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INX Interim / Quarterly Report 2019

Dec 13, 2019

52330_rns_2019-12-13_f2dbb4c3-19e9-4713-80d4-a767c2d293cd.pdf

Interim / Quarterly Report

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INNOLUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REVIEW REPORT OF INDEPENDENT

ACCOUNTANTS

MARCH 31, 2019 AND 2018

REVIEW REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Innolux Corporation

Introduction

We have reviewed the accompanying consolidated balance sheets of Innolux Corporation and subsidiaries (the “Group”) as at March 31, 2019 and 2018, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the three-month periods then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and International Accounting Standard 34, “Interim Financial Reporting” as endorsed by the Financial Supervisory Commission. Our responsibility is to express a conclusion on these consolidated financial statements based on our reviews.

Scope of Review

We conducted our reviews in accordance with the Statement of Auditing Standards No. 65 “Review of Financial Information Performed by the Independent Auditor of the Entity” in the Republic of China. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial

~1~

position of the Group as at March 31, 2019 and 2018, and of its consolidated financial performance and its consolidated cash flows for the three-month periods then ended in accordance with “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and International Accounting Standard 34, “Interim Financial Reporting” as endorsed by the Financial Supervisory Commission.

PricewaterhouseCoopers, Taiwan

May 9, 2019

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

~2~

INNOLUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS MARCH 31, 2019, DECEMBER 31, 2018 AND MARCH 31, 2018

(Expressed in thousands of New Taiwan dollars)

(The consolidated balance sheets as of March 31, 2019 and 2018 are reviewed, not audited)

Assets Notes March 31, 2019
$
44,055,572
184,177
33,157,713
37,725,139
3,035,885
1,178,209
32,762,298
2,657,438
191,593
154,948,024
2,310,331
4,533,675
1,889,960
206,117,747
6,819,263
547,887
17,644,827
7,338,152
2,364,193
249,566,035
$
404,514,059		 December 31, 2018
$
33,847,328

398,913

51,426,053

45,064,157

4,449,977

1,489,260

30,856,552

1,993,152

208,724

169,734,116

1,599,869

3,834,376

1,802,921

206,617,960

-

551,970

17,681,485

7,223,864

2,873,043

242,185,488
$
411,919,604		 March 31, 2018
Current Assets
1100
Cash and cash equivalents
1110
Financial assets at fair
value through profit or
loss - current
1136
Financial assets at
amortized cost - current
1170
Accounts receivable, net
1180
Accounts receivable, net -
related parties
1200
Other receivables
130X
Inventory
1410
Prepayments
1479
Other current assets
11XX
Total current assets
Non-current assets
1510
Financial assets at fair
value through profit or
loss - non-current
1517
Financial assets at fair
value through other
comprehensive income -
non-current
1550
Investments accounted for
under equity method
1600
Property, plant and
equipment
1755
Right-of-use assets
1760
Investment property, net
1780
Intangible assets
1840
Deferred income tax assets
1990
Other non-current assets
15XX
Total non-current
assets
1XXX
Total assets		 6(1)
6(2)
6(4)
6(5)
7
7
6(6)
8
6(2)
6(3)
6(7)
6(8), 7 and
8
6(9)
6(10)
6(11) and 8
6(8) and 8		 $
65,958,292
310,434
-
36,033,056
11,148,980
1,097,416
33,496,664
2,014,420
98,931
150,158,193
1,666,602
4,812,603
1,511,969
217,632,686
-
560,015
17,809,318
6,119,147
2,717,358
252,829,698
$
402,987,891

(Continued)

~3~

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

(Expressed in thousands of New Taiwan dollars)

(The consolidated balance sheets as of March 31, 2019 and 2018 are reviewed, not audited)

Liabilities and Equity Notes March 31, 2019 December 31, 2018 March 31, 2018
Current Liabilities
2120 Financial liabilities at fair 6(2)
value through profit or
loss - current $ 186,397 $ 23,779 $ 36,168
2170 Accounts payable 48,332,582 52,350,845 46,625,770
2180 Accounts payable - related 7
parties 2,340,571 2,652,127 2,007,381
2200 Other payables 6(12) and 7 30,328,325 32,581,609 51,556,358
2230 Current income tax
liabilities 5,069,561 5,593,063 2,053,864
2250 Provisions - current 6(15) and 9 7,129,633 6,782,914 5,941,559
2280 Lease liabilities - current 473,131 - -
2320 Long-term liabilities, 6(13)
current portion 16,195,816 16,194,486 10,960,000
2399 Other current liabilities 4,220,787 4,095,853 2,665,556
21XX Total current liabilities 114,276,803 120,274,676 121,846,656
Non-current liabilities
2540 Long-term borrowings 6(13) 29,669,625 35,142,090 11,829,982
2570 Deferred income tax
liabilities 954,286 880,013 879,533
2580 Lease liabilities - non-
current 5,591,017 - -
2600 Other non-current 6(14)
liabilities 619,363 632,120 622,960
25XX Total non-current
liabilities 36,834,291 36,654,223 13,332,475
2XXX Total liabilities 151,111,094 156,928,899 135,179,131
Equity attributable to
owners of the parent
3110 Share capital - common 6(16)
stock 99,520,720 99,520,720 99,520,720
3200 Capital surplus 6(17) 99,648,129 99,648,115 99,646,928
Retained earnings 6(18)
3310 Legal reserve 7,648,437 7,648,437 3,945,576
3320 Special reserve 1,090,721 1,090,721 3,418,804
3350 Unappropriated retained
earnings 48,021,380 51,746,175 61,823,522
3400 Other equity interest 6(19) ( 2,526,422 )( 4,663,463) ( 546,790)
3XXX Total equity 253,402,965 254,990,705 267,808,760
3X2X Total liabilities and
equity $ 404,514,059 $ 411,919,604 $ 402,987,891

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

~4~

INNOLUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIODS ENDED MARCH 31,2019 AND 2018 (Expressed in thousands of New Taiwan dollars, except (loss) earnings per share amounts) (Reviewed, not audited)

Items Notes
2019
2018
6(20) and 7
$
59,924,024
$
66,763,486
6(6)(24) and 7
(
59,048,720) (
57,712,760)
875,304
9,050,726
6(24)
(
781,700) (
605,358)
(
1,686,706) (
1,681,790)
(
3,014,309) (
2,934,683)
(
5,482,715) (
5,221,831)
(
4,607,411)
3,828,895
6(21)
722,537
505,485
6(22)
391,625
(
305,761)
6(23)
(
270,857) (
148,165)
6(7)
132,427
39,242
975,732
90,801
(
3,631,679)
3,919,696
6(26)
(
93,116) (
979,924)
($
3,724,795) $
2,939,772
6(19)
$
698,452
($
496,675)
698,452
(
496,675)
6(19)
1,484,019
1,056,859
6(19)
(
45,430) (
16,253)
1,438,589
1,040,606
$
2,137,041
$
543,931
($
1,587,754) $
3,483,703
($
3,724,795) $
2,939,772
($
1,587,754) $
3,483,703
6(27)
($
0.37) $
0.30
($
0.37) $
0.29
4000
Sales revenue
5000
Operating costs
5900
Net operating margin
Operating expenses
6100
Selling expenses
6200
General and administrative expenses
6300
Research and development expenses
6000
Total operating expenses
6900
Operating (loss) profit
Non-operating income and expenses
7010
Other income
7020
Other gains and losses
7050
Finance costs
7060
Share of profit/(loss) of associates
and joint ventures accounted for
under equity method
7000
Total non-operating income and
expenses
7900
(Loss) profit before income tax
7950
Income tax expense
8200
(Loss) profit for the period
Other comprehensive income (net)
Components of other comprehensive
income (loss) that will not be
reclassified to profit or loss
8316
Unrealized gains (losses) on
financial assets at fair value through
other comprehensive income
8310
Components of other
comprehensive income (loss)
that will not be reclassified to
profit or loss
Components of other comprehensive
income that will be reclassified to
profit or loss
8361
Financial statements translation
differences of foreign operations
8370
Share of other comprehensive loss of
associates and joint ventures
accounted for under equity method
8360
Components of other
comprehensive income that will
be reclassified to profit or loss
8300
Other comprehensive (loss) income
for the period, net of tax
8500
Total comprehensive (loss) income for
the period
(Loss) profit attributable to:
8610
Owners of the parent
Other comprehensive (loss) income
attributable to:
8710
Owners of the parent
(Loss) earnings per share (in dollars)
9750
Basic (loss) earnings per share
9850
Diluted (loss) earnings per share

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

~5~

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2019 AND 2018 (Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

(UNAUDITED)

2018
Balance at January 1
Effect of modified retrospective approach under IFRS 9
Balance at January 1 after adjustments
Profit for the period
Other comprehensive income for the period
Total comprehensive income
Recognition of change in equity of associates in proportion to the Group's ownership
Balance at March 31
2019
Balance at January 1
Loss for the period
Other comprehensive income for the period
Total comprehensive loss
Recognition of change in equity of associates in proportion to the Group's ownership
Balance at March 31		 Notes Equity attributable t o owners of the parent Total
Common stock Capital surplus Retained Earnings Other EquityInterest
Legal reserve Special reserve Unappropriated
earnings		 Financial
statements
translation
differences of
foreign operations		 Total Unrealized gains
(losses) from financial
assets measured at fair
value through other
comprehensive income		 U
 nrealized gain (loss)
on available-for-sale
financial assets
6(19)
6(19)
6(17)
6(19)
6(17)		 $
99,520,720
-
99,520,720
-
-
-
-
$
99,520,720
$
99,520,720
-
-
-
-
$
99,520,720









$
99,646,919
-
99,646,919
-
-
-
9
$
99,646,928
$
99,648,115
-
-
-
14
$
99,648,129		 $ 3,945,576
-
3,945,576
-
-
-
-
$ 3,945,576
$ 7,648,437
-
-
-
-
$ 7,648,437


$
3,418,804
-
3,418,804
-
-
-
-
$
3,418,804
$
1,090,721
-
-
-
-
$
1,090,721		 $
58,883,750
-
58,883,750
2,939,772
-
2,939,772
-
$
61,823,522
$
51,746,175
(
3,724,795 )
-
(
3,724,795 )
-
$
48,021,380





($ 5,717,223 )
-
(
5,717,223 )
-
1,040,606
1,040,606
-
($ 4,676,617 )
($ 6,461,149 )
-
1,438,589
1,438,589
-
($ 5,022,560 )





$
-
4,626,502
4,626,502
-
(
496,675 )
(
496,675 )
-
$
4,129,827
$
1,797,686
-
698,452
698,452
-
$
2,496,138





$
4,626,502
(
4,626,502 )
-
-
-
-
-
$
-
$
-
-
-
-
-
$
-





$ 264,325,048
-
264,325,048
2,939,772
543,931
3,483,703
9
$ 267,808,760
$ 254,990,705
(
3,724,795 )
2,137,041
(
1,587,754 )
14
$ 253,402,965

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

~6~

INNOLUX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

(Reviewed, not audited)

CASH FLOWS FROM OPERATING ACTIVITIES
(Loss) profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation and amortization

Net loss on financial assets or liabilities at fair
value through profit or loss
Share of loss of associates and joint ventures
accounted for under equity method

Gain from disposal of investments

Loss on disposal of property, plant and
equipment

Interest expense

Interest income

Unrealized foreign exchange (gain) loss
Changes in operating assets and liabilities
Changes in operating assets
Financial assets /liabilities at fair value
through profit or loss - current
Accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Prepayments
Other current assets
Changes in operating liabilities
Accounts payable
Accounts payable - related parties
Other payables
Provisions - current
Other current liabilities
Other non-current liabilities
Cash inflow generated from operations
Cash paid for income tax
Net cash flows from operating activities		 Notes
2019
2018
($
3,631,679 ) $
3,919,696
6(24)
8,777,199
9,211,396
(
557,824 )
148,399
6(7)
(
132,427 ) (
39,242 )
6(22)
(
10,153 ) (
26,761 )
6(22)
1,672
90,406
6(23)
270,857
148,165
6(21)
(
337,704 ) (
160,157 )
(
173,608 )
2,278
377,354
78,294
7,339,018
7,616,556
1,414,092
6,578,317
293,377
115,480
(
1,905,746 ) (
3,237,643 )
(
668,829 ) (
526,588 )
17,450
23,322
(
4,018,263 ) (
4,250,730 )
(
311,556 ) (
557,629 )
(
2,653,015 ) (
1,744,265 )
346,719
480,697
124,934 (
1,059,381 )
(
14,059 )
5,453
4,547,809
16,816,063
(
656,633 ) (
442,524 )
3,891,176
16,373,539

(Continued)

~7~

INNOLUX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

(Reviewed, not audited)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets or liabilities at fair
value through profit or loss - non-current
Acquisition of investments in equity instruments
measured at fair value through other
comprehensive income
Decrease in financial assets at amortized cost -
current
Increase in other financial assets
Proceeds from disposal of investment accounted for
under equity method
Acquisition of property, plant and equipment

Proceeds from disposal of property, plant and
equipment
Acquisition of intangible assets

(Increase) decrease in other non-current assets
Interest received
Net cash flows from (used in) investing
activities
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term borrowings
Interest paid
Payment of the principal portion of lease liabilites
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
2019
2018
($
149,008 ) ($
87,315 )
- (
228,054 )
18,442,645
-
(
319 ) (
346,289 )
-
28,928
6(28)
(
6,764,718 ) (
10,867,042 )
1,196
2,857
6(11)
(
20,413 ) (
36,314 )
(
461,491 )
11,506
354,964
159,313
11,402,856 (
11,362,410 )
(
5,480,000 ) (
5,480,000 )
(
267,837 ) (
122,329 )
(
117,079 )
-
(
5,864,916 ) (
5,602,329 )
779,128
560,537
10,208,244 (
30,663 )
33,847,328
65,988,955
$
44,055,572 $
65,958,292

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

~8~

INNOLUX CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2019 AND 2018

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

(Reviewed, not audited)

1. HISTORY AND ORGANIZATION

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

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

  • THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

  • STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were reported to the Board of Directors on May 9, 2019.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

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

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

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

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

  • A. IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognize a ‘right-of-use asset’ and a lease liability (except for those leases

~9~

with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

  • B. The Group have elected to apply IFRS 16 by not restating the comparative information (referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in 2019 as endorsed by the FSC. Accordingly, the Group increased ‘right-of-use asset’ by $6,935,181, increased ‘lease liability’ by $6,180,682 and has no effect on retained earnings with respect to the lease contracts of lessees on January 1, 2019.

