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INX Interim / Quarterly Report 2017

Dec 8, 2017

52330_rns_2017-12-08_7900b198-02e4-44f3-945f-cf31935d6253.pdf

Interim / Quarterly Report

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INNOLUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REVIEW REPORT OF INDEPENDENT

ACCOUNTANTS

MARCH 31, 2017 AND 2016

-----------------------------------------------------------------------------------------------------------------------------------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.

REVIEW REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Innolux Corporation:

We have reviewed the accompanying consolidated balance sheets of Innolux Corporation and subsidiaries as of March 31, 2017 and 2016, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the three-month period then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express a conclusion on these financial statements based on our reviews.

We conducted our reviews in accordance with the Statement on Auditing Standards No. 36, “Review of Financial Statements” in the Republic of China. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications or adjustments that should be made to the consolidated financial statements referred to above for them to be in conformity with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and IAS 34, “Interim Financial Reporting” as endorsed by the Financial Supervisory Commission.

PricewaterhouseCoopers, Taiwan

May 10, 2017

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

~1~

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 2017, DECEMBER 31, 2016 AND MARCH 31, 2016

(Expressed in thousands of New Taiwan dollars)

(The consolidated balance sheets as of March 31, 2017 and 2016 are reviewed, not audited)

Assets Notes March31,2017
$
35,881,482
180,453
44,517,322
14,201,964
1,654,046
24,878,058
1,289,758
137,095
122,740,178
314,301
7,273,641
1,512,231
196,075,992
570,743
18,326,577
11,471,658
1,280,284
236,825,427
$
359,565,605		 December31,2016
$
35,384,839

64,241

52,855,632

11,599,359

2,034,427

23,401,728

1,552,373

105,532

126,998,131

250,101

5,840,929

1,517,418

201,360,858

573,425

18,446,321

14,698,143

1,794,222

244,481,417
$
371,479,548		 March31,2016
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, net -
related parties
1200
Other receivables
130X
Inventory
1410
Prepayments
1479
Other current assets
11XX
Total current assets
Non-current assets
1510
Financial assets at fair
value through profit or
loss - non-current
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		 6(1)
6(2)
6(4)(5)
7
7
6(6)
6(1) and 8
6(2)
6(3)
6(7)
6(8), 7 and
8
6(9)
6(10) and 8
6(8) and 8		 $
38,254,605
391,992
33,773,666
2,141,351
3,248,647
29,165,795
1,166,068
670,261
108,812,385
300,345
6,782,270
1,681,029
193,473,161
581,468
19,090,785
16,052,166
4,484,752
242,445,976
$
351,258,361

(Continued)

~2~

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 2017, DECEMBER 31, 2016 AND MARCH 31, 2016

(Expressed in thousands of New Taiwan dollars)

(The consolidated balance sheets as of March 31, 2017 and 2016 are reviewed, not audited)

Liabilities and Equity Notes March31,2017 December31,2016 March31,2016
Current Liabilities
2100 Short-term borrowings 6(11) $ - $ 11,583,750 $ 2,891,950
2120 Financial liabilities at fair 6(2)
value through profit or
loss - current 16,826 1,190,148 174,156
2170 Accounts payable 47,048,678 51,875,305 44,577,527
2180 Accounts payable - related 7
parties 6,672,701 5,120,235 2,516,705
2200 Other payables 6(12) and 7 24,521,468 22,916,097 19,903,069
2230 Current income tax
liabilities 1,793,072 1,912,797 1,602,673
2250 Provisions - current 6(16) and 9 4,723,757 3,765,234 2,760,326
2320 Long-term liabilities, 6(13)
current portion 35,497,818 16,381,686 16,359,325
2399 Other current liabilities 1,493,933 1,420,652 1,101,950
21XX Total current liabilities 121,768,253 116,165,904 91,887,681
Non-current liabilities
2540 Long-term borrowings 6(13) 834,522 28,128,467 35,445,204
2570 Deferred income tax
liabilities 891,603 672,971 536,241
2600 Other non-current 6(14)
liabilities 524,261 505,843 578,943
25XX Total non-current
liabilities 2,250,386 29,307,281 36,560,388
2XXX Total liabilities 124,018,639 145,473,185 128,448,069
Equity attributable to
owners of the parent
3110 Share capital - common 6(17)
stock 99,520,784 99,521,488 99,526,816
3200 Capital surplus 6(18) 99,648,514 99,647,810 99,645,204
Retained earnings 6(19)
3310 Legal reserve 3,758,507 3,758,507 2,676,947
3350 Unappropriated retained
earnings 38,355,481 26,497,362 19,079,995
3400 Other equity interest 6(20) ( 5,736,320 )( 3,418,804) 1,881,330
31XX Equity attributable to
owners of the parent 235,546,966 226,006,363 222,810,292
3XXX Total equity 235,546,966 226,006,363 222,810,292
3X2X Total liabilities and
equity $ 359,565,605 $ 371,479,548 $ 351,258,361

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

~3~

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2017 AND 2016

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

(Reviewed, not audited)

Items Notes
2017
2016
7
$
86,025,771
$
56,417,120
6(6)(24) and 7
(
65,680,750) (
60,454,580)
20,345,021
(
4,037,460)
6(24)
(
472,420) (
577,026)
(
1,592,845) (
1,528,832)
(
3,647,720) (
2,258,969)
(
5,712,985) (
4,364,827)
14,632,036
(
8,402,287)
6(21)
447,273
1,102,758
6(22)
390,889
(
1,013,662)
6(23)
(
114,080) (
306,759)
6(7)
(
1,929)
86,370
722,153
(
131,293)
15,354,189
(
8,533,580)
6(26)
(
3,496,070) (
47,928)
$
11,858,119
($
8,581,508)
6(20)
($
3,925,710) ($
832,733)
1,681,080
(
37,760)
(
3,258) (
15,927)
6(26)
(
69,628)
3,426
(
2,317,516) (
882,994)
($
2,317,516) ($
882,994)
$
9,540,603
($
9,464,502)
$
11,858,119
($
8,581,508)
$
9,540,603
($
9,464,502)
6(27)
$
1.19
($
0.86)
$
1.18
($
0.86)
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 (loss)
Non-operating income and expenses
7010
Other income
7020
Other gains and losses
7050
Finance costs
7060
Share of profit/(loss) of associates
and joint ventures accounted for
under equity method
7000
Total non-operating income and
expenses
7900
Profit (loss) before income tax
7950
Income tax expense
8200
Profit (loss) for the period
Other comprehensive (loss) income
(net)
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
8370
Share of other comprehensive loss of
associates and joint ventures
accounted for under equity method
8399
Income tax relating to the
components of other comprehensive
income
8360
Components of other
comprehensive loss that will be
reclassified to profit or loss
8300
Other comprehensive loss for the
period, net of tax
8500
Total comprehensive income (loss) for
the period
Profit (loss) attributable to:
8610
Owners of the parent
Other comprehensive income (loss)
attributable to:
8710
Owners of the parent
Earnings (loss) per share (in dollars)
9750
Basic earnings (loss) per share
9850
Diluted earnings (loss) per share

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

~4~

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2017 AND 2016 (Expressed in thousands of New Taiwan dollars) (Reviewed, not audited)

2016
Balance at January 1
Cancellation of restricted stock to
employees
Changes in restricted stock to
employees
Compensation related to share-based
payment
Loss for the period
Other comprehensive loss for the
period
Balance at March 31
2017
Balance at January 1
Cancellation of restricted stock to
employee
Profit for the period
Other comprehensive loss for the
period
Balance at March 31		 Notes Equityattributable to owners of theparent Equityattributable to owners of theparent Equityattributable to owners of theparent Equityattributable to owners of theparent Equityattributable to owners of theparent Equityattributable to owners of theparent Equityattributable to owners of theparent Total
Common
stock		 Capital
surplus		 Retained Earnings Other EquityInterest
Legal reserve Unappropriated
earnings		 Financial
statements
translation
differences
of foreign
operations		 Unrealized
gain on
available-for-
sale financial
assets		 Employee
unearned
compensation
6(15)
6(20)
6(20)		 $ 99,532,372
(
5,556)
-
-
-
-
$ 99,526,816
$ 99,521,488
(
704)
-
-
$ 99,520,784		 $ 99,643,564
5,556
(
3,916)
-
-
-
$ 99,645,204
$ 99,647,810
704
-
-
$ 99,648,514



$ 2,676,947
-
-
-
-
-
$ 2,676,947
$ 3,758,507
-
-
-
$ 3,758,507		 $ 27,661,503
-
-
-
(
8,581,508)
-
$ 19,079,995
$ 26,497,362
-
11,858,119
-
$ 38,355,481		 $ 1,695,294
-
-
-
-
(
848,660 )
$ 846,634
($ 4,040,408 )
-
-
( 3,928,968 )
($ 7,969,376 )
(



 $ 1,074,445
-
-
-
-

34,334)
$ 1,040,111
$ 621,604
-
-
1,611,452
$ 2,233,056		 ($
19,402)
-
3,977
10,010
-
-
($
5,415)
$
-
-
-
-
$
-		 $ 232,264,723
-
61
10,010
(
8,581,508 )
(
882,994 )
$ 222,810,292
$ 226,006,363
-
11,858,119
(
2,317,516 )
$ 235,546,966

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

~5~

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars)

(Reviewed, not audited)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit (loss) before tax for the year
Adjustments
Adjustments to reconcile profit (loss)
Depreciation and amortization

Compensation related to share-based payment

Share of gain (loss) of associates and joint ventures
accounted for under equity method

(Gain) loss on disposal of investments

Loss on disposal of property, plant and equipment

Impairment loss

Interest expense

Interest income

Unrealized foreign exchange 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
Accounts payable
Accounts payable - related parties
Other payables
Provisions - current
Other current liabilities
Other non-current liabilities
Cash inflow (outflow) generated from operations
Cash paid for income tax
Net cash flows from (used in) operating activities		 Notes
2017
2016
$
15,354,189 ($
8,533,580 )
6(24)
8,476,464
11,448,019
6(24)
-
10,010
6(7)
1,929 (
86,370 )
6(22)
(
1,004,517 )
71,030
6(22)
50,494
2,678
6(22)
120,000
-
6(23)
114,080
305,943
6(21)
(
68,991 ) (
93,023 )
(
4,725 ) (
35,244 )
(
1,353,734 ) (
381,748 )
8,338,310
14,416,125
(
2,602,605 )
491,502
375,793 (
43,367 )
(
1,476,330 )
176,154
262,615 (
58,199 )
(
31,908 ) (
8,270 )
(
4,826,627 ) (
12,492,424 )
1,552,466 (
843,228 )
3,081,513 (
3,794,355 )
958,523 (
2,791,433 )
73,281 (
29,379 )
18,418
16,855
27,408,638 (
2,252,304 )
(
240,306 ) (
402,749 )
27,168,332 (
2,655,053 )

(Continued)

~6~

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars)

(Reviewed, not audited)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of available-for-sale financial
assets
Decrease in other financial assets
Acquisition of property, plant and equipment

Proceeds from disposal of property, plant and equipment
Acquisition of intangible assets
Increase in other non-current assets
Interest received
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings
Payment of long-term borrowings
Repurchase from issuance of restricted stock to employees
Interest paid
Net cash flows used in financing activities
Effect of changes in foreign currency exchange
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period		 Notes
2017
2016
$
1,093,780 $
221,479
345
1,520,472
6(28)
(
5,804,379 ) (
7,459,407 )
205,952
1,877
(
213,127 ) (
4,197 )
(
14 ) (
12,651 )
73,579
105,922
(
4,643,864 ) (
5,626,505 )
(
11,579,025 )
2,927,194
(
8,220,000 ) (
8,220,000 )

- (
884 )
(
86,171 ) (
281,217 )
(
19,885,196 ) (
5,574,907 )
(
2,142,629 ) (
411,720 )
496,643 (
14,268,185 )
35,384,839
52,522,790
$
35,881,482 $
38,254,605

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

~7~

INNOLUX CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2017 AND 2016

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

(Reviewed, not audited)

1. HISTORY AND ORGANISATION

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

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

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were authorised for issuance by the Board of Directors on May 10, 2017.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

  • (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

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

New Standards,Interpretations and Amendments Effective date by
International Accounting
Standards Board
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 amortisation
(amendments to IAS 16 and IAS 38)
Agriculture: bearer plants (amendments to IAS 16 and IAS 41)
Defined benefit plans: employee contributions (amendments to IAS 19R)
Equity method in separate financial statements (amendments to IAS 27)
Recoverable amount disclosures for non-financial assets (amendments to
IAS 36)
Novation of derivatives and continuation of hedge accounting
(amendments to IAS 39)		 January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
January 1, 2014

~8~

New Standards,Interpretations andAmendments Effective date by
International Accounting
StandardsBoard
IFRIC 21, ‘Levies’
Improvements to IFRSs 2010-2012
Improvements to IFRSs 2011-2013
Improvements to IFRSs 2012-2014		 January 1, 2014
July 1, 2014
July 1, 2014
January 1, 2016

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and operating results based on the Group’s 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.

