INX — Audit Report / Information 2016

Dec 16, 2016

INNOLUX CORPORATION

PARENT COMPANY ONLY FINANCIAL

STATEMENTS AND REPORT OF INDEPENDENT

ACCOUNTANTS

DECEMBER 31, 2016 AND 2015

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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 Shareholders of Innolux Co., Ltd.

Opinion

We have audited the accompanying parent company only balance sheets of Innolux Corporation (the “Company”) as at December 31, 2016 and 2015, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as at December 31, 2016 and 2015, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

Basis for opinion

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

Key audit matters

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

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Valuation and impairment of goodwill and property, plant and equipment

Description

For details of the impairment valuation of goodwill and property, plant and equipment, please refer to Note 6(11). As of December 31, 2016, goodwill and property, plant and equipment amounted to NT$17,096,628 thousand and NT$170,150,592 thousand, respectively.

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

How our audit addressed the matter

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

Additions to property, plant and equipment

Description

The Company’s capital expenditures increased with its operational growth. In 2016, property, plant and equipment increased by NT$41,145,085 thousand, which was 11% of total assets of the Company. For details of property, plant and equipment, please refer to Notes 6(9) and (28). As the amount of property, plant and equipment is material, we identified the additions to property, plant and equipment a key audit matter.

How our audit addressed the matter

We assessed and tested the effectiveness of internal controls related to additions to property, plant and equipment, including sampling and checking purchase orders and invoices as to whether the transactions have been approved appropriately and the correctness of the recorded amounts. We also checked the related receipts or acceptance documents to ensure that additions are recognized in appropriate period. In addition, through sampling method, we conducted physical inspection of certain assets to confirm that the purchased items exist.

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Estimation of significant disaster insurance claim

Description

As described in Note 10, some of the Company’s inventory, building and equipment were damaged during the earthquake in Kaohsiung, Taiwan on February 6, 2016. The Company is in the process of claiming insurance for the damages. The determination of the claim amount involves critical accounting judgements and estimates by the management, including the list of losses incurred which are covered by insurance and evaluation of replacement cost. Given the significance of the claim, we consider the estimation of disaster insurance claim a key audit matter.

How our audit addressed the matter

Our procedures in relation to estimation of disaster insurance claim included:

• A. Checking assets insurance contracts with the insurance company, and confirming whether the inventory, building and equipment damaged during the earthquake were covered by insurance;

• B. Obtaining the claims list and damaged inventory, building and equipment list, and verifying the damaged inventory and building list, selecting samples and cross comparing the data for completeness and accuracy and checking the accuracy of accounting records and amount of disaster loss;

• C. Assessing the reasonableness of replacement cost of inventory, building and equipment which were estimated by management, selecting samples and verifying the estimates against original documents; and

• D. Assessing the reasonableness of claim amount which was estimated by the management based on losses list and replacement cost.

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

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

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

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

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

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

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

• A. Identify and assess the risks of material misstatement of the parent company only financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• B. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• D. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• E. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial

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statements. We are responsible for the direction, supervision and performance of the company audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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

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

PricewaterhouseCoopers, Taiwan February 10, 2017

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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, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(5)(6) 7 7 6(7) 6(1) and 8 6(3) 6(8) 6(9), 7 and 8 6(10) 6(11) and 8 6(26) 6(9) and 8	December 31, 2016 AMOUNT $ 20,927,609 64,241 50,693,511 10,199,014 1,184,141 123,091 18,897,916 878,510 - 35,797 103,003,830 1,647,983 79,845,787 170,150,592 573,425 18,375,538 14,561,523 935,611 286,090,459 $ 389,094,289	December 31, 2015
			AMOUNT
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1170 Accounts receivable, net 1180 Accounts receivable - related parties 1200 Other receivables 1210 Other receivables - related parties 130X Inventory 1410 Prepayments 1476 Other financial assets - current 1479 Other current assets 11XX Total current assets Non-current assets 1523 Available-for-sale financial assets - non-current 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1760 Investment property, net 1780 Intangible assets 1840 Deferred income tax assets 1990 Other non-current assets 15XX Total non-current assets 1XXX Total assets			$ 35,279,610 81,858 45,755,129 2,904,753 872,255 377,364 24,546,126 705,456 1,400,856 3,001
			111,926,408
			1,944,917 81,315,320 163,921,697 680,503 19,264,025 15,722,814 3,263,937
			286,113,213
			$ 398,039,621

(Continued)

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INNOLUX CORPORATION

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	December 31, 2016 Notes AMOUNT 6(12) $ 11,583,750 6(2) 734,915 29,250,025 7 50,320,414 7 20,188,656 6(26) 577,254 6(16) and 9 3,765,234 6(13) 16,381,686 1,124,978 133,926,912 6(13) 28,128,467 6(26) 672,971 6(14) 359,576 29,161,014 163,087,926 6(17) 99,521,488 6(18) 99,647,810 6(19) 3,758,507 26,497,362 6(20) ( 3,418,804) 226,006,363 $ 389,094,289	December 31, 2015
		AMOUNT
Current liabilities 2100 Short-term borrowings 2120 Financial liabilities at fair value through profit or loss - current 2170 Accounts payable 2180 Accounts payable - related parties 2200 Other payables 2230 Current income tax liabilities 2250 Provisions - current 2320 Long-term liabilities, current portion 2399 Other current liabilities 21XX Total current liabilities Non-current liabilities 2540 Long-term borrowings 2570 Deferred income tax liabilities 2670 Other non-current liabilities 25XX Total non-current liabilities 2XXX Total liabilities Equity 3110 Share capital - common stock 3200 Capital surplus Retained earnings 3310 Legal reserve 3350 Unappropriated retained earnings 3400 Other equity interest 3XXX Total equity 3X2X Total liabilities and equity		$ - 53,921 27,731,035 45,433,862 24,387,687 902,134 5,551,759 16,361,238 835,806
		121,257,442
		43,629,968 514,094 373,394
		44,517,456
		165,774,898
		99,532,372 99,643,564 2,676,947 27,661,503 2,750,337
		232,264,723
		$ 398,039,621

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

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INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars, except for earning per share amonuts)

Items

Year ended December 31 2016 2015 Notes AMOUNT AMOUNT 7 $ 285,695,113 $ 360,638,133 6(7)(24) and 7 ( 270,841,149) ( 326,925,887) 14,853,964 33,712,246 6(24) ( 943,819) ( 1,167,637) ( 3,052,097) ( 3,183,374) ( 10,344,969) ( 13,534,326) ( 14,340,885) ( 17,885,337) 513,079 15,826,909 6(21) 1,905,334 1,301,865 6(22) ( 3,078,900) ( 7,842,919) 6(23) ( 850,007) ( 1,310,112) 5,171,418 5,833,198 3,147,845 ( 2,017,968) 3,660,924 13,808,941 6(26) ( 1,790,237) ( 2,993,347) $ 1,870,687 $ 10,815,594 6(14) $ 44,027 ($ 195,939) 6(26) ( 7,485) 33,309 36,542 ( 162,630) ( 5,708,026) ( 1,392,086) 355,619 ( 1,149,260) 6(4) - ( 297,675) 6(20) ( 722,679) 3,420,038 6(26) ( 113,457) 118,551 ( 6,188,543) 699,568 ($ 6,152,001) $ 536,938 ($ 4,281,314) $ 11,352,532 6(27) $ 0.19 $ 1.09 $ 0.19 $ 1.07

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

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

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INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

2015 Balance at January 1, 2015 Appropriations of 2014 earnings (Note 1): Legal reserve Special reserve Cash dividends 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 Changes in non-controlling interests Profit for the year Other comprehensive income for the year Balance at December 31, 2015 2016 Balance at January 1, 2016 Appropriations of 2015 earnings (Note 2): Legal reserve Cash dividends 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 loss for the year Balance at December 31, 2016	Notes	Common stock	Capital surplus			Retained Earnings	Retained Earnings		Other equity interest	Other equity interest		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 hedges	Employee unearned compensation
	6(19) 6(15) 6(20) 6(19) 6(15) 6(20)	$ 99,545,364 - - - ( 12,992 ) - - - - - - $ 99,532,372 $ 99,532,372 - - ( 10,884 ) - - - - - $ 99,521,488	$ 99,584,369 - - - 12,992 ( 3,760 ) 22,740 27,185 38 - - $ 99,643,564 $ 99,643,564 - - 10,884 ( 4,068 ) - ( 2,570 ) - - $ 99,647,810		$ 509,272 2,167,675 - - - - - - - - - $ 2,676,947 $ 2,676,947 1,081,560 - - - - - - - $ 3,758,507	$ 1,144,229 - ( 1,144,229 ) - - - - - - - - $ - $ - - - - - - - - - $ -	$ 24,979,173 ( 2,167,675 ) 1,144,229 ( 6,947,188 ) - - - - - 10,815,594 ( 162,630 ) $ 27,661,503 $ 27,661,503 ( 1,081,560 ) ( 1,989,810 ) - - - - 1,870,687 36,542 $ 26,497,362	$ 3,082,948 - - - - - - - - - ( 1,387,654 ) $ 1,695,294 $ 1,695,294 - - - - - - - ( 5,735,702 ) ($ 4,040,408 )	($ 1,259,847 ) - - - - - - - - - 2,334,292 $ 1,074,445 $ 1,074,445 - - - - - - - ( 452,841 ) $ 621,604	$ 247,070 - - - - - - - - - ( 247,070 ) $ - $ - - - - - - - - - $ -	($ 142,515 ) - - - - 2,411 120,702 - - - - ($ 19,402 ) ($ 19,402 ) - - - 4,142 15,260 - - - $ -	$ 227,690,063 - - ( 6,947,188 ) - ( 1,349 ) 143,442 27,185 38 10,815,594 536,938 $ 232,264,723 $ 232,264,723 - ( 1,989,810 ) - 74 15,260 ( 2,570 ) 1,870,687 ( 6,152,001 ) $ 226,006,363

Note 1: Employees' bonus accrued at $1,436,187 had been deducted from the statement of comprehensive income for the year ended December 31, 2014.

Note 2: Employee's compensation and directors' and supervisors' remuneration accrued at $734,524 and $5,000 had been deducted from the statement of comprehensive income for the year ended December 31, 2015, respectively.

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

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INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars)

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

Notes 2016 2015 $ 3,660,924 $ 13,808,941 6(24) 37,605,732 49,383,090 6(24) 15,260 143,442 ( 5,171,418 ) ( 5,833,198 ) 6(22) - 112,058 6(22) 35,222 100,841 6(22) 500,000 - 6(21) ( 131,151 ) ( 144,282 ) 6(21) ( 28,593 ) ( 117,882 ) 6(23) 831,360 1,607,782 4,725 ( 148,786 ) 698,611 ( 580,500 ) ( 4,938,382 ) 23,103,020 ( 7,294,261 ) 3,162,905 1,378,266 ( 178,584 ) 4,715,867 3,392,039 ( 173,054 ) ( 143,809 ) ( 32,796 ) 9,541 - ( 299,026 ) 1,518,990 ( 6,000,745 ) 4,886,552 ( 39,736,875 ) ( 3,435,134 ) 4,001,150 ( 1,786,525 ) 2,418,270 289,172 ( 577,572 ) ( 5,678 ) ( 17,734 ) 33,143,689 47,464,086 ( 915,890 ) ( 38,833 ) 32,227,799 47,425,253

(Continued)

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INNOLUX CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars)

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

Notes 2016 2015 $ 254,273 $ 225,689 - 231,275 159,335 - ( 77,808 ) ( 623,249 ) 23,680 531,696 6(28) ( 42,155,612 ) ( 21,096,240 ) 1,519,807 810,198 7,778 42,240 31,437 329 135,099 138,837 255,289 141,053 - 11,874 ( 39,846,722 ) ( 19,586,298 ) 11,579,025 ( 1,300,000 ) 822,702 68,100,131 ( 16,440,000 ) ( 106,427,892 ) 6(19) ( 1,989,810 ) ( 6,947,188 ) ( 1,372 ) ( 3,676 ) - ( 50 ) ( 703,623 ) ( 1,523,865 ) ( 6,733,078 ) ( 48,102,540 ) ( 14,352,001 ) ( 20,263,585 ) 35,279,610 55,543,195 $ 20,927,609 $ 35,279,610

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

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INNOLUX CORPORATION

NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

1. HISTORY AND ORGANIZATION

• (1) Innolux Corporation (the “Company”) was organized on January 14, 2003 under the Act for Establishment and Administration of Science Parks in Republic of China (R.O.C.). The Company was listed on the Taiwan Stock Exchange Corporation (the “TSEC”) in October 2006. The Company merged with TPO Displays Corporation and Chi Mei Optoelectronics Corporation on March 18, 2010, with the Company as the surviving entity.

• (2) The Company engages in the research, development, design, manufacture and sales of TFT-LCD panels, modules and monitors of LCD, color filter, and low temperature poly-silicon TFT-LCD.

• THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE PARENT COMPANY ONLY FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

• These parent company only financial statements were authorized for issuance by the Board of Directors on February 10, 2017.

• APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

• (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”) None.