  • C. The Group have used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:

  • (a) Reassessment as to whether a contract is, or contains, a lease is not required, and instead, the application of IFRS 16 depends on whether or not the contracts were previously identified as leases applying IAS 17 and IFRIC 4.

  • (b) The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.

  • (c) The accounting for operating leases whose period will end before December 31, 2019 as shortterm leases and accordingly, rent expense of $63,042 was recognized in the first quarter of 2019.

  • (d) The exclusion of initial costs for the measurement of ‘right-of-use asset’.

  • (e) The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

  • D. The Group recognized lease liabilities which had previously been classified as ‘operating leases’ under the principles of IAS 17, ‘Leases’. The reconciliation between operating lease commitments under IAS 17 measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate and lease liabilities recognized as of January 1, 2019 is as follows:

follows:
Operating lease commitments disclosed by applying IAS 17 as at December $ 3,208,917
31, 2018
Less: Short-term leases ( 3,250)
Add/Less: Adjustments as a result of a different treatment of extension and
termination options 3,728,860
Total lease contracts amount recognized as lease liabilities by applying IFRS
16 on January 1, 2019 $ 6,934,527
Incremental borrowing interest rate at the date of initial application 1.8143%~ 3.05%
Lease liabilities recognized as at January 1, 2019 by applying IFRS 16 $ 6,180,682

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

the Group

None.

~10~

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

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

endorsed by the FSC are as follows:
New Standards,Interpretations andAmendments Effective Date by
International Accounting
StandardsBoard
Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of
Material’
Amendments to IFRS 3, ‘Definition of a business’
Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets
between an investor and its associate or joint venture’
IFRS 17, ‘Insurance contracts’		 January 1, 2020
January 1, 2020
To be determined by
International Accounting
Standards Board
January 1, 2021

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

(1) Compliance statement

  • 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, 2018.

  • (2) Basis of preparation

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

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

    • (b) Financial assets at fair value through other comprehensive income.

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

  • B. The preparation of financial statements in conformity with 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

~11~

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, 2018.

  • B. Subsidiaries included in the consolidated financial statements:
Main
Business
Name of Investor
Name ofSubsidiary
Activities
Innolux Corporation
Bright Information Holding
Ltd.
Investment
holdings
Golden Achiever International
Limited
Investment
holdings
Innolux Holding Limited
Investment
holdings
Keyway Investment
Management Limited
Investment
holdings
Landmark International Ltd.
Investment
holdings
Toppoly Optoelectronics
(B.V.I.) Ltd.
Investment
holdings
Innolux Hong Kong Holding
Limited
Investment
holdings
Leadtek Global Group
Limited
Distribution
company
Yuan Chi Investment Co.,
Ltd.
Investment
company
InnoJoy Investment
Corporation
Investment
company
Innolux Japan Co., Ltd.
Investment, R&D,
manufacturing and
distribution
company
Innolux Singapore Holding
Pte. Ltd.
Investment
holdings
Aptos Technology Co., Ltd.
R&D,
manufacturing and
distribution
company
Golden Achiever
International Limited
VAP Optoelectronics
(Nanjing) Corp.
Processing
company
Innolux Holding
Limited
Rockets Holding Ltd.
Investment
holdings
Suns Holding Ltd.
Investment
holdings
Lakers Trading Ltd.
Distribution
company
Keyway Investment
Management Limited
Foshan Innolux Logistics Ltd. Warehousing
company		 March
December
March
31,2019
31,2018
31,2018
Description
100
100
100
-
-
100
100
(c)
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
54
54
54
-
100
100
100
-
100
-
-
(d)
-
-
100
(b)
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
Ownership (%)

~12~

Main
Business
Name of Investor
Name ofSubsidiary
Activities
Landmark
International Ltd.
Ningbo Innolux
Optoelectronics Ltd.
Processing
company
Foshan Innolux
Optoelectronics Ltd.
Processing
company
Ningbo Innolux Display Ltd.
Processing
company
Toppoly
Optoelectronics
(B.V.I.) Ltd.
Toppoly Optoelectronics
(Cayman) Ltd.
Investment
holdings
Innolux Hong Kong
Holding Limited
Innolux Optoelectronics
Hong Kong Holding Limited
Investment
holdings
Innolux Hong Kong Limited
Distribution
company
Innolux Europe B.V.
Investment,
distribution, and
R&D testing
company
Innolux Japan Co., Ltd.
Investment, R&D.
manufacturing and
distribution
company
Innolux Japan Co.,
Ltd.
Innolux USA, Inc.
Distribution
company
Innolux Singapore
Holding Pte. Ltd.
Innolux Optoelectronics India
Private Limited
Distribution
company
Innolux Optoelectronics
Philippines Corp.
Manufacturing
and distribution
company
Innolux Optoelectronics
Malaysia SDN. BHD.
Manufacturing
and distribution
company
Rockets Holding Ltd. Stanford Developments Ltd.
Investment
holdings
Nets Trading Ltd.
Investment
company
Suns Holding Ltd.
Warriors Technology
Investments Ltd.
Investment
company
Toppoly
Optoelectronics
(Cayman) Ltd.
Nanjing Innolux Technology
Ltd.
Distribution
company
Nanjing Innolux
Optoelectronics Ltd.
Processing
company
Innolux
Optoelectronics Hong
Kong Holding
Limited
Shanghai Innolux
Optoelectronics Ltd.
Processing
company		 March
December
March
31,2019
31,2018
31,2018
Description
Ownership (%)
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
46
46
46
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-

~13~

Main
Business
Name of Investor
Name ofSubsidiary
Activities
Innolux Europe B.V.
Innolux Technology Germany
GmbH
Testing and
maintenance
company
Innolux Optoelectronics
Germany GmbH
After sales service
company
Stanford
Developments Ltd.
Innocom Technology
(Shenzhen) Co., Ltd.
Processing
company
Ningbo Innolux
Display Ltd.
Ningbo Innolux Electornics
Ltd.
Distribution
company
Ningbo Innolux
Optoelectronics Ltd.
Ningbo Innolux Flent
Electornics Ltd.
Distribution
company
Foshan Innolux
Optoelectronics Ltd.
Foshan Innolux Flent
Electornics Ltd.
Distribution
company
Innocom Technology
(Shenzhen) Co.,
LTD.
Shenzhen PixinLED
Technology Co., LTD.
R&D and
distribution
company
Innolux Automations and
Intelligence Systems
(ShenZhen) Co., Ltd.
R&D and
distribution
company		 March
December
March
31,2019
31,2018
31,2018
Description
Ownership (%)
100
100
100
-
-
-
100
(a)
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
100
100
-
100
49
-
(e)		 
  - (a) In the third quarter of 2018, Innolux Optoelectronics Germany Gmbh had completed liquidation and dissolution.

  - (b) In the fourth quarter of 2018, VAP Optoelectronics (Nanjing) Corp. had completed liquidation and dissolution.

  - (c) In the first quarter of 2019, Golden Achiever International Limited has completed liquidation.

  - (d) Aptos Technology Co., Ltd. was established in the first quarter of 2019 and was included in the consolidated financial statements since the date of establishment.

  - (e) Remaining 51% of shares of Innolux Automations and Intelligence Systems (ShenZhen) Co., Ltd. were acquired in the first quarter of 2019 and Innolux Automations and Intelligence Systems (ShenZhen) Co., Ltd. was included in the consolidated financial statements since the effective date of share transfer.

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

  • A. Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. For short-term leases or leases of low-value assets, lease payments are recognized as an expense on a straight-line basis over the lease term.

  • B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Lease payments are comprised of the following:

~14~ 

  - (a) Fixed payments, less any lease incentives receivable; and

  - (b) Variable lease payments that depend on an index or a rate;

  - The Group subsequently measures the lease liability at amortized cost using the interest method and recognizes interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognized as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.

  • C. At the commencement date, the right-of-use asset is stated at cost comprising the following: (a) The amount of the initial measurement of lease liability; and

    • (b) Any lease payments made at or before the commencement date; The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognized as an adjustment to the right-of-use asset.

  • (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 2018 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. And, 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 2018 consolidated financial statements.

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

  • B. If a change in tax rate is enacted or substantively enacted in an interim period, the Group recognizes the effect of the change immediately in the interim period in which the change occurs. The effect of the change on items recognized outside profit or loss is recognized in other comprehensive income or equity while the effect of the change on items recognized in profit or loss is recognized in profit or loss.

  • 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, 2018.

~15~

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash on hand, checking accounts
and demand deposits
Time deposits
Cash equivalents - repurchase
bonds		 March31,2019

15,889,764
$
28,165,808
44,055,572
-
44,055,572
$		 December31,2018
14,148,462
$
19,698,866
33,847,328
-
33,847,328
$		 March31,2018
25,322,043
$
39,968,455
65,290,498
667,794
65,958,292
$

  • 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.

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

Assets
Current items
Financial assets mandatorily
measured at fair value through
profit or loss
Forward foreign exchange
contracts
Forward exchange swap contracts
Non-current items
Financial assets mandatorily
measured at fair value through
profit or loss
Listed stocks
Unlisted stocks
Convertible bonds
Liabilities
Current items
Financial liabilities held for trading
Forward foreign exchange
contracts
Forward exchange swap contracts		 March31,2019

184,177
$
-
184,177
$
1,872,602
$
402,049
35,680
2,310,331
$
March31,2019

164,517
$
21,880
186,397
$		 December31,2018
398,913
$
-
398,913
$
1,221,135
$
343,175
35,559
1,599,869
$
December31,2018
16,644
$
7,135
23,779
$		 March31,2018
263,514
$
46,920
310,434
$
1,289,765
$
376,837
-
1,666,602
$
March31,2018
36,168
$
-
36,168
$

~16~

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

Current items
Current items
Forward exchange
swap contracts
Forward foreign
exchange contracts
Forward foreign
exchange contracts
Forward foreign
exchange contracts
Forward foreign
exchange contracts
Derivative financial
assets and liabilities
Derivative financial
assets and liabilities
Forward exchange
swap contracts
Forward foreign
exchange contracts
Forward foreign
exchange contracts
Forward foreign
exchange contracts
Forward foreign
exchange contracts		 March31,2019 December31,2018 December31,2018
Contract Period
USD (sell)
420,000
$
2019/1~2019/6
JPY (buy)
45,920,673
2019/1~2019/6
EUR (sell)
35,000
2019/2~2019/5
HKD (buy)
313,022
2019/2~2019/5
EUR (sell)
10,000
2019/2~2019/6
JPY (buy)
1,248,835
2019/2~2019/6
USD (sell)
884,437
2019/1~2019/7
RMB (buy)
5,979,165
2019/1~2019/7
USD (sell)
225,000
2019/2~2019/5
TWD (buy)
6,903,495
2019/2~2019/5
Contract Amount
(Notional Principal)
(in thousands)		 Contract Amount
(Notional Principal)
(in thousands)		 Contract Period
Contract Amount
(Notional Principal)
(in thousands)		 Contract Period
USD (sell)
377,000
$
JPY (buy)
40,231,674
EUR (sell)
38,400
JPY (buy)
5,121,625
HKD (sell)
385,312
EUR (buy)
40,000
USD (sell)
410,000
RMB (buy)
2,598,212
USD (sell)
350,000
TWD (buy)
10,277,800		 2018/1-2018/6
2018/1-2018/6
2018/1-2018/6
2018/1-2018/6
2018/2-2018/4
2018/2-2018/4
2018/2-2018/5
2018/2-2018/5
2018/3-2018/4
2018/3-2018/4
(3) 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 primarily
for the requirement of capital management and not accounted for using hedge accounting.
Financial assets at fair value through other comprehensive income
March31,2019
December31,2018
March31,2018
Non-current items
Equity instruments
Listed stocks
3,360,375
$
2,661,075
$
4,509,603
$
Unlisted stocks
1,173,300
1,173,301
303,000
4,533,675
$
3,834,376
$
4,812,603
$		 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 primarily
for the requirement of capital management and not accounted for using hedge accounting.
Financial assets at fair value through other comprehensive income
March31,2019
December31,2018
March31,2018
Non-current items
Equity instruments
Listed stocks
3,360,375
$
2,661,075
$
4,509,603
$
Unlisted stocks
1,173,300
1,173,301
303,000
4,533,675
$
3,834,376
$
4,812,603
$
4,509,603
$
303,000
4,812,603
$

~17~

  • A. The Group has elected to classify equity instruments that are considered to be strategic investments as financial assets at fair value through other comprehensive income.

