INX — Audit Report / Information 2014

Oct 30, 2014

INNOLUX CORPORATION

PARENT COMPANY ONLY FINANCIAL

STATEMENTS AND REPORT OF INDEPENDENT

ACCOUNTANTS

DECEMBER 31, 2014 AND 2013

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For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Innolux Corporation

We have audited the accompanying parent company only balance sheets of Innolux Corporation as of December 31, 2014 and 2013, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended. These parent company only financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these parent company only financial statements based on our audits. We did not audit the financial statements of certain investments accounted for under equity method for the year ended December 31, 2013. The long-term equity investments amounted to NT$2,618,196,000 as of December 31, 2013, and the comprehensive income (including share of profit (loss) of subsidiaries, associates and joint ventures accounted for using equity method and share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method) was NT$451,716,000 for the year then ended. Those financial statements and the information disclosed in Note 13 were audited by other independent accountants whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on the audit reports of the other independent accountants.

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other independent accountants provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other independent accountants, the parent company only financial statements referred to above present fairly, in all material respects, the

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financial position of Innolux Corporation as of December 31, 2014 and 2013, and their financial performance and cash flows for the years then ended in conformity with the “Regulations Governing the Preparations of Financial Statements by Securities Issuers”.

Innolux Corporation’s current liabilities have exceeded its current assets by NT$42,313,979,000 as of December 31, 2014. As set forth in Note 12(4), management has designed a turnaround plan to improve the Company’s operating efficiency.

PricewaterhouseCoopers, Taiwan

February 10, 2015

------------------------------------------------------------------------------------------------------------------------------------------------The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

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INNOLUX CORPORATION

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2014 AND 2013

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(3) 6(5) 7 7 6(6) 8 6(3) 6(7) 6(8), 7 and 8 6(9) 6(10) 6(25) 8	2014 $ 55,543,195 52,453 220,000 68,858,149 6,067,658 699,592 691,024 27,938,165 542,334 2,250,035 12,542 162,875,147 3,101,461 73,096,389 192,599,182 693,677 20,127,184 17,575,426 11,160,082 625,863 318,979,264 $ 481,854,411	2013
Current assets Cash and cash equivalents Financial assets at fair value through profit or loss - current Available-for-sale financial assets - current Accounts receivable, net Accounts receivable, net - related parties Other receivables Other receivables - related parties Inventory Prepayments Other financial assets - current Other current assets Total current assets Non-current assets Available-for-sale financial assets - non-current Investments accounted for under equity method Property, plant and equipment Investment property, net Intangible assets Deferred income tax assets Other financial assets - non-current Other non-current assets Total non-current assets Total assets			$ 27,604,892 227,703 - 63,763,265 2,409,842 609,036 787,951 39,510,209 849,108 2,485,841 26,684
			138,274,531
			1,824,122 67,860,212 233,557,614 706,850 21,114,443 17,835,399 12,327,722 57,553
			355,283,915
			$ 493,558,446

(Continued)

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INNOLUX CORPORATION

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2014 AND 2013

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	Notes 6(11) 6(2) 6(4) 7 7 and 9 6(15) 6(12) 6(4) 6(12) 6(25) 6(13) and 9 6(16) 6(14)(17) 6(18) 6(19) 9 6(12)(16) and 11	2014 2013 $ 1,300,000 $ 1,943,565 605,016 689,097 1,351 - 33,731,780 29,023,925 85,171,012 81,977,746 18,688,940 15,090,951 3,133,489 1,949,029 61,092,333 155,569,218 1,465,205 1,170,242 205,189,126 287,413,773 - 21,918 37,223,093 - 477,579 909,708 11,274,550 12,169,818 48,975,222 13,101,444 254,164,348 300,515,217 99,545,364 91,094,288 99,584,369 96,058,741 509,272 2,328,981 1,144,229 - 24,979,173 5,092,716 1,927,656 ( 1,531,497) 227,690,063 193,043,229 $ 481,854,411 $ 493,558,446
Current liabilities Short-term borrowings Financial liabilities at fair value through profit or loss - current Derivative financial liabilities for hedging - current Accounts payable Accounts payable - related parties Other payables Provisions - current Long-term liabilities, current portion Other current liabilities Total current liabilities Non-current liabilities Derivative financial liabilities for hedging - non-current Long-term borrowings Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Equity Share capital - common stock Capital surplus Retained earnings Legal reserve Special reserve Unappropriated retained earnings Other equity interest Total equity Significant contingent liabilities and unrecognized contract commitments Significant events after the balance sheet date Total liabilities and equity

The accompanying notes are an integral part of these financial statements. See report of independent accountants dated February 10, 2015.

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INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

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

Items

Notes 2014 2013 7 $ 426,005,033 $ 419,738,269 6(6)(23)(24) and 7 ( 389,609,785)( 392,206,451) 36,395,248 27,531,818 6(23)(24) ( 1,092,207)( 1,105,609) ( 3,451,341)( 3,997,111) ( 11,412,260)( 11,128,979) ( 15,955,808)( 16,231,699) 20,439,440 11,300,119 6(20) 1,379,919 1,222,075 6(21) ( 3,418,822)( 8,950,438) 6(22) ( 2,721,239)( 4,369,834) 5,998,536 5,233,229 1,238,394 ( 6,864,968) 21,677,834 4,435,151 6(25) ( 1,075) 667,417 $ 21,676,759 $ 5,102,568 $ 3,087,368 $ 2,703,765 6(3) 103,510 ( 223,008) 6(4) ( 278,458) 79,477 6(13) ( 55,790)( 11,870) 263,095 275,902 6(25) 48,369 26,242 $ 3,168,094 $ 2,850,508 $ 24,844,853 $ 7,953,076 6(26) $ 2.31 $ 0.57 $ 2.28 $ 0.57

Sales revenue Operating costs Net operating margin Operating expenses Selling expenses General and administrative expenses Research and development expenses Total operating expenses Operating profit Non-operating income and expenses Other income Other gains and losses Finance costs Share of profit of subsidiaries and associates accounted for under equity method Total non-operating income and expenses Profit before income tax Income tax expense Profit for the year Other comprehensive income Financial statements translation differences of foreign operations Unrealized gain (loss) on valuation of available-for-sale financial assets Cash flow hedges Actuarial loss on defined benefit plan Share of other comprehensive income of associates and joint ventures accounted for under equity method Income tax relating to the components of other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income for the year Earnings per share (in dollars) Basic earnings per share Diluted earnings per share

The accompanying notes are an integral part of these financial statements. See report of independent accountants dated February 10, 2015.

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INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(Expressed in thousands of New Taiwan dollars)

2013 Balance at January 1, 2013 Capital surplus offset against accumulated deficit Global depositary receipt issued for cash Issuance of restricted stock to employees Cancellation of restricted stock to employees Compensation related to share-based payment Changes in net equity of long-term equity investments Profit for the year Other comprehensive income for the year Balance at December 31, 2013 2014 Balance at January 1, 2014 Capital issued for cash Appropriations of 2013 earnings: Legal reserve Special reserve Cash dividends Cash paid from capital surplus Capital surplus offset against accumulated deficit Cancellation of restricted stock to employees Changes in restricted stock to employees Compensation related to share-based payment Changes in net equity of long-term equity investments Profit for the year Other comprehensive income for the year Balance at December 31, 2014	Notes	Common stock	Capital surplus				RetainedEarnings			Otherequityinterest	Otherequityinterest	Otherequityinterest			Total
					Legal reserve		Special reserve	Unappropriated earnings	Financial statements translation differences of foreign operations	Unrealized gain (loss) on available-for- sale financial assets		Changes in gain (loss) on cash flow hedge	Employee unearned compensation
	6(16) 6(14) 6(14) 6(19) 6(16) 6(18) 6(18) 6(18) 6(14) 6(19)	$ 79,129,708 - 11,250,000 725,260 ( 10,680 ) - - - - $ 91,094,288 $ 91,094,288 8,500,000 - - - - - ( 48,924 ) - - - - - $ 99,545,364	$ 119,677,980 ( 27,308,220 ) 3,269,051 187,212 10,680 189,976 32,062 - - $ 96,058,741 $ 96,058,741 2,125,000 - - - ( 1,266,944 ) 2,328,981 48,924 47,174 289,523 ( 47,030 ) - - $ 99,584,369	$ 2,328,981 - - - - - - - - $ 2,328,981 $ 2,328,981 - 509,272 - - - ( 2,328,981 ) - - - - - - $ 509,272			$ - - - - - - - - - $ - $ - - - 1,144,229 - - - - - - - - - $ 1,144,229	($ 27,308,220 ) 27,308,220 - - - - - 5,102,568 ( 9,852 ) $ 5,092,716 $ 5,092,716 - ( 509,272 ) ( 1,144,229 ) ( 90,495 ) - - - - - - 21,676,759 ( 46,306 ) $ 24,979,173	($ 2,818,705 ) - - - - - - - 2,740,631 ($ 78,074 ) ($ 78,074 ) - - - - - - - - - - - 3,161,022 $ 3,082,948	($ 1,609,513 ) - - - - - - - 65,168 ($ 1,544,345 ) ($ 1,544,345 ) - - - - - - - - - - - 284,498 ($ 1,259,847 )		$ 423,629 - - - - - - - 54,561 $ 478,190 $ 478,190 - - - - - - - - - - - ( 231,120 ) $ 247,070	$ - - - ( 754,166 ) - 366,898 - - - ($ 387,268 ) ($ 387,268 ) - - - - - - - ( 43,951 ) 288,704 - - - ($ 142,515 )	$169,823,860 - 14,519,051 158,306 - 556,874 32,062 5,102,568 2,850,508 $193,043,229 $193,043,229 10,625,000 - - ( 90,495 ) ( 1,266,944 ) - - 3,223 578,227 ( 47,030 ) 21,676,759 3,168,094 $227,690,063

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

The accompanying notes are an integral part of these financial statements. See report of independent accountants dated February 10, 2015.

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INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(Expressed in thousands of New Taiwan dollars)

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

Notes 2014 2013 $ 21,677,834 $ 4,435,151 6(23) 56,134,539 71,068,428 6(14) 578,227 556,874 ( 5,998,536 ) ( 5,233,229 ) 6(21) ( 452,613 ) ( 18,366 ) 6(21) - 204,721 6(21) ( 22,568 ) 6,065 6(20) ( 126,493 ) ( 112,782 ) 6(20) ( 7,567 ) ( 43,822 ) 6(22) 2,998,473 4,318,564 6(21) 1,188,553 ( 468,215 ) 91,169 ( 706,193 ) ( 5,094,884 ) 5,437,335 ( 3,657,816 ) 10,145,135 ( 89,561 ) 194,789 11,572,044 ( 4,133,091 ) 306,774 ( 580,008 ) 14,142 ( 9,872 ) ( 299,025 ) ( 290,235 ) 4,707,855 ( 22,695,791 ) 3,193,266 ( 7,322,352 ) 4,125,260 ( 8,943,611 ) 1,184,460 814,253 309,564 ( 248,257 ) ( 951,067 ) 3,361,094 91,382,030 49,736,585 ( 1,075 ) - 91,380,955 49,736,585

(Continued)

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INNOLUX CORPORATION PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(Expressed in thousands of New Taiwan dollars)

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

Notes 2014 2013 $ 96,927 $ 547,891 ( 135,456 ) ( 292,854 ) 167,288 201,107 - 192,758 ( 753,906 ) ( 1,381,019 ) 1,550,113 3,557 736,214 3,278,146 6(27) ( 14,629,033 ) ( 16,072,136 ) 440,446 877,470 12,761 111,287 ( 568,172 ) ( 13,819 ) 125,498 113,894 1,444,112 5,859,537 ( 11,513,208 ) ( 6,574,181) ( 643,565 ) 1,943,565 - ( 699,430 ) ( 57,625,650 ) ( 49,210,951 ) - ( 2,000,000 ) - ( 980,000 ) 6(16) 10,625,000 14,519,051 ( 90,495 ) - ( 1,266,944 ) - 6(14) - 181,315 ( 7,754 ) ( 8,260 ) ( 2,920,036 ) ( 4,239,118) ( 51,929,444 ) ( 40,493,828) 27,938,303 2,668,576 27,604,892 24,936,316 $ 55,543,195 $ 27,604,892

The accompanying notes are an integral part of these financial statements. See report of independent accountants dated February 10, 2015.

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INNOLUX CORPORATION

NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(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 is engaged 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.

2. 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 10, 2015.

1. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

2. (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”) None.

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

the Company

According to Financial-Supervisory-Securities-Auditing No. 1030010325 issued on April 3, 2014, commencing 2015, companies with shares listed on the TWSE or traded on the Taiwan GreTai Securities Market or Emerging Stock Market shall adopt the 2013 version of IFRS (not including IFRS 9, ‘Financial instruments’) as endorsed by the FSC and the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" effective January 1, 2015 (collectively referred herein as the “2013 version of IFRSs”) in preparing the parent company only financial statements. The related new standards, interpretations and amendments are listed below:

Effective Date by International Accounting New Standards, Interpretations and Amendments Standards Board Limited exemption from comparative IFRS 7 July 1, 2010 disclosures for first-time adopters (amendment to IFRS 1) Severe hyperinflation and removal of fixed dates July 1, 2011 for first-time adopters (amendment to IFRS 1)

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New Standards,Interpretations andAmendments Government loans (amendment to IFRS 1) Disclosures－Transfers of financial assets (amendment to IFRS 7) Disclosures－Offsetting financial assets and financial liabilities (amendment to IFRS 7) IFRS 10, ‘Consolidated financial statements’ IFRS 11, ‘Joint arrangements’ IFRS 12, ‘Disclosure of interests in other entities’ IFRS 13, ‘Fair value measurement’ Presentation of items of other comprehensive income (amendment to IAS 1) Deferred tax: recovery of underlying assets (amendment to IAS 12) IAS 19 (revised), ‘Employee benefits’ IAS 27 (revised), ‘Separate financial statements’ Investments in associates and joint ventures (amendment to IAS 28) Offsetting financial assets and financial liabilities (amendment to IAS 32) IFRIC 20, ‘Stripping costs in the production phase of a surface mine’ Improvements to IFRSs 2010 Improvements to IFRSs 2009－2011

Effective Date by International Accounting StandardsBoard

January 1, 2013 July 1, 2011 January 1, 2013 January 1, 2013 (Investment entities: January 1, 2014) January 1, 2013 January 1, 2013 January 1, 2013 July 1, 2012 January 1, 2012 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2014 January 1, 2013 January 1, 2011 January 1, 2013

Based on the Company’s assessment, the adoption of the 2013 version of IFRS has no significant impact on the parent company only financial statements of the Company, except the following: A. IAS 19, ‘Employee benefits’

Under the revised standard, net interest expense or income, calculated by applying the discount rate to the net defined benefit asset or liability, replace the finance charge and expected return on plan assets. Additional disclosures are also required.

B. IAS 1, ‘Presentation of financial statements’

The amendment requires entities to separate items presented in other comprehensive income (OCI) classified by nature into two groups on the basis of whether they may be reclassified to profit or loss subsequently when specific conditions are met. If the items are presented before tax then the tax related to each of the two groups of OCI items (those that might be reclassified and those that will not be reclassified) must be shown separately. Accordingly, the Company will adjust its presentation of the statement of comprehensive income.

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C. IFRS 12, ‘Disclosure of interests in other entities’

The standard integrates the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. The Company will disclose additional information about its interests in consolidated entities and unconsolidated entities accordingly.

• D. IFRS 13, ‘Fair value measurement’

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

Based on the Company’s assessment, the adoption of the 2013 version of IFRSs has no significant impact on the parent company only financial statements of the Company.

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

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

version of IFRS as endorsed by the FSC:
New Standards,Interpretations andAmendments	Effective Date by International Accounting StandardsBoard
IFRS 9, ‘Financial instruments’ Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28) Investment entities: applying the consolidation exception (amendments to IFRS 10, IFRS 12 and IAS 28) Accounting for acquisition of interests in joint operations (amendments to IFRS 11) IFRS 14, ‘Regulatory deferral accounts’ IFRS 15, ‘Revenue from contracts with customers’ Disclosure initiative (amendments to IAS 1) Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 and IAS 38) Agriculture: bearer plants (amendments to IAS 16 and IAS 41) Defined benefit plans: employee contributions (amendments to IAS 19) Equity method in separate financial statements (amendments to IAS 27) Recoverable amount disclosures for non-financial assets (amendments to IAS 36)	January 1, 2018 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2017 January 1, 2016 January 1, 2016 January 1, 2016 July 1, 2014 January 1, 2016 January 1, 2014

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New Standards,Interpretations and Amendments	Effective Date by International Accounting Standards Board
Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) IFRIC 21, ‘Levies’ Improvements to IFRSs 2010-2012 Improvements to IFRSs 2011-2013 Improvements to IFRSs 2012-2014	January 1, 2014 January 1, 2014 July 1, 2014 July 1, 2014 January 1, 2016

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

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)Available-for-sale financial assets measured at fair value.

• (c)Defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligations.

• B.The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.

(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.

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A.Foreign currency transactions and balances

• (a)Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise, except when deferred in other comprehensive income as qualifying cash flow hedges.

• (b)Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognized in profit or loss.

• (c)Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

• (d)All foreign exchange gains and losses are presented in the statement of comprehensive income under “other gains and losses”.

• B.Translation of foreign operations

• (a)The operating results and financial position of all the group entities and associates that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

  • i.Assets and liabilities for each balance sheet presented are translated at the exchange rate prevailing at the dates of that balance sheet;

  • ii.Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period;

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

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

• (c)When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, if the Company retains

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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 pay off liabilities more than twelve months after the balance sheet date.

• B.Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

  • (a)Liabilities that are expected to be paid off within the normal operating cycle;

  • (b)Liabilities arising mainly from trading activities;

  • (c)Liabilities that are to be paid off within twelve months from the balance sheet date;

  • (d)Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

• (5) Cash equivalents

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

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

• A.Financial assets at fair value through profit or loss are financial assets held for trading or designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of sale in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

• (a)Hybrid (combined) contracts; or

• (b)They eliminate or significantly reduce a measurement or recognition inconsistency; or

• (c)They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

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• B.On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using trade date accounting.