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

  • New standards, interpretations and amendments as endorsed by FSC effective from 2017 are as follows:

follows:
New Standards,Interpretations andAmendments	Effective Date by International Accounting StandardsBoard
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’ Disclosure initiative (amendments to IAS 1) Clarification of acceptable methods of depreciation and amortization (amendments to IAS 16 and IAS 38) Agriculture: bearer plants (amendments to IAS 16 and IAS 41) Defined benefit plans: employee contributions (amendments to IAS 19R)	January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 July 1, 2014

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New Standards,Interpretations andAmendments	Effective Date by International Accounting StandardsBoard January 1, 2016 January 1, 2014 January 1, 2014 January 1, 2014 July 1, 2014 July 1, 2014 January 1, 2016
Equity method in separate financial statements (amendments to IAS 27) Recoverable amount disclosures for non-financial assets (amendments to IAS 36) Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) IFRIC 21, ‘Levies’ Annual improvements to IFRSs 2010-2012 Annual improvements to IFRSs 2011-2013 Annual improvements to IFRSs 2012-2014

Except for the following, the above standards and interpretations have no significant impact to the Company financial condition and operating results based on the Company assessment. ─ Annual improvements to IFRSs 2010-2012 cycle IFRS 8, ‘Operating segments’

The standard is amended to require disclosure of judgments made by management in aggregating operating segments. This amendment also clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets is required only when segment asset is provided to chief operating decision maker regularly.

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

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC effective from 2017 are as follows:

New Standards,Interpretations andAmendments

Effective Date by International Accounting StandardsBoard

Classification and measurement of share-based payment transactions (amendments to IFRS 2) Applying IFRS 9, ‘Financial instruments’ with IFRS 4, ‘Insurance contracts’ (amendments to IFRS 4) 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) IFRS 15, ‘Revenue from contracts with customers’ Clarifications to IFRS 15, ‘Revenue from contracts with customers’ (amendments to IFRS 15) IFRS 16, ‘Leases’ Disclosure initiative (amendments to IAS 7) Recognition of deferred tax assets for unrealised losses (amendments to IAS 12)

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

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New Standards,Interpretations andAmendments

Effective Date by International Accounting StandardsBoard

Transfers of investment property (amendments to IAS 40) IFRIC 22, ‘Foreign currency transactions and advance consideration’ Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Annual improvements to IFRSs 2014-2016 cycle-Amendments to IAS 28, ‘Investments in associates and joint ventures’

January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Company financial condition and operating results based on the Company assessment. A. IFRS 9, ‘Financial instruments’

• (a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortized cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.

• (b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognize 12-month expected credit losses (‘ECL’) or lifetime ECL (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.

• (c) The amended general hedge accounting requirements align hedge accounting more closely with an entity’s risk management strategy. Risk components of non-financial items and a group of items can be designated as hedged items. The standard relaxes the requirements for hedge effectiveness, removing the 80-125% bright line, and introduces the concept of ‘rebalancing’; while its risk management objective remains unchanged, an entity shall rebalance the hedged item or the hedging instrument for the purpose of maintaining the hedge ratio.

• B. IFRS 15, ‘Revenue from contracts with customers’

• IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11, ‘Construction Contracts’, IAS 18, ‘Revenue’, and relevant interpretations and SICs. According to IFRS 15, revenue is recognized

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when a customer obtains control of goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognizes revenue in accordance with that core principle by applying the following steps:

Step 1: Identify contracts with customer

Step 2: Identify performance obligations in the contract(s)

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligation in the contract(s)

Step 5: Recognize revenue when the performance obligation is satisfied.

Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

• C. Amendments to IFRS 15, ‘Clarifications to IFRS 15, Revenue from Contracts with Customers’

The amendments clarify how to identify a performance obligation (the promise to transfer goods or services to a customer) in a contract; determine whether a company is a principal (the provider of goods or services) or an agent (responsible for arranging for the goods or services to be provided); and determine whether the revenue from granting a license should be recognized at a point in time or a period of time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new Standard.

• D. Amendments to IAS 7, ‘Disclosure initiative’

This amendment requires that an entity shall provide more disclosures related to changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

• E. IFRS 16, ‘Leases’

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognize a 'right-of-use asset' and a lease liability (except for those leases with terms of less than 12 months and leases of low-value assets). Lessor accounting still uses the dual classification approach: operating leases and finance leases, and only increases the related disclosures.

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.

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(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.

• A. Foreign currency transactions and balances

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

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

• (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, non-

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monetary assets and liabilities denominated in foreign currencies that are not measured at fair

value are translated using the historical exchange rates at the dates of the initial transactions.

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

• B. Translation of foreign operations

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

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

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

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

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

  • (c) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, if the Company retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as 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;

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  - (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 shortterm 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.

• 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

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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:

  • (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 amortization) 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

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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) Derecognition of financial assets

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

• A. The contractual rights to receive the cash flows from the financial asset expire.

• B. The contractual rights to receive cash flows of the financial asset have been transferred and the Company has transferred substantially all risks and rewards of ownership of the financial asset.

• C. The contractual rights to receive cash flows of the financial asset have been transferred and the Company has not retained control of the financial asset.

(11) Operating leases (lessor)

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

(12) 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.

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

• A. Subsidiaries are all entities (including structured entities) controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

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

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

• D. 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

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transactions between owners. Difference of adjustment of non-controlling interest and fair value of consideration paid or received is recognized in equity.

• E. When the Company loses control of a subsidiary, the Company remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognized in profit or loss. The Company should reclassify all amounts previously recognized as other comprehensive income and amounts relating to the prior subsidiary to profit or loss.

• F. Associates are all entities over which the Company has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or 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 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. Upon loss of significant influence over an associate, the Company remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying

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amount is recognized in profit or loss.

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

• M. When the Company disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognized as capital surplus in relation to the associate are transferred to profit or loss. If it retains significant influence over this associate, the amounts previously recognized as capital surplus in relation to the associate are transferred to profit or loss proportionately.

• 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.

• (14) 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 and equipment are as follows:

Buildings 3~51years

• Machinery and equipment 5~9 years

• Other equipment 2~6 years

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(15) 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.

(16) 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 straightline basis over their estimated useful lives of 2 ～ 10 years.

(17) 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.

• (18) 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.

(19) 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 cash flow hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction.

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• 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. Cash flow hedge

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

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

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

(20) 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

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value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bond (at the balance sheet date).

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

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

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

• (21) 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”.

(22) 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

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10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

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

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

• E. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from research and development expenditures that future taxable profit will be available against which the unused tax credits can be utilized.

• (23) 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.

(24) Business combinations

• A. The Company uses the acquisition method to account for business combinations. For each business combination, the Company measures at the acquisition date components of noncontrolling interests in the acquiree that are present ownership interests and entitle their holders to the proportionate share of the entity’s net assets in the event of liquidation at either fair value or the present ownership instruments’ proportionate share in the recognized amounts of the acquiree’s identifiable net assets. All other non-controlling interests should be measured at the acquisition date fair value.

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

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

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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(11) for the information on goodwill impairment.

• B. Impairment assessment of tangible and intangible assets (excluding goodwill)

• The Company assesses impairment based on its subjective judgement and determines the separate cash flows of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilised and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Company strategy might cause material impairment on assets in the future.

• C. Estimation of significant disaster insurance claim

The insurance claim revenue is recognized when it is virtually certain that the compensation will be received in the future. As the amount of claim is measured based on the amount which is permitted by insurance company, management shall assess and estimate the replacement cost of damaged assets.

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6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand, demand deposits and checking account Time deposits	December31,2016 6,245,543 $ 14,682,066 20,927,609 $	December31,2015
		22,427,663 $ 12,851,947
		35,279,610 $

• A. The Company associates with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

• B. The above time deposits expire in 3 months and risks of changes in their values are remote. The remaining time deposits which did not meet the definition of cash equivalents were $1,400,000 at December 31, 2015, and were classfied as ‘other financial assets-current’.

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

Assets Current items Financial assets held for trading Forward foreign exchange contracts Liabilities Current items Financial liabilities held for trading Forward foreign exchange contracts	December31,2016 64,241 $ December31,2016 734,915 $	December31,2015
		81,858 $
		December31,2015
		53,921 $

• A. The Company recognized net gain and loss of $87,140 and $133,873 on financial assets held for trading for the years ended December 31, 2016 and 2015, respectively.

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

		December31,	December31,	2016		December31,	2015
	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)	$	360,000	2016/10~2017/3	USD (sell)	295,000 $	2015/10~2016/3
exchange contracts	JPY (buy)	39,597,920		2016/10~2017/3	JPY (buy)	35,649,520	2015/10~2016/3
Forward foreign	TWD (sell)		621,240	2016/9~2017/2	USD (sell)	150,000	2015/10~2016/2
exchange contracts	USD (buy)		20,000	2016/9~2017/2	TWD (buy)	4,896,705	2015/10~2016/2
Forward foreign	EUR (sell)		19,000	2016/10~2017/1	EUR (sell)	5,000	2015/11~2016/1
exchange contracts	USD (buy)		20,706	2016/10~2017/1	TWD (buy)	175,075	2015/11~2016/1
Forward foreign	EUR (sell)		55,000	2016/9~2017/4	EUR (sell)	80,500	2015/10~2016/3
exchange contracts	JPY (buy)		6,516,335	2016/9~2017/4	JPY (buy)	10,668,495	2015/10~2016/3
Forward foreign	EUR(sell)		8,960	2016/12~2017/1
exchange contracts	TWD(buy)		302,364	2016/12~2017/1

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.

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(3) Available-for-sale financial assets

Items Non-current items Listed stocks and bond investments Emerging and unlisted stocks	December31,2016 1,438,809 $ 209,174 1,647,983 $	December31,2015
		1,562,871 $ 382,046 1,944,917 $

• A. The Company recognized net gain (loss) in other comprehensive income for fair value change and reclassified from equity to profit or loss for the years ended December 31, 2016 and 2015. Please refer to Note 6(20).

• B. The Company has assessed the impairment of certain investment items and recognized loss of $500,000 which has been reclassified from equity to current period profit or loss (shown as ‘other gains and losses’) for the year ended December 31, 2016.

(4) Hedging derivative financial liabilities

• 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 longterm portion. Therefore, the Company entered into interest rate swap contracts for exchanging floating interest rate for fixed interest rate (TWD90/180CP (Page51328) to hedge such exposures. The contract had matured and was settled in February, 2015.

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

comprehensive income:
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	2016 2015 - $ 5 $ - 297,670 Years endedDecember31,
	2016 - $ -

(5) Accounts receivable

	December31,2016	December31,2016	December31,2015	December31,2015
Accounts receivable	$	51,636,429	$	46,508,958
Less: Allowance for sales returns and discounts	(	833,545)	(	636,330)
Allowance for bad debts	(	109,373)	(	117,499)
	$	50,693,511	$	45,755,129

• 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 that were past due but not impaired is as follows:

Up to 60 days 61 to 180 days Over 180 days	December31,2016 237,149 $ 8,553 - 245,702 $	December31,2015
		482,335 $ 14,480 14,481 511,296 $

The above ageing analysis was based on past due date.

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

• (a) As of December 31, 2016 and 2015, the Company’s accounts receivable that were impaired were $109,373 and $117,499, respectively.

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

as follows:
At January 1 Allowance for bad debts - reclassified Allowance for bad debts - write-offs ( At December 31	2016 117,499 $ - 8,126) ( 109,373 $	2015
		138,272 $ 674 21,447) 117,499 $

(6) Transfer of financial assets

The Company entered into a factoring agreement with financial institutions to sell its accounts receivable. Under the agreement, the Company is not obligated to bear the default risk of the transferred accounts receivable and this is without right of recourse. However, the Company is liable for the losses incurred on any business dispute.

The Company does not provide collateral, and has no continuous involvement in the transferred accounts receivable. As a result, the Company derecognized the accounts receivable from the financial statements. There were no related transactions during 2015. As of December 31, 2016, all the accounts receivable sold were collected and the Company entered into factoring agreements with CTBC bank and Taipei Fubon Commercial Bank in the amount of $19,995,000 and $6,450,000, respectively.

(7) Inventories

Raw materials and supplies Work in process Finished goods	December31,2016 2,164,341 $ 9,608,843 7,124,732 18,897,916 $	December31,2015
		1,954,960 $ 11,769,129 10,822,037 24,546,126 $

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Expenses and losses incurred on inventories are as follows:

Cost of inventories sold Loss on (gain on reversal of) decline in market value Disposal loss and others	2016 2015 270,033,125 $ 326,638,579 $ 550,000 602,500) ( 258,024 889,808 270,841,149 $ 326,925,887 $ Years endedDecember31,

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

• B. Due to the earthquake which occurred in Kaohsiung, Taiwan on February 6, 2016, certain inventories were destroyed. Please refer to Note 10 for details.

(8) Investments accounted for under the equity method

inventories were destroyed. Please refer to Note 10 Investments accounted for under the equity method	for details.
Subsidiaries: Landmark International Ltd. Innolux Holding Ltd. Toppoly Optoelectronics (B.V.I.) Ltd. Innolux Hong Kong Holding Ltd. Innolux Optoelectronics Japan Co., Ltd. InnoJoy Investment Corporation Yuan Chi Investment Co., Ltd. Others Associates: Ampower Holding Ltd. FI Medical Device Manufacturing Co., Ltd. Others	December31,2016 45,894,168 $ 18,523,142 6,717,191 3,341,269 1,548,673 1,246,809 922,529 224,744 870,941 451,943 104,378 79,845,787 $	December31,2015
		45,888,559 $ 20,242,553 6,787,268 2,907,677 1,507,382 1,242,760 1,137,982 301,375 881,351 321,683 96,730
		81,315,320 $

A. The Company’s subsidiaries

• (a)Details of the Company’s subsidiaries are provided in Note 4(3) of the Company’s consolidated financial statements as of and for the year ended December 31, 2016.

(b)The Board of Directors of the Company in July, 2015 resolved to conduct a simple merger with Chi Mei El Corporation (Chi Mei El), a 97%-owned subsidiary of the Company effective September 1, 2015. The Company was the surviving company while Chi Mei El was dissolved after the merger. Said merger was accounted for an as equity transaction.