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

the Group

None.

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

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

endorsed by the FSC effective from 2017 are as follows:
New Standards,Interpretations and Amendments Effective date by
International Accounting
Standards Board
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)
Transfers of investment property (amendments to IAS 40)
IFRIC 22, ‘Foreign currency transactions and advance consideration’		 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
January 1, 2018
January 1, 2018

~9~

New Standards,Interpretations andAmendments Effective date by
International Accounting
StandardsBoard
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, 2017
January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and operating results based on the Group’s 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 at fair value through other comprehensive income or financial asset measured at amortised 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 recognize the equity instrument not held for trading at fair value in other comprehensive income.

  • (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 recognise 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). T he 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 makes the accounting practices consistent with an entity’s risk management strategy. The components and the grouping of non-financial items can be loosened as hedged items. The 80~125% threshold of highly efficient hedge is removed, and that the hedge items and the hedged percentages of the hedge instruments that can be rebalance under the unchanged business objectives of risk management is increased.

  • 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 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.

~10~

The core principle of IFRS 15 is that an entity recognises 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 recognises 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 obligations in the contract(s) Step 5: Recognise 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 recognised 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 recognise 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 consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

  • A. The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Accounting Standard 34, “Interim financial reporting” as endorsed by the FSC.

  • B. These financial statements should be read with the consolidated financial statements for the year ended December 31, 2016.

~11~

(2) Basis of preparation

  • A. Except for the following items, these consolidated financial statements have been prepared under the historical cost convention:

  • (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

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

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

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

(3) Basis of consolidation

  • A. Basis for preparation of consolidated financial statements

  • The basis applied in these consolidated financial statements is consistent with that applied in the consolidated financial statements for the year ended December 31, 2016.

  • B. Subsidiaries included in the consolidated financial statements:

Main
business
Name of investor
Name of subsidiary
activities
Innolux Corporation
Bright Information
Holding Ltd.
Investment
holdings
Golden Achiever
International Ltd.
Investment
holdings
Innolux Holding Limited
Investment
holdings
Keyway Investment
Management Limited
Investment
holdings
Landmark International
Ltd.
Investment
holdings
Toppoly Optoelectronics
(B.V.I.) Ltd.
Investment
holdings
Innolux Hong Kong
Holding Limited
Investment
holdings
Leadtek Global Group
Limited
Distribution
company
Yuan Chi Investment Co.,
Ltd.
Investment
company		 March
December
March
31,2017
31,2016
31,2016
Description
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
Ownership (%)

~12~

Main
business
Name of investor
Name of subsidiary
activities
Innolux Corporation
InnoJoy Investment
Corporation
Investment
company
Innolux Optoelectronics
Europe B.V.
Investment and
distribution
company
Innolux Optoelectronics
Japan Co., Ltd.
Investment and
distribution
company
Bright Information
Holding Ltd.
Kunpal Optoelectronics
Ltd.
Processing
company
Golden Achiever
International Ltd.
VAP Optoelectronics
(Nanjing) Corp.
Processing
company
Innolux Holding
Limited
Rockets Holding Ltd.
Investment
holdings
Suns Holding Ltd.
Investment
holdings
Lakers Trading Ltd.
Distribution
company
Innolux Corporation
Distribution
company
Ningbo Innolux Logistics
Ltd.
Warehousing
company
Foshan Innolux Logistics
Ltd.
Warehousing
company
Landmark
International Ltd.
Ningbo Innolux
Optoelectronics Ltd.
Processing
company
Ningbo Innolux
Technology Ltd.
Processing
company
Foshan Innolux
Optoelectronics Ltd.
Processing
company
Ningbo Innolux Display
Ltd.
Processing
company
Toppoly
Optoelectronics
(B.V.I.) Ltd.
Toppoly Optoelectronics
(Cayman) Ltd.
Investment
holdings
Innolux Hong Kong
Holding Limited
Innolux Optoelectronics
Hong Kong Holding
Limited
Investment
holdings
Innolux Hong Kong
Limited
Distribution
company
Innolux Technology
Europe B.V.
Investment and
R&D company
Innolux Technology Japan
Co., Ltd.
R&D company
Innolux Technology USA
Inc.
Distribution
company
Innolux
Optoelectronics
Europe B.V.
Innolux Optoelectronics
Germany GmbH
After sales
service
company
Keyway Investment
Management Limited		 March
December
March
31,2017
31,2016
31,2016
Description
100
100
100
-
100
100
100
100
100
100
-
-
-
100
(a)
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
-
100
100
(e)
100
100
100
-
100
100
100
-
-
-
100
(d)
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
Ownership (%)

~13~

Main
business
Name of investor
Name of subsidiary
activities
Innolux
Optoelectronics
Japan Co., Ltd.
Innolux Optoelectronics
USA, Inc.
Distribution
company
Rockets Holding Ltd. Best China Investments
Ltd.
Investment
holdings
Mega Chance Investments
Ltd.
Investment
holdings
Magic Sun Ltd.
Investment
holdings
Stanford Developments
Ltd.
Investment
holdings
Nets Trading Ltd.
Investment
company
Suns Holding Ltd.
Warriors Technology
Investments Ltd.
Investment
company
Toppoly
Optoelectronics
Nanjing Innolux
Technology Ltd.
Distribution
company
(Cayman) Ltd.
Nanjing Innolux
Optoelectronics Ltd.
Processing
company
Kunpal Optoelectronics
Ltd.
Processing
company
Innolux
Optoelectronics Hong
Kong Holding
Limited
Shanghai Innolux
Optoelectronics Ltd.
Processing
company
Innolux Technology
Europe B.V.
Innolux Technology
Germany GmbH
Testing and
maintenance
company
Best China
Investments Ltd.
Asiaward Investment Ltd.
Investment
holdings
Mega Chance
Investments Ltd.
Main Dynasty Investment
Ltd.
Investment
holdings
Magic Sun Ltd.
Sun Dynasty Development
Ltd.
Investment
holdings
Stanford
Developments
Ltd.
Innocom Technology
(Shenzhen) Co., Ltd.
Processing
company
Ningbo Innolux
Display Ltd.
Ningbo Innolux
Electronics Ltd.
Distribution
company
Ningbo Innolux
Optoelectronics Ltd.
Ningbo Innolux Flnet
Electronics Ltd.
Distribution
company
Foshan Innolux
Optoelectronics Ltd.
Foshan Innolux Flnet
Electronics Ltd.
Distribution
company		 March
December
March
31,2017
31,2016
31,2016
Description
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
-
(a)
100
100
100
-
100
100
100
-
-
100
100
(e)
-
100
100
(e)
-
100
100
(e)
100
100
100
-
100
100
100
-
100
100
-
(b)
100
100
-
(c)
Ownership (%)

(a) Kunpal Optoelectronics Ltd. was previously a wholly-owned subsidiary of Bright Information Holding Ltd. However, after reorganization in July 2016, Kunpal Optoelectronics Ltd. became a wholly-owned subsidiary of Toppoly Optoelectronics (Cayman) Ltd.

~14~ 

  - (b) Ningbo Innolux Flnet Electronics Ltd. was established in October 2016 and was included in the consolidated financial statements since the date of establishment.

  - (c) Foshan Innolux Flnet Electronics Ltd. was established in October 2016 and was included in the consolidated financial statements since the date of establishment.

  - (d) In October 2016, the Board of Directors of the Group resolved to merge Ningbo Innolux Technology Ltd., which was wholly owned by the Group, with Ningbo Innolux Display Ltd., and Ningbo Innolux Display Ltd. was the surviving company. The effective date was set on December 1, 2016, and was accounted as a reorganisation.

  - (e) In the first quarter of 2017, the subsidiary had completed liquidation and dissolution.

  • C. Subsidiaries not included in the consolidated financial statements: None.

  • D. Adjustments for subsidiaries with different balance sheet dates: None.

  • E. The restrictions on fund remittance from subsidiaries to the parent company: None.

  • F. Subsidiaries that have non-controlling interests that are material to the Group: None.

  • (4) Derecognition of financial assets

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

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

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

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

  • (5) Employee benefits

Except for the following additional accounting policies, the accounting policies on employee benefits are the same as those described in Note 4 of the 2016 consolidated financial statements. Pension cost for the interim period is calculated on a year-to-date basis by using the pension cost rate derived from the actuarial valuation at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-off events. Also, the related information is disclosed accordingly.

(6) Income tax

Except for the following additional accounting policies, the accounting policies on income tax are the same as those described in Note 4 of the 2016 consolidated financial statements.

The interim period income tax expense is calculated according to pretax income times effective income tax rate, and the related information is disclosed accordingly.

  1. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

For more information, please refer to Note 5 of the consolidated financial statements for the year ended December 31, 2016.

~15~

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash and cash equivalents
Cash on hand, demand deposits
and checking accounts
Time deposits
Cash equivalents - Repurchase
bonds		 March31,2017
9,754,045
$
25,461,657
35,215,702
665,780
35,881,482
$		 December31,2016
8,392,955
$
26,326,649
34,719,604
665,235
35,384,839
$		 March31,2016
18,318,628
$
19,272,181
37,590,809
663,796
38,254,605
$

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

  • B. The above time deposits and bonds with repurchase agreement expire in 3 months and risks of changes in their values are remote. The remaining unpledged time deposits which did not meet the definition of cash equivalents were $4,755, $4,998 and $564,609 at March 31, 2017, December

  • 31, 2016 and March 31, 2016, respectively, and were classfied as ‘other current assets’.

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

Assets
Current items
Financial assets held for trading
Forward foreign exchange
contracts
Non-current items
Financial assets held for trading
Stock-Advanced
Optoelectronic
Technology Inc.
Valuation adjustment
Liabilities
Current items
Financial liabilities held for
trading
Forward foreign exchange
contracts		 March31,2017
180,453
$
77,019
$
237,282
314,301
$
16,826
$		 December31,2016
64,241
$
77,019
$
173,082
250,101
$
1,190,148
$		 March31,2016
391,992
$
77,019
$
223,326
300,345
$
174,156
$
  • A. The Group recognized net gain of $1,066,455 and $582,918 on the financial instruments for the three-month period ended March 31, 2017 and 2016, respectively.