  • B. For information about that the Group recognized other comprehensive income for fair value change for the three-month periods ended March 31, 2019 and 2018, Please refer to Note 6(19) “Other equity”.

(4) Financial assets at amortized cost

March 31, 2019 December 31, 2018 March 31, 2018 Current items Time deposits with maturity over - three months $ 33,157,713 $ 51,426,053 $

The Group recognized $186,600 and $0 of interest income arising from the financial assets at amortized cost for the three-month periods ended March 31, 2019 and 2018.

(5) Notes receivable and accounts receivable

Notes receivable
Accounts receivable
Less: Allowance for uncollectible
accounts
(		 March31,2019

34,256
$
37,900,255
37,934,511
209,372)

(
37,725,139
$		 December31,2018
25,132
$
45,248,754
45,273,886
209,729)

(
45,064,157
$		 March31,2018
9,498
$
36,133,058
36,142,556
109,500)

36,033,056
$
  • A. The aging analysis of accounts receivable and notes receivable is as follows:
Not past due
Up to 60 days
61 to 180 days
Over 180 days		 March31,2019

36,935,990
$
947,716
35,548
15,257
37,934,511
$		 December31,2018
44,209,582
$
1,003,472
54,125
6,707
45,273,886
$		 March31,2018
35,059,568
$
954,042
127,494
1,452
36,142,556
$

The above aging analysis was based on past due date.

  • B. Information relating to credit risk of accounts receivable is provided in Note 12(2).

(6) Inventories

Inventories
Raw materials and supplies
Work in progress
Finished goods		 March31,2019

4,682,289
$
14,227,838
13,852,171
32,762,298
$		 December31,2018
4,768,663
$
14,071,053
12,016,836
30,856,552
$		 March31,2018
4,477,842
$
16,899,506
12,119,316
33,496,664
$

For the three-month periods ended March 31, 2019 and 2018, the Company and Subsidiaries recognized cost of goods sold for inventories that have been sold at $59,010,616 and $57,863,647 and recognized net inventory (loss) gain at ($38,104) and $150,887 due to write down (reversal) of cost of scrap inventories to net realizable value, respectively.

~18~

(7) Investments accounted for under the equity method

Ampower Holding Ltd.
FI Medical Device Manufacturing
Co., Ltd.
Others		 March31,2019

919,650
$
785,396
184,914
1,889,960
$		 December31,2018
956,577
$
655,827
190,517
1,802,921
$		 March31,2018
834,241
$
564,056
113,672
1,511,969
$

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

below:
Property, plant and equipment
Profit for the period from continuing operations
Other comprehensive loss - net of tax
(
Total comprehensive income
AtJanuary1
Additions
Cost:
Land
3,852,792
$
-
$
Buildings
199,521,281
110,820
Machinery and equipment
510,649,778
722,800
Other equipment
43,298,695
848
757,322,546
834,468
Accumulated depreciation
and impairment:
Buildings
122,903,947)
(
2,073,929)
(
Machinery and equipment
403,140,224)
(
5,382,009)
(
Other equipment
36,348,744)
(
1,114,814)
(
562,392,915)
(
8,570,752)
(
Unfinished construction
and equipment under
acceptance
11,688,329
6,335,826
206,617,960
$		 For the three-monthperiods ended March31,
2019
132,427
$
45,430)

(
86,997
$
2019		 2018
$
 39,242

16,253)
22,989
$
2019
Transfer, net
exchange
differences
Disposals
and others
At March31
-
$
-
$
3,852,792
$
860)
(
895,669
200,526,910
980,587)
(
3,887,683
514,279,674
881,664)
(
2,021,350
44,439,229
1,863,111)
(
6,804,702
763,098,605
-
295,510)
(
125,273,386)
(
979,741
1,317,187)
(
408,859,679)
(
880,502
777,153)
(
37,360,209)
(
1,860,243
2,389,850)
(
571,493,274)
(
-
3,511,739)
(
14,512,416
206,117,747
$		 At March31

(8) Property, plant and equipment

~19~

2018

2018
Transfer, net
exchange
differences
AtJanuary1 Additions Disposals and others At March31
Cost:
Land $ 3,852,792
 $ -
 $ -
 $ -
 $ 3,852,792
Buildings 196,417,863 18,819 ( 5,255)
 2,366,920 198,798,347
Machinery and equipment 496,794,502 231,535 ( 531,866)
 6,223,908 502,718,079
Other equipment 39,761,461 12,165 ( 137,910) 1,478,882 41,114,598
736,826,618 262,519 ( 675,031) 10,069,710 746,483,816
Accumulated depreciation
and impairment:
Buildings ( 114,356,774)
 ( 2,241,804)
 5,255 ( 399,974)
 ( 116,993,297)
Machinery and equipment ( 384,279,016)
 ( 5,677,317)
 439,292 ( 732,787)
 ( 390,249,828)
Other equipment ( 33,205,003) ( 1,129,137) 137,221 ( 175,268) ( 34,372,187)
( 531,840,793) ( 9,048,258) 581,768 ( 1,308,029) ( 541,615,312)
Unfinished construction
and equipment under
acceptance 15,878,802 5,211,207 - ( 8,325,827) 12,764,182
$ 220,864,627 $ 217,632,686

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

  • B. As of March 31, 2019, December 31, 2018 and March 31, 2018, the prepayments for business facilities which have not yet entered the factory (shown as ‘other non-current assets’) amounted to $1,335,635, $1,559,446 and $1,441,256, respectively.

  • －

  • (9) Leasing arrangements lessee

  • A. The Group leases various assets including land, office and business vehicles. Rental contracts are typically made for periods of 2 to 50 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.

  • B. Short-term leases with a lease term of 12 months or less comprise office, dormitory and equipment. Low-value assets comprise computer equipment.

  • C. The carrying amount of right-of-use assets and the depreciation charge are as follows:

Land
Buildings (Office)
Transportation equipment
(Business vehicles)		 March31,2019
Carryingamount
6,778,848
$
35,201
5,214
6,819,263
$		 For the three-month period
endedMarch31,2019
Depreciation charge
130,497
$
4,413
320
135,230
$

~20~

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

Items affecting profit or loss
Interest expense on lease liabilities
Expense on variable lease payments
Expense on short-term lease contracts
Expense on leases of low-value assets		 For the three-month period
March31,2019
27,878
$
27,372
26,431
9,239

  • E. For the three-month period ended March 31, 2019, the Group’s total cash outflow for leases were $207,999.

  • (10) Investment property

$207,999.
Investment property
Cost:
Land
Buildings
Accumulated depreciation:
Buildings
(
Cost:
Land
Buildings
Accumulated depreciation:
Buildings
(		 2019 AtMarch31
188,247
$
439,228
627,475
79,588)

547,887
$
AtMarch31
188,247
$
439,228
627,475
67,460)

560,015
$
At January1
188,247
$
439,228
627,475
75,505)

(
551,970
$
(		 Additions
-
$
-
-
4,083)

(
4,083)
$
2018
At January1
188,247
$
439,228
627,475
64,778)

(
562,697
$
(		 Additions
-
$
-
-
2,682)

(
2,682)
$

The fair value of the investment property held by the Group as at March 31, 2019, December 31, 2018 and March 31, 2018 was $1,782,991, $1,660,504 and $1,282,914, respectively. The amounts mentioned above represent valuation results of comparative method based on market trading information categorized within Level 3 in the fair value hierarchy.

  • (11) Intangible assets

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

~21~

2019

2019
AtJanuary1
Additions
Cost:
Patents and royalty
8,154,685
$
-
$
Goodwill
17,096,628
-
Others
5,247,197
20,413
(
30,498,510
20,413
(
Accumulated amortization
and impairment:
Patents and royalty
8,147,367)
(
1,050)
(
Others
4,669,658)
(
66,084)
(
12,817,025)
(
67,134)
(
17,681,485
$
46,721)
($
AtJanuary1
Additions
Cost:
Patents and royalty
8,154,685
$
-
$
Goodwill
17,096,628
-
Others
5,005,156
36,314
(
30,256,469
36,314
(
Accumulated amortization
and impairment:
Patents and royalty
8,143,082)
(
1,135)
(
Others
4,202,479)
(
159,321)
(
12,345,561)
(
160,456)
(
17,910,908
$
124,142)
($		 Disposals
-
$
-
4,604)

4,604)

-
4,604
(
4,604
(
-
$
2018		 Transfer, net
exchange
differences
and others
At March31
-
$
8,154,685
$
-
17,096,628
16,496
5,279,502
16,496
30,530,815
-
8,148,417)
(
6,433)

4,737,571)
(
6,433)

12,885,988)
(
10,063
$
17,644,827
$		 At March31
Disposals
-
$
-
2,152)

2,152)

-
2,152
2,152
-
$		 Transfer, net
exchange
differences
and others
At March31
-
$
8,154,685
$
-
17,096,628
21,429
5,060,747
21,429
30,312,060
-
8,144,217)
(
1,123
4,358,525)
(
1,123
12,502,742)
(
22,552
$
17,809,318
$		 At March31

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

Details of amortization of intangible assets are as follows: follows:
Operating costs
Operating expenses		 For the three-monthperiods ended March31,
2019
27,289
$
39,845
67,134
$		 2018
132,133
$
28,323
160,456
$
  • C. The Group performed impairment assessment on the recoverable amount of goodwill on the financial period-end, and calculated based on the value in use. The computation of value in use was based on the cash flow of financial forecast in the next 5 years. The periodical assessment did not include the impairment loss of goodwill.

~22~

(12) Other payables

(12) Other payables
March31,2019 December31,2018 March31,2018
Other personnel expenses $ 8,576,436
 $ 10,642,647
 $ 11,759,002
Payable on machinery and
equipment 8,388,554 7,982,978 26,988,022
Repairs and maintenance expense
payable 2,646,246 2,625,869 2,492,497
Utilities expense payable 1,102,628 1,093,497 1,070,845
Other payables 9,614,461 10,236,618 9,245,992
$ 30,328,325
 $ 32,581,609
 $ 51,556,358
(13) Long-term borrowings
Type of loans Period March31,2019 December31,2018 March31,2018
Syndicated bank loans 2015/3/12 $ 45,960,000
 $ 51,440,000
 $ 22,920,000
~2021/12/6
Less:
Administrative
expenses charged
by syndicated
banks ( 94,559)
 ( 103,424)
 ( 130,018)
Current portion
(includes
administrative
expenses) ( 16,195,816)
 ( 16,194,486)
 ( 10,960,000)
$ 29,669,625
 $ 35,142,090
 $ 11,829,982
Range of interest rates 1.86%~1.96% 1.74%~1.96% 1.75%~1.79%

  • 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, 2018 are in compliance with the covenants on the syndicated loan agreement.

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

(14) Pensions

  • A. Defined benefit pension plan

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

~23~

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. 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 three-month periods ended March 31, 2019 and 2018 were $484,600 and $491,837, respectively.

