

Please refer to the Company’s website at www. innolux.com,and the page 27-55of annual report.

3.4.8 Other Important Information Regarding Corporate Governance

1.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. Relevant procedures have been submitted to the board for approval and internal announcements have been made in the company along with relevant trainings for all employees.
The Intellectual Property Division is the responsible unit for the planning and execution of the company's intellectual property management. It has a complete intellectual property management plan linked to the operation objectives, and the intellectual property management implementation situation in accordance with the needs of the management team is reported to the chairman and the general manager from time to time. , Is planning a mechanism for reporting to the board in the future.
Status of Directors ' participation in corporate governance related courses and trainings as of the deadline of annual report publication

Title	Name	Date	SponsoringOrganization	Course	Hours
Chairman	Jin-Yang Hung	Jul 30 2019	Corporate Operation Association	Disclosure of major company information and case analysis of directors' responsibilities	3
		Nov 08 2019		Board of Directors ’compliance with laws and regulations, legal responsibilities and case studies ofdirectorsand supervisors	3
Director	Hyield venture Capital Co., Ltd. Chu-Hsiang Yang	Jul 30 2019	Corporate Operation Association	Disclosure of major company information and case analysis of directors' responsibilities	3
		Nov 08 2019		Board of Directors ’compliance with laws and regulations, legal responsibilities and case studies ofdirectorsand supervisors	3
	Hyield venture Capital Co., Ltd. Chin-Lung Ting	Jul 30 2019	Corporate Operation Association	Disclosure of major company information and case analysis of directors' responsibilities	3
		Nov 08 2019		Board of Directors ’compliance with laws and regulations, legal responsibilities and case studies ofdirectorsand supervisors	3
Independent Director	Chi-Chia Hsieh	Jul 30 2019	Corporate Operation Association	Disclosure of major company information and case analysis of directors' responsibilities	3
		Nov 08 2019		Board of Directors ’compliance with laws and regulations, legal responsibilities and case studies ofdirectorsand supervisors	3
Independent Director	Stanley Yuk Lun Yim	Jul 30 2019	Corporate Operation Association	Disclosure of major company information and case analysis of directors' responsibilities	3
		Nov 08 2019		Board of Directors ’compliance with laws and regulations, legal responsibilities and case studies ofdirectorsand supervisors	3
Independent Director	Zhen-Wei Wang	Apr 29 2019	Taiwan Corporate Governance Association	Cayman & BVI government legislation introduces new regulations and solutions forsubstantive economicactivities	3
		Jul 30 2019	Corporate Operation Association	Disclosure of major company information and case analysis of directors' responsibilities	3

53 -
Status of managers‘participation in corporate governance related courses and trainings as of the deadline of annual report publication

Title	Name	Date	SponsoringOrganization	Course	Hours
Chairman &CEO	Jin-Yang Hung	Jul 30 2019	Corporate Operation Association	Disclosure of major company information and case analysis of directors' responsibilities	3
		Nov 08 2019		Board of Directors ’compliance with laws and regulations, legal responsibilities and case studies of directors and supervisors	3
President &COO	Chu-Hsiang Yang	Jul 30 2019	Corporate Operation Association	Disclosure of major company information and case analysis of directors' responsibilities	3
		Nov 08 2019		Board of Directors ’compliance with laws and regulations, legal responsibilities and case studies of directors and supervisors	3
Excutive Vice President	Chin-Lung Ting	Jul 30 2019	Corporate Operation Association	Disclosure of major company information and case analysis of directors' responsibilities	3
		Nov 08 2019		Board of Directors ’compliance with laws and regulations, legal responsibilities and case studies of directors and supervisors	3
Vice President	Chih-Ming Chen Yao-Tong Chen Hung-Wen Yang	Apr 15 2019	Innolux Corporation	Summary of business secrets and anti-corruptionpolicies	0.5
		Aug 20 2019		Antitrust Law	0.5
		Jul 30 2019	Corporate Operation Association	Disclosure of major company information and case analysis of directors' responsibilities	3
		Nov 08 2019		Board of Directors ’compliance with laws and regulations, legal responsibilities and case studies of directors and supervisors	3
Finance Supervisor chief corporate governance officer	Chien-Lang Lo	Apr 15 2019	Innolux Corporation	Summary of business secrets and anti-corruptionpolicies	0.5
		Aug 20 2019		Antitrust Law	0.5
		May 17 2019	Accounting Research And Development Foundation	The new version of "Corporate Governance Blueprint (2018-2020)" related specifications and corresponding practice analysis	3
		Jul 11 20119		Digital Finance Lectures: XBRL Application, Financial Report Verification and Corporate Governance Latest PolicyAnalysis	3
		Jul 30 2019	Corporate Operation Association	Disclosure of major company information and case analysis of directors' responsibilities	3
		Nov 08 2019		Board of Directors ’compliance with laws and regulations, legal responsibilities and case studies of directors and supervisors	3
Accounting Supervisor	Kun Ma	Apr 15 2019	Innolux Corporation	Summary of business secrets and anti-corruptionpolicies	0.5
		Aug 20 2019		Antitrust Law	0.5

54 -
Certification Details of Employees Whose Jobs are Related to the Release of the Company’s Financial Information

Certification	Number of Employees	Number of Employees
	Finance&Accounting	Internal Audit
Certified Public Accountant (CPA)	1	－
Certified Internal Auditor (CIA)	－	2
Chartered Financial Analyst (CFA)	1	－
Certified Management Accountant( CMA)	2	－
Financial Risk Manager (FRM)	1	－
Senior Securities Specialist	9	－
Securities Specialist	7	－
Internal controller test of SFI	2	－
Basic Competency Test of Corporate Governance of SFI	1	－

Succession planning and operation of board members and important management members

The Company has established a sound corporate governance system, and introduced the independent director system since 2007. The Remuneration Committee was established in 2013 and the Audit Committee was established in 2016. The nomination and selection of members of the board of directors are based on a candidate nomination system in accordance with the Articles of Association. In addition to evaluating the academic background and work experience of each candidate, the system also takes into consideration the professional knowledge and skills of the each director to ensure the diversity and independence of directors.

In addition to the professional background and knowledge, the members of the board of directors of the Company are also constantly improving their skills and literacy necessary for the performance of their duties, and attend at least 6 hours of advanced courses every year.

The Company adheres to embracing change and leading the market demand, with the three main directions of "cultivating innovation and arranging succession", "deploying the leadership team" and "deepening the depth of positions". In addition to excellent work ability, the successors should also have the values consistent with those of the Company.

Based on the talents' future development and potential ability, the succession cultivation plan is divided into the three stages of experience cultivation, agency and observation, and formal succession. During the period, courses and action learning, project assignment and management authorization, and assignment and rotation are provided, and the feasibility of formal succession is assessed through performance evaluation and high-level personnel review. In addition to internal learning, senior executives and potential talents are also encouraged to study in top universities to deepen the knowledge and ability of business management.

55 -

3.4.9 Internal Control System

1.Statement of internal control system

Innolux Corporation Statement of Internal Controls

Date: Feb 13, 2020

According to the examination on internal control systems done by the Company itself in 2019, 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: The effectiveness and efficiency of business operation (including earnings, operation performance, and the safeguard of company assets); The reliability of the financial and related reports; and 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, 2019 had effectively assured that the following objectives had been reasonably achieved during the assessing period: The degree of effectiveness and efficiency of business operation; The reliability of the financial and related reports; 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 13, 2020. Among the 6 attending Directors, no one raised any objection to the contents of this statement.

Innolux Corporation Chairman: Jin-Yang Hung General Manager: Chu-Hsiang Yang

2.Hire an accountant to audit the Company’s internal control system and disclose the audit report made by accountants: None.
56 -

3.4.10 If any penalties are imposed on the Company and its personnel or punishments are imposed by the Company on personnel in violation of internal control system regulations in the past year and up to the date of report, and the results of the penalty may have a material effect on hareholders equity or stock price, specify the contents of the penalty, major deficiencies and improvement: None.

3.4.11 Major Resolutions of Shareholders’ Meeting and Board Meetings

1.Important resolutions and implementation made by the Shareholders’ Meeting by the end of 2019
(1)Adoption of the 2019 Business Report and Financial Statements

Status of execution: The voting result, the weight of approval was in accordance with the statutory requirements

Implementation Status: Fully implemented in accordance with the resolutions

(2)Adoption of the Proposal for Distribution of 2018 Profits

Status of execution: The voting result, the weight of approval was in accordance with the statutory requirements

Implementation Status: The 2018 earning distribution has been fully allocated. July 20, 2019 is set as the exdividend date and August 15 of the same year is set as the cash dividend payment date. The cash dividend is NT$0.06 per share.

(3)Resolution to revise Articles of Incorporation of Innolux Corporation.

Status of execution: The voting result, the weight of approval was in accordance with the statutory requirements

Implementation Status: Fully implemented in accordance with the resolutions and approve by the SIPA also upload to official website.

(4)Amendment to the Operating Procedure Governing the Acquisition and Disposal of Assets of the Company

Status of execution: The voting result, the weight of approval was in accordance with the statutory requirements

Implementation Status: were uploaded to the MOPS and disclosed on the company website on July 5, 2019, and matters were handled in accordance with the amended procedures.

(5) Amendment to the Operating Procedure Governing Loaning of Funds of the Company.
Status of execution: The voting result, the weight of approval was in accordance with the statutory requirements

Implementation Status: were uploaded to the MOPS and disclosed on the company website on July 5, 2019, and matters were handled in accordance with the amended procedures.

(6) Amendment to the Operating Procedure Governing Endorsement and Guarantee of the Company.
Status of execution: The voting result, the weight of approval was in accordance with the statutory requirements

Implementation Status: were uploaded to the MOPS and disclosed on the company website on July 5, 2019, and matters were handled in accordance with the amended procedures.

(7) 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: The voting result, the weight of approval was in accordance with the statutory requirements

Implementation Status: The Board has been authorized to conduct fund raising but there is no any shares issued in the latest year and up to the printing date of this Annual Report.

(8) Election of all the directors of the Company.
57 -

Status of execution: Directors elected to the 8th-term Board of Directors are as follows

Implementation Status: Directors (3 seats): Jin-Yang Hung,Chin-Lung Ting, Representative of Hong Yang Venture Capital Ltd. Co.Chu-Hsiang Yang, Representative of Hong Yang Venture Capital Ltd. Co.

Independent Directors (3 seats): Chi-Chia Hsieh,Yuk-Lun Yim,Zhen-Wei Wang

Approved and registered by the Ministry of Economic

Affairs on July 10, 2019.

(9) Dismissal of the prohibition of non-competition obligation of the new directors and its representatives

Status of execution: The voting result, the weight of approval was in accordance with the statutory requirements

Implementation Status: Fully implemented in accordance with the resolutions.

Important resolutions by the Board for 2018 prior to the deadline of annual report publication

Date

Major resolutions

7-16
Board Meeting
Feb 14, 2019

1.The Company’s Business Plan 2019.
2.Proposal for the capital expenditures for the Company in 2019.
3.The Compensation Committee is proposing employee and directrs bonus for the year of 2018
4.The Company’s individual financial statements and consolidated financial statements, 2018.
5.Passed the Accountant assessment of the independence and appropriateness
6.Amendment to part of the provisions of the“Articles of Incorporation”
7.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
8.Full re-election of directors of the company
9.Proposal to convene the Company’s regular shareholders meeting 2018.
10.Declaration of the Company’s internal control system 2018.
11.Proposed revision of the company's corporate governance code of practice
12.Proposal for execution of short-term loan agreements with financial institutions.
13.Reporting the remuneration of the company's 107-year functional committee member
14.Submittal of the“Full Incentives for Managerial Officers 2018”.

7-17
Board Meeting
May 9, 2019

1.Prepare and compile Innolux’s Business Report of the company for 2018.
2.Draft of Innolux’s Dividend Remittance for 2018.
3. Amendment to the Operating Procedure Governing the Acquisition and Disposal of Assets of
the Company.
4. Amendment to the Operating Procedure Governing Loaning of Funds of the Company.
5. The Company will not continue process the private placement approved by AGM of 2018
6. Nomination and review of the board of directors accepts the list of candidates for 7 directors
(including 3 independent directors) nominated by shareholders holding more than 1%
7. Proposal to dismiss the non-competition obligation of the newly elected directors and its
representatives.
8. New proposals at the 2019 Annual Meeting of Shareholders
9. Established the Company's Corporate Governance Committee and established standard
operating procedures for handling directors' requirements and rules on the responsibilities of
independent directors
10. The proposal for appointing the corporate governance supervisor.
11. Proposal for execution of short-term loan agreements with financial institutions
12. Amendments to the Audit Committee Charter.
13. Subsidiaries investing in obtaining wealth management products
14. The Compensation Committee isproposingmanager bonus for theyear of 2018

58 -

Date	Major resolutions
8-1 Board Meeting June 20,2019	1.Elected Chairman 2. Appoint the 4th term Compensation Committee members
8-2 Board Meeting July15,2019	1.To repurchase own company stock
8-3 Board Meeting July 30, 2019	1.Approve and amend some provisions of the company's measures to buy back shares and transfer employees 2. Amendments to the Audit Committee Charter. 3. Proposal for execution of short-term loan agreements with financial institutions 4. Proposal the Board of Directors and Functional Committee Remuneration Adjustment 5. The managers salary adjustment recommendations 6. Proposal for manager toparticipate in the employee shareholdingtrustplan
8-4 Board Meeting August 20,2019	1. To repurchase own company stock
8-5 Board Meeting November 08, 2019	1.The Company’s audit plan of 2020. 2. Establish to the Rules for Evaluating Board of Directors and Functional Committee Performance 3. Amendments to the Ethical Corporate Management Best Practice Principles 4. Adjusting the investment structure of overseas businesses 5. Set the amount of shares cancelled and the base date for capital reduction 6. Proposal for execution of short-term loan agreements with financial institutions
8-6 Board Meeting December 14,2019	1. Issued the first overseas unsecured conversion of corporate bonds in 2019
8-7 Board Meeting Feb 13, 2020	1.The Company’s Business Plan 2020. 2.Proposal for the capital expenditures for the Company in 2020. 3.The Company’s individual financial statements and consolidated financial statements, 2019. 4.Passed the Accountant assessment of the independence and appropriateness 5. Amendment to the Rules of Shareholders’ Meeting of the Company. 6. By-election of the directors of the Company 7. Proposal to convene the Company’s regular shareholders meeting 2020. 8. Declaration of the Company’s internal control system 2019. 9. Proposal for execution of short-term loan agreements with financial institutions. 10. Dispose of machinery and equipment for business use 11.Reporting the remuneration of the company's functional committee member 2019 12.Submittal of the“Full Incentives for Managerial Officers 2019”.

3.4.12 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors :None

3.4.13 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D

Title	Name	Date of Appointment	Date of Termination	Reasons for Resignation or Dismissal
Accounting Supervisor	Chin-Yuan Chang	2009/01/09	2020/04/21	Job adjustment

59 -

3.5 Information Regarding the Company’s Audit Fee and Independence

3.5.1 Audit Fee

3.5.1 Audit Fee	3.5.1 Audit Fee
Accounting Firm		Name of CPA				Period Covered by CPA’s Audit		Remarks
Pricewaterhousecoopers		Wu, Han-Chi	Liang Hua-Ling			Jan 1, 2019- Dec 31, 2019		-
Unit: NT$ thousands
Fee Items Fee Range				Audit Fee	Non-Audit Fee		Total
1	Under NT$ 2,000,000
2	NT$2,000,001 ~ NT$4,000,000
3	NT$4,000,001 ~ NT$6,000,000
4	NT$6,000,001 ~ NT$8,000,000
5	NT$8,000,001 ~ NT$10,000,000
6	Over NT$100,000,000			V	V		V

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$ Thousands	Audit Fee: NT$ Thousands
Accounting Firm	Name of CPA	Audit Fee	Non-Audit Fee					Period Covered by CPA’s Audit	Remarks
			System Design	Company Registration	Human resource	Others	Subtotal
Pricewaterhou secoopers	Han-Chi Wu	12,407	－	－	－	10,108	22,515	Jan 1, 2019 to Dec 31, 2019	Note
	Liang Hua-Ling

Note: Transfer pricing, R & D credit, country report public expensery.

2.Replaced the audit firm and the audit fee paid to the new audit firm was less than the payment of the previous year: None

3.Audit fee reduced more than 10% year over year, required to disclose the reduced amount, proportion, and reason: Mainly due to overseas consulting fees in 2018
3.5.2The professional fees for auditing services referred means the professional fees paid by the company to a certified public accountant for auditing, review, and secondary reviews of financial reports, financial forecast reviews, and tax certification.
60 -

3.6 Replacement of CPA:

3.6.1 About predecessor CPA

Date of change	Feb 13,2019	Feb 13,2019	Feb 13,2019	Feb 13,2019	Feb 13,2019
Reason for Replacement	Due to accounting firm’s job rotation in accordance to relevant regulations, the CPA Wu Han-Chi & Liang, Hua-Ling replaced by Hsu, Sheng-Chung & Liang, Hua-LingsinceQ1 2019.
Descriptions whether the Company terminated or the CPA did not accept the appointment	Parties Status		CPA		The company
	Termination of appointment		－		－
	No longer accepted (continued)appointment		－		－
Other than unqualified issues in the audit reports within last twoyears	None
Differences with the Company	Yes	－		Accounting principles orpractices
		－		Disclosure of Financial Statements
		－		Audit scope or steps
		－		Others
	None	V
	Descriptions
Other Revealed Matters (Required to be disclosed by Accounting Standards Article 20 section 2 first paragraph item 4)	None

3.6.2 About the Successor CPA:

3.6.2 About the Successor CPA:
AccountingFirm	Pricewaterhousecoopers
Name of CPA	Hsu,Sheng-Chung& Liang,Hua-Ling
Date of appointment	Feb 13,2019
Consulting results regarding accounting methods or accounting principles to specific transactions or opinions on the financial statements before appointment	None
Successor CPA written disagreements to former CPA	None

3.6.3 Reply of the Previous Accountant: 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
61 -

3.8 Changes in Shareholding of Directors, Managers and Major Shareholders

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

Unit: Per share

Title	Name (Note 1)	2019	2019	As of Apr. 30,2020	As of Apr. 30,2020
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Chairman &CEO	Jin-YangHung	150,000	—	—	—
Institutional Director	Hyield Venture Capital Co., Ltd	—	—	—	—
	Chu-HsiangYang(Note 2)	—	—	—	—
Institutional Director	Hyield Venture Capital Co., Ltd	—	—	—	—
	Chin-LungTing(Note 3)	—	—	—	—
Independent Director	Chi-Chia Hsieh	—	—	—	—
Independent Director	Zhen-Wei Wang	—	—	—	—
Independent Director	StanleyYuk Lun Yim	—	—	—	—
Vice President	Yao-TongChen	—	—	—	—
Vice President	Hung-Wen Yang	—	—	—	—
Vice President	Chih-MingChen	—	—	—	—
Associate Vice President	Ke-Yi Kao	—	—	—	—
Associate Vice President	Tai-Chi Pan	—	—	—	—
Associate Vice President	Kuo-Hsiung Kuo	—	—	—	—
Associate Vice President	Chung-Kuang Wei	(50,000)	—	—	—
Associate Vice President	Jia-Pang Pang	—	—	—	—
Associate Vice President	Yu Shui Kuo	—	—	—	—
Associate Vice President	Zheng-Xia Kuo	—	—	—	—
Associate Vice President	Tien-Jen Lin	(45,000)	—	—	—
Associate Vice President	Qing-Hui Lin	—	—	—	—
Associate Vice President	Jun-Yi Yu	—	—	—	—
Associate Vice President	Jing-Wun Huang(Note 4)	—	—	—	—
Finance Supervisor	Chien-LangLo	—	—	—	—
AccountingSupervisor	Kun Ma(Note 5)	—	—	—	—

Note 1: Refers to current managerial officers as of the printing date of the annual report Note 2: President & COO Note 3: Executive Deputy General Manager on Feb 19, 2020 Note 4: Appointed to office on Jul 3, 2019 thus the change in equity in 2019 was not calculated. Note 5: Appointed to office on Apr 21, 2020 thus the change in equity in 2019 was not calculated.

3.8.2 Shares Trading with Related Parties ： None

3.8.3 Shares Pledge with Related Parties ： None

62 -

3.9 Relationship among the Top Ten Shareholders

Name	Current Shareholding	Current Shareholding	Spouse’s/minor’s Shareholding	Spouse’s/minor’s Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within TwoDegrees	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within TwoDegrees	Remarks
	Shares	%	Shares	%	Shares	%	Name	Relationship
Chimei Corporation	270,929,561	2.79%	－	－	－	－	N.A.	N.A.	－
Representative: Hsu Chun-hua	－	－	－	－	－	－	N.A.	N.A.	－
Hyield Venture Capital Co., Ltd	176,311,219	1.82%	－	－	－	－	Hon Hai Precision Ind. Co., Ltd.	Subsidiary of Hon Hai Precision Ind. Co.,Ltd.	－
							Foxconn Technology Co., Ltd.	Director of the company	－
Representative: Te-Tsai Huang	212,619	－	－	－	－	－	N.A.	N.A.	－
JPMorgan Managed Advanced Stars advanced aggregate International Equity Index	151,499,515	1.56%	－	－	－	－	N.A.	N.A.	－
Hon Hai Precision Ind. Co., Ltd.	147,965,363	1.52%	－	－	－	－	Hyield Venture Capital Co., Ltd	Subsidiary of Hon Hai Precision Ind. Co.,Ltd.	－
Representative: Yang-Wei,Liu	－	－	－	－	－	－	N.A.	N.A.	－
Terry Gou	138,536,000	1.43%	－	－	－	－	Hon Hai Precision Ind. Co.,Ltd.	Director of the company	－
Foxconn Technology Co., Ltd.	127,556,349	1.31%	－	－	－	－	Hyield Venture CapitalCo.,Ltd	Director of the company	－
							Hon Hai Precision Ind. Co.,Ltd.	Investing Company	－
							Hua Zhu Investment Co., Ltd	Parent Company	－
Representative: Hung, Chih-Chien	62,372	－	－	－	－	－	N.A.	N.A.	－
New Labor Pension Fund	127,181,125	1.31%	－	－	－	－	N.A.	N.A.	－
JPMorgan hosting Sanskrit Vanguard Emerging Markets Equity Index Fund account	124,959,372	1.29%	－	－	－	－	N.A.	N.A.	－
Hua Zhu Investment Co., Ltd	121,036,800	1.25%	－	－	－	－	Foxconn Technology Co., Ltd.	Subsidiary companies	－
Representative: Yuan-Wen,Lan	－	－	－	－	－	－	N.A.	N.A.	－
Pan-International IndustrialCorp.	94,385,987	0.97%	－	－	－	－	N.A.	N.A.	－
Representative: Song-Fa,Lu	－	－	－	－	－	－	N.A.	N.A.	－

63 -

3.10 Ownership of Shares in Affiliated Enterprises

Unit: Shares:12/31/2019

Affiliated Enterprises	Ownership by the Company	Ownership by the Company	Direct or Indirect Ownership by Directors/Managers	Direct or Indirect Ownership by Directors/Managers	Total Ownership	Total Ownership
	Shares	%	Shares	%	Shares	%
CarUX Holding Limited	—	—	9,500,000	100%	9,500,000	100%
CarUX Technology Pte. Ltd.	—	—	9,400,000	100%	9,400,000	100%
Double Star Inc.	—	—	10,000,000	63%	10,000,000	63%
InnoCare Optoelectronics Japan Co., Ltd.	—	—	30,010	100%	30,010	100%
InnoCare Optoelectronics USA, INC.	—	—	900,000	100%	900,000	100%
Innolux Europe B.V.	—	—	375,810	100%	375,810	100%
Innolux Holding Ltd.	180,568,185	100%	—	—	180,568,185	100%
Innolux Hong Kong Holding Limited	1,158,844,000	100%	—	—	1,158,844,000	100%
Innolux Hong Kong Limited	—	—	35,000,000	100%	35,000,000	100%
Innolux Japan Co., Ltd.	98	54%	82	46%-	180	100%
Innolux Optoelectronics Hong Kong Holding Ltd.	—	—	162,897,802	100%	162,897,802	100%
Innolux Optoelectronics India Private Limited	—	—	67,000,000	100%	67,000,000	100%
Innolux Optoelectronics Malaysia SDN. BHD.	—	—	16,000,000	100%	16,000,000	100%
Innolux Optoelectronics Philippines CORP.	—	—	5,000,000	100%	5,000,000	100%
Innolux Singapore Holding Pte. Ltd.	25,400,000	100%	—	—	25,400,000	100%
Innolux Technology Germany GmbH	—	—	100,000	100%	100,000	100%
Innolux USA Inc.	—	—	12,842	100%	12,842	100%
Keyway Investment Management Limited	1,656,410	100%	—	—	1,656,410	100%
Lakers Trading Ltd.	—	—	1	100%	1	100%
Landmark International Ltd.	709,450,000	100%	—	—	709,450,000	100%
Leadtek Global Group Limited	50,000,000	100%	—	—	50,000,000	100%
Nets Trading Ltd.	—	—	900,001	100%	900,001	100%
Rockets Holding Ltd.	—	—	160,504,550	100%	160,504,550	100%
Stanford Developments Ltd.	—	—	164,000,000	100%	164,000,000	100%
Suns Holding Ltd.	—	—	18,177,052	100%	18,177,052	100%
Toppoly Optoelectronics (B.V.I.) Ltd.	146,847,000	100%	—	—	146,847,000	100%
Toppoly Optoelectronics (Cayman) Ltd.	—	—	146,817,000	100%	146,817,000	100%
Warriors Technology Investments Ltd.	—	—	18,177,052	100%	18,177,052	100%
Shanghai Innolux Optoelectronics Ltd.	—	—	—	100%	—	100%
Yuan Chi investment co.,Ltd	—	100%	—	—	—	100%
Foshan Innolux Flnet Electronics Ltd.	—	—	—	100%	—	100%
Foshan Innolux Optoelectronics Ltd.	—	—	—	100%	—	100%
Foshan Innolux Logistics Ltd.	—	—	—	100%	—	100%
NanjingInnolux TechnologyLtd.	—	—	—	100%	—	100%
NanjingInnolux Optoelectronics Ltd.	—	—	—	100%	—	100%
GIO(ma an shan) Optoelectronics Corp.	—	—	—	63%	—	63%
GIO Optoelectronics Corp.	27,812,188	63%	408,643	1%	28,220,831	64%
Innolux Automations and Intelligence Systems (ShenZhen) Co.,Ltd.	—	—	—	100%	—	100%
Shenzhen PixinLED TechnologyCo.,Ltd.	—	—	—	100%	—	100%
InnoJoyInvestment Corp.	167,405,392	100%	—	—	167,405,392	100%
Innocom Technology (Shenzhen)Co.,LTD	—	—	—	100%	—	100%
CarUX Technology Inc.	20,000,000	100%	—	100%	20,000,000	100%

64 -

Affiliated Enterprises	Ownership by the Company	Ownership by the Company	Direct or Indirect Ownership by Directors/Managers	Direct or Indirect Ownership by Directors/Managers	Total Ownership	Total Ownership
	Shares	%	Shares	%	Shares	%
Ningbo Innolux Flnet Electronics Ltd.	—	—	—	100%	—	100%
Ningbo Innolux Electronics Ltd.	—	—	—	100%	—	100%
Ningbo Innolux Optoelectronics Co.,LTD	—	—	—	100%	—	100%
Ningbo Innolux DisplayLTD	—	—	—	100%	—	100%
InnoCare Optoelectronics Corporation	20,000,000	100%	—	100%	20,000,000	100%

65 -

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

1. Type of Stock

Unit:Shares 4/21/2020

Share Type	Authorized Capital	Authorized Capital	Authorized Capital	Authorized Capital	Authorized Capital
	Outstanding			Un-issued Shares	Total
	Issued Shares	Unlisted	Total Shares
Common Shares	9,711,071,977	—	9,711,071,977	788,928,023	10,500,000,000

2. Issued Shares

Unit: Shares Thousand ; NT Thousand

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
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

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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
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 ofoverseas depositaryreceipts	None	2007.12.10 Yuan-Shang-Zih No. 0960033616
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 millionpreferred 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 of preferred 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

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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
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 with restricted employee rights at positive consideration Issuance of 844,000 new shares with restricted employee rights at nil consideration	None	2013.04.16 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	12.5	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
2016.05	—	10,500,000	105,000,000	9,952,351	99,523,510	Capital reduced by 330,000 new shares with restricted employee rights	None	2016.05.23 Zhu-Shang-Zih No.1050013777
2016.08	—	10,500,000	105,000,000	9,952,210	99,522,100	Capital reduced by 141,000 new shares with restricted employee rights	None	2016.08.16 Zhu-Shang-Zih No.1050022641
2016.11	—	10,500,000	105,000,000	9,952,149	99,521,490	Capital reduced by 62,000 new shares with restricted employee rights	None	2016.11.15 Zhu-Shang-Zih No.1050031553
2017.03	—	10,500,000	105,000,000	9,952,078	99,520,780	Capital reduced by 70,000 new shares with restricted employee rights	None	2017.03.03 Zhu-Shang-Zih No.1060005404
2017.05	—	10,500,000	105,000,000	9,952,072	99,520,720	Capital reduced by 6,000 new shares with restricted employee rights	None	2017.05.26 Zhu-Shang-Zih No.1060014186
2019.11	—	10,500,000	105,000,000	9,711,072	97,110,720	Treasury shares canceled 241,000 thousand shares	None	2019.11.19 Zhu-Shang-Zih No.1080033144

3. Information for Shelf Registration: None

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4.1.2 Status of Shareholders

As of 04/21/2020

Item	Government Agencies	Financial Institutions	Other Juridical Person	Domestic Natural Persons	Foreign Institutions & Natural Persons	Total
Number of Shareholders	10	31	515	369,872	941	371,369
Shareholding (shares)	166,798,049	75,437,092	1,455,893,439	5,570,717,772	2,442,225,625	9,711,071,977
Percentage	1.72%	0.78%	14.99%	57.37%	25.14%	100.00%

4.1.3 Shareholding Distribution Status

1. Common Shares

4.1.3 Shareholding Distribution Status 1. Common Shares	4.1.3 Shareholding Distribution Status 1. Common Shares	4.1.3 Shareholding Distribution Status 1. Common Shares	4.1.3 Shareholding Distribution Status 1. Common Shares
As of 04/21/2020
Class of Shareholding (Shares)	Number of Shareholders	Shareholding (Shares)	Percentage
1 ~ 999	76,793	23,674,134	0.24%
1,000 ~ 5,000	162,404	399,050,816	4.12%
5,001 ~ 10,000	53,114	428,987,033	4.42%
10,001 ~ 15,000	19,046	241,845,551	2.49%
15,001 ~ 20,000	15,864	298,028,958	3.07%
20,001 ~ 30,000	13,859	359,775,891	3.71%
30,001 ~ 50,000	12,274	501,791,091	5.16%
50,001 ~ 100,000	9,774	719,849,197	7.41%
100,001 ~ 200,000	4,412	638,936,572	6.58%
200,001 ~ 400,000	2,028	575,481,990	5.93%
400,001 ~ 600,000	624	308,835,143	3.18%
600,001 ~ 800,000	288	199,425,171	2.05%
800,001 ~ 1,000,000	201	182,870,772	1.88%
1,000,001 or over	688	4,832,519,658	49.76%
Total	371,369	9,711,071,977	100.00%

4.1.4 List of Major Shareholders

4.1.4 List of Major Shareholders
	As of 04/22/2019
Shareholder's Name	Shareholding
	Shares	Percentage
Chimei Corporation	270,929,561	2.79%
Hyield Venture Capital Co.,Ltd	176,311,219	1.82%
JPMorgan Managed Advanced Stars advanced aggregate International EquityIndex	151,499,515	1.56%
Hon Hai Precision Ind. Co.,Ltd.	147,965,363	1.52%
TerryGuo	138,536,000	1.43%
Foxconn TechnologyCo.,Ltd.	127,556,349	1.31%
New Labor Pension Fund	127,181,125	1.31%
JPMorgan hosting Sanskrit Vanguard Emerging Markets Equity Index Fund account	124,959,372	1.29%
Hua Zhu Investment Co.,Ltd	121,036,800	1.25%
Pan-International Industrial Corp.	94,385,987	0.97%

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

Unit: NT$ Thousand share

Year Item	Year Item	Year Item	2018	2019	As of 03/31/2020
Market Price per Share	Highest Market Price		14.75	10.60	9.51
	Lowest Market Price		9.01	5.76	4.85
	Average Market Price		11.42	8.19	7.99
Net Worth per Share	Before Distribution		25.62	24.08	23.39
	After Distribution		－	－	－
Earnings per Share	Weighted Average Shares (thousand shares)		9,952,072	9,857,385	9,631,072
	Diluted Earnings Per Share	Adjusted Diluted Earnings Per Share	0.22	(1.77)	(0.55)
Dividends per Share	Cash Dividends		0.06	0.1(None)	N.A.
	Stock Dividends	Dividends from RetainedEarnings	－	－	－
		Dividends from CapitalSurplus	－	－	－
	Accumulated Undistributed Dividends		－	－	－
Return on Investment	Price/Earnings Ratio		51.91	N.A.	N.A.
	Price/Dividend Ratio		190.33	N.A.	N.A.
	Cash Dividend Yield Rate		0.53%	N.A.	N.A.

Note: 2019 loss appropriation 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

1.Dividend Policy

The annual net profits of final accounts of the Company shall make up for loss first, shall secondly appropriate 10% of profit as legal reserve (however, if legal reserve reaches the total capital amount shall not apply), to make an appropriation of another sum as special reserve or make an reversal of special reserve in accordance with laws and regulation, to distribute dividend for special/preferred shares, and to add into the profit not yet distributed before, the allocation proposal shall be prepared by the board of directors and be submitted to and resolved by the shareholders’ meeting.