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B. The Company’s associates

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

summarized below:
Profit or loss for the year from continuing operations Other comprehensive income - net of tax ( Total comprehensive income	Years ended December31,
	2016 408,382 $ 27,958) 380,424 $	2015
		268,381 $ 4,437
		272,818 $

(9) Property, plant and equipment

								2016
	AtJanuary1				Additions			Disposals		Transfer	At December31
Cost:
Land	$	3,852,792	$		-		$	-	$	-	$	3,852,792
Buildings		157,662,050			25,463	(		1,048,411)		10,744,159		167,383,261
Machinery and equipment		380,337,787			17,229	(		3,302,869)		12,318,411		389,370,558
Other equipment		26,624,640			-	(		880,686)		4,471,500		30,215,454
		568,477,269			42,692	(		5,231,966)		27,534,070		590,822,065
Accumulated depreciation
and impairment:
Buildings	(	84,570,136)	(	10,122,036)				576,527	(	61,153)	(	94,176,798)
Machinery and equipment	(	315,914,090)	(	22,724,600)				3,255,968	(	1,654,171)	(	337,036,893)
Other equipment	(	22,131,167)	(		3,582,386)			879,748	(	409,676)	(	25,243,481)
	(	422,615,393)	(	36,429,022)				4,712,243	(	2,125,000)	(	456,457,172)
Unfinished construction
and equipment under
acceptance		18,059,821		41,102,393				-	(	23,376,515)		35,785,699
	$	163,921,697									$	170,150,592
								2015
	AtJanuary1				Additions			Disposals		Transfer	At December31
Cost:
Land	$	3,852,792	$		-		$	-	$	-	$	3,852,792
Buildings		156,858,729			40,626	(		19,452)		782,147		157,662,050
Machinery and equipment		375,070,309			62,167	(		6,453,017)		11,658,328		380,337,787
Other equipment		22,584,306			-	(		2,164,598)		6,204,932		26,624,640
		558,366,136			102,793	(		8,637,067)		18,645,407		568,477,269
Accumulated depreciation
and impairment:
Buildings	(	72,766,956)	(	11,798,206)				19,172	(	24,146)	(	84,570,136)
Machinery and equipment	(	284,203,012)	(	32,843,077)				6,259,044	(	5,127,045)	(	315,914,090)
Other equipment	( (	17,590,360) 374,560,328)	( (	3,522,586) 48,163,869)				2,163,943 8,442,159	( (	3,182,164) 8,333,355)	( (	22,131,167) 422,615,393)
Unfinished construction
and equipment under
acceptance		8,793,374		22,380,334				-	(	13,113,887)		18,059,821
	$	192,599,182									$	163,921,697

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• A. Amount of borrowing costs for property, plant and equipment capitalised and interest rate range:

Year Ended December 31, 2016 Capitalised amount $ 323,503 Range of the interest rates for capitalisation 2.00%~2.26%

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

• C. As of December 31, 2016 and 2015, the prepayments for business facilities which have not yet entered the factory (shown as ‘other non-current assets’) amounted to $896,996 and $3,110,696, respectively.

• D. Due to the earthquake in Kaohsiung, Taiwan on February 6, 2016, a portion of property, plant and equipment were damaged. Please refer to Note 10 for details.

(10) Investment property

Investment property	erty
At January1 Cost: Land 188,247 $ Buildings 564,109 752,356 Accumulated depreciation and impairment: Buildings 71,853) ( 680,503 $		At At Additions Transfer December31 January1 - $ - $ 188,247 $ 188,247 $ - 124,881) ( 439,228 568,440 - 124,881) ( 627,475 756,687 11,132) ( 28,935 54,050) ( 63,010) ( 573,425 $ 693,677 $ 2016		At Additions Disposals December31 - $ - $ 188,247 $ - 4,331) ( 564,109 - 4,331) ( 752,356 13,174) ( 4,331 71,853) ( 680,503 $ 2015
		Additions		Additions
		- $ - - 11,132) (		- $ - - 13,174) (

The fair value of the investment property held by the Company as at December 31, 2016 and 2015 was $1,109,891 and $1,077,466, respectively. The amounts mentioned above represent valuation results of comparative method based on market trading information and are classified as Level 3.

(11) 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	AtJanuary1 Additions 8,152,685 $ - $ 17,096,628 - 3,900,053 - ( 29,149,366 - ( 6,668,707) ( 859,363) ( 3,216,634) ( 306,215) ( 9,885,341) ( 1,165,578) ( 19,264,025 $			2016
				Disposals - $ - 70,918) 70,918) - 70,918 70,918	Transfer At December31 2,000 $ 8,154,685 $ - 17,096,628 275,091 4,104,226 277,091 29,355,539 - 7,528,070) ( - 3,451,931) ( - 10,980,001) ( 18,375,538 $	At December31

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Cost: Patents and royalty Goodwill Others Accumulated amortisation and impairment: Patents and royalty Others				2015
	AtJanuary1 Additions 8,137,035 $ - $ 17,096,628 - 3,686,545 - ( 28,920,208 - ( 5,735,683) ( 933,024) ( 3,057,341) ( 273,023) ( 8,793,024) ( 1,206,047) ( 20,127,184 $			Disposals - $ - 113,730) 113,730) - 113,730 113,730	Transfer At December31 15,650 $ 8,152,685 $ - 17,096,628 327,238 3,900,053 342,888 29,149,366 - 6,668,707) ( - 3,216,634) ( - 9,885,341) ( 19,264,025 $

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

Operating costs Operating expenses	Years ended December31,	Years ended December31,
	2016 997,181 $ 168,397 1,165,578 $	2015
		998,974 $ 207,073
		1,206,047 $

• C. The Company performed impairment analysis for recoverable amount of the goodwill at each reporting date and used the value in use as the basis for calculation of the recoverable amount. The value in use was calculated based on the estimated present value of future cash flows for five years, which was discounted at the discount rate of 5.86% and 5.72% for the years ended December 31, 2016 and 2015, 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, 2016 and 2015.

(12) Short-term borrowings

Type ofborrowings Bank loans Credit loans Range of interest rates	December31,2016 11,583,750 $ 0.83%~1.59%	Collateral
		None

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

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- (13) Long term borrowings

Type of loans Syndicated bank loans Less: Administrative expenses charged by syndicated banks Current portion Range of interest rates	Period December31,2016 December31,2015 2015/3/12 ~2021/12/6 44,840,000 $ 60,280,000 $ 329,847) ( 288,794) ( 16,381,686) ( 16,361,238) ( 28,128,467 $ 43,629,968 $ 1.77%~2.06% 1.90%~2.19%

• 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, 2016 and 2015 are in compliance with the covenants on the syndicated loan agreement.

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

• D. In order to repay the unpaid balance of the medium and long-term syndicated loans, the Board of Directors during its meeting on July 29, 2016, resolved for the Company to apply for new syndicated credit line of $35 billion with certain financial institutions.

(14) Pensions

• A. Defined benefit pension plan

• (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005, and service years thereafter of employees who choose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last six months prior to retirement. The Company contributes monthly an amount equal to 2% of the

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employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company will make contribution for the deficit by next March.

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

Present value of defined benefit obligation Fair value of plan assets ( Net defined benefit liability	December31,2016 1,827,687 $ 1,534,864) ( 292,823 $	December31,2015 1,852,905 $ 1,529,124) 323,781 $

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

	Present value of	Present value of	Present value of
		defined benefit			Fair value of			Net defined
			obligation			planassets	benefitliability
Year ended December 31, 2016
Balance at January 1		$	1,852,905	$		1,529,124	$		323,781
Current service cost			7,565			-			7,565
Interest expense/income			31,499			25,995			5,504
			39,064			25,995			13,069
Remeasurements:
Experience adjustments	(		55,619)	(		11,592)	(		44,027)
Benefits paid	(		8,663)	(		8,663)			-
	(		64,282)	(		20,255)	(		44,027)
Balance at December 31		$	1,827,687	$		1,534,864	$		292,823
	Present value of
		defined benefit			Fair value of			Net defined
			obligation			planassets	benefitliability
Year ended December 31, 2015
Balance at January 1		$	1,605,920	$		1,488,938	$		116,982
Current service cost			8,228			-			8,228
Interest expense/income			36,133			33,501			2,632
			44,361			33,501			10,860
Remeasurements:
Change in financial assumptions			172,133			-			172,133
Experience adjustments			30,491			6,685			23,806
			202,624			6,685			195,939
Balance at December 31		$	1,852,905	$		1,529,124	$		323,781

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• (d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan assets fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2016 and 2015 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

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

Discount rate Future salary increases	Years endedDecember31,	Years endedDecember31,
	2016 1.70% 3.00%	2015
		1.70%
		3.00%

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

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

December 31, 2016 Effect on present value of defined benefit obligation December 31, 2015 Effect on present value of defined benefit obligation	Discount rate	Discount rate	Discount rate	Discount rate	Future salaryincreases	Future salaryincreases	Future salaryincreases	Future salaryincreases
	Increase 0.25%		Decrease 0.25%		Increase 0.25%		Decrease 0.25%
	(
		Increase1%		Decrease1%		Increase1%		Decrease1%
	(	299,276) $		367,992 $		337,723 $	(	283,242) $

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

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

• (g) As of December 31, 2016, the weighted average duration of that retirement plan is 18 years.

• B. Defined contribution pension plan

  • (a) Effective July 1, 2005, the Company has established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.

  • (b) The pension costs under the defined contribution pension plans of the Company for the years ended December 31, 2016 and 2015 were $978,325 and $1,003,836, respectively.

• (15) Share-based payment

• A. As of December 31, 2016, the Company’s share-based payment transactions are set forth below:

Type of arrangement Employee stock options Employee stock options Restricted stocks to employees -shares without consideration -shares subscribed with consideration -shares without consideration -shares subscribed with consideration -shares without consideration -shares subscribed with consideration	Quantity granted Contract period Grant date (in thousand units) (inyears) 2010.05.13 20,000 5 2011.05.19 50,000 5 2013.01.30 31,151 3 2013.01.30 31,151 3 2013.03.29 844 3 2013.03.29 844 3 2013.12.12 4,268 3 2013.12.12 4,268 3	Vestingconditions
		Note (a), (b) Note (a), (b) Note (c), (d) Note (c), (d) Note (c), (d) Note (c), (d) Note (c), (d) Note (c), (d)

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

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

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

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

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• (e) The fair value of stock options granted from 2010 to 2013 is measured using the BlackScholes option-pricing model. Relevant information is as follows:

Exercise Type of Price price arrangement Grant date (in dollars) (in dollars) Restricted stocks to employees -shares without consideration 2013.12.12 10.65 $ $ - - shares subscribed with consideration 2013.12.12 10.65 5.00 -shares without consideration 2013.03.29 18.40 - - shares subscribed with consideration 2013.03.29 18.40 5.00 -shares without consideration 2013.01.30 15.35 - - shares subscribed with consideration 2013.01.30 15.35 5.00 Employee stock options 2011.05.19 26.70 26.70 Employee stock options 2010.05.13 39.85 39.85	Expected volatility (%) - - - - - - 35.67 51.57	Expected duration (month) - - - - - - 48.60 48.60	Risk Expected free Fair value dividend interest per unit yield(%) rate(%) (in dollars) - - 10.65 $ - - 5.65 - - 18.40 - - 13.40 - - 15.35 - - 10.35 0.00 1.00 7.31 ~8.32 0.00 0.80 15.12 ~16.98

• B. The details of the employee stock option plan for the years ended December 31, 2016 and 2015 are as follows:

are as follows:
Quantity (in thousand StockOptions units) Outstanding options at the beginning of the year 50,000 Options exercised - Options expired 50,000) ( Outstanding options at the end of the year - Exercisable options at the end of the year -		Weighted Weighted Weighted average average Range of average stock price of exercise exercise remaining stock options price price vesting at exercise (indollars) (indollars) period date (indollars) $ 22.85 - $ 9.99 21.87 - $ - - - Year ended December31,2016
		Weighted average exercise price (indollars) $ 22.85 - 21.87 - -	Range of exercise price (indollars) $ -

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Year ended December 31, 2015

					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)	(indollars)	(indollars)	period	date (indollars)
Outstanding options at the	70,000	$ 25.63
beginning of the year
Options exercised	-	-			$ 13.61
Options expired	( 20,000)	32.59
Outstanding options at the
end of the year	50,000	22.85	$ 22.85	0.39 years
Exercisable options at the
end of the year	50,000	22.85

For the years ended December 31, 2016 and 2015, the expenses incurred from share-based payment arrangements were $15,260 and $143,442, respectively.

(16) Provisions-current

At January 1, 2016 Additions during the year Used during the year ( At December 31, 2016	Warranty 808,136 $ 2,160,000 1,333,902) ( 1,634,234 $	Litigation and others 4,743,623 $ 1,618,915 4,231,538) ( 2,131,000 $	Total 5,551,759 $ 3,778,915 5,565,440) 3,765,234 $

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).

(17) Share capital

As of December 31, 2016, the Company’s authorized and outstanding capital were $105,000,000 and $99,521,488, 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 Cancellation of restricted stock to employees ( At December 31	2016 Number of ordinary shares (inthousands) 9,953,237 1,088) ( 9,952,149	2015 Number of ordinary shares (inthousands) 9,954,536 1,299) 9,953,237

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• A. On September 26, 2014, the Board of Directors of the Company resolved to increase capital for cash by issuing global depositary receipts (the “GDR”). The amount of $9,360,000 (approximately equivalent to US$312,625 thousand) is tentatively scheduled for release. As the Company has received the bank’s approval for extending capital increase, based on shareholder’s interest, the issuance of the GDR was cancelled in accordance with the Financial Supervisory Commission (FSC)’s approval on January 30, 2015.

• B. The Board of Directors of the Company resolved to increase capital for cash by issuing the GDR and had been completed in January 2013. The Company issued 1,125,000 thousand shares of common stock for cash, with a unit of GDR representing 10 shares of common stock at the Luxembourg Stock Exchange which raised a total of $14,519,051, net of issuance cost. As of December 31, 2016, there were 213 thousand units outstanding, representing 2,134 thousand shares of common stocks.