~16~

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

March31,2017 March31,2017 December31, December31, 2016
Contract amount Contract amount
Derivative financial (Notional principal) (Notional principal)
assets and liabilities (in thousands) Contractperiod (in thousands) Contractperiod
Current items
Forward foreign USD (sell) $ 323,000
 2017/01-2017/06 USD (sell) $ 360,000
 2016/10-2017/03
exchange contracts JPY (buy) 36,384,485 2017/01-2017/06 JPY (buy) 39,597,920 2016/10-2017/03
Forward foreign EUR (sell) 14,000 2017/02-2017/06 TWD (sell) 621,240 2016/09-2017/02
exchange contracts USD (buy) 15,024 2017/02-2017/06 USD (buy) 20,000 2016/09-2017/02
Forward foreign EUR (sell) 53,500 2016/12-2017/06 EUR (sell) 19,000 2016/10-2017/01
exchange contracts JPY (buy) 6,496,560 2016/12-2017/06 USD (buy) 20,706 2016/10-2017/01
Forward foreign HKD (sell) 325,642 2017/01-2017/04 EUR (sell) 55,000 2016/09-2017/04
exchange contracts EUR (buy) 39,000 2017/01-2017/04 JPY (buy) 6,516,335 2016/09-2017/04
Forward foreign USD (sell) 643,000 2017/01-2017/06 EUR (sell) 8,960 2016/12~2017/01
exchange contracts RMB (buy) 4,446,211 2017/01-2017/06 TWD (buy) 302,364 2016/12~2017/01
Forward foreign USD (sell) 30,000 2017/03-2017/04 USD (sell) 715,000 2016/09~2017/02
exchange contracts TWD (buy) 915,000 2017/03-2017/04 RMB (buy) 4,948,754 2016/09~2017/02
HKD (sell) 330,712 2016/10~2017/01
EUR (buy) 39,000 2016/10~2017/01
March 31,2016
Contract amount
Derivative financial (Notional principal)
assets and liabilities (in thousands) Contractperiod
Current items
Forward foreign TWD (sell) $ 8,840,375
 2016/03-2016/06
exchange contracts USD (buy) 270,000 2016/03-2016/06
Forward foreign USD (sell) 332,000 2016/01-2016/06
exchange contracts JPY (buy) 37,975,785 2016/01-2016/06
Forward foreign EUR (sell) 49,000 2016/01-2016/08
exchange contracts JPY (buy) 6,181,220 2016/01-2016/08
Forward foreign HKD (sell) 330,564 2016/01-2016/04
exchange contracts EUR (buy) 39,000 2016/01-2016/04
Forward foreign USD (sell) 300,000 2016/02-2016/06
exchange contracts RMB (buy) 1,969,611 2016/02-2016/06

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

(3) Available-for-sale financial assets

Available-for-sale financial assets
Items
Non-current items
Listed stocks
Emerging and unlisted stocks		 March31,2017
6,703,477
$
570,164
7,273,641
$		 December31,2016
5,295,578
$
545,351
5,840,929
$		 March31,2016
6,047,231
$
735,039
6,782,270
$

A. The Group recognized net gain (loss) in other comprehensive income for fair value change and reclassified from equity to profit or loss for the three-month period ended March 31, 2017 and 2016. Please refer to Note 6(19).

~17~

  • B. The counterparties of the Group’s debt instrument investments have good credit quality.

  • C. For the three-month period ended March 31, 2017, the Company and its subsidiary assessed that investment value of certain investee companies was impaired and recognized impairment loss of $120,000 which was shown as ‘other gains and losses’.

(4) Accounts receivable

Accounts receivable
March31,2017 December31,2016 March31,2016
Accounts receivable $ 45,530,389
 $ 53,798,678
 $ 34,657,856
Less: Allowance for sales returns
and discounts ( 903,569)
 ( 833,545)
 ( 765,685)
Allowance for bad debts ( 109,498) ( 109,501) ( 118,505)
$ 44,517,322
 $ 52,855,632
 $ 33,773,666

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

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

is as follows:
Up to 60 days
61 to 180 days
Over 181 days		 March31,2017
445,312
$
31,326
55
476,693
$		 December31,2016
391,369
$

8,364

-
399,733
$		 March31,2016
$ 402,797
95,072
4,371
502,240
$

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

  • (a) As of March 31, 2017, December 31, 2016 and March 31, 2016, the Group’s accounts receivable that were impaired were $109,498, $109,501 and $118,505, respectively.

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

At January 1
Net exchange difference
(
At March 31		 2017
109,501
$
3)

(
109,498
$		 2016
118,516
$
11)

118,505
$

(5) 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 transferred accounts receivable. As of March 31, 2017, 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 $18,804,600 and $6,066,000, respectively.

~18~

As of March 31, 2016, the related information on accounts receivable that were transferred but not expired is as follows. Partial amounts that were not advanced were recorded in other receivables:

March 31, 2016

March31,2016
Purchaser
of accounts
receivable
CTBC Bank
Taipei Fubon
Commercial Bank		 Accounts
receivable
transferred that
hasnot expired
725,231
$
358,577
1,083,808
$		 Amount
derecognised
725,231
$
358,577
1,083,808
$		 Facilities
20,920,250
$
6,437,000
27,357,250
$		 Amount
advanced
652,708
$
322,719
975,427
$

(6) Inventories

Inventories
Raw materials and supplies
Work in process
Finished goods		 March31,2017

3,734,869
$
14,067,665
7,075,524
24,878,058
$		 December31,2016
3,352,916
$
12,345,964
7,702,848
23,401,728
$		 March31,2016
3,771,734
$
15,558,772
9,835,289
29,165,795
$

  • A. For the three-month period ended March 31, 2017 and 2016, the Company and subsidiaries recognized cost of goods sold for inventories that have been sold at $65,655,406 and $60,313,282, and recognized net inventory loss at $25,344 and $141,298 due to write down of cost of scrap inventories to net realizable value, respectively.

  • 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.

(7) Investments accounted for under the equity method

Ampower Holding Ltd.
FI Medical Device
Manufacturing Co., Ltd.
TOA Optronics Corporation
Others		 March31,2017

870,941
$
496,645
39,831
104,814
1,512,231
$		 December31,2016
870,941
$
451,943
89,366
105,168
1,517,418
$		 March31,2016
869,210
$
449,970
263,543
98,306
1,681,029
$

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

For the three-month period ended March 31,

2017
(Loss) profit for the period from continuing
operations
1,929)
($
Other comprehensive loss - net of tax
3,258)
(
(
Total comprehensive (loss) income
5,187)
($		 2016
86,370
$
15,927)

70,443
$

~19~

(8) Property, plant and equipment

2017

2017
Transfer, net
exchange
differences
AtJanuary1 Additions Disposals and others At March31
Cost:
Land 3,852,792
$		 $ -
 $ -
 $ -
 $ 3,852,792
Buildings 193,290,765 6,246 ( 81,662)
 ( 925,112)
 192,290,237
Machinery and equipment 438,234,703 4,895 ( 1,469,716)
 ( 181,823)
 436,588,059
Other equipment 36,511,450 3,734 ( 163,060) 446,040 36,798,164
671,889,710 14,875 ( 1,714,438) ( 660,895) 669,529,252
Accumulated depreciation
and impairment:
Buildings ( 105,693,860)
 ( 2,473,972)
 40,348 631,568 ( 107,495,916)
Machinery and equipment ( 371,358,748)
 ( 4,644,424)
 1,354,794 1,857,652 ( 372,790,726)
Other equipment ( 29,890,362)
 ( 1,030,403) 159,689 232,678 ( 30,528,398)
( 506,942,970) ( 8,148,799) 1,554,831 2,721,898 ( 510,815,040)
Unfinished construction and
equipment under acceptance 36,414,118 4,327,640 ( 105,943) ( 3,274,035) 37,361,780
$ 201,360,858 $ 196,075,992
2016
Transfer, net
exchange
differences
AtJanuary1 Additions Disposals and others At March31
Cost:
Land 3,852,792
$		 $ -
 $ -
 $ -
 $ 3,852,792
Buildings 185,696,326 35,045 ( 780,304)
 187,467 185,138,534
Machinery and equipment 432,460,229 85,876 ( 1,208,190)
 2,549,859 433,887,774
Other equipment 33,632,482 9,698 ( 59,232) 575,095 34,158,043
655,641,829 130,619 ( 2,047,726) 3,312,421 657,037,143
Accumulated depreciation
and impairment:
Buildings ( 95,892,428)
 ( 3,026,348)
 409,015 138,301 ( 98,371,460)
Machinery and equipment ( 352,326,878)
 ( 7,077,096)
 1,195,000 ( 301,750)
 ( 358,510,724)
Other equipment ( 26,880,493)
 ( 1,038,082) 58,039 55,954 ( 27,804,582)
( 475,099,799) ( 11,141,526) 1,662,054 ( 107,495) ( 484,686,766)
Unfinished construction and
equipment under acceptance 18,940,710 6,169,189 ( 2,169) ( 3,984,946) 21,122,784
$ 199,482,740 $ 193,473,161

A. Amount of borrowing costs capitalized as part of property, plant and equipment and the range of the interest rates for such capitalization are as follows:

the interest rates for such capitalization are as follows:
Capitalised amount
Range of the interest rates for capitalisation		 For the three-month period
ended March31,2017
150,948
$
2.15%~2.40%

~20~

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

  • C As of March 31, 2017, December 31, 2016, and March 31, 2016, the prepayments for business facilities which have not yet entered the factory (shown as ‘other non-current assets’) amounted to $414,291, $896,996 and $3,442,181, 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.

(9) Investment property

Investment property
Cost:
Land
Buildings
Accumulated
depreciation and
impairment:
Buildings
(
Cost:
Land
Buildings
Accumulated
depreciation and
impairment:
Buildings
(		 2017 AtMarch31
188,247
$
439,228
627,475
56,732)

570,743
$
AtMarch31
188,247
$
439,228
627,475
46,007)

581,468
$
At January1
188,247
$
439,228
627,475
54,050)

(
573,425
$
(		 Additions
Transfers
-
$
-
$
-
-
-
-
2,682)

-
(
2,682)
$
-
$
2016
At January1
188,247
$
564,109
752,356
71,853)

(
680,503
$
(		 Additions
-
$
-
(
-
(
3,089)

3,089)
$
(		 Disposals
-
$
124,881)

124,881)

28,935
(
95,946)
$

The fair value of the investment property held by the Group as at March 31, 2017, December 31, 2016, and March 31, 2016 was $1,109,891, $1,109,891 and $1,077,466, respectively. The amounts mentioned above represent valuation results of comparative method based on market trading information categorized within Level 3 in the fair value hierarchy.

~21~

(10) Intangible assets

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

2017

2017
AtJanuary1
Additions
Cost:
Patents and royalty
8,154,685
$
-
$
Goodwill
17,096,628
-
Others
4,417,732
213,127
(
29,669,045
213,127
(
Accumulated amortization
and impairment:
Patents and royalty
7,528,072)
(
204,866)
(
Others
3,694,652)
(
120,117)
(
11,222,724)
(
324,983)
(
18,446,321
$
111,856)
($
AtJanuary1
Additions
Cost:
Patents and royalty
8,152,685
$
-
$
Goodwill
17,096,628
-
Others
4,215,500
4,197
(
29,464,813
4,197
(
Accumulated amortization
and impairment:
Patents and royalty
6,668,709)
(
220,593)
(
Others
3,453,248)
(
82,811)
(
10,121,957)
(
303,404)
(
19,342,856
$
299,207)
($		 Disposals
-
$
-
46,479)

(
46,479)

(
-
46,479
46,479
-
$
(
2016		 Transfer, net
exchange
differences
and others
At March31
-
$
8,154,685
$
-
17,096,628
21,287)

4,563,093
21,287)

29,814,406
-
7,732,938)
(
13,399
3,754,891)
(
13,399
11,487,829)
(
7,888)
$
18,326,577
$		 At March31
Disposals
-
$
-
39,407)

39,407)

-
39,407
39,407
-
$		 Transfer, net
exchange
differences
and others
At March31
-
$
8,152,685
$
-
17,096,628
44,766
4,225,056
44,766
29,474,369
-
6,889,302)
(
2,370
3,494,282)
(
2,370
10,383,584)
(
47,136
$
19,090,785
$		 At March31
  • B. Details of amortization on intangible assets are as follows:

For the three-month period ended March 31,

Operating costs
Operating expenses		 2017
286,147
$
38,836
324,983
$		 2016
252,986
$
50,418
303,404
$
  • 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. Based on the periodic evaluation, the Company did not recognize impairment loss on goodwill.