The Company is an emerging company of growing rapidly, capital intensive business, and is at the stage of stable growth, in order to match up the long-term financial plan of the Company in the future, investment environment and business competition situation, the allocation of dividends shall consider the future capital expenditure budget and capital requirement of the Company, and allocation proposal shall be prepared by the board of director, and then shall be allocated after a resolution adopted by shareholders’ meeting. However, for the allocation of shareholders’ dividends, the stock dividends shall not exceed two-thirds of distributable dividends in that current year.

2.Proposed Distribution of Dividend

The accumulated undistributed earnings of the Company at the beginning of 2019 is NT$47,354,032,180; after deducting the retained earnings adjustment of NT$46,596,037, the after-tax net loss of the current period of NT$17,442,990,310 and the special reserve of NT$2,661,974,482, the undistributed earnings of the Company at the end of 2019 is NT$27,202,471,351, and no dividend will be distributed to shareholders.

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In accordance with Article 241 of the Company Act, the shareholders' meeting plans to allocate NT$963,107,198 of the additional paid-in capital in excess of the par value of the issued shares, and NT$0.1 of cash per share will be distributed according to the names of shareholders and their shareholdings recorded in the shareholders' register on the base date of distribution, pending the resolution of the 2020 general shareholders' meeting.

3. Significant changes of Dividend policy: None.

4.1.7 Effect of the proposed stock dividends (to be adopted by the shareholders' meeting) on the operating performance and earnings per share:

Not applicable. There is no stock dividend distribution proposed in this shareholders' meeting.

4.1.8 Compensation of Employees and Directors

1. Information Relating to Compensation of Employees and Directors in the Articles of Incorporation

Article 21 of the Articles of Incorporation stipulates that: The distribution of employees' compensation shall not be lower than 5% of and the directors’ compensation shall not be higher than 0.1% of the current year pre-tax income before deducting the distributable employees’ and directors’ compensation of the Company. However, the Company's accumulated losses shall have been covered.

The company shall, 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 distributed in the form of shares or in cash and have the profit distributable as director’s compensation in the form of cash; and in addition thereto a report of such distribution shall be submitted to the shareholders' meeting.

The target to be distributed employees’ compensation in the form of shares or cash may include employees of subsidiary companies who conform to certain criteria. Relevant regulations shall be authorized to be prescribed by the board of directors.

2.The basis for estimating the amount of employee, director, and supervisor compensation, for calculating the number of shares to be distributed as employee compensation, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period.

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) minus the accumulated losses estimated and appropriated as remuneration to employees and remuneration to directors, 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. Remuneration of employees and directors is not estimated due to pre-tax losses in 2019 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.

3. Distribution of Compensation of Employees, Directors and Supervisors for 2016 Approved in the Board of Directors Meeting

(1) The amount of any employee compensation distributed in cash or stocks and compensation for directors and supervisors. If there is any discrepancy between that amount and the estimated figure for the fiscal year these expenses are recognized, the discrepancy, its cause, and the status of treatment shall be
71 -

disclosed：

Remuneration of employees and directors is not estimated due to pre-tax losses in 2019

If there is any discrepancy between that amount and the estimated figure for the fiscal year these expenses are recognized, the discrepancy, its cause, and the status of treatment shall be disclosed ： None.

(2) The amount of any employee compensation distributed in stocks, and the size of that amount as a percentage of the sum of the after-tax net income stated in the parent company only financial reports or individual financial reports for the current period and total employee compensation：

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

4. Information of 2018 Distribution of Compensation of Employees, Directors and Supervisors (with an indication of the number of shares, monetary amount, and stock price, of the shares distributed) and, if there is any discrepancy between the actual distribution and the recognized employee, director, or supervisor compensation, additionally the discrepancy, cause, and how it is treated. ：

(1) Actual distribution

Unit ： NT$Thousand

Item	Amount
Directors' Remuneration	$4,528
Employee Remuneration	$294,289

(2) If there is any discrepancy between the actual distribution and the recognized employee and director compensation, cause, and how it is treated ：

The above-mentioned actual distribution of compensation of employees and directors was in line with the resolution of the Board of Directors.

4.1.9 Buyback of Treasury Stock

4.1.9 Buyback of Treasury Stock	4.1.9 Buyback of Treasury Stock	4.1.9 Buyback of Treasury Stock
As of 04/30/2019
Treasury stocks: Batch Order	01thBatch	02thBatch
Purpose of buy-back	transferring shares to its employees	maintain the company's credit and shareholders'rights and interests
Timeframe of buy-back	2019/07/16~2019/09/14	2019/08/20~2019/10/21
Price range	NT$ 5.08~ NT$ 11.00	NT$ 4.93~ NT$ 10.47
Class, quantityof shares bought back	80,000,000 shares	241,000,000 shares
Value of shares bought-back (in NT$ thousands)	NT$ 618,580	NT$ 1,681,043
Shares sold/transferred	－	241,000,000 shares
Accumulated number of company shares held	80,000,000 shares	80,000,000 shares
Percentage of total company shares held(%)	0.82%	0.82%

Note ： The total company shares held of issued shares registered with the Ministry of Economy as of the date of publication of the annual report

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4.2 Bonds

4.2.1 Corporate Bonds:

4.2 Bonds 4.2.1 Corporate Bonds:	4.2 Bonds 4.2.1 Corporate Bonds:
Corporate Bond Type		First issue of overseas unsecured convertible bonds of 2019
Issue date		January 22, 2020
Denomination		USD$200,000 or its integral multiple
Issuing and transaction location		Singapore Stock Exchange
Issue price		The bond is issued at full face value
Total price		USD$300,000,000
Coupon rate		Coupon rate: 0%
Tenor		5 years Maturity: January 22, 2025
Guarantee agency		None
Consignee		BNY Mellon
Underwriting institution		UBS AG, Hong Kong Branch, Credit Suisse (Hong Kong) Limited
Certified lawyer		Baker Mckenzie Yu-Jie, Shiau Attorney-at-Law
CPA		PwC Taiwan Wu, Han-Chi, CPA
Repayment method		Unless previously early redeemed, repurchased and cancelled or converted by the Bondholders, the Bonds will be redeemed at their principal amount with a yield calculated at the rate of 0% per annum on the Maturity Date.
Outstanding principal		USD$300,000,000
Terms of redemption or advance repayment		(1)The Issuer may, at its option, redeem the Bonds, in whole or in part, at an amount equal to the principal amount of the Bonds plus a tentative yield of 0% per annum (the “Early Redemption Amount”) if at any time after three years of the Issue Date, the closing price (converted into US dollars by using the prevailing exchange rate) for 20 consecutive trading days (in the event of ex-rights or ex-dividends, the closing price on each applicable trading days the period from the ex-rights or ex-dividends trading day to the ex-rights or ex-dividends record date, as the case may be, shall be adjusted to the price taking into account of impact of the ex-rights or ex-dividends) of the Issuer’s common shares on the Taiwan Stock Exchange (“TWSE”) is at least 130% of the Early Redemption Amount (as defined above) multiplied by the Conversion Price (converted into US dollar using the Fixed Exchange Rate on the pricing date) divided by the principal amount of the Bonds; or (2)The Issuer may, at its option, redeem the Bonds, in whole but not in part, at the Early Redemption Amount if more than 90% of the Bonds have been previously redeemed, repurchased and cancelled or converted; or (3)The Issuer may, at its option, redeem the Bonds, in whole but not in part, at the Early Redemption Amount if there is any change in ROC taxation resulting in increase of tax obligation or the necessity to pay additional interest expense or an increase of additional costs to the Issuer, Bondholders may elect not to have their Bonds redeemed but with no entitlement to any additional amount or reimbursement of additional tax.
Restrictive clause		None
Name of credit rating agency, rating date, rating of corporate bonds		None
Other rights attached	As of the printing date of this annual report, converted amount of ordinary shares securities	N/A
	Issuance and conversion method	Please refer to MOPS-various exclusive sections-bond section
Issuance and conversion, issuing condition dilution, and impact on existing shareholders’ equity		If the bond is fully converted, the maximum dilution ratio of the original shareholders s equitymed but with no entitlement to any addiicant dilution that affects the shareholdersequitymed but with no entitlement to any additional amount or reimbursement of additional tax.nge (“TWSE”) is at least 130% of the ayinancial structure. It will be more beneficial to the company's future operation and development.
Transfer agent		None

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4.2.2 Convertible Bonds:

Corporate bond type		First issue of overseas unsecured convertible bonds of 2019	First issue of overseas unsecured convertible bonds of 2019
Item	Year	time of issuance	As of the printing date of this annual report
Market price of the convertible bond	Highest	US$102.75	US$102.35
	Lowest	US$101.50	US$85.94
	Average	US$102.38	US$94.26
Convertible Price		NT$10.72
Issue date and conversion price at issuance		Issue Date: 2020/01/22 Conversion price at issuance: NT$10.72/share
Conversion methods		Issuingof new stocks

4.2.3 Exchangeable Bonds: None.

4.2.4 Shelf Registration for Issuing Bonds: None.

4.2.5 Corporate Bond with Warrants: None.

4.3 Status of preferred shares: None.

4.4 Global Depository Receipts: None.

4.5 Employee Stock Options: None.

4.6 Issuance of New Restricted Employee Shares: None.

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

4.8 Financing Plans and Implementation

The Company doesn’t have any uncompleted issuance plan or completed plan with unrealized benefit within the latest three years.

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V. Operational Highlights

5.1Business Activities

5.1.1Business Scope

A.Main areas of business operations

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, smart home 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.

B.Revenue distribution

nue distribution	nue distribution	nue distribution
Unit: NT$ thousand
Major Divisions	Total Sales in Year 2018	(%)of total sales
TFT-LCD	251,971,209	100%
Total	251,971,209	100%

C.Main products

The Company’s main products are TFT-LCD panels and touch-control modules and TV machine OEM. 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. The whole machine OEM uses the LCD TV as the main axis to assist the TV brand’s OEM manufacturing and realize the company’s vision from the panel to the whole machine.

D.New products development

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, automobile display 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 also continues to invest in smart home applications, electronic tags, smart watches, VR / AR, large public displays, automotive displays, medical displays, LCD antennas and other non-consumer applications.

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, Wide viewing angle and narrower frames, thereby offering an incentive to consumers to upgrade replace 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. With the continuous improvement of LCD panel technology, products in emerging

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fields such as medical, aerospace, AR/VR and electronic tags have also gradually seized applications.

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, and upgraded automatic product line,The production capacity and scale of every production line are comprehensive and flexible, matching a-Si, p-Si, LTPS, Oxide, OLED processing and VA, AAS, TN Fringe field Switching and automatic product line, 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 [420 x 317] 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
INXs
stream Middle products
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

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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 with narrow border, stylus pen 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, E-sports notebooks with high-end performance, high refresh rate, high response speed and high color saturation, notebooks with a 360-degree angle, and dual-screen notebooks with main screen and touch screen Wait for new products to be launched.even table mode can connecting with keyboard directly become a notebook, functional transform notebook are gradually becoming the mainstream design of 10-inch to 13-inch notebooks. Ultra-thin, wide viewing angle, narrow border ,high colour,low consumption 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 than 15-inch, low energy consumption, and wide color gamut panels to present better color expression.

In terms of panel specifications, the aspect ratio of 16:9 is the largest mainstream product available today. The penetration rate of IPS wide viewing angle has increased year by year. More than one-half of the products have wide viewing angle specifications, and the narrow frame is the fastest growing. The new specification trend, another 16:10 or 3:2 multi-tasking notebook, has also become another issue of design differences. Due to the light and fashionable design trend, the thin and narrow frame panel design has gradually become a must-have point for the product.

(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 narrow border of the product equipped with wide viewing angle technology has gradually increased. Meanwhile due to customers increasing demand for high quality products, we are expecting QHD and UHD high resolution products to be released on the market, will become the mainstream of the high end market gradually.

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 19.5-inch and 21.5-inch to 23.8-inch etc.; the average size is bigger for personal video and audio entertainment products, 23.8-inch, 27-inch and 32-inch units will gradually increase their proportion.18:9, With an aspect ratio of 18:9,21:9 and Matching surface design,, the ultra-wide screen is designed to increase the productivity of the commercial market through double-screen multiprocessing, expand the visual horizons to enhance visual

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enjoyment, and promote the scale of high-end markets.

Except for standard LCD monitors, 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 and accessories design adding greater entertainment function. It also shows a new appearance for the market of LCD monitors.

Amid booming digital gaming marketing and changing public opinion about the electronic gaming sports, along with their races, communities and media coverage, that are fast growing into professional and official sports. Differing from the 6-year life cycle of computer products, gamers are getting new devices in only 2-3 years on average, let alone their high-end hardware specifications and much higher costs. Leading computer brands are rushing into this market with second brands or series of gaming exclusive desktop and notebook devices designed with gamer specific requirements and configurations in mind. Electronic gaming grade components, including advanced and high-reliability mainboard, memory, independent graphic cards and displays with high refresh rate, are powerful magnets to gamer consumer groups.

(iii) LCD TV

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 50-inch, 58-inch and 65-inch, 75-inch, 85-inch, 100-inch, 120-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. At the same time, we provide the services of the whole machine, so that the panel manufacturing can be assembled in one machine, providing one-stop overall service.

With the trend of high-resolution mobile display devices, consumers are meeting the demand for high-definition TVs. In the second half of 2017, 4K2K ultra-high resolution products were launched, which is the fastest manufacturer and the highest market share in the industry. The company is leading the industry to promote ultra-high resolution 8K4K (7680x 4320) with high color saturation (NTSC >100%) panel,has been promoted to customers in 2019 is expected to grab the market in the 2020. In terms of technology, the company proposed in the 4K2K LCD TV module in 2018 that the Mega-Zone achieves pixel-level regional dimming control with dual panels, which enhances the display quality of the dark state and deep black performance to improve the visibility of the screen. With the development of 8K high-definition transmission protocol, 5G signal transmission standard, high-efficiency video coding and multimedia transmission interface specifications, the penetration rate of 8K4K image specifications will continue to increase in 2020. Various manufacturers have successively launched 8K4K-level photographic equipment, and cooperated with audio and video media to launch 8K movies and broadcast programs. The subsequent 8K4K has become a must-have specification for large-size TVs, and with the new transmission specifications of 5G, it will create 8K+5G future life.

On the design of panel appearance, the company provides ultra-narrow frames (<5mm) and ultra-thin design (thickness <4mm) using on products over 40-inch, 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

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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 higher than G6 factory. However, industry competition of medium and small panel not only at price competition, but also at market demands of higher resolution, higher definition panel, and full screen and customize surface design. 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 2017, except keep improving resolution in 4-inch to 6-inch screen and also compete in lighter, thinner, narrow frames and lower energy consumption products.

The company is advancing product competitiveness with embedded and integrated touch control technology along with enhanced product design flexibility and Time-to-Market strength to provide customers with services integrating high performance and ultra-thin and touch control LCD modules. This is followed by R&D efforts in a series of next generation panel technologies including profile cutting, wearable devices, organic light emitting displays (OLED) and flexible panels aiming at products with high added value in addition to price competition. The goal is to distantiate itself from competitors with advanced technology and to staying sustainable in the industry.

In 2019, for the year of rapid penetration of mobile phone comprehensive screens, Innolux also quickly adjusted production lines and specifications, and developed and produced competitive full-screen products to attack the market, and invested in new applications such as profile cutting and wearable devices. Investing in the development of next-generation panel technologies such as Mini-LEDs and flexible panels, and developing more niche high value-added products in addition to price competition, in order to use technology to expand the gap with competitors and continue to operate in the industry

4. Market competition situation

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, ChinaStar and CLP group step into generation G8 and higher production and starting the competition. The growing China, due to the government's high-tech policy, the support of the domestic demand market, and the high subsidies from the central and local governments, have prompted mainland panel makers to invest heavily. In recent years, BOE, ChinaStar,HKC,CHOT and China Light and Power Group (CEC) ) The government's resources have entered the ranks of G8.5, G8.6 and G10.5, and the competition in the panel industry has become more and more intense.

In order of countries input in TFT-LCD, countries are China ,South Korea, Taiwan, and Japan.Intensified industrial competition in 2019 has led South Korean manufacturers to gradually withdraw from TFT-LCD production. It is expected that the production area of South Korean manufacturers will fall behind Taiwan in 2020.

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, curve 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

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and automobile. 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 soft display manufacture process

(2) New material technical process:

Including Oxide, 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, material development and production process for curved touch control display.

(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, smart home and touch panel and the like, in the dimensions ranging from 1.36” to 100” 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$thousand	Unit: NT$thousand	Unit: NT$thousand
Item	2019	March 31,2020
R & D expense	12,464,800	3,021,633
Net Revenue	251,971,209	50,391,575
Percentage of revenue	4.95%	6.00%

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 23.6-inch/40-inch/50-inch/58-inch the best cutting efficiency size in G5.5/G6/G7.5/G8.5 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 100-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/50-inch/58-inch/65-inch/75-inch/85-inch/100-inch TV display, overall arrangement in big size application, creating more differentiation product than competitors.
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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. It has successfully developed a high-efficiency BT.2020 90% technology without Cd / Pb and other heavy metal materials, which can reduce the image distortion, caused by the adjustment of color and faithfully present all real-world images.
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 (<9mm), 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. Develop Narrow border modul(<5MM) 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. In 2017, 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.
J. Mass producer of 65-inch/75-inch large 8K4K (7680X4320) panels with the highest resolution in the world
(2) Monitors:
A. Release whole series wide viewing angle VA/AAS 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, for the market of gaming, provide highly response time,not only increase product value, but also provide client the best choice of high end monitor LCD panel.
D. Launched a 21.5-inch adjustable anti-spy display panel, designed a one-button switch to change the viewing angle, and quickly switch between general mode and anti-peep mode, which is suitable for high confidentiality needs of business people, government agencies, etc. to improve information security protection.
(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/17.3-inch) is only 2.0mm, show light feature and provide the solution of notebook carry.
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.
E. Launched a full range of narrow-bezel notebook panels to achieve a high-screen share of the overall design trend, meet the narrow-side in the standard product specifications of VESA, but also continue to publish the ultimate product design, micro-frame design to expand the horizon.
F. Developed a 15.6-inch high-speed responsive low-blue, colorless, biased, gaming panel, using Innolux's LED chip design patented to effectively reduce 70% of the blue light. The product was certified by TUV Low German Blu-Ray to relieve eye fatigue and allow long-term use of electricity. Improving players have more comfortable enjoyment.
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G. Developed dual cell privacy panel, which does not affect the brightness and chroma of the panel under better concealment effect, and is adopted by high-end commercial laptops of first-line pen power plants.
(4) Small/Medium:
A. Develop a-Si high resolution smart phone panel, resolution can reach above 400ppi, in high yield and stable processes. The product successfully built advantage.
B. Develop LTPS QHD panel of frames narrow than 0.45mm and a-Si FHD 0.6mm, 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.
C. Adopt less power hungry design to lower power consumption by the panel drive chip. Optimize panel production process and material with high color saturation, high transmittance color photo-resistor to ramp up panel efficiency and product competitiveness with balanced low power consumption and production costs.
D. Leading the industry by launching a series of Touch On Display (TOD) integrated touch control devices. Coupled with modular and compact design and good optical performance, this company is providing customers with comprehensive and full range touch control integration services with vertically integrated LCD panels and touch control production.
E. Apply the newly developed Touch In Display (TID) integrated touch control technology in a-Si HD and LTPS FHD panel for mobile phones and stay ahead in a-Si WXGA and WUXGA for tablets. This company is integrating touch control drives and display chips with Touch & Display Driver Integration (TDDI) structure to pioneer the compact and high performance niche product markets.
F. Deep Sensing Technology using a special electrode design to simulate 3D multi-finger-touch tactile sensation, combined with dual advantages of capacitive touch and resistance, highly identification surpasses 2D touch.
G. Successfully developed a full-screen, borderless, 6-inch wide color touch mobile panel. Through miniaturization of the drive lines, precise control of the plastic frame and cutting accuracy and design appearance of the glass achieves visual effects without borders, and the module surface is actively miniaturized, ultra-thin and lightweight. Increased specification advantage is extremely high.
(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.
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(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,85-inch UHD also support portrait. Also first release horizon LCD display (bar type) presents multiple sizes can fit for multiple environments.

In 2018, a 100-inch high-luminosity quantum dot public display module was introduced to replace the traditional four-panel 55-inch panel mosaic to present the visual effects of a large-scale video wall, which is widely used in large-size billboards.

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 also 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, soft disply 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；%
	Area	Amount of Sales 2019	%
	Domestic sales	50,060,495	19.87%
Foreign sales	China	43,603,799	17.31%
	HongKong	74,215,947	29.45%
	Europe	10,089,112	4.00%
	America	27,794,735	11.03%
	Other Area	46,207,121	18.34%
	Total amount of F/S	201,910,714	80.13%
	Total	251,971,209	100.00%

2. Market Share

According to the statistic of IHS research report, until 2019, the market of the company’s big size panel

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shipment is12.7%, which is the fourth-largest supplier of the world LCD panel industry. Based on application product shipment quantity distinction, global market share of LCD display panel is 16.4%, maintains world’s fourth ranking performance; global market share of LCD TV panel is 15.3%, world’s second ranking performance; global market share of notebook (not including tablet) is 20.7% which is the world’s third ranking, global market share of tablet is 15.2% which is the world’s second ranking, global market share of car panel is 11% which is the world’s fifth ranking. The market share of smart phone is 34%.Overall, under the tough economic environment, strong market competition; the company still maintains nice performance in the market. .

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, the global shipment of big size (over 9-inch) TFT-LCD panel will be 766 million chips in 2019.

If we analyze the market scale of several major application levels, in terms of LCD TVs, as the large-scale production capacity continues to be opened, the market will change from volume growth to average size enlargement, and the consumption capacity area will increase steadily., global shipment of LCD TV will be 217 million in 2019 and average size increase an1.2- inch each year and might reacg 221 million in 2020. About LCD monitor, the shipment is 138 million and will slightly grow in 2019, 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), due to the tablet is not popular after 2015, the shipment is 294 million in 2019 and the forecast will to 283 million in 2020.

==> picture [398 x 172] intentionally omitted <==

Data Source: iHS

According to the estimate of IHS, the global shipment of small and medium-sized panels in 2019 is estimated to be 2.77 billion pieces, a decline of 3.1% compared with 2018, and the estimated shipment in 2020 is 2.75 billion pieces, a decline of 0.8% compared with 2019. According to the estimate of IHS Markit, the number of mobile phones shipped in 2019 is 1.84 billion, and the market is expected to be flat at 1.879 billion in 2020. The demand for smart phones has slowed down in recent years, mainly due to the high price of high-level mobile phones and the lack of new technology to attract consumers to switch, but the sales of medium and low-level smart phones in emerging countries remain hot. The 5G communication network has been put into operation gradually since the beginning of 2019. It is expected that a wave of smart phone replacement will start in 2020 which will increase the demand for mobile phone panels, and the overall mobile phone panel shipment and emerging networking devices will continue to grow; this will be the main growth momentum of small and medium-sized panels.

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==> picture [390 x 185] intentionally omitted <==

Data Source: IHS Markit

The goable economic anabiosised gradually from depression, 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.Meanwhile delopement automatic product

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line to decrease the human resource and upgrade the product design. 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:

The company has diversified products and good marketing channels, which can be quickly integrated with world-class customers. For world-class brand manufacturers, the company also provides rapid design, timely delivery, machine manufacturing and global services. Integrated services give customers the convenience of a one-time purchase.

(6) Customize

The company provides customers customized products with good R&D and design capabilities, modular manufacturing, excellent supply chain management, vertical integration management and manufacturing cost advantages.

Looking back on 2019, the company's product line of various sizes of panels is more complete, and it can also provide customers with services from panel manufacturing to complete machine OEM. Whether in terms of capacity scale, design capability, quality yield, supply operation management and financial stability, there is a further improvement. In addition, the Company continued to strengthen its in-depth cooperation with customers in product design and supply chain management to continuously improve customer satisfaction and thereby increase the market share of the company's panel products. In 2019, the company's shipments are strong, and the business policy is clearly seen to achieve results. In the future, the products will continue to be optimized, the quality will be improved, and customers will be more satisfied.

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

(1) Advantage:

A. Keep developing new product applications

The rapid development of wireless communication technology and cloud computing has enabled the interoperability and integration of content in the fields of TV, personal computer, tablet computer, mobile phone and smart home. The new life style of "5G+8K" has developed into various manufacturers. Strategic focus. Cloud streaming services surround people's lives, and flat-panel displays as information interfaces are even more important. The more refined the content of the information, the higher the requirements of consumer size, resolution, viewing angle and lightweight design, and the unit value of TFT-LCD products, bringing new applications and demand growth. The mainstream product of the world's major TV brand factories is "Smart TV", which shows the signal that cloud applications will begin to enter the TV field quickly. Will continue to launch more 8K4K ultra-high resolution LCD TVs in 2020, provides consumers with a higher level of visual enjoyment. With the construction and popularization of 5G equipment, the future 8K4K ultra-high resolution will be an essential specification in mid-to-high-end products.

Regarding to the LCD monitors,because the market is more matured, the main product appeals in

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recent years are elements such as e-sports, high image quality and narrow borders, prompting consumers to upgrade their existing product lines. In terms of notebook computers, the new market drivers come from new operating system upgrades, energy saving, e-sports, narrow borders and Privacy PC, which stimulate consumer demand, while tablet PCs are aimed at educating the market to improve Shipment of size panels. In terms of small and medium-sized panels, the popularity and functionality of smart phones have become more diversified, making smart phones penetrate high-end products into general consumer products, and as prices have fallen, they have become the preferred choice for mobile devices in emerging regions. In the future, the innovation of 5G wireless communication and the popularization of the portable screen will enable the future shipment of smart phones to continue to be bullish; due to the continuous large-scale of smart phone panels, and for wide viewing angle, high resolution, light weight and energy saving , color performance and other requirements are relatively high, so its profit is also relatively good, in order to boost the revenue of mobile phone panel shipments

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.

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 China 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 fourth 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

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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

International Monetary Fund estimates that the global economy will be slow and highly uncertain. The developed countries' economies will be flat or declining, affected by the Sino-US trade war, the Brexit, the South American currency oscillation, and the sluggish domestic demand. Consumers are expecting a conservative outlook but are still strong in emerging markets where world economic growth is increasing. Although the geopolitical tensions have not improved, the need to develop emerging markets has become the target of consumer electronics brands. Regional or global economic fluctuations will have a major impact on consumer demand, which in turn will affect the supply of liquid crystal display products. The Company continues to optimize its products and technologies to provide products with competitive cost and specifications, and to cooperate with upstream and downstream partners in the supply chain to promote the market to reduce the adverse situation of external demand fluctuations.

5.2.2 Production Procedures of Main Products

1. Major Products and Their Main Uses

(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 , smart home 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. Major Products and Their Production Processes

(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
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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,Supplier Z,Supplier O	Good
Glass	Supplier P,Supplier S,Supplier X,SupplierQ	Good
Polarizer	Supplier W,Supplier T,Supplier R,Supplier V	Good

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5.2.4 Major Suppliers and Clients

A. Major Clients Information for the Last Two Calendar Years

Unit ： NT Thousand$

A. M	ajor Clients Information for the Last Two Ca	ajor Clients Information for the Last Two Ca	ajor Clients Information for the Last Two Ca	ajor Clients Information for the Last Two Ca	lendar Years Unit：NT Thousand$	lendar Years Unit：NT Thousand$	lendar Years Unit：NT Thousand$	lendar Years Unit：NT Thousand$
Item	2018				2019
	Company Name	Amount	Percent	Relation with Issuer	Company Name	Amount	Percent	Relation with Issuer
1	Customer A	28,944,033	10.36	None	Customer A	－	－	－
2	Others	250,432,082	89.64	None	Others	251,971,209	100.00	None
	Net Total Supplies	279,376,115	100.00	－	Net Total Supplies	251,971,209	100.00	－

B. Major Suppliers Information for the Last Two Calendar Years

Unit ： NT Thousand$

B. M	ajor Suppliers Information for the Last Two	ajor Suppliers Information for the Last Two	ajor Suppliers Information for the Last Two	ajor Suppliers Information for the Last Two	Calendar Years Unit：NT Thousand$	Calendar Years Unit：NT Thousand$	Calendar Years Unit：NT Thousand$	Calendar Years Unit：NT Thousand$
Item	2018				2019
	Company Name	Amount	Percent	Relation with Issuer	Company Name	Amount	Percent	Relation with Issuer
1	Others	166,638,578	100.00	None	Others	164,989,673	100.00	None
	Net Sales	166,638,578	100.00	－	Net Sales	164,989,673	100.00	－

5.2.5 Production in the Last Two Years

Unit: NT Thousand$

				Unit: NT Thousand$	Unit: NT Thousand$	Unit: NT Thousand$
Year Output Major Products	2017			2018
	Capacity	Quantity	Amount	Capacity	Quantity	Amount
TFT-LCD	405,000	368,119	252,000,000	359,500	318,582	249,450,000
Total	405,000	368,119	252,000,000	359,500	318,582	249,450,000

5.2.6 Shipments and Sales over the Last Two Years

Unit ： NT Thousand$

					Unit：NT Thousand$	Unit：NT Thousand$	Unit：NT Thousand$	Unit：NT Thousand$
Year Shipments & Sales Major Product	2018				2019
	Local		Export		Local		Export
	Quantity	Amount	Quantity	Amount	Quantity	Amount	Quantity	Amount
TFT-LCD	94,947	75,594,192	303,549	203,781,923	72,147	50,060,495	307,291	201,910,714
Total	94,947	75,594,192	303,549	203,781,923	72,147	50,060,495	307,291	201,910,714

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5.3 Human Resources

	Year	2018	2019	As of 4/30/2020
Number of Employees	Manager	2,702	2,779	2,791
	IDL	12,902	12,520	12,433
	DL	43,950	40,558	42,994
	Total	59,554	55,857	58,218
Average Age		31.94	32.81	32.67
Average Years of Service		5.35	6.01	5.84
Education	Ph. D.	0.14%	0.14%	0.14%
	Masters	9.58%	10.05%	9.62%
	Bachelor’s Degree	68.20%	68.57%	69.15%
	Senior High School	15.55%	15.27%	14.74%
	Below Senior High School	6.54%	6.97%	6.36%
	Total	100%	100%	100%

5.4 Environmental Protection Expenditures

5.4.1 Any losses suffered by the company in the most recent fiscal year and up to the annual report publication date due to environmental pollution incidents (including any compensation paid and any violations of environmental protection laws or regulations found in environmental inspection, specifying the disposition dates, disposition reference numbers, the articles of law violated, and the content of the dispositions), and disclosing an estimate of possible expenses that could be incurred currently and in the future and measures being or to be taken. If a reasonable estimate cannot be made, an explanation of the facts of why it cannot be made shall be provided ： None

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； Employee compensation is issued after the board of directors ’resolution and the shareholders’ meeting report. According to the position, performance and contribution, the amount of each employee is determined to motivate and retain outstanding talents
- (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. At the same time provide convenience stores, cafes, banks, insurance, tourism, telecommunications and other diverse assistance.
- (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) Setting up the Employee Welfare Committee: To set up various welfare systems, provide subsidies for festivals, weddings, funerals and emergency relief, hold various leisure and cultural activities, and actively
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promote community activities, including: community activities, sports seasons, movie banquets, family days, departmental dedication activities, seminars by talents from different industries, discounts for special stores, etc., so that employees can have a balance between work and health and life.

(6) The Company holds regular health examinations, and provides consultation for anomaly and health guidance after the health examination and cancer screening to assist employees in early detection of diseases and early treatment. In addition, professional doctors are stationed in the plant to provide various health promotion and psychological consultation programs to care for the physical and mental well-being of employees.
(7) The Company holds regular health examinations, and provides consultation for anomaly and health guidance after the health examination and cancer screening to assist employees in early detection of diseases and early treatment. In addition, professional doctors are stationed in the plant to provide various health promotion and psychological consultation programs to care for the physical and mental well-being of employees.
(8) Strengthening the concepts of sustainable management: we hire mentally or physically ill employees and insist on environmental protection and being responsible for social welfare.
(9) We integrate and continuously improve the system, process and plan of talents development.
(10)We provide internal and external trainings, such as Language learning professional studies, headquarter training, oversea training to develop employees’ professional knowledge and skills.
(11) 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.
(12) The Company promotes INX 4.0, and builds the concept of industrial Internet for its infrastructure, and improves and focuses on the integration of personnel intelligent thinking. In compliance with the Company's operation strategy, employees may use various mobile devices to learn in their fragmented time on the Company's platform for international language learning for "time freedom, theme selection and oral practice". Through the diversified training on the Company's objectives and organizational needs, employees may achieve the development goal of "technology research and development as the root, intelligent manufacturing as the basis".
Retirement structure and the situation of implement

At present, there are two kinds of labor pension systems, the old system of retired labor implemented by the accordance with the Labor Standards Law and the new system of retired labor implemented by the accordance with the Labor Pension Regulations.

(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 IAS19R financial principles.
(3) We transfer 2%~15% monthly salary to retirement preparation every month.
(4) Since July 1, 2005, the new labor pension system has been implemented in accordance with the law. If a labor retirement pension system is established, the company will allocate 6% of the insured salary to the employee ’s personal account established by the Labor Insurance Bureau on a monthly basis. Protect employees' rights.
Labor and management settlement

The Company has always attached great importance to labor relations. In addition to complying with the Labor Standard Act and relevant laws and regulations, the Company regularly holds communication meetings in order to maintain two-way communication management and exchange of opinions. All directors and

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employees are invited to participate, so that the employees can understand the Company's operation status and grasp the future goals and development. The Company also announce significant information and issues through electronic newspaper, boot up and screen protection, WingHR App, i media audio and video channels, and the Company’s Facebook account. The Company has also set up a staff care mailbox and dedicated line to solve the problems of employees around the clock for a harmonious labor relationship.

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.In 2019, there are 795 participants at 36% attend the meeting in Taiwan and 230 participants at 33% in Mainland China.