• C.Financial assets at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in profit or loss.

• (7) Available-for-sale financial assets

• A.Available-for-sale financial assets are non-derivatives that are designated in this category. On a regular way purchase or sale basis, available-for-sale financial assets are recognized and derecognized using trade date accounting.

• B.Available-for-sale financial assets are initially recognized at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in other comprehensive income.

• (8) Loans and receivables

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

(9) Impairment of financial assets

• A.The Company assesses at each balance sheet date whether there is objective evidence that an individual financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of an individual financial asset or group of financial assets that can be reliably estimated.

• B.The objective evidence that the Company uses to determine whether there is an impairment loss is as follows:

• (a)Significant financial difficulty of the issuer or debtor;

• (b)A breach of contract, such as a default or delinquency in interest or principal payments;

• (c)Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered; or

• (d)A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

• C.When the Company assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:

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• (a)Financial assets measured at amortized cost

• The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognized in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortized cost that would have been at the date of reversal had the impairment loss not been recognized previously. Impairment loss is recognized and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

• (b)Available-for-sale financial assets

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

(10) Inventories

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

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

• A.Subsidiaries are all entities over which the Company has the power to govern the financial and operating policies. In general, control is presumed when the parent owns, directly or indirectly, more than half of the voting power of an entity. The Company evaluates investments in subsidiaries accounted using equity method in these parent company only financial statements.

• B.Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Company are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.

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• C.The Company's share of its subsidiaries' post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Company’s share of losses in a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognise losses proportionate to its ownership.

• D.If changes in the Company’s shares in subsidiaries do not result in loss in control (transactions with non-controlling interest), transactions shall be considered as equity transactions, which are transactions between owners. Difference of adjustment of non-controlling interest and fair value of consideration paid or received is recognised in equity.

• E.When the Company loses its control in a subsidiary, the Company revalues the remaining investment in the prior subsidiary at fair value, and recognises the difference between fair value and book value in the profit or loss for the period. The Company should reclassify all amounts previously recognised as other comprehensive income and amounts relating to the prior subsidiary to profit or loss.

• F.Associates are all entities over which the Company has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 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.

• G.The Company’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Company’s share of losses in an associate equals or exceeds its interest in the associate, the Company does not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

• H.When changes in an associate’s equity are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Company’s ownership percentage of the associate, the Company recognizes all the change in equity in “capital surplus” in proportion to its ownership.

• I.Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Company.

• J.In the case that an associate issues new shares and the Company does not subscribe or acquire new shares proportionately, which results in a change in the Company’s ownership percentage of the associate but maintains significant influence on the associate, then “capital surplus” and “investments accounted for under the equity method” shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the

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Company’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.

• K.When the Company loses its control in an associate, the Company revalues the remaining investment in the prior associate at fair value, and recognises the difference between fair value and book value in the profit or loss for the period.

• L.When the Company disposes its investment in an associate and loses significant influence over the associate, the amounts previously recognised in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of.

• M.When the Company disposes its investment in an associate and loses significant influence over the associate, capital surplus in relation to the associate is transferred to profit or loss; if it retains significant influence over the associate, the amounts are transferred in accordance with the disposal ratio to profit or loss.

• N.Pursuant to the “Regulations Governing the Preparation of Financial Reports by Securities Issuers,” profit (loss) of the current period and other comprehensive income in the parent company only financial statements shall equal to the amount attributable to owners of the parent in the financial statements prepared with basis for consolidation. Owners’ equity in the parent company only financial statements shall equal to equity attributable to owners of the parent in the financial statements prepared with basis for consolidation.

• (12) Property, plant and equipment

• A.Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalized.

• B.Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss when incurred.

• C.Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. If each component of property, plant and equipment is significant, it is depreciated separately.

• 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

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and equipment are as follows:

Buildings 3~50 years Machinery and equipment 2~9 years Others 2~6 years

(13) 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.

(14) Intangible assets

• A.Goodwill arises in a business combination accounted for by applying the acquisition method.

• B.Intangible assets, mainly patents, royalties and other intangible assets, are amortized on a ～

• straight-line basis over their estimated useful lives of 2 10 years.

(15) Impairment of non-financial assets

• A.The Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. Such recovery of impairment loss shall not result to the asset’s carrying amount greater than its amortized cost where no impairment loss was recognized.

• B.The recoverable amounts of goodwill, intangible assets with an indefinite useful life and intangible assets that have not yet been available for use shall be evaluated periodically. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognized in profit or loss shall not be reversed in the following years.

• C.For impairment testing purpose, goodwill is allocated to cash generating units. This allocation is based on operating segments. Goodwill is allocated to a cash generating unit or a group of cash generating units that expects to benefit from business combination that will produce goodwill.

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

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

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

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(17) Derivative financial instruments and hedging activities

• A.Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Any changes in the fair value are recognized in profit or loss.

• B.The Company designates certain derivatives as either:

• (a)Hedges of the fair value of recognized assets or liabilities or a firm commitment (fair value hedge).

• (b)Hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge).

• C.The Company documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

• D.The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as current assets or liabilities.

• E.Fair value hedge

• (a)Changes in the fair value of derivatives that are designated and qualified as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The Company only applies fair value hedge accounting for hedging foreign currency on long-term borrowings. The gain or loss relating to the effective portion of currency swaps hedging long-term borrowings denominated in foreign currency is recognized in the statement of comprehensive income within “finance costs”. The gain or loss relating to the ineffective portion is recognized in the statement of comprehensive income within “other gains and losses”. Changes in the fair value of the hedge long-term borrowings denominated in foreign currency attributable to interest rate risk are recognized in the statement of comprehensive income within “finance costs”.

• (b)If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized to profit or loss over the period to maturity.

• F.Cash flow hedge

• (a)The effective portion of changes in the fair value of derivatives that are designated and qualified as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the statement of

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comprehensive income within “other gains and losses”.

• (b)Amounts accumulated in other comprehensive income are reclassified into profit or loss in the periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognized in the statement of comprehensive income within “finance costs”.

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

(18) Employee benefits

• A.Short-term employee benefits

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

• B.Pensions

• (a)Defined contribution plans

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

• (b)Defined benefit plans

  • i.The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognized past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bond (at the balance sheet date).

  • ii.Actuarial gains and losses arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise.

  • iii.Past service costs are recognized immediately in profit or loss if vested immediately; if not, the past service costs are amortized on a straight-line basis over the vesting period.

• C.Employees’ bonus and directors’ and supervisors’ remuneration

• Employees’ bonus and directors’ and supervisors’ remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. However, if the accrued amounts for employees’ bonus and directors’ and supervisors’ remuneration are different from the actual distributed amounts as resolved by the stockholders at their stockholders’ meeting subsequently, the differences should

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be recognized based on the accounting for changes in estimates. The Company calculates the number of shares of employees’ stock bonus based on the fair value per share at the previous day of the stockholders’ meeting held in the year following the financial reporting year, and after taking into account the effects of ex-rights and ex-dividends.

• (19) Employee share based payment

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

• B.Restricted stocks to employees:

  • (a)Restricted stocks issued to employees are measured at the fair value of the equity instruments granted at the grant date, and are recognized as compensation cost over the vesting period.

  • (b)For restricted stocks where employees have to pay to acquire those stocks, if employees resign during the vesting period, they must return the stocks to the Company and the Company must refund their payments on the stocks. The Company recognizes the payments from the employees who are expected to resign during the vesting period as liabilities at the grant date, and recognizes the payments from the employees who are expected to be eventually vested with the stocks in “capital surplus – others”.

• C.The grant date for the shares reserved for employee preemption in cash capital increase is the date on which the Company informs employees of the grant and both the Company and employees agree to the number of shares granted and the price for subscription.

• (20) Income tax

• A.The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity.

• B.The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

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• C.Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the parent company only balance sheet. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

• D.Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. At each balance sheet date, unrecognized and recognized deferred income tax assets are reassessed.

• E.A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilized.

• (21) Revenue recognition

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

(22) Business combinations

• A.The Company uses the acquisition method to account for business combinations. The Company chooses to measure the non-controlling interest in the acquiree at the non-controlling interest’s proportionate share of the acquirer’s identifiable net assets on an acquisition-by-acquisition basis.

• B.If the total of the fair values of the consideration of acquisition and any non-controlling interest in the acquiree as well as the acquisition-date fair value of any previous equity interest in the acquiree is higher than the fair value of the Company’s share of the identifiable net assets acquired, the difference is recorded as goodwill; if less than the fair value of the Company’s share of the identifiable net assets acquired, the difference is recognized directly in profit or loss.

(23) 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 JUDGMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these parent company only financial statements requires management to make critical judgments in applying the Company’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and

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are continually evaluated and adjusted based on historical experience and other factors. The information is addressed below:

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

• －

• Financial assets impairment of equity investments

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

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

• (2) Critical accounting estimates and assumptions

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

• A.Impairment assessment of goodwill

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

• B.Reliability of deferred income tax assets

• Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. Assessment of the reliability of deferred income tax assets involves critical accounting judgments and estimates of the management, including the assumptions of expected future sales, revenue growth rate, profit rate, tax holiday, available tax credits, and tax planning, etc. Any change in global economic environment, industrial environment, and laws and regulations might cause material adjustments to deferred income tax assets.

• 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 judgments and estimates. Due to the rapid technology innovation, the Company evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realizable value.

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

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

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand and revolving funds Checking accounts and demand deposits Time deposits Cash equivalents - Repurchase Bonds	December 31,2014 255 $ 40,578,940 11,394,000 51,973,195 3,570,000 55,543,195 $	December 31,2013
		581 $ 25,816,011 1,788,300
		27,604,892 -
		27,604,892 $

• 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. The Company’s maximum exposure to credit risk at balance sheet date is the carrying amount of all cash and cash equivalents.

• B.The above time deposits and bonds with repurchase agreement 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 Current items Financial assets held for trading Forward foreign exchange contracts Liabilities Current items Financial liabilities held for trading Forward foreign exchange contracts	December31,2014 52,453 $ December31,2014 605,016 $	December31,2013
		227,703 $
		December31,2013
		689,097 $

• A.The Company recognized net loss of $883,120 and $1,587,910 on financial assets held for trading for the years ended December 31, 2014 and 2013, respectively.

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

		December 31,	2014		December 31,	2013
	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)	425,000 $	2014/10~2015/3	USD (sell)	467,000 $	2013/10~2014/3
exchange contracts	JPY (buy)	48,580,180	2014/10~2015/3	JPY (buy)	47,065,250	2013/10~2014/3
Forward foreign	EUR (sell)	38,000	2014/10~2015/2	EUR (sell)	188,000	2013/10~2014/3
exchange contracts	USD (buy)	47,574	2014/10~2015/2	USD (buy)	256,665	2013/10~2014/3
				TWD (sell)	26,762,745	2013/12~2014/3
				USD (buy)	904,000	2013/12~2014/3

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

(3) Available-for-sale financial assets

Available-for-sale financial assets
Items Current items Bond investments Non-current items Listed stocks and bond investments Emerging and unlisted stocks	December31,2014 220,000 $ 2,537,965 $ 563,496 3,101,461 $	December31,2013
		- $
		1,150,866 $ 673,256
		1,824,122 $

A.The Company recognized gain in other comprehensive income for the fair value change for the years ended December 31, 2014 and 2013 in the amount of $138,700 and $211,410, respectively. B.The counterparties of the Company’s debt instrument investments have good credit quality, all with credit rating of twA+ above. The maximum exposure to credit risk at balance sheet date is the carrying amount of available-for-sale financial asstes - debt instruments.

(4) Hedging derivative financial liabilities

Hedging derivative financial liabilities
Items Current item Interest rate swap - cash flow hedges Non-current item Interest rate swap - cash flow hedges	December31,2014 1,351 $ - $	December31,2013
		- $
		21,918 $

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Cash flow hedges

Designated as Hedging Instruments

Hedged Items Long-term borrowings	Derivative Instruments Designated as Hedges Interest rate swap (	December 31, December 31, 2014 2013 1,351) $ 21,918) ($ Fair Value	Period of Anticipated Cash Flow	Period of Gain (Loss) Expected to be Recognised in Profit or Loss
		December 31, 2014 1,351) $
			2008~2015	2008~2015

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

• (b)Information about gain or loss arising from cash flow hedges recognized in profit or loss and other comprehensive income:

Items Amount of gain or loss adjusted in other comprehensive income Amount of gain or loss transferred from other comprehensive income to profit or loss	2014 2013 1,224 $ 3,210 $ 277,234 82,687) ( Years ended December 31,

• (c)The gain/(loss) relating to the ineffective portion of cash flow hedges recognized in profit or loss amounted to $289 for the year ended December 31, 2013.

(5) Accounts and notes receivable

Accounts and notes receivable
		December31,2014			December31,2013
Notes receivable	$		21,447	$		21,447
Accounts receivable			69,802,557			65,425,580
			69,824,004			65,447,027
Less: allowance for sales returns and discounts	(		827,583)	(		1,545,279)
allowance for bad debts	(		138,272)	(		138,483)
	$		68,858,149	$		63,763,265

A.The Company’s accounts receivable that were neither past due nor impaired meet the credit ranking rule based on the counterparties’ industrial characteristics scale of business and profitability.

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

impaired is as follows:
Up to 60 days 61 to 180 days Over 180 days	December31,2014 534,490 $ 64,153 4,309 602,952 $	December31,2013
		3,048,292 $ 561,008 65,816
		3,675,116 $

The above ageing analysis was based on past due date.

• C.Movement analysis of accounts receivable and notes receivable that were impaired is as follows:

• (a)As of December 31, 2014 and 2013, the Company’s accounts receivable that were impaired were $138,272 and $138,483, respectively.

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

follows:
At January 1 Allowance for bad debts - reclassified Allowance for bad debts - write-offs At December 31	2014 138,483 $ - 211) ( 138,272 $	2013
		117,036 $ 21,447 - 138,483 $

• D.The maximum exposure to credit risk was the carrying amount of each class of accounts receivable.

(6) Inventories

Raw materials and supplies Work in process Finished goods	December31,2014 1,780,875 $ 16,122,356 10,034,934 27,938,165 $

Expenses and losses incurred on inventories for the years ended December 31, 2014 and 2013 are as follows:

ollows:
		Years ended	December31,
		2014		2013
Cost of inventories sold	$	389,619,753	$	393,083,704
Reversal of allowance for scrap, obsolescence	(	383,000)	(	1,423,000)
and price decline
Disposal loss and others		373,032		545,747
	$	389,609,785	$	392,206,451

The Company had disposed its expired and slow-moving inventories. Thus, the risk of reduction in the inventory’s market price had been decreased and the net realizable value of inventories had been recovered.

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(7) Investments accounted for under the equity method

Investments accounted for under the equity method
Landmark International Ltd. Innolux Holding Ltd. Toppoly Optoelectronics (B.V.I.) Ltd. Innolux Hong Kong Holding Ltd. InnoJoy Investment Corporation Innolux Optoelectronics Japan Co., Ltd. Ampower Holding Ltd. Yuan Chi Investment Co., Ltd. GIO Optoelectronics Corporation Chi Mei Materials Technology Contrel Technology Co., Ltd. Others	December31,2014 41,425,623 $ 16,796,396 5,945,861 2,393,227 1,670,083 1,572,495 1,477,199 918,468 449,994 - - 447,043 73,096,389 $	December31,2013
		36,005,637 $ 15,866,385 4,347,392 2,164,447 1,721,618 1,574,455 1,526,449 1,015,867 475,253 1,883,267 473,259 806,183
		67,860,212 $

1. The Company’s subsidiaries

The Company has invested in the Mainland subsidiary through Landmark International Ltd., Innolux Holding Ltd., Toppoly Optoelectronics (B.V.I.) Ltd. and Innolux Hong Kong Holding Ltd. The subsidiary is engaged in the research and development, assembly processing and after-sale services of LCD modules and LCD monitors. Information on investees in Mainland China is provided in Note 13.

1. The Company’s associates

A.The financial information of the Company’s associates is summarized below:

December 31, 2014 December 31, 2013	Assets Liabilities Revenue Profit/(Loss) 3,908,085 $ 1,297,031 $ 1,798,602 $ 475,353) ($ 22,729,921 7,107,607 20,087,705 2,302,711

B.The fair value of the Company’s associates which have quoted market price is as follows:

Stock price per share (in dollars) December 31, 2013 Chi Mei Materials Technology $ 36.45 Contrel Technology Co., Ltd. 16.95

• C.During 2014, the Company sold its interests in Chi Mei Materials Technology and Contrel Technology Co., Ltd. Since the Company lost control, the investment was reclassified as “available-for-sale financial assets - non-current”.

• D.The Company recognized impairment loss on associates for the year ended December 31, 2013 in the amount of $204,721.

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(8) Property, plant and equipment

2014

Property, plant and equipment 2014
At January1 Additions Disposals Cost: Land 3,852,792 $ - $ - $ Buildings 156,365,038 - 303,647) ( Machinery and equipment 376,152,145 51,347 14,314,548) ( Others 20,655,250 2,223 2,591,901) ( 557,025,225 53,570 17,210,096) ( Accumulated depreciation and impairment: Buildings 59,116,947) ( 13,954,331) ( 302,794 Machinery and equipment 252,063,722) ( 37,915,245) ( 14,309,885 ( Others 15,428,084) ( 2,767,296) ( 2,588,567 ( 326,608,753) ( 54,636,872) ( 17,201,246 ( Unfinished construction and equipment under acceptance 3,141,142 14,127,037 130) ( ( 233,557,614 $ At January1 Additions Disposals Cost: Land 3,852,792 $ - $ - $ Buildings 153,864,439 - 78,689) ( Machinery and equipment 347,222,768 330 2,556,036) ( Others 17,895,333 215 1,692,005) ( 522,835,332 545 4,326,730) ( Accumulated depreciation and impairment: Buildings 44,259,742) ( 14,939,334) ( 58,594 Machinery and equipment 200,871,601) ( 51,214,999) ( 2,138,976 Others 12,598,062) ( 3,023,762) ( 1,689,971 257,729,405) ( 69,178,095) ( 3,887,541 Unfinished construction and equipment under acceptance 21,945,408 15,812,656 - 287,051,335 $ 2013	Transfer, net exchange differences and others At December 31 - $ 3,852,792 $ 797,338 156,858,729 13,181,365 375,070,309 4,518,734 22,584,306 18,497,437 558,366,136 1,528 72,766,956) ( 8,533,930) 284,203,012) ( 1,983,547) 17,590,360) ( 10,515,949) 374,560,328) ( 8,474,675) 8,793,374 192,599,182 $
	Transfer, net exchange differences and others - $ 2,579,288 31,485,083 4,451,707 38,516,078 23,535 2,116,098) ( 1,496,231) ( 3,588,794) ( 34,616,922) (	At December 31
		3,852,792 $ 156,365,038 376,152,145 20,655,250 557,025,225 59,116,947) ( 252,063,722) ( 15,428,084) ( 326,608,753) ( 3,141,142 233,557,614 $

Information about the property, plant and equipment that were pledged to others as collateral is provided in Note 8.