~22~

(11) Short-term borrowings

Short-term borrowings
Type ofborrowings

Bank loans
Credit loans
Range of interest rates		 December31,2016
11,583,750
$
0.83%~1.59%		 March31,2016
2,891,950
$
0.83%~1.23%		 Collateral
None

As of March 31, 2017, the Group has no short-term borrowings.

(12)
(13)		 Other payables
Long-term borrowings
March31,2017
December31,2016
March31,2016
Wages and salaries payable and
bonus
8,537,296
$
6,566,523
$
4,974,382
$
Payable on machinery and
equipment
1,877,900
3,339,764
2,814,553
Utilities expense payable
1,132,326
1,064,275
1,102,740
Repairs and maintenance expense
payable
2,070,234
1,974,059
1,617,761
Other payables
10,903,712
9,971,476
9,393,633
24,521,468
$
22,916,097
$
19,903,069
$
Type of loans
Period
March31,2017
December31,2016
March31,2016
Syndicated bank
loans
2015/3/12
~2021/12/6
36,620,000
$
44,840,000
$
52,060,000
$
Less:
Administrative
expenses
charged by
syndicated
banks
287,660)
(
329,847)
(
255,471)
(
Current portion (includes
administrative expenses)
35,497,818)
(
16,381,686)
(
16,359,325)
(
834,522
$
28,128,467
$
35,445,204
$
Range of interest
rates
1.85%~2.06%
1.77%~2.06%
1.83%~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, based on the Company’s annual consolidated financial statements audited by independent auditors. The Company’s financial ratios on the consolidated financial statements for the year ended December 31, 2016 are in compliance with the covenants on the syndicated loan agreement.

~23~

(14) Pensions

  • A. Defined benefit pension plan

    • (a) The Company and its domestic subsidiaries have a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005, and service years thereafter of employees who choose to continue to be subject to the pension mechanism under the Law.

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

  • B. Defined contribution pension plan

    • (a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality.

    • (b) The subsidiaries in Mainland China have defined contribution plans. Monthly contributions to an independent fund administered by the government in accordance with the pension regulations in the People’s Republic of China (PRC) are based on certain percentages of employees’ monthly salaries and wages.

    • (c) The pension costs under the defined contribution pension plans of the Group for the threemonth period ended March 31, 2017 and 2016 were $474,054 and $515,429, respectively.

  • (15) Share-based payment

  • A. The information on the Company’s share-based payment compensation plan negotiated with employees is provided in Note 6(15) of the consolidated financial statements for the year ended December 31, 2016.

  • B. The details of the employee stock option plan for the three-month period ended March 31, 2016 is as follows:

is as follows:
Weighted
Weighted
average
Range of
average
Quantity (in
exercise
exercise
remaining
thousand
price
price
vesting
StockOptions
units)
(indollars)
(indollars)
period
Outstanding options at the
beginning of the period
50,000
22.85
$
Options exercised
-
-
Options expired
-
-
Outstanding options at the
end of the period
50,000
21.87
21.87
$
0.14 years
Exercisable options at the
end of the period
50,000
21.87
Forthe three-monthperiod endedMarch		 Forthe three-monthperiod endedMarch 31,2016
Weighted
average
exercise
price
(indollars)

22.85
$
-
-
21.87
21.87		 Range of
exercise
price
(indollars)
21.87
$		 Weighted
average
remaining
vesting
period
0.14 years		 Weighted average
stock price of
stock options
at exercise
date (indollars)
9.89
$

There was no employee stock option plan for the three-month period ended March 31, 2017.

  • C. For the three-month period ended March 31, 2017 and 2016, the expenses incurred from sharebased payment arrangements were $0 and $10,010, respectively.

~24~

(16) Provisions-current

Provisions-current
At January 1, 2017
Additions during the period
Used during the period
(
At March 31, 2017		 Warranty
1,634,234
$
605,000
285,177)

1,954,057
$		 Litigation and others
2,131,000
$
638,700
-

2,769,700
$		 Total
3,765,234
$
1,243,700
285,177)
(
4,723,757
$

A. Warranty

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

B. Litigation and others

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

(17) Share capital

As of March 31, 2017, the Company’s authorized and outstanding capital were $105,000,000 and $99,520,784, 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 March 31		 2017
Number of ordinary
shares (inthousands)

9,952,149
71)

(
9,952,078		 2016
Number of ordinary
shares (inthousands)
9,953,237
555)

9,952,682

  • A. The Board of Directors of the Company resolved to increase capital for cash by issuing the GDR which 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 March 31, 2017, there were 213 thousand units outstanding, representing 2,134 thousand shares of common stocks.

  • B. 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 March 31, 2017 and 2016, the Company has retired 71 thousand and 555 thousand shares of unvested restricted stocks to employees, respectively, and decreased capital in accordance with related regulation.

~25~

(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.

At January 1
Cancellation of restricted stock to
employees
Vested in restricted stock to
employees
At March 31		 2017
Sharepremium
99,614,516
$
-
138
99,614,654
$		 Share of
profit (loss)
of associates
accounted for
Restricted
under equity
stock to
method
employees
33,888
$
594)
($
-
704
-
138)
(
33,888
$
28)
($		 Total
99,647,810
$
704
-
99,648,514
$
At January 1
Cancellation of restricted stock to
employees
Vested in restricted stock to
employees
Changes in restricted stock to
employees
At March 31		 2016
Share of
profit (loss)
of associates
accounted for
under equity
Sharepremium
method
99,101,649
$
36,458
$
-
-
117,103
-
-
-
99,218,752
$
36,458
$		 Restricted
Employee
stock to
stock options
employees
393,500
$
111,957
$
-
5,556
-
117,103)
(
-
3,916)
(
(
393,500
$
3,506)
($		 Total
99,643,564
$
5,556
-
3,916)

99,645,204
$

(19) Retained earnings

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

~26~

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 2016 net income which was proposed at the Board of Directors’ meeting in May 2017 and the appropriation of 2015 net income which was approved at the stockholders’ meeting in June 2016 are as follows:

tockholders’ meeting in June 2016 are as follows: June 2016 are as follows: June 2016 are as follows:
Legal reserve
Special reserve
Cash dividends		 Years endedDecember31,
Dividends per
Amount
share (indollars)
187,069
$
3,418,805
995,204
0.10
$
4,601,078
$
2016		 2015
Amount
187,069
$
3,418,805
995,204
4,601,078
$		 Amount
1,081,560
$
-
1,989,810
3,071,370
$		 Dividends per
share (indollars)
0.20
$
  • D. For the information relating to employees’ compensation and directors’ and supervisors’ remuneration, please refer to Note 6(24).

(20) Other equity items

remuneration, please refer to Note 6(24).
Other equity items		 4).
Available-
Currency
for-sale
translation
investments
Total
At January 1
4,040,408)
($
621,604
$
3,418,804)
($
Revaluation of available-for-sale investments
- gross
-
2,555,931
2,555,931
Revaluation transfer of available-for-sale
investment - gross
-
874,851)
(
874,851)
(
Currency translation differences
3,925,710)
(
-
3,925,710)
(
Share of subsidiaries and other comprehensive
loss of associates
3,258)
(
-
3,258)
(
Effect of income tax
-
69,628)
(
69,628)
(
At March 31
7,969,376)
($
2,233,056
$
5,736,320)
($
2017		 2017
Total

~27~

2016 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 - ( 108,790)
 - ( 108,790)
Revaluation transfer of available-for-sale
investment - gross - 71,030 - 71,030
Currency translation differences ( 832,733)
 - - ( 832,733)
Changes in restricted stocks to employees - - 3,977 3,977
Compensation related to share-based
payment - - 10,010 10,010
Share of subsidiaries and other comprehensive
loss of associates ( 15,927)
 - - ( 15,927)
Effect of income tax - 3,426 - 3,426
At March 31 $ 846,634
 $ 1,040,111
 ($ 5,415)
 $ 1,881,330

(21) Other income

Other income
For the three-monthperiod ended March31,
2017 2016
Rental revenue $ 32,621
 $ 44,319
Interest income 68,991 93,023
Other income 345,661 965,416
$ 447,273
 $ 1,102,758
Other gains and losses
Forthe three-monthperiod endedMarch31,
2017 2016
Net gain on financial assets and liabilities at fair
value through profit or loss $ 1,066,455
 $ 582,918
Net currency exchange loss ( 1,089,551)
 ( 637,835)
Gain (loss) on disposal of investments 1,004,517 ( 71,030)
Loss on disposal of property, plant and equipment ( 50,494)
 ( 2,678)
Impairment loss ( 120,000)
 -
Litigation loss and others ( 420,038)
 ( 885,037)
$ 390,889
 ($ 1,013,662)

(22) Other gains and losses

(23) Finance costs

Finance costs
Interest expense:
Bank borrowings
Others
Factoring expense of accounts receivable		 Forthe three-monthperiod endedMarch31,
2017
114,074
$
6
-
114,080
$		 2016
305,720
$
223
816
306,759
$

~28~

(24) Expenses by nature

Employee benefit expense:
Salaries and other short-term employee benefits
Share-based payments
Post-employment benefits
Depreciation
Amortization		 Forthe three-monthperiod endedMarch31, Forthe three-monthperiod endedMarch31,
2017
12,922,366
$
-
474,054
8,151,481
324,983
21,872,884
$		 2016
9,385,684
$
10,010
515,429
11,144,615
303,404
21,359,142
$

(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 three-month period ended March 31, 2017, employees’ compensation was accrued at $949,040; while no directors’ and supervisors’ remuneration was accrued. For the three-month period ended March 31, 2016, no employees’ compensation was accrued. The aforementioned amounts were recognized in expenses.

  • The expense recognized for the three-month period ended March 31, 2017 was accrued based on the earnings of current year.

  • Employees’ compensation and directors’ and supervisors’ remuneration were accrued at $192,788 and $1,928, respectively, based on the earnings of current year distributable for the year ended December 31, 2016 and the employees’ compensation will be distributed in the form of cash. Employees’ compensation and directors’ and supervisors’ remuneration for 2016 as resolved by the Board of Directors were $231,338 and $3,856, respectively. The difference of $40,478 between employees’ compensation (directors’ and supervisors’ remuneration) as resolved by the Board of Directors and the amount recognized in the 2016 financial statements was caused by a different accrual ratio and had been recorded as expense in 2017. As of March 31, 2017, the compensation and remuneration have not yet been paid.

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.

~29~

(26) Income tax

A. Income tax expense

  • (a) Components of income tax expense:
e tax
ome tax expense
Components of income tax expense:
Current tax:
Current tax on profit for the period
Prior year income tax (overestimate)
underestimate

Total current tax
Deferred tax:
Origination and reversal of temporary
differences
Income tax expense		 Forthe three-monthperiod endedMarch31,
2017
124,983
$
4,402)
(
120,581
3,375,489
(
3,496,070
$		 2016
981,995
$
558
982,553
934,625)

47,928
$
  • (b) The income tax (charge)/credit relating to components of other comprehensive income is as follows:
follows:
Fair value gains/losses on available-for-sale
financial assets		 2017
2016
69,628
$
3,426)
($
Forthe three-monthperiod endedMarch31,
2017
69,628
$
(

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

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

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

(a) Balance of tax credit
account
(b) Estimated (actual)
creditable tax rate		 March31,2017

1,462,128
$		 December31,2016
1,420,948
$
2016 (Estimated)
7.75%		 March31,2016
761,660
$
2015 (Actual)
5.71%
  • (b) Estimated (actual) creditable tax rate

~30~

(27) Earnings per share

For the three-month period ended March 31,

Basic earnings (loss) per share
Profit (loss) attributable to ordinary shareholders
of the parent
Weighted average number of ordinary shares
outstanding (shares in thousands)
Basic earnings (loss) per share (in dollars)
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 dollars)		 2017
11,858,119
$
(
9,952,019
1.19
$
(
11,858,119
$
9,952,019
90,983
56
10,043,058
1.18
$		 2016
8,581,508)
$
9,941,843
0.86)
$

As employee stock options had anti-dilutive effect for the three-month period ended March 31, 2016, they were not included in the calculation of diluted earnings per share.