The Company successfully passed the certification of ISO 45001 occupational safety and health management system in 2019 to replace the original OHSAS 18001 management system. Together with ISO 14001 environmental management system, the Company will use the more perfect management system to fulfill its social responsibility and provide better working environment for employee s in the plant, so as to achieve a sustainable operation.

Analysis and Statistics of Occupational Hazards

The Company has built an electronic and database based environmental safety and health management system to improve the communication efficiency of environmental safety and health information within the organization. Since 2016, an operational and intelligent environmental safety and health management system has been developed to establish management indicators for environmental safety, health management and risk management in the plant, so as to measure the performance level of environmental safety and health management, and supervise the operation status of risk management to grasp the trend change.

Through the electronic system, the hazard identification and the risk assessment system are interconnected, as well as the operation safety observation system and the work safety analysis, in order to eliminate the potential hazard factors of the operation activities of employees and contractors, and improve the safety of the operation environment; in addition, the "parallel implementation system" is used to carry out in parallel the corrective and preventive measures of exceptional events to all domestic and overseas plants to avoid the recurrence of similar exceptional events.

After 2013, the frequency of disability injury (FR) and the severity of disability injury (SR) decreased gradually. The FR in 2019 was 0.22 and the SR was 4; the FR in 2019 was on the same level with that in 2018, but the SR decreased by 20%. Through the implementation of the management plan, each plant has improved the safety protection of equipment and promoted the process automation to reduce the operation of personnel and equipment interface and human performance hazards, and has promoted the human engineering risk assessment, hazard prevention and other refinement and improvement projects. At the same time, the Company also actively proposes improvement and parallel implementation projects and raises the ratio of performance evaluation projects in the plant area to encourage the employees to participate actively. In order to seek improvement, all the Company’s plants continue to set the annual goal challenge for Lost Workday Event and Restrictive Workday Event in 2020.

Business Continuity Management

The company 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. Irregular meetings are conducted with contractors for two-way communication and coordination and doing PDCA if the accident happened.

The contractor accident rate of 0.46 and injury rate (IR) 0.09 in 2019 are 2% lower than the contractor

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accident rate of 0.47 in 2018 and the injury rate (IR) 0.09 is the same, but the work-related fatalities rate is 0 The Lost Days Rate (LDR) is 0, which is lower than the Lost Days Rate (LDR) in 2018.

ESH Training and Contingency drill

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 injury prevention, machinery safety, fire safety management, and plant safety management. We also monitor and control the training quality and effectiveness.In 2019, 3,297 ESH training sessions were held, for a total of 223,547 participants. On average, employees joined over 4 training sessions per person per year.

The company builds emergency response organizations and develops contingency plans and preparation procedures for various situations such as fires, earthquakes, chemical leaks, etc., and through daily education, training and drills to enable the company to deal with them quickly and effectively Disasters and loss reduction.

(2) Loss Prevention Management Projects

The company has long been committed to the establishment and improvement of damage prevention systems and regulations, annual damage prevention inspections and audits, and continuous implementation of improved technology in risk management and control standards, in order to continuously improve and strengthen the company's physical fitness.

In recent years, the implementation of inspection projects for the construction or expansion of new plants, new processes and major changes, fire and natural disaster risks has comprehensively strengthened the company's physical risk management to enhance the company's risk tolerance and recovery ability after facing shock

Continue the past experience in 2019, and consider internal, external and industry concerns about major risk trends, such as climate change threats, fires and explosions, external service supply and other operational interruption threats; the company's internal execution and optimization of the continuous operation management system extend outward Go to the environmental safety and operational risk check of the factory-resident suppliers, complete the collaborative operation robot safety evaluation report project in accordance with the automation development strategy, etc., to strengthen the mutual coexistence of stakeholders inside and outside the company, and implement sustainable business operation

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.

Disease prevention and management of workload

The company aims to effectively prevent abnormal workloads from causing diseases and ensure the safety and health of employees as follow:

A.Ensure that employees’ working hours, rest, and vacation conditions are in line with local labor regulations.
B. Perform workload level assessment, including employee overload and work pattern assessment, and assess the risk of cardiovascular disease incidence of employees based on health examination results,
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and adopt health management

C.The health management system was implemented, including annual regular health checkups, risk case identification and management, anomaly tracking management, mental health management, matching work, fitness adjustment, etc.
D. Active promotion of cardiovascular disease ,promote mental health management plans and stress management-related preventive education and dissemination on the rules of working hours, knowledge of preventing workplace fatigue related diseases, and health management strategies to employees through various ways.

Management of Female Health Protection

In order to ensure the well-being of female employees and protect their health, Innolux Corporation, taking into consideration the impact of gender differences and pregnancy on health risks, has implemented maternal health protection activities and management, including:

A. In conjunction with the local labor laws, parental leave allowance is implemented, miscarriage prevention leave and family care leave rights are reinforced, related health protection measures are established, internal standard operating procedures are set up. For pregnant female employees, health risk assessments are implemented, hazard control and risk communication are carried out, and work adjustments are made as needed.
B. Health guidance during pregnancy and breastfeeding is provided to pregnant employees. Rest areas and breastfeeding rooms are provided to create a friendly working environment for female employees, taking into account the principles of maternity protection and gender equality in employment.
(3) Recruitment and Staffing

The company’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.

At the same time, adhering to the "take from society, use to society" concept, promote employees with physical and mental disabilities, consider different physical and mental conditions to arrange work appropriately, provide a friendly working environment and strengthen their work functions, so that the work performance of colleagues with disabilities and general colleagues Go hand in hand.

(4) Zero Distance Communication

The company 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.

EAPs Employee Assistance Programs

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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.

5.5.2 List any losses suffered by the company in the most recent 2 fiscal years and up to the annual report publication date due to labor disputes (including any violations of the Labor Standards Act found in labor inspection, specifying the disposition dates, disposition reference numbers, the articles of law violated, the substance of the legal violations, and the content of the dispositions), and disclosing an estimate of possible expenses that could be incurred currently and in the future and measures being or to be taken. If a reasonable estimate cannot be made, an explanation of the facts of why it cannot be made shall be provided.

Current important labor-management agreements and implementation: The company emphasizes labor-management harmony, builds a smooth communication channel for employees, in addition to complying with labor-based laws and related laws and regulations, and provides no less than the benefits of laws and regulations, is committed to the establishment of a complete system and the establishment of friendliness The working environment, under the company's continuous efforts to operate, can effectively reduce and expect no labor disputes or losses in the future.

The Company and its subsidiaries have recently and until the annual report dated, and the estimated cost of labor disputes is NT$445 Thousand. Among them, the violation of the Labor Standards Law due to labor inspection is the following the case. As the lawsuit is a case judgment, the actual expenses will be treated according to the judgment of the court, but the amount of the dispute involved is not material and has no significant impact on the company's finances and business. The countermeasures and improvement measures are to provide systematic management reports to the management for daily care and work deployment. Disputed cases are compiled into the company's internal training course materials. Combining theory and practice, continue to promulgate relevant laws and regulations.

Company	Penalty Date	Official Number of Penalty	Act	Content	Penalty Content(NTD$ Thousand)
INX	Apr.12.2019	Nan-Huan No. 1080010043	Against the Labor Act Article 24-1.,32-2	Ruled that the extended working hours exceeded the legal requirements and the number of overtime declaration hours was insufficient	40

5.6 Important Contracts

5.6 Important	Contracts
Agreement	Counterparty	Period	MajorContents	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 MiaoliCounty (Plant No.I)	Pursuant to the terms and conditions set forth under theAgreement
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 theAgreement
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 MiaoliCounty (Plant No.II)	Pursuant to the terms and conditions set forth under theAgreement
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 theAgreement
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

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Agreement	Counterparty	Period	MajorContents	Restrictions
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 theAgreement
Lease Agreement of the Land	South Taiwan Science-based Industrial Park Administration	Jun 1,2019-Apr 30,2031	Leasehold of land	Pursuant to the terms and conditions set forth under theAgreement
Engineering Project Agreement	Chung Lin Construction Co., Ltd.	Feb 2001 till expiry of warranty period	FAB I Project of Civil Engineering Construction	Pursuant to the terms and conditions set forth under theAgreement
Engineering Project Agreement	Hu Tzu Construction Co., Ltd.	Jul 2005 till expiry of warranty period	FAB II Newly constructed project	Pursuant to the terms and conditions set forth under theAgreement
Engineering Project Agreement	Cheng Teh Fireproof Industrial Co., Ltd.	Sep 2005 till expiry of warranty period	New construction of Plant No. II, award of the fire prevention projectcontract	Pursuant to the terms and conditions set forth under theAgreement
Equipment Purchase	Hon Hai Precision Ind. Co., Ltd.	Nov 29, 2017 till expiry of warranty period	Machinery equipment	Pursuant to the terms and conditions set forth under theAgreement
Syndicated Loans	Bank of Taiwan and bank groups	Mar 12, 2015 - Mar 12, 2020	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$68.5 billion	Pursuant to the terms and conditions set forth under the Agreement
Syndicated Loans	Bank of Taiwan,CTBC and bank groups	Sep 6,2016-Dec 6,2021	1.To be used to reimburse the mid-term loan 2. In the amount of NT$35 billion	Pursuant to the terms and conditions set forth under the Agreement
Syndicated Loans	Bank of CTBC,TFC and bank groups	Jul 16 2018-Jul 16, 2023	1. To be used to reimburse the mid-term loan 2. In the amount of NT$43.75 billion 3. Medium-term guarantee loan for 5 years (subject to 2 years under the joint credit agreement)	Pursuant to the terms and conditions set forth under the Agreement
Patent authorization	Multinational Enterprise A	Jun 17, 2013 – Jun 30, 2018	3D Relevant technology & know-how	Pursuant to the terms and conditions set forth under theAgreement
Patent authorization	Multinational Enterprise B.	Jan 1, 2015 – Dec 31, 2020	IPS Relevant patents	Pursuant to the terms and conditions set forth under theAgreement
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 theAgreement
Cross-licensing	Multinational Enterprise D	Jul 2, 2012 – Jul 2, 2022	Display of the relevant cross-patent licensing within theregions.	Pursuant to the terms and conditions set forth under theAgreement
Cross-licensing	Multinational Enterprise E	Jul 1, 2013 – Jul 1, 2023	LCD Relevant technology & know-how	Pursuant to the terms and conditions set forth under theAgreement
Patent authorization	Multinational Enterprise F	Jan 1, 2013 – Dec 31, 2019	LCD Relevant technology & know-how	Pursuant to the terms and conditions set forth under the Agreement

97 -

Agreement	Counterparty	Period	MajorContents	Restrictions
Patent authorization	Multinational Enterprise G	Sept 5, 2013 – Sept 5, 2018	LCD Relevant technology & know-how	Pursuant to the terms and conditions set forth under theAgreement
Cross-licensing	Multinational Enterprise H	Oct. 1, 2017– Sep.30, 2022	LCD Relevant technology & know-how	Pursuant to the terms and conditions set forth under theAgreement
Patent authorization	Multinational Enterprise I	Jan.1,2019-Dec. 31,2028	LCD Relevant technology & know-how	Pursuant to the terms and conditions set forth under theAgreement
Patent authorization	Multinational Enterprise J	Feb,28 2019- Permanent authorization	LCD Relevant technology & know-how	Pursuant to the terms and conditions set forth under the Agreement

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VI. Financial Information

6.1 Five-Year Financial Summary

6.1.1 Condensed Balance Sheet

Consolidated Condensed Balance Sheet

1. Consolidated Condensed Balance Sheet	1. Consolidated Condensed Balance Sheet	1. Consolidated Condensed Balance Sheet	1. Consolidated Condensed Balance Sheet	1. Consolidated Condensed Balance Sheet	1. Consolidated Condensed Balance Sheet	1. Consolidated Condensed Balance Sheet	1. Consolidated Condensed Balance Sheet
Unit: NT Thousand Year Item Financial Summaryfor The Last Five Years(Note1) As of the printing date of this annual report 2015 2016 2017 2018 2019 Current assets 138,866,987 126,998,131 158,529,955 169,734,116 133,118,249 125,096,981 Property, Plant and Equipment 199,482,740 201,360,858 220,864,627 206,617,960 194,382,436 191,204,349 Intangible assets 19,342,856 18,446,321 17,910,908 17,681,485 17,577,644 17,572,237 Other assets 29,749,753 24,674,238 17,553,268 17,886,043 24,686,017 22,758,780 Total assets 387,442,336 371,479,548 414,858,758 411,919,604 369,764,346 356,632,347 Current liabilities Before distribution 110,471,463 116,165,904 131,894,172 120,274,676 110,818,145 96,913,018 After distribution 112,461,273 117,161,108 139,855,829 120,871,800 Note2 － Non current liabilities 44,706,150 29,307,281 18,639,538 36,654,223 26,836,172 34,225,996 Total liabilities Before distribution 155,177,613 145,473,185 150,533,710 156,928,899 137,654,317 131,139,014 After distribution 157,167,423 146,468,389 158,495,367 157,526,023 Note2 － Equity attributable to shareholders of the parent 232,264,723 226,006,363 264,325,048 254,990,705 231,927,704 225,306,267 Capital stock 99,532,372 99,521,488 99,520,720 99,520,720 97,110,720 97,110,720 Capital surplus 99,643,564 99,647,810 99,646,919 99,648,115 100,362,379 100,371,779 Retained earnings Before distribution 30,338,450 30,255,869 66,248,130 60,485,333 42,398,622 37,129,853 After distribution 28,348,640 29,260,665 58,286,473 59,888,209 Note2 － Other equity interest 2,750,337 (3,418,804) (1,090,721) (4,663,463) (7,325,437) (8,687,505) Treasurystock －－－－ (618,580) (618,580) Non controllinginterest －－－－ 182,325 187,066 Total equity Before distribution 232,264,723 226,006,363 264,325,048 254,990,705 232,110,029 225,493,333 After distribution 230,274,913 225,011,159 256,363,391 254,393,581 Note2 －
Year Item		Financial Summaryfor The Last Five Years(Note1)					As of the printing date of this annual report
		2015	2016	2017	2018	2019
Current assets		138,866,987	126,998,131	158,529,955	169,734,116	133,118,249	125,096,981
Property, Plant and Equipment		199,482,740	201,360,858	220,864,627	206,617,960	194,382,436	191,204,349
Intangible assets		19,342,856	18,446,321	17,910,908	17,681,485	17,577,644	17,572,237
Other assets		29,749,753	24,674,238	17,553,268	17,886,043	24,686,017	22,758,780
Total assets		387,442,336	371,479,548	414,858,758	411,919,604	369,764,346	356,632,347
Current liabilities	Before distribution	110,471,463	116,165,904	131,894,172	120,274,676	110,818,145	96,913,018
	After distribution	112,461,273	117,161,108	139,855,829	120,871,800	Note2	－
Non current liabilities		44,706,150	29,307,281	18,639,538	36,654,223	26,836,172	34,225,996
Total liabilities	Before distribution	155,177,613	145,473,185	150,533,710	156,928,899	137,654,317	131,139,014
	After distribution	157,167,423	146,468,389	158,495,367	157,526,023	Note2	－
Equity attributable to shareholders of the parent		232,264,723	226,006,363	264,325,048	254,990,705	231,927,704	225,306,267
Capital stock		99,532,372	99,521,488	99,520,720	99,520,720	97,110,720	97,110,720
Capital surplus		99,643,564	99,647,810	99,646,919	99,648,115	100,362,379	100,371,779
Retained earnings	Before distribution	30,338,450	30,255,869	66,248,130	60,485,333	42,398,622	37,129,853
	After distribution	28,348,640	29,260,665	58,286,473	59,888,209	Note2	－
Other equity interest		2,750,337	(3,418,804)	(1,090,721)	(4,663,463)	(7,325,437)	(8,687,505)
Treasurystock		－	－	－	－	(618,580)	(618,580)
Non controllinginterest		－	－	－	－	182,325	187,066
Total equity	Before distribution	232,264,723	226,006,363	264,325,048	254,990,705	232,110,029	225,493,333
	After distribution	230,274,913	225,011,159	256,363,391	254,393,581	Note2	－

Note 1: Financial summary for the last five years audited and certified by accountants. Note 2: Pending on approval of shareholders at Annual General Shareholders’ Meeting

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2. Consolidated Condensed Statement of Comprehensive Income

Unit: NT Thousand

Year Item	Financial Summaryfor The Last Five Years(Note1)	Financial Summaryfor The Last Five Years(Note1)	Financial Summaryfor The Last Five Years(Note1)	Financial Summaryfor The Last Five Years(Note1)	Financial Summaryfor The Last Five Years(Note1)	As of the printing date of this annual report
	2015	2016	2017	2015	2019 (Note2)
Operatingrevenue	364,132,984	287,089,277	329,174,401	279,376,115	251,971,209	50,391,575
Grossprofit	46,640,105	26,088,491	68,738,677	26,813,558	3,014,080	(894,253)
Income from operations	22,430,709	6,413,249	47,022,209	4,835,296	(19,933,896)	(6,214,557)
Non-operating income and expenses	(7,571,522)	(1,421,129)	1,918,980	1,734,134	3,408,468	1,254,448
Income before tax	14,859,187	4,992,120	48,941,189	6,569,430	(16,525,428)	(4,960,109)
Net income(Loss)	10,814,141	1,870,687	37,028,609	2,222,762	(17,440,272)	(5,263,604)
Profit (loss) from discontinued operations	－	－	－	－	－	－
Net income(Loss)	10,814,141	1,870,687	37,028,609	2,222,762	(17,440,272)	(5,263,604)
Other comprehensive income(income after tax)	507,196	(6,152,001)	2,286,939	(3,596,644)	(2,709,329)	(1,362,499)
Total comprehensive income	11,321,337	(4,281,314)	39,315,548	(1,373,882)	(20,149,601)	(6,626,103)
Net income attributable to shareholders of theparent	10,815,594	1,870,687	37,028,609	2,222,762	(17,442,990)	(5,268,769)
Net income attributable to non-controllinginterest	(1,453)	－	－	－	2,718	5,165
Comprehensive income attributable to Shareholders of theparent	11,352,532	(4,281,314)	39,315,548	(1,373,882)	(20,151,561)	(6,630,837)
Comprehensive income, attributable to non-controllinginterests	(31,195)	－	－	－	1,960	4,734
Earningsper share	1.09	0.19	3.72	0.22	(1.77)	(0.55)

Note 1: Financial summary for the last five years audited and certified by accountants. Note 2: Pending on approval of shareholders at Annual General Shareholders’ Meeting

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Alone Balance Sheet

Unit: NT Thousand

		Unit: NT Thousand	Unit: NT Thousand	Unit: NT Thousand	Unit: NT Thousand	Unit: NT Thousand
Year Item		Financial Summary for The Last Five Years (Note1)
		2015	2016	2017	2018	2019
Current assets		111,926,408	103,003,830	129,298,905	149,336,693	112,321,779
Property, Plant and Equipment		163,921,697	170,150,592	191,778,224	176,216,141	164,083,562
Intangible assets		19,264,025	18,375,538	17,681,078	17,599,664	17,446,858
Other assets		102,927,491	97,564,329	91,173,093	95,105,109	101,914,217
Total assets		398,039,621	389,094,289	429,931,300	438,257,607	395,766,416
Current liabilities	Before distribution	121,257,442	133,926,912	147,100,829	146,751,492	137,327,341
	After distribution	123,247,252	134,922,116	155,062,486	147,348,616	Note2
Non current liabilities		44,517,456	29,161,014	18,505,423	36,515,410	26,511,371
Total liabilities	Before distribution	165,774,898	163,087,926	165,606,252	183,266,902	163,838,712
	After distribution	167,764,708	164,083,130	173,567,909	183,864,026	Note2
Equity attributable to shareholders of the parent		232,264,723	226,006,363	264,325,048	254,990,705	231,927,704
Capital stock		99,532,372	99,521,488	99,520,720	99,520,720	97,110,720
Capital surplus		99,643,564	99,647,810	99,646,919	99,648,115	100,362,379
Retained earnings	Before distribution	30,338,450	30,255,869	66,248,130	60,485,333	42,398,622
	After distribution	28,348,640	29,260,665	58,286,473	59,888,209	Note2
Other equity interest		2,750,337	(3,418,804)	(1,090,721)	(4,663,463)	(7,325,437)
Treasury stock		－	－	－	－	(618,580)
Non controlling interest		－	－	－	－	－
Total equity	Before distribution	232,264,723	226,006,363	264,325,048	254,990,705	231,927,704
	After distribution	230,274,913	225,011,159	256,363,391	254,393,581	Note2

Note 1: Financial summary for the last five years audited and certified by accountants. Note 2: Pending on approval of shareholders at Annual General Shareholders’ Meeting

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4. Alone Statement of Comprehensive Income

Unit: NT Thousand

	Unit: NT Thousand	Unit: NT Thousand	Unit: NT Thousand	Unit: NT Thousand	Unit: NT Thousand
Year Item	Financial Summary for The Last Five Years (Note1)
	2015	2016	2017	2018	2019(Note2)
Operating revenue	360,638,133	285,695,113	323,687,952	278,407,555	249,384,126
Gross profit	33,712,246	14,853,964	57,451,834	18,005,702	(5,413,355)
Income from operations	15,826,909	513,079	40,633,793	356,315	(22,891,507)
Non-operating income and expenses	(2,017,968)	3,147,845	4,441,800	3,872,395	5,076,526
Income before tax	13,808,941	3,660,924	45,075,593	4,228,710	(17,814,981)
Net income (Loss)	10,815,594	1,870,687	37,028,609	2,222,762	(17,442,990)
Profit (loss) from discontinued operations	－	－	－	－	－
Net income (Loss)	10,815,594	1,870,687	37,028,609	2,222,762	(17,442,990)
Other comprehensive income (income after tax)	536,938	(6,152,001)	2,286,939	(3,596,644)	(2,708,571)
Total comprehensive income	11,352,532	(4,281,314)	39,315,548	(1,373,882)	(20,151,561)
Net income attributable to shareholders of the parent	10,815,594	1,870,687	37,028,609	2,222,762	(17,442,990)
Net income attributable to non-controlling interest	－	－	－	－	－
Comprehensive income attributable to Shareholders of the parent	11,352,532	(4,281,314)	39,315,548	(1,373,882)	(20,151,561)
Comprehensive income attributable to non-controlling interest	－	－	－	－	－
Earnings per share	1.09	0.19	3.72	0.22	(1.77)

Note 1: Financial summary for the last five years audited and certified by accountants.

Note 2: Pending on approval of shareholders at Annual General Shareholders’ Meeting

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6.1.2 CPA Name and Audit Opinions of the Last 5 Years

Year	Accounting Firm	CPA	Auditing Opinion
2015	PricewaterhouseCoopers	Wu Han-Chi & Hsu Sheng-Chung	Unqualified wording
2016	PricewaterhouseCoopers	Wu Han-Chi & Hsu Sheng-Chung	Unqualified wording
2017	PricewaterhouseCoopers	Wu Han-Chi & Hsu Sheng-Chung	Unqualified wording
2018	PricewaterhouseCoopers	Wu Han-Chi & Liang,Hua-Ling	Unqualified wording
2019	PricewaterhouseCoopers	Wu Han-Chi & Liang, Hua-Ling	Unqualified wording

6.1.3 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
2015	None
2016	None
2017	None
2018	Wu Han-Chi & Hsu Sheng-Chung	Wu Han-Chi & Liang, ua-Ling	Unqualified-modified wording
2019	None

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6.2 Five-Year Financial Analysis

Consolidated Financial Analysis

Item	Year(Note 1)	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	As of the printing date of this annual report
		2015	2016	2017	2018	2019
Financial structure(%)	Debt Ratio	40.05	39.16	36.29	38.10	37.23	36.77
	Ratio of long-term capital to property, plant and equipment	138.84	126.79	128.12	141.15	129.16	131.71
Solvency(%)	Current ratio	125.70	109.32	120.19	141.12	120.12	129.08
	Quick ratio	97.37	87.84	96.12	113.81	88.51	88.29
	Interest earned ratio(times)	9.68	4.90	53.16	12.59	(15.02)	(17.89)
Operating performance	Accounts receivable turnover(times)	5.68	4.97	5.32	5.13	5.46	5.17
	Average collectionperiod	64	73	69	71	67	71
	Inventoryturnover(times)	9.29	9.02	8.91	7.69	7.58	5.84
	Accounts payable turnover (times)	4.52	4.45	4.72	4.66	4.68	4.23
	Average days in sales	39	40	41	47	48	62
	Property, plant and equipment turnover(times)	1.68	1.43	1.56	1.31	1.24	1.01
	Total assets turnover(times)	0.84	0.76	0.84	0.68	0.64	0.55
Profitability	Return on total assets(%)	2.81	0.68	9.57	0.64	(4.25)	(1.39)
	Return on stockholders' equity(%)	4.69	0.82	15.10	0.86	(7.16)	(2.30)
	Pre-tax income to paid-in capital(%)	14.93	5.02	49.18	6.60	(17.02)	(5.11)
	Profit ratio(%)	2.97	0.65	11.25	0.80	(6.92)	(10.45)
	Earningsper share(NT$)	1.09	0.19	3.72	0.22	(1.77)	(0.55)
Cash flow	Cash flow ratio(%)	73.38	28.75	62.66	43.72	12.48	(3.29)
	Cash flow adequacyratio(%)	226.97	235.82	236.36	187.54	135.92	102.94
	Cash reinvestment ratio(%)	9.86	4.12	10.02	5.22	1.56	(0.37)
Leverage	Operatingleverage	3.35	7.78	1.97	10.13	－	－
	Financial leverage	1.08	1.16	1.02	1.13	－	－
Analysis of financial ratio change in the last two years. (If the difference does not exceed 20%, the analysis is not
required.)
1. Quick ratio decline: Mainly due to the significant decrease in financial assets measured in amortized cost in 2019 comared with 2018 and the increase in reaments in 2019 comared with 2018
p , ppy p . 2. The ratios of interest protection multiples and profitability decrease: mainly due to the decrease in profitability.
3. All ratios of cash flow decreased: Mainly due to the decrease in net cash inflow from operating activities in 2019. 4. Decreased operatingleverage and financial leverage: Mainlydue to the loss in 2019.

Note 1: Financial summary for the last five years audited and certified by accountants. Note 2: 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
104 -
(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)
105 -
Financial Analysis -Alone

Item	Year	Financial analysis in thepast fiveyears(Note 1)	Financial analysis in thepast fiveyears(Note 1)	Financial analysis in thepast fiveyears(Note 1)	Financial analysis in thepast fiveyears(Note 1)	Financial analysis in thepast fiveyears(Note 1)
		2015	2016	2017	2018	2019
Financial structure(%)	Debt Ratio	41.65	41.91	38.52	41.82	41.10
	Ratio of long-term capital to property, plant and equipment	168.85	149.97	147.48	165.43	152.53
Solvency(%)	Current ratio	92.30	76.91	87.90	101.76	81.79
	Quick ratio	71.48	62.14	69.93	83.01	60.16
	Interest earned ratio(times)	9.59	3.89	49.02	8.47	(16.33)
Operating performance	Accounts receivable turnover(times)	5.82	5.20	5.90	5.77	5.69
	Average collectionperiod	63	70	62	63	64
	Inventoryturnover(times)	11.61	11.47	11.00	9.28	8.95
	Accountspayable turnover(times)	3.40	3.55	3.47	3.19	2.90
	Average days in sales	31	32	33	39	41
	Property, plant and equipment turnover(times)	2.02	1.71	1.79	1.51	1.47
	Total assets turnover(times)	0.82	0.73	0.79	0.64	0.60
Profitability	Return on total assets(%)	2.76	0.65	9.19	0.62	(3.99)
	Return on stockholders' equity(%)	4.70	0.82	15.10	0.86	(7.16)
	Pre-tax income topaid-in capital(%)	13.87	3.68	45.29	4.25	(18.35)
	Profit ratio(%)	3.00	0.65	11.44	0.80	(6.99)
	Earningsper share(NT$)	1.09	0.19	3.72	0.22	(1.77)
Cash flow	Cash flow ratio(%)	39.11	24.06	55.59	34.02	5.79
	Cash flow adequacyratio(%)	214.96	203.85	215.66	174.92	122.84
	Cash reinvestment ratio(%)	5.79	4.25	10.55	5.22	0.92
Leverage	Operatingleverage	4.12	79.9	2.04	118.97	－
	Financial leverage	1.11	－	1.02	－	－
Analysis of financial ratio change in the last two years. (If the difference does not exceed 20%, the analysis is not required.) 1. Quick ratio decline: Mainly due to the significant decrease in financial assets measured in amortized cost in 2019 compared with 2018, and the increase in prepayments in 2019 compared with 2018. 2. The ratios of interest protection multiples and profitability decrease: mainly due to the decrease in profitability. 3. All ratios of cash flow decreased: Mainly due to the decrease in net cash inflow from operating activities in 2019. 4. Decreased operatingleverage and financial leverage: Mainlydue to the loss in 2019.

Note 1: Financial summary for the last five years audited and certified by accountants. Note 2: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
106 -
(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)
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6.3 Audit Committee Report in the Most Recent Year

Audit Committee Report

The Board of Directors has duly submitted the 2019 operating report, financial statements, and table of losses off-setting. The financial statements has been duly reviewed and approved by CPAs of PwC Taiwan with the issuance of Independent Auditor’s Report.

The Audit Committee 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 Securities and Exchange Act and the Company Act. For your approval.

General Shareholders Meeting of the Company in 2020

Audit Committee

Chair: Chi-Chia Hsieh

Date: May 5, 2020

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6.4 Consolidated Financial Statements for the Years Ended December 31, 2019 and 2018, and Independent Auditors’ Report

Please refer to page 127 of the annual report.

6.5 Financial Statements for the Years Ended December 31, 2019 and 2018, and Independent Auditors’ Report

Please refer to page 218 of the annual report.

6.6 Disclosure of the Impact on Company’s Financial Status Due to Financial Difficulties: None

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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	2018	2019	Difference
			Amount	%
Current Assets	169,734,116	133,118,249	(36,615,867)	(21.57)
Fixed Assets	206,617,960	194,382,436	(12,235,524)	(5.92)
Intangible assets	17,681,485	17,577,644	(103,841)	(0.59)
Other Assets	17,886,043	24,686,017	6,799,974	38.02
Total Assets	411,919,604	369,764,346	(42,155,258)	(10.23)
Current Liabilities	120,274,676	110,818,145	(9,456,531)	(7.86)
OtherLiabilities-non-current(1)	36,654,223	26,836,172	(9,818,051)	(26.79)
Total Liabilities	156,928,899	137,654,317	(19,274,582)	(12.28)
Capital stock	99,520,720	97,110,720	(2,410,000)	(2.42)
Capital surplus	99,648,115	100,362,379	714,264	0.72
Retained Earnings	60,485,333	42,398,622	(18,086,711)	(29.90)
Other equity(2)	(4,663,463)	(7,325,437)	(2,661,974)	57.08
Treasuryshares	－	(618,580)	(618,580)	100.00
Non controllingequity	－	182,325	182,325	100.00
Total Stockholders' Equity	254,990,705	232,110,029	(22,880,676)	(8.97)
Analysis of changes in financial ratios: 1. Mainly due to the decrease in financial assets and net receivables measured in amortized cost this year. 2. Mainly due to the increase in the right-of-use assets and financial assets measured at fair value through profit or loss this year. 3. Mainly due to the decrease in long-term loans this year. 4. Mainly caused by the decrease in undistributed surplus this year. 5. Mainly due to the decrease in the exchange difference in the conversion of the financial statements of foreign operating agencies this year. 6. Mainly due to the purchase of treasury stocks this year. 7. Mainlydue to the acquisition of subsidiaries thisyear.

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7.2 Analysis of Financial Performance

Unit: NT Thousand

			Unit: NT Thousand	Unit: NT Thousand
Year Item	2018	2019	Difference
			Amount	%
Gross Sales	279,376,115	251,971,209	(27,404,906)	(9.81)
Cost of Sales	252,562,557	248,957,129	(3,605,428)	(1.43)
Gross Profit(1)	26,813,558	3,014,080	(23,799,478)	(88.76)
OperatingExpenses	21,978,262	22,947,976	969,714	4.41
OperatingIncome(2)	4,835,296	(19,933,896)	(24,769,192)	(512.26)
Non-operatingIncome and Expenses	1,734,134	3,408,468	1,674,334	96.55
Income Before Tax(3)	6,569,430	(16,525,428)	(23,094,858)	(351.55)
Tax Benefit(Expense)(4)	4,346,668	914,844	(3,431,824)	(78.95)
Net income(5)	2,222,762	(17,440,272)	(19,663,034)	(884.62)
Other comprehensive income(6)	(3,596,644)	(2,709,329)	887,315	(24.67)
Total comprehensive income(7)	(1,373,882)	(20,149,601)	(18,775,719)	1,366.62
Analysis of changes in financial ratios:
1. The fluctuation of the main industry's business climate, market demand and price changes, resulting in a decline in
operating margins.
2. The main operating profit decreased.
3. Mainly due to the increase in net profit of financial assets and liabilities measured at fair value through profit or loss.
4. Mainly due to the decrease in business interests.
5. The main business profit decreased, resulting in a decrease in the income tax expense estimated in the current year
based on profitability compared to the previous year.
6. Mainly due to the decrease in net profit before tax.
7. Mainly due to the unrealized evaluation of gains and losses on equity instrument investments measured at fair value
through other comprehensive gains and losses and the reduction in conversion differences translated from the
financial statements of foreign operating agencies.
8. Mainlycaused bythe current loss.

7.3 Analysis of Cash Flow

7.3.1 Cash Flow Analysis for the Current Year

7.3.1 Cash Flow Analysis for the Current Year	7.3.1 Cash Flow Analysis for the Current Year	7.3.1 Cash Flow Analysis for the Current Year
Unit: NT Thousand
Year	21	Ali
Items	09	nayss
Net cash provided by operating activities	13,835,382	Net cash provided mainly due to depreciation and reasonable control for operating cycle.
Net cash used in investing activities	8,759,462	Mainly used for capital expenditures and financial instruments due for repayment.
Net cash used in financing activities	(20,073,165)	Mainly due to the repayment of bank loans and the
		purchase of treasurystocks.