  • (15) Provisions-current

At January 1, 2019
Additions during the period
Used during the period
(
At March 31, 2019		 Warranty

3,773,214
$
647,700
208,611)

(
4,212,303
$		 Litigation and others
3,009,700
$
-
92,370)

(
2,917,330
$		 Total
6,782,914
$
647,700
300,981)

7,129,633
$
  • A. Warranty

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

  • B. Litigation and others

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

  • (16) Share capital

As of March 31, 2019, the Company’s authorized and outstanding capital were $105,000,000 and $99,520,720, with a par value of $10 (in dollars) per share, respectively. All proceeds from shares issued have been collected.

(17) Capital surplus

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

~24~

2019

2019
At January 1
Recognition of change in equity
of associates in proportion
to the Group's ownership
At March 31
At January 1
Recognition of change in equity
of associates in proportion
to the Group's ownership
At March 31		 Share of profit (loss)
of associates
accounted for under
Share premium
equitymethod
99,614,690
$
33,425
$
-
14
99,614,690
$
33,439
$
2018		 Total
99,648,115
$
14
99,648,129
$
Share of profit (loss)
of associates
accounted for under
Share premium
equitymethod
99,614,690
$
32,229
$
-
9
99,614,690
$
32,238
$		 Total
99,646,919
$
9
99,646,928
$

(18) Retained earnings

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

  • B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. 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 2018 net income which was proposed at the Board of Directors’ meeting in May 2019 and the appropriation of 2017 net income which was approved at the

~25~

stockholders’ meeting in June 2018 are as follows:

Legal reserve
Provision (reversal)
of special reserve
Cash dividends		 Years endedDecember31, Years endedDecember31, Years endedDecember31,
Dividends per
Dividends per
Amount
share(in dollars)
Amount
share(in dollars)
222,276
$
3,702,861
$
3,572,742
2,328,083)
(
597,124
0.06
$
7,961,657
0.80
$
4,392,142
$
9,336,435
$
2018
2017		 2017
Amount
222,276
$
3,572,742
597,124
4,392,142
$		 Dividends per
share(in dollars)
0.80
$

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

  • (19) Other equity items

refer to Note 6(25).
Other equity items
Currency
translation
At January 1
6,461,149)
($
Revaluation - gross
-
Currency translation differences
1,484,019
Share of other comprehensive
loss of associates
45,430)
(
At March 31
5,022,560)
($		 2019
Financial assets at fair
value through other
comprehensive income
Total
1,797,686
$
4,663,463)
($
698,452
698,452
-
1,484,019
-
45,430)
(
2,496,138
$
2,526,422)
($		 Total
(20) Operating income
Currency
translation
At January 1
5,717,223)
($
Effect of modified retrospectvie
approach under IFRS 9
-
(
Balance after retropective adjustment
5,717,223)
(
Revaluation - gross
-
Currency translation differences
1,056,859
Share of other comprehensive
loss of associates
16,253)
(
At March 31
4,676,617)
($
TFT-LCD products		 2018 2018 2018
Financial assets
Available-
at fair value through
for-sale
other comprehensive
investments
income
Total
4,626,502
$
-
$
1,090,721)
($
4,626,502)

4,626,502
-
-
4,626,502
1,090,721)
(
-
496,675)
(
496,675)
(
-
-
1,056,859
-
-
16,253)
(
-
$
4,129,827
$
546,790)
($
2019
2018
59,924,024
$
66,763,486
$
For the three-monthperiods ended March31,		 Total
$
$
2019
59,924,024
$		 2018
66,763,486
$

~26~

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

(21) Other income

Other income
Interest income
Interest income from bank deposits
Interest income from financial assets
at amortized cost
Rental revenue
Other income		 Forthe three-monthperiods endedMarch31,
2019
151,104
$
186,600
337,704
56,097
328,736
722,537
$		 2018
160,157
$
-
160,157
50,601
294,727
505,485
$

(22) Other gains and losses

Other gains and losses
337,704
160,157
Rental revenue
56,097
50,601
Other income
328,736
294,727
722,537
$
505,485
$		 337,704
160,157
56,097
50,601
328,736
294,727
722,537
$
505,485
$		 337,704
160,157
56,097
50,601
328,736
294,727
722,537
$
505,485
$
Finance costs
2019
2018
Net gain on financial assets and liabilities at fair
value through profit or loss
1,004,624
$
1,054,184
$
Net currency exchange loss
554,905)
(
1,546,456)
(
Gain on disposal of investments
10,153
26,761
Loss on disposal of property, plant and equipment
1,672)
(
90,406)
(
Other (losses) gains
66,575)
(
250,156
391,625
$
305,761)
($
Forthe three-monthperiods endedMarch31,
2019
2018
Interest expense:
Bank borrowings
242,979
$
148,157
$
Others
27,878
8
270,857
$
148,165
$
Forthe three-monthperiods endedMarch31,		 Forthe three-monthperiods endedMarch31,
2018
2019
242,979
$
27,878
270,857
$		 2018
148,157
$
8
148,165
$

(23) Finance costs

(24) Expenses by nature

Expenses by nature
Employee benefit expense:
Salaries and other short-term employee benefits
Post-employment benefits
Depreciation
Amortization		 Forthe three-monthperiods endedMarch31,
2019
9,195,941
$
484,600
8,710,065
67,134
18,457,740
$		 2018
9,839,043
$
491,837
9,050,940
160,456
19,542,276
$

~27~

  • (25) Employees’ compensation and directors’ remuneration

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

  • B. For the three-month periods ended March 31, 2019 and 2018, the amount of employees’ compensation was accrued as $0 and $174,887, respectively. In the first quarter of 2019 and 2018, the Group did not recognize directors’ remuneration, aforementioned amounts were accounted as expenses.

    • The employees’ compensation and directors’ remuneration for the year ended December 31, 2018 were $294,289 and $4,528, respectively, and were estimated based on the profit of current year. The employees’ compensation will be distributed in the form of cash. The Board of Directors resolved to distribute employees’ compensation and directors’ remuneration in the amount of $294,289 and $4,528, respectively, in the form of cash. The actual distributed amount were in consistent with the amounts recognized as expense in 2018.

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

  • (26) Income tax

  • A. Income tax expense

Components of income tax expense:

the website of the Taiwan Stock Exchange.
ome tax
Income tax expense
Components of income tax expense:
Forthe three-monthperiods endedMarch31,
2019 2018
Current tax:
Current tax on profit for the period $ 133,130
 $ 611,056
Prior year income tax over estimation - ( 5,857)
Total current tax 133,130 605,199
Deferred tax:
Origination and reversal of temporary
differences ( 40,014)
 1,344,011
Impact of change in tax rate - ( 969,286)
Income tax expense $ 93,116
 $ 979,924

  • B. The Company’s income tax returns through 2016 have been assessed and approved by the Tax Authority.

  • C. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in February 7, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate.

~28~

(27) Earnings per share

For the three-month periods ended March 31,

Basic (loss) earnings per share
(Loss) profit attributable to ordinary shareholders
of the parent
(
Weighted average number of ordinary shares
outstanding (shares in thousands)
Basic (loss) earnings per share (in dollars)
(
Diluted (loss) earnings per share
(Loss) profit attributable to ordinary shareholders
of the parent
(
Weighted average number of ordinary shares
outstanding (shares in thousands)
Assumed conversion of all dilutive potential
ordinary shares:
- Employees' compensation
Diluted (loss) earnings per share (in dollars)
 2019
3,724,795)
$
9,952,072
0.37)
$
3,724,795)
$
9,952,072
-
9,952,072
0.37)
($		 2018
2,939,772
$
9,952,072
0.30
$
2,939,772
$
9,952,072
119,778
10,071,850
0.29
$

Diluted (loss) earnings per share (in dollars)

(28) Supplemental cash flow information

Investing activities with partial cash payments:

For the three-month periods 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

2019
7,170,294
$
7,982,978
8,388,554)
(
(
6,764,718
$		 2018
5,473,726
$
32,381,338
26,988,022)

10,867,042
$

(29) Changes in liabilities from financing activities

For the three-month periods ended March 31, 2019 and 2018, all changes in liabilities from financing activities are changes in cash flow from financing activities. Please refer to consolidated statements of cash flows.

7. RELATED PARTY TRANSACTIONS

(1) Names and relationship of related parties

Names of related parties

Hon Hai Precision Industry Co., Ltd. and its subsidiaries Chi Lin Optoelectronics Co., Ltd. and its subsidiaries Fu Lian Net International (Hong Kong) Limited Panxian FuguiKang Precision electronic Ltd. Chongqing Fuyusheng Electronics Technology Co.,Ltd. FI Medical Device Manufacturing Co., Ltd. GIO Optoelectronics Corp.

Relationship with the Group Other related party Other related party Other related party Other related party Other related party Associate Associate

~29~

(2) Significant related party transactions

A. Operating revenue

gnificant related party transactions
Operating revenue
Sales of goods:
Other related parties
Associates		 For the three-monthperiods ended March31,
2019
2,301,756
$
3,642
2,305,398
$		 2018
8,494,977
$
13,806
8,508,783
$

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:
Other related parties
Associates		 For the three-monthperiods ended March31,
2019
1,522,086
$
467,018
1,989,104
$		 2018
1,123,789
$
314,136
1,437,925
$

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

C. Receivables from related parties

Accounts receivable:
Other related parties
- Hon Hai Precision Industry
Co., Ltd.
- Others
Associates
Less: Transferred other receivable
 March31,2019

1,419,581
$
1,846,839
46,583
3,313,003
277,118)
(
(
3,035,885
$		 December31,2018
2,296,588
$
2,790,587
47,881
5,135,056
685,079)

(
4,449,977
$		 March31,2018
4,697,561
$
6,418,870
34,917
11,151,348
2,368)

11,148,980
$

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

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

~30~

D. Other receivables from related parties

March 31, 2019 December 31, 2018 March 31, 2018

E. Payables to related parties
Other receivables:
Accounts receivables transferred
to other receivables
- Other related parties
- Fu Lian Net International
(Hong Kong) Limited
- Panxian FuguiKang Precision
electronic Ltd.
- Chongqing Fuyusheng
Electronics Technology
Co., Ltd.
- Others
Other receivables
- Other related parties
- Associates
Accounts payable:
Other related parties
Associates		 -
$
137,303
139,791
24
8,656
13,227
299,001
$
March31,2019

2,110,398
$
230,173
2,340,571
$		 369,837
$
178,663
136,555

24
9,832
7,820
702,731
$
December31,2018
2,382,269
$
269,858
2,652,127
$		 -
$
-
-
2,368

8,894
11,344
22,606
$
March31,2018
1,834,903
$
172,478
2,007,381
$

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

F. Property transactions

Purchase of property

(a) Acquisition of property, plant and equipment:

erty transactions
hase of property
Acquisition of property, plant and equipment:
Other related parties
Associates		 For the three-monthperiods ended March31,
2019
28,224
$
2,462
30,686
$		 2018
1,560
$
2,548
4,108
$

~31~

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

Other related parties
- Hon Hai Precision Industry
Co., Ltd.
- Others
Associates		 March31,2019

2,225,905
$
29,316
883
2,256,104
$		 December31,2018
2,225,585
$
378
-
2,225,963
$		 March31,2018
21,280,511
$
87
2,567
21,283,165
$

Sale of property

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

For the three-monthperiods ended March31, For the three-monthperiods ended March31, For the three-monthperiods ended March31,
2019 2018
Disposal
Gain on		 Disposal Gain on
proceeds
disposal		 proceeds disposal
Other related parties $ 266

36
$
$		 -
$		 -
Period-end balances arising from sale of property (shown as ‘other receivables’)
March31,2019
December		 31,2018 March31,2018
Other related parties 275
$
$		 269
 $ -

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

(3) Key management compensation

Key management compensation
Salaries and other short-term employee benefits
Post-employment benefit		 For the three-monthperiods ended March31,
2019
12,644
$
204
12,848
$		 2018
92,084
$
226
92,310
$

8. PLEDGED ASSETS

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

Book value

Pledged asset
Other current assets
-Time deposits
Property, plant and
equipment
Intangible assets
Other non-current
assets
-Time deposits
-Refundable deposits		 March31,2019
78,169
$
107,127,626
720
-
369,452
107,575,967
$		 December31,2018
77,849
$
111,162,901
1,122
-
368,194
111,610,066
$		 March31,2018
Purpose
975
$
Tariff and credit card
guarantee
68,096,552
Long-term loans
5,612
Long-term loans
722
Guarantee for contract
and performance bond
348,894
Guarantee for litigation
68,452,755
$		 Purpose

~32~

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

  • －

  • (1) Contingencies Significant Litigations

  • A. Chi Mei Optoelectronics Corporation (the “CMO”), Chi Mei Optoelectronics Japan Co., Ltd., Chi Mei Optoelectronics UK Ltd., Chi Mei Optoelectronics Europe B.V., and Chi Mei Optoelectronics USA Inc. were investigated by the United States (the “U.S.”) Department of Justice in December 2006 for alleged violation of the anti-trust laws. In December 2009, the Company reached a plea agreement with the Department of Justice of the U.S. and paid off the fines. Later, Brazil government initiated an investigation case against the Company. In March 2019, the Company received a sanction from Brazil Administrative Council for Economic Defense - CADE but still wait for the confirmation of its payment method and deadline from the competent authority. As for civil lawsuits filed by some state governments in the U.S., downstream panel makers and customers, the Company had reached settlement agreement individually. The company’s subsidiary in U.S. received a civil complaint from the government of Puerto Rico in September 2018, claiming that the company, together with other defendants of Taiwan, Japan and South Korea panel factories, had unjustified enrichment from the TFT-LCD pricing collaborations in 2006 and requested monetary compensation. The U.S. subsidiary of the company has appointed a lawyer to handle the lawsuit.