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(9) Investment property

nvestment property
Cost: Land Buildings Accumulated depreciation and impairment: Buildings (		2014	At December 31 188,247 $ 568,440 756,687 $ 63,010) ( 693,677 $		At Additions December 31 - $ 188,247 $ - 568,440 - $ 756,687 $ 13,173) 49,837) ( 706,850 $ 2013
	At January1 188,247 $ 568,440 756,687 $ 49,837) ( 706,850 $	Additions - $ - - $ 13,173) (		At January1 188,247 $ 568,440 756,687 $ 36,664) ( 720,023 $

The fair value of the investment property held by the Company as at December 31, 2014 and 2013 was $1,110,523 and $721,774, respectively. The amounts mentioned above represent valuation results of comparative method based on market trading information.

(10) Intangible assets

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

Cost: Patents and royalty Goodwill Others Accumulated amortisation and impairment: Patents and royalty Others				2014
	At January1 Additions Disposals 8,807,308 $ - $ 673,622) ($ 17,096,628 - - 3,267,074 - 79,340) ( 29,171,010 - 752,962) ( 5,215,968) ( 1,193,337) ( 673,622 2,840,599) ( 291,157) ( 79,340 ( 8,056,567) ( 1,484,494) ( 752,962 ( 21,114,443 $				Transfer, net exchange differences and others At December 31 3,349 $ 8,137,035 $ - 17,096,628 498,811 3,686,545 502,160 28,920,208 - 5,735,683) ( 4,925) 3,057,341) ( 4,925) 8,793,024) ( 20,127,184 $	At December 31

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2013

At January1 Additions Cost: Patents and royalty 8,805,608 $ - $ Goodwill 17,096,628 - Others 3,150,228 - ( 29,052,464 - ( Accumulated amortisation and impairment: Patents and royalty 3,709,759) ( 1,506,209) ( Others 2,546,004) ( 370,951) ( 6,255,763) ( 1,877,160) ( 22,796,701 $	Disposals - $ - 14,561) 14,561) - 14,561 14,561	Transfer, net exchange differences and others At December 31 1,700 $ 8,807,308 $ - 17,096,628 131,407 3,267,074 133,107 29,171,010 - 5,215,968) ( 61,795 2,840,599) ( 61,795 8,056,567) ( 21,114,443 $

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

Operating costs Operating expenses	Years ended December31,	Years ended December31,
	2014 954,350 $ 530,144 1,484,494 $	2013
		961,945 $ 915,215
		1,877,160 $

C.The Company performed impairment analysis for recoverable amount of the goodwill at each reporting date and used the value in use as the basis for calculation of the recoverable amount. The value in use was calculated based on the estimated present value of future cash flows for five years, which was discounted at the discount rate of 4.89% and 4.22% for the years ended December 31, 2014 and 2013, respectively, to reflect the specific risks of the related cash generating units. The future cash flows were estimated based on the future revenue, gross profit, and other operating costs each year. Based on the evaluation above, the Company did not recognize impairment loss on goodwill for the years ended December 31, 2014 and 2013.

(11) Short-term borrowings

Type of borrowings December 31, 2014 December 31, 2013 Collateral Bank loans Credit loans $ 1,300,000 $ 1,943,565 None ～ Range of interest rates 2.5% 2.858% 4.050%

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- (12) Long term borrowings

Type of loans Syndicated bank loans Guaranteed commercial papers Credit loans Less: Administrative expenses charged by syndicated banks Current portion Range of interest rates	Period December31,2014 December31,2013 2005/03~2016/11 98,227,530 $ 139,125,971 $ 2012/11~2015/07 129,148 258,354 2009/09~2014/06 - 16,372,450 98,356,678 $ 155,756,775 $ 41,252) ( 187,557) ( 61,092,333) ( 155,569,218) ( 37,223,093 $ - $ 1.2474%~2.4737% 1.3115%~2.795%

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

• B.The syndicated loan agreements specified that the Company shall meet covenants on current ratio, liability ratio, interest coverage, and tangible net equity, which were based on the Company’s annual parent company only financial statements audited by independent auditors. The Company’s financial ratios on the parent company only financial statements for the years ended December 31, 2014 and 2013 are in accordance with the covenants on the syndicated loan agreement.

• C.In December 2011, the Company applied for the assistance of Ministry of Economic Affairs to negotiate the debt with the syndicated banks, in accordance with the “Procedures for the Assistance of Ministry of Economic Affairs in the Negotiation of Enterprise and Financial Institution relating to the Debt Issue”. On April 5, 2012, the Company signed an “Agreed-upon Repayment Agreement” with all financial institution creditors based on the framework of the resolutions during the creditors and debtors negotiation meeting. The major terms of the agreement were as follows:

• (a)Medium and long-term syndicated loans

  • The medium and long-term syndicated loans due between 2012 to 2014 will be extended for 2-3 years. Principal is repayable every year based on a certain percentage; interest is charged at the original interest rate or at the original interest rate plus premium rate.

• (b)Short and medium-term non-syndicated loans

  • The outstanding balances or the original amounts of each loan are renewed based on the original terms and all extended to December 31, 2013. Before maturity, the Company may apply for the extension of such loans for another year for each application, with a maximum of two applications with each bank. Interest is charged at the original interest rate plus premium rate and extension fee is charged at a certain percentage.

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• (c)Credit lines of derivative financial instruments

  • At least two-thirds of the original credit lines of derivative financial instruments are renewed based on the original terms and all extended to December 31, 2013. Before maturity, the Company may apply for the extension of such credit lines for another one year for each application, with a maximum of two applications with each bank. Extension fee is charged at a certain percentage.

• (d)Other matters

  • a)All financial institution creditors agreed to waive the 2011 and 2012 covenants, the interest penalty, and default penalty arising from the violation of covenants.

  • b)All financial institution creditors agreed to waive the agreement that the Company shall early repay whole or part of the loans as prescribed by the original agreements before the extension agreements were approved by all financial institution creditors.

• (e)The Company’s significant commitments

  • The Company is committed to increase capital in certain amounts of cash within 3 years starting from 2012, to focus on its main business activities, and not to make investments out of its main business lines, except for equipment improvements or equipment additions for its main business. Further, the Company shall not apply for bankruptcy or reorganisation during the period of negotiation for the extension of the due date on the Company’s debt.

• D.Because the Company failed to meet the requirements specified in the “syndicated repayment agreement” signed for the cash capital increase for the year ended December 31, 2013, the syndicated banks may take measures, in accordance with the agreement, including, but not limited to the outstanding principal, interest expenses, and other payables be due immediately. Therefore, the Company reclassified syndicated loans and other long-term borrowings as of December 31, 2013 amounting to $155,569,218 (including administrative expenses charged by syndicated banks) to “long-term liabilities - current portion”. However, the deadline was extended to the end of 2014 through the concession of financial institution creditors on January 27, 2014.

• E.Though the Company failed to meet the requirement specified in the “syndicated repayment agreement” signed for the cash capital increase for the year ended December 31, 2014, the deadline was extended to the end of 2015 through the concession of financial institution creditors.

• F. In order to repay the unpaid balance of the medium and long-term syndicated loans from the above “Agreed-upon Repayment Agreement”, on February 10, 2015, the Board of Directors has approved the proposal for the company to apply for a syndicated credit line of NT$68.5 billion with financial institutions.

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(13) Pensions

• A.Defined benefit pension plan

• (a)The Company has established a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforecment 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, employees are entitled to two base points for every year of service for the first 15 years and one base point for each additional year thereafter, up to a maximum of 45 base points. The pension payment to employees was computed based on years of service and average salaries or wages of the last six months prior to approved 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.

• (b)The amounts recognised in the balance sheet were determined as follows:

Changes in present value of funded obligations were as follows: December31,2014 Present value of funded obligations 1,605,920 $ Fair value of plan assets 1,488,938) ( ( Net liability in the balance sheet (shown as “Other non-current liabilities”) 116,982 $ 2014 Present value of funded obligations At January 1 1,504,354 $ Current service cost 10,470 Interest expense 30,087 Actuarial gain and loss 61,009 At December 31 1,605,920 $

December31,2013 1,504,354 $ 1,454,627) 49,727 $ 2013 1,464,983 $ 9,148 21,975 8,248 1,504,354 $

(c)Changes in present value of funded obligations were as follows:

• (d)Changes in fair value of plan assets were as follows:

Fair value of plan assets At January 1 Expected return on plan assets Actuarial gain and loss Employer contributions At December 31	2014 2013 1,454,627 $ 1,398,638 $ 29,092 20,980 5,219 3,622) ( - 38,631 1,488,938 $ 1,454,627 $

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(e)Expenses recognised in statements of comprehensive income were as follows:

Current service cost Interest cost Expected return on plan assets ( Current pension costs	2014 2013 10,470 $ 9,148 $ 30,087 21,975 29,092) 20,980) ( 11,465 $ 10,143 $ Years endedDecember31,
	2014 10,470 $ 30,087 29,092) ( 11,465 $

Details of cost and expenses recognised in statements of comprehensive income were as follows:

follows:
Cost of sales Selling expenses General and administrative expenses Research and development expenses	Years endedDecember31,
	2014 7,991 $ 184 848 2,442 11,465 $	2013
		6,593 $ 329 1,058 2,163
		10,143 $

• (f)Amounts recognised under other comprehensive income were as follows:

Recognition for current period Accumulated amount	Years endedDecember31,	Years endedDecember31,
	2014 55,790 $ 68,243 $	2013
		11,870 $
		12,453 $

• (g)The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. The composition of fair value of plan assets as of December 31, 2014 and 2013 is given in the Annual Labor Retirement Fund Utilisation Report published by the government. Expected return on plan assets was a projection of overall return for the obligations period, which was estimated based on historical returns and by reference to the status of Labor Retirement Fund utilisation by the Labor Pension Fund Supervisory Committee and taking into account the effect that the Fund’s 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

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offered by local banks.

For the years ended December 31, 2014 and 2013, the actual return on plan assets was $34,311 and $17,358, respectively.

• (h)The principal actuarial assumptions used were as follows:

Discount rate Future salary increases Expected return on plan assets	Years endedDecember31,	Years endedDecember31,
	2014 2.25% 3.00% 2.25%	2013
		2.00%
		3.00%
		2.00%

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

(i)Historical information of experience adjustments was as follows:

Present value of defined benefit obligation Fair value of plan assets ( Deficit in the plan Experience adjustments on plan liabilities Experience adjustments on plan assets	2014 2013 1,605,920 $ 1,504,354 $ 1,488,938) 1,454,627) ( 116,982 $ 49,727 $ 60,201 $ 320,046 $ 5,219 $ 3,622) ($ Years endedDecember31,
	2014 1,605,920 $ 1,488,938) ( 116,982 $ 60,201 $ 5,219 $ (

• (j)The Company suspended its contributions to the pension reserve as agreed by the Science Park Administration in June 2013.

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, 2014 and 2013 were $939,629 and $842,000, respectively.

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(14) Share-based payment

A.As of December 31, 2014, the Company’s share-based payment transactions are set forth below (excluding employee stock options assumed because of the merger stated in Note B):

Type of arrangement Employee stock options Employee stock options Employee stock options Reservation for new share subscription by employees Restricted stocks to employees- shares subscribed with consideration -shares subscribed with consideration -shares without consideration -shares subscribed with consideration -shares without consideration -shares subscribed with consideration -shares without consideration Reservation for new share subscription by employees	Quantity granted Contract period Grant date (in thousand units) (inyears) Vestingconditions 2007.12.20 25,000 6 Note (b),(c) 2010.05.13 20,000 5 Note (a) 2011.05.19 50,000 5 Note (a) 2013.01.17 36,122 - Vested immediately 2013.01.30 31,151 3 Note (d),(e) 2013.01.30 31,151 3 Note (d),(e) 2013.03.29 844 3 Note (d),(e) 2013.03.29 844 3 Note (d),(e) 2013.12.12 4,628 3 Note (d),(e) 2013.12.12 4,628 3 Note (d),(e) 2014.07.09 85,000 - Vested immediately	Vestingconditions

• (a)The employees may exercise the stock options by stage based on 30%, 30% and 40% of total options granted on completion of the specified year(s) of service (one to four years) from the grant date.

• (b)The employees may exercise the stock options by stage based on 40%, 30% and 30% of total options granted on completion of the specified year(s) of service (three to five years) from the grant date.

• (c)The employee stock options had already expired.

• (d)The employees may exercise the stock options by stage based on 20%, 40% and 40% of total options granted on completion of the specified year(s) of service (one to three years) from the grant date.

• (e)The restricted stocks issued by the Company cannot be transferred. Voting right and dividend right are restricted on these stocks before vested.

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

Exercise Type of Price price arrangement Grant date (in dollars) (in dollars) Reservation for new share subscription by employees 2014.07.09 14.90 $ 12.50 $ Restricted stocks to employees - shares subscribed with consideration 2013.12.12 10.65 - - shares issued with no consideration 2013.12.12 10.65 5.00 - shares subscribed with consideration 2013.03.29 18.40 - - shares issued with no consideration 2013.03.29 18.40 5.00 - shares subscribed with consideration 2013.01.30 15.35 - - shares issued with no consideration 2013.01.30 15.35 5.00 Reservation for new share subscription by employees 2013.01.17 14.15 12.98 Employee stock options 2011.05.19 26.70 26.70 Employee stock options 2010.05.13 39.85 39.85	Expected volatility (%) 36.01 - - - - - - 48.20 35.67 51.57	Expected duration (month) 0.84 - - - - - - 0.36 48.60 48.60	Risk Expected free Fair value dividend interest per unit yield(%) rate(%) (in dollars) - 0.42 2.42 $ - - 10.65 - - 5.65 - - 18.40 - - 13.40 - - 15.35 - - 10.35 - 0.65 1.17 - 1.00 7.31 ~8.32 - 0.80 15.12 ~16.98

B.Employee stock options acquired because of merger

(a)Details:

Type of arrangement Grant date Employee stock options 2009.09.30 Employee stock options 2007.07.02 Employee stock options 2007.12.27	24,819 5 years 21 (Note i) 6 years 2 (Note i) 6 years Quantity granted (in thousand units) Contractperiod	Vestingconditions Note ii, iv Note iii, iv Note iii, iv

i.Each unit of stock options can subscribe for 1,000 shares of common stock.

ii.The employees may exercise the stock options by stage based on 50% and 50% of total options granted on completion of the specified years of service (two to three years) from the grant date.

iii.The employees may exercise the stock options by stage based on 25%, 25%, 25% and 25%

of total options granted on completion of the specified years of service (two to five years) from the grant date.

iv.The employee stock options had already expired.

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v.The units of employee stock options above were adjusted by share conversion rate.

• (b)The fair value of employee stock options was estimated using the Hull & White (2002) Enhanced FASB 123 of the aforementioned binomial model. The information was as follows:

ollows:
Exercise Type of Price price arrangement Grant date (in dollars) (in dollars) Employee stock options 2009.09.30 51.60 $ 39.20 $ Employee stock options 2007.07.02 51.60 67.53 Employee stock options 2007.12.27 51.60 80.63	Expected volatility (%) 45.10 45.10 45.10	Expected duration (month) 36.78 24.78 48.54	Risk Expected free dividend interest yield(%) rate(%) 0.61 0.82 0.61 0.82 0.61 0.82	Fair value per unit (in dollars)
				$3.57~4.14 4.23~4.41 3.65~3.82

C.The details of the employee stock option plan for the years ended December 31, 2014 and 2013 were as follows:

were as follows:
Weighted average Range of Quantity exercise exercise (in thousand price price StockOptions units) (indollars) (indollars) Outstanding options at the beginning of the year 94,819 $ 28.71 Options exercised - - Options expired ( 24,819) 32.10 Outstanding options at the end of the year 70,000 25.63 $ 32.59 0.38 years 22.85 1.39 yeas Exercisable options at the end of the year 50,000 26.75 period YearendedDecember31,2014 Weighted average remaining vesting	YearendedDecember31,2014
		Weighted average stock price of stock options at exercise date (indollars)
		$ 12.68

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Year ended December 31, 2013

						Weighted
		Weighted			Weighted	average
		average	Range of		average	stock price of
	Quantity	exercise	exercise		remaining	stock options
	(in thousand	price		price	vesting	at exercise
StockOptions	units)	(in dollars)	(in dollars)		period	date(in dollars)
Outstanding options at the	119,842	$ 41.79
beginning of the year
Options exercised	-	-				$ 14.98
Options expired	( 25,023)	57.05
Outstanding options at the
end of the year	94,819	28.71	$	34.46	1.38 years
				23.82	2.39 years
				33.93	0.75 years
Exercisable options at the
end of the year	51,819	31.13

D.For the years ended December 31, 2014 and 2013, the expenses incurred from share-based payment arrangements were $578,227 and $556,874, respectively.

(15) Provisions-current

At January 1, 2014 Addition Used during the year ( At December 31, 2014	Warranty 140,809 $ 2,723,491 2,117,279) ( 747,021 $	Litigation and others 1,808,220 $ 2,451,275 1,873,027) ( 2,386,468 $	Total 1,949,029 $ 5,174,766 3,990,306) 3,133,489 $

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).