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7.3.2 Cash Flow Analysis for the Coming Year

Unit: NT Thousand

				Unit: NT Thousand	Unit: NT Thousand
Estimated Cash and Cash Equivalents, Beginning of Year (1)	Estimated Net Cash Flow from Operating Activities (2)	Estimated Cash Outflow (Inflow) (3)	Cash Surplus (Deficit) (1)+(2)+(3)	Leverage of Cash Surplus (Deficit)
				Investment Plan	Financing Plan
34,253,000	26,639,000	25,780,000	35,112,000	－	－
2020 Analysis of changes in cash flow Operating Activities: Net Cash inflow due to expected the company continuously optimize cost strutruct.. Investing Activities: Net cash outflow due to continuous technological advancement and capital expenditures for new technologies Financing Activities: Net cash outflow mainly due to bank Repayment. RemedyActions for Cash Shortfall: None

7.4 Major Capital Expenditure Items

The company's 2019 annual capital expenditure, it mainly consists of wide viewing angle technology, automotive profile/curvature technology, high precision/machine module line, automation upgrade, yield quality improvement, LTPS equipment purchase, new product and new technology (Mini-LED). ) and Green Energy Environmental Protection, etc., the actual capital expenditure is about NT$24,647,000. It will help the company's revenue growth and profit improvement in 2020.

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 2019, the investment gain recognized in equity method came to NT$307,296 thousand, thanks primarily to the field of special application of the panel is quite successful ,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

1. Interest rate

The international trade dispute continues to interfere with the global economic growth. Although the United States keeps an expanding financial policy, there is limited space for employment and salary promotion. In addition, the uncertainty of trade dispute and the slowdown of private consumption and investment have resulted in a weak performance of Germany, the largest economy of the European Union. Furthermore, the risk of Brexit still exists, and China has a weak domestic and foreign demand due to the effect of the trade dispute. These factors caused a slowdown in major global economies, and the Directorate-General of Budget, Accounting and Statistics forecasts that the economic growth rate in 2019 will be 2.64%, down 0.11% from

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2.75% in 2018. The pace of domestic economic recovery is moderate, and the current inflation pressure and future inflation expectations are also moderate. However, the financial situation is tightening, and to ensure the independence and flexibility of the monetary policy, the target growth area of M2 will be adjusted to the growth reference area from next year onward to cope with the uncertainty of the overall economic and financial variables, but the basic structure has not changed and the monetary policy will remain moderately loose.

Foreign exchange rates
(1) 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.
(2) 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.
(3) 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.

3. Inflation

Currently domestic inflation rate is low and stable. The average annual CPI growth rate from January to November is 0.51%, and the main reason is that the prices of oil, communication and ready-to-wear have fallen, offsetting the price increase in education and entertainment services, rent, vegetables and eating out. It is expected that the prices of international raw materials will be weak next year, the domestic demand will be moderate, and the inflation will be stable; the annual growth rates of CPI and core CPI next year will be respectively 0.77% and 0.70%. 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

The company's future technology development continues to be in the field of display applications. Mainly wide viewing angle TFT LCD display technology to improve the contrast and color of TFT LCD large viewing angle;

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high transmittance to improve the optical utilization of display; Mega Zone, Mini-LED technology to improve the color saturation, brightness and contrast; TFT LCD module technology with thin and narrow frame for display panel; continuous improvement with high resolution, high brightness, wide temperature and low energy consumption technology; endeavor to develop high-end technologies such as naked-eye stereo display, Privacy, Mirco-LED, etc. - LCD new field applications; embedded integrated touch technology (TOD, TID, Hybrid), bonding process technology and automated assembly technology. The company's research and development expenditure in 2019 is NT$14,071,560. In 2020, the company expects to invest another R&D fee of NT$13.3 billion. However, it will adjust and adjust according to the global market conditions and actual operating conditions, and continue to maintain its leading edge in technological development.

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 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 the 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,flexible display and such technology & know-how, we have, as wll, tried to develop low temperature LTPS,Oxide 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 represents 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

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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 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 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 Management Rights

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.
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. In December 2009, the Company reached a plea agreement with the Department of Justice of the U.S. and paid off the fines. Later, Brazil government initiated an investigation case against the Company. In March 2019, the Company received a sanction from the Brazil Administrative Council for Economic Defense - CADE and paid all fines on May 8, 2019 also obtained the confirmation from the representative lawyer of CADE that the Company complied with the sanction. As for civil lawsuits filed by some state governments in the U.S., downstream panel makers and customers, the Company had reached settlement agreement individually. The Company’s subsidiary in the U.S. received a civil complaint from the government of Puerto Rico in September 2018, claiming that the Company, together with other defendants of Taiwan, Japan and South Korea panel factories, had unjustified enrichment from the TFT-LCD pricing collaborations in 2006 and requested monetary compensation. The U.S. subsidiary of the company has appointed a lawyer to handle the lawsuit.
B. Eidos Displays, LLC and Eidos III, LLC (“Eidos”) filed a lawsuit against the Company and American subsidiary with the United States District Court for the Eastern District of Texas on April 25, 2011, alleging infringement of its patent. In December 2013, the magistrate judge granted summary judgment that the Eidos patent is invalid. In January 2014, the presiding judge confirmed the summary judgment.

In February 2014, Eidos appealed to the United States Court of Appeals for the Federal Circuit (CAFC). In March 2015, the CAFC reversed the district court’s judgment and remanded the case back to the district court for further proceedings. In June 2017, the jury determined that some products of the Company and American subsidiary directly infringed the patent and awarded damages for Eidos. On March 5, 2018, the district court entered judgment. In January 2020, the Company reached an agreement on the main settlement terms with Eidos during the third mediation. The parties engaged in drafting and signing the settlement agreement. On January 23, 2020, the district court ordered stay of the case, and that the parties reach agreement by February 23, 2020 and formally dismiss the case. Thus, the lawsuit is not expected

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have a material adverse effect on the Company’s financial position or operations.

C. On July 10, 2018, Vista Peak Ventures, LLC (VPV) filed four complaints against the Company in the United States District Court for the Eastern District of Texas, alleging the infringement of several of its patents. The Company reached settlements with VPV for the aforementioned lawsuits and acquired relevant patent portfolio licensing in the first quarter of 2019. VPV also dismissed the action and the lawsuits have no effect on the Company’s financial position and operations.
D. On March 23, 2018, Chongqing HKC Optoelectronics Technology Co., Ltd. (HFC) filed five complaints against the subsidiaries of the Company, Ningbo Innolux Optoelectronics Ltd., Foshan Innolux Optoelectronics Ltd. as well as their customers and terminal distributors of TV products with the Fifth Intermediate People’s Court in Chongqing, alleging the infringement of its patents. Ningbo Innolux Optoelectronics Ltd. submitted a request of patent invalidity to the National Intellectual Property Administration, PRC upon the patents asserted in the complaints. As of May 21, 2019, all five patents asserted by HKC were declared invalid by the National Intellectual Property Administration, PRC. The five lawsuits that were previously disclosed were allegedly withdrawn by the Chongqing court on June 18, 2019. Thus, the lawsuits have no effect on the Company’s financial position and results of operations.
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:

Information Security Risk and Countermeasures

The Company is committed to protecting the confidential information of the company, our clients, suppliers, and employees, as well as company intellectual property which is the key of the competitive advantage. This is to ensure the overall benefit of the company, our clients, employee, and shareholders, and to maintain company competitiveness.

The Company has an information software operation system and an information security disaster recovery mechanism to regulate the control of information assets such as computer mainframes, database systems, application software systems and personal computers, operational information, personal privacy information, and others on the company's information service system. The Company also established guidelines pursuant to the Information Security Management System (ISMS) to ensure the three targets, including confidentiality, integrity and availability of information, and to strengthen information security management, established a secure and reliable electronic information operation environment, and established an emergency response mechanisms that conducts timely notification and adoption of countermeasures when the Company’s information system and operational information encounter an information security breach to recover to normal operation in the shortest possible time in order to ensure the sustainable operation of the company's business.

The Company has established a private corporate mobile messaging platform (INX MApp) to prevent security risks when employees use public communication software. This platform also increases the overall information communication efficiency and safety and achieves the objects of rapid response and decision-making for work-on-the-go. The Company also regularly educates employees on information security concepts through the boot-up promotion platform and reduce the risk of phishing emails through the use of email source verification mechanisms.

7.7 Other Important Matters: None.

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VIII.Special Disclosure

8.1 Summary of Affiliated Companies

==> picture [579 x 391] intentionally omitted <==

8.1.2 Innolux Subsidiaries

December 31, 2019

				December 31, 2019
Company	Date of Incorporation	Address	Capital Stock	Business Activities
CarUX Holding Limited	108.08.23	The Grand Pavilion Commercial Centre, Oleander Way, 802 West Bay Road, P.O. Box 32052, Grand Cayman KY1-1208, Cayman Islands	USD 9,500	Controlling Company
CarUX Technology Pte. Ltd.	108.01.02	6 Shenton Way #33-00 Oue Downtown Singapore	USD 9,400,000	Controlling Company
Double Star Inc.	98.07.15	Level 3, Alexander House, 35 Cybercity, Ebene, Mauritius	USD 10,000,000	Controlling Company
InnoCare Optoelectronics Japan Co., Ltd.	108/06/17	Tokyo Metropolitan Central Ginza 1-chome 13-6 6F	JPY 300,100,000	X-ray flat image sensor
InnoCare Optoelectronics USA, INC.	107/02/09	101 Metro Drive Suite 510, San Jose, CA 95110, United States	USD 900,000	X-ray flat image sensor
Innolux Europe B.V.	Mar 8, 2006	Stationstraat 39G, 6411NK, Heerlen, The Netherlands	EUR 3,006,480	Controlling Company of Researching, developing and Testing
Innolux Holding Ltd.	Feb 28, 2002	Offshore Chambers, P.O. Box,217, Apia, Samoa	USD 191,927,258.89	Controlling Company
Innolux Hong Kong Holding Limited	Dec 14, 2005	Unit 2003, 20/F., Millennium City 3, 370 Kwun Tong Road, Kowloon, Hong Kong	HKD 1,441,092,339.08	Controlling Company
Innolux Hong Kong Limited	Feb 15, 2006	Unit 2003, 20/F., Millennium City 3, 370 Kwun Tong Road, Kowloon, Hong Kong	HKD 453,342,352.18	Entrepot trade company
Innolux Japan Co., Ltd.	Aug 20, 1991	8F, kowa kawasaki-nishiguchi Bldg., 66-2 horikawa-cho, Saiwai-ku, Kawasaki-City, Kanagawa 212-0013, Japan	JPY988,274,575	Operating TFT-LCD development, manufacture and sales
Innolux Optoelectronics Hong Kong Holding Ltd.	Nov 16, 2001	Unit 2003, 20/F., Millennium City 3, 370 Kwun Tong Road, Kowloon, Hong Kong.	HKD 162,897,802	Controlling Company
Innolux Optoelectronics India Private Limited	Mar 07,2018	701, Platina, Plot No. C-59, Platina G-Block, Bandra Kurla Complex, Bandra (E), Near Citi Bank, MUMBAI, Mumbai City, Maharashtra- MH,INDIA	INR$670,000,000	Distribution company
Innolux Optoelectronics Malaysia SDN. BHD.	Nov 06,2017	No 9-1, Jalan Putra Mahkota 7/4A, Putra Heights, 47650 Subang Jaya, Selangor Darul Ehsan,Malaysia	MYR$16,000,000	Manufacturing and distribution company
Innolux Optoelectronics Philippines CORP.	Jun 26,2017	Km 23 West Service Road, South Superhighway, Alabang, Muntinlupa City, 1770, Philippines	PHP$50,000,000	Manufacturing and distribution company
Innolux Singapore Holding Pte. Ltd.	June 28,2017	6 TEMASEK BOULEVARD, #09-05, SUNTEC TOWER FOUR, SINGAPORE (038986)	USD$25,400,000	Controlling Company
Innolux Technology Germany GmbH	Feb 17, 2006	Kaiserswerther Strasse 115,D-40880 Ratingen, Germany	EUR 100,000	Testing & Maintenance Company
Innolux USA, INC.	May 9, 2002	101 Metro Drive Suite 510,San Jose,CA95110, U.S.A	USD 11,842,010	Operating electronics parts and computer displaysale

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Company	Date of Incorporation	Address	Capital Stock	Business Activities
Keyway Investment Management Limited	Mar 30, 2005	Portcullis TrustNet Chambers, P.O Box 1225, Apia, Samoa	USD 1,656,410	Controlling Company
Lakers Trading Ltd.	Jun 4, 2004	Vistra Corporate Services Centre, Ground Floor NPF Building, Beach Road, Apia, Samoa	USD 1	Entrepot trade company
Landmark International Ltd.	Apr 24, 2003	Vistra Corporate Services Centre, Ground Floor NPF Building, Beach Road, Apia, Samoa	USD 709,450,000	Controlling Company
Leadtek Global Group Limited	Mar 30, 2005	Portcullis Chambers, 4th Floor, Ellen Skelton Building, 3076 Sir Francis Drake's Highway, P.O. Box 3444, Road Town, VG1110, Tortola, British Virgin Islands	USD 50,000,000	Entrepot trade company
Nets Trading Ltd.	May 2, 2008	Vistra Corporate Services Centre, Ground Floor NPF Building, Beach Road, Apia, Samoa	USD900,001	General Investment Industry
Rockets Holding Ltd.	Dec 18, 2002	Vistra Corporate Services Centre, Ground Floor NPF Building, Beach Road, Apia, Samoa	USD 171,669,290	Controlling Company
Stanford Developments Ltd.	Aug 12, 1999	Vistra Corporate Services Centre, Ground Floor NPF Building, Beach Road, Apia, Samoa	USD 164,000,000	Controlling Company
Suns Holding Ltd.	Dec 18, 2006	Vistra Corporate Services Centre, Ground Floor NPF Building, Beach Road, Apia, Samoa	USD 18,177,052	Controlling Company
Toppoly Optoelectronics (B.V.I.) Ltd.	Jul 17, 2001	P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola , British Virgin Islands	USD 146,847,000	Controlling Company
Toppoly Optoelectronics (Cayman) Ltd.	Jul 17, 2001	Grand Pavilion, Hibiscus Way, 802 West Bay Road, P. O. Box 31119, KY1-1205, Cayman Islands	USD 146,817,000	Controlling Company
Warriors Technology Investments Ltd.	Jan 3, 2007	Vistra Corporate Services Centre, Ground Floor NPF Building, Beach Road, 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 Flnet Electronics Ltd.	Oct 24, 2016	No. 18 dorm B Xingye North Rd., Foshan Science & Technology Industry Garden, Foshan, Guangdong, 528325, China	CNY 1,000,000	Goods Sale
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
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.

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Company	Date of Incorporation	Address	Capital Stock	Business Activities
Nanjing Innolux Optoelectronics Ltd.	May 23, 2001	No. 93, Fu Cheng West Road, Jiangning Economic and Technical Development Zone, Nanjing, China	USD 146,000,000	Manufacturing & selling LCD back end module related technologies and products.
GIO(maan shan) Optoelectronics Corp.	99.09.15	Cihu Economic Development Zone, Ma'anshan City	USD 10,000,000	Manufacturing
GIO Optoelectronics Corp.	93.04.21	No. 5, Titanggang Rd., Xinshi Dist., Tainan City 744, Taiwan (R.O.C.)	NTD 441,226,210	TFT-LCD related components manufacturing and sales
Innolux Automations and Intelligence Systems (ShenZhen) Co.,Ltd.	Apr 10,2018	5K, Block B, No. 8, Donghuan 2nd Road, Fukang Community, Longhua Street, Longhua District, Shenzhen, China	CNY$1,000,000	Software development and sales
Shenzhen PixinLED Technology Co.,Ltd.	Mar 30,2018	5K, Block B, No. 8, Donghuan 2nd Road, Fukang Community, Longhua Street, Longhua District, Shenzhen, China	CNY$10,000,000	Mini LED R&D and sales
InnoJoy Investment Corp.	Jun 26, 2007	No.8, Zhongxin Rd., Xinshi Dist., Tainan City 74148, Taiwan (R.O.C.)	NTD1,674,053,920	Investment activities
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, Guangdong Province, China	USD 164,000,000	Manufacturing & selling LCD back end module related technologies and products.
CarUX Technology Inc.	Mar 15,2019	Rm. A No. 12, Nanke 8th Rd., Shanhua Dist., Tainan City 741, Taiwan (R.O.C.)	NTD 200,000,000	R & D, manufacturing and distribution companies
Ningbo Innolux Flnet Electronics Ltd.	Oct 17, 2016	No.8, Cao E River Rd., Ningbo Bonded Zone Building 2 1f	CNY 1,000,000	Goods Sales
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 160,000,000	Manufacturing & selling LCD back end module related technologies and products.
InnoCare Optoelectronics Corporation	Apr 02,2019	Rm. B, No. 2, Sec. 2, Huanxi Rd., Xinshi Dist., Tainan City 744, Taiwan(R.O.C.)	NTD 200,000,000	R & D, manufacturing and distribution companies

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.

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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.

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

As of 12/31/2019

			As of 12/31/2019	As of 12/31/2019
Company	Title	Name	Shareholding
			Shares	% (Investment Holding)
CarUX Holding Limited	Director	Jin-YangHung	—	100%
	Director	Chu-HsiangYang	—	100%
	Director	Ching-LungTing	—	100%
CarUX Technology Pte. Ltd.	Director	Ching-LungTing	—	100%
	Director	Jin-YangHung	—	100%
	Director	Ngoo Sin HungJustin	—	100%
Double Star Inc.	Director	Ching-LungTing	—	63%
InnoCare Optoelectronics Japan Co., Ltd.	Director	Jhih-ShengLi	—	100%
	Director	Hsiu-huan Li	—	100%
	Director	Li-Wei Hsu	—	100%
InnoCare Optoelectronics USA,INC.	Director	Ishii Junichi	—	100%
Innolux Europe B.V.	Director	Tien-Jen Lin	—	100%
	Director	van Riel, Lucien Franciscus Henricus	—	100%
	Director	Lut-ingYang	—	100%
Innolux HoldingLtd.	Director	Jin-YangHung	—	100%
Innolux Hong Kong Holding Limited	Director	Jin-YangHung	—	100%
	Director	Chao-Hsien Liu	—	100%
	Director	Jun-Yi Yu	—	100%
Innolux Hong Kong Limited	Director	Jin-YangHung	—	100%
	Director	Pei-Yu Lu	—	100%
	Director	Rou-Li Cheng	—	100%
Innolux Japan Co., Ltd.	Director	Makoto Kaneda	—	100%
	Director	Chu-HsiangYang	—	100%
	Director	Ching-LungTing	—	100%
	Supervisor	Kida Masukichi	—	100%
	Supervisor	Jun-Hao Peng	—	100%
	Supervisor	Chin-Yuan Chang	—	100%
Innolux Optoelectronics Hong Kong Holding Ltd.	Director	Jin-YangHung	—	100%
	Director	Shu-Mei Ho	—	100%
	Director	Jun-Yi Yu	—	100%
Innolux Optoelectronics India Private Limited	Director	Chih-HungHsiao	—	100%
	Director	Cheng-ChungChiang	—	100%
	Director	Dave UdayGirishbhai	—	100%
Innolux Optpelectronics Malaysia SDN. BHD.	Director	Chih-HungHsiao	—	100%
	Director	Cheng-ChungChiang	—	100%
	Director	Lee Kit Ming	—	100%
Innolux Optoelectronics Philippines Corp.	Director	Chin-LungTing	—	100%
	Director	Cheng-ChungChiang	—	100%
	Director	Cherrylyn T. Singzon	—	100%
Innolux Singapore Holding Pte. Ltd.	Director	Chu-HsiangYang	—	100%
	Director	Cheng-ChungChiang	—	100%
	Director	Tan Sze Lian Celine	—	100%

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Company	Title	Name	Shareholding	Shareholding
			Shares	% (Investment Holding)
Innolux Technology Germany GmbH	Director	Tien-Jen Lin	—	100%
	Director	van Riel, Lucien Franciscus Henricus	—	100%
	Director	Adrianus Gosuinus Marie Kersten	—	100%
Innolux USA, INC.	Director	Yu-Hao Wu	—	100%
	Director	Kanada Makoto	—	100%
	Director	Sato Takahiro	—	100%
Keyway Investment Management Limited	Director	Jin-Yang Hung	—	100%
Lakers TradingLtd.	Director	Jin-YangHung	—	100%
Landmark International Ltd.	Director	Jin-YangHung	—	100%
Leadtek Global GroupLimited	Director	Jin-YangHung	—	100%
Nets TradingLtd.	Director	Xi-XiangHsu	—	100%
Rockets HoldingLtd.	Director	Jin-YangHung	—	100%
Stanford Developments Ltd.	Director	Jin-YangHung	—	100%
Suns HoldingLtd.	Director	Jin-YangHung	—	100%
ToppolyOptoelectronics(B.V.I.)Ltd.	Director	Jin-YangHung	—	100%
Toppoly Optoelectronics (Cayman) Ltd.	Director	Jin-Yang Hung	—	100%
Warriors Technology Investments Ltd.	Director	Jin-Yang Hung	—	100%
Shanghai Innolux Optoelectronics Ltd	Chairman	Zhi-Yuan Tsai	—	100%
	Director	Chin-Yuan Chang	—	100%
	Director	Jun-Yi Yu	—	100%
Yuan Chi investment co., Ltd	Chairman	Innolux Corporation Representative - Jin-YangHung	—	100%
	Director	Innolux Corporation Representative –Chu-HsiangYang	—	100%
	Director	Innolux Corporation Representative - Chien-LangLo	—	100%
Foshan Innolux Flnet Electronics Ltd.	Chairman	Hai-Jun Lee	—	100%
	Supervisor	Hua-Rui Lin	—	100%
Foshan Innolux Optoelectronics Ltd.	Chairman	Ching-Hui Lin	—	100%
	Director	Quyang ,Xiao-Min	—	100%
	Director	Jun-Yi Yu	—	100%
	Supervisor	Chin-Yuan Chang	—	100%
Foshan Innolux Logistics Ltd.	Chairman	Ching-Hui Lin	—	100%
	Director	QiongGu	—	100%
	Director	Ai-Qun Wang	—	100%
	Supervisor	Chin-Yuan Chang	—	100%
Nanjing Innolux Technology Ltd.	Chairman	Shi-Xian Hsu	—	100%
	Director	Chin-Yuan Chang	—	100%
	Director	Chih-ChiangLu	—	100%
	Supervisor	Kun Ma	—	100%
Nanjing Innolux Optoelectronics Ltd.	Chairman	Shi-Xian Hsu	—	100%
	Director	Chin-Yuan Chang	—	100%
	Director	Jun-Yi Yu	—	100%
	Supervisor	Kun Ma	—	100%

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Company	Title	Name	Shareholding	Shareholding
			Shares	% (Investment Holding)
GIO(maan shan) Optoelectronics Corp.	Chairman	Cheng-Che Pan	—	63%
	Director	Min-Chih Fan	—	63%
	Director	Chi-Chih Hsu	—	63%
	Supervisor	Yu-Yuan Huang	—	63%
GIO Optoelectronics Corp.	Chairman	Ching-LungTing	326,529	1%
	Director	INX Representative - Chao-Hsien Liu	27,812,188	63%
	Director	YuandingVenture Capital Co.,Ltd.	198,275	—
	Director	Chiu-Lin Chen	2,123	—
	Supervisor	Chi-HuangChen	9,759	—
	Supervisor	Lun-Pin Tseng	7,180	—
Innolux Automations and Intelligence Systems(ShenZhen)Co.,Ltd.	Chairman	Li-ZongHsien	—	49%
	Supervisor	Hua-Rui Lin	—	49%
Shenzhen PixinLED Technology Co.,Ltd.	Chairman	Chin-LungTing	—	100%
	Supervisor	Hua-Rui Lin	—	100%
InnoJoy Investment Corp	Chairman	INX Representative - Jin-Yang Hung	167,405,392	100%
	Director	INX Representative - Chu-Hsiang Yang	167,405,392	100%
	Director	INX Representative –Chien-Lang Lo	167,405,392	100%
	Supervisor	INX Representative - Chin-Yuan Chang	167,405,392	100%
Innocom Technology (Shenzhen) Co., LTD	Chairman	Cheng-ChungChiang	—	100%
	Director	Jun-Yi Yu	—	100%
	Director	Chin-Yuan Chang	—	100%
CarUX Technology Inc.	Chairman	INX Representative - Ching-Lung Ting	20,000,000	100%
	Director	INX Representative - Chu-Hsiang Yang	20,000,000	100%
	Director	INX Representative - Hung-Wen Yang	20,000,000	100%
	Supervisor	INX Representative - Chao-Hsien Liu	20,000,000	100%
Ningbo Innolux Flnet Electronics Ltd.	Chairman	Jia-Lin Chen	—	100%
	Supervisor	Kun Ma	—	100%
Ningbo Innolux Electronics Ltd.	Chairman	Chih-ShengLee	—	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%

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Company	Title	Name	Shareholding	Shareholding
			Shares	% (Investment Holding)
InnoCare Optoelectronics Corporation	Chairman	INX Representative - Chu-Hsiang Yang	20,000,000	100%
	Director	INX Representative - Tai-Chi Pan	20,000,000	100%
	Director	INX Representative –Chien-Lang Lo	20,000,000	100%
	Supervisor	INX Representative - Chao-Hsien Liu	20,000,000	100%

8.1.6 Operational Highlights of INX Subsidiaries

Unit: NT$ thousands, 12/31/2019

Company	Capital Stock	Assets	Liabilities	Net Worth	Net Revenue	Income (Loss) from Operation	Net Income (Loss)	Basic Earnings (Loss) Per Share
CarUX HoldingLimited	294,690	285,546	—	285,546	—	—	759	0.08
CarUX TechnologyPte. Ltd.	291,588	282,539	—	282,539	—	(102)	750	0.08
Double Star Inc.	298,113	100,097	—	100,097	—	—	760	—
Golden Archiever International Limited	—	—	—	—	—	—	48	—
InnoCare Optoelectronics Japan Co.,Ltd.	87,149	484,711	400,638	84,073	457,468	3,126	1,281	42.67
InnoCare Optoelectronics USA,INC.	27,963	98,544	70,536	28,008	63,797	1,470	1,058	1.18
Innolux Europe B.V.	100,988	545,983	168,907	377,076	1,048,389	78,223	62,096	165.23
Innolux HoldingLtd.	5,753,979	17,999,010	—	17,999,010	—	—	216,811	1.20
Innolux Hong Kong HoldingLimited	5,546,764	6,029,594	—	6,029,594	—	—	553,211	0.48
Innolux Hong Kong Limited	1,744,915	13,145,192	12,308,812	836,380	34,367,853	354,695	354,704	10.13
Innolux Japan Co.,Ltd.	86,735	4,097,332	316,989	3,780,343	2,727,608	37,386	141,610	786,720.74
Innolux Optoelectronics HongKongHoldingLtd.	626,994	1,598,956	—	1,598,956	—	—	108,291	0.66
Innolux Optoelectronics India Private Limited	281,534	542,429	542,772	(343)	344,967	(269,165)	(273,374)	(4.08)
Innolux Optpelectronics Malaysia SDN. BHD.	117,210	119,512	715	118,797	—	(881)	1,217	0.08
Innolux Optoelectronics Philippines Corp.	29,540	28,453	192	28,261	—	(674)	(484)	(0.10)
Innolux Singapore HoldingPte. Ltd.	761,492	460,648	125	460,523	—	(273)	(270,334)	(10.64)
Innolux Technology GermanyGmbH	3,359	102,243	29,691	72,552	41,202	5,336	3,883	38.83
Innolux USA,Inc.	355,023	6,656,610	5,885,058	771,552	20,299,768	176,835	125,244	9,752.69
Keyway Investment Management Limited	49,659	89,138	—	89,138	—	—	10,684	6.45
Lakers TradingLtd.	—	27,002,213	26,773,808	228,405	50,111,997	(88,632)	—	—
Landmark International Ltd.	21,269,311	44,796,827	—	44,796,827	—	—	2,072,156	2.92
Leadtek Global Group Limited	1,499,000	20,163,715	18,664,715	1,499,000	19,299,317	(518,731)	—	—
Nets TradingLtd.	26,982	27,213	—	27,213	—	—	(382)	(0.42)
Rockets HoldingLtd.	5,146,645	11,417,175	—	11,417,175	—	—	137,205	0.85

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Company	Capital Stock	Assets	Liabilities	Net Worth	Net Revenue	Income (Loss) from Operation	Net Income (Loss)	Basic Earnings (Loss) Per Share
Stanford Developments Ltd.	4,916,720	11,389,827	—	11,389,827	—	—	137,587	0.84
Suns HoldingLtd.	544,948	6,353,353	—	6,353,353	—	—	79,606	4.38
Toppoly Optoelectronics (B.V.I.)Ltd.	4,402,473	5,866,239	—	5,866,239	—	—	(396,479)	(2.70)
Toppoly Optoelectronics (Cayman)Ltd.	4,401,574	5,865,889	—	5,865,889	—	—-	(396,479)	(2.70)
Warriors Technology Investments Ltd.	544,948	6,353,352	—	6,353,352	—	—	79,606	4.38
Shanghai Innolux Optoelectronics Ltd.	629,580	4,999,237	3,400,281	1,598,956	8,748,338	168,261	108,291	—
Yuan Chi investment co., Ltd	2,100,000	876,112	187	875,925	—	(246)	3,176	—
Foshan Innolux Flnet Electronics Ltd.	4,298	6,410	—	6,410	—	—	682	—
Foshan Innolux Optoelectronics Ltd.	11,482,340	49,994,722	29,791,216	20,203,506	65,878,524	847,102	854,031	—
Foshan Innolux Logistics Ltd.	44,970	88,943	4,645	84,298	38,800	6,949	10,568	—
Nanjing Innolux TechnologyLtd.	62,958	1,820,323	1,290,781	529,542	2,554,254	900	538	—
Nanjing Innolux Optoelectronics Ltd.	4,676,880	14,317,198	8,980,873	5,336,325	18,007,850	307,032	(397,017)	—
GIO(maan shan) Optoelectronics Corp.	299,800	99,959	48	99,911	—	(507)	763	—
GIO Optoelectronics Corp.	441,226	937,994	463,137	474,857	121,660	(42,096)	1,299	0.03
Innolux Automations and Intelligence Systems (ShenZhen)Co.,Ltd.	4,298	90,581	87,449	3,132	93,553	2,690	3,432	—
Shenzhen PixinLED TechnologyCo.,Ltd.	42,975	44,100	2,151	41,949	35,543	91	789	—
InnoJoyInvestment Corp.	1,674,054	1,299,196	271	1,298,925	—	(226)	24,846	0.15
Innocom Technology (Shenzhen)Co.,LTD	4,916,720	11,934,521	544,744	11,389,777	259,729	6,341	137,587	—
CarUX TechnologyInc.	200,000	199,924	100	199,824	—	(192)	(176)	(0.01)
Ningbo Innolux Flnet Electronics Ltd.	4,298	10,568	45	10,523	—	(43)	1,942	—
Ningbo Innolux Electronics Ltd.	128,925	273,409	89,742	183,667	372,840	19,337	25,897	—
Ningbo Innolux Optoelectronics Co.,LTD	9,293,800	34,363,881	14,604,458	19,759,423	44,954,535	944,910	683,582	—
Ningbo Innolux Display LTD	4,796,800	14,390,175	9,557,410	4,832,765	26,081,259	610,452	532,126	—
InnoCare Optoelectronics Corporation	200,000	1,232,930	982,963	249,967	676,876	51,932	55,336	2.77

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

8.3 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.
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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Innolux Corporation:

Opinion

We have audited the accompanying consolidated balance sheets of Innolux Corporation (the “Company”) and its subsidiaries as at December 31, 2019 and 2018, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company and its subsidiaries in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

The key audit matters in relation to the consolidated financial statements of the Company and its subsidiaries for the year ended December 31, 2019 are outlined as follows:

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Inventory valuation

Description

The industry is characterized by the significant fluctuations closely in connection with the economic environment. As the technology evolves rapidly, the Group’s existing products may become obsolete when the customers demand for new products or the Group fails to compete with the evolutionary production approach. The Group evaluates the inventory by taking into account of allowance, obsolescence or trivial sales amount and the cost has been written down to the net realizable value. The abovementioned allowance for inventory valuation losses mainly arise from the excess of the cost of inventory over the net realizable value of inventory. For details of inventory, please refer to Note 6(6). There is a risk of the excess of the cost of inventory over the net realizable value of inventory as a result of that the amounts of inventories are material and the sales of related products may have significant fluctuations; we consider inventory valuation a key audit matter.

How our audit addressed the matter

We obtained the net realizable value report of inventory used by management for evaluation. And obtained an understanding of sales price basis adopted by management for abovementioned inventory along with the related supporting documents to assess the reasonableness of net realizable value and the appropriateness of valuation basis.

Valuation and impairment of goodwill and property, plant and equipment

Description

For details of the impairment valuation of goodwill and property, plant and equipment, please refer to Notes 6(8) and 6(11).

The Group estimates future cash flows based on appropriate discount rates. In determining whether goodwill and property, plant and equipment may be impaired, the recoverable amount of the cash generating unit is measured based on how assets are utilized, duration years of assets and projected income and expenses in the future. The estimate involves several assumptions such as determination of discount rates, expected growth rate and future financial projections. As these estimates are dependent upon significant management judgement, we consider management’s assessment of impairment of goodwill and property, plant and equipment a key audit matter.

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How our audit addressed the matter

We assessed the key assumptions used by management in estimating expected future cash flows, including the reasonableness of expected operating revenue, gross profit, changes in expenses, and the basic assumptions applied in expected future cash flows. We also examined the parameters of discount rates, including the risk-free rate of return on equity capital, the risk factor of the industry and the rate of return on similar investments in the market.