  • B. Eidos Displays, LLC and Eidos III, LLC (“Eidos”) filed a lawsuit against the Company and American subsidiaries 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.

    • In February 2014, Eidos appealed to the US Court of Appeals for the Federal Circuit (CAFC). In March 2015, the CAFC overruled the decision rendered by the district court and ordered a retrial. In June 2017, the jury determined that some products of the Company and American subsidiaries constituted direct infringement of patent and ordered an infringement compensation for Eidos. On March 5, 2018, the court made first instance judgement and the Company had appealled. 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. On July 10, 2018, Vista Peak Ventures, LLC (VPV) filed four complaints against the Company in the United States District Court for the Eastern District of Texas, alleging the infringement of several of its patents. The Company reached settlements with VPV for the aforementioned lawsuits and acquired relevant patent portfolio licensing. VPV also dismissed the action and the lawsuits have no effect on the Company’s financial position and results of operations.

~33~

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

  • (2) Commitments

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

March 31, 2019 December 31, 2018 March 31, 2018 Property, plant and equipment $ 19,943,471 $ 22,914,278 $ 23,831,319

  • B. Outstanding letters of credit

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

March 31, 2019 December 31, 2018 March 31, 2018 Outstanding letters of credit $ 807,854 $ 445,458 $ 125,399

10. SIGNIFICANT DISASTER LOSS

None.

11. SUBSEQUENT EVENTS AFTER THE BALANCE SHEET DATE

The Board of Directors approved the obtaining of financial products “Guangdong Finance Trust. Peng Yun Tian Hua Collection Fund Trust” of its’ subsidiaries, Innocom Technology (Shenzhen), Foshan Innolux Optoelectronics, and Ningbo Innolux Optoelectronics, which the total monetary amount of the transaction was RMB 46.6 billion.

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, 2018.

(2) Financial instruments

  • A. Financial instruments by category

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

  • B. 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, 2018.

  • C. Significant financial risks and degrees of financial risks

  • Except for the following, there was no significant change in the period. Please refer to Note 12. (a) Market risk

Foreign exchange risk

  • i. The Group operates internationally and is exposed to foreign exchange risk arising from the transactions of the company and its subsidiaries used in various functional currency, primarily with respect to the USD and RMB. Foreign exchange risk arises from future

~34~

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 $380,229 and $256,279 for the three-month periods ended March 31, 2019 and 2018, respectively. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:
would be materially affected by the exchange rate fluctuations is as follows: fluctuations is as follows:
Foreign
Currency
Exchange
Amount
Rate
Book Value
(In Thousands)
(Note)
(NTD)
Financial assets
Monetary items
USD
5,355,760
$
30.82
165,064,523
$
JPY
8,246,607
0.28
2,309,050
EUR
45,925
34.61
1,589,464
Non-monetary items
USD
2,628,637
$
30.82
81,014,592
$
HKD
273,910
3.93
1,076,466
JPY
13,297,684
0.28
3,723,352
USD
3,833,424
$
30.82
118,146,128
$
JPY
45,091,668
0.28
12,625,667
EUR
4,863
34.61
168,308
March31,2019
Financial liabilities
Monetary items
Financial assets
Monetary items
USD
JPY
EUR
Non-monetary items
USD
HKD
JPY
USD
JPY
EUR
Financial liabilities
Monetary items		 December31,2018
Foreign
Currency
Exchange
Amount
Rate
Book Value
(In Thousands)
(Note)
(NTD)
5,960,855
$
30.72
183,117,466
$
8,247,993
0.28
2,309,438
48,137
35.20
1,694,422
2,576,131
$
30.72
79,138,744
$
180,600
3.92
707,952
13,237,769
0.28
3,706,575
4,311,235
$
30.72
132,441,139
$
46,306,961
0.28
12,965,949
13,025
35.20
458,480
March31,2018		 Book Value
(NTD)
Foreign
Currency
Exchange
Amount
Rate
(In Thousands)
(Note)
4,902,099
$
29.11
7,954,014
0.27
30,040
35.87
2,637,180
$
29.11
171,227
3.71
13,066,989
0.27
3,642,931
$
29.11
46,455,068
0.27
47,636
35.87		 Book Value
(NTD)
142,700,102
$
2,147,584
1,077,535
76,768,310
$
635,252
3,528,087
106,045,721
$
12,542,868
1,708,703



~35~ 

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

  • iii. Total exchange loss, including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Group for the three-month periods ended March 31, 2019 and 2018 amounted to $554,905 and $1,546,456, respectively.

  • Price risk

  • i. The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated balance sheet as financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.

  • ii. The Group’s investments in equity securities comprise domestic listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 20% with all other variables held constant, post-tax profit for the three-month periods ended March 31, 2019 and 2018 would have increased/decreased by $454,930 and $333,320, respectively; other comprehensive gains and losses would have increased/decreased by $906,735 and $962,521, respectively.

  • Cash flow and fair value interest rate risk

  • i. The Group’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Group to cash flow interest rate risk. During the three-month periods ended March 31, 2019 and 2018, the Group’s borrowings at variable rate were denominated in the NTD.

  • ii. If the borrowing interest rate of NTD had increased/decreased by 0.25% with all other variables held constant, profit, net of tax for the three-month periods ended March 31, 2019 and 2018 would have decreased/increased by $114,900 and $57,300, respectively. The main factor is that changes in interest expense result in floating-rate borrowings.

  • (b) Credit risk

  • i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms, and the contract cash flows.

  • ii. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the managements. The utilization of credit limits is regularly monitored.

~36~

  • iii. The Group adopts following assumption under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition: If the contract payments are past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.

  • iv. The Group adopts the assumptions under IFRS 9, the default occurs when the contract payments are past due over 90 days.

  • v. The Group classifies customer’s accounts receivable in accordance with credit rating of customer, credit risk on trade and customer types. The Group applies the simplified approach using provision matrix to estimate expected credit loss under the provision matrix basis.

  • vi. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:

  • (i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;

  • (ii) Default or delinquency in interest or principal repayments;

  • (iii) Adverse changes in national or regional economic conditions that are expected to cause a default.

  • vii. The Group uses the forecastability to adjust historical and timely information to assess the default possibility of accounts receivable.

  • According to abovementioned consideration and information, the Group does not expect any significant default possibility of accounts receivable.

  • viii. Movements in relation to the Group applying the simplified approach to provide loss allowance for accounts receivable are as follows:

At January 1
Provision
Reversal
(
At March 31
At January 1_IAS 39
Adjustments under new standards
At January 1_IAS 9
Effect of exchange rate changes
At March 31		 2019
Accountsreceivable
209,729
$
-
357)

209,372
$
2018
Accountsreceivable
109,496
$
-
109,496
$
4
109,500
$
  • ix. The Group did not recognize significant impairment provision in accordance with 12 months expected credit losses, because the Group’s financial assets/loans to others and receivables at amortized cost all with low credit risk.

~37~

(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

Less than
Between 1
Between 3
March31,2019
1year
and3 years
and5 years
Lease liability
579,315
$
1,136,039
$
1,121,672
$
Long-term
borrowings
(including current
portion)
16,210,000
29,750,000
-
Less than
Between 1
Between 3
December31,2018
1 year
and3 years
and5 years
Long-term
borrowings
(including current
portion)
16,210,000
$
35,230,000
$
-
$
Less than
Between 1
Between 3
March31,2018
1year
and3 years
and5 years
Long-term
borrowings
(including current
portion)
10,960,000
$
11,410,000
$
550,000
$		 Over
5 years
Total
3,953,097
$
6,790,123
$
-

45,960,000
Over
5 years
Total
-
$
51,440,000
$
Over
5 years
Total
-
$
22,920,000
$

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

(3) Fair value estimation

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

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

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

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

  • B. Fair value information of investment property at cost is provided in Note 6(10).

  • C. Financial instruments not measured at fair value

~38~

The carrying amounts of cash and cash equivalents, accounts receivable, other receivables, financial assets at amortized cost, accounts payable, other payables, lease liability and long-term borrowings (including current portion) are approximate to their fair values.

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

  • (a) The related information of natures of the assets and liabilities is as follows:

March31,2019
Assets
Recurring fair value measurements
Financial assets at fair value
through profit or loss
Equity securities
Forward exchange contracts
Convertible bonds
Financial assets at fair value
through other comprehensive
income
Equity securities
Liabilities
Recurring fair value measurements
Financial liabilities at fair value
through profit or loss
Forward exchange contracts
Forward exchange swap contracts
December31,2018
Assets
Financial assets at fair value
through profit or loss
Equity securities
Forward exchange contracts
Convertible bonds
Financial assets at fair value
through other comprehensive
income
Equity securities
Recurring fair value measurements		 Level 1
1,872,602
$
-
-
3,360,375
5,232,977
$
-
$
-
-
$
Level 1
1,221,135
$
-
-
2,661,075
3,882,210
$		 Level 2
-
$
184,177
-
-
184,177
$
164,517
$
21,880
186,397
$
Level 2
-
$
398,913
-
-
398,913
$		 Level3
402,049
$
-
35,680
1,173,300
1,611,029
$
-
$
-
-
$
Level3
343,175
$
-
35,559
1,173,301
1,552,035
$		 Total
2,274,651
$
184,177
35,680
4,533,675
7,028,183
$
164,517
$
21,880
186,397
$
Total
1,564,310
$
398,913
35,559
3,834,376
5,833,158
$

~39~

December31,2018
Liabilities
Financial liabilities at fair value
through profit or loss
Forward exchange contracts
Forward exchange swap contracts
Recurring fair value measurements
March31,2018
Assets
Financial assets at fair value
through profit or loss
Equity securities
Forward exchange contracts
Forward exchange swap contracts
Financial assets at fair value
through other comprehensive
income
Equity securities
Liabilities
Financial liabilities at fair value
through profit or loss
Forward exchange contracts
Recurring fair value measurements
Recurring fair value measurements		 Level 1
-
$
-
-
$
Level 1
1,289,765
$
-
-
4,762,603
6,052,368
$
-
$		 Level 2
16,644
$
7,135
23,779
$
Level 2
-
$
263,514
46,920
-
310,434
$
36,168
$		 Level3
-
$
-
-
$
Level3
376,837
$
-
-
50,000
426,837
$
-
$		 Total
16,644
$
7,135
23,779
$
Total
1,666,602
$
263,514
46,920
4,812,603
6,789,639
$
36,168
$

  • (b) The methods and assumptions the Group used to measure fair value are as follows:

  • i. The instruments the Group used market quoted prices as their fair values (that is, Level

    • 1) are listed below by characteristics:

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

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

  • iii. When assessing non-standard and low-complexity financial instruments, for example, foreign exchange swap contracts, the Group adopts valuation technique that is widely

~40~

used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.

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

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

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

  • E. For the three-month periods ended March 31, 2019 and 2018, there was no transfer between Level 1 and Level 2.

  • F. The following table presents the changes in level 3 instruments as at March 31, 2019 and 2018:

Equity securities
At January 1
1,516,476
$
Gains and losses recognized
in profit or loss
5,461
Acquired in the period
49,904
Effect on exchange rate
changes
3,508
At March 31
1,575,349
$
At January 1
Gains and losses recognized in profit or loss
Acquired in the period
Effect on exchange rate changes
At March 31		 2019

~41~

  • G. For the three-month periods ended March 31, 2019 and 2018, there was no transfer into or out from Level 3.