• C. The Company adopted a resolution in 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). Until the vesting conditions are met by employees, those shares are restricted with regard to transfer of voting rights, dividend and other rights. As of December 31, 2016 and 2015, the Company bought back 1,088 and 1,299 thousand shares of unvested restricted stocks to employees, respectively, and decreased capital in accordance with related regulation.

• D. The common stock issued by the Company in 2006 through private placement was 570,929 thousand shares. The rights and obligations of the private common shares were the same as other issued common shares, except for the transfer restriction under R.O.C. Securities and Exchange Act and the listing restriction that no public listing will be allowed within three years since the day of issuance and only if the Company completes the application to publicly issue the shares. The Board of Directors of the Company approved the public issuance of the above private common shares on April 28, 2015. As approved by the Financial Supervisory Committee on July 30, 2015, the stocks were officially listed in the Taiwan Stock Exchange starting from August 7, 2015.

(18) 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.

~41~

2016

At January 1 Cancellation of restricted stock to employees Vested restricted stock to employees Changes in restricted stock to employees Expiration of employee stock options Changes in net equity of long-term equity investments At December 31	Share of profit (loss) of associates accounted for Restricted under equity Employee stock to Sharepremium method stock option employees Total 99,101,649 $ 36,458 $ 393,500 $ 111,957 $ 99,643,564 $ - - - 10,884 10,884 119,367 - - 119,367) ( - - - - 4,068) ( 4,068) ( 393,500 - 393,500) ( - - - 2,570) ( - - 2,570) ( 99,614,516 $ 33,888 $ - $ 594) ($ 99,647,810 $

At January 1 Cancellation of restricted stock to employees Vested restricted stock to employees Changes in restricted stock to employees Compensation related to share-based payment Expiration of employee stock options Changes in net equity of long-term equity investments Changes in non-controlling interests At December 31		2015

(19) Retained earnings

A. In accordance with the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be offset against prior years’ operating losses, then set aside 10% of the remaining amount as legal reserve (until the legal reserve equals the paid-in capital). Preferred dividend shall be distributed after setting aside or reversing a special reserve according to related regulations. The appropriation of the remaining amount along with the unappropriated earnings from previous years shall be proposed by the Board of Directors and resolved by the shareholders.

~42~

The Company is in an emerging industry which is growing rapidly, and has a capital intensive business. The Company is at the stage of stable growth. In line with the Company’s long-term financial plan in the future, investment environment and business competition situation, the appropriation of dividends shall be proposed by the Board of Directors and resolved by the shareholders, taking into account the future capital expenditure budget and capital requirement of the Company. However, the stock dividends distributed to shareholders shall not exceed twothirds of distributable dividends in current period.

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

• C. The details of the appropriation of 2015 net income and the appropriation of 2014 net income which was approved at the stockholders’ meeting in June 2016 and 2015 are as follows:

Years ended December 31,

Legal reserve Cash dividends	Dividends per Amount share (indollars) 1,081,560 $ 1,989,810 0.20 $ 3,071,370 $ 2015	2014	2014
	Amount 1,081,560 $ 1,989,810 3,071,370 $	Amount 2,167,675 $ 6,947,188 9,114,863 $	Dividends per share (indollars)
			0.70 $

The Company’s appropriations of earnings for 2016 are to be authorized by the Board of Directors and presented for approval in the Company’s stockholders’ meeting for 2017.

• D. For the information relating to employees’ remuneration and directors’ and supervisors’ remuneration, please refer to Note 6(25).

(20) Other equity items

Other equity items
				2016
				Available-		Employee
		Currency		for-sale		unearned
		translation		investments	compensation			Total
At January 1	$	1,695,294	$	1,074,445	($	19,402)	$	2,750,337
Revaluation of available-for-sale
investments - gross		-	(	144,381)		-	(	144,381)
Revaluation transfer of
available-for-sale investment - gross		-		500,000		-		500,000
Currency translation differences	(	5,708,026)		-		-	(	5,708,026)
Changes in restricted stocks to
employees		-		-		4,142		4,142
Compensation related to share-based
payment		-		-		15,260		15,260
Share of subsidiaries and other
comprehensive loss of associates	(	27,676)	(	695,003)		-	(	722,679)
Effect of income tax		-	(	113,457)		-	(	113,457)
At December 31	($	4,040,408)	$	621,604	$	-	($	3,418,804)

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(21) Other income (22) Other gains and losses Available- Employee Currency for-sale Hedging unearned translation investments reserve compensation Total At January 1 3,082,948 $ 1,259,847) ($ 247,070 $ 142,515) ($ 1,927,656 $ Fair value losses of cash flow hedges - - 5) ( - 5) ( Reclassified as current income of cash flow hedges - - 297,670) ( - 297,670) ( Revaluation of available-for-sale investments - gross - 1,145,267) ( - - 1,145,267) ( Revaluation transfer of available-for-sale investment - gross - 3,993) ( - - 3,993) ( Currency translation differences 1,392,086) ( - - - 1,392,086) ( Changes in restricted stocks to employees - - - 2,411 2,411 Compensation related to share-based payment - - - 120,702 120,702 Share of subsidiaries and other comprehensive income of associates 4,432 3,415,606 - - 3,420,038 Effect of income tax - 67,946 50,605 - 118,551 At December 31 1,695,294 $ 1,074,445 $ - $ 19,402) ($ 2,750,337 $ 2015 2016 2015 Rental revenue 139,315 $ 165,372 $ Interest income 131,151 144,282 Dividend income 28,593 117,882 Service income 250,240 25,597 Other income 1,356,035 848,732 1,905,334 $ 1,301,865 $ Years endedDecember31, 2016 2015 Net gain (loss) on financial assets and liabilities at fair value through profit or loss 87,140 $ 133,873) ($ Net currency exchange loss 306,238) ( 66,797) ( Loss on disposal of investments - 112,058) ( Loss on disposal of property, plant and equipment 35,222) ( 100,841) ( Impairment loss 500,000) ( - Disaster loss 1,296,166) ( - Litigation loss and others 1,028,414) ( 7,429,350) ( 3,078,900) ($ 7,842,919) ($ Years endedDecember31,			2015
					Total

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(23) Finance costs

Finance costs
Interest expense: Bank borrowings Others Gain (loss) on fair value change of financial instruments: Gain on cash flow hedges, reclassified from equity Factoring expense of accounts receivable	2016 2015 831,360 $ 1,601,674 $ - 6,108 - 297,670) ( 18,647 - 850,007 $ 1,310,112 $ Years endedDecember31,
	2016 831,360 $ - - 18,647 850,007 $

(24) Expenses by nature

Expenses by nature
Employee benefit expense: Salaries and other short-term employee benefits Share-based payments Post-employment benefits Depreciation Amortization	Years endedDecember31,
	2016 26,461,969 $ 15,260 991,394 36,440,154 1,165,578 65,074,355 $	2015
		26,436,720 $ 143,442 1,014,696 48,177,043 1,206,047 76,977,948 $

• (25) Employees’ compensation and directors’ and supervisors’ remuneration

• A. According to the Articles of Incorporation, of the Company a ratio of profit of the current year distributable, after covering accumulated losses, shall be distributed as employees' compensation and directors’ and supervisors’ remuneration. The ratio shall not be lower than 5% for employees’ compensation and shall not be higher than 0.1% for directors’ and supervisors’ remuneration.

• B. For the years ended December 31, 2016 and 2015, employees’ compensation was accrued at $192,788 and $734,524, respectively; while directors’ and supervisors’ remuneration was accrued at $1,928 and $5,000, respectively. The aforementioned amounts were recognized in expenses.

The expenses recognized for 2016 were accrued based on the earnings of current year and are to be presented for approval by the Board of Directors and reported during the Company’s stockholders’ meeting.

Employees’ compensation and directors’ and supervisors’ remuneration for 2015 as resolved by the Board of Directors on May, 2016 were $734,524 and $4,490, respectively. The difference of $510 between employees’ compensation (directors’ and supervisors’ remuneration) as resolved by the Board of Directors and the amount recognized in the 2015 financial statements was caused by a different accrual ratio and had been recorded as expense in 2016.

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

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(26) Income tax

A. Income tax expense

• (a) Components of income tax expense:

Current tax: Current tax on profit for the year Tax on undistributed surplus earnings Adjustments in respect of prior years Total current tax Deferred tax: Origination and reversal of temporary differences Income tax expense	Years endedDecember31,	Years endedDecember31,
	2016 - $ 590,712 299 591,011 1,199,226 1,790,237 $	2015
		42 $ 915,947 36,371
		952,360
		2,040,987
		2,993,347 $

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

Fair value gains/losses on available-for-sale financial assets Cash flow hedges Remeasurement of defined benefit obligation	2016 2015 113,457 $ 67,946) ($ - 50,605) ( 7,485 33,309) ( 120,942 $ 151,860) ($ Years endedDecember31,

• B. Reconciliation between income tax expense and accounting profit:

			Years ended	December31,	December31,
			2016		2015
Tax calculated based on profit before tax and
statutory tax rate		$	622,357	$	2,347,520
Effects from items disallowed by tax regulation	(		816,199)	(	975,322)
Prior year income tax underestimate			299		36,371
Additional 10% tax on undistributed earnings			590,712		915,947
Effect from Alternative Minimum Tax			-		42
Change in assessment of realization of deferred
tax assets			1,393,068		668,789
Tax expense		$	1,790,237	$	2,993,347

~46~

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

carryforward are as follows:
Recognised in other Recognised in comprehensive January1 profit or loss income December31 Temporary differences: -Deferred tax assets: Sales returns and discount provisions 243,526 $ 26,957 $ - $ 270,483 $ Accrued royalties and warranty provisions 654,557 77,287 - 731,844 Unrealized exchange loss (gain) 119,217 119,217) ( - - Unrealized loss (gain) on financial instruments 926,234 342,383) ( 113,457) ( 470,394 Loss carryforward 13,463,164 976,913) ( - 12,486,251 Others 316,116 293,920 7,485) ( 602,551 15,722,814 1,040,349) ( 120,942) ( 14,561,523 -Deferred tax liabilities: Unrealized exchange gain - 113,545) ( - 113,545) ( Amortisation charges on goodwill 477,056) ( 82,370) ( - 559,426) ( Others 37,038) ( 37,038 - - 514,094) ( 158,877) ( - 672,971) ( 15,208,720 $ 1,199,226) ($ 120,942) ($ 13,888,552 $ Year ended December31,2016 Recognised in other Recognised in comprehensive January1 profit or loss income December31 Temporary differences: -Deferred tax assets: Sales returns and discount provisions 166,373 $ 77,153 $ - $ 243,526 $ Accrued royalties and warranty provisions 327,918 326,639 - 654,557 Unrealized exchange loss (gain) 200,697 81,480) ( - 119,217 Unrealized loss on financial instruments 699,962 158,326 67,946 926,234 Loss carryforward 15,848,188 2,385,024) ( - 13,463,164 Others 332,288 49,481) ( 33,309 316,116 17,575,426 1,953,867) ( 101,255 15,722,814 -Deferred tax liabilities: Unrealized (gain) loss on cash flow hedges 50,605) ( - 50,605 - Amortisation charges on goodwill 394,687) ( 82,369) ( - 477,056) ( Others 32,287) ( 4,751) ( - 37,038) ( 477,579) ( 87,120) ( 50,605 514,094) ( 17,097,847 $ 2,040,987) ($ 151,860 $ 15,208,720 $ Year ended December31,2015		Year ended December31,2016
				December31
				270,483 $ 731,844 - 470,394 12,486,251 602,551
				14,561,523
				13,888,552 $
			Recognised in other comprehensive income December31 - $ 243,526 $ - 654,557 - 119,217 67,946 926,234 - 13,463,164 33,309 316,116 101,255 15,722,814 50,605 - - 477,056) ( - 37,038) ( 50,605 514,094) ( 151,860 $ 15,208,720 $	December31
				243,526 $ 654,557 119,217 926,234 13,463,164 316,116
				15,722,814
				15,208,720 $

~47~

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

are as follows:
		December31,2016
Year incurred 2010 2011 2012 2016	Amount filed / assessed Assessed Assessed Assessed Filed	Unused amount 9,392,452 $ 63,808,943 42,430,348 3,047,240 118,678,983 $ December31,2015	Unrecognised deferred taxassets 3,579,613 $ 24,318,605 16,170,882 1,161,351 45,230,451 $	Usable untilyear
				2020 2021 2022 2026
Year incurred 2011 2012	Amount filed / assessed Assessed Filed	Unused amount 66,433,000 $ 43,123,372 109,556,372 $	Unrecognised deferred taxassets 18,410,536 $ 11,950,753 30,361,289 $	Usable untilyear
				2021 2022

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

Deductible temporary differences

December31,2016 48,198,766 $	December31,2015
	33,185,717 $

• F. The Company has not recognized taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2016 and 2015, the amounts of temporary differences unrecognized as deferred tax liabilities were $28,052,581 and $29,289,598, respectively.

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

• H. The Company’s income tax returns through 2014 have been assessed and approved by the Tax Authority.