Other matter – Parent company only financial reports

We have audited and expressed an unqualified opinion on the parent company only financial statements of Innolux Corporation as at and for the years ended December 31, 2019 and 2018.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

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

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

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when

129 -

it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

A. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
B. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
D. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
E. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
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We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

PricewaterhouseCoopers, Taiwan February 13, 2020

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.

131 -

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(4) 6(5) 7 7 6(6) 8 6(2) 6(3) 6(7) 6(8)(30), 7 and 8 6(9) 6(10) 6(11)(30) and 8 6(28) 6(8) and 8	December 31, 2019 December 31, 2018 � �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� �� �� �� � �� ��	December 31, 2018
Current Assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1136 Financial assets at amortized cost - current 1170 Accounts receivable, net 1180 Accounts receivable, net - related parties 1200 Other receivables 130X Inventory 1410 Prepayments 1479 Other current assets 11XX Total current assets Non-current assets 1510 Financial assets at fair value through profit or loss - non-current 1517 Financial assets at fair value through other comprehensive income - non- current 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1755 Right-of-use assets 1760 Investment property, net 1780 Intangible assets 1840 Deferred income tax assets 1990 Other non-current assets 15XX Total non-current assets 1XXX Total assets

(Continued)

132 -

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity

Notes
December 31, 2019
December 31, 2018
6(2)
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7
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6(12) and 7
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6(17) and 9
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6(14)
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6(13)
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6(14)
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6(28)
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6(15)
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6(18)
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6(19)
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6(20)
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6(21)
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6(18)
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Current Liabilities
2120
Financial liabilities at fair value
through profit or loss - current
2170
Accounts payable
2180
Accounts payable - related parties
2200
Other payables
2230
Current income tax liabilities
2250
Provisions - current
2280
Lease liabilities - current
2320
Long-term liabilities, current portion
2399
Other current liabilities
21XX
Total current liabilities
Non-current liabilities
2530
Corporate bonds payable
2540
Long-term borrowings
2570
Deferred income tax liabilities
2580
Lease liabilities - non-current
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
3500
Treasury shares
31XX
Equity attributable to owners of
the parent
36XX
Non-controlling interests
3XXX
Total equity
3X2X
Total liabilities and equity

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

133 -

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

Items

Notes
2019
2018
6(22) and 7

��
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6(6)(26) and 7
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6(26)
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6(23)
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6(24)
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6(25)
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6(7)
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6(28)
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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 (loss) profit
Non-operating income and
expenses
7010
Other income
7020
Other gains and losses
7050
Finance costs
7060
Share of profit of associates and
joint ventures accounted for
under equity method
7000
Total non-operating income
and expenses
7900
(Loss) profit before income tax
7950
Income tax expense
8200
(Loss) profit for the year

(Continued)

134 -

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

Items

Notes
2019
2018
6(15)
��
��
��
6(21)
��
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6(28)
��
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��
��
6(21)
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6(21)
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6(29)
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Other comprehensive income
(loss) (net)
Components of other
comprehensive income (loss) that
will not be reclassified to profit
or loss
8311
Remeasurement of defined
benefit plans
8316
Unrealized gains (losses) on
financial assets at fair value
through other comprehensive
income
8349
Income tax related to
components of other
comprehensive income that will
not be reclassified to profit or
loss
8310
Components of other
comprehensive income (loss)
that will not be reclassified to
profit or loss
Components of other
comprehensive loss that will be
reclassified to profit or loss
8361
Financial statements translation
differences of foreign operations
8370
Share of other comprehensive
(loss) income of associates and
joint ventures accounted for
under equity method
8360
Components of other
comprehensive loss that will
be reclassified to profit or
loss
8300
Other comprehensive loss for the
year, net of tax
8500
Total comprehensive loss for the
year
(Loss) profit attributable to:
8610
Owners of the parent
8620
Non-controlling interest
Other comprehensive (loss)
income attributable to:
8710
Owners of the parent
8720
Non-controlling interest
(Loss) earnings per share (in
dollars)
9750
Basic (loss) earnings per share
9850
Diluted (loss) earnings per
share

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

135 -

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136 -

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
(Loss) profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation and amortization
Net (gain) loss on financial assets or liabilities
at fair value through profit or loss
Expected credit loss
Share of loss of associates and joint ventures
accounted for under equity method
Gain from disposal of investments
Loss on disposal of property, plant and
equipment
Gain on lease modification
Interest expense
Interest income
Dividend income
Unrealized foreign exchange loss
Changes in operating assets and liabilities
Changes in operating assets
Financial assets /liabilities at fair value
through profit or loss
Accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Prepayments
Other current assets
Changes in operating liabilities
Accounts payable
Accounts payable - related parties
Other payables
Provisions - current
Other current liabilities
Other non-current liabilities
Cash inflow generated from operations
Cash paid for income tax
Net cash flows from operating activities

Notes
2019
2018
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6(26)
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6(7)
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6(24)
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6(24)
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6(25)
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6(23)
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6(23)
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(Continued)

137 -

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at fair value through
profit or loss
Proceeds from disposal of financial assets at fair
value through profit or loss
Acquisition of investments in equity instruments
measured at fair value through other
comprehensive income
Proceeds from disposal of financial assets at fair
value through other comprehensive income
Decrease (increase) in financial assets at amortized
cost - current
Increase in investment accounted for under equity
method
Proceeds from disposal of investment 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
Net cash flow from acquisition of subsidiaries
(Increase) decrease in other non-current assets
Interest received
Dividends received
Net cash flows from (used in) investing
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term borrowings
Payment of long-term borrowings
Interest paid
Payment of the principal portion of lease liabilities
Cash dividends paid
Payments to acquire treasury shares
Others
Net cash flows (used in) from financing
activities
Effect of changes in foreign currency exchange
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Notes
2019
2018
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6(31)
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6(11)
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6(31)
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6(20)
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6(18)
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6(19)
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The accompanying notes are an integral part of these consolidated financial statements.

138 -

INNOLUX CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(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 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 13, 2020.

3. 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”)

New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

New Standards,Interpretations andAmendments	Effective Date by International Accounting StandardsBoard
Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. IFRS 16, ‘Leases’

A. IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard

139 -

requires lessees to recognize a ‘right-of-use asset’ and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

B. The Group has elected to apply IFRS 16 by not restating the comparative information (referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in 2019 as endorsed by the FSC. Accordingly, the Group increased ‘right-of-use asset’ and ‘lease liability’ were $6,935,181 and $6,180,682, as well as decreased ‘other non-current assets’ and ‘prepayments’ by $749,956 and $4,543 for the land use right contracts signed by the subsidiaries of the Company, and there was no effect on retained earnings with respect to the lease contracts of lessees on January 1, 2019.
C. The Group has used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:
(a) Reassessment as to whether a contract is, or contains, a lease is not required, instead, the application of IFRS 16 depends on whether or not the contracts were previously identified as leases applying IAS 17 and IFRIC 4.
(b) The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.
(c) The accounting for operating leases whose period will end before December 31, 2019 as shortterm leases and accordingly, rent expense recognized in 2019 was included in the expense on short-term lease contracts in Note 6(9).
(d) The exclusion of initial direct costs for the measurement of ‘right-of-use asset’.
(e) The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
D. The Group recognized lease liabilities which had previously been classified as ‘operating leases’ under the principles of IAS 17, ‘Leases’. The reconciliation between operating lease commitments under IAS 17 measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate and lease liabilities recognized as of January 1, 2019 is as follows:

Operating lease commitments disclosed by applying IAS 17 as at �� December 31, 2018 Less: Short-term leases �� Add/Less: Adjustments as a result of a different treatment of extension and termination options �� Total lease contracts amount recognized as lease liabilities by applying �� IFRS 16 on January 1, 2019 Incremental borrowing interest rate at the date of initial application �� Lease liabilities recognized as at January 1, 2019 by applying IFRS 16 ��

140 -

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by

the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2020 are as follows:

New Standards,Interpretations andAmendments	Effective date by International Accounting StandardsBoard
Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 9, IAS 39 and IFRS 7, ‘Interest rate benchmark reform’	January 1, 2020 January 1, 2020 January 1, 2020

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

(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 IFRSs as endorsed by the FSC are as follows:

New Standards,Interpretations andAmendments	Effective date by International Accounting StandardsBoard
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 17, ‘Insurance contracts’ Amendments to IAS 1, ‘Classification of liabilities as current or non- current’	To be determined by International Accounting Standards Board January 1, 2021 January 1, 2022

The above standards and interpretations have no significant impact to the Group’s financial condition

and financial performance based on the Group’s assessment.

4. 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

The consolidated financial statements of the Group have been prepared 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”).

141 -

(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) Financial assets at fair value through other comprehensive income.
(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 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 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) Significant inter-company transactions, balances and unrealized 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 noncontrolling 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 recognized 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 recognized in profit or loss. All amounts previously recognized in other comprehensive income in relation to the subsidiary would be reclassified to profit or loss when the related assets or liabilities are disposed of.
142 -

B. Subsidiaries included in the consolidated financial statements:

Main
Business
Name of Investor
Name ofSubsidiary
Activities
Innolux Corporation
Bright Information Holding
Ltd.
Investment holdings
Golden Achiever
International Limited
Investment holdings
Innolux Holding Limited
Investment holdings
Keyway Investment
Management Limited
Investment holdings
Landmark International Ltd. Investment holdings
Toppoly Optoelectronics
(B.V.I.) Ltd.
Investment holdings
Innolux Hong Kong Holding
Limited
Investment holdings
Leadtek Global Group
Limited
Distribution
company
Yuan Chi Investment Co.,
Ltd.
Investment
company
InnoJoy Investment
Corporation
Investment
company
Innolux Japan Co., Ltd.
Investment, R&D
and distribution
company
Innolux Singapore Holding
Pte. Ltd.
Investment holdings
CarUX Technology Inc.
R&D,
manufacturing and
distribution
company
InnoCare Optoelectronics
Corporation
Investment, R&D,
manufacturing and
distribution
company
GIO Optoelectronics Corp.
Investment, R&D,
manufacturing and
distribution
company
Innolux Holding
Limited
Rockets Holding Ltd.
Investment holdings
Suns Holding Ltd.
Investment holdings
Lakers Trading Ltd.
Distribution
company
Keyway Investment
Management Limited
Foshan Innolux Logistics
Ltd.
Warehousing
company

December
December
31,2019
31,2018
Description
-
100
(h)
-
100
(a)
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
54
54
-
100
100
-
100
-
(b)
100
-
(d)
63
24
(g)
100
100
-
100
100
-
100
100
-
100
100
-
Ownership (%)

143 -

Main
Business
Name of Investor
Name ofSubsidiary
Activities
Landmark
International Ltd.
Ningbo Innolux
Optoelectronics Ltd.
Processing company
Foshan Innolux
Optoelectronics Ltd.
Processing company
Ningbo Innolux Display Ltd. Processing company
Toppoly
Optoelectronics
(B.V.I.) Ltd.
Toppoly Optoelectronics
(Cayman) Ltd.
Investment holdings
Innolux Hong Kong
Holding Limited
Innolux Optoelectronics
Hong Kong Holding Limited
Investment holdings
Innolux Hong Kong Limited Distribution
company
Innolux Europe B.V.
Investment,
distribution, and
R&D testing
company
Innolux Japan Co., Ltd.
Investment, R&D
and distribution
company
CarUX Holding Limited
Investment holdings
Innolux Japan Co.,
Ltd.
Innolux USA, Inc.
Distribution
company
Innolux Singapore
Holding Pte. Ltd.
Innolux Optoelectronics
India Private Limited
Distribution
company
Innolux Optoelectronics
Philippines Corp.
Manufacturing and
distribution
company
Innolux Optoelectronics
Malaysia SDN. BHD.
Manufacturing and
distribution
company
Rockets Holding Ltd. Stanford Developments Ltd.
Investment holdings
Nets Trading Ltd.
Investment
company
Suns Holding Ltd.
Warriors Technology
Investments Ltd.
Investment
company
Toppoly
Optoelectronics
(Cayman) Ltd.
Nanjing Innolux Technology
Ltd.
Distribution
company
Nanjing Innolux
Optoelectronics Ltd.
Processing company
Innolux
Optoelectronics Hong
Kong Holding
Limited
Shanghai Innolux
Optoelectronics Ltd.
Processing company

December
December
31,2019
31,2018
Description
Ownership (%)
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
46
46
-
100
-
(i)
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-

144 -

Main
Business
Name of Investor
Name ofSubsidiary
Activities
Innolux Europe B.V. Innolux Technology
Germany GmbH
Testing and
maintenance
company
CarUX Holding
Limited
CARUX TECHNOLOGY
PTE. LTD.
Investment holdings
Stanford
Developments Ltd.
Innocom Technology
(Shenzhen) Co., Ltd.
Processing company
Ningbo Innolux
Display Ltd.
Ningbo Innolux Electornics
Ltd.
Distribution
company
Ningbo Innolux
Optoelectronics Ltd.
Ningbo Innolux Flent
Electornics Ltd.
Distribution
company
Foshan Innolux
Optoelectronics Ltd.
Foshan Innolux Flent
Electornics Ltd.
Distribution
company
Innocom Technology
(Shenzhen) Co.,
LTD.
Shenzhen PixinLED
Technology Co., LTD.
R&D and
distribution
company
Innolux Automations and
Intelligence Systems
(ShenZhen) Co., Ltd.
R&D and
distribution
company
InnoCare
Optoelectronics
Corporation
InnoCare Optoelectronics
Japan Co., Ltd.
Distribution
company
InnoCare Optoelectronics
USA, INC.
Distribution
company
GIO Optoelectronics
Corp.
Double Star Inc.
Investment holdings
GIO (Maanshan)
Optoelectronics Co., Ltd.
Processing company

December
December
31,2019
31,2018
Description
Ownership (%)
100
100
-
100
-
(j)
100
100
-
100
100
-
100
100
-
100
100
-
100
100
-
100
49
(c)
100
-
(e)
100
-
(f)
100
100
(g)
100
100
(g)

(a) In the first quarter of 2019, Golden Achiever International Limited has completed liquidation.
(b) CarUX Technology Inc. was established in the first quarter of 2019 and was included in the consolidated financial statements since the date of establishment.
(c) Remaining 51% of shares of Innolux Automations and Intelligence Systems (ShenZhen) Co., Ltd. were acquired in the first quarter of 2019 and Innolux Automations and Intelligence Systems (ShenZhen) Co., Ltd. was included in the consolidated financial statements since the effective date of share transfer.
(d) InnoCare Optoelectronics Corporation was established in the second quarter of 2019 and was included in the consolidated financial statements since the date of establishment.
(e) InnoCare Optoelectronics Japan Co., Ltd. was established in the third quarter of 2019 and was included in the consolidated financial statements since the date of establishment.
(f) InnoCare Optoelectronics USA, INC. was established in the third quarter of 2019 and was included in the consolidated financial statements since the date of establishment.
(g) GIO Optoelectronics Corp. and its subsidiaries were formerly associates accounted for under
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the equity method; the group acquired obtained control over it in the third quarter of 2019. GIO Optoelectronics Corp. and its subsidiaries were included in the consolidated financial statements since the control commenced.

  - (h) In the third quarter of 2019, Bright Information Holding Ltd. had completed liquidation and dissolution.

  - (i) CarUX Holding Limited was established in the fourth quarter of 2019 and was included in the consolidated financial statements since the date of establishment.

  - (j) CARUX TECHNOLOGY PTE. LTD. was established in the fourth quarter of 2019 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 financial statements are presented in New Taiwan dollars, 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 statements as qualifying cash flow hedge.
(b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated 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, nonmonetary 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 within ‘other gains and losses’.
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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 spot exchange rate at the date of that balance sheet;
  - ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
  - iii. All resulting exchange differences are recognized in other comprehensive income.
- (b) When the 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 when the Group 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, even when 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.
(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 settle 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 settled within the normal operating cycle;
- (b) Liabilities arising mainly from trading activities;
- (c) Liabilities that are to be settled 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
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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 amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments 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 that are not measured at amortized cost or fair value through other comprehensive income.
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. At initial recognition, the Group measures the financial assets at fair value and recognizes the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognizes the gain or loss in profit or loss.
D. The Group recognizes the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

(8) Financial assets at fair value through other comprehensive income

A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognize changes in fair value in other comprehensive income.
B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognized and derecognized using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value:
The changes in fair value of equity investments that were recognized in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognized as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

(9) Financial assets at amortized cost

A. Financial assets at amortized cost are those that meet all of the following criteria:
(a) The objective of the Group’s business model is achieved by collecting contractual cash flows.
(b) The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, financial assets at amortized cost are recognized and derecognized using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs.
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Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognized in profit or loss when the asset is derecognized or impaired.

D. The Group’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.
(10) Accounts and notes receivable
A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.
B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.
C. The Group’s operating pattern of accounts receivable that are expected to be factored is for the purpose of receiving contract cash flow and selling, and the accounts receivable are subsequently measured at fair value, with any changes in fair value recognized in other comprehensive income.
(11) Impairment of financial assets

For accounts receivable that have a significant financing component, at each reporting date, the Group recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable that do not contain a significant financing component, the Group recognizes the impairment provision for lifetime ECLs.

(12) Derecognition of financial assets

The Group derecognizes a financial asset when one of the following conditions is met:

A. The contractual rights to receive the cash flows from the financial asset expire.
B. The contractual rights to receive cash flows of the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.
C. The contractual rights to receive cash flows of the financial asset have been transferred; however, the Group has not retained control of the financial asset.

(13) Operating leases (lessor)

Lease income from an operating lease (net of any incentives given to the lessee) is recognized in profit or loss on a straight-line basis over the lease term.

(14) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method. The cost of finished goods and work in progress comprises raw materials, direct labour, 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.

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(15) Investments accounted for using 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 do not arise from 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 change in ownership interests in the associate 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.

(16) 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 during the financial period in which they are 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. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.
D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. 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:
150 -

Buildings and structures 2~51 years Machinery and equipment 5~11 years Other equipment 2~6 years

(17) Leasing arrangements (lessee) - right-of-use assets / lease liabilities

A. Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. For short-term leases or leases of lowvalue assets, lease payments are recognized as an expense on a straight-line basis over the lease term.
B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Lease payments are comprised of the following:
(a) Fixed payments, less any lease incentives receivable; and
(b) Variable lease payments that depend on an index or a rate.
The Group subsequently measures the lease liability at amortized cost using the interest method and recognizes interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognized as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.
C. At the commencement date, the right-of-use asset is stated at cost comprising the following: (a) The amount of the initial measurement of lease liability; and
(b) Any lease payments made at or before the commencement date.
The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognized as an adjustment to the right-of-use asset.

(18) 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.

(19) Intangible assets

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

(20) 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
151 -

circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortized historical cost would have been if the impairment had not been 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 are 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 the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is/are expected to benefit from the synergies of the business combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

(21) Borrowings

A. Borrowings comprise long-term and short-term bank borrowings. Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.
B. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility to which it relates.

(22) Notes and accounts payable

A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

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

A. 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. At initial recognition, the Group measures the financial liabilities at fair value. All related transaction costs are recognized in profit or loss. The Group subsequently measures these financial liabilities at fair value with any gain or loss recognized in profit or loss.
152 -
C. If the credit risk results in fair value changes in financial liabilities designated as at fair value through profit or loss, they are recognized in other comprehensive income in the circumstances other than avoiding accounting mismatch or recognizing in profit or loss for loan commitments or financial guarantee contracts.

(24) Convertible bonds payable

Convertible bonds issued by the Group contain conversion options (that is, the bondholders have the right to convert the bonds into the Group’s common shares by exchanging a fixed amount of cash for a fixed number of common shares). The Group classifies the bonds payable upon issuance as a financial liability or an equity instrument in accordance with the contract terms. They are accounted for as follows:

A. The host contracts of bonds are initially recognized at fair value. Any difference between the initial recognition and the redemption value is accounted for as the premium or discount on bonds payable and is subsequently amortized in profit or loss as an adjustment to ‘finance costs’ over the period of circulation using the effective interest method.
B. The embedded conversion options which meet the definition of an equity instrument are initially recognized in ‘capital surplus—share options’ at the residual amount of total issue price less the amount of bonds payable as stated above. Conversion options are not subsequently remeasured.
C. Any transaction costs directly attributable to the issuance are allocated to each liability or equity component in proportion to the initial carrying amount of each abovementioned item.
D. When bondholders exercise conversion options, the liability component of the bonds (including bonds payable) shall be remeasured on the conversion date. The issuance cost of converted common shares is the total book value of the abovementioned liability component and ‘capital surplus—share options’.

(25) Provisions

Provisions (including warranties, litigation, etc.) are recognized when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognized as interest expense. Provisions are not recognized for future operating losses.

(26) Employee benefits

A. Short-term employee benefits

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

153 -

B. Pensions

(a) Defined contribution plans

For defined contribution plans, the contributions are recognized as pension expense when they are due 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. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. 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 net 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 bonds (at the balance sheet date) that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.
- ii. Remeasurements arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.
C. Employees’ compensation and directors’ remuneration
Employees’ compensation and directors’ remuneration are recognized as expense and liability, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates.

- (27) Employee share based payment

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 nonmarket 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.

(28) 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.
154 -
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 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 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 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 tax asset is realized or the deferred tax liability is settled.
D. Deferred 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 tax assets are reassessed.
E. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from research and development expenditures to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilized.

(29) Treasury shares

Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs, is included in equity attributable to the Company’s equity holders.

(30) Revenue recognition

A. The Group is primarily engaged in manufacture and sale of TFT-LCD panel products. The Group recognizes revenue when the right of control is transferred to the customer when the products are delivered to customer and the Group has no unperformed obligation that could affect customer acceptance of the product. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.
B. Sales revenue is calculated based on the contract price, net of volume discounts and sales returns and discounts. Revenue from these sales is recognized based on the price specified in the contract, net of the estimated volume discounts/ sales discounts and allowances. Accumulated experience is used to estimate and provide for the volume discounts, sales discounts and allowances, using the expected value method, and revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. The estimation is subject to an assessment at each
155 -

reporting date. A refund liability is recognized for expected volume discounts, sales discounts and allowances payable to customers in relation to sales made until the end of the reporting period. No element of financing is deemed present as the sales are made, which is consistent with market practice.

C. A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

(31) Business combinations

A. The Group uses the acquisition method to account for business combinations. The consideration transferred for an acquisition is measured as the fair value of the assets transferred, liabilities incurred or assumed and equity instruments issued at the acquisition date, plus the fair value of any assets and liabilities resulting from a contingent consideration arrangement. All acquisitionrelated costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. For each business combination, the Group measures at the acquisition date components of non-controlling interests in the acquiree that are present ownership interests and entitle their holders to the proportionate share of the entity’s net assets in the event of liquidation at either fair value or the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets. All other non-controlling interests should be measured at the acquisition-date fair value.
B. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the fair value of the identifiable assets acquired and the liabilities assumed is recorded as goodwill at the acquisition date. If the total of consideration transferred, non-controlling interest in the acquiree recognized and the fair value of previously held equity interest in the acquiree is less than the fair value of the identifiable assets acquired and the liabilities assumed, the difference is recognized directly in profit or loss on the acquisition date.

(32) 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.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION

UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgements 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. For the information of critical accounting judgements, estimates and key sources of assumption uncertainty is addressed below:

156 -
(1) 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 judgement, 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(11) for the information of 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 utilized 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. Please refer to Notes 6(8) and 6(11) for the information of impairment assessment impairment.
C. 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 judgements 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. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand, checking accounts and demand deposits Time deposits	December31,2019 December31,2018 �� � �� � �� �� �� � �� �	December31,2018
		�� �

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 expire in 3 months and risks of changes in their values are remote.
157 -

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

Assets	December31,2019	December31,2019	December31,2018
Current items
Financial assets mandatorily measured at fair
value through profit or loss
Forward foreign exchange contracts	�	�� �� �

Non-current items
Financial assets mandatorily measured at fair
value through profit or loss
Listed stocks �� � �� � Unlisted stocks �� �� Convertible bonds �� �� �� � �� �
Liabilities	December31,2019		December31,2018
Current items
Financial liabilities held for trading
Forward foreign exchange contracts �� � �� � Forward exchange swap contracts � �� �� � �� �

The non-hedging derivative financial assets and liabilities transaction information are as follows:

Current items Forward foreign exchange contracts Forward foreign exchange contracts Forward foreign exchange contracts Forward foreign exchange contracts Forward exchange swap contracts Forward foreign exchange contracts Forward foreign exchange contracts Forward foreign exchange contracts Derivative financial assets and liabilities	December 31,2019	December 31,2018	December 31,2018
	Contract Period EUR (sell) �� � 2019/12-2020/3 HKD (buy) �� 2019/12-2020/3 TWD (sell) �� 2019/9-2020/4 JPY (buy) �� 2019/9-2020/4 USD (sell) �� 2019/12-2020/1 JPY (buy) �� 2019/12-2020/1 USD (sell) �� 2019/10-2020/4 RMB (buy) �� 2019/10-2020/4 HKD (sell) �� 2019/11-2020/3 USD (buy) �� 2019/11-2020/3 JPY (sell) �� 2019/11-2020/2 USD (buy) �� 2019/11-2020/2 USD (sell) �� 2019/12-2020/1 TWD (buy) �� 2019/12-2020/1 (Notional Principal) (in thousands) Contract Amount	(Notional Principal) (in thousands) Contract Amount	Contract Period

158 -

The Group entered into forward foreign exchange contracts to hedge exchange rate risk of import and export proceeds in foreign currency. In addition, forward exchange swap contracts are primarily for the requirement of capital management. However, these contracts are not accounted for using hedge accounting.

(3) Financial assets at fair value through other comprehensive income

	December31,2019	December31,2019	December31,2018	December31,2018
Non-current items
Equity instruments
Listed stocks �� � �� � Unlisted stocks �� �� �� � �� �

A. The Group has elected to classify equity instruments that are considered to be strategic investments as financial assets at fair value through other comprehensive income.
B. For information about that the Group recognized other comprehensive income for fair value change for the years ended December 31, 2019 and 2018, please refer to Note 6(21) “Other equity”.

(4) Financial assets at amortized cost

Financial assets at amortized cost
Current items Time deposits with maturity over three months	December31,2019 �� �	December31,2018
		�� �

The Group recognized $404,178 and $200,018 of interest income arising from the financial assets at amortized cost for the years ended December 31, 2019 and 2018, respectively.

(5) Notes receivable and accounts receivable

Notes receivable and accounts receivable
	December31,2019	December31,2018
Notes receivable �� � �� � Accounts receivable �� �� �� �� Less: Allowance for uncollectible accounts �� � �� � �� � �� �
A. The aging analysis of accounts receivable and notes receivable is as follows:
	December31,2019	December31,2018
Not past due �� � �� � Up to 60 days �� �� 61 to 180 days �� �� Over 180 days �� �� �� � �� �

A. The aging analysis of accounts receivable and notes receivable is as follows:

The above aging analysis was based on past due date.

B. As of December 31, 2019 and 2018, accounts receivable and notes receivable were all from contracts with customers. As of January 1, 2018, the balance of receivables from contracts with customers amounted to $43,759,108.
159 -

C. Information relating to credit risk of accounts receivable is provided in Note 12(2). (6) Inventories

nventories
	December31,2019	December31,2018
Raw materials and supplies �� � �� � Work in progress �� �� Finished goods �� �� �� � �� �

For the years ended December 31, 2019 and 2018, the Group recognized cost of goods sold for inventories that have been sold at $248,756,734 and $252,621,898 and recognized net inventory (loss) gain at ($200,395) and $59,340 due to write down (reversal) of cost of scrap inventories to net realizable value, respectively.

(7) Investments accounted for under the equity method

	December31,2019	December31,2018
Ampower Holding Ltd. �� � �� � FI Medical Device Manufacturing Co., Ltd. �� �� Others �� �� �� � �� �

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

below:
					Years endedDecember31,
					2019			2018
Profit for the year from continuing operations �� � �� � Other comprehensive (loss) income - net of tax �� � ��
Total comprehensive income				�	�� �� �
Property, plant and	equipment
				2019
							Transfer, net
				Acquired			exchange
				from business			differences
	At January1		Additions	combinations	Disposals		and others	At December 31
Cost:
Land �� � � � �� � � � � � �� � Buildings �� �� �� �� � �� �� Machinery and equipment �� �� �� �� � �� �� Other equipment �� �� �� �� � �� �� �� �� �� �� � �� ��
Accumulated depreciation
and impairment:
Buildings	�� �	�	�� �� � �� �� �� �
Machinery and equipment	�� �	�	�� �� � �� �� �� �
Other equipment	�� �	�	�� �� � �� �� � �� �
	�� �	�	�� �� � �� �� � �� �
Unfinished construction
and equipment under
acceptance	�� �� �				�	�	�� ��
	�� �							�� �

(8) Property, plant and equipment

160 -

2018

									Transfer, net
									exchange
									differences
			At January1			Additions	Disposals		and others	At December 31
Cost:
Land		�	�� � � � � � � �� �
Buildings		�� �� �� � �� ��
Machinery and equipment		�� �� �� � �� ��
Other equipment			�� �� �� � �� ��
		��			�� �� � �� ��
Accumulated depreciation
and impairment:
Buildings	�� �			�� �			�� �� �� �
Machinery and equipment	�		�� �� � �� �� � �� �
Other equipment	�		�� �� � �� �� � �� �
�� � �� � �� �� � �� � Unfinished construction
and equipment under
acceptance			�� �� �					�	�� ��
		�	�� �� �

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, 2019 and 2018, the prepayments for business facilities which have not yet entered the factory (shown as ‘other non-current assets’) amounted to $1,503,720 and $1,559,446, respectively.

� (9) Leasing arrangements lessee

A. The Group leases various assets including land, office and business vehicles. Rental contracts are typically made for periods of 2 to 50 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.
B. Short-term leases with a lease term of 12 months or less comprise office, dormitory and equipment. Low-value assets comprise computer equipment.
C. The carrying amount of right-of-use assets and the depreciation charge are as follows:

Short-term leases with a lease term of 12 months or Low-value assets comprise computer equipment. The carrying amount of right-of-use assets and the	less comprise office, dormitory and equipment. depreciation charge are as follows:	mitory and equipment. as follows:
Land Buildings (Office) Transportation equipment (Business vehicles)	Year ended December31,2019 December31,2019 Carrying amount Depreciationcharge �� � �� � �� �� �� �� �� � �� �	Year ended December31,2019
		Depreciationcharge

161 -

D. For the year ended December 31, 2019, the additions to right-of-use assets was $25,336.

E. The information on income and expense accounts relating to lease contracts is as follows:

		Year ended
		December 31,2019
Items affecting profit or loss
Interest expense on lease liabilities �� � Expense on variable lease payments �� Expense on short-term lease contracts �� Expense on leases of low-value assets ��

F. For the year ended December 31, 2019, the Group’s total cash outflow for leases was $867,996. (10) Investment property

Investment property
Cost: Land Buildings Accumulated depreciation: Buildings � Cost: Land Buildings Accumulated depreciation: Buildings �		Additions At December31 � � �� � � �� � �� �� �� � �� � �� � 2019 Additions At December31 � � �� � � �� � �� �� �� � �� � �� � 2018
	AtJanuary1 �� � �� �� �� � �� � �
	AtJanuary1 �� � �� �� �� � �� � �

The fair value of the investment property held by the Group as at December 31, 2019 and 2018 was $1,906,827 and $1,660,504, respectively. The amounts mentioned above represent valuation results of comparative method based on market trading information categorized within Level 3 in the fair value hierarchy.

162 -

(11) Intangible assets

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

							2019	2019
									Transfer, net
						Acquired				exchange
					from business					differences
		AtJanuary1		Additions	combinations			Disposals		and others	At December 31
Cost:
Patents and royalty		�� �	� �		�	� � � �� � �� �
Goodwill �� � �� � � �� Others �� �� � �� � �� ��
		��	��		�� �� �				�� ��
Accumulated amortization
and impairment:
Patents and royalty �� � �� � � � � �� � Others �� � �� � � �� �� �� �
	�� �		�	�� �			�� �� �� �
		�� �	��	�� �� � � � �� � �� �

B. Details of amortization of intangible assets are as follows: Transfer, net exchange differences AtJanuary1 Additions Disposals and others At December 31 Cost: Patents and royalty �� � � � � � � � �� � Goodwill �� � � � �� Others �� �� �� � �� �� �� �� �� � �� �� Accumulated amortization and impairment: Patents and royalty �� � �� � � � �� � Others �� � �� � �� �� � �� � �� � �� � �� �� � �� � �� � �� �� � � �� � �� � 2018 2019 2018 Operating costs �� � �� � Operating expenses �� �� �� � �� � Years endedDecember31,			2018
					At December 31

C. The Group 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.
163 -

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 12.51% and 9.08% for the years ended December 31, 2019 and 2018, 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 Group did not recognize impairment loss on goodwill for the years ended December 31, 2019 and 2018, respectively.

(12) Other payables

Other payables
	December31,2019	December31,2018
Other personnel expenses �� � �� � Payable on machinery and equipment �� �� Repairs and maintenance expense payable �� �� Utilities expense payable �� �� Other payables �� �� �� � �� �

(13) Bonds payable

Bonds payable

Less: Discount on bonds payable

December	31,2019
�	��
� �	�� ��

A. The issuance of domestic convertible bonds by the Group’s subsidiary GIO Optoelectronics Corp. (referred herein as “GIO Company”):
The terms of the first domestic secured convertible bonds issued by GIO Company are as follows:
(a) GIO Company issued $100,000, 0% first domestic secured convertible bonds, as approved by the regulatory authority. The bonds mature 3 years from the issue date (October 1, 2018 ~ October 1, 2021) and will be redeemed in cash at face value at the maturity date.
(b) The bondholders have the right to ask for conversion of the bonds into common shares of GIO Company during the period from the date after three months of the bonds issue to 10 days before the maturity date, except for the stop transfer period as specified in the terms of the bonds or the laws/regulations. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.
(c) The conversion price of the bonds is set up based on the pricing model in the terms of the bonds, and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price was $10.7 (in dollars) per share upon issuance.
(d) Under the terms of the bonds, all bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued; all rights and obligations attached to the bonds are also extinguished.
B. Regarding the issuance of convertible bonds, the equity conversion options of GIO company amounting to $4,778 were separated from the liability component and were recognized in ‘capital surplus—share options’ in accordance with IAS 32.
164 -

- (14) Long term borrowings

Long-term borrowings
Type of loans	Period		December31,2019		December31,2018
Syndicated bank loans	��	�		�� �� �
	��
Secured borrowings	��
	��			�� �
Less:
Administrative expenses
charged by syndicated
banks �� � �� � Current portion (includes
administrative expenses)		� �		�� �� � �� �� �
Range of interest rates				��		��

Range of interest rates

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, 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, 2019 and 2018 are in compliance with the covenants on the syndicated loan agreement.
C. For repayment of borrowings from financial institutions and financing mid-term working capital fund, the Board of Directors approved the signing of a syndicated loan with financial institution in the amount of NT$43.75 billion on June 20, 2018.