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(16) Share capital

• A.As of December 31, 2014, the Company’s authorized and outstanding capital were $120,000,000 (including $500,000 reserved for employee stock options) and $99,545,364, respectively, with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected. Movements in the number of the Company’s ordinary shares outstanding are as follows:

At January 1 Employee stock options exercised Issuance of restricted shares to employees Cancellation of restricted stock to employees ( At December 31	2014 Number of ordinary shares(in thousands) 9,109,429 850,000 - 4,893) ( 9,954,536	2013 Number of ordinary shares(in thousands) 7,912,971 1,125,000 72,526 1,068) 9,109,429

• B.The Company’s Board of Directors resolved to increase capital through cash on December 17, 2013 by issuing common shares of no more than 2 billion shares, in exchange for cash domestically or by using cash from capital increase to issue common shares in exchange for the issuance of foreign depository receipts. On June 19, 2014, the shareholders approved the capital increase. On June 20, 2014, the Board of Directors approved the domestic capital increase of 10,625,000 shares. The issue price was determined to be $12.5 in July 2014, and the capital increase was effective on August 12, 2014.

• C.The Board of Directors of the Company resolved to increase capital for cash by issuing global depositary receipts (the “GDR”). The amount of $9,360,000 is tentatively scheduled for release, (approximately equivalent to US$312,625 thousand). As the Company has received bank’s approval for extending capital increase, based on shareholders’ interest, the issuance of the GDR was cancelled in accordance with the Financial Supervisory Commission (FSC)’s approval on January 30, 2015.

• D.As authorized by the shareholders during their meeting in June 2012, the Board of Directors of the Company resolved to increase capital for cash by issuing the GDR on July 18, 2012, and had been completed in January 2013. The Company issued 1,125,000 thousand shares of common stock for cash, including 112,500 thousand shares regarded as employee stock options, and 101,250,000 units of GDRs which represent 1,012,500 thousand shares of common stock, with a unit of GDR representing 10 shares of common stock at the Luxembourg Stock Exchange. Per unit was issued at a premium of US$4.481, which was equivalent to $12.98 per share and raised a total of $14,519,051, net of issuance cost. As of December 31, 2014, there were 69 thousand units outstanding, representing 692 thousand shares of common stocks.

• E.As authorized by the shareholders at the shareholders’ meeting in June, 2012, the Board of Directors of the Company adopted a resolution on January 30, 2013, March 29, 2013 and

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November 12, 2013 to issue restricted shares to employees, consisting of 36,263 thousand shares without consideration and 36,263 thousand shares with consideration (the price for subscription is $5 per share). The effective dates of the issuance were on January 30, 2013, March 29, 2013 and December 12, 2013. Until the vesting conditions are met by employees, those shares are restricted to transfer voting rights, dividend and other rights. As of December 31, 2014, the Company bought back 4,893 shares of unvested restricted stocks to employees, and decreased capital in accordance with related regulation.

• F.The stockholders at the stockholders’ meeting on January 6, 2010 approved the merger of the Company with another company by issuing new shares, with the Company as the surviving company. The Company issued 4,046,382 thousand new shares according to the merger contract. The new shares included the common stock issued by the acquired companies in May and December 2006 through private placement. The issuance of 570,929 thousand shares was determined based on the exchange ratio in the merger contract. The rights and obligations of the private common shares were the same as other issued common shares, except for the transfer restriction under R.O.C. Securities and Exchange Act and the listing restriction that no public listing will be allowed within three years since the day of issuance and only if the Company completes the application to publicly issue the shares. The aforementioned private common shares have not been publicly issued as of December 31, 2014.

• G.In accordance with the Board of Directors’ resolution in August 2007, the Company decided to issue 300 million shares of common stock for cash, including 149,967,500 units of GDRs which represent 299,935 thousand shares of common stock with a unit of GDR representing 2 shares of common stock. Per unit was issued at premium of US$9.02 (in dollars). In accordance with the Board of Directors’ resolution in March 2013, the Company terminated the abovementioned GDR, and the effective date of termination was in May 2013. The depository trust company completed the cancellation and distributed proceeds in November 2013.

• (17) Capital surplus

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

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2014

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

Share of profit (loss) of associates accounted for under equity Employee Sharepremium method stock option At January 1 118,065,992 $ 24,241 $ 1,587,747 $ Capital surplus offset against accumulated deficit 27,308,220) ( - - Global depositary receipt issued for cash 3,269,051 - - Issuance of restricted stock to employees - - - Cancellation of restricted stock to employees - - - Compensation related to share-based payment 42,263 - 147,713 Expiration of employee stock options 37,525 - 37,525) ( Changes in net equity of long-term equity investments - 32,062 - At December 31 94,106,611 $ 56,303 $ 1,697,935 $ 2013		2013
			Restricted stock to employees Total - $ 119,677,980 $ - 27,308,220) ( - 3,269,051 187,212 187,212 10,680 10,680 189,976 - - 32,062 197,892 $ 96,058,741 $	Total

~44~

(18) Retained earnings

• A.In accordance with the Company’s Articles of Incorporation, net income must be distributed in the following order:

• (a)To pay all tax accruals and payables arising from the current year and to cover prior years’ losses, if any;

• (b)As legal reserve equal to 10% of net income after tax and distribution pursuant to clause (a);

• (c)As any special reserve;

• (d)To pay dividends on preferred shares;

• (e)To pay bonuses to employees not less than 5% of net income after tax and distribution pursuant to clauses (a) to (d); and

• (f)The remaining amount, if any, shall be distributed pursuant to the proposal of the Board of Directors in accordance with the Company’s dividend policy and the resolution approved at the stockholders’ meeting, of which 0.1% should be paid as remuneration to directors and supervisors and the remaining amount as dividends to stockholders.

• Dividends distributed in respect of any fiscal year in the form of shares shall not exceed two-thirds of total dividends to stockholders.

• B.Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.

• C.The Board of Directors proposed to cover accumulated deficit for the year ended December 31, 2012 and the proposal was approved by the stockholders in June 2013. It was resolved not to distribute dividends or accrue employees’ bonus and directors’ and supervisors’ remuneration. As approved by the stockholders in June 2013, the Company covered accumulated deficit amounting to $27,308,220 by using additional paid-in capital in excess of par value of common stock. In June 2014, the shareholders approved and resolved the deficit compensation amendment for 2012 which is to compensate deficit with legal reserve of $2,328,981 and $24,979,239 by using additional paid-in capital in excess of par value of common stock.

• D.The details of the appropriation of 2013 net income which was approved at the stockholders’ meeting in June 2014 are as follows:

meeting in June 2014 are as follows:
Legal reserve Special reserve Cash dividends	Year ended December 31,2013
	Amount 509,272 $ 1,144,229 90,495 1,743,996 $	Dividends per share(in dollars)
		0.01 $

~45~

Furthermore, the Company’s stockholders have resolved to distribute $0.14 cash per share with capital surplus amounting to $1,266,944. The Company distributed a total of $0.15 cash dividend per share.

• E.Employees’ bonus and directors’ and supervisors’ remuneration were accrued at $172,217 and $4,004, respectively, for the year ended December 31, 2013. The amount was accrued by considering the period’s net profit after tax, legal reserve amongst other factors and the Company’s Articles of Incorporation. As resolved by the stockholders in June 2014, employees’ bonus and directors’ and supervisors’ remuneration were $343,922 and $90, respectively, resulting to a difference of $167,791 from the amounts in 2013 financial statements. The difference was caused by different accrual ratio which has been processed as accounting estimates after being approved at the stockholders’ meeting and recorded as expense in 2014. For the year ended December 31, 2014, employees’ bonus was accrued at $1,436,187. Information about the appropriation of employees’ bonus and directors’ and supervisors’ remuneration by the Company as proposed by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(19) Other equity items

ther equity items
Available- Currency for-sale translation investments At January 1 78,074) ($ 1,544,345) ($ Fair value losses of cash flow hedges - - Reclassified as current income of cash flow hedges - - Revaluation of available-for-sale investments - gross - 138,700 Revaluation transfer of available-for-sale investment - gross - 35,190) ( Currency translation differences 3,087,368 - Issuance of restricted stocks to employees - - Compensation related to share-based payment - - Share of subsidiaries and other comprehensive income (loss) of associates 73,654 189,441 Effect of income tax - 8,453) ( At December 31 3,082,948 $ 1,259,847) ($			2014
			Employee Hedging unearned reserve compensation Total 478,190 $ 387,268) ($ 1,531,497) ($ 1,224) ( - 1,224) ( 277,234) ( - 277,234) ( - - 138,700 - - 35,190) ( - - 3,087,368 - 43,951) ( 43,951) ( - 288,704 288,704 - - 263,095 47,338 - 38,885 247,070 $ 142,515) ($ 1,927,656 $		Total

~46~

2013

			2013
Other income Available- Currency for-sale translation investments At January 1 2,818,705) ($ 1,609,513) ($ Fair value losses of cash flow hedges - - Reclassified as current income of cash flow hedges - - Revaluation of available-for-sale investments - gross - 211,410) ( Revaluation transfer of available-for-sale investment - gross - 11,598) ( Currency translation differences 2,703,765 - Issuance of restricted stocks to employees - - Compensation related to share-based payment - - Share of subsidiaries and other comprehensive income (loss) of associates 36,866 239,036 Effect of income tax - 49,140 At December 31 78,074) ($ 1,544,345) ($ Rental revenue $ Interest income Dividend income Other income $			Employee Hedging unearned reserve compensation Total 423,629 $ - $ 4,004,589) ($ 3,210) ( - 3,210) ( 82,687 - 82,687 - - 211,410) ( - - 11,598) ( - - 2,703,765 - 754,166) ( 754,166) ( - 366,898 366,898 275,902 24,916) ( - 24,224 478,190 $ 387,268) ($ 1,531,497) ($ 2014 2013 139,286 129,511 $ 126,493 112,782 7,567 43,822 1,106,573 935,960 1,379,919 1,222,075 $ Years endedDecember31,
			2014 139,286 126,493 7,567 1,106,573 1,379,919
		$
		$

(20) Other income

(21)

Other gains and losses 2014 2013 Net loss on financial assets and liabilities at fair value through profit or loss 883,120) ($ 1,587,910) ($ Net currency exchange gain 1,143,155 2,252,870 Gain on disposal of investments 452,613 18,366 Gain (loss) on disposal of property, plant and equipment 22,568 6,065) ( Impairment loss - 204,721) ( Litigation loss and others 4,154,038) ( 9,422,978) ( 3,418,822) ($ 8,950,438) ($ Years ended December31,

~47~

(22) Finance costs

Finance costs
			Years ended	December31,
			2014			2013
Interest expense:
Bank borrowings		$	2,984,966		$	4,292,335
Bonds			-			5,662
Others			13,507			20,567
(Gain) loss on fair value change of financial
instruments:
(Gain) loss on cash flow hedges, reclassified
from equity	(		277,234)			82,687
Fair value hedges			-	(		31,642)
Financing charges incurred on accounts receivable factoring			-			225
		$	2,721,239		$	4,369,834
Expenses by nature
			Years ended	December 31,
			2014			2013
Employee benefit expense		$	26,411,358		$	20,699,447
Depreciation			54,650,045			69,191,268
Amortization			1,484,494			1,877,160
		$	82,545,897		$	91,767,875
Employee benefit expense
			Years ended	December31,
			2014			2013
Salaries and other-term employee benefits	$		24,882,037	$		19,290,430
Share-based payments			578,227			556,874
Termination benefits			951,094			852,143
	$		26,411,358	$		20,699,447

(23) Expenses by nature

(24) Employee benefit expense

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(25) Income tax

A.Income tax expense

(a)Components of income tax expense:

e tax me tax expense omponents of income tax expense:
Current tax: Current tax on profit for the period Adjustments in respect of prior years Total current tax Deferred tax: Origination and reversal of temporary differences Income tax expense (benefit)	2014 2013 123,787 $ - $ 1,075 2,985 124,862 2,985 123,787) ( 670,402) ( 1,075 $ 667,417) ($ Years ended December31,
	2014 123,787 $ 1,075 124,862 123,787) ( 1,075 $

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

ollows:
		Years ended	December31,
		2014	2013
Fair value gains/losses on available-for-sale
financial assets	$	8,453	($	49,140)
Cash flow hedges	(	47,338)		24,916
Actuarial gains/losses on defined benefit
obligations	(	9,484)	(	2,018)
	($	48,369)	($	26,242)

B.Reconciliation between income tax expense and accounting profit

		Years ended	December31,	December31,
		2014		2013
Tax calculated based on profit before tax and
statutory tax rate	$	3,685,232	$	753,976
Effects from items disallowed by tax regulation	(	575,514)		166,080
Under provision of prior year's income tax		1,075		2,985
Additional 10% tax on undistributed earnings		334,872		-
Effect from Alternative Minimum Tax		74,672		118,725
Change in assessment of realization of deferred tax
assets	(	3,519,262)	(	1,709,183)
Tax expense	$	1,075	($	667,417)

~49~

C.Amounts of deferred tax assets or liabilities as a result of temporary differences, loss carryforward and investment tax credits were as follows:

				Year	Year	ended December31,2014	ended December31,2014	ended December31,2014
								Recognised
								in other
				Recognised in			comprehensive
			January1		profit or loss			income		December31
Temporary differences:
-Deferred tax assets:
Sales returns and discount		$	288,013	($		121,640)	$	-		$	166,373
provisions
Accrued royalties and
warranty provisions			364,411	(		36,493)		-			327,918
Unrealised exchange loss			-			200,697		-			200,697
Unrealised loss on
financial instruments			449,511			258,904	(	8,453)			699,962
Net operating loss
carryforward			16,520,833	(		672,645)		-			15,848,188
Others			212,631			110,173		9,484			332,288
		$	17,835,399	($		261,004)	$	1,031	$		17,575,426
-Deferred tax liabilities:
Unrealised exchange gain	($		51,357)	$		51,357	$	-		$	-
Unrealised gain on cash
flow hedges	(		97,943)			-		47,338	(		50,605)
Amortisation charges on
goodwill	(		726,842)			332,155		-	(		394,687)
Others	(		33,566)			1,279		-	(		32,287)
	($		909,708)	$		384,791	$	47,338	($		477,579)
Total		$	16,925,691	$		123,787	$	48,369	$		17,097,847

~50~

					Year	ended December31,2013	ended December31,2013	ended December31,2013
								Recognised
								in other
					Recognised in		comprehensive
			January1		profit or loss			income	December31
Temporary differences:
-Deferred tax assets:
Sales returns and discount
provisions		$	98,369		$	189,644	$	-	$	288,013
Accrued royalties and
warranty provisions			169,057			195,354		-		364,411
Unrealised loss on
financial instruments			483,870	(		83,499)		49,140		449,511
Net operating loss
carryforward			16,285,600			235,233		-		16,520,833
Others			322,918	(		112,305)		2,018		212,631
		$	17,359,814		$	424,427	$	51,158	$	17,835,399
-Deferred tax liabilities:
Unrealised exchange gain	($		455,343)		$	403,986	$	-	($	51,357)
Unrealised gain on cash
flow hedges	(		73,027)			-	(	24,916)	(	97,943)
Amortisation charges on
goodwill	(		533,081)	(		193,761)		-	(	726,842)
Others	(		69,316)			35,750		-	(	33,566)
	($		1,130,767)		$	245,975	($	24,916)	($	909,708)
Total		$	16,229,047		$	670,402	$	26,242	$	16,925,691

D.Details of investment tax credits and unrecognised deferred tax assets are as follows:

December 31, 2013

Qualifyingitems Machinery and equipment	Unused tax credits 409,544 $	Unrecognised deferred tax assets 409,544 $	Final year tax credits are due
			2014

~51~

• E.Expiration dates of unused net operating loss carryfoward and amounts of unrecognised deferred tax assets were as follows:

		December31,2014
Year incurred 2010 2011 2012	Amount filed / assessed Assessed Assessed Filed	Unused amount 14,641,521 $ 63,808,943 43,123,373 121,573,837 $ December 31,2013	Unrecognised deferred taxassets 3,414,183 $ 14,879,288 10,055,723 28,349,194 $	Usable untilyear
				2015~2020 2021 2022
Year incurred 2009 2010 2011 2012	Amount filed / assessed Assessed Assessed Filed Filed	Unused amount 44,934,812 $ 22,184,259 63,324,400 43,123,373 173,566,844 $	Unrecognised deferred taxassets 37,357,906 $ 9,273,300 17,700,435 12,053,847 76,385,488 $	Usable untilyear
				2014 2015~2020 2021 2022

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

Deductible temporary differences

December31,2014 31,105,662 $	December31,2013
	81,368,397 $

• G.The Company has not recognised taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2014 and 2013, the amounts of temporary differences unrecognised as deferred tax liabilities were $20,486,590 and $12,677,405, respectively.

• H.Certain revenue from the design, research, development, manufacture and sale of the thin film transistor - liquid crystal displays (TFT-LCD) and LCDs is exempt from income tax from 2008 to 2015.

• I.The Company’s income tax returns through 2011 have been assessed and approved by the Tax Authority.

• J.Unappropriated retained earnings recorded by the Company pertain to retained earnings after 1998.

~52~

K.The details of imputation system are as follows:

Earnings per share (a)Balance of tax credit account (b)Estimated creditable tax rate Basic earnings per share Profit attributable to ordinary shareholders of the parent Weighted average number of ordinary shares outstanding (shares in thousands) Basic earnings per share (in dollar) Diluted earnings per share Profit attributable to ordinary shareholders of the parent Weighted average number of ordinary shares outstanding (shares in thousands) Assumed conversion of all dilutive potential ordinary shares: -Employees’ bonus -Restricted stocks Diluted earnings per share (in dollar)	December31,2014 738,931 $ 2014(Estimate) 2.96% 2014 21,676,759 $ 9,377,302 2.31 $ 21,676,759 $ 9,377,302 106,514 41,875 9,525,691 2.28 $ Years ended	December31,2014 738,931 $ 2014(Estimate) 2.96% 2014 21,676,759 $ 9,377,302 2.31 $ 21,676,759 $ 9,377,302 106,514 41,875 9,525,691 2.28 $ Years ended	December31,2013 1,082,780 $ 2013 (Actual) 20.48% December31,	December31,2013 1,082,780 $ 2013 (Actual) 20.48% December31,
	$
		2014		2013
		21,676,759 $ 9,377,302 2.31 $ 21,676,759 $ 9,377,302 106,514 41,875 9,525,691 2.28 $		5,102,568 $
				8,967,080
				0.57 $
				5,102,568 $
				8,967,080 15,173 27,609
				9,009,862
				0.57 $

(26) Earnings per share

As employee stock options had anti-dilutive effect for the years ended December 31, 2014 and 2013, they were not included in the calculation of diluted earnings per share.