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

• J. The details of imputation system are as follows:

The details of imputation system are as follows:
(a) Balance of tax credit account (b) Estimated (Actual) creditable tax rate	December31,2016 1,420,948 $ 2016 (Estimated) 7.59%	December31,2015
		678,189 $ 2015 (Actual)
		5.71%

~48~

(27) Earnings per share

Earnings per share
Basic earnings per share Profit attributable to ordinary shareholders of the parent Weighted average number of ordinary shares outstanding (shares in thousands) Basic earnings per share (in dollar) Diluted earnings per share Profit attributable to ordinary shareholders of the parent Weighted average number of ordinary shares outstanding (shares in thousands) Assumed conversion of all dilutive potential ordinary shares: -Employees’ compensation -Restricted stocks Diluted earnings per share (in dollar)	Years ended December31,
	2016 1,870,687 $ 9,947,293 0.19 $ 1,870,687 $ 9,947,293 54,316 4,052 10,005,661 0.19 $	2015
		10,815,594 $ 9,922,525 1.09 $ 10,815,594 $ 9,922,525 116,513 27,519 10,066,557 1.07 $

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

(28) 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	Years endedDecember31,
	2016 41,145,085 $ 4,119,425 3,108,898) ( ( 42,155,612 $	2015
		22,483,127 $ 2,732,538 4,119,425) 21,096,240 $

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,
	2016 14,619,410 $ 11,788,496 113,916 26,521,822 $	2015
		13,019,281 $ 13,048,043 233,299
		26,300,623 $

~49~

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
Others Associates Subsidiaries Purchases of goods:	Years endedDecember31,
	2016 3,014,178 $ 1,363,067 223,037 4,600,282 $	2015 2,960,453 $ 311,987 123,169 3,395,609 $

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

nsigned processing Consigned processing
Processing costs: Subsidiaries Others	Years endedDecember31,
	2016 89,840,173 $ 40,737 89,880,910 $	2015
		122,717,171 $ 31,116 122,748,287 $

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

Payables to related parties: Subsidiaries	December31,2016 1,188,143 $	December31,2015
		3,765,006 $

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

D. Service revenue (Shown as “other revenue”)

Service revenue (Shown as“other revenue”)
Service revenue: Subsidiaries Associates	December31,2016 207,244 $ 42,996 250,240 $	December31,2015
		- $ 25,597
		25,597 $

~50~

E. Receivables from related parties:

Receivables from related parties:
		December31,2016			December31,2015
Accounts receivable:
Others		$	9,618,406	$		2,659,151
Subsidiaries			655,047			519,539
Associates			47,743			81,427
			10,321,196			3,260,117
Less: Transfer to other receivables	(		105,539)	(		355,364)
Allowance for sales returns and discounts	(		16,643)			-
		$	10,199,014	$		2,904,753

• (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’.

F. Other receivables from related parties

Other receivables from related parties
Payables to related parties: Transfer from accounts receivable Other receivables Accounts payable: Subsidiaries Others Associates	December31,2016 105,539 $ 17,552 123,091 $ December31,2016 48,369,524 $ 1,727,306 223,584 50,320,414 $	December31,2015
		355,364 $ 22,000 377,364 $ December31,2015
		44,235,860 $ 1,130,282 67,720 45,433,862 $

G. Payables to related parties:

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.

H. Property transactions

Purchase of property

• (a) Acquisition of property, plant and equipment:

perty transactions chase of property Acquisition of property, plant and equipment:
Subsidiaries Others Associates	Years endedDecember31,
	2016 83,144 $ 17,324 - 100,468 $	2015
		148,450 $ 7,820 220 156,490 $

~51~

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

Subsidiaries Others	December31,2016 6,528 $ 16,917 23,445 $	December31,2015
		542,694 $ 6,273 548,967 $

(2) Key management compensation

Key management compensation
Salaries and other short-term employee benefits Share-based payments Post-employment benefits	Years endedDecember31,
	2016 138,669 $ 665 458 139,792 $	2015
		136,698 $ 6,286 220 143,204 $

8. PLEDGED ASSETS

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

Pledged asset Other financial assets-current Time deposits Property, plant and equipment Intagible assets Other non-current assets Time deposits	Book	December31,2015 Purpose 856 $ Land lease 59,669,639 Long-term loans and performance guarantee for lease payable - Long-term loans and performance guarantee for lease payable 119,703 Tariff guarantee, land lease and guarantee for contract 59,790,198 $ value	Purpose
	December31,2016 - $ 80,828,544 15,551 752 80,844,847 $

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

－ (1) Contingencies Significant Litigations

• A. Chi Mei Optoelectronics Corporation (the “CMO”), Chi Mei Optoelectronics Japan Co., Ltd., Chi Mei Optoelectronics UK Ltd., Chi Mei Optoelectronics Europe B.V., and Chi Mei Optoelectronics USA Inc. were investigated by the United States (the “U.S.”) Department of Justice in December 2006 for alleged violation of the anti-trust laws. Moreover, authorities of some U.S state governments, as well as the governments of the European Union, China, Brazil and Korea also started to investigate this case. For Brazil case, the Company is continuously cooperating with the investigation. In addition, certain downstream customers and consumers brought classactions and/or individual civil lawsuits in the U.S. and Canada against the TFT-LCD companies; and in certain lawsuits, CMO and Chi Mei Optoelectronics USA Inc. were listed as defendants. Details of the investigations on significant cases related to the alleged violation of the anti-trust laws are as follows:

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• (a) The Company had reached a plea agreement with the U.S. Department of Justice in December 2009, agreeing to pay a fine of US$220 million through installment over five years. The fine had been fully paid as of February 2015.

  • The Company had also reached out-of-court settlement agreements with the plaintiffs on separate civil lawsuits in the U.S. since 2012 and recognized related losses.

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

• (b) In December 2010, the Company had been ordered by the European Commission to pay a fine of EUR 300 million. The Company appealed the case in February 2011, and the General Court of the European Union rendered a judgment in February 2014 lowering the fine from EUR 300 million to EUR 288 million. The Company further filed an appeal against a part of the judgment and the Court of Justice of the European Union has adjudicated to maintain the aforementioned amount of fine.

• (c) Except for those anti-trust litigations for which the ultimate results cannot be reliably estimated, the Company has recognized actual or estimated losses or liabilities in “Current Provisions”.

• B. Eidos Displays, LLC and Eidos III, LLC (“Eidos”) filed a lawsuit with the United States District Court for the District of East Texas on April 25, 2011, alleging infringement of its patent. The administrative law judge has ruled a summary judgment for the lawsuit in December 2013 rendering Eidos’ patent as invalid, and the presiding judge has confirmed the summary judgment in January 2014. Eidos has filed a complaint in February 2014. The United States Court of Appeals for the Federal Circuit has rejected the judgement and sent back to the United States District Court in March 2015. The Company submitted an application to ask the United States Court of Appeals for the Federal Circuit to rehear en banc in April 2015. Though the United States Court of Appeals rejected the request in June 2015, the Company appealed to the Supreme Court in September 2015 and petitioned for writ of certiorari. The Supreme Court of the United States has denied the appeal of the Company in November 2015. The case remains at the ruling by the United States Court of Appeals for the Federal Circuit in March 2015. However, the results of the litigation are uncertain and are dependent on the future litigation progress. The Company does not expect that the lawsuit would have a material adverse effect on the Company’s financial position or results of operations in the short-term.

(2) Commitments

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

December 31, 2016 December 31, 2015 Property, plant and equipment $ 17,663,033 $ 38,262,634

~53~

B. Operating lease commitments

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

Not later than one year Later than one year but not later than five years Later than five years	December31,2016 527,419 $ 1,861,776 880,359 3,269,554 $	December31,2015
		508,974 $ 1,873,940 1,207,891
		3,590,805 $

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	December31,2016 245,565 $	December31,2015
		474,222 $

10. SIGNIFICANT DISASTER LOSS

The Company’s partial inventories and buildings were damaged due to the earthquake which occurred in Kaohsiung, Taiwan on February 6, 2016. The Company has conducted a preliminary disaster assessment and a conservative estimation on insurance claim to assess possible disaster loss. However, the Company has full earthquake insurance and business interruption insurance to cover the operating costs of inventories and building during the repair period. The Company is actively processing the insurance claims. Based on the initial assessment, the Company may incur a probable loss after taking the insurance claims into account. Accordingly, the company recognized a loss of $1,296,166 for the year ended December 31, 2016, shown as “Other gains and losses”.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital management

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

(2) Financial instruments

A. Fair value information of financial instruments

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

• B. Financial risk management policies

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

~54~

• (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 nonderivative 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 the Company’s treasury departments. To manage their foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, entities in the Company use forward foreign exchange contracts. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency.

• c) The Company’s businesses involve some non-functional currency operations (the Company’s functional currency: NTD). Based on the simulations performed, the impact on post-tax profit of a 1% exchange rate fluctuation would be an increase of $35,439 and $29,120 for the years ended December 31, 2016 and 2015, 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 2,348,586 $ 32.25 75,741,899 $ JPY 388,289 0.28 108,721 EUR 80,977 33.90 2,745,120 Non-monetary items USD 2,337,217 $ 32.25 75,375,248 $ HKD 223,521 4.16 929,847 JPY 5,619,277 0.28 1,573,398 EUR 3,703 33.90 125,532 Monetary items USD 2,088,145 $ 32.25 67,342,676 $ JPY 27,233,384 0.28 7,625,348 EUR 2,471 33.90 83,767 December31,2016 Financial liabilities	December31,2015	December31,2015
	Foreign Currency Exchange Amount Rate (In Thousands) (Note) 2,229,374 $ 32.83 1,607,428 0.27 75,928 35.88 2,342,530 $ 32.83 178,232 4.24 5,527,619 0.27 3,697 35.88 1,990,752 $ 32.83 29,475,552 0.27 3,397 35.88	Book Value (NTD)
		73,190,348 $ 434,006 2,724,297 76,905,260 $ 755,704 1,492,457 132,648 65,356,388 $ 7,958,399 121,884

~55~

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

• d) Total exchange loss including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2016 and 2015 amounted to $306,238 and $66,797, respectively.

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 availablefor-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, 2016 and 2015 would have increased/decreased by $329,597 and $388,983, respectively, as a result of gains/losses on equity securities classified as available-for-sale.

• 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, 2016 and 2015, the Company’s borrowings at variable rate were denominated in the NTD.

• b) The Company analyzes its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Company calculates the impact on profit and loss of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios are run only for liabilities that represent the major interest-bearing positions.

• c) Based on the simulations performed, the impact on post-tax profit of a 0.25% shift would be a maximum increase of $112,100 or decrease of $150,700 for the years ended December 31, 2016 and 2015, 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 are calculated by reference to the agreed notional amounts.

~56~

• (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 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(13)) 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 nonderivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

~57~

Non-derivative financial liabilities:

Less than December31,2016 1year Short-term borrowings 11,583,750 $ Accounts payable 79,570,439 Other payables 20,188,656 Long-term borrowings (including current portion) 16,440,000 Less than December31,2015 1year Accounts payable 73,164,897 $ Other payables 24,387,687 Long-term borrowings (including current portion) 16,440,000 Derivative financial liabilities: December31,2016 Forward exchange contracts December31,2015 Forward exchange contracts	Between 1 Between 3 and3 years and5 years - $ - $ - - - - 27,850,000 550,000 Between 1 Between 3 and3 years and5 years - $ - $ - - 43,840,000 - Less than 1year $ 734,915 $ Less than 1year $ 53,921 $	Between 1 Between 3 and3 years and5 years - $ - $ - - - - 27,850,000 550,000 Between 1 Between 3 and3 years and5 years - $ - $ - - 43,840,000 - Less than 1year $ 734,915 $ Less than 1year $ 53,921 $	Total
			11,583,750 $ 79,570,439 20,188,656 44,840,000 Total
			73,164,897 $ 24,387,687 60,280,000 Total
		$	734,915 Total
		$	53,921

• d) The related information on the repayment of the medium and long-term syndicated loans from the ‘‘Agreed-upon Agreement’’ is described in Note 6(13).

(3) Fair value estimation

• A. Details of the fair value of the Company’s financial assets and financial liabilities not measured at fair value are provided in Note 12(2)A. Details of the fair value of the Company’s investment property measured at cost are provided in Note 6(10).

• B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company’s investment in listed stocks and on-the-run bonds is included in Level 1.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Company’s investment in derivative instruments is included in Level 2.

• Level 3: Unobservable inputs for the asset or liability. The fair value of the Company’s investment in equity investment without active market is included in Level 3.

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• C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2016 and 2015 is as follows:

2016 and 2015 is as follows:
December31,2016 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Forward exchange contracts Available-for-sale financial assets Equity securities Liabilities Recurring fair value measurements Financial liabilities at fair value through profit or loss Forward exchange contracts December31,2015 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Forward exchange contracts Available-for-sale financial assets Equity securities Liabilities Recurring fair value measurements Financial liabilities at fair value through profit or loss Forward exchange contracts	Level 1 - $ 1,438,809 1,438,809 $ - $ Level 1 - $ 1,562,871 1,562,871 $ - $	Level 2 64,241 $ - 64,241 $ 734,915 $ Level 2 81,858 $ - 81,858 $ 53,921 $	Level3 - $ 209,174 209,174 $ - $ Level3 - $ 382,046 382,046 $ - $	Total
				64,241 $ 1,647,983
				1,712,224 $
				734,915 $
				Total
				81,858 $ 1,944,917
				2,026,775 $
				53,921 $

• D. The methods and assumptions the Company used to measure fair value are as follows:

• (a) The instruments the Company used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

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

~59~

• (b) Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the parent company only balance sheet date.

• (c) When assessing non-standard and low-complexity financial instruments, for example, debt instruments without active market, interest rate swap contracts, foreign exchange swap contracts and options, the Company adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.

• (d) The valuation of derivative financial instruments is based on valuation model widely accepted by market participants, such as present value techniques and option pricing models. Forward exchange contracts are usually valued based on the current forward exchange rate.

• (e) The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Company’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs, for example, model risk or liquidity risk and etc. In accordance with the Company’s management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the parent company only balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.

• (f) The Company takes into account adjustments for credit risks to measure the fair value of financial and non-financial instruments to reflect credit risk of the counterparty and the Company’s credit quality.