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

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

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

Non-derivative
equity instrument:
Unlisted shares
Venture capital
shares
Private equity
fund investment
Hybrid instrument:
Convertible bond		 Fair value at
March 31,
2019		 Valuation
technique		 Significant
unobservable input		 Range
(weighted
average)		 Relationship of
inputs to fairvalue
1,549,174
$
26,175
35,680		 Market
comparable
companies
Net asset
value
Discounted
cash flow
method and
Option
pricing model		 Price to earnings ratio
multiple, price to sales
ratio multiple, price to
book ratio multiple
Discount for lack of
marketability
Not applicable
Volatility and Discount
rate		 0.58~41.52
(5.1)
30%~70%
(32%)
Not
applicable
2.5%~46.7%
(24.6%)		 The higher the
multiple, the higher
the fair value
The higher the
discount for lack of
marketability, the
lower the fair value
Not applicable
The higher the
volatility, the higher
the fair value; the
higher the discount
rate, the lower the
fair value

~42~

Non-derivative
equity instrument:
Unlisted shares
Venture capital
shares
Private equity
fund investment
Hybrid instrument:
Convertible bond
Non-derivative
equity instrument:
Unlisted shares
Venture capital
shares
Private equity
fund investment		 Fair value at
December
31,2018		 Valuation
technique		 Significant
unobservable input		 Range
(weighted
average)		 Relationship of
inputs to fairvalue
1,490,390
$
26,086
35,559
Fair value at
March 31,
2018		 Market
comparable
companies
Net asset
value
Discounted
cash flow
method and
Option
pricing model
Valuation
technique		 Price to earnings ratio
multiple, price to sales
ratio multiple, price to
book ratio multiple
Discount for lack of
marketability
Not applicable
Volatility and Discount
rate
Significant
unobservable input		 0.58~41.52
(5.06)
30%~70%
(33%)
Not
applicable
2.5%~46.7%
(24.6%)
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
The higher the
volatility, the higher
the fair value; the
higher the discount
rate, the lower the
fair value
Relationship of
inputs to fairvalue
402,069
$
24,768		 Market
comparable
companies
Net asset
value		 Price to earnings ratio
multiple, price to sales
ratio multiple, price to
book ratio multiple
Discount for lack of
marketability
Not applicable		 1.07~65.84
(31.04)
30%~70%
(52%)
Not
applicable		 The higher the
multiple, the higher
the fair value
The higher the
discount for lack of
marketability, the
lower the fair value
Not applicable

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

~43~

March 31, 2019

Financial assets Input Change
± 1%

± 1%

Change
± 1%

± 1%

Change
± 1%
 Recognized in Recognized in Recognized in
Equity instrument
Hybrid instrument
Financial assets		 $ 1,575,349
35,680
Input
Equity instrument
Hybrid instrument
Financial assets		 $ 1,516,476
35,559
Input
Favourable
Unfavourable
change
change
$ -
$ -

Recognized in other
comprehensive income		 Recognized in other
comprehensive income
Favourable
change
$ -
 Favourable
Unfavourable
change
change
$ 4,268
($ 4,268)		 Unfavourable
change
Equity instrument $ 426,837

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

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

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

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

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

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

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

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

  • capital or more: Please refer to Table 3.

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

  • refer to Table 4.

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

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

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland

~44~

China): Please refer to Table 6.

(3) Information on investments in Mainland China

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

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

14. SEGMENT INFORMATION

(1) General information

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

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

(2) Segment information

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

is as follows:
Segment revenue
Segment income
(
Depreciation and amortization
Capital expenditure-property, plant and equipment		 Forthe three-monthperiods endedMarch31,
2019
TFT LCD
59,924,024
$
3,631,679)
$
8,777,199
$
6,764,718
$		 2018
TFT LCD
66,763,486
$
3,919,696
$
9,211,396
$
10,867,042
$

(3) Reconciliation for segment income

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

Table 1

Loans to others

For the three-month period ended March 31, 2019

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 31,2019		 Balance as at
March 31,
2019		 Actual amount
drawn down		 Interest
rate		 Nature of
loan		 Amount of
transactions
with the
borrower		 Reason for
short-term
financing		 Allowance
for
uncollectible
accounts		 Collateral Collateral Limit on loans
granted to a
singleparty		 Ceiling on total
loansgranted		 Footnote
Item Value
1
1
1
1
1
2
3
4
5
6		 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.
Innolux USA Inc.
Innolux Europe B.V.
Innolux Europe B.V.
Innolux Japan Co.,
Ltd.
Warriors Technology
Investments Ltd.		 Foshan Innolux
Optoelectronics Ltd.
Ningbo Innolux
Optoelectronics Ltd.
Ningbo Innolux
Display Ltd.
Shanghai Innolux
Optoelectronics Ltd.
Nanjing Innolux
Optoelectronics Ltd.
Lakers Trading Ltd.
Innolux Hong Kong
Limited
Lakers Trading Ltd.
Leadtek Global
Group Limited
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		 $3,082,000
2,288,550
1,785,069
1,373,130
2,929,344
308,200
1,314,551
44,993
2,142,910
3,319,331		 $3,082,000
2,288,550
1,785,069
1,190,046
2,929,344
-
1,314,551
44,993
2,142,910
3,319,331		 $3,082,000
2,288,550
1,785,069
1,190,046
2,929,344
-
-
-
2,142,910
3,319,331		 2.00%
2.00%
2.00%
2.00%
2.00%
0.00%
0.00%
0.00%
1.00%
0.00%		 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		 $ -
-
-
-
-
-
-
-
-
-		 -

-
-
-
-
-
-
-
-
-		 $ -
-
-
-
-
-
-
-
-
-		 253,402,965
$ 253,402,965
253,402,965
253,402,965
253,402,965
253,402,965
253,402,965
253,402,965
253,402,965
253,402,965		 253,402,965
$ 253,402,965
253,402,965
253,402,965
253,402,965
253,402,965
253,402,965
253,402,965
253,402,965
253,402,965		 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 1

Innolux Corporation and Subsidiaries

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

March 31, 2019

Table 2

Expressed in thousands of NTD (Except as otherwise indicated)

Securities held by Marketable securities Relationship
with the
securities issuer		 General ledger account As of March31,2019 As of March31,2019 Footnote
Number of shares Bookvalue Ownership (%) Fairvalue
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Yuan Chi Investment Co., Ltd.
Yuan Chi Investment Co., Ltd.
InnoJoy Investment Corporation
InnoJoy Investment Corporation
InnoJoy Investment Corporation
InnoJoy Investment Corporation
Ningbo Innolux Optoelectronics Ltd.
Warriors Technology Investments Ltd.		 Common stock (Note)
AvanStrate Inc.
TPV Technology Limited
Chi Lin Optoelectronics Co., Ltd.
Epistar Corporation
Cheng Mei Materials Technology
Corporation
Allied Material Technology Corp.
Obsidian Sensors, Inc.
VIZIO. Inc.
Trillion Science, Inc.
Cheng Mei Materials Technology
Corporation
Advanced Optoelectronic Technology, Inc.
eChem solutions Corp.
EPILEDS Co., Ltd.
Fitipower Integrated Technology Inc.
上海辰岱投資中心(有限合夥)
OED Holding Ltd.		 None
None
Other related
party
None
None
None
None
None
None
None
None
None
None
None
None
None		 Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss
Financial assets at fair value through
other comprehensive income
Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss
Financial assets at fair value through
other comprehensive income
Financial assets at fair value through
other comprehensive income
Financial assets at fair value through
other comprehensive income
Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss		 900,000
150,500,000
17,792,552
89,072
57,211,305
1,209
238,571
927,452
1,439,180
315,000
6,964,222
2,750,000
7,347,144
10,000,000
-
16,000,000		 $ 29,034
1,075,371
65,247
2,209
672,233
-
49,904
1,111,388
-
3,701
119,088
61,912
123,065
455,000
141,064
3,997		 1
6
19
-
9
-
7
4
2
-
5
5
7
6
-
6		 $ 29,034
1,075,371
65,247
2,209
672,233
-
49,904
1,111,388
-
3,701
119,088
61,912
123,065
455,000
141,064
3,997

Table 2, Page 1

Securities held by Marketable securities Relationship
with the
securities issuer		 General ledger account As of March31,2019 As of March31,2019 Footnote
Number of shares Bookvalue Ownership (%) Fairvalue
Warriors Technology Investments Ltd.
Warriors Technology Investments Ltd.
Warriors Technology Investments Ltd.
Nets trading Ltd.		 Obsidian Sensors, Inc.
Kymeta Corporation’s convertible bonds
General Interface Solution (GIS)
Holding Limited
PilotTech Global Fund		 None
None
None
None		 Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss
Financial assets at fair value through
other comprehensive income
Financial assets at fair value through
profit or loss		 414,136
-
24,194,000
90		 $ 86,628
35,680
2,782,310
26,175		 12
-
7
-		 $ 86,628
35,680
2,782,310
26,175

Note: Except as otherwise indicated, marketable securities in the table are all stocks.

Table 2, Page 2

Table 3

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, 2019

Expressed in thousands of NTD (Except as otherwise indicated)

Purchaser/seller Counterparty Relationshipwith the counterparty Transaction Transaction Differences in transaction
terms compared to third party
transactions		 Differences in transaction
terms compared to third party
transactions		 Notes/accounts receivable(payable) Notes/accounts receivable(payable) Footnote
Purchases
(sales)		 Amount Percentage of
total purchases
(sales)		 Credit term Unitprice Credit term Balance Percentage of total
notes/accounts
receivable(payable)
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation		 Hon Hai Precision Industry Co.,
Ltd.
Lakers Trading Ltd.
Hongfujin Precision Electronics
(Yantai) Co., Ltd.
Hongfutai Precision Electronics
(Yantai) Co., Ltd.
Innolux Japan Co., Ltd.
Innolux Hong Kong Limited
Hongfujin Precision Electronics
(Chongqing) Co., Ltd.
Innolux USA Inc.
INNOLUX
OPTOELECTRONICS INDIA
PRIVATE LIMITED
Shenzhen Fugui Precision
Industrial Co., LTD
COMPETITION TEAM
IRELAND LIMITED		 Same major stockholder
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
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
of Hon Hai Precision Industry Co.,
Ltd.
An indirect wholly-owned subsidiary
of Hon Hai Precision Industry Co.,
Ltd.		 Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales
Sales		 762,374
$ 928,316
117,448
423,495
667,762
349,887
247,288
2,824,947
162,067
176,654
274,442		 1
2
-
1
1
1
-
5
-
-
-		 90 days
60 days
60 days
90 days
60 days
60 days
45 days
60 days
90 days
60 days
45 days		 Similar with
general sales
Similar with
general sales
Similar with
general sales
Similar with
general sales
Similar with
general sales
Similar with
general sales
Similar with
general sales
Similar with
general sales
Similar with
general sales
Similar with
general sales
Similar with
general sales		 No material
difference
No material
difference
No material
difference
No material
difference
No material
difference
No material
difference
No material
difference
No material
difference
No material
difference
No material
difference
No material
difference		 1,419,463
$ -
118,122
641,892
529,954
-
244,555
1,640,813
162,214
78,952
276,510		 4
-
-
2
1
-
1
4
-
-
1

Table 3, Page 1

Purchaser/seller Counterparty Relationshipwith the counterparty Transaction Transaction Differences in transaction
terms compared to third party
transactions		 Differences in transaction
terms compared to third party
transactions		 Notes/accounts receivable(payable) Notes/accounts receivable(payable) Footnote
Purchases
(sales)		 Amount Percentage of
total purchases
(sales)		 Credit term Unitprice Credit term Balance Percentage of total
notes/accounts
receivable(payable)
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Foshan Innolux
Optoelectronics Ltd.
Ningbo Innolux
Optoelectronics Ltd.
Ningbo Innolux Display
Ltd.
Nanjing Innolux
Optoelectronics Ltd.
Shanghai Innolux
Optoelectronics Ltd.
Ningbo Innolux
Optoelectronics Ltd.		 Futaijing Precision Electronics
(Beijing) Co., Ltd.
FI Medical Device Manufacturing
Co., Ltd.
Hon Hai Precision Industry Co.,
Ltd.
Lakers Trading Ltd.
Innolux Hong Kong Limited
Leadtek Global Group Limited
Lakers Trading Ltd.
Leadtek Global Group Limited
Lakers Trading Ltd.
Innolux Hong Kong Limited
Innolux Hong Kong Limited
Ningbo Innolux Display Ltd.		 An indirect wholly-owned subsidiary
of Hon Hai Precision Industry Co.,
Ltd.
Investee accounted for under the
equity method
Same major stockholder
An indirect wholly-owned subsidiary
An indirect wholly-owned subsidiary
A subsidiary of the Company
An indirect wholly-owned subsidiary
A subsidiary of the Company
An indirect wholly-owned subsidiary
An indirect wholly-owned subsidiary
An indirect wholly-owned subsidiary
An indirect wholly-owned subsidiary		 Sales
Purchases
Purchases
Processing
expense
Processing
expense
Processing
expense
Processing
revenue
Processing
revenue
Processing
revenue
Processing
revenue
Processing
revenue
Sales		 119,837
$ 440,612
456,496
11,511,641
3,352,309
4,346,597
7,358,314
4,871,678
4,288,134
1,951,868
1,375,004
780,313		 -
1
1
19
6
7
88
86
100
100
84
7		 60 days
30 days after
acceptance
60-90 days
after
acceptance
60-90 days
60-90 days
60-90 days
60 days
60 days
60 days
60 days
60 days
60 days		 Similar with
general sales
Single
purchases
target, no basis
for comparison
Single
purchases
target, no basis
for comparison
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		 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		 51,849
$ 209,837)
(
875,041)
(
23,140,265)
(
7,665,894)
(
24,762,369)
(
14,269,653
19,510,129
3,860,153
5,440,761
1,497,286
444,169		 -
-
1
28
9
30
94
98
100
100
83
2