(27) Non-cash transaction

Investing activities with partial cash payments:

Non-cash transaction Investing activities with partial cash payments:
Purchase of property, plant and equipment Add: opening balance of payable on equipment Less: ending balance of payable on equipment ( Cash paid during the year	2014 2013 14,180,607 $ 15,813,201 $ 3,180,964 3,439,899 2,732,538) 3,180,964) ( 14,629,033 $ 16,072,136 $ Years endedDecember31,
	2014 14,180,607 $ 3,180,964 2,732,538) 14,629,033 $

~53~

7. RELATED PARTY TRANSACTIONS

(1) Significant related party transactions A.Operating revenue

TED PARTY TRANSACTIONS nificant related party transactions Operating revenue
Sales of goods: Others Subsidiaries Associates	Years endedDecember31,
	2014 14,374,629 $ 7,967,864 27,050 22,369,543 $	2013
		5,617,759 $ 6,111,580 - 11,729,339 $

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

B.Purchases of goods

Purchases of goods
Associates Others Subsidiaries Purchases of goods:	Years endedDecember31,
	2014 4,431,198 $ 2,767,390 420,519 7,619,107 $	2013
		5,287,598 $ 1,772,885 1,712,587 8,773,070 $

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

C.Consigned processing

(a)Consigned processing

rd parties. nsigned processing Consigned processing
Processing costs: Subsidiaries Associates Others	Years ended December31,
	2014 167,873,521 $ - 15,192 167,888,713 $	2013
		148,212,172 $ 8,412 - 148,220,584 $

~54~

(b)Balance of consigned processing at the end of year (shown as “Other payables”)

December31,2014	December31,2013
Payables to related parties:
Subsidiaries 2,677,593 $	283,023 $
The Company subcontracted the processing of products of associates in	Mainland China. The
processing fees were mainly charged based on cost plus method.

D.Accounts receivable

Accounts receivable
		December31,2014			December31,2013
Receivables from related parties:
Others	$		5,821,222	$		1,833,860
Subsidiaries			774,814			1,095,893
Associates			27,899			-
			6,623,935			2,929,753
Less: transfer to other receivables	(		556,217)	(		519,851)
allowance for bad debts	(		60)	(		60)
	$		6,067,658	$		2,409,842

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

• (b) The above receivables from related parties that exceed normal granting periods were transferred to ‘other receivables – related parties’.

E.Other receivables

E.Other receivables
F.Accounts payable Transfer from accounts receivable Other receivables Payables to related parties: Subsidiaries Others Associates	December 31,2014 556,217 $ 134,807 691,024 $ December31,2014 83,822,951 $ 1,347,900 161 85,171,012 $	December 31,2013
		519,851 $ 268,100 787,951 $ December31,2013 80,095,077 $ 442,802 1,439,867 81,977,746 $

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.

~55~

2014

G.Other payables-short-term financing

			2014
Subsidiaries Subsidiaries	Maximum outstanding balance 396,900 $	Actual amount drawn down 396,900 $	Interest rate 1.38% 2013	Interest expenses 5,952 $	Accrued expenses - $ Accrued expenses - $
	Maximum outstanding balance 425,850 $	Actual amount drawn down 425,850 $	Interest rate 1.40%	Interest expenses 6,533 $

H.Property transactions

Purchase of property

(a)Acquisition of property, plant and equipment:

erty transactions hase of property cquisition of property, plant and equipment: sidiaries 425,850 $ 425,850 $	1.40% 6,533 $ - $	1.40% 6,533 $ - $
Subsidiaries Associates Others	Years ended December31,
	2014 597,848 $ 510,051 2,398 1,110,297 $	2013
		865,847 $ 1,095,965 -
		1,961,812 $

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

Associates Subsidiaries Others	December31,2014 - $ 586,682 748 587,430 $	December31,2013
		227,734 $ 218,466 2,034
		448,234 $

I. Endorsements and guarantees

As of December 31, 2014 and 2013, the balances of endorsement/guarantee provided by the Company for bank borrowings are as follows. Details are provided in Note 13(1)B.

Subsidiaries

December31,2014 16,901,100 $	December31,2013
	15,915,870 $

~56~

(2) Key management compensation

				Years ended	Years ended	December31,
				2014		2013
Salaries and other short-term		employee benefits		$	73,982	$	46,386
Share-based payments					18,638		27,582
Post-employment benefits					216		334
				$	92,836	$	74,302
PLEDGED ASSETS
The Company’s assets pledged as collateral are as			follows:
		Book	value
Pledged asset	December31,2014		December31,2013			Purpose
Other financial assets-
current
Demand deposits	$	2,250,035	$	2,485,841	Syndicated bank loans
Property, plant and		163,632,314		211,132,039	Long-term loans and performance
equipment					guarantee for lease payable
Other financial assets-
non-current
Refundable deposits		11,079,360		12,327,000	Guarantee to European
					Commission for litigation
Time deposits		80,722		722	Guarantee for contract
	$	177,042,431	$	225,945,602

8. PLEDGED ASSETS

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 under the Anti-Trust competition by the United States (the “U.S.”) Department of Justice. Moreover, authorities of some U.S state governments, the European Union’s, Brazil’s and Korea’s governments are starting to investigate this case. In addition, certain downstream customers and consumers in the TFT-LCD industry of the U.S. and Canada are now bringing up class-actions or individual civil lawsuits against the TFT-LCD companies; in certain lawsuits, CMO and Chi Mei Optoelectronics USA Inc. were listed as defendants. Details for investigations on significant cases related to the Anti-Trust Act are as follows:

• (a)Regarding the above lawsuits, the Company had reached an agreement with the United States Department of Justice in December 2009, agreeing to pay penalties of US$220 million in installment over five years. As of December 31, 2014, the unpaid penalties amounted to US$35 million.

~57~

The Company had reached settlement agreements with the plaintiffs on individual civil lawsuits in the U.S. since 2012 and recognized related losses.

  - The Company reached an out-of-court settlement with twelve State Governments, agreeing to pay the plaintiffs as civil statutory damages since November 2011.

• (b)In December 2010, the Company received a notice from the European Commission, requesting the Company to pay a penalty of EUR 300 million to the account as specified by the European Commission within three months upon receipt of the notice. The Company appealed this case with the Court of Justice of the European Union in February 2011 and deposited EUR 300 million to the above account on March 14, 2011. The principal and interest accrued in this account will be refunded to the Company depending on the final outcome of this case. The Court of Justice of the European Union has rendered that partial of the Company’s appeal was reasonable and lowered the penalty from EUR 300 million to EUR 288 million. The Company has decided to appeal against partial judgement within the prescribed time.

• (c)Except for the Anti-Trust litigations the ultimate outcome of which cannot be reliably estimated, the Company has recognised actual or estimated losses or liabilities in “other payables” and “other non-current liabilities”.

• B.Eidos Displays, LLC and Eidos III, LLC (“Eidos”) filed a lawsuit against the Company and its subsidiaries in the US with the United States District Court for the District of East Texas on April 25, 2011, alleging infringement of its patent. The administrative law judge has ruled a summary judgment for the lawsuit in December 2013 rendering Eidos’ patent as invalid, and the presiding judge has confirmed the summary judgment in January 2014. Eidos has filed a complaint in February 2014 and the Company remained positive on its defense. The United States Court of Appeals for the Federal Circuit has held a hearing in November 2014 but has not ruled any judgment. The Company is currently assessing the status of the litigation. The Company does not expect that the lawsuit would have a material adverse effect on the Company’s financial position or results of operations in the short-term.

(2) Commitments

• A.Capital expenditures contracted for at the balance sheet date but not yet incurred are as follows:

Property, plant and equipment

December 31, 2014 December 31, 2013 $ 19,350,952 $ 13,229,191

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B.Operating lease commitments

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

leases are as follows:
Not later than one year Later than one year but not later than five years Later than five years	December31,2014 500,648 $ 1,943,776 1,490,584 3,935,008 $	December31,2013
		500,648 $ 1,982,908 1,952,100
		4,435,656 $

C.Outstanding letters of credit

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

Outstanding letters of credit	December31,2014 693,635 $	December31,2013
		390,027 $

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

• (1) Details of cancellation of issuance of global depository receipts (the “GDR”) as approved by the Financial Supervisory Commission (FSC) on January 30, 2015 are provided in Note 6(16) C.

• (2) Details of the proposal of syndicated credit line contract with financial institution creditors that was approved by the Board of Directors on February 10, 2015 are provided in Note 6(12) F.

12. OTHERS

(1) Capital risk management

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

(2) Financial instruments

• A.Fair value information of financial instruments

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

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Financial assets: Other financial assets - non-current Financial liabilities: Long-term borrowings (including current portion)	December	Fairvalue 11,103,454 $ 98,315,426 $ 31,2014	December	31,2013
	Bookvalue 11,160,082 $ 98,315,426 $		Bookvalue 12,327,722 $ 155,569,218 $	Fairvalue
				12,265,170 $
				155,569,218 $

• B.Financial risk management policies

• (a)The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial position and financial performance. The Company uses derivative financial instruments to hedge certain risk exposures (see Notes 6(2), (4)).

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

• 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 various currency exposures, primarily with respect to the USD and RMB. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

• b) Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The group companies are required to hedge their entire foreign exchange risk exposure via their treasury departments. To manage their foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, entities in the 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.

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• 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 a decrease of $13,765 or $324,198 for the years ended December 31, 2014 and 2013, 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:

Foreign Currency Exchange Amount Rate Book Value (In Thousands) (Note) (NTD) Financial asstes Monetary items USD 3,689,844 $ 31.65 116,783,563 $ JPY 2,740,487 0.26 725,133 EUR 363,356 38.47 13,978,305 Non-monetary items USD 2,217,538 $ 31.65 70,185,078 $ HKD 278,754 4.08 1,137,316 JPY 5,383,824 0.26 1,424,560 EUR 3,834 38.47 147,494 Monetary items USD 3,568,162 $ 31.65 112,932,327 $ JPY 32,732,829 0.26 8,661,107 EUR 292,958 38.47 11,270,094 December 31,2014 Financial liabilities	December 31,2013	December 31,2013
	Foreign Currency Exchange Amount Rate (In Thousands) (Note) 2,580,180 $ 29.81 761,223 0.28 405,043 41.09 2,108,219 $ 29.81 266,670 3.84 4,813,897 0.28 3,651 41.09 3,647,810 $ 29.81 36,451,156 0.28 176,291 41.09	Book Value (NTD)
		76,915,166 $ 213,142 16,643,217 62,846,008 $ 1,024,013 1,347,891 150,020 108,741,216 $ 10,206,324 7,243,797

Note: Exchange rate represents the amount of NT dollars for which one foreign currency could be exchanged.

Price risk

• a) The Company is exposed to equity securities price risk because of investments held by the Company that are classified on the parent company only balance sheet either as available-for-sale or at fair value through profit or loss. To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio in accordance with the policy set by the Company.

• 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, other components of equity for the years ended December 31, 2014 and 2013 would have increased/decreased by $620,292 and $320,825, respectively, as a result of gains/losses on equity securities classified as available-for-sale.

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Interest rate risk

• a) The Company’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Company to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. During the years ended December 31, 2014 and 2013, the Company’s borrowings at variable rate were denominated in the NTD, USD and RMB.

• 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) Based on the simulations performed, the impact on post-tax profit of a 25% shift would be a maximum increase of $245,892 or decrease of $389,392 for the years ended December 31, 2014 and 2013, respectively. The simulation is done on a quarterly basis to verify that the maximum loss potential is within the limit given by the management.

• d) Based on the various scenarios, the Company manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Company raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if the Company borrowed at fixed rates directly. The Company agrees with other parties to exchange interest rate, at specified intervals. The difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional amounts.

(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. According to the Company’s credit policy, each local entity in the Company is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Customer credit quality is assessed via internal risk control, considering customer financial position, past experience and other factors. Individual risk limits are set by the board of directors based on internal or external ratings. The utilization of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables. Because the Company's counterparties and executor are banks with good credit standing and financial institutions and government with

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investment grade or above, there is no significant default. Therefore, there is no significant credit risk.

• b) No credit limits were exceeded during the reporting periods. Management does not expect any significant losses from non-performance by these counterparties.

• c) The individual analysis of financial assets that had been impaired is provided in Note 6.

• (c)Liquidity risk

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

• b) Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Company treasury. Company treasury invests surplus cash in interest bearing savings accounts, time deposits, money market deposits and marketable securities. The Company chooses instruments that are with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the abovementioned forecasts. These are expected to readily generate cash inflows for managing liquidity risk.

• c) The table below analyses the Company’s non-derivative financial liabilities and net-settled or gross-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

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Non-derivative financial liabilities:

Less than Between 1 December31,2014 1year and 3 years Short-term borrowings 1,300,000 $ - $ Accounts payable 118,902,792 - Other payables 18,688,940 - Long-term borrowings (including current portion) 61,122,573 37,234,105 Other financial liabilities - 11,230,850 Financial guarantee contracts 10,140,660 - Less than Between 1 December31,2013 1year and 3 years Short-term borrowings 1,943,565 $ - $ Accounts payable 111,001,671 - Other payables 15,090,951 - Long-term borrowings (including current portion) 155,756,775 - Other financial liabilities - 12,111,981 Financial guarantee contracts 13,528,490 - Derivative financial liabilities: December 31,2014 Less than 1year Forward exchange contracts $ 605,016 Interest rate swap contracts 1,351 December31,2013 Less than 1year Forward exchange contracts $ 689,097 Interest rate swap contracts -	Between 3 Over 5 and 5 years years - $ - $ - - - - - - - 6,344 - - Between 3 Over 5 and 5 years years - $ - $ - - - - - - 5,992 38 - - Between 1 and 3years $ - $ - Between 1 and 3 years $ - $ 21,918	Between 3 Over 5 and 5 years years - $ - $ - - - - - - - 6,344 - - Between 3 Over 5 and 5 years years - $ - $ - - - - - - 5,992 38 - - Between 1 and 3years $ - $ - Between 1 and 3 years $ - $ 21,918	Total
			1,300,000 $ 118,902,792 18,688,940 98,356,678 11,237,194 10,140,660 Total 1,943,565 $ 111,001,671 15,090,951 155,756,775 12,118,011 13,528,490 Total
		$	605,016 1,351 Total
		$	689,097 21,918

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(3) Fair value estimation

• A.The table below analyses financial instruments measured at fair value, by valuation method. The different levels have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

• Level 3: Inputs for the asset or liability that are not based on observable market data.

The following table presents the Company’s financial assets and liabilities that are measured at fair value at December 31, 2014 and 2013:

December31,2014 Financial assets: Financial assets at fair value through profit or loss Forward exchange contracts Available-for-sale financial assets Equity securities Debt securities Financial liabilities: Financial liabilities at fair value through profit or loss Forward exchange contracts Derivative financial liabilities for hedging Interest rate swap contracts	Level 1 - $ 2,537,965 220,000 2,757,965 $ - $ - - $	Level 2 52,453 $ - - 52,453 $ 605,016 $ 1,351 606,367 $	Level3 - $ 563,496 - 563,496 $ - $ - - $	Total
				52,453 $ 3,101,461 220,000
				3,373,914 $
				605,016 $ 1,351
				606,367 $

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December31,2013 Financial assets: Financial assets at fair value through profit or loss Forward exchange contracts Available-for-sale financial assets Equity securities Debt securities Financial liabilities: Financial liabilities at fair value through profit or loss Forward exchange contracts Derivative financial liabilities for hedging Interest rate swap contracts	Level 1 - $ 959,461 220,000 1,179,461 $ - $ - - $	Level 2 227,703 $ - - 227,703 $ 689,097 $ 21,918 711,015 $	Level3 - $ 644,661 - 644,661 $ - $ - - $	Total
				227,703 $ 1,604,122 220,000
				2,051,825 $
				689,097 $ 21,918
				711,015 $

• B.The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Company is the closing price. These instruments are included in level 1. Instruments included in level 1 comprise primarily equity instruments and debt instruments classified as financial assets/financial liabilities at fair value through profit or loss or available-for-sale financial assets.

• C.The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

• D.If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

• E.Specific valuation techniques used to value financial instruments include:

• (a)Quoted market prices or dealer quotes for similar instruments.

• (b)The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves.

• (c)The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value.

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• (d)Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.

• F.All of the resulting fair value estimates are included in level 2 except for certain forward foreign exchange contracts where forward exchange rates are not observable directly in the market.

G.The following table presents the changes in level 3 instruments as at December 31, 2014 and 2013:

2013:
		Equitysecurities
		2014		2013
At January 1	$	644,661	$	441,853
Acquired in the period		135,456		-
Gains and losses recognized in other comprehensive income	(	216,621)		313,274
Disposed in the period		-	(	110,466)
At December 31	$	563,496	$	644,661

(4) Turnaround plan

The Company’s current liabilities exceeded its current assets by $42,313,979 as of December 31, 2014. The Company’s management adopted the following measures to improve its operations and financial position:

• A.Negotiation with the creditor banks as to the debt issue

On April 5, 2012, the Company signed an “Agreed-upon Repayment Agreement” with creditor banks. Under the agreement, creditor banks agreed to extend the due dates for the repayment of the Company’s short, medium and long-term loans and to renew the Company’s credit lines to safeguard creditors’ rights and ensure the Company’s continuing operations. More information is described in Note 6(12)C.

In order to repay the unpaid balance of the medium and long-term syndicated loans from the above “Agreed-upon Repayment Agreement”, on February 10, 2015, the Board of Directors has approved the proposal for the Company to apply for a syndicated credit line of NTD$68.5 billion with financial institutions.