(28) Non-cash transaction

Investing activities with partial cash payments:

For the three-month period ended March 31,

Purchase of property, plant and equipment
Add: Opening balance of payable on equipment
Less: Ending balance of payable on equipment
(
Cash paid during the period		 2017
4,342,515
$
3,339,764
1,877,900)

(
5,804,379
$		 2016
6,299,808
$
3,974,152
2,814,553)

7,459,407
$

7. RELATED PARTY TRANSACTIONS

(1) Names and relationship of related parties

Names of related parties

Hon Hai Precision Industry Co., Ltd. and its subsidiaries

Chi Lin Optoelectronics Co., Ltd. and its subsidiaries

FI Medical Device Manufacturing Co., Ltd. GIO Optoelectronics Corp.

Relationship with the Group

The related party is owned by the same major shareholder of the Company

The related party’s director is the Company

Associate

Associate

~31~

(2) Significant related party transactions

A. Operating revenue

nificant related party transactions
Operating revenue
Sales of goods:
Others
Associates		 For the three-monthperiod ended March31,
2017
11,061,716
$
29,517
11,091,233
$		 2016
1,657,274
$
67,358
1,724,632
$

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
Purchases of goods:
Others
Associates		 For the three-monthperiod ended March31,
2017
5,141,096
$
360,408
5,501,504
$		 2016
1,673,986
$
376,107
2,050,093
$

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

C. Consigned processing

(a) Consigned processing

ties.
signed processing
Consigned processing
Processing costs:
Others		 Forthe three-monthperiod endedMarch31,
2017
131,236
$		 2016
28,554
$

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

Payables to related parties:
Others		 March31,2017

123,125
$		 December31,2016
46,171
$		 March31,2016
9,150
$

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

~32~

D. Receivables from related parties:

Receivables from related parties:
Accounts receivable
Others
-Hon Hai Precision Industry
Co., Ltd.
-Others
Associates		 March31,2017

10,239,237
$
3,911,477
51,250
14,201,964
$		 December31,2016
7,605,574
$
3,946,042
47,743
11,599,359
$		 March31,2016
911,295
$
1,145,841
84,215
2,141,351
$

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

E. Payables to related parties:

Payables to related parties:
Accounts payable
Others
-Hon Hai Precision Industry
Co., Ltd.
-Others
Associates		 March31,2017

6,132,209
$
350,333
190,159
6,672,701
$		 December31,2016
4,152,828
$
737,598
229,809
5,120,235
$		 March31,2016
1,434,682
$
920,363
161,660
2,516,705
$

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

F. Property transactions

Purchase of property

  • (a) Acquisition of property, plant and equipment:
For the three-monthperiod ended March31, three-monthperiod ended March31, three-monthperiod ended March31,
2017 2016
Others $ 37,234

$		 3,148
Period-end balances arising from purchases of property (shown as “Other payables”):
March 31,2017 December31,2016 March31, 2016
Others $ 45,210
 $ 27,031
 $ 9,910

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

Sale of property

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

For the three-month period ended March 31,

Others Disposal
Gain on
proceeds
disposal
716
$
34
$
2017		 2016 2016
Disposal
proceeds
716
$		 Disposal
proceeds
-
$		 Gain on
disposal
-
$

~33~

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

(3) Key management compensation
March31,2017
December31,2016
Others
-
$
1,570
$
2017
Salaries and other short-term employee benefits
33,102
$
$
Share-based payments
-
Post-employment benefit
108
33,210
$
$
For the three-monthperiod		 Key management compensation
March31,2017
December31,2016
Others
-
$
1,570
$
2017
Salaries and other short-term employee benefits
33,102
$
$
Share-based payments
-
Post-employment benefit
108
33,210
$
$
For the three-monthperiod		 Key management compensation
March31,2017
December31,2016
Others
-
$
1,570
$
2017
Salaries and other short-term employee benefits
33,102
$
$
Share-based payments
-
Post-employment benefit
108
33,210
$
$
For the three-monthperiod		 March31,2016
1,047
$
ended March31,
2017
33,102
$
-
108
33,210
$		 2016
$ 66,290

652
112
$ 67,054

8. PLEDGED ASSETS

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

Pledged asset
Bookvalue March31,2016
Purpose
5,837
$
Tariff guarantee and land
lease
-
Credit card guarantee
56,436,434
Long-term loans and
performance guarantee
for lease payable
-
Long-term loans and
performance guarantee
for lease payable
8,252
Tariff guarantee, land lease
and guarantee for contract
56,442,271
$
 Purpose
March31,2017
-
$
1,624
78,350,852
13,333
722
December31,2016
-
$
1,726
80,828,544
15,551
752
Other financial
assets-current
Time deposits
Time deposits
Property, plant
and equipment
Intangible assets
Other assets-non-
current
Time deposits
78,365,809
$		 80,845,821
$
  1. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRAC T COMMITMENTS

－ (1) Contingencies Significant Litigations

  • A. Chi Mei Optoelectronics Corporation (the “CMO”), Chi Mei Optoelectronics Japan Co., Ltd., Chi Mei Optoelectronics UK Ltd., Chi Mei Optoelectronics Europe B.V., and Chi Mei Optoelectronics USA Inc. were investigated by the United States (the “U.S.”) Department of Justice in December 2006 for alleged violation of the anti-trust laws. In December 2009, the Company reached a plea agreement with Department of Justice of the U.S. and paid off the fines. Later Brazil government initiated an investigation case against the Company. The investigation is still ongoing and the

~34~

Company has been cooperative with the investigation. As for civil lawsuits filed by some state governments in the U.S., downstream panel makers and customers, the Company had reached settlement agreement individually.

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.

  • C. The Company had assessed and recognised related losses and liabilities as shown in ‘provisionscurrent’ for the aforementioned investigation relating to anti-trust laws and patent litigation.

  • (2) Commitments

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

March 31, 2017 December 31, 2016 March 31, 2016 Property, plant and equipment $ 18,283,411 $ 17,531,784 $ 45,650,100

  • B. Operating lease commitments

The Group leases plant, land and warehouses under non-cancellable operating lease agreements. The majority of lease agreements are renewable at the end of the lease period at market rate. The Group has no significant additional operating lease agreement for the period. Please refer to Note 9(2) of the consolidated financial statements for the year ended December 31, 2016 for the related information.

  • C. Outstanding letters of credit

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

March 31, 2017 December 31, 2016 March 31, 2016 Outstanding letters of credit $ 144,628 $ 245,565 $ 769,348

~35~

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 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. According to the initial assessment, the Company has no other material loss on property after taking the insurance claims into account.

11. SUBSEQUENT EVENTS AFTER THE BALANCE SHEET DATE

  • None.

12. OTHERS

(1) Capital management

No significant changes during the period. Please refer to Note 12 in the consolidated financial statements for the year ended December 31, 2016.

(2) Financial instruments

  • A. Fair value information of financial instruments

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

  • B. Financial risk management policies

No significant changes during the period. Please refer to Note 12 in the consolidated financial statements for the year ended December 31, 2016.

  • C. Significant financial risks and degrees of financial risks

Except for the following description, there is no significant changes during the period. Please refer to Note 12 in the consolidated financial statements for the year ended December 31, 2016. (a) Market risk

Foreign exchange risk

  • i. The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD and RMB. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

  • ii. The Group’s businesses involve some non-functional currency operations (the Company’s and certain subsidiaries’ functional currency: NTD; other certain subsidiaries’ functional currency: RMB). Based on the simulations performed, the impact on post-tax profit of a 1% exchange rate fluctuation would be an increase of $280,778 and $77,313 for the three-month period ended March 31, 2017 and 2016, 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:

~36~

==> picture [478 x 144] intentionally omitted <==

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

March 31, 2017 December 31, 2016
Foreign Foreign
Currency Exchange Currency Exchange
Amount Rate Book Value Amount Rate Book Value
(In Thousands) (Note) (NTD) (In Thousands) (Note) (NTD)
Financial assets
Monetary items
USD $ 4,854,078 30.33 $ 147,224,186 $ 6,907,778 32.25 $ 222,775,841
JPY 7,981,361 0.27 2,154,967 8,114,141 0.28 2,271,959
EUR 67,568 32.43 2,191,230 85,344 33.90 2,893,162
Non-monetary items
----- End of picture text -----

Monetary items
USD
4,854,078
$
30.33
147,224,186
$
JPY
7,981,361
0.27
2,154,967
EUR
67,568
32.43
2,191,230
Non-monetary items		 6,907,778
$
32.25
222,775,841
$
8,114,141
0.28

2,271,959
85,344
33.90

2,893,162		 6,907,778
$
32.25
222,775,841
$
8,114,141
0.28

2,271,959
85,344
33.90

2,893,162		 6,907,778
$
32.25
222,775,841
$
8,114,141
0.28

2,271,959
85,344
33.90

2,893,162
USD
2,433,873
$
30.33
73,819,368
$
HKD
340,948
3.90
1,329,697
JPY
5,535,952
0.27
1,494,707
EUR
3,723
32.43
120,737
USD
3,713,630
$
30.33
112,634,398
$
JPY
35,102,722
0.27
9,477,735
EUR
42,566
32.43
1,380,415
Financial liabilities
Monetary items
Financial assets
Monetary items
USD
JPY
EUR
Non-monetary items
USD
HKD
JPY
EUR
USD
JPY
EUR
Financial liabilities
Monetary items		 2,337,217
$
33.25
75,375,248
$
223,521
4.16
929,847
5,619,277
0.28
1,573,398
3,703
33.90
125,532
4,636,585
$
32.25
149,529,866
$
35,248,180
0.28
9,869,490
42,379

33.90
1,436,648
March31,2016
Foreign
Currency
Amount
(In Thousands)
3,855,729
$
8,155,700
38,852
2,372,449
$
177,256
5,419,096
3,609
3,498,637
$
25,330,064
5,516		 Exchange
Rate
(Note)
32.19
0.29
36.51
32.19
4.15
0.29
36.51
32.19
0.29
36.51		 Book Value
(NTD)
124,115,917
$
2,365,153
1,418,487
76,369,133
$
735,612
1,571,538
131,765
112,621,125
$
7,345,719
201,389



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

iii. Total exchange gain (loss), including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Group for the three-month period ended March 31, 2017 and 2016 amounted to $1,089,551 and $637,835, respectively.

~37~

Price risk

The Group’s investments in equity securities comprise domestic listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 20% with all other variables held constant, post-tax profit for the three-month period ended March 31, 2017 and 2016 would have increased/decreased by $62,860 and $60,069, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss; other components of equity would have increased/decreased by $1,454,728 and $1,356,454, respectively, as a result of gains/losses on equity securities classified as available-for-sale.

Interest rate risk

  • i. The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. During the three-month period ended March 31, 2017 and 2016, the Group’s borrowings at variable rate were denominated in the NTD.

  • ii. Based on the simulations performed, the impact on post-tax profit of a 0.25% shift would be a maximum increase of $91,550 or decrease of $130,150 for the three-month period ended March 31, 2017 and 2016, respectively. The simulation is done on a quarterly basis to verify that the maximum loss potential is within the limit given by the management.

(b) Credit risk

No significant changes during the period. Please refer to Note 12 in the consolidated financial statements for the year ended December 31, 2016.