Table 3, Page 2

Purchaser/seller Counterparty Relationshipwith the counterparty Transaction Transaction Differences in transaction
terms compared to third party
transactions		 Differences in transaction
terms compared to third party
transactions		 Notes/accounts receivable(payable) Notes/accounts receivable(payable) Footnote
Purchases
(sales)		 Amount Percentage of
total purchases
(sales)		 Credit term Unitprice Credit term Balance Percentage of total
notes/accounts
receivable(payable)
Innolux Hong Kong
Limited
Innolux Europe B.V.
Ningbo Innolux Display
Ltd.
Ningbo Innolux
Optoelectronics Ltd.
Foshan Innolux
Optoelectronics Ltd.
Ningbo Innolux
Optoelectronics Ltd.		 Nanjing Innolux Technology Ltd.
Innolux Corporation
Hon Hai Precision Industry Co.,
Ltd.
Hon Hai Precision Industry Co.,
Ltd.
Hon Hai Precision Industry Co.,
Ltd.
Hongfujin Precision Industry
(Shenzhen) Co., Ltd.		 An indirect wholly-owned subsidiary
An indirect wholly-owned subsidiary
Same major stockholder
Same major stockholder
Same major stockholder
An indirect wholly-owned subsidiary
of Hon Hai Precision Industry Co.,
Ltd.		 Sales
Service
revenue
Purchases
Purchases
Purchases
Purchases		 144,272
$ 219,188
484,042
234,743
157,583
113,685		 3
79
8
2
1
1		 60 days
60 days
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
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		 123,273
$ 102,649
566,305)
(
259,301)
(
188,080)
(
134,784)
(		 1
87
10
3
1
1

Table 3, Page 3

Innolux Corporation and Subsidiaries

Table 4

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

March 31, 2019

Expressed in thousands of NTD (Except as otherwise indicated)

Creditor Counterparty Relationship
with the counterparty		 Balance as at
March31,2019		 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
Innolux Corporation
Ningbo Innolux Optoelectronics
Ltd.
Foshan Innolux Optoelectronics
Ltd.
Nanjing Innolux Optoelectronics
Ltd.
Ningbo Innolux Display Ltd.
Foshan Innolux Optoelectronics
Ltd.
Foshan Innolux Optoelectronics
Ltd.		 Hon Hai Precision Industry Co.,
Ltd.
HongFuTai Precision Electronics
(YanTai) Co., Ltd.
Foshan Innolux Optoelectronics
Ltd.
Honfujin Precision Electronics
(Chongqing) Co., Ltd.
Innolux Japan Co.,Ltd.
Innolux USA Inc.
INNOLUX OPTOELECTRONICS
INDIA PRIVATE LIMITED
COMPETITION TEAM IRELAND
LIMITED
Hongfujin Precision Electronics
(Yantai) Co., Ltd.
Leadtek Global Group Limited
Lakers Trading Ltd.
Innolux Hong Kong Limited
Lakers Trading Ltd.
Chongqing Fuyusheng Electronics
Technology Co., Ltd.
Panxian FuguiKang Precision
electronic Ltd.		 Same major stockholder
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.
A subsidiary of the Company
An indirect wholly-owned
subsidiary
An indirect wholly-owned
subsidiary
An indirect wholly-owned
subsidiary of Hon Hai Precision
Industry Co., Ltd.
An indirect wholly-owned
subsidiary of Hon Hai Precision
Industry Co., Ltd.
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 of Hon Hai Precision
Industry Co., Ltd.
An indirect wholly-owned
subsidiary of Hon Hai Precision
Industry Co., Ltd.		 $ 1,419,463
641,892
251,058
244,555
529,954
1,640,813
162,214
276,510
118,122
19,510,129
14,269,653
5,440,761
3,860,153
137,303
(Shown as other
receivables) (Note)
139,791
(Shown as other
receivables) (Note)		 1.64
2.26
0.21
3.61
5.49
4.40
7.88
5.82
6.11
0.99
1.97
1.18
3.94
-
-		 $ 25,557
857
-
80,836
669
-
-
154,936
-
12,625,033
3,633,715
4,034,642
76,764
137,303
139,791		 Subsequent collection
Subsequent collection
-
Subsequent collection
Subsequent collection
-
-
Subsequent collection
-
Subsequent collection
Subsequent collection
Subsequent collection
Subsequent collection
Subsequent collection
Subsequent collection		 $ 393,893
226,283
11,125
51,670
-
824,375
-
47,151
52,703
9,394,308
12,123,509
2,663,659
2,180,351
-
-		 $ -
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Table 4, Page 1

Creditor Counterparty Relationship
with the counterparty		 Balance as at
March31,2019		 Turnover
rate		 Overdue receivables Overdue receivables Amount collected
subsequent to the
balance sheet date		 Allowance for
doubtful accounts
Amount Action taken
Shanghai Innolux Optoelectronics
Ltd.
Innocom Technology (Shenzhen)
Co., LTD
Ningbo Innolux Optoelectronics
Ltd.
Innolux Hong Kong Limited
Innolux Europe B.V.		 Innolux Hong Kong Limited
Lakers Trading Ltd.
Ningbo Innolux Display Ltd.
Nanjing Innolux Technology Ltd.
Innolux Corporation		 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		 $ 1,497,286
119,232
444,169
123,273
102,649		 3.05
0.51
4.90
3.56
5.24		 $ 454,244
72,805
-
-
15,575		 Subsequent collection
Subsequent collection
-
-
Subsequent collection		 $ 1,950,911
-
-
46,815
86,752		 $ -
-
-
-
-

Note: Overdue receivables transferred to other receivables.

Table 4, Page 2

Innolux Corporation and Subsidiaries Significant inter-company transactions during the reporting period For the three-month period ended March 31, 2019

Expressed in thousands of NTD (Except as otherwise indicated)

Table 5

Transaction (Note D)

Number
(Note A)		 Companyname Counterparty Relationship
(Note B)		 General ledger account Amount Transaction terms
(NoteC)		 Percentage of consolidated total
operating revenues or total
assets
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
1
2
2
3
3
4
4
5
5		 Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
Foshan Innolux Optoelectronics Ltd.
Foshan Innolux Optoelectronics Ltd.
Ningbo Innolux Optoelectronics Ltd.
Ningbo Innolux Optoelectronics Ltd.
Ningbo Innolux Display Ltd.
Ningbo Innolux Display Ltd.
Nanjing Innolux Optoelectronics Ltd.
Nanjing Innolux Optoelectronics Ltd.
Shanghai Innolux Optoelectronics Ltd.
Shanghai Innolux Optoelectronics Ltd.		 Lakers Trading Ltd.
Lakers Trading Ltd.
Lakers Trading Ltd.
Innolux Japan Co.,Ltd.
Innolux Japan Co.,Ltd.
Innolux Hong Kong Limited
Innolux Hong Kong Limited
Innolux Hong Kong Limited
Leadtek Global Group Limited
Leadtek Global Group Limited
Foshan Innolux Optoelectronics Ltd.
Innolux USA Inc.
Innolux USA Inc.
INNOLUX OPTOELETRONICS INDIA
PRIVATE LIMITED
INNOLUX OPTOELETRONICS INDIA
PRIVATE LIMITED
Lakers Trading Ltd.
Lakers Trading Ltd.
Leadtek Global Group Limited
Leadtek Global Group Limited
Lakers Trading Ltd.
Lakers Trading Ltd.
Innolux Hong Kong Limited
Innolux Hong Kong Limited
Innolux Hong Kong Limited
Innolux Hong Kong Limited		 1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
3
3
3
3
3
3
3
3
3
3		 Sales
Processing expense
Accrued expenses
Sales
Accounts receivable
Sales
Processing expense
Accrued expenses
Processing expense
Accrued expenses
Accounts receivable
Sales
Accounts receivable
Sales
Accounts receivable
Processing revenue
Accounts receivable
Processing revenue
Accounts receivable
Processing revenue
Accounts receivable
Processing revenue
Accounts receivable
Processing revenue
Accounts receivable		 928,316
$ 11,511,641
23,140,265)
(
667,762
529,954
349,887
3,352,309
7,665,894)
(
4,346,597
24,762,369)
(
251,058
2,824,947
1,640,813
162,067
162,214
7,358,314
14,269,653
4,871,678
19,510,129
4,288,134
3,860,153
1,951,868
5,440,761
1,375,004
1,497,286		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-		 2
19
6
1
-
1
6
2
7
6
-
5
-
-
-
12
4
8
5
7
1
3
1
2
-

Table 5, Page 1

Transaction (Note D)

Number
(Note A)		 Companyname Counterparty Relationship
(Note B)		 General ledger account Amount Transaction terms
(NoteC)		 Percentage of consolidated total
operating revenues or total
assets
6
6
7
7
8
9
9		 Ningbo Innolux Optoelectronics Ltd.
Ningbo Innolux Optoelectronics Ltd.
Innolux Hong Kong Limited
Innolux Hong Kong Limited
Innocom Technology (Shenzhen) Co., LTD
Innolux Europe B.V.
Innolux Europe B.V.		 Ningbo Innolux Display Ltd.
Ningbo Innolux Display Ltd.
Nanjing Innolux Technology Ltd.
Nanjing Innolux Technology Ltd.
Lakers Trading Ltd.
Innolux Corporation
Innolux Corporation		 3
3
3
3
3
3
3		 Sales
Accounts receivable
Sales
Accounts receivable
Accounts receivable
Service revenue
Accounts receivable		 780,313
$ 444,169
144,272
123,273
119,232
219,188
102,649		 -
-
-
-
-
-
-		 1
-
-
-
-
-
-

Note A: The information of transactions between the Company and the consolidated subsidiaries should be noted in “Number” column.

  • (1) Number 0 represents the parent company.

  • (2) The subsidiaries are numbered in order from number 1.

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

3 refers to the subsidiary to the subsidiary.

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

Table 5, Page 2

Innolux Corporation and Subsidiaries

Information on investees

Table 6

For the three-month period ended March 31, 2019

Expressed in thousands of NTD (Except as otherwise indicated)

Investor Investee Location Main business
activities		 Initial investment amount Initial investment amount Shares held as at March Shares held as at March 31,2019 Net profit (loss)
of the investee for
the three-month
period ended
March31,2019		 Investment income
(loss) recognized by
the Company for the
three-month period
ended March 31,
2019		 Footnote
Balance as at
March31,2019		 Balance as at
December 31,
2018		 Number of shares 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		 Bright Information Holding Ltd.
Golden Achiever International
Limited
Innolux Holding Limited
Keyway Investment
Management Limited
Landmark International Ltd.
Toppoly Optoelectronics
(B.V.I.) Ltd.
Innolux Hong Kong Holding
Limited
Innolux Singapore Holding Pte.
Ltd.
Leadtek Global Group Limited
Yuan Chi Investment Co., Ltd.
InnoJoy Investment Corporation
CarUX Technology Inc.
Innolux Japan Co., Ltd.
iZ3D, Inc.
Chi Mei Lighting Technology
Corporation		 Hong Kong
BVI
Samoa
Samoa
Samoa
BVI
Hong Kong
Singapore
BVI
Taiwan
Taiwan
Taiwan
Japan
USA
Taiwan		 Investment holdings
Investment holdings
Investment holdings
Investment holdings
Investment holdings
Investment holdings
Investment holdings
Investment holdings
Distributor company
Investment company
Investment company
R&D, manufacturing and
Distributor company
Holdings, R&D,
manufacturing and
Distributor company
Research and development
and sale of 3D flat monitor
Manufacturing of electronic
equipment and lighting
equipment		 $ -
-
6,192,679
62,197
33,438,542
3,674,115
3,231,780
754,943
-
1,217,235
1,674,054
200,000
1,682,751
-
819,312		 $ -
119,106
6,192,679
62,197
33,438,542
3,674,115
3,231,780
754,943
-
1,217,235
1,674,054
-
1,682,751
-
819,312		 4,910,000
-
180,568,185
1,656,410
709,450,000
146,847,000
1,158,844,000
25,400,000
50,000,000
-
167,405,392
20,000,000
98
4,333
78,195,856		 100
-
100
100
100
100
100
100
100
100
100
100
54
35
33		 $ -
-
18,747,596
86,915
45,550,848
6,504,081
5,730,851
737,346
1,541,000
875,482
1,400,359
199,950
2,014,686
-
-		 $ -
48
22,937)
(
3,031
61,138)
(
149,746)
(
53,078
9,798)
(
-
690
2,332
( 50)
14,676
-
-		 $ -
48
22,937)
(
3,031
61,138)
(
149,746)
(
53,078
9,798)
(
-
690
2,332
( 50)
7,990
-
-