• B.Capital increase by cash

According to the “Agreed-upon Repayment Agreement” (the Agreement) stated in Note 6(12)C, the Company shall increase its capital in certain amount of cash within three years starting from 2012. From 2012 to 2014, the Company has completed some cash capital increase required by the Agreement. For more information, please refer to Notes 6(16)B and D.

As the Company has received bank’s approval for extending capital increase, based on shareholders’ interest, the issuance of the GDR was cancelled in accordance with the Financial Supervisory Commission (FSC)’s approval. Details are provided in Note 6(16) C.

• C.Improvements in operations

The Company continuously adjusts its product lines according to the market demands to increase operating revenue and gross profit. The Company also tries to strictly control various

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expenses and expenditures to effectively enhance operational performance to create cash inflows from operating activities.

• D.Capital expenditure control program

• Future capital expenditures will focus on the upgrading technology, improving efficiency and expanding production capacity. Capital expenditure budgets and amounts will be controlled strictly to maximize the benefits of capital expenditures.

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13. ADDITIONAL DISCLOSURES REQUIRED BY THE SECURITIES AND FUTURES BUREAU

(1) Related information of significant transactions

A.Loans granted during the year ended December 31, 2014:

No.	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2014	Balance at December 31,2014	Actual amount drawn down	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short- term financing	Allowance for doubtful accounts	Collateral	Limit on loans granted to a single party	Ceiling on total loans granted Note
													Item Value
1 2 2 2 2 3 4 5	Innolux Optoelectronics Europe B.V. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innolux Technology USA Inc. Innolux Technology Europe B.V.	Chi Mei Optoelectronics Germany GmbH Ningbo Innolux Technology Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Display Ltd. Ningbo Innolux Display Ltd. Foshan Innolux Optoelectronics Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd.	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Receivables from related parties Receivables from related parties	Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties	30,776 $ 822,900 3,339,075 949,500 949,500 3,620,680 189,900 1,491,707	30,776 $ - 3,165,000 949,500 949,500 3,620,680 189,900 1,491,707	- $ - 3,165,000 949,500 949,500 3,563,266 189,900 1,461,161	- - 2.7641% ~2.7807% 2.7626% 2.6506% 5.400% 0.16% ~0.56% 0.007% ~0.269%	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing	- $ - - - - - - -	Operating support Operating support Operating support Operating support Operating support Operating support Operating support Operating support	- $ - - - - - - -	- - $ - - - - - - - - - - - - - -	227,690,063 $ 227,690,063 227,690,063 227,690,063 227,690,063 227,690,063 227,690,063 227,690,063	227,690,063 $ A 227,690,063 A 227,690,063 A 227,690,063 A 227,690,063 A 227,690,063 A 227,690,063 A 227,690,063 A

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No.	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2014	Balance at December 31,2014	Actual amount drawn down	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short- term financing	Allowance for doubtful accounts	Collateral	Limit on loans granted to a single party	Ceiling on total loans granted Note
													Item Value
6 7 8 9 10 11	Bright Information Holding Limited Innolux Technology Germany GmbH Innolux Hong Kong Ltd. Innolux Technology Japan Co., Ltd. Innolux Optoelectronics Japan Co., Ltd. Foshan Innolux Optoelectronics Ltd.	Kunpal Optoelectronics Ltd. Innolux Hong Kong Ltd. Shanghai Innolux Optoelectronics Ltd. Leadtek Global Group Limited Innolux Corporation Nanhai Chi Mei Optoelectronics Ltd.	Other receivables Receivables from related parties Receivables from related parties Other receivables Other receivables Other receivables	Related parties Related parties Related parties Related parties Related parties Related parties	63,300 $ 24,927 499,941 1,375,920 396,900 2,532,000	- $ - - 1,375,920 396,900 -	- $ - - 1,375,920 396,900 -	- - - 1.475% 1.380% -	Short-term financing Short-term financing Short-term financing Short-term financing Business association Business association	- $ - - - 2,256,506 -	Operating support Operating support Operating support Operating support - -	- $ - - - - -	- - $ - - - - - - - - - -	105,729 $ 227,690,063 227,690,063 227,690,063 569,824 227,690,063	105,729 $ B 227,690,063 A 227,690,063 A 227,690,063 A 569,824 C 227,690,063 A,D

Note A: The Company – Innolux Corporation

• 1.For loans obtained for short-term financing, financial limit on loans granted to a single party shall not exceed 10% of the company’s net equity, based on the most recent audited financial statements of the company.

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

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

• Note B: The subsidiary - Bright Information Holding Limited

• 1.For loans obtained for short-term financing, financial limit on loans granted to a single party shall not exceed 10% of the company’s net equity, based on the most recent audited financial statements of the company. 2.The financial limit on loans granted shall not exceed 30% of the company’s net equity.

• 3.For the short-term capital needs of direct or indirect wholly-owned subsidiaries, the above two limitations are not required. However, the financial limit on loans granted shall not exceed 100% of the company’s net equity.

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Note C: Innolux Optoelectronics Japan Co., Ltd.

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

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

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

Note D: Foshan Innolux Optoelectronics Ltd. entered into a merger agreement with Nanhai Chi Mei Optoelectronics Ltd. on January 1, 2014 and Foshan Innolux Optoelectronics Ltd. is the surviving company.

B.Endorsements and guarantees provided during the year ended December 31, 2014:

Number	Endorsement /guarantee provider	Guaranteed party	Guaranteed party	Limit on endorsement/ guarantee amount provided to each counterparty	Maximum balance for the year	Ending balance	Actual amount drawndown	Amount of endorsement/ guarantee collateralized by properties	Ratio of accumulated endorsement/ guarantee to net equity per latest financial statements	Maximum endorsement/ guarantee amounts allowable	Provision of endorsement/ guarantees by parent company to subsidiary	Provision of endorsement/ guarantees by subsidiary to parent company	Provision of endorsements /guarantees to the party in Mainland China	Note
		Name	Nature of relationship
0	Innolux Corporation	Leadtek Global Group Limited	An indirect wholly- owned subsidiary	$113,845,032	$16,901,100	$16,901,100	$10,140,660	$ -	7.42%	$113,845,032	Y	N	N	A,B

Note A: Limits on endorsement/guarantee amount provided to each counterparty did not exceed 0.5% of the Company’s net equity based on the most recent audited financial statements of the Company. Maximum

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

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

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C.Holding of marketable securities at the end of the year (not including subsidiaries, associates and joint ventures):

Securities held by	Kind and name of marketable securities Commonstock AvanStrate Inc. TPV Technology Ltd. Chi Lin Optoelectronics Co., Ltd. Epistar Corp. Chi Mei Materials Technology Corporation Bond Unsecured subordinated bonds of Cathay Financial Holdings Commonstock Trillion Science, Inc. China Electric Mfg. Corp. Tera Xtal Technology Corporation Advanced Optoelectronic Technology, Inc. J TOUCH Corporation Fitipower Integrated Technology Inc. G-TECH Optoelectronics Corporation	Relationship with the Company None None None None None None None None None None None None None	General ledger account		December31,2014	December31,2014		Note
				Number of shares	Book value	Percentage	Fair value
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Yuan Chi Investment Co., Ltd. Yuan Chi Investment Co., Ltd. Yuan Chi Investment Co., Ltd. InnoJoy Investment Corporation InnoJoy Investment Corporation InnoJoy Investment Corporation InnoJoy Investment Corporation			Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Financial asset at fair value through profit or loss Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current	900,000 150,500,000 48,283,725 89,072 45,068,305 - 1,439,180 13,000,000 4,900,000 11,165,222 1,080,749 10,000,000 6,311,734	$ 80,302 1,031,587 483,194 5,603 1,500,775 220,000 2,252 140,400 56,693 605,155 19,507 343,350 184,934	1 6 19 - 9 - 2 3 3 8 1 8 2	$ 80,302 1,031,587 483,194 5,603 1,500,775 220,000 2,252 140,400 56,693 605,155 19,507 343,350 184,934

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Relationship Securitiesheld by Kind andname of marketable securities with the Company InnoJoy Investment Corporation Entire Technology Co., Ltd. None Warriors Technology Investments Ltd. OED Holding Ltd. None Warriors Technology Investments Ltd. General Interface Solution (GIS) Holding Limited None Warriors Technology Investments Ltd. Perfect Optronics Limited None Nets Trading Ltd. PilotTech Global Fund None	General ledgeraccount		December31,2014	December31,2014		Note
		Numberofshares	Bookvalue	Percentage	Fairvalue
	Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current Available-for-sale financial assets - non-current	7,506,326 16,000,000 40,500,000 22,000,000 90	$ 177,900 3,553 900,242 178,621 28,204	5 6 14 2 -	$ 177,900 3,553 900,242 178,621 28,204

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D.Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital:

Companyname	Marketable securities type andname	Financial statement account	Counterparty	Nature of relationship	Beginning balance	Beginning balance	Acquisition	Acquisition		Disposal	Disposal		Shares/units Amount Note Ending balance	Shares/units Amount Note Ending balance
					Shares/units	Amount	Shares/units	Amount	Shares/units	Amount	Carrying value	Gain (loss) on disposal	Shares/units
Innolux Corporation Toppoly Optoelectronics (B.V.I.) Ltd. Toppoly Optoelectronics (Cayman) Ltd. Innolux Corporation Innolux Corporation Warriors Technology Investments Ltd.	Toppoly Optoelectronics (B.V.I.) Ltd. Toppoly Optoelectronics (Cayman) Ltd. Nanjing Innolux Optoelectronics Ltd. Chi Mei Materials Technology Corporation Contrel Technology Co., Ltd. Perfect Optronics Limited	Investments accounted for under the equity method Investments accounted for under the equity method Investments accounted for under the equity method Available- for-sale financial assets - non- current Available- for-sale financial assets - non- current Available- for-sale financial assets - non- current	A A A Open market Open market Open market	B C C None None None	126,847,000 126,817,000 - 80,184,305 17,009,330 -	3,064,699 $ 3,040,776 2,935,314 2,372,660 464,322 -	17,600,000 17,600,000 - - - 66,000,000	531,608 $ 531,608 531,608 - - 77,236	- - - 35,116,000) ( 17,009,330) ( 44,000,000) (	- $ - - 1,308,457 314,798 317,743	- $ - - 871,885) ( 464,322) ( 51,491) (	- $ - - 436,572 149,524) ( 266,252	144,447,000 144,417,000 - 45,068,305 - 22,000,000	3,596,307 $ 3,572,384 3,466,922 1,500,775 D - D 25,745 E

Note A: Cash capital increase implemented by an investee. Note B: A subsidiary of the Company. Note C: An indirect wholly-owned subsidiary.

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Note D: The beginning carrying balance included profits and losses from investments. The beginning shares included stock dividends. Note E: Ending book value excludes gain (loss) on valuation of financial assets.

E.Acquisition of real estate reaching $300 million or 20% of paid-in capital or more for the year ended December 31, 2014: None.

F.Disposal of real estate reaching $300 million or 20% of paid-in capital or more for the year ended December 31, 2014: None.

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G.Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more:

Company	Counterparty	Relationship with the Company		Transactions	Transactions		Difference with general transactions(Note A)	Difference with general transactions(Note A)	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Note
			Purchases/ sales	Amount	Percentage of purchases/ sales	Terms	Unit price	Terms	Balance	Percentage ofbalance
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation	Shenzhen Fu Tai Hong Precision Industry Co., Ltd. Hon Hai Precision Industry Co., Ltd. Honfujin Precision Electronics (Chongqing) Co., Ltd. Lakers Trading Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Technology USA Inc. Foshan Innolux Optoelectronics Ltd. Innolux Optoelectronics USA, Inc. Innolux Hong Kong Ltd. Hongfujin Precision Industry (Wuhan) Co., Ltd. FuTaiJing Precision Electronics (Yantai) Co., Ltd.	An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. Same major stockholder An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary A subsidiary of the Company An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd.	Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales	$ 5,497,697 3,977,339 3,558,807 2,687,589 1,757,646 1,231,983 850,573 714,609 635,548 391,448 341,756	1 1 1 1 - - - - - - -	60 days 45-60 days 45-90 days 60-90 days 45 days 60 days 90 days 45 days 60 days 45-60 days 60 days	Similar with general sales Similar with general sales Similar with general sales Similar with general sales Single purchases target, no basis for comparsion Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales	No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference	$ 1,543,053 1,875,465 1,282,691 - 186,694 173,861 1,649 133,856 - 93,428 7,469	2 3 2 - - - - - - - -

~76~

Company Counterparty Relationship with the Company	Transactions		Difference with general transactions (NoteA)	Difference with general transactions (NoteA)	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Note
	Percentage Purchases/ of purchases/ sales Amount sales	Terms	Unit price	Terms	Balance	Percentage ofbalance
Innolux Corporation Futaijing Precision Electronics (Beijing) Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. Innolux Corporation Ambit Microsystem (Shanghai) Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. Innolux Corporation HongFuJin Precision Electronics (HengYang) Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. Innolux Corporation Chi Mei Materials Technology Corporation An investee company accounted for under the equity method Innolux Corporation Hon Hai Precision Industry Co., Ltd. Same major stockholder Innolux Corporation Chi Lin Optoelectronics Co., Ltd. The company is a corporate director of Chi Lin Optoelectronics Co., Ltd. Innolux Corporation Innolux Optoelectronics Japan Co., Ltd. A subsidiary of the Company Innolux Corporation Leadtek Global Group Limited A subsidiary of the Company Innolux Corporation Lakers Trading Ltd. An indirect wholly-owned subsidiary Innolux Corporation Innolux Hong Kong Ltd. An indirect wholly-owned subsidiary Ningbo Innolux Optoelectronics Ltd. Leadtek Global Group Limited A subsidiary of the Company	Sales $ 191,636 - Sales 133,220 - Sales 101,020 - Purchases 4,407,106 1 Purchases 1,820,509 - Purchases 898,860 - Purchases 296,646 - Processing expense 78,866,584 20 Processing expense 53,598,757 14 Processing expense 35,408,180 9 Processing revenue 41,971,830 91	60 days 60 days 45 days 90 days after acceptance 60~90 days after acceptance 120 days after acceptance 30 days after acceptance 60-90 days 60-90 days 60-90 days 90 days	Similar with general sales Similar with general sales Similar with general sales Single purchases target, no basis for comparsion Single purchases target, no basis for comparsion Single purchases target, no basis for comparsion Single purchases target, no basis for comparsion Cost plus Cost plus Cost plus Similar with general sales	No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference	$ 179,404 2,036 - - ( 726,789) ( 609,775) ( 16,826) ( 42,634,612) ( 32,726,649) ( 8,444,162) 19,784,634	- - - - 1 1 - 36 28 7 92

~77~

Company	Counterparty	Relationship with the Company		Transactions	Transactions		Difference with general transactions (NoteA)	Difference with general transactions (NoteA)	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Note
			Purchases/ sales	Amount	Percentage of purchases/ sales	Terms	Unit price	Terms	Balance	Percentage ofbalance
Foshan Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Foshan Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innolux Technology Japan Co., Ltd. Ningbo Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd.	Lakers Trading Ltd. Innolux Hong Kong Ltd. Leadtek Global Group Limited Leadtek Global Group Limited Lakers Trading Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Innolux Hong Kong Ltd. Ningbo Innolux Technology Ltd. Nanjing Innolux Optoelectronics Ltd. Ningbo Chi Mei Materials Technology Co., Ltd.	An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary A subsidiary of the Company A subsidiary of the Company An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary Subsidiary of an investee company accounted for under the equity method	Processing revenue Processing revenue Processing revenue Processing revenue Processing revenue Processing revenue Processing revenue Service revenue Sales Sales Purchases	$36,601,008 34,677,066 19,610,772 16,648,612 12,863,897 3,116,868 1,226,867 306,702 2,079,743 723,106 3,169,506	48 97 92 17 95 98 47 85 2 4 4	60 days 90 days 90 days 90 days 60 days 90 days 60 days 60 days 90 days 60 days 90 days after goods are shipped	Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales	No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference	$22,267,762 7,884,481 6,966,625 - 3,069,946 986,622 2,158,754 45,553 965,551 142,914 -	94 97 90 - 95 100 58 94 3 3 -

~78~

Company	Counterparty	Relationship with the Company		Transactions	Transactions		Difference with general transactions (NoteA)	Difference with general transactions (NoteA)	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Note
			Purchases/ sales	Amount	Percentage of purchases/ sales	Terms	Unit price	Terms	Balance	Percentage ofbalance
Ningbo Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Technology Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd.	Ningbo Lin Moug Optronics Co., Ltd. Hon Hai Precision Industry Co., Ltd. Hon Hai Precision Industry Co., Ltd. Ningbo Chi Mei Materials Technology Co., Ltd. Hon Hai Precision Industry Co., Ltd. Ningbo Chi Mei Materials Technology Co., Ltd. Chi Mei Materials Technology Corporation Hongfujin Precision Industry (Shenzhen) Co., Ltd. GIO Optoelectronics Corp. Ningbo Lin Moug Optronics Co., Ltd.	An indirect wholly-owned subsidiary of Chi Lin Optoelectronics Co., Ltd. Same major stockholder Same major stockholder Subsidiary of an investee company accounted for under the equity method Same major stockholder Subsidiary of an investee company accounted for under the equity method An investee company accounted for under the equity method An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An investee company accounted for under the equity method An indirect wholly-owned subsidiary of Chi Lin Optoelectronics Co., Ltd.	Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases	$ 2,921,686 1,903,333 1,860,997 1,546,583 1,022,838 779,482 701,095 539,927 412,044 364,731	3 2 2 1 3 2 1 1 - 1	60 days after goods are shipped 90 days after goods are shipped 60 days after goods are shipped 90 days after goods are shipped 90 days after goods are shipped 90 days after goods are shipped 90 days after goods are shipped 90 days after goods are shipped 90 days after goods are shipped 120 days after goods are shipped	Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales	No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference No significant difference	($ 1,188,883) ( 388,841) ( 688,812) - ( 300,694) - - ( 173,670) ( 26,952) ( 200,785)	6 1 3 - 3 - - 1 - 2

~79~

Company	Counterparty	Relationship with the Company		Transactions	Transactions		Difference with general transactions (NoteA)	Difference with general transactions (NoteA)	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Note
			Purchases/ sales	Amount	Percentage of purchases/ sales	Terms	Unit price	Terms	Balance	Percentage ofbalance
Ningbo Innolux Display Ltd. Ningbo Innolux Display Ltd. Foshan Innolux Optoelectronics Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd.	Ningbo Chi Mei Materials Technology Co., Ltd. Hon Hai Precision Industry Co., Ltd. Ampower Technology Co., Ltd. Jizhun Precision Industry (Huizhou) Co., Ltd. Hongfujin Precision Industry (Shenzhen) Co., Ltd.	Subsidiary of an investee company accounted for under the equity method Same major stockholder The company is a corporate director of Ampower Technology Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd.	Purchases Purchases Purchases Processing expense Processing expense	$ 179,536 155,767 130,295 167,217 114,341	4 3 - 9 6	90 days after goods are shipped 90 days after goods are shipped 90 days after goods are shipped 30 days 30 days	Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales	No significant difference No significant difference No significant difference No significant difference No significant difference	$ - ( 63,614) ( 3,401) ( 21,059) ( 23,662)	- 6 - 3 4

Note A: Accounts for the cost of goods sold ratio.