• E. For the years ended December 31, 2016 and 2015, there was no transfer between Level 1 and Level 2.

• F. The following table presents the changes in level 3 instruments as at December 31, 2016 and 2015:

		Equity securities	Equity securities	Equity securities
		2016		2015
At January 1	$	382,046	$	563,496
Proceeds from capital reduction	(	159,335)		-
Gains and losses recognized in other comprehensive
income	(	13,537)	(	181,450)
At December 31	$	209,174	$	382,046

• G. For the years ended December 31, 2016 and 2015, there was no transfer into or out from Level 3.

~60~

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

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

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

Non-derivative equity instrument: Non-derivative equity instrument: Unlisted shares Unlisted shares	Fair value at December Valuation Significant 31,2016 technique unobservable input Fair value at December Valuation Significant 31,2015 technique unobservable input Discount for lack of marketability 382,046 $ Market comparable companies Price to earnings ratio multiple, price to book ratio multiple control premium Discount for lack of marketability 209,174 $ Market comparable companies Price to earnings ratio multiple, price to book ratio multiple control premium	Range (Weighted Relationship of average) inputs to fairvalue Range (Weighted Relationship of average) inputs to fairvalue The higher the multiple and control premium, the higher the fair value 20%~30% (22%) The higher the discount for lack of marketability, the lower the fair value 0.56~1.41 (0.70) 30% (29%) The higher the discount for lack of marketability, the lower the fair value 0.68~1.55 (0.88) The higher the multiple and control premium, the higher the fair value	Relationship of inputs to fairvalue

~61~

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

Financial assets Equity instrument Equity instrument	Period 2016/12/31 2015/12/31	Input 209,174 $ 382,046	Change ± 1% ± 1%	Favourable Unfavourable change change 2,092 $ 2,092) ($ 3,820 3,820) ( Recognised in other comprehensiveincome

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

• A. Loans to others: Please refer to table 1.

• B. Provision of endorsements and guarantees to others: None.

• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 2.

• D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: None.

• E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 3.

• H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 4.

• I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Notes 6(2) and 6(4).

• J. Significant inter-company transactions during the reporting periods: Please refer to table 5.

(2) Information on investees

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

(3) Information on investments in Mainland China

• A. Basic information: Please refer to table 7.

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

14. SEGMENT INFORMATION

None.

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Loans to others

Expressed in thousands of NTD (Except as otherwise indicated)

Innolux Corporation

For the year ended December 31, 2016

Table 1

No.	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2016	Balance at December 31, 2016	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	Collateral	Limit on loans granted to a singleparty	Ceiling on total loansgranted	Footnote
													Item	Value
1 1 1 1 1 2 3 4 5	Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Nanjng Innolux Technology Ltd. Innolux Technology USA Inc. Innolux Technology Europe B.V. Innolux Technology Japan Co., Ltd.	Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Display Ltd. Nanjing Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Leadtek Global Group Limited	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties	5,084,600 $ 2,092,050 650,860 1,720,130 3,579,730 371,920 193,500 1,314,502 1,433,120	$ 4,154,800 2,092,050 - 1,720,130 2,835,890 371,920 193,500 1,314,502 1,433,120	$ 4,127,390 2,092,050 - 1,720,130 2,835,890 371,920 193,500 1,287,584 1,433,120	1.1%~ 1.5% 1.5% 0% 1.5% 1.5% 1.5% 0.56%~ 0.81% 0.007%~ 0.997% 0.5%	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing	$ - - - - - - - - -	Operating support Operating support Operating support Operating support Operating support Operating support Operating support Operating support Operating support	$ - - - - - - - - -	- - - - - - - - -	$ - - - - - - - - -	226,006,363 $ 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363	226,006,363 $ 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363	A A A A A A A A A

Table 1, Page 1

No.	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2016	Balance at December 31, 2016	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	Collateral	Limit on loans granted to a singleparty	Ceiling on total loansgranted	Footnote
													Item	Value
6 7 8 9 10 11 12 13	Innolux Optoelectronics Japan Co., Ltd. Asiaward Investment Ltd. Best China Investments Ltd. Main Dynasty Investment Ltd. Mega Chance Investments Ltd. Sun Dynasty Development Limited Magic Sun Limited Warriors Technology Investments Ltd.	Leadtek Global Group Limited Best China Investments Ltd. Lakers Trading Ltd. Mega Chance Investments Ltd. Lakers Trading Ltd. Magic Sun Limited Lakers Trading Ltd. Lakers Trading Ltd.	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Related parties Related parties Related parties Related parties Related parties Related parties Related parties Related parties	689,000 $ 261,686 261,686 430,951 430,951 1,074,111 1,074,111 354,750	689,000 $ 261,686 261,686 430,951 430,951 1,074,111 1,074,111 354,750	689,000 $ 261,686 261,686 430,951 430,951 1,074,111 1,074,111 354,750	0.5% 0% 0% 0% 0% 0% 0% 0%	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	$ - - - - - - - -	- - - - - - - -	$ - - - - - - - -	$ 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363	$ 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363 226,006,363	A A A A A A A A

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.

Table 1, Page 2

Innolux Corporation

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

December 31, 2016

			December 31, 2016
Securities held by Table 2	Marketable securities	Relationship with the securities issuer	General ledger account		As of December 31,2016		Fair value Footnote Expressed in thousands of NTD (Except as otherwise indicated)
				Number of shares	Book value	Ownership (%)	Fair value
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Yuan Chi Investment Co., Ltd. Yuan Chi Investment Co., Ltd. InnoJoy Investment Corporation InnoJoy Investment Corporation InnoJoy Investment Corporation Warriors Technology Investments Ltd. Warriors Technology Investments Ltd. Nets trading Ltd.	Common stock AvanStrate Inc. TPV Technology Ltd. Chi Lin Optoelectronics Co., Ltd. Epistar Corporation Chimei Materials Technology Corp. Allied Material Technology Corp. Trillion Science Inc. China Electric Mfg. Corp. Advanced Optoelectronic Technology, Inc. Fitipower Integrated Technology Inc. G-TECH Optoelectronics Corporation OED Holding Ltd. General Interface Solution (GIS) Holding Limited PilotTech Global Fund	None None None None None None None None None None None None None None	Available-for-sale financial assets - non- current Available-for-sale financial assets - non- current Available-for-sale financial assets - non- current Available-for-sale financial assets - non- current Available-for-sale financial assets - non- current Available-for-sale financial assets - non- current Available-for-sale financial assets - non- current Available-for-sale financial assets - non- current Financial assets at fair value through profit or loss Available-for-sale financial assets - non- current Available-for-sale financial assets - non- current Available-for-sale financial assets - non- current Available-for-sale financial assets - non- current Available-for-sale financial assets - non- current	900,000 150,500,000 32,350,095 89,072 44,741,305 1,209 1,439,180 9,282,000 11,165,222 10,000,000 3,993,565 16,000,000 40,500,000 90	$ 53,574 826,028 155,600 2,062 610,719 - 796 69,151 250,101 303,000 81,868 4,695 3,705,750 27,686	1 6 19 - 9 - 3 2 8 7 2 6 13 -	$ 53,574 826,028 155,600 2,062 610,719 - 796 69,151 250,101 303,000 81,868 4,695 3,705,750 27,686

Table 2, Page 1

Innolux Corporation For the year ended December 31, 2016

Table 3

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

Expressed in thousands of NTD (Except as otherwise indicated)

Differences in transaction terms

							Differences in transaction terms	Differences in transaction terms
Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction			compared to third party transactions		Notes/accounts receivable(payable)		Footnote
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable(payable)
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation	Hon Hai Precision Industry Co., Ltd. Lakers Trading Ltd. Innolux Optoelectronics Japan Co., Ltd. Honfujin Precision Electronics (Chongqing) Co., Ltd. Innolux Hong Kong Ltd. Competition Team Technology (India) Private Limited Innolux Technology USA Inc. Hongfujin Precision Industry (Yantai) Co., Ltd. Hongfutai Precision Electrons (Yantai) Co., Ltd. Innolux Optoelectronics USA, Inc. eCMMS Precision Singapore Pte. Ltd. Chi Lin Optoelectronics Co., Ltd. Hongfujin Precision Electronics (Zhenzhou) Co., Ltd.	Same major stockholder An indirect wholly-owned subsidiary 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 of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. The company is a corporate director of Chi Lin Optoelectronics An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd.	Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales	8,777,756 $ 6,392,974 2,017,948 1,835,243 1,341,129 953,423 949,933 836,014 621,286 541,547 522,717 434,659 372,736	3 2 1 1 - - - - - - - - -	60-90 days 60 days 45 days 45-90 days 60 days 90 days 60 days 60-90 days 90 days 45 days 90 days 45 days 60 days	Similar with general sales Similar with general sales Single sales target, no basis for comparison Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales	No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference	7,605,574 $ - 151,853 563,698 - 317,648 - 367,210 445,861 66,671 118,971 65,137 -	12 - - 1 - 1 - 1 1 - - - -

Table 3, Page 1

Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Differences in transaction terms compared to third party transactions	Differences in transaction terms compared to third party transactions	Notes/accounts receivable(payable)	Notes/accounts receivable(payable)	Footnote
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable(payable)
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation	Ningbo Innolux Display Ltd. Hongfujin Precision Industry (Wuhan) Co., Ltd. Nanjing Innolux Optoelectronics Ltd. Hongfujin Precision Industry (Shenzhen) Co., Ltd. FI Medical Device Manufacturing Co., Ltd. Innolux Optoelectronics Europe B.V. Hon Hai Precision Industry Co., Ltd. FI Medical Device Manufacturing Co., Ltd. Chi Lin Optoelectronics Co., Ltd. GIO Optoelectronics Corp. Lakers Trading Ltd. Leadtek Global Group Limited	An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. The company's investments accounted for under the equity method A subsidiary of the Company Same major stockholder The company's investments accounted for under the equity method The company is a corporate director of Chi Lin Optoelectronics The company's investments accounted for under the equity method An indirect wholly-owned subsidiary A subsidiary of the Company	Sales Sales Sales Sales Sales Sales Purchases Purchases Purchases Purchases Processing expense Processing expense	242,518 $ 207,343 141,437 125,330 113,916 110,182 2,695,546 1,123,036 302,134 240,031 53,116,567 19,102,050	- - - - - - 1 - - - 20 7	90 days 90 days 90 days 60 days 90 days 30 days 60~90 days after acceptance 30 days after acceptance 120 days after acceptance 60 days after acceptance 60-90 days 60-90 days	Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Similar with general sales Single purchases target, no basis for comparison Single purchases target, no basis for comparison Single purchases target, no basis for comparison Single purchases target, no basis for comparison Cost plus Cost plus	No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference	1,703 $ 99,027 73,386 7,516 47,743 15,023 1,577,291) ( 171,128) ( 145,018) ( 52,456) ( 21,652,362) ( 19,136,288) (	- - - - - - 2 - - - 27 24

Table 3, Page 2

Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Differences in transaction terms compared to third party transactions	Differences in transaction terms compared to third party transactions	Notes/accounts receivable(payable)	Notes/accounts receivable(payable)	Footnote
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable(payable)
Innolux Corporation Foshan Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Ningbo Innolux Technology Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innolux Hong Kong Ltd. Lakers Trading Ltd.	Innolux Hong Kong Ltd. Foxconn Precision Electronics (YanTai) Co., Ltd. Yantai Fuhuada Precision Electronics Co., Ltd. Premier Image Technology (China) Ltd. Ningbo Innolux Display Ltd. Nanjing Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Ningbo Innolux Display Ltd. Nanjing Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Nanjng Innolux Technology Ltd. Ningbo Innolux Electronics Ltd.	An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. 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 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	Processing expense Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales Sales	17,621,556 $ 1,259,092 427,330 208,657 4,965,960 520,147 714,999 132,817 379,223 103,908 303,347 844,345 131,339	7 2 1 - 11 3 3 33 46 13 37 3 -	60-90 days 90 days 90 days 90 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days	Cost plus Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions	No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference	7,545,137) ($ 1,214,351 478,034 233,414 1,406,162 - 233,397 - 330 330 245,026 337,685 52,556	9 4 2 1 6 - 5 - - - 27 3 -

Table 3, Page 3

Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Differences in transaction terms compared to third party transactions	Differences in transaction terms compared to third party transactions	Notes/accounts receivable(payable)	Notes/accounts receivable(payable)	Footnote
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable(payable)
Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Nanjing Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Innolux Technology Japan Co., Ltd. Innolux Technology Europe B.V. Ningbo Innolux Display Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd.	Lakers Trading Ltd. Leadtek Global Group Limited Lakers Trading Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Lakers Trading Ltd. Leadtek Global Group Limited Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Hon Hai Precision Industry Co., Ltd. Hon Hai Precision Industry Co., Ltd. Ningbo Lin Moug Optronics 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 A subsidiary of the Company An indirect wholly-owned subsidiary An indirect wholly-owned subsidiary Same major stockholder Same major stockholder An indirect wholly-owned subsidiary of Chi Lin Optoelectronics Co., Ltd.	Processing revenue Processing revenue Processing revenue Processing revenue Processing revenue Processing revenue Processing revenue Service revenue Service revenue Purchases Purchases Purchases	28,261,854 $ 17,344,095 17,174,029 12,061,738 4,550,697 7,349,948 267,762 318,599 649,856 993,225 2,512,243 634,425	79 78 94 95 31 53 66 92 99 4 4 1	60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 60 days 90 days after goods are shipped 90 days after goods are shipped 120 days after goods are shipped	Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions Similar with general transactions	No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference No material difference	13,598,180 $ 15,769,351 3,392,000 5,421,971 1,756,905 - - 72,628 56,365 368,533) ( 2,052,444) ( 216,554) (	83 92 94 100 100 - - 97 64 6 8 2