(c) Liquidity risk

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

Non-derivative financial liabilities

March 31, 2017
Short-term borrowings
Accounts payable
Other payables
Long-term borrowings
(including current portion)		 Less than
1year
-
$
53,721,379
24,521,468
35,620,000		 Between 1
and3 years
-
$
-
-
150,000		 Between 3
and5 years
-
$
-
-
850,000		 Total
-
$
53,721,379
24,521,468
36,620,000

~38~

Non-derivative financial liabilities

Non-derivative financial liabilities
Less than
December 31, 2016
1year
Short-term borrowings
11,583,750
$
Accounts payable
56,995,540
Other payables
22,916,097
Long-term borrowings
(including current portion)
16,440,000
Less than
March 31, 2016
1year
Short-term borrowings
2,891,950
$
Accounts payable
47,094,232
Other payables
19,903,069
Long-term borrowings
(including current portion)
16,440,000
Derivative financial liabilities
March 31, 2017
Forward exchange contracts
December 31, 2016
Forward exchange contracts
March 31, 2016
Forward exchange contracts		 Between 1
Between 3
and3 years
and5 years
-
$
-
$
-
-
-
-
27,550,000
850,000
Between 1
Between 3
and3 years
and5 years
-
$
-
$
-
-
-
-
35,620,000
-
Less than 1year

16,826
$
$
Less than 1year

1,190,148
$
$
Less than 1year

174,156
$
$		 Total
11,583,750
$
56,995,540
22,916,097
44,840,000
Total
2,891,950
$
47,094,232
19,903,069
52,060,000
Total
$
 16,826

Total
$
 1,190,148

Total
$ 174,156

(3) Fair value estimation

  • A.Details of the fair value of the Group’s financial assets and financial liabilities not measured at fair value are provided in Note 12(2)A. Details of the fair value of the Group’s investment property measured at cost are provided in Note 6(9).

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

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

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

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

~39~

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 for the three-month period ended March 31, 2017 and 2016 is as follows:

March 31, 2017
Assets
Recurring fair value measurements
Financial assets at fair value
through profit or loss
Equity securities
Forward exchange contracts
Available-for-sale financial assets
Equity securities
Liabilities
Recurring fair value measurements
Financial liabilities at fair value
through profit or loss
Forward exchange contracts
December31,2016
Assets
Recurring fair value measurements
Financial assets at fair value
through profit or loss
Equity securities
Forward exchange contracts
Available-for-sale financial assets
Equity securities
Liabilities
Recurring fair value measurements
Financial liabilities at fair value
through profit or loss
Forward exchange contracts		 Level 1
314,301
$
-
7,008,477
7,322,778
$
-
$
Level 1
250,101
$
-
5,598,578
5,848,679
$
-
$		 Level 2
-
$
180,453
-
180,453
$
16,826
$
Level 2
-
$
64,241
-
64,241
$
1,190,148
$		 Level3
-
$
-
265,164
265,164
$
-
$
Level3
-
$
-
242,351
242,351
$
-
$		 Total
314,301
$
180,453
7,273,641
7,768,395
$
16,826
$
Total
250,101
$
64,241
5,840,929
6,155,271
$
1,190,148
$

~40~

March31,2016
Assets
Recurring fair value measurements
Financial assets at fair value
through profit or loss
Equity securities
Forward exchange contracts
Available-for-sale financial assets
Equity securities
Liabilities
Recurring fair value measurements
Financial liabilities at fair value
through profit or loss
Forward exchange contracts		 Level 1
300,345
$
-
6,047,231
6,347,576
$
-
$		 Level 2
-
$
391,992
-
391,992
$
174,156
$		 Level3
-
$
-
735,039
735,039
$
-
$		 Total
300,345
$
391,992
6,782,270
7,474,607
$
174,156
$

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

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

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

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

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

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

  • (e)The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Group’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs, for example, model risk or liquidity risk and etc. In accordance with the Group’s management policies and relevant control procedures relating to the valuation models

~41~

used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the consolidated balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.

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

  • E.For the three-month period ended March 31, 2017 and 2016, there was no transfer between Level 1 and Level 2.

F.The following table presents the changes in level 3 instruments as at March 31, 2017 and 2016:

Equity securities Equity securities
2017 2016
At January 1 $ 242,351
 $ 719,585
Gains and losses recognized in profit or loss ( 120,000)
 -
Gains and losses recognized in other comprehensive
income 142,813 15,454
At March 31 $ 265,164
 $ 735,039

  • G.The Group holds private equity shares issued by Fitipower Integrated Technology Inc. The required procedures for becoming publicly traded were completed and its shares started to be traded as emerging stock in the Taipei Exchange from October 2016. The Group has transferred the fair value from Level 3 into Level 1 at the end of month when the event occurred.

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

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

~42~

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:

measurement:
Non-derivative
equity instrument:
Unlisted shares
Venture capital
shares
Private equity
fund investment
Non-derivative
equity instrument:
Unlisted shares
Venture capital
shares
Private equity
fund investment		 Fair value at
March 31,
2017		 Valuation
technique		 Significant
unobservable input		 Range
(weighted
average)		 Relationship of
inputs to fairvalue
239,126
$
26,038
Fair value at
December
31,2016		 Market
comparable
companies
Net asset
value
Valuation
technique		 Price to sales ratio
multiple, price to
book ratio multiple
Discount for lack of
marketability
Not applicable
Significant
unobservable input		 0.82~1.67
(1.03)
30%~70%
(31%)
289
(289)
Range
(weighted
average)		 The higher the
multiple, the higher
the fair value
The higher the
discount for lack of
marketability, the
lower the fair value
Not applicable
Relationship of
inputs to fairvalue
214,665
$
27,686		 Market
comparable
companies
Net asset
value		 Price to earnings ratio
multiple, price to
book ratio multiple,
control premium
Discount for lack of
marketability
Not applicable		 0.68~1.55
(0.88)
30%~70%
(31%)
308
(308)		 The higher the
multiple and control
premium, the higher
the fair value
The higher the
discount for lack of
marketability, the
lower the fair value
Not applicable

~43~

Non-derivative
equity instrument:
Unlisted shares
Venture capital
shares
Private equity
fund investment
Private placement
shares (emerging
companies)		 Fair value at
March 31,
2016		 Valuation
technique		 Significant
unobservable input		 Range
(weighted
average)		 Relationship of
inputs to fairvalue
378,477
$
27,842
328,720		 Market
comparable
companies
Net asset
value
Market price
method		 Price to earnings ratio
multiple, price to
book ratio multiple,
control premium
Discount for lack of
marketability
Not applicable
Discount for lack of
marketability		 0.62~1.39
(0.74)
30%~70%
(31%)
309
(309)
30%
(30%)		 The higher the
multiple and control
premium, the higher
the fair value
The higher the
discount for lack of
marketability, the
lower the fair value
Not applicable
The higher the
discount for lack of
marketability, the
lower the fair value
  • J.The Group has carefully assessed the valuation models and assumptions used to measure fair value; therefore, the fair value measurement is reasonable. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets and liabilities categorised within Level 3 if the inputs used to valuation models have changed:
Financial assets Period Input Change Recognised in other
comprehensive income		 Recognised in other
comprehensive income
Favourable
change		 Unfavourable
change
Equity instrument
Equity instrument
Equity instrument		 2017/3/31
2016/12/31
2016/3/31		 $ 265,164
242,351
735,039		 ± 1%
± 1%
± 1%		 $ 2,652
2,424
7,350		 ($ 2,652)
( 2,424)
( 7,350)

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: Please refer to Table 3.

  • 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.

~44~

  • G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to Table 4.

  • H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to Table 5.

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

  • J. Significant inter-company transactions during the reporting periods: Please refer to Table 6.

(2) Information on investees

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

(3) Information on investments in Mainland China

  • A. Basic information: Please refer to Table 8.

  • B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to Table 1, 4, 5 and 6.

14. SEGMENT INFORMATION

(1) General information

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

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

(2) Segment information

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

For the three-month period ended March 31,

Segment revenue
Segment income (loss)
Depreciation and amortization
Capital expenditure-property, plant and equipment		 2017
TFT LCD
86,025,771
$
15,354,189
$
(
8,476,464
$
5,804,379
$		 2016
TFT LCD
56,417,120
$
8,533,580)
$
11,448,019
$
7,459,407
$

(3) Reconciliation for segment income (loss)

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

~45~

Innolux Corporation and Subsidiaries

Loans to others

For the three-month period ended March 31, 2017

Table 1

Expressed in thousands of NTD (Except as otherwise indicated)

No. Creditor Borrower General
ledger
account		 Is a
related
party		 Maximum
outstanding
balance during
the three-month
period ended
March 31,2017		 Balance as at
March 31,
2017		 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
3
4		 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 USA
Inc.
Innolux
Technology
Europe B.V.		 Foshan Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Optoelectronics
Ltd.
Ningbo Innolux
Display Ltd.
Shanghai Innolux
Optoelectronics
Ltd.
Nanjing Innolux
Optoelectronics
Ltd.
Nanjing Innolux
Optoelectronics
Ltd.
Innolux Hong
Kong Limited
Lakers Trading
Ltd.
Innolux Hong
Kong 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		 4,351,830
$ 3,297,075
1,846,362
439,610
3,472,919
351,688
181,980
181,980
1,257,501		 4,351,830
$ 2,417,855
1,626,557
439,610
2,154,089
351,688
-
181,980
1,231,751		 $ 4,326,052
2,417,855
1,626,557
439,610
2,154,089
351,688
-
181,980
1,231,751		 1.10%~
2.00%
Short-term
financing
1.50%~
2.00%
Short-term
financing
1.50%~
2.00%
Short-term
financing
2%
Short-term
financing
1.5%~2% Short-term
financing
1.5%
Short-term
financing
0%
Short-term
financing
1.01%~
1.04%
Short-term
financing
0.627%
Short-term
financing		 $ -
-
-
-
-
-
-
-
-		 Operating
support
Operating
support
Operating
support
Operating
support
Operating
support
Operating
support
Operating
support
Operating
support
Operating
support		 $ -
-

-

-

-

-

-

-

-
 -
-
-
-
-
-
-
-
-		 $ -
-
-
-
-
-
-
-
-		 235,546,966
$ 235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966		 235,546,966
$ 235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966		 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 three-month
period ended
March 31,2017		 Balance as at
March 31,
2017		 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
5
6
7
8
9
10
11
12
13
14		 Innolux
Technology Japan
Co., Ltd.
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.
Innolux
Optoelectronics
USA, Inc.		 Leadtek Global
Group Limited
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.
Lakers Trading
Ltd.		 Other
receivables
Other
receivables
Other
receivables
Other
receivables
Other
receivables
Other
receivables
Other
receivables
Other
receivables
Other
receivables
Other
receivables		 Related
parties
Related
parties
Related
parties
Related
parties
Related
parties
Related
parties
Related
parties
Related
parties
Related
parties
Related
parties		 1,410,760
$ 678,250
246,107
246,107
405,294
405,294
1,010,164
1,010,164
333,630
121,320		 1,410,760
$ 678,250
-
246,107
-
405,294
-
1,010,164
333,630
121,320		 1,410,760
$ 678,250
-
246,107
-
405,294
-
1,010,164
333,630
121,320		 0.5%
0.5%
0%
0%
0%
0%
0%
0%
0%
1.04%		 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
Short-term
financing		 $ -
-
-
-
-
-
-
-
-
-		 Operating
support
Operating
support
Operating
support
Operating
support
Operating
support
Operating
support
Operating
support
Operating
support
Operating
support
Operating
support		 $ -
-

-

-

-

-

-

-

-
-		 -
-
-
-
-
-
-
-
-
-		 $ -
-
-
-
-
-
-
-
-
-		 $ 235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966		 $ 235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966
235,546,966		 A
A
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 and Subsidiaries

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

March 31, 2017

March 31, 2017
Securities held by
Table 2		 Marketable securities Relationship with
the securities
issuer		 General ledger account As of March 31,2017 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
9,241,000
11,165,222
10,000,000
3,651,565
16,000,000
32,499,000
90		 $ 55,319
1,233,859
177,520
2,846
588,348
-
603
76,423
314,301
305,000
73,396
5,684
4,728,605
26,038		 1
6
19
-
9
-
2
2
7
7
2
6
11
-		 $ 55,319
1,233,859
177,520
2,846
588,348
-
603
76,423
314,301
305,000
73,396
5,684
4,728,605
26,038

Table 2, Page 1

Innolux Corporation and Subsidiaries

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

For the three-month period ended March 31, 2017

Table 3

Expressed in thousands of NTD (Except as otherwise indicated)

Relationship Balance as at January 1, 2017 Balance as at March 31, 2017 Marketable General with the (Note 5) Addition (Note 3) Disposal (Note 3) (Note 5) securities ledger Counterparty investor Number Number Number Selling Book Gain on Number Investor (Note 1) account (Note 2) (Note 2) of shares Amount of shares Amount of shares price value disposal of shares Amount Warriors General Available-forNot Not 40,500,000 $ 3,705,750 - $ - 8,001,000 $ 1,086,330 $ 82,939 $1,003,391 32,499,000 $ 4,728,605 Technology Interface sale financial applicable applicable Investments Solution (GIS) assets - nonLtd. Holding Limited current (Stock)

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities.