~80~

H.Receivables from related parties exceeding $100 million or 20% of the Company’s paid-in capital:

Company	Counterparty	Relationship with the Company	Balance of receivable from related parties	Turnover rate	Overduereceivables	Overduereceivables	Subsequent collection	Allowance for doubtful accounts provided
					Amount	Action adopted for overdue accounts
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Shanghai Innolux Optoelectronics Ltd. Innocom Technology (Shenzhen) Co., Ltd.	Shenzhen Fu Tai Hong Precision Industry Co., Ltd. Hon Hai Precision Industry Co., Ltd. Honfujin Precision Electronics (Chongqing) Co., Ltd. Kang Zhun Electronical Technology (Kunshan) Co., Ltd. Innolux Optoelectronics Japan Co., Ltd. Futaijing Precision Electronics (Beijing) Co., Ltd. Innolux Technology USA Inc. Innolux Optoelectronics USA, Inc. Lakers Trading Ltd. Leadtek Global Group Limited Innolux Hong Kong Ltd. Leadtek Global Group Limited Lakers Trading Ltd. Lakers Trading Ltd.	An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. Same major stockholder An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. A subsidiary of the Company An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary A subsidiary of the Company An indirect wholly-owned subsidiary A subsidiary of the Company An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary	$ 1,543,053 1,875,465 1,282,691 489,164 186,694 179,404 173,861 133,856 22,267,762 19,784,634 7,884,481 6,966,625 3,069,946 2,158,754	7.12 3.85 3.28 - 11.39 2.14 9.93 5.93 2.34 2.29 3.73 3.10 5.48 0.77	$ - 110,139 209,867 71,285 - 1,802 - - 17,331,083 4,667,893 - 928,046 579,608 1,622,044	- Subsequent collection Subsequent collection Subsequent collection - Subsequent collection - - Subsequent collection Subsequent collection - Subsequent collection Subsequent collection Subsequent collection	$ 661,954 78,424 378,539 106,435 - 8,405 - 96,199 3,896,237 3,165,386 2,943,828 2,025,388 579,608 -	$ - - - - - - - - - - - - - -

~81~

Company	Counterparty	Relationship with the Company	Balance of receivable from relatedparties	Turnover rate	Overduereceivables	Overduereceivables	Subsequent collection	Allowance for doubtful accounts provided
					Amount	Action adopted for overdue accounts
Ningbo Innolux Display Ltd. Ningbo Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Innocom Technology (Shenzhen) Co., Ltd.	Lakers Trading Ltd. Ningbo Innolux Technology Ltd. Nanjing Innolux Optoelectronics Ltd. Honfujin Precision Electronics (Chongqing) Co., Ltd.	An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd.	$ 986,622 965,551 142,914 111,123	6.45 2.87 5.36 -	$ - 54,787 - 111,123	- Subsequent collection - Subsequent collection	$ 89,598 681,627 - -	$ - - - -

I. Derivative financial instruments undertaken during the year ended December 31, 2014: Please refer to Notes 6(2) and 6(4).

~82~

J. Significant inter-company transactions during the year ended December 31, 2014:

Number 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 2 2 2 2 3 3 3 4 4 5 5 6	Name ofcounterparty Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Technology Japan Co., Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Ningbo Innolux Optoelectronics Ltd.	Name oftransactionparties Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Innolux Optoelectronics Japan Co.,Ltd. Innolux Optoelectronics Japan Co.,Ltd. Innolux Optoelectronics Japan Co.,Ltd. Innolux Optoelectronics USA, Inc. Innolux Optoelectronics USA, Inc. Innolux Technology USA Inc. Innolux Technology USA Inc. Lakers Trading Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Leadtek Global Group Limited Leadtek Global Group Limited Foshan Innolux Optoelectronics Ltd. Innolux Hong Kong Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Nanjing Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Leadtek Global Group Limited Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Leadtek Global Group Limited	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 3 3 3 3 3 3 3 3 3 3 3 3 3 Relationship (NoteA)	General ledger Transaction account Amount terms (NoteB) Sales 635,548 $ - Processing expense 35,408,180 - Accrued expense 8,444,162) ( - Sales 1,757,646 - Accounts receivable 186,694 - Purchases 296,646 - Sales 714,609 - Accounts receivable 133,856 - Sales 1,231,983 - Accounts receivable 173,861 - Sales 2,687,589 - Processing expense 53,598,757 - Accrued expense 32,726,649) ( - Processing expense 78,866,584 - Accrued expense 42,634,612) ( - Sales 850,573 - Service revenue 306,702 - Processing revenue 12,863,897 - Accounts receivable 3,069,946 - Sales 723,106 - Accounts receivable 142,914 - Processing revenue 36,601,008 - Accounts receivable 22,267,762 - Processing revenue 16,648,612 - Processing revenue 34,677,066 - Accounts receivable 7,884,481 - Processing revenue 1,226,867 - Accounts receivable 2,158,754 - Processing revenue 41,971,830 - Information fromtransactions (Note C)	Percentage of totoal combined revenue or totalassets
				General ledger account Amount Sales 635,548 $ Processing expense 35,408,180 Accrued expense 8,444,162) ( Sales 1,757,646 Accounts receivable 186,694 Purchases 296,646 Sales 714,609 Accounts receivable 133,856 Sales 1,231,983 Accounts receivable 173,861 Sales 2,687,589 Processing expense 53,598,757 Accrued expense 32,726,649) ( Processing expense 78,866,584 Accrued expense 42,634,612) ( Sales 850,573 Service revenue 306,702 Processing revenue 12,863,897 Accounts receivable 3,069,946 Sales 723,106 Accounts receivable 142,914 Processing revenue 36,601,008 Accounts receivable 22,267,762 Processing revenue 16,648,612 Processing revenue 34,677,066 Accounts receivable 7,884,481 Processing revenue 1,226,867 Accounts receivable 2,158,754 Processing revenue 41,971,830
					- 8 2 - - - - - - - 1 12 8 18 10 - - 3 1 - - 8 5 4 8 2 - 1 9

~83~

Number 6 6 6 7 7 8 8	Name of counterparty Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Display Ltd. Ningbo Innolux Display Ltd.	Name of transactionparties Leadtek Global Group Limited Ningbo Innolux Technology Ltd. Ningbo Innolux Technology Ltd. Leadtek Global Group Limited Leadtek Global Group Limited Lakers Trading Ltd. Lakers Trading Ltd.	3 3 3 3 3 3 3 Relationship (Note A)	General ledger Transaction account Amount terms(Note B) Accounts receivable 19,784,634 $ - Sales 2,079,743 - Accounts receivable 965,551 - Processing revenue 19,610,772 - Accounts receivable 6,966,625 - Processing revenue 3,116,868 - Accounts receivable 986,622 - Information fromtransactions (Note C)	General ledger Transaction account Amount terms(Note B) Accounts receivable 19,784,634 $ - Sales 2,079,743 - Accounts receivable 965,551 - Processing revenue 19,610,772 - Accounts receivable 6,966,625 - Processing revenue 3,116,868 - Accounts receivable 986,622 - Information fromtransactions (Note C)	Percentage of totoal combined revenue or total assets
				General ledger account Accounts receivable Sales Accounts receivable Processing revenue Accounts receivable Processing revenue Accounts receivable	Amount 19,784,634 $ 2,079,743 965,551 19,610,772 6,966,625 3,116,868 986,622
						5 - - 4 2 1 -

Note A: Relationship with the transaction company:

1. The parent company to the subsidiary.

3. The subsidiary to the subsidiary.

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

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

~84~

(2) Information on investees

The information on the name, the location…etc of the investee companies is shown below (not including investees in Mainland China):

Name of company	Investee company	Location	Mainoperating activities	Originalcost	Originalcost	Held by the Company atDecember31,2014	Held by the Company atDecember31,2014	Held by the Company atDecember31,2014	Net income (loss) of the investee company	Investment income (loss) recognized by the Company
				December 31, 2014	December 31, 2013	Numberofshares	Percentage of ownership (%)	Bookvalue
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation	Bright Information Holding Ltd. Gold Union Investments Ltd. Golden Achiever International Ltd. Innolux Holding Ltd. Keyway Investment Management Limited Landmark International Ltd. Toppoly Optoelectronics (B.V.I.) Ltd. Innolux Hong Kong Holding Ltd. Leadtek Global Group Limited Yuan Chi Investment Co., Ltd. InnoJoy Investment Corporation Innolux Optoelectronics Europe B.V.	Hong Kong Samoa BVI Samoa Samoa Samoa BVI Hong Kong BVI Taiwan Taiwan Netherlands	Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Order swap company Investment company Investment company Importing, exporting, buying, selling and logistics services of electronic equipment and TFT- LCD monitors	119,724 $ 348,999 9,083 7,858,300 197,554 32,925,315 3,596,307 2,107,291 - 1,217,235 1,078,166 121,941	74,924 $ 779,152 9,083 8,000,912 197,554 32,925,315 3,064,699 2,107,291 - 1,217,235 1,078,166 121,941	4,910,000 31,783,000 39,250 246,768,185 5,656,410 693,100,000 144,447,000 1,158,844,000 50,000,000 - 167,405,392 180	100 100 100 100 100 100 100 100 100 100 100 100	185,214 $ 116,227 21,849) ( 16,796,396 277,422 41,425,623 5,945,861 2,393,227 358,432) ( 918,468 1,670,083 152,269	423 $ 111,306 573) ( 324,999 5,890 4,430,141 740,811 493,840 96,260) ( 31,904 162,272) ( 7,361	114 $ 111,306 6,829 311,917 5,890 4,356,784 740,811 518,932 96,260) ( 31,904 162,272) ( 7,361

~85~

Name of company	Investee company	Location	Mainoperating activities	Originalcost	Originalcost	Held by the Company atDecember31,2014	Held by the Company atDecember31,2014	Held by the Company atDecember31,2014	Net income (loss) of the investee company	Investment income (loss) recognized by the Company
				December 31, 2014	December 31, 2013	Numberofshares	Percentage of ownership (%)	Bookvalue
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Holding Ltd. Innolux Holding Ltd. Innolux Holding Ltd. Innolux Holding Ltd.	Innolux Optoelectronics Japan Co., Ltd. Ampower Holding Ltd. Jetronics International Corp. FI Medical Device Manufacturing Co., Ltd. iZ3D, Inc. Chi Mei Lighting Technology Corporation Chi Mei El Corporation GIO Optoelectronics Corp. Rockets Holding Ltd. Suns Holding Ltd. Lakers Trading Ltd. Innolux Corporation	Japan Cayman Samoa Taiwan USA Taiwan Taiwan Taiwan Samoa Samoa Samoa USA	Researching, manufacturing and selling of the film transistor liquid crystal display Investment holdings Investment holdings Photographic and optical instruments manufacturing Research and development and sale of 3D flat monitor Manufacturing of electronic equipment and lighting equipment Developing, designing, manufacturing and selling of organic light emitting diodes Developing, designing, manufacturing and selling of components of back light module on TFT-LCD Investment holdings Investment holdings Order swap company Distributor company	1,335,486 $ 1,717,714 86,149 73,500 - 819,312 361,382 800,892 7,296,530 555,422 - 6,348	1,335,486 $ 1,717,714 145,600 - - 819,312 361,382 800,892 7,426,240 568,324 - 6,348	80 14,062,500 726,941 7,350,000 4,333 78,195,856 155,500,000 63,521,501 226,504,550 18,177,052 1 2,000	100 47 32 49 35 33 97 24 100 100 100 100	1,572,495 $ 1,477,199 1,771) ( 73,164 - - 24,799 449,994 15,261,115 1,404,398 241,128 88,218) (	68,864 $ 276,629) ( 85,293) ( 686 - - 5,702) ( 112,745) ( 71,583 255,129 - 1,722) (	68,864 $ 90,897) ( 41,869 336 - - 5,541) ( 26,811) ( 71,583 255,129 - 1,722) (

~86~

Name of company	Investee company	Location	Mainoperating activities	Originalcost	Originalcost	Held by the Company atDecember31,2014	Held by the Company atDecember31,2014	Held by the Company atDecember31,2014	Net income (loss) of the investee company	Investment income (loss) recognized by the Company
				December 31, 2014	December 31, 2013	Numberofshares	Percentage of ownership (%)	Bookvalue
Toppoly Optoelectronics (B.V.I.) Ltd. Innolux Hong Kong Holding Ltd. Innolux Hong Kong Holding Ltd. Innolux Hong Kong Holding Ltd. Innolux Hong Kong Holding Ltd. Innolux Hong Kong Holding Ltd. Innolux Optoelectronics Europe B.V. Innolux Optoelectronics Japan Co., Ltd. Rockets Holding Ltd. Rockets Holding Ltd. Rockets Holding Ltd. Rockets Holding Ltd.	Toppoly Optoelectronics (Cayman) Ltd. Innolux Optoelectronics Hong Kong Holding Ltd. Innolux Hong Kong Ltd. Innolux Technology Europe B.V. Innolux Technology Japan Co., Ltd. Innolux Technology USA Inc. Chi Mei Optoelectronics Germany GmbH Innolux Optoelectronics USA, Inc. Best China Investments Ltd. Mega Chance Investments Ltd. Magic Sun Ltd. Stanford Developments Ltd.	Cayman Hong Kong Hong Kong Netherlands Japan USA Germany USA Samoa Samoa Samoa Samoa	Investment holdings Investment holdings Order swap company Holding company and R&D testing company Distributor company Distributor company Importing, exporting, buying, selling and logistics services of electronic equipment and TFT- LCD monitors Selling of electronic equipment and computer monitors Investment holdings Investment holdings Investment holdings Investment holdings	3,572,384 $ - - 3,073,072 1,815,603 263,685 10,324 2,400 314,740 573,940 1,146,370 5,391,125	3,040,776 $ - - 3,073,072 1,815,603 263,685 10,324 2,400 314,740 573,940 1,146,370 5,391,125	144,417,000 162,897,802 35,000,000 375,810 201 1,000 250 1,000 10,000,001 18,000,000 38,000,001 164,000,000	100 100 100 100 100 100 100 100 100 100 100 100	6,181,164 $ 780,296 2,095,946) ( 2,410,215 1,647,930 326,317 26,937 258,769 255,806 421,268 1,018,638 13,534,845	740,811 $ 233,398 320,095 35,651 128,257) ( 31,730 3,753 23,063 36,380 1,221 3,328 36,362	740,811 $ 233,398 320,095 35,651 128,257) ( 31,730 3,753 23,063 36,380 1,221 3,328 36,362

~87~

Name of company	Investee company	Location	Mainoperating activities	Originalcost	Originalcost	Held by the Company atDecember31,2014	Held by the Company atDecember31,2014	Held by the Company atDecember31,2014	Net income (loss) of the investee company	Investment income (loss) recognized by the Company
				December 31, 2014	December 31, 2013	Numberofshares	Percentage of ownership (%)	Bookvalue
Rockets Holding Ltd. Suns Holding Ltd. Innolux Technology Europe B.V. Best China Investments Ltd. Mega Chance Investments Ltd. Magic Sun Ltd. Yuan Chi Investment Co., Ltd. Yuan Chi Investment Co., Ltd. Yuan Chi Investment Co., Ltd. Yuan Chi Investment Co., Ltd.	Nets Trading Ltd. Warriors Technology Investments Ltd. Innolux Technology Germany GmbH Asiaward Investment Ltd. Main Dynasty Investment Ltd. Sun Dynasty Development Ltd. Chi Mei Lighting Technology Corporation GIO Optoelectronics Corp. Chi Mei Logistics Corp. TOA Optronics Corporation	Samoa Samoa Germany Hong Kong Hong Kong Hong Kong Taiwan Taiwan Taiwan Taiwan	Investment company Investment company Testing and maintenance company Investment holdings Investment holdings Investment holdings Trading business, manufacturing of electronic equipment and lighting equipment Developing, designing, manufacturing and selling of components of back light module on TFT-LCD Warehousing services Selling electronic materials, trading business, manufacturing of electronic equipments and lighting equipments	27,477 $ 555,422 33,735 314,740 573,940 1,146,370 263,812 6,881 - 423,606	- $ 568,324 33,735 314,740 573,940 1,146,370 263,812 6,881 124,485 423,606	900,001 18,177,052 100,000 77,830,001 139,623,801 295,969,001 19,673,402 467,519 - 58,007,000	100 100 100 100 100 100 8 0 0 40	30,441 $ 1,404,397 63,152 255,806 421,267 1,018,638 - 732 - 364,907	- $ 255,127 41 36,380 1,221 3,328 - 112,745) ( 5,843 105,740) (	- $ 255,127 41 36,380 1,221 3,328 - 203) ( 2,863 45,764) (

~88~

(3) Information on investments in Mainland China

A.Basic information:

Basic information:
Name of investee in Mainland China Main activities of investee Capital (Note A) Method of Investment (Note D) Balance of amount remitted from Taiwan on January1,2014	Transactions during Jan. 1, 2014~Dec. 31, 2014 (inthousands ofNTD)		Balance of amount remitted from Taiwan as of Dec. 31,2014	Net income of investee for the year ended Dec. 31,2014	Ownership percentage held by the Company (Direct/indirect)	Profit recognized during Jan. 1, 2014~ Dec. 31, 2014 (NoteB)	Profit Book value remitted to of investment Taiwan during as of Jan. 1, 2014 ~ Dec. 31,2014 Dec. 31,2014
	Remittance out	Remittance in
Innocom Technology (Shenzhen) Co., Ltd. Manufacturing and selling of LCD backend module and related components 5,190,600 $ 1 4,016,756 $ Innocom Technology (Chengdu) Co., Ltd. Manufacturing and selling of LCD backend module and related components 1,202,700 1 1,202,700 OED Company Manufacturing and selling of electronic paper 256,112 1 63,300 Ningbo Innolux Optoelectronics Ltd. Manufacturing and selling of LCD backend module and related components 9,811,500 2 1,396,613 Ningbo Innolux Technology Ltd. Manufacturing and selling of LCD backend module and related components 4,114,500 2 4,114,500 Foshan Innolux Optoelectronics Ltd. Manufacturing and selling of LCD backend module and related components 12,121,950 2 12,121,950 Ningbo Innolux Display Ltd. Manufacturing and selling of LCD backend module and related components 949,500 3 949,500	- $ - - - - - -	- $ - - 1,163,508) ( - - -	4,016,756 $ 1,202,700 63,300 233,105 4,114,500 12,121,950 949,500	36,362 $ 3,328 140,976) ( 2,070,696 491,039 1,866,041 34,860	100 100 5 100 100 100 100	36,362 $ 3,328 - 2,070,696 491,039 1,868,407 34,860	13,534,833 $ 1,173,844 $ 1,018,638 - 12,989 - 20,601,650 5,463,896 3,218,102 - 18,607,398 - 260,746 -

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Name of investee in Mainland China Main activities of investee Capital (Note A) Method of Investment (Note D) Balance of amount remitted from Taiwan on January1,2014	Transactions during Jan. 1, 2014~Dec. 31, 2014 (inthousands ofNTD)	Transactions during Jan. 1, 2014~Dec. 31, 2014 (inthousands ofNTD)	Balance of amount remitted from Taiwan as of Dec. 31,2014	Net income of investee for the year ended Dec. 31,2014	Ownership percentage held by the Company (Direct/indirect)	Profit recognized during Jan. 1, 2014~ Dec. 31, 2014 (Note B)	Profit Book value remitted to of investment Taiwan during as of Jan. 1, 2014 ~ Dec. 31,2014 Dec. 31,2014
	Remittance out	Remittance in
Nanjing Innolux Technology Ltd. Purchases and sales of monitor-related components company 66,465 $ 4 66,465 $ Kunpal Optoelectronics Ltd. Glass thinning processing service 126,600 5 71,744 VAP Optoelectronics (Nanjing) Corp. Manufacturing and selling of LCD backend module and related components 208,890 6 9,495 Nanjing Innolux Optoelectronics Ltd. Manufacturing and selling of LCD backend module and related components 4,494,300 4 3,937,260 Ningbo Innolux Logistics Ltd. Warehousing services 126,600 8 126,600 Shanghai Innolux Optoelectronics Ltd. Manufacturing and selling of LCD backend module and related components 664,650 7 - Foshan Innolux Logistics Ltd. Warehousing services 47,475 8 47,475 Amlink (Shanghai) Ltd. Manufacturing and selling of power supply, modem, ADSL, and other IT equipments 633,000 9 316,500	- $ 47,951 - 557,040 - - - -	- $ - - - - - - -	66,465 $ 119,695 9,495 4,494,300 126,600 - 47,475 316,500	11,797 $ 942 574) ( 729,013 5,729 233,398 161 8,949) (	100 100 100 100 100 100 100 47	11,797 $ 942 574) ( 729,013 5,729 233,398 161 4,206) (	606,961 $ - $ 79,430 - 43,749) ( - 5,574,181 - 168,311 - 780,296 - 66,633 - 594,508 -

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Name of investee in Mainland China Main activities of investee Capital (Note A) Method of Investment (Note D) Balance of amount remitted from Taiwan on January1,2014	Transactions during Jan. 1, 2014~Dec. 31, 2014 (inthousands ofNTD)	Transactions during Jan. 1, 2014~Dec. 31, 2014 (inthousands ofNTD)	Balance of amount remitted from Taiwan as of Dec. 31,2014	Net income of investee for the year ended Dec. 31,2014	Ownership percentage held by the Company (Direct/indirect)	Profit recognized during Jan. 1, 2014~ Dec. 31, 2014 (NoteB)	Profit Book value remitted to of investment Taiwan during as of Jan. 1, 2014 ~ Dec. 31,2014 Dec. 31,2014
	Remittance out	Remittance in
Kunshan Guann- Jye Electronics Co., Ltd. Manufacturing of transformers 265,860 $ 10 85,139 $ Interface Optoelectronics (Shenzhen) Co., Ltd. Development of new type of flat panel display, monitor and peripherals, production and management, and offer of after-sales service 2,095,230 1 427,275	- $ -	- $ -	85,139 $ 427,275	- $ -	32 14	- $ -	- $ - $ 900,242 -

B. Information on investments in Mainland China (Note C):

Company Innolux Corporation	Accumulated amount wired out from Taiwan toMainland China as of December31,2014 29,846,173 $	Investment amount approved byFIC of MOEA 44,838,617 $	Ceiling of investment amount ofthe Company
			- $

C. Significant transactions with investees in Mainland China directly or indirectly through the third areas:

The significant transactions between the Company and the investee companies for the year ended December 31, 2014 were eliminated in these financial statements and shown in Notes 13(1) A 、 G 、 H 、 J.

Note A: The relevant figures were listed in NT$. Where foreign currencies were involved, the figures were converted to NT$ using exchange rate.

Note B: Profit or loss recognised for the year ended December 31, 2014 was audited by independent accountants.

Note C: Pursuant to the Jing-Shen-Zi Letter No. 10100485600 of the Ministry of Economic Affairs, R.O.C., dated June 29, 2012, as the Company has obtained the certificate of conforming to the business scope of headquarters, issued by the Industrial Development Bureau, MOEA, the investment ceiling regulation for Taiwan-based companies investing in Mainland China is not applicable to the Company.

Note D: The investment methods are as follows:

1.Through investing in Innolux Holding Ltd. in the third area, which then invested in the investee in Mainland China.

2.Through investing in Landmark International Ltd. in the third area, which then invested in the investee in Mainland China.

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3.Through investing in Gold Union Investments Ltd. in the third area, which then invested in the investee in Mainland China.

4.Through investing in Toppoly Optoelectronics (B.V.I) Ltd. in the third area, which then invested in the investee in Mainland China. 5.Through investing in Bright Information Holding Ltd. in the third area, which then invested in the investee in Mainland China. 6.Through investing in Golden Achiever International Ltd. in the third area, which then invested in the investee in Mainland China. 7.Through investing in Innolux Hong Kong Holding Ltd. in the third area, which then invested in the investee in Mainland China. 8.Through investing in Keyway Investment Management Limited in the third area, which then invested in the investee in Mainland China.

9.Through investing in Ampower Holding Ltd. in the third area, which then invested in the investee in Mainland China.

10.Through investing in Jetronics International Corporation in the third area, which then invested in the investee in Mainland China.

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14. SEGMENT INFORMATION

None.

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INNOLUX CORPORATION SUMMARY OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2014

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Items Petty cash Cash in banks Demand deposits Foreign deposits Time deposits Cash equivalents (under repurchase agreement)	Abstract Amount $ 255 9,806,981 USD 948,031 In thousands Exchange rate 31.65 30,005,176 JPY 1,384,083 In thousands Exchange rate 0.2646 366,228 EUR 10,114 In thousands Exchange rate 38.47 389,075 HKD 2,349 In thousands Exchange rate 4.08 9,583 KRW 67,986 In thousands Exchange rate 0.0279 1,897 USD 360,000 In thousands Exchange rate 31.65 11,394,000 3,570,000 $55,543,195	Amount
		$55,543,195

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INNOLUX CORPORATION SUMMARY OF ACCOUNTS RECEIVABLE

DECEMBER 31, 2014

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Items Abstract Third parties Company A Company B Company C Company D Company E Others Less: Allowance for returns and discount Allowance for bad debts	Amount	Remark
	$ 8,025,263 5,169,240 4,015,221 3,788,902 3,594,367 45,231,011	Balance of individual customers is under 5% of this account’s balance.
	69,824,004 ( 827,583) (138,272)
	$68,858,149

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INNOLUX CORPORATION SUMMARY OF INVENTORY

DECEMBER 31, 2014

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Items	Abstract	Cost	Market price $ 1,512,264 27,783,376 14,109,275	Remark
Raw materials Work in progress Finished goods		$ 1,780,875 16,122,356 10,034,934		Use net realisable value as market price Use net realisable value as market price Use net realisable value as market price
		$27,938,165	$43,404,915

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INNOLUX CORPORATION

MOVEMENT SUMMARY OF INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2014

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Company name Landmark International Ltd. Innolux Holding Ltd. Toppoly Optoelectronics (B.V.I.) Ltd. Innolux Hong Kong Holding Ltd. InnoJoy Investment Corporation Innolux Optoelectronics Japan Co., Ltd. Yuan Chi Investment Co., Ltd. Chi Mei Materials Technology Corporation Ampower Holding Ltd. GIO Optoelectronics Corp. Contrel Technology Co., Ltd. Others	As of January 1, 2014 In thousand shares Amount 693,100 $ 36,005,637 251,444 15,866,385 126,847 4,347,392 1,158,844 2,164,447 107,817 1,721,618 - 1,574,455 - 1,015,867 77,758 1,883,267 14,063 1,526,449 63,522 475,253 17,009 473,259 - 806,183 $ 67,860,212	As of January 1, 2014 In thousand shares Amount 693,100 $ 36,005,637 251,444 15,866,385 126,847 4,347,392 1,158,844 2,164,447 107,817 1,721,618 - 1,574,455 - 1,015,867 77,758 1,883,267 14,063 1,526,449 63,522 475,253 17,009 473,259 - 806,183 $ 67,860,212	Additions	Additions	Deductions As of December 31, 2014 Market value or net equity value In thousand shares Amount In thousand shares Ownership (%) Amount Unit price Total price - ($ 1,259,538) 693,100 100% $ 41,425,623 - $ 42,428,341 ( 8,128) ( 523,139) 246,768 100% 16,796,396 - 16,818,434 - - 144,447 100% 5,945,861 - 6,181,533 - ( 290,152) 1,158,844 100% 2,393,227 - 2,366,109 - ( 162,272) 167,405 100% 1,670,083 - 1,670,083 - ( 70,824) - 100% 1,572,495 - 1,424,560 - ( 129,303) - 100% 918,468 - 1,229,247 ( 80,184) ( 2,055,566) - - - - - - ( 110,417) 14,063 47% 1,477,199 - 879,784 - ( 26,811) 63,522 24% 449,994 - 96,672 ( 17,009) ( 492,943) - - - - - - ( 673,688) - - 447,043 - - ($ 5,794,653) $ 73,096,389 $ 73,094,763	As of December 31, 2014	As of December 31, 2014	Market value or net equity value	Market value or net equity value	Valuation basis Equity method 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃	Pledged as
	In thousand shares 693,100 251,444 126,847 1,158,844 107,817 - - 77,758 14,063 63,522 17,009 -		In thousand shares - 3,452 17,600 - 59,588 - - 2,426 - - - -	Amount			Amount Unit price $ 41,425,623 - 16,796,396 - 5,945,861 - 2,393,227 - 1,670,083 - 1,572,495 - 918,468 - - - 1,477,199 - 449,994 - - - 447,043 - $ 73,096,389	Unit price	Total price
											collateral None 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃
		$ 36,005,637 15,866,385 4,347,392 2,164,447 1,721,618 1,574,455 1,015,867 1,883,267 1,526,449 475,253 473,259 806,183		$ 6,679,524 1,453,150 1,598,469 518,932 110,737 68,864 31,904 172,299 61,167 1,552 19,684 314,548					$ 42,428,341 16,818,434 6,181,533 2,366,109 1,670,083 1,424,560 1,229,247 - 879,784 96,672 - -
		$ 67,860,212		$ 11,030,830					$ 73,094,763

Note 1: Additions include acquisition costs, gains on investment accounted for using equity method, cumulative translation adjustment and recognition of unrealised gain on investees’ financial instruments.

Note 2: Deductions include disposal costs, losses on investment accounted for using equity method, cumulative translation adjustment, cash dividend received, recognition of unrealised loss on investees’ financial instruments and amounts transfer to available-for-sale financial assets.

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INNOLUX CORPORATION SUMMARY OF ACCOUNTS PAYABLE

DECEMBER 31, 2014

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Items Abstract Amount Remark Third parties Company A $ 2,778,697 Company B 2,095,077 Company C 1,834,951 Company D 1,756,114 Others 25,266,941 Balance of individual customers is under 5% of this account’s balance. $ 33,731,780

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INNOLUX CORPORATION SUMMARY OF OTHER PAYABLES

DECEMBER 31, 2014

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Items Wages, salaries and bonus payable Payable on machinery and equipment Payable on processing fees Payable on employees’ bonus Payable on utilities expense Payable on compensation Payable on repairs and maintenance expense Others	Amount $ 3,094,127 2,732,538 2,681,807 1,436,187 1,149,933 1,107,750 1,190,227 5,296,371	Remark
		Balance of individual accounts is under 5% of this account’s balance.
	$18,688,940

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INNOLUX CORPORATION

SUMMARY OF LONG-TERM LOANS DECEMBER 31, 2014

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Type of loans Creditor/managingbank Self-secured commercial paper Mega Bills Finance Corporation International Bills Finance Corporation China Bills Finance Corporation Chinatrust Commercial Bank Summary of long-term syndicated loan Syndicated loan from 20 banks including Mega International Commercial Bank Syndicated loan from 19 banks including Mega International Commercial Bank Syndicated loan from 20 banks including Mega International Commercial Bank Syndicated loan from 12 banks including Mega International Commercial Bank Syndicated loan from 10 banks including Chinatrust Commercial Bank Syndicated loan from 34 banks and bills finance companies including Chinatrust Commercial Bank Syndicated loan from 13 banks and bills finance companies including Chinatrust Commercial Bank Syndicated loan from 18 banks including Bank of Taiwan Syndicated loan from 33 banks including Bank of Taiwan Syndicated loan from 21 banks including Bank of Taiwan Syndicated loan from 18 banks including Bank of Taiwan Less: syndicated loan arrangement fees Less: current portion (including syndicated loan arrangement fees)	Contractperiod 2012/11~2015/07 2012/11~2015/07 2012/11~2015/07 2012/11~2015/07 2008/11~2016/11 2009/09~2016/11 2010/05~2016/11 2005/03~2015/03 2008/09~2016/08 2006/06~2015/07 2006/09~2015/07 2010/03~2016/09 2006/11~2016/11 2008/09~2016/08 2008/10~2016/11	Interest range 1.686% 1.686% 1.686% 1.686% 1.9736% 1.2474% 2.1850% 2.2842% 2.4737% 2.1232% 1.2897% 2.2316% 2.1042% 2.2316% 1.3742%	Amount $ 47,681 35,985 35,985 9,497 $129,148 6,168,000 1,625,544 30,176,000 210,000 1,530,000 3,043,938 293,482 25,142,638 8,982,000 19,316,634 1,739,294 $ 98,227,530 ( 41,252) ( 61,092,333) $ 37,223,093	Collateral orguarantee
				Property, plant and equipment are pledged as collateral. Details are provided in Note 8.

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INNOLUX CORPORATION SUMMARY OF OPERATING REVENUE FOR THE YEAR ENDED DECEMBER 31, 2014

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Items TFT-LCD products Others	Quantity (inthousands) 460,938 -	Amount $ 420,990,284 5,014,749 $ 426,005,033

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INNOLUX CORPORATION SUMMARY OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2014

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Items Beginning raw materials Incoming inventory Less: Ending raw materials Loss on physical inventory Transfer to expenses Scrapping materials Warranty expiration Sale of materials Material consumption Direct labour Manufacturing expenses Manufacturing costs Add: Beginning work in progress Incoming inventory Less: Ending work in progress Transfer to expenses Warranty expiration Scrapping work in progress Cost of finished goods Add: Beginning finished goods Acquisition of finished goods Less: Ending finished goods Transfer to expenses Scrapping finished goods Warranty expiration Cost of goods manufactured Add: Cost of sales of materials Loss on scrapping inventory Loss on physical inventory Less: Revenue from sale of scraps Gain on reversal of inventory valuation Operating costs	Amount
	$ 2,302,234 105,038,529 ( 2,053,559) ( 2,442) ( 8,819,025) ( 576,141) ( 126,378) ( 68,656)
	95,694,562 12,210,968 259,214,028
	367,119,558 27,209,678 11,523,186 ( 16,730,810) ( 614,964) ( 10,184) ( 2,379)
	388,494,085 12,593,026 853,136 ( 11,365,526) ( 274,613) ( 115,249) ( 633,762)
	389,551,097 68,656 693,769 2,442 ( 323,179) ( 383,000)
	$389,609,785

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INNOLUX CORPORATION SUMMARY OF MANUFACTURING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2014

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Items Processing fee Depreciation and amortisation Other expenses	Amount $ 171,898,712 53,045,684 34,269,632 $ 259,214,028	Remark
		Balance of individual accounts is under 5% of this account’s balance.

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INNOLUX CORPORATION SUMMARY OF OPERATING EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2014

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Items Wages and salaries Depreciation expenses Royalty expenses Indirect materials Other expenses	Selling expenses $ 310,036 38,558 2,011 2,959 738,643 $1,092,207	General and administrative expenses $ 1,422,893 253,170 - 255 1,775,023 $ 3,451,341	Research and development expenses $ 3,851,484 1,950,768 1,457,998 1,301,205 2,850,805 $11,412,260	Total $ 5,584,413 2,242,496 1,460,009 1,304,419 5,364,471 $ 15,955,808	Remark
					Balance of individual accounts is under 5% of this account’s balance.

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