Table 3, Page 4

Differences in transaction terms

							Differences in transaction terms	Differences in transaction terms
Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction			compared to third party transactions		Notes/accounts receivable(payable)		Footnote
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable(payable)
Ningbo Innolux Display Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd.	Ningbo Lin Moug Optronics Co., Ltd. Hon Hai Precision Industry Co., Ltd. Hongfujin Precision Industry (Shenzhen) Co., Ltd.	An indirect wholly-owned subsidiary of Chi Lin Optoelectronics Co., Ltd. Same major stockholder An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd.	Purchases Purchases Purchases	547,478 $ 533,865 452,727	2 1 1	120 days after goods are shipped 90 days after goods are shipped 90 days after goods are shipped	Similar with general transactions Similar with general transactions Similar with general transactions	No material difference No material difference No material difference	195,252) ($ 146,925) ( 156,541) (	3 1 1

Table 3, Page 5

Table 4

Innolux Corporation December 31, 2016

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

Expressed in thousands of NTD (Except as otherwise indicated)

Creditor	Counterparty	Relationship with the counterparty	Balance as at December 31,2016	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts
					Amount	Action taken
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Ningbo Innolux Display Ltd. Nanjing Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd.	Hon Hai Precision Industry Co., Ltd. Honfujin Precision Electronics (Chongqing) Co., Ltd. Hongfutai Precision Electrons (Yantai) Co., Ltd. Hongfujin Precision Industry (Yantai) Co., Ltd. Competition Team Technology (India) Private Limited Foshan Innolux Optoelectronics Ltd. Innolux Optoelectronics Japan Co., Ltd. eCMMS Precision Singapore Pte.Ltd. Leadtek Global Group Limited Ningbo Innolux Display Ltd. Lakers Trading Ltd. Ningbo Innolux Optoelectronics Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Lakers Trading 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. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. An indirect wholly-owned subsidiary A subsidiary of the Company An indirect wholly-owned subsidiary of Hon Hai Precision Industry Co., Ltd. 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	$ 7,605,574 563,698 445,861 367,210 317,648 218,893 151,853 118,971 15,769,351 1,406,162 3,392,000 233,397 5,421,971 1,756,905 13,598,180	2.03 3.79 2.69 3.95 4.13 0.09 13.89 8.79 1.04 1.61 1.67 3.06 1.82 5.18 2.61	$ 409,768 168,958 93,043 - - - - 17,450 9,358,075 380,541 - - 3,474,006 - 213,896	Subsequent collection Subsequent collection Subsequent collection - - - - Subsequent collection Subsequent collection Subsequent collection - - Subsequent collection - Subsequent collection	$ 716,810 92,347 175,940 117,991 54,829 - - - 2,902,573 946,047 2,380,978 191,610 1,064,446 1,238,852 5,482,509	$ - - - - - - - - - - - - - - -

Table 4, Page 1

Creditor	Counterparty	Relationship with the counterparty	Balance as at December 31,2016	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts
					Amount	Action taken
Foshan Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innolux Hong Kong Ltd.	Foxconn Precision Electronics (YanTai) Co., Ltd. Yantai Fuhuada Precision Electronics Co., Ltd. Premier Image Technology (China) Ltd. Foshan Innolux Optoelectronics Ltd. Lakers Trading Ltd. Nanjng Innolux Technology 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. 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	$ 1,214,351 478,034 233,414 245,026 674,949 337,685	0.31 0.89 0.89 1.24 - 2.31	$ - - - - 594,521 -	- - - - Subsequent collection -	$ 95,700 1,396 - 245,026 - 182,183	$ - - - - - -

Table 4, Page 2

Table 5

Innolux Corporation Significant inter-company transactions during the reporting period For the year ended December 31, 2016

Expressed in thousands of NTD (Except as otherwise indicated)

Transaction (Note C)

Number	Companyname	Counterparty	Relationship (Note A)	General ledger account	Amount	Transaction terms (Note B)	Percentage of consolidated total operating revenues or total assets
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 2 2 3 3	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 Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Shanghai Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd. Nanjing Innolux Optoelectronics Ltd.	Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Innolux Optoelectronics Europe B.V. Innolux Optoelectronics Japan Co., Ltd. Innolux Optoelectronics Japan Co., Ltd. Innolux Optoelectronics 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. Nanjing Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Lakers Trading Ltd. Nanjing Innolux Optoelectronics Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd.	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 3 3 3 3 3 3 3 3	Sales Processing expense Accrued expenses Sales Sales Accounts receivable Sales Sales Sales Processing expense Accrued expenses Processing expense Accrued expenses Accounts receivable Sales Sales Processing revenue Sales Processing revenue Accounts receivable Processing revenue Accounts receivable Processing revenue Accounts receivable	1,341,129 $ 17,621,556 7,545,137) ( 110,182 2,017,948 151,853 541,547 949,933 6,392,974 53,116,567 21,652,362) ( 19,102,050 19,136,288) ( 218,893 141,437 242,518 7,349,948 520,147 4,550,697 1,756,905 28,261,854 13,598,180 12,061,738 5,421,971	- - - - - - - - - - - - - - - - - - - - - - - -	- 6 2 - 1 - - - 2 19 6 7 5 - - - 3 - 2 - 10 4 4 1

Table 5, Page 1

Transaction (Note C)

Number	Companyname	Counterparty	Relationship (Note A)	General ledger account	Amount	Transaction terms (Note B)	Percentage of consolidated total operating revenues or total assets
4 4 4 4 4 5 5 6 6 6 6 7 7 7 7 8 9 10 10 11	Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Innocom Technology (Shenzhen) Co., Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Technology Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Ningbo Innolux Display Ltd. Ningbo Innolux Display Ltd. Ningbo Innolux Display Ltd. Innolux Technology Japan Co., Ltd. Innolux Technology Europe B.V. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Lakers Trading Ltd.	Ningbo Innolux Display Ltd. Nanjing Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Foshan Innolux Optoelectronics Ltd. Lakers Trading Ltd. Leadtek Global Group Limited Ningbo Innolux Display Ltd. Leadtek Global Group Limited Leadtek Global Group Limited Ningbo Innolux Display Ltd. Ningbo Innolux Display Ltd. Lakers Trading Ltd. Lakers Trading Ltd. Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Optoelectronics Ltd. Innolux Hong Kong Ltd. Innolux Hong Kong Ltd. Nanjng Innolux Technology Ltd. Nanjng Innolux Technology Ltd. Ningbo Innolux Electronics Ltd.	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Sales Sales Sales Accounts receivable Accounts receivable Processing revenue Sales Processing revenue Accounts receivable Sales Accounts receivable Processing revenue Accounts receivable Sales Accounts receivable Service revenue Service revenue Sales Accounts receivable Sales	379,223 $ 103,908 303,347 245,026 674,949 267,762 132,817 17,344,095 15,769,351 4,965,960 1,406,162 17,174,029 3,392,000) ( 714,999 233,397 318,599 649,856 844,345 337,685 131,339	- - - - - - - - - - - - - - - - - - - -	- - - - - - - 6 4 2 - 6 1 - - - - - - -

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

1. 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.

Table 5, Page 2

Innolux Corporation

Information on investees

For the year ended December 31, 2016

Table 6

Expressed in thousands of NTD (Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held a	s at December31,2016	s at December31,2016	Net profit (loss) of the investee for the year ended December 31, 2016	Investment income (loss) recognised by the Company for the year ended December 31, 2016	Footnote
				Balance as at December 31,2016	Balance as at December 31,2015	Number of shares	Ownership (%)	Book value
Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation Innolux Corporation	Bright Information Holding Ltd. Golden Achiever International Ltd. Innolux Holding Ltd. Keyway Investment Management Limited Landmark International Ltd. Toppoly Optoelectronics (B.V.I.) Ltd. Innolux Hong Kong Holding Ltd. Leadtek Global Group Limited Yuan Chi Investment Co., Ltd. InnoJoy Investment Corporation Innolux Optoelectronics Europe B.V. Innolux Optoelectronics Japan Co., Ltd. Ampower Holding Ltd. Jetronics International Corp. FI Medical Device Manufacturing Co., Ltd. iZ3D, Inc. Chi Mei Lighting Technology Corporation	Hong Kong BVI Samoa Samoa Samoa BVI Hong Kong BVI Taiwan Taiwan Netherlands Japan Cayman Samoa Taiwan USA Taiwan	Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Investment holdings Distributor company Investment company Investment company Importing, exporting, buying, selling and logistics services of electronic equipment and TFT-LCD monitors Researching, manufacturing and selling of the film transistor liquid crystal display Investment holdings Investment holdings Production and selling of the absorption for medical element Research and development and sale of 3D flat monitor Manufacturing of electronic equipment and lighting equipment	119,724 $ 119,106 7,858,300 197,554 33,438,542 3,674,115 2,107,291 - 1,217,235 1,674,054 121,941 1,335,486 1,717,714 - 73,500 - 819,312	119,724 $ 119,106 7,858,300 197,554 33,438,542 3,596,307 2,107,291 - 1,217,235 1,674,054 121,941 1,335,486 1,717,714 86,149 73,500 - 819,312	4,910,000 40,250 246,768,185 5,656,410 709,450,000 146,847,000 1,158,844,000 50,000,000 - 167,405,392 180 80 14,062,500 - 7,350,000 4,333 78,195,856	100 100 100 100 100 100 100 100 100 100 100 100 50 - 49 35 33	103,372 $ 61,422 18,523,142 257,392 45,894,168 6,717,191 3,341,269 322,973) ( 922,529 1,246,809 125,531 1,548,673 870,941 - 451,943 - -	6,715) ($ 149 136,022 46,660 3,833,333 426,811 581,552 94,225) ( 167,476) ( 76,420) ( 221 34,739 24,266 - 750,982 - -	6,715) ($ 766 156,597 46,660 3,856,508 426,093 586,288 94,225) ( 167,476) ( 76,420) ( 221 34,739 12,133 66,624 319,420 - -

Table 6, Page 1

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held a	s at December31,2016	s at December31,2016	Net profit (loss) of the investee for the year ended December 31, 2016	Investment income (loss) recognised by the Company for the year ended December 31, 2016	Footnote
				Balance as at December 31,2016	Balance as at December 31,2015	Number of shares	Ownership (%)	Bookvalue
Innolux Corporation Innolux Holding Ltd. Innolux Holding Ltd. Innolux Holding Ltd. Innolux Holding Ltd. 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. 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.	GIO Optoelectronics Corp. Rockets Holding Ltd. Suns Holding Ltd. Lakers Trading Ltd. Innolux Corporation 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. Innolux Optoelectronics Germany GmbH Innolux Optoelectronics USA, Inc. Best China Investments Ltd. Mega Chance Investments Ltd. Magic Sun Ltd. Stanford Developments 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	Taiwan Samoa Samoa Samoa USA Cayman Hong Kong Hong Kong Netherlands Japan USA Germany USA Samoa Samoa Samoa Samoa Samoa Samoa Germany Hong Kong Hong Kong Hong Kong Taiwan	Manufacturing and selling of components of TFT-LCD Investment holdings Investment holdings Distributor company Distributor company Investment holdings Investment holdings Distributor company Holding company and R&D testing company R&D testing 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 Investment company Investment company Testing and maintenance company Investment holdings Investment holdings Investment holdings Trading business, manufacturing of electronic equipment and lighting equipment	800,892 $ 7,296,530 555,422 - 6,348 3,650,192 - - 3,073,072 1,815,603 263,685 10,324 2,400 314,740 573,940 1,146,370 5,391,125 27,477 555,422 33,735 314,740 573,940 1,146,370 263,812	800,892 $ 7,296,530 555,422 - 6,348 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 27,477 555,422 33,735 314,740 573,940 1,146,370 263,812	14,812,705 226,504,550 18,177,052 1 2,000 146,817,000 162,897,802 35,000,000 375,810 201 1,000 250 1,000 10,000,001 18,000,000 38,000,001 164,000,000 900,001 18,177,052 100,000 77,830,001 139,623,801 295,969,001 19,673,402	24 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 8	104,378 $ 13,988,464 4,381,595 245,699 92,626) ( 6,717,534 1,253,619 1,577,537) ( 2,189,753 1,718,579 373,245 12,791 284,789 261,686 430,952 1,074,111 12,191,630 29,966 4,381,593 56,344 261,686 430,951 1,074,111 -	42,915 $ 16,326 121,085 - 1,388) ( 426,811 295,151 235,251 36,358 1,203 16,126 3,467) ( 11,954 238 391 975 14,721 - 121,085 554 238 391 975 -	10,205 $ 16,326 121,085 - 1,388) ( 426,811 295,151 235,251 36,358 1,203 16,126 3,467) ( 11,954 238 391 975 14,721 - 121,085 554 238 391 975 -

Table 6, Page 2

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held a	s at December31,2016	s at December31,2016	Net profit (loss) of the investee for the year ended December 31, 2016	Investment income (loss) recognised by the Company for the year ended December 31, 2016	Footnote
				Balance as at December 31,2016	Balance as at December 31,2015	Number of shares	Ownership (%)	Bookvalue
Yuan Chi Investment Co., Ltd. Yuan Chi Investment Co., Ltd.	GIO Optoelectronics Corp. TOA Optronics Corporation	Taiwan Taiwan	Manufacturing and selling of components of TFT-LCD Selling electronic materials, trading business, manufacturing of electronic equipments and lighting equipments	6,881 $ 423,606	6,881 $ 423,606	109,021 58,007,000	- 40	790 $ 89,366	42,915 $ 202,512) (	77 $ 221,005) (

Table 6, Page 3

Information on investments in Mainland China For the year ended December 31, 2016