Note 2: Fill in the columns the counterparty and relationship if securities are accounted for under the equity method; otherwise leaves the columns blank.

Note 3: Aggregate purchases and sales amounts should be calculated separately at their market values to verify whether they individually reach NT$300 million or 20% of paid-in capital or more. Note 4: Paid-in capital referred to herein is the paid-in capital of parent company. In the case that shares were issued with no par value or a par value other than NT$10 per share, the 20 % of paid-in capital shall be replaced by 10% of equity attributable to owners of the parent in the calculation.

Note 5: It includes unrealized gains (losses) on available-for-sale financial assets.

Table 3, Page 1

Table 4

Innolux Corporation and Subsidiaries Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more For the three-month period ended March 31, 2017

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		 Hon Hai Precision Industry
Co., Ltd.
Lakers Trading Ltd.
Hongfujin Precision Industry
(Yantai) Co., Ltd.
Innolux Optoelectronics Japan
Co., Ltd.
Honfujin Precision Electronics
(Chongqing) Co., Ltd.
Innolux Hong Kong Limited
Hongfutai Precision Electrons
(Yantai) Co., Ltd.
Innolux Optoelectronics USA,
Inc.
FIH (Hong Kong) Limited
Chi Lin Optoelectronics Co.,
Ltd.
Hon Hai Precision Industry
Co., Ltd.
FI Medical Device
Manufacturing Co., Ltd.		 Same major stockholder
An indirect wholly-owned
subsidiary
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
A subsidiary of the Company
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
An indirect wholly-owned
subsidiary
An indirect wholly-owned
subsidiary 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
Same major stockholder
The company's investments
accounted for under the
equity method		 Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales
Purchases
Purchases		 7,526,137
$ 784,749
494,137
449,420
445,951
442,967
179,491
134,402
112,391
105,848
1,443,521
304,034		 9
1
1
1
1
1
-
-
-
-
2
-		 90 days
60 days
60-90 days
45-90 days
45-90 days
60 days
90 days
45 days
60 days
45 days
60~90 days
after
acceptance
30 days after
acceptance		 Similar with
general sales
Similar with
general sales
Similar with
general sales
Single sales
target, no basis
for comparison
Similar with
general sales
Similar with
general sales
Similar with
general sales
Similar with
general sales
Similar with
general sales
Similar with
general sales
Single purchases
target, no basis
for comparison
Single purchases
target, no basis
for comparison		 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		 10,239,237
$ -
457,456
167,344
430,742
-
241,838
94,076
110,966
71,119
1,887,510)
(
146,779)
(		 18
-
1
-
1
-
-
-
-
-
2
-

Table 4, Page 1

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
Foshan Innolux
Optoelectronics Ltd.
Foshan Innolux
Optoelectronics Ltd.
Foshan Innolux
Optoelectronics Ltd.
Ningbo Innolux
Optoelectronics Ltd.
Innolux Hong Kong
Limited
Foshan Innolux
Optoelectronics Ltd.
Ningbo Innolux
Optoelectronics Ltd.
Ningbo Innolux Display
Ltd.
Shanghai Innolux
Optoelectronics Ltd.
Nanjing Innolux
Optoelectronics Ltd.
Innolux Technology
Europe B.V.		 Lakers Trading Ltd.
Innolux Hong Kong Limited
Leadtek Global Group Limited
Foxconn Precision Electronics
(YanTai) Co., Ltd.
Premier Image Technology
(China) Ltd.
Futaijing Precision Electronics
(Beijing) Co., Ltd.
Ningbo Innolux Display Ltd.
Nanjng Innolux Technology
Ltd.
Lakers Trading Ltd.
Leadtek Global Group Limited
Lakers Trading Ltd.
Innolux Hong Kong Limited
Innolux Hong Kong Limited
Innolux Hong Kong Limited		 An indirect wholly-owned
subsidiary
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 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
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		 Processing
expense
Processing
expense
Processing
expense
Sales
Sales
Sales
Sales
Sales
Processing
revenue
Processing
revenue
Processing
revenue
Processing
revenue
Processing
revenue
Service
revenue		 11,636,996
$ 4,193,181
4,005,284
1,033,868
473,622
345,674
1,082,377
438,885
7,504,176
3,871,564
4,103,497
2,271,570
1,672,464
157,609		 18
6
6
5
2
2
11
6
71
78
99
100
100
100		 60-90 days
60-90 days
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		 Cost plus
Cost plus
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		 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
No material
difference		 ($ 22,254,486)
6,138,599)
(
21,251,672)
(
1,177,307
539,333
393,633
732,103
304,097
15,306,830
17,356,683
2,925,506
1,496,211
4,399,324
53,367		 28
8
27
4
2
1
3
4
84
96
99
100
100
71

Table 4, Page 2

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.
Foshan Innolux
Optoelectronics Ltd.
Ningbo Innolux
Optoelectronics Ltd.
Ningbo Innolux
Optoelectronics Ltd.		 Hon Hai Precision Industry
Co., Ltd.
Hon Hai Precision Industry
Co., Ltd.
Hon Hai Precision Industry
Co., Ltd.
Hongfujin Precision Industry
(Shenzhen) Co., Ltd.		 Same major stockholder
Same major stockholder
Same major stockholder
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.		 Purchases
Purchases
Purchases
Purchases		 252,957
$ 3,081,219
116,611
108,764		 5
16
1
1		 90 days after
goods are
shipped
90 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
Similar with
general
transactions		 No material
difference
No material
difference
No material
difference
No material
difference		 ($ 290,897)
3,802,505)
(
137,616)
(
136,639)
(		 6
14
2
1

Table 4, Page 3

Innolux Corporation and Subsidiaries

Receivables from related parties reaching $100 million or 20% of paid-in capital or more March 31, 2017

Table 5

Expressed in thousands of NTD (Except as otherwise indicated)

Creditor Counterparty Relationship
with the counterparty		 Balance as at March 31,
2017		 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.
Nanjing Innolux Optoelectronics Ltd.
Shanghai Innolux Optoelectronics Ltd.
Foshan Innolux Optoelectronics Ltd.		 Hon Hai Precision Industry Co., Ltd.
Hongfujin Precision Industry (Yantai)
Co., Ltd.
Honfujin Precision Electronics
(Chongqing) Co., Ltd.
Foshan Innolux Optoelectronics Ltd.
Hongfutai Precision Electrons (Yantai)
Co., Ltd.
Competition Team Technology (India)
Private Limited
Innolux Optoelectronics Japan Co.,Ltd.
FIH (Hong Kong) Limited
Leadtek Global Group Limited
Ningbo Innolux Display Ltd.
Lakers Trading Ltd.
Innolux Hong Kong Limited
Innolux Hong Kong Limited
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
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
A subsidiary of the
Company
An indirect wholly-owned
subsidiary of Hon Hai
Precision Industry Co., Ltd.
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		 $ 10,239,237
457,456
430,742
295,546
241,838
227,644
167,344
110,966
17,356,683
732,103
2,925,506
4,399,324
1,496,211
15,306,830		 3.37
4.79
3.59
0.02
2.09
0.75
11.26
6.99
0.93
4.09
5.20
1.36
5.59
2.08		 $ 33,867
478
136,439
205,861
21,584
-
-
2,151
11,505,304
-
-
2,705,510
-
3,737,400		 Subsequent collection
Subsequent collection
Subsequent collection
Subsequent collection
Subsequent collection
-
-
Subsequent collection
Subsequent collection
-
-
Subsequent collection
-
Subsequent collection		 $ 3,666,910
106,221
156,237
5,536
44,887
138,424
175,484
4,777
2,919,296
333,517
1,677,971
941,275
933,685
6,748,471		 $ -
-
-
-
-
-
-
-
-
-
-
-
-
-

Table 5, Page 1

Creditor Counterparty Relationship
with the counterparty		 Balance as at March 31,
2017		 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.
Innolux Hong Kong Limited		 Foxconn Precision Electronics (YanTai)
Co., Ltd.
Premier Image Technology (China) Ltd.
Futaijing Precision Electronics (Beijing)
Co., 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		 $ 1,177,307
539,333
393,633
688,600
304,097		 3.46
4.90
3.51
0.31
5.47		 $ -
-
-
651,359
37,002		 -
-
-
Subsequent collection
Subsequent collection		 $ -
-
-
-
140,936		 $ -
-
-
-
-

Table 5, Page 2

Table 6

Expressed in thousands of NTD (Except as otherwise indicated)

Innolux Corporation and Subsidiaries

Significant inter-company transactions during the reporting period For the three-month period ended March 31, 2017

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
1
1
2
2
3
3
4
5
5
5
5
6		 Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Shanghai Innolux Optoelectronics Ltd.
Shanghai Innolux Optoelectronics Ltd.
Foshan Innolux Optoelectronics Ltd.
Foshan Innolux Optoelectronics Ltd.
Nanjing Innolux Optoelectronics Ltd.
Nanjing Innolux Optoelectronics Ltd.
Innocom Technology (Shenzhen) Co., Ltd.
Ningbo Innolux Optoelectronics Ltd.
Ningbo Innolux Optoelectronics Ltd.
Ningbo Innolux Optoelectronics Ltd.
Ningbo Innolux Optoelectronics Ltd.
Ningbo Innolux Display Ltd.		 Innolux Hong Kong Limited
Innolux Hong Kong Limited
Innolux Hong Kong Limited
Innolux Optoelectronics Japan Co.,Ltd.
Innolux Optoelectronics Japan Co.,Ltd.
Innolux Optoelectronics USA, Inc.
Lakers Trading Ltd.
Lakers Trading Ltd.
Lakers Trading Ltd.
Leadtek Global Group Limited
Leadtek Global Group Limited
Foshan Innolux Optoelectronics Ltd.
Innolux Hong Kong Limited
Innolux Hong Kong Limited
Lakers Trading Ltd.
Lakers Trading Ltd.
Innolux Hong Kong Limited
Innolux Hong Kong Limited
Lakers Trading Ltd.
Leadtek Global Group Limited
Leadtek Global Group Limited
Ningbo Innolux Display Ltd.
Ningbo Innolux Display Ltd.
Lakers Trading Ltd.		 1
1
1
1
1
1
1
1
1
1
1
1
3
3
3
3
3
3
3
3
3
3
3
3		 Sales
Processing expense
Accrued expenses
Sales
Accounts receivable
Sales
Sales
Processing expense
Accrued expenses
Processing expense
Accrued expenses
Accounts receivable
Processing revenue
Accounts receivable
Processing revenue
Accounts receivable
Processing revenue
Accounts receivable
Accounts receivable
Processing revenue
Accounts receivable
Sales
Accounts receivable
Processing revenue		 442,967
$ 4,193,181
6,138,599)
(
449,420
167,344
134,402
784,749
11,636,996
22,254,486)
(
4,005,284
21,251,672)
(
295,546
2,271,570
1,496,211
7,504,176
15,306,830
1,672,464
4,399,324
688,600
3,871,564
17,356,683
1,082,377
732,103
4,103,497		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-		 1
5
2
1
-
-
1
14
6
5
6
-
3
-
9
4
2
1
-
5
5
1
-
5

Table 6, 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
6
7
7
8		 Ningbo Innolux Display Ltd.
Innolux Hong Kong Limited
Innolux Hong Kong Limited
Innolux Technology Europe B.V.		 Lakers Trading Ltd.
Nanjng Innolux Technology Ltd.
Nanjng Innolux Technology Ltd.
Innolux Hong Kong Limited		 3
3
3
3		 Accounts receivable
Sales
Accounts receivable
Service revenue		 2,925,506
$ 438,885
304,097
157,609		 -
-
-
-		 1
1
-
-