(15) 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 chose 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 6 months prior to retirement. The Company and its domestic subsidiaries contribute 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 and its domestic subsidiaries would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is insufficient to pay the pension
165 -

calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company and its domestic subsidiaries will make contributions for the deficit by next March.

(b) The amounts recognized in the balance sheet are as follows:

			December	December	31,2019 December31,2018	31,2019 December31,2018	31,2019 December31,2018
Present value of defined benefit obligations �� � �� � Fair value of plan assets �� � �� � Net defined benefit liability �� � �� �
Movements in net defined benefit liabilities			are as follows:
	Present		value of
	defined		benefit		Fair value		Net defined
		obligations		ofplan assets		benefit liability
Year ended December 31, 2019
Balance at January 1 �� � �� � �� � Current service cost �� � �� Interest expense / income �� �� �� �� �� �� Remeasurements:
Return on plan assets
(excluding amounts included in
interest income or expense) � �� �� � Change in demographic
assumptions �� � � �� � Change in financial
assumptions �� � �� Experience adjustments �� � � �� � Benefits paid �� � �� � �
�� �� �� Contribution for the year � �� �� � Balance at December 31 �� � �� � �� �

(c) Movements in net defined benefit liabilities are as follows:
166 -

Year ended December 31, 2018 Balance at January 1 Current service cost Interest expense / income Remeasurements: Experience adjustments Benefits paid � Contribution for the year Balance at December 31	Present value of defined benefit obligations �� � �� �� �� �� �� � �� � �� �	Fair value ofplan assets �� � � �� �� �� �� �� �� � �� �	Net defined benefit liability
			�� � �� �� �� �� � �� �� �� �

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilization plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund” (Article 6: The scope of utilization 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 utilization 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 after being authorized by the Regulator. The Company and domestic subsidiaries have no right to participate in managing and operating that fund and hence the Company and domestic subsidiaries are unable to disclose the classification of plan assets fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2019 and 2018 is given in the Annual Labor Retirement Fund Utilization Report announced by the government.

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

Discount rate Future salary increases	Years endedDecember31,	Years endedDecember31,
	2019 �� ��	2018
		�� ��

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

167 -

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

	Discount rate	Discount rate	Future salaryincreases	Future salaryincreases
	Increase	Decrease	Increase	Decrease
	0.25%	0.25%	0.25%	0.25%
December 31, 2019
Effect on present value of
defined benefit obligation	�� ��	�� �	�� �	�� ��
	Discount rate		Future salaryincreases
	Increase	Decrease	Increase	Decrease
	0.25%	0.25%	0.25%	0.25%
December 31, 2018
Effect on present value of
defined benefit obligation	�� ��	�� �	�� �	�� ��
The sensitivity analysis above is 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.	The methods and	types of assumptions used in preparing the
sensitivity analysis did not change compared to		the previous	period.

  - (f) As of December 31, 2019, the weighted average duration of the retirement plan is 14 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 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 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.
C. The pension costs under the defined contribution pension plans of the Group for the years ended December 31, 2019 and 2018 were $1,815,665 and $1,929,402, respectively.
(16) Share-based payment
A. For the year ended December 31, 2019, the Group’s subsidiary GIO Optoelectronics Corp.’s (referred herein as “GIO Company”) share-based payment arrangements were as follows:
168 -

Type of arrangement	Grantdate	Quantity granted (in thousand units)	Contract period (inyears)	Vesting conditions Note
Employee stock options	2017.10.1	��	�

Note: The employees’ stock options is based on the issue date. According to the date of issuance (2 to 3 years), the employees can exercise their employee stock options in batch at the ratio of 60% and 40%. Stock options which are not exercised before the expiry date are permanently forfeited.

B. Details of the share-based payment arrangements are as follows:

The expiry date and exercise price of stock options outstanding at balance sheet date are as follows: Weighted-average Quantity exercise price (in thousand units) (indollars) Options outstanding at the beginning of the year �� �� � Options forfeited �� � �� Options outstanding at the end of the year �� �� � Options exercisable at the end of the year � � � 2019 Quantity Exercise price Issue date approved Expiry date (in thousand units) (indollars) 2017.10.1 2022.9.30 �� December31,2019		2019	2019
			Weighted-average exercise price (indollars)

C. The expiry date and exercise price of stock options outstanding at balance sheet date are as follows:
D. The fair value of stock options granted is measured using the Black-Scholes option-pricing model. Relevant information is as follows:

Type of arrangement	Grantdate	Price (indollars)	Exercise price (indollars)	Expected volatility (%)	Expected duration (inyears)	Expected dividends
Employee stock options	2017.10.1	��	�� �	�� ��	��

E. For the year ended December 31, 2019, the Group recognized expense on share-based payment transaction (equity settlement) in the amount of $28.

(17) Provisions-current

At January 1, 2019 Additions during the year Used during the year � At December 31, 2019	Warranty �� � �� �� � �� �	Litigation and others �� � � �� �� �	Total �� � �� �� � �� �

169 -

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).

(18) Share capital

A. As of December 31, 2019, the Company’s authorized and outstanding capital were $105,000,000 and $97,110,720, with a par value of $10 (in dollars) per share, respectively. All proceeds from shares issued have been collected.

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

		2019	2018
		Number of ordinary	Number of ordinary
	shares (in thousand units)		shares (in thousand units)
At January 1 �� �� Shares retired �� � � At December 31 �� ��

B. Treasury shares
(a) Reason for share reacquisition and movements in the number of the Company’s treasury shares are as follows:

shares are as follows:
At January 1 Retirement for the year Cancellation for the year � At December 31	Quantity (in thousand units) Bookvalue � � � �� �� �� �� � �� �� � 2019
	Quantity (in thousand units) � �� �� � ��

The Company repurchased shares in order to transfer to employees and maintain the Company’s credit rating and shareholders’ equity. In November 2019, the Company cancelled the treasury shares which used to maintain the Company’s credit rating and shareholders’ equity in accordance with Securities and Exchange Act.

(b) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital surplus.
(c) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should not be pledged as collateral and the shareholder's rights should not be enjoyed before it is reissued.
(d) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should be reissued to the
170 -

employees within five years from the reacquisition date and shares not reissued within the five-year period are to be cancelled.

(19) 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 Act requires that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the paidin capital each year. Accumulated deficit shall first be covered by retained earnings before the capital reserve can be used to cover the accumulated deficit.

2019

						2019
									Share of
									profit (loss)
						Changes			of associates
			Treasury		in ownership				accounted
		Share	share		interests in				for under
		premium	transactions		subsidiaries			equitymethod			Total
At January 1	�� �		�	� � � �� � �� �
Cancellation of treasury shares �� � �� � � �� Recognition of changes in
ownership interests in
subsidiaries � � �� � �� Recognition of change in equity
of associates in proportion
to the Group's ownership		�		�		�	�		�� �� �
Others		�� �				�				� ��
At December 31	�� �		�� �		�	�� �� � �� �
						2018
						Share of profit
						of associates
					accounted for under
		Share premium				equitymethod					Total
At January 1 �� � �� � �� � Recognition of change in equity
of associates in proportion
to the Group's ownership			�				�� ��
At December 31	�	�� �� � �� �

(20) Retained earnings

A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be offset against prior years’ operating losses, then set aside 10% of the remaining amount as legal reserve (until the legal reserve equals the paid-in capital). Preferred dividend shall be distributed

171 -

after setting aside or reversing a special reserve according to related regulations. The appropriation of the remaining amount along with the unappropriated earnings from previous years shall be proposed by the Board of Directors and resolved by the shareholders. The Company is in an emerging industry which is growing rapidly, and has a capital intensive business. The Company is at the stage of stable growth. In line with the Company’s long-term financial plan in the future, investment environment and business competition situation, the appropriation of dividends shall be proposed by the Board of Directors and resolved by the shareholders, taking into account the future capital expenditure budget and capital requirement of the Company. However, the stock dividends distributed to shareholders shall not exceed twothirds of distributable dividends in current period.

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 appropriations of 2018 and 2017 net income which was approved at the stockholders’ meeting in June 2019 and 2018, respectively, are as follows:

Years endedDecember31,	Years endedDecember31,	Years endedDecember31,
Dividends per Dividends per Amount share (indollars) Amount share (indollars) �� � �� � �� �� � �� �� � �� �� � �� � �� � 2018 2017	2017
		Dividends per share (indollars)
		�� �

D. For the information relating to employees’ compensation and directors’ remuneration, please refer to Note 6(27).
172 -

(21) Other equity items

Other equity items
Financial assets at fair Currency value through other translation comprehensive income Total At January 1 �� �� �� � �� �� Revaluation - gross � �� �� Currency translation differences �� � � �� � Share of other comprehensive loss of associates �� � � �� � Effect of income tax � �� �� At December 31 �� �� �� � �� �� 2019 Financial assets Available- at fair value through Currency for-sale other comprehensive translation investments income Total At January 1 �� �� �� � � � �� �� Effect of modified retrospectvie approach under IFRS 9 � �� � �� � Balance after retropective adjustment �� � � �� �� � Revaluation - gross � � �� � �� � Currency translation differences �� � � � �� � Share of other comprehensive income of associates �� � � �� At December 31 �� �� � � �� � �� �� 2018	2019
	Financial assets at fair value through other comprehensive income �� � �� �� � � � � �� �� � �� 2018	Total
		�� �� �� �� �� ��
		Total

(22) Operating income

Operating income
TFT-LCD products	Years endedDecember31,
	2019 �� �	2018
		�� �

The Group derives revenue from the transfer of goods at a point in time.

173 -

(23) Other income

Other income
	Years ended	December31,
	2019		2018
Interest income
Interest income from bank deposits �� � �� � Interest income from financial assets at
amortized cost	�� ��
�� �� Grant revenue �� �� Service revenue �� �� Rental revenue �� �� Dividend income �� �� Other income �� �� �� � �� �

(24) Other gains and losses

Other gains and losses Rental revenue Dividend income Other income		�� �� �� ��	�� �� �� �� �	�� �� �� �� �
		Years ended	December31,
		2019		2018
Net gain (loss) on financial assets and	�	�� �� ��
liabilities at fair value through profit or loss
Net currency exchange (loss) gain �� � �� Gain on disposal of investments �� �� Loss on disposal of property, plant and
equipment �� � �� � Other losses �� � �� � �� � �� ��

(25) Finance costs

Interest expense: Bank borrowings Others

	Years ended	December31,
	2019	2018
�	�� �� �
�	�� �� �� �� �

174 -

(26) Expenses by nature

Expenses by nature
		Years ended	December 31,
		2019		2018
Employee benefit expense:
Salaries and other short-term employee	�	�� �� �
benefits
Employee stock options		�� �
Post-employment benefits �� �� Depreciation �� �� Amortization �� �� �� � �� �

(27) Employees’ compensation and directors’ remuneration

A. According to the Articles of Incorporation of the Company, a ratio of profit of the current year distributable, after covering accumulated losses, shall be distributed as employees' compensation and directors’ remuneration. The ratio shall not be lower than 5% for employees’ compensation and shall not be higher than 0.1% for directors’ remuneration.
B. For the years ended December 31, 2019 and 2018, the amount of employees’ compensation was accrued at $0 and $294,289, respectively; while directors’ remuneration was accrued at $0 and $4,528, respectively. The aforementioned amounts were recognized in expenses.
For the year ended December 31, 2019, the Company incurred net loss and had an accumulated deficit. Thus, there was no distribution of employees' compensation and directors’ remuneration as resolved by the Board of Directors on February 13, 2020.
The employees’ compensation and directors’ remuneration for the year ended December 31, 2018 were $294,289 and $4,528, respectively, and were estimated based on the profit of current year. The employees’ compensation will be distributed in the form of cash. The Board of Directors resolved to distribute employees’ compensation and directors’ remuneration in the amount of $294,289 and $4,528, respectively, in the form of cash. The actual distributed amount were in consistent with the amounts recognized as expense in 2018.
Information about employees’ compensation and directors’ 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.
175 -

(28) Income tax

A. Income tax expense

(a) Components of income tax expense:

e tax ome tax expense Components of income tax expense:
			Years ended	December31,
			2019		2018
Current tax:
Current tax on profit for the year �� � �� � Tax on undistributed surplus earnings � �� Prior year income tax (over) under
estimation	�		�� ��
Total current tax			�� ��
Deferred tax:
Origination and reversal of temporary
differences �� �� Loss carryforward �� �� � Impact of change in tax rate � �� �
Income tax expense		�	�� �� �

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

ollows:
		Years ended	December31,
		2019	2018
Changes in fair value of financial	��	�� � �
assets at fair value through other
comprehensive income
Remeasurements of defined benefit
obligations	� ��	�� �� � �� �� ��

176 -

B. Reconciliation between income tax expense and accounting profit:

							Years ended	Years ended	Years ended	December31,	December31,	December31,	December31,
							2019				2018
Tax calculated based on profit before			��				�� �� �
tax and statutory tax rate
Effects from items disallowed by tax
regulation �� � �� � Prior year income tax (over) under estimation �� � �� Effect from changes in tax regulation � �� � Additional 10% tax on undistributed
earnings � �� Separate taxation �� �� Change in assessment of realization of
deferred tax assets							�� �� �
Tax expense			�				�� �� �
Amounts of deferred tax assets or liabilities as a				result of temporary						differences and loss
carryforward are as follows:
							2019
								Recognized
						Recognized			in other
							in profit	comprehensive
			January1				or loss		income			December 31
Deferred tax assets:
-Temporary differences:
Sales returns and discount provisions		�� �			�		�� � � �� �
Accrued royalties and warranty provisions	�� �� �												��
Unrealized exchange loss		�� �� �								�			�
Unrealized loss on financial instruments		�� �� �� ��
Prior year expense carryforward			�� �� � �										��
Others		�� �� �						�� ��
Loss carryforward	�� �� � �												��
		�� �				�	�� �� � �� �
- Deferred tax liabilities:
Unrealized exchange gain		� �		��			�� � � �� ��
Amortization charges on goodwill	�		�� �� � �								�		��
Others	�		�� �� � �								�		��
	��		�� �� �� � � �� ��
		�� �		��			�� �� � �� �

C. Amounts of deferred tax assets or liabilities as a result of temporary differences and loss carryforward are as follows:
177 -

2018

						Recognized	Recognized
				Recognized			in other
					in profit	comprehensive
			January1		or loss		income	December 31
Deferred tax assets:
-Temporary differences:
Sales returns and discount provisions		�	�� �� � � � �� �
Accrued royalties and warranty provisions	�� �� �								��
Unrealized exchange loss		�� �							��
Unrealized loss on financial instruments		�� �� �							��
Prior year expense carryforward			�� �� �						��
Others		�� �� �� ��
Loss carryforward	�� �� �								��
		�� �		�	�� �� � �� �
- Deferred tax liabilities:
Unrealized exchange (gain) loss	��		�� �� � � � � �
Amortization charges on goodwill	�		�� �� � �					�	��
Others	�		�� �� �					�	��
	��		�� �� �� � � �� ��
		�� �		�	�� �� � �� �

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

December 31, 2019

Year incurred 2011 2012 2016 2019	Amount filed / assessed Assessed Assessed Assessed Estimated	Unrecognized Unused deferred Usable amount tax assets untilyear �� � �� � 2021 �� �� 2022 �� �� 2026 �� �� 2029 �� � �� �	Usable untilyear

December 31, 2018

Year incurred 2011 2012 2016	Amount filed / assessed Assessed Assessed Assessed	Unrecognized Unused deferred Usable amount tax assets untilyear �� � �� � 2021 �� �� 2022 �� �� 2026 �� � �� �	Usable untilyear

178 -
E. The amounts of deductible temporary differences that were not recognized as deferred tax assets are as follows:

are as follows:
Deductible temporary differences	December31,2019 �� �	December31,2018
		�� �

F. The Company has not recognized taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2019 and 2018, the amounts of temporary differences unrecognized as deferred tax liabilities were $30,463,120 and $30,554,931, respectively.
G. The Company’s income tax returns through 2016 have been assessed and approved by the Tax Authority.
H. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China on February 7, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate.

(29) (Loss) earnings per share

change in income tax rate. (Loss) earnings per share
		Years ended	December31,
		2019		2018
Basic (loss) earnings per share
(Loss) profit attributable to ordinary
shareholders of the parent �� �� �� � Weighted average number of ordinary
shares outstanding (shares in thousands)		�� ��
Basic (loss) earnings per share (in dollars)	��	�� �� �
Diluted (loss) earnings per share
(Loss) 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’ compensation		� �� �� ��
Diluted (loss) earnings per share (in dollars)	��	�� �� �

(30) Business combinations

A. On September 18, 2019, the Group acquired 39 % of the share capital of GIO Optoelectronics Corp. for $192,405, which the ownership change from 24% to 63%, and obtained control over GIO Optoelectronics Corp.. The main business of GIO Optoelectronics Corp. is LCD glass substrate processing, LED lighting and its control power supply. As a result of the acquisition, the Group is expected to increase economic scale and strategic synergy.
179 -
B. The reference date of the consolidation was set on September 18, 2019. Under the principles of IFRS 3, ‘Business Combinations’, details of the acquisition are as follows:

	GIO	GIO	Optoelectronics Corp.
Purchase consideration - cash paid		�� �
Fair value of equity interest in GIO Optoelectronics Corp. held
before the business combination �� Fair value of the non-controlling interest �� �� Fair value of the identifiable assets acquired and liabilities
Cash �� Notes and accounts receivable and other current assets �� Property, plant and equipment �� Other non-current assets �� Notes and accounts payable and other current liabilities �� � Other non-current liabilities �� � Total identifiable net assets �� Goodwill �� �

C. The Group recognized a gain of $10,915 as a result of measuring at fair value its 24% equity interest in GIO Optoelectronics Corp. held before the business combination.
D. The operating revenue included in the consolidated statement of comprehensive income since September 18, 2019 contributed by GIO Optoelectronics Corp. was $11,201. GIO Optoelectronics Corp. also contributed profit before income tax of $7,805 over the same period. Had GIO Optoelectronics Corp. been consolidated from January 1, 2019, the consolidated statement of comprehensive income would show operating revenue of $252,055,779 and profit before income tax of $16,529,694.
E. As of December 31, 2019, the allocation of the purchase price of the acquisition is still in process, and the Company has assessed the fair value of the identifiable assets.
(31) Supplemental cash flow information
A. Investing activities with partial cash payments:

		Years ended	December31,
		2019	2018
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	�	�� �� �

180 -

B. Net cash acquired from acquisition of subsidiaries

Total consideration Less: Cash acquired from acquisition of subsidiaries Net cash acquired from acquisition of subsidiaries

	Year ended
	December31,2019
�	��
�	��
��	��

(32) Changes in liabilities from financing activities

For the years ended December 31, 2019 and 2018, all changes in liabilities from financing activities are changes in cash flow from financing activities. Please refer to consolidated statements of cash flows.

7. RELATED PARTY TRANSACTIONS

(1) Names and relationship of related parties

flows. LATED PARTY TRANSACTIONS Names and relationship of related parties
Names of related parties	Relationship with the Group
Hon Hai Precision Industry Co., Ltd. and its subsidiaries CHENG MEI MATERIALS TECHNOLOGY CORPORATION and its subsidiaries Fu Lian Net International (Hong Kong) Limited Pan Zhou Fu Gui Kang Precision Electronic Co. Ltd. Chongqing Fuyusheng Electronics Technology Co., Ltd. FI Medical Device Manufacturing Co., Ltd. GIO Optoelectronics Corp. (Note)	Other related party Other related party Other related party Other related party Other related party Associate Associate

(Note) GIO Optoelectronics Corp. was included in the consolidated financial statements in the third quarter of 2019. Please refer to Note 4(3).

(2) Significant related party transactions

A. Operating revenue

quarter of 2019. Please refer to Note 4(3). nificant related party transactions Operating revenue
Sales of goods: Other related parties Associates	Years endedDecember31,
	2019 �� � �� �� �	2018
		�� � ��
		�� �

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

181 -

B. Purchases of goods

Purchases of goods
Purchases of goods: Other related parties Associates	Years endedDecember31,
	2019 �� � �� �� �	2018
		�� � ��
		�� �

The payment term was 30~120 days to related parties after delivery, and 30~180 days to nonrelated 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. Receivables from related parties

parties. .Receivables from related parties
	December31,2019	December31,2018
Accounts receivable:
Other related parties �� � �� � Associates �� �� �� �� Less: Transferred other receivables � �� � �� � �� �
(a) The receivables from related parties arise mainly from sales transactions. The receivables are
due 30~90 days after the date of sale.	The receivables are unsecured in nature and bear no
interest.

(b) The abovementioned receivables from related parties that exceed normal granting periods were transferred under ‘Other receivables – related parties’.

D. Other receivables from related parties

Other receivables from related parties
Other receivables: Accounts receivable transferred to other receivables - Other related parties - Fu Lian Net International (Hong Kong) Limited - Pan Zhou Fu Gui Kang Precision Electronic Co. Ltd. - Chongqing Fuyusheng Electronics Technology Co., Ltd. - Others Other receivables - Other related parties - Associates	December31,2019 � � � � � �� �� �� �	December31,2018
		�� � �� �� �� �� ��
		�� �

182 -

E. Payables to related parties

Payables to related parties
Accounts payable: Other related parties Associates	December31,2019 �� � �� �� �	December31,2018
		�� � �� �� �

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:

erty transactions hase of property Acquisition of property, plant and equipment:
Period-end balances arising from purchases of Other related parties Associates Other related parties	Years endedDecember31,
	property (shown as ‘Other payables’): 2019 2018 �� � �� � �� �� �� � �� � December31,2019 December31,2018 �� � �� �	2018
		�� �

(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:

		Year	ended		Year ended	Year ended
		December31,2019			December31,	2018
		Disposal	(Loss) gain		Disposal	Gain	on
		proceeds	ondisposal		proceeds	disposal
Other related parties �� � �� �� �� � �� � Associates �� �� � �
	�� �		�� ��	�	�� �� �
Period-end balances arising from sale of property (shown as				‘other receivables’)
			December31,2019 December31,				2018
Other related parties			�	�� �� �

(b) Period-end balances arising from sale of property (shown as ‘other receivables’)

(3) Key management compensation

Key management compensation Other related parties	December31,2019 December31,2018 �� � �� �	December31,2019 December31,2018 �� � �� �
Salaries and other short-term employee benefits Post-employment benefits	Years endedDecember31,
	2019 �� � �� �� �	2018
		�� � �� �� �

183 -

8. PLEDGED ASSETS

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

Pledgedasset Other current assets -Demand deposits -Time deposits Property, plant and equipment Intangible assets Other non-current assets -Time deposits -Refundable deposits	Book	December31,2018 Purpose � � Long-term loans �� Tariff and credit card guarantee �� Long-term loans �� Long-term loans � Tariff guarantee �� Guarantee for litigation �� � value	Purpose
	December31,2019 �� � � �� �� �� �� �� �

9. 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. In December 2009, the Company reached a plea agreement with the Department of Justice of the U.S. and paid off the fines. Later, Brazil government initiated an investigation case against the Company. In March 2019, the Company received a sanction from the Brazil Administrative Council for Economic Defense - CADE and paid all fines on May 8, 2019 also obtained the confirmation from the representative lawyer of CADE that the Company complied with the sanction. As for civil lawsuits filed by some state governments in the U.S., downstream panel makers and customers, the Company had reached settlement agreement individually. The Company’s subsidiary in the U.S. received a civil complaint from the government of Puerto Rico in September 2018, claiming that the Company, together with other defendants of Taiwan, Japan and South Korea panel factories, had unjustified enrichment from the TFT-LCD pricing collaborations in 2006 and requested monetary compensation. The U.S. subsidiary of the company has appointed a lawyer to handle the lawsuit.
B. Eidos Displays, LLC and Eidos III, LLC (“Eidos”) filed a lawsuit against the Company and American subsidiary with the United States District Court for the Eastern District of Texas on April 25, 2011, alleging infringement of its patent. In December 2013, the magistrate judge granted summary judgment that the Eidos patent is invalid. In January 2014, the presiding judge confirmed the summary judgment.
184 -

C. On July 10, 2018, Vista Peak Ventures, LLC (VPV) filed four complaints against the Company in the United States District Court for the Eastern District of Texas, alleging the infringement of several of its patents. The Company reached settlements with VPV for the aforementioned lawsuits and acquired relevant patent portfolio licensing in the first quarter of 2019. VPV also dismissed the action and the lawsuits have no effect on the Company’s financial position and operations.
D. On March 23, 2018, Chongqing HKC Optoelectronics Technology Co., Ltd. (HFC) filed five complaints against the subsidiaries of the Company, Ningbo Innolux Optoelectronics Ltd., Foshan Innolux Optoelectronics Ltd. as well as their customers and terminal distributors of TV products with the Fifth Intermediate People’s Court in Chongqing, alleging the infringement of its patents. Ningbo Innolux Optoelectronics Ltd. submitted a request of patent invalidity to the National Intellectual Property Administration, PRC upon the patents asserted in the complaints. As of May 21, 2019, all five patents asserted by HKC were declared invalid by the National Intellectual Property Administration, PRC. The five lawsuits that were previously disclosed were allegedly withdrawn by the Chongqing court on June 18, 2019. Thus, the lawsuits have no effect on the Company’s financial position and results of operations.
E. The Company had assessed and recognized related losses and liabilities as shown in ‘provisionscurrent’ for the aforementioned investigation relating to anti-trust laws and patent litigation.

(2) Commitments

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

December 31, 2019 December 31, 2018 Property, plant and equipment � � �� B. Outstanding letters of credit The outstanding letters of credit for the purchase of property, plant and equipment are as follows: December 31, 2019 December 31, 2018 Outstanding letters of credit � � �� 10. SIGNIFICANT DISASTER LOSS

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

None.

185 -

11. SUBSEQUENT EVENTS AFTER THE BALANCE SHEET DATE

(1) On December 17, 2019, the Board of Directors of the Company resolved to issue USD 300 million, 0% the first unsecured Euro-convertible bonds due in 5 years on January 22, 2020, which was priced after approved by the regulatory authority on January 15, 2020.
(2) As of February 13, 2020, the Company adopt the response measures for the outbreak of coronavirus in the beginning of 2020. The subsidiaries in China are resuming work gradually or applying for resumption in February. The operation of the Company may be affected after liaised with customers and suppliers for delivery rearrangements, however, the actual degree of the impact will depend on the subsequent situation of coronavirus and the work resumption date.

12. 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. Financial instruments by category

For information of the Group’s financial assets (financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income, financial assets at amortized cost, cash and cash equivalents, accounts receivable (including related parties) and other receivables) and financial liability (financial liabilities at fair value through profit or loss, accounts payable (including related parties), other payables, lease liability, corporate bonds payable and long-term borrowings (including current portion)), please refer to Note 6 and consolidated balance sheets.

B. Risk management policies
(a) The Company’s and its subsidiaries’ 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 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)).
(b) Risk management is carried out by the treasury department under policies approved by the board of directors. The Company’s and its subsidiaries’ treasury identifies, evaluates and hedges financial risks in close cooperation with the Company’s and its subsidiaries’ 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.
186 -
C. Significant financial risks and degrees of financial risks
(a) Market risk

Foreign exchange risk

i. The Group operates internationally and is exposed to foreign exchange risk arising from the transactions of the Company and its subsidiaries used in various functional currency, 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.
ii. 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.
iii. 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 $241,844 and $412,558 for the years ended December 31, 2019 and 2018, 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:

affected by the exchange rate fluctuations is as follows:	lows:	lows:
Foreign Foreign Currency Exchange Currency Exchange Amount Rate Book Value Amount Rate Book Value (In Thousands) (Note) (NTD) (In Thousands) (Note) (NTD) Financial assets Monetary items USD �� � �� �� � �� � �� �� � JPY �� �� �� �� �� �� HKD �� �� �� �� �� �� EUR �� �� �� �� �� �� Non-monetary items USD �� � �� �� � �� � �� �� � HKD �� �� �� �� �� �� JPY �� �� �� �� �� �� USD �� � �� �� � �� � �� �� � JPY �� �� �� �� �� �� EUR �� �� �� �� �� �� December 31,2019 December 31,2018 Financial liabilities Monetary items	December 31,2018
		Book Value (NTD)

187 -
Note: Exchange rate represents the amount of NT dollars for which one foreign currency could be exchanged.
iv.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, 2019 and 2018 amounted to ($77,541) and $1,320,427, respectively.

Price risk

i. The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated balance sheet as financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.
ii. 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, 2019 and 2018 would have increased/decreased by $602,247 and $312,862, respectively; other comprehensive gains and losses would have increased/decreased by $853,697 and $766,875, respectively.

Cash flow and fair value interest rate risk

i. The Group’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Group to cash flow interest rate risk. During the years ended December 31, 2019 and 2018, the Group’s borrowings at variable rate were denominated in the NTD.
ii. The Group analyses 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.
iii. If the borrowing interest rate of NTD had increased/decreased by 0.25% with all other variables held constant, profit, net of tax for the years ended December 31, 2019 and 2018 would have decreased/increased by $89,626 and $128,600, respectively. The main factor is that changes in interest expense result in floating-rate borrowings.
(b) Credit risk
i. 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. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms, and the contract cash flows. As at December 31, 2019 and 2018, without taking into account
188 -

any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at fair value through other comprehensive income, financial assets at amortized cost and accounts receivable held by the Group was its carrying amount.

ii. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the managements. The utilization of credit limits is regularly monitored.
iii. The Group adopts the following assumption under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition: If the contract payments are past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.
iv. The Group adopts the assumptions under IFRS 9, the default occurs when the contract payments are past due over 90 days.
v. The Group classifies customer’s accounts receivable in accordance with credit rating of customer, credit risk on trade and customer types. The Group applies the simplified approach using provision matrix to estimate expected credit loss under the provision matrix basis.
vi. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:
(i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;
(ii) Default or delinquency in interest or principal repayments;
(iii) Adverse changes in national or regional economic conditions that are expected to cause a default.
vii. The Group uses the forecastability to adjust historical and timely information to assess the default possibility of accounts receivable.
According to abovementioned consideration and information, the Group does not expect any significant default possibility of accounts receivable.
viii. Movements in relation to the Group applying the simplified approach to provide loss allowance for accounts receivable are as follows:
189 -

At January 1 Reversal � At December 31 At January 1_IAS 39 Adjustments under new standards At January 1_IAS 9 Provision Write-offs � At December 31	2019 Accountsreceivable �� � �� �� � 2018 Accountsreceivable �� � � �� � �� �� �� �

ix. The Group did not recognize significant impairment provision in accordance with 12 months expected credit losses, because the Group’s financial assets/loans to others and receivables at amortized cost all with low credit risk.
(c) Liquidity risk
i. Group treasury monitors rolling forecasts of the Company’s and its subsidiaries’ liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities (Note 6(13)) 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 Company’s and its subsidiaries’ debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and external regulatory or legal requirements.
ii. Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Group’s 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.
iii. 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 nonderivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.
190 -

Non-derivative financial liabilities

		Less than	Between 1		Between 3		Over
December31,2019		1year	and 3 years	and 5 years			5 years	Total
Lease liability	�	�� �� �		�� �		�� �		�� �
Bonds payable � �� � � �� Long-term
borrowings
(including current
portion)	�� �� �� � ��
		Less than	Between 1		Between 3		Over
December31,2018		1year	and 3 years	and 5 years			5 years	Total
Long-term	�� �		�� �	�	� � � �� �
borrowings
(including current
portion)

Except for the above, the non-derivative and derivative financial liabilities of the Group are all due within one year.

(3) Fair value estimation

A. 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 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.
B. Fair value information of investment property at cost is provided in Note 6(10).
C. Financial instruments not measured at fair value
The carrying amounts of cash and cash equivalents, accounts receivable, other receivables, financial assets at amortized cost, accounts payable, other payables, lease liability, corporate bonds payable and long-term borrowings (including current portion) are approximate to their fair values.
D. 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 is as follows: (a) The related information of natures of the assets and liabilities is as follows:
191 -

December 31,2019		Level 1		Level 2		Level 3		Total
Assets
Recurring fair value measurements
Financial assets at fair value
through profit or loss
Equity securities	�	�� � � �� �					�� �
Forward exchange contracts � �� � �� Convertible bonds � � �� �� Financial assets at fair value
through other comprehensive
income
Equity securities	�� � �� ��
	�� �		�� �		�� �		�� �
Liabilities
Recurring fair value measurements
Financial liabilities at fair value
through profit or loss
Forward exchange contracts	�	� �� � � � �� �
December 31,2018		Level 1		Level 2		Level 3		Total
Assets
Recurring fair value measurements
Financial assets at fair value
through profit or loss
Equity securities	�� �		�	� �� �			�� �
Forward exchange contracts � �� � �� Convertible bonds � � �� �� Financial assets at fair value
through other comprehensive
income
Equity securities	�� �				�� ��
	�� �		�	�� �� �			�� �
Liabilities
Recurring fair value measurements
Financial liabilities at fair value
through profit or loss
Forward exchange contracts � � �� � � � �� � Forward exchange swap contracts � �� � �� � � �� � � � �� �

(b) The methods and assumptions the Group used to measure fair value are as follows:
i. 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 Market quoted price Closing price Last transaction price Weighted average quoted price

ii. 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
192 -

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.

iii. When assessing non-standard and low-complexity financial instruments, for example, foreign exchange swap contracts, 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.
iv. 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 and foreign exchange swap contracts are usually valued based on the current forward exchange rate.
v. The output of valuation model is an estimated value and the valuation technique may not be able to capture 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.
vi. 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, 2019 and 2018, there was no transfer between Level 1 and Level 2.
F. The following table presents the changes in Level 3 instruments for the years ended December 31, 2019 and 2018:
193 -

					2019
		Equity securities		Hybridinstrument		Total
At January 1 �� � �� � �� � Gains and losses recognized
in profit or loss �� �� � �� Gains and losses recognized
in other comprehensive income �� � � �� � Acquired in the year �� � �� Disposed in the year �� � � �� � Proceeds from capital reduction �� � � �� � Transfers to Level 3 �� � �� Effect on exchange rate changes �� � �� � �� �
At December 31	�		�� �� � �� �
					2019
		Equity securities		Hybridinstrument		Total
At January 1 �� � � � �� � Gains and losses recognized in
profit or loss �� � �� �� � Gains and losses recognized in
other comprehensive income �� � � �� � Acquired in the year �� �� �� Effect on exchange rate changes �� �� � ��
At December 31	�		�� �� � �� �

G. Because TPV Technology Limited was delisted since November 2019 due to its privatization and there is insufficient observable market information, therefore, the Company transferred the fair value from Level 1 to Level 3 at the end of the 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.