Table 7

Innolux Corporation

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-in capital (Note A)	Investment method (NoteC)	Accumulated amount of remittance from Taiwan to Mainland China as of January 1, 2016	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the year ended December 31, 2016	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the year ended December 31, 2016	Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2016	Net income of investee for the year ended December 31, 2016	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2016 (Note B)	Book value of investments in Mainland China as of December 31, 2016	Accumulated amount of investment income remitted back to Taiwan as of December 31, 2016	Footnote
					Remitted to Mainland China	Remitted back to Taiwan
Innocom Technology (Shenzhen) Co., Ltd. OED Company Ningbo Innolux Optoelectronics Ltd. Ningbo Innolux Technology Ltd. Foshan Innolux Optoelectronics Ltd. Ningbo Innolux Display Ltd. Nanjng Innolux Technology Ltd. Kunpal Optoelectronics Ltd. VAP Optoelectronics (Nanjing) Corp. Nanjing Innolux Optoelectronics Ltd. Ningbo Innolux Logistics Ltd.	Manufacturing and selling of LCD backend module and related components Manufacturing and selling of electronic paper Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Purchases and sales of monitor-related components company Glass thinning processing service Manufacturing and selling of LCD backend module and related components Manufacturing and selling of LCD backend module and related components Warehousing services	$ 5,289,000 298,972 9,997,500 4,192,500 12,351,750 967,500 67,725 129,000 325,725 4,579,500 129,000	2 2 2 2 2 2 2 2 2 2 2	$ 4,092,903 64,500 237,523 4,192,500 12,351,750 967,500 67,725 121,965 122,550 4,579,500 129,000	$ - - - - - - - - - - -	$ - - - - - - - - - - -	$ 4,092,903 64,500 237,523 4,192,500 12,351,750 967,500 67,725 121,965 122,550 4,579,500 129,000	$ 14,721 ( 117,377) 1,348,182 - 2,031,410 451,215 ( 9,041) ( 1,546) 149 437,398 38,371	100 4 100 100 100 100 100 100 100 100 100	$ 14,721 - 1,348,182 ( 51,415) 2,033,936 502,631 ( 9,041) ( 1,546) 149 437,398 38,371	$ 12,191,617 11,488 21,809,352 - 20,190,825 3,928,808 548,960 64,129 61,018 6,104,421 181,751	$ 1,196,097 - 5,567,477 - - - - - - - -	2.1 2.1 2.2 2.2 2.8 2.2 2.2 2.8 2.3 2.3 2.4 2.3 2.6

Table 7, Page 1

Investee in Mainland China	Main business activities	Paid-in capital (Note A)	Investment method (NoteC)	Accumulated amount of remittance from Taiwan to Mainland China as of January 1, 2016	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the year ended December 31, 2016	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the year ended December 31, 2016	Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2016	Net income of investee for the year ended December 31, 2016	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2016 (Note B)	Book value of investments in Mainland China as of December 31, 2016	Accumulated amount of investment income remitted back to Taiwan as of December 31, 2016	Footnote
					Remitted to Mainland China	Remitted back to Taiwan
Shanghai Innolux Optoelectronics Ltd. Manufacturing and selling of LCD backend module and related components $ 677,250 Foshan Innolux Logistics Ltd. Warehousing services 48,375 Amlink (Shanghai) Ltd. Manufacturing and selling of power supply, modem, ADSL, and other IT equipments 258,000 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 3,102,450 Ningbo Innolux Electronics Ltd. Manufacturing and selling of LCD backend module and related components 139,470 Foshan Innolux Flnet Electronics Ltd. Commodity agency 4,649 Ningbo Innolux Flnet Electronics Ltd. Commodity agency 4,649 Ceiling on investments in Mainland China: Companyname Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2016			2 $ - $ - 2 48,375 - 2 322,500 - 2 435,375 - 3 - - 3 - - 3 - - Investment amount approved by the Investment Commission of the Ministry of Economic Affairs(MOEA)			$ - $ - $ 295,151 - 48,375 8,289 - 322,500 22,597 - 435,375 38,027 - - 110,209 - - ( 1) - - ( 311) Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA			100 100 50 13 100 100 100	$ 295,151 8,289 11,299 - 110,209 ( 1) ( 311)	$ 1,253,619 70,731 199,222 3,705,750 244,877 4,648 4,351	$ - - - - - - -	2.5 2.6 2.7 2.1 3.1 3.2 3.2
Innolux Corporation	29,238,867 $		38,733,112 $			135,603,818 $

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, 2016 was audited by independent accountants. Note C: The investment methods are as follows:

1. Directly investing in Mainland China.

2. Through investing in companies in the third area, which then invested in the investee in Mainland China.

3. 2.1. Through investing in Innolux Holding Ltd. in the third area, which then invested in the investee in Mainland China.

4. 2.2. Through investing in Landmark International Ltd. in the third area, which then invested in the investee in Mainland China.

Table 7, Page 2

• 2.3. Through investing in Toppoly Optoelectronics (B.V.I) Ltd. in the third area, which then invested in the investee in Mainland China.

• 2.4. Through investing in Golden Achiever International Ltd. in the third area, which then invested in the investee in Mainland China.

• 2.5. Through investing in Innolux Hong Kong Holding Ltd. in the third area, which then invested in the investee in Mainland China.

• 2.6. Through investing in Keyway Investment Management Limited in the third area, which then invested in the investee in Mainland China.

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

• 2.8. Ningbo Innolux Display Ltd. acquired Ningbo Innolux Technology Ltd. by merger, and approved by the Investment Commission of the Ministry of Economic Affairs in November 2016.

• Others.

• 3.1. The company invested in the company via investee company in Mainland China, Ningbo Innolux Display Ltd. Except for the investment via the holding companies in Mainland China, other investments shall be not approved by Investment Commission of the Ministry of Economic Affairs.

• 3.2 The company invested via Foshan Innolux Optoelectronics Ltd. and Ningbo Innolux Optoelectronics Ltd. which are the company investment entities in Mainland China to invest in Foshan Innolux Flnet Electronics Ltd.

• and Ningbo Innolux Flnet Electronics Ltd. Except for the investment via the holding companies in Mainland China, other investments shall be not approved by Investment Commission of the Ministry of Economic Affairs.

Table 7, Page 3

INNOLUX CORPORATION SUMMARY OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Summary 1

Items Petty cash Cash in banks Demand deposits Foreign deposits Time deposits	Abstract Amount $ 165 2,525,637 USD 111,696In thousands Exchange rate 32.25 3,602,196 JPY 382,432In thousands Exchange rate 0.276 105,398 EUR 241In thousands Exchange rate 33.9 8,180 HKD 341In thousands Exchange rate 4.158 1,418 KRW 95,121In thousands Exchange rate 0.027 2,549 USD 455,000In thousands Exchange rate 32.25 14,673,750 HKD 2,000In thousands Exchange rate 4.158 8,316 $ 20,927,609	Amount
		$ 20,927,609

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Summary 1, Page 1

INNOLUX CORPORATION SUMMARY OF ACCOUNTS RECEIVABLE

DECEMBER 31, 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Summary 2

Items	Abstract	Amount	Remark
Third parties Company A Company B Company C Others Less: Allowance for bad debts Allowance for returns and discount		$ 11,095,874 4,274,644 4,141,489 32,124,422	Balance of individual customers is under 5% of this account’s balance.
		51,636,429 ( 109,373) ( 833,545)
		$ 50,693,511

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Summary 2, Page 1

INNOLUX CORPORATION SUMMARY OF INVENTORY

DECEMBER 31, 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Summary 3

Items	Abstract	Cost	Market price $ 1,573,540 24,711,530 11,144,201
Raw materials Work in process Finished goods		$ 2,164,341 9,608,843 7,124,732
		$ 18,897,916	$ 37,429,271

Summary 3, Page 1

INNOLUX CORPORATION

MOVEMENT SUMMARY OF INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Summary 4

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. Ampower Holding Ltd. GIO Optoelectronics Corp. FI Medical Device Manufactiurng Co., Ltd. Others	As of January 1, 2016	As of January 1, 2016	Additions In thousand shares Amount	Additions In thousand shares Amount	Deductions	Deductions	As of December 31, 2016	As of December 31, 2016
	In thousand shares Amount 709,450 $ 45,888,559 246,768 20,242,553 144,447 6,787,268 1,158,844 2,907,677 167,405 1,242,760 - 1,507,382 - 1,137,982 14,063 881,351 63,522 98,785 7,350 321,683 - 299,320 $ 81,315,320	Amount		Amount	In thousand shares	Amount In thousand shares Ownership (%) ($ 3,850,899) 709,450 100% ( 1,876,008) 246,768 100% ( 573,978) 146,847 100% ( 152,696) 1,158,844 100% ( 76,420) 167,405 100% - - 100% ( 215,734) - 100% ( 22,543) 14,063 50% ( 4,612) 14,813 24% ( 189,160) 7,350 49% ( 206,293) - - ($ 7,168,343)	In thousand shares Ownership (%)	Amount
			- - 2,400 - - - - - - - -	$ 3,856,508 156,597 503,901 586,288 80,469 41,291 281 12,133 10,205 319,420 131,717	- - - - - - - - ( 48,709) - -
		$ 81,315,320		$5,698,810

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, and recognition of unrealised loss on investees’ financial instruments.

Summary 4, Page 1

INNOLUX CORPORATION SUMMARY OF ACCOUNTS PAYABLE

DECEMBER 31, 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Summary 5

Items Abstract Amount Remark Third parties Company A $ 1,518,395 Others 27,731,630 Balance of individual suppliers is under 5% of this account’s balance. $ 29,250,025 (Remainder of page intentionally left blank)

Summary 5, Page 1

INNOLUX CORPORATION SUMMARY OF OTHER PAYABLES DECEMBER 31, 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Summary 6

Items Payable on machinery and equipment Wages, salaries and bonus payable Payable on processing fees Payable on repairs and maintenance expense Payable on royalty and others	Amount $ 3,108,898 5,034,291 1,202,227 1,761,707 9,081,533	Remark
	$ 20,188,656

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Summary 6, Page 1

INNOLUX CORPORATION SUMMARY OF OPERATING REVENUE FOR THE YEAR ENDED DECEMBER 31, 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Summary 7

Items	Quantity (in thousands)	Amount
TFT-LCD products	336,518	$ 282,794,992
Others	-	2,900,121
		$ 285,695,113
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Summary 7, Page 1

INNOLUX CORPORATION SUMMARY OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Summary 8 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 process Incoming inventory Less: Ending work in process Transfer to expenses Warranty expiration Scrapping work in process 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 Loss on decline in inventory valuation Operating costs

Amount $ 2,074,179 51,434,086 ( 2,265,970) ( 1,634) ( 5,218,084) ( 340,028) ( 6,815) ( 380,502) 45,295,232 12,814,571 197,289,005 255,398,808 12,378,127 10,354,559 ( 11,141,154) ( 1,514,111) ( 9,269) ( 11,284) 265,455,676 11,708,306 711,647 ( 7,655,279) ( 198,456) ( 10,362) ( 358,909) 269,652,623 380,502 361,674 1,634 ( 105,284) 550,000 $ 270,841,149

Summary 8, Page 1

INNOLUX CORPORATION SUMMARY OF MANUFACTURING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Summary 9

Items		Amount	Remark
Processing fee		$ 130,119,380
Depreciation and amortization		34,612,617
Utilities expense		10,946,762
Other expenses		21,610,246	Balance of individual
			accounts is under 5% of this
			account’s balance.
		$ 197,289,005
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Summary 9, Page 1

INNOLUX CORPORATION SUMMARY OF OPERATING EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Summary 10

Items Wages and salaries Depreciation expenses Royalty expenses Indirect materials Other expenses	Selling expenses $ 253,964 19,246 - 3,364 667,245 $ 943,819	General and administrative expenses $ 1,263,690 256,919 - 267 1,531,221 $ 3,052,097	Research and development expenses $ 3,972,160 1,987,499 1,421,711 1,280,675 1,682,924 $ 10,344,969	Total $ 5,489,814 2,263,664 1,421,711 1,284,306 3,881,390 $ 14,340,885	Remark
					Balance of individual accounts is under 5% of this account’s balance.

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Summary 10, Page 1

INNOLUX CORPORATION

SUMMARY OF EMPLOYEE BENEFITS EXPENSES, DEPRECIATION AND AMORTIZATION BY FUNCTION FOR THE YEAR ENDED DECEMBER 31, 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Summary 11

		Year ended December 31,2016	Year ended December 31,2016				Year ended December 31,2015	Year ended December 31,2015
	Classified as	Classified as	Classified as			Classified as	Classified as	Classified as
By nature	Operating	Operating	Non-operating			Operating	Operating	Non-operating
	Costs	Expenses	Expenses		Total	Costs	Expenses	Expenses		Total
Employee benefits
expenses (Note)
Salary and bonus	$ 17,617,750	$ 5,489,814	$	-	$ 23,107,564	$ 17,296,963	$ 5,784,049	$	-	$ 23,081,012
Labor and health insurance	1,501,065	423,482		-	1,924,547	1,573,883	452,180		-	2,026,063
Pension	733,882	257,512		-	991,394	752,707	261,989		-	1,014,696
Others	1,159,679	285,439		-	1,445,118	1,117,260	355,827		-	1,473,087
	$ 21,012,376	$ 6,456,247	$	-	$ 27,468,623	$ 20,740,813	$ 6,854,045	$	-	$ 27,594,858
Depreciation	$ 33,615,436	$ 2,263,664	$ 561,054		$ 36,440,154	$ 45,062,382	$ 2,534,140	$ 580,521		$ 48,177,043
Amortization	$ 997,181	$ 168,397	$	-	$ 1,165,578	$ 998,974	$ 207,073	$	-	$ 1,206,047

Note ： As of December 31, 2016 and 2015, the Company had 34,435 and 35,376 employees, respectively.

Summary 11, Page 1