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

3 refers to 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 6, Page 2

Innolux Corporation and Subsidiaries Information on investees

For the three-month period ended March 31, 2017

Table 7

Expressed in thousands of NTD (Except as otherwise indicated)

Investor Investee Location Main business
activities		 Initial inves tment amount Share sheld as atMarch31,2017 sheld as atMarch31,2017 Net profit (loss)
of the investee
for the three-
month period
ended March 31,
2017		 Investment income
(loss) recognised by the
Company for the three-
month period ended
March31,2017		 Footnote
Balance as at March
31,2017		 Balance as at
December31,2016		 Numberofshares Ownership
(%)		 Bookvalue
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Holding Limited
Innolux Holding Limited
Innolux Holding Limited
Innolux Holding Limited
Toppoly Optoelectronics (B.V.I.) Ltd.
Innolux Hong Kong Holding Limited
Innolux Hong Kong Holding Limited
Innolux Hong Kong Holding Limited
Innolux Hong Kong Holding Limited
Innolux Hong Kong Holding Limited
Innolux Optoelectronics Europe B.V.		 Bright Information Holding Ltd.
Golden Achiever International Ltd.
Innolux Holding Limited
Keyway Investment Management
Limited
Landmark International Ltd.
Toppoly Optoelectronics (B.V.I.)
Ltd.
Innolux Hong Kong Holding Limited
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.
FI Medical Device Manufacturing
Co., Ltd.
iZ3D, Inc.
Chi Mei Lighting Technology
Corporation
GIO Optoelectronics Corp.
Rockets Holding Ltd.
Suns Holding Ltd.
Lakers Trading Ltd.
Innolux Corporation
Toppoly Optoelectronics (Cayman)
Ltd.
Innolux Optoelectronics Hong Kong
Holding Limited
Innolux Hong Kong Limited
Innolux Technology Europe B.V.
Innolux Technology Japan Co., Ltd.
Innolux Technology USA Inc.
Innolux Optoelectronics Germany
GmbH		 Hong Kong
BVI
Samoa
Samoa
Samoa
BVI
Hong Kong
BVI
Taiwan
Taiwan
Netherlands
Japan
Cayman
Taiwan
USA
Taiwan
Taiwan
Samoa
Samoa
Samoa
USA
Cayman
Hong Kong
Hong Kong
Netherlands
Japan
USA
Germany		 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
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
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		 119,724
$ 119,106
7,858,300
62,179
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
800,892
7,296,530
555,422
-
6,348
3,650,192
-
-
3,073,072
1,815,603
263,685
10,324		 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
800,892
7,296,530
555,422
-
6,348
3,650,192
-
-
3,073,072
1,815,603
263,685
10,324		 4,910,000
40,250
246,768,185
1,656,410
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
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		 100
100
100
100
100
100
100
100
100
100
100
100
50
49
35
33
24
100
100
100
100
100
100
100
100
100
100
100		 97,200
$ 57,989
19,805,995
73,104
43,411,554
5,971,612
3,244,008
401,687
880,996
1,311,769
120,743
1,501,904
870,941
496,645
-
-
104,027
13,222,570
6,439,796
231,071
87,452)
(
5,971,263
1,204,959
1,511,436)
(
2,111,901
1,684,075
350,485
12,848		 147
$ 56)
(
1,029,795
10,089
32,572
387,361)
(
4,259
723,300
46,518)
(
55,817
669
10,214)
(
-
91,228
-
-
3,706
11,556
1,018,587
-
348)
(
387,361)
(
20,807
28,522)
(
17,621
8,362)
(
2,427
625		 147
$ 56)
(
1,029,795
10,089
42,545
386,646)
(
5,513)
(
723,300
46,518)
(
55,817
669
10,214)
(
-
44,702
-
-
437
11,556
1,018,587
-
348)
(
387,361)
(
20,807
28,522)
(
17,621
8,362)
(
2,427
625

Table 7, Page 1

Investor Investee Location Main business
activities		 Initial inves tment amount Share sheld as atMarch31,2017 sheld as atMarch31,2017 Net profit (loss)
of the investee
for the three-
month period
ended March 31,
2017		 Investment income
(loss) recognised by the
Company for the three-
month period ended
March31,2017		 Footnote
Balance as at March
31,2017		 Balance as at
December31,2016		 Numberofshares Ownership
(%)		 Bookvalue
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.
Yuan Chi Investment Co., Ltd.
Yuan Chi Investment Co., Ltd.
Yuan Chi Investment Co., Ltd.		 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
Chi Mei Lighting Technology
Corporation
GIO Optoelectronics Corp.
TOA Optronics Corporation		 USA
Samoa
Samoa
Samoa
Samoa
Samoa
Samoa
Germany
Taiwan
Taiwan
Taiwan		 Selling of electronic equipment and
computer monitors
Investment holdings
Investment holdings
Investment holdings
Investment holdings
Investment company
Investment company
Testing and maintenance company
Trading business, manufacturing of
electronic equipment and lighting
equipment
Manufacturing and selling of
components of TFT-LCD
Selling of electronic materials,
trading business, manufacturing of
electronic equipment and lighting
equipments		 2,400
$ 314,740
573,940
1,146,370
5,391,125
27,477
555,422
33,735
263,812
6,881
423,606		 2,400
$ 314,740
573,940
1,146,370
5,391,125
27,477
555,422
33,735
263,812
6,881
423,606		 1,000
10,000,001
18,000,000
38,000,001
164,000,000
900,001
18,177,052
100,000
19,673,402
109,021
58,007,000		 100
100
100
100
100
100
100
100
8
-
40		 265,669
$ 246,107
405,295
1,010,164
11,532,709
28,182
6,439,794
54,179
-
787
39,831		 2,220)
($ -
-
-
11,556
-
1,018,587
288
-
3,706
17,745)
(		 2,220)
($ -
-
-
11,556
-
1,018,587
288
-
3
47,071)
(

Table 7, Page 2

Innolux Corporation and Subsidiaries

Information on investments in Mainland China

For the three-month period ended March 31, 2017

Table 8

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,
2017		 Amount remitted from
Taiwan to Mainland
China/Amount remitted
back to Taiwan for the
three-month period ended
March31,2017		 Amount remitted from
Taiwan to Mainland
China/Amount remitted
back to Taiwan for the
three-month period ended
March31,2017		 Accumulated
amount of
remittance from
Taiwan to
Mainland China
as of March 31,
2017		 Net income of
investee for the
three-month
period ended
March 31,
2017		 Ownership
held by the
Company
(direct or
indirect)		 Investment
income (loss)
recognised by the
Company for the
three-month
period ended
March 31, 2017
(Note B)		 Book value of
investments in
Mainland
China as of
March 31,
2017		 Accumulated
amount of
investment
income
remitted back
to Taiwan as of
March 31,
2017		 Footnote
Remitted to
Mainland
China		 Remitted
back to
Taiwan
Innocom Technology
(Shenzhen) Co., Ltd.
OED Company
Ningbo Innolux
Optoelectronics 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.
Shanghai Innolux
Optoelectronics 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
Purchases and sales of
monitor-related
components company
Glass thinning processing
service
Manufacturing and selling
of LCD backend module
and related components
Manufacturing and selling
of LCD backend module
and related components
Warehousing services
Manufacturing and selling
of LCD backend module
and related components		 $ 4,974,120
282,709
9,402,300
11,616,390
4,852,800
63,693
121,320
306,333
4,306,860
-
636,930		 2
2
2
2
2
2
2
2
2
2
2		 $ 3,849,233
60,660
223,382
11,616,390
4,852,800
63,693
114,703
115,254
4,306,860
121,320
-		 $ -
-
-
-
-
-
-
-
-
-
-		 $ -
-
-
-
-
-
-
-
-
121,320
-		 $ 3,849,233
60,660
223,382
11,616,390
4,852,800
63,693
114,703
115,254
4,306,860
-
-		 $ 11,556
( 35,379)
( 84,966)
36,554
80,385
3,756
( 1,989)
( 56)
( 389,128)
4,303
20,807		 100
4
100
100
100
100
100
100
100
100
100		 $ 11,556
-
( 84,966)
37,153
80,385
3,756
( 1,989)
( 56)
( 389,128)
4,303
20,807		 $ 11,532,697
8,915
20,527,806
19,117,583
3,791,081
522,440
58,669
57,609
5,390,133
-
1,204,959		 $ 1,124,887
-
5,236,018
-
-
-
-
-
-
45,503
-		 2.1
2.1
2.2
2.2
2.2
2.8
2.3
2.3
2.4
2.3
2.6
2.9
2.5

Table 8, 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,
2017		 Amount remitted from
Taiwan to Mainland
China/Amount remitted
back to Taiwan for the
three-month period ended
March31,2017		 Amount remitted from
Taiwan to Mainland
China/Amount remitted
back to Taiwan for the
three-month period ended
March31,2017		 Accumulated
amount of
remittance from
Taiwan to
Mainland China
as of March 31,
2017		 Net income of
investee for the
three-month
period ended
March 31,
2017		 Ownership
held by the
Company
(direct or
indirect)		 Investment
income (loss)
recognised by the
Company for the
three-month
period ended
March 31, 2017
(Note B)		 Book value of
investments in
Mainland
China as of
March 31,
2017		 Accumulated
amount of
investment
income
remitted back
to Taiwan as of
March 31,
2017		 Footnote
Remitted to
Mainland
China		 Remitted
back to
Taiwan
Foshan Innolux
Logistics Ltd.
Warehousing services
$ 45,495
Amlink (Shanghai)
Ltd.
Manufacturing and selling
of power supply, modem,
ADSL, and other IT
equipments
242,640
Interface
Optoelectronics
(Shenzhen) Co., Ltd.
Development of new type
of flat panel display,
monitor and peripherals,
production and
management, and offer of
after-sales service
2,917,746
Ningbo Innolux
Electronics Ltd.
Manufacturing and selling
of LCD backend module
and related components
131,883
Foshan Innolux Flnet
Electronics Ltd.
Commodity agency
4,396
Ningbo Innolux Flnet
Electronics Ltd.
Commodity agency
4,396
Ceiling on investments in Mainland China:
Companyname
Accumulated amount of remittance from
Taiwan to Mainland China as of March 31,
2017		 2
$ 45,495 $ -
2
303,300 -
2
409,455 -
3
-
-
3
-
-
3
-
-
Investment amount approved by the
Investment Commission of the Ministry
of Economic Affairs(MOEA)		 $ -
$ 45,495
$ 1,543
- 303,300
-
- 409,455
457,618
- - 34,901
- - 632
- - ( 1,092)
Ceiling on investments in Mainland
China imposed by the Investment
Commission of MOEA		 100
50
11
100
100
100		 $ 1,543
-
-
34,901
632
( 1,092)		 $ 68,344
188,385
4,728,605
265,530
5,010
3,052		 $ -
-
-
-
-
-		 2.6
2.7
2.1
3.1
3.2
3.2
Innolux Corporation 27,498,135
$		 36,784,459
$		 141,328,180
$

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 three-month period ended March 31, 2017 was reviewed by independent accountants.

Table 8, Page 2

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 Limited 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.

  5. 2.3. Through investing in Toppoly Optoelectronics (B.V.I) Ltd. in the third area, which then invested in the investee in Mainland China.

  6. 2.4. Through investing in Golden Achiever International Ltd. in the third area, which then invested in the investee in Mainland China.

  7. 2.5. Through investing in Innolux Hong Kong Holding Limited in the third area, which then invested in the investee in Mainland China.

  8. 2.6. Through investing in Keyway Investment Management Limited in the third area, which then invested in the investee in Mainland China.

  9. 2.7. Through investing in Ampower Holding Ltd. in the third area, which then invested in the investee in Mainland China.

  10. 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.

  11. 2.9. Ningbo Innolux Logistics Ltd. was liquidated in February 2017.

  12. Others.

  13. 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.

  14. 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 8, Page 3

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