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:
194 -

Non-derivative equity instrument: Unlisted shares Venture capital shares Private equity fund investment Hybrid instrument: Convertible bond Non-derivative equity instrument: Unlisted shares Venture capital shares Private equity fund investment Hybrid instrument: Convertible bond	Fair value at December 31,2019	Valuation technique	Significant unobservableinput	Range (weighted average)	Relationship of inputstofairvalue The higher the multiple, the higher the fair value The higher the discount for lack of marketability, the lower the fair value Not applicable The higher the volatility, the higher the fair value; the higher the discount rate, the lower the fair value Relationship of inputstofairvalue The higher the multiple, the higher the fair value The higher the discount for lack of marketability, the lower the fair value Not applicable The higher the volatility, the higher the fair value; the higher the discount rate, the lower the fair value
			Price to earnings ratio multiple, price to sales ratio multiple, price to book ratio multiple Discount for lack of marketability Not applicable Volatility and Discount rate Significant unobservableinput Price to earnings ratio multiple, price to sales ratio multiple, price to book ratio multiple Discount for lack of marketability Not applicable Volatility and Discount rate	�� �� �� �� �� Not applicable �� �� �� Range (weighted average) �� �� �� �� �� Not applicable �� �� ��

J. The Group has carefully assessed the valuation models and assumptions used to measure fair value. However, use of different valuation models or assumptions may result in different
195 -

measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorized within Level 3 if the inputs used to valuation models have changed:

December 31, 2019

		December 31,2019	31,2019	31,2019
Financial assets	Input	Favourable Unfavourable Favourable Unfavourable Change change change change change �� �� �� �� �� �� �� �� � � Favourable Unfavourable Favourable Unfavourable Change change change change change �� � �� � �� �� �� � � � December31,2018 Recognized in other Recognizedinprofitor loss comprehensiveincome Recognized in other Recognizedinprofitor loss comprehensiveincome	Recognized in other comprehensiveincome
				Unfavourable change
Equity instrument Hybrid instrument Financial assets	�� �� Input
Equity instrument Hybrid instrument	�� ��

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: Please refer to Table 1.
B. Provision of endorsements and guarantees to others: None.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to Table 2.
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 3.
H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to Table 4.
I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Note 6(2)
J. Significant inter-company transactions during the reporting period: Please refer to Table 5.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to Table 6.

196 -

(3) Information on investments in Mainland China

A. Basic information: Please refer to Table 7.
B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to Table 1, 3, 4 and 5.

14. 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 Group met the criteria for combining the segment information of big size and small-medium size TFT LCD departments, the Group disclosed only one reportable operating segment for all TFT LCD products.

The Group’s operating segment information was prepared in accordance with the Group’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:

is as follows:
Segment revenue Segment (loss) income � Depreciation and amortization Capital expenditure-property, plant and equipment Segment assets	Years endedDecember31,
	2019 TFT LCD �� � �� � �� � �� � �� �	2018
		TFT LCD
		�� �
		�� �
		�� �
		�� �
		�� �

(3) Reconciliation for segment income

In current year, the revenue and income or loss before tax of reportable operating segment are consistent with those of continuing operations.

(4) Information on products

Revenue from external customers is mainly from sale of TFT-LCD products, the sales amount is in agreement with operating revenue.

197 -

(5) Geographical information

Geographical information for the years ended December 31, 2019 and 2018 is as follows:

Years ended December 31,

		2019	2019		2018	2018
		Revenue	Non-current assets		Revenue	Non-current assets
Taiwan	�	�� �� �		�	�� �� �
Hong Kong		�� �			�� �
China �� �� �� �� US �� �� �� �� Singapore �� � �� �
Europe �� �� �� �� Others �� �� �� ��
Total	�� �		�� �	�� �		�� �

(6) Major customer information

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, 2018 are set forth below:

A	YearendedDecember31,2018	YearendedDecember31,2018
	Saleamount �� �	Percentage ofsales
		��

There are no 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, 2019.

198 -

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211 -

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215 -

216 -

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217 -

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Innolux Corporation:

Opinion

We have audited the accompanying parent company only balance sheets of Innolux Corporation (the “Company”) as at December 31, 2019 and 2018, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as at December 31, 2019 and 2018, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the parent company only financial statements of the current period. These matters were addressed in the context of our audit of the parent company only financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

218 -

The key audit matters in relation to the financial statements for the year ended December 31, 2019 are outlined as follows:

Inventory valuation

Description

The industry is characterized by the significant fluctuations closely in connection with the economic environment. As the technology evolves rapidly, the Company’s existing products may become obsolete when the customers demand for new products or the Company fails to compete with the evolutionary production approach. The Company evaluates the inventory by taking into account of allowance, obsolescence or trivial sales amount and the cost has been written down to the net realizable value. The abovementioned allowance for inventory valuation losses mainly arise from the excess of the cost of inventory over the net realizable value of inventory. For details of inventory, please refer to Note 6(6). There is a risk of the excess of the cost of inventory over the net realizable value of inventory as a result of that the amounts of inventories are material and the sales of related products may have significant fluctuations; we consider inventory valuation a key audit matter.

How our audit addressed the matter

Valuation and impairment of goodwill and property, plant and equipment

Description

For details of the impairment valuation of goodwill and property, plant and equipment, please refer to Notes 6(8) and 6(11).

Innolux Corporation estimates future cash flows based on appropriate discount rates. In determining whether goodwill and property, plant and equipment may be impaired, the recoverable amount of the cash generating unit is measured based on how assets are utilized, duration years of assets and projected income and expenses in the future. The estimate involves several assumptions such as determination of discount rates, expected growth rate and future financial projections. As these estimates are dependent upon significant management judgement, we consider management’s assessment of impairment of goodwill and property, plant and equipment a key audit matter.

219 -

How our audit addressed the matter

Responsibilities of management and those charged with governance for the parent company only financial statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, and for such internal control as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee, are responsible for overseeing the Company’s financial reporting process.

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

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these parent company only financial statements.

220 -

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

A. Identify and assess the risks of material misstatement of the parent company only financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
B. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
D. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
E. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the Company audit. We remain solely responsible for our audit opinion.

221 -

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company only financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

PricewaterhouseCoopers, Taiwan

February 13, 2020

The accompanying parent company only 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 parent company only 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.

222 -

INNOLUX CORPORATION

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(4) 6(5) 7 7 6(6) 6(2) 6(3) 6(7) 6(8), 7 and 8 6(9) 6(10) 6(11) and 8 6(26) 6(8) and 8	December 31, 2019 December 31, 2018 � �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� �� �� �� � �� ��	December 31, 2018
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1136 Financial assets at amortized cost - current 1170 Accounts receivable, net 1180 Accounts receivable, net - related parties 1200 Other receivables 1210 Other receivables - related parties 130X Inventory 1410 Prepayments 1479 Other current assets 11XX Total current assets Non-current assets 1510 Financial assets at fair value through profit or loss - non-current 1517 Financial assets at fair value through other comprehensive income - non- current 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1755 Right-of-use assets 1760 Investment property, net 1780 Intangible assets 1840 Deferred income tax assets 1990 Other non-current assets 15XX Total non-current assets 1XXX Total assets

(Continued)

223 -

INNOLUX CORPORATION

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity

Notes
December 31, 2019
December 31, 2018
6(2)
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Current liabilities
2120
Financial liabilities at fair value
through profit or loss - current
2170
Accounts payable
2180
Accounts payable - related parties
2200
Other payables
2230
Current income tax liabilities
2250
Provisions - current
2280
Lease liabilities - 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
2580
Lease liabilities - non-current
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
3500
Treasury shares
3XXX
Total equity
3X2X
Total liabilities and equity

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

224 -

INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

Items

Notes
2019
2018
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4000
Sales revenue
5000
Operating costs
5900
Net operating (loss) margin
Operating expenses
6100
Selling expenses
6200
General and administrative expenses
6300
Research and development expenses
6000
Total operating expenses
6900
Operating (loss) 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
(Loss) profit before income tax
7950
Income tax benefit (expense)
8200
(Loss) profit for the year
Other comprehensive (loss) income (net)
Components of other comprehensive
income (loss) that will not be reclassified
to profit or loss
8311
Remeasurement of defined benefit plans
8316
Unrealized losses on financial assets at
fair value through other comprehensive
income
8330
Share of other comprehensive income
(loss) of subsidiaries, associates and joint
ventures accounted for under equity
method
8349
Income tax related to components of
other comprehensive income that will not
be reclassified to profit or loss
8310
Components of other comprehensive
income (loss) that will not be
reclassified to profit or loss
Components of other comprehensive loss
that will be reclassified to profit or loss
8361
Financial statements translation
differences of foreign operations
8380
Share of other comprehensive (loss)
income of subsidiaries, associates and
joint ventures accounted for under equity
method
8360
Components of other comprehensive
loss that will be reclassified to profit
or loss
8300
Other comprehensive loss for the year,
net of tax
8500
Total comprehensive loss for the year
(Loss) earnings per share (in dollars)
9750
Basic (loss) earnings per share
9850
Diluted (loss) earnings per share

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

225 -

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226 -

INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
(Loss) profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation and amortization
Net (gain) loss on financial assets or liabilities
at fair value through profit or loss
Expected credit loss
Share of profit of subsidiaries and associates
accounted for under equity method
(Gain) loss on disposal of investments
Loss on disposal of property, plant and
equipment
Gain on lease modification
Interest income
Dividend income
Interest expense
Unrealized foreign exchange loss
Changes in operating assets and liabilities
Changes in operating assets
Financial assets /liabilities at fair value
through profit or loss
Accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Prepayments
Other current assets
Changes in operating liabilities
Accounts payable
Accounts payable - related parties
Other payables
Provisions - current
Other current liabilities
Other non-current liabilities
Cash inflow generated from operations
Cash paid for income tax
Net cash flows from operating activities

Notes
2019
2018
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227 -

INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Increase in other receivables - related parties
Acquisition of financial assets at fair value through
profit or loss
Proceeds from disposal of financial assets at fair
value through profit or loss
Acquisition of investments in equity instruments
measured at fair value through other
comprehensive income
Decrease (increase) in financial assets at amortized
cost - current
Increase in investment accounted for under equity
method
Proceeds from capital reduction of investments
accounted for under equity method
Increase in other financial assets
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and
equipment
Acquisition of intangible assets
Increase in other non-current assets
Interest received
Dividends received
Net cash flows from (used in) investing
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term borrowings
Payment of long-term borrowings
Cash dividends paid
Interest paid
Payment of the principal portion of lease liabilities
Payments to acquire treasury shares
Others
Net cash flows (used in) from financing
activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Notes
2019
2018
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The accompanying notes are an integral part of these parent company only financial statements.

228 -

INNOLUX CORPORATION

NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(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 the 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 13, 2020.
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”)

New standards, interpretations and amendments endorsed by FSC effective from 2019 are as follows:

New standards, interpretations and amendments endorsed by FSC effective	from 2019 are as follows:
New Standards,InterpretationsandAmendments	Effective date by International Accounting StandardsBoard
Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

Except for the following, the above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment. IFRS 16, ‘Leases’

A. IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a ‘right-of-use asset’ and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for
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those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

B. The Company has elected to apply IFRS 16 by not restating the comparative information (referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in 2019 as endorsed by the FSC. Accordingly, the Company increased ‘right-of-use asset’ by $6,140,546, increased ‘lease liability’ by $6,140,546 and has no effect on retained earnings with respect to the lease contracts of lessees on January 1, 2019.
C. The Company has used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:
(a) Reassessment as to whether a contract is, or contains, a lease is not required, instead, the application of IFRS 16 depends on whether or not the contracts were previously identified as leases applying IAS 17 and IFRIC 4.
(b) The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.
(c) The accounting for operating leases whose period will end before December 31, 2019 as shortterm leases and accordingly, rent expense recognized in 2019 was included in the expense on short-term lease contracts in Note 6(9).
(d) The exclusion of initial direct costs for the measurement of ‘right-of-use asset’.
(e) The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
D. The Company recognized lease liabilities which had previously been classified as ‘operating leases’ under the principles of IAS 17, ‘Leases’. The reconciliation between operating lease commitments under IAS 17 measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate and lease liabilities recognized as of January 1, 2019 is as follows:

ollows:
Operating lease commitments disclosed by applying IAS 17 as at	�	��
December 31, 2018
Less: Short-term leases �� � Add/Less: Adjustments as a result of a different treatment of extension
and termination options �� Total lease contracts amount recognized as lease liabilities by applying
IFRS 16 on January 1, 2019 �� Incremental borrowing interest rate at the date of initial application ��
Lease liabilities recognized as at January 1, 2019 by applying IFRS 16	�	��

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by

the Company

New standards, interpretations and amendments endorsed by the FSC effective from 2020 are as follows:

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New Standards,InterpretationsandAmendments	Effective date by International Accounting StandardsBoard
Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 9, IAS 39 and IFRS7 ,‘Interest rate benchmark reform’	January 1, 2020 January 1, 2020 January 1, 2020

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

(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 IFRSs as endorsed by the FSC are as follows:

endorsed by the FSC are as follows:
New Standards,InterpretationsandAmendments	Effective date by International Accounting StandardsBoard
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 17, ‘Insurance contracts’ Amendments to IAS 1, ‘Classification of liabilities as current or non- current’	To be determined by International Accounting Standards Board January 1, 2021 January 1, 2022

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

4. 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) Financial assets at fair value through other comprehensive income/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.
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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 judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.
(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 retranslated 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, nonmonetary 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 spot exchange rate at the date of that balance sheet;
- ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and
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iii. All resulting exchange differences are recognized in other comprehensive income.

(b) When the 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 with 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, even when 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 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 settle 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 settled within the normal operating cycle;
(b) Liabilities arising mainly from trading activities;
(c) Liabilities that are to be settled 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

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

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(6) Financial assets at fair value through profit or loss
A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortized cost or fair value through other comprehensive income.
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. At initial recognition, the Company measures the financial assets at fair value and recognizes the transaction costs in profit or loss. The Company subsequently measures the financial assets at fair value, and recognizes the gain or loss in profit or loss.
D. The Company recognizes the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
(7) Financial assets at fair value through other comprehensive income
A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Company has made an irrevocable election at initial recognition to recognize changes in fair value in other comprehensive income.
B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognized and derecognized using trade date accounting.
C. At initial recognition, the Company measures the financial assets at fair value plus transaction costs. The Company subsequently measures the financial assets at fair value: The changes in fair value of equity investments that were recognized in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognized as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
(8) Financial assets at amortized cost
A. Financial assets at amortized cost are those that meet all of the following criteria:
- (a) The objective of the Company’s business model is achieved by collecting contractual cash flows.
- (b) The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, financial assets at amortized cost are recognized and derecognized using trade date accounting.
C. At initial recognition, the Company measures the financial assets at fair value plus transaction costs. Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognized in profit or loss when the asset is derecognized or impaired.
D. The Company’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.
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(9) Accounts and notes receivable

A. Accounts and notes receivable entitle the Company a legal right to receive consideration in exchange for transferred goods or rendered services.
B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.
C. The Company’s operating pattern of accounts receivable that are expected to be factored is for the purpose of receiving contract cash flow and selling, and the accounts receivable are subsequently measured at fair value, with any changes in fair value recognized in other comprehensive income.
(10) Impairment of financial assets
For accounts receivable that have a significant financing component, at each reporting date, the Company recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable that do not contain a significant financing component, the Company recognizes the impairment provision for lifetime ECLs.
(11) Derecognition of financial assets

The Company derecognizes a financial asset when one of the following conditions is met:

A. The contractual rights to receive the cash flows from the financial asset expire.
B. The contractual rights to receive cash flows of the financial asset have been transferred and the Company has transferred substantially all risks and rewards of ownership of the financial asset.
C. The contractual rights to receive cash flows of the financial asset have been transferred; however, the Company has not retained control of the financial asset.

(12) Operating leases (lessor)

Lease income from an operating lease (net of any incentives given to the lessee) is recognized in profit or loss on a straight-line basis over the lease term.

(13) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method. The cost of finished goods and work in progress comprises raw materials, direct labour, 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.
(14) 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.
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B. Inter-company transactions, balances and unrealized 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 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 a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognize losses proportionate to its ownership.
D. 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 more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognized at cost.
E. 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.
F. 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.
G. 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.
H. 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.
(15) 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
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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. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be 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 and structures 3~51years Machinery and equipment 5~9 years Other equipment 2~6 years

(16) Leasing arrangements (lessee) � right-of-use assets/ lease liabilities

A. Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Company. For short-term leases or leases of low-value assets, lease payments are recognized as an expense on a straight-line basis over the lease term.
B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Lease payments are comprised of the following:
(a) Fixed payments, less any lease incentives receivable; and
(b) Variable lease payments that depend on an index or a rate.
The Company subsequently measures the lease liability at amortized cost using the interest method and recognizes interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognized as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.
C. At the commencement date, the right-of-use asset is stated at cost comprising the following: (a) The amount of the initial measurement of lease liability; and
(b) Any lease payments made at or before the commencement date.
The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognized as an adjustment to the right-of-use asset.
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(17) Investment property

(18) Intangible assets

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

(19) 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 or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortized historical cost would have been if the impairment had not been 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 the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is/are expected to benefit from the synergies of the business combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

(20) Borrowings

A. Borrowings comprise long-term and short-term bank borrowings. Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.
B. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.
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(21) Notes and accounts payable

A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

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

A. 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. At initial recognition, the Company measures the financial liabilities at fair value. All related transaction costs are recognized in profit or loss. The Company subsequently measures these financial liabilities at fair value with any gain or loss recognized in profit or loss.
C. If the credit risk results in fair value changes in financial liabilities designated as at fair value through profit or loss, they are recognized in other comprehensive income in the circumstances other than avoiding accounting mismatch or recognizing in profit or loss for loan commitments or financial guarantee contracts.

(23) Provisions

Provisions (including warranties, litigations, etc.) are recognized when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognized as interest expense. Provisions are not recognized for future operating losses.

(24) Employee benefits

A. Short-term employee benefits

B. Pensions

(a) Defined contribution plans

(b) Defined benefit plans

i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the
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Group in current period or prior periods. 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 net 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 bonds (at the balance sheet date) that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

     - ii. Remeasurements arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.

C. Employees’ compensation and directors’ remuneration
- Employees’ compensation and directors’ remuneration are recognized as expense and liability, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates.
(25) 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 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 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 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 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 tax asset is realized or the deferred tax liability is settled.
D. Deferred 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 tax assets are reassessed.
E. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from research and development expenditures to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilized.
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(26) Treasury shares

(27) Revenue recognition

A. The Company is primarily engaged in manufacture and sale of TFT-LCD panel products. The Company recognizes revenue when the right of control is transferred to the customer when the products are delivered to customer and the Company has no unperformed obligation that could affect customer acceptance of the product. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, or the Company has objective evidence that all criteria for acceptance have been satisfied.
B. Sales revenue is calculated based on the contract price, net of volume discounts and sales returns and discounts. Revenue from these sales is recognized based on the price specified in the contract, net of the estimated volume discounts/ sales discounts and allowances. Accumulated experience is used to estimate and provide for the volume discounts, sales discounts and allowances, using the expected value method, and revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. The estimation is subject to an assessment at each reporting date. A refund liability is recognized for expected volume discounts, sales discounts and allowances payable to customers in relation to sales made until the end of the reporting period. No element of financing is deemed present as the sales are made, which is consistent with market practice.
C. A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

(28) Business combinations

A. The Company uses the acquisition method to account for business combinations. The consideration transferred for an acquisition is measured as the fair value of the assets transferred, liabilities incurred or assumed and equity instruments issued at the acquisition date, plus the fair value of any assets and liabilities resulting from a contingent consideration arrangement. All acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. For each business combination, the Company measures at the acquisition date components of non-controlling interests in the acquiree that are present ownership interests and entitle their holders to the proportionate share of the entity’s net assets in the event of liquidation at either fair value or the present ownership instruments’ proportionate
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share in the recognized amounts of the acquiree’s identifiable net assets. All other non-controlling interests should be measured at the acquisition-date fair value.

B. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the fair value of the identifiable assets acquired and the liabilities assumed is recorded as goodwill at the acquisition date. If the total of consideration transferred, non-controlling interest in the acquiree recognized and the fair value of previously held equity interest in the acquiree is less than the fair value of the identifiable assets acquired and the liabilities assumed, the difference is recognized directly in profit or loss on the acquisition date.
CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION

UNCERTAINTY

The preparation of these parent company only financial statements requires management to make critical judgements 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. For the information of critical accounting judgements, estimates and key sources of assumption uncertainty is addressed below:

(1) 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 judgement, 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(11) for the information on goodwill impairment.
B. Impairment assessment of tangible and intangible assets (excluding goodwill) The Company 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 utilized and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Company strategy might cause material impairment on assets in the future. Please refer to Notes 6(8) and 6(11) for the information of impairment assessment impairment.
C. 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 judgements and estimates. Due

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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. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand, demand deposits and checking accounts Time deposits	December31,2019 December31,2018 �� � �� � �� �� �� � �� �	December31,2018
		�� �

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.

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

Assets	December31,2019	December31,2019	December31,2018	December31,2018
Current items
Financial assets mandatorily measured at fair value
through profit or loss
Forward foreign exchange contracts �� � �� � Non-current items
Financial assets mandatorily measured at fair value
through profit or loss
Listed stocks �� � �� � Unlisted stocks �� �� �� � �� �
Liabilities
Current items
Financial liabilities held for trading
Forward foreign exchange contracts	�		��
Forward exchange swap contracts		�		��
	��		�	��

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A. The non-hedging derivative financial assets and liabilities transaction information are as follows:

		December 31,	2019		December 31,	2018
	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)	37,000 $	2019/12-2020/1	USD (sell)	398,000 $	2018/10-2019/3
exchange contracts	JPY (buy)	4,040,505	2019/12-2020/1	JPY (buy)	44,416,685	2018/10-2019/3
Forward foreign	EUR (sell)	35,000	2019/12-2020/3	EUR (sell)	35,000	2018/11-2019/2
exchange contracts	HKD (buy)	304,588	2019/12-2020/3	HKD (buy)	312,329	2018/11-2019/2
Forward foreign	HKD (sell)	646,350	2019/11-2020/3	EUR (sell)	10,000	2018/11-2019/2
exchange contracts	USD (buy)	82,500	2019/11-2020/3	JPY (buy)	1,288,425	2018/11-2019/2
Forward foreign	USD (sell)	30,000	2019/12-2020/1
exchange contracts	TWD (buy)	896,400	2019/12-2020/1
Forward foreign	TWD (sell)	11,287,592	2019/9-2020/4
exchange contracts	JPY (buy)	39,900,000	2019/9-2020/4
Forward foreign				USD (sell)	225,000	2018/12-2019/1
swap contracts				TWD (buy)	6,905,790	2018/12-2019/1

The Company entered into forward foreign exchange contracts to hedge exchange rate risk of import and export proceeds in foreign currency. However, these forward foreign exchange contracts are primarily for the requirement of capital management and not accounted for using hedge accounting.

(3) Financial assets at fair value through other comprehensive income

December 31, 2019 December 31, 2018

Non-current items

Equity instruments Unlisted stocks	�� �	�� �

A. The Company has elected to classify equity instruments that are considered to be strategic investments as financial assets at fair value through other comprehensive income.
B. For information about that the Company recognized other comprehensive income for fair value change for the year ended December 31, 2019 and 2018, please refer to Note 6(19) “Other equity”.
(4) Financial assets at amortized cost

Financial assets at amortized cost
Current items Time deposits with maturity over three months	December31,2019 �� �	December31,2018
		�� �

The Company recognized $348,442 and $ 198,475 of interest income arising from the financial assets at amortized cost for the year ended December 31, 2019 and 2018, respectively.

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(5) Notes receivable and accounts receivable

Notes receivable and accounts receivable
	December31,2019	December31,2018
Accounts receivable �� � �� � Less: Allowance for uncollectible accounts �� � �� � �� � �� �
A. The aging analysis of accounts receivable and notes receivable is as follows:
	December31,2019	December31,2018
Not past due �� �� Up to 60 days �� �� 61 to 180 days �� �� Over 181 days �� �� �� � �� �

The above aging analysis was based on past due date.

B. As of December 31, 2019 and 2018, accounts receivable and notes receivable were all from contracts with customers. As of January 1, 2018, the balance of receivables from contracts with customers amounted to $41,514,602.
C. Information relating to credit risk of accounts receivable is provided in Note 12(2).

(6) Inventories

Inventories
	December31,2019	December31,2018
Raw materials and supplies �� � �� � Work in progress �� �� Finished goods �� �� �� � �� �

For the years ended December 31, 2019 and 2018, the Company recognized cost of goods sold for inventories that have been sold at $254,720,156 and $260,305,200 and recognized net inventory loss at $77,325 and $96,653 due to write down (reversal) of cost of scrap inventories to net realizable value, respectively.

245 -

(7) Investments accounted for under the equity method

	December31,2019	December31,2019	December31,2018	December31,2018
Subsidiaries:
Landmark International Ltd. �� � �� � Innolux Holding Limited �� �� Toppoly Optoelectronics (B.V.I.) Ltd. �� �� Innolux Hong Kong Holding Limited �� �� Innolux Japan Co., Ltd. �� �� Leadtek Global Group Limited �� �� InnoJoy Investment Corporation �� �� Yuan Chi Investment Co., Ltd. �� �� Innolux Singapore Holding Pte. Ltd. �� �� GIO Optoelectronics Corp. �� � Others �� �� Associates:
Ampower Holding Ltd. �� �� FI Medical Device Manufacturing Co., Ltd. �� �� Others �� �� �� � �� �

A. The Company’s subsidiaries

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, 2019.

B. The Company’s associates

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

summarized below:
		Years ended	December31,
		2019		2018
Profit for the year from continuing operations �� � �� � Other comprehensive income - net of tax �� � ��
Total comprehensive income	�	�� �� �

246 -

(8) Property, plant and equipment

					2019
	AtJanuary1		Additions		Disposals	Transfer	At	December 31
Cost:
Land �� � � � � � � � �� � Buildings �� �� �� � �� �� Machinery and equipment �� �� �� � �� �� Other equipment �� �� �� � �� �� �� �� �� � �� �� Accumulated depreciation
and impairment:
Buildings	�� �	�� �			�� �� � �� �
Machinery and equipment	�� �	�� �		�� �� � �� �
Other equipment	�� �	�� �		�� �� � �� �
	�� �	�� �		�� �� � �� �
Unfinished construction
and equipment under
acceptance	�� �� � �� � �� �� � �� �
					2018
	AtJanuary1		Additions		Disposals	Transfer	At	December 31
Cost:
Land �� � � � � � � � �� � Buildings �� �� �� � �� �� Machinery and equipment �� �� �� � �� �� Other equipment �� �� �� � �� �� �� �� �� � �� �� Accumulated depreciation
and impairment:
Buildings	�� �	�� �			�� �� � �� �
Machinery and equipment	�� �	�� �		�� �� � �� �
Other equipment	�� �	�� �		�� �� � �� �
	�� �	�� �		�� �� � �� �
Unfinished construction
and equipment under
acceptance	�� �� � �� � �� �� � �� �

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, 2019 and 2018, the prepayments for business facilities which have not yet entered the factory (shown as ‘other non-current assets’) amounted to $1,500,976 and $1,559,446, respectively.
C. Information on impairment assessments is provided in Note 6 (11).

� (9) Leasing arrangements lessee

A. The Company leases various assets including land. Rental contracts are typically made for periods of 9 to 28 years. Lease terms are negotiated on an individual basis and contain a wide range of
247 -

different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.

B. Short-term leases with a lease term of 12 months or less comprise office and equipment. Lowvalue assets comprise computer equipment.
C. The carrying amount of right-of-use assets and the depreciation charge are as follows:

Land		December31,2019		YearendedDecember31,2019
		Carryingamount		Depreciationcharge
		�� �		�� �

D. The information on profit and loss accounts relating to lease contracts is as follows:

	YearendedDecember31,2019	YearendedDecember31,2019
Items affecting profit or loss
Interest expense on lease liabilities �� � Expense on variable lease payments �� Expense on leases of low-value assets �� Expense on short-term lease contracts ��

E. For the year ended December 31, 2019, the Company’s total cash outflow for leases were $651,464.

(10) Investment property

$651,464. Investment property
Cost: Land Buildings Accumulated depreciation and impairment: Buildings � Cost: Land Buildings Accumulated depreciation and impairment: Buildings �		2019
	AtJanuary1 Additions At December31 �� � � � �� � �� � �� �� � �� �� �� � �� � �� � �� � 2018		At December31
	AtJanuary1 Additions At December31 �� � � � �� � �� � �� �� � �� �� �� � �� � �� � �� �		At December31

248 -

The fair value of the investment property held by the Company as at December 31, 2019 and 2018 was $1,906,827 and $1,660,504, respectively. The amounts mentioned above represent valuation results of comparative method based on market trading information categorized within Level 3 in the fair value hierarchy.

(11) Intangible assets

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

AtJanuary1 Additions Disposals Transfer At December 31 Cost: Patents and royalty �� � � � � � �� � �� � Goodwill �� � � � �� Others �� �� �� � �� �� �� �� �� � �� �� Accumulated amortization and impairment: Patents and royalty �� � �� � � � �� � Others �� � �� � �� � �� � �� � �� � �� � �� � �� � �� � 2019 AtJanuary1 Additions Disposals Transfer At December 31 Cost: Patents and royalty �� � � � � � � � �� � Goodwill �� � � � �� Others �� �� �� � �� �� �� �� �� � �� �� Accumulated amortization and impairment: Patents and royalty �� � �� � � � �� � Others �� � �� � �� �� �� � �� � �� � �� �� �� � �� � �� � 2018				2019
						At December 31

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

Operating costs Operating expenses	Years endedDecember31,	Years endedDecember31,
	2019 2018 �� � �� � �� �� �� � �� �	2018

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.
249 -

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 12.51% and 9.08%, respectively, for the year ended December 31, 2019 and 2018, 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 year ended December 31, 2019 and 2018.

(12) Other payables

Other payables
	December31,2019	December31,2018
Other personnel expenses �� �� Payable on machinery and equipment �� � �� � Repairs and maintenance expense payable �� �� Utilities expense payable �� �� Processing fee payable �� �� Other payables �� �� �� � �� �

(13) Long term borrowings

Long-term borrowings
Type ofborrowings	Period		December31,2019		December31,2018
Syndicated bank loans	2015/3/12	�		�� �� �
	~2024/4/15
Less:
Administrative expenses charged
by syndicated banks �� � �� � Current portion (includes
administrative expenses)		� �		�� �� � �� �� �
Range of interest rates				��		��

Range of interest rates

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, 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, 2019 and 2018 are in compliance with the covenants on the syndicated loan agreement.
C. For repayment of borrowings from financial institutions and financing mid-term working capital fund, the Board of Directors approved the signing of a syndicated loan with financial institution in the amount of NT$43.75 billion on June 20, 2018.
250 -

(14) 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 6 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 insufficient 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 contributions for the deficit by next March.
(b) The amounts recognized in the balance sheet are as follows:

The amounts recognized in the balance sheet	are as follows:
	December31,2019	December31,2018
Present value of defined benefit obligation �� � �� � Fair value of plan assets �� � �� � Net defined benefit liability �� � �� �

	Present value of
	defined benefit	Fair value of		Net defined
	obligation	plan assets	benefit liability
Year ended December 31, 2019
Balance at January 1 �� � �� � �� � Current service cost �� � �� Interest expense/income �� �� �� �� �� �� Remeasurements:
Return on plan assets
(excluding amounts included in
interest income or expense)	� �� �� �
Change in demographic assumptions �� � � �� � Change in financial assumptions �� � �� Experience adjustments �� � � �� � Benefits paid �� � �� � � �� �� �� Contribution for the year � �� �� � Balance at December 31 �� � �� � �� �

251 -

	Present value of
	defined benefit		Fair value of		Net defined
	obligation		plan assets	benefit liability
Year ended December 31, 2018
Balance at January 1	�� �	�� �		�� �
Current service cost �� � �� Interest expense/income �� �� �� �� �� �� Remeasurements:
Experience adjustments �� �� �� Benefits paid �� � �� � � �� �� �� Contribution for the year � �� �� � Balance at December 31 �� � �� � �� �

(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 utilization plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund” (Article 6: The scope of utilization 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 utilization 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 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 composition of fair value of plan assets as of December 31, 2019 and 2018 is given in the Annual Labor Retirement Fund Utilization Report announced by the government.