Table 6, Page 1

Investor Investee Location Main business
activities		 Initial investment amount Initial investment amount Shares held as at March Shares held as at March 31,2019 Net profit (loss)
of the investee for
the three-month
period ended
March31,2019		 Investment income
(loss) recognized by
the Company for the
three-month period
ended March 31,
2019		 Footnote
Balance as at
March31,2019		 Balance as at
December 31,
2018		 Number of shares Ownership
(%)		 Bookvalue
Innolux Corporation
Innolux Corporation
Innolux Corporation
Innolux Corporation
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 Japan Co.,Ltd.
Rockets Holding Ltd.
Rockets Holding Ltd.
Suns Holding Ltd.
Innolux Europe B.V.
Innolux Singapore
Holding Pte. Ltd.
Innolux Singapore
Holding Pte. Ltd.		 Ampower Holding Ltd.
FI Medical Device
Manufacturing Co., Ltd.
GIO Optoelectronics Corp.
eLux, Inc.
Rockets Holding Ltd.
Suns Holding Ltd.
Lakers Trading Ltd.
Toppoly Optoelectronics
(Cayman) Ltd.
Innolux Optoelectronics Hong
Kong Holding Limited
Innolux Hong Kong Limited
Innolux Europe B.V.
Innolux Japan Co.,Ltd.
Innolux USA, Inc.
Stanford Developments Ltd.
Nets Trading Ltd.
Warriors Technology
Investments Ltd.
Innolux Technology Germany
GmbH
Innolux Optoelectronics India
Private Limited
Innolux Optoelectronics
Philippines Corp.		 Cayman
Taiwan
Taiwan
USA
Samoa
Samoa
Samoa
Cayman
Hong Kong
Hong Kong
Netherlands
Japan
USA
Samoa
Samoa
Samoa
Germany
India
Philippines		 Investment holdings
Production and selling of
the absorption for medical
element
Sales and manufacture of
TFT-LCD parts and
components
R&D of MicroLED
technology
Investment holdings
Investment holdings
Distributor company
Investment holdings
Investment holdings
Distributor company
Holding, R&D testing and
Distributor company
Holdings, R&D,
manufacturing and
Distributor company
Selling of electronic
equipment and computer
monitors
Investment holdings
Investment company
Investment company
Testing and maintenance
company
Distributor company
Manufacturer and
distributor		 $ 1,717,714
73,500
800,892
91,155
5,222,180
555,422
-
3,650,192
-
-
1,643,631
1,815,603
369,092
5,391,125
27,477
555,422
33,735
176,997
28,733		 $ 1,717,714
73,500
800,892
91,155
5,222,180
555,422
-
3,650,192
-
-
1,994,102
1,815,603
369,092
5,391,125
27,477
555,422
33,735
176,997
28,733		 14,062,500
7,350,000
10,494,001
300,000
160,504,550
18,177,052
1
146,817,000
162,897,802
35,000,000
375,810
82
12,842
164,000,000
900,001
18,177,052
100,000
39,500,000
5,000,000		 50
49
24
38
100
100
100
100
100
100
100
46
100
100
100
100
100
100
100		 919,650
$ 785,396
117,542
66,507
11,993,497
6,519,214
234,804
6,503,721
1,614,887
545,932
341,062
1,686,060
676,101
11,965,003
28,356
6,519,213
71,177
144,569
28,292		 18,580
$ 264,428
5,577
15,871)
(
28,416)
(
5,479
-
149,746)
(
21,959
39,778
14,783
14,676
7,805
28,416)
(
-
5,479
305
10,204)
(
54)
(		 9,290
$ 129,570
1,326
7,769)
(
28,416)
(
5,479
-
149,746)
(
21,959
39,778
14,783
6,686
7,805
28,416)
(
-
5,479
305
10,204)
(
54)
(

Table 6, Page 2

Investor Investee Location Main business
activities		 Initial investment amount Initial investment amount Shares held as at March Shares held as at March 31,2019 Net profit (loss)
of the investee for
the three-month
period ended
March31,2019		 Investment income
(loss) recognized by
the Company for the
three-month period
ended March 31,
2019		 Footnote
Balance as at
March31,2019		 Balance as at
December 31,
2018		 Number of shares Ownership
(%)		 Bookvalue
Innolux Singapore
Holding Pte. Ltd.
Yuan Chi Investment
Co., Ltd.
Yuan Chi Investment
Co., Ltd.		 Innolux Optoelectronics
Malaysia SDN. BHD.
Chi Mei Lighting Technology
Corporation
GIO Optoelectronics Corp.		 Malaysia
Taiwan
Taiwan		 Manufacturer and
distributor
Manufacturing of electronic
equipment and lighting
equipment
Manufacturing and selling
of components of TFT-LCD		 $ 121,179
263,812
6,881		 $ 121,179
263,812
6,881		 16,000,000
19,673,402
77,235		 100
8
-		 121,677
$ -
865		 431
$ -
5,577		 431
-
10

Table 6, Page 3

Innolux Corporation and Subsidiaries Information on investments in Mainland China

Table 7

Expressed in thousands of NTD (Except as otherwise indicated)

For the three-month period ended March 31, 2019

Investee in Mainland
China		 Main business activities Paid-in capital
(Note A)		 Investment
method
(Note C)		 Accumulated
amount of
remittance from
Taiwan to
Mainland China
as of January 1,
2019		 Amount remitted from
Taiwan to Mainland
China/Amount remitted
back to Taiwan for the
three-month period ended
March 31,2019		 Amount remitted from
Taiwan to Mainland
China/Amount remitted
back to Taiwan for the
three-month period ended
March 31,2019		 Accumulated
amount of
remittance from
Taiwan to
Mainland China
as of March 31,
2019		 Net income of
investee for the
three-month
period ended
March 31,
2019		 Ownership
held by the
Company
(direct or
indirect)		 Investment
income (loss)
recognized by
the Company
for the three-
month period
ended March
31, 2019 (Note
B)		 Book value of
investments in
Mainland China
as of March 31,
2019		 Accumulated
amount of
investment
income remitted
back to Taiwan
as of March 31,
2019		 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.
Nanjing Innolux
Technology Ltd.
Nanjing Innolux
Optoelectronics Ltd.
Shanghai Innolux
Optoelectronics Ltd.
Foshan Innolux Logistics
Ltd.
Amlink (Shanghai) 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
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
power supply, modem, ADSL, and
other IT equipments		 $ 5,054,480
294,349
9,554,200
11,804,060
4,931,200
64,722
4,499,720
647,220
46,230
246,560		 2
2
2
2
2
2
2
2
2
2		 $ 3,911,420
61,640
226,991
11,804,060
4,931,200
64,722
4,439,177
-
46,230
308,200		 $ -
-
-
-
-
-
-
-
-
-		 $ -
-
-
-
-
-
-
-
-
-		 $ 3,911,420
61,640
226,991
11,804,060
4,931,200
64,722
4,439,177
-
46,230
308,200		 ($ 28,416)
39,712
( 250,379)
209,270
( 20,622)
6
( 149,752)
21,959
2,999
-		 100
4
100
100
100
100
100
100
100
50		 ($ 28,416)
-
( 250,379)
209,864
( 20,622)
6
( 149,752)
21,959
2,999
-		 $ 11,964,951
10,043
20,101,997
20,862,853
4,584,835
563,590
5,940,109
1,614,887
82,024
196,127		 $ 1,143,060
-
5,320,609
-
-
-
-
-
-
-		 2.1
2.2
2.3
2.3
2.3
2.4
2.4
2.8
2.5
2.6
2.7

Table 7, Page 1

Investee in Mainland
China		 Main business activities Paid-in capital
(Note A)		 Investment
method
(Note C)		 Accumulated
amount of
remittance from
Taiwan to
Mainland China
as of January 1,
2019		 Amount remitted from
Taiwan to Mainland
China/Amount remitted
back to Taiwan for the
three-month period ended
March 31,2019		 Amount remitted from
Taiwan to Mainland
China/Amount remitted
back to Taiwan for the
three-month period ended
March 31,2019		 Accumulated
amount of
remittance from
Taiwan to
Mainland China
as of March 31,
2019		 Net income of
investee for the
three-month
period ended
March 31,
2019		 Ownership
held by the
Company
(direct or
indirect)		 Investment
income (loss)
recognized by
the Company
for the three-
month period
ended March
31, 2019 (Note
B)		 Book value of
investments in
Mainland China
as of March 31,
2019		 Accumulated
amount of
investment
income remitted
back to Taiwan
as of March 31,
2019		 Footnote
Remitted to
Mainland
China		 Remitted
back to
Taiwan
Interface Optoelectronics
(Shenzhen) Co., Ltd.
Ningbo Innolux
Electronics Ltd.
Foshan Innolux Flnet
Electronics Ltd.
Ningbo Innolux Flnet
Electronics Ltd.
Shenzhen PixinLED
Technology Co., Ltd.
Innolux Automations and
Intelligence Systems
(ShenZhen) Co., Ltd.		 Development of new type of flat
panel display, monitor and
peripherals, production and
management, and offer of after-
sales service
R&D, Manufacturing and selling
of LCD backend module and
related components
Commodity agency
Commodity agency
Development and selling of MINI
LED
Development and selling of
software		 $ 2,964,884
137,313
4,577
4,577
45,771
4,577		 2
3
3
3
3
3		 $ 416,070
-
-
-
-
-		 $ -
-
-
-
-
-		 $ -
-
-
-
-
-		 $ 416,070
-
-
-
-
-		 $ 1,293,354
5,298
16
( 24)
( 1,155)
69		 7
100
100
100
100
100		 $ -
5,298
16
( 24)
( 1,155)
69		 $ 2,782,310
476,604
6,149
9,206
42,728
( 97)		 $ -
-
-
-
-
-		 2.2
3.1
3.2
3.2
3.3
3.3

Table 7, Page 2

Ceiling on investments in Mainland China:

Investment amount approved Ceiling on investments in Accumulated amount of remittance by the Investment Mainland China imposed by the from Taiwan to Mainland China as Commission of the Ministry Investment Commission of Company name of March 31, 2019 of Economic Affairs (MOEA) MOEA Innolux Corporation $ 27,714,985 $ 36,951,006 (Note D)

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 recognized for the three-month period ended March 31, 2019 was reviewed by independent accountants.

Note C: The investment methods are as follows:

  1. Directly investing in Mainland China.

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

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

  4. 2.2. Through investing in Warriors Technology Investments Ltd. in the third area, which then invested in the investee in Mainland China.

  5. 2.3. Through investing in Landmark International Ltd. in the third area, which then invested in the investee in Mainland China.

  6. 2.4. Through investing in Toppoly Optoelectronics (Cayman) Ltd. in the third area, which then invested in the investee in Mainland China.

  7. 2.5. Through investing in Innolux Optoelectronics 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. Nanjing Innoloux Optoelectornics Ltd. acquired Kunpal Optoelectronics Ltd. by merger, which was approved by the Investment Commission of the Ministry of Economic Affairs in November 2017.

  11. Others.

  12. 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.

  13. 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.

  14. 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.

  15. 3.3.The company invested via Innocom Technology (Shenzhen) Co., LTD, which are the company investment entities in Mainland China to invest in Shenzhen PixinLED Technology Co.,Ltd., Innolux Automations

  16. and Intelligence Systems (ShenZhen) Co., 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.

  17. Note D: In accordance with “Rules Governing Applications for Investment or Technical Cooperation in Mainland China”, the Company has obtained the certificate of being qualified for operating headquarters, issued by the Industrial Development Bureau of the Ministry of Economic Affairs, the ceiling amount of the investment in Mainland China is not applicable to the Company.

  18. I. The amount approved by the Investment Commission of Ministry of Economic Affairs (MOEA) is USD 10,300 thousand, Vap Optoelectronics (NanJing) Corp. has finished liquidation in October 2018 but not apply the cancellation of investment with Investment Commission of MOEA yet.

Table 7, Page 3

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