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

The principal actuarial assumptions used were as	follows:	follows:
Discount rate Future salary increases	Years ended December 31,
	2019 �� ��	2018
		�� ��

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:

252 -

Discount rate	Discount rate	Discount rate	Future salary increases	Future salary increases	Future salary increases	Future salary increases
Increase 0.25%		Decrease 0.25%	Increase 0.25%		Decrease 0.25%
�
Increase 0.25%		Decrease 0.25%	Increase 0.25%		Decrease 0.25%
�	�� �			�� �	�	�� �

The sensitivity analysis above is 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. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

(f) As of December 31, 2019, the weighted average duration of that retirement plan is 14 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, 2019 and 2018 were $967,971 and $965,174, respectively.

(15) Provisions-current

Provisions-current
			Warranty	Litigation and others			Total
At January 1, 2019 �� � �� � �� � Additions during the year �� � �� Used during the year �� � �� � �� � At December 31, 2019 �� � �� � �� �

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).

253 -

(16) Share capital

A. As of December 31, 2019, the Company’s authorized and outstanding capital were $105,000,000 and $97,110,720, with a par value of $10 (in dollars) per share, respectively. All proceeds from shares issued have been collected.

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

	2019	2018
	Number of ordinary	Number of ordinary
	shares (in thousand units)	shares (in thousand units)
At January 1 �� �� Shares retired �� � � At December 31 �� ��

B. Treasury shares
(a) Reason for share reacquisition and movements in the number of the Company’s treasury shares are as follows:

hares are as follows:
At January 1 Retirement for the year Cancellation for the year � At December 31	2019
	Quantity (in thousand units) � �� �� � ��	Bookvalue
		� � �� ��
		�� �

(b) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital surplus.
(c) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should not be pledged as collateral and the shareholder's rights should not be enjoyed before it is reissued.
(d) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should be reissued to the employees within five years from the reacquisition date and shares not reissued within the five-year period are to be cancelled.
(17) Capital surplus

254 -

Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalized mentioned above should not exceed 10% of the paidin capital each year. Accumulated deficit shall first be covered by retained earnings before the capital reserve can be used to cover the accumulated deficit.

Changes in Share of profit (loss) Treasury ownership of associates share interests in accounted for Sharepremium transactions subsidiaries under equitymethod Total At January 1 �� � � � � � �� � �� � Cancellation of treasury shares �� � �� � � �� Recognition of changes in ownership interests in subsidiaries � � �� � �� Recognition of change in equity of associates in proportion to the Company's ownership � � � �� � �� � Others �� � � � �� At December 31 �� � �� � �� � �� � �� � 2019 Share of profit of associates accounted for Share premium underequitymethod Total At January 1 �� � �� � �� � Recognition of change in equity of associates in proportion to the Company's ownership � �� �� At December 31 �� � �� � �� � 2018			2019
					Total

(18) Retained earnings

A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be offset against prior years’ operating losses, then set aside 10% of the remaining amount as legal reserve (until the legal reserve equals the paid-in capital). Preferred dividend shall be distributed after setting aside or reversing a special reserve according to related regulations. The appropriation of the remaining amount along with the unappropriated earnings from previous years shall be proposed by the Board of Directors and resolved by the shareholders. The Company is in an emerging industry which is growing rapidly, and has a capital intensive business. The Company is at the stage of stable growth. In line with the Company’s long-term financial plan in the future, investment environment and business competition situation, the appropriation of dividends shall be proposed by the Board of Directors and resolved by the shareholders, taking into account the future capital expenditure budget and capital requirement of the Company. However, the stock dividends distributed to shareholders shall not exceed twothirds of distributable dividends in current period.
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.
255 -

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 appropriations of 2018 and 2017 net income which was approved at the stockholders’ meeting in June 2019 and 2018, respectively, are as follows:

Years ended December 31,

		2018		2017	2017
			Dividends per			Dividends per
	Amount	share (indollars)		Amount	share (indollars)
Legal reserve �� � �� � Provision (reversal)
of special reserve �� �� � Cash dividends �� �� � �� �� � �� � �� �

D. For the information relating to employees’ compensation and directors’ remuneration, please refer to Note 6(25).
(19) Other equity items

Financial assets at fair value through Currency other comprehensive translation income Total At January 1 �� �� �� � �� �� Revaluation - gross � �� � �� � Currency translation differences �� � � �� � Share of other comprehensive loss of subsidiaries and associates �� � �� �� Effect of income tax � �� �� At December 31 �� �� �� � �� �� 2019		2019
			Total

Financial assets at fair value Available- through other Currency for-sale comprehensive translation investments income Total At January 1 �� �� �� � � � �� �� Effect of modified retrospective approach under IFRS 9 � �� � �� � Balance after retropective adjustment �� � � �� �� � Revaluation - gross � � �� � �� � Currency translation differences �� � � � �� � Share of other comprehensive loss of subsidiaries and associates �� � �� � �� � At December 31 �� �� � � �� � �� �� 2018		2018
			Total

256 -

(20) Operating income

Operating income
TFT-LCD products	Years ended December 31,
	2019 �� �	2018
		�� �

The Company derives revenue from the transfer of goods at a point in time.

(21) Other income

Other income
	Years ended	December31,
	2019		2018
Interest income
Interest income from bank deposits �� � �� � Interest income from financial assets at
amortized cost �� �� �� �� Service income �� �� Rental revenue �� �� Dividend income �� �� Other income �� �� �� � �� �

(22) Other gains and losses

Other gains and losses Rental revenue Dividend income Other income	�� �� �� ��	�� �� �� �� �
	Years ended	December31,
	2019	2018
Net gain (loss)on financial assets and liabilities at
fair value through profit or loss �� � �� �� Net currency exchange gain (loss) �� �� � Loss on disposal of property, plant and equipment �� � �� � Gain (loss) on disposal of investments �� �� � Others �� �� �� � �� ��

(23) Finance costs

Finance costs
	Years ended	December31,
	2019		2018
Interest expense:
Bank borrowings �� � �� � Others �� �� �� � �� �

257 -

(24) Expenses by nature

Expenses by nature
	Years ended	December31,
	2019		2018
Employee benefit expense:
Salaries and other short-term employee benefits �� � �� � Post-employment benefits �� �� Depreciation �� �� Amortization �� �� �� � �� �

(25) Employees’ compensation and directors’ remuneration
A. According to the Articles of Incorporation, of the Company, a ratio of profit of the current year distributable, after covering accumulated losses, shall be distributed as employees' compensation and directors’ remuneration. The ratio shall not be lower than 5% for employees’ compensation and shall not be higher than 0.1% for directors’ remuneration.
B. For the years ended December 31, 2019 and 2018, employees’ compensation was accrued at $0 and $294,289, respectively; while directors’ remuneration was accrued at $0 and $4,528, respectively. The aforementioned amounts were recognized in expenses.
- For the year ended December 31, 2019, the Company incurred net loss and had an accumulated deficit. Thus, there was no distribution of employees' compensation and directors’ remuneration as resolved by the Board of Directors on February 13, 2020.
- The employees’ compensation and directors’ remuneration for the year ended December 31, 2018 were $294,289 and $4,528, respectively, and were estimated based on the profit of current year. The employees’ compensation will be distributed in the form of cash. The Board of Directors resolved to distribute employees’ compensation and directors’ remuneration in the amount of $294,289 and $4,528, respectively, in the form of cash. The actual distributed amount were in consistent with the amounts recognized as expense in 2018.
- Information about employees’ compensation and directors’ 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.
258 -

(26) Income tax

A. Income tax expense

(a) Components of income tax expense:

e tax ome tax expense Components of income tax expense:
		Years ended	December31,
		2019		2018
Current tax:
Current tax on profit for the year	�	�� �� �
Tax on undistributed surplus earnings � �� Prior year income tax overestimation �� � �
Total current tax �� � �� Deferred tax:
Origination and reversal of temporary
differences �� �� Loss carryforward �� � �� � Impact of change in tax rate � �� � Income tax expense �� �� �� �

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

follows:
	Years ended	December31,
	2019		2018
Changes in fair value of financial assets at fair
value through other comprehensive income �� �� � � Remeasurement of defined benefit obligation �� � �� � �� �� �� ��

B. Reconciliation between income tax expense and accounting profit:

		Years ended	December31,
		2019	2018
Tax calculated based on profit before tax and
statutory tax rate	��	�� �� �
Effects from items disallowed by tax regulation �� � �� � Prior year income tax overestimation �� � � Impact of change in tax rate � �� � Additional 10% tax on undistributed earnings � �� Separate taxation �� �� Change in assessment of realization of deferred
tax assets		�� �� �
Tax expense	��	�� �� �

259 -
C. Amounts of deferred tax assets or liabilities as a result of temporary differences and loss carryforward are as follows:

carryforward are as follows:
Recognized in other Recognized in comprehensive January1 profitor loss income December 31 Deferred tax assets: -Temporary differences: Sales returns and discount provisions �� � �� � � � �� � Accrued royalties and warranty provisions �� �� � �� Unrealized exchange loss �� �� � � � Unrealized loss on financial instruments �� �� �� �� Others �� �� � �� �� Loss carryforward �� �� � �� �� � �� � �� � �� � -Deferred tax liabilities: Unrealized exchange gain � � �� �� � � �� �� Amortization charges on goodwill �� � �� � � �� � Others �� � �� � � �� � �� �� �� �� � � �� �� �� � �� �� �� � �� � 2019 Recognized in other Recognized in comprehensive January1 profitor loss income December 31 Deferred tax assets: -Temporary differences: Sales returns and discount provisions �� � �� � � � �� � Accrued royalties and warranty provisions �� �� � �� Unrealized exchange loss � �� � �� Unrealized loss on financial instruments �� �� � �� Others �� �� �� �� Loss carryforward �� �� � �� �� � �� � �� � �� � -Deferred tax liabilities: Unrealized exchange gain �� �� �� � � � � � Amortization charges on goodwill �� � �� � � �� � Others �� � �� � �� � �� �� �� �� � � �� �� �� � �� � �� � �� � 2018		2019
			December 31

260 -
D. Expiration dates of unused loss carryforward and amounts of unrecognized deferred tax assets are as follows:

are as follows:
		December31,2019
Year incurred �� �� �� ��	Amount filed / assessed Assessed Assessed Assessed Estimated	Unrecognized deferred Usable Unused amount taxassets untilyear �� � �� � �� �� �� �� �� �� �� �� �� �� �� � �� � December31,2018	Usable untilyear
Year incurred �� �� ��	Amount filed / assessed Assessed Assessed Assessed	Unrecognized deferred Usable Unused amount taxassets untilyear �� � �� � �� �� �� �� �� �� �� �� � �� �	Usable untilyear

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

are as follows:
Deductible temporary differences	December31,2019 �� �	December31,2018
		�� �

F. The Company has not recognized taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2019 and 2018, the amounts of temporary differences unrecognized as deferred tax liabilities were $30,463,120 and $30,554,931, respectively.
G. The Company’s income tax returns through 2016 have been assessed and approved by the Tax Authority.
H. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in February 7, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Company has assessed the impact of the change in income tax rate.
261 -

(27) Earnings per share

Earnings per share
	Years ended	December31,
	2019		2018
Basic (loss) earnings per share
Net (loss) income for the period �� �� �� � Weighted average number of ordinary shares
outstanding (shares in thousands)	�� ��
Basic (loss) earnings per share (in dollar) �� �� �� � Diluted (loss) earnings per share
(Loss) Profit of ordinary shareholders �� �� �� � Weighted average number of ordinary shares
outstanding (shares in thousands) �� �� Assumed conversion of all dilutive potential
ordinary shares:
-Employees’ compensation � �� �� �� Diluted (loss) earnings per share (in dollar) �� �� �� �

(28) Business combinations

On September 18, 2019, the Company acquired 39% of the share capital of GIO Optoelectronics Corp. for $192,405, which the ownership change from 24% to 63%, and obtained control over GIO Optoelectronics Corp.. The main business of GIO Optoelectronics Corp. is LCD glass substrate processing, LED lighting and its control power supply. As a result of the acquisition, the Company is expected to increase economic scale and strategic synergy. As of December 31, 2019, the allocation of the purchase price of the acquisition is still in process, and the Company is still assessing the fair value of the identifiable assets. Please refer to Note 6(30) of consolidated financial statements for year ended December 31, 2019 for related information.

(29) Supplemental cash flow information

Investing activities with partial cash payments:

Supplemental cash flow information Investing activities with partial cash payments:
	Years ended	December31,
	2019		2018
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 �� � �� �

(30) Changes in liabilities from financing activities

For the year ended December 31, 2019 and 2018, all changes in liabilities from financing activities are changes in cash flow from financing activities. Please refer to consolidated statements of cash flows.

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7. RELATED PARTY TRANSACTIONS

(1) Names and relationship of related parties

LATED PARTY TRANSACTIONS
Names and relationship of related parties

Names of related parties

Relationship with the Company

Hon Hai Precision Industry Co., Ltd. and its subsidiaries
CHENG MEI MATERIALS TECHNOLOGY
CORPORATION and its subsidiaries
Fu Lian Net International (Hong Kong) Limited
FI Medical Device Manufacturing Co., Ltd.
GIO Optoelectronics Corp. (Note)
Leadtek Global Group Limited
Lakers Trading Ltd.
Innolux Hong Kong Limited
InnoCare Optoelectronics Corporation
Innolux USA Inc.
Innolux Optoelectronics India Private Limited
Foshan Innolux Optoelectronics Ltd.

Other related party
Other related party
Other related party
Associate
The Company’s subsidiary
The Company’s subsidiary
The Company’s subsidiary
The Company’s subsidiary
The Company’s subsidiary
The Company’s subsidiary
The Company’s subsidiary
The Company’s subsidiary

(Note) In the third quarter of 2019, the ownership change from 24% to 63%, which change associate into company’s subsidiary.

For the more information about the Company and other subsidiaries, please refer to Note 4(3) of the consolidated financial report for the year ended December 31, 2019.

(2) Significant related party transactions

A. Operating revenue

gnificant related party transactions Operating revenue
	Years ended	December31,
	2019		2018
Sales of goods:
Subsidiaries �� � �� � Other related parties �� �� Associates �� �� �� � �� �

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B. Purchases of goods

Purchases of goods
	Years ended	December31,
	2019		2018
Purchases of goods:
Other related parties �� � �� � Associates �� �� Subsidiaries �� �� �� � �� �

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

nsigned processing Consigned processing
	Years ended	December31,
	2019		2018
Processing expense:
Subsidiaries
- Lakers Trading Ltd. �� � �� � - Others �� �� Associates � � �� � �� �

(b) Balance of consigned processing at the end of year (shown as “Other payables”)

Payables to related parties: Subsidiaries	December31,2019 �� �	December31,2018
		�� �

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

D. Service revenue (Shown as “other revenue”)

Service revenue (Shown as“other revenue”)
	Years ended	December31,
	2019	2018
Service revenue:
Subsidiaries
- Foshan Innolux Optoelectronics Ltd. �� � �� � Associates �� �� �� � �� �

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E. Service expense (Shown as “manufacturing costs and operating expenses”)

Receivables from related parties:
2019
2018
Service expense:
Subsidiaries
��
�
��
�
Years endedDecember31,
December31,2019
December31,2018
Accounts receivable:
Subsidiaries
- Innolux USA Inc.
��
�
��
�
- Others
��
��
Other related parties
��
��
Associates
�
��
��
��
Less: Transfer to other receivables
��
�
��
�
��
�
��
�

(a) The receivables from related parties arise mainly from sales transactions. The receivables are due 30~90 days after the date of sale. The receivables are unsecured in nature and bear no interest.
(b) The abovementioned receivables from related parties that exceed normal granting periods were transferred under ‘Other receivables – related parties’.

G. Other receivables from related parties

Other receivables from related parties
	December	31,2019	December	31,2018
Other receivables:
Accounts receivables transferred to
other receivables
Subsidiaries
- Innolux Optoelectronics India Private Limited �� � � � Other related parties
- Fu Lian Net International (Hong Kong) Limited � �� - Others � �� Other receivables
Subsidiaries � - InnoCare Optoelectronics Corporation �� � - Others �� �� Other related parties �� �� Associates �� �� �� � �� �

265 -

H. Payables to related parties:

Payables to related parties:
	December31,2019	December31,2018
Accounts payable:
Subsidiaries
- Lakers Trading Ltd. �� � �� � - Leadtek Global Group Limited �� �� - Innolux Hong Kong Limited �� �� - Others �� �� Other related parties �� �� Associates �� �� �� � �� �

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

I. Property transactions

Purchase of property

(a) Acquisition of property, plant and equipment:

		Years ended	December31,	December31,
		2019		2018
Subsidiaries �� � �� � Other related parties �� �� Associates �� �� �� � �� �

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

	December31,2019	December31,2018
Subsidiaries �� � �� � Other related parties �� �� �� � �� �

Sale of property

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

	YearendedDecember31,2019	YearendedDecember31,2019	YearendedDecember31,2019	YearendedDecember31,2018	YearendedDecember31,2018
	Disposal		Gain (loss)	Disposal	Gain (loss)
	proceeds		ondisposal	proceeds	ondisposal
Subsidiaries �� � �� � �� � �� � Other related parties �� �� � � �
Associates	�� �� �				�
	�� �	�� �� �� � �� �

266 -

(b) Period-end balances arising from sale of property (shown as ‘other receivables’)

	December	31,2019	December31,2018	December31,2018
Subsidiaries
- InnoCare Optoelectronics Corporation �� � � � - Others �� �� � Other related parties �� � �� � �� �

(3) Key management compensation

Key management compensation
Salaries and other short-term employee benefits Post-employment benefits	Years endedDecember31,
	2019 2018 �� � �� � �� �� �� � �� �	2018
		�� �

8. PLEDGED ASSETS

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

		Book	value
Pledgedasset	December31,2019		December31,2018	Purpose
Property, plant and equipment	�	�� �� �		Long-term loans
Intangible assets		�� �� Long-term loans
Other non-current assets
- Refundable deposits		�� �� Guarantee for litigation
	�	�� �� �

9. 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. In December 2009, the Company reached a plea agreement with the Department of Justice of the U.S. and paid off the fines. Later, Brazil government initiated an investigation case against the Company. In March 2019, the Company received a sanction from the Brazil Administrative Council for Economic Defense - CADE and paid all fines on May 8, 2019 also obtained the confirmation from the representative lawyer of CADE that the Company complied with the sanction. As for civil lawsuits filed by some state governments in the U.S., downstream panel makers and customers, the Company had reached settlement agreement individually. The Company’s subsidiary in the U.S. received a civil complaint from the government of Puerto Rico in September 2018, claiming that the Company, together with other defendants of Taiwan, Japan and South Korea panel factories, had unjustified
267 -

enrichment from the TFT-LCD pricing collaborations in 2006 and requested monetary compensation. The U.S. subsidiary of the company has appointed a lawyer to handle the lawsuit.

B. Eidos Displays, LLC and Eidos III, LLC (“Eidos”) filed a lawsuit against the Company and American subsidiary with the United States District Court for the Eastern District of Texas on April 25, 2011, alleging infringement of its patent. In December 2013, the magistrate judge granted summary judgment that the Eidos patent is invalid. In January 2014, the presiding judge confirmed the summary judgment.
- In February 2014, Eidos appealed to the United States Court of Appeals for the Federal Circuit (CAFC). In March 2015, the CAFC reversed the district court’s judgment and remanded the case back to the district court for further proceedings. In June 2017, the jury determined that some products of the Company and American subsidiary directly infringed the patent and awarded damages for Eidos. On March 5, 2018, the district court entered judgment. In January 2020, the Company reached an agreement on the main settlement terms with Eidos during the third mediation. The parties engaged in drafting and signing the settlement agreement. On January 23, 2020, the district court ordered stay of the case, and that the parties reach agreement by February 23, 2020 and formally dismiss the case. Thus, the lawsuit is not expected have a material adverse effect on the Company’s financial position or operations.
C. On July 10, 2018, Vista Peak Ventures, LLC (VPV) filed four complaints against the Company in the United States District Court for the Eastern District of Texas, alleging the infringement of several of its patents. The Company reached settlements with VPV for the aforementioned lawsuits and acquired relevant patent portfolio licensing in the first quarter of 2019. VPV also dismissed the action and the lawsuits have no effect on the Company’s financial position and operations.
D. On March 23, 2018, Chongqing HKC Optoelectronics Technology Co., Ltd. (HFC) filed five complaints against the subsidiaries of the Company, Ningbo Innolux Optoelectronics Ltd., Foshan Innolux Optoelectronics Ltd. as well as their customers and terminal distributors of TV products with the Fifth Intermediate People’s Court in Chongqing, alleging the infringement of its patents. Ningbo Innolux Optoelectronics Ltd. submitted a request of patent invalidity to the National Intellectual Property Administration, PRC upon the patents asserted in the complaints. As of May 21, 2019, all five patents asserted by HKC were declared invalid by the National Intellectual Property Administration, PRC. The five lawsuits that were previously disclosed were allegedly withdrawn by the Chongqing court on June 18, 2019. Thus, the lawsuits have no effect on the Company’s financial position and results of operations.
E. The Company had assessed and recognized related losses and liabilities as shown in ‘provisionscurrent’ for the aforementioned investigation relating to anti-trust laws and patent litigation.
(2) Commitments
A. Capital expenditure contracted for at the balance sheet date but not yet incurred are as follows:
268 -

December 31, 2019 December 31, 2018 Property, plant and equipment � �� B. Outstanding letters of credit The outstanding letters of credit for the purchase of property, plant and equipment are as follows: December 31, 2019 December 31, 2018 Outstanding letters of credit ��

B. Outstanding letters of credit

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

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

(1) On December 17, 2019, the Board of Directors of the Company resolved to issue USD 300 million, 0% the first unsecured Euro-convertible bonds due in 5 years on January 22, 2020, which was priced after approved by the regulatory authority on January 15, 2020.
(2) As of February 13, 2020, the Company adopt the response measures for the outbreak of coronavirus in the beginning of 2020. The subsidiaries in China are resuming work gradually or applying for resumption in February. The operation of the Company may be affected after liaised with customers and suppliers for delivery rearrangements, however, the actual degree of the impact will depend on the subsequent situation of coronavirus and the work resumption situation.

12. 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. Financial instruments by category

For information of the Company’s financial assets (financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income, financial assets at amortized cost, cash and cash equivalents, accounts receivable (including related parties) and other receivables) and financial liability (financial liabilities at fair value through profit or loss, accounts payable (including related parties), other payables, lease liability and long- term borrowings (including current portion)), please refer to Note 6 and parent company only balance sheets.
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)).
(b) Risk management is carried out by the treasury department under policies approved by the board of directors. The Company’s treasury identifies, evaluates and hedges financial risks in close cooperation with the Company’s operating units. The Board provides principles for
269 -

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 Company operates internationally and is exposed to foreign exchange risk arising from the transactions of the company used in various functional currency, 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 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.
c) 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 $99,086 and $79,359 for the years ended December 31, 2019 and 2018, 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:

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 $99,086 and $79,359 for the years ended December 31, 2019 and 2018, 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:	e simulations performed, the impact would be an increase of $99,086 and 2018, respectively. The information currencies whose values would be is as follows:	e simulations performed, the impact would be an increase of $99,086 and 2018, respectively. The information currencies whose values would be is as follows:
Foreign Foreign Currency Exchange Currency Exchange Amount Rate Book Value Amount Rate Book Value (In Thousands) (Note) (NTD) (In Thousands) (Note) (NTD) Financial asstes Monetary items USD �� � �� �� � �� � �� �� � HKD �� �� �� �� �� �� EUR �� �� �� �� �� �� JPY �� �� �� �� �� �� Non-monetary items USD �� � �� �� � �� � �� �� � HKD �� �� �� �� �� �� JPY �� �� �� �� �� �� Monetary items USD �� � �� �� � �� � �� �� � JPY �� �� �� �� �� �� EUR �� �� �� �� �� �� December 31,2019 December 31,2018 Financial liabilities	December 31,2018
		Book Value (NTD)

270 -
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 Company for the years ended December 31, 2019 and 2018 amounted to $327,080 and $(81,620), respectively.
Price risk
a) The Company is exposed to equity securities price risk because of investments held by the Company and classified on t the parent company only balance sheet as financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income and available-for-sale financial assets. To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.
b) 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, post-tax profit for the years ended December 31, 2019 and 2018 would have increased/decreased by $530,282 and $239,683, respectively; other comprehensive gains and losses would have increased/decreased by $193,086 and $222,278, respectively.

Cash flow and fair value interest rate risk

a) The Company’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company’ to cash flow interest rate risk. During the years ended December 31, 2019 and 2018, the Company’s borrowings at variable rate were denominated in the NTD.
b) 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.
c) If the borrowing interest rate of NTD had increased/decreased by 0.25% with all other variables held constant, profit, net of tax for the years ended December 31, 2019 and 2018 would have decreased/increased by $89,325 and $128,600, respectively. The main factor is that changes in interest expense result in floating-rate borrowings.
(b) Credit risk
a) 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. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms, and the contract cash flows. As at December 31, 2019 and 2018, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at fair value through other comprehensive income, financial assets at amortized cost and accounts receivable held by the Company was its carrying amount.
271 -
b) 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. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the managements. The utilization of credit limits is regularly monitored.
c) The Company adopts following assumption under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition: If the contract payments are past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.
d) The Company adopts the assumptions under IFRS 9, the default occurs when the contract payments are past due over 90 days.
e) The Company classifies customer’s accounts receivable in accordance with credit rating of customer, credit risk on trade and customer types. The Company applies the simplified approach using provision matrix to estimate expected credit loss under the provision matrix basis.
f) The following indicators are used to determine whether the credit impairment of debt instruments has occurred:
(i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;
(ii) Default or delinquency in interest or principal repayments;
(iii) Adverse changes in national or regional economic conditions that are expected to cause a default.
g) The Company uses the forecastability to adjust historical and timely information to assess the default possibility of accounts receivable.
According to abovementioned consideration and information, the Company does not expect any significant default possibility of accounts receivable.
h) Movements in relation to the Company applying the simplified approach to provide loss allowance for accounts receivable are as follows:

allowance for accounts receivable are as follows:
	2019
	Accountsreceivable
At January 1 (As December 31)	�� �
	2018
	Accountsreceivable
At January 1_IAS 39 �� � Adjustments under new standards � At January 1_IFRS 9 �� Provision �� At December 31 �� �

272 -
i) The Company did not recognize significant impairment provision in accordance with 12 months expected credit losses, because the Company’s financial assets/loans to others and receivables at amortized cost all with low credit risk.
(c) Liquidity risk
a) 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 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.
b) Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Company’s 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.
c) The table below analyzes the Company’s non-derivative financial liabilities and netsettled 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:

December31,2019 Lease liability Long-term borrowings (including current portion) December31,2018 Long-term borrowings (including current portion)	Less than Between 1 Between 3 1year and 3 years and 5 years �� � �� � �� � �� �� �� Less than Between 1 Between 3 1year and 3 years and 5 years �� � �� � � �	Over 5 years �� � � Over 5 years � �	Total
			�� � �� Total
			�� �

Except for the above, the non-derivative and derivative financial liabilities of the Company are all due within one year.

273 -

(3) Fair value estimation

A. 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.
B. Fair value information of investment property at cost is provided in Note 6(10).
C. Financial instruments not measured at fair value
The carrying amounts of cash and cash equivalents, accounts receivable, other receivables, financial assets at amortized cost, accounts payable, other payables, lease liability and long-term borrowings (including current portion) are approximate to their fair values.
D. 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, 2019 and 2018 is as follows:
(a) The related information of natures of the assets and liabilities is as follows:

December 31,2019 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Equity securities Forward exchange contracts Financial assets at fair value through other comprehensive income Equity securities Liabilities Recurring fair value measurements Financial liabilities at fair value through profit or loss Forward exchange contracts	�� �� � � � �� � � �	�� �� �� � � �� � �� � �� � �� � �� �� �� � �� � �� � �� � � � �� �	��

274 -

December 31,2018	Level 1			Level 2			Total
Assets
Recurring fair value measurements
Financial assets at fair value
through profit or loss
Equity securities	�� �		�	� �� � �� �
Forward exchange contracts � �� � �� Financial assets at fair value
through other comprehensive
income
Equity securities		�		� �� ��
	�� �		�� �		�� �	�� �
Liabilities
Recurring fair value measurements
Financial liabilities at fair value
through profit or loss
Forward exchange contracts	�	� �� � � � �� �
Forward exchange swap contracts		�		�� � ��
	� �		�� �		� �	�	��

(b) The methods and assumptions the Company used to measure fair value are as follows:
i. 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 Market quoted price Closing price Last transaction price Weighted average quoted price

ii. 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.
iii. When assessing non-standard and low-complexity financial instruments, for example, foreign exchange swap contracts, 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.
iv. 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 and foreign exchange swap contracts are usually valued based on the current forward exchange rate.
v. The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Company’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted
275 -

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.

vi. 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, 2019 and 2018, 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, 2019 and 2018:

		Equity securities
		2019	2018
At January 1 �� � �� � Gains and losses recognized in profit or loss �� �� � Gains and losses recognized in other
comprehensive income �� � �� � Acquired in the period �� �� Transfers to Level 3 �� � Proceeds from capital reduction �� � �
At December 31	�	�� �� �

G. Because TPV Technology Limited was delisted since November 2019 due to its privatization and there is insufficient observable market information, therefore, the Company transferred the fair value from Level 1 to Level 3 at the end of the 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.
276 -
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 Non-derivative equity instrument: Unlisted shares	Fair value at December Valuation Significant 31,2019 technique unobservableinput �� � Market comparable companies price to sales ratio multiple, price to book ratio multiple Discount for lack of marketability Fair value at December Valuation Significant 31,2018 technique unobservable input �� � Market comparable companies price to sales ratio multiple, price to book ratio multiple Discount for lack of marketability	Range (Weighted Relationship of average) inputstofairvalue �� �� The higher the multiple, the higher the fair value �� �� The higher the discount for lack of marketability, the lower the fair value Range (Weighted Relationship of average) inputs to fair value �� �� The higher the multiple, the higher the fair value �� �� The higher the discount for lack of marketability, the lower the fair value	Relationship of inputstofairvalue

J. The Company has carefully assessed the valuation models and assumptions used to measure fair value. 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 categorized within Level 3 if the inputs used to valuation models have changed:

have changed:
Financial assets Equity instrument Financial assets Equity instrument	Input �� � Input �� �	Change �� Change ��	Favourable Unfavourable Favourable Unfavourable change change change change �� � �� �� �� � �� �� Favourable Unfavourable Favourable Unfavourable change change change change �� � �� �� �� � �� �� Recognized in other December31,2019 December31,2018 comprehensiveincome Recognizedinprofitor loss
			Favourable Unfavourable change change �� � �� ��

277 -

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: Please refer to table 1.
B. Provision of endorsements and guarantees to others: None.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 2.
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 3.
H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 4.
I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Notes 6(2).
J. Significant inter-company transactions during the reporting periods: Please refer to table 5.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 6.

(3) Information on investments in Mainland China

A. Basic information: Please refer to table 7.
B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to Table 1, 3, 4 and 5.

14. SEGMENT INFORMATION

None.

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Innolux Corporation Chairman: Hung ,Jin-Yang Hung

AI assistant

INX — Annual Report 2019

52330_rns_2020-07-02_7436b21d-82b0-4ed6-8247-453836a2813a.pdf

Innolux Corporation 2019 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 2019 Operating Report

(I) Result of Business Plan

(II) Budget Implementation

(III) Financial Analysis from 2018 to 2019

(IV) Research and development

(V) Digital Transformation of the Company

1.2 Business Plan for 2020

(I) Finding a New Foothold in Display

(II) New Opportunities in Non-display

(III) Expanding the parallel implementation of "Zero Touch" Light-off Factory

II. Company Profile

2.1 Date of Incorporation: January 14 2003

2.2 Company History

III. Corporate Governance Report

3.1 Organization

3.1.1 Organization Chart

3.1.2 Major Corporate Functions

3.2 Directors and Management Team

3.2.1 Directors

Major shareholders of the institutional shareholders

Major shareholders of the Company’s major institutional shareholders

Professional qualifications and independence analysis of directors

3.2.2 Management Team

3.3 Remuneration of Directors, President, and Vice President

3.3.1 Remuneration to directors and independent directors

3.3.2 Remuneration of the President and Vice Presidents

3.3.3 The top five executives with the highest remuneration

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, Presidents, and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Presidents, and Vice Presidents

3.4 Implementation of Corporate Governance

3.4.1 Board of Directors

5. Attendance of Independent directors at Board Meetings

3.4.2 Audit Committee

3.4.3 Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

Note1: Board Diversity Policy

3.4.4 Composition, Responsibilities and Operations of the Remuneration Committee

A.Professional Qualifications and Independence Analysis of Remuneration Committee Members

B.Attendance of Members at Remuneration Committee Meetings

3.4.5 Corporate Social Responsibility

3.4.6 Ethical Corporate Management

3.4.7 Corporate Governance Guidelines and Regulations

3.4.8 Other Important Information Regarding Corporate Governance

3.4.9 Internal Control System

Innolux Corporation Statement of Internal Controls

3.4.11 Major Resolutions of Shareholders’ Meeting and Board Meetings

3.4.12 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors :None

3.4.13 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D

3.5 Information Regarding the Company’s Audit Fee and Independence

3.5.1 Audit Fee

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

2.Replaced the audit firm and the audit fee paid to the new audit firm was less than the payment of the previous year: None

3.6 Replacement of CPA:

3.6.1 About predecessor CPA

3.6.2 About the Successor CPA:

3.6.3 Reply of the Previous Accountant: N/A

3.8 Changes in Shareholding of Directors, Managers and Major Shareholders

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

3.8.2 Shares Trading with Related Parties ： None

3.8.3 Shares Pledge with Related Parties ： None

3.9 Relationship among the Top Ten Shareholders

3.10 Ownership of Shares in Affiliated Enterprises

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

1. Type of Stock

2. Issued Shares

3. Information for Shelf Registration: None

INX Annual Report 2019